UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________________
FORM 10-Q
___________________________________________
| ☑ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||
For the quarterly period ended September 30, 2022
OR
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||
For the transition period from to
Commission file number 001-08641
____________________________________________
COEUR MINING, INC.
(Exact name of registrant as specified in its charter)
____________________________________________
Delaware | 82-0109423 | |||||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| 104 S. Michigan Ave. | ||||||||||||||
| Suite 900 | Chicago, | Illinois | 60603 | |||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(312) 489-5800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock (par value $.01 per share) | CDE | New York Stock Exchange | ||||||
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files.) Yes ☑ 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 | ☑ | 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 ☑
The Company has 600,000,000 shares of common stock, par value of $0.01, authorized of which 280,938,928 shares were issued and outstanding as of November 7, 2022.
COEUR MINING, INC.
INDEX
| Page | ||||||||
| Part I. | Financial Information | |||||||
Item 1. Financial Statements | ||||||||
| Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
| Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | ||||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||
| Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) | ||||||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) | ||||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||||
| Consolidated Financial Results | ||||||||
| Results of Operations | ||||||||
| Liquidity and Capital Resources | ||||||||
| Non-GAAP Financial Performance Measures | ||||||||
Item 3. Quantitative and Qualitative Disclosures about Market Risk | ||||||||
Item 4. Controls and Procedures | ||||||||
| Part II. | Other Information | |||||||
Item 1. Legal Proceedings | ||||||||
Item 1A. Risk Factors | ||||||||
Item 4. Mine Safety Disclosures | ||||||||
| Item 5. Other Information | ||||||||
Item 6. Exhibits | ||||||||
| Signatures | ||||||||
3
PART I
Item 1. Financial Statements and Supplementary Data
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| September 30, 2022 | December 31, 2021 | |||||||||||||
| ASSETS | Notes | In thousands, except share data | ||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and cash equivalents | $ | 75,389 | $ | 56,664 | ||||||||||
| Receivables | 4 | 34,947 | 32,417 | |||||||||||
| Inventory | 5 | 59,405 | 51,281 | |||||||||||
| Ore on leach pads | 5 | 83,647 | 81,128 | |||||||||||
| Equity securities | 6 | 36,255 | — | |||||||||||
| Prepaid expenses and other | 54,590 | 13,847 | ||||||||||||
| Assets held for sale | 20 | 101,750 | 54,240 | |||||||||||
| 445,983 | 289,577 | |||||||||||||
| NON-CURRENT ASSETS | ||||||||||||||
| Property, plant and equipment, net | 370,700 | 319,967 | ||||||||||||
| Mining properties, net | 952,189 | 852,799 | ||||||||||||
| Ore on leach pads | 5 | 58,221 | 73,495 | |||||||||||
| Restricted assets | 7,934 | 9,138 | ||||||||||||
| Equity securities | 6 | 9,293 | 132,197 | |||||||||||
| Receivables | 4, 12 | 8,717 | — | |||||||||||
| Other | 61,177 | 57,249 | ||||||||||||
| TOTAL ASSETS | $ | 1,914,214 | $ | 1,734,422 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Accounts payable | $ | 135,996 | $ | 103,901 | ||||||||||
| Accrued liabilities and other | 18 | 79,611 | 87,946 | |||||||||||
| Debt | 7, 8 | 26,417 | 29,821 | |||||||||||
| Reclamation | 9 | 2,853 | 2,931 | |||||||||||
| Liabilities held for sale | 20 | 12,813 | 11,269 | |||||||||||
| 257,690 | 235,868 | |||||||||||||
| NON-CURRENT LIABILITIES | ||||||||||||||
| Debt | 7, 8 | 609,262 | 457,680 | |||||||||||
| Reclamation | 9 | 183,810 | 178,957 | |||||||||||
| Deferred tax liabilities | 9,748 | 21,969 | ||||||||||||
| Other long-term liabilities | 32,115 | 39,686 | ||||||||||||
| 834,935 | 698,292 | |||||||||||||
| COMMITMENTS AND CONTINGENCIES | 17 | |||||||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||||||
Common stock, par value $0.01 per share; authorized 600,000,000 shares, 280,836,100 issued and outstanding at September 30, 2022 and 256,919,803 at December 31, 2021 | 2,808 | 2,569 | ||||||||||||
| Additional paid-in capital | 3,839,725 | 3,738,347 | ||||||||||||
| Accumulated other comprehensive income (loss) | 45,694 | (1,212) | ||||||||||||
| Accumulated deficit | (3,066,638) | (2,939,442) | ||||||||||||
| 821,589 | 800,262 | |||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,914,214 | $ | 1,734,422 | ||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Notes | In thousands, except share data | |||||||||||||||||||||||||
| Revenue | 3 | $ | 182,993 | $ | 207,969 | $ | 575,520 | $ | 624,944 | |||||||||||||||||
| COSTS AND EXPENSES | ||||||||||||||||||||||||||
Costs applicable to sales(1) | 3 | 163,180 | 134,340 | 447,126 | 375,082 | |||||||||||||||||||||
| Amortization | 29,151 | 30,962 | 83,549 | 92,872 | ||||||||||||||||||||||
| General and administrative | 9,722 | 8,743 | 29,281 | 30,764 | ||||||||||||||||||||||
| Exploration | 8,406 | 15,391 | 19,103 | 37,503 | ||||||||||||||||||||||
| Pre-development, reclamation, and other | 14 | 9,249 | 10,506 | 29,839 | 36,956 | |||||||||||||||||||||
| Total costs and expenses | 219,708 | 199,942 | 608,898 | 573,177 | ||||||||||||||||||||||
| OTHER INCOME (EXPENSE), NET | ||||||||||||||||||||||||||
| Loss on debt extinguishment | — | — | — | (9,173) | ||||||||||||||||||||||
| Fair value adjustments, net | 12 | (13,067) | (26,440) | (65,272) | 7,000 | |||||||||||||||||||||
| Interest expense, net of capitalized interest | 8 | (5,932) | (3,237) | (15,670) | (13,240) | |||||||||||||||||||||
| Other, net | 14 | 153 | (26,718) | 2,203 | (22,390) | |||||||||||||||||||||
| Total other income (expense), net | (18,846) | (56,395) | (78,739) | (37,803) | ||||||||||||||||||||||
| Income (loss) before income and mining taxes | (55,561) | (48,368) | (112,117) | 13,964 | ||||||||||||||||||||||
| Income and mining tax (expense) benefit | 10 | (1,883) | (6,400) | (15,079) | (34,526) | |||||||||||||||||||||
| NET INCOME (LOSS) | $ | (57,444) | $ | (54,768) | $ | (127,196) | $ | (20,562) | ||||||||||||||||||
| OTHER COMPREHENSIVE INCOME (LOSS): | ||||||||||||||||||||||||||
| Change in fair value of derivative contracts designated as cash flow hedges | 29,060 | 1,349 | 58,087 | 25,723 | ||||||||||||||||||||||
| Reclassification adjustments for realized (gain) loss on cash flow hedges | (9,910) | (3,902) | (11,181) | (9,683) | ||||||||||||||||||||||
| Other comprehensive income (loss) | 19,150 | (2,553) | 46,906 | 16,040 | ||||||||||||||||||||||
| COMPREHENSIVE INCOME (LOSS) | $ | (38,294) | $ | (57,321) | $ | (80,290) | $ | (4,522) | ||||||||||||||||||
| NET INCOME (LOSS) PER SHARE | 15 | |||||||||||||||||||||||||
| Basic income (loss) per share: | ||||||||||||||||||||||||||
| Basic | $ | (0.21) | $ | (0.21) | $ | (0.47) | $ | (0.08) | ||||||||||||||||||
| Diluted | $ | (0.21) | $ | (0.21) | $ | (0.47) | $ | (0.08) | ||||||||||||||||||
(1) Excludes amortization.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Notes | In thousands | |||||||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||||
| Net income (loss) | $ | (57,444) | $ | (54,768) | $ | (127,196) | $ | (20,562) | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Amortization | 29,151 | 30,962 | 83,549 | 92,872 | ||||||||||||||||||||||
| Accretion | 3,596 | 3,028 | 10,588 | 8,898 | ||||||||||||||||||||||
| Deferred taxes | (4,730) | (5,964) | (12,288) | (740) | ||||||||||||||||||||||
| Loss on debt extinguishment | 8 | — | — | — | 9,173 | |||||||||||||||||||||
| Fair value adjustments, net | 12 | 13,067 | 26,440 | 62,133 | (7,000) | |||||||||||||||||||||
| Stock-based compensation | 11 | 2,705 | 2,671 | 7,319 | 10,183 | |||||||||||||||||||||
| Write-downs | 5 | 21,204 | 31,249 | 38,018 | 31,249 | |||||||||||||||||||||
| Deferred revenue recognition | 17 | (10,167) | (307) | (10,723) | (15,908) | |||||||||||||||||||||
| Other | 1,290 | 1,493 | 824 | (339) | ||||||||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||||||||
| Receivables | (119) | (944) | 4,099 | 1,016 | ||||||||||||||||||||||
| Prepaid expenses and other current assets | (2,075) | (80) | 939 | 593 | ||||||||||||||||||||||
| Inventory and ore on leach pads | (13,715) | (3,820) | (42,650) | (18,047) | ||||||||||||||||||||||
| Accounts payable and accrued liabilities | (1,880) | (8,114) | (17,512) | (15,842) | ||||||||||||||||||||||
| CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | (19,117) | 21,846 | (2,900) | 75,546 | ||||||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||||
| Capital expenditures | (96,602) | (71,266) | (239,260) | (208,913) | ||||||||||||||||||||||
| Proceeds from the sale of assets | — | 61 | 16,001 | 5,617 | ||||||||||||||||||||||
| Purchase of investments | — | (1,079) | — | (1,955) | ||||||||||||||||||||||
| Sale of investments | 40,469 | — | 40,469 | 935 | ||||||||||||||||||||||
| Other | (42) | (12) | (63) | (42) | ||||||||||||||||||||||
| CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | (56,175) | (72,296) | (182,853) | (204,358) | ||||||||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||||
| Issuance of common stock | 15 | — | — | 98,335 | — | |||||||||||||||||||||
| Issuance of notes and bank borrowings, net of issuance costs | 8 | 100,000 | 20,000 | 255,000 | 387,493 | |||||||||||||||||||||
| Payments on debt, finance leases, and associated costs | 7, 8 | (23,211) | (7,944) | (145,515) | (261,522) | |||||||||||||||||||||
| Other | (2) | (20) | (3,565) | (4,178) | ||||||||||||||||||||||
| CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 76,787 | 12,036 | 204,255 | 121,793 | ||||||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (234) | (253) | 25 | (360) | ||||||||||||||||||||||
| INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 1,261 | (38,667) | 18,527 | (7,379) | ||||||||||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 75,555 | 125,458 | 58,289 | 94,170 | ||||||||||||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 76,816 | $ | 86,791 | $ | 76,816 | $ | 86,791 | ||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
COEUR MINING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
| 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, 2021 | 256,919 | $ | 2,569 | $ | 3,738,347 | $ | (2,939,442) | $ | (1,212) | $ | 800,262 | ||||||||||||||||||||||||
| Net income (loss) | — | — | — | 7,682 | — | 7,682 | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | (4,758) | (4,758) | |||||||||||||||||||||||||||||
| Common stock issued under "at the market" stock offering | 22,053 | 220 | 98,279 | — | — | 98,499 | |||||||||||||||||||||||||||||
| Common stock issued/canceled under long-term incentive plans and director fees and options, net | 1,862 | 19 | (1,730) | — | — | (1,711) | |||||||||||||||||||||||||||||
| Balances at March 31, 2022 | 280,834 | $ | 2,808 | $ | 3,834,896 | $ | (2,931,760) | $ | (5,970) | $ | 899,974 | ||||||||||||||||||||||||
| Net income (loss) | — | — | — | (77,434) | — | (77,434) | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 32,514 | 32,514 | |||||||||||||||||||||||||||||
| Common stock issued/canceled under long-term incentive plans and director fees and options, net | (29) | — | 2,127 | — | — | 2,127 | |||||||||||||||||||||||||||||
| Balances at June 30, 2022 | 280,805 | $ | 2,808 | $ | 3,837,023 | $ | (3,009,194) | $ | 26,544 | $ | 857,181 | ||||||||||||||||||||||||
| Net income (loss) | — | — | — | (57,444) | — | (57,444) | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 19,150 | 19,150 | |||||||||||||||||||||||||||||
| Common stock issued/canceled under long-term incentive plans and director fees and options, net | 31 | — | 2,702 | — | — | 2,702 | |||||||||||||||||||||||||||||
| Balances at September 30, 2022 | 280,836 | $ | 2,808 | $ | 3,839,725 | $ | (3,066,638) | $ | 45,694 | $ | 821,589 | ||||||||||||||||||||||||
| 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, 2020 | 243,752 | $ | 2,438 | $ | 3,610,297 | $ | (2,908,120) | $ | (11,136) | $ | 693,479 | ||||||||||||||||||||||||
| Net income (loss) | — | — | — | 2,060 | — | 2,060 | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 24,636 | 24,636 | |||||||||||||||||||||||||||||
| Common stock issued/canceled under long-term incentive plans and director fees and options, net | (282) | (3) | 334 | — | — | 331 | |||||||||||||||||||||||||||||
| Balances at March 31, 2021 | 243,470 | $ | 2,435 | $ | 3,610,631 | $ | (2,906,060) | $ | 13,500 | $ | 720,506 | ||||||||||||||||||||||||
| Net income (loss) | — | — | — | 32,146 | — | 32,146 | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | (6,043) | (6,043) | |||||||||||||||||||||||||||||
| Common stock issued for investment | 12,786 | 128 | 118,649 | — | — | 118,777 | |||||||||||||||||||||||||||||
| Common stock issued/canceled under long-term incentive plans and director fees and options, net | 792 | 7 | 3,016 | — | — | 3,023 | |||||||||||||||||||||||||||||
| Balances at June 30, 2021 | 257,048 | $ | 2,570 | $ | 3,732,296 | $ | (2,873,914) | $ | 7,457 | $ | 868,409 | ||||||||||||||||||||||||
| Net income (loss) | — | — | — | (54,768) | — | (54,768) | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | (2,553) | (2,553) | |||||||||||||||||||||||||||||
| Common stock issued/canceled under long-term incentive plans and director fees and options, net | (119) | (1) | 2,652 | — | — | 2,651 | |||||||||||||||||||||||||||||
| Balances at September 30, 2021 | 256,929 | $ | 2,569 | $ | 3,734,948 | $ | (2,928,682) | $ | 4,904 | $ | 813,739 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
7
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, 2022. The condensed consolidated December 31, 2021 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, 2021 (the “2021 10-K”).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
Please see Note 2 — Summary of Significant Accounting Policies contained in the 2021 10-K.
Use of Estimates
The Company's Consolidated Financial Statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of the Company's Consolidated Financial Statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management estimates and assumptions relate to metal prices and mineral reserves that are the basis for future cash flow estimates utilized in impairment calculations and units-of production amortization calculations, environmental, reclamation and closure obligations, estimates of recoverable silver and gold in leach pad inventories, estimates of fair value for certain reporting units and asset impairments, valuation allowances for deferred tax assets, and the fair value and accounting treatment of financial instruments, equity securities, asset acquisitions, the allocation of fair value to assets and liabilities assumed in connection with business combinations, and derivative instruments. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results will differ from the amounts estimated in these financial statements.
Properties Held for Sale
In determining whether to classify a property as held for sale, the Company considers whether: (i) management has committed to a plan to sell the property; (ii) the investment is available for immediate sale, in its present condition; (iii) the Company has initiated a program to locate a buyer; (iv) the Company believes that the sale of the property is probable; (v) the Company has received a significant non-refundable deposit for the purchase of the property; (vi) the Company is actively marketing the property for sale at a price that is reasonable in relation to its estimated fair value; and (vii) actions required for the Company to complete the plan indicate that it is unlikely that any significant changes will be made to the plan. If all of the above criteria are met, the Company classifies the property as held for sale.
At September 30, 2022, the Sterling/Crown exploration properties met the held for sale criteria. However, considering that the Sterling/Crown exploration properties are not operating mines, the Company determined that the expected disposal of the Sterling/Crown exploration properties do not represent a strategic shift that had a major effect on the entity's results and operations, therefore, the Sterling/Crown exploration properties are not classified as a discontinued operation. The applicable assets and liabilities of Coeur Sterling, Inc. for the current period presented are classified on the Consolidated Balance Sheets as held for sale. See Note 20 -- Assets and Liabilities Held for Sale for additional detail.
Revenue Recognition
The Company’s gold stream agreement with a subsidiary of Franco-Nevada Corporation (“Franco-Nevada”) provided for a $22.0 million deposit paid by Franco-Nevada in exchange for the right and obligation, commencing in 2016, to purchase 50% of a portion of Palmarejo gold production at the lesser of $800 or market price per ounce. Because there is no minimum obligation associated with the deposit, it is not considered financing, and each shipment is considered to be a separate performance obligation. The streaming agreement represents a contract liability under ASC 606, which requires the Company to ratably recognize a portion of the deposit as revenue for each gold ounce delivered to Franco-Nevada. The remaining unamortized balance is included in Accrued liabilities and other and Other long-term liabilities on the Consolidated Balance Sheet. See Note 17 -- Commitments and Contingencies for additional detail.
The following table presents a roll forward of the Franco-Nevada contract liability balance:
8
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| In thousands | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Opening Balance | $ | 7,742 | $ | 8,775 | $ | 8,150 | $ | 9,376 | |||||||||||||||
| Revenue Recognized | (167) | (307) | (575) | (908) | |||||||||||||||||||
| Closing Balance | $ | 7,575 | $ | 8,468 | $ | 7,575 | $ | 8,468 | |||||||||||||||
In December 2021, the Company received a $15.0 million prepayment (the “December 2021 Prepayment”) for deliveries of gold concentrate from the Kensington mine pursuant to the Amended Sales Contract (as defined in Note 17). In March 2022, the Company exercised an option to receive a $10.0 million prepayment (the “March 2022 Prepayment). The Amended Sales Contract represents a contract liability under ASC 606, which requires the Company to recognize ratably a portion of the deposit as revenue for each gold ounce delivered to the customer. The remaining contract liability is included in Accrued liabilities and other on the Consolidated Balance Sheet. See Note 17 -- Commitments and Contingencies for additional detail.
The following table presents a roll forward of the Amended Sales Contract liability balance:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| In thousands | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Opening Balance | $ | 25,012 | $ | 15,004 | $ | 15,016 | $ | 15,003 | |||||||||||||||
| Additions | 361 | 95 | 10,811 | 15,096 | |||||||||||||||||||
| Revenue Recognized | (10,000) | (7,500) | (10,454) | (22,500) | |||||||||||||||||||
| Closing Balance | $ | 15,373 | $ | 7,599 | $ | 15,373 | $ | 7,599 | |||||||||||||||
Recently Issued Accounting Standards
In March 2022, the FASB issued ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method” which is intended to make amendments to the fair value hedge accounting previously issued in ASU 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. The new standard is effective for reporting periods beginning after December 15, 2022. The standard introduced the portfolio layer method allowing multiple hedged layers of a single closed portfolio when applying fair value hedge accounting. The Company plans to adopt the new derivatives and hedging standards effective January 1, 2023 and does not expect the new derivatives and hedging standard to have a material effect on our financial position, results of operations or cash flows.
9
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo, Rochester, Kensington and Wharf mines and Silvertip development property. Except for the Silvertip development property, all operating segments are engaged in the discovery, mining, and production of gold and/or silver. The Silvertip development property, which suspended mining and processing activities in February 2020, is engaged in the discovery of silver, zinc and lead. Other includes the Sterling/Crown exploration properties, other mineral interests, strategic equity investments, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.
Financial information relating to the Company’s segments is as follows (in thousands):
| Three Months Ended September 30, 2022 | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Other | Total | ||||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||
| Gold sales | $ | 35,285 | $ | 16,162 | $ | 49,010 | $ | 38,724 | $ | — | $ | — | $ | 139,181 | |||||||||||||||||||||||||||
| Silver sales | 29,551 | 14,011 | 97 | 153 | — | — | 43,812 | ||||||||||||||||||||||||||||||||||
| Metal sales | 64,836 | 30,173 | 49,107 | 38,877 | — | — | 182,993 | ||||||||||||||||||||||||||||||||||
| Costs and Expenses | |||||||||||||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 43,244 | 50,760 | 40,289 | 28,887 | — | — | 163,180 | ||||||||||||||||||||||||||||||||||
| Amortization | 8,027 | 6,921 | 10,369 | 2,191 | 1,260 | 383 | 29,151 | ||||||||||||||||||||||||||||||||||
| Exploration | 1,775 | 601 | 2,796 | — | 2,303 | 931 | 8,406 | ||||||||||||||||||||||||||||||||||
| Other operating expenses | 812 | 1,804 | 425 | 482 | 4,966 | 10,482 | 18,971 | ||||||||||||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||||||||||||||
| Fair value adjustments, net | — | — | — | — | — | (13,067) | (13,067) | ||||||||||||||||||||||||||||||||||
| Interest expense, net | 26 | (225) | (442) | (22) | (32) | (5,237) | (5,932) | ||||||||||||||||||||||||||||||||||
Other, net(3) | 1,142 | (101) | (62) | (167) | (85) | (574) | 153 | ||||||||||||||||||||||||||||||||||
| Income and mining tax (expense) benefit | (1,805) | 114 | — | (417) | — | 225 | (1,883) | ||||||||||||||||||||||||||||||||||
| Net Income (loss) | $ | 10,341 | $ | (30,125) | $ | (5,276) | $ | 6,711 | $ | (8,646) | $ | (30,449) | $ | (57,444) | |||||||||||||||||||||||||||
Segment assets(2) | $ | 294,438 | $ | 769,391 | $ | 146,128 | $ | 90,542 | $ | 242,142 | $ | 85,034 | $ | 1,627,675 | |||||||||||||||||||||||||||
| Capital expenditures | $ | 10,844 | $ | 73,995 | $ | 7,076 | $ | 458 | $ | 3,821 | $ | 408 | $ | 96,602 | |||||||||||||||||||||||||||
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
(3) See Note 14 -- Additional Comprehensive Income (Loss) Detail for additional detail
| Three Months Ended September 30, 2021 | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Other | Total | ||||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||
| Gold sales | $ | 33,237 | $ | 9,923 | $ | 51,881 | $ | 52,689 | $ | — | $ | — | $ | 147,730 | |||||||||||||||||||||||||||
| Silver sales | 41,410 | 18,402 | — | 427 | — | — | 60,239 | ||||||||||||||||||||||||||||||||||
| Metal sales | 74,647 | 28,325 | 51,881 | 53,116 | — | — | 207,969 | ||||||||||||||||||||||||||||||||||
| Costs and Expenses | |||||||||||||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 39,016 | 31,669 | 34,576 | 29,079 | — | — | 134,340 | ||||||||||||||||||||||||||||||||||
| Amortization | 8,747 | 4,671 | 12,786 | 3,158 | 1,258 | 342 | 30,962 | ||||||||||||||||||||||||||||||||||
| Exploration | 2,777 | 2,394 | 2,681 | — | 4,592 | 2,947 | 15,391 | ||||||||||||||||||||||||||||||||||
| Other operating expenses | 855 | 1,433 | 515 | 539 | 6,090 | 9,817 | 19,249 | ||||||||||||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||||||||||||||
| Fair value adjustments, net | — | — | — | — | — | (26,440) | (26,440) | ||||||||||||||||||||||||||||||||||
| Interest expense, net | (135) | (149) | (194) | (39) | 396 | (3,116) | (3,237) | ||||||||||||||||||||||||||||||||||
Other, net(3) | (26,868) | (99) | (62) | 460 | (124) | (25) | (26,718) | ||||||||||||||||||||||||||||||||||
| Income and mining tax (expense) benefit | (10,702) | 1,108 | (65) | (2,014) | — | 5,273 | (6,400) | ||||||||||||||||||||||||||||||||||
| Net Income (loss) | $ | (14,453) | $ | (10,982) | $ | 1,002 | $ | 18,747 | $ | (11,668) | $ | (37,414) | $ | (54,768) | |||||||||||||||||||||||||||
Segment assets(2) | $ | 285,277 | $ | 496,940 | $ | 149,774 | $ | 73,019 | $ | 209,498 | $ | 112,836 | $ | 1,327,344 | |||||||||||||||||||||||||||
| Capital expenditures | $ | 8,506 | $ | 40,056 | $ | 6,272 | $ | 1,045 | $ | 15,099 | $ | 288 | $ | 71,266 | |||||||||||||||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
(3) See Note 14 -- Additional Comprehensive Income (Loss) Detail for additional detail
10
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
| Nine Months Ended September 30, 2022 | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Other | Total | ||||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||
| Gold sales | $ | 119,486 | $ | 42,413 | $ | 143,099 | $ | 110,259 | $ | — | $ | — | $ | 415,257 | |||||||||||||||||||||||||||
| Silver sales | 114,387 | 44,632 | 575 | 669 | — | — | 160,263 | ||||||||||||||||||||||||||||||||||
| Metal sales | 233,873 | 87,045 | 143,674 | 110,928 | — | — | 575,520 | ||||||||||||||||||||||||||||||||||
| Costs and Expenses | |||||||||||||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 135,532 | 120,988 | 116,510 | 74,096 | — | — | 447,126 | ||||||||||||||||||||||||||||||||||
| Amortization | 27,150 | 16,592 | 28,360 | 6,500 | 3,778 | 1,169 | 83,549 | ||||||||||||||||||||||||||||||||||
| Exploration | 5,071 | 4,009 | 4,416 | — | 2,041 | 3,566 | 19,103 | ||||||||||||||||||||||||||||||||||
| Other operating expenses | 2,485 | 5,465 | 1,348 | 1,521 | 16,550 | 31,751 | 59,120 | ||||||||||||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||||||||||||||
| Fair value adjustments, net | — | — | — | — | — | (65,272) | (65,272) | ||||||||||||||||||||||||||||||||||
| Interest expense, net | (100) | (606) | (1,111) | (49) | (150) | (13,654) | (15,670) | ||||||||||||||||||||||||||||||||||
Other, net(3) | 1,635 | (192) | 19 | 506 | (320) | 555 | 2,203 | ||||||||||||||||||||||||||||||||||
| Income and mining tax (expense) benefit | (24,325) | 1,079 | 127 | (2,382) | — | 10,422 | (15,079) | ||||||||||||||||||||||||||||||||||
| Net Income (loss) | $ | 40,845 | $ | (59,728) | $ | (7,925) | $ | 26,886 | $ | (22,839) | $ | (104,435) | $ | (127,196) | |||||||||||||||||||||||||||
Segment assets(2) | $ | 294,438 | $ | 769,391 | $ | 146,128 | $ | 90,542 | $ | 242,142 | $ | 85,034 | $ | 1,627,675 | |||||||||||||||||||||||||||
| Capital expenditures | $ | 34,515 | $ | 154,001 | $ | 23,828 | $ | 2,294 | $ | 21,383 | $ | 3,239 | $ | 239,260 | |||||||||||||||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
(3) See Note 14 -- Additional Comprehensive Income (Loss) Detail for additional detail
| Nine Months Ended September 30, 2021 | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Other | Total | ||||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||
| Gold sales | $ | 112,036 | $ | 36,389 | $ | 155,154 | $ | 128,631 | $ | — | $ | — | $ | 432,210 | |||||||||||||||||||||||||||
| Silver sales | 127,990 | 62,778 | — | 1,966 | — | — | 192,734 | ||||||||||||||||||||||||||||||||||
| Metal sales | 240,026 | 99,167 | 155,154 | 130,597 | — | — | 624,944 | ||||||||||||||||||||||||||||||||||
| Costs and Expenses | |||||||||||||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 114,922 | 93,733 | 95,173 | 71,254 | — | — | 375,082 | ||||||||||||||||||||||||||||||||||
| Amortization | 26,077 | 14,754 | 38,941 | 8,627 | 3,529 | 944 | 92,872 | ||||||||||||||||||||||||||||||||||
| Exploration | 6,304 | 3,802 | 5,095 | 143 | 11,119 | 11,040 | 37,503 | ||||||||||||||||||||||||||||||||||
| Other operating expenses | 3,578 | 4,325 | 5,783 | 1,249 | 18,609 | 34,176 | 67,720 | ||||||||||||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||||||||||||||
| Loss on debt extinguishment | — | — | — | — | — | (9,173) | (9,173) | ||||||||||||||||||||||||||||||||||
| Fair value adjustments, net | — | — | — | — | — | 7,000 | 7,000 | ||||||||||||||||||||||||||||||||||
| Interest expense, net | (471) | (851) | (568) | (122) | 622 | (11,850) | (13,240) | ||||||||||||||||||||||||||||||||||
Other, net(3) | (27,904) | (252) | (104) | 1,112 | (463) | 5,221 | (22,390) | ||||||||||||||||||||||||||||||||||
| Income and mining tax (expense) benefit | (29,601) | 937 | (1,106) | (4,437) | — | (319) | (34,526) | ||||||||||||||||||||||||||||||||||
| Net Income (loss) | $ | 31,169 | $ | (17,613) | $ | 8,384 | $ | 45,877 | $ | (33,098) | $ | (55,281) | $ | (20,562) | |||||||||||||||||||||||||||
Segment assets(2) | $ | 285,277 | $ | 496,940 | $ | 149,774 | $ | 73,019 | $ | 209,498 | $ | 112,836 | $ | 1,327,344 | |||||||||||||||||||||||||||
| Capital expenditures | $ | 28,284 | $ | 112,505 | $ | 19,519 | $ | 3,928 | $ | 44,011 | $ | 666 | $ | 208,913 | |||||||||||||||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
(3) See Note 14 -- Additional Comprehensive Income (Loss) Detail for additional detail
| Assets | September 30, 2022 | December 31, 2021 | |||||||||
| Total assets for reportable segments | $ | 1,627,675 | $ | 1,424,934 | |||||||
| Cash and cash equivalents | 75,389 | 56,664 | |||||||||
| Other assets | 211,150 | 252,824 | |||||||||
| Total consolidated assets | $ | 1,914,214 | $ | 1,734,422 | |||||||
11
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Geographic Information
| Long-Lived Assets | September 30, 2022 | December 31, 2021 | |||||||||
| United States | $ | 835,588 | $ | 704,007 | |||||||
| Mexico | 251,270 | 244,758 | |||||||||
| Canada | 235,907 | 223,876 | |||||||||
| Other | 124 | 125 | |||||||||
| Total | $ | 1,322,889 | $ | 1,172,766 | |||||||
| Revenue | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| United States | $ | 118,157 | $ | 133,322 | $ | 341,647 | $ | 384,918 | |||||||||||||||
| Mexico | 64,836 | 74,647 | 233,873 | 240,026 | |||||||||||||||||||
| Total | 182,993 | $ | 207,969 | $ | 575,520 | $ | 624,944 | ||||||||||||||||
NOTE 4 – RECEIVABLES
Receivables consist of the following:
| In thousands | September 30, 2022 | December 31, 2021 | |||||||||
| Current receivables: | |||||||||||
| Trade receivables | $ | 4,633 | $ | 4,879 | |||||||
| VAT receivable | 10,623 | 18,415 | |||||||||
| Income tax receivable | 9,015 | 8,418 | |||||||||
| Avino note receivable | 4,852 | — | |||||||||
| Gold forwards realized gains | 5,222 | — | |||||||||
| Other | 602 | 705 | |||||||||
| $ | 34,947 | $ | 32,417 | ||||||||
| Non-current receivables: | |||||||||||
| Deferred cash consideration | $ | 7,567 | $ | — | |||||||
| Contingent consideration | 1,150 | — | |||||||||
| $ | 8,717 | $ | — | ||||||||
| Total receivables | $ | 43,664 | $ | 32,417 | |||||||
12
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 5 – INVENTORY AND ORE ON LEACH PADS
Inventory consists of the following:
| In thousands | September 30, 2022 | December 31, 2021 | |||||||||
| Inventory: | |||||||||||
| Concentrate | $ | 3,688 | $ | 1,643 | |||||||
| Precious metals | 13,164 | 11,353 | |||||||||
| Supplies | 42,553 | 38,285 | |||||||||
| $ | 59,405 | $ | 51,281 | ||||||||
| Ore on Leach Pads: | |||||||||||
| Current | $ | 83,647 | $ | 81,128 | |||||||
| Non-current | 58,221 | 73,495 | |||||||||
| $ | 141,868 | $ | 154,623 | ||||||||
Long-term Stockpile (included in Other) | $ | 23,955 | $ | 18,027 | |||||||
| Total Inventory and Ore on Leach Pads | $ | 225,228 | $ | 223,931 | |||||||
Coeur reports the carrying value of metal and leach pad inventory at the lower of cost or net realizable value, with cost being determined using a weighted average cost method. During the first nine months of 2022, the cost of metal and leach pad inventory at Rochester exceeded its net realizable value which resulted in a non-cash write down for the three and nine months ended September 30, 2022 of $24.2 million ($21.2 million was recognized in Costs Applicable to Sales and $3.0 million in Amortization) and $43.2 million ($38.0 million was recognized in Cost Applicable to Sales and $5.2 million in Amortization), respectively.
NOTE 6 – INVESTMENTS
Equity Securities
The Company makes strategic investments in equity securities of silver and gold exploration, development and royalty and streaming companies.
| At September 30, 2022 | |||||||||||||||||||||||
| In thousands | Cost | Gross Unrealized Losses | Gross Unrealized Gains | Estimated Fair Value | |||||||||||||||||||
| Equity Securities | |||||||||||||||||||||||
| Victoria Gold Corp. | $ | 70,560 | $ | (34,305) | $ | — | $ | 36,255 | |||||||||||||||
| Integra Resources Corp. | 9,455 | (7,415) | — | 2,040 | |||||||||||||||||||
| Avino Silver & Gold Mines Ltd | 13,720 | (6,580) | — | 7,140 | |||||||||||||||||||
| Other | 2,233 | (2,120) | — | 113 | |||||||||||||||||||
| Equity securities | $ | 95,968 | $ | (50,420) | $ | — | $ | 45,548 | |||||||||||||||
| At December 31, 2021 | |||||||||||||||||||||||
| In thousands | Cost | Gross Unrealized Losses | Gross Unrealized Gains | Estimated Fair Value | |||||||||||||||||||
| Equity Securities | |||||||||||||||||||||||
| Victoria Gold Corp. | $ | 128,710 | $ | (4,499) | $ | — | $ | 124,211 | |||||||||||||||
| Integra Resources Corp. | 9,455 | (1,469) | — | 7,986 | |||||||||||||||||||
| Equity securities | $ | 138,165 | $ | (5,968) | $ | — | $ | 132,197 | |||||||||||||||
Changes in the fair value of the Company’s investment in equity securities are recognized each period in the Consolidated Statement of Comprehensive Income (Loss) in Fair value adjustments, net. See Note 12 -- Fair Value Measurements for additional details.
On June 28, 2022, the Company entered into an agreement to sell 5,000,000 shares of common stock of Victoria Gold (“Victoria Gold Common Shares”) at a price of $8.34 per Victoria Gold Common Share, which settled on July 5, 2022 for net
13
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
proceeds of $40.5 million. The Company realized a loss of $17.7 million on the sale of the Victoria Gold Common Shares, which are recognized in Fair value adjustments, net.
On March 21, 2022, the Company closed the sale of its La Preciosa silver project. In connection with the closing of the transaction, the Company received 14,000,000 common shares of Avino Silver & Gold Mines Ltd. (“Avino”) (representing approximately 12.0% of Avino’s outstanding common shares). See Note 19 -- Dispositions for additional details on the sale.
NOTE 7 – LEASES
Right of Use Assets and Liabilities
The following table summarizes quantitative information pertaining to the Company’s finance and operating leases.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| In thousands | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Lease Cost | |||||||||||||||||||||||
| Operating lease cost | $ | 2,906 | $ | 3,180 | $ | 8,800 | $ | 9,437 | |||||||||||||||
| Short-term operating lease cost | $ | 2,185 | $ | 2,441 | $ | 7,636 | $ | 7,614 | |||||||||||||||
| Finance Lease Cost: | |||||||||||||||||||||||
| Amortization of leased assets | $ | 5,521 | $ | 5,141 | $ | 15,889 | $ | 16,068 | |||||||||||||||
| Interest on lease liabilities | $ | 1,341 | 1,833 | 3,916 | 3,441 | ||||||||||||||||||
| Total finance lease cost | $ | 6,862 | $ | 6,974 | $ | 19,805 | $ | 19,509 | |||||||||||||||
Supplemental cash flow information related to leases was as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| In thousands | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Other Information | |||||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||||||||
| Operating cash flows from operating leases | $ | 5,091 | $ | 5,621 | $ | 16,437 | $ | 17,256 | |||||||||||||||
| Operating cash flows from finance leases | $ | 1,341 | $ | 1,833 | 3,916 | $ | 3,441 | ||||||||||||||||
| Financing cash flows from finance leases | $ | 8,210 | $ | 7,944 | $ | 24,118 | $ | 22,970 | |||||||||||||||
14
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Supplemental balance sheet information related to leases was as follows:
| In thousands | September 30, 2022 | December 31, 2021 | |||||||||
| Operating Leases | |||||||||||
| Other assets, non-current | $ | 23,819 | $ | 30,987 | |||||||
| 11,109 | 11,301 | ||||||||||
| 11,700 | 18,660 | ||||||||||
| Total operating lease liabilities | $ | 22,809 | $ | 29,961 | |||||||
| Finance Leases | |||||||||||
| Property and equipment, gross | $ | 143,733 | $ | 115,597 | |||||||
| Accumulated depreciation | (75,691) | (63,879) | |||||||||
| Property and equipment, net | $ | 68,042 | $ | 51,718 | |||||||
| Debt, current | $ | 26,417 | $ | 29,821 | |||||||
| Debt, non-current | 40,285 | 24,407 | |||||||||
| Total finance lease liabilities | $ | 66,702 | $ | 54,228 | |||||||
| Weighted Average Remaining Lease Term | |||||||||||
| Weighted-average remaining lease term - finance leases | 1.80 | 1.62 | |||||||||
| Weighted-average remaining lease term - operating leases | 2.53 | 3.17 | |||||||||
| Weighted Average Discount Rate | |||||||||||
| Weighted-average discount rate - finance leases | 5.17 | % | 5.08 | % | |||||||
| Weighted-average discount rate - operating leases | 5.21 | % | 5.20 | % | |||||||
Minimum future lease payments under finance and operating leases with terms longer than one year are as follows:
NOTE 8 – DEBT
| September 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
| In thousands | Current | Non-Current | Current | Non-Current | |||||||||||||||||||
2029 Senior Notes, net(1) | $ | — | $ | 368,977 | $ | — | $ | 368,273 | |||||||||||||||
Revolving Credit Facility(2) | — | 200,000 | — | 65,000 | |||||||||||||||||||
| Finance lease obligations | 26,417 | 40,285 | 29,821 | 24,407 | |||||||||||||||||||
| $ | 26,417 | $ | 609,262 | $ | 29,821 | $ | 457,680 | ||||||||||||||||
(1) Net of unamortized debt issuance costs of $6.0 million and $6.7 million at September 30, 2022 and December 31, 2021, respectively.
(2) Unamortized debt issuance costs of $3.0 million and $2.4 million at September 30, 2022 and December 31, 2021, respectively, included in Other Non-Current Assets.
15
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
2029 Senior Notes
In March 2021, the Company completed an offering of $375.0 million in aggregate principal amount of senior notes in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, for net proceeds of approximately $367.5 million (the “2029 Senior Notes”). For more details, please see Note 8 -- Debt contained in the 2021 10-K.
Revolving Credit Facility
On May 2, 2022, the Company entered into an amendment (the “May Amendment”) to the revolving credit facility (the “RCF”), dated as of September 29, 2017 (as amended, the “Credit Agreement”), by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors, Bank of America, N.A, as administrative agent (the “Agent”), and Bank of America, N.A., Royal Bank of Canada, Bank of Montreal, Chicago Branch, the Bank of Nova Scotia, ING Capital LLC and Goldman Sachs Bank USA (the “RCF Lenders”). The May Amendment, among other things, increased the maximum principal amount of the RCF by $90.0 million in incremental loans and commitments to an aggregate amount of $390.0 million.
At September 30, 2022, the Company had $200.0 million drawn at an interest rate of 5.5%, $29.8 million in outstanding letters of credit and $160.2 million available under the RCF. Future borrowing may be subject to certain financial covenants.
On November 9, 2022, the Company entered into an amendment (the “November Amendment”) to the RCF. The November Amendment, among other things, (1) modifies the financial covenants to provide greater flexibility under the consolidated net leverage ratio requirement through the December 31, 2023 test date, with the ratio returning to the original level as outlined in the RCF starting with the March 31, 2024 test date (the “Amendment Period”), (2) allows up to $50 million for integration costs or costs associated with establishing new facilities and certain costs associated with LCM adjustments at Rochester to be excluded from the calculation of Consolidated EBITDA for purposes of the RCF, (3) increases the interest rate on certain borrowings through early 2023, (4) requires the Company to repay outstanding amounts under the RCF if cash-on-hand exceeds $60 million during the Amendment Period, and (5) restricts certain payments and the incurrence of certain liens during the Amendment Period.
Finance Lease Obligations
From time-to-time, the Company acquires mining equipment and facilities under finance lease agreements. In the nine months ended September 30, 2022, the Company entered into new lease financing arrangements primarily for mining equipment at Rochester and Kensington. Coeur secured a finance lease package for nearly $60.0 million in 2021, a portion of which has been funded as of September 30, 2022. The package is earmarked for planned equipment purchases for Rochester’s Plan of Operation Amendment 11 (“POA 11”) in 2022, and has an interest rate of 5.22%. All finance lease obligations are recorded, upon lease inception, at the present value of future minimum lease payments. See Note 7 -- Leases for additional qualitative and quantitative disclosures related to finance leasing arrangements.
Interest Expense
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| In thousands | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| 2024 Senior Notes | $ | — | $ | — | $ | — | $ | 2,591 | |||||||||||||||
| 2029 Senior Notes | 4,805 | 4,805 | 14,414 | 11,211 | |||||||||||||||||||
| Revolving Credit Facility | 2,512 | 508 | 5,069 | 1,438 | |||||||||||||||||||
| Finance lease obligations | 1,341 | 1,833 | 3,916 | 3,441 | |||||||||||||||||||
| Amortization of debt issuance costs | 535 | 415 | 1,448 | 1,306 | |||||||||||||||||||
| Other debt obligations | 29 | 51 | 162 | 225 | |||||||||||||||||||
| Capitalized interest | (3,290) | (4,375) | (9,339) | (6,972) | |||||||||||||||||||
| Total interest expense, net of capitalized interest | $ | 5,932 | $ | 3,237 | $ | 15,670 | $ | 13,240 | |||||||||||||||
16
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 9 – 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 are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| In thousands | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Asset retirement obligation - Beginning | $ | 184,606 | $ | 143,229 | $ | 180,156 | $ | 139,274 | |||||||||||||||
| Accretion | 3,564 | 3,027 | 10,482 | 8,898 | |||||||||||||||||||
| Settlements | (1,507) | (1,501) | (3,975) | (3,417) | |||||||||||||||||||
| Asset retirement obligation - Ending | $ | 186,663 | $ | 144,755 | $ | 186,663 | $ | 144,755 | |||||||||||||||
NOTE 10 - INCOME AND MINING TAXES
The following table summarizes the components of Income and mining tax (expense) benefit for the three and nine months ended September 30, 2022 and 2021 by significant jurisdiction:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| In thousands | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | |||||||||||||||||||||||||||
| United States | $ | (59,012) | $ | (74) | $ | (30,247) | $ | 4,078 | $ | (154,263) | $ | (2,270) | $ | (9,131) | $ | (4,775) | |||||||||||||||||||
| Canada | (8,960) | — | (13,879) | — | (22,859) | (21) | (39,643) | — | |||||||||||||||||||||||||||
| Mexico | 12,178 | (1,809) | (4,138) | (10,478) | 64,847 | (12,788) | 59,603 | (29,751) | |||||||||||||||||||||||||||
| Other jurisdictions | 233 | — | (104) | — | 158 | — | 3,135 | — | |||||||||||||||||||||||||||
| $ | (55,561) | $ | (1,883) | $ | (48,368) | $ | (6,400) | $ | (112,117) | $ | (15,079) | $ | 13,964 | $ | (34,526) | ||||||||||||||||||||
During the third quarter of 2022, the Company reported estimated income and mining tax expense of approximately $1.9 million, resulting in an effective tax rate of 3.4%. This compares to income tax expense of $6.4 million for an effective tax rate of 13.2% during the third quarter of 2021. The comparability of the Company’s income and mining tax (expense) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) variations in our income before income taxes; (ii) geographic distribution of that income; (iii) mining taxes; (iv) the sale of non-core assets; (v) foreign exchange rates; (vi) the impact of uncertain tax positions; (vii) percentage depletion; and (viii) the non-recognition of tax assets. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period.
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 ultimately will 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 section titled “Risk Factors” in the 2021 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 2018 forward for the U.S. federal jurisdiction and from 2016 forward for certain other foreign jurisdictions. As a result of statutes of limitation that will begin to expire within the next twelve months in various jurisdictions and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease by less than $0.1 million in the next twelve months.
At September 30, 2022 and December 31, 2021, the Company had $0.0 million and $0.3 million of total gross unrecognized tax benefits, respectively, that, if recognized, would positively impact the Company’s effective income tax rate. The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At September 30, 2022 and December 31, 2021, the amount of accrued income-tax-related interest and penalties was $0.0 million and $0.4 million, respectively.
17
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
NOTE 11 – STOCK-BASED COMPENSATION
The Company has stock incentive plans for executives, directors and eligible employees. Stock awards include performance shares, restricted stock and stock options. Stock-based compensation expense in the three and nine months ended September 30, 2022 was $2.5 million and $7.1 million, respectively, compared to $2.7 million and $10.2 million in the three and nine months ended September 30, 2021. At September 30, 2022, respectively, there was $10.1 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.6 years.
The following table summarizes the grants awarded during the nine months ended September 30, 2022:
| Grant date | Restricted stock | Grant date fair value of restricted stock | Performance shares | Grant date fair value of performance shares | ||||||||||||||||||||||
| February 22, 2022 | 1,700,619 | $ | 4.21 | 1,067,118 | $ | 4.38 | ||||||||||||||||||||
| May 16, 2022 | 157,349 | $ | 3.39 | 59,010 | $ | 4.38 | ||||||||||||||||||||
| July 19, 2022 | 97,950 | $ | 2.90 | 23,462 | $ | 4.38 | ||||||||||||||||||||
NOTE 12 – FAIR VALUE MEASUREMENTS
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| In thousands | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Unrealized gain (loss) on equity securities | $ | 4,614 | $ | (35,709) | $ | (44,452) | $ | (3,702) | |||||||||||||||
| Realized gain (loss) on equity securities | (17,681) | — | (17,681) | 769 | |||||||||||||||||||
| Exchange agreement embedded derivative | — | 9,269 | — | 9,933 | |||||||||||||||||||
| Termination of gold zero cost collars | — | — | (3,139) | — | |||||||||||||||||||
| Fair value adjustments, net | $ | (13,067) | $ | (26,440) | $ | (65,272) | $ | 7,000 | |||||||||||||||
Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), secondary priority to quoted prices in inactive markets or observable inputs (Level 2), and the lowest priority to unobservable inputs (Level 3).
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
| Fair Value at September 30, 2022 | |||||||||||||||||||||||
| In thousands | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Equity securities including warrants | $ | 45,548 | $ | 45,435 | $ | 113 | $ | — | |||||||||||||||
| Provisional metal sales contracts | 120 | — | 120 | — | |||||||||||||||||||
| Gold forwards | 47,073 | — | 47,073 | — | |||||||||||||||||||
| $ | 92,741 | $ | 45,435 | $ | 47,306 | $ | — | ||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Provisional metal sales contracts | $ | 948 | $ | — | $ | 948 | $ | — | |||||||||||||||
18
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
| Fair Value at December 31, 2021 | |||||||||||||||||||||||
| In thousands | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Equity securities | $ | 132,197 | $ | 132,197 | $ | — | $ | — | |||||||||||||||
| Provisional metal sales contracts | 86 | — | 86 | — | |||||||||||||||||||
| $ | 132,283 | $ | 132,197 | $ | 86 | $ | — | ||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
Gold zero cost collars | $ | 1,212 | $ | — | $ | 1,212 | $ | — | |||||||||||||||
| Provisional metal sales contracts | 162 | — | 162 | — | |||||||||||||||||||
| $ | 1,374 | $ | — | $ | 1,374 | $ | — | ||||||||||||||||
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. The Company’s common share purchase warrants received as consideration in the La Preciosa project sale are valued using the pricing model with inputs derived from observable market data, including quoted market prices and quoted interest curve rates. 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 Company’s gold forward contracts are valued using pricing models with inputs derived from observable market data, including forward market prices, yield curves, credit spreads. The Company’s provisional metal sales contracts include concentrate and certain doré sales contracts that are valued using pricing models with inputs derived from observable market data, including forward market prices.
As further discussed in Note 19 -- Dispositions, the consideration for the sale of La Preciosa project included two royalties, a 1.25% net smelter returns royalty on properties covering the Gloria and Abundancia areas of the La Preciosa project and a 2.00% gross value royalty on all areas of the La Preciosa project other than the Gloria and Abundancia areas, and contingent consideration of $0.25 per silver equivalent ounce (adjusted for inflation) on any new mineral reserves discovered and declared outside of the current resources area at the La Preciosa project, up to a maximum payment of $50.0 million. The fair value of the royalties and the contingent consideration assets were $11.2 million and $1.2 million, respectively, valued as of the date of closing of the transaction and are measured at fair value on a non-recurring basis. The fair value of the royalties and the contingent consideration were valued using Monte Carlo simulation models. The model inputs include significant unobservable inputs and involve significant management judgment. The significant unobservable inputs included assumptions related to metal prices which assumed silver prices ranging from $22 to $25 per ounce and gold prices ranging from $1,700 to $1,930 per ounce as well as volatility assumptions for silver and gold prices (33.5% and 19.0%, respectively), and an assumed weighted average cost of capital of 15.5%. Such instruments are classified within Level 3 of the fair value hierarchy.
No assets or liabilities were transferred between fair value levels in the nine months ended September 30, 2022.
The fair value of financial assets and liabilities carried at book value in the financial statements at September 30, 2022 and December 31, 2021 is presented in the following table:
| September 30, 2022 | |||||||||||||||||||||||||||||
| In thousands | Book Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Promissory note | $ | 4,780 | $ | 4,593 | $ | — | $ | 4,593 | $ | — | |||||||||||||||||||
| Deferred cash consideration | $ | 7,458 | $ | 7,348 | $ | — | $ | 7,348 | $ | — | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
2029 Senior Notes(1) | $ | 368,977 | $ | 271,383 | $ | — | $ | 271,383 | $ | — | |||||||||||||||||||
Revolving Credit Facility(2) | $ | 200,000 | $ | 200,000 | $ | — | $ | 200,000 | $ | — | |||||||||||||||||||
(1) Net of unamortized debt issuance costs of $6.0 million
(2) Unamortized debt issuance costs of $3.0 million included in Other Non-Current Assets.
19
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
| December 31, 2021 | |||||||||||||||||||||||||||||
| In thousands | Book Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
2029 Senior Notes(1) | $ | 368,273 | $ | 337,384 | $ | — | $ | 337,384 | $ | — | |||||||||||||||||||
Revolving Credit Facility(2) | $ | 65,000 | $ | 65,000 | $ | — | $ | 65,000 | $ | — | |||||||||||||||||||
(1) Net of unamortized debt issuance costs of $6.7 million.
(2) Unamortized debt issuance costs of $2.4 million included in Other Non-Current Assets.
The fair value of the 2029 Senior Notes was estimated using quoted market prices. The fair value of the RCF approximates book value as the liability is secured, has a variable interest rate, and lacks significant credit concerns.
Also included in the consideration for the sale of La Preciosa project was a promissory note payable to the Company that matures in March 2023 and deferred cash consideration payable on the first anniversary of initial production from any portion of the La Preciosa project. These assets were valued using the pricing model with inputs derived from observable market data, including synthetic credit rating and quoted discount rate. 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.
NOTE 13 – DERIVATIVE FINANCIAL INSTRUMENTS & HEDGING ACTIVITIES
The Company is exposed to various market risks, including the effect of changes in metal prices, foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes.
The Company may elect to designate certain derivatives as hedging instruments under U.S. GAAP. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives designated as hedges to either recognized assets or liabilities or forecasted transactions and assessing, both at inception and on an ongoing basis, the effectiveness of the hedging relationships.
Derivatives Not Designated as Hedging Instruments
Provisional Metal Sales
The Company enters into sales contracts with third-party smelters, refiners and off-take customers 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.
Zero Cost Collars
To protect the Company’s exposure to fluctuations in metal prices the Company entered into Asian (or average value) put and call option contracts in net-zero-cost collar arrangements. The contracts were net cash settled monthly and, if the price of gold at the time of expiration is between the put and call prices, would expire at no cost to the Company. If the price of gold at the time of expiration was lower than the put prices or higher than the call prices, it would result in a realized gain or loss, respectively. The Company elected to designate these instruments as cash flow hedges of forecasted transactions at their inception. In the first quarter of 2022, the Company voluntarily de-designated hedge accounting for the zero cost collars and subsequently terminated the arrangements. The cost to terminate the zero cost collars was $7.7 million, of which $3.1 million was recognized in earnings and the remaining $4.6 million, which represents the fair value of the zero cost collars on the date of de-designation, was retained in accumulated other comprehensive income (loss) (“AOCI”) and will be recognized in earnings as the forecasted transactions occur. As of September 30, 2022, there was $1.4 million remaining to be recognized in earnings over the next three months.
At September 30, 2022, the Company had the following derivative instruments that settle as follows:
| In thousands except average prices and notional ounces | 2022 | 2023 and Thereafter | |||||||||
| Provisional gold sales contracts | $ | 32,768 | $ | — | |||||||
| Average gold price per ounce | $ | 1,744 | $ | — | |||||||
| Notional ounces | 18,789 | — | |||||||||
20
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The following summarizes the classification of the fair value of the derivative instruments:
| September 30, 2022 | |||||||||||
| In thousands | Prepaid expenses and other | Accrued liabilities and other | |||||||||
| Provisional metal sales contracts | $ | 120 | $ | 948 | |||||||
| December 31, 2021 | |||||||||||
| In thousands | Prepaid expenses and other | Accrued liabilities and other | |||||||||
| Provisional metal sales contracts | $ | 86 | $ | 162 | |||||||
The following represent mark-to-market gains (losses) on derivative instruments in the three and nine months ended September 30, 2022 and 2021, respectively (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| Financial statement line | Derivative | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
| Revenue | Provisional metal sales contracts | $ | (757) | $ | 79 | $ | (751) | $ | (618) | |||||||||||||||||
| Fair value adjustments, net | Exchange agreement embedded derivative | — | 9,269 | — | 9,933 | |||||||||||||||||||||
| Fair value adjustments, net | Terminated zero cost collars | — | — | (3,139) | — | |||||||||||||||||||||
| $ | (757) | $ | 9,348 | $ | (3,890) | $ | 9,315 | |||||||||||||||||||
Derivatives Designated as Cash Flow Hedging Strategies
To protect the Company’s exposure to fluctuations in metal prices the Company enters into forward contracts. The contracts are net settled monthly and if the actual price of gold at the time of expiration is lower than the fixed price or higher than the fixed prices, it would result in a realized gain or loss, respectively. The Company has elected to designate these instruments as cash flow hedges of forecasted transactions at their inception.
At September 30, 2022, the Company had the following derivative cash flow hedge instruments that settle as follows:
| In thousands except average prices and notional ounces | 2022 | 2023 and Thereafter | |||||||||
| Gold forwards | |||||||||||
| Average gold fixed price per ounce | $ | 1,994 | $ | 1,982 | |||||||
| Notional ounces | 54,500 | 112,500 | |||||||||
The effective portions of cash flow hedges are recorded in AOCI until the hedged item is recognized in earnings. Deferred gains and losses associated with cash flow hedges of metal sales revenue are recognized as a component of Revenue in the same period as the related sale is recognized.
At inception, the Company performed an assessment of the forecasted transactions and the hedging instruments and determined that the hedging relationships are considered perfectly effective. Future assessments are performed to verify that critical terms of the hedging instruments and the forecasted transactions continue to match, and the forecasted transactions remain probable, as well as an assessment of any adverse developments regarding the risk of the counterparties defaulting on their commitments. There have been no such changes in critical terms or adverse developments.
As of September 30, 2022, the Company had $47.1 million of net after-tax gain in AOCI related to gains from cash flow hedge transactions, of which $41.8 million of net after-tax gains is expected to be recognized in its Consolidated Statement of Comprehensive Income (Loss) during the next 12 months. Actual amounts ultimately reclassified to net income are dependent on the price of gold for metal contracts.
The following summarizes the classification of the fair value of the derivative instruments designated as cash flow hedges:
| September 30, 2022 | |||||||||||||||||
| In thousands | Prepaid expenses and other | Other assets | Accrued liabilities and other | ||||||||||||||
| Gold forwards | $ | 41,814 | $ | 5,259 | $ | — | |||||||||||
21
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
| December 31, 2021 | |||||||||||||||||
| In thousands | Prepaid expenses and other | Other assets | Accrued liabilities and other | ||||||||||||||
| Gold zero cost collars | $ | — | $ | — | $ | 1,212 | |||||||||||
The following table sets forth the pre-tax gains (losses) on derivatives designated as cash flow hedges that have been included in AOCI and the Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021, respectively (in thousands).
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Amount of Gain (Loss) Recognized in AOCI | |||||||||||||||||||||||
| Gold forwards | $ | 29,060 | $ | — | $ | 62,685 | $ | — | |||||||||||||||
| Gold zero cost collars | — | 1,614 | (4,598) | 25,590 | |||||||||||||||||||
| Foreign currency forward exchange contracts | — | (265) | — | 133 | |||||||||||||||||||
| $ | 29,060 | $ | 1,349 | $ | 58,087 | $ | 25,723 | ||||||||||||||||
| Amount of (Gain) Loss Reclassified From AOCI to Earnings | |||||||||||||||||||||||
| Gold forwards | $ | (11,289) | $ | — | $ | (14,399) | $ | — | |||||||||||||||
| Gold zero cost collars | 1,379 | 23 | 3,218 | 853 | |||||||||||||||||||
| Foreign currency forward exchange contracts | — | (3,925) | — | (10,536) | |||||||||||||||||||
| $ | (9,910) | $ | (3,902) | $ | (11,181) | $ | (9,683) | ||||||||||||||||
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.
NOTE 14 – ADDITIONAL COMPREHENSIVE INCOME (LOSS) DETAIL
Pre-development, reclamation, and other consists of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| In thousands | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| COVID-19 | $ | 294 | $ | 617 | $ | 1,585 | $ | 5,937 | |||||||||||||||
| Silvertip ongoing carrying costs | 4,628 | 5,589 | 15,542 | 18,957 | |||||||||||||||||||
| Asset retirement accretion | 3,597 | 3,027 | 10,588 | 8,898 | |||||||||||||||||||
| Other | 730 | 1,273 | 2,124 | 3,164 | |||||||||||||||||||
| Pre-development, reclamation and other | $ | 9,249 | $ | 10,506 | $ | 29,839 | $ | 36,956 | |||||||||||||||
Other, net consists of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| In thousands | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Foreign exchange gain (loss) | $ | 93 | $ | (1,028) | $ | (972) | $ | (2,299) | |||||||||||||||
| Gain (loss) on sale of assets | (87) | (92) | 2,365 | 4,582 | |||||||||||||||||||
| VAT write-down | — | (25,982) | — | (25,982) | |||||||||||||||||||
| Other | 147 | 384 | 810 | 1,309 | |||||||||||||||||||
| Other, net | $ | 153 | $ | (26,718) | $ | 2,203 | $ | (22,390) | |||||||||||||||
NOTE 15 – NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the
22
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
weighted average number of the Company’s common stock outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.
For the three and nine months ended September 30, 2022, there were 3,719,764 and 2,013,571 common stock equivalents, respectively, related to equity-based awards that were not included in the diluted earnings per share calculation as the shares would be antidilutive. Similarly, 1,513,288 and 1,489,158 common stock equivalents were excluded in the diluted earnings per share calculation for the three and nine months ended September 30, 2021, respectively.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| In thousands except per share amounts | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Net income (loss) available to common stockholders | $ | (57,444) | $ | (54,768) | $ | (127,196) | $ | (20,562) | |||||||||||||||
| Weighted average shares: | |||||||||||||||||||||||
| Basic | 278,105 | 254,744 | 272,599 | 247,675 | |||||||||||||||||||
| Effect of stock-based compensation plans | — | — | — | — | |||||||||||||||||||
| Diluted | 278,105 | 254,744 | 272,599 | 247,675 | |||||||||||||||||||
| Income (loss) per share: | |||||||||||||||||||||||
| Basic | $ | (0.21) | $ | (0.21) | $ | (0.47) | $ | (0.08) | |||||||||||||||
| Diluted | $ | (0.21) | $ | (0.21) | $ | (0.47) | $ | (0.08) | |||||||||||||||
On March 18, 2022, the Company completed a $100.0 million “at the market” offering of its common stock, par value $0.01 per share (the “March Equity Offering”). The Equity Offering was conducted pursuant to an ATM Equity Offering Sales Agreement (the “Sales Agreement”), entered into on April 23, 2020 between the Company and BofA Securities, Inc. and RBC Capital Markets, LLC as sales agents. The Company sold a total of 22,053,275 shares of its common stock in the March Equity Offering at an average price of $4.53 per share, raising net proceeds (after sales commissions) of $98.0 million. Proceeds from the March Equity Offering were used to repay outstanding amounts under the RCF.
NOTE 16 - SUPPLEMENTAL GUARANTOR INFORMATION
The following summarized financial information is presented to satisfy disclosure requirements of Rule 13-01 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, Coeur Capital, Inc., Coeur Sterling, Inc., Sterling Intermediate Holdco, Inc., and Coeur Sterling Holdings LLC (collectively, the “Subsidiary Guarantors”) of the 2029 Senior Notes. The following schedules present summarized financial information of (a) Coeur, the parent company and (b) the Subsidiary Guarantors (collectively the “Obligor Group”). The summarized financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions between entities in the Obligor Group eliminated. The Obligor Group’s amounts due from, amounts due to and transactions with certain wholly-owned domestic and foreign subsidiaries of the Company have been presented in separate line items, if they are material. 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.
23
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
SUMMARIZED BALANCE SHEET
| Coeur Mining, Inc. | Guarantor Subsidiaries | ||||||||||||||||||||||
| In thousands | September 30, 2022 | December 31, 2021 | September 30, 2022 | December 31, 2021 | |||||||||||||||||||
| Current assets | $ | 99,529 | $ | 11,143 | $ | 142,106 | $ | 128,630 | |||||||||||||||
Non-current assets(1) | $ | 365,784 | $ | 473,145 | $ | 1,036,176 | $ | 830,330 | |||||||||||||||
| Non-guarantor intercompany assets | $ | 6,327 | $ | 19,803 | $ | — | $ | — | |||||||||||||||
| Current liabilities | $ | 13,334 | $ | 18,353 | $ | 174,465 | $ | 130,307 | |||||||||||||||
| Non-current liabilities | $ | 74,794 | $ | 139,223 | $ | 678,240 | $ | 461,904 | |||||||||||||||
| Non-guarantor intercompany liabilities | $ | 34,801 | $ | 30,045 | $ | 1,608 | $ | 1,650 | |||||||||||||||
(1) Coeur Mining, Inc.’s non-current assets includes its investment in Guarantor Subsidiaries.
SUMMARIZED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2022
| In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | |||||||||
| Revenue | $ | — | $ | 341,647 | |||||||
| Gross profit (loss) | $ | (624) | $ | (21,940) | |||||||
| Net income (loss) | $ | (127,196) | $ | (41,081) | |||||||
NOTE 17 – COMMITMENTS AND CONTINGENCIES
Mexico Litigation Matters
As of September 30, 2022, $26.0 million in principal amount is due from the Mexican government associated with VAT that was paid under Coeur Mexicana, S.A. de C.V.’s (“Coeur Mexicana’s”) prior royalty agreement with a subsidiary of Franco-Nevada Corporation, which was terminated in 2016. Coeur Mexicana applied for and initially received VAT refunds associated with the royalty payments in the normal course; however, in 2011 the Mexican tax authorities began denying Coeur Mexicana’s VAT refunds based on the argument that VAT was not legally due on the royalty payments. Accordingly, Coeur Mexicana began to request refunds of the VAT as undue payments, which the Mexican tax authorities also denied. The Company has since been engaged in ongoing efforts to recover the VAT from the Mexican government (including through litigation and potential arbitration as well as refiling VAT refund requests). Despite a favorable ruling from Mexican tax courts in this matter in 2018, litigation has continued at the administrative, appeals court and supreme court levels, most of which has been determined unfavorably to Coeur based on interpretations of applicable law and prior court decisions which the Company and its counsel believe are contrary to legal precedent, conflicting and erroneous. While the Company believes that it remains legally entitled to be refunded the full amount of the VAT receivable and intends to rigorously continue its VAT recovery efforts, based on the continued failure to recover the VAT receivable and recent unfavorable Mexican court decisions, the Company determined to write down the carrying value of the VAT receivable at September 30, 2021. In September 2022, the Company and Coeur Mexicana filed a request for arbitration under Chapter 11 of the North American Free Trade Agreement, or NAFTA, in connection with this dispute. Outcomes in NAFTA arbitration and the process for recovering funds even if there is a successful outcome in NAFTA arbitration can be lengthy and unpredictable.
In addition, ongoing litigation with the Mexican government associated with enforcement of water rights in Mexico, if unsuccessful, may impact Coeur Mexicana’s ability to access new sources of water to provide sufficient supply for its operations at Palmarejo and, if material, may have a material adverse impact on the Company’s operations and financial results.
Palmarejo Gold Stream
Coeur Mexicana sells 50% of Palmarejo gold production (excluding production from certain properties acquired in 2015) to a subsidiary of Franco-Nevada Corporation (“Franco-Nevada”) under a gold stream agreement for the lesser of $800
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Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
or spot price per ounce. In 2016, Coeur Mexicana received a $22.0 million deposit toward future deliveries under the gold stream agreement. In accordance with generally accepted accounting principles, although Coeur Mexicana has satisfied its contractual obligation to repay the deposit to Franco-Nevada, the deposit is accounted for as deferred revenue and is recognized as revenue on a units-of-production basis as ounces are sold to Franco-Nevada. At September 30, 2022 the remaining unamortized balance was $7.6 million, which is included in Accrued liabilities and other and Other long-term liabilities on the Consolidated Balance Sheet.
Kensington Prepayment
In June 2019, Coeur amended its existing sales and purchase contract with a metal sales counterparty for gold concentrate from its Kensington mine (the “Amended Sales Contract”). From time to time thereafter, the Amended Sales Contract has been further amended to allow for additional prepayments, including in June 2021, to provide options for Coeur to receive up to two additional prepayments of up to $15.0 million each. The Company exercised these options and received $15.0 million both in June 2021 (the "June 2021 Prepayment") and in December 2021 (the "December 2021 Prepayment"). The June 2021 Prepayment was repaid in full before the December 2021 Prepayment was received. In March 2022, the Amended Sales Contract was further amended to allow for an additional $10.0 million prepayment which was made in March 2022 (the “March 2022 Prepayment”). The Amended Sales Contract was further amended in June 2022 to consolidate the remaining deliveries of $15.0 million and $10.0 million under the December 2021 Prepayment and March 2022 Prepayment (the “June 2022 Consolidated Prepayment”), to extend the repayment period for the June 2022 Consolidated Prepayment, and to provide for future prepayments of up to $25.0 million on a semi-annual basis through the end of 2024, provided all prior outstanding prepayment amounts are paid before such future prepayments are made. The remaining deliveries of the June 2022 Consolidated Prepayment are recognized as a deferred revenue liability and are presented in Accrued liabilities and other on the Consolidated Balance Sheet. Under the relevant terms of the Amended Sales Contract, Coeur maintains its exposure to the price of gold and expects to recognize the remaining value of the accrued liability by December 2022.
POA 11 Expansion Project
Coeur achieved several key milestones at the Rochester expansion during the quarter, notably, (i) completion of major concrete work in all areas except the primary crusher pocket and the pre-screens, both of which are in progress, (ii) continuation of structural, mechanical, piping, electrical and instrumentation construction work throughout the project, (iii) commencement of final major high-voltage electrical distribution and substation construction, and (iv) completion of the majority of commitments for the pre-screens.
Progress of the Merrill-Crowe plant continued on schedule during the third quarter, including (i) continuation of mechanical equipment setting, (ii) completion of building and process plant steel pipe rack erection, (iii) continuation of piping and cable tray installation, and (iv) rough setting of electrical switchgear.
Further work on the crusher corridor has also advanced, including (i) civil work on the primary crusher area with a focus on the primary crusher foundation and commencement of conveyor component installation, (ii) setting of the secondary cone crushers and commencement of piping, cable tray and lighting installation in the secondary crusher area, and (iii) setting of the tertiary HPGR crushers and cable tray and lighting installation in the tertiary crusher area.
During the quarter, Coeur successfully aligned the construction of the pre-screens with the completion of the new crusher to maintain a mid-2023 mechanical completion target. Ramp-up and commissioning is anticipated to take place during the second half of next year.
Coeur also completed a review of the total capital costs necessary to complete the expansion, resulting in a 9 - 12% increase in the capital estimate to $650 - $670 million. The estimate reflects the finalization of cost estimates for pre-screens, higher prices and quantities of steel and concrete, and additional contingency.
As of September 30, 2022, the Company had committed approximately $575 million of capital since the inception of the project and approximately $443 million of the estimated project cost had been incurred.
Other Commitments and Contingencies
As part of its ongoing business and operations, the Company and its affiliates are required to provide surety bonds, bank letters of credit, bank guarantees and, in some cases, cash as financial support for various purposes, including environmental remediation, reclamation, collateral for gold hedges and other general corporate purposes. As of September 30, 2022 and December 31, 2021, the Company had surety bonds totaling $326.7 million and $315.1 million, respectively, in place as financial support for future reclamation and closure costs. The obligations associated with these instruments are generally related to performance requirements that the Company addresses through its ongoing operations and from time-to-time, the Company may be required to post collateral, including cash or letters of credit which reduce availability under its revolving credit facility, to support these instruments. As the specific requirements are met, the beneficiary of the associated instrument
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Notes to Condensed Consolidated Financial Statements
cancels and/or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure. The Company believes it is in compliance with all applicable bonding obligations and will be able to satisfy future bonding requirements through existing or alternative means, as they arise.
NOTE 18 – ADDITIONAL BALANCE SHEET DETAIL AND SUPPLEMENTAL CASH FLOW INFORMATION
Accrued liabilities and other consist of the following:
| In thousands | September 30, 2022 | December 31, 2021 | |||||||||
| Accrued salaries and wages | $ | 28,387 | $ | 28,408 | |||||||
Deferred revenue (1) | 16,154 | 16,093 | |||||||||
| Income and mining taxes | 8,874 | 13,856 | |||||||||
| Accrued operating costs | 8,095 | 5,592 | |||||||||
| Unrealized losses on derivatives | 948 | 1,374 | |||||||||
| Taxes other than income and mining | 2,436 | 3,284 | |||||||||
| Accrued interest payable | 3,608 | 8,038 | |||||||||
| Operating lease liabilities | 11,109 | 11,301 | |||||||||
| Accrued liabilities and other | $ | 79,611 | $ | 87,946 | |||||||
(1) See Note 17 -- Commitments and Contingencies for additional details on deferred revenue liabilities
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that total the same such amounts shown in the statement of cash flows in the three and nine months ended September 30, 2022 and 2021:
| In thousands | September 30, 2022 | September 30, 2021 | |||||||||
| Cash and cash equivalents | $ | 75,389 | $ | 85,020 | |||||||
| Restricted cash equivalents | 1,427 | 1,771 | |||||||||
| Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 76,816 | $ | 86,791 | |||||||
NOTE 19 – DISPOSITIONS
On October 27, 2021 the Company entered into a definitive agreement (the “La Preciosa Agreement”) to sell its La Preciosa projected located in the State of Durango, Mexico to Avino (the “La Preciosa Sale”). On March 21, 2022, the La Preciosa Sale was completed.
Coeur and its subsidiaries received the following consideration at closing:
•$15.3 million cash,
•$5.0 million promissory note that matures prior to the first anniversary of the transaction closing, valued at $4.7 million,
•Equity consideration of 14.0 million units, consisting of one share of Avino common stock and one half of one common share purchase warrant of Avino common stock, valued at $13.7 million and $2.2 million, respectively. Common share purchase warrants are exercisable at $1.09 per share and expire September 2023.
•In addition, under the La Preciosa Agreement, Coeur is entitled to the following additional consideration:
•$8.8 million deferred cash consideration to be paid no later than the first anniversary of initial production from any portion of the La Preciosa project, valued at $7.4 million,
•Contingent payments of $0.25 per silver equivalent ounce (subject to an inflationary adjustment) on any new mineral reserves discovered and declared outside of the current resource area at the La Preciosa project, up to a maximum payment of $50.0 million, valued at $1.2 million, and
•Two royalties, valued at $11.2 million, covering the La Preciosa land package, including (i) a 1.25% net smelter returns royalty on properties covering the Gloria and Abundancia areas of the La Preciosa project and
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Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(ii) a 2.00% gross value royalty on all areas of the La Preciosa project other than the Gloria and Abundancia areas, offset by the amount of any new mineral reserve contingent payments made to Coeur.
The La Preciosa sale resulted in a gain on the sale of $1.5 million, which was recognized in Other, Net in the condensed consolidated statements of comprehensive income (loss).
NOTE 20 – ASSETS AND LIABILITIES HELD FOR SALE
On September 18, 2022, the Company entered into a Stock Purchase Agreement with AngloGold Ashanti (U.S.A.) Holdings Inc., a Delaware corporation and its affiliate for the sale of 100% of the issued and outstanding shares of Coeur Sterling, Inc. a subsidiary of Coeur that operates the Sterling/Crown exploration properties near Beatty, Nevada, in exchange for: (A) a cash payment of $150,000,000 at the closing of the transaction, subject to a customary purchase price adjustment and (B) the right to an additional payment of $50,000,000 should Buyer, its affiliates or its successors report gold resources in the Sterling/Crown exploration properties (including any in-situ ounces mined after the closing of the Transaction) equal to or greater than 3,500,000 gold ounces, subject to certain additional terms and conditions detailed in the stock purchase agreement.
The transaction was consummated on November 4, 2022.
The Company classified the Sterling/Crown exploration properties as held for sale as of September 30, 2022 and the associated assets and liabilities are classified separately on the consolidated balance sheets. The major classes of assets and liabilities associated with the Sterling/Crown exploration properties as of September 30, 2022 are as follows:
| In thousands | September 30, 2022 | ||||
| ASSETS | |||||
| Cash and cash equivalents | $ | 32 | |||
| Property, plant and equipment, net | 707 | ||||
| Mining properties, net | 100,985 | ||||
| Other | 26 | ||||
| TOTAL ASSETS | $ | 101,750 | |||
| LIABILITIES | |||||
| Accounts payable | $ | 34 | |||
| Accrued liabilities and other | 78 | ||||
| Reclamation | 1,828 | ||||
| Deferred tax liabilities | 10,873 | ||||
| TOTAL LIABILITIES | $ | 12,813 | |||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Coeur Mining, Inc. and its subsidiaries (collectively the “Company”, “our”, or “we”). We use certain non-GAAP financial performance measures in our MD&A. For a detailed description of these measures, please see “Non-GAAP Financial Performance Measures” at the end of this Item. We provide Costs applicable to sales (“CAS”) allocation, referred to as the co-product method, based on revenue contribution for Palmarejo, Rochester and Silvertip and based on the primary metal, referred to as the by-product method, for Wharf. Revenue from secondary metal, such as silver at Wharf, is treated as a cost credit.
Overview
We are primarily a gold and silver producer with assets located in the United States, Canada and Mexico
Third Quarter Highlights
For the quarter, Coeur reported revenue of $183.0 million and cash used in operating activities of $19.1 million. We reported GAAP net loss of $57.4 million, or $0.21 per diluted share. On an adjusted basis1, the Company reported EBITDA of $18.3 million and net loss of $44.7 million or $0.16 per diluted share. For the nine months ended September 30, 2022, Coeur reported revenue of $575.5 million and cash used in operating activities of $2.9 million. We reported GAAP net loss of $127.2 million, or $0.47 per diluted share. On an adjusted basis1, the Company reported EBITDA of $103.2 million and net loss of $71.6 million or $0.26 per diluted share.
•Solid production results and stronger fourth quarter expected to result in full-year production levels within 2022 guidance ranges – Third quarter gold and silver production totaled 83,438 and 2.4 million ounces, respectively. Quarter-over-quarter production growth at Rochester, Wharf and Kensington was offset by lower production at Palmarejo. Production levels are expected to increase at all four operating locations during the fourth quarter and finish the year within Coeur’s full-year guidance range of 315,000 - 353,000 ounces of gold and 9.0 - 11.0 million ounces of silver
•Recently installed pre-screens at Rochester providing intended benefit – Pre-screens were successfully installed between the secondary and tertiary crushers at the existing Rochester operation during the third quarter, which is driving enhanced operational flexibility and helping to generate a lower average size of crushed material and improved pad permeability. These learnings and results will be incorporated into the operating plan for the Rochester expansion and used to optimize Rochester’s life of mine plan
•Rochester expansion on track; capital estimate updated to incorporate pre-screens – Construction of the Rochester expansion remains on track to be completed mid-2023 with pre-commissioning, commissioning and ramp-up taking place in the second half of next year. At quarter-end, the project was 61% complete, $575 million of the estimated capital had been committed, and $443 million of the estimated capital cost had been incurred. The Company has increased the total capital by 9 - 12% to $650 - $670 million to reflect recently completed final estimates for the addition of pre-screens into the crusher circuit, higher prices and quantities of steel and concrete, and additional contingency
•Strategic sale of southern Nevada holdings to AngloGold now complete – The Company entered into a definitive agreement with a subsidiary of AngloGold Ashanti Limited (“AngloGold”) (NYSE: AU) during the third quarter to sell its Crown and Sterling holdings (“Crown Sterling”) for closing cash consideration of $150 million and deferred cash consideration of $50 million to be paid upon Crown Sterling attaining a total resource of at least 3.5 million gold ounces. Closing of the transaction occurred on November 4, 2022
•Balance sheet flexibility with opportunistic hedges support ongoing investments – Coeur ended the quarter with total liquidity of approximately $236 million, including $75 million of cash and $160 million of available capacity under its $390 million revolving credit facility (“RCF”)2. On an adjusted basis, giving effect to the Crown Sterling transaction, total liquidity stood at $386 million. In addition, Coeur currently holds gold forward hedges in the amount of 54,500 ounces for the remainder of 2022 at an average price of $1,994 per ounce and 112,500 ounces in 2023 at an average price of $1,982 per ounce. The market value of these hedges was approximately $47 million at quarter-end
28
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | ||||||||||||||||||||
| Financial Results (In thousands): | |||||||||||||||||||||||
| Gold sales | $ | 139,181 | $ | 146,625 | $ | 415,257 | $ | 432,210 | |||||||||||||||
| Silver sales | $ | 43,812 | $ | 57,498 | $ | 160,263 | $ | 192,734 | |||||||||||||||
| Consolidated Revenue | $ | 182,993 | $ | 204,123 | $ | 575,520 | $ | 624,944 | |||||||||||||||
| Net income (loss) | $ | (57,444) | $ | (77,434) | $ | (127,196) | $ | (20,562) | |||||||||||||||
| Net income (loss) per share, diluted | $ | (0.21) | $ | (0.28) | $ | (0.47) | $ | (0.08) | |||||||||||||||
Adjusted net income (loss)(1) | $ | (44,721) | $ | (13,105) | $ | (71,607) | $ | 10,493 | |||||||||||||||
Adj. net income (loss) per share, diluted(1) | $ | (0.16) | $ | (0.05) | $ | (0.26) | $ | 0.04 | |||||||||||||||
EBITDA(1) | $ | (20,478) | $ | (32,797) | $ | (12,898) | $ | 120,076 | |||||||||||||||
Adjusted EBITDA(1) | $ | 18,298 | $ | 43,330 | $ | 103,154 | $ | 167,411 | |||||||||||||||
Total debt(2) | $ | 635,679 | $ | 547,500 | $ | 635,679 | $ | 414,246 | |||||||||||||||
| Operating Results: | |||||||||||||||||||||||
| Gold ounces produced | 83,438 | 83,772 | 242,619 | 259,583 | |||||||||||||||||||
| Silver ounces produced | 2,369,543 | 2,496,186 | 7,345,171 | 7,452,931 | |||||||||||||||||||
| Gold ounces sold | 81,782 | 84,786 | 241,779 | 261,417 | |||||||||||||||||||
| Silver ounces sold | 2,295,602 | 2,543,200 | 7,289,084 | 7,509,409 | |||||||||||||||||||
| Average realized price per gold ounce | $ | 1,702 | $ | 1,729 | $ | 1,718 | $ | 1,653 | |||||||||||||||
| Average realized price per silver ounce | $ | 19.09 | $ | 22.61 | $ | 21.99 | $ | 25.67 | |||||||||||||||
(1)See “Non-GAAP Financial Performance Measures.”
(2)Includes finance leases. Net of debt issuance costs and premium received.
Consolidated Financial Results
Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022
Revenue
We sold 81,782 gold ounces and 2.3 million silver ounces, compared to 84,786 gold ounces and 2.5 million silver ounces. Revenue decreased by $21.1 million, or 10%, as a result of a 4% and 10% decrease in gold and silver ounces sold, respectively, and a 2% and 16% decrease in average realized gold and silver prices, respectively. The decrease in gold and silver ounces sold was primarily due to lower production at Palmarejo, partially offset by higher production at Rochester, Kensington and Wharf. Gold and silver represented 76% and 24% of third quarter of 2022 sales revenue, respectively. This compares to gold and silver represented 72% and 28% of second quarter of 2022 sales revenue, respectively.
The following table summarizes consolidated metal sales:
| Three Months Ended | Increase (Decrease) | Percentage Change | ||||||||||||||||||
| In thousands | September 30, 2022 | June 30, 2022 | ||||||||||||||||||
| Gold sales | $ | 139,181 | $ | 146,625 | $ | (7,444) | (5) | % | ||||||||||||
| Silver sales | 43,812 | 57,498 | (13,686) | (24) | % | |||||||||||||||
| Metal sales | $ | 182,993 | $ | 204,123 | $ | (21,130) | (10) | % | ||||||||||||
Costs Applicable to Sales
Costs applicable to sales increased $12.5 million, or 8%, primarily due to higher operating costs partially impacted by continued inflationary pressures relating to consumable costs, most notably higher diesel prices, and increased lower of cost or net realizable value (“LCM”) adjustments at Rochester. For a complete discussion of costs applicable to sales, see Results of Operations below.
29
Amortization
Amortization increased $1.2 million, or 4%, primarily due to increased LCM adjustments at Rochester.
Expenses
General and administrative expenses increased $0.4 million, or 5%, primarily due to higher employee-related costs.
Exploration expense increased $3.1 million, or 59% driven by higher spending at Kensington and Silvertip.
Pre-development, reclamation, and other expenses remained comparable to the second quarter of 2022. The following table summarizes pre-development, reclamation, and other expenses:
| Three Months Ended | Increase (Decrease) | Percentage Change | ||||||||||||||||||
| In thousands | September 30, 2022 | June 30, 2022 | ||||||||||||||||||
| COVID-19 | $ | 294 | $ | 318 | $ | (24) | (8) | % | ||||||||||||
| Silvertip ongoing carrying costs | 4,628 | 4,754 | (126) | (3) | % | |||||||||||||||
| Asset retirement accretion | 3,597 | 3,529 | 68 | 2 | % | |||||||||||||||
| Other | 730 | 577 | 153 | 27 | % | |||||||||||||||
| Pre-development, reclamation and other expense | $ | 9,249 | $ | 9,178 | $ | 71 | 1 | % | ||||||||||||
Other Income and Expenses
Fair value adjustments, net, decreased to a loss of $13.1 million compared to $62.8 million as a result of a lesser decrease in the value of the Company’s equity investments. For additional details on the Company’s equity investments see Note 6 -- Investments.
Interest expense (net of capitalized interest of $3.3 million) increased to $5.9 million from $5.2 million due to higher interest paid under the RCF, partially offset by higher capitalized interest.
Other, net gain of $0.2 million remained comparable to the second quarter of 2022.
Income and Mining Taxes
During the third quarter of 2022, income and mining tax expense of approximately $1.9 million resulted in an effective tax rate of 3.4% for 2022. This compares to income tax expense of $11.5 million for an effective tax rate of 17.4% for the second quarter of 2022. The comparability of the Company’s income and mining tax (expense) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) variations in our income before income taxes; (ii) geographic distribution of that income; (iii) mining taxes; (iv) the sale of non-core assets; (v) foreign exchange rates; (vi) the impact of uncertain tax positions; (vii) percentage depletion; and (viii) the non-recognition of tax assets. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period.
The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
| Three Months Ended September 30, | Three Months Ended June 30, | ||||||||||||||||
| 2022 | 2022 | ||||||||||||||||
| In thousands | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | |||||||||||||
| United States | $ | (59,012) | $ | (74) | $ | (85,122) | $ | (998) | |||||||||
| Canada | (8,960) | — | (6,374) | (21) | |||||||||||||
| Mexico | 12,178 | (1,809) | 25,636 | (10,483) | |||||||||||||
| Other jurisdictions | 233 | — | (72) | — | |||||||||||||
| $ | (55,561) | $ | (1,883) | $ | (65,932) | $ | (11,502) | ||||||||||
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 “Item 1A - Risk Factors” in the 2021 10-K.
30
Net Loss
Net loss was $57.4 million, or $0.21 per diluted share, compared to $77.4 million, or $0.28 per diluted share. The decrease in net loss was driven by favorable changes of $49.7 million and $9.6 million in the fair value of the Company’s equity investments and income tax expense, respectively, partially offset by a 4% and 10% decrease in gold and silver ounces sold, respectively, a 2% and 16% decrease in average realized gold and silver prices, respectively, higher operating costs, including increased LCM adjustments at Rochester and higher exploration expenditures. Adjusted net loss was $44.7 million, or $0.16 per diluted share, compared to $13.1 million, or $0.05 per share (see “Non-GAAP Financial Performance Measures”).
Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021
Revenue
We sold 241,779 gold ounces and 7.3 million silver ounces, compared to 261,417 gold ounces and 7.5 million silver ounces. Revenue decreased by $49.4 million, or 8%, as a result of an 8% and 3% decrease in gold and silver ounces sold and an 14% decrease in average realized silver prices, partially offset by a 4% increase in average realized gold prices. The decrease in gold and silver ounces was primarily due to lower grades at Rochester, Kensington and Wharf. Gold and silver accounted for 72% and 28% of 2022 sales revenue, respectively. This compares to gold and silver accounting for 69% and 31% of 2021 sales revenue, respectively.
The following table summarizes consolidated metal sales:
| Nine Months Ended | Increase (Decrease) | Percentage Change | ||||||||||||||||||
| In thousands | September 30, 2022 | September 30, 2021 | ||||||||||||||||||
| Gold sales | $ | 415,257 | $ | 432,210 | $ | (16,953) | (4) | % | ||||||||||||
| Silver sales | 160,263 | 192,734 | (32,471) | (17) | % | |||||||||||||||
| Metal sales | $ | 575,520 | $ | 624,944 | $ | (49,424) | (8) | % | ||||||||||||
Costs Applicable to Sales
Costs applicable to sales increased $72.0 million, or 19%, primarily due to higher operating costs partially impacted by inflationary pressures related to consumables, most notably higher diesel prices, employee-related costs, and increased maintenance costs, increased LCM adjustments at Rochester, and the $10.5 million favorable impact from foreign currency hedges in the comparable period of 2021. For a complete discussion of costs applicable to sales, see Results of Operations below.
Amortization
Amortization decreased $9.3 million, or 10%, primarily due to lower gold and silver ounces sold and longer assumed mine life based on year-end mineral reserve growth.
Expenses
General and administrative expenses decreased $1.5 million, or 5%, primarily due to lower employee-related costs.
Exploration expense decreased $18.4 million, or 49% driven by lower planned investment across the portfolio.
Pre-development, reclamation, and other expenses decreased $7.1 million, or 19%, stemming from lower costs incurred in connection with the Company’s COVID-19 health and safety protocols and lower ongoing carrying costs at Silvertip, partially offset by higher asset retirement accretion.
The following table summarizes pre-development, reclamation, and other expenses:
| Nine Months Ended | Increase (Decrease) | Percentage Change | ||||||||||||||||||
| In thousands | September 30, 2022 | September 30, 2021 | ||||||||||||||||||
| COVID-19 | $ | 1,585 | $ | 5,937 | $ | (4,352) | (73) | % | ||||||||||||
| Silvertip ongoing carrying costs | 15,542 | 18,957 | (3,415) | (18) | % | |||||||||||||||
| Asset retirement accretion | 10,588 | 8,898 | 1,690 | 19 | % | |||||||||||||||
| Other | 2,124 | 3,164 | (1,040) | (33) | % | |||||||||||||||
| Pre-development, reclamation and other expense | $ | 29,839 | $ | 36,956 | $ | (7,117) | (19) | % | ||||||||||||
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Other Income and Expenses
During the first nine months of 2021, the Company incurred a $9.2 million loss in connection with the tender and redemption of the 5.875% Senior Notes due 2024 (the “2024 Senior Notes”) concurrent with the offering of the 2029 Senior Notes.
Fair value adjustments, net, decreased to a loss of $65.3 million compared to a gain of $7.0 million as a result of a realized loss of $17.7 million in connection with the sale of Victoria Gold Common Shares, a decrease in the value of the Company’s equity investments leading to unrealized losses of $44.5 million, and a gain of $9.3 million related to a fair value adjustment to the Exchange Agreement embedded derivative liability in 2021. For additional details on the Company’s equity investments see Note 6 -- Investments.
Interest expense (net of capitalized interest of $9.3 million) increased to $15.7 million from $13.2 million due to higher interest paid under the 2029 Senior Notes compared to the 2024 Senior Notes, and higher interest paid under the RCF and finance lease obligations, partially offset by higher capitalized interest associated with the POA 11 project at Rochester.
Other, net increased to a gain of $2.2 million compared to a loss of $22.4 million due to a write-down of a VAT receivable of $26.0 million due to uncertain collectability in 2021.
Income and Mining Taxes
During the first nine months of 2022, income and mining tax expense of approximately $15.1 million resulted in an effective tax rate of 13.4% for 2022. This compares to income tax expense of $34.5 million for an effective tax rate of 247.3% for 2021. The comparability of the Company’s income and mining tax (expense) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) the sale of non-core assets; (ii) the non-recognition of tax assets; (iii) variations in our income before income taxes; (iv) geographic distribution of that income; (v) mining taxes; (vi) foreign exchange rates; (vii) the impact of uncertain tax positions; and (viii) percentage depletion. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period.
The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
| Nine months ended September 30, | |||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| In thousands | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | |||||||||||||
| United States | $ | (154,263) | $ | (2,270) | $ | (9,131) | $ | (4,775) | |||||||||
| Canada | (22,859) | (21) | (39,643) | — | |||||||||||||
| Mexico | 64,847 | (12,788) | 59,603 | (29,751) | |||||||||||||
| Other jurisdictions | 158 | — | 3,135 | — | |||||||||||||
| $ | (112,117) | $ | (15,079) | $ | 13,964 | $ | (34,526) | ||||||||||
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 “Item 1A - Risk Factors” in the 2021 10-K.
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Net Loss
Net loss was $127.2 million, or $0.47 per diluted share, compared to $20.6 million, or $0.08 per diluted share. The increase in net loss was driven by unfavorable changes in the fair value of the Company’s equity investments, a realized loss of $17.7 million in connection with the sale of Victoria Gold Common Shares, higher operating costs, including increased LCM adjustments at Rochester, a 8% and 3% decrease in gold and silver ounces sold and an 14% decrease in average realized silver prices, partially offset by a 4% increase in average realized gold prices, a $9.2 million loss on debt extinguishment and a VAT write-down of $26.0 million in 2021, and lower income and mining taxes. Adjusted net loss was $71.6 million, or $0.26 per diluted share, compared to adjusted net income of $10.5 million, or $0.04 per diluted share (see “Non-GAAP Financial Performance Measures”).
2022 Guidance
Production during the third quarter was in-line with Coeur’s expectations, leading the Company to reaffirm 2022 production and cost guidance.
2022 Production Guidance
| Gold | Silver | ||||||||||||||||
| (oz) | (K oz) | ||||||||||||||||
| Palmarejo | 100,000 - 110,000 | 6,000 - 7,000 | |||||||||||||||
| Rochester | 35,000 - 43,000 | 3,000 - 4,000 | |||||||||||||||
| Kensington | 110,000 - 120,000 | — | |||||||||||||||
| Wharf | 70,000 - 80,000 | — | |||||||||||||||
| Total | 315,000 - 353,000 | 9,000 - 11,000 | |||||||||||||||
2022 Costs Applicable to Sales Guidance
| Gold | Silver | |||||||
| ($/oz) | ($/oz) | |||||||
| Palmarejo (co-product) | $825 - $925 | $12.75 - $13.75 | ||||||
| Rochester (co-product) | $1,650 - $1,850 | $20.00 - $26.00 | ||||||
| Kensington | $1,300 - $1,400 | — | ||||||
| Wharf (by-product) | $1,250 - $1,350 | — | ||||||
2022 Capital, Exploration and G&A Guidance
| ($M) | |||||||||||
| Capital Expenditures, Sustaining | $110 - $135 | ||||||||||
| Capital Expenditures, Development | $220 - $260 | ||||||||||
| Exploration, Expensed | $25 - $30 | ||||||||||
| Exploration, Capitalized | $22 - $27 | ||||||||||
| General & Administrative Expenses | $42 - $46 | ||||||||||
Note: The Company’s guidance figures assume estimated prices of $1,800/oz gold and $22.00/oz silver as well as CAD of 1.25 and MXN of 20.00. Guidance figures exclude the impact of any metal sales or foreign exchange hedges.
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Results of Operations
Palmarejo
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | ||||||||||||||||||||
| Tons milled | 538,750 | 539,600 | 1,643,561 | 1,519,126 | |||||||||||||||||||
| Average gold grade (oz/t) | 0.049 | 0.054 | 0.053 | 0.060 | |||||||||||||||||||
| Average silver grade (oz/t) | 3.53 | 3.95 | 3.78 | 3.95 | |||||||||||||||||||
| Average recovery rate – Au | 93.3 | % | 92.4 | % | 92.0 | % | 93.9 | % | |||||||||||||||
| Average recovery rate – Ag | 84.9 | % | 84.2 | % | 84.0 | % | 82.9 | % | |||||||||||||||
| Gold ounces produced | 24,807 | 27,109 | 80,847 | 80,454 | |||||||||||||||||||
| Silver ounces produced | 1,612,048 | 1,795,050 | 5,219,628 | 4,977,337 | |||||||||||||||||||
| Gold ounces sold | 24,378 | 29,285 | 81,905 | 81,100 | |||||||||||||||||||
| Silver ounces sold | 1,554,288 | 1,854,695 | 5,205,011 | 4,991,932 | |||||||||||||||||||
CAS per gold ounce(1) | $ | 958 | $ | 854 | $ | 844 | $ | 666 | |||||||||||||||
CAS per silver ounce(1) | $ | 12.80 | $ | 12.96 | $ | 12.76 | $ | 12.20 | |||||||||||||||
(1)See Non-GAAP Financial Performance Measures.
Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022
Gold and silver production decreased 8% and 10%, respectively as a result of lower gold and silver grades. Metal sales were $64.8 million, or 35% of Coeur’s metal sales, compared with $86.0 million, or 42% of Coeur’s metal sales. Revenue for the three months ended September 30, 2022 decreased by $21.1 million or 25%, of which $12.8 million resulted from a lower gold and silver production and $8.3 million was due to lower average realized gold and silver prices. Costs applicable to sales per gold ounce increased 12% and decreased 1% per silver ounce due to the mix of gold and silver sales and lower production, partially offset by lower employee-related costs. Amortization decreased to $8.0 million due to lower ounces sold. Capital expenditures remained comparable at $10.8 million.
Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021
Gold production was in-line with the prior year as a result of higher mill throughput, partially offset by lower gold grade and recoveries. Silver production increased 5% as a result of higher mill throughput and recoveries, partially offset by lower silver grade. Metal sales were $233.9 million, or 42% of Coeur’s metal sales, compared with $240.0 million, or 38% of Coeur’s metal sales. Revenue for the nine months ended September 30, 2022 decreased by $6.2 million or 3%, of which $12.0 million was due to lower average realized silver prices partially offset by an increase of $5.8 million resulting from a higher gold and silver production. Costs applicable to sales per gold and silver ounce increased 27% and 5%, respectively, due to the mix of gold and silver sales, higher employee-related and consumable costs largely due to inflationary pressures, and the absence of the favorable impact of foreign currency hedges ($10.5 million) included in the prior year. Amortization increased by $1.1 million to $27.2 million due to increased sales. Capital expenditures increased to $34.5 million from $28.3 million due to higher underground development, infill drilling activities and equipment purchases.
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Rochester
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | ||||||||||||||||||||
| Tons placed | 3,551,353 | 4,236,459 | 12,165,685 | 9,863,772 | |||||||||||||||||||
| Average gold grade (oz/t) | 0.004 | 0.003 | 0.003 | 0.002 | |||||||||||||||||||
| Average silver grade (oz/t) | 0.37 | 0.35 | 0.35 | 0.42 | |||||||||||||||||||
| Gold ounces produced | 8,761 | 8,319 | 23,146 | 20,187 | |||||||||||||||||||
| Silver ounces produced | 744,880 | 689,169 | 2,089,225 | 2,400,539 | |||||||||||||||||||
| Gold ounces sold | 8,725 | 8,071 | 22,724 | 20,311 | |||||||||||||||||||
| Silver ounces sold | 733,383 | 682,677 | 2,054,176 | 2,441,429 | |||||||||||||||||||
CAS per gold ounce(1) | $ | 3,142 | $ | 2,351 | $ | 2,609 | $ | 1,707 | |||||||||||||||
CAS per silver ounce(1) | $ | 31.84 | $ | 27.80 | $ | 30.04 | $ | 24.19 | |||||||||||||||
(1)See Non-GAAP Financial Performance Measures.
Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022
Gold and silver production increased 5% and 8%, respectively, driven by the breakthrough from increased tons placed on the pad in prior quarters. Metal sales were $30.2 million, or 16% of Coeur’s metal sales, compared with $30.5 million, or 15% of Coeur’s metal sales. Revenue for the three months ended September 30, 2022 decreased by $0.3 million or 1%, of which $2.5 million was the result of lower average realized gold and silver prices, partially offset by an increase of $2.2 million due to increased gold and silver production. Costs applicable to sales per gold and silver ounce increased 34% and 15% respectively, due to the mix of gold and silver sales, higher LCM adjustments of $21.2 million compared to $9.2 million in the prior quarter, driven by lower metal prices, increased employee-related and consumable costs partially due to continued inflationary pressures. Amortization increased to $6.9 million due to higher ounces sold and the impact of LCM adjustments. Capital expenditures increased to $74.0 million from $47.0 million due to payments related to the POA 11 expansion project.
Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021
Gold production increased 15% primarily due to increased tons placed and silver production decreased 13%, as a result of lower silver grades and timing of recoveries, partially offset by increased tons placed. Metal sales were $87.0 million, or 15% of Coeur’s metal sales, compared with $99.2 million, or 16% of Coeur’s metal sales. Revenue for the nine months ended September 30, 2022 decreased by $12.1 million or 12%, of which $8.2 million was primarily due to lower average realized silver prices, and $3.9 million was due to a lower silver production. Costs applicable to sales per gold and silver ounce increased 53% and 24%, respectively, due to the mix of gold and silver sales and higher LCM adjustments of $38.0 million compared to $5.3 million in the prior year, driven by lower metal prices, higher employee-related, consumable and maintenance costs partially due to inflationary pressures. Amortization increased to $16.6 million due to higher equipment depreciation from recent equipment purchases and the impact of LCM adjustments. Capital expenditures increased to $154.0 million from $112.5 million due to payments related to the POA 11 expansion project and equipment purchases.
Coeur achieved several key milestones at the Rochester expansion during the quarter, notably, the Company achieved (i) completion of major concrete work in all areas except the primary crusher pocket and the pre-screens, both of which are in progress, (ii) continuation of structural, mechanical, piping, electrical and instrumentation construction work throughout the project, (iii) commencement of final major high-voltage electrical distribution and substation construction, and (iv) completion of the majority of commitments for the pre-screens.
Progress of the Merrill-Crowe plant continued on schedule during the third quarter, including (i) continuation of mechanical equipment setting, (ii) completion of building and process plant steel pipe rack erection, (iii) continuation of piping and cable tray installation, and (iv) rough setting of electrical switchgear.
Further work on the crusher corridor has also advanced, including (i) civil work on the primary crusher area with a focus on the primary crusher foundation and commencement of conveyor component installation, (ii) setting of the secondary cone crushers and commencement of piping, cable tray and lighting installation in the secondary crusher area, and (iii) setting of the tertiary HPGR crushers and cable tray and lighting installation in the tertiary crusher area.
During the quarter, Coeur successfully aligned the construction of the pre-screens with the completion of the new crusher to maintain a mid-2023 mechanical completion target. Ramp-up and commissioning is anticipated to take place during the second half of next year.
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Coeur also completed a review of the total capital costs necessary to complete the expansion, resulting in a 9 - 12% increase in the capital estimate. The estimate reflects the finalization of cost estimates for pre-screens, higher prices and quantities of steel and concrete, and additional contingency.
As of September 30, 2022, the Company had committed approximately $575 million of capital since the inception of the project and approximately $443 million of the estimated project cost had been incurred.
Kensington
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | ||||||||||||||||||||
| Tons milled | 175,246 | 175,722 | 516,936 | 499,265 | |||||||||||||||||||
| Average gold grade (oz/t) | 0.18 | 0.17 | 0.16 | 0.19 | |||||||||||||||||||
| Average recovery rate | 91.1 | % | 91.6 | % | 92.5 | % | 92.9 | % | |||||||||||||||
| Gold ounces produced | 28,214 | 27,866 | 78,726 | 87,624 | |||||||||||||||||||
| Gold ounces sold | 27,609 | 27,666 | 78,109 | 88,293 | |||||||||||||||||||
CAS per gold ounce(1) | $ | 1,456 | $ | 1,412 | $ | 1,484 | $ | 1,078 | |||||||||||||||
(1)See Non-GAAP Financial Performance Measures.
Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022
Gold production increased 1% as a result of higher grade. Metal sales were $49.1 million, or 27% of Coeur’s metal sales, compared to $50.3 million, or 25% of Coeur’s metal sales. Revenue for the three months ended September 30, 2022 decreased by $1.2 million or 2%, of which $1.1 million resulted from lower average realized gold prices and $0.1 million was due to a lower gold ounces sold. Costs applicable to sales per gold ounce increased 3% due to higher employee-related, maintenance and consumable costs largely due to continued inflationary pressures. Amortization increased to $10.4 million primarily due to higher production from the Jualin deposit. Capital expenditures decreased to $7.1 million compared to $8.8 million due to lower underground development.
Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021
Gold production decreased 10% as a result of lower grade, partially offset by higher mill throughput. Metal sales were $143.7 million, or 25% of Coeur’s metal sales, compared to $155.2 million, or 25% of Coeur’s metal sales. Revenue for the nine months ended September 30, 2022 decreased by $11.5 million or 7%, of which $18.1 million resulted from lower gold production, partially offset by an increase of $6.6 million due to higher average realized gold prices. Costs applicable to sales per gold ounce increased 38% due to lower production and higher employee-related, maintenance and consumable costs partially due to inflationary pressures. Amortization decreased to $28.4 million primarily due to lower ounces sold. Capital expenditures increased to $23.8 million from $19.5 million due to higher infill drilling and underground development.
Wharf
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | ||||||||||||||||||||
| Tons placed | 1,353,071 | 1,050,215 | 3,530,855 | 3,628,693 | |||||||||||||||||||
| Average gold grade (oz/t) | 0.019 | 0.015 | 0.020 | 0.028 | |||||||||||||||||||
| Gold ounces produced | 21,656 | 20,478 | 59,900 | 71,318 | |||||||||||||||||||
| Silver ounces produced | 12,615 | 11,967 | 36,318 | 75,055 | |||||||||||||||||||
| Gold ounces sold | 21,070 | 19,764 | 59,041 | 71,713 | |||||||||||||||||||
| Silver ounces sold | 7,931 | 5,828 | 29,897 | 76,048 | |||||||||||||||||||
CAS per gold ounce(1) | $ | 1,364 | $ | 1,226 | $ | 1,244 | $ | 966 | |||||||||||||||
(1)See Non-GAAP Financial Performance Measures.
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Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022
Gold production increased 6% driven by the timing of recoveries and higher grade. Metal sales were $38.9 million, or 21% of Coeur’s metal sales, compared to $37.4 million, or 18% of Coeur’s metal sales. Revenue for the three months ended September 30, 2022 increased by $1.5 million or 4%, of which $2.4 million resulted from a higher gold production, partially offset by a decrease of $0.9 million due to lower averaged realized gold prices. Costs applicable to sales per gold ounce increased 11% due to higher consumable and maintenance costs partially due to continued inflationary pressures. Amortization remained comparable at $2.2 million. Capital expenditures were $0.5 million.
Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021
Gold production decreased 16% driven by lower grade. Metal sales were $110.9 million, or 19% of Coeur’s metal sales, compared to $130.6 million, or 21% of Coeur’s metal sales. Revenue for the nine months ended September 30, 2022 decreased by $19.7 million or 15%, of which $24.7 million was due to a lower gold production, partially offset by an increase of $5.0 million due to higher average realized gold prices. Costs applicable to sales per gold ounce increased 29% due to lower production and higher consumable costs partially due to inflationary pressures. Amortization decreased to $6.5 million due to lower ounces sold. Capital expenditures were $2.3 million.
Silvertip
Nine Months Ended September 30, 2022
Silvertip suspended mining and processing activities, unrelated to COVID-19, in February 2020. Ongoing carrying and suspension costs are included in Pre-development, reclamation, and other.
Coeur continues to advance study work to assess the economics of a potential future expansion of its high-grade Silvertip silver-zinc-lead development project in British Columbia, Canada. The Company’s objective remains to complete an evaluation by year-end of higher throughput scenarios to enhance the project’s economics and to take advantage of Silvertip’s expanding, high-grade resource base. Subject to continued positive results, the Company anticipates advancing Silvertip once the Rochester expansion and ramp-up is complete and Coeur generates sustained, positive free cash flow that can be used to reduce leverage to targeted levels.
Ongoing carrying costs at Silvertip totaled $15.5 million in the first nine months of 2022, compared to $19.0 million in the prior year. Capital expenditures in the first nine months of 2022 totaled $21.4 million compared to $44.0 million in the prior year due to continued infill drilling and underground development.
Liquidity and Capital Resources
At September 30, 2022, the Company had $76.8 million of cash, cash equivalents and restricted cash and $160.2 million available under the RCF. Future borrowing may be subject to certain financial covenants. Cash and cash equivalents increased $18.7 million in the nine months ended September 30, 2022, due to net proceeds of $98.3 million from the sale of 22.1 million shares of its common stock, net proceeds of $15.3 million received from the sale of the La Preciosa project, and net proceeds of $40.5 million received from the sale of the Victoria Gold Common Shares, partially offset by a 4% and 10% decrease in gold and silver ounces sold, respectively, a 16% decrease in average realized silver prices, higher operating costs and higher capital expenditures related to POA 11 at Rochester.
In March 2022, the Company completed a $100.0 million “at the market” offering of its common stock, par value $0.01 per share (the “March Equity Offering”). The Company sold a total of 22,053,275 shares of common stock in the March Equity Offering at an average price of $4.53 per share, raising net proceeds (after sales commissions) of $98.3 million.
On May 2, 2022, the Company entered into an amendment (the “Amendment”) to the RCF to, among other things, increase the maximum principal amount of the RCF by $90.0 million in incremental loans and commitments to an aggregate of $390.0 million. On November 9, 2022, the Company entered into an amendment (the “November Amendment”) to the RCF. The November Amendment, among other things, (1) modifies the financial covenants to provide greater flexibility under the consolidated net leverage ratio requirement through the December 31, 2023 test date, with the ratio returning to the original level as outlined in the RCF starting with the March 31, 2024 test date (the “Amendment Period”), (2) allows up to $50 million for integration costs or costs associated with establishing new facilities and certain costs associated with LCM adjustments at Rochester to be excluded from the calculation of Consolidated EBITDA for purposes of the RCF, (3) increases the interest rate on certain borrowings through early 2023, (4) requires the Company to repay outstanding amounts under the RCF if cash-on-hand exceeds $60 million during the Amendment Period, and (5) restricts certain payments and the incurrence of certain liens during the Amendment Period. At September 30, 2022, the Company had $200.0 million drawn and $29.8 million in outstanding letters of credit under the RCF. The Company also holds $45.5 million of equity securities including a 9.4% interest in Victoria Gold Corporation (“Victoria Gold”). On June 28, 2022, the Company entered into an agreement to sell 5,000,000
37
shares of common stock of Victoria Gold (“Victoria Gold Common Shares”) at a price of $8.34 per Victoria Gold Common Share, which settled on July 5, 2022 for net proceeds of $40.5 million. Prior to the sale, the Company held a 17.8% interest in Victoria Gold.
On September 18, 2022, the Company entered into a Stock Purchase Agreement (“Crown Sterling Agreement”) with AngloGold Ashanti (U.S.A.) Holdings Inc., a Delaware corporation and its affiliate for the sale of 100% of the issued and outstanding shares of Coeur Sterling, Inc. a subsidiary of Coeur that operates the Sterling/Crown exploration properties near Beatty, Nevada, in exchange for: (A) a cash payment of $150,000,000 at the closing of the transaction, subject to a customary purchase price adjustment and (B) the right to an additional payment of $50,000,000 should Buyer, its affiliates or its successors report gold resources in the Sterling/Crown exploration properties (including any in-situ ounces mined after the closing of the Transaction) equal to or greater than 3,500,000 gold ounces, subject to certain additional terms and conditions detailed in the stock purchase agreement. The transaction was consummated on November 4, 2022.
The Company had outstanding forward contracts on 167,000 ounces of gold at September 30, 2022 that settle monthly through December 2023. The Company is targeting to hedge up to 70% of expected gold production in 2022, 50% of expected gold production for the first half of 2023 and 25% of expected gold production for the second half of 2023 in order to protect cash flow during a period of elevated capital expenditures, and may in the future layer on additional hedges as circumstances warrant. The weighted average fixed price on the forward contracts is $1,986 per ounce of gold.
We currently believe we have sufficient sources of funding to meet our business requirements for the next twelve months and longer-term. We expect to use a combination of cash provided by operating activities, borrowings under our RCF and additional finance leases to fund near term capital requirements, including those described in this Report for POA 11 and in our 2022 capital expenditure guidance. We also have additional potential sources of funding including proceeds from potential asset sales, and the monetization of our equity investments, including our remaining common shares of Victoria Gold. Our longer-term plans contemplate the expansion and restart of Silvertip, as well as the continued exploration and potential development of our other projects, such as the Lincoln Hill area adjacent to Rochester.
As of September 30, 2022, the Company committed approximately $575 million of capital since the inception of the POA 11 project. Approximately $443 million of the estimated project cost had been incurred.
We also have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures and other purchase obligations and commitments for purchases of goods and services.
If and to the extent liquidity resources are insufficient to support short- and long-term expenditures, we may need to incur additional indebtedness or issue additional equity securities, among other financing options, which may not be available on acceptable terms or at all. This could have a material adverse impact on the Company, as discussed in more detail under Item 1A – Risk Factors in the 2021 10-K and part II, Item 1A of this report.
Cash Provided by (Used in) Operating Activities
Net cash used in operating activities for the three months ended September 30, 2022 was $19.1 million, compared to net cash provided by operating activities of $22.6 million for the three months ended June 30, 2022. Net cash used in operating activities for the nine months ended September 30, 2022 was $2.9 million, compared to net cash provided by operating activities of $75.5 million for the nine months ended September 30, 2021. Adjusted EBITDA for the three months ended September 30, 2022 was $18.3 million, compared to $43.3 million for the three months ended June 30, 2022. Adjusted EBITDA for the nine months ended September 30, 2022 was $103.2 million, compared to $167.4 million for the nine months ended September 30, 2021 (see “Non-GAAP Financial Performance Measures”). Net cash provided by (used in) operating activities was impacted by the following key factors for the applicable periods:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| In thousands | September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||
| Cash flow before changes in operating assets and liabilities | $ | (1,328) | $ | 29,773 | $ | 52,224 | $ | 107,826 | |||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||||
| Receivables | (119) | (4,882) | 4,099 | 1,016 | |||||||||||||||||||
| Prepaid expenses and other | (2,075) | 3,523 | 939 | 593 | |||||||||||||||||||
| Inventories | (13,715) | (11,263) | (42,650) | (18,047) | |||||||||||||||||||
| Accounts payable and accrued liabilities | (1,880) | 5,493 | (17,512) | (15,842) | |||||||||||||||||||
| Cash provided by (used in) operating activities | $ | (19,117) | $ | 22,644 | $ | (2,900) | $ | 75,546 | |||||||||||||||
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Net cash used in operating activities increased $41.8 million for the three months ended September 30, 2022 compared to the three months ended June 30, 2022, primarily as a result of a 4% and 10% decrease in gold and silver ounces sold, respectively, and a 2% and 16% decrease in average realized gold and silver prices, respectively, and a net outflow related to a prepayment for concentrate deliveries from Kensington of $10.0 million, partially offset by lower exploration costs. Revenue for the three months ended September 30, 2022 compared to the three months ended June 30, 2022 decreased by $21.1 million, of which $9.8 million was due to lower volume of gold and silver sales and a decrease of $11.3 million due to lower average realized gold and silver prices.
Net cash used in operating activities increased $78.4 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to a 8% and 3% decrease in lower gold and silver ounces sold, respectively, a 14% decrease in average realized silver prices, and higher operating costs, partially offset by a 4% increase in average realized gold prices, lower exploration costs, timing of VAT collections at Palmarejo, and lower Silvertip ongoing carrying costs. Revenue for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 decreased by $49.4 million, of which $38.6 million was due to lower volume of gold and silver sales and $10.9 million was due to lower average realized silver prices.
Cash Used in Investing Activities
Net cash used in investing activities in the three months ended September 30, 2022 was $56.2 million compared to $72.5 million in the three months ended June 30, 2022. Cash used in investing activities decreased primarily due to the receipt of net proceeds of $40.5 million from the sale of the Victoria Gold Common Shares, partially offset by an increase in capital expenditures. The Company incurred capital expenditures of $96.6 million in the three months ended September 30, 2022 compared with $73.2 million in the three months ended June 30, 2022 primarily related to POA 11 construction activities at Rochester and underground development at Palmarejo and Kensington in both periods.
Net cash used in investing activities in the nine months ended September 30, 2022 was $182.9 million compared to $204.4 million in the nine months ended September 30, 2021. Cash used in investing activities decreased primarily due to the receipt of net proceeds of $15.3 million from the sale of the La Preciosa project in the first quarter of 2022 and the receipt of net proceeds of $40.5 million from the sale of the Victoria Gold Common Shares, partially offset by an increase in capital expenditures. The Company incurred capital expenditures of $239.3 million in the nine months ended September 30, 2022 compared with $208.9 million in the nine months ended September 30, 2021. Capital expenditures in the nine months ended September 30, 2022 were primarily related to POA 11 construction activities at Rochester and underground development at Palmarejo and Kensington. Capital expenditures in the nine months ended September 30, 2021 were primarily related to POA 11 construction activities at Rochester, potential expansion expenditures at Silvertip and underground development at Palmarejo and Kensington.
The Company is experiencing inflationary pressures, specifically with respect to building materials and fuel as well as overall tightness in the construction market related to capital projects, most notably the POA 11 project at Rochester, and to operating costs company-wide.
Cash Provided by Financing Activities
Net cash provided by financing activities in the three months ended September 30, 2022 was $76.8 million compared to $50.7 million in the three months ended June 30, 2022. During the three months ended September 30, 2022, the Company drew $85.0 million, net, from the RCF compared to $60.0 million, net, during the three months ended June 30, 2022.
Net cash provided by financing activities in the nine months ended September 30, 2022 was $204.3 million compared to $121.8 million in the nine months ended September 30, 2021. During the nine months ended September 30, 2022, the Company drew $135.0 million, net, from the RCF, and received net proceeds of $98.3 million from the sale of 22.1 million shares of its common stock in the Equity Offering. During the nine months ended September 30, 2021, the Company received net proceeds of $367.5 million from the issuance of the 2029 Senior Notes, and drew $20.0 million, net, from the RCF, partially offset by the tender and redemption of the 2024 Senior Notes for $238.3 million, including premiums.
Critical Accounting Policies and Accounting Developments
See Note 2 - Summary of Significant Accounting Policies contained in the 2021 10-K and Note 2 - Summary of Significant Accounting Policies contained in this Report for the Company’s critical accounting policies and estimates.
Other Liquidity Matters
We believe that our liquidity and capital resources in the U.S. 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
39
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 indebtedness, fund future cash interest payments and/or amounts due at maturity or upon redemption and for general working capital purposes, from time-to-time we may (1) issue equity securities for cash in public or private offerings or (2) repurchase certain of our debt securities for cash or in exchange for other securities, which may include secured or unsecured notes or equity, in each case in open market or privately negotiated transactions. We 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 debt repurchase transactions may occur at a substantial discount to the debt securities’ face amount.
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”). Unless otherwise noted, we present the Non-GAAP financial measures in the tables below. 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 is 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 following table:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| In thousands except per share amounts | September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||
| Net income (loss) | $ | (57,444) | $ | (77,434) | $ | (127,196) | $ | (20,562) | |||||||||||||||
| Fair value adjustments, net | 13,067 | 62,810 | 65,272 | (7,000) | |||||||||||||||||||
| Foreign exchange loss (gain) | (313) | 513 | 1,190 | 1,849 | |||||||||||||||||||
| (Gain) loss on sale of assets and securities | 87 | (621) | (2,365) | (4,582) | |||||||||||||||||||
| VAT write-off | — | — | 25,982 | ||||||||||||||||||||
| Loss on debt extinguishment | — | — | — | 9,172 | |||||||||||||||||||
| Silvertip inventory write-down | — | — | 271 | ||||||||||||||||||||
| COVID-19 costs | 294 | 318 | 1,585 | 5,937 | |||||||||||||||||||
| Interest income on notes receivables | (181) | (179) | (360) | — | |||||||||||||||||||
Tax effect of adjustments(1) | (231) | 1,488 | (9,733) | (574) | |||||||||||||||||||
| Adjusted net income (loss) | $ | (44,721) | $ | (13,105) | $ | (71,607) | $ | 10,493 | |||||||||||||||
| Adj. net income (loss) per share, Basic | $ | (0.16) | $ | (0.05) | $ | (0.26) | $ | 0.04 | |||||||||||||||
| Adj. net income (loss) per share, Diluted | $ | (0.16) | $ | (0.05) | $ | (0.26) | $ | 0.04 | |||||||||||||||
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(1) For the three months ended September 30, 2022, tax effect of adjustments of $0.2 million (-2%) is primarily related to the to the fair value adjustments on the Company’s equity investments. For the three months ended September 30, 2021, tax effect of adjustments of $1.5 million (2%) is primarily related to the to the fair value adjustments on the Company’s equity investments. For the nine months ended September 30, 2022, tax effect of adjustments of $9.7 million (-15%) is primarily related to the to the fair value adjustments on the Company’s equity investments and the derecognition of deferred tax liabilities related to the sale of La Preciosa. For the nine months ended September 30, 2021, tax effect of adjustments of $0.6 million (-2%) are primarily related to the fair value adjustments on the Company’s equity investments.
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 indenture governing the 2029 Senior Notes and the RCF 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 following table:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| In thousands except per share amounts | September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||
| Net income (loss) | $ | (57,444) | $ | (77,434) | $ | (127,196) | $ | (20,562) | |||||||||||||||
| Interest expense, net of capitalized interest | 5,932 | 5,170 | 15,670 | 13,240 | |||||||||||||||||||
| Income tax provision (benefit) | 1,883 | 11,502 | 15,079 | 34,526 | |||||||||||||||||||
| Amortization | 29,151 | 27,965 | 83,549 | 92,872 | |||||||||||||||||||
| EBITDA | (20,478) | (32,797) | (12,898) | 120,076 | |||||||||||||||||||
| Fair value adjustments, net | 13,067 | 62,810 | 65,272 | (7,000) | |||||||||||||||||||
| Foreign exchange (gain) loss | (93) | 507 | 972 | 2,299 | |||||||||||||||||||
| Asset retirement obligation accretion | 3,597 | 3,529 | 10,588 | 8,898 | |||||||||||||||||||
| Inventory adjustments and write-downs | 22,005 | 9,763 | 40,360 | 6,358 | |||||||||||||||||||
| (Gain) loss on sale of assets and securities | 87 | (621) | (2,365) | (4,582) | |||||||||||||||||||
| VAT write-off | — | — | 25,982 | ||||||||||||||||||||
| Loss on debt extinguishment | — | — | — | 9,172 | |||||||||||||||||||
| Silvertip inventory write-down | — | — | 271 | ||||||||||||||||||||
| COVID-19 costs | 294 | 318 | 1,585 | 5,937 | |||||||||||||||||||
| Interest income on notes receivables | (181) | (179) | (360) | — | |||||||||||||||||||
Adjusted EBITDA(1) | $ | 18,298 | $ | 43,330 | $ | 103,154 | $ | 167,411 | |||||||||||||||
(1) At September 30, 2022, the Company modified its method of calculating Adjusted EBITDA to include the cumulative impact of the LCM adjustments, if applicable, for the year over year presentation. Previously, the year over year Adjusted EBITDA measure only included the current quarter LCM adjustment. For the nine months ended September 30, 2022, the modification increased the Adjusted EBITDA measure by $16.8 million but had no impact for the nine months ended September 30, 2021. This modification to the Adjusted EBITDA measure was made to be consistent with the treatment of LCM adjustments in the Company’s amended RCF facility, which was completed on November 9, 2022.
Free Cash Flow
Management uses Free Cash Flow as a non-GAAP measure to analyze cash flows generated from operations. Free Cash Flow is Cash Provided By (used in) Operating Activities less Capital expenditures as presented on the Consolidated Statements of Cash Flows. The Company believes Free Cash Flow is also useful as one of the bases for comparing the Company’s performance with its competitors. Although Free Cash Flow and similar measures are frequently used as measures of cash flows generated from operations by other companies, the Company’s calculation of Free Cash Flow is not necessarily comparable to such other similarly titled captions of other companies.
The following table sets forth a reconciliation of Free Cash Flow, a non-GAAP financial measure, to Cash Provided By (used in) Operating Activities, which the Company believes to be the GAAP financial measure most directly comparable to Free Cash Flow.
41
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (Dollars in thousands) | September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||
| Cash flow from operations | $ | (19,117) | $ | 22,644 | $ | (2,900) | $ | 75,546 | |||||||||||||||
| Capital expenditures | 96,602 | 73,156 | 239,260 | 208,913 | |||||||||||||||||||
| Free cash flow | $ | (115,719) | $ | (50,512) | $ | (242,160) | $ | (133,367) | |||||||||||||||
Operating Cash Flow Before Changes in Working Capital
Management uses Operating Cash Flow Before Changes in Working Capital as a non-GAAP measure to analyze cash flows generated from operations. Operating Cash Flow Before Changes in Working Capital is Cash Provided By (used in) Operating Activities excluding the change in Receivables, Prepaid expenses and other, Inventories and Accounts payable and accrued liabilities as presented on the Consolidated Statements of Cash Flows. The Company believes Operating Cash Flow Before Changes in Working Capital is also useful as one of the bases for comparing the Company’s performance with its competitors. Although Operating Cash Flow Before Changes in Working Capital and similar measures are frequently used as measures of cash flows generated from operations by other companies, the Company’s calculation of Operating Cash Flow Before Changes in Working Capital is not necessarily comparable to such other similarly titled captions of other companies.
The following table sets forth a reconciliation of Operating Cash Flow Before Changes in Working Capital, a non-GAAP financial measure, to Cash Provided By (used in) Operating Activities, which the Company believes to be the GAAP financial measure most directly comparable to Operating Cash Flow Before Changes in Working Capital.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (Dollars in thousands) | September 30, 2022 | June 30, 2022 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||
| Cash provided by (used in) operating activities | $ | (19,117) | $ | 22,644 | $ | (2,900) | $ | 75,546 | |||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||||
| Receivables | 119 | 4,882 | (4,099) | (1,016) | |||||||||||||||||||
| Prepaid expenses and other | 2,075 | (3,523) | (939) | (593) | |||||||||||||||||||
| Inventories | 13,715 | 11,263 | 42,650 | 18,047 | |||||||||||||||||||
| Accounts payable and accrued liabilities | 1,880 | (5,493) | 17,512 | 15,842 | |||||||||||||||||||
| Operating cash flow before changes in working capital | $ | (1,328) | $ | 29,773 | $ | 52,224 | $ | 107,826 | |||||||||||||||
Costs Applicable to Sales
Management uses CAS 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 gold, silver, zinc and lead, 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 that allocating CAS to gold, silver, zinc and lead based on gold, silver, zinc and lead metal sales relative to total metal sales best allows management, analysts, investors and other stakeholders to evaluate the operating performance of the Company. Other companies may calculate CAS differently as a result of reflecting the benefit from selling non-silver metals as a by-product credit, converting to silver equivalent ounces, and differences in underlying accounting principles and accounting frameworks such as in International Financial Reporting Standards.
42
Three Months Ended September 30, 2022
| In thousands (except metal sales, per ounce and per pound amounts) | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Total | |||||||||||||||||||||||||||||
| Costs applicable to sales, including amortization (U.S. GAAP) | $ | 51,271 | $ | 57,681 | $ | 50,658 | $ | 31,078 | $ | 1,260 | $ | 191,948 | |||||||||||||||||||||||
| Amortization | (8,027) | (6,921) | (10,369) | (2,191) | (1,260) | (28,768) | |||||||||||||||||||||||||||||
| Costs applicable to sales | $ | 43,244 | $ | 50,760 | $ | 40,289 | $ | 28,887 | $ | — | $ | 163,180 | |||||||||||||||||||||||
| Metal Sales | |||||||||||||||||||||||||||||||||||
| Gold ounces | 24,378 | 8,725 | 27,609 | 21,070 | 81,782 | ||||||||||||||||||||||||||||||
| Silver ounces | 1,554,288 | 733,383 | — | 7,931 | — | 2,295,602 | |||||||||||||||||||||||||||||
| Zinc pounds | — | — | |||||||||||||||||||||||||||||||||
| Lead pounds | — | — | |||||||||||||||||||||||||||||||||
| Costs applicable to sales | |||||||||||||||||||||||||||||||||||
| Gold ($/oz) | $ | 958 | $ | 3,142 | $ | 1,456 | $ | 1,364 | |||||||||||||||||||||||||||
| Silver ($/oz) | $ | 12.80 | $ | 31.84 | $ | — | |||||||||||||||||||||||||||||
| Zinc ($/lb) | $ | — | |||||||||||||||||||||||||||||||||
| Lead ($/lb) | $ | — | |||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2022
| In thousands (except metal sales, per ounce and per pound amounts) | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Total | |||||||||||||||||||||||||||||
| Costs applicable to sales, including amortization (U.S. GAAP) | $ | 58,800 | $ | 42,914 | $ | 48,680 | $ | 26,600 | $ | 1,259 | $ | 178,253 | |||||||||||||||||||||||
| Amortization | (9,737) | (4,961) | (9,369) | (2,248) | (1,259) | (27,574) | |||||||||||||||||||||||||||||
| Costs applicable to sales | $ | 49,063 | $ | 37,953 | $ | 39,311 | $ | 24,352 | $ | — | $ | 150,679 | |||||||||||||||||||||||
| Metal Sales | |||||||||||||||||||||||||||||||||||
| Gold ounces | 29,285 | 8,071 | 27,666 | 19,764 | 84,786 | ||||||||||||||||||||||||||||||
| Silver ounces | 1,854,695 | 682,677 | — | 5,828 | — | 2,543,200 | |||||||||||||||||||||||||||||
| Zinc pounds | — | — | |||||||||||||||||||||||||||||||||
| Lead pounds | — | — | |||||||||||||||||||||||||||||||||
| Costs applicable to sales | |||||||||||||||||||||||||||||||||||
| Gold ($/oz) | $ | 854 | $ | 2,351 | $ | 1,412 | $ | 1,226 | |||||||||||||||||||||||||||
| Silver ($/oz) | $ | 12.96 | $ | 27.80 | $ | — | |||||||||||||||||||||||||||||
| Zinc ($/lb) | $ | — | |||||||||||||||||||||||||||||||||
| Lead ($/lb) | $ | — | |||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2022
| In thousands (except metal sales, per ounce and per pound amounts) | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Total | |||||||||||||||||||||||||||||
| Costs applicable to sales, including amortization (U.S. GAAP) | $ | 162,682 | $ | 137,580 | $ | 144,870 | $ | 80,596 | $ | 3,778 | $ | 529,506 | |||||||||||||||||||||||
| Amortization | (27,150) | (16,592) | (28,360) | (6,500) | (3,778) | (82,380) | |||||||||||||||||||||||||||||
| Costs applicable to sales | $ | 135,532 | $ | 120,988 | $ | 116,510 | $ | 74,096 | $ | — | $ | 447,126 | |||||||||||||||||||||||
| Metal Sales | |||||||||||||||||||||||||||||||||||
| Gold ounces | 81,905 | 22,724 | 78,109 | 59,041 | 241,779 | ||||||||||||||||||||||||||||||
| Silver ounces | 5,205,011 | 2,054,176 | — | 29,897 | — | 7,289,084 | |||||||||||||||||||||||||||||
| Zinc pounds | — | — | |||||||||||||||||||||||||||||||||
| Lead pounds | — | — | |||||||||||||||||||||||||||||||||
| Costs applicable to sales | |||||||||||||||||||||||||||||||||||
| Gold ($/oz) | $ | 844 | $ | 2,609 | $ | 1,484 | $ | 1,244 | |||||||||||||||||||||||||||
| Silver ($/oz) | $ | 12.76 | $ | 30.04 | $ | — | |||||||||||||||||||||||||||||
| Zinc ($/lb) | $ | — | |||||||||||||||||||||||||||||||||
| Lead ($/lb) | $ | — | |||||||||||||||||||||||||||||||||
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Nine Months Ended September 30, 2021
| In thousands (except metal sales, per ounce and per pound amounts) | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Total | |||||||||||||||||||||||||||||
| Costs applicable to sales, including amortization (U.S. GAAP) | $ | 140,999 | $ | 108,487 | $ | 134,114 | $ | 79,881 | $ | 3,529 | $ | 467,010 | |||||||||||||||||||||||
| Amortization | (26,077) | (14,754) | (38,941) | (8,627) | (3,529) | (91,928) | |||||||||||||||||||||||||||||
| Costs applicable to sales | $ | 114,922 | $ | 93,733 | $ | 95,173 | $ | 71,254 | $ | — | $ | 375,082 | |||||||||||||||||||||||
| Metal Sales | |||||||||||||||||||||||||||||||||||
| Gold ounces | 81,100 | 20,311 | 88,293 | 71,713 | 261,417 | ||||||||||||||||||||||||||||||
| Silver ounces | 4,991,932 | 2,441,429 | 76,048 | — | 7,509,409 | ||||||||||||||||||||||||||||||
| Zinc pounds | — | — | |||||||||||||||||||||||||||||||||
| Lead pounds | — | — | |||||||||||||||||||||||||||||||||
| Costs applicable to sales | |||||||||||||||||||||||||||||||||||
| Gold ($/oz) | $ | 666 | $ | 1,707 | $ | 1,078 | $ | 966 | |||||||||||||||||||||||||||
| Silver ($/oz) | $ | 12.20 | $ | 24.19 | $ | — | |||||||||||||||||||||||||||||
| Zinc ($/lb) | $ | — | |||||||||||||||||||||||||||||||||
| Lead ($/lb) | $ | — | |||||||||||||||||||||||||||||||||
Reconciliation of Costs Applicable to Sales for 2022 Guidance
| In thousands (except metal sales, per ounce or per pound amounts) | Palmarejo | Rochester | Kensington | Wharf | |||||||||||||||||||
| Costs applicable to sales, including amortization (U.S. GAAP) | $ | 219,862 | $ | 165,031 | $ | 191,055 | $ | 109,179 | |||||||||||||||
| Amortization | (35,687) | (22,218) | (39,051) | (7,811) | |||||||||||||||||||
| Costs applicable to sales | $ | 184,175 | $ | 142,813 | $ | 152,004 | $ | 101,368 | |||||||||||||||
| By-product credit | — | — | — | (745) | |||||||||||||||||||
| Adjusted costs applicable to sales | $ | 184,175 | $ | 142,813 | $ | 152,004 | $ | 100,623 | |||||||||||||||
| Metal Sales | |||||||||||||||||||||||
| Gold ounces | 107,034 | 37,072 | 113,890 | 78,757 | |||||||||||||||||||
| Silver ounces | 6,831,642 | 3,257,498 | 32,199 | ||||||||||||||||||||
| Revenue Split | |||||||||||||||||||||||
| Gold | 51% | 47% | 100% | 100% | |||||||||||||||||||
| Silver | 49% | 53% | |||||||||||||||||||||
| Adjusted costs applicable to sales | |||||||||||||||||||||||
| Gold ($/oz) | $825 - $925 | $1,650 - $1,850 | $1,300 - $1,400 | $1,250 - $1,350 | |||||||||||||||||||
| Silver ($/oz) | $12.75 - $13.75 | $20.00 - $26.00 | |||||||||||||||||||||
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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 operations at the Company’s properties, exploration and development efforts, strategies, expectations regarding the Rochester POA 11 expansion project, the Silvertip mine's potential expansion and restart, including timing thereof, inflation, expectations regarding the consideration received from the sale of the La Preciosa and Sterling/Crown projects, hedging strategies, realization of deferred tax assets, expectations about the recovery of VAT in Mexico, timing of completion of obligations under the Amended Sales Contract at Kensington, liquidity management, financing plans, risk management strategies, capital allocation and anticipated production, costs, expenses, and cash flow. 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 Part II, Item 1A of this Report and in “Risk Factors” section of the 2021 10-K, and the risks set forth in this MD&A and Item 3 of this report, (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 or higher treatment and refining charge environment, (iv) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays (including the impact of government shutdowns), ground conditions and grade and recovery 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 mineral reserves and resources, (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 whom the Company markets its production, (ix) the potential effects of the COVID-19 pandemic, including impacts to workforce, equipment and materials availability, inflationary pressures, continued access to financing sources, government orders that may require temporary suspension of operations at one or more of our sites and effects on our suppliers or the refiners and smelters to whom the Company markets its production, (x) the effects of environmental and other governmental regulations, (xi) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, 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.
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 13 -- 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, Silver, Zinc and Lead Prices
Gold, silver, zinc and lead 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, silver, zinc and lead.
Decreases in the market price of gold, silver, zinc and lead can also significantly affect the value of our metal inventory, stockpiles and leach pads, and it may be necessary to record a write-down to the net realizable value, as well as significantly impact our carrying value of long-lived assets.
Net realizable value represents the estimated future sales price based on short-term and long-term metals prices, less estimated costs to complete production and bring the product to sale. The primary factors that influence the need to record write-downs of our stockpiles, leach pads and product inventory include short-term and long-term metals prices and costs for production inputs such as labor, fuel and energy, materials and supplies as well as realized ore grades and recovery rates. The significant assumptions in determining the stockpile, leach pad and metal inventory adjustments at September 30, 2022 included production cost and capitalized expenditure assumptions unique to each operation, a short-term and long-term gold price of $1,729 and $1,700 per ounce, respectively, and a short-term and long-term silver price of $19.23 and $22.00 per ounce, respectively.
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The net realizable value measurement involves the use of estimates and assumptions unique to each mining operation regarding current and future operating and capital costs, metal recoveries, production levels, commodity prices, proven and probable reserve quantities, engineering data and other factors. A high degree of judgment is involved in determining such assumptions and estimates and no assurance can be given that actual results will not differ significantly from those estimates and assumptions.
Hedging
To mitigate the risks associated with metal price fluctuations, the Company may enter into option contracts to hedge future production. The Company had outstanding forward contracts on 167,000 ounces of gold at September 30, 2022 that settle monthly through December 2023. The Company is targeting to hedge up to 70% of expected gold production through 2022, 50% of expected gold production for the first half of 2023 and 25% of expected gold production for the second half of 2023 in order to protect cash flow during a period of elevated capital expenditures, and may in the future layer on additional hedges as circumstances warrant. The weighted average fixed price on the forward contracts is $1,986 per ounce of gold. The contracts are generally net cash settled and, if the spot price of gold at the time of expiration is lower than the fixed price or higher than the fixed prices, it would result in a realized gain or loss, respectively. The forward contracts expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price is below the spot price of a commodity, and (ii) price risk to the extent that the spot price exceeds the contract price for quantities of our production covered under contract positions. 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. For additional information, please see the section titled “Risk Factors” in the 2021 10-K and part II, Item 1A of this report.
At September 30, 2022, the fair value of the gold forward contracts was an asset of $47.1 million. For the nine months ended September 30, 2022 the Company recognized a gain of $14.4 million related to expired contracts in Revenue and the remaining outstanding forwards contracts were included in accumulated other comprehensive income (loss). A 10% increase and decrease in the price of gold at September 30, 2022 would result in a net realized loss and gain of nil and $80.4 million, respectively. The closing price of gold was $1,672 per ounce. As of November 8, 2022, the closing price of gold was $1,679 per ounce.
Provisional Metal 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. At September 30, 2022, the Company had outstanding provisionally priced sales of 18,789 ounces of gold at an average price of $1,744. Changes in gold prices resulted in provisional pricing mark-to-market gain of $0.75 million during the nine months ended September 30, 2022. A 10% change in realized gold prices would cause revenue to vary by $3.3 million.
Foreign Currency
The Company operates, or has mineral interests, in several foreign countries including Canada, Mexico, 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 currency forward exchange contracts. In 2020, the Company entered into foreign currency forward contracts to manage this risk and designated these instruments as cash flow hedges of forecasted foreign denominated transactions. The Company had no outstanding foreign currency forward exchange contracts at September 30, 2022.
Interest Rates
Interest Rate Hedging
We may use financial instruments to manage exposures to changes in interest rates on loans, which exposes us to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract.
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When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, it does not pose credit risk. We seek to minimize the credit risk in derivative instruments by entering into transactions with what we believe are high-quality counterparties. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The Company had no outstanding interest rate swaps at September 30, 2022.
Investment Risk
Equity Price Risk
We are exposed to changes in the fair value of our investments in equity securities. For the nine months ended September 30, 2022, the Company recognized unrealized losses of $44.5 million in Fair value adjustments, net due to decreases in the stock price of those equity securities. At September 30, 2022, the fair value of the equity securities was $45.5 million. A 10% change in realized equity prices would result in an unrealized gain or loss of $4.6 million.
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) Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
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PART II
Item 1. Legal Proceedings
See Note 17 -- Commitments and Contingencies in the notes to the Consolidated Financial Statements included herein.
Item 1A. Risk Factors
Item 1A -- Risk Factors of the 2021 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. Those risk factors have been supplemented and updated in the Company’s Form 10-Q for the quarters ended March 31, 2022 (the “Q1 2022 10-Q”) and June 30, 2022 (the “Q2 2022 10-Q”) in this Form 10-Q. Except as supplemented and updated in the Q1 2022 10-Q, and the Q2 2022 10-Q, the risk factors set forth in the 2021 10-K remain current. 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
On November 9, 2022, the Company entered into the November Amendment to the RCF. The November Amendment, among other things, (1) modifies the financial covenants to provide greater flexibility under the consolidated net leverage ratio requirement through the December 31, 2023 test date, with the ratio returning to the original level as outlined in the RCF starting with the March 31, 2024 test date, (2) allows for up to $50 million for integration costs or costs associated with establishing new facilities and certain costs associated with LCM adjustments at Rochester to be excluded from the calculation of Consolidated EBITDA for purposes of the RCF, (3) increases the interest rate on certain borrowings through early 2023, (4) requires the Company to repay outstanding amounts under the RCF if cash-on-hand exceeds $60 million during the Amendment Period, and (5) restricts certain payments and the incurrence of certain liens during the Amendment Period. This summary of the November Amendment is qualified in its entirety by reference to the November Amendment filed as Exhibit 10.1 to this Report and incorporated herein by reference.
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Item 6. Exhibits
| 2.1 | |||||
| 10.1 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
| 32.2 | |||||
| 95.1 | |||||
| 101.INS | XBRL Instance Document* | ||||
| 101.SCH | XBRL Taxonomy Extension Schema* | ||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase* | ||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase* | ||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase* | ||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase* | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101). | ||||
* The following financial information from Coeur Mining, Inc.'s Annual Report on Form 10-Q for the quarter ended September 30, 2022, formatted in XBRL (Extensible Business Reporting Language): Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Cash Flows and Consolidated Statement of Changes in Stockholders' Equity.
** Management contract or compensatory plan or arrangement.
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 | November 9, 2022 | /s/ Mitchell J. Krebs | |||||||||
| MITCHELL J. KREBS | |||||||||||
| President and Chief Executive Officer (Principal Executive Officer) | |||||||||||
| Dated | November 9, 2022 | /s/ Thomas S. Whelan | |||||||||
| THOMAS S. WHELAN | |||||||||||
| Senior Vice President and Chief Financial Officer (Principal Financial Officer) | |||||||||||
| Dated | November 9, 2022 | /s/ Ken Watkinson | |||||||||
| KEN WATKINSON | |||||||||||
| Vice President, Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) | |||||||||||
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