|
|
|
INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
|
FOR THE SIX MONTHS ENDED |
|
June 30, 2010 (UNAUDITED) |
|
MANAGEMENTS COMMENTS ON
UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements of the
Company have been prepared by and are the
responsibility of the Companys
management.
|
Suite 1805, 925 West Georgia Street, Vancouver, B.C.
Canada V6C 3L2 |
Phone: 604.688.3033 | Fax: 604.639.8873 | Toll Free:
1.866.529.2807 | Email: info@firstmajestic.com |
www.firstmajestic.com |
FIRST MAJESTIC SILVER CORP. |
INTERIM CONSOLIDATED BALANCE SHEETS |
AS AT JUNE 30, 2010 AND DECEMBER 31, 2009 |
(Unaudited,
expressed in Canadian dollars) |
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
ASSETS |
|
CURRENT ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
|
15,850,386 |
|
|
5,889,793 |
|
Accounts receivable |
|
2,396,683 |
|
|
2,174,848 |
|
Other receivables (Note 4) |
|
6,755,514 |
|
|
6,624,200 |
|
Inventories (Note 5) |
|
5,801,058 |
|
|
3,812,460 |
|
Prepaid expenses and other (Note 6) |
|
2,250,495 |
|
|
1,467,759 |
|
|
|
33,054,136 |
|
|
19,969,060 |
|
MINING INTERESTS (Note 7) |
|
|
|
|
|
|
Producing properties |
|
62,032,205 |
|
|
57,144,477 |
|
Exploration properties
|
|
112,052,069 |
|
|
109,255,696 |
|
Plant and equipment |
|
67,783,258 |
|
|
60,388,530 |
|
|
|
241,867,532 |
|
|
226,788,703 |
|
CORPORATE OFFICE EQUIPMENT (Note 7) |
|
521,173 |
|
|
409,281 |
|
DEPOSITS ON LONG-TERM ASSETS (Note
10) |
|
1,971,597 |
|
|
4,306,419 |
|
|
|
277,414,438 |
|
|
251,473,463 |
|
|
|
|
|
|
|
|
LIABILITIES |
|
CURRENT LIABILITIES |
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
14,917,025 |
|
|
11,202,381 |
|
Unearned revenue on silver bullion sales
|
|
22,857 |
|
|
158,147 |
|
Current portion of debt facilities (Note 9) |
|
2,045,440 |
|
|
1,546,612 |
|
Current portion of capital lease
obligations (Note 14) |
|
1,372,510 |
|
|
2,139,352 |
|
Income and other taxes payable |
|
264,457 |
|
|
117,844 |
|
|
|
18,622,289 |
|
|
15,164,336 |
|
FUTURE INCOME TAXES |
|
31,968,744 |
|
|
28,417,011 |
|
CAPITAL LEASE OBLIGATIONS (Note 14)
|
|
368,761 |
|
|
668,284 |
|
LONG-TERM PORTION OF DEBT FACILITIES (Note 9) |
|
2,881,015 |
|
|
3,213,487 |
|
OTHER LONG TERM LIABILITIES (Note
16) |
|
774,970 |
|
|
753,657 |
|
ASSET RETIREMENT OBLIGATIONS (Note 15) |
|
4,660,588 |
|
|
4,336,088 |
|
|
|
59,276,367 |
|
|
52,552,863 |
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY |
|
SHARE CAPITAL (Note 11(a)) |
|
245,178,244 |
|
|
244,241,006 |
|
SHARE CAPITAL TO BE ISSUED (Note
11(d)) |
|
276,495 |
|
|
276,495 |
|
CONTRIBUTED SURPLUS |
|
28,931,617 |
|
|
27,808,671 |
|
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
|
(34,984,538 |
) |
|
(40,238,914 |
) |
DEFICIT |
|
(21,263,747 |
) |
|
(33,166,658 |
) |
|
|
218,138,071 |
|
|
198,920,600 |
|
|
|
277,414,438 |
|
|
251,473,463 |
|
CONTINUING OPERATIONS (Note 1)
CONTINGENT LIABILITIES (Note
17)
COMMITMENTS (Note 18)
SUBSEQUENT EVENTS (Note 21)
APPROVED BY THE BOARD OF DIRECTORS
Keith
Neumeyer (signed) |
Director |
|
Douglas Penrose (signed) |
Director
|
The accompanying notes are an integral part
of these consolidated financial statements
FIRST MAJESTIC SILVER CORP. |
INTERIM CONSOLIDATED STATEMENTS OF INCOME |
FOR THE PERIODS ENDED JUNE 30, 2010 AND 2009 |
(Unaudited,
expressed in Canadian dollars, except share amounts)
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (Note 12) |
|
28,963,285 |
|
|
13,024,877 |
|
|
47,180,899 |
|
|
27,411,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
13,434,747 |
|
|
9,459,868 |
|
|
22,408,604 |
|
|
17,758,681 |
|
Depletion, depreciation and amortization |
|
2,380,032 |
|
|
1,772,464 |
|
|
4,178,023 |
|
|
3,201,598 |
|
Accretion of reclamation obligation (Note
15) |
|
94,201 |
|
|
117,171 |
|
|
187,921 |
|
|
233,210 |
|
Mine operating earnings |
|
13,054,305 |
|
|
1,675,374 |
|
|
20,406,351 |
|
|
6,218,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
2,406,842 |
|
|
2,114,312 |
|
|
4,393,465 |
|
|
3,932,315 |
|
Stock-based compensation |
|
643,964 |
|
|
800,808 |
|
|
1,344,143 |
|
|
1,697,548 |
|
|
|
3,050,806 |
|
|
2,915,120 |
|
|
5,737,608 |
|
|
5,629,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
10,003,499 |
|
|
(1,239,746 |
) |
|
14,668,743 |
|
|
588,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other expenses |
|
(683,210 |
) |
|
(404,765 |
) |
|
(1,245,649 |
) |
|
(764,971 |
) |
Investment and other income |
|
635,082 |
|
|
222,173 |
|
|
621,933 |
|
|
512,017 |
|
Foreign exchange gain (loss) |
|
344,075 |
|
|
840,958 |
|
|
416,100 |
|
|
(111,908 |
) |
Income (loss) before taxes |
|
10,299,446 |
|
|
(581,380 |
) |
|
14,461,127 |
|
|
223,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense - current |
|
45,411 |
|
|
113,532 |
|
|
63,972 |
|
|
171,582 |
|
Income tax expense (recovery) - future |
|
1,366,919 |
|
|
(1,731,328 |
) |
|
2,494,244 |
|
|
(1,924,160 |
) |
|
|
1,412,330 |
|
|
(1,617,796 |
) |
|
2,558,216 |
|
|
(1,752,578 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME FOR THE PERIOD |
|
8,887,116 |
|
|
1,036,416 |
|
|
11,902,911 |
|
|
1,976,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER COMMON SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
BASIC |
$ |
0.10 |
|
$ |
0.01 |
|
$ |
0.13 |
|
$ |
0.02 |
|
DILUTED
|
$ |
0.09 |
|
$ |
0.01 |
|
$ |
0.13 |
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC |
|
92,804,715 |
|
|
82,341,636 |
|
|
92,758,113 |
|
|
79,387,259 |
|
DILUTED
|
|
95,076,336 |
|
|
99,426,674 |
|
|
94,421,176 |
|
|
96,472,297 |
|
The accompanying notes are an integral part
of these consolidated financial statements
FIRST MAJESTIC SILVER CORP. |
INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
AND COMPREHENSIVE INCOME (LOSS) |
FOR THE PERIODS ENDED JUNE 30, 2010 AND 2009 |
(Unaudited,
expressed in Canadian dollars, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive |
|
|
|
|
|
Total |
|
|
|
|
|
|
Share Capital |
|
|
Contributed |
|
|
Income
(Loss) |
|
|
|
|
|
AOCI |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
To be issued |
|
|
Surplus |
|
|
("AOCI") (1) |
|
|
Deficit |
|
|
and Deficit |
|
|
Total |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2008 |
|
73,847,810 |
|
|
196,648,345 |
|
|
276,495 |
|
|
23,297,258 |
|
|
(23,216,390 |
) |
|
(39,476,883 |
) |
|
(62,693,273 |
) |
|
157,528,825 |
|
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,976,113 |
|
|
1,976,113 |
|
|
1,976,113 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
124,630 |
|
|
- |
|
|
124,630 |
|
|
124,630 |
|
Unrealized gain on
marketable securities |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
750 |
|
|
- |
|
|
750 |
|
|
750 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,101,493 |
|
|
2,101,493 |
|
Shares issued for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options |
|
6,250 |
|
|
7,938 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7,938 |
|
Public offering, net of
issue costs (Note 11(a)(i)) |
|
8,487,576 |
|
|
18,837,183 |
|
|
- |
|
|
848,758 |
|
|
- |
|
|
- |
|
|
- |
|
|
19,685,941 |
|
Stock option expense, net of deferred
compensation |
|
- |
|
|
- |
|
|
- |
|
|
1,697,548 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,697,548 |
|
Transfer of contributed surplus upon exercise of stock
options |
|
- |
|
|
2,950 |
|
|
- |
|
|
(2,950 |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Balance at June 30, 2009 |
|
82,341,636 |
|
|
215,496,416 |
|
|
276,495 |
|
|
25,840,614 |
|
|
(23,091,010 |
) |
|
(37,500,770 |
) |
|
(60,591,780 |
) |
|
181,021,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
92,648,744 |
|
|
244,241,006 |
|
|
276,495 |
|
|
27,808,671 |
|
|
(40,238,914 |
) |
|
(33,166,658 |
) |
|
(73,405,572 |
) |
|
198,920,600 |
|
Net income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
11,902,911 |
|
|
11,902,911 |
|
|
11,902,911 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
5,146,526 |
|
|
- |
|
|
5,146,526 |
|
|
5,146,526 |
|
Unrealized gain on marketable
securities |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
107,850 |
|
|
- |
|
|
107,850 |
|
|
107,850 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,157,287 |
|
|
17,157,287 |
|
Shares issued for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options |
|
277,500 |
|
|
622,436 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
622,436 |
|
Exercise of warrants |
|
25,000 |
|
|
82,500 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
82,500 |
|
Stock option expense during
the period |
|
- |
|
|
- |
|
|
- |
|
|
1,355,248 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,355,248 |
|
Transfer of contributed surplus upon exercise of stock
options and warrants |
|
- |
|
|
232,302 |
|
|
- |
|
|
(232,302 |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Balance at June 30, 2010 |
|
92,951,244 |
|
|
245,178,244 |
|
|
276,495 |
|
|
28,931,617 |
|
|
(34,984,538 |
) |
|
(21,263,747 |
) |
|
(56,248,285 |
) |
|
218,138,071 |
|
(1) |
AOCI consists of the cumulative translation adjustment on
self sustaining subsidiaries which primarily affects the mining interests,
except for the unrealized gain on marketable securities classified as
"available for sale". |
The accompanying notes are an integral part
of these consolidated financial statements
FIRST MAJESTIC SILVER CORP. |
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS |
FOR THE PERIODS ENDED JUNE 30, 2010 AND 2009 |
(Unaudited,
expressed in Canadian dollars) |
|
|
Three Months Ended June 30 |
|
|
Six Months Ended June 30 |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period |
|
8,887,116 |
|
|
1,036,416 |
|
|
11,902,911 |
|
|
1,976,113 |
|
Adjustment for items not affecting cash |
|
|
|
|
|
|
|
|
|
|
|
|
Depletion, depreciation and amortization |
|
2,380,032 |
|
|
1,772,464 |
|
|
4,178,023 |
|
|
3,201,598 |
|
Stock-based compensation |
|
643,964 |
|
|
800,808 |
|
|
1,344,143 |
|
|
1,697,548 |
|
Accretion of reclamation obligation |
|
94,201 |
|
|
117,171 |
|
|
187,921 |
|
|
233,210 |
|
Other income from derivative
financial instruments |
|
(634,501 |
) |
|
(212,380 |
) |
|
(646,810 |
) |
|
(479,197 |
) |
Loss (gain) on sale of marketable securities |
|
(15,969 |
) |
|
- |
|
|
24,501 |
|
|
- |
|
Future income tax provision
(recovery) |
|
1,366,919 |
|
|
(1,731,481 |
) |
|
2,494,244 |
|
|
(1,949,967 |
) |
Unrealized foreign exchange loss (gain) and other |
|
505,866 |
|
|
(1,310,042 |
) |
|
52,117 |
|
|
(1,004,365 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,227,628 |
|
|
472,956 |
|
|
19,537,050 |
|
|
3,674,940 |
|
Net change in non-cash working capital
items |
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable and other
receivables |
|
(637,300 |
) |
|
(662,399 |
) |
|
(218,943 |
) |
|
(266,919 |
) |
Decrease (Increase) in inventories
|
|
(1,912,605 |
) |
|
2,192,939 |
|
|
(1,988,599 |
) |
|
1,656,806 |
|
Decrease (increase) in prepaid expenses and other |
|
(122,081 |
) |
|
(1,722,418 |
) |
|
(393,220 |
) |
|
(2,202,403 |
) |
Increase (decrease) in accounts
payable and accrued liabilities |
|
1,963,958 |
|
|
(496,077 |
) |
|
1,459,600 |
|
|
(2,834,288 |
) |
Decrease in unearned revenue |
|
(105,632 |
) |
|
(336,122 |
) |
|
(135,290 |
) |
|
(68,250 |
) |
Increase (decrease) in taxes payable
|
|
88,689 |
|
|
(14,851 |
) |
|
146,613 |
|
|
(172,875 |
) |
Decrease in vendor liability on mineral property |
|
- |
|
|
(370,521 |
) |
|
- |
|
|
(721,081 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,502,657 |
|
|
(936,493 |
) |
|
18,407,211 |
|
|
(934,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Additions to plant and equipment (net of
accruals) |
|
(3,034,609 |
) |
|
(5,888,016 |
) |
|
(4,388,141 |
) |
|
(7,473,675 |
) |
Expenditures on mineral property interests (net of
accruals) |
|
(2,580,792 |
) |
|
(3,174,554 |
) |
|
(5,990,412 |
) |
|
(5,022,028 |
) |
Realized gain on derivative financial
instruments |
|
1,076,805 |
|
|
- |
|
|
646,810 |
|
|
- |
|
Proceeds from sale of marketable securities |
|
38,641 |
|
|
- |
|
|
68,171 |
|
|
- |
|
Net proceeds from pre-commercial operation
|
|
- |
|
|
- |
|
|
2,101,124 |
|
|
- |
|
Decrease (increase) of deposits on long term assets |
|
(33,839 |
) |
|
380,708 |
|
|
(498,170 |
) |
|
- |
|
Investment in marketable securities |
|
- |
|
|
- |
|
|
(25,000 |
) |
|
- |
|
Decrease in silver futures contract deposits |
|
- |
|
|
281,335 |
|
|
- |
|
|
969,628 |
|
Increase in restricted cash securitizing
vendor liability |
|
- |
|
|
- |
|
|
- |
|
|
(545,522 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,533,794 |
) |
|
(8,400,527 |
) |
|
(8,085,618 |
) |
|
(12,071,597 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares and warrants, net of issue costs
|
|
530,438 |
|
|
(19,798 |
) |
|
704,938 |
|
|
19,693,879 |
|
Payment of capital lease obligations |
|
(493,887 |
) |
|
(678,606 |
) |
|
(1,153,455 |
) |
|
(1,061,074 |
) |
Prepayment facility, net of repayments |
|
(249,326 |
) |
|
- |
|
|
498,828 |
|
|
- |
|
Payment of debt facilities |
|
(432,152 |
) |
|
- |
|
|
(432,152 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(644,927 |
) |
|
(698,404 |
) |
|
(381,841 |
) |
|
18,632,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS |
|
7,323,936 |
|
|
(10,035,424 |
) |
|
9,939,752 |
|
|
5,627,138 |
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH HELD IN FOREIGN
CURRENCY |
|
48,112 |
|
|
5,891 |
|
|
20,841 |
|
|
6,145 |
|
CASH AND CASH EQUIVALENTS - BEGINNING OF
THE PERIOD |
|
8,478,338 |
|
|
33,086,939 |
|
|
5,889,793 |
|
|
17,424,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - END OF PERIOD
|
|
15,850,386 |
|
|
23,057,406 |
|
|
15,850,386 |
|
|
23,057,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS IS COMPRISED OF:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
10,824,836 |
|
|
8,487,949 |
|
|
10,824,836 |
|
|
8,487,949 |
|
Short term deposits |
|
5,025,550 |
|
|
83,698 |
|
|
5,025,550 |
|
|
83,698 |
|
Restricted cash |
|
- |
|
|
14,485,759 |
|
|
- |
|
|
14,485,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,850,386 |
|
|
23,057,406 |
|
|
15,850,386 |
|
|
23,057,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
163,890 |
|
|
233,402 |
|
|
408,051 |
|
|
275,770 |
|
Income taxes paid |
|
32,055 |
|
|
- |
|
|
322,870 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH FINANCING AND INVESTING ACTIVITIES
(NOTE 19) |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of these consolidated financial statements
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
1. |
DESCRIPTION OF BUSINESS AND CONTINUING
OPERATIONS |
First Majestic Silver Corp. (the Company or First Majestic)
is in the business of production, development, exploration, and acquisition of
mineral properties with a focus on silver in Mexico. The Companys shares and
warrants trade on the Toronto Stock Exchange under the symbols FR and
FR.WT.B, respectively.
These consolidated financial statements have been prepared on
the going concern basis which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Companys
ability to continue as a going concern is dependent on the price of silver in
global commodity markets, and on maintaining profitable operations or obtaining
sufficient funds from alternative sources as required to augment operations and
for ongoing capital developments. If the Company were unable to continue as a
going concern, material adjustments may be required to the carrying value of
assets and liabilities and the balance sheet classifications used.
The consolidated financial statements of the Company have been
prepared by management in accordance with Canadian generally accepted accounting
principles (GAAP). These interim financial statements do not contain all the
information required by GAAP for annual financial statements and should be read
in conjunction with the Companys latest audited consolidated financial
statements for the year ended December 31, 2009.
The consolidated financial statements include the accounts of
the Company and its direct wholly-owned subsidiaries: Corporación First
Majestic, S.A. de C.V. (CFM), First Silver Reserve Inc. (First Silver) and
Normabec Mining Resources Ltd. (Normabec) as well as its indirect wholly-owned
subsidiaries: First Majestic Plata, S.A. de C.V. (First Majestic Plata),
Minera El Pilon, S.A. de C.V. (El Pilon), Minera La Encantada, S.A. de C.V.
(La Encantada), Majestic Services S.A. de C.V. (Majestic Services), Minera
Real Bonanza, S.A. de C.V. (MRB) and Servicios Minero-Metalurgicos e
Industriales, S.A. de C.V. (Servicios). First Silver underwent a wind up and
distribution of its assets and liabilities to the Company in December 2007 but
First Silver has not been dissolved for legal purposes pending the outcome of
litigation described in Note 8. Intercompany balances and transactions are
eliminated on consolidation.
3. |
SIGNIFICANT CHANGES IN ACCOUNTING
POLICIES |
Change in Accounting Policy and Future Accounting
Pronouncements
Business Combinations, Consolidations and Non-controlling
interests
The CICA has approved new Handbook Section 1582, Business
Combinations, Section 1601 Consolidations and Section 1602 Non-controlling
Interests to harmonize with International Financial Reporting Standards
(IFRS). These new sections will be effective for years beginning on or after
January 1, 2011, with early adoption permitted. Section 1582 specifies a number
of changes including: an expanded definition of a business, a requirement to
measure all business acquisitions at fair value, a requirement to measure
non-controlling interests at fair value, and a requirement to recognize
acquisition related costs as expenses. Section 1601 establishes the standards
for preparing consolidated financial statements. Section 1602 specifies that
non-controlling interests be treated as a separate component of equity, not as a
liability or other item outside of equity. The Company has adopted these new
standards for the period ended June 30, 2010 and it has not had a material
impact on the Company.
International Financial Reporting Standards (IFRS)
In 2006, the Canadian Accounting Standards Board (AcSB)
published a strategic plan that will significantly affect financial reporting
requirements for Canadian companies. The AcSB strategic plan outlines
convergence of Canadian GAAP with IFRS over an expected five-year transitional
period. In February 2008, the AcSB announced that 2011 is the changeover date
for public companies to commence using IFRS, replacing Canadas own GAAP. The
transition date is January 1, 2011, and relates to interim and annual financial
statements on or after January 1, 2011. The transition will require the
restatement for comparative purposes of amounts reported by the Company for all
reporting periods beginning after January 1, 2010.
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
Details of the components of other receivables are as
follows:
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
$ |
|
|
$ |
|
Value added taxes recoverable |
|
2,045,641 |
|
|
4,066,074 |
|
Other taxes and value added taxes on accounts payable |
|
4,200,517 |
|
|
2,072,442 |
|
Loan receivable from supplier |
|
316,677 |
|
|
478,824 |
|
Interest
receivable and other |
|
192,679 |
|
|
6,860 |
|
|
|
6,755,514 |
|
|
6,624,200 |
|
Inventories consist of the following:
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
$ |
|
|
$ |
|
Silver coins and bullion including in
process shipments |
|
522,692 |
|
|
273,262 |
|
Finished product - doré and concentrates |
|
430,990 |
|
|
343,990 |
|
Ore in process |
|
1,026,003 |
|
|
463,549 |
|
Stockpile |
|
853,884 |
|
|
387,836 |
|
Materials and supplies |
|
2,967,489 |
|
|
2,343,823 |
|
|
|
5,801,058 |
|
|
3,812,460 |
|
The amounts of inventory recognized as expenses during the
period are equivalent to the cost of sales for the respective periods.
6. |
PREPAID EXPENSES AND OTHER
|
Details of prepaid expenses and other are as follows:
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
$ |
|
|
$ |
|
Prepayments to suppliers and contractors
|
|
1,514,311 |
|
|
865,298 |
|
Deposits |
|
250,627 |
|
|
215,036 |
|
Marketable securities |
|
485,557 |
|
|
387,425 |
|
|
|
2,250,495 |
|
|
1,467,759 |
|
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
7. |
MINING INTERESTS AND PLANT AND EQUIPMENT
|
Mining interests and plant and equipment, net of accumulated
depreciation, depletion and amortization, are as follows:
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
Depreciation, |
|
|
|
|
|
|
|
|
Depreciation, |
|
|
|
|
|
|
|
|
|
Depletion and |
|
|
Net Book |
|
|
|
|
|
Depletion and |
|
|
Net Book |
|
|
|
Cost |
|
|
Amortization |
|
|
Value |
|
|
Cost |
|
|
Amortization |
|
|
Value |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Mining properties |
|
192,959,326 |
|
|
18,875,052 |
|
|
174,084,274 |
|
|
183,585,673 |
|
|
17,185,500 |
|
|
166,400,173 |
|
Plant and
equipment |
|
78,886,829 |
|
|
11,103,571 |
|
|
67,783,258 |
|
|
69,026,387 |
|
|
8,637,857 |
|
|
60,388,530 |
|
|
|
271,846,155 |
|
|
29,978,623 |
|
|
241,867,532 |
|
|
252,612,060 |
|
|
25,823,357 |
|
|
226,788,703 |
|
A summary of the net book value of mining properties is as
follows:
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
Depletion |
|
|
|
|
|
|
|
|
Depletion |
|
|
|
|
|
|
|
|
|
and |
|
|
Net Book |
|
|
|
|
|
and |
|
|
Net Book |
|
|
|
Cost |
|
|
Amortization |
|
|
Value |
|
|
Cost |
|
|
Amortization |
|
|
Value |
|
MEXICO |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Producing properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
La Encantada (a) |
|
15,148,790 |
|
|
3,040,538 |
|
|
12,108,252 |
|
|
13,055,900 |
|
|
2,886,830 |
|
|
10,169,070 |
|
La Parrilla (b) |
|
25,232,160 |
|
|
3,480,989 |
|
|
21,751,171 |
|
|
22,371,850 |
|
|
3,009,041 |
|
|
19,362,809 |
|
San Martin (c) |
|
40,526,307 |
|
|
12,353,525 |
|
|
28,172,782 |
|
|
38,902,227 |
|
|
11,289,629 |
|
|
27,612,598 |
|
|
|
80,907,257 |
|
|
18,875,052 |
|
|
62,032,205 |
|
|
74,329,977 |
|
|
17,185,500 |
|
|
57,144,477 |
|
Exploration properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
La Encantada (a) |
|
2,679,019 |
|
|
- |
|
|
2,679,019 |
|
|
2,467,451 |
|
|
- |
|
|
2,467,451 |
|
La Parrilla (b) |
|
7,886,775 |
|
|
- |
|
|
7,886,775 |
|
|
7,625,168 |
|
|
- |
|
|
7,625,168 |
|
San Martin (c) |
|
68,705,647 |
|
|
- |
|
|
68,705,647 |
|
|
65,931,244 |
|
|
- |
|
|
65,931,244 |
|
Del Toro (d) |
|
12,290,066 |
|
|
- |
|
|
12,290,066 |
|
|
11,855,627 |
|
|
- |
|
|
11,855,627 |
|
Real de Catorce (e) |
|
20,490,562 |
|
|
- |
|
|
20,490,562 |
|
|
21,376,206 |
|
|
- |
|
|
21,376,206 |
|
|
|
112,052,069 |
|
|
- |
|
|
112,052,069 |
|
|
109,255,696 |
|
|
- |
|
|
109,255,696 |
|
|
|
192,959,326 |
|
|
18,875,052 |
|
|
174,084,274 |
|
|
183,585,673 |
|
|
17,185,500 |
|
|
166,400,173 |
|
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
(1) |
|
7. |
MINING INTERESTS AND PLANT AND EQUIPMENT
(continued) |
A summary of plant and equipment is as follows:
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
|
|
Cost |
|
|
Depreciation |
|
|
Value |
|
|
Cost |
|
|
Depreciation |
|
|
Value |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
La Encantada Silver Mine |
|
49,929,614 |
|
|
3,093,139 |
|
|
46,836,475 |
|
|
42,001,694 |
|
|
1,954,699 |
|
|
40,046,995 |
|
La Parrilla Silver Mine |
|
18,089,330 |
|
|
4,655,955 |
|
|
13,433,375 |
|
|
17,228,300 |
|
|
3,792,818 |
|
|
13,435,482 |
|
San Martin Silver Mine |
|
10,822,899 |
|
|
3,347,154 |
|
|
7,475,745 |
|
|
9,751,407 |
|
|
2,889,290 |
|
|
6,862,117 |
|
Real de Catorce
Silver Project |
|
44,986
|
|
|
7,323
|
|
|
37,663
|
|
|
44,986
|
|
|
1,050
|
|
|
43,936
|
|
Used in Mining Operations |
|
78,886,829 |
|
|
11,103,571 |
|
|
67,783,258 |
|
|
69,026,387 |
|
|
8,637,857 |
|
|
60,388,530 |
|
Corporate office
equipment |
|
989,307 |
|
|
468,134 |
|
|
521,173 |
|
|
767,782 |
|
|
358,501 |
|
|
409,281 |
|
|
|
79,876,136 |
|
|
11,571,705 |
|
|
68,304,431 |
|
|
69,794,169 |
|
|
8,996,358 |
|
|
60,797,811 |
|
Details of plant and equipment and corporate office equipment
by specific assets are as follows:
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
|
|
|
|
Accumulated |
|
|
Net Book |
|
|
|
Cost |
|
|
Depreciation |
|
|
Value |
|
|
Cost |
|
|
Depreciation |
|
|
Value |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Land |
|
2,288,811 |
|
|
- |
|
|
2,288,811 |
|
|
2,279,494 |
|
|
- |
|
|
2,279,494 |
|
Automobile |
|
600,723 |
|
|
247,428 |
|
|
353,295 |
|
|
401,056 |
|
|
204,920 |
|
|
196,136 |
|
Buildings |
|
10,666,721 |
|
|
825,005 |
|
|
9,841,716 |
|
|
5,918,355 |
|
|
578,177 |
|
|
5,340,178 |
|
Machinery and equipment |
|
61,483,133 |
|
|
9,296,977 |
|
|
52,186,156 |
|
|
26,154,678 |
|
|
7,311,470 |
|
|
18,843,208 |
|
Computer equipment |
|
886,972 |
|
|
387,689 |
|
|
499,283 |
|
|
560,018 |
|
|
279,783 |
|
|
280,235 |
|
Office equipment |
|
623,764 |
|
|
618,173 |
|
|
5,591 |
|
|
577,215 |
|
|
460,070 |
|
|
117,145 |
|
Leasehold improvements |
|
320,304 |
|
|
196,433 |
|
|
123,871 |
|
|
320,304 |
|
|
161,938 |
|
|
158,366 |
|
Construction in
progress (1)(2) |
|
3,005,708 |
|
|
- |
|
|
3,005,708 |
|
|
33,583,049 |
|
|
- |
|
|
33,583,049 |
|
|
|
79,876,136 |
|
|
11,571,705 |
|
|
68,304,431 |
|
|
69,794,169 |
|
|
8,996,358 |
|
|
60,797,811 |
|
(1) |
Construction in progress includes $633,902 relating to La
Encantada, $442,456 relating to La Parrilla and $1,929,350 relating to San
Martin (December 31, 2009 - $31,283,949 relating to La Encantada, $535,604
relating to La Parrilla and $1,763,496 relating to San Martin). |
|
|
(2) |
On April 1, 2010, the La Encantada mill expansion project
achieved commercial stage of production. Prior to April 1, 2010, the net
amount of revenues less production costs of $2,770,596 (December 31, 2009
- $496,371) in connection with the sale of 316,680 silver equivalent
ounces (December 31, 2009 54,277 silver equivalent ounces) of
precipitates during the pre- operating period from November 19, 2009 to
March 31, 2010 were offset to construction in progress. The net proceeds
on the sale of silver precipitates for the quarter ended March 31, 2010
was $2,274,225, relating to 262,403 pre-commercial ounces of silver
produced in the quarter ended March 31, 2010. |
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
7. |
MINING INTERESTS AND PLANT AND EQUIPMENT
(continued) |
|
|
(a) |
La Encantada Silver Mine, Coahuila State
|
The La Encantada Silver Mine is a producing underground mine
located in Northern Mexico accessible via a 1.5 hour flight from Torreon,
Coahuila. The mine is comprised of 4,076 hectares of mining rights and surface
land ownership of 1,343 hectares. The closest town, Muzquiz, is 225 km away via
a combination of paved and unpaved road. The La Encantada Silver Mine consists
of a 3,500 tonnes per day cyanidation plant, a 1,000 tonnes per day flotation
plant, an airstrip, and a village with 180 houses as well as administrative
offices. The Company owns 100% of the La Encantada Silver Mine. On April 1,
2010, the mill expansion project achieved commercial stage production and all
revenues and costs from that date are recorded in the mine operating earnings.
During the six month period ended June 30, 2010, $8.3 million in expenditures
were capitalized at La Encantada in connection with the mill expansion
project.
(b) |
La Parrilla Silver Mine, Durango State
|
The La Parrilla Silver Mine is a system of connected
underground producing mines consisting of the La Rosa/Rosarios/La Blanca, the
San Marcos Mine and the Quebradillas Mine. La Parrilla is located approximately
65 km southeast of the city of Durango, in the State of Durango, Mexico. Located
at the mine are: mining equipment, a 425 tonnes per day cyanidation plant, a 425
tonnes per day flotation plant and mining concessions covering an area of 53,000
hectares of which the Company owns 100 hectares of surface rights. The Company
owns 100% of the La Parrilla Silver Mine.
There is a net smelter royalty (NSR) agreement of 1.5% of
sales revenue associated with the Quebradillas Mine, with a maximum payable of
US$2.5 million. The Company has an option to purchase the NSR at any time for an
amount of US$2.0 million. For the six month period ended June 30, 2010, the
Company paid US$65,131 (six month ended June 30, 2009 - US$64,846) relating to
royalties. The sum of royalties paid under the Quebradillas NSR is presently
US$269,495.
(c) |
San Martin Silver Mine, Jalisco State
|
The San Martin Silver Mine is a producing underground mine
located adjacent to the town of San Martin de Bolaños in Northern Jalisco State,
Mexico. The mine is comprised of approximately 7,840 hectares of mineral rights,
approximately 1,300 hectares of surface rights surrounding the mine, and another
104 hectares of surface rights where the 900 tonnes per day cyanidation mill,
flotation circuit, mine buildings and administrative offices are located. The
Company owns 100% of the San Martin Silver Mine.
(d) |
Del Toro Silver Mine, Zacatecas State
|
The Del Toro Silver Mine is located 60 km to the southeast of
the Companys La Parrilla Silver Mine and consists of 392 contiguous hectares of
mining claims and 100 hectares of surface rights covering the area surrounding
the San Juan mine. The Del Toro Silver Mine consolidates two old silver mines,
the San Juan and Perseverancia mines, which are approximately one kilometre
apart. The Company owns 100% of the San Juan and Perseverancia mines. The
US$225,000 option payments due in 2010, of which US$62,500 was paid in June
2010, relate to a new land acquisition of 50 hectares. All other option payments
have been made.
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
7. |
MINING INTERESTS AND PLANT AND EQUIPMENT
(continued) |
|
|
(e) |
Real de Catorce Silver Project, San Luis
Potosi State |
The Real de Catorce Silver Project is located 25 km west of the
town of Matehuala in San Luis Potosi State, Mexico. The Real de Catorce property
consists of 22 mining concessions covering 6,327 hectares. The Company owns 100%
of the Real de Catorce Silver Project. Upon commencement of commercial
production on the property, the Company has agreed to pay an amount of
US$200,000 to a previous owner. The property is subject to a 3% net smelter
return royalty, of which 1.75% may be acquired in increments of 0.25% for a
price of US$250,000 per increment for the first five years from the date of the
first payment and at a price of US$300,000 per increment for the following five
years.
In addition, the Company has agreed to acquire the surface
rights forming part of the property, including the buildings located thereon and
covering the location of the previous mining operations, in consideration for a
single payment of US$1.0 million to be made in December 2010.
The Company has also agreed to make a payment of US$200,000 on
December 10, 2010 for all technical and geological information collected over
the area. Such payment is not related to the acquisition of the mining
concessions or the surface rights and buildings agreement.
(f) |
Future Mineral Property Options
|
Future mineral property options are due as follows:
|
|
US$ |
|
Del Toro Silver Mine (d) |
|
162,500 |
|
Real de Catorce
Silver Project (e) |
|
1,200,000 |
|
Total Future Option Payments |
|
1,362,500 |
|
8. |
VENDOR LIABILITY AND INTEREST AND RESTRICTED
CASH |
In May 2006, First Majestic acquired control of First Silver
Reserve Inc. (First Silver) for $53.4 million. The purchase price was payable
in three instalments (50%, 25% and 25%) to the then majority interest
shareholder of First Silver (the Majority Shareholder). The first instalment
was paid upon closing on May 30, 2006. The second instalment was paid on May 30,
2007. The third and final instalment of $13.3 million due on May 30, 2008 was
withheld by the Company.
In November 2007, an action was commenced by the Company and
its acquired subsidiary First Silver against the Majority Shareholder (the
Defendant) who was previously a director, President and Chief Executive
Officer of First Silver. The Company and First Silver allege in their action
that, while holding the positions of director, President and Chief Executive
Officer, the Majority Shareholder engaged in a course of deceitful and dishonest
conduct in breach of his fiduciary and statutory duties owed to First Silver,
which resulted in the Majority Shareholder acquiring a mine which was First
Silvers right to acquire. Management believes that there are substantial
grounds to this claim, however, the outcome of this litigation is not presently
determinable. At the present time, the trial is scheduled to commence in the
Supreme Court of British Columbia on February 21, 2011.
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
8. |
VENDOR LIABILITY AND INTEREST AND RESTRICTED
CASH (continued) |
In March 2008, the Defendant filed a Counterclaim against the
Company for unpaid amounts and interest of $14.9 million, and this action was
secured by a $14.5 million Letter of Credit posted in Court by First Majestic.
The Company recorded these amounts as Restricted Cash as at March 31, 2009. In
July 2009, an Order was granted by the Court, with the consent of all parties,
under which the Defendant obtained a judgment in the amount of $14.9 million.
The Company agreed to pay out $14.3 million from the posted Letter of Credit to
the Defendants lawyers trust account (the Trust Funds) in partial payment of
the Judgment. The remaining funds from the Letter of Credit were paid out to the
Company. The Consent Order requires that the Trust Funds be held in trust
pending the outcome of the Companys action. If the trial has not commenced by
June 30, 2011, the Trust Funds can be released to the Defendant, unless
otherwise ordered by the court. These funds would be accessible to the Company
in the event of a favourable outcome to the litigation.
9. |
DEBT FACILITIES |
|
|
(a) |
Pre-Payment
Facility |
In August 2009, a subsidiary of the parent company entered into
an agreement for a six-month pre-payment facility for advances on the sale of
lead in its concentrate production. Under the terms of the agreement, $1.6
million (US$1.5 million) was advanced against the Companys lead concentrate
production from the La Parrilla Silver Mine for a period of six months. Interest
accrues at an annualized floating rate of one-month LIBOR plus 5%. Interest is
payable monthly and the principal amount is repayable based on the volume of
lead concentrate shipped with minimum monthly instalments of US$250,000
required. The repayment of the credit facility is guaranteed by the parent
company.
On February 28, 2010, this agreement was amended to provide an
additional six-month pre-payment facility of up to $1.6 million (US$1.5
million). A total of $1.6 million (US$1.5 million) was drawn on this pre-payment
facility. As at June 30, 2010, after delivering monthly quotas of lead
concentrates and payments of interest charges, the Company had a remaining
balance payable on the pre-payment facility of $627,681 (US$591,817).
(b) |
FIFOMI Loan Facilities
|
In October 2009, the Company entered into an agreement with the
Mexican Mining Development Trust - Fideicomiso de Fomento Minero (FIFOMI) for
two loan facilities, a capital asset loan and a working capital loan, totalling
53.8 million Mexican pesos (CAD$4.3 million). Funds from these loans were used
for the completion of the 3,500 tonnes per day cyanidation plant at the La
Encantada Silver Mine and for working capital purposes. The capital asset loan,
for up to 47.1 million Mexican pesos (CAD$3.7 million), bears interest at the
Mexican interbank rate plus 7.51% per annum and is repayable over a 60-month
period. The working capital loan, for up to 6.7 million Mexican pesos (CAD$0.6
million), bears interest at the Mexican interbank rate plus 7.31% per annum and
is a 90-day revolving loan. The loans are secured against real property, land,
buildings, facilities, machinery and equipment at the La Encantada Silver Mine.
At June 30, 2010, the balance owing was 52.0 million Mexican pesos (CAD$4.3
million) of which 17.2 million Mexican pesos (CAD$2.0 million) was classified as
current.
The following is a summary of the debt facilities as at June
30, 2010:
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
|
|
$CAD |
|
Pre-payment Facility |
|
627,681 |
|
FIFOMI Loan Facilities |
|
4,298,774 |
|
|
|
4,926,455 |
|
Less: current
portion |
|
(2,045,440 |
) |
Long-term Portion of Debt Facilities |
|
2,881,015 |
|
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
10. |
DEPOSITS ON LONG-TERM ASSETS
|
Deposits consist of advance payments made to property vendors,
drilling service providers, and equipment vendors, which are categorized as
long-term in nature, in amounts as follows:
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
$ |
|
|
$ |
|
Deposit on services |
|
2,396 |
|
|
- |
|
Deposit on equipment for La Encantada |
|
496,212 |
|
|
2,876,717 |
|
Deposit on equipment for La Parrilla |
|
1,472,989 |
|
|
1,429,702 |
|
|
|
1,971,597 |
|
|
4,306,419 |
|
11. |
SHARE CAPITAL |
|
|
(a) |
Authorized unlimited number of common
shares without par value |
|
Issued |
|
Six Months Ended June 30, 2010 |
|
|
Year Ended December 31, 2009 |
|
|
|
|
Shares |
|
|
$ |
|
|
Shares |
|
|
$ |
|
|
Balance - beginning of the period |
|
92,648,744 |
|
|
244,241,006 |
|
|
73,847,810 |
|
|
196,648,345 |
|
|
Issued during the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
For cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options |
|
277,500 |
|
|
622,436 |
|
|
36,250 |
|
|
68,838 |
|
|
Exercise of warrants |
|
25,000 |
|
|
82,500 |
|
|
50,000 |
|
|
165,000 |
|
|
Public offering of units (i) |
|
- |
|
|
- |
|
|
8,487,576 |
|
|
18,840,890 |
|
|
Private placements (ii) |
|
- |
|
|
- |
|
|
4,167,478 |
|
|
9,051,069 |
|
|
For debt settlements (iii) |
|
- |
|
|
- |
|
|
1,191,852 |
|
|
2,741,260 |
|
|
For Normabec acquisition (iv) |
|
- |
|
|
- |
|
|
4,867,778 |
|
|
16,696,479 |
|
|
Transfer of contributed surplus for stock options and warrants exercised |
|
- |
|
|
232,302 |
|
|
- |
|
|
29,125 |
|
|
Balance - end
of the period |
|
92,951,244 |
|
|
245,178,244 |
|
|
92,648,744 |
|
|
244,241,006 |
|
(i) |
On March 5, 2009, the Company completed a public offering
with a syndicate of underwriters who purchased 8,487,576 units at an issue
price of $2.50 per unit for net proceeds to the Company of $19,689,648, of
which $18,840,890 was allocated to the common shares and $848,758 was
allocated to the warrants. Each unit consisted of one common share in the
capital of the Company and one-half of one common share purchase warrant.
Each whole common share purchase warrant entitles the holder to acquire
one common share at a price of $3.50 expiring on March 5, 2011. |
|
|
(ii) |
In August and September 2009, the Company completed
non-brokered private placements consisting of an aggregate of 4,167,478
units at a price of $2.30 per unit for net proceeds to the Company of
$9,440,069, of which $9,051,069 was allocated to the common shares and
$389,000 was allocated to the warrants. Each unit consisted of one common
share and one-half of one common share purchase warrant, with each full
warrant entitling the holder to purchase one additional common share of
the Company at an exercise price of $3.30 per share for a period of two
years after closing. A total of 1,749,500 warrants expire on August 20,
2011, and 334,239 warrants expire on September 16, 2011. Finders fees in
the amount of $101,016 and 50,000 warrants were paid regarding a portion
of these private placements. The finders warrants are exercisable at a
price of $3.30 per share and expire on August 20, 2011.
|
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
11. |
SHARE CAPITAL (continued)
|
(iii) |
In August and September 2009, the Company settled certain
current liabilities amounting to $2,741,260 by the issuance of 1,191,852
common shares of the Company at a value of $2.30 per share. |
|
|
(iv) |
On November 13, 2009, the Company issued 4,867,778 common
shares at a value of $3.43 per share in connection with the acquisition of
Normabec. |
|
|
(b) |
Stock Options |
Under the terms of the Companys Stock Option Plan, the maximum
number of shares reserved for issuance under the Plan is 10% of the issued
shares on a rolling basis. Options may be exercisable over periods of up to five
years as determined by the board of directors of the Company and the exercise
price shall not be less than the closing price of the shares on the day
preceding the award date, subject to regulatory approval. All stock options are
subject to vesting with 25% vesting upon issuance and 25% vesting each six
months thereafter.
The changes in stock options outstanding for the periods ended
June 30, 2010 and December 31, 2009 are as follows:
|
|
Six Months Ended June 30, 2010 |
|
|
Year Ended December 31, 2009 |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Average |
|
|
Weighted |
|
|
|
|
|
Average |
|
|
Weighted |
|
|
|
Number of |
|
|
Exercise Price |
|
|
Average |
|
|
Number of |
|
|
Exercise Price |
|
|
Average |
|
|
|
Shares |
|
|
($) |
|
|
Remaining Life |
|
|
Shares |
|
|
($) |
|
|
Remaining Life |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of the period |
|
8,603,750 |
|
|
3.50 |
|
|
2.4 years |
|
|
6,862,500 |
|
|
3.84 |
|
|
2.8 years |
|
Granted |
|
460,000 |
|
|
3.77 |
|
|
3.0 years |
|
|
2,842,500 |
|
|
2.88 |
|
|
3.6 years |
|
Exercised |
|
(277,500 |
) |
|
2.24 |
|
|
1.6 years |
|
|
(36,250 |
) |
|
1.90 |
|
|
2.5 years |
|
Forfeited or
expired |
|
(428,750 |
) |
|
4.80
|
|
|
0.5
years |
|
|
(1,065,000 |
) |
|
4.11
|
|
|
0.7
years |
|
Balance, end of the period |
|
8,357,500 |
|
|
3.23 |
|
|
2.1 years |
|
|
8,603,750 |
|
|
3.50 |
|
|
2.4 years |
|
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
11. |
SHARE CAPITAL (continued) |
|
|
(b) |
Stock Options (continued)
|
The following table summarizes both the stock options
outstanding and those that are exercisable at June 30, 2010:
Price |
Options |
Options |
|
|
$ |
Outstanding |
Exercisable |
|
Expiry Dates |
4.17 |
100,000 |
100,000 |
|
August 8, 2010 |
3.72 |
30,000 |
30,000 |
|
September 24, 2010 |
3.98 |
20,000 |
20,000 |
|
October 17, 2010 |
4.45 |
495,000 |
495,000 |
|
October 30, 2010 |
4.34 |
25,000 |
25,000 |
|
November 1, 2010 |
4.34 |
200,000 |
200,000 |
|
December 5, 2010 |
4.42 |
50,000 |
50,000 |
|
February 20, 2011 |
4.65 |
100,000 |
100,000 |
|
March 25, 2011 |
4.19 |
20,000 |
20,000 |
|
April 26, 2011 |
4.02 |
100,000 |
100,000 |
|
May 15, 2011 |
4.30 |
450,000 |
450,000 |
|
June 19, 2011 |
4.67 |
90,000 |
90,000 |
|
July 4, 2011 |
4.15 |
275,000 |
275,000 |
|
July 28, 2011 |
3.62 |
495,000 |
495,000 |
|
August 28, 2011 |
1.60 |
100,000 |
100,000 |
|
October 8, 2011 |
1.27 |
100,000 |
100,000 |
|
October 17, 2011 |
4.32 |
245,000 |
245,000 |
|
December 6, 2011 |
4.41 |
400,000 |
400,000 |
|
December 22, 2011 |
5.00 |
155,000 |
155,000 |
|
February 7, 2012 |
2.03 |
635,000 |
476,250 |
|
May 7, 2012 |
4.65 |
25,000 |
25,000 |
|
June 20, 2012 |
2.62 |
60,000 |
30,000 |
|
September 16, 2012 |
2.96 |
25,000 |
12,500 |
|
October 28, 2012 |
4.34 |
925,000 |
925,000 |
|
December 5, 2012 |
3.52 |
540,000 |
270,000 |
|
December 7, 2012 |
3.70 |
522,500 |
261,250 |
|
December 15, 2012 |
3.56 |
200,000 |
50,000 |
|
February 2, 2013 |
3.15 |
25,000 |
6,250 |
|
March 19, 2013 |
3.98 |
100,000 |
25,000 |
|
May 13, 2013 |
4.64 |
75,000 |
18,750 |
|
June 2, 2013 |
3.94 |
10,000 |
2,500 |
|
June 3, 2013 |
4.47 |
50,000 |
12,500 |
|
June 28, 2013 |
3.62 |
100,000 |
100,000 |
|
August 28, 2013 |
1.44 |
240,000 |
240,000 |
|
November 10, 2013 |
1.56 |
550,000 |
550,000 |
|
December 17, 2013 |
2.03 |
462,500 |
346,875 |
|
May 7, 2014 |
2.32 |
12,500 |
9,375 |
|
June 15, 2014 |
3.70 |
350,000 |
175,000 |
|
December 15, 2014 |
|
|
|
|
|
|
8,357,500 |
6,986,250 |
|
|
During the six months ended June 30, 2010, the Company granted
stock options to an officer and several employees to purchase 460,000 shares
(six months ended June 30, 2009 1,275,000 shares) of the Company. Pursuant to
the Companys policy of accounting for the fair value of stock-based
compensation over the applicable vesting period, the fair value of stock options
granted during the six month period was $680,000 of which $252,486 was expensed
in the current period and $427,514 was deferred and will be amortized over the
remaining vesting period of the stock options.
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
11. |
SHARE CAPITAL (continued) |
|
|
(b) |
Stock Options (continued)
|
The weighted average fair value of each stock option granted
during the past six months was $1.43 (2009 - $1.14) . The fair value of stock
options is estimated using the Black-Scholes Option Pricing Model with
the following assumptions:
|
Six Months Ended |
Six Months Ended |
|
June 30, 2010 |
June 30, 2009 |
Risk-free interest rate |
1.4% |
0.9% |
Es timated volatility |
82.6% |
80.3% |
Expected life |
1.4 years |
2.4 years |
Expected dividend
yield |
0%
|
0%
|
Option pricing models require the use of estimates and
assumptions including the expected volatility of share prices. Changes in the
underlying assumptions can materially affect the fair value estimates,
therefore, existing models do not necessarily provide an accurate measure of the
actual fair value of the Companys stock options.
(c) |
Share Purchase Warrants
|
The changes in share purchase warrants for the six months ended
June 30, 2010, and the year ended December 31, 2009, are as follows:
|
|
Six Months Ended June 30, 2010 |
|
|
Year Ended December 31, 2009 |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Average |
|
|
Weighted |
|
|
|
|
|
Average |
|
|
Weighted |
|
|
|
Number of |
|
|
Exercise Price |
|
|
Average Term to |
|
|
Number of |
|
|
Exercise Price |
|
|
Average Term to |
|
|
|
Warrants |
|
|
($) |
|
|
Expiry |
|
|
Warrants |
|
|
($) |
|
|
Expiry |
|
Balance, beginning of the period |
|
11,357,465 |
|
|
5.04 |
|
|
0.8 years |
|
|
5,078,791 |
|
|
6.99 |
|
|
1.2 years |
|
Issued |
|
- |
|
|
- |
|
|
- |
|
|
6,638,492 |
|
|
3.66 |
|
|
2.1 years |
|
Exercised |
|
(25,000 |
) |
|
3.30 |
|
|
1.6 years |
|
|
(50,000 |
) |
|
3.30 |
|
|
1.7 years |
|
Cancelled or
expired |
|
(5,029,938 |
) |
|
7.06
|
|
|
- |
|
|
(309,818 |
) |
|
7.69
|
|
|
- |
|
Balance, end of the period |
|
6,302,527 |
|
|
3.43 |
|
|
0.8 years |
|
|
11,357,465 |
|
|
5.04 |
|
|
0.8 years |
|
(i) |
On March 5, 2009, the Company issued 4,243,788 warrants
exercisable at a price of $3.50 per share for a period of two years. The
warrants were detachable warrants issued in connection with the 8,487,576
unit offering. The fair value of the warrants was estimated using the
Black-Scholes Option Pricing Model (assumptions include a risk free
rate of 1.5%, market sector volatility of 35.0%, expected life of 2 years,
and expected dividend yield of 0%) and as a result $848,758 was credited
to contributed surplus. |
|
|
(ii) |
On August 20, 2009, the Company issued 1,799,500 warrants
exercisable at a price of $3.30 per share exercisable for a period of two
years. The warrants were issued in connection with a non-brokered private
placement of 3,499,000 units. The fair value of the warrants was estimated
using the Black-Scholes Option Pricing Model (assumptions include a risk
free rate of 1.15%, market adjusted volatility of 38.5%, expected life of
2 years, and expected dividend yield of 0%) and as a result $328,047 was
credited to contributed surplus. |
|
|
(iii) |
On September 16, 2009, the Company issued 334,239
warrants exercisable at a price of $3.30 per share exercisable for a
period of two years. The warrants were issued in connection with a
non-brokered private placement of 668,478 units. |
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
The fair value of the
warrants was estimated using the Black-Scholes Option Pricing
Model (assumptions include a risk free rate of 1.15%, market adjusted
volatility of 38.5%, expected life of 2 years, and expected dividend yield
of 0%) and as a result $60,953 was credited to contributed surplus.
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
11. |
SHARE CAPITAL (continued) |
|
|
(c) |
Share Purchase Warrants (continued)
|
(iv) |
On November 13, 2009, in connection with the acquisition
of Normabec, the Company issued 118,527 warrants exercisable at a price of
$9.11 per share expiring on December 13, 2009, and 142,438 warrants
exercisable at a price of $9.11 per share expiring on January 2, 2010. The
fair value of the warrants was estimated using the Black-Scholes Option
Pricing Model (assumptions include a risk free rate of 1.26%,
volatility of 67%, expected life of 0.1 year, and expected dividend yield
of 0%). No value was credited to contributed surplus. These warrants
expired unexercised. |
The following table summarizes the share purchase warrants
outstanding at June 30, 2010:
Exercise Price |
|
Warrants |
|
|
|
|
$ |
|
Outstanding |
|
|
Expiry Dates |
|
3.50 |
|
4,243,788 |
|
|
March 5, 2011 |
|
3.30 |
|
1,724,500 |
|
|
August 20, 2011 |
|
3.30 |
|
334,239 |
|
|
September 16, 2011 |
|
|
|
6,302,527 |
|
|
|
|
(d) |
Share Capital to be Issued
|
On June 5, 2006, pursuant to the acquisition of First Silver
Reserve Inc., First Majestic and First Silver entered into a business
combination agreement whereby First Majestic agreed to acquire the remaining
36.25% minority interest in First Silver. At June 30, 2010, prior shareholders
of First Silver had not yet exchanged 114,254 shares of First Silver,
exchangeable for 57,127 shares of First Majestic, resulting in a remaining value
of shares to be issued of $276,495.
Any certificate formerly representing First Silver shares not
duly surrendered on or prior to September 14, 2012 shall cease to represent a
claim or interest of any kind or nature, including a claim for dividends or
other distributions against First Majestic or First Silver by any former First
Silver shareholder. After such date, all First Majestic shares to which the
former First Silver shareholder was entitled shall be deemed to have been
cancelled.
Details of the components of net revenue are as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Combined revenue - silver doré bars,
concentrates, coins and ingots |
|
32,841,120 |
|
|
18,003,518 |
|
|
57,012,365 |
|
|
35,467,655 |
|
Less: intercompany
eliminations |
|
(1,041,738 |
) |
|
(2,223,922 |
) |
|
(3,277,271 |
) |
|
(2,223,922 |
) |
Consolidated gross revenue |
|
31,799,382 |
|
|
15,779,596 |
|
|
53,735,094 |
|
|
33,243,733 |
|
Less: refining, smelting, net of intercompany eliminations
|
|
(1,887,793 |
) |
|
(2,165,720 |
) |
|
(4,624,310 |
) |
|
(4,706,462 |
) |
Less: metal deductions, net of intercompany eliminations |
|
(948,304 |
) |
|
(588,999 |
) |
|
(1,929,885 |
) |
|
(1,125,522 |
) |
Net revenue
|
|
28,963,285 |
|
|
13,024,877 |
|
|
47,180,899 |
|
|
27,411,749 |
|
The La Encantada mill expansion project achieved commercial
stage of production on April 1, 2010. Sales incurred during the pre-operating
period were recorded as a reduction of capital costs and are excluded from sales
revenue. As a result, sales of $4,718,618 (2009 - $nil) in connection with the
sale of 262,403 silver equivalent ounces of precipitates during the quarter
ended March 31, 2010 were excluded from the above table.
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
13. |
SEGMENTED INFORMATION
|
The Company has three operating segments located in Mexico, one
retail market segment in Canada and one corporate segment with locations in
Canada and Mexico. The San Martin operations consist of the San Martin Silver
Mine, the San Martin property and the Jalisco Group of Properties. The La
Parrilla operations consist of the La Parrilla Silver Mine, the Del Toro Silver
Mine, the La Parrilla properties and the Del Toro properties. The La Encantada
operations consist of the La Encantada Silver Mine and the La Encantada
property.
These reportable operating segments are summarized in the table
below:
|
Three Months Ended June 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and |
|
|
|
|
|
|
San Martin |
|
|
La Parrilla |
|
|
La Encantada |
|
|
|
|
|
Other |
|
|
|
|
|
|
operations |
|
|
operations |
|
|
operations |
|
|
Coin Sales |
|
|
Eliminations |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Revenue |
|
5,511,981 |
|
|
7,100,001 |
|
|
15,633,775 |
|
|
1,648,899 |
|
|
(931,371 |
) |
|
28,963,285 |
|
Cost of sales |
|
3,201,270 |
|
|
3,010,188 |
|
|
6,529,912 |
|
|
1,322,626 |
|
|
(629,249 |
) |
|
13,434,747 |
|
Depletion, depreciation and amortization,
and accretion of ARO |
|
623,700 |
|
|
596,002 |
|
|
1,254,531 |
|
|
- |
|
|
- |
|
|
2,474,233 |
|
Mine operating earnings (loss) |
|
1,687,011 |
|
|
3,493,811 |
|
|
7,849,332 |
|
|
326,273 |
|
|
(302,122 |
) |
|
13,054,305 |
|
General and administrative |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,406,842 |
|
|
2,406,842 |
|
Stock-based compensation |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
643,964 |
|
|
643,964 |
|
Interest expense (income) |
|
274,906 |
|
|
2,536,640 |
|
|
1,349,205 |
|
|
- |
|
|
(3,187,114 |
) |
|
973,637 |
|
Other expense (income) and foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
exchange |
|
(127,735 |
) |
|
(276,609 |
) |
|
438,660 |
|
|
- |
|
|
(1,303,900 |
) |
|
(1,269,584 |
) |
Income tax expense (recovery) |
|
268,181 |
|
|
116,836 |
|
|
779,191 |
|
|
- |
|
|
248,122 |
|
|
1,412,330 |
|
Net income (loss) |
|
1,271,659 |
|
|
1,116,944 |
|
|
5,282,276 |
|
|
326,273 |
|
|
889,964 |
|
|
8,887,116 |
|
Capital expenditures |
|
774,169 |
|
|
1,134,124 |
|
|
4,092,667 |
|
|
- |
|
|
211,851 |
|
|
6,212,811 |
|
Total assets |
|
109,125,407 |
|
|
64,068,493 |
|
|
72,640,351 |
|
|
- |
|
|
31,580,187 |
|
|
277,414,438 |
|
|
|
Three Months Ended June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and |
|
|
|
|
|
|
San Martin |
|
|
La Parrilla |
|
|
La Encantada |
|
|
|
|
|
Other |
|
|
|
|
|
|
operations |
|
|
operations |
|
|
operations |
|
|
Coin Sales |
|
|
Eliminations |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Revenue |
|
5,128,241 |
|
|
5,206,431 |
|
|
2,678,133 |
|
|
1,807,629 |
|
|
(1,795,557 |
) |
|
13,024,877 |
|
Cost of sales |
|
3,326,950 |
|
|
3,436,485 |
|
|
2,588,633 |
|
|
1,779,193 |
|
|
(1,671,393 |
) |
|
9,459,868 |
|
Depletion, depreciation and amortization,
and accretion of ARO |
|
701,235 |
|
|
775,918 |
|
|
412,482 |
|
|
- |
|
|
- |
|
|
1,889,635 |
|
Mine operating earnings (loss) |
|
1,100,056 |
|
|
994,028 |
|
|
(322,982 |
) |
|
28,436 |
|
|
(124,164 |
) |
|
1,675,374 |
|
General and administrative |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,114,312 |
|
|
2,114,312 |
|
Stock-based compensation |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
800,808 |
|
|
800,808 |
|
Interest expense (income) |
|
45,143 |
|
|
66,600 |
|
|
52,526 |
|
|
- |
|
|
178,537 |
|
|
342,806 |
|
Other expense (income) and foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exchange |
|
(118,373 |
) |
|
(670,022 |
) |
|
(470,142 |
) |
|
- |
|
|
257,365 |
|
|
(1,001,172 |
) |
Income tax (recovery) expense |
|
121,398 |
|
|
(58,486 |
) |
|
(599,696 |
) |
|
- |
|
|
(1,081,012 |
) |
|
(1,617,796 |
) |
Net income (loss) |
|
1,051,888 |
|
|
1,655,936 |
|
|
694,330 |
|
|
28,436 |
|
|
(2,394,174 |
) |
|
1,036,416 |
|
Capital expenditures |
|
874,235 |
|
|
1,903,461 |
|
|
6,419,379 |
|
|
- |
|
|
131,485 |
|
|
9,328,560 |
|
Total assets |
|
118,788,430 |
|
|
62,249,122 |
|
|
49,559,957 |
|
|
- |
|
|
22,489,594 |
|
|
253,087,103 |
|
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
13. |
SEGMENTED INFORMATION (continued)
|
|
|
Six Months Ended June 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and |
|
|
|
|
|
|
San Martin |
|
|
La Parrilla |
|
|
La Encantada |
|
|
|
|
|
Other |
|
|
|
|
|
|
operations |
|
|
operations |
|
|
operations |
|
|
Coin Sales |
|
|
Eliminations |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Revenue |
|
11,075,267 |
|
|
13,264,360 |
|
|
22,785,023 |
|
|
2,981,520 |
|
|
(2,925,271 |
) |
|
47,180,899 |
|
Cost of sales |
|
6,027,591 |
|
|
6,121,862 |
|
|
9,908,028 |
|
|
2,584,332 |
|
|
(2,233,209 |
) |
|
22,408,604 |
|
Depletion, depreciation and amortization,
and accretion of ARO |
|
1,464,069 |
|
|
1,244,560 |
|
|
1,657,315 |
|
|
- |
|
|
- |
|
|
4,365,944 |
|
Mine operating earnings (loss) |
|
3,583,607 |
|
|
5,897,938 |
|
|
11,219,680 |
|
|
397,188 |
|
|
(692,062 |
) |
|
20,406,351 |
|
General and administrative |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
4,393,465 |
|
|
4,393,465 |
|
Stock-based compensation |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,344,143 |
|
|
1,344,143 |
|
Interest expense (income) |
|
658,602 |
|
|
5,166,802 |
|
|
2,884,029 |
|
|
|
|
|
(7,463,784 |
) |
|
1,245,649 |
|
Other expense (income) and foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exchange |
|
426,904 |
|
|
83,221 |
|
|
(202,596 |
) |
|
- |
|
|
(1,345,562 |
) |
|
(1,038,033 |
) |
Income tax expense (recovery) |
|
441,655 |
|
|
(15,954 |
) |
|
1,761,414 |
|
|
- |
|
|
371,101 |
|
|
2,558,216 |
|
Net income (loss) |
|
2,056,446 |
|
|
663,869 |
|
|
6,776,833 |
|
|
397,188 |
|
|
2,008,575 |
|
|
11,902,911 |
|
Capital expenditures |
|
1,394,479 |
|
|
2,495,169 |
|
|
8,725,362 |
|
|
- |
|
|
318,486 |
|
|
12,933,496 |
|
Total assets |
|
109,125,407 |
|
|
64,068,493 |
|
|
72,640,351 |
|
|
- |
|
|
31,580,187 |
|
|
277,414,438 |
|
|
|
Six Months Ended June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and |
|
|
|
|
|
|
San Martin |
|
|
La Parrilla |
|
|
La Encantada |
|
|
|
|
|
Other |
|
|
|
|
|
|
operations |
|
|
operations |
|
|
operations |
|
|
Coin Sales |
|
|
Eliminations |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Revenue |
|
9,584,207 |
|
|
9,142,290 |
|
|
8,126,458 |
|
|
3,002,081 |
|
|
(2,443,287 |
) |
|
27,411,749 |
|
Cost of sales |
|
6,060,176 |
|
|
6,137,789 |
|
|
5,072,929 |
|
|
2,863,170 |
|
|
(2,375,383 |
) |
|
17,758,681 |
|
Depletion, depreciation and amortization,
and accretion of ARO |
|
1,205,822 |
|
|
1,391,556 |
|
|
837,430 |
|
|
- |
|
|
- |
|
|
3,434,808 |
|
Mine operating earnings (loss) |
|
2,318,209 |
|
|
1,612,945 |
|
|
2,216,099 |
|
|
138,911 |
|
|
(67,904 |
) |
|
6,218,260 |
|
General and administrative |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,932,315 |
|
|
3,932,315 |
|
Stock-based compensation |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,697,548 |
|
|
1,697,548 |
|
Interest expense (income) |
|
79,204 |
|
|
121,972 |
|
|
104,561 |
|
|
- |
|
|
383,393 |
|
|
689,130 |
|
Other expense (income) and foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exchange |
|
141,199 |
|
|
(377,899 |
) |
|
(241,457 |
) |
|
- |
|
|
153,889 |
|
|
(324,268 |
) |
Income tax expense (recovery) |
|
(53,295 |
) |
|
(105,744 |
) |
|
(25,659 |
) |
|
- |
|
|
(1,567,880 |
) |
|
(1,752,578 |
) |
Net income (loss) |
|
2,151,101 |
|
|
1,974,616 |
|
|
2,378,654 |
|
|
138,911 |
|
|
(4,667,169 |
) |
|
1,976,113 |
|
Capital expenditures |
|
1,567,128 |
|
|
3,789,716 |
|
|
12,342,385 |
|
|
- |
|
|
146,301 |
|
|
17,845,530 |
|
Total assets |
|
118,788,430 |
|
|
62,249,122 |
|
|
49,559,957 |
|
|
- |
|
|
22,489,594 |
|
|
253,087,103 |
|
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
14. |
CAPITAL LEASE OBLIGATIONS
|
In 2007 and 2008, the Company completed lease financings for
$14.1 million (US$11.2 million) of mining equipment. The Company paid 50% prior
to the arrival of the equipment, and financed the remaining 50% in quarterly
payments over a period of 24 months at 9% interest over the term of the lease.
In March 2009, the Company refinanced the balance of $3.6 million (US$2.9
million) to be paid over 24 monthly payments commencing in February 2009 with
interest payable at 9% on the outstanding principal balance, secured by a
guarantee from the parent company.
In January 2009, the Company completed additional lease
financing arrangements with an equipment vendor, committing the Company to
payments of $2.6 million (US$2.0 million) over a period of 36 months with
monthly payments of $48,460 (US$38,420) consisting of principal plus 12.5%
interest on outstanding balances, plus an additional 12 monthly lease payments
of $43,640 (US$34,600) consisting of principal only.
The following is a schedule of future minimum lease payments
under the capital leases as at June 30, 2010:
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
$ |
|
|
$ |
|
2010 Gross lease payments |
|
1,031,969 |
|
|
2,235,960 |
|
2011 Gross lease payments |
|
690,615 |
|
|
684,364 |
|
2012 Gross lease payments |
|
140,581 |
|
|
139,309 |
|
|
|
1,863,165 |
|
|
3,059,633 |
|
Less: interest |
|
(121,894 |
) |
|
(251,997 |
) |
Total payments, net of interest |
|
1,741,271 |
|
|
2,807,636 |
|
Less: current portion |
|
(1,372,510 |
) |
|
(2,139,352 |
) |
Capital Lease
Obligation - long term portion |
|
368,761 |
|
|
668,284 |
|
15. |
ASSET RETIREMENT OBLIGATIONS
|
|
|
Six Months Ended |
|
|
Year Ended |
|
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
$ |
|
|
$ |
|
Balance, beginning of the period |
|
4,336,088 |
|
|
5,304,369 |
|
Effect of change in estimates |
|
- |
|
|
(877,834 |
) |
Interest accretion |
|
187,921 |
|
|
445,090 |
|
Effect of
translation of foreign currencies |
|
136,579 |
|
|
(535,537 |
) |
Balance, end of the period |
|
4,660,588 |
|
|
4,336,088 |
|
Asset retirement obligations allocated by mineral properties
are as follows:
|
|
Anticipated |
|
|
June 30, 2010 |
|
|
December 31, 2009 |
|
|
|
Date |
|
|
$ |
|
|
$ |
|
La Encantada Silver Mine |
|
2020 |
|
|
1,951,506 |
|
|
1,815,518 |
|
La Parrilla Silver Mine |
|
2025 |
|
|
1,073,070 |
|
|
998,293 |
|
San Martin Silver Mine |
|
2019 |
|
|
1,636,012 |
|
|
1,522,277 |
|
Balance, end of
the period |
|
|
|
|
4,660,588 |
|
|
4,336,088 |
|
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
15. |
ASSET RETIREMENT OBLIGATIONS (continued)
|
During the year ended December 31, 2009, the Company reassessed
its reclamation obligations at each of its mines based on updated mine life
estimates, rehabilitation and closure plans. The total undiscounted amount of
estimated cash flows required to settle the Companys estimated obligations is
$6.1 million, which has been discounted using a credit adjusted risk free rate
of 8.5%, of which $1.7 million of the reclamation obligation relates to the La
Parrilla Silver Mine, $2.0 million of the obligation relates to the San Martin
Silver Mine, and $2.5 million relates to the La Encantada Silver Mine. The
present value of the reclamation liabilities may be subject to change based on
managements current estimates, changes in the remediation technology or changes
to the applicable laws and regulations. Such changes will be recorded in the
accounts of the Company as they occur.
16. |
OTHER LONG TERM LIABILITIES
|
In 1992, El Pilon entered into a contract with a Mexican bank,
whereby the bank committed to advance cash to El Pilon in exchange for silver to
be delivered in future instalments. The bank failed to advance the fully agreed
amount, and El Pilon therefore refused to deliver the silver. El Pilon sued the
bank for breach of contract. The Company believes it will retain the advance
received from the bank, but the ultimate outcome is uncertain. The aggregate
potential liability including interest and penalties amounts to $774,970
(December 31, 2009 - $753,657).
17. |
CONTINGENT LIABILITIES
|
Due to the size, complexity and nature of the Companys
operations, various legal and tax matters arise in the ordinary course of
business. The Company accrues for such items when a liability is both probable
and the amount can be reasonably estimated. In the opinion of management, these
matters will not have a material effect on the consolidated financial statements
of the Company.
The Company is obligated to make certain mining property option
payments as described in Note 7, in connection with the acquisition of its
mineral property interests.
The Company has office lease commitments of $116,880 per annum
in 2010 through 2011 and $29,220 in 2012. Additional annual operating costs are
estimated at $101,110 per year ($8,426 per month) over the term of the lease.
The Company provided a deposit of one month of rent equaling $20,151.
As at June 30, 2010, the Company is committed to construction
contracts of approximately $0.1 million (US$0.1 million) (December 31, 2009 -
$2.1 million or US$2.0 million) relating to the completion of the smelting
furnaces installation project at La Encantada, which is expected to be completed
in the third quarter of 2010.
As a result of the acquisition of Normabec, the Company is
committed to make a US$1.0 million payment in December 2010 to acquire surface
rights forming part of the Real de Catorce Project. It is also committed to make
a payment of US$200,000 in December 2010 for technical and geological
information collected over the Real de Catorce area.
The Company is committed to making severance payments in the
amount of approximately $2.0 million, (December 31, 2009 - $1.9 million),
subject to certain adjustments, to four officers in the event of a change of
control of the Company.
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL
STATEMENTS |
FOR THE PERIODS
ENDED JUNE 30, 2010 AND 2009 (Unaudited) |
19. |
NON-CASH FINANCING AND INVESTING
ACTIVITIES |
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH FINANCING AND INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants upon completion of public offering
|
|
- |
|
|
- |
|
|
- |
|
|
848,758 |
|
Transfer of contributed surplus upon
exercise of stock options and warrants |
|
189,126 |
|
|
- |
|
|
232,302 |
|
|
2,950 |
|
Assets acquired by
capital lease |
|
- |
|
|
- |
|
|
- |
|
|
2,259,380 |
|
Certain comparative figures have been reclassified to conform
to the classifications used in the current years presentation.
Subsequent to June 30, 2010:
(a) |
A total of 37,500 options with exercise prices ranging
from $3.62 to $4.67 were cancelled; |
|
|
(b) |
A total of 100,000 options with an exercise price of
$4.17 expired unexercised; |
|
|
(c) |
A total of 100,000 options were granted with an exercise
price of $4.04 and an expiry date of August 9,
2013. |