Exhibit 99.2
LAKE SHORE GOLD CORP.
Condensed Consolidated Interim Financial Statements
(September 30, 2013 and 2012)
(unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian dollars, unaudited )
As at | | Note | | September 30, 2013 | | December 31, 2012 | |
| | | | | | | |
Assets | | | | | | | |
Current assets | | | | | | | |
Cash and cash equivalents | | | | $ | 14,746 | | $ | 48,715 | |
Receivables and prepaids | | | | 3,857 | | 7,736 | |
Inventories and stockpiled ore | | 7 | | 23,426 | | 27,898 | |
Assets held for sale | | 6(i) | | — | | 2,432 | |
| | | | 42,029 | | 86,781 | |
Non-current assets | | | | | | | |
Available for sale financial assets and warrant investments | | | | 769 | | 810 | |
Investments in associates | | 8 | | 2,921 | | 5,361 | |
Restricted cash | | | | 7,095 | | 7,095 | |
Mining interests | | 9 | | 769,722 | | 719,616 | |
Deferred financing costs | | 10(a(ii)) | | — | | 3,352 | |
| | | | $ | 822,536 | | $ | 823,015 | |
| | | | | | | |
Liabilities | | | | | | | |
Current liabilities | | | | | | | |
Accounts payable and accrued liabilities | | | | $ | 21,523 | | $ | 33,867 | |
Current portion of finance lease obligations | | | | 1,314 | | 6,324 | |
Current portion of long term debt | | 10 | | 14,390 | | 18,219 | |
| | | | 37,227 | | 58,410 | |
Non-current liabilities | | | | | | | |
Finance lease obligations | | | | 2,757 | | 2,812 | |
Long term debt | | 10 | | 120,780 | | 100,334 | |
Share-based liabilities | | | | 504 | | 479 | |
Environmental rehabilitation provision | | | | 4,909 | | 5,257 | |
| | | | 128,950 | | 108,882 | |
| | | | | | | |
Equity | | 12 | | | | | |
Share capital | | | | 1,017,262 | | 1,016,524 | |
Equity portion of convertible debentures | | | | 14,753 | | 14,753 | |
Reserves | | | | 30,886 | | 23,212 | |
Deficit | | | | (406,542 | ) | (398,766 | ) |
| | | | 656,359 | | 655,723 | |
| | | | $ | 822,536 | | $ | 823,015 | |
See accompanying notes to condensed consolidated interim financial statements
Approved by the Board
/signed/ Alan Moon | | /signed/ Arnold Klassen |
| | |
Alan Moon | | Arnold Klassen |
Director | | Director |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands of Canadian dollars, except per share amounts, unaudited)
| | | | Three months ended September 30, | | Nine months ended September 30, | |
| | Note | | 2013 | | 2012 | | 2013 | | 2012 | |
| | | | | | | | | | | |
Revenue | | | | $ | 44,301 | | $ | 33,734 | | $ | 126,833 | | $ | 99,036 | |
Production costs | | 3 | | (23,428 | ) | (20,754 | ) | (75,539 | ) | (60,221 | ) |
Depletion and depreciation | | | | (13,319 | ) | (10,407 | ) | (38,083 | ) | (31,787 | ) |
Earnings from mine operations | | | | $ | 7,554 | | 2,573 | | 13,211 | | 7,028 | |
| | | | | | | | | | | |
General and administrative | | | | (2,823 | ) | (2,670 | ) | (8,711 | ) | (9,119 | ) |
Exploration and evaluation | | | | (239 | ) | (1,166 | ) | (1,013 | ) | (2,515 | ) |
Write down of investments in associates | | 8 | | (619 | ) | (5,957 | ) | (3,572 | ) | (5,957 | ) |
Share of loss of investments in associates | | 8 | | (411 | ) | (576 | ) | (962 | ) | (2,343 | ) |
Earnings (loss) from operations and associates | | | | 3,462 | | (7,796 | ) | (1,047 | ) | (12,906 | ) |
Other (loss) income, net | | 4 | | (1,685 | ) | (3,777 | ) | 6,963 | | (3,123 | ) |
Finance items | | 5 | | | | | | | | | |
Finance income | | | | 194 | | 82 | | 652 | | 299 | |
Finance expense | | | | (3,689 | ) | (75 | ) | (10,042 | ) | (252 | ) |
Loss before taxes | | | | (1,718 | ) | (11,566 | ) | (3,474 | ) | (15,982 | ) |
Deferred mining tax recovery | | | | — | | 798 | | — | | 319 | |
Loss from continuing operations | | | | (1,718 | ) | (10,768 | ) | (3,474 | ) | (15,663 | ) |
Loss from discontinued operations | | 6(i) | | — | | (3 | ) | (4,302 | ) | (43 | ) |
Net loss | | | | $ | (1,718 | ) | $ | (10,771 | ) | $ | (7,776 | ) | $ | (15,706 | ) |
| | | | | | | | | | | |
Other comprehensive income (loss) | | | | | | | | | | | |
Items that may be reclassified subsequently to profit or loss | | | | | | | | | | | |
Other comprehensive income (loss) from continuing operations, net of tax | | | | | | | | | | | |
Realized and unrealized gain (loss) on available for sale investments | | 6(ii),8 | | 519 | | 427 | | 2,068 | | (1,759 | ) |
Other comprehensive income from discontinued operations | | | | | | | | | | | |
Exchange differences on translation of foreign operations | | 6(i) | | — | | 463 | | 3,967 | | 3,452 | |
Comprehensive loss from continuing operations | | | | (1,199 | ) | (10,341 | ) | (1,406 | ) | (17,422 | ) |
Comprehensive income (loss) from discontinued operations | | | | — | | 460 | | (335 | ) | 3,409 | |
Total comprehensive loss | | | | $ | (1,199 | ) | $ | (9,881 | ) | $ | (1,741 | ) | $ | (14,013 | ) |
| | | | | | | | | | | |
Basic and diluted loss per share | | 12(b) | | | | | | | | | |
Loss per share from continuing operations | | | | $ | (0.00 | ) | $ | (0.03 | ) | $ | (0.01 | ) | $ | (0.04 | ) |
Loss per share | | | | $ | (0.00 | ) | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.04 | ) |
| | | | | | | | | | | |
Weighted average number of common shares outstanding (in 000’s) note 12(b) | | | | | | | | | | | |
Basic | | | | 416,620 | | 415,454 | | 416,507 | | 409,879 | |
Diluted | | | | 416,620 | | 415,454 | | 416,507 | | 409,879 | |
See accompanying notes to condensed consolidated interim financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars, unaudited)
| | | | Three months ended September 30, | | Nine months ended September 30, | |
| | Note | | 2013 | | 2012 | | 2013 | | 2012 | |
| | | | | | | | | | | |
Operating Activities | | | | | | | | | | | |
| | | | | | | | | | | |
Net loss from continuing operations | | | | $ | (1,718 | ) | $ | (10,768 | ) | $ | (3,474 | ) | $ | (15,663 | ) |
Add (Deduct): | | | | | | | | | | | |
Depletion and depreciation | | | | 13,345 | | 10,447 | | 38,176 | | 31,937 | |
Share-based payments expense | | | | 412 | | 811 | | 1,647 | | 3,008 | |
Write down of investments in associates | | | | 619 | | 5,957 | | 3,572 | | 5,957 | |
Share of loss of investments in associates | | | | 411 | | 576 | | 962 | | 2,343 | |
Other loss (income), net | | | | 1,685 | | 3,777 | | (6,963 | ) | 3,123 | |
Finance income | | | | (194 | ) | (82 | ) | (652 | ) | (299 | ) |
Interest received | | | | 64 | | 100 | | 152 | | 316 | |
Deferred mining tax recovery | | | | — | | (798 | ) | — | | (319 | ) |
Finance expense | | | | 3,689 | | 75 | | 10,042 | | 252 | |
Interest paid | | | | (5,311 | ) | (588 | ) | (13,114 | ) | (2,199 | ) |
Change in operating working capital | | 13 | | (1,637 | ) | 2,129 | | 2,187 | | (2,795 | ) |
| | | | | | | | | | | |
Net cash flow provided by continuing operating activities | | | | 11,365 | | 11,636 | | $ | 32,535 | | 25,661 | |
Net cash flow used in discontinued operating activities | | | | — | | (3 | ) | — | | (43 | ) |
| | | | | | | | | | | |
Investing Activities | | | | | | | | | | | |
| | | | | | | | | | | |
Additions to mining interests, net of pre-production sales and movements in working capital | | | | (17,362 | ) | (40,800 | ) | (87,686 | ) | (123,553 | ) |
Proceeds from sale of mining interest | | | | — | | — | | 200 | | — | |
Proceeds from sale of available for sale investment | | 4 | | — | | — | | — | | 720 | |
Restricted cash | | | | — | | (993 | ) | — | | (1,481 | ) |
| | | | | | | | | | | |
Net cash flow used in investing activities of continuing operations | | | | (17,362 | ) | (41,793 | ) | (87,486 | ) | (124,314 | ) |
Net cash flow used in investing activities of discontinued operations | | | | — | | — | | — | | — | |
| | | | | | | | | | | |
Financing Activities | | | | | | | | | | | |
| | | | | | | | | | | |
Proceeds from long term debt, net of transaction costs | | 10(a(ii)) | | — | | 132,435 | | 34,927 | | 132,435 | |
Proceeds from sale of royalty interest, net of fees | | | | — | | — | | — | | 34,704 | |
Long term debt payments | | 10(a(i),b) | | (2,829 | ) | (49,055 | ) | (8,815 | ) | (49,055 | ) |
Payment of finance lease obligations | | | | (995 | ) | (2,202 | ) | (5,271 | ) | (6,362 | ) |
Common shares issued for cash (net of share issue costs) | | | | — | | (25 | ) | — | | 14,881 | |
Exercise of stock options and warrants | | | | — | | 50 | | 23 | | 69 | |
| | | | | | | | | | | |
Net cash (used in) provided by financing activities of continuing operations | | | | (3,824 | ) | 81,203 | | 20,864 | | 126,672 | |
Net cash provided by financing activities of discontinued operations | | | | — | | — | | — | | — | |
| | | | | | | | | | | |
Impact of foreign exchange on cash balances | | | | (50 | ) | (819 | ) | 118 | | (402 | ) |
| | | | | | | | | | | |
(Decrease) increase in cash and cash equivalents during the period | | | | (9,871 | ) | 50,224 | | (33,969 | ) | 27,574 | |
Cash and cash equivalents at beginning of period | | | | 24,617 | | 33,309 | | 48,715 | | 55,959 | |
Cash and cash equivalents at end of period | | | | $ | 14,746 | | $ | 83,533 | | $ | 14,746 | | $ | 83,533 | |
Supplemental cash flow information note 13
See accompanying notes to condensed consolidated interim financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands of Canadian dollars, except for share information, unaudited)
| | | | Share capital | | | | Reserves | | | | | |
| | Note | | Shares
(‘000s) | | Amount | | Equity portion
of convertible
debentures | | Warrants | | Share-based
payments | | Currency
translation
adjustment | | Investment
revaluation
reserve | | Deficit | | Equity | |
At January 1, 2013 | | | | 415,654 | | $ | 1,016,524 | | $ | 14,753 | | $ | 2,469 | | $ | 26,259 | | $ | (3,967 | ) | $ | (1,549 | ) | $ | (398,766 | ) | $ | 655,723 | |
Shares issued as part of various agreements (net of share issue costs of $30) | | 9,10(a(ii)) | | 936 | | 702 | | — | | — | | — | | — | | — | | — | | 702 | |
Share based payments | | 12(a(ii)) | | — | | — | | — | | — | | 1,652 | | — | | — | | — | | 1,652 | |
Stock-options exercised (including transfer from share-based payments reserves of $13) | | 12(a(i)) | | 30 | | 36 | | — | | — | | (13 | ) | — | | — | | — | | 23 | |
Net loss | | | | — | | — | | — | | — | | — | | — | | — | | $ | (7,776 | ) | (7,776 | ) |
Other comprehensive loss, net of tax | | | | — | | — | | — | | — | | — | | 3,967 | | 2,068 | | — | | 6,035 | |
Total comprehensive loss | | | | | | | | | | | | | | 3,967 | | 2,068 | | (7,776 | ) | (1,741 | ) |
At September 30, 2013 | | | | 416,620 | | $ | 1,017,262 | | $ | 14,753 | | $ | 2,469 | | $ | 27,898 | | $ | — | | $ | 519 | | $ | (406,542 | ) | $ | 656,359 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | Share capital | | | | Reserves | | | | | |
| | Note | | Shares
(‘000s) | | Amount | | Equity portion
of convertible
debentures | | Warrants | | Share-based
payments | | Currency
translation
adjustment | | Investment
revaluation
reserve | | Deficit | | Equity | |
At January 1, 2012 | | | | 400,169 | | $ | 992,318 | | $ | 0 | | $ | 2,469 | | $ | 21,543 | | $ | (7,679 | ) | $ | 1,011 | | $ | (80,834 | ) | $ | 928,828 | |
Share based payments | | 12(a(ii)) | | — | | — | | — | | — | | 3,574 | | — | | — | | — | | 3,574 | |
Stock-options exercised (including transfer from share-based payments reserves of $28) | | 12(a(i) | | 84 | | 96 | | — | | — | | (28 | ) | — | | — | | — | | 68 | |
Shares issued as part of mining property agreements (net of share issue costs of $94) | | 9 | | 15,401 | | 19,742 | | — | | — | | — | | — | | — | | — | | 19,742 | |
Equity portion of convertible debentures (net of transaction costs of $988) | | 10(b) | | — | | — | | 20,000 | | | | | | | | | | | | 20,000 | |
Change in deferred tax assets (liabilities) | | | | — | | 4,368 | | (5,247 | ) | | | | | | | | | | | (879 | ) |
Net loss | | | | — | | — | | — | | — | | — | | — | | — | | (15,706 | ) | (15,706 | ) |
Other comprehensive loss (income), net of tax | | | | — | | — | | — | | — | | — | | 3,452 | | (1,759 | ) | — | | 1,693 | |
Total comprehensive income | | | | | | | | | | | | | | 3,452 | | (1,759 | ) | (15,706 | ) | (14,013 | ) |
At September 30, 2012 | | | | 415,654 | | $ | 1,016,524 | | $ | 14,753 | | $ | 2,469 | | $ | 25,089 | | $ | (4,227 | ) | $ | (748 | ) | $ | (96,540 | ) | $ | 957,320 | |
| | | | | | | | | | | | | | | | | | | | | |
Share based payments | | | | — | | — | | — | | — | | 1,170 | | — | | — | | — | | 1,170 | |
Net loss | | | | — | | — | | — | | — | | — | | — | | — | | (302,226 | ) | (302,226 | ) |
Other comprehensive loss (income), net of tax | | | | — | | — | | — | | — | | — | | 260 | | (801 | ) | — | | (541 | ) |
Total comprehensive loss | | | | | | | | | | | | | | 260 | | (801 | ) | (302,226 | ) | (302,767 | ) |
At December 31, 2012 | | | | 415,654 | | $ | 1,016,524 | | $ | 14,753 | | $ | 2,469 | | $ | 26,259 | | $ | (3,967 | ) | $ | (1,549 | ) | $ | (398,766 | ) | $ | 655,723 | |
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Lake Shore Gold Corp. (“Lake Shore Gold” or the “Company”) is a publicly listed company, incorporated in Canada; the Company’s shares are traded on the Toronto Stock Exchange and on the NYSE MKT stock exchange. The head office, principal address and record office are located at 181 University Avenue, Suite 2000, Toronto, Ontario, Canada, M5H 3M7. The Company is primarily engaged in the operation, exploration and development of three gold complexes located in the Timmins Gold Camp in Timmins, Ontario; the Company also has certain exploration properties in Quebec. The Company is in commercial production at its Timmins West Mine and Bell Creek Mine.
2. BASIS OF PREPARATION
The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) as issued by the IASB, and follow the same accounting policies and methods of application as the annual consolidated financial statements of the Company for the year ended December 31, 2012, except as noted below under changes in accounting policies. These condensed consolidated interim financial statements do not contain all disclosures required by IFRS and accordingly should be read in conjunction with the 2012 annual consolidated financial statements and the notes thereto.
These condensed consolidated interim financial statements have been prepared under the historical cost convention, except for certain financial instruments, as set out in the accounting policies in Note 3 of the 2012 annual consolidated financial statements.
The preparation of financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the condensed consolidated interim financial statements are disclosed in note 4 of the 2012 annual consolidated financial statements.
CHANGES IN ACCOUNTING POLICIES
The Company has adopted the following new standards, along with any consequential amendments, effective January 1, 2013. These changes were made in accordance with the applicable transitional provisions.
Amendments to IFRS 7, Financial Instruments: Disclosures and IAS 32, Financial Instruments: Presentation
In December 2011, the IASB approved amendments to IFRS 7, Financial Instruments: Disclosures, with respect to offsetting financial assets and financial liabilities. The common disclosure requirements of amended IFRS 7 are intended to help investors and other users to better assess the effect or potential effect of offsetting arrangements on a company’s financial position. Companies and other entities are required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The required disclosures should be provided retrospectively.
As part of this project the IASB also clarified aspects of IAS 32, Financial Instruments: Presentation. The amendments to IAS 32 address inconsistencies in current practice when applying the requirements. The amendments are effective for annual periods beginning on or after January 1, 2014 and are required to be applied retrospectively.
1
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
The Company reviewed the amendments to IFRS 7 and IAS 32 and determined that no additional disclosures are currently required.
IFRS 10, Consolidated Financial Statements
IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 supersedes IAS 27, Consolidated and Separate Financial Statements and Standing Interpretation Committee (“SIC”)-12, Consolidation — Special Purpose Entities, and is effective for annual periods beginning on or after January 1, 2013.
The Company assessed its consolidation conclusions on January 1, 2013 and determined that the adoption of IFRS 10 did not result in any change in the consolidation status of the Company’s subsidiaries.
IFRS 11, Joint Arrangements
IFRS 11 establishes principles for financial reporting by parties to a joint arrangement. IFRS 11 supersedes current IAS 31, Interests in Joint Ventures and SIC-13, Jointly Controlled Entities — Non-Monetary Contributions by Venturers and is effective for annual periods beginning on or after January 1, 2013. The Company determined that the standard did not have any impact on its condensed consolidated interim financial statements.
IFRS 12, Disclosure of Interests in Other Entities
IFRS 12 applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The Company assessed its disclosures and concluded that the adoption of IFRS 12 did not result in any change in disclosures in the condensed consolidated interim financial statements.
IFRS 13, Fair Value Measurements
IFRS 13 defines fair value and sets out a single framework for measuring fair value which is applicable to all IFRSs that require or permit fair value measurements or disclosures about fair value measurements. IFRS 13 requires that when using a valuation technique to measure fair value, the use of relevant observable inputs should be maximized while unobservable inputs should be minimized. IFRS 13 is to be applied for annual periods beginning on or after January 1, 2013. The condensed consolidated interim financial statements for the nine months ended September 30, 2013 and 2012 include additional disclosures in accordance with the requirements of IFRS 13 (refer to note 15).
Amendments to IAS 1, Presentation of Financial Statements
The amendments introduce changes to presentation of items of other comprehensive income. The amendments require that an entity present separately the items of other comprehensive income that would be reclassified to profit and loss in the future if certain conditions are met from those that would never be reclassified to profit and loss. The amendments are to be applied effective July 1, 2012 and may be early adopted. The amendments are to be applied retroactively in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. In accordance with the requirements of Amendments to IAS 1, the Company separated the items of other comprehensive income that would be reclassified to profit and loss from those that would never be reclassified to profit and loss on the Statement of Other Comprehensive Income (Loss).
2
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
IAS 19, Employee Benefits (amended standard)
The amended standard introduces various changes in accounting and disclosure requirements for defined benefit plans. The amended standard also finalizes proposals on accounting for termination benefits; under the amended standard the termination benefits are recognized at the earlier of when the entity recognizes costs for a restructuring within the scope of IAS 37, Provisions, Contingent Liabilities and Contingent Assets, that includes the payment of a termination benefit, and when the entity can no longer withdraw the offer of the termination benefit. The amended standard is to be applied for periods beginning on or after January 1, 2013. The amended standard does not impact the Company’s condensed consolidated interim financial statements.
IAS 27 - Separate financial statements
IAS 27, Separate financial statements (IAS 27) was re-issued by the IASB in May 2011 to only prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. The consolidation guidance will now be included in IFRS 10. The amendments to IAS 27 are effective for annual periods beginning on or after January 1, 2013. The Company determined that the amendments to IAS 27 did not have any impact on its condensed consolidated interim financial statements.
IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine
IFRIC 20 is a new interpretation on the accounting for waste removal activities. The interpretation considers when and how to account separately for the benefits arising from a stripping activity, as well as how to measure such benefit.
The interpretation generally requires that costs from a stripping activity which improve access to ore to be recognized as a non-current asset when certain criteria are met and should be accounted as an addition to the related asset. IFRIC 20 does not impact the Company’s condensed consolidated interim financial statements.
ACCOUNTING STANDARD ISSUED BUT NOT YET EFFECTIVE
IFRS 9 Financial Instruments
This standard replaces the guidance in IAS 39, Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets and financial liabilities. The effective date has not yet been confirmed. The Company has not yet determined the effect of adoption of IFRS 9 on its condensed consolidated interim financial statements.
3
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
3. PRODUCTION COSTS
| | Three months ended September 30, | | Nine months ended September 30, | |
| | 2013 | | 2012 | | 2013 | | 2012 | |
Salaries and employee benefits | | $ | 7,816 | | $ | 6,732 | | $ | 23,684 | | $ | 20,262 | |
Raw materials and consumables | | 9,036 | | 6,597 | | 26,953 | | 19,483 | |
Contractors | | 3,529 | | 4,566 | | 12,616 | | 13,895 | |
Definition and delineation drilling | | 916 | | 2,129 | | 3,763 | | 8,452 | |
Royalties | | 980 | | 633 | | 2,885 | | 1,630 | |
Rentals and operating leases | | 215 | | 215 | | 744 | | 742 | |
Change in inventories | | 884 | | (1,268 | ) | 4,473 | | (5,819 | ) |
Share based payments | | (66 | ) | 162 | | 180 | | 577 | |
Other | | 118 | | 988 | | 241 | | 999 | |
| | $ | 23,428 | | $ | 20,754 | | $ | 75,539 | | $ | 60,221 | |
4. OTHER (LOSS) INCOME, NET
| | Three months ended September 30, | | Nine months ended September 30, | |
| | 2013 | | 2012 | | 2013 | | 2012 | |
Unrealized and realized (loss) gain on embedded derivatives note 10(a(i)) | | $ | (2,175 | ) | $ | (5,052 | ) | $ | 8,416 | | $ | (5,052 | ) |
Loss on deemed disposition of available for sale investment note 6 (ii) | | — | | — | | (1,681 | ) | — | |
Unrealized and realized foreign exchange gain, net | | 490 | | 640 | | 66 | | 1,058 | |
Gain on disposal of mining interest | | — | | — | | 200 | | — | |
Gain on settlement of debt | | — | | 601 | | — | | 546 | |
Gain on sale of available for sale investments | | — | | — | | — | | 584 | |
Unrealized gain (loss) on warrants | | — | | 34 | | (38 | ) | (259 | ) |
Other (loss) income, net | | $ | (1,685 | ) | $ | (3,777 | ) | $ | 6,963 | | $ | (3,123 | ) |
Foreign exchange gain for the three and nine months ended September 30, 2013 includes $694 and $338 unrealized gain from the mark to market of certain embedded derivatives (same periods in 2012 - $1,460) (note 10(a(i))).
During the nine months ended September 30, 2013, the Company sold one of its non-core green field exploration properties for $200 and recorded a gain for same amount.
Gain on settlement of debt relates to the repayment by the Company of the UniCredit Bank AG revolving credit facility on September 7, 2012, concurrent with the closing of the convertible debentures agreement (note 10(b)).
During 2012, the Company sold one of its available for sale investments for $720 and recorded a realized gain of $584 in net loss ($749 gain transferred from investment revaluation reserve to net loss).
5. FINANCE INCOME AND FINANCE EXPENSE
| | Three months ended September 30, | | Nine months ended September 30, | |
| | 2013 | | 2012 | | 2013 | | 2012 | |
| | | | | | | | | |
Interest income on bank deposits | | $ | 194 | | $ | 82 | | $ | 652 | | $ | 299 | |
Finance income | | $ | 194 | | $ | 82 | | $ | 652 | | $ | 299 | |
| | | | | | | | | |
Borrowing costs note 10 | | $ | (3,583 | ) | $ | — | | $ | (9,714 | ) | $ | — | |
Other interest expense | | (87 | ) | (58 | ) | (281 | ) | (207 | ) |
Unwinding of the discount on environmental rehabilitation provision | | (19 | ) | (17 | ) | (47 | ) | (45 | ) |
Finance expense | | $ | (3,689 | ) | $ | (75 | ) | $ | (10,042 | ) | $ | (252 | ) |
6. SALE OF THE MEXICO SUBSIDIARY
On January 30, 2013 the Company and Revolution Resources Corp. (“Revolution”) entered into an agreement for the sale of the Company’s Mexico subsidiary (which held 100% of the Company’s Mexico property portfolio) to Revolution for:
· 20,000,000 common shares of Revolution, receivable on closing
4
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
· 2% to 3.5% Net Smelter Return (“NSR”) on the various properties of the Mexico portfolio (subject to rights of Revolution to repurchase a portion of the NSR), and
· $5,000 in cash or common shares on or before December 31, 2017 contingent on certain conditions being met, for a maximum of 25,000,000 common shares of Revolution (valued at the greater of $0.20 and share price of Revolution at time of issuance).
The agreement closed on May 8, 2013 (the “closing date”) at which time the Company received 20,000,000 common shares of Revolution; the amended option agreement entered between the Company and Revolution in 2012 was terminated
(i) Disposal of the Mexico subsidiary
At December 31, 2012, the assets and liabilities of the Mexico subsidiary were reclassified as held for sale in the statement of financial position ($2,432 comprised of $2,053 value of mining interests and $379 cash and cash equivalents); the Company recorded an impairment charge of $71,500 on the reclassification. The disposal of the Mexico property portfolio is consistent with the Company’s long term policy to focus its activities in its three gold complexes in Canada.
The Company recorded a loss of $4,302 on the disposal of the Mexico subsidiary in May 2013 as detailed below:
Consideration received: | | | |
20,000,000 shares of Revolution valued at $0.085 per share | | $ | 1,700 | |
Total consideration received | | $ | 1,700 | |
| | | |
Asset over which control was lost: | | | |
Mining interest (Mexico properties) | | $ | 2,192 | |
Net asset disposed of | | $ | 2,192 | |
| | | |
Loss on disposal of the Mexico subsidiary | | | |
Consideration received | | $ | 1,700 | |
Net assets disposed of | | $ | (2,192 | ) |
Cumulative exchange loss in respect of the net assets of the subsidiary | | $ | (3,810 | ) |
Loss on disposal | | $ | (4,302 | ) |
(ii) Deemed disposition of available for sale investment in Revolution
Prior to May 8, 2013 (the closing date of the agreement), the Company held 6,713,740 of Revolution’s shares representing approximately 7% of the then issued and outstanding shares of Revolution; the newly issued shares brought the Company’s equity ownership on Revolution to 22.5%, making Revolution an associate (ownership over 20% and the right of board representation gives the Company significant influence on Revolution). As such, from May 8, 2013, Revolution is accounted for under the equity method of accounting which requires the investment in the associate to be initially recorded at cost and the carrying amount adjusted thereafter for the Company’s share of the post-acquisition profits and losses of the investee.
Prior to the acquisition, the Company’s investment in Revolution was considered available for sale and marked to market at each period end ($470 and $705 respectively at March 31, 2013 and December 31, 2012) with changes in value accumulated in other comprehensive income (loss) as part of investment revaluation reserve. The Company recorded a loss of $1,681 on the transaction (deemed disposition of the available for sale investment in Revolution), $1,785 of which was transferred from investment revaluation reserve.
5
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
7. INVENTORIES AND STOCKPILED ORE
As at | | September 30, 2013 | | December 31, 2012 | |
Bullion | | $ | 390 | | $ | 10,494 | |
Gold in circuit | | 9,184 | | 7,784 | |
Stockpiled ore | | 8,325 | | 6,420 | |
Materials and supplies inventory | | 5,527 | | 3,200 | |
| | $ | 23,426 | | $ | 27,898 | |
The cost of inventories and stockpiled ore recognized as an expense (excluding royalty expense) during the three and nine months ended September 30, 2013 is $22,448 and $72,654 respectively (same periods in 2012, $20,121 and $58,591). There were no write downs or reversals of write downs of inventory to net realizable value during the three and nine months ended September 30, 2013 and 2012.
8. INVESTMENTS IN ASSOCIATES
The Company’s investments in associates are as follows:
| | September 30, 2013 | | December 31, 2012 | |
As at | | Net book
value | | Fair value | | Ownership | | Net book
value | | Fair value | | Ownership | |
Northern Superior Resources Inc. | | $ | 1,986 | | $ | 2,247 | | 23.84 | % | $ | 4,493 | | $ | 4,493 | | 23.84 | % |
Revolution Resources Corporation note 6(ii) | | $ | 935 | | $ | 935 | | 22.45 | % | $ | — | | $ | — | | 0.00 | % |
Golden Share Mining Corporation | | $ | — | | $ | — | | 0.00 | % | $ | 868 | | $ | 868 | | 19.76 | % |
| | $ | 2,921 | | | | | | $ | 5,361 | | | | | |
Effective July 29, 2013 (the “transaction date”), the Company’s ownership in Golden Share Mining Corporation (“Golden Share”) was diluted to 7.31% and the Company no longer has the right of board representation; as a result, during the third quarter of 2013, the Company wrote down its investment in Golden Share to its fair value at the transaction date of $176, recorded a write down of $369 and transferred the investment in Golden Share to available for sale investments. Also, during the third quarter of 2013, the Company recorded an unrealized gain of $519 in other comprehensive income, being the increase in fair value of the investment in Golden Share from the transaction date to end of the quarter.
During the three and nine months ended September 30, 2013, in addition to the write down of Golden Share of $369 discussed above, the Company wrote down its investments in associates to their fair value and recorded an impairment charge of $250 and $3,203, respectively (same periods for 2012, $5,957), as the decline in value was considered significant or prolonged.
During the three and nine months ended September 30, 2013, the Company recorded a loss of $411 and $962, respectively (same periods for 2012, $576 and $2,343, respectively), representing the Company’s share on losses of its equity investments.
As at September 30, 2013 and December 31, 2012, the Company holds 19,000,000 shares of RT Minerals Corp. valued at $Nil.
6
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
9. MINING INTERESTS
Period ended September 30, 2013 | | Depletable | | Non
depletable | | Total | | Plant and
equipment | | Total | |
Cost | | | | | | | | | | | |
At January 1, 2013 | | $ | 501,107 | | $ | 134,605 | | $ | 635,712 | | $ | 175,579 | | $ | 811,291 | |
Additions | | 47,488 | | 64 | | 47,552 | | 39,873 | | 87,425 | |
Construction in progress | | — | | — | | — | | 429 | | 429 | |
Cost at September 30, 2013 | | $ | 548,595 | | $ | 134,669 | | $ | 683,264 | | $ | 215,881 | | $ | 899,145 | |
Accumulated depreciation and depletion | | | | | | | | | | | |
At January 1, 2013 | | $ | 47,779 | | $ | — | | $ | 47,779 | | $ | 43,896 | | $ | 91,675 | |
Depreciation | | — | | — | | — | | 9,041 | | 9,041 | |
Depletion | | 28,707 | | — | | 28,707 | | — | | 28,707 | |
Accumulated depreciation and depletion at September 30, 2013 | | $ | 76,486 | | $ | — | | $ | 76,486 | | $ | 52,937 | | $ | 129,423 | |
Carrying amount at September 30, 2013 | | $ | 472,109 | | $ | 134,669 | | $ | 606,778 | | $ | 162,944 | | $ | 769,722 | |
Year ended December 31, 2012 | | Depletable | | Non
depletable | | Total | | Plant and
equipment | | Total | |
Cost | | | | | | | | | | | |
At January 1, 2012 | | $ | 228,921 | | $ | 611,899 | | $ | 840,820 | | $ | 137,306 | | $ | 978,126 | |
Transfers from non depletable to depletable | | 379,188 | | (379,188 | ) | — | | — | | — | |
Additions | | 92,443 | | 4,893 | | 97,336 | | 45,481 | | 142,817 | |
Construction in progress | | — | | — | | — | | 37,294 | | 37,294 | |
Pre-production revenue | | (6,706 | ) | — | | (6,706 | ) | — | | (6,706 | ) |
Transfer to inventories | | (5,270 | ) | — | | (5,270 | ) | — | | (5,270 | ) |
Change in estimate and discount rate (environmental rehabilitation assets) | | 842 | | — | | 842 | | — | | 842 | |
Foreign exchange | | — | | 3,712 | | 3,712 | | — | | 3,712 | |
Franco-Nevada / Revolution transactions | | (34,704 | ) | (267 | ) | (34,971 | ) | — | | (34,971 | ) |
Reclass to assets held for sale note 6 | | — | | (2,053 | ) | (2,053 | ) | — | | (2,053 | ) |
Impairment charge | | (153,607 | ) | (104,391 | ) | (257,998 | ) | (44,502 | ) | (302,500 | ) |
Cost at December 31, 2012 | | $ | 501,107 | | $ | 134,605 | | $ | 635,712 | | $ | 175,579 | | $ | 811,291 | |
Accumulated depreciation and depletion | | | | | | | | | | | |
At January 1, 2012 | | $ | 10,173 | | $ | — | | $ | 10,173 | | $ | 28,405 | | $ | 38,578 | |
Depreciation | | — | | — | | — | | 15,491 | | 15,491 | |
Depletion | | 37,606 | | — | | 37,606 | | — | | 37,606 | |
Accumulated depreciation and depletion at December 31, 2012 | | $ | 47,779 | | $ | — | | $ | 47,779 | | $ | 43,896 | | $ | 91,675 | |
Carrying amount at December 31, 2012 | | $ | 453,328 | | $ | 134,605 | | $ | 587,933 | | $ | 131,683 | | $ | 719,616 | |
During 2013, the Company issued 50,000 common shares to the First Nation communities, under an Impact and Benefits Agreement, valued at $32.
The depreciation of plant and equipment used in the exploration and development activities of assets not yet ready as intended by management is capitalized to the specific property ($522 and $1,911, respectively, for the three and nine months ended September 30, 2013; $1,110 and $3,424, respectively, for same period in 2012).
The second phase of the Bell Creek Mill expansion to increase the mill capacity to over 3,000 tonnes per day was commissioned during the third quarter; $73,933 was transferred from construction in progress to
7
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
depreciable asset. The first phase of the expansion to increase the mill capacity to 2,500 tonnes per day was commissioned on November 30, 2012 ($37,798 transferred to depreciable asset).
Borrowing costs incurred on long term debt (note 10) totaling $1,849 and $6,202, respectively, for the three and nine months ended September 30, 2013 (same periods in 2012, $2,383 and $3,940) are capitalized to qualifying assets.
During the three months ended March 31, 2012, the Company recorded $6,706 of pre-production revenue, representing sales of gold bullion produced from Thunder Creek Deposit and Bell Creek Mine prior to commercial production on January 1, 2012.
10. LONG TERM DEBT
As at | | September 30, 2013 | | December 31, 2012 | |
Gold Loan (a(i)) | | $ | 20,205 | | $ | 36,775 | |
Standby Line (a(ii)) | | 32,317 | | — | |
Convertible Debentures (b) | | 82,648 | | 81,778 | |
| | $ | 135,170 | | $ | 118,553 | |
Current portion of long term debt (a) | | 14,390 | | 18,219 | |
Long term debt | | $ | 120,780 | | $ | 100,334 | |
(a) Sprott Resource Lending Partnership Credit Facility
On June 14, 2012, the Company signed a financing agreement with Sprott Resource Lending Partnership (“Sprott”) for a credit facility (the “Facility”) totaling up to $70,000, secured by the material assets of the Company. The Facility involves two components, a $35,000 gold loan (the “Gold Loan”), payable monthly starting on January 31, 2013 to May 31, 2015 and a standby line of credit (the “Standby Line”) for an additional $35,000, maturing on January 1, 2015. The transaction closed on July 16, 2012, at which time the Company received $35,000 for the Gold Loan.
(i) Gold Loan
The Gold Loan is being repaid through 29 monthly cash payments which started on January 31, 2013 based on 947 ounces of gold each month multiplied by the Bloomberg gold closing price on the date of payment.
As a result of the indexation of the principal repayments to the movement in the price of gold, the Company has determined that the Gold Loan contains a derivative which is embedded in the Canadian dollar denominated debt instrument (the “Embedded Derivative”). The Embedded Derivative is marked to market at each period end with changes in fair value recorded as other income (expense) and foreign exchange gain (loss), the latter representing the impact of changes in US$/Canadian$ exchange rate on the fair value of the derivative.
During the three and nine months ended September 30, 2013 the Company, respectively:
· paid $3,998 and $12,669 for the Gold Loan (including $1,169 and $3,854 of interest) and realized gains of $811 and $1,625 (change in gold prices from June 30, 2013 and December 31, 2012, respectively) partially offset by $154 and $386 of realized foreign exchange loss;
· incurred $2,986 of unrealized loss and $6,791 of unrealized gain as a result of the change in gold prices during the periods;
8
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
· incurred $694 and $338 of unrealized foreign exchange gain due to movement in US$/Canadian$ exchange rate;
· incurred $1,370 and $4,455 of interest expense and amortization of transaction costs of which $472 and $1,746 was capitalized in mining interests.
During the three and nine months ended September 30, 2012 the Company incurred the following related to the Gold Loan:
· $5,052 of unrealized loss as a result of the increase in gold prices from July 16, 2012 (when the Company received the Gold Loan) to September 30, 2012;
· $1,460 of unrealized foreign exchange gain due to movement in US$/Canadian$ exchange rate during the period;
· $1,311 of interest expense and amortization of transaction costs which was fully capitalized to mining interests.
As at | | September 30, 2013 | | December 31, 2012 | |
Accreted principal and interest, net of unamortized transaction costs of $1,344 (December 31, 2012, $1,947) | | $ | 26,190 | | $ | 35,630 | |
Embedded derivative (asset) liability | | (5,985 | ) | 1,145 | |
| | $ | 20,205 | | $ | 36,775 | |
Current portion of gold loan | | 17,942 | | 17,761 | |
Current portion of embedded derivative (asset) liability | | (3,552 | ) | 458 | |
Long term portion of gold loan | | $ | 5,815 | | $ | 18,556 | |
(ii) Standby Line
On February 1, 2013, the Company drew down the Standby Line of $35,000 and issued 885,964 common shares of the Company (valued at $700), representing the 2% drawdown fee; the Standby Line matures on January 1, 2015 and bears annual interest of 9.75%, compounded monthly; the Company can pay the Standby Line or portions of it at any time before the maturity date; the Company owes a 4% rollover fee on the outstanding principal at December 31, 2013 that can be paid in either cash or common shares at the option of the Company, subject to certain terms and conditions.
Upon drawing down the Standby Line, $4,095 of transaction costs were netted against the long term debt ($3,352 of deferred financing costs outstanding at December 31, 2012 and remaining incurred upon the draw down, including value of shares issued). For the three and nine months ended September 30, 2013 the Company incurred borrowing costs of $1,409 and $3,716 respectively, related to the Standby Line, of which $477 and $1,446, respectively, are capitalized in mining interests; borrowing costs for the three and nine months ended September 30, 2013, respectively, include interest expense of $872 and $2,306, and amortization of deferred transaction costs of $537 and $1,410.
As at | | September 30, 2013 | | December 31, 2012 | |
Principal | | $ | 35,000 | | $ | — | |
Unamortized transaction costs | | (2,683 | ) | — | |
| | $ | 32,317 | | $ | — | |
9
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
(b) Convertible Debentures
On September 7, 2012, the Company issued 103,500 of Convertible Unsecured Debentures (the “Debentures”) at $1,000 for an aggregate principal amount of $103,500 which bear annual interest at 6.25%, payable semi-annually in arrears on March 31 and September 30 of each year, starting on March 31, 2013, and maturing on September 30, 2017. During the three and nine months ended September 30, 2013 the Company paid $3,243 and $6,876, respectively, of interest to the Debenture holders.
The option of the holders to convert the Debentures into common share of the Company requires the Debentures to be accounted as a compound financial instrument with $82,512 recorded as long term debt and $20,988 as equity (the latter representing the value of the holder conversion option). The debt component is subsequently measured at amortized cost using the effective interest method.
As at | | September 30, 2013 | | December 31, 2012 | |
Beginning balance | | $ | 81,778 | | $ | 78,626 | |
Interest expense and unwinding of discount rate | | 7,746 | | 3,152 | |
Interest payment | | (6,876 | ) | — | |
| | $ | 82,648 | | $ | 81,778 | |
During the three and nine months ended September 30, 2013, respectively, the Company incurred $2,653 and $7,745 (same periods in 2012, $511) of interest expense and unwinding of the discount rate related to the Debentures, of which $900 and $3,010, respectively, (same periods in 2012, $511) was capitalized to mining interests.
11. DEFERRED TAXES
The Company is in a net deferred tax asset position for both income and mining taxes as at September 30, 2013 and December 31, 2012 and has recognized the benefit of the deferred tax assets to the extent they offset the deferred income tax liabilities. The remaining deferred tax assets are not recognized as the Company does not have a history of earnings.
During the three and nine months ended September 30, 2013, the Company recorded $Nil of deferred Ontario mining tax provision (same periods in 2012, $81 and $560).
12. EQUITY
a) Reserves
i) Share Options
As at September 30, 2013, the Company had 19,725,450 options outstanding of which 10,614,450 are exercisable. Movements in share options during the nine months ended September 30, 2013 and 2012 were as follows:
10
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
| | September 30, 2013 | | September 30, 2012 | |
| | Number of
options | | Weighted-average
exercise price | | Number of
options | | Weighted-average
exercise price | |
Outstanding, beginning of year | | 23,087,535 | | $ | 2.32 | | 20,187,752 | | $ | 2.75 | |
Granted | | 450,000 | | $ | 0.37 | | 42,000 | | $ | 1.24 | |
Forfeited and expired | | (3,782,085 | ) | $ | 2.02 | | (1,536,717 | ) | $ | 3.15 | |
Exercised | | (30,000 | ) | $ | 0.79 | | (84,000 | ) | $ | 0.82 | |
Outstanding, end of period | | 19,725,450 | | $ | 2.34 | | 18,609,035 | | $ | 2.73 | |
Exercisable, end of period | | 10,614,450 | | $ | 2.90 | | 9,649,685 | | $ | 2.44 | |
ii) Share-based payment expense
Share-based payment expense recognized is allocated to production costs (options granted to mine employees), general and administrative costs (options granted to directors and corporate employees), exploration expenses (options granted to individuals involved in exploration work on the green field exploration stage properties), and capitalized as part of mining properties (options granted to individuals involved on the specific projects capitalized). The Company capitalized $23 and $28, respectively, of share-based payments for the three and nine months ended September 30, 2013 (same period in 2012, $204 and $709).
The Company granted 450,000 stock options to its employees during the nine months ended September 30, 2013 which vest over a period of 3 years, are exercisable at $0.37 per option, expire in 2018, and have a total fair value of $90. The fair value of stock options granted during the nine months ended September 30, 2013 is estimated at the time of the grant using the Black-Scholes options pricing model with assumptions as follows: expected volatility of 64%-71%, based on past history, a risk-free interest rate of 1.1%, dividend rate of $Nil and expected time to exercise of 3.5 years.
The allocation in the condensed consolidated statement of comprehensive income (loss) for the three and nine month periods ended September 30, 2013 and 2012 is as follows:
| | Three months ended September 30, | | Nine months ended September 30, | |
| | 2013 | | 2012 | | 2013 | | 2012 | |
General and administrative | | $ | 459 | | $ | 606 | | $ | 1,370 | | $ | 2,151 | |
Production costs | | (66 | ) | 162 | | 180 | | 577 | |
Exploration | | 19 | | 39 | | 72 | | 137 | |
Total share-based payments | | $ | 412 | | $ | 807 | | $ | 1,622 | | $ | 2,865 | |
b) Basic and diluted loss per share
The impact of the outstanding options, warrants and convertible debentures for the three and nine months ended September 30, 2013 and 2012 has not been included in the calculation of loss per share as the impact would be anti-dilutive. The basic and diluted loss per share for the three and nine months ended September 30, 2013 and 2012 is calculated as follows:
11
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
| | Three months ended September 30, | | Nine months ended September 30, | |
| | 2013 | | 2012 | | 2013 | | 2012 | |
Net loss from continuing operations | | $ | (1,718 | ) | $ | (10,768 | ) | $ | (3,474 | ) | $ | (15,663 | ) |
Weighted average basic and diluted number of common shares outstanding (in ‘000s) | | 416,620 | | 415,454 | | 416,507 | | 409,879 | |
Basic and diluted loss per share from continuing operations | | $ | (0.00 | ) | $ | (0.03 | ) | $ | (0.01 | ) | $ | (0.04 | ) |
| | | | | | | | | |
Net loss from continuing and discontinued operations | | $ | (1,718 | ) | $ | (10,771 | ) | $ | (7,776 | ) | $ | (15,706 | ) |
Weighted average basic and diluted number of common shares outstanding (in ‘000s) | | 416,620 | | 415,454 | | 416,507 | | 409,879 | |
Basic and diluted loss per share | | $ | (0.00 | ) | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.04 | ) |
13. SUPPLEMENTAL CASH FLOW INFORMATION
| | Three months ended September 30, | | Nine months ended September 30, | |
| | 2013 | | 2012 | | 2013 | | 2012 | |
| | | | | | | | | |
Change in operating working capital | | | | | | | | | |
Decrease in receivables and prepaids | | $ | 1,285 | | $ | 912 | | $ | 1,997 | | $ | 553 | |
(Increase) decrease in inventory | | (552 | ) | (1,156 | ) | 2,144 | | (6,020 | ) |
(Decrease) increase in accounts payable and accrued liabilities | | 2,449 | | 2,373 | | (2,033 | ) | 2,672 | |
| | $ | (1,716 | ) | $ | 2,129 | | $ | (2,108 | ) | $ | (2,795 | ) |
| | | | | | | | | |
Cash and cash equivalents at September 30 consist of: | | | | | | | | | |
Cash | | $ | 14,746 | | $ | 33,524 | | $ | 14,746 | | $ | 33,524 | |
Short term investments | | — | | 50,009 | | — | | 50,009 | |
| | $ | 14,746 | | $ | 83,533 | | $ | 14,746 | | $ | 83,533 | |
| | Three months ended September 30, | | Nine months ended September 30, | |
Non-cash investing and financing activities | | 2013 | | 2012 | | 2013 | | 2012 | |
| | | | | | | | | |
Mining interests | | | | | | | | | |
(Reduction) increase in working capital related to mining interests | | $ | (3,171 | ) | $ | 434 | | $ | (7,158 | ) | $ | (1,557 | ) |
Shares issued as part of mining property agreements | | — | | 340 | | 32 | | 382 | |
Transfers to inventories and stockpiled ore upon commercial production | | — | | — | | — | | (5,270 | ) |
Share-based payments expense capitallized | | 23 | | 204 | | 28 | | 709 | |
Additions of capital lease assets | | — | | 832 | | — | | 2,517 | |
Changes in mine closure assets | | (394 | ) | 439 | | (394 | ) | 817 | |
Non cash interest capitalized | | 796 | | 2,003 | | 2,110 | | 2,482 | |
| | $ | (2,746 | ) | $ | 4,252 | | $ | (5,382 | ) | $ | 80 | |
Share Capital | | | | | | | | | |
Transfer of amounts from share-based payments reserve | | $ | — | | $ | 10 | | $ | 13 | | $ | 28 | |
Shares issued as part of mining property agreement | | — | | 340 | | 32 | | 382 | |
Shares issued as part of financing agreement note 11(a(ii)) | | — | | — | | 700 | | 4,479 | |
| | $ | — | | $ | 350 | | $ | 745 | | $ | 4,889 | |
14. SEGMENTED INFORMATION
The Company has two operating segments: mining operations and exploration and advanced exploration. Corporate, which is not an operating segment includes all the corporate growth and development activities and the corporate team that provides administrative, technical, financial and other support to all of the Company’s business units. Other corporate expenses include general and administrative costs, write down of investment in associates, other income (loss), net, the Company’s share of income (loss) of its investment in associates; corporate finance items, net, include borrowing costs, bank and debt interest and other charges and interest earned on cash and cash equivalents. The information reported below is based on the information provided to the Chief Executive Officer, the Company’s chief operating decision maker.
12
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
As at and for the three months ended September 30, 2013
| | Mining
operations* | | Exploration and
advanced
exploration** | | Corporate | | Total | |
Revenues | | $ | 44,301 | | $ | — | | $ | — | | $ | 44,301 | |
Earnings from mine operations | | 7,554 | | $ | — | | $ | — | | $ | 7,554 | |
| | | | | | | | | |
General and administrative | | — | | — | | (2,823 | ) | (2,823 | ) |
Exploration and evaluation | | — | | (239 | ) | — | | (239 | ) |
Write down of investments in associates | | — | | — | | (619 | ) | (619 | ) |
Share of loss of investments in associates | | — | | — | | (411 | ) | (411 | ) |
Earnings (loss) from operations and associates | | 7,554 | | (239 | ) | (3,853 | ) | 3,462 | |
Other loss, net | | — | | — | | (1,685 | ) | (1,685 | ) |
Finance items (net) | | — | | — | | (3,495 | ) | (3,495 | ) |
Earnings (loss) from continuing operations | | 7,554 | | (239 | ) | (9,033 | ) | (1,718 | ) |
Loss from discontinued operations | | — | | — | | — | | — | |
Net earnings (loss) | | $ | 7,554 | | $ | (239 | ) | $ | (9,033 | ) | $ | (1,718 | ) |
Expenditures on mining interests | | $ | 17,362 | | $ | — | | $ | — | | $ | 17,362 | |
Total assets | | $ | 664,388 | | $ | 135,376 | | $ | 22,772 | | $ | 822,536 | |
Total liabilities | | $ | 28,285 | | $ | — | | $ | 137,892 | | $ | 166,177 | |
As at and for the nine months ended September 30, 2013
| | Mining
operations* | | Exploration and
advanced
exploration** | | Corporate | | Total | |
Revenues | | $ | 126,833 | | $ | — | | $ | — | | $ | 126,833 | |
Earnings from mine operations | | $ | 13,211 | | $ | — | | $ | — | | $ | 13,211 | |
| | | | | | | | | |
General and administrative | | — | | — | | (8,711 | ) | (8,711 | ) |
Exploration and evaluation | | — | | (1,013 | ) | — | | (1,013 | ) |
Write down of investments in associates | | — | | — | | (3,572 | ) | (3,572 | ) |
Share of loss of investments in associates | | — | | — | | (962 | ) | (962 | ) |
Earnings (loss) from operations and associates | | 13,211 | | (1,013 | ) | (13,245 | ) | (1,047 | ) |
Other income, net | | — | | — | | 6,963 | | 6,963 | |
Finance items (net) | | — | | — | | (9,390 | ) | (9,390 | ) |
Earnings (loss) from continuing operations | | 13,211 | | (1,013 | ) | (15,672 | ) | (3,474 | ) |
Loss from discontinued operations | | — | | (4,302 | ) | — | | (4,302 | ) |
Net earnings (loss) | | $ | 13,211 | | $ | (5,315 | ) | $ | (15,672 | ) | $ | (7,776 | ) |
Expenditures on mining interests | | $ | 87,622 | | $ | 64 | | $ | — | | $ | 87,686 | |
Total assets | | $ | 664,388 | | $ | 135,376 | | $ | 22,772 | | $ | 822,536 | |
Total liabilities | | $ | 28,285 | | $ | — | | $ | 137,892 | | $ | 166,177 | |
13
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
Three months ended September 30, 2012
| | Mining operations* | | Exploration and
advanced exploration** | | Corporate | | Total | |
Revenues | | $ | 33,734 | | $ | 0 | | $ | 0 | | $ | 33,734 | |
Earnings from mine operations | | $ | 2,573 | | — | | — | | $ | 2,573 | |
| | | | | | | | | |
General and administrative | | — | | — | | (2,670 | ) | (2,670 | ) |
Exploration and evaluation | | — | | (1,166 | ) | — | | (1,166 | ) |
Write down of investments in associates | | — | | — | | (5,957 | ) | (5,957 | ) |
Share of loss of investments in associates | | — | | — | | (576 | ) | (576 | ) |
Earnings (loss) from operations and associates | | $ | 2,573 | | $ | (1,166 | ) | $ | (9,203 | ) | $ | (7,796 | ) |
Other loss, net | | — | | — | | (3,777 | ) | (3,777 | ) |
Finance items (net) | | — | | — | | 7 | | 7 | |
Earnings (loss) before taxes | | 2,573 | | (1,166 | ) | (12,973 | ) | (11,566 | ) |
Deferred mining tax provision | | 798 | | — | | — | | 798 | |
Earnings (loss) from continuing operations after tax | | 3,371 | | (1,166 | ) | (12,973 | ) | (10,768 | ) |
Loss from discontinuing operations after tax | | — | | (3 | ) | — | | (3 | ) |
Net earnings (loss) | | $ | 3,371 | | $ | (1,169 | ) | $ | (12,973 | ) | $ | (10,771 | ) |
As at and for the year ended December 31, 2012 | | | | | | | | | |
Expenditures on mining interests | | $ | 163,888 | | $ | 4,706 | | $ | — | | $ | 168,594 | |
Pre-production revenue | | $ | (6,706 | ) | $ | — | | $ | — | | $ | (6,706 | ) |
| | | | | | | | | |
Total assets | | $ | 620,954 | | $ | 138,258 | | $ | 63,803 | | $ | 823,015 | |
Total liabilities | | $ | 45,789 | | $ | — | | $ | 121,503 | | $ | 167,292 | |
Nine months ended September 30, 2012
| | Mining operations* | | Exploration and
advanced exploration** | | Corporate | | Total | |
Revenues | | $ | 99,036 | | $ | — | | $ | — | | $ | 99,036 | |
Earnings from mine operations | | $ | 7,028 | | $ | — | | $ | — | | $ | 7,028 | |
| | — | | | | | | | |
General and administrative | | — | | — | | (9,119 | ) | (9,119 | ) |
Exploration and evaluation | | — | | (2,515 | ) | — | | (2,515 | ) |
Write down of investments in associates | | — | | — | | (5,957 | ) | (5,957 | ) |
Share of loss of investments in associates | | — | | — | | (2,343 | ) | (2,343 | ) |
Earnings (loss) from operations and associates | | $ | 7,028 | | $ | (2,515 | ) | (17,419 | ) | $ | (12,906 | ) |
Other loss, net | | — | | — | | (3,123 | ) | (3,123 | ) |
Finance items (net) | | — | | — | | 47 | | 47 | |
Earnings (loss) before taxes) | | 7,028 | | (2,515 | ) | (20,495 | ) | (15,982 | ) |
Deferred mining tax provision | | 319 | | — | | — | | 319 | |
Earnings (loss) from continuing operations after tax | | 7,347 | | (2,515 | ) | (20,495 | ) | (15,663 | ) |
Loss from discontinuing operations after tax | | — | | (43 | ) | — | | (43 | ) |
Net earnings (loss) | | $ | 7,347 | | $ | (2,558 | ) | $ | (20,495 | ) | $ | (15,706 | ) |
As at and for the year ended December 31, 2012 | | | | | | | | | |
Expenditures on mining interests | | $ | 163,888 | | $ | 4,706 | | $ | — | | $ | 168,594 | |
Pre-production revenue | | $ | (6,706 | ) | $ | — | | $ | — | | $ | (6,706 | ) |
| | | | | | | | | |
Total assets | | $ | 620,954 | | $ | 138,258 | | $ | 63,803 | | $ | 823,015 | |
Total liabilities | | $ | 45,789 | | $ | — | | $ | 121,503 | | $ | 167,292 | |
* Mining operations include activities on the Company’s Timmins West Mine and Bell Creek Mine.
** Exploration and advanced exploration include green field exploration (which is expensed on the consolidated statement of income (loss)) as well as properties capitalized as per the Company’s policy (other than the properties which are in commercial production as discussed above).
14
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
The Company sells its gold bullion through several brokers and there is no economic dependence; the Company does not have any long term sales contracts.
15. FINANCIAL INSTRUMENTS
CARRYING VALUES OF FINANCIAL INSTRUMENTS
The carrying values of the financial assets and liabilities at September 30, 2013 and December 31, 2012 are as follows:
| | September 30, 2013 | | December 31, 2012 | |
Financial Assets | | | | | |
At fair value through profit or loss | | | | | |
Cash and cash equivalents | | $ | 14,746 | | $ | 48,715 | |
Restricted cash | | 7,095 | | 7,095 | |
Warrant investments | | 70 | | 108 | |
| | $ | 21,911 | | $ | 55,918 | |
| | | | | |
Loans and receivable, measured at amortized cost | | | | | |
Receivables | | $ | 3,289 | | $ | 6,578 | |
| | | | | |
Available-for-sale, measured at fair value | | | | | |
Investments in public companies | | $ | 699 | | $ | 702 | |
| | | | | |
Financial Liabilities | | | | | |
At fair value through profit and loss | | | | | |
Embedded derivative (asset) liability note 10(a(i)) | | $ | (5,985 | ) | $ | 1,145 | |
| | | | | |
Other financial liabilities, measured at fair value | | | | | |
Share-based liabilities | | $ | 504 | | $ | 479 | |
| | | | | |
Other financial liabilities, measured at amortized cost | | | | | |
Accounts payable and accrued liabilities | | $ | 21,523 | | $ | 33,867 | |
Long term debt note 10 | | $ | 141,155 | | $ | 117,408 | |
| | $ | 162,678 | | $ | 151,275 | |
FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of cash and cash equivalents, restricted cash, receivables and accounts payable and accrued liabilities approximate their carrying values due to the short-term to maturity of these financial instruments. The fair value of debentures at September 30, 2013 is $77,625 (December 31, 2012, $95,499).
The fair value hierarchy of financial instruments measured at fair value on the balance sheet is as follows:
15
LAKE SHORE GOLD CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands of Canadian dollars, except for share information and per share amounts, unaudited)
| | September 30, 2013 | | December 31, 2012 | |
As at | | Level 1 | | Level 1 | |
| | | | | |
Cash and cash equivalents | | $ | 14,746 | | $ | 48,715 | |
Restricted cash | | $ | 7,095 | | $ | 7,095 | |
Investments in public companies | | $ | 699 | | $ | 702 | |
| | | | | |
| | Level 2 | | Level 2 | |
Gold loan liability note 10(a(i)) | | $ | 22,958 | | $ | 38,521 | |
Embedded derivative (asset) liability note 10(a(i)) | | $ | (5,985 | ) | $ | 1,145 | |
Share-based liabilities | | $ | 504 | | $ | 479 | |
Warrant investments | | $ | 70 | | $ | 108 | |
The Company does not have Level 3 input financial instruments. The Company does not offset financial assets with financial liabilities and there were no transfers between Level 1 and Level 2 input financial instruments.
The fair value of the gold loan liability and embedded derivative (asset) liability are determined by discounting future payments based on forward gold prices and forward US$/Canadian$ foreign exchange rates.
The fair value of share based liabilities and warrant investments are determined based on option pricing models that utilize a variety of inputs that are a combination of quoted prices and market corroborated inputs.
16
