Attached files

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EX-10.B - EX-10.B - Coeur Mining, Inc.v55047exv10wb.htm
EX-3.D - EX-3.D - Coeur Mining, Inc.v55047exv3wd.htm
EX-12 - EX-12 - Coeur Mining, Inc.v55047exv12.htm
EX-23 - EX-23 - Coeur Mining, Inc.v55047exv23.htm
EX-32.2 - EX-32.2 - Coeur Mining, Inc.v55047exv32w2.htm
EX-10.J - EX-10.J - Coeur Mining, Inc.v55047exv10wj.htm
EX-32.1 - EX-32.1 - Coeur Mining, Inc.v55047exv32w1.htm
EX-10.L - EX-10.L - Coeur Mining, Inc.v55047exv10wl.htm
EX-10.K - EX-10.K - Coeur Mining, Inc.v55047exv10wk.htm
EX-10.C - EX-10.C - Coeur Mining, Inc.v55047exv10wc.htm
EX-31.1 - EX-31.1 - Coeur Mining, Inc.v55047exv31w1.htm
EX-10.I - EX-10.I - Coeur Mining, Inc.v55047exv10wi.htm
EX-10.AA - EX-10.AA - Coeur Mining, Inc.v55047exv10waa.htm
EX-21 - EX-21 - Coeur Mining, Inc.v55047exv21.htm
EX-31.2 - EX-31.2 - Coeur Mining, Inc.v55047exv31w2.htm
Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K
 
     
(Mark One)    
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended December 31, 2009
OR
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from          to          
 
Commission File Number 1-8641
 
COEUR D’ALENE MINES CORPORATION
(Exact name of registrant as specified in its charter)
 
     
Idaho   82-0109423
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
505 Front Ave., P. O. Box “I”
Coeur d’Alene, Idaho
(Address of principal executive offices)
  83816
(Zip Code)
 
Registrant’s telephone number, including area code: (208) 667-3511
 
Securities Registered pursuant to Section 12(b) of the Act:
 
     
Title of each class
 
Name of each exchange on which registered
 
Common Stock, par value $0.01 per share   New York Stock Exchange/Toronto Stock Exchange/Australian Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.  Yes þ     No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
             
Large accelerated filer þ
  Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company o
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter.
$917,797,845
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
As of February 23, 2010, 81,431,083 shares of Common Stock, Par Value $0.01
 
DOCUMENTS INCORPORATED BY REFERENCE
Certain information called for by Part III of the Form 10-K is incorporated by reference from the registrant’s definitive proxy statement for the 2010 Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.
 


 

 
TABLE OF CONTENTS
 
                 
      Business     2  
      Risk Factors     12  
      Unresolved Staff Comments     22  
      Properties     22  
      Legal Proceedings     43  
      Submission of Matters to a Vote of Security Holders     43  
 
PART II
      Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     45  
      Selected Financial Data     49  
      Management’s Discussion and Analysis of Financial Condition and Results of Operations     50  
      Quantitative and Qualitative Disclosures About Market Risk     74  
      Financial Statements and Supplementary Data     76  
      Changes in and Disagreements With Accountants on Accounting and Financial Disclosure     76  
      Controls and Procedures     77  
      Other Information     78  
 
PART III
      Directors, Executive Officers of the Registrant     78  
      Executive Compensation     78  
      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     78  
      Certain Relationships and Related Transactions     79  
      Principal Accounting Fees and Services     79  
 
PART IV
      Exhibits, Financial Statement Schedules     79  
    83  
 EX-3.D
 EX-10.B
 EX-10.C
 EX-10.I
 EX-10.J
 EX-10.K
 EX-10.L
 EX-10.AA
 EX-12
 EX-21
 EX-23
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2


Table of Contents

 
PART I
 
Item 1.   Business
 
INTRODUCTION
 
Coeur d’Alene Mines Corporation is primarily a silver producer with a growing gold production profile. The Company is located in North America and is engaged, through its subsidiaries, in the operation and ownership, development and exploration of silver and gold mining properties and companies located primarily within South America (Chile, Argentina and Bolivia), Mexico (Chihuahua), United States (Nevada and Alaska) and Australia (New South Wales). Coeur d’Alene Mines Corporation and its subsidiaries are hereinafter referred to collectively as “Coeur” or the “Company.” Coeur is an Idaho corporation incorporated in 1928.
 
OVERVIEW OF MINING PROPERTIES AND INTERESTS
 
The Company’s most significant operating and development-stage mining properties and interests are:
 
  •  Coeur owns, either directly or indirectly, 100% of Coeur Mexicana S.A. de C.V., which operates the underground and surface Palmarejo silver and gold mine in Mexico. The Palmarejo mine poured its first silver/gold doré on March 30, 2009 and began shipping doré on April 16, 2009. Palmarejo produced 3.0 million ounces of silver and 54,740 gold ounces during this initial year of operation. During 2009, the Company increased reserves at Palmarejo by 49.6% or 31.5 silver ounces and 54.0% or 408,000 gold ounces after giving effect for the 2009 production. The Company also controls other exploration-stage properties in northern Mexico. On January 21, 2009, the Company entered into a gold production royalty transaction with Franco-Nevada Corporation under which Franco-Nevada purchased a royalty covering 50% of the life of mine gold to be produced by Coeur from its Palmarejo silver and gold mine in Mexico. The royalty is payable when the market price per ounce of gold is greater than $400.00.
 
  •  Coeur owns, either directly or indirectly, 100% of Empresa Minera Manquiri S.A., a Bolivian company that controls the mining rights for the San Bartolomé mine, which is a surface silver mine in Bolivia where commercial production commenced in June 2008. San Bartolomé produced 7.5 million ounces of silver during its first full year of operation in 2009. The mine plan has been temporarily adjusted during a temporary suspension of mining above 4,400 meters while stability studies of the Cerro Rico Mountain are undertaken by COMIBOL. Mining continues on the remainder of the property.
 
  •  The Company owns 100% of Coeur Alaska, Inc., which owns the Kensington property, an advanced underground gold property located north of Juneau, Alaska, which is an advanced development-stage underground gold property. Construction activities have recommenced at the Kensington mine and production is expected to begin in the third quarter of 2010. A lawsuit was filed in 2005 in Federal Court challenging a permit necessary for construction of a tailings facility at the Kensington property. During 2008, the Company completed all surface facility construction activities not impacted by the legal challenge. On June 22, 2009, the U.S. Supreme Court reversed the Ninth Circuit Court of Appeals decision that invalidated the previously issued U.S. Army Corps of Engineers Section 404 permit for the tailings facility for the Kensington gold mine, and on August 14, 2009, the U.S. Army Corps of Engineers re-activated the Company’s 404 permit clearing the way for construction at the tailings facility to continue.
 
  •  The Company owns 100% of Coeur Rochester, Inc., which has owned and operated the Rochester mine, a silver and gold surface mining operation located in northwestern Nevada since 1986. The active mining of ore at the Rochester mine was completed during 2007; however, silver and gold production is expected to continue through 2014 as a result of continuing heap leaching operations. During 2009, the Company completed a technical and economic evaluation of an expansion of mining operations at its Rochester mine. This study envisions an average of 2.9 million ounces of incremental annual silver production and 30,000 ounces of further gold production through 2017. The Company expects to complete the permitting necessary for construction of facilities to restart active mining in the second half of 2010. Rochester produced 2.2 million ounces of silver and 12,663 ounces of gold in 2009.


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  •  Coeur owns, either directly or indirectly, 100% of the capital stock of Coeur Argentina S.R.L., which owns and operates the underground high-grade silver and gold Martha mine located in Santa Cruz, Argentina. Mining operations commenced at the Martha mine in June 2002. In 2007, the Company built a stand-alone mill to process ore from the Martha mine which previously was transported to its Cerro Bayo mine in Chile for processing. The Company carries on an active exploration program at its Martha mine and on its other exploration properties in Santa Cruz, which totals over 560 square miles. During 2009, Martha produced 3.7 million ounces of silver, the most in its history. Due to depletion of the ore reserve at the Martha mine, the Company expects operating activities will cease in late 2010, unless additional mineralization is discovered during the year.
 
  •  In May 2005, the Company acquired, for $44.0 million, all of the silver production and reserves (up to 20.0 million payable ounces) contained at the Endeavor mine in Australia, which is owned and operated by Cobar Operations Pty. Limited, a wholly-owned subsidiary of CBH Resources Ltd. (“CBH”). The Endeavor mine is an underground zinc, lead and silver mine located in New South Wales, Australia, which has been in production since 1983. Endeavor produced 461,800 ounces of silver in 2009.
 
  •  Coeur owns, either directly or indirectly, 100% of Compania Minera Cerro Bayo Limitada, which controls the Cerro Bay mine in southern Chile. Cerro Bay comprises a gold and silver underground mine and processing facilities. The ore deposits at the Cerro Bayo districts were discovered in the late 1990’s and exploration discoveries have been made consistently from then to the present. Operations commenced in 1995 and continued uninterrupted until 2000 when a brief production hiatus occurred. That same year new deposits were discovered and production recommenced there in late 2001 and ore processing restarted in April 2002. The Company carries on an active exploration program on its 132 square mile (34,106 hectares) property package encompassing the mine and mill complex and exploration area. During the fourth quarter of 2008, the Company suspended operations at Cerro Bayo in order to conserve existing reserves and to focus on exploration and development of new discoveries and existing veins. The suspension resulted in no silver and gold production in 2009.
 
  •  Effective July 1, 2009, the Company sold its 100% interest in silver contained at the Broken Hill mine for $55.0 million in cash to Perilya Broken Hill Ltd.
 
Coeur also has interests in other properties that are subject to silver or gold exploration activities upon which no minable ore reserves have yet been delineated.
 
SILVER AND GOLD PRICES
 
The Company’s operating results are substantially dependent upon the world market prices of silver and gold. The Company has no control over silver and gold prices, which can fluctuate widely. The volatility of such prices is illustrated by the following table, which sets forth the high and low prices of silver (as reported by Handy and Harman) and gold (as reported by London Final) per ounce during the periods indicated:
 
                                                 
    Year Ended December 31,
    2009   2008   2007
 
      High       Low       High       Low       High       Low  
                                                 
Silver
  $ 19.28     $ 10.45     $ 20.70     $ 8.81     $ 15.67     $ 11.54  
Gold
  $ 1,212.50     $ 810.00     $ 1,011.25     $ 712.50     $ 841.10     $ 608.40  
 
MARKETING
 
All of our mining operations produce silver and gold in doré form except for the Martha Mine which produces a concentrate that contains both silver and gold and the Endeavor Mine which produces a concentrate that contains silver.
 
The Company markets its refined metal and doré to credit worthy bullion trading houses, market makers and members of the London Bullion Market Association, industrial companies and sound financial institutions. The refined metals are sold to end users for use in electronic circuitry, jewelry, silverware, and the pharmaceutical and


3


Table of Contents

technology industries. The Company currently has five trading counterparties (Mitsui, Mitsubishi, Standard Bank, Valcambi and Auramet) and the sales of metals to these companies amounted to approximately 83%, 50% and 52% of total metal sales in 2009, 2008 and 2007, respectively. Generally, the loss of a single bullion trading counterparty would not adversely affect the Company due to the liquidity of the markets and the availability of alternative trading counterparties.
 
The Company refines and markets its precious metals doré and concentrates using a geographically diverse group of third party smelters and refiners, including clients located in Mexico, Switzerland, Australia and the United States (Penoles, Valcambi, Nyrstar, Johnson Matthey). Sales of silver concentrates to third-party smelters amounted to approximately 17%, 50% and 48% of total metal sales for the years ended December 31, 2009, 2008 and 2007, respectively. The loss of any one smelting and refining client may have a material adverse effect if alternate smelters and refiners are not available. The Company believes there is sufficient global capacity available to address the loss of any one smelter.
 
HEDGING ACTIVITES
 
The Company’s strategy is to provide shareholders with leverage to changes in silver and gold prices by selling silver and gold production at market prices. Coeur has historically sold silver and gold from its mines both pursuant to forward contracts and at spot prices prevailing at the time of sale. The Company has entered into derivative contracts to protect the selling price for certain anticipated gold and silver production and to manage risks associated with commodities and foreign currencies. For additional information see hedging in Item 7A. Quantitative and Qualitative Disclosures About Market Risk and Note Q to the consolidated financial statements, Derivative Financial Instruments and Fair Value of Financial Instruments.
 
GOVERNMENT REGULATION
 
General
 
The Company’s activities are subject to extensive federal, state and local laws governing the protection of the environment, prospecting, development, production, taxes, labor standards, occupational health, mine safety, toxic substances and other matters. The costs associated with compliance with such regulatory requirements are substantial and possible future legislation and regulations could cause additional expense, capital expenditures, restrictions and delays in the development and continued operation of the Company’s properties, the extent of which cannot be predicted. In the context of environmental permitting, including the approval of reclamation plans, the Company must comply with known standards and regulations which may entail significant costs and delays. Although Coeur has been recognized for its commitment to environmental responsibility and believes it is in substantial compliance with applicable laws and regulations, amendments to current laws and regulations, more stringent implementation of these laws and regulations through judicial review or administrative action or the adoption of new laws could have a materially adverse effect upon the Company and its results of operations.
 
Estimated future reclamation costs are based primarily on legal and regulatory requirements. As of December 31, 2009, $38.2 million was accrued for reclamation costs relating to currently developed and producing properties. The Company is also involved in several matters concerning environmental obligations associated with former mining activities. Based upon our best estimate of our liabilities for these items, $1.7 million was accrued as of December 31, 2009. These amounts are included in reclamation and mine closure liabilities and the consolidated balance sheet.
 
Federal Environmental Laws
 
Certain mining wastes from extraction and beneficiation of ores are currently exempt from the extensive set of Environmental Protection Agency (“EPA”) regulations governing hazardous waste, although such wastes may be subject to regulation under state law as a solid or hazardous waste. The EPA has worked on a program to regulate these mining wastes pursuant to its solid waste management authority under the Resource Conservation and Recovery Act (“RCRA”). Certain ore processing and other wastes are currently regulated as hazardous wastes by the EPA under RCRA. If the Company’s mine wastes were treated as hazardous waste or such wastes resulted in operations being designated as a “Superfund” site under the Comprehensive Environmental Response,


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Compensation and Liability Act (“CERCLA” or “Superfund”) for cleanup, material expenditures would be required for the construction of additional waste disposal facilities or for other remediation expenditures. Under CERCLA, any present owner or operator of a Superfund site or an owner or operator at the time of its contamination generally may be held liable and may be forced to undertake 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 may also be imposed upon the Company’s tailings and waste disposal in Alaska under the Federal Clean Water Act (“CWA”) and state law counterparts, and in Nevada under the Nevada Water Pollution Control Law which implements the CWA. Air emissions are subject to controls under Nevada’s and Alaska’s air pollution statutes implementing the Clean Air Act. The Company has reviewed and considered current federal legislation relating to climate change and does not believe it to have a material effect on its operations. Additional regulation or requirements under any of these laws and regulations could have a materially adverse effect upon the Company and its results of operations.
 
Proposed Mining Legislation
 
Legislation has been introduced regularly in the U.S. Congress over the last decade to change the Mining Law of 1872 as amended, under which the Company holds unpatented mining claims on federal lands. A portion of the Company’s U.S. mining properties are on unpatented mining claims on federal lands. It is possible that the Mining Law may be amended or be replaced by more onerous legislation in the future. Previously proposed legislation contained a production royalty obligation, new environmental standards and conditions, additional reclamation requirements and extensive new procedural steps which would be likely to result in delays in permitting. In January 2009, a bill was introduced in the U.S. House of Representatives called the “Hardrock Mining and Reclamation Act of 2009” (H.R. 699). The proposed legislation contains new proposed royalties on gross revenues for new and existing mining operations on public lands, among other provisions. The ultimate content of this or any future proposed legislation, if enacted, is uncertain. If a royalty on unpatented mining claims were to be imposed under any ultimately enacted law, the Company’s operations could be adversely affected, although the majority of the Company’s operations are either outside of the United States or on private patented lands and would be unaffected by potential legislation. In addition, the Forest Service and the Bureau of Land Management have considered revising regulations governing operations under the Mining Law on federal lands they administer, which, if implemented, may result in additional procedures and environmental conditions and standards on those lands.
 
Any such reform of the Mining Law or Bureau of Land Management and Forest Service regulations there under could increase the costs of mining activities on unpatented mining claims, or could materially impair the ability of the Company to develop or continue operations which derive ore from federal lands, and as a result could have an adverse affect on the Company and its results of operations. Until such time, if any, as new reform legislation or regulations are enacted, the ultimate effects and costs of compliance on the Company cannot be estimated.
 
Foreign Government Regulations
 
The mining properties of the Company that are located in Chile and Argentina are subject to various government laws and regulations pertaining to the protection of the air, surface water, ground water and the environment in general, as well as the health of the work force, labor standards and the socio-economic impacts of mining facilities upon the communities. In Chile, a recently established State Council for the Environment (“COREMA”) has responsibility to define policy, approve plans and programs, control regulatory activities and enforce compliance in Chile. The Company believes it is in substantial compliance with all applicable laws and regulations to which it is subject in Chile and Argentina.
 
Bolivia, where the San Bartolomé mine is located, and Mexico, where the Palmarejo mine is located, have both adopted laws and guidelines for environmental permitting that are similar to those in effect in the United States and other South American countries. The permitting process requires a thorough study to determine the baseline condition of the mining site and surrounding area, an environmental impact analysis, and proposed mitigation measures to minimize and offset the environmental impact of mining operations. The Company has received all permits required to operate the San Bartolomé mine and to build and operate the Palmarejo mine.


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The Company does not directly hold any interest in mining properties in Australia. However, under the Silver Sale Agreements with CBH Resources Limited (“CBH”), the Company has purchased CBH’s silver reserves and resources in the ground. CBH is responsible for the mining operation and compliance with government regulations and the Company is not responsible for compliance. The Company is however at risk for any production stoppages resulting from non-compliance. The mining property of CBH is subject to a range of state and federal government laws and regulations pertaining to the protection of the air, surface water, ground water, noise, site rehabilitation and the environment in general, as well as the occupational health and safety of the work force, labor standards and the socio-economic impacts of mining facilities among local communities. In addition, the various federal and state native title legislation recognize and protect the rights and interests in Australia of Aboriginal and Torres Strait Islander people in land and waters, according to their traditional laws and customs, and may restrict mining and exploration activity and/or result in additional costs. CBH is required to deal with a number of governmental departments in development and exploitation of its mining property. The Company is not aware of any substantial non-compliance with applicable laws and regulations to which this company is subject in Australia.
 
Maintenance of Claims
 
United States
 
At mining properties in the United States, including the Rochester and Kensington mines, operations are conducted in part upon unpatented mining claims, as well as patented mining claims. Pursuant to applicable federal law it is necessary, to maintain the unpatented claims, to pay to the Secretary of the Interior, on or before August 31 of each year, a claim maintenance fee of $135 per claim. This claim maintenance fee is in lieu of the assessment work requirement contained in the Mining Law. In addition, in Nevada, holders of unpatented mining claims are required to pay the county recorder of the county in which the claim is situated an annual fee of $8.50 per claim. No maintenance fees are payable for patented claims. Patented claims are similar to land held by an owner who is entitled to the entire interest in the property with unconditional power of disposition.
 
Mexico
 
In order to carry out mining activities in Mexico, the Company is required to obtain a mining concession from the General Bureau of Mining which belongs to the Ministry of Economy (Secretaría de Economía) of the Federal Government, or be assigned previously granted concession rights, and both must be recorded with the Public Registry of Mining. In addition, mining works may have to be authorized by other authorities when performed in certain areas, including villages, dams, channels, general communications ways, submarine shelf of islands, islets and reefs, marine beds and subsoil and federal maritime-terrestrial zones. Reports have to be filed with the Bureau in May of each year evidencing previous calendar year mining works. Generally nominal biannual mining duties are payable in January and July of each year, and failure to pay these duties could lead to cancellation of the concessions. Obligations such as not to withdraw permanent works of fortification and to file technical reports are to be fulfilled upon expiration or cancellation of the concession.
 
Bolivia
 
The Bolivian national mining company, Corporación Minera de Bolivia (“Comibol”), is the underlying owner of all of the mining rights relating to the San Bartolomé mine. Comibol’s ownership derives from the Supreme Decree 3196 issued in October 1952, when the government nationalized most of the mines in Potosí. Comibol has leased the mining rights for the surface sucu or pallaco gravel deposits to several Potosí cooperatives. The cooperatives in turn have subleased their mining rights to Manquiri through a series of “joint venture” contracts with Manquiri. In addition to those agreements with the cooperatives, Coeur, through its subsidiary Manquiri, holds additional mining rights under lease agreements directly with Comibol. All of Manquiri’s mining and surface rights collectively constitute the San Bartolomé project. For additional information regarding the maintenance of our claims to the San Bartolomé mine, see Item 2 Properties — Silver and Gold Mining Properties — South America — Bolivia below.


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Argentina
 
Minerals are owned by the provincial governments, which impose a maximum 3% mine-mouth royalty on mineral production. The first step in acquiring mining rights is filing a cateo, which gives exclusive prospecting rights for the requested area for a period of time, generally up to 3 years. Maximum size of each cateo is 10,000 hectares; a maximum of 20 cateos, or 200,000 hectares, can be held by a single entity (individual or company) in any one province.
 
The holder of a cateo has exclusive right to establish a Manifestation of Discovery (“MD”) on that cateo, but MD’s can also be set without a cateo on any land not covered by someone else’s cateo. MDs are filed as either a vein or disseminated discovery. A square protection zone can be declared around the discovery — up to 840 hectares for a vein MD or up to 7,000 hectares for a disseminated MD. The protection zone grants the discoverer exclusive rights for an indefinite period, during which the discoverer must provide an annual report presenting a program of exploration work and investments related to the protection zone. A MD can later be upgraded to a Mina (mining claim), which gives the holder the right to begin commercial extraction of minerals.
 
Chile
 
In Chile, mineral rights are owned by the national government. Mineral concessions are granted by the court with jurisdiction over the land where the requested concession is located. For exploitation concessions (somewhat similar to a U.S. patented claim), to maintain the concession, an annual tax is payable to the government before March 31 of each year in the approximate amount of $6.90 per hectare. For exploration concessions, to maintain the right, the annual tax is approximately $1,380 per hectare. An exploration concession is valid for a five-year period. It may be renewed unless a third party claims the right to explore upon the property, in which event the exploration concession must be converted to an exploitation concession in order to maintain the rights to the concession.
 
Australia
 
At the mining property in Australia operated by CBH, operations are conducted on designated Mining Leases issued by the relevant state government mining department. Mining Leases are issued for a specific term and include a range of environmental and other conditions including the payment of production royalties, annual lease fees and the use of cash or a bank guarantee as security for reclamation liabilities. The amounts required to be paid to secure reclamation liabilities are determined on a case by case basis. In addition, CBH holds a range of exploration titles and permits, which are also issued by the respective state government mining departments for specified terms and require payment of annual fees and completion of designated expenditure programs on the leases to maintain title. In Australia, minerals in the ground are owned by the state until severed from the ground through mining operations.
 
Condition of Physical Assets and Insurance
 
Our business is capital intensive, requiring ongoing capital investment for the replacement, modernization or expansion of equipment and facility. For more information see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations below.
 
The Company maintains insurance policies against property loss and business interruption and insures against risks that are typical in the operation of our business, in amounts we believe to be reasonable. Such insurance, however, contains exclusions and limitations on coverage, particularly with respect to environmental liability and political risk. There can be no assurance that claims would be paid under such insurance policies in connection with a particular event. See Item 1A Risk Factors below.


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EMPLOYEES
 
The number of full-time employees at the Company as of December 31, 2009 was:
 
         
U.S. Corporate Staff and Office
    43  
Rochester Mine
    31  
Kensington Mine
    74  
South American Administrative Offices
    34  
South American Exploration
    16  
Cerro Bayo Mine/Chile(1)
    31  
Mina Martha/Argentina(1)
    179  
San Bartolomé Mine/Bolivia(1)
    299  
Palmarejo Mine/Mexico
    586  
Australia
     
Tanzania
    1  
         
Total
    1,294  
         
 
 
(1) The Company maintains three labor agreements in South America, consisting of a labor agreement with Syndicato de Trabajadores de Compañía Minera Cerro Bayo Ltd. at its Cerro Bayo mine in Chile, a labor agreement with Associacion Obrera Minera Argentina at its Martha mine in Argentina and a labor agreement with Sindicato de la Empresa Minera Manquiri at its San Bartolomé mine in Boliva. The agreement at Cerro Bayo is effective from December 24, 2007 to December 21, 2010 and the agreement at Mina Martha is effective from June 12, 2006 to June 1, 2010. The Bolivian labor agreement, which became effective October 11, 2007, does not have a fixed term. As of December 31, 2009, approximately 19% of the Company’s worldwide labor force was covered by collective bargaining agreements.
 
EXPLORATION STAGE MINING PROPERTIES
 
The Company, either directly or through wholly-owned subsidiaries, owns, leases and has interests in certain exploration-stage mining properties located in the United States, Chile, Argentina, Bolivia, Mexico and Tanzania. During 2010, the Company expects to invest approximately $17.9 million in exploration and reserve development compared to $18.9 million spent on similar activities in 2009.
 
BUSINESS STRATEGY
 
The Company’s business strategy is to discover, acquire, develop and operate low-cost silver and gold operations that will produce long-term cash flow, provide opportunities for growth through continued exploration, and generate superior and sustainable returns for shareholders.
 
SOURCES OF REVENUE
 
The Palmarejo mine, San Bartolomé mine, Martha mine, Rochester mine, each operated by the Company and the Endeavor mine, operated by another non-affiliated party, constituted the Company’s principal sources of mining revenues in 2009. See the Financial Statements, Note U Segment Information under the caption “Geographical Information” for revenues attributed to all foreign countries. The following table sets forth information regarding


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the percentage contribution to the Company’s total revenues (i.e., revenues from the sale of concentrates and doré) by the sources of those revenues during the past five years:
 
                                                 
    CoeurPercentage
                               
    Ownership at
    Percentage of Total Revenues(2)
 
    December 31,
    For The Years Ended December 31,  
Mine/Company
  2009     2009     2008     2007     2006     2005  
 
Palmarejo Mine
    100 %     30 %     %     %     %     %
San Bartolomé Mine
    100       38       10                    
Martha Mine
    100       15       18       19       18       14  
Rochester Mine
    100       15       40       52       53       46  
Endeavor Mine(1)
    100       2       7       4       3       1  
Cerro Bayo Mine
    100             25       25       26       39  
                                                 
              100 %     100 %     100 %     100 %     100 %
                                                 
 
 
(1) Ownership interest reflects the Company’s ownership interest in the property’s silver production. Other constituent metals are owned by another non-affiliated entity.
 
(2) Effective July 1, 2009, the Company sold to Perilya Broken Hill Ltd. its 100% interest in silver contained at the Broken Hill mine for $55.0 million in cash.
 
DEFINITIONS
 
The following sets forth definitions of certain important mining terms used in this report.
 
“Ag” is the abbreviation for silver.
 
“Au” is the abbreviation for gold.
 
“Backfill” is primarily waste sand or rock used to support the roof or walls after removal of ore from a stope.
 
“By-Product” is a secondary metal or mineral product recovered in the milling process such, as gold.
 
“Cash Costs” are costs directly related to the physical activities of producing silver and gold, and include mining, processing, transportation and other plant costs, third-party refining and smelting costs, marketing expense, on-site general and administrative costs, royalties and in-mine drilling expenditures that are related to production and other direct costs. Sales of by-product metals, including gold, are deducted from the above in computing cash costs per ounce. Cash costs exclude depreciation, depletion and amortization, corporate general and administrative expense, exploration, interest, and pre-feasibility costs and accruals for mine reclamation. Cash costs are calculated and presented using the “Gold Institute Production Cost Standard” applied consistently for all periods presented.
 
“Cash Costs per Ounce” are calculated by dividing the cash costs computed for each of the Company’s mining properties for a specific period by the amount of gold ounces or silver ounces produced by that property during that same period. Management uses cash costs per ounce produced as a key indicator of the profitability of each of its mining properties. Gold and silver are sold and priced in the world financial markets on a U.S. dollar per ounce basis. By calculating the cash costs from each of the Company’s mines on the same unit basis, management can determine the gross margin that each ounce of gold and silver produced is generating. While this represents a key indicator of the performance of the Company’s mining properties you are cautioned not to place undue reliance on this single measurement. To fully evaluate a mine’s performance, management also monitors U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) based profit/(loss), depreciation and amortization expenses and capital expenditures for each mine as presented in Note T — Segment Information in the Notes to the Company’s Consolidated Financial Statements. Total cash costs per ounce is a non-GAAP measurement and investors are cautioned not to place undue reliance on it and are urged to read all GAAP accounting disclosures presented in the consolidated financial statements and accompanying footnotes.
 
“Concentrate” is a very fine powder-like product containing the valuable metal from which most of the waste material in the ore has been eliminated.


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“Contained Ounces” represents ounces in the ground before reduction of ounces not able to be recovered by applicable metallurgical process.
 
“Cut-off Grade” is the minimum metal at which an ore body can be economically mined; used in the calculation of reserves in a given deposit.
 
“Cyanidation” is a method of extracting gold or silver by dissolving it in a weak solution of sodium or potassium cyanide.
 
“Development” is work carried out for the purpose of accessing a mineral deposit. In an underground mine that includes shaft sinking, crosscutting, drifting and raising. In an open pit mine, development includes the removal of over burden.
 
“Dilution” is an estimate of the amount of waste or low-grade mineralized rock which will be mined with the ore as part of normal mining practices in extracting an ore body.
 
“Doré” is unrefined gold and silver bullion bars which contain gold, silver and minor amounts of impurities which will be further refined to almost pure metal.
 
“Drilling”
 
Core: with a hollow bit with a diamond cutting rim to produce a cylindrical core that is used for geological study and assays used in mineral exploration.
 
In-fill: is any method of drilling intervals between existing holes, used to provide greater geological detail and to help establish reserve estimates.
 
“Exploration” is prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore.
 
“Gold” is a metallic element with minimum fineness of 999 parts per 1000 parts pure gold.
 
“Grade” is the amount of metal in each ton of ore, expressed as troy ounces per ton or grams per tonne for precious metals.
 
“Heap Leach Pad” is a large impermeable foundation or pad used as a base for ore during heap leaching.
 
“Heap Leaching Process” is a process of extracting gold and silver by placing broken ore on an impermeable pad and applying a diluted cyanide solution that dissolves a portion of the contained gold and silver, which are then recovered in metallurgical processes.
 
“Hectare” is a metric unit of area equal to 10,000 square meters (2.471 acres).
 
“Mill” is a processing facility where ore is finely ground and thereafter undergoes physical or chemical treatments to extract the valuable metals.
 
“Mill-Lead Grades” are metal content of mined ore going into a mill for processing.
 
“Mineralized Material” is gold and silver bearing material that has been physically delineated by one or more of a number of methods, including drilling, underground work, surface trenching and other types of sampling. This material has been found to contain a sufficient amount of mineralization of an average grade of metal or metals to have economic potential that warrants further exploration evaluation. While this material is not currently or may never be classified as ore reserves, it is reported as mineralized material only if the potential exists for reclassification into the reserves category. This material cannot be classified in the reserves category until final technical, economic and legal factors have been determined. Under the United States Securities and Exchange Commission’s standards, a mineral deposit does not qualify as a reserve unless it can be economically and legally extracted at the time of reserve determination and it constitutes a proven or probable reserve (as defined below). In accordance with Securities of Exchange Commission guidelines, mineralized material reported in the Company’s Form 10-K no longer includes inferred mineral resources.
 
“Mining Rate” tons of ore mined per day or even specified time period.


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“Non-cash Costs” are costs that are typically accounted for ratably over the life of an operation and include depreciation, depletion and amortization of capital assets, accruals for the costs of final reclamation and long-term monitoring and care that are usually incurred at the end of mine life, and the amortization of the cost of property acquisitions.
 
“Open Pit” is a mine where the minerals are mined entirely from the surface.
 
“Operating Cash Costs Per Ounce” are cash costs per ounce minus production taxes and royalties.
 
“Ore” is rock, generally containing metallic or non-metallic minerals, which can be mined and processed at a profit.
 
“Ore Body” is a sufficiently large amount of ore that can be mined economically.
 
“Ore Reserve” is the part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
 
“Probable Reserve” is a part of a mineralized deposit which can be extracted or produced economically and legally at the time of the reserve determination. The quantity and grade and/or quality of a probable reserve is computed from information similar to that used for a proven reserve, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. Mining dilution, where appropriate, has been factored into the estimation of probable reserves.
 
“Proven Reserve” is a portion of a mineral deposit which can be extracted or produced economically and legally at the time of the reserve determination. The quantity of a proven reserve is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and the sites for inspections, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of a proven reserve is well-established. Mining dilution, where appropriate, has been factored into the estimation of proven reserves.
 
“Reclamation” is the process by which lands disturbed as a result of mining activity are modified to support beneficial land use. Reclamation activity may include the removal of buildings, equipment, machinery and other physical remnants of mining, closure of tailings, leach pads and other features, and contouring, covering and re-vegetation of waste rock and other disturbed areas.
 
“Recovery Rate” is a term used in process metallurgy to indicate the proportion of valuable material physically recovered in the processing of ore. It is generally stated as a percentage of material recovered compared to the material originally present.
 
“Refining” is the final stage of metal production in which impurities are removed from the molten metal.
 
“Run-of-mine Ore” is mined ore which has not been subjected to any pretreatment, such as washing, sorting or crushing prior to processing.
 
“Silver” is a metallic element with minimum fineness of 995 parts per 1000 parts pure silver.
 
“Stripping Ratio” is the ratio of the number of tons of waste material to the number of tons of ore extracted at an open-pit mine.
 
“Tailings” is the material that remains after all economically and technically recovered precious metals have been removed from the ore during processing.
 
“Ton” means a short ton which is equivalent to 2,000 pounds, unless otherwise specified.
 
“Total costs” are the sum of cash costs and non-cash costs.
 
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
 
This report contains numerous forward-looking statements relating to the Company’s gold and silver mining business, including estimated production data, expected operating schedules, expected capital costs and other


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operating data and permit and other regulatory approvals. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,” “hopes,” “may,” “should,” “plan,” “projected,” “contemplates,” “anticipates” or similar words. Actual production, operating schedules, results of operations, ore reserve and resources could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include (i) the risk factors set forth below under Item 1A, (ii) the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), (iii) changes in the market prices of gold and silver, (iv) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays, (v) any future labor disputes or work stoppages, (vi) the uncertainties inherent in the estimation of gold and silver ore reserves, (vii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (viii) reliance on third parties to operate certain mines where the Company owns silver production and reserves, (ix) the loss of any third-party smelter to which the Company markets silver and gold, (x) the effects of environmental and other governmental regulations, (xi) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, (xii) the worldwide economic downturn and difficult conditions in the global capital and credit markets, and (xiii) the Company’s ability to raise additional financing necessary to conduct its business, make payments or refinance its debt. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.
 
AVAILABLE INFORMATION
 
The Company maintains an internet website at http://www.coeur.com. Coeur makes available, free of charge, on or through its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and Forms 4 and 5, as soon as reasonably practicable after electronically filing such reports with the Securities and Exchange Commission. Copies of Coeur’s Corporate Governance Guidelines, charters of the key Committees of the Board of Directors (Audit, Compensation, Nominating and Corporate Governance) and its Code of Business Conduct and Ethics for Directors, Officers and Employees, applicable to the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, are available at our website http://www.coeur.com. Information contained on the Company’s website is not a part of this report.
 
Item 1A.   Risk Factors
 
The following sets forth information relating to important risks and uncertainties that could materially adversely affect the Company’s business, financial condition or operating results. References to “we,” “our” and “us” in these risk factors refer to the Company. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also impair our business operations.
 
The market prices of silver and gold are volatile. Low silver and gold prices could result in decreased revenues, decreased net income or losses and decreased cash flows, 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 currently derive approximately 79% of our revenues from continuing operations from sales of silver and 21% from gold, our earnings are primarily related to the price of these metals.
 
The market prices of silver (Handy & Harman) and gold (London Final) on February 23, 2010 were $15.92 per ounce and $1,107 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.


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If the prices of silver and gold are depressed for a sustained period and our net losses continue, 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 financial condition and results of operations.
 
We have significant demands on our liquidity.
 
We have incurred significant capital expenditures in recent years to acquire and develop new mining properties. Our ability to complete the funding of these properties depends to a significant extent on both our operating performance, which in turn depends on our production of silver and gold and the price of silver and gold, as well as on our ability to raise funds through the sale of debt and equity securities. The current global financial crisis has increased our cost of funds and may impede our ability to raise any additional funds that could be required in the future. There can be no assurances that such funds will be available upon acceptable terms, or at all, when or if needed.
 
We may have to record write-downs of long-lived assets, which could negatively impact our results of operations.
 
Established accounting standards for impairment of the value of long-lived assets such as mining properties 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 financial condition and results of operations.
 
If silver or gold prices decline or we fail to control production costs or realize the minable 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 a property is sold by us 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 impact our financial condition and results of operations.
 
Due to declining ore reserve at the Martha mine, the Company expects operating activities to cease in late 2010 unless additional mineralization is discovered during the year. In addition, the Company has placed the Cerro Bayo mine under a care and maintenance plan, while undertaking efforts to further explore its holdings and develop a new mine plan and ore reserves in an effort to re-commence operations. The Company is also pursuing strategic alternatives for our Cerro Bayo and Martha mines which may result in the assets (asset groups) being sold or otherwise substantially disposed of before the end of their previously estimated useful lives.
 
On October 14, 2009, the Bolivian state-owned mining organization, COMIBOL, announced by resolution that it was temporarily suspending mining activities above the elevation of 4,400 meters above sea level while stability studies of Cerro Rico mountain are undertaken. The Company holds rights to mine above this elevation under valid contracts backed by Supreme Decree with COMIBOL as well as contracts with local mining cooperatives who hold their rights through COMIBOL. The Company temporarily adjusted its mine plan to confine its activities to ore deposits below 4,400 meters above sea level and has advised COMIBOL that the restriction must be lifted timely. It is uncertain at this time how long the temporary suspension will remain in place.
 
The Company determined that these factors were triggering events in accordance with Generally Accepted Accounting Principles in the United States, (U.S. GAAP), requiring the Company to assess whether the long-lived assets at these mines were impaired. The impairment assessment compared the cumulative undiscounted prospective cash flows of each mine to the sum of the carrying values of the long-lived assets at San Bartolomé, Cerro Bayo and Martha mines as of December 31, 2009.
 
In projecting its future cash flows, the Company considered certain assumptions for silver and gold prices (including current and historical prices, analyst consensus forward prices, as well as the trailing three-year average silver and gold market prices) and production levels, expected and historical operating costs and required capital


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expenditures based on available life of mine plans. Assumptions underlying future cash flows are subject to significant risk and uncertainty associated with any differences between specific assumptions and market conditions, such as silver and gold prices, lower than expected recoverable ounces and/or the Company’s operating performance. Based on the Company’s assessment, there were no required impairments at the San Bartolomé, Cerro Bayo and the Martha mines as of December 31, 2009. Should silver prices fall below consensus forward for historical prices, should cash costs per ounce exceed those projected and historically achieved or should facts and circumstances regarding mining restrictions above the 4,400 level at the San Bartolomé mine adversely change, the Company may need to record an impairment loss and that loss could have a material adverse affect on the Company’s operations and financial position.
 
Our future operating performance may not generate cash flows sufficient to meet our debt payment obligations.
 
As of December 31, 2009, we had a total of approximately $363.6 million of 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.
 
We might be unable to raise additional financing necessary to complete capital needs, conduct our business, make payments when due or refinance our debt.
 
We might need to raise additional funds in order to meet capital needs, implement our business plan, refinance our debt or acquire complementary businesses or products. Any required additional financing might not be available on commercially reasonable terms, or at all. If we raise additional funds by issuing equity securities, holders of our common stock could experience significant dilution of their ownership interest, and these securities could have rights senior to those of the holders of our common stock.
 
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.
 
Exploration, development, production and closure activities outside of North America are potentially subject to heightened political and economic risks, including (i) cancellation or re-negotiation of contracts; (ii) disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the Foreign Corrupt Practices Act; (iii) changes in foreign laws and regulations; (iv) royalty and tax increases or claims by governmental entities or indigenous communities, including retroactive claims; (v) expropriation or nationalization of property; (vi) currency fluctuations; and (vii) other risks arising out of foreign sovereignty over areas in which our operations are conducted including risks inherent in contracts with government owned entities.
 
Consequently, our exploration, development and production activities outside of North America may be substantially affected by factors beyond our control, some of which could materially adversely affect our financial position, results of operations and liquidity. Furthermore, if a dispute arises from such activities, we may be subject to the exclusive jurisdiction of courts outside North America, which could adversely affect the outcome of a dispute.
 
Our revenues and income (or loss) from our interest in the Endeavor mine are dependent in part upon the performance of the operators of the mine.
 
In May 2005, we acquired silver production and reserves at the Endeavor mine in Australia. This mine is owned and operated by another mining company. The Company’s revenues and income (or loss) from its interest in the silver production at this mine is dependent in part upon the performance of the operators of this mine as well as


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upon zinc and lead prices that are sufficient to maintain sustainable operations. The decline in primary metal prices may result in cessation of mining operations at Endeavor and an impairment would likely occur.
 
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. 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, 2009 on a long-term silver price average of $14.50 per ounce, with the exceptions of San Bartolomé which used $13.25, Martha at $16.00 and the Endeavor mine at $12.00 per ounce of silver, and a long-term gold price average of $850 per ounce for all properties with the exceptions of Kensington which uses $750, and the Martha Mine at $950. On February 23, 2010 silver and gold prices were $15.92 per ounce and $1,107 per ounce, respectively.
 
The estimation of the ultimate recovery of metals contained within the Rochester heap leach pad inventory is inherently inaccurate and subjective and requires the use of estimation techniques. Actual recoveries can be expected to vary from estimations.
 
The Rochester mine utilizes the heap leach process to extract silver and gold from ore. The heap leach process is a process of extracting silver and gold by placing ore on an impermeable pad and applying a diluted cyanide solution that dissolves a portion of the contained silver and gold, which are then recovered in metallurgical processes.
 
We use several integrated steps in the process of extracting silver and gold to estimate the metal content of ore placed on the leach pads. Although we refine our estimates as appropriate at each step in the process, the final amounts are not determined until 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. As a result, actual recoveries can vary from estimates, and the amount of the variation could be significant and could have a material adverse impact on our financial condition and results of operations.
 
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 inventories 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 current and long-term operating results may be less than anticipated.


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Silver mining involves significant production and operational risks. Coeur may suffer from the failure to efficiently operate its mining projects.
 
Silver mining involves significant degrees of risk, including those related to mineral exploration success, unexpected geological or mining conditions, the development of new deposits, climatic conditions, equipment and/or service failures, compliance with current or new governmental requirements, current availability of or delays in installing and commissioning plant and equipment, import or customs delays and other general operating risks. Problems may also arise due to the quality or failure of locally obtained equipment or interruptions to services (such as power, water, fuel or transport or processing capacity) or technical support, which results in the failure to achieve expected target dates for exploration or production activities and/or result in a requirement for greater expenditure. The right to export silver and gold may depend on obtaining certain licenses and quotas, the granting of which may be at the discretion of the relevant regulatory authorities. There may be delays in obtaining such licenses and quotas, leading to our results of operations being adversely affected, and it is possible that from time to time export licenses may be refused. Many of these risks are outside of the ability of Coeur’s management to control and may result in a materially adverse effect on Coeur’s operations, financial position and cash flows.
 
Mineral exploration and development inherently involves significant and irreducible financial risks. Coeur may suffer from the failure to find and develop profitable mines.
 
The exploration for and development of mineral deposits involves significant financial risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. Unprofitable efforts may result 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. 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


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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 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 ore body, 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 financial condition and results of operations may be negatively affected.
 
The Company’s marketing of metals and concentrates could be adversely affected if there were to be a significant delay or purchases by its third-party smelter and refinery 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.
 
The Company currently markets and refines its silver and gold doré and concentrates to third-party smelters and refineries in Mexico, Switzerland, United States and Australia. The loss of any one smelter and/or refinery customer could have a material adverse effect on us in the event of the possible unavailability of alternative smelters and refineries. No assurance can be given that alternative smelters or refineries 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 minable ore reserves and are expected to become operational in the near future. We can provide no assurance that our silver and gold production in the future will not decline. 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, some of which may not be 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. 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. 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 financial condition, results of operation and liquidity.
 
We are subject to significant governmental regulations, and their related costs and delays may negatively affect our business.
 
Coeur’s mining activities are subject to extensive federal, state, local and foreign laws and regulations governing environmental protection, natural resources, prospecting, development, production, post-closure


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reclamation, taxes, labor standards and occupational health and safety laws and regulations including mine safety, toxic substances and other matters related to Coeur’s business. 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 Coeur’s operations and delays in the development of its properties. Moreover, future developments in U.S. federal laws and regulations are currently especially difficult to predict due to the new President and Congress in 2009. Changes in the federal government may increase the likelihood that mining companies generally will be subject to new laws, regulations and regulatory investigations.
 
In addition, government approvals, approval of aboriginal people and permits are currently and may in the future be required in connection with our operations at San Bartolomé and Palmarejo. To the extent such approvals are required and not obtained, Coeur may be curtailed or prohibited from operating at San Bartolomé or Palmarejo.
 
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 Coeur is subject to environmental liabilities, the payment of such liabilities or the costs that it may incur to remedy environmental pollution would reduce funds otherwise available to it and could have a material adverse effect on our financial condition and results of operations. If Coeur is unable to fully remedy an environmental problem, it might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy. The environmental standards that may ultimately be imposed at a mine site impact the cost of remediation and may exceed the financial accruals that have been made for such remediation. The potential exposure may be significant and could have a material adverse effect on our financial condition and results of operations.
 
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 Coeur’s 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 Coeur’s operations. Although Coeur believes that it is in substantial compliance with applicable laws and regulations, Coeur cannot assure you that any such law, regulation, enforcement or private claim will not have a negative effect on its business, financial condition or results of operations.
 
Some of Coeur’s mining wastes are currently exempt to a limited extent from the extensive set of federal Environmental Protection Agency (“EPA”) regulations governing hazardous waste under the Resource Conservation and Recovery Act (“RCRA”). If the EPA designates these wastes as hazardous under RCRA, Coeur would be required to expend additional amounts on the handling of such wastes and to make significant expenditures to construct hazardous waste disposal facilities. In addition, if any of these wastes causes contamination in or damage to the environment at a mining facility, such facility may be designated as a “Superfund” site under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). Under CERCLA, any owner or operator of a Superfund site since the time of its contamination may be held liable and may be forced to undertake extensive remedial cleanup action or to pay for the government’s cleanup efforts. Such owner or operator


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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 Coeur’s tailings and waste disposal areas in Alaska under the federal Clean Water Act (“CWA”) and in Nevada under the Nevada Water Pollution Control Law which implements the CWA. The Company considers the current proposed federal legislation relating to climate change and its potential enactment may have future impacts to the Company’s operations in the United States or abroad through international accords.
 
Airborne emissions are subject to controls under air pollution statutes implementing the Clean Air Act in Nevada and Alaska. In addition, there are numerous legislative and regulatory proposals related to climate change, including legislation pending in the U.S. Congress to require reductions in greenhouse gas emissions. The Company has reviewed and considered current federal legislation relating to climate change and does not believe it to have a material effect on its operations, however, additional regulation or requirements under any of these laws and regulations could have a materially adverse effect upon the Company and its results of operations.
 
Compliance with CERCLA, the CWA and state environmental laws could entail significant costs, which could have a material adverse effect on Coeur’s operations.
 
In the context of environmental permits, including the approval of reclamation plans, Coeur must comply with standards and regulations which entail significant costs and can entail significant delays. Such costs and delays could have a dramatic impact on Coeur’s operations. There is no assurance that future changes in environmental regulation, if any, will not adversely affect Coeur’s operations. Coeur intends to fully comply with all applicable environmental regulations.
 
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. 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.
 
Our operations in Bolivia are subject to political risks.
 
The Bolivian government adopted a new constitution in early 2009 that strengthened state control over key economic sectors such as mining. We cannot assure you that our operations at the San Bartolomé mine in Bolivia will not be affected in the current political environment in Bolivia. On October 14, 2009, the Bolivian state-owned mining organization, COMIBOL, announced by resolution that it was temporarily suspending mining activities above the elevation of 4,400 meters above sea level while stability studies of Cerro Rico mountain are undertaken. The Company holds rights to mine above this elevation under valid contracts backed by Supreme Decree with COMIBOL as well as contracts with local mining cooperatives who hold their rights through COMIBOL. The Company temporarily adjusted its mine plan to confine its activities to the ore deposits below 4,400 meters above sea level. The Company timely notified COMIBOL of the need to lift the restriction. The mine plan adjustment may reduce the 2010 production by as much as 500,000 ounces of silver per quarter until the Company is able to resume mining above 4,400 meters. The Company is also reviewing its mine plan and may modify its manpower and operations schedule to minimize any financial impact of this potential production shortfall. It is uncertain at this time how long the temporary suspension will remain in place. It is also unknown if any new mining or investment policies or shifts in political attitude may affect mining in Bolivia.


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Our business depends on good relations with our employees.
 
The Company could experience labor disputes, work stoppages or other disruptions in production that could adversely affect us. As of December 31, 2009, unions represented approximately 19% of our worldwide workforce. On that date, the Company had 7 employees at its Cerro Bayo mine and 57 employees at its 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, 2010. Additionally, the Company had 176 employees at its San Bartolomé mine working under a labor agreement which became effective October 11, 2007, and does not have a fixed term.
 
Coeur is exposed to risks with respect to the legal systems in the countries in which it has significant operations or interests and resolutions of any disputes may adversely affect its business.
 
Some of the jurisdictions in which Coeur currently and may in the future operate have less developed legal systems than would be found in more established economies like the United States. This may result in risks such as potential difficulties in obtaining effective legal redress in the courts of such jurisdictions, whether in respect of a breach of law or regulation, or in an ownership dispute; a higher degree of discretion on the part of governmental authorities; the lack of judicial or administrative guidance on interpreting applicable rules and regulations; inconsistencies or conflicts between and within various laws, regulations, decrees, orders and resolutions; or relative inexperience of the judiciary and courts in such matters.
 
In certain jurisdictions the commitment of local business people, government officials and agencies and the judicial system to abide by legal requirements and negotiated agreements may be uncertain, creating particular concerns with respect to licenses and agreements for business. These may be susceptible to revision or cancellation and legal redress may be uncertain or delayed. There can be no assurance that joint ventures, licenses, license applications or other legal arrangements will not be adversely affected by the actions of government authorities or others, and the effectiveness of and enforcement of such arrangements in these jurisdictions cannot be assured.
 
Any of 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 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 impact the price of our common stock and negatively affect our results of operations.
 
Coeur is continuously considering possible acquisitions of additional mining properties or interests therein that are located in other countries, and could be exposed to significant risks associated with any such acquisitions.
 
In the ordinary course of Coeur’s business, Coeur is continuously considering the possible acquisition of additional significant mining properties or interests therein that may be located in countries other than those in which Coeur now has operations or interests. Consequently, in addition to the risks inherent in the valuation and acquisition of such mining properties, as well as the subsequent development, operation or ownership thereof, Coeur could be subject to additional risks in such countries as a result of governmental policies, economic instability, currency value fluctuations and other risks associated with the development, operation or ownership of mining properties or interests therein. Such risks could adversely affect Coeur’s results of operations.


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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 the discovery of defective titles and losses affecting our business.
 
The validity of unpatented mining claims, which constitute a significant portion of Coeur’s property holdings in the United States, is often uncertain and may be contested. Although Coeur has attempted to acquire satisfactory title to undeveloped properties, Coeur, in accordance with mining industry practice, does not generally obtain title 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 Coeur’s mining claims could result in litigation, insurance claims, and potential losses affecting its business as a whole.
 
The acquisition of title to concessions and similar property interests is a detailed and time consuming process. Title to, and the area of, concessions and similar property interests may be disputed.
 
There may be challenges to the title of any of the claims comprising Palmarejo that, if successful, could impair development and/or operations. A defect could result in Coeur losing all or a portion of its right, title, estate and interest in and to the properties to which the title defect relates. Also, while Coeur believes that the registration defects relating to certain non-material properties as described herein will be remedied; there can be no assurance as to timing or successful completion.
 
The market price of our common stock has been volatile and may decline.
 
The market price of our common stock has been volatile and may decline in the future. The market price of our common stock historically has fluctuated widely and been affected by our operating results and by many factors beyond our control. These factors include: market prices of silver and gold; general stock market conditions; interest rates; expectations regarding inflation; currency values; and global and regional political and economic conditions and other factors.
 
We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common stock and may materially and adversely affect the price of our common stock.
 
The issuance of additional equity securities or securities convertible into equity securities would result in dilution of existing shareholders’ equity interests in the Company. 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 series and to fix the designation, powers, preferences and relative participating, optional, conversion and other special rights of the shares of each series as well as the qualification, limitations or restrictions on each series, including but not limited to 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 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 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. If we issue additional equity securities, the price of our common stock may be materially and adversely affected.


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We are subject to anti-takeover provisions in our charter and in our bylaws that could delay or prevent an acquisition of Coeur even if such an acquisition would be beneficial to our shareholders.
 
Certain provisions in our articles of incorporation and our bylaws could provide the ability to delay or prevent a third party from acquiring us, even if doing so might be beneficial to our shareholders. Some of these provisions: (i) authorize the issuance of preferred stock which can be created and issued by the Board of Directors without prior shareholder approval, commonly referred to as “blank check” preferred stock, with rights senior to those of common stock; (ii) authorize the Board of Directors to increase or decrease the size of the board without shareholder approval; (iii) authorize a majority of the directors then in office to fill any vacancy on the Board of Directors; and (iv) require that a “fair price” be paid in some business transactions.
 
Item 1B.   Unresolved Staff Comments
 
None
 
Item 2.   Properties
 
WORLD MAP
 
SILVER AND GOLD MINING PROPERTIES
 
Our operating segments include Rochester (Nevada), Palmarejo (Mexico), San Bartolomé (Bolivia), Martha (Argentina), Endeavor (Australia) and Cerro Bayo (Chile). See Item 1A Risk Factors, related to Coeur’s operations in Bolivia and Note T to the consolidated financial statements for information relating to our business segments and our domestic and export sales.
 
South America
 
Bolivia — San Bartolomé Mine
 
The San Bartolomé open pit silver mine, operated by Empresa Minera Manquiri SA (“Manquiri”), a wholly-owned subsidiary of the Company, is located on the flanks of the Cerro Rico Mountain bordering the town of Potosí, Bolivia. Access to the property and the Company’s processing facilities is by paved and all-weather gravel roads leading south-southwest from Potosí.
 
Silver production for 2009 was 7.5 million ounces compared to 2.9 million ounces in 2008. Cash operating costs per ounce for 2009 were $7.80 per ounce compared to $8.22 per ounce in 2008. Total cash costs per ounce (which includes production taxes and royalties) for 2009 were $10.48 per ounce compared to $10.53 per ounce in 2008.
 
The mineral rights for the San Bartolomé mine are held through joint venture and long-term lease agreements with several independent mining cooperatives and the Bolivian State Mining Company (“COMIBOL”). Manquiri controls 67 square kilometers under lease from COMIBOL and 16,600 acres under lease from the cooperatives at San Bartolomé and approximately 17.8 square miles of concessions at the Khori Huasi property, a gold exploration target south of Potosí. The San Bartolomé lease agreements, executed between 1996 and 2003 and with 25 year


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terms, are generally subject to a 4% production royalty payable partially to the cooperatives and partially to COMIBOL. During 2003, the Company acquired additional mining rights known as the Plahipo project which include the mining rights to oxide dumps adjacent to the original property package. The oxide dumps included in the Plahipo project are subject to a sliding scale royalty payable to COMIBOL that is a function of silver price. The Company incurred royalty payment obligations for these mining rights totaling $20.0 million and $6.6 million for the years ended 2009 and 2008, respectively.
 
On October 14, 2009, the state-owned mining organization, COMIBOL, announced by resolution that it was temporarily suspending mining activities above the elevation of 4,400 meters above sea level while stability studies of Cerro Rico mountain are undertaken. The Company holds rights to mine above this elevation under valid contracts backed by Supreme Decree with COMIBOL as well as contracts with local mining cooperatives who hold their rights through COMIBOL. The Company temporarily adjusted its mine plan to confine its activities to the ore deposits below 4,400 meters above sea level and the Company timely notified COMIBOL of the need to lift the restriction. It is uncertain at this time how long the temporary suspension will remain in place.
 
Coeur acquired 100% of the equity in Manquiri from Asarco Incorporated (“ASARCO”) on September 9, 1999. Manquiri’s principal asset is the mining rights to the San Bartolomé mine. Silver was first discovered in the area around 1545. Mining of silver and lesser amounts of tin and base metals has been conducted nearly continuously since that time from multiple underground mines driven into Cerro Rico. The prior owner did not conduct any mining or processing of the surface ores at San Bartolomé.
 
We completed a preliminary feasibility study in 2000, which concluded that an open pit mine was potentially capable of producing approximately six million ounces of silver annually. In 2003, SRK, an independent consulting firm, was retained to review the reserve/resource estimate to include additional sampling data to incorporate additional resources acquired with the Plahipo project at Cerro Rico. During 2003, we retained Fluor Daniel Wright to prepare an updated feasibility study which was completed at the end of the third quarter of 2004. The study provides for the use of a cyanide milling flow sheet with a wet pre-concentration screen circuit which will result in the production of a doré that may be treated by a number of refiners under a tolling agreement which results in the return of refined silver to the Company that is readily marketed by metal banks and brokers to the ultimate customer. During 2004, the Company obtained all operating permits and commercial construction activities commenced.
 
The Company’s total capital cost (excluding political risk insurance premiums and capitalized interest) to place the mine into production was $237.9 million. The property, plant and equipment were placed into service in June 2008 and are maintained in good working condition through a regular preventative maintenance program with periodic improvements as required. Power is supplied to the property by the local power utility. Water is supplied to the property by a public water source.
 
In November 2007, Bolivia’s Congress approved a reform to the mining tax code. The Bolivia tax rate on most mining companies has increased from 25% to 37.5%. However, mining companies similar to San Bartolomé that produce a doré product will receive a 5% credit based upon their specific operation. Thus, the tax rate for San Bartolomé will be 32.5%.
 
The Company obtained political risk insurance policies from the Overseas Private Insurance Corporation (“OPIC”) and another private insurer. The combined policies are in the amount of $155 million and cover Coeur up to the lesser of $131 million or 85% of any loss arising from expropriation, political violence or currency inconvertibility. The policy costs approximately $3.4 million per year, which was capitalized during the development and construction phases and is now included as a cost of inventory produced (estimated at approximately $0.21 per ounce of silver produced) over the term of the policies which expire in 2019 and 2024.
 
The silver mineralization at San Bartolomé is hosted in gravel (pallacos) and reworked gravel (sucu and troceras) deposits and oxide stockpiles and dumps from past mining that occurred on the flanks of Cerro Rico. Cerro Rico is a prominent mountain in the region that reaches an elevation of over 15,400 feet (over 4,700 meters). It is composed of Tertiary-aged volcanic and intrusive rocks that were emplaced into and over older sedimentary, and volcanic, basement rocks. Silver, along with tin and base metals, is located in multiple veins and vein swarms that occur in a northeast trending belt which transects Cerro Rico. The upper parts of the Cerro Rico mineralized system were subsequently eroded and re-deposited into the flanking gravel deposits. Silver is hosted in all portions of the


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pallacos, sucus, and troceras with the best grades segregated to the coarser-grained silicified fragments. These deposits lend themselves to simple, free digging surface mining techniques and can be extracted without drilling and blasting. Of the several pallaco deposits which are controlled by Coeur and surround Cerro Rico, three are of primary importance and are known as Huacajchi, Diablo and Santa Rita.
 
In 2009, exploration at San Bartolomé consisted of collecting additional data from new pits (pozos) to further define and/or expand the ore reserves.
 
Year-end Proven and Probable Ore Reserves — San Bartolomé Mine
 
                         
    2009     2008     2007  
    (1, 2, 3, 4, 5)              
 
Proven
                       
Short Tons (000’s)
    131       160        
Ounces of silver per ton
    3.29       6.35        
Contained ounces of silver (000’s)
    430       1,015        
Probable
                       
Short Tons (000’s)
    31,241       35,147       42,043  
Ounces of silver per ton
    3.83       3.81       3.64  
Contained ounces of silver (000’s)
    119,603       134,015       153,003  
Proven and Probable
                       
Short Tons (000’s)
    31,372       35,307       42,043  
Ounces of silver per ton
    3.83       3.82       3.64  
Contained ounces of silver (000’s)
    120,033       135,030       153,003  
 
Year-end Mineralized Material — San Bartolomé Mine
 
                         
    2009   2008   2007
 
Short Tons (000’s)
    36,953       37,087       15,567  
Ounces of silver per ton
    1.75       1.75       2.22  
 
Operating Data
 
                         
    2009     2008     2007  
 
Production(6)
                       
Tons ore milled
    1,518,671       505,514        
Ore grade silver (oz./ton)
    5.49       7.46        
Recovery silver(%)
    89.6       75.8        
Silver produced (oz.)
    7,469,222       2,861,500        
Cost per Ounce of Silver
                       
Cash operating costs
  $ 7.80     $ 8.22     $  
Other cash costs(7)
    2.68       2.31        
                         
Cash costs(8)
    10.48       10.53        
Non-cash costs
    2.48       1.97        
                         
Total production costs
  $ 12.96     $ 12.50     $  
                         
 
 
(1) Current ore reserves are effective as of December 31, 2009. The metal price used for current ore reserves was $13.25 per ounce of silver.
 
(2) Ore reserves are open pit-minable and include variable mining recovery factors from 96.1 to 100%


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(3) Metallurgical recoveries are variable per ore type but average 62.2% based on operating experience to date for silver and should be applied to the total contained silver ounces.
 
(4) Ore reserves were prepared by G. Blaylock (consultant Mining Engineer) and J. Sims (Geologist) of the Company’s technical staff.
 
(5) Proven and probable ore reserves are defined by surface drill holes and pits (pozos) with an average spacing of no more than 70 meters. Proven reserves are those reserves in stockpile at the end of 2009. The grade of ore reserve block is determined by the grade of proximal drill hole and/or pit composites and three-dimensional models of geologic controls. A minimum of 8 and maximum of 20 composite were used to classify proven and probable ore reserves and variable geostatistical estimation variances. Mineralized material is similarly classified.
 
(6) Includes production taxes and royalties, if applicable.
 
(7) Costs per ounce of silver represent a non-U.S. GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs.”
 
Argentina — Martha Mine
 
The Martha mine is an underground silver and gold mine owned and operated by Coeur Argentina S.R.L., a wholly-owned subsidiary of the Company, which is located in the Santa Cruz Province of southern Argentina. Access to the mine is provided by all-weather gravel roads 30 miles northeast of the town of Gobernador Gregores.
 
Production at the Martha mine in 2009 was approximately 3.7 million ounces of silver and 4,709 ounces of gold compared to 2.7 million ounces of silver and 3,313 ounces of gold in 2008. The 36.8% increase in silver production was primarily due to an 90.0% increase in tons milled as a result of increased processing of ore stockpile in 2009. Cash operating costs per ounce for 2009 were $6.19 per ounce compared to $6.87 per ounce in 2008. Total cash costs per ounce of silver (which includes production taxes and royalties) were $6.68 in 2009 compared to $7.57 in 2008. The decrease in total cash costs per ounce was attributed to the increase in silver production as compared to 2008 due to a significant increase in tons milled in 2009. The Company expects active mining operations will cease in late 2010 unless additional mineralization is discovered during the year. In addition, the Company is pursuing strategic alternatives for Martha.
 
The mineral rights for the Martha property are fully-owned by Coeur Argentina S.R.L. totaling 195 square miles (50,623 hectares) of exploration concessions (claims), 86.4 square miles (22,377 hectares) of discovery concessions, and 0.54 square miles (142 hectares) of exploitation concessions. Martha is centered on the exploitation concessions, which fully cover the area of the mine infrastructure and the ore reserves reported herein. Concessions do not have an expiration date; subject only to required annual fees. Surface rights covering the Martha deposit are controlled by the 137.8 square mile (35,705-hectare) Cerro 1o de Abril Estancia which is owned by Coeur Argentina S.R.L. Included on the estancia is a 60-person man camp, mine and exploration offices, and assay lab.
 
The Company acquired the property in 2002 through the purchase of a subsidiary of Yamana Resources Inc. for $2.5 million. The prior owner conducted minor underground mining on the near-surface portion of the Martha vein from late 2000 to mid 2001. The Company is obligated to pay a 2% net smelter royalty on silver and gold production to Royal Gold Corporation granted by Yamana Resources. In addition, the Company is subject to a 3.0% net proceeds royalty payable to the Province of Santa Cruz. The Company incurred royalty payments totaling $1.8 million, $1.9 million and $2.0 million for the years ended 2009, 2008 and 2007, respectively.
 
Prior to 2008, ore from the Martha mine was trucked approximately 600 miles by road for processing at the Company’s Cerro Bayo mill located approximately 270 miles away. In 2007, the Company commenced the construction of a 240 ton per day flotation mill which was completed in December 2007 and produces a flotation concentrate. During December 2007, the newly-constructed facility commenced operating. In 2008, concentrate began to be shipped to a third-party smelter located in Mexico. The property and equipment are maintained in good working condition through a regular preventive maintenance program with periodic improvements as required. Power is provided by Company-owned diesel generators.
 
Total capital expenditures at the Martha mine in 2009 were $1.6 million and the Company plans approximately $0.4 million of additional capital expenditures in 2010.


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At Martha, silver and gold mineralization is hosted in epithermal quartz veins and veinlets within generally sub-horizontal volcanic rocks of the Chon Aike Formation. The veins and veinlets occur as sub-parallel clusters largely trending west-northwest and dipping steeply to the southwest. The main ore minerals of silver and gold are silver sulfosalt minerals, argentite, electrum (a naturally-occurring gold and silver alloy) and native silver.
 
During 2009, we spent $3.1 million on exploration near the Martha Mine in the Santa Cruz province and $0.8 million on reserve development at the Martha mine to discover new silver- and gold-bearing veins and define new reserves. In 2009, exploration tested extensions at depth and on strike on the Martha, R4, Catalina, Francisca, Belen, Esperanza and Isabel and Betty ore-bearing structures. A total of 61,266 feet (18,764 meters) of drilling was completed in 2009.
 
Year-end Proven and Probable Ore Reserves — Martha Mine
 
                         
    2009     2008     2007  
    (1, 2, 3, 4, 5)              
 
Proven
                       
Short Tons (000’s)
          18       55  
Ounces of silver per ton
          55.86       52.95  
Contained ounces of silver (000’s)
          992       2,924  
Ounces of gold per ton
          0.07       0.07  
Contained ounces of gold
          1,000       4,100  
Probable
                       
Short Tons (000’s)
    38       58       98  
Ounces of silver per ton
    33.14       31.22       54.55  
Contained ounces of silver (000’s)
    1,249       1,817       5,369  
Ounces of gold per ton
    0.04       0.04       0.07  
Contained ounces of gold
    1,400       2,000       6,500  
Proven and Probable
                       
Short Tons (000’s)
    38       76       154  
Ounces of silver per ton
    33.14       36.99       53.97  
Contained ounces of silver (000’s)
    1,249       2,809       8,293  
Ounces of gold per ton
    0.04       0.04       0.07  
Contained ounces of gold
    1,400       3,000       10,600  
 
Year-end Mineralized Material — Martha Mine
 
                         
    2009     2008     2007  
 
Short Tons (000’s)
    29       46       92  
Ounces of silver per ton
    59.54       29.5       36.80  
Ounces of gold per ton
    0.05       0.02       0.05  


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Operating Data
 
                         
    2009     2008     2007  
 
Production
                       
Tons ore milled
    109,974       57,886       37,047  
Ore grade silver (oz./ton)
    36.03       49.98       78.10  
Ore grade gold (oz./ton)
    0.049       0.065       0.120  
Recovery silver(%)
    93.6       93.7       95.0  
Recovery gold(%)
    87.6       88.3       92.7  
Silver produced (oz.)
    3,707,544       2,710,673       2,748,705  
Gold produced (oz.)
    4,709       3,313       4,127  
Cost per Ounce
                       
Cash operating costs
  $ 6.19     $ 6.87     $ 5.54  
Other cash costs(6)
    0.49       0.70       0.73  
                         
Cash costs(7)
    6.68       7.57       6.27  
Non-cash costs
    1.94       1.81       0.51  
                         
Total production costs
  $ 8.62     $ 9.38     $ 6.78  
                         
 
 
(1) Current ore reserves are effective as of December 31, 2009. Metal prices used for current ore reserves were $16.00 per ounce of silver and $950 per ounce of gold
 
(2) Ore reserves are underground minable and include a variable dilution, at zero grade, added to vein true widths. Mining recovery is 90% on stope ore and on development ore.
 
(3) Metallurgical recovery factors of 93% for silver and 90% for gold should be applied to the contained silver and gold ounces.
 
(4) Ore reserves were prepared by J. Sims (Geologist) and K. Flores (Mining Engineer) of the Company’s technical staff.
 
(5) Ore reserves are defined with polygonal estimation using underground channels and drill hole samples. For probable reserves: An area demonstrating grade continuity with channel sample or drill hole spacing less than 25 meters. Mineralized material is similarly classified.
 
(6) Includes production taxes and royalties, if applicable.
 
(7) Cash costs per ounce of silver or gold represent a non-U.S. GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs.”
 
Chile — Cerro Bayo Mine
 
The Cerro Bayo District is located south of Coyhaique, the capital of Region XI in southern Chile, and due west of the town of Chile Chico. The underground silver and gold mine and ore processing facilities lie on the east side of the Andes mountain range at an elevation ranging from 600 to 4,500 feet and are serviced by an all-weather gravel road from Chile Chico.
 
There was no production during 2009 because of the temporary suspension. Production at the Cerro Bayo mine in 2008 was approximately 1.2 million ounces of silver and 21,761 ounces of gold. Cash costs per ounce of silver produced in 2008 were $8.56.
 
The mineral rights for the Cerro Bayo property are fully-controlled by Compañia Minera Cerro Bayo Ltd. (CMCB), a wholly-owned subsidiary of the Company, encompassing an 89 square mile contiguous block (23,106 hectares) of exploitation concessions and 18.1 square miles (4,700 hectares) of exploration concessions. The Company also controls several other concessions southeast of the Cerro Bayo District. The Company’s ore reserves


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and rights to operate are fully-contained within the exploitation concessions and separate surface use agreements from private surface land owners. Exploitation concessions are maintained by annual payments (taxes).
 
The Company acquired the property in 1990 from Freeport Chilean Exploration Company. No mining or processing was conducted by the prior owner. Initial mining and processing commenced, by the Company in 1995, at the Laguna Verde area, in the western portion of the holdings. Mining and processing temporarily ceased in late 2000 then recommenced in 2002 at the Cerro Bayo area on the east. The entire holdings and infrastructure are now referred to as the Cerro Bayo district. Construction of two ramps to intersect the high-grade Lucero Vein, in the Cerro Bayo zone on the east side of its holdings, commenced in November 2001. Additional mineralized high-grade gold and silver vein systems were discovered since then from surface and underground exploration.
 
The ore processing mill for the Cerro Bayo Mine uses a standard flotation process to produce a high grade gold and silver concentrate. The mill has a design capacity of 1,650 tons per day. On October 31, 2008, the Company announced a temporary suspension of operating activities at the Cerro Bayo mine due primarily to lower metal prices and continuing higher operating costs. The Company has placed the Cerro Bayo mine under a care and maintenance plan, while undertaking efforts to further explore its holdings and develop a new mine plan and ore reserves in an effort to re-commence operations. The Company is also pursuing strategic alternatives for the Cerro Bayo mine. The property, plant and equipment are maintained in good working condition through a regular preventive maintenance program with periodic improvements as required. Power is supplied to the property by the local power utility as well as generators. Mining is conducted utilizing underground methods. Total capital expenditures at the Cerro Bayo property in 2009 were $1.1 million. The Company does not plan to incur capital expenditures in 2010.
 
Silver and gold mineralization is hosted in epithermal quartz veins and veinlets and lesser amounts of stockworks and breccias within generally sub-horizontal volcanic rocks of the Ibañez Formation. Veins and veinlets occur in sub-parallel clusters largely trending north-northwest and dipping steeply to the west or east. The main ore minerals of silver and gold are silver sulfosalt minerals, argentite and electrum (a naturally-occurring gold and silver alloy). Numerous epithermal veins located within the Cerro Bayo district offer exploration and development opportunities for us. To date, we have discovered over 100 veins.
 
During 2009, the Company continued its exploration and development program in the district with its efforts concentrated in the Cerro Bayo and Laguna Verde zones in the east and west sections of the Company’s land holdings. In 2009, $2.7 million was spent on exploration in Chile and $1.0 million on reserve development at Cerro Bayo with 108,700 feet (33,130 meters) of core drilling completed during the year. Most of this drilling was focused on exploration and definition of the new Delia silver and gold-bearing vein discovered approximately one half mile south of the ore processing facilities at Laguna Verde and other targets at Cerro Bayo. Other targets drilled were Granja Temer, Polvorin, Cerro Coigues, Trinidad, Caiquenes, Juncos, Gaby and Taitao, also all near the ore processing facilities. District reconnaissance identified new targets at Zona 2, Ema, Brillantes and Cerro Bayo Este for future drilling. The Company plans to continue its exploration programs in the Chile and the Cerro Bayo district in 2010 with a budget of $0.9 million for this work.


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Year-end Proven and Probable Ore Reserves — Cerro Bayo Mine
 
                         
    2009     2008     2007  
    (1, 2, 3, 4,5)              
 
Proven
                       
Short Tons (000’s)
    41             440  
Ounces of silver per ton
    8.32             9.73  
Contained ounces of silver (000’s)
    345             4,280  
Ounces of gold per ton
    0.05             0.15  
Contained ounces of gold
    2,000             67,100  
Probable
                       
Short Tons (000’s)
    734       547       342  
Ounces of silver per ton
    9.86       10.18       8.64  
Contained ounces of silver (000’s)
    7,242       5,564       2,954  
Ounces of gold per ton
    0.08       0.07       0.13  
Contained ounces of gold
    55,000       38,000       44,500  
Proven and Probable
                       
Short Tons (000’s)
    775       547       782  
Ounces of silver per ton
    9.78       10.18       9.26  
Contained ounces of silver (000’s)
    7,587       5,564       7,234  
Ounces of gold per ton
    0.07       0.07       0.14  
Contained ounces of gold
    57,000       38,000       111,600  
 
Year-end Mineralized Material — Cerro Bayo Mine
 
                         
    2009     2008     2007  
 
Tons (000’s)
    769       908       1,266  
Ounces of silver per ton
    10.36       9.71       8.10  
Ounces of gold per ton
    0.15       0.14       0.14  
 
Operating Data
 
                         
    2009     2008     2007  
 
Production
                       
Ore tons milled
          236,403       387,378  
Ore grade silver (oz./ton)
          5.54       4.68  
Ore grade gold (oz./ton)
          0.102       0.105  
Recovery silver(%)
          93.4       94.4  
Recovery gold(%)
          90.2       92.2  
Silver produced (oz.)
          1,224,083       1,709,830  
Gold produced (oz.)
          21,761       37,479  
Cost per Ounce
                       
Operating costs
  $     $ 8.56     $ 8.22  
Other cash costs
                 
                         
Cash costs(6)
          8.56       8.22  
Non-cash costs
          6.09       3.60  
                         
Total production costs
  $     $ 14.65     $ 11.82  
                         


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(1) Current ore reserves are effective as of December 31, 2009. Metal prices used to calculate proven and probable reserves were $14.50 per ounce of silver and $850 per ounce of gold.
 
(2) Ore reserves are minable reserves within underground mine designs and include factors for mining dilution and recovery. Veins are diluted to a minimum mining width of 2.4 meters at zero grade. Mining recovery is 90%.
 
(3) Metallurgical recoveries of 93.4% and 90.5% should be applied to the contained silver and gold ounces, respectively.
 
(4) Ore reserve estimates were prepared by J. Sims (Geologist), and D. Duffy (Mining Engineer) of the Company’s technical staff.
 
(5) Proven and probable reserves are defined by geostatistical methods within manual boundaries based on grade thickness contouring. For proven reserves: An area demonstrating grade continuity defined by two or more bounding horizontal levels of drill holes or channel samples spaced vertically no more than about 12.5 meters containing horizontally spaced samples less than 5 meters apart — the key feature being confirmation on two levels. For probable reserves: An area demonstrating grade continuity with channel sample or drill hole spacing less than about 35 meters. Mineralized material is similarly classified .
 
(6) Cash costs per ounce of silver or gold represent a non-U.S. GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs.”
 
North America
 
Mexico — Palmarejo Silver and Gold Mine
 
On December 21, 2007, the Company acquired all of the outstanding stock of Bolnisi Gold NL (“Bolnisi”) and Palmarejo Silver and Gold Corporation (“Palmarejo”) resulting in 100% ownership of the Palmarejo mine. The Palmarejo mine commenced commercial production on April 20, 2009. The Palmarejo mine is an open-pit and underground silver and gold mine and ore processing facility, located in the state of Chihuahua in northern Mexico. Access to the Palmarejo property is by paved and all weather dirt roads southwest from the capital city of Chihuahua.
 
In its initial year of operations, production at the Palmarejo mine was 3.0 million ounces of silver and 54,740 ounces of gold. Cash operating costs per ounce and total cash costs per ounce of silver for 2009 were $9.80. Operational results continue to improve and the Company now expects production for 2010 to be approximately 7.9 million ounces of silver and approximately 109,000 ounces of gold.
 
The Company’s property position at Palmarejo consists of 32 mining concessions totaling 46.9 square miles (12,141 hectares). Of the total concessions, 23 concessions consisting of 46.1 square miles (11,949 hectares) are owned 100% by Coeur Mexicana S.A. de C.V. (Coeur Mexicana), formerly Planet Gold S.A. de C.V. (a wholly-owned subsidiary of the Company), and the remaining nine concessions, representing 0.74 square miles (191.96 hectares) are held by Coeur Mexicana under various agreements and leases. All of the company’s reserves are located on concessions owned 100% by Coeur Mexicana. All concessions owned by Coeur Mexicana are valid until at least 2029. In addition to Palmarejo, the Company also acquired the Yecora exploration-stage property located in Sonora, on the border with Chihuahua, and the El Realito and La Guitarra exploration-stage properties in Chihuahua.
 
Total capital costs in 2009 were $162.8 million. The Company incurred $190.3 million of capital expenditures in 2008. All property and equipment are in good operating condition with no major maintenance expected. Power is supplied to the property by the local power utility as well as by generators. Water is supplied to the property by pipeline from the Chinipas River and also from recycled process water collected at site.
 
Commercial production commenced in April 2009, and the commissioning of the plant continued during the second half of 2009. Recovery of gold has been consistent with metallurgical testwork and feasibility study estimations, and averaged 88.2% during 2009. The recovery of silver has not achieved the feasibility study values and averaged 66.3% during 2009. Consequently, during the fourth quarter, the Company conducted substantial


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metallurgical test work and third party reviews of the processing plant, which led to a number of improvements now being implemented and causing silver recoveries to increase during January and February.
 
The terrain at the Palmarejo mine is characterized by steep-sided hills and V-shaped valleys, although sites for mining infrastructures such as a mill should not pose a significant problem. Dumps and tailings will likely need to be placed within the upper reaches of drainage valleys, which would require the construction of a retention dam(s).
 
The Palmarejo mine is located on the western flank of the Sierra Madre Occidental, a mountain range that comprises the central spine of northern Mexico. The north-northwest-trending Sierra Madre Occidental is composed of a relatively flat-lying sequence of Tertiary volcanic rocks that forms a volcanic plateau. This volcanic plateau is deeply incised in the Palmarejo mine area, locally forming steep-walled canyons. The Sierra Madre Occidental gives way to the west to an extensional terrain that represents the southward continuation of the Basin and Range Province of the western United States, and then to the coastal plain of western Mexico.
 
The gold and silver deposits at the Palmarejo mine, typical of many of the other silver and gold deposits in the Sierra Madre, are classified as epithermal deposits, and are hosted in multiple veins, breccias and fractures. These geologic structures trend generally northwest to southeast and dip either southwest or northeast. The dip on the structures ranges from about 45 degrees to 70 degrees. In the mineralized portions of the structures gold and silver are zoned from top to bottom with higher silver values occurring in the upper parts of the deposit to a gold-rich basal portion, sometimes accompanied by base metal mineralization. The Palmarejo property contains a number of mineralized zones or areas of interest. The most important of these to date is the Palmarejo zone in the far north of the concessions which covers the old Palmarejo gold-silver mine based on the northwest-southeast trending La Prieta and La Blanca gold-silver bearing structures. In addition to Palmarejo, mineralized vein and alteration systems in the Trogan license area have been identified on other strongly mineralized corridors, roughly sub-parallel to the Palmarejo zone. The most significant of these additional targets are the Guadalupe (including Animas) and La Patria vein systems in the southern part of the property and are currently under investigation by the Company’s exploration teams.
 
The Company spent $7.6 million on exploration in Mexico of which $7.4 million was committed to the Palmarejo District in 2009, to discover new silver and gold mineralization and define new ore reserves. This program consisted of drilling 136,024 feet (41,460 meters) of core drilling at Palmarejo and 5,154 feet (1,571 meters) on other targets in Mexico. The exploration budget for Mexico for 2010 is $9.2 million of which $8.4 million is allocated to the Palmarejo district.


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Year-end Proven and Probable Ore Reserves — Palmarejo Mine
 
                         
    2009     2008     2007  
    (1, 2, 3, 4,5)              
 
Proven
                       
Short Tons (000’s)
    7,277       6,840        
Ounces of silver per ton
    5.05       5.09        
Contained ounces of silver (000’s)
    37,121       34,844        
Ounces of gold per ton
    0.06       0.06        
Contained ounces of gold
    442,000       406,000        
Probable
                       
Short Tons (000’s)
    10,623       5,355        
Ounces of silver per ton
    5.03       5.37        
Contained ounces of silver (000’s)
    53,400       28,732        
Ounces of gold per ton
    0.06       0.07        
Contained ounces of gold
    660,000       350,000        
Proven and Probable
                       
Short Tons (000’s)
    17,900       12,195        
Ounces of silver per ton
    5.06       5.21        
Contained ounces of silver (000’s)
    90,521       63,576        
Ounces of gold per ton
    0.06       0.06        
Contained ounces of gold
    1,102,000       756,000        
 
Year-end Mineralized Material — Palmarejo Mine
 
                         
    2009     2008     2007  
    (1, 2, 3, 4)              
 
Short Tons (000’s)
    4,493       15,373       16,105  
Ounces of silver per ton
    3.48       3.47       5.51  
Ounces of gold per ton
    0.05       0.04       0.06  
 
Operating Data
 
                         
    2009     2008     2007  
 
Production
                       
Ore tons milled
    1,065,508              
Ore grade silver (oz./ton)
    4.31              
Ore grade gold (oz./ton)
    .058              
Recovery silver(%)
    66.3              
Recovery gold(%)
    88.2              
Silver produced (oz.)
    3,047,843              
Gold produced (oz.)
    54,740              
Cost per Ounce
                       
Cash operating costs
  $ 9.80     $     $  
Other cash costs
                 
                         
Cash costs
    9.80              
Non-cash costs
    17.00              
                         
Total production costs
  $ 26.80     $     $  
                         
 
 
(1) Current ore reserves are effective as of December 31, 2009. Metal prices used in calculating proven and probable reserves were $14.50 per ounce of silver and $850 per ounce of gold.


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(2) The ore reserves are underground and open pit minable and include factors for mining dilution and recovery. For underground-minable reserves, 10% additional tons at zero grade and 100% mining recovery was applied to the Palmarejo mine and 16% average additional tons at 0.69 g/t Au and 58.3 g/t Ag as dilution for the Guadalupe deposit and 100% mining recovery. For open pit-minable reserves, 10% additional tons at zero grade as mining dilution was added and a 95% mining recovery for the Palmarejo open pit. For Guadalupe open pit reserves a variable dilution and 95% mining recovery was applied.
 
(3) Metallurgical recovery factor of 90.8% and 93.8% should be applied to the contained silver and gold reserve ounces, respectively.
 
(4) The ore reserves were estimated by G. Blaylock (Mine Engineer consultant) and J. Sims (Geologist) of the Company’s technical staff and the independent consulting firm of Mine Development Associates.
 
(5) Proven and probable reserves are defined by exploration holes drilled from stations on a nominal grid spacing of 40 meters. Proven reserves is material demonstrating grade continuity that is less than or equal to 15 meters distance from the nearest hole, with a minimum of 5 samples, no more than 2 of which originate from the same diamond drill hole. Sample spacing for probable reserves was less than or equal to approximately 40 meters.
 
(6) Cash costs per ounce of silver or gold represent a non-U.S. GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs.”
 
USA — Rochester Mine
 
The Rochester Mine is an open pit silver and gold mine located in Pershing County, Nevada, which is located approximately 25 paved and all-weather gravel road miles northeast of the town of Lovelock. The Company owns 100% of the Rochester Mine by virtue of its 100% ownership of its subsidiary, Coeur Rochester, Inc. (“Coeur Rochester”). The mine consists of the main Rochester deposit and the adjacent Nevada Packard deposit, due south of Rochester.
 
Production at the Rochester mine in 2009 was approximately 2.2 million ounces of silver and 12,663 ounces of gold, compared to approximately 3.0 million ounces of silver and 21,041 ounces of gold in 2008. Production was lower due to decreased ounces recovered from the ore on leach pad. Cash operating costs per ounce of silver increased to $1.95 per ounce in 2009, compared to $(0.75) per ounce in 2008. Total cash costs per ounce of silver (which includes production taxes and royalties) were $2.58 per ounce in 2009 compared to $(0.03) per ounce in 2008. This increase was primarily due to lower by-product credit of gold production in 2009 compared to 2008.
 
Coeur Rochester controls 541 US Federal unpatented claims (including 54 mill sites), 23 patented claims, and leases an additional 53 unpatented claims, totaling approximately 7,200 acres. All of the Company’s mineral resources and reserves are located within the claims. The unpatented claims and mill sites are maintained via annual fees to the U.S. Bureau of Land Management (BLM) and to Pershing County, which acts as administrator of the claims. Real property taxes to the State of Nevada are paid yearly for the patented claims. Lease payments are paid annually; all leases are in good standing.
 
The Company acquired the Rochester property from ASARCO in 1983 and commenced mining in 1986. No mining or processing was conducted at Rochester by the prior owner. The Company acquired initial interest in the adjacent Nevada Packard property in 1996, completed the full purchase in 1999 and commenced mining in 2003. Very limited mining and processing was conducted at Nevada Packard by the prior owner. Collectively, the Rochester and Nevada Packard properties comprise the Company’s Rochester silver and gold mining and processing operation.
 
In August of 2007, the Company completed mining of the existing ore reserves. While mining operations were discontinued, it is expected that metal production will continue as a result of residual leaching until approximately 2014.
 
The Rochester Mine is fully supported with electricity, supplied by a local power company on their public grid, telephone and radio communications, production water wells, and processing, maintenance, warehouse, and office facilities. All of these facilities are in good operating condition with no major maintenance expected. The mine utilizes the heap leaching process to extract both silver and gold from ore mined using conventional open pit methods.


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Based upon actual operating experience and certain metallurgical testing, the Company estimates ultimate recovery rates from the crushed ore of between 59.0% and 61.5% for silver, depending on the area being leached, and 93% for gold. See Note C — Summary of Significant Accounting Policies of the Company’s consolidated financial statements for further discussion.
 
The Company completed a technical and economic study in early 2010 demonstrating the viability of an expansion of mining and leaching operations at its Rochester mine through 2017. The Company prepared an Amended Plan of Operations for resumption of mining within the existing and permitted Rochester Pit and construction of an additional heap leach pad, all within the currently permitted mine boundary. The Bureau of Land Management (BLM) deemed this plan complete in August 2009 under federal regulations and initiated the NEPA process. An Environmental Assessment is currently being prepared and approvals are anticipated in late summer 2010. A modification to the Water Pollution Control Permit will also be required from the Nevada Department of Environmental Protection. Application is pending and approvals are expected in a similar time period.
 
The Company’s capital expenditures at the Rochester Mine totaled approximately $0.3 million in 2009. The Company plans capital expenditures at the Rochester Mine of $0.8 million in 2010. The Company is obligated to pay a net smelter royalty interest only when the market price of silver equals or exceeds $22.87 per ounce up to a maximum rate of 5% to ASARCO, the prior owner. No royalties were required to be paid by the Company during the three years ended December 31, 2009.
 
At Rochester, silver and gold mineralization is hosted in folded and faulted volcanic rocks of the Rochester Formation and overlying Weaver Formation. Silver and gold, consisting of silver sulfosalt minerals, argentite, argentian tetrahedrite and minor native gold, are contained in zones of multiple quartz veins and veinlets (vein and vein swarms and stockworks) with variable but lesser amounts of pyrite.
 
In 2009, exploration expenditures consisted of evaluation of prior drilling results and target selection for 2010. The Company has plans to follow-up on targets in the Rochester and Nevada Packard area and has allocated $0.2 million for the first phase of drilling in 2010.
 
Year-end Proven and Probable Ore Reserves — Rochester Mine
 
                         
    2009     2008     2007  
    (1, 2, 3, 4, 5,6)              
 
Proven
                       
Short Tons (000’s)
    31,821              
Ounces of silver per ton
    0.58              
Contained ounces of silver (000’s)
    18,361              
Ounces of gold per ton
    0.006              
Contained ounces of gold
    185,000              
Probable
                       
Short Tons (000’s)
    10,596              
Ounces of silver per ton
    0.71              
Contained ounces of silver (000’s)
    7,523              
Ounces of gold per ton
    0.005              
Contained ounces of gold
    48,000              
Proven and Probable
                       
Short Tons (000’s)
    42,417              
Ounces of silver per ton
    0.61              
Contained ounces of silver (000’s)
    25,884              
Ounces of gold per ton
    0.005              
Contained ounces of gold
    233,000              


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Year-end Mineralized Material — Rochester Mine
 
                         
    2009     2008     2007  
 
Short Tons (000’s)
    104,783       114,058       32,664  
Ounces of silver per ton
    0.52       0.54       0.85  
Ounces of gold per ton
    0.004       0.005       0.006  
 
Operating Data
 
                         
    2009     2008     2007  
 
Production (7)
                       
Tons ore mined (000’s)
                2,962  
Tons crushed/leached (000’s)
                5,061  
Ore grade silver (oz./ton)
                0.65  
Ore grade gold (oz./ton)
                0.006  
Recovery/Ag oz
                141.4 %
Recovery/Au oz
                167.6 %
Silver produced (oz.)
    2,181,788       3,033,721       4,614,780  
Gold produced (oz.)
    12,663       21,041       50,408  
Cost per Ounce
                       
Operating cash costs(8)
  $ 1.95     $ (0.75 )   $ 0.99  
Other cash costs(9)
    .63       .72       .53  
                         
Cash costs(7)
    2.58       (0.03 )     1.52  
Non-cash costs
    0.93       0.78       2.30  
                         
Total production costs
  $ 3.51     $ 0.75     $ 3.82  
                         
 
 
(1) Current ore reserves are effective as of December 31, 2009. Metal prices used in calculating proven and probable reserves were $14.50 per ounce of silver and $850 per ounce of gold.
 
(2) Reserves were estimated with a cutoff grade of 0.54 silver equivalent ounces per ton.
 
(3) The mineralized material was estimated with gold and silver prices of $1100 and $17.00 per ounce, respectively, historical metallurgical recoveries for gold and silver, historical mine operating costs within a non-optimized Whittle® open pit model, and include no additional factors for mining dilution or recovery. The estimate of mineralized material and reserves was constrained to exclude any silver and gold mineralization beneath existing leaching operations.
 
(4) The Company estimates the ultimate metallurgical recovery to be approximately 61% for silver and 92% for gold. However, ultimate recoveries will not be known until leaching operations cease.. Current recovery may vary significantly from ultimate recovery, calculated based on the ounces recovered as a percent of the ounces placed on the pad. The ore reserves were estimated by J. Sims (Geologist) and C. Kiel (Superintendent of Rochester Technical Services) of the Company’s technical staff. The firm of Pincock, Allen & Holt, an independent consulting group, was used to review engineering studies and the consulting firm of Reserva International was used to model results from drilling l.
 
(5) Ore reserves are defined by drilling on grid of 100 feet by 200 feet, or closer, and includes open pit mine production sampling to assist with determination of gold and silver grades. The grade is defined by the number of proximal composites and three-dimensional geologic controls. The number of drill samples used in estimation of grades must be at least 4 with a maximum search distance 150 feet at Rochester and 120 feet at Nevada Packard.
 
(6) Mining and crushing operations terminated in August 2007 and are planned to resume in 2010. L leaching will continue until approximately 2 years following depletion of the ore reserves.


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(7) Includes production taxes.
 
(8) Cash costs per ounce of silver or gold represent a non-U.S. GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs.”
 
Australia
 
New South Wales — Endeavor Mine
 
The Endeavor Mine, is an underground silver and base metal operation, located in north central New South Wales, Australia, about 447 miles (720 kilometers) from Sydney. Access to the mine is by paved roads 30 miles (18 kilometers) to the northwest from the community of Cobar.
 
Production at the Endeavor mine in 2009 was 461,800 ounces of silver compared to 824,093 ounces of silver in 2008. The decrease in silver production was due to a 46.3% decrease in tons milled partially offset by a 18.4% increase in ore grades as compared to 2008. Cash operating costs and total cash costs per ounce of silver produced were $6.80 in 2009 compared to $2.55 in 2008. This increase was primarily due to the price participation component of the transaction which was not in effect until 2009.
 
The ore reserves at Endeavor are covered by five consolidated mining leases issued by the state of New South Wales to Cobar Operations Pty. Limited (“Cobar”), a wholly-owned subsidiary of CBH Resources Ltd. (“CBH”). The leases form a contiguous block of 10,121 acres in size and expire between 2019 and 2027.
 
The Endeavor Mine has been in production since 1983. On September 12, 2003, CBH acquired the Elura mine and processing facilities from Pasminco and changed the name to the Endeavor Mine. On May 23, 2005, CDE Australia Pty. Ltd., a wholly-owned subsidiary of Coeur (“CDE Australia”), acquired all of the silver production and reserves, up to a maximum 17.7 million payable ounces, contained at the Endeavor Mine, which is owned and operated by CBH, for $44.0 million including transaction fees. Under the terms of the original agreement, CDE Australia paid Cobar $15.4 million of cash at the closing. In addition, CDE Australia agreed to pay Cobar approximately $26.5 million upon the receipt of a report confirming that the reserves at the Endeavor mine are equal to or greater than the reported ore reserves for 2004. In addition, CDE Australia originally committed to pay Cobar an operating cost contribution of $1.00 for each ounce of payable silver plus a further increment when the silver price exceeds $5.23 per ounce. This further increment was to have begun on the second anniversary of this agreement and is 50% of the amount by which the silver price exceeds $5.23 per ounce. A cost contribution of $0.25 per ounce is also payable by CDE Australia in respect of new ounces of proven and probable silver reserves as they are discovered. During the first quarter of 2007, $2.1 million was paid for additional ounces of proven and probable silver reserves under the terms of the contract. This amount was capitalized as a cost of the mineral interests acquired and is being amortized using the units of production method.
 
On March 28, 2006, CDE Australia reached an agreement with CBH to modify the terms of the original silver purchase agreement. Under the modified terms, CDE Australia owns all silver production and reserves up to a total of 20.0 million payable ounces, up from 17.7 million payable ounces in the original agreement. The silver price-sharing provision is deferred until such time as CDE Australia has received approximately two million cumulative ounces of silver from the mine or June 2007, whichever is later. In addition, the silver price-sharing threshold increased to $7.00 per ounce, from the previous level of $5.23 per ounce. The conditions relating to the second payment were also modified and tied to certain paste fill plant performance criteria and mill throughput tests. In January 2008, the mine met the criteria for payment of the additional $26.2 million. This amount was paid on April 1, 2008, plus accrued interest at the rate of 7.5% per annum from January 24, 2008. CDE Australia has received approximately 2.5 million payable ounces to-date, and the current ore reserve contains approximately 9.8 million payable ounces based on current metallurgical recovery and current smelter contract terms. Expansion of the ore reserve will be required to achieve the maximum payable ounces of silver production as set forth in the modified contract. It is expected that future expansion to the ore reserve will occur as a result of the conversion of portions of the property’s existing inventory of mineralized material and future exploration discoveries. CBH conducts regular exploration to discover new mineralization and to define reserves from surface and underground drilling platforms.


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As of December 31, 2009, CDE Australia had recovered approximately 50% of the transaction consideration consisting of 2.5 million payable ounces, or 13%, of the 20 million maximum payable silver ounces to which CDE Australia is entitled under the terms of the silver sale and purchase agreement. No assurances can be made that the mine will achieve its 20 million payable silver ounce cap to which CDE Australia is entitled under the terms of the silver sale and purchase agreement.
 
The mine employs bulk mining methods and utilizes a conventional flotation mill to produce a concentrate that is sold to a third-party smelter. Silver recovery averaged approximately 49.9% in 2009 and 56.5% in 2008. Power to the mine and processing facilities is provided by the grid servicing the local communities. The property and equipment are maintained in good working condition, by CBH, through a regular preventive maintenance program with periodic improvements as required.
 
The Company is not required to contribute to ongoing capital costs at the mine.
 
At Endeavor, silver, lead, zinc and lesser amounts of copper mineralization are contained within sulfide lenses hosted in fine-grained sedimentary rocks of the Paleozoic-aged Amphitheatre Group. Sulphide lenses are elliptically-shaped, steeply-dipping to the southwest and strike to the northwest. Principal ore minerals are galena, sphalerite and chalcopyrite. Silver occurs with both lead and zinc rich sulphide zones.
 
CBH conducts regular exploration to define new reserves at the mine from both underground and surface core drilling platforms. For fiscal year ended June 30, 2009, which is the fiscal year used by the operator (CBH), the exploration expenditure at the mine was A$2.5 million (US$2.0 million).
 
Year-end Proven and Probable Ore Reserves — Endeavor Mine
 
                         
    2009   2008   2007
    (1, 2, 3, 4)        
 
Proven
                       
Short Tons (000’s)
    1,984       3,417       8,818  
Ounces of silver per ton
    1.93       1.47       1.52  
Contained ounces of silver (000’s)
    3,820       5,019       13.375  
Probable
                       
Short Tons (000’s)
    6,393       5,842       10,913  
Ounces of silver per ton
    3.15       3.55       1.52  
Contained ounces of silver (000’s)
    20,139       20,753       16,551  
Proven and Probable
                       
Short Tons (000’s)
    8,377       9,259       19,731  
Ounces of silver per ton
    2.86       2.78       1.52  
Contained ounces of silver (000’s)
    23,959       25,772       29,926  
 
Year-end Mineralized Material — Endeavor Mine
 
                         
    2009   2008   2007
 
Short Tons (000’s)
    20,205       18,127       12,172  
Ounces of silver per ton
    1.77       0.96       2.44  


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Operating Data (Coeur’s Share)
 
                         
    2009     2008     2007  
 
Production
                       
Tons ore milled
    552,799       1,030,368       1,146,857  
Ore grade silver (oz./ton)
    1.67       1.41       1.40  
Recovery silver(%)
    49.9       56.5       48.0  
Silver produced (oz.)
    461,800       824,093       772,609  
Cost per Ounce of Silver
                       
Operating cash costs
  $ 6.80     $ 2.55     $ 2.67  
Other cash costs
                 
                         
Cash costs(5)
    6.80       2.55       2.67  
Non-cash costs
    2.75       2.39       0.98  
                         
Total production costs
  $ 9.55     $ 4.94     $ 3.65  
                         
 
 
(1) Ore reserves are effective as of June 30, 2009, which is the end of the most recent fiscal year of the operator, CBH Resources Ltd. These totals do not include additions or depletions through December 31, 2009. Metal prices used were $12.00 per ounce of silver.
 
(2) The ore reserves are underground and open pit minable. Underground reserves include variable mining dilution (10% to 20% additional waste) and mining recovery factor (50% -for pillars to 95%). For open pit reserves 10% additional tons at variable grades and 100% mining recovery was applied
 
(3) Metallurgical recovery factor of 45% should be applied to the silver reserve ounces.
 
(4) Classification of reserves is based on spacing from drill hole composites to reserve block centers. For proven reserves the maximum distance is 20 meters and for probable reserves it is 40 meters. A minimum of 15 drill holes samples are used in estimation of ore reserve grades. Mineralized material is similarly classified.
 
(5) Cash costs per ounce of silver represent a non U.S. GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs.”
 
Discontinued Operation
 
New South Wales — Broken Hill Mine
 
Effective July 1, 2009, the Company sold to Perilya Broken Hill Ltd. its 100% interest in silver contained at the Broken Hill mine for $55.0 million in cash. As a result of this transaction, the Company realized a gain on the sale in the third quarter of 2009 of approximately $25.5 million, net of income taxes. Coeur originally purchased this interest from Perilya Broken Hill Ltd. in September 2005 for $36.9 million. This transaction closed on July 30, 2009.
 
Silver production in 2009 from the Broken Hill mine amounted to approximately 0.8 million ounces of silver compared to 1.4 million ounces of silver in 2008. The decrease in silver production was due to the sale of the company’s interest in the silver production from the Broken Hill mineral interests on July 1, 2009. The cash cost per ounce of silver production, which includes the operating cost contribution and smelting, refining and transportation costs, was $3.40 in 2009 compared to $3.41 in 2008.


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Year-end Proven and Probable Ore Reserves — Broken Hill Mine
 
                 
    2008     2007  
    (1, 2, 3, 4, 5)        
 
Proven
               
Short Tons (000’s)
    6,431       8,021  
Ounces of silver per ton
    1.58       1.59  
Contained ounces of silver (000’s)
    10,185       12,727  
Probable
               
Short Tons (000’s)
    4,616       4,373  
Ounces of silver per ton
    1.05       1.19  
Contained ounces of silver (000’s)
    4,861       5,204  
Proven and Probable
               
Short Tons (000’s)
    11,047       12,394  
Ounces of silver per ton
    1.36       1.45  
Contained ounces of silver (000’s)
    15,046       17,931  
 
Year-end Mineralized Material — Broken Hill Mine
 
                 
    2008   2007
 
Short Tons (000’s)
    6,376       5,357  
Ounces of silver per ton
    4.51       5.15  
 
Operating Data (Coeur’s share)
 
                         
    2009(7)     2008     2007  
 
Production
                       
Tons ore milled
    827,766       1,952,066       1,646,203  
Ore grade silver (oz./ton)
    1.44       0.97       1.19  
Recovery (%)
    70.6       72.5       83.6  
Silver produced (oz.)
    842,751       1,369,009       1,642,205  
Cost per Ounce of Silver
                       
Operating cash costs
  $ 3.40     $ 3.41     $ 3.18  
Other cash costs
                 
                         
Cash costs(6)
    3.40       3.41       3.18  
Non-cash costs
    1.86       1.83       1.86  
                         
Total production costs
  $ 5.26     $ 5.24     $ 5.04  
                         
 
 
(1) Ore reserves are effective as of June 30, 2008, which is the end of the most recent fiscal year of the operator (PBH). Metal prices used were $2.22 per ounce of silver.
 
(2) The ore reserves are underground minable reserves and include factors for mining dilution and recovery. Dilution ranges from 0% to 20% of additional tonnage while recovery ranges from 80% to 100% of the diluted tonnage and averages 85%.
 
(3) Metallurgical recovery factor of 72% should be applied to the silver reserve ounces.
 
(4) The ore reserves were estimated by the technical staff of CBH Resources, the mine operator, and reviewed by B. O’Leary (Mine Engineer) and J. L. Sims (Geologist) of the Company’s technical staff.
 
(5) The proven and probable reserves are a combination of zinc, lead and silver mineralization remnant from historic mining and new parts or extensions of the mine. Proven and probable reserves must be accessible as


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defined by the site specific conditions of the mine. Furthermore, reserves are defined by definition drilling on a grid of 40 meters horizontally by 20 meters vertically and over 70% of the proven reserves are drilled on a 20 meter by 10 meter grid.
 
(6) Cash costs per ounce of silver represent a non-U.S. GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs.”
 
(7) Broken Hill was sold in July 2009, therefore, production totals represent a partial year.
 
SILVER AND GOLD DEVELOPMENT PROPERTIES
 
USA — Alaska — Kensington Gold Project
 
The Kensington underground gold project, consisting of the Kensington and adjacent Jualin properties, is located on the east side of the Lynn Canal about 45 miles north-northwest of Juneau, Alaska. The mine will be accessed by a horizontal tunnel and utilize conventional and mechanized underground mining methods. The ore will be processed in a flotation mill that produces a concentrate which will be sold to third party smelters. Waste material will be deposited in an impoundment facility on the property. Power is supplied to the site by on-site diesel generators. Access to the project is presently by helicopter, float plane or boat from Juneau.
 
The Company estimates $81.7 million of remaining capital expenditures are required to complete construction and mine related activities at Kensington and to commence production during the third quarter of 2010. Production during the mine’s initial partial year is expected to be approximately 40,000 ounces of gold. Based on an initial 12.5 year mine life based solely on proven and probable mineral reserves, the Company expects gold production to average approximately 120,000 ounces annually and total operating costs to average approximately $475 per ounce annually.
 
Coeur Alaska, Inc., a wholly owned subsidiary of the Company (“Coeur Alaska”), controls two contiguous land groups: the Kensington and Jualin. The Kensington property consists of 51 private patented lode and mill-site claims covering approximately 766 acres, 294 federal unpatented lode claims covering approximately 3,127 acres, and eight State of Alaska mining claims covering approximately 95 acres. The Company controls the Jualin Property, under a lease agreement with Hyak Mining Company, through the cessation of mining, so long as the Company makes timely payments pursuant to the lease agreement. The Jualin Property consists of 23 patented lode and mill-site claims covering approximately 383.6 acres, 438 federal unpatented lode claims and one unpatented mill-site claim covering approximately 7,911 acres, and 17 State of Alaska mining claims covering approximately 110 acres. The Federal and State claims, as well as the private patented lode and mill-site claims, provide Coeur with the necessary rights to mine and process ore from Kensington. All of the Company’s ore reserves are located within the patented claims. The unpatented claims and mill site are maintained via annual filings and fees to the U.S. Bureau of Land Management (BLM), which acts as administrator of the claims. State claims are maintained via filings and fees to ADNR — Juneau Recorder’s Office. Real property taxes to the State of Alaska are paid yearly for the patented claims. Lease payments are paid annually and all leases are in good standing.
 
The property is located on the east side of Lynn Canal between Juneau and Haines, Alaska. Coeur Alaska is obligated to pay a scaled net smelter return royalty on 1.0 million ounces of future gold production after Coeur Alaska recoups the $32.5 million purchase price and its construction and development expenditures incurred after July 7, 1995 in connection with placing the property into commercial production. The royalty ranges from 1% at $400 per ounce gold prices to a maximum of 21/2% at gold prices above $475 per ounce, with the royalty to be capped at 1.0 million ounces of production.
 
On June 22, 2009, the U.S. Supreme Court reversed the Ninth Circuit Court of Appeals decision that invalidated the previously issued Section 404 Permit for the tailings facility for the Kensington gold mine. The Kensington property litigation, described in Note U of the Company’s consolidated financial statements, “Federal Court (Alaska) Kensington Project Permit Challenge”, has contributed to an increase in capital costs.
 
Following the U.S. Supreme Court decision, on August 14, 2009, the U.S. Army Corps of Engineers re-activated the Company’s 404 permit, clearing the way for construction at the tailing facility to continue.


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Construction activities have recommenced at the Kensington mine and production is expected to begin in the second half of 2010.
 
No assurances can be given as to whether or when regulatory permits and approvals granted to the Company may be further challenged, appealed or contested by third parties or issuing agencies, or as to whether the Company will ultimately place the Kensington project into commercial production.
 
The Kensington ore deposit consists of multiple precious metals bearing mesothermal, quartz, carbonate, pyrite vein swarms and discrete quartz-pyrite veins hosted in the Cretaceous age Jualin diorite. The gold-telluride-mineral calaverite is associated with the pyrite mineralization.
 
In 2009, the Company continued the exploration program started in the third quarter of 2005 designed to increase the size and geologic continuity of gold mineralization in its mineralized material inventory and ultimately result in an increase in ore reserves. In 2009, a total of $0.3 million was spent on this program.
 
Year-end Proven and Probable Ore Reserves — Kensington Property
 
                         
    2009   2008   2007
    (1, 2, 3, 4, 5, 6)
 
Proven
                       
Short Tons (000’s)
    199       199       21  
Ounces of gold per ton
    0.38       0.38       0.23  
Contained ounces of gold (000’s)
    76       76       5  
Probable
                       
Short Tons (000’s)
    5,301       5,301       4,397  
Ounces of gold per ton
    0.26       0.26       0.31  
Contained ounces of gold (000’s)
    1,402       1,402       1,347  
Proven and Probable
                       
Short Tons (000’s)
    5,500       5,500       4,419  
Ounces of gold per ton
    0.27       0.27       0.31  
Contained ounces of gold (000’s)
    1,478       1,478       1,352  
 
Year-end Mineralized Material — Kensington Property
 
                         
    2009   2008   2007
 
Short Tons (000’s)
    2,724       2,724       3,136  
Ounces of gold per ton
    0.18       0.18       0.20  
 
 
(1) Current ore reserves are effective as of December 31, 2009. Metal price used in calculating proven and probable reserves was $750 per ounce of gold.
 
(2) The ore reserves are underground minable and include factors for mining dilution and recovery. A factor of approximately 10% additional tonnage at 0.063 ounces per ton of dilution was included. An average 97% mining recovery was included.
 
(3) Metallurgical recovery factor of 95.3% should be applied to the contained gold reserve ounces.
 
(4) The ore reserves were estimated by J. Barry (Mine Engineer) and J. Sims (Geologist) of the Company’s technical staff. Snowden Mining Industry Consultants, an independent consultant group, performed an independent review of the Company’s updated resource estimate model used to prepare the ore reserve estimates and AMEC, an independent consultant group, were used to help prepare the Company’s mine plan and mining cost estimates.
 
(5) Proven and probable reserves are defined underground drilling and underground workings. In practice, reserve blocks are defined by the number of proximal composites and three-dimensional geologic controls. Proven ore


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reserves include stockpiled ore. Ore reserve must be defined by at least 10 drill samples from at least 2 drill holes spaced not more than 60 feet from the block center. Mineralized material is similarly classified.
 
(6) See the additional discussion — Note U of the consolidated financial statements for further details under “Federal Court of (Alaska) Kensington Project Permit Challenge” and Part I, “Item 1A. — Risk Factors.”
 
EXPLORATION AND DEVELOPMENT ACTIVITY
 
Coeur, either directly or through its wholly-owned subsidiaries, owns, leases and has interests in certain exploration-stage mining properties located in the United States, Chile, Argentina, Tanzania, Bolivia, and Mexico. Exploration and reserve development expenditures of approximately $18.9 million, $23.6 million and $11.9 million were incurred by the Company in 2009, 2008 and 2007 respectively.
 
Highlights of the 2009 program include:
 
  •  Drilling and engineering studies on the Guadalupe structure at Palmarejo led to estimation of the first proven and probable ore reserve estimate for that important gold and silver system in south east Palmarejo.
 
  •  Discovery of new high-grade mineralization at the La Negra zone at Joaquin in Argentina located northwest of the Company’s Martha mill facility.
 
  •  Discovery of a new gold-bearing vein and vein system at Kensington called Kimberly. Fourteen core holes were completed on this new discovery.
 
  •  Definition drilling on the Delia vein at Cerro Bayo, discovered in late 2008, resulting in the first proven and probable ore reserve estimate for that gold and silver-bearing vein.
 
Coeur plans to spend $17.9 million in exploration during 2010 with approximately 80% of the budget earmarked for expansion of mineral resources and reserves at or near its existing operations at Palmarejo (Mexico), Kensington (Alaska), Rochester (Nevada), Martha (Argentina) and Cerro Bayo (Chile).
 
USA — Kensington/Jualin
 
Fourteen core holes, totaling 4,100 feet, were completed in 2009 at Kensington. This work targeted a new blind vein (not exposed on surface) called the Kimberly. Eight of the core holes intersected significant gold mineralization in Kensington-style veins. The Company plans for an additional drilling program in 2010 on Kimberly and other targets with a budget of $2.0 million. Approximately $0.3 million was spent in exploration in 2009 at Kensington; all at Jualin.
 
USA — Rochester
 
The Company did not explore around the Rochester and Nevada Packard deposits in 2009 but used results from 2008 and prior years drilling to assess the viability of recommencing mining and leaching of new ore and in combination with existing leaching of prior-placed ore, extend the mine life and production. In 2010, the Company has allocated $0.2 million for exploration.
 
Chile — Cerro Bayo Mine
 
Coeur continued to conduct extensive exploration at its 100%-owned Cerro Bayo gold/silver mining operation in southern Chile. Approximately $2.2 million was spent in exploration for new silver and gold-bearing veins, and an additional $1.0 million was capitalized as reserve development during 2009. Over 103,900 feet (31,700 meters) of core drilling was completed during the year to discover new mineralization and define new ore reserves. The most significant result of this program was the expansion and definition of new ore reserves at the Delia vein discovered near the Laguna Verde ore processing facility in 2008. Silver and gold mineralization at Delia extends for over 1 kilometer on strike and over 100 meters vertically and forms a significant part of the reserves at Cerro Bayo. The Company believes that there is potential to discover additional high grade veins within the entire Cerro Bayo district. Late in 2009, new veins were discovered west of the mill facilities in a zone called Zona 2 and due east of the Cerro Bayo Dome in the eastern part of the district.


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Chile — Other Properties
 
In 2009, Coeur completed a phase one drilling program on the Huantajaya silver property in northern Chile. During 2009, first phase of reverse circulation drilling totaling 4,783 feet (1,458 meters) was completed at Huantajaya at a total cost of $0.6 million including supports costs in Santiago. This work was not successful defining significant new mineralization. The 2010 exploration budget for Chile is expected to be $0.5 million.
 
Argentina — Martha Mine
 
In 2009, the Company’s exploration efforts consisted of mapping, sampling and 61,266 feet (18,674 meters) of core drilling for a total expenditure of $3.3 million, of which $0.8 million was capitalized as reserve development at Martha. At the Martha mine area, drilling amounted to over 35,400 feet (10,799 meters) of the total for Argentina.
 
Argentina — Other Properties
 
The Company also continued exploration in other parts of the Santa Cruz Province near the Martha mine. Activities focused on the Nico, Satelite and Joaquin properties as well as targets near to the Martha mine. A total of over 25,700 feet of drilling (7,039 meters) was completed on these areas. During 2010, we expect to spend $3.3 million on exploration for the discovery of new mineralization and reserve development, across all our large land holdings in the province of Santa Cruz.
 
Drilling at Joaquin in the fourth quarter of 2009 returned encouraging results with of drilling on three targets; La Morena, La Negra and La Morocha. Joaquin is located about 80 kilometers north of the Company’s Martha mine, and the Company has an option to earn up to 71% managing interest in a joint venture with property owners Mirasol Resources Ltd. A fourth phase of drilling will begin early this year.
 
The Company has budgeted $3.3 million for 2010 in Argentina, Joaquin and reconnaissance exploration in the country.
 
Africa, Tanzania
 
During the first quarter of 2004, the Company acquired ten prospecting licenses for properties located in the Lake Victoria Gold Belt of Tanzania, Africa, and in 2005, 2006 and 2007 added the Saragurwa, Bismark and Pangea properties, respectively. Based on results from its annual exploration programs, four of the original ten concessions were not renewed. Except for Saragurwa, Bismark and Pangea, all properties are held 100% by Tanzanian subsidiaries of the Company. Saragurwa, Bismark and Pangea were all returned to their respective owners. The Company changed its business plan in 2009 and actively sought to attract a partner or buyer for its interests and companies.
 
Item 3.   Legal Proceedings.
 
For a discussion of legal proceedings, see Note U to the consolidated financial statements.
 
Item 4.   Submission of Matters to a Vote of Security Holders.
 
None.


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Item 4A.   Executive Officers of the Registrant.
 
The following table sets forth certain information regarding the Company’s current executive officers:
 
                     
Name
 
Age
 
Positions with Coeur
 
Since
 
Dennis E. Wheeler
    67     Chairman of the Board     1992  
            Chief Executive Officer and President     1986  
                  1980  
Mitchell J. Krebs
    38     Senior Vice President, Chief Financial Officer and Treasurer     2008  
Richard M. Weston
    58     Senior Vice President, Operations     2007  
Donald J. Birak
    56     Senior Vice President, Exploration     2004  
Kelli C. Kast
    43     Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary     2009  
Humberto Rada
    57     President, Coeur South America     2008  
K. Leon Hardy
    56     Senior Vice President, North American Operations     2008  
Tom T. Angelos
    54     Senior Vice President, Chief Accounting Officer     2008  
Luther J. Russell
    54     Vice President, Environmental Services     2005  
Larry A. Nelson
    57     Vice President, Human Resources     2008  
Kenneth L. Koski
    41     Controller     2008  
 
Dennis E. Wheeler has been Chairman of the Board of the Company since May 1992, Chief Executive Officer since December 1986 and President since December 1980. Mr. Wheeler was our Chief Administrative Officer from December 1980 to December 1986, Secretary from January 1980 to December 1980 and Senior Vice President and General Counsel from 1978 to 1980.
 
Mitchell J. Krebs first joined Coeur in 1995 after spending several years in the investment banking industry in New York. During his tenure with Coeur, Mr. Krebs has held various positions in the corporate development department, including Senior Vice President of Corporate Development. Since March 2008, Mr. Krebs has held the position of Chief Financial Officer and was made Treasurer in July 2008. Mr. Krebs holds a BS in Economics from The Wharton School at the University of Pennsylvania and an MBA from Harvard University.
 
Richard M. Weston was appointed Senior Vice President — Operations in May 2007. Prior to that, Mr. Weston served as Senior Vice President and Managing Director of Coeur Australia and Vice President of the Company’s South American Operations from December 2006 to May 2007. Prior thereto, he served as Senior Vice President and Managing Director of Coeur Australia from February 2006 to December 2006. Prior to that, Mr. Weston was employed with Barrick Australia from January 2003 to February 2006 as General Manager of Cowal Gold Project and Rio Tinto Australia from December 2000 to November 2002 as General Manager of the ERA and Jabiluka mines.
 
Donald J. Birak was appointed as Senior Vice President — Exploration of Coeur in January 2004. Prior to that, Mr. Birak was employed with AngloGold North America, Inc. from March 1999 to January 20, 2004, as Vice President — Exploration and with Independence Mining Company Inc. as Vice President of Exploration from 1995 to 1999.
 
Kelli C. Kast was appointed Sr. Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary in March 2009. Prior to that, Ms. Kast served as Vice President, General Counsel and Corporate Secretary from May of 2005 to March of 2009. Ms. Kast was previously Corporate Counsel for HealtheTech. Inc. from April 2004 to April 2005. Prior thereto, she served as Assistant General Counsel and Corporate Secretary for Global Water Technologies Inc. and Psychrometric Systems, Inc. from December 1997 through February 2003.
 
Humberto Rada was appointed President, Coeur South America in July 2008. Prior to that, Mr. Rada was employed from 1985 to 2008 by Newmont Mining Corp. at their Bolivian subsidiary, Empresa Minera Inti Raymi S.A., most recently as General Manager. Prior to that Mr. Rada held various positions in Argentina and Bolivia with PricewaterhouseCoopers from 1978 to 1984.


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K. Leon Hardy was appointed Senior Vice President North American Operations in July 2008. Prior to that, Mr. Hardy served as Vice President and General Manager for Coeur Argentina from May 2003 to July 2008. Prior to that Mr. Hardy was employed with Apex Silver Mines as Operations Manager at their San Cristobal project in Bolivia from 1999 to 2002. Prior to that Mr. Hardy was employed in Argentina with Minera Alumbrera Ltd from 1996 to 1998. Prior to that Mr. Hardy was employed with Cyprus Amax Minerals from 1979 to 1996.
 
Tom T. Angelos was appointed Senior Vice President and Chief Accounting Officer in March 2008. Prior to this, Mr. Angelos was Vice President, Controller and Chief Accounting Officer of the Company from December 2006 to March 2008 and Controller and Chief Accounting Officer of the Company from 2004 to 2006. Mr. Angelos was previously Controller of Stillwater Mining Company from 1998 to 2004, and from 1983 to 1998 was employed by Coeur in various capacities, most recently as Controller.
 
Luther J. Russell was appointed Vice President of Environmental Services at Coeur in 2005. Prior to that, Mr. Russell was Coeur d’Alene Basin Project Manager for the State of Idaho’s Department of Environmental Quality from 2001 to 2005. Before that, he held a series of increasingly responsible positions in the management of environmental affairs at major mining companies and was previously Director of Environmental and Government Affairs for Coeur from 1995 to 2000.
 
Larry A. Nelson was appointed Vice President Human Resources in January 2008. Prior to that, Mr. Nelson served as Director Human Resources from 2005 to 2008. Mr. Nelson held the position of Human Resources Manager at Coeur Silver Valley from 1996 to 2005. Prior to that, he was employed in corporate and site human resource positions within the mining industry since 1977.
 
Kenneth L. Koski was appointed Controller of Coeur in March 2008. Prior to that, Mr. Koski served as Assistant Controller of Coeur from August 2002 to March 2008. From January 2001 to August 2002 Mr. Koski was employed with Telect Inc. as a financial and cost analyst. Prior to this, Mr. Koski was employed by Coeur from June 1990 to January 2001 in various capacities, most recently as Manager of Financial Accounting.
 
PART II
 
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
                                 
                Maximum Number
                (or Approximate
            Total Number of
  Dollar Value) of
            Shares (or Units)
  Shares (or Units)
            Purchased as
  That May Yet be
    Total Number of
  Average Price
  Part of Publicly
  Purchased Under
    Shares (or Units)
  Paid per Share
  Announced Plans
  the Plans or
Period
  Purchased(1)   (or Unit)   or Programs   Programs
 
1/1/09 - 1/31/09
    3,898       9.00              
2/1/09 - 2/29/09
    1,231       7.70              
3/1/09 - 3/31/09
    3,144       8.60              
4/1/09 - 4/30/09
    937       11.00              
5/1/09 - 5/31/09
                       
6/1/09 - 6/30/09
                       
7/1/09 - 7/31/09
    570       10.53              
8/1/09 - 8/31/09
                       
9/1/09 - 9/30/09
                       
10/1/09 - 10/31/09
                       
11/1/09 - 11/30/09
                       
12/1/09 - 12/31/09
                       
Total
    9,780       8.99              


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(1) Represents shares withheld from employees to pay taxes related to the vesting of restricted shares.
 
                                 
                      Maximum Number
 
                Total Number of
    (or Approximate
 
                Shares (or Units)
    Dollar Value) of
 
                Sold as
    Shares (or Units)
 
    Total Number of
    Average Price
    Part of Publicly
    That May Yet be
 
    Shares (or Units)
    Received per Share
    Announced Plans
    Sold Under the
 
Period
  Sold     (or Unit)     or Programs     Plans or Programs  
 
1/1/09 - 1/31/09
                           
2/1/09 - 2/29/09
                           
3/1/09 - 3/31/09
    1,988,057 (1)     6.50                  
      1,074,773 (2)     6.80                  
4/1/09 - 4/30/09
    127,320 (4)     10.58                  
5/1/09 - 5/31/09
                           
6/1/09 - 6/30/09
    3,556,561 (3)     13.03                  
      3,215,467 (4)     13.60                  
7/1/09 - 7/31/09
                           
8/1/09 - 8/31/09
    784,466 (5)     15.19                  
9/1/09 - 9/30/09
    1,951,700 (5)     16.20                  
10/1/09 - 10/31/09
                           
11/1/09 - 11/30/09
                       
12/1/09 - 12/31/09
    2,074,305 (6)     22.11              
      93,848 (7)     19.69                  
Total
    14,866,497       13.68              
 
 
(1) Pursuant to privately-negotiated agreements, the Company agreed to exchange $22.2 million aggregate principal amount of its 1.25% Convertible Senior Notes due 2024.
 
(2) Pursuant to privately-negotiated agreements, the Company agreed to exchange $16.6 million aggregate principal amount of its 3.25% Convertible Senior Notes due 2028.
 
(3) Pursuant to privately-negotiated agreements, the Company agreed to exchange $51.1 million aggregate principal amount of its 1.25% Convertible Senior Notes due 2024.
 
(4) Pursuant to privately-negotiated agreements, the Company agreed to exchange $63.0 million aggregate principal amount of its 3.25% Convertible Senior Notes due 2028.
 
(5) Pursuant to privately-negotiated agreements, the Company agreed to exchange $41.6 million aggregate principal amount of its 1.25% Convertible Senior Notes due 2024.
 
(6) Pursuant to privately-negotiated agreements, the Company agreed to exchange $43.0 million aggregate principal amount of its 1.25% Convertible Senior Notes due 2024.
 
(7) Pursuant to privately-negotiated agreements, the Company agreed to exchange $2.0 million aggregate principal amount of its 3.25% Convertible Senior Notes due 2028.


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The Company’s Common Stock is listed on the New York Stock Exchange (the “NYSE”), the Toronto Stock Exchange (“TSX”) and the Australian Stock Exchange (“ASX”). The following table sets forth, for the periods indicated, the high and low closing sales prices of the Common Stock as reported by the NYSE:
 
                                 
    2009   2008(1)
    High   Low   High   Low
 
First Quarter
  $ 9.80     $ 5.80     $ 51.60     $ 38.80  
Second Quarter
  $ 16.70     $ 10.00     $ 39.40     $ 27.70  
Third Quarter
  $ 21.56     $ 10.51     $ 28.90     $ 14.40  
Fourth Quarter
  $ 24.29     $ 17.96     $ 14.80     $ 3.60  
2010
                               
First Quarter (through February 23, 2010)
  $ 14.70     $ 13.68                  
 
 
(1) Common stock prices in 2008 have been adjusted to reflect the 1-for-10 reverse stock split. See Note N of the Company’s consolidated financial statements for further discussion.
 
The Company has not paid per share cash distributions or dividends on its Common Stock since 1996. Future distributions or dividends on the Common Stock, if any, will be determined by the Company’s Board of Directors and will depend upon the Company’s results of operations, financial conditions, capital requirements and other factors.
 
On February 23, 2010, there were outstanding 81,431,083 shares of the Company’s common stock which were held by approximately 3175 stockholders of record.
 
The Company made no repurchases of its common stock during the year ended December 31, 2009.


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STOCK PERFORMANCE CHART
 
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG COEUR D’ALENE MINES CORPORATION,
S&P 500 INDEX AND PEER GROUP INDEX
 
The following performance graph compares the performance of the Company’s Common Stock during the period beginning December 31, 2004 and ending December 31, 2009 to the S&P 500 and a Peer Group Index consisting of the following companies: Agnico Eagle Mines, Goldcorp, Hecla Mining Co., IAM Gold, Kinross Gold Corp., Northgate Minerals, Pan American Silver Corp. Centerra Gold, Inc, and Stillwater Mining Co. for the same period. The graph assumes a $100 investment in the Company’s Common Stock and in each of the indexes at the beginning of the period, and a reinvestment of dividends paid on such investments throughout the period.
 
 
                                                             
      Dec.
    Dec.
    Dec.
    Dec.
    Dec.
    Dec.
      2004     2005     2006     2007     2008     2009
Coeur d’Alene Mines Corporation
      100.00         101.9         125.96         125.70         22.39         45.96  
S&P 500 Index
      100.00         104.89         121.46         128.13         80.73         102.08  
Peer Group Only
      100.0         131.53         160.00         191.59         157.47         202.45  
                                                             
 
This stock performance information is “furnished” and shall not be deemed to be “soliciting material” or subject to Rule 14A, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this report and irrespective of any general incorporation by reference language in any such filing, except to the extent that we specifically incorporate the information by reference.


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Item 6.   Selected Financial Data
 
The following table summarizes certain selected consolidated financial data with respect to the Company and should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this report.
 
                                         
Income Statement Data:
  2009     2008     2007     2006     2005  
    (In thousands, except per share data)  
 
Sales of metal
  $ 300,618     $ 170,874     $ 194,717     $ 192,782     $ 152,014  
Production costs applicable to sales
    (191,105 )     (106,582 )     (113,733 )     (88,014 )     (87,415 )
Depreciation and depletion
    (85,570 )     (24,856 )     (17,930 )     (21,652 )     (17,082 )
                                         
Gross profit
    23,943       39,436       63,054       83,116       47,517  
Costs and expenses:
                                       
Administrative and general
    22,097       25,846       23,875       19,369       20,624  
Exploration
    15,209       20,531       11,941       9,474       10,553  
Care and maintenance and other
    11,801       3,155                    
Pre-development
    97       16,950                   6,057  
Litigation settlement
                507       2,365       1,600  
                                         
Total costs and expenses
    49,204       66,482       36,323       31,208       38,834  
                                         
Operating income (loss)
    (25,261 )     (27,046 )     26,731       51,908       8,683  
Other income (expense)
                                       
Gains (loss) on debt extinguishments
    31,988                          
Loss on derivatives, net
    (82,687 )     1,756                    
Interest and other income
    3,248       2,557       18,195       18,654       8,385  
Interest expense, net of capitalized interest
    (18,102 )     (4,726 )     (365 )     (1,224 )     (2,485 )
                                         
Total other income (expense)
    (65,553 )     (413 )     17,830       17,430       5,900  
                                         
Income (loss) from continuing operations before income taxes
    (90,814 )     (27,459 )     44,561       69,338       14,583  
Income tax benefit (provision)
    25,921       17,500       (10,650 )     (3,934 )     (989 )
                                         
Income (loss) from continuing operations
    (64,893 )     (9,959 )     33,911       65,404       13,594  
Income (loss) from discontinued operations
    7,449       9,332       9,979       11,950       (3,043 )
Gain on sale of net assets of discontinued operation
    25,537                   11,132        
                                         
Net income (loss)
  $ (31,907 )   $ (627 )   $ 43,890     $ 88,486     $ 10,551  
                                         
Other comprehensive income (loss)
          (634 )     86       2,391       447  
                                         
Comprehensive income (loss)
  $ (31,907 )   $ (1,261 )   $ 43,976     $ 90,877     $ 10,998  
                                         
Basic and Diluted Income (Loss) Per Share Data:
                                       
Basic Income (Loss) Per Share:
                                       
Income (loss) from continuing operations
  $ (0.91 )   $ (0.18 )   $ 1.19     $ 2.41     $ 0.56  
Income (loss) from discontinued operations
    0.46       0.17       0.35       0.85       (0.12 )
                                         
Net income (loss)
  $ (0.45 )   $ 0.01     $ 1.54     $ 3.26     $ 0.44  
                                         
Diluted Income (Loss) Per Share:
                                       
Income (loss) from continuing operations
  $ (0.91 )   $ (0.18 )   $ 1.10     $ 2.21     $ 0.56  
Income (loss) from discontinued operations
    0.46       0.17       0.32       0.78       (0.13 )
                                         
Net income (loss)
  $ (0.45 )   $ 0.01     $ 1.42     $ 2.99     $ 0.43  
                                         
Weighted average number of shares of common stock(1)
                                       
Basic
    71,565       55,073       28,597       27,136       24,291  
                                         
Diluted
    71,565       55,073       31,052       29,608       24,368  
                                         


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Balance Sheet Data:(2)
  2009     2008     2007     2006     2005  
    (In thousands except per share data)  
 
Total assets
  $ 3,054,035     $ 2,928,121     $ 2,651,694     $ 849,626     $ 594,816  
Working capital
  $ (2,572 )   $ (8,533 )   $ 152,390     $ 383,082     $ 281,977  
Long-term liabilities
  $ 872,222     $ 981,225     $ 812,650     $ 210,117     $ 206,921  
Shareholders’ equity
  $ 1,993,205     $ 1,785,912     $ 1,727,367     $ 580,994     $ 341,553  
 
 
(1) In May 2009, the company’s Board of Directors authorized a 1-for-10 reverse stock split which became effective on May 26, 2009. Consequently, previously reported amounts for weighted average number of shares of common stock have been adjusted to reflect the 1-for-10 reverse stock split.
 
(2) On December 21, 2007, the Company completed its acquisition of all the shares of Bolnisi and Palmarejo in exchange for a total of approximately 272 million shares of Coeur common stock and a total cash payment of approximately $1.1 million. The total consideration paid amounted to $1.1 billion and the total liabilities assumed were $0.7 billion.
 
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following discussion provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Coeur d’Alene Mines Corporation and its subsidiaries for the three years ended December 31, 2009. It consists of the following subsections:
 
  •  “Overview” provides a brief summary of our financial position and the primary factors affecting those results.
 
  •  “Critical Accounting Policies” which provides a discussion of the accounting policies we consider critical because of their effect on the reported amounts of assets, liabilities, income and/or expenses in our consolidated financial statements and/or because they require different objectives or complex judgments by management.
 
  •  “Operating statistics and ore reserve estimates” which provides a summary of the consolidated production results for the three years ended December 31, 2009 and discussion of our reported ore reserves.
 
  •  “Results of operations” which sets forth an analysis of the operating results for the last three years.
 
  •  “Liquidity and capital resources” which contains a discussion of our cash flows and liquidity, investing activities and financing activities, contractual obligations and environmental compliance expenditures.
 
  •  “Recently issued accounting pronouncements” which summarizes recently published authorative accounting guidance, how it might apply to us and how it might affect our future results.
 
Overview
 
Coeur is one of the world’s largest silver producers with growing gold production from assets in the United States, Mexico, Bolivia, Argentina, Chile and Australia. The Palmarejo mine, San Bartolomé mine, Rochester mine and Martha mine, each operated by the Company, and the Endeavor Mine which is operated by others, constituted the Company’s principal sources of mining revenues in 2009. The Company’s management focuses on maximizing cash flow from its existing operations, the main factors of which are silver and gold prices, cash costs of production and capital expenditures. The Company also focuses on reducing its non-operating costs in order to maximize cash flow.
 
We face key risks associated with our business. One of the most significant risks is fluctuation in prices of silver and gold, which are affected by numerous factors beyond our control including interest rates, expectations regarding inflation, currency values, governmental decisions regarding the disposal of precious metals stockpiles, global and regional political and economic conditions, and other factors. In addition, we face challenges which include capital and production cost increases and social, political and environmental issues. Operating costs at our mines are subject to variation due to a number of factors such as changing commodity prices, ore grades, metallurgy, revisions to mine plans, and changes in accounting principles. At foreign locations, operating costs are also influenced by currency fluctuations that may affect our U.S. dollar costs.


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Highlights during 2009:
 
  •  Silver and gold prices averaged $14.65 per ounce and $972.35 per ounce in 2009, respectively. Silver hit a high of $19.275 per ounce on December 2, 2009 and a low of $10.45 per ounce on January 15, 2009. Gold hit a high of $1,212.50 per ounce on December 2, 2009 and a low of $810 per ounce on January 15, 2009;
 
  •  The Company produced a total of 17.7 million ounces of silver (includes 842,751 of silver production from Broken Hill) and 72,112 ounces of gold during 2009, 47.3% and 56.4% increases over 2008, respectively;
 
  •  Net cash provided by operating activities in 2009 was $64.5 million, compared to $(7.4) million in 2008;
 
  •  On June 22, 2009, the United States Supreme Court released its decision reversing the Ninth Circuit Court of Appeals decision that invalidated the previously issued Section 404 permit for the tailings facility for the Kensington gold mine near Juneau, Alaska clearing the way for final construction of the project. The Company estimates $81.7 million of remaining capital expenditures are required to complete construction and mine related activities at Kensington and to commence production during the second half of 2010;
 
  •  The Company completed construction and commenced production at its 100% owned Palmarejo mine in Mexico in April 2009;
 
  •  The Company’s silver reserves increased by 16% over 2008 to over 269 million ounces, while gold reserves increased 26% to 2.9 million ounces;
 
Critical Accounting Policies and Estimates
 
Management considers the following policies to be most critical in understanding the judgments that are involved in preparing the Company’s consolidated financial statements and the uncertainties that could impact its results of operations, financial condition and cash flows. Our consolidated financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. We have identified the policies below as critical to our business operations and the understanding of our results of operations. The information provided herein is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. We base these estimates on historical experience and on assumptions that we consider reasonable under the circumstances; however, reported results could differ from those based on the current estimates under different assumptions or conditions. The effects and associated risks of these policies on our business operations are discussed throughout this discussion and analysis. The areas requiring the use of management’s estimates and assumptions relate to recoverable ounces from proven and probable reserves that are the basis of future cash flow estimates and units-of-production depreciation and amortization calculations; useful lives utilized for depreciation, depletion, and long lived assets; estimates of recoverable gold and silver ounces in ore on leach pad; reclamation and remediation costs; valuation allowance for deferred tax assets; and post-employment and other employee benefit liabilities. For a detailed discussion on the application of these and other accounting policies, see Note C in the Notes to the Consolidated Financial Statements of this Form 10-K.
 
Revenue Recognition.  Revenue includes sales value received for our principal product, silver, and associated by-product revenues from the sale of by-product metals consisting primarily of gold and copper. Revenue is recognized when title to silver and gold passes to the buyer and when collectability is reasonably assured. Title passes to the customer based on terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets, for example, the London Bullion Market for both gold and silver, in an identical form to the product sold.
 
Under our concentrate sales contracts with third-party smelters, final gold and silver prices are set on a specified future quotational period, typically one to three months, after the shipment date based on market metal prices. Revenues are recorded under these contracts at the time title passes to the buyer based on the forward price for the expected settlement period. The contracts, in general, provide for provisional payment based upon provisional assays and quoted metal prices. Final settlement is based on the average applicable price for a


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specified future period and generally occurs from three to six months after shipment. Final sales are settled using smelter weights, settlement assays (average of assays exchanged and/or umpire assay results) and are priced as specified in the smelter contract. The Company’s provisionally priced sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of concentrates at the forward price at the time of sale. The embedded derivative does not qualify for hedge accounting. The embedded derivative is recorded as a derivative asset in prepaid expenses and other assets or as a derivative liability in accrued liabilities and other on the balance sheet and is adjusted to fair value through revenue each period until the date of final gold and silver settlement. The form of the material being sold, after deduction for smelting and refining, is in an identical form to that sold on the London Bullion Market. The form of the product is metal in flotation concentrate, which is the final process for which the Company is responsible.
 
The effects of forward sales contracts are reflected in revenue at the date the related precious metals are delivered. Third-party smelting and refining costs are recorded as a reduction of revenue.
 
At December 31, 2009, the Company had outstanding provisionally priced sales of $19.1 million consisting of 1.0 million ounces of silver and 1,227 ounces of gold, which had a fair value of approximately $19.1 million including the embedded derivative. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $10,000 and for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $1,200. At December 31, 2008, the Company had outstanding provisionally priced sales of $33.2 million consisting of 2.2 million ounces of silver and 8,388 ounces of gold, which had a fair value of approximately $32.1 million including the embedded derivative. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $22,000 and for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $8,000.
 
Estimates.  The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. The most critical accounting principles upon which the Company’s financial status depends are those requiring estimates of recoverable ounces from proven and probable reserves and/or assumptions of future commodity prices. There are a number of uncertainties inherent in estimating quantities of reserves, including many factors beyond our control. Ore reserves estimates are based upon engineering evaluations of samplings of drill holes and other openings. These estimates involve assumptions regarding future silver and gold prices, the geology of our mines, the mining methods we use and the related costs we incur to develop and mine our reserves. Changes in these assumptions could result in material adjustments to our reserve estimates. We use reserve estimates in determining the units-of-production depreciation and amortization expense, as well as in evaluating mine asset impairments.
 
We review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if total estimated future cash flows or probability-weighted cash flows on an undiscounted basis are less than the carrying amount of the assets, including property, plant and equipment, mineral property, development property, and any deferred costs. The accounting estimates related to impairment are critical accounting estimates because the future cash flows used to determine whether an impairment exists is dependent on reserve estimates and other assumptions, including silver and gold prices, production levels, and capital and reclamation costs, all of which are based on detailed engineering life-of-mine plans.
 
We depreciate our property, plant and equipment, mining properties and mine development using the units-of-production method over the estimated life of the ore body based on our proven and probable recoverable reserves or on a straight-line basis over the useful life, whichever is shorter. The accounting estimates related to depreciation and amortization are critical accounting estimates because 1) the determination of reserves involves uncertainties with respect to the ultimate geology of our reserves and the assumptions used in determining the economic feasibility of mining those reserves and 2) changes in estimated proven and probable reserves and useful asset lives can have a material impact on net income.
 
Ore on leach pad.  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,


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which are then recovered in metallurgical processes. In August 2007, the Company terminated mining and crushing operations at the Rochester mine as ore reserves were fully mined. Residual heap leach activities are expected to continue through 2014.
 
The Company used several integrated steps to scientifically measure the metal content of ore placed on the leach pads. As the ore body was drilled in preparation for the blasting process, samples were taken of the drill residue which is assayed to determine estimated quantities of contained metal. The Company estimated the quantity of ore by utilizing global positioning satellite survey techniques. The Company then processed the ore through crushing facilities where the output was again weighed and sampled for assaying. A metallurgical reconciliation with the data collected from the mining operation was completed with appropriate adjustments made to previous estimates. The crushed ore was then transported to the leach pad for application of the leaching solution. As the leach solution is collected from the leach pads, it is continuously sampled for assaying. The quantity of leach solution is measured by flow meters throughout the leaching and precipitation process. After precipitation, the product is converted to dorè, which is the final product produced by the mine. The inventory is stated at lower of cost or market, with cost being determined using a weighted average cost method.
 
The Company reported ore on leach pad of $24.0 million as of December 31, 2009. Of this amount, $9.6 million is reported as a current asset and $14.4 million is reported as a non-current asset. The distinction between current and non-current is based upon the expected length of time necessary for the leaching process to remove the metals from the broken ore. The historical cost of the metal that is expected to be extracted within twelve months is classified as current and the historical cost of metals contained within the broken ore that will be extracted beyond twelve months is classified as non-current. Inventories of ore on leach pad are valued based on actual production costs incurred to produce and place ore on the leach pad, adjusted for effects on monthly production of costs of abnormal production levels, less costs allocated to minerals recovered through the leach process.
 
The estimate of both the ultimate recovery expected over time and the quantity of metal that may be extracted relative to the time the leach process occurs requires the use of estimates which are inherently inaccurate since they rely upon laboratory testwork. Testwork consists of 60 day leach columns from which the Company projects metal recoveries up to five years in 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 more than twenty years of leach pad operations at the Rochester Mine. The assumptions used by the Company to measure metal content during each stage of the inventory conversion process includes estimated recovery rates based on laboratory testing and assaying. The Company periodically reviews its estimates compared to actual experience and revises its estimates when appropriate. During the third quarter of 2008, the Company increased its estimated silver ounces contained in the heap inventory by 5.4 million ounces. The increase in estimated silver ounces contained in the heap inventory is due to changes in estimated recoveries anticipated for the remainder of the residual leach phase. There were no changes in recoveries related to gold contained in the heap. Consequently, the Company believes its current residual heap leach activities are expected to continue through 2014. The ultimate recovery will not be known until leaching operations cease. If our estimate of ultimate recovery requires adjustment, the impact upon our valuation and upon our income statement would be as follows:
 
                                                 
    Positive/Negative
    Positive/Negative
 
    Change in Silver Recovery     Change in Gold Recovery  
    1%     2%     3%     1%     2%     3%  
 
Quantity of recoverable ounces
    1.7 million       3.5 million       5.2 million       13,240       26,480       39,720  
Positive impact on future cost of production per silver equivalent ounce for increases in recovery rates
  $ 3.52     $ 2.81     $ 2.33     $ 4.05     $ 3.54     $ 3.14  
Negative impact on future cost of production per silver equivalent ounce for decreases in recovery rates
  $ 7.17     $ 12.05     $ 12.05     $ 5.67     $ 7.10     $ 7.77  


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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 of 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.
 
Reclamation and remediation costs.  The Company recognizes obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. These legal obligations are associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset. The fair value of a liability for an asset retirement obligation will be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. An accretion cost, representing the increase over time in the present value of the liability, is recorded each period in depreciation, depletion and amortization expense. As reclamation work is performed or liabilities are otherwise settled, the recorded amount of the liability is reduced.
 
Future remediation costs for inactive mines are accrued based on management’s best estimate at the end of each period of the undiscounted costs expected to be incurred at the site. Such cost estimates include, where applicable, ongoing care and maintenance and monitoring costs. Changes in estimates are reflected in earnings in the period an estimate is revised.
 
Income taxes.  The Company computes income taxes using an asset and liability approach which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences or benefits of temporary differences between the financial reporting bases and the tax bases of assets and liabilities, as well as operating loss and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse.
 
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. A valuation allowance has been provided for the portion of the Company’s net deferred tax assets for which it is more likely than not that they will not be realized.
 
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 1999. Federal income tax returns for 2000 through 2008 are subject to examination. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. There were no significant accrued interest or penalties at December 31, 2009.
 
Operating Statistics and Ore Reserve Estimates
 
The Company’s total production, including discontinued operations in 2009 was 17.7 million ounces of silver and 72,112 ounces of gold, compared to 12.0 million ounces of silver and 46,115 ounces of gold in 2008. Total estimated proven and probable reserves at December 31, 2009 were approximately 269.5 million ounces of silver and 2.9 million ounces of gold, compared to silver and gold ore reserves at December 31, 2008 of approximately 247.8 million ounces and 2.3 million ounces, respectively.


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The following table shows the estimated amounts of proven and probable ore reserves and mineralized material at the following Company locations at year-end 2009:
 
                                                                 
    Proven and Probable Ore Reserves     Mineralized Material  
    (000’s)
    Grade
    Grade
    (000’s)
    (000’s)
    (000’s)
    Grade
    Grade
 
    Tons     Ag oz/t     Au oz/t     Ounces Ag     Ounces Au     Tons     Ag oz/t     Au oz/t  
 
Rochester
    42,417       0.61       0.005       25,884       233       104,783       0.52       0.004  
Cerro Bayo
    775       9.78       0.07       7,587       57       769       10.36       0.15  
Mina Martha
    38       33.14       0.04       1,249       1       29       59.54       0.05  
San Bartolomé
    31,372       3.83             120,033             36,953       1.75        
Kensington
    5,500             0.27             1,478       2,724             0.18  
Endeavor
    8,377       2.86             23,959             20,205       1.77        
Palmarejo
    17,900       5.03       0.06       90,521       1,102       4,493       3.48       0.05  
                                                                 
Total tons
    106,379                       269,233       2,871       169,956                  
                                                                 
                                                                 
                                                                 
    Total tons
    Ag oz/t
    Au oz/t
                Total tons
    Ag oz/t
    Au oz/t
 
    (000’s)     (Wt. Avg.)     (Wt. Avg.)                 (000’s)     (Wt. Avg.)     (Wt. Avg.)  
 
Summary by metal:
                                                               
Silver
    101,006       2.67                             167,275       1.08        
Gold
    66,757             0.04                       112,841             0.01  
 
The ore reserves at December 31, 2009 may change with fluctuations in the price of gold and silver. The following table shows the estimated changes to ore reserves at mines operated by the Company at different pricing ranges:
 
                                         
    Proven and Probable Ore Reserve Sensitivity to  
    Per ounce
    Per ounce
    (000’s)
    (000’s)
    (000’s)
 
    Silver Price     Gold Price     Tons     Ounces Ag     Ounces Au  
 
Cerro Bayo
  $ 12.50     $ 750       730       7,374       56  
    $ 13.50     $ 800       758       7,516       57  
    $ 14.50     $ 850       776       7,587       57  
    $ 15.50     $ 900       802       7,688       58  
    $ 16.50     $ 950       822       7,752       59  
                                         
Mina Martha
  $ 12.50     $ 750       31       1,112       1.2  
    $ 13.50     $ 800       34       1,191       1.3  
    $ 14.50     $ 850       34       1,191       1.3  
    $ 15.50     $ 900       34       1,191       1.3  
    $ 16.50     $ 950       38       1,249       1.4  
                                         
San Bartolomé
  $ 12.50             25,724       107,646        
    $ 13.50             31,372       120,033        
    $ 14.50             34,196       126,227        
    $ 15.50             36,732       132,114        
    $ 16.50             39,267       138,001        
                                         
Kensington
        $ 750       5,500             1,478  
          $ 800       6,364             1,622  
          $ 850       7,247             1,738  
          $ 900       7,926             1,814  
          $ 950       8,550             1,883  


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    Proven and Probable Ore Reserve Sensitivity to  
    Per ounce
    Per ounce
    (000’s)
    (000’s)
    (000’s)
 
    Silver Price     Gold Price     Tons     Ounces Ag     Ounces Au  
 
Palmarejo(1)
  $ 12.50     $ 750       17,286       89,443       1,090  
    $ 13.50     $ 800       17,744       90,372       1,101  
    $ 14.50     $ 850       17,900       90,521       1,102  
    $ 15.50     $ 900       18,205       91,052       1,107  
    $ 16.50     $ 950       18,392       91,293       1,110  
                                         
Rochester(2)
  $ 13.50     $ 800       42,417       25,884       232  
    $ 14.50     $ 850       42,417       25,884       232  
    $ 15.50     $ 900       42,417       25,884       232  
    $ 16.50     $ 950       42,417       25,884       232  
 
 
(1) Palmarejo reserves include the Palmarejo and Guadalupe deposits.
 
(2) Rochester reserves do not change at metal price ranges specified due to heap leach pad limitations; the reserve is reported at cut-off grade that was raised above the economic breakeven to accommodate this limitation.
 
The following table presents production information by mine and consolidated sales information for the years ended December 31:
 
                         
    2009     2008     2007  
 
Palmarejo(A)
                       
Tons milled
    1,065,508              
Ore grade/Ag oz
    4.31              
Ore grade/Au oz
    0.06              
Recovery/Ag oz(A)
    66.3 %            
Recovery/Au oz(A)
    88.2 %            
Silver production ounces
    3,047,843              
Gold production ounces
    54,740              
Cash operating costs/oz
  $ 9.80              
Cash cost/oz
  $ 9.80              
Total production cost/oz
  $ 26.80              
San Bartolomé(B)
                       
Tons milled
    1,518,671       505,514        
Ore grade/Ag oz
    5.49       7.46        
Recovery/Ag oz
    89.6 %     75.8 %      
Silver production ounces
    7,469,222       2,861,500        
Cash operating costs/oz
  $ 7.80     $ 8.22        
Cash cost/oz
  $ 10.48     $ 10.53        
Total production cost/oz
  $ 12.96     $ 12.50        

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    2009     2008     2007  
 
Martha Mine
                       
Tons milled
    109,974       57,886       37,047  
Ore grade/Ag oz
    36.03       49.98       78.10  
Ore grade/Au oz
    0.05       0.07       0.12  
Recovery/Ag oz
    93.6 %     93.7 %     95.0 %
Recovery/Au oz
    87.6 %     88.3 %     92.7 %
Silver production ounces
    3,707,544       2,710,673       2,748,705  
Gold production ounces
    4,709       3,313       4,127  
Cash operating costs/oz
  $ 6.19     $ 6.87     $ 5.54  
Cash cost/oz
  $ 6.68     $ 7.57     $ 6.27  
Total production cost/oz
  $ 8.62     $ 9.38     $ 6.78  
Rochester
                       
Tons processed
                5,060,678  
Ore grade/Ag oz
                0.65  
Ore grade/Au oz
                0.01  
Recovery/Ag oz(B)
                141.4 %
Recovery/Au oz(B)
                167.6 %
Silver production ounces
    2,181,788       3,033,720       4,614,780  
Gold production ounces
    12,663       21,041       50,408  
Cash operating costs/oz
  $ 1.95     $ (0.75 )   $ 0.99  
Cash cost/oz
  $ 2.58     $ (0.03 )   $ 1.52  
Total production cost/oz
  $ 3.51     $ 0.75     $ 3.82  
Endeavor
                       
Tons milled
    552,799       1,030,368       1,146,857  
Ore grade/Ag oz
    1.67       1.41       1.40  
Recovery/Ag oz
    49.9 %     56.5 %     48.0 %
Silver production ounces
    461,800       824,093       772,609  
Cash operating costs/oz
  $ 6.80     $ 2.55     $ 2.67  
Cash cost/oz
  $ 6.80     $ 2.55     $ 2.67  
Total production cost/oz
  $ 9.55     $ 4.94     $ 3.65  
Cerro Bayo
                       
Tons milled
          236,403       387,378  
Ore grade/Ag oz
          5.54       4.68  
Ore grade/Au oz
          0.10       0.11  
Recovery/Ag oz
          93.4 %     94.4 %
Recovery/Au oz
          90.2 %     92.2 %
Silver production ounces
          1,224,084       1,709,830  
Gold production ounces
          21,761       37,479  
Cash operating costs/oz
        $ 8.56     $ 8.22  
Cash cost/oz
        $ 8.56     $ 8.22  
Total production cost/oz
        $ 14.65     $ 11.82  

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    2009     2008     2007  
 
CONSOLIDATED PRODUCTION TOTALS
                       
Silver ounces
    16,868,197       10,654,070       9,845,924  
Gold ounces
    72,112       46,115       92,014  
Cash operating costs/oz
  $ 7.03     $ 4.92     $ 3.64  
Cash cost per oz/silver
  $ 8.40     $ 5.92     $ 4.10  
Total production cost/oz
  $ 13.19     $ 8.02     $ 6.02  
CONSOLIDATED SALES TOTALS(C)
                       
Silver ounces sold
    16,310,225       9,637,242       9,846,982  
Gold ounces sold
    65,607       49,130       94,284  
Realized price per silver ounce
  $ 14.83     $ 14.22     $ 13.53  
Realized price per gold ounce
  $ 1,003     $ 915     $ 700  
 
 
(A) Palmarejo achieved commercial production on April 20, 2009. Mine statistics do not represent normal operating results.
 
(B) The leach cycle at Rochester requires 5 to 10 years to recover gold and silver contained in the ore. The Company estimates the ultimate recovery to be approximately 61.5% for silver and 93% for gold. However, ultimate recoveries will not be known until leaching operations cease, which is currently estimated for 2014. Current recovery may vary significantly from ultimate recovery. See Critical Accounting Policies and Estimates — Ore on Leach Pad.
 
(C) Current production ounces and recoveries reflect final metal settlements of previously reported production ounces.
 
Operating Statistics From Discontinued Operations
 
The following table presents information for Broken Hill which was sold on July 30, 2009, effective as of July 1, 2009:
 
                         
    2009     2008     2007  
 
Broken Hill
                       
Tons milled
    827,766       1,952,066       1,646,203  
Ore grade/Silver oz
    1.44       0.97       1.19  
Recovery/Silver oz
    70.6 %     72.5 %     83.6 %
Silver production ounces
    842,751       1,369,009       1,642,205  
Cash operating cost/oz
  $ 3.40     $ 3.41     $ 3.18  
Cash cost/oz
  $ 3.40     $ 3.41     $ 3.18  
Total cost/oz
  $ 5.26     $ 5.24     $ 5.04  
 
Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs
 
The following table presents a reconciliation between non-GAAP cash operating costs per ounce and cash costs per ounce to production costs applicable to sales including depreciation, depletion and amortization, calculated in accordance with U.S. GAAP.
 
Total cash costs include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs, royalties and mining production taxes, net of by-product revenues earned from all metals other than the primary metal produced at each unit. Cash operating costs include all cash costs except production taxes and royalties if applicable. Total cash costs and cash operating costs are performance measures which we believe provide management and investors with an indication of net cash flow, after consideration of the realized price received for production sold. Management also uses these measurements for

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the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective. “Cash operating costs per ounce” and “Total cash costs per ounce” are measures developed by precious metals companies in an effort to provide a comparable standard, however, there can be no assurance that our reporting of these non-GAAP measures are similar to that reported by other mining companies. Cash operating costs and total cash costs, as alternative measures, have the limitation of excluding potentially large amounts related to inventory adjustments, non-cash charges and byproduct credits. Management compensates for this limitation by using both the GAAP production costs and the non-GAAP cash costs metrics in its planning.
 
Production costs applicable to sales including depreciation, depletion and amortization, is the most comparable financial measure calculated in accordance with GAAP to total cash costs. The sum of the production costs applicable to sales and depreciation, depletion and amortization for our mines as set forth in the tables below is included in our Consolidated Statements of Operations and Comprehensive Income.
 
Year Ended December 31, 2009
 
                                                         
(In thousands except ounces and
  San
                Cerro
                   
per ounce costs)
  Bartolomé     Martha     Palmarejo     Bayo     Rochester     Endeavor     Total  
 
Production of silver (ounces)
    7,469,222       3,707,544       3,047,843             2,181,788       461,800       16,868,197  
Cash operating cost per ounce
  $ 7.80     $ 6.19     $ 9.80     $     $ 1.95     $ 6.80     $ 7.03  
                                                         
Cash costs per ounce
  $ 10.48     $ 6.68     $ 9.80     $     $ 2.58     $ 6.80     $ 8.40  
                                                         
Total Operating Cost (Non-GAAP)
  $ 58,293     $ 22,963     $ 29,883     $     $ 4,236     $ 3,142     $ 118,517  
Royalties
    19,988       1,815                               21,803  
Production taxes
                            1,401             1,401  
                                                         
Total Cash Costs (Non-GAAP)
    78,281       24,778       29,883             5,637       3,142       141,721  
Add/Subtract:
                                                       
Third party smelting costs
          (7,118 )     (1,416 )                 (1,035 )     (9,569 )
By-product credit(2)
          4,615       55,386             12,335             72,336  
Other adjustments
    8       669       20             171             868  
Change in inventory
    2,590       (5,048 )     (19,028 )     1,211       6,063       (38 )     (14,250 )
Depreciation, depletion and amortization
    18,509       6,511       51,801             1,852       1,269       79,942  
Production costs applicable to sales, including depreciation, depletion and amortization (GAAP)
    99,388       24,407       116,646       1,211       26,058       3,338       271,048  
 
Year Ended December 31, 2008
 
                                                 
    San
                               
(In thousands except ounces and per ounce costs)
  Bartolomé     Martha     Cerro Bayo     Rochester     Endeavor     Total  
 
Production of silver (ounces)
    2,861,500       2,710,673       1,224,084       3,033,720       824,093       10,654,070  
Cash operating cost per ounce
  $ 8.22     $ 6.87     $ 8.56     $ (0.75 )   $ 2.55     $ 4.92  
                                                 
Cash costs per ounce
  $ 10.53     $ 7.57     $ 8.56     $ (0.03 )   $ 2.55     $ 5.92  
                                                 
Total Operating Cost (Non-GAAP)
  $ 23,535     $ 18,619     $ 10,478     $ (2,290 )   $ 2,101     $ 52,443  
Royalties
    6,605       1,889                         8,494  
Production taxes
                      2,188             2,188  
                                                 
Total Cash Costs (Non-GAAP)
    30,140       20,508       10,478       (102 )     2,101       63,125  
Add/Subtract:
                                               
Third party smelting costs
          (3,019 )     (3,818 )           (1,212 )     (8,049 )
By-product credit(2)
          2,880       19,595       18,499             40,974  
Other adjustment
          470       (425 )     12             57  
Change in inventory
    (12,393 )     (3,240 )     2,099       23,837       171       10,474  
Depreciation, depletion and amortization
    5,638       4,431       7,881       2,353       1,971       22,274  
                                                 
Production costs applicable to sales, including depreciation, depletion and amortization (GAAP)
  $ 23,385     $ 22,030     $ 35,810     $ 44,599     $ 3,031     $ 128,855  
                                                 


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Year Ended December 31, 2007
 
                                         
In thousands except ounces and per ounce costs)
  Martha     Cerro Bayo     Rochester     Endeavor     Total  
 
Production of silver (ounces)
    2,748,705       1,709,830       4,614,780       772,609       9,845,924  
Cash operating cost per ounce
  $ 5.53     $ 8.22     $ 0.99     $ 2.67     $ 3.64  
                                         
Cash costs per ounce
  $ 6.27     $ 8.22     $ 1.52     $ 2.67     $ 4.10  
                                         
Total Operating Cost (Non-GAAP)
  $ 15,217     $ 14,055     $ 4,559     $ 2,064     $ 35,895  
Royalties
    2,028                         2,028  
Production taxes
                2,476             2,476  
                                         
Total Cash Costs (Non-GAAP)
    17,245       14,055       7,035       2,064       40,399  
Add/Subtract:
                                       
Third party smelting costs
    (2,112 )     (3,603 )           (1,347 )     (7,062 )
By-product credit(2)
    2,889       26,199       34,664             63,752  
Other adjustment
                1,926             1,926  
Change in inventory
    (146 )     (1,701 )     16,738       (172 )     14,719  
Depreciation, depletion and amortization
    1,383       6,155       8,697       755       16,990  
                                         
Production costs applicable to sales, including depreciation, depletion and amortization (GAAP)
  $ 19,259     $ 41,105     $ 69,060     $ 1,300     $ 130,724  
                                         
 
 
(1) The Palmarejo gold production royalty is currently reflected as a minimum royalty obligation which commenced on July 1, 2009 and ends when payments have been made on a total of 400,000 ounces of gold, at which time a royalty expense will be recorded.
 
(2) Amounts reflect final metal settlement adjustments.
 
The following tables present a reconciliation between non-GAAP cash costs per ounce to GAAP production costs applicable to sales reported in Discontinued Operations for the years ended (see Note F — Discontinued Operations):
 
                         
Broken Hill
  2009(2)     2008     2007  
 
Production of Silver (ounces)
    842,751       1,369,009       1,642,205  
Cash operating costs per ounce
  $ 3.40     $ 3.41     $ 3.18  
                         
Cash Costs per ounce
  $ 3.40     $ 3.41     $ 3.18  
                         
Total Cash Costs (Non-GAAP)
    2,862       4,670       5,228  
Add/Subtract:
                      </