Item 1A - Risk Factors of the 2019 10-K sets forth information relating to important risks and uncertainties that could materially adversely affect the Company’s business, financial condition or operating results.
−Removed: Those risk factors have been supplemented and updated in the Form 10-Q filed for the quarterly period ended March 31, 2020 (the “First Quarter 10-Q”) and in this Form 10-Q.
−Removed: Except as supplemented and updated below and in the First Quarter 10-Q, the risk factors set forth in the 2019 10-K remain current.
+Added: Those risk factors have been supplemented and updated in the Forms 10-Q filed for the quarterly period ended March 31, 2020 (the “First Quarter 10-Q”) and the quarterly period ended June 30, 2020 (the “Second Quarter 10-Q”) and in this Form 10-Q.
+Added: Except as supplemented and updated below and in the First Quarter 10-Q and the Second Quarter 10-Q, the risk factors set forth in the 2019 10-K remain current.
Additional risks and uncertainties that the Company does not presently know or that it currently deems immaterial also may impair our business operations.
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In addition, we have implemented several initiatives to protect the health and safety of our employees, contractors and communities during this pandemic, including COVID-19 testing, contact tracing technology and procuring additional personal protective equipment for our employees, among others, some of which may result in additional costs to the Company.
+Added: For example, we continue to require all employees who travel to the Kensington mine to submit to a 7-day quarantine and testing protocol in Juneau, Alaska before traveling to the mine.
+Added: We believe this is an important step to protect the health and safety of all workers who stay at the Kensington camp, although it has required changes to worker scheduling and is expected to result in higher labor costs due to additional overtime pay and pay during the quarantine period.
Illnesses or government restrictions, including the closure of national borders, related to COVID-19 also may disrupt the supply of raw goods, equipment, supplies and services upon which our operations rely.
We also continue to monitor legislative initiatives in the U.S., Mexico and Canada to provide relief to businesses impacted by COVID-19 to determine their potential impacts or benefits (if any) to our business.
−Removed: Early in the second quarter of 2020, we temporarily suspended active mining and processing activities at the Palmarejo complex in the State of Chihuahua, Mexico, in accordance with a government-mandated decree in response to COVID-19, and we began taking steps to restart active mining, processing and exploration activities at Palmarejo in accordance with updated guidance from the government approximately 45 days later.
−Removed: In addition, we are requiring all employees who travel to the Kensington mine to submit to a 7-day quarantine and testing protocol in Juneau, Alaska before traveling to the mine.
−Removed: We believe this is an important step to protect the health and safety of all workers who stay at the Kensington camp, although it has required changes to worker scheduling and is expected to result in higher labor costs due to additional overtime pay and pay during the quarantine period.
+Added: Early in the second quarter of 2020, we temporarily suspended active mining and processing activities at the Palmarejo complex in the State of Chihuahua, Mexico, in accordance with a government decree in response to COVID-19, and we began taking steps to restart active mining, processing and exploration activities at Palmarejo in accordance with updated guidance from the government approximately 45 days later.
+Added: In addition, as a result of several reported positive COVID-19 cases at our Kensington mine outside of Juneau, Alaska, during the third quarter of 2020, we experienced a minor short-term production impact associated with this situation, which adversely impacted cash flows, financial condition and results of operations.
The refiners and smelters upon which the Company relies to refine and process and, in some cases, purchase the gold and silver doré and gold, silver, zinc and lead concentrate produced by the Company’s mines, are also subject to these risks and may be required to reduce or suspend operations, which could impact the Company’s ability to sell its products to buyers and generate revenues.
−Removed: For example, on March 23, 2020, Argor-Heraeus, a Swiss refiner which provides refining services to several of our mines, announced that it was temporarily suspending operations in response to a government order.
+Added: For example, in the first quarter of 2020, Argor-Heraeus, a Swiss refiner which provides refining services to several of our mines, announced that it was temporarily suspending operations in response to a government order.
Following the temporary suspension, Argor-Heraeus recommenced operations.
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We understand that, as indicated by sharp increases in average premiums for director and officer insurance policies in recent months, insurers expect increased litigation relating to COVID-19.
−Removed: To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section and those set forth under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019, such as those relating to our operation and indebtedness and financing.
+Added: To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section and those set forth under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A of Part II of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, such as those relating to
+Added: our operation and indebtedness and financing.
Because of the highly uncertain and dynamic nature of events relating to the COVID-19 pandemic, it is not currently possible to estimate the impact of the pandemic on our business.
However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 situation closely.
−Removed: The Company is dependent upon information technology systems, which are subject to cybersecurity incidents, disruption, damage, failure and risks associated with implementation and integration.
−Removed: The Company’s information technology systems used in its operations are subject to disruption, damage or failure from a variety of sources, including, without limitation, computer viruses, security breaches, cyberattacks, natural disasters and defects in design.
−Removed: Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data or machines and equipment, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information, the corruption of data or the disabling, misuse or malfunction of machines and equipment.
−Removed: Various measures have been implemented to manage the Company’s risks related to information technology systems and network disruptions.
−Removed: However, given the unpredictability of the timing, nature and scope of information or operational technology disruptions, the Company could potentially be subject to production downtimes, operational delays, operating accidents, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on cash flows, financial condition or results of operations.
−Removed: The Company faces increased cybersecurity risks due to the COVID-19 pandemic.
−Removed: For example, a portion of the Company’s workforce is working remotely to facilitate social distancing, and these employees may transmit data using unsecured internet connections despite training advising of those risks.
−Removed: In addition, our employees have faced increases in phishing and malware attacks and socially engineered cyberattacks which, in some cases, attempt to use the circumstances of the COVID-19 pandemic to gain unauthorized access to the Company’s information technology systems.
−Removed: The Company could also be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into operations.
−Removed: Various measures have been implemented to manage the risks related to the system implementation and modification, but system modification failures could have a material adverse effect on the Company’s business, financial position and results of operations.
−Removed: There are significant hazards associated with mining activities, some of which may not be fully covered by insurance.
−Removed: The mining business is subject to risks and hazards, including environmental hazards, industrial accidents, the encountering of unusual or unexpected geological formations, cave-ins, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions or machine failure, such as the failure of the secondary crusher in Rochester’s new crushing circuit in 2019, which impacted crushing rates.
−Removed: These occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, reduced production and delays in mining, asset write-downs, monetary losses and possible legal liability.
−Removed: We maintain insurance policies that protect against property loss and business interruption in amounts that we believe are reasonable taking into account the nature of, and risks related to, our business and operations as well as the cost of policy premiums.
−Removed: Such insurance is, however, subject to certain exclusions, and there is no guarantee that the Company will receive insurance proceeds with respect to a particular event or loss.
−Removed: Insurance fully covering many environmental risks, including potential liability for pollution or other hazards as a result of disposal of waste products occurring from exploration and production, is not generally available.
−Removed: Any liabilities that the Company incurs for these risks and hazards could be significant and could adversely affect results of operations, cash flows and financial condition.
−Removed: The Company’s use of derivative contracts to protect against market price volatility exposes it to risk of opportunity loss, mark- to-market fair value adjustments, potential cash collateral calls and exposure to counterparty credit risk.
−Removed: From time-to-time, the Company has in the past and in the future may enter into price risk management contracts to protect against fluctuations in the price of gold, silver, zinc and lead, foreign currency rates and changes in the prices of fuel and other input costs.
−Removed: These contracts could include forward sales or purchase contracts, futures contracts, purchased or sold put and call options and other derivative instruments.
−Removed: In 2019 and through July 24, 2020, the Company entered into price risk management contracts on a total of 477,700 ounces of its expected gold production for 2020, 2021 and 2022 after a significant increase in gold prices during 2019 and into the first half of 2020.
−Removed: The Company determined to implement these contracts to provide for a minimum level of revenue from the sales of the covered gold ounces in order to mitigate the risk of not being able to fund all or a portion of the costs of several projects at existing operations.
−Removed: As of June 30, 2020, contracts with respect to 307,800 ounces of gold were outstanding.
−Removed: See Note 13 — Derivative Financial Instruments in the notes to the Condensed Consolidated Financial Statements.
−Removed: The use of derivative instruments can expose the Company to risk of an opportunity loss and may also result in significant mark-to-market fair value adjustments, which may require the Company to post cash or other collateral or have a material adverse impact on reported financial results.
−Removed: The Company’s exposure may be particularly acute for its derivative instruments accounted for as cash flow hedges, because those contracts are cash net settled on a monthly basis.
−Removed: The ceiling on
−Removed: the gold ounces covered by the price risk management contracts described above, representing the highest price the Company could realize for those ounces under outstanding contracts, averages $1,825 per ounce for 2020 production, $1,875 per ounce for 2021 production and $2,030 per ounce for 2022 production.
−Removed: The price ceiling may be lower than actual spot gold prices at the time of sale under those contracts.
−Removed: As of June 30, 2020, the closing price of gold was $1,768 per ounce.
−Removed: On July 29, 2020, the closing price of gold increased further to $1,951 per ounce.
−Removed: The Company is exposed to credit risk with contract counterparties, including, but not limited to, sales contracts and derivative contracts.
−Removed: In the event of nonperformance in connection with a contract, the Company could be exposed to a loss of value for that contract.
Mine Safety Disclosures
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.