XML 32 R19.htm IDEA: XBRL DOCUMENT
v3.20.2

Derivative Financial Instruments | 6 Months Ended
--- | ---
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS & HEDGING ACTIVITIES The Company is exposed to various market risks, including the effect of changes in metal prices, foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes. The Company may elect to designate certain derivatives as hedging instruments under U.S. GAAP. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives designated as hedges to either recognized assets or liabilities or forecasted transactions and assessing, both at inception and on an ongoing basis, the effectiveness of the hedging relationships. Derivatives Not Designated as Hedging Instruments Provisional Metal Sales The Company enters into sales contracts with third-party smelters, refiners and off-take customers which, in some cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable recorded at the forward price at the time of sale. The embedded derivatives do not qualify for hedge accounting and are marked to market through earnings each period until final settlement. At June 30, 2020, the Company had the following derivative instruments that settle as follows:
In thousands except average prices and notional ounces | 2020 |  | Thereafter
Provisional gold sales contracts | $ | 26,173 |  |  | $ | — |
Average gold price per ounce | $ | 1,728 |  |  | $ | — |
Notional ounces | 15,147 |  |  | — |
The following summarizes the classification of the fair value of the derivative instruments:
| June 30, 2020 |  |  |  |  |  |  |  |
In thousands | Prepaid expenses and other |  | Accrued liabilities and other |  |  |  |  |  |
Provisional metal sales contracts | $ | 666 |  |  | $ | — |  |  |  |  |  |  |
| December 31, 2019 |  |  |  |  |  |  |  |
In thousands | Prepaid expenses and other |  | Accrued liabilities and other |  |  |  |  |  |
Provisional metal sales contracts | $ | 753 |  |  | $ | 275 |  |  |  |  |  |  |
The following represent mark-to-market gains (losses) on derivative instruments in the three and six months ended June 30, 2020 and 2019, respectively (in thousands):
|  | Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |  |  |  |
Financial statement line | Derivative | 2020 |  | 2019 |  | 2020 |  | 2019 |  |
Revenue | Provisional metal sales contracts | $ | 713 |  |  | $ | (1,944) |  |  | $ | 1,213 |  |  | $ | (1,694) |  |  |
Fair value adjustments, net | Interest rate swaps | — |  |  | (132) |  |  | — |  |  | (188) |  |  |
|  | $ | 713 |  |  | $ | (2,076) |  |  | $ | 1,213 |  |  | $ | (1,882) |  |  |
Derivatives Designated as Cash Flow Hedging Strategies To protect the Company’s exposure to fluctuations in metal prices the Company entered into Asian (or average value) put and call option contracts in net-zero-cost collar arrangements. The contracts are net cash settled monthly and, if the price of gold at the time of expiration is between the put and call prices, would expire at no cost to the Company. If the price of gold at the time of expiration is lower than the put prices or higher than the call prices, it would result in a realized gain or loss, respectively. The Company has elected to designate these instruments as cash flow hedges of forecasted transactions at their inception. To protect the Company’s exposure to fluctuations in foreign currency exchange rates for subsidiaries whose functional currency is U.S dollar and are exposed to forecasted transaction denominated in the Mexican Peso and the Canadian Dollar, in March 2020, the Company entered into foreign currency forward exchange contracts to manage this risk and designated these instruments as cash flow hedges of forecasted foreign denominated transactions. At June 30, 2020, the Company had the following derivative cash flow hedge instruments that settle as follows:
In thousands except average prices and notional ounces |  |  | 2020 | 2021 and Thereafter |  |
Gold put options |  |  |  |  |  |
Average gold strike price per ounce |  |  | $ | 1,457 |  | $ | 1,600 |  |  |
Notional ounces |  |  | 105,000 |  | 202,800 |  |  |
Gold call options |  |  |  |  |  |
Average gold strike price per ounce |  |  | $ | 1,825 |  | $ | 1,892 |  |  |
Notional ounces |  |  | 105,000 |  | 202,800 |  |  |
Foreign currency forward exchange contracts - Mexican Peso |  |  |  |  |  |
Average Mexican Peso exchange rate |  |  | 24.22 |  | 25.00 |  |  |
Notional US dollar |  |  | $ | 30,000 |  | $ | 60,000 |  |  |
Foreign exchange forward exchange contracts - Canadian Dollar |  |  |  |  |  |
Average Canadian Dollar exchange rate |  |  | 1.44 |  | — |  |  |
Notional US dollar |  |  | $ | 15,000 |  | $ | — |  |  |
The effective portions of cash flow hedges are recorded in accumulated other comprehensive income (loss) (“AOCI”) until the hedged item is recognized in earnings. Deferred gains and losses associated with cash flow hedges of metal sales revenue are recognized as a component of net sales in the same period as the related revenue is recognized. Deferred gains and losses associated with cash flow hedges of foreign currency transactions are recognized as a component of costs applicable to sales in the same period the related expenses are incurred. As of June 30, 2020, the Company had $7.7 million of net after-tax loss in AOCI related to losses from cash flow hedge transactions, of which $4.1 million of net after-tax losses is expected to be recognized in its Condensed Consolidated Statement of Comprehensive Income (Loss) during the next 12 months. Actual amounts ultimately reclassified to net income are dependent on the price of gold for metal contracts and the Canadian and Mexican exchange rates for foreign currency contracts. The following summarizes the classification of the fair value of the derivative instruments designated as cash flow hedges:
| June 30, 2020 |  |  |  |  |  |  |  |
In thousands | Prepaid expenses and other |  | Accrued liabilities and other |  |  |  |  |  |
Gold zero cost collars | $ | — |  |  | $ | 14,485 |  |  |  |  |  |  |
Foreign currency forward exchange contracts | 6,779 |  |  | — |  |  |  |  |  |  |
| $ | 6,779 |  |  | $ | 14,485 |  |  |  |  |  |  |
| December 31, 2019 |  |  |  |  |  |  |  |
In thousands | Prepaid expenses and other |  | Accrued liabilities and other |  |  |  |  |  |
Gold zero cost collars | $ | — |  |  | $ | 136 |  |  |  |  |  |  |
The following table sets forth the pre-tax gains (losses) on derivatives designated as cash flow hedges that have been included in Accumulated Other Comprehensive Income (“AOCI”) and the Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and six months ended June 30, 2020 and 2019, respectively (in thousands).
|  | Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |  |  |  |
|  | 2020 |  | 2019 |  | 2020 |  | 2019 |  |
Amount of Gain (Loss) Recognized in AOCI |  |  |  |  |  |  |  |  |  |
Gold zero cost collars |  | $ | (14,490) |  |  | $ | — |  |  | $ | (14,349) |  |  | $ | — |  |  |
Foreign currency forward exchange contracts |  | 7,393 |  |  | — |  |  | 7,458 |  |  | — |  |  |
|  | $ | (7,097) |  |  | $ | — |  |  | $ | (6,891) |  |  | $ | — |  |  |
Amount of (Gain) Loss Reclassified From AOCI to Earnings |  |  |  |  |  |  |  |  |  |
Gold zero cost collars |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |
Foreign currency forward exchange contracts |  | (679) |  |  | — |  |  | (679) |  |  | — |  |  |
|  | $ | (679) |  |  | $ | — |  |  | $ | (679) |  |  | $ | — |  |  |
Credit Risk The credit risk exposure related to any derivative instrument is limited to the unrealized gains, if any, on outstanding contracts based on current market prices. To reduce counter-party credit exposure, the Company enters into contracts with institutions management deems credit-worthy and limits credit exposure to each institution. The Company does not anticipate non-performance by any of its counterparties.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration