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CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE NINE MONTHS ENDED |
SEPTEMBER 30, 2009 (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. |
CONSOLIDATED BALANCE SHEETS |
AS AT SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
(Expressed in Canadian dollars) |
September 30, 2009 | December 31, 2008 | |||||
$ | $ | |||||
ASSETS | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents (Note 4) | 8,168,209 | 17,424,123 | ||||
Accounts receivable | 2,109,447 | 2,116,325 | ||||
Other receivables (Note 5) | 6,232,624 | 7,212,693 | ||||
Inventories (Note 6) | 3,363,691 | 4,941,340 | ||||
Prepaid expenses and other (Note 7) | 2,307,238 | 2,174,256 | ||||
22,181,209 | 33,868,737 | |||||
MINING INTERESTS (Note 8) | ||||||
Producing properties | 50,640,792 | 49,933,735 | ||||
Exploration properties | 93,879,672 | 102,760,230 | ||||
Plant and equipment | 53,630,584 | 42,127,380 | ||||
198,151,048 | 194,821,345 | |||||
CORPORATE OFFICE EQUIPMENT (Note 8) | 396,801 | 483,050 | ||||
DEPOSITS ON LONG-TERM ASSETS (Note 11) | 4,031,467 | 1,986,517 | ||||
224,760,525 | 231,159,649 | |||||
LIABILITIES | ||||||
CURRENT LIABILITIES | ||||||
Accounts payable and accrued liabilities | 11,722,690 | 17,339,624 | ||||
Unearned revenue on silver bullion sales | 254,078 | 110,258 | ||||
Debt facility (Note 10) | 1,431,112 | - | ||||
Vendor liability and interest (Note 9) | - | 13,940,237 | ||||
Vendor liability on mineral property (Note 8(b)) | 297,461 | 1,372,973 | ||||
Current portion of capital lease obligations (Note 16) | 2,200,451 | 1,584,477 | ||||
Income and other taxes payable | 276,620 | 557,634 | ||||
16,182,412 | 34,905,203 | |||||
FUTURE INCOME TAXES | 24,601,132 | 30,690,087 | ||||
CAPITAL LEASE OBLIGATIONS (Note 16) | 1,181,825 | 1,898,396 | ||||
OTHER LONG TERM LIABILITIES | 748,107 | 832,769 | ||||
ASSET RETIREMENT OBLIGATIONS (Note 17) | 5,074,265 | 5,304,369 | ||||
47,787,741 | 73,630,824 | |||||
SHAREHOLDERS' EQUITY | ||||||
SHARE CAPITAL (Note 12(a)) | 227,288,080 | 196,648,345 | ||||
SHARE CAPITAL TO BE ISSUED (Note 12(d)) | 276,495 | 276,495 | ||||
CONTRIBUTED SURPLUS | 26,735,460 | 23,297,258 | ||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | (41,668,104 | ) | (23,216,390 | ) | ||
DEFICIT | (35,659,147 | ) | (39,476,883 | ) | ||
176,972,784 | 157,528,825 | |||||
224,760,525 | 231,159,649 |
CONTINUING OPERATIONS (Note 1)
COMMITMENTS (Note 18)
APPROVED BY THE BOARD OF DIRECTORS
(signed) Keith Neumeyer | Director | (signed) Douglas Penrose | Director |
The accompanying notes are an integral part of these consolidated financial statements
FIRST MAJESTIC SILVER CORP. |
CONSOLIDATED STATEMENTS OF INCOME (LOSS) |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED) |
(Expressed in Canadian dollars, except share amounts) |
Three Months ended September 30, | Nine Months ended September 30, | |||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||
$ | $ | $ | $ | |||||||||
Revenue (Note 13) | 13,724,803 | 10,817,211 | 41,136,552 | 35,218,282 | ||||||||
Cost of sales | 8,054,387 | 7,977,801 | 25,813,068 | 22,124,612 | ||||||||
Amortization and depreciation | 786,518 | 455,028 | 2,588,908 | 2,119,459 | ||||||||
Depletion | 628,801 | 623,746 | 2,028,008 | 2,208,952 | ||||||||
Accretion of reclamation obligation | 105,400 | 41,088 | 338,610 | 136,930 | ||||||||
Mine operating earnings | 4,149,697 | 1,719,548 | 10,367,958 | 8,628,329 | ||||||||
General and administrative | 1,724,437 | 1,521,567 | 5,656,753 | 5,753,772 | ||||||||
Stock-based compensation | 505,847 | 1,035,864 | 2,203,394 | 2,814,696 | ||||||||
2,230,284 | 2,557,431 | 7,860,147 | 8,568,468 | |||||||||
Operating income (loss) | 1,919,413 | (837,883 | ) | 2,507,811 | 59,861 | |||||||
Interest and other expenses | (337,208 | ) | (223,639 | ) | (1,102,179 | ) | (789,338 | ) | ||||
Investment and other income | 85,748 | 331,929 | 597,764 | 1,113,379 | ||||||||
Foreign exchange (loss) gain | (447,659 | ) | 72,816 | (559,567 | ) | 605,850 | ||||||
Income (loss) before taxes | 1,220,294 | (656,777 | ) | 1,443,829 | 989,752 | |||||||
Income tax (recovery) - current | 274,327 | (519,549 | ) | 445,910 | 186,385 | |||||||
Income tax (recovery) - future | (895,656 | ) | 237,017 | (2,819,817 | ) | 409,245 | ||||||
Income tax (recovery) expense | (621,329 | ) | (282,532 | ) | (2,373,907 | ) | 595,630 | |||||
NET INCOME (LOSS) FOR THE PERIOD | 1,841,623 | (374,245 | ) | 3,817,736 | 394,122 | |||||||
EARNINGS (LOSS) PER COMMON SHARE | ||||||||||||
BASIC | $ | 0.02 | $ | (0.01 | ) | $ | 0.05 | $ | 0.01 | |||
DILUTED | $ | 0.02 | $ | (0.01 | ) | $ | 0.04 | $ | - | |||
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||
BASIC | 84,347,213 | 73,839,538 | 81,058,745 | 62,527,430 | ||||||||
DILUTED | 103,503,490 | 91,309,778 | 100,215,022 | 79,997,670 |
The accompanying notes are an integral part of these consolidated financial statements
FIRST MAJESTIC SILVER CORP. |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS) |
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (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, 2007 | 63,042,160 | 145,699,783 | 9,286,155 | 17,315,001 | (15,186,207 | ) | (34,332,099 | ) | (49,518,306 | ) | 122,782,633 | |||||||||||||
Net income | - | - | - | - | - | 394,122 | 394,122 | 394,122 | ||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Translation adjustment | - | - | - | - | 7,431,319 | - | 7,431,319 | 7,431,319 | ||||||||||||||||
Unrealized loss on marketable securities | - | - | - | - | (391,000 | ) | - | (391,000 | ) | (391,000 | ) | |||||||||||||
Total comprehensive income | 7,434,441 | 7,434,441 | ||||||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Exercise of options | 436,650 | 1,762,556 | - | (363,990 | ) | - | - | - | 1,398,566 | |||||||||||||||
Exercise of warrants | 7,500 | 31,875 | - | - | - | - | - | 31,875 | ||||||||||||||||
First Silver arrangement | 1,861,500 | 9,009,660 | (9,009,660 | ) | - | - | - | - | - | |||||||||||||||
Public offering, net of issue costs (Note 12(a)(iv)) | 8,500,000 | 40,144,471 | - | 2,666,135 | - | - | - | 42,810,606 | ||||||||||||||||
Stock option expense during the period | - | - | - | 2,814,696 | - | - | - | 2,814,696 | ||||||||||||||||
Balance at September 30, 2008 | 73,847,810 | 196,648,345 | 276,495 | 22,431,842 | (8,145,888 | ) | (33,937,977 | ) | (42,083,865 | ) | 177,272,817 | |||||||||||||
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 | - | - | - | - | - | 3,817,736 | 3,817,736 | 3,817,736 | ||||||||||||||||
Other comprehensive loss: | ||||||||||||||||||||||||
Translation adjustment | - | - | - | - | (18,472,214 | ) | - | (18,472,214 | ) | (18,472,214 | ) | |||||||||||||
Unrealized gain on marketable securities | - | - | - | - | 20,500 | - | 20,500 | 20,500 | ||||||||||||||||
Total comprehensive loss | (14,633,978 | ) | (14,633,978 | ) | ||||||||||||||||||||
Shares issued for: | ||||||||||||||||||||||||
Exercise of options | 6,250 | 10,888 | - | (2,950 | ) | - | - | - | 7,938 | |||||||||||||||
Public offering, net of issue costs (Note 12(a)(i)) | 8,487,576 | 18,836,518 | - | 848,758 | - | - | - | 19,685,276 | ||||||||||||||||
Private placements, net of i ssue costs (Note 12(a)(ii)) | 4,167,478 | 9,051,069 | - | 389,000 | - | - | - | 9,440,069 | ||||||||||||||||
Debt settlements (Note 12(a)(iii)) | 1,191,852 | 2,741,260 | - | - | - | - | - | 2,741,260 | ||||||||||||||||
Stock option expense during the period | - | - | - | 2,203,394 | - | - | - | 2,203,394 | ||||||||||||||||
Balance at September 30, 2009 | 87,700,966 | 227,288,080 | 276,495 | 26,735,460 | (41,668,104 | ) | (35,659,147 | ) | (77,327,251 | ) | 176,972,784 |
(1) |
AOCI consists of the cumulative translation adjustment on self sustaining subsidiaries which primarily affects the mining interests, except for the unrealized gain of $20,500 (2008 - unrealized loss of $391,000) on marketable securities classified as "available for sale". |
The accompanying notes are an integral part of these consolidated financial statements
FIRST MAJESTIC SILVER CORP. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED) |
(Expressed in Canadian dollars) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||
$ | $ | $ | $ | |||||||||
OPERATING ACTIVITIES | ||||||||||||
Net income (loss) for the period | 1,841,623 | (374,245 | ) | 3,817,736 | 394,122 | |||||||
Adjustment for items not affecting cash | ||||||||||||
Depletion | 628,801 | 623,746 | 2,028,008 | 2,208,952 | ||||||||
Depreciation | 786,518 | 455,028 | 2,588,908 | 2,119,459 | ||||||||
Stock-based compensation | 505,847 | 1,035,864 | 2,203,394 | 2,814,696 | ||||||||
Accretion of reclamation obligation | 105,400 | 41,088 | 338,610 | 136,930 | ||||||||
Write-down of other assets | - | - | - | 240,000 | ||||||||
Future income taxes | (895,656 | ) | 237,017 | (2,819,817 | ) | 409,245 | ||||||
Unrealized gain on derivative financial instruments | (27,356 | ) | - | (27,356 | ) | - | ||||||
Other income from derivative financial instruments | (41,476 | ) | - | (520,673 | ) | - | ||||||
Unrealized foreign exchange loss and other | 1,367,344 | (411,034 | ) | 362,979 | (307,948 | ) | ||||||
4,271,045 | 1,607,464 | 7,971,789 | 8,015,456 | |||||||||
Net change in non-cash working capital items | ||||||||||||
Increase in accounts receivable and other receivables | (465,488 | ) | (1,862,280 | ) | (732,407 | ) | (2,454,963 | ) | ||||
(Increase) decrease in inventories | (489,119 | ) | (1,750,957 | ) | 1,167,687 | (2,545,640 | ) | |||||
Decrease (increase) in prepaid expenses and advances | 675,908 | (720,941 | ) | (1,526,495 | ) | (1,694,783 | ) | |||||
(Decrease) increase in accounts payable (net of settled debt) | (1,839,691 | ) | 1,364,826 | (4,673,978 | ) | 8,345,944 | ||||||
Increase in unearned revenue | 212,070 | - | 143,820 | - | ||||||||
Increase (decrease) in taxes payable | 269,791 | (744,381 | ) | 71,110 | (321,644 | ) | ||||||
(Decrease) increase in vendor liability and interest | (226,998 | ) | - | (948,079 | ) | 399,112 | ||||||
2,407,518 | (2,106,269 | ) | 1,473,447 | 9,743,482 | ||||||||
INVESTING ACTIVITIES | ||||||||||||
Expenditures on mineral property interests (net of accruals) | (4,106,347 | ) | (11,283,988 | ) | (9,128,375 | ) | (23,821,246 | ) | ||||
Additions to plant and equipment (net of accruals) | (6,880,693 | ) | (8,498,145 | ) | (14,354,368 | ) | (14,491,198 | ) | ||||
(Increase) decrease in silver futures contract deposits | (147,594 | ) | - | 822,034 | - | |||||||
(Increase) decrease in deposits on long term assets and other | (2,246,905 | ) | 5,031,931 | (2,246,905 | ) | 1,188,625 | ||||||
Decrease in restricted cash securitizing vendor liability | 545,522 | - | - | - | ||||||||
(12,836,017 | ) | (14,750,202 | ) | (24,907,614 | ) | (37,123,819 | ) | |||||
FINANCING ACTIVITIES | ||||||||||||
Issuance of common shares and warrants, net of issue costs | 9,439,404 | 267,978 | 29,125,345 | 42,834,806 | ||||||||
Exercise of options and warrants | - | 24,200 | 7,938 | 1,430,441 | ||||||||
Payment of capital lease obligations | (1,047,905 | ) | - | (2,108,979 | ) | - | ||||||
Prepayment facility, net of repayments | 1,394,752 | - | 1,394,752 | - | ||||||||
Payment of restricted cash into trust account | (14,258,332 | ) | - | (14,258,332 | ) | - | ||||||
Payment of short-term Arrangement liability | - | (388,836 | ) | - | (388,836 | ) | ||||||
(4,472,081 | ) | (96,658 | ) | 14,160,724 | 43,876,411 | |||||||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (14,900,580 | ) | (16,953,129 | ) | (9,273,443 | ) | 16,496,074 | |||||
EFFECT OF EXCHANGE RATE ON CASH HELD IN FOREIGN CURRENCY | 11,383 | 78,933 | 17,529 | 19,266 | ||||||||
CASH AND CASH EQUIVALENTS - BEGINNING OF THE PERIOD | 23,057,406 | 46,224,719 | 17,424,123 | 12,835,183 | ||||||||
CASH AND CASH EQUIVALENTS - END OF THE PERIOD | 8,168,209 | 29,350,523 | 8,168,209 | 29,350,523 | ||||||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: | - | |||||||||||
Cash | 7,574,496 | 227,099 | 7,574,496 | 227,099 | ||||||||
Short-term deposits | 593,713 | 15,184,129 | 593,713 | 15,184,129 | ||||||||
Restricted cash (Notes 4 and 9) | - | 13,939,295 | - | 13,939,295 | ||||||||
8,168,209 | 29,350,523 | 8,168,209 | 29,350,523 | |||||||||
Interest paid | 200,073 | 144,471 | 475,843 | 156,136 | ||||||||
Income taxes paid | - | - | - | 221,108 | ||||||||
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 CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
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, FR.WT.A 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 primarily on the price of silver in global commodity markets, and on maintaining sustained, profitable operations and/or obtaining funds from other sources as required for capital developments. If the Company were unable to continue as a going concern, material adjustments would be required to the carrying value of assets and liabilities and the balance sheet classifications used.
2. | BASIS OF PRESENTATION |
The consolidated financial statements of the Company have been prepared by management in accordance with Canadian generally accepted accounting principles (GAAP) with respect to the preparation of interim financial information. Accordingly, they do not include all the information and disclosures required by Canadian GAAP in the preparation of annual financial statements. Certain information and footnote disclosure normally included in consolidated financial statements prepared in accordance with GAAP have been omitted. The accounting policies, used in preparation of the accompanying unaudited interim consolidated financial statements, are the same as those described in our most recent annual consolidated financial statements. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results for the entire year. These interim financial statements should be read in conjunction with the Companys latest audited consolidated financial statements for the year ended December 31, 2008.
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) and First Silver Reserve Inc. (First Silver) 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) and Majestic Services S.A. de C.V. (Majestic Services). 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 9. Intercompany balances and transactions are eliminated on consolidation.
The financial statements of Mexican subsidiaries are translated to Canadian dollars using the current rate method and translation losses and gains are recorded as a separate component of accumulated other comprehensive income.
1
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
3. | CHANGES IN SIGNIFICANT ACCOUNTING POLICIES |
The CICA issued the new Handbook Section 3064, Goodwill and Intangible Assets, which establishes revised standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. The new standard also provides guidance for the treatment of preproduction and start-up costs and requires that these costs be expensed as incurred. The new standard is effective for the Company beginning January 1, 2009.
The CICA issued the new Handbook Section 1582, Business Combinations, Section 1601 Consolidations and Section 1602 Non-controlling Interests to harmonize with International Financial Reporting Standards (IFRS). 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. These new standards become effective beginning on or after January 1, 2011, but early adoption is permitted.
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 for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The transition date of January 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for all the periods ended after January 1, 2010.
We have begun planning our transition to IFRS but the impact on our consolidated financial position and results of operations has not yet been determined.
4. | RESTRICTED CASH |
On July 22, 2008, the Company secured its outstanding vendor liability (Note 9) by entering into a Letter of Credit facility for $13,940,237, secured by cash and liquid short term investments. In addition, a further $545,522 was paid into the Supreme Court of British Columbia in January 2009 and the Letter of Credit increased to a total Restricted Cash balance of $14,485,759. On July 16, 2009, the Company agreed to a consent order whereby $14,258,332 was paid out of the Letter of Credit to the trust account of the lawyers of the prior Majority Shareholder of First Silver. The remaining $227,420 was paid out to the Company and the Letters of Credit were cancelled. The consent order requires that the $14,258,332 be held in trust by legal counsel pending the outcome of the litigation. At December 31, 2008, the cash was not available for general corporate purposes. These funds will be accessible to the Company in the event of a favourable outcome to the litigation.
5. | OTHER RECEIVABLES |
Details of the components of other receivables are as follows:
September 30, 2009 | December 31, 2008 | |||||
$ | $ | |||||
Value added taxes recoverable | 5,520,587 | 6,109,943 | ||||
Other taxes recoverable | 102,918 | 406,536 | ||||
Interest receivable | 4,996 | 188,111 | ||||
Advances to employees | 130,002 | 67,240 | ||||
Advances to suppliers | 474,121 | 440,863 | ||||
6,232,624 | 7,212,693 |
2
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
6. | INVENTORIES |
Inventories consist of the following:
September 30, 2009 | December 31, 2008 | |||||
$ | $ | |||||
Silver coins and bullion including in process shipments | 323,469 | 572,149 | ||||
Finished product - doré and concentrates | 755,177 | 1,017,769 | ||||
Ore in process | 166,431 | 196,169 | ||||
Stockpile | 516,044 | 1,631,625 | ||||
Materials and supplies | 1,602,570 | 1,523,628 | ||||
3,363,691 | 4,941,340 |
7. | PREPAID EXPENSES AND OTHER |
Details of prepaid expenses and other are as follows:
September 30, 2009 | December 31, 2008 | |||||
$ | $ | |||||
Advances to suppliers and contractors | 1,898,731 | 1,380,509 | ||||
Deposits | 224,620 | 252,941 | ||||
Marketable securities | 70,875 | 50,375 | ||||
Derivative financial instruments | 113,012 | 490,431 | ||||
2,307,238 | 2,174,256 |
8. | MINING INTERESTS AND PLANT AND EQUIPMENT |
Expenditures incurred on mining interests, net of accumulated depreciation and depletion, are as follows:
September 30, 2009 | December 31, 2008 | |||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||
depreciation | depreciation | |||||||||||||||||
and | Net Book | and | Net Book | |||||||||||||||
Cost | depletion | Value | Cost | depletion | Value | |||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||
Mining properties | 160,985,262 | 16,464,798 | 144,520,464 | 167,130,756 | 14,436,791 | 152,693,965 | ||||||||||||
Plant and equipment | 61,434,723 | 7,804,139 | 53,630,584 | 48,271,432 | 6,144,052 | 42,127,380 | ||||||||||||
222,419,985 | 24,268,937 | 198,151,048 | 215,402,188 | 20,580,843 | 194,821,345 |
3
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
8. | MINING INTERESTS AND PLANT AND EQUIPMENT (continued) |
A summary of the net book value of mining properties is as follows:
September 30, 2009 | December 31, 2008 | |||||||||||||||||
Accumulated | Net Book | Accumulated | Net Book | |||||||||||||||
Cost | Depletion | Value | Cost | Depletion | Value | |||||||||||||
MEXICO | $ | $ | $ | $ | $ | $ | ||||||||||||
Producing properties | ||||||||||||||||||
La Encantada (a) | 11,076,403 | 2,718,943 | 8,357,460 | 8,922,466 | 2,276,963 | 6,645,503 | ||||||||||||
La Parrilla (b) | 20,479,317 | 2,648,129 | 17,831,188 | 18,644,777 | 2,038,223 | 16,606,554 | ||||||||||||
San Martin (c) | 35,549,870 | 11,097,726 | 24,452,144 | 36,803,283 | 10,121,605 | 26,681,678 | ||||||||||||
67,105,590 | 16,464,798 | 50,640,792 | 64,370,526 | 14,436,791 | 49,933,735 | |||||||||||||
Exploration properties | ||||||||||||||||||
La Encantada (a) | 3,266,126 | - | 3,266,126 | 2,858,043 | - | 2,858,043 | ||||||||||||
La Parrilla (b) | 8,355,437 | - | 8,355,437 | 8,722,897 | - | 8,722,897 | ||||||||||||
San Martin (c) (1) | 68,176,278 | - | 68,176,278 | 77,582,247 | - | 77,582,247 | ||||||||||||
Del Toro (d) | 11,641,929 | - | 11,641,929 | 11,881,557 | - | 11,881,557 | ||||||||||||
Cuitaboca (e) | 2,439,902 | - | 2,439,902 | 1,715,486 | - | 1,715,486 | ||||||||||||
93,879,672 | - | 93,879,672 | 102,760,230 | - | 102,760,230 | |||||||||||||
160,985,262 | 16,464,798 | 144,520,464 | 167,130,756 | 14,436,791 | 152,693,965 |
(1) |
This includes properties acquired from First Silver and held by Minera El Pilon. The properties are located in the San Martin de Bolaños region, as well as in Jalisco State (the Jalisco Group of Properties). |
A summary of plant and equipment is as follows:
September 30, 2009 | December 31, 2008 | |||||||||||||||||
Accumulated | Net Book | Accumulated | Net Book | |||||||||||||||
Cost | Depreciation | Value | Cost | Depreciation | Value | |||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||
La Encantada Silver Mine | 35,112,511 | 1,734,091 | 33,378,420 | 19,541,421 | 1,221,301 | 18,320,120 | ||||||||||||
La Parrilla Silver Mine | 16,981,477 | 3,388,731 | 13,592,746 | 18,590,746 | 2,568,373 | 16,022,373 | ||||||||||||
San Martin Silver Mine | 9,340,735 | 2,681,317 | 6,659,418 | 10,139,265 | 2,354,378 | 7,784,887 | ||||||||||||
Us ed in Mining Operations | 61,434,723 | 7,804,139 | 53,630,584 | 48,271,432 | 6,144,052 | 42,127,380 | ||||||||||||
Corporate office equipment | 736,114 | 339,313 | 396,801 | 712,525 | 229,475 | 483,050 | ||||||||||||
62,170,837 | 8,143,452 | 54,027,385 | 48,983,957 | 6,373,527 | 42,610,430 |
Details of plant and equipment and corporate office equipment by specific assets are as follows:
September 30, 2009 | December 31, 2008 | |||||||||||||||||
Accumulated | Net Book | Accumulated | Net Book | |||||||||||||||
Cost | Depreciation | Value | Cost | Depreciation | Value | |||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||
Land | 2,269,421 | - | 2,269,421 | 2,302,273 | - | 2,302,273 | ||||||||||||
Automobile | 375,178 | 183,110 | 192,068 | 427,817 | 140,703 | 287,114 | ||||||||||||
Buildings | 5,867,189 | 523,623 | 5,343,566 | 6,250,748 | 399,982 | 5,850,766 | ||||||||||||
Machinery and equipment | 25,597,220 | 6,582,891 | 19,014,329 | 27,744,171 | 5,053,326 | 22,690,845 | ||||||||||||
Computer equipment | 511,613 | 260,256 | 251,357 | 566,511 | 239,162 | 327,349 | ||||||||||||
Office equipment | 553,378 | 448,881 | 104,497 | 600,413 | 447,405 | 153,008 | ||||||||||||
Leasehold improvements | 320,304 | 144,691 | 175,613 | 320,304 | 92,949 | 227,355 | ||||||||||||
Construction in progress (1) | 26,676,534 | - | 26,676,534 | 10,771,720 | - | 10,771,720 | ||||||||||||
62,170,837 | 8,143,452 | 54,027,385 | 48,983,957 | 6,373,527 | 42,610,430 |
(1) |
Construction in progress includes $24,436,753 relating to La Encantada, $523,770 relating to La Parrilla and $1,716,011 relating to San Martin. |
4
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
8. | MINING INTERESTS AND PLANT AND EQUIPMENT (continued) |
Mineral property options paid and future option payments in U.S. dollars are due as follows:
Del Toro | Cuitaboca | ||||||||
Note 8(d) | Note 8(e) | Total | |||||||
(US$) | (US$) | (US$) | |||||||
Paid as at September 30, 2009 | 5,925,000 | 1,175,000 | 7,100,000 | ||||||
Payable November 25, 2009 | - | 275,000 | 275,000 | ||||||
Payable December 6, 2009 | 62,500 | - | 62,500 | ||||||
Payable before December 31, 2009 | 62,500 | 275,000 | 337,500 | ||||||
Payable in 2010 and beyond | 225,000 | 1,050,000 | 1,275,000 | ||||||
Total Future Option Payments | 287,500 | 1,325,000 | 1,612,500 |
(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 de Boquillas del Cármen, is 45 kilometres away via unpaved road. The La Encantada Silver Mine consists of a 1,000 tonnes per day flotation plant, an airstrip, and other facilities, including a village with 180 houses as well as administrative offices. The Company owns 100% of the La Encantada Silver Mine.
The Company is in the final stages of constructing a 3,500 tonne per day cyanidation plant at La Encantada which began commissioning in August 2009 and is expected to be fully commissioned by the end of 2009.
(b) | La Parrilla Silver Mine, Durango State |
The La Parrilla Silver Mine is a system of connecting 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 kilometres southeast of the city of Durango, in Durango state Mexico. Located at the mine are: mining equipment, a 425 tonne-per-day cyanidation plant, a 425 tonne-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, which began commercial silver production in October 2004.
In 2008, the Company amended payment terms to an optionor regarding the outstanding payments as at December 31, 2008 on the Quebradillas Mine. In regards to the aggregate of US$749,000 which was previously payable in 2008, the Company has agreed to make a series of payments in 2009 totaling US$1,121,160 which includes interest at an annualized fixed rate of 4.5% . During the nine months ended September 30, 2009, the Company made payments totaling US$855,021 (of which US$209,009 related to interest) pursuant to the amended agreements.
There is a net smelter royalty agreement (NSR) of 1.5% of sales revenue from the Quebradillas Mine to a maximum of US$2,500,000 and an option to purchase the NSR at any time for US$2,000,000. For the period ended September 30, 2009, the Company paid US$102,131 (December 31, 2008 US$69,000) relating to royalties.
5
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
8. | MINING INTERESTS AND PLANT AND EQUIPMENT (continued) |
(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 land rights surrounding the mine, and another 104 hectares of surface rights where the 950 tonnes per day cyanidation mill, flotation circuit, mine buildings and 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 from the Companys La Parrilla Silver Mine and consists of 320 contiguous hectares of mining claims plus an additional 100 hectares of surface rights covering the area surrounding the San Juan mine. The Del Toro operation represents the consolidation of two old silver mines, the Perseverancia and San Juan mines, which are approximately one kilometre apart.
The Company owns 100% of the Perseverancia Silver Mine, the San Juan Silver Mine and the surrounding 293 hectare land package.
(e) | Cuitaboca Silver Project, Sinaloa State |
The Cuitaboca Silver Project, located in Sinaloa State, Mexico, consists of an option to acquire a 5,134 hectare land package. This option was acquired in May 2006 through the acquisition of First Silver and its wholly owned subsidiary, El Pilon.
The Company entered into an option agreement in November 2004 with Consorcio Minero Latinamericano, S.A. de C.V., a private Mexican company owned by a former director of First Silver, for the purchase of a 100% interest in seven mining claims covering 3,718 hectares located in Sinaloa State, Mexico. To purchase the claims, the Company needs to pay US$2,500,000 in staged cash payments through November, 2010 (US$1,175,000 paid as at September 30, 2009). A 2.5% NSR on the claims may be purchased at any time during the term of the agreement or for a period of 12 months thereafter for an additional US$500,000.
9. | VENDOR LIABILITY AND INTEREST |
In May 2006, First Majestic acquired control of First Silver Reserve Inc. (First Silver) for $53,365,519. The purchase price was payable to the majority shareholder of First Silver (the Majority Shareholder) in three instalments. The first instalment of $26,682,759, for 50% of the purchase price, was paid upon closing on May 30, 2006. An additional 25% instalment of $13,341,380 was paid on May 30, 2007, the first anniversary of the closing. The final 25% instalment of $13,341,380 was due on May 30, 2008, the second anniversary of the closing of the acquisition. Simple interest at 6% per annum was payable quarterly on the outstanding vendor balance.
In November 2007, an action was commenced by the Company and First Silver against the Majority Shareholder who previously was a director, President & Chief Executive Officer of First Silver. The Company and First Silver allege 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.
6
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
9. | VENDOR LIABILITY AND INTEREST (continued) |
Pending resolution of the litigation set out above, the Company had withheld payments of interest due to the previous Majority Shareholder on scheduled interest payment dates of November 30, 2007, February 29, 2008 and May 30, 2008, as well as payment of the final instalment of $13,341,380 due May 30, 2008, the combined amounts totalling $13,940,237. On July 22, 2008, the Company posted an irrevocable Letter of Credit with the Supreme Court of British Columbia pending the court outcome which is not anticipated for at least one year or until such litigation has been resolved. In January 2009, a further $545,522 was paid into the Supreme Court of British Columbia for additional interest payments and was added to the Letter of Credit posted to the Supreme Court of British Columbia.
On July 16, 2009, the Company agreed to a consent order with the prior Majority Shareholder, with respect to the $14,485,759 posted by a Letter of Credit securing the vendor liability and interest. Pursuant to the order, $14,258,332 was paid out of the Letter of Credit to the trust account of the lawyers of the prior Majority Shareholder. The remaining $227,420 was paid out to the Company and the Letters of Credit were cancelled. The consent order requires that the $14,258,332 be held in trust pending the outcome of the litigation. These funds will be accessible to the Company in the event of a favourable outcome to the litigation.
10. | DEBT FACILITY |
In August 2009, the 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, 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.
A total of US$1.5 million was drawn down and at September 30, 2009, the balance was US$1,314,767 after shipments were deducted and US$13,125 was payable for interest.
11. | 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:
September 30, 2009 | December 31, 2008 | |||||
$ | $ | |||||
Deposit on equipment at La Encantada | 2,671,267 | 1,986,517 | ||||
Deposit on equipment at La Parrilla | 1,360,200 | - | ||||
4,031,467 | 1,986,517 |
7
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
12. | SHARE CAPITAL |
(a) | Authorized unlimited number of common shares without par value |
Issued | Nine months ended September 30, 2009 | Year ended December 31, 2008 | ||||||||||
Shares | $ | Shares | $ | |||||||||
Balance - beginning of the period | 73,847,810 | 196,648,345 | 63,042,160 | 145,699,783 | ||||||||
Issued during the period | ||||||||||||
For cash: | ||||||||||||
Exercise of options | 6,250 | 7,938 | 436,650 | 1,398,566 | ||||||||
Exercise of warrants | - | - | 7,500 | 31,875 | ||||||||
Public offering of units (i) (iv) | 8,487,576 | 18,836,518 | 8,500,000 | 40,144,471 | ||||||||
Private placements (ii) | 4,167,478 | 9,051,069 | - | - | ||||||||
For debt s ettlements (iii) | 1,191,852 | 2,741,260 | - | - | ||||||||
For First Silver Arrangement | - | - | 1,861,500 | 9,009,660 | ||||||||
Transfer of contributed surplus for stock options exercised | - | 2,950 | - | 363,990 | ||||||||
Balance - end of the period | 87,700,966 | 227,288,080 | 73,847,810 | 196,648,345 |
(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 $19,685,276, of which $18,836,518 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 additional common share at a price of $3.50 expiring on March 5, 2011. The underwriters had an option, exercisable up until 30 days following closing of the offering, to purchase up to an additional 1,273,136 common shares at a price of $2.40 per share and up to an additional 636,568 warrants at a price of $0.20 per warrant. The underwriters did not exercise their option to purchase the option shares or warrants. |
| |
(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. |
| |
(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. |
8
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
12. | SHARE CAPITAL (continued) |
(iv) |
On March 25, 2008, the Company completed a public offering with a syndicate of underwriters who purchased 8,500,000 units at an issue price of $5.35 per unit for net proceeds to the Company of $42,881,471, of which $40,144,471 was allocated to the common shares, $2,380,000 was allocated to the warrants and $357,000 was allocated to the underwriters 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 additional common share at a price of $7.00 expiring on March 25, 2010. The underwriters had an option, exercisable up until 30 days following closing of the offering, to purchase up to an additional 1,275,000 common shares at a price of $5.07 per share and up to an additional 637,500 warrants at a price of $0.56 per warrant. The underwriters did not exercise their option to purchase any option shares, but did acquire the 637,500 warrants (see Note 12(c)). |
(b) | Stock Options |
Under the terms of the Companys Stock Option Plan, the maximum number of shares reserved for issuance under the 2008 Plan is 10% of the issued shares on a rolling basis. Options may be exercisable over periods of up to five years as determined by the board of directors of the Company and the exercise price shall not be less than the closing price of the shares on the day preceding the award date, subject to regulatory approval. All stock options are subject to vesting with 25% vesting upon issuance and 25% vesting each six months thereafter.
The changes in stock options outstanding for the nine months ended September 30, 2009 and the year ended December 31, 2008 are as follows:
Nine Months Ended September 30, 2009 | Year Ended December 31, 2008 | |||||||||||||||||
Weighted | Weighted | |||||||||||||||||
Average | Weighted | Average | Weighted | |||||||||||||||
Number of | Exercise Price | Average | Number of | Exercise Price | Average | |||||||||||||
Shares | ($) | Remaining Life | Shares | ($) | Remaining Life | |||||||||||||
Balance, beginning of the period | 6,862,500 | 3.84 | 2.78 years | 5,892,500 | 4.04 | 2.75 years | ||||||||||||
Granted | 1,347,500 | 2.06 | 3.71 years | 2,672,500 | 2.93 | 3.67 years | ||||||||||||
Exercised | (6,250 | ) | 1.27 | 2.78 years | (436,650 | ) | 3.20 | 0.51 years | ||||||||||
Forfeited or expired | (312,500 | ) | 4.04 | 1.54 years | (1,265,850 | ) | 3.05 | 0.45 years | ||||||||||
Balance, end of the period | 7,891,250 | 3.53 | 2.28 years | 6,862,500 | 3.84 | 2.78 years |
9
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
12. | SHARE CAPITAL (continued) |
(b) | Stock Options (continued) |
The following table summarizes both the stock options outstanding and those that are exercisable at September 30, 2009:
Price | Options | Options | |||||||
$ | Outstanding | Exercisable | Expiry Dates | ||||||
4.32 | 575,000 | 575,000 | December 6, 2009 | ||||||
5.50 | 200,000 | 200,000 | February 1, 2010 | ||||||
4.64 | 75,000 | 75,000 | June 1, 2010 | ||||||
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 | 545,000 | 545,000 | October 30, 2010 | ||||||
4.34 | 50,000 | 50,000 | November 1, 2010 | ||||||
4.42 | 25,000 | 25,000 | November 12, 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 | 15,000 | April 26, 2011 | ||||||
4.02 | 100,000 | 75,000 | May 15, 2011 | ||||||
4.30 | 450,000 | 450,000 | June 19, 2011 | ||||||
4.67 | 120,000 | 90,000 | July 4, 2011 | ||||||
4.15 | 300,000 | 225,000 | July 28, 2011 | ||||||
3.62 | 635,000 | 476,250 | August 28, 2011 | ||||||
1.60 | 200,000 | 100,000 | October 8, 2011 | ||||||
1.27 | 118,750 | 56,250 | 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 | 790,000 | 197,500 | May 7, 2012 | ||||||
4.65 | 25,000 | 25,000 | June 20, 2012 | ||||||
2.40 | 12,500 | 3,125 | August 10, 2012 | ||||||
2.62 | 60,000 | 15,000 | September 16, 2012 | ||||||
4.34 | 925,000 | 925,000 | December 5, 2012 | ||||||
3.62 | 100,000 | 75,000 | August 28, 2013 | ||||||
1.44 | 240,000 | 120,000 | November 10, 2013 | ||||||
1.56 | 550,000 | 275,000 | December 17, 2013 | ||||||
2.03 | 462,500 | 115,625 | May 7, 2014 | ||||||
2.32 | 12,500 | 3,125 | June 15, 2014 | ||||||
7,891,250 | 6,011,875 |
During the nine months ended September 30, 2009, the Company granted stock options to directors, officers and employees to purchase 1,347,500 shares of the Company. Pursuant to the Companys policy of accounting for the fair value of stock-based compensation over the applicable vesting period, $2,203,394 has been recorded as an expense in the nine months ended September 30, 2009 relating to all stock options.
The fair value of stock options granted is estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions:
10
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
12. | SHARE CAPITAL (continued) |
(b) | Stock Options (continued) |
Nine Months ended | Nine Months ended | |
September 30, 2009 | September 30, 2008 | |
Risk-free interest rate | 0.9% | 2.9% |
Estimated volatility | 80.6% | 53.8% |
Expected life | 2.4 years | 1.9 years |
Expected dividend yield | 0% | 0% |
Option pricing models require the use of estimates and assumptions including the expected volatility of share prices. Changes in the underlying assumptions can materially affect the fair value estimates, therefore, existing models do not necessarily provide an accurate measure of the actual fair value of the Companys stock options.
(c) | Share Purchase Warrants |
The changes in share purchase warrants for the nine months ended September 30, 2009 and the year ended December 31, 2008 are as follows:
Nine months ended September 30, 2009 | Year ended December 31, 2008 | |||||||||||||||||
Weighted | Weighted | |||||||||||||||||
Average | Weighted | Average | Weighted | |||||||||||||||
Number of | Exercise Price | Average Term to | Number of | Exercise Price | Average Term to | |||||||||||||
Warrants | ($) | Expiry | Warrants | ($) | Expiry | |||||||||||||
Balance, beginning of the period | 5,078,791 | 6.99 | 1.19 years | 5,845,240 | 5.66 | 0.89 years | ||||||||||||
Issued (i) (ii) (iii) (iv) (v) | 6,377,527 | 3.43 | 2.00 years | 4,887,500 | 7.00 | 2.00 years | ||||||||||||
Exercised | - | 0.00 | 0.00 years | (7,500 | ) | 4.25 | 0.86 years | |||||||||||
Cancelled or expired | (191,291 | ) | 6.81 | 0.00 years | (5,646,449 | ) | 5.62 | 0.00 years | ||||||||||
Balance, end of the period | 11,265,027 | 4.98 | 1.11 years | 5,078,791 | 6.99 | 1.19 years |
(i) |
On March 5, 2009, the Company issued 4,243,788 warrants exercisable at a price of $3.50 per share exercisable 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 $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 $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. 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 $60,953 was credited to contributed surplus. |
11
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
12. | SHARE CAPITAL (continued) |
(c) | Share Purchase Warrants (continued) |
(iv) |
On March 25, 2008, the Company issued 4,250,000 warrants exercisable at a price of $7.00 per share exercisable for a period of two years. The warrants were detachable warrants issued in connection with the 8.5 million unit offering. The fair value of the warrants was estimated using the Black-Scholes Option Pricing Model (assumptions include a risk free rate of 2.74%, market sector volatility of 42%, expected life of 2 years and expected dividend yield of 0%) and $2,380,000 was credited to contributed surplus. |
(v) |
On April 4, 2008, the Company issued 637,500 warrants exercisable at a price of $7.00 per share exercisable for a period of two years under the over-allotment option in connection with the March 25, 2008 public offering. Each warrant entitles the holder to acquire one additional common share at a price of $7.00 until March 25, 2010. The fair value of the warrants was estimated using the Black-Scholes Option Pricing Model (assumptions include a risk free rate of 2.74%, market sector volatility of 42%, expected life of 2 years and expected dividend yield of 0%) and $357,000 was credited to contributed surplus. |
The following table summarizes the share purchase warrants outstanding at September 30, 2009:
Exercise Price | Warrants | |||||
$ | Outstanding | Expiry Dates | ||||
7.00 | 4,887,500 | March 25, 2010 | ||||
3.50 | 4,243,788 | March 5, 2011 | ||||
3.30 | 1,799,500 | August 20, 2011 | ||||
3.30 | 334,239 | September 16, 2011 | ||||
11,265,027 |
(d) | Share Capital to be Issued |
On June 5, 2006, pursuant to the acquisition of First Silver Reserve Inc. and the San Martin mine, First Majestic and First Silver entered into a business combination agreement whereby First Majestic acquired the 36.25% remaining minority interest in securities of First Silver resulting in First Silver becoming a wholly owned subsidiary of First Majestic.
At September 30, 2009, the prior shareholders of First Silver had yet to exchange the remaining 114,254 shares of First Silver, exchangeable for 57,127 shares of First Majestic resulting in a remaining balance 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.
12
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
13. | REVENUE |
Details of the components of revenue are as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||
$ | $ | $ | $ | |||||||||
Combined revenue - silver doré bars, concentrates, coins and ingots | 17,715,392 | 13,853,479 | 53,183,047 | 44,390,294 | ||||||||
Less: intercompany eliminations | (869,506 | ) | - | (3,093,428 | ) | - | ||||||
Consolidated gross revenue | 16,845,886 | 13,853,479 | 50,089,619 | 44,390,294 | ||||||||
Less: refining and smelting charges, net of intercompany eliminations | (2,440,169 | ) | (2,515,593 | ) | (7,146,631 | ) | (7,662,158 | ) | ||||
Less: metal deductions, net of intercompany eliminations | (680,914 | ) | (520,675 | ) | (1,806,436 | ) | (1,509,854 | ) | ||||
Net revenue | 13,724,803 | 10,817,211 | 41,136,552 | 35,218,282 |
14. | RELATED PARTY TRANSACTIONS |
During the period ended September 30, 2009, the Company:
a) |
incurred $213,281 for the nine month period ended September, 2009 and $65,533 for the quarter ended September 30, 2009 (nine months ended September 30, 2008 - $197,359; quarter ended September 30, 2008 - $77,086) for management services provided by the President & CEO and/or a corporation controlled by the President & CEO of the Company pursuant to a consulting agreement. | |
b) |
incurred $211,733 for the nine month period ended September 30, 2009 and $65,271 for the quarter ended September 30, 2009 (nine months ended September 30, 2008 - $215,624; quarter ended September 30, 2008 - $76,519) to a director and Chief Operating Officer for management and other services related to the mining operations of the Company in Mexico pursuant to a consulting agreement. | |
c) |
incurred $1,269,751 of service fees during the nine month period September 30, 2009 and $nil for the quarter ended September 30, 2009 (nine months ended September 30, 2008 - $6,618,301; quarter ended September 30, 2008 - $2,411,178) to a mining services company sharing our premises in Durango Mexico. This related party provided management services and paid mining contractors who provided services at the Companys mines in Mexico for the period January 1 to February 28, 2009. Of the fees incurred, $165,227 was unpaid as at September 30, 2009 (September 30, 2008 - $3,075,105). This relationship was terminated in February 2009. | |
d) |
incurred $nil for the nine month period ended September 30, 2009 (nine months ended September 30, 2008 - $7,365) to a director of the Company as finders fees upon the completion of certain option agreements relating to Del Toro. |
Amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties.
13
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
15. | SEGMENTED INFORMATION |
The Company considers that it has three operating segments all of which are located in Mexico, and one corporate segment with locations in Canada and Mexico. The El Pilon operations consist of the San Martin Silver Mine, the San Martin property, the Cuitaboca Silver Project and the Jalisco Group of Properties. The First Majestic Plata 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 September 30, 2009 | |||||||||||||||
First Majestic | Corporate | ||||||||||||||
El Pilon | Plata | La Encantada | and Other | ||||||||||||
operations | operations | operations | Eliminations | Total | |||||||||||
$ | $ | $ | $ | $ | |||||||||||
Revenue | 4,718,691 | 5,759,291 | 3,385,341 | (138,520 | ) | 13,724,803 | |||||||||
Cost of sales | 2,959,383 | 2,774,983 | 2,499,113 | (179,092 | ) | 8,054,387 | |||||||||
Amortization, depreciation and accretion | 233,101 | 398,615 | 260,202 | - | 891,918 | ||||||||||
Depletion | 261,601 | 230,839 | 136,361 | - | 628,801 | ||||||||||
Mine operating earnings | 1,264,606 | 2,354,854 | 489,665 | 40,572 | 4,149,697 | ||||||||||
General and administrative | - | - | - | 1,724,437 | 1,724,437 | ||||||||||
Stock-based compensation | - | - | - | 505,847 | 505,847 | ||||||||||
Net interest, other income (expense) and foreign exchange | (284,100 | ) | (431,960 | ) | (1,024,015 | ) | 1,040,956 | (699,119 | ) | ||||||
Income tax expense (recovery) | (15,639 | ) | 143,549 | (67,837 | ) | (681,402 | ) | (621,329 | ) | ||||||
Net income (loss) | 996,145 | 1,779,345 | (466,513 | ) | (467,354 | ) | 1,841,623 | ||||||||
Capital expenditures | 1,837,554 | 1,918,056 | 9,856,121 | 32,010 | 13,643,741 | ||||||||||
Total assets | 105,384,737 | 57,579,107 | 52,969,873 | 8,826,808 | 224,760,525 |
Three months ended September 30, 2008 | |||||||||||||||
First Majestic | Corporate | ||||||||||||||
El Pilon | Plata | La Encantada | and Other | ||||||||||||
operations | operations | operations | Eliminations | Total | |||||||||||
$ | $ | $ | $ | $ | |||||||||||
Revenue | 3,588,564 | 4,138,741 | 3,360,423 | (270,517 | ) | 10,817,211 | |||||||||
Cost of sales | 3,253,495 | 2,861,629 | 2,133,194 | (270,517 | ) | 7,977,801 | |||||||||
Amortization, depreciation and accretion | 424,080 | (44,733 | ) | 83,320 | 33,449 | 496,116 | |||||||||
Depletion | 359,679 | 97,789 | 166,278 | - | 623,746 | ||||||||||
Mine operating earnings (loss) | (448,690 | ) | 1,224,056 | 977,631 | (33,449 | ) | 1,719,548 | ||||||||
General and administrative | - | - | - | 1,521,567 | 1,521,567 | ||||||||||
Stock-based compensation | - | - | - | 1,035,864 | 1,035,864 | ||||||||||
Net interest, other income (expense) and foreign exchange | (752,680 | ) | (1,540,785 | ) | (7,872 | ) | 2,482,443 | 181,106 | |||||||
Income tax (recovery) expense | 475,250 | (683,293 | ) | (1,164,753 | ) | 1,090,264 | (282,532 | ) | |||||||
Net income (loss) | (1,676,620 | ) | 366,564 | 2,134,512 | (1,198,701 | ) | (374,245 | ) | |||||||
Capital expenditures | 2,980,550 | 5,575,209 | 9,143,135 | 28,506 | 17,727,400 | ||||||||||
Total a ssets | 130,472,670 | 61,756,284 | 29,037,518 | 31,371,230 | 252,637,702 |
14
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
15. | SEGMENTED INFORMATION (continued) |
Nine months ended September 30, 2009 | |||||||||||||||
First | |||||||||||||||
Majestic | Corporate | ||||||||||||||
El Pilon | Plata | La Encantada | and Other | ||||||||||||
operations | operations | operations | Eliminations | Total | |||||||||||
$ | $ | $ | $ | $ | |||||||||||
Revenue | 14,302,897 | 14,901,581 | 11,511,799 | 420,275 | 41,136,552 | ||||||||||
Cost of sales | 9,019,559 | 8,912,772 | 7,572,042 | 308,695 | 25,813,068 | ||||||||||
Amortization, depreciation and accretion | 724,401 | 1,411,104 | 792,013 | - | 2,927,518 | ||||||||||
Depletion | 976,122 | 609,906 | 441,980 | - | 2,028,008 | ||||||||||
Mine operating earnings | 3,582,815 | 3,967,799 | 2,705,764 | 111,580 | 10,367,958 | ||||||||||
General and administrative | - | - | - | 5,656,753 | 5,656,753 | ||||||||||
Stock-based compensation | - | - | - | 2,203,394 | 2,203,394 | ||||||||||
Net interest, other income (expense) and foreign exchange | (504,503 | ) | (176,033 | ) | (887,119 | ) | 503,673 | (1,063,982 | ) | ||||||
Income tax (recovery) expense | (68,934 | ) | 37,805 | (93,496 | ) | (2,249,282 | ) | (2,373,907 | ) | ||||||
Net income (loss) | 3,147,246 | 3,753,961 | 1,912,141 | (4,995,612 | ) | 3,817,736 | |||||||||
Capital expenditures | 2,961,596 | 5,003,771 | 20,954,415 | 163,854 | 29,083,636 | ||||||||||
Total assets | 105,384,737 | 57,579,107 | 52,969,873 | 8,826,808 | 224,760,525 |
Nine months ended September 30, 2008 | |||||||||||||||
First | |||||||||||||||
Majestic | Corporate | ||||||||||||||
El Pilon | Plata | La Encantada | and Other | ||||||||||||
operations | operations | operations | Eliminations | Total | |||||||||||
$ | $ | $ | $ | $ | |||||||||||
Revenue | 9,141,672 | 13,194,466 | 13,152,661 | (270,517 | ) | 35,218,282 | |||||||||
Cost of sales | 7,511,173 | 8,689,128 | 6,194,828 | (270,517 | ) | 22,124,612 | |||||||||
Amortiza tion, depreciation and accretion | 923,353 | 859,744 | 376,307 | 96,985 | 2,256,389 | ||||||||||
Depletion | 1,108,659 | 516,635 | 583,658 | - | 2,208,952 | ||||||||||
Mine operating earnings (loss) | (401,513 | ) | 3,128,959 | 5,997,868 | (96,985 | ) | 8,628,329 | ||||||||
General and administrative | - | - | - | 5,753,772 | 5,753,772 | ||||||||||
Stock-based compensation | - | - | - | 2,814,696 | 2,814,696 | ||||||||||
Net interest, other income (expense) and foreign exchange | (583,668 | ) | (859,539 | ) | (31,791 | ) | 2,404,889 | 929,891 | |||||||
Income tax expense | 37,411 | 67,593 | 5,683 | 484,943 | 595,630 | ||||||||||
Net income (loss) | (1,022,592 | ) | 2,201,827 | 5,960,394 | (6,745,507 | ) | 394,122 | ||||||||
Capital expenditures | 9,901,475 | 18,654,249 | 12,787,627 | 49,011 | 41,392,362 | ||||||||||
Total assets | 130,472,670 | 61,756,284 | 29,037,518 | 31,371,230 | 252,637,702 |
15
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
16. | CAPITAL LEASE OBLIGATIONS |
In 2007 and 2008, the Company entered into lease commitments with a mining equipment supplier for $14.1 million (US$11.2 million) of equipment to be delivered during 2007 and 2008. The Company committed to pay 35% within 30 days of entering into the leases, 15% on arrival of the equipment, and the remaining 50% in quarterly payments over a period of 24 months from delivery, financed at 9% interest over the term of the lease. On March 13, 2009, the Company executed a restructuring agreement for the balance of $3.6 million (US$2.9 million) payable to the equipment lease vendor, to be paid over 24 monthly payments commencing February 1, 2009 with interest payable at 9% on the outstanding principal balance, secured by a guarantee from the parent company.
On January 12, 2009, the Company executed two additional financing arrangements with an equipment vendor, committing the Company to total payments of approximately $2.6 million (US$2.0 million) representing the purchase price plus interest with terms of 36 monthly lease payments of $48,460 (US$38,420) consisting of principal plus 12.5% interest on outstanding balances and 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 September 30, 2009:
$US | $CA | |||||
2009 Gross lease payments | 612,198 | 655,480 | ||||
2010 Gross lease payments | 2,136,442 | 2,287,489 | ||||
2011 Gross lease payments | 655,752 | 702,114 | ||||
2012 Gross lease payments | 132,549 | 141,920 | ||||
3,536,941 | 3,787,003 | |||||
Less: interest | (378,002 | ) | (404,727 | ) | ||
Total payments, net of interest | 3,158,939 | 3,382,276 | ||||
Less: current portion | (2,055,152 | ) | (2,200,451 | ) | ||
Capital Lease Obligation | 1,103,787 | 1,181,825 |
17. | ASSET RETIREMENT OBLIGATIONS |
Nine months ended | Year ended | |||||
September 30, 2009 | December 31, 2008 | |||||
$ | $ | |||||
Balance, beginning of the period | 5,304,369 | 2,290,313 | ||||
Effect of change in estimates | - | 2,979,726 | ||||
Interest a ccretion | 338,610 | 200,477 | ||||
Effect of translation of foreign currencies | (568,714 | ) | (166,147 | ) | ||
5,074,265 | 5,304,369 |
16
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
17. | ASSET RETIREMENT OBLIGATIONS (continued) |
Asset retirement obligations allocated by mineral properties are as follows:
Anticipated | September 30, 2009 | December 31, 2008 | |||||||
Date | $ | $ | |||||||
La Encantada Silver Mine | 2018 | 1,784,742 | 1,865,674 | ||||||
La Parrilla Silver Mine | 2022 | 1,539,776 | 1,609,602 | ||||||
San Martin Silver Mine | 2016 | 1,749,747 | 1,829,093 | ||||||
5,074,265 | 5,304,369 |
During the year ended December 31, 2008, 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 $7.27 million, which has been discounted using a credit adjusted risk free rate of 8.5%, of which $2.46 million of the reclamation obligation relates to the La Parrilla Silver Mine, $2.31 million of the obligation relates to the San Martin Silver Mine, and $2.51 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.
18. | COMMITMENTS |
The Company is obligated to make certain mining property option payments as described in Note 8, in connection with the acquisition of its mineral property interests.
As at September 30, 2009, the Company is obligated to make a series of payments totalling US$277,819 before the end of 2009 with respect to property payments at the Quebradillas Mine at La Parrilla.
The Company has office lease commitments of $77,900 per annum in 2009 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 September 30, 2009, the Company is committed to construction contracts of approximately $6.0 million (US$5.6 million) (December 31, 2008 - $5.9 million or US$4.9 million) relating to the La Encantada Project which is currently being constructed.
The Company is committed to making severance payments amounting to US$605,000 (December 31, 2008 -US$540,000) to four officers in the event of a change of control of the Company.
19. | NON-CASH FINANCING AND INVESTING ACTIVITIES |
Three months ended | Nine months ended | |||||||||||
Sept. 30, 2009 | Sept. 30, 2008 | Sept. 30, 2009 | Sept. 30, 2008 | |||||||||
$ | $ | $ | $ | |||||||||
NON-CASH FINANCING AND INVESTING ACTIVITIES: | ||||||||||||
Fair value of warrants upon completion of public offering | - | - | 848,758 | 2,666,135 | ||||||||
Fair value of warrants upon completion of private placements | 389,000 | - | 389,000 | - | ||||||||
Issuance of shares for debt settlement | 2,741,260 | - | 2,741,260 | - | ||||||||
Issuance of shares for First Silver Arrangement | - | 24,200 | - | 9,009,660 | ||||||||
Transfer of contributed surplus to common shares for options exercised | - | 100,583 | 2,950 | 363,990 | ||||||||
Assets acquired by capital lease | - | - | 2,259,380 | 1,989,227 |
17
FIRST MAJESTIC SILVER CORP. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008 |
20. | SUBSEQUENT EVENTS |
Subsequent to September 30, 2009:
(a) |
In September 2009, First Majestic and Normabec Mining Resources Ltd. (Normabec) entered into a definitive agreement whereby First Majestic will acquire Normabec. The transaction will be an all-share transaction by way of plan of arrangement (the "Arrangement"). | |
The agreement provides that First Majestic will acquire Normabec in exchange for the issuance directly to Normabec's shareholders of 0.060425 First Majestic shares for each Normabec common share outstanding (the "Exchange Ratio"). In addition to Normabec's shareholders receiving shares in First Majestic, they will also receive shares in a newly formed public company (Newco) which will hold Normabec's interest in the Pitt Gold Property (and all other Quebec mineral interests currently held by Normabec) which will continue to be managed by the existing Normabec management. Subsequent to the completion of the Arrangement, First Majestic will invest, via a private placement, $300,000 in this public company which will represent approximately 10% of Newco. | ||
Normabec's primary asset is the Real de Catorce Silver Project which is located in the northern portion of San Luís Potosí State, Mexico. | ||
The proposed Arrangement was approved by Normabec shareholders on November 6, 2009, received court approvals on November 9, 2009, and is expected to close on November 13, 2009. | ||
(b) |
In October 2009, the Company entered into an agreement for two loan facilities totaling $53.8 million Mexican pesos (CAD$4.3 million) from the Mexican Mining Development Trust - Fideicomiso de Fomento Minero (FIFOMI). Funds from these loans will be used for the completion of the 3,500 tpd 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. | |
(c) |
On October 24, 2009, the following stock options were forfeited: | |
(i) |
25,000 stock options exercisable at a price of $4.34 per share expiring on November 1, 2010; | |
(ii) |
30,000 stock options exercisable at a price of $3.62 per share expiring on August 28, 2011; and | |
(iii) |
30,000 stock options exercisable at a price of $2.03 per share expiring on May 7, 2012. | |
(d) |
On October 28, 2009, 25,000 stock options were granted at a price of $2.96 per share expiring on October 28, 2012. | |
(e) |
On November 1, 2009, 12,500 stock options exercisable at a price of $2.40 per share expiring on August 10, 2012 were forfeited. | |
(f) |
On November 5, 2009, 25,000 stock options were granted at a price of $3.38 per share expiring on November 5, 2012. |
21. | COMPARATIVE FIGURES |
Certain comparative figures have been reclassified to conform with the classifications used in 2009.
18