Managements’ responsibility for financial statements | 1 |
Reports of independent registered chartered accountant | 2-3 |
Consolidated statements of operations | 4 |
Consolidated statements of comprehensive loss | 5 |
Consolidated balance sheets | 6 |
Consolidated statements of shareholders’ equity | 7 |
Consolidated statements of cash flows | 8 |
Notes to the consolidated financial statements | 9-72 |
(Signed) Robert Gallagher | (Signed) Brian Penny |
Robert Gallagher | Brian Penny |
Chief Executive Officer | Executive Vice-President and Chief Financial Officer |
Toronto, Ontario | |
March 4, 2010 | |
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New Gold Inc. | |||||||
Consolidated statements of operations | |||||||
Year ended December 31, 2009 | |||||||
(Expressed in thousands of U.S. dollars, except share and per share amounts) | |||||||
2009 | 2008 | ||||||
$ | $ | ||||||
Revenues | 323,780 | 143,083 | |||||
Operating expenses | (176,491 | ) | (103,130 | ) | |||
Depreciation and depletion | (58,668 | ) | (18,551 | ) | |||
Earnings from mine operations | 88,621 | 21,402 | |||||
Corporate administration | (24,689 | ) | (22,446 | ) | |||
Business combination transaction costs | (6,583 | ) | - | ||||
Exploration | (6,412 | ) | (4,026 | ) | |||
Goodwill impairment charge (Note 4 (a)) | (192,099 | ) | - | ||||
Loss from operations | (141,162 | ) | (5,070 | ) | |||
Other income (expense) | |||||||
Realized and unrealized gain on gold contracts (Note 11 (a)) | 8,161 | - | |||||
Realized and unrealized gain on fuel contracts (Note 11 (b)) | 797 | - | |||||
Realized and unrealized loss on investments | 351 | - | |||||
Interest and other income | 4,896 | 5,374 | |||||
Gain on redemption of long-term debt (Note 10(a)) | 14,236 | - | |||||
Interest and finance fees | (3,140 | ) | (1,507 | ) | |||
Gain (loss) on foreign exchange | (52,667 | ) | 68,819 | ||||
Earnings (loss) before taxes | (168,528 | ) | 67,616 | ||||
Income and mining taxes (Note 13) | (14,906 | ) | 3,268 | ||||
Net earnings (loss) from continuing operations | (183,434 | ) | 70,884 | ||||
Loss from discontinued operations, (Note 8) | (10,882 | ) | (173,563 | ) | |||
Net loss | (194,316 | ) | (102,679 | ) | |||
Earnings (loss) per share from continuing operations | |||||||
Basic and diluted | (0.60 | ) | 0.48 | ||||
Loss per share from discontinued operations | |||||||
Basic and diluted | (0.04 | ) | (1.17 | ) | |||
Loss per share | |||||||
Basic and diluted | (0.64 | ) | (0.69 | ) | |||
Weighted average number of shares outstanding (in thousands) | |||||||
Basic | 306,288 | 148,126 | |||||
Diluted | 306,288 | 148,616 | |||||
(i) Stock option expense (a non-cash item included in corporate administration) | (6,621 | ) | (7,039 | ) |
Page 4
New Gold Inc. | |||||||
Consolidated statements of comprehensive loss | |||||||
Year ended December 31, 2009 | |||||||
(Expressed in thousands of U.S. dollars) | |||||||
2009 | 2008 | ||||||
$ | $ | ||||||
Net loss | (194,316 | ) | (102,679 | ) | |||
Other comprehensive income (loss) | |||||||
Unrealized losses on mark-to-market of gold contracts | (45,698 | ) | - | ||||
Unrealized gains on mark-to-market of fuel contracts | 189 | - | |||||
Gain on available-for-sale securities (net of tax of $Nil) | - | 1,160 | |||||
Future income tax | 17,870 | - | |||||
Total other comprehensive income (loss) | (27,639 | ) | 1,160 | ||||
Total comprehensive loss | (221,955 | ) | (101,519 | ) | |||
Page 5
New Gold Inc. | |||||||
Consolidated balance sheets | |||||||
as at December 31 | |||||||
(Expressed in thousands of U.S. dollars) | |||||||
2009 | 2008 | ||||||
$ | $ | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | 262,325 | 182,013 | |||||
Restricted cash (Note 5) | 9,201 | - | |||||
Accounts receivable | 10,345 | 11,232 | |||||
Inventories (Note 6) | 86,299 | 23,265 | |||||
Future income and mining taxes (Note 13) | 8,848 | 2,690 | |||||
Current portion of mark-to-market gain on fuel contracts (Note 11) | 706 | - | |||||
Prepaid expenses and other | 6,933 | 4,991 | |||||
Current assets of operations held for sale (Note 8) | 10,298 | 18,746 | |||||
Total current assets | 394,955 | 242,937 | |||||
Investments (Note 7) | 45,890 | 77,016 | |||||
Mining interests (Note 9) | 2,000,438 | 1,609,224 | |||||
Future income tax asset (Note 13) | 2,250 | - | |||||
Reclamation deposits and other (Note 14) | 17,646 | 4,900 | |||||
Assets of operations held for sale (Note 8) | 27,080 | 23,624 | |||||
Total assets | 2,488,259 | 1,957,701 | |||||
Liabilities | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | 36,033 | 28,759 | |||||
Current portion of long-term debt (Note 10) | 12,088 | - | |||||
Current portion of mark-to-market loss on gold contracts (Note 11 (a)) | 19,206 | - | |||||
Income and mining taxes payable (Note 13) | 15,677 | 5,126 | |||||
Current liabilities of operations held for sale (Note 8) | 10,414 | 20,120 | |||||
Total current liabilities | 93,418 | 54,005 | |||||
Reclamation and closure cost obligations (Note 14) | 19,889 | 8,701 | |||||
Mark-to-market loss on gold contracts (Note 11 (a)) | 76,780 | - | |||||
Future income and mining taxes (Note 13) | 316,426 | 224,068 | |||||
Long-term debt (Note 10) | 225,456 | 212,387 | |||||
Employee benefits and other | 5,355 | 3,808 | |||||
Liabilities of operations held for sale (Note 8) | 19,890 | 12,944 | |||||
Total liabilities | 757,214 | 515,913 | |||||
Shareholders' equity | |||||||
Common shares (Note 12 (a)) | 1,810,865 | 1,321,110 | |||||
Contributed surplus | 82,984 | 65,409 | |||||
Share purchase warrants (Note 12 (e)) | 150,656 | 145,614 | |||||
Equity component of convertible debentures | 21,604 | 21,604 | |||||
Accumulated other comprehensive loss | (29,205 | ) | (406 | ) | |||
Deficit | (305,859 | ) | (111,543 | ) | |||
(335,064 | ) | (111,949 | ) | ||||
Total shareholders' equity | 1,731,045 | 1,441,788 | |||||
Total liabilities and shareholders' equity | 2,488,259 | 1,957,701 | |||||
Commitments and contingencies (Note 21) | |||||||
Approved by the Board | |||||||
(Signed) Robert Gallagher | |||||||
Robert Gallagher, Director | |||||||
(Signed) James Estey | |||||||
James Estey, Director |
Page 6
New Gold Inc. | |||||||
Consolidated statements of shareholders' equity | |||||||
Year ended December 31, 2009 | |||||||
(Expressed in thousands of U.S. dollars, except share amounts) | |||||||
2009 | 2008 | ||||||
$ | $ | ||||||
Common shares | |||||||
Balance, beginning of year | 1,321,110 | 339,796 | |||||
Shares issued, net of share issue costs | 103,122 | - | |||||
Shares issued for mineral properties | 63 | - | |||||
Acquisition of Western Goldfields (Note 4 (a)) | 375,367 | - | |||||
Exercise of options | 11,203 | 3,022 | |||||
Exercise of special warrants | - | 80,448 | |||||
Exercise of warrants | - | 3,167 | |||||
Acquisition of Metallica (Note 4 (b)(i)) | - | 605,139 | |||||
Acquisition of NGI (Note 4 (b)(ii)) | - | 289,538 | |||||
Balance, end of year | 1,810,865 | 1,321,110 | |||||
Contributed surplus | |||||||
Balance, beginning of year | 65,409 | 6,166 | |||||
Exercise of options | (5,803 | ) | (1,664 | ) | |||
Acquisition of Western Goldfields (Note 4 (a)) | 9,949 | - | |||||
Acquisition of Metallica (Note 4 (b)(i)) | - | 7,294 | |||||
Acquisition of NGI (Note 4 (b)(ii)) | - | 8,241 | |||||
Expiry of warrants | 6,808 | 38,333 | |||||
Stock-based compensation | 6,621 | 7,039 | |||||
Balance, end of year | 82,984 | 65,409 | |||||
Special warrants | |||||||
Balance, beginning of year | - | 104,166 | |||||
Exercise of special warrants | - | (104,166 | ) | ||||
Balance, end of year | - | - | |||||
Share purchase warrants | |||||||
Balance, beginning of year | 145,614 | 57,673 | |||||
Acquisition of Western Goldfields (Note 4 (a)) | 11,850 | - | |||||
Acquisition of Metallica (Note 4 (b)(i)) | - | 46,674 | |||||
Acquisition of NGI (Note 4 (b)(ii)) | - | 57,415 | |||||
Exercise of special warrants | - | 23,718 | |||||
Exercise of warrants | - | (1,533 | ) | ||||
Expiry of warrants | (6,808 | ) | (38,333 | ) | |||
Balance, end of year | 150,656 | 145,614 | |||||
Equity component of convertible debentures | |||||||
Balance, beginning of year | 21,604 | - | |||||
Acquisition of NGI (Note 4 (b)(ii)) | - | 21,604 | |||||
Balance, end of year | 21,604 | 21,604 | |||||
Accumulated other comprehensive loss | |||||||
Balance, beginning of year | (406 | ) | (1,566 | ) | |||
Net change in fair value of hedging instruments (Note 11) | (27,639 | ) | - | ||||
Reclassification of gains on available-for-sale investments to earnings | (1,160 | ) | - | ||||
Unrealized gain on available-for-sale investments | - | 1,160 | |||||
Balance, end of year | (29,205 | ) | (406 | ) | |||
Deficit | |||||||
Balance, beginning of year | (111,543 | ) | (8,864 | ) | |||
Net loss | (194,316 | ) | (102,679 | ) | |||
Balance, end of year | (305,859 | ) | (111,543 | ) | |||
Total shareholders' equity | 1,731,045 | 1,441,788 |
Page 7
New Gold Inc. | |||||||
Consolidated statements of cash flows | |||||||
Year ended December 31, 2009 | |||||||
(Expressed in thousands of U.S. dollars) | |||||||
2009 | 2008 | ||||||
$ | $ | ||||||
Operating activities | |||||||
Net Loss | (194,316 | ) | (102,679 | ) | |||
Loss from discontinued operations | 10,882 | 173,563 | |||||
Items not involving cash | |||||||
Goodwill impairment charge (Note 4 (a)) | 192,099 | - | |||||
Unrealized and realized gain on gold contracts | (12,389 | ) | - | ||||
Unrealized gain on fuel contracts | (523 | ) | - | ||||
Unrealized foreign exchange loss (gain) | 46,057 | (66,677 | ) | ||||
Depreciation and depletion | 59,473 | 18,866 | |||||
Stock option expense | 6,621 | 7,039 | |||||
Future income and mining taxes | (1,441 | ) | (9,741 | ) | |||
Gain on redemption of long-term debt | (14,236 | ) | - | ||||
Other | - | 1,129 | |||||
Loss on investments | 351 | - | |||||
Change in non-cash working capital (Note 15) | (13,597 | ) | 1,573 | ||||
Cash provided by continuing operations | 78,981 | 23,073 | |||||
Cash provided by discontinued operations | 5,576 | 1,612 | |||||
Investing activities | |||||||
Mining interests | (111,522 | ) | (126,791 | ) | |||
Reclamation deposits | (1,547 | ) | (1,225 | ) | |||
Cash acquired in business combination and asset acquisition (Note 4 (a)) | 20,735 | 137,718 | |||||
Receipt of accrued interest on investments | 3,015 | - | |||||
Proceeds from settlement of investments | 36,636 | 32,440 | |||||
Cash provided by (used in) continuing operations | (52,683 | ) | 42,142 | ||||
Cash used in discontinued operations | (1,405 | ) | (7,077 | ) | |||
Financing activities | |||||||
Common shares issued | 107,015 | 2,991 | |||||
Repayment of long-term debt | (66,981 | ) | (10,000 | ) | |||
Cash provided by (used in) continuing operations | 40,034 | (7,009 | ) | ||||
Cash provided by (used in) discontinued operations | (7,000 | ) | 7,000 | ||||
Effect of exchange rate changes on cash and cash equivalents | 13,980 | (23,997 | ) | ||||
Increase in cash and cash equivalents | 77,483 | 35,744 | |||||
Cash and cash equivalents, beginning of year | 185,668 | 149,924 | |||||
Cash and cash equivalents, end of year | 263,151 | 185,668 | |||||
Comprised of | |||||||
Cash and cash equivalents of continuing operations | 262,325 | 182,013 | |||||
Cash and cash equivalents of discontinued operations | 826 | 3,655 | |||||
263,151 | 185,668 | ||||||
Cash and cash equivalents are comprised of | |||||||
Cash | 84,961 | 21,398 | |||||
Short-term money market instruments | 178,190 | 164,270 | |||||
263,151 | 185,668 | ||||||
Supplemental cash flow information (Note 15) |
Page 8
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Subsidiary | Interest | |
Metallica Resources Inc. | 100% | |
Metallica Resources Alaska Inc. | 100% | |
Minera Metallica Resources Chile Limitada | 100% | |
Minera San Xavier, S.A. de C.V. | 100% | |
Mineração Pedra Branca do Amapari Ltda (“Amapari”) | 100% | |
Peak Gold Mines Pty | 100% | |
Inversiones El Morro Limitada | 100% | |
Western Goldfields Inc. | 100% | |
Western Goldfields (USA) Inc. | 100% | |
Western Mesquite Mines Inc. | 100% |
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Page 15
(i) | Effective January 1, 2009, the Company adopted CICA Handbook Section 3064, Goodwill and Intangible Assets, which replaces CICA Handbook Section 3062, and establishes revised standards for recognition, measurement, presentation and disclosure of goodwill and intangible assets. Concurrent with the adoption of this standard, Emerging Issues Committee (“EIC”) 27, Revenues and Expenditures in the Pre-operating Period is no longer applicable. The adoption of Section 3064 did not have a material impact on the Company’s consolidated financial position and results of operations for the year ended December 31, 2009. |
(ii) | Effective January 1, 2009, the Company adopted CICA Handbook Sections 1582, Business Combinations, (“Section 1582”), 1601, Consolidated Financial Statements, (“Section 1601”) and 1602, Non-controlling Interests, (“Section 1602”) which replaces CICA Handbook Sections 1581, Business Combinations, and 1600, Consolidated Financial Statements. Section 1582 establishes standards for the accounting for business combinations that is equivalent to the business combination accounting standard under International Financial Reporting Standards (“IFRS”). Section 1582 was applicable for the Company& #8217;s business combinations with acquisition dates on or after January 1, 2009. Section 1601 together with Section 1602 establishes standards for the preparation of consolidated financial statements. Section 1601 was applicable for the Company’s interim and annual consolidated financial statements for its fiscal year beginning January 1, 2009. The adoption of these standards had a significant impact on how the Company accounted for the business combination with Western Goldfields. The impact was as follows: |
Page 16
3. | Changes in accounting policies (continued) |
· | Transaction costs were not capitalized as part of the purchase consideration and instead were expensed as incurred. As a result of this, the Company has expensed approximately $6.6 million of transaction costs. |
· | Measurement date for equity instruments issued by the Company was at the date of acquisition (May 27, 2009) and not at the average of a few days before and after the terms were agreed to and announced (March 4, 2009). This resulted in using a share price of $2.63 versus a share price of $1.73. This resulted in an increase in the purchase consideration for the Business Combination of $138.1 million, resulting in increased goodwill being recorded on the balance sheet (Note 4 (a)). |
(iii) | On January 20, 2009, the CICA issued EIC 173, Credit Risk and the Fair Value of Financial Assets and Financial Liabilities, which clarifies that an entity’s own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and liabilities, including derivative instruments. EIC 173 is to be applied retrospectively without restatement of prior periods in interim and annual financial statements for periods ending on or after the date of issuance of EIC 173. The Company adopted this recommendation January 1, 2009. The adoption of this standard had a significant impact on the fair value of the gold forward sales at December 31, 2009. Without the inclusion of the Company’s own credit risk the fair value of the gold hedge liability would have been $109.2 million c ompared to $96.0 million at December 31, 2009. |
Page 17
Page 18
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$ | ||||
Issuance of New Gold shares (142,796,000 common shares) | 375,554 | |||
Fair value of options issued | 9,949 | |||
Fair value of warrants issued | 11,850 | |||
Purchase consideration | 397,353 | |||
Net assets acquired | ||||
Net working capital (including cash of $20,735) | 39,427 | |||
Plant and equipment | 102,693 | |||
Mining interest | 234,479 | |||
Reclamation deposits | 8,978 | |||
Other assets | 1,790 | |||
Fair value of gold contracts | (50,960 | ) | ||
Long-term debt | (56,984 | ) | ||
Reclamation and closure costs obligations | (5,221 | ) | ||
Future income taxes | (68,948 | ) | ||
Goodwill | 192,099 | |||
397,353 |
Page 20
2009 | ||
$ | ||
Revenues | 365,278 | |
Net loss | (218,430) |
Page 21
$ | ||||
Issuance of New Gold shares (87,448,000 common shares) | 605,139 | |||
Fair value of options issued | 7,294 | |||
Fair value of warrants issued | 46,674 | |||
Transaction costs | 3,651 | |||
Purchase consideration | 662,758 | |||
Net assets acquired | ||||
Net working capital acquired (including cash of $34,154) | 35,340 | |||
Mineral interest | 814,352 | |||
Other long-term assets | 2,214 | |||
Long-term liabilities | (3,684 | ) | ||
Future income tax liability | (185,464 | ) | ||
662,758 |
Page 22
The final allocation of the purchase price based on the consideration paid and NGI’s net assets acquired is as follows: | ||||
$ | ||||
Issuance of New Gold shares (37,006,000 common shares) | 289,538 | |||
Fair value of options issued | 8,241 | |||
Fair value of warrants issued | 57,415 | |||
Transaction costs | 4,011 | |||
Purchase consideration | 359,205 | |||
Net working capital (including cash of $103,564) | 85,687 | |||
Mineral interest | 537,720 | |||
Other assets | 94,631 | |||
Long-term liabilities | (252,892 | ) | ||
Future income tax liability | (84,337 | ) | ||
Convertible debentures | (21,604 | ) | ||
359,205 |
Page 23
2009 | 2008 | ||
$ | $ | ||
Heap leach ore (a) | 58,169 | 14,252 | |
Work-in-process (b) | 13,907 | 5,008 | |
Finished goods | 4,819 | 542 | |
Stockpiled ore (c) | 55 | 112 | |
Supplies | 9,349 | 3,351 | |
86,299 | 23,265 |
Page 24
2009 | 2008 | |||||||
Fair | Fair | |||||||
Face | value | Face | value | Expected | ||||
Restructuring categories | value | estimate* | value | estimate* | maturity date | |||
$ | $ | $ | $ | |||||
(millions) | (millions) | (millions) | (millions) | |||||
MAV 2 Notes | ||||||||
A1 (rated A) | 66.7 | 39.3 | 81.2 | 46.6 | December 31, 2016 | |||
A2 (rated A) | 12.7 | 5.9 | 27.9 | 14.9 | December 31, 2016 | |||
B | 5.5 | 0.5 | 5.0 | 0.9 | December 31, 2016 | |||
C | 4.1 | - | 3.5 | 0.3 | December 31, 2016 | |||
Traditional asset tracking notes | ||||||||
MAV3 - Class 9 | 0.1 | 0.1 | 7.8 | 7.6 | September 12, 2015 | |||
Ineligible asset tracking notes | ||||||||
MAV2 - Class 3/13/15 | 10.3 | 0.1 | 13.0 | 2.0 | December 20, 2012 to | |||
October 24, 2016 | ||||||||
Accrued interest | - | - | - | 4.7 | January 2, 2009 | |||
99.4 | 45.9 | 138.4 | 77.0 |
Page 25
2009 | 2008 | ||
$ | $ | ||
Current assets | 10,298 | 18,746 | |
Non-current assets | 27,080 | 23,624 | |
Current liabilities | (10,414) | (20,120) | |
Long-term liabilities | (19,890) | (12,944) | |
7,074 | 9,306 |
2009 | 2008 | ||
$ | $ | ||
Revenue | 18,738 | 75,052 | |
Loss before taxes | (10,882) | (177,318) | |
Net loss | (10,882) | (173,563) |
Page 26
Year ended December 31 | |||
2009 | 2008 | ||
$ | $ | ||
Operating activities | 5,576 | 1,612 | |
Investing activities | (1,405) | (7,077) | |
Financing activities | (7,000) | 7,000 | |
Increase (decrease) in cash and cash equivalents | |||
from discontinued operations | (2,829) | 1,535 |
2009 | ||||
Accumulated | ||||
depreciation | Net book | |||
Cost | and depletion | value | ||
$ | $ | $ | ||
Mining properties | 1,744,236 | 43,464 | 1,700,772 | |
Plant and equipment | 348,078 | 48,412 | 299,666 | |
2,092,314 | 91,876 | 2,000,438 |
2008 | ||||
Accumulated | ||||
depreciation | Net book | |||
Cost | and depletion | value | ||
$ | $ | $ | ||
Mining properties | 1,447,742 | 11,065 | 1,436,677 | |
Plant and equipment | 191,979 | 19,432 | 172,547 | |
1,639,721 | 30,497 | 1,609,224 |
Page 27
Mining properties | |||||||
Non- | Plant and | ||||||
Depletable | depletable | Total | equipment | 2009 | 2008 | ||
$ | $ | $ | $ | $ | $ | ||
Mesquite Mine | 180,625 | 44,547 | 225,172 | 97,254 | 322,426 | - | |
Cerro San Pedro Mine | 232,830 | 84,822 | 317,652 | 66,208 | 383,860 | 399,630 | |
Peak Mine | 56,932 | 61,506 | 118,438 | 59,765 | 178,203 | 172,710 | |
New Afton Project | - | 630,890 | 630,890 | 75,417 | 706,307 | 632,085 | |
El Morro Project (a) | - | 383,347 | 383,347 | - | 383,347 | 377,430 | |
Other projects (b) | - | 25,273 | 25,273 | - | 25,273 | 26,746 | |
Corporate | - | - | - | 1,022 | 1,022 | 623 | |
470,387 | 1,230,385 | 1,700,772 | 299,666 | 2,000,438 | 1,609,224 |
(a) | Chile - El Morro project (“El Morro”) |
(1) | Chile - Rio Figueroa Project |
(2) | USA - Liberty Bell |
Page 28
2009 | 2008 | ||
$ | $ | ||
Senior secured notes (a) | 169,044 | 182,553 | |
Subordinated convertible debentures (b) | 37,609 | 29,834 | |
Term loan facility (c) | 27,235 | - | |
El Morro project funding loan (d) | 3,656 | - | |
237,544 | 212,387 | ||
Less: Current portion of term loan facility | (12,088) | - | |
225,456 | 212,387 |
Page 29
· | cancellation of the remaining undrawn facility of $18.6 million; |
· | a $15.0 million prepayment of principal which was made on October 7, 2009; |
· | increasing the interest rate from U.S. dollar LIBOR plus 2.20% to U.S. dollar LIBOR plus 4.25%; |
· | a restructuring fee payment of $0.2 million; |
· | repayable by June 30, 2012; and, |
· | conversion of the cost overrun account (Note 5) to a debt service reserve account. |
Page 30
$ | ||
2010 | 12,088 | |
2011 | 15,147 | |
27,235 |
Page 31
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Asset derivatives | |||
2009 | 2008 | ||
$ | $ | ||
Derivatives classified as hedging instruments | |||
for accounting purposes | |||
Fuel contracts | 706 | - | |
706 | - | ||
Less: Current portion | (706) | - | |
- | - |
Liability derivatives | |||
2009 | 2008 | ||
$ | $ | ||
Derivatives classified as hedging instruments | |||
for accounting purposes | |||
Gold hedging contracts | 95,986 | - | |
95,986 | - | ||
Less: Current portion | (19,206) | - | |
76,780 | - |
Year ended December 31 | |||
2009 | 2008 | ||
$ | $ | ||
Derivatives not classified as hedging instruments for | |||
accounting purposes | |||
Gold hedging contracts | (734) | - | |
Fuel contracts | 14 | - | |
(720) | - | ||
Derivatives classified as hedging instruments for | |||
accounting purposes | |||
Gold hedging contracts | (3,403) | - | |
Fuel contracts | (66) | - | |
(3,469) | - | ||
(4,169) | - |
Page 33
Year ended December 31 | |||
2009 | 2008 | ||
$ | $ | ||
Derivatives not classified as hedging instruments for | |||
accounting purposes | |||
Gold hedging contracts | 8,161 | - | |
Fuel contracts | 797 | - | |
8,958 | - |
Year ended December 31 | |||
2009 | 2008 | ||
$ | $ | ||
Effective portion of change in fair value of hedging | |||
instruments | |||
Gold hedging contracts | (45,698) | - | |
Fuel contracts | 189 | - | |
Future income tax | 17,870 | - | |
(27,639) | - |
Page 34
2009 | 2009 | 2008 | 2008 | ||
(000's) | $ | (000's) | $ | ||
Balance, beginning of year | 212,841 | 1,321,110 | 72,629 | 339,796 | |
Shares issued (i) | 30,705 | 103,122 | - | - | |
Shares issued for mineral properties ((ii) and (iii)) | 25 | 63 | - | - | |
Acquisition of Western Goldfields (iv) | 142,796 | 375,367 | - | - | |
Acquisition of Metallica (v) | - | - | 87,448 | 605,139 | |
Acquisition of NGI (vi) | - | - | 37,006 | 289,538 | |
Exercise of options ((vii) and (viii)) | 2,448 | 11,203 | 424 | 3,022 | |
Exercise of Special Warrants (ix) | - | - | 14,772 | 80,448 | |
Exercise of warrants (x) | - | - | 562 | 3,167 | |
Balance, end of year | 388,815 | 1,810,865 | 212,841 | 1,321,110 |
(i) | On September 11, 2009, the Company closed a bought deal public offering of 26,700,000 common shares and the underwriters’ exercise in full of an over-allotment option to purchase an additional 4,005,000 common shares granted the Company in connection with such offering at a price of $3.49 per share (Cdn$3.75 per share) for total gross proceeds of $107.2 million (Cdn$115.0 million). The Company incurred related share issuance costs of $4.1 million. |
(ii) | On August 31, 2009, the Company issued 5,000 common shares valued at $17,000 related to other exploration projects. |
(iii) | On February 27, 2009, the Company issued 20,000 common shares valued at $46,000 related to other exploration projects |
(iv) | On May 27, 2009, the Company issued 142,796,000 common shares to effect the acquisition of Western Goldfields, as described in Note 4(a). These shares were issued at the closing share price of the Company on May 27, 2009, the transaction completion date, of $2.63 per share for total consideration of $375.4 million. |
(v) | On May 9, 2008, the Company issued 87,448,000 common shares to effect the acquisition of Metallica, as described in Note 4(b)(i). These shares were issued at $6.92 per share which represented the average share price for the two days prior to, the day of and two days subsequent to the announcement of the transaction for total consideration of $605.1 million. |
(vi) | On June 30, 2008, the Company issued 37,006,000 common shares to effect the acquisition of NGI, as described in Note 4(b)(ii). These shares were issued at the closing share price of the Company on June 30, 2008, the transaction completion date, of $7.82 per share for total consideration of $289.5 million. |
Page 35
(vii) | During the year ended December 31, 2009, 2,448,000 common shares were issued pursuant to the exercise of stock options. The Company received proceeds of $5.4 million from these exercises. |
(viii) | During the year ended December 31, 2008, 424,000 common shares were issued pursuant to the exercise of stock options. The Company received proceeds of $1.4 million from these exercises. |
(ix) | On February 28, 2008, the 14,772,000 Special Warrants outstanding at December 31, 2007 were converted into 14,772,000 common shares of the Company and 73,862,000 common share purchase warrants. |
(x) | During the year ended December 31, 2008, 562,000 common shares were issued pursuant to the exercise of share purchase warrants. The Company received proceeds of $1.6 million from these exercises. |
Page 36
Weighted | |||
average | |||
Number of | exercise | ||
options | price | ||
(000's) | Cdn$ | ||
Balance, December 31, 2007 | 2,150 | 9.10 | |
Granted | 3,085 | 6.92 | |
Options assumed on acquisition of Metallica | 1,930 | 4.07 | |
Options assumed on acquisition of NGI | 2,828 | 7.03 | |
Exercised | (424) | 3.39 | |
Forfeited | (579) | 8.44 | |
Balance, December 31, 2008 | 8,990 | 6.94 | |
Options assumed on acquisition of Western | |||
Goldfields | 5,699 | 1.58 | |
Granted | 5,762 | 3.02 | |
Exercised | (2,448) | 2.29 | |
Forfeited | (2,679) | 6.27 | |
Balance, December 31, 2009 | 15,324 | 4.34 |
Options outstanding | Options exercisable | |||||
Weighted | ||||||
average | Weighted | Weighted | ||||
remaining | Number of | average | Number of | average | ||
Exercise | contractual | stock options | exercise | options | exercise | |
prices | life (years) | outstanding | price | exercisable | price | |
Cdn$ | (000's) | Cdn$ | (000's) | Cdn$ | ||
0.34 - 0.99 | 4.03 | 1,402 | 0.68 | 1,402 | 0.68 | |
1.00 - 1.99 | 3.43 | 1,608 | 1.68 | 1,608 | 1.68 | |
2.00 - 2.99 | 5.15 | 2,999 | 2.58 | 1,163 | 2.38 | |
3.00 - 3.99 | 5.94 | 3,776 | 3.26 | 388 | 3.66 | |
4.00 - 4.99 | 2.19 | 72 | 4.39 | 72 | 4.39 | |
5.00 - 5.99 | 2.98 | 682 | 5.50 | 634 | 5.51 | |
6.00 - 6.99 | 2.65 | 1,057 | 6.33 | 796 | 6.37 | |
7.00 - 7.99 | 3.22 | 1,915 | 7.70 | 1,216 | 7.63 | |
8.00 - 8.99 | - | - | - | - | - | |
9.00 - 9.99 | 2.20 | 1,615 | 9.30 | 1,615 | 9.30 | |
11.00 | 1.41 | 198 | 11.00 | 198 | 11.00 | |
0.34 - 11.00 | 4.18 | 15,324 | 4.34 | 9,092 | 4.74 |
Page 37
(c) | Stock options (continued) |
Page 38
Weighted | ||||
Common | average | |||
Number of | Shares | exercise | ||
warrants | Issuable | price | ||
(000's) | (000's) | Cdn$ | ||
Balance, December 31, 2007 ((i) and (ii)) | 217,500 | 21,750 | 15.00 | |
Issued ((i) and (iii) | 73,862 | 7,386 | 9.00 | |
Metallica share purchase warrants | ||||
exercisable into New Gold shares (iv) | 17,758 | 17,758 | 3.93 | |
NGI share purchase warrants (v) | 27,825 | 27,825 | 15.00 | |
Exercised (vi) | (562) | (562) | 3.44 | |
Expired (vii) | (14,046) | (14,046) | 3.44 | |
Balance, December 31, 2008 | 322,337 | 60,111 | 13.80 | |
Issued (iv) | 25 | 25 | 15.00 | |
WGI share purchase warrants | ||||
exercisable into New Gold shares* (viii) | 6,056 | 6,056 | 0.80 | |
Expired (vii) | (3,150) | (3,150) | 6.11 | |
Balance, December 31, 2009 | 325,268 | 63,042 | 12.94 | |
*The exercise price of these US$0.76 warrants have been converted to Canadian dollars | ||||
for presentation purposes. |
(i) | On June 30, 2008, the Company completed a 10 for 1 common share consolidation as part of the Transaction described in Note 4 (b). The number of common shares outstanding has been adjusted to reflect this common share consolidation. While the number of share purchase warrants outstanding was not affected by this consolidation, the number of common shares to be issued upon exercise and the price to be paid upon exercise has been adjusted to reflect this common share consolidation. | |
(ii) | The Company has 217,500,000 share purchase warrants (Series B) outstanding that entitle the holders of these warrants to purchase one common share for Cdn$15.00 per share for every 10 share purchase warrants held. These warrants expire on April 3, 2012. | |
(iii) | As described in Note 12(b), on February 28, 2008, the Company issued 73,862,000 common share purchase warrants (Series C) upon the conversion of the Special Warrants previously issued. The warrants were valued at $23.7 million using the Black-Scholes pricing model and that amount is included in share purchase warrants. A fair value of approximately $0.32 for each warrant was calculated using the following assumptions: no dividends are paid, volatility of 60%, risk free interest rate of 3.4%, and expected life of five years. The holders of these warrants are entitled to purchase one common share for Cdn$9.00 per share for every 10 share purchase warrants held. These share purchase warrants expire November 28, 2012. | |
(iv) | On June 30, 2008, the Company issued 17,758,000 shares purchase warrants to effect the acquisition of Metallica, as described in Note 4(b)(i). These share purchase warrants were valued at $46.7 million as part of the business combination valuation. At December 31, 2009, these share purchase warrants have expired. |
Page 39
(e) | Share purchase warrants (continued) | ||
(v) | On June 30, 2008, the Company issued 27,850,000 share purchase warrants (Series A) to effect the acquisition of NGI, as described in Note 4(b)(ii). These share purchase warrants were valued at $57.4 million as part of the business combination valuation. The holders of these warrants are entitled to purchase one common share for Cdn$15.00 per share for every share purchase warrant held. These share purchase warrants expire on June 28, 2017. | ||
(vi) | During the year ended December 31, 2008, 562,000 share purchase warrants were exercised resulting in the issuance of 562,000 common shares. No share purchase warrants were exercised during the year ended December 31, 2009. | ||
(vii) | During the years ended December 31, 2009 and 2008, 3,150,000 and 14,046,000, respectively, share purchase warrants expired resulting in a transfer from share purchase warrants to contributed surplus of $6.8 million and $38.3 million respectively. | ||
(viii) | On May 27, 2009, the Company issued 6,056,000 share purchase warrants to effect the acquisition of Western Goldfields, as described in Note 4(a). The warrants were valued at $11.9 million as part of the business combination valuation. The holders of these warrants are entitled to purchase one common share for $0.76 per share for every share purchase warrant held. These share purchase warrants expire between July 9, 2011 and July 9, 2012. |
Common | |||||
Number | Shares | Exercise | |||
of warrants | Issuable | prices | Expiry date | ||
(000's) | (000's) | Cdn$ | |||
460 | 460 | 0.80 | * | July 12, 2011 | |
2,300 | 2,300 | 0.80 | * | June 9, 2011 | |
217,500 | 21,750 | 15.00 | April 3, 2012 | ||
3,296 | 3,296 | 0.80 | * | July 9, 2012 | |
73,862 | 7,386 | 9.00 | November 28, 2012 | ||
4,150 | 4,150 | 15.00 | June 28, 2017 | ||
23,700 | 23,700 | 15.00 | June 28, 2017 | ||
325,268 | 63,042 | ||||
*The exercise price of these US$0.76 warrants have been converted to Canadian dollars for presentation purposes. | |||||
Page 40
2009 | 2008 | ||
Earnings (loss) from continuing operations | ($183,434) | $70,884 | |
Loss from discontinued operations, net of tax | (10,882) | (173,563) | |
Net loss | ($194,316) | ($102,679) | |
(in thousands) | |||
Basic weighted average number of shares outstanding | 306,288 | 148,126 | |
Effective of diluted securities | |||
Stock options | - | 490 | |
Diluted weighted average number of shares outstanding | 306,288 | 148,616 | |
Earnings (loss) per share from continuing operations | |||
Basic | ($0.60) | $0.48 | |
Diluted | ($0.60) | $0.48 | |
Loss per share from discontinued operations | |||
Basic | ($0.04) | ($1.17) | |
Diluted | ($0.04) | ($1.17) | |
Loss per share | |||
Basic | ($0.64) | ($0.69) | |
Diluted | ($0.64) | ($0.69) |
2009 | 2008 | ||
(000's) | (000's) | ||
Stock options | 15,324 | 7,257 | |
Share purchase warrants | 63,042 | 60,111 | |
Convertible debentures | 55,000 | 55,000 |
Page 41
2009 | 2008 | ||
$ | $ | ||
Current income and mining tax expense | 16,347 | 6,473 | |
Future income and mining tax recovery | (1,441) | (9,741) | |
14,906 | (3,268) |
2009 | 2008 | ||
$ | $ | ||
Earnings (loss) before income taxes | (168,528) | 67,616 | |
Canadian federal and provincial income tax rates | 30.00% | 31.00% | |
Income tax recovery based on above rates | (50,987) | (29,551) | |
Increase (decrease) due to | |||
Non-taxable income | (11,715) | (26,983) | |
Non-deductible expenditures | 14,287 | 8,192 | |
Different statutory tax rates on earnings of foreign | |||
subsidiaries | 2,882 | (580) | |
Impact of decrease in tax rates on future income taxes | 9,832 | - | |
Adjustment of prior year provision to statutory tax | |||
returns | (2,839) | (872) | |
Goodwill write down | 57,769 | ||
Benefit of losses not recognized in period | 650 | 1,626 | |
Change in valuation allowance and other | (4,973) | 44,900 | |
14,906 | (3,268) |
Page 42
2009 | 2008 | ||
$ | $ | ||
Future income and mining tax assets | |||
Tax loss carryforwards | 41,944 | 15,620 | |
Deductible temporary differences and other | 3,770 | 10,356 | |
Deferred financing costs and other | 12,608 | 14,620 | |
Value of future income tax and mining assets | 58,322 | 40,596 | |
Valuation allowance | (18,202) | (12,613) | |
Future income and mining tax assets | 40,120 | 27,983 | |
Future income and mining tax liabilities | |||
Accumulated cost base differences on assets | (345,448) | (249,361) | |
Future income and mining tax liabilities, net | (305,328) | (221,378) | |
Presented on the consolidated balance sheets as | |||
Future income and mining tax assets | 8,848 | 2,690 | |
Future income and mining tax assets - non-current | 2,250 | - | |
Future income and mining tax liabilities | (316,426) | (224,068) | |
Future income and mining tax liabilities, net | (305,328) | (221,378) |
(i) | Canadian income tax losses of approximately $48.8 million that expire from 2025 through 2028; |
(ii) | U.S. loss carryforwards of approximately $56.1 million that expire from 2021 through 2028; |
(iii) | Mexican loss carryforwards of approximately $0.1 million that expire from 2010 through 2017; |
(iv) | Chilean loss carryforwards of approximately $1.9 million that may be available for tax purposes. These losses carry forward indefinitely. |
Canada | 2005 to 2009 | |
United States | 2004 to 2009 | |
Mexico | 2004 to 2009 | |
Australia | 2004 to 2009 |
Page 43
Cerro | New | |||||
Mesquite | San Pedro | Peak | Afton | |||
Mine | Mine | Mine | Project | Total | ||
$ | $ | $ | $ | $ | ||
Balance, January 1, 2008 | - | - | 5,910 | - | 5,910 | |
Acquisition (Note 4) | - | 3,228 | - | - | 3,228 | |
Reclamation expenditures | - | - | (98) | - | (98) | |
Accretion | - | 86 | 334 | - | 420 | |
Revisions to expected cash flows | - | 112 | 575 | 182 | 869 | |
Foreign exchange | - | (168) | (1,212) | - | (1,380) | |
Balance, December 31, 2008 | - | 3,258 | 5,509 | 182 | 8,949 | |
Acquisition (Note 4) | 5,221 | - | - | - | 5,221 | |
Reclamation expenditures | - | - | (32) | - | (32) | |
Accretion | 203 | 316 | 521 | 75 | 1,115 | |
Revisions to expected cash flows | 163 | 843 | 880 | 1,556 | 3,442 | |
Foreign exchange | - | 201 | 1,574 | 33 | 1,808 | |
Balance, December 31, 2009 | 5,587 | 4,618 | 8,452 | 1,846 | 20,503 | |
Less: current portion | (188) | (304) | (122) | - | (614) | |
5,399 | 4,314 | 8,330 | 1,846 | 19,889 |
Page 44
(a) | Mesquite Mine |
(b) | Cerro San Pedro |
(c) | Peak Mine |
Page 45
(c) | Peak Mine (continued) |
(d) | New Afton |
Year ended December 31 | |||
2009 | 2008 | ||
$ | $ | ||
Change in non-cash working capital | |||
Accounts receivable | (233) | 10,626 | |
Inventories and stockpiled ore | (18,239) | 21,827 | |
Accounts payable and accrued liabilities | 5,210 | (28,394) | |
Prepaids and other | (335) | (2,486) | |
(13,597) | 1,573 | ||
Non-cash financing and investing activities: | |||
Shares, options and warrants issued on acquisition | |||
(Note 4 (a) and 4 (b)) | 397,353 | 1,014,301 | |
Operating activities included the following payments: | |||
Interest paid | 22,614 | 12,584 | |
Income taxes paid | 8,290 | 12,223 |
Page 46
Year ended December 31 2009 | ||||||
(Loss) | ||||||
Depletion | earnings | Expenditures | ||||
and | from | Total | for mining | |||
Revenues | depreciation | operations | assets | interest | ||
$ | $ | $ | $ | $ | ||
USA (3) | 94,506 | 16,523 | (169,874) | 414,893 | 1,341 | |
Mexico (2) | 112,642 | 25,737 | 31,207 | 442,300 | 3,164 | |
Australia | 116,632 | 17,023 | 39,685 | 228,420 | 28,581 | |
Canada (2) | - | 16 | (589) | 739,251 | 76,210 | |
Chile (2) | - | - | (627) | 392,976 | 1,530 | |
Other (1) | - | 174 | (40,964) | 233,041 | 696 | |
323,780 | 59,473 | (141,162) | 2,450,881 | 111,522 |
(1) | Other includes corporate balances and exploration properties. | |
(2) | Segments acquired on June 30, 2008 (Note 1). | |
(3) | Segment acquired on May 27, 2009 (Note 4 (a)) - results from operations for period of ownership. |
Year ended December 31 2008 | ||||||
(Loss) | ||||||
Depletion | earnings | Expenditures | ||||
and | from | Total | for mining | |||
Revenues | depreciation | operations | assets | interest | ||
$ | $ | $ | $ | $ | ||
Mexico (2) | 47,285 | 8,788 | (12,549) | 444,555 | 9,812 | |
Australia | 95,798 | 9,665 | 28,595 | 198,477 | 29,389 | |
Canada (2) | - | 9 | (5,789) | 640,133 | 87,466 | |
Chile (2) | - | - | - | 377,430 | - | |
Other (1) | - | 91 | (15,327) | 254,736 | 124 | |
143,083 | 18,553 | (5,070) | 1,915,331 | 126,791 |
(1) | Other includes corporate balances and exploration properties. | |
(2) | Segments acquired on June 30, 2008 (Note 1). |
Page 47
Metal sales | Year ended December 31 | ||
Customer | 2009 | 2008 | |
$ | $ | ||
1 | 112,643 | 56,649 | |
2 | 59,516 | 47,285 | |
3 | 48,011 | 39,149 | |
4 | 47,677 | - | |
5 | 24,728 | - | |
Total | 292,575 | 143,083 | |
% of total metal sales | 90% | 100% |
2009 | 2008 | ||
$ | $ | ||
Shareholders' equity | 1,731,045 | 1,441,788 | |
Long-term debt | 237,544 | 212,387 | |
1,968,589 | 1,654,175 | ||
Cash and cash equivalents | (262,325) | (182,013) | |
Investments | (45,890) | (77,016) | |
1,660,374 | 1,395,146 |
Page 48
Page 49
(a) | Credit risk (continued) |
2009 | 2008 | ||
$ | $ | ||
Cash and cash equivalents | 262,325 | 182,013 | |
Restricted cash | 9,201 | - | |
Accounts receivable | 10,345 | 11,232 | |
Mark-to-market gain on fuel contracts | 706 | - | |
Investments | 45,890 | 77,016 | |
Reclamation deposits and other | 17,646 | 4,900 | |
346,113 | 275,161 |
0-30 | 31-60 | 61-90 | 91-120 | Over | 2009 | 2008 | ||
days | days | days | days | 120 days | Total | Total | ||
$ | $ | $ | $ | $ | $ | |||
Corporate | 47 | - | 123 | - | - | 170 | 813 | |
Mesquite mine | 273 | - | - | - | - | 273 | - | |
Peak Mines | 3,913 | - | - | - | 9 | 3,922 | 3,455 | |
New Afton | 54 | - | 119 | 459 | - | 632 | 2,148 | |
Cerro San Pedro | 608 | 606 | 1,089 | 937 | 2,108 | 5,348 | 4,816 | |
4,895 | 606 | 1,331 | 1,396 | 2,117 | 10,345 | 11,232 |
Page 50
Less than | After | 2009 | 2008 | ||||
1 year | 1-3 years | 4-5 years | 5 years | Total | Total | ||
$ | $ | $ | $ | $ | |||
Accounts payable and | |||||||
accrued liabilities | 36,006 | - | - | - | 36,006 | 28,759 | |
Long-term debt | 12,088 | 15,147 | 52,553 | 178,679 | 258,467 | 238,447 | |
Interest payable on | |||||||
long-term debt | 21,552 | 41,480 | 39,651 | 44,669 | 147,352 | 187,654 | |
Gold contracts | 19,206 | 57,095 | 19,685 | - | 95,986 | - | |
88,852 | 113,722 | 111,889 | 223,348 | 537,811 | 454,860 |
Page 51
2009 | |||||
Canadian | Australian | Mexican | Chilean | ||
dollar | dollar | peso | peso | ||
Cash and cash equivalents | 165,147 | 32,008 | 2,670 | 18 | |
Investments | 45,890 | - | - | - | |
Accounts receivable | 549 | 3,922 | 5,674 | - | |
Reclamation deposit | 6,211 | - | - | - | |
Accounts payable and accruals | (6,529) | (11,566) | (8,806) | (94) | |
Reclamation and closure cost obligations | (1,846) | (8,330) | (4,314) | - | |
Long-term debt | (206,653) | - | - | - | |
Gross balance sheet exposure | 2,769 | 16,034 | (4,776) | (76) |
2008 | |||||
Canadian | Australian | Mexican | Chilean | ||
dollar | dollar | peso | peso | ||
Cash and cash equivalents | 88,977 | 15,213 | 531 | - | |
Investments | 77,017 | - | - | - | |
Accounts receivable | 2,667 | - | 5,228 | - | |
Reclamation deposit | - | - | - | - | |
Accounts payable and accruals | (14,414) | (7,980) | (3,028) | - | |
Reclamation and closure cost obligations | (182) | (5,449) | (3,270) | - | |
Long-term debt | (223,951) | - | (238) | - | |
Gross balance sheet exposure | (69,886) | 1,784 | (777) | - |
Page 52
2009 | 2008 | ||
$ | $ | ||
Canadian dollar | 277 | 700 | |
Australian dollar | 1,603 | 178 | |
Mexican peso | 478 | 70 | |
Chilean peso | 76 | - | |
2,434 | 948 |
· | the strength of the U.S. economy and the economies of other industrialized and developing nations; |
· | global or regional political or economic crises; |
· | the relative strength of the U.S. dollar and other currencies; |
· | expectations with respect to the rate of inflation; |
· | interest rates; |
· | purchases and sales of gold by central banks and other holders; |
· | demand for jewelry containing gold; and |
· | investment activity, including speculation, in gold as a commodity. |
Page 53
Year ended December 31 | |||||
2009 | 2009 | 2008 | 2008 | ||
Other | Other | ||||
Net | Comprehensive | Net | Comprehensive | ||
Earnings | Income | Earnings | Income | ||
$ | $ | $ | $ | ||
Gold price | 27,303 | 31,793 | 16,257 | - | |
Copper price | 3,531 | - | 969 | - | |
Silver price | 2,136 | - | 758 | - | |
Fuel price | 2,700 | 695 | - | - |
Page 54
2009 | |||||
Financial | |||||
Assets | |||||
Liabilities at | |||||
Loans and | Held at | Amortized | |||
Receivables | Fair value | Cost | Total | ||
$ | $ | $ | $ | ||
Financial Assets | |||||
Cash and cash equivalents | - | 262,325 | - | 262,325 | |
Restricted cash | - | 9,201 | - | 9,201 | |
Accounts receivable | 10,345 | - | - | 10,345 | |
Fuel contract | - | 706 | - | 706 | |
Investments | - | 45,890 | - | 45,890 | |
Reclamation deposits | - | 17,646 | - | 17,646 | |
Financial Liabilities | |||||
Accounts payable and accrued liabilities | - | - | 36,033 | 36,033 | |
Long-term debt | - | - | 237,544 | 237,544 | |
Gold contracts | - | 95,986 | - | 95,986 |
2008 | |||||
Financial | |||||
Assets | |||||
Liabilities at | |||||
Loans and | Held at | Amortized | |||
Receivables | Fair value | Cost | Total | ||
$ | $ | $ | $ | ||
Financial Assets | |||||
Cash and cash equivalents | - | 182,013 | - | 182,013 | |
Restricted cash | - | - | - | - | |
Accounts receivable | 11,232 | - | - | 11,232 | |
Fuel contract | - | - | - | - | |
Investments | - | 77,016 | - | 77,016 | |
Reclamation deposits | - | 4,900 | - | 4,900 | |
Financial Liabilities | |||||
Accounts payable and accrued liabilities | - | - | 28,759 | 28,759 | |
Long-term debt | - | - | 212,387 | 212,387 | |
Gold contracts | - | - | - | - |
Page 55
December 31, 2009 | December 31, 2008 | ||||
Carrying | Fair | Carrying | Fair | ||
Value | Value | Value | Value | ||
$ | $ | $ | $ | ||
Financial Assets | |||||
Cash and cash equivalents | 262,325 | 262,325 | 182,013 | 182,013 | |
Restricted cash | 9,201 | 9,201 | - | - | |
Accounts receivable | 10,345 | 10,345 | 11,232 | 11,232 | |
Fuel contract | 706 | 706 | - | - | |
Investments | 45,890 | 45,890 | 77,016 | 77,016 | |
Reclamation deposits | 17,646 | 17,646 | 4,900 | 4,900 | |
Financial Liabilities | |||||
Accounts payable and accrued liabilities | 36,033 | 36,006 | 28,759 | 28,759 | |
Long-term debt | 237,544 | 265,696 | 212,387 | 168,550 | |
Gold contracts | 95,986 | 95,986 | - | - |
2009 | ||||
Level 1 | Level 2 | Level 3 | ||
$ | $ | $ | ||
Cash and cash equivalents | 262,325 | - | - | |
Fuel contracts | - | 706 | - | |
Gold contracts | - | (95,986) | - | |
Investments | - | 45,890 | - |
Page 56
2009 | ||
$ | ||
Opening balance | 77,016 | |
Transfers to Level 2 | (77,016) | |
Ending balance | - |
20. | Related Parties |
21. | Commitments and contingencies |
(a) | The Company has entered into a number of contractual commitments related to equipment orders to purchase long lead items or critical pieces of mining equipment and operating leases for its operations. At December 31, 2009, these commitments totaled $12.4 million and are expected to fall due over the next 12 months. |
(b) | The Company terminated various employment, consulting and service agreements as a result of slowing development activities at the New Afton project. Certain of the affected parties have or may in the future make legal claims in response to such terminations. The Company cannot reasonably predict the likelihood or outcome of any such actions, but would vigorously defend against them. |
Page 57
(c) | Amapari Mine contingencies |
(i) | The Company terminated various employment, consulting and service agreements as a result of placing the Amapari Mine on temporary care and maintenance. Certain of the affected parties have or may in the future make legal claims in response to such terminations. The Company cannot reasonably predict the likelihood or outcome of any such actions, but would vigorously defend against them. |
(ii) | The Company has received notice that legal claims have been filed in Brazilian courts against the Company’s Amapari Mine. The claims allege that the Amapari Mine has adversely impacted the quality of William Creek causing economic loss and health concerns. The Company believes that these claims are unfounded and intends to vigorously defend against them. |
(iii) | A tax claim has been received by the Amapari Mine. The Company has lodged an appeal. |
(iv) | The Company has been notified of infraction notices on the Amapari Mine for which it intends to take action to revoke or reduce. Also, claims have been filed in Brazilian courts against the Amapari Mine alleging rents are payable for the occupation of land where the Amapari Mine was developed. The Company is defending against these claims. |
(v) | The Company has received notice that legal claims have been filed in Brazilian courts against the Company’s Amapari Mine. The claims allege environmental damage at the Amapari Mine site. The Company is defending against these claims. |
(d) | The Company is involved in legal proceedings from time to time, arising in the ordinary course of business. Typically, the amount of the ultimate liability with respect to these actions will not materially affect the Company’s financial position, results of operations or cash flows. |
(e) | The Company has a history of legal challenges to its Cerro San Pedro Mine. In November 2009, the Company was notified it was required to suspend mining operations at its Cerro San Pedro Mine. Although mining had been suspended, gold recovery operations of existing inventory on the leach pads continued. The mining suspension followed a ruling by the Federal Court of Fiscal and Administrative Justice nullifying the mine's Environmental Impact Statement ("EIS") which was issued in 2006. PROFEPA, the Mexican environmental enforcement agency, issued the order requiring Cerro San Pedro Mine to suspend mining as a consequence of the nullification of the EIS. The Company has filed appeals to both the court decision and the PROFEPA order related to the EIS. In December, 2009, the Company was granted an injunction rel ated to the suspension of operations at its Cerro San Pedro Mine. The court ruling temporarily overturns the PROFEPA order to suspend mining operations at the Cerro San Pedro Mine. Subsequent to December 31, 2009, the Company was scheduled to face a hearing in the Fourth District Court in San Luis Potosi, related to a challenge by opposition to the mine to the annual renewal of the explosives permit at Cerro San Pedro. The Company is vigorously defending against this challenge and a hearing is scheduled for March, 2010. Until the hearing is held, no additional blasting will take place at Cerro San Pedro. |
Page 58
23. | Comparative presentation |
Page 59
24. | Differences between generally accepted accounting principles in Canada and the United States |
2009 | ||||
Canadian | ||||
GAAP | ||||
As reported | Adjustments | U.S. GAAP | ||
$ | $ | |||
Revenues (note c) | 323,780 | (825) | 322,955 | |
Operating expenses (note c) | (176,491) | 358 | (176,133) | |
Depreciation and depletion (note c) | (58,668) | 61 | (58,607) | |
Earnings from mine operations | 88,621 | (406) | 88,215 | |
Corporate administration (note a) | (24,689) | 4,929 | (19,760) | |
Business combination transaction costs | (6,583) | - | (6,583) | |
Exploration | (6,412) | - | (6,412) | |
Goodwill impairment charge | (192,099) | - | (192,099) | |
Loss from operations | (141,162) | 4,523 | (136,639) | |
Other income (expense) | ||||
Realized and unrealized gain on gold contracts | 8,161 | - | 8,161 | |
Realized and unrealized gain on fuel contracts | 797 | - | 797 | |
Realized and unrealized loss on investments | 351 | - | 351 | |
Unrealized loss on equity-linked instruments (notes (a) and (e)) | - | (10,643) | (10,643) | |
Interest and other income | 4,896 | - | 4,896 | |
Gain on redemption of long-term debt | 14,236 | - | 14,236 | |
Interest and finance fees | (3,140) | - | (3,140) | |
Loss on foreign exchange (notes (a) and (e)) | (52,667) | (7,007) | (59,674) | |
Loss before taxes | (168,528) | (13,127) | (181,655) | |
Income and mining taxes (note c) | (14,906) | 122 | (14,784) | |
Net loss from continuing operations | (183,434) | (13,005) | (196,439) | |
Loss from discontinued operations, net of taxes | (10,882) | - | (10,882) | |
Net loss | (194,316) | (13,005) | (207,321) | |
Earnings (loss) per share from continuing operations | ||||
Basic and diluted | (0.60) | - | (0.64) | |
Loss per share from discontinued operations, net of taxes | ||||
Basic and diluted | (0.04) | - | (0.04) | |
Loss per share | ||||
Basic and diluted | (0.64) | - | (0.68) | |
Weighted average number of shares outstanding | ||||
(in thousands) | ||||
Basic | 306,288 | - | 306,288 | |
Diluted | 306,288 | - | 306,288 | |
(i) Stock option expense (a non-cash item included in corporate | ||||
administration) (note a) | (6,621) | 4,929 | (1,692) |
Page 60
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
2008 | ||||
Canadian | ||||
GAAP | ||||
As reported | Adjustments | U.S. GAAP | ||
$ | $ | |||
Revenues (note c) | 143,083 | 825 | 143,908 | |
Operating expenses (note c) | (103,130) | (358) | (103,488) | |
Depreciation and depletion (note c) | (18,551) | (61) | (18,612) | |
Earnings from mine operations | 21,402 | 406 | 21,808 | |
Corporate administration (note a) | (22,446) | 1,999 | (20,447) | |
Business combination transaction costs | - | - | - | |
Exploration | (4,026) | - | (4,026) | |
Goodwill impairment charge | - | - | - | |
Loss from operations | (5,070) | 2,405 | (2,665) | |
Other income (expense) | ||||
Realized and unrealized gain on gold contracts | - | - | - | |
Realized and unrealized gain on fuel contracts | - | - | - | |
Realized and unrealized loss on investments | - | - | - | |
Interest and other income | 5,374 | - | 5,374 | |
Gain on redemption of long-term debt | - | - | - | |
Interest and finance fees | (1,507) | - | (1,507) | |
Gain on foreign exchange (note a) | 68,819 | - | 68,819 | |
Earnings before taxes | 67,616 | 2,405 | 70,021 | |
Income and mining taxes (note c) | 3,268 | (122) | 3,146 | |
Net earnings from continuing operations | 70,884 | 2,283 | 73,167 | |
Loss from discontinued operations, net of taxes | (173,563) | - | (173,563) | |
Net earnings (loss) | (102,679) | 2,283 | (100,396) | |
Earnings per share from continuing operations | ||||
Basic and diluted | 0.48 | - | 0.49 | |
Loss per share from discontinued operations, net of taxes | ||||
Basic and diluted | (1.17) | - | (1.17) | |
Loss per share | ||||
Basic and diluted | (0.69) | - | (0.68) | |
Weighted average number of shares outstanding | ||||
(in thousands) | ||||
Basic | 148,126 | - | 148,126 | |
Diluted | 148,616 | - | 148,616 | |
(i) Stock option expense (a non-cash item included in corporate | ||||
administration) (note a) | (5,803) | 1,999 | (3,804) |
Page 61
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
2009 | ||||
Canadian | ||||
GAAP | ||||
As reported | Adjustments | U.S. GAAP | ||
$ | $ | |||
Net loss | (194,316) | (13,005) | (207,321) | |
Other comprehensive income (loss) | ||||
Unrealized losses on mark-to-market of gold contracts | (45,698) | - | (45,698) | |
Unrealized gains on mark-to-market of fuel contracts | 189 | - | 189 | |
Gain on available-for-sale securities (net of tax of $Nil) | - | - | - | |
Future income tax | 17,870 | - | 17,870 | |
Total other comprehensive loss | (27,639) | - | (27,639) | |
Total comprehensive loss | (221,955) | (13,005) | (234,960) |
2008 | ||||
Canadian | ||||
GAAP | ||||
As reported | Adjustments | U.S. GAAP | ||
$ | $ | |||
Net income (loss) | (102,679) | 2,283 | (100,396) | |
Other comprehensive income | ||||
Unrealized losses on mark-to-market of gold contracts | - | - | - | |
Unrealized losses on mark-to-market of fuel contracts | - | - | - | |
Gain on available-for-sale securities (net of tax of $Nil) | 1,160 | - | 1,160 | |
Future income tax | - | - | - | |
Total other comprehensive income | 1,160 | - | 1,160 | |
Total comprehensive income (loss) | (101,519) | 2,283 | (99,236) |
Page 62
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
2009 | ||||
Canadian | ||||
GAAP | ||||
As reported | Adjustments | U.S. GAAP | ||
$ | $ | |||
Assets | ||||
Current assets | ||||
Cash and cash equivalents | 262,325 | - | 262,325 | |
Restricted cash | 9,201 | - | 9,201 | |
Accounts receivable | 10,345 | - | 10,345 | |
Inventories (note c) | 86,299 | (185) | 86,114 | |
Future income and mining taxes | 8,848 | - | 8,848 | |
Current portion of mark-to-market gain on fuel contracts | 706 | - | 706 | |
Prepaid expenses and other | 6,933 | - | 6,933 | |
Current assets of operations held for sale | 10,298 | - | 10,298 | |
Total current assets | 394,955 | (185) | 394,770 | |
Investments | 45,890 | - | 45,890 | |
Mining interests (note c) | 2,000,438 | (221) | 2,000,217 | |
Future income tax asset | 2,250 | - | 2,250 | |
Reclamation deposits and other | 17,646 | - | 17,646 | |
Assets of operations held for sale | 27,080 | - | 27,080 | |
Total assets | 2,488,259 | (406) | 2,487,853 | |
Liabilities | ||||
Current liabilities | ||||
Accounts payable and accrued liabilities | 36,033 | - | 36,033 | |
Current portion of long-term debt | 12,088 | - | 12,088 | |
Current portion of mark-to-market loss on gold contracts | 19,206 | - | 19,206 | |
Income and mining taxes payable | 15,677 | - | 15,677 | |
Current liabilities of operations held for sale | 10,414 | - | 10,414 | |
Total current liabilities | 93,418 | - | 93,418 | |
Reclamation and closure cost obligations | 19,889 | - | 19,889 | |
Mark-to-market loss on gold contracts | 76,780 | - | 76,780 | |
Mark-to-market loss on equity-linked instruments (notes (a) and (e)) | - | 33,375 | 33,375 | |
Future income and mining taxes (note c) | 316,426 | (122) | 316,304 | |
Long-term debt | 225,456 | - | 225,456 | |
Employee benefits and other | 5,355 | - | 5,355 | |
Liabilities of operations held for sale | 19,890 | - | 19,890 | |
Total liabilities | 757,214 | 33,253 | 790,467 | |
Shareholders' equity | ||||
Common shares | 1,810,865 | (560) | 1,810,305 | |
Contributed surplus (note a) | 82,984 | (5,887) | 77,097 | |
Share purchase warrants (note e) | 150,656 | (138,806) | 11,850 | |
Equity component of convertible debentures (note b) | 21,604 | - | 21,604 | |
Accumulated other comprehensive loss | (29,205) | - | (29,205) | |
Deficit | (305,859) | 111,594 | (194,265) | |
(335,064) | 111,594 | (223,470) | ||
Total shareholders' equity | 1,731,045 | (33,659) | 1,697,386 | |
Total liabilities and shareholders' equity | 2,488,259 | (406) | 2,487,853 |
Page 63
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
2008 | ||||
Canadian | ||||
GAAP | ||||
As reported | Adjustments | U.S. GAAP | ||
$ | $ | |||
Assets | ||||
Current assets | ||||
Cash and cash equivalents | 182,013 | - | 182,013 | |
Accounts receivable | 11,232 | - | 11,232 | |
Inventories (note c) | 23,265 | 185 | 23,450 | |
Future income and mining taxes | 2,690 | - | 2,690 | |
Prepaid expenses and other | 4,991 | - | 4,991 | |
Current assets of operations held for sale | 18,746 | - | 18,746 | |
Total current assets | 242,937 | 185 | 243,122 | |
Investments | 77,016 | - | 77,016 | |
Mining interests (note c) | 1,609,224 | 221 | 1,609,445 | |
Reclamation deposits and other | 4,900 | - | 4,900 | |
Assets of operations held for sale | 23,624 | - | 23,624 | |
Total assets | 1,957,701 | 406 | 1,958,107 | |
Liabilities | ||||
Current liabilities | ||||
Accounts payable and accrued liabilities | 28,759 | - | 28,759 | |
Income and mining taxes payable | 5,126 | - | 5,126 | |
Current liabilities of operations held for sale | 20,120 | - | 20,120 | |
Total current liabilities | 54,005 | - | 54,005 | |
Reclamation and closure cost obligations | 8,701 | - | 8,701 | |
Mark to market loss on equity-linked instruments (note a) | - | 8,128 | 8,128 | |
Future income and mining taxes (note c) | 224,068 | 122 | 224,190 | |
Long-term debt | 212,387 | - | 212,387 | |
Employee benefits and other | 3,808 | - | 3,808 | |
Liabilities of operations held for sale | 12,944 | - | 12,944 | |
Total liabilities | 515,913 | 8,250 | 524,163 | |
Shareholders' equity | ||||
Common shares | 1,321,110 | - | 1,321,110 | |
Contributed surplus (note a) | 65,409 | (10,327) | 55,082 | |
Share purchase warrants | 145,614 | - | 145,614 | |
Equity component of convertible debentures (note b) | 21,604 | - | 21,604 | |
Accumulated other comprehensive loss | (406) | - | (406) | |
Deficit | (111,543) | 2,483 | (109,060) | |
(111,949) | 2,483 | (109,466) | ||
Total shareholders' equity | 1,441,788 | (7,844) | 1,433,944 | |
Total liabilities and shareholders' equity | 1,957,701 | 406 | 1,958,107 |
Page 64
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
2009 | ||||
Canadian | ||||
GAAP | ||||
As reported | Adjustments | U.S. GAAP | ||
$ | $ | |||
Operating activities from continuing operations | 78,981 | (282) | 78,699 | |
Operating activities from discontinued operations | 5,576 | - | 5,576 | |
Investing activities from continuing operations | (52,683) | 282 | (52,401) | |
Investing activities from discontinued operations | (1,405) | - | (1,405) | |
Financing activities from continuing operations | 40,034 | - | 40,034 | |
Financing activities from discontinued operations | (7,000) | - | (7,000) | |
Effect of exchange rates on cash and cash equivalents | 13,980 | - | 13,980 | |
Increase in cash and cash equivalents | 77,483 | - | 77,483 | |
Comprised of | ||||
Cash and cash equivalents of continuing operations | 262,325 | - | 262,325 | |
Cash and cash equivalents of discontinued operations | 826 | - | 826 | |
263,151 | - | 263,151 |
2008 | ||||
Canadian | ||||
GAAP | ||||
As reported | Adjustments | U.S. GAAP | ||
$ | $ | |||
Operating activities from continuing operations | 23,073 | 282 | 23,355 | |
Operating activities from discontinued operations | 1,612 | - | 1,612 | |
Investing activities from continuing operations | 42,142 | (282) | 41,860 | |
Investing activities from discontinued operations | (7,077) | - | (7,077) | |
Financing activities from continuing operations | (7,009) | - | (7,009) | |
Financing activities from discontinued operations | 7,000 | - | 7,000 | |
Effect of exchange rates on cash and cash equivalents | (23,997) | - | (23,997) | |
Increase in cash and cash equivalents | 35,744 | - | 35,744 | |
Comprised of | ||||
Cash and cash equivalents of continuing operations | 182,013 | - | 182,013 | |
Cash and cash equivalents of discontinued operations | 3,655 | - | 3,655 | |
185,668 | - | 185,668 |
Page 65
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
2008 | |||
$ | |||
Balance at December 31 | (105,427) | ||
Cummulative adjustment for: | |||
Convertible debenture (note b) | (3,633) | ||
Balance at December 31 | (109,060) |
Page 66
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
Page 67
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
2009 | 2008 | ||
$ | $ | ||
Balance at January 1 | 2,701 | - | |
Additions for tax positions taken during prior years | 1,490 | 2,701 | |
Balance at December 31 | 4,191 | 2,701 |
Page 68
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
2009 | 2008 | ||
$ | $ | ||
Canada | |||
Deferred tax assets | 9,661 | 6,580 | |
Deferred tax liabilities | (87,365) | (71,297) | |
(77,704) | (64,717) | ||
Australia | |||
Deferred tax assets | - | - | |
Deferred tax liabilities | (25,712) | (18,473) | |
(25,712) | (18,473) | ||
Mexico | |||
Deferred tax assets | - | - | |
Deferred tax liabilities | (163,668) | (138,188) | |
(163,668) | (138,188) | ||
United States | |||
Deferred tax assets | 30,459 | - | |
Deferred tax liabilities | (68,703) | - | |
(38,244) | - | ||
(305,328) | (221,378) |
(e) | Share purchase warrants |
Page 69
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
2009 | 2008 | ||
$ | $ | ||
Revenues | 364,453 | 239,335 | |
Income (loss) from continuing operations | (223,663) | 81,461 | |
Net loss | (234,545) | (92,102) | |
Basic and diluted earnings per share | |||
Income (loss) from continuing operations | (0.61) | 0.28 | |
Net loss | (0.64) | (0.32) | |
Weighted average number of shares outstanding | |||
Basic | 365,786 | 290,922 | |
Diluted | 365,786 | 291,412 |
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
· | all business acquisitions would be measured at fair value; |
· | pre-acquisition contingencies would be measured at fair value; |
· | most acquisition-related costs would be recognized as expense as incurred (they would no longer be part of the purchase consideration); and, |
· | non-controlling interests would be measured at fair value at the date of acquisition (i.e. 100% of the assets and liabilities would be measured at fair value even when an acquisition is less than 100%). |
Page 71
24. | Differences between generally accepted accounting principles in Canada and the United States (continued) |
(i) | Significant future accounting developments |