XML 33 R15.htm IDEA: XBRL DOCUMENT
v3.22.2.2

Note 8 - Derivative Instruments | 9 Months Ended
--- | ---
Sep. 30, 2022
Disclosure Text Block [Abstract] |
Derivative Instruments |
Note 8. | Derivative Instruments
General Our current risk management policy provides that up to 75% of five years foreign currency, lead and zinc metals price and silver and gold price exposure may be covered under a derivatives program with certain other limitations. The silver and gold price program can only establish a floor (puts). We are not currently utilizing this silver and gold program. Our program also utilizes derivatives to manage price risk exposure created from when revenue is recognized from a shipment of concentrate until final settlement. These instruments 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 the hedged commodity or foreign currency and (ii) price risk to the extent that the spot price exceeds the contract price for quantities of our production and/or forecasted costs covered under contract positions. Foreign Currency Our wholly-owned subsidiaries owning the Casa Berardi operation as well as the recently acquired Keno Hill development property which Alexco owned are USD-functional entities which routinely incur expenses denominated in CAD. Such expenses expose us to exchange rate fluctuations between the USD and CAD. We have a program to manage our exposure to fluctuations in the USD exchange rate for these subsidiaries’ future operating and capital costs denominated in CAD. The program utilizes forward contracts to buy CAD, some of which are designated as cash flow hedges. As of September 30, 2022, we have 296 forward contracts outstanding to buy a total of CAD$ 539.9 million having a notional amount of USD$ 408.7 million. The CAD contracts that are related to forecasted cash operating costs at Casa Berardi to be incurred from 2022 through 2026 have a total notional value of CAD$ 430.3 million and have CAD-to-USD exchange rates ranging between 1.2702 and 1.3714 . As of September 30, 2022 and December 31, 2021, we recorded the following balances for the fair value of the contracts (in millions):
|  | September 30, |  |  | December 31, |
Balance sheet line item: |  | 2022 |  |  | 2021 |
Current derivatives assets |  | $ | 0.3 |  |  | $ | 2.7 |
Non-current derivatives assets |  |  | 0.3 |  |  |  | 2.5 |
Current derivatives liabilities |  |  | 5.8 |  |  |  | — |
Non-current derivatives liabilities |  |  | 5.6 |  |  |  | — |
Net unrealized losses of approximately $10.8 million related to the effective portion of the hedges were included in accumulated other comprehensive income (loss) as of September 30, 2022. Unrealized gains and losses will be transferred from accumulated other comprehensive income (loss) to current earnings as the underlying operating expenses are recognized. We estimate approximately $5.1 million in net unrealized losses included in accumulated other comprehensive income (loss) as of September 30, 2022 will be reclassified to current earnings in the next twelve months. Net realized gains of approximately $0.2 million and $2.0 million on contracts related to underlying expenses which have been recognized were transferred from accumulated other comprehensive income (loss) and included in cost of sales and other direct production costs for the three and nine months ended September 30, 2022, respectively. No net unrealized gains or losses related to ineffective hedges were included in current earnings for the nine months ended September 30, 2022. Net losses of approximately $0.8 million and $1.1 million for the three and nine months ended September 30, 2022, respectively, related to contracts not designated as hedges were included in fair value adjustments, net on our consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2022. Metals Prices 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; and
| • |  | 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 September 30, 2022 and December 31, 2021:
September 30, 2022 |  | 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 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2022 settlements |  |  | 2,235 |  |  |  | 1,840 |  |  |  | 18,739 |  |  |  | 14,991 |  |  | $ | 19.54 |  |  | $ | 1,760 |  |  | $ | 1.30 |  |  | $ | 0.96 |
Contracts on forecasted sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2022 settlements |  |  | 2,235 |  |  |  | 1,840 |  |  |  | 8,763 |  |  |  | 1,984 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.32 |  |  | $ | 0.97 |
2023 settlements |  |  | — |  |  |  | — |  |  |  | 71,209 |  |  |  | 75,618 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.30 |  |  | $ | 1.00 |
2024 settlements |  |  | — |  |  |  | — |  |  |  | 78,760 |  |  |  | 31,526 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.34 |  |  | $ | 1.00 |
2025 settlements |  |  | — |  |  |  | — |  |  |  | 2,480 |  |  |  | — |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.33 |  |  |  | N/A |
December 31, 2021 |  | 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 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2022 settlements |  |  | 1,814 |  |  |  | 6 |  |  |  | 13,371 |  |  |  | 4,575 |  |  | $ | 23.02 |  |  | $ | 1,812 |  |  | $ | 1.39 |  |  | $ | 0.96 |
Contracts on forecasted sales |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2022 settlements |  |  | — |  |  |  | — |  |  |  | 57,706 |  |  |  | 59,194 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.28 |  |  | $ | 0.98 |
2023 settlements |  |  | — |  |  |  | — |  |  |  | 76,280 |  |  |  | 71,650 |  |  |  | N/A |  |  |  | N/A |  |  | $ | 1.29 |  |  | $ | 1.00 |
Effective November 1, 2021, we designated the contracts for lead and zinc contained in our forecasted future shipments as hedges for accounting purposes, with gains and losses deferred to accumulated other comprehensive loss until the hedged product ships. Prior to November 1, 2021, these contracts had not been designated as hedges for hedge accounting and were therefore marked-to-market through earnings each period. The forward contracts for silver and gold contained in our concentrate shipments have not been designated as hedges and are marked-to-market through earnings each period. We recorded the following balances for the fair value of the forward contracts as of September 30, 2022 and forward and put option contracts as of December 31, 2021 (in millions):
|  | September 30, 2022 |  |  | December 31, 2021 |
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) |
Current derivatives assets |  | $ | 6.9 |  |  | $ | — |  |  | $ | 6.9 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Non-current derivatives assets |  | $ | 20.5 |  |  | $ | — |  |  |  | 20.5 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Current derivatives liabilities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.7 |  |  |  | (20.1 | ) |  |  | (19.4 | )
Non-current derivatives liabilities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.4 |  |  |  | (18.9 | ) |  |  | (18.5 | )
Net unrealized gains of approximately $28.3 million related to the effective portion of the contracts designated as hedges were included in accumulated other comprehensive income (loss) as of September 30, 2022, and are net of related deferred taxes. Unrealized gains and losses will be transferred from accumulated other comprehensive income (loss) to current earnings as the underlying operating sales are recognized. We estimate approximately $6.0 million in net unrealized gains included in accumulated other comprehensive income (loss) as of September 30, 2022 would be reclassified to current earnings in the next twelve months. We recognized a net gain of $1.6 million, including a $4.2 million loss transferred from accumulated other comprehensive income (loss), during the three months ended September 30, 2022. For the nine months ended September 30, 2022, we recognized a net gain of $8.1 million, including a $8.1 million loss transferred from accumulated other comprehensive income (loss). These losses were recognized on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which is included in sales. The net losses and gains recognized on the contracts offset gains and 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 net gain of $12.1 million and a net loss of $4.7 million during the three and nine months ended September 30, 2021, respectively, on the contracts utilized to manage exposure to prices for forecasted future sales, which were not designated as hedges. The net gain or loss on these contracts are 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. Credit-risk-related Contingent Features Certain of our derivative contracts contain cross default provisions which provide that a default under our New Credit Agreement would cause a default under the derivative contract. As of September 30, 2022, we have not posted any collateral related to these contracts. The fair value of derivatives in a net liability position related to these agreements was $14.2 million as of September 30, 2022, which includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at September 30, 2022, we could have been required to settle our obligations under the agreements at their termination value of $14.2 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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types: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