CDE

Business Context and Reporting Period

Company: Coeur d'Alene Mines Corporation (Coeur Mining, Inc.)
Filing Type: Form 10-Q (Unaudited)
Period Ended: March 31, 2006
Business Overview: Coeur is a precious metals mining company operating gold and silver mines in the United States (Rochester, Nevada), Chile (Cerro Bayo), Argentina (Martha), and Australia (Endeavor and Broken Hill). The company also holds development projects in Bolivia (San Bartolome) and Alaska (Kensington).

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 39% to $44.9 million, driven by higher realized silver prices ($10.36/oz vs. $6.82/oz) and gold prices ($588/oz vs. $424/oz), as well as increased silver production volumes from newly acquired Australian mines.
• Profitability Turnaround: The company reported a net income of $14.3 million compared to a net loss of $1.1 million in the prior year. This was primarily due to higher metal prices and the inclusion of income from discontinued operations.
• Discontinued Operations: The Coeur Silver Valley (Galena) mine was classified as "held for sale" and reported as discontinued operations. An agreement was reached to sell the subsidiary for $15 million in cash.
• Capital Expenditures: Investing cash outflows increased significantly to $29.6 million (from $8.7 million) due to construction activities at the Kensington (Alaska) and San Bartolome (Bolivia) development projects.
• Financing Activity: Financing cash inflows surged to $145.5 million, primarily due to net proceeds of $146.2 million from a public offering of 27.6 million shares of common stock in March 2006.

Guidance, Outlook, and Risks

• Production Outlook: Management expects ore grades at the Cerro Bayo mine to improve to historical levels later in 2006. The Endeavor mine is expected to produce approximately one million ounces of silver in 2006 following ground stability issues.
• Development Projects:
  • San Bartolome (Bolivia): Construction is ongoing with a target for commercial production in late 2007. Estimated capital cost is $135 million.
  • Kensington (Alaska): Full-scale construction is proceeding. The Section 404 permit was reinstated by the Corps of Engineers in March 2006, though litigation challenging the permit was re-opened in April 2006. Commercial production is targeted for late 2007.
• Market Risks: Results are highly sensitive to volatile silver and gold prices. Approximately 68% of revenue is derived from silver sales.
• Regulatory Risks: Ongoing litigation regarding the Kensington mine permits poses a risk to the project timeline. Political stability in Bolivia is also a factor for the San Bartolome project.
• Accounting Changes: The company adopted SFAS No. 123(R) for share-based compensation effective January 1, 2006, resulting in a $0.6 million expense for the quarter.

Investor Verification Checklist

• Discontinued Operations Sale: Verify the closing of the $15 million sale of Coeur Silver Valley Inc. to U.S. Silver Corporation, expected by June 1, 2006.
• Kensington Permit Status: Monitor the outcome of the re-opened litigation challenging the Section 404 permit for the Kensington mine, which could delay the late 2007 production target.
• Commodity Price Sensitivity: Assess the impact of current silver and gold prices on the company's cash costs per ounce, particularly at the Rochester and Cerro Bayo mines.
• Capital Expenditure Funding: Confirm that the $146.2 million raised in the equity offering is sufficient to fund the estimated $181.9 million in capital expenditures planned for 2006 without requiring additional debt.
• Reclamation Liabilities: Review the $30.8 million asset retirement obligation and potential changes in estimates due to regulatory requirements.