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 and Rochester 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 operating assets located in the United States and Mexico and an exploration project in Canada. Second Quarter Highlights For the quarter, Coeur reported revenue of $177.2 million and cash provided by operating activities of $39.4 million. We reported GAAP net loss of $32.4 million, or $0.10 per diluted share. On a non-GAAP adjusted basis 1 , the Company reported EBITDA of $22.2 million and net loss of $20.2 million or $0.06 per diluted share. For the six months ended June 30, 2023, Coeur reported revenue of $364.5 million and cash provided by operating activities of $4.4 million. We reported GAAP net loss of $57.0 million, or $0.18 per diluted share. On a non-GAAP adjusted basis 1 , the Company reported EBITDA of $47.4 million and net loss of $53.2 million or $0.17 per diluted share. • Rochester expansion approximately 97% complete as of July 31 – Solution is now circulating through the completed Stage VI leach pad and Merrill-Crowe process plant, with initial ounces expected to be recovered next month. Construction completion of the new three-stage crushing circuit is anticipated this quarter. Ramp-up of the expanded operation is set to occur over the remainder of 2023 and into early 2024, leading to expected significant production growth and materially lower costs. The estimated ultimate cost to complete the expansion is expected to be approximately 6 - 9%, or $40 - $60 million, higher than the prior high-end of guidance. The Company has incurred approximately $660 million of total project costs through the end of July. • Second quarter operating strength at Rochester and Wharf offset lower production at Kensington – Gold and silver production for the quarter totaled 68,406 ounces and 2.4 million ounces, respectively. Stronger production at Rochester and Wharf offset a weaker quarter at Kensington due to excessive water flows and paste backfill issues, which delayed the timing of production from certain stopes • Full-year silver production guidance maintained; gold production guidance revised to reflect lower outlook at Kensington – 2023 silver production is expected to be 10 - 12 million ounces. 2023 gold production expected to be 304,000 - 352,500 ounces, approximately 5% lower than prior full-year gold production guidance, after taking Kensington’s lower than anticipated second quarter production into account • Balance sheet flexibility maintained to support remaining capital investments – Coeur ended the quarter with total liquidity of approximately $346 million including $57 million of cash, $280 million of available capacity under its $390 million revolving credit facility (“RCF”), and $9 million of marketable securities • State of South Dakota approves Boston Expansion at Wharf - Coeur has received a state mine permit from the South Dakota Board of Minerals and Environment allowing for a fifty-acre expansion of mining operations at Wharf, which is expected to add significant certainty to Wharf’s current eight-year mine life 25 Selected Financial and Operating Results Three Months Ended Six Months Ended In thousands June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Financial Results (In thousands): Gold sales $ 121,355 $ 127,101 $ 248,456 $ 276,076 Silver sales $ 55,880 $ 60,197 $ 116,077 $ 116,451 Consolidated Revenue $ 177,235 $ 187,298 $ 364,533 $ 392,527 Net income (loss) $ (32,412) $ (24,586) $ (56,998) $ (69,752) Net income (loss) per share, diluted $ (0.10) $ (0.08) $ (0.18) $ (0.26) Adjusted net income (loss) (1) $ (20,153) $ (33,058) $ (53,211) $ (26,887) Adjusted net income (loss) per share, diluted (1) $ (0.06) $ (0.11) $ (0.17) $ (0.10) EBITDA (1) $ 3,961 $ 16,219 $ 20,180 $ 7,580 Adjusted EBITDA (1) $ 22,235 $ 25,127 $ 47,362 $ 77,261 Total debt (2) $ 469,386 $ 494.086 $ 469,386 $ 547,500 Operating Results: Gold ounces produced 68,406 69,039 137,445 159,181 Silver ounces produced 2,388,141 2,534,883 4,923,024 4,975,628 Gold ounces sold 67,090 70,866 137,956 159,997 Silver ounces sold 2,337,413 2,588,919 4,926,332 4,993,482 Average realized price per gold ounce $ 1,809 $ 1,794 $ 1,801 $ 1,726 Average realized price per silver ounce $ 23.91 $ 23.25 $ 23.56 $ 23.32 (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 June 30, 2023 compared to Three Months Ended March 31, 2023 Revenue We sold 67,090 gold ounces and 2.3 million silver ounces, compared to 70,866 gold ounces and 2.6 million silver ounces. Revenue decreased by $10.1 million, or 5%, as a result of a 5% and 10% decrease in gold and silver ounces sold, respectively, partially offset by a 1% and 3% increase in average realized gold and silver prices, respectively. The decrease in gold ounces sold was primarily due to lower mill throughput at Palmarejo, timing of recoveries and placement of ore tons on the new Stage VI leach pad at Rochester, and lower grades at Kensington, partially offset by timing of recoveries at Wharf. The decrease in silver ounces sold was primarily due to lower mill throughput at Palmarejo and timing of recoveries and placement of ore tons on the new Stage VI leach pad at Rochester. Gold and silver represented 68% and 32% of second quarter 2023 sales revenue, respectively, compared to 68% and 32% of first quarter 2023 sales revenue, respectively. The following table summarizes consolidated metal sales: Three Months Ended Increase (Decrease) Percentage Change In thousands June 30, 2023 March 31, 2023 Gold sales $ 121,355 $ 127,101 $ (5,746) (5) % Silver sales 55,880 60,197 (4,317) (7) % Metal sales $ 177,235 $ 187,298 $ (10,063) (5) % Costs Applicable to Sales Costs applicable to sales decreased $13.4 million, or 9%, primarily due to lower gold and silver ounces sold and a decreased 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. 26 Amortization Amortization decreased $3.1 million, or 14% primarily due to lower gold and silver ounces sold. Expenses General and administrative expenses decreased $2.3 million, or 19%, primarily due to lower employee incentive related costs. Exploration expense decreased $1.7 million, or 37% driven by increased Canadian mining exploration tax credits associated with expenditures at the Silvertip exploration project. Pre-development, reclamation, and other expenses decreased $0.8 million, or 8%, stemming from lower ongoing carrying costs at Silvertip. The following table summarizes pre-development, reclamation, and other expenses: Three Months Ended Increase (Decrease) Percentage Change In thousands June 30, 2023 March 31, 2023 COVID-19 $ 21 $ 56 $ (35) (63) % Silvertip ongoing carrying costs 4,609 6,180 (1,571) (25) % Asset retirement accretion 4,073 3,993 80 2 % Other 1,345 661 684 103 % Pre-development, reclamation and other expense $ 10,048 $ 10,890 $ (842) (8) % Other Income and Expenses During the second quarter of 2023, the Company incurred a $3.0 million gain in connection with the exchange of $48.5 million in aggregate principal amount plus accrued interest of 2029 Senior Notes for 13.9 million shares of common stock. Fair value adjustments, net, decreased to a loss of $3.9 million compared to a gain of $10.6 million as a result of a decrease in 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 $3.2 million) decreased to $6.9 million from $7.4 million due to lower interest payable following the extinguishment of $48.5 million in 2029 Senior Notes, and higher capitalized interest, partially offset by higher interest paid under the RCF due to increasing interest rates. Other, net decreased to a loss of $9.9 million compared to $1.0 million as a result of the $12.3 million loss recognized from the sale of the deferred cash consideration, two royalties and contingent consideration received in connection with the sale of the La Preciosa Deferred Consideration. Income and Mining Taxes Income and mining tax expense of approximately $9.9 million resulted in an effective tax rate of (43.8)% for the three months ended June 30, 2023. This compares to income tax expense of $10.7 million for an effective tax rate of (77.2)% for the three months ended March 31, 2023. 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 rate; (vi) percentage depletion; and (vii) the impact of uncertain tax positions. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period. 27 The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit: Three Months Ended June 30, Three Months Ended March 31, 2023 2023 In thousands Income (loss) before tax Tax (expense) benefit Income (loss) before tax Tax (expense) benefit United States $ (35,540) $ (2,264) $ (25,780) $ (1,018) Canada (4,410) — (9,294) — Mexico 17,534 (7,602) 21,399 (9,690) Other jurisdictions (130) — (203) — $ (22,546) $ (9,866) $ (13,878) $ (10,708) 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”. Net Loss Net loss was $32.4 million, or $0.10 per diluted share, compared to $24.6 million, or $0.08 per diluted share. The increase in net loss was driven by a 5% and 10% decrease in gold and silver ounces sold, respectively, unfavorable changes in the fair value of the Company’s equity investments, and a $12.3 million loss on the sale of the La Preciosa Deferred Consideration. This was partially offset by a $3.0 million gain from extinguishment of $48.5 million in aggregate principal of 2029 Senior Notes, a 1% and 3% increase in average realized gold and silver prices, and lower exploration costs. Adjusted net loss was $20.2 million, or $0.06 per diluted share, compared to $33.1 million, or $0.11 per diluted share (see “Non-GAAP Financial Performance Measures”). Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022 Revenue We sold 137,956 gold ounces and 4.9 million silver ounces, compared to 159,997 gold ounces and 5.0 million silver ounces. Revenue decreased by $28.0 million, or 7%, as a result of a 14% and 1% decrease in gold and silver ounces sold, respectively, partially offset by a 4% and 1% increase in average realized gold and silver prices, respectively. The decrease in gold ounces sold was primarily due to lower mill throughput and grades at Palmarejo and lower mill throughput and recoveries at Kensington, partially offset by timing of recoveries at Rochester and Wharf, and higher grades at Wharf. The decrease in silver ounces sold was primarily due to lower mill throughput at Palmarejo, partially offset by the timing of recoveries and higher grades at Rochester. Gold and silver represented 68% and 32% of 2023 sales revenue, respectively, compared to gold and silver representing 70% and 30% of 2022 sales revenue, respectively. The following table summarizes consolidated metal sales: Six Months Ended Increase (Decrease) Percentage Change In thousands June 30, 2023 June 30, 2022 Gold sales $ 248,456 $ 276,076 $ (27,620) (10) % Silver sales 116,077 116,451 (374) — % Metal sales $ 364,533 $ 392,527 $ (27,994) (7) % Costs Applicable to Sales Costs applicable to sales increased $8.7 million, or 3%, primarily due to higher operating costs partially impacted by continued inflationary pressures relating to diesel and consumable costs. For a complete discussion of costs applicable to sales, see Results of Operations below. 28 Amortization Amortization decreased $12.1 million primarily due to lower gold ounces sold and longer assumed mine lives at Palmarejo, Rochester, Kensington and Wharf driven by prior year’s successful investments in exploration. Expenses General and administrative expenses increased $2.3 million, or 12%, primarily due to higher employee incentive related costs. Exploration expense decreased $3.1 million, or 29%, driven by increased Canadian mining exploration tax credits associated with expenditures at the Silvertip exploration project. Pre-development, reclamation, and other expenses increased $0.3 million, or 2%, stemming from higher asset retirement accretion, partially offset by lower costs incurred in connection with the Company’s COVID-19 health and safety protocols. The following table summarizes pre-development, reclamation, and other expenses: Six Months Ended June 30, Increase (Decrease) Percentage Change In thousands 2023 2022 COVID-19 $ 77 $ 1,290 $ (1,213) (94) % Silvertip ongoing carrying costs 10,789 10,913 (124) (1) % Asset retirement accretion 8,066 6,992 1,074 15 % Other 2,006 1,395 611 44 % Pre-development, reclamation and other expense $ 20,938 $ 20,590 $ 348 2 % Other Income and Expenses During the second quarter of 2023, the Company incurred a $3.0 million gain in connection with the exchange of $48.5 million in aggregate principal amount plus accrued interest of 2029 Senior Notes for 13.9 million shares of common stock. Fair value adjustments, net, increased to a gain of $6.6 million compared to a $52.2 million loss as a result of an increase in 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 $5.3 million) increased to $14.3 million from $9.7 million due to higher interest paid under the RCF attributable to higher average debt levels and interest rates, and lower capitalized interest. Other, net decreased to a loss of $10.9 million compared to a gain of $2.1 million, as a result of the $12.3 million loss recognized from the sale of the La Preciosa Deferred Consideration. Income and Mining Taxes During the first half of 2023, income and mining tax expense of approximately $20.6 million resulted in an effective tax rate of (56.5)% for 2023. This compares to income tax expense of $13.2 million for an effective tax rate of (23.3)% for 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) the sale of non-core assets; (ii) variations in our income before income taxes; (iii) geographic distribution of that income; (iv) mining taxes; (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. 29 The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit: Six Months Ended June 30, 2023 2022 In thousands Income (loss) before tax Tax (expense) benefit Income (loss) before tax Tax (expense) benefit United States $ (61,320) $ (3,282) $ (95,252) $ (2,197) Canada (13,704) — (13,899) (21) Mexico 38,933 (17,292) 52,669 (10,978) Other jurisdictions (333) — (74) — $ (36,424) $ (20,574) $ (56,556) $ (13,196) 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”. Net Loss Net loss was $57.0 million, or $0.18 per diluted share, compared to $69.8 million, or $0.26 per diluted share. The decrease in net loss was driven by favorable changes in the fair value of the Company’s equity investments, a 4% and 1% increase in average realized gold and silver prices, respectively, decreased LCM adjustments at Rochester and lower exploration costs. This was partially offset by a 14% and 1% decrease in gold and silver ounces sold, respectively, higher losses on the sale of assets, interest expense and income and mining taxes. Adjusted net loss was $53.2 million, or $0.17 per diluted share, compared to $26.9 million, or $0.10 per diluted share (see “Non-GAAP Financial Performance Measures”). 2023 Guidance Coeur reiterated its 2023 production and cost guidance other than (i) updating production and costs at Kensington and (ii) modifying capital expenditures to reflect the updated estimate to complete the Rochester expansion. 2023 Production Guidance Previous Updated Gold Silver Gold Silver (oz) (K oz) (oz) (K oz) Palmarejo 100,000 - 112,500 6,500 - 7,500 100,000 - 112,500 6,500 - 7,500 Rochester 35,000 - 50,000 3,500 - 4,500 35,000 - 50,000 3,500 - 4,500 Kensington 100,000 - 112,500 — 84,000 - 95,000 — Wharf 85,000 - 95,000 — 85,000 - 95,000 — Total 320,000 - 370,000 10,000 - 12,000 304,000 - 352,500 10,000 - 12,000 2023 Costs Applicable to Sales Guidance Previous Updated Gold Silver Gold Silver ($/oz) ($/oz) ($/oz) ($/oz) Palmarejo (co-product) $900 - $1,050 $14.25 - $15.25 $900 - $1,050 $14.25 - $15.25 Rochester (co-product) — — — — Kensington $1,500 - $1,700 — $1,650 - $1,750 — Wharf (by-product) $1,200 - $1,350 — $1,200 - $1,350 — The Company expects second half 2023 CAS at Rochester to be similar to actual first half 2023 CAS as Coeur completes and ramps up the expansion project. 30 2023 Capital, Exploration and G&A Guidance Previous Updated ($M) ($M) Capital Expenditures, Sustaining $120 - $145 $148 - $168 Capital Expenditures, Development $200 - $235 $230 - $264 Exploration, Expensed $30 - $35 $30 - $35 Exploration, Capitalized $10 - $15 $10 - $15 General & Administrative Expenses $36 - $40 $36 - $40 Note: The Company’s previous guidance figures assume estimated prices of $1,800/oz gold and $23.00/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. The Company’s updated guidance figures assume estimated prices of $1,900/oz gold and $23.00/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. 31 Results of Operations Palmarejo Three Months Ended Six Months Ended June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Tons milled 472,622 533,606 1,006,228 1,104,811 Average gold grade (oz/t) 0.056 0.052 0.054 0.055 Average silver grade (oz/t) 4.10 4.02 4.06 3.91 Average recovery rate – Au 87.4 % 90.1 % 88.8 % 91.5 % Average recovery rate – Ag 83.5 % 81.7 % 82.5 % 83.6 % Gold ounces produced 23,216 25,118 48,334 56,040 Silver ounces produced 1,616,986 1,752,430 3,369,416 3,607,580 Gold ounces sold 22,207 25,970 48,177 57,527 Silver ounces sold 1,560,743 1,795,159 3,355,902 3,650,723 CAS per gold ounce (1) $ 1,028 $ 930 $ 975 $ 802 CAS per silver ounce (1) $ 15.22 $ 14.00 $ 14.57 $ 12.64 (1) See Non-GAAP Financial Performance Measures. Three Months Ended June 30, 2023 compared to Three Months Ended March 31, 2023 Gold and silver production decreased 8% as a result of 11% lower mill throughput, partially offset by 8% and 2% higher gold and silver grades, respectively. Metal sales were $72.7 million, or 41% of Coeur’s metal sales, compared with $82.3 million, or 45% of Coeur’s metal sales. Revenue decreased by $9.6 million or 12%, of which $11.6 million was due to a lower volume of gold and silver production, partially offset by an increase of $2.0 million due to higher average realized gold and silver prices. Costs applicable to sales per gold and silver ounce increased 11% and 9%, respectively, due to higher consumable costs and higher employee-related costs. Amortization decreased to $8.0 million due to lower sales. Capital expenditures increased to $11.9 million from $10.2 million due to higher expenditures related to the open pit backfill project and underground development. Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022 Gold and silver production decreased 14% and 7%, respectively as a result of 9% lower mill throughput, 2% lower gold grades, and lower recoveries, partially offset by 4% higher silver grades. Metal sales were $155.0 million, or 43% of Coeur’s metal sales, compared with $169.0 million, or 44% of Coeur’s metal sales. Revenue decreased by $14.0 million or 8%, of which $21.7 million was due to a lower volume of gold and silver production, partially offset by an increase of $7.7 million due to higher average realized gold and silver prices. Costs applicable to sales per gold and silver ounce increased 22% and 15%, respectively, due to the mix of gold and silver sales, lower production, higher employee-related and consumable costs primarily due to inflationary pressures. Amortization decreased to $16.7 million due to lower sales and longer assumed mine life. Capital expenditures decreased to $22.1 million from $23.7 million due to lower infill drilling activities. 32 Rochester Three Months Ended Six Months Ended June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Tons placed (1) 2,690,840 2,456,586 5,147,426 8,614,332 Average gold grade (oz/t) 0.003 0.003 0.003 0.003 Average silver grade (oz/t) 0.42 0.45 0.43 0.34 Gold ounces produced 6,314 8,155 14,469 14,385 Silver ounces produced 682,656 761,346 1,444,002 1,344,345 Gold ounces sold 6,493 8,349 14,842 13,999 Silver ounces sold 694,657 769,804 1,464,461 1,320,793 CAS per gold ounce (2) $ 1,726 $ 2,413 $ 2,136 $ 2,308 CAS per silver ounce (2) $ 21.39 $ 29.51 $ 25.42 $ 28.71 (1) During the three months ended June 30, 2023, 258,736 and 2,432,104 tons were placed on Stage IV and Stage VI leach pads, respectively. During the three months ended March 31, 2023, 1,405,499 and 1,051,087 tons were placed on Stage IV and Stage VI leach pads, respectively. During the six months ended June 30, 2023, 1,664,235 and 3,483,192 tons were placed on Stage IV and Stage VI leach pads, respectively. During the six months ended June 30, 2022, 8,338,045 and 276,287 tons were placed on Stage IV and Stage VI leach pads, respectively. (2) See Non-GAAP Financial Performance Measures. Three Months Ended June 30, 2023 compared to Three Months Ended March 31, 2023 Gold and silver production decreased 23% and 10%, respectively, as a result of the timing of recoveries primarily due to Rochester preparing to transition from the legacy Stage IV leach pad to the new Stage VI leach pad associated with the Rochester expansion. Approximately 90% of the tons placed in the second quarter of 2023 were placed onto the new Stage VI leach pad, which is expected to begin production in the third quarter of 2023. Metal sales were $29.1 million, or 16% of Coeur’s metal sales, compared with $33.9 million, or 18% of Coeur’s metal sales. Revenue decreased by $4.8 million, or 14%, of which $5.4 million was due to a lower volume of gold and silver production, partially offset by an increase of $0.6 million due to higher average realized gold and silver prices. Costs applicable to sales per gold and silver ounce decreased 28% due to a lower LCM adjustment of $1.6 million compared to $13.1 million in the prior period and lower cyanide and outside service costs. Amortization decreased to $3.6 million due to lower gold and silver ounces sold. Capital expenditures increased to $61.5 million from $52.0 million due to timing of payments related to the Rochester expansion project. Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022 Gold and silver production increased 1% and 7%, respectively, primarily due to the timing of recoveries. Metal sales were $63.0 million, or 17% of Coeur’s metal sales, compared with $56.9 million, or 14% of Coeur’s metal sales. Revenue increased by $6.1 million, or 11%, of which $5.0 million was due to a higher volume of gold and silver production, and $1.1 million due to higher average realized gold and silver prices. Costs applicable to sales per gold and silver ounce decreased 7% and 11%, respectively, due to the mix of gold and silver sales, lower LCM adjustments of $14.7 million compared to $16.8 million in the prior period, and lower diesel costs, partially offset by higher employee-related, and maintenance costs. Amortization decreased to $8.9 million due to longer assumed mine life. Capital expenditures increased to $113.4 million from $80.0 million due to timing of payments related to the Rochester expansion project. At the end of July, the project was approximately 97% complete and the Company had incurred $660 million of the total project costs. Coeur expects to achieve mechanical completion of the crusher corridor in the third quarter, with ramp-up anticipated throughout the second half of 2023 and into early 2024. The Company also updated its estimate for the expected ultimate cost to complete the expansion, which reflects additional contractor hours required to offset the loss of approximately thirty days due to extreme weather and lower than planned productivity rates driven by a lack of qualified skilled labor. Together with ongoing inflationary impacts and required construction re-work to address issues from previously completed engineering designs, the Company expects the total cost for the project to be approximately 6 - 9%, or $40 - $60 million above the high end of Coeur’s previous guidance range of $650 - $670 million. 33 Kensington Three Months Ended Six Months Ended June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Tons milled 152,907 153,337 306,244 341,690 Average gold grade (oz/t) 0.09 0.15 0.12 0.16 Average recovery rate 90.9 % 91.2 % 91.1 % 93.3 % Gold ounces produced 13,193 20,296 33,489 50,512 Gold ounces sold 13,273 20,902 34,175 50,500 CAS per gold ounce (1) $ 2,945 $ 1,785 $ 2,235 $ 1,500 (1) See Non-GAAP Financial Performance Measures. Three Months Ended June 30, 2023 compared to Three Months Ended March 31, 2023 Gold production decreased 35% as a result of 40% lower grades due to challenges with mine sequencing and stope extraction driven by significant water inflows from spring runoff and paste backfill issues. Metal sales were $24.6 million, or 14% of Coeur’s metal sales, compared to $40.2 million, or 21% of Coeur’s metal sales. Revenue decreased by $15.6 million, or 39%, of which $14.1 million resulted from a lower volume of gold production, and $1.5 million due to lower average realized gold prices. Costs applicable to sales per gold ounce increased 65% due to lower production and higher outside service costs. Amortization decreased to $4.8 million primarily due to lower ounces sold. Capital expenditures increased to $11.7 million from $7.7 million due to higher infill drilling and underground development. Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022 Gold production decreased 34% as a result of 10% lower throughput primarily due to challenges with mine sequencing and stope extraction as well as lower grades and recoveries. Metal sales were $64.8 million, or 18% of Coeur’s metal sales, compared to $94.6 million, or 24% of Coeur’s metal sales. Revenue decreased by $29.8 million, or 31%, of which $30.9 million resulted from a lower volume of gold production, partially offset by an increase of $1.1 million due to higher average realized gold prices. Costs applicable to sales per gold ounce increased 49% due to lower production. Amortization decreased to $10.6 million primarily due to lower ounces sold and longer assumed mine life. Capital expenditures increased to $22.4 million from $16.8 million due to higher infill drilling and underground development. Wharf Three Months Ended Six Months Ended June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Tons placed 1,041,846 1,156,794 2,198,640 2,177,784 Average gold grade (oz/t) 0.022 0.032 0.027 0.020 Gold ounces produced 25,683 15,470 41,153 38,244 Silver ounces produced 88,499 21,107 109,606 23,703 Gold ounces sold 25,117 15,645 40,762 37,971 Silver ounces sold 82,013 23,956 105,969 21,966 CAS per gold ounce (1) $ 1,031 $ 1,468 $ 1,199 $ 1,177 (1) See Non-GAAP Financial Performance Measures. Three Months Ended June 30, 2023 compared to Three Months Ended March 31, 2023 Gold production increased 66% driven by timing of recoveries. Metal sales were $50.8 million, or 29% of Coeur’s metal sales, compared to $30.9 million, or 16% of Coeur’s metal sales. Revenue increased by $19.9 million, or 64%, of which $19.8 million was due to a higher gold production, and $0.1 million due to higher average realized gold prices. Costs applicable to sales per gold ounce decreased 30% due to higher production and lower operating costs. Amortization increased to $1.8 million due to higher ounces sold. Capital expenditures were $0.2 million. Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022 Gold production increased 8% driven by higher grades. Metal sales were $81.7 million, or 22% of Coeur’s metal sales, compared to $72.1 million, or 18% of Coeur’s metal sales. Revenue increased by $9.6 million, or 13%, of which $7.4 million 34 was due to a higher volume of gold production, and $2.2 million due to higher average realized gold prices. Costs applicable to sales per gold ounce increased 2% due to higher diesel and other consumable costs primarily due to inflationary pressures. Amortization decreased to $3.2 million due to longer assumed mine life. Capital expenditures were $0.3 million. Silvertip Six Months Ended June 30, 2023 Ongoing carrying costs at Silvertip totaled $10.8 million in the first half of 2023 and $10.9 million in 2022. Capital expenditures in the first half of 2023 totaled $0.8 million compared to $17.6 million in the prior year due to planned reduction in capital development expenditures. Since acquisition, exploration at Silvertip has been consistently successful, with demonstrated resource growth. Multiple new zones have been discovered, providing a path to potentially significant resource expansion. In addition, the full geochemical and metal zonation of the deposit will be studied including the critical minerals indium, germanium and gallium that are present in the ore body. The Company anticipates a slower overall timeline to advance the Silvertip project, with the primary focus on growth and understanding of the overall deposit. Consistent with Silvertip’s status as a long-term exploration project, the Company reclassified its mineral reserves to measured and indicated resources as of year-end 2022. Coeur focused on compiling, analyzing and interpreting historical data during the first half of the year to increase the understanding of the geological context and mineralization system. Significant work on logging, data collection, analysis and interpretation is ongoing as part of this effort. A new detailed geological model will be compiled to support year-end resource calculations at the end of 2023. Liquidity and Capital Resources At June 30, 2023, the Company had $58.6 million of cash, cash equivalents and restricted cash and $280.5 million available under the RCF. Future borrowing under the RCF may be subject to certain financial covenants. Cash and cash equivalents decreased $4.6 million in the six months ended June 30, 2023, due to 14% and 1% decrease in gold and silver ounces sold, respectively, $159.6 million of capital expenditures primarily related to the Rochester expansion project and higher costs at our operations due to continued inflationary pressures, partially offset by net proceeds of $98.4 million from the sale of 32.9 million shares of its common stock in the March 2023 Equity Offering, $39.8 million received from the sale of the remaining 6.0 million shares of common stock of Victoria Gold (“Victoria Gold Common Shares”), and net proceeds of $18.2 million from the sale of 5.3 million shares of its common stock in the Private Placement Offering (excludes 3 million over-allotment shares issued subsequent to quarter end). Additionally, the Company received net proceeds of $7.0 million from the sale of the deferred cash consideration, two royalties and contingent consideration received in connection with the sale of the La Preciosa project, $5.0 million received from the Avino note receivable, net proceeds of $1.8 million from the sale of remaining common stock of Integra Resources Corporation, and a 1% and 3% increase in average realized gold and silver prices, respectively. At June 30, 2023, the Company had $80.0 million drawn, $29.5 million in outstanding letters of credit and $280.5 million available under the RCF. On August 9, 2023, the Company entered into an amendment (the “August Amendment”) to the RCF. The August Amendment, among other things, (1) modifies the financial covenants to provide greater flexibility during the final stages of the Rochester expansion under (a) the consolidated net leverage and consolidated senior secured leverage ratios at September 30, 2023 through the March 31, 2024, with the ratios returning to the previous levels at June 30, 2024 and (b) the consolidated interest coverage ratio at June 30 through September 30, 2023, with the ratio returning to the previous level at December 31, 2023, (2) allows up to $50 million, through June 30, 2024, stepping down to $40 million in September 31, 2024, $30 million in December 31, 2024 and $15 million thereafter, 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 June 30, 2024, and (4) restricts certain acquisitions through March 31, 2024. In January 2023, the Company completed the sale of its remaining 6.0 million Victoria Gold Common Shares at a price of $6.70 per Victoria Gold Common Share, for net proceeds of $39.8 million. At June 30, 2023, the Company held $9.2 million of equity securities. 35 In March 2023, the Company completed a $100.0 million “at the market” offering of its common stock, par value $0.01 per share (the “March 2023 Equity Offering”). The Company sold a total of 32,861,580 shares of common stock in the March 2023 Equity Offering at an average price of $3.04 per share, raising net proceeds (after sales commissions) of $98.4 million. In June 2023, the Company sold a total of 5,276,154 shares its common stock (“Private Placement Offering”) issued as “flow-through shares” as defined in subsection 66(15) of the Income Tax Act (Canada) (the “FT Shares”), raising a net proceeds of $18.2 million, of which $5.1 million represents net proceeds received in excess of the Company’s average price (“FT Premium Liability”). The proceeds of the issuance of FT Shares will be used by the Company for certain qualifying “Canadian Exploration Expenditures” (as such term is defined in the Income Tax Act (Canada)). The Company granted an over-allotment option of up to 3,000,000 additional flow-through shares, which was exercised in full and closed on July 20, 2023. The over-allotment option raised net proceeds of $10.5 million, including an additional $2.7 million of FT Premium Liability. The Company had outstanding forward contracts on 111,498 ounces of gold and 2.5 million ounces of silver at June 30, 2023 that settle monthly through December 2023. The Company is targeting to hedge up to 70% of expected gold production and 50% of expected silver production for 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 $1,977 per ounce of gold and $25.40 per ounce of silver. In the second quarter of 2023, the Company exchanged $48.5 million in aggregate principal amount plus accrued interest of 2029 Senior Notes for 13.9 million shares of common stock. 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 under-pinned by our gold and silver hedging programs, additional equity financing, and borrowings under our RCF depending on future commodity prices to fund near term capital requirements, including those described in this report for the Rochester expansion project and in our 2023 capital expenditure guidance. Our longer-term plans contemplate the expansion and restart of Silvertip, as well as the continued exploration to extend mine lives at all of our operating sites. At the end of July, the project was approximately 97% complete and the Company had incurred $660 million of the total project costs. Coeur expects to achieve mechanical completion of the crusher corridor in the third quarter, with ramp-up anticipated throughout the second half of 2023 and into early 2024. The Company also updated its estimate for the expected ultimate cost to complete the expansion, which reflects additional contractor hours required to offset the loss of approximately thirty days due to extreme weather and lower than planned productivity rates driven by a lack of qualified skilled labor. Together with ongoing inflationary impacts and required construction re-work to address issues from previously completed engineering designs, the Company expects the total cost for the project to be approximately 6 - 9%, or $40 - $60 million above the high end of Coeur’s previous guidance range of $650 - $670 million. 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 2022 10-K and Part II, Item 1A of this Report. Cash Provided by (Used in) Operating Activities Net cash provided by operating activities for the three months ended June 30, 2023 was $39.4 million, compared to net cash used in operating activities of $35.0 million for the three months ended March 31, 2023. Net cash provided by operating activities for the six months ended June 30, 2023 was $4.4 million, compared to $16.2 million for the six months ended June 30, 2022. Adjusted EBITDA for the three months ended June 30, 2023 was $22.2 million, compared to $25.1 million for the three months ended March 31, 2023. Adjusted EBITDA for the six months ended June 30, 2023 was $47.4 million, compared to $77.3 million for the six months ended June 30, 2022. (see “Non-GAAP Financial Performance Measures”). Net cash provided by operating activities was impacted by the following key factors for the applicable periods: 36 Three Months Ended Six Months Ended In thousands June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Cash flow before changes in operating assets and liabilities $ (6,920) $ 6,223 $ (697) $ 53,552 Changes in operating assets and liabilities: Receivables (913) 3,050 2,137 4,218 Prepaid expenses and other 4,260 (496) 3,764 3,014 Inventories (18,738) (17,635) (36,373) (28,935) Accounts payable and accrued liabilities 61,708 (26,145) 35,563 (15,632) Cash provided by (used in) operating activities $ 39,397 $ (35,003) $ 4,394 $ 16,217 Net cash provided by operating activities increased $74.4 million for the three months ended June 30, 2023 compared to the three months ended March 31, 2023, primarily as a result of a 1% and 3% increase in average realized gold and silver prices, respectively, receipt of $45.0 million of metal sales prepayments in the second quarter of 2023, the timing of interest payments and lower exploration costs, partially offset by 5% and 10% decrease in gold and silver ounces sold. Revenue for the three months ended June 30, 2023 compared to the three months ended March 31, 2023 decreased by $10.1 million, of which $12.8 million was due to the lower volume of gold and silver sales, partially offset by $2.8 million as the result of higher average realized gold and silver prices. Net cash provided by operating activities decreased $11.8 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to a 14% and 1% decrease in gold and silver ounces sold, respectively, higher operating and costs, partially offset by a 4% and 1% increase in average realized gold and silver prices, respectively, receipt of $45.0 million of prepayments in the second quarter of 2023 and lower exploration costs. Revenue for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 decreased by $28.0 million, of which $41.3 million was due to a lower volume of gold and silver sales, partially offset by $13.3 million as the result of higher average realized gold and silver prices. Cash Provided by (Used in) Investing Activities Net cash used in investing activities in the three months ended June 30, 2023 was $75.6 million compared to $29.3 million in the three months ended March 31, 2023. Cash used in investing activities increased primarily due to higher capital expenditures partially offset by net proceeds of $7.0 million received from the sale of the La Preciosa Deferred Consideration, and net proceeds of $1.8 million from the sale of remaining common stock of Integra Resources Corporation. The Company incurred capital expenditures of $85.6 million in the three months ended June 30, 2023 compared with $74.0 million in the three months ended March 31, 2023 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 six months ended June 30, 2023 was $105.0 million compared to $126.7 million in the six months ended June 30, 2022. Cash used in investing activities decreased primarily due to net proceeds of $39.8 million received from the sale of its remaining Victoria Gold Common Shares, net proceeds of $7.0 million received from the sale of the La Preciosa Deferred Consideration, $5.0 million received from the collection of amounts due under the promissory note issued in connection with the sale of the La Preciosa project, and net proceeds of $1.8 million from the sale of remaining common stock of Integra Resources Corporation, partially offset by an increase in capital expenditures and the receipt of net proceeds of $15.3 million from the sale of the La Preciosa project in 2022. The Company incurred capital expenditures of $159.6 million in the six months ended June 30, 2023 compared with $142.7 million in the six months ended June 30, 2022 primarily related to POA 11 construction activities at Rochester and underground development at Palmarejo and Kensington in both periods. Cash Provided by Financing Activities Net cash provided by financing activities in the three months ended June 30, 2023 was $25.9 million compared to $69.4 million in the three months ended March 31, 2023. During the three months ended June 30, 2023, the Company drew $20.0 million, net, under the RCF, and received net proceeds of $13.1 million from the sale of 5.3 million shares of its common stock issued as the FT Shares. During the three months ended March 31, 2023, the Company repaid $20.0 million, net, under the RCF and received net proceeds of $98.4 million from the sale of 32.9 million shares of its common stock in the March 2023 Equity Offering. Net cash provided by financing activities in the six months ended June 30, 2023 was $95.3 million compared to $127.5 million in the six months ended June 30, 2022. During the six months ended June 30, 2023, the Company received net proceeds of $98.4 million from the sale of 32.9 million shares of its common stock in the March 2023 Equity Offering, and received net proceeds of $13.1 million from the sale of 5.3 million shares of its common stock issued as the FT Shares. During the six 37 months ended June 30, 2022, the Company drew $50.0 million, net, under the RCF, and the Company received net proceeds of $98.3 million from the sale of 22.1 million shares of its common stock in the March 2022 Equity Offering. Critical Accounting Policies and Accounting Developments See Note 2 - Summary of Significant Accounting Policies contained in the 2022 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 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: 38 Three Months Ended Six Months Ended In thousands except per share amounts June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Net income (loss) $ (32,412) $ (24,586) $ (56,998) $ (69,752) Fair value adjustments, net 3,922 (10,561) (6,639) 52,205 Foreign exchange loss (gain) 154 1,991 2,145 1,503 (Gain) loss on sale of assets and securities 12,622 9 12,631 (2,452) RMC bankruptcy distribution (1,516) — (1,516) — Gain on debt extinguishment (2,961) — (2,961) — COVID-19 costs 21 56 77 1,290 Other adjustments 1,137 70 1,207 (179) Tax effect of adjustments (1) (1,120) (37) (1,157) (9,502) Adjusted net income (loss) $ (20,153) $ (33,058) $ (53,211) $ (26,887) Adjusted net income (loss) per share, Basic $ (0.06) $ (0.11) $ (0.17) $ (0.10) Adjusted net income (loss) per share, Diluted $ (0.06) $ (0.11) $ (0.17) $ (0.10) (1) For the three months ended June 30, 2023, tax effect of adjustments of $1.1 million (-9%) is primarily related to fair value adjustments on the Company’s equity investments, loss on the sale of the La Preciosa Deferred Consideration and LCM adjustment recorded at Rochester. For the three months ended March 31, 2023, tax effect of adjustments of $37 (0.3%) is primarily related to the fair value adjustments on the Company’s equity investments and LCM adjustment recorded at Rochester. For the six months ended June 30, 2023, tax effect of adjustments of $1.2 million (-41%) is primarily related to the fair value adjustments on the Company’s equity investments, loss on the sale of the La Preciosa Deferred Consideration and LCM adjustment recorded at Rochester. For the six months ended June 30, 2022, tax effect of adjustments of $9.5 million (-19%) is primarily related to the de-recognition of deferred tax liabilities related to the sale of La Preciosa and 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 the 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: 39 Three Months Ended Six Months Ended In thousands except per share amounts June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Net income (loss) $ (32,412) $ (24,586) $ (56,998) $ (69,752) Interest expense, net of capitalized interest 6,912 7,389 14,301 9,738 Income tax provision (benefit) 9,866 10,708 20,574 13,196 Amortization 19,595 22,708 42,303 54,398 EBITDA 3,961 16,219 20,180 7,580 Fair value adjustments, net 3,922 (10,561) (6,639) 52,205 Foreign exchange (gain) loss (627) 1,154 527 1,065 Asset retirement obligation accretion 4,073 3,993 8,066 6,992 Inventory adjustments and write-downs 1,603 14,187 15,790 10,760 (Gain) loss on sale of assets and securities 12,622 9 12,631 (2,452) RMC bankruptcy distribution (1,516) — (1,516) — Gain on debt extinguishment (2,961) — (2,961) — COVID-19 costs 21 56 77 1,290 Other adjustments 1,137 70 1,207 (179) Adjusted EBITDA $ 22,235 $ 25,127 $ 47,362 $ 77,261 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 Condensed 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. Three Months Ended Six Months Ended (Dollars in thousands) June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Cash flow from operations $ 39,397 $ (35,003) $ 4,394 $ 16,217 Capital expenditures 85,581 74,048 159,629 142,658 Free cash flow $ (46,184) $ (109,051) $ (155,235) $ (126,441) 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. 40 Three Months Ended Six Months Ended (Dollars in thousands) June 30, 2023 March 31, 2023 June 30, 2023 June 30, 2022 Cash provided by (used in) operating activities $ 39,397 $ (35,003) $ 4,394 $ 16,217 Changes in operating assets and liabilities: Receivables 913 (3,050) (2,137) (4,218) Prepaid expenses and other (4,260) 496 (3,764) (3,014) Inventories 18,738 17,635 36,373 28,935 Accounts payable and accrued liabilities (61,708) 26,145 (35,563) 15,632 Operating cash flow before changes in working capital $ (6,920) $ 6,223 $ (697) $ 53,552 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 and silver, 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 and silver based on gold and silver 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. Three Months Ended June 30, 2023 In thousands (except metal sales, per ounce or per pound amounts) Palmarejo Rochester Kensington Wharf Silvertip Total Costs applicable to sales, including amortization (U.S. GAAP) $ 54,608 $ 29,717 $ 43,950 $ 29,634 $ 1,021 $ 158,930 Amortization (8,017) (3,649) (4,801) (1,805) (1,021) (19,293) Costs applicable to sales $ 46,591 $ 26,068 $ 39,149 $ 27,829 $ — $ 139,637 Metal Sales Gold ounces 22,207 6,493 13,273 25,117 — 67,090 Silver ounces 1,560,743 694,657 — 82,013 — 2,337,413 Costs applicable to sales Gold ($/oz) $ 1,028 $ 1,726 $ 2,945 $ 1,031 Silver ($/oz) $ 15.22 $ 21.39 $ — Three Months Ended March 31, 2023 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) $ 57,984 $ 48,083 $ 43,226 $ 24,953 $ 1,221 $ 175,467 Amortization (8,719) (5,218) (5,844) (1,409) (1,221) (22,411) Costs applicable to sales $ 49,265 $ 42,865 $ 37,382 $ 23,544 $ — $ 153,056 Metal Sales Gold ounces 25,970 8,349 20,902 15,645 70,866 Silver ounces 1,795,159 769,804 — 23,956 — 2,588,919 Costs applicable to sales Gold ($/oz) $ 930 $ 2,413 $ 1,785 $ 1,468 Silver ($/oz) $ 14.00 $ 29.51 $ — 41 Six Months Ended June 30, 2023 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) $ 112,592 $ 77,800 $ 87,176 $ 54,587 $ 2,242 $ 334,397 Amortization (16,736) (8,867) (10,645) (3,214) (2,242) (41,704) Costs applicable to sales $ 95,856 $ 68,933 $ 76,531 $ 51,373 $ — $ 292,693 Metal Sales Gold ounces 48,177 14,842 34,175 40,762 137,956 Silver ounces 3,355,902 1,464,461 — 105,969 — 4,926,332 Costs applicable to sales Gold ($/oz) $ 975 $ 2,136 $ 2,235 $ 1,199 Silver ($/oz) $ 14.57 $ 25.42 $ — Six 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) $ 111,411 $ 79,899 $ 94,212 $ 49,518 $ 2,518 $ 337,558 Amortization (19,123) (9,671) (17,991) (4,309) (2,518) (53,612) Costs applicable to sales $ 92,288 $ 70,228 $ 76,221 $ 45,209 $ — $ 283,946 Metal Sales Gold ounces 57,527 13,999 50,500 37,971 159,997 Silver ounces 3,650,723 1,320,793 — 21,966 — 4,993,482 Zinc pounds — — Lead pounds — — Costs applicable to sales Gold ($/oz) $ 802 $ 2,308 $ 1,500 $ 1,177 Silver ($/oz) $ 12.64 $ 28.71 $ — Zinc ($/lb) $ — Lead ($/lb) $ — Reconciliation of Costs Applicable to Sales for Updated 2023 Guidance In thousands (except metal sales, per ounce or per pound amounts) Palmarejo Kensington Wharf Costs applicable to sales, including amortization (U.S. GAAP) $ 233,198 $ 183,769 $ 118,406 Amortization (37,547) (26,764) (6,319) Costs applicable to sales $ 195,651 $ 157,005 $ 112,087 By-product credit — — (745) Adjusted costs applicable to sales $ 195,651 $ 157,005 $ 111,342 Metal Sales Gold ounces 104,618 90,673 88,732 Silver ounces 6,784,929 163,607 Revenue Split Gold 50% 100% 100% Silver 50% Adjusted costs applicable to sales Gold ($/oz) $900 - $1,050 $1,650 - $1,750 $1,500 - $1,700 Silver ($/oz) $14.25 - $15.25 — 42 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 and activities at the Company’s properties, exploration and development efforts, mine lives, strategies, expectations regarding the Rochester expansion project (including future LCM adjustments), the tax treatment of the FT Shares and the risk that related exploration efforts at Silvertip will not occur on a timely basis or at all, inflation, hedging strategies, realization of deferred tax assets, expectations about the recovery of unduly paid VAT in Mexico, timing of completion of obligations under prepayment agreements, 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 the Q1 2023 10-Q and in “Risk Factors” section of the 2022 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), mining law changes, 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 or refiner 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.