Investment in Affiliates

12 Months Ended

Dec. 31, 2021

Investment in Affiliate

Investment in Affiliates

15.Investment in Affiliates

During the years ended December 31, 2021 and 2020, the Company recognized income of $35,883 and a loss of $17,585, respectively, on its investment in the LGJV Entities, representing its ownership share of the LGJV Entities’ results. The equity income or loss in affiliate includes amortization of the carrying value of the investment in excess of the underlying net assets of the LGJV Entities. This basis difference is being amortized as the LGJV Entities’ proven and probable reserves are processed.

On November 10, 2022, the Company provided an updated technical report, the Los Gatos Technical Report. The Los Gatos Technical Report indicated a significant decrease in the mineral reserve and mineral resource from the previously issued technical report in 2020. The Company considered this reduction in the mineral reserve and mineral resources as an indicator of a possible other-than-temporary impairment and as a result compared the carrying value of the LGJV on December 31, 2021 to the fair value of the LGJV.

The fair value of the LGJV was estimated based on the net present value (“NPV”) of the expected cash flows to be generated by the LGJV on 70% basis. The discount rate used was 5.00%. The fair value of the investment in the LGJV was estimated to be $355,310 and the carrying value at December 31, 2021 was $406,874. Since the carrying value is exceeding the fair value, an impairment charge of $51,564 was recorded during the fourth quarter of 2021. See Note 9 – Fair Value Measurements for additional detail of the assumptions used in the determination of the fair value of the long-lived assets tested for impairment.

For the year ended December 31, 2021, the Company contributed $260,039 to the LGJV to repurchase 18.5% of the ownership of the LGJV, to retire the WCF and the Term Loan and in support of exploration activities. For the year ended December 31, 2020, the Company contributed $17,227 to the LGJV in support of continued operations in the form of cash and receivables converted to capital of the LGJV, as described in Note 7 – Related-Party Transactions.

In April 2022, July 2022 and November 2022, the Company received dividends from the LGJV in the amount of $5,936, $9,975 and $13,300, respectively.

The LGJV Entities’ combined balance sheets as of December 31, 2021 and 2020, and combined statements of income (loss) for the years ended December 31, 2021 and 2020, are as follows:

LOS GATOS JOINT VENTURE

COMBINED BALANCE SHEETS

(in thousands)

	December 31,		December 31,
	2021		2020
ASSETS
Current Assets
Cash and cash equivalents	$	20,280	$	1,676
Receivables		11,263		3,988
Inventories		11,062		10,315
VAT receivable		46,242		50,732
Other current assets		4,515		2,891
Total current assets		93,362		69,602
Non‑Current Assets
Mine development, net		229,076		202,874
Property, plant and equipment, net		190,896		196,942
Net deferred tax assets		9,226		—
Total non‑current assets		429,198		399,816
Total Assets	$	522,560	$	469,418
LIABILITIES AND OWNERS’ CAPITAL
Current Liabilities
Accounts payable and accrued liabilities	$	33,179	$	35,767
Related party payable		1,609		1,703
Accrued interest		51		101
Unearned revenue		1,714		3,276
Income taxes		6,315		—
Equipment loans		5,534		7,084
Term Loan		—		31,826
Working Capital Facility		—		60,000
Total current liabilities		48,402		139,757
Non‑Current Liabilities
Term Loan		—		187,767
Equipment loans		478		6,120
Asset retirement obligation		14,706		12,162
Total non‑current liabilities		15,184		206,049
Owners’ Capital
Capital contributions		540,638		271,368
Paid‑in capital		18,370		16,366
Accumulated deficit		(100,034)		(164,122)
Total owners’ capital		458,974		123,612
Total Liabilities and Owners’ Capital	$	522,560	$	469,418

LOS GATOS JOINT VENTURE

COMBINED STATEMENTS OF INCOME (LOSS)

(in thousands)

	Years Ended December 31,
	2021		2020
Revenue	$	249,194	$	121,470
Expenses
Cost of sales		97,710		65,005
Royalties		4,781		2,148
Exploration		5,383		841
General and administrative		13,345		9,718
Depreciation, depletion and amortization		52,402		44,904
Other		—		3,416
Total expenses		173,621		126,032
Other income (expense)
Interest expense		(5,542)		(12,484)
Loss on Term Loan extinguishment		(4,359)		—
Arrangement fee		(2,090)		(8,888)
Accretion expense		(924)		(849)
Other income		222		109
Foreign exchange loss		(749)		(1,042)
Total other expense		(13,442)		(23,154)
Income (loss) before taxes		62,131		(27,716)
Mining tax expense		(954)		—
Income (loss) before income taxes		61,177		(27,716)
Income tax benefit		2,911		—
Net income (loss)	$	64,088	$	(27,716)