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Item 1A. Risk Factors

2021-07-28 compared with 2021-04-28 · 70 added, 13 removed, 4 unchanged (95% of the section changed)

Item 1A -- Risk Factors of the 2020 10-K sets forth information relating to important risks and uncertainties that could materially adversely affect the Company’s business, financial condition or operating results.

Those risk factors have been supplemented and updated in this Form 10-Q.

Except as supplemented and updated below, the risk factors set forth in the 2020 10-K remain current.

Those risk factors have been supplemented and updated in the Form 10-Q filed for the quarterly period ended March 31, 2021 (the “First Quarter 10-Q”) and in this Form 10-Q.

Except as supplemented and updated below and in the First Quarter 10-Q, the risk factors set forth in the 2020 10-K remain current.

Additional risks and uncertainties that the Company does not presently know or that it currently deems immaterial also may impair our business operations.

Coeur is an international company and is exposed to political and social risks associated with its foreign operations.

A significant portion of our revenues are generated by operations outside the United States.

Exploration, development, production and closure activities in many countries are potentially subject to heightened political and social risks that are beyond our control and could result in increased costs, capacity constraints and potential disruptions to our business.

These risks include the possible unilateral cancellation or forced renegotiation of contracts in which we, directly or indirectly, may have an interest, unfavorable changes in foreign laws and regulations, royalty and tax increases (including taxes associated with the import or export of goods), risks associated with the value-added tax (“VAT”) and income tax refund recovery and collection process, erection of trade barriers, including tariffs and duties, claims by governmental entities or indigenous communities, expropriation or nationalization of property and other risks arising out of foreign sovereignty over areas in which our operations are conducted.

As an example, as disclosed in Note 17 -- Commitments and Contingencies to the Consolidated Financial Statements, we are currently engaged in efforts to recover VAT paid to the Mexican government that is owed to Coeur associated with Coeur Mexicana’s prior royalty agreement, including through ongoing litigation.

In addition, in April 2021 the legislation that limits outsourcing by companies in Mexico of certain services received congressional approval and is expected to be enacted into law as early as the second quarter of 2021.

The law is expected to result in increased costs to our operations in Mexico, including additional tax expense, increased compensation to certain employees and costs associated with restructuring our Mexican subsidiaries and employment arrangements to comply with the new law.

The right to import and export gold, silver, zinc and lead may depend on obtaining certain licenses and quotas, which could be delayed or denied at the discretion of the relevant regulatory authorities, or could become subject to new taxes, tariffs or duties imposed by U.S.

or foreign jurisdictions, which could have a material adverse effect on our business, financial condition, or future prospects.

In addition, our rights under local law may be less secure in countries where judicial systems are susceptible to manipulation and intimidation by government agencies, non-governmental organizations or civic groups.

Any of these developments could require us to curtail or terminate operations at our mines, incur significant costs to renegotiate contracts, meet newly-imposed environmental or other standards, pay greater royalties or higher prices for labor or services and recognize higher taxes, or experience significant delays or obstacles in the recovery of VAT or income tax refunds owed, which could materially and adversely affect financial condition, results of operations and cash flows.

Our operations may be further disrupted, and our financial results may be adversely affected by the COVID-19 pandemic.

COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, poses a material risk to our business and operations.

If a significant portion of our workforce becomes unable to work or travel to our operations due to illness or state or federal government restrictions (including travel restrictions and “shelter-in-place” and similar orders restricting certain activities that may be issued or extended by authorities), we may be forced to reduce or suspend operations at one or more of our mines, which occurred at our Palmarejo complex in the second quarter of 2020 and at the Kensington mine in the third quarter of 2020, which could reduce production, limit exploration activities and development projects and impact liquidity and financial results.

In addition, we have implemented several initiatives to protect the health and safety of our employees, contractors and communities during this pandemic, including COVID-19 testing, site access symptom checks, contact tracing technology and procuring additional disinfectant and sanitation products and personal protective equipment for our employees, among others, some of which have and may result in additional costs to us.

Illnesses or government restrictions, including the closure of national borders, related to COVID-19 also may disrupt the supply of raw goods, equipment, supplies and services upon which our operations rely.

We also continue to monitor legislative initiatives in the U.S., Mexico and Canada to provide relief to businesses impacted by COVID-19 to determine their potential impacts or benefits (if any) to our business.

Third parties with whom we conduct business, including the refiners and smelters that, process and, in some cases, purchase the gold and silver doré and gold, silver, zinc and lead concentrate produced by our mines, are also subject to these risks and may be required to reduce or suspend operations, which could impact our ability to conduct our operations, advance exploration, development and expansion projects, sell our products and generate revenues.

We may be subject to litigation if one or more employees or contractors contract COVID-19 at work or litigation initiated by stockholders who view decisions by the Board of Directors or management as inconsistent with duties to the Company under Delaware law or who may assert claims under federal securities laws.

We understand that, as indicated by sharp increases in average premiums for director and officer insurance policies in recent months, insurers expect increased litigation relating to COVID-19.

The jurisdictions in which we operate have and may in the future continue to encounter financial difficulties resulting from one or both of lower tax revenue and new and increased costs related to COVID-19.

As a result, national, state or local governments may seek to raise existing taxes or introduce new taxes that affect our business, which may adversely affect our business and financial results.

For example, in Nevada, where the Rochester mine, Sterling/Crown project and Lincoln Hill project are located, in response to a significant loss of tourism and gaming revenue during 2020, in June 2021 the Governor signed into law a new excise tax on gross proceeds derived from mining gold and silver.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section as well as those contained in the 2020 10-K, such as those relating to our operations and indebtedness and financing.

Because of the highly uncertain and dynamic nature of events relating to the COVID-19 pandemic, it is not currently possible to estimate the full impact of the pandemic on our business.

However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 situation closely.

Continuation of our mining operations is dependent on the availability of sufficient and affordable water supplies.

Our mining operations require significant quantities of water for mining, ore processing and related support facilities.

In particular, our properties in Mexico and Nevada are in areas where water is scarce and competition among users for continuing access to water is significant.

Continuous production and mine development is dependent on our ability to acquire

and maintain water rights and claims and to defeat claims adverse to current water uses in legal proceedings.

Although each of our operating mines currently has sufficient water rights and claims to cover its operational demands, we cannot predict the potential outcome of pending or future legal proceedings relating to enforcement of water rights, claims and uses, or potential pressure from other users of water, government agencies and officials, and/or non-governmental organizations to limit the amount of water made available to or used for mining activities, regardless of legally valid water rights.

Water shortages may also result from weather or environmental and climate impacts outside of our control.

Shortages in water supply could result in production and processing interruptions.

In addition, the scarcity of water in certain regions could result in increased costs to obtain sufficient quantities of water to conduct our operations.

The loss of some or all water rights, ongoing litigation to enforce existing water rights, ongoing shortages of water to which we have rights and/or significantly higher costs to obtain sufficient quantities of water could result in our inability to maintain production at current or expected levels, require us to curtail or shut down mining operations and could prevent us from pursuing expansion or development opportunities, which could adversely affect our results of operations and financial condition.

Laws and regulations may be introduced in some jurisdictions in which we operate which could also limit access to sufficient water resources, adversely affecting our existing operations or our expansion or development plans.

Significant investment risks and operational costs are associated with exploration and development activities.

These risks and costs may result in higher costs, lower economic returns and may adversely affect our business.

Our ability to sustain or increase current production levels depends in part on successful exploration and development of new ore bodies and expansion of existing mining operations.

Substantial expenditures are required to establish ore reserves, to extract metals from ores and, in the case of new properties, to construct mining and processing facilities.

Our plans include several significant projects to construct or upgrade mining and processing facilities at our existing mining operations, including the POA 11 expansion project at Rochester and the POA 1 planned mine life extension at Kensington, and future plans to develop the Sterling/Crown and Lincoln Hill projects.

These projects can take up to several months or years to complete, are complex and require significant capital expenditures.

These projects are subject to significant risks, including delays, extreme weather events, unexpected increases in the cost of required materials, including as a result of inflation, and disputes with third-party providers of materials, equipment or services, and a completed project may not yield the anticipated operational or financial benefit, any of which may have a material negative impact on returns on invested capital, operating costs or cash flows.

Mineral exploration involves many risks and is frequently unproductive.

Even if mineral deposits are found, those 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 that are explored are ultimately developed into producing mines.

The commercial viability of a mineral deposit, once developed, 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;

importing and exporting of minerals;

environmental protection;

mineral prices;

and issuance and maintenance of necessary permits.

Factors that affect adequacy of infrastructure include:

reliability of roads, bridges, power sources and water supply;

unusual or infrequent weather phenomena;

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.

In addition, exploration projects, such as the La Preciosa, Sterling/Crown and Lincoln Hill projects may have no operating history upon which to base estimates of future operating costs and capital requirements.

Exploration 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 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 operating costs and economic returns of any and all exploration projects may materially differ from the costs and returns estimated, and accordingly, our financial condition, results of operations and cash flows may be negatively affected.

The Company’s effective tax rate could be volatile and materially change as a result of changes in tax laws, mix of earnings and other factors;

we may be negatively impacted by new tax legislation.

We are subject to tax laws in the United States and numerous foreign jurisdictions.

President Biden’s administration (the “Administration”) has called for changes to fiscal and tax policies, which may include comprehensive tax reform.

The Administration has previously proposed an increase in the U.S.

corporate income tax rate from 21% to 28%, doubling the rate of tax on certain earnings of foreign subsidiaries, a 15% minimum tax on worldwide book income, and other

various tax law changes.

If any or all of these (or similar) proposals are enacted into law, in whole or in part, they could have a negative impact on the Company’s effective tax rate.

Currently, the Company incurs losses in certain countries where it does not receive a financial statement benefit, and the Company operates in countries which have different statutory rates.

Consequently, changes in the mix and source of earnings between countries could have a material impact on the Company’s overall effective tax rate.

In addition, new tax legislation in certain jurisdictions where we operate could negatively affect us.

In addition, there have been recent proposals by elected officials in Mexico for even more significant increases in mining taxes, although it is unclear whether those proposals will result in legislation.

It is difficult to predict whether proposed changes to tax laws in the jurisdictions where we operate will be passed and if passed, the impact of those changes on the Company.

Any additional taxes imposed on us could adversely affect our financial condition.

Mine Safety Disclosures

1 unchanged sentence

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What changed 10-Q

Item 1A. Risk Factors