v3.26.3
Note 8 - Derivative Instruments
 9 Months Ended
Sep. 30, 2026
Disclosure Text Block [Abstract]  
Derivative Instruments

Note 8. Derivative Instruments

 

General

 

Our current risk management policy provides that up to 75% of the next five years of our foreign currency, lead and zinc metals prices and silver and gold price exposure may be covered under a derivatives program with certain other limitations. Within this five year period our policy also allows us to hedge up to 100% of a specific exposure, provided the structure of the derivative instrument allows us to participate 100% in the upside. Our program also utilizes derivatives to manage price risk exposure created from the date when revenue is recognized from a shipment of concentrate until final settlement.

 

These instruments expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price exceeds the spot price of the hedged commodity or foreign currency and (ii) price risk to the extent that the spot price or

currency exchange rate exceeds the contract price for quantities of our production and/or forecasted costs covered under contract positions.

 

Foreign Currency

 

Our wholly-owned non-US subsidiaries owning the Keno Hill operation are USD-functional currency entities which routinely incur Canadian dollar ("CAD") denominated expenses. Such expenses expose us to exchange rate fluctuations, for which we have a program to manage our exposure to fluctuations of these subsidiaries' future CAD denominated operating and capital costs. The program utilizes forward contracts to buy CAD, which are not designated as cash flow hedges.

 

During the nine months ended September 30, 2026, realized losses of $0.9 million related to derivatives designated to our previously held Casa Berardi operation were transferred from accumulated other comprehensive (loss) into discontinued operations (three and nine months ended September 30, 2025: $0.7 million loss and $3.5 million loss, respectively).

 

As of September 30, 2026, we have a total of 143 forward contracts outstanding to buy a total of CAD $123.8 million having a notional amount of USD $89.0 million to provide economic hedges to the following exposures in 2026 and 2027:

•
Forecasted cash operating expenditures at Keno Hill of CAD $80.1 million at an average CAD-to-USD exchange rate of 1.3915.
•
Forecasted capital expenditures at Keno Hill of CAD $35.3 million at an average CAD-to-USD exchange rate of 1.3895.
•
Forecasted exploration expenditures at Keno Hill of CAD $4.9 million at an average CAD-to-USD exchange rate of 1.3903.
•
Forecasted Corporate expenditures of CAD $3.5 million at an average CAD-to-USD exchange rate of 1.3900.

 

As of September 30, 2026 and December 31, 2025, we recorded the following balances for the fair value of the forward contracts (in millions):

 

 

 

September 30,

 

 

December 31,

 

Balance sheet line item:

 

2026

 

 

2025

 

Other current assets

 

$

0.2

 

 

$

1.1

 

Other current liabilities

 

 

(1.2

)

 

 

(0.8

)

For the three and nine months ended September 30, 2026, a net gain of $0.1 million and a net loss of $2.6 million, respectively, (2025: net loss of $2.0 million and $3.5 million gain), were recognized.

 

Metals Prices

 

We currently utilize a combination of derivatives including financially settled forward contracts, commodity price collars, and commodity price put options 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; and
•
changes in prices of zinc, lead, and silver contained in our forecasted future concentrate shipments.

 

The following tables summarize the quantities of metals committed under forward metals contracts at September 30, 2026 and December 31, 2025 which are designated and accounted for as cash flow hedges:

 

September 30, 2026

 

Pounds under contract (in 000's)

 

 

Average price per pound

 

 

 

Zinc

 

 

Lead

 

 

Zinc

 

 

Lead

 

 

 

(pounds)

 

 

(pounds)

 

 

(pounds)

 

 

(pounds)

 

Contracts on provisional sales

 

 

 

 

 

 

 

 

 

 

 

 

2026 settlements

 

 

20,448

 

 

 

6,504

 

 

$

1.36

 

 

$

0.97

 

2027 settlements

 

 

2,425

 

 

 

—

 

 

$

1.36

 

 

$

—

 

Contracts on forecasted sales

 

 

 

 

 

 

 

 

 

 

 

 

2026 settlements

 

 

—

 

 

 

2,315

 

 

$

—

 

 

$

0.99

 

2027 settlements

 

 

50,816

 

 

 

—

 

 

$

1.42

 

 

$

—

 

2028 settlements

 

 

44,974

 

 

 

—

 

 

$

1.54

 

 

$

—

 

 

December 31, 2025

 

Pounds under contract (in 000's)

 

 

Average price per pound

 

 

 

Zinc

 

 

Lead

 

 

Zinc

 

 

Lead

 

 

 

(pounds)

 

 

(pounds)

 

 

(pounds)

 

 

(pounds)

 

Contracts on provisional sales

 

 

 

 

 

 

 

 

 

 

 

 

2026 settlements

 

 

18,850

 

 

 

13,117

 

 

$

1.37

 

 

$

1.05

 

Contracts on forecasted sales

 

 

 

 

 

 

 

 

 

 

 

 

2026 settlements

 

 

53,407

 

 

 

42,108

 

 

 

1.33

 

 

 

1.02

 

2027 settlements

 

 

23,810

 

 

 

—

 

 

 

1.36

 

 

N/A

 

 

We utilize Zero Cost Collars ("Collars") to manage our exposure to changes in the price of precious metals in our provisional concentrate sales shipments. These Collars provide us a contractual right to receive at least the minimum price if market prices fall below the minimum price level specified in the contracts, while limiting our potential gains to the maximum price level specified in the contracts, should market prices rise higher. Should the price at settlement date be within the Collars price range, the Collars expire unexercised and we receive the spot price on settlement date. This strategy helps protect us from significant price drops while still allowing for some upside participation within the minimum and maximum price range. For the three and nine months ended September 30, 2026, these Collars had net gains of $0.3 million and net losses of $9.5 million, respectively (three and nine months ended September 30, 2025: $6.3 million and $6.5 million loss, respectively). The collars are not designated as cash flow hedges.

 

The following table summarizes the quantities of silver and gold ounces committed under Collars at September 30, 2026.

 

Settlement Period

 

Ounces under contract

 

 

Average strike price per silver ounce

 

 

Average strike price per gold ounce

 

 

 

Silver (ounces)

 

 

Gold (ounces)

 

 

Minimum ($)

 

 

Maximum ($)

 

 

Minimum ($)

 

 

Maximum ($)

 

Contracts on provisional sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2026 settlements

 

 

295,000

 

 

 

120

 

 

 

61.67

 

 

 

72.70

 

 

 

4,200

 

 

 

4,600

 

 

In December 2025, we entered into financially-settled put option contracts to manage the exposure of future silver sales to potential declines in silver market prices. These put options give us the option, but not the obligation, to realize established prices on quantities of silver to be sold in the future. For the three and nine months ended September 30, 2026, we recognized net losses of $6.8 million and $14.4 million, respectively, on these puts. The following table summarizes the quantities of metals for which we have entered into put contracts and the strike price as of September 30, 2026:

 

Settlement Period

 

 

 

Production Protected (in 000's)

 

 

Strike price per ounce

 

 

 

 

 

Silver (ounces)

 

 

($)

 

Contracts on forecasted sales

 

 

 

 

 

 

 

 

2026 settlements

 

 

 

 

3,292

 

 

 

50.00

 

 

We recorded the following balances for the fair value of our metals price contracts as of September 30, 2026 and December 31, 2025 (in millions):

 

 

 

September 30,

 

 

December 31,

 

Balance sheet line item:

 

2026

 

 

2025

 

Other current assets

 

$

—

 

 

$

8.6

 

Other non-current assets

 

 

—

 

 

 

7.2

 

Other current liabilities

 

 

(13.7

)

 

 

(36.4

)

Other non-current liabilities

 

 

(8.7

)

 

 

(1.9

)

 

Net unrealized losses of $23.8 million related to the effective portion of the forward metals contracts designated as hedges were included in accumulated other comprehensive (loss) as of September 30, 2026. Unrealized gains and losses will be transferred from accumulated other comprehensive loss to current earnings as the underlying forecasted sales are recognized. We estimate $17.5 million in net unrealized losses included in accumulated other comprehensive loss as of September 30, 2026 will be reclassified to current earnings in the next twelve months.

 

During the three months ended September 30, 2026, we recognized a net loss of $13.2 million (2025: $14.0 million loss), including a $3.2 million loss transferred from accumulated other comprehensive loss (2025: $5.1 million gain). During the nine months ended September 30, 2026, we recognized a net loss of $13.5 million (2025: $16.0 million loss), including a $1.6 million loss transferred

from accumulated other comprehensive loss (2025: $10.8 million gain). These gains and losses were recognized on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which are included in sales.

The losses recognized on the contracts offset net gains of $6.2 million and $0.2 million (2025: $19.5 million and $31.8 million) for the three and nine months ended September 30, 2026, respectively, on 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.

 

Credit-risk-related Contingent Features

 

Certain of our derivative contracts contain cross-default provisions which provide that a default under our Credit Agreement would cause a default under the derivative contract. As of September 30, 2026, we have not posted any collateral related to these contracts. The fair value of derivatives in a net liability position related to these agreements was $27.9 million as of September 30, 2026, which includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at September 30, 2026, we could have been required to settle our obligations under the agreements at their termination value of $27.9 million.