DEBT AND CAPITAL LEASE OBLIGATIONS

The current and non-current portions of long-term debt and capital lease obligations as of March 31, 2012 and December 31, 2011 are as follows (in thousands):



	March 31, 2012				December 31, 2011
	Current		Non-Current		Current		Non-Current
3.25% Convertible Senior Notes due March 2028	$	46,157	$	—	$	—	$	45,545
Kensington Term Facility	21,747		54,075		15,398		60,425
Capital lease obligations	12,953		9,859		17,119		9,891
Other	—		—		85		—
	$	80,857	$	63,934	$	32,602	$	115,861

3.25% Convertible Senior Notes

As of March 31, 2012, the outstanding balance of the 3.25% Convertible Senior Notes due 2028 was $48.7 million, or $46.2 million net of debt discount. The notes were reclassified from non-current to current liabilities as a result of the holders' option to require the Company to repurchase the notes on March 15, 2013.

The notes are unsecured and bear interest at a rate of 3.25% per year, payable on March 15 and September 15 of each year, beginning on September 15, 2008. The notes mature on March 15, 2028, unless earlier converted, redeemed or repurchased by the Company.

Each holder of the notes may require that the Company repurchase some or all of the holder’s notes on March 15, 2013, March 15, 2015, March 15, 2018 and March 15, 2023 at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, in cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election. Holders have the right, following certain fundamental change transactions, to require the Company to repurchase all or any part of their notes for cash at a repurchase price equal to 100% of the principal amount of the notes to be repurchased plus accrued and unpaid interest. The Company may redeem the notes for cash in whole or in part at any time on or after March 22, 2015 at 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest.

The notes provide for “net share settlement” of any conversions. Pursuant to this feature, upon conversion of the notes, the Company (1) will pay the note holder an amount in cash equal to the lesser of the conversion obligation or the principal amount of the notes and (2) will settle any excess of the conversion obligation above the notes’ principal amount in the Company’s common stock, cash or a combination thereof, at the Company’s election.

The notes are convertible under certain circumstances, at the holder’s option, at a conversion rate of 17.60254 shares of the Company’s common stock per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $56.81 per share, subject to adjustment in certain circumstances.

The fair value of the notes outstanding, as determined by market transactions at March 31, 2012 and December 31, 2011 was $48.7 million and $49.2 million, respectively. The carrying value of the equity component at March 31, 2012 and December 31, 2011 was $10.9 million and $10.9 million, respectively.

For the three months ended March 31, 2012 and 2011 interest expense recognized was $0.4 million and $0.4 million, respectively, and accretion of the debt discount was $0.6 million and $0.6 million, respectively. The debt discount remaining at March 31, 2012 was $2.5 million, which will be amortized through March 15, 2013. The effective interest rate on the notes was 8.9%.

Kensington Term Facility

As of March 31, 2012 the outstanding balance of the Kensington Term Facility was $75.8 million.

As a condition to the Kensington term facility with Credit Suisse, the Company agreed to enter into a gold hedging program which protects a minimum of 243,750 ounces of gold production over the life of the term facility against the risk associated with fluctuations in the market price of gold. This program consists of a series of zero cost collars which consist of a floor price and a ceiling price of gold. Call options protecting 136,000 ounces of gold were outstanding at March 31, 2012. The weighted average strike price of the call options was $1,919.83. Put options protecting 173,000 ounces of gold were outstanding at March 31, 2012. The weighted average strike price of the options was $954.74.

The Amended Credit Facility contains affirmative and negative covenants that the Company believes are usual and customary, including financial covenants that Coeur Alaska’s debt to equity ratio shall not exceed 40%, the ratio of project cash flow to debt service shall be at least 125%, the tangible net worth of the Borrower is not less than $325 million and the tangible net worth of the Guarantor is no less than $1.0 billion. Project covenants include covenants as to performance of sales contracts, maintenance and management. As of March 31, 2012, the Company was not in compliance with the debt service ratio covenant. The bank has waived that requirement of the agreement for the year ending December 31, 2012.

Capital Lease Obligations

As of March 31, 2012 and December 31, 2011, the Company had outstanding balances on capital leases of $22.8 million and $27.0 million, respectively.

Palmarejo Gold Production Royalty Obligation

The Company recognized accretion expense on the Palmarejo gold production royalty obligation for the three months ended March 31, 2012 and 2011 of $5.1 million and $5.3 million, respectively. As of March 31, 2012 and December 31, 2011, the remaining minimum obligation under the royalty agreement was $69.1 million and $72.1 million, respectively.

Interest Expense

The Company expenses interest incurred on its various debt instruments as a cost of operating its properties. For the three months ended March 31, 2012 and 2011, the Company expensed interest of $6.7 million and $9.3 million, respectively.



	Three month ended March 31,
	2012			2011
	(in thousands)
3.25% Convertible Senior Notes due March 2028	$	395		$	395
1.25% Convertible Senior Notes due January 2024	—			1
Senior Term Notes due December 2012	—			488
Kensington Term Facility	974			1,105
Capital lease obligations	343			466
Other debt obligations	69			469
Gold Lease Facility	—			107
Accretion of Franco Nevada royalty obligation	5,104			5,267
Amortization of debt issuance costs	256			624
Accretion of debt discount	612			560
Capitalized interest	(1,083		)	(178		)
Total interest expense, net of capitalized interest	$	6,670		$	9,304

Capitalized Interest

The Company capitalizes interest incurred on its various debt instruments as a cost of properties under development. For the three months ended March 31, 2012 and 2011, the Company capitalized interest of $1.1 million and $0.2 million, respectively.