The Company is exposed to various market risks, including the effect of changes in metal prices, foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes.

The Company may elect to designate certain derivatives as hedging instruments under U.S. GAAP. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives designated as hedges to either recognized assets or liabilities or forecasted transactions and assessing, both at inception and on an ongoing basis, the effectiveness of the hedging relationships.

The Company enters into sales contracts with third-party smelters, refiners and off-take customers which, in some 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.


In thousands except average prices and notional ounces	2020		Thereafter




















Provisional gold sales contracts	$	16,396	$	—
Average gold price per ounce	$	1,928	$	—
Notional ounces	8,504		—


	September 30, 2020
In thousands	Prepaid expenses and other		Accrued liabilities and other

Provisional metal sales contracts	$	3	$	299


	December 31, 2019
In thousands	Prepaid expenses and other		Accrued liabilities and other
Provisional metal sales contracts	$	753	$	275

The following represent mark-to-market gains (losses) on derivative instruments in the three and nine months ended September 30, 2020 and 2019, respectively (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
Financial statement line	Derivative	2020		2019		2020		2019
Revenue	Provisional metal sales contracts	$	(962)	$	233	$	250	$	(1,461)

Fair value adjustments, net	Interest rate swaps	—		15		—		(173)
		$	(962)	$	248	$	250	$	(1,634)

To protect the Company’s exposure to fluctuations in metal prices the Company entered into Asian (or average value) put and call option contracts in net-zero-cost collar arrangements. The contracts are net cash settled monthly and, if the price of gold at the time of expiration is between the put and call prices, would expire at no cost to the Company. If the price of gold at the time of expiration is lower than the put prices or higher than the call prices, it would result in a realized gain or loss, respectively. The Company has elected to designate these instruments as cash flow hedges of forecasted transactions at their inception.

To protect the Company’s exposure to fluctuations in foreign currency exchange rates for subsidiaries whose functional currency is U.S dollar and are exposed to forecasted transaction denominated in the Mexican Peso and the Canadian Dollar, in March 2020, the Company entered into foreign currency forward exchange contracts to manage this risk and designated these instruments as cash flow hedges of forecasted foreign denominated transactions.


In thousands except average prices and notional ounces	2020		2021 and Thereafter
Gold put options
Average gold strike price per ounce	$	1,471	$	1,612
Notional ounces	55,500		284,700

Gold call options
Average gold strike price per ounce	$	1,823	$	1,943
Notional ounces	55,500		284,700

Foreign currency forward exchange contracts - Mexican Peso
Average Mexican Peso exchange rate	$	24.35	$	25.00
Notional US dollar	15,000		60,000

Foreign exchange forward exchange contracts - Canadian Dollar
Average Canadian Dollar exchange rate	$	1.44	—
Notional US dollar	7,500		$	—

The effective portions of cash flow hedges are recorded in accumulated other comprehensive income (loss) (“AOCI”) until the hedged item is recognized in earnings. Deferred gains and losses associated with cash flow hedges of metal sales revenue are recognized as a component of net sales in the same period as the related revenue is recognized. Deferred gains and losses associated with cash flow hedges of foreign currency transactions are recognized as a component of costs applicable to sales in the same period the related expenses are incurred.

As of September 30, 2020, the Company had $26.3 million of net after-tax loss in AOCI related to losses from cash flow hedge transactions, of which $13.8 million of net after-tax losses is expected to be recognized in its Condensed Consolidated Statement of Comprehensive Income (Loss) during the next 12 months. Actual amounts ultimately reclassified to net income are dependent on the price of gold for metal contracts and the Canadian and Mexican exchange rates for foreign currency contracts.


	September 30, 2020
In thousands	Prepaid expenses and other		Accrued liabilities and other
Gold zero cost collars	$	—	$	33,926
Foreign currency forward exchange contracts	7,614		—
	$	7,614	$	33,926

The following table sets forth the pre-tax gains (losses) on derivatives designated as cash flow hedges that have been included in Accumulated Other Comprehensive Income (“AOCI”) and the Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019, respectively (in thousands).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Amount of Gain (Loss) Recognized in AOCI
Gold zero cost collars	$	(24,003)	$	—	$	(38,353)	$	—
Foreign currency forward exchange contracts	2,755		—		10,214		—
	$	(21,248)	$	—	$	(28,139)	$	—

Amount of (Gain) Loss Reclassified From AOCI to Earnings
Gold zero cost collars	$	4,563	$	—	$	4,563	$	—
Foreign currency forward exchange contracts	(1,921)		—		(2,600)		—
	$	2,642	$	—	$	1,963	$	—

On August 10, 2020, in order to obtain more working capital flexibility, the Company novated certain of its gold zero cost collar option contracts to a different counterparty. Other than a change in counterparty and the credit support provided under the agreements with the old and new counterparties, the novation did not result in any changes to the critical terms of the applicable option contracts, nor was there a change in creditworthiness in relation to the new counterparty. To execute the novation, the Company was required to make an upfront payment of $3.8 million, as compensation for more favorable credit and margin requirements.