| Basis of Preparation | 2.
BASIS OF PREPARATION
2.1
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. These consolidated financial statements were
authorized for issue by the Board of Directors on February 20,
2018.
2.2
Basis of measurement, judgment and
estimation These consolidated financial statements have been
prepared on a historical cost basis except for fair-value-through-profit-or-loss, available-for-sale These consolidated financial statements are
presented in Canadian dollars, which is the Company’s
functional currency. Foreign currency monetary assets and
liabilities are translated into Canadian dollars at the closing
exchange rate as at the balance sheet date. Foreign currency
non-monetary The preparation of these consolidated financial
statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and in
any future periods affected. In the process of applying the Company’s
accounting policies, significant areas where judgment is required
include the determination of a joint arrangement and recovery of
other deferred tax assets. Significant areas of estimation include reserve and
resource estimation; asset valuations and the measurement of
impairment charges or reversals; finished and in-process
The accuracy of reserve and resource estimates is a
function of the quantity and quality of available data and the
assumptions made and judgment used in the engineering and
geological interpretation, and may be subject to revision based on
various factors. Changes in reserve and resource estimates may
impact the carrying value of property, plant and equipment; the
calculation of depreciation expense; the capitalization of
stripping costs incurred during production; and the timing of cash
flows related to the provision for environmental
rehabilitation. Changes in forecast prices of commodities, exchange
rates, production costs and recovery rates may change the economic
status of reserves and resources. Forecast prices of commodities,
exchange rates, production costs and recovery rates, and discount
rates assumptions, either individually or collectively, may impact
the carrying value of derivative financial instruments,
inventories, property, plant and equipment, and intangibles, as
well as the measurement of impairment charges or reversals.
2.3
Basis of consolidation The consolidated financial statements comprise the
financial statements of the Company and controlled entities as at
December 31, 2017. Control is achieved when the Company is
exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power over the investee. The Company reassesses whether or not it controls
an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control.
Consolidation of a subsidiary begins when the Company obtains
control over the subsidiary and ceases when the Company loses
control of the subsidiary. Assets, liabilities, income and expenses
of a subsidiary acquired or disposed of during the year are
included in the consolidated statement of comprehensive income
(loss) from the date the Company gains control until the date the
Company ceases to control the subsidiary. When necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with the Company’s
accounting policies. All intercompany assets and liabilities,
equity, income, expenses and cash flows relating to transactions
between members of the Company are eliminated in full on
consolidation. The Company applies the acquisition method in
accounting for business combinations. The consideration transferred
by the Company to obtain control of a subsidiary is calculated as
the sum of the acquisition-date fair values of assets transferred,
liabilities incurred and the equity interests issued by the
Company, which includes the fair value of any asset or liability
arising from a contingent consideration arrangement. Acquisition
costs are expensed as incurred. The Company recognizes identifiable assets acquired
and liabilities assumed in a business combination regardless of
whether they have been previously recognized in the
acquiree’s financial statements prior to the acquisition.
Assets acquired and liabilities assumed are generally measured at
their acquisition-date fair values. Goodwill is stated after separate recognition of
identifiable intangible assets. It is calculated as the excess of
the sum of a) fair value of consideration transferred, b) the
recognized amount of any non-controlling
2.4
Significant Accounting Policies
(a)
Revenue recognition Revenue is recognized when the significant risks
and rewards of ownership have been transferred and the amount of
revenue is reasonably determinable. These conditions are generally
satisfied when title passes to the customer. Cash received in
advance of meeting these conditions is recorded as deferred
revenue. Under the terms of the Company’s concentrate
and cathode sales contracts, the final sales amount is based on
final assay results and quoted market prices which may be in a
period subsequent to the date of sale. Revenues for these sales,
net of treatment and refining charges are recorded at the time of
shipment, which is also when the risks and rewards of ownership
transfer to the customer, based on an estimate of metal contained
using initial assay results and forward market prices on the
expected date that final sales prices will be fixed. The period
between provisional pricing and final settlement can be up to four
months. This provisional pricing mechanism represents an embedded
derivative. The embedded derivative is recorded at fair value each
reporting period by reference to forward market prices until the
date of final pricing, with the changes in fair value recorded as
an adjustment to revenue.
(b)
Cash and equivalents Cash and equivalents consist of cash and
highly-liquid investments having terms of three months or less from
the date of acquisition and that are readily convertible to known
amounts of cash. Cash and equivalents exclude cash subject to
restrictions.
(c)
Financial instruments Financial assets and liabilities are recognized on
the balance sheet when the Company becomes party to the contractual
provisions of the instrument. The classification of financial
instruments dictates how these assets and liabilities are measured
subsequently in the Company’s consolidated financial
statements.
Financial instruments at fair value through profit or loss
(FVTPL) Financial instruments are classified as FVTPL when
they are held for trading. A financial instrument is held for
trading if it was acquired for the purpose of selling in the near
term. Derivative financial instruments that are not designated and
effective as hedging instruments are classified as FVTPL. Financial
instruments classified as FVTPL are stated at fair value with any
changes in fair value recognized in earnings for the period.
Financial assets in this category include derivative financial
instruments that the Company acquires to manage exposure to
commodity price fluctuations. These instruments are non-hedge
Loans and receivables Loans and receivables are financial assets with
fixed or determinable payments that are not quoted in an active
market. Subsequent to initial recognition, these financial assets
are recorded at amortized cost using the effective interest method,
except for short-term receivables when the recognition of interest
would be immaterial. Accounts receivable are assessed for evidence
of impairment at each reporting date, with any impairment
recognized in earnings for the period. Financial assets in this
category include cash and equivalents and accounts receivable.
Available-for-sale Marketable securities, subscription receipts and
reclamation deposits are designated as available-for-sale
Financial liabilities Financial liabilities are initially recorded at
fair value, net of transaction costs, and are subsequently measured
at amortized cost using the effective interest method. The Company
has accounted for accounts payable and accrued liabilities and
long-term debt under this method.
Fair value measurement Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The fair value hierarchy establishes three levels to classify the
inputs to valuation techniques used to measure fair value, by
reference to the reliability of the inputs used to estimate the
fair values. Level 1 – quoted prices (unadjusted) in
active markets for identical assets or liabilities; Level 2 – inputs other than quoted
prices included within 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).
(d)
Exploration and evaluation Exploration and evaluation expenditures relate to
the initial search for a mineral deposit and the subsequent
evaluation to determine the economic potential of the mineral
deposit. The exploration and evaluation stage commences when the
Company obtains the legal right or license to begin exploration.
Exploration and evaluation expenditures are recognized in earnings
in the period in which they are incurred. Capitalization of development costs as mineral
property, plant and equipment commences once the technical
feasibility and commercial viability of the extraction of mineral
reserve and resources associated with the Company’s
evaluation properties are established and management has made a
decision to proceed with development.
(e)
Inventories Inventories are valued at the lower of cost and net
realizable value. Cost is determined on a weighted average basis
and includes direct labour and materials; non-capitalized Ore stockpiles represent stockpiled ore and metals
in the processing circuits that have not yet completed the
production process, and are not yet in a saleable form. Finished
goods inventories represent metals in saleable form that have not
yet been sold. Materials and supplies inventories represent
consumables used in the production process, as well as spare parts
and other maintenance supplies that are not classified as capital
items. The quantity of recoverable metal in stockpiled ore
and in the processing circuits is an estimate which is based on the
tons of ore added and removed, expected grade and recovery. The
quantity of recoverable metal in concentrate is an estimate using
initial assay results.
(f)
Property, plant and equipment
Land, buildings, plant and equipment Land, buildings, plant and equipment are recorded
at cost, including all expenditures incurred to prepare an asset
for its intended use. Repairs and maintenance costs are charged to
expense as incurred, except when these repairs significantly extend
the life of an asset or result in an operating improvement. In
these instances, the portion of these repairs relating to the
betterment is capitalized as part of plant and equipment. Depreciation is based on the cost of the asset less
residual value. Where an item of plant and equipment is comprised
of major components with different useful lives, the components are
accounted for as separate items and depreciated separately.
Depreciation commences when an asset is available for use.
Estimates of remaining useful lives and residual values are
reviewed annually. Changes in estimates are accounted for
prospectively. The depreciation rates of the major asset
categories are as follows:
Land Not depreciated
Buildings Straight-line basis over
10-25
Plant and equipment Units-of-production
Mining equipment Straight-line basis over
5-20
Light vehicles and other mobile equipment Straight-line basis over
2-5
Furniture, computer and office equipment Straight-line basis over
2-3
Mineral properties Mineral properties consist of the cost of acquiring
and developing mineral properties. Once in production, mineral
properties are amortized on a units-of-production Property acquisition costs arise either as an
individual asset purchase or as part of a business combination, and
may represent a combination of either proven and probable reserves,
resources, or future exploration potential. When management has not
made a determination that technical feasibility and commercial
viability of extracting a mineral resource are demonstrable, the
entire amount is considered property acquisition costs and not
amortized. When such property moves into development, the property
acquisition cost asset is transferred to mineral properties within
property, plant and equipment. Mineral property development costs include:
stripping costs incurred in order to provide initial access to the
ore body; stripping costs incurred during production that generate
a future economic benefit by increasing the productive capacity,
extending the productive life of the mine or allowing access to a
mineable reserve; capitalized project development costs; and
capitalized interest.
Construction in progress Construction in progress includes the purchase
price and any costs directly attributable to bringing the asset to
the location and condition necessary for its intended use.
Construction in progress includes advances on long-lead items.
Construction in progress is not depreciated. Once the asset is
complete and available for use, the costs of construction are
transferred to the appropriate category of property, plant and
equipment, and depreciation commences.
Capitalized interest Interest is capitalized for qualifying assets.
Qualifying assets are assets that require a substantial period of
time to prepare for their intended use. Capitalization ceases when
the asset is substantially complete or if construction is
interrupted for an extended period. Where the funds used to finance
a project form part of general borrowings, the amount capitalized
is calculated using a weighted average of rates applicable to
relevant general borrowings of the Company during the period.
Leased assets Leased assets in which the Company receives
substantially all the risks and rewards of ownership of the asset
are capitalized as finance leases at the lower of the fair value of
the asset or the estimated present value of the minimum lease
payments. The corresponding lease obligation is recorded within
debt on the balance sheet. Assets under operating leases are not
capitalized and rental payments are expensed on a straight-line
basis.
Impairment The carrying amounts of the Company’s
non-financial The recoverable amount of an asset or cash
generating unit (CGU) is the higher of fair value less costs to
sell and value in use. Fair value is determined as the amount that
would be obtained from the sale of the asset in an arm’s-length pre-tax Where an impairment loss subsequently reverses, the
carrying amount of the asset or CGU is increased to the revised
estimate of its recoverable amount, but not to an amount that
exceeds the carrying amount that would have been determined had no
impairment loss been recognized for the asset or CGU in prior
years. A reversal of an impairment loss is recognized immediately
in earnings.
(g)
Income taxes Income tax on the earnings for the periods
presented comprises current and deferred tax. Income tax is
recognized in earnings except to the extent that it relates to
items recognized directly in equity or in other comprehensive
income. Income tax is calculated using tax rates enacted or
substantively enacted at the reporting date applicable to the
period of expected realization or settlement. Current tax expense is the expected tax payable on
the taxable income for the year, adjusted for amendments to tax
payable with regards to previous years. Deferred tax is determined using the balance sheet
liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of assets or liabilities acquired (not in a business combination)
that affect neither accounting nor taxable profit on acquisition;
and differences relating to investments in subsidiaries,
associates, and joint ventures to the extent that they are not
probable to reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of
realization or settlement of the carrying amount of assets and
liabilities. 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 are
reviewed at each reporting date and are reduced to the extent it is
no longer probable that the related tax benefit will be
realized.
(h)
Share-based compensation The fair-value method is used for the
Company’s share-based payment transactions. Under this
method, the cost of share options and equity-settled performance
share units is recorded based on their estimated fair value at the
grant date, including an estimate of the forfeiture rate. The
fair value of the share options and performance share units is
expensed on a graded amortization basis over the vesting period of
the awards, with a corresponding increase in equity. Share-based compensation expense relating to
cash-settled awards, including deferred share units, is recognized
based on the quoted market value of the Company’s common
shares on the date of grant. The related liability is
re-measured
(i)
Provisions
Environmental rehabilitation The Company records the present value of estimated
costs of legal and constructive obligations required to retire an
asset in the period in which the obligation occurs. Environmental
rehabilitation activities include facility decommissioning and
dismantling; removal and treatment of waste materials; site and
land rehabilitation, including compliance with and monitoring of
environmental regulations; and related costs required to perform
this work and/or operate equipment designed to reduce or eliminate
environmental effects. The provision for environmental
rehabilitation (“PER”) is adjusted each period for new
disturbances, and changes in regulatory requirements, the estimated
amount of future cash flows required to discharge the liability,
the timing of such cash flows and the pre-tax When a PER is initially recognized, the
corresponding cost is capitalized by increasing the carrying amount
of the related asset, and is amortized to earnings on a
unit-of-production Significant estimates and assumptions are made in
determining the provision for environmental rehabilitation as there
are numerous factors that will affect the ultimate liability
payable. These factors include estimation of the extent and cost of
rehabilitation activities; timing of future cash flows that are
impacted by changes in discount rates; inflation rate; and
regulatory requirements.
Other provisions Other provisions are recognized when the Company
has a present obligation (legal or constructive) that has arisen as
a result of a past event and it is probable that a future outflow
of resources will be required to settle the obligation, provided
that a reliable estimate can be made of the amount of the
obligation. Where the effect is material, the provision is
discounted using a pre-tax
(j)
Finance income and expenses Finance income comprises interest income on funds
invested, gains on the disposal of marketable securities, and
changes in the fair value of derivatives included in cash and
equivalents and marketable securities. Interest income is
recognized as it accrues in earnings, using the effective interest
method. Finance expenses comprise interest expense on borrowings,
unwinding of the discount on provisions, losses on the disposal of
marketable securities, changes in the fair value of derivatives
included in cash and equivalents and marketable securities, and
impairment losses recognized on financial assets. Borrowing costs
that are not directly attributable to the acquisition, construction
or production of a qualifying asset are recognized in earnings
using the effective interest method.
(k)
Earnings (loss) per share The Company presents basic and diluted earnings
(loss) per share data for its common shares, calculated by dividing
the earnings (loss) attributable to common shareholders of the
Company by the weighted average number of common shares outstanding
during the period. 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 dilutive potential common shares, which comprise
warrants and share options granted. There is no dilution impact
when the Company incurs a loss.
(l)
Interests in joint arrangements IFRS defines a joint arrangement as one over which
two or more parties have joint control, which is the contractually
agreed sharing of control over an arrangement. This exists only
when the decisions about the relevant activities (being those that
significantly affect the returns of the arrangement) require the
unanimous consent of the parties sharing control. A joint operation is a type of joint arrangement
whereby the parties that have joint control of the arrangement have
rights to the assets and obligations for the liabilities, relating
to the arrangement. In relation to its interests in joint
operations, the Company recognizes its:
•
Assets, including its share of any assets held
jointly;
•
Liabilities, including its share of any liabilities
incurred jointly;
•
Revenue from the sale of its share of the output
arising from the joint operation; and
•
Expenses, including its share of any expenses
incurred jointly.
2.6
New accounting standards The Company has not applied the following revised
or new IFRS that have been issued but were not yet effective at
December 31, 2017:
•
In July 2014, the IASB issued the final version of
IFRS 9 Financial Instruments IAS 39, Financial
Instruments: Recognition and Measurement.
•
In May 2014, the IASB issued IFRS 15 Revenue
from Contracts with Customers.
•
In January 2016, the IASB issued IFRS 16
Leases Revenue from Contracts with Customers |
