EX-99.1 2 exhibit99-1.htm CONSOLIDATED INTERIM FINANCIAL STATEMENTS Silver Standard Resources Inc.: Exhibit 99.1 - Filed by newsfilecorp.com

Silver Standard Resources Inc.

Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(unaudited)

Silver Standard Resources Inc.
Consolidated Interim Financial Statements for the three and nine months ended September 30, 2011

CONTENTS

Primary financial statements  
   
Consolidated Interim Statement of Financial Position  
Consolidated Interim Statement of Income (Loss)  
Consolidated Interim Statement of Comprehensive Income (Loss) Shareholders’ equity
Consolidated Interim Statement of Changes in Shareholders’ Equity Note 10 – Share capital and share-based compensation
Consolidated Interim Statement of Cash Flows
 
  Income Statement
  Note 11 – Operating costs by nature
Notes to the consolidated interim financial statements Note 12 – Finance income and expenses
Note 13 – Other income (expenses)
Note 1 – Nature of operations  
Note 2 – Significant accounting policies Additional disclosures
Note 14 – Operating segments
  Note 15 – Supplemental cash flow information
Statement of Financial Position Note 16 – Related party transactions
Note 3 – Other financial assets Note 17 – Transition to International Financial Reporting Standards
Note 4 – Inventory
Note 5 – Property, plant and equipment  
Note 6 – Investment in associate  
Note 7 – Warrant liability  
Note 8 – Current and deferred income tax  
Note 9 – Convertible notes  

2 | P a g e


Silver Standard Resources Inc.
Consolidated Interim Statement of Financial Position
(expressed in thousands of United States dollars, except per share amounts - unaudited)

          September 30     December 31     January 1  
    Note     2011     2010     2010  
        $    $    $   
Current assets                        
Cash and cash equivalents         355,903     232,311     26,659  
Trade and other receivables         34,563     35,916     8,251  
Other financial assets   3     39,218     33,651     19,722  
Inventory   4     78,771     40,176     20,565  
          508,455     342,054     75,197  
Non-current assets                        
Property, plant and equipment   5     500,508     499,632     496,824  
Investment in associate   6     136,499     226,271     -  
Deferred income tax asset   8     17,326     -     -  
Value added tax receivable         85,015     70,782     54,095  
Other non-current financial assets   3     1,767     9,251     8,015  
Total assets         1,249,570     1,147,990     634,131  
                         
Current liabilities                        
Trade and other payables         42,972     35,163     50,682  
Taxes payable   8     28,902     -     -  
Warrant liability   7     7,954     -     -  
          79,828     35,163     50,682  
Non-current liabilities                        
Deferred tax liabilities   8     36,995     20,472     1,202  
Taxes payable         2,777     3,672     3,370  
Close down and restoration provision         12,521     12,671     10,340  
Convertible notes   9     122,908     116,125     107,895  
Derivative liabilities   9     6,817     21,735     20,728  
Total liabilities         261,846     209,838     194,217  
                         
Shareholders' equity                        
Share capital   10     704,264     676,651     538,700  
Other reserves         8,167     63,257     46,966  
Retained earnings         275,293     197,748     (146,248 )
                         
Total shareholders' equity attributable to shareholders of the Company         987,724     937,656     439,418  
                         
Non-controlling interest   5     -     496     496  
                         
Total shareholders' equity         1,249,570     1,147,990     634,131  

The accompanying notes are an integral part of the consolidated interim financial statements

Approved by the Board of Directors and authorized for issue on November 9, 2011

“John R. Brodie”   “John Smith”
John R. Brodie, FCA, Director   John Smith, Director

3 | P a g e


Silver Standard Resources Inc.
Consolidated Interim Statement of Income (Loss)
(expressed in thousands of United States dollars, except per share amounts - unaudited)

    Three Months Ended September 30     Nine Months Ended September 30  
    Note     2011     2010     2011     2010  
        $    $    $    $   
                               
Revenue         26,152     41,557     133,476     67,179  
Cost of sales   11     (14,660 )   (34,131 )   (78,287 )   (78,020 )
Income / (Loss) from mine operations         11,492     7,426     55,189     (10,841 )
                               
General and administrative expenses   11     (6,748 )   (6,251 )   (20,348 )   (19,617 )
Exploration and evaluation expenses         (1,678 )   (169 )   (5,139 )   (449 )
Operating income (loss)         3,066     1,006     29,702     (30,907 )
                               
Gain (loss) on sale of mineral property   5     51,359     (65 )   50,536     13,073  
Gain on partial disposal of associate   6     -     -     39,266     -  
Interest earned and other finance income   12     449     409     1,989     1,030  
Interest expense and other finance costs   12     (4,329 )   (4,265 )   (12,866 )   (12,041 )
Other income (expenses)   13     7,388     (2,025 )   13,798     12,352  
Foreign exchange loss         (5,209 )   (6,218 )   (3,132 )   (6,887 )
Income (loss) before tax         52,724     (11,158 )   119,293     (23,380 )
                               
Income tax (expense) recovery         (30,888 )   751     (41,748 )   211  
                               
Net income (loss) and net income (loss) attributable to shareholders         21,836     (10,407 )   77,545     (23,169 )
                               
Weighted average shares outstanding (thousands)                              
 Basic         80,549     78,767     80,223     77,531  
 Diluted         80,897     78,767     80,686     77,531  
                               
Earnings (loss) per share                              
 Basic       $ 0.27   $  (0.13 ) $  0.97   $  (0.30 )
 Diluted       $ 0.27   $  (0.13 ) $  0.96   $  (0.30 )

The accompanying notes are an integral part of the consolidated interim financial statements

4 | P a g e


Silver Standard Resources Inc.
Consolidated Interim Statement of Comprehensive Income (Loss)
(expressed in thousands of United States dollars - unaudited)

    Three Months Ended September 30     Nine Months Ended September 30  
    2011     2010     2011     2010  
  $    $    $    $   
                         
                         
Income (loss) for the period attributable to shareholders   21,836     (10,407 )   77,545     (23,169 )
Other comprehensive income (loss)                        
     Unrealized gain (loss) on marketable securities, net of tax   (2,501 )   5,406     (10,725 )   4,049  
     Realized gain on the disposal of marketable securities recycled to net income (loss), net of tax   (4,731 )   (628 )   (4,731 )   (2,645 )
     Share of other comprehensive income of associate   (10,066 )   -     (4,821 )   -  
     Cumulative translation adjustment   (2,711 )   5,566     (2,210 )   2,061  
Other comprehensive income (loss) for the period   (20,009 )   10,344     (22,487 )   3,465  
                         
Total comprehensive income (loss) for the period attributable to shareholders   1,827     (63 )   55,058     (19,704 )
Non-controlling interests   -     -     -     -  
Total comprehensive income (loss) for the period   1,827     (63 )   55,058     (19,704 )

The accompanying notes are an integral part of the consolidated interim financial statements

5 | P a g e


Silver Standard Resources Inc.
Consolidated Interim Statement of Changes in Shareholders’ Equity
(expressed in thousands of United States dollars - unaudited)

    Note     Common Shares     Other     Retained earnings     Total     Non-     Total  
          Shares     Amount     reserves     (accumulated     attributable to       controlling     shareholders'  
                            deficit)     shareholders     Interest     equity  
          000's   $    $    $    $    $    $   
Balance, January 1, 2010         71,965     538,700     46,966     (146,248 )   439,418     496     439,914  
                                                 
     Issue of ordinary shares, net of costs         6,729     107,758     -     -     107,758     -     107,758  
     Exercise of stock options         125     2,643     (812 )   -     1,831     -     1,831  
     Share-based compensation         -     -     5,742     -     5,742     -     5,742  
     Total comprehensive income (loss) for the period       -     -     3,465     (23,169 )   (19,704 )   -     (19,704 )
Balance, at September 30, 2010         78,819     649,101     55,361     (169,417 )   535,045     496     535,541  
                                                 
                                                 
Balance, January 1, 2011         79,665     676,651     63,257     197,748     937,656     496     938,152  
     Exercise of stock options         950     27,613     (8,410 )   -     19,203     -     19,203  
     Share-based compensation         -     -     4,003     -     4,003     -     4,003  
     Transactions with non-controlling interests   5     -     -     (28,196 )   -     (28,196 )   (496 )   (28,692 )
     Total comprehensive income (loss) for the period       -     -     (22,487 )   77,545     55,058     -     55,058  
Balance, at September 30, 2011         80,615     704,264     8,167     275,293     987,724     -     987,724  

The accompanying notes are an integral part of the consolidated interim financial statements

6 | P a g e


Silver Standard Resources Inc.
Consolidated Interim Statement of Cash Flows
(expressed in thousands of United States dollars - unaudited)

    Nine Months Ended September 30  
                                                                                                                                                2011     2010  
  $    $   
Cash flows from operating activities            
Net income (loss) for the period   77,545     (23,169 )
Adjustments for:            
   Depletion, depreciation and amortization   13,645     16,504  
   Share-based payments   4,003     5,524  
   Close down and restoration provision   1,207     1,238  
   Gain on sale of mineral property and property plant and equipment   (50,536 )   (13,073 )
   Accretion expense on convertible notes   6,855     6,111  
   Accretion income on convertible debenture   (636 )   (630 )
   Other income   (13,798 )   (12,352 )
   Gain on partial disposal of associate   (39,266 )   -  
   Deferred income tax expense (recovery)   1,744     (211 )
   Foreign exchange loss (gain)   (7,700 )   2,435  
Net changes in non cash working capital items   19,840     (1,165 )
             
Cash generated by (used in) operating activities   12,903     (18,788 )
             
Cash flows from investing activities            
Purchase of property, plant and equipment   (20,402 )   (42,931 )
Mineral property expenditures   (24,531 )   (41,416 )
Increase in value added tax recoverable   (10,317 )   (15,216 )
Proceeds from sale of marketable securities   -     11,015  
Net proceeds from partial disposal of associate   112,873     -  
Net proceeds from sale and acquisition of mineral properties   33,864     6,927  
             
Cash generated by (used in) investing activities   91,487     (81,621 )
             
Cash flows from financing activities            
Proceeds from issuance of common shares (net of costs)   -     107,758  
Proceeds from exercise of stock options   19,202     1,831  
             
Cash generated by financing activities   19,202     109,589  
             
Increase in cash and cash equivalents   123,592     9,180  
Cash and cash equivalents, beginning of period   232,311     26,659  
Cash and cash equivalents, end of period   355,903     35,839  

Supplemental cash flow information (note 15)

The accompanying notes are an integral part of the consolidated interim financial statements

7 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

1.

NATURE OF OPERATIONS

   

Silver Standard Resources Inc. (the “Company”) is a limited liability company incorporated under the laws of the Province of British Columbia, Canada and its shares are publicly listed on the Toronto Stock Exchange in Canada and the NASDAQ in the United States. The Company together with its subsidiaries (the “Group”) are principally engaged in the exploration, development and production of silver-dominant resource properties located in the Americas. The Company is the ultimate parent of the Group.

   

The Company’s address is Suite 1400, 999 West Hastings Street, Vancouver, British Columbia, V6C 2W2.

   

The Company’s strategic focus is to optimize the production of silver from its Pirquitas mine in Argentina, and to advance other principal development and exploration projects including San Luis in Peru, Diablillos in Argentina, and Pitarrilla, Nazas and San Agustin in Mexico. In addition to its principal projects, the Company holds a geologically- diverse portfolio of other predominantly silver projects in various stages of exploration.

   
2.

SIGNIFICANT ACCOUNTING POLICIES

   

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.


  a)

Basis of preparation and adoption of International Financial Reporting Standards

The Company prepares its financial statements in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) as set out in the Handbook of the Canadian Institute of Chartered Accountants (“CICA Handbook”). In 2010, the CICA Handbook was revised to incorporate International Financial Reporting Standards (“IFRS”), and require publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, 2011. Accordingly, the Company commenced reporting on this basis in its 2011 interim consolidated financial statements. In the financial statements, the term Canadian GAAP refers to Canadian GAAP before the adoption of IFRS.

These interim consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting” and IFRS 1, “First-time adoption of International Financial Reporting Standards” using accounting policies consistent with IFRS as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). The accounting policies followed in these interim financial statements are the same as those applied in the Company’s interim financial statements for the period ended March 31, 2011. The Company has consistently applied the same accounting policies throughout all periods presented, as if these policies had always been in effect. The impact of the transition to IFRS on the Company’s reported equity as at September 30, 2010 and comprehensive income for the three and nine months ended September 30, 2010 is provided in note 17. This note also includes the nature and effect of significant changes in accounting policies from those used in the Company’s consolidated financial statements for the year ended December 31, 2010.

The policies applied in these interim consolidated financial statements are based on IFRS issued and outstanding as of November 9, 2011, the date the Board of Directors approved the statements. Any subsequent changes to IFRS that are given effect in the Company’s annual consolidated financial statements for the year ending December 31, 2011 could result in restatement of these interim consolidated financial statements, including the transition adjustments recognised on change-over to IFRS.

8 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

2.

SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

   

The interim consolidated financial statements should be read in conjunction with the Company’s Canadian GAAP annual financial statements for the year ended December 31, 2010, and the Company’s interim financial statements for the quarter ended March 31, 2011 prepared in accordance with IFRS applicable to interim financial statements.


  b)

Significant accounting judgements and estimates

     
 

The preparation of financial statements in conformity with IFRS requires the use of judgements and/or estimates that affect the amounts reported and disclosed in the interim financial statements and related notes. There has been no change to the Company’s significant accounting estimates from those disclosed in the unaudited interim consolidated financial statements (note 2) for the three months ended March 31, 2011 except for the impairment assessment and the determination of ore resources and mineral reserves at the Pirquitas mine that are discussed below.

   
 

Review of asset carrying values and impairment assessment In accordance with the Company’s accounting policy, each asset or cash generating unit is evaluated every reporting period to determine whether there are any indications of impairment. If any such indication exists, a formal estimate of recoverable amount is performed and an impairment loss is recognised to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use.

   
 

The determination of fair value and value in use requires management to make estimates and assumptions about expected production, sales volumes, commodity prices, reserves, operating costs, closure and rehabilitiation costs and future capital expenditures. The estimates and assumptions are subject to risk and uncertainty, hence 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 the income statement.

   
 

Determination of ore reserve and mineral resource estimates The Company estimates its ore reserves and mineral resources based on information compiled by Qualified Persons as defined by NI 43-101. Reserves determined in this way are used in the calculation of depreciation, amortization and impairment charges, and for forecasting the timing of the payment of close down and restoration costs. In assessing the life of a mine for accounting purposes, mineral resources are only taken into account where there is a high degree of confidence of economic extraction. There are numerous uncertainties inherent in estimating ore reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in reserve estimates being revised. Such changes in reserves could impact on depreciation and amortisation rates, asset carrying values and provisions for close down and restoration costs.

   
 

As at September 30, 2011, the Company determined that there were impairment indicators for the Company’s wholly-owned operating Pirquitas mine as a result of revised mineral Resources and Reserve estimates. Management performed an impairment assessment to determine fair value based on estimates of discounted future after-tax cash flows expected to be derived from the Pirquitas mine using a discount rate of 9% and forecasted silver prices that reflect market consensus. The Company’s assessment concluded that the carrying value of the Pirquitas mine assets are not impaired at this time.

9 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

2.

SIGNIFICANT ACCOUNTING POLICIES (Cont’d)


  c)

Future accounting changes

On June 16, 2011 the IASB issued Presentation of Items of Other Comprehensive Income (amendments to IAS 1, Presentation of Financial Statements). The amendments require the grouping of items presented in other comprehensive income into items that might be reclassified to profit or loss in subsequent periods and items that will not be reclassified to profit or loss in subsequent periods. The amendments are effective for annual periods beginning on or after July 1, 2012, with full retrospective application. The adoption of this standard will impact the presentation of the statement of other comprehensive income (loss) from the date of adoption; the Company has not determined whether it will adopt the standard early.

In October 2011 the IASB issued IFRIC 20 Stripping Costs in the Production Phase of a Mine (“IFRIC 20”). This interpretation provides guidance on the accounting for the costs of stripping activity in the production phase when two benefits accrue to the entity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. IFRIC 20 is applicable for annual periods beginning on or after January 1, 2013 with early adoption permitted. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early.

3.

OTHER FINANCIAL ASSETS


      September 30, 2011     December 31, 2010  
      Non-current     Current     Non-current     Current  
    $    $    $    $   
                           
  Restricted cash   1,767     -     2,071     -  
  Marketable securities   -     36,403     -     33,465  
  Convertible debenture receivable (a )   -     2,815     7,180     186  
      1,767     39,218     9,251     33,651  

  (a)

The Company received a $9,980,000 (C$10,000,000) convertible debenture with a coupon rate of 3% per annum from Aurcana Corporation (“Aurcana”) as part of the consideration received for the sale of the Shafter Silver property in 2008. The convertible debenture was repayable on July 15, 2011. In 2009 the coupon rate on the debenture was revised from 3% per year to 1.5% in the first year and 4% per year thereafter, which resulted in an impairment of $2,002,000 during that year. On March 25, 2011 the terms of the convertible debenture receivable were renegotiated so that Aurcana was required to pay C$7,000,000 on July 15, 2011 and the remaining C$3,000,000 in quarterly instalments until July 15, 2012. The interest rate for the remainder of the arrangement was increased to 9%. This resulted in a recovery of the previous impairment of $2,400,000 which was recorded within other income (expenses) (note 13) and the reclassification of $8,600,000 to current assets. On July 15, 2011, the Company received a payment for C$7,400,000 from Aurcana of which C$7,000,000 was applied to reduce the principal outstanding as per the March 25, 2011 amended terms and C$400,000 was in respect of the interest earned to July 15, 2011.

10 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

4.

INVENTORY

Inventory is comprised of the following:

    September 30     December 31  
    2011     2010  
  $    $   
             
Finished goods   31,714     6,919  
Stockpiled ore   34,536     26,327  
Materials and supplies   12,521     6,930  
    78,771     40,176  

5.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment comprises the following:

            Period ended September 30, 2011        
      Plant and     Producing     Assets     Exploration and       Total  
      equipment     properties     under     development        
                  construction     expenditure (a)        
    $    $    $    $    $   
  Cost                              
  Balance, January 1, 2011   263,305     76,209     8,695     190,909     539,118  
  Additions   1,989     102     18,554     25,501     46,146  
  Disposals   (3,542 )   (256 )   -     (19,630 )   (23,428 )
  Costs written off   -     -     -     (4,514 )   (4,514 )
  Transfers   15,717     224     (15,941 )   -     -  
  Balance, end of period   277,469     76,279     11,308     192,266     557,322  
                                 
  Accumulated depreciation                              
  Balance, January 1, 2011   (35,450 )   (4,036 )   -     -     (39,486 )
  Charge for the year   (18,281 )   (2,360 )   -     -     (20,641 )
  Disposals   3,313     -     -     -     3,313  
  Balance, end of period   (50,418 )   (6,396 )   -     -     (56,814 )
                                 
  Net book value at September 30, 2011   227,051     69,883     11,308     192,266     500,508  

No items of property, plant and equipment have been pledged as security for liabilities.

11 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

5.

PROPERTY, PLANT AND EQUIPMENT (Cont’d)


            Year ended December 31, 2010        
      Plant and     Producing     Assets     Exploration and       Total  
      equipment     properties     under     development        
                  construction     expenditure (a)        
    $    $    $    $    $   
  Cost                              
  Balance, January 1, 2010   250,085     76,841     8,015     179,445     514,386  
  Additions   7,644     5,017     15,806     55,942     84,409  
  Disposals   (8,455 )   (5,649 )   (1,095 )   (44,478 )   (59,677 )
  Transfers   14,031     -     (14,031 )   -     -  
  Balance, end of period   263,305     76,209     8,695     190,909     539,118  
                                 
  Accumulated depreciation                              
  Balance, January 1, 2010   (16,944 )   (618 )   -     -     (17,562 )
  Charge for the year   (19,370 )   (3,418 )   -     -     (22,788 )
  Disposals   864     -     -     -     864  
  Balance, end of period   (35,450 )   (4,036 )   -     -     (39,486 )
                                 
  Net book value at December 31, 2010   227,855     72,173     8,695     190,909     499,632  

  a)

Exploration and development expenditure by property


            September 30, 2011     December 31, 2010  
      Acquisition      Exploration      Total     Total  
      costs     costs              
    $    $    $    $   
  Exploration projects                        
  Bowdens, Australia (i)   -     -     -     19,685  
  Challacollo, Chile   2,990     5,504     8,494     9,206  
  San Agustin, Mexico   101     2,033     2,134     1,654  
  Veta Colorada, Mexico   3,688     1,039     4,727     4,845  
  Nazas, Mexico (ii)   565     349     914     1,423  
  Berenguela, Peru   10,645     6,111     16,756     16,480  
  Candelaria, United States   2,434     3,812     6,246     6,022  
  Maverick Springs, United States   565     2,074     2,639     2,628  
  Other exploration projects   2,772     3,270     6,042     5,743  
                           
  Development projects                        
  Diablillos, Argentina   4,516     16,179     20,695     18,765  
  Pitarrilla, Mexico   17,745     74,346     92,091     77,796  
  San Luis, Peru (iii)   661     30,867     31,528     26,662  
      46,682     145,584     192,266     190,909  

  (i)

On September 23, 2011, the Company completed the sale of its 100% interest in the Bowdens project located in Australia to Kingsgate Consolidated Limited (“Kingsgate”). Under the terms of the agreement, the Company received total consideration of $70,473,000. The consideration received comprised cash of $44,908,000 of which $9,908,000 is payable in two equal installments on December 31, 2011 and June 30, 2012, and 3,440,367 common shares of Kingsgate with a fair value of $25,565,000. The total gain recorded on the sale of this mineral property was $51,359,000 before tax expense of $15,306,000.

12 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

5.

PROPERTY, PLANT AND EQUIPMENT (Cont’d)


  (ii)

During the nine months ended September 30, 2011 the Company elected not to continue its option on the Navidad claims at the Nazas property, which is at the centre of the Nazas project. As a result, the Company wrote off accumulated costs of $4,514,000 which was recorded in other income (expense) (note 13).

     
  (iii)

On July 28, 2011, the Company completed the 100% acquisition of the San Luis property in Peru (70% interest held at December 31, 2010) from Esperanza Resources Corp. (“Esperanza”). The Company paid consideration of $17,865,000 in cash and transferred to Esperanza the 6.459 million shares of Esperanza that it owned. In addition, under the terms of the agreement the Company will provide a 1% net smelter return royalty (“NSR”) on future production. The total fair value of the consideration paid to acquire the 30% interest held by Esperanza was $28,692,000, which includes transaction costs of $306,000. The carrying amount of the non-controlling interest in the San Luis project on the date of acquisition was $496,000. This transaction did not result in a change of control and therefore the Company recognised a decrease in non-controlling interest of $496,000 and a decrease in other reserves of $28,196,000.

In February 2010 the Company completed the sale of its 100% interest in the Silvertip property located in British Columbia, Canada to Silvercorp Metals Inc. (“Silvercorp”). Under the terms of the agreement, Silvercorp paid total consideration of $14,957,000, comprising cash of $7,125,000 and 1,200,000 common shares of Silvercorp with a fair value of $7,832,000, for an after tax gain of $13,073,000.

6.

INVESTMENT IN ASSOCIATE


          September 30, 2011     December 31, 2010  
        $    $   
Pretium Resources Inc.   Common shares     136,499     187,202  
    Convertible note     -     39,069  
          136,499     226,271  

On December 21, 2010 the Company completed the sale of its 100% interest in the Snowfield and Brucejack properties located in British Columbia, Canada, to Pretium Resources Inc. (“Pretium”). Total consideration was $442,260,000 (C$450,000,000) which comprised 32,537,833 common shares of Pretium, with a fair value of $191,869,000, cash of $211,322,000 (before underwriters’ fees of $12,427,000), and a non-interest bearing promissory note in the principal amount of $39,069,000.

As at December 31, 2010 the convertible note was included in carrying value of the investment in Pretium as this most accurately reflected the substance of the arrangement. The note was partially repaid on January 6, 2011 whereby the Company received proceeds of $18,083,000 and on January 31, 2011 the balance of the note $20,986,000 was converted into 3,625,500 common shares of Pretium with a fair value of $22,946,000 resulting in a gain on settlement of $1,092,000. Total transaction costs of $1,631,000 were expensed in the period, and together with the gain on settlement of the note these were presented within the gain (loss) on sale of mineral property in the income statement as they are all interrelated with the original sale transaction.

13 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

6.

INVESTMENT IN ASSOCIATE (Cont’d)

   

On April 8, 2011 the Company sold 11.5 million units in relation to the shares of Pretium it owns. Each unit contained one common share of Pretium and half of a warrant to acquire an additional common share of Pretium for C$12.50 within 12 months and was priced at C$10.00. The Company received cash proceeds of $120,117,000 before transaction costs of $7,244,000. In the nine months ended September 30, 2011, the Company recognized a gain on partial disposal of associate of $39,266,000 (after tax gain of $34,687,000). The warrants issued are recognized at fair value and recorded as a liability (note 7). Following the closing of the secondary offering the Company’s ownership interest in Pretium was approximately 28.86%. The investment is accounted for as an equity investment.

   

On July 15, 2011, Pretium completed a 1,390,000 flow-through common shares private placement. The Company did not participate in this placement which resulted in a dilution of the Company’s interest to 28.39% and a dilution gain of $1,803,000 which was recorded in other income (expenses) (note 13).

   

The carrying amount of the investment in associate represents the fair value at initial recognition, plus the Company’s share of comprehensive income or loss. Share of loss of associate for the three and nine months ended September 30, 2011 was $624,000 (2010: $nil) and $4,616,000 (2010: $nil) respectively.

   
7.

WARRANT LIABILITY

   

On April 8, 2011 as part of the unit offering (note 6) the Company issued 5,750,000 common share purchase warrants of Pretium shares owned by the Company. Each warrant is exercisable at a price of C$12.50 for a period of 12 months. The Company initially recognized a warrant liability of $7,500,000, transaction costs of $453,000 were expensed, and this liability is recorded at fair value through profit and loss (“FVTPL”). For the three and nine months ended September 30, 2011, the Company recorded an unrealized loss upon re-measurement of the liability of $3,154,000 and $1,094,000 respectively.

   
8.

CURRENT AND DEFERRED INCOME TAX

   

Current tax payable of $28,902,000 as at September 30, 2011 includes an estimate of $15,126,000 for taxes payable from the sale of the Bowdens project (note 5). Additional taxes payable result from the receipt of the Aurcana convertible debenture (note 3) and from the disposal of the investment in associate and the conversion of the convertible notes into common shares of Pretium (note 6).

   

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

   

The deferred income tax asset of $17,326,000 as at September 30, 2011 relates to property, plant and equipment and has been recognized only to the extent management believe it is probable that future taxable income will be available against which the temporary differences can be utilized.

14 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

9.

CONVERTIBLE NOTES

   

In February 2008, the Company sold $138,000,000 in senior convertible unsecured notes (“Notes”) for net proceeds of $132,754,000 after payment of commissions and expenses related to the offering. The unsecured Notes mature on March 1, 2028 and bear an interest rate of 4.5% per annum, payable semi-annually. At initial recognition the value of the notes was allocated between the debt and the derivative components. The fair value of the debt portion was $99,144,000 and the fair value of the derivative was $38,856,000 upon inception. The debt component continues to be accreted to its maturity value using the effective interest rate method.

   

For the three and nine months ended September 30, 2011, the Company recorded an unrealized gain (loss) on the derivative of $8,584,000 (2010: ($2,704,800)) and $14,918,000 (2010: $9,645,000) respectively. The following assumptions were used to obtain the valuation:


    September 30
    2011
  Expected dividend yield (%) 0%
  Average risk-free interest rate (%) 2.66
  Expected life (years) 17
  Expected volatility (%) 72.5
  Implied yield on straight debt (%) 8.41

10.

SHARE CAPITAL AND SHARE-BASED COMPENSATION


  a)

Share capital

During the nine months ended September 30, 2010, the Company closed a public share offering of 6,729,000 common shares at a price of $17.00 per share, for aggregate gross proceeds of $114,389,000. After deducting underwriting fees and estimated offering expenses of $6,631,000, net proceeds were approximately $107,758,000.

  b)

Share-based compensation

The Company has an incentive plan, approved by the Company’s shareholders at its annual general meeting held on May 14, 2008 and amended on May 11, 2011, under which options to purchase common shares may be granted to directors, officers, employees and others at the discretion of the Board of Directors. The plan provides for the issuance of incentive options to acquire up to a total of 8.5% of the issued and outstanding common shares of the company. The exercise price of each option is set at the date of grant and shall not be less than the closing market price of the company’s stock on the award date.

The options can be granted for a maximum term of 7 years with vesting provisions determined by the Board of Directors. Currently, the vesting periods range up to three years. New shares from treasury are issued on the exercise of stock options.

The Company also has plans for deferred share units (“DSUs”), restricted share units (“RSUs”), and performance share units (“PSUs”).

15 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

10.

SHARE CAPITAL AND SHARE-BASED COMPENSATION (Cont’d)

   

During the nine months ended September 30, 2011, 418,500 options were granted to employees exercisable over a 7 year period at a weighted average exercise price of C$26.97 and average fair value of C$12.30. The option valuations were based on an average expected option life of 4.6 years, a risk free interest rate of 2.4%, a dividend yield of nil and an expected volatility of 55%.  In addition, 949,891 options were exercised at a weighted average exercise price of C$19.59. During the nine months ended September 30, 2010, 585,000 options were granted to an employee exercisable over a 10 year period at a strike price of C$17.52 and average fair value of C$9.21.

   

During the nine months ended September 30, 2011, 14,927 (2010: 29,498) DSUs were granted to non-executive directors, 77,800 RSUs were granted to employees, and 141,800 PSUs to senior executives. A total of 6,500 RSUs and 32,100 PSUs were forfeited.

   

The DSUs vest immediately and are redeemable in cash on the date the non-executive director ceases to be a director of the company. At September 30, 2011, there were 92,065 DSUs (2010: 80,461) outstanding with a fair value of $1,693,000 (2010: $1,602,000).

   

The RSUs vest over a three year period, and are cash-settled immediately upon vesting. At September 30, 2011, there were 71,300 RSUs outstanding with a fair value of C$19.27. The PSUs vest after a performance period of two to three years; the vesting of the award is based on the Company’s total shareholder return in comparison to its peer group, and awards range from 0% to 200% of initial PSUs granted. At September 30, 2011, there were 109,700 PSUs outstanding with fair values ranging from C$14.26 to C$16.43.

   

The share-based compensation expense, including all equity and cash-settled arrangements, recorded for the nine months period ended September 30, 2011 was $4,028,000 (September 30, 2010: $5,983,000) of which $nil (September 30, 2010: $207,000) was capitalized to exploration and development expenditures.

   
11.

OPERATING COSTS BY NATURE


  a)

Cost of sales


      Three Months Ended September 30     Nine Months Ended September 30  
      2011     2010     2011     2010  
    $    $    $    $   
  Cost of inventory   11,532     25,013     53,436     56,067  
  Depletion, depreciation and amortization   2,410     5,554     13,439     16,291  
  Export duties (1)   718     3,564     11,412     5,662  
      14,660     34,131     78,287     78,020  

  (1)

The Pirquitas mine has a fiscal stability agreement with the government of Argentina dating from 1998. In 2002, the government of Argentina implemented an export duty on concentrates that did not apply to companies with pre- existing fiscal stability agreements. In December 2007 the National Customs Authority of Argentina levied an export duty of approximately 10% on concentrates for projects with fiscal stability agreements predating 2002. The Company has been advised that the project is subject to this export duty despite rights under the fiscal stability agreement from 1998. The legality of the export duty has been challenged and is currently under review by the court in Argentina. In July 2010, the Company filed a claim in the provincial Argentina court for repayment of export duties paid to date and for an order to cease payment of the export duty until the matter is decided by the court. An order was granted effective September 29, 2010 to cease payment of the export duty pending the decision of the courts, and in April 2011 a government appeal against this order was denied.

16 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

11.

OPERATING COSTS BY NATURE (Cont’d)

As of September 30, 2011 the Pirquitas mine has paid $6,646,000 in duties, however despite the order to cease payment the Company has continued to accrue duties in full until the outcome of the claim is known with certainty. At September 30, 2011 the accrual totalled $12,289,000, and $9,449,000 has been included in cost of sales for the nine months ended September 30, 2011. If these duties are recovered the benefit will be recognized in the statement of earnings for the full amount in the period recovery becomes virtually certain.

  b)

General and administrative


      Three Months Ended September 30     Nine Months Ended September 30  
      2011     2010     2011     2010  
    $    $    $    $   
  Salaries and benefits   3,074     2,110     8,609     7,466  
  Share-based compensation   619     2,165     4,028     5,776  
  Travelling expense   362     352     1,216     709  
  Consulting and professional fees   503     353     1,333     1,960  
  Insurance expense   228     245     630     580  
  Depreciation and amortization   80     70     206     213  
  Other expenses   1,882     956     4,326     2,913  
      6,748     6,251     20,348     19,617  

12.

FINANCE INCOME AND EXPENSES


  a)

Interest earned and other finance income


      Three Months Ended September 30     Nine Months Ended September 30  
      2011     2010     2011     2010  
    $    $    $    $   
  Interest earned   236     192     1,353     400  
  Accretion earned on convertible debenture receivable   213     217     636     630  
  Total interest earned and other finance income   449     409     1,989     1,030  

  b)

Interest expense and other finance costs


      Three Months Ended September 30     Nine Months Ended September 30  
      2011     2010     2011     2010  
    $    $    $    $   
  Interest expense on convertible notes   (1,565 )   (1,566 )   (4,644 )   (4,645 )
  Accretion expense on convertible notes   (2,346 )   (2,113 )   (6,855 )   (6,111 )
  Accretion of close down and restoration provision   (399 )   (532 )   (1,207 )   (1,231 )
  Other interest expense   (19 )   (54 )   (160 )   (54 )
  Total interest expense and other finance costs   (4,329 )   (4,265 )   (12,866 )   (12,041 )

17 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

13.

OTHER INCOME (EXPENSES)


      Three Months Ended September 30     Nine Months Ended September 30  
      2011     2010     2011     2010  
    $    $    $    $   
                           
  Reversal of impairment of convertible debenture   -     -     2,400     -  
  Unrealized gain (loss) on financial instruments at FVTPL(1)   5,362     (2,766 )   13,477     9,237  
  Gain on sale of marketable securities   5,453     741     5,453     3,115  
  Write-off of mineral property costs   (4,514 )   -     (4,514 )   -  
  Gain on dilution of associate   1,803     -     1,803     -  
  Share of loss of associate   (624 )   -     (4,616 )   -  
  Miscellaneous expense   (92 )   -     (205 )   -  
      7,388     (2,025 )   13,798     12,352  

  (1)

Financial instruments held at FVTPL include the conversion option of the convertible debenture receivable (note 3), the warrant liability (note 7) and the share purchase option embedded in the convertible notes (note 9).


14.

OPERATING SEGMENTS

The Company has identifed its operating segments based on the information used by the President and Chief Executive Officer (who is considered to be the chief operating decision maker (“CODM”)) to manage the business. The Company primarily manages its business by looking at individual extractive projects and typically segregates them between production, development and exploration. For reporting purposes all exploration and development projects have been aggregated into a single reportable segment ‘exploration and development’ because they all have similar characteristics and none exceed the quantitative thresholds for individual disclosure. The only production property, Pirquitas, is considered a single operating segment which derives its revenues from the sale of silver and zinc concentrates. The corporate division only earns income that is considered incidental to the activities of the Company and therefore does not meet the definition of an operating segment.

The following reporting segments have been identified:

  • Pirquitas mine

  • Exploration and development properties

18 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

14.

OPERATING SEGMENTS (Cont’d)

The following is a summary of the carrying amounts of income or loss, and segment assets and liabilities by operating segment:

      Pirquitas Mine     Exploration and     Other     Total  
            Development     reconciling        
            Properties     items (i, ii)        
  Three months ended September 30, 2011                        
    $    $    $    $   
  Revenue from external customers   26,152     -     -     26,152  
                           
  Cost of inventory and export duties   (12,250 )   -     -     (12,250 )
  Depletion, depreciation and amortization   (2,410 )   -     -     (2,410 )
  Cost of sales   (14,660 )   -     -     (14,660 )
                           
  Income from mine operations   11,492     -     -     11,492  
                           
  Operating income (loss)   10,249     (333 )   (6,850 )   3,066  
  Income (loss) before income tax   7,510     46,552     (1,338 )   52,724  
                           
  Interest income earned and other finance income   -     -     449     449  
  Interest expense and other finance costs   (322 )   (29 )   (3,978 )   (4,329 )
  Write-off of mineral property costs   -     (4,514 )   -     (4,514 )
  Income tax recovery (expense)   (7,447 )   (17,438 )   (6,003 )   (30,888 )
                           
  As at September 30, 2011                        
  Total assets   516,208     234,937     498,425     1,249,570  
  Non-current assets   409,175     194,865     137,075     741,115  
  Total liabilities   (65,907 )   (23,737 )   (172,202 )   (261,846 )

      Pirquitas Mine     Exploration and     Other     Total  
            Development     reconciling        
  Three months ended September 30, 2010         Properties     items (i)        
    $    $    $    $   
  Revenue from external customers   41,557     -     -     41,557  
                           
  Cost of inventory and export duties   (28,577 )   -     -     (28,577 )
  Depletion, depreciation and amortization   (5,554 )   -     -     (5,554 )
  Cost of sales   (34,131 )   -     -     (34,131 )
                           
  Income from mine operations   7,426     -     -     7,426  
                           
  Operating income (loss)   7,499     (137 )   (6,356 )   1,006  
  Income (loss) before income tax   3,651     (97 )   (14,712 )   (11,158 )
                           
  Interest income earned and other finance income   -     -     409     409  
  Interest expense and other finance costs   (237 )   (84 )   (3,944 )   (4,265 )
  Income tax recovery   -     -     751     751  

19 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

14.

OPERATING SEGMENTS (Cont’d)


      Pirquitas Mine     Exploration and     Other     Total  
            Development     reconciling        
  Nine months ended September 30, 2011         Properties     items (i, ii)        
    $    $    $    $   
  Revenue from external customers   133,476     -     -     133,476  
  Cost of inventory and export duties   (64,848 )         -     (64,848 )
  Depletion, depreciation and amortization   (13,439 )         -     (13,439 )
  Cost of sales   (78,287 )   -     -     (78,287 )
                           
  Income from mine operations   55,189     -     -     55,189  
                           
  Operating income (loss)   51,190     (912 )   (20,576 )   29,702  
  Income (loss) before income tax   44,652     45,912     28,729     119,293  
                           
  Interest income earned and other finance income   -     -     1,989     1,989  
  Interest expense and other finance costs   (1,077 )   (87 )   (11,702 )   (12,866 )
  Write-off of mineral property costs   -     (4,514 )   -     (4,514 )
  Income tax recovery (expense)   (16,741 )   (17,193 )   (7,814 )   (41,748 )

      Pirquitas Mine     Exploration and     Other     Total  
            Development     reconciling        
  Nine months ended September 30, 2010         Properties     items (i)        
    $    $    $    $   
  Revenue from external customers   67,179     -     -     67,179  
                           
  Cost of inventory and export duties   (61,729 )   -     -     (61,729 )
  Depletion, depreciation and amortization   (16,291 )   -     -     (16,291 )
  Cost of sales   (78,020 )   -     -     (78,020 )
                           
  Loss from mine operations   (10,841 )   -     -     (10,841 )
                           
  Operating loss   (10,841 )   (297 )   (19,769 )   (30,907 )
  Income (loss) before income tax   (18,317 )   (451 )   (4,612 )   (23,380 )
                           
  Interest income earned and other finance income   -     -     1,030     1,030  
  Interest expense and other finance costs   (858 )   (162 )   (11,021 )   (12,041 )
  Income tax recovery (expense)   -     758     (547 )   211  

  (i)

Other reconciling items refer to items that are not reported as part of segment performance as they are managed on a group basis.

     
  (ii)

Includes the equity accounted investment in Pretium.

20 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

14.

OPERATING SEGMENTS (Cont’d)

Segment revenue by product

      September 30, 2011     September 30, 2010  
      %     %  
  Silver   94     100  
  Zinc   6     -  

Segment revenue by location of customer

100% of revenues were sold to a single customer which is based in Switzerland, and is the customer of the Pirquitas mine segment.

Non-current assets by location

      September 30, 2011     December 31, 2010  
    $    $   
  Canada   138,395     235,563  
  Argentina   430,352     397,447  
  Mexico   104,195     89,540  
  Peru   48,620     43,456  
  United States   10,717     10,419  
  Australia   -     19,970  
  Chile   8,836     9,541  
  Total   741,115     805,936  

15.

SUPPLEMENTAL CASH FLOW INFORMATION

During the three and nine months ended September 30, 2011 and 2010 the Company made the following cash payments for interest and taxes:

      Three Months Ended September 30     Nine Months Ended September 30  
      2011     2010     2011     2010  
    $    $    $    $   
  Interest paid   3,105     3,105     6,210     6,210  
  Taxes paid   1,510     -     14,195     -  
      4,615     3,105     20,405     6,210  

16.

RELATED PARTY TRANSACTIONS

During the period ended September 30, 2011, the Company recorded administrative, technical services and expense reimbursements of $179,000 (December 31, 2010 - $19,000) from companies related by common directors or officers including our equity accounted investee. At September 30, 2011, trade and other receivables include $257,000 (December 31, 2010 - $2,000) and trade and other payables include $329,000 (December 31, 2010 - $nil) with these related parties. Any amounts due from and payable to related parties are non-interest bearing and without specific terms of repayment. Any transactions for expense reimbursement with related parties are under normal business terms.

21 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

17.

TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

The accounting policies set out in these interim consolidated financial statements have been applied for the three and nine months ended September 30, 2011 and 2010.

The Company’s transition from Canadian GAAP to IFRS was on January 1, 2010 and the effect of this adoption on the Company’s opening IFRS balance sheet as at January 1, 2010, statement of financial position as at December 31, 2010 and income statement for the period ended December 31, 2010 is included in the notes to the unaudited interim financial statements for the three months ended March 31, 2011. The impact of the IFRS adoption on the previously reported Company’s shareholders’ equity position as at September 30, 2010 and comprehensive loss for the three and nine months ended September 30, 2010 is set out in the following tables and accompanying notes;

  a)

Reconciliation of shareholders’ equity as at September 30, 2010:


            September 30  
            2010  
          $   
  Total shareholders' equity reported under Canadian GAAP         624,460  
               
  Increase (decrease) net of tax in respect of:            
               
  Valuation of Pirquitas mine   (i)     (80,868 )
  Share-based compensation   (iii)     (52 )
  Functional currency   (iv)     6,667  
  Convertible notes   (v)     (7,945 )
  Deferred tax liabilities   (vi)     (6,721 )
               
  Total shareholders' equity reported under IFRS         535,541  

  b)

Reconciliation of comprehensive income (loss) for the three and nine months ended September 30, 2010:


            3 months ended     9 months ended  
            September 30     September 30  
            2010     2010  
          $    $   
  Total comprehensive loss as reported under Canadian GAAP         (2,722 )   (28,932 )
                     
  Increase (decrease) net of tax in respect of:                  
  Valuation of Pirquitas mine   (i)     1,040     3,150  
  Share-based compensation   (iii)     238     824  
  Functional currency   (iv)     2,973     1,634  
  Convertible notes   (v)     (2,892 )   9,140  
  Deferred tax liabilities   (vi)     1,300     (5,520 )
                     
  Total comprehensive loss as reported under IFRS         (63 )   (19,704 )

22 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

17.

TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d)


  c)

Explanations of the key differences between Canadian GAAP and IFRS giving rise to adjustments in the reconciliations

     
 

(i) Valuation of the Pirquitas mine

     
 

The Company elected under IFRS 1 to deem the fair value of the Pirquitas mine as cost at January 1, 2010. The fair value of the mine was determined to be approximately US$317 million following a discounted cash flow analysis using a discount rate of 10%. The resulting difference between the carrying value under Canadian GAAP and the deemed cost was charged to accumulated deficit.

     
 

In addition to the adjustment to the carrying value of the Pirquitas mine additional adjustments following the transition to IFRS were recorded. These relate to close down and restoration provisions for $720,000, capitalized interest $797,000 and deferred tax liabilities $20,262,000. The impacts of these adjustments on the carrying value of the Pirquitas mine at January 1, 2010 are detailed below:


      Canadian GAAP     
Transition to IFRS adjustment
    IFRS  
            Fair value as     Close down and     Capitalised              
            deemed cost of     restoration     borrowing     Deferred        
      January 1, 2010      Pirquitas     provision     costs     taxes     January 1, 2010  
            (i)     (ii)     (vi)     (vii)        
    $    $    $    $    $    $   
  Producing properties   180,018     (84,018 )   313     797     (20,262 )   76,848  
  Construction in progress   8,015                             8,015  
  Mining equipment   12,478                             12,478  
  Plant and equipment   219,305           407                 219,712  
  Other   222                             222  
  Total   420,038     (84,018 )   720     797     (20,262 )   317,275  

The lower carrying value of the producing property balance under IFRS also impacts the periodic depletion expense charged. Depletion is charged using the percentage of completion method based on the tonnage of ore mined as a ratio to the total ore expected to be mined over the life of the mine. The lower cost base of the asset has reduced depletion for the three and nine months ended September 30, 2010;

      Three months ended September 30     Nine months ended September 30  
      2010     2010  
               
  Cost of Sales   1,040     3,150  

23 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

17.

TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d)

(ii) Close down and restoration provision

Under Canadian GAAP asset retirement obligations for close down and decommissioning costs are measured at the initial date of recognition using a discounted cash flow analysis with the Company’s credit-adjusted risk free interest rate. The liability (and corresponding asset) is only re-measured in the event of changes in the amount or timing of cash flows required to settle the obligation.

IFRS (IAS 37) requires initial measurement of the obligation using a pre-tax discount rate that reflects the risk associated with the liability; furthermore the liability is required to be re-measured at each reporting date.

The Company elected to use the IFRS 1 transition exemption from full retrospective adjustment that would have been required under IFRIC 1.

For the three and nine month period ended September 30, 2010 no adjustment was recorded as it was insignificant.

(iii) Share-based compensation

The Company’s accounting policy for share based compensation under Canadian GAAP was broadly consistent with the requirements of IFRS, however, under IFRS 2 the Company is required to make adjustments to the compensation expense recorded for estimates of non-market vesting conditions, such as options that are not expected to vest i.e. forfeited. The initial estimation of non-market vesting conditions is not mandatory under Canadian GAAP. As a result the Company’s accounting policy choice was to make adjustments only when events occurred so that non-market vesting conditions were not met, such as when options were forfeited. The Company elected to apply the IFRS 1 transition exemption, whereby adjustments were only required to be made to options that had been granted after November 7, 2002 and had not vested at the date of transition to IFRS.

The Company estimated the amount of options that would not vest by using historical data, for the three and nine months ended September 30, 2010 the impact was a reduction to stock based compensation of $249,000 and $876,000 of which $238,000 and $824,000 was credited to the income statement and the balance of $11,000 and $52,000 was credited to mineral properties.

(iv) Functional currency and cumulative translation adjustment account

Under Canadian GAAP the Company determines whether a subsidiary is an integrated operation or a self-sustaining entity which determines the method of translation into the presentation currency of the Group. IFRS requires that an entity determine the functional currency of each subsidiary individually, prior to consolidation into the Group’s presentation currency.

24 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

17.

TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d)

The Company determined that certain subsidiaries had a functional currency other than the US dollar, which under Canadian GAAP had been classified as being integrated operations. Those subsidiaries under Canadian GAAP were consolidated using the temporal method (i.e. monetary assets and liabilities translated at the current rate and non-monetary assets and liabilities at historic exchange rates with gains or losses being charged to income), whereas under IFRS those entities with non US dollar functional currencies are translated into US dollars using the current rate method (whereby all assets and liabilities are translated using the reporting date exchange rates with any gains or losses being recorded in equity).

For the three and nine month period ended September 30, 2010 the impact was an increase in mineral properties of $2,973,000 and $1,634,000.

(v) Convertible notes

The Company issued US$138 million of convertible notes (“Notes”) in 2008. Under Canadian GAAP the Company accounted for the Notes as a split instrument allocating the value of the notes between the debt and equity components. The debt was valued using a discounted cash flow model, with the residual balance being allocated to equity. At initial recognition the transaction costs were allocated to the debt and equity components pro rata. The debt portion was designated as an ‘other liability’, those transaction costs allocated to the debt were expensed, those allocated to equity were treated as a reduction of the value of the equity component. Subsequently, the difference in carrying value of the debt and its final redemption amount was recognised as accretion expense in the income statement over the period to maturity using the effective interest rate method.

There are two GAAP differences in relation to this instrument. Firstly, under Canadian GAAP the conversion feature is considered to be an equity instrument, but under IFRS it is considered as an embedded derivative liability due to the fact that if the holder elects to exercise their conversion option, the instrument can be cash-settled at the option of the Company. Secondly, under Canadian GAAP the debt component of the instrument was designated as an ‘other liability’, and it was similarly designated under IFRS. However, under IFRS, transaction costs relating to an instrument that is designated as an ‘other liability’ must be netted against the carrying value of the instrument, whereas under Canadian GAAP the Company made an accounting policy election to expense those costs.

At initial recognition under IFRS, similar to Canadian GAAP, the fair value of the debt component and conversion option were estimated but under IFRS the conversion option was recognised as a derivative liability. Transaction costs incurred were allocated pro rata to the two components, again consistent with Canadian GAAP. For IFRS the debt has been designated as an ‘other liability’, which means that the instrument is recorded at amortized cost, net of transaction costs. Subsequently, the accounting is the same as Canadian GAAP whereby the instrument is accreted over an expected life of 5 years using the effective interest method.

The accretion expense each reporting period under IFRS is greater than under Canadian GAAP due to the lower value attributed to the debt portion upon initial recognition, due to the fact that transaction costs are netted against the carrying value of the debt. Differences in accretion expense have been charged to accumulated deficit at the date of transition.

Under IFRS the derivative liability is recognised as FVTPL so all transaction costs were expensed and the instrument is re-measured at each reporting period using a binomial tree approach.

25 | P a g e


Silver Standard Resources Inc.
Notes to Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2011
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

17.

TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (Cont’d)

The following table illustrates the differences in the income statement for the nine months ended September 30, 2010:

      Canadian GAAP     IFRS  
      Nine months ended     Nine months ended  
      September 30, 2010     September 30, 2010  
  Balance sheet impact $    $   
  Income statement impact            
  Interest expense   4,645     4,645  
  Interest accretion   5,600     5,928  
  Unrealised (gain) or loss on derivative            
  instruments   -     (9,645 )

(vi) Deferred income tax

Under Canadian GAAP deferred tax liabilities were calculated following the acquisition of various mineral property assets. IFRS does not allow the recognition of deferred tax liabilities for temporary differences that arise in a transaction other than a business combination that at the time of the transaction affects neither the taxable nor accounting profit or loss. As a result deferred tax liabilities recognized on asset acquisitions under Canadian GAAP have been derecognized under IFRS and credited to accumulated deficit.

Non-monetary assets and liabilities of an entity are measured in its functional currency. If an entity’s taxable income or loss is determined in a different currency, changes in exchange rate will give rise to a temporary difference that results in a deferred tax asset or liability under IAS 12. Effectively, the carrying value of the non-monetary asset/liability (as measured in the functional currency based on historical exchange rates) is translated from the functional currency to the local currency at the current rate and compared to the tax value in the local currency. The resulting temporary difference (measured in the local currency) is multiplied by the appropriate tax rate to arrive at the deferred tax balance in the local currency. This deferred tax balance is then translated into the functional currency at the current rate and charged/credited to profit or loss.

The above result is different from Canadian GAAP which prohibits the recognition of deferred taxes for temporary differences caused by exchange gains and losses related to foreign non-monetary assets and liabilities that are remeasured into the functional currency using historical exchange rates.

The impact on retained earnings as a result of these differences in the three and nine months ended September 30, 2010 was an increase of $1,300,000 and a reduction of $5,520,000 respectively.

  d)

Adjustments to Statement of Cash Flows

     
 

The transition from Canadian GAAP to IFRS had no significant impact on cash flows generated by the Company.

26 | P a g e