Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Mexico Litigation Matters

As of March 31, 2023, $29.1 million in principal is due from the Mexican government associated with VAT that was paid under Coeur Mexicana, S.A. de C.V.’s (“Coeur Mexicana’s”) prior royalty agreement with a subsidiary of Franco-Nevada Corporation, which was terminated in 2016. Coeur Mexicana applied for and initially received VAT refunds associated with the royalty payments in the normal course; however, in 2011 the Mexican tax authorities began denying Coeur Mexicana’s VAT refunds based on the argument that VAT was not legally due on the royalty payments. Accordingly, Coeur Mexicana began to request refunds of the VAT as undue payments, which the Mexican tax authorities also denied. The Company has since been engaged in ongoing efforts to recover the VAT from the Mexican government (including through litigation and potential arbitration as well as refiling VAT refund requests). Despite a favorable ruling from Mexican tax courts in this matter in 2018, litigation of the matter continued at the Mexican administrative, appeals court and supreme court levels for several years, most of which was determined unfavorably to Coeur based on interpretations of applicable law and prior court decisions which the Company and its counsel believe are contrary to legal precedent, conflicting and erroneous. While the Company believes that it remains legally entitled to be refunded the full amount of the VAT receivable and intends to rigorously continue its VAT recovery efforts, based on the continued failure to recover the VAT receivable and unfavorable Mexican court decisions, the Company determined to write down the carrying value of the VAT receivable at September 30, 2021. Coeur has elected to initiate an arbitration proceeding under Chapter 11 of the North American Free Trade Agreement, or NAFTA, to resolve the matter. Outcomes in NAFTA arbitration and the process for recovering funds even if there is a successful outcome in NAFTA arbitration can be lengthy and unpredictable.

In addition, ongoing litigation with the Mexican government associated with enforcement of water rights in Mexico, if unsuccessful, may impact Coeur Mexicana’s ability to access new sources of water to provide sufficient supply for its operations at Palmarejo and, if material, may have a material adverse impact on the Company’s operations and financial results.

Palmarejo Gold Stream

Coeur Mexicana sells 50% of Palmarejo gold production (excluding production from certain properties acquired in 2015) to a subsidiary of Franco-Nevada Corporation (“Franco-Nevada”) under a gold stream agreement for the lesser of $800 or spot price per ounce. In 2016, Coeur Mexicana received a $22.0 million deposit toward future deliveries under the gold stream agreement. In accordance with generally accepted accounting principles, although Coeur Mexicana has satisfied its

contractual obligation to repay the deposit to Franco-Nevada, the deposit is accounted for as deferred revenue and is recognized as revenue on a units-of-production basis as ounces are sold to Franco-Nevada. At March 31, 2023, the remaining unamortized balance was $7.3 million, which is included in Accrued liabilities and other and Other long-term liabilities on the Condensed Consolidated Balance Sheet.

Kensington Prepayment

In June 2019, Coeur amended its existing sales and purchase contract with a metal sales counterparty for gold concentrate from its Kensington mine (the “Amended Sales Contract”). From time to time thereafter, the Amended Sales Contract has been further amended to allow for additional prepayments. In December 2022, the Company received a $25.0 million prepayment, of which $10.0 million was recognized as revenue in the first quarter of 2023. The remaining deliveries of the December 2022 Prepayment are recognized as a deferred revenue liability and are presented in Accrued liabilities and other on the Condensed Consolidated Balance Sheet. Under the relevant terms of the Amended Sales Contract, Coeur maintains its exposure to the price of gold and expects to recognize the remaining value of the accrued liability by June 2023.

Rochester Expansion Project Update

As of March 31, 2023, the Company had committed approximately $634 million of capital since inception of the Rochester expansion project, approximately $560 million of the estimated project cost had been incurred and the project was 82% complete. The Company estimates the total capital cost for the project will likely be around the high end of the $650 - $670 million guidance range, which primarily reflects the impact of extreme winter weather on construction productivity during the first quarter. Mechanical completion remains on target for mid-2023 with ramp-up and commissioning expected to take place during the second half of the year. The Company expects capital expenditures related to the Rochester expansion to be approximately $197 - $207 million during 2023, with roughly 70% incurred during the first half of the year.

Coeur achieved several key milestones at the Rochester expansion project during the quarter. Notably, the Company began placing ore on the new Stage VI leach pad on February 1 and achieved mechanical completion of the Merrill-Crowe process plant on March 31, ahead of its second quarter target completion date. Coeur also energized the 63-kilovolt power system and achieved mechanical completion of the crusher corridor electrical substation.

In addition to achieving mechanical completion ahead of schedule, progress on the Merrill-Crowe plant included (i) completion of the leach recirculation system which will deliver solution to the Stage VI leach pad, (ii) advancement of pre-commissioning of power and process systems, and (iii) completion of control systems programming and acceptance testing.

Coeur also continued to make solid progress on the crusher corridor with the start of steel erection and equipment setting for the pre-screen and further advancement of concrete work in the primary crusher area. Other work on the crusher corridor included (i) stacker steel and conveyor erection at the primary, secondary and tertiary stockpiles, (ii) topping out of the steel erection at both the secondary and tertiary crushers, (iii) continuation of piping and electrical installation across the crusher corridor, and (iv) completion of control systems programming with acceptance testing now well advanced.

Other Commitments and Contingencies

As part of its ongoing business and operations, the Company and its affiliates are required to provide surety bonds, bank letters of credit, bank guarantees and, in some cases, cash as financial support for various purposes, including environmental remediation, reclamation, collateral for gold and silver hedges and other general corporate purposes. As of March 31, 2023 and December 31, 2022, the Company had surety bonds totaling $319.1 million and $326.8 million, respectively, in place as financial support for future reclamation and closure costs. The obligations associated with these instruments are generally related to performance requirements that the Company addresses through its ongoing operations and from time-to-time, the Company may be required to post collateral, including cash or letters of credit which reduce availability under its revolving credit facility, to support these instruments. As the specific requirements are met, the beneficiary of the associated instrument cancels and/or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure. The Company believes it is in compliance with all applicable bonding obligations and will be able to satisfy future bonding requirements through existing or alternative means, as they arise.