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Fair Value Measurements
 12 Months Ended
Dec. 31, 2016
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
 
Year ended December 31,
In thousands
2016
 
2015
 
2014
Palmarejo royalty obligation embedded derivative
$
(5,866
)
 
$
3,101

 
$
(2,001
)
Rochester net smelter returns (“NSR”) royalty obligation
(4,133
)
 
818

 
3,653

Silver and gold options
(1,582
)
 
1,283

 
1,058

Foreign exchange contracts
—


—


908

Fair value adjustments, net
$
(11,581
)
 
$
5,202

 
$
3,618


Accounting standards establish 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), secondary priority to quoted prices in inactive markets or observable inputs (Level 2), and the lowest priority to unobservable inputs (Level 3).
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
 
Fair Value at December 31, 2016
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
4,488

 
$
4,209

 
$
—

 
$
279

Liabilities:
 
 
 
 
 
 
 
Rochester NSR royalty obligation
9,287

 
—

 
—

 
9,287

Other derivative instruments, net
762

 
—

 
762

 
—

 
$
10,049

 
$
—

 
$
762

 
$
9,287


 
 
Fair Value at December 31, 2015
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
2,766

 
$
2,756

 
$
—

 
$
10

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
4,957

 
$
—

 
$
—

 
$
4,957

Rochester NSR royalty obligation
9,593

 
—

 
—

 
9,593

Other derivative instruments, net
508

 
—

 
508

 
—

 
$
15,058

 
$
—

 
$
508

 
$
14,550


The Company’s investments in equity securities are recorded at fair market value in the financial statements based primarily on quoted market prices. Such instruments are classified within Level 1 of the fair value hierarchy. Quoted market prices are not available for certain equity securities; these securities are valued using pricing models, which require the use of observable and unobservable inputs, and are classified within Level 3 of the fair value hierarchy.
The Company’s silver and gold options and other derivative instruments, net, which relate to concentrate and certain doré sales contracts and foreign exchange contracts, are valued using pricing models, which require inputs that are derived from observable market data, including contractual terms, forward market prices, yield curves, credit spreads, and other unobservable inputs. The model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.
The fair value of the Palmarejo royalty obligation embedded derivative and Rochester NSR royalty obligation were estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves, and credit spreads, as well as the Company’s current mine plan which is considered a significant unobservable input. Therefore, the Company has classified these obligations as Level 3 financial liabilities. Based on current mine plans, 1.7 years was used to estimate the fair value of the Rochester NSR royalty obligation at December 31, 2016. At December 31, 2016, there was no Palmarejo royalty obligation or related embedded derivative as a result of the satisfaction of the minimum ounce obligation in the third quarter of 2016.
No assets or liabilities were transferred between fair value levels in the year ended December 31, 2016.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the years ended December 31, 2016, and 2015:
 
Year ended December 31, 2016
In thousands
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
Equity securities
$
10

 
$
272

 
$
(3
)
 
$
279

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
4,957

 
$
5,866

 
$
(10,823
)
 
$
—

Rochester NSR royalty obligation
$
9,593

 
$
4,133

 
$
(4,439
)
 
$
9,287


 
Year ended December 31, 2015
In thousands
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
Equity securities
$
1,379

 
$
(983
)
 
$
(386
)
 
$
10

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
21,912

 
$
(3,101
)
 
$
(13,854
)
 
$
4,957

Rochester NSR royalty obligation
$
15,370

 
$
(818
)
 
$
(4,959
)
 
$
9,593


During 2016, Coeur recorded write-downs related to Mining properties totaling $4.4 million ($3.9 million net of tax). The operator of the Endeavor mine in Australia, on which the Company has a 100% silver stream, announced in early 2016 a significant curtailment of production due to low lead and zinc prices. As a result, Coeur recorded a $2.5 million write-down of the mineral interest associated with the Endeavor silver stream within the Coeur Capital segment at March 31, 2016. In April 2016, Coeur sold its tiered NSR royalty on the El Gallo mine to the operator, a subsidiary of McEwen Mining Inc., for total consideration of approximately $6.3 million, including $1 million in contingent consideration. In anticipation of this sale, the Company recorded a $1.9 million write-down of the mineral interest within the Coeur Capital segment at March 31, 2016.
During 2015, Coeur recorded write-downs related to Property, plant, and equipment and Mining properties totaling $313.3 million ($276.5 million net of tax). The fair values of Property, plant, and equipment and Mining properties were estimated using a discounted cash flow approach. The discounted cash flow model used significant unobservable inputs and is therefore classified within Level 3 for the fair value hierarchy. The following table sets forth the quantitative and qualitative information related to the unobservable inputs used in the calculation of the Company's non-recurring Level 3 fair value measurements:
Description
Valuation technique
Unobservable input
Range / Weighted Average
Property, plant, and equipment and Mining properties
Discounted cash flow
Discount rate
7.50% - 11.00%
 
 
Long-term silver price
$17.50
 
 
Long-term gold price
$1,200
During 2014, Coeur recorded write-downs related to Property, plant, and equipment and Mining properties totaling $1,472.7 million ($1,021.8 million net of tax). The fair values of Property, plant, and equipment and Mining properties were estimated using a discounted cash flow approach. The discounted cash flow model used significant unobservable inputs and is therefore classified within Level 3 for the fair value hierarchy. The following table sets forth the quantitative and qualitative information related to the unobservable inputs used in the calculation of the Company's non-recurring Level 3 fair value measurements:
Description
Valuation technique
Unobservable input
Range / Weighted Average
Property, plant, and equipment and Mining properties
Discounted cash flow
Discount rate
8.00% - 10.75%
 
 
Long-term silver price
$19.00
 
 
Long-term gold price
$1,275
The fair value of financial assets and liabilities carried at book value in the financial statements at December 31, 2016 and December 31, 2015 is presented in the following table:
 
December 31, 2016
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 

 
 
 
 
 
 
7.875% Senior Notes due 2021(1)
$
175,991

 
$
184,373

 
$
—

 
$
184,373

 
$
—


(1)
Net of unamortized debt issuance costs and premium received of $2.0 million.
The fair values of 7.875% Senior Notes due 2021 (the “Senior Notes”) outstanding were estimated using quoted market prices.
 
December 31, 2015
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 
 
 
 
 
 
 
 
3.25% Convertible Senior Notes due 2028
$
712

 
$
693

 
$
—

 
$
693

 
$
—

Senior Notes(1)
373,433

 
227,487

 
—

 
227,487

 
—

Term Loan due 2020(2)
94,489

 
99,500

 
—

 
99,500

 
—

San Bartolomé Lines of Credit
4,571

 
4,571

 
—

 
4,571

 
—

Palmarejo gold production royalty obligation
15,207

 
15,580

 
—

 
—

 
15,580


(1)
Net of unamortized debt issuance costs and premium received of $5.3 million.
(2)
Net of unamortized debt issuance costs of $5.0 million.
The fair values of the Senior Notes outstanding were estimated using quoted market prices. The fair value of the Term Loan due 2020 (the “Term Loan”) approximates book value (excluding unamortized debt issuance costs) as the liability is secured, has a variable interest rate, and lacks significant credit concerns. The fair value of the San Bartolomé line of credit approximates book value due to the short-term nature of the liability and absence of significant interest rate or credit concerns. The fair value of the Palmarejo gold production royalty obligation is estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves, and credit spreads, as well as the Company’s current mine plan which is considered a significant unobservable input.