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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2014
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The following table presents the components of Fair value adjustments, net (in thousands):
|  | Three months ended March 31, |  | Six months ended June 30,
|  | 2014 |  | 2013 |  | 2014 |  | 2013
Palmarejo royalty obligation embedded derivative |  | $ | (5,061 | ) |  | $ | 61,066 |  |  | $ | (15,296 | ) |  | $ | 75,495 |
Rochester net smelter royalty obligation |  | (1,837 | ) |  | — |  |  | (2,510 | ) |  | — |
Silver and gold options |  | (1,374 | ) |  | 6,350 |  |  | (2,868 | ) |  | 10,577 |
Foreign exchange contracts |  | (10 | ) |  | (662 | ) |  | 957 |  |  | (1,522 | )
Fair value adjustments, net |  | $ | (8,282 | ) |  | $ | 66,754 |  |  | $ | (19,717 | ) |  | $ | 84,550 |
Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 | Quoted market prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):
| Fair Value at June 30, 2014
| Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |
Short-term investments | $ | 47,642 |  |  | $ | 47,642 |  |  | $ | — |  |  | $ | — |
Marketable equity securities | 13,761 |  |  | 13,761 |  |  | — |  |  | — |
Silver and gold options | 1,298 |  |  | — |  |  | 1,298 |  |  | — |
Other derivative instruments, net | 240 |  |  | — |  |  | 240 |  |  | — |
| $ | 62,941 |  |  | $ | 61,403 |  |  | $ | 1,538 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Palmarejo royalty obligation embedded derivative | $ | 43,960 |  |  | $ | — |  |  | $ | — |  |  | $ | 43,960 |
Rochester net smelter royalty obligation | 23,656 |  |  | — |  |  | — |  |  | 23,656 |
Silver and gold options | 291 |  |  | — |  |  | 291 |  |  | — |
| $ | 67,907 |  |  | $ | — |  |  | $ | 291 |  |  | $ | 67,616 |
| Fair Value at December 31, 2013
| Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |
Marketable equity securities | $ | 14,521 |  |  | $ | 14,521 |  |  | $ | — |  |  | $ | — |
Silver and gold options | 135 |  |  | — |  |  | 135 |  |  | — |
| $ | 14,656 |  |  | $ | 14,521 |  |  | $ | 135 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Palmarejo royalty obligation embedded derivative | $ | 40,338 |  |  | $ | — |  |  | $ | — |  |  | $ | 40,338 |
Rochester net smelter royalty obligation | 21,630 |  |  | — |  |  | — |  |  | 21,630 |
Other derivative instruments, net | 1,591 |  |  | — |  |  | 1,591 |  |  | — |
| $ | 63,559 |  |  | $ | — |  |  | $ | 1,591 |  |  | $ | 61,968 |
The Company’s short-term investments are readily convertible to cash. The Company’s investments in marketable equity securities are recorded at fair market value in the financial statements based on quoted market prices, which are accessible at the measurement date for identical assets. Such instruments are classified within Level 1 of the fair value hierarchy. The Company’s silver and gold options and other derivative instruments, net, which relate to concentrate sales contracts and foreign exchange contracts, are valued using pricing models, which require inputs that are derived from observable market data, including contractual terms, forward market prices, yield curves and credit spreads. The model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy. The estimated fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation was estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves and credit spreads. The Company’s current mine plans are a significant input used in the estimated fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation and is considered company specific and unobservable. Therefore, the Company has classified the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation as Level 3 financial liabilities. Based on the current mine plans, expected royalty durations of 2.0 years and 4.6 years were used to estimate the fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation, respectively, at June 30, 2014. No assets or liabilities were transferred between fair value levels in the three and six months ended June 30, 2014. The following tables present the changes in the fair value of the Company's Level 3 financial liabilities for the three and six months ended June 30, 2014 (in thousands):
| Three months ended June 30, 2014
| Balance at the beginning of the period |  | Revaluation |  | Settlements |  | Balance at the end of the period
Palmarejo royalty obligation embedded derivative | $ | 44,357 |  |  | $ | 5,061 |  |  | $ | (5,458 | ) |  | $ | 43,960 |
Rochester net smelter royalty obligation | 22,303 |  |  | 1,837 |  |  | (484 | ) |  | 23,656 |
| Six months ended June 30, 2014
| Balance at the beginning of the period |  | Revaluation |  | Settlements |  | Balance at the end of the period
Palmarejo royalty obligation embedded derivative | $ | 40,338 |  |  | $ | 15,296 |  |  | $ | (11,674 | ) |  | $ | 43,960 |
Rochester net smelter royalty obligation | 21,630 |  |  | 2,510 |  |  | (484 | ) |  | 23,656 |
The fair value of financial assets and liabilities measured at book value in the financial statements at June 30, 2014 and December 31, 2013 is presented in the following table (in thousands):
| June 30, 2014
| Book Value |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Liabilities: |  |  |  |  |  |  |  |  |
3.25% Convertible Senior Notes due 2028 | $ | 5,334 |  |  | $ | 5,047 |  |  | $ | — |  |  | $ | 5,047 |  |  | $ | — |
7.875% Senior Notes due 2021 | 452,855 |  |  | 455,625 |  |  | — |  |  | 455,625 |  |  | — |
Palmarejo Gold Production Royalty Obligation | 41,976 |  |  | 51,252 |  |  | — |  |  | — |  |  | 51,252 |
| December 31, 2013
| Book Value |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Liabilities: |  |  |  |  |  |  |  |  |
3.25% Convertible Senior Notes due 2028 | $ | 5,334 |  |  | $ | 5,067 |  |  | $ | 5,067 |  |  | $ | — |  |  | $ | — |
7.875% Senior Notes due 2021 | 300,000 |  |  | 307,314 |  |  | 307,314 |  |  | — |  |  | — |
Palmarejo Gold Production Royalty Obligation | 51,193 |  |  | 65,212 |  |  | — |  |  | — |  |  | 65,212 |
The fair value at June 30, 2014 and December 31, 2013 of the 3.25% Convertible Senior Notes and 7.875% Senior Notes outstanding were estimated using quoted market prices. The fair value of debt was transferred to Level 2 from Level 1 of the fair value hierarchy at March 31, 2014 due to observability of quoted market prices. The fair value of the Palmarejo gold production royalty obligation is estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves and credit spreads. The Company’s current mine plan is a significant input used in the estimated fair value of the Palmarejo gold production royalty obligation and is considered company specific and unobservable. Therefore, the Company has classified the Palmarejo gold production royalty obligation as Level 3 financial liabilities. Based on the current mine plan, an expected royalty duration of 2.0 years was used to estimate the fair value of the Palmarejo gold production royalty obligation as of June 30, 2014.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25499696&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13504-108611 + Details
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