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Fair Value Measurements
9 Months Ended
Sep. 30, 2011
Fair Value Measurements [Abstract] 
Fair Value Measurements
2.
Fair value measurements
 
ASC 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value, and delineates disclosures about fair value measurements.  This guidance applies to a broad range of other existing accounting pronouncements that require or permit fair value measurements.  ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”  Fair value is an exit price and that exit price should reflect all the assumptions that market participants would use in pricing the asset or liability.
 
Our fair value measurements include the consideration of market risks that other market participants might consider in pricing the particular asset or liability, specifically non-performance risk and counterparty credit risk.  Consideration of the non-performance risk and counterparty credit risk are used to establish the appropriate risk-adjusted discount rates used in our fair value measurements.
 
The following section describes the valuation methodology used to measure our financial assets and liabilities that were accounted for at fair value.

Overview of Century’s valuation methodology
 
Level
Significant inputs
Cash equivalents
1
Quoted market prices
Trust assets (1)
1
Quoted market prices
Surety bonds
1
Quoted market prices
Primary aluminum put option contracts
2
Quoted London Metal Exchange (“LME”) forward market prices for primary aluminum, historical volatility measurements and risk-adjusted discount rates
Natural gas forward financial contracts
2
Quoted natural gas forward market prices for primary aluminum and risk-adjusted discount rates
Power contract
3
Quoted LME forward market prices for primary aluminum, power tariff prices, management’s estimate of future power usage and risk-adjusted discount rates
E.ON U.S. (“E.ON”) contingent obligation
3
Quoted LME forward market prices for primary aluminum, management’s estimates of the LME forward market prices for primary aluminum for periods beyond the quoted periods and management’s estimate of future level of operations at Century Aluminum of Kentucky, our wholly owned subsidiary (“CAKY”)
Primary aluminum sales premium contracts
3
Management’s estimates of future U.S. Midwest premium and risk-adjusted discount rates
 (1)
Trust assets are currently invested in money market funds.  The trust has sole authority to invest the funds in secure interest producing investments consisting of short-term securities issued or guaranteed by the United States government or cash and cash equivalents.
 
Fair value measurements
 
The following table sets forth by level within the ASC 820 fair value hierarchy our financial assets and liabilities that are accounted for at fair value on a recurring basis.  As required by ASC 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and the placement within the fair value hierarchy levels.

Recurring Fair Value Measurements
 
As of September 30, 2011
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
ASSETS:
            
Cash equivalents
 $209,181  $—  $—  $209,181 
Trust assets
  16,207   —   —   16,207 
Surety bond
  2,391   —   —   2,391 
Primary aluminum put option contracts
  —   7,183   —   7,183 
Power contract
  —   —   122   122 
TOTAL
 $227,779  $7,183  $122  $235,084 
                  
LIABILITIES:
                
E.ON contingent obligation – net
 $—  $—  $13,605  $13,605 
Primary aluminum sales contract – premium collar
  —   —   1,127   1,127 
TOTAL
 $—  $—  $14,732  $14,732 


Recurring Fair Value Measurements
 
As of December 31, 2010
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
ASSETS:
            
Cash equivalents
 $294,269  $—  $—  $294,269 
Primary aluminum put option contracts
  —   4,691   —   4,691 
Natural gas forward financial contracts
  —   79   —   79 
Power contract
  —   —   72   72 
TOTAL
 $294,269  $4,770  $72  $299,111 
                  
LIABILITIES:
                
E.ON contingent obligation – net
 $—  $—  $13,091  $13,091 
Primary aluminum sales contract – premium collar
  —   —   783   783 
TOTAL
 $—  $—  $13,874  $13,874 


Change in Level 3 Fair Value Measurements during the three months ended September 30,
 
   
Derivative liabilities - net
 
   
2011
  
2010
 
Beginning balance, July 1,
 $(14,536) $(844)
Total gain (loss) (realized/unrealized) included in earnings
  (45)  151 
Settlements
  (29)  (28)
Ending balance, September 30,
 $(14,610) $(721)
          
Amount of total gain (loss) included in earnings attributable to the change in unrealized losses relating to assets and liabilities held at September 30,
 $(45) $151 
Change in Level 3 Fair Value Measurements during the nine months ended September 30,
 
   
Derivative liabilities - net
 
   
2011
  
2010
 
Beginning balance, January 1,
 $(13,802) $(1,632)
Total loss (realized/unrealized) included in earnings
  (1,275)  (28)
Settlements
  467   939 
Ending balance, September 30,
 $(14,610) $(721)
          
Amount of total loss included in earnings attributable to the change in unrealized losses (gains) relating to assets and liabilities held at September 30,
 $(1,275) $(28)
 
The net gain (loss) on our derivative assets and liabilities is recorded in our statement of operations under net gain (loss) on forward contracts.  See Note 3 Derivative and hedging instruments for the location of our Level 3 derivative assets and liabilities within our consolidated balance sheets.