FAIR VALUE MEASUREMENTS



	Three months ended June 30,					Six months ended June 30,
In thousands	2018			2017		2018			2017
Rochester royalty obligation	$	—		$	336	$	—		$	(864	)
Interest rate swap	(188		)	—		(188		)	—
Unrealized gain (loss) on equity securities	(8,028		)	—		(3,185		)	—
Realized gain (loss) on equity securities	5,535			—		5,202			—
Zinc options	219			—		363			—
Fair value adjustments, net	$	(2,462	)	$	336	$	2,192		$	(864	)

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 June 30, 2018
In thousands	Total		Level 1		Level 2		Level 3
Assets:
Equity and debt securities	$	23,804	$	17,577	$	—	$	6,227
Other derivative instruments, net	486		—		486		—
	$	24,290	$	17,577	$	486	$	6,227
Liabilities:
Silvertip contingent consideration	$	48,616	$	—	$	—	$	48,616
Other derivative instruments, net	302		—		302		—
	$	48,918	$	—	$	302	$	48,616



	Fair Value at December 31, 2017
In thousands	Total		Level 1		Level 2		Level 3
Assets:
Equity and debt securities	$	34,837	$	27,946	$	—	$	6,891
Other derivative instruments, net	251		—		251		—
	$	35,088	$	27,946	$	251	$	6,891
Liabilities:
Silvertip contingent consideration	$	47,965	$	—	$	—	$	47,965
Other derivative instruments, net	222		—		222		—
	$	48,187	$	—	$	222	$	47,965

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 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, include concentrate and certain doré sales contracts, zinc hedges, and interest rate swap which are valued using pricing models with inputs 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 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 and unobservable data including yield curves and credit spreads. Therefore, the Company classifies the convertible debenture in Level 3 of the fair value hierarchy.

In October 2017, the Company acquired the Silvertip mine from shareholders of JDS Silver Holdings Ltd. The consideration for the Silvertip mine includes two $25.0 million contingent payments, which are payable in cash and common stock upon reaching a future permitting milestone in 2018 and resource declaration milestone in 2019, respectively. The fair value of the Silvertip contingent consideration is estimated based on an estimated discount rate of 2.5% for the contingent permitting payment and 2.9% for the contingent resource declaration payment and is classified within Level 3 of the fair value hierarchy.

No assets or liabilities were transferred between fair value levels in the six months ended June 30, 2018.

The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the three and six months ended June 30, 2018:



	Three Months Ended June 30, 2018
In thousands	Balance at the beginning of the period		Revaluation			Settlements		Accretion		Balance at the end of the period
Assets:
Equity and debt securities	$	6,314	$	(87	)	$	—	$	—	$	6,227
Liabilities:
Silvertip contingent consideration	$	48,289	$	—		$	—	$	327	$	48,616



	Six Months Ended June 30, 2018
In thousands	Balance at the beginning of the period		Revaluation			Settlements			Accretion		Balance at the end of the period
Assets:
Equity and debt securities	$	6,891	$	(365	)	$	(299	)	$	—	$	6,227
Liabilities:
Silvertip contingent consideration	$	47,965	$	—		$	—		$	651	$	48,616

The fair value of financial assets and liabilities carried at book value in the financial statements at June 30, 2018 and December 31, 2017 is presented in the following table:



	June 30, 2018
In thousands	Book Value		Fair Value		Level 1		Level 2		Level 3
Assets:
Manquiri Notes Receivable	$	40,315	$	40,157	$	—	$	—	$	40,157
Liabilities:
5.875% Senior Notes due 2024⁽¹⁾	$	245,471	$	238,019	$	—	$	238,019	$	—
Revolving Credit Facility⁽²⁾	$	115,000	$	115,000	$	—	$	115,000	$	—

⁽¹⁾Net of unamortized debt issuance costs of $4.5 million.

⁽²⁾Unamortized debt issuance costs of $1.7 million included in Other Non-Current Assets.



	December 31, 2017
In thousands	Book Value		Fair Value		Level 1		Level 2		Level 3
Liabilities:
5.875% Senior Notes due 2024⁽¹⁾	$	245,088	$	243,913	$	—	$	243,913	$	—
Revolving Credit Facility⁽²⁾	$	100,000	$	100,000	$	—	$	100,000	$	—

⁽¹⁾Net of unamortized debt issuance costs of $4.9 million.

⁽²⁾Unamortized debt issuance costs of $1.9 million included in Other Non-Current Assets.

The fair value of the Manquiri Notes Receivable is estimated based on observable and unobservable data including yield curves and credit spreads, therefore, the Company classifies the Manquiri Notes Receivable in Level 3 of the fair value hierarchy; see Note 21 -- Discontinued Operations for additional detail. The fair value of the 5.875% Senior Notes due 2024 (the “2024 Senior Notes”) was estimated using quoted market prices. The fair value of the Revolving Credit Facility approximates book value as the liability is secured, has a variable interest rate, and lacks significant credit concerns.