Coeur d'Alene Mines Corporation
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to § 240.14a-12
COEUR DALENE MINES CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
o No fee required.
o Fee computed on table below per Exchange Act Rules 14(a)-6(i)(4) and 0-11.
þ Fee paid previously with preliminary materials.
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(1) |
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Title of each class of securities to which transaction applies: |
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Common stock, par value $1.00 per share, of Coeur dAlene Mines Corporation |
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(2) |
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Aggregate number of securities to which transaction applies: |
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260,976,363 shares of common stock |
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4,049,000 options to purchase
shares of common stock |
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(3) |
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Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 011 (set forth the amount on which the filing fee is calculated and
state how it was determined): |
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The maximum aggregate value was determined based upon the sum of (A) 260,976,363 shares of
common stock multiplied by $3.41 per share; (B) options to purchase 4,049,000 shares of common
stock multiplied by $3.01 (which is the difference between $3.41 and the weighted average exercise
price of such options of $0.40 per share) and (C) $1,052,000 in cash that is
payable in the transaction. In accordance with Section 14(g) of the Securities Exchange Act of
1934, as amended, the filing fee was determined by multiplying 0.00003070 by the sum calculated in
the preceding sentence. |
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(4) |
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Proposed maximum aggregate value of transaction: |
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$903,168,888.30 |
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(5) |
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Total fee paid: |
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$27,727.28 |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its filing. |
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(1) |
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Amount Previously Paid: |
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(2) |
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Form, Schedule or Registration Statement No.: |
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(3) |
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Filing Party: |
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(4) |
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Date Filed: |
COEUR DALENE MINES
CORPORATION
505 Front Avenue
Post Office Box I
Coeur dAlene, Idaho 83814
October 19,
2007
Dear Coeur Shareholder:
You are cordially invited to attend a special meeting of
shareholders of Coeur dAlene Mines Corporation, to be held
at The Coeur dAlene Resort and Conference Center, Second
Street and Front Avenue, Coeur dAlene, Idaho at
9:30 am, local time, on December 3, 2007 to consider
matters relating to the proposed acquisitions of Bolnisi Gold NL
and Palmarejo Silver and Gold Corporation (the
Transactions), as described in the attached proxy
statement. Coeurs Board of Directors unanimously believes
that the Transactions are in the best interests of Coeur and its
shareholders, because the combined company will be:
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The worlds leading primary silver company in terms of:
annual silver production and low production costs (once the
Palmarejo Project commences operations), expected growth rate of
production over the next two years, and exploration potential,
along with a leading silver resource base;
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Diversified geographically, with mining operations in North
America, South America and Australia, ranging from exploration
stage properties to development and operating properties;
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Highly leveraged to commodity prices with unhedged production;
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One of the worlds most liquid publicly-traded silver
mining companies with listings on the NYSE and the Toronto Stock
Exchange and an expected listing on the ASX in the form of CHESS
Depositary Interests; and
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Financially flexible with a large cash position, balance sheet
strength, and enhanced access to capital markets.
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At the special meeting, Coeur shareholders will be asked to vote
on:
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Proposal 1 an amendment to Coeurs
articles of incorporation to increase the authorized number of
shares of Coeur common stock from 500,000,000 to 750,000,000;
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Proposal 2 the issuance of shares of Coeur
common stock in the Transactions;
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Proposal 3 authorization to adjourn or postpone
the special meeting, if necessary or appropriate, to solicit
additional votes to approve Proposals 1 and 2; and
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such other matters as may be properly brought before the special
meeting.
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Coeurs Board of Directors has unanimously approved the
Transactions and the issuance of Coeur common stock in the
Transactions. Accordingly, the Board of Directors unanimously
recommends that Coeur shareholders vote FOR Proposals 1, 2
and 3.
The effectiveness of Proposals 1 and 2 is conditioned upon
the approval of both proposals. Coeur shareholders can cast
separate votes on each proposal, but unless the Coeur
shareholders approve both proposals, neither will take effect.
There are certain risks associated with the Transactions, which
are described in the attached proxy statement under the heading
Risk Factors, beginning on page 31.
The Board of Directors hopes that you will attend the special
meeting. However, whether or not you plan to attend the meeting,
please sign, date and return the accompanying proxy card in the
enclosed postage paid pre-addressed envelope, or otherwise
return your proxy in a manner described in the accompanying
proxy card, as soon as possible. Your vote is important,
regardless of the number of shares you own, so please return
your proxy card TODAY.
Sincerely,
DENNIS E. WHEELER
Chairman of the Board and Chief Executive Officer
The proxy statement and accompanying proxy card are dated
October 19, 2007, and are first being mailed or given to
Coeur shareholders on or about October 23, 2007.
The Transactions described in the attached proxy statement have
not been approved or disapproved by the Securities and Exchange
Commission or any other securities commission or authority, nor
has any such commission or authority passed upon the fairness or
merits of the Transactions or upon the accuracy or adequacy of
the information contained in the attached proxy statement. Any
representation to the contrary is a criminal offense.
COEUR
DALENE MINES CORPORATION
505 Front Avenue
Post Office Box I
Coeur dAlene, Idaho 83814
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD ON DECEMBER 3,
2007
COEUR DALENE MINES CORPORATION
To the Shareholders of Coeur dAlene Mines Corporation:
Notice is hereby given that a special meeting of shareholders of
Coeur dAlene Mines Corporation, an Idaho corporation
(Coeur), will be held on December 3, 2007 at
9:30 am, local time at The Coeur dAlene Resort and
Conference Center located at Second Street and Front Avenue,
Coeur dAlene, Idaho, for the following purposes:
1. To consider and vote upon a proposal to amend and
restate Coeurs articles of incorporation to increase the
authorized number of shares of Coeur common stock from
500,000,000 to 750,000,000.
2. To consider and vote on the proposed issuance of new
shares of Coeur common stock, par value $1.00 per share, to
Bolnisi Gold NL (Bolnisi) shareholders in connection
with the combination of Bolnisi with Coeur and the proposed
issuance of new shares of Coeur common stock to Palmarejo Silver
and Gold Corporation (Palmarejo) shareholders in
connection with the combination of Palmarejo and Coeur. The
final number of new shares issued in connection with the
combination will depend on whether existing Palmarejo options
and warrants are exercised.
3. To approve the adjournment or postponement of the
special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the special meeting to adopt any of the foregoing proposals.
4. To consider and vote upon any other matters that
properly come before the special meeting.
Only holders of record of Coeur common stock at the close of
business on October 19, 2007, the record date of the
special meeting, are entitled to notice of, and to vote at, the
special meeting or any adjournments or postponements of the
special meeting.
By Order of our Board of Directors,
KELLI C. KAST
Secretary
Your Vote Is Important
Your vote is important. Accordingly, please complete, sign
and return the enclosed proxy card or submit your proxy by
telephone or over the Internet following the instructions on the
proxy card. If you have any questions or need assistance, please
call D.F. King & Co., Inc., which is
assisting Coeur, toll-free at
1-800-901-0068.
Proxy
Statement
Table
of Contents
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Page
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1
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2
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5
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9
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9
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9
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9
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9
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9
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10
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10
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11
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13
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15
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16
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28
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30
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31
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31
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32
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44
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44
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45
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45
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57
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65
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66
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66
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66
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67
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67
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i
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Page
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67
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68
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69
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69
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75
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76
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82
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109
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141
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172
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Annex A-1
Bolnisi Merger Implementation Agreement
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A-1-1
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Annex A-2
Amending Agreement to Bolnisi Merger Implementation Agreement
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A-2-1
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Annex A-3
Second Amending Agreement to Bolnisi Merger Implementation
Agreement
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A-3-1
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Annex A-4
Conditional Extension to Bolnisi Merger Implementation Agreement
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A-4-1
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Annex B-1
Palmarejo Merger Implementation Agreement
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B-1-1
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Annex B-2
Extension to Palmarejo Merger Implementation Agreement
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B-2-1
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Annex C Historical Consolidated Financial Statements of
Coeur
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C-1
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Annex D Historical Consolidated Financial Statements of
Bolnisi
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D-1
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Annex E Historical Consolidated Financial Statements of
Palmarejo
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E-1
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Annex F-1 May 2,
2007 Opinion of CIBC World Markets
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F-1-1
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Annex F-2 July 2,
2007 Opinion of CIBC World Markets
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F-2-1
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Annex G Bolnisi Scheme of Arrangement
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G-1
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Annex H Palmarejo Plan of Arrangement
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H-1
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Annex I Form of Amendment to Restated and Amended Articles
of Incorporation
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I-1
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Annex J Certain Information Regarding Properties of Coeur
dAlene Mines Corporation
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J-1
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Annex K Certain Information Regarding Properties of
Palmarejo and Bolnisi
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K-1
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iii
The functional currency of Coeur is the U.S. dollar. Unless
otherwise specified, all references to dollars,
$, or US$ shall mean United States
dollars. Bolnisi and Palmarejo use the Australian dollar
(A$) and Canadian dollar (C$),
respectively, as their functional currency.
1
This summary term sheet highlights selected information
contained in this proxy statement and may not contain all of the
information that is important to you. You are urged to read this
entire proxy statement carefully, including the annexes. In
addition, we incorporate by reference important business and
financial information about us in this proxy statement. You may
obtain the information incorporated by reference into this proxy
statement without charge by following the instructions in the
section entitled Where Shareholders Can Find More
Information About Coeur. In this proxy statement, the
terms we, us, our,
Coeur and the Company refer to Coeur
dAlene Mines Corporation. In this proxy statement, we
refer to Bolnisi Gold NL as Bolnisi, Palmarejo
Silver and Gold Corporation as Palmarejo, Coeur Sub
Two, Inc. as Coeur Sub Two, and Coeur dAlene
Mines Australia Pty Ltd as Australian Bidco.
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The Companies. Coeur dAlene Mines
Corporation is one of the worlds leading primary silver
producers and a growing gold producer. Coeur has mining
interests in Alaska, Argentina, Australia, Bolivia, Chile,
Nevada, and Tanzania. Bolnisi Gold NL is an Australia-based
company listed on the Australian stock exchange under the symbol
BSG and whose principal asset is its indirect 72.8%
(as of August 23, 2007) shareholding in outstanding common
shares of Palmarejo. Palmarejo is a Canadian company listed on
the TSX Venture Exchange under the symbol PJO.
Palmarejo is engaged in the exploration and development of
silver and gold properties located in the state of Chihuahua, in
northern Mexico. Through its indirectly owned Mexican
subsidiary, Palmarejo owns or has entered into agreements to
acquire concessions comprising the Palmarejo-Trogan project.
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The Proposed Transactions. Coeur, Bolnisi and
Palmarejo are proposing to combine the three companies in a
series of mergers. Coeur will indirectly acquire all the shares
of Bolnisi pursuant to a scheme of arrangement and Coeur will
indirectly acquire all the shares of Palmarejo pursuant to a
plan of arrangement, each in exchange for Coeur common stock and
cash. On May 3, 2007, Coeur, Coeur Sub Two, Australian
Bidco and Bolnisi entered into a merger implementation
agreement, or MIA, for Coeur to acquire the outstanding shares
of Bolnisi in accordance with a scheme of arrangement to be
submitted for approval by the Federal Court of Australia. On the
same day, Coeur and Palmarejo entered into a merger
implementation agreement for Coeur to acquire the outstanding
shares of Palmarejo not indirectly owned by Bolnisi in
accordance with a plan of arrangement to be submitted for
approval by the Ontario Superior Court of Justice.
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Consideration to be Paid. Coeur has agreed to
issue 0.682 shares of Coeur common stock (or, at the
election of the Bolnisi shareholder, CHESS Depositary Interests
representing Coeur shares) and A$0.004 in cash (or approximately
US$0.9 million in aggregate) for each Bolnisi ordinary
share held on or about 5 days after the effective date of
the scheme of arrangement. Coeur has agreed to issue
2.715 shares of Coeur common stock and C$0.004 in cash (or
approximately US$0.2 million in aggregate) for each
Palmarejo common share held immediately prior to the
consummation of the combination excluding shares held by
Bolnisi. Palmarejo will also issue new options to purchase Coeur
shares that will be exchanged for all outstanding options to
purchase Palmarejo shares. It is anticipated that this will
result in Coeur issuing a total of approximately
261.0 million new shares, which excludes up to
11.0 million new shares that will be issuable upon the
exercise of existing Palmarejo options and assumes that none of
the existing Palmarejo warrants will be exercised before their
expiration on October 19, 2007.
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Purpose of Coeur Shareholder
Vote. Coeurs shareholders are being asked
to consider and vote upon a proposal to amend our articles of
incorporation to increase the authorized shares of Coeur common
stock and to issue shares of common stock to shareholders of
Bolnisi and Palmarejo. See The Special Meeting of Coeur
Shareholders beginning on page 44.
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Coeurs Special Meeting. The Coeur
shareholders vote will take place at a special meeting to
be held at 9:30 am local time on December 3, 2007, at
The Coeur dAlene Resort and Conference Center located at
Second Street and Front Avenue, Coeur dAlene, Idaho.
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Required Vote of Coeurs
Shareholders. The proposals must be adopted by
the affirmative vote of a majority of the shares of Coeur common
stock that are present or represented by proxy at the
shareholder meeting. In addition, the total votes cast on the
proposal to authorize the issuance of shares of Coeur common
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stock to shareholders of Bolnisi and Palmarejo must represent a
majority of the shares of common stock outstanding on the date
of the special meeting.
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Record Date for Coeurs Shareholders. You
are entitled to vote at the special meeting if you owned shares
of Coeur common stock at the close of business on
October 19, 2007.
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Coeur Voting Information. You will have one
vote for each share of Coeur common stock that you owned at the
close of business on the record date. If your shares are held in
street name by a broker, you will need to provide
your broker with instructions on how to vote your shares. Before
voting your shares of Coeur common stock you should read this
proxy statement in its entirety, including its annexes, and
carefully consider how the Transactions affect you. Then, mail
your completed, dated and signed proxy card in the enclosed
return envelope or submit your proxy by telephone or over the
Internet as soon as possible so that your shares can be voted at
the special meeting. For more information on how to vote your
shares, please refer to The Special Meeting of Coeur
Shareholders beginning on page 44.
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Coeurs Board
Recommendation. Coeurs board of directors
unanimously recommends that Coeurs shareholders vote FOR
the amendment to Coeurs articles of incorporation and the
issuance of Coeur shares necessary to implement the Transactions.
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Opinions of Coeurs Financial Advisor. On
May 2, 2007 and July 2, 2007 Coeurs board of
directors received a written opinion from CIBC World Markets
Inc. each to the effect that, as of May 2, 2007 and
July 2, 2007, respectively, and based upon and subject to
the factors, assumptions, qualifications and limitations set
forth in such opinion, the consideration to be paid by Coeur
pursuant to the Transactions was fair, from a financial point of
view, to Coeur.
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Regulatory Approvals. Under the Corporations
Act of 2001 (Cth) (Corporations Act), the
Bolnisi Transaction requires court approval before it can become
effective. The Corporations Act expressly prevents the Federal
Court of Australia from granting approval unless: (1) a
statement from the Australian Securities and Investments
Commission (ASIC) that it has no objection to the
Bolnisi Transaction is produced to the court; or (2) it is
satisfied that the arrangement has not been proposed for the
purpose of enabling any person to avoid the operation of any of
the provisions of Chapter 6 of the Corporations Act (which
relates to takeovers). Bolnisi intends to apply to ASIC for a
statement that it has no objection to the Bolnisi Transaction
and such no objection statement would be expected to be received
on or about the Second Court Date, which we expect to occur on
or about December 5, 2007. In addition to court approval,
approval is also required from a majority of shareholders in
each class of shares that are present and voting as well as 75%
of the shareholders of Bolnisi present and voting. This meeting
of Bolnisi shareholders is scheduled to occur on or about
December 4, 2007. The Treasurer of the Commonwealth of
Australia must also either issue a notice stating that the
Commonwealth Government does not object to Coeur entering into
and completing the Bolnisi Transaction or becomes, or be,
precluded (any time before the Bolnisi Transaction becomes
effective) from making an order in respect of the entry into or
completion by Coeur of the Bolnisi Transaction under the Foreign
Acquisition and Takeovers Act of 1975. In addition, permission
must be obtained for the admission of Coeur Shares in the form
of CDIs to quotation on the Australian Securities Exchange
(ASX) by 8:00 am on the Second Court Date which is
the day on which an application made to the Federal Court of
Australia for orders under section 411(4)(b) of the
Corporations Act approving the scheme of arrangement is heard.
Any such approval may be subject to customary conditions and to
the Scheme becoming Effective. Coeur also intends applying to
ASX for a waiver of certain ASX Listing Rules.
|
Under the Canada Business Corporations Act, the Palmarejo
Transaction requires court and shareholder approval. Palmarejo
is expected to obtain an interim order from the Ontario Superior
Court of Justice providing for the calling and holding of the
Palmarejo special meeting and other procedural matters. Subject
to the approval of the Palmarejo Transaction by two-thirds of
the votes cast by Palmarejo shareholders represented in person
or by proxy and by a majority of minority Palmarejo shareholders
(being those shareholders other than Fairview (a wholly owned
subsidiary of Bolnisi) and its affiliates and interested
parties) at the Palmarejo special meeting and the approval of
the Coeur share issuance and Coeur amendment to the articles of
incorporation by the Coeur shareholders at the Coeur special
meeting, the
3
hearing in respect of a final order from the Ontario Superior
Court of Justice is expected to take place on or about
December 6, 2007.
|
|
|
|
|
Anticipated Closing of the
Transactions. Coeur, Bolnisi and Palmarejo will
complete the Transactions when all of the conditions to
completion of the Transactions have been satisfied or waived.
The parties are working toward satisfying these conditions and
completing the Transactions as quickly as possible. The parties
currently plan to complete the Transactions in the fourth
quarter of 2007.
|
|
|
|
Additional Information. You can find more
information about Coeur in the periodic reports and other
information Coeur files with the Securities and Exchange
Commission (the SEC). This information is available
at the SECs public reference facilities and at the website
maintained by the SEC at www.sec.gov. For a more detailed
description of the additional information available, see the
section entitled Where Shareholders Can Find More
Information About Coeur beginning on page 199. For a
detailed description of the additional information available
about Bolnisi, see the section entitled Where Shareholders
Can Find More Information About Bolnisi beginning on
page 200. Palmarejo files reports and other information
with Canadian provincial securities commissions. These reports
and information are available to the public free of charge on
the System for Electronic Document Analysis and Retrieval of the
Canadian Securities Administrators (SEDAR) at
www.sedar.com.
|
4
Questions
and Answers about the Transactions and the Special
Meeting
The following questions and answers are for your convenience
only, and briefly address some commonly asked questions about
the Transactions and the special meeting. You should still
carefully read this entire proxy statement, including the
attached Annexes.
|
|
|
Q: |
|
What are Coeur, Bolnisi and Palmarejo proposing? |
|
A: |
|
Coeur, Bolnisi and Palmarejo are proposing to combine the three
companies in a series of mergers. Coeur will acquire all the
shares of Bolnisi pursuant to a scheme of arrangement and Coeur
will acquire all the shares of Palmarejo pursuant to a plan of
arrangement, each in exchange for Coeur common stock and cash.
On May 3, 2007, Coeur, Coeur Sub Two, Australian Bidco and
Bolnisi entered into a merger implementation agreement for Coeur
to acquire the outstanding shares of Bolnisi in accordance with
a scheme of arrangement to be submitted for approval by the
Federal Court of Australia. On the same day, Coeur and Palmarejo
entered into a merger implementation agreement for Coeur to
acquire the outstanding shares of Palmarejo not indirectly owned
by Bolnisi in accordance with a plan of arrangement to be
submitted for approval by the Ontario Superior Court of Justice.
Under the terms of the Bolnisi Transaction, Bolnisi shareholders
will receive 0.682 Coeur shares (or, at the election of the
Bolnisi shareholder, CHESS Depositary Interests representing
Coeur shares) and a cash payment equal to A$0.004 (or
approximately US$0.9 million in aggregate) for each Bolnisi
ordinary share they own. In addition, new Palmarejo options to
purchase Coeur shares will be exchanged for all outstanding
options to purchase Palmarejo shares. Under the terms of the
Palmarejo Transaction, Palmarejo shareholders will receive 2.715
Coeur shares and a cash payment equal to C$0.004 (or
approximately US$0.2 million in aggregate) for each
Palmarejo common share they own. It is anticipated that this
will result in Coeur issuing a total of approximately
261.0 million new shares, which excludes up to
11.0 million new shares that will be issuable upon the
exercise of existing Palmarejo options and assumes that none of
the existing Palmarejo warrants will be exercised before their
expiration on October 19, 2007. |
|
Q: |
|
How does the board of directors recommend that I vote? |
|
A: |
|
Coeurs board of directors unanimously recommends that
Coeurs shareholders vote FOR the amendment to
Coeurs articles of incorporation and the issuance of Coeur
shares necessary to implement the Transactions. |
|
Q: |
|
Why are Coeur, Bolnisi and Palmarejo proposing to combine? |
|
A: |
|
We believe that following commencement of production at the
Palmarejo Project the combination of Coeur, Bolnisi and
Palmarejo will create the worlds leading primary silver
company in terms of growth rate, production costs, exploration
potential, and silver resources. Once production commences for
the Palmarejo Project, the combined company expects to become
the largest primary silver producer in the world. The combined
company is expected to be diversified geographically, with
mining operations in North America, South America and Australia,
ranging from exploration stage properties to development and
operating properties, and will be highly leveraged to commodity
prices with unhedged production. The combined company is
expected to be one of the worlds most liquid
publicly-traded silver mining companies with listings on the
NYSE and the Toronto Stock Exchange and an expected listing on
the ASX in the form of CHESS Depositary Interests. The combined
company is expected to be financially flexible with a large cash
position, balance sheet strength, and enhanced access to capital
markets. Following the Transactions, the combined company is
expected to have the scope, scale and financial strength to more
efficiently develop existing opportunities and assets and to
capitalize quickly on new growth and other opportunities within
the mining industry. |
|
Q: |
|
Are there risks I should consider in deciding whether to vote
for the proposed Transactions? |
|
A: |
|
Yes. The proposed transactions are subject to a number of risks
and uncertainties. Coeur may not realize the benefits it
currently anticipates due to the challenges associated with
integrating the companies and other risks inherent in its mining
business. See Risk Factors beginning on page 31. |
|
Q: |
|
How does Coeur intend to finance the Transactions? |
|
A: |
|
Coeur has agreed to issue 0.682 shares of Coeur common
stock (or, at the election of the Bolnisi shareholder, CHESS
Depositary Interests representing Coeur shares) and A$0.004 (or
US$0.9 million in aggregate) in cash for each |
5
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|
|
|
|
Bolnisi ordinary share held immediately prior to the
consummation of the combination. Coeur has agreed to issue
2.715 shares of Coeur common stock and C$0.004 (or
US$0.2 million in aggregate) in cash for each Palmarejo
common share held immediately prior to the consummation of the
combination. It is anticipated that this will result in Coeur
issuing a total of approximately 261.0 million new shares,
which excludes up to 11.0 million new shares that will be
issuable upon the exercise of existing Palmarejo options and
assumes that none of the existing Palmarejo warrants will be
exercised before their expiration on October 19, 2007. |
|
Q: |
|
When do Coeur, Bolnisi and Palmarejo expect to complete the
Transactions? |
|
A: |
|
Coeur, Bolnisi and Palmarejo will complete the Transactions when
all of the conditions to completion of the Transactions have
been satisfied or waived. The parties are working toward
satisfying these conditions and completing the Transactions as
quickly as possible. The parties currently plan to complete the
Transactions in the fourth quarter of 2007. |
|
Q: |
|
What will the share ownership, board of directors and
management of Coeur look like after the combination? |
|
A: |
|
We estimate that upon completion of the Transactions, former
shareholders of Bolnisi and Palmarejo will own approximately
48.29% of the outstanding common stock of the combined company.
Assuming that all existing Palmarejo options are exercised
before or after the consummation of the Transactions, former
shareholders of Bolnisi and Palmarejo will own approximately
49.32% of the outstanding stock of the combined company. We do
not expect any change in our board of directors or management
following completion of the Transactions. |
|
Q: |
|
Why am I receiving this proxy statement? |
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A: |
|
You are receiving this proxy statement and enclosed proxy card
because, as of October 19, 2007, the record date for the
special meeting, you owned shares of Coeur common stock. Only
holders of record of shares of Coeur common stock as of the
close of business on October 19, 2007, will be entitled to
vote those shares at the special meeting. Our Board of Directors
is providing these proxy materials to give you information to
determine how to vote in connection with the special meeting of
our shareholders. |
|
|
|
This proxy statement describes the issues on which we would like
you, as a shareholder, to vote. It also provides you with
important information about these issues to enable you to make
an informed decision as to whether to vote your shares of Coeur
common stock for the matters described herein. |
|
|
|
As more fully described herein, Coeur has agreed to acquire
Bolnisi pursuant to a merger implementation agreement, made and
entered into as of May 3, 2007, between Coeur, Coeur
dAlene Mines Australia Pty Ltd, Coeur Sub Two, Inc. and
Bolnisi and Coeur has agreed to acquire Palmarejo pursuant to a
merger implementation agreement, made and entered into as of
May 3, 2007, between Coeur and Palmarejo. |
|
|
|
We are holding a special meeting of shareholders in order to
obtain the shareholder approval necessary to amend our articles
of incorporation to increase the authorized shares of Coeur
common stock and to issue shares of our common stock to
shareholders of Bolnisi and Palmarejo. We will be unable to
complete the Transactions unless the shareholders approve the
proposals described in this proxy statement at the special
meeting. We have included in this proxy statement important
information about the Transactions and the special meeting. You
should read this information carefully and in its entirety. We
have attached a copy of the Bolnisi merger implementation
agreement and the Palmarejo merger implementation agreement to
this proxy statement as Annex A-1 and Annex B-1,
respectively. The enclosed voting materials allow you to vote
your shares without attending the special meeting. |
|
|
|
Your vote is very important and we encourage you to complete,
sign, date and mail your proxy card, as soon as possible,
whether or not you plan to attend the special meeting.
Convenient telephone and Internet voting options also are
available. This proxy statement describes the issues on which we
would like you, as a shareholder to vote. |
|
Q: |
|
When and where is the special meeting? |
|
A: |
|
The special meeting will be held at The Coeur dAlene
Resort and Conference Center, Second Street and Front Avenue,
Coeur dAlene, Idaho at 9:30 am, local time, on
December 3, 2007. |
6
|
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|
Q: |
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Who is entitled to vote at the special meeting? |
|
A: |
|
Holders of Coeur common stock at the close of business on
October 19, 2007, the record date for the special meeting,
may vote in person or by proxy at the special meeting. |
|
Q: |
|
What am I being asked to vote upon? |
|
A: |
|
You are being asked to consider and vote upon a proposal to
increase the authorized shares of Coeur common stock from
500,000,000 to 750,000,000 in order to provide sufficient shares
to issue to Bolnisi and Palmarejo shareholders in the
Transactions and a proposal to authorize the issuance of shares
of Coeur common stock to Bolnisi and Palmarejos
shareholders. You are also being asked to consider and vote upon
a proposal to approve the adjournment or postponement of the
special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the special meeting to adopt such proposals. None of the
proposed amendment to the existing articles of incorporation or
the proposed share issuance will be implemented unless all are
approved and the Transactions are completed. |
|
Q: |
|
What vote is required to approve the proposals? |
|
A: |
|
The proposals must be adopted by the affirmative vote of a
majority of the shares of Coeur common stock that are present or
represented by proxy at the shareholder meeting. In addition,
the total votes cast on Proposal 2 must represent a
majority of the shares of common stock outstanding on the date
of the special meeting. |
|
Q: |
|
How many votes do I have? |
|
A: |
|
You have one vote for each share of Coeur common stock that you
own as of the record date. |
|
Q: |
|
How are votes counted? |
|
A: |
|
Votes will be counted by the inspector of election appointed for
the special meeting, who will separately count FOR
and Against votes, abstentions and broker non-votes.
A broker non-vote occurs when a nominee holding
shares for a beneficial owner does not receive instructions with
respect to the proposals from the beneficial owner. |
|
Q: |
|
How do I vote my Coeur common stock? |
|
A: |
|
Before you vote, you should read this proxy statement in its
entirety, including its Annexes, and carefully consider how the
Transactions affect you. Then, mail your completed, dated and
signed proxy card in the enclosed return envelope or submit your
proxy by telephone or over the Internet as soon as possible so
that your shares can be voted at the special meeting. For more
information on how to vote your shares, see the section entitled
The Special Meeting Record Date and Voting
Information. |
|
Q: |
|
What happens if I do not vote? |
|
A: |
|
The presence, in person or by proxy, of a majority of the shares
of common stock outstanding on the date of the special meeting
is necessary to constitute a quorum at the special meeting.
Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum, but will not be
counted as present for purposes of determining whether a
proposal has been approved. In addition, the total votes cast on
Proposal 2 must represent a majority of the shares of
common stock outstanding on the date of the special meeting. If
you do not vote, your shares will not be counted towards the
approval requirement. |
|
Q: |
|
What happens if I dont indicate how to vote on my
proxy? |
|
A: |
|
If you are a record holder of Coeur common stock and sign and
send in your proxy card, but do not include instructions on how
to vote, your shares will be voted FOR approval of the
Coeur articles of incorporation amendment and the Coeur share
issuance. |
|
Q: |
|
What happens if I sell my shares of Coeur common stock before
the special meeting? |
|
A: |
|
The record date for shareholders entitled to vote at the special
meeting is earlier than the expected date of the mergers. If you
transfer your shares of Coeur common stock after the record date
but before the special meeting you will, unless special
arrangements are made, retain your right to vote at the special
meeting. |
7
|
|
|
Q: |
|
If my shares are held in street name by my
broker, will my broker vote my shares for me? |
|
A: |
|
Your broker will vote your shares only if you provide
instructions to your broker on how to vote. You should instruct
your broker to vote your shares by following the directions
provided to you by your broker. |
|
Q: |
|
Will my shares held in street name or another
form of record ownership be combined for voting purposes with
shares I hold of record? |
|
A: |
|
No. Because any shares you may hold in street
name will be deemed to be held by a different shareholder
than any shares you hold of record, any shares so held will not
be combined for voting purposes with shares you hold of record.
Similarly, if you own shares in various registered forms, such
as jointly with your spouse, as trustee of a trust or as
custodian for a minor, you will receive, and will need to sign
and return, a separate proxy card for those shares because they
are held in a different form of record ownership. Shares held by
a corporation or business entity must be voted by an authorized
officer of the entity. Shares held in an IRA must be voted under
the rules governing the account. |
|
Q: |
|
What does it mean if I receive more than one set of
materials? |
|
A: |
|
This means you own shares of Coeur common stock that are
registered under different names. For example, you may own some
shares directly as a shareholder of record and other shares
through a broker or you may own shares through more than one
broker. In these situations, you will receive multiple sets of
proxy materials. You must vote, sign and return all of the proxy
cards or follow the instructions for any alternative voting
procedure on each of the proxy cards that you receive in order
to vote all of the shares you own. Each proxy card you receive
comes with its own prepaid return envelope. If you vote by mail,
make sure you return each proxy card in the return envelope that
accompanies that proxy card. |
|
Q: |
|
What if I fail to instruct my broker? |
|
A: |
|
Without instructions, your broker will not vote any of your
shares held in street name. Broker non-votes will be
counted for purposes of determining the presence or absence of a
quorum, but will not be counted as present for purposes of
determining whether a proposal has been approved. |
|
Q: |
|
May I vote in person? |
|
A: |
|
Yes. You may attend the special meeting and vote your shares in
person whether or not you sign and return your proxy card. If
your shares are held of record by a broker, bank or other
nominee and you wish to vote in person at the special meeting,
you must contact your broker or bank and obtain a
legal proxy from the record holder. |
|
Q: |
|
May I change my vote after I have mailed my signed proxy
card? |
|
A: |
|
Yes. You may revoke and change your vote at any time before your
proxy card is voted at the special meeting. You can do this in
one of three ways: |
|
|
|
First, you can send a written notice to the Coeur
corporate secretary stating that you would like to revoke your
proxy;
|
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|
|
Second, you can complete and submit a new proxy in
writing, by telephone or over the Internet; or
|
|
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|
Third, you can attend the meeting and vote in
person. Your attendance alone will not revoke your proxy.
|
|
|
|
If you have instructed a broker to vote your shares, you must
follow directions received from your broker to change those
instructions. |
|
Q: |
|
Who can help answer my questions? |
|
A: |
|
If you have questions about the Transactions and the special
meeting, including the procedures for voting your shares, you
should contact our proxy solicitor D.F. King & Co., Inc.
toll-free at 1-800-901-0068 (banks and brokers may call collect
at (212) 269-5550). |
8
This proxy statement and the accompanying form of proxy are
being furnished to Coeur shareholders in connection with the
solicitation of proxies by Coeurs Board of Directors for
use at the special meeting to be held at The Coeur dAlene
Resort and Conference Center located at Second Street and Front
Avenue, Coeur dAlene, Idaho, on December 3, 2007 at
9:30 am local time.
You are being asked to vote upon a proposal to increase the
authorized shares of Coeur common stock from 500,000,000 to
750,000,000 in order to provide sufficient shares to issue to
Bolnisi and Palmarejo shareholders in the Transactions and a
proposal to authorize the issuance of shares of Coeur common
stock to Bolnisi and Palmarejos shareholders.
Coeur
dAlene Mines Corporation
Coeur dAlene Mines Corporation is one of the worlds
leading primary silver producers and a growing gold producer.
Coeur has mining interests in Alaska, Argentina, Australia,
Bolivia, Chile, Nevada, and Tanzania.
Additional information about Coeurs business is set forth
in Coeurs Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, which is
available on the SECs website at www.sec.gov. See
Where Shareholders Can Find More Information About
Coeur on page 199.
Coeur dAlene Mines Corporation
505 Front Avenue
Coeur dAlene, Idaho 83814
Coeur
dAlene Mines Australia Pty Ltd
Coeur dAlene Mines Australia Pty Ltd, an Australian
corporation (Australian Bidco), was formed solely
for the purpose of acquiring Bolnisi. Australian Bidco is a
wholly-owned direct subsidiary of Coeur Sub Two and a
wholly-owned indirect subsidiary of Coeur and has not engaged in
any business except in anticipation of the Bolnisi Transaction.
Coeur dAlene Mines Australia Pty Ltd
c/o CDE
Australia Pty Ltd
Suite 1003
3 Spring Street
Sydney NSW 2000
Coeur Sub Two, Inc., a Delaware corporation, was formed solely
for the purpose of acquiring Bolnisi. Coeur Sub Two is a
wholly-owned indirect subsidiary of Coeur and has not engaged in
any business except in anticipation of the Bolnisi Transaction.
Coeur Sub Two, Inc.
c/o Coeur
dAlene Mines Corporation
505 Front Avenue
Coeur dAlene, Idaho 83814
Bolnisi Gold NL is an Australia-based company listed on the
Australian Stock Exchange under the symbol BSG and
who is engaged in mining and exploration for gold and silver.
Bolnisis principal asset is its indirect 72.8% (as of
August 23, 2007) shareholding in the outstanding common
shares of Palmarejo. Bolnisi also has a
9
portfolio of Mexican-based exploration projects, which include
the Yecora Gold-Silver project, Sonora, and the El Realito
Gold-Silver project, Chihuahua.
Bolnisi Gold NL
Level 8
261 George Street
Sydney NSW 2000
Australia
Palmarejo
Silver and Gold Corporation
Palmarejo Silver and Gold Corporation is engaged in the
exploration and development of silver and gold projects, and is
listed on the TSX Venture Exchange under the symbol
PJO. Through its indirectly owned Mexican
subsidiary, Palmarejo owns or has entered into agreements to
acquire concessions comprising the Palmarejo-Trogan project.
Additional information about Palmarejos business is set
forth in Palmarejos Annual Information Form dated
October 12, 2006, which is available under Palmarejos
profile on SEDAR at www.sedar.com.
Palmarejo Silver and Gold Corporation
199 Bay Street, Suite 5300
Commerce Court West
Toronto, Ontario M5L 1B9
Canada
Cautionary
Statements Concerning Forward-Looking Information
This proxy statement contains numerous forward-looking
statements relating to Coeurs, Bolnisis and
Palmarejos gold and silver mining business, including
estimated production data, expected operating schedules,
expected operating and capital costs and other operating data
and permit and other regulatory approvals. 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 production, operating schedules, results of
operations, ore reserve and resource estimates and other
projections and estimates 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 below under Risk Factors,
(ii) the risks and hazards inherent in the mining business
(including environmental hazards, industrial accidents, weather
or geologically related conditions), (iii) changes in the
market prices of gold and silver, (iv) the uncertainties
inherent in Coeurs, Bolnisis and Palmarejos
production, exploratory and developmental activities, including
risks relating to permitting and regulatory delays, (v) the
uncertainties inherent in the estimation of gold and silver ore
reserves, (vi) changes that could result from Coeurs
future acquisition of new mining properties or businesses,
(vii) the effects of environmental and other governmental
regulations, and (viii) the risks inherent in the ownership
or operation of or investment in mining properties or businesses
in foreign countries. Readers are cautioned not to put undue
reliance on forward-looking statements. Coeur disclaims any
intent or obligation to update publicly these forward-looking
statements, whether as a result of new information, future
events or otherwise.
All subsequent written and oral forward-looking statements
attributable to Coeur or persons acting on Coeurs behalf
are expressly qualified in their entirety by the cautionary
statements contained throughout this proxy statement.
All information contained in this proxy statement concerning
Bolnisi has been supplied by Bolnisi and all information
contained in this proxy statement concerning Palmarejo has been
supplied by Palmarejo and in neither case has been independently
verified by Coeur.
10
Selected
Historical Financial Data of Coeur
The following table summarizes certain selected consolidated
financial data with respect to Coeur and its subsidiaries and
should be read in conjunction with Coeurs historical
consolidated financial statements and related notes attached as
Annex C to this proxy statement.
Shareholders also should read this summary data with the
unaudited pro forma condensed combined financial statements
beginning on page 16.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
Year Ended December 31,
|
|
Income Statement Data:
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metal
|
|
$
|
102,524
|
|
|
$
|
98,895
|
|
|
$
|
216,573
|
|
|
$
|
156,284
|
|
|
$
|
109,047
|
|
|
$
|
93,620
|
|
|
$
|
67,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales
|
|
|
47,760
|
|
|
|
41,687
|
|
|
|
92,378
|
|
|
|
88,232
|
|
|
|
63,715
|
|
|
|
64,970
|
|
|
|
65,654
|
|
Depreciation and depletion
|
|
|
12,774
|
|
|
|
13,307
|
|
|
|
26,772
|
|
|
|
18,889
|
|
|
|
16,833
|
|
|
|
15,107
|
|
|
|
10,150
|
|
Administrative and general
|
|
|
11,884
|
|
|
|
9,618
|
|
|
|
19,369
|
|
|
|
20,624
|
|
|
|
17,499
|
|
|
|
12,264
|
|
|
|
8,806
|
|
Exploration
|
|
|
5,430
|
|
|
|
3,901
|
|
|
|
9,474
|
|
|
|
10,553
|
|
|
|
8,031
|
|
|
|
4,277
|
|
|
|
3,849
|
|
Pre-development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,057
|
|
|
|
11,449
|
|
|
|
1,967
|
|
|
|
2,606
|
|
Other holding costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,478
|
|
|
|
3,608
|
|
Litigation settlements
|
|
|
507
|
|
|
|
469
|
|
|
|
2,365
|
|
|
|
1,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
78,355
|
|
|
|
68,982
|
|
|
|
150,358
|
|
|
|
145,955
|
|
|
|
117,527
|
|
|
|
103,063
|
|
|
|
94,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
8,866
|
|
|
|
7,314
|
|
|
|
18,654
|
|
|
|
8,385
|
|
|
|
3,165
|
|
|
|
2,064
|
|
|
|
4,080
|
|
Interest expense, net
|
|
|
(170
|
)
|
|
|
(888
|
)
|
|
|
(1,224
|
)
|
|
|
(2,485
|
)
|
|
|
(2,831
|
)
|
|
|
(12,851
|
)
|
|
|
(21,948
|
)
|
Merger expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,675
|
)
|
|
|
|
|
|
|
|
|
Loss on early retirement of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,564
|
)
|
|
|
(19,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
8,696
|
|
|
|
6,426
|
|
|
|
17,430
|
|
|
|
5,900
|
|
|
|
(15,341
|
)
|
|
|
(52,351
|
)
|
|
|
(36,929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
32,865
|
|
|
|
36,339
|
|
|
|
83,645
|
|
|
|
16,229
|
|
|
|
(23,821
|
)
|
|
|
(61,794
|
)
|
|
|
(64,485
|
)
|
Income tax (provision) benefit
|
|
|
(6,928
|
)
|
|
|
(2,481
|
)
|
|
|
(8,226
|
)
|
|
|
(1,483
|
)
|
|
|
5,785
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
25,937
|
|
|
|
33,858
|
|
|
|
75,419
|
|
|
|
14,746
|
|
|
|
(18,036
|
)
|
|
|
(61,787
|
)
|
|
|
(64,485
|
)
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
1,968
|
|
|
|
1,935
|
|
|
|
(4,195
|
)
|
|
|
1,178
|
|
|
|
(2,139
|
)
|
|
|
(16,334
|
)
|
Gain on sale of net assets of discontinued operation
|
|
|
|
|
|
|
11,159
|
|
|
|
11,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of accounting change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
25,937
|
|
|
$
|
46,985
|
|
|
$
|
88,486
|
|
|
$
|
10,551
|
|
|
$
|
(16,858
|
)
|
|
$
|
(66,232
|
)
|
|
$
|
(80,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
516
|
|
|
|
1,740
|
|
|
|
2,391
|
|
|
|
447
|
|
|
|
(908
|
)
|
|
|
(556
|
)
|
|
|
(1,470
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
26,453
|
|
|
$
|
48,725
|
|
|
$
|
90,877
|
|
|
$
|
10,998
|
|
|
$
|
(17,766
|
)
|
|
$
|
(66,788
|
)
|
|
$
|
(82,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
Year Ended December 31,
|
|
Income Statement Data:
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands except per share data)
|
|
|
Basic and Diluted Income (Loss) Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Income (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.09
|
|
|
$
|
0.13
|
|
|
$
|
0.28
|
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.82
|
)
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
0.05
|
|
|
|
0.05
|
|
|
|
(0.02
|
)
|
|
|
0.00
|
|
|
|
(0.01
|
)
|
|
|
(0.21
|
)
|
Cumulative effect of accounting change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.09
|
|
|
$
|
0.18
|
|
|
$
|
0.33
|
|
|
$
|
0.04
|
|
|
$
|
(0.08
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(1.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Income (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.09
|
|
|
$
|
0.12
|
|
|
$
|
0.26
|
|
|
$
|
0.06
|
|
|
$
|
(0.08
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.82
|
)
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
(0.02
|
)
|
|
|
0.00
|
|
|
|
(0.01
|
)
|
|
|
(0.21
|
)
|
Cumulative effect of accounting change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.09
|
|
|
$
|
0.16
|
|
|
$
|
0.30
|
|
|
$
|
0.04
|
|
|
$
|
(0.08
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(1.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
277,720
|
|
|
|
265,049
|
|
|
|
271,357
|
|
|
|
242,915
|
|
|
|
215,969
|
|
|
|
168,186
|
|
|
|
78,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
302,205
|
|
|
|
289,832
|
|
|
|
296,082
|
|
|
|
243,683
|
|
|
|
215,969
|
|
|
|
168,186
|
|
|
|
78,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
Balance Sheet Data:
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(In thousands except per share data)
|
|
|
Total assets
|
|
$
|
883,912
|
|
|
$
|
794,083
|
|
|
$
|
849,626
|
|
|
$
|
594,816
|
|
|
$
|
525,777
|
|
|
$
|
259,467
|
|
|
$
|
173,491
|
|
Working capital
|
|
$
|
311,379
|
|
|
$
|
425,626
|
|
|
$
|
383,082
|
|
|
$
|
281,977
|
|
|
$
|
345,894
|
|
|
$
|
96,994
|
|
|
$
|
2,661
|
|
Long-term debt
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
|
$
|
9,563
|
|
|
$
|
66,797
|
|
Long-term liabilities
|
|
$
|
211,844
|
|
|
$
|
207,955
|
|
|
$
|
210,117
|
|
|
$
|
206,921
|
|
|
$
|
198,873
|
|
|
$
|
29,461
|
|
|
$
|
81,200
|
|
Shareholders equity
|
|
$
|
609,163
|
|
|
$
|
537,290
|
|
|
$
|
580,994
|
|
|
$
|
341,553
|
|
|
$
|
293,454
|
|
|
$
|
197,478
|
|
|
$
|
47,687
|
|
12
Selected
Historical Financial Data of Bolnisi
The following selected historical financial data of Bolnisi is
derived from Bolnisis audited financial statements for
each of the years in the five year period ended June 30,
2007. As of August 23, 2007 Bolnisi owns approximately
72.8% of Palmarejo whose separate selected financial data is
shown separately hereafter. The consolidated amounts shown below
include the accounts of Palmarejo. This summary data should be
read together with Bolnisis financial statements and the
accompanying notes, included in Annex D to this proxy
statement. Bolnisis financial statements are prepared in
accordance with Australian Accounting Standards
(AASBS), which differs from US GAAP in certain
respects. A discussion of these differences is presented in the
notes to Bolnisis financial statements contained in
Annex D to this proxy statement. Selected historical
financial data presented under US GAAP is also shown below.
The following selected financial data is presented in Australian
dollars. Historical results are not indicative of the results to
be expected in the future.
Shareholders also should read this summary data with the
unaudited pro forma condensed combined financial statements
beginning on page 16.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bolnisi Historical Financial Data
|
|
|
|
Year Ended June 30,
|
|
Australian Accounting Standards(1)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Australian $ in thousands except per share data)
|
|
|
Revenue from sale of gold and silver
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
24,446
|
|
|
$
|
49,487
|
|
mining and treatment costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,173
|
)
|
|
|
(22,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit from the sale of gold and silver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,273
|
|
|
|
26,993
|
|
Other revenues from ordinary activities
|
|
|
2,458
|
|
|
|
3,253
|
|
|
|
809
|
|
|
|
6,834
|
|
|
|
126
|
|
Expenses from ordinary activities
|
|
|
7,124
|
|
|
|
6,452
|
|
|
|
3,824
|
|
|
|
10,623
|
|
|
|
6,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from ordinary activities before related income tax
expense
|
|
|
(4,666
|
)
|
|
|
(3,199
|
)
|
|
|
(3,015
|
)
|
|
|
6,484
|
|
|
|
20,780
|
|
Income tax (expense)/benefit related to ordinary activities
|
|
|
|
|
|
|
(420
|
)
|
|
|
(493
|
)
|
|
|
(2,424
|
)
|
|
|
(6,380
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) after tax but before profit and loss of
discontinued operation and gain on sale of discontinued
operation
|
|
|
(4,666
|
)
|
|
|
(3,619
|
)
|
|
|
(3,508
|
)
|
|
|
4,060
|
|
|
|
14,400
|
|
Profit and loss from discontinued operations and gain on sale of
discontinued operations, net of tax
|
|
|
|
|
|
|
10,693
|
|
|
|
6,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the year
|
|
$
|
(4,666
|
)
|
|
$
|
7,074
|
|
|
$
|
2,915
|
|
|
$
|
4,060
|
|
|
$
|
14,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) attributable to outside equity interests
|
|
$
|
(300
|
)
|
|
$
|
3,209
|
|
|
$
|
574
|
|
|
$
|
(3,449
|
)
|
|
$
|
(7,824
|
)
|
Net profit (loss) attributable to members of the parent
entity
|
|
$
|
(4,366
|
)
|
|
$
|
3,865
|
|
|
$
|
2,341
|
|
|
$
|
611
|
|
|
$
|
6,576
|
|
Basic earnings (loss) per share from continuing operations
|
|
$
|
(.016
|
)
|
|
$
|
(.01
|
)
|
|
$
|
.013
|
|
|
$
|
.004
|
|
|
$
|
.04
|
|
Diluted earnings (loss) per share from continuing operations
|
|
$
|
(.016
|
)
|
|
$
|
(.01
|
)
|
|
$
|
.013
|
|
|
$
|
.004
|
|
|
$
|
.04
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bolnisi Historical Financial Data
|
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Australian $ in thousands)
|
|
|
Balance sheet data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
137,999
|
|
|
$
|
144,111
|
|
|
$
|
88,246
|
|
|
$
|
50,886
|
|
|
$
|
44,599
|
|
Working capital
|
|
|
16,056
|
|
|
|
91,387
|
|
|
|
45,015
|
|
|
|
21,869
|
|
|
|
19,355
|
|
Long-term debt
|
|
|
9,877
|
|
|
|
|
|
|
|
2,196
|
|
|
|
9,588
|
|
|
|
9,525
|
|
Shareholders equity
|
|
|
119,335
|
|
|
|
138,170
|
|
|
|
66,932
|
|
|
|
33,226
|
|
|
|
29,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bolnisi Historical Financial Data
|
|
|
|
Year Ended June 30,
|
|
US GAAP
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(Australian $ in thousands
|
|
|
|
except per share data)
|
|
|
Revenue from sale of gold and silver
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
mining and treatment costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit from the sale of gold and silver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues from ordinary activities
|
|
|
2,458
|
|
|
|
3,253
|
|
|
|
809
|
|
Expenses from ordinary activities:
|
|
|
7,124
|
|
|
|
6,452
|
|
|
|
3,824
|
|
Exploration and predevelopment
|
|
|
18,328
|
|
|
|
21,636
|
|
|
|
12,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from ordinary activities before related income tax
expense
|
|
|
(22,994
|
)
|
|
|
(24,835
|
)
|
|
|
(15,791
|
)
|
Income tax (expense)/benefit related to ordinary activities
|
|
|
|
|
|
|
(420
|
)
|
|
|
(493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) after tax but before profit and loss of
discontinued operation and gain on sale of discontinued
operation
|
|
|
(22,994
|
)
|
|
|
(25,255
|
)
|
|
|
(16,284
|
)
|
Profit and loss from discontinued operations and gain on sale of
discontinued operations, net of tax
|
|
|
|
|
|
|
10,693
|
|
|
|
6,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the year before outside equity interests
|
|
|
(22,994
|
)
|
|
|
(14,562
|
)
|
|
|
(9,861
|
)
|
Net profit (loss) attributable to outside equity interests
|
|
|
5,292
|
|
|
|
1,945
|
|
|
|
8,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) attributable to members of the parent
entity
|
|
$
|
(17,702
|
)
|
|
$
|
(12,617
|
)
|
|
$
|
(1,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share from continuing operations
|
|
$
|
(.063
|
)
|
|
$
|
(.046
|
)
|
|
$
|
(.008
|
)
|
Diluted earnings (loss) per share from continuing operations
|
|
$
|
(.063
|
)
|
|
$
|
(.046
|
)
|
|
$
|
(.008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bolnisi Historical Financial Data
|
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(Australian $ in thousands)
|
|
|
Balance sheet data
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
100,152
|
|
|
$
|
114,410
|
|
|
$
|
74,979
|
|
Working capital
|
|
|
16,056
|
|
|
|
91,387
|
|
|
|
45,015
|
|
Long-term debt
|
|
|
9,877
|
|
|
|
|
|
|
|
2,196
|
|
Shareholders equity
|
|
|
181,488
|
|
|
|
108,469
|
|
|
|
53,664
|
|
|
|
|
(1) |
|
The consolidated financial statements for the years ended
June 30, 2007, 2006 and 2005 are general purpose financial
statements which have been prepared in accordance Australian
equivalents to International Financial Reporting Standards
(AIFRS), comprising Australian Accounting Standards
(AASBs) (including Australian Accounting
Interpretations) adopted by the Australian Accounting Standards
Board (AASB) and the Corporations Act 2001. These
consolidated financial statements of Bolnisi comply with
International Financial Reporting Standards (IFRS)
and interpretations adopted by the International Accounting
Standards Board. For the years ended June 30, 2004 and
2003, the consolidated financial statements have been prepared
in accordance with Accounting Standards, Urgent Issues Group
Consensus Views, other authoritative pronouncements of the
Australian Accounting Standards Board and the Corporations Act
2001. |
14
Selected
Historical Financial Data of Palmarejo
The following selected historical financial data of Palmarejo is
derived from Palmarejos audited financial statements for
the years ended June 30, 2007 and 2006 and for the
248-day
period from Palmarejos inception to June 30, 2005.
This summary data should be read together with Palmarejos
financial statements and the accompanying notes, included in
Annex E to this proxy statement. Palmarejos financial
statements are prepared in accordance with Canadian GAAP, which
differs from US GAAP in certain respects. A discussion of these
differences is presented in the notes to Palmarejos
financial statements contained in Annex E to this proxy
statement. Selected historical financial data presented under
US GAAP is also shown below. The following selected
historical financial data is presented in Canadian dollars.
Historical results are not indicative of the results to be
expected in the future.
Shareholders also should read this summary data with the
unaudited pro forma condensed combined financial statements
beginning on page 16.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palmarejo Historical Financial Data
|
|
|
|
Year Ended June 30,
|
|
Canadian GAAP
|
|
2007
|
|
|
2006
|
|
|
2005(1)
|
|
|
|
(In thousands except per share data)
|
|
Operating data
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
1,805
|
|
|
$
|
700
|
|
|
$
|
73
|
|
Expenses and other
|
|
|
2,340
|
|
|
|
1,781
|
|
|
|
4,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(535
|
)
|
|
$
|
(1,081
|
)
|
|
$
|
(4,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.14
|
)
|
Weighted average shares basic and diluted
|
|
|
90,739
|
|
|
|
75,403
|
|
|
|
31,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Balance sheet data
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
129,674
|
|
|
$
|
104,350
|
|
|
$
|
15,493
|
|
Working capital
|
|
|
5,116
|
|
|
|
67,059
|
|
|
|
(1,603
|
)
|
Long-term debt
|
|
|
8,918
|
|
|
|
752
|
|
|
|
|
|
Shareholders equity
|
|
|
104,061
|
|
|
|
103,097
|
|
|
|
11,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palmarejo Historical Financial Data
|
|
|
|
Year Ended June 30,
|
|
US GAAP
|
|
2007
|
|
|
2006
|
|
|
2005(1)
|
|
|
|
(In thousands except per share data)
|
|
Operating data
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
1,805
|
|
|
$
|
700
|
|
|
$
|
73
|
|
Expenses and other
|
|
|
19,072
|
|
|
|
20,771
|
|
|
|
9,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(17,267
|
)
|
|
$
|
(20,071
|
)
|
|
$
|
(8,977
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
$
|
(0.19
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.29
|
)
|
Weighted average shares basic and diluted
|
|
|
90,739
|
|
|
|
75,403
|
|
|
|
31,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Balance sheet data
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
81,694
|
|
|
$
|
73,414
|
|
|
$
|
10,781
|
|
Working capital
|
|
|
5,116
|
|
|
|
67,059
|
|
|
|
(1,603
|
)
|
Long-term debt
|
|
|
8,918
|
|
|
|
752
|
|
|
|
|
|
Shareholders equity
|
|
|
56,081
|
|
|
|
72,161
|
|
|
|
6,496
|
|
|
|
|
(1) |
|
The Company commenced operations during the year ended
June 30, 2005. Operating data is provided for the
248-day
period ended June 30, 2005. |
15
Unaudited
Pro Forma Condensed Combined Financial Statements
On May 3, 2007, Coeur, Coeur Sub Two, Australian Bidco and
Bolnisi entered into a merger implementation agreement for Coeur
to acquire all of the shares of Bolnisi in accordance with a
scheme of arrangement to be submitted for approval by the
Federal Court of Australia. On the same day, Coeur and Palmarejo
entered into a merger implementation agreement for Coeur to
acquire the outstanding shares of Palmarejo not directly owned
by Bolnisi in accordance with a plan of arrangement to be
submitted for approval by the Ontario Superior Court of Justice.
Pursuant to these agreements, Coeur will indirectly acquire all
the shares of Bolnisi pursuant to a scheme of arrangement and
Coeur will indirectly acquire all the shares of Palmarejo
pursuant to a plan of arrangement, each in exchange for Coeur
common stock and cash.
Under the terms of the Transactions, Bolnisi shareholders will
receive 0.682 Coeur shares for each Bolnisi share they own (or,
at the election of the Bolnisi shareholder, CHESS Depositary
Interests representing Coeur shares), and Palmarejo shareholders
will receive 2.715 Coeur shares for each Palmarejo share they
own. It is anticipated that this will result in Coeur issuing a
total of approximately 261.0 million new shares, which
excludes up to 11.0 million shares that are issuable in
exchange for Palmarejo shares that may be issued upon the
exercise of outstanding Palmarejo options. Upon closing, all
unexercised Palmarejo options will be exchanged for options to
acquire Coeur shares. In addition, Bolnisi and Palmarejo
shareholders will receive a nominal cash payment equal to
A$0.004/US$0.003 per Bolnisi share (or approximately
US$0.9 million in aggregate) and C$0.004/US$0.003 per
Palmarejo share (or approximately US$0.2 million in
aggregate), respectively.
All holders of Palmarejo options will receive Palmarejo
Replacement Options (as defined below) under the plan of
arrangement. A Palmarejo Replacement Option will
entitle the holder thereof to acquire the number of Coeur shares
equal to the product of (i) the number of Palmarejo shares
subject to the Palmarejo option immediately prior to the
consummation of the Transactions, and (ii) 2.715 Coeur
shares plus the portion of a Coeur share that, immediately prior
to the consummation of the Transactions, has a fair market value
equal to C$0.004 for each Palmarejo share that the holder was
entitled to receive, provided that if the foregoing would result
in the issuance of a fraction of a Coeur share, then the number
of Coeur shares otherwise issued shall be rounded down to the
nearest whole number of Coeur shares. The exercise price per
Coeur share subject to any such Palmarejo Replacement Option
shall be an amount (rounded up to the nearest one-hundredth of a
cent) equal to the quotient of (A) the exercise price per
Palmarejo share subject to such Palmarejo Option immediately
before the consummation of the Transactions divided by
(B) 2.715 plus such portion of a Coeur share that,
immediately prior to the consummation of the Transactions, has a
fair market value equal to C$0.004 cash (provided that the
aggregate exercise price payable on any particular exercise of
Palmarejo Replacement Options shall be rounded up to the nearest
whole cent). Except as set out above, the terms of each
Palmarejo Replacement Option shall be the same as the terms of
the Palmarejo option exchanged therefor pursuant to the
Palmarejo Share Option Plan in the plan of arrangement and any
agreement evidencing the grant thereof prior to the consummation
of the Transactions.
The following unaudited pro forma condensed combined financial
statements and notes have been prepared based on Coeurs,
Bolnisis and Palmarejos historical financial
statements to assist shareholders in analyzing the potential
financial results of the combined company. The Transactions are
accounted for as purchases of assets and not as business
combinations since Bolnisi and Palmarejo are considered to be in
the development stage. The unaudited pro forma condensed
combined financial statements are prepared on that basis, and
are presented to give effect to the following two alternative
scenarios: (i) the acquisition of Bolnisi and Palmarejo by
Coeur and (ii) the acquisition of Bolnisi only (and not
Palmarejo) by Coeur. For each of the alternative scenarios, the
following unaudited pro forma condensed combined financial
statements represent the combined companys unaudited pro
forma condensed combined balance sheet as of June 30, 2007,
and unaudited pro forma condensed combined income statements for
the six months ended June 30, 2007 and the year ended
December 31, 2006. The unaudited pro forma condensed
combined balance sheet gives effect to the acquisition(s) as if
they occurred on the date of such balance sheet. The
accompanying unaudited pro forma condensed combined income
statements give effect to the acquisition(s) as if they occurred
on January 1, 2006, the first day of Coeurs year
ended December 31, 2006.
Coeurs historical information has been derived from its
historical financial statements which were prepared and
presented in accordance with
U.S. GAAP. Bolnisis historical
consolidated financial statements are presented in Australian
dollars and were prepared in accordance with AIFRS, which
differs in certain respects from
16
U.S. GAAP. As described in the notes to Bolnisis
financial statements included in Annex D to this proxy
statement and the notes to these unaudited pro forma condensed
combined financial statements, Bolnisis historical
consolidated financial statements were adjusted to be presented
under U.S. GAAP and were translated from A$ to US$. As
presented in the notes to Palmarejos financial statements
included in Annex E to this proxy statement and the notes
to these unaudited pro forma condensed combined financial
statements, pro forma adjustments have been made to the
consolidated financial statements of Bolnisi (including
Palmarejo) to conform with Coeurs presentation under
U.S. GAAP.
The pro forma adjustments are based upon available information
and assumptions that management of Coeur believes are
reasonable. The unaudited pro forma condensed combined financial
statements are presented for illustrative purposes only and are
based on the estimates and assumptions set forth in the notes
accompanying those statements. The companies might have
performed differently had they always been combined. You should
not rely on this information as being indicative of the
historical results that would have been achieved had the
companies always been combined or the future results that the
combined company will experience after the combination. The
unaudited pro forma condensed combined financial statements
should be read in conjunction with the historical financial
statements of Coeur, Bolnisi and Palmarejo and the related notes
included as annexes to this proxy statement.
17
Coeur
dAlene Mines Corporation
Unaudited
Pro Forma Combined Consolidated Balance Sheet as of
June 30, 2007
(Bolnisi and Palmarejo) (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Coeur
|
|
|
Bolnisi
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands except per share data)
|
|
|
ASSETS
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
236,232
|
|
|
$
|
16,646
|
|
|
|
(d)
|
|
|
$
|
(11,600
|
)
|
|
$
|
240,226
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
|
|
|
(1,052
|
)
|
|
|
|
|
Short-term investments
|
|
|
36,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,270
|
|
Receivables
|
|
|
38,732
|
|
|
|
4,393
|
|
|
|
|
|
|
|
|
|
|
|
43,125
|
|
Ore on leach pad
|
|
|
32,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,729
|
|
Metal and other inventory
|
|
|
18,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,353
|
|
Deferred taxes
|
|
|
3,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,872
|
|
Prepaid expenses and other
|
|
|
8,096
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
8,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
374,284
|
|
|
|
21,087
|
|
|
|
|
|
|
|
(12,652
|
)
|
|
|
382,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant & equipment, net
|
|
|
98,497
|
|
|
|
52,952
|
|
|
|
|
|
|
|
|
|
|
|
151,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MINING PROPERTIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational mining properties, net
|
|
|
13,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,098
|
|
Mineral interests, net
|
|
|
64,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,891
|
|
Non producing and development properties
|
|
|
258,979
|
|
|
|
|
|
|
|
(c)
|
|
|
|
1,483,371
|
|
|
|
1,729,294
|
|
|
|
|
|
|
|
|
|
|
|
|
(f)
|
|
|
|
(13,056
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
435,465
|
|
|
|
52,952
|
|
|
|
|
|
|
|
1,470,315
|
|
|
|
1,958,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore on leach pad, non current portion
|
|
|
37,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,374
|
|
Restricted cash and cash equivalents
|
|
|
21,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,652
|
|
Debt issuance costs, net
|
|
|
4,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,999
|
|
Deferred income taxes
|
|
|
1,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,389
|
|
Other
|
|
|
8,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
74,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
883,912
|
|
|
$
|
74,039
|
|
|
|
|
|
|
$
|
1,457,663
|
|
|
$
|
2,415,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
35,967
|
|
|
$
|
5,360
|
|
|
|
|
|
|
$
|
|
|
|
$
|
41,327
|
|
Accrued liabilities and other
|
|
|
8,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,877
|
|
Accrued taxes
|
|
|
5,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,363
|
|
Accrued payroll and related benefits
|
|
|
7,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,005
|
|
Accrued interest payable
|
|
|
1,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,031
|
|
Current portion of reclamation and mine closure
|
|
|
4,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,662
|
|
Current portion of capital leases
|
|
|
|
|
|
|
2,098
|
|
|
|
|
|
|
|
|
|
|
|
2,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
62,905
|
|
|
|
7,458
|
|
|
|
|
|
|
|
|
|
|
|
70,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/4% Convertible
senior Notes due 2024
|
|
|
180,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,000
|
|
Long-term debt
|
|
|
|
|
|
|
8,384
|
|
|
|
|
|
|
|
|
|
|
|
8,384
|
|
Reclamation and mine closure
|
|
|
27,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,579
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
453,701
|
|
|
|
440,645
|
|
|
|
|
|
|
|
|
|
|
|
|
(f)
|
|
|
|
(13,056
|
)
|
|
|
|
|
Other long-term liabilities
|
|
|
4,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
211,844
|
|
|
|
8,384
|
|
|
|
|
|
|
|
440,645
|
|
|
|
660,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
279,507
|
|
|
|
47,751
|
|
|
|
(a)
|
|
|
|
(47,751
|
)
|
|
|
540,483
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
|
|
260,976
|
|
|
|
|
|
Additional paid in capital
|
|
|
779,062
|
|
|
|
(6,730
|
)
|
|
|
(a)
|
|
|
|
6,730
|
|
|
|
1,593,301
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
|
|
|
782,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(g)
|
|
|
|
31,309
|
|
|
|
|
|
Accumulated deficit
|
|
|
(437,285
|
)
|
|
|
3,997
|
|
|
|
(a)
|
|
|
|
(3,997
|
)
|
|
|
(437,285
|
)
|
Shares held in treasury
|
|
|
(13,190
|
)
|
|
|
|
|
|
|
(b)
|
|
|
|
|
|
|
|
(13,190
|
)
|
Minority interest
|
|
|
|
|
|
|
13,179
|
|
|
|
(a)
|
|
|
|
(13,179
|
)
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
1,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
609,163
|
|
|
|
58,197
|
|
|
|
|
|
|
|
1,017,018
|
|
|
|
1,684,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
883,912
|
|
|
$
|
74,039
|
|
|
|
|
|
|
$
|
1,457,663
|
|
|
$
|
2,415,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these pro forma financial statements.
18
Coeur
dAlene Mines Corporation
Unaudited
Pro Forma Combined Income Statement for the Six Months Ended
June 30, 2007
(Bolnisi and Palmarejo) (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Coeur
|
|
|
Bolnisi
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands except per share data)
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metals
|
|
$
|
102,524
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
102,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales
|
|
|
47,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,760
|
|
Depreciation and depletion
|
|
|
12,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,774
|
|
Administrative and general
|
|
|
11,884
|
|
|
|
1,808
|
|
|
|
|
|
|
|
|
|
|
|
13,692
|
|
Exploration
|
|
|
5,430
|
|
|
|
9,695
|
|
|
|
|
|
|
|
|
|
|
|
15,125
|
|
Litigation settlement
|
|
|
507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
507
|
|
Other
|
|
|
|
|
|
|
1,863
|
|
|
|
|
|
|
|
|
|
|
|
1,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
78,355
|
|
|
|
13,366
|
|
|
|
|
|
|
|
|
|
|
|
91,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
24,169
|
|
|
|
(13,366
|
)
|
|
|
|
|
|
|
|
|
|
|
10,803
|
|
OTHER INCOME AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other
|
|
|
8,866
|
|
|
|
654
|
|
|
|
|
|
|
|
|
|
|
|
9,520
|
|
Interest expense, net of capitalized interest
|
|
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income and expenses
|
|
|
8,696
|
|
|
|
654
|
|
|
|
|
|
|
|
|
|
|
|
9,350
|
|
Income (loss) before taxes
|
|
|
32,865
|
|
|
|
(12,712
|
)
|
|
|
|
|
|
|
|
|
|
|
20,153
|
|
Income tax (provision) benefit
|
|
|
(6,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
25,937
|
|
|
$
|
(12,712
|
)
|
|
|
|
|
|
$
|
|
|
|
$
|
13,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED INCOME (LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
277,720
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
260,976
|
|
|
|
536,696
|
|
Diluted
|
|
|
302,205
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
260,976
|
|
|
|
563,181
|
|
See accompanying notes to these pro forma financial statements.
19
Coeur
dAlene Mines Corporation
Unaudited
Pro Forma Combined Income Statement for the Year Ended
December 31, 2006
(Bolnisi and Palmarejo) (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bolnisi and
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Coeur
|
|
|
Palmarejo
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands except per share data)
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metals
|
|
$
|
216,573
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
216,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales
|
|
|
92,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,378
|
|
Depreciation and depletion
|
|
|
26,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,772
|
|
Administrative and general
|
|
|
19,369
|
|
|
|
3,155
|
|
|
|
|
|
|
|
|
|
|
|
22,524
|
|
Exploration
|
|
|
9,474
|
|
|
|
15,013
|
|
|
|
|
|
|
|
|
|
|
|
24,487
|
|
Litigation settlement
|
|
|
2,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,365
|
|
Other
|
|
|
|
|
|
|
538
|
|
|
|
|
|
|
|
|
|
|
|
538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
150,358
|
|
|
|
18,706
|
|
|
|
|
|
|
|
|
|
|
|
169,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
66,215
|
|
|
|
(18,706
|
)
|
|
|
|
|
|
|
|
|
|
|
47,509
|
|
OTHER INCOME AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other
|
|
|
18,654
|
|
|
|
1,957
|
|
|
|
|
|
|
|
|
|
|
|
20,611
|
|
Interest expense, net of capitalized interest
|
|
|
(1,224
|
)
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income and expenses
|
|
|
17,430
|
|
|
|
1,517
|
|
|
|
|
|
|
|
|
|
|
|
18,947
|
|
Income (loss) from continuing operations before taxes
|
|
|
83,645
|
|
|
|
(17,189
|
)
|
|
|
|
|
|
|
|
|
|
|
66,456
|
|
Income tax (provision) benefit
|
|
|
(8,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM CONTINUING OPERATIONS
|
|
$
|
75,419
|
|
|
$
|
(17,189
|
)
|
|
|
|
|
|
$
|
|
|
|
$
|
58,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED INCOME (LOSS) PER SHARE FROM CONTINUING
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
271,357
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
260,976
|
|
|
|
532,333
|
|
Diluted
|
|
|
296,082
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
260,976
|
|
|
|
557,058
|
|
See accompanying notes to these pro forma financial statements.
20
Coeur
dAlene Mines Corporation
Unaudited
Pro Forma Combined Consolidated Balance Sheet as of
June 30, 2007
(Bolnisi Only (and not Palmarejo)) (Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Coeur
|
|
|
Bolnisi
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands except per share data)
|
|
|
ASSETS
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
236,232
|
|
|
$
|
16,646
|
|
|
|
(d
|
)
|
|
$
|
(11,600
|
)
|
|
$
|
240,309
|
|
|
|
|
|
|
|
|
|
|
|
|
(e
|
)
|
|
|
(969
|
)
|
|
|
|
|
Short-term investments
|
|
|
36,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,270
|
|
Receivables
|
|
|
38,732
|
|
|
|
4,393
|
|
|
|
|
|
|
|
|
|
|
|
43,125
|
|
Ore on leach pad
|
|
|
32,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,729
|
|
Metal and other inventory
|
|
|
18,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,353
|
|
Deferred taxes
|
|
|
3,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,872
|
|
Prepaid expenses and other
|
|
|
8,096
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
8,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
374,284
|
|
|
|
21,087
|
|
|
|
|
|
|
|
(12,569
|
)
|
|
|
382,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant & equipment, net
|
|
|
98,497
|
|
|
|
52,952
|
|
|
|
|
|
|
|
|
|
|
|
151,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MINING PROPERTIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational mining properties, net
|
|
|
13,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,098
|
|
Mineral interests, net
|
|
|
64,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,891
|
|
Non producing and development properties
|
|
|
258,979
|
|
|
|
|
|
|
|
(c
|
)
|
|
|
1,115,684
|
|
|
|
1,361,607
|
|
|
|
|
|
|
|
|
|
|
|
|
(f
|
)
|
|
|
(13,056
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
435,465
|
|
|
|
52,952
|
|
|
|
|
|
|
|
1,102,628
|
|
|
|
1,591,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore on leach pad, non current portion
|
|
|
37,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,374
|
|
Restricted cash and cash equivalents
|
|
|
21,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,652
|
|
Debt issuance costs, net
|
|
|
4,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,999
|
|
Deferred income taxes
|
|
|
1,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,389
|
|
Other
|
|
|
8,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
74,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
883,912
|
|
|
$
|
74,039
|
|
|
|
|
|
|
$
|
1,090,059
|
|
|
$
|
2,048,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
35,967
|
|
|
$
|
5,360
|
|
|
|
|
|
|
$
|
|
|
|
$
|
41,327
|
|
Accrued liabilities and other
|
|
|
8,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,877
|
|
Accrued taxes
|
|
|
5,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,363
|
|
Accrued payroll and related benefits
|
|
|
7,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,005
|
|
Accrued interest payable
|
|
|
1,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,031
|
|
Current portion of reclamation and mine closure
|
|
|
4,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,662
|
|
Current portion of capital leases
|
|
|
|
|
|
|
2,098
|
|
|
|
|
|
|
|
|
|
|
|
2,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
62,905
|
|
|
|
7,458
|
|
|
|
|
|
|
|
|
|
|
|
70,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/4% Convertible
senior Notes due 2024
|
|
|
180,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,000
|
|
Long-Term Debt
|
|
|
|
|
|
|
8,384
|
|
|
|
|
|
|
|
|
|
|
|
8,384
|
|
Reclamation and mine closure
|
|
|
27,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,579
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
(c
|
)
|
|
|
366,846
|
|
|
|
353,790
|
|
|
|
|
|
|
|
|
|
|
|
|
(f
|
)
|
|
|
(13,056
|
)
|
|
|
|
|
Other long-term liabilities
|
|
|
4,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
211,844
|
|
|
|
8,384
|
|
|
|
|
|
|
|
353,790
|
|
|
|
574,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority Interest
|
|
|
|
|
|
|
|
|
|
|
(g
|
)
|
|
|
13,179
|
|
|
|
13,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
279,507
|
|
|
|
47,751
|
|
|
|
(a
|
)
|
|
|
(47,751
|
)
|
|
|
474,247
|
|
|
|
|
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
194,740
|
|
|
|
|
|
Capital surplus
|
|
|
779,062
|
|
|
|
(6,730
|
)
|
|
|
(a
|
)
|
|
|
6,730
|
|
|
|
1,365,609
|
|
|
|
|
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
586,547
|
|
|
|
|
|
Accumulated deficit
|
|
|
(437,285
|
)
|
|
|
3,997
|
|
|
|
(a
|
)
|
|
|
(3,997
|
)
|
|
|
(437,285
|
)
|
Shares held in treasury
|
|
|
(13,190
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,190
|
)
|
Minority interest
|
|
|
|
|
|
|
13,179
|
|
|
|
(g
|
)
|
|
|
(13,179
|
)
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
1,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
609,163
|
|
|
|
58,197
|
|
|
|
|
|
|
|
723,090
|
|
|
|
1,390,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
883,912
|
|
|
$
|
74,039
|
|
|
|
|
|
|
$
|
1,090,059
|
|
|
$
|
2,048,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these pro forma financial statements.
21
Coeur
dAlene Mines Corporation
Unaudited
Pro Forma Combined Income Statement for the Six Months Ended
June 30, 2007
(Bolnisi only (and not Palmarejo)) (Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Coeur
|
|
|
Bolnisi
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands except per share data)
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metals
|
|
$
|
102,524
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
102,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales
|
|
|
47,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,760
|
|
Depreciation and depletion
|
|
|
12,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,774
|
|
Administrative and general
|
|
|
11,884
|
|
|
|
1,808
|
|
|
|
|
|
|
|
|
|
|
|
13,692
|
|
Exploration
|
|
|
5,430
|
|
|
|
9,695
|
|
|
|
|
|
|
|
|
|
|
|
15,125
|
|
Litigation settlement
|
|
|
507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
507
|
|
Other
|
|
|
|
|
|
|
1,863
|
|
|
|
|
|
|
|
|
|
|
|
1,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
78,355
|
|
|
|
13,366
|
|
|
|
|
|
|
|
|
|
|
|
91,721
|
|
Operating income (loss)
|
|
|
24,169
|
|
|
|
(13,366
|
)
|
|
|
|
|
|
|
|
|
|
|
10,803
|
|
OTHER INCOME AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other
|
|
|
8,866
|
|
|
|
654
|
|
|
|
|
|
|
|
|
|
|
|
9,520
|
|
Interest expense, net of capitalized interest
|
|
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(170
|
)
|
Minority interest in loss of consolidated subsidiaries
|
|
|
|
|
|
|
3,606
|
|
|
|
|
|
|
|
|
|
|
|
3,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income and expenses
|
|
|
8,696
|
|
|
|
4,260
|
|
|
|
|
|
|
|
|
|
|
|
12,956
|
|
Income (loss) before taxes
|
|
|
32,865
|
|
|
|
(9,106
|
)
|
|
|
|
|
|
|
|
|
|
|
23,759
|
|
Income tax (provision) benefit
|
|
|
(6,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
25,937
|
|
|
$
|
(9,106
|
)
|
|
|
|
|
|
$
|
|
|
|
$
|
16,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED INCOME (LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
277,720
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
194,740
|
|
|
|
472,460
|
|
Diluted
|
|
|
302,205
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
194,740
|
|
|
|
496,945
|
|
See accompanying notes to these pro forma financial statements.
22
Coeur
dAlene Mines Corporation
Unaudited
Pro Forma Combined Income Statement for the Year Ended
December 31, 2006
(Bolnisi only (and not Palmarejo)) (Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Coeur
|
|
|
Bolnisi
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metals
|
|
$
|
216,573
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
216,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales
|
|
|
92,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,378
|
|
Depreciation and depletion
|
|
|
26,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,772
|
|
Administrative and general
|
|
|
19,369
|
|
|
|
3,155
|
|
|
|
|
|
|
|
|
|
|
|
22,524
|
|
Exploration
|
|
|
9,474
|
|
|
|
15,013
|
|
|
|
|
|
|
|
|
|
|
|
24,487
|
|
Litigation settlement
|
|
|
2,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,365
|
|
Other
|
|
|
|
|
|
|
538
|
|
|
|
|
|
|
|
|
|
|
|
538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
150,358
|
|
|
|
18,706
|
|
|
|
|
|
|
|
|
|
|
|
169,064
|
|
Operating income (loss)
|
|
|
66,215
|
|
|
|
(18,706
|
)
|
|
|
|
|
|
|
|
|
|
|
47,509
|
|
OTHER INCOME AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other
|
|
|
18,654
|
|
|
|
1,957
|
|
|
|
|
|
|
|
|
|
|
|
20,611
|
|
Interest expense, net of capitalized interest
|
|
|
(1,224
|
)
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,664
|
)
|
Minority interest in loss of consolidated subsidiaries
|
|
|
|
|
|
|
3,417
|
|
|
|
|
|
|
|
|
|
|
|
3,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income and expenses
|
|
|
17,430
|
|
|
|
4,934
|
|
|
|
|
|
|
|
|
|
|
|
22,364
|
|
Income (loss) from continuing operations before taxes
|
|
|
83,645
|
|
|
|
(13,772
|
)
|
|
|
|
|
|
|
|
|
|
|
69,873
|
|
Income tax (provision) benefit
|
|
|
(8,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM CONTINUING OPERATIONS
|
|
$
|
75,419
|
|
|
$
|
(13,772
|
)
|
|
|
|
|
|
$
|
|
|
|
$
|
61,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED INCOME (LOSS) PER SHARE FROM CONTINUING
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
271,357
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
194,740
|
|
|
|
466,097
|
|
Diluted
|
|
|
296,082
|
|
|
|
|
|
|
|
(b
|
)
|
|
|
194,740
|
|
|
|
490,822
|
|
See accompanying notes to these pro forma financial statements.
23
Notes to
Unaudited Pro Forma Condensed Combined Financial
Statements
|
|
Note 1.
|
Pro Forma
transaction adjustments for the acquisition of Bolnisi and
Palmarejo as of June 30, 2007.
|
The unaudited pro forma condensed combined financial statements
contained herein assume that the merger transaction had been
completed on January 1, 2007 (for income statement
purposes) and on June 30, 2007 (for balance sheet purposes).
The existing Coeur shareholders will hold the majority of the
voting stock of the combined company. The existing members of
the Coeur board of directors will be retained as directors of
the combined company. Thereafter, the directors will be elected
annually by the holders of the combined companys
shareholders. The composition of the senior management of the
combined company will consist of existing Coeur senior
management. Accordingly, Coeur is deemed to be the accounting
acquiror. As a result, Bolnisis and Palmarejos
assets and liabilities are recorded at their estimated fair
values. The purchase price is based upon Coeur issuing a total
of 261.0 million new shares. The number of Coeur shares to
be issued is determined by multiplying the outstanding shares of
Bolnisi ordinary shares at June 30, 2007 of 285,542,321 by
the Bolnisi conversion ratio of 0.682, and multiplying the
outstanding shares of Palmarejo common stock at June 30,
2007 of 91,251,738, less the 66,855,237 Palmarejo shares held by
Bolnisi, by the Palmarejo conversion ratio of 2.715. In
addition, the purchase price includes the fair value of new
Palmarejo options to purchase Coeur shares that will be
exchanged for the outstanding vested options to purchase
Palmarejo shares of $31.3 million, cash payments totaling
$1.1 million and estimated transaction costs of
approximately $11.6 million, resulting in total
consideration of approximately $1.1 billion. The estimated
Coeur share price of $4.00 on May 3, 2007, the date the
merger was agreed to and announced, was used to estimate the
fair value of the Coeur shares to be issued in the Transactions.
The exact market price of Coeur common stock on the date of
closing will be used to ultimately determine the fair value of
the Coeur shares issued in the Transactions.
For purposes of preparing the unaudited pro forma condensed
combined financial statements for the merger transactions,
management has made certain assumptions. The book value of
Bolnisis and Palmarejos assets and liabilities,
excluding development properties, at June 30, 2007 are
assumed to approximate fair value and, as such, the excess
purchase price, including the impact of deferred income taxes,
has been allocated to mining properties.
The following represents the preliminary allocation of the
purchase price if the Bolnisi and Palmarejo transactions had
occurred on June 30, 2007:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Consideration:
|
|
|
|
|
Coeur stock issued (260,976,363 shares at $4.00)
|
|
$
|
1,043,905
|
|
Fair value of options issued
|
|
|
31,308
|
|
Cash payments
|
|
|
1,052
|
|
Transaction advisory fee and other transaction costs
|
|
|
11,600
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
1,087,865
|
|
|
|
|
|
|
Fair value of net assets acquired:
|
|
|
|
|
Cash
|
|
$
|
16,646
|
|
Other current assets
|
|
|
4,393
|
|
Property, plant and equipment, net
|
|
|
52,952
|
|
Non producing and development properties
|
|
|
1,470,315
|
|
Other assets
|
|
|
46
|
|
|
|
|
|
|
Total assets
|
|
|
1,544,352
|
|
|
|
|
|
|
Less:
|
|
|
|
|
Current liabilities
|
|
|
7,458
|
|
Other long-term liabilities
|
|
|
8,384
|
|
Deferred tax liabilities
|
|
|
440,645
|
|
|
|
|
|
|
Total liabilities
|
|
|
456,487
|
|
|
|
|
|
|
Net assets
|
|
$
|
1,087,865
|
|
|
|
|
|
|
24
Notes to
Unaudited Pro Forma Condensed Combined Financial
Statements (Continued)
The unaudited pro forma condensed combined financial statements
for the Transactions include the following adjustments:
(a) To eliminate the Bolnisis historical
stockholders equity accounts.
(b) To record the issuance of an estimated
260,976,363 shares of Coeur common stock to be issued to
Bolnisi and Palmarejo shareholders based on the outstanding
shares of Bolnisi ordinary shares at June 30, 2007 of
285,542,321 multiplied by the exchange ratio of 0.682 and the
estimated outstanding shares of Palmarejo common stock of
91,251,738, less the 66,855,237 Palmarejo shares held by
Bolnisi, multiplied by the exchange ratio of 2.715.
(c) To record the portion of the purchase price allocated
to Bolnisis mining properties. In addition, deferred
income taxes are recognized for the difference between the
revised carrying amounts of Bolnisis assets and their
associated income tax bases which will not change as a result of
the Transactions.
This allocation is preliminary and is subject to change due to
several factors including: changes in the fair values of
Bolnisis assets and liabilities up to the closing date of
the transaction; the actual merger costs incurred, the number of
Palmarejo stock options outstanding at the closing date;
valuations of assets and liabilities that may be required which
have not been completed as of the date of this proxy statement.
These changes will not be known until after the closing date of
the merger transaction.
(d) To record the transaction advisory fees and estimated
transaction costs to be incurred by Coeur as a result of the
Bolnisi/Palmarejo-Coeur combination as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Advisory fees
|
|
$
|
5,425
|
|
Legal fees
|
|
|
2,750
|
|
Other
|
|
|
3,425
|
|
|
|
|
|
|
|
|
$
|
11,600
|
|
|
|
|
|
|
(e) To record the distribution of the cash consideration to
be paid to Bolnisi and Palmarejo shareholders in the
Transactions of $1,052,000.
(f) To record a deferred tax asset related to net operating
losses in Mexico acquired in the transactions.
(g) To record the fair value attributable to Coeur share
options to be issued in exchange for vested Palmarejo options.
|
|
Note 2.
|
Pro Forma
transaction adjustments for the acquisition of Bolnisi only (and
not Palmarejo) as of June 30, 2007.
|
The unaudited pro forma condensed combined financial statements
contained herein assume that the Bolnisi merger transaction had
been completed on January 1, 2007 (for income statement
purposes) and on June 30, 2007 (for balance sheet purposes).
The existing Coeur shareholders will hold the majority of the
voting stock of the combined company. The existing members of
the Coeur board of directors will be retained as directors of
the combined company. Thereafter, the directors will be elected
annually by the holders of the combined companys
shareholders. The composition of the senior management of the
combined company will consist of existing Coeur senior
management. Accordingly, Coeur is deemed to be the accounting
acquiror. As a result, Bolnisis assets and liabilities are
recorded at their estimated fair values. The purchase price is
based upon Coeur issuing a total of 261.0 million new
shares. The number of Coeur shares to be issued is determined by
multiplying the outstanding shares of Bolnisi ordinary shares at
June 30, 2007 of 285,542,321 by the conversion ratio of
0.682, and cash payments totaling $1.0 million and
estimated transaction costs of approximately $11.6 million,
resulting in total consideration of approximately
$791.5 million. The estimated Coeur share price of $4.00 on
May 3, 2007, the date the merger was agreed to and
25
Notes to
Unaudited Pro Forma Condensed Combined Financial
Statements (Continued)
announced, was used to estimate the fair value of the Coeur
shares to be issued in the Transactions. The exact market price
of Coeurs common stock on the date of closing will be used
to ultimately determine the fair value of Coeur shares issued in
the Transactions.
For purposes of preparing the unaudited pro forma condensed
combined financial statements for the Bolnisi Transaction,
management has made certain assumptions. The book value of
Bolnisis assets and liabilities, excluding development
properties, at June 30, 2007 are assumed to approximate
fair value and, as such, the excess purchase price, including
the impact of deferred income taxes, has been allocated to
mining properties.
The following represents the preliminary allocation of the
purchase price if the Bolnisi transaction had occurred on
June 30, 2007:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Consideration:
|
|
|
|
|
Coeur stock issued (194,739,863 shares at $4.00)
|
|
$
|
778,959
|
|
Cash payments
|
|
|
970
|
|
Transaction advisory fee and other transaction costs
|
|
|
11,600
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
791,529
|
|
|
|
|
|
|
Fair value of net assets acquired:
|
|
|
|
|
Cash
|
|
$
|
12,304
|
|
Other current assets
|
|
|
3,301
|
|
Property, plant and equipment, net
|
|
|
38,817
|
|
Non producing and development properties
|
|
|
1,102,628
|
|
|
|
|
|
|
Total assets
|
|
|
1,157,050
|
|
|
|
|
|
|
Less:
|
|
|
|
|
Current liabilities
|
|
|
5,589
|
|
Other long-term liabilities
|
|
|
6,142
|
|
Deferred tax liabilities
|
|
|
353,790
|
|
|
|
|
|
|
Total liabilities
|
|
|
365,521
|
|
|
|
|
|
|
Net assets
|
|
$
|
791,529
|
|
|
|
|
|
|
The unaudited pro forma condensed combined financial statements
for the Transactions include the following adjustments:
(a) To eliminate the components of Bolnisis
historical stockholders equity accounts.
(b) To record the issuance of an estimated
194,739,863 shares of Coeur common stock to be issued to
Bolnisi shareholders based on the outstanding shares of Bolnisi
ordinary shares at June 30, 2007 of 285,542,321 multiplied
by the exchange rate of 0.682.
(c) To record the portion of the purchase price allocable
to Bolnisis mining properties. In addition, deferred
income taxes are recognized for the difference between the
revised carrying amounts of Bolnisis assets and their
associated tax bases which will not change as a result of the
Transactions.
This allocation is preliminary and is subject to change due to
several factors including: changes in the fair values of
Bolnisis assets and liabilities up to the closing date of
the transaction; the actual merger costs incurred; valuations of
assets and liabilities that may be required which have not been
completed as of the date of these adjustments. These changes
will not be known until after the closing date of the
Transactions.
26
(d) To record the transaction advisory fees and estimated
transaction costs to be incurred by Coeur as a result of the
Bolnisi/Coeur combination as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Advisory fees
|
|
$
|
5,425
|
|
Legal fees
|
|
|
2,750
|
|
Other
|
|
|
3,425
|
|
|
|
|
|
|
|
|
$
|
11,600
|
|
|
|
|
|
|
(e) To record the distribution of the cash consideration to
be paid to Bolnisi shareholders in the Transaction of $969,000.
(f) To record a deferred tax asset related to net operating
losses in Mexico acquired in the transaction.
(g) To record reclassification of minority interest balance
to comply with US GAAP presentation.
|
|
Note 3.
|
Non
recurring charges resulting directly from the
transaction.
|
The company expects to recognize compensation expense of
approximately $14 million within the 12 months
following consummation of the transaction. This expense is as a
result of the conversion of options to purchase Palmarejo shares
into options to purchase Coeur shares.
|
|
Note 4.
|
Bolnisi
and Bolnisi and Palmarejo Balances.
|
The Bolnisi and the Bolnisi and Palmarejo balances presented in
the pro forma financial statements have been adjusted to reflect
U.S. generally accepted accounting principles and to
present the balances in U.S. dollars. The balances were
translated to U.S. dollars at foreign exchange rates
applicable for each of the periods presented. The balance sheets
were translated using a rate of .8488 in effect at the balance
sheet date as of June 30, 2007. Revenues and expenses
reflected in the income statements were translated at an average
exchange rate of .8488 for the six month period ended
June 30, 2007 and .7893 for the year ended
December 31, 2006, which rates approximate the average
foreign exchange rates for these periods.
27
Comparative
Per Share Information
The following table summarizes unaudited per share information
for Coeur, Bolnisi and Palmarejo separately on a historical
basis and on an equivalent unaudited pro forma condensed
combined basis. The unaudited pro forma condensed combined
information is presented for illustrative purposes only. The
companies might have performed differently had they always been
combined. You should not rely on this information as being
indicative of the historical results that would have been
achieved had the companies always been combined or the future
results that the combined company will experience after the
combination. The unaudited pro forma condensed combined
financial statements should be read in conjunction with the
historical financial statements of Coeur, Bolnisi and Palmarejo
and the related notes included as annexes to this proxy
statement as well as the unaudited pro forma condensed combined
financial statements and the related notes beginning on
page 16. The historical book value per share is computed by
dividing total shareholders equity by the average number
of shares outstanding during the applicable period. The
unaudited pro forma condensed combined income per share is
computed by dividing the unaudited pro forma condensed combined
income from continuing operations available to holders of common
stock by the unaudited pro forma condensed combined weighted
average number of shares outstanding. The unaudited pro forma
condensed combined book value per share is computed by dividing
total unaudited pro forma condensed combined shareholders
equity by the unaudited pro forma condensed combined average
number of shares outstanding during the applicable period. The
historical per share information of Coeur, Bolnisi and Palmarejo
was derived from the historical financial statements of Coeur,
Bolnisi and Palmarejo and the related notes included as annexes
to this proxy statement.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Year Ended
|
|
Coeur - Historical
|
|
June 30, 2007
|
|
|
December 31, 2006
|
|
|
Historical per common share:
|
|
|
|
|
|
|
|
|
Income per basic share
|
|
$
|
0.09
|
|
|
$
|
0.28
|
|
Income per diluted share
|
|
$
|
0.09
|
|
|
$
|
0.26
|
|
Dividends declared
|
|
$
|
|
|
|
$
|
|
|
Book value per share
|
|
$
|
2.19
|
|
|
|
|
|
|
|
|
|
|
Bolnisi - Historical (Australian Accounting
|
|
Year Ended
|
|
Standards) (in Australian dollars)
|
|
June 30, 2007
|
|
|
Historical per common share:
|
|
|
|
|
(Loss) per basic share
|
|
A$
|
(0.016
|
)
|
(Loss) per diluted share
|
|
A$
|
(0.016
|
)
|
Dividends declared
|
|
A$
|
|
|
Book value per share
|
|
A$
|
0.418
|
|
28
|
|
|
|
|
Unaudited Bolnisi (US GAAP)
|
|
Year Ended
|
|
(in Australian dollars)
|
|
June 30, 2007
|
|
|
Historical per common share:
|
|
|
|
|
(Loss) per basic share
|
|
A$
|
(0.063
|
)
|
(Loss) per diluted share
|
|
A$
|
(0.063
|
)
|
Dividends declared
|
|
A$
|
|
|
Book value per share
|
|
A$
|
0.186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palmarejo - Historical (Canadian GAAP)
|
|
|
|
(in Canadian dollars)
|
|
|
|
|
Historical per common share:
|
|
|
|
|
(Loss) per basic share
|
|
C$
|
(0.01
|
)
|
(Loss) per diluted share
|
|
C$
|
(0.01
|
)
|
Dividends declared
|
|
C$
|
|
|
Book value per share
|
|
C$
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Palmarejo (US GAAP)
|
|
|
|
(in Canadian dollars)
|
|
|
|
|
Historical per common share:
|
|
|
|
|
(Loss) per basic share
|
|
C$
|
(0.19
|
)
|
(Loss) per diluted share
|
|
C$
|
(0.19
|
)
|
Dividends declared
|
|
C$
|
|
|
Book value per share
|
|
C$
|
0.61
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Condensed
|
|
|
|
|
|
|
Combined (Bolnisi and Palmarejo)
|
|
Six Months Ended
|
|
|
Year Ended
|
|
(US GAAP)
|
|
June 30, 2007
|
|
|
December 31, 2006
|
|
|
Unaudited pro forma condensed combined per common share:
|
|
|
|
|
|
|
|
|
Income per basic share
|
|
$
|
0.03
|
|
|
$
|
0.11
|
|
Income per diluted share
|
|
$
|
0.02
|
|
|
$
|
0.10
|
|
Dividends declared
|
|
$
|
|
|
|
$
|
|
|
Book value per share
|
|
$
|
3.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Condensed
|
|
|
|
|
|
|
Combined (Bolnisi Only (and not Palmarejo))
|
|
Six Months Ended
|
|
|
Year Ended
|
|
(US GAAP)
|
|
June 30, 2007
|
|
|
December 31, 2006
|
|
|
Unaudited pro forma condensed combined per common share:
|
|
|
|
|
|
|
|
|
Income per basic share
|
|
$
|
0.04
|
|
|
$
|
0.13
|
|
Income per diluted share
|
|
$
|
0.03
|
|
|
$
|
0.13
|
|
Dividends declared
|
|
$
|
|
|
|
$
|
|
|
Book value per share
|
|
$
|
2.94
|
|
|
|
|
|
29
Consolidated
Capitalization
The following table shows: Coeurs capitalization on
June 30, 2007 and Coeurs pro forma capitalization as
of June 30, 2007, assuming the completion of the Bolnisi
Transaction and assuming completion of the Bolnisi and Palmarejo
Transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
Pro Forma
|
|
|
for the
|
|
|
|
|
|
|
for the
|
|
|
Bolnisi and
|
|
|
|
|
|
|
Bolnisi
|
|
|
Palmarejo
|
|
|
|
Actual
|
|
|
Transaction
|
|
|
Transactions
|
|
|
|
(In thousands except for per share data)
|
|
|
Cash, cash equivalents and short term investments
|
|
$
|
272,502
|
|
|
$
|
276,579
|
|
|
$
|
276,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
11/4%
convertible senior notes due January 2024
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
Other long-term debt
|
|
|
|
|
|
|
8,384
|
|
|
|
8,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
180,000
|
|
|
|
188,384
|
|
|
|
188,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
|
|
|
|
13,179
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock; par value $1.00 per share; 500,000,000 shares
authorized and 279,506,709 shares issued and outstanding,
actual; 750,000,000 shares authorized and
474,247,000 shares issued and outstanding, pro forma for
the Bolnisi Transaction and 750,000,000 shares authorized
and 540,483,000 shares issued and outstanding, pro forma as
adjusted for the Bolnisi and Palmarejo Transactions(1)(2)
|
|
|
279,507
|
|
|
|
474,247
|
|
|
|
540,483
|
|
Additional paid in capital
|
|
|
779,062
|
|
|
|
1,365,609
|
|
|
|
1,593,301
|
|
Accumulated deficit
|
|
|
(437,285
|
)
|
|
|
(437,285
|
)
|
|
|
(437,285
|
)
|
Shares held in treasury
|
|
|
(13,190
|
)
|
|
|
(13,190
|
)
|
|
|
(13,190
|
)
|
Accumulated other comprehensive income
|
|
|
1,069
|
|
|
|
1,069
|
|
|
|
1,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
609,163
|
|
|
|
1,390,450
|
|
|
|
1,684,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
789,163
|
|
|
$
|
1,592,013
|
|
|
$
|
1,872,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The number of shares of common stock as reflected in the table
above does not include: |
|
|
|
23,684,211 shares of common stock reserved for
issuance upon conversion of Coeurs
11/4%
convertible senior notes due January 2024 at the conversion
price of $7.60,
|
|
|
|
5,780,157 shares of common stock reserved for
issuance under Coeurs 2003 Long-Term Incentive Plan,
|
|
|
|
575,282 shares of common stock reserved for
issuance under Coeurs 1989 Long-Term Incentive Plan,
|
|
|
|
369,486 shares of common stock reserved for
issuance under Coeurs 2005 Non-Employee Directors Equity
Incentive Plan, and
|
|
|
|
465,787 shares of common stock reserved for the
issuance under Coeurs prior Non-Employee Directors Equity
Incentive Plan.
|
|
(2) |
|
The number of pro forma shares issued and outstanding for the
Bolnisi and Palmarejo transactions do not include up to
10,993,035 shares to be issued in exchange for Palmarejo
shares that may be issued upon the exercise of outstanding
Palmarejo options or shares reserved for issuance upon the
exchange of Palmarejo options into new Palmarejo options to
purchase Coeur shares upon closing, and assumes that none of the
existing Palmarejo warrants will be exercised before their
expiration on October 19, 2007. |
30
You should carefully consider the following risk factors
related to the Transactions and the anticipated business of
Coeur after the closing of the Transactions, as well as the
other information contained in this proxy statement, including
the attached annexes, in evaluating whether to approve the
shareholder proposals.
Risks
Related to the Transactions
Coeur
may not realize the cost savings and other benefits it currently
anticipates due to challenges associated with integrating
operations, personnel and other aspects of the companies and due
to liabilities that may exist at Bolnisi and
Palmarejo.
The Transactions are being entered into with the expectation
that their successful completion will result in increased metal
production, earnings and cash flow for the combined company.
These anticipated increases will depend in part on whether
Coeurs, Bolnisis and Palmarejos operations can
be integrated in an efficient and effective manner, and whether
the project development in fact produces the benefits
anticipated. Most operational and strategic decisions, and
certain staffing decisions, with respect to the combined company
have not yet been made and may not have been fully identified.
These decisions and the integration of the three companies will
present significant challenges to management, including the
integration of systems and personnel of the three companies, and
special risks, including possible unanticipated liabilities,
significant one-time write-offs or restructuring charges,
unanticipated costs, and the loss of key employees. There can be
no assurance that there will be operational or other synergies
realized by the combined company, or that the integration of the
three companies operations, management and cultures will
be timely or effectively accomplished, or ultimately will be
successful in increasing earnings and reducing costs. In
addition, the integration of Bolnisi and Palmarejo may subject
Coeur to liabilities existing at one or both of Bolnisi and
Palmarejo, some of which may be unknown. While Coeur has
conducted due diligence on the operations of Bolnisi and
Palmarejo, there can be no guarantee that Coeur is aware of any
and all liabilities of Bolnisi and Palmarejo. These liabilities,
and any additional risks and uncertainties related to the
Transactions not currently known to Coeur or that Coeur may
currently deem immaterial, could negatively impact Coeurs
business, financial condition and results of operations.
Coeur
will incur significant transaction, combination-related and
restructuring costs in connection with the
Transactions.
Coeur, Bolnisi and Palmarejo will be obligated to pay
transaction fees and other expenses related to the Transactions
of approximately $11.6 million, including financial
advisors fees, filing fees, legal and accounting fees,
soliciting fees, regulatory fees and mailing costs. Furthermore,
Coeur expects to incur significant costs associated with
combining the operations of the three companies. However, it is
difficult to predict the amount of these costs before Coeur
begins the integration process. The combined company may incur
additional unanticipated costs as a consequence of difficulties
arising from efforts to integrate the operations of the three
companies. Although Coeur expects that the elimination of
duplicative costs, as well as the realization of other
efficiencies related to the integration of the businesses, can
offset incremental transaction, combination-related and
restructuring costs over time, Coeur cannot give any assurance
that this net benefit will be achieved in the near term, or at
all.
Coeur
shareholders will suffer immediate and substantial dilution to
their equity and voting interests as a result of the issuance of
Coeur common stock to the Bolnisi and Palmarejo
shareholders.
In connection with the Transactions, Coeur will issue
approximately 261.0 million shares of common stock, which
excludes up to 11.0 million new shares that will be
issuable upon the exercise of existing Palmarejo options and
assumes that none of the existing Palmarejo warrants will be
exercised before their expiration on October 19, 2007.
Bolnisi and Palmarejo shareholders will own approximately 48.35%
of the total number of shares of Coeurs outstanding common
stock following the completion of the Transactions. Assuming
that all existing Palmarejo options are exercised before or
after the consummation of the Transactions, former shareholders
of Bolnisi and Palmarejo will own approximately 49.32% of the
outstanding stock of the combined company. Accordingly, the
issuance of Coeur common stock to the Bolnisi and Palmarejo
shareholders will have the effect of reducing the percentage of
equity and voting interest held by each of Coeurs current
shareholders. Furthermore, some Bolnisi
31
and Palmarejo shareholders may not intend to hold shares of
Coeur common stock. If a significant number of Bolnisi and
Palmarejo shareholders seek to sell their shares of Coeur common
stock, this may adversely affect the trading price of Coeur
common stock.
Risks
Relating to the Businesses of Coeur, Bolnisi and Palmarejo and
the Combined Company
After the completion of the Transactions, the business of the
combined company, as well as the price of Coeur common stock,
will be subject to numerous risks currently affecting the
businesses of Coeur, Bolnisi and Palmarejo.
Palmarejo
has incurred losses and Coeur expects to continue incurring
losses related to the Palmarejo Project and other
properties.
There can be no assurance that significant losses will not occur
at the Palmarejo Project in the near future or that the
Palmarejo Project will be profitable in the future. Coeurs
operating expenses and capital expenditures may increase in
subsequent years as needed consultants, personnel and equipment
associated with advancing exploration, development and
commercial production of the Palmarejo Project and any other
properties Coeur may acquire are added. The amounts and timing
of expenditures will depend on the progress of ongoing
exploration and development, the results of consultants
analyses and recommendations, the rate at which operating losses
are incurred, and Coeurs acquisition of additional
properties and other factors, many of which are beyond
Coeurs control. While Coeur expects production at the
Palmarejo Project to commence in 2009, there can be no assurance
that this timetable will be met and Coeur expects to incur
losses related to the Palmarejo Project until such time as the
Palmarejo Project and any other properties Coeur may acquire
enter into commercial production and generate sufficient
revenues to fund its continuing operations. The development of
the Palmarejo Project and any other properties Coeur may acquire
will require the commitment of substantial resources to conduct
the time-consuming exploration and development of properties.
There can be no assurance that Coeur will generate any revenues
or achieve profitability at the Palmarejo Project and any other
properties Coeur may acquire.
Recently
discovered settlement and subsidence issues at the Palmarejo
Project may increase development costs and delay the start of
production.
In early August 2007, Coeur representatives observed previously
unnoticed ground settlement and subsidence in three main areas:
the lower plant site, the upper plant site, and the site where
the power plant is to be located. The initial engineering review
conducted by Coeur technical personnel as well as third party
engineering consultants concluded that the settlement and
subsidence was occurring primarily due to issues with the
original compaction and placement of fill material. This
settlement became visible once heavy rainfall was experienced.
Since that time, Coeurs third party engineering
consultants have conducted more extensive
on-site
analysis and have provided Coeur with a detailed report based on
its review, which recommends specific remedial actions that
should be initiated. Coeur estimates that these remedial actions
may cost up to $15 million, which is an estimate endorsed
by Coeurs third party engineering consultants. Coeur
anticipates production from the Palmarejo Project to commence in
the first quarter of 2009, which takes into account the
estimated time to complete these remedial activities. There can
be no assurance that these preliminary estimates will prove
accurate, and any inaccuracy in such estimates could materially
adversely impact the development of the Palmarejo Project and
Coeurs financial condition and results of operations.
Coeur
may be required to incur additional indebtedness to
fund Coeurs capital expenditures.
Coeur has historically financed its operations through the
issuance of common stock and convertible debt, and may be
required to incur additional indebtedness in the future. During
2004, Coeur commenced construction at the San Bartolome
project and in 2005 Coeur commenced construction at the
Kensington project. Construction of both projects could require
a total capital investment of approximately $412 million of
which approximately $142.0 million will be required in
future periods. In addition, Coeur expects that the Palmarejo
Project will require a total capital investment of approximately
$1.3 billion of which approximately $200 million will
be required in future periods. While Coeur believes that its
cash, cash equivalents and short-term investments combined with
cash flow generated from operations will be sufficient for it to
make this level of capital investment, no assurance can be given
32
that additional capital investments will not be required to be
made at these or other projects. If Coeur is unable to generate
enough cash to finance such additional capital expenditures
through operating cash flow and the issuance of common stock,
Coeur may be required to issue additional indebtedness. Any
additional indebtedness would increase Coeurs debt payment
obligations, and may negatively impact its results of operations.
Prior
to 2005, Coeur did not have sufficient earnings to cover fixed
charges, which deficiency could occur in future
periods.
As a result of Coeurs net losses prior to 2005, its
earnings were not adequate to satisfy fixed charges (i.e.,
interest, preferred stock dividends and that portion of rent
deemed representative of interest) in each of the three years
prior to 2005. The amounts by which earnings were inadequate to
cover fixed charges were approximately $80.8 million in
2002, $63.9 million in 2003 and $22.7 million in 2004.
Earnings have been sufficient to cover fixed charges subsequent
to 2004. In addition, Coeur is required to make annual interest
payments of approximately $2.25 million on the
$180 million principal amount of its
11/4% Senior
Convertible Notes due 2024 until their maturity.
Coeur expects to satisfy its fixed charges and other obligations
in the future from cash flow from operations and, if cash flow
from operations is insufficient, from working capital, which
amounted to approximately $311.4 million at June 30,
2007. Prior to 2005, Coeur experienced negative cash flow from
operating activities. The amount of net cash used in
Coeurs operating activities amounted to approximately
$8.5 million in 2002, $5.1 million in 2003 and
$18.6 million in 2004. During the years ended
December 31, 2006 and 2005, Coeur generated
$91.2 million and $6.7 million, respectively, of
operating cash flow. The availability of future cash flow from
operations or working capital to fund the payment of interest on
the notes and other fixed charges will be dependent upon
numerous factors, including Coeurs results of operations,
silver and gold prices, levels and costs of production at
Coeurs mining properties and the amount of Coeurs
capital expenditures and expenditures for acquisitions,
developmental and exploratory activities.
The
market prices of silver and gold are volatile. If silver and
gold prices decline, Coeur may experience a decrease in
revenues, a decrease in net income or an increase in losses, and
a negative affect on its business.
Silver and gold are commodities. Their prices fluctuate and are
affected by many factors beyond Coeurs control, including
interest rates, expectations regarding inflation, speculation,
currency values, governmental decisions regarding the disposal
of precious metals stockpiles, global and regional demand and
production, political and economic conditions and other factors.
Because Coeur currently derives approximately 69% of its
revenues from continuing operations from sales of silver,
Coeurs earnings are primarily related to the price of this
metal.
The market prices of silver (Handy & Harman) and gold
(London Final) on September 19, 2007 were $12.98 and $725
per ounce, respectively. The prices of silver and gold may
decline in the future. Factors that are generally understood to
contribute to a decline in the price of silver include sales by
private and government holders and a general global economic
slowdown.
If the prices of silver and gold are depressed for a sustained
period and Coeurs net losses resume, Coeur may be forced
to suspend mining at one or more of its properties until the
prices increase, and to record additional asset impairment
write-downs. Any lost revenues, continued or increased net
losses or additional asset impairment write-downs would
adversely affect Coeurs results of operations.
Coeur may also suffer from declines in mineral prices. Since
1999, Coeur has not engaged in any silver hedging activities and
is currently not engaged in any gold hedging activities.
Accordingly, Coeur has no protection from declines in mineral
prices or currency fluctuations.
Coeur
may have to record additional write-downs, which could
negatively impact its results of operations.
Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS 144) established accounting standards
for impairment of the value of long-lived assets such as mining
properties. SFAS 144 requires a company to review the
recoverability of the cost of its assets by estimating the
future undiscounted cash flows expected to result from the use
and eventual disposition of the asset. Impairment
33
must be recognized when the carrying value of the asset exceeds
these cash flows, and recognizing impairment write-downs could
negatively impact Coeurs results of operations.
If silver or gold prices decline or Coeur fails to control
production costs or realize the mineable ore reserves at its
mining properties, Coeur may be required to recognize further
asset write-downs. Coeur also may record other types of
additional mining property write-downs in the future to the
extent a property is sold by us for a price less than the
carrying value of the property or if liability reserves have to
be increased in connection with the closure and reclamation of a
property. Additional write-downs of mining properties could
negatively impact Coeurs results of operations.
The Kensington property has been the subject of litigation
involving a permit required to complete construction of a
required tailings facility. On September 12, 2005 three
environmental groups (Plaintiffs) filed a lawsuit in
Federal District Court in Alaska against the U.S. Army
Corps of Engineers (Corps of Engineers) and the
U.S. Forest Service (USFS) seeking to
invalidate the permit issued to Coeur Alaska, Inc. for
Coeurs Kensington mine. The Plaintiffs claim the Clean
Water Act (CWA) Section 404 permit issued by
the Corps of Engineers authorizing the deposition of mine
tailings into Lower Slate Lake conflicts with the CWA. They
additionally claim the USFSs approval of the amended plan
of operations is arbitrary and capricious because it relies on
the 404 permit issued by the Corps of Engineers.
On November 8, 2005, the Corps of Engineers filed a Motion
for Voluntary Remand with the court to review the permit issued
to Coeur under the CWA Section 404 and requested that the
court stay the legal proceeding filed by the Plaintiffs pending
the outcome of review. On November 12, 2005, the Federal
District Court in Alaska granted the remand of the permit to the
Corps of Engineers for further review. On November 22,
2005, the Corps of Engineers advised Coeur that it was
suspending the CWA Section 404 permit pursuant to the
Courts remand to further review the permit.
On March 29, 2006, the Corps of Engineers reinstated
Coeurs CWA Section 404 permit. On April 6, 2006
the lawsuit challenging the permit was re-opened, and Coeur
Alaska, Inc. filed its answer to the Amended Complaint and
Motion to Intervene as a Defendant-Intervenor in the action. Two
other parties, the State of Alaska and Goldbelt, Inc., a local
native corporation, also filed Motions to Intervene as
Defendant-Intervenors as supporters of the Kensington project as
permitted. Coeur, the State of Alaska and Goldbelt, Inc. were
granted Defendant-Intervenor status and joined the agencies in
their defense of the permits as issued.
On August 4, 2006, the Federal District Court in Alaska
dismissed the Plaintiffs challenge and upheld the CWA
Section 404 permit. On August 7, 2006 the Plaintiffs
filed a Notice of Appeal of the decision to the Ninth Circuit
Court of Appeals (Circuit Court) and on
August 9, 2006 the Plaintiffs additionally filed a Motion
for Injunction Pending Appeal with the Circuit Court. The
Circuit Court granted a temporary injunction pending appeal on
August 24, 2006, enjoining certain activities relating to
the lake tailings facility. The Circuit Court further ordered an
expedited briefing schedule on the merits of the legal
challenge. As of October 13, 2006, the parties filed their
briefs in the Circuit Court and participated in an oral argument
on December 4, 2006.
On March 7, 2007, the Department of Justice
(DOJ), on behalf of the Corps of Engineers, filed a
motion for authorization under injunction pending appeal to
permit construction of a western interception ditch which
related to site stabilization due to spring snowmelt. On
March 16, 2007, the Circuit Court panel issued an Order
which denied the western interception ditch work plan. This
Order further announced that the Circuit Court intended to
reverse the District Courts upholding of the CWA
Section 404 permit, vacate the permit authorizing the lake
tailings facility and remand the order to the District Court
with instructions to enter summary judgments in favor of the
Plaintiffs. The Court stated that it planned to publish an
opinion in the case that would explain the reasons for its
holding in greater detail and directed that all tailings pond
construction-related activities cease. On May 22, 2007, the
Ninth Circuit Court of Appeals reversed the District
Courts August 4, 2006 decision which had upheld
Coeurs 404 permit and issued its opinion that remanded the
case to the District Court with instructions to vacate
Coeurs 404 permit as well as the USFS Record of Decision
approving the general tailings disposal plan as well as the
Goldbelt 404 permit to construct the Cascade Point Marine
Facility. The DOJ, on behalf of the Corps of Engineers and the
USFS, filed for an extension of time to file a Petition for
Rehearing with the Ninth Circuit. The extension was granted on
June 29, 2007. On August 20, 2007, Coeur Alaska filed
a Petition for Rehearing En Banc with the Ninth Circuit Court of
Appeals, as did the State of Alaska and Goldbelt, Inc. The
Department of Justice, acting on behalf of
34
the federal agencies USFS, EPA and Corps of Engineers,
additionally filed a limited Petition for Rehearing with the
Ninth Circuit panel seeking reconsideration of the mandate of
the May 22, 2007 panel. The Court ordered a reply briefing
by the plaintiffs which were filed on October 11, 2007. The
petitions are currently pending. Coeur cannot now predict the
potential for obtaining an appeal or if it will prevail upon
appeal if one is granted.
This litigation has contributed to an increase in capital costs.
While Coeur believes it will ultimately prevail in the defense
of the awarded permits, in the event that Coeur does not
prevail, it could be necessary to seek an alternate site for the
tailings disposal facility. Coeur is not aware of an alternate
site that could be permitted or would be economic. Therefore, it
is possible that the failure to obtain reversal upon appeal
could render the project uneconomic and an asset impairment
would be necessary. Based upon Coeurs estimates, an
impairment writedown could be necessary should the expectation
of the long-term price for gold decrease below approximately
$535 per ounce. As of June 30, 2007, the carrying value of
the long-lived assets associated with the Kensington project was
$231 million.
Additionally, the value allocated to Bolnisis long-lived
assets will be subject to assessments of recoverability under
SFAS 144 and these assessments could result in writedowns
of carrying values in future periods.
Coeurs
revenues and income (or loss) from its interest in the Endeavor
and Broken Hill mines are dependent in part upon the performance
of the operators of the mine.
In May and September 2005, Coeur acquired silver production and
reserves at the Endeavor and Broken Hill mines in Australia,
respectively. These mines are owned and operated by other mining
companies. Coeurs revenues and income (or loss) from its
interest in the silver production at these mines are dependent
in part upon the performance of the operators of these mines. If
the operators of these mines are not able to produce silver at
the same rate as they have in the past, Coeurs revenues
and income could decrease.
The
estimation of ore reserves is imprecise and depends upon
subjective factors. Estimated ore reserves may not be realized
in actual production. Coeurs reported reserves and
operating results may be negatively affected by inaccurate
estimates.
The ore reserve figures presented in Coeurs public filings
are estimates made by Coeurs technical personnel. Reserve
estimates are a function of geological and engineering analyses
that require Coeur to make assumptions about production costs
and future silver and gold prices. Reserve estimation is an
imprecise and subjective process and the accuracy of such
estimates is a function of the quality of available data and of
engineering and geological interpretation, judgment and
experience. Assumptions about silver and gold market prices are
subject to great uncertainty as those prices have fluctuated
widely in the past. Declines in the market prices of silver or
gold may render reserves containing relatively lower grades of
ore uneconomic to exploit, and Coeur may be required to reduce
reserve estimates, discontinue development or mining at one or
more of its properties, or write down assets as impaired. Should
Coeur encounter mineralization or geologic formations at any of
its mines or projects different from those Coeur predicted,
Coeur may adjust its reserve estimates and alter its mining
plans. Either of these situations may adversely affect
Coeurs actual production and its operating results.
Coeur based its ore reserve determinations as of
December 31, 2006 on a long-term silver price average of
$8.00 per ounce, with the exception of the San Bartolome
mine which used $6.00 per ounce, the Endeavor mine which uses
$10.00 per ounce and the Broken Hill mine which uses $10.12 per
ounce of silver, and a long-term gold price average of $475 per
ounce for all properties with the exception of the Kensington
property which used a gold price of $550 per ounce. On
September 19, 2007 silver and gold prices were $12.98 per
ounce and $725 per ounce, respectively.
The
estimation of the ultimate recovery of metals contained within
the Rochester heap leach pad inventory is inherently inaccurate
and subjective and requires the use of estimation techniques.
Actual recoveries can be expected to vary from
estimations.
The Rochester mine utilizes the heap leach process to extract
silver and gold from ore. The heap leach process is a process of
extracting silver and gold by placing ore on an impermeable pad
and applying a diluted cyanide
35
solution that dissolves a portion of the contained silver and
gold, which are then recovered in metallurgical processes.
The key stages in the conversion of ore into silver and gold
are: (i) the blasting process in which the ore is broken
into large pieces; (ii) the processing of the ore through a
crushing facility that breaks it into smaller pieces;
(iii) the transportation of the crushed ore to the leach
pad where the leaching solution is applied; (iv) the
collection of the leach solution; (v) subjecting the leach
solution to the precipitation process, in which gold and silver
is converted back to a fine solid; (vi) the conversion of
the precipitate into doré; and (vii) the conversion by
a third party refinery of the doré into refined silver and
gold bullion.
Coeur uses several integrated steps to scientifically measure
the metal content of ore placed on the leach pads during the key
stages. As the ore body is drilled in preparation for the
blasting process, samples of the drill residue are assayed to
determine estimated quantities of contained metal. Coeur
estimates the quantity of ore by utilizing global positioning
satellite survey techniques. Coeur then processes the ore
through a crushing facility where the output is again weighed
and sampled for assaying. A metallurgical reconciliation with
the data collected from the mining operation is completed with
appropriate adjustments made to previous estimates. Coeur then
transports the crushed ore to the leach pad for application of
the leaching solution. As the leach solution is collected from
the leach pads, Coeur continuously samples for assaying. Coeur
measures the quantity of leach solution with flow meters
throughout the leaching and precipitation process. After
precipitation, the product is converted to doré, which is
the final product produced by the mine. Coeur again weighs,
samples and assays the doré. Finally, a third party smelter
converts the doré and determines final ounces of silver and
gold available for sale. Coeur then reviews this end result and
reconcile it to the estimates Coeur developed and used
throughout the production process. Based on this review, Coeur
adjusts its estimation procedures when appropriate.
Coeurs reported inventories include metals estimated to be
contained in the ore on the leach pads of $70.1 million as
of June 30, 2007. Of this amount, $32.7 million is
reported as a current asset and $37.4 million is reported
as a non-current asset. The distinction between current and
non-current is based upon the expected length of time necessary
for the leaching process to remove the metals from the crushed
ore. The historical cost of the metal that is expected to be
extracted within twelve months is classified as current and the
historical cost of metals contained within the crushed ore that
will be extracted beyond twelve months is classified as
non-current. The inventory of ore on the leach pads is stated at
actual production costs incurred to produce and place ore on the
leach pads during the current period, adjusted for the effects
on monthly production costs of abnormal production levels.
The estimate of both the ultimate recovery expected over time,
and the quantity of metal that may be extracted relative to such
twelve-month period, requires the use of estimates which are
inherently inaccurate since they rely upon laboratory test work.
Test work consists of
60-day leach
columns from which Coeur projects metal recoveries into the
future. The quantities of metal contained in the ore are based
upon actual weights and assay analysis. The rate at which the
leach process extracts gold and silver from the crushed ore is
based upon laboratory column tests and actual experience
occurring over approximately nineteen years of leach pad
operation at the Rochester mine. The assumptions Coeur uses to
measure metal content during each stage of the inventory
conversion process includes estimated recovery rates based on
laboratory testing and assaying. Coeur periodically reviews its
estimates compared to actual experience and revises its
estimates when appropriate. The length of time necessary to
achieve Coeurs currently estimated ultimate recoveries of
between 59% and 61.5% for silver, depending on the area being
leached, and 93% for gold is estimated to be between 5 and
10 years. However, the ultimate recovery will not be known
until leaching operations cease, which is currently estimated
for approximately 2011.
When Coeur began leach operations in 1986, based solely on
laboratory testing, Coeur estimated the ultimate recovery of
silver and gold at 50% and 80%, respectively. Since 1986, Coeur
has adjusted the expected ultimate recovery three times (once in
each of 1989, 1997 and 2003) based upon actual experience
gained from leach operations. In 2003, Coeur increased its
estimated recoveries for silver and gold, respectively, to
between 59% and 61.5%, depending on the area being leached for
silver, and 93% for gold. The leach cycle at the Rochester Mine
requires leaching to approximately the year 2011 for all
recoverable metal to be recovered.
36
If Coeurs estimate of ultimate recovery requires
adjustment, the impact upon its inventory valuation and upon its
income statement would be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Positive/Negative
|
|
Positive/Negative
|
|
|
|
Change in Silver Recovery
|
|
Change in Gold Recovery
|
|
|
|
1%
|
|
2%
|
|
3%
|
|
1%
|
|
|
2%
|
|
|
3%
|
|
|
Quantity of recoverable ounces
|
|
|
1.7 million
|
|
|
|
3.5 million
|
|
|
|
5.2 million
|
|
|
|
13,214
|
|
|
|
26,428
|
|
|
|
39,642
|
|
Positive impact on future cost of production per silver
equivalent ounce for increases in recovery rates
|
|
|
$1.28
|
|
|
|
$2.20
|
|
|
|
$2.90
|
|
|
$
|
0.54
|
|
|
$
|
1.01
|
|
|
$
|
1.43
|
|
Negative impact on future cost of production per silver
equivalent ounce for decreases in recovery rates
|
|
|
$1.90
|
|
|
|
$4.99
|
|
|
|
$10.98
|
|
|
$
|
0.63
|
|
|
$
|
1.36
|
|
|
$
|
2.24
|
|
Inventories of ore on leach pads are valued based upon actual
production costs incurred to produce and place such ore on the
leach pad during the current period, adjusted for the effects on
monthly production costs of abnormal production levels, less
costs allocated to minerals recovered through the leach process.
The costs consist of those production activities occurring at
the mine site and include the costs, including depreciation,
associated with mining, crushing and precipitation circuits. In
addition, refining is provided by a third party refiner to place
the metal extracted from the leach pad in a saleable form. These
additional costs are considered in the valuation of inventory.
Negative changes in Coeurs inventory valuations and
correspondingly on Coeurs income statement would have an
adverse impact on Coeurs results of operations.
Coeurs
estimates of current and non-current inventories may not be
realized in actual production and operating results, which may
negatively affect Coeurs business.
Coeur uses estimates, based on prior production results and
experiences, to determine whether heap leach inventory will be
recovered more than one year in the future, and is non-current
inventory, or will be recovered within one year, and is current
inventory. The estimates involve assumptions that may not prove
to be consistent with Coeurs actual production and
operating results. Coeur cannot determine the amount ultimately
recoverable until leaching is completed. If Coeurs
estimates prove inaccurate, Coeurs operating results may
be less than anticipated.
Silver
mining involves significant production and operational risks.
Coeur may suffer from the failure to efficiently operate its
mining projects.
Silver mining involves significant degrees of risk, including
those related to mineral exploration success, unexpected
geological or mining conditions, the development of new
deposits, climatic conditions, equipment
and/or
service failures, compliance with current or new governmental
requirements, current availability of or delays in installing
and commissioning plant and equipment, import or customs delays
and other general operating risks. Problems may also arise due
to the quality or failure of locally obtained equipment or
interruptions to services (such as power, water, fuel or
transport or processing capacity) or technical support, which
results in the failure to achieve expected target dates for
exploration or production activities
and/or
result in a requirement for greater expenditure. The right to
export silver and gold may depend on obtaining certain licenses
and quotas, the granting of which may be at the discretion of
the relevant regulatory authorities. There may be delays in
obtaining such licenses and quotas leading to the income
receivable by Coeur being adversely affected, and it is possible
that from time to time export licenses may be refused. Many of
these risks are outside of the ability of Coeurs
management to control and may result in a materially adverse
effect on Coeurs operations and Coeurs financial
results.
Mineral
exploration and development inherently involves significant and
irreducible financial risks. Coeur may suffer from the failure
to find and develop profitable mines.
The exploration for and development of mineral deposits involves
significant financial risks, which even a combination of careful
evaluation, experience and knowledge may not eliminate.
Unprofitable efforts may result
37
from the failure to discover mineral deposits. Even if mineral
deposits are found, such deposits may be insufficient in
quantity and quality to return a profit from production, or it
may take a number of years until production is possible, during
which time the economic viability of the project may change. Few
properties which are explored are ultimately developed into
producing mines. Mining companies rely on consultants and others
for exploration, development, construction and operating
expertise.
Substantial expenditures are required to establish ore reserves,
extract metals from ores and, in the case of new properties, to
construct mining and processing facilities. The economic
feasibility of any development project is based upon, among
other things, estimates of the size and grade of ore reserves,
proximity to infrastructures and other resources (such as water
and power), metallurgical recoveries, production rates and
capital and operating costs of such development projects, and
metals prices. Development projects are also subject to the
completion of favorable feasibility studies, issuance and
maintenance of necessary permits and receipt of adequate
financing.
Once a mineral deposit is developed, whether it will be
commercially viable depends on a number of factors, including:
the particular attributes of the deposit, such as size, grade
and proximity to infrastructure; government regulations
including taxes, royalties, land tenure; land use, importing and
exporting of minerals and environmental protection; and mineral
prices. Factors that affect adequacy of infrastructure include:
reliability of roads, bridges, power sources and water supply;
unusual or infrequent weather phenomena; sabotage; and
government or other interference in the maintenance or provision
of such infrastructure. All of these factors are highly
cyclical. The exact effect of these factors cannot be accurately
predicted, but the combination may result in not receiving an
adequate return on invested capital.
Significant
investment risks and operational costs are associated with
Coeurs exploration, development and mining activities,
such as San Bartolome, Kensington and the Palmarejo
Project. These risks and costs may result in lower economic
returns and may adversely affect Coeurs
business.
Coeurs ability to sustain or increase its present
production levels depends in part on successful exploration and
development of new ore bodies
and/or
expansion of existing mining operations.
Development projects, such as San Bartolome, Kensington and
the Palmarejo Project, may have no operating history upon which
to base estimates of future operating costs and capital
requirements. Development project items such as estimates of
reserves, metal recoveries and cash operating costs are to a
large extent based upon the interpretation of geologic data
obtained from a limited number of drill holes and other sampling
techniques and feasibility studies. Estimates of cash operating
costs are then derived based upon anticipated tonnage and grades
of ore to be mined and processed, the configuration of the
orebody, expected recovery rates of metals from the ore,
comparable facility and equipment costs, anticipated climate
conditions and other factors. As a result, actual cash operating
costs and economic returns of any and all development projects
may materially differ from the costs and returns estimated, and
accordingly, Coeurs business results of operations may be
negatively affected.
Coeurs
marketing of metals concentrates could be adversely affected if
there were to be a significant delay or disruption of purchases
by its third party smelter customers. In particular, a
significant delay or disruption in Coeurs sales of
concentrates as a result of the unexpected discontinuation of
purchases by Coeurs smelter customers could have a
material adverse effect on Coeurs
operations.
Coeur currently markets its silver and gold concentrates to
third party smelters in Mexico, Japan and Australia. The loss of
any one smelter customer could have a material adverse effect on
Coeur in the event of the possible unavailability of alternative
smelters. No assurance can be given that alternative smelters
would be timely available if the need for them were to arise, or
that delays or disruptions in sales would not be experienced
that would result in a materially adverse effect on Coeurs
operations and Coeurs financial results. Furthermore, the
marketing of metals is dependent on market fluctuations and the
availability of processing facilities and storage and
transportation infrastructure at economic tariff rates over
which Coeur may have limited or no control.
38
Coeurs
silver and gold production may decline, reducing its revenues
and negatively impacting its business.
Coeurs future silver and gold production may decline as a
result of an exhaustion of reserves and possible closure of
mines. It is Coeurs business strategy to conduct silver
and gold exploratory activities at its existing mining and
exploratory properties as well as at new exploratory projects,
and to acquire silver and gold mining properties and businesses
or reserves that possess mineable ore reserves and are expected
to become operational in the near future. Coeur can provide no
assurance that its silver and gold production in the future will
not decline. Accordingly, Coeurs revenues from the sale of
silver and gold may decline, negatively affecting its results of
operations.
There
are significant hazards associated with Coeurs mining
activities, not all of which are fully covered by insurance. To
the extent Coeur must pay the costs associated with such risks,
its business may be negatively affected.
The mining business is subject to risks and hazards, including
environmental hazards, industrial accidents, the encountering of
unusual or unexpected geological formations, cave-ins, flooding,
earthquakes and periodic interruptions due to inclement or
hazardous weather conditions. These occurrences could result in
damage to, or destruction of, mineral properties or production
facilities, personal injury or death, environmental damage,
reduced production and delays in mining, asset write-downs,
monetary losses and possible legal liability. Although Coeur
maintains insurance in an amount that Coeur considers to be
adequate, liabilities might exceed policy limits, in which event
Coeur could incur significant costs that could adversely affect
its results of operation. Insurance fully covering many
environmental risks (including potential liability for pollution
or other hazards as a result of disposal of waste products
occurring from exploration and production) is not generally
available to Coeur or to other companies in the industry. The
realization of any significant liabilities in connection with
Coeurs mining activities as described above could
negatively affect Coeurs results of operations.
Coeur
is subject to significant governmental regulations, and its
related costs and delays may negatively affect Coeurs
business.
Coeurs mining activities are subject to extensive federal,
state, local and foreign laws and regulations governing
environmental protection, natural resources, prospecting,
development, production, post-closure reclamation, taxes, labor
standards and occupational health and safety laws and
regulations including mine safety, toxic substances and other
matters related to Coeurs business. Although these laws
and regulations have never required Coeur to close any mine, the
costs associated with compliance with such laws and regulations
are substantial. Possible future laws and regulations, or more
restrictive interpretations of current laws and regulations by
governmental authorities could cause additional expense, capital
expenditures, restrictions on or suspensions of Coeurs
operations and delays in the development of its properties.
In addition, government approvals, approval of aboriginal people
and permits are currently and may in the future be required in
connection with the Palmarejo Project. To the extent such
approvals are required and not obtained, Coeur may be curtailed
or prohibited from planned mining operations or continuing its
planned exploration or development of mineral properties at the
Palmarejo Project.
Failure to comply with applicable laws, regulations and
permitting requirements may result in enforcement actions
thereunder, including orders issued by regulatory or judicial
authorities causing operations to cease or be curtailed, and may
include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions.
Parties engaged in mining operations or in the exploration or
development of mineral properties may be required to compensate
those suffering loss or damage by reason of the mining
activities and may have civil or criminal fines or penalties
imposed for violations of applicable laws or regulations.
Compliance
with environmental regulations and litigation based on
environmental regulations could require significant
expenditures.
Environmental regulations mandate, among other things, the
maintenance of air and water quality standards and land
reclamation. They also set forth limitations on the generation,
transportation, storage and disposal of solid
39
and hazardous waste. Environmental legislation is evolving in a
manner which will require stricter standards and enforcement,
increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects, and a heightened
degree of responsibility for companies and their officers,
directors and employees.
To the extent Coeur is subject to environmental liabilities, the
payment of such liabilities or the costs that it may incur to
remedy environmental pollution would reduce funds otherwise
available to it and could have a material adverse effect on the
combined company. If Coeur is unable to fully remedy an
environmental problem, it might be required to suspend
operations or enter into interim compliance measures pending
completion of the required remedy. The potential exposure may be
significant and could have a material adverse effect.
Moreover, governmental authorities and private parties may bring
lawsuits based upon damage to property and injury to persons
resulting from the environmental, health and safety impacts of
Coeurs past and current operations, which could lead to
the imposition of substantial fines, remediation costs,
penalties and other civil and criminal sanctions. Substantial
costs and liabilities, including for restoring the environment
after the closure of mines, are inherent in Coeurs
operations. Although Coeur believes that it is in substantial
compliance with applicable laws and regulations, Coeur cannot
assure you that any such law, regulation, enforcement or private
claim will not have a negative effect on its business, financial
condition or results of operations.
Some of Coeurs mining wastes are currently exempt to a
limited extent from the extensive set of federal Environmental
Protection Agency (EPA) regulations governing
hazardous waste under the Resource Conservation and Recovery Act
(RCRA). If the EPA designates these wastes as
hazardous under RCRA, Coeur would be required to expend
additional amounts on the handling of such wastes and to make
significant expenditures to construct hazardous waste disposal
facilities. In addition, if any of these wastes causes
contamination in or damage to the environment at a mining
facility, such facility may be designated as a
Superfund site under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA).
Under CERCLA, any owner or operator of a Superfund site since
the time of its contamination may be held liable and may be
forced to undertake extensive remedial cleanup action or to pay
for the governments cleanup efforts. Additional
regulations or requirements are also imposed upon Coeurs
tailings and waste disposal areas in Alaska under the federal
Clean Water Act (CWA) and in Nevada under the Nevada
Water Pollution Control Law which implements the CWA. Airborne
emissions are subject to controls under air pollution statutes
implementing the Clean Air Act in Nevada and Alaska. Compliance
with CERCLA, the CWA and state environmental laws could entail
significant costs, which could have a material adverse effect on
Coeurs operations.
In the context of environmental permits, including the approval
of reclamation plans, Coeur must comply with standards and
regulations which entail significant costs and can entail
significant delays. Such costs and delays could have a dramatic
impact on Coeurs operations. There is no assurance that
future changes in environmental regulation, if any, will not
adversely affect Coeurs operations. Coeur intends to fully
comply with all applicable environmental regulations.
Mining
companies are required to obtain government permits to expand
operations or begin new operations. The costs and delays
associated with such approvals could affect Coeurs
operations, reduce Coeurs revenues, and negatively affect
the combined companys business as a whole.
Mining companies are required to seek governmental permits for
expansion of existing operations or for the commencement of new
operations such as the Kensington development project and the
Palmarejo Project. Obtaining the necessary governmental permits
is a complex and time-consuming process involving numerous
jurisdictions and often involving public hearings and costly
undertakings. The duration and success of permitting efforts are
contingent on many factors that are out of Coeurs control.
The governmental approval process may increase costs and cause
delays depending on the nature of the activity to be permitted,
and could cause Coeur to not proceed with the development of a
mine. Accordingly, this approval process could harm Coeurs
results of operations.
Reference is made to the discussion of the current litigation
regarding the validity of the mine tailings permit at the
Kensington property in Alaska that is set forth under the above
risk factor entitled Coeur may have to record additional
write-downs, which could negatively impact its results of
operations.
40
Meanwhile, although Palmarejo currently holds all consents that
it requires in order to carry out its current drilling and
development program on the Palmarejo Project, Coeur cannot be
certain that it will receive the necessary permits on acceptable
terms to conduct further exploration and to develop the
Palmarejo Project in accordance with its pre-feasibility study.
The failure to obtain such permits, or delays in obtaining such
permits, could increase costs and delay activities, and could
adversely affect the Palmarejo Project.
Coeurs
business depends on good relations with its employees and key
personnel.
Coeur could experience labor disputes, work stoppages or other
disruptions in production that could adversely affect Coeur. As
of June 30, 2007, unions represented approximately 22% of
Coeurs worldwide workforce. On that date, Coeur had
135 employees at its Cerro Bayo mine and 96 employees
at its Martha mine who were working under a collective
bargaining agreement. The agreement covering the Cerro Bayo mine
expires on December 21, 2007 and a collective bargaining
agreement covering the Martha mine expires on June 11,
2008. Additionally, Coeur relies on its management team, and the
loss of a key individual or Coeurs inability to attract
qualified personnel in the future may adversely impact its
business.
Coeur
is an international company and is exposed to risks in the
countries in which it has significant operations or interests.
Foreign instability or variances in foreign currencies may cause
unforeseen losses, which may affect Coeurs
business.
Any foreign operations or investment is subject to political and
economic risks and uncertainties. These risks and uncertainties
may include exchange controls; extreme fluctuations in currency
exchange rates; high rates of inflation; labor unrest; civil
unrest; military repression; expropriation and nationalization;
renegotiation or nullification of existing concessions,
licenses, permits and contracts; illegal mining; changes in
taxation policies; restrictions on foreign exchange and
repatriation, and laws or policies in the U.S. affecting
foreign trade investment and taxation. Further, foreign
operations or investment is subject to changes in government
regulations with respect to, but not limited to, restrictions on
production, price controls, export controls, currency
remittance, income taxes, expropriation of property, foreign
investment, maintenance of claims, environmental legislation,
land use, land claims of local people, water use and mine safety.
Chile, Argentina, Bolivia and Australia are the most significant
foreign countries in which Coeur now directly or indirectly owns
or operates mining properties or developmental projects. Coeur
also conducts exploratory projects in these countries. With the
acquisition of Palmarejo and Bolnisi, Coeur would also own a
major mining operation in Mexico. Argentina, Bolivia, and
Mexico, while currently economically and politically stable,
have experienced political instability, provincial government
pressures on mining operations, currency value fluctuations and
changes in banking regulations in recent years. It is uncertain
at this time how new mining or investment policies or shifts in
political attitude may affect mining in these countries.
Coeur may enter into agreements which require Coeur to purchase
currencies of foreign countries in which Coeur does business in
order to ensure fixed exchange rates. In the event that actual
exchange rates vary from those set forth in the hedge contracts,
Coeur will experience U.S. dollar-denominated currency
gains or losses. Future economic or political instabilities or
changes in the laws of foreign countries in which Coeur has
significant operations or interests and unfavorable fluctuations
in foreign currency exchange rates could negatively impact its
foreign operations and its business as a whole. Further,
property ownership in a foreign country is generally subject to
the risk of expropriation or nationalization with inadequate
compensation.
Coeur
is exposed to risks with respect to the legal systems in the
countries in which it has significant operations or interests,
and resolutions of any disputes may adversely affect its
business.
Some of the jurisdictions in which Coeur currently and may in
the future operate have less developed legal systems than would
be found in more established economies like the United States.
This may result in risks such as potential difficulties in
obtaining effective legal redress in the courts of such
jurisdictions, whether in respect of a breach of law or
regulation, or in an ownership dispute; a higher degree of
discretion on the part of governmental authorities; the lack of
judicial or administrative guidance on interpreting applicable
rules and regulations;
41
inconsistencies or conflicts between and within various laws,
regulations, decrees, orders and resolutions; or relative
inexperience of the judiciary and courts in such matters.
In certain jurisdictions the commitment of local business
people, government officials and agencies and the judicial
system to abide by legal requirements and negotiated agreements
may be uncertain, creating particular concerns with respect to
licenses and agreements for business. These may be susceptible
to revision or cancellation and legal redress may be uncertain
or delayed. There can be no assurance that joint ventures,
licenses, license applications or other legal arrangements will
not be adversely affected by the actions of government
authorities or others and the effectiveness of and enforcement
of such arrangements in these jurisdictions cannot be assured.
Any of
Coeurs future acquisitions may result in significant
risks, which may adversely affect its business.
An important element of Coeurs business strategy is the
opportunistic acquisition of silver and gold mines, properties
and businesses or interests therein. While it is Coeurs
practice to engage independent mining consultants to assist in
evaluating and making acquisitions, any mining properties or
interests Coeur may acquire may not be developed profitably or,
if profitable when acquired, that profitability might not be
sustained. In connection with any future acquisitions, Coeur may
incur indebtedness or issue equity securities, resulting in
increased interest expense, or dilution of the percentage
ownership of existing shareholders. Coeur intends to seek
shareholder approval for any such acquisitions to the extent
required by applicable law, regulations or stock exchange rules.
Coeur cannot predict the impact of future acquisitions on its
business or the price of its common stock. Unprofitable
acquisitions, or additional indebtedness or issuances of
securities in connection with such acquisitions, may impact the
price of Coeurs common stock and negatively affect
Coeurs results of operations.
Coeur
is continuously considering possible acquisitions of additional
mining properties or interests therein that are located in other
countries, and could be exposed to significant risks associated
with any such acquisitions.
In the ordinary course of Coeurs business, Coeur is
continuously considering the possible acquisition of additional
significant mining properties or interests therein that may be
located in countries other than those in which Coeur now has
operations or interests. Consequently, in addition to the risks
inherent in the valuation and acquisition of such mining
properties, as well as the subsequent development, operation or
ownership thereof, Coeur could be subject to additional risks in
such countries as a result of governmental policies, economic
instability, currency value fluctuations and other risks
associated with the development, operation or ownership of
mining properties or interests therein. Such risks could
adversely affect Coeurs results of operations.
Coeurs
ability to find and acquire new mineral properties is uncertain.
Accordingly, Coeurs prospects are uncertain for the future
growth of its business.
Because mines have limited lives based on proven and probable
ore reserves, Coeur is continually seeking to replace and expand
its ore reserves. Identifying promising mining properties is
difficult and speculative. Furthermore, Coeur encounters strong
competition from other mining companies in connection with the
acquisition of properties producing or capable of producing
silver and gold. Competition in the precious metals mining
industry is primarily for mineral rich properties which can be
developed and can produce economically; the technical expertise
to find, develop, and operate such properties; the labor to
operate the properties; and the capital for the purpose of
funding such properties. Many companies have greater financial
resources than Coeur does. Consequently, Coeur may be unable to
replace and expand current ore reserves through the acquisition
of new mining properties or interests therein on terms Coeur
considers acceptable. As a result, Coeurs revenues from
the sale of silver and gold may decline, resulting in lower
income and reduced growth.
Third
parties may dispute Coeurs unpatented mining claims, which
could result in the discovery of defective titles and losses
affecting its business.
The validity of unpatented mining claims, which constitute a
significant portion of Coeurs property holdings in the
United States, is often uncertain and may be contested. Although
Coeur has attempted to acquire satisfactory title to undeveloped
properties, Coeur, in accordance with mining industry practice,
does not generally obtain title
42
opinions until a decision is made to develop a property. As a
result, some titles, particularly titles to undeveloped
properties, may be defective. Defective title to any of
Coeurs mining claims could result in litigation, insurance
claims, and potential losses affecting its business as a whole.
The acquisition of title to concessions and similar property
interests is a detailed and time consuming process. Title to,
and the area of, concessions and similar property interests may
be disputed.
No assurances can be given that title defects to the Palmarejo
Project do not exist. The Palmarejo Project may be subject to
prior unregistered agreements, interests or native land claims
and title may be affected by undetected defects. There may be
valid challenges to the title of any of the claims comprising
the Palmarejo Project that, if successful, could impair
development
and/or
operations. A defect could result in Coeur losing all or a
portion of its right, title, estate and interest in and to the
properties to which the title defect relates. Also, while Coeur
believes that the registration defects relating to certain
non-material properties as described herein will be remedied;
there can be no assurance as to timing or successful completion.
Coeur
will not own all of the concessions comprising the Palmarejo
Project, and Coeurs failure to comply with its contractual
commitments on such properties may result in their
loss.
Planet Gold, S.A. de C.V., a wholly-owned indirect subsidiary of
Palmarejo, is the registered owner of most but not all of the
concessions comprising the Palmarejo Project. If Coeur fails to
meet payments or work commitments on these properties, Coeur may
lose its interests in a portion of the Palmarejo Project or
forfeit some of the concessions.
43
The
Special Meeting of Coeur Shareholders
The enclosed proxy is solicited on behalf of Coeurs Board
of Directors for use at a special meeting of Coeurs
shareholders to be held on December 3, 2007, at
9:30 am local time, or at any adjournments or postponements
thereof, for the purposes set forth in this proxy statement and
in the accompanying notice of special meeting. The special
meeting will be held at The Coeur dAlene Resort and
Conference Center, Second Street and Front Avenue, Coeur
dAlene, Idaho. Coeur intends to commence mailing of this
proxy statement and the accompanying proxy card to Coeurs
shareholders on or about October 23, 2007.
At the special meeting, Coeurs shareholders are being
asked to consider and vote on:
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Proposal 1 an amendment to Coeurs
articles of incorporation to increase the authorized number of
shares of Coeur common stock from 500,000,000 to 750,000,000;
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Proposal 2 the issuance of shares of Coeur
common stock in the Transactions; and
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Proposal 3 adjourn or postpone the special
meeting to solicit additional votes to approve Proposals 1
and 2.
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Coeur does not expect a vote to be taken on any other matters at
the special meeting. If any other matters are properly presented
at the special meeting for consideration, however, the holders
of the proxies, if properly authorized, will have discretion to
vote on these matters in accordance with their best judgment.
Coeurs Board of Directors has unanimously approved the
Transactions, the amendment to Coeurs articles of
incorporation and the issuance of Coeur common stock in the
Transactions. Accordingly, the Board of Directors unanimously
recommends that Coeur shareholders vote FOR Proposals 1, 2,
and 3.
The effectiveness of Proposals 1 and 2 is conditioned upon
the approval of both proposals. Coeur shareholders can cast
separate votes on each proposal, but unless the Coeur
shareholders approve both proposals, neither will take effect.
There are certain risks associated with the Transactions, which
are described under the heading Risk Factors,
beginning on page 31.
Record
Date and Voting Information
Only holders of record of Coeur common stock at the close of
business on October 19, 2007 are entitled to notice of and
to vote at the special meeting. At the close of business on
October 15, 2007, 278,465,840 shares of Coeur common
stock were outstanding and entitled to vote. A list of
Coeurs shareholders will be available for review at
Coeurs executive offices during regular business hours
after the date of this proxy statement and through the date of
the special meeting. Each holder of record of Coeur common stock
on the record date will be entitled to one vote for each share
held. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Coeur common stock
entitled to vote at the special meeting is necessary to
constitute a quorum for the transaction of business at the
special meeting.
All votes will be tabulated by the inspector of election
appointed for the special meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker
non-votes. If a shareholders shares are held of record by
a broker, bank or other nominee and the shareholder wishes to
vote in person at the special meeting, the shareholder must
contact his or her broker or bank and obtain from the record
holder a legal proxy issued in the
shareholders name. Brokers who hold shares in street
name for clients typically have the authority to vote on
routine proposals when they have not received
instructions from beneficial owners. Absent specific
instructions from the beneficial owner of the shares, brokers
are not allowed to exercise their voting discretion with respect
to the approval of non-routine matters, such as
Proposals 1, 2, and 3. Proxies submitted without a vote by
brokers on these matters are referred to as broker
non-votes. Abstentions and broker non-votes are counted
for purposes of determining whether a quorum exists at the
special meeting.
Proxies received at any time before the special meeting and not
revoked or superseded before being voted will be voted at the
special meeting. If the proxy indicates a specification, it will
be voted in accordance with the specification. If no
specification is indicated, the proxy will be voted
FOR the adoption of the amendment to Coeurs
articles of incorporation, FOR the issuance of
shares of Coeur common stock in the Transactions,
FOR
44
the approval of the proposal to adjourn the special meeting if
there are not sufficient votes to adopt Proposals 1 and 2,
and, in the discretion of the persons named in the proxy with
respect to any other business that may properly come before the
special meeting or any adjournment of the special meeting. You
may also vote in person by ballot at the special meeting.
The proposals must be adopted by the affirmative vote of a
majority of the shares of Coeur common stock that are present or
represented by proxy at the shareholder meeting. In addition,
the total votes cast on Proposal 2 must represent a
majority of the shares of common stock outstanding on the date
of the special meeting.
The approval of Proposal 3 to adjourn the special meeting
if there are not sufficient votes to adopt Proposals 1 and
2 requires the affirmative vote of shareholders holding a
majority of the shares present in person or by proxy at the
special meeting. The persons named as proxies may propose and
vote for one or more adjournments of the special meeting,
including adjournments to permit further solicitations of
proxies. No proxy voted against Proposal 1 or 2 will be
voted in favor of any adjournment of the special meeting.
Each share of Coeur common stock outstanding on October 19,
2007, the record date for shareholders entitled to vote at the
special meeting, is entitled to vote at the special meeting.
If you are a shareholder of record, you may vote your shares in
any of the following ways:
Voting by mail. If you choose to vote by mail,
simply mark your proxy, date and sign it, and return it in the
postage-paid envelope provided.
Voting by telephone. You can vote your proxy
by telephone by calling the toll free number 1-888-693-8683. You
will then be prompted to enter the control number printed on
your proxy card and to follow the subsequent instructions.
Voting by telephone is also available 24 hours a day, seven
days a week, until 6:00 a.m. EDT on the morning of the special
meeting. If you vote by telephone, do not return your proxy
card(s).
Voting by Internet. You can also vote your
proxy via the Internet. The website for Internet voting is
www.cesvote.com, and voting is also available 24 hours per
day, seven days a week, until 6:00 a.m. EDT on the morning
of the special meeting. If you vote via the Internet, you should
not return your proxy card(s). Instructions on how to vote via
the Internet are located on the proxy card enclosed with this
proxy statement. Have a your proxy card in hand when you access
the web site and follow the instructions to obtain your records
and create an electronic voting form.
Voting in Person. You can also vote by
appearing and voting in person at the special meeting.
If your stock is held in street name by a bank or
broker, please follow the instruction provided by your bank or
broker.
If you vote your shares of Coeur common stock by submitting a
proxy, your shares will be voted at the special meeting as you
indicated on your proxy card, or Internet or telephone proxy. If
no instructions are indicated on your signed proxy card, all of
your shares of Coeur common stock will be voted FOR
the adoption of the amendment to Coeurs articles of
incorporation, the issuance of shares of Coeur common stock in
the Transactions, and the approval of any proposal to adjourn
the special meeting, if necessary, to solicit additional proxies
in the event that there are not sufficient votes at the time of
the special meeting to adopt the proposals. You should return a
proxy by mail, by telephone, or via the Internet even if you
plan to attend the special meeting in person.
Any person giving a proxy pursuant to this solicitation has the
power to revoke and change it anytime before it is voted. It may
be revoked
and/or
changed at any time before it is voted at the special meeting by:
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giving written notice of revocation to Coeurs Corporate
Secretary;
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submitting another proper proxy via the Internet, by telephone,
or a later-dated written proxy; or
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attending the special meeting and voting by paper ballot in
person. Your attendance at the special meeting alone will not
revoke your proxy.
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If your Coeur shares are held in the name of a bank, broker,
trustee or other holder of record, including the trustee or
other fiduciary of an employee benefit plan, you must contact
your bank or broker and obtain a legal proxy,
executed in your favor from the holder of record to be able to
vote in person at the special meeting.
Expenses
of Proxy Solicitation
Coeur will pay the costs of soliciting proxies for the special
meeting. Officers, directors and employees of Coeur may solicit
proxies by telephone, mail, the Internet or in person. However,
they will not be paid for soliciting proxies. Coeur will also
request that individuals and entities holding shares in their
names, or in the names of their nominees, that are beneficially
owned by others, send proxy materials to and obtain proxies
from, those beneficial owners, and will reimburse those holders
for their reasonable expenses in performing those services. D.F.
King has been retained by Coeur to assist it in the solicitation
of proxies, using the means referred to above, and will receive
a fee estimated not to exceed $125,000, plus reimbursement of
out-of-pocket expenses.
Although it is not expected, the special meeting may be
adjourned for any reason by either the Chairman of the meeting
or the holders of a majority in voting power of the stock
entitled to vote at the meeting. When a meeting is adjourned to
another time or place, notice need not be provided of the place
(if any), date and time, and the means of remote communications
(if any) for shareholders and proxy holders to be deemed present
in person and vote at such adjourned meeting if the adjournment
is announced at the meeting. If, however, the date of the
adjourned meeting is more than 30 days after the date for
which the special meeting was originally called, or if a new
record date is fixed, notice of place (if any), date and time,
and the means of remote communications (if any) must be
provided. Such notice will be mailed to you or transmitted
electronically to you and will be provided not less than
10 days nor more than 60 days before the date of the
adjourned meeting and will set forth the purpose of the meeting.
Coeurs Board of Directors is not aware of any business to
be brought before the special meeting other than that described
in this proxy statement.
Representatives of KPMG LLP, Coeurs independent registered
public accountants, are expected to attend the Coeur special
meeting and will have an opportunity to make a statement if they
desire to do so. Such representatives are also expected to be
available to respond to appropriate questions.
Description
of the Transactions
On May 3, 2007, Coeur, Coeur Sub Two, Australian Bidco and
Bolnisi entered into a merger implementation agreement for Coeur
to acquire all of the shares of Bolnisi in accordance with a
scheme of arrangement to be submitted for approval by the
shareholders of Bolnisi and, if approved, the Federal Court of
Australia. On the same day, Coeur and Palmarejo entered into a
merger implementation agreement for Coeur to acquire the
outstanding shares of Palmarejo not indirectly owned by Bolnisi
in accordance with a plan of arrangement to be submitted for
approval by the Ontario Superior Court of Justice. Under the
terms of the Bolnisi Transaction, Bolnisi shareholders will
receive 0.682 Coeur shares (or, at the election of the Bolnisi
shareholder, CHESS Depositary Interests representing Coeur
shares) and a cash payment equal to A$0.004 (or
US$0.9 million in aggregate) for each Bolnisi share they
own. Under the terms of the Palmarejo Transaction, Palmarejo
shareholders will receive 2.715 Coeur shares and a cash payment
equal to C$0.004 (or US$0.2 million in aggregate) for each
Palmarejo share they own. It is anticipated that this will
result in Coeur issuing a total of approximately
261.0 million new shares excludes up to 11.0 million
new shares that will be issuable upon the exercise of existing
Palmarejo options and assumes that none of the existing
Palmarejo warrants will be exercised before their expiration on
October 19, 2007.
46
Background
of the Transactions
Coeur regularly reviews, as part of its strategic planning
process, the acquisition of silver and gold mines, properties
and businesses or interests therein in order to enhance
shareholder value and its competitive and financial position.
Coeurs criteria for identifying these acquisition
opportunities include: significant production profile, low-cost
production, highly-prospective land position that can lead to
new discoveries and additions to resources and reserves, and the
location of the asset in an attractive mining jurisdiction.
Mr. Dennis Wheeler, Coeurs chairman, president and
chief executive officer, originally met with Mr. Norman
Seckold, chairman of Bolnisi and Palmarejo, on October 10,
2005 to express Coeurs potential interest in acquiring the
Palmarejo Project. No agreement of any type was reached between
Coeur and Bolnisi at that time.
In September 2006, Coeur approached CIBC World Markets Inc.
(CIBC World Markets), through its affiliate CIBC
Australia Limited, to assist it in identifying and evaluating
various strategic or financial alternatives relating to Bolnisi
and/or
Palmarejo. Coeur selected CIBC World Markets for this assignment
based on CIBC World Markets qualifications, experience and
reputation, its familiarity with Coeur and Coeurs business
and the significance of the proposed transaction for Coeur.
Coeur requested that CIBC World Markets approach
Mr. Seckold to establish whether, and under what
circumstances, Bolnisi
and/or
Palmarejo might be receptive to a transaction proposal from
Coeur.
Representatives of CIBC World Markets met with Mr. Seckold
on September 20, 2006. Mr. Seckold indicated that
Bolnisi and Palmarejo would be receptive to a potential proposal
from Coeur.
On November 17, 2006, Coeur, Bolnisi and Palmarejo executed
a confidentiality agreement. From November 17, 2006 to and
including the date that the definitive agreements were signed
and thereafter as provided by the terms of the definitive
agreements, Coeur conducted a due diligence review of public and
non-public materials provided by Bolnisi and Palmarejo, met with
certain members of Bolnisi and Palmarejo management and visited
the Palmarejo Project site in Mexico.
Representatives of Coeur completed an initial due diligence
visit to the Palmarejo Project site from December 7, 2006
to December 10, 2006. Representatives of Coeur completed a
more detailed
follow-up
due diligence visit to the Palmarejo Project site as well as to
the offices of Palmarejos technical consultants, Mine
Development Associates, between January 22, 2007 and
January 26, 2007. During February 2007, Mr. Wheeler
was briefed on the findings from the Palmarejo Project site
visits by the Coeur due diligence team.
On March 1, 2007, Coeur formally appointed CIBC World
Markets as its financial advisor.
On March 20, 2007, in connection with a regularly scheduled
board of directors meeting, the Coeur board of directors
discussed the possibility of a transaction involving Bolnisi and
Palmarejo. Representatives of CIBC World Markets attended this
meeting. Coeur management provided their preliminary
perspectives with respect to a possible combination of Coeur
with Bolnisi and Palmarejo. At this meeting, after discussion of
the merits and risks of the transaction, the board of directors
authorized senior management of Coeur to continue discussions
with Bolnisi and Palmarejo regarding a possible combination.
On March 23, 2007, Mr. Wheeler called Mr. Seckold
to schedule a meeting in Sydney. Mr. Wheeler and
Mr. Seckold met in Sydney on April 3, 2007 to discuss
the basis on which Bolnisi and Palmarejo would be receptive to
discussions in respect of a transaction with Coeur and
discussions continued.
On April 3, 2007, Coeur authorized its legal advisors to
prepare and commence negotiation of the forms of definitive
transaction documents.
On April 6, 2007, the parties ceased discussions based on
an inability to move negotiations forward. On April 12,
2007, the parties agreed to resume discussions. Thereafter, the
parties and their financial advisors also had further
discussions regarding the appropriate method for determining the
exchange ratios and other terms for the proposed transaction,
and Mr. Wheeler periodically provided the Coeur board of
directors with telephonic updates on the status of discussions
with Bolnisi and Palmarejo and discussed with members of the
Coeur board of directors potential benefits and risks of the
proposed transaction.
On April 15, 2007, Bolnisi formally engaged Cormark
Securities Inc. as its financial advisor.
47
On April 16, 2007, a special meeting was held by the
Palmarejo board of directors. The Palmarejo board of directors
approved the creation of a special committee comprised of three
independent directors. The special committee of the Palmarejo
board of directors was to consider a potential transaction with
Coeur as well as investigate other strategic alternatives, among
other things. The engagement of Dundee Securities Corporation
(Dundee) as financial advisor to the Palmarejo
special committee was discussed and a draft engagement letter
was presented to the Palmarejo board of directors.
At an April 19, 2007 meeting of the Palmarejo special
committee, following a discussion of the scope of the Dundee
engagement and the services to be provided, the Palmarejo
special committee formally appointed Dundee to act as its
financial advisor in connection with the potential transaction
with Coeur. In addition, subsequently in April 2007, the
Palmarejo special committee retained the services of Westwind
Partners Inc., to provide a separate and independent valuation
required under Canadian securities laws.
At meetings in Sydney from April 23 25, 2007,
Mr. Wheeler met with both Mr. Seckold and
Mr. James Crombie, Palmarejos president and chief
executive officer, during which certain preliminary indicative
terms of the transaction were discussed, subject to resolution
of a number of material issues.
Between April 25, 2007 and April 27, 2007, senior
technical management of Coeur conducted an additional due
diligence site visit to the Palmarejo Project.
Between April 25, 2007 and May 2, 2007, Bolnisis
and Palmarejos legal and financial advisors conducted due
diligence on Coeur and its business, including reviewing public
and non-public documents, meeting with various members of Coeur
management, visiting Coeurs offices in Santiago, Chile,
visiting Coeurs Rochester Mine in Nevada and visiting
Coeurs headquarters in Coeur dAlene, Idaho.
On May 2, 2007, at a special meeting of the Coeur board of
directors, Mr. Wheeler reviewed for the board the status of
negotiations and updated the board with the developments since
his last communications and the last meeting. Coeurs legal
advisors presented the final terms of the proposed Transactions
and responded to questions by the board of directors members.
The board discussed and reviewed with Coeurs advisors the
post-signing diligence period and termination right. Members of
Coeurs management provided a detailed summary of the
results to that date of the technical diligence and of
Coeurs plans with respect to the mine. In addition, CIBC
World Markets provided the Coeur board of directors with its
opinion to the effect that, as of May 2, 2007, and based
upon and subject to the factors, assumptions, qualifications and
limitations set forth in its opinion, the consideration to be
paid by Coeur pursuant to the Transactions was fair, from a
financial point of view, to Coeur. After discussion and
deliberation of the merits and risks of the transaction, the
Coeur board of directors unanimously approved the form of
definitive agreements and the transactions contemplated by those
agreements and authorized Coeurs management to finalize
and execute the definitive agreements and other related
agreements, subject to continuation of the due diligence as
provided for in the definitive agreements.
On May 2, 2007 at a meeting of Palmarejos special
committee, Palmarejos special committee financial advisor,
Dundee Securities Corporation, reviewed with the Palmarejo
special committee its financial analysis of the 2.715 exchange
ratio provided for in the Palmarejo Transaction and delivered an
opinion to the Palmarejo special committee to the effect that,
as of May 2, 2007 and based on and subject to the matters
described in its opinion, the 2.715 exchange ratio was fair,
from a financial point of view, to the holders of Palmarejo
shares. The special committees separate and independent
financial advisor, Westwind Partners Inc., also made a
presentation to the special committee of its valuation report.
Palmarejos legal advisors presented the final terms of the
proposed Transactions and responded to questions by the special
committee members. After these presentations and further
discussion, the Palmarejo special committee voted unanimously to
approve the Palmarejo Transaction and the execution of the
definitive agreement. The Palmarejo special committee
subsequently recommended that the full Palmarejo board of
directors approve the Palmarejo Transaction.
On May 2, 2007 at a meeting of Palmarejos board of
directors, held immediately after the meeting of the Palmarejo
special committee, the chairman of the Palmarejo special
committee reported on the opinion received from Dundee, on the
recommendation of the Palmarejo special committee and on the
reasons for its recommendation. Presentations were made by
Dundee Securities Corporation and Westwind Partners Inc. The
full Palmarejo
48
board of directors voted unanimously to approve the Palmarejo
Transaction and the execution of the definitive agreement.
On May 3, 2007 at a meeting of Bolnisis board of
directors held in Australia, Bolnisis legal advisors
presented the final terms of the proposed transaction and
responded to questions by the board of directors members. After
this presentation and further discussion, the Bolnisi board of
directors voted unanimously to approve the Bolnisi Transaction
and to authorize the execution of the definitive agreements and
other related agreements.
The definitive agreements were thereafter executed on behalf of
each of the companies, and each of Bolnisis directors
entered into the call option agreements contemplated by the
Bolnisi Transaction. See The Transactions
Option Deeds. The Transactions were publicly announced
on May 3, 2007.
The Merger Implementation Agreement with Bolnisi initially
entitled Coeur to conduct additional diligence with respect to
Bolnisi until June 8, 2007. From the period from
May 3, 2007 through June 8, 2007, Coeur and its
representatives conducted additional due diligence on Bolnisi
and the Palmarejo Project. On June 8, 2007, Coeur and
Bolnisi agreed to extend Coeurs additional due diligence
period by 14 days, to June 22, 2007 to give Coeur
further time to complete its review of Bolnisi and the Palmarejo
Project. On June 22, 2007, Coeur and Bolnisi again agreed
to extend Coeurs additional due diligence period for an
additional period until July 3, 2007.
On June 29, 2007, representatives of Bolnisi and Bolnisi
management and representatives of Coeur and Coeur management met
in Sydney to discuss their due diligence findings and outlook
for the Palmarejo Project, which included, without limitation,
revisions to the operational and financial projections for the
Palmarejo Project. On July 2, 2007, Coeurs board of
directors met to discuss the results of the due diligence review
and the outcome of the meeting between Coeurs management
and representatives and Bolnisi. At this meeting, CIBC World
Markets delivered an opinion, which was subsequently confirmed
in writing, to the effect that, as of July 2, 2007, and
based upon and subject to the factors, assumptions,
qualifications and limitations set forth in its written opinion,
the consideration to be paid by Coeur pursuant to the
Transactions was fair, from a financial point of view, to Coeur.
At the meeting, the Coeur board determined to proceed with the
Transactions. Thereafter, upon the expiration of the additional
due diligence period, Coeur, Bolnisi and Palmarejo announced
that Coeur had completed its due diligence investigation
pursuant to the Bolnisi Merger Implementation Agreement.
Coeurs
Reasons for the Transactions; Recommendation of Coeurs
Board of Directors
Coeur regularly reviews, as part of its strategic planning
process, the acquisition of silver and gold mines, properties
and businesses or interests therein in order to enhance
shareholder value and its competitive and financial position.
Because mines have limited lives based on proven and probable
ore reserves, Coeur is continually seeking to replace and expand
its ore reserves.
On May 2, 2007 and on July 2, 2007, following
completion of due diligence, Coeurs board of directors,
after an extensive review and thorough discussion of all facts
and issues it considered relevant with respect to the proposed
transactions, concluded unanimously that the Transactions are
fair to, and in the best interests of, the shareholders of
Coeur, and authorized Coeurs executive officers to enter
into the definitive agreements and recommend to shareholders of
Coeur that they vote in favor of the shareholder proposals
contained herein.
The key strategic benefits identified by Coeurs board of
directors for entering into the Transactions are summarized
below:
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upon completion of the Transactions and following commencement
of production at the Palmarejo Project, Coeur is expected to be
positioned as the worlds leading primary silver producer
in terms of annual silver production;
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Coeur expects to possess one of the largest silver resource
bases among its peers, providing Coeur with the opportunity to
convert these resource ounces into reserves over time and create
a substantial production profile for many years;
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the addition of the Palmarejo Project to Coeurs existing
pipeline of new projects that are currently under construction
is expected to result in a dominant production growth rate among
its peers;
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the Palmarejo Projects anticipated low operating costs are
expected to materially reduce Coeurs overall cash costs
per ounce of silver produced, making Coeur one of the lowest
cost producers in its sector;
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the addition of the Palmarejo Project to Coeurs portfolio
will geographically diversify Coeurs asset mix and provide
entry into a prolific mining area of Mexico, which is the
worlds second largest silver producing country;
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the combination of Coeurs prospective exploration
portfolio and the Palmarejo properties is expected to provide
considerable exploration upside potential for Coeurs
shareholders; and
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Coeur expects to remain one of the worlds most liquid
publicly-traded silver mining companies based on average daily
historical trading volume. Coeur is currently listed on both the
NYSE and TSX, and, in connection with the Transactions, Coeur
intends to seek listing of its shares on the ASX in the form of
CHESS Depositary Interests.
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In reaching their conclusion and making their recommendation,
the members of Coeurs board of directors relied on their
knowledge of Coeur and the industry in which it is involved, on
the information provided by Coeur and its advisors and on the
advice of its legal and financial advisors. The Coeur board of
directors considered numerous other factors to be in favor of
the Transactions, including among other things, the following:
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the fairness opinion provided by CIBC World Markets on
May 2, 2007, subsequently confirmed in writing, to the
effect that, as of May 2, 2007, and based upon and subject
to the factors, assumptions, qualifications and limitations set
forth in such opinion, the consideration to be paid by Coeur
pursuant to the Transactions was fair, from a financial point of
view, to Coeur;
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the fairness opinion provided by CIBC World Markets on
July 2, 2007, subsequently confirmed in writing, to the
effect that, as of July 2, 2007, and based upon and subject
to the factors, assumptions, qualifications and limitations set
forth in such opinion, the consideration to be paid by Coeur
pursuant to the Transactions was fair, from a financial point of
view, to Coeur;
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each of the directors of Bolnisi had agreed to enter into a call
option deed, which, between them, would grant Coeur the right
under certain circumstances to acquire up to 19.9% of
Bolnisis outstanding shares held by the directors at the
same price as that offered by Coeur to other Bolnisi
shareholders under the Bolnisi Transaction;
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the current economic, industry and market trends affecting
Coeur; and
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the current and historical trading prices of Coeurs shares
and shares of its peer companies and the anticipated market
reaction to the announcement of the Transactions.
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The members of Coeurs board of directors also considered
adverse factors associated with the Transactions, including
among other things, the following:
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the fact that there was inherent uncertainty about the estimates
of the future development costs that would need to be incurred
at the Palmarejo Project;
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the fact that there was inherent uncertainty about the quality
and ultimate recoverability of the ore body at the Palmarejo
Project;
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the fact that Coeur may be obligated to pay a termination fee
under certain circumstances;
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the fact that if the Transactions are not completed, Coeur may
be adversely affected due to potential disruptions in its
operations and market perceptions;
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the fact that the completion of the Transactions would be
subject to satisfaction of various conditions, including, but
not limited to, completion of additional diligence to be
conducted by Coeur, the requirement that Bolnisi obtain the
report of an independent expert as to whether the proposed
scheme is in the best interests of Bolnisis shareholders
and receipt of Federal Court of Australia approval of the
Bolnisi Transaction and the Ontario Supreme Court of Justice
approval of the Palmarejo Transaction; and
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the fact that Coeur would agree to a no shop clause
for the duration of the Transactions.
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50
This discussion of the information and factors considered by the
Coeur board of directors is not intended to be exhaustive but
addresses the major information and factors considered by the
Coeur board of directors in its consideration of the
Transactions. In reaching its conclusion, the Coeur board of
directors did not find it practical to assign, and did not
assign, any relative or specific weight to the different factors
that were considered, and individual members of the Coeur board
of directors may have given different weight to different
factors.
May 2,
2007 Opinion of CIBC World Markets (Coeurs Financial
Advisor)
Coeur retained CIBC Australia Limited to act as its financial
advisor and to render opinions, through its affiliate, CIBC
World Markets in connection with the Transactions. At the
special meeting of the Coeur board of directors on May 2,
2007, CIBC World Markets rendered its oral opinion to the Coeur
board of directors, which was subsequently confirmed by a
written opinion to the Coeur board of directors dated
May 2, 2007, to the effect that, as of that date and based
upon and subject to the factors, assumptions, qualifications and
limitations set forth in such opinion, the consideration to be
paid by Coeur pursuant to the Transactions was fair, from a
financial point of view, to Coeur.
The full text of the opinion of CIBC World Markets dated
May 2, 2007, which sets forth, among other things, the
assumptions made, the procedures followed, matters considered
and qualifications and limitations of the review undertaken by
CIBC World Markets in rendering its opinion, is attached as
Annex F-1
to this document. The summary of the CIBC World Markets opinion
set forth herein is qualified in its entirety by reference to
the full text of the opinion. Coeur shareholders should read
this opinion carefully and in its entirety. CIBC World Markets
provided its opinion for the information and assistance of the
Coeur board of directors in connection with its consideration of
the Transactions, and the opinion related only to the fairness,
from a financial point of view, of the consideration to be paid
by Coeur pursuant to the Transactions. The CIBC World Markets
opinion did not express an opinion as to any other aspect or
implication of the Transactions or related transactions, the
terms of the merger implementation agreements (and the exhibits
thereto) or any agreement, arrangement or undertaking entered
into in connection with such transactions, the fairness of the
Transactions (or the merger consideration) to, or any other
consideration of, the holders of any class of securities,
creditors or other constituencies of Coeur, or as to the
underlying decision by Coeur to engage in the Transactions. The
CIBC World Markets opinion is not a recommendation to any Coeur
shareholder as to how it should vote or act on any matter
relating to the Transactions and should not be relied upon by
any Coeur shareholder as such.
In preparing its opinion, CIBC World Markets reviewed the merger
implementation agreements, as well as certain publicly available
business and financial information relating to Coeur, Bolnisi
and Palmarejo, all as noted in the CIBC World Markets opinion
under the heading Scope of Review. CIBC World
Markets reviewed certain other information relating to Coeur,
Bolnisi and Palmarejo, including certain information prepared by
and provided to CIBC World Markets by the managements of Coeur,
Bolnisi and Palmarejo regarding their respective businesses and
prospects and certain publicly available estimates and forecasts
relating to the business and prospects of each of Coeur, Bolnisi
and Palmarejo prepared by certain research analysts and met with
the managements of Coeur, Bolnisi and Palmarejo to discuss the
business and prospects of Coeur, Bolnisi and Palmarejo,
respectively. CIBC World Markets also considered certain
financial and stock market data of Coeur, Bolnisi and Palmarejo,
and CIBC World Markets compared that data with similar data for
other publicly held companies in businesses CIBC World Markets
deemed similar to those of Coeur, Bolnisi and Palmarejo, and
CIBC World Markets considered, to the extent publicly available,
the financial terms of certain other business combinations and
other transactions that have been effected or announced. CIBC
World Markets also considered such other information, financial
studies, analyses and investigations and financial, economic and
market criteria that CIBC World Markets deemed relevant.
In connection with its review, CIBC World Markets did not assume
any responsibility for independent verification of any of the
foregoing information and, as permitted under the terms of its
engagement agreements with Coeur, CIBC World Markets relied on
such information being complete and accurate in all material
respects without any independent verification. CIBC World
Markets was not requested to conduct, and did not conduct any
valuation or appraisal of any assets or liabilities (contingent
or otherwise) of Coeur, Bolnisi or Palmarejo (nor was it
furnished with any valuations or appraisals), nor did it
evaluate the solvency or fair value of Coeur, Bolnisi or
Palmarejo under any state or federal laws relating to
bankruptcy, insolvency or similar matters. CIBC World
51
Markets did not assume any obligation to conduct any physical
inspection of the properties or facilities of Coeur, Bolnisi or
Palmarejo, did not meet with independent auditors of Coeur,
Bolnisi or Palmarejo and relied upon and assumed the accuracy
and fair presentation of the audited financial statements of
Coeur, Bolnisi and Palmarejo and the reports of the auditors
thereon. In relying on financial analyses and forecasts provided
to or discussed with it by Coeur, Bolnisi and Palmarejo, CIBC
World Markets assumed that they had been reasonably prepared and
reflect the best currently available estimates and judgment by
Coeurs, Bolnisis or Palmarejos management as
to the expected future results of operations and financial
condition of Coeur, Bolnisi or Palmarejo, as the case may be.
CIBC World Markets expressed no view as to such analyses or
forecasts or the assumptions on which they were based. CIBC
World Markets also assumed that the Transactions will have the
tax consequences described in discussions with, and materials
furnished to it by, representatives of Coeur, that, in all
respects material to its analysis, the other transactions
contemplated by the merger implementation agreements will be
consummated as described in the respective merger implementation
agreements and that the final forms of the merger implementation
agreements would be substantially similar to the last draft
thereof reviewed by it, without waiver, modification or
amendment of any material term, condition or agreement thereof.
CIBC World Markets also assumed that the representations and
warranties made by Coeur, Bolnisi and Palmarejo in the merger
implementation agreements were and will be true and correct in
all respects material and that the Transactions will be
completed substantially in accordance with the merger
implementation agreements and all applicable laws and that this
document will satisfy all applicable legal requirements. CIBC
World Markets is not a legal, regulatory or tax expert and
relied on the assessments made by advisors to Coeur with respect
to such issues. CIBC World Markets further assumed that all
governmental, regulatory or other consents and approvals
(contractual or otherwise) necessary for the consummation of the
Transactions will be obtained without any material adverse
effect on Coeur, Bolnisi and Palmarejo or on the contemplated
benefits of the Transactions.
The CIBC World Markets opinion was necessarily based on
financial, economic, market and other conditions as they existed
and could be evaluated on, and the information made available to
it as of, the date of its opinion. Subsequent developments may
affect its opinion, and CIBC World Markets does not have any
obligation to update, revise, or reaffirm its opinion. The CIBC
World Markets opinion was provided to the Coeur board of
directors in connection with and for the sole purposes of its
evaluation of the Transactions. The CIBC World Markets opinion
is limited to the fairness, from a financial point of view, of
the consideration to be paid by Coeur pursuant to the
Transactions and CIBC World Markets is expressing no opinion as
to the fairness of the Transactions (or the merger
consideration) to, or any other consideration of, the holders of
any class of securities, creditors or other constituencies of
Coeur or as to the underlying decision by Coeur to engage in the
Transactions. The opinion of CIBC World Markets did not address
the relative merits of the Transactions as compared to
alternative transactions or strategies that might be available
to Coeur, nor did it address Coeurs underlying business
decision to effect the Transactions. CIBC World Markets was not
requested to, and did not, solicit third party indications of
interest in acquiring all or any part of Coeur. CIBC World
Markets is expressing no opinion as to the price or value of the
Coeur common stock or Bolnisi ordinary shares or Palmarejo
common shares at any time. The CIBC World Markets opinion does
not constitute a recommendation to any shareholder of Coeur as
to how such shareholder should vote or act on any matter
relating to the Transactions or any other matter.
Financial
Analyses of Coeurs Financial Advisors
In preparing its opinion, CIBC World Markets performed a variety
of generally accepted financial and comparative analyses,
including those described below. The preparation of a fairness
opinion is a complex process and is not susceptible to partial
analysis or summary description. In arriving at its opinion,
CIBC World Markets considered the results of all of its analyses
as a whole and did not attribute any particular weight to any
analysis or factor considered by it, but rather made its
determination as to fairness on the basis of its experience and
professional judgment after considering the results of all of
its analyses. CIBC World Markets believes that the summary
provided and the analyses described herein must be considered as
a whole and that selecting any portion of its analyses, without
considering all analyses and factors, would create an incomplete
view of the process underlying its analysis and opinion. As a
result, the ranges of valuations resulting from any particular
analysis or combination of analyses described herein were merely
utilized to create points of reference for analytical purposes
and should not be taken to be the view of CIBC World Markets
with respect to the actual value of Coeur, Bolnisi or Palmarejo.
52
In performing its analysis, CIBC World Markets made, and was
provided by Coeur management with, numerous assumptions with
respect to industry performance, general business, market,
financial and economic conditions and other matters, many of
which are beyond the control of CIBC World Markets and Coeur,
Bolnisi and Palmarejo. Analyses based on estimates or forecasts
of future results are not necessarily indicative of future
results or actual values, which may be significantly more or
less favourable than those suggested by such analyses. The
analysis does not purport to be an appraisal or to reflect the
prices at which Coeur common stock will trade following the
announcement or consummation of the Transactions. Because such
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of Coeur, Bolnisi,
Palmarejo or their respective advisors, none of Coeur, Bolnisi,
Palmarejo or CIBC World Markets, nor any other person assumes
responsibility if future results or actual values are materially
different from these forecasts or assumptions.
CIBC World Markets was not requested to, and it did not,
recommend the specific form or amount of consideration offered
by Coeur pursuant to the Transactions, which consideration was
determined through negotiations between Coeur, Bolnisi and
Palmarejo. The decision to enter into the Transactions and
related transactions was solely that of the Coeur board of
directors, Bolnisi and Palmarejo. The opinion of CIBC World
Markets and CIBC World Markets related financial analyses
were among many factors considered by the Coeur board of
directors in its evaluation of the Transactions and should not
be viewed as determinative of the views of the Coeur board of
directors or Coeurs management with respect to the
Transactions or the consideration to be paid by Coeur pursuant
to the Transactions.
The following is a summary of the material financial analyses
performed by CIBC World Markets in connection with rendering its
opinion. Some of the summaries of the financial analyses
include information presented in tabular format. In order to
fully understand CIBC World Markets financial analyses,
the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of
CIBC World Markets financial analyses. Considering the
data in the tables below without considering the full narrative
descriptions of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of CIBC World
Markets analyses and opinion.
CIBC World Markets performed its analyses with respect to each
of Coeur, Bolnisi and Palmarejo on a stand-alone and a pro-forma
basis based on:
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Consensus analyst estimates, derived as the average of a range
of market analysts estimates. The estimates selected
represented the most recent publications of those analysts
covering the relevant company, with a specific cut-off date for
Bolnisi and Palmarejo coverage of November 2006 to ensure that
reports reflected the most recent drilling updates from the
Palmarejo Project.
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Coeur managements production and cost projections for each
of Coeur and the Palmarejo Project, overlaid with consensus
equity analyst projections of future commodity prices
(Internal Estimates). CIBC World Markets derived a
net asset value per share for Palmarejo based on the discounted
cashflow value of the Palmarejo Project adjusted for net cash
and other long term liabilities. Since the only currently
measurable assets of Bolnisi are its investment in Palmarejo and
net cash, the net asset value of Bolnisi was derived by
multiplying the derived value per share of Palmarejo by the
number of shares owned by Bolnisi, plus net cash held by Bolnisi.
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For the purpose of performing many of its analyses, CIBC World
Markets concluded that it was appropriate to look only at the
relative financial metrics of the Palmarejo Project rather than
aggregating 100% of the relevant Bolnisi financial metric with
the minority share of the Palmarejo financial metric. This
approach was selected as it most accurately reflects the
substance of the Transactions which is that Coeur will own 100%
of the Palmarejo Project as a result of the Transactions and so
will have full ownership and access to the earnings and
cashflows of the Palmarejo Project.
All market data used by CIBC World Markets was as of
April 25, 2007, on which day Coeurs closing price on
the NYSE was $4.03.
53
Implied
Valuation Analyses
CIBC World Markets performed various implied valuation analyses
of the ordinary shares of Coeur, Palmarejo shares and Bolnisi
ordinary shares, as described below. For purposes of the implied
valuation analyses, diluted shares of Palmarejo were calculated
assuming that outstanding options and warrants are to be
acquired based on a Black Scholes valuation as at the date of
the Transactions.
Net Asset Value (NAV) Analysis. CIBC World
Markets analysed implied exchange ratios based on two separate
methodologies for calculating the NAV (defined as the discounted
cash flow value of operating assets plus fair value of
non-operating assets such as cash less fair value of
non-operating liabilities such as debt) of each of Coeur,
Bolnisi and Palmarejo:
1. Analyst consensus figures for each company.
2. Discounted cashflow analysis of each company based on
Coeur management estimates.
Comparing analyst consensus NAVs for Bolnisi and Palmarejo to
that of Coeur implied exchange ratios of 0.709 and 2.870
respectively.
A discounted cash flow analysis is a method of evaluating an
asset using estimates of the future unlevered free cash flows
generated by assets and taking into consideration the time value
of money with respect to those future cash flows by calculating
their present value. Present value
refers to the current value of one or more future cash payments
from the asset, which we refer to as that assets cash
flows, and is obtained by discounting those cash flows back to
the present using a discount rate that takes into account
macro-economic assumptions and estimates of risk, the
opportunity cost of capital, capitalized returns and other
appropriate factors.
In selecting appropriate discount rates to employ, CIBC World
Markets gave consideration to the discount rates employed by
analysts covering the three companies. It was noted that the
average discount rate employed by analysts covering Coeur was
5.9% while the average for both Bolnisi and Palmarejo was 5%.
These discount rates are in line with standard market practice
amongst precious metals analysts who generally employ 5% as a
base discount rate for all companies, adjusted,
where necessary, for company specific risk factors.
Based on these analyst consensus discount rates and risk
factors, CIBC World Markets employed a range of 5%
7% for discount rates to be applied to each company. The implied
exchange ratios derived from this analysis are set out in the
table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
|
|
|
Palmarejo Project
|
|
|
rate
|
|
|
5%
|
|
6%
|
|
7%
|
|
|
|
|
5
|
%
|
|
Bolnisi
|
|
0.825
|
|
Bolnisi
|
|
0.776
|
|
Bolnisi
|
|
0.729
|
|
|
|
|
|
|
Palmarejo
|
|
3.366
|
|
Palmarejo
|
|
3.161
|
|
Palmarejo
|
|
2.964
|
Coeur
|
|
|
6
|
%
|
|
Bolnisi
|
|
0.943
|
|
Bolnisi
|
|
0.887
|
|
Bolnisi
|
|
0.837
|
|
|
|
|
|
|
Palmarejo
|
|
3.847
|
|
Palmarejo
|
|
3.612
|
|
Palmarejo
|
|
3.388
|
|
|
|
7
|
%
|
|
Bolnisi
|
|
1.074
|
|
Bolnisi
|
|
1.010
|
|
Bolnisi
|
|
0.953
|
|
|
|
|
|
|
Palmarejo
|
|
4.384
|
|
Palmarejo
|
|
4.116
|
|
Palmarejo
|
|
3.860
|
Comparable Companies Analysis. CIBC World
Markets calculated implied exchange ratios on a price to NAV,
price to cashflow and price to earnings basis for each of Coeur,
Bolnisi and Palmarejo. Calculations were effected by deriving a
per share value for each company based on analyst consensus NAV,
cashflow and earnings figures multiplied by the relevant average
multiple for appropriate comparable trading companies.
For cashflow and earnings, estimates for 2009 were employed as
this is expected to be the first full year of production at the
Palmarejo Project and so is the most appropriate period to use.
54
Based on its experience with companies in the mining industry,
CIBC World Markets selected the following companies as being
potentially relevant to an evaluation of the per share value of
Coeur:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P/2009E
|
|
|
P/2009E
|
|
|
|
P/NAV
|
|
|
Cashflow
|
|
|
Earnings
|
|
|
Coeur comparable company set(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Hecla Mining
|
|
|
1.85x
|
|
|
|
10.2x
|
|
|
|
14.9x
|
|
Gammon Lake
|
|
|
1.37x
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Pan American Silver
|
|
|
1.62x
|
|
|
|
n/a
|
|
|
|
14.0x
|
|
Apex Silver
|
|
|
0.92x
|
|
|
|
2.6x
|
|
|
|
4.9x
|
|
Silver Wheaton
|
|
|
1.61x
|
|
|
|
19.3x
|
|
|
|
17.8x
|
|
Average
|
|
|
1.47x
|
|
|
|
10.7x
|
|
|
|
12.9x
|
|
|
|
|
(1) |
|
Calculated based on last price on April 25, 2007 |
Similarly, the following companies were selected as being
potentially relevant to an evaluation of the per share value of
Bolnisi and Palmarejo:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P/2009E
|
|
|
P/2009E
|
|
|
|
P/NAV
|
|
|
Cashflow
|
|
|
Earnings
|
|
|
Bolnisi and Palmarejo comparable company set(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Endeavour Silver
|
|
|
0.95x
|
|
|
|
8.1x
|
|
|
|
14.5x
|
|
First Majestic
|
|
|
1.18x
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Fortuna Silver Mines
|
|
|
1.21x
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Minefinders
|
|
|
1.30x
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Scorpio Mining
|
|
|
n/a
|
|
|
|
8.9x
|
|
|
|
10.3x
|
|
Silver Standard
|
|
|
2.51x
|
|
|
|
25.6x
|
|
|
|
n/a
|
|
Average
|
|
|
1.43x
|
|
|
|
14.19x
|
|
|
|
12.40x
|
|
|
|
|
(1) |
|
Calculated based on last price on April 25, 2007 |
Applying each of these multiples to consensus analyst estimates
of NAV, 2009 cashflow and 2009 earnings for each of Coeur,
Bolnisi and Palmarejo, the following implied exchange ratios
were calculated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P/2009E
|
|
|
P/2009E
|
|
|
|
P/NAV
|
|
|
Cashflow
|
|
|
Earnings
|
|
|
Bolnisi/Coeur
|
|
|
0.709
|
|
|
|
0.696
|
|
|
|
0.480
|
|
Palmarejo/Coeur
|
|
|
2.87
|
|
|
|
2.756
|
|
|
|
2.560
|
|
Precedent Transactions Analysis. In
identifying an appropriate universe of precedent transactions,
CIBC World Markets gave consideration to the fact that there are
a very limited number of silver corporate transactions due to
the lack of listed pure silver companies. Furthermore, there are
even fewer examples of asset transactions, with many silver
transactions being acquisitions of silver streams and therefore
not directly comparable.
Hence, CIBC World Markets elected to employ gold industry
corporate transactions as a proxy due to the similar valuation
methodologies employed and the fact that silver is often a
by-product of gold production (and vice-versa).
55
Using company filings, company presentations and information
from Bloomberg and Thomson, CIBC World Markets examined a total
of 26 global corporate gold transactions since 2001:
|
|
|
|
|
Target
|
|
Acquiror
|
|
Date
|
|
Cumberland Resources Ltd.
|
|
Agnico-Eagle Mines Ltd.
|
|
February 2007
|
Bema Gold Corp.
|
|
Kinross Gold Corp.
|
|
November 2006
|
Cambior Inc.
|
|
IAMGold Corp.
|
|
September 2006
|
Western Areas Ltd.
|
|
Gold Fields Ltd.
|
|
September 2006
|
Glamis Gold Ltd.
|
|
Goldcorp Inc.
|
|
August 2006
|
Viceroy Exploration Ltd.
|
|
Yamana Gold Inc.
|
|
August 2006
|
Desert Sun Mining Corp.
|
|
Yamana Gold Inc.
|
|
February 2006
|
Gallery Gold Ltd.
|
|
IAMGold Corp.
|
|
December 2005
|
Bolivar Gold Corp.
|
|
Gold Fields Ltd.
|
|
November 2005
|
Placer Dome Inc.
|
|
Barrick Gold Corp.
|
|
October 2005
|
Young-Davidson Mines Ltd.
|
|
Northgate Minerals Corp.
|
|
September 2005
|
Afcan Mining Corp.
|
|
Eldorado Gold Corp.
|
|
May 2005
|
Riddarhyttan Resources AB
|
|
Agnico-Eagle Mines Ltd.
|
|
May 2005
|
Wheaton River Minerals Ltd.
|
|
Goldcorp Inc.
|
|
December 2004
|
Ashanti Goldfields Company Ltd.
|
|
AngloGold Limited
|
|
May 2003
|
Repadre Capital Corp.
|
|
IAMGold Corp.
|
|
October 2002
|
TVX Gold Inc.
|
|
Kinross Gold Corp.
|
|
June 2002
|
Echo Bay Mines Ltd.
|
|
Kinross Gold Corp.
|
|
June 2002
|
AurionGold Ltd.
|
|
Placer Dome Inc.
|
|
May 2002
|
Brancote Holdings Plc
|
|
Meridian Gold Inc.
|
|
April 2002
|
Francisco Gold Corp.
|
|
Glamis Gold Ltd.
|
|
March 2002
|
Hill 50 Ltd.
|
|
Harmony Gold Mining Co Ltd.
|
|
October 2001
|
Normandy Mining Ltd.
|
|
Newmont Mining Corp.
|
|
September 2001
|
Delta Gold Ltd.
|
|
Goldfields Ltd.
|
|
September 2001
|
PacMin Mining Corp Ltd.
|
|
Sons of Gwalia Ltd.
|
|
August 2001
|
Homestake Mining Company
|
|
Barrick Gold Corp.
|
|
June 2001
|
In each case, two key metrics were evaluated:
1. Price to NAV
2. Total Acquisition Cost (TAC) per ounce of
recoverable gold as a percentage of the spot gold price at the
date of announcement.
Price to
NAV
Price to NAV is calculated as the equity value of a transaction
divided by the analyst consensus NAV of the company being
acquired. For the 26 precedent transactions, the lowest price to
NAV was 0.80x, the highest was 4.06x and the average was 1.73x.
Based on market prices as at April 25, 2007 and the
consensus analyst estimate of the Palmarejo Project NAV, the
calculated price to NAV of the proposed Transactions was 1.31x.
56
Total
Acquisition Cost
TAC is a recognized market methodology for assessing precious
metals transactions and is arrived at by aggregating:
|
|
|
|
|
Estimated cash operating cost per recovered reserve ounce
(typically approximated by proven and probable reserves
multiplied by the expected recovery factor);
|
|
|
|
Capital expenditure per recovered reserve ounce; and
|
|
|
|
Enterprise value of offer per recovered reserve ounce.
|
This TAC per ounce is then expressed as a percentage of the gold
spot price at the date of the transaction.
Due to the lack of a formal reserve estimate at the Palmarejo
Project, Coeur managements base case estimate
of life of mine production was employed as a proxy for
recoverable ounces. To ensure consistency of source, Coeur
managements estimates of cash operating cost and capital
costs were also employed.
For the 26 precedent transactions, the lowest TAC percentage was
66% and the highest was 146%, with an average of 104%. This
compares to the calculated TAC percentage for the proposed
Transactions of 105%.
Historical Exchange Ratios. CIBC World Markets
calculated the implied exchange ratio for Bolnisi/Coeur and
Palmarejo/Coeur based on each companys volume weighted
average share price for each trading day for the two years prior
to April 20, 2007. This analysis showed that while the
implied exchange ratios on the first day of analysis were 0.105
and 0.658 for Bolnisi and Palmarejo respectively, the
appreciation in the price of both companies has resulted in
implied exchange ratios at April 20, 2007 of 0.639 and
2.471.
Other
Relative Financial Contribution Analysis. CIBC
World Markets calculated the relative financial contributions of
Coeur and the Palmarejo Project to the combined estimated NAV
(derived from both analyst consensus estimates and Internal
Estimates), market capitalization and target market
capitalization (calculated as average analyst target price for
each company multiplied by shares issued and outstanding) and
2009 earnings and cashflow of the companies, based on analyst
estimates. Such analysis indicated that Coeur would have
contributed 52% of the combined estimated analysts NAV,
48% of combined management estimated NAV, 54% of combined market
capitalization, 57% of combined target market capitalization,
55% of the combined estimated 2009 earnings and 60% of the
combined 2009 estimated cashflow.
Pro-forma Accretion/Dilution Analysis. CIBC
World Markets prepared an analysis of cashflow per share
(defined as cashflow from operations), earnings per share and
NAV per share potential accretion/dilution for Coeur pro-forma
for the Transactions. Cashflow per share and earnings per share
were based on 2009 analyst estimates while NAV was assessed on
both an analyst estimate basis and using NAVs calculated by CIBC
World Markets financial models employing Internal Estimates.
The Transactions were found to be 6% accretive on Internal
Estimates and 2% dilutive on analyst NAV as well as 10% dilutive
on 2009 earnings per share and 15% dilutive on 2009 cashflow per
share.
Implied Transactions Multiples. CIBC World
Markets calculated the implied transaction multiple based on a
deal value of $1.1 billion (based on Coeurs closing
price on April 25, 2007). Based on analyst estimates of
NAV, 2009 earnings and 2009 cashflow, implied transaction
multiples were derived and compared to the comparable company
multiples employed in the Comparable Companies Analysis
(described above). For each metric, the implied transaction
multiple was in line with or below those of the comparable
companies.
July 2,
2007 Opinion of CIBC World Markets (Coeurs Financial
Advisor)
At the special meeting of the Coeur board of directors on
July 2, 2007, CIBC World Markets rendered its oral opinion
to the Coeur board of directors, which was subsequently
confirmed by a written opinion to the Coeur board of directors
dated July 2, 2007, to the effect that, as of that date and
based upon and subject to the factors,
57
assumptions, qualifications and limitations set forth in such
opinion, the consideration to be paid by Coeur pursuant to the
Transaction was fair, from a financial point of view, to Coeur.
The full text of the opinion of CIBC World Markets dated
July 2, 2007, which sets forth, among other things, the
assumptions made, the procedures followed, matters considered
and qualifications and limitations of the review undertaken by
CIBC World Markets in rendering its opinion, is attached as
Annex F-2
to this document. The summary of the CIBC World Markets opinion
set forth herein is qualified in its entirety by reference to
the full text of the opinion. Coeur shareholders should read
this opinion carefully and in its entirety. CIBC World Markets
provided its opinion for the information and assistance of the
Coeur board of directors in connection with its consideration of
the Transactions, and the opinion related only to the fairness,
from a financial point of view, of the consideration to be paid
by Coeur pursuant to the Transactions. The CIBC World Markets
opinion did not express an opinion as to any other aspect or
implication of the Transactions or related transactions, the
terms of the merger implementation agreements (and the exhibits
thereto) or any agreement, arrangement or undertaking entered
into in connection with such transactions, the fairness of the
Transactions (or the merger consideration) to, or any other
consideration of, the holders of any class of securities,
creditors or other constituencies of Coeur, or as to the
underlying decision by Coeur to engage in the Transactions. The
CIBC World Markets opinion is not a recommendation to any Coeur
shareholder as to how it should vote or act on any matter
relating to the Transactions and should not be relied upon by
any Coeur shareholder as such.
In preparing its opinion, CIBC World Markets reviewed the merger
implementation agreements, as well as certain publicly available
business and financial information relating to Coeur, Bolnisi
and Palmarejo, all as noted in the CIBC World Markets opinion
under the heading Scope of Review. CIBC World
Markets reviewed certain other information relating to Coeur,
Bolnisi and Palmarejo, including certain information prepared by
and provided to CIBC World Markets by the managements of Coeur,
Bolnisi and Palmarejo regarding their respective businesses and
prospects, including operational and financial projections
prepared by Coeur incorporating the findings of Coeurs
post-announcement due diligence on the Palmarejo Project, and
certain publicly available estimates and forecasts relating to
the business and prospects of each of Coeur, Bolnisi and
Palmarejo prepared by certain research analysts and met with the
managements of Coeur, Bolnisi and Palmarejo to discuss the
business and prospects of Coeur, Bolnisi and Palmarejo,
respectively. CIBC World Markets also considered certain
financial and stock market data of Coeur, Bolnisi and Palmarejo,
and CIBC World Markets compared that data with similar data for
other publicly held companies in businesses CIBC World Markets
deemed similar to those of Coeur, Bolnisi and Palmarejo, and
CIBC World Markets considered, to the extent publicly available,
the financial terms of certain other business combinations and
other transactions that have been effected or announced. CIBC
World Markets also considered such other information, financial
studies, analyses and investigations and financial, economic and
market criteria that CIBC World Markets deemed relevant.
In connection with its review, CIBC World Markets did not assume
any responsibility for independent verification of any of the
foregoing information and, as permitted under the terms of its
engagement agreements with Coeur, CIBC World Markets relied on
such information being complete and accurate in all material
respects without any independent verification. CIBC World
Markets was not requested to conduct, and did not conduct any
valuation or appraisal of any assets or liabilities (contingent
or otherwise) of Coeur, Bolnisi or Palmarejo (nor was it
furnished with any valuations or appraisals), nor did it
evaluate the solvency or fair value of Coeur, Bolnisi or
Palmarejo under any state or federal laws relating to
bankruptcy, insolvency or similar matters. CIBC World Markets
did not assume any obligation to conduct any physical inspection
of the properties or facilities of Coeur, Bolnisi or Palmarejo,
did not meet with independent auditors of Coeur, Bolnisi or
Palmarejo and relied upon and assumed the accuracy and fair
presentation of the audited financial statements of Coeur,
Bolnisi and Palmarejo and the reports of the auditors thereon.
In relying on financial analyses and forecasts provided to or
discussed with it by Coeur, Bolnisi and Palmarejo, CIBC World
Markets assumed that they had been reasonably prepared and
reflect the best currently available estimates and judgment by
Coeurs, Bolnisis or Palmarejos management as
to the expected future results of operations and financial
condition of Coeur, Bolnisi or Palmarejo, as the case may be.
CIBC World Markets expressed no view as to such analyses or
forecasts or the assumptions on which they were based. CIBC
World Markets also assumed that the Transactions will have the
tax consequences described in discussions with, and materials
furnished to it by, representatives of Coeur and that, in all
respects material to its analysis, the other
58
transactions contemplated by the merger implementation
agreements will be consummated as described in the respective
merger implementation agreements. CIBC World Markets also
assumed that the representations and warranties made by Coeur,
Bolnisi and Palmarejo in the merger implementation agreements
were and will be true and correct in all respects material and
that the Transactions will be completed substantially in
accordance with the merger implementation agreements and all
applicable laws and that this document will satisfy all
applicable legal requirements. CIBC World Markets is not a
legal, regulatory or tax expert and relied on the assessments
made by advisors to Coeur with respect to such issues. CIBC
World Markets further assumed that all governmental, regulatory
or other consents and approvals (contractual or otherwise)
necessary for the consummation of the Transactions will be
obtained without any material adverse effect on Coeur, Bolnisi
and Palmarejo or on the contemplated benefits of the
Transactions.
The CIBC World Markets opinion was necessarily based on
financial, economic, market and other conditions as they existed
and could be evaluated on, and the information made available to
it as of, the date of its opinion. Subsequent developments may
affect its opinion, and CIBC World Markets does not have any
obligation to update, revise, or reaffirm its opinion. The CIBC
World Markets opinion was provided to the Coeur board of
directors in connection with and for the sole purposes of its
evaluation of the Transactions. The CIBC World Markets opinion
is limited to the fairness, from a financial point of view, of
the consideration to be paid by Coeur pursuant to the
Transactions and CIBC World Markets is expressing no opinion as
to the fairness of the Transactions (or the merger
consideration) to, or any consideration of, the holders of any
class of securities, creditors or other constituencies of Coeur
or as to the underlying decision by Coeur to engage in the
Transactions. The opinion of CIBC World Markets did not address
the relative merits of the Transactions as compared to
alternative transactions or strategies that might be available
to Coeur, nor did it address Coeurs underlying business
decision to effect the Transactions. CIBC World Markets was not
requested to, and did not, solicit third party indications of
interest in acquiring all or any part of Coeur. CIBC World
Markets is expressing no opinion as to the price or value of the
Coeur common stock or Bolnisi ordinary shares or Palmarejo
common shares at any time. The CIBC World Markets opinion does
not constitute a recommendation to any shareholder of Coeur as
to how such shareholder should vote or act on any matter
relating to the Transactions or any other matter.
Financial
Analyses of Coeurs Financial Advisors
In preparing its opinion, CIBC World Markets performed a variety
of generally accepted financial and comparative analyses,
including those described below. The preparation of a fairness
opinion is a complex process and is not susceptible to partial
analysis or summary description. In arriving at its opinion,
CIBC World Markets considered the results of all of its analyses
as a whole and did not attribute any particular weight to any
analysis or factor considered by it, but rather made its
determination as to fairness on the basis of its experience and
professional judgment after considering the results of all of
its analyses. CIBC World Markets believes that the summary
provided and the analyses described herein must be considered as
a whole and that selecting any portion of its analyses, without
considering all analyses and factors, would create an incomplete
view of the process underlying its analysis and opinion. As a
result, the ranges of valuations resulting from any particular
analysis or combination of analyses described herein were merely
utilized to create points of reference for analytical purposes
and should not be taken to be the view of CIBC World Markets
with respect to the actual value of Coeur, Bolnisi or Palmarejo.
In performing its analysis, CIBC World Markets made and was
provided by Coeur management with numerous assumptions with
respect to industry performance, general business, market,
financial and economic conditions and other matters, many of
which are beyond the control of CIBC World Markets and Coeur,
Bolnisi and Palmarejo. Analyses based on estimates or forecasts
of future results are not necessarily indicative of future
results or actual values, which may be significantly more or
less favourable than those suggested by such analyses. The
analysis does not purport to be an appraisal or to reflect the
prices at which Coeur common stock will trade following the
announcement or consummation of the Transactions. Because such
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of Coeur, Bolnisi,
Palmarejo or their respective advisors, none of Coeur, Bolnisi,
Palmarejo or CIBC World Markets, nor any other person assumes
responsibility if future results or actual values are materially
different from these forecasts or assumptions.
59
CIBC World Markets was not requested to, and it did not,
recommend the specific form or amount of consideration offered
by Coeur pursuant to the Transactions, which consideration was
determined through negotiations between Coeur, Bolnisi and
Palmarejo. The decision to enter into the Transactions and
related transactions was solely that of the Coeur board of
directors, Bolnisi and Palmarejo. The opinion of CIBC World
Markets and CIBC World Markets related financial analyses
were among many factors considered by the Coeur board of
directors in its evaluation of the Transactions and should not
be viewed as determinative of the views of the Coeur board of
directors or Coeurs management with respect to the
Transactions or the consideration to be paid by Coeur pursuant
to the Transactions.
The following is a summary of the material financial analyses
performed by CIBC World Markets in connection with rendering its
opinion. Some of the summaries of the financial analyses
include information presented in tabular format. In order to
fully understand CIBC World Markets financial analyses,
the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of
CIBC World Markets financial analyses. Considering the
data in the tables below without considering the full narrative
descriptions of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of CIBC World
Markets analyses and opinion.
CIBC World Markets performed its analyses with respect to each
of Coeur, Bolnisi and Palmarejo on a stand-alone and a pro-forma
basis based on:
|
|
|
|
|
Consensus analyst estimates, derived as the average of a range
of market analysts estimates. The estimates selected
represented the most recent publications of those analysts
covering the relevant company, with a specific cut-off date for
Bolnisi and Palmarejo coverage of November 2006 to ensure that
reports reflected the most recent drilling updates from the
Palmarejo Project.
|
|
|
|
Coeur managements production and cost projections for each
of Coeur and the Palmarejo Project, in the latter case including
operational and financial projections prepared by Coeur
incorporating the findings of Coeurs post-announcement due
diligence on the Palmarejo Project, overlaid with consensus
equity analyst projections of future commodity prices
(Internal Estimates). CIBC World Markets derived a
net asset value per share for Palmarejo based on the discounted
cashflow value of the Palmarejo Project adjusted for net cash
and other long term liabilities. Since the only currently
measurable assets of Bolnisi are its investment in Palmarejo and
net cash, the net asset value of Bolnisi was derived by
multiplying the derived value per share of Palmarejo by the
number of shares owned by Bolnisi, plus net cash held by Bolnisi.
|
For the purpose of performing many of its analyses, CIBC World
Markets concluded that it was appropriate to look only at the
relative financial metrics of the Palmarejo Project rather than
aggregating 100% of the relevant Bolnisi financial metric with
the minority share of the Palmarejo financial metric. This
approach was selected as it most accurately reflects the
substance of the Transactions which is that Coeur will own 100%
of the Palmarejo Project as a result of the Transactions and so
will have full ownership and access to the earnings and
cashflows of the Palmarejo Project.
For the purpose of performing many of its analyses, CIBC World
Markets used an unaffected share price for each of
Coeur, Bolnisi and Palmarejo. CIBC World Markets concluded that
it was appropriate to use an unaffected share price
for each of Coeur, Bolnisi and Palmarejo, where necessary, in
its analyses, derived by averaging the outcomes of the following
two analyses:
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Adjusting the pre-announcement share price of each of Coeur,
Bolnisi and Palmarejo as at May 2, 2007 by reference to the
movement in the silver price since the public announcement of
the Transaction on May 3, 2007 until June 27, 2007
(adjusted for each companys respective historical beta to
such silver price); and
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Adjusting the pre-announcement share price of each of Coeur,
Bolnisi and Palmarejo as at May 2, 2007 by reference to the
movement in the Philadelphia Stock Exchange Gold &
Silver Index since the date of the public announcement of the
Transaction on May 3, 2007 until June 27, 2007
(adjusted for each companys respective historical beta to
such index). The Philadelphia Stock Exchange Gold &
Silver Index was chosen as it is comprised of both U.S. and
Canadian gold and silver producers and explorers.
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60
Implied
Valuation Analyses
CIBC World Markets performed various implied valuation analyses
of the ordinary shares of Coeur, Palmarejo and Bolnisi common
shares, as described below. For purposes of the implied
valuation analyses, diluted shares of Palmarejo were calculated
assuming that outstanding options and warrants are to be
acquired based on a Black Scholes valuation as at the date of
the Transactions.
Net Asset Value (NAV) Analysis. CIBC World
Markets analysed implied exchange ratios based on two separate
methodologies for calculating the NAV (defined as the discounted
cash flow value of operating assets plus fair value of
non-operating assets such as cash less fair value of
non-operating liabilities such as debt) of each of Coeur,
Bolnisi and Palmarejo:
1. Analyst consensus figures for each company
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2.
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Discounted cash flow analysis of each company based on Coeur
management estimates including operational and financial
projections prepared by Coeur incorporating the findings of
Coeurs post-announcement due diligence on the Palmarejo
Project.
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Comparing analyst consensus NAVs for Bolnisi and Palmarejo to
that of Coeur implied exchange ratios of 0.742 and 2.902
respectively.
A discounted cash flow analysis is a method of evaluating an
asset using estimates of the future unlevered free cash flows
generated by assets and taking into consideration the time value
of money with respect to those future cash flows by calculating
their present value. Present value
refers to the current value of one or more future cash payments
from the asset, which we refer to as that assets cash
flows, and is obtained by discounting those cash flows back to
the present using a discount rate that takes into account
macro-economic assumptions and estimates of risk, the
opportunity cost of capital, capitalized returns and other
appropriate factors.
In selecting appropriate discount rates to employ, CIBC World
Markets gave consideration to the discount rates employed by
analysts covering the three companies. It was noted that the
average discount rate employed by analysts covering Coeur was
5.9% while the average for both Bolnisi and Palmarejo was 5%.
These discount rates are in line with standard market practice
amongst precious metals analysts who generally employ 5% as a
base discount rate for all companies, adjusted,
where necessary, for company specific risk factors.
Based on these analyst consensus discount rates for each
company, the implied exchange ratios derived from this analysis
were 0.694 per Bolnisi share and 2.955 per Palmarejo share.
Comparable Companies Analysis. CIBC World
Markets calculated implied exchange ratios on a price to NAV,
price to cashflow and price to earnings basis for each of Coeur,
Bolnisi and Palmarejo. Calculations were effected by deriving a
per share value for each company based on analyst consensus NAV,
cashflow and earnings figures multiplied by the relevant average
multiple for appropriate comparable trading companies.
For cashflow and earnings, estimates for 2009 were employed as
this is expected to be the first full year of production at the
Palmarejo Project and so is the most appropriate period to use.
Based on its experience with companies in the mining industry,
CIBC World Markets selected the following companies as being
potentially relevant to an evaluation of the per share value of
Coeur:
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P/2009E
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P/2009E
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Coeur Comparable Company Set(1)
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P/NAV
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Cashflow
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Earnings
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Hecla Mining
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1.56
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x
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10.5
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x
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14.8
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x
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Gammon Gold
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1.62
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x
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8.7
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x
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12.4
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x
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Pan American Silver
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1.53
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x
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11.2
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x
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16.1
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x
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Apex Silver
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n/a
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8.5
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x
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12.6
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x
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Silver Wheaton
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1.48
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x
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14.0
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x
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15.4
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x
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Average
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1.47
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x
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9.7
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x
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13.1
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x
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(1) |
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Calculated based on last price on June 27, 2007 |
61
Similarly, the following companies were selected as being
potentially relevant to an evaluation of the per share value of
Bolnisi and Palmarejo:
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P/2009E
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P/2009E
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Bolnisi and Palmarejo Comparable Company Set(1)
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P/NAV
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Cashflow
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Earnings
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Endeavour Silver
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1.63
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x
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12.6
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x
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22.7
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x
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First Majestic
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1.04
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x
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n/a
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n/a
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Minefinders
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1.01
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x
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4.4
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x
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5.0
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x
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Scorpio Mining
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n/a
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