UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
¨
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
x
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2020 |
For the fiscal year ended December 31, 2018
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report______________
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Date of event requiring this shell company report______________ | |
For the transition period from _______________ to ________________ |
Commission File Number 001-35254
AVINO SILVER & GOLD MINES LTD. |
(Exact name of Registrant as specified in its charter) |
Not Applicable
(Translation of Registrant’s name into English)
British Columbia, Canada
(Jurisdiction of incorporation or organization)
570 Granville Street, Suite 900 Vancouver, British Columbia V6C 3P1, Canada
(Address of principal executive offices)
David Wolfin, Chief Executive Officer 570
570 Granville Street, Suite 900 Vancouver, British Columbia V6C 3P1, Canada,
Tel: 604-682-3701, Email: dwolfin@avino.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Common Shares, without Par Value |
| ASM | NYSE American, LLC | |
Title of Each Class | Trading Symbol |
| Name of Each Exchange on Which Registered |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Not Applicable
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Not Applicable
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
There were 63,337,76989,568,682 common shares, without par value, issued and outstanding as of December 31, 2018.2020.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨☐ Yes x☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨☐ Yes x☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☒ Yes ¨☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x☒ Yes ¨☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer, “accelerated filer,” and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | Non-Accelerated Filer | ☒ | Emerging Growth Company | ☐ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP | International Financial Reporting Standards as issued | Other o |
by the International Accounting Standards Board |
|
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ ☐ Item 18 ¨☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ ☐ No x☒
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ ☐ No ¨☐
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Identity of Directors, Senior Management and |
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Major Shareholders and Related Party |
| 73 |
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Quantitative and Qualitative Disclosures about Market |
| 84 |
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Description of Securities Other than Equity |
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Defaults, Dividend Arrearages and |
| 85 |
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Material Modifications to the Rights of Security Holders and Use of |
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Exemptions from the Listing Standards for Audit |
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Purchases of Equity Securities by the Issuer and Affiliated |
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Table of Contents |
In this Annual Report on Form 20-F, which we refer to as the “Annual Report”, except as otherwise indicated or as the context otherwise requires, the “Company”, “Avino”, “we”, “our” or “us” refers to Avino Silver & Gold Mines Ltd. and its subsidiaries.
You should rely only on the information contained in this Annual Report. We have not authorized anyone to provide you with information that is different. The information in this Annual Report may only be accurate on the date of this Annual Report or on or as at any other date provided with respect to specific information.
Certain statements contained in this document, other than statements of historical fact, including, without limitation, those concerning the economic outlook for the silver mining industry, expectations regarding silver prices, production (or, “extracting and processing resources”), cash costs and other operating results, growth prospects and outlook of the Company’s operations, individually or in the aggregate, including the commencement of extracting and processing resources at levels intended by management at certain of the Company’s projects, the Company’s liquidity and capital resources and capital expenditures, and the outcome and consequences of any potential or pending litigation or regulatory proceedings, contain forward-looking statements regarding the Company’s operations, economic performance and financial condition.
These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied in these forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, amongst other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government actions, fluctuations in silver prices and exchange rates, political changes in Mexico, competition for resource properties and infrastructure in the mineral exploration industry, the Company’s ability to obtain additional financing, and business and operational risk management and other factors as determined in “Item 3.D. Key Information – Risk factors” and elsewhere in this annual report. These factors are not necessarily all of the important factors that could cause the Company’s actual results to differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results.
The Company undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events, except as may be required by law. All subsequent written or oral forward-looking statements attributable to the Company or any person acting on its behalf are qualified by the cautionary statements herein.
Status as an Emerging Growth Company
We are an “emerging growth company” as defined in Section 3(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We will continue to qualify as an “emerging growth company” until the earliest to occur of: (a) the last day of the fiscal year during which we had total annual gross revenues of US$1,000,000,000 (as such amount is indexed for inflation every 5 years by the SEC) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act; (c) the date on which we have, during the previous 3-year period, issued more than US$1,000,000,000 in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer”, as defined in Exchange Act Rule 12b-2. After fiscal year 2019, we will no longer be deemed an emerging growth company.
Effective January 1, 2017, the Company changed its presentation currency to US dollars from Canadian dollars. The Company believes that the change in presentation currency will provide shareholders with a better reflection of the Company’s business activities and to enhance the comparability of the Company’s financial information to its peers. All references to dollar amounts are expressed in the lawful currency of the United States of America, unless indicated otherwise. Per share amounts are expressed in United States dollars, unless indicated otherwise. All references to Canadian dollars will be indicated with a “C$”.
Foreign Private Issuer Filings
We are considered a “foreign"foreign private issuer”issuer" pursuant to Rule 405 promulgated under the Securities Act of 1933, as amended (the “"Securities Act”"). In our capacity as a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing”"short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our common shares. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.
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For as long as we are a “foreign"foreign private issuer”issuer" we intend to file our annual financial statements on Form 20-F and furnish our quarterly financial statements on Form 6-K to the SEC for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act. However, the information we file or furnish maywill not be the same as the information that is required in annual and quarterly reports on Form 10-K or Form 10-Q for U.S. domestic issuers. Accordingly, there may be less information publicly available concerning us than there is for a company that files as a domestic issuer.
We may take advantage of these exemptions,will continue to file our Forms 20-F or 6-K until we are no longer a foreign private issuer. We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by United States residents and any of the following three circumstances applies: (1) the majority of our executive officers or directors are United States citizens or residents; (2) more than 50% of our assets are located in the United States; or (3) our business is administered principally in the United States. If we lose our “foreign"foreign private issuer status”status" we wouldwill be required to comply with Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirement for “foreign"foreign private issuers”issuers".
Cautionary Note to United States Investors Concerning Estimates of Measured and Indicated Mineral ResourcesCAUTIONARY NOTE TO UNITED STATES INVESTORS CONCERNING
TERMINOLOGY OF MINERAL RESERVES AND MINERAL RESOURCES
In Canada, an issuer As a British Columbia corporation, the Company, is required to provide technical information with respect to mineralization, including reserves and resources, if any, on its mineral exploration properties in accordance with Canadian requirements, which differ significantly from the requirements of the Securities and Exchange Commission (the “SEC”) applicable to registration statements and reports filed by United States companies pursuant to the United States Securities Act of 1933, as amended (the “Securities Act”), or the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, information contained in this Annual Report concerning descriptions of mineralization under Canadian standards may not be comparable to similar information made public by United States companies subject to the reportingcertain rules and disclosure requirements of the SEC. In particular thisregulations issued by Canadian Securities Administrators. The Company files an Annual Report on Form 20-F includesas its Annual Information Form (“AIF”) with the terms “mineral resource,” “measured mineral resource,” “indicated mineral resource”British Columbia via the System for Electronic Document Analysis and “inferred mineral resource”Retrieval (“SEDAR”). Investors are advised that these terms are defined in andUnder the filing requirements for an AIF, the Company is required to be disclosed underprovide detailed information regarding its properties including mineralization, drilling, sampling and analysis, security of samples, and mineral resource and mineral reserve estimates, if any. Further, the Company may describe its properties utilizing terminology such as “Proven Mineral Reserve” or “Probable Mineral Reserve” or “Measured Mineral Resources,” “Indicated Mineral Resources” and “Inferred Mineral Resources” that are permitted by Canadian rules by National Instrument 43-101 (“NI 43-101”). U.S.securities regulations.
United States investors are cautioned not to assume that any part of the mineral deposits, if any, in thesethe “Proven Mineral Reserve” or “Probable Mineral Reserve” or “Measured Mineral Resources,” “Indicated Mineral Resources” and “Inferred Mineral Resources” categories, as defined by Canadian Regulations will ever be converted into reserves. However, these terms are notMineral Reserves as defined terms under SEC Industry Guide 7 and are not permitted to be used in reports and registration statements filed withby Regulation S-K. On October 31, 2018, the SEC by U.S. domestic issuers. In addition, NI 43-101 permitsadopted Item 1300 of Regulation S-K (“Item 1300”) to modernize the property disclosure of “contained ounces” of mineralization. In contrast,requirements for mining registrants, and related guidance, under the SEC only permits issuersSecurities Act and the Exchange Act. All registrants are required to report mineralization as in place tonnagecomply with Item 1300 for fiscal years ending after January 1, 2021. Accordingly, the Company must comply with Item 1300 for its fiscal year ending December 31, 2021, and grade without reference to unit measures.thereafter. Item 1300 uses the Committee for Mineral Reserves International Reporting Standards (“CRIRSCO”) based classification scheme for mineral resources and mineral reserves, that includes definitions for inferred, indicated, and measured mineral resources.
The definitions of proven and probable reserves used in NI 43-101 differ from the definitions in SEC Industry Guide 7. Under SEC Industry Guide 7 (under the Exchange Act), as interpreted by the staff of the SEC, mineralization may not be classified as a “reserve” for United States reporting purposes unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Among other things, all necessary permits would be required to be in hand or issuance imminent to classify mineralized material as reserves under the SEC standards.
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United States investors are cautioned not to assume that any part or all of the mineral deposits identified as an “indicated mineral resource,” “measured mineral resource” or “inferred mineral resource” will ever be converted to mineral reserves as defined in NI 43-101 or SEC Industry Guide 7. Further, “inferred mineral resources” have a great amount of uncertainty as to their existence and economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian securities legislation, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, or economic studies except as may be permitted under NI 43-101. U.S. investors are cautioned not to assume that part or all of an inferred mineral resource exists, or is economically or legally mineable.
agglomeration | Cementing crushed or ground rock particles together into larger pieces, usually to make them easier to handle; used frequently in heap-leaching operations. |
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anomalous | A value, or values, in which the amplitude is statistically between that of a low contrast anomaly and a high contrast anomaly in a given data set. |
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anomaly | Any concentration of metal noticeably above or below the average background concentration. |
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assay | An analysis to determine the presence, absence or quantity of one or more components. |
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Breccia | A rock in which angular fragments are surrounded by a mass of finer-grained material. |
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cretaceous | The geologic period extending from 135 million to 65 million years ago. |
cubic meters or m3 | A metric measurement of volume, being a cube one meter in length on each side. |
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cyanidation | A method of extracting exposed silver or gold grains from crushed or ground ore by dissolving it in a weak cyanide solution. |
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diamond drill | A rotary type of rock drill that cuts a core of rock that is recovered in long cylindrical sections, two centimeters or more in diameter. |
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fault | A fracture in a rock where there has been displacement of the two sides. |
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grade | The concentration of each ore metal in a rock sample, usually given as weight percent. Where extremely low concentrations are involved, the concentration may be given in grams per tonne (g/t or gpt) or ounces per ton (oz/t). The grade of an ore deposit is calculated, often using sophisticated statistical procedures, as an average of the grades of a very large number of samples collected from throughout the deposit. |
hectare or ha | An area totaling 10,000 square meters. |
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highly anomalous | An anomaly which is 50 to 100 times average background, i.e. it is statistically much greater in amplitude. |
induced polarization (IP) | A method of ground geophysics surveying employing an electrical current to determine indications of mineralization. |
Inferred Mineral Resource | That part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure. |
Indicated Mineral Resource |
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Measured Mineral Resource | A Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit.
Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation.
A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve |
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Mineral Reserve | A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction could reasonably be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.
Mineral resources are sub-divided in order of increasing confidence into Probable Mineral Reserves and Proven Mineral Reserves. A Probable Mineral Reserve has a lower level of confidence than a Proven Mineral Reserve. The term “mineral reserve” need not necessarily signify that extraction facilities are in place or operative or that all governmental approvals have been received. It does signify that there are reasonable expectations of such approvals. |
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Mineral Resource | A concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.
A Mineral Resource is an inventory of mineralization that under realistically assumed and justifiable technical and economic conditions might become economically extractable. |
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mineralization | Usually implies minerals of value occurring in rocks. |
Modifying Factors | Modifying Factors are considerations used to convert mineral resources to mineral reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors. |
net smelter returns (NSR) royalty | Payment of a percentage of net mining revenue after deducting applicable smelter charges. |
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NI 43-101 | National Instrument 43-101, Standards of Disclosure for Mineral Projects, adopted by the Canadian Securities Administrators in Canada. |
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Oxide | A compound of oxygen and some other element. |
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ore | A natural aggregate of one or more minerals which may be mined and sold at a profit, or from which some part may be profitably separated. |
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prefeasibility study and | Each means a comprehensive study of the viability of a mineral project that has advanced to a stage where mining method, in the case of underground mining, or the pit configuration, in the case of open pit mining, has been established, and which, if an effective method of mineral processing has been determined, includes a financial analysis based on reasonable assumptions of technical, engineering, operating and economic factors, and the evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve. |
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| Is the economically mineable part of an Indicated and, in some circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. |
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Proven Mineral Reserve | Is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.
The term should be restricted to that part of the deposit where production planning is taking place and for which any variation in the estimate would not significantly affect potential economic viability. |
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quartz | Silica or SiO2, a common constituent of veins, especially those containing silver and gold mineralization. |
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Tailings | Material rejected from a mill after most of the recoverable valuable minerals have been extracted. |
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ton | Imperial measurement of weight equivalent to 2,000 pounds. |
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Tonne | Metric measurement of weight equivalent to 2,205 pounds (1,000 kg) |
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| Tonnes per day. |
Trench | A long, narrow excavation dug through overburden, or blasted out of rock, to expose a vein or ore structure. |
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veins | The mineral deposits that are found filling openings in rocks created by faults or replacing rocks on either side of faults. |
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Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
A. Selected financial data
The selected historical consolidated financial information set forth below has been derived from our annual audited consolidated financial statements for the year ended December 31, 2018.2020. For the yearsyear ended December 31, 2016, 2015, and 2014, the Company’s consolidated financial information was presented in Canadian dollars and has been translated in this Form 20-F into United States dollars using the applicable exchange rates.
For the years ended December 31, 2020, 2019, 2018, 2017, 2016, 2015, and 2014,2016, we have prepared our consolidated financial statements in accordance with IFRS, as issued by the IASB. We adopted IFRS with a transition date
On December 13, 2019, the Company completed the sale of January 1, 2010.its 100% wholly-owned subsidiary Bralorne Gold Mines Ltd. (“Bralorne”) to Talisker Resources Ltd. (“Talisker”). The sale includes the Bralorne Gold Mine and is part of the Company’s plan to focus on its core mining operations in Mexico. For more information regarding the sale, please see Item 4.D. Property, plant and equipment, Bralorne Property – British Columbia
On July 11, 2018, upon further review of the Company’s experience at the Avino and San Gonzalo mines, the Company concluded to change its accounting policy under IFRS 6 and IAS 16 in accounting for the Company’s Exploration and Evaluation Assets and Development Costs, including our determination that we commenced production at the Avino Mine effective July 1, 2015. The voluntary change in accounting policy was intended to provide investors with a better reflection of the Company’s business activities to enhance the comparability of our financial statements to our peers and to make our financial statements more relevant to the economic decision-making needs of users.
As a result of applying the change in accounting policy, we have determined that we would have been deemed to be in the production phase effective July 1, 2015. Accordingly, we have applied this retrospective application of this change in accounting policy for (i) the year ended December 31, 2015; (ii) the year ended December 31, 2016; and (iii) the year ended December 31, 2017, which are reflected in this Annual Report.
The selected historical consolidated financial information presented below is condensed and may not contain all of the information that you should consider. This selected financial data should be read in conjunction with our annual audited consolidated financial statements, the notes thereto and the section entitled ‘‘Item 5 — Operating and Financial Review and Prospects.’’
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In accordance with IFRS
The tables below set forth selected consolidated financial data under IFRS for the years ended, and as at, December 31, 2020, 2019, 2018, 2017, 2016, 2015, and 2014.2016. Subject to the comments above, the information has been derived from our annual audited consolidated financial statements set forth in ‘‘Item 18 — Financial Statements.’’
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| 2020 |
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| 2019 |
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| 2018 |
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| 2017(1) |
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| 2016(1) |
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Summary of Operations: |
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Revenue |
| $ | 16,022,000 |
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| $ | 31,746,000 |
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| $ | 34,116,000 |
|
| $ | 33,359,000 |
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| $ | 34,692,000 |
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Cost of sales |
|
| 15,832,000 |
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| 32,016,000 |
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| 27,850,000 |
|
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| 22,106,000 |
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| 22,961,000 |
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Mine operating income (loss) |
|
| 190,000 |
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| (270,000 | ) |
|
| 6,266,000 |
|
|
| 11,253,000 |
|
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| 11,731,000 |
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Operating expenses |
|
| 4,759,000 |
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| 4,130,000 |
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| 4,240,000 |
|
|
| 5,345,000 |
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|
| 5,007,000 |
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Income (loss) before other items and income taxes |
|
| (4,569,000 | ) |
|
| (4,400,000 | ) |
|
| 2,026,000 |
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| 5,908,000 |
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|
| 6,724,000 |
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Other items |
|
| (4,321,000 | ) |
|
| 1,432,000 |
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|
| 38,000 |
|
|
| (472,000 | ) |
|
| (269,000 | ) |
Income (loss) before income taxes |
|
| (8,890,000 | ) |
|
| (2,968,000 | ) |
|
| 2,064,000 |
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|
| 5,436,000 |
|
|
| 6,455,000 |
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Incomes taxes |
|
| 1,408,000 |
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|
| 633,000 |
|
|
| (407,000 | ) |
|
| (2,771,000 | ) |
|
| (4,439,000 | ) |
Net income (loss) from continuing operations |
|
| (7,482,000 | ) |
|
| (2,335,000 | ) |
|
| 1,657,000 |
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|
| 2,665,000 |
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|
| 2,016,000 |
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Net loss from discontinued operations |
|
| (169,000 | ) |
|
| (29,126,000 | ) |
|
| (31,000 | ) |
|
| (143,000 | ) |
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| - |
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Net income (loss) |
|
| (7,651,000 | ) |
|
| (31,461,000 | ) |
|
| 1,626,000 |
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|
| 2,522,000 |
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|
| 2,016,000 |
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Earnings (Loss) per share from continuing operations |
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Basic |
| $ | (0.09 | ) |
| $ | (0.03 | ) |
| $ | 0.03 |
|
| $ | 0.05 |
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| $ | 0.05 |
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Diluted |
| $ | (0.09 | ) |
| $ | (0.03 | ) |
| $ | 0.03 |
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| $ | 0.05 |
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| $ | 0.05 |
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Earnings (Loss) per share |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.09 | ) |
| $ | (0.45 | ) |
| $ | 0.03 |
|
| $ | 0.05 |
|
| $ | 0.05 |
|
Diluted |
| $ | (0.09 | ) |
| $ | (0.45 | ) |
| $ | 0.03 |
|
| $ | 0.05 |
|
| $ | 0.05 |
|
Weighted average number of shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 83,180,069 |
|
|
| 69,980,178 |
|
|
| 56,851,626 |
|
|
| 52,523,454 |
|
|
| 42,695,999 |
|
Diluted |
|
| 83,180,069 |
|
|
| 69,980,178 |
|
|
| 60,000,637 |
|
|
| 53,320,009 |
|
|
| 43,791,451 |
|
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017(1) |
|
| 2016(1) |
| |||||
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total assets |
| $ | 68,780,000 |
|
| $ | 72,571,000 |
|
| $ | 108,588,000 |
|
| $ | 102,835,000 |
|
| $ | 94,131,000 |
|
Cash |
|
| 11,713,000 |
|
|
| 9,625,000 |
|
|
| 3,252,000 |
|
|
| 3,420,000 |
|
|
| 11,780,000 |
|
Total liabilities |
|
| 9,772,000 |
|
|
| 18,648,000 |
|
|
| 33,420,000 |
|
|
| 33,833,000 |
|
|
| 32,337,000 |
|
Shareholders’ equity |
|
| 59,008,000 |
|
|
| 53,923,000 |
|
|
| 75,168,000 |
|
|
| 69,002,000 |
|
|
| 61,794,000 |
|
Share capital |
|
| 108,303,000 |
|
|
| 96,396,000 |
|
|
| 88,045,000 |
|
|
| 81,468,000 |
|
|
| 80,785,000 |
|
Shares outstanding |
|
| 89,568,682 |
|
|
| 76,592,388 |
|
|
| 63,337,769 |
|
|
| 52,718,153 |
|
|
| 52,431,001 |
|
____________
(1)Financial results for 2017 and 2016 are reflective of the change in retrospective change in accounting policy outlined at the beginning of Item 4-B, and disclosed in the Company’s audited consolidated financial statements.
Table of Contents |
|
| Years Ended December 31, |
| |||||||||||||||||
|
| 2018 |
|
| 2017(1) |
|
| 2016(1) |
|
| 2015(1) |
|
| 2014 |
| |||||
Summary of Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenue |
| $ | 34,116,000 |
|
| $ | 33,359,000 |
|
| $ | 34,692,000 |
|
| $ | 30,460,000 |
|
| $ | 17,467,000 |
|
Cost of sales |
|
| 27,850,000 |
|
|
| 22,106,000 |
|
|
| 22,961,000 |
|
|
| 23,918,000 |
|
|
| 10,313,000 |
|
Mine operating income |
|
| 6,266,000 |
|
|
| 11,253,000 |
|
|
| 11,731,000 |
|
|
| 6,168,000 |
|
|
| 7,154,000 |
|
Operating expenses |
|
| 4,195,000 |
|
|
| 5,331,000 |
|
|
| 5,007,000 |
|
|
| 3,329,000 |
|
|
| 3,750,000 |
|
Income (loss) before other items and income taxes |
|
| 2,071,000 |
|
|
| 5,922,000 |
|
|
| 6,724,000 |
|
|
| 3,839,000 |
|
|
| 3,404,000 |
|
Net income (loss) |
|
| 1,626,000 |
|
|
| 2,522,000 |
|
|
| 2,016,000 |
|
|
| 193,000 |
|
|
| 2,276,000 |
|
Earnings (Loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.03 |
|
| $ | 0.05 |
|
| $ | 0.05 |
|
| $ | 0.01 |
|
| $ | 0.07 |
|
Diluted |
| $ | 0.03 |
|
| $ | 0.05 |
|
| $ | 0.05 |
|
| $ | 0.01 |
|
| $ | 0.07 |
|
Weighted average number of shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 56,851,626 |
|
|
| 52,523,454 |
|
|
| 42,695,999 |
|
|
| 36,229,424 |
|
|
| 32,333,224 |
|
Diluted |
|
| 60,000,637 |
|
|
| 53,320,009 |
|
|
| 43,791,451 |
|
|
| 36,723,725 |
|
|
| 33,273,740 |
|
|
| 2018 |
|
| 2017(1) |
|
| 2016(1) |
|
| 2015(1) |
|
| 2014 |
| |||||
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total assets |
| $ | 108,588,000 |
|
| $ | 102,835,000 |
|
| $ | 94,131,000 |
|
| $ | 62,925,000 |
|
| $ | 52,940,000 |
|
Cash |
|
| 3,252,000 |
|
|
| 3,420,000 |
|
|
| 11,780,000 |
|
|
| 5,401,000 |
|
|
| 3,663,000 |
|
Total liabilities |
|
| 33,420,000 |
|
|
| 33,833,000 |
|
|
| 32,337,000 |
|
|
| 25,580,000 |
|
|
| 14,107,000 |
|
Shareholders’ equity |
|
| 75,168,000 |
|
|
| 69,002,000 |
|
|
| 61,794,000 |
|
|
| 37,344,000 |
|
|
| 38,833,000 |
|
Share capital |
|
| 88,045,000 |
|
|
| 81,468,000 |
|
|
| 80,785,000 |
|
|
| 58,241,000 |
|
|
| 55,381,000 |
|
Shares outstanding |
|
| 63,337,769 |
|
|
| 52,718,153 |
|
|
| 52,431,001 |
|
|
| 37,298,009 |
|
|
| 35,374,813 |
|
_______________
B. Capitalization and indebtedness
Not Applicable.
C. Reasons for the offer and use of proceeds
Not Applicable.
D. Risk factors
An investment in our common shares involves a high degree of risk and should be considered speculative. You should carefully consider the following risks set out below and other information before investing in our common shares. If any event arising from these risks occurs, our business, prospects, financial condition, results of operations or cash flows could be adversely affected, the trading price of our common shares could decline and all or part of your investment may be lost.
Our operations are highly speculative due to the high-risk nature of our business, which include the acquisition, financing, exploration, development of mineral properties and operation of mines. The risks and uncertainties set out below are not the only ones we face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial, may also impair our operations. If any of the risks actually occur, our business, financial condition and operating results could be adversely affected. As a result, the trading price of our common shares could decline, and investors could lose part or all of their investment. Our business is subject to significant risks and past performance is not a guarantee of future performance.
Our results of operations, cash flows and the value of our properties are highly dependent on the market prices of silver and gold and certain base metals and these prices can be volatile.
The profitability of our silver and gold mining operations and the value of our mining properties are directly related to the market price of silver, and to a lesser extent gold and other base metals. The price of silver may also have a significant influence on the market price of our common shares. The market price of silver historically has fluctuated significantly and is affected by numerous factors beyond our control. These factors include supply and demand fundamentals, global or national political or economic conditions, expectations with respect to the rate of inflation, the relative strength of the U.S. dollar and other currencies, interest rates, silver and gold sales and loans by central banks, forward sales by metal producers, accumulation and divestiture by exchange traded funds, and a number of other factors.
We derive a significant portion of our revenue from the sale of silver and our results of operations will fluctuate as the prices of this metals change. A period of significant and sustained lower silver prices would materially and adversely affect our results of operations and cash flows. During the past fiscal year, silver prices have decreasedecreased and, in the event, mineral prices decline or remain low for prolonged periods of time; we might be unable to develop our existing exploration properties, which may adversely affect our results of operations, financial performance, and cash flows. An asset impairment charge may result from the occurrence of unexpected adverse events that impact our estimates of expected cash flows generated from our producing properties or the market value of our non-producing properties, including a material diminution in the price of silver and/or gold.
We willmay be required to raise additional capital to mine our properties.
The Company is currently focusing on further defining plans to mine its San Gonzalo and Avino mineralized material, as well as further exploration of the Avino propertyproperties in Mexico, and on exploring and evaluating the Bralorne Mine project.Mexico. The Company willmay be required to raise capital to further advance the San Gonzalo and Avino minesMine and its infrastructure, as well as to explore the Avino property, and to further explore and evaluate the Bralorne Mine project.properties. Our ability to raise funds will depend on several factors, including, but not limited to, current economic conditions, our perceived value for our properties, our prospects, metal prices, businesses competing for financing and our financial condition. There can be no assurance that we will be able to raise funds, or to raise funds on commercially reasonable terms. Historically, the Company has raised funds through equity and debt financing and the exercise of options and warrants. The raising of capital may have a dilutive effect on the CompanysCompany’s per share book value.
No assurances can be given wethat our continuing operations will continue to be profitable in the future
We began extracting and processing resources at levels intended by management at the San Gonzalo Mine during the fourth quarter of 2012 (ceasing operations in 2019), and at the Avino Mine in the third quarter of 2015. For the year ended December 31, 2020, we incurred net loss from continuing operations of ($7,482,000). For the years ended December 31, 2018, 2017,2019, and 2016,2018, we earned net (loss) income from continuing operations of $1,626,000, $2,522,000($2,335,000) and, $2,016,000,$1,657,000, respectively. Prior to the 2013 fiscal year, we had not been profitable. There is no assurance that our operations will continue to be profitable in the future.
10 |
Table of Contents |
We have no proven or probable mineral reserves, and our decision to commence extracting and processing resources at levels intended by management was not based on a study demonstrating economic recovery of any mineral reserves and is therefore inherently risky.
We have not established the presence of any proven or probable mineral reserves as defined by the SEC, at any of our properties. Under Guide 7, the SEC has defined a “reserve” as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Any mineralized material discovered or produced by us should not be considered proven or probable reserves.
In order to demonstrate the existence of proven or probable reserves, it would be necessary for us to perform additional exploration to demonstrate the existence of sufficient mineralized material with satisfactory continuity and obtain a positive feasibility study which demonstrates with reasonable certainty that the deposit can be economically and legally extracted and produced. We have not completed a feasibility study with regard to all or a portion of any of our properties to date. Since we commenced extracting and processing resources of mineralized material at levels intended by management at the San Gonzalo Mine and the Avino Mine without a feasibility study, there is inherent uncertainty as to whether the mineralized material can be economically produced or if so, for what period of time. The absence of proven or probable reserves makes it more likely that our properties may cease to be profitable and that the money we spend on exploration and evaluation may never be recovered.
In order to raise additional capital, we may in the future offer additional shares of our common shares or other securities convertible into or exchangeable for our common shares at prices that may not be the same as the price per share paid by investors. We may sell shares or other securities in any other offering at a price per share that is less than the then current trading price, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our common shares, or securities convertible or exchangeable into common shares, in future transactions may be higher or lower than the price per share paid by an investor.
Impact of COVID-19 on mining operations.
Mexico has been particularly impacted by the COVID-19 pandemic. The Company’s mining operations have been temporarily shut-down since April 2020 first as a result of governmental COVID-19 quarantine and containment measures, and later in July 2020 due to a labour strike, which was resolved in October 2020. The labour settlement agreement must be approved by Mexican governmental labour authority. Although the Company takes appropriate measures and safeguards to protect its staff from infection, these events can result in volatility and disruption to supply chains, operations, transportation, and mobility of people, which are beyond the control of the Company, and which have had and could continue to adversely affect the availability of components, supplies and materials, labour, interest rates, credit ratings, credit risk, inflation, business operations, financial markets, exchange rates, and other factors material to the Company, including in particular, the Company’s revenues and concentrate delivery schedule.
In 2012 and 2015, we decided to begin extracting and processing resources at levels intended by management at the San Gonzalo Mine and the Avino Mine, respectively, without preparing a pre-feasibility study or bankable feasibility study which may subject us to more risks.
We decided to begin extracting and processing resources at levels intended by management at the San Gonzalo Mine (which ceased operations during 2019) and the Avino Mine without preparing a pre-feasibility study or bankable feasibility study which is a more common practice within the mining industry and therefore may subject us to more business risks. Our decision to begin extracting and processing resources at the San Gonzalo Mine and the Avino Mine were based on limited prior historical information, bulk sample drilling programs, small pilot plant and bench scale testing. Therefore, our decision to begin extracting and processing resources at the San Gonzalo Mine and the Avino Mine were based on limited information which may or may not be representative of information regarding the mines had we otherwise prepared a more comprehensive study. In addition, basing our decision to begin extracting and processing resources on limited information may make us susceptible to risks including:
| · | certain difficulties in obtaining expected metallurgical recoveries when scaling up to extracting and processing activities at levels intended by management from pilot plant scale; |
| · | |
the inability to predict the amount of minerals within an area to be mine due the limited sample drilling programs which makes it a challenge to predict our revenues; | ||
| · | |
the preliminary nature of mine plans and processing concepts and applying them to full scale extracting and processing activities at levels intended by management; | ||
| · | |
determining operating/capital cost estimates and possible variances associated with constructing, commissioning and operating the | ||
| · | |
that metallurgical flow sheets and recoveries are based on information at the time and may not be representative of results of the | ||
| · | |
that we may underestimate capital and operating costs without a comprehensive bankable feasibility study. |
11 |
Table of Contents |
Company has a limited number of customers.
The Company produces concentrates containing silver and gold. The Company sells its concentrates to metals traders and smelters. During the year ended December 31, 2020, one customer accounted for more than 75% of revenues. The Company believes that a small number of customers will continue to represent a significant portion of its total revenue. However, the Company does not consider itself economically dependent upon any single customer or combination of customers due to the existence of other potential metals traders or smelters capable of purchasing the Company’s production. There is a risk that the Company could be subject to limited smelter availability and capacity, or it may not be able to maintain its current significant customers or secure significant new customers on similar terms, any of which may have a material adverse effect on the Company’s business, financial condition, operating results and cash flows.
Company may be subject to substantial decommissioning and reclamation costs.
The Company reviews and reassesses its reclamation obligations at each of its mines based on updated mine life estimates, rehabilitation and closure plans. As at December 31, 2020, the Company had a provision of approximately $0.8 million for future reclamation and remediation associated with the expected retirement of its mineral properties, plant, and equipment. The present value of these reclamation provisions may be subject to change as a result of management’s estimates of ultimate decommissioning and reclamation costs, changes in the remediation technology or changes to applicable laws, regulations and interest rates. Such changes will be recorded in the accounts of the Company as they occur.
The costs of performing the decommissioning and reclamation must be funded by the Company’s operations. These costs can be significant and are subject to change. The Company cannot predict what level of decommissioning and reclamation may be required in the future by regulators. If the Company is required to comply with significant additional regulations or if the actual cost of future decommissioning and reclamation is significantly higher than current estimates, this could have an adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition.
Company’s operations are subject to political risk and government regulations
The Company’s mining, exploration and development activities are focused in Mexico and Canada, and are subject to national and local laws and regulations, governing prospects, taxes, labour standards, occupational health, land use, environmental protection, mine safety and others which currently or in the future may have a substantial adverse impact on the Company. In order to comply with applicable laws, the Company may be required to incur significant capital or operating expenditures. Existing and possible future environmental legislation, regulation and action could cause additional expense, capital expenditures, restriction and delays in the activities of the Company, the extent of which cannot be reasonably predicted. Violations may require compensation of those suffering loss or damage by reason of the Company’s mining activities, and the Company may be fined if convicted of an offence under such legislation.
Mining and exploration activities in Mexico and/or Canada may be affected in varying degrees by political instabilities and government regulations relating to the mining industry. Any changes in regulations or shifts in political conditions are beyond the Company’s control and may adversely affect the business. Operations may also be affected to varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety. The status of Mexico as a developing country may make it more difficult for the Company to obtain any required financing for projects. The effect of all these factors cannot be accurately predicted. Notwithstanding the progress achieved in improving Mexican political institutions and revitalizing its economy, the present administration, or any successor government, may not be able to sustain the progress achieved. The Company does not carry political risk insurance.
12 |
Table of Contents |
Under the Foreign Investment Law of Mexico, there is no limitation on foreign capital participation in mining operations; however, the applicable laws may change in a way which may adversely impact the Company and its ability to repatriate profits. Under Mexican Income Tax Law, dividends are subject to a withholding tax. Corporations with their tax residence in Mexico are taxed on their worldwide income. Mexico levies a value-added tax, known as the IVA, which is an indirect tax levied on the value added to goods and services, and it is imposed on corporations that carry out activities within Mexican territory.
During 2013, the Mexico Senate passed tax reform legislation, which took effect on January 1, 2014. The tax reform includes an increase in the corporate tax rate from 28% to 30%, the introduction of a special mining royalty of 7.5% on the profits derived from the sale of minerals, and the introduction of a mining royalty of 0.5% on the gross income derived from the sale of gold, silver and platinum. These changes may have a material impact on the Company’s future earnings and cash flows, and possibly on future capital investment decisions.
Exploration and development.development risks.
The business of exploration and development for minerals involves a high degree of risk and few properties become producing mines. Unprofitable efforts result not only from the failure to discover mineral deposits, but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. There is no assurance that the Company’s future exploration and development activities will result in any discoveries of commercial bodies of ore. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of mining facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection, the combination of which factors may result in the Company not receiving an adequate return on invested capital.
The mining industry is highly speculative and involves substantial risks.risks.
Even when mining is conducted on properties known to contain significant quantities of mineral deposits it is generally accepted in the mining industry that most exploration projects do not result in the discovery of mineable deposits of ore that can be extracted in a commercially economic manner. There may be limited availability of water, which is essential to milling operations, and interruptions may be caused by adverse weather conditions. Operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air quality standards, pollution and other environmental protection controls. Mining activities are subject to substantial operating hazards, some of which are not insurable or may not be insured for economic reasons.
The commercial quantities of ore cannot be accurately predicted.
Whether an ore body will be commercially viable depends on a number of factors including the particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as minerals prices and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in a mineral deposit being unprofitable.
There are no assurances that we can produce minerals on a commercially viable basis.basis.
The Company’s ability to generate revenue and profit is expected to occur through exploration, evaluation, advancement and operation of its existing properties as well as through acquisitions of interests in new properties. Substantial expenditures will be incurred in an attempt to establish the economic feasibility of mining activities by identifying mineral deposits and establishing ore reserves through drilling and other techniques, developing metallurgical processes to extract metals from ore, designing facilities and planning mining activities. The economic feasibility of a project depends on numerous factors, including the cost of mining and production facilities required to extract the desired minerals, the total mineral deposits that can be mined using a given facility, the proximity of the mineral deposits to refining facilities, and the market price of the minerals at the time of sale. There is no assurance that existing or future exploration programs or acquisitions will result in the identification of deposits that can be mined profitably.
13 |
Table of Contents |
Mining activities and exploration activities are subject to various federal, state, provincial and local laws and regulations.
Laws and regulations govern the development, mining, production, importing and exporting of minerals, taxes, labour standards, occupational health, waste disposal, protection of the environment, mine safety, toxic substances, and other matters. In many cases, licenses and permits are required to conduct mining operations. Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a substantial adverse impact on the Company. Applicable laws and regulations will require the Company to make certain capital and operating expenditures to initiate new activity. Under certain circumstances, the Company may be required to suspend an activity once it is started until a particular problem is remedied or to undertake other remedial actions.
Mining activities are inherently risky.risky and subject to accidents.
Mining activities are risky and heavily regulated. Despite our attempts to minimize accidents through strict safety procedures, individuals may be injured or harmed working in our mines. Should any accidents occur, our mine may be partially or fully shut down to aid regulators in their investigation, even if it is determined we are not at fault for the cause of the accident. In this regard, there were two accidental deaths at the Company’sCompany's San Gonzalo mine in March 2016, and an accidental death at the Avino mineMine complex processing facility in June 2014. We do not believe that we were at fault in these accidents and, unfortunately, believe that the accidents were the result of the employees not following the proper safety protocols. Following the accidents, local authorities allowed us to resume mining activities. Notwithstanding our belief that we were not at fault for the accidents, we may nevertheless be found liable and subject to fines and/or penalties or we may be required to revise and implement new safety procedures that would make it more costly to operate our mines. Currently, we do not have insurance covering accidents, but may obtain insurance in the future.
MiningOur concentrates are subject to theft and loss.
The concentrates produced by the Company have significant value, and are loaded onto road vehicles for transport to smelters in Mexico or to seaports for export to smelters in foreign markets, such as Europe and Asia, where the metals are extracted. The geographic location of the Company’s operating mines in Mexico and trucking routes taken through the country to the smelters and ports for delivery, give rise to risks including concentrate theft, road blocks and terrorist attacks, losses caused by adverse weather conditions, delays in delivery of shipments, and environmental liabilities in the event of an accident or spill. In addition, the Company may have significant concentrate inventories at its facilities or on consignment at other warehouses awaiting shipment. The Company has taken steps to secure its concentrate, whether in storage or in transit. The Company has insurance coverage for its inventory while in transit; however, recovery of the full market value may not always be possible. Despite these risk mitigation measures, there remains a continued risk that theft of concentrate may have a material impact on the Company’s financial results.
Our mining operations andare subject to number of risks including uninsured risks.risks which may result in suspension of operations.
Mining operations generally involve a high degree of risk which even a combination of experience, knowledge and careful evaluation may not be able to overcome. The business of mining and exploration is subject to a variety of risks including, but not limited to, fires, power outages, labour disruptions, industrial accidents, flooding, explosions, cave-ins, landslides, environmental hazards, technical failures, and the inability to obtain suitable or adequate machinery, equipment or labour. Such occurrences, against which the Company cannot, or may elect not to insure, may delay production, increase production costs or result in liabilities. The payment of such liabilities may have a material adverse effect on the Company’s financial position. The economics of developing mineral properties are affected by such factors as the cost of operations, variations in the grade and metallurgy of the ore mined, fluctuations in mineral markets, costs of processing and equipment, transportation costs, government regulations including regulations relating to royalties, allowable production, importing and exporting of mineral product, and environmental protection rules and regulations.
During the period between the end of April to June 2020, the Company was required to shut down operations at the Avino Mine due to COVID-19 pandemic safety measures imposed by the Mexican authorities. In June 2020, mining operations briefly resumed, until a labour strike in July 2020 resulting in a suspension of operations. Although the labour strike was resolved in October 2020, operations at the Avino Mine cannot resume until the labour settlement agreement has been approved by the Mexican labour authority.
14 |
Table of Contents |
The exercise of our outstanding warrants, stock options into common shares and issuance of RSUs will result in ownership dilution to our shareholders and could temporary suppress the price of our common shares.
At December 31, 2020, we had outstanding warrants to purchase 2,890,774 common shares at a weighted average exercise price of $0.80 per share. At December 31, 2020, there were outstanding share options exercisable into 3,483,000 common shares at a weighted average exercise price of Cdn$1.77 and RSUs outstanding for the issuance of a further 2,874,000 common shares at a weighted average exercise price of Cdn$1.28. If all of these options and warrants are exercised and RSUs are issued, such issuance will cause ownership dilution to our shareholders. The dilution may result in a decline in the market price of our common shares.
Market forces.forces may adversely affect the marketability of mineral resources.
There is no assurance that, even if commercial quantities of mineral resources are discovered, that these can be sold at a profit. Factors beyond the control of the Company may affect the marketability of any mineral occurrences discovered. The prices of silver, gold and copper have experienced volatile and significant movements over short periods of time, and are affected by numerous factors beyond the control of the Company, including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically, the United States dollar relative to the Canadian dollar and other currencies), interest rates and global or regional consumption patterns (such as the development of gold coin programs), speculative activities and increased production due to improved mining and production methods.
ForeignThe Company is subject to foreign corrupt practices legislation.laws.
The Company is subject to the Foreign Corrupt Practices Act (the “FCPA”“FCPA”), the Corruption of Foreign Public Officials Act (Canada) (“CFPOA”CFPOA”), and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by persons and issuers as defined by the statutes, for the purpose of obtaining or retaining business. It is our policy to implement safeguards to discourage these practices by our employees; however, our existing safeguards and any future improvements may prove to be ineffective, and our employees, consultants, sales agents or distributors may engage in conduct for which the Company might be held responsible. Violations of the FCPA, CFPOA, and/or other laws may result in criminal or civil sanctions and the Company may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. The Company is also subject to the Extractive Sector Transparency Measures Act (Canada) (“ESTMA”ESTMA”), which requires us to maintain records of specific payments (including taxes, royalties, fees, production entitlements, bonuses, dividends, and infrastructure improvements) to all government entities in Canada and abroad, and to publicly disclose payments of $100,000 or more in any payment category on an annual basis within 150 days of our fiscal year end, to increase transparency and deter corruption in the extractive industry sector.
The validity of the title to our mining properties may be challenged.
In those jurisdictions where the Company has property interests, the Company undertakes searches of mining records and obtains title opinions from reputable counsel in accordance with mining industry practices to confirm satisfactory title to properties in which it holds or intends to acquire an interest, but the Company does not obtain title insurance with respect to such properties. The possibility exists that title to one or more of its properties, particularly title to undeveloped properties, might be defective because of errors or omissions in the chain of title, including defects in conveyances and defects in locating or maintaining such claims, prior unregistered agreements or transfers, and title may be affected by undetected defects or native land claims. For unsurveyed mineral claims, the location and boundaries of such mining claims may be in doubt. The ownership and validity of mining claims are often uncertain and may be contested. The Company is not aware of any challenges to the location or area of its mineral claims. There is, however, no guarantee that title to the Company’s properties will not be challenged or impugned in the future. The properties may be subject to prior unregistered agreements or transfers.
In Mexico and British Columbia legal rights applicable to mining concessions or mineral claims, as applicable, are different and separate from legal rights applicable to surface lands; accordingly, title holders of mining concessions or mineral claims must accommodate and agree with surface land ownersland-owners on compensation in respect of mining activities conducted on such land.
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Dividend policy
We do not intend to pay dividends in the foreseeable future.
We have never paid, and we do not intend to pay, any cash dividends in the foreseeable future.
Certain provisions of organizational documents may discourage takeovers and business combinations that our shareholders may consider in their best interests, which could negatively affect our stock price.
Certain provisions of our Articles of Incorporation (“Articles”) may have the effect of delaying or preventing a change in control of our Company or deterring tender offers for our common shares that other shareholders may consider in their best interests.
Our Articles authorize us to issue an unlimited number of common shares. Shareholder approval is not necessary to issue our common shares. Issuance of these common shares could have the effect of making it more difficult and more expensive for a person or group to acquire control of us, and could effectively be used as an anti-takeover device.
Our Articles provide for an advance notice procedure for shareholders to nominate director candidates for election or to bring business before an annual meeting of shareholders, including proposed nominations of persons for election to our board of directors, and require that special meetings of shareholders be called by the board or shareholders who hold at least 5% of the total issued and outstanding shares.
Competition.Our business is subject to competition.
There is a limited supply of desirable mineral lands available for acquisition, claim staking or leasing in the areas where the Company contemplates expanding its operations and conducting exploration activities. Many participants are engaged in the mining business, including large, established mining companies. There can be no assurance that the Company will be able to compete successfully for new mining properties. The resource industry is intensely competitive in all of its phases, and the Company competes with many companies possessing greater financial resources and technical facilities than itself. Competition could adversely affect the Company’s ability to acquire suitable producing properties or prospects exploration in the future.
Uncertainty of exploration and evaluation programs.programs.
The Company’s profitability is significantly affected by the costs and results of its exploration and evaluation programs. As mines have limited lives, the Company actively seeks to expand its mineral resources, primarily through exploration, evaluation and strategic acquisitions. Exploration for minerals is highly speculative in nature, involves many risks and is frequently unsuccessful. Among the many uncertainties inherent in any silver, gold, and/or copper exploration and evaluation program are the location of economic ore bodies, the development of appropriate metallurgical processes, the receipt of necessary governmental permits and the construction of mining and processing facilities. Assuming the discovery of an economic deposit, depending on the type of mining operation involved, several years may elapse from the initial phases of drilling until commercial operations are commenced and, during such time, the economic feasibility of extracting and processing resources may change. Accordingly, the Company’s exploration and evaluation programs may not result in any new economically viable mining operations or yield new mineral resources to expand current mineral resources.
Permitting.If the Company fails to obtain or maintain the necessary permits, this may adversely affect the Company’s financial condition and business.
Existing and possible future environmental legislation, regulations and actions could give rise to additional expense, capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be predicted. Regulatory requirements and environmental standards are subject to constant evaluation and may become more restrictive, which could materially affect the business of the Company or its ability to develop its properties. Before production can commence on any of its mineral properties, the Company must obtain regulatory and environmental approvals. There is no assurance that such approvals will be obtained, or if they are obtained, if they will be granted on a timely basis. The cost of compliance with existing and future governmental regulations has the potential to reduce the profitability of operations or preclude entirely the economic development of the Company’s mineral projects and properties.
Permitting of exploration programs in Mexico requires the completion of agreements with the indigenous communities in the vicinity of the project. The timing for the completion of such agreements is unpredictable. The process of obtaining such agreements is also affected by the two-year election cycle for the councils of the indigenous communities.
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Political or economic instability or unexpected regulatory change. may adversely affect the Company.
The Company is subject to a number of factors beyond its control. Our primary property is located in a foreign country that may be subject to political and economic instability, or unexpected legislative change than is usually the case in certain other countries, provinces and states. Our mineral exploration and mining activities could be adversely affected by:
| · | political instability and violence; |
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war and civil disturbances; | ||
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expropriation or nationalization; | ||
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changing fiscal regimes; | ||
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fluctuations in currency exchange rates; | ||
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high rates of inflation; | ||
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underdeveloped industrial and economic infrastructure; | ||
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changes in the regulatory environment governing exploration and evaluation assets; and | ||
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unenforceability of contractual rights, any of which may adversely affect our business in that country. |
We may be adversely affected by fluctuations in foreign exchange rates.rates.
We maintain our bank accounts in Canadian and U.S. Dollars and Mexican pesos. Any appreciation in the currency of Mexico or other countries where we may carry out exploration and mining activities against the Canadian or U.S. Dollar will increase our costs of carrying out operations in such countries. In addition, any increase in the Canadian Dollar against the U.SU.S. Dollar will result in a loss on our financial statements to the extent we hold funds in Canadian Dollars. Copper, gold and silver are typically sold in U.S. dollars. As a result, the Company is subject to foreign exchange risks relating to the relative value of the U.S. dollar as compared to the Canadian dollar and the Mexican peso. To the extent that the Company generates revenues at the Avino Mine, or San Gonzalo Mine, it will be subject to foreign exchange risks as revenues will be received in U.S. dollars while certain operating and capital costs will be incurred primarily in Mexican pesos. A decline in the U.S. dollar would result in a decrease in the Company’s revenues and adversely impact the Company’s financial performance.
LandWe may be subject to land reclamation requirements.requirements.
Although variable, depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration and mining companies, in order to minimize the long-term effects of land disturbance. Reclamation may include requirements to control dispersion of potentially deleterious effluents and reasonably re-establish pre-disturbance land forms and vegetation. In order to carry out reclamation obligations imposed on us in connection with our mineral exploration and mining activities we must allocate financial resources that might otherwise be spent on further exploration or acquisition programs.
Acquisitions the Company may undertake may change our business or expose us to risks.
The Company undertakes evaluations of opportunities to acquire additional silver and gold mining properties. Any resultant acquisitions may be significant in size, may change the scale of the Company’s business, and may expose the Company to new geographic, political, operating, financial and geological risks. The Company’s success in its acquisition activities depends on its ability to identify suitable acquisition candidates, acquire them on acceptable terms, and integrate their operations successfully. Any acquisitions would be accompanied by risks, such as a significant decline in the price of silver or gold, the mineralized material proving to be below expectations, the difficulty of assimilating the operations and personnel of any acquired companies, the potential disruption of the Company’s ongoing business, the inability of management to maximize the financial and strategic position of the Company through the successful integration of acquired assets and businesses, the maintenance of uniform standards, controls, procedures and policies, the impairment of relationships with customers and contractors as a result of any integration of new management personnel and the potential unknown liabilities associated with acquired mining properties. There can be no assurance that the Company would be successful in overcoming these risks or any other problems encountered in connection with such acquisitions.
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Current global financial conditions.conditions may adversely affect the Company’s ability to secure financing.
Financial markets globally have been subject to increased volatility. Access to financing has been negatively affected by liquidity crises and uncertainty with respect to sovereign defaults throughout the world. These factors may impact the ability of the Company to obtain loans and other forms of financing in the future and, if obtained, on terms favourable to the Company. If these levels of volatility and market turmoil continue or worsen, the Company may not be able to secure appropriate debt or equity financing when needed, any of which could affect the trading price of the Company’s securities in an adverse manner.
Dilution.
There are a numbermay be potential conflicts of outstanding convertible securities and agreements pursuant to which Common Shares ofinterest between the Company may be issued in the future. If these Common Shares are issued, this will result in further dilution to the Company’s shareholders. An investor’s equity interest in the Company may also be diluted by future equity financings of the Company.
Conflicts of interest.and our directors, officers, affiliates and promoters.
There are potential conflicts of interest to which the directors, officers, insiders and promoters of the Company will be subject in connection with the operations of the Company. The directors, officers, insiders and promoters of the Company are engaged in and will continue to be engaged in corporations or businesses which may be in competition with the Company. Accordingly, situations may arise where such directors, officers, insiders and promoters will be in direct competition with the Company. The Company has a process to identify and declare any conflicts. Conflicts, if any, will be subject to the procedures and remedies as provided under the Business Corporations Act of British Columbia.
DependenceWe are dependent on management.our management.
We are dependent on the services of key executives including our President and Chief Executive Officer and other highly skilled and experienced executives and personnel focused on advancing our corporate objectives as well as the identification of new opportunities for growth and funding. Due to our relatively small size, the loss of these persons or our inability to attract and retain additional highly skilled employees required for our activities may have a material adverse effect on our business and financial condition.
CompetitionWe are subject to competition for recruitment and retention of qualified personnel.personnel.
We compete with other exploration and mining companies, many of which have greater financial resources than us or are further in their advancement, for the recruitment and retention of qualified employees and other personnel. Competition for exploration and mining resources at all levels is highly cyclical and can quickly become very intense, particularly affecting the availability of manpower, drill rigs and supplies. Recruiting and retaining qualified personnel in the future is critical to the Company’s success. As the Company explores its Avino Mine and San Gonzalo Mine and other properties, the need for skilled labour will increase. The number of persons skilled in the exploration of mining properties is limited and competition for this workforce is intense. The exploration and other initiatives of the Company may be significantly delayed or otherwise adversely affected if the Company cannot recruit and retain qualified personnel and/or obtain other exploration and mining resources as and when required.
LimitedOur common shares are subject to limited and volatile trading volume.volume.
Although the Company’s common shares are listed on the NYSE American, the Toronto Stock Exchange, referred to herein as the “TSX” (the Company graduated from the TSX, Venture Exchange on January 8, 2018), the Frankfurt Stock Exchange, referred to herein as the “FSE”, and the Berlin Stock Exchange, the volume of trading has been limited and volatile in the past and ismay likely to continue to be so in the future, reducing the liquidity of an investment in the Company’s common shares and making it difficult for investors to readily sell their common shares in the open market. Without a liquid market for the Company’s common shares, investors may be unable to sell their shares at favorable times and prices and may be required to hold their shares in declining markets or to sell them at unfavorable prices.
Volatility ofOur common shares are subject to volatile share price.price.
In recent years, securities markets in general have experienced a high level of price volatility. The market price of many resource companies, particularly those, like the Company, that are considered speculative exploration and mining companies, have experienced wide fluctuations in price, resulting in substantial losses to investors who have sold their shares at a low price point. These fluctuations are based only in part on the level of progress of exploration, and can reflect general economic and market trends, world events or investor sentiment, and may sometimes bear no apparent relation to any objective factors or criteria. Significant fluctuation in the Company’s common share price is likely to continue.
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Difficulty for United States investors to effect services of process against the Company.
The Company is incorporated under the laws of the Province of British Columbia, Canada. Consequently, it will be difficult for United States investors to affect service of process in the United States upon the directors or officers of the Company, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the Exchange Act. The majority of the Company’s directors and officers are residents of Canada and manyall of the Company’s material assets are located outside of the United States. A judgment of a United States court predicated solely upon such civil liabilities would probably be enforceable in Canada by a Canadian court if the United States court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities.
Disruptions to our information technology systems, including future cyber-attacks and security breaches, and the costs of maintaining secure and effective information technology systems could negatively affect our business and results of operations.
The efficient operation of our businesses is dependent on computer hardware and software systems. Information systems are vulnerable to security breaches by computer hackers and cyber terrorists. We rely on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems, and continue to invest in maintaining and upgrading these systems and applications to ensure risk is controlled. Regardless of our efforts to maintain and upgrade our cyber security systems, there can be no assurance that we will not suffer an intrusion, that unauthorized parties will not gain access to confidential or personal information, or that any such incident will be discovered promptly. The techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often are not recognized until launched against a target, and we may be unable to anticipate these techniques or implement adequate preventative measures. The failure to promptly detect, determine the extent of and appropriately respond to a significant data security breach could have a material adverse impact on our business, financial condition and results of operations. In addition, the unavailability of the information systems or failure of these systems to perform as anticipated for any reason, including a major disaster or business interruption resulting in an inability to access data stored in these systems or sustain the data center systems necessary to support functions to meet our needs, and any inability to respond to, or recover from, such an event, could disrupt our business and could result in decreased performance and increased overhead costs, causing our business and results of operations to suffer.
We are a multinational company that faces complex taxation regimes in various jurisdictions. Audits, investigations, and tax proceedings could have a material adverse effect on our business, results of operations, and financial condition.
We are subject to income and non-income taxes in numerous jurisdictions. Income tax accounting often involves complex issues, and judgment is required in determining our worldwide provision for income taxes and other tax liabilities. In particular, most of the jurisdictions in which we conduct business have detailed transfer pricing rules, which require that all transactions with non-resident related parties be priced using arm’s length pricing principles within the meaning of such rules. In addition, the application of withholding tax, value added tax, goods and services tax, sales taxes and other non-income taxes is not always clear and we may be subject to tax audits relating to such withholding or non-income taxes. We believe that our tax positions are reasonable and our tax reserves are adequate to cover any potential liability. However, tax authorities in certain jurisdictions may disagree with our position, including the propriety of our related party arm’s length transfer pricing policies and the tax treatment of corresponding expenses and income. If any of these tax authorities were successful in challenging our positions, we may be liable for additional income tax and penalties and interest related thereto in excess of any reserves established therefor, which may have a significant impact on our results and operations and future cash flow.
Changes to tax laws in any of the jurisdictions in which we operate or plan to operate in the future could have a material adverse effect on our business, results of operations, and financial condition.
We are a multinational company that is subject to complex taxation regimes in numerous jurisdictions. Our future effective tax rates could be affected by changes in tax laws or their interpretation in any of those jurisdictions. Tax laws, including tax rates, in the jurisdictions in which we operate may change as a result of macroeconomic or other factors outside of our control. Changes in tax laws, treaties, or regulations or their interpretation or enforcement are unpredictable. Any of these occurrences could have a material adverse effect on our results of operations and financial condition.
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Item 4. Information on the Company
A. History and development of the Company
The Company was incorporated by Memorandum of Association under the laws of the Province of British Columbia on May 15, 1968, and on August 22, 1969, by virtue of an amalgamation with Ace Mining Company Ltd., became a public company whose common shares are registered under the Exchange Act, changing its name to Avino Mines & Resources Limited. On April 12, 1995, the Company changed its corporate name to International Avino Mines Ltd. and effected a reverse stock split of one common share for every five common shares outstanding. On August 29, 1997, the Company changed its corporate name to Avino Silver & Gold Mines Ltd., its current name, to better reflect the business of the Company of exploring for and mining silver and gold. In January 2008, the Company announced the change of its financial year end from January 31 to December 31. The change was completed in order to align the Company’s financial statement reporting requirements with its Mexico subsidiaries which operate on a calendar fiscal year.
The Company is a reporting issuer in all of the Provinces of Canada, except for Quebec, a foreign private issuer in the United States, and is listed on the Toronto Stock Exchange, (the Company graduated from the TSX Venture Exchange on January 8, 2018), under the symbol “ASM”, on the NYSE-American under the symbol “ASM”, and on the Berlin and Frankfurt Stock Exchanges under the symbol “GV6”. The principal executive office of the Company is located at Suite 900, 570 Granville Street, Vancouver, British Columbia V6C 3P1, and its telephone number is 604-682-3701.
The Company is a natural resource company primarily engaged in the extracting and processing of gold, silver, and copper and the acquisition and exploration of natural resource properties. The Company’s principal business activities have been the exploration for and extracting and processing of silver, gold and copper at mineral properties located in the State of Durango, Mexico. The Company also owns other exploration and evaluation assets in British Columbia and the Yukon, Territory, Canada.
B. Business overview
Operations and Principal Activities
The Company is a Canadian-based resource firm focused on silver, gold, and copper exploration, extraction and processing. The Company has a long prior history of operation, beginning in 1968 with the development of the Avino Silver Mine, located in the state of Durango, Mexico (the Avino Mine)“Avino Mine”). From 1974 to 2001, the Avino Mine produced silver, gold, copper and lead and provided hundreds of jobs for the Durango region before closing due to depressed metal prices and closing of a smelter. Beginning in 2002, the Company re-directed its corporate strategy to focus almost entirely on silver, and the Company began acquiring silver properties in North America. The Company acquired the Eagle Property in CanadasCanada’s Yukon, Territory, and the Aumax silver and gold property in British Columbia. Each property produced encouraging assays for silver through drilling and sampling, however, in late April 2012, the Company relinquished its interest in the Aumax silver and gold property to focus on its property in Mexico. In October 2014, Avino acquired Bralorne Gold Mines Ltd. (Bralorne)(“Bralorne”), a British Columbia company, which owns the past producing Bralorne Gold Mine in British Columbia, as a wholly ownedwholly-owned subsidiary. The Avino Mine in Mexico, the Bralorne Mine in British Columbia, and surrounding mineral leases continue to hold silver and gold potential. On December 13, 2019, the Company completed the sale of Bralorne to Talisker. The sale includes the Bralorne Gold Mine and is part of the Company’s plan to focus on its core mining operations in Mexico. For more information regarding the sale, please see below. The Company also had an option agreement with Alexco Resources Corp. on its wholly-owned Eagle Property located in the Yukon Territory.Yukon. This option agreement was recently terminated on January 31, 2019. These properties, along with other silver and gold projects, will remain the CompanysCompany’s principal focus for the foreseeable future. The Eagle Property is currently inactive.
On October 1, 2012, the Company declared that extracting and processing resources at levels intended by management had been achieved at the San Gonzalo Mine. The decision was based on the following criteria:
The above factors were considered in making the decision that extracting and processing resources at levels intended by management had been achieved as at October 1, 2012, and management is confident that its decision is appropriate and accurately reflects the stage the Company is in.
In the second quarter of 2016, the Company declared that effective April 1, 2016 extracting and processing resources at levels intended by management had been achieved at the Avino Mine following an advancement and test period of 19 months. The decision was based on the following criteria:
| · | All critical capital components have been acquired and installed to achieve desired mining and processing results; |
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The necessary labor force, including production and development mining contractors, has been secured to mine and process at planned levels of output; | ||
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The mill has consistently processed at levels above design capacity and budgeted production levels of 1,250 tpd with consistent recoveries and grades; and | ||
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Subsequently, on July 11, 2018, upon further review of the Company’s experience at the Avino and San Gonzalo mines, the Company concluded to change its accounting policy under IFRS 6 and IAS 16 in accounting for the Company’s Exploration and Evaluation Assets and Development Costs, including the determination that the Company commenced production effective July 1, 2015. The voluntary change in accounting policy was intended to provide investors with a better reflection of the Company’s business activities to enhance the comparability of the Company’s financial statements to the Company’s peers and to make the Company’s financial statements more relevant to the economic decision-making needs of users.
As a result of applying the change in accounting policy, we have determined that we would have been deemed to be in the production phase effective July 1, 2015. Accordingly, we have applied this retrospective application of this change in accounting policy for (i) the year ended December 31, 2015; (ii) the year ended December 31, 2016; and (iii) the year ended December 31, 2017, which are reflected in this Annual Report.
On July 8, 2014,December 13, 2019 Avino acquired a 33.33% interest in Bralorne fromclosed an unrelated party for cash consideration of C$2,660,000 in connection with its intentionagreement to acquiresell all of the issued and outstanding shares of Bralorne to Talisker for:
(i) | A cash consideration of C$8.7 million; | |
(ii) | The issuance of 12,580,000 common shares of Talisker (the “Talisker Shares”) which had a trading price of C$0.235 per Talisker Share on the Canadian Securities Exchange as of the date of close; | |
(iii) | The issuance of 6,290,000 share purchase warrants (the “Talisker Warrants”) exercisable at C$0.25 per share for a period of three years after the Closing Date, subject to acceleration in the event the closing price of Talisker’s common shares is greater than C$0.35 per share for 20 or more consecutive trading days at any time following April 14, 2020. |
In addition, as part of the sale of Bralorne to Talisker, Avino also assigned all of its rights and obligations to the nine BRX mineral claims to Talisker. As a result of the sale, Avino acquired the Talisker Shares, representing 9.9% of the total issued and outstanding shares of Talisker, and the Talisker Shares and Talisker Warrants represent 14.85% of Talisker on a fully diluted basis assuming the exercise of the Talisker Warrants. The Talisker Shares and Talisker Warrants were acquired by Avino for investment purposes.
On February 25, 2020 the Company exercised its Talisker Warrant to purchase 6,290,000 common shares. On that same date, the Company sold 3,000,000 common shares of Bralorne. Avino also madeTalisker. As a C$1,250,000 loan to Bralorne (in three tranches) to provide immediate working capital. The loan carried interest at 12% per annum,result of these transactions, the Company holds directly and the principal amount and accrued interest were secured by a general security agreement against all of the assets of Bralorne. On October 20, 2014, under a plan of arrangement, Bralorne shareholders received 2,636,845indirectly, 15,870,000 common shares of Avino, resulting in Bralorne becoming a wholly-owned subsidiaryTalisker representing approximately 9.6% of Avino. All unexercised outstanding stock options of Bralorne were cancelled, and BralornesTalisker common shares were delisted from the TSX Venture Exchange ("TSX-V") and the OTCQX.shares.
Avino’s remaining Mexican properties other than San Gonzalo and Avino, as well as its Canadian properties, are all in the exploration stage. In order to determine if a commercially viable mineral deposit exists in any of these properties, further geological work will need to be done, and based upon the results of that work a final evaluation will need to be made to conclude on economic and legal feasibility. The Company is currently focusing on extracting and processing resources at the San Gonzalo Mine and the Avino Mine, and exploration of the Avino property in Mexico and the Bralorne Mine project in British Columbia, Canada.Mine. The Company’s three other Canadian properties are not deemed to be material and are subject to care and maintenance for further exploration and evaluation, if any.
Competition
The mining industry in which the Company is engaged is highly competitive. Competitors include well-capitalized mining companies, independent mining companies and other companies having financial and other resources far greater than those of the Company. The Company competes with other mining companies in connection with the acquisition of gold, silver and other base metal properties. In general, properties with a higher grade of recoverable minerals and/or which are more readily mined afford the owners a competitive advantage in that the cost of production of the final mineral product is lower.
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Seasonality
Certain of our operationsexploration properties are conductedlocated in British Columbia and the Yukon Territory.Yukon. The weather during the colder seasons in these areas can be extreme and can cause interruptions or delays in our operations. As a result, the preferable time for activities in these regions is spring and summer when costs are more reasonable and access to the properties is easier. In the summer months, however, if the weather has been unusually hot and dry, access to the Company’s properties may be limited as a result of access restrictions being imposed to monitor the risks of forest fires.
Governmental Regulation
The current and anticipated future operations of the Company, including exploration and evaluation activities and extracting and processing resources on its properties, require permits from various federal, territorial and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that the Company obtain permits from various governmental agencies. The Company believes it is in substantial compliance with all material laws and regulations which currently apply to its activities. There can be no assurance, however, that all permits which the Company may require for construction of mining facilities and conduct of mining activities will be obtainable on reasonable terms or that such laws and regulations, or that new legislation or modifications to existing legislation, would not have an adverse effect on any exploration or mining project which the Company might undertake.
The Company believes it has obtained all necessary permits and authorizations required for its current exploration and mining activities. The Company has had no material costs related to compliance and/or permits in recent years, and it anticipates incurring necessary expenditures to maintain compliance in the future. Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Company and cause increases in capital expenditures which could result in a cessation of operations by the Company.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in exploration and mining activities may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations.
The enactment of new laws or amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or costs of extracting and processing resources or reductions in levels of extracting and processing resources at its mining properties or require abandonment or delays in the exploration and evaluation of new mining properties.
Governmental Regulation - Mexico
Mineral exploration and mining in Mexico is covered under the Mining Law as first published in June 1992, and most recently amended in August 2014. Mining activities in Mexico are administered by the Ministry of Economy. Environmental regulations are covered under “Ley General del Equilibrio Ecológio y la Protección al Ambiente” (General Law of Ecological Balance and Environmental Protection) and its regulations. Certain other environmental laws, including “Ley de Aguas Nacionales” (Law of National Waters) and “Ley Forestal” (Forestry Law) and their associated regulations may also cover certain operations. The kind of permits or authorizations required to conduct mining or mineral exploration operations in Mexico depend upon the type of operation. Common exploration activities do not require prior environmental authorization or licenses, but it is advisable to request a confirmation from the National Water Commission that planned operations will not affect the water table. It is also necessary to confirm that any planned operations will not be conducted in protected natural areas.
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Governmental Regulation - British Columbia
The Bralorne Mine holds a Mining Permit M-207 under the Mining Act of British Columbia as administered by the Ministry of Energy, Mines and Petroleum Resources (“EMPR”). A permit amendment for Permit M-207 was received in November 2017 updating the Permit to current standards approving the Tailings Storage Facility and allowing the company to restart the Bralorne Mine at 100 tons per day, which included incorporation of the updated Interim Closure and Reclamation Plan (“ICRP”) and a Closure and Reclamation Plan Update 2018. All Permit conditions are currently being met. An additional permit amendment to Permit M-207 to allow for expansion beyond the 100 tons per day is currently being contemplated by the Company.
The Bralorne Mine holds an Emissions Permit #14479 and an Effluent Permit #14480 under the Ministry of Environment (British Columbia) which are both current. In October 2018, the Company received a Permit Amendment for expanded water treatment under the Effluent Permit #14480 which encompasses a broader scope for water management at the site, including greater volumes and waste disposal for the Best-Available-Technology (BAT) Water Treatment Plant.
Mining activities in British Columbia are subject to the Mines Act and the Health, Safety and Reclamation Code (the “Code”), which are administered by the EMPR, and in particular its Mines and Minerals Resource Division, as well as the Chief Inspector of Mines. Mining permits are issued upon meeting certain conditions, including the provision of a security reclamation bond, and mining activities are regularly inspected for compliance with the Code. At this time, our three properties located in British Columbia are in the care and maintenance phase.
C. Organizational structure
The Company’s Mexican subsidiaries are the wholly ownedwholly-owned subsidiary Oniva Silver and Gold Mines S.A. de C.V., referred to as “Oniva”, the wholly-owned subsidiary Nueva Vizcaya Mining S.A. de C.V., referred to as “Nueva Vizcaya”, Promotora, in which the Company has direct ownership of 79.09%, and Avino Mexico in which the Company has a 98.45% direct ownership and an additional 1.22% indirect ownership held through Promotora. The Company’s total effective ownership interest in Avino Mexico is 99.67%. All of these subsidiaries are incorporated under the laws of Mexico. The Company also ownspreviously owned 100% of Bralorne Gold Mines Ltd., incorporated in British Columbia, Canada.Canada which was sold during calendar 2019.
D. Property, plant and equipment
The Company iswas extracting resources and processing it to yield a bulk silver/gold concentrate at the San Gonzalo Mine ceasing operations in 2019 and a copper concentrate from the Avino Mine, both of which are located on the Avino property in Durango, Mexico. The Company is also exploring options to re-process a large tailings resource left from past mining on the Avino property. In addition, we have optioned the Eagle Claims in the Yukon to Alexco Resource Corp. and are exploring our remaining gold and silver projects in Canada.
All of the Company’s mineral property interests in Canada are wholly-owned by the Company. In Mexico, the Company has a 99.67% interest in Avino Mexico, a Mexican company which is involved in the mining of commercial resources and resource exploration and evaluation, including the operation of the Avino and San Gonzalo Mines.
The Company owns and manages its Canadian properties. Exploration in Canada iswas previously focused on the Bralorne Mine project in southwest British Columbia which was acquired by the Company in 2014. The Bralorne Mine project iswas considered in the advanced exploration phase and extracting and processing resources at trial levels took place between 2011 and 2014. In addition tocalendar 2019, the Company sold the Bralorne Mine project,Mine. Avino has in recent years conducted limited prospecting, trenching and drill programs on the Eagle (which has beenwas optioned to Alexco Resource Corp.) and returned to the Company), Olympic-Kelvin, and Minto properties.
The Company uses detailed sampling to provide the basis for quality estimates and grades of its mineral discoveries. Samples are collected under the supervision of a qualified person who then follows procedures for the collection, sample preparation and chain of custody guidelines for the shipment of the samples to a certified commercial laboratory as set out in National Instrument 43-101. These commercial labs have standard Quality Assurance/Quality Control protocols in place for the various assaying methods that are being used on the samples. In addition, blanks, standards and duplicates are generally used to confirm the validity of the results before they are reported.
Avino Property, Durango, Mexico
Location
The property is located in Durango State in North Central Mexico, within the Sierra Madre Silver Belt on the eastern edge of the Sierra Madre Occidental mountain range. The nearest major center is the city of Durango, 82 km to the southwest of the property. The property is within the municipality of Pánuco de Coronado between the towns of Pánuco de Coronado and San José de Avino. The property is located at latitude N 24° 53’, longitude W 104° 31’, 14 km northwest of Highway 40D.
23 |
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The property is situated as illustrated in the figures below:
General Property Location Map
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Regional Property Location Map
Accessibility and Local Resources
The property is accessible by road and is an important part of the local community from which skilled workers are available. Access is provided by Highway 40, a four-lane highway leading from Durango, past the airport and on to the city of Torreon in Coahuila. Successive turn-offs for the property are at Francisco I Madero, Ignacio Zaragoza, and San José de Avino (Slim 2005d).Avino. The Avino mineral concessions are covered by a network of dirt roads which provide easy transport access between all areas of interest on the Propertyproperty and the mill at the main Avino Mine (Gunning 2009).Mine.
The nearest major city is Durango, with a population of approximately 600,000. Durango is a major mining center in Mexico where experienced labour and services can be obtained. The two towns nearest the mine are Pánuco de Coronado and San José de Avino, where the majority of the employees live while working at the mine. Pánuco de Coronado has a population of approximately 12,000, and San José de Avino is a small center with a population of less than 1,000.
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Geology and Mineralization
The property is located within the Sierra de Gamon, on the east flank of the Sierra Madre Occidental. The area is a geological window into the Lower Volcanic series and consists mainly of volcanic flows, sills, and tuffaceous layers of andesite, rhyolite, and trachyte. Individual rock units vary from 300 to 800 m in thickness. Andesitic rocks outcrop over most of the region with other rock types occurring more sparsely to the north (Slim, 2005d).north.
A large monzonitic intrusion is observed in the region in the form of dykes and small stocks, which appear to be linked to the onset of the Avino vein mineralization. Other post-mineralization dykes of intermediate to felsic composition outcrop in various areas and appear to cause minor structural displacements. Several mafic sills are also found in various parts of the region and are related to recent volcanism.
Regionally, the Avino concession is situated within a 12 km north-south by 8.5 km caldera, which hosts numerous low sulphidation epithermal veins, breccias, stockwork and silicified zones. These zones grade into a “near porphyry” environment, particularly in the Avino Mine area. The caldera has been uplifted by regional north trending block faulting (a graben structure), exposing a window of andesitic pyroclastic rocks of the lower volcanic sequence, a favourable host rock, within the caldera. This sequence is overlain by rhyolite to trachytes with extensive ignimbrite layers forming the upper volcanic sequence and is intruded by monzonite bodies. The basal andesite-bearing conglomerate and underlying Paleozoic basement sedimentary rocks (consisting of shales, sandstones and conglomerates) have been identified on the Avino concession in the south-central portion of the caldera, covering the Guadalupe, Santiago, San Jorge, the San Gonzalo Trend, Malinche, Porterito and Yolanda areas. A northerly trending felsic dyke, probably a feeder to the upper volcanic sequence, transects the Property and many of the veins. The Aguila Mexicana low temperature vein system, with significant widths but overall low precious metal values, trends north-northwest, similar to the felsic dyke and with similar continuity across the property. The two structures may occupy deep crustal faults that controlled volcanism and mineralization, with the felsic dyke structure controlling the emplacement of the Avino, Nuestra Senora and El Fuerte-Potosina volcanic centres and the Aguila Mexicana controlling the Cerro San Jose and El Fuerte-Potosina volcanic centres (Paulter 2006).
Silver-Silver and gold-bearing veins cross-cut the various lithologies, and they are generally oriented north-northwest to south-southeast and northwest to southeast. The rocks have been weathered and leached in the upper sections, as a result of contact with atmospheric waters. The oxide tailings material is primarily from this source, whereas the sulphide tailings are predominantly from material sourced at depth from the underground workings. In Mexico, these types of deposits can have large lateral extents, but can be limited in the vertical continuity of grades.
The minerals found during the period of mining of the oxide zone were reported to be argentite, bromargyrite, chalcopyrite, chalcocite, galena, sphalerite, bornite, native silver, gold and native copper. The gangue minerals include hematite, chlorite, quartz, barite, pyrite, arsenopyrite and pyrrhotite. Malachite, anglesite, and limonite are common in the quartz zones of the weathered parts of the oxide material.
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Perspective View of the Property Looking North and Showing the Three Deposits
Property Ownership
The current PropertyAvino property is comprised of 23 mineral concessions, totalling 1,103.934 ha.
In 1968, Avino Mines and Resources Ltd. acquired a 49% interest in Avino Mexico and Minera San José de Avino SA, which together held mineral claims totalling 2,626 ha (6,488 ac). Avino Mines and Resources Ltd. retained Vancouver-based Cannon-Hicks & Associates Ltd. (Cannon-Hicks), a mining consulting firm, to conduct the exploration and development of the Property. Cannon-Hicks exploration activities included surface and underground sampling and diamond drilling (VSE 1979).
In early 1970, Avino Mines and Resources Ltd. signed a letter of intent with Denison Mines Ltd. for the future development of the Avino Mine. However, a formal agreement was never signed.
In May 1970, Avino Mines and Resources Ltd. signed a formal agreement with Selco Mining and Development (Selco), a division of Selection Trust Company. Due to other commitments, Selco abandoned its interest in the Project in 1973 (VSE 1979).
In October 1973, Avino Mines and Resources Ltd. signed a new agreement with S.G.L. Ltd. and Sheridan Geophysics Ltd. Under the terms of the agreement, S.G.L. Ltd. was to provide up to $500,000 plus the management to erect a resource processing plant. The agreement provided for the return of the capital from first cash flow, plus a management fee and interest payment together with an option to convert a portion of the advanced funds to common shares. The agreement with S.G.L. Ltd. was terminated in mid-1976.
On July 17, 2006, the Company completed the acquisition of Compañía Minera Mexicana de Avino, S.A. de C.V. (“Avino Mexico”), a Mexican corporation, through the acquisition of an additional 39.25% interest in Avino Mexico, which combined with the Company’s pre-existing 49% share of Avino Mexico, brought the Company’s ownership interest in Avino Mexico to 88.25%. The additional 39.25% interest in Avino Mexico was obtained through the acquisition of 79.09% of the common shares of Promotora Avino S.A. de C.V., referred to as “Promotora”, which in turn owns 49.75% of Avino Mexico’s common shares, and the direct acquisition of 1% of the common shares of Avino Mexico.
The July 17, 2006, acquisition was accomplished by a share exchange by which the Company issued 3,164,702 shares as consideration, which we refer to as the “Payment Shares”, for the purchase of the additional 39.25% interest in Avino Mexico. The Payment Shares were valued based on the July 17, 2006 closing market price of the Company’s shares on the TSX-V.
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The Company acquired a further 1.1% interest in Avino Mexico through the acquisition from an estate subject to approval and transfer of the shares to the Company by the trustee for the estate. On December 21, 2007, approval was received and the Company obtained the 1.1% interest from the estate for no additional consideration.
On February 16, 2009, the Company converted existing loans advanced to Avino Mexico into new additional shares of Avino Mexico. As a result, the Company’s ownership interest in Avino Mexico increased to 99.28%.
On June 4, 2013, the Company converted existing loans advanced to Avino Mexico into new additional shares of Avino Mexico, resulting in the Company’s ownership increasing by 0.38% to an effective 99.67%. The issuance of shares to the Company by Avino Mexico on June 4, 2013 resulted in a reduction in the non-controlling interest from 0.72% to 0.34%.
On August 26, 2015, the Company converted existing loans advanced to Avino Mexico into new additional shares, resulting in an increase of the Company’s ownership by 0.01% to an effective 99.67%. The intercompany loans and investments are eliminated upon consolidation of the financial statements. The Company had a pre-existing effective ownership interest of 99.66% in Avino Mexico prior to the 0.01% increase. The issuance of shares to the Company by Avino Mexico on August 26, 2015, resulted in a reduction in the non-controlling interest from 0.34% to 0.33%.
Summary of Property Ownership
Company |
| Relationship to
Gold Mines Ltd. |
|
| Effective Ownership of |
| ||
Avino Mexico |
| Subsidiary |
|
|
| 98.45 |
| |
Promotora Avino, S.A. de C.V. |
| Subsidiary |
|
|
| 1.22 |
| |
Total Effective Ownership of Avino Mine Property |
|
| - |
|
|
| 99.67 |
|
Estate of Ysita |
| Non-controlling interest |
|
|
| 0.33 |
| |
Total |
|
| - |
|
|
| 100.00 |
|
Mineral Concessions and Agreements
The current Propertyproperty is comprised of 23 mineral concessions, totalling 1,103.934 ha. Of these, 22 mineral concessions totalling 1,005.104 ha, are held by Avino Mexico, (Avino’s Mexican subsidiary company), Promotora Avino SA de CV, and Susesion de la Sra. Elena del Hoyo Algara de Ysita. Ownership proportions and mineral concessions are summarized in the tables following the next paragraphs regarding Claim Staking and Mineral Tenure in Mexico.
Claim Staking and Mineral Tenure in Mexico
In 1992, a new Mining Law was enacted and has been amended from time to time since then. In general, and for North American companies in particular, Mexican law permits direct or indirect 100% foreign ownership of exploration and mining properties. For practical purposes, most foreign companies establish Mexican subsidiaries. Mining companies are subject to the normal corporate income tax rate of 30%. Further, in 2014 the Mexican Government enacted a new tax reform which includes a 7.5% mining royalty calculated as taxable revenues (except interest and inflationary adjustment), less allowable deductions for income tax purposes (excluding interest, inflationary adjustment, mining concessions and depreciation and depletion), less exploration expenses, and a 0.50% mining royalty on the sale of silver and gold.
In December 2005, amendments to the mining law eliminated the distinction between “exploration” and “exploitation” concessions. Currently, the mining act and regulations provide solely for mining concessions (Concesiones Mineras), which are issued for a term of fifty years, renewable for an additional term of fifty years.
Owners of mining concessions are obliged to:
| · | Execute work under the terms and conditions established in the mining law; |
| · | |
Pay fees to the Secretaria de Economia on a semi-annual basis; | ||
| · | |
Locate on the ground a starting point (mojonera) for the location of the concession, and maintain the mojonera in good condition; | ||
| · | |
Begin work on the concession within 90 days of receiving the mining title; | ||
| · | |
File annual reports describing the work completed and the amount spent doing the reported work; | ||
| · | |
The Direccion General de Minas (“DGM”) has the right to audit the receipts and verify that reported work was completed in the field; and | ||
| · | |
Failure to comply with the obligations or to assist the DGM with an audit will result in cancellation of the mining concession. |
Table of Contents |
Mineral Concessions – Avino Property
Concession Name |
| Concession No. |
| Claim Type |
| Location |
| Hectares (ha) |
| Date Acquired |
| Expiration Date |
| Cost (US$/ha) |
| Payment (US$) |
|
| Concession |
|
| Claim Type |
| Location |
| Hectares |
|
| Date |
| Expiration |
| Cost |
|
| Payment |
| |||||||||||
Agrupamiento San Jose (Purisma Chica) |
| 155597 |
| Lode |
| Pánuco |
| 136.708 |
| 30/09/1971 |
| 29/09/2021 |
| 124.74 |
| 17,052.91 |
|
| 155597 |
| Lode |
| Pánuco |
| 136.708 |
| 30/09/1971 |
| 29/09/2021 |
| 124.74 |
| 17,052.91 |
| ||||||||||||||
Agrupamiento (San Jose) |
| 164985 |
| Lode |
| Pánuco |
| 8 |
| 13/08/1979 |
| 12/8/2029 |
| 124.74 |
| 997.92 |
|
| 164985 |
| Lode |
| Pánuco |
| 8 |
| 13/08/1979 |
| 12/8/2029 |
| 124.74 |
| 997.92 |
| ||||||||||||||
Agrupamiento San Jose (El Trompo) |
| 184397 |
| Lode |
| Pánuco |
| 81.547 |
| 13/10/1989 |
| 12/10/2039 |
| 124.74 |
| 10,172.12 |
|
| 184397 |
| Lode |
| Pánuco |
| 81.547 |
| 13/10/1989 |
| 12/10/2039 |
| 124.74 |
| 10,172.12 |
| ||||||||||||||
Agrupamiento San Jose (Gran Lucero) |
| 189477 |
| Lode |
| Pánuco |
| 161.468 |
| 5/12/1990 |
| 4/12/2040 |
| 124.74 |
| 20,141.57 |
|
| 189477 |
| Lode |
| Pánuco |
| 161.468 |
| 5/12/1990 |
| 4/12/2040 |
| 124.74 |
| 20,141.57 |
| ||||||||||||||
Agrupamiento San Jose (San Carlos) |
| 117411 |
| Lode |
| Pánuco |
| 4.451 |
| 5/2/1961 |
| 16/12/2061 |
| 124.74 |
| 555.16 |
|
| 117411 |
| Lode |
| Pánuco |
| 4.451 |
| 5/2/1961 |
| 16/12/2061 |
| 124.74 |
| 555.16 |
| ||||||||||||||
Agrupamiento San Jose (San Pedro Y San Pablo) |
| 139615 |
| Lode |
| Pánuco |
| 12 |
| 22/06/1959 |
| 21/06/2061 |
| 124.74 |
| 1,496.88 |
|
| 139615 |
| Lode |
| Pánuco |
| 12 |
| 22/06/1959 |
| 21/06/2061 |
| 124.74 |
| 1,496.88 |
| ||||||||||||||
Aguila Mexicana |
| 215733 |
| Lode |
| Pánuco |
| 36.768 |
| 12/3/2004 |
| 29/06/2044 |
| 70.88 |
| 2,606.12 |
|
| 215733 |
| Lode |
| Pánuco |
| 36.768 |
| 12/3/2004 |
| 29/06/2044 |
| 70.88 |
| 2,606.12 |
| ||||||||||||||
Ampliacion La Malinche |
| 204177 |
| Lode |
| Pánuco |
| 6.01 |
| 18/12/1996 |
| 17/12/2046 |
| 124.74 |
| 749.72 |
|
| 204177 |
| Lode |
| Pánuco |
| 6.01 |
| 18/12/1996 |
| 17/12/2046 |
| 124.74 |
| 749.72 |
| ||||||||||||||
Ampliacion San Gonzalo |
| 191837 |
| Lode |
| Pánuco |
| 5.85 |
| 19/12/1991 |
| 18/12/2041 |
| 124.74 |
| 729.67 |
|
| 191837 |
| Lode |
| Pánuco |
| 5.85 |
| 19/12/1991 |
| 18/12/2041 |
| 124.74 |
| 729.67 |
| ||||||||||||||
Avino Grande Ix |
| 216005 |
| Lode |
| Pánuco |
| 19.558 |
| 2/4/2002 |
| 1/4/2052 |
| 70.88 |
| 1,386.24 |
|
| 216005 |
| Lode |
| Pánuco |
| 19.558 |
| 2/4/2002 |
| 1/4/2052 |
| 70.88 |
| 1,386.24 |
| ||||||||||||||
Avino Grande Viii |
| 215224 |
| Lode |
| Pánuco |
| 22.882 |
| 14/02/2002 |
| 13/02/2052 |
| 70.88 |
| 1,621.85 |
|
| 215224 |
| Lode |
| Pánuco |
| 22.882 |
| 14/02/2002 |
| 13/02/2052 |
| 70.88 |
| 1,621.85 |
| ||||||||||||||
El Caracol |
| 215732 |
| Lode |
| Pánuco |
| 102.382 |
| 12/3/2002 |
| 28/04/2044 |
| 70.88 |
| 7,256.84 |
|
| 215732 |
| Lode |
| Pánuco |
| 102.382 |
| 12/3/2002 |
| 28/04/2044 |
| 70.88 |
| 7,256.84 |
| ||||||||||||||
El Potrerito |
| 185328 |
| Lode |
| Pánuco |
| 9 |
| 14/12/1989 |
| 13/12/2039 |
| 124.74 |
| 1,122.66 |
|
| 185328 |
| Lode |
| Pánuco |
| 9 |
| 14/12/1989 |
| 13/12/2039 |
| 124.74 |
| 1,122.66 |
| ||||||||||||||
Fernando |
| 205401 |
| Lode |
| Pánuco |
| 72.129 |
| 29/08/1997 |
| 28/08/2047 |
| 124.74 |
| 8,997.33 |
|
| 205401 |
| Lode |
| Pánuco |
| 72.129 |
| 29/08/1997 |
| 28/08/2047 |
| 124.74 |
| 8,997.33 |
| ||||||||||||||
La Estela |
| 179658 |
| Lode |
| Pánuco |
| 14 |
| 11/12/1986 |
| 12/12/2036 |
| 124.74 |
| 1,746.36 |
|
| 179658 |
| Lode |
| Pánuco |
| 14 |
| 11/12/1986 |
| 12/12/2036 |
| 124.74 |
| 1,746.36 |
| ||||||||||||||
La Malinche |
| 203256 |
| Lode |
| Pánuco |
| 9 |
| 28/06/1996 |
| 27/06/2046 |
| 124.74 |
| 1,122.66 |
|
| 203256 |
| Lode |
| Pánuco |
| 9 |
| 28/06/1996 |
| 27/06/2046 |
| 124.74 |
| 1,122.66 |
| ||||||||||||||
Los Angeles |
| 154410 |
| Lode |
| Pánuco |
| 23.713 |
| 25/03/1971 |
| 24/03/2021 |
| 124.74 |
| 2,957.96 |
|
| 154410 |
| Lode |
| Pánuco |
| 23.713 |
| 25/03/1971 |
| 24/03/2021 |
| 124.74 |
| 2,957.96 |
| ||||||||||||||
Negro Jose |
| 218252 |
| Lode |
| Pánuco |
| 58 |
| 17/10/2002 |
| 16/10/2052 |
| 70.88 |
| 4,111.04 |
|
| 218252 |
| Lode |
| Pánuco |
| 58 |
| 17/10/2002 |
| 16/10/2052 |
| 70.88 |
| 4,111.04 |
| ||||||||||||||
San Gonzalo |
| 190748 |
| Lode |
| Pánuco |
| 12 |
| 29/04/1991 |
| 28/04/2041 |
| 124.74 |
| 1,496.88 |
|
| 190748 |
| Lode |
| Pánuco |
| 12 |
| 29/04/1991 |
| 28/04/2041 |
| 124.74 |
| 1,496.88 |
| ||||||||||||||
San Martin De Porres |
| 222909 |
| Lode |
| Pánuco |
| 30 |
| 15/09/2004 |
| 14/09/2054 |
| 70.88 |
| 2,126.40 |
|
| 222909 |
| Lode |
| Pánuco |
| 30 |
| 15/09/2004 |
| 14/09/2054 |
| 70.88 |
| 2,126.40 |
| ||||||||||||||
Santa Ana |
| 195678 |
| Lode |
| Pánuco |
| 136.182 |
| 14/09/1992 |
| 13/09/2042 |
| 124.74 |
| 16,987.38 |
|
| 195678 |
| Lode |
| Pánuco |
| 136.182 |
| 14/09/1992 |
| 13/09/2042 |
| 124.74 |
| 16,987.38 |
| ||||||||||||||
Yolanda |
|
| 191083 |
|
| Lode |
| Pánuco |
|
| 43.458 |
|
| 29/04/1991 |
| 28/04/2041 |
|
| 124.74 |
|
|
| 5,420.91 |
|
|
| 191083 |
|
| Lode |
| Pánuco |
|
| 43.458 |
|
| 29/04/1991 |
| 28/04/2041 |
|
| 124.74 |
|
|
| 5,420.91 |
|
Total hectares |
|
|
|
|
|
|
|
|
| 1,005.106 |
|
|
|
|
|
|
| 110.29 |
|
|
| 110,856.58 |
|
|
|
|
|
|
|
|
| 1,005.106 |
|
|
|
|
|
|
| 110.29 |
|
|
| 110,856.58 |
|
Note: Concession “La Platosa” is not included because it is not held by Avino.
Table of Contents |
Map of Avino Mine Property Concessions
Table of Contents |
On February 18, 2012, through its subsidiary company Avino Mexico, Avino re-entered into an agreement (the Minerales Agreement) with Minerales de Avino, S.A. de C.V. (“Minerales”), whereby Minerales has indirectly granted to Avino the exclusive mining and occupation rights to the La Platosa concession. The La Platosa concession covers 98.83 ha and hosts the Avino vein and ET Zone.
Pursuant to the Minerales Agreement, Avino has the exclusive right to explore and mine the concession for an initial period of 15 years, with the option to extend the agreement for another 5 years. In consideration of the grant of these rights, Avino must pay to Minerales the sum of $250,000, by the issuance of common shares of Avino. Avino will have a period of 24 months for the development of mining facilities.
Avino has agreed to pay to Minerales a royalty equal to 3.5% of NSRs. If at the commencement of commercial production from the property the monthly processing rate of the mine facilities is less than 15,000 tonnes, then Avino must pay to Minerales in any event a minimum royalty equal to the applicable NSR royalty based on processing at a minimum monthly rate of 15,000 tonnes. In the event of a force majeure, Avino shall pay the minimum royalty as follows:
| · | first quarter: payment of 100% of the minimum royalty; |
| · | |
second quarter: payment of 75% of the minimum royalty; | ||
| · | |
third quarter: payment of 50% of the minimum royalty; | ||
| · | |
fourth quarter: payment of 25% of the minimum royalty; and | ||
| · | |
in the case of force majeure still in place after one year of payments, payment shall recommence at a rate of 100% of the minimum royalty and shall continue being made as per the quarterly schedule. |
Minerales has also granted to Avino the exclusive right to purchase a 100% interest in the concession at any time during the term of the Minerales Agreement (or any renewal thereof), upon payment of $8 million within 15 days of Avino’s notice of election to acquire the Property. The purchase would be completed under a separate purchase agreement for the legal transfer of the concession. This agreement replaces all other previous agreements.
During the month of May of each year, Avino must file assessment work made on each concession for the immediately preceding calendar year. During the months of January and July of each year, Avino must pay in advance the mining taxes which are based on the surface of the concession and the number of years that have elapsed since it was issued.
Consistent with the mining regulations of Mexico, cadastral surveys have been carried out for all the listed mineral concessions as part of the field staking prior to recording (Slim 2005d).recording. It is believed that all concessions are current and up to date. Mineral concessions in Mexico do not include surface rights. Avino has entered into agreements with communal land owners (Ejidos) of San José de Avino, for the temporary occupation and surface rights of the concessions.
Based on a review of documents, issued title certificates and the unhindered residence on the Property, Tetra Tech has verified that Avino owns the concessions through its Mexican subsidiary company, Avino Mexico, and that there is no indication of any encumbrances at the site. Furthermore, the legal document prepared by Jesús Bermúdez Fernández, dated February 18, 2012, delineating the terms of the agreement on the La Platosa concession has been sourced for information.
History
Avino Mine
The Avino deposit was originally discovered around 1555 by the Spanish conquistador, Don Francisco de Ibarra. In 1562, Francisco de Ibarra, was appointed governor of the newly formed province of Nueva Vizcaya, in the Viceroyalty of Nueva España (New Spain) and, in 1563, founded the town of Durango. Francisco de Ibarra led several expeditions in search of silver deposits in the region and is recognized as having established Minas de Avino, present day Avino Mine; San Martín, Durango; and Pánuco, Sinaloa. Mining activities at the Avino Mine are said to have commenced in 1562-1563 and continued up to the onset of the War of Independence (1810) when operations were interrupted but later continued through to the Mexican Revolution the early 1900s.
In 1880, the mines were taken over by Avino Mines Ltd., a company controlled by American and English interests. With aid of new industrial technology the Avino Mine developed into a more efficient mining operation. By 1908, the Avino Mine was considered one of the largest open pit mines in the world and equipped with one of the largest smelters (Gallegos 1960; Bannon 1970; VSE 1977; Slim 2005d).
During the outbreak of the Mexican Revolution in 1910, proceeds from the mine supplied funds to the revolutionary forces. Since much of the fighting occurred in and around Durango and the risk posed by brigands hiding in the mountains was high, the mine was abandoned in 1912.
31 |
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Between 1912 and 1968, the mine was worked intermittently on a very small scale (Avino Annual Report 1980). There is no known historical record of production from the Avino Mine during this period. The Avino Property was acquired under current ownership in 1968.
In 1968, the current operators of the Avino property acquired an initial 49% interest in the property. Initial mining was by open-cut in the oxide material from 1976 until 1992 when the stripping ratio was becoming excessive and sulphide content increasing, at which date the extraction was transferred to underground. This necessitated a mill change from the prior lead concentrate production to one of copper carrying silver and gold. In the 1990s a larger ball mill was installed to increase throughput to 1,000 t/d.
During the underground mining period starting in 1992, Trackless mining was adopted, with all underground advancement headings sized at 4m x 4m. Mine access from surface was by a spiral ramp from a portal on the south side of the hill and there is a secondary ramp– Rampo El Trompo – on the north side, close to the maintenance shop.
Production was by sub-level stoping with a sub-vertical increment restricted from 11m to 15m to countermine dilution arising from an occasional, semi-incompetent hanging-wall. Stopes were started by raising, and then slashing to the designated width. Blasting was by parallel holes drilled with a traditional drill wagon. Rib and sill pillars were left but are generally considered as non–recoverable.
Standard mine development was by using boom jumbo with waste being dumped where possible into old stopes. Ore mucking and haulage was by scoop tram and dumped on surface at the main portal. The ore was then picked up and transferred to the plant ROM hopper about 300 m away.
A surface-stacked, downstream tailings-system was adopted with cyclones on the tails discharge line to provide coarse wall-material. Decant water was recovered by a back-slope gradient and pumping, for mill re-circulation. A second, stepped-back bench was created, possibly about 1986 or 1987. A third bench was started, apparently in 1990, with about two years placement of final oxide material then continued with the sulphide tails.
The Avino Mine and processing plant were serviced by a heavy equipment repair shop, mechanical and electrical shops, assay office, metallurgical laboratory, warehouse and other auxiliary facilities. Electric power was supplied by the government-owned Federal Electricity Commission.
In November 2001, delays in payments, low metals prices and the closure of the toll smelter led to the suspension of mine operations. During the 27-year period of extracting and processing resources starting in 1974, output from the Avino mine totalled approximately 497 tons of silver, three tons of gold, and 11,000 tons of copper. When mining activities stopped, level 12 of the mine had been reached.
The property was mainly dormant from 2002 to 2006, largely due to low copper and silver prices.
San Gonzalo Mine
The history of the San Gonzalo deposit is not well known. Shallow workings from an old mine are present in the San Gonzalo vein, and they consist of small underground workings which were originally accessed by a five-level vertical shaft. These workings were sampled by M. Evans in 1954. The workings are accessible through a raise that was driven in 2012 which is being used for ventilation. No attempts have been made to duplicate the results of the 1954 sampling. The limits of past workings have been taken from old maps but are assumed to be reasonably accurate (Gunning 2009).accurate.
Current Condition
San Gonzalo Mine
Avino gained control of the property in July 2006 and exploration (see exploration section below) resumed that year; this led to the discovery of new mineralization at San Gonzalo.
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The original underground workings extend over an area approximately 150 m along strike and 136 m in depth. In 2007-08 Avino conducted a 42-hole, 9,204 meter drill program to explore the San Gonzalo deposit. Drilling produced encouraging results which were input into a resource calculation in 2009.
Following a 2009 mineral resource estimate, independently verified preliminary metallurgical testing on a composite sample of San Gonzalo material was completed at SGS Minerals Services in Durango, Mexico. The results indicated the silver and gold minerals from the San Gonzalo vein at lower levels would respond favorably to flotation with gold recoveries of 89 to 90% and silver recoveries of 92 to 93%.
The San Gonzalo mining activities began in January 2010. DMG, the mining contractor, was contracted to provide this service. Their original scope of work was to drive the main haulage decline to level 2 and to intersect the vein; drift and sample to the east and the west on the vein, and to determine the extent of the mineralized zones and to extract the 10,000 tonne bulk sample for testing as per the recommendations of the Orequest Mineral Resource Estimate Report. A smaller decline to level 1 was also commissioned and its purpose was for ventilation and an escape route once the two levels were connected by raises from level 2 to level 1. This scope of work was extended with the successful completion of the bulk sample program, and mining continued with the aim of developing San Gonzalo to a state whereby it could provide mill feed at the rate of 250 tonnes per day on a sustained basis.
Processing of San Gonzalo material began in late November 2010 in the newly refurbished 250 tonne per day bulk flotation circuit. Testing with extracted material was performed initially to ensure the circuit was operating satisfactorily before the bulk sample test with material from the stopes began in January of 2011. The bulk sample test continued until early April 2011 when the limit of 10,000 tonnes was achieved for the independent verification. Processing of the remaining San Gonzalo material on stockpile continued until the middle of May. During this period of November 2010 to May 2011, the plant processed a total of 19,850 tonnes leaving approximately 14,798 tonnes remaining on stockpile in inventory by calculation.
The majority of the concentrate processed during the bulk sample test was sold and the assays from the concentrate sale were used to reconcile the mill balance as reported following the verification of the bulk sampling results. All the remaining concentrate processed from the extracted material was shipped and sold early in 2012.
Following the completion of the bulk sample which was comprised of material from levels 1 and 2, mine advancement at San Gonzalo has been ongoing. In 2012, the remaining material from the stopes on level 2 was mined and brought to the surface. During 2012, level 3 was the main focus of mining activities with two stopes having been developed and partially extracted by the end of the year. By the end of July, a decline from level 3 to level 4 had been completed and work on the ramp to level 5 had commenced. By year-end, level 5 had been reached and stope advancement on level 4 was underway. Underground advancement for 2012 totaled 2,558 meters consisting of ramp advancement, cross cuts, drifts and raises.
During 2013 the extraction of resources came mainly from level 4. Advancement of level 5 was ongoing and by year end a sampling program totaling 440 meters had been completed. The ramp from level 5 to level 6 had been completed by April 2014.
During 2014, mine exploration and advancement included the discovery of significant additional mineralization along strike to the southeast while drifting on level 5. These areas had not previously been considered for mining. Following this discovery, the extension of this new mineralized zone was explored on levels 2 through 6. Previous exploration did not encounter this area as the vein had pinched out and an offset of the vein was not considered at that time. During 2014, extraction of resources came primarily from levels 5 and 6 as well as from mined material from the new zone on level 3. Advancement work on level 6 continued throughout the fourth quarter, and by year end the main haulage ramp had progressed past the level 7 elevation of 2,043 meters above sea level towards level 8.
During 2015, San Gonzalo mill feed came primarily from stopes on levels 4, 5 and 6. During the second quarter, the ramp advance was deferred (at 70 metres below level 7) in favor of using the mining equipment to advance levels 5, 6 and 6.5 laterally along the San Gonzalo structure to the East and West where the new mineralized zones were identified in 2014.
During 2016, San Gonzalo mill feed came from stopes on level 4, 5, 6 and 7 with the bulk of the tonnage coming from stopes 4-050, 5-030, 5-500, 5-600, 6-030, 6-100 and 7-070.
In 2017, San Gonzalo mill feed came from stopes on levels 4, 5, 6 and 7 with most of the tonnage coming from stopes 4-020, 6-030, 6.5-070 and 7.5-200. Smaller amounts came from 5-020 and 5-030.
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In 2018, San Gonzalo mill feed came from stopes on levels 2, 3, 4, 5 and 6 with most of the tonnage coming from stopes 3-020, 4-010, 4-020, 5-010, 6-020 and 6.5-070. Smaller amounts came from 2-380 and 6.5-100.
Access to the underground at San Gonzalo is via a 4m by 4m decline developed at -12%. The decline is developed at about 20m to 25m from the mineralized material. San Gonzalo is using shrinkage mining for the narrower mineralized material, ~1.4m in width and cut and fill mining for mineralized material wider than 2m.
The San Gonzalo Mine has been the subject of threefour mineral resource estimates, the most recent of which was published on February 21, 2018, as amended on December 19, 2018;January 13, 2021; please see the section below on Mineral Resource Estimates for more details.
Avino Mine
In February 2012, a new long-term royalty agreement was signed to grant Avino mining rights to the main Avino vein. At the time of signing this agreement, Avino planned to refurbish the existing 1,000 TPD circuit to process the material from the main Avino vein.
To resume underground advancement at the Avino Mine, the existing underground workings had to be de-watered; the dewatering process was completed in May 2014. The process lasted for a total of 482 days, and successfully removed 1,013,069 cubic meters of acidic water which was then treated for the removal of base metals using lime. The treated water, which met agricultural standards for discharge, was used for mill processes and the excess was gravity fed to the Company-built La Caricol dam; sludge from the water treatment plant was disposed of in the tailings storage facility.
Following dewatering and rehabilitation of the haulage ramp, underground mining activities re-commenced at the Avino Mine. Full scale mining began at level 11.5 with drifts heading east and west along the vein during the third quarter of 2014. By the end of 2014, a total of 877 metres of underground advancement had taken place on levels 11.0 and 12.0 with the haulage ramp advancing to level 12.5.
Initially, new material from underground at Avino was processed on a limited scale using the existing 250 TPD Mill Circuit 2. By year end, rehabilitation of the 1,000 TPD Mill Circuit 3 had been completed and sufficient material had been stockpiled; on January 1, 2015, the Company commenced testing of mining and milling methods at levels anticipated for full-scale activities.
During 2015, underground advancement totalled 5,056 metres and took place mainly in levels 12.5 to 14.5 with the ramp advancing to level 15. The breakdown of the advance in 2015 consisted of 2,855 metres of drifts, 785 metres of ramp, 1,050 metres of crosscuts and 366 metres of raises.
During 2016, underground advancement totaled 3,901 metres with the ramp advancing to level 16. Breakdown of the advance consisted of 1,489 metres of drifts, 415 metres of ramp 1,609 metres of crosscuts and 390 metres of raises. Production mining with the Trac Drill took place on levels 12, 12.5 and 14.5. Mill feed from development mining came from levels 14.5, 15, 15.5 and the crosscuts towards the hanging wall breccia on levels 12.5 and 14.5 where high gold values were encountered.
During 2017, underground advancement totaled 29052,905 metres with the ramp advancing to level 16.5. Breakdown of the advance consisted of 961 metres of drifts, 287 metres of ramp, 1,375 metres of crosscuts and 283 metres of raises. Production mining with the Trac Drill took place on all the developed levels up to level 15. Some mill feed from development mining came from levels 15.5 and 16.
In 2017, the Company announced plans to increase the throughput capacity of the processing plant by adding an additional 1,000 TPD circuit intended to process mill feed from another area of the Mine known as San Luis. The San Luis area of the Avino Mine was last mined in the 1990’s and is accessed through a separate portal located approximately 2 km from the main entrance of the Avino Mine (Elena Tolosa area). Current resources at San Luis were included in the most recent resource estimate on the Avino property, which can be found in Avino’s news release dated February 21, 2018
During 2018 work at San Luis was primarily focused on restoration of the main haulage ramp, which was completed during the third quarter. With the haulage ramp complete, work is underway to begin drifting on levels 6 and 6.5, followed by levels 7, 7.5, 8, 8.5 and 9. Most of these areas were partially developed during the 1980’s and 90’s prior to the mine’s closure. Underground development at San Luis was temporarily reduced to save costs in the third and fourth quarters. Mill feed from the San Luis area was processed using the 250 TPD Mill Circuit 2.
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During 2018, underground advancement totaled 3,462 metres with the ramp advancing to level 17. Breakdown of the advance consisted of 1,502 metres of drifts, 224 metres of ramp, 1,336 metres of crosscuts and 400metres400 metres of raises. Production mining with the Trac Drill took place on all the developed levels up to level 17. Some mill feed from development mining came from levels 15.5 and 16. The drill results were disclosed as follows:
| · | The Company announced drill results from Avino Open Pit Mine area on its press release dated December 4, 2018 and on Form |
| · | The Company announced drill results from the El Chirumbo and Guadalupe Area of the Avino Property on its press release dated July 11, 2018 and on Form |
| · | The Company announced drill results from its current exploration drill program on the El Chirumbo, |
Guadelupe, and San Juventino Area of the Avino Property on its press release dated February 6, 2018 and on Form 6K Guadelupe, and San Juventino Area of the Avino Property on its press release dated February 6, 2018 and on Form 6-K with SEC on the same date.
During 2019, underground advancement totaled 3,677 meters. There were no advancements with the ramp as level 17 is the deepest level of the mine currently. Breakdown of the advance consisted of 1578 metres of drifts, 1850 metres of crosscuts and 249 metres of raises. Production mining with the trac drill and jumbo took place on level 11.5, 12, 16.5 and 17 complemented with development mining mill feed from levels 12, 16.5 and 17.
A sampling campaign comprising 52 recent and historic holes that were previously drilled in the hanging-wall of the Avino vein stockwork system located on the Avino property. The drill results were disclosed as follows:
· | The Company announced drills results from the Hanging-Wall Breccia sampling campaign on its press release dated July 23 2019 and on Form 6-K with SEC on the same date; |
During 2020, underground advancement totaled 1,267 meters. There were no advancements with the ramp as level 17 is the deepest level of the mine currently. Production mining with the trac drill and jumbo took place on level 16.5 and 17.
The Avino Mine has been the subject of threefour mineral resource estimates, the most recent of which was published on February 21, 2018, as amended on December 19, 2018;January 13, 2021; please see the section below on Mineral Resource Estimates for more details.
Tailings Mineral Resource
Avino continues to explore options for exploiting the mine’smine's tailings resource left from past mining of the Avino Vein. The tailings are situated approximately 500 m west-southwest of the main shaft to the main Avino mine.
This asset includes oxide and sulphide tailings, each requiring separate treatment methods. The tailings mineral resource was created between 1976 and 2001 during Avino’sAvino's previous operation from both open pit (oxide tailings) then later underground (sulphide tailings) mining. Improved metals markets now potentially enable Avino to process the remaining silver and gold in the tailings.
The existing tailings storage facility is presently being used in connection with the operation of Mill Circuits 1, 2, 3 and 4. In 2017-8,2017-2019, the Company continued to evaluate plans to build a new tailings storage facility and other tailings storage options which is necessary to allow the existing TSF to be decommissioned, which will enable Avino to begin assessing the upper sulphide bench as well as the lower oxide bench in areas that are currently being used to store tailings from our active operations. The assessment work is part of the recommendations contained in a 2013 technical report intended to advance the oxide tailings mineral resource towards a production decision for an agglomerated heap leach Merrill-Crowe precipitation operation.
In 2019, the construction of the tailings thickener, which reduces water sent to the tailings facility, was completed and is now in full operation.
Also in 2019, a geomembrane was installed in a portion of the old historic open pit to allow for tailings deposition. Tailings were sent to this area starting in October 2019 and will continue into 2020.
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For longer term tailings storage the Company has been exploring the potential of dry stack tailings for another one of its permitted tailings storage facilities, which we refer to as, TSF#2.
For 2020, there were no changes to the tailings storage plans or the oxide tailings resource.
The oxide tailings were produced between 1974 and 1993 from open pit mining of the main Avino vein. For further details regarding the oxide tailings, please see the sections below titled: Mineral Resource Estimates and Preliminary Economic Assessment on the Oxide Tailings Resource or the Company’s Technical Report on the Avino Property, dated February 21, 2018, as amended on December 19, 2018.January 13, 2021.
Project Infrastructure
The Avino Mine is connected to the local power grid with a line capacity quoted at 4 MW when the mine last operated in 2001. With the shutdown, much of this excess power was diverted to the surrounding towns in the district. Between 2001 and 2016 the powerline provided only 1,000 kW of power with 500 kW servicing the mill, 400 kW for San Gonzalo and the balance for the well at Galeana, the employee accommodation facility and water reclamation from the tailings dam. In 2009 a power line to the San Gonzalo Mine was built to replace the contractor’s diesel generator used during mine advancement.
Discussions with CFE, the federal electricity commission in Mexico, on a new 34.5kV power line were completed in 2014 along with a study covering the proposed locations of towers and power poles. Additionally, in October 2014, CFE informed the Company that it had completed internal upgrades to several transformers that would enable CFE to provide Avino with sufficient grid power to operate all three mill circuits and both underground locations in the interim period prior to the commissioning of the new power line. Construction of the new power line was completed in 2015; and energized in June 2016. The new line is now fully functional at the design capacity of 5 megawatts (“MW”("MW"). Current power consumption at the mine is approximately 2MW, leaving sufficient additional power for near-term expansion projects that are currently being organized, such as the Oxide Tailings Heap Leach/Merrill-Crowe Precipitation Project (which would require 1 MW) and expansion of the processing plant, which will require a further 1 MW.
While water supply was found to be limiting in the past, Avino has taken the necessary steps to secure adequate supply. To supplement the 1 Mm3 dam built by Avino in 1989, a well (Galeana) was drilled to the west of the mine site in 1996 to a depth of 400 m and is reported to have a water level at 40 m below the collar. From this, a pipeline connection has been installed to the mine. Additionally, Avino Mexico, in cooperation with the government, has repaired a government dam (El Caracol) and raised the dam wall by 6 m. A pipeline to the mine has also been installed. This dam is shared with the population of Pánuco de Coronado for their irrigation needs, as 60% for the mine and 40% for the town, with government setting the annual total take to which percent sharing applies. Mine site water use is from a combination of tailings water reclaim, El Caracol, and Galeana with preference given to mine site sources for which no water conservation charge was applicable (Slim 2005).
Both the San Gonzalo and Avino mines are equipped with two mine dewatering pumps. The pumps at San Gonzalo are each capable of pumping 20L/s to surface via 2 six inch lines. One pump operates 24 hours per day and the other 10 hours per day. At Avino one pump operates constantly with the second on standby. Each pump is capable of handling the entire inflow via a 6 inch line. Water from both mines is pumped to the surface and is sent to the process water tanks in the plant. Any water not used in the plant flows by gravity to the La Caricol Dam for agricultural use.
Processing Plant
In September 2006, the Company conducted a review of the plant, including the condition of all equipment, capacity of each circuit, and efficiency of the plant. The review was an order of magnitude cost estimate for putting the plant back into operation at the rate of 1,000 tpd, which was approximately $3 million. In the property valuation, the replacement cost of the mill was estimated at roughly $40 million.
The Company’s processing plant was built in the 1970’s and was refurbished to accommodate increased capacity in 1993. Most of the infrastructure was in place for two 250 tpd circuits and one 1,000 tpd circuit. At the time of shutdown in 2001 due to low commodity prices and the closure of a smelter, the mill was operating at an average rate of 1,130 tpd.
In order to perform the bulk sample program at San Gonzalo, major infrastructure spending and mill repairs were required. Most of these expenditures took place in 2008 and 2009 with additional spending required more recently as further needs arose to meet the demands of mining activities.
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Beginning in May 2011, when the San Gonzalo stockpiled material was depleted following the bulk sample, the process plant was used to treat old stockpiles from historic extraction at the Avino Mine. These were lower-grade stockpiles which were originally considered marginal or waste due to prevailing metal prices at the time. These stockpiles were processed until underground advancement at San Gonzalo was sufficient to provide mill feed at a sustained rate of 250 tonnes per day. On October 1, 2012, Avino made the transition to San Gonzalo mill feed and declared that resource extraction and processing had reached levels intended by management at San Gonzalo.
During the second quarter of 2013, a second 250 tpd circuit (“Mill Circuit 2”) in the mill was commissioned and put into operation for the processing of remaining Avino Mine surface stockpiles. In September 2014, Mill Circuit 2 began processing new mineralized material from the Avino Mine during the mine’s commissioning phase. On January 1, 2015, Mill Circuit 2 transitioned to processing feed material from the San Gonzalo Mine stockpile which continued throughout the first half of 2015 apart from May, when Mill Circuit 2 was once again used to process Avino Mine surface stockpiles. During the second half of 2015, Mill Circuit 2 was used to process mineralized material from the Avino Mine underground in July, August, November and December; and mineralized material from the San Gonzalo Mine during September and October. In 2016, Mill Circuit 2 is expected to primarily process mineralized material from the Avino Mine.
In November 2014, Avino completed its Mill Circuit 3 expansion in preparation for the re-opening of the main Avino Mine. The refurbished circuit was initially commissioned using historic above ground Avino Mine stockpiles during November and December of 2014. Mill Circuit 3 began processing new mill feed from underground at the Avino Mine beginning on January 1, 2015. During 2015, Mill Circuit 3 was optimized to process approximately 1,150 tonnes per day. In the second quarter of 2016, the Company declared that effective April 1, 2016, extraction and processing had reached levels intended by management at the Avino Mine.
In June 2018, Avino completed its 1,000 TPD Mill Circuit 4 expansion, increasing the plants throughput capacity to 2,650 TPD. During the startup, testing and commissioning phase which lasted through the end of 2018, Mill Circuit 4 processed material from historic above ground Avino Mine stockpiles. Mill Circuit 4 is expected to transition to processing newly mined-minedmined mill feed from the San Luis area of the Avino Mine in 2019 once sufficient development work is completed to support the 1,000 TPD circuit.
Circuit # | Operating Throughput (TPD) | Sources of Mill Feed | Operating Status | |||||||
1 |
|
| 250 | Avino Mine (“ | Online | |||||
2 |
|
|
| |||||||
250 |
|
| Avino Mine (“ET”) | Online | ||||||
|
|
| 1,050 | Avino Mine (“ | Online | |||||
4 | 1,050 | Avino Mine (“ET”) | Online |
| · | In 2020 Circuit 1 processed mineralized material from Hanging Wall Breccia (“HWB”) area of the Avino Mine. |
· | Circuit | |
| · | |
Circuit 3 is expected to continue to process mineralized material from the Elena Tolosa (“ET”) area of the Avino Mine. | ||
| · | |
Circuit 4 is expected to process mineralized material |
_____________
____________
*No feasibility study or preliminary economic assessment has been carried out on the Avino Mine and San Gonzalo Mine resources. The Company has determined extraction and processing of resources at levels intended by management without undertaking any further formal studies.
** The San Luis area of the Avino Mine going forward will be referred to as Avino West.
Mining Fleet
To operate the Avino and San Gonzalo Mines, Avino’s mining fleet currently consists of 3 front end loaders, a D6R Cat dozer, 12 scoop trams, 56 jumbos, 2 combination backhoe and rock breakers, 23 excavators, a forklift, 2 surface and an underground diamond drill, 2 mini loaders, a CAT grader suitable for both surface and underground, 20 contractor provided haulage trucks, a shotcrete machine, a welding machine, 3233 light service passenger vehicles, a contractor provided water truck, a 15 tonne capacity contractor provided truck to distribute explosives and a contractor provided fuel truck, 3 power generators, 87 air compressors, a mobile crane, a mobile crushing plant and an ambulance.
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Table of Contents |
Costs Incurred to Date
The table below for the years ended December 31, 20142016 to December 31, 20182020 contains selected financial data prepared in accordance with IFRS derived from our audited consolidated financial statements for the periods ending on such dates.
|
| Exploration and Evaluation Expenditures |
|
| Capital Expenditures |
|
| Mine Operating Expenditures |
|
| Administrative Expenditures* |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
| (1) | 4,601,000 |
|
|
| (1) | 4,940,000 |
|
|
| ||||||||
2017 | 1,055,000 |
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
| ||||||||||||||
2019 | 134,000 |
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
| ||||||||||||||
2020 | 223,000 |
|
|
|
|
|
|
_________________
|
| |||||
| 22,274,000 |
_________
*Operating and administrative expenses do not reflect other income or expenses or other comprehensive income or loss.
(1)Exploration and evaluation and mine operating expenditures for 2017 and 2016 are reflective of the change in retrospective change in accounting policy outlined at the beginning of Item 4-B, and disclosed in the Company’s audited consolidated financial statements.
Below is a table summarizing the estimated planned future costs for 2019.2021. The Company will need to raise capital to meet its planned future costs. No assurance can be given that the Company will be able to raise the amounts in the table below or that actual future costs will equal the amounts in the table below. If the Company is unable to raise capital to meet its planned future costs, it may have to curtail planned activities.
Year |
| Mine Operating and Administrative Expenses |
|
| Capital and Exploration and Evaluation Expenditures |
|
| TOTAL |
|
| Mine Operating and Administrative Expenses |
| Capital and Exploration and Evaluation Expenditures |
| TOTAL |
| ||||||||
2019 |
| $ | 32,800,000 |
| $ | 5,500,000 |
| $ | 38,300,000 |
| ||||||||||||||
2021 |
| $ | 24,865,000 |
|
| $ | 10,308,000 |
|
| $ | 35,173,000 |
|
Mineral Reserve Estimates
There are currently no mineral reserves on the Property.
Mineral Resource Estimates
Below is a summary of current mineral resources at the San Gonzalo and Avino Mines as well as the oxide tailings mineral resource (as reported in the February 21, 2018January 13, 2021 Technical Report on the Avino Property, Durango, Mexico and amended on December 19, 2018)Mexico) grouped into the measured, indicated and inferred categories.categories (the “Technical Report”). The effective date of the resource estimates is February 21, 2018.October 31, 2020.
The mineral resource estimates were prepared by Michael O’Brien P.Geo., Pr.Sci.Nat., who is a “Qualified Person” within the meaning of National Instrument 43-101 and who is an employee of Red Pennant Geoscience Ltd. (previously, Ausenco Engineering Canada Inc. (previously, QG Australia Pty Ltd, an ARANZ Geo Company)Inc) and independent of Avino, as defined by Section 1.5 of NI 43-101.
|
|
|
|
|
|
| Grade |
|
| Metal Contents |
| |||||||||||||||||||||||||||||||
Resource Category |
| Deposit |
| Cut-off (AgEQ g/t) |
|
| Tonnes (t) |
|
| AgEQ (g/t) |
|
| Ag (g/t) |
|
| Au (g/t) |
|
| Cu (%) |
|
| AgEQ (million tr oz)* |
|
| Ag (million tr oz) |
|
| Au (thousand tr oz) |
|
| Cu (t) |
| ||||||||||
Measured and Indicated Mineral Resources | ||||||||||||||||||||||||||||||||||||||||||
Measured |
| Avino – ET |
|
| 60 |
|
|
| 3,890,000 |
|
|
| 141 |
|
|
| 71 |
|
|
| 0.54 |
|
|
| 0.55 |
|
|
| 17.6 |
|
|
| 8.9 |
|
|
| 67.4 |
|
|
| 21,000 |
|
Measured |
| Avino – San Luis |
|
| 60 |
|
|
| 650,000 |
|
|
| 142 |
|
|
| 67 |
|
|
| 0.70 |
|
|
| 0.49 |
|
|
| 3.0 |
|
|
| 1.4 |
|
|
| 14.6 |
|
|
| 3,000 |
|
Measured |
| San Gonzalo System |
|
| 130 |
|
|
| 290,000 |
|
|
| 397 |
|
|
| 314 |
|
|
| 1.65 |
|
|
| 0.00 |
|
|
| 3.7 |
|
|
| 2.9 |
|
|
| 15.4 |
|
|
| 0 |
|
Total Measured |
| All Deposits |
|
| - |
|
|
| 4,830,000 |
|
|
| 156 |
|
|
| 85 |
|
|
| 0.63 |
|
|
| 0.51 |
|
|
| 24.3 |
|
|
| 13.2 |
|
|
| 97.4 |
|
|
| 24,000 |
|
Indicated |
| Avino – ET |
|
| 60 |
|
|
| 2,640,000 |
|
|
| 105 |
|
|
| 49 |
|
|
| 0.56 |
|
|
| 0.34 |
|
|
| 8.9 |
|
|
| 4.2 |
|
|
| 47.6 |
|
|
| 9,000 |
|
Indicated |
| Avino – San Luis |
|
| 60 |
|
|
| 1,620,000 |
|
|
| 126 |
|
|
| 54 |
|
|
| 0.82 |
|
|
| 0.36 |
|
|
| 6.6 |
|
|
| 2.8 |
|
|
| 42.9 |
|
|
| 6,000 |
|
Indicated |
| San Gonzalo System |
|
| 130 |
|
|
| 240,000 |
|
|
| 319 |
|
|
| 257 |
|
|
| 1.25 |
|
|
| 0.00 |
|
|
| 2.5 |
|
|
| 2.0 |
|
|
| 9.6 |
|
|
| 0 |
|
Indicated |
| Oxide Tailings |
|
| 50 |
|
|
| 1,330,000 |
|
|
| 124 |
|
|
| 98 |
|
|
| 0.46 |
|
|
| 0.00 |
|
|
| 5.3 |
|
|
| 4.2 |
|
|
| 19.8 |
|
|
| 0 |
|
Total Indicated |
| All Deposits |
|
| - |
|
|
| 5,830,000 |
|
|
| 124 |
|
|
| 70 |
|
|
| 0.64 |
|
|
| 0.25 |
|
|
| 23.3 |
|
|
| 13.1 |
|
|
| 119.8 |
|
|
| 15,000 |
|
Total Measured and Indicated |
| All Deposits |
|
| - |
|
|
| 10,660,000 |
|
|
| 139 |
|
|
| 77 |
|
|
| 0.63 |
|
|
| 0.37 |
|
|
| 47.5 |
|
|
| 26.3 |
|
|
| 217.2 |
|
|
| 39,000 |
|
Inferred Mineral Resources | ||||||||||||||||||||||||||||||||||||||||||
Inferred |
| Avino – ET |
|
| 60 |
|
|
| 2,380,000 |
|
|
| 111 |
|
|
| 58 |
|
|
| 0.51 |
|
|
| 0.33 |
|
|
| 8.5 |
|
|
| 4,4 |
|
|
| 39.1 |
|
|
| 8,000 |
|
Inferred |
| Avino – San Luis |
|
| 60 |
|
|
| 1,780,000 |
|
|
| 124 |
|
|
| 57 |
|
|
| 0.72 |
|
|
| 0.38 |
|
|
| 7.1 |
|
|
| 3.2 |
|
|
| 41.2 |
|
|
| 7,000 |
|
Inferred |
| San Gonzalo System |
|
| 130 |
|
|
| 120,000 |
|
|
| 262 |
|
|
| 219 |
|
|
| 0.86 |
|
|
| 0.00 |
|
|
| 1.0 |
|
|
| 0.8 |
|
|
| 3.3 |
|
|
| 0 |
|
Inferred |
| Oxide Tailings |
|
| 50 |
|
|
| 1,810,000 |
|
|
| 113 |
|
|
| 88 |
|
|
| 0.44 |
|
|
| 0.00 |
|
|
| 6.6 |
|
|
| 5.1 |
|
|
| 25.6 |
|
|
| 0 |
|
Total Inferred |
| All Deposits |
|
| - |
|
|
| 6,090,000 |
|
|
| 118 |
|
|
| 70 |
|
|
| 0.56 |
|
|
| 0.24 |
|
|
| 23.2 |
|
|
| 13.6 |
|
|
| 109.2 |
|
|
| 15,000 |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Table of Contents |
Avino Mine | ||||||||||||||||||||||||||||||||||||||||||
Measured & Indicated Mineral Resources |
|
| Grade |
|
| Metal Contents |
| |||||||||||||||||||||||||||||||||||
Resource Category |
| Deposit |
| Cut-off |
|
| Metric Tonnes |
|
| AgEQ g/t |
|
| Ag g/t |
|
| Au g/t |
|
| Cu % |
|
| AgEQ Million |
|
| Ag |
|
| Au |
|
| Cu Tonnes |
| ||||||||||
Measured |
| Avino - ET |
|
| 60 |
|
|
| 4,760,000 |
|
|
| 120 |
|
|
| 74 |
|
|
| 0.63 |
|
|
| 0.55 |
|
|
| 18.4 |
|
|
| 11.3 |
|
|
| 97.0 |
|
|
| 26,300 |
|
Measured |
| San Gonzalo System |
|
| 130 |
|
|
| 267,000 |
|
|
| 356 |
|
|
| 263 |
|
|
| 1.36 |
|
|
| 0.00 |
|
|
| 3.1 |
|
|
| 2.3 |
|
|
| 12.0 |
|
|
| 0 |
|
Total Measured |
| All Deposits |
|
|
|
|
|
| 5,027,000 |
|
|
| 133 |
|
|
| 84 |
|
|
| 0.67 |
|
|
| 0.55 |
|
|
| 21.5 |
|
|
| 13.6 |
|
|
| 109 |
|
|
| 26,300 |
|
Indicated |
| Avino - ET |
|
| 60 |
|
|
| 13,890,000 |
|
|
| 107 |
|
|
| 59 |
|
|
| 0.68 |
|
|
| 0.41 |
|
|
| 47.9 |
|
|
| 26.5 |
|
|
| 304 |
|
|
| 56,700 |
|
Indicated |
| San Gonzalo System |
|
| 130 |
|
|
| 216,000 |
|
|
| 304 |
|
|
| 230 |
|
|
| 1.09 |
|
|
| 0.00 |
|
|
| 2.1 |
|
|
| 1.6 |
|
|
| 8.0 |
|
|
| 0.00 |
|
Indicated |
| Oxide Tailings |
|
| 50 |
|
|
| 1,120,000 |
|
|
| 124 |
|
|
| 89 |
|
|
| 0.42 |
|
|
| 0.00 |
|
|
| 4.5 |
|
|
| 3.2 |
|
|
| 15.0 |
|
|
| 0.00 |
|
Total Indicated |
| All Deposits |
|
|
|
|
|
| 15,226,000 |
|
|
| 111 |
|
|
| 64 |
|
|
| 0.67 |
|
|
| 0.37 |
|
|
| 54.5 |
|
|
| 31.3 |
|
|
| 327 |
|
|
| 56,700 |
|
Total Measured & Indicated |
|
|
|
|
|
|
|
| 20,253,000 |
|
|
| 117 |
|
|
| 69 |
|
|
| 0.67 |
|
|
| 0.41 |
|
|
| 75.9 |
|
|
| 44.9 |
|
|
| 436 |
|
|
| 83,000 |
|
Inferred Mineral Resources | ||||||||||||||||||||||||||||||||||||||||||
Inferred |
| Deposit |
| Cut-off |
|
| Metric tonnes |
|
| AgEQ |
|
| Ag |
|
| Au |
|
| Cu |
|
| AgEQ Million |
|
| Ag |
|
| Au |
|
| Cu T |
| ||||||||||
Inferred |
| Avino - ET |
|
| 60 |
|
|
| 5,230,000 |
|
|
| 95 |
|
|
| 51 |
|
|
| 0.64 |
|
|
| 0.34 |
|
|
| 16.0 |
|
|
| 8.5 |
|
|
| 108 |
|
|
| 17,700 |
|
Inferred |
| San Gonzalo System |
|
| 130 |
|
|
| 85,000 |
|
|
| 298 |
|
|
| 233 |
|
|
| 0.96 |
|
|
| 0.00 |
|
|
| 0.8 |
|
|
| 0.6 |
|
|
| 3.0 |
|
|
| 0 |
|
Inferred |
| Oxide Tailings |
|
| 50 |
|
|
| 1,230,000 |
|
|
| 125 |
|
|
| 85 |
|
|
| 0.47 |
|
|
| 0.00 |
|
|
| 5.0 |
|
|
| 3.4 |
|
|
| 19.0 |
|
|
| 0 |
|
Total Inferred |
| All Deposits |
|
|
|
|
|
| 6,545,000 |
|
|
| 103 |
|
|
| 59 |
|
|
| 0.61 |
|
|
| 0.27 |
|
|
| 21.8 |
|
|
| 12.5 |
|
|
| 129.0 |
|
|
| 17,700 |
|
Notes:
Figures may not add to totals shown due to rounding.
Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
The Mineral Resource estimate is classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum's (CIM) Definition Standards for Mineral Resources and Mineral Reserves incorporated by reference into National Instrument 43-101 (NI 43-101) Standards of Disclosure for Mineral Projects.
Based on recent mining costs (Section 21) Mineral Resources are reported at cut-off grades 60 g/t, 130 g/t, and 50 g/t AgEQ grade for ET, San Gonzalo, and oxide tailings, respectively.
AgEQ or silver equivalent ounces are notational, based on the combined value of metals expressed as silver ounces
Cut-off grades were calculated using the following consensus metal price assumptions: gold price of US$1,875/oz, silver price of US$24.00/oz, and copper price of US$3.10/lb.
Metal recovery is based on operational results and column testing.
The silver equivalent was back calculated using the following formulas: ET AgEQ = Ag + 65.1 * Au + 8.66 * Cu ppm / 10,000 ; SG AgEQ = Ag + 72.54 * Au; Oxide Tailings AgEQ = Ag + 84.55 * Au.
Method of Calculation
The estimation methods used were substantially the same for all three deposits (Ordinary Kriging), providing a consistent baseline for strategic planning.
Mineral resources were estimated by ordinary kriging, optimized using kriging neighborhood analysis and verificationverified by means of nearest neighbor and inverse distance methods, swathplot comparisons of estimates and visual inspections. Block models were created for the San Gonzalo and Avino Vein Systems and the oxide tailingsOxide Tailings deposit and estimates were made intoutilizing blocks of sizes 10m20 m easting x 5m5 m northing x10mx 10 m elevation (Sanfor Avino (ET Mine), sizes 10 m easting x 5 m northing x10 m elevation for San Gonzalo and Avino) and 40m40 m easting x 40m40 m northing x 2m2 m elevation (oxide tailings).for Oxide Tailings.
Classification of the mineral resource was based on kriging variance‘slope of regression’ as a measure of uncertainty, with adjustment to practical geometries using geological knowledge of the deposit.
Silver equivalent cut-off grades were applied to satisfy the condition of reasonable prospects for eventual economic extraction and were calculated using conversion formulas AgEQ = Ag + 55.9 * Au + 72.99 * Cu for Avino Vein, AgEQ = Ag + 69.37 * Au for oxide tailings and AgEQ = Ag + 56.38 * Au for San Gonzalo vein System.
Cut-off grades were calculated using current costs, silver price of US$19.50/oz, gold price of US$1,250/oz and copper price of US$2.10/lb.
Since 2013, Avino has drilled 57 new holes on the oxide tailings deposit, nearly three thousand channel samples representing 14,470 metres of vein material have been obtained on the Avino and San Gonzalo Veins, and 46 surface drill holes, (totaling 7,960 m) have been drilled on the San Gonzalo and Avino vein systems. This investment has significantly increased the amount of information available for resource estimation.
Fundamental changes since the previous mineral resource estimates are (1) depletion due to mining (over 1 million800 thousand tonnes milled since the beginning of 2013)2017), (2) significant new sampling information (almost double in the case of the oxide tailings) (3) changes to silver equivalent calculation and cut-offscut-off calculations and (4) reclassification of mineral resources in the light of improved understanding of confidence in the deposits at distances from the underground channel samples and drill hole samples.
More sampling information does not always lead to direct increases in resource tonnages and contained metal. In some cases, the new information provides improved understanding (developed by variogram modelling and kriging neighborhood analysis) that may demote some portions of mineral resource from high confidence categories, such as measured and indicated, to a lower confidence category such as inferred.
Currently, for the San Gonzalo and Avino Vein Systems, estimated blocks more than thirty five metres from sampling are not considered to be of sufficient confidence to be included in the indicated category resources and have been classified as inferred resources. Consequently, the total indicated resources for the Avino Property are significantly less than those were reported previously.
For the oxide tailings,Oxide Tailings, estimated blocks more than fifty metres from sampling are not considered to be of sufficient confidencesufficiently confident to be included in the indicated category resources.
Preliminary Economic Assessment onSilver equivalent cut-off grades were applied to satisfy the Oxide Tailings Mineral Resourcecondition of reasonable prospects for eventual economic extraction and were calculated using conversion formulas AgEQ = Ag + 65.1 * Au + 8.66 * Cu for Avino Vein, AgEQ = Ag + 84.55 * Au for oxide tailings and AgEQ = Ag + 72.54 * Au for San Gonzalo vein System.
An update to the Preliminary Economic Assessment ("Oxide Tailings PEA") on the oxide tailings mineral resource was first published in the April 11, 2017 technical report on the Avino Property, Durango, Mexico, which was updated in 2018 for the Avino Mine.Cut-off grades were calculated using current costs, silver price of US$24.00oz, gold price of US$1,875/oz and copper price of US$3.10/lb.
The Oxide Tailings PEA incorporated base case metal prices of $18.50/oz silver, and $1,250/oz gold. Highlights of the base case economic estimates for the oxide tailings Resource are shown in the following table:
The Oxide Tailings PEA focuses on the oxide tailings Retreatment of the Avino mine as a stand-alone project with an initial 7 year life of mine plan. The sulphides will be considered during the pre-feasibility study stage, and must be evaluated by the Company as to their own economic viability. This approach provides attractive economic returns using lower initial capital costs.
The financial results for the base case are presented in the table below:
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The life of project average material tonnages, grades and metal production are shown below:
|
| |||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
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| ||||
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Oxide Tailings PEA Study Parameters and Basis of Financial Evaluations
The production schedule was incorporated into the 100% equity pre-tax financial model to develop annual recovered metal production from the relationships of tonnage processed, head grades, and recoveries.
Gold and silver payable values were calculated utilizing base case metal prices. Net invoice value was calculated each year by subtracting the applicable refining charges from the payable metal value. At-mine revenues are then estimated by subtracting transportation and insurance costs. Operating costs for mining, processing, and G&A were deducted from the at-mine revenues to derive annual operating cash flow.
Initial and sustaining capital costs as well as working capital have been incorporated on a year-by-year basis over the mine life. Salvage value and mine reclamation costs are applied to the capital expenditure in the last production year. Capital expenditures are then deducted from the operating cash flow to determine the net cash flow before taxes.
Initial capital expenditures include costs accumulated prior to first production of dore. Sustaining capital includes any capital expenditures required during the production period. Initial and sustaining capital costs applied in the economic analysis are US$24.36 million and US$4.35 million, respectively.
The Company cautions that the Oxide Tailings PEA is preliminary in nature in that it is based on inferred mineral resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves, and there is no certainty that the Oxide Tailings PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Sensitivity Analysis
Sensitivities of the project’s NPV, IRR and payback period to the Project key variables were investigated. Using the base case as reference, all of the key variables were changed between -30%/+30% at a 10% interval while holding the other variables constant. The project NPV is most sensitive to the silver price, and in descending order gold price, operating costs; and capitals costs. The project IRR is most sensitive to the capital costs and the silver price, followed by the gold price and operating costs and the gold price. The payback period is also most sensitive to the silver price, followed by capital costs, operating costs and the gold price.
Post-Tax Economic Analysis
Avino commissioned an independent accounting firm in Mexico to prepare the tax component for the post-tax economic evaluation for this updated Oxide Tailings PEA with the inclusion of applicable income and mining taxes, and the results are as follows:
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Post-tax Financial Results
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and Operating Costs
All estimates are based on mining the Oxide Tailing resource only. The total capital costs including reclamation and salvage are estimated to be $28.5 million. The process operating costs include agglomeration, heap leaching, followed by Merrill-Crowe refinery plant to produce a silver/gold doré. The operating cost estimate is reported in US dollars with an exchange rate of Mexican Peso to US Dollars at 12.5. The operating cost estimate is sensitive to the exchange rate. The annual operating costs include:
The operating cost summary for the processing facility and the G&A costs is based on a processing design rate of 1,370 t/d (500,000 tonnes per year) with an availability of 90% and 365 operating days per year resulting in an effective annual production rate of 450,000 tonnes.
39 |
Table of Contents |
The yearly average annual operating cost for the process facilities is estimated to be $15.06/tonne of tailings treated at the processing rate of 1,370 tonnes per day, as shown in the table below:
Operating Cost Summary:
Description | Personnel | Unit Cost ($/treated) |
Mining | 15 | 1.13 |
Process | 39 | 12.53 |
G&A | 11 | 1.41 |
Total Operating Cost | 65 | 15.06 |
Mineral Processing, Metallurgical Testing and Recovery Methods
Tetra Tech used the estimated grade values and test work results as reported by MineStart Management Inc. (MMI) and Process Research Associates Ltd. (PRA), who conducted the metallurgical tests, to develop the process flowsheet. The investigated metal recovery methods included gravity separation, flotation, tank cyanide leach, and heap leach processing options. According to preliminary economical evaluations, a heap leach followed by gold and silver recovery using Merrill Crowe process was selected for the Oxide Tailings PEA.
Mining Methods
The oxide tailings mineral resource will be mined/moved using a conventional truck/loader surface mining method. The Production cycle consists of loading and trucking. The Loading/trucking operations will be conducted in two 12 hour shifts per day. A 3.85 m3 rated (5.0 yd3) front-end loader will be used to load three, 24 tonne articulated trucks that will either deliver the sulphide tailings to the sulphide waste stockpile or the oxide tailings to the oxide tailings hopper. The Production schedule has been developed for the oxide tailings based on a treatment rate of 500 kt/a, this would be equivalent to a throughput rate of 1,370 t/d. This will give an overall project duration of approximately eight years. This eight-year period includes a one-year pre-production period and excludes the time required for remediation of the heap after the leaching process has been completed. Only oxide tailings will be considered for treatment while sulphide materials will be considered waste at this time. The LOM total oxide tailings materials treated is 3.12 million tonnes with average grades of 87.75 g/t silver and 0.43 g/t gold.
Environmental
Environmental parameters, permits and registrations, and environmental management strategies that may be required for the Project will be summarized in the technical report. Permits and authorizations required for the operation of the Project may include an operating permit, an application for surface tenures, a waste water discharge registration, a hazardous waste generator’s registration, and an Environmental Impact Assessment (EIA) or Evaluación de Impacto Ambiental. Acid-base accounting (ABA) tests have indicated that mild acid generation may already have started on the tailings dam. A gap analysis and additional tests to further characterize current conditions of the tailings should be completed to properly design a tailings management plan.
Mineral Resource Discussions
Oxide Tailings
A mineral resource was estimated for the oxide tailings generated from prior historical mining operations, using ordinary kriging (OK) interpolation and uncapped grades. The assay values for this estimate are based on 28 drill holes, which were completed on the oxide tailings by Compañía Minera Mexicana de Avino, S.A. de C.V. in 1990, and include 407.75 m of drilling and 383 assays of both gold and silver. The oxide tailings are estimated to contain a 2.34 Mt inferred mineral resource at a grade of 91.3 g/t silver and 0.54 g/t gold, with a 50 g/t silver cut-off. The entire resource is classified as an inferred mineral resource, based on the historical nature of the drilling (prior to the institution of NI 43-101 and associated quality assurance/quality control (QA/QC) requirements). Verification samples collected confirmed the presence of gold and silver mineralization at grades similar to those obtained in the original tailings drilling campaign and confirmed that the Mine’sMine's lab assays are not materially different from those of external labs. It is QG Australia (Pty)Red Pennant Geoscience Ltd.’s opinion that the oxide tailings sampling data are considered sufficient to support the purpose of the Technical Report and a current inferred mineral resource.
Mineral Resources
The Companys August 2016new mineral resource estimate was used as the resource base for the Oxide Tailings PEA. This new estimate includesestimates include data from 57 holes drilled during the last two years. Due to closer drill hole spacing, there is sufficient information to justify elevating 1,330,000 tonnes of the previous 2,340,000 tonnes of inferred resources to the indicated category. However, there is still an additional inferred resource of 1,810,000 tonnes in the new estimate. The oxide tailings resource is accessible on surface and contains significant gold and silver grades. The resource estimate used in the Oxide Tailings PEA for the oxide tailing resource is outlined in the table belowabove at a cut-off grade of 50 AgEQ g/t.
Measured & Indicated Mineral Resources | Grade | Metal Contents | ||||||||
Resource Category | Deposit | Cut-off (AgEQ g/t) | Metric Tonnes | AgEQ g/t | Ag g/t | Au g/t | Cu% | Ag Million Tr Oz | Au Thousand Tr Oz | Cu T |
Indicated | Oxide Tailings | 50 | 1,330,000 | 124 | 98 | 0.46 | 0.00 | 4.2 | 19.8 | 0 |
Inferred | Oxide Tailings | 50 | 1,810,000 | 113 | 88 | 0.44 | 0.00 | 5.1 | 25.6 | 0 |
Note on Mineral Resources and Production
Mineral resources that are not mineral reserves do not have demonstrated economic viability. No current preliminary economic assessment, pre-feasibility study, or feasibility study has been carried out on the Company’s mineral resources. The Oxide Tailings PEA is preliminary in nature as it includes inferredCompany has determined extraction and processing of its mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable to them to be categorized as mineral reserves. At this time there is no certainty that the results of the Oxide Tailings PEA will be realized.at levels intended by management without undertaking any further formal studies.
Recommendations
The Technical Report contains the following recommendations for further work:
Resource EstimatesDatabase Management and Underground Sampling
In orderIt is recommended that tailings sampling and QA/QC data be added to improve confidence in the inferred mineral resourcedrillhole and channel sampling database. The underground sampling should be improved by making an advance drift along the footwall side of the Avino Vein system from which fan drilling at 40 metre intervals can be drilled to provide advanced and balanced sample coverage. The Company should develop the database for specific gravity data using drill cores, grab samples from controlled underground exposures, and large samples cut from the faces of the oxide tailingstailings. QA/QC standards and evaluateblank submissions should be included in the overlying sulphide tailings,master database, and bismuth (which is a sonic drill program of 90 holes with 50 m x 50 m drill collar spacing totaling 1,800 m is recommended.significant deleterious penalty element) should be assayed at the same rate as copper to provide detailed information for mine planning.
Resource estimatesEstimation
An internal capacity to perform mineral resource estimation using geostatistical methods should be developed.
Exploration for the ET ZoneWestern Extension of the Avino vein,Vein
The known portion of the Avino Vein system west of San Luis terminations on a post-mineralization fault, and it is recommended that the extension to the system be investigated.
40 |
Table of Contents |
Long-Term Mine Planning
It is recommended that the Company prepare a long-term mine plan based on the resource estimates.
Metallurgical Studies
It is recommended that the Company further optimize its processing conditions, including metallurgical tests, to improve metallurgical performances for the mill feeds.
Oxide and Sulphide Tailings
Further tests are recommended to evaluate the metallurgical performances of the tailing samples, including the sulphide tailings samples. The test work should include: head characterization and mineralogical determination; leaching condition optimization, leaching retention time, agglomeration binding material types and dosages; determination of the effect of the particle size distribution on metal extraction and agglomeration; further confirmation of the effect of flotation pre-concentration on improving metal recovery; residual cyanide management tests, and further evaluations to compare heap leach vs. tank leach methods. The potential for handling sulphide tailings as a mineralized material, rather than waste material, should be investigated based on appropriate metallurgical tests, and optimization of the mine plan for the oxide tailings should be conducted.
Environmental
Government agencies should be consulted prior to the permitting process to determine if current permits for the San Gonzalo vein andMine can be revised for an oxide tailings should be completed for mine planning purposes.
The drill hole database should be consolidated and mining depletions updated before the estimation is performed.
Process
Take sufficient amounts of samples from both oxide and sulphide tailings to obtain representative samples for assay and metallurgical test work to confirm the grade of the depositproject. Permitting costs and the recoverycost of silverexpropriation of agricultural land for the leach pad, and gold fromthe cost of water which would have to be redirected to the heap leach process.project, should be investigated, and the cost for monitoring environmental effects post-mine closure needs to be estimated in a detailed study.
Use the results from the metallurgical test work program to confirm/define the duration of leaching on the pad, the reagent consumption values and the silver and gold precipitation efficiencies.
Investigate the metallurgical performance of the sulphide tailings materials and develop the process method for the sulphide tailings materials, including co-processing the sulphide tailings with the oxide tailings.
Environmental
A detailed trade-off study should be undertaken to characterize current conditions of the sulphide tailings and to determine whether the re-treatment of this material would contribute to the profitability of the Project.
Qualified Person(s)
The Qualified Persons as defined by NI 43-101, who supervised and are responsible for the Technical Report, on the oxide tailings retreatment of the Avino Mine, and have reviewed the scientific, technical and financial content of this Annual Report, are Hassan Ghaffari, MASc., P.Eng., P.Eng, Jianhui Huang, PhD., P.Eng, and Barnard Foo, M.Eng. MBA, P.Eng., all of Tetra Tech Canada Inc., Sabry Abdel‐Hafez, PhD., (previously with Tetra Tech Canada Inc.) and Michael O’Brien P.Geo., Pr.Sci.Nat., who is an employee of Red Pennant Geoscience Ltd. (previously, Ausenco Engineering Canada Inc. (previously with QG Australia Pty Ltd., an ARANZ Geo Company)) and independent of Avino, as defined by Section 1.5 of NI 43-101.
San Gonzalo Mine – Resource Depletion
The mineral resource estimate at San Gonzalo factors in depletion from ongoing mining activities up to the effective date of February 21, 2018. Between the effective date andOctober 31, 2020. As at December 31, 2018, a total2019, management had determined that the economic life of 117,298 tonnes were extracted.the San Gonzalo Mine was Nil, and had stopped the processing of mineralized ore.
Avino Mine – Resource Depletion
The mineral resource estimate at San GonzaloAvino factors in depletion from ongoing mining activities up to the effective date of February 21, 2018. Between the effective date and DecemberOctober 31, 2018, a total of 539,206 tonnes were extracted.2020.
Exploration - Avino Vein
Early Drilling (Prior to Mine Closure), 1968 to 2001
Between 1968 and 2001, at least 25 diamond drill holes, ranging in length from 132 to 575 m, are reported to have been drilled from surface into the Avino vein. Included in this total are 10 holes that were drilled by Selco in 1970 when they were re-habilitating some of the old underground workings to provide access for sampling (Slim 2005d).sampling. No further information on these drill holes was available to Tetra Tech and they are not included in the resource estimate for the Avino vein.
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Oxide Tailings, 1990 to 1991
Between November 10 and December 5, 1990, and March 8 and May 30, 1991, Avino completed six trenches and 28 vertical drill holes in the tailings along 7 fences at a spacing of roughly 50 m by 50 m (Benitez Sanchez 1991). Drilling was completed transversely to the drainage pattern of the tailings. Cut at 1 m vertical increments, 461 samples were assayed for silver and gold at the mine assay lab and occasional moisture contents were reported. Assay results from these drill holes have been previously reported (Tetra Tech 2013).
Recent Drilling (Post Mine Closure), 2001 to Present
A total of 156 surface and underground drill holes have been completed on the Avino and San Gonzalo veins, totalling 35,846.5 m. Additional exploration holes have been drilled elsewhere on the Property, but those drilling results are not considered material. Most holes were surveyed down hole using a Tropari single-shot magnetic instrument. Of those holes for which down hole surveys were completed, the majority contain three or fewer measurements, typically at the collar and near the end of hole, and sometimes part-way down the hole. Many holes were not surveyed to within 10 m of the end of the hole.
Geophysical Surveys: Induced Polarization (IP)
In December 2006, Avino conducted an 80 km line deep penetrating IP survey at the property. IP geophysics helps identify drill targets. The IP survey was completed in 2007. Avino did follow-up soil geochemical, satellite imagery and other surveys to better define targets in the covered areas.
Avino Vein (including ET Zone) and Nearby Veins
Since 2001, Avino has drilled 34 holes below Level 12, where mining ceased, for a total of 11,523.2 m. Drilling has targeted the ET Zone in particular. There were 5 holes completed in 2006 (2,166.85 m), 12 holes in 2007 (3,906.5 m), 8 holes in 2008 (2,186.7 m), and 9 holes in 2012 (3,263.15 m).
In September 2016, Avino began an exploration diamond drilling program between the San Luis Mine, which was last mined in the 1990’s, and the ET Mine, which is the area of current production; both areas are part of the Avino Mine. The area between the two mines is approximately 300 metres long and 220 metres deep and was recently the subject of a geological review where it was determined that the main Avino vein showed economically viable values, was open at depth and was largely underexplored. The 22-hole program, comprising approximately 3,374 metres, was extended from the original 18-hole program to fully evaluate the tonnage and the grade of the new area of the Avino Vein System and was completed in August 2017. The drill results support the continuation of the extensive Avino vein system. This new area is close to surface and accessible from the existing Avino Mine underground workings.
Additional drilling around the Avino Vein in 2017 and 2018 was focused on the El Chirumbo and San Juventino areas. The historic El Chirumbo area is located at the east end of Avino vein and was previously mined prior to 1940 and is characterized by gold rich mineralization in narrow veins. In 2017 and 2018, 10 diamond drill holes were completed totalling approximately 2,240 metres. An additional five holes totalling 1,300 metres were drilled at the San Juventino area which is located where the Avino-San Juventino and Footwall Breccia intersect north of the main Avino Vein system.
During 2019 a sampling campaign comprising 52 recent and historic holes that were previously drilled in the hanging-wall of the Avino vein stockwork system located on the Avino property. The relogging and sampling by the mine geology team of intervals previously regarded as not of economic interest has revealed extensive Hanging-wall Breccia (“HWB”) material with significant and consistent metal grades and wide vein widths. The HWB material has not yet been exploited and is close to the existing development levels 6 and 9 where services such as compressed air, water and electricity can be accessed swiftly if mineability is confirmed. At the time of the drilling, the main Avino vein structure was the target and the potential of the HWB was unknown, therefore the spacing in the vein intercepts which were recently sampled was is 30 to 70 metres apart.
Since the Avino deposit strikes approximately east-west and dips at 60° to 70° to the south, holes are generally oriented from south to north at various bearings and dip angles in order to intersect the structure at a target depth. Holes were drilled using Avino’s Longyear 44 core rig at thin wall NQ diameter.
In 2020, no new holes were drilled.
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Table of Contents |
San Gonzalo and Nearby Veins
At San Gonzalo, Avino drilled 40 holes in 2007 (9,222.9 m), 6 in 2008 (1,782.65 m), 18 in 2011 (3,618.57 m), 15 in 2014 (3,631.93 m), and 25 in 2015 (3,197.60m) for a total of 104 drill holes and 21,453.65 m. All holes were of thin wall NQ size core diameter and were completed using Avino’s Longyear 44 core rig with the exception of 6 underground holes in 2014 and 14 in 2015. Additional holes also explored the nearby Guadalupe, San Juventino, San Lucerno, Mercedes, San Jorge, and Yolanda veins.
According to Gunning (2009), theThe collars for 2007 and 2008 drill holes were marked by concrete monuments and the collars have been surveyed. A check of the coordinates with a handheld global positioning system (GPS) revealed a possible 10 m constant error which may simply mean that all of the mine coordinates are not precisely Universal Transverse Mercator (UTM). However, this could also indicate the existence of a small surveying error on the Property.
In 2011, 69 holes totalling 9,862.97 m were drilled principally in the following locations: San Gonzalo (18 holes, as above), Aguila Mexicana (2 holes), Guadalupe (25 holes), La Potosina (9 holes), Mercedes (1 hole), San Jorge (3 holes), San Juventino (3 holes), San Lucero (5 holes), Tucero (1 hole), and Yolanda (2 holes). With the exception of the San Gonzalo vein, all of these locations are considered targets for further exploration.
In 2014, Avino undertook a 15 hole (3,631.93 m) surface and underground definition drill program to test the San Gonzalo vein at depth. In April 2014, a 70 meter cross cut was completed on level 6, and the underground drill program started on May 2. Three holes were drilled from the cross cut (SG-14-01 through SG-14-03).
Surface drill holes SG-14-04 through SG-14-10 were drilled between June and October 2014. Hole SG-14-11 was an underground hole drilled in October 2014 from the end of the San Gonzalo level 6 crosscut (same location as SG-14-01 through SG-14-03).
Holes SG-14-12 and SG-14-13 were drilled during October and November 2014 from the end of a crosscut on level 7. A sudden inflow of water on November 17, 2014 caused hole SG-14-13 to be terminated. Surface drilling later resumed and holes SG-14-14 and SG-14-15 were drilled by December 31, 2014.
In 2015, the Company continued its definition drill program intended to define the boundaries of the San Gonzalo structure. In total, 25 holes were completed totaling 3,197.60m metres. From January 2015, through the end of April, 19 holes were drilled of which 5 were from surface and 14 were underground holes (SG-15-1 through SG-15-16). Drilling resumed in September 2015 with Hole CH-07-01 which was the deepening of a hole drilled in 2007 on the Chihuahua vein, which is an extension of the San Gonzalo structure. Drilling then resumed at San Gonzalo to test the southeast extension of the structure; drilling for the year concluded in November with the completion of hole SG-15-24. No holes were drilled at San Gonzalo in 2016.
In 2017 and 2018, eleven holes were drilled at the Guadalupe area totalling 2,020 metres. The Guadalupe area is located on surface at the west end of the San Gonzalo mine.
In 2020, there were no current exploration program and active mining has ceased at the San Gonzalo mine.
Reclamation
The Company has mine closure and reclamation plans for the Avino and San Gonzalo Mines and has estimated the undiscounted value of reclamation at approximately $1.5$1.2 million for the Avino Mine and approximately $0.3$0.1 million for the San Gonzalo Mine as at December 31, 2018.
As per Federal Mexican regulations (LGEEPA), both the SEMARNAT and PROFEPA ministries require Avino to present in its first semi-annual report a “General Plan to Remediate the Site” including dates, activities, techniques, and costs that will ensure restoration of affected areas, considering complete reforestation of impacted sites, removal of foundations and infrastructure that are no longer useful, roads that no longer have any use, removal and proper disposal of all rubbish, closing off adits that are no longer needed and restoration of the tailings facility at the end of its operational life. Avino will also need to present a reforestation program for the entire surface area affected during mining activities. This program will include caveats to safeguard flora and fauna.
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Table of Contents |
Avino Property Activity Summary
The table below presents material mined, material processed, concentrate produced, concentrate sold, and average realized concentrate pricing for each of the San Gonzalo Mine, the historic Avino stockpiles, and the Avino Mine.
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||||||||||||||||
|
| Avino Historic Above Ground Stockpiles |
|
| Avino Mine |
|
| San Gonzalo |
|
| Avino Historic Above Ground Stockpiles |
|
| Avino Mine |
|
| San Gonzalo |
|
| Avino Historic Above Ground Stockpiles |
|
| Avino Mine |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Processed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Tonnes |
|
| 4,711 |
|
|
| 199,575 |
|
|
| 56,179 |
|
|
| 306,334 |
|
|
| 427,147 |
|
|
| 79,140 |
|
|
| 202,830 |
|
|
| 426,794 |
|
Grade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold (g/t) |
|
| 0.31 |
|
|
| 0.40 |
|
|
| 0.46 |
|
|
| 0.36 |
|
|
| 0.45 |
|
|
| 1.03 |
|
|
| 0.41 |
|
|
| 0.49 |
|
Silver (g/t) |
|
| 59 |
|
|
| 54 |
|
|
| 118 |
|
|
| 55 |
|
|
| 44 |
|
|
| 222 |
|
|
| 58 |
|
|
| 53 |
|
Copper (%) |
|
| N/A |
|
|
| 0.58 |
|
|
| N/A |
|
|
| 0.18 |
|
|
| 0.56 |
|
|
| N/A |
|
|
| 0.2 |
|
|
| 0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentrate Produced |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tonnes |
|
| 33 |
|
|
| 4,911 |
|
|
| 1,442 |
|
|
| 2,737 |
|
|
| 10,075 |
|
|
| 3,174 |
|
|
| 1,890 |
|
|
| 9,395 |
|
Grade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold (g/t) |
|
| 17.73 |
|
|
| 13.03 |
|
|
| 11.79 |
|
|
| 21.12 |
|
|
| 14.26 |
|
|
| 19.15 |
|
|
| 22.99 |
|
|
| 15.31 |
|
Silver (g/t) |
|
| 4,214 |
|
|
| 2,014 |
|
|
| 3,185 |
|
|
| 3,355 |
|
|
| 1,576 |
|
|
| 4,250 |
|
|
| 3,540 |
|
|
| 2,030 |
|
Copper (%) |
|
| 6.66 |
|
|
| 20.38 |
|
|
| N/A |
|
|
| 6.75 |
|
|
| 20.23 |
|
|
| N/A |
|
|
| 6.53 |
|
|
| 21.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentrate Sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tonnes |
|
| 528 |
|
|
| 6,955 |
|
|
| 1,741 |
|
|
| 4,483 |
|
|
| 9,366 |
|
|
| 4,052 |
|
|
| 1,818 |
|
|
| 8,315 |
|
Grade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold (g/t) |
|
| 15.16 |
|
|
| 11.55 |
|
|
| 18.56 |
|
|
| 17.46 |
|
|
| 12.41 |
|
|
| 20.08 |
|
|
| 22.48 |
|
|
| 14.75 |
|
Silver (g/t) |
|
| 2,015.93 |
|
|
| 1,392 |
|
|
| 2,725 |
|
|
| 2,100 |
|
|
| 1,339 |
|
|
| 3,451 |
|
|
| 2,582 |
|
|
| 2,015 |
|
Copper (%) |
|
| N/A |
|
|
| 20.57 |
|
|
| N/A |
|
|
| 8.13 |
|
|
| 20.82 |
|
|
| N/A |
|
|
| 6.84 |
|
|
| 23.11 |
|
Average Realized Pricing (US$/oz) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold ($/oz) |
|
| 1,640.43 |
|
|
| 1,745.82 |
|
|
| 1,367.80 |
|
|
| 1,407.41 |
|
|
| 1,403.98 |
|
|
| 1,251.07 |
|
|
| 1,259.82 |
|
|
| 1,254.78 |
|
Silver ($/oz) |
|
| 14.98 |
|
|
| 18.37 |
|
|
| 15.50 |
|
|
| 16.18 |
|
|
| 16.18 |
|
|
| 15.44 |
|
|
| 15.41 |
|
|
| 15.33 |
|
Copper ($/lb) |
|
| N/A |
|
|
| 2.60 |
|
|
| N/A |
|
|
| 2.70 |
|
|
| 2.70 |
|
|
| N/A |
|
|
| 2.94 |
|
|
| 2.92 |
|
2018 2017 2016 San Gonzalo Avino Historic Above Ground Stockpiles Avino Mine San Gonzalo Avino Mine San Gonzalo Avino Mine Processed Tonnes 79,140 202,830 426,794 81,045 460,890 115,047 429,289 Grade Gold (g/t) 1.03 0.41 0.49 1.32 0.52 1.25 0.42 Silver (g/t) 222 58 53 269 64 267 67 Copper (%) N/A 0.2 0.6 N/A 0.5 N/A 0.5 Concentrate Produced tonnes 3,174 1,890 9,395 3,167 9,782 4,115 9,390 Grade Gold (g/t) 19.15 22.99 15.31 26.27 16.72 25.9 12.23 Silver (g/t) 4,250 3,540 2,030 5,800 2,560 6,220 2,620 Copper (%) N/A 6.53 21.96 N/A 20.28 N/A 20.32 Concentrate Sold tonnes 4,051.69 1,818.28 8,314.90 2,895.08 9,139.73 3,229.97 10,761.81 Grade Gold (g/t) 20.08 22.48 14.75 17.16 16.27 20.56 11.48 Silver (g/t) 3,450.90 2,582.18 2,014.54 5,129.31 2,381.36 5,175.13 2,448.42 Copper (%) n/a 6.84% 23.11% n/a 18.38% n/a 19.01 Average Realized Pricing (US$/oz) Gold ($/oz) 1,251.07 1,259.82 1,254.78 1,270.75 1,267.09 1,249.70 1,257.91 Silver ($/oz) 15.44 15.41 15.33 17.01 17.07 17.09 17.74 Copper ($/lb) n/a 2.94 2.92 n/a 2.84 n/a 2.19
44 |
Table of Contents |
Bralorne Property—British Columbia, Canada
Introduction
The Bralorne property consists of approximately 11,189 acres (4,528 hectares) of mineral claims located in southwestern British Columbia, Canada, which cover three former gold mines with historic production of 4 million ounces of gold between 1928 and 1971. Since these mines closed, exploration has been carried out by various companies. A new vein was discovered in 2006 that spurred renewed exploration drilling followed by test mining and processing between 2011 and 2014 for a total of 18,436 ounces of gold recovered.
Assets include underground mining equipment, tailings storage facility, water treatment plant, and associated surface shops, accommodation and office buildings. Historically, the property was permitted for extracting and processing resources at a rate of up to 450 tonnes (approximately 500 tons) per day. More recently, in 1996 under M-207 amended in 1997, 2004, 2010, the mine was permitted to operate at 100 tons per day until its shutdown in 2014; A permit amendment for Permit M-207 was received in November 2017 updating the Permit to current standards and allowing the company to restart the Bralorne Mine at 100 tons per day, which included incorporation of the updated Interim Closure and Reclamation Plan (“ICRP”). An additional permit amendment to Permit M-207 to allow for expansion beyond the 100 tons per day is currently being contemplated by the Company. On October 21, 2016, Avino announced the results of an updated NI 43-101 resource estimate for the Bralorne property. The resource estimate has been included in an updated NI 43-101 technical report, prepared by Kirkham Geosystems Ltd., which was filed on SEDAR and EDGAR on October 27, 2016 and is discussed in more detail in the Resource Estimate section below. Continued exploration and trial mining is planned with the aim of lowering costs and outlining sufficient additional resources for an expansion of activities.
Location and Access
The Bralorne Property is located northeast of Vancouver, British Columbia, Canada and is accessible by road from Vancouver 322km through the Fraser Valley along Highway 1 to Lytton, and then to Lillooet on Highway 12, or alternatively 255 km from Vancouver on Highway 99 through Squamish, Whistler and Pemberton to Lillooet. From Lillooet it is another 105 km on Highway 40 through Gold Bridge to the town of Bralorne.
The property is situated as illustrated in the figure below:
The community of Bralorne lies in the centre of the property. This town site was built to support historic mining operations and now has about 70 full-time residents. The community of Gold Bridge lies 11 kilometres northwest of Bralorne and including the surrounding area has a population of approximately 50. There are limited facilities in Gold Bridge, including two motels, a restaurant, gas station, grocery store, and one school covering kindergarten to grade seven levels. Additional services are available in Lillooet or Pemberton.
Geology and Mineralization
The Bralorne property is situated at a tectonic boundary between the regionally extensive Cache Creek and Stikine allochthonous terranes. The Bridge River terrane, part of the Cache Creek terrane, is comprised of Mississippian to Middle Jurassic accretionary complexes of oceanic basalt and gabbro and related ultramafic rocks, chert, basalt, shale and argillite. It is juxtaposed with Late Triassic to Early Jurassic island arc volcanic rocks and mostly marine, arc-marginal clastic strata of the Cadwallader terrane, interpreted as part of the Stikine terrane.
The region has been intruded by a wide range of Cretaceous and Tertiary plutonic and volcanic rocks and their hypabyssal equivalents. Most significant among these are the dominantly Cretaceous granitoid bodies that form the Coast Plutonic Complex, which locally is characterized by the 92 Ma Dickson McClure intrusions, and the large individual bodies of the Late Cretaceous Bendor plutonic suite. Hypabyssal magmatism is reflected by emplacement of porphyritic dikes between 84 and 66 Ma, with the youngest magmatic event being 44 Ma lamprophyre dikes (Hart et. al. 2008).
The district was deformed by mid-Cretaceous contractional deformation within the westerly-trending Shulaps thrust belt, and by contractional and oblique-sinistral deformation associated with the Bralorne-Eldorado fault system. The timing of this deformation and metamorphism is bracketed around 130–92 Ma. The Bridge River and Cadwallader terranes are juxtaposed along the Bralorne-Eldorado fault system, which consists of a 1 to 3 km wide linear zone of tectonized and serpentinized slices of late Paleozoic mafic and ultramafic rocks.
The main gold-forming event in the Bridge River district is interpreted to have taken place at around 68 to 64 Ma at the Bralorne-Pioneer deposit. Mineralization pre-dated or was synchronous with the emplacement of the Bendor batholith, and the gold event overlaps initiation of dextral strike-slip on the regional fault systems in this region.
The principal stratigraphic assemblages of the local area include the Bridge River Complex and Cadwallader Group. The Bridge River Complex is subdivided into two packages, sedimentary and volcanic, with a thickness of 1,000 m or more of ribbon chert and argillite with very minor discontinuous limestone lenses, and large volumes of basalt. The Cadwallader Group has been subdivided into three formations: the lowermost sedimentary Noel Formation, the Pioneer Formation greenstones, and the upper Hurley Formation sedimentary rocks. The Pioneer Formation ranges from fine-grained, massive amygdaloidal flows and medium-grained dykes or sills, to coarse lapilli tuffs and aquagene breccias. It is estimated to be at least 300 m thick in the Cadwallader Valley, but may be thicker elsewhere. The Hurley Formations is comprised of rhythmically layered green volcanic wacke and darker argillite. The Noel Formation consists of black argillites that are less calcareous than those of the Hurley.
Igneous rocks within the Bralorne area include Upper Paleozoic ultramafic rocks and associated Bralorne intrusive suite, Mesozoic Coast Plutonic rocks, Tertiary Bendor intrusive rocks, and dykes of Cretaceous-Tertiary age. Ultramafic rocks, called the President ultramafics, form narrow serpentinized bodies and with the pillow basalts and radiolarian ribboned cherts of the Bridge River Complex, they complete the trinity of a typical ophiolite package. The ultramafic rocks in the Bralorne area range from dunite to pyroxenite, but peridotites are most common. Usually they are partly to completely serpentinized, or altered to talc-antigorite-tremolite-carbonate, and are intruded by diorite. The Bralorne intrusive suite includes augite diorite and “Soda Granite” (trondhjemite or albite tonalite), which commonly occur together. The main mass is called Bralorne Diorite (hornblende quartz diorite) and occurs between the bounding Fergusson and Cadwallader faults. The Bralorne Diorite complex is cross cut by intrusions of soda granite with complex dyke relations. The main body of Soda Granite is found along the northeast side of the Bralorne Diorite, but also forms many dykes cutting the diorite. Typically, the Soda Granite is a leucocratic, coarse-grained granitic rock. Cretaceous-Tertiary dykes, including grey plagioclase porphyry, albitite, green hornblende porphyry, Bendor porphyry and lamprophyre, intrude all the units. All the rocks in the Bralorne area, except the Bendor and lamprophyre dykes, are affected by low-grade metamorphism.
The Bralorne-Pioneer gold-quartz vein system is hosted in variably altered rocks of the Bralorne Diorite complex and Pioneer Greenstone that occur as fault-bounded lenses in a structurally complex zone between the Cadwallader and Fergusson faults referred to as the Bralorne-Pioneer fault lens or Bralorne Block. This lens has an approximate 4.5 km strike length, mostly along, adjacent to, or between these two faults. All of the significant historic gold production in the Bridge River area came from within the Bralorne Block.
Property Ownership
The Bralorne property is comprised of different types of legal mineral properties registered under and subject to the Mineral Tenure Act and Mineral Land Tax Act of the Province of British Columbia. The Property consists of 154 Crown granted mineral claims, two reverted Crown granted claims and eighteen metric unit mineral claims, all of which are contiguous. Bralorne Gold Mines Ltd. (in this section, “BGM”) owns 100% of the property. During 2016, the Company also acquired a 100% interest in nine mineral claims from Great Thunder Gold Corp. (“GTG”) located in the Lillooet Mining Division of British Columbia, known as the BRX Property.
Mineral Concessions and Agreements
There is an underlying agreement on twelve Crown grants in which the Company is required to pay 1.6385% of Net Smelter Proceeds of Production from the claims, and has to pay fifty cents (C$0.50) per ton of material produced from these claims if the material grade exceeds ¾ (0.75) ounce per ton gold. No extraction or processing has come from these claims in the past and none is planned in the near future. The Crown grants subject to this agreement include:
DL 5742 Sunbeam
DL 5743 Comstock No. 5
DL 5744 Comstock No. 2
DL 5745 Homestake
DL 5746 Sunshine
DL 5747 Comstock No. 3
DL 5748 Lorenzo
DL 5750 Orion No. 4
DL 5751 Orion
DL 5752 Comstock No. 8
DL 5754 Comstock No. 7
DL 5755 Comstock No. 6
Crown granted mineral claims may also include surface rights, water rights and timber rights. At the Bralorne property, surface rights are currently held by BGM on 9 of its 154 Crown Grants as listed below:
DL 456 Pioneer
DL 457 Ida May
DL 539 Little Joe
DL 579 Wood Chuck
DL 670 Telephone
DL 671 Wood Duck (Lot 1)
DL 5489 Telephone Fr.
DL 5484 Polnud (Lot 20)
DL 5582 Millbank
DL 7883 Cora Fr (Lots 3, 4, 6, and 7 – no Crown granted mineral claim, surveyed lot only)
Claim Staking and Mineral Tenure in British Columbia
Crown granted mineral claims are legacy claims in British Columbia that confer rights to subsurface minerals. The Crown granted claims are subject to the Mineral Land Tax Act, which requires the owner to pay to the BC Ministry of Finance a tax at C$1.25 per hectare up to a holding of 20,235 ha if no commercial production has been declared to maintain the claims in good standing for one year. The total annual tax payable for all of the Crown granted mineral claims in the Bralorne property was C$2,248.35 in 2018. All of BGM’s Crown granted mineral claims are in good standing until July 2019 and it is expected that the annual taxes will be paid again prior to that date.
Reverted Crown grants are treated the same as mineral cell claims in terms of holding costs. Below is the required work value for mineral cell claims.
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Instead of applying a work value to claims the claim owner can pay cash in lieu of expenditure to the British Columbia government (“cash-in-lieu”). To maintain the claim by paying cash-in-lieu, double the minimum value of exploration and development for the respective anniversary year as noted above would need to be paid.
Any mineral cells which have a border with each other are considered to be contiguous and the work value performed on one claim can be applied proportionally to all connected cells.
All of Bralorne’s reverted Crown granted mineral claims and mineral cell claims are contiguous.
All of the Crown granted mineral claims and reverted Crown granted mineral claims have been legally surveyed. The mineral claims have not been surveyed.
All of BGM’s reverted Crown granted mineral claims and mineral cell claims are in good standing with the first expiry date being September 23, 2026, with the exception of one mineral cell claim (tenure number 1051046) which has a good to date of March 29, 2020. It is expected that new exploration work prior to that date will be completed and work credit been applied to all claims to bring them to the same good to date as they are all contiguous. Alternatively, cash-in-lieu can be paid for this claim to extend the expiry date.
Mineral and Placer Claims are acquired using the British Columbia Mineral Titles Online (MTO) system. The online MTO system allows clients to acquire and maintain mineral and placer claims. Cell claims are registered by selecting one or more adjoining cells on the electronic MTO map. Mineral Titles can be acquired anywhere in the province where there are no other impeding interests (other mineral titles, reserves, parks, etc.). No two MTO users can select the same cells simultaneously, since the database is live and updated instantly; once a selection is made, the cells selected will no longer be available to another user, unless payment is not successfully completed within 30 minutes.
Bralorne Area Crown Grants owned by Avino Silver & Gold Mines Ltd.:
Bralorne Area Mineral Cell Claims and Reverted Crown Grants Owned by BGM:
This list is considered to be accurate as of March 19, 2019, according to the MTO database. Note that the Mineral Titles Online database lists only the reverted Crown Grants and the metric cell unit claims.
Map of Bralorne Property Concessions
History
The Bralorne property has an extensive history of exploration and mining, starting in the late 1800’s, when placer miners followed gold up the Fraser River and its tributaries and eventually discovered lode gold in the area of Cadwallader Creek. The first claims on the property were staked in 1896 and small-scale production began in the area of the Pioneer Mine shortly thereafter. Larger scale commercial production from underground mining commenced in 1928, and production at Pioneer and Bralorne Mines was expanded to 450 tonnes per day at each mine. Bralorne subsequently merged with Pioneer and continued production until 1971, when operations were closed for economic factors when the gold price was fixed at $35 per ounce.
Total historic production from the Bralorne-Pioneer gold mine is recorded as 4.2 million ounces of gold (equating to 129.14 tonnes) from 7.3 million tonnes of material grading 17.7 grams gold per tonne (8.0 million short tons at 0.52 ounce per ton). Silver production from the deposits is recorded as 29.61 tonnes (952,000 ounces).
The current Bralorne mineral property encompasses several historic mine workings, of which the major ones are the King, Bralorne, and Pioneer mines. A total of 30 veins on the property were mined in the various workings by 80 kilometres of tunneling on 44 levels, the deepest of which traced the 77 vein to a depth of 1,800 meters below surface at the deepest part (~ 670 meters below sea level).
With the acquisition of the “BRX” claims to the North of the Bralorne claims in August 2016, it expanded to include the former California and Arizona mine workings among others.
Since 1971, considerable work by a number of companies has been carried out on the property. Major exploration programs were carried out on the old mine areas of the property in 1973 by Bralorne Resources and in 1980 to 1984 by E & B Explorations, Inc., who acquired the main historic deposits in 1980, and also in 1988 by a successor company to E & B, Corona Corporation. In 1973 and 1974 Love Oil carried out exploration work on the northeast sector of the property. In 1987, Levon Resources carried out surface exploration over the same area, and underground mine advancement including an adit and a cross cut plus 20 meters of drifting on the Peter vein was carried out. In 1986, Mascot Gold Mines Limited conducted surface and underground diamond drilling and drifting.
Avino Mines and Resources Limited became involved in the Bralorne area in 1987, and subsequently acquired 100% ownership from Love Oil Company, Coral Gold Corporation and Levon Resources. Avino purchased the Bralorne-Pioneer property from Corona in 1991. This was a major accomplishment for management and marked the first time in the history of the mining camp that all of the major deposits were held by the same company. In 1991, Avino Mines and Resources conducted surface and underground exploration including surface drilling, rehabilitation of the King Mine 800 level, and underground drilling to explore the Peter Vein.
In 1993, Bralorne Pioneer Gold Mines Ltd. (“Bralorne Pioneer”) optioned the property from Avino and conducted surface exploration over the northeastern part of the property. In 1994, the same company carried out a diamond drill program on the Peter Vein and other nearby veins. In 1995, Bralorne Pioneer carried out 700 feet of underground drifting on the Peter Vein on the 800 level and underground drilling to test the Peter and Big Solley Veins. Also in 1995, Bralorne Pioneer carried out surface trenching followed by drilling. Further surface drilling was done in 1997. In 2001, Bralorne Pioneer drove a raise from the upper Peter drift through to surface and a second raise was driven part way to surface from the same level.
Bralorne Pioneer acquired 100% interest in the property from Avino Silver and Gold Mines Ltd in 2002. In 2002 and 2003, Bralorne Pioneer drilled 24 surface diamond drill holes and carried out a trenching program on the Peter Vein.
In 2003 and 2004, Bralorne Pioneer rehabilitated part of the 800 level, prepared both the 800 level drift on the Peter Vein and the Upper Peter cross-cut (4,230 level) for stoping, and commenced stoping the vein in the Upper Peter workings. Between 2004 and 2005, Bralorne Pioneer drove a trackless decline on the Peter vein from the 4,230 Level to the 4,130 Level and developed stopes on both these levels. A total of 3,500 tons of material grading 0.35 ounces of gold per ton is estimated to have been produced from the Peter vein before mining was stopped in 2005. Also in 2004 and 2005, Bralorne Pioneer carried out a surface drilling program consisting of 5,691.2 meters of NQ core in 43 holes. This program was targeted mainly at the 51BFW vein in the historic gap between the Bralorne and Pioneer Mines.
In 2005, Bralorne Pioneer collared an adit and drove a crosscut to access the 51BFW vein at the 4,140 elevation. A sill drift was driven in this vein and a trial shrinkage stope was developed. In the process of constructing the access road to the new adit, a mineralized quartz vein was discovered. This zone remains a valid exploration target and is now interpreted to be the top of the 52 vein.
Bralorne Pioneer changed its name to Bralorne Gold Mines Ltd. and operated the mill intermittently on a trial basis in 2004 and 2005 to process bulk sample material from the Peter and 51BFW veins, plus low grade material from old mine dumps and tailings. The combined total for all of the old tailings and low grade stockpile material that was processed between March 2004 and January 2005 was 22,642 tons at a feed grade of 3.15 g/T gold (0.092 oz/ton Au) with an overall gold recovery rate of 73.89%. The mill was operated again from March 2005 to November 2005 with feed from the Peter and 51BFW veins. Production totalled 8,552 tons at 8.67 g/t gold (0.253 oz/ton Au) with a recovery rate of 92.33% (of which 46% was in the flotation concentrate). Material from the Peter vein had about 35% of the gold reporting to the cleaned gravity concentrate (smelted on site). The balance of the gold (to a total of approximately 92%) was recovered into a flotation concentrate which averaged 62 g/T Au. The 51BFW material was found to be much coarser grained and yielded 61% gravity recovery and produced a flotation concentrate grading over 186 g/T Au.
In 2005, a Preliminary Economic Assessment (Beacon Hill 2005) showed that an average grade of at least 15.5 g/T gold would be required to sustain a viable operation, based upon the operating costs at a production rate of 100 tons/day. The study recommended programs to delineate sufficient resources to support a production rate of 280 tons/day at 12 g/T gold (0.35 oz/ton). This analysis was based on a gold price of US$400 per ounce.
In 2006, BGM conducted surface and underground exploration, including an MMI geochemical survey, surface diamond drilling (26 holes; 5,667.8m), underground drilling (4 holes; 980.9m), and digitization and compilation of current and historic data. Significant drill intercepts were identified including two high-grade intercepts in the Bralorne-King area. SB06-109B intersected 0.61 m of 15.87 g/T gold and then intersected two smaller zones of high-grade gold; a 0.34 m vein assaying 402.58 g/T gold and a 0.37 m vein assaying 246.99 g/T gold.
In 2007, BGM conducted underground drilling (47 holes; 8,603m) in the area of the high-grade intercepts obtained in 2006. Significant intercepts obtained in the underground drill program were modeled by Beacon Hill as a new zone (BK Zone).
In 2008, BGM conducted underground advancement including a track drift to cross cut to the BK Zone, and drifting along the zone. Drift muck from the mineralized structure was stockpiled for mill feed.
2009-2015 Exploration, Development and Advancement Activity
BGM continued exploration and evaluation of the property between 2009 and 2015, and conducted diamond drilling, underground advancement plus trial mining and milling. The purpose of this work was to locate new gold resources and evaluate production at higher gold prices.
Between 2010 and 2014, a total of 83,462 tonnes of material were extracted from the underground mine for mill feed at an estimated grade of 10.01 grams of gold per tonne, and 7,025 tonnes at an estimated grade of 3.44 grams of gold per tonne were extracted from surface stockpiles.
BGM operated the processing plant from May 2011 until December 2014. The output of the plant consisted of gold and silver in doré bars and flotation concentrate, with gold making up the majority of sales. BGM sold to refiners and concentrate traders to offset the costs of exploration and advancement work.
Between 2011 and 2014, BGM produced a total of 18,436 ounces of gold, of which 10,670 ounces were contained in gold doré and the balance contained in flotation concentrate. These totals include 590.1 ounces produced after the acquisition of BGM by Avino in 2014.
The Beacon Hill 2012 technical report recognized that the Bralorne mine extracts and processes resources and has the potential for delineating additional resources below the area presently being mined. Thus, there is opportunity for continued extracting and processing and the potential for expanded extracting and processing should these resources be delineated. The process of resource expansion combined with operational expansion, if applicable, should be completed in a controlled manner. The recommended expansion program at the time of the 2012 technical report had a cost estimate of CAD $17,963,000 (Beacon Hill, 2012).
In October 2014, BGM was acquired as a wholly owned subsidiary of the Company. Under the Company’s ownership, BGM continued its trial mining program and carried out diamond drilling in the winter of 2014 and 2015.
Annual drilling is summarized in the table below. From 2009 to 2013, a total of 100 holes totaling 16,114.6 metres were drilled on the Bralorne property from underground and surface.
After the acquisition of BGM by Avino in 2014, surface drilling was carried out totaling 7,628.5 meters on 10 holes on the Prince and Shaft veins in 2014, and 25 holes on the Alhambra and 77 / 52 Veins in 2015.
Summary of drilling performed between 2009 and 2018:
Year | Type | Number of Holes | Total Meters | Core Size |
2009 | Surface | 16 | 3,658.9 | NQ |
2010 | Surface | 11 | 2,655.4 | NQ |
2011 | Surface | 30 | 5,202.9 | NQ |
Underground | 5 | 902.2 | NQ | |
2012 | Surface | 2 | 569.1 | NQ |
Underground
| 17 | 2,274.3 | NQ | |
9 | 137.8 | AW | ||
2013 | Underground | 4 | 600.0 | NQ |
6 | 114.0 | AW | ||
2014 | Surface | 10 | 1,054.3 | NQ2 |
2015 | Surface | 25 | 6,574.2 | NQ2 |
2018 | Surface | 13 | 3,035.81 | NQ2 |
12 |
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The Bralorne underground mine is operated under EMPR Permit M-207. This permit was based on a mine plan for BK and Alhambra zones for an underground operation of 100 tons per day.
Historic and recent underground advancement in the form of drifting, raising and stoping was carried out in the area of the discovery made in 2006 on the BK zone. Stope mining (stoping) was performed using the shrinkage method. In this approach, raises are driven in the material under geological control from the sill horizon at horizontal intervals dictated by the continuity of the material zone and connected to drifts at the upper end of the stope for access and ventilation. The material is excavated in horizontal slices from the bottom of the stope and advancing upwards. Part of the broken material is mined out of the stope and the remaining material acts as a working platform for mining the next lift and also to support the stope walls. Approximately 35 to 40% is drawn out during mining advancement and when all the material has been broken within a stope the remainder is extracted. This approach results in limited extraction during mining, but a significant increase in the extraction rate from each stope when all the material is broken. As a result of this process, a number of stopes will be in a breaking mode while a number will be in a pulling mode to ensure continuous feed to the plant.
A total of 1,283.2 meters of drifting, 618.6 meters of raising and 6,884.5 tonnes of material were mined from stopes in 2012 and 2013. In 2014, underground advancement continued in the BK zone, with 546 meters (1,791 feet) of exploration drifting along veins on the 3700, 3800, 3840 and 3900 elevation sublevels, and 155 meters (510 feet) of waste drifts in extraction drifts and draw points for mining. Exploration advancement on veins was carried out on the 3700 and 3900 levels, including 310 meters (1,016 feet) of raises. The table below summarizes the underground advancement carried out in the BK zone from 2009 to 2015, no underground advancement occurred in 2016 to 2018.
Summary of underground exploration advancement – BK zone:
Year Location Type Amount Units 2009 BK Portal Trackless Decline (11’x9’) 391.8 ft. Taylor Access Trackless Drifting (track installed) (11’x9’) 431.0 ft. BK Exploration Raises Raising (5’x5’) 216.2 ft. 2010 Taylor Access Trackless Drifting (track installed) (11’x9’) 459.1 ft. 8L BK (ext./DP) Track Drift (6’x7’) 699.1 ft. BK Exploration Raises Raising (5’x5’) 20.0 ft. BK Stope (lifts) Stoping 4,434.6 tons 8L North Drifting Track Drift 245.0 ft. North Subdrifting Subdrift 567.6 ft. North Slot Raises Slot Raising in Stope 477.2 ft. North Vein Stoping Stoping 650.6 tons Taylor Access Underground Rehab 368.0 ft.
Year Location Type Amount Units 2011 BK Stope (lifts) Stoping 7,966.7 tons North Slot Raises Slot Raising in Stope 118.5 ft. North Stoping tons/slashes Stoping/slashes 153.0 tons Alhambra DD Cutout Cut out from track drift 11.7 ft. Pass Raise and Chute Raising (6’x5’) 382.6 ft. Manway Raise Raising (6’x5’) 90.4 ft. BK Portal Ramps Trackless Decline / Incline (11’x9’) 1,560.1 ft. Alhambra Drift Underground Rehab 222.7 ft. Sumps and Remucks Trackless Drifting (11’x9’) 168.6 ft. BK Access Trackless Drifting (11’x9’) 71.5 ft. BK Refuge Trackless Drifting (11’x9’) 32.6 ft. BK Safety Bays Jackleg Drifting (5’x6’) 66.0 ft. 2012 BK Portals Trackless Decline / Incline (11’x9’) 472.0 ft. Sumps and Remucks Trackless Drifting (11’x9’) 40.0 ft. BK Access Trackless Drifting (11’x9’) 206.4 ft. BK Safety Bays Jackleg Drifting (5’x6’) 20.0 ft. Extraction Drifts Trackless Drifting (11’x9’) 370.0 ft. Drawpoints Trackless Drifting (9’x9’) 199.0 ft. Drifts Trackless Drifting (8’x9’) 1,652.1 ft. Stope Manway Raises Raising (6’x5’) 693.1 ft. Manway Raises Raising (6’x5’) 394.7 ft. 2013 BK Access Trackless Drifting (11’x9’) 31.7 ft. Sumps and Remucks Trackless Drifting (11’x9’) 6.0 ft. Exploration Raises Raising (6’x5’) 876.4 ft. Stope Manway Raises Raising (6’x5’) 65.2 ft. Drifts Trackless Drifting (8’x9’) 443.8 ft. Subdrift Trackless Drifting (6’x6’) 171.7 ft. Extraction Drifts / Drawpoints Trackless Drifting (11’x9’) 462.5 ft. BK Portal Trackless Decline / Incline (11’x9’) 134.9 ft. BK Stopes Stoping 7,588.9 tons 2014 Drifts Trackless Drifting (8’x9’) 1,791.0 ft. Extraction Drifts / Drawpoints Trackless Drifting (11’x9’) 510.0 ft. Exploration Raises Raising (6’x5’) 1,016.0 ft. BK Stopes Stoping 20,953.9 tons 2015 BK Access Trackless Drifting (11’x9’) 685.2 ft
The table below presents material mined, material processed, concentrate and doré bars produced, concentrate and doré bars sold, and average realized pricing for the Bralorne Mine property since the acquisition by Avino in October 2014:
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Recent Exploration, Development and Advancement – 2015 - 2018
During 2015 and 2016, Avino worked to provide a route to Bralorne’s growth with manageable sequenced capital expenditures. Independent mining engineers continued to review potential scenarios to develop a long-term mine plan which includes a change to narrow vein long hole mining wherever possible, to replace the historic labor intensive shrinkage and cut and fill mining methods.
By mid-year of 2017 the Company completed its review of potential scenarios for developing an operating plan. The original plan was for the future start-up of a small tonnage operation, and during the course of work being completed, our onsite consultants identified ground and safety issues in the existing 800 level tunnel. It was determined that the 800 level needed rehabilitative work, and consultants were engaged to review and develop a plan for the repairs. In view of the proposed repairs, which would have restricted mine throughput, the consultant’s recommendations were to construct a new tunnel on the 800 level, due to the age and limiting size of the original main access tunnel. The future construction of a new 800 tunnel should allow earlier access to the resources below the 800 level.
The recommended new 800 level tunnel would be sized for mechanized equipment (4.5 metres x 4.5 metres) for the long-term development of the mine to depth. The portal entrance would be near the mill and replace the old 800 tunnel (2.5 metres x 2.5 metres) which was only accessible by small track equipment. The old tunnel would be maintained and would still be used for ventilation, secondary egress, and mine water drainage.
The proposed new mine plan also contemplates testing a different mining method, sub level long hole retreat mining on veins where the hanging wall, foot wall, and mineralization are conducive to this method, which should be safer and more productive than the shrinkage and cut & fill mining methods used in the past. Combined with the larger new tunnel, the mining operation should be more mechanized and efficient than in the past and enable operating at a higher mining rate.
During 2017, an independent consulting engineering firm has reviewed the processing plant and infrastructure to determine which buildings and equipment should be replaced. Most of the equipment was configured for a 100 ton per day operation and will need to be updated for the anticipated higher processing plant operating rate. Accordingly, new or refurbished equipment is being proposed for the processing plant. A separate crushing building is being considered for the plant, with separate fine ore storage, which will provide more space in the current mill building for the larger equipment being considered. Other building and surface infrastructure will either be upgraded to meet the current required capacity, or they will be removed / demolished, and replaced.
On November 3, 2017, the Company received an approved Permit Amendment from the EMPR. The Permit Amendment provides a comprehensive and responsible permit, which is updated to modern environmental and permitting standards, and is an important step in the Company’s strategic plan to re-open the Bralorne Gold Mine. With the receipt of this modern permit, the Company anticipates an easier and quicker transition to an amended permit that will allow for future expansion.
In December 2017, the Company announced that plans were finalized for an 8,000 metre drill program to commence early January 2018. The program began in January 2018 and was aimed at both identifying additional resources and increasing the confidence in existing resources, in advance of a revised resource update. Following the completion of four holes, and flow through financing in April 2017, the Company decided to update the scope of the exploration program to include structural modelling and geological mapping, airborne and ground geophysics surveys, and geochemical sampling along with 24,000 metres of drilling as well as the digitization of historical data. By year end, 9,381 meters had been drilled primarily targeting an extension of the 27 vein. The results of the drilling program were disclosed in the Company’s press release dated December 17, 2018 and filed on Form 6-K with SEC on the same date.
In October 2018, the Company received a Permit Amendment of the Effluent Permit from the BC Ministry of Environment. This amendment now encompasses a broader scope for water management at the site, including greater volumes and waste disposal for the Best-Available-Technology (BAT) Water Treatment Plant.
In Q4 2018, pursuant to discussions with the Ministry of Energy, Mines, and Petroleum Resources (“EMPR”) regarding reclamation security, non-collateralized surety bonding has been secured to cover current, and future security requirements. The bond has freed up cash previously held by the Ministry, and will serve to cover future contributions to security, as laid out in the permitting requirements. Aon Risk Solutions, acting as insurance broker for the Company, was the responsible broker for negotiating the terms of the Surety.
The Company is maintaining open lines of communication with First Nations communities, and management continues its efforts to build meaningful progressive relationships with its stakeholders. In 2017, Avino continued with the underground mining training for members of the St’át’imc communities, and the third training program with North Island College began in November in Pemberton, B.C. In addition to the training program through North Island College, Avino has been working with the Center for Training Excellence in Mining, the BC government, Thompson Rivers University, New Gold, Seabridge Gold and Sandvik, amongst others, on the development of the curriculum for a new accredited underground mining training program aligned with the Mining Industry Human Resources Council’s Canadian Mining Certification Program.
During 2017, Avino announced the signing of a non-binding Letter of Intent (“LOI”) to recognize the opportunity for collaboration and the establishment of joint ventures to allow the St’át’imc First Nations (the “St’át’imc”) to economically participate in the development and ongoing operations of the Bralorne Gold Mine project. St’át’imc Eco-Resources Ltd. is owned by 9 of the 11 St’át’imc Communities.
Tailings Storage Facility
The tailings storage facility (“TSF”) is permitted under the existing mine permit, M-207 with the Province of British Columbia, Canada.
Construction of the TSF commenced in 2003 and initial construction was completed in 2004. Tailings were deposited in the TSF up until December 2014. Approximately 32,000 tons of tailings were deposited in the TSF between April 2004 and November 2005, and a further 108,180 tons deposited between 2011 and 2014, for a combined total of approximately 140,000 tons deposited. The Concentrator Mill was temporarily shut down in December 2014. No tailings were produced or deposited since then.
Tetra-Tech EBA Inc. has been supplying the Engineer of Record and has undertaken the annual Dam Safety Inspections of the TSF since 2011 and is familiar with site conditions and background data.
The current TSF consists of the following components:
TetraTech EBA was contracted to design and oversee construction of a TSF raise. A Raise was constructed on the existing approximately 17m wide embankment crest in 2015. The Raise included a compacted key trench and a spillway in the design. Approximately 8600 cubic metres of material was used in the construction. The raised dam elevations vary between 991.422 masl and 991.500 masl. The spillway invert is at 990.9 masl and the required freeboard is 1 metre. Approval from British Columbia Ministry of Energy & Mines (now the Ministry of Energy, Mines & Petroleum Resources “EMPR”) to operate the TSF with the raise was received on 11 December 2015. However, holes drilled through the dam to install piezometers and check the quality of the material below the bottom of the dam in November of 2015 plus additional holes drilled in January of 2016 and subsequent geo-technical evaluation in early 2016 indicated that construction of a Buttress would be required along part of the dam to stabilize this area. Thus, the TSF could not be used to store water or tailings until the Buttress work was completed. This work was completed in August of 2016 and approval received for use of the TSF in September of 2016.
With the raise in place, it was estimated by TetraTech EBA that there is capacity for 126,000 cubic metres of tailings storage when the design storm volume of 62,500 cubic metres is taken into account.
The third party Dam Safety Review by SRK Consulting was completed in December 2016.
Three seepage zones, north, south and middle, have been noted since impoundment of water within the TSF. Rates and quality of the discharge fluctuates seasonally. The water quality and volume flowrates have not exceeded the British Columbia Ministry of Environment (“MOE”) Permitted quality and flow limits.
Water level and water quality monitoring includes groundwater monitoring wells installed downstream of the TSF, standpipe and vibrating wire piezometers installed downstream and in the TSF embankment, and H flumes in the seepage ditches.
Tailings are delivered to the TSF from the mill by a tailings pipeline constructed of 3” diameter butt fused HDPE DR17 pipe. Tailings disposal requires pumping from the mill to the TSF by a multi-stage pump in the mill. The tailings pipeline crosses Cadwallader creek on a suspended wire crossing. New anchors for the crossing were engineered and installed in a project overseen by SNC Lavalin in 2015. New cables were also installed at this time. With the Company anticipating expanded mill throughput, the tailings pumps and tailings lines will need to be upgraded.
Water Treatment
Water treatment of mine drainage has been in place since 2013. Based on recommendations from Tetra Tech and SNC Lavalin a Pall microfiltration system was commissioned in 2016. The Water Treatment Plant (WTP) removes arsenic through precipitation with Ferric chloride followed by Microfiltration. The WTP uses Geo-Tubes for dewatering, a polymer coagulant station and sumps in a new building to protect it from the elements.
SNC Lavalin indicated that the high flows in 2015 could be from new openings from surface, new flows from underground, caving from old stopes underground. The Company inspected the surface for water flowing to the underground and stopped or diverted water in these areas.
In 2017, Lorax carried out some hydro-geological work on surface and a review of the underground to determine whether there are any areas of inflow that could be mitigated, and this work is in progress.
From 2015-2018 maximum flows during freshet from underground reached 35L/s. The Pall System has the capacity to treat this level of flow. The Water Tiger treatment system will be maintained as standby, which can treat another 8L/s. The water treatment system is used to minimize mine drainage water pumped to the TSF and can be used to treat TSF supernatant to further reduce TSF water levels.
Updates to the Effluent Permit in 2018, allow for year-round water treatment if necessary, disposal of the dewatered water treatment sludge at the TSF and water quality requirement for the discharge that are within the capabilities of the Pall system. The Operations, Maintenance and Surveillance Manual (OMS) for the WTP details the procedures, maintenance and spare parts that are kept onsite.
Project Infrastructure
The infrastructure at the Bralorne Mine is well developed. A 100 ton per day plant was in place and was operated from 2011 through 2014 on a trial basis, processing 100-120 t/d of material. In 2017, it was decided to remove all of the equipment for the 100 ton per day operation from the mill building to allow expansion for a larger processing plant. The access roads to the minesite are provincially maintained and open year-round. All other buildings on site are being reviewed for upgrading or replacement. The minesite has high speed internet communications.
The Bralorne Mine is supplied with electrical power from BC Hydro. The main BC Hydro service is estimated to be rated for a maximum demand of 1,500 kVA based on the single line diagrams provided and existing transformer capacities, consisting of 500 kVA for the surface buildings and 800 portal, and 1,000 kVA for the mill. The load distribution between the surface buildings/underground feeder and the mill feeder is understood to be divided in proportion to the two transformer bank capacities, therefore the surface buildings/underground feeder take one third of the combined load and the mill feeder takes two thirds. The maximum electrical demand measured at the BC Hydro service point in 2012 was 660 kW. At unity power factor, this translates to an estimated peak demand load of 220 kVA on the surface buildings/underground feeder and 440 kVA on the mill feeder.
There is also a second BC Hydro electrical service to the BK Mine which is rated 600V 400A and which supplies an estimated existing peak demand load of about 100 kVA. Engineering work in 2017 determined that there is sufficient power to expand the operating rate to about 500tpd with minimal capital expenditures.
Offices, Dry, Warehouse and Camp
The facilities at the Bralorne Mine were in good condition and were adequate for the past extracting and processing activities. The camp can house up to 45 people, however, with the Company planning and expansion, the camp will need to be expanded or a new one constructed.
Processing Plant
The process plant was a conventional flotation plant designed to produce both gravity and flotation concentrates. The quantity and quality of these processes were dependent on the material being treated. The plant, including the crushing circuit, was housed in a single building along with both coarse and fine material bins.
The crushing circuit was capable of 50 t/hr, and would operate with single shift crushing; however, feed storage was limited at 90t coarse material and 180t fine material (in two bins). The feed was reclaimed from the fine material bins and fed to a 6.5’ x 6’ ball mill fitted with a 150HP motor. The ball mill operated at 72% critical speed and drew 80HP at the pinion.
The feed to the mill was determined by belt cuts. Processing experience indicated that as tonnage was increased beyond approximately 3.7 t/hr (80 t/day), an excessive amount of pebble was rejected by the mill; this problem was addressed by the installation of a reverse spiral on the output trommel.
Mill discharge was passed over a jig. Jig tailing was cyclone feed, the cyclone underflow being returned to the mill and overflow reporting to the conditioning tank ahead of flotation.
The flotation circuit was conventional, the small 15 cu ft Minpro cells being supplemented by a single 100 cu ft Wemco cell which was used as the first rougher cell. Rougher and scavenger concentrates were cleaned to produce a final concentrate.
The tailings from the flotation circuit, representing final tailings, were pumped to the tailings storage facility using a four-stage pumping system.
The flotation concentrate was pumped to a concentrate thickener. This thickener was adequate at expected processing rates. Thickener underflow was pumped to a 4ft. drum filter. Filtered concentrate was bagged in super sacks for shipment.
During this past year, an independent consulting engineering firm has reviewed the processing plant and infrastructure to determine which buildings and equipment should be replaced. Most of the equipment was configured for a 100tpd operation and will need to be updated for the anticipated higher processing plant operating rate. Accordingly, new or refurbished equipment is being proposed for the processing plant. A separate crushing building is being considered for the plant, with separate fine ore storage, which will provide more space in the current mill building for the larger equipment being considered and all of the equipment for the 100 tpd mill has been removed. Other building and surface infrastructure will either be upgraded to meet the current required capacity, or they will be removed / demolished, and replaced.
Mining Fleet
The Bralorne mining fleet in 2018 includes an excavator, 2 loaders, 5 scoop trams, 3 electric locomotives with 5 mine cars, a rock breaker, a jumbo and an emergency transport vehicle. The excavator and one of the loaders were replaced with new ones.
Costs Incurred to Date
The table below for the period from acquisition on October 20, 2014 to December 31, 2018 contains selected financial data prepared in accordance with IFRS derived from our audited consolidated financial statements.
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| ||||||||||||||||
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______________
Eagle |
Below is a table summarizing the estimated planned future costs for 2019. The Company will need to raise capital to meet its planned future costs. No assurance can be given that the Company will be able to raise the amounts in the table below or that actual future costs will equal the amounts in the table below. If the Company is unable to raise capital to meet its planned future costs, it may have to curtail planned activities.
Year |
| Exploration and Evaluation Expenditures |
|
| Capital Expenditures |
|
| TOTAL |
| |||
2019 |
| $ | 4,700,000 |
|
| $ | 500,000 |
|
| $ | 5,200,000 |
|
Mineral Reserve Estimates
There are currently no mineral reserves on the property.
Mineral Resource Estimates
The estimates described below are for Mineral Resources and are categorized as Measured, Indicated or Inferred according to the CIM Definition Standards for Mineral Resources and Mineral Reserves, as adopted on November 27, 2010, and amended on May 10, 2014. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimates are not categorized as Mineral Reserves at this time since they do not take into account other economic factors including mining outlines or mining recovery. However, a reasonable requirement of a minimum mining width is incorporated in the estimate by compositing assays to a minimum mining width of 1.2 meters (4 feet), and by addition of 10% dilution at zero grade to each resource model.
Resource Estimates – Methodology
The drill hole database was supplied in electronic format by Bralorne. This included collars, down hole surveys, lithology data, vein intersections and Au opt along with down-hole from and to intervals in imperial units. A total of 3,396 collars with 15,897 individual assays were supplied which included 321 drillholes, 2 trenches, 266 back samples, 1,187 face samples, 386 historic channels, 256 raises and 972 stope samples.
In addition, composites within the vein structures were supplied which is included 3,878 assay intervals with uncut Au opt and the application of a 3 opt top cut at varying stages.
A model of the 51bFW, 51bHW/FW, Alhambra, BK, BK-9870, BKN, Prince, Shaft, Taylor zones was supplied by Bralorne. These are based upon assay intersections, visual inspection and site knowledge.
Intersections were inspected against the corresponding solid for which it was assigned. The challenge for vein type deposits relate to geometric precision due to the lack of relative precision with the downhole and sample survey information. Therefore, although the intercepts may not exactly align with the vein solid, the composites are tagged to appropriate solid for use within the interpolation process. Once the solid volumes are created, they are used to code the drill hole and sample assays and composites for subsequent statistical and geostatistical analysis. In addition, these vein solids volumes are coded into the block model in order to derive a partial percentage which is important for weighting the calculations for volumes and tonnages. The solid volumes are also then utilized to constrain the block model by matching assays to those within the zones. The orientation and ranges (distances) utilized for search ellipsoids used in the estimation process were derived from strike and dip of the mineralized zone and site knowledge and on-site observations.
The composite database was supplied in electronic format by Bralorne. This included collars, down hole surveys and composite gold assays along with vein assignments.
It was determined that the 4’ composite lengths offered the best balance between supplying common support for samples and minimizing the smoothing of the grades. The 4’ sample length also was consistent with the distribution of sample lengths within the mineralized domains.
The method employed for capping was to limit the range of influence for gold values greater than 3 opt to 25 feet, which equates to the adjacent, adjoining two blocks. Outside of this range, the gold values are capped to 3 opt.
The block models are orthogonal and non-rotated with the exception of the Alhambra and the 51b models which are reflective of the orientation of each deposit. The block size chosen was 16’ x 4’ x 16’ for all models with the exception of the 51b veins which are 20’ x 20’ x 4’. These block sizes differ considerably from previous models which utilized significantly smaller blocks but the author feels that the larger block size is a better reflection of the distribution of the data.
The search strategy employed for all zones was using inverse distance squared (ID2) as the interpolator, using a 200’ omni-directional search with a minimum of 3 composites, a maximum of 9 and a maximum of 3 composites per drillhole.
The average bulk dry density for ore-grade mineralized vein is 12.1 ft3/ton (2.63 cubic meters per tonne). This is the value historically used on-site and is based measurements and on production experience. All tonnage calculation utilizes this value. It is recommended that densities be revised and continually verified.
Solids volumes have been created of the mined out areas that must be accounted for and extracted from the resource calculation. These volumes have been coded into the block model and utilized for resource reporting.
During the block model estimation process, the distance to nearest composite, average distance, number of composites and number of drillholes stored.
The following details the grid spacing for each resource category to classify resources are;
The spacing distances are intended to define contiguous volumes, and they should allow for some irregularities due to actual drill hole placement. The final classification volume results typically must be smoothed manually to come to a coherent classification scheme. Subsequently, each of the zones were evaluated and digitized to insure continuity of the classification and eliminate the “spotted dog” effect.
Resource Estimates – Bralorne Property
The following is a summary of current resources at the Bralorne Property, grouped into the measured, indicated, and inferred categories. The effective date of the resource estimates is October 20, 2016. The resource estimates were prepared by Garth Kirkham, P. Geo., who is a “qualified person” within the meaning of National Instrument 43-101, and who is an employee of Kirkham Geosystems Ltd. and independent of Avino, as defined by Section 1.5 of NI 43-101.
Class | Measured | Indicated | Measured and Indicated | Inferred | ||||||||
Tons | Au opt | Au Ounces | Tons | Au opt | Au Ounces | Tons | Au opt | Au Ounces | Tons | Au opt | Au Ounces | |
51b FW | 8,294 | 0.26 | 2,176 | 33,466 | 0.2 | 6,596 | 41,760 | 0.21 | 8,772 | 147,691 | 0.19 | 28,785 |
51bFW/HW | 15,713 | 0.27 | 4,313 | 26,717 | 0.62 | 16,639 | 42,430 | 0.49 | 20,953 | 39,072 | 0.38 | 14,828 |
Alhambra | 21,915 | 0.46 | 10,153 | 16,462 | 0.26 | 4,259 | 38,377 | 0.38 | 14,412 | 10,454 | 0.19 | 2,001 |
BK | - | - | - | 50,501 | 0.33 | 16,822 | 50,501 | 0.33 | 16,822 | 50,430 | 0.16 | 8,064 |
BK-9870 | - | - | - | 5,754 | 0.53 | 3,058 | 5,754 | 0.53 | 3,058 | 7,327 | 0.27 | 1,986 |
BKN | - | - | - | 37,546 | 0.36 | 13,569 | 37,546 | 0.36 | 13,569 | 46,972 | 0.30 | 14,007 |
Prince | - | - | - | - | - | - | - | - | - | 12,790 | 0.17 | 2,138 |
Shaft | - | - | - | 41,300 | 0.28 | 11,432 | 41,300 | 0.28 | 11,432 | 25,781 | 0.27 | 6,994 |
Taylor | - | - | - | 15,455 | 0.16 | 2,510 | 15,455 | 0.16 | 2,510 | 23,010 | 0.22 | 5,097 |
Total | 45,922 | 0.36 | 16,643 | 227,201 | 0.32 | 74,855 | 273,123 | 0.33 | 91,528 | 363,527 | 0.22 | 83,900 |
Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred resources as an Indicated or Measured mineral resource and it is uncertain if further exploration will result in upgrading them to the Indicated or Measured mineral resource category.
Figures in the table may not add to the totals shown due to rounding.
The mineral resource estimate is classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum’s “CIM Definition Standards - For Mineral Resources and Mineral Reserves” incorporated by reference into National Instrument 43-101 “Standards of Disclosure for Mineral Projects”.
Mineral Resources are reported at cut-off grades 0.1 ounces per ton gold.
We advise U.S. investors that while the terms “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize these terms. U.S. investors are cautioned not to assume that any part or all of a mineral resource will ever be converted into reserves. Mineral resources are not mineral reserves and do not have demonstrated economic viability. The mineral resources reported represent estimated contained metal in the ground and have not been adjusted for metallurgical recovery. The potential exploration for and evaluation of mineral resources may be materially affected by legal, political, environmental or other risks.
Under National Instrument 43-101, BGM is required to disclose that it has not based its extracting and processing resources decisions on NI 43-101-compliant reserve estimates, or feasibility studies, and historically projects without such reports have increased uncertainty and risk of economic viability. BGM’s decision to extract and process resources, expand a mine, make other extracting- and processing-related decisions, or otherwise carry out mining and processing activities is largely based on internal non-public Company data, and on reports based on exploration and mining work by BGM and by geologists and engineers engaged by BGM.
Resource Depletion
Since the resource estimate was published on October 27, 2016, there has been no mining activity on the property.
Reclamation
On November 3, 2017, Bralorne received approval of the Interim Closure and Reclamation Plan (ICRP) through an Amended Mines Act Permit, M-207. The plan and an update submitted in 2018, outlines Bralorne’s reclamation objectives for the Bralorne property which include:
Reclamation projects in 2018 included a Terrestrial Plan, Hazardous Building Material assessment, a Risk Assessment and Feasibility study for the Preliminary Site Investigations, a Pilot-scale Bioreactor for post-closure Passive water treatment, and a conceptual full-scale design for a Bioreactor. These projects are included in the 2018 Update for the Closure and Reclamation Plan that was submitted in September 2018.
BRX Property – Not Active
Ownership. The wholly owned BRX was acquired in 2016 when Avino purchased a 100% interest in nine mineral claims from Great Thunder Gold Corp. (“GTG”). In consideration for the for the claims, Avino paid C$65,000 and issued 10,000 common shares to GTG and will pay GTG a 1% net smelter returns royalty to a maximum of C$250,000 on the sale of ore or other products from the BRX property. The BRX Property also has a pre-existing 2½% net smelter returns royalty payable to Levon Resources Ltd.
Property Description and Location. The 2,114 ha property is located in the Lillooet Mining Division of British Columbia near the town of Gold Bridge. The property lies east of the Hurley River, in the Gwyneth Lake area, south of the Eldorado basin, and near the west end and along the south shore of Carpenter Lake. Gold Bridge can be reached from Vancouver via Hope and Lillooet, a distance of 445 kilometers, or via Pemberton using the four-wheel-drive Hurley Pass route, a distance of 225 km.
Proposed Work Program. No further work is proposed at this time.
Eagle Property – Not Active
Ownership. The wholly ownedwholly-owned Eagle property was acquired in 2003 when Avino purchased a 100% interest in 14 quartz leases by issuing 200,000 common shares at a price of C$0.50 per share for total consideration of C$100,000. The property was written down to a nominal value of $1 in fiscal 2006 and currently has a deferred value of $1.
In July 2017, an option agreement was signed between Avino and Alexco Resource Corp. (“Alexco”), granting Alexco the right to acquire a 65% interest in the Eagle Property. To exercise the option, Alexco must pay Avino a total of C$70,000 in instalments over 4 years, issue Avino a total of 70,000 Alexco common shares in instalments over 4 years, incur C$550,000 in exploration work by the second anniversary of the option agreement date, and a further C$2.2 million in exploration work on the Eagle Property by the fourth anniversary of the option agreement date. Avino received the first anniversary payment of C$10,000 and 10,000 common shares from Alexco in 2018.
In the event that Alexco earns its 65% interest in the Eagle Property, Alexco and Avino will form a joint venture for the future exploration and development of the Eagle Property, and may contribute towards expenditures in proportion to their interests (65% Alexco / 35% Avino). If either company elects to not contribute its share of costs, then its interest will be diluted. If either company’s joint venture interest is diluted to less than 10%, its interest will convert to a 5.0% net smelter returns royalty, subject to the other’s right to buy-down the royalty to 2.0% for $2.5 million.
The option agreement was terminated on January 31, 2019.
Property Description and Location. The 516 ha property is located in the Yukon Territory roughly 38 kilometres northeast of Mayo and 350 kilometres due north of the capital of Whitehorse. It is currently in its Phase I stage of exploration. The property is accessed by a road. Whitehorse, the nearest major city, is approximately 380 kilometres to the south of the village of Mayo. The village of Mayo is 60 kilometers to the southeast of Keno City. The Eagle property lies on the south-east facing slope of Galena Hill where the elevations range from about 1350 m to 1540 m. Permafrost, while thin to non-existent in places, is reported to be found under accumulations of surface rubble left from glaciation.
Proposed Work Program. No further work is proposed by Avino at this time as the option agreement was terminated on January 31, 2019.time.
Olympic-Kelvin Property – Not Active
Ownership. The Olympic-Kelvin property is wholly ownedwholly-owned by the Company and was acquired in 1987 when it acquired a 100% interest in 20 reverted Crown-granted mineral claims, one located mineral claim and three fractions located in the Lillooet Mining Division of British Columbia. The property was written down entirely in fiscal 2002. During the fiscal year ended January 31, 2007, these original mineral claims and fractions were converted into six claims encompassing all of the original claims. The Company recommenced exploration of the property in fiscal 2004 and ceased exploration activities in fiscal 2006. During the fiscal year ended December 31, 2009, the Company wrote down the value of these exploration costs to a nominal value of $1. The Company will maintain these claims in good standing and may decide to commence exploration again on the Olympic-Kelvin Property.
Property Description and Location. The Olympic-Kelvin property totals approximately 662.5 hectares and is located on the south side of Carpenter Lake, five kilometers northeast of Gold Bridge in the Lillooet Mining Division, British Columbia.
The Olympic-Kelvin property is easily accessible by the all-weather, publicly maintained, Gray Rock logging road which runs northeast from Gold Bridge. Access on the Olympic-Kelvin property is possible on a number of cat trails built by the Company and previous operators.
The Olympic-Kelvin property covers rocks of the Pioneer Formation and Bridge River Terrane. These rocks are cut by northwest trending regional scale structures sub-parallel to the Ferguson and Cadwallader Structures. The structures on the Olympic-Kelvin property are roughly the same distance from the Upper Cretaceous-Tertiary granitic Bendor Intrusions as the Bralorne/Pioneer mines. A similar flexure is present in the northwest trending structures on the Olympic-Kelvin property. These structures on the property are mineralized with silver and gold and have received considerable past work, including at least four adits.
Proposed Work Program. No further work is proposed at this time.
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Minto Property – Not Active
Ownership. The Minto Property is wholly ownedwholly-owned by the Company and was acquired in early 1985 when it acquired its 100% interest in eight Crown granted mineral claims, eight reverted Crown granted mineral claims and one located mineral claim, situated in the Lillooet Mining Division of British Columbia. During the January 31, 2007 year end these mineral claims were converted into one claim encompassing all of the original claims. The property was written down to a nominal value of $1 in fiscal 2002. The Company recommenced exploration of the property in fiscal 2006 and ceased exploration activities in fiscal 2007 and during the 2009 year end wrote down the value to a nominal amount of $1. The Company will maintain these claims in good standing and may decide to commence exploration again on the Minto Property.
Property Description and Location. The Minto Property is situated about tenkilometers east of Gold Bridge in the Bridge River gold district of British Columbia and adjoins the Olympic-Kelvin Property. The property covers approximately 204 hectares. The claims occupy the lake bed and north side of Carpenter Lake. Access from Gold Bridge is made via an all-weather gravel road which skirts the north shore of Carpenter Lake.
Gold Bridge can be reached from Vancouver via Hope and Lillooet, a distance of 445 kilometers, or via Pemberton using the four-wheel-drive Hurley Pass route, a distance of 225 km.
The terrain is rugged, typical of the eastern margin of the Coast Range Mountains. The claim group ranges in elevation from 650 meters on Carpenter Lake to a maximum of 1020 meters.
The climate of the Bridge River District is transitional between humid coastal belt and more arid interior plateau. Annual precipitation is modest with a significant proportion falling as snow in the winter. Summers tend to be warm to hot depending on the altitude, and winters are moderately cold.
Proposed Work Program. No further work is proposed at this time.
El Laberinto Property – Not Active
Ownership. Avino is, directly or through its wholly-owned Mexican subsidiary Compañía Minera Mexicana de Avino, S.A. de C.V., a Mexican corporation, the sole legal and beneficial owner of 100% of the rights, title and interest in and to the El Laberinto Property located in Durango State, Mexico.
Property Description and Location. The El Laberinto property is situated 60 kilometres NE of Durango, Mexico and 25 kilometres west of Avino’s main mine. It occurs in the Sierra La Silla (hills) which form part of a large volcanic caldera which also contains Avino’s main holdings. The Sierra La Silla area contains many silver, gold, lead, zinc and copper veins similar to those at Avino which are also situated in the lower volcanic Andesite sequence.
History. El Laberinto is a small property today and is a remnant of a much larger land package in the area once controlled by Avino.
During 1995 Avino mapped the La Silla area and sampled the principal veins. Avino had assembled the land package in the district in search of another Avino main vein.
Avino drove an adit on the Veta Grande (“Big Vein”) in late 1995. Values of silver and gold were sub-economic. The adit was stopped at a length of approximately 300 meters before it reached the main shoot described in the 1995 report. Three holes were drilled below the adit, for which assays are unavailable.
Avino does not consider that the Big Vein has been adequately explored to date. Although the adit showed low values, it did not reach the principal shoot and was likely too high on the vein structure.
In July 2012, the Company entered into an option and joint venture agreement with Endeavour Silver Corp. (“Endeavour”), whereby Endeavour was granted the option to acquire up to a 75% interest in the El Laberinto property, consisting of approximately 91.7 hectares. In order to exercise the option, Endeavour must pay up to $200,000 in annual installments over 4 years to Avino in option payments, and incur up to $3 million in exploration work on the El Laberinto property over the next 4 years.
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In July 2014, the Company’s option and joint venture agreement with Endeavour Silver Corp. was terminated. Up to the termination date, Endeavour had met its obligations by incurring exploration expenditures of at least $300,000 and making option payments of $50,000.
In August 2020, the Company optioned “El Laberinto Property” and “Ana Maria Property” to Silver Wolf Exploration Ltd. (formerly, Gray Rock Resources Ltd.). Please see “Option of Ana Maria and El Laberinto Properties” below.
Proposed Work Program. No further work is proposed at this time.
Other Properties (Durango, Mexico) – Not Active
Avino also has mineral rights for 5 other properties in the Durango State of Mexico, described below:
The Ana Maria property, located near Gomez Palacio, consists of 9 adjoining concessions and covers approximately 2,545 hectares. Avino assembled the land package in 2001 and 2002. In August 2020, the Company optioned “El Laberinto Property” and “Ana Maria Property” to Silver Wolf Exploration Ltd. (formerly, Gray Rock Resources Ltd.). Please see “Option of Ana Maria and El Laberinto Properties” below.
The El Hueco property, located near Silver Standard’s Pitarilla mine close to the town of Santiago Papasquiaro is comprised of 5 adjoining concessions and covers approximately 1,312.42 hectares. Avino assembled the land package between 1999 and 2005.
The Ana Maria property, located near Gomez Palacio, consists of 9 adjoining concessions and covers approximately 2,545 hectares. Avino assembled the land package in 2001 and 2002.
The La Potosina, El Fuerte, and Aranjuez concessions, used to be contiguous with the Avino Mine property where the bulk of the work has been taking place, but claims in between these mining concessions and the Avino Mine property have been dropped.
Avino considers these properties to be of merit, buthowever, has no current plans for exploration and evaluation at this time.
Option of Ana Maria and El Laberinto Properties
By an option agreement dated August 12, 2020 (the “Option Agreement”), Avino has optioned to Silver Wolf Exploration Ltd. (“Silver Wolf”; formerly, Gray Rock Resources Ltd.), or its assign, the right to purchase the Ana Maria and El Laberinto Properties, consisting of ten (10) mining concessions comprising a total area pf 2,640.7 ha, located in the State of Durango, Mexico. Silver Wolf is a reporting issuer in British Columbia and Alberta, whose common shares are listed for trading on the TSX Venture Exchange (“TSXV”).
Under the terms of the Option Agreement, to exercise the option to purchase the properties, Silver Wolf must:
(a) | Issue to Avino share purchase warrants to purchase up to 300,000 common shares at an exercise price of C$0.20 per share, exercisable for a period of three (3) years from the date of acceptance of the Option Agreement by the TSXV (the “Approval Date”); | |
(b) | Issue to Avino C$50,000 worth of Silver Wolf’s common shares at the volume weighted average price of such shares for the ten (10) trading days immediately following the Approval Date, subject to a minimum of C$0.20 per share (or a maximum of 250,000 shares); | |
(c) | Pay C$50,000 in cash to Avino, or issue to Avino C$50,000 worth of Silver Wolf’s common shares at the volume weighted average price of such shares for the ten (10) trading days immediately following the Approval Date, subject to a minimum of C$0.20 per share (or a maximum of 250,000 shares) on or before the first anniversary of the Approval Date; | |
(d) | Pay C$100,000 in cash to Avino, or issue to Avino C$100,000 worth of Silver Wolf’s common shares at the volume weighted average price of such shares for the ten (10) trading days immediately following the Approval Date, subject to a minimum of C$0.20 per share (or a maximum of 500,000 shares) on or before the second anniversary of the Approval Date; | |
(e) | Pay C$200,000 in cash to Avino, or issue to Avino C$200,000 worth of Silver Wolf’s common shares at the volume weighted average price of such shares for the ten (10) trading days immediately following the Approval Date, subject to a minimum of C$0.20 per share (or a maximum of 1,000,000 shares) on or before the third anniversary of the Approval Date; | |
(f) | Pay C$200,000 in cash to Avino, or issue to Avino C$200,000 worth of Silver Wolf’s common shares at the volume weighted average price of such shares for the ten (10) trading days immediately following the Approval Date, subject to a minimum of C$0.20 per share (or a maximum of 1,000,000 shares) on or before the fourth anniversary of the Approval Date; and | |
(g) | Assume liability for and pay the semi-annual assessment fees to the Mexican government to maintain the properties in good standing during the term of the Option Agreement. |
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Further, Silver Wolf must incur a total of C$750,000 in exploration expenditures on the properties, as follows:
(a) | C$50,000 on or before the first anniversary of the Approval Date; | |
(b) | A further C$100,000 on or before the second anniversary of the Approval Date; and | |
(c) | A further C$600,000 on or before the fourth anniversary of the Approval Date. |
There has been no material exploration work conducted on the Ana Maria or El Laberinto Properties by Avino, and these properties are not material to its current operations in Mexico.
There is one director in common to both Avino and Silver Wolf, namely, David Wolfin, who is also the control person of Silver Wolf. The two companies also share the same Chief Financial Officer and Corporate Secretary. Independent special committees of the boards of directors of each of the parties negotiated and recommended the transaction to their respective board of directors, and Mr. Wolfin abstained from voting thereon.
The Option Agreement has been accepted for filing by the TSXV for Silver Wolf.
Item 4A. Unresolved Staff Comments
None
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the information contained in the Company’s annual audited consolidated financial statements and the notes thereto for the years ended December 31, 2018, 20172020, 2019 and 20162018 included in this annual report on Form 20-F. Such discussion and analysis is based upon our annual audited consolidated financial statements prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) for the years ended December 31, 2018, 20172020, 2019 and 2016.2018.
For all periods up to and including the year ended December 31, 2010, we prepared our consolidated financial statements in accordance with Canadian generally accepted accounting principles (‘‘Canadian GAAP’’). The annual audited consolidated financial statements for the year ended December 31, 2011 were our first annual consolidated financial statements that were prepared in accordance with IFRS as issued by the International Accounting Standards Board (‘‘IASB’’).
A. Operating results
San Gonzalo Mine
The fiscal year ended December 31, 2012 saw Avino transition from exploration activities to extraction and processing of resources at levels intended by management in addition to exploration activities. On October 1, 2012, the Company declared extracting and processing resources at levels intended by management had been achieved at the San Gonzalo mine. The mine has continued to operate in this manner through 2018to the fourth quarter of 2019 when the mine reached the end of its current resources and into 2019.mining was halted.
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OperatingThe operating results fromfor the San Gonzalo Mine for the most recent 3 fiscal years are as follows:
|
| 2016 Total |
|
| 2017 Total |
|
| 2018 Total |
|
| 2018 Total |
| 2019 Total |
| 2020 Total |
| ||||||||
Total Mill Feed (dry tonnes) |
| 115,047 |
| 81,045 |
| 79,140 |
|
| 79,140 |
|
| 56,179 |
|
| - |
| ||||||||
Feed Grade Silver (g/t) |
| 267 |
| 269 |
| 222 |
|
| 222 |
|
| 118 |
|
| - |
| ||||||||
Feed Grade Gold (g/t) |
| 1.25 |
| 1.32 |
| 1.03 |
|
| 1.03 |
|
| 0.46 |
|
| - |
| ||||||||
Bulk Concentrate (dry tonnes) |
| 4,115 |
| 3,167 |
| 3,174 |
|
| 3,174 |
|
| 1,442 |
|
| - |
| ||||||||
Bulk Concentrate Grade Silver (kg/t) |
| 6.22 |
| 5.80 |
| 4.25 |
|
| 4.25 |
|
| 3.18 |
|
| - |
| ||||||||
Bulk Concentrate Grade Gold (g/t) |
| 25.9 |
| 26.3 |
| 19.15 |
|
| 19.15 |
|
| 11.79 |
|
| - |
| ||||||||
Recovery Silver (%) |
| 83 |
| 84 |
| 77 |
|
| 77 |
|
| 69 |
|
| - |
| ||||||||
Recovery Gold (%) |
| 74 |
| 78 |
| 75 |
|
| 75 |
|
| 66 |
|
| - |
| ||||||||
Mill Availability (%) |
| 94.4 |
| 95.4 |
| 95.5 |
|
| 95.5 |
|
|
|
|
| - |
| ||||||||
Total Silver Recovered (kg) |
| 25,588 |
| 18,375 |
| 13,500 |
|
| 13,500 |
|
| 4,591 |
|
| - |
| ||||||||
Total Gold Recovered (g) |
| 106,599 |
| 83,215 |
| 60,800 |
|
| 60,800 |
|
| 17,003 |
|
| - |
| ||||||||
Total Silver Recovered (oz) calculated |
| 822,689 |
| 590,765 |
| 434,020 |
|
| 434,020 |
|
| 153,372 |
|
| - |
| ||||||||
Total Gold Recovered (oz) calculated |
| 3,427 |
| 2,675 |
| 1,955 |
|
| 1,955 |
|
| 581 |
|
| - |
| ||||||||
Total Silver Equivalent Recovered (oz) calculated* |
| 1,073,062 |
| 789,157 |
| 592,098 |
|
| 592,098 |
|
| 215,148 |
|
| - |
|
______________
____________
* Metal production is expressed in terms of silver equivalent ounces (oz Ag Eq),
* In 2020, AgEq was calculated using metals prices of $20.55 oz Ag, $1,769 oz Au and $2.80 lb Cu. In 2019, AgEq was calculated using metals prices of$16.20 oz Ag, $1,393 oz Au and $2.72 lb Cu.
Avino Mine
In the fourth quarter of 2014 the Company completed its Avino Mine and mill expansion. Initially, new material from underground at Avino was processed on a limited scale using the existing 250 TPD Mill Circuit 2. By year end, rehabilitation of the 1,000 TPD Mill Circuit 3 had been completed and sufficient material had been stockpiled; on January 1, 2015, full scale testing of both material and equipment commenced.
During 2015, newly mined underground material from the Avino Mine was processed primarily using Mill Circuit 3. During the months of July, August, November and December, Mill Circuit 2 was also used to process new material from the Avino Mine. Additionally, during the month of May, above ground stockpiles left from past mining of the Avino vein were processed using Mill Circuit 2; production from Mill Circuit 2 during the months listed above is reflected in the production figures in the following table. In 2016 and 2017 Mill Circuits 2 and 3 were used to process mill feed from the Avino Mine.
In the second quarter of 2018, the Company completed its Mill Circuit 4 expansion. During the testing and commissioning phase which lasted through the end of 2018, Mill Circuit 2 was used to process new material from the newly developed San Luis area of the Avino Mine while Mill Circuit 4 was used to process historic above ground Avino Mine Stockpiles.Historic Above Ground Stockpiles (“AHAGS”).
Accordingly, year-endIn the first quarter of 2019, Mill Circuit 1 processed material from San Gonzalo, Mill Circuit 2 processed material from San Luis, Mill Circuit 3 processed material from Elena Tolosa, and Mill Circuit 4 processed material from the AHAGS. This configuration continued throughout 2019, other than when the Company stopped processing San Gonzalo material in Mill Circuit 1 during Q4 2019, and began processing from the Hanging Wall Breccia area of the Avino Mine.
49 |
Table of Contents |
Year-end totals for 20162018 through 20182020 from the Avino Mine and Avino Mine Above Ground StockpileAHAG’s Operations are reported as follows:
Avino Mine Production Totals
|
| 2016 Totals |
| 2017 Totals |
| 2018 Totals |
|
| 2018 Totals |
|
| 2019 Totals |
|
| 2020 Totals |
| ||||||||
Tonnes Mined |
| 450,281 |
| 462,279 |
| 428,075 |
|
| 428,075 |
| 456,100 |
| 190,061 |
| ||||||||||
Underground Advancement(m) |
| 4,005 |
| 2,898 |
| 3,804 |
|
| 3,804 |
| 3,835 |
| 1,792 |
| ||||||||||
Total Mill Feed (dry tonnes) |
| 429,289 |
| 460,890 |
| 426,794 |
|
| 426,794 |
| 427,147 |
| 199,575 |
| ||||||||||
Feed Grade Silver (g/t) |
| 67 |
| 64 |
| 53 |
|
| 53 |
| 44 |
| 54 |
| ||||||||||
Feed Grade Gold (g/t) |
| 0.42 |
| 0.516 |
| 0.49 |
|
| 0.49 |
| 0.45 |
| 0.40 |
| ||||||||||
Feed Grade Copper (%) |
| 0.50 |
| 0.484 |
| 0.55 |
|
| 0.55 |
| 0.56 |
| 0.58 |
| ||||||||||
Copper Concentrate (dry tonnes) |
| 9,390 |
| 9,782 |
| 9,395 |
|
| 9,395 |
| 10,075 |
| 4,911 |
| ||||||||||
Copper Concentrate Grade Silver (kg/t) |
| 2.62 |
| 2.56 |
| 2.03 |
|
| 2.03 |
| 1.58 |
| 2.01 |
| ||||||||||
Copper Concentrate Grade Gold (g/t) |
| 12.23 |
| 16.72 |
| 15.31 |
|
| 15.31 |
| 14.26 |
| 13.03 |
| ||||||||||
Copper Concentrate Grade Copper (%) |
| 20.32 |
| 20.28 |
| 21.96 |
|
| 21.96 |
| 20.23 |
| 20.38 |
| ||||||||||
Recovery Silver (%) |
| 85 |
| 85 |
| 84 |
|
| 84 |
| 85 |
| 90 |
| ||||||||||
Recovery Gold (%) |
| 64 |
| 69 |
| 69 |
|
| 69 |
| 73 |
| 75 |
| ||||||||||
Recovery Copper (%) |
| 90 |
| 89 |
| 87 |
|
| 87 |
| 86 |
| 88 |
| ||||||||||
Total Silver Recovered (kg) |
| 24,552 |
| 24,990 |
| 19,109 |
|
| 19,109 |
| 15,871 |
| 9,730 |
| ||||||||||
Total Gold Recovered (g) |
| 114,812 |
| 163,582 |
| 143,843 |
|
| 143,843 |
| 139,131 |
| 59,584 |
| ||||||||||
Total Copper Recovered (kg) |
| 1,908,077 |
| 1,983,637 |
| 2,062,465 |
|
| 2,062,465 |
| 2,069,833 |
| 1,026,518 |
| ||||||||||
Total Silver Recovered (oz) calculated |
| 789,372 |
| 803,438 |
| 614,361 |
|
| 614,361 |
| 510,270 |
| 312,819 |
| ||||||||||
Total Gold Recovered (oz) calculated |
| 3,691 |
| 5,259 |
| 4,625 |
|
| 4,625 |
| 4,473 |
| 1,916 |
| ||||||||||
Total Copper Recovered (lbs) calculated |
| 4,206,585 |
| 4,373,585 |
| 4,546,952 |
|
| 4,546,952 |
| 4,563,195 |
| 2,263,082 |
| ||||||||||
Total Ag Eq. (oz) calculated* |
| 1,606,272 |
| 1,911,428 |
| 1,847,303 |
|
| 1,847,303 |
| 1,656,091 |
| 835,370 |
|
_____________
___________
* Metal production is expressed in terms of silver equivalent ounces (oz Ag Eq),
* In 2020, AgEq was calculated using metals prices of $20.55 oz Ag, $1,769 oz Au and $2.80 lb Cu. In 2019, AgEq was calculated using metals prices of$16.20 oz Ag, $1,393 oz Au and $2.72 lb Cu.
Table of Contents |
Historic Avino Mine Stockpile Production Totals
|
| 2018 Totals |
|
| 2019 Totals |
|
| 2020 Totals |
| |||
Total Mill Feed (dry tonnes) |
|
| 202,830 |
|
|
| 306,334 |
|
|
| 4,711 |
|
Feed Grade Silver (g/t) |
|
| 58 |
|
|
| 55 |
|
|
| 59 |
|
Feed Grade Gold (g/t) |
|
| 0.41 |
|
|
| 0.36 |
|
|
| 0.31 |
|
Feed Grade Copper (%) |
|
| 0.16 |
|
|
| 0.18 |
|
|
| 0.15 |
|
Bulk Concentrate (dry tonnes) |
|
| 1,890 |
|
|
| 2,737 |
|
|
| 33 |
|
Bulk Concentrate Grade Silver (kg/t) |
|
| 3.54 |
|
|
| 3.36 |
|
|
| 4.21 |
|
Bulk Concentrate Grade Gold (g/t) |
|
| 22.99 |
|
|
| 21.12 |
|
|
| 17.73 |
|
Bulk Concentrate Grade Copper (%) |
|
| 6.53 |
|
|
| 6.75 |
|
|
| 6.66 |
|
Recovery Silver (%) |
|
| 57 |
|
|
| 54 |
|
|
| 50 |
|
Recovery Gold (%) |
|
| 52 |
|
|
| 53 |
|
|
| 41 |
|
Recovery Copper (%) |
|
| 38 |
|
|
| 35 |
|
|
| 31 |
|
Total Silver Recovered (kg) |
|
| 6,697 |
|
|
| 9,181 |
|
|
| 139 |
|
Total Gold Recovered (g) |
|
| 43,454 |
|
|
| 57,809 |
|
|
| 586 |
|
Total Copper Recovered (kg) |
|
| 123,409 |
|
|
| 184,639 |
|
|
| 2,203 |
|
Total Silver Recovered (oz) calculated |
|
| 215,312 |
|
|
| 295,169 |
|
|
| 4,481 |
|
Total Gold Recovered (oz) calculated |
|
| 1,397 |
|
|
| 1,859 |
|
|
| 19 |
|
Total Copper Recovered (lbs) calculated |
|
| 272,070 |
|
|
| 407,059 |
|
|
| 4,857 |
|
Total Ag Eq. (oz) calculated* |
|
| 380,766 |
|
|
| 525,803 |
|
|
| 6,860 |
|
_____________
* Metal production is expressed in terms of silver equivalent ounces (oz Ag Eq),
* In 2020, AgEq was calculated using metals prices of $20.55 oz Ag, $1,769 oz Au and $2.80 lb Cu. In 2019, AgEq was calculated using metals prices of$16.20 oz Ag, $1,393 oz Au and $2.72 lb Cu.
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
____________
Table of Contents |
Results of Operations
Twelve months ended December 31, 20182020 compared with twelve months ended December 31, 20172019
Revenues
Revenues for the year ended December 31, 20182020 were $34,116,000.$16,022,000. Revenues relate to the sale of bulk silver and gold concentrate produced from the San Gonzalo Mine, bulk copper, silver and gold concentrates produced from the Avino Mine, and bulk copper, silver and gold concentrates from the Avino Historical Above Ground Stockpiles. Revenues for the comparable year were $33,359,000.$31,746,000. The increasedecrease in revenues of $757,000$15,724,000 in the current year can be attributed to an increasea decrease in the number of AgEq oz. sold by 18%,54% due to the temporary mine closures during 2020 described below, and was partially offset by a decreasean increase in the average realized price of silver by 10%, compared to the year ended December 31, 2017. During2019.
Revenues decreased for the year ended December 31, 20182020, compared to December 31, 2019, mainly due to lower ounces sold as a result of a planned reduction in monthly sales due to the Company produced 9,395 tonnes of bulk copper/silver/gold concentratetemporary shutdown due to COVID-19. Revenues also decreased due to the unplanned temporary stoppage to mining operations caused by a strike action from its Avino Mine, 1,890 tonnes of bulk copper/silver/gold concentrate from its Avino Historical Above Ground Stockpiles, and 3,174 tonnes of bulk silver/gold concentrate from its San Gonzalo Mine. The Company recognized revenues of $21,816,000 on sales fromthe Company’s unionized workers at the Avino Mine $3,336,000 on sales fromduring the Avino Historical Above Ground Stockpiles, and $8,964,000 on sales fromsecond half of 2020.
The lower revenues were partially offset by an increase in average realized metal prices in the San Gonzalo Mine.latter part of Q2 2020, specifically in June, as well as in July & August of 2020.
Metal prices for revenues recognized during the year ended December 31, 2018, weighted by dollar of revenue recognized,2020, averaged $15.32$18.03 per ounce of silver, $1,249$1,737 per ounce of gold, and $6,392 per tonne of copper. Compared to metal prices for revenues recognized in the year ended December 31, 2017 of $17.05 per ounce of silver, $1,268 per ounce of gold and $6,251$5,724 per tonne of copper, this represents a decrease of 10%, decrease of 2%,compared to $16.06, $1,399, and an increase of 2%, respectively.$5,961, respectively, in 2019.
Operating and administrative expenses
Operating expenses, or cost of sales, includes production costs from mining operations and depreciation and depletion. Production costs for the year ended December 31, 20182020 were $27,850,000$15,832,000 compared to $22,106,000$32,016,000 for the year ended December 31, 2017, an increase2019, a decrease of $5,744,000. The increase is primarily$16,184,000. As a result of the temporary shutdown due to an increase inCOVID-19 and temporary mine operations stoppage caused by company’s unionized workers strike during second half 2020, costs were lower overall due to lower than anticipated tonnes mined and processed, as well as sales initiatives to maximize realized prices per ounce, partly offset by lower silver equivalent ounces sold from 2.641.07 million AgEq oz. in 2018, an increase2020, a decrease of 0.41.27 million, or 18%54%, from 2.242.35 million AgEq oz. sold in 2017.2019.
Administrative expenses include management, consulting, and director fees, salaries, office expenses, investor relations, travel, and promotion, as well as share-based payments, and were $4,195,000$4,759,000 for the year ended December 31, 2018,2020, compared to $5,331,000$4,130,000 for the year ended December 31, 2017, a decrease2019, an increase of $1,136,000.$629,000. Operating and administrative expenses decreasedincreased compared to the year ended December 31, 2017 primarily2019, mainly due to a decrease inan increase to share-based payments of $1,388,000. This isare a result of a reduced numberthe vesting of stock options grantedand RSUs at higher valuations during the year ended December 31, 20182020, compared to the year endedsame period in 2019, this is a result of the increase in the Company’s share price from January 1 to December 31, 2017, from 1,475,0002020, as there were RSU and option grants during both Q3 2020 and Q3 2019. This was partly offset by slightly decreased in 2017 downgeneral and administrative expenses which reflects costs reduction initiatives made by management to 497,500maintain operations in 2018. Further,good standing during the resultingdifficult market conditions.
Other items
Others items includes interest and other income, unrealized gain/loss on long-term investments, fair value adjustments on warrant liability, realized loss on exercise of each option issued also decreased when calculated through the Black Scholes Option Pricing model decreased in 2018 compared to 2017 due to fluctuations in the share price volatility, share price on issuance datewarrants, unrealized foreign exchange gain/loss, finance costs, accretion of reclamation provision, and interest rates used in the model.
Earnings for the year
The earningsexpense, and totalled loss of $4,321,000 for the year ended December 31, 2018 were $1,626,0002020, compared to $2,522,000income of $1,432,000 for the year ended December 31, 2017, a2019, an decrease of $896,000. $5,753,000.
Other items decreased due to during the year ended December 31, 2020, 4,195,072 warrants were exercised resulting in a non-cash realized loss on exercise of warrants of $2,733,000, fair value adjustment on the Company’s warrant liability decrease by $1,170,000 resulting in loss compared with a gain during 2019, as the Company’s share price increased, there was an unrealized, non-cash fair value loss during the year, unrealized gain (loss) on long-term investments decrease by $1,406,000 resulting in a loss compared with a gain during 2019 due to the fair value recognition of the acquired common shares and share purchase warrants of Talisker Resources Inc. decreases to interest and other income of $213,000 as a result of the recognition of IFRS 9 and the impact on the Company’s term facility, further increases were a result of a increase unrealized foreign exchange loss of $148,000, due to minor fluctuations between the US dollar and Mexican Peso throughout 2020, as well as increases in finance costs of $127,000.
52 |
Table of Contents |
Income taxes
Current income tax expenses for the year ended December 31, 20182020 were $1,052,000$161,000 compared to $2,911,000$327,000 during the year ended December 31, 2017,2019, a decrease of $1,859,000.$166,000. The change in current income taxes is a result of decrease in profits in Mexico in 2020, as a result of the COVID-19 shutdown and the mine operating income in 2018, which was $6,266,000 compared to $11,253,000 in 2017. stoppage.
Deferred income tax recoveries for the year ended December 31, 20182019 were $645,000$1,569,000 compared to $140,000$960,000 during the year ended 2017, a decrease2019, an increase of $505,000.$609,000. The decreaseincrease in deferred income tax recoveries is a result of a decrease in the liability associated temporary differences arising from the carrying value of plant, equipment and mining properties. properties, and the provision that future expected profits will be offset by current period operating losses that were recognized in Mexico for 2020.
Earnings or losses after taxes for the year
The loss for continuing operations for the year ended December 31, 2020 was $7,482,000 compared to a loss of $2,335,000 for the year ended December 31, 2019, an increase of $5,147,000. The change is a result of the factors noted in the “Revenues” and “Operating and administrative expenses” sections above, as well as the income tax movements outlined in the “Income taxes” section above.
Loss from discontinued operations for the year ended December 31, 2020 was $169,000 compared to a loss of $29,126,000 for the year ended December 31, 2019. The change, and all discontinued operations, relates to the sale of Bralorne during the year ended December 31, 2019, as outlined below in the “Earnings or losses after taxes for the year” section under the “Twelve months ended December 31, 2019 compared with twelve months ended December 31, 2018” section below.
Overall, the decreaseincrease in net income in 20182020 compared to 20172019 was primarily due to the decreasedecreases in mine operating income mentioned above, and such decreaseloss from discontinued operation due to the disposal of Bralorne in net income was partially offset by decreases2019, with no comparable transaction in 2020, as well as increases in overall income tax expenses.recoveries for 2020 compared to 2019. These were partially offset by significant decreases in other items income or losses resulting in loss during 2020 compared to a gain in 2019, which are mentioned above in the “Other items” section.
Twelve months ended December 31, 20172019 compared with the twelve months ended December 31, 20162018
Revenues
Revenues for the year ended December 31, 20172019 were $33,359,000.$31,746,000. Revenues relate to the sale of bulk silver and gold concentrate produced from the San Gonzalo Mine, and from bulk copper, silver and gold concentrateconcentrates produced from the Avino Mine.Mine, and bulk copper, silver and gold concentrates from the Avino Historical Above Ground Stockpiles. Revenues for the comparable year were $34,692,000.$34,116,000. The decrease in revenues of $1,333,000$2,370,000 in the current year can be attributed to a decrease of 4% in the number of AgEq oz. sold by 11%, and was partially offset by an increase in the average realized price of silver by 5%, compared to the year ended December 31, 2016. 2018. Revenues also declined compared to the previous year as a result of the planned shutdown of San Gonzalo. The overall silver and gold feed grades at San Gonzalo declined for the year ended December 31, 2019 by 47% and 55%, respectively, combined with a decrease in both silver and gold recovery lead to San Gonzalo producing 66% fewer silver equivalent ounces on a year over year comparison basis.
During the year ended December 31, 2017,2019 the Company produced 9,78210,075 tonnes of bulk copper/silver/gold concentrate from its Avino Mine, 2,737 tonnes of bulk copper/silver/gold concentrate from its Avino Historical Above Ground Stockpiles, and 3,1671,765 tonnes of bulk silver/gold concentrate from its San Gonzalo Mine, andMine. The Company recognized revenues of $24,846,000$19,945,000 on sales from the sale of 9,655 tonnes of Avino Mine, bulk copper/silver/gold concentrate$8,702,000 on sales from the Avino Historical Above Ground Stockpiles, and $8,513,000$3,099,000 on sales from the sale of 2,366 tonnes of San Gonzalo bulk silver/gold concentrate for a gross profit of $11,253,000.
Metal prices for revenues recognized during the year ended December 31, 2017,2019, weighted by dollar of revenue recognized, averaged $17.05$16.06 per ounce of silver, $1,268$1,399 per ounce of gold, and $6,251$5,961 per tonne of copper. This is comparedcopper, Compared to metal prices for revenues recognized duringin the year ended December 31, 2016, of $17.712018 averaged $15.32 per ounce of silver, $1,258$1,249 per ounce of gold and $4,850$6,392 per tonne of copper,copper., this represents a increase of 5%, increase of 12%, and an decrease of 7%, respectively.
53 |
Table of Contents |
Operating and administrative expenses
Operating expenses, or cost of sales, includes production costs from mining operations and depreciation and depletion. Production costs for the year ended December 31, 2019 were $32,016,000 compared to $27,850,000 for the year ended December 31, 2019, an increase of $4,166,000. The increase is primarily due to an increase in higher production costs mainly attributable to increase in tonnes produced resulting in higher overall mining material and labour cost. Further, there were increases to non-cash depletion and depreciation expenses as a result of San Gonzalo mine reaching the end of its economic life and prospective change in policy for depreciation, partly offset by lower silver equivalent ounces sold from 2.35 million AgEq oz. in 2019, a decrease of 4%0.29 million, or 11%, an increase of 1%, and an increase of 29%, respectively.from 2.64 million AgEq oz. sold in 2018.
Operating and administrative expenses
Operating and administrativeAdministrative expenses include management, consulting, and director fees, salaries, office expenses, investor relations, travel, and promotion, as well as share-based payments, and were $5,331,000$4,130,000 for the year ended December 31, 2017,2019, compared to $5,007,000$4,240,000 for the year ended December 31, 2016, an increase2018, a decrease of $324,000.$110,000. Operating and administrative expenses increasedslightly decreased compared to the previous year dueended December 31, 2018, which reflects reduction initiatives made by management in the current year to an increasedmaintain operations in share-based payment expense of 66%, as a resultgood standing during the difficult market conditions in the beginning of the vesting of restricted share units (“RSUs”) and options issued during the period. Although the Company’s operations are expanding, management continues to monitor operating and administrative expenses carefully to maintain efficient operations.year.
Earnings for the yearOther items
The earningsOthers items includes interest and other income, unrealized gain/loss on long-term investments, fair value adjustments on warrant liability, unrealized foreign exchange gain/loss, finance costs, accretion of reclamation provision, and interest expense, and totalled income of $1,432,000 for the year ended December 31, 2017 were $2,522,0002019, compared to $2,016,000income of $38,000 for the year ended December 31, 2016,2018, an increase of $506,000. Net$1,394,000.
Income from other items increased due to increases to interest and other income of $330,000 as a result of the recognition of IFRS 9 and the impact on the Company’s term facility, increases in the unrealized gain on long-term investments of $1,287,000 due to the recognition of the acquired common shares and share purchase warrants of Talisker Resources Inc. and subsequent fair value adjustment to reflect the fair value at December 31, 2019. Further increases were a result of a reduced unrealized foreign exchange loss of $138,000, due to minor fluctuations between the US dollar and Mexican Peso throughout 2019, as well as reductions in finance costs of $360,000.
These increases were offset by lower income from fair value adjustment on warrant liability of $784,000. The fair value adjustment on the Company’s warrant liability relates to the issuance of US dollar denominated warrants, which are re-valued each reporting period, and the value fluctuates with changes in the US-Canadian dollar exchange rate, and in the variables used in the valuation model, such as the Company’s US share price, and expected share price volatility. The remaining differences of $63,000 relate to movements in the accretion of the Company’s reclamation provision and interest expense from 2019 compared to 2018.
Income taxes
Current income tax expenses for the year ended December 31, 2019 were $327,000 compared to $1,052,000 during the year ended December 31, 2018, a decrease of $725,000. The change in current income taxes is a result of decrease mine operating income in 2019, which was higherloss of $270,000 compared to income of $6,266,000 in 2018.
Deferred income tax recoveries for the year ended December 31, 2019 were $960,000 compared to $645,000 during the year ended 2018, an increase of $315,000. The increase in deferred income tax recoveries is a result of a decrease in the liability associated temporary differences arising from the carrying value of plant, equipment and mining properties.
Earnings or losses after taxes for the year
The loss for continuing operations for the year ended December 31, 2019 was $2,335,000 compared to income of $1,657,000 for the year ended December 31, 2018, a decrease of $3,992,000. The change is a result of the factors noted in the “Revenues” and “Operating and administrative expenses” sections above, as well as the income tax movements outlined in the “Income taxes” section above.
Loss from discontinued operations for the year ended December 31, 2019 was $29,126,000 compared to a loss of $31,000 for the year ended December 31, 2018. The change, and all discontinued operations, relates to the sale of Bralorne during the year ended December 31, 2019, as outlined below:
On December 13, 2019, the Company completed the sale of its 100% wholly-owned subsidiary Bralorne Gold Mines Ltd. (“Bralorne”) to Talisker Resources Ltd. (“Talisker”). The sale includes the Bralorne Gold Mine and is part of the Company’s plan to focus on its core mining operations in Mexico.
54 |
Table of Contents |
The consideration includes:
· | C$8.7 million (translated to $6,599) in cash | |
· | The issuance of 12,580,000 common shares of Talisker, representing 9.9% on a pro-forma basis following the close of the transaction and subsequent financing by Talisker; | |
· | The issuance of 6,290,000 share purchase warrants exercisable at C$0.25 per share for a period of three years after the closing, subject to acceleration in the event the closing price of Talisker’s common shares is great than C$0.35 per share for 20 or more consecutive trading days at any time following April 14, 2020; |
The sale includes the Bralorne claims, as well as nine mineral claims covering approximately 2,114 hectares in the Lillooet Mining Division of British Columbia, known as the BRX Property.
The Company also received future consideration of a $2.5 million cash payment, contingent upon the commencement of commercial production at the Bralorne Mine, for which a fair value has been determined to be Nil at this time.
The Company recognized a loss on disposition, net of tax, calculated as follows:
Cash proceeds |
| $ | 6,599 |
|
Talisker shares |
|
| 2,243 |
|
Talisker warrants |
|
| 716 |
|
Total proceeds |
| $ | 9,558 |
|
Net assets sold and derecognized: |
|
|
|
|
Cash |
|
| 1,495 |
|
Other current assets |
|
| 242 |
|
Exploration and evaluation assets |
|
| 45,613 |
|
Plant and equipment |
|
| 1,745 |
|
Other long-term assets |
|
| 19 |
|
Current portion of finance lease obligations and equipment loans |
|
| (175 | ) |
Non-current portion of finance lease obligations and equipment loans |
|
| (111 | ) |
Site restoration obligation |
|
| (10,828 | ) |
Foreign currency translation adjustments |
|
| (42 | ) |
|
|
| 37,958 |
|
Loss on disposition before selling costs |
|
| (28,400 | ) |
Selling costs |
|
| (490 | ) |
Loss on disposition, net |
|
| (28,890 | ) |
As a result of the sale, the comparative net income (loss) for the current period, as well as previous two years, have been reclassified from continuing operations to discontinued operations:
|
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Revenue from mining operations |
| $ | - |
|
| $ | - |
|
| $ | - |
|
Cost of sales |
|
| - |
|
|
| - |
|
|
| - |
|
Mine operating income (loss) |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (income) |
|
| 16 |
|
|
| (45 | ) |
|
| (14 | ) |
Accretion of reclamation provision |
|
| 217 |
|
|
| 256 |
|
|
| 154 |
|
Gain on sale of assets |
|
| 2 |
|
|
| (175 | ) |
|
| - |
|
Other items |
|
| 1 |
|
|
| (5 | ) |
|
| 3 |
|
Loss on disposition |
|
| 28,890 |
|
|
| - |
|
|
| - |
|
Net loss before income taxes |
|
| (29,126 | ) |
|
| (31 | ) |
|
| (143 | ) |
Income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
Net loss from discontinued operations and on disposal |
| $ | (29,126 | ) |
| $ | (31 | ) |
| $ | (143 | ) |
55 |
Table of Contents |
The results of discontinued operations included in the consolidated statements of cash flows for the years ended December 31, 2019, 2018 and 2017, are as follows:
Cash generated by (used in): |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Cash flow used in operating activities |
| $ | (19 | ) |
| $ | (7 | ) |
| $ | 12 |
|
Cash flow used in financing activities |
|
| (258 | ) |
|
| (590 | ) |
|
| (871 | ) |
Cash flow used in investing activities |
|
| (5,583 | ) |
|
| (4,178 | ) |
|
| (5,270 | ) |
Net cash decrease from discontinued operations |
| $ | (5,860 | ) |
| $ | (4,775 | ) |
| $ | (6,129 | ) |
Overall, the decrease in net loss in 2020 compared to 2019 was primarily due to a decreasethe increase in mine operating income (loss) mentioned above, decreases in loss from discontinued operation from the disposal of Bralorne in 2019 mentioned above, increases in overall income tax expense. Income before tax was $5,293,000; however, this was reducedexpenses, and such increases in net income, were partially offset by currentsignificant decreases in other items income tax expense of $2,911,000 and increased by(loss) resulting in loss during 2020 compared with a non-cash deferred income tax recovery of $140,000.gain in 2019 mentioned above.
Voluntary Change in Accounting Policy
Upon review of the Company’s experience at the Avino and San Gonzalo mines, on a retrospective basis, the Company has changed its accounting policy under IFRS 6 and IAS 16 in accounting for its exploration and evaluation assets and development costs. The change in accounting policy resulted in a reassessment of the commencement of production date from April 1, 2016 to July 1, 2015, at the Avino Mine. The voluntary change in accounting policy is intended to provide shareholders with a better reflection of its business activities to enhance the comparability of its financial statements to its peers and to make the consolidated financial statements more relevant to the economic decision-making needs of users. The forgoing discussion reflects the change in accounting policy. See note 3 to the Company’s financial statements.
B. Liquidity and capital resources
The Company’s ability to generate sufficient amounts of cash and cash equivalents, in both the short term and the long-term, to maintain existing capacity and to fund ongoing exploration is dependent upon the discovery of economically recoverable reserves or resources and the ability of the Company to obtain the financing necessary to generate and sustain profitable operations.
Management expects that the Company’s ongoing liquidity requirements will be funded from cash and cash equivalents generated from current operations and from further financing as required in order to fund ongoing exploration activities and meet its objectives, including ongoing advancement at the Avino Mine. The Company continues to evaluate financing opportunities to advance its projects. The Company’s ability to secure adequate financing is in part dependent on overall market conditions, the prices of silver, gold, and copper, and other factors outside the Company’s control, and there is no guarantee the Company will be able to secure any or all necessary financing in the future.
During the month of September 2018,2020, the Company issued 151,800 common shares for aggregate proceeds of $136,000 pursuant to the Company’s at-the-market offering. The Company intends to use the proceeds primarily for working capital.
On September 25, 2018, the Company issued 7,105,658 common shares and warrants to purchase 7,175,846 common shares in the aggregate forreceived gross proceeds of $4,619,000$4,685,000 in connection with a publicbrokered at-the-market offering in the US. The Company intends to use the proceeds to advance the exploration and development of the Avino Mine and Bralorne Mine and for working capital.issued under prospectus supplements.
Discussion and analysis relating to our liquidity as at December 31, 20182020 and December 31, 20172019 is as follows:
Statement of Financial Position |
| December 31, 2018 |
|
| December 31, 2017 |
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||||
Cash |
| $ | 3,252,000 |
| $ | 3,420,000 |
|
| $ | 11,713,000 |
| $ | 9,625,000 |
| ||
Working Capital |
| 13,106,000 |
| 16,403,000 |
|
| 14,680,000 |
| 13,209,000 |
| ||||||
Accumulated Deficit |
| 16,505,000 |
| 18,877,000 |
|
| 54,339,000 |
| 47,204,000 |
|
Cash comprises cash at banks and on hand, and short-term deposits with an original maturity of three months or less which are readily convertible into a known amount of cash.
At December 31, 2018, $736,0002020, $2,062,000 of the $3,252,000$11,713,000 of cash was held by our Mexican subsidiaries. If these funds were needed for our operations in Canada, we would be required to accrue and pay Canadian taxes (to the extent we no longer had Canadian tax loss carry forwards available) to repatriate these funds. However, our intent is to permanently reinvest these funds back into our Mexican subsidiaries and our current plans do not demonstrate a need to repatriate them to fund our Canadian operations.
Cash Flow |
| December 31, 2018 |
|
| December 31, 2017 |
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||||
Cash generated by (used in) operating activities |
| $ | 9,224,000 |
| $ | (2,167,000 | ) |
| $ | 72,000 |
| $ | 5,507,000 |
| ||
Cash generated by (used in) financing activities |
| 3,855,000 |
| (3,055,000 | ) |
| 4,203,000 |
| 4,970,000 |
| ||||||
Cash used in investing activities |
|
| (13,229,000 | ) |
|
| (3,135,000 | ) |
|
| (2,167,000 | ) |
|
| (3,734,000 | ) |
Change in cash |
| (150,000 | ) |
| (8,357,000 | ) |
| 2,108,000 |
| 6,743,000 |
| |||||
Effect of exchange rate changes on cash |
| (18,000 | ) |
| (3,000 | ) |
| (20,000 | ) |
| (370,000 | ) | ||||
Cash, beginning of the year |
|
| 3,420,000 |
|
|
| 11,780,000 |
|
|
| 9,625,000 |
|
|
| 3,252,000 |
|
Cash, end of year |
| $ | 3,252,000 |
|
| $ | 3,420,000 |
|
| $ | 11,713,000 |
|
| $ | 9,625,000 |
|
56 |
Table of Contents |
Operating Activities
Cash generated by operating activities for the year ended December 31, 2018,2020, was $9,224,000$72,000 compared to cash used in operating activities of $2,167,000$5,507,000 million for the year ended December 31, 2017.2019. Cash generated by or used in operating activities can fluctuate with changes in net income, non-cash items, such as foreign exchange share-based payments and deferred income tax expenses, and working capital.
Financing Activities
Cash generated by in financing activities was $3,855,000$4,203,000 for the year ended December 31, 2018,2020, compared to cash used in financing activities of $3,055,000 in$4,970,000 million for the year ended December 31, 2017, a change of $6,910,000. The change in cash provided2019. Cash generated by financing activities for the year ended December 31, 2018,2020, relates primarily to increased activity involving the issuance of common shares for cash, by way of at-the-market sales and warrantsthe exercise of warrants. Cash used in brokered bought-deal and at-the-market offerings issued under prospectus supplements,financing activities relates to the repayment of the term facility, as well as the issuance of common shares upon the exercise of stock options.on its existing equipment loans and finance leases for mining equipment. During the year ended December 31, 2018,2020, the Company issued commonreceived net proceeds from issuance of shares andfor cash of $4,685,000 (December 31, 2019 - $7,283,000), received proceeds from warrants through the aforementioned offerings, as well as employees, consultants, and directors exercised stock options, all which generated cash flows of $8,466,000 (2017 – $40,000)exercise by $3,679,000 (December 31, 2019 - $Nil). During the year ended December 31, 2018, theThe Company also made term facility repayments of $3,333,000 (December 31, 2019 - $833,000) and made finance lease and equipment loan payments of $2,611,000 (2017totalling $857,000 (December 31, 2019 - $2,428,000), and repayments of $2,000,000 (2017 - $667,000) on the term facility. In November 2018, the Company and Samsung C&T U.K. Ltd. amended the concentrates prepayment agreement, extending the sales of Avino Mine concentrates to December 2024 and deferring monthly repayments on the term facility provided under the agreement to the period November 2019 through October 2021.$1,459,000).
Investing Activities
Cash used in investing activities for the year ended December 31, 2018,2020, was $13,229,000$2,167,000 compared to $3,135,000$3,734,000 for the year ended December 31, 2017.2018. Cash used in investinggenerated by financing activities duringfor the year ended December 31, 2018,2020, relates to the issuance of shares for cash, by way of at-the-market sales and the exercise of warrants. Cash generated from the proceeds of sale of common shares in Talisker totalled $1.3 million (December 31, 2019 - $Nil). Proceeds were re-invested through the exercise of share purchase warrants in Talisker, totalling $1,176,000 million (December 31, 2019 - $Nil).
Other financing activities the year ended December 31, 2020, includes cash capital expenditures of $9,416,000 (2017$2,014,000 (December 31, 2019 - $6,608,000) on$3,276,000 million) mainly due to the acquisition of property and equipment. Equipment purchases included new mining, milling/processing, and transportation equipmentfilter press for the Company’s San Gonzalo Mine and Avino Mine, and exploration and mining equipment for the Bralorne Mine.plant. During the year ended December 31, 2018,2020, the Company also incurred cash capital expenditures of $5,361,000 (2017$231,000 (December 31, 2019 - $5,527,000)$5,723,000) on exploration and evaluation activities of which $432,000 relate to exploration and evaluation activities at the Avino Mine, and $4,929,000 relate to exploration and evaluation activities at the Bralorne Mine. During the year ended December 31, 2018, the Company redeemed $1,000,000 (2017 - $9,000,000) of the $10,000,000 in short-term investments (comprised of term deposits) that were purchased during the year ended December 31, 2016, and another $548,000 in reclamation bonds (2017 - $Nil).including drilling expenditures.
C. Research and development, patents and licenses, etc.
As the Company is a mining and exploration company with no research and development, the information required by this section is not applicable.
D. Trend information
As at the time of filing this Annual Report and as otherwise disclosed in this Annual Report, the Company is not aware of any specific trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the Company’s net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. However, it should be noted that a planned major expansion offuture required capital expenditures at the Avino Mine and the indicated current mine life of approximately 0.8 years at San Gonzalo would likely have positive and negative impacts,impact, respectively, on future cash flows after 2018.2020. Many factors that are beyond the control of the Company can affect the Company’s operations, including, but not limited to, the price of minerals, the economy on a global scale, land and exploration permitting, and the appeal of investments in mining companies. The appeal of mining companies as investment alternatives could affect the liquidity of the Company and thus future exploration and evaluation, extracting and processing activities, and financial conditions of the Company. Other factors such as retaining qualified mining personnel and contractor availability and costs could also impact the Company’s operations.
57 |
Table of Contents |
E. Off-balance sheet arrangements
The Company has no off-balance sheet arrangements.
F. Tabular disclosure of contractual obligations
As at December 31, 2018,2020, the Company had the following contractual obligations:
|
| Payment due by period |
|
| Payment due by period |
| ||||||||||||||||||||||||||||||||||
|
| Total |
|
| <1 year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| More than 5 years |
|
| Total |
| <1 year |
| 1-3 Years |
| 3-5 Years |
| More than 5 years |
| ||||||||||||||
Accounts payable and accrued liabilities |
| $ | 5,885,000 |
| $ | 5,885,000 |
| $ | - |
| $ | - |
| $ | - |
|
| $ | 2,068,000 |
| $ | 2,068,000 |
| $ | - |
| $ | - |
| $ | - |
| ||||||||
Due to related parties |
| 157,000 |
| 157,000 |
| - |
| - |
| - |
|
| 154,000 |
| 154,000 |
| - |
| - |
| - |
| ||||||||||||||||||
Minimum rental and lease payments |
| 246,000 |
| 162,000 |
| 64,000 |
| 10,000 |
| 10,000 |
|
| 26,000 |
| 7,000 |
| 10,000 |
| 6,000 |
| 3,000 |
| ||||||||||||||||||
Term facility |
| 7,669,000 |
| 1,432,000 |
| 6,237,000 |
| - |
| - |
|
| 2,552,000 |
| 2,552,000 |
| - |
| - |
| - |
| ||||||||||||||||||
Deferred income tax liabilities |
| 1,369,000 |
| - |
| - |
| - |
| 1,369,000 |
| |||||||||||||||||||||||||||||
Equipment loan |
| 978,000 |
| 550,000 |
| 427,000 |
| 1,000 |
| - |
|
| 72,000 |
| 72,000 |
| - |
| - |
| - |
| ||||||||||||||||||
Finance lease obligations |
|
| 1,889,000 |
|
|
| 942,000 |
|
|
| 947,000 |
|
|
| - |
|
|
| - |
|
|
| 514,000 |
|
|
| 213,000 |
|
|
| 180,000 |
|
|
| 121,000 |
|
|
| - |
|
Total |
| $ | 16,824,000 |
|
| $ | 9,128,000 |
|
| $ | 7,675,000 |
|
| $ | 11,000 |
|
| $ | 10,000 |
|
| $ | 6,755,000 |
|
| $ | 5,066,000 |
|
| $ | 190,000 |
|
| $ | 127,000 |
|
| $ | 1,372,000 |
|
G. Safe harbor
Certain statements in this Annual Report, including those appearing under this Item 5E and 5F, constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Additionally, forward-looking statements may be made orally or in press releases, conferences, reports, on our website or otherwise, in the future, by us or on our behalf. Such statements are generally identifiable by the terminology used such as “plans”, “expects”, “estimates”, “budgets”, “intends”, “anticipates”, “believes”, “projects”, “indicates”, “targets”, “objective”, “could”, “may”, or other similar words.
The forward-looking statements are subject to known and unknown risks and uncertainties and other factors that may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Such factors include, among others: market prices for metals; the results of exploration and evaluation drilling and related activities; economic conditions in the countries and provinces in which we carry on business, especially economic slowdown; actions by governmental authorities including increases in taxes, changes in environmental and other regulations, and renegotiations of contracts; political uncertainty, including actions by insurgent groups or other conflict; the negotiation and closing of material contracts; and the other factors discussed in Item 3.D.: Key Information – Risk factors, and in other documents that we file with the SEC. The impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are interdependent upon other factors; our course of action would depend upon our assessment of the future considering all information then available. In that regard, any statements as to future levels of extracting and processing resources; capital expenditures; the allocation of capital expenditures to exploration and evaluation activities; sources of funding of our capital program; drilling; expenditures and allowances relating to environmental matters; dates by which certain areas will be available for extraction and processing or will come on-stream; expected exploration and evaluation costs; future rates of extracting and processing resources; ultimate recoverability of reserves; dates by which transactions are expected to close; cash flows; uses of cash flows; collectability of receivables; availability of trade credit; expected operating costs; expenditures and allowances relating to environmental matters; debt levels; and changes in any of the foregoing are forward-looking statements, and there can be no assurances that the expectations conveyed by such forward-looking statements will, in fact, be realized.
Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on information available to us on the date such forward-looking statements were made, no assurances can be given as to future results, levels of activity, achievements or financial condition.
Readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described above, as well as others not now anticipated. The foregoing statements are not exclusive and further information concerning us, including factors that could materially affect our financial results, may emerge from time to time. We do not intend to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.
58 |
Table of Contents |
Item 6. Directors, Senior Management and Employees
A. Directors and senior management
The following is a list of the Company’s directors and senior management as at March 20, 2019.18, 2021. The directors are elected for a term of one year at the annual meeting of shareholders. This year’s annual meeting will be held on May 30, 2019.27, 2021.
Name and Present Position with the Company |
| Principal Occupation |
| Director/Officer Since |
|
|
| ||
Gary Robertson
|
| Certified Financial Planner; Director and Chairman of Avino Silver & Gold Mines |
| August 2005 |
|
|
|
|
|
David Wolfin Director/President/CEO |
| Director, President and CEO of Avino Silver & Gold Mines Ltd., |
| October 1995 |
|
|
| ||
Peter Bojtos Director |
|
|
| June |
|
|
|
|
|
Jasman Yee |
| Professional Engineer and Metallurgist |
| January 2011 |
Ronald Andrews Director | Director of Bonner Mall Partnership. Owner and operator of Andrews Orchards | May 2019 | ||
|
|
|
|
|
J.C. Rodríguez Chief Operating Officer |
| Geology Professional |
| December 2012 |
|
|
|
|
|
Dorothy Chin Corporate Secretary |
| Corporate Secretary of Avino Silver & Gold Mines Ltd., |
| September 2008 |
|
|
|
|
|
Nathan Harte Chief Financial Officer |
| CPA, Chief Financial Officer of Avino Silver & Gold Mines Ltd, |
| November 2018 |
Peter Latta VP Technical Services | ||
Professional Engineer, Director and President of | October 2020 |
B. Compensation
During the last completed fiscal year, the Company had four executive officers, namely, David Wolfin, Chief Executive Officer; Nathan Harte, Chief Financial Officer, (appointed on November 21, 2018); Malcolm Davidson, former Chief Financial Officer (employment relationship ended on November 21, 2018) and J.C. Rodríguez, Chief Operating Officer.Officer and Peter Latta, VP Technical Services.
· | Compensation Discussion and Analysis |
·Compensation Discussion and Analysis
The executive compensation program is comprised of fixed and variable elements of compensation; base salary, discretionary bonus, and equity based incentive awards in the form of stock options and Restricted Share Units (“RSUs”) to its executive officers. The Company recognizes the need to provide a compensation package that will attract and retain qualified and experienced executives, as well as align the compensation level of each executive to that executive’s level of responsibility. The three components of the compensation package are included to enable the Company to meet different objectives.
59 |
Table of Contents |
The objectives of base salary are to recognize market pay and acknowledge the competencies and skills of individuals. The objective of discretionary bonuses (paid in the form of cash payments) is to add a variable component of compensation to recognize corporate and individual performances for executive officers and employees. The objectives of equity based incentive award are to align the interest of executive officers with that of Shareholders by encouraging equity ownership through awards of stock options and RSUs, to motivate executive and other key employees to contribute and increase in corporate performance and shareholder value, and to attract talented individuals and reward achievement of long-term financial and operating performance and focus on key activities and achievements critical to the ongoing success of the Company. Implementation of incentive stock options and RSUs plans and amendments thereto are the responsibility of the Company’s Compensation Committee.
The compensation of the executive officers is reviewed and recommended for Board approval by the Company’s Compensation Committee. Although the Board has not formally evaluated the risks associated with the Company’s compensation policies and practices, the Board has no reason to believe that any risks that arise from the Company’s compensation policies and practices are reasonably likely to have a material impact on the Company.
The members of the Compensation Committee are Peter Bojtos (Chair), Michael BaybakRonald Andrews, and Gary Robertson, all of whom are independent.
The general objectives of the Company’s compensation strategy are to:
| (a) | compensate management in a manner that encourages and rewards a high level of performance and outstanding results with a view to increasing long-term shareholder value; |
|
|
|
| (b) | align management’s interests with the long-term interests of shareholders; |
|
|
|
| (c) | provide a compensation package that is commensurate with other comparable companies to enable the Company to attract and retain talent; and |
|
|
|
| (d) | ensure that the total compensation package is designed in a manner that takes into account the Company’s present stage of exploration, evaluation, extraction, and processing activities and its available financial resources. The Company’s compensation packages have been designed to provide a blend of a non-cash stock option component and a reasonable salary. In addition, extraordinary efforts which enhance shareholder value are rewarded with cash bonuses. |
Other than discussed above, the Company has no other forms of compensation. Payments may be made from time to time to individuals or companies that they control for the provision of consulting services which may be deemed a form of compensation. Such consulting services are paid for by the Company at competitive industry rates for work of a similar nature by reputable arm’s length services providers.
Actual compensation will vary based on the performance of the executives relative to the achievement of goals and the price of the Company’s securities.
Compensation Element | Description | Compensation Objectives |
Annual Base Salary | Salary is market-competitive, fixed level of compensation | Retain qualified leaders, motivate strong business performance. |
Incentive Bonuses | Discretionary cash payment | Reward individual performance in achieving corporate goals |
Equity Based Incentive Awards | Equity-based incentive awards are made in the form of incentive stock options and Restricted Share Units (“RSU”). The amount of each grant will be dependent on individual and corporate performance. | Reward long-term financial and operating performance and align interests of key employees with those of shareholders |
The Company relies on the discretion and judgment of the directors in establishing and amending contracts for all forms of compensation, including stock options and RSUs to be granted to the CEO and the directors, and for reviewing the CEO’s recommendations respecting compensation of the other officers of the Company, to ensure such arrangements reflect the responsibilities and risks associated with each position. There is no formal process using objectives, criteria, or analysis, for determining compensation. However, the Compensation Committee considers a number of key factors (including cash cost per ounce of silver equivalent, all-in sustaining cost per ounce of silver equivalent, operating margin and net income, share price relative to a competitive set of silver producers, safety and environmental issues, changes in amounts and categories of reserves and resources, total silver equivalent ounces produced and sold, investor and community relations, exploration results, financings, etc.), and considers these in comparison to other similar silver producers (that have comparable market capitalizations, revenues, and total assets). When determining the compensation of its officers, the Compensation Committee and the Board are guided by the general objectives of the Company’s compensation strategy as set out above.
60 |
Table of Contents |
· Summary Compensation Table
· | Summary Compensation Table |
The following table sets forth particulars concerning the compensation paid or accrued for services rendered to the Company in all capacities during the most recently completed financial year ended December 31, 20182020 of the Company to its executive officers:
Name and principal position |
| Year |
| Salary ($) |
|
| Share-based awards ($)(1) |
|
| Option-based awards ($)(2) |
|
| Non-equity incentive plan compensation ($)(3) |
| Pension value ($)(4) |
| All other compensation ($)(5) |
|
| Total compensation ($) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
David Wolfin(6) (9) President, CEO and Director
|
| 2018 |
|
| 231,535 |
|
|
| 227,875 |
|
| NIL |
|
| NIL |
| NIL |
| NIL |
|
|
| 459,410 |
| ||
| 2017 |
|
| 231,018 |
|
|
| 282,019 |
|
|
| 219,467 |
|
| NIL |
| NIL |
| NIL |
|
|
| 732,504 |
| ||
| 2016 |
|
| 226,381 |
|
|
| 113,276 |
|
|
| 30,184 |
|
| NIL |
| NIL |
| 277,090 |
|
|
| 646,931 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Malcolm Davidson Former CFO(8) (9) |
| 2018 |
|
| 259,661 |
|
|
| 1,278 |
|
| NIL |
|
| NIL |
| NIL |
| NIL |
|
|
| 260,939 |
| ||
| 2017 |
|
| 149,007 |
|
|
| 85,528 |
|
|
| 109,734 |
|
| NIL |
| NIL |
| NIL |
|
|
| 344,269 |
| ||
| 2016 |
|
| 132,056 |
|
|
| 33,983 |
|
|
| 60,368 |
|
| NIL |
| NIL |
|
| 49,125 |
|
|
| 275,532 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nathan Harte CFO(8) (9) |
| 2018 |
|
| 5,981 |
|
|
| 4,201 |
|
|
| 11,016 |
|
| NIL |
| NIL |
| NIL |
|
|
| 21,199 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.C. Rodríguez COO(7)
|
| 2018 |
|
| 170,563 |
|
|
| 72,172 |
|
| NIL |
|
| NIL |
| NIL |
| NIL |
|
|
| 242,735 |
| ||
| 2017 |
|
| 177,192 |
|
|
| 85,528 |
|
|
| 109,734 |
|
| NIL |
| NIL |
| NIL |
|
|
| 372,456 |
| ||
| 2016 |
|
| 160,762 |
|
|
| 33,983 |
|
|
| 60,368 |
|
| NIL |
| NIL |
|
| 47,540 |
|
|
| 302,653 |
|
Name and principal position |
| Year |
| Salary ($) |
|
| Share-based awards ($)(1) |
|
| Option-based awards ($)(2) |
|
| Non-equity incentive plan compensation ($)(3) |
|
| Pension value ($)(4) |
|
| All other compensation ($)(5) |
|
| Total compensation ($) |
| |||||||
David Wolfin(6) (8) |
| 2020 |
|
| 223,680 |
|
|
| 361,117 |
|
|
| 137,090 |
|
|
| NIL |
|
|
| NIL |
|
|
| NIL |
|
|
| 731,887 |
|
President, |
| 2019 |
|
| 226,108 |
|
|
| 336,177 |
|
| NIL |
|
| NIL |
|
| NIL |
|
| NIL |
|
|
| 562,285 |
| ||||
CEO and Director |
| 2018 |
|
| 231,535 |
|
|
| 227,875 |
|
| NIL |
|
| NIL |
|
| NIL |
|
| NIL |
|
|
| 459,410 |
| ||||
Nathan Harte |
| 2020 |
|
| 73,557 |
|
|
| 68,086 |
|
|
| 73,338 |
|
| NIL |
|
| NIL |
|
| NIL |
|
|
| 214,981 |
| |||
CFO(8) |
| 2019 |
|
| 58,865 |
|
|
| 21,396 |
|
|
| 19,429 |
|
| NIL |
|
| NIL |
|
| NIL |
|
|
| 99,690 |
| |||
|
| 2018 |
|
| 5,981 |
|
|
| 4,201 |
|
|
| 11,016 |
|
| NIL |
|
| NIL |
|
| NIL |
|
|
| 21,199 |
| |||
J.C. Rodríguez |
| 2020 |
|
| 215,022 |
|
|
| 172,225 |
|
|
| 91,394 |
|
| NIL |
|
| NIL |
|
| NIL |
|
|
| 478,641 |
| |||
COO(7) |
| 2019 |
|
| 202,441 |
|
|
| 117,866 |
|
| NIL |
|
| NIL |
|
| NIL |
|
| NIL |
|
|
| 320,307 |
| ||||
|
| 2018 |
|
| 170,563 |
|
|
| 72,172 |
|
| NIL |
|
| NIL |
|
| NIL |
|
| NIL |
|
|
| 242,735 |
| ||||
Peter Latta VP-Technical Services |
| 2020 |
|
| 111,840 |
|
|
| 44,724 |
|
|
| 50,489 |
|
| NIL |
|
| NIL |
|
| NIL |
|
|
| 207,053 |
|
_____________
___________________
(1) | The |
(2) | The methodology used to calculate the grant-date fair value is based on the Black-Scholes Option Pricing Model. During the year ended December 31, |
(3) | The Company does not have a non-equity incentive |
(4) | The Company does not have any pension plans. |
(5) | Discretionary cash payment of incentive bonuses. |
(6) | Mr. David Wolfin was appointed |
(7) | Mr. Rodríguez receives his salary in Mexican Pesos (“MXP”). For |
(8) | |
All compensation to Mr. David Wolfin, Mr. | |
(9) | Mr. Peter Latta was appointed VP- Technical Services in 2020. |
· | Annual Base Salary |
· Annual Base Salary
Base Salary for the executive officers is determined by the Board based upon the recommendation of the Compensation Committee and its recommendations are reached primarily by comparison of the remuneration paid by other reporting issuers similar in size and within the industry and review of other publicly available information on remuneration that the Compensation Committee feels is suitable.
The Annual Base Salary paid to the executive officers is, for the purpose of establishing appropriate increases, reviewed annually by the Board upon the recommendation of the Compensation Committee as part of the annual review of executive officers. The decision on whether to grant an increase to the executive’s base salary and the amount of any such increase is in the sole discretion of the Board and Compensation Committee.
61 |
Table of Contents |
· Non-Equity Incentive Plan Compensation
· | Non-Equity Incentive Plan Compensation |
One of the three components of the Company’s compensation package is a discretionary annual cash bonus, paid to recognize individual performance in attaining corporate goals and objectives. The Company does not have a long-term incentive plan.
· | Equity-Based Incentive Awards |
· Equity-Based Incentive Awards
Equity-based incentive awards are in the form of the grant of incentive stock options and RSUs. The objective of the equity-based incentive award is to reward executive officers, employees, and directors’ individual performance at the discretion of the Board upon the recommendation of the Compensation Committee.
The Company currently maintains a stock optionStock Option and two RSUs plansan RSU Plan (the “Plans”), under which stock options have been granted and may be granted to purchase a number equal to up to 10% of the Company’s issued capital from time to time. On April 15, 2016, the board of directors of Avino, acting upon the recommendations of the Compensation Committee, implemented a fixed restricted share unit plan (the “2016 RSU Plan”) for the issuance of up to a maximum of 870,560 restricted share units (“RSUs”) to qualifying directors, officers, employees, and consultants, upon certain vesting restrictions determined by the board of directors, for any RSUs awarded. The 2016 RSU Plan was approved by the shareholders of Avino on May 27, 2016. As of December 31, 2018, a total of 870,500 RSUs were granted and 506,045 were vested. The second RSU Plan (the “2018 RSU Plan”) was approved by the shareholders on May 24, 2018, and the maximum number of RSU shares issuable under this Plan shall not, together with all other security-based compensation arrangements of the Corporation exceed 10% of the issued and outstanding Common Shares as at the date of such Grant on a non-diluted basis. As of December 31, 2018, 1,081,5002020, a total 4,293,000 RSUs were granted under the 2018 RSU Plan to officers, directors, employees and consultants and none1,238,610 were vested and 260,890 were cancelled. The value of thesethe RSUs were vested.is based on the closing price of the Common Shares on the vesting date. The RSUs will vest at the rate of one-third annually over three years, until fully vested over three years from the date of the awards, and provided that these designated persons are continuously employed with or providing services to Avino.
All Plans are administered by the Compensation Committee. The process the Company uses to grant equity based incentive awards is upon the recommendations of the Compensation Committee.
The role of the Compensation Committee is to recommend to the Board the compensation of the Company’s directors and the executive officers which the Committee feels is suitable. All previous grants of equity-based incentive awards are taken into account when considering new grants.
· |
· Outstanding share-based awards and option-based awards
The following table sets forth the options and RSUs granted to the executive officers to purchase or acquire securities of the Company outstanding at December 31, 2018:2020:
|
| Option-based Awards |
|
| Share-based Awards | ||||||||||||||||||||||
Name |
| Number of securities underlying unexercised options (#) |
|
| Option exercise price (C$)(3) |
|
| Option expiration date |
| Value of unexercised in-the-money options ($)(1)(4) |
|
| Share grant date |
| Number of shares or units of shares that have not vested (#)(2) |
|
| Market or payout value of share-based awards that have not vested ($)(2)(4) |
|
| Market or payout value of vested share-based awards not paid out or distributed ($)(2) (4) | ||||||
David Wolfin |
|
| 25,000 |
|
| $ | 2.95 |
|
| Sept 2, 2021 |
| Nil |
|
| Aug 28, 2018 |
|
| 135,000 |
|
|
| 131,860 |
|
| Nil | ||
President, CEO and Director |
|
| 250,000 |
|
| $ | 1.98 |
|
| Sept. 20, 2022 |
| Nil |
|
| Aug 21, 2019 |
|
| 440,000 |
|
|
| 259,171 |
|
| Nil | ||
|
| 300,000 |
|
|
| 1.64 |
|
| Aug 4, 2025 |
|
| 2,237 |
|
| Aug 4, 2020 |
|
| 300,000 |
|
|
| 366,836 |
|
| Nil | ||
Nathan Harte, |
|
| 25,000 |
|
| $ | 1.98 |
|
| Sept 20, 2022 |
| Nil |
|
| Aug 28, 2018 |
|
| 8,500 |
|
|
| 8,302 |
|
| Nil | ||
CFO |
|
| 50,000 |
|
| $ | 1.30 |
|
| Aug 28, 2023 |
|
| 13,048 |
|
| Aug 21, 2019 |
|
| 40,000 |
|
|
| 23,561 |
|
| Nil | |
|
|
| 48,000 |
|
| $ | 0.79 |
|
| Aug 21, 2024 |
|
| 32,061 |
|
| Aug 4, 2020 |
|
| 150,000 |
|
|
| 183,418 |
|
| Nil | |
|
|
| 150,000 |
|
| $ | 1.64 |
|
| Aug 4, 2025 |
|
| 1,118 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
J.C. Rodríguez |
|
| 50,000 |
|
| $ | 2.95 |
|
| Sept 2, 2021 |
| Nil |
|
| Aug 28, 2018 |
|
| 42,000 |
|
|
| 41,023 |
|
| Nil | ||
COO |
|
| 125,000 |
|
| $ | 1.98 |
|
| Sept 20, 2022 |
| Nil |
|
| Aug 21, 2019 |
|
| 200,000 |
|
|
| 117,805 |
|
| Nil | ||
|
|
| 200,000 |
|
| $ | 1.64 |
|
| Aug 4, 2025 |
|
| 1,491 |
|
| Aug 4, 2020 |
|
| 200,000 |
|
|
| 244,557 |
|
| Nil | |
Peter Latta |
|
| 50,000 |
|
| $ | 1.30 |
|
| Aug 28, 2023 |
|
| 13,048 |
|
| Aug 28, 2018 |
|
| 8,500 |
|
|
| 8,302 |
|
| Nil | |
VP-Technical Services |
|
| 100,000 |
|
| $ | 1.64 |
|
| Aug 4, 2025 |
|
| 746 |
|
| Aug 21, 2019 |
|
| 20,000 |
|
|
| 11,780 |
|
| Nil | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aug 4, 2020 |
|
| 102,000 |
|
|
| 124,724 |
|
| Nil |
Option-based Awards Share-based Awards Name Number of securities underlying unexercised options (#) Option exercise price (C$)(3) Option expiration date Value of unexercised in-the-money options ($)(1)(4) Share grant date Number of shares or units of shares that have not vested (#)(2) Market or payout value of share-based awards that have not vested ($)(2)(4) Market or payout value of vested share-based awards not paid out or distributed ($)(2) (4) David Wolfin Sept 19, 2019 Nil Sept 2, 2016 Nil President, CEO Sept 2, 2021 Nil Sept 20, 2017 Nil and Director Sept. 20, 2022 Nil Aug 28, 2018 Nil Malcolm Davidson Sept 19, 2019 Nil Sept 2, 2016 Nil Former CFO (5) (6) Sept 2, 2021 Nil Sept 20, 2017 Nil Sept. 20, 2022 Nil Aug 28, 2018 Nil Nathan Harte, Sept. 20, 2022 Nil Sept 20, 2017 Nil CFO (5) Aug 28, 2023 Nil Aug 28, 2018 Nil J.C. Rodríguez Sept 19, 2019 Nil Sept 2, 2016 Nil COO Sept 2, 2021 Nil Sept 20, 2017 Nil Sept. 20, 2022 Nil Aug 28, 2018 Nil 100,000 $ 1.90 83,334 189,732 25,000 $ 2.95 8,667 13,244 250,000 $ 1.98 405,000 409,470 50,000 $ 1.90 5,480 12,477 50,000 $ 2.95 425 649 125,000 $ 1.98 8,151 8,241 25,000 $ 1.98 1,250 1,910 50,000 $ 1.30 25,500 25,781 50,000 $ 1.90 25,000 56,919 50,000 $ 2.95 5,000 7,641 125,000 $ 1.98 126,000 127,391
________________
__________________
(1) | In-the-Money Options are the difference between the market value of the underlying securities at December 31, |
(2) | Share Based Awards are in the form of |
(3) | The option exercise price is quoted in Canadian dollars as they relate specifically to the Canadian dollar share price as quoted on the Toronto Stock Exchange. |
(4) | The Awards are calculated in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$ |
·
Incentive plan awards – value vested or earned during the year
An “incentive plan” is any plan providing compensation that depends on achieving certain performance goals or similar conditions within a specific period. An “incentive plan award” means compensation awarded, earned, paid or payable under an incentive plan.
The following table sets forth the value vested or earned during the year of option-based awards, share-based awards and non-equity incentive plan compensation paid to executive officers during the most recently completed financial year ended December 31, 2018:2020:
Name |
| Option-based awards – Value vested during the year ($) (1)(3) |
|
| Share-based awards – Value vested during the year ($) (2)(3) |
|
| Non-equity incentive plan compensation – Value earned during the year ($)(3) | |||
David Wolfin President, CEO and Director |
| Nil |
|
|
| 413,686 |
|
| Nil | ||
Nathan Harte, CFO |
|
| 7,605 |
|
|
| 53,187 |
|
| Nil | |
J.C. Rodríguez COO |
| Nil |
|
|
| 166,146 |
|
| Nil | ||
Peter Latta VP-Technical Services |
|
| 4,753 |
|
|
| 21,337 |
|
| Nil |
________________
|
|
|
| ||||||
|
|
| |||||||
|
|
| |||||||
|
|
| |||||||
|
|
|
________________
The aggregate dollar value that would have been realized if the options granted during the year had been exercised on the vesting date. | |
(2) | The RSU Vesting prices were C$ |
(3) | The Awards are calculated in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$ |
· Pension Plan Benefits
63 |
Table of Contents |
· | Pension Plan Benefits |
No pension plan or retirement benefit plans have been instituted by the Company and none are proposed at this time.
· | Use of Financial Instruments |
· Use of Financial Instruments
The Company does not have in place policies which restrict the ability of directors or executive officers to purchase financial instruments, such as prepaid variable forward contracts, equity swaps, collars, or units of exchange funds, that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by a director or executive officers. However, any such purchases would be subject to applicable insider reporting requirements.
· | Termination and Change of Control Benefits |
· Termination and Change of Control Benefits
On January 1, 2016, the Company entered into a consulting agreement with Intermark Capital Corporation, a company owned by David Wolfin, and on March 23, 2016 the Company further amended the consulting agreement which contains certain provisions in connection with termination of employment or change of control. The consulting agreement was renewed for a period of three years on January 1, 2019 with the same terms and conditions.
This Agreement can be terminated at any time as follows:
| (a) | by the Consultant electing to give the Company not less than 3 months prior notice of such termination; |
|
|
|
| (b) | by the Company electing to give the Consultant 3 months prior notice of such termination along with a termination payment equal to the annual Consulting Fee; and |
|
|
|
| (c) | by the Consultant electing to give the Company notice, in the event that there occurs a Change of Control (as defined below) within six (6) months of the effective date of such Change of Control, and if the Consultant so elects to terminate this Agreement, then the Consultant will be immediately entitled to a termination payment equal to C$2 million. |
On January 1, 2014,May 30, 2019, the Company entered into an employment agreementa Change of Control Agreement with Malcolm Davidson,Nathan Harte, the named executive officer of the Company. The agreement contains certain provisionsIf a Change of Control occurs, and the Executive’s employment is terminated by the Company for any reason, except excluding a termination for just cause, within six (6) months of the date of the Change of Control, or the Executive resigns from his employment for Good Reason during such six (6) month period, then the Executive shall be entitled to receive from the Company an amount equal to the Executive current monthly base salary multiplied by twelve (12) months which Executive will be paid his salary, accrued bonuses, if any, and vacation earned and other amounts due to him up to the termination date; which amount is to be paid in connection witha lump sum within 10 business days of the Change in Control termination of employment or change of control.date.
ThisOn May 30, 2019, the Company entered into a Change of Control Agreement may bewith Peter Latta, the named executive officer of the Company. If a Change of Control occurs, and the Executive’s employment is terminated atby the Company for any time as follows:
The employment relationship with Mr. Malcolm Davidson ended on November 21, 2018, and in connection with the endingdate of the Change of Control, or the Executive resigns from his employment Mr. Davidson received C$135,000for Good Reason during such six (6) month period, then the Executive shall be entitled to receive from the Company.Company an amount equal to the Executive current monthly base salary multiplied by twelve (12) months which Executive will be paid his salary, accrued bonuses, if any, and vacation earned and other amounts due to him up to the termination date; which amount is to be paid in a lump sum within 10 business days of the Change in Control termination date.
On July 1, 2013, the Company entered into an employment agreement with J.C. Rodríguez, the named executive officer of the Company. The employment agreement was further amended on April 14, 2014.
| (a) | by the Employee electing to give the Employer not less than 3 months prior notice of such termination; |
|
|
|
| (b) | by the Employer electing to give the Employee 3 months prior notice of such termination along with a termination payment equal to the sum of Employee’s Fee earned pursuant to Section TEN during the preceding 12 months prior to the month notice of termination was given plus any unpaid vacation and other amounts due to him up to the termination; and |
|
|
|
| (c) | (1) by the Employee electing to give the Employer notice, in the event that there occurs a Change of Control (as defined below) within 6 months of the effective date of such Change of Control, and if the Employee so elects to terminate this Agreement, or (2) by the Employer upon notice to the Employee within 3 months prior to or within 6 months after a Change of Control is announced by the Employer, or its parent, then the Employer will be entitled to a termination payment equal to 3 times the sum of Employee’s Fee earned pursuant to Section Ten of the employment agreement during the preceding 12 months prior to the month notice of termination was given, plus any accrued vacation and other amounts due to him up to the termination. |
64 |
Table of Contents |
A Change of Control shall be deemed to have occurred when:
| (i) | any person, entity or group becomes the beneficial owner of 20% or more of the combined voting power of the |
|
|
|
| (ii) | completion of the sale or other disposition by the Company of all or substantially all of the |
| (A) | a reorganization or merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent, either by remaining outstanding or by being converted into voting securities of another entity, more than 50.1% of the combined voting power of the voting securities of the Company or such other entity outstanding immediately after such reorganization or merger or consolidation; or |
|
|
|
| (B) | a reorganization or merger or consolidation effected to implement a recapitalization or reincorporation of the Company (or similar transaction) that does not result in a material change in beneficial ownership of the voting securities of the Company or its successor. |
· |
·Director Compensation
The following table sets forth the value of all compensation paid or accrued to the directors, excluding Mr. Wolfin who is paid as an officer and not as a director, in their capacity as directors for the year ended December 31, 2018:2020:
Name |
| Fees earned(6) ($) |
|
| Share-based awards(1) (6) ($) |
|
| Option-based awards(2)(6) ($) |
|
| Non-equity incentive plan compensation(3)(6) ($) |
| Pension value(4)(6) ($) |
| All other compensation(6) ($) |
|
| Total(6) ($) |
| |||||
Michael Baybak* |
|
| 38,782 |
|
|
| 34,784 |
|
|
| 6,396 |
|
| Nil |
| Nil |
| Nil |
|
|
| 79,962 |
| |
Gary Robertson* |
|
| 55,568 |
|
|
| 63,365 |
|
| Nil |
|
| Nil |
| Nil |
| Nil |
|
|
| 118,933 |
| ||
Jasman Yee |
|
| 30,871 |
|
|
| 56,302 |
|
| Nil |
|
| Nil |
| Nil |
|
| 35,791 | (5) |
|
| 122,965 |
| |
Peter Bojtos*(7) |
|
| 20,452 |
|
|
| 4,443 |
|
|
| 15,990 |
|
| Nil |
| Nil |
| Nil |
|
|
| 40,885 |
| |
Ross Glanville*(7) |
|
| 16,252 |
|
| Nil |
|
| Nil |
|
| Nil |
| Nil |
| Nil |
|
|
| 16,252 |
|
________________
Name |
| Fees earned(5) ($) |
|
| Share-based awards(1) (5) ($) |
|
| Option-based awards(2)(5) ($) |
|
| Non-equity incentive plan compensation(3)(5) ($) |
| Pension value(4)(6) ($) |
| All other compensation(5) ($) |
| Total(5) ($) |
| ||||
Gary Robertson* |
|
| 53,683 |
|
|
| 72,434 |
|
|
| 45,696 |
|
| Nil |
| Nil |
| Nil |
|
| 171,814 |
|
Jasman Yee |
|
| 31,315 |
|
|
| 58,940 |
|
|
| 45,696 |
|
| Nil |
| Nil |
|
|
|
| 135,951 |
|
Peter Bojtos* |
|
| 43,245 |
|
|
| 52,487 |
|
|
| 45,696 |
|
| Nil |
| Nil |
| Nil |
|
| 141,248 |
|
Ronald Andrews*(6) |
|
| 43,245 |
|
|
| 48,349 |
|
|
| 45,696 |
|
| Nil |
| Nil |
| Nil |
|
| 137,290 |
|
_______________
* | Independent and Non-Employee Directors |
(1) | Share Based Awards are in the form of |
(2) | The methodology used to calculate the grant-date fair value is based on the Black-Scholes Option Pricing Model. During the year ended December 31, |
(3) | The Company does not have any non-equity incentive plans. |
(4) | The Company does not have any pension plans. |
(5) | |
All director compensation is paid in Canadian dollars and is converted into US dollars by applying an exchange rate of US$1.00 = C$ | |
(6) | Mr. |
65 |
Table of Contents |
The Board, on recommendation of the Compensation Committee, determines director compensation. The objective in determining such director compensation is to ensure that the Company can attract and retain experienced and qualified individuals to serve as directors. The Company compensates its non-executive directors through the payment of directorsdirectors’ fees, plus annual retainer for board and committee chair, and per meeting fees, and through the grant of incentive stock options and RSUs. All retainers are paid pro rata on a quarterly basis. The non-executive directors receive the following annual retainers and other fees for their services as directors:
Annual Retainer per Director |
| $ | 23,154 | * |
Annual Retainer for Board Chair |
| $ | 23,154 | * |
Annual Retainer for Audit Committee Chair |
| $ | 6,174 | * |
Annual Retainer for Compensation Committee Chair |
| $ | 3,859 | * |
Annual Retainer for Governance & Nominating Committee Chair |
| $ | 3,859 | * |
Meeting Attendance Fee per Meeting |
| $ | 772 | * |
____________
Annual Retainer per Director |
| $ | 22,368 | * |
Annual Retainer for Board Chair |
| $ | 22,368 | * |
Annual Retainer for Audit Committee Chair |
| $ | 5,965 | * |
Annual Retainer for Compensation Committee Chair |
| $ | 3,728 | * |
Annual Retainer for Governance & Nominating Committee Chair |
| $ | 3,728 | * |
Meeting Attendance Fee per Meeting |
| $ | 746 | * |
_______________ *All director compensation is paid in Canadian dollars and is converted into US dollars by applying an exchange rate of US$1.00 = C$1.3412, which represents the average exchange rate for the year 2020 as quoted by the Bank of Canada |
The Company may grant incentive stock options and RSUs to Directors of the Company from time to time pursuant to the stock optionStock Option and RSUs plansRSU Plans of the Company and in accordance with the policies of the Toronto Stock Exchange (the “TSX”).
Outstanding share-based awards and option-based awards
The following table sets forth the options and RSUs granted to the directors to purchase or acquire securities of the Company outstanding at December 31, 2018:2020:
|
| Option-based Awards |
| Share-based Awards |
| |||||||||||||||||||||
Name (1) |
| Number of securities underlying unexercised options (#) |
|
| Option exercise price (C$) |
|
| Option expiration date |
| Value of unexercised in-the-money options ($)(2)(4) |
| Share grant date |
| Number of shares or units of shares that have not vested (#)(3) |
|
| Market or payout value of share- based awards that have not vested ($)(3)(4) |
|
| Market or payout value of share-based awards not paid out or distributed ($)(3)(4) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Michael Baybak |
|
| 75,000 |
|
| $ | 1.90 |
|
| Sept 19, 2019 |
| Nil |
| Sept 2, 2016 |
|
| 16,667 |
|
|
| 37,947 |
|
| Nil |
| |
|
|
| 75,000 |
|
| $ | 2.95 |
|
| Sept 2, 2021 |
| Nil |
| Sept 20, 2017 |
|
| 3,333 |
|
|
| 5,093 |
|
| Nil |
| |
|
|
| 100,000 |
|
| $ | 1.98 |
|
| Sept 20, 2022 |
| Nil |
| Aug 28, 2018 |
|
| 21,000 |
|
|
| 21,232 |
|
| Nil |
| |
|
|
| 20,000 |
|
| $ | 1.30 |
|
| Aug. 28, 2018 |
| Nil |
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary Robertson |
|
| 75,000 |
|
| $ | 1.90 |
|
| Sept 19, 2019 |
| Nil |
| Sept 2, 2016 |
|
| 25,000 |
|
|
| 56,919 |
|
| Nil |
| |
|
|
| 100,000 |
|
| $ | 2.95 |
|
| Sept 2, 2021 |
| Nil |
| Sept 20, 2017 |
|
| 6,667 |
|
|
| 10,188 |
|
| Nil |
| |
|
|
| 150,000 |
|
| $ | 1.98 |
|
| Sept 20, 2022 |
| Nil |
| Aug 28, 2018 |
|
| 75,000 |
|
|
| 75,828 |
|
| Nil |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Jasman Yee |
|
| 75,000 |
|
| $ | 1.90 |
|
| Sept 19, 2019 |
| Nil |
| Sept 2, 2016 |
|
| 25,000 |
|
|
| 56,919 |
|
| Nil |
| |
|
|
| 50,000 |
|
| $ | 2.95 |
|
| Sept 2, 2021 |
| Nil |
| Sept 20, 2017 |
|
| 5,000 |
|
|
| 7,641 |
|
| Nil |
| |
|
|
| 125,000 |
|
| $ | 1.98 |
|
| Sept 20, 2022 |
| Nil |
| Aug 28, 2018 |
|
| 51,000 |
|
|
| 51,563 |
|
| Nil |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Ross Glanville(5) |
|
| 75,000 |
|
| $ | 1.90 |
|
| Sept 19, 2019 |
| Nil |
| Sept 2, 2016 |
| Nil |
|
| Nil |
|
| Nil |
| |||
|
|
| 75,000 |
|
| $ | 2.95 |
|
| Sept 2, 2021 |
| Nil |
| Sept 20, 2017 |
| Nil |
|
| Nil |
|
| Nil |
| |||
|
|
| 100,000 |
|
| $ | 1.98 |
|
| Sept 20, 2022 |
| Nil |
| Aug 28, 2018 |
| Nil |
|
| Nil |
|
| Nil |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Peter Bojtos (5) |
|
| 50,000 |
|
| $ | 1.30 |
|
| Aug. 28, 2018 |
| Nil |
| Aug 28, 2018 |
|
| 21,000 |
|
|
| 21,232 |
|
| Nil |
|
______________
|
| Option-based Awards |
|
| Share-based Awards | ||||||||||||||||||||||
Name (1) |
| Number of securities underlying unexercised options (#) |
|
| Option exercise price (C$) |
|
| Option expiration date |
| Value of unexercised in-the-money options ($)(2)(4) |
|
| Share grant date |
| Number of shares or units of shares that have not vested (#)(3) |
|
| Market or payout value of share-based awards that have not vested ($)(3)(4) |
|
| Market or payout value of share-based awards not paid out or distributed ($)(3)(4) | ||||||
Gary Robertson |
|
| 100,000 |
|
| $ | 2.95 |
|
| Sept 2, 2021 |
| Nil |
|
| Aug 28, 2018 |
|
| 25,000 |
|
|
| 24,418 |
|
| Nil | ||
|
|
| 150,000 |
|
| $ | 1.98 |
|
| Sept 20, 2022 |
| Nil |
|
| Aug 21 2019 |
|
| 90,000 |
|
|
| 53,012 |
|
| Nil | ||
|
|
| 100,000 |
|
| $ | 1.64 |
|
| Aug 4, 2025 |
|
| 746 |
|
| Aug 4, 2020 |
|
| 60,000 |
|
|
| 73,367 |
|
| Nil | |
Jasman Yee |
|
| 50,000 |
|
| $ | 2.95 |
|
| Sept 2, 2021 |
| Nil |
|
| Aug 28, 2018 |
|
| 17,000 |
|
|
| 16,605 |
|
| Nil | ||
|
|
| 125,000 |
|
| $ | 1.98 |
|
| Sept 20, 2022 |
| Nil |
|
| Aug 21, 2019 |
|
| 70,000 |
|
|
| 41,232 |
|
| Nil | ||
|
|
| 100,000 |
|
| $ | 1.64 |
|
| Aug 4, 2025 |
|
| 746 |
|
| Aug 4, 2020 |
|
| 60,000 |
|
|
| 73,367 |
|
| Nil | |
Ronald Andrews (5) |
|
| 100,000 |
|
| $ | 1.64 |
|
| Aug 4, 2025 |
|
| 746 |
|
| Aug 21, 2019 |
|
| 70,000 |
|
|
| 41,232 |
|
| Nil | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aug 4, 2020 |
|
| 60,000 |
|
|
| 73,367 |
|
| Nil | |
Peter Bojtos |
|
| 50,000 |
|
| $ | 1.30 |
|
| Aug. 28, 2023 |
|
| 13,048 |
|
| Aug 28, 2018 |
|
| 7,000 |
|
|
| 6,837 |
|
| Nil | |
|
|
| 100,000 |
|
| $ | 1.64 |
|
| Aug 4, 2025 |
|
| 746 |
|
| Aug 21, 2019 |
|
| 70,000 |
|
|
| 41,232 |
|
| Nil | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aug 4, 2020 |
|
| 60,000 |
|
|
| 73,367 |
|
| Nil |
________________
(1) | For the compensation of David Wolfin, the named executive officer of the Company, see “Incentive Plan Awards” above. |
(2) | In-the-Money Options are the difference between the market value of the underlying securities |
(3) | Share Based Awards are in the form of |
(4) | The Awards are calculated in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$ |
(5) | Mr. |
66 |
Table of Contents |
Incentive plan awards – value vested or earned during the year
An “incentive plan” is any plan providing compensation that depends on achieving certain performance goals or similar conditions within a specific period.
An “incentive plan award” means compensation awarded, earned, paid or payable under an incentive plan.
The following table sets forth the value vested or earned during the year of option-based awards, share-based awards and non-equity incentive plan compensation paid to directors during the year ended December 31, 2018:2020:
Name (1) |
| Option-based awards – Value vested during the year ($)(2)(4) |
| Share-based awards – Value vested during the year ($)(3)(4) |
|
| Non-equity incentive plan compensation – Value earned during the year ($)(4) | ||||
|
|
| |||||||||
Gary Robertson |
| Nil |
|
|
|
| Nil | ||||
Jasman Yee |
| Nil |
|
|
|
| Nil | ||||
|
| Nil |
|
|
|
| Nil | ||||
Peter Bojtos |
|
| Nil |
|
| 48,304 | Nil |
_______________
__________________
(1) | For the compensation of David Wolfin, the named executive officer of the Company, see “Incentive Plan Awards” above. |
(2) | The aggregate dollar value that would have been realized if the options granted during the year had been exercised on the vesting date. |
(3) | The RSU Vesting prices were C$ |
(4) | The Awards are calculated in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$ |
(5) | Mr. |
Termination of Employment, Changes in Responsibilities and Employment Contracts
On January 1, 2016, the Company entered into a consulting agreement with Intermark Capital Corporation, a company wholly ownedwholly-owned by David Wolfin, the named executive officer of the Company. The consulting agreement was further amended on March 23, 2016. On January 1, 2019, the Company renewed the consulting agreement with Intermark Capital Corporation for a period of three years with the same terms and conditions.
On January 1, 2014,May 30, 2019, the Company entered into an employment agreementa Change of Control Agreement with Malcolm Davidson, theNathan Harte, and Peter Latta, both who are named executive officerofficers of the Company. The employment relationship with Mr. Malcolm Davidson ended on November 21, 2018, and in connection with the ending of his employment, Mr. Davidson received C$135,000 from the Company.
On July 1, 2013, the Company entered into an employment agreement with J.C. Rodríguez, the named executive officer of the Company. The employment agreement was further amended on April 14, 2014.
Please see “Termination and Change of Control Benefits” above for details.
C. Board practices
The Board is currently comprised of five directors. The size and experience of the Board is important for providing the Company with effective governance in the mining industry. The Board’s mandate and responsibilities can be effectively and efficiently administered at its current size. The Board has functioned and is of the view that it can continue to function, independently of management as required. Directors are elected for a term of one year at the annual general meeting. At the Annual General and Special Meeting, held on May 24, 2018,August 27, 2020, the shareholders elected Messrs. Michael Baybak, Gary Robertson, David Wolfin, Jasman Yee, Peter Bojtos, and Ross GlanvilleRonald Andrews as directors of the Company. Ross Glanville resigned on June 15, 2018 and Peter Bojtos was appointed as a Director on the same date.
The Board has considered the relationship of each director to the Company and currently considers three of the five directors to be “unrelated” (Messrs. Baybak,Andrews, Robertson, and Bojtos). “Unrelated director” means a director who is independent of management and free from any interest and any business or other relationship which could reasonably be perceived to materially interfere with the director’s ability to act with a view to the best interest of the Company, other than interests and relationships arising solely from shareholdings.
Procedures are in place to allow the Board to function independently. At the present time, the Board has experienced directors that have made a significant contribution to the Company’s success, and is satisfied that it is not constrained in its access to information, in its deliberations or in its ability to satisfy the mandate established by law to supervise the business and affairs of the Company. Committees meet independent of management and other directors.
Table of Contents |
Mandate of the Board of Directors, its Committees and Management
The role of the Board is to oversee the conduct of the Company’s business, including the supervision of management, and determining the Company’s strategy. Management is responsible for the Company’s day to day operations, including proposing its strategic direction and presenting budgets and business plans to the Board for consideration and approval. The strategic plan takes into account, among other things, the opportunities and risks of the Company’s business. Management provides the Board with periodic assessments as to those risks and the implementation of the Company’s systems to manage those risks. The Board reviews the personnel needs of the Company from time to time, having particular regard to succession issues relating to senior management. Management is responsible for the training and development of personnel. The Board assesses how effectively the Company communicates with shareholders but has not adopted a formal communications policy. Through the Audit Committee, and in conjunction with its auditors, the Board assesses the adequacy of the Company’s internal control and management information systems. The Board looks to management to keep it informed of all significant developments relating to or affecting the Company’s operations. Major financings, acquisitions, dispositions and investments are subject to board approval. A formal Code of Ethics (“Code”) has been adopted and applies to all directors, officers and employees. The Board meets on at least a quarterly basis and following the annual meeting of shareholders. The frequency of the meetings and nature of the meeting agendas are dependent on the nature of the business and affairs which the Company faces from time to time. During the year ended December 31, 2018,2020, the Board met seventen times.
To facilitate the functioning of the Board independently of management, the Audit Committee, Compensation Committee and Governance and Nominating Committee consist of majority independent directors. When appropriate, members of management are not present for the discussion and determination of certain matters at meetings of the Board. The independent directors hold regularly scheduled meetings at which non-independent directors and members of management are not in attendance.
The Board and committees may take action at these meetings or at a meeting by conference call or by written consent.
Committees
Audit Committee
Under Canadian National Instrument 52-110 – Audit Committees (“NI 52-110”) a reporting issuer in those jurisdictions which have adopted NI 52-110 and that is not a “venture issuer” is required to provide disclosure with respect to its Audit Committee including the text of the Audit Committee’s Charter, composition of the Committee, and the fees paid to the external auditor. Accordingly, the Company provides the following disclosure with respect to its Audit Committee:
Audit Committee Charter
1. | Purpose of the Committee |
|
|
1.1 | The purpose of the Audit Committee is to assist the Board of Directors in its oversight of the integrity of the |
|
|
2. | Members of the Audit Committee |
|
|
2.1 | All Members of the Audit Committee must be “financially literate” as defined under NI 52-110, having sufficient accounting or related financial management expertise to read and understand a set of financial statements, including the related notes, that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements. |
|
|
2.2 | The Audit Committee shall consist of no less than three Directors. |
|
|
2.3 | All Members of the Audit Committee must be “independent” as defined under NI 52-110. |
68 |
Table of Contents |
3. | Relationship with External Auditors |
|
|
3.1 | |
The external auditors are the independent representatives of the shareholders, but the external auditors are also accountable to the Board of Directors and the Audit Committee. | |
|
|
3.2 | The external auditors must be able to complete their audit procedures and reviews with professional independence, free from any undue interference from the management or directors. |
3.3
The Audit Committee must direct and ensure that the management fully co-operates with the external auditors in the course of carrying out their professional duties. | |
|
|
3.4 | The Audit Committee will have direct communications access at all times with the external auditors. |
|
|
4. | Non-Audit Services |
|
|
4.1 | The external auditors are prohibited from providing any non-audit services to the Company, without the express written consent of the Audit Committee. In determining whether the external auditors will be granted permission to provide non-audit services to the Company, the Audit Committee must consider that the benefits to the Company from the provision of such services, outweighs the risk of any compromise to or loss of the independence of the external auditors in carrying out their auditing mandate. |
|
|
4.2 | Notwithstanding section 4.1, the external auditors are prohibited at all times from carrying out any of the following services, while they are appointed the external auditors of the Company: |
| (i) | acting as an agent of the Company for the sale of all or substantially all of the undertaking of the Company; and |
|
|
|
| (ii) | performing any non-audit consulting work for any director or senior officer of the Company in their personal capacity, but not as a director, officer or insider of any other entity not associated or related to the Company. |
5. | Appointment of Auditors |
|
|
5.1 | The external auditors will be appointed each year by the shareholders of the Company at the annual general meeting of the shareholders. |
|
|
5.2 | The Audit Committee will nominate the external auditors for appointment, such nomination to be approved by the Board of Directors. |
|
|
6. | Evaluation of Auditors |
|
|
6.1 | The Audit Committee will review the performance of the external auditors on at least an annual basis, and notify the Board of Directors and the external auditors in writing of any concerns in regards to the performance of the external auditors, or the accounting or auditing methods, procedures, standards, or principles applied by the external auditors, or any other accounting or auditing issues which come to the attention of the Audit Committee. |
|
|
7. | Remuneration of the Auditors |
|
|
7.1 | The remuneration of the external auditors will be determined by the Board of Directors, upon the annual authorization of the shareholders at each general meeting of the shareholders. |
|
|
7.2 | The remuneration of the external auditors will be determined based on the time required to complete auditing procedures as determined by the external auditors in accordance with the Canadian Auditing Standards and the stands of the PCAOB. |
|
|
8. | Termination of the Auditors |
|
|
8.1 | The Audit Committee has the power to terminate the services of the external auditors, with or without the approval of the Board of Directors, provided the Committee is acting reasonable and responsible. |
|
|
9. | Funding of Auditing and Consulting Services |
|
|
9.1 | Auditing expenses will be funded by the Company. The auditors must not perform any other consulting services for the Company, which could impair or interfere with their role as the independent auditors of the Company. |
|
|
10. | Role and Responsibilities of the Internal Auditor |
|
|
10.1 | Due to the |
69 |
Table of Contents |
11. | Oversight of Internal Controls |
|
|
11.1 | |
The Audit Committee will have the oversight responsibility for ensuring that the internal controls are implemented and monitored, and that such internal controls are effective. |
|
|
12. | Continuous Disclosure Requirements |
12.1 | Due to the |
|
|
13. | Other Auditing Matters |
|
|
13.1 | The Audit Committee may meet with the Auditors independently of the management of the Company at any time, provided the Committee is acting reasonable and responsible. |
|
|
13.2 | The Auditors are authorized and directed to respond to all enquiries from the Audit Committee in a thorough and timely fashion, without reporting these enquiries or actions to the Board of Directors or the management of the Company. |
|
|
14. | Annual Review |
|
|
14.1 | The Audit Committee Charter will be reviewed annually by the Board of Directors and the Audit Committee to assess the adequacy of this Charter. |
|
|
15. | Independent Advisers |
|
|
15.1 | The Audit Committee shall have the power to retain legal, accounting or other advisors to assist the Committee. |
Composition of Audit Committee
As of March 20, 2019,18, 2020, the following are the members of the Audit Committee:
Name | Independent (1) | Financially Literate(2) | Education and Experience | |||
| Yes | Yes |
| Master’s degree in political science, and | ||
Gary Robertson | Yes | Yes | Certified Financial Planner and director of several reporting issuers | |||
Peter Bojtos | Yes | Yes | Professional Engineer with over |
_______________
________________
(1) | A member of an audit committee is independent if the member has no direct or indirect material relationship with the Company, which could, in the view of the Board of Directors, reasonably interfere with the exercise of a member’s independent judgment. |
(2) | An individual is financially literate if he has the ability to read and understand a set of financial statements that present a breadth of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements. |
Relevant Education and Experience
The relevant education and/or experience of each member of the Audit Committee is as follows:
Michael BaybakRonald Andrews:Mr. Baybak isAndrews has a graduateBachelor of Science degree in horticulture from ColumbiaWashington State University and attended Yale Law School.a Master’s degree in Political Science. Mr. BaybakAndrews is the founderowner and principaloperator of Michael BaybakAndrews Orchards and Company Inc. headquartered in Florida with affiliate offices in California. The company serves a diversified North American clientelesells and distributes agricultural chemicals and fertilizers. Mr. Andrews has acted as director and chairman of financial advisors and resources-sectorthe audit committee of several public companies. Mr. Baybak and the firm have acted for leading Canadianmining companies in the resource sector for more than thirty years.
70 |
Table of Contents |
Gary Robertson: Mr. Robertson is a Certified Financial Planner. He has worked in the financial industry for the past twenty years, and has acted as director of several public mining companies. Mr.Robertson has gained considerable financial and business experience through his involvement in various businesses in the mining industries.
Peter Bojtos: Mr. Bojtos is a professional engineer with over 4548 years of worldwide experience in the mining industry. He has an extensive background in corporate management as well as in all facets of the industry from exploration through the feasibility study stage to mine construction, operations and decommissioning. Mr. Bojtos graduated from the University of Leicester, England in 1972, following which he worked at open-pit iron-ore and underground base-metal and uranium mines in West Africa, the United States and Canada. Following that, he worked in Toronto for Kerr Addison Mines Ltd., a Noranda Group company, in increasingly senior management and officer positions for 12 years. From 1990 to 1992 he was the President & CEO of RFC Resource Finance Corp. developing a zinc mine in Washington State. From 1992 to 1993 Mr. Bojtos was the President & CEO of Consolidated Nevada Goldfields Corp. which operated precious metal mines in the United States. From 1993 to 1995 he was Chairman & CEO of Greenstone Resources Ltd, constructing and operating several gold mines in Central America. From 2017 to 2019 he was president of Pembridge Resources plc. He has served on over two dozen public company boards from 1996 to present.
Audit Committee Oversight
At no time since the commencement of the Company’s most recently completed financial year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board of Directors.
Reliance on Certain Exemptions
At no time since the commencement of the Company’s most recently completed financial year has the Company relied on the exemption in Section 2.4 of NI 52-110 (De Minimis Non-audit Services), or an exemption from NI 52-110, in whole or in part, granted under Part 8 of National Instrument 52-110.
Pre-Approval Policies and Procedures
The Audit Committee is authorized by the Board of Directors to review the performance of the Company’s external auditors and approve in advance provision of services other than auditing and to consider the independence of the external auditors, including a review of the range of services provided in the context of all consulting services bought by the Company. The Audit Committee is authorized to approve in writing any non-audit services or additional work which the Chairman of the Audit Committee deems is necessary, and the Chairman will notify the other members of the Audit Committee of such non-audit or additional work and the reasons for such non-audit work for the Committee’s consideration, and if thought fit, approval in writing.
External Auditor Service Fees
The fees billed by the Company’s external auditors in each of the last two fiscal years for audit and non-audit related services provided to the Company or its subsidiaries (if any) are as follows:
| Audit Fees |
|
|
|
| ||||
December 31, | C$253,000 | C$ | C$0 | C$37,250 | |||||
December 31, 2019 | C$266,000 | C$10,000 | C$0 | C$ | |||||
|
|
|
|
| 39,500 |
________________
(1) | Estimated |
(2) | Travel and expenses |
(3) | Preparation of corporate tax returns |
(4) | Procedures and letters related to financings |
Compensation Committee
The Compensation Committee of the Company is responsible for, among other things, evaluating the performance of the Company’s executive officers, determining or making recommendations to the Board with respect to the compensation of the Company’s executive officers, making recommendations to the Board with respect to director compensation, incentive compensation plans and equity-based plans, making recommendations to the Board with respect to the compensation policy for the employees of the Company or its subsidiaries and ensuring that the Company is in compliance with all legal requirements with respect to compensation disclosure. In performing its duties, the Compensation Committee has the authority to engage such advisors, including executive compensation consultants, as it considers necessary.
71 |
Table of Contents |
The Compensation Committee is currently composed of Peter Bojtos, Gary Robertson, and Michael Baybak,Ronald Andrews, all of whom are independent directors within the meaning set out in NI 58-101. All three members of the Compensation Committee are experienced participants in the business world who have sat on the board of directors of other companies, charities or business associations, in addition to the Board of the Company.
The recommendations of the Compensation Committee are based primarily on a benchmarking analysis which compares the Company’s pay levels and compensation practices with other reporting issuers of similar size, and which are active in the industry and/or market in which the Company competes for talent. This analysis provides valuable information that will allow the Company to make adjustments, if necessary, to attract and retain the best individuals to meet the Company’s needs and provide value to the Company’s shareholders. In formulating its recommendations, the Compensation Committee benchmarked the compensation of the Company’s directors and executive officers against companies with similar market capitalization, assets, and revenue including the following companies: Aquila Resources, Belo Sun Mining Corp., Chesapeake Gold Corp, Entrée Resources Ltd., Liberty Gold Corp, Vista Gold Corp. and Alio Gold, and several others.
The Compensation Committee has not engaged the services of independent compensation consultants to assist it in making recommendations to the Board with respect to director and executive officer compensation.
In performing its duties, the Compensation Committee has considered the implications of risks associated with the Company’s compensation policies and practices. At its present early stage of development and considering its present compensation policies, the Company currently has no compensation policies or practices that would encourage an executive officer or other individual to take inappropriate or excessive risks.
The charter of the Compensation Committee is available at the Company’s website at www.avino.com.
Governance and Nominating Committee
The Governance and Nominating Committee review/recommend matters to the Board with respect to the governance and nominating matters. In this regard, the purpose of the Governance and Nominating Committee is to:
i. | manage the corporate governance system for the Board; | |
ii. | assist the Board to fulfill its duty to meet the applicable legal, regulatory and (self-regulatory) business principles and | |
iii. | assist in the creation of a corporate culture and environment of integrity and accountability; | |
iv. | ||
monitor the quality of the relationship between the Board and management of the Company; | ||
v. | ||
review the Chief Executive | ||
vi. | ||
recommend to the Board nominees for appointment of the Board; | ||
vii. | ||
lead the | ||
viii. | ||
annually review and set an agenda of the Board on an ongoing basis. |
The Governance and Nominating Committee currently consists of three directors, Jasman Yee, Michael Baybak,Ronald Andrews, and Peter Bojtos, two of the three directors to be “independent” (Messrs. Bojtos and Baybak)Andrews).
The charter of the Governance and Nominating Committee is available at the Company’s website at www.avino.com.
D. Employees
As at December 31, 2018,2020, the Company had 48918 employees and contractors located in Mexico and 2212 employees and contractors in Canada. Certain of the Company’s senior management as well as administrative and corporate services are located in Canada and are contracted by the Company through their companies or through the Company’s cost sharing agreement for overhead and corporate services with Oniva International Services Corp. However, because these people are hired through companies, they are not technically deemed employees of the Company.
As at December 31, 2017, the Company had 510 employees and contractors located in Mexico, and as at December 31, 2016 the Company had 478 employees and contractors located in Mexico.
E. Share ownership
The following table sets forth the share ownership of the individuals referred to in “Compensation” as of March 20, 2019:18, 2021:
Name of Beneficial Owner |
| Number of Shares |
|
| Percent |
| ||
Michael Baybak |
|
| 299,700 |
|
| * |
| |
Gary Robertson |
|
| 502,549 |
|
| * |
| |
David Wolfin |
|
| 1,455,210 |
|
|
| 2.25 | % |
Jasman Yee |
|
| 282,520 |
|
| * |
| |
Peter Bojtos |
|
| 2,000 |
|
| * |
| |
J.C. Rodríguez |
|
| 202,500 |
|
| * |
| |
Malcolm Davidson |
|
| 113,000 |
|
| * |
| |
Nathan Harte |
|
| 625 |
|
| * |
|
_____________
Name of Beneficial Owner |
| Number of Shares |
|
| Percent |
| ||
Ronald Andrews |
|
| 35,000 |
|
| * |
| |
Gary Robertson |
|
| 429,216 |
|
| * |
| |
David Wolfin |
|
| 1,962,678 |
|
|
| 1.96 | % |
Jasman Yee |
|
| 314,520 |
|
| * |
| |
Peter Bojtos |
|
| 51,000 |
|
| * |
| |
J.C. Rodríguez |
|
| 416,500 |
|
| * |
| |
Nathan Harte |
|
| 29,175 |
|
| * |
| |
Peter Latta |
|
| 16,500 |
|
| * |
|
___________
*Less than one percent
72 | |
Outstanding Options
The following information, as of March 20, 201918, 2021 reflects outstanding options held by the individuals referred to in “Compensation”:
|
| No. of Shares |
|
| Date of Grant |
| Exercise Price* |
|
| Expiration Date | |||
David Wolfin |
|
| 100,000 |
|
| Sept 19, 2014 |
| $ | 1.90 |
|
| Sept 19, 2019 | |
President, CEO and Director |
|
| 25,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
|
|
| 250,000 |
|
| Sept. 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Malcolm Davidson |
|
| 50,000 |
|
| Sept 19, 2014 |
| $ | 1.90 |
|
| Sept 19, 2019 | |
Former CFO |
|
| 50,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
|
|
| 125,000 |
|
| Sept 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Nathan Harte |
|
| 25,000 |
|
| Sept 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
CFO |
|
| 50,000 |
|
| Aug 28, 2018 |
| $ | 1.30 |
|
| Aug 28, 2023 | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
J.C. Rodríguez |
|
| 50,000 |
|
| Sept 19, 2014 |
| $ | 1.90 |
|
| Sept 19, 2019 | |
COO |
|
| 50,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
|
|
| 125,000 |
|
| Sept. 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Michael Baybak Director |
|
| 75,000 |
|
| Sept 19, 2014 |
| $ | 1.90 |
|
| Sept 19, 2019 | |
|
|
| 75,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
|
|
| 100,000 |
|
| Sept. 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
| 20,000 |
|
| Aug 28, 2018 |
| $ | 1.30 |
|
| Aug 28, 2023 | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gary Robertson Director |
|
| 75,000 |
|
| Sept 19, 2014 |
| $ | 1.90 |
|
| Sept 19, 2019 | |
|
|
| 100,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
|
|
| 150,000 |
|
| Sept. 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Jasman Yee Director |
|
| 75,000 |
|
| Sept 9, 2014 |
| $ | 1.90 |
|
| Sept 19, 2019 | |
|
|
| 50,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
|
|
| 125,000 |
|
| Sept. 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Peter Bojtos** |
|
| 50,000 |
|
| Aug 28, 2018 |
| $ | 1.30 |
|
| Aug 28, 2023 |
_________________
|
|
|
| No. of Shares |
|
| Date of Grant |
| Exercise Price* |
|
| Expiration Date | |||
David Wolfin |
|
| 25,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
President, CEO and Director |
|
| 250,000 |
|
| Sept. 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
| 300,000 |
|
| Aug 4, 2020 |
| $ | 1.64 |
|
| Aug 4, 2025 | |
Nathan Harte |
|
| 25,000 |
|
| Sept 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
CFO |
|
| 48,000 |
|
| Aug 21, 2019 |
| $ | 0.79 |
|
| Aug 21, 2024 | |
|
|
| 150,000 |
|
| Aug 4, 2020 |
| $ | 1.64 |
|
| Aug 4, 2025 | |
J.C. Rodríguez |
|
| 50,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
COO |
|
| 125,000 |
|
| Sept. 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
| 200,000 |
|
| Aug 4, 2020 |
| $ | 1.64 |
|
| Aug 4, 2025 | |
Peter Latta** VP Technical Services |
|
| 100,000 |
|
| Aug 4, 2020 |
| $ | 1.64 |
|
| Aug 4, 2025 | |
Gary Robertson |
|
| 100,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
Director |
|
| 150,000 |
|
| Sept. 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
| 100,000 |
|
| Aug 4, 2020 |
| $ | 1.64 |
|
| Aug 4, 2025 | |
Jasman Yee |
|
| 50,000 |
|
| Sept 2, 2016 |
| $ | 2.95 |
|
| Sept 2, 2021 | |
Director |
|
| 125,000 |
|
| Sept. 20, 2017 |
| $ | 1.98 |
|
| Sept. 20, 2022 | |
|
|
| 100,000 |
|
| Aug 4, 2020 |
| $ | 1.64 |
|
| Aug 4, 2025 | |
Ronald Andrews |
|
| 100,000 |
|
| Aug 4, 2020 |
| $ | 1.64 |
|
| Aug 4, 2025 | |
Peter Bojtos |
|
| 50,000 |
|
| Aug 28, 2018 |
| $ | 1.30 |
|
| Aug 28, 2023 | |
|
|
| 100,000 |
|
| Aug 4, 2020 |
| $ | 1.64 |
|
| Aug 4, 2025 |
_____________
*The option exercise price is quoted in Canadian dollars as they relate specifically to the Canadian dollar share price as quoted on the Toronto Stock Exchange.
** Mr. Peter Latta was appointed VP Technical Services on October 20, 2020.
Item 7. Major Shareholders and Related Party Transactions
A. Major shareholders
To the knowledge of the Company, it is not directly or indirectly owned or controlled by any other corporation or by the Canadian Government, or any foreign government, or by any other natural or legal person.
As of March 20, 2019,18, 2021, to the knowledge of the Company, no person owned more than five (5%) percent of the outstanding shares of each class of the Company’s voting securities.
As of March 20, 2019,18, 2021, there were •common99,795,244 common shares issued and outstanding. Of those common shares issued and outstanding, 34,330,96948,016,197 common shares were held by 33174 registered shareholders whose addresses were in Canada.
Table of Contents |
B. Related party transactions
All related party transactions are recorded at the exchange amount which is the amount agreed to by the Company and the related party.
| i) | The Company transacts with companies related to Avino’s directors or officers. All amounts payable are non-interest bearing and due on demand. Advances to Oniva International Services Corp. (“Oniva”) of |
|
| December 31, 2018 |
|
| December 31, 2017 |
| ||
Directors’ fees |
| $ | 47,000 |
|
| $ | 42,000 |
|
Oniva International Services Corp. |
|
| 107,000 |
|
|
| 139,000 |
|
Jasman Yee & Associates, Inc. |
|
| 3,000 |
|
|
| 6,000 |
|
|
| $ | 157,000 |
|
| $ | 187,000 |
|
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
Directors’ fees |
| $ | 48,000 |
|
| $ | 51,000 |
|
Oniva International Services Corp. |
|
| 106,000 |
|
|
| 105,000 |
|
|
| $ | 154,000 |
|
| $ | 156,000 |
|
| ii) | The Company has a cost sharing agreement to reimburse Oniva for its expenses and to pay Oniva a percentage fee. Pursuant to the cost sharing agreement, the Company will reimburse Oniva for the Company’s percentage of overhead and corporate expenses, and for out-of-pocket expenses incurred on behalf of the Company. David Wolfin, President & CEO, and a director of the Company is the sole owner of Oniva. The cost sharing agreement may be terminated with one-month notice by either party without penalty. The transactions with Oniva during the years ended December 31, are summarized below: |
|
| 2018 |
|
| 2017 |
|
| 2016 |
| |||
Salaries and benefits |
| $ | 594,000 |
|
| $ | 450,000 |
|
| $ | 297,000 |
|
Office and miscellaneous |
|
| 560,000 |
|
|
| 567,000 |
|
|
| 507,000 |
|
Exploration and evaluation assets |
|
| 353,000 |
|
|
| 352,000 |
|
|
| 248,000 |
|
|
| $ | 1,507,000 |
|
| $ | 1,369,000 |
|
| $ | 1,052,000 |
|
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Salaries and benefits |
| $ | 636,000 |
|
| $ | 665,000 |
|
| $ | 594,000 |
|
Office and miscellaneous |
|
| 290,000 |
|
|
| 322,000 |
|
|
| 560,000 |
|
Exploration and evaluation assets |
|
| - |
|
|
| 206,000 |
|
|
| 353,000 |
|
|
| $ | 926,000 |
|
| $ | 1,193,000 |
|
| $ | 1,507,000 |
|
| iii) | For services provided to the Company as President and Chief Executive Officer, the Company pays Intermark Capital Corporation (“ICC”), a company controlled by David Wolfin, for consulting services. For the years ended December 31, |
The Company pays Jasman Yee & Associates, Inc. (“JYAI”), a company whose managing director is Jasman Yee, a director of the Company, for operational, managerial, metallurgical, engineering and consulting services related to the Company’s activities. For the years ended December 31, 2018, 2017,2020, 2019, and 2016,2018, the Company paid $66,000, $80,000,$31,000, $33,000, and $140,000,$66,000, respectively to JYAI.
The Company pays Wear Wolfin Designs Ltd. (“WWD”), a company whose director is the brother-in-law of David Wolfin, President, Chief Executive Officer and a director of the Company, for financial consulting services related to ongoing consultation with stakeholders and license holders. For the years ended December 31, 2018, 20172020, 2019 and 2016,2018, the Company paid $12,000, $23,000,$Nil, $Nil, and $23,000,$12,000, respectively to WWD.
C. Interests of experts and counsel
Not Applicable.
A. Consolidated Statements and Other Financial Information
See ‘‘Item 18. Financial Statements’’ for our Annual Audited Consolidated Financial Statements, related notes and other financial information filed with this annual report on Form 20-F.
Dividend Policy
The Company has never paid any dividends and does not intend to in the near future.
B. Significant Changes
Except as otherwise disclosed in this annual report, there have been no material changes in our financial position, operations or cash flows since December 31, 2018.2020.
74 |
Table of Contents |
A. Offer and listing details
Our common shares are listed on the NYSE American and the TSX under the symbol ASM. The Company graduated from the TSX-V on January 8, 2018. The following sets forth the high and low prices expressed in U.S. Dollars on the NYSE American and in Canadian Dollars on the TSX and TSX-V for each quarter forNo suspensions regarding our common shares have occurred during the past two fiscal years:3 years.
|
| NYSE-AMERICAN |
|
| TSX and TSX-V |
| ||||||||||
|
| (United States Dollars) |
|
| (Canadian Dollars) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| High |
|
| Low |
|
| High |
|
| Low |
| ||||
For the Quarter Ended |
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2018 |
|
| 0.73 |
|
|
| 0.50 |
|
|
| 0.95 |
|
|
| 0.65 |
|
September 30, 2018 |
|
| 1.31 |
|
|
| 0.56 |
|
|
| 1.74 |
|
|
| 0.74 |
|
June 30, 2018 |
|
| 1.55 |
|
|
| 1.20 |
|
|
| 1.95 |
|
|
| 1.59 |
|
March 31, 2018 |
|
| 1.61 |
|
|
| 1.21 |
|
|
| 1.99 |
|
|
| 1.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
| High |
|
| Low |
|
| High |
|
| Low |
| ||||
December 31, 2017 |
|
| 1.62 |
|
|
| 1.14 |
|
|
| 2.04 |
|
|
| 1.44 |
|
September 30, 2017 |
|
| 1.89 |
|
|
| 1.41 |
|
|
| 2.35 |
|
|
| 1.85 |
|
June 30, 2017 |
|
| 1.90 |
|
|
| 1.39 |
|
|
| 2.53 |
|
|
| 1.85 |
|
March 31, 2017 |
|
| 2.13 |
|
|
| 1.32 |
|
|
| 2.80 |
|
|
| 1.75 |
|
B. Plan of distribution
Not Applicable.
C. Markets
On January 8, 2018, the Company graduated from the TSX-V to the TSX where our common shares are listed under the symbol ASM.“ASM”. We are also listed on the Berlin and Frankfurt Stock Exchanges under the symbol GV6,“GV6”, and on the NYSE American under the symbol ASM.“ASM”.
D. Selling shareholders
Not Applicable.
E. Dilution
Not Applicable.
F. Expenses of the issue
Not Applicable.
Item 10. Additional Information
A. Share capital
Not Applicable.
B. Memorandum and articles of association
Common Shares
All issued and outstanding common shares are fully paid and non-assessable. Each holder of record of common shares is entitled to one vote for each common share so held on all matters requiring a vote of shareholders, including the election of directors. The holders of common shares will be entitled to dividends on a pro-rata basis, if and when as declared by the board of directors. There are no preferences, conversion rights, pre-emptive rights, subscription rights, or restrictions or transfers attached to the common shares. In the event of liquidation, dissolution, or winding up of the Company, the holders of common shares are entitled to participate in the assets of the Company available for distribution after satisfaction of the claims of creditors. The Company is authorized to issue an unlimited number of common shares.
Take Over Bid Regulations
On May 9, 2016, amendments came into effect in Canada under National Instrument 62-104, Take-Over bids and Issuer Bids (the “Instrument”), which require all non-exempt take-over bids of a Canadian reporting issuer (“Bids”) to be subject to the following tender requirements:
50% Minimum Tender Requirement: Bids will be subject to a mandatory minimum tender requirement of more than 50% of the outstanding securities of the class of securities that are subject to the Bid, excluding those securities beneficially owned, or over which control or direction is exercised, by the offeror and its joint actors.
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105 Day Minimum Bid Period: Bids will be required to remain open for a minimum period of 105 days, subject to two exceptions. Firstly, the target issuer’s board of directors may issue a “deposit period news release” for a proposed or Bid, which allows an initial bid period that is shorter than 105 days, but not less than 35 days. In result, if this action is taken by the Board, then any other outstanding or subsequent Bids will also be entitled to the shorter minimum deposit period calculated from the date that the other Bid is made. Secondly, if an issuer issues a news release that it has entered into an “alternate transaction” (i.e., a friendly change of control transaction that is not a Bid, such as a plan of arrangement), then any other outstanding or subsequent Bids will be entitled to a minimum 35 day deposit period calculated from the date that other Bid is made.
10 Day Extension Requirement: Following a successful Bid where the minimum tender requirement has been met, as well as the satisfaction or waiver of all other Bid terms and conditions, Bids will be required to be extended for at least an additional 10-day period to permit shareholders who did not tender time to do so on the same terms.
Under the amended Instrument, an offeror who makes a Bid which is open for 105 days, together with a further 10-day extension, will still be able to avail itself of the compulsory acquisition procedure provisions under applicable Canadian corporate legislation. These provisions permit the offeror to acquire on the same terms as contained in the Bid, the remaining shares held by any minority shareholders who did not tender, within 120 days of the launch of the Bid, if at least 90% of the total shares that were subject to the Bid have been acquired.
Powers and Duties of Directors
The directors shall manage or supervise the management of the affairs and business of the Company and shall have authority to exercise all such powers of the Company as are not, by the British Columbia Business Corporations Act or by the Memorandum or the Articles, required to be exercised by the Company in a general meeting.
Directors will serve as such until the next annual meeting. In general, a director who is, in any way, directly or indirectly interested in an existing or proposed contract or transaction with the Company whereby a duty or interest might be created to conflict with his duty or interest as a director, shall declare the nature and extent of his interest in such contract or transaction or the conflict or potential conflict with his duty and interest as a director. Such director shall not vote in respect of any such contract or transaction with the Company in which he is interested and if he shall do so, his vote shall not be counted, but he shall be counted in the quorum present at the meeting at which such vote is taken. However, notwithstanding the foregoing, directors shall have the right to vote on determining the remuneration of the directors.
The directors may from time to time on behalf of the Company: (a) borrow money in such manner and amount from such sources and upon such terms and conditions as they think fit; (b) issue bonds, debentures and other debt obligations; and (c) mortgage, charge or give other security on the whole or any part of the property and assets of the Company.
The directors of the Company must be persons of the full age of 18 years. There is no minimum share ownership to be a Director. No person shall be a director of the Company who is not capable of managing their own affairs; is an undischarged bankrupt; convicted of an offense in connection with the promotion, formation or management of a corporation or involved in fraud within the last five years; or a person that has had a registration in any capacity under the British Columbia Securities Act or the British Columbia Mortgage Brokers Act cancelled within the last five years.
Shareholders
An annual general meeting shall be held once in every calendar year at such time and place as may be determined by the directors. A quorum at an annual general meeting and special meeting shall be two shareholders or one or more proxy holders representing two shareholders, or one shareholder and a proxy holder representing another shareholder. There is no limitation imposed by the laws of Canada or by the charter or other constituent documents of the Company on the right of a non-resident to hold or vote the common shares, other than as provided in the Investment Canada Act, referred to as the “Investment Act”, discussed below under “Item 10. Additional Information, D. Exchange Controls”
In accordance with British Columbia law, directors shall be elected by an “ordinary resolution” which means: (a) a resolution passed by the shareholders of the Company at a general meeting by a simple majority of the votes cast in person or by proxy; or (b) a resolution that has been submitted to the shareholders of the Company who would have been entitled to vote on it in person or by proxy at a general meeting of the Company and that has been consented to in writing by such shareholders of the Company holding shares carrying not less than the requisite majority of the votes entitled to be cast on it.
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Under British Columbia law certain items such as an amendment to the Company’s articles or entering into a merger requires approval by a special resolution which means: (a) a resolution passed by a majority of not less than the requisite majority of the votes cast by the shareholders of the Company who, being entitled to do so, vote in person or by proxy at a general meeting of the company; or (b) a resolution consented to in writing by every shareholder of the Company who would have been entitled to vote in person or by proxy at a general meeting of the Company, and a resolution so consented to is deemed to be a special resolution passed at a general meeting of the Company.
C. Material contracts
| 1. | |
Sales Agreement dated | ||
| ||
2. | Option Agreement dated August 12, 2020 entered into between the Company and Silver Wolf Exploration Ltd. regarding the granting of an option to purchase the Ana Maria and El Laberinto properties to Silver Wolf Exploration Ltd. (formerly, Gray Rock Resources Ltd.); | |
3. | Change Control Agreement dated May 30, 2019 with Peter Latta, VP Technical Services of the Company; | |
4. | Share Purchase Agreement dated November |
D. Exchange controls
Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Issuer’s securities, except as discussed below under “Item 10. Additional Information, E. Taxation.”
There are no limitations under the laws of Canada or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of “control” of the Company by a “non-Canadian”. The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. “Non-Canadian” generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.
E. Taxation
Canadian Federal Income Tax Consequences
The following summarizes the principal Canadian federal income tax consequences applicable to the holding and disposition of common shares in the capital of the Company by a United States resident, and who holds common shares solely as capital property, referred to as a “U.S. Holder”. This summary is based on the current provisions of the Income Tax Act (Canada), referred to as the “Tax Act”, the regulations thereunder, all amendments thereto publicly proposed by the government of Canada, the published administrative practices of Revenue Canada, Customs, Excise and Taxation, and the current provisions of the Canada‑United States Income Tax Convention, 1980, as amended, referred to as the “Treaty”. Except as otherwise expressly provided, this summary does not take into account any provincial, territorial or foreign (including without limitation, any United States) tax law or treaty. It has been assumed that all currently proposed amendments will be enacted substantially as proposed and that there is no other relevant change in any governing law or practice, although no assurance can be given in these respects.
Each U.S. Holder is advised to obtain tax and legal advice applicable to such U.S. Holder’s particular circumstances.
Every U.S. Holder is liable to pay a Canadian withholding tax on every dividend that is or is deemed to be paid or credited to the U.S. Holder on the U.S. Holder’s common shares. The statutory rate of withholding tax is 25% of the gross amount of the dividend paid. The Treaty reduces the statutory rate with respect to dividends paid to a U.S. Holder for the purposes of the Treaty. Where applicable, the general rate of withholding tax under the Treaty is 15% of the gross amount of the dividend. The Company is required to withhold the applicable tax from the dividend payable to the U.S. Holder, and to remit the tax to the Receiver General of Canada for the account of the U.S. Holder.
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Pursuant to the Tax Act, a U.S. Holder will not be subject to Canadian capital gains tax on any capital gain realized on an actual or deemed disposition of a common share, including a deemed disposition on death, provided that the U.S. Holder did not hold the common share as capital property used in carrying on a business in Canada, and that neither the U.S. Holder nor persons with whom the U.S. Holder did not deal at arms-length (alone or together) owned or had the right or an option to acquire 25% or more of the issued shares of any class of the Company at any time in the five years immediately preceding the disposition.
United States Federal Income Tax Consequences
The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from the ownership and disposition of the common shares. This summary applies only to U.S. Holders who hold common shares as capital assets (generally, property held for investment).
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder as a result of the ownership and disposition of common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including specific tax consequences to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any particular U.S. Holder. In addition, this summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. Medicare contribution, U.S. state and local, or non-U.S. tax consequences of the acquisition, ownership or disposition of common shares. Except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each U.S. Holder should consult its own tax advisor regarding all U.S. federal, U.S. state and local and non-U.S. tax consequences of the ownership and disposition of common shares.
No opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the ownership or disposition of common shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, any position taken in this summary. In addition, because the authorities upon which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.
Scope of This Disclosure
Authorities This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date hereof. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.
U.S. Holders. For purposes of this summary, the term “U.S. Holder” means a beneficial owner of common shares that is for U.S. federal income tax purposes:
| · | An individual who is a citizen or resident of the U.S.; |
|
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| · | A corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S., any state thereof or the District of Columbia; |
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| · | An estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
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| · | A trust that (a) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (b) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. |
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Non-U.S. Holders. For purposes of this summary, a “non-U.S. Holder” is a beneficial owner of common shares that is not a partnership (or other “pass-through” entity) for U.S. federal income tax purposes and is not a U.S. Holder. This summary does not address the U.S. federal income tax considerations applicable to non-U.S. Holders arising from the ownership or disposition of common shares.
Accordingly, a non-U.S. Holder should consult its own tax advisor regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences (including the potential application of and operation of any income tax treaties) relating to the purchase of the common shares pursuant to the Offering and the ownership or disposition of common shares.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations of ownership or disposition of common shares by U.S. Holders that are subject to special provisions under the Code, including, but not limited to, the following: (a) tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) broker-dealers, dealers, or traders in securities or currencies that elect to apply a “mark-to-market” accounting method; (d) U.S. Holders that have a “functional currency” other than the U.S. dollar; (e) U.S. Holders that own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) U.S. Holders that acquire common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) U.S. Holders that hold common shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); (h) U.S. Holders that own directly, indirectly, or by attribution, 10% or more, by voting power or value, of the outstanding stock of the Company; and (i) U.S. Holders subject to Section 451(b) of the Code. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Tax Act; (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold common shares in connection with carrying on a business in Canada; (d) persons whose common shares constitute “taxable Canadian property” under the Tax Act; or (e) persons that have a permanent establishment in Canada for purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their own tax advisors regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences (including the potential application and operation of any income tax treaties) relating to the acquisition, ownership, or disposition of common shares.
If an entity or arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds common shares, the U.S. federal income tax consequences to such partnership and the partners (or other owners) of such partnership of the ownership, or disposition of the common shares generally will depend on the activities of the partnership and the status of such partners (or other owners). This summary does not address the U.S. federal income tax consequences for any such partner or partnership (or other “pass-through” entity or its owners). Owners of entities and arrangements that are classified as partnerships (or other “pass-through” entities) for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership or disposition of common shares.
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Sale or Other Taxable Disposition of Common Shares
Subject to the PFIC rules discussed below, upon the sale or other taxable disposition of common shares, a U.S. Holder generally will recognize a capital gain or loss in an amount equal to the difference between the amount of cash plus the fair market value of any property received and such U.S. Holder’s tax basis in the common shares sold or otherwise disposed of. Such capital gain or loss will generally be a long-term capital gain or loss if, at the time of the sale or other taxable disposition, the U.S. Holder’s holding period for the common shares is more than one year. Preferential tax rates apply to long-term capital gains of non-corporate U.S. Holders. Deductions for capital losses are subject to significant limitations under the Code. A U.S. Holder’s tax basis in common shares generally will be such U.S. Holder’s U.S. dollar cost for such common shares.
Medicare Tax
Certain U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% tax on all or a portion of their net investment income, which may include their gross dividend income and net gains from the disposition of our ordinary shares.
PFIC Status of the Company
Because the Company is producing revenue from its mining operations, the Company does not believe that it was classified as a PFIC for its taxable year ended December 31, 2018.2020. However, the Company has not performed an analysis of whether or not it will be deemed a PFIC for its current taxable year. If the Company is or becomes a PFIC, the foregoing description of the U.S. federal income tax consequences to U.S. Holders of the acquisition, ownership and disposition of Common Shares will be different. The U.S. federal income tax consequences of owning and disposing of common shares if the Company is or becomes a PFIC are described below under the heading “Tax Consequences if the Company is a PFIC.”
A non-U.S. corporation is a PFIC for each tax year in which (i) 75% or more of its gross income is passive income (as defined for U.S. federal income tax purposes) (the “income test”) or (ii) 50% or more (by value) of its assets (based on an average of the quarterly values of the assets during such tax year) either produce or are held for the production of passive income (the “asset test”). For purposes of the PFIC provisions, “gross income” generally includes sales revenues less cost of goods sold, plus income from investments and from incidental or other operations or sources, and “passive income” generally includes dividends, interest, certain rents and royalties, certain gains from commodities or securities transactions and the excess of gains over losses from the disposition of certain assets which product passive income. If a non-U.S. corporation owns at least 25% (by value) of the stock of another corporation, the non-U.S. corporation is treated, for purposes of the income test and asset test, as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporation’s income.
Under certain attribution and indirect ownership rules, if the Company is a PFIC, U.S. Holders will generally be deemed to own their proportionate share of the Company’s direct or indirect equity interest in any company that is also a PFIC (a “Subsidiary PFIC”), and will be subject to U.S. federal income tax on their proportionate share of (a) any “excess distributions,” as described below, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of common shares. Accordingly, U.S. Holders should be aware that they could be subject to tax even if no distributions are received and no redemptions or other dispositions of the Company’s common shares are made.
The Company does not believe that it was classified as a PFIC for its taxable year ended December 31, 2018,2020, but has not made a determination as to whether it will or will not be a PFIC in the current tax year or in subsequent tax years. The determination of PFIC status is inherently factual, is subject to a number of uncertainties, and can be determined only annually at the close of the tax year in question. Additionally, the analysis depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. There can be no assurance that the Company will or will not be determined to be a PFIC for the current tax year or any prior or future tax year, and no opinion of legal counsel or ruling from the IRS concerning the status of the Company as a PFIC has been obtained or will be requested. U.S. Holders should consult their own U.S. tax advisors regarding the PFIC status of the Company.
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Tax Consequences if the Company is a PFIC
If the Company is a PFIC for any tax year during which a U.S. Holder holds common shares, special rules may increase such U.S. Holder’s U.S. federal income tax liability with respect to the ownership and disposition of such common shares. If the Company is a PFIC for any tax year during which a U.S. Holder owns common shares, the Company will be treated as a PFIC with respect to such U.S. Holder for that tax year and for all subsequent tax years, regardless of whether the Company meets the income test or the asset test for such subsequent tax years, unless the U.S. Holder makes a “deemed sale” election with respect to the common shares. If the election is made, the U.S. Holder will be deemed to sell the common shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder’s common shares would not be treated as shares of a PFIC unless the Company subsequently becomes a PFIC. U.S. Holders should consult their own U.S. tax advisors regarding the availability and desirability of a deemed sale election.
Under the default PFIC rules:
| · | Any gain realized on the sale or other disposition (including dispositions and certain other events that would not otherwise be treated as taxable events) of common shares (including an indirect disposition of the stock of any Subsidiary PFIC) and any “excess distribution” (defined as a distribution to the extent it (together with all other distributions received in the relevant tax year) exceeds 125% of the average annual distribution received during the shorter of the preceding three years or the U.S. Holder’s holding period for the common shares) received on common shares or with respect to the stock of a Subsidiary PFIC will be allocated ratably to each day of such U.S. Holder’s holding period for the common shares; |
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| · | The amount allocated to the current tax year and any year prior to the first year in which the Company was a PFIC will be taxed as ordinary income in the current year; |
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| · | The amount allocated to each of the other tax years (the “Prior PFIC Years”) will be subject to tax at the highest ordinary income tax rate in effect for the applicable class of taxpayer for that year; and |
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| · | An interest charge will be imposed with respect to the resulting tax attributable to each Prior PFIC Year. |
A U.S. Holder that makes a timely and effective “mark-to-market” election under Section 1296 of the Code (a “Mark-to-Market Election”) or a timely and effective election to treat the Company and each Subsidiary PFIC as a “qualified electing fund” (a “QEF”) under Section 1295 of the Code (a “QEF Election”) may generally mitigate or avoid the default PFIC rules described above with respect to common shares U.S. Holders should be aware that there can be no assurance that the Company has satisfied or will satisfy the recordkeeping requirements that apply to a QEF or that the Company has supplied or will supply U.S. Holders with information such U.S. Holders require to report under the QEF rules in the event that the Company is a PFIC for any tax year.
A timely and effective QEF Election requires a U.S. Holder to include currently in gross income each year its pro rata share of the Company’s ordinary earnings and net capital gains, regardless of whether such earnings and gains are actually distributed. Thus, a U.S. Holder could have a tax liability with respect to such ordinary earnings or gains without a corresponding receipt of cash from the Company. If the Company is a QEF with respect to a U.S. Holder, the U.S. Holder’s basis in the common shares will be increased to reflect the amount of the taxed but undistributed income. Distributions of income that had previously been taxed will result in a corresponding reduction of basis in the common shares and will not be taxed again as a distribution to a U.S. Holder. Taxable gains on the disposition of common shares by a U.S. Holder that has made a timely and effective QEF Election are generally capital gains. A U.S. Holder must make a QEF Election for the Company and each Subsidiary PFIC if it wishes to have this treatment. To make a QEF Election, a U.S. Holder will need to have an annual information statement from the Company setting forth the ordinary earnings and net capital gains for the year and the Company may not provide this statement, in which case a QEF Election cannot be made. In general, a U.S. Holder must make a QEF Election on or before the due date for filing its income tax return for the first year to which the QEF Election will apply. Under applicable Treasury Regulations, a U.S. Holder will be permitted to make retroactive elections in particular, but limited, circumstances, including if it had a reasonable belief that the Company was not a PFIC and did not file a protective election. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs.
Each U.S. Holder should consult its own tax advisor regarding the availability and desirability of, and procedure for, making a timely and effective QEF Election (including a “pedigreed” QEF election where necessary) for the Company and any Subsidiary PFIC.
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Alternatively, a Mark-to-Market Election may be made with respect to “marketable stock” in a PFIC if which is stock that is “regularly traded” on a “qualified exchange or other market” (within the meaning of the Code and the applicable U.S. Treasury Regulations). A class of stock that is traded on one or more qualified exchanges or other markets is considered to be “regularly traded” for any calendar year during which such class of stock is traded in other than de minimis quantities on at least 15 days during each calendar quarter. If the common shares are considered to be “regularly traded” within this meaning, then a U.S. Holder generally will be eligible to make a Mark-to-Market Election with respect to its common shares. However, there is no assurance that the common shares will be or remain “regularly traded” for this purpose. A Mark-to-Market Election may not be made with respect to the stock of any Subsidiary PFIC. Hence, a Mark-to-Market Election will not be effective to eliminate the application of the default PFIC rules, described above, with respect to deemed dispositions of Subsidiary PFIC stock, or excess distributions with respect to a Subsidiary PFIC.
A U.S. Holder that makes a timely and effective Mark-to-Market Election with respect to common shares generally will be required to recognize as ordinary income in each tax year in which the Company is a PFIC an amount equal to the excess, if any, of the fair market value of such shares as of the close of such taxable year over the U.S. Holder’s adjusted tax basis in such shares as of the close of such taxable year. A U.S. Holder’s adjusted tax basis in the common shares generally will be increased by the amount of ordinary income recognized with respect to such shares. If the U.S. Holder’s adjusted tax basis in the common shares as of the close of a tax year exceeds the fair market value of such shares as of the close of such taxable year, the U.S. Holder generally will recognize an ordinary loss, but only to the extent of net mark-to-market income recognized with respect to such shares for all prior taxable years. A U.S. Holder’s adjusted tax basis in its common shares generally will be decreased by the amount of ordinary loss recognized with respect to such shares. Any gain recognized upon a disposition of the common shares generally will be treated as ordinary income, and any loss recognized upon a disposition generally will be treated as an ordinary loss to the extent of net mark-to-market income recognized for all prior taxable years. Any loss recognized in excess thereof will be taxed as a capital loss. Capital losses are subject to significant limitations under the Code.
Each U.S. Holder should consult its own tax advisor regarding the availability and desirability of, and procedure for, making a timely and effective Mark-to-Market Election with respect to the common shares.
Foreign Tax Credit
A U.S. Holder that pays (whether directly or through withholding) Canadian income tax in connection with the ownership or disposition of common shares may (under certain circumstances) be entitled to receive either a deduction or a credit for such Canadian income tax paid generally at the election of such U.S. Holder. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all creditable foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.
Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” Generally, dividends paid by a non-U.S. corporation should be treated as foreign source for this purpose, and gains recognized on the sale of securities of a non-U.S. corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty and if an election is properly made under the Code. However, the amount of a distribution with respect to the common shares that is treated as a “dividend” may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.
Special rules apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution, including a constructive distribution, from a PFIC. Subject to such special rules, non-U.S. taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult its own tax advisor regarding their application to the U.S. Holder.
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Receipt of Foreign Currency
The amount of any distribution or proceeds paid in Canadian dollars to a U.S. Holder in connection with the ownership of common shares, or on the sale or other taxable disposition of common shares will be included in the gross income of a U.S. Holder as translated into U.S. dollars calculated by reference to the exchange rate prevailing on the date of actual or constructive receipt of the payment, regardless of whether the Canadian dollars are converted into U.S. dollars at that time. If the Canadian dollars received are not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the Canadian dollars equal to their U.S. dollar value on the date of receipt. Any U.S. Holder who receives payment in Canadian dollars and engages in a subsequent conversion or other disposition of the Canadian dollars may have a foreign currency exchange gain or loss that would generally be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method with respect to foreign currency.
Each U.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of Canadian dollars.
Information Reporting; Backup Withholding
Under U.S. federal income tax law, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a non-U.S. corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain threshold amounts. The definition of “specified foreign financial assets” includes not only financial accounts maintained in non-U.S. financial institutions, but also, if held for investment and not in an account maintained by certain financial institutions, any stock or security issued by a non-U.S. person, any financial instrument or contract that has an issuer or counterparty other than a U.S. person and any interest in a non-U.S. entity. A U.S. Holder may be subject to these reporting requirements unless such U.S. Holder’s common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns on IRS Form 8938, and, if applicable, filing obligations relating to the PFIC rules, including possible reporting on an IRS Form 8621.
Payments made within the U.S. or by a U.S. payor or U.S. middleman of (a) distributions on the common shares, and (b) proceeds arising from the sale or other taxable disposition of common shares generally will be subject to information reporting. In addition, backup withholding, currently at a rate of 24%, may apply to such payments if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding. Certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner. The information reporting and backup withholding rules may apply even if, under the Canada-U.S. Tax Convention, payments are eligible for a reduced withholding rate.
The discussion of reporting requirements set forth above is not intended to constitute an exhaustive description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisor regarding the information reporting and backup withholding rules.
The Effect Of Comprehensive U.S. Tax Reform Legislation On The Company, Whether Adverse Or Favorable, Is Uncertain.
On December 22, 2017, President Trump signed into law H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (informally titled the “Tax Cuts and Jobs Act”). Among a number of significant changes to the U.S. federal income tax rules, the Tax Cuts and Jobs Act reduces the marginal U.S. corporate income tax rate from 35% to 21%, limits the deduction for net interest expense, shifts the United States toward a more territorial tax system, and imposes new taxes to combat erosion of the U.S. federal income tax base. The effect of the Tax Cuts and Jobs Act on the Company and its subsidiaries, whether adverse or favorable, is uncertain, and may not become evident for some period of time. Each U.S. Holder is urged to consult its own tax adviser regarding the implications of the Tax Cuts and Jobs Act of holding of our common shares.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL U.S. TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE OWNERSHIP, EXERCISE OR DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR CIRCUMSTANCES.
F. Dividends and paying agents
Not Applicable.
G. Statement by experts
Not Applicable.
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H. Documents on display
The Company files annual reports and furnishes other information with the SEC via Edgar. You may read and copyreview any document that we file at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 orSEC by accessing the Commission’s website (http://www.sec.gov). The Company also files its annual reports and other information with the Canadian Securities Administrators via SEDAR (www.sedar.com).
Our principal executive office is located at Suite 900, 570 Granville Street, Vancouver, British Columbia V6C 3P1, Canada. Our telephone number is (604) 682-3701. Our website is located at www.avino.com. Information contained on, or that can be accessed through, our website is not part of this Annual Report.
I. Subsidiary information
Discussion regarding our subsidiaries is contained in Item 4.B., Information on the Company; Business Overview.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
The Audit Committee of our board of directors regularly reviews foreign exchange and interest rates. Our policy prohibits the use of financial instruments for speculative purposes. See Note 24,23, Financial Instruments, in our annual audited consolidated Financial Statements contained in this annual report on Form 20-F for quantitative and qualitative disclosure of market risk.
Item 12. Description of Securities Other than Equity Securities
None.
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Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
None
Item 15. Controls and Procedures
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our principal executive officer and principal financial officer evaluated our Company’s disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this annual report on Form 20-F. Based on the evaluation, these officers concluded that as of the end of the period covered by this Annual Report on Form 20-F, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by our Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Securities and Exchange Commission. These disclosure controls and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to our Company’s management, including our Company’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected.
Management’s Report on Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our Company. Our Company’s internal control over financial reporting is designed to provide reasonable assurance, not absolute assurance, regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards, and that our Company’s receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
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For the purposes of Exchange Act Rules 13a-15(e), 13a-15(f), 15d-15(e), and 15d-15(f), management, including our principal executive officer and principal financial officer, conducted an evaluation of the design and operation of our internal controls over financial reporting as of December 31, 2018,2020, based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal controls over financial reporting were effective as at December 31, 2018.2020.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Because the Company is an Emerging Growth company, the Company has elected to defer its Section 404(b) requirements and the Company’s management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.reporting because we are a non-accelerated filer.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Changes in Internal Controls over Financial Reporting
Based on the evaluation as at December 31, 2018,2020, management, including our principal executive officer and principal financial officer, have concluded that there were no material changes in the design of internal controls from the last annual reporting date of December 31, 2017.2020.
Item 16A. Audit Committee Financial Expert
The Board determined that Mr. Gary Robertson, and Mr. Peter Bojtos, and Mr. Ronald Andrews are qualified as Audit Committee Financial Experts. Mr. Robertson, Mr. Bojtos, and Mr. BojtosRonald Andrews are independent as determined by the NYSE American rules.
The Company has adopted a Code of Ethics that applies to all directors, officers, consultants and employees of the Company.
This Code of Ethics covers a wide range of financial and non-financial business practices and procedures. This Code of Ethics does not cover every issue that may arise, but it sets out basic principles to guide all executive and staff of the Company. If a law or regulation conflicts with a policy in this Code of Ethics, then personnel must comply with such law or regulation. If any person has any questions about this Code of Ethics or potential conflicts with a law or regulation, they should refer to the Company’s Whistleblower Policy.
All executive and staff should recognize that they hold an important role in the overall corporate governance and ethical standards of the Company. Each person is capable and empowered to ensure that the Company’s,Company's, its shareholders’shareholders' and other stakeholders’stakeholders' interests are appropriately balanced, protected and preserved. Accordingly, the Code of Ethics provides principles to which all personnel are expected to adhere and advocate. The Code of Ethics embodies rules regarding individual and peer responsibilities, as well as responsibilities to the Company, the shareholders, other stakeholders, and the public generally.
A copy of the Code of Ethics and Whistleblower Policy has been filed as an exhibit with the SEC and are available at the Company’s website at www.avino.com.
. You may obtain a copy of the Code of Ethics and Whistleblower Policy upon request by contacting the Company’s Corporate Secretary at 570 Granville Street, Suite 900, Vancouver, British Columbia V6C 3P1, Canada.
Item 16C. Principal Accountant Fees and Services
The Company’s independent registered public accounting firm for the years ended December 31, 20182020 and 20172019 was Manning Elliott LLP, Chartered Professional Accountants.
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Audit Fees
The aggregate fees billed by Manning Elliott LLP for professional services rendered for the audit of the annual financial statements or services that are normally provided in connection with statutory and regulatory filings or engagements for the Company’s years ended December 31, 20182020 and 2017,2019, were C$233,000C253,000 and C$228,500,266,000, respectively.
Audit-Related Fees
The audit-related fees billed by Manning Elliott LLP for assurance and related services that are reasonably related to the performance of the audit or review for the Company’s years ended December 31, 20182020 and 2017,2019, were C$10,0000 and C$10,000, respectively, and consisted of travel and expenses.
Tax Fees
The tax fees billed by Manning Elliott LLP for the Company’s years ended December 31, 20182020 and 2017,2019, were Nil.Nil
All Other Fees
The aggregate fees billed by Manning Elliott LLP for services other than the services reported above for the Company’s years ended December 31, 20182020 and 2017,2019, were C$42,52537,250 and C$7,500,39,500 respectively, and consisted of fees related to the Company’s securities registration documents.
The Audit Committee approved 100% of the fees paid to the principal accountant for audit-related, tax and other fees in the fiscal years 20182020 and 2017.2019. The Audit Committee pre-approves all non-audit services to be performed by the auditor in accordance with the Audit Committee Charter.
There were no hours expended on the principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Changes in Registrant’s Certifying Accountant
Not applicable.
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Item 16G. Corporate Governance
The Company’sWe are a foreign private issuer with our common shares are listed on the NYSE American. TheSection 110 of the NYSE American Company does not believe that itsGuide permits NYSE American to consider the laws, customs and practices of foreign private issuers like us in relaxing certain NYSE American corporate governance requirements, and to grant exemptions from NYSE American corporate governance requirements on these considerations. A company seeking relief under these provisions is required to provide written certification from independent local counsel that the non-complying practice is not prohibited by home country law. A description of the significant ways in which our governance practices differdifferent from those followed by domestic companies pursuant to NYSE American corporate governance standards is as follows:
· | Shareholder Approval Requirement: Sections 711-713 of the NYSE American Company Guide require shareholder approval prior to an issuance of securities in connection with: (i) the acquisition of the stock or assets of another company; (ii) equity-based compensation of officers, directors, employees or consultants; (iii) a change of control; and (iv) private placements. Under the laws of the British Columbia, Canada, we are not required to solicit shareholder approval of equity incentive plans, including those in which our officers or directors may participate; stock issuances that will result in a change in control; the issuance of our stock in related party transactions or other transactions in which we may issue 20% or more of our outstanding shares; or, below market issuances of 20% or more of our outstanding shares to any person. |
· | In addition, as a foreign private issuer, and our equity securities are accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Exchange Act. We solicit proxies in accordance with our Memorandum and Articles of Association the applicable rules and regulations of British Columbia, Canada and the Toronto Stock Exchange. |
The foregoing is consistent with the laws, customs and practices in British Columbia, Canada. In addition, we may from time-to-time seek relief from NYSE American corporate governance requirements on specific transactions under the listing standardsSection 110 of the NYSE American.American Company Guide by providing written certification from independent local counsel that the non-complying practice is not prohibited by our home country law.
Item 16H. Mine Safety Disclosure
Under Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and pursuant to this Item 16H, each operator of a coal or other mine is required to include disclosures regarding certain mine safety results in its periodic reports filed with the SEC.
We do not own or operate any mines in the United States and, as a result, this information is not required.
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Not applicable.
The following financial statements pertaining to the Company are filed as part of this Annual Report:
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Exhibit Number |
| Exhibit |
1.1 |
| Memorandum of Avino Silver & Gold Mines Ltd.* |
1.2 |
| Articles of Avino Silver & Gold Mines Ltd.* |
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| Certificate under the Sarbanes-Oxley Act of the Principal Executive Officer | |
| Certificate under the Sarbanes-Oxley Act of the Principal Financial Officer | |
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* Previously filed.
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AVINO SILVER & GOLD MINES LTD.
Consolidated Financial Statements
For the years ended December 31, 2018, 20172020, 2019 and 20162018
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements of Avino Silver & Gold Mines Ltd. (the “Company”) are the responsibility of the Company’s management. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and reflect management’s best estimates and judgments based on information currently available.
Management has developed and is maintaining a system of internal controls to ensure that the Company’s assets are safeguarded, transactions are authorized and properly recorded, and financial information is reliable.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities. The Audit Committee reviews the results of the annual audit and reviews the consolidated financial statements prior to their submission to the Board of Directors for approval.
The consolidated financial statements as at December 31, 20182020 and 2017, and at January 1, 2017,2019, and for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, have been audited by Manning Elliott LLP, an independent registered public accounting firm, and their report outlines the scope of their examination, and gives their opinion on the consolidated financial statements.
“David Wolfin” |
| “Nathan Harte” |
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David Wolfin |
| Nathan Harte, CPA |
President & CEO |
| Chief Financial Officer |
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To the Shareholders and the Board of Directors of
Avino Silver & Gold Mines Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Avino Silver & Gold Mines Ltd. and its subsidiaries (the(together, the “Company”), which comprise the consolidated statements of financial position as at December 31, 2018, December 31, 20172020 and January 1, 2017,2019, and the consolidated statements of operations and comprehensive income (loss), consolidated statements of changes in equity and consolidated statements of cash flows for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, and the related notes, including a summary of significant accounting policies and other explanatory information (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2018, December 31, 20172020 and January 1, 2017,2019, and its financial performance and its cash flows for the years then ended December 31, 2020, 2019 and 2018 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Voluntary Change in Accounting Policy
As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for exploration and evaluation assets and development costs under IFRS 6 and IAS 16 and has retrospectively adjusted the consolidated financial statements as at December 31, 2017 and January 1, 2017, and for the years ended December 31, 2017 and 2016.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a reasonable basis for our audit opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of the Existence of Impairment Indicators for the Avino Mine
As described in Note 11 to the consolidated financial statements the carrying amount of the plant, equipment and Avino mining properties is $34,846,000 as at December 31, 2020. Management applies significant judgement to assess plant, equipment and Avino mining properties (collectively the “Avino Mine”) for the existence of impairment indicators that could give rise to the requirement to conduct a formal impairment test. Management considers both external and internal sources of information in assessing whether there are any indictors of impairment as disclosed in Note 2 (iv). External sources of information considered by management include changes in the market, economic and legal environments, in which the Company operates, that are not within its control and that affect the recoverable amount of the Avino Mine. Internal sources of information that management considers include the manner in which the Avino Mine is being used, or is expected to be used, and indications of economic performance of the assets.
We have determined that performing procedures relating to the assessment of the existence of impairment indicators for the Avino Mine is a critical audit matter primarily due to the application of judgment by management in assessing specific factors such as (a) significant adverse changes in the economic or legal environment of operations, (b) significant changes with an adverse effect on the use of the asset, (c) current period cash flow or operating losses, combined with a history of losses or a forecast of continuing losses associated with the use of the assets. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence relating to the judgements made by management in their assessment of indicators of impairment that could give rise to the requirement to conduct a formal impairment test.
Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures included amongst others, (a) a review of management’s assessment of the existence of impairment indicators of the Avino Mine (b) completion of our own assessment of impairment indicators in accordance with IAS 36 Impairment of Assets, (c) a review of matters that impact the Company’s ability to continue mining operations, (d) evaluated whether there were adverse economic changes in metal prices by considering external observable market prices, (e) compared the current performance to the Company’s historical mining results associated with the assets, (f) compared management’s mine plans to data in the Company’s resource estimate which was prepared by a specialist.
/s/ Manning Elliott LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, British Columbia, Canada
February 27, 2019March 3, 2021
We have served as the Company’s auditor since 2007.
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AVINO SILVER & GOLD MINES LTD.
AVINO SILVER & GOLD MINES LTD. Consolidated Statements of Financial Position
Commitments – Note Subsequent Approved by the Board of Directors on
The accompanying notes are an integral part of the consolidated financial statements
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