Fair Value Measurements

9 Months Ended

Sep. 30, 2022


	Three Months Ended September 30,				Nine Months Ended September 30,
In thousands	2022		2021		2022		2021
Unrealized gain (loss) on equity securities	$	4,614	$	(35,709)	$	(44,452)	$	(3,702)
Realized gain (loss) on equity securities	(17,681)		—		(17,681)		769
Exchange agreement embedded derivative	—		9,269		—		9,933
Termination of gold zero cost collars	—		—		(3,139)		—
Fair value adjustments, net	$	(13,067)	$	(26,440)	$	(65,272)	$	7,000

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 September 30, 2022
In thousands	Total		Level 1		Level 2		Level 3
Assets:
Equity securities including warrants	$	45,548	$	45,435	$	113	$	—
Provisional metal sales contracts	120		—		120		—
Gold forwards	47,073		—		47,073		—
	$	92,741	$	45,435	$	47,306	$	—
Liabilities:

Provisional metal sales contracts	$	948	$	—	$	948	$	—


	Fair Value at December 31, 2021
In thousands	Total		Level 1		Level 2		Level 3
Assets:
Equity securities	$	132,197	$	132,197	$	—	$	—
Provisional metal sales contracts	86		—		86		—
	$	132,283	$	132,197	$	86	$	—
Liabilities:
Gold zero cost collars	$	1,212	$	—	$	1,212	$	—
Provisional metal sales contracts	162		—		162		—
	$	1,374	$	—	$	1,374	$	—

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. The Company’s common share purchase warrants received as consideration in the La Preciosa project sale are valued using the pricing model with inputs derived from observable market data, including quoted market prices and quoted interest curve rates. 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 Company’s gold forward contracts are valued using pricing models with inputs derived from observable market data, including forward market prices, yield curves, credit spreads. The Company’s provisional metal sales contracts include concentrate and certain doré sales contracts that are valued using pricing models with inputs derived from observable market data, including forward market prices.

As further discussed in Note 19 -- Dispositions, the consideration for the sale of La Preciosa project included two royalties, a 1.25% net smelter returns royalty on properties covering the Gloria and Abundancia areas of the La Preciosa project and a 2.00% gross value royalty on all areas of the La Preciosa project other than the Gloria and Abundancia areas, and contingent consideration of $0.25 per silver equivalent ounce (adjusted for inflation) on any new mineral reserves discovered and declared outside of the current resources area at the La Preciosa project, up to a maximum payment of $50.0 million. The fair value of the royalties and the contingent consideration assets were $11.2 million and $1.2 million, respectively, valued as of the date of closing of the transaction and are measured at fair value on a non-recurring basis. The fair value of the royalties and the contingent consideration were valued using Monte Carlo simulation models. The model inputs include significant unobservable inputs and involve significant management judgment. The significant unobservable inputs included assumptions related to metal prices which assumed silver prices ranging from $22 to $25 per ounce and gold prices ranging from $1,700 to $1,930 per ounce as well as volatility assumptions for silver and gold prices (33.5% and 19.0%, respectively), and an assumed weighted average cost of capital of 15.5%. Such instruments are classified within Level 3 of the fair value hierarchy.

No assets or liabilities were transferred between fair value levels in the nine months ended September 30, 2022.

The fair value of financial assets and liabilities carried at book value in the financial statements at September 30, 2022 and December 31, 2021 is presented in the following table:


	September 30, 2022
In thousands	Book Value		Fair Value		Level 1		Level 2		Level 3
Assets:
Promissory note	$	4,780	$	4,593	$	—	$	4,593	$	—
Deferred cash consideration	$	7,458	$	7,348	$	—	$	7,348	$	—
Liabilities:
2029 Senior Notes(1)	$	368,977	$	271,383	$	—	$	271,383	$	—
Revolving Credit Facility(2)	$	200,000	$	200,000	$	—	$	200,000	$	—

(1) Net of unamortized debt issuance costs of $6.0 million

(2) Unamortized debt issuance costs of $3.0 million included in Other Non-Current Assets.


	December 31, 2021
In thousands	Book Value		Fair Value		Level 1		Level 2		Level 3


Liabilities:
2029 Senior Notes(1)	$	368,273	$	337,384	$	—	$	337,384	$	—
Revolving Credit Facility(2)	$	65,000	$	65,000	$	—	$	65,000	$	—

(1) Net of unamortized debt issuance costs of $6.7 million.

(2) Unamortized debt issuance costs of $2.4 million included in Other Non-Current Assets.

The fair value of the 2029 Senior Notes was estimated using quoted market prices. The fair value of the RCF approximates book value as the liability is secured, has a variable interest rate, and lacks significant credit concerns.

Also included in the consideration for the sale of La Preciosa project was a promissory note payable to the Company that matures in March 2023 and deferred cash consideration payable on the first anniversary of initial production from any portion of the La Preciosa project. These assets were valued using the pricing model with inputs derived from observable market data, including synthetic credit rating and quoted discount rate. 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.

- 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.

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