Document
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 September 30, 2017
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
____________________________________________ 
a021914coeurminingrpmshsma81.jpg
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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
þ
Accelerated filer
 
¨   
 
 
 
 
Non-accelerated filer
 
¨   
Smaller reporting company
 
¨   
 
 
 
 
 
 
 
 
 
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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 300,000,000 shares of common stock, par value of $0.01, authorized of which 185,640,359 shares were issued and outstanding as of October 23, 2017.



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 Statement of Changes in Stockholders’ Equity
 
 
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 
 
 
 
 
 
 
Consolidated Financial Results
 
 
 
 
Results of Operations
 
 
 
 
Liquidity and Capital Resources
 
 
 
 
Non-GAAP Financial Performance Measures
 
 
 
 
 
 
 
 
 
 
 
Part II.
 
 
 
 
 
 
 
 
Item 1A. Risk Factors
 
 
 
 
 
 
 
 
Item 5. Other Information
 
 
 
 
Item 6. Exhibits
 
 
 
Signatures



2


PART I
Item 1.        Financial Statements

COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
Notes
In thousands, except share data
Revenue
3
$
175,963

 
$
176,247

 
$
555,455

 
$
506,641

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
3
118,924

 
105,408

 
377,257

 
307,428

Amortization
 
33,830

 
27,763

 
106,880

 
93,232

General and administrative
 
7,412

 
7,113

 
24,587

 
22,789

Exploration
 
9,814

 
3,706

 
22,879

 
7,669

Write-downs
 

 

 

 
4,446

Pre-development, reclamation, and other
 
7,961

 
4,491

 
16,908

 
13,059

Total costs and expenses
 
177,941

 
148,481


548,511

 
448,623

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
Loss on debt extinguishment
17

 
(10,040
)
 
(9,342
)
 
(10,040
)
Fair value adjustments, net
10

 
(961
)
 
(864
)
 
(13,235
)
Interest expense, net of capitalized interest
17
(3,606
)
 
(8,068
)
 
(10,941
)
 
(30,063
)
Other, net
7
3,164

 
6,405

 
28,439

 
5,862

Total other income (expense), net
 
(442
)
 
(12,664
)

7,292

 
(47,476
)
Income (loss) before income and mining taxes
 
(2,420
)
 
15,102


14,236

 
10,542

Income and mining tax (expense) benefit
8
(14,232
)
 
54,455

 
(23,180
)
 
53,118

NET INCOME (LOSS)
 
$
(16,652
)
 
$
69,557


$
(8,944
)
 
$
63,660

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax of $997 and ($1,177) for the three and nine months September 30, 2016, respectively
 
1,066

 
1,387

 
(1,134
)
 
4,533

Reclassification adjustments for impairment of equity securities
 

 

 
426

 
20

Reclassification adjustments for realized (gain) loss on sale of equity securities
 
32

 
(2,965
)
 
1,300

 
(2,691
)
Other comprehensive income (loss)
 
1,098

 
(1,578
)

592

 
1,862

COMPREHENSIVE INCOME (LOSS)
 
$
(15,554
)
 
$
67,979


$
(8,352
)
 
$
65,522

 
 
 
 
 
 
 
 
 
NET INCOME (LOSS) PER SHARE
9
 
 
 
 
 
 
 
Basic
 
$
(0.09
)
 
$
0.43

 
$
(0.05
)
 
$
0.41

 
 
 
 
 
 
 
 
 
Diluted
 
$
(0.09
)
 
$
0.42

 
$
(0.05
)
 
$
0.40

(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 September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
Notes
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(16,652
)
 
$
69,557

 
(8,944
)
 
63,660

Adjustments:
 
 
 
 
 
 
 
 
Amortization
 
33,830

 
27,763

 
106,880

 
93,232

Accretion
 
2,691

 
2,184

 
7,798

 
8,201

Deferred taxes
 
1,940

 
(49,463
)
 
(1,529
)
 
(66,738
)
Loss on debt extinguishment
 

 
10,040

 
9,342

 
10,040

Fair value adjustments, net


 
961

 
864

 
13,235

Stock-based compensation

2,585

 
2,312

 
8,127

 
7,534

Gain on sale of the Joaquin project
 

 

 
(21,138
)
 

Write-downs
 

 

 

 
4,446

Other
 
(3,157
)
 
(5,236
)
 
(8,979
)
 
(4,743
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Receivables
 
6,529

 
19,672

 
17,719

 
10,751

Prepaid expenses and other current assets
 
(3,195
)
 
(2,816
)
 
(3,882
)
 
(2,435
)
Inventory and ore on leach pads
 
(2,874
)
 
(8,900
)
 
10,421

 
(24,408
)
Accounts payable and accrued liabilities
 
7,735

 
(18,262
)
 
(2,697
)
 
(12,407
)
CASH PROVIDED BY OPERATING ACTIVITIES
 
29,432


47,812


113,982

 
100,368

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Capital expenditures
 
(29,461
)
 
(25,627
)
 
(90,922
)
 
(71,087
)
Acquisitions, net
 

 
(1,427
)
 

 
(1,427
)
Proceeds from the sale of assets
 
1,083

 
4,802

 
16,538

 
16,104

Purchase of investments
 
(3,595
)
 
(21
)
 
(13,559
)
 
(120
)
Sale of investments
 
403

 
5,432

 
11,321

 
7,077

Other
 
(5,850
)
 
(1,299
)
 
(7,457
)
 
(4,218
)
CASH USED IN INVESTING ACTIVITIES
 
(37,420
)

(18,140
)
 
(84,079
)

(53,671
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
Issuance of common stock
 

 
49,513

 

 
122,584

Issuance of notes and bank borrowings, net of issuance costs
17
(2,257
)
 

 
242,701

 

Payments on debt, capital leases, and associated costs
17
(3,344
)
 
(107,868
)
 
(195,501
)
 
(120,551
)
Gold production royalty payments
 

 
(7,563
)
 

 
(27,155
)
Other
 
(6
)
 
1,051

 
(3,726
)
 
323

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(5,607
)

(64,867
)

43,474

 
(24,799
)
Effect of exchange rate changes on cash and cash equivalents
 
(222
)
 
121

 
662

 
(95
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
(13,817
)
 
(35,074
)

74,039

 
21,803

Cash and cash equivalents at beginning of period
 
250,038

 
257,591

 
162,182

 
200,714

Cash and cash equivalents at end of period
 
$
236,221

 
$
222,517


$
236,221

 
$
222,517


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

4


COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
September 30, 2017 (Unaudited)
 
December 31, 2016
ASSETS
Notes
In thousands, except share data
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
$
236,221

 
$
162,182

Receivables
13
66,415

 
60,431

Inventory
14
72,329

 
106,026

Ore on leach pads
14
78,801

 
64,167

Prepaid expenses and other
 
20,360

 
17,981

 
 
474,126

 
410,787

NON-CURRENT ASSETS
 
 
 
 
Property, plant and equipment, net
15
235,058

 
216,796

Mining properties, net
16
536,201

 
558,455

Ore on leach pads
14
69,805

 
67,231

Restricted assets
12
20,953

 
17,597

Equity and debt securities
12
29,125

 
4,488

Receivables
13
13,461

 
30,951

Other
 
23,363

 
12,604

TOTAL ASSETS
 
$
1,402,092

 
$
1,318,909

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
60,188

 
$
53,335

Accrued liabilities and other
 
50,593

 
42,743

Debt
17
14,375

 
12,039

Royalty obligations
10

 
4,995

Reclamation
4
3,604

 
3,522

 
 
128,760

 
116,634

NON-CURRENT LIABILITIES
 
 
 
 
Debt
17
274,523

 
198,857

Royalty obligations
10

 
4,292

Reclamation
4
104,505

 
95,804

Deferred tax liabilities
 
77,190

 
74,798

Other long-term liabilities
 
52,577

 
60,037

 
 
508,795

 
433,788

STOCKHOLDERS’ EQUITY
 
 
 
 
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 181,428,717 at September 30, 2017 and 180,933,287 at December 31, 2016
 
1,814

 
1,809

Additional paid-in capital
 
3,318,987

 
3,314,590

Accumulated other comprehensive income (loss)
 
(1,896
)
 
(2,488
)
Accumulated deficit
 
(2,554,368
)
 
(2,545,424
)
 
 
764,537

 
768,487

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
1,402,092

 
$
1,318,909


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
Income (Loss)
 
Total
Balances at December 31, 2016
180,933

 
$
1,809

 
$
3,314,590

 
$
(2,545,424
)
 
$
(2,488
)
 
$
768,487

Net income (loss)

 

 

 
(8,944
)
 

 
(8,944
)
Other comprehensive income (loss)

 

 

 

 
592

 
592

Common stock issued under stock-based compensation plans, net
496

 
5

 
4,397

 

 

 
4,402

Balances at September 30, 2017 (Unaudited)
181,429

 
$
1,814

 
$
3,318,987

 
$
(2,554,368
)
 
$
(1,896
)
 
$
764,537

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


NOTE 1 - BASIS OF PRESENTATION
The interim condensed consolidated financial statements of Coeur Mining, Inc. and its subsidiaries (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 which will be reported for the year ending December 31, 2017. The condensed consolidated December 31, 2016 balance sheet data was derived from audited consolidated financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) - Clarifying the Definition of a Business,” which clarifies the definition of a business to assist entities in the evaluation of acquisitions and disposals of assets or businesses. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company is currently evaluating this standard and does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash,” which will require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company is currently evaluating this standard and does not expect this ASU to materially impact the Company’s consolidated statement of cash flows.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on presentation and classification of certain cash receipts and payments in the statement of cash flows. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company is currently evaluating this standard and does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which amends several aspects of the accounting for share-based payment transaction, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. These changes became effective for the Company’s fiscal year beginning January 1, 2017, and the Company’s adoption had no impact on the Company’s consolidated financial position, results of operations, and cash flows.
In February 2016, the FASB issued ASU 2016-02, “Leases,” which will require lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. These changes become effective for the Company’s fiscal year beginning January 1, 2019. Modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an option to use certain transition relief. The Company is currently evaluating the potential impact of implementing these changes on the Company’s consolidated financial position, results of operations, and cash flows.
In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory, which provides a revised, simpler measurement for inventory to be measured at the lower of cost and net realizable value. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company is currently evaluating this standard and does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers, which has subsequently been amended several times. The new standard 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 for the Company’s fiscal year beginning January 1, 2018. The Company has substantially completed its analysis of the new standard and reviewed potential impacts from timing of when control is transferred to customers, variable consideration on concentrate sales and classification of refining fees.  The Company does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.    
    


7

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

NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo complex, and the Rochester, Kensington, Wharf, and San Bartolomé mines. All operating segments are engaged in the discovery, mining, and production of gold and/or silver. Other includes the La Preciosa project, other mineral interests, strategic equity investments, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts. The Company eliminated Coeur Capital as a standalone reportable segment in the first quarter of 2017 and has classified the operating performance, segment assets, and capital expenditures of the Endeavor silver stream and other remaining non-core assets in Other. All prior period amounts have been adjusted to conform to the current presentation.
Financial information relating to the Company’s segments is as follows (in thousands):
Three months ended September 30, 2017
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
60,677

 
$
31,156

 
$
36,603

 
$
31,334

 
$
16,043

 
$
150

 
$
175,963

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
33,255

 
23,275

 
27,658

 
17,330

 
17,365

 
41

 
118,924

Amortization
16,414

 
4,591

 
7,864

 
3,223

 
1,430

 
308

 
33,830

Exploration
4,517

 
531

 
2,966

 
207

 
23

 
1,570

 
9,814

Other operating expenses
319

 
846

 
356

 
648

 
2,998

 
10,206

 
15,373

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
(112
)
 
(136
)
 
(113
)
 
(16
)
 
(11
)
 
(3,218
)
 
(3,606
)
Other, net
(218
)
 
(73
)
 
(28
)
 
4

 
754

 
2,725

 
3,164

Income and mining tax (expense) benefit
(7,898
)
 
41

 

 
(963
)
 
(518
)
 
(4,894
)
 
(14,232
)
Net income (loss)
$
(2,056
)

$
1,745


$
(2,382
)

$
8,951


$
(5,548
)

$
(17,362
)

$
(16,652
)
Segment assets(2)
$
388,044

 
$
253,477

 
$
211,052

 
$
103,843

 
$
64,463

 
$
71,551

 
$
1,092,430

Capital expenditures
$
5,540

 
$
9,737

 
$
10,144

 
$
3,135

 
$
479

 
$
426

 
$
29,461

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

Three months ended September 30, 2016
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
30,663

 
$
37,946

 
$
40,164

 
$
39,316

 
$
27,485

 
$
812

 
$
176,386

Royalties

 

 

 

 

 
(139
)
 
(139
)
 
30,663


37,946


40,164


39,316


27,485


673


176,247

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
16,033

 
21,783

 
26,709

 
19,697

 
20,813

 
373

 
105,408

Amortization
5,761

 
5,244

 
8,046

 
6,461

 
1,723

 
528

 
27,763

Exploration
1,262

 
129

 
1,208

 
2

 

 
1,105

 
3,706

Other operating expenses
305

 
703

 
263

 
521

 
1,165

 
8,647

 
11,604

Other income (expense)
 
 
 
 
 
 
 
 
 
 


 


Loss on debt extinguishment

 

 

 

 

 
(10,040
)
 
(10,040
)
Fair value adjustments, net
(110
)
 
(851
)
 

 

 

 

 
(961
)
Interest expense, net
(184
)
 
(157
)
 
(30
)
 
(22
)
 
(8
)
 
(7,667
)
 
(8,068
)
Other, net
(2,223
)
 
17

 
(7
)
 
45

 
549

 
8,024

 
6,405

Income and mining tax (expense) benefit
35,671

 
7,844

 

 
30,208

 
5,905

 
(25,173
)
 
54,455

Net income (loss)
$
40,456


$
16,940


$
3,901


$
42,866


$
10,230


$
(44,836
)

$
69,557

Segment assets(2)
$
430,716

 
$
212,477

 
$
192,204

 
$
105,456

 
$
81,704

 
$
87,353

 
$
1,109,910

Capital expenditures
$
10,012

 
$
3,383

 
$
8,602

 
$
567

 
$
3,001

 
$
62

 
$
25,627

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

8

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

Nine months ended September 30, 2017
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
191,616

 
$
102,926

 
$
110,134

 
$
88,598

 
$
60,441

 
$
1,740

 
$
555,455

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 


Costs applicable to sales(1)
110,150

 
73,875

 
84,089

 
49,418

 
58,979

 
746

 
377,257

Amortization
50,995

 
15,345

 
25,389

 
8,883

 
5,053

 
1,215

 
106,880

Exploration
9,272

 
990

 
5,785

 
210

 
23

 
6,599

 
22,879

Other operating expenses
930

 
2,487

 
1,051

 
1,899

 
4,048

 
31,080

 
41,495

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on debt extinguishment

 

 

 

 

 
(9,342
)
 
(9,342
)
Fair value adjustments, net

 
(864
)
 

 

 

 

 
(864
)
Interest expense, net
(339
)
 
(386
)
 
(266
)
 
(52
)
 
(23
)
 
(9,875
)
 
(10,941
)
Other, net
(345
)
 
2,239

 
(893
)
 
429

 
1,125

 
25,884

 
28,439

Income and mining tax (expense) benefit
(22,313
)
 
(413
)
 

 
(2,980
)
 
(304
)
 
2,830

 
(23,180
)
Net income (loss)
$
(2,728
)

$
10,805


$
(7,339
)

$
25,585


$
(6,864
)

$
(28,403
)

$
(8,944
)
Segment assets(2)
$
388,044

 
$
253,477

 
$
211,052

 
$
103,843

 
$
64,463

 
$
71,551

 
$
1,092,430

Capital expenditures
$
22,972

 
$
34,121

 
$
24,314

 
$
5,493

 
$
1,242

 
$
2,780

 
$
90,922

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

Nine months ended September 30, 2016
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
108,748

 
$
103,689

 
$
112,376

 
$
101,250

 
$
73,948

 
$
3,208

 
$
503,219

Royalties


 


 


 


 


 
3,422

 
3,422

 
108,748


103,689


112,376


101,250


73,948


6,630

 
506,641

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
59,936

 
65,989

 
73,738

 
49,500

 
56,955

 
1,310

 
307,428

Amortization
27,815

 
15,994

 
26,203

 
15,640

 
5,330

 
2,250

 
93,232

Exploration
2,625

 
426

 
2,138

 
2

 

 
2,478

 
7,669

Write-downs

 

 

 

 

 
4,446

 
4,446

Other operating expenses
898

 
2,084

 
772

 
1,702

 
2,532

 
27,860

 
35,848

Other income (expense)
 
 
 
 
 
 
 
 
 
 


 
 
Loss on debt extinguishment

 

 

 

 

 
(10,040
)
 
(10,040
)
Fair value adjustments, net
(5,814
)
 
(5,787
)
 

 

 

 
(1,634
)
 
(13,235
)
Interest expense, net
(1,343
)
 
(509
)
 
(107
)
 
(49
)
 
(18
)
 
(28,037
)
 
(30,063
)
Other, net
(7,818
)
 
(3,840
)
 
(26
)
 
259

 
1,275

 
16,012

 
5,862

Income and mining tax (expense) benefit
38,922

 
7,429

 

 
29,972

 
5,182

 
(28,387
)
 
53,118

Net income (loss)
$
41,421


$
16,489


$
9,392


$
64,588


$
15,570


$
(83,800
)
 
$
63,660

Segment assets(2)
$
430,716

 
$
212,477

 
$
192,204

 
$
105,456

 
$
81,704

 
$
87,353

 
$
1,109,910

Capital expenditures
$
27,690

 
$
10,557

 
$
24,228

 
$
3,488

 
$
4,839

 
$
285

 
$
71,087

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

Assets
September 30, 2017

December 31, 2016
Total assets for reportable segments
$
1,092,430

 
$
1,122,038

Cash and cash equivalents
236,221

 
162,182

Other assets
73,441


34,689

Total consolidated assets
$
1,402,092


$
1,318,909



9

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

Geographic Information
Long-Lived Assets
September 30, 2017

December 31, 2016
Mexico
$
366,960

 
$
397,697

United States
375,728

 
338,897

Bolivia
27,662

 
31,539

Australia

 
2,983

Argentina
228

 
10,228

Other
681

 
5,564

Total
$
771,259


$
786,908

 
Revenue
Three months ended September 30,
 
Nine months ended September 30,
2017
 
2016
 
2017
 
2016
United States
$
99,093

 
$
117,425

 
$
301,658

 
$
317,315

Mexico
60,677

 
30,663

 
191,616

 
109,674

Bolivia
16,043

 
27,485

 
60,441

 
73,948

Australia
150

 
812

 
1,740

 
3,207

Other


(138
)
 


2,497

Total
$
175,963

 
$
176,247

 
$
555,455


$
506,641

        
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. 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 for operating sites are as follows:
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2017
 
2016
 
2017
 
2016
Asset retirement obligation - Beginning
$
101,127

 
$
85,545

 
$
97,380

 
$
82,072

Accretion
2,455

 
2,059

 
7,190

 
6,027

Additions and changes in estimates
3,116

 
(239
)
 
3,116

 
(118
)
Settlements
(656
)
 
(183
)
 
(1,644
)
 
(799
)
Asset retirement obligation - Ending
$
106,042


$
87,182

 
$
106,042

 
$
87,182

The Company has accrued $2.1 million and $1.9 million at September 30, 2017 and December 31, 2016, respectively, for reclamation liabilities related to former mining activities, which are included in Reclamation.
The Company increased the reclamation liability at Rochester by $3.1 million at September 30, 2017 due to leach pad expansion.


10

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

NOTE 5 – STOCK-BASED COMPENSATION
The Company has stock incentive plans for executives and eligible employees. Stock awards include performance shares, restricted stock and stock options. Stock-based compensation expense for the three and nine months ended September 30, 2017 was $2.6 million and $8.1 million, respectively, compared to $2.3 million and $7.5 million for the three and nine months ended September 30, 2016, respectively. At September 30, 2017, there was $7.4 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.5 years.
The following table summarizes the grants awarded during the nine months ended September 30, 2017:
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 18, 2017
 
236,581

 
$
11.47

 

 
$

 
316,213

 
$
11.58

March 7, 2017
 
542,621

 
$
7.60

 
14,820

 
$
3.91

 

 
$


The following options and stock appreciation rights were exercisable during the nine months ended September 30, 2017:
Award Type
 
Number of 
Exercised Units
 
Weighted Average
Exercised Price
 
Number of Exercisable Units
 
Weighted Average
Exercisable Price
Stock options
 
26,966

 
$
3.28

 
427,730

 
$
13.62

Stock appreciation rights
 

 
$

 
42,152

 
$
14.14


NOTE 6 – RETIREMENT SAVINGS PLAN
The Company has a 401(k) retirement savings plan that covers all eligible U.S. employees. Eligible employees may elect to contribute up to 75% of base salary, subject to ERISA limitations. The Company generally makes matching contributions equal to the employee’s contribution up to 4% of the employee’s salary. The Company may also provide an additional contribution based on an eligible employee’s salary. Total plan expenses recognized for the three and nine months ended September 30, 2017 were $1.8 million and $5.7 million, respectively, compared to $2.3 million and $4.2 million for the three and nine months ended September 30, 2016, respectively. In addition, the Company has a deferred compensation plan for employees whose benefits under the 401(k) plan are limited by federal regulations.

NOTE 7 - OTHER, NET
Other, net consists of the following:
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2017
 
2016
 
2017
 
2016
Foreign exchange gain (loss)
$
229

 
$
(1,466
)
 
$
2,578

 
$
(7,286
)
Gain (loss) on sale of assets and investments
945

 
7,463

 
(607
)
 
11,674

Gain on sale of the Joaquin project

 

 
21,138

 

Gain on repurchase of the Rochester royalty obligation

 

 
2,332

 

Gain on sale of Endeavor stream and other royalties
1,172

 

 
1,172

 

Impairment of equity securities

 

 
(426
)
 
(20
)
Other
818


408


2,252

 
1,494

Other, net
$
3,164

 
$
6,405

 
$
28,439

 
$
5,862



11

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

NOTE 8 - INCOME AND MINING TAXES
The following table summarizes the components of Income and mining tax (expense) benefit for the three and nine months ended September 30, 2017 and 2016 by significant jurisdiction:

 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
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
$
(6,008
)
$
(2,362
)
 
$
3,286

$
10,712

 
$
8,213

$
(2,739
)
 
$
(5,956
)
$
8,370

Argentina
738

(366
)
 
(301
)
67

 
281

1,704

 
3,137

(183
)
Mexico
3,210

(9,057
)
 
3,020

37,821

 
9,665

(23,745
)
 
(1,136
)
42,155

Bolivia
(5,029
)
(518
)
 
4,325

5,904

 
(6,559
)
(304
)
 
10,388

5,182

Other jurisdictions
4,669

(1,929
)

4,772

(49
)

2,636

1,904


4,109

(2,406
)
 
$
(2,420
)
$
(14,232
)
 
$
15,102

$
54,455

 
$
14,236

$
(23,180
)
 
$
10,542

$
53,118

    
The Company’s effective income and mining tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in the consolidated effective tax rate, along with mining taxes, uncertain tax positions, and a full valuation allowance on deferred tax assets related to losses in the United States and certain foreign jurisdictions. Fluctuations in foreign exchange rates on deferred tax balances decreased income and mining tax expense by $1.4 million and increased by $7.2 million for the three and nine months ended September 30, 2017, predominately due to the Mexican Peso. Also, favorable operating results at Palmarejo contributed to higher income and mining tax expense. The three and nine months ended September 30, 2016 benefited from a legal entity reorganization to integrate acquisitions that resulted in a valuation allowance release of $40.8 million and a $15.0 million deferred tax benefit related to unremitted earnings.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. The Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact the Company’s ability to realize its deferred tax assets. For additional information, please see the sections titled “Risk Factors” set forth in the 2016 10-K.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The statute of limitations remains open from 2013 forward for the U.S. federal jurisdiction and from 2009 forward for certain other foreign jurisdictions. As a result of statutes of limitation that will begin to expire within the next twelve months in various jurisdictions and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease between $1.5 million and $2.5 million in the next twelve months.
At September 30, 2017 and December 31, 2016, the Company had $17.5 million and $19.6 million of total gross unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’s effective income tax rate. The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At September 30, 2017 and December 31, 2016, the amount of accrued income-tax-related interest and penalties was $8.7 million and $8.7 million, respectively.


12

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

NOTE 9 – NET INCOME (LOSS) PER SHARE
Basic net 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 and nine months ended September 30, 2017, 633,391 and 851,254 common stock equivalents, respectively, related to equity-based awards were not included in the diluted earnings per share calculation as the shares would be antidilutive. Similarly, 215,298 and 404,543 common stock equivalents were excluded from the diluted earnings per share calculation for the three and nine months ended September 30, 2016, respectively.
The 3.25% Convertible Senior Notes (“Convertible Notes”) were not included in the computation of diluted net income (loss) per share for the three and nine months ended September 30, 2016 because there is no excess value upon conversion over the principal amount of the Convertible Notes. The outstanding Convertible Notes were redeemed in the third quarter of 2016.
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands except per share amounts
2017
 
2016
 
2017
 
2016
Net income (loss) available to common stockholders
$
(16,652
)
 
$
69,557

 
$
(8,944
)
 
$
63,660

Weighted average shares:
 
 
 
 
 
 
 
Basic
179,278

 
161,039

 
179,141

 
155,108

Effect of stock-based compensation plans

 
4,789

 

 
3,284

Diluted
179,278


165,828


179,141


158,392

Income (loss) per share:
 
 
 
 
 
 
 
Basic
$
(0.09
)
 
$
0.43

 
$
(0.05
)

$
0.41

Diluted
$
(0.09
)
 
$
0.42

 
$
(0.05
)

$
0.40


NOTE 10 – FAIR VALUE MEASUREMENTS
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2017
 
2016
 
2017
 
2016
Rochester royalty obligation
$

 
$
(851
)
 
$
(864
)
 
$
(5,787
)
Palmarejo royalty obligation embedded derivative

 
(110
)
 

 
(5,866
)
Silver and gold options



 

 
(1,582
)
Fair value adjustments, net
$

 
$
(961
)
 
$
(864
)
 
$
(13,235
)
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), secondary priority to quoted prices in inactive markets or observable inputs (Level 2), and the lowest priority to unobservable inputs (Level 3).
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:
 
Fair Value at September 30, 2017
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity and debt securities
$
29,125

 
$
22,194

 
$

 
$
6,931

Other derivative instruments, net
44

 

 
44

 

 
$
29,169

 
$
22,194

 
$
44

 
$
6,931

Liabilities:
 
 
 
 
 
 
 
Other derivative instruments, net
$
255

 
$

 
$
255

 
$

 

13

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

 
Fair Value at December 31, 2016
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
4,488

 
$
4,209

 
$

 
$
279

 
$
4,488

 
$
4,209

 
$

 
$
279

Liabilities:
 
 
 
 
 
 
 
Rochester royalty obligation
9,287

 

 

 
9,287

Other derivative instruments, net
762

 

 
762

 

 
$
10,049

 
$

 
$
762

 
$
9,287

The Company’s investments in equity securities are recorded at fair market value in the financial statements based primarily on quoted market prices. Such instruments are classified within Level 1 of the fair value hierarchy. Quoted market prices are not available for certain debt and equity securities; these securities are valued using pricing models, which require the use of observable and unobservable inputs, and are classified within Level 3 of the fair value hierarchy.
The Company’s other derivative instruments, net, relate to concentrate and certain doré sales contracts valued using pricing models, which require inputs that are derived from observable market data, including contractual terms, forward market prices, yield curves, credit spreads, and other unobservable inputs. 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.
In May 2017, the Company repurchased the Rochester royalty obligation for $5.0 million, resulting in a pre-tax gain of $2.3 million, which is included in Other, net. The fair value of the Rochester royalty obligation was estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves, and credit spreads, as well as the Company’s current mine plan which is considered a significant unobservable input. Therefore, the Company historically classified this obligation as a Level 3 financial liability.
In July 2017, the Company sold the Endeavor silver stream and remaining non-core royalties to Metalla Royalty & Streaming Ltd. (“Metalla”) for total consideration of $13.0 million, including a $6.7 million convertible debenture. The convertible debenture matures June 30, 2027, bears interest at a rate of 5% payable semi-annually, and is convertible into Metalla shares in connection with future equity financings or asset acquisitions by Metalla at the then-current price to maintain the Company’s approximate 19.9% ownership. The fair value of the convertible debenture is estimated based on observable market data including yield curves and credit spreads. Therefore, the Company classifies the convertible debenture in Level 3 of the fair value hierarchy.
No assets or liabilities were transferred between fair value levels in the nine months ended September 30, 2017.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the nine months ended September 30, 2017:
 
Three Months Ended September 30, 2017
In thousands
Balance at the beginning of the period
 
Additions
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
 
 
Equity and debt securities
$
258

 
$
6,677

 
$
(4
)
 
$

 
$
6,931

 
Nine Months Ended September 30, 2017
In thousands
Balance at the beginning of the period
 
Additions
 
Revaluation
 
Settlements
 
Gain on settlement
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
 
 
 
 
Equity and debt securities
$
279

 
$
6,677

 
$
(25
)
 
$

 
$

 
$
6,931

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Rochester royalty obligation
$
9,287

 

 
$
864

 
$
(7,819
)
 
(2,332
)
 
$


14

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

The fair value of financial assets and liabilities carried at book value in the financial statements at September 30, 2017 and December 31, 2016 is presented in the following table:
 
September 30, 2017
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 

 
 
 
 
 
 
5.875% Senior Notes due 2024(1)
$
244,934

 
$
247,161

 
$

 
$
247,161

 
$

(1)
Net of unamortized debt issuance costs of $5.1 million.

 
December 31, 2016
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 
 
 
 
 
 
 
 
7.875% Senior Notes due 2021(1)
$
175,991

 
$
184,373

 

 
$
184,373

 

(1)
Net of unamortized debt issuance costs and premium received of $2.0 million.
The fair value of the 5.875% Senior Notes due 2024 (the “2024 Senior Notes”) and the 7.875% Senior Notes due 2021 (the “2021 Senior Notes”) were estimated using quoted market prices.

NOTE 11 – DERIVATIVE FINANCIAL INSTRUMENTS
Palmarejo Gold Production Royalty
In January 2009, the Company's subsidiary, Coeur Mexicana, S.A. de C.V. (“Coeur Mexicana”), entered into a gold production royalty agreement with a subsidiary of Franco-Nevada Corporation that covered 50% of the life of mine production from the Palmarejo mine and legacy adjacent properties. The royalty transaction included a minimum obligation of 4,167 gold ounces per month and terminated upon delivery of 400,000 gold ounces, which occurred in July 2016.
    The price volatility associated with the minimum royalty obligation was considered an embedded derivative. The Company was required to recognize the change in fair value of the remaining minimum obligation due to changing gold prices. For the three and nine months ended September 30, 2016, the mark-to-market adjustment associated with the change were losses of $0.1 million and $5.9 million, respectively. Payments on the royalty obligation decreased the carrying amount of the minimum obligation and the derivative liability. For the three and nine months ended September 30, 2016, realized losses on settlement of the liabilities were $0.1 million and $5.9 million, respectively. The mark-to-market adjustments and realized losses are included in Fair value adjustments, net.
Provisional Silver and Gold Sales
The Company enters into sales contracts with third-party smelters and refiners which, in some cases, provide for a provisional payment based upon preliminary 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 recorded 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 provisional pricing mark-to-market losses of $0.1 million and gains of $0.6 million in the three and nine months ended September 30, 2017, respectively, compared to losses of $0.8 million and gains of $0.4 million in the three and nine months ended September 30, 2016, respectively.

15

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

At September 30, 2017, the Company had the following provisionally priced sales that settle as follows:
In thousands except average prices and notional ounces
2017
 
Thereafter
 
 
 
 
Provisional silver sales contracts
$
3,915

 
$

Average silver price
$
16.86

 
$

Notional ounces
232,200

 

 
 
 
 
Provisional gold sales contracts
$
33,887

 
$

Average gold price
$
1,299

 
$

Notional ounces
26,087

 

Silver and Gold Options
During the nine months ended September 30, 2016, the Company had realized losses of $1.6 million, from settled option contracts. At September 30, 2017, the Company had no outstanding gold and silver options contracts.
The following summarizes the classification of the fair value of the derivative instruments:
 
September 30, 2017
In thousands
Prepaid expenses and other
 
Accrued liabilities and other
 
Current portion of royalty obligation
 
Non-current portion of royalty obligation
Provisional silver and gold sales contracts
$
44

 
$
255

 
$

 
$

 
December 31, 2016
In thousands
Prepaid expenses and other
 
Accrued liabilities and other
 
Current portion of royalty obligation
 
Non-current portion of royalty obligation
Provisional silver and gold sales contracts

 
762

 

 

The following represent mark-to-market gains (losses) on derivative instruments for the three and nine months ended September 30, 2017 and 2016 (in thousands):
 
 
Three months ended September 30,
 
Nine months ended September 30,
Financial statement line
Derivative
2017
 
2016
 
2017
 
2016
Revenue
Provisional silver and gold sales contracts
$
(45
)
 
$
(784
)
 
$
551

 
$
378

Fair value adjustments, net
Palmarejo gold production royalty

 
(110
)
 

 
(5,866
)
Fair value adjustments, net
Silver and gold options

 

 

 
(1,582
)
 
 
$
(45
)

$
(894
)
 
$
551

 
$
(7,070
)
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 institutions management deems credit-worthy and limits credit exposure to each institution. The Company does not anticipate non-performance by any of its counterparties.


16

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

NOTE 12 – INVESTMENTS
Equity and Debt Securities
The Company makes strategic investments in equity and debt 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).
 
At September 30, 2017
In thousands
Cost
 
Gross
Unrealized
Losses
 
Gross
Unrealized
Gains
 
Estimated
Fair Value
Equity Securities
 
 
 
 
 
 
 
Metalla Royalty & Streaming Ltd.
$
6,294

 
$

 
$
817

 
$
7,111

Corvus Gold Inc.
3,582

 

 
542

 
4,124

Almaden Minerals, Ltd.
3,125

 

 
102

 
3,227

Northern Empire Resources Corp.
2,999

 

 
378

 
3,377

Rockhaven Resources, Ltd.
2,064

 
(364
)
 

 
1,700

Kootenay Silver, Inc.
928

 

 
40

 
968

Other
1,482

 
(82
)
 
566

 
1,966

Equity securities
$
20,474

 
$
(446
)
 
$
2,445

 
$
22,473

 
 
 
 
 
 
 
 
Debt Securities
 
 
 
 
 
 
 
Metalla Royalty & Streaming Ltd.
$
6,677

 
$
(25
)
 
$

 
$
6,652

 
 
 
 
 
 
 
 
Equity and debt securities
$
27,151

 
$
(471
)
 
$
2,445

 
$
29,125


 
At December 31, 2016
In thousands
Cost
 
Gross
Unrealized
Losses
 
Gross
Unrealized
Gains
 
Estimated
Fair Value
Kootenay Silver, Inc.
$
2,645

 
$

 
$

 
$
2,645

Silver Bull Resources, Inc.
233

 

 
783

 
1,016

Other
229

 

 
598

 
827

Equity securities
$
3,107

 
$

 
$
1,381

 
$
4,488


The Company performs a quarterly assessment on each of its equity and debt securities with unrealized losses to determine if the security is other than temporarily impaired. The Company recorded no pre-tax other-than-temporary impairment losses in the three months ended September 30, 2017, in Other, net. The Company recorded pre-tax other-than-temporary impairment losses of $0.4 million in the nine months ended September 30, 2017, in Other, net. No impairment losses were recorded in the three and nine months ended September 30, 2016, in Other, net. The following table summarizes unrealized losses on equity and debt 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 September 30, 2017:

 
Less than twelve months
 
Twelve months or more
 
Total
In thousands
Unrealized Losses
Fair Value
 
Unrealized Losses
Fair Value
 
Unrealized Losses
Fair Value
Equity securities
$
446

$
2,046

 
$

$

 
$
446

$
2,046

Debt securities
25

6,652

 


 
25

6,652

Restricted Assets
The Company, under the terms of its self-insurance and bonding agreements with certain banks, lending institutions and regulatory agencies, is required to collateralize certain portions of its asset retirement obligations. The Company has collateralized these obligations by assigning certificates of deposit that have maturity dates ranging from three months to a year to the applicable institutions or agencies. At September 30, 2017 and December 31, 2016, the Company held certificates of deposit and cash under

17

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

these agreements of $21.0 million and $17.6 million, respectively. The ultimate timing of the release of the collateralized amounts is dependent on the timing and closure of each mine and repayment of the obligation. In order to release the collateral, the Company must seek approval from certain government agencies responsible for monitoring the mine closure status. Collateral could also be released to the extent the Company is able to secure alternative financial assurance satisfactory to the regulatory agencies. The Company believes the collateral will remain in place beyond a twelve-month period and has therefore classified these investments as long-term.

NOTE 13 – RECEIVABLES
Receivables consist of the following:
In thousands
September 30, 2017
 
December 31, 2016
Current receivables:
 
 
 
Trade receivables
$
13,040

 
$
10,669

Income tax receivable
220

 
1,038

Value added tax receivable
51,133

 
46,083

Other
2,022

 
2,641

 
$
66,415

 
$
60,431

Non-current receivables:
 
 
 
Value added tax receivable
$
13,461

 
$
19,293

Income tax receivable

 
11,658

 
13,461

 
30,951

Total receivables
$
79,876

 
$
91,382


NOTE 14 – INVENTORY AND ORE ON LEACH PADS
Inventory consists of the following:
In thousands
September 30, 2017
 
December 31, 2016
Inventory:
 
 
 
Concentrate
$
8,245

 
$
17,994

Precious metals
24,537

 
47,228

Supplies
39,547

 
40,804

 
$
72,329

 
$
106,026

Ore on leach pads:
 
 
 
Current
$
78,801

 
$
64,167

Non-current
69,805

 
67,231

 
$
148,606

 
$
131,398

Total inventory and ore on leach pads
$
220,935

 
$
237,424


NOTE 15 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
In thousands
September 30, 2017
 
December 31, 2016
Land
$
9,417

 
$
7,878

Facilities and equipment
670,375

 
650,480

Assets under capital leases
71,624

 
54,968

 
751,416

 
713,326

Accumulated amortization (1)
(546,212
)
 
(524,806
)
 
205,204

 
188,520

Construction in progress
29,854

 
28,276

Property, plant and equipment, net
$
235,058

 
$
216,796

(1) Includes $24.4 million of accumulated amortization related to assets under capital leases.

18

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

NOTE 16 – MINING PROPERTIES
Mining properties consist of the following (in thousands):
September 30, 2017
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San
Bartolomé
 
La Preciosa
 
Total
Mine development
$
191,562

 
$
192,734

 
$
294,388

 
$
38,339

 
$
39,445

 
$

 
$
756,468

Accumulated amortization
(142,262
)
 
(142,686
)
 
(170,343
)
 
(14,984
)
 
(33,418
)
 

 
(503,693
)
 
49,300

 
50,048

 
124,045

 
23,355

 
6,027

 

 
252,775

Mineral interests
629,303

 

 

 
45,837

 
12,868

 
49,085

 
737,093

Accumulated amortization
(418,512
)
 

 

 
(23,264
)

(11,891
)
 

 
(453,667
)
 
210,791

 

 

 
22,573

 
977

 
49,085

 
283,426

Mining properties, net
$
260,091

 
$
50,048

 
$
124,045

 
$
45,928

 
$
7,004

 
$
49,085

 
$
536,201

December 31, 2016
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San
Bartolomé
 
La Preciosa
 
Joaquin
 
Other
 
Total
Mine development
$
174,890

 
$
165,230

 
$
271,175

 
$
37,485

 
$
39,184

 
$

 
$

 
$

 
$
687,964

Accumulated amortization
(134,995
)
 
(138,244
)
 
(154,744
)
 
(11,699
)
 
(32,192
)
 

 


 

 
(471,874
)
 
39,895

 
26,986

 
116,431

 
25,786

 
6,992

 

 

 

 
216,090

Mineral interests
629,303

 

 

 
45,837

 
12,868

 
49,085

 
10,000

 
37,272

 
784,365

Accumulated amortization
(381,686
)
 

 

 
(19,249
)
 
(11,695
)
 

 

 
(29,370
)
 
(442,000
)
 
247,617

 

 

 
26,588

 
1,173

 
49,085

 
10,000

 
7,902

 
342,365

Mining properties, net
$
287,512

 
$
26,986

 
$
116,431

 
$
52,374

 
$
8,165

 
$
49,085

 
$
10,000

 
$
7,902

 
$
558,455

In February 2017, the Company sold the Joaquin silver-gold exploration project for consideration of $27.4 million and a 2.0% NSR royalty on the Joaquin project, which is included in Other. The Company recognized a $21.1 million pre-tax gain on this sale, included in Other, net on the Consolidated Statements of Comprehensive Income.
In July 2017, the Company sold the Endeavor silver stream and our remaining portfolio of royalties to Metalla for total consideration of $13.0 million comprised of $6.3 million of Metalla shares and a $6.7 million convertible debenture. The Company recognized a $1.2 million pre-tax gain, included in Other, net on the Consolidated Statements of Comprehensive Income.
    
NOTE 17 – DEBT
 
September 30, 2017
 
December 31, 2016
In thousands
Current
 
Non-Current
 
Current
 
Non-Current
2024 Senior Notes, net(1)
$

 
$
244,934

 
$

 
$

2021 Senior Notes, net(2)

 

 

 
175,991

Capital lease obligations
14,375

 
29,589

 
12,039

 
22,866

 
$
14,375

 
$
274,523

 
$
12,039

 
$
198,857

(1) Net of unamortized debt issuance costs of $5.1 million at September 30, 2017.
(2) Net of unamortized debt issuance costs and premium received of $2.0 million at December 31, 2016.


19

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

Revolving Credit Facility
In September 2017, the Company, as borrower, and certain subsidiaries of the Company, as guarantors, entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A, Royal Bank of Canada, Bank of Montreal, Chicago Branch, and the Bank of Nova Scotia. The Credit Agreement provides for a $200.0 million senior secured revolving credit facility (the “Facility”), which may be increased by up to $50.0 million in incremental loans and commitments subject to the terms of the Credit Agreement. The Facility has a term of four years. Loans under the Facility will bear interest at a rate equal to either a base rate plus a margin ranging from 1.00% to 1.75% or an adjusted LIBOR rate plus a margin ranging from 2.00% to 2.75%, as selected by the Company, in each case, with such margin determined in accordance with a pricing grid based upon the Company’s consolidated net leverage ratio as of the end of the applicable period.
The Facility is secured by substantially all of the assets of the Company and its domestic subsidiaries, including the land, mineral rights and infrastructure at the Kensington, Rochester and Wharf mines, as well as a pledge of the shares of certain of the Company’s subsidiaries.  The Credit Agreement contains representations and warranties and affirmative and negative covenants that are usual and customary, including representations, warranties, and covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions. The Credit Agreement contains financial covenants consisting of a consolidated net leverage ratio and a consolidated interest coverage ratio.  Obligations under the Credit Agreement may be accelerated upon the occurrence of certain customary events of default. At September 30, 2017, the Company had $200.0 million available under the Facility with no amounts drawn. Issuance costs of $1.8 million were recorded as prepaid costs and will be amortized over the term of the Facility. On October 12, 2017, the Company drew $100.0 million from the Facility at a rate of 3.5%, which was based on the 1-month LIBOR rate plus a margin of 2.25%.

5.875% Senior Notes due 2024
In May 2017, the Company completed an offering of $250.0 million in aggregate principal amount of 2024 Senior Notes in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended for net proceeds of approximately $245.0 million. The 2024 Senior Notes are governed by an Indenture dated as of May 31, 2017 (the “Indenture”), among the Company, as issuer, certain of the Company's subsidiaries named therein, as guarantors thereto (the “Guarantors”), and the Bank of New York Mellon, as trustee. In connection with the sale of the 2024 Senior Notes, the Company entered into a Registration Rights Agreement. On August 4, 2017, the Company commenced an exchange offer of registered 2024 Senior Notes for privately-placed 2024 Senior Notes which was completed on September 12, 2017. The 2024 Senior Notes bear interest at a rate of 5.875% per year from the date of issuance.  Interest on the 2024 Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2017. The 2024 Senior Notes will mature on June 1, 2024 and are fully and unconditionally guaranteed by the Guarantors. At any time prior to June 1, 2020, the Company may redeem all or part of the 2024 Senior Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem some or all of the 2024 Senior Notes on or after June 1, 2020, at redemption prices set forth in the Indenture, together with accrued and unpaid interest. At any time prior to June 1, 2020, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2024 Senior Notes, including any permitted additional 2024 Senior Notes, at a redemption price equal to 105.875% of the principal amount. The Indenture contains covenants that, among other things, limit the Company’s ability under certain circumstances to incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem capital stock, prepay, redeem or repurchase certain debt, make loans and investments, create liens, sell, transfer or otherwise dispose of assets, enter into transactions with affiliates, enter into agreements restricting the Company's subsidiaries' ability to pay dividends and impose conditions on the Company’s ability to engage in mergers, consolidations and sales of all or substantially all of its assets. The Indenture also contains certain “Events of Default” (as defined in the Indenture) customary for indentures of this type.
7.875% Senior Notes due 2021
Concurrent with the offering of the 2024 Senior Notes, the Company commenced a cash tender offer (the “Tender Offer”) to purchase the outstanding $178.0 million in aggregate principal amount of its 2021 Senior Notes. The Tender Offer was made on the terms and subject to the conditions set forth in the Offer to Purchase dated May 19, 2017. Holders of the 2021 Senior Notes who tendered their notes were entitled to receive $1,043.88 per $1,000 principal amount of the Notes, plus accrued and unpaid interest. $118.1 million aggregate principal amount of the Notes were tendered and purchased by the Company on May 31, 2017. In accordance with the terms of the indenture governing the 2021 Senior Notes, the remaining $59.9 million aggregate principal amount of the Notes were redeemed on June 30, 2017 at the redemption price of $1,039.38 per $1,000 principal amount, plus accrued and unpaid interest. The Company recorded a loss of $9.3 million as a result of the extinguishment of the 2021 Senior Notes.

20

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

Lines of Credit
At September 30, 2017, the Company’s subsidiary that holds the San Bartolomé mine had an available line of credit for $12.0 million that matures in June 30, 2018, bearing interest at 6.0% per annum, which is secured by machinery and equipment. There was no outstanding balance at September 30, 2017.
Capital Lease Obligations
From time to time, the Company acquires mining equipment under capital lease agreements. In the nine months ended September 30, 2017, the Company entered into new lease financing arrangements primarily for diesel generators at Kensington and mining equipment at Palmarejo, Rochester, and Kensington. All capital lease obligations are recorded, upon lease inception, at the present value of future minimum lease payments.
Interest Expense
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2017
 
2016
 
2017
 
2016
2024 Senior Notes
$
3,672

 
$

 
$
4,937

 
$

2021 Senior Notes

 
7,337

 
6,221

 
22,250

Term Loan due 2020

 
417

 

 
4,939

Capital lease obligations
413

 
399

 
1,115

 
1,079

Accretion of Palmarejo gold production royalty obligation

 
49

 

 
1,211

Amortization of debt issuance costs
180

 
388

 
518

 
1,650

Accretion of debt premium

 
(90
)
 
(71
)
 
(272
)
Other debt obligations
13


40


30


95

Capitalized interest
(672
)
 
(472
)
 
(1,809
)
 
(889
)
Total interest expense, net of capitalized interest
$
3,606

 
$
8,068

 
$
10,941

 
$
30,063



21

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

NOTE 18 - SUPPLEMENTAL GUARANTOR INFORMATION
The following 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., Wharf Resources (U.S.A.), Inc. and its subsidiaries, and Coeur Capital, Inc. (collectively, the “Subsidiary Guarantors”) of the 2024 Senior Notes. The following schedules present 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 and joint and several obligations. There are no restrictions on the ability of Coeur to obtain funds from the Subsidiary Guarantors by dividend or loan.

22

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

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED SEPTEMBER 30, 2017
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
99,093

 
$
76,870

 
$

 
$
175,963

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
68,267

 
50,657

 

 
118,924

Amortization
 
286

 
15,678

 
17,866

 

 
33,830

General and administrative
 
7,250

 
6

 
156

 

 
7,412

Exploration
 
466

 
4,582

 
4,766

 

 
9,814

Pre-development, reclamation, and other
 
1,030

 
1,922

 
5,009

 

 
7,961

Total costs and expenses
 
9,032

 
90,455

 
78,454

 

 
177,941

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Loss on debt extinguishments
 

 

 

 

 

Fair value adjustments, net
 

 

 

 

 

Other, net
 
2,868

 
(4,603
)
 
6,312

 
(1,413
)
 
3,164

Interest expense, net of capitalized interest
 
(3,220
)
 
(264
)
 
(1,535
)
 
1,413

 
(3,606
)
Total other income (expense), net
 
(352
)
 
(4,867
)
 
4,777

 

 
(442
)
Loss before income and mining taxes
 
(9,384
)
 
3,771

 
3,193

 

 
(2,420
)
Income and mining tax (expense) benefit
 
(8,091
)
 
(574
)
 
(5,567
)
 

 
(14,232
)
Total loss after income and mining taxes
 
(17,475
)
 
3,197

 
(2,374
)
 

 
(16,652
)
Equity income (loss) in consolidated subsidiaries
 
823

 
(1,755
)
 
(304
)
 
1,236

 

NET INCOME (LOSS)
 
$
(16,652
)
 
$
1,442

 
$
(2,678
)
 
$
1,236

 
$
(16,652
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
 
1,066

 
1,504

 

 
(1,504
)
 
1,066

Reclassification adjustments for impairment of equity securities, net of tax
 

 
(852
)
 

 
852

 

Reclassification adjustments for realized gain (loss) on sale of equity securities, net of tax
 
32

 
1,112

 

 
(1,112
)
 
32

Other comprehensive income (loss)
 
1,098

 
1,764

 

 
(1,764
)
 
1,098

COMPREHENSIVE INCOME (LOSS)
 
$
(15,554
)
 
$
3,206

 
$
(2,678
)
 
$
(528
)
 
$
(15,554
)
(1) Excludes amortization.
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED SEPTEMBER 30, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
117,426

 
$
58,821

 
$

 
$
176,247

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
68,189

 
37,219

 

 
105,408

Amortization
 
389

 
19,750

 
7,624

 

 
27,763

General and administrative
 
6,956

 
16

 
141

 

 
7,113

Exploration
 
989

 
1,410

 
1,307

 

 
3,706

Pre-development, reclamation, and other
 
388

 
1,470

 
2,633

 

 
4,491

Total costs and expenses
 
8,722

 
90,835

 
48,924

 

 
148,481

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Loss on debt extinguishments
 
(10,040
)
 

 

 

 
(10,040
)
Fair value adjustments, net
 

 
(852
)
 
(109
)
 

 
(961
)
Other, net
 
1,666

 
3,021

 
3,178

 
(1,460
)
 
6,405

Interest expense, net of capitalized interest
 
(7,852
)
 
(209
)
 
(1,467
)
 
1,460

 
(8,068
)
Total other income (expense), net
 
(16,226
)
 
1,960

 
1,602

 

 
(12,664
)
Income (Loss) before income and mining taxes
 
(24,948
)
 
28,551

 
11,499

 

 
15,102

Income and mining tax (expense) benefit
 
(29,312
)
 
41,807

 
41,960

 

 
54,455

Income (Loss) after income and mining taxes
 
(54,260
)
 
70,358

 
53,459

 

 
69,557

Equity income (loss) in consolidated subsidiaries
 
123,818

 
328

 

 
(124,146
)
 

NET INCOME (LOSS)
 
$
69,558

 
$
70,686

 
$
53,459

 
$
(124,146
)
 
$
69,557

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax
 
1,387

 
1,387

 

 
(1,387
)
 
1,387

Reclassification adjustments for impairment of equity securities, net of tax
 

 

 

 

 

Reclassification adjustments for realized loss on sale of equity securities, net of tax
 
(2,965
)
 
(2,485
)
 

 
2,485

 
(2,965
)
Other comprehensive income (loss)
 
(1,578
)
 
(1,098
)
 

 
1,098

 
(1,578
)
COMPREHENSIVE INCOME (LOSS)
 
$
67,980

 
$
69,588

 
$
53,459

 
$
(123,048
)
 
$
67,979

(1) Excludes amortization.


23

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

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 2017
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
(8,682
)
 
$
27,407

 
$
9,471

 
$
1,236

 
29,432

 
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(318
)
 
(23,016
)
 
(6,127
)
 

 
(29,461
)
Proceeds from the sale of assets
 

 
76

 
1,007

 

 
1,083

Purchase of investments
 
(3,594
)
 
(1
)
 

 

 
(3,595
)
Sales of investments
 

 
403

 

 

 
403

Other
 
(5,783
)
 

 
(67
)
 

 
(5,850
)
Investments in consolidated subsidiaries
 
3,433

 
7,144

 
(1,311
)
 
(9,266
)
 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(6,262
)

(15,394
)

(6,498
)
 
(9,266
)
 
(37,420
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Issuance of notes and bank borrowings
 
(2,257
)
 

 

 

 
(2,257
)
Payments on debt, capital leases, and associated costs
 

 
(1,894
)
 
(1,450
)
 

 
(3,344
)
Net intercompany financing activity
 
9,266

 
(12,370
)
 
(4,926
)
 
8,030

 

Other
 
(6
)
 

 

 

 
(6
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
7,003


(14,264
)

(6,376
)

8,030


(5,607
)
Effect of exchange rate changes on cash and cash equivalents
 

 
3

 
(225
)
 

 
(222
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
 
(7,941
)

(2,248
)

(3,628
)
 

 
(13,817
)
Cash and cash equivalents at beginning of period
 
103,878

 
47,912

 
98,248

 

 
250,038

Cash and cash equivalents at end of period
 
$
95,937


$
45,664


$
94,620


$


$
236,221


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
101,581

 
$
48,791

 
$
21,586

 
$
(124,146
)
 
47,812

 
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(62
)
 
(12,550
)
 
(13,015
)
 

 
(25,627
)
Acquisitions, net of cash acquired
 

 

 
(1,427
)
 

 
(1,427
)
Proceeds from the sale of assets
 
2

 
560

 
4,240

 

 
4,802

Purchase of investments
 
(5
)
 
(16
)
 

 

 
(21
)
Sales of investments
 
2

 
5,430

 

 

 
5,432

Other
 
(1,245
)
 
(7
)
 
(47
)
 

 
(1,299
)
Investments in consolidated subsidiaries
 
(117,911
)
 
1,356

 

 
116,555

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(119,219
)

(5,227
)

(10,249
)

116,555


(18,140
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Issuance of common stock
 
49,513

 

 

 

 
49,513

Payments on debt, capital leases, and associated costs
 
(104,165
)
 
(2,498
)
 
(1,205
)
 

 
(107,868
)
Gold production royalty payments
 

 

 
(7,563
)
 

 
(7,563
)
Net intercompany financing activity
 
39,297

 
(42,679
)
 
(4,209
)
 
7,591

 

Other
 
1,051

 

 

 

 
1,051

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(14,304
)

(45,177
)

(12,977
)

7,591


(64,867
)
Effect of exchange rate changes on cash and cash equivalents
 

 

 
121

 

 
121

NET CHANGE IN CASH AND CASH EQUIVALENTS
 
(31,942
)

(1,613
)

(1,519
)



(35,074
)
Cash and cash equivalents at beginning of period
 
127,803

 
53,548

 
76,240

 

 
257,591

Cash and cash equivalents at end of period
 
$
95,861


$
51,935


$
74,721


$


$
222,517




24

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

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
NINE MONTHS ENDED SEPTEMBER 30, 2017
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
301,658

 
$
253,797

 
$

 
$
555,455

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
207,385

 
169,872

 

 
377,257

Amortization
 
908

 
49,617

 
56,355

 

 
106,880

General and administrative
 
24,316

 
26

 
245

 

 
24,587

Exploration
 
1,197

 
9,526

 
12,156

 

 
22,879

Pre-development, reclamation, and other
 
1,803

 
5,593

 
9,512

 

 
16,908

Total costs and expenses
 
28,224

 
272,147

 
248,140

 

 
548,511

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Loss on debt extinguishments
 
(9,342
)
 

 

 

 
(9,342
)
Fair value adjustments, net
 

 
(864
)
 

 

 
(864
)
Other, net
 
20,090

 
3,332

 
9,256

 
(4,239
)
 
28,439

Interest expense, net of capitalized interest
 
(9,876
)
 
(703
)
 
(4,601
)
 
4,239

 
(10,941
)
Total other income (expense), net
 
872

 
1,765

 
4,655

 

 
7,292

Loss before income and mining taxes
 
(27,352
)
 
31,276

 
10,312

 

 
14,236

Income and mining tax (expense) benefit
 
(3,108
)
 
(3,946
)
 
(16,126
)
 

 
(23,180
)
Total loss after income and mining taxes
 
(30,460
)
 
27,330

 
(5,814
)
 

 
(8,944
)
Equity income (loss) in consolidated subsidiaries
 
21,516

 
(546
)
 
(609
)
 
(20,361
)
 

NET INCOME (LOSS)
 
$
(8,944
)
 
$
26,784

 
$
(6,423
)
 
$
(20,361
)
 
$
(8,944
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
 
(1,134
)
 
756

 

 
(756
)
 
(1,134
)
Reclassification adjustments for impairment of equity securities, net of tax
 
426

 
(426
)
 

 
426

 
426

Reclassification adjustments for realized gain (loss) on sale of equity securities, net of tax
 
1,300

 
540

 

 
(540
)
 
1,300

Other comprehensive income (loss)
 
592

 
870

 

 
(870
)
 
592

COMPREHENSIVE INCOME (LOSS)
 
$
(8,352
)
 
$
27,654

 
$
(6,423
)
 
$
(21,231
)
 
$
(8,352
)
(1) Excludes amortization.
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
NINE MONTHS ENDED SEPTEMBER 30, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
317,587

 
$
189,054

 
$

 
$
506,641

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
189,227

 
118,201

 

 
307,428

Amortization
 
1,225

 
57,983

 
34,024

 

 
93,232

General and administrative
 
22,132

 
237

 
420

 

 
22,789

Exploration
 
2,091

 
2,843

 
2,735

 

 
7,669

Write-downs
 

 

 
4,446

 

 
4,446

Pre-development, reclamation, and other
 
1,774

 
4,332

 
6,953

 

 
13,059

Total costs and expenses
 
27,222

 
254,622

 
166,779

 

 
448,623

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Loss on debt extinguishments
 
(10,040
)
 

 

 

 
(10,040
)
Fair value adjustments, net
 
(1,635
)
 
(5,787
)
 
(5,813
)
 

 
(13,235
)
Other, net
 
3,345

 
3,082

 
3,068

 
(3,633
)
 
5,862

Interest expense, net of capitalized interest
 
(28,348
)
 
(665
)
 
(4,683
)
 
3,633

 
(30,063
)
Total other income (expense), net
 
(36,678
)
 
(3,370
)
 
(7,428
)
 

 
(47,476
)
Income (Loss) before income and mining taxes
 
(63,900
)
 
59,595

 
14,847

 

 
10,542

Income and mining tax (expense) benefit
 
(29,768
)
 
39,905

 
42,981

 

 
53,118

Income (Loss) after income and mining taxes
 
(93,668
)
 
99,500

 
57,828

 

 
63,660

Equity income (loss) in consolidated subsidiaries
 
157,328

 
(4,825
)
 

 
(152,503
)
 

NET INCOME (LOSS)
 
$
63,660

 
$
94,675

 
$
57,828

 
$
(152,503
)
 
$
63,660

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax
 
4,533

 
4,466

 

 
(4,466
)
 
4,533

Reclassification adjustments for impairment of equity securities, net of tax
 
20

 
20

 

 
(20
)
 
20

Reclassification adjustments for realized loss on sale of equity securities, net of tax
 
(2,691
)
 
(3,181
)
 

 
3,181

 
(2,691
)
Other comprehensive income (loss)
 
1,862

 
1,305

 

 
(1,305
)
 
1,862

COMPREHENSIVE INCOME (LOSS)
 
$
65,522

 
$
95,980

 
$
57,828

 
$
(153,808
)
 
$
65,522

(1) Excludes amortization.


25

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

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2017
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
(18,502
)
 
$
59,434

52,577

$
93,411

 
$
(20,361
)
 
113,982

 
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(1,626
)
 
(63,928
)
52,577

(25,368
)
 

 
(90,922
)
Proceeds from the sale of assets
 
8,917

 
6,670

52,577

951

 

 
16,538

Purchase of investments
 
(13,558
)
 
(1
)
52,577


 

 
(13,559
)
Sales of investments
 
9,157

 
2,164

52,577


 

 
11,321

Other
 
(7,269
)
 

52,577

(188
)
 

 
(7,457
)
Investments in consolidated subsidiaries
 
(9,571
)
 
7,897

52,577

(1,004
)
 
2,678

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(13,950
)
 
(47,198
)
 
(25,609
)
 
2,678

 
(84,079
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Issuance of notes and bank borrowings
 
242,701

 

52,577


 

 
242,701

Payments on debt, capital leases, and associated costs
 
(185,538
)
 
(5,789
)
52,577

(4,174
)
 

 
(195,501
)
Net intercompany financing activity
 
16,904

 
(10,809
)
52,577

(23,778
)
 
17,683

 

Other
 
(3,726
)
 

52,577


 

 
(3,726
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
70,341

 
(16,598
)
 
(27,952
)
 
17,683

 
43,474

Effect of exchange rate changes on cash and cash equivalents
 

 
3

 
659

 

 
662

NET CHANGE IN CASH AND CASH EQUIVALENTS
 
37,889

 
(4,359
)
 
40,509

 

 
74,039

Cash and cash equivalents at beginning of period
 
58,048

 
50,023

 
54,111

 

 
162,182

Cash and cash equivalents at end of period
 
$
95,937

 
$
45,664

 
$
94,620

 
$

 
$
236,221


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
98,323

 
$
101,368

 
$
53,180

 
$
(152,503
)
 
100,368

 
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(196
)
 
(38,272
)
 
(32,619
)
 

 
(71,087
)
Acquisitions, net of cash acquired
 

 

 
(1,427
)
 

 
(1,427
)
Proceeds from the sale of assets
 
2

 
4,601

 
11,501

 

 
16,104

Purchase of investments
 
(104
)
 
(16
)
 

 

 
(120
)
Sales of investments
 
501

 
6,576

 

 

 
7,077

Other
 
(4,383
)
 
294

 
(129
)
 

 
(4,218
)
Investments in consolidated subsidiaries
 
(138,843
)
 
25,516

 

 
113,327

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(143,023
)
 
(1,301
)
 
(22,674
)
 
113,327

 
(53,671
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Issuance of common stock
 
122,584

 

 

 

 
122,584

Payments on debt, capital leases, and associated costs
 
(104,665
)
 
(9,001
)
 
(6,885
)
 

 
(120,551
)
Gold production royalty payments
 

 

 
(27,155
)
 

 
(27,155
)
Net intercompany financing activity
 
26,196

 
(73,364
)
 
7,992

 
39,176

 

Other
 
323

 

 

 

 
323

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
44,438


(82,365
)

(26,048
)

39,176


(24,799
)
Effect of exchange rate changes on cash and cash equivalents
 

 
5

 
(100
)
 

 
(95
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
 
(262
)
 
17,707

 
4,358

 

 
21,803

Cash and cash equivalents at beginning of period
 
96,123

 
34,228

 
70,363

 

 
200,714

Cash and cash equivalents at end of period
 
$
95,861

 
$
51,935

 
$
74,721

 
$

 
$
222,517




26

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

CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2017
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
95,937

 
$
45,664

 
$
94,620

 
$

 
$
236,221

Receivables
 
18

 
11,085

 
55,312

 

 
66,415

Ore on leach pads
 

 
78,801

 

 

 
78,801

Inventory
 

 
35,371

 
36,958

 

 
72,329

Prepaid expenses and other
 
7,688

 
2,985

 
9,687

 

 
20,360

 
 
103,643

 
173,906

 
196,577

 

 
474,126

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
3,940

 
151,765

 
79,353

 

 
235,058

Mining properties, net
 

 
220,022

 
316,179

 

 
536,201

Ore on leach pads
 

 
69,805

 

 

 
69,805

Restricted assets
 
13,242

 
227

 
7,484

 

 
20,953

Equity and debt securities
 
27,558

 
1,567

 

 

 
29,125

Receivables
 

 

 
13,461

 

 
13,461

Deferred tax assets
 

 

 

 

 

Net investment in subsidiaries
 
259,259

 
407

 
(1,166
)
 
(258,500
)
 

Other
 
214,047

 
10,531

 
5,168

 
(206,383
)
 
23,363

TOTAL ASSETS
 
$
621,689

 
$
628,230

 
$
617,056

 
$
(464,883
)
 
$
1,402,092

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
2,492

 
$
25,975

 
$
31,721

 
$

 
$
60,188

Other accrued liabilities
 
9,381

 
14,087

 
27,125

 

 
50,593

Debt
 

 
7,885

 
6,490

 

 
14,375

Reclamation
 

 
2,754

 
850

 

 
3,604

 
 
11,873

 
50,701

 
66,186

 

 
128,760

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Debt
 
244,920

 
22,838

 
213,148

 
(206,383
)
 
274,523

Reclamation
 

 
82,043

 
22,462

 

 
104,505

Deferred tax liabilities
 
14,978

 
6,137

 
56,075

 

 
77,190

Other long-term liabilities
 
2,328

 
4,061

 
46,188

 

 
52,577

Intercompany payable (receivable)
 
(416,947
)
 
341,431

 
75,516

 

 

 
 
(154,721
)
 
456,510

 
413,389

 
(206,383
)
 
508,795

STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Common stock
 
1,814

 
250

 
172,599

 
(172,849
)
 
1,814

Additional paid-in capital
 
3,318,987

 
174,111

 
1,803,807

 
(1,977,918
)
 
3,318,987

Accumulated deficit
 
(2,554,368
)
 
(49,984
)
 
(1,838,925
)
 
1,888,909

 
(2,554,368
)
Accumulated other comprehensive income (loss)
 
(1,896
)
 
(3,358
)
 

 
3,358

 
(1,896
)
 
 
764,537

 
121,019

 
137,481

 
(258,500
)
 
764,537

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
621,689

 
$
628,230

 
$
617,056

 
$
(464,883
)
 
$
1,402,092



27

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

CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
58,048

 
$
50,023

 
$
54,111

 
$

 
$
162,182

Receivables
 
12

 
6,865

 
53,554

 

 
60,431

Ore on leach pads
 

 
64,167

 

 

 
64,167

Inventory
 

 
49,393

 
56,633

 

 
106,026

Prepaid expenses and other
 
3,803

 
1,459

 
12,719

 

 
17,981

 
 
61,863

 
171,907

 
177,017

 

 
410,787

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
3,222

 
139,885

 
73,689

 

 
216,796

Mining properties, net
 

 
195,791

 
362,664

 

 
558,455

Ore on leach pads
 

 
67,231

 

 

 
67,231

Restricted assets
 
10,170

 
226

 
7,201

 

 
17,597

Equity and debt securities
 

 
4,488

 

 

 
4,488

Receivables
 

 

 
30,951

 

 
30,951

Net investment in subsidiaries
 
273,056

 
11,650

 

 
(284,706
)
 

Other
 
221,381

 
9,263

 
3,344

 
(221,384
)
 
12,604

TOTAL ASSETS
 
$
569,692

 
$
600,441

 
$
654,866

 
$
(506,090
)
 
$
1,318,909

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
2,153

 
$
24,921

 
$
26,261

 
$

 
$
53,335

Other accrued liabilities
 
12,881

 
13,664

 
16,198

 

 
42,743

Debt
 

 
6,516

 
5,523

 

 
12,039

Royalty obligations
 

 
4,995

 

 

 
4,995

Reclamation
 

 
2,672

 
850

 

 
3,522

 
 
15,034

 
52,768

 
48,832

 

 
116,634

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Debt
 
175,991

 
15,214

 
229,036

 
(221,384
)
 
198,857

Royalty obligations
 

 
4,292

 

 

 
4,292

Reclamation
 

 
75,183

 
20,621

 

 
95,804

Deferred tax liabilities
 
13,810

 
6,179

 
54,809

 

 
74,798

Other long-term liabilities
 
1,993

 
4,750

 
53,294

 

 
60,037

Intercompany payable (receivable)
 
(405,623
)
 
336,813

 
68,810

 

 

 
 
(213,829
)
 
442,431

 
426,570

 
(221,384
)
 
433,788

STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Common stock
 
1,809

 
250

 
197,913

 
(198,163
)
 
1,809

Additional paid-in capital
 
3,314,590

 
181,009

 
1,864,261

 
(2,045,270
)
 
3,314,590

Accumulated deficit
 
(2,545,424
)
 
(73,529
)
 
(1,882,710
)
 
1,956,239

 
(2,545,424
)
Accumulated other comprehensive income (loss)
 
(2,488
)
 
(2,488
)
 

 
2,488

 
(2,488
)
 
 
768,487

 
105,242

 
179,464

 
(284,706
)
 
768,487

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
569,692

 
$
600,441

 
$
654,866

 
$
(506,090
)
 
$
1,318,909



28

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

NOTE 19 – COMMITMENTS AND CONTINGENCIES
Labor Union Contract
The Company maintains a labor agreement 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 September 30, 2017, approximately 11% of the Company’s global labor force was covered by this collective bargaining agreement. 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.
Palmarejo Gold Stream
Effective August 2016, Coeur Mexicana sells 50% of Palmarejo gold production (excluding production from the Paramount properties acquired in 2015) to a subsidiary of Franco-Nevada Corporation under a gold stream agreement for the lesser of $800 or spot price per ounce. In 2015, Coeur Mexicana received a $22.0 million deposit toward future deliveries under the gold stream agreement.

NOTE 20 – SUBSEQUENT EVENTS
On September 10, 2017, the Company entered into an Arrangement Agreement (the “Arrangement Agreement”) among the Company, an indirect wholly-owned subsidiary of the Company, JDS Silver Holdings, Ltd. (“JDS Silver”) and Silvertip Resources Investment LLC as representative of the shareholders of JDS Silver. The Arrangement Agreement provides for the implementation of a Plan of Arrangement (the “Plan of Arrangement”), pursuant to which the Company would acquire all of the issued and outstanding common shares of JDS Silver (the “Acquisition”), the owner of the high-grade silver-zinc-lead Silvertip Mine located in northern British Columbia, Canada. On October 16, 2017, the Supreme Court of British Columbia approved the Plan of Arrangement, and the Company completed the Acquisition on October 17, 2017. Total initial consideration for the Acquisition was $200.0 million, consisting of (i) payments by the Company of approximately $147.5 million in cash and approximately $37.5 million in shares of common stock of the Company, and (ii) the assumption of approximately $15.0 million in existing debt. Additional contingent consideration of up to $50.0 million may become payable upon the achievement of certain permitting and exploration milestones prior to December 31, 2019.
In connection with the completion of the Acquisition, on October 12, 2017 the Company borrowed $100.0 million under the revolving credit facility.



29


Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Coeur Mining, Inc. and its subsidiaries (collectively the “Company”, “our”, or “we”). We use certain non-GAAP financial performance measures in our MD&A. For a detailed description of these measures, please see “Non-GAAP Financial Performance Measures” at the end of this item. We provide certain operational and financial data on a silver equivalent basis, converting gold to silver at a historical 60:1 ratio of silver ounces to gold ounces, unless otherwise noted. We also provide realized silver equivalent data determined by average spot silver and gold prices during the relevant period.
Overview
We are a gold and silver producer with mines located in the United States, Mexico, and Bolivia and exploration projects in the United States and Mexico. The Palmarejo complex, and Rochester, Kensington, Wharf, and San Bartolomé mines constitute our principal sources of revenue. In October 2017, the Company added its sixth mine to Coeur’s North America-focused platform with the acquisition of the high-grade silver-zinc-lead Silvertip mine (“Silvertip”) located in northern British Columbia, Canada. Silvertip is expected to achieve commercial production in 2018.
The Company's strategy is to discover, acquire, develop and operate low-cost silver and gold mines that produce long-term cash flow, provide opportunities for growth through continued exploration, and generate superior and sustainable returns for stockholders. Management focuses on maximizing net cash flow through identifying and implementing revenue enhancement opportunities, reducing operating and non-operating costs, exercising consistent capital discipline, and efficient working capital management.
Third Quarter Highlights
Production of 9.5 million silver equivalent ounces, consisting of 4.0 million silver ounces and 93,293 gold ounces
Sales of 9.2 million silver equivalent ounces, consisting of 3.8 million silver ounces and 89,972 gold ounces
Net loss of $16.7 million ($0.09 per share) and adjusted net loss of $18.4 million ($0.10 per share) (see “Non-GAAP Financial Performance Measures”)
Costs applicable to sales were $12.28 per silver equivalent ounce ($11.19 per average spot silver equivalent ounce) and $845 per gold equivalent ounce (see “Non-GAAP Financial Performance Measures”)
All-in sustaining costs were $17.68 per silver equivalent ounce ($15.30 per average spot silver equivalent ounce) (see “Non-GAAP Financial Performance Measures”)
Operating cash flow of $29.4 million and adjusted EBITDA of $39.5 million (see “Non-GAAP Financial Performance Measures”)
Cash and cash equivalents of $236.2 million at September 30, 2017
Acquired the Silvertip mine for initial consideration of $200.0 million (closed in October 2017). Additional consideration up to $50.0 million is contingent upon achieving specific future permitting and exploration milestones.
Established a $200.0 million secured revolving credit facility, which may be increased by up to $50.0 million in incremental loans and commitments subject to the terms of the Credit Agreement; drew $100.0 million on October 12, 2017 in connection with the Silvertip closing




30


Selected Financial and Operating Results
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Metal sales
$
175,963

 
$
176,386

 
$
555,455

 
$
503,219

Net income (loss)
$
(16,652
)
 
$
69,557

 
$
(8,944
)
 
$
63,660

Net income (loss) per share, diluted
$
(0.09
)
 
$
0.42

 
$
(0.05
)
 
$
0.40

Adjusted net income (loss)(1)
$
(18,425
)
 
$
38,555

 
$
(13,958
)
 
$
45,045

Adjusted net income (loss) per share, diluted(1)
$
(0.10
)
 
$
0.23

 
$
(0.08
)
 
$
0.28

EBITDA(1)
$
35,016

 
$
50,933

 
$
132,057

 
$
133,837

Adjusted EBITDA(1)
$
39,477

 
$
62,725

 
$
128,125

 
$
171,137

Silver ounces produced
3,951,616

 
3,545,697

 
11,858,974

 
10,948,145

Gold ounces produced
93,293

 
84,871

 
264,330

 
255,669

Silver equivalent ounces produced
9,549,196


8,637,957


27,718,774


26,288,285

Silver ounces sold
3,817,063

 
3,394,121

 
12,377,603

 
10,897,097

Gold ounces sold
89,972

 
83,389

 
287,040

 
251,023

Silver equivalent ounces sold
9,215,393

 
8,397,467

 
29,599,974

 
25,958,451

Average realized price per silver ounce
$
16.86

 
$
19.61

 
$
17.17

 
$
17.36

Average realized price per gold ounce
$
1,240

 
$
1,317

 
$
1,195

 
$
1,251

Costs applicable to sales per silver equivalent ounce(1)
$
12.28

 
$
12.38

 
$
12.21

 
$
11.79

Costs applicable to sales per average spot silver equivalent ounce(1)
$
11.19

 
$
11.91

 
$
11.28

 
$
11.02

Costs applicable to sales per gold equivalent ounce(1)
$
845

 
$
767

 
$
831

 
$
716

All-in sustaining costs per silver equivalent ounce(1)
$
17.68

 
$
17.02

 
$
16.72

 
$
16.03

All-in sustaining costs per average spot silver equivalent ounce(1)
$
15.30

 
$
15.75

 
$
14.86

 
$
14.17

(1)
See Non-GAAP Financial Performance Measures.

Consolidated Financial Results
Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016
Net Income (Loss)
Net loss was $16.7 million ($0.09 per share) compared to Net income of $69.6 million ($0.42 per share).  The decrease in Net income is primarily due to a significant tax benefit realized in 2016, lower realized silver and gold prices and higher all-in sustaining costs per silver equivalent ounce, partially offset by higher production, lower interest expense and loss on debt extinguishment in the third quarter of 2016.
Revenue
Metal sales were lower due to a decrease in average realized silver and gold prices of 14% and 6%, respectively, partially offset by higher silver and gold production. The Company sold 3.8 million silver ounces and 89,972 gold ounces, compared to sales of 3.4 million silver ounces and 83,389 gold ounces. Gold contributed 63% of sales and silver contributed 37%, compared to 62% of sales from gold and 38% from silver. Metal sales from North American operations provided 91% of consolidated revenue, compared to 84%.
Costs Applicable to Sales
Costs applicable to sales increased due to higher silver and gold ounces sold and higher costs applicable to sales per gold ounce. For a complete discussion of costs applicable to sales, see Results of Operations below.
Amortization
Amortization increased $6.1 million, or 22%, primarily due to higher silver and gold ounces sold.


31


Expenses
General and administrative expenses increased 4% due to higher professional service costs.
Exploration expense increased $6.1 million, due to the Company’s expansion of near-mine drilling at Palmarejo, Kensington and Rochester and regional exploration focused on projects in Nevada and Chihuahua, Mexico.
Pre-development, reclamation, and other expenses increased 77% due to additional work at La Preciosa, Silvertip acquisition costs, and workforce reduction severance at San Bartolomé.
Other Income and Expenses
In 2016, the Company incurred losses of $10.0 million on extinguishment of debt and non-cash fair value adjustments related to the Palmarejo gold production royalty which was terminated in the third quarter of 2016 and the Rochester royalty obligation which was terminated in the second quarter of 2017.
Interest expense (net of capitalized interest of $0.7 million) decreased to $3.6 million from $8.1 million, primarily due to lower debt levels and the lower 2024 Senior Notes interest rate.
Other, net decreased by $3.2 million, primarily due to lower gains on the sale of non-core assets and investments.
Income and Mining Taxes
During the third quarter of 2017, the Company reported estimated income and mining tax expense of approximately $14.2 million resulting in an effective tax rate of (588.1%). This compares to estimated income and mining tax benefit of $54.5 million for an effective tax rate of (360.6%) during the third quarter of 2016.
The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
 
Three months ended September 30,
 
2017
 
2016
In thousands
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
(6,008
)
$
(2,362
)
 
$
3,286

$
10,712

Argentina
738

(366
)
 
(301
)
67

Mexico
3,210

(9,057
)
 
3,020

37,821

Bolivia
(5,029
)
(518
)
 
4,325

5,904

Other jurisdictions
4,669

(1,929
)
 
4,772

(49
)
 
$
(2,420
)
$
(14,232
)
 
$
15,102

$
54,455

The Company’s effective income and mining tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in the consolidated effective tax rate, along with mining taxes, uncertain tax positions, and a full valuation allowance on deferred tax assets related to losses in the United States and certain foreign jurisdictions. Favorable operating results at Palmarejo continued to contribute to higher income and mining tax expense. The three months ended September 30, 2016 benefited from a legal entity reorganization to integrate acquisitions that resulted in a valuation allowance release of $40.8 million and a $15.0 million deferred tax benefit related to unremitted earnings.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related benefits will not be realized. The Company analyzes its deferred tax assets and if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets.
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
Net Income (Loss)
Net loss was $8.9 million ($0.05 per share) compared to Net income of $63.7 million ($0.40 per share).  The decrease in Net income is primarily due to a significant tax benefit realized in 2016, lower realized silver and gold prices, and higher all-in sustaining costs per silver equivalent ounce, partially offset by a $21.1 million gain on the sale of the Joaquin project, less unfavorable fair value adjustments, lower interest expense and higher silver and gold production.

32


Revenue
Metal sales increased due to higher silver and gold production, and a reduction in metal inventory, partially offset by a 1% and 4% decrease in average realized silver and gold prices, respectively. The Company sold 12.4 million silver ounces and 287,040 gold ounces, compared to sales of 10.9 million silver ounces and 251,023 gold ounces. Gold contributed 62% of sales and silver contributed 38% for both periods. Royalty revenue was lower due to the Company’s divestiture of non-core royalty assets throughout 2016 and the first half of 2017. Metal sales from North American operations provided 89% of revenue, compared to 85%.
Costs Applicable to Sales
Costs applicable to sales increased due to higher silver and gold ounces sold and higher mining and processing costs. For a complete discussion of costs applicable to sales, see Results of Operations below.
Amortization
Amortization increased $13.6 million, or 15%, primarily due to higher silver and gold ounces sold.
Expenses
General and administrative expenses increased 8% due to higher compensation, severance and professional service costs.
Exploration expense increased $15.2 million, due to the Company’s expansion of near-mine exploration drilling at Palmarejo, Kensington and Rochester as well as regional exploration with a focus on projects in Nevada and Chihuahua, Mexico.
Pre-development, reclamation, and other expenses increased 29% to $16.9 million due to additional work at La Preciosa, Silvertip acquisition costs and workforce reduction severance at San Bartolomé.
Other Income and Expenses
In 2017, the Company incurred a $9.3 million loss in connection with the repurchase of the 2021 7.875% Senior Notes concurrent with the completed offering of the 2024 5.875% Senior Notes compared to $10.0 million primarily related to the voluntary repayment of a term loan.
Non-cash fair value adjustments, net, were a loss of $0.9 million compared to a loss of $13.2 million, primarily due to the termination of the Palmarejo gold production royalty in the third quarter of 2016 and the lesser impact of changes in future metal prices on the Rochester royalty obligation, which was repurchased and terminated in May 2017.
Interest expense (net of capitalized interest of $1.8 million) decreased to $10.9 million from $30.1 million, primarily due lower debt levels and a lower interest rate on the 2024 Senior Notes compared to the 2021 Senior Notes.
Other, net increased by $22.6 million, primarily due to a $21.1 million gain on the sale of the Joaquin project in Argentina and a $2.3 million gain on the repurchase of the Rochester royalty obligation.
Income and Mining Taxes
During the first three quarters of 2017, the Company reported estimated income and mining tax expense of approximately $23.2 million resulting in an effective tax rate of 162.8%. This compares to estimated income and mining tax benefit of $53.1 million for an effective tax rate of (503.9%) during the first nine months of 2016.
The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
 
Nine months ended September 30,
 
2017
 
2016
In thousands
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
8,213

$
(2,739
)
 
$
(5,956
)
$
8,370

Argentina
281

1,704

 
3,137

(183
)
Mexico
9,665

(23,745
)
 
(1,136
)
42,155

Bolivia
(6,559
)
(304
)
 
10,388

5,182

Other jurisdictions
2,636

1,904

 
4,109

(2,406
)
 
$
14,236

$
(23,180
)
 
$
10,542

$
53,118


33


The Company’s effective income and mining tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in the consolidated effective tax rate, along with mining taxes, uncertain tax positions, and a full valuation allowance on deferred tax assets related to losses in the United States and certain foreign jurisdictions. During the first three quarters of the year, fluctuations in foreign exchange rates on deferred tax balances increased income and mining tax expense by $7.2 million, predominately due to the strength of the Mexican Peso. Also, continued favorable operating results at Palmarejo contributed to higher income and mining tax expense. The first three quarters of 2016 benefited from a legal entity reorganization to integrate acquisitions that resulted in a valuation allowance release of $40.8 million and a $15.0 million deferred tax benefit related to unremitted earnings.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related benefits will not be realized. The Company analyzes its deferred tax assets and if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets.
2017 Outlook
Full-year 2017 production guidance remains unchanged from the revised guidance published in the third quarter production release on October 5, 2017, which reflected lower expected silver production at the San Bartolomé mine due to persistent drought conditions. Revised 2017 cost guidance is shown in the table below.
2017 Production Outlook
(silver and silver equivalent ounces in thousands)
Silver
Gold
Silver Equivalent1
Palmarejo
6,500 - 7,000
110,000 - 120,000
13,100 - 14,200
Rochester
4,200 - 4,700
47,000 - 52,000
7,020 - 7,820
San Bartolomé
4,500 - 4,750
4,500 - 4,750
Endeavor
107
107
Kensington
120,000 - 125,000
7,200 - 7,500
Wharf
90,000 - 95,000
5,400 - 5,700
Total
15,307 - 16,557
367,000 - 392,000
37,327 - 40,077
2017 Cost Outlook
(dollars in millions, except per ounce amounts)
Previous Guidance
Revised Guidance
CAS per AgEqOz1  Palmarejo
$10.00 - $10.50
$10.00 - $10.50
CAS per AgEqOz1  Rochester
$11.50 - $12.00
$12.50 - $13.00
CAS per AgOz1  San Bartolomé
$15.75 - $16.25
$16.50 - $17.00
CAS per AuOz1  Kensington
$800 - $850
$850 - $900
CAS per AuEqOz1  Wharf
$700 - $750
$700 - $750
Capital Expenditures
$109 - $129
$120 - $140
General and Administrative Expenses
$28 - $32
$28 - $32
Exploration Expense
$29 - $31
$32 - $36
AISC per AgEqOz1
$15.75 - $16.25
$16.25 - $16.75
(1)
See Non-GAAP Financial Performance Measures.

Results of Operations
The Company produced 4.0 million ounces of silver and 93,293 ounces of gold in the three months ended September 30, 2017, compared to 3.5 million ounces of silver and 84,871 ounces of gold in the three months ended September 30, 2016. Silver production increased 11% due to higher mill throughput and higher grade at Palmarejo, partially offset by lower tons placed at Rochester and lower grade and mill throughput at San Bartolomé. Gold production increased 10% due to higher mill throughput and grade at Palmarejo, partially offset by lower grades at Wharf.

34


The Company produced 11.9 million ounces of silver and 264,330 ounces of gold in the nine months ended September 30, 2017, compared to 10.9 million ounces of silver and 255,669 ounces of gold in the nine months ended September 30, 2016. Silver production increased 8% due to higher mill throughput and grade at Palmarejo and timing of leach pad recoveries at Rochester, partially offset by lower mill throughput and grade at San Bartolomé and lower tons placed at Rochester. Gold production increased 3% due to higher mill throughput and grade Palmarejo, partially offset by lower grades at Kensington and Wharf.
Costs applicable to sales were $12.28 per silver equivalent ounce ($11.19 per average spot silver equivalent ounce) and $845 per gold equivalent ounce in the three months ended September 30, 2017 compared to $12.38 per silver equivalent ounce ($11.91 per average spot silver equivalent ounce) and $767 per gold equivalent ounce in the three months ended September 30, 2016. Costs applicable to sales per silver equivalent ounce remained comparable while costs applicable to sales per gold equivalent ounce increased 10% in the three months ended September 30, 2017 due to lower grades and production at Kensington and Wharf.
Costs applicable to sales were $12.21 per silver equivalent ounce ($11.28 per average spot silver equivalent ounce) and $831 per gold equivalent ounce in the nine months ended September 30, 2017 compared to $11.79 per silver equivalent ounce ($11.02 per average spot silver equivalent ounce) and $716 per gold equivalent ounce in the nine months ended September 30, 2016. Costs applicable to sales per silver equivalent ounce increased 4% in the nine months ended September 30, 2017 due to higher mining and maintenance costs at Rochester and lower production at San Bartolomé. Costs applicable to sales per gold equivalent ounce increased 16% in the nine months ended September 30, 2017 due to lower grades and production at Kensington and Wharf.
All-in sustaining costs were $17.68 per silver equivalent ounce ($15.30 per average spot silver equivalent ounce) in the three months ended September 30, 2017, compared to $17.02 per silver equivalent ounce ($15.75 per average spot silver equivalent ounce) in the three months ended September 30, 2016. The 4% increase in all-in sustaining costs per silver equivalent ounce in 2017 was primarily due to higher costs applicable to sales and exploration expense, partially offset by lower sustaining capital.
All-in sustaining costs were $16.72 per silver equivalent ounce ($14.86 per average spot silver equivalent ounce) in the nine months ended September 30, 2017, compared to $16.03 per silver equivalent ounce ($14.17 per average spot silver equivalent ounce) in the nine months ended September 30, 2016. The 4% increase in all-in sustaining costs per silver equivalent ounce in 2017 was primarily due to higher costs applicable to sales and exploration expense, partially offset by lower sustaining capital.
Palmarejo
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Tons milled
413,086

 
274,644

 
1,108,897

 
791,319

Silver ounces produced
1,907,548

 
933,200

 
4,894,910

 
3,173,665

Gold ounces produced
28,948

 
16,608

 
84,032

 
50,006

Silver equivalent ounces produced
3,644,428

 
1,929,680

 
9,936,830

 
6,174,025

Costs applicable to sales per silver equivalent oz(1)
$
9.82

 
$
10.96

 
$
10.19

 
$
10.58

Costs applicable to sales per average spot silver equivalent oz(1)
$
8.73

 
$
10.29

 
$
9.17

 
$
9.58

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016
Silver equivalent production increased 89% due to higher mining rates from Guadalupe and Independencia and higher silver and gold grade. Metal sales were $60.7 million, or 34% of Coeur’s metal sales, compared with $30.7 million, or 17% of Coeur’s metal sales. Costs applicable to sales per ounce decreased 10% as a result of higher production, partially offset by higher consumable costs. Amortization increased to $16.4 million, primarily due to due to higher production from Guadalupe and Independencia. Capital expenditures decreased to $5.5 million due to lower underground development at Independencia.
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
Silver equivalent production increased 61% due to higher mining rates from Guadalupe and Independencia and higher silver and gold grade, partially offset by lower silver recovery. Metal sales were $191.6 million, or 34% of Coeur’s metal sales, compared with $108.7 million, or 22% of Coeur’s metal sales. Costs applicable to sales per ounce decreased 4% as a result of higher production. Amortization increased to $51.0 million compared to $27.8 million, primarily due to higher production from Guadalupe and Independencia. Capital expenditures decreased to $23.0 million due to lower underground development at Independencia.

35


Rochester
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Tons placed
4,262,011

 
4,901,039

 
12,268,819

 
15,677,511

Silver ounces produced
1,069,945

 
1,160,902

 
3,353,608

 
3,286,817

Gold ounces produced
10,955

 
12,120

 
32,056

 
36,521

Silver equivalent ounces produced
1,727,245

 
1,888,102

 
5,276,968

 
5,478,077

Costs applicable to sales per silver equivalent oz(1)
$
13.91

 
$
11.66

 
$
13.31

 
$
11.87

Costs applicable to sales per average spot silver equivalent oz(1)
$
12.66

 
$
11.11

 
$
12.32

 
$
10.90

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016
Silver equivalent production decreased 9% due to lower tons placed, partially offset by the timing of silver recoveries. Metal sales were $31.2 million, or 18% of Coeur’s metal sales, compared with $37.9 million, or 22% of Coeur’s metal sales. Costs applicable to sales per silver equivalent ounce increased 19% due to lower production, higher waste tons mined as well as higher hauling and maintenance costs. Amortization decreased to $4.6 million compared to $5.2 million due to lower production. Capital expenditures increased to $9.7 million compared to $3.4 million due to the stage IV leach pad expansion and commissioning.
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
Silver equivalent production decreased 4% due to lower tons placed resulting from planned crusher maintenance and higher waste tons mined, partially offset by the timing of silver recoveries. Metal sales were $102.9 million, or 19% of Coeur’s metal sales, compared with $103.7 million, or 21% of Coeur’s metal sales. Costs applicable to sales per silver equivalent ounce increased 12% due to lower placed recoverable ounces, higher waste tons mined as well as higher hauling and maintenance costs. Amortization remained comparable at $15.3 million. Capital expenditures increased to $34.1 million compared to $10.6 million due to the stage IV leach pad expansion and commissioning.
Kensington
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Tons milled
172,038

 
140,322

 
501,096

 
456,799

Gold ounces produced
27,541

 
26,459

 
80,162

 
90,642

Costs applicable to sales/oz(1)
$
948

 
$
862

 
$
931

 
$
794

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016
Gold production increased 4% due to higher mill throughput, partially offset by lower grades mined. Metal sales were $36.6 million, or 21% of Coeur’s metal sales, compared to $40.2 million, or 23% of Coeur’s metal sales. Costs applicable to sales per ounce were 10% higher, primarily due to lower grade, higher maintenance costs and contract services. Amortization remained comparable at $7.9 million. Capital expenditures increased to $10.1 million compared to $8.6 million, due to higher rates of underground mine development.
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
Gold production decreased 12% due to lower grades mined, partially offset by higher mill throughput. Metal sales were $110.1 million, or 20% of Coeur’s metal sales, compared to $112.4 million, or 22% of Coeur’s metal sales. Costs applicable to sales per ounce were 17% higher, primarily due to lower grade and higher contract services. Amortization was $25.4 million compared to $26.2 million due to lower production, partially offset by higher amortizable mining properties and equipment. Capital expenditures remained comparable at $24.3 million.


36


Wharf
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Tons placed
1,150,308

 
1,199,008

 
3,435,656

 
3,089,302

Gold ounces produced
25,849

 
29,684

 
68,080

 
78,500

Silver ounces produced
14,817

 
25,335

 
47,469

 
73,515

Gold equivalent ounces produced(1)
26,096


30,106


68,871


79,725

Costs applicable to sales per gold equivalent oz(1)
$
720

 
$
668

 
$
704

 
$
623

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016
Gold equivalent production decreased 13% due to fewer high-grade tons placed from the Golden Reward deposit. Metal sales were $31.3 million, or 18% of Coeur’s metal sales, compared to $39.3 million, or 22% of Coeur’s metal sales. Costs applicable to sales per gold equivalent ounce increased 8% due to lower production, partially offset by lower mining, crushing and processing costs. Amortization was $3.2 million compared to $6.5 million due to lower production and higher life of mine reserves. Capital expenditures increased to $3.1 million due to mining equipment purchases.
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
Gold equivalent production decreased 14% due to lower grade, partially offset by higher tons placed. Metal sales were $88.6 million, or 16% of Coeur’s metal sales, compared to $101.3 million, or 20% of Coeur’s metal sales. Costs applicable to sales per gold equivalent ounce increased 13% due to lower production and higher blasting and crushing costs. Amortization was $8.9 million compared to $15.6 million due to lower production and higher life of mine reserves. Capital expenditures increased to $5.5 million due to mining equipment purchases.
San Bartolomé
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Tons milled
365,554

 
450,409

 
1,167,605

 
1,298,656

Silver ounces produced
956,893

 
1,370,194

 
3,455,961

 
4,210,051

Costs applicable to sales/oz(1)
$
18.26

 
$
14.97

 
$
16.86

 
$
13.58

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016
Silver production decreased 30% due to lower high-grade ore purchases and mill throughput due to continued drought conditions and lower third-party ore purchases. Silver sales were $16.0 million, or 9% of Coeur’s metal sales, compared with $27.5 million, or 16% of Coeur’s metal sales. Costs applicable to sales per ounce increased due to lower production and an inventory adjustment of $0.6 million. Amortization remained comparable at $1.4 million due to lower life of mine reserves. Capital expenditures decreased to $0.5 million.
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
Silver production decreased 18% due to lower high-grade ore purchases and mill throughput due to continued drought conditions and lower third-party ore purchases, partially offset by higher recoveries. Silver sales were $60.4 million, or 11% of Coeur’s metal sales, compared with $73.9 million, or 15% of Coeur’s metal sales. Costs applicable to sales per ounce increased due to lower production and inventory adjustments of $1.6 million. Amortization remained comparable at $5.1 million due to lower life of mine reserves. Capital expenditures decreased to $1.2 million.
Endeavor Silver Stream
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Tons milled

 
42,335

 
133,905

 
166,740

Silver ounces produced
2,413

 
56,066

 
107,026

 
204,097

Costs applicable to sales/oz(1)
$
4.86

 
$
8.10

 
6.95

 
6.42

(1)
See Non-GAAP Financial Performance Measures.

37


In July 2017, the Company sold the Endeavor silver stream and our remaining portfolio of royalties for total consideration of $13.0 million to Metalla Royalty & Streaming Ltd. Reported production and financial results include operations through May 2017, as the buyer is entitled to production and any associated sales subject to the stream agreement after June 1, 2017 under the terms of the sale agreement. Amounts presented for the three months ended September 30, 2017 relate to final adjustments for provisional sales.
Nine Months Ended September 30, 2017 compared to Nine Months Ended September 30, 2016
Silver production at Endeavor decreased due to lower grades. Costs applicable to sales per ounce increased due to the impact of higher silver prices on the Company’s silver price sharing agreement with the Endeavor mine operator. Amortization was $0.3 million compared to $0.9 million due to lower production and lower amortizable mining properties.

Liquidity and Capital Resources
Cash Provided by Operating Activities
Net cash provided by operating activities for the three and nine months ended September 30, 2017 was $29.4 million and $114.0 million, respectively, compared to net cash provided by operating activities of $47.8 million and $100.4 million, respectively, for the three and nine months ended September 30, 2016, and was impacted by the following key factors:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Consolidated silver equivalent ounces sold
9,215,393

 
8,397,467

 
29,599,974

 
25,958,451

Average realized price per consolidated silver equivalent ounce
$
19.09

 
$
21.00

 
$
18.77

 
$
19.39

Costs applicable to sales per consolidated silver equivalent ounce (1)
(12.90
)
 
(12.55
)
 
(12.75
)
 
(11.84
)
Operating margin per consolidated silver equivalent ounce
$
6.19

 
$
8.45

 
$
6.02

 
$
7.55

(1)
See Non-GAAP Financial Performance Measures.
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2017
 
2016
 
2017
 
2016
Cash flow before changes in operating assets and liabilities
$
21,237

 
$
58,118

 
$
92,421

 
$
128,867

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Receivables
6,529

 
19,672

 
17,719

 
10,751

Prepaid expenses and other
(3,195
)
 
(2,816
)
 
(3,882
)
 
(2,435
)
Inventories
(2,874
)
 
(8,900
)
 
10,421

 
(24,408
)
Accounts payable and accrued liabilities
7,735

 
(18,262
)
 
(2,697
)
 
(12,407
)
CASH PROVIDED BY OPERATING ACTIVITIES
$
29,432

 
$
47,812

 
$
113,982

 
$
100,368

Cash provided by operating activities decreased $18.4 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 due to lower average realized prices and higher costs applicable to sales per consolidated silver equivalent ounce, partially offset by higher silver equivalent ounces sold and favorable working capital adjustments. Metal sales for the three months ended September 30, 2017 decreased $0.4 million, with $15.7 million due to lower average realized prices mostly offset by $15.3 million due to higher silver equivalent ounces sold. The $8.2 million working capital decrease in the three months ended September 30, 2017 was primarily due to an increase in accounts payable partially offset by an increase in inventories and prepaid assets, compared to the $10.3 million working capital increase in the three months ended September 30, 2016 primarily due to an increase on ore on leach pads and timing of payments, partially offset by lower trade receivables.
Cash provided by operating activities increased $13.6 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 due to higher silver equivalent ounces sold and favorable working capital adjustments, partially offset by higher costs applicable to sales per consolidated silver equivalent ounce and lower average realized prices. Metal sales for the nine months ended September 30, 2017 increased $52.2 million, with $68.5 million due to higher silver equivalent ounces sold, partially offset by $16.2 million due to lower average realized prices. The $21.6 million working capital decrease in the nine months ended September 30, 2017 was primarily due to the reduction in precious metal inventory and

38


receivables, compared to the $28.5 million working capital increase in the nine months ended September 30, 2016, primarily due to an increase in ore on leach pads and precious metal inventory, and a reduction in accounts payable partially offset by lower receivables.
Cash Used in Investing Activities
Net cash used in investing activities in the three months ended September 30, 2017 was $37.4 million compared to $18.1 million in the three months ended September 30, 2016, primarily due to the purchase of strategic equity investments, and higher capital expenditures, partially offset by non-core asset sales. The Company had capital expenditures of $29.5 million in the three months ended September 30, 2017 compared with $25.6 million in the three months ended September 30, 2016. Capital expenditures in the three months ended September 30, 2017 were primarily related to underground development at Palmarejo and Kensington, capitalized conversion drilling, and the Stage IV leach pad expansion and commissioning at Rochester. Capital expenditures in the three months ended September 30, 2016 were primarily related to underground development at Palmarejo and Kensington.
Net cash used in investing activities in the nine months ended September 30, 2017 was $84.1 million compared to $53.7 million in the nine months ended September 30, 2016, primarily due to higher capital expenditures and the purchase of strategic equity investments, partially offset by the proceeds from the sale of the Joaquin project. The Company had capital expenditures of $90.9 million in the nine months ended September 30, 2017 compared with $71.1 million in the nine months ended September 30, 2016. Capital expenditures in the nine months ended September 30, 2017 were primarily related to underground development at Palmarejo and Kensington, capitalized conversion drilling, and the Stage IV leach pad expansion and commissioning at Rochester. Capital expenditures in the nine months ended September 30, 2016 were primarily related to underground development at Palmarejo and Kensington.
Cash Provided by (Used in) Financing Activities
Net cash used in financing activities in the three months ended September 30, 2017 was $5.6 million compared to $64.9 million in the three months ended September 30, 2016, primarily due to issuance costs incurred in connection with the Revolving Credit Facility. During the three months ended September 30, 2016, the Company repaid the Term Loan, partially offset by net proceeds from the settlement of sales of shares of its common stock. In addition, the Company made payments of $7.6 million under the Palmarejo gold production royalty obligation that terminated in July 2016. Coeur Mexicana now sells 50% of Palmarejo gold production (excluding production from Independencia Este, acquired in the 2015 Paramount transaction) for the lesser of $800 or spot price per ounce under a gold stream agreement.
Net cash provided by financing activities in the nine months ended September 30, 2017 was $43.5 million compared to net cash used in financing activities of $24.8 million in the nine months ended September 30, 2016. During the nine months ended September 30, 2017, the Company received net proceeds of approximately $245.0 million from the issuance of the 2024 Senior Notes, partially offset by the repurchase of the 2021 Senior Notes for $185.5 million, including premiums. Payments of $27.2 million were made in 2016 under the Palmarejo gold production royalty that terminated in July 2016. Coeur Mexicana now sells 50% of Palmarejo gold production (excluding production from Independencia Este, acquired in 2015 Paramount transaction) for the lesser of $800 or spot price per ounce under a gold stream agreement.
In September 2017, the Company, as borrower, and certain subsidiaries of the Company, as guarantors, entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A, Royal Bank of Canada, Bank of Montreal, Chicago Branch, and the Bank of Nova Scotia. The Credit Agreement provides for a $200.0 million senior secured revolving credit facility (the “Facility”), which may be increased by up to $50.0 million in incremental loans and commitments subject to the terms of the Credit Agreement. The Facility has a term of four years. Loans under the Facility will bear interest at a rate equal to either a base rate plus a margin ranging from 1.00% to 1.75% or an adjusted LIBOR rate plus a margin ranging from 2.00% to 2.75%, as selected by the Company, in each case, with such margin determined in accordance with a pricing grid based upon the Company’s consolidated net leverage ratio as of the end of the applicable period.
The Facility is secured by substantially all of the assets of the Company and its domestic subsidiaries, including the land, mineral rights and infrastructure at the Kensington, Rochester and Wharf mines, as well as a pledge of the shares of certain of the Company’s subsidiaries.  The Credit Agreement contains representations and warranties and affirmative and negative covenants that are usual and customary, including representations, warranties, and covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions.  The Credit Agreement also contains financial covenants consisting of a consolidated net leverage ratio and a consolidated interest coverage ratio.  Obligations under the Credit Agreement may be accelerated upon the occurrence of certain customary events of default At September 30, 2017, the Company had $200.0 million available under the Facility with no amounts drawn. Issuance costs of $1.8 million were recorded as prepaid costs and will be amortized over the term of the Facility. On October 12, 2017, the Company drew $100.0 million from the Facility at a rate of 3.5% based on the 1-month LIBOR rate plus a margin of 2.25%.

39


In May 2017, the Company completed an offering of $250.0 million in aggregate principal amount of 2024 Senior Notes in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended for net proceeds of approximately $245.0 million. The 2024 Senior Notes are governed by an Indenture dated as of May 31, 2017 (the “Indenture”), among the Company, as issuer, certain of the Company's subsidiaries named therein, as guarantors thereto (the “Guarantors”), and the Bank of New York Mellon, as trustee. In connection with the sale of the 2024 Senior Notes, the Company entered into a Registration Rights Agreement. On August 4, 2017, the Company commenced an exchange offer of registered 2024 Senior Notes for privately-placed 2024 Senior Notes which was completed on September 12, 2017. The 2024 Senior Notes bear interest at a rate of 5.875% per year from the date of issuance.  Interest on the 2024 Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2017. The 2024 Senior Notes will mature on June 1, 2024 and are fully and unconditionally guaranteed by the Guarantors. At any time prior to June 1, 2020, the Company may redeem all or part of the 2024 Senior Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem some or all of the 2024 Senior Notes on or after June 1, 2020, at redemption prices set forth in the Indenture, together with accrued and unpaid interest. At any time prior to June 1, 2020, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2024 Senior Notes, including any permitted additional 2024 Senior Notes, at a redemption price equal to 105.875% of the principal amount. The Indenture contains covenants that, among other things, limit the Company’s ability under certain circumstances to incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem capital stock, prepay, redeem or repurchase certain debt, make loans and investments, create liens, sell, transfer or otherwise dispose of assets, enter into transactions with affiliates, enter into agreements restricting the Company's subsidiaries' ability to pay dividends and impose conditions on the Company’s ability to engage in mergers, consolidations and sales of all or substantially all of its assets. The Indenture also contains certain “Events of Default” (as defined in the Indenture) customary for indentures of this type.
Concurrent with the offering of the 2024 Senior Notes, the Company commenced a cash tender offer (the “Tender Offer”) to purchase the outstanding $178.0 million in aggregate principal amount of its 2021 Senior Notes. The Tender Offer was made on the terms and subject to the conditions set forth in the Offer to Purchase dated May 19, 2017. Holders of the 2021 Senior Notes who tendered their notes were entitled to receive $1,043.88 per $1,000 principal amount of the Notes, plus accrued and unpaid interest. $118.1 million aggregate principal amount of the Notes were tendered and purchased by the Company on May 31, 2017. In accordance with the terms of the indenture governing the 2021 Senior Notes, the remaining $59.9 million aggregate principal amount of the Notes were redeemed on June 30, 2017 at the redemption price of $1,039.38 per $1,000 principal amount, plus accrued and unpaid interest. The Company recorded a loss of $9.3 million as a result of the extinguishment of the 2021 Senior Notes.

Other Liquidity Matters
We believe that our liquidity and capital resources from U.S. operations are adequate to fund our U.S. operations and corporate activities. The Company has asserted indefinite reinvestment of earnings from its Mexican operations as determined by management’s judgment about and intentions concerning the future operations of the Company. The Company does not believe that the amounts reinvested will have a material impact on liquidity.

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, 2016 (the “2016 10-K”) for the Company’s critical accounting policies and estimates. Those critical accounting policies and estimates have been supplemented and updated in this Form 10-Q.
    
    


40


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 its 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. The tax effect of adjustments are based on statutory tax rates and the Company’s tax attributes, including the impact through the Company’s valuation allowance. The combined effective rate of tax adjustments may not be consistent with the statutory tax rates or the Company’s effective tax rate due to jurisdictional tax attributes and related valuation allowance impacts which may minimize the tax effect of certain adjustments and may not apply to gains and losses equally. Adjusted net income (loss) is reconciled to Net income (loss) in the table below:
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands except per share amounts
2017
 
2016
 
2017
 
2016
Net income (loss)
$
(16,652
)
 
$
69,557

 
$
(8,944
)
 
$
63,660

Fair value adjustments, net

 
961

 
864

 
13,235

Impairment of equity and debt securities

 

 
425

 
20

Write-downs

 

 

 
4,446

Inventory write-downs

 
3,689

 

 
3,689

Gain on sale of Joaquin project

 

 
(21,138
)
 

(Gain) loss on sale of assets and securities
(2,117
)
 
(7,462
)
 
(565
)
 
(11,674
)
Gain on repurchase of Rochester royalty

 

 
(2,332
)
 

Loss on debt extinguishment

 
10,040

 
9,342

 
10,040

San Bartolomé workforce severance
2,175

 

 
2,175

 

Transaction costs
819

 
26

 
819

 
1,198

Deferred tax on reorganization

 
(40,767
)
 

 
(40,767
)
Foreign exchange loss (gain)
(1,660
)
 
2,549

 
4,580

 
(1,384
)
Tax effect of adjustments(1)
(990
)
 
(38
)
 
816

 
2,582

Adjusted net income (loss)
$
(18,425
)

$
38,555


$
(13,958
)
 
$
45,045

 
 
 
 
 
 
 
 
Adjusted net income (loss) per share - Basic
$
(0.10
)
 
$
0.24

 
$
(0.08
)
 
$
0.29

Adjusted net income (loss) per share - Diluted
$
(0.10
)
 
$
0.23

 
$
(0.08
)
 
$
0.28

(1)
For the three months ended September 30, 2017, tax effect of adjustments of $(1.0) million (112.9%) is primarily related to deferred taxes on the Metalla transaction. For the three months ended September 30, 2016, tax effect of adjustments of $(38) thousand (0.5%) is primarily related to the tax gain on the sale of an asset, partially offset by losses on other asset sales where no tax benefit was recognized and tax benefit from fair value adjustment.

For the nine months ended September 30, 2017, tax effect of adjustments of $0.8 million (-7.8%) is primarily related to a taxable gain on the sale of the Joaquin project and deferred taxes on the Metalla transaction. For the nine months ended September 30, 2016, tax effect of adjustments of $2.6 million (-12.3%) is primarily related to a taxable gain on the sale of assets and the tax valuation allowance impact from an asset write-down, partially offset by tax benefit from fair value adjustments.


41


EBITDA and Adjusted EBITDA
Management uses EBITDA to evaluate the Company’s operating performance, to plan and forecast its operations, and assess leverage levels and liquidity measures. The Company believes the use of EBITDA 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. Adjusted EBITDA is a measure used in the Indenture and the Facility to determine our ability to make certain payments and incur additional indebtedness. EBITDA and Adjusted EBITDA do not represent, and should not be considered an alternative to, Net income (Loss) or Cash Flow from Operations as determined under GAAP. Other companies may calculate Adjusted EBITDA differently and those calculations may not be comparable to our presentation. Adjusted EBITDA is reconciled to Net income (loss) in the table below:
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands except per share amounts
2017
 
2016
 
2017
 
2016
Net income (loss)
$
(16,652
)
 
$
69,557

 
$
(8,944
)
 
$
63,660

Interest expense, net of capitalized interest
3,606

 
8,068

 
10,941

 
30,063

Income tax provision (benefit)
14,232

 
(54,455
)
 
23,180

 
(53,118
)
Amortization
33,830

 
27,763

 
106,880

 
93,232

EBITDA
35,016


50,933


132,057


133,837

Fair value adjustments, net

 
961

 
864

 
13,235

Impairment of equity and debt securities

 

 
425

 
20

Foreign exchange (gain) loss
(229
)
 
1,466

 
(2,577
)
 
7,286

Gain on sale of Joaquin project

 

 
(21,138
)
 

(Gain) loss on sale of assets and securities
(2,117
)
 
(7,462
)
 
(565
)
 
(11,674
)
Gain on repurchase of Rochester royalty

 

 
(2,332
)
 

Loss on debt extinguishment

 
10,040

 
9,342

 
10,040

San Bartolomé workforce severance
2,175

 

 
2,175

 

Transaction costs
819

 
26

 
819

 
1,198

Asset retirement obligation accretion
2,511

 
2,096

 
7,352

 
6,221

Inventory adjustments and write-downs
1,302

 
4,665

 
1,703

 
6,528

Write-downs

 

 

 
4,446

Adjusted EBITDA
$
39,477


$
62,725


$
128,125


$
171,137

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 gold, assessing our operating performance and ability to generate free cash flow from operations and sustaining production. 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 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.














42


Three Months Ended September 30, 2017
 
 
Silver
 
Gold
 
Total
In thousands except per ounce amounts
 
Palmarejo
 
Rochester
 
San Bartolomé
 
Endeavor
 
Total
 
Kensington
 
Wharf
 
Total
 
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
49,669

 
$
27,866

 
$
18,795

 
$
59

 
$
96,389

 
$
35,522

 
$
20,553

 
$
56,075

 
$
152,464

Amortization
 
16,414

 
4,591

 
1,430

 
20

 
22,455

 
7,864

 
3,223

 
11,087

 
33,542

Costs applicable to sales
 
$
33,255

 
$
23,275

 
$
17,365

 
$
39

 
$
73,934

 
$
27,658

 
$
17,330

 
$
44,988

 
$
118,922

Silver equivalent ounces sold
 
3,386,963

 
1,673,704

 
951,219

 
8,027

 
6,019,913

 
 
 
 
 
 
 
9,215,393

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
29,173

 
24,085

 
53,258

 
 
Costs applicable to sales per ounce
 
$
9.82

 
$
13.91

 
$
18.26

 
$
4.86

 
$
12.28

 
$
948

 
$
720

 
$
845

 
$
12.90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per average spot ounce
 
$
8.73

 
$
12.66

 
 
 
 
 
$
11.19

 
 
 
 
 
 
 
$
11.17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
118,922

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,408

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18,626

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,412

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,814

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,364

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,337

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
162,883

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,019,913

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
3,195,480

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,215,393

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
17.68

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated silver equivalent ounces sold (average spot)
 
 
 
 
 
 
 
 
 
 
 
 
 
10,645,948

All-in sustaining costs per average spot silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
15.30

(1)
Excludes development capital for Jualin, Guadalupe South Portal and Rochester expansion permitting.

Three Months Ended September 30, 2016
 
 
Silver
 
Gold
 
 
In thousands except per ounce amounts
 
Palmarejo
 
Rochester
 
San Bartolomé
 
Endeavor
 
Total
 
Kensington
 
Wharf
 
Total
 
Total
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
21,794

 
$
27,027

 
$
22,536

 
$
486

 
$
71,843

 
$
34,755

 
$
26,158

 
$
60,913

 
$
132,756

Amortization
 
5,761

 
5,244

 
1,723

 
113

 
12,841

 
8,046

 
6,461

 
14,507

 
27,348

Costs applicable to sales
 
$
16,033

 
$
21,783

 
$
20,813

 
$
373

 
$
59,002

 
$
26,709

 
$
19,697

 
$
46,406

 
$
105,408

Silver equivalent ounces sold
 
1,462,401

 
1,868,085

 
1,390,552

 
46,069

 
4,767,107

 
 
 
 
 
 
 
8,397,467

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
30,998

 
29,508

 
60,506

 
 
Costs applicable to sales per ounce
 
$
10.96

 
$
11.66

 
$
14.97

 
$
8.10

 
$
12.38

 
$
862

 
$
668

 
$
767

 
$
12.55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per average spot ounce
 
$
10.29

 
$
11.11

 
 
 
 
 
$
11.91

 
 
 
 
 
 
 
$
11.62

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
105,408

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
761

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19,762

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,113

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,706

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,036

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,133

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
142,919

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,767,107

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
3,630,360

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,397,467

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
17.02

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated silver equivalent ounces sold (average spot)
 
 
 
 
 
 
 
 
 
 
 
 
 
9,074,222

All-in sustaining costs per average spot silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
15.75

(1)
Excludes development capital for Jualin, Guadalupe, Independencia and Rochester crushing capacity expansion.

43


Nine Months Ended September 30, 2017
 
 
Silver
 
Gold
 
Total
In thousands except per ounce amounts
 
Palmarejo
 
Rochester
 
San Bartolomé
 
Endeavor
 
Total
 
Kensington
 
Wharf
 
Total
 
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
161,145


$
89,220

 
$
64,032

 
$
1,045

 
$
315,442

 
$
109,478

 
$
58,301

 
$
167,779

 
$
483,221

Amortization
 
50,995

 
15,345

 
5,053

 
301

 
71,694

 
25,389

 
8,883

 
34,272

 
105,966

Costs applicable to sales
 
$
110,150

 
$
73,875

 
$
58,979

 
$
744

 
$
243,748

 
$
84,089

 
$
49,418

 
$
133,507

 
$
377,255

Silver equivalent ounces sold
 
10,809,932

 
5,551,913

 
3,497,263

 
107,026

 
19,966,134

 
 
 
 
 
 
 
29,599,974

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
90,348

 
70,216

 
160,564

 
 
Costs applicable to sales per ounce
 
$
10.19


$
13.31

 
$
16.86

 
$
6.95

 
$
12.21

 
$
931

 
$
704

 
$
831

 
$
12.75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per average spot ounce
 
$
9.17

 
$
12.32

 

 

 
$
11.28

 

 

 

 
$
11.33

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
377,255

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,312

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47,795

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24,587

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22,879

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12,279

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,903

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
495,010

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19,966,134

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
9,633,840

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
29,599,974

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
16.72

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated silver equivalent ounces sold (average spot)
 
 
 
 
 
 
 
 
 
 
 
 
 
33,311,575

All-in sustaining costs per average spot silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
14.86

(1)
Excludes development capital for Jualin, Guadalupe South Portal and Rochester expansion permitting.

Nine Months Ended September 30, 2016
 
 
Silver
 
Gold
 
 
In thousands except per ounce amounts
 
Palmarejo
 
Rochester
 
San Bartolomé
 
Endeavor
 
Total
 
Kensington
 
Wharf
 
Total
 
Total
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
87,751

 
$
81,983

 
$
62,285

 
$
1,806

 
$
233,825

 
$
99,941

 
$
65,140

 
$
165,081

 
$
398,906

Amortization
 
27,815

 
15,994

 
5,330

 
496

 
49,635

 
26,203

 
15,640

 
41,843

 
91,478

Costs applicable to sales
 
$
59,936

 
$
65,989

 
$
56,955

 
$
1,310

 
$
184,190

 
$
73,738

 
$
49,500

 
$
123,238

 
$
307,428

Silver equivalent ounces sold
 
5,667,133

 
5,559,347

 
4,193,397

 
204,174

 
15,624,051

 
 
 
 
 
 
 
25,958,451

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
92,824

 
79,416

 
172,240

 
 
Costs applicable to sales per ounce
 
$
10.58


$
11.87


$
13.58


$
6.42


$
11.79

 
$
794


$
623


$
716

 
$
11.84

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per average spot ounce
 
$
9.58

 
$
10.90

 

 

 
$
11.02

 
 
 
 
 
 
 
$
10.47

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
307,428

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,047

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
57,491

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22,789

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,669

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,967

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,789

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
416,180

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15,624,051

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
10,334,400

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25,958,451

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
16.03

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated silver equivalent ounces sold (average spot)
 
 
 
 
 
 
 
 
 
 
 
 
 
29,370,501

All-in sustaining costs per average spot silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
14.17

(1)
Excludes development capital for Jualin, Guadalupe, Independencia and Rochester crushing capacity expansion.


44


Reconciliation of All-in Sustaining Costs per Silver Equivalent Ounce for Revised 2017 Guidance
 
Silver
Gold
 
In thousands except per ounce amounts
Palmarejo
Rochester
San Bartolomé
Endeavor
Total Silver
Kensington
Wharf
Total Gold
Total Combined
Costs applicable to sales, including amortization (U.S. GAAP)
$
215,400

$
118,700

$
86,000

$
1,044

$
421,144

$
153,800

$
83,600

$
237,400

$
658,544

Amortization
67,800

20,500

7,800

300

96,400

38,800

12,800

51,600

148,000

Costs applicable to sales
$
147,600

$
98,200

$
78,200

$
744

$
324,744

$
115,000

$
70,800

$
185,800

$
510,544

Silver equivalent ounces sold
14,500,000

7,690,000

4,700,000

107,000

26,997,000

 
 
 
40,557,000

Gold equivalent ounces sold
 
 
 
 
 
131,000

95,000

226,000

 
Costs applicable to sales per ounce
$10.00 - $10.50
$12.50 - $13.00
$16.50 - $17.00


$850 - $900
$700 - $750


 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
$
510,544

Treatment and refining costs
 
 
 
 
 
 
 
 
5,100

Sustaining capital, including capital lease payments
 
 
 
 
 
 
70,000

General and administrative
 
 
 
 
 
 
 
 
32,000

Exploration
 
 
 
 
 
 
 
 
33,000

Reclamation
 
 
 
 
 
 
 
 
16,000

Project/pre-development costs
 
 
 
 
 
 
 
 
7,000

All-in sustaining costs
 
 
 
 
 
 
 
 
$
673,644

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
26,997,000

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
13,560,000

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
40,557,000

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
$16.25 - $16.75


Reconciliation of All-in Sustaining Costs per Silver Equivalent Ounce for Previous 2017 Guidance
 
Silver
Gold
 
In thousands except per ounce amounts
Palmarejo
Rochester
San Bartolomé
Endeavor
Total Silver
Kensington
Wharf
Total Gold
Total Combined
Costs applicable to sales, including amortization (U.S. GAAP)
$
228,500

$
113,550

$
92,300

$
1,038

$
435,388

$
136,600

$
82,200

$
218,800

$
654,188

Amortization
76,500

22,550

8,300

281

107,631

29,100

13,200

42,300

149,931

Costs applicable to sales
$
152,000

$
91,000

$
84,000

$
757

$
327,757

$
107,500

$
69,000

$
176,500

$
504,257

Silver equivalent ounces sold
14,900,000

7,800,000

5,200,000

105,000

28,005,000

 
 
 
41,505,000

Gold equivalent ounces sold
 
 
 
 
 
130,000

95,000

225,000

 
Costs applicable to sales per ounce guidance
$10.00 - $10.50
$11.50 - $12.00
$15.75 - $16.25
 
 
$800 - $850
$700 - $750
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
$
504,257

Treatment and refining costs
 
 
 
 
 
 
 
 
4,500

Sustaining capital, including capital lease payments
 
 
 
 
 
 
77,000

General and administrative
 
 
 
 
 
 
 
 
30,000

Exploration
 
 
 
 
 
 
 
 
30,000

Reclamation
 
 
 
 
 
 
 
 
15,000

Project/pre-development costs
 
 
 
 
 
 
 
 
6,000

All-in sustaining costs
 
 
 
 
 
 
 
 
$
666,757

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
28,005,000

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
13,500,000

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
41,505,000

All-in sustaining costs per silver equivalent ounce guidance
 
 
 
 
 
$15.75 - $16.25


45


Cautionary Statement Concerning Forward-Looking Statements
This report contains numerous forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) relating to the Company’s gold and silver mining business, including statements regarding strategies to produce long-term cash flow, provide opportunities for growth through continued exploration, generate superior and sustainable returns for stockholders, maximize net cash flow, reduce operating and non-operating costs, demonstrate consistent capital discipline, efficiently manage working capital, and statements regarding tax positions, the anticipated results of the Silvertip acquisition, anticipated production, costs and expenses, drought conditions in Bolivia, efforts to mitigate risks associated with gold and silver price and foreign currency fluctuations and the adequacy of liquidity and capital resources. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,” “hopes,” “may,” “should,” “plan,” “projected,” “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 projected in the forward-looking statements include (i) the risk factors set forth in the “Risk Factors” section of the 2016 10-K, in this Report and in the Company’s Quarterly Report on Form 10-Q filed on July 27, 2017, and the risks and uncertainties discussed in this MD&A, (ii) the risk that the anticipated results of the Silvertip acquisition are not realized, (iii) 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), (iv) changes in the market prices of gold and silver and a sustained lower price environment, including any resulting impact on cash flows, (v) 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, (vi) any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), (vii) the uncertainties inherent in the estimation of gold and silver reserves and mineralized material, (viii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (ix) the loss of access to any third-party smelter to which the Company markets silver and gold, (x) the effects of environmental and other governmental regulations, (xi) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, (xii) the political risks and uncertainties associated with operations in Bolivia; and (xiii) the Company’s ability to raise additional financing necessary to conduct its business, make payments or refinance its 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.

46


Item 3.        Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to various market risks as a part of its operations and engages in risk management strategies to mitigate these risks. The Company continually evaluates the potential benefits of engaging in these strategies based on current market conditions. The Company does not actively engage in the practice of trading derivative instruments for profit. Additional information about the Company’s derivative financial instruments may be found in Note 11 -- Derivative Financial Instruments in the notes to the condensed consolidated financial statements. This discussion of the Company’s market risk assessments contains “forward looking statements”. For additional information regarding forward-looking statements and risks and uncertainties that could impact the Company, please refer to Item 2 of this Report - Cautionary Statement Concerning Forward-Looking Statements. Actual results and actions could differ materially from those discussed below.
Gold and Silver Price
Gold and silver prices may fluctuate widely due to numerous factors, such as U.S. dollar strength or weakness, demand, investor sentiment, inflation or deflation, and global mine production. The Company’s profitability and cash flow may be significantly impacted by changes in the market price of gold and silver.
Gold and Silver Hedging
To mitigate the risks associated with gold and silver price fluctuations, the Company may enter into option contracts to hedge future production. The Company had no outstanding gold and silver option contracts at September 30, 2017.
Provisional Silver and Gold Sales
The Company enters into sales contracts with third-party smelters and refiners which, in some cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract. Depending on the difference between the price at the time of sale and the final settlement price, embedded derivatives are recorded as either a derivative asset or liability. The embedded derivatives do not qualify for hedge accounting and, as a result, are marked to the market gold and silver price at the end of each period from the provisional sale date to the date of final settlement. The mark-to-market gains and losses are recorded in earnings. Changes in silver and gold prices resulted in provisional pricing mark-to-market losses of $0.1 million and gains of $0.6 million in the three and nine months ended September 30, 2017, respectively, compared to losses of $0.8 million and gains of $0.4 million in the three and nine months ended September 30, 2016, respectively.
At September 30, 2017, the Company had outstanding provisionally priced sales of 0.2 million ounces of silver and 26,087 ounces of gold at prices of $16.86 and $1,299, respectively. A 10% change in realized silver price would cause revenue to vary by $0.4 million and a 10% change in realized gold price would cause revenue to vary by $3.4 million.
Foreign Currency
The Company operates, or has mineral interests, in several foreign countries including Australia, Bolivia, Chile, Mexico, Argentina, Ecuador, and New Zealand, which exposes it to foreign currency exchange rate risks. Foreign currency exchange rates are influenced by world market factors beyond the Company’s control such as supply and demand for U.S. and foreign currencies and related monetary and fiscal policies. Fluctuations in local currency exchange rates in relation to the U.S. dollar may significantly impact profitability and cash flow.
Foreign Exchange Hedging
To manage foreign currency risk, the Company may enter into foreign exchange forward and/or option contracts when the Company believes such contracts would be beneficial. The Company had no outstanding foreign exchange contracts at September 30, 2017.

47


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, as amended (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 the three months ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II
Item 1.         Legal Proceedings
For a discussion of legal proceedings, see Note 19 -- Commitments and Contingencies in the notes to the Consolidated Financial Statements included herein.

Item 1A.     Risk Factors

Item 1A - Risk Factors of the 2016 10-K and the Company’s Quarterly Report on Form 10-Q filed on July 27, 2017 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 may be unable to successfully integrate the recently acquired Silvertip mine or other acquisitions.

There can be no assurance that the anticipated benefits of the recently completed acquisition of the Silvertip mine in British Columbia, Canada, or any future acquisition, will be realized. The success of this and any other acquisition will depend upon the Company’s ability to effectively manage the integration and operations of entities or properties it acquires and to realize other anticipated benefits. The process of managing acquired businesses may involve unforeseen difficulties and may require a disproportionate amount of management resources, which may divert management’s focus and resources from other strategic opportunities and from operational matters during this process.

Any acquisition would be accompanied by risks, including:

a significant change in commodity prices after the Company has committed to complete the transaction and established the purchase price or exchange ratio;
a material orebody may prove to be below expectations;
difficulties integrating and assimilating the operations and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial and strategic position of the combined enterprise, and maintaining uniform standards, policies and controls across the organization; and
the acquired business or assets may have unknown liabilities which may be significant.

In addition, the Silvertip acquisition was funded, in part, with funds drawn under the Facility, resulting in increased interest expense. In connection with any future acquisition, the Company may incur indebtedness or issue equity securities or securities convertible into equity securities, resulting in increased interest expense, or dilution of the percentage ownership of existing stockholders. The Company cannot predict the impact of future acquisitions on the price of its common stock, or assure that it

48


would be able to obtain any necessary financing on acceptable terms. Unprofitable acquisitions, or additional indebtedness or issuances of securities in connection with such acquisitions, may negatively affect results of operations.

Finally, the Company’s systems, procedures and controls may be inadequate to support the expansion of our operations resulting from an acquisition or development of a new mine, including the Silvertip mine. The Company’s future operating results could be affected by the ability of its officers and key employees to manage the changing business conditions and to integrate an acquired business or new operation into Coeur. There may also be liabilities, such as environmental liabilities, or significant capital expenditures that the Company failed to discover or have underestimated in connection with any acquisition or development. Any such liabilities or capital expenditure requirements could have a material adverse effect on the Company’s business, financial condition or future prospects.

The Company's results of operations, cash flows and operating costs are highly dependent upon the market prices of silver and gold and, following the Silvertip acquisition, other commodities, including zinc and lead, which are volatile and beyond the Company's control.

Silver, gold, lead and zinc are actively traded commodities, and their prices are volatile. During the twelve months ended September 30, 2017, the price of silver ranged from a low of $15.22 per ounce to a high of $19.35 per ounce, the price of gold ranged from a low of $1,126 per ounce to a high of $1,346 per ounce, the price of lead ranged from a low of $0.89 per pound to a high of $1.14 per pound, and the price of zinc ranged from a low of $1.01 per pound to a high of $1.45 per pound. The closing market prices of silver, gold, lead, and zinc on October 24, 2017 were $17.04 per ounce, $1,276 per ounce, $1.12 per pound, and $1.47 per pound, respectively.

Silver, gold, lead and zinc prices are affected by many factors beyond the Company’s control, including U.S. dollar strength or weakness, speculation, global currency values, the price of products that incorporate silver, gold, lead or zinc, global and regional demand and production, political and economic conditions and other factors. In addition, Exchange Traded Funds (“ETFs”), which have substantially facilitated the ability of large and small investors to buy and sell precious metals and base metals, have become significant holders of gold, silver, lead and zinc. Silver and gold prices are also affected by prevailing interest rates and returns on other asset classes, expectations regarding inflation and governmental decisions regarding precious metals stockpiles.

Because the Company derives a significant portion of its revenues from sales of silver and gold, and to a lesser extent, lead and zinc as a result of the Silvertip acquisition, its results of operations and cash flows will fluctuate as the prices of these metals change. A period of significant and sustained lower gold and silver prices and, to a lesser extent, lead and zinc prices, would materially and adversely affect the Company’s results of operations and cash flows. Additionally, if market prices for silver, gold, lead and zinc decline further or remain at current or lower levels for a sustained period of time, the Company may have to revise its operating plans, including reducing operating costs and capital expenditures, terminating or suspending mining operations at one or more of its properties and discontinuing certain exploration and development plans. The Company may be unable to decrease its costs in an amount sufficient to offset reductions in revenues, and may continue to incur losses.

Operating costs at the Company’s mines are also affected by the price of input commodities, such as fuel, electricity, labor, chemical reagents, explosives, steel and concrete. Prices for these input commodities are volatile and can fluctuate due to conditions that are difficult to predict, including global competition for resources, currency fluctuations, consumer or industrial demand and other factors. Continued volatility in the prices of commodities and other supplies the Company purchases could lead to higher costs, which would adversely affect results of operations and cash flows.


49


The terms of the Company’s debt impose restrictions on its operations.

The agreements governing the Company’s outstanding indebtedness include a number of significant negative covenants. These covenants, among other things:

limit the Company’s ability to obtain additional financing, repurchase outstanding equity or issue debt securities;
require the Company to meet certain financial covenants consisting of a consolidated net leverage ratio and a consolidated interest coverage ratio;
require a portion of the Company’s cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;
limit the Company’s ability to sell, transfer or otherwise dispose of assets, enter into transactions with and invest capital in affiliates, enter into agreements restricting our subsidiaries’ ability to pay dividends, consolidate, amalgamate, merger or sell all or substantially all of the Company’s assets;
increase our vulnerability to general adverse economic and industry conditions;
limit the Company’s flexibility in planning for and reacting to changes in the industry in which we compete; and
place the Company at a disadvantage compared to other, less leveraged competitors.

A breach of any of these covenants could result in an event of default under the applicable agreement governing the Company’s outstanding indebtedness that, if not cured or waived, could cause all amounts outstanding with respect to the debt to be due and payable immediately. Acceleration of any debt could result in cross-defaults under the Company’s other debt instruments. The Company’s assets and cash flow may be insufficient to repay borrowings fully under all of its outstanding debt instruments if any of its debt instruments are accelerated upon an event of default, which could force the Company into bankruptcy or liquidation.

The Company’s future operating performance may not generate cash flows sufficient to meet debt payment obligations.

As of September 30, 2017, the Company had approximately $288.9 million of outstanding indebtedness. On October 12, 2017, the Company borrowed $100.0 million under the Facility. The Company’s ability to make scheduled debt payments on outstanding indebtedness will depend on future results of operations and cash flows. The Company’s results of operations and cash flows, in part, are subject to economic factors beyond its control, including the market prices of silver, gold, lead and zinc. The Company may not be able to generate enough cash flow to meet obligations and commitments under outstanding debt instruments. If the Company cannot generate sufficient cash flow from operations to service debt, it may need to further refinance debt, dispose of assets or issue equity to obtain the necessary funds.

If the Company’s cash flows and capital resources are insufficient to fund its debt services obligations, the Company could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness. The Company cannot predict whether it would be able to refinance debt, issue equity or dispose of assets to raise funds on a timely basis or on satisfactory terms. In a rising interest rate environment, the costs of borrowing additional funds or refinancing outstanding indebtedness would also be expected to increase. The agreements governing the Company’s outstanding indebtedness restrict the Company’s ability to dispose of assets and use the proceeds from those dispositions and may also restrict its ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. The Company may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. If the Company raises additional funds by issuing equity securities or securities convertible into equity securities, holders of its common stock could experience significant dilution of their ownership interest, and these securities could have rights senior to those of the holders of common stock.

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 Form 10-Q.

Item 5.         Other Information

None.




50


Item 6.        Exhibits

10.1
31.1
31.2
32.1
32.2
95.1
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**
*    Management contract or compensatory plan or arrangement.
**    The following financial information from Coeur Mining, Inc.’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2017, formatted in XBRL (Extensible Business Reporting Language): Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Statements of Cash Flows, Condensed Consolidated Balance Sheets, and Condensed Consolidated Statement of Changes in Stockholders’ Equity.

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
October 25, 2017
/s/ Mitchell J. Krebs
 
 
 
MITCHELL J. KREBS
 
 
 
President and Chief Executive Officer (Principal Executive Officer)
 
 
 
 
Dated
October 25, 2017
/s/ Peter C. Mitchell
 
 
 
PETER C. MITCHELL
 
 
 
Senior Vice President and Chief Financial Officer (Principal Financial Officer)
 
 
 
 
Dated
October 25, 2017
/s/ Mark Spurbeck
 
 
 
MARK SPURBECK
 
 
 
Vice President, Finance and Chief Accounting Officer (Principal Accounting Officer)


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