Coeur Mining, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Coeur Mining, Inc. and its subsidiaries (collectively the “Company”, “our”, or “we”). We use certain non-GAAP financial performance measures in our MD&A. For a detailed description of these measures, please see “Non-GAAP Financial Performance Measures” at the end of this Item. We provide Costs applicable to sales (“CAS”) allocation, referred to as the co-product method, based on revenue contribution for Palmarejo, Rochester and Silvertip and based on the primary metal, referred to as the by-product method, for Wharf. Revenue from secondary metal, such as silver at Wharf, is treated as a cost credit. Overview We are primarily a gold and silver producer with assets located in the United States, Canada and Mexico Third Quarter Highlights For the quarter, Coeur reported revenue of $183.0 million and cash used in operating activities of $19.1 million. We reported GAAP net loss of $57.4 million, or $0.21 per diluted share. On an adjusted basis 1 , the Company reported EBITDA of $18.3 million and net loss of $44.7 million or $0.16 per diluted share. For the nine months ended September 30, 2022, Coeur reported revenue of $575.5 million and cash used in operating activities of $2.9 million. We reported GAAP net loss of $127.2 million, or $0.47 per diluted share. On an adjusted basis 1 , the Company reported EBITDA of $103.2 million and net loss of $71.6 million or $0.26 per diluted share. • Solid production results and stronger fourth quarter expected to result in full-year production levels within 2022 guidance ranges – Third quarter gold and silver production totaled 83,438 and 2.4 million ounces, respectively. Quarter-over-quarter production growth at Rochester, Wharf and Kensington was offset by lower production at Palmarejo. Production levels are expected to increase at all four operating locations during the fourth quarter and finish the year within Coeur’s full-year guidance range of 315,000 - 353,000 ounces of gold and 9.0 - 11.0 million ounces of silver • Recently installed pre-screens at Rochester providing intended benefit – Pre-screens were successfully installed between the secondary and tertiary crushers at the existing Rochester operation during the third quarter, which is driving enhanced operational flexibility and helping to generate a lower average size of crushed material and improved pad permeability. These learnings and results will be incorporated into the operating plan for the Rochester expansion and used to optimize Rochester’s life of mine plan • Rochester expansion on track; capital estimate updated to incorporate pre-screens – Construction of the Rochester expansion remains on track to be completed mid-2023 with pre-commissioning, commissioning and ramp-up taking place in the second half of next year. At quarter-end, the project was 61% complete, $575 million of the estimated capital had been committed, and $443 million of the estimated capital cost had been incurred. The Company has increased the total capital by 9 - 12% to $650 - $670 million to reflect recently completed final estimates for the addition of pre-screens into the crusher circuit, higher prices and quantities of steel and concrete, and additional contingency • Strategic sale of southern Nevada holdings to AngloGold now complete – The Company entered into a definitive agreement with a subsidiary of AngloGold Ashanti Limited (“AngloGold”) (NYSE: AU) during the third quarter to sell its Crown and Sterling holdings (“Crown Sterling”) for closing cash consideration of $150 million and deferred cash consideration of $50 million to be paid upon Crown Sterling attaining a total resource of at least 3.5 million gold ounces. Closing of the transaction occurred on November 4, 2022 • Balance sheet flexibility with opportunistic hedges support ongoing investments – Coeur ended the quarter with total liquidity of approximately $236 million, including $75 million of cash and $160 million of available capacity under its $390 million revolving credit facility (“RCF”) 2 . On an adjusted basis, giving effect to the Crown Sterling transaction, total liquidity stood at $386 million. In addition, Coeur currently holds gold forward hedges in the amount of 54,500 ounces for the remainder of 2022 at an average price of $1,994 per ounce and 112,500 ounces in 2023 at an average price of $1,982 per ounce. The market value of these hedges was approximately $47 million at quarter-end 28 Three Months Ended Nine Months Ended September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Financial Results (In thousands): Gold sales $ 139,181 $ 146,625 $ 415,257 $ 432,210 Silver sales $ 43,812 $ 57,498 $ 160,263 $ 192,734 Consolidated Revenue $ 182,993 $ 204,123 $ 575,520 $ 624,944 Net income (loss) $ (57,444) $ (77,434) $ (127,196) $ (20,562) Net income (loss) per share, diluted $ (0.21) $ (0.28) $ (0.47) $ (0.08) Adjusted net income (loss) (1) $ (44,721) $ (13,105) $ (71,607) $ 10,493 Adj. net income (loss) per share, diluted (1) $ (0.16) $ (0.05) $ (0.26) $ 0.04 EBITDA (1) $ (20,478) $ (32,797) $ (12,898) $ 120,076 Adjusted EBITDA (1) $ 18,298 $ 43,330 $ 103,154 $ 167,411 Total debt (2) $ 635,679 $ 547,500 $ 635,679 $ 414,246 Operating Results: Gold ounces produced 83,438 83,772 242,619 259,583 Silver ounces produced 2,369,543 2,496,186 7,345,171 7,452,931 Gold ounces sold 81,782 84,786 241,779 261,417 Silver ounces sold 2,295,602 2,543,200 7,289,084 7,509,409 Average realized price per gold ounce $ 1,702 $ 1,729 $ 1,718 $ 1,653 Average realized price per silver ounce $ 19.09 $ 22.61 $ 21.99 $ 25.67 (1) See “Non-GAAP Financial Performance Measures.” (2) Includes finance leases. Net of debt issuance costs and premium received. Consolidated Financial Results Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022 Revenue We sold 81,782 gold ounces and 2.3 million silver ounces, compared to 84,786 gold ounces and 2.5 million silver ounces. Revenue decreased by $21.1 million, or 10%, as a result of a 4% and 10% decrease in gold and silver ounces sold, respectively, and a 2% and 16% decrease in average realized gold and silver prices, respectively. The decrease in gold and silver ounces sold was primarily due to lower production at Palmarejo, partially offset by higher production at Rochester, Kensington and Wharf. Gold and silver represented 76% and 24% of third quarter of 2022 sales revenue, respectively. This compares to gold and silver represented 72% and 28% of second quarter of 2022 sales revenue, respectively. The following table summarizes consolidated metal sales: Three Months Ended Increase (Decrease) Percentage Change In thousands September 30, 2022 June 30, 2022 Gold sales $ 139,181 $ 146,625 $ (7,444) (5) % Silver sales 43,812 57,498 (13,686) (24) % Metal sales $ 182,993 $ 204,123 $ (21,130) (10) % Costs Applicable to Sales Costs applicable to sales increased $12.5 million, or 8%, primarily due to higher operating costs partially impacted by continued inflationary pressures relating to consumable costs, most notably higher diesel prices, and increased lower of cost or net realizable value (“LCM”) adjustments at Rochester. For a complete discussion of costs applicable to sales, see Results of Operations below. 29 Amortization Amortization increased $1.2 million, or 4%, primarily due to increased LCM adjustments at Rochester. Expenses General and administrative expenses increased $0.4 million, or 5%, primarily due to higher employee-related costs. Exploration expense increased $3.1 million, or 59% driven by higher spending at Kensington and Silvertip. Pre-development, reclamation, and other expenses remained comparable to the second quarter of 2022. The following table summarizes pre-development, reclamation, and other expenses: Three Months Ended Increase (Decrease) Percentage Change In thousands September 30, 2022 June 30, 2022 COVID-19 $ 294 $ 318 $ (24) (8) % Silvertip ongoing carrying costs 4,628 4,754 (126) (3) % Asset retirement accretion 3,597 3,529 68 2 % Other 730 577 153 27 % Pre-development, reclamation and other expense $ 9,249 $ 9,178 $ 71 1 % Other Income and Expenses Fair value adjustments, net, decreased to a loss of $13.1 million compared to $62.8 million as a result of a lesser decrease in the value of the Company’s equity investments. For additional details on the Company’s equity investments see Note 6 -- Investments. Interest expense (net of capitalized interest of $3.3 million) increased to $5.9 million from $5.2 million due to higher interest paid under the RCF, partially offset by higher capitalized interest. Other, net gain of $0.2 million remained comparable to the second quarter of 2022. Income and Mining Taxes During the third quarter of 2022, income and mining tax expense of approximately $1.9 million resulted in an effective tax rate of 3.4% for 2022. This compares to income tax expense of $11.5 million for an effective tax rate of 17.4% for the second quarter of 2022. The comparability of the Company’s income and mining tax (expense) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) variations in our income before income taxes; (ii) geographic distribution of that income; (iii) mining taxes; (iv) the sale of non-core assets; (v) foreign exchange rates; (vi) the impact of uncertain tax positions; (vii) percentage depletion; and (viii) the non-recognition of tax assets. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period. The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit: Three Months Ended September 30, Three Months Ended June 30, 2022 2022 In thousands Income (loss) before tax Tax (expense) benefit Income (loss) before tax Tax (expense) benefit United States $ (59,012) $ (74) $ (85,122) $ (998) Canada (8,960) — (6,374) (21) Mexico 12,178 (1,809) 25,636 (10,483) Other jurisdictions 233 — (72) — $ (55,561) $ (1,883) $ (65,932) $ (11,502) A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. The Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact the Company’s ability to realize its deferred tax assets. For additional information, please see “Item 1A - Risk Factors” in the 2021 10-K. 30 Net Loss Net loss was $57.4 million, or $0.21 per diluted share, compared to $77.4 million, or $0.28 per diluted share. The decrease in net loss was driven by favorable changes of $49.7 million and $9.6 million in the fair value of the Company’s equity investments and income tax expense, respectively, partially offset by a 4% and 10% decrease in gold and silver ounces sold, respectively, a 2% and 16% decrease in average realized gold and silver prices, respectively, higher operating costs, including increased LCM adjustments at Rochester and higher exploration expenditures. Adjusted net loss was $44.7 million, or $0.16 per diluted share, compared to $13.1 million, or $0.05 per share (see “Non-GAAP Financial Performance Measures”). Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021 Revenue We sold 241,779 gold ounces and 7.3 million silver ounces, compared to 261,417 gold ounces and 7.5 million silver ounces. Revenue decreased by $49.4 million, or 8%, as a result of an 8% and 3% decrease in gold and silver ounces sold and an 14% decrease in average realized silver prices, partially offset by a 4% increase in average realized gold prices. The decrease in gold and silver ounces was primarily due to lower grades at Rochester, Kensington and Wharf. Gold and silver accounted for 72% and 28% of 2022 sales revenue, respectively. This compares to gold and silver accounting for 69% and 31% of 2021 sales revenue, respectively. The following table summarizes consolidated metal sales: Nine Months Ended Increase (Decrease) Percentage Change In thousands September 30, 2022 September 30, 2021 Gold sales $ 415,257 $ 432,210 $ (16,953) (4) % Silver sales 160,263 192,734 (32,471) (17) % Metal sales $ 575,520 $ 624,944 $ (49,424) (8) % Costs Applicable to Sales Costs applicable to sales increased $72.0 million, or 19%, primarily due to higher operating costs partially impacted by inflationary pressures related to consumables, most notably higher diesel prices, employee-related costs, and increased maintenance costs, increased LCM adjustments at Rochester, and the $10.5 million favorable impact from foreign currency hedges in the comparable period of 2021. For a complete discussion of costs applicable to sales, see Results of Operations below. Amortization Amortization decreased $9.3 million, or 10%, primarily due to lower gold and silver ounces sold and longer assumed mine life based on year-end mineral reserve growth. Expenses General and administrative expenses decreased $1.5 million, or 5%, primarily due to lower employee-related costs. Exploration expense decreased $18.4 million, or 49% driven by lower planned investment across the portfolio. Pre-development, reclamation, and other expenses decreased $7.1 million, or 19%, stemming from lower costs incurred in connection with the Company’s COVID-19 health and safety protocols and lower ongoing carrying costs at Silvertip, partially offset by higher asset retirement accretion. The following table summarizes pre-development, reclamation, and other expenses: Nine Months Ended Increase (Decrease) Percentage Change In thousands September 30, 2022 September 30, 2021 COVID-19 $ 1,585 $ 5,937 $ (4,352) (73) % Silvertip ongoing carrying costs 15,542 18,957 (3,415) (18) % Asset retirement accretion 10,588 8,898 1,690 19 % Other 2,124 3,164 (1,040) (33) % Pre-development, reclamation and other expense $ 29,839 $ 36,956 $ (7,117) (19) % 31 Other Income and Expenses During the first nine months of 2021, the Company incurred a $9.2 million loss in connection with the tender and redemption of the 5.875% Senior Notes due 2024 (the “2024 Senior Notes”) concurrent with the offering of the 2029 Senior Notes. Fair value adjustments, net, decreased to a loss of $65.3 million compared to a gain of $7.0 million as a result of a realized loss of $17.7 million in connection with the sale of Victoria Gold Common Shares, a decrease in the value of the Company’s equity investments leading to unrealized losses of $44.5 million, and a gain of $9.3 million related to a fair value adjustment to the Exchange Agreement embedded derivative liability in 2021. For additional details on the Company’s equity investments see Note 6 -- Investments. Interest expense (net of capitalized interest of $9.3 million) increased to $15.7 million from $13.2 million due to higher interest paid under the 2029 Senior Notes compared to the 2024 Senior Notes, and higher interest paid under the RCF and finance lease obligations, partially offset by higher capitalized interest associated with the POA 11 project at Rochester. Other, net increased to a gain of $2.2 million compared to a loss of $22.4 million due to a write-down of a VAT receivable of $26.0 million due to uncertain collectability in 2021. Income and Mining Taxes During the first nine months of 2022, income and mining tax expense of approximately $15.1 million resulted in an effective tax rate of 13.4% for 2022. This compares to income tax expense of $34.5 million for an effective tax rate of 247.3% for 2021. The comparability of the Company’s income and mining tax (expense) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) the sale of non-core assets; (ii) the non-recognition of tax assets; (iii) variations in our income before income taxes; (iv) geographic distribution of that income; (v) mining taxes; (vi) foreign exchange rates; (vii) the impact of uncertain tax positions; and (viii) percentage depletion. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period. The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit: Nine months ended September 30, 2022 2021 In thousands Income (loss) before tax Tax (expense) benefit Income (loss) before tax Tax (expense) benefit United States $ (154,263) $ (2,270) $ (9,131) $ (4,775) Canada (22,859) (21) (39,643) — Mexico 64,847 (12,788) 59,603 (29,751) Other jurisdictions 158 — 3,135 — $ (112,117) $ (15,079) $ 13,964 $ (34,526) A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. The Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact the Company’s ability to realize its deferred tax assets. For additional information, please see “Item 1A - Risk Factors” in the 2021 10-K. 32 Net Loss Net loss was $127.2 million, or $0.47 per diluted share, compared to $20.6 million, or $0.08 per diluted share. The increase in net loss was driven by unfavorable changes in the fair value of the Company’s equity investments, a realized loss of $17.7 million in connection with the sale of Victoria Gold Common Shares, higher operating costs, including increased LCM adjustments at Rochester, a 8% and 3% decrease in gold and silver ounces sold and an 14% decrease in average realized silver prices, partially offset by a 4% increase in average realized gold prices, a $9.2 million loss on debt extinguishment and a VAT write-down of $26.0 million in 2021, and lower income and mining taxes. Adjusted net loss was $71.6 million, or $0.26 per diluted share, compared to adjusted net income of $10.5 million, or $0.04 per diluted share (see “Non-GAAP Financial Performance Measures”). 2022 Guidance Production during the third quarter was in-line with Coeur’s expectations, leading the Company to reaffirm 2022 production and cost guidance. 2022 Production Guidance Gold Silver (oz) (K oz) Palmarejo 100,000 - 110,000 6,000 - 7,000 Rochester 35,000 - 43,000 3,000 - 4,000 Kensington 110,000 - 120,000 — Wharf 70,000 - 80,000 — Total 315,000 - 353,000 9,000 - 11,000 2022 Costs Applicable to Sales Guidance Gold Silver ($/oz) ($/oz) Palmarejo (co-product) $825 - $925 $12.75 - $13.75 Rochester (co-product) $1,650 - $1,850 $20.00 - $26.00 Kensington $1,300 - $1,400 — Wharf (by-product) $1,250 - $1,350 — 2022 Capital, Exploration and G&A Guidance ($M) Capital Expenditures, Sustaining $110 - $135 Capital Expenditures, Development $220 - $260 Exploration, Expensed $25 - $30 Exploration, Capitalized $22 - $27 General & Administrative Expenses $42 - $46 Note: The Company’s guidance figures assume estimated prices of $1,800/oz gold and $22.00/oz silver as well as CAD of 1.25 and MXN of 20.00. Guidance figures exclude the impact of any metal sales or foreign exchange hedges. 33 Results of Operations Palmarejo Three Months Ended Nine Months Ended September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Tons milled 538,750 539,600 1,643,561 1,519,126 Average gold grade (oz/t) 0.049 0.054 0.053 0.060 Average silver grade (oz/t) 3.53 3.95 3.78 3.95 Average recovery rate – Au 93.3 % 92.4 % 92.0 % 93.9 % Average recovery rate – Ag 84.9 % 84.2 % 84.0 % 82.9 % Gold ounces produced 24,807 27,109 80,847 80,454 Silver ounces produced 1,612,048 1,795,050 5,219,628 4,977,337 Gold ounces sold 24,378 29,285 81,905 81,100 Silver ounces sold 1,554,288 1,854,695 5,205,011 4,991,932 CAS per gold ounce (1) $ 958 $ 854 $ 844 $ 666 CAS per silver ounce (1) $ 12.80 $ 12.96 $ 12.76 $ 12.20 (1) See Non-GAAP Financial Performance Measures. Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022 Gold and silver production decreased 8% and 10%, respectively as a result of lower gold and silver grades. Metal sales were $64.8 million, or 35% of Coeur’s metal sales, compared with $86.0 million, or 42% of Coeur’s metal sales. Revenue for the three months ended September 30, 2022 decreased by $21.1 million or 25%, of which $12.8 million resulted from a lower gold and silver production and $8.3 million was due to lower average realized gold and silver prices. Costs applicable to sales per gold ounce increased 12% and decreased 1% per silver ounce due to the mix of gold and silver sales and lower production, partially offset by lower employee-related costs. Amortization decreased to $8.0 million due to lower ounces sold. Capital expenditures remained comparable at $10.8 million. Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021 Gold production was in-line with the prior year as a result of higher mill throughput, partially offset by lower gold grade and recoveries. Silver production increased 5% as a result of higher mill throughput and recoveries, partially offset by lower silver grade. Metal sales were $233.9 million, or 42% of Coeur’s metal sales, compared with $240.0 million, or 38% of Coeur’s metal sales. Revenue for the nine months ended September 30, 2022 decreased by $6.2 million or 3%, of which $12.0 million was due to lower average realized silver prices partially offset by an increase of $5.8 million resulting from a higher gold and silver production. Costs applicable to sales per gold and silver ounce increased 27% and 5%, respectively, due to the mix of gold and silver sales, higher employee-related and consumable costs largely due to inflationary pressures, and the absence of the favorable impact of foreign currency hedges ($10.5 million) included in the prior year. Amortization increased by $1.1 million to $27.2 million due to increased sales. Capital expenditures increased to $34.5 million from $28.3 million due to higher underground development, infill drilling activities and equipment purchases. 34 Rochester Three Months Ended Nine Months Ended September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Tons placed 3,551,353 4,236,459 12,165,685 9,863,772 Average gold grade (oz/t) 0.004 0.003 0.003 0.002 Average silver grade (oz/t) 0.37 0.35 0.35 0.42 Gold ounces produced 8,761 8,319 23,146 20,187 Silver ounces produced 744,880 689,169 2,089,225 2,400,539 Gold ounces sold 8,725 8,071 22,724 20,311 Silver ounces sold 733,383 682,677 2,054,176 2,441,429 CAS per gold ounce (1) $ 3,142 $ 2,351 $ 2,609 $ 1,707 CAS per silver ounce (1) $ 31.84 $ 27.80 $ 30.04 $ 24.19 (1) See Non-GAAP Financial Performance Measures. Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022 Gold and silver production increased 5% and 8%, respectively, driven by the breakthrough from increased tons placed on the pad in prior quarters. Metal sales were $30.2 million, or 16% of Coeur’s metal sales, compared with $30.5 million, or 15% of Coeur’s metal sales. Revenue for the three months ended September 30, 2022 decreased by $0.3 million or 1%, of which $2.5 million was the result of lower average realized gold and silver prices, partially offset by an increase of $2.2 million due to increased gold and silver production. Costs applicable to sales per gold and silver ounce increased 34% and 15% respectively, due to the mix of gold and silver sales, higher LCM adjustments of $21.2 million compared to $9.2 million in the prior quarter, driven by lower metal prices, increased employee-related and consumable costs partially due to continued inflationary pressures. Amortization increased to $6.9 million due to higher ounces sold and the impact of LCM adjustments. Capital expenditures increased to $74.0 million from $47.0 million due to payments related to the POA 11 expansion project. Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021 Gold production increased 15% primarily due to increased tons placed and silver production decreased 13%, as a result of lower silver grades and timing of recoveries, partially offset by increased tons placed. Metal sales were $87.0 million, or 15% of Coeur’s metal sales, compared with $99.2 million, or 16% of Coeur’s metal sales. Revenue for the nine months ended September 30, 2022 decreased by $12.1 million or 12%, of which $8.2 million was primarily due to lower average realized silver prices, and $3.9 million was due to a lower silver production. Costs applicable to sales per gold and silver ounce increased 53% and 24%, respectively, due to the mix of gold and silver sales and higher LCM adjustments of $38.0 million compared to $5.3 million in the prior year, driven by lower metal prices, higher employee-related, consumable and maintenance costs partially due to inflationary pressures. Amortization increased to $16.6 million due to higher equipment depreciation from recent equipment purchases and the impact of LCM adjustments. Capital expenditures increased to $154.0 million from $112.5 million due to payments related to the POA 11 expansion project and equipment purchases. Coeur achieved several key milestones at the Rochester expansion during the quarter, notably, the Company achieved (i) completion of major concrete work in all areas except the primary crusher pocket and the pre-screens, both of which are in progress, (ii) continuation of structural, mechanical, piping, electrical and instrumentation construction work throughout the project, (iii) commencement of final major high-voltage electrical distribution and substation construction, and (iv) completion of the majority of commitments for the pre-screens. Progress of the Merrill-Crowe plant continued on schedule during the third quarter, including (i) continuation of mechanical equipment setting, (ii) completion of building and process plant steel pipe rack erection, (iii) continuation of piping and cable tray installation, and (iv) rough setting of electrical switchgear. Further work on the crusher corridor has also advanced, including (i) civil work on the primary crusher area with a focus on the primary crusher foundation and commencement of conveyor component installation, (ii) setting of the secondary cone crushers and commencement of piping, cable tray and lighting installation in the secondary crusher area, and (iii) setting of the tertiary HPGR crushers and cable tray and lighting installation in the tertiary crusher area. During the quarter, Coeur successfully aligned the construction of the pre-screens with the completion of the new crusher to maintain a mid-2023 mechanical completion target. Ramp-up and commissioning is anticipated to take place during the second half of next year. 35 Coeur also completed a review of the total capital costs necessary to complete the expansion, resulting in a 9 - 12% increase in the capital estimate. The estimate reflects the finalization of cost estimates for pre-screens, higher prices and quantities of steel and concrete, and additional contingency. As of September 30, 2022, the Company had committed approximately $575 million of capital since the inception of the project and approximately $443 million of the estimated project cost had been incurred. Kensington Three Months Ended Nine Months Ended September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Tons milled 175,246 175,722 516,936 499,265 Average gold grade (oz/t) 0.18 0.17 0.16 0.19 Average recovery rate 91.1 % 91.6 % 92.5 % 92.9 % Gold ounces produced 28,214 27,866 78,726 87,624 Gold ounces sold 27,609 27,666 78,109 88,293 CAS per gold ounce (1) $ 1,456 $ 1,412 $ 1,484 $ 1,078 (1) See Non-GAAP Financial Performance Measures. Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022 Gold production increased 1% as a result of higher grade. Metal sales were $49.1 million, or 27% of Coeur’s metal sales, compared to $50.3 million, or 25% of Coeur’s metal sales. Revenue for the three months ended September 30, 2022 decreased by $1.2 million or 2%, of which $1.1 million resulted from lower average realized gold prices and $0.1 million was due to a lower gold ounces sold. Costs applicable to sales per gold ounce increased 3% due to higher employee-related, maintenance and consumable costs largely due to continued inflationary pressures. Amortization increased to $10.4 million primarily due to higher production from the Jualin deposit. Capital expenditures decreased to $7.1 million compared to $8.8 million due to lower underground development. Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021 Gold production decreased 10% as a result of lower grade, partially offset by higher mill throughput. Metal sales were $143.7 million, or 25% of Coeur’s metal sales, compared to $155.2 million, or 25% of Coeur’s metal sales. Revenue for the nine months ended September 30, 2022 decreased by $11.5 million or 7%, of which $18.1 million resulted from lower gold production, partially offset by an increase of $6.6 million due to higher average realized gold prices. Costs applicable to sales per gold ounce increased 38% due to lower production and higher employee-related, maintenance and consumable costs partially due to inflationary pressures. Amortization decreased to $28.4 million primarily due to lower ounces sold. Capital expenditures increased to $23.8 million from $19.5 million due to higher infill drilling and underground development. Wharf Three Months Ended Nine Months Ended September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Tons placed 1,353,071 1,050,215 3,530,855 3,628,693 Average gold grade (oz/t) 0.019 0.015 0.020 0.028 Gold ounces produced 21,656 20,478 59,900 71,318 Silver ounces produced 12,615 11,967 36,318 75,055 Gold ounces sold 21,070 19,764 59,041 71,713 Silver ounces sold 7,931 5,828 29,897 76,048 CAS per gold ounce (1) $ 1,364 $ 1,226 $ 1,244 $ 966 (1) See Non-GAAP Financial Performance Measures. 36 Three Months Ended September 30, 2022 compared to Three Months Ended June 30, 2022 Gold production increased 6% driven by the timing of recoveries and higher grade. Metal sales were $38.9 million, or 21% of Coeur’s metal sales, compared to $37.4 million, or 18% of Coeur’s metal sales. Revenue for the three months ended September 30, 2022 increased by $1.5 million or 4%, of which $2.4 million resulted from a higher gold production, partially offset by a decrease of $0.9 million due to lower averaged realized gold prices. Costs applicable to sales per gold ounce increased 11% due to higher consumable and maintenance costs partially due to continued inflationary pressures. Amortization remained comparable at $2.2 million. Capital expenditures were $0.5 million. Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021 Gold production decreased 16% driven by lower grade. Metal sales were $110.9 million, or 19% of Coeur’s metal sales, compared to $130.6 million, or 21% of Coeur’s metal sales. Revenue for the nine months ended September 30, 2022 decreased by $19.7 million or 15%, of which $24.7 million was due to a lower gold production, partially offset by an increase of $5.0 million due to higher average realized gold prices. Costs applicable to sales per gold ounce increased 29% due to lower production and higher consumable costs partially due to inflationary pressures. Amortization decreased to $6.5 million due to lower ounces sold. Capital expenditures were $2.3 million. Silvertip Nine Months Ended September 30, 2022 Silvertip suspended mining and processing activities, unrelated to COVID-19, in February 2020. Ongoing carrying and suspension costs are included in Pre-development, reclamation, and other. Coeur continues to advance study work to assess the economics of a potential future expansion of its high-grade Silvertip silver-zinc-lead development project in British Columbia, Canada. The Company’s objective remains to complete an evaluation by year-end of higher throughput scenarios to enhance the project’s economics and to take advantage of Silvertip’s expanding, high-grade resource base. Subject to continued positive results, the Company anticipates advancing Silvertip once the Rochester expansion and ramp-up is complete and Coeur generates sustained, positive free cash flow that can be used to reduce leverage to targeted levels. Ongoing carrying costs at Silvertip totaled $15.5 million in the first nine months of 2022, compared to $19.0 million in the prior year. Capital expenditures in the first nine months of 2022 totaled $21.4 million compared to $44.0 million in the prior year due to continued infill drilling and underground development. Liquidity and Capital Resources At September 30, 2022, the Company had $76.8 million of cash, cash equivalents and restricted cash and $160.2 million available under the RCF. Future borrowing may be subject to certain financial covenants. Cash and cash equivalents increased $18.7 million in the nine months ended September 30, 2022, due to net proceeds of $98.3 million from the sale of 22.1 million shares of its common stock, net proceeds of $15.3 million received from the sale of the La Preciosa project, and net proceeds of $40.5 million received from the sale of the Victoria Gold Common Shares, partially offset by a 4% and 10% decrease in gold and silver ounces sold, respectively, a 16% decrease in average realized silver prices, higher operating costs and higher capital expenditures related to POA 11 at Rochester. In March 2022, the Company completed a $100.0 million “at the market” offering of its common stock, par value $0.01 per share (the “March Equity Offering”). The Company sold a total of 22,053,275 shares of common stock in the March Equity Offering at an average price of $4.53 per share, raising net proceeds (after sales commissions) of $98.3 million. On May 2, 2022, the Company entered into an amendment (the “Amendment”) to the RCF to, among other things, increase the maximum principal amount of the RCF by $90.0 million in incremental loans and commitments to an aggregate of $390.0 million. On November 9, 2022, the Company entered into an amendment (the “November Amendment”) to the RCF. The November Amendment, among other things, (1) modifies the financial covenants to provide greater flexibility under the consolidated net leverage ratio requirement through the December 31, 2023 test date, with the ratio returning to the original level as outlined in the RCF starting with the March 31, 2024 test date (the “Amendment Period”), (2) allows up to $50 million for integration costs or costs associated with establishing new facilities and certain costs associated with LCM adjustments at Rochester to be excluded from the calculation of Consolidated EBITDA for purposes of the RCF, (3) increases the interest rate on certain borrowings through early 2023, (4) requires the Company to repay outstanding amounts under the RCF if cash-on-hand exceeds $60 million during the Amendment Period, and (5) restricts certain payments and the incurrence of certain liens during the Amendment Period. At September 30, 2022, the Company had $200.0 million drawn and $29.8 million in outstanding letters of credit under the RCF. The Company also holds $45.5 million of equity securities including a 9.4% interest in Victoria Gold Corporation (“Victoria Gold”). On June 28, 2022, the Company entered into an agreement to sell 5,000,000 37 shares of common stock of Victoria Gold (“Victoria Gold Common Shares”) at a price of $8.34 per Victoria Gold Common Share, which settled on July 5, 2022 for net proceeds of $40.5 million. Prior to the sale, the Company held a 17.8% interest in Victoria Gold. On September 18, 2022, the Company entered into a Stock Purchase Agreement (“Crown Sterling Agreement”) with AngloGold Ashanti (U.S.A.) Holdings Inc., a Delaware corporation and its affiliate for the sale of 100% of the issued and outstanding shares of Coeur Sterling, Inc. a subsidiary of Coeur that operates the Sterling/Crown exploration properties near Beatty, Nevada, in exchange for: (A) a cash payment of $150,000,000 at the closing of the transaction, subject to a customary purchase price adjustment and (B) the right to an additional payment of $50,000,000 should Buyer, its affiliates or its successors report gold resources in the Sterling/Crown exploration properties (including any in-situ ounces mined after the closing of the Transaction) equal to or greater than 3,500,000 gold ounces, subject to certain additional terms and conditions detailed in the stock purchase agreement. The transaction was consummated on November 4, 2022. The Company had outstanding forward contracts on 167,000 ounces of gold at September 30, 2022 that settle monthly through December 2023. The Company is targeting to hedge up to 70% of expected gold production in 2022, 50% of expected gold production for the first half of 2023 and 25% of expected gold production for the second half of 2023 in order to protect cash flow during a period of elevated capital expenditures, and may in the future layer on additional hedges as circumstances warrant. The weighted average fixed price on the forward contracts is $1,986 per ounce of gold. We currently believe we have sufficient sources of funding to meet our business requirements for the next twelve months and longer-term. We expect to use a combination of cash provided by operating activities, borrowings under our RCF and additional finance leases to fund near term capital requirements, including those described in this Report for POA 11 and in our 2022 capital expenditure guidance. We also have additional potential sources of funding including proceeds from potential asset sales, and the monetization of our equity investments, including our remaining common shares of Victoria Gold. Our longer-term plans contemplate the expansion and restart of Silvertip, as well as the continued exploration and potential development of our other projects, such as the Lincoln Hill area adjacent to Rochester. As of September 30, 2022, the Company committed approximately $575 million of capital since the inception of the POA 11 project. Approximately $443 million of the estimated project cost had been incurred. We also have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures and other purchase obligations and commitments for purchases of goods and services. If and to the extent liquidity resources are insufficient to support short- and long-term expenditures, we may need to incur additional indebtedness or issue additional equity securities, among other financing options, which may not be available on acceptable terms or at all. This could have a material adverse impact on the Company, as discussed in more detail under Item 1A – Risk Factors in the 2021 10-K and part II, Item 1A of this report. Cash Provided by (Used in) Operating Activities Net cash used in operating activities for the three months ended September 30, 2022 was $19.1 million, compared to net cash provided by operating activities of $22.6 million for the three months ended June 30, 2022. Net cash used in operating activities for the nine months ended September 30, 2022 was $2.9 million, compared to net cash provided by operating activities of $75.5 million for the nine months ended September 30, 2021. Adjusted EBITDA for the three months ended September 30, 2022 was $18.3 million, compared to $43.3 million for the three months ended June 30, 2022. Adjusted EBITDA for the nine months ended September 30, 2022 was $103.2 million, compared to $167.4 million for the nine months ended September 30, 2021 (see “Non-GAAP Financial Performance Measures”). Net cash provided by (used in) operating activities was impacted by the following key factors for the applicable periods: Three Months Ended Nine Months Ended In thousands September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Cash flow before changes in operating assets and liabilities $ (1,328) $ 29,773 $ 52,224 $ 107,826 Changes in operating assets and liabilities: Receivables (119) (4,882) 4,099 1,016 Prepaid expenses and other (2,075) 3,523 939 593 Inventories (13,715) (11,263) (42,650) (18,047) Accounts payable and accrued liabilities (1,880) 5,493 (17,512) (15,842) Cash provided by (used in) operating activities $ (19,117) $ 22,644 $ (2,900) $ 75,546 38 Net cash used in operating activities increased $41.8 million for the three months ended September 30, 2022 compared to the three months ended June 30, 2022, primarily as a result of a 4% and 10% decrease in gold and silver ounces sold, respectively, and a 2% and 16% decrease in average realized gold and silver prices, respectively, and a net outflow related to a prepayment for concentrate deliveries from Kensington of $10.0 million, partially offset by lower exploration costs. Revenue for the three months ended September 30, 2022 compared to the three months ended June 30, 2022 decreased by $21.1 million, of which $9.8 million was due to lower volume of gold and silver sales and a decrease of $11.3 million due to lower average realized gold and silver prices. Net cash used in operating activities increased $78.4 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to a 8% and 3% decrease in lower gold and silver ounces sold, respectively, a 14% decrease in average realized silver prices, and higher operating costs, partially offset by a 4% increase in average realized gold prices, lower exploration costs, timing of VAT collections at Palmarejo, and lower Silvertip ongoing carrying costs. Revenue for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 decreased by $49.4 million, of which $38.6 million was due to lower volume of gold and silver sales and $10.9 million was due to lower average realized silver prices. Cash Used in Investing Activities Net cash used in investing activities in the three months ended September 30, 2022 was $56.2 million compared to $72.5 million in the three months ended June 30, 2022. Cash used in investing activities decreased primarily due to the receipt of net proceeds of $40.5 million from the sale of the Victoria Gold Common Shares, partially offset by an increase in capital expenditures. The Company incurred capital expenditures of $96.6 million in the three months ended September 30, 2022 compared with $73.2 million in the three months ended June 30, 2022 primarily related to POA 11 construction activities at Rochester and underground development at Palmarejo and Kensington in both periods. Net cash used in investing activities in the nine months ended September 30, 2022 was $182.9 million compared to $204.4 million in the nine months ended September 30, 2021. Cash used in investing activities decreased primarily due to the receipt of net proceeds of $15.3 million from the sale of the La Preciosa project in the first quarter of 2022 and the receipt of net proceeds of $40.5 million from the sale of the Victoria Gold Common Shares, partially offset by an increase in capital expenditures. The Company incurred capital expenditures of $239.3 million in the nine months ended September 30, 2022 compared with $208.9 million in the nine months ended September 30, 2021. Capital expenditures in the nine months ended September 30, 2022 were primarily related to POA 11 construction activities at Rochester and underground development at Palmarejo and Kensington. Capital expenditures in the nine months ended September 30, 2021 were primarily related to POA 11 construction activities at Rochester, potential expansion expenditures at Silvertip and underground development at Palmarejo and Kensington. The Company is experiencing inflationary pressures, specifically with respect to building materials and fuel as well as overall tightness in the construction market related to capital projects, most notably the POA 11 project at Rochester, and to operating costs company-wide. Cash Provided by Financing Activities Net cash provided by financing activities in the three months ended September 30, 2022 was $76.8 million compared to $50.7 million in the three months ended June 30, 2022. During the three months ended September 30, 2022, the Company drew $85.0 million, net, from the RCF compared to $60.0 million, net, during the three months ended June 30, 2022. Net cash provided by financing activities in the nine months ended September 30, 2022 was $204.3 million compared to $121.8 million in the nine months ended September 30, 2021. During the nine months ended September 30, 2022, the Company drew $135.0 million, net, from the RCF, and received net proceeds of $98.3 million from the sale of 22.1 million shares of its common stock in the Equity Offering. During the nine months ended September 30, 2021, the Company received net proceeds of $367.5 million from the issuance of the 2029 Senior Notes, and drew $20.0 million, net, from the RCF, partially offset by the tender and redemption of the 2024 Senior Notes for $238.3 million, including premiums. Critical Accounting Policies and Accounting Developments See Note 2 - Summary of Significant Accounting Policies contained in the 2021 10-K and Note 2 - Summary of Significant Accounting Policies contained in this Report for the Company’s critical accounting policies and estimates. Other Liquidity Matters We believe that our liquidity and capital resources in the U.S. are adequate to fund our U.S. operations and corporate activities. The Company has asserted indefinite reinvestment of earnings from its Mexican operations as determined by 39 management’s judgment about and intentions concerning the future operations of the Company. The Company does not believe that the amounts reinvested will have a material impact on liquidity. In order to reduce indebtedness, fund future cash interest payments and/or amounts due at maturity or upon redemption and for general working capital purposes, from time-to-time we may (1) issue equity securities for cash in public or private offerings or (2) repurchase certain of our debt securities for cash or in exchange for other securities, which may include secured or unsecured notes or equity, in each case in open market or privately negotiated transactions. We evaluate any such transactions in light of prevailing market conditions, liquidity requirements, contractual restrictions, and other factors. The amounts involved may be significant and any debt repurchase transactions may occur at a substantial discount to the debt securities’ face amount. Non-GAAP Financial Performance Measures Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles (“GAAP”). Unless otherwise noted, we present the Non-GAAP financial measures in the tables below. These measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. Adjusted Net Income (Loss) Management uses Adjusted net income (loss) to evaluate the Company’s operating performance, and to plan and forecast its operations. The Company believes the use of Adjusted net income (loss) reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. Management’s determination of the components of Adjusted net income (loss ) are evaluated periodically and is based, in part, on a review of non-GAAP financial measures used by mining industry analysts. The tax effect of adjustments are based on statutory tax rates and the Company’s tax attributes, including the impact through the Company’s valuation allowance. The combined effective rate of tax adjustments may not be consistent with the statutory tax rates or the Company’s effective tax rate due to jurisdictional tax attributes and related valuation allowance impacts which may minimize the tax effect of certain adjustments and may not apply to gains and losses equally. Adjusted net income (loss) is reconciled to Net income (loss) in the following table: Three Months Ended Nine Months Ended In thousands except per share amounts September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Net income (loss) $ (57,444) $ (77,434) $ (127,196) $ (20,562) Fair value adjustments, net 13,067 62,810 65,272 (7,000) Foreign exchange loss (gain) (313) 513 1,190 1,849 (Gain) loss on sale of assets and securities 87 (621) (2,365) (4,582) VAT write-off — — 25,982 Loss on debt extinguishment — — — 9,172 Silvertip inventory write-down — — 271 COVID-19 costs 294 318 1,585 5,937 Interest income on notes receivables (181) (179) (360) — Tax effect of adjustments (1) (231) 1,488 (9,733) (574) Adjusted net income (loss) $ (44,721) $ (13,105) $ (71,607) $ 10,493 Adj. net income (loss) per share, Basic $ (0.16) $ (0.05) $ (0.26) $ 0.04 Adj. net income (loss) per share, Diluted $ (0.16) $ (0.05) $ (0.26) $ 0.04 40 ( 1) For the three months ended September 30, 2022, tax effect of adjustments of $0.2 million (-2%) is primarily related to the to the fair value adjustments on the Company’s equity investments. For the three months ended September 30, 2021, tax effect of adjustments of $1.5 million (2%) is primarily related to the to the fair value adjustments on the Company’s equity investments. For the nine months ended September 30, 2022, tax effect of adjustments of $9.7 million (-15%) is primarily related to the to the fair value adjustments on the Company’s equity investments and the derecognition of deferred tax liabilities related to the sale of La Preciosa. For the nine months ended September 30, 2021, tax effect of adjustments of $0.6 million (-2%) are primarily related to the fair value adjustments on the Company’s equity investments. EBITDA and Adjusted EBITDA Management uses EBITDA to evaluate the Company’s operating performance, to plan and forecast its operations, and assess leverage levels and liquidity measures. The Company believes the use of EBITDA reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. Adjusted EBITDA is a measure used in indenture governing the 2029 Senior Notes and the RCF to determine our ability to make certain payments and incur additional indebtedness. EBITDA and Adjusted EBITDA do not represent, and should not be considered an alternative to, Net income (Loss) or Cash Flow from Operations as determined under GAAP. Other companies may calculate Adjusted EBITDA differently and those calculations may not be comparable to our presentation. Adjusted EBITDA is reconciled to Net income (loss) in the following table: Three Months Ended Nine Months Ended In thousands except per share amounts September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Net income (loss) $ (57,444) $ (77,434) $ (127,196) $ (20,562) Interest expense, net of capitalized interest 5,932 5,170 15,670 13,240 Income tax provision (benefit) 1,883 11,502 15,079 34,526 Amortization 29,151 27,965 83,549 92,872 EBITDA (20,478) (32,797) (12,898) 120,076 Fair value adjustments, net 13,067 62,810 65,272 (7,000) Foreign exchange (gain) loss (93) 507 972 2,299 Asset retirement obligation accretion 3,597 3,529 10,588 8,898 Inventory adjustments and write-downs 22,005 9,763 40,360 6,358 (Gain) loss on sale of assets and securities 87 (621) (2,365) (4,582) VAT write-off — — 25,982 Loss on debt extinguishment — — — 9,172 Silvertip inventory write-down — — 271 COVID-19 costs 294 318 1,585 5,937 Interest income on notes receivables (181) (179) (360) — Adjusted EBITDA (1) $ 18,298 $ 43,330 $ 103,154 $ 167,411 (1) At September 30, 2022, the Company modified its method of calculating Adjusted EBITDA to include the cumulative impact of the LCM adjustments, if applicable, for the year over year presentation. Previously, the year over year Adjusted EBITDA measure only included the current quarter LCM adjustment. For the nine months ended September 30, 2022, the modification increased the Adjusted EBITDA measure by $16.8 million but had no impact for the nine months ended September 30, 2021. This modification to the Adjusted EBITDA measure was made to be consistent with the treatment of LCM adjustments in the Company’s amended RCF facility, which was completed on November 9, 2022. Free Cash Flow Management uses Free Cash Flow as a non-GAAP measure to analyze cash flows generated from operations. Free Cash Flow is Cash Provided By (used in) Operating Activities less Capital expenditures as presented on the Consolidated Statements of Cash Flows. The Company believes Free Cash Flow is also useful as one of the bases for comparing the Company’s performance with its competitors. Although Free Cash Flow and similar measures are frequently used as measures of cash flows generated from operations by other companies, the Company’s calculation of Free Cash Flow is not necessarily comparable to such other similarly titled captions of other companies. The following table sets forth a reconciliation of Free Cash Flow, a non-GAAP financial measure, to Cash Provided By (used in) Operating Activities , which the Company believes to be the GAAP financial measure most directly comparable to Free Cash Flow. 41 Three Months Ended Nine Months Ended (Dollars in thousands) September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Cash flow from operations $ (19,117) $ 22,644 $ (2,900) $ 75,546 Capital expenditures 96,602 73,156 239,260 208,913 Free cash flow $ (115,719) $ (50,512) $ (242,160) $ (133,367) Operating Cash Flow Before Changes in Working Capital Management uses Operating Cash Flow Before Changes in Working Capital as a non-GAAP measure to analyze cash flows generated from operations. Operating Cash Flow Before Changes in Working Capital is Cash Provided By (used in) Operating Activities excluding the change in Receivables , Prepaid expenses and other , Inventories and Accounts payable and accrued liabilities as presented on the Consolidated Statements of Cash Flows. The Company believes Operating Cash Flow Before Changes in Working Capital is also useful as one of the bases for comparing the Company’s performance with its competitors. Although Operating Cash Flow Before Changes in Working Capital and similar measures are frequently used as measures of cash flows generated from operations by other companies, the Company’s calculation of Operating Cash Flow Before Changes in Working Capital is not necessarily comparable to such other similarly titled captions of other companies. The following table sets forth a reconciliation of Operating Cash Flow Before Changes in Working Capital, a non-GAAP financial measure, to Cash Provided By (used in) Operating Activities , which the Company believes to be the GAAP financial measure most directly comparable to Operating Cash Flow Before Changes in Working Capital. Three Months Ended Nine Months Ended (Dollars in thousands) September 30, 2022 June 30, 2022 September 30, 2022 September 30, 2021 Cash provided by (used in) operating activities $ (19,117) $ 22,644 $ (2,900) $ 75,546 Changes in operating assets and liabilities: Receivables 119 4,882 (4,099) (1,016) Prepaid expenses and other 2,075 (3,523) (939) (593) Inventories 13,715 11,263 42,650 18,047 Accounts payable and accrued liabilities 1,880 (5,493) 17,512 15,842 Operating cash flow before changes in working capital $ (1,328) $ 29,773 $ 52,224 $ 107,826 Costs Applicable to Sales Management uses CAS to evaluate the Company’s current operating performance and life of mine performance from discovery through reclamation. We believe these measures assist analysts, investors and other stakeholders in understanding the costs associated with producing gold, silver, zinc and lead, assessing our operating performance and ability to generate free cash flow from operations and sustaining production. These measures may not be indicative of operating profit or cash flow from operations as determined under GAAP. Management believes that allocating CAS to gold, silver, zinc and lead based on gold, silver, zinc and lead metal sales relative to total metal sales best allows management, analysts, investors and other stakeholders to evaluate the operating performance of the Company. Other companies may calculate CAS differently as a result of reflecting the benefit from selling non-silver metals as a by-product credit, converting to silver equivalent ounces, and differences in underlying accounting principles and accounting frameworks such as in International Financial Reporting Standards. 42 Three Months Ended September 30, 2022 In thousands (except metal sales, per ounce and per pound amounts) Palmarejo Rochester Kensington Wharf Silvertip Total Costs applicable to sales, including amortization (U.S. GAAP) $ 51,271 $ 57,681 $ 50,658 $ 31,078 $ 1,260 $ 191,948 Amortization (8,027) (6,921) (10,369) (2,191) (1,260) (28,768) Costs applicable to sales $ 43,244 $ 50,760 $ 40,289 $ 28,887 $ — $ 163,180 Metal Sales Gold ounces 24,378 8,725 27,609 21,070 81,782 Silver ounces 1,554,288 733,383 — 7,931 — 2,295,602 Zinc pounds — — Lead pounds — — Costs applicable to sales Gold ($/oz) $ 958 $ 3,142 $ 1,456 $ 1,364 Silver ($/oz) $ 12.80 $ 31.84 $ — Zinc ($/lb) $ — Lead ($/lb) $ — Three Months Ended June 30, 2022 In thousands (except metal sales, per ounce and per pound amounts) Palmarejo Rochester Kensington Wharf Silvertip Total Costs applicable to sales, including amortization (U.S. GAAP) $ 58,800 $ 42,914 $ 48,680 $ 26,600 $ 1,259 $ 178,253 Amortization (9,737) (4,961) (9,369) (2,248) (1,259) (27,574) Costs applicable to sales $ 49,063 $ 37,953 $ 39,311 $ 24,352 $ — $ 150,679 Metal Sales Gold ounces 29,285 8,071 27,666 19,764 84,786 Silver ounces 1,854,695 682,677 — 5,828 — 2,543,200 Zinc pounds — — Lead pounds — — Costs applicable to sales Gold ($/oz) $ 854 $ 2,351 $ 1,412 $ 1,226 Silver ($/oz) $ 12.96 $ 27.80 $ — Zinc ($/lb) $ — Lead ($/lb) $ — Nine Months Ended September 30, 2022 In thousands (except metal sales, per ounce and per pound amounts) Palmarejo Rochester Kensington Wharf Silvertip Total Costs applicable to sales, including amortization (U.S. GAAP) $ 162,682 $ 137,580 $ 144,870 $ 80,596 $ 3,778 $ 529,506 Amortization (27,150) (16,592) (28,360) (6,500) (3,778) (82,380) Costs applicable to sales $ 135,532 $ 120,988 $ 116,510 $ 74,096 $ — $ 447,126 Metal Sales Gold ounces 81,905 22,724 78,109 59,041 241,779 Silver ounces 5,205,011 2,054,176 — 29,897 — 7,289,084 Zinc pounds — — Lead pounds — — Costs applicable to sales Gold ($/oz) $ 844 $ 2,609 $ 1,484 $ 1,244 Silver ($/oz) $ 12.76 $ 30.04 $ — Zinc ($/lb) $ — Lead ($/lb) $ — 43 Nine Months Ended September 30, 2021 In thousands (except metal sales, per ounce and per pound amounts) Palmarejo Rochester Kensington Wharf Silvertip Total Costs applicable to sales, including amortization (U.S. GAAP) $ 140,999 $ 108,487 $ 134,114 $ 79,881 $ 3,529 $ 467,010 Amortization (26,077) (14,754) (38,941) (8,627) (3,529) (91,928) Costs applicable to sales $ 114,922 $ 93,733 $ 95,173 $ 71,254 $ — $ 375,082 Metal Sales Gold ounces 81,100 20,311 88,293 71,713 261,417 Silver ounces 4,991,932 2,441,429 76,048 — 7,509,409 Zinc pounds — — Lead pounds — — Costs applicable to sales Gold ($/oz) $ 666 $ 1,707 $ 1,078 $ 966 Silver ($/oz) $ 12.20 $ 24.19 $ — Zinc ($/lb) $ — Lead ($/lb) $ — Reconciliation of Costs Applicable to Sales for 2022 Guidance In thousands (except metal sales, per ounce or per pound amounts) Palmarejo Rochester Kensington Wharf Costs applicable to sales, including amortization (U.S. GAAP) $ 219,862 $ 165,031 $ 191,055 $ 109,179 Amortization (35,687) (22,218) (39,051) (7,811) Costs applicable to sales $ 184,175 $ 142,813 $ 152,004 $ 101,368 By-product credit — — — (745) Adjusted costs applicable to sales $ 184,175 $ 142,813 $ 152,004 $ 100,623 Metal Sales Gold ounces 107,034 37,072 113,890 78,757 Silver ounces 6,831,642 3,257,498 32,199 Revenue Split Gold 51% 47% 100% 100% Silver 49% 53% Adjusted costs applicable to sales Gold ($/oz) $825 - $925 $1,650 - $1,850 $1,300 - $1,400 $1,250 - $1,350 Silver ($/oz) $12.75 - $13.75 $20.00 - $26.00 44 Cautionary Statement Concerning Forward-Looking Statements This report contains numerous forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) relating to the Company’s gold and silver mining business, including statements regarding operations at the Company’s properties, exploration and development efforts, strategies, expectations regarding the Rochester POA 11 expansion project, the Silvertip mine's potential expansion and restart, including timing thereof, inflation, expectations regarding the consideration received from the sale of the La Preciosa and Sterling/Crown projects, hedging strategies, realization of deferred tax assets, expectations about the recovery of VAT in Mexico, timing of completion of obligations under the Amended Sales Contract at Kensington, liquidity management, financing plans, risk management strategies, capital allocation and anticipated production, costs, expenses, and cash flow. 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 results 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 in Part II, Item 1A of this Report and in “Risk Factors” section of the 2021 10-K, and the risks set forth in this MD&A and Item 3 of this report, (ii) the risks and hazards inherent in the mining business (including risks inherent in developing large-scale mining projects, environmental hazards, industrial accidents, weather or geologically related conditions), (iii) changes in the market prices of gold and silver and a sustained lower price or higher treatment and refining charge environment, (iv) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays (including the impact of government shutdowns), ground conditions and grade and recovery variability, (v) any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), (vi) the uncertainties inherent in the estimation of mineral reserves and resources, (vii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (viii) the loss of access to any third-party smelter to whom the Company markets its production, (ix) the potential effects of the COVID-19 pandemic, including impacts to workforce, equipment and materials availability, inflationary pressures, continued access to financing sources, government orders that may require temporary suspension of operations at one or more of our sites and effects on our suppliers or the refiners and smelters to whom the Company markets its production, (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, and (xii) 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.