NOTE 10 — LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

The current and non-current portions of long-term debt and capital lease obligations as of June 30, 2011 and December 31, 2010 are as follows (in thousands):


	June 30,				December 31,
	2011				2010
	Current		Non-Current		Current		Non-Current

3.25% Convertible Senior Notes due March 2028	$	—	$	44,357	$	—	$	43,220
1.25% Convertible Senior Notes due January 2024		—		—		1,859		—
Senior Term Notes due December 31, 2012		15,000		7,500		15,000		15,000
Kensington Term Facility		21,648		68,124		25,908		48,322
Capital lease obligations		18,799		15,341		15,759		23,483
Other		392		—		4,791		42

	$	55,839	$	135,322	$	63,317	$	130,067

3.25% Convertible Senior Notes due 2028

As of June 30, 2011, the outstanding balance of the 3.25% Convertible Senior Notes was $48.7 million, or $44.4 million net of debt discount.

The carrying value of the equity component representing the embedded conversion option at June 30, 2011, and December 31, 2010 was $10.9 million and $10.9 million, respectively.

Interest expense recognized during the three months ended June 30, 2011, and 2010, was $0.4 million and $0.4 million, respectively, and during the six months ended June 30, 2011 and 2010, was $0.9 million and $1.6 million, respectively. Accretion of the debt discount was $0.3 million and $0.6 million, for the three months ended June 30, 2011 and 2010, respectively, and $0.6 million and $1.9 million for the six months ended June 30, 2011 and 2010, respectively. The debt discount remaining at June 30, 2011 was $4.3 million, which will be amortized through March 15, 2013. The effective interest rate on the notes was 12.4%.

1.25% Convertible Senior Notes due 2024

As of June 30, 2011, the Company had no outstanding 1.25% Convertible Senior Notes.

On January 18, 2011, the Company repurchased $945,000 in aggregate principal amount of the notes pursuant to a Tender Offer Statement filed on December 10, 2010. The Company repurchased the remaining $914,000 in aggregate principal amount of the notes outstanding on January 21, 2011.

Senior Term Notes due December 31, 2012

As of June 30, 2011 the balance of the Senior Term Notes was $22.5 million.

For the three and six months ended June 30, 2011 the Company paid in cash $3.8 million and $7.5 million in principal and $0.4 million and $0.9 million in interest, respectively, in connection with the quarterly payments due under the notes. A loss of $0.4 million and $0.9 million for the three and six months ended June 30, 2011, respectively, was recognized in connection with quarterly debt payments as a result of the Company’s election to make the required principal and interest payment entirely in cash.

The Company elected to pay the June 30, 2010 payment on the notes with a combination of 50% cash and 50% common stock. The March 31, 2010 payment was paid entirely with common stock. For the three and six months ended June 30, 2010, the Company paid $8.3 million and $16.6 million, respectively, in principal and $1.5 million and $2.5 million, respectively, in interest. For the three and six months ended June 30, 2010, the Company issued 384,410 shares and 1,060,413 shares, respectively, of the Company’s stock. In addition, $0.5 million and $1.6 million were paid and recognized as a loss in connection with quarterly debt payments in the three and six months ended June 30, 2010, respectively. The loss is recorded in debt extinguishments.

Kensington Term Facility

As of June 30, 2011, the balance of the Kensington term facility was $89.8 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 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. Collars protecting 220,000 ounces of gold were outstanding at June 30, 2011. The weighted average put feature of each collar was $943.09 and the weighted average call feature of each collar was $1,858.41.

Capital Leases

As of June 30, 2011, Coeur Mexicana S.A. de C.V. (“Coeur Mexicana”), a wholly owned subsidiary of the Company, had outstanding balances on capital leases of $24.5 million.

Other capital leases for equipment and facilities totaling $9.6 million were outstanding at June 30, 2011 with monthly payments through May 31, 2016.

Other

On July 6, 2010, the Company entered into a short-term financing agreement with AFCO Credit Corporation in the principal amount of $2.4 million and bearing interest at 2.9%, to finance insurance premiums. Installments of $0.2 million were paid monthly with the final payment made on June 1, 2011. As of June 30, 2011, and December 31, 2010, the outstanding balance was nil and $1.1 million, respectively.

On July 15, 2009, to fund equipment purchases, Coeur Mexicana entered into an equipment financing agreement bearing interest at 8.26% with Atlas Copco. This agreement is secured by certain machinery and equipment. The loans call for twenty-four monthly installments with the final payment due on January 31, 2012. As of June 30, 2011, and December 31, 2010, the outstanding balance was $0.4 million and $1.2 million, respectively.

Palmarejo Gold Production Royalty Obligation

The Company recognized accretion expense on the Palmarejo gold production royalty obligation of $5.8 million and $5.0 million for the three months ended June 30, 2011 and 2010, respectively, and $11.0 million and $10.0 million for the six months ended June 30, 2011 and 2010, respectively. As of June 30, 2011 and December 31, 2010, the remaining minimum obligation under the royalty agreement was $76.5 million and $80.3 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 June 30, 2011 and 2010, the Company expensed interest of $9.3 million and $5.6 million, respectively, and for the six months ended June 30, 2011 and 2010, $18.6 million and $11.5 million, respectively.