EXHIBIT 99.1
Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2021 and 2020
(Unaudited, expressed in thousands of United States dollars, unless otherwise stated)
Condensed Consolidated Interim Statements of Financial Position
(Unaudited, expressed in thousands of United States dollars)
March 31, | December 31, | |||||
Note | 2021 | 2020 | ||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 317,529 | $ | 344,926 | ||
Restricted cash | 10(b)(i) | 61,284 | 1,206 | |||
Trade and other receivables | 47,179 | 55,872 | ||||
Inventory | 4 | 196,018 | 208,290 | |||
Other current assets | 5 | 51,983 | 35,730 | |||
Assets held for sale | 6, 8 | 27,478 | - | |||
701,471 | 646,024 | |||||
Non-current assets | ||||||
Restricted cash | 2,583 | 2,004 | ||||
Inventory | 4 | 121,989 | 130,888 | |||
Mineral properties, plant and equipment | 7 | 1,895,594 | 1,844,973 | |||
Exploration and evaluation assets | 13,750 | 13,750 | ||||
Investment in associate | 8 | 12,573 | 22,287 | |||
Derivative asset | 10(a) | 3,316 | - | |||
Other assets | 10,518 | 13,474 | ||||
Total assets | $ | 2,761,794 | $ | 2,673,400 | ||
Liabilities and Equity | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | $ | 132,959 | $ | 130,543 | ||
Current portion of loans and borrowings | 9 | 20,000 | 13,333 | |||
Derivative liabilities - current | 10(b) | 113,952 | 63,993 | |||
Other current liabilities | 21,781 | 14,795 | ||||
Liabilities held for sale | 6 | 19,390 | - | |||
308,082 | 222,664 | |||||
Non-current liabilities
| ||||||
Loans and borrowings | 9 | 527,356 | 531,908 | |||
Derivative liabilities | 10(b) | 38,168 | 90,573 | |||
Reclamation obligations | 101,996 | 117,103 | ||||
Other long-term liabilities | 43,807 | 32,769 | ||||
Deferred tax liabilities | 239,193 | 229,860 | ||||
Total liabilities | 1,258,602 | 1,224,877 | ||||
Shareholders’ equity | ||||||
Share capital | 12 | 1,521,863 | 1,518,042 | |||
Reserves | 39,310 | 38,779 | ||||
Deficit | (57,981) | (108,298) | ||||
Total equity | 1,503,192 | 1,448,523 | ||||
Total liabilities and equity | $ | 2,761,794 | $ | 2,673,400 | ||
Commitments and contingencies (notes 7 and 22) | ||||||
Subsequent events (notes 1, 5, 6, 10(b) and 23) | ||||||
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
|
2 |
Condensed Consolidated Interim Statements of Income and Comprehensive Income
(Unaudited, expressed in thousands of United States dollars, except share and per share amounts)
For the three months ended March 31, | |||||
Note | 2021 | 2020 | |||
Revenue | 13 | $ | 229,702 | $ | 130,035 |
Operating expenses | 14 | (146,798) | (76,489) | ||
Depreciation and depletion | (38,660) | (16,920) | |||
Earnings from mine operations | 44,244 | 36,626 | |||
Care and maintenance | (2,013) | (944) | |||
Exploration | (2,967) | (2,644) | |||
General and administration | 15 | (7,359) | (6,633) | ||
Income from operations | 31,905 | 26,405 | |||
Finance expense | (8,680) | (6,892) | |||
Finance income | 374 | 273 | |||
Other income | 16 | 46,675 | 15,616 | ||
Net income before taxes | 70,274 | 35,402 | |||
Current tax expense | (11,318) | (7,895) | |||
Deferred tax expense | (8,639) | (21,925) | |||
Net income and comprehensive income | $ | 50,317 | $ | 5,582 | |
Net income and comprehensive income per share | |||||
Basic | 18 | $ | 0.21 | $ | 0.04 |
Diluted | 18 | $ | 0.14 | $ | 0.04 |
Weighted average shares outstanding | |||||
Basic | 18 | 242,576,291 | 138,000,552 | ||
Diluted | 18 | 291,620,441 | 140,231,774 | ||
The accompanying notes form an integral part of these condensed consolidated interim financial statements. |
3 |
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited, expressed in thousands of United States dollars)
For the three months ended March 31, | ||||||||||||
Note | 2021 | 2020 | ||||||||||
Cash provided by (used in): | ||||||||||||
Operations | ||||||||||||
Net income for the period | $ | 50,317 | $ | 5,582 | ||||||||
Adjustments for: | ||||||||||||
Depreciation and depletion | 39,779 | 17,104 | ||||||||||
Tax expense | 19,957 | 29,820 | ||||||||||
Unrealized loss on foreign exchange contracts | 10(b)(iii) | 11,344 | 18,256 | |||||||||
Loss from equity investment | 2,660 | 1,003 | ||||||||||
Unrealized gain on gold contracts | 10(b)(ii) | (42,068) | (23,677) | |||||||||
Change in fair value of warrants | 16 | (33,300) | (10,100) | |||||||||
Unrealized foreign exchange gain | 2,046 | (9,615) | ||||||||||
Finance expense | 9,525 | 6,892 | ||||||||||
Share-based compensation | 12(b)(vi) | (105) | 116 | |||||||||
Income taxes paid | (960) | (7,617) | ||||||||||
Other | 2,766 | 3,507 | ||||||||||
Operating cash flow before non-cash changes in working capital | 61,961 | 31,271 | ||||||||||
Changes in non-cash working capital: | ||||||||||||
Accounts receivable and other current assets | 3,722 | (3,976) | ||||||||||
Inventory | 14,637 | 3,649 | ||||||||||
Accounts payable and accrued liabilities | (957) | (27,465) | ||||||||||
79,363 | 3,479 | |||||||||||
Investing | ||||||||||||
Capital expenditures | (70,874) | (34,437) | ||||||||||
Loan to i-80 Gold Corp | 5 | (20,750) | - | |||||||||
Acquisition of Leagold Mining Corporation | - | 55,252 | ||||||||||
Other | 1,982 | (2,636) | ||||||||||
(89,642) | 18,179 | |||||||||||
Financing | ||||||||||||
Finance fees paid | (5,301) | (14,976) | ||||||||||
Lease payments | (3,766) | (531) | ||||||||||
Decrease in restricted cash | (1,291) | (17) | ||||||||||
Proceeds from option and warrant exercises | 12 | 1,210 | 5,892 | |||||||||
Draw down of loans and borrowings | - | 509,680 | ||||||||||
Repayment of loans and borrowings | - | (323,870) | ||||||||||
Net proceeds from equity financings | - | 39,938 | ||||||||||
(9,148) | 216,116 | |||||||||||
Effect of foreign exchange on cash and cash equivalents | (5,169) | (2,438) | ||||||||||
(Decrease) increase in cash and cash equivalents | (24,596) | 235,336 | ||||||||||
Cash and cash equivalents, beginning of period | 344,926 | 67,716 | ||||||||||
Cash and cash equivalents, end of period | 320,330 | 303,052 | ||||||||||
Cash and cash equivalents reclassified as held for sale | 6 | (2,801) | - | |||||||||
Cash and cash equivalents, excluding amounts classified as held for sale, end of period | $ | 317,529 | $ | 303,052 | ||||||||
Supplemental cash flow information (note 19) | ||||||||||||
The accompanying notes form an integral part of these condensed consolidated interim financial statements. | ||||||||||||
4 |
Condensed Consolidated Interim Statements of Changes in Equity
(Unaudited, expressed in thousands of United States dollars, except share amounts)
Share Capital | |||||||||||
Shares | Amount | Reserves | Deficit | Total | |||||||
December 31, 2020 (as reported) | 242,354,406 | $ | 1,518,042 | $ | 38,779 | $ | (109,866) | $ | 1,446,955 | ||
Adjustment on initial application of IAS 16 amendment (note 2(d)) | - | - | - | 1,568 | 1,568 | ||||||
December 31, 2020 | 242,354,406 | 1,518,042 | 38,779 | (108,298) | 1,448,523 | ||||||
Shares issued on exercise of warrants, stock options and RSUs (note 12(b)) | 487,462 | 3,821 | (1,249) | - | 2,572 | ||||||
Share-based compensation (note 12(b)(vi)) | - | - | 1,780 | - | 1,780 | ||||||
Net income and comprehensive income | - | - | - | 50,317 | 50,317 | ||||||
Balance March 31, 2021 | 242,841,868 | $ | 1,521,863 | $ | 39,310 | $ | (57,981) | $ | 1,503,192 |
Share Capital | |||||||||||
Shares | Amount | Reserves | Deficit | Total | |||||||
December 31, 2019 | 113,452,363 | $ | 505,686 | $ | 27,959 | $ | (130,586) | $ | 403,059 | ||
Shares and options issued for acquisition of Leagold Mining Corporation | 94,635,765 | 732,042 | 19,777 | - | 751,819 | ||||||
Shares issued in financings | 6,472,491 | 40,000 | - | - | 40,000 | ||||||
Equity component of Convertible Notes | - | - | 7,801 | - | 7,801 | ||||||
Shares issued on exercise of warrants, stock options and RSUs | 1,640,451 | 11,877 | (2,429) | - | 9,448 | ||||||
Share-based compensation (note 12(b)(vi)) | - | - | 584 | - | 584 | ||||||
Share issue costs | - | (62) | - | - | (62) | ||||||
Net income and comprehensive income | - | - | - | 5,582 | 5,582 | ||||||
Balance March 31, 2020 | 216,201,070 | $ | 1,289,543 | $ | 53,692 | $ | (125,004) | $ | 1,218,231 | ||
The accompanying notes form an integral part of these condensed consolidated interim financial statements. |
5 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
1. Nature of operations |
Equinox Gold Corp. (the “Company” or “Equinox Gold”) was incorporated under the Business Corporations Act of British Columbia on March 23, 2007. Equinox Gold’s primary listing is on the Toronto Stock Exchange (“TSX”) in Canada where its common shares trade under the symbol “EQX” and its warrants trade under the symbol “EQX.WT”. The Company’s shares also trade on the NYSE American Stock Exchange (“NYSE-A”) in the United States under the symbol “EQX”. Equinox Gold is a mining company engaged in the operation, acquisition, exploration and development of mineral properties, with a focus on gold. All of the Company’s principal properties are located in the Americas. At March 31, 2021, the Company had two properties in the United States, one property in Mexico and five in Brazil. Each property is wholly-owned by the Company. The Company’s producing assets at March 31, 2021 were the Mesquite Mine (“Mesquite”) and Castle Mountain Mine (“Castle Mountain”) in the United States, the Los Filos Mine Complex (“Los Filos”) in Mexico, and the Aurizona Mine (“Aurizona”), Fazenda Mine (“Fazenda”) and the RDM Mine (“RDM”) in Brazil. The Pilar Mine (“Pilar”) also in Brazil, was sold on April 7, 2021 (note 6). The Company’s Santa Luz project (“Santa Luz”) in Brazil is in construction. In April 2021, subsequent to Quarter end, the Company acquired a wholly-owned interest in the producing Mercedes Mine (“Mercedes”) in Mexico, a 60% interest in the Greenstone Project (“Greenstone”) in Canada and interests in a number of exploration-stage properties in Canada. |
2. Basis of preparation |
(a) Basis of presentation |
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, and do not include all of the information required for full annual financial statements prepared using International Financial Reporting Standards (“IFRS”). These condensed consolidated interim financial statements should be read in conjunction with the Company’s most recent annual audited financial statements for the year ended December 31, 2020. Except as described in note 2(d) and 19, the accounting policies applied in these condensed consolidated interim financial statements are the same as those applied in the Company’s annual audited consolidated financial statements for the year ended December 31, 2020. These condensed consolidated interim financial statements were approved and authorized for issuance by the Company’s Board of Directors on May 5, 2021. |
(b) Basis of consolidation |
These condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are entities controlled by the Company. Control is defined as Equinox Gold having power over the entity, rights to variable returns from its involvement with the entity, and the ability to use its power to affect the amount of returns. All intercompany transactions and balances are eliminated on consolidation. |
6 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
2. Basis of preparation (continued) |
At March 31, 2021, the Company’s material subsidiaries include the following: | |||
Company | Location | Ownership Interest | |
Castle Mountain Venture | USA | 100% | |
Desarrollos Mineros San Luis S.A. de C.V. | Mexico | 100% | |
Fazenda Brasileiro Desenvolvimento Mineral Ltda | Brazil | 100% | |
Mineração Aurizona S.A. | Brazil | 100% | |
Mineração Riacho Dos Machados Ltda | Brazil | 100% | |
Santa Luz Desenvolvimento Mineral Ltda | Brazil | 100% | |
Western Mesquite Mines, Inc. | USA | 100% | |
(c) Functional currency and presentation currency | |||
Except as otherwise noted, these financial statements are presented in United States dollars (“US dollars”), the functional currency of the Company and its subsidiaries. Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing at the date of the statement of financial position. Non-monetary assets and liabilities are translated at historical exchange rates, unless the item is carried at fair value, in which case it will be translated at the exchange rate in effect at the date when the fair value was determined. Resulting foreign exchange gains and losses are recognized in income or loss. Foreign currency gains and losses are reported on a net basis. | |||
(d) Significant accounting policies | |||
(i) IAS 16, Property, Plant and Equipment - Proceeds before Intended Use | |||
On May 14, 2020, the IASB published a narrow scope amendment to IAS 16, Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and related cost in profit or loss. The effective date is for annual periods beginning on or after January 1, 2022. Earlier application is permitted. The amendment applies retrospectively, but only to items of property, plant and equipment made available for use in the earliest period presented in the financial statements in the year of adoption. The Company adopted the amendment in its financial statements for the annual period beginning on January 1, 2021. On adoption, the Company reclassified $1.6 million of pre-commercial production net income earned in the fourth quarter from property, plant and equipment to the income statement for the year ended December 31, 2020, comprising $2.9 million in revenue, $1.0 million in production costs and $0.3 million in depreciation. | |||
(ii) Presentation of finance fees and interest paid in statement of cash flows | |||
Effective January 1, 2021, the Company made an accounting policy change to classify cash interest paid within the condensed consolidated statement of cash flows for the three months ended March 31, 2021 as a financing activity rather than an operating activity, which more appropriately reflects the nature of these cash flows. The comparative figures for the three-month period have been reclassified to conform with this change in accounting policy. |
7 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
2. Basis of preparation (continued) |
(e) Purchase price accounting measurement period adjustments |
On March 10, 2020, the Company completed the acquisition of Leagold Mining Corporation (“Leagold” and the “Leagold Acquisition”). As of December 31, 2020, the Company completed its allocation of the purchase price to the fair value of assets acquired and liabilities assumed. Comparative figures for the three months ended March 31, 2020 have been recast to reflect measurement period adjustments to inventories, mineral properties, plant and equipment, reclamation obligations and deferred tax liabilities. As a result of these measurement period adjustments, the Company recognized an additional $6.9 million in operating expenses, a reduction of $0.3 million in depreciation, and $0.6 million in tax expense for the three months ended March 31, 2020 from previously reported figures. |
3. Use of judgements and estimates |
In preparing these condensed consolidated interim financial statements, management has made judgements, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ. Significant judgements made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied in the most recent annual audited consolidated financial statements for the year ended December 31, 2020. |
4. Inventory | |||||
March 31, 2021 | December 31, 2020 | ||||
Heap leach ore (current and non-current) | $ | 249,595 | $ | 268,703 | |
Less: Non-current portion of heap leach ore | (121,989) | (130,888) | |||
Current portion of heap leach ore | 127,606 | 137,815 | |||
Stockpiles | 10,095 | 13,514 | |||
Work-in-process | 19,945 | 14,988 | |||
Supplies | 33,352 | 37,473 | |||
Finished goods | 5,020 | 4,500 | |||
Current inventory | $ | 196,018 | $ | 208,290 | |
Non-current inventory relates to heap leach ore at Mesquite and Castle Mountain not expected to be recovered in the next twelve months. For the three months ended March 31, 2021, impairment charges of $8.5 million, $0.4 million and $0.1 million, respectively, were recorded to adjust heap leach ore, work-in-process and stockpiles at Los Filos. Impairment charges of $0.8 million, $1.7 million and $0.4 million, respectively, were recorded to adjust stockpiles, work-in-process and finished goods at Pilar. Impairment charges recognized are included in production costs. |
8 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
5. Other Current Assets |
In connection with the acquisition of Premier Gold Mines Limited (“Premier” and the “Premier Transaction”) (note 23(a)), the Company advanced to i-80 Gold Corp. (“i-80 Gold”) a $20.8 million bridge loan. The loan accrues interest at 5% per annum and matures ten days following closing of the Premier Transaction. At March 31, 2021, the Company recorded the principal and accrued interest due on the bridge loan of $20.8 million within other current assets. The bridge loan was repaid in full by i-80 Gold on April 16, 2021. |
6. Assets held for sale | ||||
During the Quarter the Company was finalizing the terms of an agreement to sell its Pilar mine. As such, the Company determined that Pilar met the requirements to be classified as held for sale as at March 31, 2021. As required by IFRS, the Company measured the asset group at the lower of the carrying value and fair value less costs to sell (“FVLCS”). The expected purchase consideration was used as the basis for determining the fair value. In performing this assessment, the Company concluded that the carrying value of Pilar of $1.0 million was lower than the FVLCS and no adjustment was required at March 31, 2021. On April 19, 2021, the Company completed the sale of Pilar to Pilar Gold Inc. for aggregate consideration of: • $38.0 million, payable as follows: • $10.5 million on closing of the sale; • $10.0 million payable on or before May 31, 2021; and • $17.5 million payable on or before July 31, 2021 • 9.9% equity interest in Pilar Gold Inc.; and a • 1% net smelter returns (“NSR”) royalty on production from Pilar. | ||||
The assets and liabilities of Pilar at March 31, 2021 classified as held for sale are as follows: | ||||
Cash and cash equivalents | $ | 2,801 | ||
Trade and other receivables | 1,574 | |||
Inventory | 4,824 | |||
Mineral properties, plant & equipment | 7,093 | |||
Other assets | 4,132 | |||
Assets classified as held for sale | $ | 20,424 | ||
Accounts payable and accrued liabilities | $ | 9,465 | ||
Reclamation obligation | 7,172 | |||
Other long-term liabilities | 2,753 | |||
Liabilities associated with assets held for sale | $ | 19,390 | ||
Net assets classified as held for sale | $ | 1,034 | ||
9 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
7. Mineral properties, plant and equipment (Continued) | ||||||||||||||
Mineral properties | Plant and equipment | Construction in-progress | Other | Total | ||||||||||
Cost | ||||||||||||||
Balance - December 31, 2020 | $ | 1,372,327 | $ | 641,303 | $ | 35,642 | $ | 2,758 | $ | 2,052,030 | ||||
Additions | 58,788 | 43,802 | 9,264 | 276 | 112,130 | |||||||||
Transfers | (787) | 787 | - | - | - | |||||||||
Disposals | (8) | (30,373) | (30,381) | |||||||||||
Reclassified to assets held for sale | (1,516) | (5,577) | - | - | (7,093) | |||||||||
Change in reclamation cost asset | (5,254) | - | - | - | (5,254) | |||||||||
Balance - March 31, 2021 | $ | 1,423,550 | $ | 649,942 | $ | 44,906 | $ | 3,034 | $ | 2,121,432 | ||||
Accumulated depreciation | ||||||||||||||
Balance - December 31, 2020 | $ | 90,734 | $ | 115,270 | $ | - | $ | 1,053 | $ | 207,057 | ||||
Additions | 18,658 | 27,191 | - | 169 | 46,018 | |||||||||
Transfers | 689 | (689) | - | - | - | |||||||||
Disposals | - | (27,237) | - | - | (27,237) | |||||||||
Balance - March 31, 2021 | $ | 110,081 | $ | 114,535 | $ | - | $ | 1,222 | $ | 225,838 | ||||
Net book value: | ||||||||||||||
At December 31, 2020 | $ | 1,281,593 | $ | 526,033 | $ | 35,642 | $ | 1,705 | $ | 1,844,973 | ||||
At March 31, 2021 | $ | 1,313,469 | $ | 535,407 | $ | 44,906 | $ | 1,812 | $ | 1,895,594 | ||||
During the three months ended March 31, 2021, the Company capitalized to construction-in-progress $8.3 million (December 31, 2020 - $3.5 million) of costs at Santa Luz. Mineral properties at March 31, 2021 includes $63.4 million (December 31, 2020 - $63.4 million) allocated to the mineral interest at Los Filos as part of the Leagold purchase price allocation, which is not currently subject to depletion. | ||||||||||||||
Certain of the Company’s mining properties are subject to royalty arrangements based on their NSR or gross revenues. At March 31, 2021, the Company’s significant royalty arrangements were as follows: | ||||||||||||||
Mineral property | Royalty arrangements | |||||||||||||
Mesquite | Weighted average life of mine NSR of 2.0% | |||||||||||||
Castle Mountain | 2.65% NSR | |||||||||||||
Los Filos | 3% of gross sales at Xochipala concession; 1.5% EBITDA; 0.5% gross revenues | |||||||||||||
Aurizona | 1.5% of gross sales; 3-5% sliding scale NSR based on gold price | |||||||||||||
Fazenda | 0.75-1.5% of gross sales | |||||||||||||
RDM | 1-1.5% of gross sales | |||||||||||||
10 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
8. Investment in associate | ||||||||||||||||
Details of the Company’s investment in associate as at March 31, 2021 and December 31, 2020 are as follows: | ||||||||||||||||
Name of equity accounted for investee | Principal Activity | Principal place of business | Ownership interest | Fair value(1) | Carrying amount(2) | |||||||||||
2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||
Solaris Resources (“Solaris”) | Exploration | Ecuador | 25.9% | 26.5% | $ | 184,647 | $ | 132,026 | $ | 12,573 | $ | 22,287 |
(1) The fair value of the Company’s interest in Solaris includes the fair value of 17,826,737 common shares and 9,218,750 warrants. The common shares were valued based on the quoted market price per share at March 31, 2021 and December 31, 2020, of C$8.98 and C$6.08, respectively, which is a Level 1 input in terms of IFRS 13. The warrants were valued using the Black Scholes option pricing model to determine the fair value per warrant, which is a Level 2 input in terms of IFRS 13.
(2) The Company holds 10,218,750 warrants exercisable into common shares of Solaris. The value of 9,218,750 warrants are included in the carrying amount of the investment and 1,000,000 warrants are accounted for separately as a derivative asset (note 10(a)). | ||||||||||||||||||
On March 30, 2021, the Company announced the sale of a portion of its shareholdings in Solaris totaling ten million units, including one common share and one-half common share purchase warrant (each whole warrant being a “Warrant”) (the “Solaris Units”) to Augusta Investments Inc. and a strategic shareholder for gross proceeds of C$82.5 million. Each Warrant entitles the holder to acquire one common share of Solaris from the Company at a price of C$10.00 for a period of twelve months. The Company determined that the portion of the Company’s interest in Solaris to be sold met the requirements to be classified as held for sale as at March 30, 2021. As required by IFRS, the Company measured the asset group at the lower of the carrying value and FVLCS. The expected purchase consideration was used as the basis for determining the fair value. In performing this assessment, the Company concluded that the carrying value of the Company’s interest in Solaris to be sold was lower than the FVLCS and no adjustment was required at March 30, 2021. For the purposes of applying the equity method of accounting, the consolidated financial statements of Solaris as at December 31, 2020 have been used and appropriate adjustments have been made for the effects of significant transactions between that date and March 31, 2021. The following table summarizes the change in the carrying amount of the Company’s investment in Solaris: | ||||||||||||||||||
Balance - December 31, 2020 | $ | 22,287 | ||||||||||||||||
Company’s share of net loss of Solaris | (2,660) | |||||||||||||||||
Investment classified as held for sale | (7,054) | |||||||||||||||||
Balance - March 31, 2021 | $ | 12,573 | ||||||||||||||||
11 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
8. Investment in associate (continued) |
Summarized financial information in respect of the Company’s associate as at and for the three months ended March 31, 2021 and December 31, 2020, is set out below. The summarized financial information below represents amounts in the associate’s condensed consolidated interim financial statements prepared in accordance with IFRS. | |||||
2021 | 2020 | ||||
Current assets | $ | 64,547 | $ | 72,295 | |
Non-current assets | 20,652 | 20,652 | |||
Total assets | 85,199 | 92,947 | |||
Current liabilities | 7,348 | 3,141 | |||
Non-current liabilities | 1,015 | 544 | |||
Total liabilities | 8,363 | 3,685 | |||
Non-controlling interest | 7,914 | 7,766 | |||
Net assets of associate attributable to shareholders | 68,922 | 81,496 | |||
Equinox Gold’s share of net assets | 17,841 | 21,096 | |||
Investment classified as held for sale | (7,054) | - | |||
Other equity adjustments | 1,786 | 1,191 | |||
Carrying amount | $ | 12,573 | $ | 22,287 | |
Three months ended March 31, | |||||
2021 | 2020 | ||||
Net loss | $ | 10,424 | $ | 3,642 | |
Net comprehensive loss | $ | 10,424 | $ | 4,464 | |
On April 28, 2021, the Company completed the sale of the Solaris Units and received $66.6 million (C$82.5 million) in cash proceeds. On completion of the sale, the Company holds 17,826,737 Solaris shares and warrants exercisable into 10,218,750 Solaris shares, representing an approximately 16.6% interest in Solaris on a non-diluted basis and 19.9% on a diluted basis. |
9. Loans and borrowings | ||||||
Note | March 31, 2021 | December 31, 2020 | ||||
Credit Facility | 9(a) | $ | 290,651 | $ | 289,910 | |
2020 Convertible Notes | 9(b) | 127,287 | 126,645 | |||
2019 Convertible Notes | 9(b) | 129,418 | 128,686 | |||
547,356 | 545,241 | |||||
Less: Current portion of loans and borrowings | (20,000) | (13,333) | ||||
Non-current portion of loans and borrowings | $ | 527,356 | $ | 531,908 | ||
(a) Credit Facility | ||||||
In March 2020, the Company amended its corporate revolving credit facility with a syndicate of lenders led by The Bank of Nova Scotia, Société Générale, Bank of Montreal and ING Capital LLC. The amended credit facility is comprised of a $400 million revolving loan (the “Revolving Facility”) and $100 million amortizing term loan (the “Term Loan”) (together, the “Credit Facility”). At March 31, 2021, the Company had drawn the full amount of the Term Loan and $200 million from the Revolving Facility. |
12 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
9. Loans and borrowings (continued) |
The Credit Facility bears interest at an annual rate of LIBOR plus 2.5% to 3.75%, subject to certain leverage ratios. The Revolving Facility matures on March 8, 2024, at which date it must be repaid in full and the Term Loan matures on March 10, 2025 with quarterly repayments equal to 6.67% of principal beginning September 30, 2021 through to maturity. The Credit Facility is secured by first-ranking security over all present and future property and assets of the Company. The Credit Facility is subject to standard conditions and covenants, including maintenance of debt service coverage ratio, leverage ratio and minimum liquidity of $50 million. As at March 31, 2021, the Company is in compliance with these covenants. | |||||
(b) Convertible Notes | |||||
In April 2019, the Company issued $139.7 million in Convertible Notes (the “2019 Notes”) to Mubadala Investment Company (“Mubadala”) and Pacific Road Resources Funds (“Pacific Road”). The 2019 Notes mature on March 10, 2025 and bear interest at a fixed rate of 5% per year payable quarterly in arrears. The 2019 Notes are convertible at the holder’s option into common shares of the Company at a fixed conversion price of $5.25 per share. In March 2020, the Company issued $139.3 million in Convertible Notes (the “2020 Notes”) to Mubadala and Pacific Road. The 2020 Notes mature on March 10, 2025 and bear interest at a fixed rate of 4.75% per year payable quarterly in arrears. The 2020 Notes are convertible at the holder’s option into common shares of the Company at a fixed conversion price of $7.80 per share. Holders may exercise their conversion option at any time, provided that the holder owns less than 20% of the outstanding common shares of the Company. Security for the 2019 Notes and 2020 Notes includes a charge over all present and future property and assets of the Company and is subordinate to the Credit Facility. | |||||
(c) Loans and borrowings continuity | |||||
The following is a summary of the changes in loans and borrowings arising from investing and financing activities for the three months ended March 31, 2021: | |||||
Balance - December 31, 2019 | $ | 264,049 | |||
Debt assumed in Leagold Acquisition, including accrued interest | 323,870 | ||||
$380 million draw from Credit Facility, net of deferred financing costs | 372,682 | ||||
Debt component of Convertible Notes, net of deferred financing costs | 124,622 | ||||
Repayment of debt and accrued interest | (547,463) | ||||
Modification gain and transaction costs incurred on Credit Facility | (4,839) | ||||
Accretion and accrued interest | 12,320 | ||||
Balance - December 31, 2020 | $ | 545,241 | |||
Interest paid | (5,301) | ||||
Accretion and accrued interest | 7,416 | ||||
Balance - March 31, 2021 | $ | 547,356 | |||
13 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
10. Derivative financial instruments | |||||
(a) Derivative financial asset | |||||
The Company holds 10,218,750 warrants each exercisable into one common shares of Solaris. The value of 9,218,750 warrants is included in the carrying amount of the Company’s investment in associate (note 8) and 1,000,000 warrants are accounted for separately as a derivative asset. The fair value of the warrants is determined using the Black Scholes option pricing model with the following assumptions: | |||||
March 31, 2021 | |||||
Risk-free rate | 0.21% | ||||
Warrant expected life | 1.75 years | ||||
Expected volatility | 76.8% | ||||
Expected dividend | 0.0% | ||||
Strike price (C$) | $6.75 | ||||
Share price (C$) | $8.98 | ||||
During the three months ended March 31, 2021, the Company recognized a $3.3 million mark-to-market gain on revaluation of the warrants in other income. | |||||
(b) Derivative financial liabilities | |||||
(i) Subscription receipts | |||||
In April 2021, the Company completed a non-brokered private placement (the “Private Placement”) in two tranches, issuing subscription receipts at a price of C$10.00 per subscription receipt for gross proceeds of C$75.0 million. Each subscription receipt entitled the holder to receive one common share of Equinox Gold upon completion of the Premier Transaction. Certain of the Company’s executives and directors subscribed for C$40.4 million in subscription receipts, which is a related party transaction. At March 31, 2021, the Company recognized the C$75.0 million of escrowed funds in current restricted cash and an offsetting derivative liability representing its obligation to exchange subscription receipts for common shares of Equinox Gold upon completion of the Premier Transaction. The obligation is considered a derivative financial instrument due to the subscription receipts being priced in Canadian dollars which differs from the Company’s functional currency of US dollars. Concurrent with completion of the Premier Transaction on April 7, 2021 (note 23(a)), the Company exchanged the subscription receipts for common shares and the escrowed funds were released to the Company. |
14 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
10. Derivative financial instruments (continued) |
(ii) Gold collars and forward contracts | ||||||||||||||
As part of the Leagold Acquisition, the Company assumed gold collar contracts with put and call strike prices of $1,325 and $1,430 per ounce, respectively, for 3,750 ounces per month to September 2022. The Company also assumed forward contracts with an average fixed gold price of $1,350 per ounce for 4,583 ounces per month to September 2022. As of March 31, 2021, the Company had 67,514 ounces and 82,486 ounces remaining to be delivered under its gold collars and forward contracts, respectively. The gold collars and forward contracts have not been designated as hedges and are recorded at fair value at the end of each reporting period with changes in fair value recognized in other expense. The fair value of gold collars and forward contracts at March 31, 2021 was a liability of $49.3 million (December 31, 2020 - $91.4 million), of which $32.6 million was recorded as current derivative liabilities. For the three months ended March 31, 2021 and 2020, the Company recognized the following within other income (note 16): | ||||||||||||||
Three months ended March 31, | ||||||||||||||
2021 | 2020 | |||||||||||||
Realized loss on settlement of gold contracts | $ | 10,319 | $ | 1,724 | ||||||||||
Unrealized gain on revaluation of gold contracts outstanding | (42,068) | (23,744) | ||||||||||||
$ | (31,749) | $ | (22,020) | |||||||||||
(iii) Foreign exchange contracts | ||||||||||||||
Certain of the Company’s expenditures at its Brazilian and Mexican operations are denominated in the Brazilian Réal (“BRL”) and the Mexican Peso (“MXP”), respectively. The Company has implemented a foreign currency exchange risk management program to reduce its exposure to fluctuations in the value of the BRL and MXP relative to the US dollar. | ||||||||||||||
As at March 31, 2021, the Company had in place USD:BRL and USD:MXP put and call options with the following notional amounts, weighted average rates and maturity dates: | ||||||||||||||
USD notional amount | Call options’ weighted average strike price | Put options’ weighted average strike price | ||||||||||||
Currency | Within 1 year | 1-2 years | ||||||||||||
BRL | $ | 205,795 | $ | 25,983 | 4.68 | 5.43 | ||||||||
MXP | 79,000 | 7,000 | 20.66 | 23.86 | ||||||||||
The foreign exchange contracts have not been designated as hedges and are recorded at fair value at the end of each reporting period with changes in fair value recognized in other expense. The Company entered into these contracts at no premium and therefore incurred no investment costs at inception. The fair value of foreign exchange contracts at March 31, 2021 was a liability of $23.9 million (December 31, 2020 - $12.5 million), of which $2.2 million was recorded as current derivative liabilities. For the three months ended March 31, 2021, the Company recognized the following within other income (note 16): | ||||||||||||||
Three months ended March 31, | ||||||||||||||
2021 | 2020 | |||||||||||||
Realized loss on settlement of foreign exchange contracts | $ | - | $ | 251 | ||||||||||
Unrealized loss on revaluation of foreign exchange contracts | 11,344 | 18,256 | ||||||||||||
$ | 11,344 | $ | 18,507 | |||||||||||
15 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
10. Derivative financial instruments (continued) |
(iv) Equinox Gold warrant liability | |||||
The functional currency of the Company is the US dollar. The Equinox Gold warrants were not issued for goods or services rendered. As the exercise price of the Company’s share purchase warrants is fixed in Canadian dollars, these warrants are considered a derivative as a variable amount of cash in the Company’s functional currency will be received on exercise. Accordingly, the Equinox Gold warrants are classified and accounted for as a derivative liability at fair value through net income or loss. The fair value of the warrants is determined using the Black Scholes option pricing model at the period-end date or the market price on the TSX for warrants that are trading. | |||||
Balance - December 31, 2020 | $ | 50,666 | |||
Warrants exercised | (1,363) | ||||
Change in fair value (note 16) | (29,984) | ||||
Balance - March 31, 2021 | $ | 19,319 | |||
The fair value of non-traded warrants was calculated with the following weighted average assumptions: | |||||
March 31, 2021 | December 31, 2020 | ||||
Risk-free rate | 0.19% | 0.2% | |||
Warrant expected life | 0.8 years | 1.0 years | |||
Expected volatility | 38.2% | 47.1% | |||
Expected dividend | 0.0% | 0.0% | |||
Share price (C$) | $11.19 | $14.02 | |||
The fair value of traded warrants was based on the market price of C$0.19 per warrant on March 31, 2021 (December 31, 2020 - C$0.58). |
11. Leases | |||||
(a) Right-of-use assets | |||||
Plant and equipment | Computer and office equipment | ||||
Balance - December 31, 2020 | $ | 16,383 | $ | 586 | |
Additions | 27,844 | - | |||
Depreciation | (2,796) | (68) | |||
Balance - March 31, 2021 | $ | 41,431 | $ | 518 | |
(b) Lease liabilities | |||||
March 31, 2021 | December 31, 2020 | ||||
Current lease liabilities included in other current liabilities | $ | 15,803 | $ | 8,935 | |
Non-current lease liabilities included in other long-term liabilities | 27,152 | 9,949 | |||
$ | 42,955 | $ | 18,884 | ||
In February 2021, the Company entered into a new three-year lease agreement for the use of mining equipment to replace part of the Company’s mining fleet at Mesquite. The Company makes quarterly fixed payments for the usage of the assets during the contract period. On commencement of the lease, the Company recognized a $27.8 million right-of-use asset and related lease liability. |
16 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
12. Share capital |
(a) Authorized and issued | ||||||||||||
The Company is authorized to issue an unlimited number of common shares with no par value. | ||||||||||||
(b) Share based compensation plans | ||||||||||||
(i) Share purchase options | ||||||||||||
A summary of the Company’s share purchase options is as follows: | ||||||||||||
Shares issuable on exercise of options | Weighted average exercise price (C$) | |||||||||||
Outstanding - December 31, 2020 | 2,919,070 | $ | 7.09 | |||||||||
Exercised | (27,155) | 6.07 | ||||||||||
Outstanding - March 31, 2021 | 2,891,915 | $ | 7.10 | |||||||||
Total share-based compensation expense for the three months ended March 31, 2021 related to the vesting of stock options was $0.1 million (2020 - $0.1 million). | ||||||||||||
At March 31, 2021, the Company had the following options issued and outstanding: | ||||||||||||
Options Outstanding | Options Exercisable | |||||||||||
Range of exercise price (C$) | Number of options | Weighted average exercise price (C$) | Weighted average remaining contractual life (years) | Number of options | Weighted average exercise price (C$) | |||||||
$1.89 - $2.99 | 591,820 | $ | 2.89 | 0.44 | 591,820 | $ | 2.89 | |||||
$3.00 - $4.99 | 3,000 | 4.75 | 2.34 | 3,000 | 4.75 | |||||||
$5.00 - $6.99 | 1,192,110 | 5.72 | 1.80 | 1,186,656 | 5.72 | |||||||
$7.00 - $8.99 | 679,623 | 8.54 | 1.02 | 679,623 | 8.54 | |||||||
$9.00 - $17.15 | 425,362 | 14.52 | 1.77 | 269,162 | 16.10 | |||||||
2,891,915 | 2,730,261 | |||||||||||
The weighted average exercise price of options exercisable at March 31, 2021 was C$6.83. | ||||||||||||
17 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
12. Share capital (continued) |
(ii) Restricted share units | |||||||
Equity settled RSUs | |||||||
During the three months ended March 31, 2021, the Company granted 0.5 million Restricted Share Units (“RSUs”) (three months ended March 31, 2020 - 0.1 million) and 0.2 million Performance Restricted Share Units (“pRSUs”) (three months ended March 31, 2020 - nil) to directors, officers and employees. The fair value of RSUs was determined based on the Company’s share price on the date of grant. The weighted average share price for RSUs granted during the Quarter was C$12.80 (three months ended March 31, 2020 2020 - nil). The pRSUs vest in two tranches and the number of shares issued will range from 0% to 200% of the grant based on the achievement of gold production targets and total shareholder return compared to the S&P Gold Miners Index over a three-year period. Compensation expense related to the pRSUs is recorded over the three-year vesting period and the amount is adjusted at each reporting period to reflect the change in quoted market value of the Company’s common shares, the number of pRSUs expected to vest, and the expected performance factor. | |||||||
A continuity table of the equity-settled RSUs and pRSUs outstanding is as follows: | |||||||
RSUs | pRSUs | ||||||
Outstanding - December 31, 2020 | 709,706 | 1,145,300 | |||||
Granted | 500,191 | 236,800 | |||||
Settled | (230,131) | - | |||||
Forfeited | (19,736) | - | |||||
Outstanding - March 31, 2021 | 960,030 | 1,382,100 | |||||
Total share-based compensation expense for the three months ended March 31, 2021 related to the vesting of RSUs and pRSUs was $1.3 million (three months ended March 31, 2020 - $0.2 million). | |||||||
Cash-settled RSUs | |||||||
During the three months ended March 31, 2021, the Company granted 0.1 million cash-settled RSUs (three months ended March 31, 2020 - nil) with a weighted average grant date fair value of C$12.80. | |||||||
A continuity table of the cash-settled RSUs outstanding is as follows: | |||||||
RSUs | pRSUs | ||||||
Outstanding - December 31, 2020 | 144,800 | - | |||||
Granted | 67,800 | 7,700 | |||||
Settled | (85,650) | - | |||||
Outstanding - March 31, 2021 | 126,950 | 7,700 | |||||
The total fair value of cash-settled RSUs outstanding as at March 31, 2021 was $0.4 million (December 31, 2020 - $1.2 million) and is included in other liabilities. | |||||||
18 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
12. Share capital (continued) |
(iii) Performance share units |
In March 2020, the Company issued 369,915 replacement PSUs in the Leagold Acquisition. The PSUs vest in three tranches based on the achievement of certain gold production targets at the Los Filos, Fazenda, RDM, Pilar and Santa Luz mines and are payable in cash. All unvested PSUs expire on December 31, 2021. The fair value of the PSUs is based on the current share price and reflects management’s best estimates of the probability that gold production targets will be achieved. |
A continuity table of the PSUs outstanding is as follows: | |||
PSUs outstanding | |||
Outstanding - December 31, 2020 | 282,876 | ||
Settled | (48,355) | ||
Outstanding - March 31, 2021 | 234,521 |
The total fair value of PSUs outstanding as at March 31, 2021 was $0.5 million (December 31, 2020 - $2.3 million) and is included in other current liabilities. |
(iv) Deferred share units |
During the three months ended March 31, 2021, the Company granted 0.1 million (three months ended March 31, 2020 - 0.3 million) Deferred Share Units (“DSUs”) with a weighted average grant date fair value of C$13.50. |
A continuity table of the DSUs outstanding is as follows: |
DSUs outstanding | ||||||||||||
Outstanding - December 31, 2020 | 125,437 | |||||||||||
Granted | 6,976 | |||||||||||
Outstanding - March 31, 2021 | 132,413 | |||||||||||
The total fair value of DSUs outstanding as at March 31, 2021 was $1.1 million (December 31, 2020 - $1.3 million) and is included in other liabilities. | ||||||||||||
(v) Share purchase warrants | ||||||||||||
A continuity table of the Company’s share purchase warrants is as follows: | ||||||||||||
Shares issuable on exercise of warrants | Weighted average exercise | |||||||||||
Outstanding - December 31, 2020 | 19,025,158 | $ | 14.00 | |||||||||
Exercised | (230,176) | 6.59 | ||||||||||
Expired | (10,520) | 12.17 | ||||||||||
Outstanding - March 31, 2021 | 18,784,462 | $ | 14.09 | |||||||||
19 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
12. Share capital (continued) |
At March 31, 2021, the Company had the following share purchase warrants issued and outstanding: | |||||||||||||
Range of exercise price (C$)(1) | Shares issuable on exercise of warrants | Weighted average (C$)(1) | Expiry dates | ||||||||||
$3.67 - $4.99 | 317,454 | $ | 3.67 | May 2021 | |||||||||
$5.00 - $9.99 | 614,117 | 5.30 | December 2022 - May 2023 | ||||||||||
$10.00 - $14.99 | 1,835,232 | 10.89 | May 2021 - March 2022 | ||||||||||
$15.00 | 16,017,659 | 15.00 | October 2021 | ||||||||||
18,784,462 | |||||||||||||
(1) 17,460,462 warrants with a weighted average exercise price of C$14.34 are exercisable into one common share of Equinox Gold and one-quarter of a share of Solaris. Equinox Gold will receive nine-tenths of the proceeds from the exercise of each of these warrants and the remaining proceeds will be paid to Solaris. | |||||||||||||
(vi) Share-based compensation expense | |||||||||||||
The following table summarizes non-cash share-based compensation expense for the period: | |||||||||||||
Three months ended March 31, | |||||||||||||
2021 | 2020 | ||||||||||||
Share purchase option expense | $ | 150 | $ | 111 | |||||||||
RSU expense | 1,278 | 205 | |||||||||||
PSU expense (recovery) | (1,007) | 133 | |||||||||||
DSU expense (recovery) | (316) | (344) | |||||||||||
Total compensation expense | $ | 105 | $ | 105 | |||||||||
Compensation expense included in: | |||||||||||||
General and administration | $ | (102) | $ | 87 | |||||||||
Operating expenses | 198 | (24) | |||||||||||
Exploration | 9 | 42 | |||||||||||
$ | 105 | $ | 105 | ||||||||||
13. revenue |
(a) Gold offtake arrangement |
As part of the Leagold Acquisition, the Company assumed offtake arrangements with Orion Mine Finance (“Orion”) that provide for gold offtake of 50% of the gold production from Los Filos and 35% of the gold production from the Fazenda, RDM, Pilar and Santa Luz mines at market prices, until a cumulative delivery of 1.1 million ounces and 0.7 million ounces, respectively, to Orion has been achieved. As at March 31, 2021, a total of 0.4 million ounces had been delivered to Orion under the terms of the offtake arrangements. |
(b) Silver streaming arrangement |
As part of the Leagold Acquisition, the Company assumed a silver streaming agreement with Wheaton Precious Metals Corp. (“WPM”) under which the Company must sell to WPM a minimum of 5 million payable silver ounces produced by Los Filos from August 5, 2010 to the earlier of the termination of the agreement and October 15, 2029 at the lesser of $3.90 per ounce and the prevailing market price, subject to an inflationary adjustment. The contract price is revised each year on the anniversary date of the contract, which at the Leagold acquisition date was $4.43 per ounce, and at March 31, 2021 was $4.46 per ounce. As at March 31, 2021, a total of 1.9 million ounces had been delivered to WPM under the terms of the streaming agreement. |
20 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
14. operating expenses | ||||||
Operating expenses consists of the following components by nature: | ||||||
Three months ended March 31, | ||||||
2021 | 2020 | |||||
Raw materials and consumables | $ | 64,319 | $ | 31,888 | ||
Salaries and employee benefits | 13,735 | 13,508 | ||||
Contractors | 25,490 | 12,535 | ||||
Repairs and maintenance | 11,274 | 5,612 | ||||
Site administration | 25,364 | 13,785 | ||||
Royalties | 5,726 | 4,292 | ||||
145,908 | 81,620 | |||||
Change in inventories | 890 | (5,131) | ||||
Total operating expenses | $ | 146,798 | $ | 76,489 | ||
15. General and administration | ||||||
General and administration expenses for the Company consists of the following components by nature: | ||||||
Three months ended March 31, | ||||||
2021 | 2020 | |||||
Salaries and benefits | $ | 2,424 | $ | 1,564 | ||
Share-based compensation | (102) | 99 | ||||
Professional fees | 2,378 | 3,091 | ||||
Office and other expenses | 2,490 | 1,695 | ||||
Amortization | 169 | 184 | ||||
Total general and administration | $ | 7,359 | $ | 6,633 | ||
16. Other income | ||||||||||
Other income consists of the following components: | ||||||||||
Three months ended March 31, | ||||||||||
Note | 2021 | 2020 | ||||||||
Foreign exchange gain | $ | 1,153 | $ | 7,477 | ||||||
Realized and unrealized gain on gold contracts | 10(ii) | 31,749 | 22,020 | |||||||
Change in fair value of warrants | 8, 10(iv) | 33,300 | 10,100 | |||||||
Realized and unrealized losses on foreign exchange contracts | 10(iii) | (11,344) | (18,507) | |||||||
Loss from investment in associate | 8 | (2,660) | (1,003) | |||||||
Other income (expense) | (5,523) | (4,471) | ||||||||
Total other income | $ | 46,675 | $ | 15,616 | ||||||
21 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
17. Segmented information | |||||||||||||||||||||
Three months ended March 31, 2021 | |||||||||||||||||||||
Revenue | Operating expenses | Depreciation and depletion | Exploration expenses | Other expenses | Income (loss) from operations | ||||||||||||||||
Mesquite | $ | 41,429 | $ | (24,951) | $ | (4,097) | $ | - | $ | - | $ | 12,381 | |||||||||
Aurizona | 58,162 | (22,786) | (9,667) | (741) | - | 24,968 | |||||||||||||||
Los Filos | 50,736 | (56,938) | (7,537) | (85) | (1,089) | (14,913) | |||||||||||||||
Fazenda | 30,762 | (12,505) | (8,881) | (1,280) | - | 8,096 | |||||||||||||||
RDM | 28,059 | (14,839) | (5,951) | (73) | - | 7,196 | |||||||||||||||
Other operating mines(1) | 20,554 | (14,779) | (2,527) | (556) | (924) | 1,768 | |||||||||||||||
Development projects(2) | - | - | - | (232) | (397) | (629) | |||||||||||||||
Corporate and other | - | - | - | - | (6,962) | (6,962) | |||||||||||||||
$ | 229,702 | $ | (146,798) | $ | (38,660) | $ | (2,967) | $ | (9,372) | $ | 31,905 | ||||||||||
(1) Includes Castle Mountain and Pilar. (2) Includes Santa Luz. | |||||||||||||||||||||
Three months ended March 31, 2020 | |||||||||||||||||||||
Revenue | Operating expenses | Depreciation and depletion | Exploration expenses | Other expenses | Income (loss) from operations | ||||||||||||||||
Mesquite | $ | 57,521 | $ | (32,113) | $ | (4,394) | $ | (6) | $ | - | $ | 21,008 | |||||||||
Aurizona | 48,708 | (25,221) | (9,300) | (577) | - | 13,610 | |||||||||||||||
Los Filos | 11,557 | (11,630) | (2,625) | (21) | - | (2,719) | |||||||||||||||
Other operating mines(1) | 12,249 | (7,525) | (601) | (9) | (944) | 3,170 | |||||||||||||||
Development projects(2) | - | - | - | (2,031) | - | (2,031) | |||||||||||||||
Corporate and other | - | - | - | - | (6,633) | (6,633) | |||||||||||||||
$ | 130,035 | $ | (76,489) | $ | (16,920) | $ | (2,644) | $ | (7,577) | $ | 26,405 | ||||||||||
(1) Includes Fazenda, RDM and Pilar, which were acquired on March 10, 2020. (2) Includes Castle Mountain and also Santa Luz, which was acquired on March 10, 2020. | |||||||||||||||||||||
Information about the carrying amount of the Company’s assets and liabilities by operating segment is detailed below: | |||||||||||||||||||||
Total assets | Total liabilities | ||||||||||||||||||||
March 31, | December 31, | March 31, | December 31, | ||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||
Los Filos | $ | 1,077,012 | $ | 1,066,378 | $ | (289,557) | $ | (271,712) | |||||||||||||
Aurizona | 348,202 | 338,792 | (44,869) | (49,261) | |||||||||||||||||
Mesquite | 297,298 | 262,758 | (67,072) | (36,032) | |||||||||||||||||
Fazenda | 195,273 | 180,397 | (48,438) | (52,261) | |||||||||||||||||
RDM | 132,743 | 144,025 | (38,486) | (42,146) | |||||||||||||||||
Other operating mines | 253,265 | 268,275 | (44,326) | (45,059) | |||||||||||||||||
Development projects | 206,742 | 209,215 | (15,618) | (10,605) | |||||||||||||||||
Corporate and other | 251,259 | 203,560 | (710,236) | (717,801) | |||||||||||||||||
$ | 2,761,794 | $ | 2,673,400 | $ | (1,258,602) | $ | (1,224,877) | ||||||||||||||
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Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
17. segmented information (continued) |
Information about the Company’s non-current assets and revenue by jurisdiction is detailed below: | |||||||||
| March 31, 2021 | December 31, 2020 | |||||||
Mexico | $ | 928,002 | $ | 919,464 | |||||
Brazil | 615,861 | 686,804 | |||||||
United States | 434,834 | 391,525 | |||||||
Canada | 81,626 | 28,014 | |||||||
Total non-current assets | $ | 2,060,323 | $ | 2,025,807 | |||||
18. Basic and diluted earnings per share | ||||||||||||||||||||||||
Information about the Company’s earnings per share (“EPS”), calculated on a basic and diluted basis, is detailed below: | ||||||||||||||||||||||||
Three months ended | ||||||||||||||||||||||||
March 31, 2021 | March 31, 2020 | |||||||||||||||||||||||
Weighted average shares outstanding | Net income | Earnings per share | Weighted average shares outstanding | Net income | Earnings per share | |||||||||||||||||||
Basic EPS | 242,576,291 | $ | 50,317 | $ | 0.21 | 138,000,552 | $ | 5,582 | $ | 0.04 | ||||||||||||||
Dilutive share options | 1,248,817 | - | 1,559,209 | - | ||||||||||||||||||||
Dilutive RSUs | 1,780,309 | - | 672,013 | - | ||||||||||||||||||||
Dilutive convertible notes | 44,458,210 | 4,318 | - | - | ||||||||||||||||||||
Dilutive warrants | 1,556,814 | (14,705) | - | - | ||||||||||||||||||||
Diluted EPS | 291,620,441 | $ | 39,930 | $ | 0.14 | 140,231,774 | $ | 5,582 | $ | 0.04 | ||||||||||||||
For the three months ended March 31, 2021, 16.0 million warrants and 0.4 million options (three months ended March 31, 2020 - 33.7 million warrants, 0.4 million options and 30.6 million shares issuable for convertible notes) were anti-dilutive. | ||||||||||||||||||||||||
19. Supplemental cash flow information | ||||||
During the three months ended March 31, 2021 and 2020, the Company conducted the following non-cash investing and financing transactions: | ||||||
Three months ended March 31, | ||||||
2021 | 2020 | |||||
Non-cash changes in accounts payable in relation to capital expenditures | $ | (5,455) | $ | (4,205) | ||
Non-cash change in restricted cash and current derivative liabilities in relation to subscription receipts | 59,625 | - | ||||
Right-of-use assets recognized (note 11(a)) | 27,844 | - | ||||
Shares, options, warrants, DSUs and PSUs issued in Leagold Acquisition | - | 764,083 | ||||
23 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
20. Financial instrument risk exposure and risk management |
Market risk is the risk that changes in market factors, such as foreign exchange, commodity prices or interest rates will affect the value of the Company’s financial instruments. Market risks are managed by either accepting the risk or mitigating it through the use of derivatives and other economic hedges. As at March 31, 2021, there are no substantial changes to the market risk described in Note 28: Financial Instrument Risk Exposure and Risk Management to the Company’s Consolidated Annual Financial Statements. The Company manages its exposure to fluctuations in commodity prices, and foreign exchange rates by entering into derivative financial instruments from time to time, in accordance with the Company's risk management policy. Details of these contracts are included in Note 10. |
21. Fair value measurements |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels in which to classify the inputs of valuation techniques used to measure fair values. Level 1 - quoted market prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly, such as prices, or indirectly (derived from prices). Level 3 - inputs are unobservable (supported by little or no market activity) such as non-corroborative indicative prices for a particular instrument provided by a third party. |
As at March 31, 2021, marketable securities and listed share purchase warrants of the Company are measured at fair value using Level 1 inputs and non-listed warrants, gold collars and forward contracts and foreign exchange collars are measured at fair value using Level 2 inputs. The fair value of the long-term receivables, Convertible Notes and Revolving Facility, for disclosure purposes, are determined using Level 2 inputs. The carrying values of cash and cash equivalents, accounts receivable, reclamation bond, and accounts payable and accrued liabilities approximate fair value due to their short terms to maturity. The fair value of marketable securities is measured based on the quoted market price of the related common shares at each reporting date, and changes in fair value are recognized in net income (loss). The fair value of the listed warrants is measured based on the quoted market price of the warrants at each reporting date. The fair value of the non-listed warrants is determined using an option pricing formula (note 10(iv)). The fair value of gold collars and forwards swap contracts is measured based on forward gold prices and the fair value of foreign exchange contracts is measured based on forward foreign exchange rates. The fair value of the long-term receivables, Convertible Notes and Credit Facility for disclosure purposes is determined using discounted cash flows based on the expected amounts and timing of the cash flows discounted using a market rate of interest adjusted for appropriate credit risk. There were no transfers between fair value levels during the three months ended March 31, 2021. |
24 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
21. Fair value measurements (continued) |
The following table provides the fair value of each classification of financial instrument: | |||||
March 31, | December 31, | ||||
2021 | 2020 | ||||
Loans and receivables: | |||||
Cash and cash equivalents | $ | 317,529 | $ | 344,926 | |
Restricted cash | 63,867 | 3,210 | |||
Trade receivables | 4,666 | 17,212 | |||
Receivable from asset sales | 3,515 | 6,429 | |||
Long-term receivables | 6,035 | 5,768 | |||
Reclamation bonds and other receivables | 136 | 136 | |||
Financial assets at FVTPL: | |||||
Marketable securities | 2,116 | 3,121 | |||
Solaris warrants | 3,316 | - | |||
Total financial assets | $ | 401,180 | $ | 380,802 | |
Financial liabilities at FVTPL: | |||||
Traded warrants | $ | 12,097 | $ | 36,455 | |
Non-listed warrants | 7,221 | 14,211 | |||
Gold collars and forward contracts | 49,326 | 91,393 | |||
Foreign exchange contracts | 23,851 | 12,507 | |||
Cash settled equity awards | 4,011 | 4,831 | |||
Subscription receipts | 59,625 | - | |||
Other: | |||||
Accounts payable and accrued liabilities | 121,572 | 119,641 | |||
Convertible Notes | 429,692 | 521,873 | |||
Credit Facility | 300,986 | 300,599 | |||
Total financial liabilities | $ | 1,008,381 | $ | 1,101,510 |
22. Commitments and contingencies | |||||||||||||||
At March 31, 2021, the Company had the following contractual obligations outstanding which are expected to be settled in the time periods indicated: | |||||||||||||||
Total | Within 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | Thereafter | |||||||||
Loans and borrowings and accrued interest | $ | 655,899 | 43,768 | 50,222 | 249,147 | 312,762 | - | - | |||||||
Accounts payable and accrued liabilities | 121,572 | 121,572 | - | - | - | - | - | ||||||||
Reclamation obligations(1) | 158,740 | 4,220 | 8,994 | 10,644 | 10,246 | 15,818 | 108,818 | ||||||||
Purchase commitments | 82,034 | 77,426 | 4,239 | 347 | 8 | 7 | 7 | ||||||||
Gold contracts | 108,950 | 92,255 | 16,695 | - | - | - | - | ||||||||
Foreign exchange contracts | 23,851 | 21,697 | 2,154 | - | - | - | - | ||||||||
Lease commitments | 47,912 | 18,198 | 13,053 | 12,977 | 3,659 | 6 | 19 | ||||||||
Total | $ | 1,198,958 | 379,136 | 95,357 | 273,115 | 326,675 | 15,831 | 108,844 | |||||||
(1) Amount represents undiscounted future cash flows. |
25 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
22. Commitments and contingencies (continued) |
Due to the nature of the Company’s operations, various legal, tax, environmental and regulatory matters are outstanding from time to time. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events. While the outcomes of these matters are uncertain, based upon the information currently available, the Company does not believe that these matters in aggregate will have a material adverse effect on its consolidated financial statements. In the event that management’s estimate of the future resolution of these matters changes, the Company will recognize the effect of these changes in its consolidated financial statements in the period in which such changes occur. The Company is a defendant in various lawsuits and legal actions, including for alleged fines, taxes and labour related matters in the jurisdictions in which it operates. Management regularly reviews these lawsuits and legal actions with outside counsel to assess the likelihood that the Company will ultimately incur a material cash outflow to settle the claim. To the extent management believes it is probable that a cash outflow will be incurred to settle the claim, a provision for the estimated settlement amount is recorded. At March 31, 2021, the Company recorded a legal provision for these items totaling $12.3 million (December 31, 2020 - $13.2 million) which is included in other long-term liabilities. The Company is contesting federal income and municipal VAT assessments in Brazil. Brazilian courts often require a taxpayer to post cash or a guarantee for the disputed amount before hearing a case. It can take up to five years to complete an appeals process and receive a final verdict. The Company may in the future have to post security, by way of cash, insurance bonds or equipment pledges, with respect to certain federal income and municipal tax assessments being contested, the amounts and timing of which are uncertain. The Company and its advisor believe the federal income and municipal tax assessments under appeal are wholly without merit and no provision has been recorded with respect to these matters. In certain jurisdictions where the Company operates, entities that are exporters are permitted to maintain offshore bank accounts and are required to register all transactions resulting in deposits into and payments out of those accounts. The Company has identified that in certain instances it has not registered all transactions prior to 2017. The Company has been advised by its tax and foreign trade legal advisors that material fines that could result from non-compliance are imposable under statute with a five-year statute of limitations. In March and April 2021, the Company received notices from the Brazilian government of environmental infractions related to turbidity in the local water supply at Aurizona with associated fines totaling $5.6 million. A one-in-ten-thousand-year rain event caused widespread flooding in the Aurizona region in late March 2021 and a fresh water pond on the Aurizona site overflowed during the rain event. The Company and its advisors believe the fines are without merit because the turbidity in the water supply was caused by the extensive regional flooding. There was not any failure of the tailings facility or other infrastructure at the Aurizona site. No amount has been recorded in the financial statements in relation to the fines. If the Company is unable to resolve all these matters favorably, there may be an adverse impact on the Company’s financial performance, cash flows and results of operations. The Company continues to closely monitor the COVID-19 situation. Should the duration, spread or intensity of the pandemic further develop in 2021, the Company’s supply chain, market pricing, operations and customer demand could be affected. These factors may further impact the Company’s operating plan, its liquidity and cash flows, and the valuation of its long-lived assets. The COVID-19 situation continues to evolve. The magnitude of its effects on the economy, and on the Company’s financial and operational performance, is uncertain at this time. |
26 |
Notes to Condensed Consolidated Interim Financial Statements (Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts) For the three months ended March 31, 2021 and 2020 |
23. Other Subsequent EventS |
(a) Acquisition of Premier |
On April 7, 2021, the Company completed the acquisition of Premier Gold Mines Limited (“Premier” and the “Premier Transaction”), adding Premier’s 50% interest in Greenstone, 100% interest in Mercedes, and interests in a number of exploration-stage properties to the Company’s existing portfolio of gold assets. Under the terms of the Premier Transaction, the Company acquired 100% of the issued and outstanding shares of Premier at an exchange ratio of 0.1967 Equinox Gold common shares for each Premier share held, such that existing Equinox Gold and Premier shareholders will own approximately 84% and 16% of Equinox Gold, respectively, on an issued share basis. Each Premier option and warrant will become exercisable for Equinox Gold common shares, as adjusted in accordance with the e xchange ratio. As a result of the acquisition of Premier, the Company issued 47,373,723 common shares (valued at approximately $400.0 million based on the Company’s April 7, 2021 closing price), 2,813,747 replacement options and 688,450 replacement warrants. The Company has determined that the Premier Transaction represents a business combination with Equinox Gold identified as the acquirer. The results of operations of Premier will be consolidated from April 7, 2021 onwards. As the transaction closed in April 2021, the initial allocation of the purchase price to the assets and liabilities acquired is not complete. The Company will include a preliminary purchase price allocation in the second quarter 2021 condensed consolidated interim financial statements.
|
(b) Acquisition of additional interest in Greenstone |
On April 16, 2021, the Company completed the acquisition of 10% of Orion’s interest in Greenstone, bringing the Company’s total interest in the project to 60%. The Company paid to Orion $51.0 million in cash on closing and assumed certain contingent payment obligations comprising: • $5 million in cash 24 months after a positive mine construction decision for Greenstone; and • Delivery of approximately 2,200 ounces of refined gold, the cash equivalent value of such refined gold, or a combination thereof, after production milestones of 250,000 oz, 500,000 oz and 700,000 oz from Greenstone. |
(c) Investment in i-80 Gold |
Concurrent with completion of the Premier Transaction, Premier completed the spin-out of i-80 Gold, a US-focused gold production and development company that will hold Premier’s Nevada assets. The Company received 41.3 million shares in i-80 Gold in connection with the spin-out. As per terms of the Premier Transaction, the Company participated in the i-80 Gold private placement financing, purchasing 9,274,384 units at a price of C$2.60 per unit, for a total investment of $19.2 million (C$24.1 million). Each unit comprises one common share of i-80 Gold and one quarter of one common share purchase warrant. Each whole warrant entitles the Company to acquire one common share of i-80 Gold at a price of C$3.64 until September 18, 2022. |
27 |