ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(unaudited - prepared by management)
(expressed in thousands of US dollars)
September 30, | December 31, | ||||||
Notes | 2022 | 2021 | |||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 69,193 | $ | 103,303 | |||
Other investments | 4 | 8,146 | 11,200 | ||||
Accounts and other receivable | 5 | 11,301 | 14,462 | ||||
Income tax receivable | 2,474 | 177 | |||||
Inventories | 6 | 36,528 | 27,485 | ||||
Prepaid expenses | 11,369 | 5,135 | |||||
Loans receivable | 8 | 914 | - | ||||
Total current assets | 139,925 | 161,762 | |||||
Non-current deposits | 565 | 599 | |||||
Non-current income tax receivable | 3,570 | 3,570 | |||||
Non-current other investments | 4 | 1,993 | - | ||||
Non-current IVA receivable | 5 | 7,507 | 4,256 | ||||
Non-current loans receivable | 8 | 2,718 | - | ||||
Deferred income tax asset | - | 936 | |||||
Intangible assets | - | 40 | |||||
Right-of-use leased assets | 563 | 664 | |||||
Mineral properties, plant and equipment | 8 | 215,863 | 122,197 | ||||
Total assets | $ | 372,704 | $ | 294,024 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | $ | 27,740 | $ | 31,991 | |||
Income taxes payable | 4,631 | 4,228 | |||||
Loans payable | 9 | 5,791 | 4,128 | ||||
Lease liabilities | 145 | 207 | |||||
Total current liabilities | 38,307 | 40,554 | |||||
Loans payable | 9 | 8,242 | 6,366 | ||||
Lease liabilities | 680 | 794 | |||||
Provision for reclamation and rehabilitation | 7,592 | 7,397 | |||||
Deferred income tax liability | 10,597 | 1,506 | |||||
Total liabilities | 65,418 | 56,617 | |||||
Shareholders' equity | |||||||
Common shares, unlimited shares authorized, no par value, issued, issuable | |||||||
and outstanding 189,989,563 shares (Dec 31, 2021 - 170,537,307 shares) | Page 4 | 657,833 | 585,406 | ||||
Contributed surplus | Page 4 | 5,543 | 6,331 | ||||
Retained earnings (deficit) | Page 4 | (356,090 | ) | (354,330 | ) | ||
Total shareholders' equity | 307,286 | 237,407 | |||||
Total liabilities and shareholders' equity | $ | 372,704 | $ | 294,024 |
Commitments and contingencies (Notes 8, 9)
Subsequent events (Note 9)
The accompanying notes are an integral part of these consolidated financial statements.
Approved on behalf of the Board:
/s/ Margaret Beck | /s/ Daniel Dickson | |
Director | Director |
ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(unaudited - prepared by management)
(expressed in thousands of US dollars, except for shares and per share amounts)
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
Notes | 2022 | 2021 | 2022 | 2021 | |||||||||
Revenue | 11 | $ | 39,649 | $ | 34,562 | $ | 128,171 | $ | 116,803 | ||||
Cost of sales: | |||||||||||||
Direct production costs | 24,510 | 18,639 | 71,059 | 63,590 | |||||||||
Royalties | 2,821 | 2,698 | 9,332 | 9,498 | |||||||||
Share-based payments | 10(b)(c)(d) | 113 | 105 | 353 | 334 | ||||||||
Depreciation, depletion and amortization | 5,753 | 4,843 | 16,234 | 18,963 | |||||||||
Write down of inventory to net realizable value | 6 | 1,323 | - | 1,323 | 272 | ||||||||
34,520 | 26,285 | 98,301 | 92,657 | ||||||||||
Mine operating earnings | 5,129 | 8,277 | 29,870 | 24,146 | |||||||||
Expenses: | |||||||||||||
Exploration and evaluation | 12 | 4,023 | 4,660 | 11,023 | 13,815 | ||||||||
General and administrative | 13 | 2,201 | (522 | ) | 7,846 | 7,294 | |||||||
Care and maintenance costs | 203 | 364 | 582 | 940 | |||||||||
Severance costs | - | 737 | - | 737 | |||||||||
Impairment (reversal of impairment) of non- current assets, net | 8(b) | - | - | - | (16,791 | ) | |||||||
Write off of exploration properties | - | - | 500 | - | |||||||||
6,427 | 5,239 | 19,951 | 5,995 | ||||||||||
Operating earnings (loss) | (1,298 | ) | 3,038 | 9,919 | 18,151 | ||||||||
Finance costs | 311 | 195 | 945 | 702 | |||||||||
Other income (expense): | |||||||||||||
Foreign exchange gain (loss) | 841 | (1,184 | ) | 1,363 | (1,219 | ) | |||||||
Gain on asset disposal | 8(d) | 2,780 | - | 2,780 | 5,841 | ||||||||
Investment and other | (272 | ) | (2,462 | ) | (1,324 | ) | 2,091 | ||||||
3,349 | (3,646 | ) | 2,819 | 6,713 | |||||||||
Earnings (loss) before income taxes | 1,740 | (803 | ) | 11,793 | 24,162 | ||||||||
Income tax expense: | |||||||||||||
Current income tax expense | 1,186 | 659 | 3,526 | 2,476 | |||||||||
Deferred income tax expense | 2,053 | 3,017 | 10,027 | 7,260 | |||||||||
3,239 | 3,676 | 13,553 | 9,736 | ||||||||||
Net earnings (loss) and comprehensive earnings (loss) for the period | $ | (1,499 | ) | $ | (4,479 | ) | $ | (1,760 | ) | $ | 14,426 | ||
Basic earnings (loss) per share based on net earnings | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | $ | 0.09 | ||
Diluted earnings (loss) per share based on net earnings 10(f) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | $ | 0.09 | ||
Basic weighted average number of shares outstanding | 189,241,367 | 170,432,326 | 180,655,842 | 166,201,727 | |||||||||
Diluted weighted average number of shares outstanding 10(f) | 189,241,367 | 170,432,326 | 180,655,842 | 169,628,783 |
The accompanying notes are an integral part of these consolidated financial statements.
ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited - prepared by management)
(expressed in thousands of US dollars, except share amounts)
Note | Number of shares | Share Capital | Contributed Surplus | Retained Earnings (Deficit) | Total Shareholders' Equity | |||||||||||
Balance at December 31, 2020 | 157,924,708 | 517,711 | 9,662 | (368,302 | ) | 159,071 | ||||||||||
Public equity offerings, net of issuance costs | 10 (a) | 10,060,398 | 58,389 | - | - | 58,389 | ||||||||||
Exercise of options | 10 (b) | 2,096,861 | 8,550 | (3,967 | ) | - | 4,583 | |||||||||
Share-based compensation | 10 (b)(c)(d) | - | - | 2,918 | - | 2,918 | ||||||||||
Settlement of performance share units | 10(c) | 379,340 | 561 | (2,924 | ) | - | (2,363 | ) | ||||||||
Earnings for the period | - | - | - | 13,971 | 13,971 | |||||||||||
Balance at September 30, 2021 | 170,461,307 | $ | 585,211 | $ | 5,689 | $ | (354,331 | ) | $ | 236,569 | ||||||
Public equity offerings, net of issuance costs | 10 (a) | - | - | - | - | - | ||||||||||
Exercise of options | 10 (b) | 76,000 | 195 | (59 | ) | - | 136 | |||||||||
Share-based compensation | 10 (b)(c)(d) | - | - | 718 | - | 718 | ||||||||||
Expiry and forfeiture of options | 10 (b) | - | - | (17 | ) | 17 | - | |||||||||
Settlement of performance share units | 10 (c) | - | - | - | - | - | ||||||||||
Loss for the period | - | - | - | (16 | ) | (16 | ) | |||||||||
Balance at December 31, 2021 | 170,537,307 | $ | 585,406 | $ | 6,331 | $ | (354,330 | ) | $ | 237,407 | ||||||
Public equity offerings, net of issuance costs | 10 (a) | 9,293,150 | 43,096 | - | - | 43,096 | ||||||||||
Exercise of options | 10 (b) | 563,200 | 2,364 | (766 | ) | - | 1,598 | |||||||||
Issued and issuable for performance share units | 10 (c) | 1,014,999 | 1,361 | (3,258 | ) | - | (1,897 | ) | ||||||||
Issued on acquisition of mineral properties | 8 (c) | 8,577,380 | 25,589 | - | - | 25,589 | ||||||||||
Issued for deferred share units | 10 (c) | 3,527 | 17 | (17 | ) | - | - | |||||||||
Share-based compensation | 10 (b)(c)(d) | - | - | 3,259 | - | 3,259 | ||||||||||
Settlement of deferred share units | 10 (c) | - | - | (6 | ) | - | (6 | ) | ||||||||
Loss for the period | - | - | - | (1,760 | ) | (1,760 | ) | |||||||||
Balance at September 30, 2022 | 189,989,563 | $ | 657,833 | $ | 5,543 | $ | (356,090 | ) | $ | 307,286 |
The accompanying notes are an integral part of these consolidated financial statements.
ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(unaudited - prepared by management)
(expressed in thousands of US dollars)
Three months ended | Nine months ended | ||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||
Notes | 2022 | 2021 | 2022 | 2021 | |||||||||
Operating activities | |||||||||||||
Net earnings (loss) for the period | $ | (1,499 | ) | $ | (4,479 | ) | $ | (1,760 | ) | $ | 14,426 | ||
Items not affecting cash: | |||||||||||||
Share-based compensation | 10(b)(c)(d) | 760 | 725 | 3,259 | 2,918 | ||||||||
Depreciation, depletion and amortization | 8 | 6,023 | 4,980 | 16,809 | 19,327 | ||||||||
Impairment (reversal of impairment) of non-current assets, net | 8 | - | - | - | (16,791 | ) | |||||||
Writte off of exploration properties | - | - | 500 | - | |||||||||
Deferred income tax expense | 2,053 | 3,017 | 10,027 | 7,260 | |||||||||
Unrealized foreign exchange loss (gain) | 89 | 140 | (131 | ) | 87 | ||||||||
Finance costs | 312 | 195 | 946 | 702 | |||||||||
Write down of inventory to net realizable value | 1,323 | - | 1,323 | 272 | |||||||||
Loss (gain) on asset disposal | (2,826 | ) | - | (2,780 | ) | (5,807 | ) | ||||||
Loss (gain) on other investments | 4 | 1,097 | 3,077 | 3,366 | (835 | ) | |||||||
Net changes in non-cash working capital | 14 | 85 | (7,808 | ) | (20,957 | ) | (16,168 | ) | |||||
Cash from (used in) operating activities | 7,417 | (153 | ) | 10,602 | 5,391 | ||||||||
Investing activities | |||||||||||||
Proceeds on disposal of property, plant and equipment | 250 | - | 332 | 7,541 | |||||||||
Mineral property, plant and equipment | 8 | (52,889 | ) | (23,373 | ) | (81,337 | ) | (38,807 | ) | ||||
Reclamation and rehabilitation change in estimate | (157 | ) | - | (157 | ) | - | |||||||
Purchase of investments | - | - | (2,119 | ) | (832 | ) | |||||||
Proceeds from disposal of marketable securities | 4 | - | - | - | 9,288 | ||||||||
Redemption of (investment in) non-current deposits | 30 | 1 | 34 | - | |||||||||
Cash from (used) in investing activities | (52,766 | ) | (23,372 | ) | (83,247 | ) | (22,810 | ) | |||||
Financing activities | |||||||||||||
Repayment of loans payable | 9 | (1,268 | ) | (843 | ) | (3,565 | ) | (2,730 | ) | ||||
Repayment of lease liabilities | (55 | ) | (46 | ) | (161 | ) | (131 | ) | |||||
Interest paid | 9 | (204 | ) | (159 | ) | (585 | ) | (526 | ) | ||||
Public equity offerings | 10(a) | - | 864 | 46,001 | 59,998 | ||||||||
Exercise of options | 10(b) | 20 | - | 1,598 | 4,583 | ||||||||
Share issuance costs | 10(a) | (93 | ) | (27 | ) | (2,905 | ) | (1,293 | ) | ||||
Deferred share unit redemption | - | - | (6 | ) | - | ||||||||
Performance share unit redemption | - | (189 | ) | (1,897 | ) | (2,363 | ) | ||||||
Cash from (used) financing activities | (1,600 | ) | (400 | ) | 38,480 | 57,538 | |||||||
Effect of exchange rate change on cash and cash equivalents | (84 | ) | (190 | ) | 55 | (126 | ) | ||||||
Increase (decrease) in cash and cash equivalents | (46,949 | ) | (23,925 | ) | (34,165 | ) | 40,119 | ||||||
Cash and cash equivalents, beginning of the period | 116,226 | 125,191 | 103,303 | 61,083 | |||||||||
Cash and cash equivalents, end of the period | $ | 69,193 | $ | 101,076 | $ | 69,193 | $ | 101,076 |
Supplemental cash flow information (Note 14)
The accompanying notes are an integral part of these consolidated financial statements.
ENDEAVOUR SILVER CORP. |
1. CORPORATE INFORMATION
Endeavour Silver Corp. (the "Company" or "Endeavour Silver") is a corporation governed by the Business Corporations Act (British Columbia). The Company is engaged in silver mining in Mexico and related activities including acquisition, exploration, development, extraction, processing, refining and reclamation. The Company is also engaged in exploration activities in Chile and United States. The address of the registered office is #1130 - 609 Granville Street, Vancouver, B.C., V7Y 1G5.
2. BASIS OF PRESENTATION
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and do not include all of the information required for full annual financial statements and should be read in conjunction with the Company's consolidated financial statements as at and for the year ended December 31, 2021.
The Board of Directors approved the consolidated financial statements for issue on November 3, 2022.
The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
These consolidated financial statements are presented in the Company's functional currency of US dollars and include the accounts of the Company and its wholly owned subsidiaries: Endeavour Management Corp., Endeavour Gold Corporation S.A. de C.V., EDR Silver de Mexico S.A. de C.V. SOFOM , Minera Santa Cruz Y Garibaldi S.A de C.V., Metalurgica Guanaceví S.A. de C.V., Minera Plata Adelante S.A. de C.V., Refinadora Plata Guanaceví S.A. de C. V., Minas Bolañitos S. A. de C.V., Guanaceví Mining Services S.A. de C.V., Recursos Humanos Guanaceví S.A. de C.V., Recursos Villalpando S.A. de C.V., Servicios Administrativos Varal S.A. de C.V., Minera Plata Carina SPA, MXRT Holding Ltd., Compania Minera del Cubo S.A. de C.V., Minas Lupycal S.A. de C.V., Metales Interamericanos S.A. de C.V., Oro Silver Resources Ltd., Minera Oro Silver de Mexico S.A. de C.V. disposed of on September 9, 2022 (note 8), Terronera Precious Metals S.A. de C.V, Endeavour USA Holdings, Endeavour USA Corp and SSR Durango S.A. de C.V.. All intercompany transactions and balances have been eliminated upon consolidation of these subsidiaries.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied in these condensed consolidated interim financial statements are the same as those applied in the Company's annual audited consolidated financial statements as at and for the year ended December 31, 2021, except as described below.
The following new accounting standards has been adopted in the condensed consolidated financial statements:
On May 14, 2020, the International Accounting Standard Board (IASB) published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and the related costs in profit or loss. As of September 30, 2022, these amendments did not affect our condensed consolidated interim financial statements as no amounts have been received from selling items produced while preparing assets for their intended use.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual audited consolidated financial statements as at and for the year ended December 31, 2021, and accordingly should be read in conjunction with the Company's annual audited financial statements for the year ended December 31, 2021.
ENDEAVOUR SILVER CORP. |
4. OTHER INVESTMENTS
September 30, | December 31, | |||||
2022 | 2021 | |||||
Balance at beginning of the year | $ | 11,200 | $ | 4,767 | ||
Acquisition of marketable securities, at cost | 2,305 | 3,753 | ||||
FMV of investments received on asset disposal | - | 9,851 | ||||
Disposals | - | (9,288 | ) | |||
Gain (loss) on marketable securities | (3,366 | ) | 2,117 | |||
Balance at end of the period | 10,139 | 11,200 | ||||
Less: Current portion | 8,146 | 11,200 | ||||
Non-Current marketable securities | $ | 1,993 | $ | - |
The Company holds $9,652 in marketable securities that are classified as Level 1 and $487 in marketable securities that are classified as Level 3 in the fair value hierarchy and are classified as financial assets measured at FVTPL (Note 17). The fair values of Level 1 marketable securities are determined based on a market approach reflecting the closing price of each particular security at the reporting date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security, being the market with the greatest volume and level of activity for the assets. Marketable securities classified as Level 3 in the fair value hierarchy are share purchase warrants and the fair value of the warrants at each period end has been estimated using the Black-Scholes Option Pricing Model.
During the nine months ended September 30, 2022, the Company acquired 6,600,000 units of Max Resource Corp ("Max") through a private placement with each unit consisting of one common share and ½ share purchase warrant. At the same time, the Company entered into a collaboration agreement with Max under which acquired shares and warrants of Max have certain transfer restrictions and cannot be liquidated before March 28, 2024. Accordingly, those shares and warrants have been classified as non-current.
5. ACCOUNTS AND OTHER RECEIVABLES
September 30, | December 31, | ||||||
Note | 2022 | 2021 | |||||
Trade receivables (1) | $ | 3,591 | $ | 4,751 | |||
IVA receivables (2) | 7,111 | 8,863 | |||||
Other receivables | 599 | 847 | |||||
Due from related parties | - | 1 | |||||
$ | 11,301 | $ | 14,462 |
(1) The trade receivables consist of receivables from provisional silver and gold sales from the Bolañitos mine. The fair value of receivables arising from concentrate sales contracts that contain provisional pricing mechanisms is determined using the appropriate quoted forward price on the measurement date from the exchange that is the principal active market for the particular metal. As such, these receivables, which meet the definition of an embedded derivative, are classified within Level 2 of the fair value hierarchy (Note 17).
(2) The Company's Mexican subsidiaries pay value added tax, Impuesto al Valor Agregado ("IVA"), on the purchase and sale of goods and services. The net amount paid is recoverable but is subject to review and assessment by the tax authorities. The Company regularly files the required IVA returns and all supporting documentation with the tax authorities, however, the Company has been advised that certain IVA amounts receivable from the tax authorities are being withheld pending completion of the authorities' audit of certain of the Company's third-party suppliers. Under Mexican law the Company has legal rights to those IVA refunds and the results of the third-party audits should have no impact on refunds. A smaller portion of IVA refund requests are from time to time improperly denied based on the alleged lack of compliance of certain formal requirements and information returns by the Company's third-party suppliers. The Company takes necessary legal action on the delayed refunds as well as any improperly denied refunds.
ENDEAVOUR SILVER CORP. |
These delays and denials have occurred within Compañia Minera del Cubo ("El Cubo") and Refinadora Plata Guanaceví S.A. de C.V. ("Guanaceví"). At September 30, 2022, El Cubo holds $207 and Guanaceví holds $6,022 in IVA receivables which the Company and its advisors have determined to be recoverable from tax authorities (December 31, 2021 - $302 and $8,067 respectively). The Company is in regular contact with the tax authorities in respect of its IVA filings and believes the full amount of its IVA receivables will ultimately be received; however, the timing of recovery of these amounts and the nature and extent of any adjustments to the Company's IVA receivables remains uncertain.
As at September 30, 2022, the total IVA receivable of $14,618 (December 31, 2021 - $13,119) has been allocated between the current portion of $7,111, which is included in accounts receivable, and a non-current portion of $7,507 (December 31, 2021 - $8,863 and $4,256 respectively). The non-current portion is composed of El Cubo and Guanacevi of $25 (December 31, 2021 - $165) and $1,457 (December 31, 2021 - $1,434) respectively, which are currently under appeal and are unlikely to be received in the next 12 months. The remaining $6,025 (December 31, 2021 - $2,657) is IVA receivable for Terronera, which may not become recoverable until Terronera recognizes revenue for tax purposes.
6. INVENTORIES
September 30, | December 31, | |||||
2022 | 2021 | |||||
Warehouse inventory (1) | $ | 8,517 | $ | 8,698 | ||
Stockpile inventory | 4,619 | 2,335 | ||||
Finished Goods inventory | 22,111 | 15,550 | ||||
Work in process inventory | 1,281 | 902 | ||||
$ | 36,528 | $ | 27,485 |
(1) The warehouse inventory balace at September 30, 2022 is net of an allowance for obsolete inventory of $1,179 (December 31, 2021 - $539) at the Guanacevi mine and $1,038 (December 31, 2021- $357) at the Bolanitos mine.
7. RELATED PARTY TRANSACTIONS
The Company previously shared common administrative services and office space with a company related by virtue of a former common director and from time to time incurred third party costs on behalf of related parties on a full cost recovery basis. The charges for these costs totaled $Nil and $9 for the three and nine months ended September 30, 2022 respectively (September 30, 2021 - $1 and $3 respectively). The Company has a $Nil net receivable related to these costs as of September 30, 2022 (December 31, 2021 - $1).
The Company was charged $57 and $402 for legal services for the three and nine months ended September 30, 2022 respectively by a legal firm in which the Company's corporate secretary is a partner (September 30, 2021 - $45 and $236 respectively). The Company has $27 payable to the legal firm as at September 30, 2022 (December 31, 2021 - $5).
ENDEAVOUR SILVER CORP. |
8. MINERAL PROPERTIES, PLANT AND EQUIPMENT
(a) Mineral properties, plant and equipment comprise:
Mineral | Machinery & | Transport & | ||||||||||||||||
properties | Plant | equipment | Building | office equipment | Total | |||||||||||||
Cost | ||||||||||||||||||
Balance at December 31, 2020 | $ | 552,878 | $ | 106,445 | $ | 81,003 | $ | 13,314 | $ | 12,777 | $ | 766,417 | ||||||
Additions | 40,261 | 2,838 | 15,435 | 1,623 | 2,113 | 62,270 | ||||||||||||
Disposals | (81,740 | ) | (11,098 | ) | (9,298 | ) | (1,492 | ) | (2,845 | ) | (106,473 | ) | ||||||
Balance at December 31, 2021 | $ | 511,399 | $ | 98,185 | $ | 87,140 | $ | 13,445 | $ | 12,045 | $ | 722,214 | ||||||
Additions | 93,334 | 3,253 | 14,728 | 1,487 | 1,144 | 113,946 | ||||||||||||
Disposals | (14,784 | ) | (6,396 | ) | (375 | ) | (650 | ) | (705 | ) | (22,910 | ) | ||||||
Balance at September 30, 2022 | $ | 589,949 | $ | 95,042 | $ | 101,493 | $ | 14,282 | $ | 12,484 | $ | 813,250 | ||||||
Accumulated amortization and impairment | ||||||||||||||||||
Balance at December 31, 2020 | $ | 510,335 | $ | 94,815 | $ | 53,122 | $ | 10,166 | $ | 10,024 | $ | 678,462 | ||||||
Amortization | 15,614 | 3,393 | 4,947 | 352 | 1,202 | 25,508 | ||||||||||||
Disposals | (81,180 | ) | (10,000 | ) | (8,624 | ) | (1,324 | ) | (2,825 | ) | (103,953 | ) | ||||||
Balance at December 31, 2021 | $ | 444,769 | $ | 88,208 | $ | 49,445 | $ | 9,194 | $ | 8,401 | $ | 600,017 | ||||||
Amortization | 11,656 | 1,695 | 3,893 | 253 | 728 | 18,225 | ||||||||||||
Disposals | (13,574 | ) | (6,396 | ) | (280 | ) | (147 | ) | (458 | ) | (20,855 | ) | ||||||
Balance at September 30, 2022 | $ | 442,851 | $ | 83,507 | $ | 53,058 | $ | 9,300 | $ | 8,671 | $ | 597,387 | ||||||
Net book value | ||||||||||||||||||
At December 31, 2021 | $ | 66,630 | $ | 9,977 | $ | 37,695 | $ | 4,251 | $ | 3,644 | $ | 122,197 | ||||||
At September 30, 2022 | $ | 147,098 | $ | 11,535 | $ | 48,435 | $ | 4,982 | $ | 3,813 | $ | 215,863 |
Included in Mineral properties is $80,118 in acquisition costs for exploration properties and $21,760 for development properties (December 31, 2021 - $19,063 and $10,311 respectively).
As of September 30, 2022, the Company has $24.3 million committed for capital equipment purchases.
(b) El Cubo, Mexico
On March 17, 2021, the Company signed a definitive agreement to sell its El Cubo mine and related assets to Guanajuato Silver Company Ltd. ("GSilver") (formerly known as VanGold Mining Corp.) for $15.0 million in consideration composed of cash and share payments plus additional contingency payments. On April 9, 2021, GSilver purchased the El Cubo assets for the following consideration:
Per the terms of the agreement, GSilver agreed to pay $15.0 million for the El Cubo assets. The Company has received total gross consideration of $19.7 million as follows:
- $0.5 million cash down-payment
- $7.0 million cash on closing
- $9.8 million paid in shares with 21,331,058 shares of GSilver with fair value of CAN$0.58 per share on April 9, 2021. Total fair value of the shares at the time of agreement was $5.0 million priced at CAN$0.30
- $2.4 million paid by unsecured promissory note with face value $2.5 million (settled in November 2021).
GSilver has also agreed to pay the Company up to an additional $3.0 million in contingent payments, for which the Company has not recorded any consideration, based on the following events:
- $1.0 million upon GSilver producing 3.0 million silver equivalent ounces from the El Cubo mill
- $1.0 million if the price of gold closes at or above $2,000 dollars per ounce for 20 consecutive days within two years after closing
- $1.0 million if the price of gold closes at or above $2,200 dollars per ounce for 20 consecutive days prior to April 9, 2023.
ENDEAVOUR SILVER CORP. |
During the period ended March 31, 2021, the El Cubo mine project, consisting of the land rights, plant, buildings and the related reclamation liability were re-classified to current assets and liabilities as "assets held for sale" and "liabilities held for sale" . Immediately prior to the classification to assets and liabilities held for sale, the carrying amounts of the land rights, plant and building were remeasured and the historical gross impairments of $216.9 million net of depletion and depreciation of $200.1 million, were reversed resulting in a $16.8 million impairment reversal. The reclamation provision for the El Cubo mine of $4.6 million was transferred to GSilver upon acquisition of the related mining concessions. The Company has recognized a $5.8 million gain on the disposal of the El Cubo mine and related assets in the year ended December 31, 2021.
On November 16, 2021 the Company arranged for early payment of the $2.5 million promissory note. In consideration for the early payment, the Company has agreed to reduce the principal amount of the note by $25,000 and settle the Mexican value added tax payable on the purchase price for El Cubo represented by the note for 901,224 common shares of GSilver.
(c) Acquisition of the Pitarrilla Project
On January 17, 2022, the Company entered into a definitive agreement to purchase the Pitarrilla project in Durango State, Mexico, by acquiring all of the issued and outstanding shares of SSR Durango, S.A. de C.V. from SSR Mining Inc. ("SSR") for total consideration of $70 million (consisting of $35 million in Company's shares and a further $35 million in cash or in the Company's shares at the election of SSR and as agreed to by the Company) and a 1.25% net smelter returns royalty. SSR retains a 1.25% NSR Royalty in Pitarrilla. Endeavour will have matching rights to purchase the NSR Royalty in the event SSR proposes to sell it.
The acquisition was completed on July 6, 2022. Total consideration included 8,577,380 shares of the Company issued on July 6, 2022 and a $35.1 million cash payment. Fair value of the 8,577,380 common shares issued on July 6, 2022 was $25,590 at CAN$3.89 per share. The deemed value of the common shares issued, at the time of agreement was $34.9 million. The shares are subject to a hold period of four months and one day following the date of closing.
The 4,950-hectares Pitarrilla exploration project is located in northern Mexico, consists of five concessions, has a significant infrastructure in place and has access to utilities.
The acquisition is outside the scope of IFRS 3, Business Combinations as the Pitarrilla project does not meet the definition of a business, and as such, the transaction was accounted for as an asset acquisition. The purchase price is allocated to the underlying assets acquired and liabilities assumed, based upon their estimated fair values at the date of acquisition.
Pitarilla Project purchase consideration: | |||
Common shares issued(1) | $ | 25,590 | |
Consideration paid in cash | 35,067 | ||
Acquisition costs | 930 | ||
Total consideration | $ | 61,587 |
ENDEAVOUR SILVER CORP. |
Fair value summary of assets acquired and liabilities assumed: | |||
Assets: | |||
Current assets | $ | 288 | |
Buildings and equipment | 652 | ||
Mineral properties | 60,861 | ||
Total assets | $ | 61,801 | |
Liabilities: | |||
Accounts payable and accrued liabilities | 170 | ||
Reclamation liability | 44 | ||
Total liabilities | $ | 214 | |
Net identifiable assets acquired | $ | 61,587 |
d) Disposal of El Compas mine
On September 9, 2022, the Company entered into an agreement to sell its 100% interest in Minera Oro Silver de Mexico, S.A. de C.V. ("MOS") to Grupo ROSGO, S.A. de C.V., ("Grupo ROSGO"). Minera Oro Silver holds the El Compas property and the lease on the La Plata processing plant in Zacatecas, Mexico.
Pursuant to the agreement, Grupo ROSGO assumed the Minera Oro Silver loan payable to the Company, in the amount of $5,000 payable in cash payments over a five year period with an initial payment of $250 which was received during nine months ended September 30, 2022. Instalment payments of $500 will be made every six months other than the third payment, which will be $750. The payments are secured by a pledge of the shares of MOS. At the date of the sale, using the effective interest rate method, management has estimated the fair value of the $5,000 loan receivable to be $3,882. As of September 30, 2022, the carrying value of the loan receivable is $3,632, consisting of the current portion of $914 and non-current portion of $2,718.
Carrying value of the net Minera Oro Silver's net assets at the date of the sale was $1,149 and as a result of the sale, the Company has recorded $2,733 gain on sale presented in 'investments and other income' in the condensed consolidated interim statements of comprehensive income (loss).
9. LOANS PAYABLE
September 30, | December 31, | |||||
2022 | 2021 | |||||
Balance at the beginning of the year | $ | 10,494 | $ | 9,672 | ||
Net proceeds from software and equipment financing | 7,119 | 4,399 | ||||
Finance cost | 536 | 650 | ||||
Repayments of principal | (3,565 | ) | (3,563 | ) | ||
Repayments of finance costs | (536 | ) | (611 | ) | ||
Effects of movements in exchange rates | (15 | ) | (53 | ) | ||
Balance at the end of the period | $ | 14,033 | $ | 10,494 | ||
Statements of Financial Position Presentation | ||||||
Current loans payable | $ | 5,791 | $ | 4,128 | ||
Non-Current loans payable | 8,242 | 6,366 | ||||
Total | $ | 14,033 | $ | 10,494 |
The Company has financing arrangements for equipment totaling $27,445, with terms ranging from 1 year to 4 years. The agreements require either monthly or quarterly payments of principal and interest with a weighted-average interest rate of 6.0%.
Subsequent to September 30, 2022, the Company entered into an additional loan agreement in the amount of $918 for the purchase of equipment.
ENDEAVOUR SILVER CORP. |
The equipment financing is secured by the underlying equipment purchased and is subject to various non-financial covenants and as at September 30, 2022 the Company was in compliance with these covenants. As at September 30, 2022, the net book value of equipment includes $23,450 (December 31, 2021 - $16,090) of equipment pledged as security for the equipment financing.
10. SHARE CAPITAL
(a) Public Offerings
In April 2020 the Company filed a short form base shelf prospectus that qualifies for the distribution of up to CAN$150,000 of common shares, debt securities, warrants or units of the Company comprising any combination of common shares and warrants (the "Securities") over a 25 month period. The Company filed a corresponding registration statement in the United States registering the Securities under United States federal securities laws. The distribution of Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, or at prices related to such prevailing market prices to be negotiated with purchasers and as set forth in an accompanying prospectus supplement, including transactions that are "At-The-Market (ATM) distributions.
On October 1, 2020, the Company entered into an ATM equity facility with BMO Capital Markets (the lead agent), CIBC Capital Markets, H.C. Wainwright & Co. LLC, TD Securities Inc., Roth Capital Partners, LLC, B. Riley Securities Inc. and A.G.P./Alliance Global Partners (together, the "Agents"). Under the terms of this ATM facility, the Company can, from time to time, sell common stock having an aggregate offering value of up to $60,000 on the New York Stock Exchange. The Company determined, at its sole discretion, the timing and number of shares sold under the ATM facility.
In the period from January 1, 2021 to July 20, 2021, when this ATM facility was completed, the Company issued 10,060,398 common shares under the ATM facility at an average price of $5.96 per share for gross proceeds of $59,998, less commission of $1,230 and recognized $379 of other transaction costs related to the ATM financing as share issuance costs, which have been presented net within share capital.
On March 22, 2022, the Company completed a prospectus equity financing with the offering co-led by BMO Capital Markets and PI Financial Corp., together with a syndicate of underwriters consisting of CIBC World Markets Inc., B. Riley Securities Inc., and H.C. Wainwright & Co., LLC. The Company issued a total of 9,293,150 common shares at a price of $4.95 per share for aggregate gross proceeds of $46,001, less commission of $2,524 and recognized $288 of other transaction costs related to the financing as share issuance costs, which have been presented net within share capital.
(b) Stock Options
Options to purchase common shares have been granted to directors, officers, employees and consultants pursuant to the Company's current stock option plan, approved by the Company's shareholders in fiscal 2009 and amended and re-ratified in 2021, at exercise prices determined by reference to the market value on the date of grant. The stock option plan allows for, with approval by the Board, granting of options to its directors, officers, employees and consultants to acquire up to 5.0% of the issued and outstanding shares at any time. Prior to the 2021 amendment, the plan allowed for the granting of up to 7.0% of the issued and outstanding shares at any time.
ENDEAVOUR SILVER CORP. |
The following table summarizes the status of the Company's stock option plan and changes during the period:
Expressed in Canadian dollars | Nine months ended | Year ended | ||||||||||
September 30, 2022 | December 31, 2021 | |||||||||||
Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | |||||||||
Outstanding, beginning of the year | 3,848,200 | $ | 3.68 | 5,978,300 | $ | 3.29 | ||||||
Granted | 736,986 | $ | 6.24 | 818,500 | $ | 6.90 | ||||||
Exercised | (563,200 | ) | $ | 3.58 | (2,801,600 | ) | $ | 3.76 | ||||
Expired and forfeited | (84,956 | ) | $ | 6.66 | (147,000 | ) | $ | 4.29 | ||||
Outstanding, end of the period | 3,937,030 | $ | 4.11 | 3,848,200 | $ | 3.68 | ||||||
Options exercisable at the end of the period | 3,398,059 | $ | 3.75 | 2,973,100 | $ | 3.40 |
During the nine months ended September 30, 2022, the weighted-average share price at the date of exercise was CAN$6.79 (December 31, 2021 - CAN$7.51).
The following table summarizes the information about stock options outstanding at September 30, 2022:
Expressed in Canadian dollars | |||||||||||||||
Options Outstanding | Options exercisable | ||||||||||||||
Number | Weighted Average | Weighted Average | Number Exercisable | Weighted Average | |||||||||||
Outstanding | Remaining | ||||||||||||||
Price | as at | Contractual Life | Exercise | as at | Exercise | ||||||||||
Intervals | September 30, 2022 | (Number of Years) | Price | September 30, 2022 | Price | ||||||||||
$2.00 - $2.99 | 1,372,600 | 2.4 | $ | 2.14 | 1,372,600 | $ | 2.14 | ||||||||
$3.00 - $3.99 | 1,131,900 | 1.1 | $ | 3.45 | 1,131,900 | $ | 3.45 | ||||||||
$5.00 - $5.99 | 60,000 | 3.0 | $ | 5.60 | 60,000 | $ | 5.60 | ||||||||
$6.00 - $6.99 | 1,372,530 | 4.0 | $ | 6.56 | 833,559 | $ | 6.67 | ||||||||
3,937,030 | 2.6 | $ | 4.11 | 3,398,059 | $ | 3.75 |
During the three and nine months ended September 30, 2022, the Company recognized share-based compensation expense of $320 and $1,425 respectively (September 30, 2021 - $386 and $1,680 respectively) based on the fair value of the vested portion of options granted in the current and prior periods.
The weighted-average fair values of stock options granted and the assumptions used to calculate the related compensation expense have been estimated using the Black-Scholes Option Pricing Model with the following assumptions:
Nine months ended | Year ended | |
September 30, 2022 | December 31, 2021 | |
Weighted-average fair value of options in CAN$ | $3.17 | $3.37 |
Risk-free interest rate | 2.19% | 0.66% |
Expected dividend yield | 0% | 0% |
Expected stock price volatility | 67% | 66% |
Expected options life in years | 3.80 | 3.85 |
(c) Share Units Plan
On March 23, 2021 the Company adopted an equity-based Share Unit Plan ("SUP"), which was approved by the Company's shareholders on May 12, 2021. The SUP allows for, with approval by the Board, granting of Performance Share Units ("PSU"s) and Deferred Share Units ("DSU"s), to its directors, officers, employees to acquire up to 1.5% of the issued and outstanding shares. The SUP incorporates any new PSUs and DSUs granted and are to be subject to share settlement, cash settlement or a combination of cash and share procedures at the discretion of the Board of Directors.
ENDEAVOUR SILVER CORP. |
Performance Share Units
The PSUs granted are subject to a performance payout multiplier between 0% and 200% based on the Company's total shareholder return at the end of a three-year period, relative to the total shareholder return of the Company's peer group.
Nine months ended | Year ended | |||||
September 30, 2022 | December 31, 2021 | |||||
Number of units | Number of units | |||||
Outstanding, beginning of year | 1,639,000 | 1,805,000 | ||||
Granted | 316,000 | 322,000 | ||||
Cancelled | - | (100,000 | ) | |||
Settled for shares | (797,000 | ) | (388,000 | ) | ||
Outstanding, end of period | 1,158,000 | 1,639,000 |
There were 316,000 PSUs granted during the nine months ended September 30, 2022 (September 30, 2021 - 322,000). The PSUs vest over a two to three-year period if certain pre-determined performance and vesting criteria are achieved. Performance criteria are based on the Company's share price performance relative to a representative group of other mining companies and specific achievements related to Terronera development. 806,000 PSUs vest on March 1, 2023, 298,000 PSUs vest on March 4, 2024, 256,000 PSUs vest on March 23, 2025 and 60,000 PSUs vest on or before June 30, 2025.
On March 3, 2022, PSUs granted in 2019 vested with a payout multiplier of 200% based on the Company's shareholder return, relative to the total shareholder return of the Company's peer group over the three year period and 535,000 PSUs were settled, on a net of tax basis, through the issuance of 664,170 common shares.
On August 16, 2022, vesting was accelerated on a pro-rata basis for 195,000 PSUs granted in 2020 and 67,000 PSUs granted in 2021. As at September 30, 2022, there are 350,829 issuable shares from the settlement of these PSUs.
During the three and nine months ended September 30, 2022, the Company recognized share-based compensation expense of $428 and $1,321 respectively related to the PSUs (September 30, 2021 - $339 and $1,238 respectively).
Deferred Share Units
The DSUs granted are vested immediately and are redeemable for shares at the time of a Director's retirement.
Nine months ended | Year ended | |||||
September 30, 2022 | December 31, 2021 | |||||
Number of units | Number of units | |||||
Outstanding, beginning of year | - | - | ||||
Granted | 106,153 | - | ||||
Settled for shares | (5,038 | ) | - | |||
Outstanding, end of period | 101,115 | - |
There were 106,153 DSUs granted during the nine months ended September 30, 2022 (September 30, 2021 - Nil) under the SUP. During the nine months 5,038 DSUs were settled, on a net of tax basis, through the issuance of 3,527 common shares. During the three and nine months ended September 30, 2022, the Company recognized share-based compensation expense of $12 and $513 related to the DSUs (September 30, 2021 - $Nil and $Nil).
ENDEAVOUR SILVER CORP. |
(d) Deferred Share Units - Cash settled
The Company previously had a Deferred Share Unit ("DSU") plan whereby deferred share units were granted to independent directors of the Company in lieu of compensation in cash or share stock options. These DSUs vested immediately and are redeemable for cash, based on the market value of the units at the time of a director's retirement. Upon adoption of the SUP plan in March 2021, no new DSUs will be granted under this cash settled plan.
Expressed in Canadian dollars | Nine months ended | Year ended | ||||||||||
September 30, 2022 | December 31, 2021 | |||||||||||
Number of units | Weighted Average Grant Price | Number of units | Weighted Average Grant Price | |||||||||
Outstanding, beginning of year | 1,348,765 | $ | 3.24 | 1,266,199 | $ | 3.00 | ||||||
Granted | - | - | 82,566 | $ | 6.90 | |||||||
Redeemed | (304,561 | ) | $ | 3.41 | - | $ | 0.00 | |||||
Outstanding, end of period | 1,044,204 | $ | 3.19 | 1,348,765 | $ | 3.24 | ||||||
Fair value at period end | 1,044,204 | $ | 4.16 | 1,348,765 | $ | 5.35 |
During the three and nine months ended September 30, 2022, the Company recognized a mark to market recovery on director's compensation related to these DSUs, which is included in general and administrative salaries, wages and benefits, of $110 and $1,099 respectively (September 30, 2021 - recovery of $2,751 and $882 respectively) based on the change in the fair value of the DSUs granted in the prior years. As at September 30, 2022, there are 1,044,204 cash settled deferred share units outstanding with a fair market value of $3,161 (December 31, 2021 - 1,348,765 cash settled deferred share units outstanding with a fair market value of $5,682) recognized in accounts payable and accrued liabilities. During the nine months ended September 30, 2022, 304,561 DSUs were redeemed with a fair value of $1,421.
(e) Share Appreciation Rights
As part of the Company's bonus program, the Company may grant share appreciation rights ("SARs") to its employees in Mexico and Chile. The SARs are subject to vesting conditions and, when exercised, constitute a cash bonus based on the value of the appreciation of the Company's common shares between the SARs grant date and the exercise date.
Nine months ended | Year ended | |||||||||||
September 30, 2022 | December 31, 2021 | |||||||||||
Number of Units | Weighted Average Grant Price | Number of Units | Weighted Average Grant Price | |||||||||
Outstanding, beginning of year | 113,670 | $ | 5.40 | - | - | |||||||
Granted | 148,030 | $ | 4.62 | 115,930 | $ | 5.40 | ||||||
Exercised | - | - | (2,260 | ) | $ | 5.34 | ||||||
Cancelled | (51,334 | ) | $ | 5.41 | - | - | ||||||
Outstanding, end of period | 210,366 | $ | 4.85 | 113,670 | $ | 5.40 | ||||||
Exercisable at the end of the period | 69,992 | $ | 5.05 | 40,912 | $ | 5.39 |
During the nine months ended September 30, 2022, the Company recognized a recovery related to SARs, which is included in operation cost of sales and exploration salaries, wages and benefits, of $4 (September 30, 2021 - expense $89) based on the change in the fair value of the SARs granted in prior years. As of September 30, 2022, there are 210,366 SARs outstanding (December 31, 2021 - 113,670) with a fair market value of $108 (December 31, 2021 - $113).
ENDEAVOUR SILVER CORP. |
The SARs were valued using an option pricing model, which requires the input of highly subjective assumptions. The expected life of the SARs considered such factors as the average length of time similar grants in the past have remained outstanding prior to exercise, expiry or cancellation and the vesting period of SARs granted. Volatility was estimated based on average daily volatility based on historical share price observations over the expected term of the SARs grant. Changes in the subjective input assumptions can materially affect the estimated fair value of the SARs. The Company amortized the fair value of SARs on a graded basis over the respective vesting period of each tranche of SARs awarded.
(f) Diluted Earnings per Share
Three months ended | Nine months ended | |||||||||||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||
Net earnings (loss) | $ | (1,499 | ) | $ | (4,479 | ) | $ | (1,760 | ) | $ | 14,426 | |
Basic weighted average number of shares outstanding | 189,241,367 | 170,432,326 | 180,655,842 | 166,201,727 | ||||||||
Effect of dilutive securities: | ||||||||||||
Stock options | - | - | - | 1,788,056 | ||||||||
Equity settled deferred share units | - | - | - | - | ||||||||
Performance share units | - | - | - | 1,639,000 | ||||||||
Diluted weighted average number of share outstanding | 189,241,367 | 170,432,326 | 180,655,842 | 169,628,783 | ||||||||
Diluted earnings (loss) per share | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | $ | 0.09 |
As of September 30, 2022, there are 2,833,740 anti-dilutive stock options (September 30, 2021 - 2,048,255 stock options).
11. REVENUE
Three months ended | Nine months ended | |||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Silver Sales (1) | $ | 25,541 | $ | 17,180 | $ | 81,123 | $ | 64,167 | ||||
Gold Sales (1) | 14,852 | 17,774 | 49,383 | 54,237 | ||||||||
Less: smelting and refining costs | (744 | ) | (392 | ) | (2,335 | ) | (1,601 | ) | ||||
Revenue | $ | 39,649 | $ | 34,562 | $ | 128,171 | $ | 116,803 |
(1) Changes in fair value from provisional pricing in the period are included in silver and gold sales.
Three months ended | Nine months ended | |||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
Revenue by product | 2022 | 2021 | 2022 | 2021 | ||||||||
Concentrate sales | $ | 11,614 | $ | 12,075 | $ | 42,192 | $ | 46,273 | ||||
Provisional pricing adjustments | (443 | ) | (128 | ) | (400 | ) | (242 | ) | ||||
Total revenue from concentrate sales | 11,171 | 11,947 | 41,792 | 46,031 | ||||||||
Refined metal sales | 28,478 | 22,615 | 86,379 | 70,772 | ||||||||
Total revenue | $ | 39,649 | $ | 34,562 | $ | 128,171 | $ | 116,803 |
Provisional pricing adjustments on sales of concentrate consist of provisional and final pricing adjustments made prior to the finalization of the sales contract. The Company's sales contracts are provisionally priced with provisional pricing periods lasting typically one to three months with provisional pricing adjustments recorded to revenue as market prices vary.
ENDEAVOUR SILVER CORP. |
12. EXPLORATION AND EVALUATION
Three months ended | Nine months ended | |||||||||||
September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||
Depreciation and depletion | $ | 143 | $ | 87 | $ | 348 | $ | 238 | ||||
Share-based compensation | 117 | (78 | ) | 328 | 228 | |||||||
Exploration salaries, wages and benefits | 330 | 667 | 1,423 | 1,977 | ||||||||
Direct exploration expenditures | 1,541 | 798 | 3,353 | 4,456 | ||||||||
Evaluation salaries, wages and benefits | 487 | 456 | 1,632 | 1,099 | ||||||||
Direct evaluation expenditures | 1,405 | 2,730 | 3,939 | 5,817 | ||||||||
$ | 4,023 | $ | 4,660 | $ | 11,023 | $ | 13,815 |
13. GENERAL AND ADMINISTRATIVE
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Depreciation and depletion | $ | 57 | $ | 30 | $ | 156 | $ | 102 | ||||
Share-based compensation | 530 | 697 | 2,577 | 2,355 | ||||||||
Salaries, wages and benefits | 852 | 951 | 3,067 | 2,885 | ||||||||
Directors' DSU mark to market expense (recovery) | (110 | ) | (2,751 | ) | (1,099 | ) | (882 | ) | ||||
Direct general and administrative | 872 | 551 | 3,145 | 2,834 | ||||||||
$ | 2,201 | $ | (522 | ) | $ | 7,846 | $ | 7,294 |
14. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Three months ended | Nine months ended | |||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Net changes in non-cash working capital: | ||||||||||||
Accounts receivable | $ | 2,205 | $ | (1,227 | ) | $ | (91 | ) | $ | 5,043 | ||
Income tax receivable | (1,255 | ) | (7 | ) | (2,297 | ) | (3,585 | ) | ||||
Inventories | (2,049 | ) | (5,465 | ) | (8,473 | ) | (12,732 | ) | ||||
Prepaid expenses | 197 | 2,163 | (6,234 | ) | (2,852 | ) | ||||||
Accounts payable and accrued liabilities | 1,351 | (3,737 | ) | (4,265 | ) | (2,150 | ) | |||||
Income taxes payable | (1,170 | ) | 465 | 403 | 108 | |||||||
$ | (721 | ) | $ | (7,808 | ) | $ | (20,957 | ) | $ | (16,168 | ) | |
Non-cash financing and investing activities: | ||||||||||||
Fair value of exercised options allocated to share capital | $ | (11 | ) | $ | - | $ | (766 | ) | $ | (3,967 | ) | |
Fair value of performance share units allocated to share capital | $ | (555 | ) | $ | - | $ | (1,361 | ) | $ | (561 | ) | |
Fair value of capital assets acquired under equipment loans | $ | 2,745 | $ | - | $ | 7,119 | $ | - | ||||
Other cash disbursements: | ||||||||||||
Income taxes paid | $ | 2,733 | $ | 206 | $ | 3,184 | $ | 4,532 | ||||
Special mining duty paid | $ | - | $ | - | $ | 2,272 | $ | 1,331 |
ENDEAVOUR SILVER CORP. |
15. SEGMENT DISCLOSURES
The Company's operating segments are based on internal management reports that are reviewed by the Company's executives (the chief operating decision makers) in assessing performance. The Company has two operating mining segments which are located in Mexico, Guanaceví and Bolañitos, the El Compas mine which was on care and maintenance until the sale of the mine on September 9, 2022, one development project in Mexico, Terronera, as well as Exploration and Corporate segments. The Exploration segment consists of projects in the exploration and evaluation phases in Mexico, Chile and the USA. Exploration projects that are in the local district surrounding a mine are included in the mine's segments. Comparative period figures related to Terronera, previously reported as part of the exploration segment have been reclassified to conform with current period's presentation. Comparative period figures related to the El Cubo mine, which was on care and maintenance from November 2019 until the sale of the mine and related assets in April 2021, previously reported as it own segment have been reclassified to the Corporate segment.
September 30, 2022 | |||||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | El Compas | Terronera | Total | |||||||||||||||
Cash and cash equivalents | $ | 39,566 | $ | 2,511 | $ | 17,537 | $ | 8,250 | $ | - | $ | 1,329 | $ | 69,193 | |||||||
Other Investments | 10,139 | - | - | - | - | - | $ | 10,139 | |||||||||||||
Accounts and other receivables | 343 | 385 | 5,436 | 5,052 | - | 85 | $ | 11,301 | |||||||||||||
Loans receivable | 3,632 | - | - | - | - | - | $ | 3,632 | |||||||||||||
Income tax receivable | 27 | - | 2,379 | 68 | - | - | $ | 2,474 | |||||||||||||
Inventories | 116 | - | 32,242 | 4,122 | - | 48 | $ | 36,528 | |||||||||||||
Prepaid expenses | 1,017 | 162 | 1,450 | 492 | - | 8,248 | $ | 11,369 | |||||||||||||
Non-current deposits | 150 | 3 | 320 | 92 | - | - | $ | 565 | |||||||||||||
Non-current IVA receivable | 24 | - | 1,458 | - | - | 6,025 | $ | 7,507 | |||||||||||||
Non-currrent income tax receivable | 3,570 | - | - | - | - | - | $ | 3,570 | |||||||||||||
Right-of-use leased assets | 538 | - | - | 25 | - | - | $ | 563 | |||||||||||||
Mineral property, plant and equipment | 503 | 81,450 | 63,846 | 28,199 | - | 41,865 | $ | 215,863 | |||||||||||||
Total assets | $ | 59,625 | $ | 84,511 | $ | 124,668 | $ | 46,300 | $ | - | $ | 57,600 | $ | 372,704 | |||||||
Accounts payable and accrued liabilities | $ | 5,710 | $ | 509 | $ | 13,691 | $ | 4,652 | $ | - | $ | 3,178 | $ | 27,740 | |||||||
Income taxes payable | - | - | 3,936 | 695 | - | - | $ | 4,631 | |||||||||||||
Loans payable | - | - | 1,270 | 2,581 | - | 10,182 | $ | 14,033 | |||||||||||||
Lease obligations | 798 | - | - | 27 | - | - | $ | 825 | |||||||||||||
Provision for reclamation and rehabilitation | - | 44 | 4,164 | 3,384 | - | - | $ | 7,592 | |||||||||||||
Deferred income tax liability | - | - | 10,362 | 235 | - | - | $ | 10,597 | |||||||||||||
Total liabilities | $ | 6,508 | $ | 553 | $ | 33,423 | $ | 11,574 | $ | - | $ | 13,360 | $ | 65,418 |
ENDEAVOUR SILVER CORP. |
December 31, 2021 | |||||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | El Compas | Terronera | Total | |||||||||||||||
Cash and cash equivalents | $ | 68,149 | $ | 144 | $ | 27,060 | $ | 4,234 | $ | 3,349 | $ | 367 | $ | 103,303 | |||||||
Other Investments | 11,200 | - | - | - | - | - | $ | 11,200 | |||||||||||||
Accounts and other receivables | 812 | - | 6,706 | 6,633 | 308 | 3 | $ | 14,462 | |||||||||||||
Income tax receivable | 169 | 1 | 3 | 2 | 2 | - | $ | 177 | |||||||||||||
Inventories | 351 | - | 19,852 | 7,057 | 195 | 30 | $ | 27,485 | |||||||||||||
Prepaid expenses | 1,327 | 118 | 844 | 349 | 20 | 2,477 | $ | 5,135 | |||||||||||||
Non-current deposits | 150 | - | 321 | 128 | - | - | $ | 599 | |||||||||||||
Non-current IVA receivable | 164 | - | 1,434 | - | - | 2,658 | $ | 4,256 | |||||||||||||
Deferred income tax asset | - | - | - | 936 | - | - | $ | 936 | |||||||||||||
Non-current Income tax receivable | 3,570 | - | - | - | - | - | $ | 3,570 | |||||||||||||
Intangible assets | 2 | 1 | 15 | 17 | 2 | 3 | $ | 40 | |||||||||||||
Right-of-use leased assets | 564 | - | 100 | - | - | - | $ | 664 | |||||||||||||
Mineral property, plant and equipment | 373 | 18,963 | 54,234 | 27,371 | 2,005 | 19,251 | 122,197 | ||||||||||||||
Total assets | $ | 86,831 | $ | 19,227 | $ | 110,569 | $ | 46,727 | $ | 5,881 | $ | 24,789 | $ | 294,024 | |||||||
Accounts payable and accrued liabilities | $ | 10,121 | $ | 238 | 15,247 | $ | 4,667 | $ | 141 | $ | 1,577 | $ | 31,991 | ||||||||
Income taxes payable | 29 | - | 3,563 | 636 | - | - | $ | 4,228 | |||||||||||||
Loans payable | 43 | - | 2,005 | 4,048 | - | 4,398 | $ | 10,494 | |||||||||||||
Lease obligations | 896 | - | 105 | - | - | $ | 1,001 | ||||||||||||||
Provision for reclamation and rehabilitation | - | - | 3,997 | 3,237 | 163 | - | $ | 7,397 | |||||||||||||
Deferred income tax liability | - | - | 1,271 | 235 | - | - | 1,506 | ||||||||||||||
Total liabilities | $ | 11,089 | $ | 238 | $ | 26,083 | $ | 12,928 | $ | 304 | $ | 5,975 | $ | 56,617 |
ENDEAVOUR SILVER CORP. |
Three months ended September 30, 2022 | |||||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | El Compas | Terronera | Total | |||||||||||||||
Silver revenue | $ | - | $ | - | $ | 23,241 | $ | 2,300 | $ | - | $ | - | $ | 25,541 | |||||||
Gold revenue | - | - | 5,237 | 9,615 | - | - | 14,852 | ||||||||||||||
Less: smelting and refining costs | - | - | - | (744 | ) | - | - | (744 | ) | ||||||||||||
Total revenue | $ | - | $ | - | $ | 28,478 | $ | 11,171 | $ | - | $ | - | $ | 39,649 | |||||||
Salaries, wages and benefits: | |||||||||||||||||||||
mining | $ | - | $ | - | $ | 2,052 | $ | 1,851 | $ | - | $ | - | $ | 3,903 | |||||||
processing | - | - | 907 | 554 | - | - | 1,461 | ||||||||||||||
administrative | - | - | 1,625 | 1,016 | - | - | 2,641 | ||||||||||||||
stock based compensation | - | - | 56 | 57 | - | - | 113 | ||||||||||||||
change in inventory | - | - | (736 | ) | 134 | - | - | (602 | ) | ||||||||||||
Total salaries, wages and benefits | - | - | 3,904 | 3,612 | - | - | 7,516 | ||||||||||||||
Direct costs: | |||||||||||||||||||||
mining | - | - | 7,298 | 3,018 | - | - | 10,316 | ||||||||||||||
processing | - | - | 4,138 | 1,457 | - | - | 5,595 | ||||||||||||||
administrative | - | - | 1,742 | 1,079 | - | - | 2,821 | ||||||||||||||
change in inventory | - | - | (1,870 | ) | 245 | - | - | (1,625 | ) | ||||||||||||
Total direct production costs | - | - | 11,308 | 5,799 | - | - | 17,107 | ||||||||||||||
Depreciation and depletion: | |||||||||||||||||||||
depreciation and depletion | - | - | 3,348 | 2,542 | - | - | 5,890 | ||||||||||||||
change in inventory | - | - | (229 | ) | 92 | - | - | (137 | ) | ||||||||||||
Total depreciation and depletion | - | - | 3,119 | 2,634 | - | - | 5,753 | ||||||||||||||
Royalties | - | - | 2,762 | 59 | - | - | 2,821 | ||||||||||||||
Write down of inventory to NRV | - | - | 642 | 681 | - | - | 1,323 | ||||||||||||||
Total cost of sales | $ | - | $ | - | $ | 21,735 | $ | 12,785 | $ | - | $ | - | $ | 34,520 | |||||||
Care and maintenance costs | - | - | - | - | 203 | - | 203 | ||||||||||||||
Earnings (loss) before taxes | $ | 837 | $ | (2,131 | ) | $ | 6,743 | $ | (1,614 | ) | $ | (203 | ) | $ | (1,892 | ) | $ | 1,740 | |||
Current income tax expense | - | - | 1,258 | (72 | ) | - | - | 1,186 | |||||||||||||
Deferred income tax expense | - | - | 2,053 | - | - | - | 2,053 | ||||||||||||||
Total income tax expense | - | - | 3,311 | (72 | ) | - | - | 3,239 | |||||||||||||
Net earnings (loss) | $ | 837 | $ | (2,131 | ) | $ | 3,432 | $ | (1,542 | ) | $ | (203 | ) | $ | (1,892 | ) | $ | (1,499 | ) |
The Exploration segment included $347 of costs incurred in Chile for the three months ended September 30, 2022 (September 30, 2021 - $341).
ENDEAVOUR SILVER CORP. |
Three months ended September 30, 2021 | |||||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | El Compas | Terronera | Total | |||||||||||||||
Silver revenue | $ | - | $ | - | $ | 14,942 | $ | 1,956 | $ | 282 | $ | - | $ | 17,180 | |||||||
Gold revenue | - | - | 7,673 | 7,827 | 2,274 | - | 17,774 | ||||||||||||||
Less: smelting and refining costs | - | - | - | (350 | ) | (42 | ) | - | (392 | ) | |||||||||||
Total revenue | $ | - | $ | - | $ | 22,615 | $ | 9,433 | $ | 2,514 | $ | - | $ | 34,562 | |||||||
Salaries, wages and benefits: | |||||||||||||||||||||
mining | $ | - | $ | - | $ | 2,327 | $ | 1,593 | $ | 279 | $ | - | $ | 4,199 | |||||||
processing | - | - | 1,003 | 455 | 150 | - | 1,608 | ||||||||||||||
administrative | - | - | 1,744 | 910 | 182 | - | 2,836 | ||||||||||||||
stock based compensation | - | - | 44 | 46 | 16 | - | 106 | ||||||||||||||
change in inventory | - | - | (2,933 | ) | (591 | ) | 390 | - | (3,134 | ) | |||||||||||
Total salaries, wages and benefits | - | - | 2,185 | 2,413 | 1,017 | - | 5,615 | ||||||||||||||
Direct costs: | |||||||||||||||||||||
mining | - | - | 5,265 | 3,137 | 373 | - | 8,775 | ||||||||||||||
processing | - | - | 2,925 | 1,347 | 223 | - | 4,495 | ||||||||||||||
administrative | - | - | 1,261 | 1,008 | 233 | - | 2,502 | ||||||||||||||
change in inventory | - | - | (2,293 | ) | (1,169 | ) | 819 | - | (2,643 | ) | |||||||||||
Total direct production costs | - | - | 7,158 | 4,323 | 1,648 | - | 13,129 | ||||||||||||||
Depreciation and depletion: | |||||||||||||||||||||
depreciation and depletion | - | - | 1,978 | 3,916 | 59 | - | 5,953 | ||||||||||||||
change in inventory | - | - | (295 | ) | (845 | ) | 30 | - | (1,110 | ) | |||||||||||
Total depreciation and depletion | - | - | 1,683 | 3,071 | 89 | - | 4,843 | ||||||||||||||
Royalties | - | - | 2,595 | 48 | 55 | - | 2,698 | ||||||||||||||
Total cost of sales | $ | - | $ | - | $ | 13,621 | $ | 9,855 | $ | 2,809 | $ | - | $ | 26,285 | |||||||
Care and maintenance costs | 142 | - | - | - | 222 | - | 364 | ||||||||||||||
Impairment (impairment reversal) | - | - | - | - | 737 | - | 737 | ||||||||||||||
Earnings (loss) before taxes | $ | (3,461 | ) | $ | (1,981 | ) | $ | 8,994 | $ | (422 | ) | $ | (1,254 | ) | $ | (2,679 | ) | $ | (803 | ) | |
Current income tax expense (recovery) | - | - | 829 | (175 | ) | 5 | - | 659 | |||||||||||||
Deferred income tax expense (recovery) | - | - | 3,345 | (328 | ) | - | - | 3,017 | |||||||||||||
Total income tax expense (recovery) | - | - | 4,174 | (503 | ) | 5 | - | 3,676 | |||||||||||||
Net earnings (loss) | $ | (3,461 | ) | $ | (1,981 | ) | $ | 4,820 | $ | 81 | $ | (1,259 | ) | $ | (2,679 | ) | $ | (4,479 | ) |
The Exploration segment included $1,068 of costs incurred in Chile for the nine months ended September 30, 2022 (September 30, 2021 - $1,356).
ENDEAVOUR SILVER CORP. |
Nine months ended September 30, 2022 | |||||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | El Compas | Terronera | Total | |||||||||||||||
Silver revenue | $ | - | $ | - | $ | 70,401 | $ | 10,722 | $ | - | $ | - | $ | 81,123 | |||||||
Gold revenue | - | - | 15,978 | 33,405 | - | - | 49,383 | ||||||||||||||
Less: smelting and refining costs | - | - | - | 2,335 | - | - | (2,335 | ) | |||||||||||||
Total revenue | $ | - | $ | - | $ | 86,379 | $ | 41,792 | $ | - | $ | - | $ | 128,171 | |||||||
Salaries, wages and benefits: | |||||||||||||||||||||
mining | $ | - | $ | - | 5,845 | 5,942 | $ | - | $ | - | $ | 11,787 | |||||||||
processing | - | - | 2,608 | 1,751 | - | - | 4,359 | ||||||||||||||
administrative | - | - | 4,417 | 3,044 | - | - | 7,461 | ||||||||||||||
stock based compensation | - | - | 176 | 177 | - | - | 353 | ||||||||||||||
change in inventory | - | - | (1,789 | ) | 784 | - | - | (1,005 | ) | ||||||||||||
Total salaries, wages and benefits | - | - | 11,257 | 11,698 | - | - | 22,955 | ||||||||||||||
Direct costs: | |||||||||||||||||||||
mining | - | - | $ | 21,447 | $ | 9,385 | - | - | 30,832 | ||||||||||||
processing | - | - | 11,064 | 4,495 | - | - | 15,559 | ||||||||||||||
administrative | - | - | 5,092 | 3,300 | - | - | 8,392 | ||||||||||||||
change in inventory | - | - | (7,847 | ) | 1,521 | - | - | (6,326 | ) | ||||||||||||
Total direct production costs | - | - | 29,756 | 18,701 | - | - | 48,457 | ||||||||||||||
Depreciation and depletion: | |||||||||||||||||||||
depreciation and depletion | - | - | 10,285 | 7,842 | - | - | 18,127 | ||||||||||||||
change in inventory | - | - | (2,316 | ) | 423 | - | - | (1,893 | ) | ||||||||||||
Total depreciation and depletion | - | - | 7,969 | 8,265 | - | - | 16,234 | ||||||||||||||
Royalties | - | - | 9,124 | 208 | - | - | 9,332 | ||||||||||||||
Write down of inventory to NRV | - | - | 642 | 681 | - | - | 1,323 | ||||||||||||||
Total cost of sales | $ | - | $ | - | $ | 58,748 | $ | 39,553 | $ | - | $ | - | $ | 98,301 | |||||||
Care and maintenance costs | - | - | - | - | 582 | - | 582 | ||||||||||||||
Write of of exploration properties | - | - | - | - | - | 500 | 500 | ||||||||||||||
Earnings (loss) before taxes | $ | (5,972 | ) | $ | (5,452 | ) | $ | 27,631 | $ | 2,239 | $ | (582 | ) | $ | (6,071 | ) | $ | 11,793 | |||
Current income tax expense | - | - | 3,189 | 337 | - | - | 3,526 | ||||||||||||||
Deferred income tax expense | - | - | 9,091 | 936 | - | - | 10,027 | ||||||||||||||
Total income tax expense | - | - | 12,280 | 1,273 | - | - | 13,553 | ||||||||||||||
Net earnings (loss) | $ | (5,972 | ) | $ | (5,452 | ) | $ | 15,351 | $ | 966 | $ | (582 | ) | $ | (6,071 | ) | $ | (1,760 | ) |
The Exploration segment included $1,068 of costs incurred in Chile for the nine months ended September 30, 2022 (September 30, 2021 - $1,356).
ENDEAVOUR SILVER CORP. |
Nine months ended September 30, 2021 | |||||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | El Compas | Terronera | Total | |||||||||||||||
Silver revenue | $ | - | $ | - | $ | 55,426 | $ | 7,496 | $ | 1,245 | $ | - | $ | 64,167 | |||||||
Gold revenue | - | - | 15,346 | 30,265 | 8,626 | - | 54,237 | ||||||||||||||
Less: smelting and refining costs | - | - | - | (1,353 | ) | (248 | ) | - | (1,601 | ) | |||||||||||
Total revenue | $ | - | $ | - | $ | 70,772 | $ | 36,408 | $ | 9,623 | $ | - | $ | 116,803 | |||||||
Salaries, wages and benefits: | |||||||||||||||||||||
mining | $ | - | $ | - | $ | 6,286 | $ | 4,101 | $ | 1,314 | $ | - | $ | 11,701 | |||||||
processing | - | - | 2,423 | 1,310 | 614 | - | 4,347 | ||||||||||||||
administrative | - | - | 4,116 | 2,495 | 814 | - | 7,425 | ||||||||||||||
stock based compensation | - | - | 137 | 136 | 61 | - | 334 | ||||||||||||||
change in inventory | - | - | (4,963 | ) | (518 | ) | 342 | - | (5,139 | ) | |||||||||||
Total salaries, wages and benefits | - | - | 7,999 | 7,524 | 3,145 | - | 18,668 | ||||||||||||||
Direct costs: | �� | ||||||||||||||||||||
mining | - | - | 18,945 | 8,555 | 2,746 | - | 30,246 | ||||||||||||||
processing | - | - | 9,069 | 3,895 | 1,202 | - | 14,166 | ||||||||||||||
administrative | - | - | 4,294 | 2,860 | 1,398 | - | 8,552 | ||||||||||||||
change in inventory | - | - | (7,098 | ) | (1,132 | ) | 522 | - | (7,708 | ) | |||||||||||
Total direct production costs | - | - | 25,210 | 14,178 | 5,868 | - | 45,256 | ||||||||||||||
Depreciation and depletion: | |||||||||||||||||||||
depreciation and depletion | - | - | 4,119 | 9,803 | 3,643 | - | 17,565 | ||||||||||||||
change in inventory | - | - | 1,644 | 861 | (1,107 | ) | - | 1,398 | |||||||||||||
Total depreciation and depletion | - | - | 5,763 | 10,664 | 2,536 | - | 18,963 | ||||||||||||||
Royalties | - | - | 8,966 | 186 | 346 | - | 9,498 | ||||||||||||||
Write down of inventory to NRV | - | - | - | - | 272 | - | 272 | ||||||||||||||
Total cost of sales | $ | - | $ | - | $ | 47,938 | $ | 32,552 | $ | 12,167 | $ | - | $ | 92,657 | |||||||
Care and maintenance costs | 718 | - | - | - | 222 | - | 940 | ||||||||||||||
Severance costs | - | - | - | - | 737 | - | 737 | ||||||||||||||
Impairment (impairment reversal) | (16,791 | ) | - | - | - | - | - | (16,791 | ) | ||||||||||||
Earnings (loss) before taxes | $ | 14,790 | $ | (6,969 | ) | $ | 22,834 | $ | 3,856 | $ | (3,503 | ) | $ | (6,846 | ) | $ | 24,162 | ||||
Current income tax expense | - | - | 1,979 | 447 | 50 | - | 2,476 | ||||||||||||||
Deferred income tax expense | - | - | 7,154 | 106 | - | - | 7,260 | ||||||||||||||
Total income tax expense | - | - | 9,133 | 553 | 50 | - | 9,736 | ||||||||||||||
Net earnings (loss) | $ | 14,790 | $ | (6,969 | ) | $ | 13,701 | $ | 3,303 | $ | (3,553 | ) | $ | (6,846 | ) | $ | 14,426 |
ENDEAVOUR SILVER CORP. |
16. INCOME TAXES
(a) Tax Assessments
Minera Santa Cruz y Garibaldi SA de CV ("MSCG"), a subsidiary of the Company, received a MXN 238 million assessment on October 12, 2010 by Mexican fiscal authorities for failure to provide the appropriate support for certain expense deductions taken in MSCG's 2006 tax return, failure to provide appropriate support for loans made to MSCG from affiliated companies, and deemed an unrecorded distribution of dividends to shareholders, among other individually immaterial items. MSCG immediately initiated a Nullity action and filed an administrative attachment to dispute the assessment.
In June 2015, the Superior Court ruled in favour of MSCG on a number of the matters under appeal; however, the Superior Court ruled against MSCG for failure to provide appropriate support for certain deductions taken in MSCG's 2006 tax return. In June 2016, the Company received an MXN 122.9 million ($6,100) tax assessment based on the June 2015 ruling. The 2016 tax assessment comprised of MXN 41.8 million owed ($2,100) in taxes, MXN 17.7 million ($900) in inflationary charges, MXN 40.4 million ($2,000) in interest and MXN 23.0 million ($1,100) in penalties. The 2016 tax assessment was issued for failure to provide the appropriate support for certain expense deductions taken in MSCG's 2006 tax return and failure to provide appropriate support for loans made to MSCG from affiliated companies. The MXN 122.9 million assessment includes interest and penalties. If MSCG agrees to pay the tax assessment, or a lesser settled amount, it is eligible to apply for forgiveness of 100% of the penalties and 50% of the interest.
The Company filed an appeal against the June 2016 tax assessment on the basis certain items rejected by the courts were included in the new tax assessment, and a number of deficiencies exist within the assessment. Since issuance of the assessment interest charges of MXN 16.1 million ($797) and inflationary charges of MXN 24.0 million ($1,193) have accumulated.
Included in the Company's consolidated financial statements are net assets of $964 held by MSCG. Following the Tax Court's rulings, MSCG is in discussions with the tax authorities with regards to the shortfall of assets within MSCG to settle its estimated tax liability. An alternative settlement option would be to transfer the shares and assets of MSCG to the tax authorities. As of September 30, 2022, the Company's income tax payable includes an allowance for transferring the shares and assets of MSCG amounting to $964. The Company is currently assessing MSCG's settlement options based on ongoing court proceedings and discussion with the tax authorities. The Company has been advised that the appeal filed with the Federal Tax Court and Supreme Court of Justice, against the June 2016 tax assessment has been rejected. The Company continues to assess MSCG's settlement options.
Compania Minera Del Cubo SA de CV ("Cubo"), a subsidiary of the Company, received a MXN 58.5 million ($2,900) assessment in 2019 by Mexican fiscal authorities for alleged failure to provide the appropriate support for depreciation deductions taken in the Cubo 2016 tax return and denied eligibility of deductions of certain suppliers. The tax assessment consists of MXN 24.1 million ($1,200) for taxes, MXN 21.0 million ($1,100) for penalties, MXN 10.4 million ($500) for interest and MXN 3.0 million ($100) for inflation. At the time of the tax assessment the Cubo entity had and continues to have sufficient loss carry forwards which would be applied against the assessed difference of taxable income. The Mexican tax authorities did not consider these losses in the assessment.
Due to the denial of certain suppliers for income tax purposes in the Cubo assessment, the invoices from these suppliers have been assessed as ineligible for refunds of IVA paid on the invoices. The assessment includes MXN 14.7 million ($600) for re-payment of IVA (value added taxes) refunded on these supplier payments. In the Company's judgement the suppliers and invoices meet the necessary requirements to be deductible for income tax purposes and the recovery of IVA.
ENDEAVOUR SILVER CORP. |
The Company has filed an administrative appeal related to the 2016 Cubo Tax assessment. The Company had previously provided a lien on certain El Cubo mining concessions during the appeal process. To facilitate the sale of the El Cubo mine and related assets, the Company elected to pay the assessed amount of $3.5 million during Q1, 2021. During the appeal process the amount paid has been classified as a non-current income tax recoverable. Since issuance of the assessment interest charges of MXN 9.9 million ($500) and inflationary charges of MXN 1.6 million ($100) had accumulated. The Company continues to assess that it is probable that its appeal will prevail, and no provision is recognized in respect of the Cubo tax assessment.
The Company has recognized $3.2 million and $13.6 million in income tax expense for the three and nine months ended September 30, 2022 respectively. The income tax expense is derived from current and deferred income tax due to profitable mining operations at both the Guanacevi and Bolañitos mines and changes in temporary tax differences.
17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
(a) Financial assets and liabilities
As at September 30, 2022, the carrying and fair values of the Company's financial instruments by category are as follows:
Fair value through profit or loss | Amortized cost | Carrying value | Fair value | |||||||||
$ | $ | $ | $ | |||||||||
Financial assets: | ||||||||||||
Cash and cash equivalents | - | 69,193 | 69,193 | 69,193 | ||||||||
Other Investments | 10,139 | - | 10,139 | 10,139 | ||||||||
Trade and other receivables | 3,591 | 7,710 | 11,301 | 11,301 | ||||||||
Loans receivable | - | 3,632 | 3,632 | 3,632 | ||||||||
Total financial assets | 13,730 | 80,535 | 94,265 | 94,265 | ||||||||
Financial liabilities: | ||||||||||||
Accounts payable and accrued liabilities | 3,269 | 24,471 | 27,740 | 27,740 | ||||||||
Loans payable | - | 14,033 | 14,033 | 14,033 | ||||||||
Total financial liabilities | 3,269 | 38,504 | 41,773 | 41,773 |
(b) Fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
Level 1:
Other investments are comprised of marketable securities. When there is an active market are determined based on a market approach reflecting the closing price of each particular security at the reporting date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security. As a result, $9,652 of these financial assets have been included in Level 1 of the fair value hierarchy.
Cash settled deferred share units are determined based on a market approach reflecting the Company's closing share price or share price at redemption date for pending settlements.
ENDEAVOUR SILVER CORP. |
Level 2:
The Company determines the fair value of the embedded derivatives related to its trade receivables based on the quoted closing price obtained from the silver and gold metal exchanges and the fair value of the SARs liability is determined by using an option pricing model.
Level 3:
Included in other investments are share purchase warrants. Fair value of the warrants at each period end has been estimated using the Black-Scholes Option Pricing Model. As a result, $487 of these financial assets have been included in Level 3 of the fair value hierarchy.
Assets and liabilities as at September 30, 2022 measured at fair value on a recurring basis include:
Total | Level 1 | Level 2 | Level 3 | |||||||||
$ | $ | $ | $ | |||||||||
Financial assets: | ||||||||||||
Investments | 10,139 | 9,652 | - | 487 | ||||||||
Trade receivables | 3,591 | - | 3,591 | - | ||||||||
Total financial assets | 13,730 | 9,652 | 3,591 | 487 | ||||||||
Financial liabilities: | ||||||||||||
Deferred share units | 3,161 | 3,161 | - | - | ||||||||
Share appreciation rights | 108 | - | 108 | - | ||||||||
Total financial liabilities | 3,269 | 3,161 | 108 | - |
ENDEAVOUR SILVER CORP. |
HEAD OFFICE | Suite #1130, 609 Granville Street |
Vancouver, BC, Canada V7Y 1G5 | |
Telephone: (604) 685-9775 1-877-685-9775 Facsimile: (604) 685-9744 Website: www.edrsilver.com | |
DIRECTORS | Margaret Beck Ricardo Campoy Daniel Dickson Amy Jacobsen Rex McLennan Kenneth Pickering Mario Szotlender |
OFFICERS | Daniel Dickson - Chief Executive Officer Donald Gray - Chief Operating Officer Christine West - Chief Financial Officer Nicholas Shakesby - Vice President, Operations Luis Castro - Vice-President, Exploration Dale Mah - Vice-President, Corporate Development Galina Meleger - Vice-President, Investor Relations Bernard Poznanski - Corporate Secretary |
REGISTRAR AND TRANSFER AGENT | Computershare Trust Company of Canada |
3rd Floor - 510 Burrard Street Vancouver, BC, V6C 3B9 | |
AUDITORS | KPMG LLP 777 Dunsmuir Street Vancouver, BC, V7Y 1K3 |
SOLICITORS | Koffman Kalef LLP 19th Floor - 885 West Georgia Street Vancouver, BC, V6C 3H4 |
SHARES LISTED | Toronto Stock Exchange Trading Symbol - EDR New York Stock Exchange Trading Symbol - EXK |