Note 11 - Derivative Instruments

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 11.    Derivative Instruments

At times, we use commodity forward sales commitments, commodity swap contracts and commodity put and call option contracts to manage our exposure to fluctuation in the prices of certain metals which we produce. Contract positions are designed to ensure that we will receive a defined minimum price for certain quantities of our production, thereby partially offsetting our exposure to fluctuations in the market. These instruments do, however, expose us to (i) credit risk in the event of non-performance by counterparties for contracts in which the contract price exceeds the spot price of a commodity and (ii) price risk to the extent that the spot price exceeds the contract price for quantities of our production contained under contract positions.

We use financially-settled forward contracts to manage the exposure to changes in metal prices of silver, gold, zinc and lead contained in our doré and concentrate shipments between the time of sale and final settlement. These contracts do not qualify for hedge accounting and are marked-to-market through earnings each period.  At March 31, 2014, we recorded a current asset of $0.9 million, net of approximately $0.4 million of contracts in a liability position, which is included in other current assets, for the fair value of the contracts.  We recognized a $19 thousand net gain on the contracts during the first three months of 2014, which is included in sales of products.  The net gain recognized on the contracts offsets price adjustments on our provisional concentrate sales related to changes to lead and zinc prices between the time of sale and final settlement.

In addition, we use financially-settled forward contracts to manage the exposure to changes in prices of zinc and lead (but not silver and gold) contained in our forecasted future concentrate shipments.  These contracts also do not qualify for hedge accounting and are marked-to-market through earnings each period.  At March 31, 2014, we recorded a current asset of $5.0 million, which is included in other current assets, and a non-current asset of $7.4 million, which is included in other non-current assets, for the fair value of the contracts.  The non-current asset balance is net of approximately $0.2 million for contracts that were in a fair value liability position at March 31, 2014. We recognized a $9.5 million net gain on the contracts, which includes $2.0 million in gains realized on settled contracts, during the first three months of 2014. The net gain on these contracts is included as a separate line item under other income (expense), as they relate to forecasted future shipments, as opposed to sales that have already taken place but are subject to final pricing.  The gains recognized during the first three months of 2014 are the result of decreasing lead and zinc prices during the quarter and contacts with settlement prices that are higher than spot prices.  This program is designed and intended to mitigate the impact of potential future declines in lead and zinc prices from the price levels established in the contracts (see average price information below).

The following tables summarize the quantities of base metals committed under forward sales contracts at March 31, 2014 and December 31, 2013:

March 31, 2014	Ounces/pounds under contract (in 000's)								Average price per ounce/pound
	Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead
	(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)
Contracts on provisional sales
2014 settlements		1,590		7		29,817		9,755	$	20.15	$	1,304	$	0.91	$	0.95
Contracts on forecasted sales
2014 settlements		—		—		29,652		21,054	N/A		N/A		$	0.99	$	1.05
2015 settlements		—		—		45,635		40,179	N/A		N/A		$	0.96	$	1.07
2016 settlements		—		—		9,094		31,030	N/A		N/A		$	0.94	$	1.03

	Ounces/pounds under contract (in 000's)								Average price per ounce/pound
	Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead
	(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)
Contracts on provisional sales
2014 settlements		673		3		11,188		3,472	$	19.50	$	1,205	$	0.89	$	1.00
Contracts on forecasted sales
2014 settlements		—		—		31,967		34,282	N/A		N/A		$	1.00	$	1.04
2015 settlements		—		—		39,683		36,982	N/A		N/A		$	0.96	$	1.07
2016 settlements		—		—		3,803		30,589	N/A		N/A		$	0.96	$	1.03

Our concentrate sales are based on a provisional sales price containing an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the concentrates at the forward price at the time of the sale. The embedded derivative, which does not qualify for hedge accounting, is adjusted to market through earnings each period prior to final settlement.