Derivative Financial Instruments

6 Months Ended

Jun. 30, 2015

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 June 30, 2015, a total of 59,913 gold ounces remain outstanding under the 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 10.3% and 11.8% at June 30, 2015 and December 31, 2014, respectively. The fair value of the embedded derivative at June 30, 2015 and December 31, 2014 was a liability of $15.3 million and $21.9 million, respectively. For the three and six months ended June 30, 2015 and 2014, the mark-to-market adjustments were gains of $0.4 million and losses of $5.1 million and losses of $1.2 million and $15.3 million, respectively.

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 actual gold production multiplied by the excess of the monthly average market price of gold above $412 per ounce, subject to a 1% annual inflation adjustment. For the three and six months ended June 30, 2015 and 2014, realized losses on settlement of the liabilities were $3.6 million and $5.5 million and $7.8 million and $11.7 million, respectively. The mark-to-market adjustments and realized losses are included in Fair value adjustments, net.

Provisional Silver and Gold Sales

The Company enters into sales contracts with third-party smelters and refiners which, in most cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable recorded 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 $0.6 million and nil and gains of $0.3 million and $0.9 million in the three and six months ended June 30, 2015 and 2014, respectively. At June 30, 2015, the Company had outstanding provisionally priced sales of 0.8 million ounces of silver and 44,238 ounces of gold at prices of $15.84 and $1,193, respectively.

Silver and Gold Options

At June 30, 2015, the Company has outstanding put spread contracts on 0.9 million ounces of silver. The weighted average high and low strike prices on the silver put spreads are $17.00 per ounce and $15.50 per ounce, respectively.

If the market price of silver 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 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 during the third quarter of 2015. At June 30, 2015, the fair market value of the put spreads was a net asset of $1.1 million.

At December 31, 2014, the Company had outstanding put spread contracts on 1.3 million ounces of silver and 24,000 ounces of gold. The weighted average high and low strike prices on the silver put spreads were $18.00 per ounce and $16.00 per ounce, respectively. The weighted average high and low strike prices on the gold put spreads were $1,200 and $1,050, respectively.

During the three and six months ended June 30, 2015 and 2014, the Company recorded unrealized gains of $1.2 million and $1.4 million and unrealized gains of $1.0 million and $2.9 million, respectively, related to outstanding options which were included in Fair value adjustments, net. The Company recognized no realized losses or gains and losses of $0.7 million during the three months ended June 30, 2015 and 2014, respectively, and realized gains of $0.8 million and losses of $0.4 million during the six months ended June 30, 2015 and 2014, respectively, from expiring and terminated contracts.

At June 30, 2015, 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	$	22,220		$	23,374	$	—
Average gold price in excess of minimum contractual deduction	$	762		$	760	$	—
Notional ounces	29,169			30,744		—
Provisional silver sales	$	12,505		$	—	$	—
Average silver price	$	15.84		$	—	$	—
Notional ounces	789,479			—		—
Provisional gold sales	$	52,776		$	—	$	—
Average gold price	$	1,193		$	—	$	—
Notional ounces	44,238			—		—
Silver put options purchased	$	15,300		$	—	$	—
Average silver strike price	$	17.00		$	—	$	—
Notional ounces	900,000			—		—
Silver put options sold	$	(13,950	)	$	—	$	—
Average silver strike price	$	15.50		$	—	$	—
Notional ounces	900,000			—		—

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

	June 30, 2015
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	—		—		13,878		1,404
Silver and gold options	1,250		123		—		—
Concentrate sales contracts	142		655		—		—
	$	1,392	$	778	$	13,878	$	1,404

	December 31, 2014
	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

The following represent mark-to-market gains (losses) on derivative instruments for the three and six months ended June 30, 2015, and 2014 (in thousands):

		Three months ended June 30,						Six months ended June 30,
Financial statement line	Derivative	2015			2014			2015			2014
Revenue	Concentrate sales contracts	$	(623	)	$	7		$	291		$	872
Costs applicable to sales	Foreign exchange contracts	—			(10		)	—			(924		)
Fair value adjustments, net	Foreign exchange contracts	—			—			—			957
Fair value adjustments, net	Palmarejo gold royalty	385			(5,061		)	(1,160		)	(15,296		)
Fair value adjustments, net	Silver and gold options	1,232			(1,374		)	185			(2,868		)
		$	994		$	(6,438	)	$	(684	)	$	(17,259	)

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.