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Derivative Financial Instruments | 9 Months Ended
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Sep. 30, 2022
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. Zero Cost Collars 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 were 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 was lower than the put prices or higher than the call prices, it would result in a realized gain or loss, respectively. The Company elected to designate these instruments as cash flow hedges of forecasted transactions at their inception. In the first quarter of 2022, the Company voluntarily de-designated hedge accounting for the zero cost collars and subsequently terminated the arrangements. The cost to terminate the zero cost collars was $7.7 million, of which $3.1 million was recognized in earnings and the remaining $4.6 million, which represents the fair value of the zero cost collars on the date of de-designation, was retained in accumulated other comprehensive income (loss) (“AOCI”) and will be recognized in earnings as the forecasted transactions occur. As of September 30, 2022, there was $1.4 million remaining to be recognized in earnings over the next three months. At September 30, 2022, the Company had the following derivative instruments that settle as follows:
In thousands except average prices and notional ounces | 2022 |  | 2023 and Thereafter
Provisional gold sales contracts | $ | 32,768 |  |  | $ | — |
Average gold price per ounce | $ | 1,744 |  |  | $ | — |
Notional ounces | 18,789 |  |  | — |
The following summarizes the classification of the fair value of the derivative instruments:
| September 30, 2022 |  |  |  |  |  |
In thousands | Prepaid expenses and other |  | Accrued liabilities and other |  |  |  |  |  |
Provisional metal sales contracts | $ | 120 |  |  | $ | 948 |  |  |  |  |  |  |
| December 31, 2021
In thousands | Prepaid expenses and other |  | Accrued liabilities and other |  |  |  |  |  |
Provisional metal sales contracts | $ | 86 |  |  | $ | 162 |  |  |  |  |  |  |
The following represent mark-to-market gains (losses) on derivative instruments in the three and nine months ended September 30, 2022 and 2021, respectively (in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Financial statement line | Derivative | 2022 |  | 2021 |  | 2022 |  | 2021 |  |
Revenue | Provisional metal sales contracts | $ | (757) |  |  | $ | 79 |  |  | $ | (751) |  |  | $ | (618) |  |  |
Fair value adjustments, net | Exchange agreement embedded derivative | — |  |  | 9,269 |  |  | — |  |  | 9,933 |  |  |
Fair value adjustments, net | Terminated zero cost collars | — |  |  | — |  |  | (3,139) |  |  | — |  |  |
|  | $ | (757) |  |  | $ | 9,348 |  |  | $ | (3,890) |  |  | $ | 9,315 |  |  |
Derivatives Designated as Cash Flow Hedging Strategies To protect the Company’s exposure to fluctuations in metal prices the Company enters into forward contracts. The contracts are net settled monthly and if the actual price of gold at the time of expiration is lower than the fixed price or higher than the fixed 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. At September 30, 2022, the Company had the following derivative cash flow hedge instruments that settle as follows:
In thousands except average prices and notional ounces |  |  | 2022 |  | 2023 and Thereafter |  |
Gold forwards |  |  |  |  |  |  |
Average gold fixed price per ounce |  |  | $ | 1,994 |  |  | $ | 1,982 |  |  |
Notional ounces |  |  | 54,500 |  |  | 112,500 |  |  |
The effective portions of cash flow hedges are recorded in 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 Revenue in the same period as the related sale is recognized. At inception, the Company performed an assessment of the forecasted transactions and the hedging instruments and determined that the hedging relationships are considered perfectly effective. Future assessments are performed to verify that critical terms of the hedging instruments and the forecasted transactions continue to match, and the forecasted transactions remain probable, as well as an assessment of any adverse developments regarding the risk of the counterparties defaulting on their commitments. There have been no such changes in critical terms or adverse developments. As of September 30, 2022, the Company had $47.1 million of net after-tax gain in AOCI related to gains from cash flow hedge transactions, of which $41.8 million of net after-tax gains is expected to be recognized in its 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. The following summarizes the classification of the fair value of the derivative instruments designated as cash flow hedges:
| September 30, 2022
In thousands | Prepaid expenses and other |  | Other assets |  | Accrued liabilities and other
Gold forwards | $ | 41,814 |  |  | $ | 5,259 |  |  | $ | — |
| December 31, 2021
In thousands | Prepaid expenses and other |  | Other assets |  | Accrued liabilities and other
Gold zero cost collars | $ | — |  |  | $ | — |  |  | $ | 1,212 |
The following table sets forth the pre-tax gains (losses) on derivatives designated as cash flow hedges that have been included in AOCI and the Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021, respectively (in thousands).
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021 |  |
Amount of Gain (Loss) Recognized in AOCI |  |  |  |  |  |  |  |  |
Gold forwards | $ | 29,060 |  |  | $ | — |  |  | $ | 62,685 |  |  | $ | — |  |  |
Gold zero cost collars | — |  |  | 1,614 |  |  | (4,598) |  |  | 25,590 |  |  |
Foreign currency forward exchange contracts | — |  |  | (265) |  |  | — |  |  | 133 |  |  |
| $ | 29,060 |  |  | $ | 1,349 |  |  | $ | 58,087 |  |  | $ | 25,723 |  |  |
Amount of (Gain) Loss Reclassified From AOCI to Earnings |  |  |  |  |  |  |  |  |
Gold forwards | $ | (11,289) |  |  | $ | — |  |  | $ | (14,399) |  |  | $ | — |  |  |
Gold zero cost collars | 1,379 |  |  | 23 |  |  | 3,218 |  |  | 853 |  |  |
Foreign currency forward exchange contracts | — |  |  | (3,925) |  |  | — |  |  | (10,536) |  |  |
| $ | (9,910) |  |  | $ | (3,902) |  |  | $ | (11,181) |  |  | $ | (9,683) |  |  |
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.

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- 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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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