UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

[X]    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2006

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 Identification No.)
incorporation or organization)

PO Box I,
505 Front Ave.
Coeur d’Alene, Idaho
83816
(Address of principal executive offices) (Zip Code)
(208) 667-3511
(Registrant’s telephone number, including area code)

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

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 under the Exchange Act).
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|

Applicable only to corporate issuers: Indicate the number of shares outstanding of each of Issuer’s classes of common stock, as of the latest practicable date: Common stock, par value $1.00, of which 277,995,133 shares were issued and outstanding as of November 3, 2006.


COEUR D’ALENE MINES CORPORATION

INDEX

Page No.

Part I.
Financial Information  

Item 1.
Financial Statements
Consolidated Balance Sheets - Unaudited   3
September 30, 2006 and December 31, 2005

 
Consolidated Statements of Operations and   5
Comprehensive Income (Loss) - Unaudited
Three and Nine Months Ended September 30, 2006 and 2005

 
Consolidated Statements of Cash Flows - Unaudited   6
Three and Nine Months Ended September 30, 2006 and 2005

 
Notes to Consolidated Financial Statements - Unaudited   7

Item 2.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations 28

Item 3.
Quantitative and Qualitative Disclosures About Market Risk 50

Item 4.
Controls and Procedures 51

Part II.
Other Information 52

Item 1.
Legal Proceedings 52

Item 1A.
Risk Factors 52

Item 6.
Exhibits 56





2


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

September 30,
2006

December 31,
2005

ASSETS (In Thousands)

CURRENT ASSETS
           
    Cash and cash equivalents   $ 354,051   $ 214,616  
    Short-term investments    11,180    25,726  
    Receivables    27,207    27,986  
    Ore on leach pad    28,205    25,394  
    Metal and other inventories    17,143    12,807  
    Deferred tax assets    5,442    2,255  
    Prepaid expenses and other    5,803    4,707  
    Assets of discontinued operations held for sale (Note D)    --    14,828  


     449,031    328,319  

PROPERTY, PLANT AND EQUIPMENT
  
    Property, plant and equipment    119,467    105,107  
    Less accumulated depreciation    (61,805 )  (57,929 )


     57,662    47,178  

MINING PROPERTIES
  
    Operational mining properties    126,862    121,441  
    Less accumulated depletion    (113,513 )  (105,486 )


     13,349    15,955  

    Mineral interests
    72,201    72,201  
    Less accumulated depletion    (6,688 )  (2,218 )


     65,513    69,983  

    Non-producing and development properties
    160,053    72,488  


     238,915    158,426  

OTHER ASSETS
  
    Ore on leach pad, non-current portion    36,396    29,254  
    Restricted cash and cash equivalents    19,863    16,943  
    Debt issuance costs, net    5,227    5,454  
    Deferred tax assets    1,890    923  
    Other    7,754    8,319  


     71,130    60,893  


         TOTAL ASSETS   $ 816,738   $ 594,816  


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

3


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

September 30,
2006

December 31,
2005

(In thousands except
share data)
LIABILITIES AND SHAREHOLDERS’ EQUITY            

CURRENT LIABILITIES
  
    Accounts payable   $ 25,312   $ 17,189  
    Other current liabilities    12,652    6,274  
    Accrued interest payable    469    1,031  
    Accrued salaries and wages    6,405    7,840  
    Current taxes payable    7,477    66  
    Liabilities of discontinued operations held for sale (Note D)    --    12,908  


     52,315    45,308  

LONG-TERM LIABILITIES
  
    11/4% Convertible Senior Notes due January 2024    180,000    180,000  
    Reclamation and mine closure    24,459    24,082  
    Other long-term liabilities    3,022    3,873  


     207,481    207,955  

COMMITMENTS AND CONTINGENCIES
  

SHAREHOLDERS’ EQUITY
  
    Common Stock, par value $1.00 per share; authorized 500,000,000  
        shares, issued 279,063,659 and 250,961,353 shares in 2006 and  
        2005 (1,059,211 shares held in treasury)    279,064    250,961  
    Additional paid-in capital    777,117    656,977  
    Accumulated deficit    (486,372 )  (551,357 )
    Shares held in treasury    (13,190 )  (13,190 )
    Accumulated other comprehensive income (loss)    323    (1,838 )


     556,942    341,553  


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 816,738   $ 594,816  


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





4


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

Three Months
Ended September 30,
Nine Months
Ended September 30,
2006
2005
2006
2005
REVENUES (In thousands except per share data)

Sales of metal
    $ 50,606   $ 39,281   $ 149,501   $ 105,020  

COSTS AND EXPENSES
  
Production costs applicable to sales    21,915    24,448    63,602    60,602  
Depreciation and depletion    6,536    4,344    19,843    12,866  
Administrative and general    4,045    4,326    13,662    15,031  
Exploration    2,572    2,525    6,474    8,130  
Pre-development    --    (35 )  --    6,051  
Litigation settlements    874    --    1,343    1,600  




         Total costs and expenses    35,942    35,608    104,924    104,280  

OTHER INCOME AND EXPENSE
  
Interest and other income    5,619    2,067    12,933    5,351  
Interest expense, net of capitalized interest    (232 )  (737 )  (1,120 )  (1,869 )




         Total other income and expense    5,387    1,330    11,813    3,482  
Income from continuing operations before income taxes    20,051    5,003    56,390    4,222  
Income tax provision    (1,673 )  (281 )  (4,155 )  (813 )





INCOME FROM CONTINUING OPERATIONS
    18,378    4,722    52,235    3,409  
Income (loss) from discontinued operations, net of income taxes    --    (1,269 )  1,969    (2,802 )
Gain (loss) on sale of net assets of discontinued operations    (27 )  --    11,132    --  





NET INCOME
    18,351    3,453    65,336    607  
Other comprehensive income    420    134    2,161    255  





COMPREHENSIVE INCOME
   $ 18,771   $ 3,587   $ 67,497   $ 862  





BASIC AND DILUTED INCOME (LOSS) PER SHARE
  
Basic income per share:  
Income from continuing operations   $ 0.07   $ 0.02   $ 0.19   $ 0.01  
Income (loss) from discontinued operations    --    (0.01 )  0.05    (0.01 )




Net income   $ 0.07   $ 0.01   $ 0.24   $ 0.00  





Diluted income per share:
  
Income from continuing operations   $ 0.06   $ 0.02   $ 0.18   $ 0.01  
 Income (loss) from discontinued operations    --    (0.01 )  0.05    (0.01 )




Net income   $ 0.06   $ 0.01   $ 0.23   $ 0.00  





Weighted average number of shares of common stock
  
   Basic    277,543    241,683    269,259    240,572  
   Diluted    302,172    266,161    293,975    241,345  

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

5


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

Three Months
Ended September 30,
Nine Months
Ended September 30,
2006
2005
2006
2005
(In Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
                   
Net income   $ 18,351   $ 3,453   $ 65,336   $ 607  
Add (deduct) non-cash items:  
    Depreciation and depletion    6,536    4,344    19,843    12,866  
    Deferred taxes    (816 )  (175 )  (3,947 )  (55 )
    Unrealized loss on embedded derivative, net    (954 )  (389 )  2,247    (353 )
    Share based compensation    655    313    1,819    887  
    Other charges    (268 )  346    253    1,350  
Changes in Operating Assets and Liabilities:  
    Receivables    282    (463 )  1,092    (13,334 )
    Prepaid and other current assets    (846 )  (371 )  (1,872 )  (1,093 )
    Inventories    (5,345 )  (1,086 )  (14,290 )  (10,278 )
    Accounts payable and accrued liabilities    3,196    (1,978 )  10,832    386  
    Discontinued operations    27    (127 )  (11,308 )  1,242  





CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    20,818    3,867    70,005    (7,775 )

CASH FLOWS FROM INVESTING ACTIVITIES:
  
    Capital expenditures    (49,021 )  (57,305 )  (102,505 )  (82,693 )
    Purchases of short-term investments    (7,558 )  (11,502 )  (17,441 )  (34,419 )
    Proceeds from sales of short-term investments    15,465    13,019    29,081    35,207  
    Other    25    (53 )  (409 )  (20 )
    Discontinued operations    1,081    (981 )  15,446    (2,346 )




CASH USED IN INVESTING ACTIVITIES    (40,008 )  (56,822 )  (75,828 )  (84,271 )

CASH FLOWS FROM FINANCING ACTIVITIES:
  
    Retirement of long-term debt    (377 )  (147 )  (1,066 )  (208 )
    Proceeds from issuance of common stock    --    35,949    154,560    35,397  
    Payment of public offering costs    59    --    (8,329 )  --  
    Other    167    (65 )  93    (160 )




CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES    (151 )  35,737    145,258    35,029  





INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    (19,341 )  (17,218 )  139,435    (57,017 )
    Cash and cash equivalents at beginning of period    373,392    233,269    214,616    273,079  





    Cash and cash equivalents at end of period
   $ 354,051   $ 216,051   $ 354,051   $ 216,062  




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




6


Coeur d’Alene Mines and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

NOTE A – BASIS OF PRESENTATION

        The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three- and nine-month periods ended September 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date. For further information, refer to the consolidated financial statements and footnotes thereto included in the Coeur d’Alene Mines Corporation (“Coeur” or the “Company”) Annual Report on Form 10-K for the year ending December 31, 2005.

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Principles of Consolidation: The consolidated financial statements include the wholly-owned subsidiaries of the Company, the most significant of which are Coeur Rochester, Inc., Coeur Alaska, Inc., CDE Cerro Bayo Ltd., Coeur Argentina, CDE Australia 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.

        The Company’s reported revenues included revenues from its primary product, silver, in addition to revenues from associated by-products which consist primarily of gold. For the quarters ended September 30, 2006 and 2005, by-product revenues totaled $15.8 million and $17.2 million, respectively. For the nine months ended September 30, 2006 and 2005, by-product revenues totaled $47.9 million and $45.4 million, respectively.

        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.

7


        The effects of forward sales contracts are reflected in revenue at the date the related precious metals are delivered or the contracts expire. Third party smelting and refining costs of $2.6 million, $7.9 million, $2.0 million and $6.0 million during the three and nine months ended September 30, 2006 and 2005, respectively, are recorded as a reduction of revenue.

        At September 30, 2006, the Company had outstanding provisionally priced sales of $48.8 million, consisting of 3.3 million ounces of silver and 15,558 ounces of gold. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $33,500; and for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $15,600. At September 30, 2005, the Company had outstanding provisionally priced sales of $32.8 million consisting of 2.6 million ounces of silver and 31,214 ounces of gold. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $26,000; for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $31,200.

        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, Chile, Argentina and Australia 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.

        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 doré, 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.

8


        The Company reported ore on the leach pads of $64.6 million as of September 30, 2006. Of this amount, $28.2 million is reported as a current asset and $36.4 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.

        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, doré, 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 doré 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 the 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.

9


        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 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 costs of product inventory and charged against operations as products are sold. Major development expenditures incurred to increase production or extend the life of the mine are capitalized. Mineral exploration costs are expensed as incurred.

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

        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 and development property. 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 September 30, 2006 and December 31, 2005, the Company held certificates of deposit and cash under these agreements of $19.9 million and $16.9 million, respectively, which were restricted for this purpose. The ultimate timing of 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 is 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.

10


        Deferred Stripping Costs: Effective January 1, 2006, the Company adopted 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. The consensus requires application through recognition of a cumulative effect adjustment to opening retained earnings in the period of adoption, with no charge to current earnings for prior periods. The Company recorded a charge of approximately $0.4 million to retained earnings at January 1, 2006 to write off deferred stripping costs, as the cumulative effect of a change in accounting method.

        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. Accretion, 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 H 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.

        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 Consolidated Statements of 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 I – Derivative Financial Instruments and Fair Value of Financial Instruments.

11


        Stock-based Compensation Plans: Effective January 1, 2006, the Company began recording compensation expense associated with awards of equity instruments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment”. Prior to January 1, 2006, the Company accounted for awards of equity instruments according to the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. The Company adopted the modified prospective transition method provided for under SFAS No. 123(R), and, consequently, has not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with awards of equity instruments recognized in the first nine months of 2006 includes: 1) amortization related to the remaining unvested portion of all awards granted for the fiscal years 1995 to 2005, based on the grant date fair value, estimated in accordance with the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”; and 2) amortization related to all equity instrument awards granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). The compensation cost is included in administrative and general expenses.

        The compensation expense recognized in the Company’s consolidated financial statements for the three and nine months ended September 30, 2006 for awards of equity instruments was $0.7 million and $1.8 million, respectively. As of September 30, 2006, there was $2.4 million of total unrecognized compensation cost (net of estimated forfeitures) related to unvested stock options, restricted stock grants and performance share grants which is expected to be recognized over a weighted-average vesting period of 2.1 years.

        The Company continues to estimate the fair value of each stock option award on the date of grant using the Black-Scholes option valuation model. The Company now estimates forfeitures of stock based awards based on historical data and adjusts the forfeiture rate periodically. The adjustment of the forfeiture rate will result in a cumulative adjustment in the period the forfeiture estimate is changed. During the nine months ended September 30, 2006, the Company recorded an adjustment of $0.1 million to reduce compensation expense for forfeited awards.

        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 currently enacted tax laws.

        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): The company reported no tax effects associated with other comprehensive income (loss) as there are none due to the availability of net operating loss carryforwards and related deferred tax valuation allowances. 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:

12


Three Months Ended
September 30,
Nine Months Ended
September 30,
2006
2005
2006
2005
Net income     $ 18,351   $ 3,453   $ 65,336   $ 607  
Unrealized gain (loss) on marketable  
securities    (51 )  64    71    221  
Change in fair value of cash flow  
    hedges, net of settlements    471    70    (127 )  34  
Minimum pension liabilities    --    --    2,219    --  
Other    --    --    (2 )  --  




Comprehensive income   $ 18,771   $ 3,587   $ 67,497   $ 862  




        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 three and nine months ending September 30, 2006 and September 30, 2005 are as follows:

Three Months Ended
September 30, 2006

Nine Months Ended
September 30, 2006

(In thousands except for EPS) Income
(Numerator)

Shares
(Denominator)

Per-Share
Amount

Income
(Numerator)

Shares
(Denominator)

Per-Share
Amount

Basic EPS                            
   Net income from continuing operations   $ 18,378    277,543   $ 0.07   $ 52,235    269,259   $ 0.19  
   Income (loss) from discontinued operations    (27 )  277,543    --    13,101    269,259    0.05  




   Net income    18,351    277,543    0.07    65,336    269,259    0.24  
Effect of Dilutive Securities  
   Equity awards    --    945        --    1,031      
   1.25% Convertible Notes    209    23,684        1,030    23,685      




Diluted EPS  
   Net income from continuing operations    18,587    302,172    0.06    53,265    293,975    0.18  
   Income (loss) from discontinued operations    (27 )  302,172    --    13,101    293,975    0.05  




   Net income   $ 18,560    302,172   $ 0.06   $ 66,366    293,975   $ 0.23  





Three Months Ended
September 30, 2005

Nine Months Ended
September 30, 2005

(In thousands except for EPS) Income
(Numerator)

Shares
(Denominator)

Per-Share
Amount

Income
(Numerator)

Shares
(Denominator)

Per-Share
Amount

Basic EPS                            
   Net income from continuing operations   $ 4,722    241,683   $ 0.02   $ 3,409    240,572   $ 0.01  
   Income (loss) from discontinued operations    (1,269 )  241,683    (0.01 )  (2,802 )  240,572    (0.01 )




   Net income    3,453    241,683    0.01    607    240,572    0.00  
Effect of Dilutive Securities  
   Equity awards    --    794        --    773      
   1.25% Convertible Notes    638    23,684        --    --      




Diluted EPS  
   Net income from continuing operations    5,360    266,161    0.02    3,409    241,345    .01  
   Income (loss) from discontinued operations    (1,269 )  266,161    (0.01 )  (2,802 )  241,345    (0.01 )




   Net income   $ 4,091    266,161   $ 0.01   $ 607    241,345   $ 0.00  




        For the three and nine months ended September 30, 2006, options to purchase 643,948 and 327,492 shares of common stock at prices between $5.14 to $15.19 and $6.66 to $15.19, respectively, were not included in the computation of diluted EPS because the exercise price of the options was greater than the average market price of the common shares. This compares to the three and nine months ended September 30, 2005, when options to purchase 886,455 shares of common stock at prices between $3.92 to $17.94 were not included in the computation of diluted EPS because the exercise price of the options was greater than the average market price of the common shares. The options which expire between 2006 to 2015 are outstanding at September 30, 2006.

13


The following potentially dilutive shares have been excluded from earnings per share calculation for the nine months ended of September 30, 2005 as their effect is antidilutive:

September 30, 2005
Stock options      --  
1.25% Notes  
  Convertible at $7.60 per share    23,684  

Total potentially dilutive shares    23,684  

        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; post-employment and other employee benefit liabilities; and assumptions for stock option and restricted stock forfeitures.

        Reclassifications: Certain amounts in prior years have been reclassified to conform to September 30, 2006 presentation. The most significant reclassifications were to reclassify the consolidated balance sheet amounts and the consolidated statements of operations from historical presentation to assets and liabilities of operations held for sale on the consolidated balance sheets and to income (loss) from discontinued operations in the consolidated statements of operations for the period ended September 30, 2005. The consolidated statements of cash flows have been reclassified to reflect discontinued operations separately for all periods presented.

NOTE C – METAL AND OTHER INVENTORIES

        Inventories consist of the following:

September 30,
2006

December 31,
2005

(in thousands)

Concentrate and dore inventory
    $ 11,432   $ 7,836  
Supplies    5,711    4,971  


Metal and other inventories   $ 17,143   $ 12,807  


NOTE D – DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

        During the first quarter of 2006, the Company committed to a plan to sell Coeur Silver Valley Inc. (“CSV”), a wholly owned subsidiary of Coeur d’Alene Mines Corporation, that owns and operates the Galena underground silver mine and adjoining properties in Northern Idaho. On April 10, 2006, the Company announced that it had entered into an agreement to sell 100% of the shares of CSV to U.S. Silver Corporation for $15 million in cash. On June 1, 2006, the Company completed the sale of 100% of CSV to U.S. Silver Corporation for a total of $15 million in cash plus a post-closing working capital adjustment of $1.1 million. The Company recorded, within discontinued operations, a gain of approximately $11.1 million, net of $0 income taxes in the nine months ended September 30, 2006. Pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” CSV was classified as held for sale and the results of its operations reported in discontinued operations for all prior periods.

14


        The following table details selected financial information included in the income (loss) from discontinued operations in the consolidated statements of operations for the three and nine months ended September 30, 2006 and 2005 (in thousands):

Three Months
Ended September 30,
Nine Months
Ended September 30,
2006
2005
2006
2005
Sales of metal      --   $ 3,418   $ 11,223   $ 12,522  
Production costs applicable to sales    --    (3,796 )  (8,233 )  (12,431 )
Depreciation and depletion    --    (493 )  (681 )  (1,506 )
Mining exploration    --    (361 )  (279 )  (1,220 )
Other    --    (37 )  (61 )  (167 )




Income (loss) from discontinued operations    --    (1,269 )  1,969    (2,802 )
Gain (loss) on sale of net assets of discontinued  
 operations    (27 )  --    11,132    --  




Net income (loss) from discontinued operations    (27 ) $ (1,269 ) $ 13,101   $ (2,802 )




        The major classes of assets and liabilities of discontinued operations held for sale in the consolidated balance sheet as of December 31, 2005 is as follows (in thousands):

December 31, 2005
Assets        
    Receivables   $ 2,036  
    Prepaids    906  
    Inventory    2,561  
    Property, plant and equipment (net)    2,016  
    Operational mining properties, net    6,357  
    Other    952  

Total assets of discontinued operations   $ 14,828  


Liabilities
  
    Accounts payable   $ 747  
    Accrued liabilities    166  
    Accrued salaries, wages and benefits    578  
    Reclamation and mine closure    6,905  
    Defined benefit liabilities    2,588  
    Other non-current liabilities    1,924  

Total liabilities of discontinued operations   $ 12,908  

NOTE E – SHARE-BASED COMPENSATION PLANS

        The company has a Long Term Incentive Plan and Directors’ Plan, which is more fully described in Note K of the Company’s notes to the consolidated financial statements included in the 2005 Annual Report on Form 10-K, that provides for the grant to eligible employees and directors of stock options, share appreciation rights (SARs), restricted shares and performance shares.

        Stock options granted under the Company’s incentive plans vest over three years and are exercisable over a period not to exceed 10 years from the grant date. Exercise prices are equal to the fair market value of the shares on the date of the grant. The value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model.

15


        Restricted stock is granted at prices equal to the fair market value of the shares on the date of grant and vest in equal installments annually over three years. Holders of the restricted stock are entitled to vote the shares and to receive any dividends declared on the shares.

        Performance shares also are granted at the fair market value of the underlying shares on the date of grant. Vesting is contingent on meeting certain performance measures based on relative total shareholder return. The performance shares vest at the end of the three-year service period. Performance shares granted under the plan assume that the performance measure will be achieved. If such performance measures are not met, no compensation cost is recognized and any recognized compensation is reversed.

        Effective January 1, 2006, the Company began recording compensation expense associated with awards of equity instruments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment”. Prior to January 1, 2006, the Company accounted for awards of equity instruments according to the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. The Company adopted the modified prospective transition method provided for under SFAS No. 123(R), and, consequently, has not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with awards of equity instruments recognized in the first three months of 2006 includes: 1) amortization related to the remaining unvested portion of all awards granted for the fiscal years 1995 to 2005, based on the grant date fair value, estimated in accordance with the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”; and 2) amortization related to all equity instruments awards granted subsequent to December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). The compensation cost is included in administrative and general expenses.

        Prior to the Company’s adoption of SFAS No. 123(R), benefits of tax deduction in excess of recognized compensation costs were reported as operating cash flows. SFAS No. 123(R) requires excess tax benefits be reported as a financing cash inflow rather than as a reduction of taxes paid. There were no significant excess tax benefits for the nine-month periods ended September 30, 2006 and 2005.

        The compensation expense recognized in the Company’s consolidated financial statements for the three and nine months ended September 30, 2006 for awards of equity instruments was $0.7 million and $1.8 million, respectively. As of September 30, 2006, there was $2.4 million of total unrecognized compensation cost (net of estimated forfeitures) related to unvested stock options, restricted stock grants and performance share grants which is expected to be recognized over a weighted-average vesting period of 2.1 years.

        The Company continues to estimate the fair value of each stock option award on the date of grant using the Black-Scholes option valuation model. The Company now estimates forfeitures of stock-based awards based on historical data and adjusts the forfeiture rate periodically. The adjustment of the forfeiture rate will result in a cumulative adjustment in the period the forfeiture estimate is changed. During the nine months ended September 30, 2006, the Company recorded an adjustment of $0.1 million to reduce compensation expense for forfeited awards.

        The impact of adopting SFAS No. 123(R) as of January 1, 2006 resulted in a decrease in net income of $0.3 million, or less than $0.01 per basic and diluted share for the nine months ended September 30, 2006. The impact of adoption excludes the amortization of restricted stock awards in the amount of $0.6 million for the nine months ended September 30, 2006. Compensation expense related to the amortization of restricted stock awards was recognized prior to the implementation of SFAS No. 123(R). Cash received from share options exercised under the Long-Term Incentive Plan for the nine months ended September 30, 2006 was $0.8 million and is reflected as a financing activity in the Company’s consolidated statements of cash flows.

16


        The following pro-forma information, as required by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123,” is presented for comparative purposes and illustrates the effect on net income per common share for the periods presented as if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation prior to December 31, 2005.

Three Months Ended
September 30, 2005

Nine Months Ended
September 30, 2005

(in thousands except per share data)

Net income as reported
    $ 3,453   $ 607  
    Add: Stock-based employee compensation  
    expense included in reported net income    313    887  

    Less: Stock-based employee compensation
  
    expense determined under fair value for  
    all awards    (434 )  (1,421 )


Net income - Pro forma   $ 3,332   $ 73  



Net income per share:
  
    Basic and diluted - As reported   $ 0.01   $ 0.00  


    Basic and diluted - Pro forma   $ 0.01   $ 0.00  


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

Nine Months Ended
September 30,
2006

September 30,
2005


Weighted average fair value of options granted
    $3.35   $3.92  
Expected volatility    68.5%  68.5%
Expected life    6 years    6 years  
Risk-free interest rate    4.6%  3.9%
Expected dividend yield    0.00%  0.00%

        The expected volatility of the option is determined using historical volatilities based on historical stock prices. The expected life of options granted during the first quarter of 2006 was based on the Company’s historical share option exercise experience. The Company estimated the expected life of options granted using the midpoint between the vesting date and the original contractual term. The risk free rate was determined using the yield available on U.S. Treasury Zero-coupon issues with a remaining term equal to the expected life of the option. The Company has not paid dividends on its common stock since 1996.




17


        The following table summarizes stock option activity during the nine months ended September 30, 2006:

Number of
Shares

Weighted
Average
Exercise Price


Outstanding at December 31, 2005
     2,218,629   $ 3.16  
Granted    332,169    5.14  
Exercised    (395,723 )  1.99  
Forfeited    (60,586 )  7.69  


Outstanding at September 30, 2006    2,094,489   $ 3.56  


        The following table summarizes information for options currently outstanding at September 30, 2006:

Options Outstanding
Options Exercisable
Range of
Exercise
Price



Number
Outstanding

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life (Years)

Number
Exercisable

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life (Years)

$0.74 to $1.22      442,641   $0.80    5.02    442,641   $0.80    5.02  
$1.23 to $1.85    336,525   $1.75    5.92    336,525   $1.75    5.92  
$1.86 to $2.63    111,502   $2.10    6.15    111,502   $2.10    6.15  
$2.64 to $3.92    537,089   $3.86    7.75    248,767   $3.78    7.02  
$3.93 to $7.09    629,127   $6.00    8.20    240,916   $6.82    6.89  
$7.10 to $17.94    37,605   $11.68    0.82    37,605   $11.68    0.82  






    2,094,489   $3.56    6.80    1,417,956   $2.96    5.88  






        As of September 30, 2006, the total future compensation cost related to non-vested options not yet recognized in the statement of income was $0.9 million and the weighted average period over which these awards are expected to be recognized was 2 years. The total intrinsic value of share options exercised during the third quarter of 2006 and 2005 was $0.2 million and $0, respectively. The total intrinsic value of share options exercised during the nine months ended September 30, 2006 and 2005 was $1.6 million and $0, respectively. At September 30, 2006, the total intrinsic value was $3.5 million and $3.2 million for stock options outstanding and exercisable, respectively.

        The following table summarizes restricted stock activity during the nine months ended September 30, 2006:

Number of
Shares

Weighted
Average Grant
Date Fair Value

Outstanding at December 31, 2005      661,381   $ 3.30  
Granted    220,894    5.14  
Vested    (445,025 )  2.71  
Forfeited    (24,218 )  4.83  


Outstanding at September 30, 2006    413,032   $ 4.83  


        The fair value of restricted stock is determined based on the closing stock price on the grant date. As of September 30, 2006, there was $0.8 million of total unrecognized compensation cost related to restricted stock-based compensation to be recognized over a weighted-average period of 2.1 years.

18


        The following table summarizes performance shares activity during the nine months ended September 30, 2006:

Number of
Shares

Weighted
Average Grant Date
Fair Value

Outstanding at December 31, 2005      --   $ --  
Granted    220,844    5.14  
Exercised    --    --  
Forfeited    (10,449 )  5.14  


Outstanding at September 30, 2006    210,445   $ 5.14  


        The fair value of performance shares is determined based on the closing price on the grant date. As of September 30, 2006, there was $0.7 million of total unrecognized compensation cost related to performance shares to be recognized over a weighted average period of 2.4 years.

NOTE F – INCOME TAXES

        The Company computes income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” SFAS No. 109 requires an asset and liability approach which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of those assets and liabilities, as well as net operating loss and tax credit carryforwards, using currently enacted tax laws. The Company has U.S. net operating loss carryforwards which expire in 2008 through 2025. Net operating losses in foreign countries have an indefinite carryforward period.

        For the three months ended September 30, 2006, the Company reported a net income tax provision of approximately $1.7 million. The income tax provision was comprised of $2.4 million in current taxes payable in Argentina, Australia and the United States, and an additional $0.1 million provision for foreign tax withholding for a total current provision of $2.5 million. The Company recorded a $1.4 million deferred tax benefit at CDE Cerro Bayo Ltd., and a $0.6 million deferred tax provision at Coeur Argentina and CDE Australia, based upon actual results of operations, increased proven and probable reserves and revised projected future taxable income.

        For the nine months ended September 30, 2006, the Company reported a net income tax provision of approximately $4.2 million. The income tax provision is comprised of $7.6 million in current taxes payable in Argentina, Australia and the United States, and an additional $0.6 million provision for foreign tax withholding for a total current provision of $8.2 million. The Company recorded a $3.9 million and $0.3 million deferred tax benefit at CDE Cerro Bayo Ltd. and Coeur Argentina, respectively, that was generated by actual results of operations and the release of approximately $5.0 million of valuation allowance on net operating loss carryforwards due to increased proven and probable reserves and revised projected future taxable income at CDE Cerro Bayo Ltd. The Company’s $4.2 million of deferred tax benefit was reduced by a $0.2 million deferred tax provision at CDE Australia.

        The income tax provision for the nine months ended September 30, 2006 and 2005 varies from the statutory rate primarily because of foreign operations and management’s determination as to the realization of net deferred tax assets.

NOTE G – SEGMENT REPORTING

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

19


        The operating segments are managed separately because each segment represents a distinct use of company resources which contribute to Company cash flows in its respective geographic area. The Company’s reportable operating segments include the Rochester, Cerro Bayo, Martha, San Bartolome, Kensington and CDE Australia (Endeavor and Broken Hill) mining properties. On June 1, 2006, the Company completed its sale of Coeur Silver Valley (Galena). For the period ending September 30, 2005, CSV was classified as held for sale and reported in discontinued operations (see Note D). All operating segments are engaged in the discovery and/or mining of gold and silver and generate the majority of their revenues from the sale of these precious metal concentrates and/or refined precious metals. The Cerro Bayo and Martha mines sell precious metal concentrates, typically under long-term contracts, to smelters located in Japan (Sumitomo Corporation and Dowa Mining Ltd.), Mexico (Met-Mex Penoles) and Germany (Nordeutsche). Refined gold and silver produced by the Rochester mine is principally sold on a spot basis to precious metals trading banks such as Standard Bank and Mitsui. Concentrates produced at CDE Australia (Endeavor and Broken Hill mines) are sold by the mines’ operators to Zinifex, an Australia smelter. The Company’s exploration programs are reported under the “other” segment. The other segment also includes the corporate headquarters, elimination of intersegment transactions and other items necessary to reconcile to consolidated amounts. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies above. The Company evaluates performance and allocates resources based on profit or loss before interest, income taxes, depreciation and amortization, unusual and infrequent items, and extraordinary items.

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

Segment Reporting
(In Thousands)

Rochester
Mine

Cerro Bayo
Mine

Martha
Mine

Endeavor
Broken
Hill

San
Bartolome

Kensington
Corporate
and
Other

Total
Three Months Ended                                        
September 30, 2006  

Sales of metal
   $ 24,409   $ 7,895   $ 10,872   $ 1,219   $ 6,211   $ --   $ --   $ --   $ 50,606  
Segment profit (loss)    13,629    340    7,472    1,132    5,165    (3 )  (485 )  443    27,693  

Depreciation and depletion
    3,654    1,222    316    119    1,151    --    --    74    6,536  
Interest income    --    241    --    --    --    --    4    5,060    5,305  
Interest expense    --    19    --    --    --    --    --    213    232  
Litigation settlement    --    --    --    --    --    --    --    (874 )  (874 )
Income tax (benefit) expense    --    (1,368 )  1,369    --    --    --    --    1,672    1,673  

Segment assets (A)
    86,473    41,944    11,257    15,290    34,059    40,888    175,493    5,928    411,332  
Capital expenditures    343    2,103    433    --    --    4,093    41,910    139    49,021  

Rochester
Mine

Cerro Bayo
Mine

Martha
Mine

Endeavor
Broken
Hill

San
Bartolome

Kensington
Corporate
and
Other

Total
Three Months Ended                                        
September 30, 2005  

Sales of metal
   $ 17,335   $ 15,084   $ 4,996   $ 1,328   $ 538   $ --   $ --   $ --   $39,281
Segment profit (loss)    4,915    4,370    1,795    1,131    385    (31 )  (263 )  (2,218 )  10,084  

Depreciation and depletion
    2,492    1,109    224    274    160    --    --    85    4,344  
Interest income    --    30    --    --    --    --    --    2,387    2,417  
Interest expense    --    3    --    --    --    --    --    734    737  
Income tax (benefit) expense    --    410    (12 )  --    --    --    --    (117 )  281  

Segment assets (A)
    84,441    33,790    5,615    15,513    36,502    29,981    47,511    10,257    263,610  
Capital expenditures    113    683    468    25    36,472    2,465    17,032    47    57,305  

20


Rochester
Mine

Cerro Bayo
Mine

Martha
Mine

Endeavor
Broken
Hill

San
Bartolome

Kensington
Corporate
and
Other

Total
Nine Months Ended                                        
September 30, 2006  

Sales of metal
   $ 72,226   $ 30,169   $ 26,103   $ 2,555   $ 18,448   $ --   $ --   $ --   $ 149,501  
Segment profit (loss)    39,225    10,941    14,741    2,374    14,997    (6 )  (575 )  (3,001 )  78,696  

Depreciation and depletion
    10,172    4,124    864    334    4,136    --    --    213    19,843  
Interest income    --    412    4    --    --    --    4    12,566    12,986  
Interest expense    --    68    --    --    --    --    --    1,052    1,120  
Litigation settlement    --    --    --    --    --    --    --    (1,343 )  (1,343 )
Income tax (benefit) expense    --    (3,809 )  3,452    --    --    --    --    4,512    4,155  

Segment assets (A)
    86,473    41,944    11,257    15,290    34,059    40,888    175,493    5,928    411,332  
Capital expenditures    1,086    5,017    1,810    --    --    7,558    86,590    444    102,505  

Rochester
Mine

Cerro Bayo
Mine

Martha
Mine

Endeavor
Broken
Hill

San
Bartolome

Kensington
Corporate
and
Other

Total
Nine Months Ended                                        
September 30, 2005  

Sales of metal
   $ 45,050   $ 43,045   $ 14,804   $ 1,583   $ 538   $ --   $ --   $ --   $ 105,020  
Segment profit (loss)    15,911    14,393    5,473    1,371    385    (120 )  (6,822 )  (10,034 )  20,557  

Depreciation and depletion
    8,061    3,431    614    346    160    --    35    219    12,866  
Interest income    --    75    (1 )  --    --    --    --    6,472    6,546  
Interest expense    --    3    --    --    --    --    --    1,866    1,869  
Litigation settlement    --    --    --    --    --    --    --    (1,600 )  (1,600 )
Income tax (benefit) expense    --    1,182    (290 )  --    --    --    --    (79 )  813  

Segment assets (A)
    84,441    33,790    5,615    15,513    36,502    29,981    47,511    10,257    263,610  
Capital expenditures    1,082    2,115    1,468    15,125    36,472    8,034    18,031    366    82,693  

(A)     Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties

Three Months Ended
September 30,
Nine Months Ended
September 30,
2006
2005
2006
2005
Income (loss) from continuing operations                    
 before income taxes  
Total segment profit   $ 27,693   $ 10,084   $ 78,696   $ 20,557  
Depreciation and amortization    (6,536 )  (4,344 )  (19,843 )  (12,866 )
Interest expense    (232 )  (737 )  (1,120 )  (1,869 )
Litigation settlements and other    (874 )  --    (1,343 )  (1,600 )




    Income (loss) from continuing operations  
     before income taxes   $ 20,051   $ 5,003   $ 56,390   $ 4,222  





As of September 30,
2006
2005
Assets                    
Total assets for reportable segments   $ 411,332   $ 263,610          
Cash and cash equivalents    354,051    216,051          
Short-term investments    11,180    41,418          
Other assets    40,175    35,139          
Total assets held for sale    --    13,852          


        Total consolidated assets   $ 816,738   $ 570,070          


21


Geographic Information

Three Months Ended
September 30, 2006
Revenues
Long-Lived
Assets

United States     $ 24,409   $ 186,603  
Australia    7,430    45,393  
Chile    7,895    20,675  
Argentina    10,872    3,513  
Bolivia    --    40,184  
Other Foreign Countries    --    209  


    Total   $ 50,606   $ 296,577  


Three Months Ended  
September 30, 2005  
United States   $ 17,335   $ 69,339  
Australia    1,866    51,091  
Chile    15,084    16,581  
Argentina    4,996    1,919  
Bolivia    --    29,361  
Other Foreign Countries    --    194  


    Total   $ 39,281   $ 168,485  


Nine Months Ended  
September 30, 2006  
United States   $ 72,226   $ 186,603  
Australia    21,003    45,393  
Chile    30,169    20,675  
Argentina    26,103    3,513  
Bolivia    --    40,184  
Other Foreign Countries    --    209  


    Total   $ 149,501   $ 296,577  


Nine Months Ended  
September 30, 2005  
United States   $ 45,050   $ 69,339  
Australia    2,121    51,091  
Chile    43,045    16,581  
Argentina    14,804    1,919  
Bolivia    --    29,361  
Other Foreign Countries    --    194  


    Total   $ 105,020   $ 168,485  


NOTE H – RECLAMATION AND REMEDIATION

        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. The Company uses 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.

        At September 30, 2006 and 2005, $24.1 million and $24.3 million, respectively, were accrued for reclamation obligations related to currently producing and developmental mineral properties. In addition to the asset retirement obligations, the Company had accrued $0.9 million and $0.8 million, respectively, for reclamation obligations associated with former mining activities. These amounts are also included in reclamation and mine closure liabilities.

22


        Changes to the Company’s asset retirement obligations are as follows:

Nine Months Ended
September 30,
2006
2005
(in thousands)
Asset retirement obligation - January 1     $ 30,429   $ 23,436  
Accretion    1,546    1,313  
Additions    --    --  
Sale of discontinued operations    (7,120 )  --  
Settlements    (755 )  (445 )


Asset retirement obligation - September 30    24,100   $ 24,304  


NOTE I – DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

        The Company enters into derivative instruments to manage the Company’s exposure to foreign currency exchange rates and market prices associated with changes in gold and silver commodity prices. The Company accounts for its derivative contracts in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Accordingly, unrealized gains and losses related to the change in fair market value of derivative contracts, which qualify and are designated as cash flow hedges, are recorded as other comprehensive income or loss and such amounts are recognized into earnings as the associated contracts are settled.

Forward Foreign Exchange Contracts

        During the first and second quarters of 2006, the Company entered into forward foreign currency exchange contracts to reduce the foreign exchange risk associated with forecasted Chilean peso operating costs for the remainder of 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 521 pesos to each U.S. dollar. At September 30, 2006, the Company had foreign exchange contracts for 4.8 million in U.S. dollars. For the nine months ended September 30, 2006, the Company recorded a realized loss of approximately $0.3 million in connection with its foreign currency hedging program. As of September 30, 2006, the fair value of the foreign exchange contracts was a liability of $0.3 million. Change in gains (losses) accumulated in other comprehensive income (loss) for cash flow hedging contracts are as follows:

For the Nine Months
Ended September 30,
2006
2005
Beginning balance     $ (171 ) $ --  
Reclassification to earnings    304    --  
Change in fair value    (431 )  34  


Ending balance   $ (298 )  34  


Commodity Derivatives

        The Company has occasionally entered into forward metal sales contracts to manage the price risk on a portion of its cash flows against fluctuating gold prices. As of September 30, 2006, the Company had no outstanding forward sales contracts for either gold or silver. For metal delivery contracts, the realized price pursuant to the contract is recognized when physical gold or silver is delivered in satisfaction of the contract.

23


        The credit risk exposure related to any potential hedging activities is limited to the unrealized gains, if any, on outstanding contracts based on current market prices. To reduce counter-party credit exposure, the Company deals only with a group of large credit-worthy financial institutions and limits credit exposure to each. The Company does not anticipate non-performance by any of its counter parties. In addition, to allow for situations where positions may need to be revised, the Company deals only in markets that it considers highly liquid.

Concentrate Sales Contracts

        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 other current liabilities), on the balance sheet and are adjusted to fair value through earnings each period until the date of final settlement.

        At September 30, 2006 the Company had outstanding provisionally priced sales of $48.8 million, consisting of 3.3 million ounces of silver and 15,558 ounces of gold, which had a fair value of approximately $48.8 million, including the embedded derivative.

NOTE J – LONG-TERM DEBT

1 ¼% Debentures

        The $180.0 million principal amount of 1 ¼% Debentures due 2024 outstanding at September 30, 2006 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 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. Before January 18, 2011, the redemption price is equal to 100% of the principal amount of the notes plus an amount equal to 8.75% of the principal amount of the notes, less the amount of any interest actually paid on the notes on or prior to the redemption date. The Debentures are due at maturity on January 15, 2024.

NOTE K – DEFINED CONTRIBUTION, 401(k), DEFINED BENEFIT AND POST-RETIREMENT MEDICAL PLANS

Defined Contribution Plan and 401(k) Plan

        The Company provides a noncontributory defined contribution retirement plan for all eligible U.S. employees. Total plan expenses charged to operations were $0.3 million and $0.2 million in the third quarters of 2006 and 2005, respectively, and plan expenses charged to operations for the nine months ended September 30, 2006 and 2005 were $0.9 million and $0.7 million, respectively, which is based on a percentage of salary of qualified employees.

        The Company maintains a savings plan (which qualifies under Section 401(k) of the U.S. Internal Revenue Code) covering all eligible U.S. employees. Under the plan, employees may elect to contribute up to 100% of their cash compensation, subject to ERISA limitations. The Company is required to make matching cash contributions equal to 50% of the employees’ contribution to a maximum of 3% of the employees’ compensation. Employees have the option of investing in thirteen different types of investment funds. Total plan expenses charged to operations were $0.1 million and $0.1 million in the third quarter of 2006 and 2005, respectively, and total plan expenses charges to operations for the nine months ended September 30, 2006 and 2005 were $0.5 million and $0.4 million, respectively.

24


        In connection with the sale of Coeur Silver Valley, the Company no longer maintains the Post-Retirement Medical and Defined Benefit Plans.

NOTE L – COMMITMENTS AND CONTINGENCIES

Labor Union Contracts

        The Company maintains two labor agreements in South America, consisting of a labor agreement with Syndicato de Trabajadores de Compañía Minera Cerro Bayo Ltd. at its Cerro Bayo mine in Chile and with Associacion Obrera Minera Argentina at its Martha mine in Argentina. The agreement at Cerro Bayo is effective from December 22, 2005 to December 21, 2007 and the agreement at Mina Martha is effective from June 12, 2006 to June 11, 2008. As of September 30, 2006, the Company had approximately 42% of its worldwide labor force covered by collective bargaining agreements.

Termination Benefits

        In September 2005, the Company established a one-time termination benefit program at the Rochester mine as the mine approaches the end of its mine life. The employees will be required to render service until they are terminated in order to be eligible for benefits. Approximately 80% of the workforce is expected to be severed by mid-2007, while the remaining 20% are expected to stay on for residual leaching and reclamation activities. As of September 30, 2006, the total amount expected to be incurred under this plan is approximately $3.1 million. The liability is recognized ratably over the minimum future service period. The amount accrued as of September 30, 2006 was $1.5 million and was charged to production costs.

Three Months Ended
September 30,

Nine Months Ended
September 30,

2006
2005
2006
2005
(in thousands) (in thousands)
Beginning Balance     $ 1,119   $ --   $ 542   $ --  
Accruals    383    46    1,319    46  
Payments    (26 )  --    (385 )  --  




Ending Balance   $ 1,476   $ 46   $ 1,476   $ 46  




NOTE M – SIGNIFICANT CUSTOMERS

        The Company markets its metals products and concentrates primarily to bullion trading banks and five 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 48.3% and 42.9% of total metals sales for the nine months ended September 30, 2006 and 2005, respectively. Generally, the loss of a single bullion trading bank customer would not adversely affect the Company in view of the liquidity of the markets and availability of alternative trading banks.

        The Company currently markets its silver and gold concentrates to third party smelters in Japan, Mexico, Australia and Germany. Sales of metals concentrates to third party smelters amounted to approximately 51.7% and 57.1% of metals sales for the nine months ended September 30, 2006 and 2005, respectively. The loss of any one smelter customer could have a material adverse effect in the event of the possible unavailability of alternative smelters.

25


NOTE N – LITIGATION AND OTHER EVENTS

Federal Natural Resources Action

          On March 22, 1996, an action was filed 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 1800’s.

        In May 2001, 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 total of $3 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 commenced on May 14, 2006 and will expire on May 14, 2021, or earlier once the cumulative amount has been paid. During the three and nine months ended September 30, 2006, $0.9 million and $1.3 million, respectively, of royalty expense was incurred in connection with this settlement and recorded as a litigation settlement in the consolidated statement of operations.

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

        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.

26


        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.

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. Army Corps of Engineers (“Corps of Engineers”) and the U.S. Forest Service (“USFS”) 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 USFS’s approval of the Amended Plan of Operations is arbitrary and capricious because it relies on the 404 permit issued by the Corps of Engineers.

        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 the Plaintiffs 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.

        On March 29, 2006, the Corps of Engineers reinstated the Company’s 404 permit. On April 6, 2006 the lawsuit challenging the permit was re-opened, and Coeur Alaska, Inc. filed its answer to the Amended Complaint and Motion to Intervene as a Defendant-Intervenor in the action. Two other parties, the State of Alaska and Goldbelt, Inc., a local native corporation, also filed Motions to Intervene as Defendant-Intervenors as supporters of the Kensington project as permitted. The Company, the State of Alaska and Goldbelt, Inc. were granted Defendant-Intervenor status and joined the agencies in their defense of the permits as issued.

        On August 4, 2006, the Federal District Court in Alaska dismissed the Plaintiffs challenge and upheld the Section 404 permit. On August 7, 2006 the Plaintiffs filed a Notice of Appeal of the decision to the Ninth Circuit Court of Appeals (“Circuit Court”) and on August 9, 2006 the Plaintiffs additionally filed a Motion for Injunction Pending Appeal with the Circuit Court. The Circuit Court granted a temporary injunction pending appeal on August 24, 2006, enjoining certain activities relating to the lake tailings facility. The Circuit Court further ordered an expedited briefing schedule on the merits of the legal challenge. As of October 13, 2006, the parties have filed their briefs in the Circuit Court and will participate in an oral argument in December 2006. There is no indication of when the Circuit Court may rule on the merits on appeal.

        The Company is unable to predict the outcome of the litigation or the impact of the temporary injunction. The Company is continuing to move forward with all construction activities at the mine not related to the temporarily enjoined lake tailings facility area activities.

27


Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        This document contains numerous forward-looking statements relating to the Company’s gold and silver mining business. The United States Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. Operating, exploration and financial data, and other statements in this document are based on information the Company believes reasonable, but involve significant uncertainties as to future gold and silver prices, costs, ore grades, estimation of gold and silver reserves, mining and processing conditions, changes that could result from the Company’s future acquisition of new mining properties or businesses, the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), regulatory and permitting matters, and risks inherent in the ownership and operation of, or investment in, mining properties or businesses in foreign countries. Actual results and timetables could vary significantly from the estimates presented. 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.

        Management’s Discussion and Analysis includes references to total cash costs per ounce of silver produced both on an individual mine basis and on a consolidated basis. Total cash costs per ounce represent a non- U.S. generally accepted accounting principles (“GAAP”) measurement that management uses to monitor and evaluate the performance of its mining operations. A reconciliation of total cash costs per ounce to U.S. GAAP “Production Expenses” is also provided herein and should be referred to when reading the total cash costs per ounce measurement.

General

        The results of the Company’s operations are significantly affected by the market prices of silver and gold which may fluctuate widely and are affected by many factors beyond the Company’s control, including, without limitation, 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 average price of silver (Handy & Harman) and gold (London Final) for the first nine months of 2006 was $11.23 and $601 per ounce, respectively. The market price of silver and gold on November 3, 2006 was $12.58 per ounce and $623 per ounce, respectively.

        The Company’s operating mines are the Rochester mine in Nevada, the Cerro Bayo mine in Chile and the Martha mine in Argentina. In addition, the Company owns all of the silver production and reserves, up to certain limits, at the Endeavor and Broken Hill mines in Australia, which are owned and operated by other companies. On June 1, 2006, the Company completed the sale of Coeur Silver Valley to U.S. Silver Corporation for $15 million in cash plus an estimated $1.1 million working capital adjustment.

  Operating Highlights and Statistics

South American Operations

        Cerro Bayo Mine:

        At the Cerro Bayo mine in Southern Chile, silver production was 405,586 ounces and gold production was 7,325 ounces in the third quarter of 2006 compared to 742,825 ounces of silver and 16,744 ounces of gold in the third quarter of 2005. The decrease in silver and gold production was primarily due to a 47% and 57% decrease in silver and gold ore grades, respectively, as a result of the Company focusing its mining activities on narrower, lower silver and gold grade veins of the mine. Under its 2006 mine plan, Cerro Bayo has been making a transition from narrower, lower-grade veins to newly-developed, wider and higher-grade veins as the year progresses. Total cash cost per silver ounce in the third quarter of 2006 was $8.33 per ounce compared to $0.37 per ounce in 2005. The increase in cash cost per ounce is primarily due to lower silver production ounces and lower gold by-product credit, due to lower gold production compared to the third quarter of 2005.

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        For the nine months ended September 30, 2006, silver production was 1,711,153 ounces and gold production was 26,054 ounces compared to 2,093,964 ounces of silver and 46,711 ounces of gold for the same period of 2005. The decrease in silver and gold production was primarily due to a decrease in overall ore grades as a result of the Company focusing its mining activities on lower-grade, narrower veins of the mine. Total cash costs per ounce for the first nine months of 2006 amounted to $3.86 compared to $0.33 during the same period in 2005. The higher cash costs per ounce were due to lower silver production and lower gold by-product credit due to lower gold production as compared to the same period of 2005.

        Martha Mine:

        At the Martha mine in Southern Argentina, silver production increased 42% to 806,384 ounces in the third quarter of 2006 compared to 569,873 ounces in the third quarter of 2005. The increase in silver production was due to a 53% increase in ore grades partially offset by a 9% decrease in tons milled as compared to the third quarter of 2005. Total cash costs per ounce in the third quarter of 2006 were $4.01 per ounce compared to $4.24 per ounce in 2005. The lower cash costs per ounce were primarily due to an increase in silver production partially offset by higher operating costs, including increased royalties resulting from higher realized metal prices, in the third quarter of 2006 compared to the third quarter of 2005.

        For the nine months ended September 30, 2006, silver production was 1,982,884 ounces compared to 1,555,054 ounces in the same period last year. The increase in silver production was primarily due to a 38% increase in ore grades, partially offset by a modest decrease in tons milled. Total cash costs per ounce in the nine-month period were $4. 51 per ounce in 2006 compared to $4.52 per ounce in 2005.

North American Operations

        Rochester Mine:

        At the Rochester mine, silver production was 1,403,302 ounces and gold production was 21,583 ounces during the third quarter of 2006 compared to 1,708,950 ounces of silver and 21,436 ounces of gold in the third quarter of 2005. The decrease in silver production is due to a 25% decrease in silver recoveries primarily related to excess precipitation on the leach pad. Total cash costs per ounce decreased to $1.14 from $3.64 in the third quarter of 2005. The decrease in cash cost per ounce is primarily due to the higher gold by-product credit as a result of higher gold prices.

        Silver production for the nine months ended September 30, 2006 was 3,704,960 ounces compared to 4,053,531 ounces for the nine months ended September 30, 2005 and gold production increased to 55,965 ounces from 49,840 ounces for the nine months ended September 30, 2005. Total cash costs per ounce decreased by 54% to $2.58 compared to $5.56 for the same period of 2005. This decrease in cash cost per ounce is attributable to lower operating costs, increased gold production and higher gold prices.

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Australia Operations

        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 Company is entitled to all of the silver production and reserves up to a maximum of 17.7 million payable ounces. 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 original agreement, CDE Australia, a wholly-owned subsidiary of Coeur, paid Cobar $15.1 million of cash at the closing. In addition, CDE Australia, subject to certain conditions, 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 could occur in 2007. In addition to these upfront payments, pursuant to the original agreement, Coeur pays Cobar an operating cost contribution of $1.00 for each ounce of payable silver plus a further increment which was to begin when the silver price exceeds $5.23 per ounce. This further increment was to begin on the second anniversary of the agreement and would have been 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.

        On March 28, 2006, CDE Australia Pty, Ltd. (CDE Australia), reached an agreement with CBH Resources Ltd. to modify the terms of the original silver purchase agreement. Under the modified terms, CDE Australia owns all silver production and reserves up to a total of 20.0 million ounces, up from 17.7 million ounces in the original agreement. Based on the most recent ore reserve report, the current ore reserve contains approximately 15.3 million payable ounces. To date, the Company has received 0.5 million payable ounces based on current metallurgical recovery and current smelter contract terms. Expansion of the ore reserve will be required to achieve the maximum payable ounces of silver production as set forth in the modified contract. The silver price-sharing provision is deferred until such time as Coeur has received approximately 2 million cumulative ounces of silver from the mine or June 2007, whichever is later. In addition, the silver price-sharing threshold increased to US$7.00 per ounce, from the previous level of US$5.23 per ounce.

Proven and Probable Ore Reserves (1,2,3,4) - Endeavor Mine

2006
Tons (000’s)      21,385  
Ounces of silver per ton    1.51  
Contained ounces of silver (000’s)    32,259  

Mineralized Material

2006
Tons (000’s)      9,370  
Ounces of silver per ton    3.00  

(1) Ore reserves are reported as of June 30, 2006, which is the end of the most recent fiscal year of the operator, CBH. Metal prices used were $10.00/ounce of silver, $2.95/pound of copper, $0.91/pound of zinc and $0.34/pound of lead.

(2) The ore reserves are minable reserves and include an 11% average factor for mining dilution and mining recovery factors ranging from 40% to 100%.

(3) Metallurgical recovery factor of 54% should be applied to the silver reserve ounces.

(4) Classification of reserves is based on spacing from drill hole composites to reserve block centers. For proven (measured) reserves the maximum distance is 25 meters and for probable (indicated) reserves it is greater than 25 meters and less than 40 meters. Mineralized material is similarly classified.

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In connection with the modification of the terms of the agreement, CDE Australia agreed to provide CBH with an advance of up to A$15.0 million of the A$30 million that remains to be paid under the terms of the original agreement. The remaining payment from Coeur to CBH is subject to the Endeavor mine achieving certain operational benchmarks. The advance, in the form of a loan facility, will bear interest at 7.75% per annum once drawn by CBH. The term is for a twelve month period with an option for CBH to extend the term for an additional six months.

        The Company’s share of silver production during the third quarter of 2006 amounted to 136,849 ounces compared to 220,613 ounces in the third quarter of 2005. Total cash costs per ounce increased to $2.52 from $1.95. For the nine months ended September 30, 2006, the Company’s share of silver production amounted to 302,019 ounces compared to 279,078 ounces for the same period in 2005. The cash costs per ounce of silver production increased to $2.48 compared to $1.94 due to higher smelting and refining charges associated with the increased market value of silver deduction charges pursuant to the smelting and refining contracts and inflation indexing provisions of the purchase agreement. Production rates at the Endeavor mine have not yet returned to expected levels as the mine continues to recover from a rock fall that occurred in October 2005. Based on the progress made to date in correcting issues related to the ground fall, the Company now expects production levels to return to normal levels during the fourth quarter of 2006.

        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. The Company is entitled to all of the silver production and reserves up to a maximum of 17.2 million payable ounces. To date, the Company has received 2.1 million payable ounces and based on the most recent ore reserve report, the current ore reserve contains approximately 12.4 million payable ounces based on current metallurgical recovery and current smelter contract terms. Expansion of the ore reserve will be required to achieve the maximum payable ounces of silver production as set forth in the contract. 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, PBH may earn up to US$750,000 of additional consideration per year over the first eight years of the contract by meeting certain annual silver production thresholds. The Company’s share of silver production during the third quarter of 2006 amounted to 587,360 ounces compared with 83,010 ounces in the same period of 2005. The cash costs per ounce of silver production was $3.05 compared with $2.69 during the third quarter of 2005 due to higher smelting and refining charges associated with the increased market value of silver deduction charges pursuant to the smelting and refining contracts and inflation indexing provisions of the purchase agreement. For the nine months ended September 30, 2006, the Company’s share of silver production amounted to 1,672,713 ounces. The cash cost per ounce of silver production was $3.07.



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Proven and Probable Ore Reserves - Broken Hill Mine

2006
(1,2,3,4)
Tons (000’s)      12,907  
Ounces of silver per ton    1.40  
Contained ounces of silver (000’s)    18,015  

Mineralized Material

2006
Tons (000’s)      10,900  
Ounces of silver per ton    3.80  
(1) Ore reserves are effective as of June 30, 2006. Metal prices used were $10.12/ounce of silver, $0.91/pound of zinc and $0.41/pound of lead.

(2) The ore reserves are underground minable reserves and include factors for mining dilution and recovery. Dilution ranges from 0% to 20% additional tonnage while recovery ranges from 80% to 100% of the diluted tonnage and averages 85%.

(3) Metallurgical recovery factor of 74% should be applied to the silver reserve ounces.

(4) The proven (measured) and probable (indicated) reserves are a combination of zinc, lead and silver mineralization remnant from historic mining and new parts or extensions of the mine. Proven (measured) and probable (indicated) reserves must be accessible as defined by the site specific conditions of the mine. Furthermore, reserves are defined by definition drilling on a grid of 40 meters horizontally by 20 meters vertically and over 70% of the proven (measured) reserves are drilled on a 20 meter by 10 meter grid.

Discontinued Operations

        Coeur Silver Valley (Galena) Mine:

        On June 1, 2006, the Company completed the sale of 100% of the shares of its wholly owned subsidiary Coeur Silver Valley, Inc. to U.S. Silver Corporation for $15 million in cash and additional consideration received of $1.1 million for working capital.

        The production figures at the Galena mine reflect the five-month period ending May 31, 2006 and therefore are not comparable to the three and nine months ended September 30, 2005. Silver production during the period of Coeur’s ownership of the Galena mine in 2006 amounted to 768,674 ounces. Silver production for the three and nine months ended September 30, 2005 was 459,805 and 1,729,801 ounces, respectively. Total cash costs per ounce were $9.75 during the five-month period ending May 31, 2006. Total cash costs per ounce were $8.39 and $7.60 in the three and nine months ended September 30, 2005, respectively. The lower production and higher costs per ounce for the periods presented are due to lower than expected production grades as mine operations adjusted to changing geologic ground conditions and the sale of Coeur Silver Valley on June 1, 2006.

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Operating Statistics From Continuing Operations

        The following table presents information by mine and consolidated sales information for the three- and nine-month periods ended September 30, 2006 and 2005:

Three Months Ended September 30, Nine Months Ended September 30,
2006
2005
2006
2005
Rochester                    
    Tons processed    2,648,263    2,131,844    7,917,710    6,783,878  
    Ore grade/Ag oz    0.83    0.94    0.75    0.98  
    Ore grade/Au oz    0.01    0.01    0.01    0.01  
    Recovery/Ag oz (A)    63.9%  84.9%  62.0%  60.9%
    Recovery/Au oz (A)    93.0%  97.5%  68.1%  74.2%
    Silver production ounces    1,403,302    1,708,950    3,704,960    4,053,531  
    Gold production ounces    21,583    21,436    55,965    49,840  
    Cash cost/oz   $1.14   $3.64   $2.58   $5.56  
    Total cost/oz   $4.02   $5.07   $5.68   $7.49  
Cerro Bayo  
    Tons milled    105,945    103,213    321,581    294,463  
    Ore grade/Ag oz    4.04    7.63    5.64    7.49  
    Ore grade/Au oz    .075    .176    0.088    0.171  
    Recovery/Ag oz    94.9%  94.3%  94.4%  94.9%
    Recovery/Au oz    92.0%  92.0%  92.1%  92.7%
    Silver production ounces    405,586    742,825    1,711,153    2,093,964  
    Gold production ounces    7,325    16,744    26,054    46,711  
    Cash cost/oz   $8.33   $0.37   $3.86   $0.33  
    Total cost/oz   $11.25   $1.86   $6.20   $1.97  
Martha Mine  
    Tons milled    9,101    9,966    24,767    26,719  
    Ore grade/Ag oz    92.82    60.64    84.56    61.21  
    Ore grade/Au oz    0.123    0.079    0.111    0.078  
    Recovery/Ag oz    95.5%  94.3%  94.7%  95.1%
    Recovery/Au oz    91.9%  92.0%  91.9%  92.9%
    Silver production ounces    806,384    569,873    1,982,884    1,555,054  
    Gold production ounces    1,026    726    2,535    1,933  
    Cash cost/oz   $4.01   $4.24   $4.51   $4.52  
    Total cost/oz   $4.39   $4.62   $4.94   $4.91  
Endeavor (B)  
    Tons milled    218,997    299,311    440,776    377,637  
    Ore grade/Ag oz    0.94    1.48    1.07    1.48  
    Recovery/Ag oz    66.1%  49.8%  63.9%  50.0%
    Silver production ounces    136,849    220,613    302,019    279,078  
    Cash cost/oz   $2.52   $1.95   $2.48   $1.94  
    Total cost/oz   $3.39   $3.19   $3.59   $3.18  
Broken Hill (B)  
    Tons milled    614,620    98,281    1,721,512    98,281  
    Ore grade/Ag oz    1.27    1.16    1.33    1.16  
    Recovery/Ag oz    75.1%  73.1%  73.3%  73.1%
    Silver production ounces    587,360    83,010    1,672,713    83,010  
    Cash cost/oz   $3.05   $2.69   $3.07   $2.69  
    Total cost/oz   $5.01   $4.62   $5.54   $4.62  
CONSOLIDATED PRODUCTION TOTALS  
    Silver ounces    3,339,481    3,325,271    9,373,729    8,064,637  
    Gold ounces    29,934    38,906    84,554    98,484  
    Cash cost per oz/silver   $3.10   $2.87   $3.31   $3.85  
    Total cost/oz   $5.14   $4.14   $5.53   $5.38  
CONSOLIDATED SALES TOTALS (C)  
    Silver ounces sold    3,020,351    3,154,544    9,148,095    8,688,786  
    Gold ounces sold    26,595    38,303    81,486    107,516  
    Realized price per silver ounce   $11.55   $7.29   $11.73   $7.13  
    Realized price per gold ounce   $634   $452   $625   $436  

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(A) The leach cycle at Rochester requires 5 to 10 years to recover gold and silver contained in the ore. The Company estimates the ultimate recovery to be approximately 61.5% for silver and 93% for gold. However, ultimate recoveries will not be known until leaching operations cease which is currently estimated for 2011. Current recovery may vary significantly from ultimate recovery. See Critical Accounting Policies and Estimates – Ore on Leach Pad.

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

(C) Units sold at realized metal prices will not match reported metal sales due primarily to the effects of embedded derivatives in the Company’s previously priced sales contracts.

“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.

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. In addition, see the reconciliation of “cash costs” to production costs under “Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs” set forth below.

Operating Statistics From Discontinued Operation

        The following table presents information for Coeur Silver Valley which was sold on June 1, 2006:

Three Months
Ended September 30,
Nine Months
Ended September 30,
2006
2005
2006 (1)
2005
Silver Valley/Galena                    
    Tons milled    --    28,498    52,876    101,889  
    Ore grade/Silver oz    --    16.62    15.15    17.46  
    Recovery/Silver oz    --    97.1%  96.0%  97.2%
    Silver production ounces    --    459,805    768,674    1,729,801  
    Cash cost/oz    --   $8.39   $9.75   $7.60  
    Total cost/oz    --   $9.47   $10.64   $8.47  
    Gold production    --    60    180    205  

(1) Amounts represent five months ended May 31, 2006.

Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs

        The tables below present reconciliations between non-GAAP cash costs per ounce to production costs applicable to sales including depreciation, depletion and amortization (GAAP).

        Total cash costs include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs, royalties and mining production taxes, net of by-product revenues earned from all metals other than the primary metal produced at each unit. Total cash costs are a performance measure and provide management and investors with an indication of net cash flow, after consideration of the realized price received for production sold. Management also uses this measurement for the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective. “Total cash costs per ounce” is a measure developed by precious metals companies in an effort to provide a comparable standard, however, there can be no assurance that our reporting of this non-GAAP measure is similar to that reported by other mining companies.

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        Production costs applicable to sales including depreciation, depletion and amortization, is the most comparable financial measure calculated in accordance with GAAP to total cash costs. The sum of the production costs applicable to sales and depreciation, depletion and amortization for our mines as set forth in the tables below is included in our Consolidated Statement of Operations and Comprehensive Loss.

THREE MONTHS ENDED SEPTEMBER 30, 2006
(In thousands except ounces and per ounce costs)
Rochester
Cerro Bayo
Martha
Endeavor (1)
Broken Hill (1)
Total

Production of Silver (ounces)
     1,403,302    405,586    806,384    136,849    587,360    3,339,481  
Cash Costs per ounce   $ 1.14   $ 8.33   $ 4.01   $ 2.52   $ 3.05   $ 3.10  

Total Cash Costs (Non-GAAP)
   $ 1,598   $ 3,380   $ 3,230   $ 346   $ 1,791   $ 10,345  
Add/Subtract:  
Third party smelting costs    --    (672 )  (552 )  (224 )  (666 )  (2,114 )
By-Product credit (2)    13,423    4,542    630    --    --    18,595  
Other adjustments    383    --    --    --    --    383  
Change in inventory    (4,635 )  (546 )  --    (35 )  (78 )  (5,294 )
Depreciation, depletion and  
   amortization    4,037    1,184    313    119    1,152    6,805  







Production costs applicable to
  
   sales, including depreciation,  
   depletion and amortization (GAAP)   $ 14,806   $ 7,888   $ 3,621   $ 206   $ 2,199   $ 28,720  







THREE MONTHS ENDED SEPTEMBER 30, 2005
(In thousands except ounces and per ounce costs)

Rochester

Cerro Bayo
Martha
Endeavor (1)
Broken Hill (1)
Total
Production of Silver (ounces)      1,708,950    742,825    569,873    220,613    83,010    3,325,271  
Cash Costs per ounce   $ 3.64   $ 0.37   $ 4.24   $ 1.95   $ 2.69   $ 2.87  

Total Cash Costs (Non- GAAP)
   $ 6,217   $ 273   $ 2,415   $ 430   $ 224   $ 9,559  
Add/Subtract:  
Third party smelting costs    --    (861 )  (312 )  (235 )  (70 )  (1,478 )
By-Product credit (2)    9,476    7,350    320    --    --    17,146  
Other Adjustment    (55 )  10    174    --    --    129  
Change in inventory    (3,326 )  2,005    410    3    --    (908 )
Depreciation, depletion and  
amortization    2,437    1,109    219    274    160    4,199  







Production costs applicable to
  
   sales, including depreciation,  
   depletion and amortization (GAAP)   $ 14,749   $ 9,886   $ 3,226   $ 472   $ 314   $ 28,647  






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NINE MONTHS ENDED SEPTEMBER 30, 2006
(In thousands except ounces and per ounce costs)

Rochester

Cerro Bayo
Martha
Endeavor (1)
Broken Hill (1)
Total

Production of Silver (ounces)
     3,704,960    1,711,153    1,982,884    302,019    1,672,713    9,373,729  
Cash Costs per ounce   $ 2.58   $ 3.86   $ 4.51   $ 2.48   $ 3.07   $ 3.31  

Total Cash Costs (Non-GAAP)
   $ 9,570   $ 6,602   $ 8,939   $ 750   $ 5,127   $ 30,988  
Add/Subtract:  
Third party smelting costs    --    (2,464 )  (1,333 )  (481 )  (2,000 )  (6,278 )
By-product Credit (2)    33,899    15,713    1,523    --    --    51,135  
Other adjustments    1,320    --    --    --    --    1,320  
Change in inventory    (11,657 )  (2,142 )  --    (89 )  325    (13,563 )
Depreciation, depletion and  
   amortization    11,491    4,004    853    334    4,137    20,819  







Production costs applicable to
  
   sales, including depreciation,  
   depletion and amortization (GAAP)   $ 44,623   $ 21,713   $ 9,982   $ 514   $ 7,589   $ 84,421  







NINE MONTHS ENDED SEPTEMBER 30, 2005
(In thousands except ounces and per ounce costs)

Rochester

Cerro Bayo
Martha
Endeavor (1)
Broken Hill (1)
Total

Production of Silver (ounces)
     4,053,531    2,093,964    1,555,054    279,078    83,010    8,064,637  
Cash Costs per ounce   $ 5.56   $ 0.33   $ 4.52   $ 1.94   $ 2.69   $ 3.85  

Total Cash Costs (Non- GAAP)
   $ 22,536   $ 691   $ 7,030   $ 541   $ 224   $ 31,022  
Add/Subtract:  
Third party smelting costs    --    (2,099 )  (811 )  (292 )  (70 )  (3,272 )
By-Product credit (2)    21,637    20,150    834    --    --    42,621  
Other adjustment    (256 )  --    --    --    --    (256 )
Change in inventory    (15,124 )  5,271    376    (36 )  --    (9,513 )
Depreciation, depletion and  
amortization    7,805    3,431    600    346    160    12,342  







Production costs applicable to
  
   sales, including depreciation,  
   depletion and amortization (GAAP)   $ 36,598   $ 27,444   $ 8,029   $ 559   $ 314   $ 72,944  






The following tables present a reconciliation between non-GAAP cash costs per ounce to GAAP production costs applicable to sales reported in Discontinued Operations (see Note D):

Coeur Silver Valley/Galena THREE MONTHS
ENDED SEPTEMBER 30,
NINE MONTHS
ENDED SEPTEMBER 30,
2006 (3)
2005
2006 (3)
2005
(In thousands except ounces and per ounce costs)
Production of Silver (ounces)      --    459,805    768,674    1,729,801          
Cash Costs per ounce    --   $ 8.39   $ 9.75   $ 7.60          





Total Cash Costs (Non-GAAP)
    --   $ 3,859   $ 7,498   $ 13,149          
Add/Subtract:  
Third party smelting costs    --    (662 )  (1,464 )  (2,620 )        
By-Product credit (2)    --    596    1,473    2,223          
Change in inventory    --    3    726    (321 )        
Depreciation, depletion and  
amortization    --    493    681    1,506          





Production costs applicable to
  
   sales, including depreciation,  
   depletion and amortization (GAAP)    --   $ 4,289   $ 8,914   $ 13,937          




36


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

(2) By-product credits are based upon production units and the period’s average metal price for the purposes of reporting cash costs per ounce.

(3) Amounts represent five months ended May 31, 2006.

Exploration Activity

Cerro Bayo Mine (Chile)

        Exploration at Cerro Bayo during the third quarter of 2006 focused on reserve development/delineation drilling and discovery of new mineralization. During the third quarter, drilling was performed at the Marcela Sur and Cascada vein systems; important new vein systems discovered in late 2005. Approximately 19,800 meters (64,900 feet) were drilled in the two programs. The majority of the drilling (61%) was devoted to the conversion of mineralized material to reserves around the current mine operations areas. Results from both programs are expected to produce additional reserves and mineralized material though the impact of the new drilling will not be fully evaluated until the program is completed.

Martha Mine (Argentina)

        At Martha, approximately 6,600 meters (21,700 feet) of drilling was completed during the third quarter to expand reserves and discover new mineralization. The majority of this drilling (75%) was focused on discovering new mineralization. Results obtained from drilling R4 Deep, Francisca and Catalina continues to expand the strike and depth of the mineralization in those veins, which were discovered in 2004. Drilling will continue throughout the year on these and other targets in the Martha mine district.

South America Exploration

        In the third quarter of 2006, the Company continued to advance its exploration activities on new properties in Chile and Argentina. Most of this work was conducted on the new El Aguila property in eastern Santa Cruz, Argentina as planned. Work on the second new property – Costa – will commence in the fourth quarter with the onset of spring weather conditions. Work at El Aguila has identified new gold and silver targets and plans are being made to conduct detailed sampling with trenching on them in the fourth quarter.

Tanzania (Africa)

        In the third quarter of 2006, the Company continued exploration on several of its properties in the Lake Victoria Goldfields District of northern Tanzania, the majority of which was devoted to its Geita 2 and Saragurwa concessions. The rotary air blast drill program, which commenced in the second quarter on Geita 2, was completed in the third quarter. A total of over 13,400 meters of short, rotary drill holes was completed. Analytical results are continuing to be received and interpreted and a program of core drilling is under review for a potential start-up in the fourth quarter to test gold anomalies identified thus far. The airborne geophysical survey over Saragurwa and Bunda was completed as planned this quarter.



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Development Projects:

San Bartolome (Bolivia)

        During 2004, the Company completed an updated feasibility study, obtained all required permits and commenced construction of the San Bartolome mine. The updated feasibility study estimates the capital cost of the project to be approximately $135 million, and the annual production to be approximately 6-8 million ounces of silver over a mine life of approximately 14 years.

        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. During the first nine months of 2006, construction work activity has increased and included the construction of access roads to and around the site, rough cut grading of the mill site, and diversion channels around the mill site, preparation of an ore stockpile area. In addition, the Company has begun construction of the mine’s $29 million tailings facility. The Company is proceeding with engineering and procurement activities.

        During the nine months ended September 30, 2006, Coeur expended approximately $7.6 million and plans to incur additional engineering, procurement and construction costs of approximately $60.3 million in 2006, assuming a full-scale construction schedule is implemented during the year. The Company is aiming to complete construction activities toward the end of 2007.

        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.

Kensington (Alaska)

        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 (“USFS”) issued its Record of Decision (“ROD”) for the Final Supplemental Environmental Impact Statement (“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.

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        On September 12, 2005 three environmental groups (“Plaintiffs”) filed a lawsuit in Federal District Court in Alaska against the Corps of Engineers and the USFS 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 USFS’s approval of the Amended Plan of Operations is arbitrary and capricious because it relies on the 404 permit issued by the Corps of Engineers.

        On August 4, 2006, the Federal District Court in Alaska dismissed the Plaintiff’s challenge and upheld the Section 404 permit. On August 7, 2006 the Plaintiffs filed a Notice of Appeal of the decision to the Ninth Circuit Court of Appeals (Circuit Court) and on August 9, 2006 the Plaintiffs additionally filed a Motion for Injunction Pending Appeal with the Circuit Court. The Circuit Court granted a temporary injunction pending appeal on August 24, 2006, enjoining certain activities relating to the lake tailings facility. The Circuit Court further ordered an expedited briefing schedule on the merits of the legal challenge. As of October 13, 2006, the parties have filed their briefs in the Circuit Court and will participate in an oral argument in December 2006. There is no indication of when the Circuit Court may rule on the merits on appeal.

        The Company is unable to predict the outcome of the litigation or the impact of the temporary injunction. The Company is continuing to move forward with all construction activities at the mine not related to the temporarily enjoined lake tailings facility area activities.

        No assurance can be given as to whether or when regulatory permits and approvals granted to the Company may be further challenged, appealed or contested by third parties or issuing agencies, or as to whether the Company will place the Kensington project into commercial production. The Company currently estimates the total cost of construction to be approximately $190 million. The Company believes that commercial production could commence in late 2007.

        Total expenditures by the Company at the Kensington property in the nine months ended September 30, 2006 were $86.6 million. Such expenditures were used to continue the permitting and development activities. The Company plans to incur additional construction cost of approximately $16.6 million during the remainder of 2006.

        The Company recommenced an underground core drilling program at Kensington this year in a continuation of the program conducted in the second half of 2005. In the third quarter of 2006, over 1,400 meters (4,600 feet) of core drilling was conducted from underground positions at Kensington for a year-to date total of over 9,800 meters (32,200 feet). The data from this program, designed to expand the project’s mineralized material inventory and proven and probable reserves through conversion of mineralized material to ore reserves, is under review. In addition, the planned surface drilling program, at the Company’s Jualin property, commenced in the third quarter of 2006 with nearly 1,300 meters completed (4,200 feet).



39


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 Form 10-Q.

Revenue Recognition. Revenue includes sales value received for our principal product, silver, and associated by-product revenues from the sale of by-product metals consisting primarily of gold and copper. 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 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 September 30, 2006, the Company had outstanding provisionally priced sales of $48.8 million consisting of 3.3 million ounces of silver and 15,558 ounces of gold. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $33,500; and for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $15,600.

40


Reserve Estimates. The preparation of this Quarterly Report on Form 10-Q 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.

        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 Assets,” 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. 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 periods ended September 30, 2006 and 2005.

        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 1) the 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.

41


        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 we are 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.

        Our reported inventories include metals estimated to be contained in the ore on the leach pads of $64.6 million as of September 30, 2006. Of this amount, $28.2 million is reported as a current asset and $36.4 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 the effects on monthly production costs of abnormal production levels.

        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.

42


        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    1.7 million  3.4 million  5.1 million  12,740    25,481    38,221  
Positive impact on  
  future cost of  
  production per silver  
  equivalent ounce for  
  increases in recovery  
  rates   $ 0.90   $ 1.57   $ 2.09   $ 0.38   $ 0.73   $ 1.03  
Negative impact on  
  future cost of  
  production per silver  
  equivalent ounce for  
  decreases in recovery  
  rates   $ 1.25   $ 3.12   $ 6.20   $ 0.44   $ 0.94   $ 1.53  

        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 the effects on monthly production of costs of abnormal production levels, 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.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

Revenues

        Sales of metal from continuing operations in the third quarter of 2006 increased by $11.3 million, or 29%, from the third quarter of 2005 to $50.6 million. The increase in sales of metal is attributable to increased metals prices realized, partially offset by decreased ounces of silver and gold sold during the third quarter of 2006 as compared to the same period in 2005. In the third quarter of 2006, the Company sold 3.0 million ounces of silver and 26,595 ounces of gold compared to 3.2 million ounces of silver and 38,303 ounces of gold for the same period in 2005. Realized silver and gold prices were $11.55 and $634 per ounce, respectively, in the third quarter of 2006 compared to $7.29 and $452 in the comparable quarter of 2005.

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        Included in revenues is the by-product revenue associated with by-product metal sales consisting primarily of gold. In the third quarter of 2006, by-product revenues totaled $15.8 million compared to $17.2 million for the same period of 2005.

        The Company believes, based on the best estimates, that presentation of these revenue streams as by-products will continue to be appropriate in the future.

        In the third quarter of 2006, the Company’s continuing operations produced a total of 3,339,481 ounces of silver and 29,934 ounces of gold, compared to 3,325,271 ounces of silver and 38,906 ounces of gold in the third quarter of 2005. The increase in silver production is primarily due to increased silver production at the Martha mine and the silver production from the Broken Hill mine in which the Company acquired certain silver production and reserves on September 8, 2005, offset by lower silver production from the Rochester, Cerro Bayo and Endeavor Mines.

Costs and Expenses

        Production costs applicable to sales from continuing operations in the third quarter of 2006 decreased by $2.5 million, or 10%, from the third quarter of 2005 to $21.9 million. The decrease in the third quarter of 2006 is primarily due to the decreased quantity of silver and gold sold during the quarter, offset by higher production costs associated with the Broken Hill mine in which the Company acquired certain silver production and reserves on September 8, 2005.

        Depreciation and depletion increased by $2.2 million, or 50%, in the third quarter of 2006 compared to the prior year’s third quarter, primarily due to the increase in depletion associated with the newly acquired Broken Hill mine.

        Administrative and general expenses decreased by $0.3 million in the third quarter of 2006 compared to the same period in 2005 and is primarily due to lower general corporate services.

        Exploration expenses in the third quarter of 2006 remained consistent with the same period in 2005.

        Litigation settlement expenses increased by $0.9 million from the third quarter of 2005 due to the commencement of the net smelter return royalty related to the Federal Natural Resources settlement decree dated May 14, 2001. Under the terms of the settlement, the Company is required to pay a net smelter royalty on all of its domestic and foreign operations until May 14, 2021, or earlier once the cumulative amount of $3.0 million has been paid.

Other Income and Expenses

        Interest and other income in the third quarter of 2006 increased by $3.6 million to $5.6 million compared with the third quarter of 2005. The increase was primarily due to increased interest income from short-term investments due to higher levels of invested cash and short-term investments on hand and higher interest rates.

        Interest expense was $0.2 million in the third quarter of 2006 compared to $0.7 million in the third quarter of 2005. The decrease in interest expense is related to the higher capitalized interest associated with higher capital expenditures at the Kensington and San Bartolome projects compared to the same period in 2005.

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Income Taxes

        For the three months ended September 30, 2006, the Company reported a net income tax provision of approximately $1.7 million. The income tax provision was comprised of $2.4 million in current taxes payable in Argentina, Australia and the United States, and an additional $0.1 million provision for foreign tax withholding for a total current provision of $2.5 million. The Company recorded a $1.4 million deferred tax benefit at CDE Cerro Bayo Ltd., and a $0.6 million deferred tax provision at Coeur Argentina and CDE Australia, based upon actual results of operations, increased proven and probable reserves and revised projected future taxable income.

Results of Discontinued Operations

        On June 1, 2006, the Company completed the sale of 100% of the shares of Coeur Silver Valley Inc. to U.S. Silver Corporation for $15 million in cash. Pursuant to FAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, Coeur Silver Valley has been classified as an asset held for sale and reported in discontinued operations for the three month period ended September 30, 2006 and 2005. The Company recognized a loss of $27,000 on the sale in the third quarter ended September 30, 2006, representing an adjustment of the post-closing working capital amount.

        The following is a summary of the Company’s discontinued operations included in the consolidated statements of operations for the three months ended September 30, 2006 and 2005 (in thousands):

Three Months Ended
September 30,
2006
2005
Sales of metal     $ --   $ 3,418  
Production costs applicable to sales    --    (3,796 )
Depreciation and depletion    --    (493 )
Mining exploration    --    (361 )
Other    --    (37 )


Income (loss) from discontinued operations   $ --   $ (1,269 )
Loss on sale of net assets of discontinued operations    (27 )  --  


Net income (loss) for discontinued operations   $ (27 ) $ (1,269 )


Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

Revenues

        Sales of metal from continuing operations in the nine months ended September 30, 2006 increased by $44.5 million, or 42%, over the same period of 2005 to $149.5 million. The increase in product sales of metal is attributable to an increase in the realized prices for both silver and gold and an increase in the ounces of silver sold. In the nine months ended September 30, 2006, the Company sold 9.1 million ounces of silver and 81,486 ounces of gold compared to 8.7 million ounces of silver and 107,516 ounces of gold for the same period in 2005. Realized silver and gold prices were $11.73 and $625 per ounce, respectively, in the nine months ended September 30, 2006 compared to $7.13 and $436 in the comparable period of 2005.

        Included in revenues is the by-product revenue associated with by-product metal sales consisting primarily of gold. In the nine months ended September 30, 2006, by-product revenues totaled $47.9 million compared to $43.4 million for the same period of 2005. The increase in by-product revenues is primarily due to an increase in the realized prices for gold. The Company believes, based on its best estimates, that presentation of these revenue streams as by-products will continue to be appropriate in the future.

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        In the nine months ended September 30, 2006, the Company’s continuing operations produced a total of 9,373,729 ounces of silver and 84,554 ounces of gold, compared to 8,064,637 ounces of silver and 98,484 ounces of gold in the same period of 2005. The increase in silver production is primarily due to the silver production from the Endeavor and Broken Hill mines in which the Company acquired the silver production and reserves on May 23, 2005 and September 8, 2005, respectively.

Costs and Expenses

        Production costs applicable to sales from continuing operations in the nine months ended September 30, 2006 increased by $3.0 million, or 5%, from the same period of 2005 to $63.6 million. The increase in the nine months ended September 30, 2006 is primarily due to production costs associated with the Endeavor and Broken Hill mines in which the Company acquired the silver production and reserves on May 23, 2005 and September 8, 2005, respectively.

        Depreciation and depletion increased by $7.0 million, or 54%, for the first nine months of 2006 compared to the first nine months of 2005 primarily due to the increase in depletion associated with the newly acquired Endeavor and Broken Hill mines.

        Administrative and general expenses decreased by $1.4 million, or 9%, in the nine months ended September 30, 2006 compared to the same period in 2005 due to lower general corporate services and outside audit services related to financial reporting compliance activities.

        Exploration expenses decreased by $1.7 million in the nine months ended September 30, 2006 compared to the same period in 2005 as a result of lower exploration activity in 2006 compared to 2005.

        Pre-development expenses decreased $6.1 million from the nine months ended September 30, 2005 due to the classification of the Kensington project as a development-stage property in the third quarter of 2005.

        Litigation settlement expenses decreased by $0.3 million in the first nine months of 2006 to $1.3 million. During 2006, the Company commenced payments pursuant to the Federal Natural Resource settlement decree dated May 14, 2001. Under the terms of the settlement, the Company is required to pay a net smelter royalty on all of its domestic and foreign operations until the earlier of May 14, 2021 or once the cumulative amount of $3.0 million has been paid. During the 2005 period, the Company recorded an unrelated legal settlement of $1.6 million.

Other Income and Expenses

        Interest and other income in the nine months ended September 30, 2006 increased by $7.6 million to $12.9 million compared with the same period of 2005. The increase was primarily due to increased interest income from short-term investments due to higher levels of invested cash and short-term investments on hand and higher interest rates.

        Interest expense was $1.1 million in the nine months ended September 30, 2006 compared to $1.9 million in the nine months ended September 30, 2005. The decrease in interest expense is related to higher capitalized interest associated with higher capital expenditures at the Kensington and San Bartolome projects as compared to 2005.

Income Taxes

        For the nine months ended September 30, 2006, the Company reported a net income tax provision of approximately $4.2 million. The income tax provision is comprised of $7.6 million in current taxes payable in Argentina, Australia and the United States, and an additional $0.6 million provision for foreign tax withholding for a total current provision of $8.2 million. The Company recorded a $3.9 million and $0.3 million deferred tax benefit at CDE Cerro Bayo Ltd. and Coeur Argentina, respectively, that was generated by actual results of operations and the release of approximately $5.0 million of valuation allowance on net operating loss carryforwards due to increased proven and probable reserves and revised projected future taxable income at CDE Cerro Bayo Ltd. The Company’s $4.2 million of deferred tax benefit was reduced by a $0.2 million deferred tax provision at CDE Australia.

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Results of Discontinued Operations

        On June 1, 2006, the Company completed the sale of 100% of the shares of Coeur Silver Valley Inc. to U.S. Silver Corporation for $15 million in cash. Pursuant to FAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, Coeur Silver Valley has been classified as an asset held for sale and reported in discontinued operations for the nine month period ended September 30, 2006 and 2005. The Company recognized a gain of approximately $11.1 million on the sale in the nine months ended September 30, 2006.

        The following is a summary of the Company’s discontinued operations included in the consolidated statements of operations for the nine months ended September 30, 2006 and 2005 (in thousands):

Nine Months Ended
September 30,

2006
2005
Sales of metal     $ 11,223   $ 12,522  
Production costs applicable to sales    (8,233 )  (12,431 )
Depreciation and depletion    (681 )  (1,506 )
Mining exploration    (279 )  (1,220 )
Other    (61 )  (167 )


Income (loss) from discontinued operations   $ 1,969   $ (2,802 )
Gain on sale of net assets of discontinued operations    11,132    --  


Net income (loss) for discontinued operations   $ 13,101   $ (2,802 )


LIQUIDITY AND CAPITAL RESOURCES

Working Capital; Cash and Cash Equivalents

        The Company’s working capital at September 30, 2006, increased by $113.7 million to approximately $396.7 million compared to $283.0 million at December 31, 2005. The increase in working capital was primarily attributed to the net proceeds of $146.2 million related to the public sale of common stock on March 22, 2006. The ratio of current assets to current liabilities was 8.6 to 1 at September 30, 2006, compared to 7.2 to 1 at December 31, 2005.

        Net cash provided by operating activities in the third quarter of 2006 was $20.8 million compared to net cash provided by operating activities of $3.9 million in the third quarter of 2005. The increase of $16.9 million in cash flow from operations is primarily due to increases in net income and changes in operating assets and liabilities. Net cash used in investing activities in the third quarter of 2006 was $40.0 million compared to net cash used in investing activities of $56.8 million in the prior year’s comparable period. The decrease of $16.8 million in cash used in investing activities is primarily due to the acquisition on September 8, 2005 of certain silver production and reserves of the Broken Hill mine, which totaled $36.0 million. Net cash used in financing activities was $0.2 million in the third quarter of 2006, compared to an increase in cash flow related to the issuance of common stock of $35.7 million in the third quarter of 2005. As a result of the above, cash and cash equivalents decreased by $19.3 million in the third quarter of 2006 compared to a decrease of $17.2 million for the comparable period in 2005.

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        Net cash provided by operating activities in the nine months ended September 30, 2006 was $70.0 million compared to net cash used in operating activities of $7.8 million in the nine months ended September 30, 2005. The increase of $77.8 million in cash flow from operations is primarily due to increases in net income. Net cash used in investing activities in the first nine months of 2006 was $75.8 million compared to net cash used in investing activities of $84.3 million in the prior year’s comparable period. The decrease of $8.5 million in cash used in investing activities is due to the acquisition of the silver production and reserves of the Endeavor and Broken Hill mines on May 23, 2005 and September 8, 2005, respectively, which totaled $51.1 million. Net cash provided by financing activities was $145.3 million in the first nine months of 2006, compared to $35.0 million in the first nine months of 2005. The increase was primarily due to the sale of 27.6 million shares of common stock during the first quarter of 2006. As a result of the above, cash and cash equivalents increased by $139.4 million in the first nine months of 2006 compared to a decrease of $57.0 million for the comparable period in 2005.

Debt and Capital Resources

        At September 30, 2006, the Company had $365.2 million of cash, cash equivalents and short-term investments. Management therefore believes that its existing and available cash and cash flow from operations will allow it to meet its obligations for the next twelve months. The Company estimates approximately $82.8 million will be spent during the remainder of 2006 on capital expenditures at its operating mines and development-stage properties.

Issuance of 1 ¼% Convertible Senior Notes

        On January 13, 2004 the Company completed its offering of $180 million aggregate principal amount of 1.25% Convertible Senior Notes due 2024 (the “1.25% Notes”). The 1.25% 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 is payable in cash at the rate of 1.25% per annum beginning July 15, 2004. The 1.25% Notes are general unsecured obligations, senior in right of payment to Coeur’s other indebtedness.

Issuance of Common Stock

        During the first quarter of 2006, the Company completed a public offering of 27.6 million shares of common stock at a public offering price of $5.60 per share. The Company realized net proceeds of $146.2 million after payment of the underwriters’ discount and other offering costs.

Litigation and Other Events

Federal Natural Resources Action

          On March 22, 1996, an action was filed 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 1800’s.

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        In May 2001, 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 total of $3 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 commenced on May 14, 2006 and will expire on May 14, 2021, or earlier once the cumulative amount has been paid. During the three and nine months ended September 30, 2006, $0.9 million and $1.3 million, respectively, of royalty expense was incurred in connection with this settlement and recorded as a litigation settlement in the consolidated statement of operations.

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

        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.

Federal District Court of Alaska Permit Challenge

        On September 12, 2005 three environmental groups (“Plaintiffs”) filed a lawsuit in Federal District Court in Alaska against the U.S. Army Corps of Engineers (“Corps of Engineers”) and the U.S. Forest Service (“USFS”) 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 USFS’s approval of the Amended Plan of Operations is arbitrary and capricious because it relies on the 404 permit issued by the Corps of Engineers.

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        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 CWA Section 404 and requested that the court stay the legal proceeding filed by the Plaintiffs 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.

        On March 29, 2006, the Corps of Engineers reinstated the Company’s 404 permit. On April 6, 2006 the lawsuit challenging the permit was re-opened, and Coeur Alaska, Inc. filed its answer to the Amended Complaint and Motion to Intervene as a Defendant-Intervenor in the action. Two other parties, the State of Alaska and Goldbelt, Inc., a local native corporation, also filed Motions to Intervene as Defendant-Intervenors as supporters of the Kensington project as permitted. The Company, the State of Alaska and Goldbelt, Inc. were granted Defendant-Intervenor status and joined the agencies in their defense of the permits as issued.

        On August 4, 2006, the Federal District Court in Alaska dismissed the Plaintiffs challenge and upheld the Section 404 permit. On August 7, 2006 the Plaintiffs filed a Notice of Appeal of the decision to the Ninth Circuit Court of Appeals (“Circuit Court”) and on August 9, 2006 Plaintiffs additionally filed a Motion for Injunction Pending Appeal with the Circuit Court. The Circuit Court granted a temporary injunction pending appeal on August 24, 2006, enjoining certain activities relating to the lake tailings facility. The Circuit Court further ordered an expedited briefing schedule on the merits of the legal challenge. As of October 13, 2006, the parties have filed their briefs in the Circuit Court and will participate in an oral argument in December 2006. There is no indication of when the Circuit Court may rule on the merits on appeal.

        The Company is unable to predict the outcome of the litigation or the impact of the temporary injunction. The Company cannot predict when the court will rule on the merits on appeal in the Circuit Court or the impact upon the project. The Company plans to continue to move forward with all construction activities at the mine not related to the temporarily enjoined lake tailings facility area activities.

Item 3. Quantitative and Qualitative Disclosure 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.

        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 market 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.

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        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 September 30, 2006, the Company had outstanding provisionally priced sales of $48.8 million, consisting of 3.3 million ounces of silver and 15,558 ounces of gold, which had a fair value of approximately $48.8 million including the embedded derivative. For each one cent per ounce change in realized silver price, revenue would vary (plus or minus) approximately $33,500; and for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately $15,600.

        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, from time to time, the Company enters into 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 the first quarter of 2006, 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 521 pesos to each U.S. dollar. At September 30, 2006, the Company had foreign exchange contracts of $4.8 million in U.S. dollars. For the nine months ended September 30, 2006, the Company recorded a realized loss of approximately $0.3 million in connection with its foreign currency hedging program. As of September 30, 2006, the fair value of the foreign exchange contracts was a liability of $0.3 million.

        All of the Company’s long-term debt at September 30, 2006, is fixed-rate based. The fair value of the Company’s long-term debt at September 30, 2006 was $166.5 million. The fair value was estimated based upon bond market closing prices at September 30, 2006.

Item 4. 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 at September 30, 2006, that the Company’s disclosure controls and procedures were effective at a reasonable level.

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(b) Changes in Internal Control Over Financial Reporting

        Based on an evaluation by the Company’s Chief Executive Officer and Chief Financial Officer, such officers concluded that there was no change in the Company’s internal control over financial reporting during the quarter ending September 30, 2006 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. Other Information

Item 1. Legal Proceedings.

        Reference is made to the disclosure in the fourth paragraph under “NOTE N – LITIGATION AND OTHER EVENTS – Federal District Court of Alaska Permit Challenge” to the consolidated financial statements set forth under Item 1 above, of the granting by the Ninth Circuit Court of Appeals on August 24, 2006 of a temporary injunction relating to the challenge of the Kensington mine Section 404 permit.

Item 1A. Risk Factors

        Item 1A (“Risk Factors”) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 sets forth information relating to important risks and uncertainties that could materially adversely affect the Company’s business, financial condition or operating results. Those risk factors continue to be relevant to an understanding of the Company’s business, financial condition and operating results. Certain of those risk factors have been updated in this Form 10-Q to provide updated information, as set forth below. References to “we,” “our” and “us” in these risk factors refer to the Company.

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 of which approximately $198.9 million will be required in future periods. 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.

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 have been sufficient to cover fixed charges subsequent to 2004. As of September 30, 2006, 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 $396.7 million at September 30, 2006. 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, $18.6 million in 2004 and $6.7 million in 2005. During the first nine months of 2006, we generated $70.0 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 68% of our revenues from continuing operations 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 November 3, 2006 was $12.58 and $623 per ounce, 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.

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 $64.6 million as of September 30, 2006. Of this amount, $28.2 million is reported as a current asset and $36.4 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 the effects on monthly production costs of abnormal production levels.

        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.





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        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    1.7 million  3.4 million  5.1 million  12,740    25,481    38,221  
Positive impact on  
  future cost of  
  production per silver  
  equivalent ounce for  
  increases in recovery  
  rates   $ 0.90   $ 1.57   $ 2.09   $ 0.38   $ 0.73   $ 1.03  
Negative impact on  
  future cost of  
  production per silver  
  equivalent ounce for  
  decreases in recovery  
  rates   $ 1.25   $ 3.12   $ 6.20   $ 0.44   $ 0.94   $ 1.53  

        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 the effects on monthly production costs of abnormal production levels, 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.

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 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. 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 the Southeast Alaska Conservation Council (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 which was then re-instated on March 29, 2006. On April 6, 2006 the lawsuit challenging the permit was re-opened, and Coeur Alaska, Inc. filed its Answer to the Amended Complaint and Motion to Intervene as a Defendant-Intervenor in the action. That motion was granted on April 25, 2006 and the Company has joined the agencies in their defense of the permits as issued.

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        On August 4, 2006, the Federal District Court in Alaska dismissed the Plaintiffs challenge and upheld the Section 404 permit. On August 7, 2006 the Plaintiffs filed a Notice of Appeal of the decision to the Ninth Circuit Court of Appeals (“Circuit Court”) and on August 9, 2006 Plaintiffs additionally filed a Motion for Injunction Pending Appeal with the Circuit Court. The Circuit Court granted a temporary injunction pending appeal on August 24, 2006, enjoining certain activities relating to the lake tailings facility. The Circuit Court further ordered an expedited briefing schedule on the merits of the legal challenge. As of October 13, 2006, the parties have filed their briefs in the Circuit Court and will participate in an oral argument in December 2006. There is no indication of when the Circuit Court may rule on the merits on appeal and the Company is unable to predict the outcome of this litigation or its impact on the project.

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 September 30, 2006, unions represented approximately 42% of our worldwide workforce. On that date, the Company had 364 employees at its Cerro Bayo mine and 74 employees at its Martha mine which are working under a collective bargaining agreement. The agreement covering the Cerro Bayo mine expires on December 21, 2007 and a collective bargaining agreement covering the Martha mine expires on June 11, 2008.

Item 6. Exhibits

  a) Exhibits.

  31.1 Certification of the CEO
  31.2 Certification of the CFO
  32.1 Certification of the CEO (18 U.S.C. Section 1350)
  32.2 Certification of the CFO (18 U.S.C. Section 1350)









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SIGNATURES

        Pursuant to the requirements 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)

Dated November 3, 2006 /s/ Dennis E. Wheeler
DENNIS E. WHEELER
Chairman, President and
    Chief Executive Officer


Dated November 3, 2006
/s/ James A. Sabala
JAMES A SABALA
Executive Vice President and
    Chief Financial Officer










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