Note 11 - Derivative Instruments

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 11.    Derivative Instruments

At times, we may 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 are currently using financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments between the time of shipment 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 do not qualify for hedge accounting and are marked-to-market through earnings each period.  At June 30, 2014, we recorded the following balances related to these contracts:

• a current asset of $0.9 million which is included in other current assets and is net of $0.4 million in contracts in a fair value liability position;

• a non-current asset of $0.1 million which included in other non-current assets and is net of $1 thousand in contracts in a fair value liability position;

• a current liability of $1.2 million which is included in other current liabilities and is net of $1.9 million in contracts in a fair value asset position; and

• a non-current liability of $1.5 million which is included in other non-current liabilities and is net of $2.4 million in contracts in a fair value asset position.

We recognized a $3.5 million net loss during the first six months of 2014 on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which is included in sales of products.  The net loss recognized on the contracts offsets gains related to price adjustments on our provisional concentrate sales due to changes to silver, gold, lead and zinc prices between the time of sale and final settlement.

We recognized a $2.1 million net loss during the first six months of 2014 on the contracts utilized to manage exposure to prices for forecasted future concentrate shipments, which is net of $2.0 million in gains realized on settled contracts. The net loss 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 as discussed in the preceding paragraph.  The net loss during the first six months of 2014 is the result of increasing zinc and lead prices. This program is designed 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 metals committed under forward sales contracts at June 30, 2014 and December 31, 2013:

June 30, 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		786		4		12,236		6,449	$	18.90	$	1,263	$	0.95	$	0.95
Contracts on forecasted sales
2014 settlements		—		—		19,566		14,330	N/A		N/A		$	1.01	$	1.09
2015 settlements		—		—		49,604		40,179	N/A		N/A		$	0.96	$	1.07
2016 settlements		—		—		32,022		32,132	N/A		N/A		$	0.97	$	1.03
2017 settlements		—		—		661		—	N/A		N/A		$	0.99	N/A

December 31, 2013	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		$	0.93	$	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 relates to the change in price between sale and settlement, does not qualify for hedge accounting; therefore, it is adjusted to market through earnings each period prior to final settlement.