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Derivatives

12 Months Ended

Dec. 31, 2022

Derivatives

14. Derivatives

Embedded Derivatives

Concentrate Sales

Concentrate sales contracts contain embedded derivatives due to the provisional pricing terms for shipments pending final settlement. At the end of each reporting period, the Company records an adjustment to accounts receivable and revenue to reflect the mark-to-market adjustments for outstanding provisional invoices based on forward metal prices. Please see Note 20—Fair Value Measurement in Item 8—Financial Statements and Supplementary Data for additional information.

The following table summarizes the Company’s unsettled sales contracts at December 31, 2022, with the quantities of metals under contract subject to final pricing occurring through February 2023:


		Gold			Silver			Copper			Lead			Zinc				Total
		(ounces)			(ounces)			(tonnes)			(tonnes)			(tonnes)
Under contract			4,118			279,537			231			1,386			3,268
Average forward price (per ounce or tonne)		$	1,752		$	21.45		$	8,294		$	2,018		$	3,001
Unsettled sales contracts value (in thousands)		$	7,215		$	5,996		$	1,916		$	2,797		$	9,807		$	27,731

Other Derivatives

Zinc zero cost collar

Derivative instruments that are not designated as hedging instruments are required to be recorded on the balance sheet at fair value. Changes in fair value impact the Company’s earnings through mark-to-market adjustments until the physical commodity is delivered or the financial instrument is settled. The fair value does not reflect the realized or cash value of the instrument.

Effective May 18, 2021, GRC entered into Trading Agreement with Auramet International LLC that governs nonexchange traded, over-the-counter, spot, forward, and option transactions on both a deliverable and non-deliverable basis involving various metals and currencies, and these contracts are not designated as hedging instruments. In 2022, the Company had a realized loss of $2.0 million and an unrealized gain of $1.8 million related to the program, compared to a

realized loss of $1.2 million and an unrealized loss of $1.8 million in 2021. As of December 31, 2022, the current hedge program concluded, but the Company may utilize similar programs in the future to manage near-term exposure to cash flow variability from metal prices.

Derivatives are carried at fair value and on a net basis as a legal right of offset exists with the same counterparty. Otherwise, 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. For the full year 2022, the LME average zinc price of $3,516 per tonne exceeded the average call option ceiling of $3,288 per tonne, resulting in a realized loss of $2.0 million.

The Company manages credit risk by selecting counterparties that it believes to be financially strong, by entering into netting arrangements with counterparties, and by requiring other credit risk mitigants, as appropriate. The Company actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits, and monitors credit exposures against those assigned limits.