CALCULATION OF REGISTRATION FEE

				Proposed Maximum					Proposed Maximum					Proposed Maximum
	Title of Each Class of Securities			Amount to be					Aggregate Price					Aggregate Offering
	to Be Registered			Registered(1)					Per Unit					Price(1)					Registration Fee(2)
	3.25% Convertible Senior Notes due 2028			$	230,000,000					100%				$	230,000,000				$	9,039.00
	Common Stock				—(3)					—(3)					—(3)					—(3)

As filed pursuant to Rule 424(b)(5)
under the Securities Act of 1933
in connection with
Registration No. 333-130711

Prospectus Supplement (to Prospectus dated December 27, 2005)

Coeur d’Alene Mines Corporation

 

 

 

		Per Note				Total
Public offering price			100.00	%		$	200,000,000
Underwriting discounts and commissions			3.25	%		$	6,500,000
Proceeds, before expenses, to us			96.75	%		$	193,500,000

 

Some of the information included in this prospectus supplement and in the accompanying prospectus and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by us or our representatives) contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by the fact that they do not relate strictly to historical or current facts and may include the words “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan” or other words or expressions of similar meaning. We have based these forward-looking statements on our current expectations about future events. The forward-looking statements include statements that reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our financial condition, results of operations, future performance and business, including statements relating to our business strategy, expected production volumes and our current and future development plans.

 

Oral or written forward-looking statements are included in this prospectus supplement and in the accompanying prospectus and other materials filed or to be filed by us with the SEC (as well as information included in oral statements or other written statements made or to be made by us or our representatives). Although we believe, at the time made, that the expectations reflected in all of these forward-looking statements are and will be reasonable, any or all of the forward-looking statements in this prospectus supplement and in the accompanying prospectus, our Annual Report on Form 10-K and in any other public statements that are made may prove to be incorrect, whether as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties including, but not limited to, future gold and silver prices, costs, ore grades, estimation of gold and silver reserves, mining and processing conditions, construction schedules, currency exchange rates, and the completion and/or updating of mining feasibility studies, changes that could result from future acquisitions of new mining properties or businesses, the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), regulatory and permitting matters, risks inherent in the ownership and operation of, or investment in, mining properties or businesses in foreign countries. Many of these and other factors discussed in this prospectus supplement and in the accompanying prospectus, some of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this prospectus supplement or in the accompanying prospectus or other public communications that we might make as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements.

 

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent reports filed with the SEC on Forms 10-K, 10-Q and 8-K.

 

 

This document is in two parts. The first is this prospectus supplement, which describes the specific terms of this offering. The second part, the accompanying prospectus, gives more general information, some of which may not apply to this offering and some of which has been replaced or superseded by information in this prospectus supplement or in the documents incorporated by reference herein.

 

If the description of this offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.

 

PROSPECTUS SUPPLEMENT SUMMARY

	•	continue to increase our silver production and reserves;
	•	decrease cash costs and increase production at our existing silver mining operations;
	•	transform development-stage properties into producing mines;
	•	acquire operating mines, mineral interests, exploration and/or development properties with a goal of reducing our overall cash and total costs per ounce of silver produced, providing immediate positive cash flow return and expanding our silver production base and reserves; and
	•	continue to explore for new silver and gold discoveries primarily near our existing mine sites and evaluate new opportunities to expand our production through acquisitions and exploration.

		Proven and
		Probable				Mineralized
		Ore Reserves				Material
Tons (000’s)			782				2,865
Ounces of silver per ton			9.26				9.28
Contained ounces of silver (000’s)			7,234				—
Ounces of gold per ton			0.14				0.14
Contained ounces of gold			111,600				—

		Proven and
		Probable				Mineralized
		Ore Reserves				Material
Tons (000’s)			154				165
Ounces of silver per ton			53.97				32.75
Contained ounces of silver (000’s)			8,293				—
Ounces of gold per ton			0.07				0.04
Contained ounces of gold			10,600				—

		Proven and
		Probable				Mineralized
		Ore Reserves				Material
Tons (000’s)			—				32,664
Ounces of silver per ton			—				0.85
Ounces of gold per ton			—				0.006

		Proven and
		Probable				Mineralized
		Ore Reserves				Material
Tons (000’s)			19,731				12,291
Ounces of silver per ton			1.52				2.44
Contained ounces of silver (000’s)			29,926				—

		Proven and
		Probable				Mineralized
		Ore Reserves				Material
Tons (000’s)			12,394				9,844
Ounces of silver per ton			1.45				3.82
Contained ounces of silver (000’s)			17,931				—

		2007				2006				2005
CERRO BAYO MINE
Silver ozs			1,709,830				2,331,060				2,875,047
Gold ozs			37,479				40,923				61,058
Cash costs per oz./silver		$	8.22			$	3.04			$	0.54
Total costs per oz./silver		$	11.82			$	5.46			$	2.30
MARTHA MINE
Silver ozs			2,748,705				2,712,846				2,093,464
Gold ozs			4,127				3,440				2,589
Cash costs per oz./silver		$	6.27			$	4.88			$	4.60
Total costs per oz./silver		$	6.78			$	5.36			$	5.01
ENDEAVOR MINE (A)
Silver ozs			772,609				481,991				316,169
Cash costs per oz./silver		$	2.67			$	2.85			$	2.05
Total costs per oz./silver		$	3.65			$	3.87			$	3.35
BROKEN HILL MINE (A)
Silver ozs			1,642,205				2,174,585				657,093
Cash costs per oz./silver		$	3.18			$	3.09			$	2.72
Total costs per oz./silver		$	5.04			$	5.44			$	5.47
ROCHESTER MINE (B)
Silver ozs			4,614,780				5,113,504				5,720,489
Gold ozs			50,408				71,891				70,298
Cash costs per oz./silver		$	1.52			$	2.80			$	4.82
Total costs per oz./silver		$	3.82			$	5.84			$	6.66
CONSOLIDATED PRODUCTION TOTALS
Silver ozs			11,488,129				12,813,986				11,662,262
Gold ozs			92,014				116,254				133,945
Cash costs per oz./silver		$	3.97			$	3.33			$	3.53
Total costs per oz./silver		$	5.88			$	5.53			$	5.13
CONSOLIDATED SALES TOTAL (C)
Silver ozs. sold			11,506,560				12,841,634				12,579,634
Gold ozs. sold			94,284				116,400				146,749
Realized price per silver oz		$	13.59			$	12.03			$	7.47
Realized price per gold oz		$	700			$	623			$	452

(A)	We acquired our interests in the Endeavor and Broken Hill mines in May 2005 and September 2005, respectively.
(B)	The leach cycle at Rochester requires 5 to 10 years to recover gold and silver contained in the ore. We estimate the ultimate recovery to be approximately 61.5% for silver and 93% for gold. Ultimate recoveries will not, however, be known until leaching operations cease, which we expect will occur in 2011. Current recovery may vary significantly from ultimate recovery. In August 2007, mining and crushing activities were terminated as ore reserves were fully mined.
(C)	Units sold at realized metal prices will not match reported metal sales due primarily to the effects on revenues of mark-to-market adjustments on embedded derivatives in our provisionally priced sales contracts.

		Year Ended December 31,
		2006				2005
Silver Valley/Galena
Tons milled			52,876				128,502
Ore grade/Silver oz			15.15				16.53
Recovery/Silver oz			96.0	%			97.0	%
Silver production ounces			768,674				2,060,338
Cash cost/oz		$	9.75			$	8.37
Total cost/oz		$	10.64			$	9.34
Gold production ounces			180				282

		Year Ended December 31, 2007
						Cerro												Broken
		Rochester				Bayo				Martha				Endeavor (1)				Hill (1)				Total
		(in thousands except ounces and per ounce costs)
Production of silver (ounces)			4,614,780				1,709,830				2,748,705				772,609				1,642,205				11,488,129
Cash costs per ounce		$	1.52			$	8.22			$	6.27			$	2.67			$	3.18			$	3.97
Total cash costs (Non-GAAP)		$	7,035			$	14,055			$	17,245			$	2,064			$	5,228			$	45,627
Add/Subtract:
Third party smelting costs			—				(3,603	)			(2,112	)			(1,347	)			(2,006	)			(9,068	)
By-product credit (2)			34,664				26,199				2,889				—				—				63,752
Other adjustment			1,926				—				—				—				—				1,926
Change in inventory			16,738				(1,701	)			(146	)			(172	)			69				14,788
Depreciation, depletion and amortization			8,697				6,155				1,383				755				3,055				20,045
Production costs applicable to sales, including depreciation, depletion and amortization (GAAP)		$	69,060			$	41,105			$	19,259			$	1,300			$	6,346			$	137,070

		Year Ended December 31, 2006
						Cerro												Broken
		Rochester				Bayo				Martha				Endeavor (1)				Hill (1)				Total
		(in thousands except ounces and per ounce costs)
Production of silver (ounces)			5,113,504				2,331,060				2,712,846				481,991				2,174,585				12,813,986
Cash costs per ounce		$	2.80			$	3.04			$	4.88			$	2.85			$	3.09			$	3.33
Total cash costs (Non-GAAP)		$	14,299			$	7,089			$	13,240			$	1,373			$	6,712			$	42,713
Add/Subtract:
Third party smelting costs			—				(3,475	)			(1,853	)			(948	)			(2,620	)			(8,896	)
By-product credit (2)			43,697				24,861				2,079				—				—				70,637
Other adjustment			1,803				—				—				—				—				1,803
Change in inventory			(12,489	)			(1,105	)			(518	)			(39	)			272				(13,879	)
Depreciation, depletion and amortization			13,745				5,638				1,297				490				5,120				26,290
Production costs applicable to sales, including depreciation, depletion and amortization (GAAP)		$	61,055			$	33,008			$	14,245			$	876			$	9,484			$	118,668

		Year Ended December 31, 2005
																		Broken
		Rochester				Cerro Bayo				Martha				Endeavor (1)				Hill (1)				Total
		(in thousands except ounces and per ounce costs)
Production of silver (ounces)			5,720,489				2,875,047				2,093,464				316,169				657,093				11,662,262
Cash costs per ounce		$	4.82			$	0.54			$	4.60			$	2.05			$	2.72			$	3.53
Total cash costs (Non-GAAP)		$	27,575			$	1,542			$	9,637			$	648			$	1,790			$	41,192
Add/Subtract:
Third party smelting costs			—				(2,783	)			(1,165	)			(370	)			(570	)			(4,888	)
By-product credit (2)			31,601				27,114				1,152				—				—				59,867
Other adjustment			140				—				—				—				—				140
Change in inventory			(14,769	)			7,421				(328	)			—				(403	)			(8,079	)
Depreciation, depletion and amortization			10,402				5,064				843				411				1,807				18,527
Production costs applicable to sales, including depreciation, depletion and amortization (GAAP)		$	54,949			$	38,358			$	10,139			$	689			$	2,624			$	106,759

		2006 (3)				2005
		(in thousands except for ounces and per ounce costs)
Production of silver (ounces)			768,674				2,060,338
Cash costs per ounce		$	9.75			$	8.37
Total cash costs (Non-GAAP)		$	7,498			$	17,248
Add/Subtract:
Third party smelting costs			(1,464	)			(3,091	)
By-product credit (2)			1,473				2,722
Change in inventory			726				(181	)
Depreciation, depletion and amortization			681				1,996
Production costs applicable to sales, including depreciation, depletion and amortization (GAAP)		$	8,914			$	18,694

(1)		Our share of silver production at Endeavor and Broken Hill commenced in May 2005 and September 2005, respectively.
(2)		By-product credits are based upon production units and the period’s average metal price for purposes of reporting cash costs per ounce.
(3)		Amounts represent five months ended May 31, 2006.

		Proven and
		Probable				Mineralized
		Ore Reserves				Material
Tons (000’s)			42,043				15,816
Ounces of silver per ton			3.64				2.21
Contained ounces of silver (000’s)			153,000				—

		Proven and
		Probable				Mineralized
		Ore Reserves				Material
Tons (000’s)			4,419				4,320
Ounces of gold per ton			0.31				0.20
Contained ounces of gold			1,352,100				—

Issuer		Coeur d’Alene Mines Corporation, an Idaho corporation.
Notes Offered		$200,000,000 aggregate principal amount of 3.25% Convertible Senior Notes due 2028 (plus up to an additional $30,000,000 aggregate principal amount if the underwriters exercise in full their option to purchase additional notes).
Maturity		March 15, 2028, unless earlier converted, redeemed or repurchased.
Ranking		The notes will be our general unsecured obligations and will rank in right of payment:
		• equally with all our other existing and future obligations that are unsecured and unsubordinated;
		• senior to any future subordinated indebtedness of ours;
		• effectively junior to any of our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness; and
		• structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
Interest		The notes will bear interest at an annual rate of 3.25%. Interest on the notes is payable semi-annually in arrears on March 15 and September 15 of each year, beginning September 15, 2008.
Conversion Rights		The notes are convertible only under the following circumstances:
		• during any calendar quarter commencing after the date of original issuance of the notes, if the closing sale price per share of our common stock is more than 130% of the conversion price for at least 20 trading days in the 30-consecutive-trading-day period ending on the last trading day of the immediately preceding calendar quarter;
		• during the five consecutive trading-day-period immediately after any five-consecutive-trading-day period in which the average trading price of the notes for each day of such period was less than 95% of the product of the closing sale price per share of our common stock

		on that day multiplied by the applicable conversion rate in respect of the notes on each such trading day;
		• in the case of notes called for redemption, at any time prior to the close of business two business days prior to the redemption date for the notes;
		• upon the occurrence of specified events described under “Description of the Notes — Conversion Rights — Conversion upon Specified Corporate Transactions;” or
		• at any time during the three-month periods prior to each of March 15, 2013, March 15, 2015, March 15, 2018, March 15, 2023 and March 15, 2028 (three months prior to each date holders have the right to require us to repurchase notes at their option and the stated maturity date), ending on or prior to the close of business on the business day immediately prior to each such date.
		The initial conversion rate for each $1,000 principal amount of notes is 176.0254 shares of our common stock, which is equivalent to an initial conversion price of approximately $5.68 per share, subject to adjustment upon certain events as described in this prospectus supplement. The initial conversion rate will be adjusted for certain events, but it will not be adjusted for accrued interest. If you elect to convert your notes in connection with certain fundamental change transactions described below under “Description of the Notes — Adjustment to Shares Delivered upon Conversion upon a Qualifying Fundamental Change” at any time while the notes are outstanding, we will increase the conversion rate by a number of additional shares of common stock as described hereunder.
		You will not receive any cash payment of interest upon conversion of a note, except in limited circumstances. Instead, interest will be deemed paid in full by the cash and shares of common stock delivered to you upon conversion as described under “Description of the Notes — Settlement upon Conversion,” rather than cancelled, extinguished or forfeited.
Settlement upon Conversion		Upon conversion, we will deliver cash equal to the lesser of the aggregate principal amount of the notes being converted and our total conversion obligation, plus cash or shares of common stock or a combination of cash and shares of common stock, at our election, in respect of the remainder, if any, of our total conversion obligation. See “Description of the Notes — Settlement upon Conversion.”
Redemption		We will have the right to redeem the notes for cash as a whole, at any time, or from time to time in part, on or after March 22, 2015 at 100% of the principal amount of the notes to be redeemed, plus any accrued and unpaid

		interest up to, but not including, the redemption date as described under “Description of the Notes — Optional Redemption of the Notes.”
Repurchase at the Option of the Holder		Holders will have the right to require us to repurchase their notes, in whole or in part, on March 15, 2013, March 15, 2015, March 15, 2018 and March 15, 2023 for a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest as described under “Description of the Notes — Repurchase of Notes at the Option of the Holder.” In lieu of paying cash for the repurchase price, we may elect to pay shares of common stock or a combination of cash and shares of common stock.
Repurchase upon Fundamental Change		If we undergo certain fundamental change transactions at any time while the notes are outstanding, holders will have the right, subject to certain conditions, to require us to repurchase all or any part of their notes for cash at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest as described under “Description of the Notes — Right to Require Purchase of Notes upon a Fundamental Change.”
Use of Proceeds		We estimate that the net proceeds from this offering, after deducting the underwriters’ discounts and commissions and estimated offering expenses, will be approximately $192.7 million (or approximately $221.7 million if the underwriters exercise in full their option to purchase additional notes).
		We intend to apply the net proceeds from this offering to complete the construction of the San Bartolomé silver project in Bolivia and fund construction of the Palmarejo silver/gold project in Mexico. Any additional remaining proceeds may be used to repay borrowings under our bridge loan facility and for general corporate purposes.
Trustee, Paying Agent and Conversion Agent		The Bank of New York.
Book-Entry Form		The notes will be issued in book-entry only form and will be represented by one or more global notes in definitive, fully registered, book-entry form, deposited with, or on behalf of, The Depository Trust Company (“DTC”) and registered in the name of a nominee of DTC. Beneficial interests in any of the notes will be shown on, and transfers will be effected only through, records maintained by DTC or its nominee and any such interest may not be exchanged for certificated notes except in limited circumstances. See “Description of the Notes — Book-Entry System.”

Trading		The notes will be new securities for which no market currently exists. While the underwriters have informed us that they intend to make a market in the notes, they are under no obligation to do so and may discontinue such activities at any time without notice. See “Underwriting.” We cannot assure you that an active or liquid market will develop or be maintained for the notes.
New York Stock Exchange Symbol		CDE.
Toronto Stock Exchange Symbol		CDM.
Risk Factors		You should carefully consider the information set forth under the heading “Risk Factors” in this prospectus supplement and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as well as the other information included in or incorporated by reference into this prospectus supplement before deciding whether to invest in the notes or the common stock into which the notes, in certain circumstances, are convertible.

		2007				2006				2005
		(in thousands, except
		per share data)
Income Statement Data:
Revenues:
Sales of metal		$	215,319			$	216,573			$	156,284
Costs and expenses:
Production costs applicable to sales			117,025				92,378				88,232
Depreciation and depletion			20,984				26,772				18,889
Administrative and general			23,875				19,369				20,624
Exploration			11,941				9,474				10,553
Pre-development			—				—				6,057
Litigation settlements			507				2,365				1,600
Total costs and expenses			174,332				150,358				145,955
Operating income			40,987				66,215				10,329
Other income and expense:
Interest and other income			18,195				18,654				8,385
Interest expense, net of capitalized interest			(365	)			(1,224	)			(2,485	)
Total other income and expense			17,830				17,430				5,900
Income (loss) from continuing operations before income taxes			58,817				83,645				16,229
Income tax provision			(14,927	)			(8,226	)			(1,483	)
Income (loss) from continuing operations			43,890				75,419				14,746
Income (loss) from discontinued operations before income taxes			—				1,935				(4,195	)
Gain on sale of net assets of discontinued operation			—				11,132				—
Net income		$	43,890			$	88,486			$	10,551
Other comprehensive income			86				2,391				447
Comprehensive income		$	43,976			$	90,877			$	10,998
Basic and Diluted Income Per Share Data:
Basic Income Per Share
Income from continuing operations		$	0.15			$	0.28			$	0.06
Income (loss) from discontinued operations			—				0.05				(0.02	)
Net income		$	0.15			$	0.33			$	0.04
Diluted Income Per Share
Income from continuing operations		$	0.14			$	0.26			$	0.06
Income (loss) from discontinued operations			—				0.04				(0.02	)
Net income		$	0.14			$	0.30			$	0.04
Weighted average number of shares of common stock
Basic			285,972				271,357				242,915
Diluted			310,524				296,082				243,683
Balance Sheet Data (1):
Total assets		$	2,651,694			$	849,626			$	594,816
Working capital		$	152,390			$	383,082			$	281,977
Long-term liabilities		$	812,650			$	210,117			$	206,921
Shareholders’ equity		$	1,727,367			$	580,994			$	341,553

(1)		On December 21, 2007, we completed our acquisition of all the shares of Bolnisi and Palmarejo in exchange for a total of approximately 272 million shares of our common stock and a total cash payment of approximately $1.1 million. The total consideration paid amounted to $1.1 billion and total liabilities assumed were $0.7 billion.

						Bolnisi/Palmarejo				Purchase								Pro-Forma Income
		Coeur				For the period of				Transaction								Statement
		12 Months Ended				January 1, 2007 to				Adjustments								12 Months Ended
(in thousands)		December 31, 2007				December 20, 2007				Dr				Cr				December 31, 2007
REVENUES
Sales of metals		$	215,319			$	—			$	—			$	—			$	215,319
COSTS AND EXPENSES
Production costs applicable to sales			117,025				—				—				—				117,025
Depreciation and depletion			20,984				17												21,001
Administrative and general			23,875				4,400				—				—				28,275
Exploration			11,941				11,579				—				—				23,520
Pre-Development Expense			—				9,610				—				—				9,610
Other			—				3,360												3,360
Litigation settlements			507				—				—				—				507
Total costs and expenses			174,332				28,966				—				—				203,298
Operating income (loss)			40,987				(28,966	)			—				—				12,021
OTHER INCOME AND EXPENSE
Interest and other income			18,195				305												18,500
Interest expense, net of capitalized interest			(365	)			(212	)											(577	)
Merger related costs			—				(11,302	)			—				—				(11,302	)
Total other income and expense			17,830				(11,209	)			—				—				6,621
Income (loss) from continuing operations before income taxes			58,817				(40,175	)			—				—				18,642
Income tax provision			(14,927	)			—												(14,927	)
NET INCOME (LOSS)			43,890				(40,175	)			—				—				3,715
Other comprehensive income			86				—				—				—				86
COMPREHENSIVE INCOME (LOSS)		$	43,976			$	(40,175	)		$	—			$	—			$	3,801
BASIC INCOME per share		$	0.15															$	0.01
DILUTED INCOME per share		$	0.14															$	0.01
Weighted average number of shares of common stock
Basic			285,972					(a)			8,196				271,969				549,745
Diluted			310,524					(a)			8,196				271,969				574,297

(a)		Adjustment to eliminate the effect of the weighted average shares issued from December 20, 2007 to December 31, 2007 that is already included in the Coeur column.

 

An investment in the notes and our common stock involves certain risks. You should carefully consider the risks described below and all other information set forth or incorporated by reference in this prospectus supplement before making an investment decision. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are immaterial, actually occur, our business, financial condition and results of operations could be materially and adversely affected. In that event, the value of the notes and the trading price of our shares could decline, and you may lose part or all of your investment.

 

Risks Relating to an Investment in the Notes

 

Our obligations under the notes will be unsecured and, therefore, will be effectively subordinated to any of our secured debt.

 

Our obligations under the notes are unsecured by any of our assets or any assets of our subsidiaries. As a result, the notes will be effectively subordinated to any secured debt that we may incur. In any liquidation, dissolution, bankruptcy, or other similar proceeding, holders of our secured debt may assert rights against the assets securing that debt in order to receive full payment of their debt before the assets may be used to pay our unsecured creditors, including the holders of the notes. The notes and the related indenture do not limit our ability to incur additional indebtedness, liabilities and obligations, including secured indebtedness.

 

Creditors of our subsidiaries will get paid before you will get paid.

 

We operate our business through our subsidiaries. Accordingly, we are dependent upon the cash flows of, and receipt of dividends and advances from, or repayments of advances by, our subsidiaries in order to meet our debt obligations, including our obligations under the notes. The notes are not guaranteed by our subsidiaries and, consequently, our subsidiaries are not obligated or required to pay any amounts pursuant to the notes or to make funds available in the form of dividends or advances. Any payment of dividends, distributions, loans or advances by our subsidiaries will also be contingent upon our subsidiaries’ earnings and subject to contractual or statutory restrictions.

 

In addition, our right to participate in any distribution of assets of any of our subsidiaries, upon any subsidiary’s bankruptcy, liquidation, reorganization or similar proceeding, and thus your ability as a holder of the notes to benefit indirectly from such distribution, will be subject to the prior claims of creditors of that subsidiary, except to the extent that any of our claims as a creditor of such subsidiary may be recognized. As a result, the notes will be structurally subordinated to all existing and future liabilities and obligations of our subsidiaries. Therefore, holders of the notes should look only to our assets for payments on the notes. The notes and the related indenture do not limit the ability of any of our subsidiaries to incur additional indebtedness, liabilities and obligations, and our subsidiaries may incur significant additional indebtedness that effectively ranks senior to the notes. As of December 31, 2007, our subsidiaries had $154.7 million of indebtedness and other liabilities, including trade payables and excluding deferred tax liabilities.

 

There may not be an active trading market for the notes and their price may be volatile. You may be unable to sell your notes at the time and price desired or at all.

 

The notes are a new issue of securities for which there currently is no trading market. As a result, a liquid market may not develop or be maintained for the notes, you may not be able to sell any of the notes at a particular time, if at all, and the prices you receive if or when you sell the notes may not be above their initial offering price. If any of the notes are traded after their initial issuance, they may trade at a discount from their initial offering price. Future trading prices of the notes will depend on many factors, including prevailing interest rates, the market for similar securities, the price of our underlying common stock, general economic conditions and our financial condition, performance and prospects. The underwriters have advised us that they intend to make a market in the notes, but they are not obligated to do so. The underwriters may terminate their market making activities, if any, at any time, in their sole discretion, which could negatively affect your ability to sell the notes or the prevailing market price at the time you choose to sell.

 

We may not be able to repurchase the notes upon a fundamental change.

 

Upon the occurrence of certain fundamental changes at any time while the notes are outstanding, you will have the right to require us to repurchase your notes at a price in cash equal to 100% of the principal amount of the notes you have selected to be repurchased plus accrued and unpaid interest, if any, to, but not including, the repurchase date. In the event that we experience a fundamental change that results in our having to repurchase the notes offered hereby, we may not have sufficient financial resources to satisfy all of our obligations under the notes and our other indebtedness. If any arrangement or agreement governing our indebtedness prohibits us from repurchasing the notes when we become obligated to do so, we could seek the consent of the lenders to repurchase the notes or attempt to refinance the borrowings that contain the prohibitions. If we did not obtain the necessary consents or refinance such borrowings, we would not be able to repurchase the notes.

 

Additionally, we derive almost all of our operating income from our subsidiaries. An important source of cash to repurchase the notes or to pay you cash upon conversion of your notes would be cash distributions, dividends and other payments from our subsidiaries. The payment of dividends by our subsidiaries is subject to the declaration of dividends by those subsidiaries’ governing bodies, and our subsidiaries are not obligated to pay dividends. Our subsidiaries’ ability to make such payments may also be restricted by, among other things, applicable laws and regulations and current and future debt agreements into which our subsidiaries may enter. In any of the situations described above, or otherwise, our failure to make the fundamental change offer, to pay the fundamental change repurchase price when due or to pay cash to you upon your conversion of notes, would result in a default under the indenture governing the notes. A default under the indenture or a fundamental change could lead to a default under our credit facilities or other existing and future agreements governing our indebtedness. If the repayment of the related indebtedness were to be accelerated, we may not have sufficient funds to repay the indebtedness and repurchase the notes.

 

Upon the exercise of your option to require us to repurchase the notes, we may elect, in lieu of paying cash for the repurchase price, to pay shares of common stock or a combination of cash and shares of common stock.

 

You should be aware that, upon the exercise of your option to require us to repurchase the notes in cash, we may elect to pay the repurchase price in cash, shares of our common stock or a combination of cash and share of common stock. If you require us to repurchase your notes, you may not have the liquidity you expect upon repurchase of the notes and, if we elect to pay some or all of the repurchase price in common stock, you may become subject to the market risks of our common stock.

We would not be obligated to repurchase the notes in connection with significant restructuring transactions that do not constitute a fundamental change.

 

Upon the occurrence of a fundamental change, you will have the right subject to certain conditions, to require us to repurchase your notes for cash, in whole or in part, at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest up to but excluding the date of repurchase. However, the fundamental change provisions will not afford protection to holders of the notes in the event of certain transactions. For example, we will not be required to repurchase any notes upon the occurrence of a fundamental change and you will not be entitled to an increased conversion rate upon conversion in connection with a fundamental change if more than 90% of the consideration in the transaction consists of shares of common stock traded on a U.S. national or regional securities exchange, or will be so traded immediately following the fundamental change transaction. Furthermore, transactions such as leveraged recapitalizations, refinancings, restructurings or acquisitions initiated by us would not constitute a fundamental change requiring us to repurchase the notes. In the event of any such transaction, the holders of notes would not have the right to require us to repurchase the notes, even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of the notes.

 

Provisions of the notes could discourage an acquisition of us by a third party.

 

Upon the occurrence of certain transactions constituting a fundamental change at any time while the notes are outstanding, holders of the notes will have the right, at their option, to require us to repurchase, at a cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest on the notes, all of their notes or any portion of the principal amount of such notes in integral multiples of $1,000. These fundamental change repurchase provisions may make it more difficult or more expensive for a third party to acquire us or delay or prevent a takeover of our company and the removal of incumbent management that might otherwise be beneficial to investors.

 

The net share settlement feature of the notes may have adverse consequences.

 

The net share settlement feature of the notes, as described under “Description of the Notes — Settlement upon Conversion,” may:

 

 

If the notes are convertible, upon conversion we will deliver cash equal to the lesser of the aggregate principal amount of the notes being converted and our total conversion obligation, plus cash or shares of common stock or a combination thereof, at our election, in respect of the remainder, if any, of our total conversion obligation. The settlement amount that you will receive on conversion of your notes will in part be determined by the volume weighted average price of our common stock on each of the 20 consecutive trading days beginning on the first trading day after the two consecutive business days immediately following the day you have tendered your notes for conversion and complied with the other requirements to convert them, subject to certain exceptions in connection with conversions during a period immediately preceding the maturity date of the relevant notes as described in this prospectus

supplement. We refer to this 20 consecutive trading day period as the “conversion settlement averaging period.”

 

Other than during certain periods immediately prior to maturity, we will generally deliver the cash and, if applicable, shares of common stock issuable upon conversion on the third business day following the conversion settlement averaging period, which will generally be at least 23 trading days after the date holders tender their notes for conversion. In addition, because the consideration due upon conversion is based in part on the trading prices of our common stock during the conversion settlement averaging period, any decrease in the price of our common stock after you tender your notes for conversion may significantly decrease the value of the consideration you receive. Furthermore, because we must settle at least a portion of our conversion obligation in cash, the conversion of notes may significantly reduce our liquidity.

 

We expect that the trading value of the notes will be significantly affected by the price of our common stock and other factors.

 

The market price of the notes is expected to be significantly affected by the market price of our common stock. This may result in greater volatility in the trading value of the notes than would be expected for nonconvertible debt securities. In addition, the notes have a number of features, including conditions to conversion, which, if not met, could result in the trading price of the notes being less than the value of our common stock into which a note would otherwise be convertible. These features could adversely affect the value and the trading prices of the notes.

 

The market price of our common stock, into which the notes are convertible, has been volatile and may decline.

 

The market price of our common stock has been volatile and may decline in the future. The high and low closing sale prices of our common stock on the New York Stock Exchange were $4.59 and $2.75 in 2005; $7.37 and $3.95 in 2006; $4.94 and $3.25 in 2007; and $5.06 and $4.20 for the two months ending February 29, 2008. The closing sale price on the New York Stock Exchange on March 11, 2008 was $4.89 per share.

 

The market price of our common stock historically has fluctuated widely and been affected by many factors beyond our control. These factors include:

 

 

Most of these factors are beyond our control. In addition, stock markets, including The New York Stock Exchange, generally experience price and trading fluctuations, which result in volatility in the market price of securities that may be unrelated or disproportionate to changes in operating performance. These broad market fluctuations may affect adversely the market prices of the notes and our common stock.

Sales of a significant number of shares of our common stock in the public markets, or the perception of these sales, could depress the market price of the notes.

 

Sales of a substantial number of shares of our common stock or other equity-related securities in the public markets, including the issuance of common stock upon conversion of the notes or the vesting of restricted stock, could depress the market price of the notes, our common stock, or both, and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock or the value of the notes. In addition, the existence of the notes also may encourage short selling by market participants because the conversion of the notes could depress our common stock price.

 

If you hold notes, you will not be entitled to any rights with respect to our common stock, but will be subject to all changes made with respect to our common stock.

 

If you hold notes, you will not be entitled to any rights with respect to our common stock (including voting rights or rights to receive any dividends or other distributions on our common stock), but will be subject to all changes affecting our common stock. You will have rights with respect to our common stock only if and when you tender your notes for conversion and comply with the other requirements to convert them and they are converted into our common stock, except, in limited cases, for rights arising under the conversion rate adjustments applicable to the notes. For example, in the event that an amendment is proposed to our charter or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to conversion of your notes, you will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock that result from such amendment. Similarly, if we declare a dividend and the record date for determining the stockholder of record entitled to the dividend occurs prior to the conversion date, you will not be entitled to the dividend, but only to a conversion rate adjustment, if any, provided for under “Description of the Notes—Conversion Rate Adjustments.”

 

The conversion rate of the notes may not be adjusted for all dilutive events, which may adversely affect the trading price of the notes.

 

The conversion rate of the notes is subject to adjustment for certain events, including the issuance of stock dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness or assets, certain cash dividends and certain issuer tender or exchange offers as described under “Description of the Notes—Conversion Rate Adjustments.” However, the conversion rate will not be adjusted for other events, such as certain exchange offers or an issuance of common stock for cash, that may adversely affect the trading price of the notes or our common stock. An event that adversely affects the value of the notes may occur, and the event may not result in an adjustment to the conversion rate.

 

Rating agencies may provide unsolicited ratings on the notes that could reduce the market value or liquidity of the notes and our common stock.

 

We have not requested a rating of the notes from any rating agency, and we do not anticipate that the notes will be rated. However, if one or more rating agencies rates the notes and assigns the notes a rating lower than the rating expected by investors, or reduces their rating in the future, the market price or liquidity of the notes could be harmed.

The adjustment to increase the conversion rate for notes converted in connection with certain fundamental changes may not adequately compensate holders for the lost option time value of their notes as a result of such fundamental change.

 

If a fundamental change occurs at any time while the notes are outstanding, we may be required to increase the conversion rate for any notes converted in connection with such fundamental change. The extent to which the conversion rate will be increased will be based on the date on which the fundamental change becomes effective and the price paid, or deemed to be paid, in respect of a share of our common stock in the fundamental change as described under “Description of the Notes—Adjustment to Shares Delivered upon Conversion upon a Qualifying Fundamental Change.” While this adjustment is designed to compensate you for the lost option time value of your notes as a result of a fundamental change, the adjustment is only an approximation of such lost value and may not adequately compensate you for any loss you experience.

 

Our obligation to adjust the conversion rate in connection with fundamental change transactions could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.

 

You should consider the United States federal income tax consequences of owning the notes.

 

Investors should be aware that the conversion of notes into cash or a combination of cash and shares of common stock will be taxable at the time of such conversion (or subject to alternative treatment different from that of convertible debt instruments settled in shares only). These consequences may be materially different from the consequences that may be expected by investors in considering other convertible debt investments. Investors considering the purchase of notes are urged to consult with their own tax advisors concerning such consequences and the potential effect in their particular circumstances. The material United States federal income tax consequences of the purchase, ownership and disposition of the notes are summarized in this prospectus supplement under the heading “Certain United States Federal Income Tax Consequences.”

 

The contingent conversion features of the notes could result in your receiving less than the value of the common stock upon which the settlement amount would otherwise be based.

 

Except during the three-month periods prior to each of March 15, 2013, March 15, 2015, March 15, 2018, March 15, 2023 and March 15, 2028 (three months prior to each repurchase date and the stated maturity date), the notes are convertible only if specified conditions are met. If the specific conditions for conversion are not met then, other than during such three month periods, you may not be able to receive the settlement amount prior to such date. Therefore, you may not be able to realize the appreciation, if any, in the value of our common stock after the issuance of the notes in this offering and prior to such date.

 

The notes will not contain restrictive covenants, and there is limited protection in the event of a fundamental change.

 

The indenture under which the notes will be issued will not contain restrictive covenants that would protect you from several kinds of transactions that may adversely affect you. Neither the indenture nor the terms of the notes restrict us or our subsidiaries from incurring additional debt, including secured debt. In addition, the limited covenants contained in the indenture do not require us to achieve or maintain any minimum financial ratios relating to our financial position or results of operations. The indenture also does not impose any limitation on the incurrence by our subsidiaries of any indebtedness or on our ability to transfer our

assets and property among our subsidiaries. Moreover, the right of each holder to require us to repurchase for cash all or part of that holder’s notes in a “fundamental change” is limited to the transactions specified in the definition of a “fundamental change” under “Description of the Notes—Right to Require Purchase of Notes at Your Option upon a Fundamental Change.” Accordingly, subject to restrictions contained in our other debt agreements, we could enter into certain transactions, such as acquisitions, financings or recapitalizations and incurrences of indebtedness that could affect our capital structure and the value of the notes and our common stock but would not constitute a “fundamental change” under the indenture.

 

You may have to pay taxes if we make or fail to make certain adjustments to the conversion rate of the notes even though you do not receive a corresponding cash distribution.

 

The conversion rate of the notes is subject to adjustment for certain events arising from stock splits and combinations, stock dividends, certain cash dividends and certain other actions by us that modify our capital structure. See “Description of the Notes—Conversion Rate Adjustments.” If, for example, the conversion rate is adjusted as a result of a distribution that is taxable to our common stockholders, such as a cash dividend, you may be required to include an amount in income for United States federal income tax purposes, notwithstanding the fact that you do not receive a corresponding cash distribution. In addition, a failure to adjust (or to adjust adequately) the conversion rate after an event that has the effect of increasing your proportionate interest in our company could be treated as a deemed taxable dividend to you. The amount that you would have to include in income generally will be equal to the amount of the distribution that you would have received if you had converted your notes into our common stock.

 

If certain types of fundamental changes occur on or before the maturity date of the notes, under some circumstances, we will increase the conversion rate for notes converted in connection with the fundamental change. Such increase may also be treated as a distribution subject to United States federal income tax as a dividend. See “Certain United States Federal Income Tax Consequences.”

 

If you are a non-U.S. holder, any deemed dividend would be subject to United States federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty, which may be set off against subsequent payments. See “Certain United States Federal Income Tax Consequences.”

 

Changes in the accounting treatment of the notes could decrease our earnings per share and our stock price.

 

The Financial Accounting Standards Board has issued a proposed staff position that would change the current accounting treatment for the notes. We cannot predict the outcome of any changes in GAAP that may be made affecting accounting for convertible debt securities. Any change in the accounting method for convertible debt securities could have an adverse effect on our reported or future financial results and could adversely affect the trading price of our common stock and adversely affect the trading price of the notes.

 

We may not be able to refinance the notes if required or if we so desire.

 

It may benefit you or us to refinance all or a portion of the notes or any other future indebtedness that we incur on or before the maturity of the notes. We may not be able to refinance any of our indebtedness on commercially reasonable terms, if at all.

The notes initially will be held in book-entry form and, therefore, you must rely on the procedures and the relevant clearing systems to exercise your rights and remedies.

 

Unless and until certificated notes are issued in exchange for book-entry interests in the notes, owners of the book-entry interests will not be considered owners or holders of notes. Instead, DTC, or its nominee, will be the sole holder of the notes. Payments of principal, interest and other amounts owing on or in respect of the notes in global form will be made to the paying agent, which will make payments to DTC. Thereafter, those payments will be credited to DTC participants’ accounts that hold book-entry interests in the notes in global form and credited by such participants to indirect participants. Unlike holders of the notes themselves, owners of book-entry interests will not have the direct right to act upon our solicitations for consents or requests for waivers or other actions from holders of the notes. Instead, if you own a book-entry interest, you will be permitted to act only to the extent you have received appropriate proxies to do so from DTC or, if applicable, a participant. Procedures implemented for the granting of such proxies may not be sufficient to enable you to vote on any requested actions on a timely basis.

 

Conversion of the notes may dilute the ownership interest of existing stockholders, including holders who had previously converted their notes.

 

To the extent we issue shares of our common stock upon conversion of the notes, the conversion of some or all of the notes will dilute the ownership interests of existing stockholders, including holders who had previously converted their notes. Any sales in the public market of shares of our common stock issuable upon such conversion could adversely affect prevailing market prices of shares of our common stock. In addition, the existence of the notes may encourage short selling by market participants because the conversion of the notes could depress the price of shares of our common stock.

 

Our future operating performance may not generate cash flows sufficient to meet our debt payment obligations, and our indebtedness could negatively affect holders of our notes and our common stock, into which the notes are convertible.

 

As of December 31, 2007, we had a total of approximately $234.5 million outstanding indebtedness on a consolidated basis, consisting of $180.0 million of our 1.25% Convertible Senior Notes due 2024, $20 million under our credit facility with Macquarie Bank Limited, $1.7 million under our temporary credit facility and $32.8 million under capital lease agreements. Following this offering, and assuming that the underwriters do not exercise their over-allotment option, we will have a total of approximately $384.5 million outstanding indebtedness.

 

Our ability to make scheduled debt payments on our outstanding indebtedness will depend on our future operating performance and cash flow. Our operating performance and cash flow, in part, are subject to economic factors beyond our control, including the market prices of silver and gold. We may not be able to generate enough cash flow to meet our obligations and commitments. If we cannot generate sufficient cash flow from operations to service our debt, we may need to further refinance our debt, dispose of assets, or issue equity to obtain the necessary funds. We cannot predict whether we will be able to refinance our debt, issue equity, or dispose of assets to raise funds on a timely basis or on satisfactory terms.

Our indebtedness could negatively affect holders of the notes and our common stock, into which the notes are convertible, in many ways, including by:

 

 

We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common stock and any common stock issued upon conversion of the notes and may materially and adversely affect the price of our common stock and the trading price of the notes, which are convertible into common stock.

 

The issuance of additional equity securities or securities convertible into equity securities would result in dilution of existing shareholders’ equity interests in us. We are authorized to issue, without shareholder approval, 10,000,000 shares of preferred stock in one or more series, to establish the number of shares to be included in each such series, and to fix the designation, powers, preferences, and relative participating, optional, conversion and other special rights of the shares of each such series, and the qualification, limitations or restrictions thereof, including the fixing or alteration of the dividend rights, dividend rate or rates, conversion rights, voting rights, rights and terms of redemption, the redemption price or prices, and the liquidation preferences of any wholly unissued series of shares of preferred stock, or any or all of them. Any such series of preferred stock could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of holders of our common stock. Our board of directors has no present intention of issuing any such preferred stock, but reserves the right to do so in the future and has reserved for issuance a series of preferred stock in connection with our shareholder rights plan. In addition, we are authorized to issue, without shareholder approval, up to 750,000,000 shares of common stock, of which 550,825,760 shares were outstanding as of February 29, 2008. We are also authorized to issue, without shareholder approval, securities convertible into either shares of common stock or preferred stock. If we issue additional equity securities, the price of our common stock and the trading price of the notes, which are convertible into our common stock, may be materially and adversely affected.

 

We are subject to anti-takeover provisions in our charter, in our bylaws and in our shareholder rights plan that could delay or prevent an acquisition of Coeur even if such an acquisition would be beneficial to our shareholders.

 

The provisions of our articles of incorporation and our bylaws could delay or prevent a third party from acquiring us, even if doing so might be beneficial to our shareholders. Some of these provisions:

 

 

 

We have also implemented a shareholder rights plan which could delay or prevent a third party from acquiring us.

 

Conversion of notes in cash or a combination of both cash and our common stock will require U.S. holders to recognize taxable gain.

 

Upon the conversion of a note into cash or a combination of cash and our common stock, a U.S. holder generally will be required to recognize gain on the conversion for U.S. federal income tax purposes. Prospective investors should carefully review the information regarding tax considerations relevant to an investment in the notes set forth under “Certain United States Federal Income Tax Consequences” and are also urged to consult their own tax advisors prior to investing in the notes.

 

Risks Relating to our Business

 

The market prices of silver and gold are volatile. Low silver and gold prices could result in decreased revenues and decreased net income or losses, and may negatively affect our business.

 

Silver and gold are commodities. Their prices fluctuate, and are affected by many factors beyond our 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 we derive a majority of our revenues from continuing operations from sales of silver, our earnings are primarily related to the price of this metal. In 2007, 70.0% of our revenues from continuing operations were generated from sales of silver.

 

The market prices of silver (Handy & Harman) and gold (London Final) on March 10, 2008 were $19.69 and $973.80 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.

 

We also may suffer from declines in mineral prices. Since 1999, we have not engaged in silver hedging activities, and we currently are not engaged in any gold hedging activities. Accordingly, we have no protection from declines in mineral prices or currency fluctuations.

 

If the prices of silver and gold are depressed for a sustained period and our net losses resume, we may be forced to suspend mining at one or more of our 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 our results of operations.

 

We may be required to incur additional indebtedness to fund our capital expenditures.

 

We have historically financed our operations through the issuance of common stock and convertible debt, and may be required to incur additional indebtedness in the future. During 2008, we will have construction activities at the San Bartolomé, Palmarejo and Kensington projects as well as sustaining capital projects at our operating properties. Construction of all of these projects could require a total capital investment of approximately $398.5 million during 2008. Our cash, cash equivalents and short-term investments combined with cash flow

generated from operations will not be sufficient for us to make this level of capital investment. No assurance can be given that additional capital investments will not be required to be made at these or other projects. If we are unable to generate enough cash to finance such additional capital expenditures through operating cash flow and the issuance of common stock, we may be required to issue additional indebtedness or secure other forms of financing or delay the capital projects. Any additional indebtedness would increase our debt payment obligations, and may negatively affect our results of operations.

 

Prior to 2005, we did not have sufficient earnings to cover fixed charges, which deficiency could occur in future periods.

 

As a result of our net losses prior to 2005, our 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 those periods prior to 2005. The amounts by which earnings were inadequate to cover fixed charges were approximately $61.8 million in 2003 and $23.9 million in 2004. Earnings have been sufficient to cover fixed charges subsequent to 2004. We are required to make fixed payments on the $180 million principal amount of our 11/4% Senior Convertible Notes due 2024, requiring annual interest payments of approximately $2.25 million until their maturity.

 

We expect to satisfy our fixed charges and other expense obligations in the future from cash flow from operations and, if cash flow from operations is insufficient, from working capital, which amounted to approximately $152.4 million at December 31, 2007. Prior to 2005, we experienced negative cash flow from operating activities. The amount of net cash used in our 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, 2007 and 2006, we generated $40.1 million and $91.2 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 our results of operations, silver and gold prices, levels and costs of production at our mining properties and the amount of our capital expenditures and expenditures for acquisitions, developmental and exploratory activities.

 

We may have to record additional write-downs, which could negatively affect our results of operations.

 

Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, or 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, measured by comparing an asset’s carrying value to its fair value, must be recognized when the carrying value of the asset exceeds these cash flows, and recognizing impairment write-downs could negatively impact our results of operations.

 

If silver or gold prices decline or we fail to control production costs or realize the mineable ore reserves at our mining properties, we may be required to recognize asset write-downs. We also may record other types of additional mining property charges in the future to the extent we sell a property for a price less than the carrying value of the property, or if reclamation liabilities have to be increased in connection with the closure and reclamation of a property. Additional write-downs of mining properties could negatively affect our 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 filed a lawsuit in Federal District Court in Alaska against the U.S. Army Corps of

Engineers and the U.S. Forest Service, or USFS, seeking to invalidate the permit issued to Coeur Alaska, Inc. for our Kensington mine. The plaintiffs claim the Section 404 of the Clean Water Act permit issued by the Corps of Engineers authorizing the deposition of mine tailings into Lower Slate Lake conflicts with the Clean Water Act. They additionally claim the USFS’s approval of the Amended Plan of Operations is arbitrary and capricious because it relies on the 404 permit issued by the Corps of Engineers. Following the District Court’s remand of the Section 404 permit to the Corps of Engineers for further review, the Corps reinstated the permit on March 29, 2006. The lawsuit challenging the permit was re-opened on April 6, 2006; Coeur Alaska filed its answer to the Amended Complaint; and Coeur Alaska, the State of Alaska, and Goldbelt, Inc., a local native corporation, were granted Defendant Intervenor status to join the agencies in their defense of the permit.

 

On August 4, 2006, the Federal District Court in Alaska dismissed the plaintiffs’ challenge and upheld the Section 404 permit. On August 7, 2006 the plaintiffs filed a Notice of Appeal of the decision to the Ninth Circuit Court of Appeals, and on August 9, 2006 the Plaintiffs additionally filed a Motion for Injunction Pending Appeal with the Ninth Circuit Court. The Ninth Circuit Court granted a temporary injunction pending appeal on August 24, 2006, enjoining certain activities relating to the lake tailings facility.

 

On May 22, 2007 the Ninth Circuit Court reversed the District Court’s August 4, 2006 decision which had upheld our 404 permit and issued its opinion that remanded the case to the District Court with instructions to vacate our 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. On August 20, 2007, Coeur Alaska filed a Petition for Rehearing En Banc with the Ninth Circuit Court, as did the State of Alaska and Goldbelt, Inc. The Department of Justice, on behalf of the Corps of Engineers, and USFS additionally filed a limited Petition for Rehearing with the Ninth Circuit panel seeking reconsideration of the mandate of the May 22, 2007 panel decision. On October 29, 2007, the Ninth Circuit denied the Petitions for Rehearing En Banc. On November 14, 2007 the Ninth Circuit granted a stay of the mandate pending further appeal to the Supreme Court, subject to the development of a reclamation plan for the lake area. We and the State of Alaska each filed Petitions for Certiorari to the Supreme Court of the United States on January 28, 2008. We cannot predict the potential for obtaining further appeal or if it will prevail upon appeal if one is granted.

 

This litigation has contributed to an increase in capital costs. While we cannot predict with certainty the outcome of this litigation, we believe we should ultimately prevail. In the event that we do not prevail, it could be necessary to seek an alternate site for the tailings disposal facility. We have identified an alternate site which we believe can be permitted and have submitted a modified plan to the USFS. Based upon our current estimates, an impairment writedown could be necessary should the expectation of the long-term price for gold decrease below approximately $606 per ounce. As of December 31, 2007, the carrying value of the Kensington project’s long-lived assets was $298.2 million.

 

Additionally, the value allocated to Palmarejo’s 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.

 

We may not realize the cost savings and other benefits we currently anticipate 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.

 

Our acquisition of Bolnisi and Palmarejo reflected our expectation that the acquisitions will result in increased metal production, earnings and cash flow for the combined company. These anticipated increases will depend in part on whether Coeur’s, Bolnisi’s and Palmarejo’s 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 us to liabilities existing at one or both of Bolnisi and Palmarejo, some of which may be unknown. While we have conducted due diligence on the operations of Bolnisi and Palmarejo, there can be no guarantee that we are aware of the liabilities of Bolnisi and Palmarejo. These liabilities, and any additional risks and uncertainties related to the acquisitions not currently known to us or that we currently deem immaterial, could negatively affect our business, financial condition and results of operations.

 

The Palmarejo project is a development-stage project and involves significant risks associated with development and commencement of commercial production.

 

We cannot assure you 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. Our 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 we may acquire are added. The amounts and timing of expenditures will depend on the progress of ongoing exploration and development and the results of consultants’ analyses and recommendations, which are beyond our control. While we expect production at the Palmarejo project to commence in 2009, we cannot assure you that this timetable will be met. The development of the Palmarejo project and any other properties we acquire will require the commitment of substantial resources to conduct the time-consuming exploration and development of properties. We cannot assure you that we will generate any revenues or achieve profitability at the Palmarejo project and any other properties we 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, our 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 our 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, our third party engineering consultants have conducted more extensive on-site analysis and have provided us with a detailed report based on its review, which recommends specific remedial actions that should be initiated which include the relocation of a substantial section of the process plant facilities to an identified alternate site. We estimate that these remedial actions may cost up to $15 million. We anticipate production from the Palmarejo project will commence, after completion of these remedial activities, in the first quarter of 2009. We cannot assure you that these preliminary estimates will prove accurate, and any inaccuracy in such estimates could materially adversely impact the development of the Palmarejo project and our financial condition and results of operations.

Our revenues and income (or loss) from our 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, we 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. Our revenues and income (or loss) from our interest in the silver production at these mines are dependent in part upon the performance of those operators and such mines.

 

The estimation of ore reserves is imprecise and depends upon subjective factors. Estimated ore reserves may not be realized in actual production. Our operating results may be negatively affected by inaccurate estimates.

 

The ore reserve figures presented in our public filings are estimates made by our technical personnel. Reserve estimates are a function of geological and engineering analyses that require us to make assumptions about production costs and silver and gold market 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 we may be required to reduce reserve estimates, discontinue development or mining at one or more of our properties, or write down assets as impaired. Should we encounter mineralization or geologic formations at any of our mines or projects different from those we predicted, we may adjust our reserve estimates and alter our mining plans. Either of these alternatives may adversely affect our actual production and operating results.

 

We based our ore reserve determinations as of December 31, 2007 on a long-term silver price average of $11 per ounce, with the exception of the Endeavor mine which uses $15 per ounce and the Broken Hill mine which uses $13.50 per ounce of silver, and a long-term gold price average of $600 per ounce for all properties with the exception of the Kensington property which used a gold price of $550 per ounce. On March 10, 2008 silver and gold prices were $19.69 per ounce and $973.80 per ounce, respectively.

 

The estimate 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 estimates.

 

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 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.

 

We use 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. We estimate the quantity of ore by utilizing global positioning satellite survey techniques. We then process 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. We then transport the crushed ore to the leach pad for application of the leaching solution. As the leach solution is collected from the leach pads, we continuously sample for assaying. We measure 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. We again weigh, sample and assay the doré. Finally, a third party smelter converts the doré and determines final ounces of silver and gold available for sale. We then review this end result and reconcile it to the estimates we developed and used throughout the production process. Based on this review, we adjust our estimation procedures when appropriate.

 

Our reported inventories include metals estimated to be contained in the ore on leach pad of $50.9 million as of December 31, 2007. Of this amount, $25.9 million is reported as a current asset and $25.0 million is reported as a noncurrent asset. The distinction between current and noncurrent 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 12 months is classified as current and the historical cost of metals contained within the crushed ore that will be extracted beyond 12 months is classified as noncurrent. The ore on leach pad inventory is stated at actual production costs incurred to produce and place ore on the leach pad 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 12-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 we project 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 19 years of leach pad operation at the Rochester mine. The assumptions we use to measure metal content during each stage of the inventory conversion process includes estimated recovery rates based on laboratory testing and assaying. We periodically review our estimates compared to actual experience and revise our estimates when appropriate. The length of time necessary to achieve our 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 five and ten years. In August 2007, we terminated mining and crushing operations as ore reserves were fully mined. Residual heap leach activities are expected to continue through 2011.

 

When we began leach operations in 1986, based solely on laboratory testing, we estimated the ultimate recovery of silver and gold at 50% and 80%, respectively. Since 1986, we have 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, we increased our estimated recoveries for silver and gold, respectively, to between 59% and 61.5% for silver, depending on the area being leached, 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.

If our estimate of ultimate recovery requires adjustment, the impact upon our inventory valuation and upon our income statement would be as follows:

 

 

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 our inventory valuations and correspondingly on our income statement would have an adverse impact on our results of operations, financial position and cash flows.

 

Our estimates of current and non-current inventories may not be realized in actual production and operating results, which may negatively affect our business.

 

We use 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 our actual production and operating results. We cannot determine the amount ultimately recoverable until leaching is completed. If our estimates prove inaccurate, our 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, which would adversely affect our business, and it

is possible that from time to time export licenses may be refused. Many of these risks are outside of the ability of our management to control and may result in a materially adverse effect on our operations, financial position and cash flows.

 

Mineral exploration and development inherently involves significant and irreducible financial risks. We 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 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 and 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 our exploration, development and mining activities, such as San Bartolomé, Kensington and Palmarejo. These risks and costs may result in lower economic returns and may adversely affect our business.

 

Our ability to sustain or increase our present production levels depends in part on successful exploration and development of new ore bodies and/or expansion of existing mining operations. Mineral exploration, particularly for silver and gold, involves many risks and is frequently unproductive. If mineralization is discovered, it may take a number of years until production is possible, during which time the economic viability of the project may change. 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.

Development projects, such as San Bartolomé, Kensington and Palmarejo, 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, our business results of operations may be negatively affected.

 

Our marketing of metals concentrates could be adversely affected if there were to be a significant delay or disruption of purchases by our third party smelter customers. In particular, a significant delay or disruption in our sales of concentrates as a result of the unexpected discontinuation of purchases by our smelter customers could have a material adverse effect on our operations.

 

We currently market our 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 us 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 could not be experienced that would result in a materially adverse effect on our operations and our financial results.

 

Our silver and gold production may decline, reducing our revenues and negatively impacting our business.

 

Our future silver and gold production may decline as a result of an exhaustion of reserves and possible closure of mines. It is our business strategy to conduct silver and gold exploratory activities at our 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. We cannot assure you that our silver and gold production will not decline in the future. Accordingly, our revenues from the sale of silver and gold may decline, negatively affecting our results of operations.

 

There are significant hazards associated with our mining activities, not all of which are fully covered by insurance. To the extent we must pay the costs associated with such risks, our 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 we maintain insurance in an amount that we consider to be adequate, liabilities might exceed policy limits, in which event we could incur significant costs that could adversely affect our 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 us or to other companies in the industry. The realization of any significant liabilities in connection with our mining activities as described above could negatively affect our results of operations.

We are subject to significant governmental regulations, and their related costs and delays may negatively affect our business.

 

Our 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 our business. Although these laws and regulations have never required us 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 our operations and delays in the development of our 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, we 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 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 we are subject to environmental liabilities, the payment of such liabilities or the costs that we may incur to remedy environmental pollution would reduce funds otherwise available to us and could have a material adverse effect on us. If we are unable to fully remedy an environmental problem, we 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 on our results of operations and financial condition.

 

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 our 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 our operations. Although we believe that we are in substantial compliance with applicable laws and regulations, we 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 our mining wastes are currently exempt to a limited extent from the extensive set of federal Environmental Protection Agency regulations governing hazardous waste under the Resource Conservation and Recovery Act. If the Environmental Protection Agency designates these wastes as hazardous under the Act, we 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, or 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 government’s cleanup efforts. Such owner or operator may also be liable to governmental entities for the cost of damages to natural resources, which may be substantial. Additional regulations or requirements are also imposed upon our tailings and waste disposal areas in Alaska under the federal Clean Water Act and in Nevada under the Nevada Water Pollution Control Law which implements the Clean Water Act. Airborne emissions are subject to controls under air pollution statutes implementing the Clean Air Act in Nevada and Alaska. Compliance with CERCLA, the Clean Water Act and state environmental laws could entail significant costs, which could have a material adverse effect on our operations.

 

In the context of environmental permits, including the approval of reclamation plans, we 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 our operations. There is no assurance that future changes in environmental regulation, if any, will not adversely affect our operations.

 

We are required to obtain government permits to expand operations or begin new operations. The acquisition of such permits can be materially impacted by third party litigation seeking to prevent the issuance of such permits. The costs and delays associated with such approvals could affect our operations, reduce our revenues, and negatively affect our 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 our control. The governmental approval process may increase costs and cause delays depending on the nature of the activity to be permitted, and could cause us to not proceed with the development of a mine. Accordingly, this approval process could harm our 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 “We may have to record additional write-downs, which could negatively impact our results of operations.”

 

Although Palmarejo currently holds all consents that it requires in order to carry out its current drilling and development program on the Palmarejo project, we cannot assure you that we 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.

 

Our business depends on good relations with our employees.

 

We could experience labor disputes, work stoppages or other disruptions in production that could adversely affect us. As of December 31, 2007, unions represented approximately 44% of our worldwide workforce. On that date, we had 316 employees at our Cerro Bayo mine and 120 employees at our Martha mine who were working under a collective bargaining agreement. The agreement covering the Cerro Bayo mine expires on December 21, 2010 and a collective bargaining agreement covering the Martha mine expires on June 1, 2008. Additionally, we had 21 employees at its San Bartolomé project working under a labor agreement that does not have a fixed term.

 

We are an international company and are exposed to risks in the countries in which we have significant operations or interests. Foreign instability or variances in foreign currencies may cause unforeseen losses, which may affect our business.

 

Any foreign operation 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 investments are subject to changes in government regulations with respect 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 we directly or indirectly own or operate mining properties or developmental projects. We also conduct exploratory projects in these countries. With the acquisition of Palmarejo and Bolnisi, we also own major mining operations in Mexico. Argentina and Bolivia, 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.

 

We may enter into agreements which require us to purchase currencies of foreign countries in which we do business in order to ensure fixed exchange rates. In the event that actual exchange rates vary from those set forth in the hedge contracts, we 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 we have significant operations or interests and unfavorable fluctuations in foreign currency exchange rates could negatively affect our foreign operations and our business as a whole. Further, property ownership in a foreign country is generally subject to the risk of expropriation or nationalization with inadequate compensation.

 

We are exposed to risks with respect to the legal systems in the countries in which we have significant operations or interests, and resolutions of any disputes may adversely affect our business.

 

Some of the jurisdictions in which we operate have less developed legal systems than are 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; 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 licenses and agreements may be susceptible to revision or cancellation and legal redress may be uncertain or delayed. We cannot assure you 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.

 

We may be unable to raise additional financing necessary to conduct our business, make payments when due or refinance our debt.

 

We may need to raise additional funds in the future in order to implement our business plan, to refinance our debt or to acquire complementary businesses or products. Any required additional financing may be unavailable on terms favorable to us, or at all. If we raise additional funds by issuing equity securities, holders of common stock may experience significant dilution of their ownership interest and these securities may have rights senior to those of the holders of our common stock.

 

Any of our future acquisitions may result in significant risks, which may adversely affect our business.

 

An important element of our business strategy is the opportunistic acquisition of silver and gold mines, properties and businesses or interests therein. While it is our practice to engage independent mining consultants to assist in evaluating and making acquisitions, any mining properties or interests therein we may acquire may not be developed profitably or, if profitable when acquired, that profitability might not be sustained. In connection with any future acquisitions, we may incur indebtedness or issue equity securities, resulting in increased interest expense, or dilution of the percentage ownership of existing shareholders. We intend to seek shareholder approval for any such acquisitions to the extent required by applicable law, regulations or stock exchange rules. We cannot predict the impact of future acquisitions on the price of our business or our common stock. Unprofitable acquisitions, or additional indebtedness or issuances of securities in connection with such acquisitions, may adversely affect the price of our common stock and negatively affect our results of operations.

 

We regularly consider potential acquisitions of additional mining properties and interests and could be exposed to significant risks associated with any such acquisitions.

 

In the ordinary course of business, we regularly consider potential acquisitions of significant mining properties and interests, including properties and interests located in countries other than those in which we now have operations. 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, we 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 our results of operations.

Our ability to find and acquire new mineral properties is uncertain. Accordingly, our prospects are uncertain for the future growth of our business.

 

Because mines have limited lives based on proven and probable ore reserves, we are continually seeking to replace and expand our ore reserves. Identifying promising mining properties is difficult and speculative. Furthermore, we encounter strong competition from other mining companies in connection with the acquisition of properties producing or capable of producing silver and gold. Many of these companies have greater financial resources than we do. Consequently, we may be unable to replace and expand current ore reserves through the acquisition of new mining properties or interests therein on terms we consider acceptable. As a result, our revenues from the sale of silver and gold may decline, resulting in lower income and reduced growth.

 

Third parties may dispute our unpatented mining claims, which could result in losses affecting our business.

 

The validity of unpatented mining claims, which constitute a significant portion of our property holdings in the United States, is often uncertain and may be contested. Although we have attempted to acquire satisfactory title to undeveloped properties, we, in accordance with mining industry practice, do not generally obtain title 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 our mining claims could result in litigation, insurance claims, and potential losses affecting our 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.

 

We cannot assure you that there are no title defects to the Palmarejo project. 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 our 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 we believe 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.

 

We do not own all of the concessions comprising the Palmarejo project, and our 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 we fail to meet payments or work commitments on these properties, we may lose its interests in a portion of the Palmarejo project or forfeit some of the concessions.

 

We estimate that the net proceeds from this offering after payment of fees and expenses and assuming the underwriters’ over-allotment option is not exercised will be approximately $192.7 million. We intend to use the proceeds of this offering to complete the construction of the San Bartolomé silver project in Bolivia and fund construction of the Palmarejo silver/gold project in Mexico. Any additional remaining proceeds may be used to pay off borrowings under our bridge loan facility and bank facility and for general corporate purposes.

 

As of December 31, 2007, we had $20 million outstanding under our bridge loan facility bearing interest rate at a rate of LIBOR plus 2.45%, which was 7.35% on December 31, 2007. The bridge loan facility matures on June 30, 2008, and we used the borrowings under the facility to fund exploration and development of the Palmarejo project and surrounding areas and for working capital purposes.

 

As of December 31, 2007, we had $1.7 million outstanding under our bank facility bearing an interest rate of the prime rate plus 1.50%. The bank facility matures on May 31, 2008, and we used the borrowings under the facility for working capital purposes.

 

We have not recently paid dividends on our common stock and currently have no plan to do so. Future distributions or dividends on our common stock, if any, will be determined by our board of directors and will depend upon our results of operation, financial condition, capital requirements and other factors.

 

Our common stock is listed on the New York Stock Exchange under the symbol “CDE” and on the Toronto Stock Exchange under the symbol “CDM.” The following table sets forth, for the periods indicated, the high and low closing prices of our common stock as reported on the New York Stock Exchange and on the Toronto Stock Exchange.

 

 

 

 

The following table sets forth our cash, cash equivalents and short-term investment balances and our capitalization as of December 31, 2007:

 

 

 

 

 

For purposes of computing the ratio of earnings to fixed charges, earnings consist of income before provision for income taxes plus fixed charges (excluding capitalized interest) and fixed charges consist of interest expensed and capitalized, amortization of debt discount and expense related to debentures, and the portion of rent expense deemed to be representative of the interest factor attributed to leases for real property. The following table sets forth our ratio of earnings to fixed charges for each of the periods indicated.

 

 

Our earnings were inadequate to cover fixed charges for 2003 and 2004. The amounts by which earnings were inadequate to cover fixed charges were approximately $61.8 million in 2003 and $23.9 million in 2004. Earnings have been sufficient to cover fixed charges subsequent to 2004.

 

On December 21, 2007, we acquired all of the outstanding stock of Bolnisi Gold NL, an Australian company listed on the Australian Stock Exchange, and Palmarejo Silver and Gold Corporation, a Canadian company listed on the TSX Venture Exchange. The principal asset of Bolnisi was its ownership of 72.8% of the outstanding common shares of Palmarejo. We accounted for the acquisition as a purchase of assets and not as business combination. Consequently, the consolidated balance sheet as of December 31, 2007 gives effect to the acquisition.

 

The following selected unaudited pro forma condensed combined financial statement is prepared on the basis of historical statements and are presented to give effect to our acquisition of Bolnisi and Palmarejo. The following selected unaudited pro forma condensed combined income statement for the year ended December 31, 2007 (i) gives effect to the acquisition as if it occurred on January 1, 2007, the first day of our fiscal year ended December 31, 2007 and (ii) replaces and supercedes the unaudited pro forma condensed combined financial statements included as Exhibit 99.3 to our current report on Form 8-K/A filed on January 15, 2008.

 

Coeur’s historical information has been derived from its historical financial statements, which were prepared and presented in accordance with U.S. GAAP. Bolnisi’s historical consolidated financial statements are presented in Australian dollars and were prepared in accordance with AIFRS, which differs in certain respects from U.S. GAAP. The Bolnisi/Palmarejo pro-forma consolidated financial statements were adjusted to be presented in U.S. dollars and under U.S. GAAP.

 

The pro forma information presented may not be indicative of the historical results that would have been achieved had the companies always been combined or our future results.

Coeur d’Alene Mines Corporation

 

Unaudited Pro Forma Combined Income Statement for the

Year Ended December 31, 2007