DEBT AND CAPITAL LEASE OBLIGATIONS

The current and non-current portions of long-term debt and capital lease obligations as of September 30, 2012 and December 31, 2011 are as follows (in thousands):



	September 30, 2012				December 31, 2011
	Current		Non-Current		Current		Non-Current
3.25% Convertible Senior Notes due March 2028	$	47,424	$	—	$	—	$	45,545
Kensington Term Facility	—		—		15,398		60,425
Capital lease obligations	8,916		5,053		17,119		9,891
Other	—		—		85		—
	$	56,340	$	5,053	$	32,602	$	115,861

3.25% Convertible Senior Notes

As of September 30, 2012, the outstanding balance of the 3.25% Convertible Senior Notes due 2028 was $48.7 million, or $47.4 million net of debt discount. The notes are classified as current liabilities as of September 30, 2012 as a result of the holders' option to require the Company to repurchase the notes on March 15, 2013.

The fair value of the notes outstanding, as determined by market transactions at September 30, 2012 and December 31, 2011 was $49.6 million and $49.2 million, respectively. The carrying value of the equity component at September 30, 2012 and December 31, 2011 was $10.9 million.

For the three months ended September 30, 2012 and 2011 interest expense recognized was $0.4 million and $0.4 million, respectively. For the nine months ended September 30, 2012 and 2011 interest expense recognized was $1.2 million, and $1.2 million, respectively. For the three months ended September 30, 2012 and 2011 accretion of the debt discount was $0.6 million and $0.6, respectively. For the nine months ended September 30, 2012 and 2011 accretion of the debt discount was $1.9 million and $1.7 million, respectively. The debt discount remaining at September 30, 2012 was $1.2 million, which will be amortized through March 15, 2013. The effective interest rate on the notes was 8.9%.

Revolving Credit Facility

On August 1, 2012, Coeur Alaska, Inc. and Coeur Rochester, Inc. (the “Borrowers”), each a wholly-owned subsidiary of the Company, entered into a new Credit Agreement (the “Credit Agreement”) by and among the Company, the Borrowers, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent. The Credit Agreement provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $100.0 million, which principal amount may be increased, subject to receiving additional commitments therefor, by up to $50.0 million. The unused line fee for the three months ended September 30, 2012 was $0.1 million and was charged to interest expense.

The term of the Revolving Credit Facility is four years. Amounts may be borrowed under the Revolving Credit Facility to finance working capital and general corporate purposes of the Company and its subsidiaries, including the payment of fees and expenses incurred in connection with the Revolving Credit Facility. The obligations under the Revolving Credit Facility are secured by substantially all of the assets of the Company and its domestic subsidiaries, including the land, mineral rights and infrastructure at the Kensington and Rochester mines, as well as a pledge of the shares of certain of the Company's subsidiaries. In addition, in connection with the Revolving Credit Facility, Coeur Alaska, Inc. retained its existing hedge positions established under the Kensington Term Facility described below, with Wells Fargo Bank, N.A. as hedge provider.

Borrowings under the Revolving Credit Facility bear interest at a rate selected by the Borrowers equal to either LIBOR plus a margin of 2.25%-3.25% or an alternate base rate plus a margin of 1.25%-2.25%, with the margin determined by reference to the Company's ratio of consolidated debt to adjusted EBITDA.

Voluntary prepayments of the loans and voluntary reductions of the unutilized portion of the commitments under the Revolving Credit Facility are permitted without prepayment premium or penalty, subject to payment of customary LIBOR breakage costs. Amounts so repaid may be re-borrowed subject to customary requirements.

The Revolving Credit Facility contains representations and warranties, events of default and affirmative and negative covenants that are usual and customary, including covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and make dividends and distributions. The Revolving Credit Facility also contains financial covenants that require (i) our ratio of consolidated debt to adjusted EBITDA to be not greater than 3.25 to 1.00 (subject to a step-down to 3.00 to 1.00 after two years), (ii) our ratio of adjusted EBITDA to interest expense to be not less than 3.00 to 1.00 and (iii) our tangible net worth to be not less than 90% of our tangible net worth as of March 31, 2012 plus 25% of our net income for each fiscal quarter ending after March 31, 2012 to the date of measurement.

As of September 30, 2012, no amounts were outstanding under the Revolving Credit Facility.

Kensington Term Facility

On August 16, 2012, Coeur Alaska prepaid all obligations and indebtedness outstanding under the Coeur Alaska, Inc. Term Facility Agreement, as amended and restated on December 20, 2010, with Credit Suisse AG (the "Kensington Term Facility"), which totaled approximately $68.6 million. Upon payment in full, the Kensington Term Facility was terminated and all of the liens granted under the Kensington Term Facility were released.

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. Coeur Alaska has transferred these hedge positions to Wells Fargo Bank, N.A., as hedge provider. Call options protecting 104,000 ounces of gold were outstanding at September 30, 2012. The weighted average strike price of the call options was $1,970.05. Put options protecting 139,000 ounces of gold were outstanding at September 30, 2012. The weighted average strike price of the put options was $962.42.

Capital Lease Obligations

As of September 30, 2012 and December 31, 2011, the Company had outstanding balances on capital leases of $14.0 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 and nine months ended September 30, 2012 and 2011 of $4.4 million and $5.4 million and $15.0 million and $16.4 million, respectively. As of September 30, 2012 and December 31, 2011, the remaining minimum obligation under the royalty agreement was $64.1 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 and nine months ended September 30, 2012 and 2011, the Company expensed interest of $7.4 million and $8.0 million, and $21.6 million and $26.6 million, respectively.



	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
	(in thousands)						(in thousands)
3.25% Convertible Senior Notes due March 2028	$	395		$	395		$	1,186		$	1,186
Senior Term Notes (terminated in 2011)	—			366			—			1,280
Kensington Term Facility (terminated in 2012)	459			1,086			2,339			3,353
Capital lease obligations	219			416			827			1,353
Other debt obligations	436			144			668			801
Gold Lease Facility (terminated in 2011)	—			—			—			107
Accretion of Franco Nevada royalty obligation	4,384			5,370			15,047			16,407
Amortization of debt issuance costs	1,331			504			1,838			1,646
Accretion of debt discount	639			585			1,879			1,722
Capitalized interest	(512		)	(886		)	(2,206		)	(1,302		)
Total interest expense, net of capitalized interest	$	7,351		$	7,980		$	21,578		$	26,553

Capitalized Interest

The Company capitalizes interest incurred on its various debt instruments as a cost of properties under development. For the three and nine months ended September 30, 2012 and 2011, the Company capitalized interest of $0.5 million and $0.9 million, and $2.2 million and $1.3 million, respectively.