UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2008

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                 to                

COEUR D’ALENE MINES CORPORATION

 

Idaho		82-0109423
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
PO Box I, 505 Front Ave. Coeur d’Alene, Idaho		83816
(Address of principal executive offices)		(Zip Code)

(208) 667-3511 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes  þ     No  o

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o     No  þ

Applicable only to corporate issuers: Indicate the number of shares outstanding of each of Issuer’s classes of common stock, as of the latest practicable date: Common stock, par value $1.00, of which 551,335,009 shares were issued and outstanding as of October 28, 2008.

 

 

COEUR D’ALENE MINES CORPORATION

INDEX

				Page No.
Part I.		Financial Information
Item 1.		Financial Statements Consolidated Balance Sheets — Unaudited September 30, 2008 and December 31, 2007			3
		Consolidated Statements of Operations and Comprehensive Income — Unaudited Three and Nine Months Ended September 30, 2008 and 2007			5
		Consolidated Statements of Cash Flows — Unaudited Three and Nine Months Ended September 30, 2008 and 2007			6
		Notes to Consolidated Financial Statements — Unaudited			7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			56
Item 4.		Controls and Procedures			57
Part II.		Other Information			58
Item 1.		Legal Proceedings			58
Item 1A.		Risk Factors			58
Item 6.		Exhibits			64

COEUR D’ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

		September 30,				December 31,
		2008				2007
		(dollars in thousands, except per
		share, per ounce amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	55,677			$	98,671
Short-term investments			23,301				53,039
Receivables			64,767				56,121
Ore on leach pad			9,345				25,924
Metal and other inventory			31,600				18,918
Deferred tax assets			11,496				3,573
Prepaid expenses and other			11,729				7,821
			207,915				264,067
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment			444,494				322,733
Less accumulated depreciation			(84,973	)			(69,937	)
			359,521				252,796
MINING PROPERTIES
Operational mining properties			217,944				143,324
Less accumulated depletion			(129,686	)			(124,401	)
			88,258				18,923
Mineral interests			1,758,226				1,731,715
Less accumulated depletion			(15,165	)			(11,639	)
			1,743,061				1,720,076
Non-producing and development properties			363,046				311,469
			2,194,365				2,050,468
OTHER ASSETS
Ore on leach pad, non-current portion			22,918				24,995
Restricted assets			24,980				25,760
Receivables, non current			28,395				18,708
Debt issuance costs, net			12,648				4,848
Deferred tax assets			1,386				1,109
Other			7,906				8,943
			98,233				84,363
TOTAL ASSETS		$	2,860,034			$	2,651,694

The accompanying notes are an integral part of these consolidated financial statements.

COEUR D’ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

		September 30,				December 31,
		2008				2007
		(dollars in thousands, except
		per share, per ounce amounts)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Credit facility, current portion of long-term debt and capital lease obligations		$	7,149			$	30,831
Accounts payable			55,501				49,642
Accrued liabilities and other			15,163				9,072
Accrued income taxes			4,765				7,547
Accrued payroll and related benefits			8,033				9,342
Accrued interest payable			780				1,060
Current portion of reclamation and mine closure			4,766				4,183
			96,157				111,677
LONG-TERM LIABILITIES
3 1/4% Convertible Senior Notes due March 2028			230,000				—
1 1/4% Convertible Senior Notes due January 2024			180,000				180,000
Non-current portion of other long-term debt and capital lease obligations			19,833				23,661
Reclamation and mine closure			29,453				30,629
Deferred income taxes			574,234				573,681
Other long-term liabilities			5,857				4,679
			1,039,377				812,650
COMMITMENTS AND CONTINGENCIES
(See Notes K, L, M, N, O and P)
SHAREHOLDERS’ EQUITY
Common Stock, par value $1.00 per share; authorized 750,000,000 shares, issued 551,893,594 shares in 2008 and 551,512,230 shares in 2007			551,894				551,512
Additional paid-in capital			1,609,633				1,607,737
Accumulated deficit			(423,622	)			(419,331	)
Shares held in treasury			(13,190	)			(13,190	)
Accumulated other comprehensive income (loss)			(215	)			639
			1,724,500				1,727,367
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	2,860,034			$	2,651,694

     The accompanying notes are an integral part of these consolidated financial statements.

COEUR D’ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)

		Three Months								Nine Months
		Ended September 30,								Ended September 30,
		2008				2007				2008				2007
		(dollars in thousands, except per share, per ounce amounts)
REVENUES
Sales of metal		$	39,763			$	52,863			$	147,073			$	155,388
COSTS AND EXPENSES
Production costs applicable to sales			30,694				38,231				80,852				85,991
Depreciation and depletion			6,621				3,895				18,591				16,669
Administrative and general			4,606				4,706				20,163				16,590
Exploration			5,824				3,268				14,291				8,699
Pre-development			780				—				17,222
Litigation settlement			—				—				—				507
Total costs and expenses			48,525				50,100				151,119				128,456
OPERATING INCOME (LOSS)			(8,762	)			2,763				(4,046	)			26,932
OTHER INCOME AND EXPENSE
Interest and other income			2,295				3,436				3,803				12,301
Interest expense, net of capitalized interest			(1,003	)			(79	)			(2,691	)			(249	)
Total other income and expense			1,292				3,357				1,112				12,052
Income (loss) before income taxes			(7,470	)			6,120				(2,934	)			38,984
Income tax (provision) benefit			3,836				(2,485	)			(1,357	)			(9,413	)
NET INCOME (LOSS)			(3,634	)			3,635				(4,291	)			29,571
Other comprehensive income (loss)			(526	)			(226	)			(854	)			290
COMPREHENSIVE INCOME (LOSS)		$	(4,160	)		$	3,409			$	(5,145	)		$	29,861
BASIC AND DILUTED INCOME (LOSS) PER SHARE
Basic		$	(0.01	)		$	0.01			$	(0.01	)		$	0.11
Diluted		$	(0.01	)		$	0.01			$	(0.01	)		$	0.10
Weighted average number of shares of common stock
Basic			550,096				277,800				550,059				277,747
Diluted			550,096				302,336				550,059				302,249

     The accompanying notes are an integral part of these consolidated financial statements.

COEUR D’ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Three Months								Nine Months
		Ended September 30,								Ended September 30,
		2008				2007				2008				2007
		(dollars in thousands, except per share, per ounce amounts)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	(3,634	)		$	3,635			$	(4,291	)		$	29,571
Add (deduct) non-cash items:
Depreciation and depletion			6,621				3,895				18,591				16,669
Deferred taxes			(3,894	)			(469	)			(7,795	)			806
Unrealized loss (income) on embedded derivative, net			5,115				(983	)			8,639				107
Share based compensation			356				910				2,244				2,516
Other			297				162				792				(71	)
Changes in Operating Assets and Liabilities:
Receivables and other assets			2,393				(22,536	)			(23,825	)			(19,911	)
Inventories			(685	)			10,773				5,974				5,328
Accounts payable and accrued liabilities			(5,381	)			(936	)			(9,366	)			(6,354	)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			1,188				(5,549	)			(9,037	)			28,661
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(87,727	)			(57,325	)			(256,362	)			(157,029	)
Purchases of short-term investments			(58,973	)			(26,455	)			(304,596	)			(77,034	)
Proceeds from sales of short-term investments			124,894				24,130				334,604				106,392
Other			49				(97	)			11				330
CASH USED IN INVESTING ACTIVITIES			(21,757	)			(59,747	)			(226,343	)			(127,341	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes			—				—				230,000				—
Repayment of credit facility, long-term debt and capital leases			(22,389	)			(370	)			(30,213	)			(1,148	)
Proceeds from short-term borrowings			500				—				1,194				—
Payment of debt issuance costs			293				—				(8,258	)			—
Common stock repurchased			—				(102	)			(372	)			(379	)
Other			—				26				35				25
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			(21,596	)			(446	)			192,386				(1,502	)
DECREASE IN CASH AND CASH EQUIVALENTS			(42,165	)			(65,742	)			(42,994	)			(100,182	)
Cash and cash equivalents at beginning of period			97,842				236,232				98,671				270,672
Cash and cash equivalents at end of period		$	55,677			$	170,490			$	55,677			$	170,490

The accompanying notes are an integral part of these consolidated financial statements.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

NOTE A — BASIS OF PRESENTATION

          The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three- and nine-month periods ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date. For further information, refer to the consolidated financial statements and footnotes thereto included in the Coeur d’Alene Mines Corporation (“Coeur” or the “Company”) Annual Report on Form 10-K for the year ending December 31, 2007.

NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Principles of Consolidation: The consolidated financial statements include the wholly-owned subsidiaries of the Company, the most significant of which are Coeur Rochester, Inc., Coeur Alaska, Inc., CDE Cerro Bayo Ltd., Coeur Argentina, CDE Australia Pty Ltd., Empressa Minera Manquiri S.A., Bolnisi Gold N.L. and Palmarejo Silver and Gold Corporation. The consolidated financial statements also include all entities in which voting control of more than 50% is held by the Company. The Company has no investments in entities in which it has greater than 50% ownership interest accounted for using the equity method. Intercompany balances and transactions have been eliminated in consolidation. Investments in corporate joint ventures where the Company has ownership of 50% or less and funds its proportionate share of expenses are accounted for under the equity method. The Company has no investments in entities in which it has a greater than 20% ownership interest accounted for using the cost method.

          Revenue Recognition: Pursuant to guidance in Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition for Financial Statements”, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, no obligations remain and collectability is probable. The passing of title to the customer is based on the terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets, for example the London Bullion Market for both gold and silver, in an identical form to the product sold.

          Under our concentrate sales contracts with third-party smelters, final gold and silver prices are set on a specified future quotational period, typically one to three months, after the shipment date based on market metal prices. Revenues and production costs applicable to sales are recorded on a gross basis under these contracts at the time title passes to the buyer based on the forward price for the expected settlement period. The contracts, in general, provide for a provisional payment based upon provisional assays and quoted metal prices. Final settlement is based on the average applicable price for a specified future period, and generally occurs from three to six months after shipment. Final sales are settled using smelter weights, settlement assays (average of assays exchanged and/or umpire assay results) and are priced as specified in the smelter contract. The Company’s provisionally priced sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of concentrates measured at the forward price at the time of sale. The embedded derivative does not qualify for hedge accounting. The embedded derivative is recorded as a derivative asset, in prepaid expenses and other assets or as a derivative liability in accrued liabilities and other on the balance sheet and is adjusted to fair value through revenue each period until the date of final gold and silver settlement. The form of the material being sold, after deduction for smelting and refining is in an identical form to that sold on the London Bullion Market. The forms of the Company’s products are as metal in flotation concentrate and doré bullion, which is the final process for which the Company is responsible.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

          The effects of forward sales contracts are reflected in revenue at the date the related precious metals are delivered or the contracts expire. Third party smelting and refining costs of $2.0 and $2.2 million during the three months ended September 30, 2008 and 2007, respectively, and $7.7 and $5.9 million during the nine months ended September 30, 2008 and 2007, respectively, are recorded as a reduction of revenue.

          At September 30, 2008, the Company had outstanding provisionally priced sales of $58.9 million, consisting of 2.5 million ounces of silver and 19,710 ounces of gold. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $25,000; and for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $19,700. At September 30, 2007, the Company had outstanding provisionally priced sales of $62.0 million, consisting of 3.5 million ounces of silver and 24,350 ounces of gold. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $35,000; and for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $24,400.

          Short-term Investments: Short-term investments principally consist of highly-liquid United States, foreign government and corporate securities, all classified as available-for-sale and are reported at fair value with maturities that range from three months to forty years. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income (loss) as a separate component of shareholders’ equity. Any decline in market value considered to be other than temporary is recognized in determining net income/loss. Realized gains and losses from the sale of these investments are included in determining net income/loss.

          Ore on Leach Pad: The heap leach process is a process of extracting silver and gold by placing ore on an impermeable pad and applying a diluted cyanide solution that dissolves a portion of the contained silver and gold, which are then recovered in metallurgical processes. In August 2007, the Company ceased mining and crushing operations at the Rochester mine as ore reserves were fully mined. Residual heap leach activities are expected to continue through 2014.

          The Company used several integrated steps to scientifically measure the metal content of ore placed on the leach pads. As the ore body was drilled in preparation for the blasting process, samples are taken of the drill residue which is assayed to determine estimated quantities of contained metal. The Company estimated the quantity of ore by utilizing global positioning satellite survey techniques. The Company then processed the ore through crushing facilities where the output was again weighed and sampled for assaying. A metallurgical reconciliation with the data collected from the mining operation was completed with appropriate adjustments made to previous estimates. The crushed ore was then transported to the leach pad for application of the leaching solution. As the leach solution is collected from the leach pads, it is continuously sampled for assaying. The quantity of leach solution is measured by flow meters throughout the leaching and precipitation process. After precipitation, the product is converted to dorè, which is the final product produced by the mine. The inventory is stated at lower of cost or market, with cost being determined using a weighted average cost method.

          The Company reported ore on leach pad of $32.3 million as of September 30, 2008. Of this amount, $9.3 million is reported as a current asset and $22.9 million is reported as a non-current asset. The distinction between current and non-current is based upon the expected length of time necessary for the leaching process to remove the metals from the broken ore. The historical cost of the metal that is expected to be extracted within twelve months is classified as current and the historical cost of metals contained within the broken ore that will be extracted beyond twelve months is classified as non-current. Inventories of ore on leach pad are valued based on actual production costs incurred to produce and place ore on the leach pad, adjusted for effects on monthly production of costs of abnormal production levels, less costs allocated to minerals recovered through the leach process.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

          The estimate of both the ultimate recovery expected over time and the quantity of metal that may be extracted relative to the time the leach process occurs requires the use of estimates which are inherently inaccurate since they rely upon laboratory testwork. Testwork consists of 60 day leach columns from which the Company projects metal recoveries up to five years in the future. The quantities of metal contained in the ore are based upon actual weights and assay analysis. The rate at which the leach process extracts gold and silver from the crushed ore is based upon laboratory column tests and actual experience occurring over approximately twenty years of leach pad operations at the Rochester Mine. The assumptions used by the Company to measure metal content during each stage of the inventory conversion process includes estimated recovery rates based on laboratory testing and assaying. The Company periodically reviews its estimates compared to actual experience and revises its estimates when appropriate. During the third quarter of 2008, the Company increased its estimated silver ounces contained in the heap inventory by approximately 5.4 million ounces. The increase in estimated silver ounces contained in the heap inventory is due to changes in estimated silver recoveries anticipated over the remainder of the residual leaching phase. There were no changes in estimated recoveries related to gold contained in the heap. Consequently, the Company believes its current residual heap leach activities are expected to continue through 2014. The ultimate recovery will not be known until leaching operations cease.

          Metal and Other Inventory: Inventories include concentrate ore, dorè, ore in stockpiles and operating materials and supplies. The classification of inventory is determined by the stage at which the ore is in the production process. To extent there is work in process inventories at the Endeavor and Broken Hill mines, such amounts will be carried as inventories. Inventories of ore in stock piles are sampled for gold and silver content and are valued based on the lower of actual costs incurred or estimated net realizable value based upon the period ending prices of gold and silver. Material that does not contain a minimum quantity of gold and silver to cover estimated processing expense to recover the contained gold and silver is not classified as inventory and is assigned no value. All inventories are stated at the lower of cost or market, with cost being determined using a weighted average cost method. Concentrate and dorè inventory includes product at the mine site and product held by refineries and are also valued at lower of cost or market value. Concentrate inventories associated with the Endeavor and Broken Hill mines are held by third parties. Metal inventory costs include direct labor, materials, depreciation, depletion and amortization as well as administrative overhead costs relating to mining activities.

          Property, Plant, and Equipment: Expenditures for new facilities, assets acquired pursuant to capital leases, new assets or expenditures that extend the useful lives of existing facilities are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs over the shorter of estimated productive lives of such facilities or the useful life of the individual assets. Productive lives range from 7 to 31 years for buildings and improvements, 3 to 13 years for machinery and equipment and 3 to 7 years for furniture and fixtures. Certain mining equipment is depreciated using the units-of-production method based upon estimated total proven and probable reserves. Maintenance and repairs are expensed as incurred.

          Operational Mining Properties and Mine Development: Capitalization of mine development costs that meet the definition of an asset begins once all operating permits have been secured, mineralization is classified as proven and probable reserves and a final feasibility study has been completed. Mine development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, the removal of overburden to initially expose an ore body at open pit surface mines and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure at underground mines. Costs incurred during the start-up phase of a mine are expensed as incurred. Costs incurred before mineralization is classified as proven and probable reserves are expensed and classified as Exploration or Pre-development expense. All capitalized costs are amortized using the units of production method over the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves. Interest expense allocable to the cost of developing mining properties and to construct new facilities is capitalized until assets are ready for their intended use. Gains or losses from sales or retirements of assets are included in other income or expense.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

          Drilling and related costs incurred at our operating mines are expensed as incurred as exploration expense, unless we can conclude with a high degree of confidence, prior to the commencement of a drilling program, that the drilling costs will result in the conversion of a mineral resource into proven and probable reserves. Our assessment is based on the following factors: results from previous drill programs; results from geological models; results from a mine scoping study confirming economic viability of the resource; and preliminary estimates of mine inventory, ore grade, cash flow and mine life. In addition, the Company must have all permitting and/or contractual requirements necessary to have the right to and/or control of the future benefit from the targeted ore body. The costs of a drilling program that meet these criteria are capitalized as mine development costs. All other drilling and related costs, including those beyond the boundaries of the development and production stage properties, are expensed as incurred.

          Drilling and related costs of approximately $0.7 million and $1.9 million, respectively, for the three and nine months ended September 30, 2008 and $0.5 million and $2.2 million, respectively, for the three and nine months ended September 30, 2007, met the criteria for capitalization listed above at our properties that are in the development and production stages.

          The cost of removing overburden and waste materials to access the ore body at an open pit mine prior to the production phase are referred to as “pre-stripping costs.” Pre-stripping costs are capitalized during the development of an open pit mine. Stripping costs incurred during the production phase of a mine are variable production costs that are included as a component of inventory to be recognized in production costs applicable to sales in the same period as the revenue from the sale of inventory.

          Mineral Interests: Significant payments related to the acquisition of land and mineral rights are capitalized as incurred. Prior to acquiring such land or mineral rights, the Company generally makes a preliminary evaluation to determine that the property has significant potential to develop an economic ore body. The time between initial acquisition and full evaluation of a property’s potential is variable and is determined by many factors including: location relative to existing infrastructure, the property’s stage of development, geological controls and metal prices. If a mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on recoverable ounces to be mined from proven and probable reserves. If no mineable ore body is discovered, such costs are expensed in the period in which it is determined the property has no future economic value. The Company amortizes its mineral interests in the Endeavor and Broken Hill mines using the units of production method.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

          Asset Impairment: The Company follows Statement of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” to evaluate the recoverability of its assets. Management reviews and evaluates its long-lived assets for impairment when events and changes in circumstances indicate that the related carrying amounts of its assets may not be recoverable. Impairment is considered to exist if total estimated future cash flows or probability-weighted cash flows on an undiscounted basis, are less than the carrying amount of the assets, including property plant and equipment, mineral property, development property, and any deferred costs. An impairment loss is measured and recorded based on the difference between book value and discounted estimated future cash flows or the application of an expected present value technique to estimate fair value in the absence of a market price. Future cash flows include estimates of recoverable ounces, gold and silver prices (considering current and historical prices, price trends and related factors), production levels and capital, all based on life-of-mine plans and projections. Assumptions underlying future cash flow estimates are subject to risks and uncertainties. If the assets are impaired, a calculation of fair value is performed and if the fair value is lower than the carrying value of the assets, the assets are reduced to their fair market value. Any differences between significant assumptions and market conditions and/or the Company’s operating performance could have a material effect on the Company’s determination of ore reserves, or its ability to recover the carrying amounts of its long-lived assets resulting in impairment charges. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular mine for which there is identifiable cash flow.

          Restricted Cash and Cash Equivalents: The Company, under the terms of its lease, self insurance, and bonding agreements with certain banks, lending institutions and regulatory agencies, is required to collateralize certain portions of the Company’s obligations. The Company has collateralized these obligations by assigning certificates of deposit that have maturity dates ranging from three months to a year, to the respective institutions or agency. At September 30, 2008 and December 31, 2007, the Company held certificates of deposit and cash under these agreements of $25.0 million and $25.8 million, respectively, restricted for this purpose. The ultimate timing for the release of the collateralized amounts is primarily dependent on the timing and closure of each mine. In order to release the collateral, the Company must seek approval from certain government agencies responsible for monitoring the mine closure status. Collateral could also be released to the extent the Company was able to secure alternative financial assurance satisfactory to the regulatory agencies. The Company believes there is a reasonable probability that the collateral will remain in place beyond a twelve-month period and has therefore classified these investments as long-term. As of September 30, 2008, the Company held certificates of deposit totaling $3.5 million that were pledged to support letters of credit to Standard Bank of Argentina of $0.5 million and $3.0 million to Banco De Credito E Inversiones.

          Reclamation and Remediation Costs: The Company follows SFAS No. 143, “Accounting for Asset Retirement Obligations”, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. An accretion cost, representing the increase over time in the present value of the liability, is recorded each period in depreciation, depletion and amortization expense. As reclamation work is performed or liabilities are otherwise settled, the recorded amount of the liability is reduced.

          Future remediation costs for inactive mines are accrued based on management’s best estimate at the end of each period of the undiscounted costs expected to be incurred at the site. Such cost estimates include, where applicable, ongoing care and maintenance and monitoring costs. Changes in estimates are reflected in earnings in the period an estimate is revised.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

          Foreign Currency: Substantially all assets and liabilities of foreign subsidiaries are translated at exchange rates in effect at the end of each period. Revenues and expenses are translated at the average exchange rate for the period. Foreign currency transaction gains and losses are included in the determination of net income and/or capitalized in connection with construction activities at the Palmarejo project.

          Derivative Financial Instruments: The Company accounts for derivative financial instruments in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (as amended by SFAS No. 137) and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities.” These Statements require recognition of all derivatives as either assets or liabilities on the balance sheet and measurement of those instruments at fair value. Appropriate accounting for changes in the fair value of derivatives held is dependent on whether the derivative instrument is designated and qualifies as an accounting hedge and on the classification of the hedge transaction.

          For derivative instruments that are designated and qualify as cash flow hedges, the effective portions of changes in fair value of the derivative are recorded in other comprehensive income (loss), and are recognized in the Statement of Consolidated Operations when the hedged item affects net income (loss) for the period. Ineffective portions of changes in the fair value of cash flow hedges are recognized currently in earnings. Refer to Note J — Derivative Financial Instruments and Fair Value of Financial Instruments.

          Stock-based Compensation Plans: Effective January 1, 2006, the Company began recording compensation expense associated with awards of equity instruments in accordance with SFAS No. 123(R), “Share-Based Payment”. Prior to January 1, 2006, the Company accounted for awards of equity instruments according to the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. The Company adopted the modified prospective transition method provided for under SFAS No. 123(R), and, consequently, has not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with awards of equity instruments recognized includes: 1) amortization related to the remaining unvested portion of all awards granted for the fiscal years 1995 to 2005, based on the grant date fair value, estimated in accordance with the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”; and 2) amortization related to all equity instrument awards granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). The compensation costs are included in administrative and general expenses, production costs applicable to sales and the cost of self-constructed property, plant and equipment as deemed appropriate.

          The Company continues to estimate the fair value of each stock option award on the date of grant using the Black-Scholes option valuation model. In addition, the Company estimates the fair value of performance share grants using the Monte Carlo simulation valuation model. The Company estimates forfeitures of stock-based awards based on historical data and periodically adjusts the forfeiture rate. The adjustment of the estimated forfeiture rate will result in a cumulative adjustment in the period the forfeiture estimate is changed.

          Income Taxes: The Company computes income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” SFAS No. 109 requires an asset and liability approach which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences or benefits of temporary differences between the financial reporting basis and the tax basis of assets and liabilities, as well as operating loss and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
(dollars in thousands, except per share, per ounce amounts)

          In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. A valuation allowance has been provided for the portion of the Company’s net deferred tax assets for which it is more likely than not that they will not be realized.

          During the third quarter of 2008, the Company provided liabilities for uncertain tax positions in accordance with the requirements of FASB Interpretation No. 48, or FIN 48, “Accounting for Uncertainty in Income Taxes”. FIN 48 requires that the Company evaluate positions taken or expected to be taken in its income tax filings under jurisdictions where it is required to file tax returns and provide liability for any positions that do not meet a “more likely than not” likelihood of being sustained if examined by tax authorities. As of September 30, 2008, the Company has accrued $0.6 million related to uncertain tax positions. The Company has substantially concluded all U.S. Federal Income tax matters for years through 1999. Federal Income tax returns for 2000 through 2007 are subject to examination. The Company recognizes potential incurred interest and penalties related to unrecognized tax benefits in income tax expense. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions.

          Comprehensive Income: Comprehensive income includes net income (loss) as well as changes in stockholders’ equity that result from transactions and events other than those with stockholders. Items of comprehensive income include the following:

		Three Months								Nine Months
		Ended September 30,								Ended September 30,
		2008				2007				2008				2007
Net income (loss)		$	(3,634	)		$	3,635			$	(4,291	)		$	29,571
Unrealized gain (loss) on securities			(609	)			(65	)			(724	)			96
Change in fair value of cash flow hedges, net of settlements			83				(161	)			(130	)			188
Other			—				—				—				6
		$	(4,160	)		$	3,409			$	(5,145	)		$	29,861

Net Income (loss) Per Share: The Company follows SFAS No. 128, “Earnings Per Share,” which requires the presentation of basic and diluted earnings per share. Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during each period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The calculation of EPS for three and nine months ended September 30, 2008 and 2007 are as follows:

		Three Months Ended												Nine Months Ended
		September 30, 2008												September 30, 2008
		Loss				Shares				Per-Share				Loss				Shares				Per-Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Basic EPS
Net loss available to common shareholders		$	(3,634	)			550,096			$	(0.01	)		$	(4,291	)			550,059			$	(0.01	)
Effect of Dilutive Securities
Equity awards			—				—				—				—				—				—
1.25% Convertible Notes			—				—				—				—				—				—
Diluted EPS
Net loss		$	(3,634	)			550,096			$	(0.01	)		$	(4,291	)			550,059			$	(0.01	)

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

		Three Months Ended												Nine Months Ended
		September 30, 2007												September 30, 2007
		Income				Shares				Per-Share				Income				Shares				Per-Share
		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Basic EPS
Net income available to common shareholders		$	3,635				277,800			$	0.01			$	29,571				277,747			$	0.11
Effect of Dilutive Securities
Equity awards			—				852				—				—				818				—
1.25% Convertible Notes			74				23,684				—				223				23,684				—
Diluted EPS
Net income available to common shareholders		$	3,709				302,336			$	0.01			$	29,794				302,249			$	0.10

          Potentially dilutive shares (23,684,211 shares attributed to the 1.25% Convertible Senior Notes and 3,718,845 shares attributed to outstanding options and non-vested shares) have been excluded from the earnings per share calculation for the three and nine months ended September 30, 2008 as their effect was anti-dilutive. The 3 ¹/4% Convertible Senior Notes were not included in the computation of diluted EPS because there is no excess conversion value over the principal amount of the notes.

          Debt Issuance Costs: Costs associated with the issuance of debt are included in other noncurrent assets and are amortized over the term of the related debt.

          Use of Estimates: The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in their consolidated financial statements and accompanying notes. The areas requiring the use of management’s estimates and assumptions relate to recoverable ounces from proven and probable reserves that are the basis of future cash flow estimates and units-of-production depreciation and amortization calculations; useful lives utilized for depreciation, depletion and amortization; estimates of future cash flows for long lived assets; estimates of recoverable gold and silver ounces in ore on leach pad; the amount and timing of reclamation and remediation costs; valuation allowances for deferred tax assets; and estimates of other employee benefit liabilities.

          Reclassifications: Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or cash flows for the periods presented. On June 27, 2008 the Company reclassified approximately $71.8 million from non-producing and development properties to operational mining properties related to the commencement of operations at the San Bartolomé mine.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

          Recent Accounting Pronouncements and Developments:

          Accounting for Convertible Debt Instruments

          In May 2008, the FASB issued FSP No. APB 14-1 “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (the “FSP”). The FSP applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under FASB Statement No. 133. Convertible debt instruments within the scope of the FSP are not addressed by the existing APB 14. The FSP would require that the liability and equity components of convertible debt instruments within the scope of the FSP be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate. This will require an allocation of the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component would be reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method. FSP APB 14-1 is effective for the Company’s fiscal year beginning January 1, 2009 and will be applied retrospectively to all periods presented. The Company estimates that approximately $140.1 million of debt discount will be recorded and the effective interest rate on the Company’s 3 1/4% Convertible Senior Notes will increase by approximately 7.6 percentage points to 10.8%, including the amortization of the debt discount.

NOTE C— RECENTLY ADOPTED ACCOUNTING STANDARDS

          On January 1, 2008, the Company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (fair value option) with changes in fair value reported in earnings. The Company already records marketable securities at fair value in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and derivative instruments and hedging activities at fair value in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (SFAS 133). The adoption of SFAS 159 had no impact on the financial statements as management did not elect the fair value option for any other financial instruments or other assets and liabilities.

          On January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”) as it relates to financial assets and financial liabilities. In February 2008, the FASB staff issued Staff Position No. 157-2 “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”). FSP FAS 157-2 delayed the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The provisions of FSP FAS 157-2 are effective for the Company’s fiscal year beginning January 1, 2009. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.

          SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under SFAS 157 are described below:

	Level 1		Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
	Level 2		Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	Level 3		Inputs that are both significant to the fair value measurement and unobservable.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued
(dollars in thousands, except per share, per ounce amounts))

          The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by SFAS 157, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

		Fair Value at September 30, 2008
		Total				Level 1				Level 2				Level 3
Assets:
Cash equivalents		$	7,537			$	7,537			$	—			$	—
Marketable equity securities			9				9				—				—
Marketable debt securities			21,111				—				21,111				—
Short-term certificates of deposit			2,190				—				2,190				—
Restricted Investments			2,031				—				2,031				—
Asset-backed commercial paper			5,148				—				—				5,148
		$	35,836			$	7,546			$	23,142			$	5,148
Liabilities:
Derivative instruments, net		$	6,373			$	—			$	6,373			$	—
1.25% debentures			124,200				124,200				—				—
3.25% debentures			135,700				135,700				—				—
		$	266,273			$	259,900			$	6,373			$	—

          The Company’s cash equivalents and marketable equity securities are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash equivalents that are valued based on quoted market prices in active markets are primarily comprised of commercial paper, short-term certificates of deposit and U.S. Treasury securities.

          The Company’s marketable debt, short-term certificates of deposit and restricted investments are valued using quoted market prices in active markets and as such are classified within Level 2 of the fair value hierarchy. The fair value of the marketable equity securities is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company.

          The asset backed commercial paper falls within Level 3 of the fair value hierarchy because there are no observable market quotes. For these instruments, management uses significant other observable inputs adjusted for various factors such as liquidity or management’s best estimate of fair value.

          The Company’s derivative instruments are valued using quoted market prices and other significant observable inputs. Such financial instruments consist of foreign currency contracts and commodity contracts. Such instruments are typically classified within Level 2 of the fair value hierarchy.

          The Company’s outstanding debentures are classified within level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

NOTE D— INVESTMENTS AND OTHER MARKETABLE SECURITIES

     The Company classifies its investment securities as available-for-sale securities. Pursuant to SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities”, such securities are measured at fair market value in the financial statements with unrealized gains or losses recorded in other comprehensive income. At the time securities are sold or otherwise disposed of, gains or losses are included in net income. The following is a summary of available-for-sale securities:

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

		Available-For-Sale Securities
						Gross				Gross				Estimated
						Unrealized				Unrealized				Fair
		Cost				Losses				Gains				Value
As of September 30, 2008
U.S. Corporate		$	7,328			$	(3	)		$	—			$	7,325
U.S. Government			15,976				—				—				15,976
Total current available for sale securities			23,304				(3	)			—				23,301
Asset-Backed Commercial Paper			5,148				—				—				5,148
Equity securities			10				(1	)			—				9
Total available for sale securities		$	28,462			$	(4	)		$	—			$	28,458
As of December 31, 2007
U.S. Corporate		$	2,000			$	—			$	—			$	2,000
U.S. Government			51,031				—				8				51,039
Total current available for sale securities			53,031				—				8				53,039
Asset-Backed Commercial Paper			5,286				—				—				5,286
Equity securities			99				—				702				801
		$	58,416			$	—			$	710			$	59,126

          Gross realized gains and losses are based on the carrying value (cost, net of discount or premium) of short-term investments and equity securities sold or adjusted for other than temporary decline in market value. Short-term investments mature at various dates. The Company recorded $0.6 million realized gains in the nine months ended September 30, 2008. There were no realized losses in the 2008 or 2007 periods.

          Asset-Backed Commercial Paper (“ABCP”)

          The Company acquired certain asset-backed securities in connection with the Bolnisi and Palmarejo acquisition. Palmarejo has investments in non-bank sponsored ABCP, of which $6.3 million is invested in Apsley Trust Class E and $0.5 million in Aurora Trust Class A.

          Since a portion of the assets supporting the commercial paper was invested in U.S. sub-prime residual mortgage-backed securities, the Company determined the fair value of the investments based on the best available market data for such investments at the date of acquisition. The Company recorded these investments at the date of the Palmarejo acquisition, as a non-current asset, at their estimated fair value of $5.1 million ($5.3 million Canadian dollars). No impairments beyond the value initially recorded were deemed necessary at September 30, 2008. The fair value reported may change materially in subsequent periods.

NOTE E — METAL AND OTHER INVENTORIES

          Inventories consist of the following:

		September 30,				December 31,
		2008				2007
Concentrate and doré inventory		$	16,201			$	11,221
Supplies			15,399				7,697
Metal and other inventories		$	31,600			$	18,918

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) – (Continued)
(dollars in thousands, except per share, per ounce amounts)

NOTE F — STOCK-BASED COMPENSATION PLANS

          The Company has an Annual Incentive Plan, Long-Term Incentive Plans (the “2003 Long-Term Incentive Plan” and the “1989 Long-Term Incentive Plan”) and the 2005 Non-Employee Directors’ Equity Incentive Plan (“2005 Non-Employee Directors’ Plan”). Total employee compensation expense charged to operations and capital projects under these Plans was $1.2 million and $5.0 million, and $1.6 million and $4.7 million for the three and nine months ended September 30, 2008 and 2007, respectively.

Annual Incentive Plan

          Under the Annual Incentive Plan, the Board of Directors may annually approve cash-based awards to the executive officers and key management employees based on certain Company and employee performance measures. Cash payments for the nine months ended September 30, 2008 and 2007, amounted to $2.6 million and $2.2 million, respectively, and relate to accruals for the years 2008 and 2007.

1989 Long-Term Incentive Plan

          Under the 1989 Long-Term Incentive Plan, as amended by shareholders in 1995, the Company may grant non-qualified and incentive stock options that are exercisable at prices equal to the fair market value of the shares on the date of grant and vest cumulatively at an annual rate of one third during the three-year period following the date of grant. In addition to stock options, the Company’s 1989 Long-Term Incentive Plan provides for grants of stock appreciation rights (SARs), restricted stock, restricted stock units, performance shares, performance units, cash based awards, and stock based awards.

          The number of shares authorized to be issued under this plan was 2.9 million shares. There were 0.6 million shares reserved for issuance under this plan at September 30, 2008 for stock options previously awarded. No further awards will be made under this plan.

2003 Long-Term Incentive Plan

          The 2003 Long-Term Incentive Plan (the “LTIP”) was approved by our shareholders on May 20, 2003, and replaced our prior 1989 Long-Term Incentive Plan. Under the plan, we may grant nonqualified stock options, incentive stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards to our executive officers and other key employees.

          The number of shares authorized for grant under this plan was 6.8 million shares. There were 5.4 million shares reserved for issuance under this plan at September 30, 2008. Of the 5.4 million shares, 3.5 million shares can be issued for future grants. There were 1.4 million options and 0.5 million performance shares outstanding under this plan at September 30, 2008.

Non-Employee Directors’ Plan

          On June 3, 2005, the Company’s shareholders approved the 2005 Non-Employee Directors’ Equity Incentive Plan and authorized 500,000 shares of common stock for issuance under the plan. During the nine months ended September 30, 2008 and September 30, 2007, 55,782 and 59,476 shares were issued in lieu of $0.3 million and $0.2 million, respectively, of Directors’ fees. At September 30, 2008, 0.3 million shares were reserved for issuance under this plan.

          Under the previous Directors’ plan, options were granted only in lieu of annual directors’ fees. At September 30, 2008, 0.4 million shares are reserved for issuance under this plan for stock options previously awarded. No further grants of options will be made under this plan.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
(dollars in thousands, except per share, per ounce amounts)

          As of September 30, 2008 and 2007, options to purchase 2,433,182 shares and 2,390,949 shares of common stock, respectively, were outstanding under the Long-Term and the Directors’ Plans described above. The options are exercisable at prices ranging from $0.74 to $7.09 per share.

          Stock options granted under the Company’s incentive plans vest over three years and are exercisable over a period not to exceed ten years from the grant date. Exercise prices are equal to the fair market value of the shares on the date of the grant. The value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model.

          Restricted stock grants are recorded based on the fair value of the underlying shares on the date of grant and vest in equal installments annually over three years. Holders of the restricted stock are entitled to vote the shares and to receive any dividends declared on the shares.

          Performance share grants are valued using a Monte Carlo simulation model on the date of grant. Compensation costs ultimately recognized are equal to the grant date fair value. Vesting is contingent on meeting certain market conditions based on relative total shareholder return. The performance shares vest at the end of the three-year service period if the market conditions are met and the employee remains an employee of the Company. The existence of a market condition requires recognition of compensation cost over the requisite period regardless of whether the market condition is ever satisfied.

          The compensation expense recognized in the Company’s consolidated financial statements for the three months ended September 30, 2008 and 2007 for awards of equity instruments was $0.4 million and $1.0 million, respectively, and $2.3 million and $2.7 million for the nine months ended September 30, 2008 and 2007, respectively. As of September 30, 2008, there was $2.0 million of total unrecognized compensation cost (net of estimated forfeitures) related to unvested stock options, restricted stock grants and performance share grants which is expected to be recognized over a weighted-average vesting period of 2.2 years.

          The weighted average fair value of stock options on the date of grant, and the assumptions used to estimate the fair value of the stock options using the Black-Scholes option valuation model were as follows:

		Nine Months Ended
		September 30,
		2008				2007
Weighted average fair value of options granted		$	2.26			$	2.35
Expected volatility			56.0%-56.2	%			58.9	%
Expected life		6 years				6 years
Risk-free interest rate			3.0% -3.35	%			4.5	%
Expected dividend yield			—				—

          The expected volatility of the option is determined using historical volatilities based on historical stock prices. The Company estimated the expected life of options granted using the midpoint between the vesting date and the original contractual term. The risk free rate was determined using the yield available on U.S. Treasury Zero-coupon issues with a remaining term equal to the expected life of the option. The Company has not paid dividends on its common stock since 1996.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
(dollars in thousands, except per share, per ounce amounts)

          The following table summarizes stock option activity during the nine months ended September 30, 2008:

						Weighted Average
		Shares				Exercise Price
Stock options outstanding at December 31, 2007			2,281,595			$	3.42
Granted			550,180				4.09
Exercised			(9,053	)			3.92
Canceled/expired			(389,540	)			4.82
Stock options outstanding at September 30, 2008			2,433,182			$	3.35

          Options to purchase 1,735,921 shares were exercisable at September 30, 2008 at a weighted average exercise price of $3.04.

          As of September 30, 2008, the total future compensation cost related to non-vested options not yet recognized in the statement of income was $0.4 million and the weighted average period over which these awards are expected to be recognized was 2.2 years.

          The following table summarizes restricted stock activity during the nine months ended September 30, 2008:

						Weighted Average
		Number of				Grant Date Fair
		Shares				Value
Outstanding at December 31, 2007			603,195			$	4.20
Granted			560,845				4.16
Vested			(265,705	)			4.22
Forfeited			(160,200	)			4.25
Outstanding at September 30, 2008			738,135			$	4.15

          As of September 30, 2008, there was $0.9 million of total unrecognized compensation cost related to restricted awards to be recognized over a weighted-average period of 2.3 years.

          The following table summarizes performance shares activity during the nine months ended September 30, 2008:

						Weighted
		Number of				Average Grant
		Shares				Date Fair Value
Outstanding at December 31, 2007			420,543			$	4.45
Granted			282,326				5.25
Vested			—				—
Forfeited			(155,341	)			4.88
Outstanding at September 30, 2008			547,528			$	4.74

          As of September 30, 2008, there was $0.6 million of total unrecognized compensation cost related to performance shares to be recognized over a weighted average period of 2.0 years.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
(dollars in thousands, except per share, per ounce amounts)

NOTE G — INCOME TAXES

          The Company computes income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” SFAS No. 109 requires an asset and liability approach which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of those assets and liabilities, as well as net operating loss and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company has U.S. net operating loss carryforwards which expire in 2011 through 2025. Net operating losses in foreign countries generally have an indefinite carryforward period, however, Mexico has a 10 year carryforward period and carryforwards there expire from 2016 through 2018.

          The following table summarizes the components of the Company’s tax provision for the three and nine months ended September 30, 2008 and 2007:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Current:
United States — Alternative minimum tax		$	422			$	3			$	(566	)		$	(306	)
United States — Foreign withholding			(523	)			(131	)			(927	)			(797	)
Argentina			443				(1,566	)			(2,496	)			(4,472	)
Australia			(1,048	)			(1,260	)			(5,339	)			(3,033	)
Mexico			(27	)			—				(49	)			—
Canada			—				—				(20	)			—
Bolivia			669				—				—				—
Deferred:
United States			403				—				1,950				—
Argentina			267				73				638				(101	)
Australia			276				(271	)			411				(632	)
Chile			608				667				(740	)			(72	)
Bolivia			(1,058	)			—				(1,446	)			—
Mexico			3,404				—				7,227				—
Income tax benefit (provision)		$	3,836			$	(2,485	)		$	(1,357	)		$	(9,413	)

          The income tax provision for the nine months ended September 30, 2008 and 2007 varies from the statutory rate primarily because of differences in tax rates for the Company’s foreign operations and changes in valuation allowances for net deferred tax assets. The tax provision for the Company’s operations in Bolivia was calculated using a year to date effective tax rate due to the volatility of current metal prices and the start-up of operations at the San Bartolomé mine in 2008.

NOTE H — SEGMENT REPORTING

     Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision-making group is comprised of the Chief Executive Officer, Chief Financial Officer, the Senior Vice President of Operations and the President of South America.

Coeur d’Alene Mines Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited) — (Continued)
(dollars in thousands, except per share, per ounce amounts)

          The operating segments are managed separately because each segment represents a distinct use of Company resources which contribute to Company cash flows in its respective geographic area. The Company’s reportable operating segments include the Rochester, Cerro Bayo, Martha, San Bartolomé, Kensington, Palmarejo, Endeavor and Broken Hill mining properties. All operating segments are engaged in the discovery and/or mining of gold and silver and generate the majority of their revenues from the sale of these precious metal concentrates and/or refined precious metals. The Cerro Bayo and Martha mines sell precious metal concentrates, typically under long-term contracts, to smelters located in Japan (Dowa Mining Ltd.), Mexico (Met-Mex Penoles) and Germany (Nordeutsche). Refined gold and silver produced by the San Bartolomé and Rochester mines are principally sold on a spot basis to precious metals trading banks such as Standard Bank and Mitsui. Concentrates produced at the Endeavor and Broken Hill mines are sold to Nystar (formerly Zinifex), an Australia smelter. The Company’s exploration programs are reported as other. The other segment also includes the corporate headquarters, elimination of intersegment transactions and other items necessary to reconcile to the consolidated amounts. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies above. The Company evaluates performance and allocates resources based on profit or loss.

          Financial information relating to the Company’s segments is as follows:

Segment Reporting
(In Thousands)

						Cerro												Broken				San
		Rochester				Bayo				Martha				Endeavor				Hill				Bartolomé				Kensington				Palmarejo
		Mine				Mine				Mine				Mine				Mine				Mine				Project				Project				Other				Total
Three Months Ended September 30, 2008
Total net sales of metals		$	20,732			$	6,737			$	3,747			$	2,427			$	3,225			$	2,895			$	—			$	—			$	—			$	39,763
Production costs applicable to sales			11,583				8,530				4,229				186				645				5,521				—				—				—				30,694
Depreciation and depletion			551				1,661				1,390				545				553				1,793				—				(8	)			136				6,621
Exploration expense			118				668				1,521				—				—				(116	)			112				2,067				1,454				5,824
Other operating expenses			2				5				(68	)			—				—				27				125				627				4,668				5,386
Interest and other income			1				501				(381	)			—				—				1,385				9				18				762				2,295
Interest expense			—				—				(68	)			—				—				—				3				(578	)			1,646				1,003
Income tax (benefit) expense			—				(607	)			(710	)			—				—				390				—				(3,404	)			495				(3,836	)
Profit (loss)			8,479				(3,019	)			(2,928	)			1,696				2,027				(3,335	)			(231	)			1,314				(7,637	)			(3,634	)
Segment assets (A)		$	36,074			$	50,535			$	43,068			$	42,254			$	25,439			$	270,028			$	334,498			$	1,876,771			$	12,578			$	2,691,245
Capital expenditures		$	273			$	2,623			$	246			$	2			$	—			$	29,635			$	12,876			$	42,265			$	(193	)		$	87,727

																		Broken				San
		Rochester				Cerro Bayo				Martha				Endeavor				Hill				Bartolomé				Kensington				Palmarejo
		Mine				Mine				Mine				Mine				Mine				Mine				Project				Project				Other				Total
Three Months Ended September 30, 2007
Total net sales of metals		$	23,250			$	12,410			$	9,986			$	1,817			$	5,400			$	—			$	—			$	—			$	—			$	52,863
Production costs applicable to sales			17,977				14,549				4,694				141				870				—				—				—				—				38,231
Depreciation and depletion			911				1,443				487				174				756				—				—				—				124				3,895
Exploration expense			36				817				1,063				—				—				—				68				—				1,284				3,268
Other operating expenses			73				3				7				—				—				—				—				—				4,623				4,706
Interest and other income			60				293				(159	)			—				—				—				38				—				3,204				3,436
Interest expense			—				3				—				—				—				—				—				—				76				79
Income tax (benefit) expense			—				(667	)			1,967				—				—				—				10				—				1,175				2,485
Profit (loss)			4,313				(3,445	)			1,609				1,502				3,774				—				(40	)			—				(4,078	)			3,635
Segment assets (A)		$	77,342			$	55,702			$	17,764			$	17,131			$	28,881			$	137,833			$	290,464				—			$	14,159			$	639,276
Capital expenditures		$	632			$	3,016			$	4,854			$	—			$	1			$	21,430			$	26,623			$	—			$	769			$	57,325

																		Broken				San
		Rochester				Cerro Bayo				Martha								Hill				Bartolomé				Kensington				Palmarejo
		Mine				Mine				Mine				Endeavor				Mine				Mine				Project				Project				Other				Total
Nine Months Ended September 30, 2008
Total net sales of metals		$	56,762			$	37,662			$	22,765			$	11,061			$	15,928			$	2,895			$	—			$	—			$	—			$	147,073
Production costs applicable to sales			35,376				24,595				12,482				781				2,156				5,462				—				—				—				80,852
Depreciation and depletion			1,724				6,693				3,643				1,524				1,914				1,853				—				831				409				18,591
Exploration expense			202				2,160				3,770				—				—				56				145				4,749				3,209				14,291
Other operating expenses			2				888				17				—				—				27				1,434				16,024				18,993				37,385
Interest and other income			6				107				(443	)			—				—				1,384				46				(60	)			2,763				3,803
Interest expense			—				—				1				—				—				—				3				476				2,211				2,691
Income tax (benefit) expense			—				741				1,858				—				—				1,447				—				(7,227	)			4,538				1,357
Profit (loss)			19,464				2,692				551				8,756				11,858				(4,566	)			(1,536	)			(14,913	)			(26,597	)			(4,291	)
Segment assets (A)		$	36,074			$	50,535			$	43,068			$	42,254			$	25,439			$	270,028			$	334,498			$	1,876,771			$	12,578			$	2,691,245
Capital expenditures		$	434			$	6,759			$	3,915			$	26,513			$	—			$	97,093			$	32,306			$	88,869			$	473			$	256,362