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Note 11 - Derivative Instruments | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | Note 11: Derivative Instruments Foreign Currency Our wholly-owned subsidiaries owning the Casa Berardi and San Sebastian mines are USD-functional entities which routinely incur expenses denominated in CAD and 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 similar program with respect to MXN, which was not in use as of December 31, 2020. The programs utilize forward contracts to buy CAD and MXN, and each contract is designated as a cash flow hedge. As of December 31, 2020, we had 143 forward contracts outstanding to buy a total of CAD$293.8 million having a notional amount of US$223.0 million. The CAD contracts are related to forecasted cash operating costs at Casa Berardi forecasted to be incurred from 2021 through 2024 and have USD-to-CAD exchange rates ranging between 1.2702 and 1.3785. There were no outstanding contracts for MXN as of December 31, 2020. Our risk management policy allows for up to 75% of our planned cost exposure for five years into the future to be covered under such programs, and for potential additional programs to manage other foreign currency-related exposure areas. These instruments do, however, expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract exchange rate exceeds the spot exchange rate of a currency and (ii) exchange rate risk to the extent that the spot exchange rate exceeds the contract exchange rate for amounts of our operating costs covered under contract positions. As of December 31, 2020 and 2019, we recorded the following balances for the fair value of the contracts (in millions):
|  | December 31, |
Balance sheet line item: |  | 2020 |  |  | 2019 |
Other current assets |  | $ | 3.5 |  |  | $ | 0.6 |
Other non-current assets |  |  | 4.2 |  |  |  | 0.6 |
Current derivatives liability |  |  | — |  |  |  | 0.4 |
Other non-current assets |  |  | — |  |  |  | 1.0 |
Net unrealized gains of approximately $7.6 million related to the effective portion of the hedges were included in accumulated other comprehensive loss as of December 31, 2020. 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 $3.1 million in net unrealized gains included in accumulated other comprehensive loss as of December 31, 2020 would be reclassified to current earnings in the next twelve months. Net realized losses of approximately $2.7 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 year ended December 31, 2020. No net unrealized gains or losses 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 year ended December 31, 2020. Metals Prices We may at times 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 covered under such programs that would establish a ceiling for prices to be realized on future sales. 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, we are using 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. The following tables summarize the quantities of metals committed under forward sales contracts at December 31, 2020 and 2019:
December 31, 2020 |  | 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 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2021 settlements |  |  | 1,282 |  |  |  | 4 |  |  |  | 23,314 |  |  |  | 4,905 |  |  | $ | 25.00 |  |  | $ | 1,858 |  |  | $ | 1.19 |  |  | $ | 0.90 |
Contracts on forecasted sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2021 settlements |  |  | — |  |  |  | — |  |  |  | 41,557 |  |  |  | 30,876 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.17 |  |  | $ | 0.88 |
2022 settlements |  |  | — |  |  |  | — |  |  |  | 18,519 |  |  |  | — |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.28 |  |  |  | N/A |
December 31, 2019 |  | 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 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2020 settlements |  |  | 2,556 |  |  |  | 10 |  |  |  | 21,550 |  |  |  | 5,159 |  |  | $ | 17.20 |  |  | $ | 1,481 |  |  | $ | 1.04 |  |  | $ | 0.88 |
Contracts on forecasted sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2020 settlements |  |  | — |  |  |  | — |  |  |  | 441 |  |  |  | 11,740 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.13 |  |  | $ | 0.98 |
In June 2019, we began using put option contracts to manage the exposure of our forecasted future gold and silver sales to potential declines in market prices for those metals. These put contracts give us the option, but not the obligation, to realize established prices on quantities of silver and gold to be sold in the future. The put contracts establish the minimum ("floor") prices we would expect to be able to realize, without limiting our ability to realize higher prices when market prices exceed the put exercise prices at the time the metals are sold. As of December 31, 2020, we had put contracts that provide average floor prices of $16.50 per ounce for silver and $1,650 per ounce for gold for a total of 1.1 million silver ounces and 12,992 gold ounces. These forward and put option contracts are not designated as hedges and are marked-to-market through earnings each period. At December 31, 2020 and 2019, we recorded the following balances for the fair value of the forward and put option contracts held at that time (in millions):
|  | December 31, 2020 |  |  | December 31, 2019 |
Balance sheet line item: |  | Contracts in an asset position |  |  | Contracts in a liability position |  |  | Net asset (liability) |  |  | Contracts in an asset position |  |  | Contracts in a liability position |  |  | Net asset (liability) |
Other current assets |  | $ | 0.2 |  |  | $ | (0.2 | ) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Other non-current assets |  |  | 0.5 |  |  |  | (0.1 | ) |  |  | 0.4 |  |  |  | — |  |  |  | — |  |  |  | — |
Current derivatives liability |  |  | 0.1 |  |  |  | (11.8 | ) |  |  | (11.7 | ) |  |  | 2.1 |  |  |  | (7.9 | ) |  |  | (5.8 | )
We recognized a $16.4 million net loss during 2020 on the contracts utilized to manage exposure to changes in prices of metals in our concentrate shipments, which is included in sales of products. The net loss recognized on the contracts offsets gains 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 $22.1 million net loss during 2020 on the contracts utilized to manage exposure to changes in prices for forecasted future sales. The net loss on these contracts is included as a separate line item under other income (expense), as they relate to forecasted future sales, as opposed to sales that have already taken place but are subject to final pricing as discussed in the preceding paragraph. The net loss for 2020 is the result of increasing silver, gold, zinc and lead prices. During the third quarters of 2019 and 2018, we settled, prior to their maturity date, contracts in a gain position for cash proceeds to us of approximately $6.7 million and $32.8 million, respectively, with no such early settlements in 2020. These programs, when utilized and the contracts are not settled prior to their maturity, are designed to mitigate the impact of potential future declines in silver, gold, lead and zinc prices from the price levels established in the contracts (see average price information above). When those prices increase compared to the contracts, we incur losses on the contracts. 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 December 31, 2020, we have not posted any collateral related to these contracts. The fair value of derivatives in a net liability position related to these arrangements was $12.2 million as of December 31, 2020, and includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at December 31, 2020, we could have been required to settle our obligations under the agreements at their termination value of $12.2 million.

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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 + Details
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