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Fair value measurement | 12 Months Ended
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Dec. 31, 2021
FAIR VALUE MEASUREMENT |
Fair value measurement | Fair value measurement Fair value is the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In assessing the fair value of a particular contract, the market participant would consider the credit risk of the counterparty to the contract. Consequently, when it is appropriate to do so, the Company adjusts the valuation models to incorporate a measure of credit risk. Fair value represents management's estimates of the current market value at a given point in time. The Company has certain financial assets and liabilities that are measured at fair value. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts), or inputs that are derived principally from, or corroborated by, observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. There were no transfers among Levels 1, 2, and 3 during the year ended December 31, 2021 or the year ended December 31, 2020. The Company’s policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. Valuation methodology for Level 1 financial assets and liabilities: Investments The fair value of the investments are measured based on the closing share price on the reporting date. Valuation methodologies for Level 2 and 3 financial assets and liabilities: Provisionally priced contracts and gold and copper swap contracts The fair value of the provisionally priced contracts and the gold and copper swap contracts is calculated using the mark-to-market forward prices of London Metals Exchange gold and copper based on the applicable settlement dates of the outstanding provisionally priced contracts and copper swap contracts. Gold and copper price option contracts The fair value of the gold and copper price option contracts is measured based on fair value prices obtained from the counterparties of the gold price option contracts and copper price option contracts. Foreign exchange forward contracts The fair value of foreign exchange forward contracts is calculated using the mark-to-market method based on the difference between the forward Canadian dollar to U.S dollar foreign exchange rate and the foreign exchange rates of the contracts. Gold stream obligation The fair value of the gold stream obligation is calculated using the risk-free interest rate derived from the U.S. Treasury rate, forward and consensus metal prices, company specific credit spread based on the yield on the Company’s 2025 Senior Unsecured Notes, and expected gold and silver ounces to be delivered from Rainy River’s life of mine projections. Free cash flow interest obligation The fair value of the free cash flow interest obligation is calculated using the risk-free interest rate derived from the U.S. Treasury rate, forward and consensus metal prices, company specific credit spread based on the yield on the Company’s 2027 Senior Unsecured Notes, and expected production, operating and capital costs from New Afton’s life of mine projections, including considerations to the minimum cash guarantee over the first four years of the instrument. The following table summarizes the Company’s financial assets and liabilities by category and information about financial assets and liabilities measured at fair value on a recurring basis in the statement of financial position categorized by level of significance of the inputs used in making the measurements:
|  | As at December 31, 2021 | As at December 31, 2020
(in millions of U.S. dollars) | Category | Level |  | Level |
FINANCIAL ASSETS |  |  |  |  |
Cash and cash equivalents | Financial assets at amortized cost |  | 481.5 |  |  | 186.3 |
Trade and other receivables | Financial assets at amortized cost |  | 14.2 |  |  | 65.2 |
Provisionally priced contracts | Financial instruments at FVTPL | 2 | 1.2 |  | 2 | 8.9 |
Gold and copper swap contracts | Financial instruments at FVTPL | 2 | (1.8) |  | 2 | (9.8) |
Foreign exchange forward contracts | Financial instruments at FVTPL | 2 | 1.5 |  | 2 | — |
Proceeds due from income tax refunds at Mesquite(1) | Financial assets at amortized cost | 1 | 12.8 |  | 1 | 12.8 |
Investments | Financial instruments at FVTPL | 1 | 59.5 |  | 1 | 46.2 |
FINANCIAL LIABILITIES |  |  |  |  |
Trade and other payables(2) | Financial liabilities at amortized cost |  | 124.3 |  |  | 115.7 |
Long-term debt | Financial liabilities at amortized cost |  | 491.0 |  |  | 489.2 |
Gold stream obligation | Financial instruments at FVTPL | 3 | 194.0 |  | 3 | 217.9 |
Free cash flow interest obligation | Financial instruments at FVTPL | 3 |  | 467.4 |  | 3 |  | 436.1 |
1.Proceeds due from income tax refunds at Mesquite are included in trade and other receivables on the consolidated statement of financial position. 2.Trade and other payables exclude the short-term portions of reclamation and closure cost obligations, the gold stream obligation and the free cash flow interest obligation. The carrying values and fair values of the Company’s financial instruments are as follows:
As at December 31, 2021 | As at December 31, 2020
(in millions of U.S. dollars) | Carrying value | Fair value | Carrying value | Fair value
FINANCIAL ASSETS |  |  |  |
Cash and cash equivalents | 481.5 |  | 481.5 |  | 186.3 |  | 186.3 |
Trade and other receivables | 14.2 |  | 14.2 |  | 65.2 |  | 65.2 |
Provisionally priced contracts | 1.2 |  | 1.2 |  | 8.9 |  | 8.9 |
Gold and copper swap contracts | (1.8) |  | (1.8) |  | (9.8) |  | (9.8) |
Foreign exchange forward contracts | 1.5 |  | 1.5 |  | — |  | — |
Proceeds due from income tax refunds at Mesquite(2) | 12.8 |  | 12.8 |  | 12.8 |  | 12.8 |
Investments | 59.5 |  | 59.5 |  | 46.2 |  | 46.2 |
FINANCIAL LIABILITIES |  |  |  |
Trade and other payables(1) | 124.3 |  | 124.3 |  | 115.7 |  | 115.7 |
Long-term debt | 491.0 |  | 530.8 |  | 489.2 |  | 548.0 |
Gold stream obligation | 194.0 |  | 194.0 |  | 217.9 |  | 217.9 |
Free cash flow interest obligation | 467.4 |  | 467.4 |  | 436.1 |  | 436.1 |
1.Trade and other payables exclude the short-term portion of reclamation and closure cost obligation and the short-term portion of the gold stream obligation and New Afton free cash flow interest obligation. 2.Proceeds due from income tax refunds at Mesquite are included in trade and other receivables on the consolidated statement of financial position.

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