UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005

OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to

Commission File Number 1-8641

COEUR D'ALENE MINES CORPORATION
(Exact name of registrant as specified in its charter)

Idaho
82-0109423
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

505 Front Ave., P. O. Box “I”
Coeur d'Alene, Idaho
83816
(Address of principal Executive Offices) (Zip Code)

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

Securities Registered pursuant to Section 12(b) of the Act:

Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, par value $1.00 per share New York Stock Exchange/Toronto Stock Exchange/Pacific Stock Exchange
1 ¼% Convertible Senior Notes due January 15, 2024 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

        Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.

Yes    X     No        

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        Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes           No    X  

        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    X     No        

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[v]

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer  |X|   Accelerated filer  |_|   Non-accelerated filer  |_|

        Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes           No    X  

        State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant. (The aggregate market value is computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter.)

$868,596,996

        Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of February 28, 2006.

250,141,360 shares of Common Stock, Par Value $1.00

DOCUMENTS INCORPORATED BY REFERENCE

        The information called for by Part III of the Form 10-K is incorporated by reference from the registrant’s definitive proxy statement which will be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

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TABLE OF CONTENTS

PART I    
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 4A. Executive Officers of the Registrant

PART II
Item 5. Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information

PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions
Item 14. Principal Accountant Fees and Services

PART IV
Item 15. Exhibits and Financial Statement Schedules
SIGNATURES

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PART I

Item 1. Business

INTRODUCTION

        Coeur d’Alene Mines Corporation is the largest primary silver producer in North America and is engaged, through its subsidiaries, in the operation and/or ownership, development and exploration of silver and gold mining properties and companies located primarily within the United States (Nevada, Idaho and Alaska) South America (Chile, Argentina and Bolivia), Australia (New South Wales) and Africa (Tanzania). Coeur d’Alene Mines Corporation and its subsidiaries are hereinafter referred to collectively as “Coeur” or the “Company.”

OVERVIEW OF MINING PROPERTIES AND INTERESTS

        The Company’s most significant operating and development-stage mining properties and interests are:

  The Rochester mine is a silver and gold surface mining operation located in northwestern Nevada and is 100% owned and operated by Coeur. It is one of the largest primary silver mines in the United States. During 1999, the Company acquired the mineral rights to the Nevada Packard property, which is located one and one-half miles south of the Rochester mine, and commenced mining there in the first quarter of 2003.

  Coeur owns 100% of the Cerro Bayo mine in southern Chile, which comprises a high grade gold and silver underground mine and processing facilities. The Cerro Bayo deposit was discovered during 2000. Initial mining operations commenced in late 2001 and processing started in April 2002. The Company carries on an active exploration program on its 205 square mile property package.

  Coeur owns 100% of the capital stock of Coeur Argentina S.R.L., which owns and operates the high-grade Martha underground silver mine located 270 miles southeast of the Cerro Bayo Mine in Chile. Mining operations commenced at the Martha Mine in June 2002.

  Coeur owns 100% of the capital stock of Coeur Silver Valley (“Silver Valley”), which owns and operates the Galena underground silver mine and owns the adjacent Coeur underground silver mine that discontinued operations on July 2, 1998. In addition, Silver Valley owns the Caladay property that adjoins the Galena Mine and has operating control of several contiguous exploration properties in the Coeur d’Alene Silver Mining District of Idaho.

  The Company acquired, in May 2005, all of the silver production and reserves, up to 17.7 million payable ounces, contained at the Endeavor mine in Australia which is owned and operated by Cobar Operations Pty. Limited (“Cobar”), a wholly-owned subsidiary of CBH Resources Ltd. (“CBH”) for up to $38.4 million. The Endeavor mine is an underground zinc/lead/silver mine located in New South Wales, Australia which has been in production since 1983.

  The Company acquired, in September 2005, all of the silver production and reserves, up to 17.2 million payable ounces, contained at the Broken Hill mine in Australia, which is owned and operated by Perilya Broken Hill Ltd. (“PBH”) for $36.0 million. The Broken Hill Mine is located in New South Wales, Australia and is an underground zinc/lead/silver mine.

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  Coeur owns 100% of Empressa Minera Manquiri S.A. (“Manquiri”), a Bolivian company that controls the mining rights for the San Bartolome project, which is an open pit silver mine in Bolivia where an updated feasibility study was completed in 2004 and construction activities have commenced. The Company continues to monitor events in Bolivia to determine when to commence full scale construction activities. The Company believes that commercial production could begin as early as 2007.

  The Company owns 100% of the Kensington property, located north of Juneau, Alaska, which is a development-stage gold property. An updated feasibility study was completed for the property during 2004 and construction activities commenced in 2005. On November 12, 2005, the Federal District Court in Alaska granted a remand of the Section 404 permit to the Army Corp of Engineers and on November 22, 2005, the US Army Corp of Engineers suspended the permit to further review it. The Company believes the permit will be reinstated upon completion of the review which is expected in the first quarter of 2006. The Company is currently conducting construction activities not governed by the Section 404 permit. The Company believes production could commence as early as late 2007, subject to successful resolution of the permitting and litigation issues described above.

        Coeur also has interests in other properties which are subject to silver or gold exploration activities upon which no mineable ore reserves have yet been delineated.

EXPLORATION STAGE MINING PROPERTIES

        The Company, either directly or through wholly-owned subsidiaries, owns, leases and has interests in certain exploration-stage mining properties located in the United States, Chile, Argentina, Bolivia and Tanzania. In keeping with its overall efforts to focus its resources, the Company conducted the majority of its exploration activities during 2005 on or near existing properties where infrastructure and production facilities are already in place. During 2005, the Company significantly increased its exploration activities. During 2006, the Company expects to incur exploration costs of approximately $10.9 million.

BUSINESS STRATEGY

        The Company’s business strategy is to capitalize on the ore reserve/mineralized material bases located at its operating mines and the expertise of its management team to continue as one of the world’s leading primary silver production companies through long-term, cash flow generating growth. The principal elements of the Company’s business strategy are to: (i) increase the Company’s silver production and reserves; (ii) decrease cash costs and increase production at the Company’s existing silver mining operations; (iii) transform development-stage properties into producing mines; (iv) acquire operating mines, mineral interests, exploration and/or development properties with a view to reducing the Company’s cash and total costs per ounce of silver produced, provide immediate positive cash flow return and expand its silver production base and reserves; and (v) continue to explore for new silver and gold discoveries primarily near its existing mine sites and evaluate new opportunities to expand its production through acquisitions and exploration.

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SOURCES OF REVENUE

        The Rochester mine, Cerro Bayo mine, Martha mine and Silver Valley’s Galena mine, each operated by the Company, and the Endeavor and Broken Hill mines operated by others, constituted the Company’s principal sources of mining revenues in 2005. The following table sets forth information regarding the percentage contribution to the Company’s total revenues (i.e., revenues from the sale of concentrates and doré) by the sources of those revenues during the past five years:

Mine/Company
Coeur Percentage
Ownership at
December 31, 2005

Percentage of Total Revenues
for the Years Ended December 31,

2005
2004
2003
2002
2001
Rochester Mine   100 % 40 % 48 % 41 % 59 % 71 %
Cerro Bayo Mine(1)  100   35   27   36   13   --  
Martha Mine  100   12   7   8   4   --  
Galena Mine  100   9   18   15   24   22  
Endeavor Mine(2)  100   1   --   --   --   --  
Broken Hill Mine(2)  100   3   --   --   --   --  
Petorca Mine(3)  --   --   --   --   --   7  






  100 % 100 % 100 % 100 % 100 %






(1) The Company closed the original Fachinal Mine in 2000 and subsequently commenced operations at the Cerro Bayo Mine, located within the same property package but to the east of Fachinal, in April 2002.

(2) Ownership interest reflects the Company’s ownership interest in the property’s silver reserves. Other constituent metals are owned by another non-affiliated entity.

(3) The Company closed the Petorca Mine in August 2001 and sold its interest on August 30, 2002. The Company’s interest in the Petorca Mine was 100% prior to the sale.

DEFINITIONS

        The following sets forth definitions of certain important mining terms used in this report.

“Ag” is the abbreviation for silver.

“Au” is the abbreviation for gold.

“Cash Costs” are costs directly related to the physical activities of producing silver and gold, and include mining, processing, transportation and other plant costs, third-party refining and smelting costs, marketing expense, on-site general and administrative costs, royalties and in-mine drilling expenditures that are related to production and other direct costs. Sales of by-product metals, including gold, are deducted from the above in computing cash costs per ounce. Cash costs exclude depreciation, depletion and amortization, corporate general and administrative expense, exploration, interest, and pre-feasibility costs and accruals for mine reclamation. Cash costs are calculated and presented using the “Gold Institute Production Cost Standard” applied consistently for all periods presented.

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“Cash Costs per Ounce” are calculated by dividing the cash costs computed for each of the Company’s mining properties for a specific period by the amount of gold ounces or silver ounces produced by that property during that same period. Management uses cash costs per ounce produced as a key indicator of the profitability of each of its mining properties. Gold and silver are sold and priced in the world financial markets on a US dollar per ounce basis. By calculating the cash costs from each of the Company’s mines on the same unit basis, management can easily determine the gross margin that each ounce of gold and silver produced is generating. While this represents a key indicator of the performance of the Company’s mining properties you are cautioned not to place undue reliance on this single measurement. To fully evaluate a mine’s performance, management also monitors US Generally Accepted Accounting Principles (“GAAP”) based profit/(loss), depreciation and amortization expenses and capital expenditures for each mine as presented in Note O – Segment Information in the Notes to the Company’s Consolidated Financial Statements. Total cash costs per ounce is a non-GAAP measurement and investors are cautioned not to place undue reliance on it and are urged to read all GAAP accounting disclosures presented in the consolidated financial statements and accompanying footnotes.

“Concentrate” is a product containing the valuable metal and from which most of the waste material in the ore has been eliminated.

“Cut-off Grade” is the lowest grade of mineral resource considered economic; used in the calculation of reserves in a given deposit.

“Cyanidation” is a method of extracting gold or silver by dissolving it in a weak solution of sodium or potassium cyanide.

“Dilution” is an estimate of the amount of waste or low-grade mineralized rock which will be mined with the ore as part of normal mining practices in extracting an ore body.

“Doré” is unrefined gold and silver bullion bars which contain gold, silver and minor amounts of impurities which will be further refined to almost pure metal.

“Gold” is a metallic element with minimum fineness of 999 parts per 1000 parts pure gold.

“Heap Leaching Process” is a process of extracting gold and silver by placing broken ore on an impermeable pad and applying a diluted cyanide solution that dissolves a portion of the contained gold and silver, which are then recovered in metallurgical processes.

“Mineralized Material” is gold and silver bearing material that has been physically delineated by one or more of a number of methods including drilling, underground work, surface trenching and other types of sampling. This material has been found to contain a sufficient amount of mineralization of an average grade of metal or metals to have economic potential that warrants further exploration evaluation. While this material is not currently or may never be classified as reserves, it is reported as mineralized material only if the potential exists for reclassification into the reserves category. This material cannot be classified in the reserves category until final technical, economic and legal factors have been determined. Under the United States Securities and Exchange Commission’s standards, a mineral deposit does not qualify as a reserve unless the recoveries from the deposit are expected to be sufficient to recover total cash and non-cash costs for the mine and related facilities and make a profit.

“Non-cash Costs” are costs that are typically accounted for ratably over the life of an operation and include depreciation, depletion and amortization of capital assets, accruals for the costs of final reclamation and long-term monitoring and care that are usually incurred at the end of mine life, and the amortization of the cost of property acquisitions.

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“Ore Reserve” is the part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.

“Probable Reserve” is a part of a mineralized deposit which can be extracted or produced economically and legally at the time of the reserve determination. The quantity and grade and/or quality of a probable reserve is computed from information similar to that used for a proven reserve, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. Mining dilution has been factored into the estimation of probable reserves. The Company used a price estimate of $6.50 per ounce for silver, with the exception of San Bartolome which uses $6.00 per ounce and Endeavor which uses $7.06 per ounce of silver, and $410 per ounce for gold with the exception of Kensington which uses $375 per ounce of gold in estimating probable reserves at December 31, 2005.

“Proven Reserves” are a portion of a mineral deposit which can be extracted or produced economically and legally at the time of the reserve determination. The quantity of a proven reserve is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and the sites for inspections, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of a proven reserve is well-established. Mining dilution has been factored into the estimation of proven reserves. The Company used a price estimate of $6.50 per ounce for silver, with the exception of San Bartolome which uses $6.00 per ounce and Endeavor which uses $7.06 per ounce of silver, and $410 per ounce for gold, with the exception of Kensington which uses $375 per ounce of gold in estimating proven reserves at December 31, 2005.

“Run-of-mine Ore” is mined ore which has not been subjected to any pretreatment, such as washing, sorting or crushing prior to processing.

“Silver” is a metallic element with minimum fineness of 995 parts per 1000 parts pure silver.

“Stripping Ratio” is the ratio of the number of tons of waste material to the number of tons of ore extracted at an open-pit mine.

“Ton” means a short ton which is equivalent to 2,000 pounds, unless otherwise specified.

“Total costs” are the sum of cash costs and non-cash costs.

IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS

        This report contains numerous forward-looking statements relating to the Company’s gold and silver mining business, including estimated production data, expected operating schedules, expected capital costs and other operating data and permit and other regulatory approvals. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,” “hopes,” “may,” “should,” “plan,” “projected,” “contemplates,” “anticipates” or similar words. Actual production, operating schedules, results of operations, ore reserve and resource estimates and other projections and estimates could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include (i) the risk factors set forth below under Item 1A, (ii) the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), (iii) changes in the market prices of gold and silver, (iv) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays, (v) the uncertainties inherent in the estimation of gold and silver ore reserves, (vi) changes that could result from the Company’s future acquisition of new mining properties or businesses, (vii) the effects of environmental and other governmental regulations, and (viii) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.

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Item 1A. Risk Factors

        The following information sets forth information relating to important risks and uncertainties that could materially adversely affect the Company’s business, financial condition or operating results. References to “we,” “our” and “us” in these risk factors refer to the Company. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also impair our business operations.

Risks Relating to our Business

  Prior to 2005, we incurred losses due to several factors and could incur losses in the future.

        We incurred net losses in the five years prior to 2005 and had losses from continuing operations in each of those prior periods. Factors that significantly contributed to our losses are:

  until recently, historically low gold and silver market prices during those years;

  our deliberate pursuit of a growth policy prior to 2003 calling for the acquisition of mining properties and companies and financing such growth principally by incurring convertible indebtedness which had a high coupon rate, thereby resulting in an interest expense of $14.6 million in 2001, $21.9 million in 2002, $12.9 million in 2003, $2.8 million in 2004, and $2.5 million in 2005;

  write-offs for impaired assets and other holding costs in 2000 ($12.2 million), 2001 ($6.1 million), and 2002 ($19.0 million); and

  losses on the early retirement of debt of $19.1 million in 2002, and $41.6 million in 2003.

        If silver and gold prices decline and we are unable to reduce our production costs, our losses may resume. If lower silver and gold prices make mining at our properties uneconomical, we may be required to recognize additional impairment write-downs, which would increase our operating losses and negatively impact our results of operations.

  We may be required to incur additional indebtedness to fund our capital expenditures.

        We have historically financed our operations through the issuance of common stock and convertible debt, and may be required to incur additional indebtedness in the future. During 2004, we commenced construction at the San Bartolome project and in 2005 we commenced construction at Kensington project. Construction of both projects could require a total capital investment of approximately $325 million. While we believe that our cash, cash equivalents and short-term investments combined with cash flow generated from operations will be sufficient for us to make this level of capital investment, no assurance can be given that additional capital investments will not be required to be made at these or other projects. If we are unable to generate enough cash to finance such additional capital expenditures through operating cash flow and the issuance of common stock, we may be required to issue additional indebtedness. Any additional indebtedness would increase our debt payment obligations, and may negatively impact our results of operations.

  In recent years, prior to 2005, we did not have sufficient earnings to cover fixed charges, which deficiency could occur in future periods.

        As a result of our net losses prior to 2005, our earnings were not adequate to satisfy fixed charges (i.e., interest, preferred stock dividends and that portion of rent deemed representative of interest) in each of those periods prior to 2005. The amounts by which earnings were inadequate to cover fixed charges were approximately $3.1 million in 2001, $80.8 million in 2002, $63.9 million in 2003 and $22.7 million in 2004. Earnings were sufficient to cover fixed charges in 2005. As of December 31, 2005, we are required to make fixed payments on $180 million principal amount of our 1¼% Senior Convertible Notes due 2024, requiring annual interest payments of approximately $2.25 million until their maturity.

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        We expect to satisfy our fixed charges and other expense obligations in the future from cash flow from operations and, if cash flow from operations is insufficient, from working capital, which amounted to approximately $285.1 million at December 31, 2005. Prior to 2005, we experienced negative cash flow from operating activities. The amount of net cash used in our operating activities amounted to approximately $29.9 million in 2001, $8.5 million in 2002, $5.1 million in 2003 and $18.6 million in 2004. In 2005, we generated $6.7 million of operating cash flow. The availability of future cash flow from operations or working capital to fund the payment of interest on the notes and other fixed charges will be dependent upon numerous factors, including our results of operations, silver and gold prices, levels and costs of production at our mining properties and the amount of our capital expenditures and expenditures for acquisitions, developmental and exploratory activities.

  The market prices of silver and gold are volatile. If we experience low silver and gold prices it may result in decreased revenues and decreased net income or losses, and may negatively affect our business.

        Silver and gold are commodities. Their prices fluctuate, and are affected by many factors beyond our control, including interest rates, expectations regarding inflation, speculation, currency values, governmental decisions regarding the disposal of precious metals stockpiles, global and regional demand and production, political and economic conditions and other factors. Because we currently derive approximately 63% of our revenues from sales of silver, our earnings are primarily related to the price of this metal.

        The market price of silver (Handy & Harman) and gold (London Final) on February 17, 2006 was $9.43 and $552 per ounce, respectively, compared with 2005‘s average prices for silver and gold of $7.34 and $445, respectively. The price of silver and gold may decline in the future. Factors that are generally understood to contribute to a decline in the price of silver include sales by private and government holders, and a general global economic slowdown.

        If the prices of silver and gold are depressed for a sustained period and our net losses resume, we may be forced to suspend mining at one or more of our properties until the price increases, and record additional asset impairment write-downs. Any lost revenues, continued or increased net losses or additional asset impairment write-downs would adversely affect our results of operations.

  We have recorded significant write-downs of mining properties in recent years and may have to record additional write-downs, which could negatively impact our results of operations.

        Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144) established accounting standards for impairment of the value of long-lived assets such as mining properties. SFAS 144 requires a company to review the recoverability of the cost of its assets by estimating the future undiscounted cash flows expected to result from the use and eventual disposition of the asset. Impairment must be recognized when the carrying value of the asset exceeds these cash flows, and recognizing impairment write-downs has negatively impacted our results of operations in recent years.

        If silver or gold prices decline or we fail to control production costs or realize the mineable ore reserves at our mining properties, we may be required to recognize further asset write-downs. We also may record other types of additional mining property write-downs in the future to the extent a property is sold by us for a price less than the carrying value of the property, or if liability reserves have to be created in connection with the closure and reclamation of a property. Additional write-downs of mining properties could negatively impact our results of operations.

  Our revenues and income (or loss) from our interest in the Endeavor and Broken Hill mines are dependent in part upon the performance of the operators of the mine.

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        In May and September 2005, we acquired silver production and reserves at the Endeavor and Broken Hill mines in Australia, respectively. These mines are owned and operated by other mining companies. The Company’s revenues and income (or loss) from its interest in the silver production at these mines is dependent in part upon the performance of those operators and such mines.

  The estimation of ore reserves is imprecise and depends upon subjective factors. Estimated ore reserves may not be realized in actual production. Our operating results may be negatively affected by inaccurate estimates.

        The ore reserve figures presented in our public filings are estimates made by our technical personnel. Reserve estimates are a function of geological and engineering analyses that require us to make assumptions about production costs and silver and gold market prices. Reserve estimation is an imprecise and subjective process and the accuracy of such estimates is a function of the quality of available data and of engineering and geological interpretation, judgment and experience. Assumptions about silver and gold market prices are subject to great uncertainty as those prices have fluctuated widely in the past. Declines in the market prices of silver or gold may render reserves containing relatively lower grades of ore uneconomic to exploit, and we may be required to reduce reserve estimates, discontinue development or mining at one or more of our properties, or write down assets as impaired. Should we encounter mineralization or geologic formations at any of our mines or projects different from those we predicted, we may adjust our reserve estimates and alter our mining plans. Either of these alternatives may adversely affect our actual production and operating results.

        We based our ore reserve determinations as of December 31, 2005 on a long-term silver price average of $6.50 per ounce, with the exception of the Endeavor mine which uses $7.06 per ounce and the San Bartolome mine which uses $6.00 per ounce, and a long-term gold price average of $410 per ounce for all properties with the exception of the Kensington property which used a gold price of $375 per ounce. On February 17, 2006 silver and gold prices were $9.43 per ounce and $552 per ounce, respectively.

  The estimation of the ultimate recovery of metals contained within the heap leach pad inventory is inherently inaccurate and subjective and requires the use of estimation techniques. Actual recoveries can be expected to vary from estimations.

        The Rochester mine utilizes the heap leach process to extract silver and gold from ore. 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.

        The key stages in the conversion of ore into silver and gold are (i) the blasting process in which the ore is broken into large pieces; (ii) the processing of the ore through a crushing facility that breaks it into smaller pieces; (iii) the transportation of the crushed ore to the leach pad where the leaching solution is applied; (iv) the collection of the leach solution; (v) subjecting the leach solution to the precipitation process, in which gold and silver is converted back to a fine solid; (vi) the conversion of the precipitate into doré; and (vii) the conversion by a third party refinery of the doré into refined silver and gold bullion.

        We use several integrated steps to scientifically measure the metal content of ore placed on the leach pads during the key stages. As the ore body is drilled in preparation for the blasting process, samples of the drill residue are assayed to determine estimated quantities of contained metal. We estimate the quantity of ore by utilizing global positioning satellite survey techniques. We then process the ore through a crushing facility where the output is again weighed and sampled for assaying. A metallurgical reconciliation with the data collected from the mining operation is completed with appropriate adjustments made to previous estimates. We then transport the crushed ore to the leach pad for application of the leaching solution. As the leach solution is collected from the leach pads, we continuously sample for assaying. We measure the quantity of leach solution with flow meters throughout the leaching and precipitation process. After precipitation, the product is converted to doré, which is the final product produced by the mine. We again weigh, sample and assay the doré. Finally, a third party smelter converts the doré and determines final ounces of silver and gold available for sale. We then review this end result and reconcile it to the estimates we developed and used throughout the production process. Based on this review, we adjust our estimation procedures when appropriate.

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        Our reported inventories include metals estimated to be contained in the ore on the leach pads of $54.6 million as of December 31, 2005. Of this amount, $25.4 million is reported as a current asset and $29.2 million is reported as a noncurrent asset. The distinction between current and noncurrent is based upon the expected length of time necessary for the leaching process to remove the metals from the crushed 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 crushed ore that will be extracted beyond twelve months is classified as noncurrent. The ore on leach pad inventory is stated at actual production costs incurred to produce and place ore on the leach pad during the current period, adjusted for production issues encountered during the period.

        The estimate of both the ultimate recovery expected over time, and the quantity of metal that may be extracted relative to such twelve month period, requires the use of estimates which are inherently inaccurate since they rely upon laboratory test work. Test work consists of 60 day leach columns from which we project metal recoveries into 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 nineteen years of leach pad operation at the Rochester mine. The assumptions we use to measure metal content during each stage of the inventory conversion process includes estimated recovery rates based on laboratory testing and assaying. We periodically review our estimates compared to actual experience and revise our estimates when appropriate. The length of time necessary to achieve our currently estimated ultimate recoveries of between 59% and 61.5% for silver, depending on the area being leached, and 93% for gold is estimated to be between 5 and 10 years. However, the ultimate recovery will not be known until leaching operations cease, which is currently estimated for approximately 2011.

        When we began leach operations in 1986, based solely on laboratory testing, we estimated the ultimate recovery of silver and gold at 50% and 80%, respectively. Since 1986, we have adjusted the expected ultimate recovery three times (once in each of 1989, 1997 and 2003) based upon actual experience gained from leach operations. In 2003, we revised our estimated recoveries for silver and gold of between 59% and 61.5%, depending on the area being leached, and 93%, respectively, which increased the estimated recoverable ounces of silver and gold contained in the heap by 1.8 million ounces and 41,000 ounces, respectively.

        If our estimate of ultimate recovery requires adjustment, the impact upon our inventory valuation and upon our income statement would be as follows:

Positive/Negative
Change in Silver Recovery

Positive/Negative
Change in Gold Recovery

1%
2%
3%
1%
2%
3%
Quantity of recoverable                            
ounces    1.6 million  3.3 million  4.9 million  11,900    23,800    35,800  

Positive impact on
  
future cost of  
production per silver  
equivalent ounce for  
increases in recovery rates   $0.78   $1.36   $1.82   $0.36   $0.68   $0.97  

Negative impact on
  
future cost of  
production per silver  
equivalent ounce for  
decreases in recovery rates   $1.08   $2.70   $5.35   $0.42   $0.91   $1.48  

12


        Inventories of ore on leach pads are valued based upon actual production costs incurred to produce and place such ore on the leach pad during the current period, adjusted for production issues encountered during the period, less costs allocated to minerals recovered through the leach process. The costs consist of those production activities occurring at the mine site and include the costs, including depreciation, associated with mining, crushing and precipitation circuits. In addition, refining is provided by a third party refiner to place the metal extracted from the leach pad in a saleable form. These additional costs are considered in the valuation of inventory. Negative changes in our inventory valuations and correspondingly on our income statement would have an adverse impact on our results of operations.

  Our estimates of current and non-current inventories may not be realized in actual production and operating results, which may negatively affect our business.

        We use estimates, based on prior production results and experiences, to determine whether heap leach inventory will be recovered more than one year in the future, and is non-current inventory, or will be recovered within one year, and is current inventory. The estimates involve assumptions that may not prove to be consistent with our actual production and operating results. We cannot determine the amount ultimately recoverable until leaching is completed. If our estimates prove inaccurate, our operating results may be less than anticipated.

  Significant investment risks and operational costs are associated with our exploration, development and mining activities, such as San Bartolome and Kensington. These risks and costs may result in lower economic returns and may adversely affect our business.

        Our ability to sustain or increase our present production levels depends in part on successful exploration and development of new ore bodies and/or expansion of existing mining operations. Mineral exploration, particularly for silver and gold, involves many risks and is frequently unproductive. If mineralization is discovered, it may take a number of years until production is possible, during which time the economic viability of the project may change. Substantial expenditures are required to establish ore reserves, extract metals from ores and, in the case of new properties, to construct mining and processing facilities. The economic feasibility of any development project is based upon, among other things, estimates of the size and grade of ore reserves, proximity to infrastructures and other resources (such as water and power), metallurgical recoveries, production rates and capital and operating costs of such development projects, and metals prices. Development projects are also subject to the completion of favorable feasibility studies, issuance of necessary permits and receipt of adequate financing.

        Development projects, such as San Bartolome and Kensington, may have no operating history upon which to base estimates of future operating costs and capital requirements. Development project items such as estimates of reserves, metal recoveries and cash operating costs are to a large extent based upon the interpretation of geologic data obtained from a limited number of drill holes and other sampling techniques and feasibility studies. Estimates of cash operating costs are then derived based upon anticipated tonnage and grades of ore to be mined and processed, the configuration of the orebody, expected recovery rates of metals from the ore, comparable facility and equipment costs, anticipated climate conditions and other factors. As a result, actual cash operating costs and economic returns of any and all development projects may materially differ from the costs and returns estimated, and accordingly, our business results of operations may be negatively affected.

  The Company’s marketing of metals concentrates could be adversely affected if there were to be a significant delay or disruption of purchases by its third party smelter customers. In particular, a significant delay or disruption in our sales of concentrates as a result of the unexpected discontinuation of purchases by our smelter customers could have a material adverse effect on our operations.

        The Company currently markets its silver and gold concentrates to third party smelters in Mexico, Japan, Australia and Canada. The loss of any one smelter customer could have a material adverse effect on us in the event of the possible unavailability of alternative smelters. No assurance can be given that alternative smelters would be timely available if the need for them were to arise, or that delays or disruptions in sales could not be experienced that would result in a materially adverse effect on our operations and our financial results.

13


  Our silver and gold production may decline, reducing our revenues and negatively impacting our business.

        Our future silver and gold production may decline as a result of an exhaustion of reserves and possible closure of mines. It is our business strategy to conduct silver and gold exploratory activities at our existing mining and exploratory properties as well as at new exploratory projects, and to acquire silver and gold mining properties and businesses or reserves that possess mineable ore reserves and are expected to become operational in the near future. We can provide no assurance that our silver and gold production in the future will not decline. Accordingly, our revenues from the sale of silver and gold may decline, negatively affecting our results of operations.

  There are significant hazards associated with our mining activities, not all of which are fully covered by insurance. To the extent we must pay the costs associated with such risks, our business may be negatively affected.

        The mining business is subject to risks and hazards, including environmental hazards, industrial accidents, the encountering of unusual or unexpected geological formations, cave-ins, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, reduced production and delays in mining, asset write-downs, monetary losses and possible legal liability. Although we maintain insurance in an amount that we consider to be adequate, liabilities might exceed policy limits, in which event we could incur significant costs that could adversely affect our results of operation. Insurance fully covering many environmental risks (including potential liability for pollution or other hazards as a result of disposal of waste products occurring from exploration and production) is not generally available to us or to other companies in the industry. The realization of any significant liabilities in connection with our mining activities as described above could negatively affect our results of operations.

  We are subject to significant governmental regulations, and their related costs and delays may negatively affect our business.

        Our mining activities are subject to extensive federal, state, local and foreign laws and regulations governing environmental protection, natural resources, prospecting, development, production, post-closure reclamation, taxes, labor standards and occupational health and safety laws and regulations including mine safety, toxic substances and other matters related to our business. Although these laws and regulations have never required us to close any mine, the costs associated with compliance with such laws and regulations are substantial. Possible future laws and regulations, or more restrictive interpretations of current laws and regulations by governmental authorities could cause additional expense, capital expenditures, restrictions on or suspensions of our operations and delays in the development of our properties. Moreover, governmental authorities and private parties may bring lawsuits based upon damage to property and injury to persons resulting from the environmental, health and safety impacts of our past and current operations, which could lead to the imposition of substantial fines, penalties and other civil and criminal sanctions. Substantial costs and liabilities, including for restoring the environment after the closure of mines, are inherent in our operations. Although we believe we are in substantial compliance with applicable laws and regulations, we cannot assure you that any such law, regulation, enforcement or private claim will not have a negative effect on our business, financial condition or results of operations.

        Some of our mining wastes are currently exempt to a limited extent from the extensive set of federal Environmental Protection Agency (EPA) regulations governing hazardous waste under the Resource Conservation and Recovery Act (RCRA). If the EPA designates these wastes as hazardous under RCRA, we would be required to expend additional amounts on the handling of such wastes and to make significant expenditures to construct hazardous waste disposal facilities. In addition, if any of these wastes causes contamination in or damage to the environment at a mining facility, such facility may be designated as a “Superfund” site under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Under CERCLA, any owner or operator of a Superfund site since the time of its contamination may be held liable and may be forced to undertake extensive remedial cleanup action or to pay for the government’s cleanup efforts. Additional regulations or requirements are also imposed upon our tailings and waste disposal areas in Idaho and Alaska under the federal Clean Water Act (CWA) and in Nevada under the Nevada Water Pollution Control Law which implements the CWA. Airborne emissions are subject to controls under air pollution statutes implementing the Clean Air Act in Nevada, Idaho and Alaska. Compliance with CERCLA, the CWA and state environmental laws could entail significant costs, which could have a material adverse effect on our operations.

14


        In the context of environmental permits, including the approval of reclamation plans, we must comply with standards and regulations which entail significant costs and can entail significant delays. Such costs and delays could have a dramatic impact on our operations.

  We are required to obtain government permits to expand operations or begin new operations. The acquisition of such permits can be materially impacted by third party litigation seeking to prevent the issuance of such permits. The costs and delays associated with such approvals could affect our operations, reduce our revenues, and negatively affect our business as a whole.

        Mining companies are required to seek governmental permits for expansion of existing operations or for the commencement of new operations such as the Kensington development project. Obtaining the necessary governmental permits is a complex and time-consuming process involving numerous jurisdictions and often involving public hearings and costly undertakings. The duration and success of permitting efforts are contingent on many factors that are out of our control. The governmental approval process may increase costs and cause delays depending on the nature of the activity to be permitted, and could cause us to not proceed with the development of a mine. Accordingly, this approval process could harm our results of operations.

        On September 12, 2005, SEACC, the Sierra Club and Lynn Canal Conservation filed a lawsuit in Federal District Court in Alaska challenging the permits issued by the Corps of Engineers and the US Forest Service and on November 8, 2005, the Corps of Engineers filed a Motion for Voluntary Remand with the court to review the permit issued to the Company under the Clean Water Act (CWA) Section 404 and requested that the court stay the legal proceeding filed by SEACC and the other environmental groups pending the outcome of review. On November 12, 2005, the Federal District Court in Alaska granted the remand of the permit to the Corps of Engineers for further review. On November 22, 2005, the Corps of Engineers advised the Company that it was suspending the Section 404 permit pursuant to the Court’s remand to further review the permit. The Company has submitted a work plan which defines the activities at the project that are not impacted by the 404 permit or are allowable activities under the 404 permit that can continue during the suspension by the Corps of Engineers. The Company has been continuing its drilling and exploration activities and progressing construction pursuant to the work plan. The Company is unable to predict the impact of this suspension or litigation on the project at this time.

  Our business depends on good relations with our employees.

        The Company could experience labor disputes, work stoppages or other disruptions in production that could adversely affect us. As of December 31, 2005, unions represented approximately 25% of our worldwide workforce. On that date, the Company had 157 employees at its Cerro Bayo mine, and 147 employees at its Coeur Silver Valley mine working under a collective bargaining agreement or similar labor agreement. The Company has a collective bargaining agreement covering the Cerro Bayo mine which expires on December 21, 2007. The current collective bargaining agreement with the Coeur Silver Valley workforce expires on September 1, 2006. The Company is currently in negotiations with the workforce at the Martha mine and expects to enter into a labor agreement by the end of March 2006.

15


  We are an international company and are exposed to risks in the countries in which we have significant operations or interests. Foreign instability or variances in foreign currencies may cause unforeseen losses, which may affect our business.

        Chile, Argentina, Bolivia and Australia are the most significant foreign countries in which we directly or indirectly own or operate mining properties or developmental projects. We also conduct exploratory projects in these countries. Argentina, while currently economically and politically stable, has experienced political instability, currency value fluctuations and changes in banking regulations in recent years. Although the governments and economy of Chile have been relatively stable in recent years, property ownership in a foreign country is generally subject to the risk of expropriation or nationalization with inadequate compensation. Elections were held in Bolivia in December, 2005 resulting in a new government which is still formulating policies. It is uncertain at this time how new policies may affect mining in the country. Any foreign operations or investment may also be adversely affected by exchange controls, currency fluctuations, taxation and laws or policies of particular countries as well as laws and policies of the United States affecting foreign trade investment and taxation. We may enter into agreements which require us to purchase currencies of foreign countries in which we do business in order to ensure fixed exchange rates. In the event that actual exchange rates vary from those set forth in the hedge contracts, we will experience U.S. dollar-denominated currency gains or losses. Future economic or political instabilities or changes in the laws of foreign countries in which we have significant operations or interests and unfavorable fluctuations in foreign currency exchange rates could negatively impact our foreign operations and our business as a whole.

  Any of our future acquisitions may result in significant risks, which may adversely affect our business.

        An important element of our business strategy is the opportunistic acquisition of silver and gold mines, properties and businesses. While it is our practice to engage independent mining consultants to assist in evaluating and making acquisitions, any mining properties we may acquire may not be developed profitably or, if profitable when acquired, that profitability might not be sustained. In connection with any future acquisitions, we may incur indebtedness or issue equity securities, resulting in dilution of the percentage ownership of existing shareholders. We intend to seek shareholder approval for any such acquisitions to the extent required by applicable law, regulations or stock exchange rules. We cannot predict the impact of future acquisitions on the price of our business or our common stock. Unprofitable acquisitions, or additional indebtedness or issuances of securities in connection with such acquisitions, may impact the price of our common stock and negatively affect our results of operations.

  Our ability to find and acquire new mineral properties is uncertain. Accordingly, our prospects are uncertain for the future growth of our business.

        Because mines have limited lives based on proven and probable ore reserves, we are continually seeking to replace and expand our ore reserves. Identifying promising mining properties is difficult and speculative. Furthermore, we encounter strong competition from other mining companies in connection with the acquisition of properties producing or capable of producing silver and gold. Many of these companies have greater financial resources than we do. Consequently, we may be unable to replace and expand current ore reserves through the acquisition of new mining properties on terms we consider acceptable. As a result, our revenues from the sale of silver and gold may decline, resulting in lower income and reduced growth.

  Third parties may dispute our unpatented mining claims, which could result in losses affecting our business.

        The validity of unpatented mining claims, which constitute a significant portion of our property holdings in the United States, is often uncertain and may be contested. Although we have attempted to acquire satisfactory title to undeveloped properties, we, in accordance with mining industry practice, do not generally obtain title opinions until a decision is made to develop a property. As a result, some titles, particularly titles to undeveloped properties, may be defective. Defective title to any of our mining claims could result in litigation, insurance claims, and potential losses affecting our business as a whole.

  If previously announced control findings re-occur, or if we experience other similar issues, our ability to report our financial results in an accurate and timely manner could be materially adversely impacted, which could cause investors to lose confidence in our financial reports and negatively impact our business and the price of our common stock.

        As disclosed in our recently-filed Annual Report on Form 10-K for the year ended December 31, 2005 (the “2005 10-K”), our management concluded that, as of December 31, 2005, our disclosure controls and procedures were effective and our internal control over financial reporting was effective, and this assessment of the effectiveness of our internal control over financial reporting was audited by KPMG LLP, as stated in their report appearing therein. However, in our previously-filed Annual Report on Form 10-K for the year ended December 31, 2004 (the “2004 10-K”), management’s report and the report of KPMG LLP on management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 expressed an opinion that we did not maintain effective internal control over financial reporting as of December 31, 2004 because of the effect of certain material weaknesses. We believe we have implemented actions that addressed the issues raised by KPMG LLP in their report. In addition, on March 10, 2006 we filed an amendment to our Quarterly Report on Form 10-Q for the quarterly period ending March 31, 2005, to reflect that management had concluded that our disclosure controls and procedures were not effective as of March 31, 2005. Such conclusion was based on our identification of a material weakness with regard to the controls over our calculation of the ore on leach pad inventory at our Rochester operation. Subsequent to March 31, 2005, we implemented remediation measures as part of our ongoing effort to improve our internal controls over financial reporting, which we believe has remediated this material weakness prior to December 31, 2005. If these issues re-occur, or if similar issues re-occur, our ability to report our financial results in an accurate and timely manner could be materially adversely impacted, which could cause investors to lose confidence in our financial reports and negatively impact our business.

16


Item 1B. Unresolved Staff Comments

None

Item 2. Properties.

SILVER AND GOLD MINING OPERATIONS

North America

        Rochester Mine

        The Rochester Mine is a silver and gold surface mine located in Pershing County, Nevada, which is located approximately 25 road miles northeast of the town of Lovelock. The mine commenced operations in 1986. The Company owns 100% of the Rochester Mine by virtue of its 100% ownership of its subsidiary, Coeur Rochester, Inc. (“Coeur Rochester”). The property consists of 22 patented and 589 unpatented contiguous mining claims, including 54 mill-site claims totaling approximately 11,000 acres.

        Production at the Rochester mine in 2005 was approximately 5.7 million ounces of silver and 70,298 ounces of gold, compared to 5.7 million ounces of silver and 69,456 ounces of gold in 2004. Cash costs per ounce of silver increased by 23% to $4.82 per ounce in 2005, compared to $3.93 per ounce in 2004.

        The mine utilizes the heap leaching process to extract both silver and gold from ore mined using conventional open pit methods. Approximately 47,300 tons of ore and waste per day were mined in 2005, compared to 48,100 tons per day in 2004. The average ore to waste strip ratio for the remaining life of the mine will vary based primarily on future gold and silver prices; however, it is anticipated to be less than 1:1. The Company expects to complete mining of the existing ore reserves in late 2006 or early 2007. While mining operations will be discontinued, it is expected that metal production will continue as a result of residual leaching through approximately 2011.

        Ore is crushed and transported by conveyor to a loadout facility where it is transferred to 150 ton trucks which transport the crushed ore to leach pads where solution is applied via drip irrigation to dissolve the silver and gold contained in the ore. Certain low-grade ores are hauled directly, as run-of-mine, by 100 ton haul trucks to leach pads where solution is applied to dissolve the silver and gold contained in the ore. The solutions containing the dissolved silver and gold are pumped to a processing plant where zinc precipitation is used to recover the silver and gold from solution as dore. The dore is transported to a refinery for final processing after which the silver and gold is sold on established markets through third party broker dealers.

        Based upon actual operating experience and certain metallurgical testing, the Company estimates ultimate recovery rates from the crushed ore of 61.5% for silver, depending on the ore being leached, and 93% for gold. The leach cycle at the Rochester Mine requires leaching to approximately the year 2011 for all recoverable metal to be recovered. A significant proportion of metal recovery occurs after mining is completed.

        At the Nevada Packard satellite deposit, located south of the Rochester deposit, the Company commenced mining of silver in the first quarter of 2003. Mining at Nevada Packard is expected to be completed in 2006.

        The Company’s capital expenditures at the Rochester Mine totaled approximately $1.2 million in 2005. During 2003, the Company relocated and upgraded its existing crushing facility, at a capital cost of $9.2 million, in order to access a portion of the reserves contained underneath the existing crusher. The Company plans capital expenditures at the Rochester Mine of $0.5 million in 2006.

17


        Asarco Incorporated (“Asarco”), the prior owner, had a net smelter royalty interest which is payable only when the market price of silver equals or exceeds $20.64 per ounce up to maximum rate of 5%. No royalties were required to be paid by the Company during the three years ended December 31, 2005.

Year-end Proven and Probable Ore Reserves(1) - Rochester Mine
(includes Nevada Packard)

2005
2004
2003
Tons (000’s)   10,168   23,998   32,563  
Ounces of silver per ton  0.86   0.86   0.91  
Contained ounces of silver (000's)  8,765   20,731   29,596  
Ounces of gold per ton  0.011   0.009   0.009  
Contained ounces of gold  112,650   213,000   283,000  

Year-end Mineralized Material

2005
2004
2003
Tons (000’s)   15,646   35,064   40,328  
Ounces of silver per ton  1.03   0.86   0.77  
Ounces of gold per ton  0.010   0.005   0.006  

Operating Data

2005
2004
2003
Production        
    Tons ore mined (000’s)  9,023   10,751   6,626  
    Tons crushed/leached (000’s)  9,327   8,976   7,324  
    Ore grade silver (oz./ton)  0.91   0.74   0.94  
    Ore grade gold (oz./ton)  0.010   0.009   0.005  
    Silver produced (oz.)  5,720,489   5,669,074   5,585,385  
    Gold produced (oz.)  70,298   69,456   52,363  

Cost per Ounce of Silver
 
    Cash costs(2)  $                4.82   $                3.93   $                4.67  
    Non-cash costs  1.84   1.73   0.91  



    Total production costs  $                6.66   $                5.66   $                5.58  

  (1) Metal prices used in calculating proven and probable reserves were $6.50 per ounce of silver and $410 per ounce of gold in 2005.

  (2) Cash costs per ounce of silver or gold represent a non-U.S. GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations; Total Production and Reserves” for reconciliation of this non-GAAP measure to GAAP production costs.

18


        Coeur Silver Valley

        Coeur Silver Valley is a wholly-owned subsidiary of the Company which owns and operates the Galena underground silver mine, an operating mine, and the Coeur and Caladay properties, that adjoin to the Galena mine, located in the heart of the Coeur d’Alene Mining District. Coeur Silver Valley’s property consists of 6,131 acres of Company-owned fee land, patented mining claims and unpatented claims in addition to 4,800 acres of leased claims. Silver Valley recommenced operations at the Coeur mine in June 1996 and continued mining existing reserves there through July 2, 1998 when known reserves were depleted. Silver Valley resumed production at the Galena Mine in May 1997 and operations continue to date. During the second half of 2003, we commenced a three-year plan designed to locate, develop and mine additional resources believed to exist on the property which, if successful, could result in an extended mine life. However, as a result of the mine’s performance during 2005, the Company is currently evaluating the mine plan, including the current development and exploration plans, and strategic, alternatives which could include a possible sale of the wholly-owned subsidiary which owns the mine. The outcome of this review is not known at this time but the extent of future mine operations could be impacted.

        During 2005, we spent $1.4 million for exploration activities at the Galena mine and adjacent properties. Overall, reserves decreased at Galena due to mining depletion, higher operating costs and external smelter and refinery costs which resulted in an overall increase in the ore reserve cutoff grade. Mineralized Material increased at Galena as a result of exploration and reclassification from proven and probable reserves to mineralized material in year-end 2004 reserves due to increased operating costs.

  Galena Mine

        The Galena Mine property is located immediately west of the City of Wallace in Shoshone County in northern Idaho. The property consists of 52 patented mining claims and 25 unpatented mining claims totaling approximately 1,100 acres.

        The Galena Mine is an underground silver-copper mine and is served by two vertical shafts. The No. 3 shaft is the primary production shaft and is 5,800 feet deep. The Galena shaft primarily provides utility access for water, electrical power and sand backfill for underground operations down to the 2,400 level.

        The mine utilizes conventional and mechanized cut and fill mining methods with sand backfill to extract ore from the high grade silver-copper vein deposits that constitute the majority of the ore reserves. Silver and copper are recovered by a flotation mill that produces a silver rich concentrate which is sold to third-party smelters in Canada. Silver recovery through the mill averaged 97% in 2005 and 97% in 2004.

        Waste material from the milling process is deposited in a tailings pond located approximately two miles from the minesite. The tailings containment pond, which is expanded on an as needed basis, has capacity for approximately seven additional years at current production rates.

        Silver production at the Galena Mine in 2005 was approximately 2.1 million ounces of silver compared to 3.5 million ounces in 2004. During 2005, silver production was adversely affected by the loss of production from the 2400 Upper Silver vein and the Lower 72 vein while these areas were under redevelopment, as well as ore grade dilution from development activities currently occurring on the 3400 and 4000 level 215 vein systems.

        Cash costs for 2005 increased to $8.37 per ounce compared to $5.46 per ounce in 2004. The higher cash costs are the result of lower-grade ore and the conversion to higher-cost mining methods needed to accommodate ground conditions in certain mining areas during 2005.

        Total capital expenditures by Silver Valley at the Galena Mine in 2005 were $3.5 million and the Company currently plans for capital expenditures of approximately $3.3 million for the Galena Mine during 2006.

19


Year-end Proven and Probable Ore Reserves - Galena Mine (1)

2005
2004
2003
Tons (000’s)   444   718   717  
Ounces of silver per ton  24.50   18.84   21.54  
Contained ounces of silver (000’s)  10,879   13,518   15,432  

Year-end Mineralized Material (2)

2005
2004
2003
Tons (000’s)   2,580   2,169   2,252  
Ounces of silver per ton  11.74   10.92   10.94  

Operating Data

2005
2004
2003
Production        
    Tons ore milled  128,502   169,413   164,732  
    Ore grade silver (oz./ton)  16.53   21.43   23.61  
    Recovery (%)  97   97   96  
    Silver produced (oz.)  2,060,338   3,521,813   3,735,663  

Cost per Ounce of Silver
 
    Cash costs(3)  $              8.37   $              5.46   $              4.66  
    Non-cash costs  0.97   0.56   0.37  



    Total production costs  $              9.34   $              6.02   $              5.03  

  (1) The Galena Mine reserve estimate is based on a minimum mining width of 4 to 4.5 feet diluted to 5.0 feet minimum width for most silver-copper and silver-lead veins. Metal prices used in caclulating proven and probable reserves were $6.50/ounce of silver, $410/ounce of gold, $1.30/pound of copper, and $0.34/pound of lead in 2005.

  (2) Mineralized material includes both the Galena and Coeur mines.

  (3) Cash costs per ounce of silver or gold represent a non-U.S.-GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations; Total Production and Reserves” for reconciliation of this non-GAAP measure to GAAP production costs.

  Coeur Mine

        The Coeur Mine is an underground silver mine located west of and adjacent to the Galena Mine and consists of approximately 868 acres comprised of 38 patented mining claims and four unpatented mining claims.

        The Coeur Mine operated until mid-1998 when the property was placed on care and maintenance. While there was no mining activity at the Coeur mine in 2005, the Company conducts exploration on the property and believes that there is potential to discover additional high grade silver veins beneath the current limit of the underground workings based on current geological conditions and recent exploration work. In addition, the Coeur Mine is connected to the Galena Mine, thus any future discoveries at either mine could be efficiently developed and processed at either facility. This connection is currently being utilized to provide ventilation and secondary access to the Galena Mine.

20


  Caladay Property

        The Caladay property adjoins the Galena Mine or its east boundary. Prior to its acquisition by the Company in 1991, approximately $32.5 million was expended on the property to construct surface facilities, a 5,101 ft. deep shaft and associated underground workings to explore the property. The Company conducts exploration at the Caladay property in recognition of geologic conditions which extend into the Caladay property from the adjacent Galena Mine. In addition, the Caladay facilities are used to provide additional ventilation to the Galena mine.

South America

        Chile – Cerro Bayo Mine

        The Cerro Bayo District covers about 205 square miles and is located south of Coyhaique, the capital of Region XI in southern Chile, and approximately 17 miles west of the town of Chile Chico. The project lies on the east side of the Andes mountain range at an elevation ranging from 600 to 4,500 feet and is serviced by a gravel road from Chile Chico. The property contains multiple epithermal veins containing gold and silver. The Company has been granted exploitation concessions (the Chilean equivalent to an unpatented claim except that the owner does not have title to the surface which must be separately acquired from the surface owner) covering the mineralized areas of the property as well as the necessary surface rights to permit mining.

        Construction of two ramps to intersect the high-grade Lucero Vein in the Cerro Bayo zone on the east side of its holdings, commenced in November 2001. Additional mineralized high-grade gold and silver vein systems were discovered since then from surface and underground exploration.

        Production at the Cerro Bayo mine in 2005 was approximately 2.9 million ounces of silver and 61,000 ounces of gold compared to 3.2 million ounces of silver and 57,500 ounces of gold in 2004. Cash costs per ounce of silver produced was $0.54 in 2005 compared to $1.01 in 2004.

        The ore processing mill for the Cerro Bayo Mine uses a standard flotation process to produce a high grade gold and silver concentrate. During 2005, the concentrate processed at this mill was sold to third-party smelters, primarily in Japan and Mexico. The mill has a design capacity of 1,650 tons per day. During 2005, the Company experienced recovery rates of approximately 92.8% for gold and 94.7% for silver. Electrical power is generated on-site by diesel generators and process water is obtained from a combination of the adjacent General Carrera Lake and from tailings re-circulation.

        During 2005, the Company continued its exploration and development program in the district with its efforts concentrated in the Cerro Bayo and Laguna Verde zones in the east and west sections of the Company’s land holdings. In 2005, we spent approximately $4.8 million on exploration for new gold and silver mineralization and reserve definition and completed nearly 245,000 feet of core drilling. After giving effect to 2005 mine production, silver reserves at December 31, 2005 increased by 72% to 7.5 million ounces, and gold reserves increased by 71% to 0.13 million ounces from 2004.

        Numerous epithermal veins located within the 205 square mile property package in the Cerro Bayo district offer exploration and development opportunities for us. To date, we have discovered over 100 veins, the majority of which are located within nine miles of our existing ore processing facilities. Of particular interest from 2005 exploration was the discovery of the Marcela Sur, Cascada and Gabriela veins. Marcela Sur, situated about 1,000 meters west of the current mining operations in main Cero Bayo zone, was discovered beneath 50 to 70 meters of post-mineral sediment. Cascada lies south of the Cerro Bayo mining operations while Gabrielas occurs near the processing facility at Laguna Verde. In 2006, we expect to spend $4.9 million for exploration to attempt to discover new silver and gold veins and define new reserves at Cerro Bayo.

21


        Total capital expenditures at the Cerro Bayo property in 2005 were $2.7 million and the Company plans approximately $6.1 million of additional capital expenditures there in 2006.

Year-end Proven and Probable Ore Reserves (1) - Cerro Bayo Mine

2005
2004
2003
Tons (000’s)   935   862   645  
Ounces of silver per ton  8.00   7.09   8.34  
Contained ounces of silver (000’s)  7,476   6,109   5,377  
Ounces of gold per ton  0.14   0.13   0.15  
Contained ounces of gold  131,600   115,900   93,777  

Year-end Mineralized Material

2005
2004
2003
Tons (000’s)   4,113   3,829   3,475  
Ounces of silver per ton  6.19   4.29   4.83  
Ounces of gold per ton  0.10   0.13   0.10  

Operating Data

2005
2004
2003
Production        
    Tons ore milled  403,695   456,941   476,731  
    Ore grade gold (oz./ton)  0.163   0.137   0.153  
    Ore grade silver (oz./ton)  7.52   7.51   6.96  
    Recovery gold (%)  92.8   91.8   89.7  
    Recovery silver (%)  94.7   94.2   91.8  
    Gold produced (oz.)  61,058   57,558   65,370  
    Silver produced (oz.)  2,875,047   3,235,192   3,319,429  

    Cash costs (2)
  $                0.54   $                1.01   $              (0.04 )
    Non-cash costs  1.76   1.42   2.43  



    Total production costs  $                2.30   $                2.43   $                 2.39  

  (1) Metal prices used to calculate proven and probable reserves were $6.50/ounce of Ag and $410/ounce of Au.

  (2) Cash costs per ounce of silver or gold represent a non-U.S.-GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations; Total Production and Reserves” for reconciliation of this non-GAAP measure to GAAP production costs.

22


        Argentina – Martha Mine

        In April 2002, the Company acquired 145,000 acres of prospective ground including the Martha high-grade underground silver mine located in Argentina, approximately 270 miles southeast of the Cerro Bayo Mine, for $2.5 million. Like Cerro Bayo, silver and gold are hosted in multiple, epithermal veins at the Martha Mine – though Martha ore is of much higher silver grade than Cerro Bayo.

        We transport ore mined at the Martha Mine by truck for processing at the Cerro Bayo mill, which is located 270 miles northwest of the Martha Mine. The transport costs to ship the ore to the Cerro Bayo mill from the Martha Mine have necessitated a focus on the highest grade portions of the veins discovered at the Martha Mine; however, lower grade mineralized material exists, but is not included in reserves. During 2006, the Company plans to complete a feasibility study at the Martha mine which may allow the processing of the lower-grade material.

        In June 2002, we commenced shipping of high-grade Martha Mine ore to the Cerro Bayo mill. All of the production came from the Martha vein, which was one of six known veins on the Martha Mine property prior to our acquisition of the property. Also in 2002, exploration discovered both extensions of the Martha Mine vein and the R4 Zone within the vein, which is located 300 feet southwest of the main Martha Mine mining areas. During 2005, we spent $2.7 million on exploration at the Martha Mine to attempt to discover new silver- and gold-bearing veins and define new reserves.

        Production at the Martha mine in 2005 was approximately 2.1 million ounces of silver and 2,600 ounces of gold compared to 1.7 million ounces of silver and 2,300 ounces of gold in 2004. Cash costs per ounce of silver produced was $4.60 in 2005 compared to $4.08 in 2004.

        In 2004, similar to Cerro Bayo, we embarked on the first year of an exploration program to extend the mine life at the Martha Mine to three years. During 2006, we expect to spend $2.9 million on exploration for the discovery of new mineralization and reserve development, across our large land holdings in the province of Santa Cruz which totals over 620 square miles. In 2005, we announced discovery of the Betty West vein, approximately 0.6 miles north of the current Martha mine. In addition, exploration also defined extensions at depth and on strike of the Martha and R4 ore-bearing structures which was the main focus of the year’s program. Work in the coming year will focus on expanding those discoveries and exploration for additional silver and gold mineralized veins and structures. After giving effect to 2005 mine production, silver reserves at December 31, 2005 increased by 59% to 4.1 million ounces from 2004. Based on reserves and mineralized material discovered to date, the mine life at the Martha Mine has been extended to at least three and a half years.

        The Martha Mine property is large, covering 283 square miles of prospective geology for silver and gold mineralization. To date, we have focused our exploration on the immediate Martha Mine area. In addition, we own about another 337 square miles of exploration stage properties in Santa Cruz, Argentina which we identified through our reconnaissance activities.

Year-end Proven and Probable Ore Reserves (1) - Martha Mine

2005
2004
2003
Tons (000’s)   67   57   16  
Ounces of silver per ton  60.29   68.56   83.70  
Contained ounces of silver (000’s)  4,054   3,930   1,349  
Ounces of gold per ton  0.08   0.08   0.09  
Contained ounces of gold  5,400   4,600   1,449  

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Year-end Mineralized Material

2005
2004
2003
Tons (000’s)   134   74   24  
Ounces of silver per ton  45.37   52.75   78.43  
Ounces of gold per ton  0.05   0.06   0.08  

Operating Data

2005
2004
2003
Production        
    Tons ore milled  35,293   30,276   20,420  
    Ore grade gold (oz./ton)  0.079   0.084   0.097  
    Ore grade silver (oz./ton)  62.53   59.94   82.66  
    Recovery gold (%)  92.9   91.6   89.7  
    Recovery silver (%)  94.9   94.2   91.8  
    Gold produced (oz.)  2,590   2,318   1,785  
    Silver produced (oz.)  2,093,464   1,709,069   1,549,425  

    Cash costs (2)
  $                4.60   $                4.08   $                1.96  
    Non-cash costs  0.41   0.97   0.86  



    Total production costs  $                5.01   $                5.05   $                2.82  

  (1) Metal prices used in calculating proven and probable reserves were $6.50/ounce of Ag and $410/ounce of Au.

  (2) Cash costs per ounce of silver or gold represent a non-U.S.-GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations; Total Production and Reserves” for reconciliation of this non-GAAP measure to GAAP production costs.

        Australia –Endeavor Mine

        On May 23, 2005, the Company acquired all of the silver production and reserves, up to a maximum 17.7 million payable ounces, contained at the Endeavor Mine in Australia, which is owned and operated by Cobar Operations Pty. Limited (“Cobar”), a wholly-owned subsidiary of CBH Resources Ltd. (“CBH”) for $38.4 million. The Endeavor Mine is located 720 km northwest of Sydney in New South Wales and has been in production since 1983. Under the terms of the agreement, CDE Australia, a wholly-owned subsidiary of Coeur, paid Cobar $15.4 million of cash at the closing. In addition, CDE Australia will pay Cobar approximately $23.0 million upon the receipt of a report confirming that the reserves at the Endeavor mine are equal to or greater than the reported ore reserves for 2004. Payment is expected to be made in 2006. In addition to these upfront payments, Coeur pays Cobar an operating cost contribution of $1.00 for each ounce of payable silver plus a further increment when the silver price exceeds $5.23 per ounce. This further increment begins on the second anniversary of this agreement and is 50% of the amount by which the silver price exceeds $5.23 per ounce. A cost contribution of $0.25 per ounce is also payable by Coeur in respect of new ounces of proven and probable silver reserves as they are discovered.

        The Endeavor mine is an underground lead/zinc/silver mine. The mine employs bulk mining methods and utilizes a conventional flotation mill to produce a concentrate that is sold to a third party smelter. Silver recovery averaged approximately 45% from May 23, 2005 to December 31, 2005.

        On October 24, 2005, CBH announced that mining operations at the Endeavor mine had been suspended below the No. Four haulage level following an uncontrolled fall of waste ground into the mine’s 6Z2 crown pillar stope. Limiting production to above this level was done as a safety precaution due to the proximity of the 6Z2 crown pillar stope to the main haulage decline. In late November 2005, CBH announced that mine operations had recommenced below the No. Four haulage level, but at a reduced production rate. Based on the progress made to date in correcting issues related to the ground fall, the Company expects the mine to resume normal operations during mid-2006.

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        The Company’s share of silver production in 2005 from the Endeavor mine from May 23, 2005 amounted to 316,169 ounces of silver. The cash cost per ounce of silver production was $2.05.

        The Company is not required to contribute to ongoing capital costs at the mine.

Proven and Probable Ore Reserves (1) - Endeavor Mine

2005
Tons (000’s)   12,125  
Ounces of silver per ton  1.93  
Contained ounces of silver (000’s)  23,341  

Mineralized Material (1)

2005
Tons (000’s)   8,488  
Ounces of silver per ton  2.03  

Operating Data (Coeur’s Share) (3)

2005
Production    
    Tons ore milled  463,129  
    Ore grade silver (oz./ton)  1.52  
    Recovery silver (%)  45  
    Gold produced (oz.)  --  
    Silver produced (oz.)  316,169  

    Cash costs (2)
  $           2.05  
    Non-cash costs  1.30  

    Total production costs  $           3.35  

  (1) Ore reserves are reported as of June 30, 2005, which is the end of the most recent fiscal year of the operator, CBH. Metal price used was $7.06/ounce of Ag.

  (2) Cash costs per ounce of silver or gold represent a non-U.S.-GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations; Total Production and Reserves” for reconciliation of this non-GAAP measure to GAAP production costs.

  (3) The Endeavor property was purchased on May 23, 2005. Operating data is presented commencing on May 23, 2005 to December 31, 2005.

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        Australia –Broken Hill Mine

        On September 8, 2005, the Company acquired all of the silver production and reserves, up to 17.2 million payable ounces, contained at the Broken Hill mine in Australia, which is owned and operated by Perilya Broken Hill Ltd. (“PBH”) for $36.0 million. The Broken Hill Mine is located in New South Wales, Australia and is a zinc/lead/silver ore body. Pursuant to the agreement, the transaction includes up to a maximum of approximately 24.5 million contained ounces (or 17.2 million payable ounces) of silver to be mined by PBH at Broken Hill on the Company’s behalf. In addition, CDE Australia will pay PBH an operating cost contribution of approximately $2.00 for each ounce of payable silver under the terms of the agreement and PBH may earn up to US$6.0 million of additional consideration by meeting certain silver production thresholds over the next eight years.

        The Broken Hill mine is an underground lead/zinc/silver mine. The mine uses bulk mining methods and utilizes a conventional flotation mill to produce a concentrate that is sold to third party smelters in Australia. Silver recovery averaged approximately 75.4% from September 8, 2005 to December 31, 2005.

        The Company’s share of silver production in 2005 from the Broken Hill mine from September 8, 2005 amounted to 657,093 ounces of silver. The cash cost per ounce of silver production was $2.72.

        The Company is not required to contribute to ongoing capital costs at the mine.

Proven and Probable Ore Reserves (1) - Broken Hill Mine

2005
Tons (000’s)   11,519  
Ounces of silver per ton  1.30  
Contained ounces of silver (000’s)  14,955  

Mineralized Material (2)

2005
Tons (000’s)   10,825  
Ounces of silver per ton  1.93  

Operating Data (Coeur's share) (3)

2005
Production    
    Tons ore milled  667,140  
    Ore grade silver (oz./ton)  1.31  
    Recovery (%)  75.4  
    Silver produced (oz.)  657,093  

Cost per Ounce of Silver
 
    Cash costs(2)  $           2.72  
    Non-cash costs  2.75  

    Total production costs  $           5.47  

  (1) Ore reserves are effective as of March 31, 2005. Metal price used was $6.50/ounce of Ag.

  (2) Cash costs per ounce of silver or gold represent a non-U.S.-GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations; Total Production and Reserves” for reconciliation of this non-GAAP measure to GAAP production costs.

  (3) The Broken Hill property was purchased on September 8, 2005. Operating data is presented commencing on September 8, 2005 to December 31, 2005.

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SILVER AND GOLD DEVELOPMENT PROPERTIES

        Bolivia – The San Bartolome Project

        Coeur acquired 100% of the equity in Empressa Minera Manquiri S.A. (“Manquiri”) from Asarco on September 9, 1999. Manquiri’s principal asset is the mining rights to the San Bartolome project, a silver property located near the city of Potosí, Bolivia, on the flanks of the Cerro Rico Mountain. The San Bartolome project consists of several distinct silver-bearing gravel deposits, which are locally referred to as pallaco or sucu deposits. These deposits lend themselves to simple, free digging surface mining techniques and can be extracted without drilling and blasting. The deposits were formed as a result of erosion of the silicified silver-rich upper part of the Cerro Rico volcanic dome complex.

        The mineral rights for the San Bartolome project are held through long-term lease agreements with several independent mining cooperatives and the Bolivian State Mining Company (“COMIBOL”). Manquiri controls 67 square kilometers under lease from COMIBOL and 16,600 acres under lease from the cooperatives at San Bartolome and approximately 17.8 square miles of concessions at the Khori Huasi property, a gold exploration target south of Potosi. The San Bartolome lease agreements are generally subject to a 4% production royalty payable partially to the cooperatives and partially to COMIBOL. During 2003, the Company acquired additional mining rights known as the Plahipo property which is adjacent to the original property package for $1.3 million. The properties are currently subject to monthly payments totaling approximately $31,200.

        Of the several pallaco deposits which are controlled by Coeur and surround Cerro Rico, three are of primary importance and are known as Huacajchi, Diablo (consisting of Diablo Norte, and Diablo Este) and Santa Rita.

        We completed a preliminary feasibility study in 2000, which concluded that an open pit mine was potentially capable of producing approximately 6 million ounces of silver annually. In 2003, SRK, an independent consulting firm, was retained to review the reserve/resource estimate to include additional sampling data to incorporate additional resources acquired with the Plahipo property, which lies to the east of Cerro Rico. During 2003, we retained Flour Daniel Wright to prepare an updated feasibility study which was completed at the end of the third quarter of 2004. The study provides for the use of a cyanide milling flow sheet with a wet preconcentration screen circuit which will result in the production of a dore that may be treated by a number of refiners under a tolling agreement which results in the return of refined silver to the Company that is readily marketed by metal banks and brokers to the ultimate customer. Based upon the results of the updated feasibility study, we estimate the capital cost of the project to be approximately $135 million. In the second quarter of 2004, we obtained all operating permits. In the fourth quarter of 2004, we commenced construction activities at the project. An updated project review has confirmed the capital cost estimate for the project.

        During the second quarter of 2005, the government of Bolivia experienced political unrest which resulted in the resignation of that country’s President and the appointment of a temporary President. In December 2005, an election was held which resulted in a new president, without the necessity of a runoff election, as well as changes in numerous other levels of government. As a result, the Company is continuing the development of the project but has extended the construction period until it has been determined that the recent election has mitigated the political uncertainty. Additional construction work planned for the first half of 2006 includes the construction of access roads to and around the site, rough cut grading of the mill site, preparation of an ore stockpile area, movement of some ore to stockpile and the construction of a fence around the perimeter of the plant site area. As a result, the previously estimated construction period of 20 months and the original projected commencement of commercial production has been impacted. The Company is targeting July 1, 2006 for the resumption of full-scale construction activities at the site. The Company continues to monitor the events in Bolivia to determine when to commence full scale construction activities. The Company believes that commercial production could begin as early as 2007.

27


        Coeur expended approximately $10.5 million in 2005 and plans to incur construction costs of approximately $65.6 million in 2006, assuming a more aggressive construction schedule is implemented during the year.

        The San Bartolome project involves risks that are inherent in any mining venture, as well as particular risks associated with the location of the project. The estimate of mineralized material indicated by the geologic studies performed to date are preliminary in nature and may differ materially after further metallurgical testing is completed. Also, managing mining projects in the altiplano area of Bolivia, where Cerro Rico is located, presents logistical challenges. The political and cultural differences of Bolivia may also present challenges.

        We have obtained a political risk insurance policy from the Overseas Private Insurance Corporation (“OPIC”) and another private insurer. The policy is in the amount of $155 million and covers 85% of any loss arising from expropriation, political violence or currency inconvertibility. The policy is expected to cost approximately $3.4 million during the course of construction and $0.21 per ounce of silver produced when the project commences commercial production.

Year-end Probable Ore Reserves (1) - San Bartolome Project

2005
2004
2003
Tons (000’s)   46,176   46,176   35,274  
Ounces of silver per ton  3.29   3.29   3.48  
Contained ounces of silver (000’s)  151,882   151,882   122,816  

Year-end Mineralized Material - San Bartolome Project

2005
2004
2003
Tons (000’s)   1,166   1,166   238  
Ounces of silver per ton  3.44   3.44   4.16  

  (1) Metal prices used in calculating proven and probable reserves were $6.00 per ounce of silver.

        Alaska –Kensington Gold Project

        On July 7, 1995, Coeur, through its wholly-owned subsidiary, Coeur Alaska, Inc. (“Coeur Alaska”), acquired the 50% ownership interest of Echo Bay Exploration Inc. (“Echo Bay”) in the Kensington property from Echo Bay and Echo Bay Alaska, Inc. (collectively the “Sellers”), giving Coeur 100% ownership of the Kensington property. The Kensington project consists of approximately 6,000 acres, of which approximately 750 acres are patented claims. The property is located on the east side of Lynn Canal between Juneau and Haines, Alaska. Coeur Alaska is obligated to pay Echo Bay a scaled net smelter return royalty on 1.0 million ounces of future gold production after Coeur Alaska recoups the $32.5 million purchase price and its construction and development expenditures incurred after July 7, 1995 in connection with placing the property into commercial production. The royalty ranges from 1% at $400 gold prices to a maximum of 2 ½% at gold prices above $475, with the royalty to be capped at 1.0 million ounces of production.

        During the fourth quarter of 2004, the U.S. Forest Service issued its Record of Decision (“ROD”) for the Final Supplemental Environmental Impact Statement (“FSEIS”). An environmental group, Southeast Alaska Conservation Council (“SEACC”), and a group of other community and private environmental groups, appealed the issuance of the ROD. On March 23, 2005, the US Forest Service upheld the decision to approve the FSEIS. On June 28, 2005, the Company received the Environmental Protection Agency’s (“EPA”) National Pollution Discharge Elimination System (“NPDES”) Permit. In addition, the Company received the U.S. Army Corps of Engineers (“Corps of Engineers”) 404 Wetlands Permit, which authorized the construction of a Lower Slate Lake tailings facility, millsite road improvements and a Slate Creek Cove dock facility. All permits were reviewed for consistency by both the Alaska Coastal Management and Department of Governmental Coordination, which issued its final ACMP permit certification. On June 6, 2005, two environmental groups, Lynn Canal Conservation Inc. and the Sierra Club, Alaska Chapter filed an appeal of the State of Alaska 401 certification of the Corps of Engineers’ approval of the project. Both the State of Alaska and the Company responded in opposition of the appeal to the Commissioner of the Department of Environmental Conservation. The Commissioner denied a hearing which concluded the administrative appeal process.

28


        On September 12, 2005, SEACC, the Sierra Club and Lynn Canal Conservation filed a lawsuit in Federal District Court in Alaska challenging the permits issued by the Corps of Engineers and the US Forest Service and on November 8, 2005, the Corps of Engineers filed a Motion for Voluntary Remand with the court to review the permit issued to the Company under the Clean Water Act (CWA) Section 404 and requested that the court stay the legal proceeding filed by SEACC and the other environmental groups pending the outcome of review. On November 12, 2005, the Federal District Court in Alaska granted the remand of the permit to the Corps of Engineers for further review. On November 22, 2005, the Corps of Engineers advised the Company that it was suspending the Section 404 permit pursuant to the Court’s remand to further review the permit. The Company has submitted a work plan which defines the activities at the project that are not impacted by the 404 permit or are allowable activities under the 404 permit that can continue during the suspension by the Corps of Engineers. The Company has been continuing its drilling and exploration activities and progressing construction pursuant to the work plan. The Company is unable to predict the impact of this suspension or litigation on the project at this time.

        No assurance can be given as to whether or when regulatory permits and approvals granted to the Company may be challenged, appealed or contested by third parties or issuing agencies, or as to whether the Company will place the Kensington project into commercial production.

        In the second quarter of 2004, we completed an updated feasibility study based on an alternative operating scenario which would eliminate the need for a man camp, simplify operating logistics and focus mining on higher-grade areas of the deposit (thereby reducing significantly the size of the mill facilities). This plan significantly reduced capital and operating costs while preserving the ability to expand production as market conditions warrant. In the second quarter of 2005, the Company received its final construction permits and updated the construction and operating cost estimates set forth in the feasibility study. Due to a general increase in commodity prices impacting the industry in general, the Company retained an independent engineering firm to review its capital cost estimate during the fourth quarter of 2005. As a result of increased earthwork requirements, increased storm water management programs, the costs associated with the challenges to the project’s permits and the general increase in commodity prices, the Company currently estimates the total cost of construction to be approximately $190 million. Construction commenced during the third quarter of 2005 and is expected to take approximately 18 months. The Company believes that commercial production could commence as early as late 2007, subject to successful resolution of the permitting and litigation issues described above.

        During 2005, the Company invested $50.2 million in connection with the development of the mine, of which $44.2 million was capitalized. The Company plans to spend approximately $76.7 million on the project during 2006.

        The Kensington ore deposit consists of multiple precious metals bearing mesothermal, quartz, carbonate, pyrite vein swarms and discrete quartz-pyrite veins hosted in the Cretaceous age Jualin diorite. The gold-telluride-mineral calaverite is associated with the pyrite mineralization.

29


Year-end Proven and Probable Ore Reserves (1) - Kensington Property

2005(2)
2004(2)
2003
Tons (000’s)   4,206   4,206   4,113  
Ounces of gold per ton  0.25   0.25   0.24  
Contained ounces of gold  1,050,000   1,050,000   1,003,000  

Year-end Mineralized Material

2005
2004
2003
Tons (000’s)   3,116   3,116   7,262  
Ounces of gold per ton  0.27   0.27   0.12  

  (1) A gold price of $375 per ounce was used to determine ore reserves.

  (2) Reserves shown are based on the study dated June 15, 2004.

        Not all Kensington ore zones have been fully delineated internally, or at depth or on strike and several peripheral zones and veins remain to be explored. In the third quarter of 2005 the Company commenced an exploration program designed to increase the size and geologic continuity of gold mineralization currently in its mineralized material inventory and ultimately result in an increase in proven and probable reserves. For the year, a total of $2.2 million was spent on this exploration program which consisted of completion of approximately 34,000 feet of core drilling, sampling and assaying from underground platforms at Kensington. The program will be continued into 2006 and an updated model of reserves and additional mineralized material is expected to be completed in the third quarter of 2006. A total of 74 holes were drilled in 2005 of which 62, or 87%, encountered gold mineralization with assays greater than or equal to 0.120 troy ounces per short ton; the expected cut-off grade for the current mineralized material. Based on the drilling completed to date, the Company expects to convert a significant portion of the existing mineralized material into reserves and expects the total reserves and mineralized material to increase during 2006 although there can be no assurance we will be able to do so. In addition, the Company possesses the right to develop the Jualin property, an exploratory property located adjacent to the Kensington Property where approximately $0.7 million was spent on approximately 5,000 feet of core drilling, sampling and assaying. The Company’s rights to use and develop the Jualin property are subject to an Amended Lease Agreement dated August 5, 2005 between Hyak Mining Company Inc. as Lessor and Coeur Alaska Inc. as Lessee which expires in August 2020 with provision for lease extension.

EXPLORATION ACTIVITY

        Coeur, either directly or through its wholly-owned subsidiaries, owns, leases and has interests in certain exploration-stage mining properties located in the United States, Chile, Argentina, Tanzania and Bolivia. Exploration expenses of approximately $11.9 million, $9.7 million and $4.9 million were incurred by the Company in connection with exploration activities in 2005, 2004 and 2003, respectively.

        Donald J. Birak, Coeur’s Senior Vice President of Exploration, is the qualified person responsible for the preparation of the scientific and technical information in this Annual Report on Form 10-K. Mr. Birak has reviewed the available data and procedures and believes the calculations of mineral resources and mineral reserves were conducted in a professional and competent manner.

        Cerro Bayo Mine, Chile

        Coeur continued to have exploration success at its 100%-owned Cerro Bayo gold/silver mining operation in southern Chile. Approximately $4.8 million was spent in exploration during 2005. A total of nearly 245,000 feet of core drilling was completed during the year primarily to discover new mineral resources and define new mineral reserves.

30


        The Company believes that there is potential to discover additional high grade veins within the entire Cerro Bayo district, which is over 2.5 miles east–west by 6 miles north-south. The exploration budget for 2006 is estimated to be $4.9 million.

        Martha Mine, Argentina

        Coeur had encouraging exploration results at its 100%-owned high-grade silver Martha Mine area located in Santa Cruz Province, Argentina. The underground mine is approximately 270 miles southeast of Coeur’s Cerro Bayo property located in Southern Chile.

        Coeur continued a mine development and exploration program during 2005 and focused primarily on areas around the 100 acre Martha mine property. The Martha vein, which is exposed for over one mile, is one of seven presently known veins that have had very limited exploration prior to Coeur’s acquisition of the property. Coeur’s efforts consisted of mapping, sampling and nearly 83,000 feet of core drilling for a total expenditure of $2.7 million.

        The 2005 program was successful in discovering extensions of high grade ore along the strike of the Martha and R4 veins within the mine itself as well as locating several new high-grade ore shoots, in the depth and eastern extensions of the known veins. An ongoing drill program during 2006 is planned to expand the high-grade mineralization discovered in 2005 and to explore for additional high-grade veins.

        Coeur also continued reconnaissance on its large land package in Santa Cruz Province surrounding the Martha mine as well as 90 miles to the north surrounding its Lejano property. The Company plans to continue to map, sample and drill targets on its holdings in 2006.

        Tanzania, Africa

        During the first quarter of 2004, the Company acquired ten prospecting licenses for properties located in the Victoria Gold Belt of Tanzania, Africa. The prospecting licenses are valid for a period of three years and contain renewal options. During 2005, work consisted of mapping, sampling and acquisition and interpretation of geophysical and remote sensing data. As a result of this work, a large gold-in-soil anomaly, measuring over 2 kilometers (1.2 miles) long in an east-west orientation, by over 0.5 kilometers (0.3 miles) wide was defined on the Geita 2 exploration concession. Other, smaller-scale gold anomalies were also defined on this 105 square kilometer-sized property which lies on the same belt of Archean-aged rocks, commonly termed “greenstone”, which host the Geita gold mine to the east. Greenstone rocks, a mixture of volcanic, sedimentary and intrusive rocks, are a major host to gold mineralization around the globe. During 2005 the company added the Sargurwa property, northwest of its Geita 2 concession, to its portfolio through an option agreement with a local Tanzanian group of owners.

        Plans for 2006 are to conduct shallow rotary air-blast (RAB) drilling on Geita 2 to determine the source of the gold-in-soil anomaly and map bedrock geology under the lateritic terrain typical of east Africa and follow-up with deeper core drilling on favorable RAB drilling and geochemical results, as well as reconnaissance activity on the Company’s other parcels. During 2006, the Company plans to spend approximately $0.8 million on exploration activities which, if successful, could identify targets for drilling later in 2006.

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SILVER AND GOLD PRICES

        The Company’s operating results are substantially dependent upon the world market prices of silver and gold. The Company has no control over silver and gold prices, which can fluctuate widely. The volatility of such prices is illustrated by the following table, which sets forth the high and low prices of silver (as reported by Handy and Harman) and gold (London Final) per ounce during the periods indicated:


Year Ended December 31,
2005
2004
2003
High
Low
High
Low
High
Low
Silver   $9.11   $6.38   $8.24   $5.57   $5.97   $4.39  
Gold  $536.50   $411.10   $454.20   $375.00   $416.25   319.90  

MARKETING

        The Company markets its metals products and concentrates primarily to bullion trading banks and third party smelters. These customers then sell the metals to end users for use in industry applications such as electronic circuitry, jewelry and silverware production and the manufacture and development of photographic film. Sales of metals to bullion trading banks amounted to approximately 40%, 48% and 41% of total sales of metals in 2005, 2004 and 2003, respectively, and sales of metal concentrates to third party smelters amounted to approximately 60%, 52% and 59% of total metal sales in 2005, 2004 and 2003, respectively. Generally, the loss of a single bullion trading bank customer would not adversely affect the Company in view of the liquidity of the product and availability of alternative trading banks. In 2005, the Company had sales of concentrates to two third- party smelters which constituted 10% or more of the Company’s total metal sales. A significant delay or disruption as the result of a disruption in the Company’s contracts could have a materially adverse effect on our operations if we were unable to locate an alternate smelter to treat our concentrates.

        The Company has no future silver or gold production hedged at December 31, 2005 and has no plans to hedge its silver in the future. Coeur has historically sold the gold from its mines both pursuant to forward contracts and at spot prices prevailing at the time of sale. Silver has been sold at spot prices prevailing at the time of sale. Entering into forward sale contracts is a strategy which can be used to enhance revenues and/or mitigate some of the risks associated with fluctuating precious metals prices. For further details of the Company’s gold sales program please refer to Note M – Derivative Financial Instruments and Fair Value Financial Instruments of the Company’s Consolidated Financial Statements and Accompanying Notes.

GOVERNMENT REGULATION

General

        The Company’s commitment to environmental responsibility has been recognized in 23 awards received since 1987, which included the Dupont/Conoco Environmental Leadership Award, awarded to the Company on October 1, 1991 by a judging panel that included representatives from environmental organizations and the federal government, the “Star” award granted on June 23, 1993 by the National Environmental Development Association, and the Environmental Waikato Regional Council award for Golden Cross environmental initiative granted on May 15, 1995 and in March 2004 the Habitat Restoration Award from the Nevada Division of Wildlife for developing habitat at the Rochester mine. In 1994, the Company’s Chairman and Chief Executive Officer, and in 1997, the Company’s Vice President of Environmental and Governmental Affairs, were awarded the American Institute of Mining, Metallurgical and Petroleum Engineers’ Environmental Conservation Distinguished Service Award.

        The Company’s activities are subject to extensive federal, state and local laws governing the protection of the environment, prospecting, development, production, taxes, labor standards, occupational health, mine safety, toxic substances and other matters. Although the Company is usually involved in regulatory proceedings for renewal or reissue of various permits, such regulations have never caused the Company to close any mine. The costs associated with compliance with such regulatory requirements are substantial and possible future legislation and regulations could cause additional expense, capital expenditures, restrictions and delays in the development of the Company’s properties, the extent of which cannot be predicted. In the context of environmental permitting, including the approval of reclamation plans, the Company must comply with known standards and regulations which may entail significant costs and delays. Although Coeur has been recognized for its commitment to environmental responsibility and believes it is in substantial compliance with applicable laws and regulations, amendments to current laws and regulations, the more stringent implementation thereof through judicial review or administrative action or the adoption of new laws could have a materially adverse effect upon the Company.

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        For the years ended December 31, 2005, 2004 and 2003, the Company expended $5.1 million, $4.4 million and $4.5 million, respectively, in connection with routine environmental compliance activities at its operating properties and expects to expend approximately $3.7 million for that purpose in 2006. Future environmental expenditures will be determined by governmental regulations and the overall scope of the Company’s operating and development activities.

Federal Environmental Laws

        Mining wastes are currently exempt to a limited extent from the extensive set of Environmental Protection Agency (“EPA”) regulations governing hazardous waste, although such wastes may be subject to regulation under state law as a solid or hazardous waste. The EPA plans to develop a program to regulate mining waste pursuant to its solid waste management authority under the Resource Conservation and Recovery Act (“RCRA”). Certain processing and other wastes are currently regulated as hazardous wastes by the EPA under RCRA. The EPA is studying how mine wastes from extraction and beneficiation should be managed and regulated. If the Company’s mine wastes were treated as hazardous waste or such wastes resulted in operations being designated as a “Superfund” site under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) for cleanup, material expenditures would be required for the construction of additional waste disposal facilities or for other remediation expenditures. Under CERCLA, any present owner or operator of a Superfund site or an owner or operator at the time of its contamination generally may be held liable and may be forced to undertake remedial cleanup action or to pay for the government’s cleanup efforts. Additional regulations or requirements may also be imposed upon the Company’s tailings and waste disposal in Idaho and Alaska under the Federal Clean Water Act (“CWA”) and state law counterparts, and in Nevada under the Nevada Water Pollution Control Law which implements the CWA. Air emissions are subject to controls under Nevada’s, Idaho’s and Alaska’s air pollution statutes implementing the Clean Air Act.

Proposed Mining Legislation

        Legislation has been introduced, on several occasions, in the U.S. Congress to change the Mining Act under which the Company holds mining claims on public lands. It is possible that the Mining Act may be amended or be replaced by more onerous legislation in the future. Previously proposed legislation contained new environmental standards and conditions, additional reclamation requirements and extensive new procedural steps which would be likely to result in delays in permitting. The Forest Service and the Bureau of Land Management have considered revising regulations governing operations under the Mining Act on public lands they administer, which, if reintroduced, may result in additional procedures and environmental conditions and standards on those lands.

        During the last several Congressional sessions, bills have been introduced which would supplant or materially alter the Mining Act. If enacted, such legislation may materially impair the ability of the Company to develop or continue operations which derive ore from federal lands. No such bills have been passed and the extent of the changes, if any, which may be enacted by Congress is not presently known. A significant portion of Coeur’s U.S. mining properties are on public lands. Any reform of the Mining Act or Bureau of Land Management and Forest Service regulations thereunder based on these initiatives could increase the costs of mining activities on unpatented mining claims, and as a result could have an adverse effect on the Company and its results of operations. Until such time, if any, as new reform legislation or regulations are enacted, the ultimate effects and costs of compliance on the Company cannot be estimated.

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Foreign Government Regulations

        The mining properties of the Company that are located in Chile and Argentina are subject to various government laws and regulations pertaining to the protection of the air, surface water, ground water and the environment in general, as well as the health of the work force, labor standards and the socioeconomic impacts of mining facilities upon the communities. A recently established State Council for the Environment (CODEMA) has responsibility to define policy, approve plans and programs, control regulatory activities and enforce compliance. The Company believes it is in substantial compliance with all applicable laws and regulations to which it is subject in Chile and Argentina.

        The Republic of Bolivia, where the San Bartolome project is located, has adopted laws and guidelines for environmental permitting that are similar to those in effect in the United States and other South American countries. The permitting process requires a thorough study to determine the baseline condition of the mining site and surrounding area, an environmental impact analysis, and proposed mitigation measures to minimize and offset the environmental impact of mining operations. The Company has received all permits required to build and operate the San Bartolome mine.

        The Company does not directly hold any interest in mining properties in Australia. However, under the respective Silver Sale Agreements with CBH Resources Limited and Perilya Broken Hill Limited, the Company has purchased the silver resources in the ground of these mining companies. These two companies are responsible for the mining operation and compliance with Government regulations and the Company is not responsible for compliance. The Company is however at risk for any production stoppages resulting from non-compliance. The mining properties of CBH and Perilya are subject to a range of State and Federal government laws and regulations pertaining to the protection of the air, surface water, ground water, noise, site rehabilitation and the environment in general, as well as the occupational health and safety of the work force, labor standards and the socio-economic impacts of mining facilities among local communities. In addition, the various Federal and State native title legislation recognizes and protects the rights and interests in Australia of Aboriginal and Torres Strait Islander people in land and waters, according to their traditional laws and customs, and may restrict mining and exploration activity and/or result in additional costs. CBH and Perilya are required to deal with a number of governmental departments in development and exploitation of their respective mining properties. The Company is not aware of any substantial non-compliance with applicable laws and regulations to which its partners are subject in Australia.

Maintenance of Claims

        United States

        At mining properties in the United States, including the Rochester, Kensington, Coeur, Galena and Caladay mines, operations are conducted in part upon unpatented mining claims, as well as patented mining claims. Pursuant to applicable federal law it is necessary, in order to maintain the unpatented claims, to pay to the Secretary of the Interior, on or before August 31 of each year, a claim maintenance fee of $100 per claim. This claim maintenance fee is in lieu of the assessment work requirement contained in the Mining Law of 1872. In addition, in Nevada, holders of unpatented mining claims are required to pay the county recorder of the county in which the claim is situated an annual fee of $3.50 per claim. No maintenance fees are payable for patented claims. Patented claims are similar to land held by an owner who is entitled to the entire interest in the property with unconditional power of disposition.

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        Chile

        In Chile, operations are conducted upon mineral concessions granted by the national government. For exploitation concessions (somewhat similar to a U.S. patented claim), to maintain the concession, an annual tax is payable to the government before March 31 of each year in the approximate amount of $1.14 per hectare. For exploration concessions, to maintain the right, the annual tax is approximately $.30 per hectare. An exploration concession is valid for a five-year period. It may be renewed for new periods unless a third party claims the right to explore upon the property, in which event the exploration concession must be converted to an exploitation concession in order to maintain the rights to the concession.

        Argentina

        Minerals are owned by the Argentine government, which allows individual provinces to impose a maximum 3% mine-mouth royalty on mineral production. The first step in acquiring mining rights is filing a cateo, which gives exclusive prospecting rights for the requested area for a period of time, generally up to 3 years. Maximum size of each cateo is 10,000 hectares; a maximum of 20 cateos can be held by a single entity (individual or company) in any one province.

        The holder of a cateo has exclusive right to establish a Manifestation of Discovery (MD) on that cateo, but MD’s can also be set without a cateo on any land not covered by someone else’s cateo. MDs are filed as either a vein or disseminated discovery. A square protection zone can be declared around the discovery – up to 840 hectares for vein MD or up to 7,000 hectares for a disseminated MD. The protection zone grants the discoverer exclusive rights for an indefinite period, during which the discoverer must provide an annual report presenting a program of exploration work and investments related to the protection zone. An MD can later be upgraded to a Mina (mining claim), which give the holder the right to begin commercial extraction of minerals.

        Bolivia

        The Bolivian national mining company, Corporacion Minera Bolivia (“Comibol”), is the underlying owner of all of the mining rights relating to the San Bartolome project, with the exception of the Thuru property, which is owned by the Cooperativa Reserva Fiscal, a local miners cooperative. Comibol’s ownership derives from the Supreme Decree 3196 in October 1952, when the government nationalized most of the mines in Potosi, except for Thuru. Except for Thuru, Comibol has leased the mining rights for the surface sucu or pallaco gravel deposits to several Potosi cooperatives. The cooperatives in turn have subleased their mining rights to Manquiri through a series of “joint venture” contracts. In addition to those agreements with the cooperatives, Coeur, through its subsidiary Manquiri, holds additional mining rights under lease agreements. All of Manquiri’s mining and surface rights collectively constitute the San Bartolome project.

        Australia

        At mining properties in Australia operated by CBH Resources Limited and Perilya Broken Hill Limited, operations are conducted on designated Mining Leases issued by the relevant State Government mining department. Mining Leases are issued for a specific term and include a range of environmental and other conditions including the payment of production royalties, annual lease fees and the use of cash or a bank guarantee as security for reclamation liabilities. The amounts required to be paid to secure reclamation liabilities are determined on a case by case basis. In addition, both CBH Resources Limited and Perilya Broken Hill Limited hold a range of exploration titles permits which are also issued by the respective State government mining departments for specified terms and require payment of annual fees and completion of designated expenditure programs on the leases to maintain title. In Australia, minerals in the ground are owned by the state until severed from the ground through mining operations.

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EMPLOYEES

        The number of full-time employees at December 31, 2005 of Coeur d’Alene Mines Corporation and its subsidiaries was:

United States Corporate Staff & Office   38  
Silver Valley - Galena Mine (1)  181  
Rochester Mine  226  
Kensington Property  38  
Chilean Corporate Staff & Office  48  
Cerro Bayo Mine (1)  509  
Mina Martha/Argentina (1)  128  
San Bartolome  38  

  Total  1,206  


  (1) The Company maintains a labor agreement with the United Steelworkers of America at its Coeur Silver Valley mine. The agreement is effective from March 26, 2003 to March 1, 2006, which was further extended to September 1, 2006. The Company also maintains a labor agreement with Syndicate De Trabayadores De Compania Minera Cerro Bayo LTA at its Cerro Bayo Chile mine. The agreement is effective from December 22, 2005 to December 21, 2007. As of December 31, 2005, the Company had approximately 25% of its labor force covered by collective bargaining. In Argentina, the Company’s production workforce is not currently represented by a union; however, negotiations started in February 2006 with the Asociacion Obrea Minera Argentina with the intent of reaching a labor agreement by the end of March 2006. Management believes it has a satisfactory relationship with its Union workforce.

Item 3. Legal Proceedings.

        Federal Natural Resources Action

        An action was filed on March 22, 1996 in the United States District Court for the District of Idaho by the United States against various defendants, including the Company, asserting claims under CERCLA and the Clean Water Act for alleged damages to federal natural resources in the Coeur d’Alene River Basin of Northern Idaho. The damages are claimed to result from alleged releases of hazardous substances from mining activities conducted in the area since the late 1800s.

        The Company and representatives of the U.S. Government, including the Environmental Protection Agency, the Department of Interior and the Department of Agriculture, reached an agreement to settle the lawsuit. The terms of settlement are set forth in a Consent Decree issued by the court. Pursuant to the terms of the Consent Decree, dated May 14, 2001, the Company has paid the U.S. Government a total of approximately $3.9 million, of which $3.3 million was paid in May 2001 and the remaining $0.6 million was paid in June 2001. In addition, the Company will (i) pay the United States 50% of any future recoveries from insurance companies for claims for defense and indemnification under general liability insurance policies in excess of $0.6 million, (ii) accomplish certain cleanup work on the Mineral Point property and Caladay property, and (iii) make a conveyance to the U.S. or the State of Idaho of certain real property to possibly be used as a waste repository. Finally, commencing five years after effectiveness of the settlement, the Company will be obligated to pay net smelter return royalties on all of its domestic and foreign operating properties, up to a cumulative maximum of $3.0 million, amounting to a 2% net smelter royalty on silver production if the price of silver exceeds $6.50 per ounce, and a $5.00 per ounce net smelter royalty on gold production if the price of gold exceeds $325 per ounce. The royalty payment obligation commences on May 14, 2006 and expires after May 14, 2021.

        States of Maine, Idaho and Colorado Superfund Sites Related to Callahan Mining Corporation

        During 1991, the Company acquired all of the outstanding common stock of Callahan Mining Corporation.

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        During 2001, the United States Forest Service made a formal request for information regarding the Deadwood Mine Site located in central Idaho. Callahan Mining Corporation had operated at this site during the 1940‘s. The Forest Service believes that some cleanup action is required at the location. However, Coeur d’Alene Mines Corporation did not acquire Callahan until 1991, more than 40 years after Callahan disposed of its interest in the Deadwood property. The Company did not make any decisions with respect to generation, transport or disposal of hazardous waste at the site. Therefore, it is believed that the Company is not liable for any cleanup, and if Callahan might be liable, it has no substantial assets with which to satisfy any such liability. To date, no claim has been made by the United States for any cleanup costs against either the Company or Callahan.

        During 2002, the EPA made a formal request for information regarding a Callahan mine site in the State of Maine. Callahan operated there in the late 1960‘s, shut the operations down in the early 1970‘s and disposed of the property. The EPA contends that some cleanup action is warranted at the site, and listed it on the National Priorities List in late 2002. The Company believes that because it made no decisions with respect to generation, transport or disposal of hazardous waste at this location, it is not liable for any cleanup costs. If Callahan might have liability, it has no substantial assets with which to satisfy such liability. To date, no claim has been made for any cleanup costs against either the Company or Callahan.

        In January 2003, the U.S. Forest Service made a formal request for information regarding a Callahan mine site in the State of Colorado known as the Akron Mine Site. Callahan operated there in approximately the late 1930s through the 1940s, and to the Company’s knowledge, disposed of the property. The Company is not aware of what, if any, cleanup action the Forest Service is contemplating. However, the Company did not make decisions with respect to generation, transport or disposal of hazardous waste at this location, and therefore believes it is not liable for any cleanup costs. If Callahan might have liability, it has no substantial assets with which to satisfy such liability. To date, no claim has been made for any cleanup costs against either the Company or Callahan.

        Suit by Credit Suisse First Boston

        On December 2, 2003, suit was filed by Credit Suisse First Boston against the Company in the United States District Court for the Southern District of New York (Docket No. 03 Civ 9547). The plaintiff alleged that the Company breached a contract between the parties providing for services to be furnished by the plaintiff to the defendant. Plaintiff alleged that it was entitled to damages in the amount of $2.4 million attributed to the breach. On April 6, 2005, the Company agreed to settle the suit for $1.6 million which was accrued in the first quarter of 2005 and paid in the second quarter of 2005.

        Argentina Regulatory Issues

        In September 2004 the Provincial government in Argentina made a formal demand upon the Company’s wholly owned subsidiary which operates the Martha Mine for royalty payment attributed to ore mined and shipped in excess of payments made before the demand. The government has taken the position that an insufficient royalty was being paid. The demand was in the approximate amount of $0.3 million. The Company paid the demand under protest and is contesting the amount through an administrative review procedure. The Provincial government may make further such demands attributed to additional ore shipped from the mine. The Company is not able to predict at this time what the position of the Provincial government will be nor the amount of exposure associated with further demands, if such demands are made.

        Coeur learned on November 19, 2004 that its wholly owned subsidiary, Compania Minera Polimet S.A. (“Polimet”), the owner of the Martha mine, is being investigated by Argentine governmental agencies. Based on discussions between the Company’s counsel and governmental authorities, the Company currently believes that the investigation relates to operations carried out by the predecessor owner of Polimet. In particular, the Company understands that the investigation may focus on shipments of ore from the Martha mine made by the predecessor owner of Polimet in 2001 and early 2002, and whether such shipments complied with applicable export control laws. The Company acquired the stock of Polimet in April 2002.

37


        At this point, neither the Company, Polimet nor any officer or director has been served with any complaint or subpoena, given any official written notice or formally charged with any offense. Consequently, the Company cannot predict with certainty or specificity any allegations that may ultimately be brought against the Company, Polimet or their individual directors or officers, or what remedies may ultimately be sought or obtained against the Company. If the Company suffers any losses or damages related to operation of the Martha mine prior to the Company’s ownership, the Company would expect to pursue indemnification against the previous owner of Polimet.

        In December 2005, the Company was notified that the prosecutor assigned to the investigation had recommended that the investigation be concluded with no action to be taken against the Company or Polimet. Based upon this information, the Company believes there will be no formal charges or notification of an action against the Company.

        Federal District Court of Alaska Permit Challenge

        On September 12, 2005 three environmental groups filed a lawsuit in Federal District Court in Alaska against the U.S. Corps of Engineers and the U.S. Forest Service seeking to invalidate permits issued to Coeur Alaska, Inc. for the Company’s Kensington mine. The Plaintiffs claim the Clean Water Act (CWA) Section 404 permit issued by the Corps of Engineers authorizing the deposition of mine tailings into Lower Slate Lake conflicts with the CWA and is thus illegal. They additionally claim the U.S. Forest Service’s approval of the Amended Plan of Operations is arbitrary and capricious because it relies on the 404 permit issued by the Corps.

        On September 29, 2005, Coeur Alaska, Inc. filed its Answer to Complaint and Motion to Intervene as a Defendant-Intervenor in the action. That motion is pending with the court. Once the Company has been granted Defendant-Intervenor status, it will join the agencies in their defense of the permits as issued. On October 12, 2005, the State of Alaska and Goldbelt, Inc, a local native corporation, additionally joined in filing their respective Motions to Intervene as Defendant-Intervenors as supporters of the Kensington project as permitted. On November 8, 2005, the U.S. Corps of Engineers filed a Motion for Voluntary Remand with the court to review the permit issued to the Company under the Clean Water Act (CWA) Section 404 and requested that the court stay the legal proceeding filed by SEACC and the other environmental groups pending the outcome of review.

        On November 12, 2005, the Federal District Court in Alaska granted the remand of the permit to the Corps of Engineers for further review. On November 22, 2005, the Corps of Engineers advised the Company that it was suspending the Section 404 permit pursuant to the Court’s remand to further review the permit. The Company has submitted a work plan which will define the activities at the project that are not impacted by the 404 permit or are allowable activities under the 404 permit that can continue during the suspension by the Corps of Engineers. The Company is unable to predict the impact of this suspension or litigation on the project at this time.

        District Court of Alaska Wrongful Death Action

        On July 11, 2005, an action was filed in the United States District Court for the District of Alaska at Juneau by Chelsea Walker Fink on behalf of Joseph Kollander, a minor child, and Thomas J. Kollander, Jr., plaintiffs, against defendants Echo Bay Exploration, Inc., Coeur d’Alene Mines Corporation and Coeur Alaska, Inc. alleging wrongful death and negligence relating to a mine accident occurring in 1990 at the Kensington mine. Coeur Alaska was engaged in a joint venture agreement with Echo Bay Exploration at the time of the incident at issue when Echo Bay was the operator of the facility.  The insurer for the Company is defending the action under a reservation of rights.  The complaint does not specify damages sought by the plaintiff; however, management believes this will not result in a material adverse impact to the Company, and believes that the matter is covered by insurance.

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AVAILABLE INFORMATION

        The Company’s website is http://www.coeur.com. Coeur makes available free of charge, on or through its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Forms 3 and 4, as soon as reasonably practicable after electronically filing such reports with the Securities and Exchange Commission. Copies of the charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee of the Board of Directors are available at our website www.coeur.com. Coeur has adopted a Code of Conduct and Ethics for Directors, Officers and Employees, including the chief executive officer, chief financial officer and chief accounting officer. A copy of the code of ethics and our Corporate Governance Guidelines are available at our website www.coeur.com. Information contained on the Company’s website is not a part of this report.

        The Company’s Board of Directors adopted an addendum to its Policies and Procedures Manual to establish a code of ethics for the chief executive and principal financial and accounting officers of the Company. The Company will provide a copy of the code free of charge to any person that requests a copy by writing to the Secretary, Coeur d’Alene Mines Corporation, 400 Coeur d’Alene Mines Building, 505 Front Avenue, Post Office Box I, Coeur d’Alene, Idaho 83816-0316.

Item 4. Submission of Matters to a Vote of Security Holders.

        Not applicable.

Item 4A. Executive Officers of the Registrant.

        The following table sets forth certain information regarding the Company’s current executive officers:

Name
Age
Positions with Coeur
Since

     Dennis E. Wheeler
63 Chairman of the Board 1992
Chief Executive Officer and President 1986

     James A. Sabala
51 Executive Vice President, Chief Financial Officer 2003
  and Treasurer

     Harry F. Cougher
63 Senior Vice President - North American Operations 2005

     James K. Duff
61 President - South American Operations 2005

     Donald J. Birak
52 Senior Vice President - Exploration 2004

     Alan L. Wilder
57 Senior Vice President - Project Development 2004

     Gary W. Banbury
53 Senior Vice President 2004
  Chief Administrative Officer

     Kelli C. Kast
39 Vice President, General Counsel and 2005
  Corporate Secretary

     W. Scott Lamb
51 Vice President of Investor Relations 2005

     James R. Arnold
53 Vice President - Technical Services 2003

     Mitchell J. Krebs
34 Vice President - Corporate Development 2003

     Tom T. Angelos
50 Controller 2004
  Chief Accounting Officer

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Dennis E. Wheeler has been Chairman of the Board of Coeur d’Alene Mines Corporation since May 1992 and Chief Executive Officer since December 1986. Previously, Mr. Wheeler served as President of Coeur, commencing in December 1980. Mr. Wheeler was our Chief Administrative Officer from December 1980 to December 1986, Secretary from January 1980 to December 1980 and Senior Vice President and General Counsel from 1978 to 1980.

James A. Sabala was appointed as Executive Vice President and Chief Financial Officer of Coeur in January 2003. Prior to that, Mr. Sabala was Vice President and Chief Financial Officer of Stillwater Mining Company from 1998 to 2003, and from 1981 to 1998 was employed by Coeur in various capacities, most recently as Executive Vice President and Chief Financial Officer.

Harry F. Cougher was appointed Senior Vice President – North American Operations in January 2005. Prior to that Mr. Cougher was the Vice President and General Manager of Coeur Silver Valley since 2001. Previous to this Mr. Cougher served as Senior Vice President Mining & Chief Operating Officer for Sunshine Mining Company from 1994 to 2001.

James K. Duff was appointed President South American Operations September of 2005. Prior to that Mr. Duff served as President Empressa Manquiri SA from June 2005 to September 2005. Prior to that he was employed as an independent contractor by Coeur from November 2002 to June 2005 and prior to that he was employed from March 1990 to November 2002 as Vice President Business Development for Coeur d’Alene Mines.

Donald J. Birak was appointed as Senior Vice President – Exploration of Coeur in January 2004. Prior to that, Mr. Birak was employed with AngloGold North America, Inc. from March 1999 to January 20, 2004, as Vice President – Exploration.

Alan L. Wilder was appointed Senior Vice President – Project Development in July 2004. Prior to that, Mr. Wilder was an independent consultant from July 2002 to July 2004 for Glamis Gold and Coeur d’Alene Mines Corporation. Prior thereto, he was Project Manager for BHP Tintaya from February 2000 to June 2002 and from 1999 to 2000 he was an independent consultant for the mining industry.

Gary W. Banbury was appointed Senior Vice President and Chief Administrative Officer in February 2004. Prior to that, Mr. Banbury served as Vice President—Administration and Human Resources from 2000 to 2004. Mr. Banbury held the position of Vice President—Human Resources of Coeur from 1998 to 2000, and prior thereto he served as Manager of Human Resources with Coeur.

Kelli C. Kast was appointed Vice President General Counsel and Corporate Secretary in May 2005. Prior to that Ms. Kast served as Corporate Counsel for HealtheTech. Inc. from April 2004 to April 2005. Prior thereto, she served as Assistant General Counsel and Corporate Secretary for Global Water Technologies Inc. and Psychrometric Systems, Inc. from December 1997 through February 2003.

W. Scott Lamb was appointed Vice President Investor Relations in August 2005. Prior to that Mr. Lamb was employed with Kaiser Aluminum Corporation from January 1992 to July 2005 as Vice President Investor Relations and Corporate Communications.

James R. Arnold was appointed as Vice President Technical Services in June 2003. From February 2002 to May 2003, Mr. Arnold served as Chief Operating Officer of Earthworks Technologies, Inc., a wholly owned subsidiary of Coeur. In addition, he was a principal with Knight Piesold and Company from September 1997 until February 2002 where he served as President and CEO.

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Mitchell J. Krebs was appointed to the position of Vice President—Corporate Development of Coeur in February 2003. Mr. Krebs was employed as an independent consultant from September 2001 through January 2003, and from May 2000 through August 2001 was employed as the President of Mine Depot Inc. From August 1999 through April 2000, Mr. Krebs was an associate with Allied Capital Corporation. From August 1995 through November 1997, Mr. Krebs was employed by Coeur as Manager—Acquisition Evaluation.

Tom T. Angelos was appointed as Controller and Chief Accounting Officer of Coeur in September 2004. Prior to that, Mr. Angelos was Controller of Stillwater Mining Company from 1998 to 2004, and from 1983 to 1998 was employed by Coeur in various capacities, most recently as Controller.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

        The Company’s Common Stock is listed on the New York Stock Exchange (the “NYSE”), the Toronto Stock Exchange and the Pacific Exchange. The following table sets forth, for the periods indicated, the high and low closing sales prices of the Common Stock as reported by the NYSE:

High
Low
2004    
First Quarter  $      7.67   $      5.34  
Second Quarter  $      7.14   $      3.88  
Third Quarter  $      4.74   $      3.10  
Fourth Quarter  $      5.21   $      3.93  
2005 
First Quarter  $      4.37   $      3.33  
Second Quarter  $      3.75   $      2.75  
Third Quarter  $      4.32   $      3.36  
Fourth Quarter  $      4.59   $      3.62  
2006 
First Quarter (through February 28, 2006)  $      5.73   $      4.11  

        The Company has not paid per share cash distributions or dividends on its Common Stock since 1996. Future distributions or dividends on the Common Stock, if any, will be determined by the Company’s Board of Directors and will depend upon the Company’s results of operations, financial conditions, capital requirements and other factors.

        At February 28, 2006, there were 4,970 record holders of the Company’s outstanding Common Stock.

        The Company did not issue any securities without registration under the Securities Act of 1933 during the year ended December 31, 2005.

        The Company made no repurchases of its common stock during the year ended December 31, 2005.

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        Equity Compensation Plan Information

        The following table sets forth information as of December 31, 2005 regarding the Company’s equity compensation plans.

Plan category
Number of shares to be
issued upon exercise of
outstanding options,
warrants and rights

Weighted-average exercise
price of outstanding options,
warrants and rights

Number of shares remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))

(a) (b) (c)
Equity compensation                
   plans approved by  
   security holders    2,218,629   3.16    6,022,993  

Equity compensation
  
   plans not approved  
   by security holders    --    --    --  



       Total    2,218,629   3.16    6,022,993  






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Item 6. Selected Financial Data

        The following table summarizes certain selected consolidated financial data with respect to the Company and its subsidiaries and should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this report.

Income Statement Data: 2005
2004
2003
2002
2001
(In thousands except per share data)
Revenues:                        
  Sales of metal    $ 172,336   $ 132,807   $ 110,703   $ 88,436   $ 70,589  






Costs and expenses:
  
  Production costs applicable to sales    104,930    82,352    80,042    84,958    70,538  
  Depreciation and depletion    20,885    18,800    16,627    13,511    11,347  
  Administrative and general    19,417    15,914    12,264    8,806    8,122  
  Exploration    11,914    9,651    4,947    3,849    10,046  
  Pre-development    6,057    11,449    1,967    2,606    --  
  Write-down of mining properties and other    1,379    1,983    6,393    23,060    9,946  
  Litigation settlement    1,600    --    --    --    --  





     Total costs and expenses    166,182    140,149    122,240    136,790    109,999  






Other income (expense)
  
  Interest and other income    8,365    3,205    2,019    8,544    2,712  
  Interest expense, net    (2,485 )  (2,831 )  (12,851 )  (21,948 )  (14,592 )
  Merger expenses    --    (15,675 )  --    --    --  
  (Loss) gain on early retirement of debt     --    --    (41,564 )  (19,061 )  48,217  





    Total other income (expense)    5,880    (15,301 )  (52,396 )  (32,465 )  36,337  






Income (loss) from continuing operations before
  
  income taxes    12,034    (22,643 )  (63,933 )  (80,819 )  (3,073 )
Income tax (provision) benefit    (1,483 )  5,785    7    --    6  





Income (loss) before cumulative effect of change in  
    accounting principle    10,551    (16,858 )  (63,926 )  (80,819 )  (3,067 )
Cumulative effect of accounting change    --    --    (2,306 )  --    --  





Net income (loss)   $ 10,551   $ (16,858 ) $ (66,232 ) $ (80,819 ) $ (3,067 )






Other comprehensive income (loss)
    447    (908 )  (556 )  (1,470 )  821  





Comprehensive income (loss)    10,998    (17,766 )  (66,788 )  (82,289 )  (2,246 )






Basic and Diluted Income (Loss) Per Share Data:
  
Basic income (loss)   $ 0.04   $ (0.08 ) $ (0.39 ) $ (1.03 ) $ (0.07 )





Diluted income (loss)   $ 0.04   $ (0.08 ) $ (0. 39   $ (1.03 ) $ (0.07 )





Weighted average number of shares of  
   Common stock  
   Basic    242,915    215,969    168,186    78,193    41,946  





   Diluted    243,683    215,969    168,186    78,193    41,946  





43


Balance Sheet Data: 2005
2004
2003
2002
2001
(In thousands except per share data)

Total assets
    $ 594,816   $ 525,777   $ 259,467   $ 173,491   $ 210,380  
Working capital   $ 285,114   $ 349,560   $ 100,315   $ 7,034   $ 16,270  
Long-term liabilities   $ 219,372   $ 210,173   $ 39,529   $ 89,711   $ 141,877  
Shareholders’ equity   $ 341,553   $ 293,454   $ 197,478   $ 47,687   $ 26,788  

Item 7. Management’s Discussion and Analysis of Financial Condition andResults of Operations

General

        The results of the Company’s operations are significantly affected by the market prices of gold and silver which fluctuate widely and are affected by many factors beyond the Company’s control, including interest rates, expectations regarding inflation, currency values, governmental decisions regarding the disposal of precious metals stockpiles, global and regional political and economic conditions, and other factors.

        The Company’s business strategy is to capitalize on the ore reserve/mineralized material bases located at its operating mines and the expertise of its management team to continue as a leading primary silver production company through long-term, cash flow generating growth. The principal elements of the Company’s business strategy are to: (i) increase the Company’s silver production and reserves; (ii) decrease cash costs and increase production at the Company’s existing silver mining operations; (iii) transform development-stage properties into producing mines; (iv) acquire operating mines, exploration and/or development properties with a view to reducing the Company’s cash and total costs, provide short-term positive cash flow return and expand its silver production base and reserves; and (v) continue to explore for new silver and gold discoveries primarily near its existing mine sites and evaluate new opportunities to expand its production through acquisitions and exploration.

        The Rochester mine, Cerro Bayo mine/Martha mine and Silver Valley’s Galena mine, each operated by the Company, and the Endeavor and Broken Hill mines which are operated by others, constituted the Company’s principal sources of mining revenues in 2005.

Critical Accounting Policies and Estimates

        Management considers the following policies to be most critical in understanding the judgments that are involved in preparing the Company’s consolidated financial statements and the uncertainties that could impact its results of operations, financial condition and cash flows. Our consolidated financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. We have identified the policies below as critical to our business operations and the understanding of our results of operations. Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States (GAAP). The preparation of these statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. We base these estimates on historical experience and on assumptions that we consider reasonable under the circumstances; however, reported results could differ from those based on the current estimates under different assumptions or conditions. The impact and any associated risks related to these policies on our business operations are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations. 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, amortization and accretion of future cash flows for long lived assets; estimates of recoverable gold and silver ounces in ore on leach pad; reclamation and remediation costs; valuation allowance for deferred tax assets; and post-employment and other employee benefit liabilities. For a detailed discussion on the application of these and other accounting policies, see Note B in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.

44


Revenue Recognition. Revenue is recognized when title to silver and gold passes to the buyer and when collectibility is reasonably assured. The passing of title to the customer is based on 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, an active and freely traded commodity 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 are recorded 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 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, or a derivative liability 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 form of the product is metal in flotation concentrate, which is the final process for which the company is responsible.

        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 are recorded as a reduction of revenue.

        At December 31, 2005, the Company had outstanding provisionally priced sales of $53.6 million consisting of 4.3 million ounces of silver, 40,000 ounces of gold and 0.5 million pounds of copper. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $43,000; for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $40,000; and for each one cent per pound change in realized copper price, revenue would vary (plus or minus) approximately $5,200. At December 31, 2004, the Company had outstanding provisionally priced sales of $26.7 million, consisting of 2.5 million ounces of silver, 18,755 ounces of gold and 1.0 million pounds of copper. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $25,000; for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $18,755; and for each one cent per pound change in realized copper price, revenue would vary (plus or minus) approximately $10,000.

Reserve Estimates. The preparation of this Annual Report on Form 10-K requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. The most critical accounting principles upon which the Company’s financial status depends are those requiring estimates of recoverable ounces from proven and probable reserves and/or assumptions of future commodity prices. There are a number of uncertainties inherent in estimating quantities of reserves, including many factors beyond our control. Ore reserves estimates are based upon engineering evaluations of samplings of drill holes and other openings. These estimates involve assumptions regarding future silver and gold prices, the geology of our mines, the mining methods we use and the related costs we incur to develop and mine our reserves. Changes in these assumptions could result in material adjustments to our reserve estimates. We use reserve estimates in determining the units-of-production depreciation and amortization expense, as well as in evaluating mine asset impairments.

45


        We review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. We utilize the methodology set forth in Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Asset,” to evaluate the recoverability of capitalized mineral property costs. An impairment is considered to exist if total estimated future cash flows or probability-weighted cash flows on an undiscounted basis is less than the carrying amount of the assets, including property, plant and equipment, mineral property, development property, and any deferred costs such as deferred stripping. The accounting estimates related to impairment are critical accounting estimates because the future cash flows used to determine whether an impairment exists is dependent on reserve estimates and other assumptions including, silver and gold prices, production levels, and capital and reclamation costs, all of which are based on detailed engineering life-of-mine plans. An impairment loss exists when estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Any impairment loss recognized represents the excess of the asset’s carrying value as compared to its estimated fair value. The Company reviews the carrying value of its assets whenever events or changes in circumstances indicate that the carrying amount of its assets may not be fully recoverable. The Company did not record any write-downs during the years ended December 31, 2005, 2004 and 2003.

        We depreciate our property, plant and equipment, mining properties and mine development using the units-of-production method over the estimated life of the ore body based on our proven and probable recoverable reserves or on a straight-line basis over the useful life, whichever is shorter. The accounting estimates related to depreciation and amortization are critical accounting estimates because the 1) determination of reserves involves uncertainties with respect to the ultimate geology of our reserves and the assumptions used in determining the economic feasibility of mining those reserves and 2) changes in estimated proven and probable reserves and useful asset lives can have a material impact on net income.

        Ore on leach pad. The Rochester Mine utilizes the heap leach process to extract silver and gold from ore. 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.

        The key stages in the conversion of ore into silver and gold are (i) the blasting process in which the ore is broken into large pieces; (ii) the processing of the ore through a crushing facility that breaks it into smaller pieces; (iii) the transportation of the crushed ore to the leach pad where the leaching solution is applied; (iv) the collection of the leach solution; (v) subjecting the leach solution to the precipitation process, in which gold and silver is converted back to a fine solid; (vi) the conversion of the precipitate into dorè; and (vii) the conversion by a third party refinery of the dorè into refined silver and gold bullion.

        We use several integrated steps to scientifically measure the metal content of ore placed on the leach pads during the key stages. As the ore body is drilled in preparation for the blasting process, samples of the drill residue are assayed to determine estimated quantities of contained metal. We estimate the quantity of ore by utilizing global positioning satellite survey techniques. We then process the ore through a crushing facility where the output is again weighed and sampled for assaying. A metallurgical reconciliation with the data collected from the mining operation is completed with appropriate adjustments made to previous estimates. We then transport the crushed ore to the leach pad for application of the leaching solution. As the leach solution is collected from the leach pads, we continuously sample for assaying. We measure the quantity of leach solution 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. We again sample and assay the dorè. Finally, a third party smelter converts the dorè into refined silver and gold bullion. At this point are we able to determine final ounces of silver and gold available for sale. We then review this end result and reconcile it to the estimates we had used and developed throughout the production process. Based on this review, we adjust our estimation procedures when appropriate.

46


        Our reported inventories include metals estimated to be contained in the ore on the leach pads of $54.6 million as of December 31, 2005. Of this amount, $25.4 million is reported as a current asset and $29.2 million is reported as a noncurrent asset. The distinction between current and noncurrent 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 noncurrent. The ore on leach pad inventory is stated at actual production costs incurred to produce and place ore on the leach pad during the current period, adjusted for production issues encountered during the period.

        The estimate of both the ultimate recovery expected over time, and the quantity of metal that may be extracted relative to such twelve month period, requires the use of estimates which are inherently inaccurate since they rely upon laboratory testwork. Testwork consists of 60 day leach columns from which we project metal recoveries into 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 nineteen years of leach pad operation at the Rochester Mine. The assumptions we use to measure metal content during each stage of the inventory conversion process includes estimated recovery rates based on laboratory testing and assaying. We periodically review our estimates compared to actual experience and revise our estimates when appropriate. The length of time necessary to achieve our currently estimated ultimate recoveries of 61.5% for silver and 93% for gold is estimated to be between 5 and 10 years. However, the ultimate recovery will not be known until leaching operations cease, which is currently estimated for 2011.

        When we began operations in 1986, based solely on laboratory testing, we estimated the ultimate recovery of silver and gold at 50% and 80%, respectively. Since 1986, we have adjusted the expected ultimate recovery 3 times (once in each of 1989, 1997 and 2003) based upon actual experience gained from leach operations. In 1989, we increased our estimated recoveries for silver and gold to 55% and 85%, respectively. The change was accounted for prospectively as a change in estimate, which had the effect of increasing the estimated recoverable ounces of silver and gold contained in the heap by 1.6 million ounces and 10,000 ounces, respectively. In 1997, we revised our estimated recoveries for silver and gold to 59% and 89%, respectively, which increased the estimated recoverable ounces of silver and gold contained in the heap by 4.7 million ounces and 39,000 ounces, respectively. Finally, in 2003, we revised our estimated recoveries for silver and gold to 61.5% and 93%, respectively, which increased the estimated recoverable ounces of silver and gold contained in the heap by 1.8 million ounces and 41,000 ounces, respectively.

47


        If our estimate of ultimate recovery requires adjustment, the impact upon our inventory valuation and upon our income statement would be as follows:

Positive/Negative
Change in Silver Recovery

Positive/Negative
Change in Gold Recovery

1%
2%
3%
1%
2%
3%
Quantity of recoverable                            
ounces    1.6 million  3.3 million  4.9 million  11,900    23,800    35,800  

Positive impact on
  
future cost of  
production per silver  
equivalent ounce for  
increases in recovery rates   $0.78   $1.36   $1.82   $0.36   $0.68   $0.97  

Negative impact on
  
future cost of  
production per silver  
equivalent ounce for  
decreases in recovery rates   $1.08   $2.70   $5.35   $0.42   $0.91   $1.48  

        Inventories of ore on leach pads are valued based upon actual production costs incurred to produce and place such ore on the leach pad during the current period, adjusted for production issues encountered during the period, less costs allocated to minerals recovered through the leach process. The costs consist of those production activities occurring at the mine site and include the costs, including depreciation, associated with mining, crushing and precipitation circuits. In addition, refining is provided by a third party refiner to place the metal extracted from the leach pad in a saleable form. These additional costs are considered in the valuation of inventory.

        Reclamation and remediation costs. Reclamation and remediation costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation cost for inactive properties. Such costs related to active mines are accrued and charged over the expected operating lives of the mines using the units-of-production method.

        The estimated undiscounted cash flows generated by our assets and the estimated liabilities for reclamation and remediation are determined using the Company’s assumptions about future costs, mineral prices, mineral processing recovery rates, production levels and capital and reclamation costs. Such assumptions are based on the Company’s current mining plan and the best available information for making such estimates. On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions.

Operating Statistics and Reserve Estimates

        The Company’s total production in 2005 was 13.7 million ounces of silver and 134,227 ounces of gold, compared to 14.1 million ounces of silver and 129,686 ounces of gold in 2004. Total estimated proven and probable reserves at December 31, 2005 were approximately 221.4 million ounces of silver and 1.3 million ounces of gold, compared to silver and gold reserves at December 31, 2004 of approximately 196.2 million ounces and 1.4 million ounces, respectively.

48


        The following table shows the estimated amounts of proven and probable reserves and mineralized material at the Company’s following locations (1):

Proven and Probable (1)
Mineralized Material
Tons (000’s)
Grade
Ag oz/t

Grade
Au oz/t

Ounces AG
(000’s)

Ounces AU
(000’s)

Tons (000’s)
Grade
Ag oz/t

Grade
Au oz/t

Rochester   10,168   .86   .011   8,765   113   15,646   1.03   .01  
Silver Valley  444   24.50   --   10,879   --   2,580   11.74   --  
Cerro Bayo  935   8.00   .14   7,476   132   4,113   6.19   .10  
Mina Martha  67   60.29   .08   4,054   5   134   45.37   .05  
San Bartolome  46,176   3.29   --   151,882   --   1,166   3.44   --  
Kensington   4,206   --   .25   --   1,050   3,116   --   .27  
Endeavor (2)  12,125   1.93   --   23,341   --   8,488   2.03   --  
Broken Hill (3)  11,519   1.30   --   14,955   --   10,825   1.93   --  








Total tons  85,640       221,352   1,300   46,068      
 
Summary by metal: Total tons
(000’s)

Ag oz/t
(Wt. Avg.)

Au oz/t
(Wt. Avg.)

Total tons
(000’s)

Ag oz/t
(Wt. Avg.)

Au oz/t
(Wt. Avg.)

     Silver  81,434   2.72         42,952   2.80    
      Gold  15,376     0.08       23,009     0.06  

  (1) Reserves using silver price of $6.50 and gold price of $410, except for Endeavor which uses a $7.06 silver price, San Bartolome which uses a $6.00/oz. silver price and Kensington which uses a gold price of $375.
  (2) Reserves are provided by the operator as of June 30, 2005, the end of the operator’s most recent fiscal year. These totals do not include additions or depletions through December 31, 2005.
  (3) Reserves are provided by the operator as of March 31, 2005. These totals do not include additions or depletions through December 31, 2005.

The ore reserves at December 31, 2005 may change with fluctuations in the price of gold and silver. The following table shows the estimated changes to ore reserves at mines operated by the Company at different pricing ranges.

Proven and Probable Ore Reserve Sensitivity to Prices

Per ounce
Silver Price

Per ounce
Gold Price

Tons (000’s)
(000’s)
Ounces AG

(000’s)
Ounces AU

Rochester (1)   $6.00   $400   10,168   8,765   113  
  $6.50   $410   10,168   8,765   113  
  $7.00   $425   10,168   8,765   113  
  $7.65   $465   10,168   8,765   113  
Silver Valley  $6.00   $400   261   6,810   --  
  $6.50   $410   444   10,879   --  
  $7.00   $425   584   13,248   --  
  $7.65   $465   756   15,292   --  
Cerro Bayo  $6.00   $400   869   7,080   125  
  $6.50   $410   935   7,476   132  
  $7.00   $425   935   7,476   132  
  $7.65   $465   967   7,602   134  
Mina Martha  $6.00   $400   62   3,932   5  
  $6.50   $410   67   4,054   5  
  $7.00   $425   69   4,172   6  
  $7.65   $465   69   4,172   6  

  (1) Due to constraints related to the current mine plan and mining equipment fleet, the Rochester reserve does not change within the specific range of metals prices.

49


        The following table presents production information by mine and consolidated sales information for the years ended December 31:

2005
2004
2003
ROCHESTER MINE        
       Silver ozs  5,720,489   5,669,074   5,585,385  
       Gold ozs  70,298   69,456   52,363  
       Cash Costs per oz./silver  $4.82   $3.93   $4.67  
       Total Costs per oz./silver  $6.66   $5.66   $5.58  

GALENA MINE (COEUR SILVER VALLEY)
 
       Silver ozs  2,060,338   3,521,813   3,735,663  
       Gold ozs  282   354   843  
       Cash Costs per oz./silver  $8.37   $5.46   $4.66  
       Total Costs per oz./silver  $9.34   $6.02   $5.03  

CERRO BAYO MINE
 
       Silver ozs  2,875,047   3,235,192   3,319,429  
       Gold ozs  61,058   57,558   65,370  
       Cash Costs per oz./silver  $0.54   $1.01   $(0.04 )
       Total Costs per oz./silver  $2.30   $2.43   $2.39  

MARTHA MINE
 
       Silver ozs  2,093,464   1,709,069   1,549,425  
       Gold ozs  2,589   2,318   1,785  
       Cash costs per oz./silver  $4.60   $4.08   $1.96  
       Total costs per oz./silver  $5.01   $5.05   $2.82  

ENDEAVOR MINE (A)
 
       Silver ozs  316,169   --   --  
       Cash Costs per oz./silver  $2.05   --   --  
       Total Costs per oz./silver  $3.35   --   --  

BROKEN HILL MINE (A)
 
       Silver ozs  657,093   --   --  
       Cash costs per oz./silver  $2.72   --   --  
       Total costs per oz./silver  $5.47   --   --  

CONSOLIDATED PRODUCTION TOTALS
 
       Silver ozs  13,722,600   14,135,148   14,189,902  
       Gold ozs  134,227   129,686   120,361  
       Cash costs per oz./silver  $4.26   $3.66   $3.27  
       Total costs per oz./silver  $5.77   $4.94   $4.39  

CONSOLIDATED SALES TOTAL
 
       Silver ozs. sold  14,707,933   13,354,961   15,032,114  
       Gold ozs. sold  146,749   117,257   128,899  
       Realized price per silver oz  $7.44   $6.82   $4.89  
       Realized price per gold oz  $452   $409   $345  

(A) The Company acquired its interests in the Endeavor and Broken Hill mines in May 2005 and September 2005, respectively.

50


        The following tables present reconciliation between Non-GAAP cash costs per ounce to GAAP production costs:

YEAR ENDED DECEMBER 31, 2005
(In thousands except ounces
and per ounce costs)
Rochester
Galena
Cerro Bayo
Martha
Endeavor
Broken Hill
Total

Production of Silver (ounces)
     5,720,489    2,060,338    2,875,047    2,093,464    316,169    657,093    13,722,600  
Cash Costs per ounce   $ 4.82   $ 8.37   $ 0.54   $ 4.60   $ 2.05   $ 2.72   $ 4.26  








Total Cash Costs
    27,575   $ 17,248   $ 1,542   $ 9,637   $ 648   $ 1,790   $ 58,440  
Add/Subtract:  
Third Party Smelting Costs    --    (3,091 )  (2,783 )  (1,165 )  (370 )  (570 )  (7,979 )
By-Product Credit    31,601    2,722    27,114    1,152    --    --    62,589  
Deferred Stripping Adjustment    140    --    --    --    --    --    140  
Change in Inventory    (14,769 )  (181 )  7,421    (328 )  --    (403 )  (8,260 )








Production costs applicable to
  
   sales   $ 44,547   $ 16,698   $ 33,294   $ 9,296   $ 278   $ 817   $ 104,930  







 
YEAR ENDED DECEMBER 31, 2004
(In thousands except ounces
and per ounce costs)
Rochester
Galena
Cerro Bayo
Martha
Endeavor
Broken Hill
Total

Production of Silver (ounces)
    5,669,074    3,521,813    3,235,192    1,709,069    --    --    14,135,148  
Cash Costs per ounce   $ 3.93   $ 5.46   $ 1.01   $ 4.08    --    --   $ 3.66  








Total Cash Costs (000’s)
   $ 22,287   $ 19,231   $ 3,253   $ 6,975    --    --   $ 51,746  
Add/Subtract:  
Third Party Smelting Costs    --    (5,117 )  (4,106 )  (887 )  --    --    (10,110 )
By-Product Credit    28,646    3,766    23,845    951    --    --    57,208  
Deferred Stripping Adjustment    (403 )  1    110    --    --    --    (292 )
Change in Inventory    (13,380 )  756    (3,212 )  (364 )  --    --    (16,200 )








Production costs applicable to
  
   sales   $ 37,150   $ 18,637   $ 19,890   $ 6,675    --    --   $ 82,352  







 
YEAR ENDED DECEMBER 31, 2003
(In thousands except ounces
and per ounce costs)
Rochester
Galena
Cerro Bayo
Martha
Endeavor
Broken Hill
Total

Production of Silver (ounces)
    5,585,385    3,735,663    3,319,429    1,549,425    --    --    14,189,902  
Cash Costs per ounce   $ 4.67   $ 4.66   $ (0.04 ) $ 1.96    --    --   $ 3.27  








Total Cash Costs (000’s)
   $ 26,062   $ 17,392   $ (132 ) $ 3,043    --    --   $ 46,365  
Add/Subtract:  
Third Party Smelting Costs    --    (4,410 )  (3,118 )  (716 )  --    --    (8,244 )
By-Product Credit    18,980    2,256    23,735    648    --    --    45,619  
Deferred Stripping Adjustment    (322 )  --    --    --    --    --    (322 )
Change in Inventory    (5,149 )  (165 )  1,465    473    --    --    (3,376 )








Production costs applicable to
  
   sales   $ 39,571   $ 15,073   $ 21,950   $ 3,448    --    --   $ 80,042  








(1) The Company’s share of silver production at Endeavor and Broken Hill commenced in May 2005 and September 2005, respectively.

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        “Cash Costs per Ounce” are calculated by dividing the cash costs computed for each of the Company’s mining properties for a specified period by the amount of gold ounces or silver ounces produced by that property during that same period. Management uses cash costs per ounce as a key indicator of the profitability of each of its mining properties. Gold and silver are sold and priced in the world financial markets on a US dollar per ounce basis.

        “Cash Costs” are costs directly related to the physical activities of producing silver and gold, and include mining, processing and other plant costs, third-party refining and smelting costs, marketing expense, on-site general and administrative costs, royalties, in-mine drilling expenditures that are related to production and other direct costs. Sales of by-product metals are deducted from the above in computing cash costs. Cash costs exclude depreciation, depletion and amortization, corporate general and administrative expense, exploration, interest, and pre-feasibility costs and accruals for mine reclamation. Cash costs are calculated and presented using the “Gold Institute Production Cost Standard” applied consistently for all periods presented.

        Cash costs per ounce is a non-GAAP measurement and you are cautioned not to place undue reliance on it and are urged to read all GAAP accounting disclosures presented in the consolidated financial statements and accompanying footnotes. In addition, see the reconciliation of “cash costs” to production costs above.

Results of Operations

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

        Revenues

        Sales of metal in the year ended December 31, 2005 increased by $39.5 million, or 30%, over the year ended December 31, 2004 to $172.3 million. The increase in sales was primarily attributable to an increase in the quantity of silver and gold sold during 2005 and increased metal prices realized in 2005 as compared to 2004. In 2005, the Company sold 14.7 million ounces of silver and 146,749 ounces of gold, compared to sales of 13.4 million ounces of silver and 117,257 ounces of gold in 2004. In the year ended December 31, 2005, the Company realized average silver and gold prices of $7.44 and $452, respectively, compared with realized average prices of $6.82 and $409, respectively, in the prior year.

        In the year ended December 31, 2005, the Company produced a total of 13.7 million ounces of silver and 134,227 ounces of gold compared to 14.1 million ounces of silver and 129,686 ounces of gold in 2004. The lower silver production in 2005, as compared to 2004, was primarily due to lower production at the Galena mine which was the result of lower than expected ore grades from the Lower 72 Vein area and shorter than expected strike length of the 2400 Upper silver vein which necessitated the redevelopment of these areas to reach higher ore grade horizons in the ore block. In addition, poor ground conditions have delayed the development and mining of the 112 vein. This was partially offset by higher silver production from the Rochester and Martha mines. In addition, on May 23, 2005, the Company acquired silver production and reserves contained at the Endeavor mine in Australia, which is owned and operated by Cobar Operations Pty. Limited, a subsidiary of CBH Resources Ltd. Coeur’s share of silver production there amounted to 316,169 ounces. On September 8, 2005, the Company acquired silver production and reserves contained at the Broken Hill mine in Australia, which is owned and operated by Perilya Broken Hill Ltd. Coeur’s share of silver production at that mine from September 8, 2005 to December 31, 2005 amounted to 657,093 ounces.

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        Costs, Expenses and Write-downs

        The following table sets forth year 2005 versus year 2004 costs, expenses and write-downs:

        Production costs applicable to sales in the year ended December 31, 2005 increased by $22.6 million, or 27%, from the year ended December 31, 2004 to $104.9 million. The increase for the year is primarily the result of higher diesel, utility and operating materials and supply costs at the Company’s mining operations and the Company’s operating costs associated with the Company’s newly acquired interests in the Endeavor and Broken Hill mines.

        Depreciation and amortization increased in the year ended December 31, 2005 by $2.1 million, or 11%, over the prior year, primarily due to the increased depletion associated with the Company’s newly acquired interests in the Endeavor and Broken Hill mines.

        Administrative and general expenses increased $3.5 million in the year ended December 31, 2005 compared to 2004 due primarily to higher outside audit services of $1.4 million related to financial reporting compliance activities, higher compensation costs of $0.7 million and $1.4 million in increased other general administration expenses.

        Exploration expenses increased $2.3 million in the year ended December 31, 2005 compared to 2004, due to increased exploration activities at the Kensington, Cerro Bayo and Martha mines.

        Pre-development expense decreased $5.4 million to $6.1 million due to the classification of the San Bartolome and Kensington projects as development-stage properties in the fourth quarter of 2004 and the third quarter of 2005, respectively.

        Write-downs of mining properties and other expenses amounted to $1.4 million in 2005 compared to $2.0 million in 2004. The decrease is primarily due to reduced holding costs on inactive properties.

        During the first quarter of 2005, the Company recorded a litigation settlement of $1.6 million related to the Company’s settlement of the suit by Credit Suisse First Boston on April 6, 2005. See Note Q — Litigation.

        Other Income and Expenses

        Interest and other income in the year ended December 31, 2005 increased by $5.2 million compared with the year ended December 31, 2004 due to higher interest rates earned on the Company’s cash, cash equivalents and short-term investments. Interest expense decreased $0.3 million in the year ended December 31, 2005 compared to 2004, due to the fact that the Company began capitalizing a portion of its interest expense associated with the capitalization of development expenditures at the Kensington and San Bartolome development projects. Capitalized interest was $0.2 million in 2005 compared to $0.1 million in 2004.

        Expenses of $15.7 million were incurred in 2004 in connection with the Company’s tender offer for outstanding shares of Wheaton River Minerals Ltd. That offer expired on September 30, 2004, with Coeur not purchasing any Wheaton shares tendered due to unsatisfied conditions of the offer. No such expenses were incurred in 2005.

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        Income Taxes

        For the year ended December 31, 2005, the Company recorded an income tax provision of approximately $1.5 million. The tax provision is comprised of $4.2 million deferred tax provision, reduced by a $1.7 million deferred tax benefit primarily arising from a release of valuation allowance due to increased proven and probable reserves and revised projected future taxable income at the Cerro Bayo mine, a $0.8 million deferred tax benefit primarily from the release of valuation allowance associated with net operating losses and other deductible temporary differences in Argentina, and a current benefit of approximately $0.2 million primarily from the carryback of alternative minimum tax net operating losses which had previously been provided for. As of December 31, 2005, the net foreign deferred tax asset is approximately $2.8 million ($2.1 million current and $0.7 million non-current).

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

        Revenues

        Sales of concentrates and dorè in the year ended December 31, 2004 increased by $22.1 million, or 20%, over the year ended December 31, 2003 to $132.8 million. The increase in sales was attributable to increased metal prices received in 2004 compared with 2003. In 2004, the Company sold 13.4 million ounces of silver and 117,257 ounces of gold, compared to sales of 15.0 million ounces of silver and 128,899 ounces of gold in 2003. In the year ended December 31, 2004, the Company realized average silver and gold prices of $6.82 and $409, respectively, compared with realized average prices of $4.89 and $345, respectively, in the prior year.

        In the year ended December 31, 2004, the Company produced a total of 14.1 million ounces of silver and 129,686 ounces of gold compared to 14.2 million ounces of silver and 120,361 ounces of gold in 2003.

        Costs, Expenses and Write-downs

        The following table sets forth year 2004 versus year 2003 costs, expenses and write-downs:

        Production costs applicable to sales in the year ended December 31, 2004 increased by $2.3 million, or 3%, over the year ended December 31, 2003 to $82.4 million. The increase for the year is primarily due to increased costs at the Company’s Galena and Cerro Bayo/Martha mines. At the Galena mine, the cash cost per ounce of silver production increased to $5.46 per ounce compared to $4.66 per ounce in 2003. The higher cost in 2004 is attributable to the mining of lower-grade ore and the conversion to higher-cost mining methods needed to accommodate ground conditions in certain mining areas during 2004. Also contributing to higher costs were increased mine repair in connection with the ongoing optimization plan designed to increase production in future years. At the Cerro Bayo and Martha mines, the cash cost per ounce of production increased to $1.01 and $4.08 per silver ounce in 2004, respectively, compared to $(0.04) and $1.96 per silver ounce in 2003, respectively. The increase in costs is primarily attributable to the mining of lower-grade ore in 2004 compared to 2003. All operations were impacted by increasing costs for consumables, particularly diesel and steel. The increases at Galena and Cerro Bayo/Martha were partially offset by lower costs at the Rochester mine. At Rochester, the cash cost per ounce of silver production declined to $3.93 in 2004 compared to $4.67 in 2003. The decrease is primarily attributable to the increased production of by-product gold in 2004 occurring as a result of the mining of higher-grade gold ores.

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        Depreciation and amortization increased in the year ended December 31, 2004 by $2.2 million, or 13%, over the prior year, primarily due to the placement of additional assets, particularly the new crusher facility at Rochester, in service during the year.

        Administrative and general expenses increased $3.7 million in the year ended December 31, 2004 compared to 2003 due primarily to costs associated with the implementation of Sarbanes-Oxley Section 404 activities, the termination of certain benefit plans and increased stock exchange fees resulting from an increase of the number of common shares outstanding.

        Exploration expenses increased $4.7 million in the year ended December 31, 2004 compared to 2003, due to increased exploration activity at the Cerro Bayo and Mina Martha mines and increased activity to identify additional business opportunities.

        Pre-development expense increased $9.5 million as a result of an increased level of activity at the San Bartolome and Kensington mines during 2004. In the fourth quarter of 2004, we commenced construction activities at the San Bartolome project and as a result, $1.0 million of expenditures were capitalized.

        Write-downs of mining properties and other expenses amounted to $2.0 million in 2004 compared to $6.4 million in 2003. The decrease is primarily the result of classification of Kensington costs as pre-development in 2004 and reduced holding costs at the Galena mine stemming from its temporary shutdown in the third quarter of 2003.

        Other Income and Expenses

        Interest and other income in the year ended December 31, 2004 increased by $1.2 million compared with the year ended December 31, 2003. The increase is attributable to an increase in the level of cash, cash equivalents and short-term investments held during 2004 as compared to 2003. Interest expenses decreased $10.0 million in the year ended December 31, 2004 compared to 2003, as a result of the completion of the Company’s restructuring program which was substantially completed in 2003.

        Expenses of $15.7 million were incurred in 2004 in connection with the Company’s tender offer for outstanding shares of Wheaton River Minerals Ltd. That offer expired on September 30, 2004, with Coeur not purchasing any Wheaton shares tendered due to unsatisfied conditions of the offer. No such expenses were incurred in 2003.

        During 2003, the Company completed a debt restructuring program; therefore, no loss on exchange on early retirement of debt was incurred in 2004 compared to a $41.6 million loss in 2003. See “Debt Reduction Program” discussion below.

        Income Taxes

        The Company recorded an income tax benefit of $5.8 million or 25.5% of pre-tax loss for the year 2004. The tax benefit is comprised of a $4.4 million benefit for income taxes associated with the expected utilization of past net operating losses and $1.4 million reversal of a previous tax accrual.

        Cumulative Effect of Change in Accounting Principle

        Effective January 1, 2003, the Company was required by the FASB to recognize the full discounted estimated future reclamation liability and set up a corresponding asset to be amortized over the life of the mine on a units-of-production basis. The impact of this change was accounted for as a cumulative effect of a change in accounting principle as of January 1, 2003. Prior to 2003, the Company recognized a pro rata share of the future estimated reclamation liability on a units-of-production basis. See Note H to the Consolidated Financial Statements – Reclamation and Remediation costs.

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Liquidity and Capital Resources

        Working Capital; Cash and Cash Equivalents

        The Company’s working capital at December 31, 2005 was approximately $285.1 million compared to $349.6 million at December 31, 2004. The ratio of current assets to current liabilities was 9.4 to 1 at December 31, 2005 compared to 16.8 to 1 at December 31, 2004. The decrease in working capital is primarily the result of a decrease in cash and cash equivalents and short-term investments primarily related to activities as discussed below:

        Net cash provided by operating activities in 2005 was $6.7 million compared with net cash used in operating activities of $18.6 million in 2004. The increase of $25.3 million is primarily attributable to the change in net income.

        A total of $99.9 million was used in investing activities in 2005 compared to $43.8 million used in 2004. The increase of $56.1 million is due to an increase in capital expenditures related to the construction activities at the Kensington and San Bartolome projects and the acquisition of silver reserves and production from the Endeavor and Broken Hill mines.

        The Company’s financing activities provided $34.8 million of cash during 2005 compared to $273.0 million in 2004. The decrease is primarily due to the proceeds received from the issuance in 2004 of $113.1 million of common stock, net of issuance costs, and the issuance of 1 ¼% Convertible Senior Notes of $173.9 million, net of issuance costs, partially offset by the proceeds received of $35.9 million, net of issuance costs, from issuance of common stock in 2005.

        The Company believes its cash, cash equivalents and short-term investments and cash from operations will be adequate to meet its obligations during the next twelve months. Nevertheless, if the Company decides to pursue additional mineral interests or acquisitions, additional equity issuances or financing may be necessary. There can be no assurances that such financing will be available when or if needed.

        The Company estimates approximately $181.9 million will be spent during 2006 on capital expenditures at its operating mines and development-stage properties.





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        Capitalized Expenditures

        During 2005, the Company expended $1.2 million at the Rochester mine, $4.8 million for continuing mine development at the Cerro Bayo and Mina Martha properties, $3.5 million at the Galena mine, $0.5 million for corporate and other activities, $10.5 million for the development of the San Bartolome project and $44.2 million for construction and development activities at Kensington. In addition, the Company paid $52.1 million for the acquired interests in Endeavor and Broken Hill. During 2006, the Company plans to expend approximately $0.5 million for investment activities at the Rochester mine, $3.3 million at the Galena mine, $6.1 million at Cerro Bayo, $2.4 million at Martha, $76.7 million at the Kensington development property, $65.9 million at the San Bartolome development property, $23.0 million for the remaining payment for the Endeavor acquisition and $4.0 million for corporate and other activities.

        Debt Reduction Program

        In 1998, the Company began a program of restructuring and reducing its outstanding indebtedness, which has resulted in a reduction of long-term debt from $246.5 million at December 31, 1998 to $180.0 million at December 31, 2004. In addition, the interest rate on the long-term debt has been reduced to 1 ¼%. A summary of the major components of the program for the years 2003 to 2005 is as follows:

        2003 Issuance of 9% Senior Convertible Notes

        On February 26, 2003, the Company completed a private placement of $37.2 million principal amount of 9% Notes. The net proceeds were approximately $33.8 million. The 9% Notes were senior in right of payment to the 6 3/8% and 7 1/4% Debentures. The 9% Notes were convertible into Coeur common stock, at any time prior to maturity at a conversion price of $1.60 per share, subject to adjustment. Interest was payable semi-annually on February 15 and August 15 of each year. The Company was entitled to elect to pay interest in cash or stock, in its sole discretion. The 9% Notes were redeemable at the option of the Company six months after issuance, subject to certain conditions, and at the option of the holders in the event of a change in control. Of the financial advisory fees paid by the Company in connection with the issuance of the 9% Notes, the Company elected to issue 0.6 million unregistered shares of common stock valued at $1.54 per share in lieu of cash. No underwriter was used with this transaction. The private placement was made to several accredited institutional investors. The private placement was exempt from registration under the Securities Act of 1933 by virtue of Regulation D thereunder.

        On March 7, 2003, the Company called for the redemption of approximately $22.4 million principal amount of the outstanding 6 3/8% Debentures, which was funded by a portion of the proceeds received from the sale of the 9% Notes. The redeemed securities were retired on April 7, 2003.

        Effective as of July 10, 2003, Coeur entered into a series of agreements under which indebtedness of the Company were exchanged for or converted into shares of the Company’s common stock. The Company and each of the holders of the Company’s 9% Notes entered into an Early Conversion Agreement. The amount of principal converted under the Early Conversion Agreements was $32.6 million, and the common shares issued, including payment of interest, was approximately 27.5 million. After giving effect to the exchanges, an aggregate of $4.6 million of 9% Notes remained outstanding. The Company recorded a loss on early retirement of debt of $4.2 million in the third quarter of 2003 in conjunction with these transactions.

        2003 Redemptions

        On November 25, 2003, the Company issued 3.1 million shares of common stock in a registered offering, the proceeds of which were used to redeem the remaining $4.6 million principal amount of the 9% Notes and recorded a loss on the early retirement of debt of $7.6 million. In addition, during the fourth quarter of 2003, the Company redeemed the remaining $4.9 million principal amount of the 6 3/8% Convertible Subordinated Debentures due January 2004.

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        2003 Exchanges and Conversions

        During 2003, holders of $12.7 million of our Series I 13 3/8% Convertible Senior Subordinated Notes due December 31, 2003 voluntarily converted such notes, in accordance with original terms, into approximately 9.6 million shares of common stock including payment for make whole provision for interest expense.

        During 2003, we exchanged $27.9 million and $2.1 million principal amount of our outstanding 6 3/8% Debentures and our 7 1/4% Debentures, respectively, in exchange for 18.5 million shares of common stock and recorded a loss on exchange and early retirement of debt of approximately $29.7 million. The shares included 0.5 million shares of common stock issued as payment for interest expense as part of the transaction. In conjunction with the issuance of the 9% Convertible Senior Subordinated Notes due 2007, we also issued 0.6 million shares of common stock for partial payment of offering costs of $1.0 million.

        2004 Redemption

        On February 11, 2004, the Company announced the redemption of the remaining outstanding $9.6 million principal amount of the Company’s 7 ¼% Convertible Subordinated Debentures due October 15, 2005. On March 11, 2004, the Company redeemed the remaining outstanding $9.6 million principal amount of the 7 ¼% Debentures.

        2004 Issuance of 1.25% Convertible Senior Notes

        On January 13, 2004 the Company completed its offering of $180 million aggregate principal amount of 1¼% Convertible Senior Notes due 2024 (“1¼% Notes”). The 1¼% Notes are convertible into shares of Coeur common stock at a conversion rate of approximately 131.5789 shares of Coeur common stock per $1,000 principal amount of Notes, representing a conversion price of $7.60 per share. Interest on the notes was payable in cash at the rate of 1¼% per annum beginning July 15, 2004. The Company intends to use the proceeds of the offering for general corporate purposes, which may include the development of its Kensington gold project and its San Bartolome silver project, or the acquisition of precious metals properties or businesses. Construction commenced at the San Bartolome and Kensington projects on October 1, 2004 and July 1, 2005, respectively. The Notes are general unsecured obligations, senior in right of payment to Coeur’s other indebtedness. The offering was made through an underwriting led by Deutsche Bank Securities. Offering of the Notes was made only by means of a prospectus under Coeur’s existing shelf registration statement, including the accompanying prospectus supplement relating to the Notes.

        Issuances of Common Stock

        During 2005, the Company completed a public offering of 9.9 million shares of common stock at a public offering price of $3.70 per share. The Company realized total net proceeds for the offering of $35.9 million after payment of the underwriters’ discount.

        During 2004, the Company completed a public offering of 26.6 million shares of common stock at a public offering price of $4.50 per share, which included 1.6 million shares purchased by the underwriter at the offering price to cover over allotment. The Company realized total net proceeds for the offering, after payment of the underwriters’ discount, of $113.1 million.

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        On November 25, 2003, the Company issued 3.1 million shares of common stock in a registered offering, the proceeds of $13.5 million were used to redeem the remaining $4.6 million principal amount of the 9% Convertible Senior Subordinated Notes.

        During the third quarter of 2003, the Company completed a public offering of 23.7 million shares of common stock at a public offering price of $3.40 per share, which included 3.1 million shares purchased by the underwriters at the offering price to cover over allotments. The Company realized total net proceeds from the offering, after payment of the underwriters’ discount, of approximately $75.8 million.

        On July 7, 2003, the Company sold 0.2 million shares of common stock to an institutional investor for an aggregate value of $0.3 million, or $1.40 per share. The shares were used to pay amounts owed by the Company’s subsidiary, Empresa Minera Manquiri S.A., a Bolivian corporation, under contracts pursuant to which it obtained certain mineral rights in Bolivia and for general corporate purposes. The sale of shares was effected pursuant to the Company’s shelf registration statement.

        On May 23, 2003, the Company sold 8.1 million shares of common stock to an institutional investor for an aggregate of $10.0 million, or $1.23 per share. The Company also granted the investor an option, exercisable within 30 days, to purchase an additional 1.2 million shares of common stock at a price of $1.23 per share. The proceeds of the sale were used for general corporate purposes and working capital needs, including the repayment of Series I 13 3/8% Notes and 6 3/8% Debentures. On June 20, 2003, the Company sold 1.2 million shares of common stock to the institutional investor for an aggregate of $1.5 million, or $1.23 per share, in connection with the above-referenced option. The sales of shares were effected under the Company’s shelf registration statement.

Contractual Obligations

        The following table summarizes our contractual obligations at December 31, 2005 and the effect such obligations are expected to have on our liquidity and cash flow in future periods.

Payments Due by Period
Contractual Obligations
Total
Less Than 1
Year

1- 3
Years

3-5
Years

More Than 5
Years

Convertible debt (1)     $ 180,000   $ --   $ --   $ --   $ 180,000  
Interest on convertible debt    40,500    2,250    4,500    4,500    29,250  
Operating lease (2)    1,515    1,351    163    1    --  
Capital lease (3)    2,105    1,189    916    --    --  
Kensington Trust (4)    1,119    255    790    74    --  
Hyak Mining Lease    9,930    231    462    3,462    5,775  
TDA Grant (5)    546    546    --    --    --  
Reclamation and mine closure (6)    49,173    1,144    4,339    9,395    34,295  
Pension and health benefits (7)    5,042    240    594    815    3,393  
Other long-term liabilities (8)    5,069    9    2,358    887    1,815  





     Total   $ 294,999   $ 7,215   $ 14,122   $ 19,134   $ 254,528  





  (1) The $180.0 million principal amount of 1 ¼% Debentures due 2024 outstanding at December 31, 2005 are convertible into shares of common stock at the option of the holder on January 15, 2011, 2014 and 2019 unless previously redeemed at a conversion rate of approximately 131.5789 shares of Coeur common stock per $1,000 principal amount of Notes, representing a conversion price of $7.60 per share, subject to adjustment in certain events.

  The Company is required to make semi-annual interest payments. The Debentures are redeemable at the option of the Company before January 18, 2011, if the closing price of the Company’s common stock over a specified number of trading days has exceeded 150% of the conversion price, and anytime thereafter. The Debentures have no other funding requirements until maturity on January 15, 2024.

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  (2) The Company has entered into various operating lease agreements which expire over a period of five years.

  (3) The Company has entered into various capital lease agreements for commitments principally over the next year.

  (4) Purchase obligation for the Kensington property in Alaska.

  (5) The Company obtained a U.S. government grant to promote development in Bolivia. The amount received is to be reimbursed once a construction decision and financing are obtained.

  (6) Reclamation and mine closure amounts represent the Company’s estimate of the discounted cash flows of its legal obligation to reclaim and remediate mining properties. This amount will increase over the passage of time for accretion of the obligation and will decrease as reclamation and remediation work is completed. Amounts shown on table are undiscounted.

  (7) Pension and health benefit amounts were determined by the actuary and are estimated based on the census information for the employee or retiree for each respective plan.

  (8) The other long-term liabilities include amounts for severance, workers’ compensation and other miscellaneous accruals.

Risk Factors; Forward-Looking Statements

        For information relating to important risks and uncertainties that could materially adversely affect the Company’s business, securities, financial condition or operating results, reference is made to the disclosure set forth under Item 1A above. In addition, because the following discussion includes numerous forward-looking statements relating to the Company, its results of operations and financial condition and business, reference is made to the information set forth above in Item 1 under the caption “Important Factors Relating to Forward-Looking Statements.”

Environmental Compliance Expenditures

        For the years ended December 31, 2005, 2004, and 2003, the Company expended $5.1 million, $4.4 million and $4.5 million, respectively, in connection with routine environmental compliance activities at its operating properties. Such activities include monitoring, bonding, earth moving, water treatment and re-vegetation activities.

        The Company estimates that environmental compliance expenditures during 2006 will be approximately $3.7 million to obtain permit modifications and other regulatory authorizations. Future environmental expenditures will be determined by governmental regulations and the overall scope of the Company’s operating and development activities. The Company places a very high priority on its compliance with environmental regulations.

Off-Balance Sheet Arrangements

        The Company has no existing off-balance sheet arrangements as defined under accounting principles generally accepted in the United States.

Recent Accounting Pronouncements

        In November 2004, FASB issued SFAS No. 151, “Inventory Costs,” which amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement now requires that these items be recognized as current-period expenses regardless of whether they meet the criterion of “so abnormal” as previously stated in ARB No. 43, Chapter 5, “Intangible Assets”. In addition, this Statement requires that the allocation of fixed production overheads to costs of conversion be based on the normal capacity of the production facility. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company has performed a review of the provisions of the Statement and has determined that its current accounting practice is to recognize idle facilities as a current-period expense and, therefore, the adoption does not have a material impact on its financial statements.

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        In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payments”, which revised SFAS No. 123, “Accounting for Stock-Based Compensation” and superseded Accounting Principles Board (“APB”) Opinion 25, “Accounting for Stock Issued to Employees” and its related implementation guidance. SFAS No. 123(R) requires measurement and recording in the financial statements of the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. The Company will adopt the provisions of SFAS No. 123(R) on January 1, 2006, using the modified prospective method. Accordingly, compensation expense will be recognized for all newly granted awards and awards modified, repurchased, or cancelled after January 1, 2006. Compensation cost for the unvested portion of awards that are outstanding, as of January 1, 2006, will be recognized ratably over the remaining vesting period. The compensation cost for the unvested portion of awards will be based on the fair value at date of grant, adjusted for forfeitures, as utilized in the SFAS No. 123 pro forma disclosure above. The actual effect on net income and earnings per share in future periods will vary depending upon the number and fair value of options granted in future years compared to prior years. It is believed that adoption will impact the Company’s statement of operations by $0.6 million in 2006 and will not impact the Company’s cash flow.

        In March 2005, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues Task Force (“EITF”) Issue No. 04-06, “Accounting for Stripping Costs Incurred during Production in the Mining Industry.” EITF Issue No. 04-06 addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs as variable production costs that should be 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. As a result, capitalization of post-production stripping costs is appropriate only to the extent product inventory exists at the end of a reporting period. The guidance in EITF Issue No. 04-06 is effective for the first reporting period in fiscal years beginning after December 15, 2005, with early adoption permitted. The guidance requires application through recognition of a cumulative effect adjustment in the period of adoption, with no charge to current earnings for prior periods. The most significant expected impacts of adoption are the elimination of the deferred stripping costs and the recognition of future post-production stripping costs 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, or in the case of inventory on hand at the end of a period, from writedowns where the carrying value of inventory on hand exceeds the net realizable value. The Company will adopt this new accounting rule as of January 1, 2006 and will record a charge of approximately $0.4 million to write off deferred stripping costs, as the cumulative effect of a change in accounting method. Adoption of the new guidance will have no impact on the Company’s cash position.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

        The Company is exposed to various market risks as a part of its operations. In an effort to mitigate losses associated with these risks, the Company may, at times, enter into derivative financial instruments. These may take the form of forward sales contracts, foreign currency exchange contracts and interest rate swaps. The Company does not actively engage in the practice of trading derivative securities for profit. This discussion of the Company’s market risk assessments contains “forward looking statements” that contain risks and uncertainties. Actual results and actions could differ materially from those discussed below.

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        The Company’s operating results are substantially dependent upon the world market prices of silver and gold. The Company has no control over silver and gold prices, which can fluctuate widely and are affected by numerous factors, such as supply and demand and investor sentiment. In order to mitigate some of the risk associated with these fluctuations, the Company will at times, enter into forward sale contracts. The Company continually evaluates the potential benefits of engaging in these strategies based on current market conditions. The Company may be exposed to nonperformance by counterparties as a result of its hedging activities. This exposure would be limited to the amount that the spot price of the metal falls short of the contract price. The Company has historically sold silver and gold produced by our mines pursuant to forward contracts and at spot prices prevailing at the time of sale. Since 1999, the Company has not engaged in any silver hedging activities and is currently not engaged in any gold hedging activities.

        The Company enters into concentrate sales contracts with third-party smelters. The contracts, in general, provide for a provisional payment based upon provisional assays and quoted metal prices and the 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 at the forward price at the time of sale. The embedded derivative, which is the final settlement price based on a future price, does not qualify for hedge accounting. These embedded derivatives are recorded as derivative assets (in Prepaid expenses and other), or derivative liabilities (in Accrued liabilities and other), on the balance sheet and are adjusted to fair value through earnings each period until the date of final settlement.

        At December 31, 2005, the Company had outstanding provisionally priced sales of $53.6 million, consisting of 4.3 million ounces of silver, 40,000 ounces of gold and 0.5 million pounds of copper, which had a fair value of approximately $56.5 million including the embedded derivative. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $43,000; for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $40,000; and for each one cent per pound change in realized copper price, revenue would vary (plus or minus) approximately $5,200.

        The Company operates in several foreign countries, specifically Bolivia, Chile, and Argentina, which exposes it to risks associated with fluctuations in the exchange rates of the currencies involved. As part of its program to manage foreign currency risk, the Company enters into, from time to time, foreign currency forward exchange contracts. These contracts enable the Company to purchase a fixed amount of foreign currencies. Gains and losses on foreign exchange contracts that are related to firm commitments are designated and effective as hedges and are deferred and recognized in the same period as the related transaction. All other contracts that do not qualify as hedges are marked to market and the resulting gains or losses are recorded in income. The Company continually evaluates the potential benefits of entering into these contracts to mitigate foreign currency risk and proceeds when it believes that the exchange rates are most beneficial. During 2005, the Company entered into forward foreign currency exchange contracts to reduce the foreign exchange risk associated with forecasted Chilean peso operating costs for 2006 at its Cerro Bayo mine. The contracts require the Company to exchange U.S. dollars for Chilean pesos at a weighted average exchange rate of 514 pesos to each U.S. dollar. At December 31, 2005, the Company had foreign exchange contracts to exchange $7.2 million U.S. dollars. At December 31, 2005, the fair value of the foreign exchange contracts was a liability of $0.2 million.

        All of the Company’s long-term debt at December 31, 2005, is fixed-rate based. The fair value of the Company’s long-term debt at December 31, 2005 was $146.7 million. The fair value was estimated based upon bond market closing prices near the balance sheet date.

62


Item 8. Financial Statements and Supplementary Data

        The financial statements required hereunder and contained herein are listed under Item 15(a)(1) below.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        Not applicable.

Item 9A. Controls and Procedures

(a) Disclosure Controls and Procedures

        The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by it in its periodic reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Based on an evaluation of the Company’s disclosure controls and procedures conducted by the Company’s Chief Executive Officer and Chief Financial Officer, such officers concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2005.

(b) Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Securities and Exchange Act of 1934 defines internal control over financial reporting in Rule 13a-15(f) and 15d-15(f) as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

  Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and  

  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the consolidated financial statements.  

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

63


        Based upon its assessment, management concluded that, as of December 31, 2005, the Company’s internal control over financial reporting is effective based upon those criteria.

        Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears herein.

(c) Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

        Not applicable.

Part III

Item 10. Directors and Executive Officers of the Registrant

        Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item regarding directors is hereby incorporated by reference from our definitive proxy statement or amendment hereto to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. Information regarding our executive officers is set forth under Item 4A of this Form 10-K.

Item 11. Executive Compensation

        Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference from our definitive proxy statement or amendment hereto to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference from our definitive proxy statement or amendment hereto to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

Item 13. Certain Relationships and Related Transactions

        Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference from our definitive proxy statement or amendment hereto to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

Item 14. Principal Accountant Fees and Services

        Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is hereby incorporated by reference from our definitive proxy statement or amendment hereto to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

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Part IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following financial statements are filed herewith:

(1) The following consolidated financial statements of Coeur d’Alene Mines Corporation and subsidiaries are included in Item 8:

  Consolidated Balance Sheets – December 31, 2005 and 2004.

  Consolidated Statements of Operations and Comprehensive Income (Loss) – Years Ended December 31, 2005, 2004 and 2003.

  Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003.

  Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003.

  Notes to Consolidated Financial Statements.

(b) Exhibits: The following listed documents are filed as Exhibits to this report:

  3(a) - Articles of Incorporation of the Registrant and amendments thereto. (Incorporated herein by reference to Exhibit 3(a) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1988.)

  3(b) - Bylaws of the Registrant and amendments thereto. (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated August 30, 2004.)

  3(c) - Certificate of Designations, Powers and Preferences of the Series B Junior Preferred Stock of the Registrant, as filed with Idaho Secretary of State on May 13, 1999. (Filed herewith.)

  3(d) - Restated and Amended Articles of Incorporation of the Registrant as filed with the Secretary of State of the State of Idaho effective September 13, 1999. (Incorporated herein by reference to Exhibit 3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.)

  3(e) - Amendment to Restated and Amended Articles of Incorporation of the Registrant (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002.)

  4(a) - Specimen certificate of the Registrant’s stock. (Incorporated herein by reference to Exhibit 4 to the Registrant’s Registration Statement on Form S-2 (File No. 2-84174).)

  4(b) - Indenture dated as of January 13, 2004, by and between the Registrant and the Bank of New York relating to the Registrant’s 1 ¼% Convertible Senior Notes due 2024 (Incorporated herein by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K dated January 7, 2004).

65


  10(a) - Agreement, dated January 1, 1994, between Coeur-Rochester, Inc. and Johnson Matthey Inc. (Incorporated herein by reference to Exhibit 10(m) of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993.)

  10(b) - Master Equipment Lease No. 099-03566-01, dated as of December 28, 1988, between Idaho First National Bank and the Registrant. (Incorporated herein by reference to Exhibit 10(w) of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1988.)

  10(c) - Master Equipment Lease No. 01893, dated as of December 28, 1988, between Cargill Leasing Corporation and the Registrant. (Incorporated herein by reference to Exhibit 10(x) of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1988.)

  10(d) - Rights Agreement, dated as of May 11, 1999, between the Registrant and ChaseMellon Shareholder Services, L.L.C., as Rights Agent. (Incorporated herein by reference to Exhibit 1 to the Registrant’s Form 8-A relating to the registration of the Rights on the New York and Pacific Stock Exchanges.)

  10(e) - Amended and Restated Profit Sharing Retirement Plan of the Registrant. (Incorporated herein by reference to Exhibit 10(ff) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993.) *

  10(f) - 1993 Annual Incentive Plan and Long-Term Performance Share Plan of the Registrant. (Incorporated herein by reference to Exhibit 10(jj) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993.)*

  10(g) - Lease Agreement, dated January 12, 1994, between First Security Bank of Idaho and Coeur Rochester, Inc. (Incorporated herein by reference to Exhibit 10(mm) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993.)

  10(h) - 401k Plan of the Registrant. (Incorporated by reference to Exhibit 10 (pp) to the Registrants Annual Report on Form 10-K for the year ended December 31, 1994.)*

  10(i) - Mining Lease, effective as of June 1, 1997, between Silver Valley Resources and American Silver Mining Company. (Incorporated herein by reference to Exhibit 10(a) to the Registrant’s Registration Statement on Form S-3 (File No. 333-40513).)

  10(j) - Mining Lease, effective as of April 23, 1996, between Silver Valley Resources Corporation and Sterling Mining Company. (Incorporated herein by reference to Exhibit 10(b) to the Registrant’s Registration Statement on Form S-3 (File No. 333-40513).)

  10(k) - Mining Lease, effective as of March 21, 1997, between Silver Valley Resources Corporation and Silver Buckle Mines, Inc. (Incorporated herein by reference to Exhibit 10(c) to the Registrant’s Registration Statement on Form S-3 (File No. 333-40513).)

  10(l) - Mining Lease, effective as of March 21, 1997, between Silver Valley Resources Corporation and Placer Creek Mining Company. (Incorporated herein by reference to Exhibit 10(d) to the Registrant’s Registration Statement on Form S-3 (File No. 333-40513).)

66


  10(m) - Form of severance/change in control agreements entered into by the Registrant with each of its executive officers (James A. Sabala – January 13, 2003). (Incorporated by reference to Exhibit 10(hh) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).

  10(n) - Employment Agreement, dated as of January 13, 2003, between the Registrant and James A. Sabala. (Incorporated by reference to Exhibit 10(jj) to Registrant’s Annual Report on Form 10-K for the period ended December 31, 2002).

  10(o) - 2003 Long-Term Incentive Plan of the Registrant. (Incorporated herein by reference to Appendix A to the Registrant’s definitive Proxy Statement on Schedule 14A filed with the SEC on April 21, 2003.)

  10(p) - Employment Agreement, dated as of September 20, 2004, between the Registrant and Tom T. Angelos. (Incorporated by reference to Exhibit 10(b) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.)

  10(q) - Employment Agreement, dated as of July 15, 2004, between the Registrant and Alan L. Wilder. (Incorporated by reference to Exhibit 10(c) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.)

  10(r) - Silver Sale and Purchase Agreement, dated April 7, 2005, between CDE Australia Pty. Limited and Cobar Operations Pty. Limited. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.)

  10(s) - 2005 Non-Employee Directors’ Equity Incentive Plan (Incorporated herein by reference to Appendix A to the Registrant’s proxy statement dated April 5, 2005)

  10(t) - Amended and restated employment agreement and change in control agreement, effective July 1, 2005, between the Registrant and Harry F. Cougher (Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).

  10(u) - Amended and restated employment agreement and change in control agreement, effective July 1, 2005, between the Registrant and Mitchell J. Krebs (Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).

  10(v) - Amended and restated employment agreement and change in control agreement, effective July 1, 2005, between the Registrant and Donald J. Birak (Incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).

  10(w) - Amended and restated employment agreement and change in control agreement, effective June 1, 2005, between the Registrant and Kelli C. Kast (Filed herewith).

  10(x) - Amended and restated employment agreement and change in control agreement, effective July 1, 2005, between the Registrant and Gary W. Banbury (Filed herewith).

67


  10(y) - Amended and restated employment agreement and change in control agreement, effective July 1, 2005, between the Registrant and James R. Arnold (Filed herewith).

  10(z) - Employment Agreement, dated as of September 17, 2002, between the Registrant and Dennis E. Wheeler (Filed herewith).

  10(aa) - Amended Mining Lease, effective as of August 5, 2005, between Hyak Mining Company, Inc. and Coeur Alaska, Inc. (Incorporated herein by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).

  10(bb) - Silver Sale Agreement, dated September 8, 2005, between the Registrant, Perilya Broken Hill Ltd and CDE Australia Pty. Ltd. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).

  10(cc) - Employment agreement and change in control agreement, effective October 15, 2005, between the Registrant and James K. Duff. (Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).

  10(dd) - Form of Restricted Stock Agreement (Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated February 15, 2005).

  10(ee) - Form of Incentive Stock Option Agreement (Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated February 15, 2005).

  10(ff) - Form of Non-Qualified Stock Option Agreement (Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated February 15, 2005).

  21 - List of subsidiaries of the Registrant. (Filed herewith.)

  23 - Consent of KPMG LLP (Filed herewith.)

  31.1 - Certification of the CEO (Filed herewith.)

  31.2 - Certification of the CFO (Filed herewith.)

  32.1 - CEO Section 1350 Certification (Filed herewith.)

  32.2 - CFO Section 1350 Certification (Filed herewith.)

(c) Independent auditors’ reports are included herein as follows:

  Report of KPMG LLP as of December 31, 2004 and for the years ended December 31, 2005, 2004 and 2003.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Coeur d’Alene Mines Corporation
(Registrant)

Date:  March 13, 2006
By:  /s/ Dennis E. Wheeler
        Dennis E. Wheeler
        (Chairman, President and Chief Executive Officer)

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Dennis E. Wheeler Chairman, President, Chief Executive Officer March 13, 2006
Dennis E. Wheeler and Director

/s/ James A. Sabala
Executive Vice President March 13, 2006
James A. Sabala and Chief Financial Officer

/s/ Harry F. Cougher
Senior Vice President March 13, 2006
Harry F. Cougher North American Operations

/s/ James K. Duff
President - South American Operations March 13, 2006
James K. Duff

/s/ Tom T. Angelos
Controller and Chief March 13, 2006
Tom T. Angelos Accounting Officer

/s/ Cecil D. Andrus
Director March 13, 2006
Cecil D. Andrus

/s/ James J. Curran
Director March 13, 2006
James J. Curran

/s/ Andrew D. Lundquist
Director March 13, 2006
Andrew D. Lundquist

/s/ Robert E. Mellor
Director March 13, 2006
Robert E. Mellor

/s/ John H. Robinson
Director March 13, 2006
John H. Robinson

/s/ J. Kenneth Thompson
Director March 13, 2006
J. Kenneth Thompson

/s/ Alex Vitale
Director March 13, 2006
Alex Vitale

/s/ Timothy R. Winterer
Director March 13, 2006
Timothy R. Winterer

69


ANNUAL REPORT ON FORM 10-K

CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2005

COEUR D’ALENE MINES CORPORATION
COEUR D’ALENE, IDAHO

Reports of Independent Registered Public Accounting Firm F-2 - F-4

Consolidated Balance Sheets - December 31, 2005 and 2004
F-5 - F-6

Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years
    Ended December 31, 2005, 2004 and 2003 F-7

Consolidated Statements of Changes in Shareholders’ Equity for
    the Years Ended December 31, 2005, 2004 and 2003 F-8

Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2005, 2004 and 2003 F-9

Notes to Consolidated Financial Statements
F-10




F-1


Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Coeur d’Alene Mines Corporation:

We have audited the accompanying consolidated balance sheets of Coeur d’Alene Mines Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Coeur d’Alene Mines Corporation and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

As discussed in Note B to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, as of January 1, 2003.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Coeur d’Alene Mines Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

KPMG LLP

Boise, Idaho
March 10, 2006

F-2


Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Coeur d’Alene Mines Corporation:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Coeur d’Alene Mines Corporation maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Coeur d’Alene Mines Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Coeur d’Alene Mines Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Coeur d’Alene Mines Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

F-3


We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Coeur d’Alene Mines Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005, and our report dated March 10, 2006 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

Boise, Idaho
March 10, 2006









F-4


COEUR D’ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31,
2005
2004
ASSETS (In Thousands)

CURRENT ASSETS
           
    Cash and cash equivalents   $ 214,626   $ 273,079  
    Short-term investments    25,726    48,993  
    Receivables    30,022    10,634  
    Ore on leach pad    25,394    15,046  
    Metal and other inventory    15,369    17,639  
    Deferred tax assets    2,255    2,592  
    Prepaid expenses and other    5,613    3,727  


     319,005    371,710  

PROPERTY, PLANT AND EQUIPMENT
  
    Property, plant and equipment    108,964    85,070  
    Less accumulated depreciation    (59,770 )  (54,154 )


     49,194    30,916  

MINING PROPERTIES
  
    Operational mining properties    131,577    121,344  
    Less accumulated depletion    (109,265 )  (100,079 )


     22,312    21,265  

    Mineral interests
    72,201    20,125  
    Less accumulated depletion    (2,218 )  --  


     69,983    20,125  

    Non-producing and development properties
    72,488    26,071  


     164,783    67,461  

OTHER ASSETS
  
    Ore on leach pad, non-current portion    29,254    28,740  
    Restricted cash and cash equivalents    16,943    10,847  
    Debt issuance costs, net    5,454    5,757  
    Deferred tax assets    923    1,811  
    Other    9,260    8,535  


     61,834    55,690  


         TOTAL ASSETS   $ 594,816   $ 525,777  



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

F-5


COEUR D’ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31,
2005
2004
LIABILITIES AND SHAREHOLDERS’ EQUITY (In thousands except share data)

CURRENT LIABILITIES
           
    Accounts payable   $ 17,936   $ 8,389  
    Accrued liabilities and other    6,002    5,306  
    Accrued interest payable    1,031    1,035  
    Accrued salaries and wages    8,419    6,379  
    Current portion of remediation costs    503    1,041  


     33,891    22,150  

LONG-TERM LIABILITIES
  
    1 1/4% Convertible Senior Notes due January 2024    180,000    180,000  
    Reclamation and mine closure    30,988    23,670  
    Other long-term liabilities    8,384    6,503  


     219,372    210,173  

COMMITMENTS AND CONTINGENCIES
  
    (See Notes I, J, L, M, N, O, P and R)  

SHAREHOLDERS’ EQUITY
  
    Common Stock, par value $1.00 per share; authorized 500,000,000  
        shares, issued 250,961,353 and 241,028,303 shares in 2005 and 2004  
        (1,059,211 shares held in treasury)    250,961    241,028  
    Additional paid-in capital    656,977    629,809  
    Accumulated deficit    (551,357 )  (561,908 )
    Shares held in treasury    (13,190 )  (13,190 )
    Accumulated other comprehensive loss    (1,838 )  (2,285 )


     341,553    293,454  



TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 594,816   $ 525,777  


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

F-6


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

Years Ended December 31,
2005
2004
2003
(In Thousands, except per share data)
REVENUES                
Sales of metal   $ 172,336   $ 132,807   $ 110,703  

COSTS AND EXPENSES
  
Production costs applicable to sales    104,930    82,352    80,042  
Depreciation and depletion    20,885    18,800    16,627  
Administrative and general    19,417    15,914    12,264  
Exploration    11,914    9,651    4,947  
Pre-development    6,057    11,449    1,967  
Write-down of mining properties and other holding costs    1,379    1,983    6,393  
Litigation settlement    1,600    --    --  



         Total cost and expenses    166,182    140,149    122,240  




OTHER INCOME AND EXPENSE
  
Interest and other income    8,365    3,205    2,019  
Interest expense, net of capitalized interest    (2,485 )  (2,831 )  (12,851 )
Merger expenses    --    (15,675 )  --  
Loss on exchange and early retirement of debt    --    --    (41,564 )



         Total other income and expense    5,880    (15,301 )  (52,396 )




INCOME (LOSS) FROM CONTINUING OPERATIONS
    12,034    (22,643 )  (63,933 )
Income tax (provision) benefit    (1,483 )  5,785    7  




Income (loss) before cumulative effect of change in accounting
  
   principle    10,551    (16,858 )  (63,926 )
Cumulative effect of accounting change    --    --    (2,306 )




NET INCOME (LOSS)
    10,551    (16,858 )  (66,232 )
Other comprehensive income (loss)    447    (908 )  (556 )




COMPREHENSIVE INCOME (LOSS)
   $ 10,998   $ (17,766 ) $ (66,788 )




BASIC AND DILUTED INCOME (LOSS) PER SHARE
  
Basic income (loss) per share:  
Income (loss) before cumulative effect of accounting change   $ 0.04   $ (0.08 ) $ (0.38 )
Cumulative effect of accounting change    --    --    (0.01 )



Net income (loss)   $ 0.04   $ (0.08 ) $ (0.39 )




Diluted income (loss) per share:
  
Income (loss) before cumulative effect of accounting change   $ 0.04   $ (0.08 ) $ (0.38 )
Cumulative effect of accounting change    --    --    (0.01 )



Net income (loss)   $ 0.04   $ (0.08 ) $ (0.39 )




Weighted average number of shares of common stock
  
   Basic    242,915    215,969    168,186  
   Diluted    243,683    215,969    168,186  

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

F-7


COEUR D’ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For Years Ended December 31, 2005, 2004 and 2003
(In thousands except share data)
Common
Stock
Shares

Common
Stock
$1 Par

Additional
Paid-In
Capital

Accumulated
Deficit

Shares
Held in
Treasury

Accumulated
Other
Comprehensive
Income (Loss)

Total
Balances at January 1, 2003      119,653   $ 119,653   $ 420,863   $ (478,818 ) $ (13,190 ) $ (821 ) $ 47,687  
Net Loss    --    --    --    (66,232 )  --    --    (66,232 )
Unrealized losses on short-term  
  investments and marketable securities    --    --    --    --    --    (306 )  (306 )
 Change in fair value of derivative  
  hedging instruments, net of settlement    --    --    --    --    --    140    140  
Excess additional pension liability over  
  unrecognized prior service cost    --    --    --    --    --    (390 )  (390 )
Conversions and exchanges of convertible  
  senior subordinated notes to  
  common stock    50,317    50,317    54,158    --    --    --    104,475  
Interest on convertible senior  
  subordinated notes paid in common stock    5,878    5,878    3,169    --    --    --    9,047  
Issuance of common stock    36,230    36,230    64,580    --    --    --    100,810  
Common stock issued under long-term  
  incentive plans    1,290    1,290    (289 )  --    --    --    1,001  
Other    827    827    419    --    --    --    1,246  







Balances at December 31, 2003    214,195   $ 214,195   $ 542,900   $ (545,050 ) $ (13,190 ) $ (1,377 ) $ 197,478  
Net Loss    --    --    --    (16,858 )  --    --    (16,858 )
Unrealized losses on short-term  
  investments and marketable securities    --    --    --    --    --    (347 )  (347 )
Change in fair value of derivative  
  hedging instruments, net of settlements    --    --    --    --    --    (130 )  (130 )
Excess additional pension liability  
  over unrecognized prior service cost    --    --    --    --    --    (431 )  (431 )
Issuance of common stock    26,625    26,625    86,475    --    --    --    113,100  
Common stock issued under long-term  
  incentive plans    208    208    432    --    --    --    640  
Other    --    --    2    --    --    --    2  







Balances at December 31, 2004    241,028   $ 241,028   $ 629,809   $ (561,908 ) $ (13,190 ) $ (2,285 ) $ 293,454  
Net Income    --    --    --    10,551    --    --    10,551  
Unrealized gain on short-term  
  investments and marketable securities    --    --    --    --    --    853    853  
Change in fair value of derivative  
  hedging instruments, net of settlements    --    --    --    --    --    (171 )  (171 )
Excess additional pension liability  
  over unrecognized prior service cost    --    --    --    --    --    (237 )  (237 )
Issuance of common stock    9,863    9,863    26,351    --    --    --    36,214  
Common stock issued under long-term  
  incentive plans    70    70    817    --    --    --    887  
Foreign currency translation    --    --    --    --    --    2    2  







Balances at December 31, 2005    250,961   $ 250,961   $ 656,977   $ (551,357 ) $ (13,190 ) $ (1,838 ) $ 341,553  







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

F-8


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

Years Ended December 31,
2005
2004
2003
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income (loss)     $ 10,551   $ (16,858 ) $ (66,232 )
Add (deduct) non-cash items:    
    Depreciation and depletion       20,885     18,800     16,627  
    Deferred taxes       1,629     (4,403 )   --  
    Loss on early retirement of convertible    
       subordinated debentures       --     --     41,564  
    Cumulative effect of accounting change       --     --     2,306  
    Interest expense on convertible senior    
       subordinated notes paid in common stock       --     --     9,047  
   Unrealized (gain) loss on embedded derivative       (2,863 )   881     (411 )
   Amortization of restricted stock compensation       1,237     1,137     911  
   Amortization of debt issuance costs       303     408     697  
   Amortization of premium and/or discount on short-term    
      investments       790     1,527     760  
    Other non-cash charges       250     (18 )   (59 )
Changes in operating assets and liabilities:    
    Receivables       (19,387 )   (2,532 )   (2,738 )
    Prepaid expenses and other       (152 )   (486 )   (3,844 )
    Inventories       (8,591 )   (16,798 )   (3,226 )
    Accounts payable and accrued liabilities       2,023     (239 )   (528 )



    CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES       6,675     (18,581 )   (5,126 )




CASH FLOWS FROM INVESTING ACTIVITIES:
   
    Purchases of short-term investments       (45,657 )   (63,619 )   (99,782 )
    Proceeds from sales of short-term investments       62,296     29,864     86,168  
    Capital expenditures       (116,827 )   (10,514 )   (19,914 )
    Other       294     482     174  



    CASH USED IN INVESTING ACTIVITIES       (99,894 )   (43,787 )   (33,354 )




CASH FLOWS FROM FINANCING ACTIVITIES:
   
    Repayment of long-term debt       --     (9,561 )   (39,717 )
    Proceeds from issuance of common stock       36,493     119,803     105,988  
      Payments of common stock issuance costs       (557 )   (6,702 )   (5,178 )
    Proceeds from issuance of notes       --     180,000     33,280  
    Payments of debt issuance costs       --     (6,089 )   --  
    Borrowings from bank on working capital facility       --     6,056     30,785  
    Payments to bank on working capital facility       --     (8,422 )   (33,226 )
    Other       (1,170 )   (2,055 )   (128 )



    CASH PROVIDED BY FINANCING ACTIVITIES:       34,766     273,030     91,804  




INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
      (58,453 )   210,662     53,324  

    Cash and cash equivalents at beginning of period
      273,079     62,417     9,093  



    Cash and cash equivalents at end of period     $ 214,626   $ 273,079   $ 62,417  




SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   
Cash paid for:    
    Interest     $ 2,280   $ 1,572   $ 3,927  

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

F-9


COEUR D’ALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, unless otherwise specified)

NOTE A — BUSINESS OF COEUR D’ALENE MINES CORPORATION

        Coeur d’Alene Mines Corporation and its subsidiaries (collectively, “Coeur” or the “Company”) is principally engaged in silver and gold mining and related activities including exploration, development, and mining at its properties located in the United States (Nevada, Idaho and Alaska), South America (Chile, Argentina and Bolivia) and Australia (New South Wales).

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 Silver Valley, Inc., Coeur Alaska, Inc., CDE Cerro Bayo Ltd., Coeur Argentina, CDE Australia and Empressa Minera Manquiri S.A.. 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 collectibility 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 are recorded 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 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 form of the product is metal in flotation concentrate, which is the final process for which the company is responsible.

F-10


        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 $9.5 million, $8.8 million and $8.5 million in 2005, 2004 and 2003, respectively, are recorded as a reduction of revenue.

        At December 31, 2005, the Company had outstanding provisionally priced sales of $53.6 million, consisting of 4.3 million ounces of silver, 40,000 ounces of gold and 0.5 million pounds of copper. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $43,000; for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $40,000; and for each one cent per pound change in realized copper price, revenue would vary (plus or minus) approximately $5,200. At December 31, 2004, the Company had outstanding provisionally priced sales of $26.7 million consisting of 2.5 million ounces of silver, 18,755 ounces of gold and 1.0 million pounds of copper. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $25,000; for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $18,755; and for each one cent per pound change in realized copper price, revenue would vary (plus or minus) approximately $10,000.

        Cash and Cash Equivalents: Cash and cash equivalents include all highly-liquid investments with a maturity of three months or less at the date of purchase. The Company minimizes its credit risk by investing its cash and cash equivalents with major international banks and financial institutions located principally in the United States and Chile with a minimum credit rating of A1 as defined by Standard & Poor’s. The Company’s management believes that no concentration of credit risk exists with respect to the investment of its cash and cash equivalents.

        Short-term Investments: Short-term investments principally consist of highly-liquid United States, foreign government and corporate securities with original maturities in excess of three months and less than one year. The Company classifies all short-term investments as available-for-sale securities. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive 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. The Company maintains a pledge of collateral agreement to reserve $1.0 million against the investment portfolio to cover credit exposure related to ACH transactions.

        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.

        The Company uses several integrated steps to scientifically measure the metal content of ore placed on the leach pads. As the ore body is 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 estimates the quantity of ore by utilizing global positioning satellite survey techniques. The Company then processes the ore through a crushing facility where the output is again weighed and sampled for assaying. A metallurgical reconciliation with the data collected from the mining operation is completed with appropriate adjustments made to previous estimates. The crushed ore is 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 the leach pads of $54.6 million as of December 31, 2005. Of this amount, $25.4 million is reported as a current asset and $29.2 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. The ore on leach pad inventory is stated at actual production costs incurred to produce and place ore on the leach pad during the current period, adjusted for production issues encountered during the period.

F-11


        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 nineteen 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. The length of time necessary to achieve ultimate recoveries for silver and gold is currently estimated between 5 and 10 years. Commencing in 2003, the estimated recoveries for silver and gold were revised to 61.5% and 93%, respectively, from the 59% and 89% used in 2002. The impact of this change in recovery increased the estimated recoverable ounces of silver and gold contained in the heap by 1.8 million ounces and 41,000 ounces, respectively. However, the ultimate recovery will not be known until leaching operations cease which is currently estimated for 2011.

        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. 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. 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, 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: Costs incurred to develop new properties are capitalized as incurred, where it has been determined that the property can be economically developed. At the Company’s surface mines, these costs include costs to further delineate the ore body and remove overburden to initially expose the ore body. At the Company’s underground mines, these costs include the cost of building access ways, shaft sinking and access, lateral development, drift development, ramps and infrastructure development. All such 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. Costs incurred during the start-up phase of a mine are expensed as incurred. Ongoing mining expenditures on producing properties are charged against earnings as incurred. Major development expenditures incurred to increase production or extend the life of the mine are capitalized. Mineral exploration costs are expensed as incurred.

F-12


        Mineral Interests: Significant payments related to the acquisition of the 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.

        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 such as deferred stripping. 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, capital and reclamation costs, 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 December 31, 2005 and December 31, 2004, the Company held certificates of deposit and cash under these agreements of $16.9 million and $10.8 million, respectively, restricted for this purpose. The ultimate timing for the release of the collateralized amounts is 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.

        Deferred Stripping Costs: Deferred stripping costs are unique to the mining industry and are determined based on the Company’s estimates for the life of mine strip ratio for each mine. These costs are capitalized in periods when the life of mine ratio is below the current mining strip ratio, and amortized during periods where the life of mine strip ratio is above the current strip ratio. The Rochester mine is the only mine that has previously capitalized deferred stripping costs. The life of mine strip ratio that was used to accumulate the deferred stripping amounts was 1.8 to 1 (waste to ore) and was based on the estimated average stripping ratio for the life of the mine, compared to the then current ratio of 2.2 to 1 (waste to ore). The deferred stripping costs have been amortized as waste and ore have been removed from the Rochester mine pit. At December 31, 2005 and December 31, 2004 the carrying amount of the deferred stripping costs were $0.4 million and $0.8 million, respectively, and are included in other assets in the accompanying balance sheet. No additional deferred stripping costs were capitalized during the periods presented. The amounts that were amortized for the years ended December 31, 2005, 2004 and 2003 were $0.4 million, $0.4 million and $0.3 million, respectively.

F-13


        In March 2005, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues Task Force (“EITF”) Issue No. 04-06, “Accounting for Stripping Costs Incurred during Production in the Mining Industry.” EITF Issue No. 04-06 addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs as variable production costs that should be included as a component of inventory to be recognized in costs applicable to sales in the same period as the revenue from the sale of inventory. As a result, capitalization of post-production stripping costs is appropriate only to the extent product inventory exists at the end of a reporting period. The guidance in EITF Issue No. 04-06 is effective for the first reporting period in fiscal years beginning after December 15, 2005, with early adoption permitted. The guidance requires application through recognition of a cumulative effect adjustment in the period of adoption, with no charge to current earnings for prior periods. The most significant expected impacts of adoption are the elimination of the deferred stripping costs and the recognition of future post-production stripping costs 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, or in the case of inventory on hand at the end of a period, from writedowns where the carrying value of inventory on hand exceeds the net realizable value. The Company will adopt this new accounting rule as of January 1, 2006 and will record a charge of approximately $0.4 million to write off deferred stripping costs, as the cumulative effect of a change in accounting method. Adoption of the new guidance will have no impact on the Company’s cash position.

        Reclamation and Remediation Costs: Effective January 1, 2003, the Company adopted 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. Prior to the adoption of SFAS No. 143, reclamation costs were accrued on an undiscounted, units-of-production basis. 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. 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. Refer to Note I for additional disclosure.

        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.

        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 qualifies as an accounting hedge and on the classification of the hedge transaction.

F-14


        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 M – Derivative Financial Instruments and Fair Value of Financial Instruments.

        Stock-based Compensation Plans: The Company currently applies the intrinsic-value method of accounting in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations, in accounting for stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, “Accounting for Stock-Based Compensation” established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed under SFAS No. 123, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123.

        In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payments”, which revised SFAS No. 123, “Accounting for Stock-Based Compensation” and superseded Accounting Principles Board (“APB”) Opinion 25, “Accounting for Stock Issued to Employees” and its related implementation guidance. SFAS No. 123(R) requires measurement and recording in the financial statements of the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. The Company will adopt the provisions of SFAS No. 123(R) on January 1, 2006, using the modified prospective method. Accordingly, compensation expense will be recognized for all newly granted awards and awards modified, repurchased, or cancelled after January 1, 2006. Compensation cost for the unvested portion of awards that are outstanding, as of January 1, 2006, will be recognized ratably over the remaining vesting period. The compensation cost for the unvested portion of awards will be based on the fair value at date of grant adjusted for forfeitures as utilized in the SFAS No. 123 pro forma disclosure below. The actual effect on net income and earnings per share in future periods will vary depending upon the number and fair value of options granted in future years compared to prior years. Had compensation costs for the Company’s options been recognized based on the fair value at the grant dates as prescribed by SFAS No. 123, the Company’s net income (loss) and net income (loss) per common share would have been the pro forma amounts indicated below:

Years Ended December 31,
2005
2004
2003
Net income (loss) as reported     $ 10,551   $ (16,858 ) $ (66,232 )
Add: Stock based employee compensation expense included in reported  
   net income (loss)    1,237    1,137    911  
Deduct: Total stock based employee compensation expense  
    determined under fair value method for all rewards    (2,316 )  (2,017 )  (482 )



Pro forma net income (loss)   $ 9,472   $ (17,738 ) $ (65,803 )




Basic and diluted net income (loss) per share as reported
   $ 0.04   $ (0.08 ) $ (0.39 )
Basic and diluted pro forma net income (loss) per share   $ 0.04   $ (0.08 ) $ (0.39 )

        The fair value of each option grant was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 3.9% and 3.3% for 2005 and 2004, respectively; expected option life of 6 years for officers and directors; expected volatility of 69% and 76% for 2005 and 2004, respectively, and no expected dividends. There were no stock option grants in 2003.

F-15


        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.

        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.

        Comprehensive Income (Loss): Comprehensive income (loss) 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 loss in addition to net income (loss) include the following:

2005
2004
2003
Unrealized gain (loss) on marketable securities     $ 853   $ (347 ) $ (306 )
Change in fair value of cash flow hedges,  
    net of settlements    (169 )  (130 )  140  
Excess additional pension liability over unrecognized  
    prior service cost    (237 )  (431 )  (390 )

        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 effect of potentially dilutive stock options and debentures outstanding in the years ending December 31, 2005, 2004 and 2003 are as follows:

For the Year Ended
December 31, 2005

For the Year Ended
December 31, 2004

For the Year Ended
December 31, 2003

(In thousands except for EPS) Income
(Numerator)

Shares
(Denominator)

Per-Share
Amount

Income
(Numerator)

Shares
(Denominator)

Per-Share
Amount

Income
(Numerator)

Shares
(Denominator)

Per-Share
Amount

Net income (loss) available                                        
  to common shareholders   $ 10,551           $ (16,858 )         $ (66,232 )        



Basic EPS  
   Net income (loss)  
  available to common  
  stockholders   $ 10,551    242,915   $ 0.04   $ (16,858 )  215,969   $ (0.08 ) $ (66,232 )  168,186   $ (0.39 )
Effect of Dilutive Securities  
  Stock Options    --    768        --    --        --    --      






Diluted EPS  
  Net income (loss)  
  available to common  
  stockholders   $ 10,551    243,683   $ 0.04   $ (16,858 )  215,969   $ (0.08 ) $ (66,232 )  168,186   $ (0.39 )









The following potentially dilutive shares have been excluded from earnings per share calculation as their effect is antidilutive:

December 31, 2005
December 31, 2004
December 31, 2003
Stock Options      --    1,796,908    1,650,054  
7.25% Debentures  
  Convertible at $17.45 per share    --    --    548,023  
1.25% Notes  
  Convertible at $7.06 per share    23,684,211    23,684,211    --  



Total potentially dilutive shares    23,684,211    25,481,119    2,198,077  



F-16


        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, amortization and accretion of future cash flows for long lived assets; estimates of recoverable gold and silver ounces in ore on leach pad; reclamation and remediation costs; valuation allowance for deferred tax assets; and post-employment and other employee benefit liabilities.

        Reclassifications: Certain reclassifications of prior year balances have been made to conform to the current year presentation.

        Recent Accounting Pronouncements: In November 2004, FASB issued SFAS No. 151, “Inventory Costs,” which amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement now requires that these items be recognized as current-period expenses regardless of whether they meet the criterion of “so abnormal” as previously stated in ARB No. 43, Chapter 5, “Intangible Assets”. In addition, this Statement requires that the allocation of fixed production overhead to costs of conversion be based on the normal capacity of the production facility. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005.