MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Endeavour Silver Corp. ("the Company") have been prepared by management in accordance with International Financial Reporting Standards (IFRS), and within the framework of the significant accounting policies disclosed in the notes to these consolidated financial statements.
Management, under the supervision and participation of the Chief Executive Officer and the Chief Financial Officer, have a process in place to evaluate disclosure controls and procedures and internal control over financial reporting as required by Canadian and United States securities regulations. We, as CEO and CFO, will certify our annual filings with Canadian Securities Administrators and the US Securities and Exchange Commission, as required in Canada by Multilateral Instrument 52-109 and in the United States as required by the Securities Exchange Act of 1934, respectively.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements. The Board carries out its responsibility principally through its Audit Committee, which is independent from management.
The Audit Committee of the Board of Directors meets with management to review the consolidated financial statements and related financial reporting matters prior to submitting the consolidated financial statements to the Board of Directors for approval. The Audit Committee reviews the consolidated financial statements and management discussion and analysis; considers the report of the external auditor; assesses the adequacy of internal controls, including management's assessment; examines the fees and expenses for audit services; and recommends to the Board the independent auditors for appointment by the shareholders. The independent auditors have full and free access to the Audit Committee and meet with it to discuss the audit work, financial reporting matters and our internal control over financial reporting. The Audit Committee is appointed by the Board of Directors and all of its members are independent directors.
February 28, 2023
/s/ Daniel Dickson | /s/ Christine West | |
Chief Executive Officer | Chief Financial Officer |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 2 |
KPMG LLP Chartered Professional Accountants PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3 Canada | Telephone (604) 691-3000 Fax (604) 691-3031 Internet www.kpmg.ca |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Endeavour Silver Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Endeavour Silver Corp. (the Company) as of December 31, 2022 and December 31, 2021, the related consolidated statements of comprehensive earnings (loss), cash flows, and changes in shareholders’ equity for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two‑year period ended December 31, 2022, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the 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 of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included 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 our audits provide a reasonable basis for our opinion.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 3 |
Endeavour Silver Corp. |
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Recoverable amount of the Bolanitos cash-generating unit
As discussed in Note 3(h) to the consolidated financial statements, when an indicator of impairment exists, the Company is required to determine the recoverable amount of the Cash Generating Unit (“CGU”) to determine whether an impairment should be recognized. If an indicator of impairment or reversal exists, the asset’s recoverable amount is estimated. An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit, exceeds its recoverable amount. As discussed in Note 9 to the consolidated financial statements, the Company determined there were indicators of impairment associated with the Bolanitos CGU as of December 31, 2022. To determine the recoverable amount of the CGU, the Company used a discounted cash flow model. Based on its assessment, the Company determined that no impairment loss or reversal of impairment for the Bolanitos CGU was required.
We identified the assessment of the recoverable amount of the Bolanitos CGU to be a critical audit matter. A high degree of auditor judgment was required to evaluate the inputs used to estimate the recoverable amount. Significant assumptions used in the determination of the recoverable amount included future metal prices, future production volumes including the amount of recoverable reserves and resources, future operating costs and capital expenditures, and the salvage value of the plant and equipment. Changes in any of these assumptions could have had a significant effect on the determination of the estimated recoverable amount.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 4 |
Endeavour Silver Corp. |
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of an internal control over the Company's process to determine the recoverable amount of the CGU. This control addresses the review of the Company’s development of the significant assumptions used to estimate the recoverable amount of the Bolanitos CGU. We evaluated the competence, experience, and objectivity of the qualified persons responsible for the recoverable reserves and resource estimate. We compared the amount of reserves and resources in the valuation model to the mine plan and to the latest mineral reserve and resource estimate. We compared estimated operating and capital costs in the valuation model to the mine plan and to historical expenditures. We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the future metal prices by comparing to third party data. We compared the estimated salvage value of plant and equipment to comparable sales transactions in a similar geographical region to which the Bolanitos mine operates.
//s// KPMG LLP
Chartered Professional Accountants
We have served as the Company's auditor since 1994.
Vancouver, Canada
February 28, 2023
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 5 |
KPMG LLP Chartered Professional Accountants PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3 Canada | Telephone (604) 691-3000 Fax (604) 691-3031 Internet www.kpmg.ca |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Endeavour Silver Corp.
Opinion on Internal Control over Financial Reporting
We have audited Endeavour Silver Corp.’s (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2022 and December 31, 2021, the related consolidated statements of comprehensive earnings (loss), cash flows, and changes in shareholders’ equity for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2023 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in "Management's Discussion and Analysis - Internal Controls over Financial Reporting". Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 6 |
Endeavour Silver Corp. |
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
//s// KPMG LLP
Chartered Professional Accountants
Vancouver, Canada
February 28, 2023
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 7 |
ENDEAVOUR SILVER CORP. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
December 31, | December 31, | ||||||
Notes | 2022 | 2021 | |||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | $ | |||||
Other investments | 4 | ||||||
Accounts and other receivables | 5 | ||||||
Income tax receivable | |||||||
Inventories | 6 | ||||||
Prepaid expenses | |||||||
Loans receivable | 8 | ||||||
Total current assets | |||||||
Non-current deposits | |||||||
Non-current income tax receivable | 21 | ||||||
Non-current other investments | 4 | ||||||
Non-current IVA receivable | 5 | ||||||
Non-current loans receivable | 8 | ||||||
Deferred income tax asset | 21 | ||||||
Intangible assets | |||||||
Right-of-use leased assets | |||||||
Mineral properties, plant and equipment | 8, 9 | ||||||
Total assets | $ | $ | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | $ | $ | |||||
Income taxes payable | |||||||
Loans payable | 10 | ||||||
Lease liabilities | 11 | ||||||
Total current liabilities | |||||||
Loans payable | 10 | ||||||
Lease liabilities | 11 | ||||||
Provision for reclamation and rehabilitation | 12 | ||||||
Deferred income tax liability | 21 | ||||||
Other non-current liabilities | |||||||
Total liabilities | |||||||
Shareholders' equity | |||||||
Common shares, unlimited shares authorized, no par value, issued, issuable and outstanding |
13 | ||||||
Contributed surplus | 13 | ||||||
Retained earnings (deficit) | ( |
) | ( |
) | |||
Total shareholders' equity | |||||||
Total liabilities and shareholders' equity | $ | $ |
The accompanying notes are an integral part of these consolidated financial statements.
Approved on behalf of the Board:
/s/ Margaret Beck | /s/ Daniel Dickson | |
Director | Director |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 8 |
ENDEAVOUR SILVER CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS) |
Years ended | |||||||
December 31, | December 31, | ||||||
Notes | 2022 | 2021 | |||||
Revenue | 14 | $ | $ | ||||
Cost of sales: | |||||||
Direct production costs | |||||||
Royalties | 8 (a)(b) | ||||||
Share-based payments | 13 (c)(d) | ||||||
Depreciation, depletion and amortization | |||||||
Write down of inventory to net realizable value | 6 | ||||||
Mine operating earnings | |||||||
Expenses: | |||||||
Exploration and evaluation | 15 | ||||||
General and administrative | 16 | ||||||
Care and maintenance costs | 17 | ||||||
Impairment (reversal of impairment) of non-current assets, net | 8 (e), 9 | ( |
) | ||||
Severance costs | |||||||
Write off of mineral properties | 8 (j) | ||||||
Operating earnings | |||||||
Finance costs | 18 | ||||||
Other income (expense): | |||||||
Foreign exchange gain (loss) | ( |
) | |||||
Gain on asset disposal | |||||||
Investment and other | ( |
) | |||||
Earnings before income taxes | |||||||
Income tax expense: | |||||||
Current income tax expense | 21 | ||||||
Deferred income tax expense | 21 | ||||||
Net earnings and comprehensive earnings for the year | $ | $ | |||||
Basic earnings per share based on net earnings | $ | $ | |||||
Diluted earnings per share based on net earnings | 13 (g) | $ | $ | ||||
Basic weighted average number of shares outstanding | |||||||
Diluted weighted average number of shares outstanding | 13 (g) |
The accompanying notes are an integral part of these consolidated financial statements.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 9 |
ENDEAVOUR SILVER CORP. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY |
Notes | Number of shares |
Share Capital |
Contributed Surplus |
Retained Earnings (Deficit) |
Total Shareholders' Equity |
|||||||||||
Balance at December 31, 2020 | $ | $ | $ | ( |
) | $ | ||||||||||
Public equity offerings, net of issuance costs | 13 (b) | - | - | |||||||||||||
Exercise of options | 13 (c) | ( |
) | - | ||||||||||||
Share-based compensation | 13 (c) (d) | - | - | - | ||||||||||||
Expiry and forfeiture of options | 13 (c) | - | - | ( |
) | - | ||||||||||
Settlement of performance share units | 13 (d) | ( |
) | - | ( |
) | ||||||||||
Earnings for the year | - | - | - | |||||||||||||
Balance at December 31, 2021 | $ | $ | $ | ( |
) | $ | ||||||||||
Public equity offerings, net of issuance costs | 13 (b) | - | - | |||||||||||||
Issued on acquisition of mineral properties | 8 (l) | - | - | |||||||||||||
Exercise of options | 13 (c) | ( |
) | - | ||||||||||||
Issued and issuable for performance share units | 13 (d) | ( |
) | - | ( |
) | ||||||||||
Issued for deferred share units | 13 (c) | ( |
) | - | - | |||||||||||
Share-based compensation | 13 (c)(d) | - | - | - | ||||||||||||
Canceled options | 13 (c) | - | - | ( |
) | - | ||||||||||
Settlement of deferred share units | 13 (e) | - | - | ( |
) | - | ( |
) | ||||||||
Earnings for the year | - | - | - | |||||||||||||
Balance at December 31, 2022 | $ | $ | $ | ( |
) | $ |
The accompanying notes are an integral part of these consolidated financial statements.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 10 |
ENDEAVOUR SILVER CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS |
Years ended | |||||||
December 31, | December 31, | ||||||
Notes | 2022 | 2021 | |||||
Operating activities | |||||||
Net earnings (loss) for the year | $ | $ | |||||
Items not affecting cash: | |||||||
Share-based compensation | 13 (c)(d) | ||||||
Depreciation, depletion and amortization | 8 | ||||||
Impairment (reversal of impairment) of non-current assets, net | 9 | ( |
) | ||||
Deferred income tax expense (recovery) | 21 | ||||||
Unrealized foreign exchange loss (gain) | ( |
) | |||||
Finance costs | 18 | ||||||
Accretion of loans receivable | 8 (d) | ( |
) | ||||
Long term employee benefits | |||||||
Write off of mineral properties | 8 (j) | ||||||
Write down of warehouse inventory | 6 | ||||||
Write down of inventory to net realizable value | 6 | ||||||
Loss (gain) on asset disposal | ( |
) | ( |
) | |||
Loss (gain) on other investments | 4 | ( |
) | ||||
Net changes in non-cash working capital | 19 | ( |
) | ||||
Cash from operating activities | |||||||
Investing activities | |||||||
Proceeds on disposal of property, plant and equipment | |||||||
Mineral properties, plant and equipment | ( |
) | ( |
) | |||
Purchase of other investments | ( |
) | ( |
) | |||
Proceeds from disposal of other investments | 4 | ||||||
Redemption of (investment in) non-current deposits | ( |
) | |||||
Cash used in investing activities | ( |
) | ( |
) | |||
Financing activities | |||||||
Repayment of loans payable | 10 | ( |
) | ( |
) | ||
Repayment of lease liabilities | 11 | ( |
) | ( |
) | ||
Interest paid | 10, 11 | ( |
) | ( |
) | ||
Public equity offerings | 13 (b) | ||||||
Exercise of options | 13 (c) | ||||||
Share issuance costs | 13 (c)(d) | ( |
) | ( |
) | ||
Performance and deferred share unit settlement | 13 (d)(e) | ( |
) | ( |
) | ||
Cash from financing activities | |||||||
Effect of exchange rate change on cash and cash equivalents | ( |
) | |||||
Increase in cash and cash equivalents | ( |
) | |||||
Cash and cash equivalents, beginning of the year | |||||||
Cash and cash equivalents, end of the year | $ | $ |
Supplemental cash flow information (Note 19)
The accompanying notes are an integral part of these consolidated financial statements.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 11 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
1. CORPORATE INFORMATION
Endeavour Silver Corp. (the "Company" or "Endeavour Silver") is a corporation governed by the Business Corporations Act (British Columbia, Canada). The Company is engaged in silver mining in Mexico and related activities including acquisition, exploration, development, extraction, processing, refining and reclamation. The Company is also engaged in exploration activities in Chile and United States. The address of the registered office is #1130 - 609 Granville Street, Vancouver, B.C., V7Y 1G5.
2. BASIS OF PRESENTATION
These consolidated financial statements have been prepared in accordance with and using accounting policies in full compliance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), effective for the Company's year ended December 31, 2022.
The Board of Directors approved the consolidated financial statements for issue on February 28, 2023.
The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates (Note 3b).
These consolidated financial statements are presented in the Company's functional currency of US dollars and include the accounts of the Company and its wholly owned subsidiaries: Endeavour Management Corp., Endeavour Gold Corporation S.A. de C.V., EDR Silver de Mexico S.A. de C.V. SOFOM , Minera Santa Cruz Y Garibaldi S.A de C.V., Metalurgica Guanaceví S.A. de C.V., Minera Plata Adelante S.A. de C.V., Refinadora Plata Guanaceví S.A. de C. V., Minas Bolañitos S. A. de C.V., Guanaceví Mining Services S.A. de C.V., Recursos Humanos Guanaceví S.A. de C.V., Recursos Villalpando S.A. de C.V., Servicios Administrativos Varal S.A. de C.V., Minera Plata Carina SPA, MXRT Holding Ltd., Compania Minera del Cubo S.A. de C.V., Minas Lupycal S.A. de C.V., Metales Interamericanos S.A. de C.V., Oro Silver Resources Ltd., Minera Oro Silver de Mexico S.A. de C.V. disposed of on September 9, 2022 (Note 8 (d)), Terronera Precious Metals S.A. de C.V, Minera Pitarrilla S.A. de C. V. (formerly SSR Durango S.A de C.V.), Endeavour USA Holdings and Endeavour USA Corp. All intercompany transactions and balances have been eliminated upon consolidation of these subsidiaries.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies below have been applied consistently to all years presented and by all subsidiaries in the group and no material accounting standards were adopted during the year.
(a) Currency Translation
The functional and reporting currency of the Company and its subsidiaries is the US dollar. Transactions in currencies other than an entity's functional currency are recorded at the rates of exchange prevailing on the transaction dates. Monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at each reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date the fair value was determined. Non-monetary items that are measured in terms of historical costs in a foreign currency are not retranslated. Foreign currency translation differences are recognized in comprehensive earnings (loss).
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 12 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
(b) Use of estimates and judgments
The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
These estimates and judgments are based on management's knowledge of the relevant facts and circumstances at the time, having regard to prior experience, and are continually evaluated. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Actual results could differ materially from those estimates.
Significant areas requiring the use of management judgment relate to the determination of mineralized reserves and resources, plant and equipment useful lives, existence of indication of impairment or impairment reversal of non-current assets, and recognition of deferred tax assets.
Significant areas requiring the use of management estimates relate to the valuation of inventory, mineral properties, plant and equipment, impairment of non-current assets, provision for reclamation and rehabilitation, and income taxes.
Critical judgments and estimates in applying policies that have the most significant effect on the amounts recognized in the consolidated financial statements include the following:
Determination of ore reserves and resources
Judgments about the amount of product that can be economically and legally extracted from the Company's properties are made by management using a range of geological, technical and economic factors, history of conversion of mineral deposits to proven and probable reserves as well as data regarding quantities, grades, production techniques, recovery rates, production costs, commodity prices and exchange rates. This process may require complex and difficult geological judgments to interpret the data. The Company uses qualified persons (as defined by the Canadian Securities Administrator's National Instrument 43-101) to compile this data.
Changes in the judgments surrounding reserves and resources may impact the carrying value of mineral properties, plant and equipment (Note 8), reclamation and rehabilitation provisions (Note 12), recognition of deferred income tax amounts (Note 21), and depreciation, depletion and amortization (Note 8).
Estimating the quantity and/or grade of reserves and resources requires the size, shape and depth of ore bodies or fields to be determined by analyzing geological data such as drilling samples. Following this, the quantity of ore that can be extracted in an economical manner is calculated using data regarding the life of mine plans and forecast sales prices (based on current and long-term historical average price trends). Changes in estimates can be the result of estimated future production differing from previous forecasts of future production, expansion of mineable ore through exploration activities, differences between estimated and actual costs of mining and differences in the commodity price used in the estimation of mineable ore.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 13 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Review of asset carrying values and assessment of impairment (accounting policy Note 3 (h) and Note 3 (f))
Management applies significant judgment in assessing each cash-generating unit or assets for the existence of indicators of impairment or impairment reversal at the reporting date. Internal and external factors are considered in assessing whether indicators are present that would necessitate impairment testing. Significant assumptions regarding commodity prices, operating costs, capital expenditures and discount rates are used in determining whether there are any indicators of impairment. These assumptions are reviewed regularly by senior management and compared, when applicable, to relevant market consensus views.
If an indicator of impairment or reversal exists, the asset's recoverable amount is estimated. The recoverable amount is the greater of fair value less costs of disposal and value in use. The determination of fair value less costs of disposal and value in use requires management to make estimates and assumptions about future metal prices, production based on current estimates of capacity, ore grade, recovery rate and recoverable reserves and resources, future operating costs, capital expenditures and assets salvage value The estimates and assumptions are subject to risk and uncertainty, and as such there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be further impaired or the impairment charge reduced with the impact recorded in earnings (loss).
Estimation of the amount and timing of reclamation and rehabilitation costs (accounting policy Note 3 (j))
Accounting for restoration requires management to make estimates of the future costs the Company will incur to complete the reclamation and rehabilitation work required to comply with existing laws, regulations and agreements in place at each mining operation and any environmental and social principles the Company is in compliance with. The calculation of the present value of these costs also includes assumptions regarding the timing of reclamation and rehabilitation work, applicable risk-free interest rate for discounting those future cash flows, inflation and foreign exchange rates and assumptions relating to probabilities of alternative estimates of future cash flows. Actual costs incurred may differ from those amounts estimated. Future changes to environmental laws and regulations could increase the extent of reclamation and rehabilitation work required to be performed by the Company. Increase in future costs could materially impact the amounts charged to operations for reclamation and rehabilitation.
Taxes (Note 3 (m))
Judgment is required in determining the recognition and measurement of deferred income tax assets and liabilities on the balance sheet. In the normal course of business, the Company is subject to assessment by taxation authorities in various jurisdictions. These authorities may have different interpretations of tax legislation or tax agreements than those applied by the Company in computing current and deferred income taxes. These different interpretations may alter the timing or amounts of taxable income or deductions.
Final taxes payable and receivable are dependent on many factors, including outcomes of tax litigation and resolution of disputes. The resolution of these uncertainties may result in adjustments to the Company's tax assets and liabilities and value added tax receivable balances.
Management assesses the likelihood and timing of taxable earnings in future periods in recognizing deferred income tax assets. Estimates of future taxable income are based on forecasted cash flows using life of mine projections and the application of existing tax laws in each jurisdiction.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 14 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred income tax assets recorded at the balance sheet date could be impacted. In addition, future changes to tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income tax assets. Deferred income tax assets are disclosed in Note 21.
Inventory (Note 3(e))
In valuing inventories at the lower of cost and net realizable value, the Company makes estimates in determining the net realizable price and in quantifying the contained metal in finished goods and work in process.
(c) Cash and cash equivalents
Cash and cash equivalents consist of deposits in banks and highly liquid investments with an original maturity at the date of the purchase of no more than three months, or that are readily convertible into cash.
(d) Marketable securities
Marketable securities include investments in shares of companies and other investments capable of reasonably prompt liquidation. Share investments are measured at fair value through profit and loss and carried at fair value. Unrealized gains and losses are recognized in earnings (loss).
(e) Inventories
Work in process inventories, including ore stockpiles, are valued at the lower of production cost and net realizable value, after an allowance for further processing costs. Finished goods inventory, characterized as doré bars or concentrate, is valued at the lower of production cost and net realizable value. Materials and supplies are valued at the lower of cost and replacement cost. Similar inventories within the consolidated group are measured using the same method, and the reversal of previous write-downs to net realizable value is required when there is a subsequent increase in the value of inventories.
(f) Intangible assets
Intangible assets are initially recognized at cost if acquired externally, or at fair value if acquired as part of a business combination and have a useful life of greater than one year. Intangible assets which have finite useful lives are measured at cost less accumulated amortization and accumulated impairment. Intangible assets that are assessed as having a finite useful life are amortized over their useful life on a straight-line basis from the date they become available for use and are tested for impairment if indications exist that they may be impaired. The useful life is determined using the period of the underlying contract or the period over which the intangible asset can be expected to be used.
(g) Mineral properties, plant and equipment
Mineral properties, plant and equipment are stated at cost less accumulated depreciation, depletion and accumulated impairment losses. The cost of mineral properties, plant and equipment items consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Mineral properties include direct costs of acquiring properties (including option payments) and costs incurred directly in the development of properties once the technical feasibility and commercial viability has been established.
Development costs relating to specific properties are capitalized prospectively upon management's determination that a property will be developed. A development decision is made based upon consideration of project economics, including future metal prices, reserves and resources, and estimated operating and capital costs. Capitalization of costs incurred ceases when the property is capable of operating in the manner intended by management.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 15 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Exploration and evaluation costs are those costs required to acquire a mineral property and determine commercial feasibility. These costs include costs to establish an initial mineral resource and determine whether inferred mineral resources can be upgraded to measured and indicated mineral resources and whether measured and indicated mineral resources can be converted to proven and probable reserves. The Company recognizes acquisition costs for exploration and evaluation properties as assets when acquired as part of a business combination or asset purchase. All other exploration and evaluation costs are expensed as incurred until the technical feasibility and commercial viability of the property has been established and a development decision has been made.
Capitalized exploration and evaluation costs for a project are classified as such until the project demonstrates technical feasibility and commercial viability. Upon demonstrating technical feasibility and commercial viability, and subject to an impairment analysis, capitalized exploration and evaluation costs are transferred to mineral property costs within mineral properties, plant and equipment. Ongoing exploration costs as well as evaluation costs that do not meet requirement for capitalizing are expensed in earnings (loss) for the period. Where an item of plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of plant and equipment and amortized separately over their useful lives.
The Company conducts an annual assessment of the residual balances, useful lives and depreciation methods being used for mineral properties, plant and equipment and any changes arising from the assessment are applied by the Company prospectively.
(h) Impairment of non-current assets
The Company's tangible assets are reviewed for indications of impairment or reversal of a previous impairment at each financial statement date. If an indicator of impairment or reversal exists, the asset's recoverable amount is estimated. An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit, exceeds its recoverable amount. A cash-generating unit is the smallest identifiable group of assets that generates cash flows that are largely independent of the cash flows from other assets or groups of assets. Impairment losses are recognized in earnings (loss) for the period.
The recoverable amount is the greater of fair value less costs of disposal and value in use. 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. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount and the recoverable amount exceeds the carrying amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Management periodically reviews the carrying values of its exploration and evaluation assets with internal and external mining related professionals. A decision to abandon, reduce or expand a specific project is based upon many factors including general and specific assessments of reserves, forecast future metal prices, forecast future costs of exploring, developing and operating a producing mine, expiration term and ongoing expense of maintaining leased mineral properties and the general likelihood that the Company will continue exploration. The Company does not set a pre-determined holding period for properties with unproven reserves. However, properties which have not demonstrated suitable mineral concentrations at the conclusion of each phase of an exploration program are re-evaluated to determine if future exploration is warranted and their carrying values are recoverable.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 16 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
If any area of interest is abandoned or it is determined that its carrying value cannot be supported by future production or sale, the related costs are recognized in earnings (loss) in the period of abandonment or determination that the carrying value exceeds its fair value. The amounts recorded as mineral properties represent costs incurred to date and do not necessarily reflect present or future values.
(i) Leases
At inception of a contract, the Company assesses whether a contract is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which is composed of:
The right-of-use asset is depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. Estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or if that rate cannot be readily determined, the Company's incremental borrowing rate. Lease payments included in the measurement of the lease liability are composed of:
The lease payments exclude variable payments which are dependent on external factors other than an index or a rate. These variable payments are recognized directly in earnings (loss). The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company's estimated amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in earnings (loss) if the carrying amount of the right-of-use asset has been reduced to zero.
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases are expensed on a straight-line basis over the lease term.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 17 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
(j) Provision for reclamation and rehabilitation
The Company recognizes provisions for statutory, contractual, constructive or legal obligations associated with the decommissioning and reclamation of mineral properties, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. A liability is recognized at the time environmental disturbance occurs and the resulting costs are capitalized to the corresponding asset. The provision for reclamation and rehabilitation obligations is estimated using expected cash flows based on engineering and environmental reports prepared by third-party industry specialists and is discounted at a pre-tax rate specific to the liability. The capitalized amount is amortized on the same basis as the related asset.
In subsequent periods, the liability is adjusted for any changes in the amount or timing of the estimated future cash costs, changes in the discount or inflation rates and for the accretion of discounted underlying future cash flows. The unwinding of the effect of discounting the provision is recorded as a finance cost in earnings (loss) for the period.
(k) Revenue recognition
Revenue is generated from the sale of refined silver and gold or from the sale of these metals contained in doré or concentrate. Revenue for doré is recorded in the consolidated statement of comprehensive earnings (loss) gross of treatment and refining costs paid to counterparties under the terms of the sales agreements. Revenue for concentrate is recorded in the consolidated statement of comprehensive earnings (loss) net of treatment and refining costs paid to counterparties under the terms of the sales agreements. Revenue is recognized when control of the metal is transferred to the customer in an amount that reflects the consideration the Company expects to receive in exchange for the metals. In determining whether the Company has satisfied its performance obligation, it considers the indicators of the transfer of control, which include but are not limited to, whether: the Company has a present right to payment; the customer has a legal title to the asset; the Company has transferred physical possession of the asset to the customer; and the customer controls the risks and rewards of ownership of the asset.
Revenue from metals in doré
The refiners who receive doré from the Company refine the materials on the Company's behalf. The refiners transfer the refined product to our customers according to the Company's instructions. Refined metals are sold at spot prices with sales proceeds collected upon or within several days of the completion of the sales transaction. Revenue from sale of doré is recognized at the time a metal sale is executed and the Company has irrevocably directed the refiner to deliver the refined metal to the customer.
Revenue from metals in concentrate
Metals in concentrate are sold under pricing arrangements where final prices are determined by market prices subsequent to the date of sale. Revenue from the sale of concentrates is provisionally priced at the date control transfers. On transfer, the Company recognizes revenue on a provisional basis based on current prices and at each period end, re-estimated prices based on period end closing prices for the estimated month of settlement. The final selling price is subject to movements in metal prices up to the final settlement date. Revenue is initially recognized based on the estimated mineral content then adjusted to final settlement adjustments. Final settlement periods range from two to six months after delivery of the product.
Variations between the sales price recorded at the initial recognition date and the actual final sales price at the settlement date, caused by changes in market metal prices, results in an embedded derivative in the related trade accounts receivable. For each reporting period until final settlement, period end closing prices are used to record revenue. The embedded derivative is recorded at fair value each period until final settlement occurs, with changes in fair value classified as an adjustment to revenue.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 18 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
(l) Share-based payments
The Company has a share option plan and a share unit plan which are described in Note 13 (c) and Note 13 (d) respectively. Equity-settled share-based payment awards to employees are measured by reference to the fair value of the equity instruments granted and are charged over the vesting period using the graded vesting method. The amount recognized as an expense is adjusted to reflect the actual number of share options for which the related service and vesting conditions are met. Equity-settled share-based payment awards to non-employees are measured at the fair value of the goods or services received as the goods or services are received, unless that fair value cannot be measured reliably, in which case they are measured by reference to the fair value of the equity instrument. The offset is credited to contributed surplus. Consideration received on the exercise of stock options is recorded as share capital and the related contributed surplus is transferred to share capital. For those options that expire or are forfeited after vesting, the amount previously recorded in contributed surplus is transferred to deficit.
Share-based compensation expense relating to cash-settled awards, including deferred share units and share appreciation rights which are described in Note 13 (e) and Note 13 (f), is recognized over the vesting period of the units based on the fair market value of the units. As these awards will be settled in cash, the expense and liability are adjusted each reporting period for changes in the fair value.
(m) Income taxes
Income tax expense (recovery) comprises current and deferred tax. It is recognized in earnings (loss) except to the extent that it relates to a business combination, or items recognized directly in equity or other comprehensive income.
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustments to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.
The Company follows the asset and liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and tax losses carried forward. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings (loss) in the period that includes the substantive enactment date. Deferred tax assets are recognized to the extent their recovery is considered probable based on their term to expiry and estimates of future taxable income. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable earnings improve.
(n) Earnings per share
Basic earnings per share is computed by dividing the net earnings (loss) available to common shareholders by the weighted average number of shares outstanding during the period. For all periods presented, net earnings available to common shareholders equals the reported net earnings. The Company uses the treasury stock method for calculating diluted earnings per share. Under the treasury stock method, the weighted average number of common shares outstanding used for the calculation of diluted earnings per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the year.
(o) Business combinations
On a business combination, the acquisition method of accounting is used, whereby the purchase consideration is allocated to the identifiable assets, liabilities and contingent liabilities (identifiable net assets) based on fair value at the date of acquisition. When the cost of acquisition exceeds the fair values attributable to the Company's share of identifiable net assets, the difference is treated as purchased goodwill. If the fair value attributable to the Company's share of the identifiable net assets exceeds the cost of acquisition, the difference is immediately recognized in earnings (loss). Incremental costs related to acquisitions are expensed as incurred.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 19 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Determination of the fair value of assets acquired and liabilities assumed and resulting goodwill, if any, requires that management make estimates based on the information provided by the acquiree. Changes to the provisional values of assets acquired and liabilities assumed, deferred income taxes and resulting goodwill, if any, will be adjusted when the final measurements are determined (within one year of the acquisition date).
When purchase consideration is contingent on future events, the initial cost of the acquisition recorded includes an estimate of the fair value of the contingent amounts expected to be payable in the future. Changes to the estimated fair value of contingent consideration subsequent to the acquisition date are recorded in earnings (loss).
(p) Financial instruments
The Company recognizes financial assets and financial liabilities on the date the Company becomes party to the contractual provisions of the instruments. On initial recognition, all financial assets and financial liabilities are recorded at fair value, net of attributable transaction costs, except for financial assets and liabilities classified as fair value through profit or loss ("FVTPL"). Transaction costs of financial assets and liabilities classified as FVTPL are expensed in the period in which they are incurred. A financial asset is derecognized either when the Company has transferred substantially all the risks and rewards of ownership of the financial assets or when cash flows expire. A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expired.
On initial recognition, the Company classifies and measures financial assets as either FVTPL, fair value through other comprehensive income ("FVTOCI") or amortized cost. Subsequent measurement of financial assets depends on the classifications of such assets. The basis of classification depends on an entity's business model and the contractual cash flows of the financial asset.
Amortized cost
Financial assets that meet the following conditions are measured subsequently 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 the initial amount and the maturity amount, adjusted for any loss allowance. Interest income is recognized using the effective interest method.
Fair value through other comprehensive income
Financial assets that meet the following conditions are measured subsequently at amortized cost:
Investments in equity instruments at FVTOCI are initially recognized at fair value. Subsequently, they are measured at fair value, with gains and losses arising from changes from initial recognition recognized in comprehensive earnings (loss). 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.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 20 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Fair value through profit and loss
By default, all other financial assets are measured at FVTPL.
The Company, at initial recognition, may also irrevocably designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on a different basis. Financial assets measured at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized in profit or loss to the extent that they are not part of a designated hedging relationship. Determination of fair value is further described in Note 22.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all its liabilities. Equity instruments issued by the Company are measured at the proceeds received, net of direct issue costs.
Financial liabilities that are not contingent consideration of an acquirer in a business combination, held for trading or designated as FVTPL, are measured at amortized cost using the effective interest method.
The Company's financial instruments are recognized as:
Assets |
|
|
Cash and cash equivalents |
Amortized cost |
|
Trade and other receivables (other than derivatives) |
Amortized cost |
|
Trade receivables (derivative component) |
FVTPL |
|
Loans receivable |
Amortized cost |
|
Other investments |
FVTPL |
|
|
|
|
Liabilities |
|
|
Accounts payable and accrued liabilities |
Amortized cost |
|
Loans payable |
Amortized cost |
|
Share appreciation rights and deferred share units |
FVTPL |
|
(q) Accounting standards adopted during the year
On May 14, 2020, the International Accounting Standard Board (IASB) published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and the related costs in earnings (loss). The Company has adopted the narrow scope amendments to IAS 16 in its financial statements for the annual period beginning on January 1, 2022. The adoption did not result in a change in carrying value of property, plant and equipment at December 31, 2022 or December 31, 2021 nor in change in sales proceeds or related cost of sales for the years ended December 31, 2022 or December 31, 2021.
As a result of the adoption of narrow scope amendment to IAS 16, the Company's previous accounting policy for the achievement of the commercial production is no longer relevant, and any amounts received prior to the mine reaching the operating levels will be accounted for as sales proceeds in line with accounting policy Note 3 (k).
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 21 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
4. OTHER INVESTMENTS
December 31, | December 31, | ||||||
Note | 2022 | 2021 | |||||
Balance at beginning of the year | $ | $ | |||||
Investment in marketable securities, at cost | |||||||
FMV of investments received on asset disposal | 10 | ||||||
Disposals | ( |
) | |||||
Gain (loss) on marketable securities | ( |
) | |||||
Balance at end of the year | |||||||
Less: Current portion | |||||||
Non-current marketable securities | $ | $ |
The Company holds $
During the year ended December 31, 2022, the Company acquired
5. ACCOUNTS AND OTHER RECEIVABLES
December 31, | December 31, | ||||||
Note | 2022 | 2021 | |||||
Trade receivables (1) | $ | $ | |||||
IVA receivable (2) | |||||||
Other receivables | |||||||
Due from related parties | 7 | ||||||
$ | $ |
(1) At December 31, 2022 the trade receivables consist of receivables from provisional silver and gold sales from the Bolañitos mine. The fair value of receivables arising from concentrate sales contracts that contain provisional pricing mechanisms is determined using the appropriate period end closing prices on the measurement date from the exchange that is the principal active market for the particular metal. As such, these receivables, which meet the definition of an embedded derivative, are classified within Level 2 of the fair value hierarchy (Note 22).
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 22 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
(2) The Company's Mexican subsidiaries pay value added tax, Impuesto al Valor Agregado ("IVA"), on the purchase and sale of goods and services. The net amount paid is recoverable but is subject to review and assessment by the tax authorities. The Company regularly files the required IVA returns and all supporting documentation with the tax authorities, however, the Company has been advised that certain IVA amounts receivable from the tax authorities are being withheld pending completion of the authorities' audit of certain of the Company's third-party suppliers. Under Mexican law the Company has legal rights to those IVA refunds and the results of the third-party audits should have no impact on refunds. A smaller portion of IVA refund requests are from time to time improperly denied based on the alleged lack of compliance of certain formal requirements and information returns by the Company's third-party suppliers. The Company takes necessary legal action on the delayed refunds as well as any improperly denied refunds.
These delays and denials have occurred in Refinadora Plata Guanaceví S.A. de C.V. ("Guanaceví,"). At December 31, 2022, Guanaceví holds $
As at December 31, 2022, the total IVA receivable of $
6. INVENTORIES
December 31, | December 31, | |||||
2022 | 2021 | |||||
Warehouse inventory(1) | $ | $ | ||||
Stockpile inventory | ||||||
Finished goods inventory | ||||||
Work in process inventory | ||||||
$ | $ |
(1) The warehouse inventory balance at December 31, 2022 is net of a write down to net realizable value of $
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 23 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
7. RELATED PARTY TRANSACTIONS
The Company previously shared common administrative services and office space with a company related by virtue of a former common director and from time to time incurred third party costs on behalf of related parties on a full cost recovery basis. The agreement for sharing office space and administrative services ended in May 2022. The charges for these costs totaled $
The Company was charged $
Key management personnel
The key management of the Company comprises executive and non-executive directors, members of executive management and the Company's corporate secretary. Compensation of key management personnel was as follows:
December 31, | December 31, | |||||
2022 | 2021 | |||||
Salaries and short-term employee benefits | $ | $ | ||||
Non-executive directors' fees | ||||||
Non-executive directors' deferred share units | ( |
) | ( |
) | ||
Share-based payments | ||||||
$ | $ |
The existing non-executive directors' deferred share units are comprised of both equity and cash settled deferred share units. The recognized expense or recovery includes the fair value of new issuances of deferred share units during the period and the change in fair value of all outstanding cash-settled deferred share units during the reporting period. During the year ended December 31, 2022, the Company granted
The amount disclosed for share-based payments is the expense for the year calculated in accordance with IFRS 2, Share-based payments for share options, performance share units and deferred share units (Notes 13 (c), (d) and (e)). The fair values of these share-based payments are recognized as an expense over the vesting period of the award. Therefore, the compensation expense in the current year comprises a portion of current year awards and those of preceding years that vested within the current year.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 24 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
8. MINERAL PROPERTIES, PLANT AND EQUIPMENT
(a) Mineral properties, plant and equipment comprise:
Mineral | Machinery & | Transport & | ||||||||||||||||
properties | Plant | equipment | Building | office equipment | Total | |||||||||||||
Cost | ||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | $ | $ | ||||||||||||
Additions | ||||||||||||||||||
Disposals | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||
Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||
Additions | ||||||||||||||||||
Disposals | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||
Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||
Accumulated amortization and impairment | ||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | $ | $ | ||||||||||||
Amortization | ||||||||||||||||||
Disposals | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||
Balance at December 31, 2021 | $ | 444,769 | $ | $ | $ | $ | $ | |||||||||||
Amortization | ||||||||||||||||||
Disposals | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||
Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||
Net book value | ||||||||||||||||||
At December 31, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||
At December 31, 2022 | $ | $ | $ | $ | $ | $ |
Included in Mineral properties is $
As of December 31, 2022, the Company has $
(b) Guanaceví, Mexico
In 2005, the Company acquired mining properties and related assets to the Guanaceví silver-gold mines located in the state of Durango, Mexico. Certain concessions in the district retained a
These properties and subsequently acquired property concessions in the Guanaceví district are maintained with nominal property tax payments to the Mexican government.
On July 5, 2019, the Company acquired a
•
•
•
•
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 25 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Both properties cover extensions of the Guanaceví ore bodies with the El Porvenir concession adjacent to the Company's operating Porvenir Norte mine and the El Curso concession adjacent to the Company's Porvenir Cuatro mine. On December 12, 2021, the Company executed an amendment to the agreement whereby two additional properties, adjacent to the existing and historic mine workings were included in the existing agreement. In 2022, the Company expensed $
(c) Bolañitos, Mexico
In 2007, the Company acquired the exploitation contracts, mining properties and related assets to the Bolañitos silver-gold mines located in the northern parts of the Guanajuato and La Luz silver districts in the state of Guanajuato, Mexico.
The Company holds various property concessions in the Guanajuato District that it maintains with nominal property tax payments to the Mexican government.
(d) El Compas, Mexico
In August 2021, the Company suspended mining and milling operations at El Compas, and mining equipment and key talent were transferred within the Company to Bolañitos and Terronera. In 2022, the associated suspension costs were $
On September 9, 2022, the Company entered into an agreement to sell its
Pursuant to the agreement, Grupo ROSGO assumed the Minera Oro Silver loan payable to the Company, in the amount of $
The carrying value of the net Minera Oro Silver's net assets at the date of the sale was $
(e) El Cubo, Mexico
On March 17, 2021, the Company signed a definitive agreement to sell its El Cubo mine and related assets to Guanajuato Silver Company Ltd. ("GSilver") (formerly known as VanGold Mining Corp. ("VanGold")) for $
Per the terms of the agreement, GSilver agreed to pay $
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 26 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
GSilver has also agreed to pay the Company up to an additional $
During the period ended March 31, 2021, the El Cubo mine project, consisting of the land rights, plant, buildings and the related reclamation liability were re-classified to current assets and liabilities as "assets held for sale" and "liabilities held for sale". Immediately prior to the classification to assets and liabilities held for sale, the carrying amounts of the land rights, plant and building were remeasured and the historical gross impairments of $
On November 16, 2021 the Company arranged for early payment of the $
(f) Terronera, Mexico
In February 2013, the Company acquired an option to purchase a
On September 23, 2020, the Company entered into an option agreement to acquire a
These properties and subsequently acquired property concessions in the Terronera district are maintained with nominal property tax payments to the Mexican government.
During 2021, the Company completed a Feasibility Study on the Terronera Project and based on an assessment of the economic viability of extracting mineral resources at Terronera, it was reclassified from an exploration and evaluation asset to a development asset (See Note 20). During 2022 the Company proceeded with road construction, procurement of long lead items including major equipment, camp construction, site clearing and initial earthworks for plant construction, and construction of initial project infrastructure.
(g) Parral Properties
On September 13, 2016, the Company entered into a definitive agreement with SSR Mining Inc. ("SSR") formerly known as Silver Standard Resources Inc., to acquire a
In addition, the Company committed to spending $
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 27 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
(h) Guadalupe Y Calvo, Mexico
In 2012, the Company acquired the Guadalupe Y Calvo exploration project in Chihuahua, Mexico.
In 2014, the Company acquired the La Bufa exploration property, which is adjacent to the Guadalupe y Calvo exploration property in Chihuahua, Mexico. The property is subject to a
(i) Calicanto Properties
On July 21, 2016, the Company entered into a definitive agreement with Compania Minera Estrella de Plata S.A. de C.V. ("Compania Minera Estrella") to acquire a
On September 8, 2017, the Company entered into a concession division agreement with Capstone Mining Corp. ("Capstone") whereby the Company has the right to explore and mine for precious metals above 2,000 metres above sea level on Capstone's Toro del Cobre concessions, which is adjacent to Calicanto. In return, the Company has granted Capstone the right to explore and mine for base metals below the elevation of 2,000 metres above sea level. Capstone has granted the Company a
(j) Exploration Projects, Chile
Cerro Marquez - Las Palcas
In October 2016, the Company entered into an option agreement with Minera Cerro Marquez to acquire
Aida Properties
In July 2018, the Company entered into an option agreement to acquire
Paloma Properties
In December 2018, the Company signed an option agreement to acquire up to a
(k) Acquisition of Bruner Gold Project
On July 14, 2021, the Company entered into a definitive agreement with Canamex Gold Corp. ("Canamex") to acquire a
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 28 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
(l) Acquisition of the Pitarrilla Project
On January 17, 2022, the Company entered into a definitive agreement to purchase the Pitarrilla project in Durango State, Mexico, by acquiring all of the issued and outstanding shares of SSR Durango, S.A. de C.V. from SSR Mining Inc. ("SSR") for total consideration of $
The acquisition was completed on July 6, 2022. Total consideration included
The 4,950-hectares Pitarrilla exploration project is located in northern Mexico, consists of five concessions, has ignificant infrastructure in place and has access to utilities.
The acquisition is outside the scope of IFRS 3 Business Combinations, as the Pitarrilla project does not meet the definition of a business, and as such, the transaction was accounted for as an asset acquisition. The purchase price is allocated to the underlying assets acquired and liabilities assumed, based upon their estimated fair values at the date of acquisition.
Pitarilla Project purchase consideration: | |||
Common shares issued | $ | ||
Consideration paid in cash | |||
Acquisition costs | |||
Total consideration | $ |
Fair value summary of assets acquired and liabilities assumed:
Assets: | |||
Current assets | $ | ||
Buildings and equipment | |||
Mineral properties | |||
Total assets | $ | ||
Liabilities: | |||
Accounts payable and accrued liabilities | |||
Reclamation liability | |||
Total liabilities | $ | ||
Net identifiable assets acquired | $ |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 29 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
9. IMPAIRMENT OF NON-CURRENT ASSETS
The recoverable amounts of the Company's CGUs, which include mining properties, plant and equipment are determined at the end of each reporting period, if impairment indicators are identified.
Management applies significant judgement in assessing whether indicators of impairment or reversal of impairment exist for an asset or a group of assets which could result in a testing for impairment. Internal and external factors such as significant changes in the use of the asset, commodity prices, life of mines, tax laws and regulations and interest rates are some of the indicators used by management in determining whether there are any indicators of impairment or reversal of previous impairments. As of December 31, 2022, the Company determined that indicators of impairment existed at the Bolañitos mine due to a change in the reserves and resources, including a narrowing of the veins in the ore bodies which may result in lower future conversion of inferred resources to economically mineable ore.
The recoverable amount is based on CGU's future cash flows expected to be derived from the Company's mining properties and represent each CGU's fair value less cost of disposal. Expected cash flows were determined based on the life-of-mine after-tax cash flow forecast which incorporates management's best estimates of future metal prices, production based on current estimates of capacity, ore grade, recovery rate and recoverable reserves and resources, future operating costs, capital expenditures and assets salvage value. Expected cash flows are discounted at risk adjusted rate based on the CGU's weighted average cost of capital. The average forecasted price of $
10. LOANS PAYABLE
December 31, | December 31, | |||||
2022 | 2021 | |||||
Balance at the beginning of the year | $ | $ | ||||
Net proceeds from software and equipment financing | ||||||
Finance cost | ||||||
Repayments of principal | ( |
) | ( |
) | ||
Repayments of finance costs | ( |
) | ( |
) | ||
Effects of movements in exchange rates | ( |
) | ||||
Balance at the end of the year | $ | $ | ||||
Statements of Financial Position presentation | ||||||
Current loans payable | $ | $ | ||||
Non-current loans payable | ||||||
Total | $ | $ |
The Company currently has financing arrangements for equipment totaling $
The equipment financing is secured by the underlying equipment purchased and is subject to various non-financial covenants and as at December 31, 2022 the Company was in compliance with these covenants. As at December 31, 2022, the net book value of equipment includes $
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 30 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
11. LEASE LIABILITIES
The Company leases office space, and prior to the sale of the El Compas mine, the Company had been leasing the El Compas plant. These leases are for periods of five to ten years. Certain leases include an option to renew the lease after the end of the contract term and/ or provide for payments that are indexed to local inflation rates.
The following table presents the lease obligations of the Company:
December 31, | December 31, | |||||
2022 | 2021 | |||||
Balance at the beginning of the year | $ | $ | ||||
Additions | ||||||
Interest | ||||||
Payments | ( |
) | ( |
) | ||
Effects of movement in exchange rates | ( |
) | ( |
) | ||
Balance at the end of the year | ||||||
Less: Current portion | ||||||
Non-current lease liabilities | $ | $ |
The following table presents lease liability maturity - contractual undiscounted cash flows for the Company:
December 31, | December 31, | |||||
2022 | 2021 | |||||
Less than one year | $ | $ | ||||
One to five years | ||||||
More than five years | ||||||
Total at the end of the year | $ | $ |
The following amounts have been recognized in earnings (loss):
Years ended | ||||||
December 31, 2022 |
December 31, 2021 |
|||||
Interest on lease liabilities | $ | $ | ||||
Expenses related to short-term leases | $ | $ |
As at December 31, 2022, the lease liabilities have a weighted-average interest rate of
12. PROVISION FOR RECLAMATION AND REHABILITATION
The Company's environmental permit requires that it reclaim certain land it disturbs during mining operations. Significant reclamation and closure activities include land rehabilitation, decommissioning of buildings and mine facilities, ongoing care and maintenance and other costs. Although the ultimate amount of the reclamation and rehabilitation costs to be incurred cannot be predicted with certainty, the total undiscounted amount of probability weighted estimated cash flows required to settle the Company's estimated obligations is $
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 31 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
The timing of cash flows has been estimated based on the estimated mine lives using current reserves and the present value of the probability weighted future cash flows. The model assumes a risk-free rate specific to the liability of
Changes to the reclamation and rehabilitation provision balance during the year are as follows:
Terronera | Guanaceví | Bolañitos | El Cubo | El Compas | Pitarrilla | Total | |||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Accretion | |||||||||||||||||||||
Disposals | ( |
) | ( |
) | |||||||||||||||||
Change in estimates during the year | |||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Acquisitions | |||||||||||||||||||||
Accretion | |||||||||||||||||||||
Disposals | ( |
) | ( |
) | |||||||||||||||||
Effects of movements in exchange rates | |||||||||||||||||||||
Change in estimates during the year | ( |
) | ( |
) | ( |
) | |||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | $ |
13. SHARE CAPITAL
(a) Management of Capital
The Company considers the items included in the consolidated statement of changes in equity as capital. The Company's objective when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may issue new shares through private placements, convertible debentures, asset acquisitions or return capital to shareholders. As at December 31, 2022, the Company is not subject to externally imposed capital requirements.
(b) Public Offerings
In April 2020, the Company filed a short form base shelf prospectus that qualified for the distribution of up to CAN$
On October 1, 2020, the Company entered into an ATM equity facility with BMO Capital Markets (the lead agent), CIBC Capital Markets, H.C. Wainwright & Co. LLC, TD Securities Inc., Roth Capital Partners, LLC, B. Riley Securities Inc. and A.G.P./Alliance Global Partners (together, the "Agents"). Under the terms of this ATM facility, the Company could, from time to time, sell common stock having an aggregate offering value of up to $
In the period from January 1, 2021 to July 20, 2021, when this ATM facility was completed, the Company issued
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 32 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
On March 22, 2022, the Company completed a prospectus equity financing with the offering co-led by BMO Capital Markets and PI Financial Corp., together with a syndicate of underwriters consisting of CIBC World Markets Inc., B. Riley Securities Inc., and H.C. Wainwright & Co., LLC. The Company issued a total of
(c) Stock Options
Options to purchase common shares have been granted to directors, officers, employees and consultants pursuant to the Company's current stock option plan, approved by the Company's shareholders in fiscal 2009 and amended and re-ratified in 2021, at exercise prices determined by reference to the market value on the date of grant. The stock option plan allows for, with approval by the Board, granting of options to its directors, officers, employees and consultants to acquire up to
The following table summarizes the status of the Company's stock option plan and changes during the years 2022 and 2021.
Expressed in Canadian dollars | Years ended | |||||||||||
December 31, 2022 |
December 31, 2021 |
|||||||||||
Number of options |
Weighted average exercise price |
Number of options |
Weighted average exercise price |
|||||||||
Outstanding, beginning of the year | $ |
$ |
||||||||||
Granted | $ |
$ |
||||||||||
Exercised | ( |
) | $ |
( |
) | $ |
||||||
Expired and forfeited | ( |
) | $ |
( |
) | $ |
||||||
Outstanding, end of the year | $ |
$ |
||||||||||
Options exercisable at the end of the year | $ |
$ |
During the year ended December 31, 2022, the weighted-average share price at the date of exercise was CAN$
The following table summarizes the information about stock options outstanding at December 31, 2022:
Expressed in Canadian dollars |
|
|
|
||
|
Options Outstanding |
Options Exercisable |
|||
|
|
|
|
|
|
|
Number |
Weighted Average |
Weighted |
Number |
Weighted |
|
Outstanding |
Remaining |
|||
Price |
as at |
Contractual Life |
Exercise |
as at |
Exercise |
Intervals |
December 31, 2022 |
(Number of Years) |
Price |
December 31, 2022 |
Price |
|
|
|
|
|
|
$ |
|
|
$ |
|
$ |
$ |
|
|
$ |
|
$ |
$ |
|
|
$ |
|
$ |
$ |
|
|
$ |
|
$ |
|
|
|
$ |
|
$ |
During the year ended December 31, 2022, the Company recognized share-based compensation expense of $
The weighted-average fair values of stock options granted and the assumptions used to calculate the related compensation expense have been estimated using the Black-Scholes Option Pricing Model with the following assumptions:
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 33 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
|
Years ended |
|
|
December 31, |
December 31, |
Weighted-average fair value of options in CAN$ |
$ |
$ |
Risk-free interest rate |
|
|
Expected dividend yield |
|
|
Expected stock price volatility |
|
|
Expected options life in years |
|
|
Option pricing models require the input of highly subjective assumptions. The expected life of the options considered such factors as the average length of time similar option grants in the past have remained outstanding prior to exercise, expiry or cancellation and the vesting period of options granted. Volatility was estimated based on average daily volatility based on historical share price observations over the expected term of the option grant. Changes in the subjective input assumptions can materially affect the estimated fair value of the options. The Company amortizes the fair value of stock options on a graded basis over the respective vesting period of each tranche of stock options awarded. As at December 31, 2022, the unvested stock option expense not yet recognized was $
(d) Share Units Plan
On March 23, 2021 the Company adopted an equity-based Share Unit Plan ("SUP"), which was approved by the Company's shareholders on May 12, 2021. The SUP allows for, with approval by the Board, granting of Performance Share Units ("PSU"s) and Deferred Share Units ("DSU"s), to its directors, officers, employees to acquire up to
Performance Share Units
The PSUs granted are subject to a performance payout multiplier between
Years ended | ||||||
December 31, 2022 |
December 31, 2021 |
|||||
Number of units | Number of units | |||||
Outstanding, beginning of year | ||||||
Granted | ||||||
Cancelled | ( |
) | ||||
Settled for shares | ( |
) | ( |
) | ||
Outstanding, end of year |
There were
On March 3, 2022, PSUs granted in 2019 vested with a payout multiplier of 200% based on the Company's shareholder return, relative to the total shareholder return of the Company's peer group over the three-year period and
On August 16, 2022, vesting was accelerated on a pro-rata basis for
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 34 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
During the year ended December 31, 2022, the Company recognized share-based compensation expense of $
Deferred Share Units
The DSUs granted are vested immediately and are redeemable for shares at the time of a director's retirement.
Years ended | ||||||
December 31, 2022 |
December 31, 2021 |
|||||
Number of units | Number of units | |||||
Outstanding, beginning of year | ||||||
Granted | ||||||
Settled for shares | ( |
) | ||||
Outstanding, end of year |
There were
(e) Deferred Share Units - Cash Settled
The Company previously had a Deferred Share Unit ("DSU") plan whereby deferred share units were granted to independent directors of the Company in lieu of compensation in cash or share purchase options. These DSUs vested immediately and are redeemable for cash, based on the market value of the units at the time of a director's retirement. Upon adoption of the SUP plan in March 2021, no new DSUs will be granted under this cash settled plan.
Expressed in Canadian dollars | Years ended | |||||||||||
December 31, 2022 |
December 31, 2021 |
|||||||||||
Number of Units |
Weighted Average Grant Price |
Number of Units |
Weighted Average Grant Price |
|||||||||
Outstanding, beginning of year | $ |
$ |
||||||||||
Granted | $ |
|||||||||||
Redeemed | ( |
) | $ |
|||||||||
Outstanding, end of year | $ |
$ |
||||||||||
Fair value at year end | $ |
$ |
During the year ended December 31, 2022, the Company recognized a recovery on director's compensation related to these DSUs, which is included in general and administrative salaries, wages and benefits, of $
(f) Share Appreciation Rights
As part of the Company's bonus program, the Company may grant share appreciation rights ("SARs") to its employees in Mexico and Chile. The SARs are subject to vesting conditions and, when exercised, constitute a cash bonus based on the value of the appreciation of the Company's common shares between the SARs grant date and the exercise date.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 35 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Years ended | ||||||||||||
December 31, 2022 |
December 31, 2021 |
|||||||||||
Number of Units |
Weighted Average Grant Price |
Number of Units |
Weighted Average Grant Price |
|||||||||
Outstanding, beginning of year | $ |
|||||||||||
Granted | $ |
$ |
||||||||||
Exercised | ( |
) | $ |
( |
) | $ |
||||||
Cancelled | ( |
) | $ |
|||||||||
Outstanding, end of period | $ |
$ |
||||||||||
Exercisable at the end of the period | $ |
$ |
The SARs were valued using an option pricing model, which requires the input of highly subjective assumptions. The expected life of the SARs considered such factors as the average length of time similar grants in the past have remained outstanding prior to exercise, expiry or cancellation and the vesting period of SARs granted. Volatility was estimated based on average daily volatility based on historical share price observations over the expected term of the SAR grant. Changes in the subjective input assumptions can materially affect the estimated fair value of the SARs. The Company amortized the fair value of SARs on a graded basis over the respective vesting period of each tranche of SARs awarded.
(g) Diluted Earnings per Share
Years ended | ||||||
December 31, 2022 |
December 31, 2021 |
|||||
Net earnings | $ | $ | ||||
Basic weighted average number of shares outstanding | ||||||
Effect of dilutive securities: | ||||||
Stock options | ||||||
Equity settled deferred share units | ||||||
Performance share units | ||||||
Diluted weighted average number of share outstanding | ||||||
Diluted earnings per share | $ | $ |
As of December 31, 2022, there are
14. REVENUE
Years ended | ||||||
December 31, | December 31, | |||||
2022 | 2021 | |||||
Silver sales (1) | $ | $ | ||||
Gold sales (1) | ||||||
Less: smelting and refining costs | ( |
) | ( |
) | ||
Revenue | $ | $ |
(1) Changes in fair value from provisional pricing in the period are included in silver and gold sales.
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 36 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Years ended | ||||||
December 31, | December 31, | |||||
2022 | 2021 | |||||
Revenue by product | ||||||
Concentrate sales |
$ | $ | ||||
Provisional pricing adjustments |
( |
) | ( |
) | ||
Total revenue from concentrate sales | ||||||
Refined metal sales | ||||||
Total revenue | $ | $ |
Provisional pricing adjustments on sales of concentrate consist of provisional and final pricing adjustments made prior to the finalization of the sales contract. The Company's sales contracts are provisionally priced with provisional pricing periods lasting typically one to three months with provisional pricing adjustments recorded to revenue as market prices vary. As at December 31, 2022, a
15. EXPLORATION AND EVALUATION
Years ended | ||||||
December 31, 2022 |
December 31, 2021 |
|||||
Depreciation and depletion | $ | $ | ||||
Share-based compensation | ||||||
Exploration salaries, wages and benefits | ||||||
Direct exploration expenditures | ||||||
Evaluation salaries, wages and benefits | ||||||
Direct evaluation expenditures | ||||||
$ | $ |
16. GENERAL AND ADMINISTRATIVE
Years ended | ||||||
December 31, | December 31, | |||||
2022 | 2021 | |||||
Depreciation and depletion | $ | $ | ||||
Share-based compensation | ||||||
Salaries, wages and benefits | ||||||
Directors' DSU expense (recovery) | ( |
) | ( |
) | ||
Direct general and administrative | ||||||
$ | $ |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 37 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
17. CARE AND MAINTENANCE
Years ended | ||||||
December 31, | December 31, | |||||
2022 | 2021 | |||||
Depreciation and depletion | $ | $ | ||||
Salaries, wages and benefits | ||||||
Direct general and administrative | ||||||
$ | $ |
18. FINANCE COSTS
Years ended | |||||||||
December 31, | December 31, | ||||||||
Notes | 2022 | 2021 | |||||||
Accretion on provision for reclamation and rehabilitation | 12 | $ | $ | ||||||
Interest on loans | 10 | ||||||||
Interest on lease liabilities | 11 | ||||||||
Other financing costs | |||||||||
$ | $ |
19. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Years ended | ||||||
December 31, | December 31, | |||||
2022 | 2021 | |||||
Net changes in non-cash working capital: | ||||||
Accounts and other receivables | $ | ( |
) | $ | ||
Income tax receivable | ( |
) | ( |
) | ||
Inventories | ( |
) | ||||
Prepaid expenses | ( |
) | ( |
) | ||
Accounts payable and accrued liabilities | ||||||
Income taxes payable | ||||||
$ | $ | ( |
) | |||
Non-cash financing and investing activities: | ||||||
Reclamation included in mineral properties, plant and equipment | $ | ( |
) | $ | ( |
) |
Fair value of exercised options allocated to share capital | $ | $ | ||||
Fair value of performance share units allocated to share capital | $ | ( |
) | $ | ||
Fair value of capital assets acquired under finance leases | $ | $ | ||||
Other cash disbursements: | ||||||
Income taxes paid | $ | $ | ||||
Special mining duty paid | $ | $ |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 38 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
20. SEGMENT DISCLOSURES
The Company's operating segments are based on internal management reports that are reviewed by the Company's executives (the chief operating decision makers) in assessing performance. The Company has two operating mining segments which are located in Mexico, Guanaceví and Bolañitos, and the El Compas mine which was on care and maintenance until the sale of the mine on September 9, 2022. The Company has one development project in Mexico, Terronera, as well as Exploration and Corporate segments. The Exploration segment consists of projects in the exploration and evaluation phases in Mexico, Chile and the USA. Exploration projects that are in the local district surrounding a mine are included in the mine's segments. Comparative period figures related to Terronera, previously reported as part of the exploration segment have been reclassified to conform with current period's presentation. Comparative period figures related to the El Cubo mine, which was on care and maintenance from November 2019 until the sale of the mine and related assets in April 2021, previously reported as its own segment have been reclassified to the Corporate segment.
December 31, 2022 | ||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | Terronera | Total | |||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | $ | ||||||||||||
Other investments | ||||||||||||||||||
Accounts and other receivables | ||||||||||||||||||
Loans receivable | ||||||||||||||||||
Income tax receivable | ||||||||||||||||||
Inventories | ||||||||||||||||||
Prepaid expenses | ||||||||||||||||||
Non-current deposits | ||||||||||||||||||
Non-current IVA receivable | ||||||||||||||||||
Non-current income tax receivable | ||||||||||||||||||
Right-of-use leased assets | ||||||||||||||||||
Mineral properties, plant and equipment | ||||||||||||||||||
Total assets | $ | $ | $ | $ | $ | $ | ||||||||||||
Accounts payable and accrued liabilities | $ | $ | $ | $ | $ | |||||||||||||
Income taxes payable | ||||||||||||||||||
Loans payable | ||||||||||||||||||
Lease obligations | ||||||||||||||||||
Provision for reclamation and rehabilitation | ||||||||||||||||||
Deferred income tax liability | ||||||||||||||||||
Other non-current liabilities | ||||||||||||||||||
Total liabilities | $ | $ | $ | $ | $ | $ |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 39 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
December 31, 2021 | |||||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | El Compas | Terronera | Total | |||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Other investments | |||||||||||||||||||||
Accounts and other receivables | |||||||||||||||||||||
Income tax receivable | |||||||||||||||||||||
Inventories | |||||||||||||||||||||
Prepaid expenses | |||||||||||||||||||||
Non-current deposits | |||||||||||||||||||||
Non-current IVA receivable | |||||||||||||||||||||
Deferred income tax asset | |||||||||||||||||||||
Non-current income tax receivable | |||||||||||||||||||||
Intangible assets | |||||||||||||||||||||
Right-of-use leased assets | |||||||||||||||||||||
Mineral properties, plant and equipment | |||||||||||||||||||||
Total assets | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Accounts payable and accrued liabilities | $ | $ | $ | $ | $ | $ | |||||||||||||||
Income taxes payable | |||||||||||||||||||||
Loans payable | |||||||||||||||||||||
Lease obligations | |||||||||||||||||||||
Provision for reclamation and rehabilitation | |||||||||||||||||||||
Deferred income tax liability | |||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | $ | $ | $ |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 40 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Year ended December 31, 2022 | |||||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | El Compas | Terronera | Total | |||||||||||||||
Silver revenue | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Gold revenue | |||||||||||||||||||||
Less: smelting and refining costs | ( |
) | ( |
) | |||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Salaries, wages and benefits: | |||||||||||||||||||||
mining |
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||
processing |
|||||||||||||||||||||
administrative |
|||||||||||||||||||||
share-based compensation |
- | - | - | - | |||||||||||||||||
change in inventory |
|||||||||||||||||||||
Total salaries, wages and benefits | |||||||||||||||||||||
Direct costs: | |||||||||||||||||||||
mining |
|||||||||||||||||||||
processing |
|||||||||||||||||||||
administrative |
|||||||||||||||||||||
change in inventory |
|||||||||||||||||||||
Total direct production costs | |||||||||||||||||||||
Depreciation and depletion: | |||||||||||||||||||||
depreciation and depletion |
|||||||||||||||||||||
change in inventory |
|||||||||||||||||||||
Total depreciation and depletion | |||||||||||||||||||||
Royalties | |||||||||||||||||||||
Write down of inventory to NRV | |||||||||||||||||||||
Total cost of sales | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Care and maintenance costs | |||||||||||||||||||||
Write-off of exploration properties | |||||||||||||||||||||
Earnings (loss) before taxes | $ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||
Current income tax expense (recovery) |
|||||||||||||||||||||
Deferred income tax expense (recovery) |
|||||||||||||||||||||
Total income tax expense (recovery) | |||||||||||||||||||||
Net earnings (loss) | $ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | $ |
The Exploration segment included $
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 41 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Year ended December 31, 2021 | |||||||||||||||||||||
Corporate | Exploration | Guanaceví | Bolanitos | El Compas | Terronera | Total | |||||||||||||||
Silver revenue | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Gold revenue | |||||||||||||||||||||
Less: smelting and refining costs | ( |
) | ( |
) | ( |
) | |||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Salaries, wages and benefits: | |||||||||||||||||||||
mining |
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||
processing |
|||||||||||||||||||||
administrative |
|||||||||||||||||||||
share-based compensation |
- | - | 61 | - | |||||||||||||||||
change in inventory |
( |
) | ( |
) | ( |
) | |||||||||||||||
Total salaries, wages and benefits | |||||||||||||||||||||
Direct costs: | |||||||||||||||||||||
mining |
|||||||||||||||||||||
processing |
|||||||||||||||||||||
administrative |
|||||||||||||||||||||
change in inventory |
( |
) | ( |
) | ( |
) | |||||||||||||||
Total direct production costs | |||||||||||||||||||||
Depreciation and depletion: | |||||||||||||||||||||
depreciation and depletion |
- | - | - | ||||||||||||||||||
change in inventory |
( |
) | ( |
) | ( |
) | |||||||||||||||
Total depreciation and depletion | |||||||||||||||||||||
Royalties | |||||||||||||||||||||
Write down of inventory to NRV | |||||||||||||||||||||
Total cost of sales | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
Care and maintenance costs | |||||||||||||||||||||
Write-off of exploration properties | |||||||||||||||||||||
Impairment (impairment reversal) | ( |
) | ( |
) | |||||||||||||||||
Earnings (loss) before taxes | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||
Current income tax expense (recovery) |
|||||||||||||||||||||
Deferred income tax expense (recovery) |
|||||||||||||||||||||
Total income tax expense (recovery) | |||||||||||||||||||||
Net earnings (loss) | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | $ |
The Exploration segment included $
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 42 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
21. INCOME TAXES
(a) Tax Assessments
Minera Santa Cruz y Garibaldi S.A. de C.V. ("MSCG"), a subsidiary of the Company, received a MXN
Included in the Company's consolidated financial statements are net assets of $
Compania Minera Del Cubo S.A. de C.V. ("Cubo"), a subsidiary of the Company, received a MXN
Due to the denial of certain suppliers for income tax purposes in the Cubo assessment, the invoices from these suppliers have been assessed as ineligible for refunds of IVA paid on the invoices. The assessment includes MXN
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 43 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
The Company's Mexican operations are subject to an Environmental Royalty Tax of
Deferred Income Tax Assets and Liabilities
Mexico operations | December 31, | December 31, | ||||
Deferred tax derived from income tax | 2022 | 2021 | ||||
Deferred income tax assets: | ||||||
Tax loss carryforwards | $ | $ | ||||
Working capital | ||||||
Deferred income tax liabilities: | ||||||
Inventories | ( |
) | ( |
) | ||
Mineral properties, plant and equipment | ( |
) | ( |
) | ||
Deferred income tax assets (liabilities), net | $ | ( |
) | $ | ||
Mexico operations | December 31, | December 31, | ||||
Deferred tax derived from special mining duty | 2022 | 2021 | ||||
Deferred income tax liabilities: | ||||||
Working capital | $ | ( |
) | $ | ||
Mineral properties, plant and equipment | ( |
) | ( |
) | ||
Deferred income tax assets (liabilities), net | $ | ( |
) | $ | ( |
) |
(b) Income Tax Expense
Years ended | ||||||
December 31, | December 31, | |||||
2022 | 2021 | |||||
Current income tax expense: | ||||||
Current income tax expense in respect of current year | $ | $ | ||||
Special mining duty | ||||||
Deferred income tax expense: | ||||||
Deferred tax expense recognized in the current year | ||||||
Special mining duty | ||||||
Adjustments recognized in the current year in relation to prior years | ( |
) | ( |
) | ||
Total income tax expense | $ | $ |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 44 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
The reconciliation of the income tax provision computed at statutory tax rates to the reported income tax provision is as follows:
December 31, | December 31, | |||||
2022 | 2021 | |||||
Canadian statutory tax rates | ||||||
Income tax expense computed at Canadian statutory rates | $ | $ | ||||
Foreign tax rates different from statutory rate | ||||||
Withholding taxes, net of tax credits | ||||||
Share-based compensation | ||||||
Foreign exchange | ||||||
Inflationary adjustment | ||||||
Other non-deductible items | ||||||
Adjustments recognized in the current year in relation to prior years | ( |
) | ||||
Current year losses not recognized | ||||||
Special mining duty Mexican tax | ||||||
Recognition of previously unrecognized losses | ( |
) | ( |
) | ||
Income tax expense | $ | $ |
(c) Unrecognized Deferred Tax Assets
Management believes that sufficient uncertainty exists regarding the realization of certain deferred tax assets such that they have not been fully recognized. The tax benefits not recognized reflect management's assessment regarding the future realization of Canadian, Chilean and certain Mexican tax assets and estimates of future earnings and taxable income in these jurisdictions as of December 31, 2022. When circumstances cause a change in management's judgement about the recoverability of deferred tax assets, the impact of the change will be reflected in current income.
Loss Carry Forward | December 31, | December 31, | |||||
Expiry | 2022 | 2021 | |||||
Unrecognized Mexico tax loss carry forward | $ | $ | |||||
Unrecognized Canada tax loss carry forward | |||||||
Unrecognized Chile tax loss carry forward | |||||||
Capital losses | |||||||
Reclamation provision | |||||||
Exploration pools | |||||||
Other Canada temporary differences |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 45 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
22. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
(a) Financial assets and liabilities
As at December 31, 2022, the carrying and fair values of the Company's financial instruments by category are as follows:
Fair value through profit or loss |
Amortized cost |
Carrying value | Fair value |
|||||||||
$ | $ | $ | $ | |||||||||
Financial assets: | ||||||||||||
Cash and cash equivalents |
||||||||||||
Other investments |
||||||||||||
Trade and other receivables |
||||||||||||
Loans receivable |
||||||||||||
Total financial assets | ||||||||||||
Financial liabilities: | ||||||||||||
Accounts payable and accrued liabilites |
||||||||||||
Loans payable |
||||||||||||
Total financial liabilities |
(b) Fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
Level 1:
Other investments are comprised of marketable securities. When there is an active market are determined based on a market approach reflecting the closing price of each particular security at the reporting date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security. As a result, $
Cash settled deferred share units are determined based on a market approach reflecting the Company's closing share price or share price at redemption date for any pending settlements.
Level 2:
The Company determines the fair value of the embedded derivatives related to its accounts and other receivables based on the quoted closing price obtained from the silver and gold metal exchanges and the fair value of the SARs liability is determined by using an option pricing model.
Level 3:
Included in other investments are share purchase warrants. Fair value of the warrants at each period end has been estimated using the Black-Scholes Option Pricing Model. As a result, $
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 46 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Assets and liabilities as at December 31, 2022 measured at fair value on a recurring basis include:
Total | Level 1 | Level 2 | Level 3 | |||||||||
$ | $ | $ | $ | |||||||||
Financial assets: | ||||||||||||
Accounts and other receivables |
||||||||||||
Other investments |
||||||||||||
Total financial assets | ||||||||||||
Financial liabilities: | ||||||||||||
Deferred share units |
||||||||||||
Share appreciation rights |
||||||||||||
Total financial liabilities |
(c) Financial instrument risk exposure and risk management
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management process. The types of risk exposure and the manner in which such exposures are managed is outlined as follows:
Credit Risk
The Company is exposed to credit risk on its bank accounts, accounts and other receivables and loans receivable. Credit risk exposure on bank accounts is limited through maintaining the Company's balances with high-credit quality financial institutions, maintaining investment policies, assessing institutional exposure and continual discussion with external advisors. Accounts and other receivables are generated on the sale of concentrate inventory to reputable metal traders as well as various other receivables arising from operations. There has been no indication of a change in creditworthiness of the counterparty to the loan receivable since the initial recognition.
The carrying amount of financial assets represents the Company's maximum credit exposure.
Below is an aged analysis of the Company's financial instruments included in accounts and other receivables:
Carrying | Gross | Carrying | Gross | |||||||||
amount | impairment | amount | impairment | |||||||||
December 31, 2022 |
December 31, 2021 |
|||||||||||
Less than 1 month | $ | $ | $ | $ | ||||||||
1 to 3 months | ||||||||||||
4 to 6 months | ||||||||||||
Over 6 months | ||||||||||||
Total | $ | $ | $ | $ |
At December 31, 2022,
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 47 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. We manage our liquidity risk by continually monitoring forecasted and actual cash flows. We have in place a planning and budgeting process to help determine the funds required to support our normal operating requirement and development plans. We aim to maintain sufficient liquidity to meet our short term business requirements, taking into account our anticipated cash flows from operations, our holdings of cash and cash equivalents, and our committed and anticipated liabilities.
The following table summarizes the remaining contractual maturities of the Company's financial liabilities and operating and capital commitments at December 31, 2022:
Less than | 1 to 3 | 4 to 5 | Over 5 | ||||||||||||
1 year | years | years | years | Total | |||||||||||
$ | $ | $ | $ | $ | |||||||||||
Accounts payable and accrued liabilities | |||||||||||||||
Loans payable | |||||||||||||||
Lease liabilities | |||||||||||||||
Provision for reclamation and rehabilitation | |||||||||||||||
Capital expenditure commitments | |||||||||||||||
Operating leases | |||||||||||||||
Total contractual obligations |
Market Risk
Significant market related risks to which the Company is exposed consist of foreign currency risk, commodity price risk and equity price risk.
Foreign Currency Risk - The Company's operations in Mexico and Canada make it subject to foreign currency fluctuations. Certain of the Company's operating expenses are incurred in Mexican pesos and Canadian dollars, therefore the fluctuation of the US dollar in relation to these currencies will consequently have an impact on the profitability of the Company and may also affect the value of the Company's assets and the amount of shareholders' equity. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks.
The US dollar equivalents of financial assets and liabilities denominated in currencies other than the US dollar as at December 31, 2022, are as follows:
December 31, 2022 |
December 31, 2021 |
|||||||||||
Canadian Dollar | Mexican Peso | Canadian Dollar | Mexican Peso | |||||||||
Financial assets | $ | $ | $ | $ | ||||||||
Financial liabilities | ( |
) | ( |
) | ( |
) | ( |
) | ||||
Net financial assets (liabilities) | $ | $ | ( |
) | $ | $ | ( |
) |
Of the financial assets listed above, $
As at December 31, 2022, with other variables unchanged, a
As at December 31, 2022, with other variables unchanged, a
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 48 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
Commodity Price Risk - Gold and silver prices have historically fluctuated significantly and are affected by numerous factors outside of the Company's control, including, but not limited to, industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply and demand due to speculative hedging activities and certain other factors. The Company has not engaged in any hedging activities, other than short-term metal derivative transactions less than 90 days, to reduce its exposure to commodity price risk. Revenue from the sale of concentrates is based on prevailing market prices which is subject to adjustment upon final settlement. For each reporting period until final settlement, estimates of metal prices are used to record sales. At December 31, 2022 there are
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 49 |
ENDEAVOUR SILVER CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2022 and 2021 (expressed in thousands of US dollars, unless otherwise stated) |
HEAD OFFICE | Suite #1130, 609 Granville Street Vancouver, BC, Canada V7Y 1G5 Telephone: (604) 685-9775 1-877-685-9775 Facsimile: (604) 685-9744 Website: www.edrsilver.com |
DIRECTORS | Margaret Beck Ricardo Campoy Daniel Dickson Amy Jacobsen Rex McLennan Kenneth Pickering Mario Szotlender |
OFFICERS | Daniel Dickson - Chief Executive Officer Donald Gray - Chief Operating Officer Christine West - Chief Financial Officer Nicholas Shakesby - Vice President, Operations Luis Castro - Vice-President, Exploration Dale Mah - Vice-President, Corporate Development Galina Meleger - Vice-President, Investor Relations Bernard Poznanski - Corporate Secretary |
REGISTRAR AND TRANSFER AGENT | Computershare Trust Company of Canada 3rd Floor - 510 Burrard Street Vancouver, BC, V6C 3B9 |
AUDITORS | KPMG LLP 777 Dunsmuir Street Vancouver, BC, V7Y 1K3 |
SOLICITORS | Koffman Kalef LLP 19th Floor - 885 West Georgia Street Vancouver, BC, V6C 3H4 |
SHARES LISTED | Toronto Stock Exchange Trading Symbol - EDR New York Stock Exchange Trading Symbol - EXK |
ENDEAVOUR SILVER CORP. | CONSOLIDATED FINANCIAL STATEMENTS | PAGE 50 |