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Fair Value Measurement | 9 Months Ended
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Sep. 30, 2022
Fair Value Measurement |
Fair Value Measurement | 20. Fair Value Measurement ​ Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: ​
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
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Level 2 | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
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Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
​ As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth certain of the Company’s assets measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2022 and December 31, 2021: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of | ​ | As of | ​ | ​
​ | ​ | September 30, | ​ | December 31, | ​ | Input Hierarchy Level
​ | ​ | 2022 | ​ | 2021 | ​ | ​
​ | ​ | (in thousands) | ​ | ​
Cash and cash equivalents | ​ | $ | 22,531 | ​ | $ | 33,712 | ​ | Level 1
Accounts receivable, net | ​ | $ | 3,741 | ​ | $ | 8,672 | ​ | Level 2
Investment in equity securities | ​ | $ | 1,716 | ​ | $ | - | ​ | Level 1
Derivative asset - zinc zero cost collar | ​ | $ | 432 | ​ | $ | - | ​ | Level 2
Derivative liability - zinc zero cost collar | ​ | $ | - | ​ | $ | (1,844) | ​ | Level 2
Contingent consideration | ​ | $ | (4,036) | ​ | $ | (4,603) | ​ | Level 3
Gold and silver stream agreements | ​ | $ | (43,201) | ​ | $ | (42,560) | ​ | Level 3
​ The following methods and assumptions were used to estimate the fair value of each class of financial instrument: ​ Cash and cash equivalents: Cash and cash equivalents consist primarily of cash deposits and are valued at cost, which approximates fair value. ​ Accounts receivable, net: Accounts receivable, net includes amounts due to the Company for deliveries of concentrates and doré sold to customers, net of embedded derivatives mark-to-market value of $1.7 million as of September 30, 2022, and nil as of December 31, 2021. Concentrate sales contracts provide for provisional pricing as specified in such contracts. These sales contain an embedded derivative related to the provisional pricing mechanism and are accounted for as a derivative. At the end of each reporting period, the Company records an adjustment to sales to reflect the mark-to-market of outstanding provisional invoices based on the forward price curve. Because these provisionally priced sales have not yet settled as of the reporting date, the mark-to-market adjustment related to these invoices is included in accounts receivable as of each reporting date and included in its accounts receivable on the accompanying Condensed Consolidated Interim Balance Sheets related to mark-to-market adjustments. Please see Note 14—Derivatives for additional information. ​ Investment in equity securities: On September 22, 2022, Gold Resource Corporation invested C$2.4 million (or $1.7 million) in the common shares of Maritime Resources Corp. (“Maritime”), ticker symbol MAE.V on TSX-V, in a private placement. The 47 million shares purchased represent less than 10% of the issued and outstanding shares of Maritime. As of September 30, 2022, the share price of Maritime was the same as at the time of purchase; and therefore, no unrealized gain or loss was recorded. Derivative liability - zinc zero cost collar: Derivatives are carried at fair value and on a net basis as a legal right of offset exists with the same counterparty. The valuation is using the Black Scholes model as applied to zinc call options and considers interest rate forecast, market volatility, and the zinc forward price curve for each respective hedge period. Any fair value gains or losses are recognized in earnings in the current period. The fair value does not reflect the realized or cash value of the instrument. Mark-to-market adjustments are made until the physical commodity is delivered or the financial instrument is settled. At each reporting period Management evaluates the unrealized gain (loss) on the derivatives instruments based on average London Metal Exchange forward underlying price over a period from the trade date to the payment date. For the zinc zero cost collar, when the prior month LME average zinc price is greater than the call price, positions settling in the period are recorded as a realized gain or loss, and unsettled positions are recorded as an unrealized gain or loss. ​ Contingent consideration: For September 30, 2022, a time value of money calculation was utilized to value the contingent consideration. Each milestone payment was assessed separately. Key risks including permitting, feasibility study, commercial production, and timing were each assigned a probability weighting based on the likelihood of occurrence, and a 60.75% overall probability was used. The change in the fair value since December 31, 2021 is contributable to unrealized foreign currency exchange adjustment. Please see Note 12— Commitments and Contingencies for additional information. ​ Gold and silver stream agreements: The gold and silver stream liabilities are carried at fair value. The discounted cash flow model that was used to determine the fair value utilizes significant unobservable inputs, such as the probability and timing of permitting, feasibility study, and commercial production. Also, a periodic interest expense is recorded based on an implied interest rate. The implied interest rate is determined based on a 67.5% probability of future production and an 8% discount rate. The change in the fair value since December 31, 2021 is contributable to the implied interest. Please see Note 10—Gold and Silver Stream Agreements for additional information. ​ Gains and losses related to changes in the fair value of these financial instruments were included in the Company’s Condensed Consolidated Interim Statements of Operations as shown in the following table: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended September 30, | ​ | For the nine months ended September 30, | ​ | Statements of Operations Classification
​ | ​ | 2022 | ​ | 2021 | ​ | ​ | 2022 | ​ | 2021 | ​ | ​
​ | Note | (in thousands) | ​ | ​
Realized and unrealized derivative (loss) gain, net | 14 | $ | (934) | ​ | $ | (478) | ​ | ​ | $ | (1,064) | ​ | $ | 156 | ​ | Sales, net
Realized gain (loss) on zinc zero cost collar | 17 | $ | 61 | ​ | $ | (40) | ​ | ​ | $ | (2,396) | ​ | $ | (40) | ​ | Realized and unrealized loss on zinc zero cost collar
Unrealized gain (loss) on zinc zero cost collar | 17 | $ | 157 | ​ | $ | (144) | ​ | ​ | $ | 2,276 | ​ | $ | (144) | ​ | Realized and unrealized loss on zinc zero cost collar
​ Realized/Unrealized Derivatives ​ The following tables summarize the Company’s realized/unrealized derivatives for the periods presented (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Gold | ​ | Silver | ​ | Copper | ​ | Lead | ​ | Zinc | ​ | Total
For the three months ended September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Realized loss | ​ | $ | (198) | ​ | $ | (141) | ​ | $ | (158) | ​ | $ | (88) | ​ | $ | (627) | ​ | $ | (1,212)
Unrealized (loss) gain | ​ | ​ | (95) | ​ | ​ | (81) | ​ | ​ | 108 | ​ | ​ | 96 | ​ | ​ | 250 | ​ | ​ | 278
Total realized/unrealized derivatives, net | ​ | $ | (293) | ​ | $ | (222) | ​ | $ | (50) | ​ | $ | 8 | ​ | $ | (377) | ​ | $ | (934)
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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Gold | ​ | Silver | ​ | Copper | ​ | Lead | ​ | Zinc | ​ | Total
For the three months ended September 30, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Realized (loss) gain | ​ | $ | (110) | ​ | $ | (295) | ​ | $ | (4) | ​ | $ | 72 | ​ | $ | 91 | ​ | $ | (246)
Unrealized gain (loss) | ​ | ​ | 28 | ​ | ​ | (11) | ​ | ​ | (16) | ​ | ​ | (84) | ​ | ​ | (149) | ​ | ​ | (232)
Total realized/unrealized derivatives, net | ​ | $ | (82) | ​ | $ | (306) | ​ | $ | (20) | ​ | $ | (12) | ​ | $ | (58) | ​ | $ | (478)
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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Gold | ​ | Silver | ​ | Copper | ​ | Lead | ​ | Zinc | ​ | Total
For the nine months ended September 30, 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Realized (loss) gain | ​ | $ | (16) | ​ | $ | 13 | ​ | $ | (173) | ​ | $ | (32) | ​ | $ | 1,022 | ​ | $ | 814
Unrealized (loss) gain | ​ | ​ | (96) | ​ | ​ | 30 | ​ | ​ | 3 | ​ | ​ | (103) | ​ | ​ | (1,712) | ​ | ​ | (1,878)
Total realized/unrealized derivatives, net | ​ | $ | (112) | ​ | $ | 43 | ​ | $ | (170) | ​ | $ | (135) | ​ | $ | (690) | ​ | $ | (1,064)
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Gold | ​ | Silver | ​ | Copper | ​ | Lead | ​ | Zinc | ​ | Total
For the nine months ended September 30, 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Realized (loss) gain | ​ | $ | (133) | ​ | $ | (123) | ​ | $ | 63 | ​ | $ | 146 | ​ | $ | 251 | ​ | $ | 204
Unrealized gain (loss) | ​ | ​ | 58 | ​ | ​ | 10 | ​ | ​ | (24) | ​ | ​ | (63) | ​ | ​ | (29) | ​ | ​ | (48)
Total realized/unrealized derivatives, net | ​ | $ | (75) | ​ | $ | (113) | ​ | $ | 39 | ​ | $ | 83 | ​ | $ | 222 | ​ | $ | 156
​

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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