Derivative Financial Instruments

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

Palmarejo Gold Production Royalty

On January 21, 2009, the Company's subsidiary, Coeur Mexicana S.A. de C.V. ("Coeur Mexicana"), entered into a gold production royalty agreement with a subsidiary of Franco-Nevada Corporation. The royalty covers 50% of the life of mine production from the Palmarejo mine and adjacent properties. The royalty transaction includes a minimum obligation of 4,167 gold ounces per month and terminates when payments of 400,000 gold ounces have been made. At December 31, 2014, a total of 84,915 gold ounces remain outstanding under the original obligation.

The price volatility associated with the minimum royalty obligation is considered an embedded derivative. The Company is required to recognize the change in fair value of the remaining minimum obligation due to changing gold prices. Unrealized gains are recognized in periods when the gold price has decreased from the previous period and unrealized losses are recognized in periods when the gold price increases. The fair value of the embedded derivative is reflected net of the Company's current credit adjusted risk free rate, which was 11.8% and 5.7% at December 31, 2014 and December 31, 2013, respectively. The fair value of the embedded derivative at December 31, 2014 and December 31, 2013 was a liability of $21.9 million and $40.3 million, respectively. For the years ended December 31, 2014, 2013, and 2012 the fair value adjustments were gains of $18.4 million, $104.8 million, and $14.3 million.

Payments on the royalty obligation decrease the carrying amount of the minimum obligation and the derivative liability. Each monthly payment is an amount equal to the greater of the minimum of 4,167 ounces of gold or 50% of the actual gold production per month multiplied by the excess of the monthly average market price of gold above $408 per ounce, subject to a 1% annual inflation adjustment. For the years ended December 31, 2014, 2013, and 2012, realized losses on settlement of the liabilities were $20.4 million, $28.6 million, and $45.4 million, respectively. The fair value adjustments and realized losses are included in Fair value adjustments, net.

Foreign Exchange Contracts

At December 31, 2014, the Company had no outstanding call and put option contracts, or collars. At December 31, 2013, the Company had MXN foreign exchange forward contracts on $12.0 million in U.S. dollars. These contracts required the Company to exchange U.S. dollars for MXN at a weighted average exchange rate of 12.21 MXN to each U.S. dollar and the fair value of those contracts was a liability of $0.9 million at December 31, 2013. In addition, at December 31, 2013, the Company had outstanding collars on $45.0 million with a weighted-average strike price of 12.60 MXN for the floor and 14.80 MXN for the ceiling. The fair value of these contracts was nil at December 31, 2013.

For the years ended December 31, 2014, 2013, and 2012, the Company recorded mark-to-market gains of nil, losses of $1.0 million, and gains of $3.3 million, respectively, on MXN forward contracts and collars. These mark-to-market adjustments are reflected in Fair value adjustments, net. For the years ended December 31, 2014, 2013, and 2012, the Company recorded realized losses of $0.9 million, realized gains of $0.6 million, and realized losses of $1.6 million, respectively, in Costs applicable to sales.

Provisional Gold and Silver Sales

The Company's sales to third-party smelters, in general, provide for a provisional payment based upon preliminary assays and forward metal prices. The provisionally priced sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of concentrates at the forward price at the time of sale. The embedded derivatives do not qualify for hedge accounting and are marked to market through earnings each period until final settlement. Changes in silver and gold prices resulted in provisional pricing mark-to-market losses of $0.1 million, losses of $2.0 million, and gains of $1.7 million in the years ended December 31, 2014, 2013, and 2012, respectively. At December 31, 2014, the Company had outstanding provisionally priced sales of 0.6 million ounces of silver and 29,137 ounces of gold at prices of $16.35 and $1,221, respectively.

Silver and Gold Options

At December 31, 2014, the Company has outstanding put spread contracts on 1,250,000 ounces of silver and 24,000 ounces of gold. The weighted average high and low strike prices on the silver put spreads are $18.00 per ounce and $16.00 per ounce, respectively. The weighted average high and low strike prices on the gold put spreads are $1,200 and $1,050, respectively.

If the market price of silver and gold were to average less than the high strike price but more than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period. If the market price of silver and gold were to average less than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period, and the Company would be required to pay the difference between the average market price and the low strike price for the contracted volume over the contract period.

The put spread contracts are generally net cash settled and expire in the first quarter of 2015. At December 31, 2014, the fair market value of the put spreads was a net asset of $2.8 million.

At December 31, 2013, the Company had outstanding put options allowing it to net settle 25,000 ounces of gold and 1,250,000 ounces of silver at weighted average prices of $1,150 per ounce and $17.00 per ounce, respectively, if the market price of gold or silver were to average less than the strike price during the contract period. At December 31, 2013, the fair market value of these contracts was a net asset of $0.1 million.

During the years ended December 31, 2014, 2013, and 2012, the Company recorded unrealized gains of $1.5 million, unrealized gains of $8.9 million, and unrealized gains of $8.6 million, respectively, related to outstanding options which was included in Fair value adjustments, net. The Company also recognized realized losses of $0.6 million, nil, and nil, respectively, resulting from expiring and terminated contracts during the years ended December 31, 2014, 2013, and 2012.

At December 31, 2014, the Company had the following derivative instruments that settle in each of the years indicated:

In thousands except average prices and notional ounces	2015			2016		Thereafter
Palmarejo gold production royalty	$	41,981		$	23,779	$	—
Average gold price in excess of minimum contractual deduction	$	775		$	774	$	—
Notional ounces	54,171			30,744		—
Silver concentrate sales contracts	$	10,392		$	—	$	—
Average silver price	$	16.35		$	—	$	—
Notional ounces	635,614			—		—
Gold concentrate sales contracts	$	35,576		$	—	$	—
Average gold price	$	1,221		$	—	$	—
Notional ounces	29,137			—		—
Gold put options purchased	$	14,400		$	—	$	—
Average gold strike price	$	1,200		$	—	$	—
Notional ounces	12,000			—		—
Silver put options purchased	$	11,250		$	—	$	—
Average silver strike price	$	18.00		$	—	$	—
Notional ounces	625,000			—		—
Gold put options sold	$	(12,600	)	$	—	$	—
Average gold strike price	$	1,050		$	—	$	—
Notional ounces	12,000			—		—
Silver put options sold	$	(10,000	)	$	—	$	—
Average silver strike price	$	16.00		$	—	$	—
Notional ounces	625,000			—		—

The following summarizes the classification of the fair value of the derivative instruments:

	December 31, 2014
In thousands	Prepaid expenses and other		Accrued liabilities and other		Current portion of royalty obligation		Non-current portion of royalty obligation
Palmarejo gold production royalty	$	—	$	—	$	14,405	$	7,507
Silver and gold options	3,882		1,039
Concentrate sales contracts	43		848
	$	3,925	$	1,887	$	14,405	$	7,507

	December 31, 2013
	Prepaid expenses and other		Accrued liabilities and other		Current portion of royalty obligation		Non-current portion of royalty obligation
Foreign exchange contracts	$	38	$	947	$	—	$	—
Palmarejo gold production royalty	—		—		17,650		22,688
Silver and gold options	135		—		—		—
Concentrate sales contracts	11		693		—		—
	$	184	$	1,640	$	17,650	$	22,688

The following represent mark-to-market gains (losses) on derivative instruments for the years ended December 31, 2014, 2013, and 2012 (in thousands):

		Year ended December 31,
Financial statement line	Derivative	2014			2013			2012
Sales of metal	Concentrate sales contracts	$	(123	)	$	(1,995	)	$	1,682
Costs applicable to sales	Foreign exchange contracts	924			589			(1,621		)
Fair value adjustments, net	Foreign exchange contracts	(16		)	(985		)	3,264
Fair value adjustments, net	Palmarejo gold royalty	(2,001		)	76,200			(31,053		)
Fair value adjustments, net	Silver and gold options	1,058			7,119			4,302
		$	(158	)	$	80,928		$	(23,426	)

Credit Risk

The credit risk exposure related to any derivative instrument is limited to the unrealized gains, if any, on outstanding contracts based on current market prices. To reduce counter-party credit exposure, the Company enters into contracts with financial institutions management deems credit worthy and limits credit exposure to each institution. The Company does not anticipate non-performance by any of its counterparties. In addition, to allow for situations where derivative positions may need to be revised, the Company transacts only in markets that management considers highly liquid.