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Coeur Mining, Inc. - Quarter Report: 2017 March (Form 10-Q)

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 March 31, 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
____________________________________________ 
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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 181,449,038 shares were issued and outstanding as of April 24, 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 March 31,
 
 
2017
 
2016
 
Notes
In thousands, except share data
Revenue
3
$
206,138

 
$
148,387

COSTS AND EXPENSES
 
 
 
 
Costs applicable to sales(1)
3
132,712

 
101,555

Amortization
 
40,104

 
27,964

General and administrative
 
10,133

 
8,276

Exploration
 
5,252

 
1,731

Write-downs
 

 
4,446

Pre-development, reclamation, and other
 
4,581

 
4,204

Total costs and expenses
 
192,782

 
148,176

OTHER INCOME (EXPENSE), NET
 
 
 
 
Fair value adjustments, net
10
(1,200
)
 
(8,695
)
Interest expense, net of capitalized interest
17
(3,586
)
 
(11,120
)
Other, net
7
21,139

 
1,314

Total other income (expense), net
 
16,353

 
(18,501
)
Income (loss) before income and mining taxes
 
29,709

 
(18,290
)
Income and mining tax (expense) benefit
8
(11,046
)
 
(2,106
)
NET INCOME (LOSS)
 
$
18,663

 
$
(20,396
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax of ($1,101) for the three months ended March 31, 2016
 
(2,182
)
 
1,043

Reclassification adjustments for impairment of equity securities
 
121

 

Reclassification adjustments for realized (gain) loss on sale of equity securities
 
1,471

 
588

Other comprehensive income (loss)
 
(590
)
 
1,631

COMPREHENSIVE INCOME (LOSS)
 
$
18,073

 
$
(18,765
)
 
 
 
 
 
NET INCOME (LOSS) PER SHARE
9
 
 
 
Basic
 
$
0.10

 
$
(0.14
)
 
 
 
 
 
Diluted
 
$
0.10

 
$
(0.14
)
(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
 
 
Three months ended March 31,
 
 
2017
 
2016
 
Notes
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income (loss)
 
$
18,663

 
(20,396
)
Adjustments:
 
 
 
 
Amortization
 
40,104

 
27,964

Accretion
 
2,514

 
3,169

Deferred income taxes
 
1,375

 
(2,105
)
Fair value adjustments, net
10
1,200

 
8,695

Stock-based compensation
5
3,307

 
2,915

Gain on sale of the Joaquin project
 
(21,138
)
 

Write-downs
 

 
4,446

Other
 
(2,198
)
 
(1,435
)
Changes in operating assets and liabilities:
 
 
 
 
Receivables
 
13,106

 
3,481

Prepaid expenses and other current assets
 
(4,299
)
 
1,279

Inventory and ore on leach pads
 
14,292

 
(7,822
)
Accounts payable and accrued liabilities
 
(11,655
)
 
(13,574
)
CASH PROVIDED BY OPERATING ACTIVITIES
 
55,271

 
6,617

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Capital expenditures
 
(23,979
)
 
(22,172
)
Proceeds from the sale of assets
 
15,019

 
4,009

Purchase of investments
 
(1,016
)
 
(7
)
Sale of investments
 
10,020

 
997

Other
 
(1,546
)
 
(1,473
)
CASH USED IN INVESTING ACTIVITIES
 
(1,502
)
 
(18,646
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Payments on debt, capital leases, and associated costs
 
(3,226
)
 
(5,971
)
Gold production royalty payments
 

 
(9,131
)
Other
 
(3,247
)
 
(280
)
CASH USED IN FINANCING ACTIVITIES
 
(6,473
)
 
(15,382
)
Effect of exchange rate changes on cash and cash equivalents
 
555

 
86

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
47,851


(27,325
)
Cash and cash equivalents at beginning of period
 
162,182

 
200,714

Cash and cash equivalents at end of period
 
$
210,033

 
$
173,389


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

4


COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
March 31, 2017 (Unaudited)
 
December 31, 2016
ASSETS
Notes
In thousands, except share data
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
$
210,033

 
$
162,182

Receivables
13
67,064

 
60,431

Inventory
14
73,760

 
106,026

Ore on leach pads
14
66,585

 
64,167

Prepaid expenses and other
 
22,450

 
17,981

 
 
439,892

 
410,787

NON-CURRENT ASSETS
 
 
 
 
Property, plant and equipment, net
15
222,617

 
216,796

Mining properties, net
16
549,207

 
558,455

Ore on leach pads
14
72,461

 
67,231

Restricted assets
12
18,954

 
17,597

Equity securities
12
3,796

 
4,488

Receivables
13
15,558

 
30,951

Other
 
15,265

 
12,604

TOTAL ASSETS
 
$
1,337,750

 
$
1,318,909

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
47,370

 
$
53,335

Accrued liabilities and other
 
37,999

 
42,743

Debt
17
13,451

 
12,039

Royalty obligations
10
4,961

 
4,995

Reclamation
4
3,604

 
3,522

 
 
107,385

 
116,634

NON-CURRENT LIABILITIES
 
 
 
 
Debt
17
205,625

 
198,857

Royalty obligations
10
4,316

 
4,292

Reclamation
4
97,595

 
95,804

Deferred tax liabilities
 
76,363

 
74,798

Other long-term liabilities
 
59,846

 
60,037

 
 
443,745

 
433,788

STOCKHOLDERS’ EQUITY
 
 
 
 
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 181,492,911 at March 31, 2017 and 180,933,287 at December 31, 2016
 
1,815

 
1,809

Additional paid-in capital
 
3,314,644

 
3,314,590

Accumulated other comprehensive income (loss)
 
(3,078
)
 
(2,488
)
Accumulated deficit
 
(2,526,761
)
 
(2,545,424
)
 
 
786,620

 
768,487

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
1,337,750

 
$
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)

 

 

 
18,663

 

 
18,663

Other comprehensive income (loss)

 

 

 

 
(590
)
 
(590
)
Common stock issued under stock-based compensation plans, net
560

 
6

 
54

 

 

 
60

Balances at March 31, 2017 (Unaudited)
181,493

 
$
1,815

 
$
3,314,644

 
$
(2,526,761
)
 
$
(3,078
)
 
$
786,620

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 (the “2016 10-K”).

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 the potential impact of implementing these changes on the Company’s consolidated financial position, results of operations, and 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 the potential impact of implementing these changes on the Company’s consolidated financial position, results of operations, and 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 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.    
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 the potential impact of implementing these changes on the Company’s consolidated financial position, results of operations, and 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, 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 Endeavor silver stream, La Preciosa project, other royalties and 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 March 31, 2017
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
77,704

 
$
38,979

 
$
37,964

 
$
30,251

 
$
20,584

 
$
656

 
$
206,138

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 


Costs applicable to sales(1)
43,001

 
26,439

 
28,443

 
16,320

 
18,222

 
287

 
132,712

Amortization
20,150

 
5,816

 
9,178

 
3,111

 
1,411

 
438

 
40,104

Exploration
1,631

 
144

 
839

 

 

 
2,638

 
5,252

Other operating expenses
301

 
810

 
345

 
619

 
752

 
11,887

 
14,714

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net

 
(1,200
)
 

 

 

 

 
(1,200
)
Interest expense, net
(125
)
 
(117
)
 
(40
)
 
(19
)
 
(7
)
 
(3,278
)
 
(3,586
)
Other, net
1,794

 
(32
)
 
(808
)
 
89

 
279

 
19,817

 
21,139

Income and mining tax (expense) benefit
(12,245
)
 
(498
)
 

 
(957
)
 
(31
)
 
2,685

 
(11,046
)
Net income (loss)
$
2,045


$
3,923


$
(1,689
)

$
9,314


$
440


$
4,630


$
18,663

Segment assets(2)
$
401,623

 
$
227,526

 
$
204,987

 
$
104,673

 
$
68,412

 
$
84,402

 
$
1,091,623

Capital expenditures
$
6,230

 
$
10,568

 
$
5,521

 
$
887

 
$
388

 
$
385

 
$
23,979

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

Three months ended March 31, 2016
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
29,813

 
$
29,982

 
$
35,743

 
$
27,929

 
$
21,278

 
$
1,891

 
$
146,636

Royalties

 

 

 

 

 
1,751

 
1,751

 
29,813


29,982


35,743


27,929


21,278


3,642

 
148,387

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
21,038

 
22,485

 
24,418

 
15,461

 
17,497

 
656

 
101,555

Amortization
7,289

 
5,313

 
8,349

 
4,051

 
1,754

 
1,208

 
27,964

Exploration
801

 
109

 
(47
)
 

 

 
868

 
1,731

Write-downs

 

 

 

 

 
4,446

 
4,446

Other operating expenses
315

 
681

 
252

 
493

 
291

 
10,448

 
12,480

Other income (expense)
 
 
 
 
 
 
 
 
 
 


 
 
Fair value adjustments, net
(4,864
)
 
(2,249
)
 

 

 

 
(1,582
)
 
(8,695
)
Interest expense, net
(734
)
 
(171
)
 
(43
)
 

 
(3
)
 
(10,169
)
 
(11,120
)
Other, net
(1,235
)
 
3

 
(20
)
 
10

 
315

 
2,241

 
1,314

Income and mining tax (expense) benefit
98

 
(423
)
 

 
116

 
(1,571
)
 
(326
)
 
(2,106
)
Net income (loss)
$
(6,365
)

$
(1,446
)

$
2,708


$
8,050


$
477


$
(23,820
)
 
$
(20,396
)
Segment assets(2)
$
422,086

 
$
209,692

 
$
192,805

 
$
113,383

 
$
87,750

 
$
92,224

 
$
1,117,940

Capital expenditures
$
8,815

 
$
3,289

 
$
8,090

 
$
1,410

 
$
521

 
$
47

 
$
22,172

(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

Assets
March 31, 2017

December 31, 2016
Total assets for reportable segments
$
1,091,623

 
$
1,122,038

Cash and cash equivalents
210,033

 
162,182

Other assets
36,094


34,689

Total consolidated assets
$
1,337,750


$
1,318,909


Geographic Information
Long-Lived Assets
March 31, 2017

December 31, 2016
Mexico
$
376,890

 
$
397,697

United States
355,736

 
338,897

Bolivia
32,422

 
31,539

Australia
2,871

 
2,983

Argentina
227

 
10,228

Other
5,601

 
5,564

Total
$
773,747


$
786,908

 
Revenue
Three months ended March 31,
2017
 
2016
United States
$
107,194

 
$
93,654

Mexico
77,704

 
30,522

Bolivia
20,584

 
21,278

Australia
656

 
1,891

Other

 
1,042

Total
$
206,138


$
148,387

        
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 March 31,
In thousands
2017
 
2016
Asset retirement obligation - Beginning
$
97,380

 
$
82,072

Accretion
2,338

 
1,960

Additions and changes in estimates

 
251

Settlements
(478
)
 
(309
)
Asset retirement obligation - Ending
$
99,240


$
83,974

The Company has accrued $2.0 million and $1.9 million at March 31, 2017 and December 31, 2016, respectively, for reclamation liabilities related to former mining activities, which are included in Reclamation.

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 months ended March 31, 2017 and 2016 was $3.3 million and $2.9 million, respectively. At March 31, 2017, there was $12.2 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.8 years.

9

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

The following table summarizes the grants awarded during the three months ended March 31, 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
 
539,858

 
$
7.60

 
14,820

 
$
3.91

 

 
$


The following options and stock appreciation rights were exercisable during the three months ended March 31, 2017:
Award Type
 
Number of 
Exercised Units
 
Weighted Average
Exercised Price
 
Number of Exercisable Units
 
Weighted Average
Exercisable Price
Stock options
 

 
$

 
425,850

 
$
14.29

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 100% of 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 months ended March 31, 2017 and 2016 were $2.1 million and $1.0 million, respectively, due to timing of Company contributions. 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 March 31,
In thousands
2017
 
2016
Foreign exchange gain (loss)
$
1,349

 
$
(164
)
Gain (loss) on sale of assets and investments
(2,066
)
 
1,085

Gain on sale of the Joaquin project
21,138

 

Impairment of equity securities
(121
)
 

Other
839

 
393

Other, net
$
21,139

 
$
1,314


NOTE 8 - INCOME AND MINING TAXES
The following table summarizes the components of Income and mining tax (expense) benefit for the three months ended March 31, 2017 and 2016 by significant jurisdiction:

 
Three months ended March 31,
 
2017
 
2016
In thousands
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
20,714

$
(1,964
)
 
$
(9,361
)
$
(532
)
Argentina
(328
)
1,124

 
(1,015
)
1,543

Mexico
8,650

(9,923
)
 
(7,509
)
17

Bolivia
471

(31
)
 
2,047

(1,570
)
Other jurisdictions
202

(252
)

(2,452
)
(1,564
)
 
$
29,709

$
(11,046
)
 
$
(18,290
)
$
(2,106
)
    
    



10

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

The Company’s effective tax rate is impacted by recurring and nonrecurring items. These items include foreign exchange rates on deferred tax balances, uncertain tax positions, and the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions. During the first quarter of 2017, foreign exchange increased income and mining tax expense by $5.6 million, predominately due to the strength of the Mexican peso. Additionally, the Company recognized $1.8 million income and mining tax expense from the sale of the Joaquin project. Also during the first quarter, favorable operating results at Palmarejo contributed to higher income and mining tax expense. The Company’s consolidated 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 our consolidated effective tax rate.
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 2012 forward for the U.S. federal jurisdiction and from 2008 forward for certain other foreign jurisdictions. As a result of statutes of limitation that will begin to expire within the next 12 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 $2.5 million and $3.5 million in the next 12 months.
At March 31, 2017 and December 31, 2016, the Company had $18.7 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 March 31, 2017 and December 31, 2016, the amount of accrued income-tax-related interest and penalties was $8.7 million and $8.7 million, respectively.

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 months ended March 31, 2017 and 2016, 1,368,685 and 3,321,424 of common stock equivalents, respectively, related to equity-based awards were not included in the diluted per share calculation as the shares would be antidilutive.
The 3.25% Convertible Senior Notes (“Convertible Notes”) were not included in the computation of diluted net income (loss) per share for the three months ended March 31, 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 March 31,
In thousands except per share amounts
2017
 
2016
Net income (loss) available to common stockholders
$
18,663

 
$
(20,396
)
Weighted average shares:
 
 
 
Basic
178,898

 
150,249

Effect of stock-based compensation plans
4,170

 

Diluted
183,068


150,249

Income (loss) per share:
 
 
 
Basic
$
0.10


$
(0.14
)
Diluted
$
0.10


$
(0.14
)


11

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

NOTE 10 – FAIR VALUE MEASUREMENTS
 
Three months ended March 31,
In thousands
2017
 
2016
Rochester net smelter returns (“NSR”) royalty obligation
$
(1,200
)
 
$
(2,249
)
Palmarejo royalty obligation embedded derivative

 
(4,878
)
Silver and gold options


(1,568
)
Fair value adjustments, net
$
(1,200
)
 
$
(8,695
)
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 March 31, 2017
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
3,796

 
$
3,517

 
$

 
$
279

Other derivative instruments, net
614

 

 
614

 

 
$
4,410

 
$
3,517

 
$
614

 
$
279

Liabilities:
 
 
 
 
 
 
 
Rochester NSR royalty obligation
9,277

 

 

 
9,277

Other derivative instruments, net
4

 

 
4

 

 
$
9,281

 
$

 
$
4

 
$
9,277

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

 
$
4,209

 
$

 
$
279

Liabilities:
 
 
 
 
 
 
 
Rochester NSR 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 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.
The fair value of the Rochester NSR 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 has classified this obligation as Level 3 financial liabilities. Based on current mine plans, 1.6 years was used to estimate the fair value of the Rochester NSR royalty obligation at March 31, 2017.

12

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

No assets or liabilities were transferred between fair value levels in the three months ended March 31, 2017.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the three months ended March 31, 2017:
 
Three Months Ended March 31, 2017
In thousands
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
Equity securities
$
279

 
$

 
$

 
$
279

Liabilities:
 
 
 
 
 
 
 
Rochester NSR royalty obligation
$
9,287

 
$
1,200

 
$
(1,210
)
 
$
9,277

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

 
 
 
 
 
 
7.875% Senior Notes due 2021(1)
$
176,114

 
$
184,279

 
$

 
$
184,279

 
$

(1)
Net of unamortized debt issuance costs and premium received of $1.9 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 7.875% Senior Notes due 2021 (the “Senior Notes”) was 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 months ended March 31, 2016, the mark-to-market adjustment associated with the change was a loss of $4.9 million. Payments on the royalty obligation decreased the carrying amount of the minimum obligation and the derivative liability. For the three months ended March 31, 2016, realized loss on settlement of the liability was $3.0 million. 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 gains of $1.4 million and $0.6 million in the three months ended March 31, 2017 and 2016, respectively.

13

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

At March 31, 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
$
1,403

 
$

Average silver price
$
17.74

 
$

Notional ounces
79,084

 

 
 
 
 
Provisional gold sales contracts
$
35,849

 
$

Average gold price
$
1,211

 
$

Notional ounces
29,603

 

Silver and Gold Options
During three months ended March 31, 2016, the Company had realized losses of $1.6 million, from settled contracts. At March 31, 2017, the Company had no outstanding gold and silver options contracts.
The following summarizes the classification of the fair value of the derivative instruments:
 
March 31, 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
$
614

 
$
4

 
$

 
$

 
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 months ended March 31, 2017 and 2016 (in thousands):
 
 
Three months ended March 31,
Financial statement line
Derivative
2017
 
2016
Revenue
Provisional silver and gold sales contracts
$
1,372

 
$
566

Fair value adjustments, net
Palmarejo gold production royalty

 
(4,878
)
Fair value adjustments, net
Silver and gold options

 
(1,568
)
 
 
$
1,372


$
(5,880
)
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.


14

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

NOTE 12 – INVESTMENTS
Equity Securities
The Company makes strategic investments in equity securities of silver and gold exploration and development companies. These investments are classified as available-for-sale and are measured at fair value in the financial statements with unrealized gains and losses recorded in Other comprehensive income (loss).
 
At March 31, 2017
In thousands
Cost
 
Gross
Unrealized
Losses
 
Gross
Unrealized
Gains
 
Estimated
Fair Value
Kootenay Silver, Inc.
$
2,167

 
$

 
$

 
$
2,167

Rockhaven Resources Ltd
514

 
(64
)
 

 
450

Silver Bull Resources, Inc.
131

 

 
356

 
487

Other
193

 

 
499

 
692

Equity securities
$
3,005

 
$
(64
)
 
$
855

 
$
3,796


 
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 securities with unrealized losses to determine if the security is other than temporarily impaired. The Company recorded a pre-tax other-than-temporary impairment loss of $0.1 million in the three months ended March 31, 2017, and no impairment loss in the three months ended March 31, 2016, in Other, net. The following table summarizes unrealized losses on equity 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 March 31, 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
$
(64
)
$
450

 
$

$

 
$
(64
)
$
450

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 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 March 31, 2017 and December 31, 2016, the Company held certificates of deposit and cash under these agreements of $19.0 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 there is a reasonable probability that the collateral will remain in place beyond a twelve-month period and has therefore classified these investments as long-term.


15

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

NOTE 13 – RECEIVABLES
Receivables consist of the following:
In thousands
March 31, 2017
 
December 31, 2016
Current receivables:
 
 
 
Trade receivables
$
8,772

 
$
10,669

Income tax receivable
11,441

 
1,038

Value added tax receivable
44,085

 
46,083

Other
2,766

 
2,641

 
$
67,064

 
$
60,431

Non-current receivables:
 
 
 
Value added tax receivable
$
15,558

 
$
19,293

Income tax receivable

 
11,658

 
15,558

 
30,951

Total receivables
$
82,622

 
$
91,382


NOTE 14 – INVENTORY AND ORE ON LEACH PADS
Inventory consists of the following:
In thousands
March 31, 2017
 
December 31, 2016
Inventory:
 
 
 
Concentrate
$
13,476

 
$
17,994

Precious metals
20,938

 
47,228

Supplies
39,346

 
40,804

 
$
73,760

 
$
106,026

Ore on leach pads:
 
 
 
Current
$
66,585

 
$
64,167

Non-current
72,461

 
67,231

 
$
139,046

 
$
131,398

Total inventory and ore on leach pads
$
212,806

 
$
237,424


NOTE 15 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
In thousands
March 31, 2017
 
December 31, 2016
Land
$
8,403

 
$
7,878

Facilities and equipment
649,030

 
650,480

Assets under capital leases
63,775

 
54,968

 
721,208

 
713,326

Accumulated amortization (1)
(531,480
)
 
(524,806
)
 
189,728

 
188,520

Construction in progress
32,889

 
28,276

Property, plant and equipment, net
$
222,617

 
$
216,796

(1) Includes $15.6 million of accumulated amortization related to assets under capital leases.


16

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

NOTE 16 – MINING PROPERTIES
Mining properties consist of the following (in thousands):
March 31, 2017
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San
Bartolomé
 
La Preciosa
 
Other
 
Total
Mine development
$
179,562

 
$
171,543

 
$
279,095

 
$
37,562

 
$
39,338

 
$

 
$

 
$
707,100

Accumulated amortization
(137,215
)
 
(139,519
)
 
(159,485
)
 
(12,530
)
 
(32,625
)
 

 

 
(481,374
)
 
42,347

 
32,024

 
119,610

 
25,032

 
6,713

 

 

 
225,726

Mineral interests
629,303

 

 

 
45,837

 
12,868

 
49,085

 
41,272

 
778,365

Accumulated amortization
(393,532
)
 

 

 
(20,106
)

(11,762
)
 

 
(29,484
)
 
(454,884
)
 
235,771

 

 

 
25,731

 
1,106

 
49,085

 
11,788

 
323,481

Mining properties, net
$
278,118

 
$
32,024

 
$
119,610

 
$
50,763

 
$
7,819

 
$
49,085

 
$
11,788

 
$
549,207

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.


NOTE 17 – DEBT
 
March 31, 2017
 
December 31, 2016
In thousands
Current
 
Non-Current
 
Current
 
Non-Current
Senior Notes, net(1)
$

 
$
176,114

 
$

 
$
175,991

Capital lease obligations
13,451

 
29,511

 
12,039

 
22,866

 
$
13,451

 
$
205,625

 
$
12,039

 
$
198,857

(1) Net of unamortized debt issuance costs and premium received of $1.9 million and $2.0 million at March 31, 2017 and December 31, 2016, respectively.

7.875% Senior Notes due 2021
On or after February 1, 2017, the Company may redeem some or all of the Senior Notes at the applicable redemption prices set forth in the Indenture for the Senior Notes, together with accrued and unpaid interest.
Lines of Credit
At March 31, 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 March 31, 2017.

17

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

Capital Lease Obligations
From time to time, the Company acquires mining equipment under capital lease agreements. In the three months ended March 31, 2017, the Company entered into new lease financing arrangements primarily for diesel generators at Kensington and mining equipment at Rochester. All capital lease obligations are recorded, upon lease inception, at the present value of future minimum lease payments.
Interest Expense
 
Three months ended March 31,
In thousands
2017
 
2016
Senior Notes
$
3,504

 
7,457

Term Loan due 2020

 
2,264

Capital lease obligations
306

 
265

Accretion of Palmarejo gold production royalty obligation

 
765

Amortization of debt issuance costs
166

 
631

Accretion of debt premium
(43
)
 
(91
)
Other debt obligations
16

 
32

Capitalized interest
(363
)
 
(203
)
Total interest expense, net of capitalized interest
$
3,586

 
$
11,120



18

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 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.

19

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

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 2017
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
107,194

 
$
98,944

 
$

 
$
206,138

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
71,202

 
61,510

 

 
132,712

Amortization
 
324

 
18,104

 
21,676

 

 
40,104

General and administrative
 
10,106

 
24

 
3

 

 
10,133

Exploration
 
336

 
1,727

 
3,189

 

 
5,252

Pre-development, reclamation, and other
 
175

 
1,781

 
2,625

 

 
4,581

Total costs and expenses
 
10,941

 
92,838

 
89,003

 

 
192,782

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
 

 
(1,200
)
 

 

 
(1,200
)
Other, net
 
15,222

 
5,458

 
1,873

 
(1,414
)
 
21,139

Interest expense, net of capitalized interest
 
(3,279
)
 
(175
)
 
(1,546
)
 
1,414

 
(3,586
)
Total other income (expense), net
 
11,943

 
4,083

 
327

 

 
16,353

Loss before income and mining taxes
 
1,002

 
18,439

 
10,268

 

 
29,709

Income and mining tax (expense) benefit
 
1,588

 
(2,434
)
 
(10,200
)
 

 
(11,046
)
Total loss after income and mining taxes
 
2,590

 
16,005

 
68

 

 
18,663

Equity income (loss) in consolidated subsidiaries
 
16,073

 
70

 
(67
)
 
(16,076
)
 

NET INCOME (LOSS)
 
$
18,663

 
$
16,075

 
$
1

 
$
(16,076
)
 
$
18,663

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
 
(2,182
)
 
(279
)
 

 
279

 
(2,182
)
Reclassification adjustments for impairment of equity securities, net of tax
 
121

 
121

 

 
(121
)
 
121

Reclassification adjustments for realized gain (loss) on sale of equity securities, net of tax
 
1,471

 
(369
)
 

 
369

 
1,471

Other comprehensive income (loss)
 
(590
)
 
(527
)
 

 
527

 
(590
)
COMPREHENSIVE INCOME (LOSS)
 
$
18,073

 
$
15,548

 
$
1

 
$
(15,549
)
 
$
18,073

(1) Excludes amortization.
 
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
93,954

 
$
54,433

 
$

 
$
148,387

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
62,364

 
39,191

 

 
101,555

Amortization
 
423

 
17,859

 
9,682

 

 
27,964

General and administrative
 
8,080

 
18

 
178

 

 
8,276

Exploration
 
623

 
184

 
924

 

 
1,731

Write-downs
 

 

 
4,446

 

 
4,446

Pre-development, reclamation, and other
 
452

 
1,416

 
2,336

 

 
4,204

Total costs and expenses
 
9,578

 
81,841

 
56,757

 

 
148,176

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
 
(1,582
)
 
(2,249
)
 
(4,864
)
 

 
(8,695
)
Other, net
 
338

 
2,254

 
(253
)
 
(1,025
)
 
1,314

Interest expense, net of capitalized interest
 
(10,255
)
 
(213
)
 
(1,677
)
 
1,025

 
(11,120
)
Total other income (expense), net
 
(11,499
)
 
(208
)
 
(6,794
)
 

 
(18,501
)
Income (Loss) before income and mining taxes
 
(21,077
)
 
11,905

 
(9,118
)
 

 
(18,290
)
Income and mining tax (expense) benefit
 
(209
)
 
(307
)
 
(1,590
)
 

 
(2,106
)
Income (Loss) after income and mining taxes
 
(21,286
)
 
11,598

 
(10,708
)
 

 
(20,396
)
Equity income (loss) in consolidated subsidiaries
 
890

 
(4,479
)
 

 
3,589

 

NET INCOME (LOSS)
 
$
(20,396
)
 
$
7,119

 
$
(10,708
)
 
$
3,589

 
$
(20,396
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax
 
1,043

 
976

 

 
(976
)
 
1,043

Reclassification adjustments for realized loss on sale of equity securities, net of tax
 
588

 
(381
)
 

 
381

 
588

Other comprehensive income (loss)
 
1,631

 
595

 

 
(595
)
 
1,631

COMPREHENSIVE INCOME (LOSS)
 
$
(18,765
)
 
$
7,714

 
$
(10,708
)
 
$
2,994

 
$
(18,765
)
(1) Excludes amortization.


20

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

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 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
 
$
(4,815
)
 
$
17,183

 
$
58,979

 
$
(16,076
)
 
55,271

 
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(319
)
 
(16,975
)
 
(6,685
)
 

 
(23,979
)
Proceeds from the sale of long-lived assets
 
8,916

 
6,151

 
(48
)
 

 
15,019

Purchase of investments
 
(1,016
)
 

 

 

 
(1,016
)
Sales and maturities of investments
 
9,157

 
863

 

 

 
10,020

Other
 
(1,486
)
 

 
(60
)
 

 
(1,546
)
Investments in consolidated subsidiaries
 
(12,454
)
 
(70
)
 
67

 
12,457

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
2,798

 
(10,031
)
 
(6,726
)
 
12,457

 
(1,502
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Payments on debt, capital leases, and associated costs
 

 
(1,874
)
 
(1,352
)
 

 
(3,226
)
Net intercompany financing activity
 
14,318

 
(9,325
)
 
(8,612
)
 
3,619

 

Other
 
(3,247
)
 

 

 

 
(3,247
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
11,071

 
(11,199
)
 
(9,964
)
 
3,619

 
(6,473
)
Effect of exchange rate changes on cash and cash equivalents
 

 

 
555

 

 
555

NET CHANGE IN CASH AND CASH EQUIVALENTS
 
9,054

 
(4,047
)
 
42,844

 

 
47,851

Cash and cash equivalents at beginning of period
 
58,048

 
50,023

 
54,111

 

 
162,182

Cash and cash equivalents at end of period
 
$
67,102

 
$
45,976

 
$
96,955

 
$

 
$
210,033


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 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
 
$
(28,642
)
 
$
21,460

 
$
10,210

 
$
3,589

 
6,617

 
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(46
)
 
(12,790
)
 
(9,336
)
 

 
(22,172
)
Proceeds from the sale of long-lived assets
 

 
4,000

 
9

 

 
4,009

Purchase of investments
 
(7
)
 

 

 

 
(7
)
Sales and maturities of investments
 
501

 
496

 

 

 
997

Other
 
(1,539
)
 
107

 
(41
)
 

 
(1,473
)
Investments in consolidated subsidiaries
 
3,420

 
8,179

 

 
(11,599
)
 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
2,329

 
(8
)
 
(9,368
)
 
(11,599
)
 
(18,646
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Payments on debt, capital leases, and associated costs
 
(250
)
 
(830
)
 
(4,891
)
 

 
(5,971
)
Gold production royalty payments
 

 

 
(9,131
)
 

 
(9,131
)
Net intercompany financing activity
 
(7,879
)
 
(24,965
)
 
24,834

 
8,010

 

Other
 
(280
)
 

 

 

 
(280
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(8,409
)
 
(25,795
)
 
10,812

 
8,010

 
(15,382
)
Effect of exchange rate changes on cash and cash equivalents
 

 
4

 
82

 

 
86

NET CHANGE IN CASH AND CASH EQUIVALENTS
 
(34,722
)
 
(4,339
)
 
11,736

 

 
(27,325
)
Cash and cash equivalents at beginning of period
 
96,123

 
34,228

 
70,363

 

 
200,714

Cash and cash equivalents at end of period
 
$
61,401

 
$
29,889

 
$
82,099

 
$

 
$
173,389






21

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

CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2017
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
67,102

 
$
45,976

 
$
96,955

 
$

 
$
210,033

Receivables
 
(12
)
 
9,084

 
57,992

 

 
67,064

Ore on leach pads
 

 
66,585

 

 

 
66,585

Inventory
 

 
38,295

 
35,465

 

 
73,760

Prepaid expenses and other
 
7,719

 
3,699

 
11,032

 

 
22,450

 
 
74,809

 
163,639

 
201,444

 

 
439,892

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
3,217

 
146,122

 
73,278

 

 
222,617

Mining properties, net
 
4,000

 
202,397

 
342,810

 

 
549,207

Ore on leach pads
 

 
72,461

 

 

 
72,461

Restricted assets
 
11,701

 
226

 
7,027

 

 
18,954

Equity securities
 
450

 
3,346

 

 

 
3,796

Receivables
 

 

 
15,558

 

 
15,558

Net investment in subsidiaries
 
274,724

 
11,720

 
(624
)
 
(285,820
)
 

Other
 
216,386

 
10,009

 
5,256

 
(216,386
)
 
15,265

TOTAL ASSETS
 
$
585,287

 
$
609,920

 
$
644,749

 
$
(502,206
)
 
$
1,337,750

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,547

 
$
21,364

 
$
24,459

 
$

 
$
47,370

Other accrued liabilities
 
7,234

 
9,555

 
21,210

 

 
37,999

Debt
 

 
7,852

 
5,599

 

 
13,451

Royalty obligations
 

 
4,961

 

 

 
4,961

Reclamation
 

 
2,754

 
850

 

 
3,604

 
 
8,781

 
46,486

 
52,118

 

 
107,385

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Debt
 
176,114

 
23,288

 
222,609

 
(216,386
)
 
205,625

Royalty obligations
 

 
4,316

 

 

 
4,316

Reclamation
 

 
76,443

 
21,152

 

 
97,595

Deferred tax liabilities
 
9,072

 
6,354

 
60,937

 

 
76,363

Other long-term liabilities
 
2,407

 
4,756

 
52,683

 

 
59,846

Intercompany payable (receivable)
 
(397,707
)
 
326,814

 
70,893

 

 

 
 
(210,114
)
 
441,971

 
428,274

 
(216,386
)
 
443,745

STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Common stock
 
1,815

 
250

 
191,613

 
(191,863
)
 
1,815

Additional paid-in capital
 
3,314,644

 
181,683

 
1,809,557

 
(1,991,240
)
 
3,314,644

Accumulated deficit
 
(2,526,761
)
 
(57,455
)
 
(1,836,813
)
 
1,894,268

 
(2,526,761
)
Accumulated other comprehensive income (loss)
 
(3,078
)
 
(3,015
)
 

 
3,015

 
(3,078
)
 
 
786,620

 
121,463

 
164,357

 
(285,820
)
 
786,620

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
585,287

 
$
609,920

 
$
644,749

 
$
(502,206
)
 
$
1,337,750



22

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 securities
 

 
4,488

 

 

 
4,488

Receivables
 

 

 
30,951

 

 
30,951

Deferred tax assets
 

 

 
191

 
(191
)
 

Net investment in subsidiaries
 
273,056

 
11,650

 

 
(284,706
)
 

Other
 
221,381

 
9,263

 
3,153

 
(221,193
)
 
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



23

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 March 31, 2017, approximately 10% 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.
Rochester Production Royalty
Effective January 2014, Coeur Rochester is obligated to pay a 3.4% net smelter returns royalty on up to 39.4 million silver equivalent ounces produced and sold from a portion of the Rochester mine, payable on a quarterly basis. For each calendar quarter, the royalty is payable on the actual sales prices received, less refining and related costs, of gold and silver produced and sold from the applicable portions of the Rochester mine. Changes in silver and gold prices and the Company’s mine plan result in the recognition of mark-to-market gains or losses in Fair value adjustments, net. At March 31, 2017, a total of 15.9 million silver equivalent ounces remain outstanding under the obligation.
Palmarejo Gold Stream
Effective August 2016, Coeur Mexicana sells 50% of Palmarejo gold production (excluding production from the recently acquired Paramount properties) to a subsidiary of Franco-Nevada Corporation under a gold stream agreement for the lesser of $800 or spot price per ounce. Previously, Coeur Mexicana received a $22.0 million deposit toward future deliveries under the gold stream agreement.
Bolivian Temporary Restriction on Mining above 4,400 Meters
In October 2009, the Bolivian state-owned mining organization, COMIBOL, announced by resolution that it was temporarily suspending mining activities above the elevation of 4,400 meters above sea level while stability studies of Cerro Rico mountain are undertaken. The Company holds rights to mine above this elevation under valid contracts with COMIBOL. The stability studies have been completed and officially submitted to the Bolivian mining technical authorities. Accordingly, the COMIBOL suspension has expired in accordance with the terms of the resolution. The Company is not currently mining above the 4,400 meter level.
If COMIBOL decides to affirmatively adopt a new resolution to restrict access above the 4,400 meter level, the Company may need to further write down the carrying value of the asset. While a portion of the Company’s proven and probable reserves relate to material above the 4,400 meter level at San Bartolomé, so long as operations remain suspended, there is a risk that silver may not be produced from this material at expected levels or at all, particularly given the remaining anticipated mine life of this asset. It is also uncertain if any new mining or investment policies or shifts in political attitude may affect mining in Bolivia.


24


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 non-GAAP financial performance 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 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, Rochester, Kensington, Wharf, and San Bartolomé mines constitute our principal sources of revenue. The Company also owns the Endeavor silver stream.
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.
First Quarter Highlights
Production of 9.2 million silver equivalent ounces, consisting of 3.9 million silver ounces and 88,218 gold ounces
Sales of 11.1 million silver equivalent ounces, consisting of 4.5 million silver ounces and 110,874 gold ounces
Net income of $18.7 million ($0.10 per share) and adjusted net income of $7.0 million ($0.04 per share) (see “Non-GAAP Financial Performance Measures”)
Costs applicable to sales were $11.39 per silver equivalent ounce ($10.64 per average spot silver equivalent ounce) and $788 per gold equivalent ounce (see “Non-GAAP Financial Performance Measures”)
All-in sustaining costs were $15.01 per silver equivalent ounce ($13.65 per average spot silver equivalent ounce) (see “Non-GAAP Financial Performance Measures”)
Operating cash flow of $55.3 million and adjusted EBITDA of $56.6 million (see “Non-GAAP Financial Performance Measures”)
Sold the Joaquin silver-gold exploration project for consideration of $27.4 million and retained a 2.0% NSR royalty
Cash and cash equivalents of $210.0 million at March 31, 2017

25


Selected Financial and Operating Results
 
Three months ended March 31,
 
2017
 
2016
Metal sales
$
206,138

 
$
146,636

Net income (loss)
$
18,663

 
$
(20,396
)
Net income (loss) per share, diluted
$
0.10

 
$
(0.14
)
Adjusted net income (loss)(1)
$
6,987

 
$
(10,459
)
Adjusted net income (loss) per share, diluted(1)
$
0.04

 
$
(0.06
)
EBITDA(1)
$
73,399

 
$
20,794

Adjusted EBITDA(1)
$
56,585

 
$
37,398

Silver ounces produced
3,932,376

 
3,372,475

Gold ounces produced
88,218

 
78,072

Silver equivalent ounces produced
9,225,456


8,056,795

Silver ounces sold
4,473,712

 
3,529,502

Gold ounces sold
110,874

 
79,091

Silver equivalent ounces sold
11,126,126

 
8,274,952

Average realized price per silver ounce
$
17.61

 
$
15.16

Average realized price per gold ounce
$
1,149

 
$
1,178

Costs applicable to sales per silver equivalent ounce(1)
$
11.39

 
$
12.36

Costs applicable to sales per average spot silver equivalent ounce(1)
$
10.64

 
$
11.28

Costs applicable to sales per gold equivalent ounce(1)
$
788

 
$
728

All-in sustaining costs per silver equivalent ounce(1)
$
15.01

 
$
16.28

All-in sustaining costs per average spot silver equivalent ounce(1)
$
13.65

 
$
13.71

(1)
See Non-GAAP Financial Performance Measures.

Consolidated Financial Results
Three Months Ended March 31, 2017 compared to Three Months Ended March 31, 2016
Net Income (Loss)
Net income was $18.7 million ($0.10 per share) compared to a Net loss of $20.4 million ($0.14 per share).  The increase in Net income is primarily due to a $21.1 million gain on the sale of the Joaquin project, higher silver and gold production, higher average realized silver prices, lower all-in sustaining costs per silver equivalent ounce, and lower interest expense, partially offset by lower average realized gold prices and higher general and administrative and exploration expense.
Revenue
Metal sales increased due to higher silver and gold production, a reduction in metal inventory and a 16% increase in average realized silver prices. The Company sold 4.5 million silver ounces and 110,874 gold ounces, compared to sales of 3.5 million silver ounces and 79,091 gold ounces. Gold contributed 62% of sales and silver contributed 38%, compared to 64% of sales from gold and 36% from silver. Royalty revenue was lower due to the Company’s divestiture of several non-core royalty assets in 2016.
Costs Applicable to Sales
Costs applicable to sales increased due to higher silver and gold ounces sold. For a complete discussion of costs applicable to sales, see Results of Operations below.

26


Amortization
Amortization increased $12.1 million, or 43%, primarily due to higher silver and gold ounces sold, partially offset by higher amortizable mining properties and equipment at Rochester and Kensington.
Expenses
General and administrative expenses increased 22% due to higher compensation and professional service costs.
Exploration expense increased $3.5 million, due to the Company’s expansion of drilling activities 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 9% to $4.6 million as a result of additional work at La Preciosa.
Other Income and Expenses
Non-cash fair value adjustments, net, were a loss of $1.2 million compared to a loss of $8.7 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 3.4% NSR royalty obligation.
Interest expense (net of capitalized interest of $0.4 million) decreased to $3.6 million from $11.1 million, primarily due to the repayment of the Term Loan, redemption of $200.8 million of Senior Notes and termination of the Palmarejo gold production royalty obligation in July 2016.
Other, net increased by $19.8 million, primarily due to a $21.1 million pre-tax gain on the sale of the Joaquin project in Argentina.
Income and Mining Taxes
During the first quarter of 2017, the Company reported estimated income and mining tax expense of approximately $11.0 million resulting in an effective tax rate of 37.2%. This compares to estimated income and mining tax expense of $2.1 million for an effective tax rate of 11.5% during the first 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 March 31,
 
2017
 
2016
In thousands
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
20,714

$
(1,964
)
 
$
(9,361
)
$
(532
)
Argentina
(328
)
1,124

 
(1,015
)
1,543

Mexico
8,650

(9,923
)
 
(7,509
)
17

Bolivia
471

(31
)
 
2,047

(1,570
)
Other jurisdictions
202

(252
)
 
(2,452
)
(1,564
)
 
$
29,709

$
(11,046
)
 
$
(18,290
)
$
(2,106
)
The Company’s effective tax rate is impacted by recurring and nonrecurring items. These items include foreign exchange rates on deferred tax balances, uncertain tax positions, and the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions. During the first quarter of 2017, foreign exchange increased income and mining tax expense by $5.6 million, predominately due to the strength of the Mexican peso. Additionally, the Company recognized $1.8 million income and mining tax expense from the sale of the Joaquin project. Also during the first quarter, favorable operating results at Palmarejo contributed to higher income and mining tax expense. The Company’s consolidated 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 our consolidated effective tax rate.

27


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
The Company is maintaining its full-year 2017 production and related cost guidance. Exploration expense is expected to increase $6 million to $29 - $31 million to accelerate the expansion of Kensington’s Jualin deposit, offset by a $6 million decrease in underground capital development at Kensington, resulting in expected capital expenditures of $109 - $129 million.

Results of Operations
The Company produced 3.9 million ounces of silver and 88,218 ounces of gold in the three months ended March 31, 2017, compared to 3.4 million ounces of silver and 78,072 ounces of gold in the three months ended March 31, 2016. Silver production increased 17% due to higher mill throughput and grade at Palmarejo and timing of leach pad recoveries at Rochester. Gold production increased 13% due to higher mill throughput,    grade and recovery at Palmarejo, partially offset by lower grade at Kensington.
Costs applicable to sales were $11.39 per silver equivalent ounce ($10.64 per average spot silver equivalent ounce) and $788 per gold equivalent ounce in the three months ended March 31, 2017 compared to $12.36 per silver equivalent ounce ($11.28 per average spot silver equivalent ounce) and $728 per gold equivalent ounce in the three months ended March 31, 2016. Costs applicable to sales per silver equivalent ounce decreased 8% in the three months ended March 31, 2017 due to lower unit costs at Palmarejo, partially offset by higher unit costs at San Bartolomé. Costs applicable to sales per gold equivalent ounce increased 8% in the three months ended March 31, 2017 due to higher unit costs at Kensington.
All-in sustaining costs were $15.01 per silver equivalent ounce ($13.65 per average spot silver equivalent ounce) in the three months ended March 31, 2017, compared to $16.28 per silver equivalent ounce ($13.71 per average spot silver equivalent ounce) in the three months ended March 31, 2016. The 8% decrease in all-in sustaining costs per silver equivalent ounce in 2017 was primarily due to lower costs applicable to sales per consolidated silver equivalent ounce and lower sustaining capital, partially offset by higher general and administrative and exploration expense.
Palmarejo
 
Three months ended March 31,
 
2017
 
2016
Tons milled
360,383

 
246,533

Silver ounces produced
1,530,541

 
933,369

Gold ounces produced
30,792

 
14,668

Silver equivalent ounces produced
3,378,061

 
1,813,449

Costs applicable to sales per silver equivalent oz(1)
$
9.71

 
$
12.36

Costs applicable to sales per average spot silver equivalent oz(1)
$
8.89

 
$
10.74

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended March 31, 2017 compared to Three Months Ended March 31, 2016
Silver equivalent production increased 86% due to higher mill throughput, silver and gold grades and gold recoveries. Metal sales were $77.7 million, or 38% of Coeur’s metal sales, compared with $29.8 million, or 21% of Coeur’s metal sales. Costs applicable to sales per ounce decreased 21% as a result of higher production, lower waste tons mined and favorable currency exchange rates. Amortization increased to $20.2 million compared to $7.3 million, primarily due to higher production from Guadalupe and Independencia. Capital expenditures were $6.2 million as the Company continues underground development at Guadalupe and Independencia.

28


Rochester
 
Three months ended March 31,
 
2017
 
2016
Tons placed
3,513,708

 
4,374,459

Silver ounces produced
1,127,322

 
928,903

Gold ounces produced
10,356

 
10,460

Silver equivalent ounces produced
1,748,682

 
1,556,503

Costs applicable to sales per silver equivalent oz(1)
$
12.56

 
$
12.64

Costs applicable to sales per average spot silver equivalent oz(1)
$
11.80

 
$
11.20

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended March 31, 2017 compared to Three Months Ended March 31, 2016
Silver equivalent production increased 12% due to timing of recoveries, partially offset by lower tons placed and lower silver and gold grades. Metal sales were $39.0 million, or 19% of Coeur’s metal sales, compared with $30.0 million, or 20% of Coeur’s metal sales. Costs applicable to sales per silver equivalent ounce were generally consistent at $12.56 per silver equivalent ounce. Amortization increased to $5.8 million compared to $5.3 million due to higher silver production and amortizable mining properties and equipment. Capital expenditures increased to $10.6 million compared to $3.3 million due to the stage IV leach pad expansion.
Kensington
 
Three months ended March 31,
 
2017
 
2016
Tons milled
165,895

 
159,360

Gold ounces produced
26,197

 
31,974

Costs applicable to sales/oz(1)
$
885

 
$
772

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended March 31, 2017 compared to Three Months Ended March 31, 2016
Gold production decreased 18% due to lower grades mined as a result of mine sequencing, partially offset by higher mill throughput. Metal sales were $38.0 million, or 18% of Coeur’s metal sales, compared to $35.7 million, or 24% of Coeur’s metal sales. Costs applicable to sales per ounce were 15% higher, primarily due to lower production and higher diesel, contract services and other mining costs. Amortization was $9.2 million compared to $8.3 million due to higher amortizable mining properties and equipment. Capital expenditures decreased to $5.5 million compared to $8.1 million, due to less underground mine development.
Wharf
 
Three months ended March 31,
 
2017
 
2016
Tons placed
1,292,181

 
974,663

Gold ounces produced
20,873

 
20,970

Silver ounces produced
20,065

 
12,980

Gold equivalent ounces produced(1)
21,207


21,186

Costs applicable to sales per gold equivalent oz(1)
$
662

 
$
669

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended March 31, 2017 compared to Three Months Ended March 31, 2016
Gold equivalent production remained comparable at 21,207 gold equivalent ounces. Metal sales were $30.3 million, or 15% of Coeur’s metal sales, compared to $27.9 million, or 19% of Coeur’s metal sales. Costs applicable to sales per gold equivalent ounce remained comparable at $662 per gold equivalent ounce. Amortization was $3.1 million compared to $4.1 million due to higher life of mine reserves. Capital expenditures were $0.9 million compared to $1.4 million.

29


San Bartolomé
 
Three months ended March 31,
 
2017
 
2016
Tons milled
384,267

 
407,806

Silver ounces produced
1,214,507

 
1,381,913

Costs applicable to sales/oz(1)
$
15.87

 
$
12.64

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended March 31, 2017 compared to Three Months Ended March 31, 2016
Silver production decreased 12% due to drought conditions. Silver sales were $20.6 million, or 10% of Coeur’s metal sales, compared with $21.3 million, or 15% of Coeur’s metal sales. Costs applicable to sales per ounce increased due to lower production and higher mining and processing costs. Amortization was $1.4 million compared to $1.8 million due to lower production. Capital expenditures were $0.4 million compared to $0.5 million.
Endeavor Silver Stream
 
Three months ended March 31,
 
2017
 
2016
Tons milled
45,340

 
86,863

Silver ounces produced
39,941

 
115,310

Costs applicable to sales/oz(1)
7.22

 
5.35

(1)
See Non-GAAP Financial Performance Measures.
Three Months Ended March 31, 2017 compared to Three Months Ended March 31, 2016
Silver production at Endeavor decreased due to lower mining and mill throughput rates. 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 $0.1 million compared to $0.8 million due to lower production and lower amortizable mining properties.

30


Liquidity and Capital Resources
Cash Provided by Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2017 and 2016 was $55.3 million and $6.6 million, respectively, and was impacted by the following key factors:
 
Three months ended March 31,
 
2017
 
2016
Consolidated silver equivalent ounces sold
11,126,126

 
8,274,952

Average realized price per consolidated silver equivalent ounce(1)
$
18.53

 
$
17.72

Costs applicable to sales per consolidated silver equivalent ounce (1)
(11.93
)
 
(12.27
)
Operating margin per consolidated silver equivalent ounce
$
6.60

 
$
5.45

(1)
See Non-GAAP Financial Performance Measures.
 
Three months ended March 31,
In thousands
2017
 
2016
Cash flow before changes in operating assets and liabilities
$
43,827

 
$
23,253

Changes in operating assets and liabilities:
 
 
 
Receivables
13,106

 
3,481

Prepaid expenses and other
(4,299
)
 
1,279

Inventories
14,292

 
(7,822
)
Accounts payable and accrued liabilities
(11,655
)
 
(13,574
)
CASH PROVIDED BY OPERATING ACTIVITIES
$
55,271

 
$
6,617

Cash provided by operating activities increased $48.7 million for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 due to higher silver equivalent ounces sold, higher average realized prices, lower costs applicable to sales per consolidated silver equivalent ounce and favorable working capital adjustments. Metal sales for three months ended March 31, 2017 increased $59.5 million, $53.1 million due to higher silver equivalent ounces sold and $6.4 million due to higher average realized prices. The $11.4 million working capital decrease in the three months ended March 31, 2017 was primarily due to the reduction of precious metal inventory and the collection of accounts receivable, compared to the $16.6 million working capital increase in the three months ended March 31, 2016 due to an increase in ore on leach pads and the payment of accrued interest, payroll, and other benefits, partially offset by the collection of accounts receivable.
Cash Used in Investing Activities
Net cash used in investing activities in the three months ended March 31, 2017 was $1.5 million compared to $18.6 million in the three months ended March 31, 2016, primarily due to proceeds from the sale of the Joaquin project, net of a retained 2.0% NSR, and sale of equity securities. The Company had capital expenditures of $24.0 million in the three months ended March 31, 2017 compared with $22.2 million in the three months ended March 31, 2016. Capital expenditures in both periods primarily related to underground development at Palmarejo and Kensington.
Cash Used in Financing Activities
Net cash used in financing activities in the three months ended March 31, 2017 was $6.5 million compared to $15.4 million in the three months ended March 31, 2016. The Company’s Palmarejo gold production royalty obligation terminated July 2016 and Coeur Mexicana now sells 50% of Palmarejo gold production for the lesser of $800 or spot price per ounce under a gold stream agreement. In addition, the Company had higher tax withholdings on vested stock-based compensation awards during three months ended March 31, 2017.
    
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.
In order to reduce future cash interest payments, and/or amounts due at maturity or upon redemption, from time to time we may repurchase certain of our debt securities for cash or in exchange for other securities, which may include secured or

31


unsecured notes or equity, in each case in open market or privately negotiated transactions. We regularly engage in conversations with our bondholders and evaluate any such transactions in light of prevailing market conditions, liquidity requirements, contractual restrictions, and other factors. The amounts involved may be significant and any such transactions may occur at a substantial discount to the debt securities’ face amount. For additional information, please see the section titled “Risk Factors” included in Item 1A.

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.
    



32


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 March 31,
In thousands except per share amounts
2017
 
2016
Net income (loss)
$
18,663

 
$
(20,396
)
Fair value adjustments
1,200

 
8,695

Impairment of marketable securities
121

 

Write-downs

 
4,446

Gain on sale of Joaquin project
(21,138
)
 

(Gain) loss on sale of assets and securities
2,066

 
(1,085
)
Transaction costs

 
380

Foreign exchange loss (gain)
4,268

 
(1,124
)
Tax effect of adjustments(1)
1,807

 
(1,375
)
Adjusted net income (loss)
$
6,987

 
$
(10,459
)
 
 
 
 
Adjusted net income (loss) per share - Basic
$
0.04

 
$
(0.06
)
Adjusted net income (loss) per share - Diluted
$
0.04

 
$
(0.06
)
(1)
For the three months ended March 31, 2017, tax effect of adjustments of $1.8 million (14%) is primarily related to a taxable gain on the sale of the Joaquin project. For the three months ended March 31, 2016, tax effect of adjustments of $1.4 million (-11%) is primarily related to the tax benefit from fair value adjustments.



33


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 Company’s Senior Notes indenture 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 March 31,
In thousands except per share amounts
2017
 
2016
Net income (loss)
$
18,663

 
$
(20,396
)
Interest expense, net of capitalized interest
3,586

 
11,120

Income tax provision (benefit)
11,046

 
2,106

Amortization
40,104

 
27,964

EBITDA
73,399


20,794

Fair value adjustments, net
1,200

 
8,695

Impairment of equity securities
121

 

Foreign exchange (gain) loss
(1,349
)
 
164

Gain on sale of Joaquin project
(21,138
)
 

(Gain) loss on sale of assets and securities
2,066

 
(1,085
)
Transaction costs

 
380

Asset retirement obligation accretion
2,390

 
2,060

Inventory adjustments and write-downs
(104
)
 
1,944

Write-downs

 
4,446

Adjusted EBITDA
$
56,585


$
37,398

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.















34


Three Months Ended March 31, 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)
 
$
63,151


$
32,255

 
$
19,633

 
$
400

 
$
115,439

 
$
37,621

 
$
19,431

 
$
57,052

 
$
172,491

Amortization
 
20,150

 
5,816

 
1,411

 
113

 
27,490

 
9,178

 
3,111

 
12,289

 
39,779

Costs applicable to sales
 
$
43,001

 
$
26,439

 
$
18,222

 
$
287

 
$
87,949

 
$
28,443

 
$
16,320

 
$
44,763

 
$
132,712

Silver equivalent ounces sold
 
4,427,346

 
2,104,209

 
1,148,006

 
39,765

 
7,719,326

 
 
 
 
 
 
 
11,126,126

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
32,144

 
24,636

 
56,780

 
 
Costs applicable to sales per ounce
 
$
9.71


$
12.56

 
$
15.87

 
$
7.22

 
$
11.39

 
$
885

 
$
662

 
$
788

 
$
11.93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per average spot ounce
 
$
8.89

 
$
11.80

 

 

 
$
10.64

 

 

 

 
$
10.85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
132,712

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,616

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,600

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,133

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,252

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,818

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,889

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
167,020

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,719,326

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
3,406,800

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,126,126

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
15.01

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated silver equivalent ounces sold (average spot)
 
 
 
 
 
 
 
 
 
 
 
 
 
12,235,897

All-in sustaining costs per average spot silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
13.65

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

Three Months Ended March 31, 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)
 
$
28,327

 
$
27,798

 
$
19,251

 
$
955

 
$
76,331

 
$
32,767

 
$
19,512

 
$
52,279

 
$
128,610

Amortization
 
7,289

 
5,313

 
1,754

 
299

 
14,655

 
8,349

 
4,051

 
12,400

 
27,055

Costs applicable to sales
 
$
21,038

 
$
22,485

 
$
17,497

 
$
656

 
$
61,676

 
$
24,418

 
$
15,461

 
$
39,879

 
$
101,555

Silver equivalent ounces sold
 
1,702,290

 
1,779,377

 
1,384,391

 
122,694

 
4,988,752

 
 
 
 
 
 
 
8,274,952

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
31,648

 
23,122

 
54,770

 
 
Costs applicable to sales per ounce
 
$
12.36


$
12.64


$
12.64


$
5.35


$
12.36

 
$
772


$
669


$
728

 
$
12.27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per average spot ounce
 
$
10.74

 
$
11.20

 

 

 
$
11.28

 
 
 
 
 
 
 
$
10.34

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
101,555

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,158

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16,710

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,276

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,731

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,759

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,558

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
134,747

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,988,752

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
3,286,200

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,274,952

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
16.28

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated silver equivalent ounces sold (average spot)
 
 
 
 
 
 
 
 
 
 
 
 
 
9,828,373

All-in sustaining costs per average spot silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
13.71

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


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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, and generate superior and sustainable returns for stockholders, maximizing net cash flow, reducing operating and non-operating costs, demonstrating consistent capital discipline, efficient management of working capital, tax positions, anticipated expenses, 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, and the risks and uncertainties discussed in this MD&A, (ii) the risks and hazards inherent in the mining business (including risks inherent in developing large-scale mining projects, environmental hazards, industrial accidents, weather or geologically related conditions), (iii) changes in the market prices of gold and silver and a sustained lower price environment, including any resulting impact on cash flows, (iv) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays, ground conditions and grade variability, (v) any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), (vi) the uncertainties inherent in the estimation of gold and silver reserves and mineralized material, (vii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (viii) the loss of access to any third-party smelter to which the Company markets silver and gold, (ix) the effects of environmental and other governmental regulations, (x) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, (xi) the political risks and uncertainties associated with operations in Bolivia; and (xii) 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.
    

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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 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 March 31, 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 pricing resulted in provisional pricing mark-to-market gains of $1.4 million in the three months ended March 31, 2017.
At March 31, 2017, the Company had outstanding provisionally priced sales of 0.1 million ounces of silver and 29,603 ounces of gold at prices of $17.74 and $1,211, respectively. A 10% change in realized silver price would cause revenue to vary by $0.1 million and a 10% change in realized gold price would cause revenue to vary by $3.6 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 March 31, 2017.

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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 March 31, 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 sets forth information relating to important risks and uncertainties that could
materially adversely affect the Company’s business, financial condition or operating results. Additional risks and uncertainties
that the Company does not presently know or that it currently deems immaterial also may impair our business operations.

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

In accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and the Company’s insider trading policy, Casey M. Nault, the Company’s Senior Vice President, General Counsel & Secretary entered into a selling plan effective March 6, 2017. Under the selling plan, between May 1, 2017 and November 30, 2017, Mr. Nault will sell a total of 60,000 shares of the Company’s common stock so long as the market price of the common stock is higher than a minimum threshold price specified in the plan. Rule 10b5-1 permits an insider to implement a written prearranged trading plan entered into at a time when the insider is not aware of any material nonpublic information about the Company and allows the insider to trade on a one-time or regularly scheduled basis regardless of any material nonpublic information about the Company thereafter received by the insider.




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Item 6.        Exhibits
31.1
Certification of the CEO (Filed herewith).
31.2
Certification of the CFO (Filed herewith).
32.1
CEO Section 1350 Certification (Filed herewith).
32.2
CFO Section 1350 Certification (Filed herewith).
95.1
Mine Safety Disclosure (Filed herewith).
101.INS
XBRL Instance Document**
101.SCH
XBRL Taxonomy Extension Schema**
101.CAL
XBRL Taxonomy Extension Calculation Linkbase**
101.DEF
XBRL Taxonomy Extension Definition Linkbase**
101.LAB
XBRL Taxonomy Extension Label Linkbase**
101.PRE
XBRL Taxonomy Extension Presentation Linkbase**
*    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 months ended March 31, 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
April 26, 2017
/s/ Mitchell J. Krebs
 
 
 
MITCHELL J. KREBS
 
 
 
President and Chief Executive Officer (Principal Executive Officer)
 
 
 
 
Dated
April 26, 2017
/s/ Peter C. Mitchell
 
 
 
PETER C. MITCHELL
 
 
 
Senior Vice President and Chief Financial Officer (Principal Financial Officer)
 
 
 
 
Dated
April 26, 2017
/s/ Mark Spurbeck
 
 
 
MARK SPURBECK
 
 
 
Vice President, Finance (Principal Accounting Officer)


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