EXHIBIT 99.1
|
AVINO SILVER & GOLD MINES LTD.
Consolidated Financial Statements
For the years ended December 31, 2020, 2019 and 2018
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements of Avino Silver & Gold Mines Ltd. (the “Company”) are the responsibility of the Company’s management. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and reflect management’s best estimates and judgments based on information currently available.
Management has developed and is maintaining a system of internal controls to ensure that the Company’s assets are safeguarded, transactions are authorized and properly recorded, and financial information is reliable.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities. The Audit Committee reviews the results of the annual audit and reviews the consolidated financial statements prior to their submission to the Board of Directors for approval.
The consolidated financial statements as at December 31, 2020 and 2019, and for the years ended December 31, 2020, 2019 and 2018, have been audited by Manning Elliott LLP, an independent registered public accounting firm, and their report outlines the scope of their examination, and gives their opinion on the consolidated financial statements.
“David Wolfin” |
| “Nathan Harte” |
|
|
|
David Wolfin |
| Nathan Harte, CPA |
President & CEO |
| Chief Financial Officer |
|
|
|
March 3, 2021 |
| March 3, 2021 |
- 2 - |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders and the Board of Directors of
Avino Silver & Gold Mines Ltd.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Avino Silver & Gold Mines Ltd. and its subsidiaries (together, the “Company”), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of operations and comprehensive income (loss), consolidated statements of changes in equity and consolidated statements of cash flows for the years ended December 31, 2020, 2019 and 2018, and the related notes, including a summary of significant accounting policies and other explanatory information (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years ended December 31, 2020, 2019 and 2018 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a reasonable basis for our audit opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of the Existence of Impairment Indicators for the Avino Mine
As described in Note 11 to the consolidated financial statements the carrying amount of the plant, equipment and Avino mining properties is $34,846,000 as at December 31, 2020. Management applies significant judgement to assess plant, equipment and Avino mining properties (collectively the “Avino Mine”) for the existence of impairment indicators that could give rise to the requirement to conduct a formal impairment test. Management considers both external and internal sources of information in assessing whether there are any indictors of impairment as disclosed in Note 2 (iv). External sources of information considered by management include changes in the market, economic and legal environments, in which the Company operates, that are not within its control and that affect the recoverable amount of the Avino Mine. Internal sources of information that management considers include the manner in which the Avino Mine is being used, or is expected to be used, and indications of economic performance of the assets.
We have determined that performing procedures relating to the assessment of the existence of impairment indicators for the Avino Mine is a critical audit matter primarily due to the application of judgment by management in assessing specific factors such as (a) significant adverse changes in the economic or legal environment of operations, (b) significant changes with an adverse effect on the use of the asset, (c) current period cash flow or operating losses, combined with a history of losses or a forecast of continuing losses associated with the use of the assets. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence relating to the judgements made by management in their assessment of indicators of impairment that could give rise to the requirement to conduct a formal impairment test.
Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures included amongst others, (a) a review of management’s assessment of the existence of impairment indicators of the Avino Mine (b) completion of our own assessment of impairment indicators in accordance with IAS 36 Impairment of Assets, (c) a review of matters that impact the Company’s ability to continue mining operations, (d) evaluated whether there were adverse economic changes in metal prices by considering external observable market prices, (e) compared the current performance to the Company’s historical mining results associated with the assets, (f) compared management’s mine plans to data in the Company’s resource estimate which was prepared by a specialist.
/s/ Manning Elliott LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, British Columbia, Canada
March 3, 2021
We have served as the Company’s auditor since 2007.
- 3 - |
AVINO SILVER & GOLD MINES LTD. Consolidated Statements of Financial Position (Expressed in thousands of US dollars) |
|
| Note |
|
| December 31, 2020 |
|
| December 31, 2019 |
| |||
ASSETS |
|
|
|
|
|
|
|
|
| |||
Current assets |
|
|
|
|
|
|
|
|
| |||
Cash |
|
|
|
| $ | 11,713 |
|
| $ | 9,625 |
| |
Amounts receivable |
|
|
|
|
| 529 |
|
|
| 1,477 |
| |
Taxes recoverable |
|
| 6 |
|
|
| 5,044 |
|
|
| 5,483 |
|
Prepaid expenses and other assets |
|
|
|
|
|
| 757 |
|
|
| 594 |
|
Inventory |
|
| 7 |
|
|
| 1,659 |
|
|
| 5,592 |
|
Total current assets |
|
|
|
|
|
| 19,702 |
|
|
| 22,771 |
|
Exploration and evaluation assets |
|
| 9 |
|
|
| 10,052 |
|
|
| 9,827 |
|
Plant, equipment and mining properties |
|
| 11 |
|
|
| 34,846 |
|
|
| 35,658 |
|
Long-term investments |
|
| 8 |
|
|
| 4,176 |
|
|
| 4,311 |
|
Other assets |
|
|
|
|
|
| 4 |
|
|
| 4 |
|
Total assets |
|
|
|
|
| $ | 68,780 |
|
| $ | 72,571 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
|
|
| $ | 2,068 |
|
| $ | 4,907 |
|
Amounts due to related parties |
|
| 12(b) |
|
| 154 |
|
|
| 156 |
| |
Taxes payable |
|
|
|
|
|
| 7 |
|
|
| 46 |
|
Current portion of term facility |
|
| 13 |
|
|
| 2,513 |
|
|
| 3,384 |
|
Current portion of equipment loans |
|
| 14 |
|
|
| 72 |
|
|
| 199 |
|
Current portion of finance lease obligations |
|
| 15 |
|
|
| 208 |
|
|
| 692 |
|
Other liabilities |
|
|
|
|
|
| - |
|
|
| 178 |
|
Total current liabilities |
|
|
|
|
|
| 5,022 |
|
|
| 9,562 |
|
Term facility |
|
| 13 |
|
|
| - |
|
|
| 2,513 |
|
Equipment loans |
|
| 14 |
|
|
| - |
|
|
| 90 |
|
Finance lease obligations |
|
| 15 |
|
|
| 278 |
|
|
| 442 |
|
Warrant liability |
|
| 16 |
|
|
| 2,295 |
|
|
| 1,579 |
|
Reclamation provision |
|
| 17 |
|
|
| 808 |
|
|
| 1,524 |
|
Deferred income tax liabilities |
|
| 26 |
|
|
| 1,369 |
|
|
| 2,938 |
|
Total liabilities |
|
|
|
|
|
| 9,772 |
|
|
| 18,648 |
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
| 18 |
|
|
| 108,303 |
|
|
| 96,396 |
|
Equity reserves |
|
|
|
|
|
| 9,951 |
|
|
| 9,391 |
|
Treasury shares (14,180 shares, at cost) |
|
|
|
|
|
| (97 | ) |
|
| (97 | ) |
Accumulated other comprehensive loss |
|
|
|
|
|
| (4,810 | ) |
|
| (4,563 | ) |
Accumulated deficit |
|
|
|
|
|
| (54,339 | ) |
|
| (47,204 | ) |
Total equity |
|
|
|
|
|
| 59,008 |
|
|
| 53,923 |
|
Total liabilities and equity |
|
|
|
|
| $ | 68,780 |
|
| $ | 72,571 |
|
Commitments – Note 21
Subsequent Events – Note 27
Approved by the Board of Directors on March 3, 2021:
Gary Robertson |
| Director |
| David Wolfin |
| Director |
The accompanying notes are an integral part of the consolidated financial statements
- 4 - |
AVINO SILVER & GOLD MINES LTD. Consolidated Statements of Operations and Comprehensive Income (Loss) (Expressed in thousands of US dollars) |
|
| Note |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
Revenue from mining operations |
|
| 19 |
|
| $ | 16,022 |
|
| $ | 31,746 |
|
| $ | 34,116 |
|
Cost of sales |
|
| 19 |
|
|
| 15,832 |
|
|
| 32,016 |
|
|
| 27,850 |
|
Mine operating income (loss) |
|
|
|
|
|
| 190 |
|
|
| (270 | ) |
|
| 6,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
| 20 |
|
|
| 2,902 |
|
|
| 3,193 |
|
|
| 3,610 |
|
Share-based payments |
|
| 18 |
|
|
| 1,857 |
|
|
| 937 |
|
|
| 630 |
|
Income (loss) before other items |
|
|
|
|
|
| (4,569 | ) |
|
| (4,400 | ) |
|
| 2,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
|
|
|
| 332 |
|
|
| 545 |
|
|
| 215 |
|
Unrealized gain (loss) on long-term investments |
|
|
|
|
|
| (124 | ) |
|
| 1,282 |
|
|
| (5 | ) |
Realized loss on exercise of warrants |
|
|
|
|
|
| (2,733 | ) |
|
| - |
|
|
| - |
|
Fair value adjustment on warrant liability |
|
| 16 |
|
|
| (650 | ) |
|
| 520 |
|
|
| 1,304 |
|
Unrealized foreign exchange loss |
|
|
|
|
|
| (811 | ) |
|
| (663 | ) |
|
| (801 | ) |
Finance cost |
|
|
|
|
|
| (211 | ) |
|
| (84 | ) |
|
| (444 | ) |
Accretion of reclamation provision |
|
| 17 |
|
|
| (99 | ) |
|
| (104 | ) |
|
| (122 | ) |
Interest expense |
|
|
|
|
|
| (25 | ) |
|
| (64 | ) |
|
| (109 | ) |
Income (loss) from continuing operations before income taxes |
|
|
|
|
|
| (8,890 | ) |
|
| (2,968 | ) |
|
| 2,064 |
|
Income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense |
|
| 26 |
|
|
| (161 | ) |
|
| (327 | ) |
|
| (1,052 | ) |
Deferred income tax recovery |
|
| 26 |
|
|
| 1,569 |
|
|
| 960 |
|
|
| 645 |
|
Income tax recovery (expense) |
|
|
|
|
|
| 1,408 |
|
|
| 633 |
|
|
| (407 | ) |
Net income (loss) from continuing operations |
|
|
|
|
|
| (7,482 | ) |
|
| (2,335 | ) |
|
| 1,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations and on disposal |
|
| 5 |
|
|
| (169 | ) |
|
| (29,126 | ) |
|
| (31 | ) |
Net income (loss) |
|
|
|
|
|
| (7,651 | ) |
|
| (31,461 | ) |
|
| 1,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation differences |
|
|
|
|
|
| (247 | ) |
|
| 1,603 |
|
|
| (2,051 | ) |
Reclassification of foreign exchange on translation into net loss on sale of discontinued operations |
|
|
|
|
|
| - |
|
|
| (42 | ) |
|
| - |
|
Total comprehensive loss |
|
|
|
|
| $ | (7,898 | ) |
| $ | (29,900 | ) |
| $ | (425 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share from continuing operations |
|
| 18(e) |
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
|
|
| $ | (0.09 | ) |
| $ | (0.03 | ) |
| $ | 0.03 |
|
Diluted |
|
|
|
|
| $ | (0.09 | ) |
| $ | (0.03 | ) |
| $ | 0.03 |
|
Earnings (loss) per share |
|
| 18(e) |
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
|
|
| $ | (0.09 | ) |
| $ | (0.45 | ) |
| $ | 0.03 |
|
Diluted |
|
|
|
|
| $ | (0.09 | ) |
| $ | (0.45 | ) |
| $ | 0.03 |
|
Weighted average number of common shares outstanding |
|
| 18(e) |
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
|
|
|
| 83,180,069 |
|
|
| 69,980,178 |
|
|
| 56,851,626 |
|
Diluted |
|
|
|
|
|
| 83,180,069 |
|
|
| 69,980,178 |
|
|
| 60,000,637 |
|
The accompanying notes are an integral part of the consolidated financial statements
- 5 - |
AVINO SILVER & GOLD MINES LTD. Consolidated Statements of Changes in Equity (Expressed in thousands of US dollars) |
|
| Note |
|
| Number of Common Shares |
|
| Share Capital Amount |
|
| Equity Reserves |
|
| Treasury Shares |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Accumulated Deficit |
|
| Total Equity |
| |||||||
Balance, January 1, 2018 |
|
|
|
|
| 52,718,153 |
|
| $ | 81,468 |
|
| $ | 10,581 |
|
| $ | (97 | ) |
| $ | (4,073 | ) |
| $ | (18,877 | ) |
| $ | 69,002 |
|
Common shares issued for cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokered public offerings |
|
|
|
|
| 10,105,658 |
|
|
| 6,547 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,547 |
|
Less: Issuance costs |
|
|
|
|
| - |
|
|
| (895 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (895 | ) |
At the market issuances |
|
|
|
|
| 151,800 |
|
|
| 136 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 136 |
|
Less: Issuance costs |
|
|
|
|
| - |
|
|
| (4 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (4 | ) |
Exercise of stock options |
|
|
|
|
| 87,500 |
|
|
| 112 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 112 |
|
Carrying value of stock options exercised |
|
|
|
|
| - |
|
|
| 84 |
|
|
| (84 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Less: share issuance costs |
|
|
|
|
| - |
|
|
| (5 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (5 | ) |
Carrying value of RSUs exercised |
|
|
|
|
| 274,658 |
|
|
| 602 |
|
|
| (602 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Options cancelled or expired |
|
|
|
|
| - |
|
|
| - |
|
|
| (746 | ) |
|
| - |
|
|
| - |
|
|
| 746 |
|
|
| - |
|
Share-based payments |
|
|
|
|
| - |
|
|
| - |
|
|
| 700 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 700 |
|
Net income for the year |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,626 |
|
|
| 1,626 |
|
Currency translation differences |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,051 | ) |
|
| - |
|
|
| (2,051 | ) |
Balance, December 31, 2018 |
|
|
|
|
| 63,337,769 |
|
| $ | 88,045 |
|
| $ | 9,849 |
|
| $ | (97 | ) |
| $ | (6,124 | ) |
| $ | (16,505 | ) |
| $ | 75,168 |
|
Common shares issued for cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokered public offerings |
|
|
|
|
| 7,735,360 |
|
|
| 4,877 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,877 |
|
Less: Issuance costs |
|
|
|
|
| - |
|
|
| (472 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (472 | ) |
At the market issuances |
|
|
|
|
| 4,954,000 |
|
|
| 2,924 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,924 |
|
Less: Issuance costs |
|
|
|
|
| - |
|
|
| (162 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (162 | ) |
Options cancelled or expired |
|
|
|
|
| - |
|
|
| - |
|
|
| (762 | ) |
|
| - |
|
|
| - |
|
|
| 762 |
|
|
| - |
|
Carrying value of RSUs exercised |
|
|
|
|
| 565,259 |
|
|
| 835 |
|
|
| (835 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Fair value of warrants issued |
|
|
|
|
| - |
|
|
| - |
|
|
| 116 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 116 |
|
Shares to be issued |
|
|
|
|
| - |
|
|
| 349 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 349 |
|
Share-based payments |
|
|
|
|
| - |
|
|
| - |
|
|
| 1,023 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,023 |
|
Net loss for the year |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (31,461 | ) |
|
| (31,461 | ) |
Currency translation differences |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,561 |
|
|
| - |
|
|
| 1,561 |
|
Balance, December 31, 2019 |
|
|
|
|
| 76,592,388 |
|
| $ | 96,396 |
|
| $ | 9,391 |
|
| $ | (97 | ) |
| $ | (4,563 | ) |
| $ | (47,204 | ) |
| $ | 53,923 |
|
Common shares issued for cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the market issuances |
| 18 |
|
|
| 6,730,054 |
|
|
| 4,940 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,940 |
|
Exercise of warrants |
| 18 |
|
|
| 4,659,194 |
|
|
| 6,528 |
|
|
| (116 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,412 |
|
Exercise of options |
| 18 |
|
|
| 48,000 |
|
|
| 43 |
|
|
| (15 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 28 |
|
Common shares issued for services |
| 18 |
|
|
| 675,145 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Issuance costs |
| 18 |
|
|
| - |
|
|
| (254 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (254 | ) |
Options cancelled or expired |
|
|
|
|
| - |
|
|
| - |
|
|
| (516 | ) |
|
| - |
|
|
| - |
|
|
| 516 |
|
|
| - |
|
Carrying value of RSUs exercised |
| 18 |
|
|
| 863,901 |
|
|
| 650 |
|
|
| (650 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Share-based payments |
| 18 |
|
|
| - |
|
|
| - |
|
|
| 1,857 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,857 |
|
Net loss for the year |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (7,651 | ) |
|
| (7,651 | ) |
Currency translation differences |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (247 | ) |
|
| - |
|
|
| (247 | ) |
Balance, December 31, 2020 |
|
|
|
|
| 89,568,682 |
|
| $ | 108,303 |
|
| $ | 9,951 |
|
| $ | (97 | ) |
| $ | (4,810 | ) |
| $ | (54,339 | ) |
| $ | 59,008 |
|
The accompanying notes are an integral part of the consolidated financial statements
- 6 - |
AVINO SILVER & GOLD MINES LTD. Consolidated Statements of Cash Flows (Expressed in thousands of US dollars) |
|
| Note |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash generated by (used in): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
|
|
|
| $ | (7,651 | ) |
| $ | (31,461 | ) |
| $ | 1,626 |
| |
Adjustments for non-cash items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Deferred income tax expense (recovery) |
|
|
|
|
| (1,569 | ) |
|
| (960 | ) |
|
| (645 | ) | |
Depreciation and depletion |
|
|
|
|
| 1,917 |
|
|
| 3,723 |
|
|
| 3,256 |
| |
Inventory net realizable value adjustment |
|
|
|
|
| - |
|
|
| 387 |
|
|
| - |
| |
Accretion of reclamation provision |
|
|
|
|
| 99 |
|
|
| 104 |
|
|
| 122 |
| |
Unrealized loss (gain) on investments |
|
|
|
|
| 124 |
|
|
| (1,282 | ) |
|
| 5 |
| |
Foreign exchange loss |
|
|
|
|
| (588 | ) |
|
| 1,461 |
|
|
| 270 |
| |
Fair value adjustment on warrant liability |
|
|
|
|
| 650 |
|
|
| (520 | ) |
|
| (1,304 | ) | |
Realized loss on exercise of warrants |
|
|
|
|
| 2,733 |
|
|
| - |
|
|
| - |
| |
Fair value adjustment on modification of term facility |
|
|
|
|
| - |
|
|
| - |
|
|
| 234 |
| |
Unwinding of fair value adjustment of term facility |
|
|
|
|
| (51 | ) |
|
| (170 | ) |
|
| - |
| |
Loss from discontinued operations and on disposal |
|
|
|
|
| - |
|
|
| 29,126 |
|
|
| 31 |
| |
Share-based payments |
|
|
|
|
| 1,857 |
|
|
| 937 |
|
|
| 630 |
| |
|
|
|
|
|
| (2,479 | ) |
|
| 1,345 |
|
|
| 4,225 |
| |
Net change in non-cash working capital items |
|
| 22 |
|
|
| 2,551 |
|
|
| 4,162 |
|
|
| 4,999 |
|
|
|
|
|
|
|
| 72 |
|
|
| 5,507 |
|
|
| 9,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares and units issued for cash, net of issuance costs |
|
|
|
|
|
| 8,393 |
|
|
| 7,283 |
|
|
| 8,466 |
|
Finance lease payments |
|
|
|
|
|
| (640 | ) |
|
| (956 | ) |
|
| (1,166 | ) |
Equipment loan payments |
|
|
|
|
|
| (217 | ) |
|
| (524 | ) |
|
| (1,445 | ) |
Term facility payments |
|
|
|
|
|
| (3,333 | ) |
|
| (833 | ) |
|
| (2,000 | ) |
|
|
|
|
|
|
| 4,203 |
|
|
| 4,970 |
|
|
| 3,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation expenditures |
|
|
|
|
|
| (231 | ) |
|
| (5,723 | ) |
|
| (5,361 | ) |
Additions to plant, equipment and mining properties |
|
|
|
|
|
| (2,014 | ) |
|
| (3,276 | ) |
|
| (9,416 | ) |
Changes in long-term investments |
|
|
|
|
|
| 78 |
|
|
| 23 |
|
|
| - |
|
Cash proceeds from sale of discontinued operations |
|
|
|
|
|
| - |
|
|
| 6,599 |
|
|
| - |
|
Cash disposed of in discontinued operations |
|
|
|
|
|
| - |
|
|
| (1,459 | ) |
|
| - |
|
Redemption of short-term investments |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,000 |
|
Redemption of reclamation bonds |
|
|
|
|
|
| - |
|
|
| 102 |
|
|
| 548 |
|
|
|
|
|
|
|
| (2,167 | ) |
|
| (3,734 | ) |
|
| (13,229 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash |
|
|
|
|
|
| 2,108 |
|
|
| 6,743 |
|
|
| (150 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
| (20 | ) |
|
| (370 | ) |
|
| (18 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, Beginning |
|
|
|
|
|
| 9,625 |
|
|
| 3,252 |
|
|
| 3,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, Ending |
|
|
|
|
| $ | 11,713 |
|
| $ | 9,625 |
|
| $ | 3,252 |
|
Supplementary Cash Flow Information (Note 22)
The accompanying notes are an integral part of the consolidated financial statements
- 7 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
1. | NATURE OF OPERATIONS |
Avino Silver & Gold Mines Ltd. (the “Company” or “Avino”) was incorporated in 1968 under the laws of the Province of British Columbia, Canada. The Company is engaged in the production and sale of silver, gold, and copper and the acquisition, exploration, and advancement of mineral properties.
The Company’s head office and principal place of business is Suite 900, 570 Granville Street, Vancouver, BC, Canada. The Company is a reporting issuer in Canada and the United States, and trades on the Toronto Stock Exchange (“TSX”), the NYSE American, and the Frankfurt and Berlin Stock Exchanges.
The Company owns interests in mineral properties located in Durango, Mexico, as well as in British Columbia and the Yukon, Canada. On October 1, 2012, the Company commenced production of silver and gold at levels intended by management at its San Gonzalo Mine, and on July 1, 2015, the Company commenced production of copper, silver, and gold at levels intended by management at its Avino Mine; both mines are located on the historic Avino property in the state of Durango, Mexico.
Risks associated with Public Health Crises, including COVID-19
The Company's business, operations and financial condition could be materially adversely affected by the outbreak of epidemics, pandemics or other health crises, such as the outbreak of COVID-19 that was designated as a pandemic by the World Health Organization on March 11, 2020. The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in consumer activity. Such public health crises can result in operating, supply chain and project development delays and disruptions, global stock market and financial market volatility, declining trade and market sentiment, reduced movement of people and labour shortages, and travel and shipping disruption and shutdowns, including as a result of government regulation and prevention measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest rates, credit risk and inflation. In addition, the current COVID-19 pandemic, and any future emergence and spread of similar pathogens could have an adverse impact on global economic conditions which may adversely impact the Company's operations, and the operations of suppliers, contractors and service providers, including smelter and refining service providers, and the demand for the Company's production.
The Company may experience business interruptions, including suspended (whether government mandated or otherwise) or reduced operations relating to COVID-19 and other such events outside of the Company's control, which could have a material adverse impact on its business, operations and operating results, financial condition and liquidity.
As at the date of the consolidated financial statements, the duration of the business disruptions internationally and related financial impact of COVID-19 cannot be reasonably estimated. It is unknown whether and how the Company may be affected if the pandemic persists for an extended period of time. In particular, the region in which we operate may not have sufficient public infrastructure to adequately respond or efficiently and quickly recover from such event, which could have a materially adverse effect on the Company's operations. The Company's exposure to such public health crises also includes risks to employee health and safety. Should an employee, contractor, community member or visitor become infected with a serious illness that has the potential to spread rapidly, this could place the Company's workforce at risk.
- 8 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
2. | BASIS OF PRESENTATION |
Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Basis of Presentation
These consolidated financial statements are expressed in US dollars and have been prepared on a historical cost basis except for financial instruments that have been measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting on a going concern basis. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements as if the policies have always been in effect.
Foreign Currency Translation
Functional & presentation currencies
The functional currency of the Company is the Canadian dollar. The functional currency of the Company’s Mexican subsidiaries is the US dollar, which is determined to be the currency of the primary economic environment in which the subsidiaries operate.
Foreign currency transactions
Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each financial position reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the date of the statement of financial position. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.
Foreign operations
Subsidiaries that have functional currencies other than the US dollar translate their statement of operations items at the average rate during the year. Assets and liabilities are translated at exchange rates prevailing at the end of each reporting period. Exchange rate variations resulting from the retranslation at the closing rate of the net investment in these subsidiaries, together with differences between their statement of operations items translated at actual and average rates, are recognized in accumulated other comprehensive income (loss). On disposition or partial disposition of a foreign operation, the cumulative amount of related exchange difference is recognized in the statement of operations.
Significant Accounting Judgments and Estimates
The Company’s management makes judgments in its process of applying the Company’s accounting policies to the preparation of its consolidated financial statements. In addition, the preparation of financial data requires that the Company’s management make assumptions and estimates of the impacts on the carrying amounts of the Company’s assets and liabilities at the end of the reporting period from uncertain future events and on the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to estimates and the resulting impacts on the carrying amounts of the Company’s assets and liabilities are accounted for prospectively.
- 9 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
| a) | Critical judgments exercised by management in applying accounting policies that have the most significant effect on the amounts presented in these consolidated financial statements are as follows: |
| i. | Economic recoverability and probability of future economic benefits from exploration and evaluation costs |
Management has determined that mine and camp, exploratory drilling, and other exploration and evaluation-related costs that were capitalized have future economic benefits and are economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefits including geologic and metallurgic information, scoping studies, accessible facilities, existing permits, and mine plans.
| ii. | Commencement of production at levels intended by management |
Prior to reaching production levels intended by management, costs incurred are capitalized as part of the costs of related exploration and evaluation assets, and proceeds from concentrate sales are offset against costs capitalized. Depletion of capitalized costs for mining properties and depreciation of plant and equipment begin when operating levels intended by management have been reached. Management considers several factors in determining when a mining property has reached the intended production levels, including production capacity, recoveries, and number of uninterrupted production days. The results of operations of the Company during the periods presented in these consolidated financial statements have been impacted by management’s determination that the San Gonzalo Mine and Avino Mine had achieved production levels intended by management as of October 1, 2012 and July 1, 2015, respectively, and that none of the Company’s exploration and evaluation assets had achieved production levels intended by management as at December 31, 2020.
The basis for achievement of production levels intended by management as indicated by technical feasibility and commercial viability is generally established with proven reserves based on a NI 43-101-compliant technical report or a comparable resource statement and feasibility study, combined with pre-production operating statistics and other factors. In cases where the Company does not have a 43-101-compliant reserve report, on which to base a production decision, the technical feasibility and commercial viability of extracting a mineral resource are considered in light of additional factors including but not limited to:
| · | Acquisition and installation of all critical capital components to achieve desired mining and processing results has been completed. Capital components have been acquired directly and are also available on an as-needed basis from the underground mining contractor; |
| · | The necessary labour force, including mining contractors, has been secured to mine and process at planned levels of output; |
| · | The mill has consistently processed at levels above design capacity and budgeted production levels with consistent recoveries and grades; and, |
| · | Establishing sales agreements with respect to the sale of concentrates. |
When technical feasibility and commercial viability are considered demonstrable according to the above criteria and other factors, the Company performs an impairment assessment and records an impairment loss, if any, before reclassifying exploration and evaluation costs to plant, equipment, and mining properties.
| iii. | Functional currency |
The functional currency for the Company and its subsidiaries is the currency of the primary economic environment, in which the entity operates. The Company has determined the functional currency of the Company to be the Canadian dollar. The Company has determined the functional currency of its Mexican subsidiaries to be the US dollar. Determination of functional currency may involve certain judgments to determine the primary economic environment. The Company reconsiders the functional currency of its entities, if there is a change in events and conditions, which determine the primary economic environment.
- 10 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
| b) | Significant assumptions about the future and other sources of estimation uncertainty that management has made at the consolidated statement of financial position date that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made relate to, but are not limited to, the following: |
| i. | Stockpile and concentrate inventory valuations |
Concentrate and stockpile mineralized material are valued at the lower of average cost or net realizable value. The assumptions used in the valuation of concentrate and stockpile mineralized material include estimates of copper, silver, and gold contained in the stockpiles and finished goods assumptions for the amount of copper, silver, and gold that is expected to be recovered from the concentrate. If these estimates or assumptions prove to be inaccurate, the Company could be required to write down the recorded value of its concentrate and stockpile mineralized material inventory, which would result in an increase in the Company’s expenses and a reduction in its working capital.
| ii. | Estimated reclamation provisions |
The Company’s provision for reclamation represents management’s best estimate of the present value of the future cash outflows required to settle estimated reclamation and closure costs at the Avino and San Gonzalo properties. The provision reflects estimates of future costs, inflation, foreign exchange rates and assumptions of risks associated with the future cash outflows, and the applicable risk-free interest rates for discounting the future cash outflows. Changes in the above factors could result in a change to the provision recognized by the Company.
Changes to reclamation and closure cost obligations are recorded with a corresponding change to the carrying amounts of the related exploration and evaluation assets or mining properties. Adjustments to the carrying amounts of related mining properties result in a change to future depletion expense.
| iii. | Valuation of share-based payments and warrants |
The Company uses the Black-Scholes Option Pricing Model for valuation of share-based payments and warrants. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect fair value estimates and the Company’s net income or loss and its equity reserves. Warrant liabilities are accounting for as derivate liabilities (see Note 16).
| iv. | Impairment of plant, equipment and mining properties, and exploration and evaluation assets |
Management considers both external and internal sources of information in assessing whether there are any indications that the Company’s plant, equipment, and mining properties, and exploration and evaluation assets are impaired. External sources of information management considers include changes in the market, economic and legal environments, in which the Company operates, that are not within its control and that affect the recoverable amount of its plant, equipment, and mining properties. Internal sources of information that management considers include the manner in which mining properties and plant and equipment are being used, or are expected to be used, and indications of economic performance of the assets.
In determining the recoverable amounts of the Company’s plant, equipment and mining properties, management makes estimates of the undiscounted future pre-tax cash flows expected to be derived from the Company’s mining properties, and the appropriate discount rate. Reductions in metal price forecasts, increases in estimated future costs of production, increases in estimated future non expansionary capital expenditures, reductions in the amount of recoverable resources and exploration potential, and adverse current economic conditions are examples of factors that could result in a write down of the carrying amounts of the Company’s plant, equipment and mining properties, and exploration and evaluation assets.
- 11 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Impairment
Based on the Company’s assessment with respect to possible indicators of impairment of its mineral properties, including the impact of COVID-19 on our operations and the prevailing market metals prices, the Company concluded that as of December 31, 2020, no impairment indicators were identified.
| v. | Depreciation rate for plant and equipment and depletion rate for mining properties |
Depreciation and depletion expenses are allocated based on estimates for useful lives of assets. Should the asset life, depletion rates, or depreciation rates differ from the initial estimate, the revised life or rate would be reflected prospectively through income or loss. A change in the mineral resource estimate may impact depletion expense on a prospective basis.
| vi. | Recognition and measurement of deferred tax assets and liabilities |
Actual amounts of income tax expense are not final until tax returns are filed and accepted by the relevant authorities. This occurs subsequent to the issuance of the consolidated financial statements and the final determination of actual amounts may not be completed for a number of years. Therefore, tax assets and liabilities and net income in subsequent periods will be affected by the amount that estimates differ from the final tax return. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. Forecasted cash flows from operations are based on projections internally developed and reviewed by management. Weight is attached to tax planning opportunities that are within the Company’s control, and are feasible and implementable without significant obstacles. The likelihood that tax positions taken will be sustained upon examination by applicable tax authorities is assessed based on individual facts and circumstances of the relevant tax position evaluated in light of all available evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that could materially affect the amounts of deferred tax assets and liabilities.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its Mexican subsidiaries as follows:
Subsidiary |
| Ownership Interest |
| Jurisdiction |
| Nature of Operations |
Oniva Silver and Gold Mines S.A. de C.V. |
| 100% |
| Mexico |
| Mexican administration |
Nueva Vizcaya Mining, S.A. de C.V. |
| 100% |
| Mexico |
| Mexican administration |
Promotora Avino, S.A. de C.V. (“Promotora”) |
| 79.09% |
| Mexico |
| Holding company |
Compañía Minera Mexicana de Avino, S.A. de C.V. (“Avino Mexico”) |
| 98.45% direct 1.22% indirect (Promotora) 99.67% effective |
| Mexico |
| Mining and exploration |
Up until the sale of Bralorne Gold Mines Ltd. (“Bralorne”) on December 13, 2019 (see Note 5), the consolidated financial statements included the 100% ownership interest of Bralorne, a mining and exploration company located in Canada.
- 12 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Intercompany balances and transactions, including unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the consolidated financial statements.
Cash
Cash in the consolidated statement of financial position comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are readily convertible into a known amount of cash.
3. | SIGNIFICANT ACCOUNTING POLICIES |
Exploration and evaluation assets and development costs
(i) Exploration and evaluation expenditures
The Company capitalizes all costs relating to the acquisition, exploration and evaluation of mineral claims. Expenditures incurred before the Company has obtained the legal rights to explore a specific area are expensed. The Company’s capitalized exploration and evaluation costs are classified as intangible assets. Such costs include, but are not limited to, certain camp costs, geophysical studies, exploratory drilling, geological and sampling expenditures, and depreciation of plant and equipment during the exploration stage. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the period in which they occur. Proceeds from the sale of mineral products or farm outs during the exploration and evaluation stage are deducted from the related capitalized costs.
The carrying values of capitalized amounts are reviewed annually, or when indicators of impairment are present. In the case of undeveloped properties, there may be only inferred resources to allow management to form a basis for the impairment review. The review is based on the Company’s intentions for the development of such properties. If a mineral property does not prove to be viable, all unrecoverable costs associated with the property are charged to the consolidated statement of comprehensive income (loss) at the time the determination is made.
When the technical feasibility and commercial viability of extracting mineral resources have been demonstrated, exploration and evaluation costs are assessed for impairment, reclassified to mining properties and become subject to depletion. Management considers the technical feasibility and commercial viability of extracting a mineral resource to be demonstrable upon the completion of a positive feasibility study and the establishment of mineral reserves. For certain mineral projects, management may determine the completion of a feasibility study to be cost prohibitive, unnecessary or to present undue risk to the structural integrity of the ore body. Under such circumstances, management considers technical feasibility to be demonstrable when the Company has obtained the necessary environmental and mining permits, land surface and mineral access rights, and the mineral project can be physically constructed and operated in a technically sound manner to produce a saleable mineral product. In assessing whether commercial viability is demonstrable, management considers if its internal economic assessment indicates that the mineral project can be mined to generate a reasonable return on investment for the risk undertaken, and markets or long-term contracts for the product exist.
(ii) Development expenditures
Mine development costs are capitalized until the mineral property is capable of operating in the manner intended by management. The Company evaluates the following factors in determining whether a mining property is capable of operating in the manner intended by management:
| · | The completion and assessment of a reasonable commissioning period of the mill and mining facilities; |
| · | Consistent operating results are achieved during the test period; |
| · | Existence of clear indicators that operating levels intended by management will be sustainable for the foreseeable future; |
| · | Plant / mill has reached a pre-determined percentage of design capacity; |
| · | Adequate funding is available and can be allocated to the operating activities; and, |
| · | Long term sales arrangements have been secured. |
- 13 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
The carrying values of capitalized development costs are reviewed annually, or when indicators are present, for impairment.
Plant, equipment and mining properties
Upon demonstrating the technical feasibility and commercial viability of extracting mineral resources, all expenditures incurred to that date for the mine are reclassified to mining properties. Expenditures capitalized to mining properties include all costs related to obtaining or expanding access to resources including extensions of the haulage ramp and installation of underground infrastructure, and the estimated reclamation provision. Expenditures incurred with respect to a mining property are capitalized when it is probable that additional future economic benefits will flow to the Company. Otherwise, such expenditures are classified as a cost of sales.
Plant and equipment are recorded at historical cost less accumulated depreciation and any accumulated impairment losses. Historical costs include expenditures that are directly attributable to bringing the asset to a location and condition necessary to operate in a manner intended by management. Such costs are accumulated as construction in progress until the asset is available for use, at which point the asset is classified as plant, equipment and mining properties and depreciation commences.
After the date that management’s intended production levels have been achieved, mining properties are depleted using the straight-line method over the estimated remaining life of the mine. The Company estimates the remaining life of its producing mineral properties on an annual basis using a combination of quantitative and qualitative factors including historical results, mineral resource estimates, and management’s intent to operate the property.
The Company does not have sufficient reserve information to form a basis for the application of the units-of-production method for depreciation and depletion.
As at December 31, 2020 and 2019, the Company estimated a remaining mine life for San Gonzalo of Nil.
The Company obtained an updated resource estimate which had increased measured and indicated resources, and as a result management completed a review of the mine operations and updated the remaining life of the Avino Mine. Depletion relating to the Avino Mine has been adjusted prospectively, as of October 31, 2020, which was the effective report date.
As at December 31, 2020 and 2019, the Company estimated a remaining mine life for the Avino Mine of 20.4 and 8.5 years, respectively.
Accumulated mill, machinery, plant facilities, and certain equipment are depreciated using the straight-line method over their estimated useful lives, not to exceed the life of the mine for any assets that are inseparable from the mine. When parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (or components) of plant and equipment.
Effective October 1, 2019, and as a result of a review of the remaining life and the pattern of usage of office equipment, furniture and fixtures, computer equipment and mine machinery and transportation equipment, the Company adopted a straight-line method for its plant and equipment, which were previously depreciated using the declining balance method. The change in depreciation has been applied prospectively as a change in estimate. The Company believes that the new method better reflects the pattern of consumption of future economic benefits to be derived from the assets being depreciated.
- 14 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Plant and equipment are depreciated using the following annual rates and methods:
Office equipment, furniture, and fixtures | 3 years straight line balance |
Computer equipment | 5 years straight line balance |
Mine machinery and transportation equipment | 5 years straight line balance |
Mill machinery and processing equipment | 5 - 20 years straight line |
Buildings | 5 - 20 years straight line |
Impairment
At each financial position reporting date, the carrying amounts of the Company’s assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
An asset’s recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as 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. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset or cash generating unit is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, provided the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
Leases
Leases in which the Company assumes substantially all risks and rewards of ownership are classified as finance leases. Assets held under finance leases are recognized at the lower of the fair value and present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. The corresponding liability is recognized as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation to achieve a constant rate of interest on the remaining liability. Finance charges are recorded as a finance expense within profit and loss, unless they are attributable to qualifying assets, in which case they are capitalized.
Operating lease payments are recognized on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed, in which case that systematic basis is used. Operating lease payments are recorded within profit and loss unless they are attributable to qualifying assets, in which case they are capitalized.
Inventory
Material extracted from the Company's mine is classified as either process material or waste. Process material represents mineralized material that, at the time of extraction, the Company expects to process into a saleable form and sell at a profit, while waste is considered uneconomic to process and its extraction cost is included in direct mining costs. Raw materials are comprised of process material stockpiles. Process material is accumulated in stockpiles that are subsequently processed into bulk copper, silver, and gold concentrate in a saleable form. The Company has bulk copper, silver, and gold concentrate inventory in saleable form that has not yet been sold. Mine operating supplies represent commodity consumables and other raw materials used in the production process, as well as spare parts and other maintenance supplies that are not classified as capital items.
- 15 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Inventories are valued at the lower of cost and net realizable value (“NRV”). Cost is determined on a weighted average basis and includes all costs incurred, based on normal production capacity, in bringing each product to its present location and condition. Cost of inventories comprises direct labor, materials and contractor expenses, depletion and depreciation on mining properties, plant and equipment, and an allocation of mine site costs. As mineralized material is removed for processing, costs are removed based on the average cost per tonne in the stockpile. Stockpiled process material tonnages are verified by periodic surveys.
NRV of mineralized material is determined with reference to relevant market prices less applicable variable selling expenses and costs to bring the inventory into its saleable form. NRV of materials and supplies is generally calculated by reference to salvage or scrap values when it is determined that the supplies are obsolete. NRV provisions are recorded within cost of sales in the consolidated statement of operations, and are reversed to reflect subsequent recoveries where the inventory is still on hand.
Revenue from Contracts with Customers
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue and costs to sell can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales tax or duty.
Performance Obligations
Based on the criteria outlined in IFRS 15, the Company applied significant judgment in determining that the primary performance obligation relating to its sales contracts is the delivery of concentrates. Shipping and insurance services arranged by the Company for concentrate sales that occur after the transfer of control are also considered performance obligations.
Transfer of Control
Based on the criteria outlined in IFRS 15, the Company applied significant judgment in determining when the transfer of control occurs. Management based its assessment on a number of indicators of control, which include but are not limited to, whether the Company has the present right of payment and whether the physical possession of the goods, significant risks and rewards, and legal title have been transferred to the customer.
Provisional Pricing
Based on the criteria outlined in IFRS 15, the Company applied significant judgment in determining variable consideration. The Company identified two provisional pricing components in concentrate sales, represents variable consideration in the form of a) adjustments between original and final assay results relating to the quantity and quality of concentrate shipments, as well as b) pricing adjustments between provisional and final invoicing based on market prices for base and precious metals.
Based on the Company’s historical accuracy in the assay process, as evidenced by the negligible historical adjustments relating to assay differences, the Company concluded the variability in consideration caused by the assaying results is negligible. The Company does not expect a significant amount of reversal related to assaying differences. The Company records revenues based on provisional invoices based on quoted market prices of the London Bullion Market Association and the London Metal Exchange during the quotation period outlined in the concentrate sales agreement. The Company applied judgment to determine the amount of variable consideration to be recognized during the period for which the likelihood of significant reversal is low.
- 16 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Financial Instruments
Measurement – initial recognition
All financial assets and financial liabilities are initially recorded on the Company’s consolidated statement of financial position when the Company becomes a party to the contractual provisions of the instrument. All financial asset and liabilities are initially recorded at fair value, net of attributable transaction costs, except for those classified as fair value through profit or loss (“FVTPL”). Subsequent measurement of financial assets and financial liabilities depends on the classifications of such assets and liabilities.
Classification – financial assets
Amortized cost:
Financial assets that are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and that the contractual terms of the financial assets give rise on specified date to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured subsequent to initial recognition at amortized cost.
The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. Interest income is recognized using the effect interest method, and is recognized in Interest and other income, on the consolidated statements of operations and comprehensive income (loss)
The Company financial assets at amortized costs include its cash, amounts receivable not related to sales of concentrate, investments (short-term), and reclamation bonds.
Fair value through other comprehensive income (“FVTOCI”)
Financial assets that are held within a business model whose objective is to hold financial assets in order to both collect contractual cash flows and selling financial assets, and that the contractual terms of the financial assets give rise on specified date to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Upon initial recognition of equity securities, the Company may make an irrevocable election (on an instrument-by-instrument basis) to designate its equity securities that would otherwise be measured at FVTPL to present subsequent changes in fair value in other comprehensive income. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other OCI. The cumulative gain or loss is not reclassified to profit or loss on disposal of the instrument; instead, it is transferred to retained earnings.
The Company currently has no financial assets designated as FVTOCI.
Fair value through profit or loss (“FVTPL”)
By default, all other financial assets are measured subsequently at FVTPL, which includes amounts receivable from concentrate sales.
Classification – financial liabilities
Financial liabilities that are not contingent consideration of an acquirer in a business combination, held for trading or designated as at FVTPL, are measured at amortized cost using the effective interest method.
- 17 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Financial liabilities at amortized cost include accounts payable, amounts due to related parties, term facility, equipment loans, and finance lease obligations.
Financial liabilities classified FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Fair value changes on financial liabilities classified as FVTPL are recognized in the consolidated statements of operations. The Company has classified share purchase warrants with an exercise price in US dollars (see Note 16) as financial liabilities at FVTPL. As these warrants are exercised, the fair value of the recorded warrant liability on date of exercise is included in share capital along with the proceeds from the exercise. If these warrants expire, the related decrease in warrant liability is recognized in the consolidated statements of operations and comprehensive income (loss).
The Company has no hedging arrangements and does not apply hedge accounting.
Impairment
The Company recognizes a loss allowance for expected credit losses on its financial assets when necessary. The amount of expected credit losses is updated at each reporting period to reflect changes in credit risk since initial recognition of the respective financial instruments.
Share capital
| a) | Common shares |
Common shares are classified as equity. Transaction costs directly attributable to the issuance of common shares and equity warrants are recognized as a deduction from equity, net of any tax effects. Transaction costs directly attributable to derivative warrants are charged to operations as a finance cost.
| b) | Repurchase of share capital (treasury shares) |
When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to accumulated deficit.
Share-based payment transactions
The Company’s share option plan and restricted share unit (“RSU”) plan allows directors, officers, employees, and consultants to acquire common shares of the Company.
The fair value of options granted is measured at fair value at the grant date based on the market value of the Company’s common shares on that date.
The fair value of equity-settled RSUs is measured at the grant date based on the market value of the Company’s common shares on that date, and each tranche is recognized using the graded vesting method over the period during which the RSUs vest. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of RSUs that are expected to vest.
All options and RSUs are recognized in the consolidated statements of operations and comprehensive income (loss) as an expense or in the consolidated statements of financial position as exploration and evaluation assets over the vesting period with a corresponding increase in equity reserves in the consolidated statements of financial position.
- 18 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Reclamation and other provisions
Provisions are recognized where a legal or constructive obligation has been incurred as a result of past events, it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. If material, provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The increase in any provision due to the passage of time is recognized as accretion expense.
The Company records the present value of estimated costs of legal and constructive obligations required to restore properties in the period in which the obligation is incurred. The nature of these restoration activities includes dismantling and removing structures, rehabilitating mines and restoration, reclamation, and re-vegetation of affected areas.
The fair value of the liability for a rehabilitation provision is recorded when it is incurred. When the liability is initially recognized, the present value of the estimated cost is capitalized by increasing the carrying amount of the related mining property or exploration and evaluation asset. Over time, the discounted liability is increased for the change in present value based on the discount rates that reflect current market assessments and the risks specific to the liability, which is accreted over time through periodic charges to income or loss. A revision in estimates or new disturbance will result in an adjustment to the provision with an offsetting adjustment to the mineral property or the exploration and evaluation asset. Additional disturbances, changes in costs, or changes in assumptions are recognized as adjustments to the corresponding assets and reclamation liabilities when they occur.
Earnings per share
The Company presents basic and diluted earnings per share data for its common shares, calculated by dividing the earnings attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted earnings per share is determined by adjusting the earnings attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all potentially dilutive common shares.
Income taxes
Income taxes in the years presented are comprised of current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized as equity.
Deferred tax is recognized using the statement of financial position asset and liability method, which provides for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax recognized is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the consolidated statement of financial position date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.
Deferred tax assets and liabilities are not recognized if the temporary differences arise from the initial recognition of goodwill or an asset or liability in a transaction other than a business combination that affects neither accounting profit nor taxable profit.
- 19 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
4. | RECENT ACCOUNTING PRONOUNCEMENTS |
Application of new and revised accounting standards:
IFRS 3 – Definition of a Business
In October 2018, the IASB issued amendments to IFRS 3 – Definition of a Business which:
| · | Clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs; |
| · | Narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs; |
| · | Add guidance and illustrative examples to help entities assess whether a substantive process has been acquired; |
| · | Remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and |
| · | Add an option concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. |
The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020, and to asset acquisitions that occurred on or after the beginning of that period. The Company adopted IFRS 3 with no material impact on the financial statements.
5. | DISPOSITION OF DISCONTINUED OPERATIONS – BRALORNE GOLD MINES LTD. |
On December 13, 2019, the Company completed the sale of its 100% wholly-owned subsidiary Bralorne Gold Mines Ltd. (“Bralorne”) to Talisker Resources Ltd. (“Talisker”). The sale was record in the fourth quarter of fiscal 2019 and includes the Bralorne Gold Mine and is part of the Company’s plan to focus on its core mining operations in Mexico.
The consideration included:
| · | C$8.7 million (translated to $6,599) in cash |
| · | The issuance of 12,580,000 common shares of Talisker, representing 9.9% on a pro-forma basis following the close of the transaction and subsequent financing by Talisker; |
| · | The issuance of 6,290,000 share purchase warrants exercisable at C$0.25 per share for a period of three years after the closing, subject to acceleration in the event the closing price of Talisker’s common shares is great than C$0.35 per share for 20 or more consecutive trading days at any time following April 14, 2020; |
The sale includes the Bralorne claims, as well as nine mineral claims covering approximately 2,114 hectares in the Lillooet Mining Division of British Columbia, known as the BRX Property.
The Company also received future consideration of a $2.5 million cash payment, contingent upon the commencement of commercial production at the Bralorne Mine, for which a fair value has been determined to be Nil at this time.
- 20 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
The Company recognized a loss on disposition, net of tax, calculated as follows:
Cash proceeds |
| $ | 6,599 |
|
Talisker shares |
|
| 2,243 |
|
Talisker warrants |
|
| 716 |
|
Total proceeds |
| $ | 9,558 |
|
Net assets sold and derecognized: |
|
|
|
|
Cash |
|
| 1,495 |
|
Other current assets |
|
| 242 |
|
Exploration and evaluation assets |
|
| 45,613 |
|
Plant and equipment |
|
| 1,745 |
|
Other long-term assets |
|
| 19 |
|
Current portion of finance lease obligations and equipment loans |
|
| (175 | ) |
Non-current portion of finance lease obligations and equipment loans |
|
| (111 | ) |
Site restoration obligation |
|
| (10,828 | ) |
Foreign currency translation adjustments |
|
| (42 | ) |
|
|
| 37,958 |
|
Loss on disposition before selling costs |
|
| (28,400 | ) |
Selling costs |
|
| (490 | ) |
Loss on disposition, net |
|
| (28,890 | ) |
As a result of the sale, the comparative net income (loss) for the current period, as well as previous two years, have been reclassified from continuing operations to discontinued operations:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Revenue from mining operations |
| $ | - |
|
| $ | - |
|
| $ | - |
|
Cost of sales |
|
| - |
|
|
| - |
|
|
| - |
|
Mine operating income (loss) |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (income) |
|
| - |
|
|
| 16 |
|
|
| (45 | ) |
Accretion of reclamation provision |
|
| - |
|
|
| 217 |
|
|
| 256 |
|
Gain on sale of assets |
|
| - |
|
|
| 2 |
|
|
| (175 | ) |
Other items |
|
| - |
|
|
| 1 |
|
|
| (5 | ) |
Loss on disposition |
|
| 169 |
|
|
| 28,890 |
|
|
| - |
|
Net loss before income taxes |
|
| (169 | ) |
|
| (29,126 | ) |
|
| (31 | ) |
Income taxes |
|
| - |
|
|
| - |
|
|
| - |
|
Net loss from discontinued operations and on disposal |
| $ | (169 | ) |
| $ | (29,126 | ) |
| $ | (31 | ) |
The results of discontinued operations included in the consolidated statements of cash flows for the years ended December 31, 2020, 2019 and 2018, are as follows:
Cash generated by (used in): |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Cash flow used in operating activities |
| $ | - |
|
| $ | (19 | ) |
| $ | (7 | ) |
Cash flow used in financing activities |
|
| - |
|
|
| (258 | ) |
|
| (590 | ) |
Cash flow used in investing activities |
|
| - |
|
|
| (5,583 | ) |
|
| (4,178 | ) |
Net cash decrease from discontinued operations |
| $ | - |
|
| $ | (5,860 | ) |
| $ | (4,775 | ) |
- 21 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
6. | TAXES RECOVERABLE |
The Company’s taxes recoverable consist of the Mexican I.V.A. (“VAT”) and income taxes recoverable and Canadian sales taxes (“GST”) recoverable.
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
VAT recoverable |
| $ | 2,328 |
|
| $ | 2,652 |
|
GST recoverable |
|
| 16 |
|
|
| 42 |
|
Income taxes recoverable |
|
| 2,700 |
|
|
| 2,789 |
|
|
| $ | 5,044 |
|
| $ | 5,483 |
|
7. | INVENTORY |
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
Process material stockpiles |
| $ | 373 |
|
| $ | 1,079 |
|
Concentrate inventory |
|
| 64 |
|
|
| 3,055 |
|
Materials and supplies |
|
| 1,222 |
|
|
| 1,458 |
|
|
| $ | 1,659 |
|
| $ | 5,592 |
|
The amount of inventory recognized as an expense for the year ended December 31, 2020 totalled $15,832 (2019 – $32,016, 2018 - $27,850). See Note 19 for further details.
8. | LONG-TERM INVESTMENTS |
The Company classifies its long-term investments as designated at fair value through profit and loss under IFRS 9. Long-term investments are summarized as follows:
|
| Fair Value December 31, |
|
| Net Additions and(Warrants |
|
| Movements in foreign |
|
| Fair value adjustments |
|
| Fair Value December 31, |
| |||||
|
| 2019 |
|
| Exercised) |
|
| exchange |
|
| for the period |
|
| 2020 |
| |||||
Talisker Resources Common Shares |
| $ | 3,197 |
|
| $ | 1,184 |
|
| $ | 100 |
|
| $ | (305 | ) |
| $ | 4,176 |
|
Talisker Resources Warrants |
|
| 1,114 |
|
|
| (1,114 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Other |
|
| - |
|
|
| (1 | ) |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| $ | 4,311 |
|
| $ | 69 |
|
| $ | 100 |
|
| $ | (304 | ) |
| $ | 4,176 |
|
- 22 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
9. | EXPLORATION AND EVALUATION ASSETS |
The Company has accumulated the following acquisition, exploration and evaluation costs which are not subject to depletion:
|
| Durango, Mexico |
|
| British Columbia & Yukon, Canada |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Balance, January 1, 2019 |
| $ | 9,692 |
|
| $ | 37,089 |
|
| $ | 46,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs incurred during 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
Mine and camp costs |
|
| - |
|
|
| 2,537 |
|
|
| 2,537 |
|
Drilling and exploration |
|
| 50 |
|
|
| 2,333 |
|
|
| 2,383 |
|
Depreciation of plant and equipment |
|
| - |
|
|
| 317 |
|
|
| 317 |
|
Interest and other costs |
|
| - |
|
|
| 325 |
|
|
| 325 |
|
Provision for reclamation |
|
| - |
|
|
| 1,338 |
|
|
| 1,338 |
|
Assessments and taxes |
|
| 90 |
|
|
| 31 |
|
|
| 121 |
|
Geological and related services |
|
| - |
|
|
| 116 |
|
|
| 116 |
|
Assays |
|
| - |
|
|
| 130 |
|
|
| 130 |
|
Water treatment and tailing storage facility costs |
|
| - |
|
|
| 112 |
|
|
| 112 |
|
Effect of movements in exchange rates |
|
| (6 | ) |
|
| 1,286 |
|
|
| 1,280 |
|
Disposition of Bralorne Mine (Note 5) |
|
| - |
|
|
| (45,613 | ) |
|
| (45,613 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 |
| $ | 9,826 |
|
| $ | 1 |
|
| $ | 9,827 |
|
Costs incurred during 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
Drilling and exploration |
|
| 146 |
|
|
| - |
|
|
| 146 |
|
Assessments and taxes |
|
| 83 |
|
|
| - |
|
|
| 83 |
|
Effect of movements in exchange rates |
|
| (4 | ) |
|
| - |
|
|
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
| $ | 10,051 |
|
| $ | 1 |
|
| $ | 10,052 |
|
Additional information on the Company’s exploration and evaluation properties by region is as follows:
| (a) | Durango, Mexico |
The Company’s subsidiary Avino Mexico owns 42 mineral claims and leases four mineral claims in the state of Durango, Mexico. The Company’s mineral claims in Mexico are divided into the following four groups:
| (i) | Avino mine area property |
The Avino mine area property is situated around the towns of Panuco de Coronado and San Jose de Avino and surrounding the historic Avino mine site. There are four exploration concessions covering 154.4 hectares, 24 exploitation concessions covering 1,284.7 hectares, and one leased exploitation concession covering 98.83 hectares. Within the Avino mine site area is the Company’s San Gonzalo Mine, which achieved production at levels intended by management as of October 1, 2012, and on this date accumulated exploration and evaluation costs were transferred to mining properties.
| (ii) | Gomez Palacio/Ana Maria property |
The Ana Maria property is located near the town of Gomez Palacio, and consists of nine exploration concessions covering 2,549 hectares, and is also known as the Ana Maria property.
- 23 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Option Agreement – Silver Wolf Exploration Ltd. (formerly Gray Rock Resources Ltd.) (“Silver Wolf”)
During the year ended December 31, 2020, the Company announced that it has entered into an option agreement to grant Silver Wolf the exclusive right to acquire a 100% interest in the Ana Maria and El Laberinto properties in Mexico (the “Option Agreement”). In exchange, Silver Wolf will issue to Avino share purchase warrants to acquire 300,000 common shares of Silver Wolf at an exercise price of $0.20 per share for a period of 36 months from the date of the TSX Venture Exchange’s final acceptance of the Option Agreement (the “Approval Date”). In order to exercise the option, Silver Wolf will:
| 1. | Issue to Avino a total of $600,000 in cash or common shares of Silver Wolf as follows: |
| a. | $50,000 in common shares of Silver Wolf within 30 days of the Approval Date; |
| b. | A further $50,000 in cash or shares of Silver Wolf at Avino’s discretion on or before the first anniversary of the Approval Date; |
| c. | A further $100,000 in cash or shares of Silver Wolf at Avino’s discretion on or before the second anniversary of the Approval Date; |
| d. | A further $200,000 in cash or shares of Silver Wolf at Avino’s discretion on or before the third anniversary of the Approval Date; and |
| e. | A further $200,000 in cash or shares of Silver Wolf at Avino’s discretion on or before the fourth anniversary of the Approval Date; and |
| 2. | Incur a total of $750,000 in exploration expenditures on the properties, as follows: |
| a. | $50,000 on or before the first anniversary of the Approval Date; |
| b. | A further $100,000 on or before the second anniversary of the Approval Date; and |
| c. | A further $600,000 on or before the fourth anniversary of the Approval Date. |
Under the Option Agreement, the parties intend that the first two year’s payments ($200,000 in cash or shares), and first $150,000 in exploration work will be firm commitments by Silver Wolf. All share issuances will be based on the average volume weighted trading price of Silver Wolf’s shares on the TSX Venture Exchange for the ten (10) trading days immediately preceding the date of issuance of the shares, and the shares will be subject to resale restrictions under applicable securities legislation for 4 months and a day from their date of issue. The Option Agreement is subject to approval by the TSX Venture Exchange.
| (iii) | Santiago Papasquiaro property |
The Santiago Papasquiaro property is located near the village of Santiago Papasquiaro, and consists of four exploration concessions covering 2,552.6 hectares and one exploitation concession covering 602.9 hectares.
| (iv) | Unification La Platosa properties |
The Unification La Platosa properties, consisting of three leased concessions in addition to the leased concession described in note (i) above, are situated within the Avino mine area property near the towns of Panuco de Coronado and San Jose de Avino and surrounding the Avino Mine.
In February 2012, the Company’s wholly-owned Mexican subsidiary entered into a new agreement with Minerales de Avino, S.A. de C.V. (“Minerales”) whereby Minerales has indirectly granted to the Company the exclusive right to explore and mine the La Platosa property known as the “ET zone”. The ET zone includes the Avino Mine, where production at levels intended by management was achieved on July 1, 2015.
- 24 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Under the agreement, the Company has obtained the exclusive right to explore and mine the property for an initial period of 15 years, with the option to extend the agreement for another 5 years. In consideration of the granting of these rights, the Company issued 135,189 common shares with a fair value of C$250 during the year ended December 31, 2012.
The Company has agreed to pay to Minerales a royalty equal to 3.5% of net smelter returns (“NSR”). In addition, after the start of production, if the minimum monthly processing rate of the mine facilities is less than 15,000 tonnes, then the Company must pay to Minerales a minimum royalty equal to the applicable NSR royalty based on the processing at a monthly rate of 15,000 tonnes.
Minerales has also granted to the Company the exclusive right to purchase a 100% interest in the property at any time during the term of the agreement (or any renewal thereof), upon payment of $8 million within 15 days of the Company’s notice of election to acquire the property. The purchase would be subject to a separate purchase agreement for the legal transfer of the property.
| (b) | British Columbia, Canada |
| (i) | Minto and Olympic-Kelvin properties |
The Company’s mineral claims in British Columbia encompass two additional properties, Minto and Olympic-Kelvin, each of which consists of 100% owned Crown-granted mineral claims located in the Lillooet Mining Division.
| (c) | Yukon, Canada |
The Company has a 100% interest in 14 quartz leases located in the Mayo Mining Division of Yukon, Canada, which collectively comprise the Eagle property.
10. | NON-CONTROLLING INTEREST |
At December 31, 2020, the Company had an effective 99.67% (2019 - 99.67%, 2018 – 99.67%) interest in its subsidiary Avino Mexico and the remaining 0.33% (2019 - 0.33%, 2018 – 0.33%) interest represents a non-controlling interest. The accumulated deficit and current year income attributable to the non-controlling interest are insignificant and accordingly have not been recognized in the consolidated financial statements.
- 25 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
11. | PLANT, EQUIPMENT AND MINING PROPERTIES |
|
| Mining properties |
|
| Office equipment, furniture, and fixtures |
|
| Computer equipment |
|
| Mine machinery and transportation equipment |
|
| Mill machinery and processing equipment |
|
| Buildings and construction in process |
|
| Total |
| |||||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||
COST |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance at January 1, 2019 |
|
| 12,962 |
|
|
| 149 |
|
|
| 358 |
|
|
| 17,257 |
|
|
| 17,603 |
|
|
| 6,710 |
|
|
| 55,039 |
|
Additions / Transfers |
|
| 644 |
|
|
| 381 |
|
|
| (6 | ) |
|
| (648 | ) |
|
| 148 |
|
|
| 2,770 |
|
|
| 3,289 |
|
Disposals |
|
| - |
|
|
| (6 | ) |
|
| (12 | ) |
|
| (3,723 | ) |
|
| (231 | ) |
|
| (206 | ) |
|
| (4,178 | ) |
Effect of movements in exchange rates |
|
| 31 |
|
|
| - |
|
|
| 1 |
|
|
| 33 |
|
|
| 34 |
|
|
| 13 |
|
|
| 112 |
|
Balance at December 31, 2019 |
|
| 13,637 |
|
|
| 524 |
|
|
| 341 |
|
|
| 12,919 |
|
|
| 17,554 |
|
|
| 9,287 |
|
|
| 54,262 |
|
Additions / Transfers |
|
| (493 | ) |
|
| 34 |
|
|
| 6 |
|
|
| 36 |
|
|
| (71 | ) |
|
| 1,976 |
|
|
| 1,488 |
|
Effect of movements in exchange rates |
|
| 5 |
|
|
| 5 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10 |
|
Balance at December 31, 2020 |
|
| 13,149 |
|
|
| 563 |
|
|
| 347 |
|
|
| 12,955 |
|
|
| 17,483 |
|
|
| 11,263 |
|
|
| 55,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED DEPLETION AND DEPRECIATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2019 |
|
| 6,102 |
|
|
| 65 |
|
|
| 175 |
|
|
| 6,830 |
|
|
| 2,416 |
|
|
| 708 |
|
|
| 16,296 |
|
Additions / Transfers |
|
| 1,952 |
|
|
| 22 |
|
|
| 49 |
|
|
| 51 |
|
|
| 1,619 |
|
|
| 714 |
|
|
| 4,407 |
|
Disposals |
|
| - |
|
|
| (3 | ) |
|
| (11 | ) |
|
| (2,040 | ) |
|
| (27 | ) |
|
| (49 | ) |
|
| (2,130 | ) |
Effect of movements in exchange rates |
|
| 12 |
|
|
| - |
|
|
| - |
|
|
| 13 |
|
|
| 5 |
|
|
| 1 |
|
|
| 31 |
|
Balance at December 31, 2019 |
|
| 8,066 |
|
|
| 84 |
|
|
| 213 |
|
|
| 4,854 |
|
|
| 4,013 |
|
|
| 1,374 |
|
|
| 18,604 |
|
Additions / Transfers |
|
| 577 |
|
|
| 103 |
|
|
| 43 |
|
|
| 53 |
|
|
| 1,284 |
|
|
| 250 |
|
|
| 2,310 |
|
Effect of movements in exchange rates |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance at December 31, 2020 |
|
| 8,643 |
|
|
| 187 |
|
|
| 256 |
|
|
| 4,907 |
|
|
| 5,297 |
|
|
| 1,624 |
|
|
| 20,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET BOOK VALUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2020 |
|
| 4,506 |
|
|
| 376 |
|
|
| 91 |
|
|
| 8,048 |
|
|
| 12,186 |
|
|
| 9,639 |
|
|
| 34,846 |
|
At December 31, 2019 |
|
| 5,571 |
|
|
| 440 |
|
|
| 128 |
|
|
| 8,065 |
|
|
| 13,541 |
|
|
| 7,913 |
|
|
| 35,658 |
|
Included in Buildings above are assets under construction of $5,327 as at December 31, 2020 (December 31, 2019 - $3,746) on which no depreciation was charged in the years then ended. Once the assets are put into service, they are transferred to the appropriate class of plant, equipment and mining properties.
- 26 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
12. | RELATED PARTY TRANSACTIONS AND BALANCES |
All related party transactions are recorded at the exchange amount which is the amount agreed to by the Company and the related party.
| (a) | Key management personnel |
The Company has identified its directors and certain senior officers as its key management personnel. The compensation costs for key management personnel for the year ended December 31, 2020, 2019 and 2018, were as follows:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Salaries, benefits, and consulting fees |
| $ | 757 |
|
| $ | 723 |
|
| $ | 956 |
|
Share-based payments |
|
| 1,468 |
|
|
| 659 |
|
|
| 531 |
|
|
| $ | 2,225 |
|
| $ | 1,382 |
|
| $ | 1,487 |
|
| (b) | Amounts due to/from related parties |
In the normal course of operations the Company transacts with companies related to Avino’s directors or officers. All amounts payable and receivable are non-interest bearing, unsecured and due on demand. Advances to Oniva International Services Corp. (“Oniva”) of $Nil (December 31, 2019 - $Nil) for expenditures to be incurred on behalf of the Company are included in prepaid expenses and other assets on the consolidated statements of financial position as at December 31, 2020. The following table summarizes the amounts due to related parties:
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
Oniva International Services Corp. |
| $ | 106 |
|
| $ | 105 |
|
Directors |
|
| 48 |
|
|
| 51 |
|
Jasman Yee & Associates, Inc. |
|
| - |
|
|
| - |
|
|
| $ | 154 |
|
| $ | 156 |
|
| (c) | Other related party transactions |
The Company has a cost sharing agreement with Oniva for office and administration services. Pursuant to the cost sharing agreement, the Company will reimburse Oniva for the Company’s percentage of overhead and corporate expenses and for out-of-pocket expenses incurred on behalf of the Company. David Wolfin, President & CEO, and a director of the Company, is the sole owner of Oniva. The cost sharing agreement may be terminated with one-month notice by either party without penalty.
The transactions with Oniva during the years ended December 31, 2020, 2019 and 2018, are summarized below:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Salaries and benefits |
| $ | 636 |
|
| $ | 665 |
|
| $ | 594 |
|
Office and miscellaneous |
|
| 290 |
|
|
| 322 |
|
|
| 560 |
|
Exploration and evaluation assets |
|
| - |
|
|
| 206 |
|
|
| 353 |
|
|
| $ | 926 |
|
| $ | 1,193 |
|
| $ | 1,507 |
|
- 27 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
For services provided to the Company as President and Chief Executive Officer, the Company pays Intermark Capital Corporation (“ICC”), a company controlled by David Wolfin, the Company’s president and CEO and also a director, for consulting services. For the years ended December 31, 2020, 2019 and 2018, the Company paid $224, $226 and $232, respectively, to ICC.
The Company pays Jasman Yee & Associates, Inc. (“JYAI”) for operational, managerial, metallurgical, engineering and consulting services related to the Company’s activities. JYAI’s managing director is a director of the Company. For the years ended December 31, 2020, 2019 and 2018, the Company paid $31, $33 and $66, respectively, to JYAI.
The Company pays Wear Wolfin Designs Ltd. (“WWD”), a company whose director is the brother-in-law of David Wolfin, for financial consulting services related to ongoing consultation with stakeholders and license holders. For the years ended December 31, 2020, 2019 and 2018, the Company paid $Nil, $Nil and $12, respectively, to WWD.
13. | TERM FACILITY |
In July 2015, the Company entered into a ten million dollar term facility with Samsung C&T U.K. Limited (“Samsung”). Interest is charged on the facility at a rate of US dollar LIBOR (3 month) plus 4.75%. The agreement was later amended in 2018 to extend the repayment period and modify the monthly payments. Other material terms of the facility remained unchanged. The Company is currently repaying the remaining balance in monthly instalments of $278 ending September 2021, with 9 remaining payments as at December 31, 2020. The Company is committed to selling Avino Mine concentrate on an exclusive basis to Samsung until December 31, 2024.
The facility is secured by the concentrates produced under the agreement and by 33% of the common shares of the Company’s subsidiary Compañía Minera Mexicana de Avino, S.A. de C.V. The facility with Samsung relates to the sale of concentrates produced from the Avino Mine only.
The continuity of the term facility with Samsung is as follows:
|
| December 31, |
|
| December 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Balance, beginning |
| $ | 5,897 |
|
| $ | 6,900 |
|
Repayments |
|
| (3,333 | ) |
|
| (833 | ) |
Unwinding of fair value adjustment |
|
| (51 | ) |
|
| (170 | ) |
Balance, ending |
|
| 2,513 |
|
|
| 5,897 |
|
Less: Current portion |
|
| (2,513 | ) |
|
| (3,384 | ) |
Non-current portion |
| $ | - |
|
| $ | 2,513 |
|
- 28 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
14. | EQUIPMENT LOANS |
The Company has entered into loans for mining equipment maturing in 2021 with fixed interest rates of 6.29% per annum. The Company’s obligations under the loans are secured by the mining equipment. As at December 31, 2020, plant, equipment, and mining properties includes a net carrying amount of $442 (December 31, 2019 - $559) for this mining equipment.
The contractual maturities and interest charges in respect of the Company’s obligations under the equipment loans are as follows:
|
| December 31, |
|
| December 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Not later than one year |
| $ | 73 |
|
| $ | 228 |
|
Later than one year and not later than five years |
|
| - |
|
|
| 73 |
|
Less: Future interest charges |
|
| (1 | ) |
|
| (12 | ) |
Present value of loan payments |
|
| 72 |
|
|
| 289 |
|
Less: current portion |
|
| (72 | ) |
|
| (199 | ) |
Non-current portion |
| $ | - |
|
| $ | 90 |
|
The equipment loan credit facilities are a component of the master credit facilities described in Note 15.
15. | FINANCE LEASE OBLIGATIONS |
The Company has entered into office space and mining equipment leases expiring between 2021 and 2025, with interest rates ranging from Nil% to 14.99% per annum. The Company has the option to purchase the mining equipment at the end of the lease term for a nominal amount. The Company’s obligations under finance leases are secured by the lessor’s title to the leased assets. As at December 31, 2020, plant, equipment and mining properties includes a net carrying amount of $1,087 (December 31, 2019 - $2,697) for this leased mining equipment.
The contractual maturities and interest charges in respect of the Company’s finance lease obligations are as follows:
|
| December 31, |
|
| December 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Not later than one year |
| $ | 213 |
|
| $ | 716 |
|
Later than one year and not later than five years |
|
| 301 |
|
|
| 444 |
|
Later than five years |
|
| - |
|
|
| 28 |
|
Less: Future interest charges |
|
| (28 | ) |
|
| (54 | ) |
Present value of lease payments |
|
| 486 |
|
|
| 1,134 |
|
Less: current portion |
|
| (208 | ) |
|
| (692 | ) |
Non-current portion |
| $ | 278 |
|
| $ | 442 |
|
The Company has a master credit facility with an equipment supplier for a total of $5,000. The facility is used to acquire equipment necessary for maintaining operations and exploration activities at the Avino Mine. As of December 31, 2020, the Company had $4,927 in available credit remaining under these facilities.
- 29 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
16. | WARRANT LIABILITY |
The Company’s warrant liability arises as a result of the issuance of warrants exercisable in US dollars. As the denomination is different from the Canadian dollar functional currency of the entity issuing the underlying shares, the Company recognizes a derivative liability for these warrants and re-measures the liability at the end of each reporting period using the Black-Scholes model. Changes in respect of the Company’s warrant liability are as follows:
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
Balance at beginning of the period |
| $ | 1,579 |
|
| $ | 2,009 |
|
Fair value adjustment |
|
| 650 |
|
|
| (520 | ) |
Effect of movement in exchange rates |
|
| 66 |
|
|
| 90 |
|
Balance at end of the period |
| $ | 2,295 |
|
| $ | 1,579 |
|
Continuity of warrants during the periods is as follows:
|
| Underlying Shares |
|
| Weighted Average Exercise Price |
| ||
Warrants outstanding and exercisable, January 1, 2019 |
|
| 10,778,061 |
|
| $1.20 |
| |
Issued |
|
| 464,122 |
|
| C$0.85 |
| |
Expired |
|
| (3,602,215 | ) |
| $1.99 |
| |
Warrants outstanding and exercisable, December 31, 2019 |
|
| 7,639,968 |
|
| $0.79 |
| |
Exercised |
|
| (4,195,072 | ) |
| $0.80 |
| |
Exercised |
|
| (464,122 | ) |
| C$0.85 |
| |
Warrants outstanding and exercisable, December 31, 2020 |
|
| 2,980,774 |
|
| $0.80 |
|
|
|
|
| All Warrants Outstanding and Exercisable |
| |||||||
Expiry Date |
| Exercise Price per Share |
|
| December 31, 2020 |
|
| December 31, 2019 |
| |||
July 30, 2020 |
| C$ | 0.85 |
|
|
| - |
|
|
| 464,122 |
|
September 25, 2023 |
| $ | 0.80 |
|
|
| 2,980,774 |
|
|
| 7,175,846 |
|
|
|
|
|
|
|
| 2,980,774 |
|
|
| 7,639,968 |
|
As at December 31, 2020, the weighted average remaining contractual life of warrants outstanding was 2.73 years (December 31, 2019 – 3.55 years).
Valuation of the warrant liability requires the use of highly subjective estimates and assumptions including the expected stock price volatility. The expected volatility used in valuing warrants is based on volatility observed in historical periods. Changes in the underlying assumptions can materially affect the fair value estimates. The fair value of the warrant liability was calculated using the Black-Scholes model with the following weighted average assumptions and resulting fair values:
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
Weighted average assumptions: |
|
|
|
|
|
| ||
Risk-free interest rate |
|
| 0.20 | % |
|
| 1.68 | % |
Expected dividend yield |
|
| 0 | % |
|
| 0 | % |
Expected warrant life (years) |
|
| 2.73 |
|
|
| 3.57 |
|
Expected stock price volatility |
|
| 73.93 | % |
|
| 61.61 | % |
Weighted average fair value |
| $ | 0.77 |
|
| $ | 0.22 |
|
- 30 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
17. | RECLAMATION PROVISION |
Management’s estimate of the reclamation provision at December 31, 2020, is $808 (December 31, 2019 – $1,524), and the undiscounted value of the obligation is $1,275 (December 31, 2019 – $1,985).
The present value of the obligation was calculated using a risk-free interest rate of 5.96% (December 31, 2019 – 6.86%) and an inflation rate of 3.15% (December 31, 2019 – 3.54%). Reclamation activities are estimated to begin in 2023 for the San Gonzalo Mine and in 2041 for the Avino Mine.
A reconciliation of the changes in the reclamation provision during the years ended December 31, 2020, and 2019, is as follows:
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
|
|
|
|
|
|
| ||
Balance at beginning of the period |
| $ | 1,524 |
|
| $ | 10,799 |
|
Changes in estimates |
|
| (737 | ) |
|
| 840 |
|
Disposition of Bralorne (Note 5) |
|
| - |
|
|
| (10,828 | ) |
Unwinding of discount related to Bralorne |
|
| - |
|
|
| 217 |
|
Unwinding of discount related to continuing operations |
|
| 99 |
|
|
| 104 |
|
Effect of movements in exchange rates |
|
| (78 | ) |
|
| 392 |
|
Balance at end of the period |
| $ | 808 |
|
| $ | 1,524 |
|
During the year ended December 31, 2020, the Company recognized a decrease in the asset retirement obligations in connection with the Avino and San Gonzalo Mines due to the changes in estimated timing of reclamation activities, and closure cost estimates. As a result, a reduction of $544 was recognized in relation to the capitalized costs of the Avino Mine (Note 11 – Plant, equipment and mining properties) and an amount of $193 was recognized in the consolidated statement of operations and comprehensive income (loss) in relation to the reduction of the asset retirement obligation of the San Gonzalo Mine.
18. | SHARE CAPITAL AND SHARE-BASED PAYMENTS |
| (a) | Authorized: Unlimited common shares without par value. |
|
|
|
| (b) | Issued: |
| (i) | During the year ended December 31, 2020, the Company issued 6,730,054 common shares in an at-the-market offering under prospectus supplement for gross proceeds of $4,940. The Company paid a 3% cash commission of $148 on gross proceeds, for net proceeds of $4,792, and incurred an additional $106 in issuance costs during the period. |
During the year ended December 31, 2020, the Company issued 4,195,072 common shares following the exercise of 4,195,072 warrants. As a result, $6,112 was recorded to share capital, representing cash proceeds of $3,356, fair value of the warrants on the date of exercise (see Note 16 for valuation methodology for $US denominated warrants) of $2,733, and movements in foreign exchange of $69.
During the year ended December 31, 2020, the Company also issued 464,122 common shares following the exercise of 464,122 broker warrants. As a result, $416 was recorded to share capital, representing cash proceeds of $300 and the amount attributed to the warrants upon issuance in 2019, representing $116.
During the year ended December 31, 2020, the Company issued 675,145 common shares as settlement of accrued advisory services provided by Cantor Fitzgerald Canada Corporate (“Cantor”) for the completion of the sale of Bralorne. The value of these shares was accrued at December 31, 2019; however, the shares were not issued until January 2020.
- 31 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
During the year ended December 31, 2020, the Company issued 48,000 common shares following the exercise of 48,000 options. As a result, $43 was recorded to share capital, representing cash proceeds of $28 and the fair value upon issuance of $15.
During the year ended December 31, 2020, the Company issued 863,901 common shares upon exercise of RSUs. As a result, $650 was recorded to share capital.
| (ii) | During the year ended December 31, 2019, the Company closed a bought-deal financing, issuing 5,411,900 common shares at the price of C$0.85, as well as 2,323,460 flow-through shares at the price of C$0.99 for gross proceeds of $5,240 (C$6,900). The financing was made by way of prospectus supplement in July 2019, so the Company’s existing Canadian short-form base shelf prospectus dated December 21, 2018. |
Of the $5,240 total aggregate proceeds raised, $116 was attributed to 464,122 warrants issued as commission, leaving a residual amount of $5,124. This amount includes a flow-through premium, which represents the difference between the C$0.85 price in which the common shares were issued, and the offering price of C$0.99 per share. Based on the C$ to US$ exchange rate on the date of the transaction, $247 was recorded as the flow-through premium, for a net share capital allocation of $4,877. This premium is presented in “Other liabilities” on the consolidated statements of financial position as at December 31, 2019.
The Company paid a 7% cash commission on the gross proceeds in the amount of $367, and incurred additional legal and professional costs of $115. Costs of $10 were allocated to the fair value of the warrants and have been reflected in the condensed consolidated interim statements of operations as a finance cost, and costs of $472 have been reflected as share issuance costs in the condensed consolidated interim statements of changes in equity.
During the year ended December 31, 2019, the Company issued 4,954,000 common shares in an at-the-market offering under prospectus supplement for gross proceeds of $2,924. The Company paid a 3% cash commission of $87 on gross proceeds, for net proceeds of $2,837, and incurred an additional $75 in issuance costs during the period,
During the year ended December 31, 2019, the Company issued 565,259 common shares upon exercise of RSUs. As a result, $835 was recorded to share capital.
| (c) | Stock options: |
The Company has a stock option plan to purchase the Company’s common shares, under which it may grant stock options of up to 10% of the Company’s total number of shares issued and outstanding on a non-diluted basis. The stock option plan provides for the granting of stock options to directors, officers, and employees, and to persons providing investor relations or consulting services, the limits being based on the Company’s total number of issued and outstanding shares per year. The stock options vest on the date of grant, except for those issued to persons providing investor relations services, which vest over a period of one year. The option price must be greater than or equal to the discounted market price on the grant date, and the option term cannot exceed ten years from the grant date.
- 32 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
Continuity of stock options is as follows:
|
| Underlying Shares |
|
| Weighted Average Exercise Price (C$) |
| ||
|
|
|
|
|
|
| ||
Stock options outstanding, January 1, 2019 |
|
| 2,917,500 |
|
| $ | 2.04 |
|
Granted |
|
| 526,000 |
|
| $ | 0.79 |
|
Cancelled / Forfeited |
|
| (255,000 | ) |
| $ | 2.09 |
|
Expired |
|
| (550,000 | ) |
| $ | 1.90 |
|
Stock options outstanding, December 31, 2019 |
|
| 2,638,500 |
|
| $ | 1.82 |
|
Granted |
|
| 1,700,000 |
|
| $ | 1.64 |
|
Exercised |
|
| (48,000 | ) |
| $ | 0.79 |
|
Cancelled / Forfeited |
|
| (807,500 | )) |
| $ | 1.70 |
|
Stock options outstanding, December 31, 2020 |
|
| 3,483,000 |
|
| $ | 1.77 |
|
Stock options exercisable, December 31, 2020 |
|
| 2,208,000 |
|
| $ | 1.85 |
|
The following table summarizes information about the stock options outstanding and exercisable at December 31, 2020:
|
|
|
| Outstanding |
|
| Exercisable |
| ||||||||||||
Expiry Date |
| Price (C$) |
|
| Number of Options |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Number of Options |
|
| Weighted Average Remaining Contractual Life (Years) |
| |||||
September 2, 2021 |
| $ | 2.95 |
|
|
| 360,000 |
|
|
| 0.67 |
|
|
| 360,000 |
|
|
| 0.67 |
|
September 20, 2022 |
| $ | 1.98 |
|
|
| 880,000 |
|
|
| 1.72 |
|
|
| 880,000 |
|
|
| 1.72 |
|
August 28, 2023 |
| $ | 1.30 |
|
|
| 295,000 |
|
|
| 2.66 |
|
|
| 295,000 |
|
|
| 2.66 |
|
August 21, 2024 |
| $ | 0.79 |
|
|
| 248,000 |
|
|
| 3.64 |
|
|
| 248,000 |
|
|
| 3.64 |
|
August 4, 2025 |
| $ | 1.64 |
|
|
| 1,700,000 |
|
|
| 4.59 |
|
|
| 425,000 |
|
|
| 4.59 |
|
|
|
|
|
|
|
| 3,483,000 |
|
|
| 3.23 |
|
|
| 2,208,000 |
|
|
| 2.44 |
|
Option pricing requires the use of highly subjective estimates and assumptions including the expected stock price volatility. The expected volatility used in valuing stock options is based on volatility observed in historical periods. Changes in the underlying assumptions can materially affect the fair value estimates. The fair value of the options granted during the year ended December 31, 2020, was calculated using the Black-Scholes model with the following weighted average assumptions and resulting grant date fair value:
|
| 2020 |
|
| 2019 |
| ||
Weighted average assumptions: |
|
|
|
|
|
| ||
Risk-free interest rate |
|
| 0.30 | % |
|
| 1.27 | % |
Expected dividend yield |
|
| 0 | % |
|
| 0 | % |
Expected option life (years) |
|
| 5.00 |
|
|
| 5.00 |
|
Expected stock price volatility |
|
| 66.09 | % |
|
| 59.01 | % |
Weighted average fair value at grant date |
| C$0.89 |
|
| C$0.40 |
|
During the year ended December 31, 2020, the Company charged $777 (December 31, 2019 - $144) to operations as share-based payments and capitalized $Nil (December 31, 2019 - $37) to exploration and evaluation assets for the fair value of stock options vested during the period.
- 33 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
| (d) | Restricted Share Units: |
On April 19, 2018, the Company’s Restricted Share Unit (“RSU”) Plan was approved by its shareholders. The RSU Plan is administered by the Compensation Committee under the supervision of the Board of Directors as compensation to officers, directors, consultants, and employees. The Compensation Committee determines the terms and conditions upon which a grant is made, including any performance criteria or vesting period.
Upon vesting, each RSU entitles the participant to receive one common share, provided that the participant is continuously employed with or providing services to the Company. RSUs track the value of the underlying common shares, but do not entitle the recipient to the underlying common shares until such RSUs vest, nor do they entitle a holder to exercise voting rights or any other rights attached to ownership or control of the common shares, until the RSU vests and the RSU participant receives common shares.
Continuity of RSUs is as follows:
|
| Underlying Shares |
|
| Weighted Average Price (C$) |
| ||
|
|
|
|
|
|
| ||
RSUs outstanding, January 1, 2019 |
|
| 1,235,300 |
|
| $ | 1.62 |
|
Granted |
|
| 1,730,500 |
|
| $ | 0.79 |
|
Exercised |
|
| (565,259 | ) |
| $ | 1.96 |
|
Cancelled / Forfeited |
|
| (27,666 | ) |
| $ | 1.35 |
|
RSUs outstanding, December 31, 2019 |
|
| 2,372,875 |
|
| $ | 0.94 |
|
Granted |
|
| 1,481,000 |
|
| $ | 1.64 |
|
Exercised |
|
| (863,901 | ) |
| $ | 0.99 |
|
Cancelled / Forfeited |
|
| (115,974 | ) |
| $ | 1.00 |
|
RSUs outstanding, December 31, 2020 |
|
| 2,874,000 |
|
| $ | 1.28 |
|
The following table summarizes information about the RSUs outstanding at December 31, 2020:
Issuance Date |
| Price (C$) |
|
| Number of RSUs Outstanding |
| ||
August 28, 2018 |
| $ | 1.31 |
|
|
| 288,000 |
|
August 21, 2019 |
| $ | 0.79 |
|
|
| 1,105,000 |
|
August 4, 2020 |
| $ | 1.64 |
|
|
| 1,481,000 |
|
|
|
|
|
|
|
| 2,874,000 |
|
For the RSUs issued during year ended December 31, 2020, the weighted average fair value at the measurement date was C$1.64 (December 31, 2019 - C$0.79), based on the TSX market price of the Company’s shares on the date the RSUs were granted.
During the year ended December 31, 2020, the Company charged $1,080 (December 31, 2019 - $793) to operations as share-based payments and capitalized $Nil (December 31, 2019 - $49) to exploration and evaluation assets for the fair value of the RSUs vested. The fair value of the RSUs is recognized over the vesting period with reference to vesting conditions and the estimated RSUs expected to vest.
- 34 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
| (e) | Earnings (loss) per share: |
The calculations for basic and diluted earnings per share are as follows:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Net income (loss) for the year |
| $ | (7,482 | ) |
| $ | (2,335 | ) |
| $ | 1,657 |
|
Basic weighted average number of shares outstanding |
|
| 83,180,069 |
|
|
| 69,980,178 |
|
|
| 56,851,626 |
|
Effect of dilutive share options, warrants, and RSUs |
|
| - |
|
|
| - |
|
|
| 3,149,011 |
|
Diluted weighted average number of shares outstanding |
|
| 83,180,069 |
|
|
| 69,980,178 |
|
|
| 60,000,637 |
|
Basic earnings (loss) per share |
| $ | (0.09 | ) |
| $ | (0.03 | ) |
| $ | 0.03 |
|
Diluted earnings (loss) per share |
| $ | (0.09 | ) |
| $ | (0.03 | ) |
| $ | 0.03 |
|
19. | REVENUE AND COST OF SALES |
The Company’s revenues for the year ended December 31, 2020 of $16,022 (2019 - $31,746, 2018 - $34,116) are all attributable to Mexico, from shipments of concentrate produced by the Avino Mine, the San Gonzalo Mine, prior to its closure in Q4 2019, and processing of Historical Above Ground Stockpiles.
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Concentrate sales |
| $ | 15,304 |
|
| $ | 31,417 |
|
| $ | 34,551 |
|
Provisional pricing adjustments |
|
| 718 |
|
|
| 329 |
|
|
| (435 | ) |
|
| $ | 16,022 |
|
| $ | 31,746 |
|
| $ | 34,116 |
|
Cost of sales consists of changes in inventories, direct costs including personnel costs, mine site costs, energy costs (principally diesel fuel and electricity), maintenance and repair costs, operating supplies, external services, third party transport fees, depreciation and depletion, and other expenses for the periods. Direct costs include the costs of extracting co-products. Stand-by costs consists of care and maintenance costs incurred during the work stoppage at the Avino Mine during the year ended December 31, 2020.
Cost of sales is based on the weighted average cost of inventory sold for the periods and consists of the following:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Production costs |
| $ | 11,443 |
|
| $ | 27,949 |
|
| $ | 24,619 |
|
Stand-by costs |
|
| 2,394 |
|
|
| - |
|
|
| - |
|
Inventory net realizable adjustment |
|
| - |
|
|
| 387 |
|
|
| - |
|
Depreciation and depletion |
|
| 1,995 |
|
|
| 3,680 |
|
|
| 3,231 |
|
|
| $ | 15,832 |
|
| $ | 32,016 |
|
| $ | 27,850 |
|
- 35 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
20. | GENERAL AND ADMINISTRATIVE EXPENSES |
General and administrative expenses on the consolidated statements of operations consist of the following:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Salaries and benefits |
| $ | 1,361 |
|
| $ | 1,347 |
|
| $ | 1,244 |
|
Office and miscellaneous |
|
| 117 |
|
|
| 286 |
|
|
| 359 |
|
Management and consulting fees |
|
| 406 |
|
|
| 461 |
|
|
| 354 |
|
Investor relations |
|
| 166 |
|
|
| 171 |
|
|
| 401 |
|
Travel and promotion |
|
| 46 |
|
|
| 110 |
|
|
| 226 |
|
Professional fees |
|
| 380 |
|
|
| 470 |
|
|
| 529 |
|
Directors fees |
|
| 171 |
|
|
| 162 |
|
|
| 161 |
|
Regulatory and compliance fees |
|
| 139 |
|
|
| 143 |
|
|
| 311 |
|
Depreciation |
|
| 116 |
|
|
| 43 |
|
|
| 25 |
|
|
| $ | 2,902 |
|
| $ | 3,193 |
|
| $ | 3,610 |
|
21. | COMMITMENTS |
The Company has a cost sharing agreement to reimburse Oniva for a percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the Company, and to pay a percentage fee based on Oniva’s total overhead and corporate expenses. The agreement may be terminated with one-month notice by either party. Transactions and balances with Oniva are disclosed in Note 12.
The Company and its subsidiaries have various operating lease agreements for their office premises, use of land, and equipment. Commitments in respect of these lease agreements are as follows:
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
Not later than one year |
| $ | 20 |
|
| $ | 1,269 |
|
Later than one year and not later than five years |
|
| 14 |
|
|
| 20 |
|
Later than five years |
|
| 3 |
|
|
| 5 |
|
|
| $ | 37 |
|
| $ | 1,294 |
|
Included in the above amount as at December 31, 2020, is the Company’s commitment to incur flow-through eligible expenditures of $Nil (December 31, 2019 - $1,262 (C$1,639)) that must be incurred in Canada.
Office lease payments recognized as an expense during the year ended December 31, 2020, totalled $40 (2019 - $72, 2018 - $81).
- 36 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
22. | SUPPLEMENTARY CASH FLOW INFORMATION |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Net change in non-cash working capital items: |
|
|
|
|
|
|
|
|
| |||
Deferred revenues |
| $ | - |
|
| $ | (573 | ) |
| $ | 573 |
|
Accounts payable and accrued liabilities |
|
| (2,877 | ) |
|
| (941 | ) |
|
| 2,329 |
|
Prepaid expenses and other assets |
|
| (157 | ) |
|
| 287 |
|
|
| 981 |
|
Amounts receivable |
|
| 1,211 |
|
|
| 2,615 |
|
|
| 543 |
|
Taxes payable |
|
| (39 | ) |
|
| (121 | ) |
|
| (358 | ) |
Amounts due to related parties |
|
| 1 |
|
|
| 6 |
|
|
| (44 | ) |
Taxes recoverable |
|
| 440 |
|
|
| (193 | ) |
|
| 1,017 |
|
Other liabilities |
|
| (178 | ) |
|
| (100 | ) |
|
| - |
|
Inventory |
|
| 4,150 |
|
|
| 3,182 |
|
|
| (42 | ) |
|
| $ | 2,551 |
|
| $ | 4,162 |
|
| $ | 4,999 |
|
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Interest paid |
| $ | 264 |
|
| $ | 618 |
|
| $ | 959 |
|
Taxes paid |
| $ | 279 |
|
| $ | 2,373 |
|
| $ | 4,991 |
|
Equipment acquired under finance leases and equipment loans |
| $ | - |
|
| $ | 122 |
|
| $ | 1,771 |
|
23. | FINANCIAL INSTRUMENTS |
The fair values of the Company’s amounts due to related parties and accounts payable approximate their carrying values because of the short-term nature of these instruments. Cash, amounts receivable, long-term investments, and warrant liability are recorded at fair value. The carrying amounts of the Company’s term facility, equipment loans, and finance lease obligations are a reasonable approximation of their fair values based on current market rates for similar financial instruments.
The Company’s financial instruments are exposed to certain financial risks, including credit risk, liquidity risk, and market risk.
| (a) | Credit Risk |
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company has exposure to credit risk through its cash, long-term investments and amounts receivable. The Company manages credit risk, in respect of cash and short-term investments, by maintaining the majority of cash and short-term investments at highly rated financial institutions.
The Company is exposed to a significant concentration of credit risk with respect to its trade accounts receivable balance because all of its concentrate sales are with three (December 31, 2019 – six) counterparties (see Note 25). However, the Company has not recorded any allowance against its trade receivables because to-date all balances owed have been settled in full when due (typically within 60 days of submission) and because of the nature of the counterparties.
The Company’s maximum exposure to credit risk at the end of any period is equal to the carrying amount of these financial assets as recorded in the consolidated statement of financial position. At December 31, 2020, no amounts were held as collateral.
- 37 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
| (b) | Liquidity Risk |
Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows required by its operating, investing and financing activities. The Company had cash at December 31, 2020, in the amount of $11,713 and working capital of $14,680 in order to meet short-term business requirements. Accounts payable have contractual maturities of approximately 30 to 90 days, or are due on demand and are subject to normal trade terms. The current portions of term facility, equipment loans, and finance lease obligations are due within 12 months of the condensed consolidated interim statement of financial position date. Amounts due to related parties are without stated terms of interest or repayment.
The maturity profiles of the Company’s contractual obligations and commitments as at December 31, 2020, are summarized as follows:
|
| Total |
|
| Less Than 1 Year |
|
| 1-5 years |
|
| More Than 5 Years |
| ||||
Accounts payable and accrued liabilities |
| $ | 2,068 |
|
| $ | 2,068 |
|
| $ | - |
|
| $ | - |
|
Amounts due to related parties |
|
| 154 |
|
|
| 154 |
|
|
| - |
|
|
| - |
|
Minimum rental and lease payments |
|
| 26 |
|
|
| 7 |
|
|
| 16 |
|
|
| 3 |
|
Term facility |
|
| 2,552 |
|
|
| 2,552 |
|
|
| - |
|
|
| - |
|
Equipment loans |
|
| 72 |
|
|
| 72 |
|
|
| - |
|
|
| - |
|
Finance lease obligations |
|
| 514 |
|
|
| 213 |
|
|
| 301 |
|
|
| - |
|
Total |
| $ | 5,386 |
|
| $ | 5,066 |
|
| $ | 317 |
|
| $ | 3 |
|
| (c) | Market Risk |
Market risk consists of interest rate risk, foreign currency risk and price risk. These are discussed further below.
Interest Rate Risk
Interest rate risk consists of two components:
| (i) | To the extent that payments made or received on the Company’s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk. |
|
|
|
| (ii) | To the extent that changes in prevailing market rates differ from the interest rates on the Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk. |
In management’s opinion, the Company is exposed to interest rate risk primarily on its outstanding term facility, as the interest rate is subject to floating rates of interest. A 10% change in the interest rate would not a result in a material impact on the Company’s operations.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company is exposed to foreign currency risk to the extent that the following monetary assets and liabilities are denominated in Mexican pesos and Canadian dollars:
- 38 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||||||||||
|
| MXN |
|
| CDN |
|
| MXN |
|
| CDN |
| ||||
Cash |
| $ | 36,896 |
|
| $ | 2,831 |
|
| $ | 2,780 |
|
| $ | 5,902 |
|
Long-term investments |
|
| - |
|
|
| 5,317 |
|
|
| - |
|
|
| 5,599 |
|
Reclamation bonds |
|
| - |
|
|
| 6 |
|
|
| - |
|
|
| 6 |
|
Amounts receivable |
|
| - |
|
|
| 20 |
|
|
| - |
|
|
| 54 |
|
Accounts payable and accrued liabilities |
|
| (22,972 | ) |
|
| (157 | ) |
|
| (51,307 | ) |
|
| (442 | ) |
Due to related parties |
|
| - |
|
|
| (196 | ) |
|
| - |
|
|
| (202 | ) |
Finance lease obligations |
|
| (1,543 | ) |
|
| (448 | ) |
|
| (1,037 | ) |
|
| (522 | ) |
Net exposure |
|
| 12,381 |
|
|
| 7,373 |
|
|
| (49,564 | ) |
|
| 10,395 |
|
US dollar equivalent |
| $ | 620 |
|
| $ | 5,791 |
|
| $ | (2,627 | ) |
| $ | 8,004 |
|
Based on the net US dollar denominated asset and liability exposures as at December 31, 2020, a 10% fluctuation in the US/Mexican and Canadian/US exchange rates would impact the Company’s earnings for the year ended December 31, 2020, by approximately $589 (December 31, 2019 - $465). The Company has not entered into any foreign currency contracts to mitigate this risk.
Price Risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk.
The Company is exposed to price risk with respect to its amounts receivable, as certain trade accounts receivable are recorded based on provisional terms that are subsequently adjusted according to quoted metal prices at the date of final settlement. Quoted metal prices are affected by numerous factors beyond the Company’s control and are subject to volatility, and the Company does not employ hedging strategies to limit its exposure to price risk. At December 31, 2020, based on outstanding accounts receivable that were subject to pricing adjustments, a 10% change in metals prices would have an impact on net income (loss) of approximately $2 (December 31, 2019 - $70).
The Company is exposed to price risk with respect to its long-term investments, as these investments are carried at fair value based on quoted market prices. Changes in market prices result in gains or losses being recognized in net income (loss). At December 31, 2020, a 10% change in market prices would have an impact on net earnings (loss) of approximately $418 (December 31, 2019 - $467).
The Company’s profitability and ability to raise capital to fund exploration, evaluation and production activities is subject to risks associated with fluctuations in mineral prices. Management closely monitors commodity prices, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company.
| (d) | Classification of Financial Instruments |
IFRS 7 Financial Instruments: Disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
- 39 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
The following table sets forth the Company’s financial assets and financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as at December 31, 2020:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||
Financial assets |
|
|
|
|
|
|
|
|
| |||
Cash |
| $ | 11,713 |
|
| $ | - |
|
| $ | - |
|
Amounts receivable |
|
| - |
|
|
| 529 |
|
|
| - |
|
Long-term investments |
|
| 4,176 |
|
|
| - |
|
|
| - |
|
Total financial assets |
| $ | 15,889 |
|
| $ | 529 |
|
| $ | - |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability |
|
| - |
|
|
| - |
|
|
| (2,295 | ) |
Total financial liabilities |
| $ | - |
|
| $ | - |
|
| $ | (2,295 | ) |
The Company uses Black-Scholes model to measure its Level 3 financial instruments. The warrants of Talisker are measured on acquisition and at December 31, 2019, using the following assumptions:
|
| December 31, 2019 |
|
| December 13, 2019 |
| ||
Weighted average assumptions: |
|
|
|
|
|
| ||
Risk-free interest rate |
|
| 1.71 | % |
|
| 1.67 | % |
Expected dividend yield |
|
| 0 | % |
|
| 0 | % |
Expected life (years) |
|
| 2.95 |
|
|
| 3.00 |
|
Expected stock price volatility |
|
| 106.79 | % |
|
| 108.41 | % |
Weighted average fair value at grant date |
| C$ | 0.23 |
|
| C$ | 0.15 |
|
During the year ended December 31, 2020, all warrants of Talisker were exercised, and any changes in Level 3 measurements were a result of the Company exercising these warrants (see Note 8 of the consolidated financial statements).
As at December 31, 2020, the Company’s Level 3 financial instruments consisted solely of the warrant liability. For the Company’s warrant liability valuation and fair value adjustments during the years ended December 31, 2020 and 2019, see Note 16 of the consolidated financial statements.
During the year ended December 31, 2019, changes in Level 3 measurements were comprised of the recognition of the Talisker warrants received in the sale of Bralorne (see Note 5) of $716, and its subsequent fair value increase of $398 for a total fair value of $1,114 at December 31, 2019.
- 40 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
24. | CAPITAL MANAGEMENT |
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the exploration and expansion of its properties and to maintain a flexible capital structure for its projects for the benefit of its stakeholders. In the management of capital, the Company includes equity (comprising of all issued share capital, equity reserves, retained earnings or accumulated deficit, and other comprehensive income (loss)), the term facility, equipment loan obligations, and finance lease, are listed as follows:
|
| December 31, |
|
| December 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Equity |
| $ | 59,008 |
|
| $ | 53,923 |
|
Term Facility |
|
| 2,513 |
|
|
| 5,897 |
|
Finance Lease Obligations |
|
| 486 |
|
|
| 1,134 |
|
Equipment Loans |
|
| 72 |
|
|
| 289 |
|
|
| $ | 62,079 |
|
| $ | 61,243 |
|
The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may attempt to incur new debt or issue new shares. Management reviews the Company’s capital structure on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. At December 31, 2020, the Company expects its capital resources and projected future cash flows from operations to support its normal operating requirements on an ongoing basis, and planned development and exploration of its mineral properties and other expansionary plans. At December 31, 2020, there was no externally imposed capital requirement to which the Company was subject and with which the Company did not comply.
25. | SEGMENTED INFORMATION |
The Company’s revenues for the year ended December 31, 2020 of $16,022 (2019 - $31,746; 2018 – $34,116) are all attributable to Mexico, from shipments of concentrate produced by the Avino Mine, the San Gonzalo Mine and the Avino Historic Above Ground stockpiles.
On the consolidated statements of operations, the Company had revenue from the following product mixes:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Silver |
| $ | 6,318 |
|
| $ | 14,030 |
|
| $ | 17,259 |
|
Copper |
|
| 4,662 |
|
|
| 13,953 |
|
|
| 12,996 |
|
Gold |
|
| 8,517 |
|
|
| 10,326 |
|
|
| 9,866 |
|
Penalties, treatment costs and refining charges |
|
| (3,475 | ) |
|
| (6,563 | ) |
|
| (6,005 | ) |
Total revenue from mining operations |
| $ | 16,022 |
|
| $ | 31,746 |
|
| $ | 34,116 |
|
- 41 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
For the year ended December 31, 2020, the Company had three customers (2019 – six, 2018 – six) that accounted for total revenues as follows:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Customer #1 |
| $ | 12,573 |
|
| $ | 21,810 |
|
| $ | 23,314 |
|
Customer #2 |
|
| 3,206 |
|
|
| 4,861 |
|
|
| 321 |
|
Customer #3 |
|
| (19 | ) |
|
| 3,350 |
|
|
| 8,071 |
|
Customer #4 |
|
| 262 |
|
|
| 1,246 |
|
|
| - |
|
Customer #5 |
|
| - |
|
|
| 469 |
|
|
| - |
|
Customer #6 |
|
| - |
|
|
| 10 |
|
|
| 519 |
|
Customer #7 |
|
| - |
|
|
| - |
|
|
| 1,547 |
|
Customer #8 |
|
| - |
|
|
| - |
|
|
| 344 |
|
Total revenue from mining operations |
| $ | 16,022 |
|
| $ | 31,746 |
|
| $ | 34,116 |
|
Geographical information relating to the Company’s non-current assets (other than financial instruments) is as follows:
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
Exploration and evaluation assets - Mexico |
| $ | 10,051 |
|
| $ | 9,826 |
|
Exploration and evaluation assets - Canada |
|
| 1 |
|
|
| 1 |
|
Total exploration and evaluation assets |
| $ | 10,052 |
|
| $ | 9,827 |
|
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
Plant, equipment, and mining properties - Mexico |
| $ | 34,475 |
|
| $ | 35,239 |
|
Plant, equipment, and mining properties - Canada |
|
| 371 |
|
|
| 419 |
|
Total plant, equipment, and mining properties |
| $ | 34,846 |
|
| $ | 35,658 |
|
On December 13, 2019, the Company sold Bralorne (see Note 5) which held substantially all of the Company’s non-current assets in Canada.
26. | INCOME TAXES |
| (a) | Income tax expense |
Income tax expense included in the consolidated statements of operations and comprehensive income (loss) is as follows:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Current income tax expense |
| $ | 161 |
|
| $ | 327 |
|
| $ | 1,052 |
|
Deferred income tax recovery |
|
| (1,569 | ) |
|
| (960 | ) |
|
| (645 | ) |
Total income tax expense (recovery) |
| $ | (1,408 | ) |
| $ | (633 | ) |
| $ | 407 |
|
- 42 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
The reconciliation of income taxes calculated at the Canadian statutory tax rate to the income tax expense recognized in the year is as follows:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Net income (loss) before income taxes |
| $ | (8,890 | ) |
| $ | (2,968 | ) |
| $ | 2,064 |
|
Net loss from discontinued operations before income taxes |
|
| (169 | ) |
|
| (29,126 | ) |
|
| (31 | ) |
Net income (loss) before income taxes |
| $ | (9,059 | ) |
| $ | (32,094 | ) |
| $ | 2,033 |
|
Combined statutory tax rate |
|
| 27.00 | % |
|
| 27.00 | % |
|
| 27.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (recovery) at the Canadian statutory rate |
|
| (2,446 | ) |
|
| (8,665 | ) |
|
| 549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling items: |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of difference in foreign tax rates |
|
| (86 | ) |
|
| (120 | ) |
|
| 48 |
|
Non-deductible/non-taxable items |
|
| 1,467 |
|
|
| 6,449 |
|
|
| (121 | ) |
Change in unrecognized deductible temporary differences |
|
| 332 |
|
|
| 1,263 |
|
|
| (257 | ) |
Impact of foreign exchange |
|
| (112 | ) |
|
| 222 |
|
|
| 915 |
|
Special mining duties |
|
| (185 | ) |
|
| 231 |
|
|
| 117 |
|
Revisions to estimates |
|
| (297 | ) |
|
| 58 |
|
|
| (368 | ) |
Share issue costs |
|
| (73 | ) |
|
| (174 | ) |
|
| (231 | ) |
Other items |
|
| (8 | ) |
|
| 103 |
|
|
| (245 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (recovery) recognized in the year |
| $ | (1,408 | ) |
| $ | (633 | ) |
| $ | 407 |
|
The Company recognized a non-cash recovery of $164 for the year ended December 31, 2020 (2019 – expense of $235; 2018 – expense of $379) related to the deferred tax impact of the special mining duty. The Canadian income tax rate increased from 26% to 27% effective January 1, 2018, with a statutory impact prior to year-end. The impact of this change has been reflected in the consolidated financial statements.
|
| December 31, |
|
| December 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
| ||
Deferred income tax assets |
| $ | 4,249 |
|
| $ | 2,755 |
|
Deferred income tax liabilities |
|
| (5,618 | ) |
|
| (5,693 | ) |
|
|
|
|
|
|
|
|
|
|
| $ | (1,369 | ) |
| $ | (2,938 | ) |
The approximate tax effects of each type of temporary difference that gives rise to potential deferred income tax assets and liabilities are as follows:
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
|
|
|
|
|
|
| ||
Reclamation provision |
| $ | 304 |
|
| $ | 571 |
|
Non-capital losses |
|
| 3,383 |
|
|
| 1,171 |
|
Other deductible temporary differences |
|
| 562 |
|
|
| 1,013 |
|
Inventory |
|
| (2 | ) |
|
| (243 | ) |
Exploration and evaluation assets |
|
| (3,349 | ) |
|
| (3,340 | ) |
Plant, equipment and mining properties |
|
| (2,267 | ) |
|
| (2,110 | ) |
|
|
|
|
|
|
|
|
|
Net deferred income tax liabilities |
| $ | (1,369 | ) |
| $ | (2,938 | ) |
The net deferred tax liability presented in these consolidated financial statements is due to the difference in the carrying amounts and tax bases of the Mexican plant, equipment and mining properties which were acquired in the purchase of Avino Mexico. The carrying values of the Mexican plant, equipment and mining properties includes an estimated fair value adjustment recorded upon the July 17, 2006, acquisition of control of Avino Mexico that was based on a share exchange, while the tax bases of these assets are historical undeducted tax amounts that were nil on acquisition. The deferred tax liability is attributable to assets in the tax jurisdiction of Mexico.
- 43 - |
AVINO SILVER & GOLD MINES LTD. Notes to the consolidated financial statements For the years ended December 31, 2020, 2019 and 2018 (Expressed in thousands of US dollars, except where otherwise noted) |
| (b) | Unrecognized deductible temporary differences: |
Temporary differences and tax losses arising in Canada have not been recognized as deferred income tax assets due to the fact that management has determined it is not probable that sufficient future taxable profits will be earned in Canada to recover such assets. Unrecognized deductible temporary differences are summarized as follows:
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
|
|
|
|
|
|
| ||
Tax losses carried forward |
| $ | 18,974 |
|
| $ | 24,229 |
|
Share issue costs |
|
| 1,144 |
|
|
| 1,352 |
|
Plant, equipment and mining properties |
|
| 263 |
|
|
| 170 |
|
Exploration and evaluation assets |
|
| 1,248 |
|
|
| 1,237 |
|
Investments |
|
| (400 | ) |
|
| (1,273 | ) |
Reclamation provision and other |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Unrecognized deductible temporary differences |
| $ | 21,229 |
|
| $ | 25,715 |
|
The Company has capital losses of $11,396 carried forward and $7,578 in non-capital tax losses carried forward available to reduce future Canadian taxable income. The capital losses can be carried forward indefinitely until used. The non-capital losses have an expiry date range of 2027 to 2040.
27. | SUBSEQUENT EVENTS |
Warrant Exercises – Subsequent to December 31, 2020, the Company issued 896,562 common shares through the early exercise of share purchase warrants for proceeds of $717 at an average price per share of $0.80.
At-The-Market Sales – Subsequent to December 31, 2020, the Company issued 9,050,000 common shares in at-the-market offerings under prospectus supplement for gross proceeds of $17,732. The Company paid a 2.75% cash commission of $488 on gross proceeds, for net proceeds of $17,244.
Option Exercises – Subsequent to December 31, 2020, the Company issued 264,000 common shares through the exercise of incentive stock options for proceeds of C$305, at an average price of C$1.16.
- 44 - |