Note 3 - Business Segments, Sales of Products and Significant Customers

12 Months Ended

Dec. 31, 2022

Segment Reporting [Abstract]

Business Segments, Sales of Products and Significant Customers

Note 3: Business Segments, Sales of Products and Significant Customers

We discover, acquire and develop mines and other mineral interests and produce and market concentrates, containing silver, gold (in the case of Greens Creek), lead and zinc, (ii) carbon material containing silver and gold, and (iii) doré containing silver and gold. We are currently organized and managed in five reportable segments being: Greens Creek, Lucky Friday, Keno Hill, Casa Berardi and the Nevada Operations.

General corporate activities not associated with operating mines and their various exploration activities, as well as idle properties and San Sebastian, a former operating mine and reportable segment, and the acquired Alexco environmental remediation services, are

presented as “other.” Interest expense, interest income and income taxes are considered general corporate items, and are not allocated to our segments.

The tables below present information about our reportable segments as of and for the years ended December 31, 2022, 2021 and 2020 (in thousands).

	2022			2021			2020
Net sales to unaffiliated customers:
Greens Creek	$	335,062		$	384,843		$	327,820
Lucky Friday		147,814			131,488			63,025
Keno Hill		—			—			—
Casa Berardi		235,136			245,152			209,224
Nevada Operations		419			45,814			58,898
Other		474			176			32,906
Total sales to unaffiliated customers	$	718,905		$	807,473		$	691,873
Income (loss) from operations:
Greens Creek	$	87,297		$	164,666		$	114,607
Lucky Friday		27,636			31,683			(1,711	)
Keno Hill		(4,249	)		—			—
Casa Berardi		(21,799	)		5,807			10,379
Nevada Operations		(38,134	)		(46,115	)		(6,674	)
Other		(63,189	)		(72,621	)		(49,623	)
Total (loss) income from operations	$	(12,438	)	$	83,420		$	66,978
Capital additions (excluding non-cash items):
Greens Creek	$	36,898		$	23,883		$	19,685
Lucky Friday		50,992			29,885			25,776
Keno Hill		19,725			—			—
Casa Berardi		39,667			49,617			40,840
Nevada Operations		333			5,470			4,003
Other		1,763			193			712
Total capital additions	$	149,378		$	109,048		$	91,016

Depreciation, depletion and amortization:
Greens Creek	$	48,911		$	48,710			49,692
Lucky Friday		33,704			26,846			11,473
Keno Hill		—			—			—
Casa Berardi		60,962			80,744			60,552
Nevada Operations		361			15,341			22,845
Other		—			152			3,548
Total depreciation, depletion and amortization	$	143,938		$	171,793		$	148,110
Other significant non-cash items:
Greens Creek	$	2,821		$	3,653		$	3,103
Lucky Friday		1,138			1,048			881
Keno Hill		1,669			—			—
Casa Berardi		1,520			1,284			(1,741	)
Nevada Operations		4,384			7,740			2,039
Other		(816	)		(20,030	)		8,569
Total other significant non-cash items	$	10,716		$	(6,305	)	$	12,851
Identifiable assets:
Greens Creek	$	582,687		$	589,944		$	610,360
Lucky Friday		571,510			516,545			520,463
Keno Hill		276,096			—			—
Casa Berardi		681,631			701,868			727,008
Nevada Operations		466,722			468,985			513,309
Other		348,526			451,466			329,070
Total identifiable assets	$	2,927,172		$	2,728,808		$	2,700,210

The following are our long-lived assets by geographic area as of December 31, 2022 and 2021 (in thousands):

	2022		2021
United States	$	1,670,676	$	1,662,689
Canada		891,375		640,367
Mexico		7,739		7,754
Total long-lived assets	$	2,569,790	$	2,310,810

Following the acquisition of Alexco (see Note 1), our sales for 2022 are comprised of metal sales as described below and $474,000 of environmental services revenue.

Our products consist of metal concentrates and carbon material, which we sell to custom smelters, metal traders and third-party processors, and unrefined bullion bars (doré), which may be sold as doré or further refined before sale to precious metal traders. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer.

For sales of metals from refined doré, which we currently have at Casa Berardi, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner. Refining, selling and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred.

For sales of carbon materials, transfer of control takes place, the performance obligation is met, the transaction price is known, and revenue is recognized generally at the time of arrival at the customer's facility.

For concentrate sales, which we currently have at Greens Creek and Lucky Friday, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment. Concentrates sold at Lucky Friday typically leave the mine and are received by the customer within the same day. However, there is a period of time between shipment of concentrates from Greens Creek and their physical receipt by the customer, and judgment is required in determining when control has been transferred to the customer and the performance obligation has been met for those shipments. We have determined control is met, title is transferred and the performance obligation is met upon shipment of concentrate parcels from Greens Creek because, at that time, 1) legal title is transferred to the customer, 2) the customer has accepted the parcel and obtained the ability to realize all of the benefits from the product, 3) the concentrate content specifications are known, have been communicated to the customer, and the customer has the significant risks and rewards of ownership of it, 4) it is very unlikely a concentrate parcel from Greens Creek will be rejected by a customer upon physical receipt, and 5) we have the right to payment for the parcel.

Judgment is also required in identifying our concentrate sales performance obligations. Most of our concentrate sales involve “frame contracts” with smelters that can cover multiple years and specify certain terms under which individual parcels of concentrates are sold. However, some terms are not specified in the frame contracts and/or can be renegotiated as part of annual amendments to the frame contract. We have determined parcel shipments represent individual performance obligations satisfied at the point in time when control of the shipment is transferred to the customer.

The consideration we receive for our concentrate sales fluctuates due to changes in metals prices between the time of shipment and final settlement with the customer. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement with the customer. Also, it is unlikely a significant reversal of revenue for any one concentrate parcel will occur. As such, we use the expected value method to price the parcels until the final settlement date occurs, at which time the final transaction price is known. At December 31, 2022, metals contained in concentrate sales and exposed to future price changes totaled 3.1 million ounces of silver, 7,580 ounces of gold, 18.6 million pounds of zinc, and 12 million pounds of lead. However, as discussed in Note 9, we seek to mitigate the risk of price adjustments by using financially-settled forward contracts for some of our sales.

Sales and accounts receivable for concentrate shipments are recorded net of charges for treatment, refining, smelting losses, and other charges negotiated by us with the customers, which represent components of the transaction price. Charges are estimated by us upon shipment of concentrates based on contractual terms, and actual charges typically do not vary materially from our estimates. Costs charged by customers include fixed treatment and refining costs per ton of concentrate and may include price escalators which allow the customers to participate in the increase of lead and zinc prices above a negotiated baseline. Costs for shipping concentrates to customers are recorded to cost of sales as incurred.

Sales of metal concentrates and metal products are made principally to custom smelters, third-party processors and metal traders. The percentage of sales contributed by each segment is reflected in the following table:

	Year Ended December 31,
	2022			2021			2020
Greens Creek		46.6	%		47.6	%		47.4	%
Lucky Friday		20.6	%		16.3	%		9.1	%
Casa Berardi		32.7	%		30.4	%		30.2	%
Nevada Operations		0.1	%		5.7	%		8.5	%
Other		—			—			4.8	%
		100	%		100	%		100	%

Sales of metal for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands):

	Year Ended December 31,
	2022			2021			2020
Silver	$	265,054		$	293,646		$	260,227
Gold		298,910			362,037			356,166
Lead		83,384			75,431			48,776
Zinc		123,057			125,292			95,065
Less: Smelter and refining charges		(51,973	)		(48,933	)		(68,361	)
Sales of products	$	718,432		$	807,473		$	691,873

The following is sales information by geographic area based on the location of smelters and metal traders (for concentrate shipments) and the location of parent companies (for doré sales to metal traders) for the years ended December 31, 2022, 2021 and 2020 (in thousands):

	2022		2021		2020
United States	$	21,938	$	71,278	$	115,378
Canada		406,600		419,090		321,896
Japan		51,375		63,588		39,418
Netherlands		—		—		(923	)
Korea		107,828		203,115		166,402
China		136,514		50,945		66,082
Total, excluding gains/losses on forward contracts	$	724,255	$	808,016	$	708,253

Sales by significant product type for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands):

	Year Ended December 31,
	2022		2021		2020
Doré and metals from doré	$	255,608	$	313,337	$	266,536
Carbon		2,607		4,117		60,302
Silver concentrate		329,165		345,732		281,050
Zinc concentrate		109,177		112,448		76,481
Precious metals concentrate		27,698		32,382		23,884
Total, excluding gains/losses on forward contracts	$	724,255	$	808,016	$	708,253

Sales of products for 2022, 2021 and 2020 included net losses of $5.8 million, $0.5 million, and $16.4 million, respectively, on derivative contracts for silver, gold, lead and zinc contained in our sales. See Note 9 for more information.

Sales from continuing operations to significant metals customers as a percentage of total sales were as follows for the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31,
	2022			2021			2020
Customer A		35.4	%		37.2	%		32.7	%
Customer B		23.9	%		21.5	%		16.1	%
Customer C		11.3	%		21.6	%		13.3	%
Customer D		3.5	%		6.2	%		13.9	%

Our trade accounts receivable balance related to contracts with customers was $45.1 million and $36.4 million at December 31, 2022 and 2021, respectively, and included no allowance for doubtful accounts.

We have determined our contracts do not include a significant financing component. For doré sales and sales of metal from doré, payment is received at the time the performance obligation is satisfied. Payment for carbon sales is received within a relatively short period of time after the performance obligation is satisfied. The amount of consideration for concentrate sales is variable, and we receive payment for a significant portion of the estimated value of concentrate parcels within a relatively short period of time after the performance obligation is satisfied.

We do not incur significant costs to obtain contracts, nor costs to fulfill contracts which are not addressed by other accounting standards. Therefore, we have not recognized an asset for such costs as of December 31, 2022 and 2021.