XML 37 R17.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Note 12 - Derivative Instruments | 9 Months Ended
--- | ---
Sep. 30, 2018
Notes to Financial Statements |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | Note 12. Derivative Instruments Foreign Currency Our wholly-owned subsidiaries owning the Casa Berardi and San Sebastian mines are U.S. dollar ("USD")-functional entities which routinely incur expenses denominated in Canadian dollars ("CAD") and Mexican pesos ("MXN"), respectively, and such expenses expose us to exchange rate fluctuations between the USD and CAD and MXN. In April 2016, we initiated a program to manage our exposure to fluctuations in the exchange rate between the USD and CAD and the impact on our future operating costs denominated in CAD. In October 2016, we also initiated a program to manage our exposure to the impact of fluctuations in the exchange rate between the USD and MXN on our future operating costs denominated in MXN. The programs utilize forward contracts to buy CAD and MXN, and each contract is designated as a cash flow hedge. As of September 30, 2018, we had 94 forward contracts outstanding to buy CAD$225.1 million having a notional amount of US$174.0 million, and 30 forward contracts outstanding to buy MXN$178.5 million having a notional amount of USD$8.8 million. The CAD contracts are related to forecasted cash operating costs at Casa Berardi to be incurred from 2018 through 2022 and have USD-to-CAD exchange rates ranging between 1.2729 and 1.3315. The MXN contracts are related to forecasted cash operating costs at San Sebastian to be incurred from 2018 through 2020 and have MXN-to-USD exchange rates ranging between 19.4400 and 20.8550. Our risk management policy provides that up to 75% of our planned cost exposure for five years into the future may be hedged under such programs, and for potential additional programs to manage other foreign currency-related exposure areas. As of September 30, 2018, we recorded the following balances for the fair value of the contracts:
| • | a current asset of $1.1 million, which is included in other current assets;
| • | a non-current asset of $0.7 million, which is included in other non-current assets; and
| • | a current liability of $0.1 million, which is included in other current liabilities.
Net unrealized gains of approximately $1.5 million related to the effective portion of the hedges were included in accumulated other comprehensive loss as of September 30, 2018. Unrealized gains and losses will be transferred from accumulated other comprehensive loss to current earnings as the underlying operating expenses are recognized. We estimate approximately $0.8 million in net unrealized gains included in accumulated other comprehensive loss as of September 30, 2018 would be reclassified to current earnings in the next twelve months. Net realized gains of approximately $0.2 million on contracts related to underlying expenses which have been recognized were transferred from accumulated other comprehensive loss and included in cost of sales and other direct production costs for the nine months ended September 30, 2018. Net unrealized gains of approximately $19 thousand related to ineffectiveness of the hedges were included in gain (loss) on derivatives contracts on our consolidated statements of operations and comprehensive income (loss) for the nine months ended September 30, 2018. Metals Prices At times, we may use commodity forward sales commitments, commodity swap contracts and commodity put and call option contracts to manage our exposure to fluctuation in the prices of certain metals we produce. Contract positions are designed to ensure that we will receive a defined minimum price for certain quantities of our production, thereby partially offsetting our exposure to fluctuations in the market. Our risk management policy allows for up to 75% of our planned metals price exposure for five years into the future, with certain other limitations, to be hedged under such programs. These instruments do, however, expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price exceeds the spot price of a commodity and (ii) price risk to the extent that the spot price exceeds the contract price for quantities of our production covered under contract positions. We are currently using financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments between the time of shipment and final settlement. In addition, at times we use financially-settled forward contracts to manage the exposure to changes in prices of zinc and lead (but not silver and gold) contained in our forecasted future concentrate shipments. These contracts are not designated as hedges and are marked-to-market through earnings each period. As of September 30, 2018, we recorded the following balances for the fair value of the contracts:
| • | a current asset of $0.3 million, which is included in other current assets; and
| • | a current liability of $0.6 million, which is included in other current liabilities and is net of $0.2 million for contracts in a fair value current asset position.
We recognized an $8.3 million net gain during the first nine months of 2018 on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which is included in sales of products. The net gain recognized on the contracts offsets losses related to price adjustments on our provisional concentrate sales due to changes to silver, gold, lead and zinc prices between the time of sale and final settlement. We recognized a $40.3 million net gain during the first nine months of 2018 on the contracts utilized to manage exposure to prices for forecasted future concentrate shipments. The net gain on these contracts is included as a separate line item under other income (expense), as they relate to forecasted future shipments, as opposed to sales that have already taken place but are subject to final pricing as discussed in the preceding paragraph. The net gain for the first nine months of 2018 is the result of decreasing zinc and lead prices. During the third quarter of 2018, we settled, prior to their maturity date, contracts in a gain position for cash proceeds to us of approximately $32.8 million. As a result, there were no metals committed under contracts on forecasted sales as of September 30, 2018. This program, when utilized, is designed to mitigate the impact of potential future declines in lead and zinc prices from the price levels established in the contracts (see average price information below). When those prices increase compared to the contracts, we incur losses on the contracts. The following tables summarize the quantities of metals committed under forward sales contracts at September 30, 2018 and December 31, 2017:
September 30, 2018 |  | Ounces/pounds under contract (in 000's) |  |  | Average price per ounce/pound |
|  | Silver |  |  | Gold |  |  | Zinc |  |  | Lead |  |  | Silver |  |  | Gold |  |  | Zinc |  |  | Lead |
|  | (ounces) |  |  | (ounces) |  |  | (pounds) |  |  | (pounds) |  |  | (ounces) |  |  | (ounces) |  |  | (pounds) |  |  | (pounds) |
Contracts on provisional sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2018 settlements |  |  | 1,221 |  |  |  | 6 |  |  |  | 10,362 |  |  |  | 4,685 |  |  | $ | 14.56 |  |  | $ | 1,211 |  |  | $ | 1.17 |  |  | $ | 0.94 |
December 31, 2017 |  | Ounces/pounds under contract (in 000's) |  |  | Average price per ounce/pound |
|  | Silver |  |  | Gold |  |  | Zinc |  |  | Lead |  |  | Silver |  |  | Gold |  |  | Zinc |  |  | Lead |
|  | (ounces) |  |  | (ounces) |  |  | (pounds) |  |  | (pounds) |  |  | (ounces) |  |  | (ounces) |  |  | (pounds) |  |  | (pounds) |
Contracts on provisional sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2018 settlements |  |  | 1,447 |  |  |  | 5 |  |  |  | 21,550 |  |  |  | 4,740 |  |  | $ | 16.64 |  |  | $ | 1,279 |  |  | $ | 1.45 |  |  | $ | 1.11 |
Contracts on forecasted sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2018 settlements |  |  | — |  |  |  | — |  |  |  | 32,187 |  |  |  | 16,645 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.29 |  |  | $ | 1.06 |
2019 settlements |  |  | — |  |  |  | — |  |  |  | 23,589 |  |  |  | 18,078 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.33 |  |  | $ | 1.09 |
2020 settlements |  |  | — |  |  |  | — |  |  |  | 3,307 |  |  |  | 2,866 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.27 |  |  | $ | 1.08 |
Credit-risk-related Contingent Features Certain of our derivative contracts contain cross default provisions which provide that a default under our revolving credit agreement would cause a default under the derivative contract. As of September 30, 2018, we have not posted any collateral related to these contracts. The fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $1.0 million as of September 30, 2018. If we were in breach of any of these provisions at September 30, 2018, we could have been required to settle our obligations under the agreements at their termination value of $1.0 million.

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

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