| COEUR D ALENE MINES CORP Item 1A Risk Factors Item 1A Risk Factors The following information 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 |
| Risks Relating to our Business Prior to 2005, we incurred losses due to several factors and could incur losses in the future |
| We incurred net losses in the five years prior to 2005 and had losses from continuing operations in each of those prior periods |
| Factors that significantly contributed to our losses are: • until recently, historically low gold and silver market prices during those years; • our deliberate pursuit of a growth policy prior to 2003 calling for the acquisition of mining properties and companies and financing such growth principally by incurring convertible indebtedness which had a high coupon rate, thereby resulting in an interest expense of dlra14dtta6 million in 2001, dlra21dtta9 million in 2002, dlra12dtta9 million in 2003, dlra2dtta8 million in 2004, and dlra2dtta5 million in 2005; • write-offs for impaired assets and other holding costs in 2000 (dlra12dtta2 million), 2001 (dlra6dtta1 million), and 2002 (dlra19dtta0 million); and • losses on the early retirement of debt of dlra19dtta1 million in 2002, and dlra41dtta6 million in 2003 |
| If silver and gold prices decline and we are unable to reduce our production costs, our losses may resume |
| If lower silver and gold prices make mining at our properties uneconomical, we may be required to recognize additional impairment write-downs, which would increase our operating losses and negatively impact our results of operations |
| We may be required to incur additional indebtedness to fund our capital expenditures |
| We have historically financed our operations through the issuance of common stock and convertible debt, and may be required to incur additional indebtedness in the future |
| During 2004, we commenced construction at the San Bartolome project and in 2005 we commenced construction at Kensington project |
| Construction of both projects could require a total capital investment of approximately dlra325 million |
| While we believe that our cash, cash equivalents and short-term investments combined with cash flow generated from operations will be sufficient for us to make this level of capital investment, no assurance can be given that additional capital investments will not be required to be made at these or other projects |
| If we are unable to generate enough cash to finance such additional capital expenditures through operating cash flow and the issuance of common stock, we may be required to issue additional indebtedness |
| Any additional indebtedness would increase our debt payment obligations, and may negatively impact our results of operations |
| In recent years, prior to 2005, we did not have sufficient earnings to cover fixed charges, which deficiency could occur in future periods |
| As a result of our net losses prior to 2005, our earnings were not adequate to satisfy fixed charges (ie, interest, preferred stock dividends and that portion of rent deemed representative of interest) in each of those periods prior to 2005 |
| The amounts by which earnings were inadequate to cover fixed charges were approximately dlra3dtta1 million in 2001, dlra80dtta8 million in 2002, dlra63dtta9 million in 2003 and dlra22dtta7 million in 2004 |
| Earnings were sufficient to cover fixed charges in 2005 |
| As of December 31, 2005, we are required to make fixed payments on dlra180 million principal amount of our 1¼% Senior Convertible Notes due 2024, requiring annual interest payments of approximately dlra2dtta25 million until their maturity |
| 9 _________________________________________________________________ We expect to satisfy our fixed charges and other expense obligations in the future from cash flow from operations and, if cash flow from operations is insufficient, from working capital, which amounted to approximately dlra285dtta1 million at December 31, 2005 |
| Prior to 2005, we experienced negative cash flow from operating activities |
| The amount of net cash used in our operating activities amounted to approximately dlra29dtta9 million in 2001, dlra8dtta5 million in 2002, dlra5dtta1 million in 2003 and dlra18dtta6 million in 2004 |
| In 2005, we generated dlra6dtta7 million of operating cash flow |
| The availability of future cash flow from operations or working capital to fund the payment of interest on the notes and other fixed charges will be dependent upon numerous factors, including our results of operations, silver and gold prices, levels and costs of production at our mining properties and the amount of our capital expenditures and expenditures for acquisitions, developmental and exploratory activities |
| The market prices of silver and gold are volatile |
| If we experience low silver and gold prices it may result in decreased revenues and decreased net income or losses, and may negatively affect our business |
| Silver and gold are commodities |
| Their prices fluctuate, and are affected by many factors beyond our control, including interest rates, expectations regarding inflation, speculation, currency values, governmental decisions regarding the disposal of precious metals stockpiles, global and regional demand and production, political and economic conditions and other factors |
| Because we currently derive approximately 63prca of our revenues from sales of silver, our earnings are primarily related to the price of this metal |
| The market price of silver (Handy & Harman) and gold (London Final) on February 17, 2006 was dlra9dtta43 and dlra552 per ounce, respectively, compared with 2005‘s average prices for silver and gold of dlra7dtta34 and dlra445, respectively |
| The price of silver and gold may decline in the future |
| Factors that are generally understood to contribute to a decline in the price of silver include sales by private and government holders, and a general global economic slowdown |
| If the prices of silver and gold are depressed for a sustained period and our net losses resume, we may be forced to suspend mining at one or more of our properties until the price increases, and record additional asset impairment write-downs |
| Any lost revenues, continued or increased net losses or additional asset impairment write-downs would adversely affect our results of operations |
| We have recorded significant write-downs of mining properties in recent years and may have to record additional write-downs, which could negatively impact our results of operations |
| Statement of Financial Accounting Standards Nodtta 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144) established accounting standards for impairment of the value of long-lived assets such as mining properties |
| SFAS 144 requires a company to review the recoverability of the cost of its assets by estimating the future undiscounted cash flows expected to result from the use and eventual disposition of the asset |
| Impairment must be recognized when the carrying value of the asset exceeds these cash flows, and recognizing impairment write-downs has negatively impacted our results of operations in recent years |
| If silver or gold prices decline or we fail to control production costs or realize the mineable ore reserves at our mining properties, we may be required to recognize further asset write-downs |
| We also may record other types of additional mining property write-downs in the future to the extent a property is sold by us for a price less than the carrying value of the property, or if liability reserves have to be created in connection with the closure and reclamation of a property |
| Additional write-downs of mining properties could negatively impact our results of operations |
| Our revenues and income (or loss) from our interest in the Endeavor and Broken Hill mines are dependent in part upon the performance of the operators of the mine |
| 10 _________________________________________________________________ In May and September 2005, we acquired silver production and reserves at the Endeavor and Broken Hill mines in Australia, respectively |
| These mines are owned and operated by other mining companies |
| The Company’s revenues and income (or loss) from its interest in the silver production at these mines is dependent in part upon the performance of those operators and such mines |
| The estimation of ore reserves is imprecise and depends upon subjective factors |
| Estimated ore reserves may not be realized in actual production |
| Our operating results may be negatively affected by inaccurate estimates |
| The ore reserve figures presented in our public filings are estimates made by our technical personnel |
| Reserve estimates are a function of geological and engineering analyses that require us to make assumptions about production costs and silver and gold market prices |
| Reserve estimation is an imprecise and subjective process and the accuracy of such estimates is a function of the quality of available data and of engineering and geological interpretation, judgment and experience |
| Assumptions about silver and gold market prices are subject to great uncertainty as those prices have fluctuated widely in the past |
| Declines in the market prices of silver or gold may render reserves containing relatively lower grades of ore uneconomic to exploit, and we may be required to reduce reserve estimates, discontinue development or mining at one or more of our properties, or write down assets as impaired |
| Should we encounter mineralization or geologic formations at any of our mines or projects different from those we predicted, we may adjust our reserve estimates and alter our mining plans |
| Either of these alternatives may adversely affect our actual production and operating results |
| We based our ore reserve determinations as of December 31, 2005 on a long-term silver price average of dlra6dtta50 per ounce, with the exception of the Endeavor mine which uses dlra7dtta06 per ounce and the San Bartolome mine which uses dlra6dtta00 per ounce, and a long-term gold price average of dlra410 per ounce for all properties with the exception of the Kensington property which used a gold price of dlra375 per ounce |
| On February 17, 2006 silver and gold prices were dlra9dtta43 per ounce and dlra552 per ounce, respectively |
| The estimation of the ultimate recovery of metals contained within the 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 |
| The key stages in the conversion of ore into silver and gold are (i) the blasting process in which the ore is broken into large pieces; (ii) the processing of the ore through a crushing facility that breaks it into smaller pieces; (iii) the transportation of the crushed ore to the leach pad where the leaching solution is applied; (iv) the collection of the leach solution; (v) subjecting the leach solution to the precipitation process, in which gold and silver is converted back to a fine solid; (vi) the conversion of the precipitate into dore; and (vii) the conversion by a third party refinery of the dore into refined silver and gold bullion |
| We use several integrated steps to scientifically measure the metal content of ore placed on the leach pads during the key stages |
| As the ore body is drilled in preparation for the blasting process, samples of the drill residue are assayed to determine estimated quantities of contained metal |
| We estimate the quantity of ore by utilizing global positioning satellite survey techniques |
| We then process the ore through a crushing facility where the output is again weighed and sampled for assaying |
| A metallurgical reconciliation with the data collected from the mining operation is completed with appropriate adjustments made to previous estimates |
| We then transport the crushed ore to the leach pad for application of the leaching solution |
| As the leach solution is collected from the leach pads, we continuously sample for assaying |
| We measure the quantity of leach solution with flow meters throughout the leaching and precipitation process |
| After precipitation, the product is converted to dore, which is the final product produced by the mine |
| We again weigh, sample and assay the dore |
| 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 |
| 11 _________________________________________________________________ Our reported inventories include metals estimated to be contained in the ore on the leach pads of dlra54dtta6 million as of December 31, 2005 |
| Of this amount, dlra25dtta4 million is reported as a current asset and dlra29dtta2 million is reported as a noncurrent asset |
| The distinction between current and noncurrent is based upon the expected length of time necessary for the leaching process to remove the metals from the crushed ore |
| The historical cost of the metal that is expected to be extracted within twelve months is classified as current and the historical cost of metals contained within the crushed ore that will be extracted beyond twelve months is classified as noncurrent |
| The ore on leach pad inventory is stated at actual production costs incurred to produce and place ore on the leach pad during the current period, adjusted for production issues encountered during the period |
| The estimate of both the ultimate recovery expected over time, and the quantity of metal that may be extracted relative to such twelve month period, requires the use of estimates which are inherently inaccurate since they rely upon laboratory test work |
| Test work consists of 60 day leach columns from which we project metal recoveries into the future |
| The quantities of metal contained in the ore are based upon actual weights and assay analysis |
| The rate at which the leach process extracts gold and silver from the crushed ore is based upon laboratory column tests and actual experience occurring over approximately nineteen years of leach pad operation at the Rochester mine |
| The assumptions we use to measure metal content during each stage of the inventory conversion process includes estimated recovery rates based on laboratory testing and assaying |
| We periodically review our estimates compared to actual experience and revise our estimates when appropriate |
| The length of time necessary to achieve our currently estimated ultimate recoveries of between 59prca and 61dtta5prca for silver, depending on the area being leached, and 93prca for gold is estimated to be between 5 and 10 years |
| However, the ultimate recovery will not be known until leaching operations cease, which is currently estimated for approximately 2011 |
| When we began leach operations in 1986, based solely on laboratory testing, we estimated the ultimate recovery of silver and gold at 50prca and 80prca, respectively |
| Since 1986, we have adjusted the expected ultimate recovery three times (once in each of 1989, 1997 and 2003) based upon actual experience gained from leach operations |
| In 2003, we revised our estimated recoveries for silver and gold of between 59prca and 61dtta5prca, depending on the area being leached, and 93prca, respectively, which increased the estimated recoverable ounces of silver and gold contained in the heap by 1dtta8 million ounces and 41cmam000 ounces, respectively |
| If our estimate of ultimate recovery requires adjustment, the impact upon our inventory valuation and upon our income statement would be as follows: Positive/Negative Change in Silver Recovery _______________________________________________________________ Positive/Negative Change in Gold Recovery _______________________________________________________________ 1prca ________________________________________________________ 2prca ________________________________________________________ 3prca ________________________________________________________ 1prca ________________________________________________________ 2prca ________________________________________________________ 3prca ________________________________________________________ Quantity of recoverable ounces 1dtta6 million 3dtta3 million 4dtta9 million 11cmam900 23cmam800 35cmam800 Positive impact on future cost of production per silver equivalent ounce for increases in recovery rates dlra0dtta78 dlra1dtta36 dlra1dtta82 dlra0dtta36 dlra0dtta68 dlra0dtta97 Negative impact on future cost of production per silver equivalent ounce for decreases in recovery rates dlra1dtta08 dlra2dtta70 dlra5dtta35 dlra0dtta42 dlra0dtta91 dlra1dtta48 12 _________________________________________________________________ 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 production issues encountered during the period, less costs allocated to minerals recovered through the leach process |
| The costs consist of those production activities occurring at the mine site and include the costs, including depreciation, associated with mining, crushing and precipitation circuits |
| In addition, refining is provided by a third party refiner to place the metal extracted from the leach pad in a saleable form |
| These additional costs are considered in the valuation of inventory |
| Negative changes in our inventory valuations and correspondingly on our income statement would have an adverse impact on our results of operations |
| Our estimates of current and non-current inventories may not be realized in actual production and operating results, which may negatively affect our business |
| We use estimates, based on prior production results and experiences, to determine whether heap leach inventory will be recovered more than one year in the future, and is non-current inventory, or will be recovered within one year, and is current inventory |
| The estimates involve assumptions that may not prove to be consistent with our actual production and operating results |
| We cannot determine the amount ultimately recoverable until leaching is completed |
| If our estimates prove inaccurate, our operating results may be less than anticipated |
| Significant investment risks and operational costs are associated with our exploration, development and mining activities, such as San Bartolome and Kensington |
| These risks and costs may result in lower economic returns and may adversely affect our business |
| Our ability to sustain or increase our present production levels depends in part on successful exploration and development of new ore bodies and/or expansion of existing mining operations |
| Mineral exploration, particularly for silver and gold, involves many risks and is frequently unproductive |
| If mineralization is discovered, it may take a number of years until production is possible, during which time the economic viability of the project may change |
| Substantial expenditures are required to establish ore reserves, extract metals from ores and, in the case of new properties, to construct mining and processing facilities |
| The economic feasibility of any development project is based upon, among other things, estimates of the size and grade of ore reserves, proximity to infrastructures and other resources (such as water and power), metallurgical recoveries, production rates and capital and operating costs of such development projects, and metals prices |
| Development projects are also subject to the completion of favorable feasibility studies, issuance of necessary permits and receipt of adequate financing |
| Development projects, such as San Bartolome and Kensington, may have no operating history upon which to base estimates of future operating costs and capital requirements |
| Development project items such as estimates of reserves, metal recoveries and cash operating costs are to a large extent based upon the interpretation of geologic data obtained from a limited number of drill holes and other sampling techniques and feasibility studies |
| Estimates of cash operating costs are then derived based upon anticipated tonnage and grades of ore to be mined and processed, the configuration of the orebody, expected recovery rates of metals from the ore, comparable facility and equipment costs, anticipated climate conditions and other factors |
| As a result, actual cash operating costs and economic returns of any and all development projects may materially differ from the costs and returns estimated, and accordingly, our business results of operations may be negatively affected |
| The Company’s marketing of metals concentrates could be adversely affected if there were to be a significant delay or disruption of purchases by its third party smelter customers |
| In particular, a significant delay or disruption in 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 its silver and gold concentrates to third party smelters in Mexico, Japan, Australia and Canada |
| The loss of any one smelter customer could have a material adverse effect on us in the event of the possible unavailability of alternative smelters |
| No assurance can be given that alternative smelters would be timely available if the need for them were to arise, or that delays or disruptions in sales could not be experienced that would result in a materially adverse effect on our operations and our financial results |
| 13 _________________________________________________________________ Our silver and gold production may decline, reducing our revenues and negatively impacting our business |
| Our future silver and gold production may decline as a result of an exhaustion of reserves and possible closure of mines |
| It is our business strategy to conduct silver and gold exploratory activities at our existing mining and exploratory properties as well as at new exploratory projects, and to acquire silver and gold mining properties and businesses or reserves that possess mineable ore reserves and are expected to become operational in the near future |
| We 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, not all of which are fully covered by insurance |
| To the extent we must pay the costs associated with such risks, our business may be negatively affected |
| The mining business is subject to risks and hazards, including environmental hazards, industrial accidents, the encountering of unusual or unexpected geological formations, cave-ins, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions |
| These occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, reduced production and delays in mining, asset write-downs, monetary losses and possible legal liability |
| Although we maintain insurance in an amount that we consider to be adequate, liabilities might exceed policy limits, in which event we could incur significant costs that could adversely affect our results of operation |
| Insurance fully covering many environmental risks (including potential liability for pollution or other hazards as a result of disposal of waste products occurring from exploration and production) is not generally available to us or to other companies in the industry |
| The realization of any significant liabilities in connection with our mining activities as described above could negatively affect our results of operations |
| We are subject to significant governmental regulations, and their related costs and delays may negatively affect our business |
| Our mining activities are subject to extensive federal, state, local and foreign laws and regulations governing environmental protection, natural resources, prospecting, development, production, post-closure reclamation, taxes, labor standards and occupational health and safety laws and regulations including mine safety, toxic substances and other matters related to our business |
| Although these laws and regulations have never required us to close any mine, the costs associated with compliance with such laws and regulations are substantial |
| Possible future laws and regulations, or more restrictive interpretations of current laws and regulations by governmental authorities could cause additional expense, capital expenditures, restrictions on or suspensions of our operations and delays in the development of our properties |
| Moreover, governmental authorities and private parties may bring lawsuits based upon damage to property and injury to persons resulting from the environmental, health and safety impacts of our past and current operations, which could lead to the imposition of substantial fines, penalties and other civil and criminal sanctions |
| Substantial costs and liabilities, including for restoring the environment after the closure of mines, are inherent in our operations |
| Although we believe we are in substantial compliance with applicable laws and regulations, we cannot assure you that any such law, regulation, enforcement or private claim will not have a negative effect on our business, financial condition or results of operations |
| Some of our mining wastes are currently exempt to a limited extent from the extensive set of federal Environmental Protection Agency (EPA) regulations governing hazardous waste under the Resource Conservation and Recovery Act (RCRA) |
| If the EPA designates these wastes as hazardous under RCRA, we would be required to expend additional amounts on the handling of such wastes and to make significant expenditures to construct hazardous waste disposal facilities |
| In addition, if any of these wastes causes contamination in or damage to the environment at a mining facility, such facility may be designated as a “Superfund” site under the Comprehensive Environmental Response, Compensation and Liability Act (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 |
| Additional regulations or requirements are also imposed upon our tailings and waste disposal areas in Idaho and Alaska under the federal Clean Water Act (CWA) and in Nevada under the Nevada Water Pollution Control Law which implements the CWA Airborne emissions are subject to controls under air pollution statutes implementing the Clean Air Act in Nevada, Idaho and Alaska |
| Compliance with CERCLA, the CWA and state environmental laws could entail significant costs, which could have a material adverse effect on our operations |
| 14 _________________________________________________________________ In the context of environmental permits, including the approval of reclamation plans, we must comply with standards and regulations which entail significant costs and can entail significant delays |
| Such costs and delays could have a dramatic impact on our operations |
| We are required to obtain government permits to expand operations or begin new operations |
| The acquisition of such permits can be materially impacted by third party litigation seeking to prevent the issuance of such permits |
| The costs and delays associated with such approvals could affect our operations, reduce our revenues, and negatively affect our business as a whole |
| Mining companies are required to seek governmental permits for expansion of existing operations or for the commencement of new operations such as the Kensington development project |
| 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 |
| On September 12, 2005, SEACC, the Sierra Club and Lynn Canal Conservation filed a lawsuit in Federal District Court in Alaska challenging the permits issued by the Corps of Engineers and the US Forest Service and on November 8, 2005, the Corps of Engineers filed a Motion for Voluntary Remand with the court to review the permit issued to the Company under the Clean Water Act (CWA) Section 404 and requested that the court stay the legal proceeding filed by SEACC and the other environmental groups pending the outcome of review |
| On November 12, 2005, the Federal District Court in Alaska granted the remand of the permit to the Corps of Engineers for further review |
| On November 22, 2005, the Corps of Engineers advised the Company that it was suspending the Section 404 permit pursuant to the Court’s remand to further review the permit |
| The Company has submitted a work plan which defines the activities at the project that are not impacted by the 404 permit or are allowable activities under the 404 permit that can continue during the suspension by the Corps of Engineers |
| The Company has been continuing its drilling and exploration activities and progressing construction pursuant to the work plan |
| The Company is unable to predict the impact of this suspension or litigation on the project at this time |
| 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, 2005, unions represented approximately 25prca of our worldwide workforce |
| On that date, the Company had 157 employees at its Cerro Bayo mine, and 147 employees at its Coeur Silver Valley mine working under a collective bargaining agreement or similar labor agreement |
| The Company has a collective bargaining agreement covering the Cerro Bayo mine which expires on December 21, 2007 |
| The current collective bargaining agreement with the Coeur Silver Valley workforce expires on September 1, 2006 |
| The Company is currently in negotiations with the workforce at the Martha mine and expects to enter into a labor agreement by the end of March 2006 |
| 15 _________________________________________________________________ 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 |
| Chile, Argentina, Bolivia and Australia are the most significant foreign countries in which we directly or indirectly own or operate mining properties or developmental projects |
| We also conduct exploratory projects in these countries |
| Argentina, while currently economically and politically stable, has experienced political instability, currency value fluctuations and changes in banking regulations in recent years |
| Although the governments and economy of Chile have been relatively stable in recent years, property ownership in a foreign country is generally subject to the risk of expropriation or nationalization with inadequate compensation |
| Elections were held in Bolivia in December, 2005 resulting in a new government which is still formulating policies |
| It is uncertain at this time how new policies may affect mining in the country |
| Any foreign operations or investment may also be adversely affected by exchange controls, currency fluctuations, taxation and laws or policies of particular countries as well as laws and policies of the United States affecting foreign trade investment and taxation |
| We may enter into agreements which require us to purchase currencies of foreign countries in which we do business in order to ensure fixed exchange rates |
| Future economic or political instabilities or changes in the laws of foreign countries in which we have significant operations or interests and unfavorable fluctuations in foreign currency exchange rates could negatively impact our foreign operations and our business as a whole |
| 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 |
| While it is our practice to engage independent mining consultants to assist in evaluating and making acquisitions, any mining properties 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 dilution of the percentage ownership of existing shareholders |
| We intend to seek shareholder approval for any such acquisitions to the extent required by applicable law, regulations or stock exchange rules |
| We cannot predict the impact of future acquisitions on the price of our business or our common stock |
| Unprofitable acquisitions, or additional indebtedness or issuances of securities in connection with such acquisitions, may impact the price of our common stock and negatively affect our results of operations |
| Our ability to find and acquire new mineral properties is uncertain |
| Accordingly, our prospects are uncertain for the future growth of our business |
| Because mines have limited lives based on proven and probable ore reserves, we are continually seeking to replace and expand our ore reserves |
| Identifying promising mining properties is difficult and speculative |
| Furthermore, we encounter strong competition from other mining companies in connection with the acquisition of properties producing or capable of producing silver and gold |
| Consequently, we may be unable to replace and expand current ore reserves through the acquisition of new mining properties on terms we consider acceptable |
| Third parties may dispute our unpatented mining claims, which could result in losses affecting our business |
| The validity of unpatented mining claims, which constitute a significant portion of our property holdings in the United States, is often uncertain and may be contested |
| Although we have attempted to acquire satisfactory title to undeveloped properties, we, in accordance with mining industry practice, do not generally obtain title opinions until a decision is made to develop a property |
| As a result, some titles, particularly titles to undeveloped properties, may be defective |
| Defective title to any of our mining claims could result in litigation, insurance claims, and potential losses affecting our business as a whole |
| If previously announced control findings re-occur, or if we experience other similar issues, our ability to report our financial results in an accurate and timely manner could be materially adversely impacted, which could cause investors to lose confidence in our financial reports and negatively impact our business and the price of our common stock |
| As disclosed in our recently-filed Annual Report on Form 10-K for the year ended December 31, 2005 (the “2005 10-K”), our management concluded that, as of December 31, 2005, our disclosure controls and procedures were effective and our internal control over financial reporting was effective, and this assessment of the effectiveness of our internal control over financial reporting was audited by KPMG LLP, as stated in their report appearing therein |
| However, in our previously-filed Annual Report on Form 10-K for the year ended December 31, 2004 (the “2004 10-K”), management’s report and the report of KPMG LLP on management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 expressed an opinion that we did not maintain effective internal control over financial reporting as of December 31, 2004 because of the effect of certain material weaknesses |
| We believe we have implemented actions that addressed the issues raised by KPMG LLP in their report |
| In addition, on March 10, 2006 we filed an amendment to our Quarterly Report on Form 10-Q for the quarterly period ending March 31, 2005, to reflect that management had concluded that our disclosure controls and procedures were not effective as of March 31, 2005 |
| Such conclusion was based on our identification of a material weakness with regard to the controls over our calculation of the ore on leach pad inventory at our Rochester operation |
| Subsequent to March 31, 2005, we implemented remediation measures as part of our ongoing effort to improve our internal controls over financial reporting, which we believe has remediated this material weakness prior to December 31, 2005 |
| If these issues re-occur, or if similar issues re-occur, our ability to report our financial results in an accurate and timely manner could be materially adversely impacted, which could cause investors to lose confidence in our financial reports and negatively impact our business |