FAIR VALUE MEASUREMENTS



	Three months ended September 30,					Nine months ended September 30,
In thousands	2017		2016			2017			2016
Rochester royalty obligation	$	—	$	(851	)	$	(864	)	$	(5,787	)
Palmarejo royalty obligation embedded derivative	—		(110		)	—			(5,866		)
Silver and gold options	—		—			—			(1,582		)
Fair value adjustments, net	$	—	$	(961	)	$	(864	)	$	(13,235	)

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, 2017
In thousands	Total		Level 1		Level 2		Level 3
Assets:
Equity and debt securities	$	29,125	$	22,194	$	—	$	6,931
Other derivative instruments, net	44		—		44		—
	$	29,169	$	22,194	$	44	$	6,931
Liabilities:
Other derivative instruments, net	$	255	$	—	$	255	$	—



	Fair Value at December 31, 2016
In thousands	Total		Level 1		Level 2		Level 3
Assets:
Equity securities	$	4,488	$	4,209	$	—	$	279
	$	4,488	$	4,209	$	—	$	279
Liabilities:
Rochester royalty obligation	9,287		—		—		9,287
Other derivative instruments, net	762		—		762		—
	$	10,049	$	—	$	762	$	9,287

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 debt and 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 other derivative instruments, net, relate to concentrate and certain doré sales contracts 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.

In May 2017, the Company repurchased the Rochester royalty obligation for $5.0 million, resulting in a pre-tax gain of $2.3 million, which is included in Other, net. The fair value of the Rochester royalty obligation was 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 historically classified this obligation as a Level 3 financial liability.

In July 2017, the Company sold the Endeavor silver stream and remaining non-core royalties to Metalla Royalty & Streaming Ltd. (“Metalla”) for total consideration of $13.0 million, including a $6.7 million convertible debenture. The convertible debenture matures June 30, 2027, bears interest at a rate of 5% payable semi-annually, and is convertible into Metalla shares in connection with future equity financings or asset acquisitions by Metalla at the then-current price to maintain the Company’s approximate 19.9% ownership. The fair value of the convertible debenture is estimated based on observable market data including yield curves and credit spreads. Therefore, the Company classifies the convertible debenture in Level 3 of the fair value hierarchy.

No assets or liabilities were transferred between fair value levels in the nine months ended September 30, 2017.

The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the nine months ended September 30, 2017:



	Three Months Ended September 30, 2017
In thousands	Balance at the beginning of the period		Additions		Revaluation			Settlements		Balance at the end of the period
Assets:
Equity and debt securities	$	258	$	6,677	$	(4	)	$	—	$	6,931



	Nine Months Ended September 30, 2017
In thousands	Balance at the beginning of the period		Additions		Revaluation			Settlements			Gain on settlement			Balance at the end of the period
Assets:
Equity and debt securities	$	279	$	6,677	$	(25	)	$	—		$	—		$	6,931
Liabilities:
Rochester royalty obligation	$	9,287	—		$	864		$	(7,819	)	(2,332		)	$	—

The fair value of financial assets and liabilities carried at book value in the financial statements at September 30, 2017 and December 31, 2016 is presented in the following table:



	September 30, 2017
In thousands	Book Value		Fair Value		Level 1		Level 2		Level 3
Liabilities:
5.875% Senior Notes due 2024⁽¹⁾	$	244,934	$	247,161	$	—	$	247,161	$	—


(1)	Net of unamortized debt issuance costs of $5.1 million.



	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 value of the 5.875% Senior Notes due 2024 (the “2024 Senior Notes”) and the 7.875% Senior Notes due 2021 (the “2021 Senior Notes”) were estimated using quoted market prices.