5N Plus
Annual Report 2014

Plain-text annual report

2014 ANNUAL REPORT 5N5N PLUSSPECIALTY METALS AND CHEMICALSMORE THAN PRODUCTS+ UNITED STATES GERMANY BELGIUM ENGLAND LAOS CHINA MALAYSIA CANADA BELGIUM UNITED STATES GERMANY BELGIUM ENGLANDTABLE OF CONTENTS 1 Our Vision 2 Message to Shareholders 5 Management’s Discussion and Analysis 25 Consolidated Financial Statements 34 Notes to Consolidated Financial Statements 69 Corporate Information 5N5N1 SUSTAINABLE GROWTH THROUGH INNOVATION AND PRODUCT EXCELLENCE. OURVISION5N5N PLUS + 2014 ANNUAL REPORT 2 Dear Shareholders, This has been another important year for the company with significant improvements in financial performance and important progress towards our stated objectives of positioning ourselves throughout the value chain. Combined with record sales of bismuth metals and chemicals, the launch of our metal powder business and several new product initiatives including compounds for battery material applications, the mining industry and the solar module market, there is much to be proud of as we reach our 15th year of existence. A YEAR OF ACCOMPLISHMENTS For all practical purposes, profitability reached We launched or increased sales of several new products, most of which organically driven, for a five-year high with revenues increasing by 10% markets as diverse as batteries, solar modules… with over 2013 figures, to 508 million dollars, led by renewed interest in our product for the CIGS based strong bismuth sales which reached a record level modules… catalysts and the mining industry. for a second consecutive year. Demand for bismuth continues to grow in several industrial applications such as coatings and pigments driven primarily by the requirements for lead-free products. Financial flexibility was greatly increased during the year as we issued a convertible debenture and renewed our credit facilities. We also increased our management bandwidth while simplifying We also saw several positive developments in the our organizational structure, as we aim to further solar industry where our main customer in this improve efficiency and execution with the intent of market, First Solar, made important announcements cost differentiation by leveraging our footprint of in the year including another record conversion assets worldwide and our technical and research and efficiency level, and a 25 year multi-million dollar development investments. agreement with Apple which will be purchasing annually 130 MW of electricity produced from First Solar CdTe solar modules. First Solar modules are VALUE CHAIN STRATEGY Our strategy implies gradually positioning ourselves at becoming increasingly complex from a materials all levels of the value chain from primary sourcing all standpoint. We are positioning ourselves to increase the way up to value-added products. our product offering and we announced during the year the renewal and extension of our exclusive supply agreements with this customer. On one hand, we therefore aim to expand our custom refining activities to encompass primary sourcing opportunities. The bismuth feedstock offtake 5N5N PLUS + 2014 ANNUAL REPORT MESSAGETO SHAREHOLDERS3 agreement that we have entered into and announced In our metal powders business, we acquired the in October 2013 is clearly in line with this objective, technology from AM&M which was rebranded 5N Plus just as the corresponding significant investments that Micro Powders, assembled a technical, commercial we have made this year into our Laos facility to treat and production team and successfully launched the this material. Despite some production delays, we business. Further investments are ongoing as we have laid the foundation of what we expect will be a aim to develop a full fledge industrial capacity in long term strategic asset for the Company. 2015, which should enable a step change increase On the other, we are pursuing two main value-added business opportunities, namely semiconductor substrates and metal powders, both of which saw important developments during the year. VALUE CHAIN STRATEGY INCREASE LEVEL OF INTEGRATION INCREASE VALUE OF PRODUCTS PRIMARY PRODUCERS CORE 5N PLUS REFINING ACTIVITIES VALUE-ADDED PRODUCTS In our semiconductor business, we are positioning in production and sales levels. Our metal powders will be targeting the electronic packaging and the additive manufacturing or 3D printing markets, both of which are rapidly expanding and require a robust supply chain for high quality and cost effective fine metal powders. Overall we aim through this supply chain strategy to become fully integrated, hence reducing our vulnerability to metal price fluctuations and further enhancing our competitive position. A TURBULENT AND INCREASINGLY CHINESE LANDSCAPE Minor metals have been subject to important price ourselves to fully leverage this industrial and fluctuations over the last few years, a trend further technological platform and expand into other material enhanced by the growing impact of several metal systems beyond germanium substrates. To facilitate exchanges in China, where many of the metals we this transition, we chose to acquire during the year deal with are traded. Bismuth for example has close all of the minority interest in Sylarus which was to double in price over an 18-month period before rebranded 5N Plus Semiconductors. We were also seeing its value be cut in half during the last 6 months. able to make significant technical and commercial Other metals that we are involved in have or are also progress, although the latter is still well below likely to see their price fluctuate in a similar fashion, long-term expectations, especially following recent leading, together with an increasingly competitive developments in the concentrator photovoltaic cell landscape, to volatility in our financial performance. market, which negatively impacted our germanium substrate product line. Regardless, we remain hopeful that this business will contribute to our bottom line, as we overcome these short term pains and expand into other materials systems including III-V and II-VI, and will be an important component of our value-added product portfolio. 5N5N PLUS + 2014 ANNUAL REPORT 4 In this respect, the influence of China, through supply Another important contributor to our growth strategy and demand dynamics and the advent of these new involves our research & development efforts in which metal exchanges, continues to be of significance. we are increasingly investing. With key deliverables, China is the largest producer of bismuth, indium, besides continuous improvement of current gallium and germanium worldwide and it is also an operations, being closely associated with our value important producer of tellurium and selenium. This chain strategy, our R&D teams are defining an exciting comes as no surprise as many of these metals are growth roadmap that holds great promises. by-products of base metal refining, and contained at trace levels in the base metal concentrates which are increasingly being processed in China. In terms of demand, China is also likely to play an increasingly significant role as growth of the Chinese Our ability to grow is again perhaps best appreciated by looking at our track record over the last five years enabling us once again to be amongst the Deloitte Fast 500™ for a fifth consecutive year. semiconductor industry is likely to gradually increase And our commitment to continue building a domestic sales of metals such as indium, gallium sustainable business, best illustrated by our growing and germanium which are closely associated with workforce, our continuing capital investments and electronics. With over 150 employees in China and our willingness to invest in both new products and close relationships with several Chinese suppliers and activities as well as in existing ones to maintain our customers alike, we remain well positioned to capture competitive advantage and generate value. new opportunities and mitigate the impact of any negative market developments there. POSITIONNING OURSELVES FOR SUSTAINABLE GROWTH We continue to implement measures aimed at providing means for sustainable growth. In addition to our value chain strategy such measures include improving operational efficiency, cost leadership and fully leveraging our footprint of assets worldwide. We believe that there is room for further improvement in these areas, with a corresponding impact on value creation and growth. On behalf of our employees and our management team, let me thank you again for your confidence and support. We remain more than ever confident on our ability to provide sustainable long-term value to all of our shareholders as we execute on our strategy. Jacques L’Ecuyer President and Chief Executive Officer 5N PLUS + 2014 ANNUAL REPORT Management’s Discussion and Analysis  5 This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations is intended to  assist  readers  in  understanding  5N  Plus  Inc.  (the  “Company”  or  “5N  Plus”),  its  business  environment,  strategies,  performance and risk factors. This MD&A should be read in conjunction with the audited consolidated financial statements  and the accompanying notes for the year ended December 31, 2014. This MD&A has been prepared in accordance with  the requirements of the Canadian Securities Administrators.  Information contained herein includes any significant developments to February 24, 2015, the date on which the MD&A  was approved by the Company’s board of directors. Unless otherwise indicated, the terms “we”, “us” “our” and “the group”  as used herein refer to the Company together with its subsidiaries.   The “Q4 2014” and the “Q4 2013” refer to the three‐month periods ended December, 2014 and 2013. All amounts in this  MD&A  are  expressed  in  U.S.  dollars,  and  all  amounts  in  the  tables  are  in  thousands  of  U.S.  dollars,  unless  otherwise  indicated. All quarterly information disclosed in this MD&A is based on unaudited figures.  Non‐IFRS Measures  This  MD&A  also  includes  certain  figures  that  are  not  performance  measures  consistent  with  IFRS.  These  measures  are  defined at the end of this MD&A under the heading Non‐IFRS Measures. Please note that the comparatives periods have  been restated to reflect a change in the EBITDA definition, see Selected Data Information section.  Notice Regarding Forward‐Looking Statements   Certain statements in this MD&A may be forward‐looking within the meaning of applicable securities laws.  Forward‐looking  information and statements are based on the best estimates available to the Company at the time and involve known and  unknown risks, uncertainties or other factors that may cause the Company’s actual results, performance or achievements  to be materially different from any future results, performance or achievements expressed or implied by such forward‐ looking statements. Factors of uncertainty and risk that might result in such differences include the risks related to the  possible  failure  to  realize  anticipated  benefits  of  acquisitions  and  investments,  credit,  liquidity,  interest  rate,  inventory  pricing,  commodity  pricing,  currency  fluctuation,  fair  value,  source  of  supply,  environmental  regulations,  competition,  dependence  on  key  personnel,  business  interruptions,  protection  of  intellectual  property,  international  operations,  collective agreements and being a public issuer.  A description of the risks affecting the Company’s business and activities  appears under the heading “Risk and Uncertainties” of this MD&A. Forward‐looking statements can generally be identified  by the use of terms such as “may”, “should”, “would”, “believe”, “expect”, the negative of these terms, variations of them  or any similar terms. No assurance can be given that any events anticipated by the forward‐looking information in this  MD&A will transpire or occur, or if any of them do so, what benefits that 5N Plus will derive therefrom. In particular, no  assurance can be given as to the future financial performance of 5N Plus. The forward‐looking information contained in  this  MD&A  is made as of  the  date hereof and  the  Company  has no  obligation  to  publicly update such  forward‐looking  information to reflect new information, subsequent or otherwise, unless required by applicable securities laws. The reader  is warned against placing undue reliance on these forward‐looking statements.  5N PLUS + 2014 ANNUAL REPORT           6 Management’s Discussion and Analysis  Overview   5N  Plus  is  the  leading  producer  of  specialty  metal  and  chemical  products.    Fully  integrated  with  closed‐loop  recycling  facilities,  the  Company  is  headquartered  in  Montreal,  Quebec,  Canada  and  operates  manufacturing  facilities  and  sales  offices in several locations in Europe, the Americas and Asia. 5N Plus deploys a range of proprietary and proven technologies  to produce products which are used in a number of advanced pharmaceutical, electronic and industrial applications. Typical  products include purified metals such as bismuth, gallium, germanium, indium, selenium and tellurium, inorganic chemicals  based on such metals and compound semiconductor wafers. Many of these are critical precursors and key enablers in  markets such as solar, light‐emitting diodes and eco‐friendly materials.  Reportable Segments   The  Company  has  two  reportable  segments,  namely  Electronic  Materials  and  Eco‐Friendly  Materials.  Corresponding  operations  and  activities  are  managed  accordingly  by  the  Company’s  key  decision  makers.  Segmented  operating  and  financial information, labelled key performance indicators, are available and used to manage these business segments,  review performance and allocate resources. Financial performance of any given segment is evaluated primarily in terms of  revenues and Adjusted EBITDA which is reconciled to consolidated numbers by taking into account corporate income and  expenses.    The  Electronic  Materials  segment  operates  in  North  America,  Europe  and  Asia.  The  Electronic  Materials  segment  manufactures  and  sells  refined  metals,  compounds  and  alloys  which  are  primarily  used  in  a  number  of  electronic  applications. Typical end‐markets include photovoltaics (terrestrial and spatial solar energy), light emitting diodes (LED),  displays, high‐frequency electronics, medical imaging and thermoelectrics. Main products are associated with the following  metals: cadmium, gallium, germanium, indium and tellurium. These are sold either in elemental or alloyed form as well as  in the form of chemicals and compounds. Revenues and earnings associated with recycling services and activities provided  to customers of the Electronic Materials segment are also included in the Electronic Materials segment and management  of such activities is the responsibility of the Electronic Materials executive team.  The Eco‐Friendly Materials segment is so labelled because it is mainly associated with bismuth, one of the very few heavy  metals  which  have  no  detrimental  effect  on  either  human  health  or  in  the  environment.  As  a  result,  bismuth  is  being  increasingly used in a number of applications as a replacement for more harmful metals and chemicals. The Eco‐Friendly  Materials segment operates in North America, Europe and Asia. The Eco‐Friendly Materials segment manufactures and  sells refined bismuth and bismuth chemicals, low melting point alloys as well as refined selenium and selenium chemicals.   These are used in the pharmaceutical and animal‐feed industry as well as in a number of industrial applications including  coatings, pigments,  metallurgical alloys and  electronics. Management of  such activities is the  responsibility  of  the Eco‐ Friendly Materials executive team.  Corporate expenses associated with the head office and unallocated selling, general and administrative expenses (SG&A)  together with financial expenses (revenues) have been regrouped under the heading Corporate.   5N PLUS + 2014 ANNUAL REPORT              7 Management’s Discussion and Analysis  Highlights of Q4 2014 and Fiscal Year 2014    EBITDA1 reached $39.4 million during the year compared to $63.9 million in 2013 (or $18.7 million excluding the $45.2  million gain realised following the MCP Group S.A. (“MCP”) litigation settlement).  Adjusted EBITDA1 increased to $35.0  million in 2014 compared to $30.4 million in 2013.  EBITDA and Adjusted EBITDA were respectively of $4.0 million and  $5.7 million in the fourth quarter of 2014 compared to $6.8 million and $7.9 million for the fourth quarter of 2013.   Revenues for 2014 reached $508.2 million up from $459.0 million in 2013. Revenues for the fourth quarter of 2014  reached $114.8 million, down from $119.4 million for the fourth quarter of 2013.    Net earnings for fiscal year 2014 were $10.7 million compared to $42.8 million in 2013 which included the positive  impact of the MCP litigation settlement (or a loss of $2.4 million excluding the $45.2 million gain realised following the  MCP litigation settlement).  Net loss for the fourth quarter of 2014 reached $2.5 million, compared to net earnings of  $1.6 million for the fourth quarter of 2013.   Net debt1 stood at $84.0 million, up from September 30, 2014 and up from $58.3 million as at December 31, 2013.   Bookings1 increased to $130.8 million in the quarter up from $101.3 million in the previous quarter.  This compares  with bookings of $156.1 million in the fourth quarter of 2013. Backlog1 as at December 31, 2014 stood at $153.2 million,  up from $137.2 million in the previous quarter and down from $170.1 million one year ago.   On April 3, 2014, 5N Plus announced that it had acquired the remaining 33.33% ownership interest in its subsidiary  Sylarus Technologies, LLC, located in St. George, Utah, and had changed its name to 5N Plus Semiconductors LLC.   On May 5, 2014, 5N Plus announced that it had completed the acquisition of all of the issued and outstanding shares in  the capital of AM&M Advanced Machine and Materials Inc. (“AM&M”).   On May 29, 2014, 5N Plus announced that it had entered into new supply agreements with First Solar, Inc., the world’s  leading thin‐film solar module manufacturer, covering First Solar’s compound semiconductor needs until March 31,  2019.   On  June  26,  2014,  5N  Plus  announced  the  closing  of  its  offering  of  CA$60.0  million  of  convertible  unsecured  subordinated debentures and that the underwriters had purchased an additional CA$6.0 million.   On August 7, 2014, 5N Plus announced the closing of a senior secured multi‐currency revolving credit facility of $125.0  million maturing in August 2018 (with an additional $25.0 million accordion feature) to replace its existing $100.0 million  senior secured revolving facility.   On  November  13,  2014,  the  Company  was  named  for  a  fifth  consecutive  year  as  one  of  Canada’s  fastest  growing  technology companies in the Deloitte Technology Fast 50TM based on the percentage of revenue growth over five years.  5N Plus' increase in revenues of 581% from 2009 to 2013 resulted in a number 23 ranking. The Company was also  ranked  179  on  Deloitte’s  Technology  Fast  500TM,  a  list  of  the  500  fastest  growing  technology,  media,  telecommunications, life sciences and clean technology companies in North America.  Deloitte Technology Fast 50TM program  The Company ended the year 2014 close to its highest level in terms of profitability as it reached record EBITDA (excluding  the impact of the MCP litigation settlement realized in 2013), despite a relatively soft fourth quarter.  The year was mainly  characterized by strong demand for most of the Company’s products with bismuth sales reaching a record level for a second  consecutive year.  Demand for the solar products was also high as one of the Company’s main customers continues to  make  significant  progress  in  terms  of  efficiency  and  costs  demonstrating  the  overall  competitiveness  of  the  CdTe  technology over other technologies and its ability to penetrate unsubsidized markets.  This was recently highlighted by  Apple’s decision to enter into a 25‐year commercial power purchase agreement, the largest of its kind, for 130 MW of  electricity produced using CdTe solar cells.  Sales of other products were in line with expectations with important advances  having been made during the year in the semiconductor substrate business where the Company is now fully qualified with  both of the main US based suppliers of space solar cells.  1 See Non‐IFRS Measures  5N PLUS + 2014 ANNUAL REPORT                         8 Management’s Discussion and Analysis  The Company experienced however a relatively soft fourth quarter with demand being negatively impacted by significant  underlying commodity price volatility.  This is especially true for bismuth and gallium, the pricing of which has been under  severe downward pressure following latest developments at the Fanya Metal Exchange which has forced the Company to  record inventory impairment charges of $5.3 million in the quarter.  The Company expects demand to recover in the first  quarter although pricing volatility may continue.  The Company’s bookings and backlog increases recorded in the fourth  quarter reflect this to a large extent with lower dollar figures being essentially associated with decreases in selling prices,  following  latest  trends  in  underlying  commodity  prices,  but  not  sales  volumes.    Similarly,  should  such  pricing  trends  continue, the Company expects inventory dollar figures to come down together with its debt level as average unit pricing  decreases.”  The Company improved its financial flexibility in 2014, through the issuance of a convertible debenture and the renewal of  its credit facility, enabling the Company to continue making progress in several strategic initiatives aimed at strengthening  its position throughout the entire value chain.  This included, on one hand, additional investments in the Laos facility with  the  intent  of  expanding  the  primary  refining  capabilities  and  providing  an  efficient  footprint  for  the  treatment  of  the  bismuth  feedstock  produced  in  Vietnam;  and  on  the  other,  investments  aimed  at  expanding  its  value‐added  product  portfolio  by  fully  leveraging  its  industrial  and  technological  platform  in  the  semiconductor  substrate  business  and  by  acquiring  the  AM&M  business  and  technology  as  the  Company  intends  to  rapidly  position  itself  in  the  metal  powder  business.   The Company estimates that current underlying commodity pricing volatility is likely to continue to weigh on its financial  performance but remains cautiously optimistic about future demand and its ability to grow as the Company executes its  strategic plan.  To its employees, the Company would like to thank them for their dedication and hard work in what has  turned  out  to  be  a  record  year  in  many  respects  despite  the  competitive  landscape  the  Company  operates  in.   To   its  stakeholders and shareholders, the Company would like to thank them as well for their continuing confidence and support.  50TM  program  is  a  ranking  of  Canada’s  50  fastest  growing  technology  companies for technological innovation, entrepreneurship, rapid growth and leadership, based on the percentage of revenue growth over five years. 5N Plus’ percent revenue growth of 581% from 2009 to 2013 resulted in a 23rd place ranking.  Deloitte Technology Fast 50TM program is a ranking of Canada’s 50 fastest growing technology companies for technological innovation, entrepreneurship, rapid growth and leadership, based on the percentage of revenue growth over five years. 5N Plus’ percent revenue growth of 581% from 2009 to 2013 resulted in a 23rd place ranking.  5N PLUS + 2014 ANNUAL REPORT     9 2013 $ 459,012 428,637 30,375 10,182 (45,188) 4,068 ‐ ‐ (2,590) 63,903 8,524 10,686 44,693 4,338 (2,425) 1,913 42,780 $0.51 $0.51 Q4 2014 $ 114,781 109,124 5,657 5,251 ‐ 1,178 ‐ (1,368) (3,425) 4,021 2,860 2,546 (1,385) (2,237) 3,305 1,068 (2,453) ($0.03) ($0.04) Q4 2013  $  119,416  111,474  7,942  ‐  ‐  569  ‐  ‐  525  6,848  1,779  2,419  2,650  132  880  1,012  1,638  $0.02  $0.02  2014  $  508,195  473,150  35,045  5,251  ‐  1,952  (1,312)  (7,179)  (3,111)  39,444  8,769  11,148  19,527  4,875  3,979  8,854  10,673  $0.13  $0.05  Management’s Discussion and Analysis  Summary of Results  Revenues  Operating expenses  Adjusted EBITDA1  Impairment of inventory  Gain related to the settlement of the purchase price of MCP Litigation and restructuring costs  Gain on disposal of property, plant and equipment  Change in fair value of debenture conversion option  Foreign exchange and derivative (gain) loss  EBITDA1 2  Interest on long‐term debt, imputed interest and other interest expense Depreciation and amortization  Earnings (loss) before income taxes  Income tax (recovery) expense  Current  Deferred  Net (loss) earnings  Basic (loss) earnings per share  Diluted (loss) earnings  per share  Revenues by Segment  Electronic Materials Segment  Eco‐Friendly Materials Segment  Total revenues  Q4 2014 $ 41,898 72,883 114,781 Q4 2013 $ 46,264 73,152 119,416 % Change (9%) ‐ (4%) 2014  $  169,367  338,828  508,195  2013 $ 179,368 279,644 459,012 % Change (6%) 21% 11% Revenues for fiscal year 2014 increased by 11% compared to the prior fiscal year to $508.2 million versus $459.0 million in  fiscal year 2013. Revenues for the Electronic Materials segment decreased by 6% compared to 2013 while the Eco‐Friendly  Materials segment achieved an increase of more than 21% supported by better volumes and average prices.  Revenues decreased by 4% compared to the prior year quarter. Revenues in Q4 2014 for the Electronic Materials segment  reached $41.9 million, lower from $46.3 million in Q4 2013, negatively impacted by prices. Eco‐Friendly Materials segment  revenues reached $72.9 million, similar to the prior year quarter, with better prices mitigating lower volumes than prior  year quarter.  Net earnings (loss) and Adjusted net earnings   Net (loss) earnings   Basic net (loss) earnings  per share  Reconciling items:  Impairment of inventory  Litigation and restructuring costs  Change in fair value of debenture conversion option  Gain related to the settlement of the purchase price of MCP Income taxes on taxable items above  Adjusted net earnings1  Basic adjusted net earnings per share1  Q4 2014 $ (2,453) ($0.03) 5,251 1,178 (1,368) ‐ (1,361) 1,247 $0.01 Q4 2013 $ 1,638 $0.02 ‐ 569 ‐ ‐ (139) 2,068 $0.02 2014  $  10,673  $0.13  5,251  1,952  (7,179)  ‐  (61)  10,636  $0.13  2013 $ 42,780 $0.51 10,182 4,068 ‐ (45,188) (1,002) 10,840 $0.13 In 2014, Adjusted net earnings1 reached $10.6 million compared to $10.8 million for the prior fiscal year. Net earnings for  fiscal year 2014 reached $10.7 million compared to $42.8 million in 2013, impacted by the MCP litigation settlement of  $45.2  million  in  the  second  quarter  of  2013.  This  is  partially  offset  by  the  positive  change  in  fair  value  of  debenture  conversion option and lower inventory impairment charge recorded this year compared to last year.   1 See Non‐IFRS Measures 2  The comparative periods have been restated to reflect a change in the EBITDA1 definition  5N PLUS + 2014 ANNUAL REPORT                                             10 Management’s Discussion and Analysis  In Q4 2014, Adjusted net earnings1 decreased by $0.8 million from $2.1 million to $1.2 million compared to the same period  last year. Net loss reached $2.5 million in Q4 2014 compared to net earnings of $1.6 million for the same period last year.  The decrease in net earnings compared to prior year quarter is mainly explained by an inventory impairment charge of $5.3  million as well as restructuring costs partially offset by a positive change in fair value of debenture conversion option of  $1.4 million.   Adjusted EBITDA  Electronic Materials  Eco‐Friendly Materials  Corporate  Adjusted EBITDA1  Q4 2014 Q4 2013 % Change 2014  2013  % Change 4,853 3,106 (2,302) 5,657 4,006 6,474 (2,538) 7,942 21% (52%) (9%) (29%) 23,642 22,167 (10,764) 35,045 22,466 16,285 (8,376) 30,375 5% 36% 29% 15% For fiscal year 2014, Adjusted EBITDA1 amounted to $35.0 million compared to $30.4 million for 2013. The Adjusted EBITDA  improved mainly from an increase in average selling prices, volumes, and settlement of an insurance claim received in Q3  2014, net of higher labor costs, utilities and logistic costs. Adjusted EBITDA for the Electronic Materials segment increased  by $1.2 million at $23.6 million with an Adjusted EBITDA margin1 of 14% compared to 13% in 2013. Adjusted EBITDA for  the Eco‐Friendly Materials segment increased to $22.2 million compared to $16.3 million last year with an adjusted EBITDA  margin of 7% compared to 6% in 2013.  In  Q4 2014,  Adjusted EBITDA  amounted  to  $5.7  million compared  to $7.9  million  for the same period  a year ago.  The  Adjusted EBITDA decreased mainly from lower volumes compared to the same period a year ago. Adjusted EBITDA for the  Electronic  Materials  segment  increased  by  $0.8  million  at  $4.9  million  achieving  an  Adjusted  EBITDA  margin  of  12%  compared to 9% for the prior year quarter. Adjusted EBITDA for the Eco‐Friendly Materials segment decreased to $3.1  million compared to $6.5 million in Q4 2013 with an Adjusted EBITDA margin of 4% compared to 9% for the prior year  quarter.  Impairment Charges  Electronic Materials  Eco‐Friendly Materials  Impairment of inventories  Q4 2014 Q4 2013 856 4,395 5,251 ‐ ‐ ‐ 2014  856  4,395  5,251  2013  150 10,032 10,182 An inventory impairment charge of $5.3 million mainly on bismuth and gallium was recorded in 2014 compared to a charge  of  $10.2  million  in  2013,  reflecting  the  expected  net  realized  value  of  year‐end  inventories  following  recent  decline  in  commodity prices impacting our industry.  Bookings and Backlog   Electronic Materials   Eco‐Friendly Materials   Total  Q4 2014 $ 83,676 69,483         153,159 BACKLOG1 Q3 2014 $ 79,753 57,430 137,183 Q4 2013 $ 80,382 89,691 170,073 Q4 2014 $ 45,821 84,936 130,757 BOOKINGS1  Q3 2014  $  37,259  63,999  101,258  Q4 2013 $ 54,337 101,800 156,137 Q4 2014 vs Q3 2014  Overall  the  backlog1  as  at  December  31,  2014  stood  at  $153.2  million,  higher  than  the  previous  quarter  following  the  renewal pattern of most contracts which generally occurs in the fourth quarter or in the first quarter of the year.    Backlog as at December 31, 2014, for the Electronic Materials segment stood at $83.7 million increasing by $3.9 million, or  5%, over the backlog of Q3 2014. The backlog for the Eco‐Friendly Materials segment stood at $69.5 million, an increase  of $12.1 million or 21%, over the backlog of Q3 2014.   Bookings1  for the Electronic Materials segment increased by $8.6 million to $45.8 million compared to Q3 2014. Bookings  for the Eco‐Friendly Materials segment increased by $20.9 million or 33%, from $64.0 million in Q3 2014 to $84.9 million  in Q4 2014.  1 See Non‐IFRS Measures 5N PLUS + 2014 ANNUAL REPORT                                 Management’s Discussion and Analysis  11 Q4 2014 vs Q4 2013  Backlog as at December 31, 2014 increased by $3.3 million for the Electronic Materials segment and decreased by $20.2  million for the Eco‐Friendly Materials segment compared to the previous year quarter.      Bookings for the Electronic Materials segment decreased by $8.5 million, and by $16.9 million for the Eco‐Friendly Materials  segment compared to the previous year quarter.    Expenses  Depreciation and amortization  SG&A   Litigation and restructuring costs  Financial (revenues) expenses   Income tax expense  Total expenses  Q4 2014 $  2,546 8,639 1,178 (1,933) 1,068 11,498 Q4 2013 $  2,419 8,607 569 2,304 1,012 14,911 % Change 5% ‐% 107% (184%) 6% (23%) 2014  $  11,148  36,922  1,952  (1,521)  8,854  57,355  2013 $  10,686 36,066 4,068 5,934 1,913 58,667 % Change 4% 2% (52%) (126%) 363% (2%) Depreciation and Amortization  Depreciation and amortization expenses in Q4 2014 and 2014 amounted to $2.5 million and $11.1 million respectively,  compared to $2.4 million and 10.7 million for the same periods of 2013.  SG&A   For Q4 2014 and 2014, SG&A expenses were $8.6 million and $36.9 million respectively, compared to $8.6 million and  $36.1 million for the same periods of 2013. Variation is mostly explained by additional wages and professional expenses.  Litigation and Restructuring costs  The Company recorded litigation and restructuring costs of $1.2 million and $2.0 million for Q4 2014 and 2014 respectively  compared to $0.6 million and $4.1 million for the same periods a year ago. On a fiscal year basis, the decrease is mainly  due to lower expenses to attorney’s and other professional fees for legal proceedings and employee severance costs.   Financial Expenses   Financial revenues for Q4 2014 amounted to $1.9 million compared to financial expenses of $2.3 million for the same  period last year. The positive variance is mainly due to higher gain on foreign exchange and derivative of $4.0 million and  the positive change in the fair value of the debenture conversion option of $1.4 million partially offset by higher interest  expenses, either imputed or from debt.  For 2014, financial revenues amounted to $1.5 million compared to financial expenses of $5.9 million for the same period  last year. Positive change in fair value of the debenture conversion option of $7.2 million combined with a higher gain on  foreign exchange and derivative of $0.5 million are partially offset by higher interest expenses, either imputed or from  debt.  Income Taxes  For Q4 2014 and 2014, income tax expense was $1.1 million and $8.9 million, respectively, representing an effective tax  rate of 77% and 45% respectively. Effective tax rate is higher in Q4 2014 compared to the same quarter of 2013 mainly due  to the losses carried forward for which no deferred tax asset was recognized in Q4 2014. Effective tax rate is higher for  2014 at 45% compared to 2013 mainly due to the fact that 2013 was impacted by a non‐taxable gain on settlement of the  MCP litigation which was reflected as a reduction of the acquisition price, and losses carried forward for which no deferred  tax asset was recognized in 2014.  5N PLUS + 2014 ANNUAL REPORT                                  12 Management’s Discussion and Analysis  Liquidity and Capital Resources  Funds from operations1  Net changes in non‐cash working capital items  Operating activities  Investing activities   Financing activities   Effect of foreign exchange rate changes on cash and  cash equivalents related to operations  Net increase (decrease) in cash and cash equivalents  Q4 2014 $ 4,030 (8,019) (3,989) (4,529) 11,268 Q4 2013 $ 9,043 372 9,415 (3,755) 3,510 % Change (55%) (2,256%) (142%) 21% 221% (261)  2,489 (382)  8,788 (32%)  (72%) 2014  $  17,592  (34,765)  (17,173)  (15,753)  24,121  (845)  (9,650)  2013 $ 20,033 27,930 47,963 (11,748) (22,410) (913)  12,892 % Change (12%) (224%) (136%) 34% (208%) (7%)  (175%) For  Q4  2014,  cash  consumed  by  operating  activities  was  $4.0  million  compared  to  cash  generated  by  operation  of                 $9.4 million for the same period last year. The decrease is mainly attributable to higher inventory and accounts receivable.  Investing activities consumed $4.5 million in Q4 2014 compared to $3.8 million in the same period a year ago. This increase  is explained by an increase in acquisition of property, plant and equipment and intangible assets.  Financing  activities  generated  $11.3  million  in  Q4  2014  compared  to  $3.5  million  in  the  same  period  a  year  ago.  This  increase is mainly explained by additional borrowing under the credit facility.  For 2014, cash consumed by operating activities was $17.2 million compared to cash generated of $48.0 million in 2013.  This  decrease  in  2014  is  mainly  attributable  to  the  inventory  and  accounts  receivable  increases.  Investing  activities  consumed  $15.8  million  compared  to  $11.7  million  in  2013.  This  increase  is  explained  by  an  increase  in  acquisition  of  property, plant and equipment and intangible assets and by the acquisition of AM&M partially offset by the proceeds of  disposition of real estate property recorded in Q1 2014. Cash generated by financing activities amounted to $24.1 million  compared to cash consumed of $22.4 for the same period a year ago. This increase is mainly associated with the issuance  of convertible debentures net of fees in Q2 2014 partially offset by repayment of long‐term debt.  Working Capital  Inventories  Other current assets   Current liabilities  Working capital1  Working capital current ratio1  As at December 31, 2014  $  204,454  93,100  (67,992)  229,562  4.38  As at December 31, 2013 $ 174,374 97,233 (86,861) 184,746 3.13 The  increase  in  working  capital1  is  mainly  due  to  higher  anticipated  demand  and  its  impact  on  inventory  and  by  a  reclassification from trade and accrued liabilities to other liabilities following new agreements with a supplier. The current  level was impacted by average commodity pricing during the year and by the last quarter activities.  Net Debt  Bank indebtedness  Long‐term debt including current portion  Convertible debentures  Total Debt  Cash and cash equivalents and restricted cash  Net Debt1  As at December 31, 2014  $  975  51,823  46,101  98,899  (14,892)  84,007  As at December 31, 2013 $  10,462  72,785  ‐  83,247 (24,917) 58,330 Total  debt  increased  by  $15.7  million  to  $98.9  million  as  at  December  31,  2014,  compared  to  $83.2  million  as  at   December 31, 2013. The increase of debt is due to the increase in working capital.   Net debt after taking into account cash and cash equivalents and restricted cash increased by $25.7 million, from $58.3  million as at December 31, 2013 to $84.0 million as at December 31, 2014.   1 See Non‐IFRS Measures  5N PLUS + 2014 ANNUAL REPORT                                    13 Management’s Discussion and Analysis  Available Short‐Term Capital Resources  Cash and cash equivalents  Available bank indebtedness   Available revolving credit facility  Available short‐term capital resources  As at December 31, 2014  $  12,777  650  79,976  93,403  As at December 31, 2013 $  22,427  12,912  11,980  47,319 The  Company  believes  that  funds  from  operations1,  combined  with  its  available  short‐term  capital  resources  of  $93.4  million  as  at  December  31,  2014  will  enable  it  to  support  its  growth,  its  working  capital  needs  and  its  planned  capital  expenditures.  Funds from Operations  Funds from operations1  Net acquisition of PPE and intangible assets  Working capital changes  Issuance of common shares  Settlement of the purchase price of MCP  Others  Total movement in net debt1  Net debt1, beginning of period  Net debt1, end of period  Q4 2014 $ 4,030 (4,484) (8,019) ‐ ‐ 333 (12,170) (8,140) (75,867) (84,007) Q4 2013 $ 9,043 (3,768) 372 ‐ ‐ (457) (3,853) 5,190 (63,520) (58,330) 2014  $  17,592  (14,221)  (34,765)  164  ‐  5,553  (43,269)  (25,677)  (58,330)  (84,007)  2013 $ 20,033 (11,615) 27,930 ‐ 45,188 (3,319) 58,184 78,217 (136,547) (58,330) For Q4 2014 and 2014, funds from operations decreased to $4.0 million and $17.6 million respectively, compared to $9.0  million and $20.0 million for the same periods of 2013. The decrease was mainly attributable to unfavorable working capital  changes.  Net debt1 to annualized adjusted EBITDA ratio  Annualized funds from operations1 to net debt (%)  Q4 2014 3.7  19.2  Q4 2013 1.8  62.0  2014  2.4  20.9  2013  1.9  34.3  Net debt to annualized adjusted EBITDA ratio for 2014 was 2.4 compared to 1.9 for 2013, with Q4 2014 at 3.7 versus 1.8  in Q4 2013. Annualized funds from operations to net debt represented 20.9% for 2014 and 34.3% for 2013, with Q4 2014  at 19.2% of our net debt compared to 62.0% for the same period last year.   Share Information  Issued and outstanding shares  Stock options potentially issuable  Convertible debentures potentially issuable  As at February 24, 2015  83,979,657  1,388,760  9,777,777  As at December 31, 2014 83,979,657  1,702,100  9,777,777  1 See Non‐IFRS Measures 5N PLUS + 2014 ANNUAL REPORT                                     14 Management’s Discussion and Analysis  Stock Option Plan   On April 11, 2011, the Company adopted a new stock option plan replacing the previous plan (the “Old Plan”), in place  since October 2007, with the same features as the Old Plan with the exception of a maximum number of options granted  which  cannot  exceed  5,000,000.  The  aggregate  number  of  shares  which  could  be  issued  upon  the  exercise  of  options  granted under the Old Plan could not exceed 10% of the issued shares of the Company at the time of granting the options.  Options granted under the Old Plan may be exercised during a period not exceeding ten years from the date of grant. The  stock options outstanding as at December 31, 2014 may be exercised during a period not exceeding six years from their  date of grant. Options vest at a rate of 25% (100% for directors) per year, beginning one year following the grant date of  the options. Any unexercised options will expire one month after the date a beneficiary ceases to be an employee, director  or officer and one year for retired directors.  The following table presents information concerning all outstanding stock options:  Outstanding, beginning of year  Granted  Cancelled  Exercised  Expired  Outstanding, end of year  Exercisable, end of year  Number of options  1,637,951 352,000 (206,463) (71,388) (10,000) 1,702,100 1,192,918 2014 Weighted average exercise price  CA$  4.19 3.99 4.16 2.46 7.80 4.21 4.37 Number of  options  1,585,448  546,939            (141,386)                          ‐            (353,050)  1,637,951  1,001,826  2013 Weighted average exercise price CA$ 4.67 2.39 5.55 ‐ 3.00 4.19 4.94 Off‐Balance Sheet Arrangements  The Company has certain off‐balance sheet arrangements, consisting of leasing certain premises and equipment under the  terms of operating leases and contractual obligations in the normal course of business.    The Company is exposed to currency risk on sales in Euro and other currencies and therefore periodically enters into foreign  currency forward contracts to protect itself against currency fluctuation. The reader will find more details related to these  contracts in Notes 17 and 25 of the audited consolidated financial statements for the year ended December 31, 2014.    The contractual maturities of the Company’s financial liabilities as at December 31, 2014 are as follows:  Bank indebtedness   Trade and accrued liabilities  Long‐term debt  Convertible debentures  Long‐term payable (including in other liabilities)  Total   Carrying amount $ 975 60,286 51,823 46,101 12,577 171,762 1 year $ 1,030 60,286 3,224 3,263 ‐ 67,803 2‐3 years $ 4‐5 years Beyond 5 years $ $ ‐ ‐ 5,136 6,527 15,064 26,727 ‐ ‐ 52,837 61,635 ‐ 114,472 ‐ ‐ ‐ ‐ ‐ ‐ Total $ 1,030 60,286 61,197 71,425 15,064 209,002 Commitments  In September 2014, the Company signed a loan agreement with one of its suppliers for the construction of manufacturing  equipment in Asia. The loan bears an interest rate of 8.5%, and is guaranteed by the supplier’s corporate entity. Under this  agreement, the total amount can reach up to $7 million upon achievement of certain milestones. The initial tranche was  disbursed  on  October  15,  2014.  As  at  December  31,  2014,  the  amount  receivable  under  the  loan  is  $1.8  million.  Each  tranche is to be reimbursed on a monthly basis over a term of 12 months starting after each drawdown.   In  the  normal  course  of  business,  the  Company  contracted  letters  of  credit  for  an  amount  of  up  to  $0.4  million  as  at  December 31, 2014.  5N PLUS + 2014 ANNUAL REPORT                                    Management’s Discussion and Analysis  15 The  Company rents  certain  premises and  equipment  under  the  terms  of  operating  leases.  Future minimum payments,  following recent contractual lease renewals, excluding operating costs are as follows:  Within one year  After one year but not more than five years  Total commitments  2014  $  2,881  5,100  7,981  2013 $ 2,265  3,635  5,900  Contingencies   In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or assets.   As at February 24, 2015, the Company was not aware of any significant events that would have a material effect on its  consolidated financial statements, except for the following.   In 2013, the Company settled its case with the former shareholders of MCP thereby prohibiting further related action by  either party involved in the settlement. As of the date hereof, the Company does not believe that it is probable that an  outflow of resources, which could be material to the consolidated financial statements, will be required by the Company  following potential third party claims pertaining to actions or events related to the alleged breaches of representations and  warranties by the former shareholders of MCP.  Governance  As required by Multilateral Instrument 52‐109 of the Canadian Securities Administrators («MI 52‐109 »), 5N Plus has filed  certificates signed by the Chief Executive Officer and the Chief Financial Officer that, among others, attest to the design of  the disclosure controls and procedures and the design and effectiveness of internal control over financial reporting.   Disclosure Controls and Procedures  The  Chief  Executive  Officer  and  the  Chief  Financial  Officer  have  designed  disclosure  controls  and  procedures,  or  have  caused them to be designed under their supervision, in order to provide reasonable assurance that:   material information relating to the Company has been made known to them; and   information required to be disclosed in the Company’s filings is recorded, processed, summarized and reported  within the time periods specified in securities legislation.  An  evaluation  was  carried  out,  under  the  supervision  of  the  Chief  Executive  Officer  and  Chief  Financial  Officer,  of  the  effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer  and the Chief Financial Officer concluded that the disclosure controls and procedures are effective.  Internal Control over Financial Reporting  The Chief Executive Officer and the Chief Financial Officer have also designed internal controls over financial reporting  (ICFR), or have caused them to be designed under their supervision, in order to provide reasonable assurance regarding  the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with  IFRS.  Based on their evaluation carried out to assess the effectiveness of the Company’s internal control over financial reporting,  the Chief Executive Officer and the Chief Financial Officer have concluded that the internal control over financial reporting  was designed and operated effectively as at December 31, 2014, using the Internal Control – Integrated Framework (2013  Framework)  issued  by  the  Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission  (“COSO  2013  Framework”).  Changes in Internal Control over Financial Reporting  No changes were made to our internal controls over financial reporting during fiscal year ended December 31, 2014 that  have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.  5N PLUS + 2014 ANNUAL REPORT                         16 Management’s Discussion and Analysis  Accounting Policies and Changes  The Company established its accounting policies and methods used in the preparation of its audited consolidated financial  statements for the fiscal year 2014 in accordance with IFRS.  The Company’s significant accounting policies are described  in Note 2 of the December 31, 2014 audited consolidated financial statements. The key assumptions and basis for estimates  that management has made under IFRS, and their impact on the amounts reported in the consolidated financial statements  and  notes,  remain  substantially  unchanged  from  those  described  in  the  Company’s  audited  consolidated  financial  statements for the fiscal year ended December 31, 2013.  Changes in Accounting Policies   On January 1, 2014, the Company applied the new standard described below.  IFRS Interpretations Committee Interpretation 21, “Levies”, provides guidance on accounting for levies in accordance with  the requirements of IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”. The interpretation defines a levy as  an outflow from an entity imposed by a government in accordance with legislation and confirms that a liability for a levy is  recognized  only  when  the  triggering  event  specified  in  the  legislation  occurs.  The  Company  has  applied  IFRIC  21  on  a  retrospective basis in compliance with the transitional requirements of IFRIC 21. The application of IFRIC 21 did not have  any impact to the consolidated financial statements.  Future Changes in Accounting Policies  The following standards have been issued but are not yet effective:  In May 2014, the IASB issued IFRS 15, “Revenues from Contracts with Customers”, to specify how and when to recognize  revenue  as  well  as  requiring  the  provision  of  more  information  and  relevant  disclosure.  IFRS  15  supersedes  IAS  18,  “Revenue”, IAS 11, “Construction Contracts”, and other revenue‐related interpretations. The standard will be effective on  January 1, 2017 for the Company with earlier adoption permitted. The Company is currently evaluating the impact of this  standard on its consolidated financial statements.  In  July 2014,  the IASB amended  IFRS  9,  “Financial  Instruments”, to  bring  together  the  classification  and  measurement,  impairment and hedge accounting phases of the IASB’s project to replace IAS 39, “Financial Instruments: Recognition and  Measurement”. The standard supersedes all previous versions of IFRS 9 and will be effective on January 1, 2018 for the  Company  with  earlier  application  permitted.  The  Company  is  currently  evaluating  the  impact  of  this  standard  on  its  consolidated financial statements.  Significant Management Estimation and Judgment in Applying Accounting Policies  The following are significant management judgments used in applying the accounting policies of the Company that have  the most significant effect on the consolidated financial statements.  Estimation Uncertainty  When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and  assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and underlying  assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the  estimates are revised and in any future periods affected.  Information  about  the  significant  judgments,  estimates  and  assumptions  that  have  the  most  significant  effect  on  the  recognition and measurement of assets, liabilities, revenues and expenses are discussed below.  Impairment of Non‐Financial Assets  An impairment loss is recognized for the amount by which an asset’s or Cash Generating Units (“CGU”), carrying amount  exceeds its recoverable amount, which is the higher of fair value less cost of disposal and value in use.  5N PLUS + 2014 ANNUAL REPORT                     17 Management’s Discussion and Analysis  To determine value in use, management estimates expected future cash flows from each asset or CGU and determines a  suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected  future cash flows, management makes assumptions about future operating results. These assumptions relate to future  events and circumstances. The actual results may vary, and may cause significant adjustments to the Company’s assets in  future periods. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to  market risk and the appropriate adjustment to asset‐specific risk factors.  Inventories  Inventories are measured at the lower of cost and net realizable value, with cost determined on the average cost method.  In estimating net realizable values, management takes into account the most reliable evidence available at the time the  estimates are made. The Company’s core business is subject to changes in foreign policies and internationally accepted  metal prices which may cause selling prices to change rapidly. The Company evaluates its inventories using a group of  similar items basis and considers expected future prices as well as events that have occurred between the consolidated  statement of financial position date and the date of completion of the consolidated financial statements. Net realizable  value held to satisfy a specific sale contract is measured at the contract price.  Debenture conversion option  The  convertible  debentures  issued  by  the  Company  included  conversion  and  early  redemption  options,  which  are  considered as Level 3 financial instruments. The derivative is measured at fair value through profit and loss, and its fair  value must be measured at each reporting period, with subsequent changes in fair value recorded in the statement of  earnings. A derivative valuation model is used and includes assumptions, to estimate the fair value. Detailed assumptions  used in the model to determine the fair value of the embedded derivative, upon inception and as at December 31, 2014,  are provided in the note 13 of the 2014 consolidated financial statements of the Company.  Income Taxes  The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the  worldwide  provision  for  income  taxes.  There  are  many  transactions  and  calculations  for  which  the  ultimate  tax  determination  is  uncertain.  The  Company  recognizes  liabilities  for  anticipated  tax  audit  issues  based  on  estimates  of  whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were  initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in  which such determination is made.  The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of the  Company’s deferred income tax assets is largely dependent upon its achievement of projected future taxable income and  the continued applicability of ongoing tax planning strategies. The Company’s judgment regarding future profitability may  change due to future market conditions, changes in tax legislation and other factors that could adversely affect the ongoing  value of the deferred income tax assets. These changes, if any, may require the material adjustment of these deferred  income tax asset balances through an adjustment to the carrying value thereon in the future. This adjustment would reduce  the deferred income tax asset to the amount that is considered to be more likely than not to be realized and would be  recorded in the period such a determination was to be made.  Related Party Transactions  The Company’s related parties are its joint ventures, directors and executive members. Transactions with these related  parties are described in Notes 9, 10, 24 and 27 in the 2014 consolidated financial statements of the Company.  Financial Instruments and Risk Management  Fair Value of financial instruments  A  detailed  description  of  the  methods  and  assumptions  used  to  measure  the  fair  value  of  the  Company  financial  instruments and their fair value are discussed in Note 17 – Categories of Financial Assets and Financial Liabilities in the  2014 consolidated financial statements of the Company.  5N PLUS + 2014 ANNUAL REPORT                    18 Management’s Discussion and Analysis  The fair value of the derivative financial instruments was as follows:  Assets (Liabilities)  December 31, 2014  Debenture conversion option  Interest rate swap  Foreign exchange forward contracts  Derivative forward contracts  Warrants   Total   $   (2,093)   ‐   ‐   147   ‐   (1,946)   December 31, 2013  $  ‐  (2,588)  (1,468)  955  (181)  (3,282)  Interest Rate Risk  Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates. The  Company’s policy is to limit its exposure to interest rate risk fluctuation by ensuring that a reasonable portion of its bank  advance, long‐term debt and convertible debentures are at fixed rate. The Company is exposed to interest rate fluctuations  on its revolving credit facility, which bears a floating interest rate. A 1% increase/decrease in interest rate would not have  a significant impact on the Company’s net earnings.  Currency Risk  The Company’s sales are primarily denominated in U.S. dollars whereas a portion of its operating costs are realized in local  currencies,  such  as  Euros,  Canadian  dollars  and  Pounds  Sterling.  Even  though  the  purchases  of  raw  materials  are  denominated in U.S. dollars, which reduce to some extent exchange rate fluctuations, we are subject to currency translation  risk which can negatively impact our results.  Management has implemented a policy for managing foreign exchange risk  against the relevant functional currency.  The Company manages the foreign exchange risk by entering into various foreign  exchange forward contracts.   Foreign  exchange  forward  contracts  are  described  in  Note  17  in  the  2014  consolidated  financial  statements  of  the  Company.  The Company had the following currency exposures on December 31, 2014:  Cash and cash equivalents  Restricted cash  Accounts receivable  Bank indebtedness   Trade and accrued liabilities  Long‐term debt  Convertible debentures  Net financial (liabilities) assets   CA$ $ 256 ‐ 1,083 ‐ (2,884) ‐ (46,101) (47,646) EUR                 $ 3,896 2,089 14,729 ‐ (14,046) (61) ‐ 6,607 GBP  $ 724 29 2,358 ‐ (2,514)  ‐ ‐ 597 RMB               $      1,864  16  8,640  (975) (3,491) ‐  ‐  6,054 Other $ 264 ‐ 649 ‐ (697) ‐ ‐ 216 The following table shows the impact on earnings before income tax of a one‐percentage point strengthening or weakening  of foreign currencies against the US dollar as at December 31, 2014 for the Company’s financial instruments denominated  in non‐functional currencies:  1% Strengthening  Earnings (loss) before tax  1% Weakening  Earnings (loss) before tax  CA$  $ (476) 476 EUR  $ 66 (66) GBP  $ 6   (6) RMB  $  61  (61)  Other  $ 2 (2) Credit Risk  Credit risk corresponds to the risk of loss due to the client’s inability to fulfill its obligations with respect to trade and other  receivables as well as contracts. The Company has a large number of clients and is no longer dependent on a specific client.  The Company has a credit policy that defines standard credit practices. This policy dictates that all new customer accounts  be reviewed prior to approval and establishes the maximum amount of credit exposure per customer. The creditworthiness  and financial well‐being of the customer are monitored on an ongoing basis.  5N PLUS + 2014 ANNUAL REPORT                                                 19 Management’s Discussion and Analysis  The Company establishes an allowance for doubtful accounts as determined by management based on its assessment of  collection; therefore, the carrying amount of accounts receivable generally represents the maximum credit exposure. As  at December 31, 2014 and 2013, the Company had an allowance for doubtful accounts of $0.1 million and $0.2 million  respectively. The provision for doubtful accounts, if any, will be included in SG&A expenses in the consolidated statements  of earnings, and will be net of any recoveries that were provided for in prior periods.  Liquidity Risk  Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company  manages  liquidity  risk  through  the  management  of  its  capital  structure.  It  also  manages  liquidity  risk  by  continually  monitoring  actual  and  projected  cash  flows,  taking  into  account  the  Company’s  sales  and  receipts  and  matching  the  maturity profile of financial assets and financial liabilities. The Board of Directors reviews and approves the Company’s  annual operating and capital budgets, as well as any material transactions out of the ordinary course of business, including  proposals on acquisitions and other major investments. Under the terms of its credit facility, the Company is required to  satisfy certain restrictive covenants. In order to comply with these covenants, the Company has prepared, and will need to  execute  on,  its  budgeted  EBITDA  and  cash  flow  estimates.  Management  believes  that  the  assumptions  used  by  the  Company in preparing its budgets are reasonable and that it is not likely that the financial covenants on the credit facility  during a certain period will be violated in the next 12 months. However, risk remains. Successful achievement of these  budgeted results is dependent on stability in the price of metals and other raw materials, the reduction of debt due to the  optimization of the Company’s working capital and the continued viability and support of the Company’s banks.   Risks and Uncertainties  The Company is subject to a number of risk factors which may limit its ability to execute its strategy and achieve its long‐ term growth objectives. Management analyses these risks and implements strategies in order to minimize their impact on  the Company's performance.   Possible Failure to Realize Anticipated Benefits of Acquisitions and Investments  There  is  a  risk  that  some  of  the  expected  benefits  will  fail  to  materialize,  or  may  not  occur  within  the  time  periods  anticipated by management. The realization of such benefits may be affected by a number of factors, many of which are  beyond our control. These factors include achieving the benefits of investments and any future acquisitions that we may  complete  and  will  depend  in  part  on  successfully  consolidating  functions  and  integrating  operations,  procedures  and  personnel  in  a  timely  and  efficient  manner,  as  well  as  our  ability  to  realize  the  anticipated  growth  opportunities  and  synergies  from  combining  the  acquired  businesses  and  operations  with  ours.  The  integration  of  acquired  businesses  requires the dedication of substantial management effort, time and resources which may divert management’s focus and  resources from other strategic opportunities and from operational matters during this process. The integration process  may  result  in  the  loss  of  key  employees,  significant  expenses  and  the  disruption  of  ongoing  business,  customer  and  employee relationships that may adversely affect our ability to achieve the anticipated benefits of these acquisitions and  investments.  International Operations  We  operate  in  a  number  of  countries,  including  China  and  Laos,  and,  as  such,  face  risks  associated  with  international  business  activities.  We  could  be  significantly  affected  by  such  risks,  which  include  the  integration  of  international  operations, challenges associated with dealing with numerous legal systems, the potential for volatile economic and labor  conditions, political instability, expropriation, and changes in taxes, tariffs and other regulatory costs. Although we operate  primarily in countries with relatively stable economic and political climates, there can be no assurance that our business  will not be adversely affected by the risks inherent in international operations.  Environmental Regulations  Our  operations  involve  the  use,  handling,  generation,  processing,  storage,  transportation,  recycling  and  disposal  of  hazardous materials and are subject to extensive environmental laws and regulations at the national, provincial, local and  international level. These environmental laws and regulations include those governing the discharge of pollutants into the  air and water, the use, management and disposal of hazardous materials and wastes, the clean‐up of contaminated sites  and occupational health and safety. We have incurred and will continue to incur capital expenditures in order to comply  with these laws and regulations. In addition, violations of, or liabilities under, environmental laws or permits may result in  restrictions  being  imposed  on  our  operating  activities  or  in  our  being  subject  to  substantial  fines,  penalties,  criminal  proceedings, third party property damage or personal injury claims, clean‐up costs or other costs. While we believe that  we are currently in compliance with applicable environmental requirements, future developments such as more aggressive  5N PLUS + 2014 ANNUAL REPORT           20 Management’s Discussion and Analysis  enforcement  policies,  the  implementation  of  new,  more  stringent  laws  and  regulations,  or  the  discovery  of  currently  unknown environmental conditions may require expenditures that could have a material adverse effect on our business,  results of operations and financial condition. Former MCP’s facility in Tilly, Belgium completed corrective measures under  a remediation plan as a result of industrial legacy at this site, which has been in industrial use for more than 100 years. The  remediation performed has been approved and audited by local authorities and the Company is expecting full compliance  confirmation in the near term.  Competition Risk  We are the leading producer of specialty metal and chemical products and have a limited number of competitors, none of  which are as fully integrated as we are or have a similar range of products. Accordingly, they have limitation to provide the  same comprehensive set of services and products as we do. However, there can be no guarantee that this situation will  continue in the future and competition could arise from new low‐cost metal refiners or from certain of our customers who  could  decide  to  backward  integrate.  The  forecasted  growth  in  demand  for  our  main  products  may  attract  more  metal  refiners into this industry and increase competition. Although we believe that our operations and our commercial network  are important competitive advantages, greater competition could have an adverse effect on our revenues and operating  margins if our competitors gain market share and we are unable to compensate for the volume lost to our competition.  Commodity Price Risk  The price we pay for, and availability of, various inputs fluctuates due to numerous factors beyond our control, including  economic  conditions,  currency  exchange  rates,  global  demand  for  metal  products,  trade  sanctions,  tariffs,  labor  costs,  competition, over capacity of producers and price surcharges. Fluctuations in availability and cost of inputs may materially  affect our business, financial condition, results of operations and cash flows. To the extent that we are not able to pass on  any increases, our business, financial condition, results of operations and cash flows may be materially adversely affected.  Sources of Supply  We may not be able to secure the critical raw material feedstock on which we depend for our operations. We currently  procure our raw materials from a number of suppliers with whom we have had long‐term commercial relationships. The  loss of any one of these suppliers or a reduction in the level of deliveries to us may reduce our production capacity and  impact our deliveries to customers. This would in turn negatively impact our sales, net margins and may lead to liabilities  with respect to some of our supply contracts.  Protection of Intellectual Property  Protection of our proprietary processes, methods and other technologies is important to our business. We rely almost  exclusively  on  a  combination  of  trade  secrets  and  employee  confidentiality  agreements  to  safeguard  our  intellectual  property.  We  have  deliberately  chosen  to  limit  our  patent  position  to  avoid  disclosing  valuable  information.  Failure  to  protect and monitor the use of our existing intellectual property rights could result in the loss of valuable technologies and  processes.  Inventory Price Risk  The Company monitors its risk associated with the value of its inventories in relation to the market price of such inventories.  Because of the highly illiquid nature of many of its inventories, we rely on a combination of standard risk measurement  techniques, such as value at risk as well as a more empirical assessment of the market conditions. Decisions on appropriate  physical stock levels are taken by considering both the value at risk calculations and the market conditions.  5N PLUS + 2014 ANNUAL REPORT               21 Management’s Discussion and Analysis  Business Interruptions  We may incur losses resulting from business interruptions. In many instances, especially those related to our long‐term  contracts, we have contractual obligations to deliver product in a timely manner. Any disruption in our activities which  leads to a business interruption could harm our customers’ confidence level and lead to the cancellation of our contracts  and  legal  recourse  against  us.  Although  we  believe  that  we  have  taken  the  necessary  precautions  to  avoid  business  interruptions  and  carry  business  interruption  insurance,  we  could  still  experience  interruptions  which  would  adversely  impact our financial results.  Dependence on Key Personnel  The Company relies on the expertise and know‐how of its personnel to conduct its operations. The loss of any member of  our senior management team could have a material adverse effect on us. Our future success also depends on our ability to  retain and attract our key employees, train, retain and successfully integrate new talent into our management and technical  teams. Recruiting and retaining talented personnel, particularly those with expertise in the specialty metals industry and  refining technology is vital to our success and may prove difficult. We cannot provide assurance that we will be able to  attract and retain qualified personnel when needed.  Collective Agreements  A portion of our workforce is unionized and we are party to collective agreements that are due to expire at various times  in  the  future.  If  we  are  unable  to  renew  these  collective  agreements  on  similar  terms  as  they  become  subject  to  renegotiation from time to time, this could result in work stoppages or other labour disturbances, such as strikes, walkouts  or lock‐outs, potentially affecting our performance.  Risks Associated with Public Issuer Status  The Company’s shares are publicly traded and, as such, it is subject to all of the obligations imposed on "reporting issuers"  under applicable securities laws in Canada and all of the obligations applicable to a listed company under stock exchange  rules.  Direct  and  indirect  costs  associated  with  public  company  status  have  escalated  in  recent  years  and  regulatory  initiatives under consideration may further increase the costs of being public in Canada. Those costs could have a negative  effect  on  the  Company’s  financial  results.    Another  risk  associated  with  a  public  issuer  status  is  the  disclosure  of  key  Company information as compared to privately owned competitors.  Non‐IFRS Measures  In this Management’s Report, the Company’s management uses certain measures which are not in accordance with IFRS.  Non‐IFRS measures are useful supplemental information but may not have a standardized meaning according to IFRS.  Backlog represents the expected value of orders we have received but have not yet executed and that are expected to  translate into sales within the next twelve months. Bookings represents the value of orders received during the period  considered and is calculated by adding revenues to the increase or decrease in backlog for the period considered. We use  backlog to provide an indication of expected future revenues, and bookings to determine our ability to sustain and increase  our revenues.   EBITDA means net earnings (loss) before interest expenses (income), income taxes, depreciation and amortization. We use  EBITDA because we believe it is a meaningful measure of the operating performance of our ongoing business without the  effects of certain expenses. The definition of this non‐IFRS measure used by the Company may differ from that used by  other companies.    EBITDA margin is defined as EBITDA divided by revenues.  Adjusted EBITDA means EBITDA as defined above before impairment of inventories, litigation and restructuring costs, gain  related to the settlement of the purchase price of MCP, gain on disposal of property, plant and equipment, change in fair  value of debenture conversion option, foreign exchange and derivatives loss (gain). We use adjusted EBITDA because we  believe it is a meaningful measure of the operating performance of our ongoing business without the effects of inventory  write‐downs. The definition of this non‐IFRS measure used by the Company may differ from that used by other companies.   Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.  5N PLUS + 2014 ANNUAL REPORT                       22 Management’s Discussion and Analysis  Adjusted net earnings means the net earnings (loss) before the effect of charge and reversal of impairment related to  inventory,  PPE  and  intangible  assets,  impairment  of  goodwill,  litigation  and  restructuring  costs,  change  in  fair  value  of  debenture conversion option, settlement of purchase price and acquisitions costs net of the related income tax. We use  adjusted net earnings (loss) because we believe it is a meaningful measure of the operating performance of our ongoing  business without the effects of unusual inventory write‐downs and property plant and equipment and intangible asset  impairment charges, litigation and restructuring costs, change in fair value of debenture conversion option, the settlement  of purchase price and acquisition costs. The definition of this non‐IFRS measure used by the Company may differ from that  used by other companies.     Basic adjusted net earnings (loss) per share means adjusted net earnings (loss) divided by the weighted average number of  outstanding shares. We use basic adjusted net earnings (loss) per share because we believe it is a meaningful measure of  the operating performance of our ongoing business without the effects of unusual inventory write‐downs and property  plant and equipment and intangible asset impairment charges, litigation and restructuring costs, change in fair value of  debenture conversion option, the settlement of purchase price and acquisition costs per share. The definition of this non‐ IFRS measure used by the Company may differ from that used by other companies.     Funds from operations means the amount of cash generated from operating activities before changes in non‐cash working  capital balances related to operations. This amount appears directly in the consolidated statements of cash flows of the  Company. We consider funds from operations to be a key measure as it demonstrates the Company’s ability to generate  cash necessary for future growth and debt repayment.   Net debt or net cash is a measure we use to monitor how much debt we have after taking into account cash and cash  equivalents and restricted cash. We use it as an indicator of our overall financial position, and calculate it by taking our  total debt, including the current portion, and subtracting cash and cash equivalents and restricted cash.   Working  capital  is  a  measure  of  liquid  assets  that  is  calculated  by  taking  current  assets  and  subtracting  current  liabilities.  Given that the company is currently indebted, we use it as an indicator of our financial efficiency and aim to  maintain it at the lowest possible level.    Working capital ratio is calculated by dividing current assets by current liabilities.   Additional Information  Our  common  shares  trade  on  the  Toronto  Stock  Exchange  (TSX)  under  the  ticker  symbol  VNP.  Additional  information  relating to the Company, including the Company’s annual information form is available under the Company’s profile on  SEDAR at www.sedar.com.  5N PLUS + 2014 ANNUAL REPORT                 23 Management’s Discussion and Analysis  Selected Data Information  The following table provides selected quarterly financial information for the years 2012 through to 2014.  (in thousands of United States dollars except per share amounts)  Fiscal 2014  Revenues  EBITDA1 2  Adjusted EBITDA1  Net earnings (loss) attributable to equity holders of 5N Plus   Basic earnings (loss) per share attributable to equity holders of 5N Plus   Net earnings (loss)  Basic earnings (loss) per share  Diluted earnings (loss) per share  Adjusted net earnings (loss)1  Basic adjusted net earnings (loss) per share1  Funds from operations1  Backlog1  Fiscal 2013  Revenues  EBITDA1 2  Adjusted EBITDA1  Net earnings (loss) attributable to equity holders of 5N Plus   Basic earnings (loss) per share attributable to equity holders of 5N Plus   Net earnings (loss)  Basic earnings (loss) per share  Diluted earnings (loss) per share  Adjusted net earnings (loss)1  Basic adjusted net earnings (loss) per share1  Funds from operations1  Backlog1  Fiscal 2012  Revenues  EBITDA1 2  Adjusted EBITDA1  Net earnings (loss) attributable to equity holders of 5N Plus   Basic earnings (loss) per share attributable to equity holders of 5N Plus   Net earnings (loss)  Basic earnings (loss) per share  Diluted earnings (loss) per share  Adjusted net earnings (loss)1  Basic adjusted net earnings (loss) per share1  Funds from operations1  Backlog1  Q1 Q2 Q3  Q4 Total 142,379 11,178 10,501 4,655 $0.06 4,519 $0.05 $0.05 4,916 $0.06 6,806 187,330 118,389 12,121 10,115 5,371 $0.06 5,538 $0.07 $0.07 6,296 $0.08 4,608 166,290 162,235 14,707 16,867 4,972 $0.07 4,891 $0.07 $0.07 5,250 $0.07 11,236 215,588 136,597 11,524 10,816 4,436 $0,05 4,436 $0.05 $0.05 4,303 $0.05 5,774 150,363 112,637 38,008 6,543 34,185 $0.41 34,281 $0.41 $0.41 959 $0.01 1,560 153,277 140,076 (22,012) 5,594 (21,922) ($0.29) (22,062) ($0.30) ($0.30) (1,911) ($0.03) (407) 188,982 114,438  12,721  8,071  4,172  $0.05  4,171  $0.05  ($0.01)  170  $‐  982  137,183  108,570  6,926  5,775  1,083  $0.01  1,323  $0.02  $0.02  1,517  $0.02  4,822  133,352  120,744  8,662  9,001  1,218  $0.02  1,275  $0.02  $0.02  648  $0.01  10,320  162,323  114,781 4,021 5,657 (2,451) ($0.03) (2,453) ($0.03) ($0.04) 1,247 $0.01 4,030 153,159 119,416 6,848 7,942 2,022 $0,02 1,638 $0.02 $0.02 2,068 $0.02 9,043 170,073 128,620 (223,440) 6,395 (212,006) ($2.71) (211,953) ($2.70) ($2.70) (6,880) ($0.08) 4,243 165,790 508,195 39,444 35,045 10,812 $0.13 10,673 $0.13 $0.05 10,636 $0.13 17,592 153,159 459,012 63,903 30,375 42,661 $0.51 42,780 $0.51 $0.51 10,840 $0.13 20,033 170,073 551,675 (222,083) 37,857 (227,738) ($2.91) (227,849) ($2.91) ($2.91) (2,893) ($0.04) 25,392 165,790 (in thousands of United States dollars)   EBITDA – previous definition  Litigation and restructuring costs  Gain related to the settlement of MCP purchase price  Gain on disposal of property, plant and equipment  Impairment of intangible assets and goodwill  Impairment of property, plant and equipment  Reversal of impairment of property, plant and equipment  Foreign exchange and derivatives loss (gain)  EBITDA – current definition  (in thousands of United States dollars)  Balance Sheet Data  Total assets  Net debt (net cash)1  Retirement benefit obligation  Shareholders’ equity  Q4 2013 $ 7,942 (569) ‐ ‐ ‐ ‐ ‐ (525) 6,848 Q3 2013 $ 5,775 (255) ‐ ‐ ‐ ‐ ‐ 1,406 6,926 Q2 2013 $ (3,639) (2,233) 45,188 ‐ ‐ ‐ ‐ (1,308) 38,008  Q1 2013 $ 10,115 (1,011) ‐ ‐ ‐ ‐ ‐ 3,017 12,121 Q4 2012 $ (18,122) (932) ‐ ‐ (165,507) (39,239) ‐ 360 (223,440) Q3 2012 $ 9,001 (464) ‐ ‐ ‐ ‐ 932 (807) 8,662 Q2 2012 $ (20,474) (908) ‐ ‐ ‐ ‐ ‐ (630) (22,012) Q1 2012 $ 16,867 (478) ‐ ‐ ‐ ‐ ‐ (1,682) 14,707 2014  $  399,531  84,007  16,928  196,443  2013  $  365,240  58,330  15,887  190,052  2012  $  385,396  136,547  16,667  144,955  1 See Non‐IFRS Measures  2 The comparative periods have been restated to reflect a change in the EBITDA1 definition  5N PLUS + 2014 ANNUAL REPORT                                                   24 5N PLUS + 2014 ANNUAL REPORT 25 5N PLUS INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (Figures in thousands of United States dollars) 5N PLUS + 2014 ANNUAL REPORT 26 Management’s Report To the Shareholders of 5N Plus Inc. The accompanying consolidated financial statements are the responsibility of the management of 5N Plus Inc. and have been reviewed by the Audit Committee and approved by the Board of Directors. These consolidated financial statements and related notes have been prepared by management in conformity with International Financial Reporting Standards and necessarily include amounts based on management’s informed judgments and estimates. Management is also responsible for all other information included in this Annual Report and for ensuring that this information is consistent with the Company’s consolidated financial statements and business activities. Management is responsible for the design, establishment and maintenance of appropriate internal controls and procedures for financial reporting, to ensure that financial statements for external purposes are fairly presented in conformity with International Financial Reporting Standards. Such internal control systems are designed to provide reasonable assurance on the reliability of the financial information and the safeguarding of assets. The Company’s external auditors have free and independent access to the Audit Committee, which is comprised of independent directors. The Audit Committee, which meets regularly throughout the year with members of management, reviews the consolidated financial statements and recommends their approval to the Board of Directors. The consolidated financial statements have been audited by PricewaterhouseCoopers LLP. SIGNED Jacques L’Ecuyer President and Chief Executive Officer SIGNED Richard Perron Chief Financial Officer Montréal, Canada February 24, 2015 5N PLUS + 2014 ANNUAL REPORT 27 February 24, 2015 Independent Auditor’s Report To the Shareholders of 5N Plus Inc. We have audited the accompanying consolidated financial statements of 5N Plus Inc., which comprise the consolidated statements of financial position at December 31, 2014 and 2013 and the consolidated statements of earnings, comprehensive income, changes in equity and cash flows for the years then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l. 1250 René-Lévesque Boulevard West, Suite 2800, Montréal, Quebec, Canada H3B 2G4 T: +1 514 205 5000, F: +1 514 876 1502, www.pwc.com/ca “PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership. 5N PLUS + 2014 ANNUAL REPORT 28 We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of 5N Plus Inc. as at December 31, 2014 and 2013 and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards. 1 CPA auditor, CA, public accountancy permit No. A116853 5N PLUS + 2014 ANNUAL REPORT 5N PLUS INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Figures in thousands of United States dollars) ASSETS Current Cash and cash equivalents Restricted cash Accounts receivable (Note 5) Inventories (Note 6) Income tax receivable Derivative financial assets (Note 17) Other current assets Total current assets Property, plant and equipment (Note 7) Intangible assets (Note 8) Deferred tax asset (Note 16) Investment accounted for using the equity method (Note 9) Other assets (Note 10) Total non-current assets Total assets LIABILITIES AND EQUITY Current Bank indebtedness (Note 12) Trade and accrued liabilities (Note 11) Income tax payable Derivative financial liabilities (Note 17) Long-term debt due within one year (Note 12) Total current liabilities Long-term debt (Note 12) Convertible debentures (Note 13) Deferred tax liability (Note 16) Retirement benefit obligation (Note 14) Derivative financial liabilities (Note 17) Other liabilities (Note 15) Total non-current liabilities Total liabilities Shareholders’ equity Non-controlling interest Total equity Total liabilities and equity Commitments and contingencies (Note 23) The accompanying notes are an integral part of these consolidated financial statements. 29 As at December 31, 2014 $ As at December 31, 2013 $ 12,777 2,115 72,391 204,454 2,705 147 2,965 297,554 68,261 15,728 11,037 316 6,635 101,977 399,531 975 60,286 6,064 - 667 67,992 51,156 46,101 3,111 16,928 2,093 15,711 135,100 203,092 196,443 (4) 196,439 399,531 22,427 2,490 60,616 174,374 8,455 955 2,290 271,607 59,614 13,143 13,387 444 7,045 93,633 365,240 10,462 65,016 3,660 3,284 4,439 86,861 68,346 - 1,600 15,887 953 1,064 87,850 174,711 190,052 477 190,529 365,240 5N PLUS + 2014 ANNUAL REPORT 30 5N PLUS INC. CONSOLIDATED STATEMENTS OF EARNINGS (Figures in thousands of United States dollars, except per share information) Revenues Cost of sales (Note 27) Selling, general and administrative expenses (Note 27) Other expenses (income), net (Note 27) Share of loss from joint ventures (Note 9) Operating earnings Gain on disposal of property, plant and equipment Financial expenses (revenues) Interest on long-term debt Imputed interest and other interest expense Changes in fair value of debenture conversion option (Note 17) Foreign exchange and derivative gain Earnings before income tax Income tax expense (Note 16) Current Deferred Net earnings for the year Attributable to: Equity holders of 5N Plus Inc. Non-controlling interest Earnings per share attributable to equity holders of 5N Plus Inc. (Note 21) Basic earnings per share Diluted earnings per share The accompanying notes are an integral part of these consolidated financial statements. For the year ended December 31, 2014 $ For the year ended December 31, 2013 $ 508,195 445,673 36,922 8,778 128 491,501 16,694 1,312 5,465 3,304 (7,179) (3,111) (1,521) 19,527 4,875 3,979 8,854 10,673 10,812 (139) 10,673 0.13 0.13 0.05 459,012 405,114 36,066 (32,854) 59 408,385 50,627 - 5,935 2,589 - (2,590) 5,934 44,693 4,338 (2,425) 1,913 42,780 42,661 119 42,780 0.51 0.51 0.51 5N PLUS + 2014 ANNUAL REPORT 5N PLUS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Figures in thousands of United States dollars, except per share information) 31 Net earnings for the year Other comprehensive income (loss) Items that may be reclassified subsequently to the consolidated statements of earnings Net changes in cash flow hedges Effective portion of changes in fair value of cash flow hedges Reclassification to consolidated statements of earnings Income taxes Currency translation adjustment Items that will not be reclassified subsequently to the consolidated statements of earnings Remeasurement of retirement benefit obligation Income taxes Other comprehensive income (loss) Comprehensive income for the year Attributable to equity holders of 5N Plus Inc. Attributable to non-controlling interests The accompanying notes are an integral part of these consolidated financial statements. For the year ended December 31, 2014 $ For the year ended December 31, 2013 $ 10,673 42,780 560 (184) (111) 265 (57) 208 (3,365) 1,043 (2,322) (2,114) 8,559 8,698 (139) 1,282 (385) (242) 655 291 946 1,337 (414) 923 1,869 44,649 44,530 119 5N PLUS + 2014 ANNUAL REPORT 9 3 4 , 6 9 1 $ l a t o T y t i u q e 3 1 3 , 5 4 1 0 8 7 , 2 4 5 5 6 1 9 2 3 2 9 9 4 6 , 4 4 7 6 5 9 2 5 , 0 9 1 Attributable to equity holders of the Company Contributed surplus $ 9 1 1 - - - 9 1 1 Accumulated other comprehensive loss $ - 7 7 4 Total shareholders’ equity $ Non- controlling interests $ Deficit $ 32 5N PLUS INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Figures in thousands of United States dollars, except number of shares) $ l a t o T y t i u q e 9 2 5 , 0 9 1 3 7 6 , 0 1 ) 7 5 ( 5 6 2 ) 2 2 3 , 2 ( 9 5 5 , 8 4 6 1 7 3 2 For the year ended December 31, 2014 - - - $ - n o N s t s e r e t n i Balances at beginning of year g n i l l o r t n o c ) 9 3 1 ( 7 7 4 - - ) 9 3 1 ( ) 0 5 0 , 3 ( ) 2 4 3 ( $ l a t o T y t i u q e Net earnings for the year y Other comprehensive income (loss) n a p m o C e Total comprehensive income (loss) h t Net changes in cash flow hedges Currency translation adjustment Remeasurement of retirement benefit obligation ’ s r e d l o h e r a h s 2 5 0 , 0 9 1 ) 2 2 3 , 2 ( 2 1 8 , 0 1 8 9 6 , 8 ) 7 5 ( 5 6 2 4 6 1 7 3 2 ) 8 0 7 , 2 ( - - - $ t i c i f e D f o Exercise of stock options s r e Share-based compensation d l Purchase of a subsidiary’s non-controlling interests o h y t i u q Balances at end of year e o t including transaction costs (Note 4) ) 2 1 4 , 5 5 1 ( 2 1 8 , 0 1 2 1 8 , 0 1 - - - - - ) 8 0 7 , 2 ( - $ s s o l ) 5 5 5 , 1 ( ) 7 5 ( 5 6 2 ) 2 2 3 , 2 ( ) 4 1 1 , 2 ( e l b a t u b i r t t A r e h t o d e t a l u m u c c A e v i s n e h e r p m o c For the year ended December 31, 2013 - - - l - $ 7 4 7 , 3 d e t u b s u p r u Balances at beginning of year s i r t n o C Net earnings for the year Other comprehensive income - ) 0 7 ( 7 3 2 - $ ) 0 2 Net changes in cash flow hedges Currency translation adjustment Remeasurement of retirement benefit obligation l a t i p a c e r a h S 2 7 2 , 3 4 3 4 3 2 - - - - - - - e t o N Total comprehensive income ( Number of shares ) 4 ( - n o N $ Share capital $ (Note 20) s t s e r e t n i 343,272 g n i l l o r t n o c 8 5 3 $ y t i u q e l a t o T ’ s r e d l o h e r a h s 5 5 9 , 4 4 1 - - - - - t i c i f e D $ 234 - ) 3 7 0 , 8 9 1 ( - 343,506 $ s s o l ) 4 2 4 , 3 ( $ Share capital s u $ p r u 343,272 s l 0 8 1 , 3 r e h t o e v i s n e h e r p m o c d e t u b i r t n o C - 2 7 2 , 3 4 3 - - - - - 9 6 2 , 8 0 9 , 3 8 $ e r a h S l a t i p a c r e b m u N s e r 343,272 a h s f o 83,908,269 3 4 4 , 6 9 1 - - - - - y n a p m o C e h t f o 71,388 s r e - d - l o h y t i u q 83,979,657 e o t ) 8 0 3 , 7 4 1 ( ) 9 6 6 , 3 ( d e t a l u m u c c A e l b a t u b i r t t A Number of shares 4 1 9 , 3 83,908,269 - - - - - - 6 0 5 , 3 4 3 7 5 6 , 9 7 9 , 3 8 ) s e r a h s f o r e b m u n t p e c x e , s r a l l o d s e t a t S d e t i n U f o s d n a s u o h t n i s e r u g i F ( Y T I U Q E N I S E G N A H C F O S T N E M E T A T S D E T A D I L O S N O C . C N I S U L P N 5 Share-based compensation r e b Balances at end of year m u N s e r a h s f o 9 6 2 , 8 0 9 , 3 8 - - - - - - - 8 8 3 , 1 7 83,908,269 The accompanying notes are an integral part of these consolidated financial statements. n o i t a g i l b o t i f e n e b t n e m e r i t e r f o t n e m e r u s a e m e R ) s s o l ( e m o c n i e v i s n e h e r p m o c l a t o T s t s e r e t n i g n i l l o r t n o c - n o n s ’ y r a i d i s b u s a f o e s a h c r u P ) 4 e t o N ( s t s o c n o i t c a s n a r t g n i d u l c n i n o i t a s n e p m o c d e s a b - e r a h S s n o i t p o k c o t s f o e s i c r e x E r a e y f o d n e t a s e c n a l a B s e g d e h w o l f h s a c n i s e g n a h c t e N t n e m t s u j d a n o i t a l s n a r t y c n e r r u C ) s s o l ( e m o c n i e v i s n e h e r p m o c r e h t O r a e y e h t r o f s g n i n r a e t e N r a e y f o g n i n n i g e b t a s e c n a l a B 4 1 0 2 , 1 3 r e b m e c e D d e d n e r a e y e h t r o F n o i t a g i l b o t i f e n e b t n e m e r i t e r f o t n e m e r u s a e m e R e m o c n i e v i s n e h e r p m o c l a t o T n o i t a s n e p m o c d e s a b - e r a h S s e g d e h w o l f h s a c n i s e g n a h c t e N t n e m t s u j d a n o i t a l s n a r t y c n e r r u C e m o c n i e v i s n e h e r p m o c r e h t O r a e y e h t r o f s g n i n r a e t e N r a e y f o g n i n n i g e b t a s e c n a l a B 3 1 0 2 , 1 3 r e b m e c e D d e d n e r a e y e h t r o F 3,747 (1,555) (155,412) 190,052 1 6 6 , 2 4 1 6 6 , 2 4 5 5 6 1 9 2 3 2 9 0 3 5 , 4 4 - - - - - - - - (70) 237 1 6 6 , 2 4 - 3,914 9 6 8 , 1 - 5 5 6 1 9 2 3 2 9 7 6 5 - - 2 5 0 , 0 9 1 ) 2 1 4 , 5 5 1 ( - 265 (57) (2,322) (2,114) - - - 10,812 - - - 10,812 - - 10,812 265 (57) (2,322) 8,698 164 237 (2,708) (2,708) (342) (3,050) (3,669) (147,308) 196,443 (4) 196,439 Attributable to equity holders of the Company Contributed surplus $ - - - - - Accumulated other comprehensive loss $ 7 6 5 7 4 7 , 3 Total shareholders’ equity Non- controlling interests $ Deficit $ 3,180 (3,424) (198,073) 144,955 Total equity $ 190,529 10,673 265 (57) (2,322) 8,559 164 237 Total equity $ 145,313 42,780 655 291 923 567 477 (139) (139) - - - - - $ 358 119 - - - - - - - - - - - - - - - 567 - - - - - - 3,747 42,661 - - - 42,661 - 42,661 655 291 923 44,530 567 119 44,649 (155,412) 190,052 477 190,529 . s 655 t n e 291 m e 923 t a t 1,869 s - - (1,555) l a i c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i n a e r a s e t o n g n i y n a p m o c c a e h T ) 5 5 5 , 1 ( 2 7 2 , 3 4 3 9 6 2 , 8 0 9 , 3 8 r a e y f o d n e t a s e c n a l a B 5N PLUS + 2014 ANNUAL REPORT 5N PLUS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Figures in thousands of United States dollars) 33 Operating activities Net earnings for the year Adjustments to reconcile net earnings to cash flows Depreciation of property, plant and equipment and amortization of intangible assets Amortization of other assets Amortization of deferred revenues (Note 15) Share-based compensation expense Deferred income tax Share of loss from joint ventures (Note 9) Gain related to the settlement of the purchase price of MCP Group SA (Note 27) Impairment of inventories (Note 6) Gain on disposal of property, plant and equipment Imputed interest Retirement benefit obligation (Note 14) Change in fair value of debenture conversion option (Note 17) Unrealized gain on non-hedge financial instruments Unrealized foreign exchange (gain) loss on assets and liabilities Funds from operations before the following Net change in non-cash working capital balances related to operations (Note 19) Cash flows (used in) from operating activities Investing activities Business acquisitions, net of cash acquired (Note 4) Additions to property, plant and equipment (Notes 7 and 19) Proceeds on disposal of property, plant and equipment Additions of intangible assets (Note 8) Restricted cash Cash flows used in investing activities Financing activities Repayment of long-term debt Proceeds from the issuance of long-term debt Issue expenses related to long-term debt Proceeds from the issuance of convertible debentures, net of transaction costs (Note 13) Net (decrease) increase in bank indebtedness Issuance of common shares Financial instruments – net Increase in other liabilities Purchase of a subsidiary’s non-controlling interest including transaction costs (Note 4) Cash flows from (used in) financing activities Effect of foreign exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year For the year ended December 31, 2014 $ For the year ended December 31, 2013 $ 10,673 42,780 11,148 732 (427) 668 3,979 128 - 5,251 (1,312) 1,575 (143) (7,179) (2,892) (4,609) 17,592 (34,765) (17,173) (1,525) (13,611) 2,174 (2,784) (7) (15,753) (101,305) 80,343 (1,915) 58,062 (9,487) 164 23 1,286 (3,050) 24,121 (845) (9,650) 22,427 12,777 10,686 2,017 - 567 (1,769) 59 (45,188) 10,182 - - - - (847) 1,546 20,033 27,930 47,963 - (11,063) 245 (797) (133) (11,748) (25,186) - - - 2,448 - 328 - - (22,410) (913) 12,892 9,535 22,427 Supplemental information(1) Income tax recovered Interest paid (2,779) 5,715 (7,636) 5,472 (1) Amounts (recovered) paid for interest and income tax were reflected as cash flows from operating activities in the consolidated statements of cash flows. The accompanying notes are an integral part of these consolidated financial statements. 5N PLUS + 2014 ANNUAL REPORT 34 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 1 – NATURE OF ACTIVITIES 5N Plus Inc. (“5N Plus” or the “Company”) is a Canadian-based international company. 5N Plus is a producer of specialty metal and chemical products. Fully integrated with closed-loop recycling facilities, the Company’s head office is located at 4385 Garand Street, Saint-Laurent, Quebec (Canada) H4R 2B4. The Company operates manufacturing facilities and sales offices in several locations in Europe, the Americas and Asia. The Company’s shares are listed on the Toronto Stock Exchange (“TSX”). 5N Plus and its subsidiaries represent the “Company” mentioned throughout these consolidated financial statements. The Company has two reportable business segments, namely Electronic Materials and Eco-Friendly Materials. These consolidated financial statements were approved by the Board of Directors on February 24, 2015. NOTE 2 – SUMMARY OF PRINCIPAL ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated. Basis of preparation The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles as set forth in Part 1 of the Chartered Professional Accountants of Canada (CPA Canada) Handbook – Accounting, which incorporates International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements have been prepared under the historical cost convention, except for derivative financial instruments. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are also further disclosed in this note, in the Significant management estimation and judgment in applying accounting policies section. a) Subsidiaries Subsidiaries are all entities (including structured entities) over which the Company has control. Control exists when the Company is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through the power over the entity. The subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. 5N PLUS + 2014 ANNUAL REPORT 35 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) The following table includes the principal subsidiaries which significantly impact the results or assets of the Company: 5N Plus Inc. 5N PV Gmbh 5N Plus Lübeck Gmbh 5N Plus UK Limited 5N Plus Belgium SA 5N Plus Asia Limited 5N Plus Wisconsin Inc Country of incorporation Canada Germany Germany United Kingdom Belgium Hong Kong United States % Equity interest 2013 2014 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% The US dollar is the functional currency of all those subsidiaries. Intercompany transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from intercompany transactions that are recognized in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company. b) Joint ventures A joint venture is a contractual agreement whereby the Company agrees with other parties to undertake an economic activity that is subject to joint control, i.e. strategic financial and operating decisions relating to the joint venture’s activities require the unanimous consent of the parties sharing control. Investments in joint ventures are accounted for using the equity method. The share of income (loss) of joint ventures is recognized in the consolidated statement of earnings and the share of other comprehensive income (loss) of joint ventures is included in other comprehensive income (loss). Foreign currency translation a) Functional and presentation currency The Company’s functional and presentation currency is the US dollar. Functional currency is determined for each of the Company’s entities, and items included in the financial statements of each entity are measured using that functional currency. b) Transactions and balances Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in consolidated statement of earnings. Foreign exchange gains and losses are presented in the consolidated statement of earnings within “foreign exchange and derivative loss (gain)”. 5N PLUS + 2014 ANNUAL REPORT 36 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) c) Foreign operations Assets and liabilities of subsidiaries that have a functional currency other than US dollar are translated from their functional currency to US dollars at exchange rates in effect at the reporting date. The resulting translation adjustments are included in the currency translation adjustment in other comprehensive income (loss). Revenue and expenses are translated at the average exchange rates for the period. Segment reporting The Company operates two principal segments: Electronic Materials and Eco-Friendly Materials. Discrete operating and financial information is available for these segments and is used to determine the operating performance of each segment and to allocate resources. The Electronic Materials segment is associated with the following metals: cadmium, gallium, germanium, indium and tellurium. These are sold as elements, alloys, chemicals and compounds. The Eco-Friendly Materials segment manufactures and sells refined bismuth and bismuth chemicals and low melting- point alloys as well as refined selenium and selenium chemicals. Corporate expenses associated with the head office and unallocated selling, general and administrative expenses together with financing costs and foreign exchange and derivative loss (gain) have been regrouped under the heading “Corporate and unallocated”. Each operating segment is managed separately as each of these service lines requires different technologies, resources and marketing approaches. The financial information of the recycling and trading of complex material is allocated to the two main segments. All intersegment transactions between the Electronic Materials and the Eco-Friendly Materials segments have been eliminated on consolidation. Revenue recognition Revenue comprises the sale of manufactured products and the rendering of services and is measured at the fair value of the sale of manufactured products, net of value-added tax, and estimated customer returns and allowances at the time of recognition. The estimates of fair value are based on the Company’s historical experience with each customer and the specifics of each arrangement. Revenue from the sale of manufactured products is recognized when the risks and rewards of ownership have been transferred to the buyer (which generally occurs upon shipment) and collectibility of the related receivables is reasonably assured. Revenue is recognized when (i) it can be measured reliably; (ii) it is probable that the economic benefits associated with the transaction will flow to the Company; and (iii) the costs incurred or to be incurred can be measured reliably. Revenue from custom refining activities is recognized when services are rendered. 5N PLUS + 2014 ANNUAL REPORT 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Property, plant and equipment Property, plant and equipment are recorded at cost, net of accumulated depreciation, accumulated impairment losses and subsequent reversals, if applicable. Property, plant and equipment are depreciated using the straight-line method over their estimated useful lives, taking into account any residual values. Useful lives are as follows: 37 Land Building Production equipment Furniture Office equipment Rolling stock Leasehold improvements Period Not depreciated 25 years 10 years 3 to 10 years 3 to 10 years 3 to 10 years Over the term of the lease However, “major overhauls and replacements” are capitalized to the consolidated statement of financial position as a separate component, with the replaced part or previous overhaul derecognized from the statement. Maintenance and repairs are charged to expense as incurred. Construction in progress is not depreciated until the assets are put into use. Costs are only capitalized if they are directly attributable to the construction or development of the assets. Residual values, method of depreciation and useful life of the assets are reviewed annually and adjusted if appropriate. Leases Leases are classified as finance leases if the Company bears substantially all risks and rewards of ownership of the leased asset. At inception of the lease, the related asset is recognized at the lower of fair value and the present value of the minimum lease payments, and a corresponding amount is recognized as a finance lease obligation. Lease payments are split between finance charges and the reduction of the finance lease obligation to achieve a constant proportion of the capital balance outstanding. Finance charges are charged to net earnings (loss) over the lease term. All other leases are classified as operating leases. Operating lease payments are recognized as an expense on a straight- line basis over the lease term. Intangible assets Intangible assets acquired separately are recorded at cost, net of accumulated amortization, accumulated impairment losses and reversals, if applicable. Intangible assets acquired through a business combination are recognized at fair value at the date of acquisition. Intangible assets are amortized on a straight-line basis over their useful lives according to the following annual terms: Customer relationships Technology Trade name and non-compete agreements Software Intellectual property Development costs Period 10 years 5 years 2 to 5 years 5 years 10 years Not exceeding 10 years 5N PLUS + 2014 ANNUAL REPORT 38 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Impairment of non-financial assets Non-financial assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. In addition, non-financial assets that are not amortized are subject to an annual impairment assessment. Any impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). The Company evaluates impairment losses for potential reversals when events or changes in circumstances warrant such consideration. Financial instruments Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. All financial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent periods depends on the classification of the financial instrument. At initial recognition, the Company classifies its financial instruments in the following categories depending on the purpose for which the instruments were acquired: a) Financial assets at fair value through profit or loss A financial asset is classified in this category if acquired principally for the purpose of selling or repurchasing in the short term. Derivatives are also included in this category unless they are designated as hedges. Financial instruments in this category are recognized initially and subsequently at fair value. Transaction costs are expensed in the consolidated statement of earnings. Financial assets at fair value through profit or loss are classified as current assets except for the portion expected to be realized or paid beyond twelve months of the consolidated statements of financial position date, which is classified as non-current asset. b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are recognized initially at the amount expected to be received, less, when material, a discount to reduce the loans and receivables to fair value. Subsequently, loans and receivables are measured at amortized cost using the effective interest method less a provision for impairment. Loans and receivables are included in current assets, except for instruments with maturities greater than twelve months after the end of the reporting period, which are classified as non-current assets. c) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. 5N PLUS + 2014 ANNUAL REPORT 39 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Available-for-sale financial assets are recognized initially at fair value plus transaction costs and are subsequently carried at fair value. Gains or losses arising from changes in fair value are recognized in other comprehensive income (loss). When an available-for-sale asset is sold or impaired, the accumulated gains or losses are moved from accumulated other comprehensive income (loss) to the consolidated statement of earnings. Available-for-sale financial assets are classified as non-current assets, unless the investment matures within twelve months, or management expects to dispose of them within twelve months. d) Financial liabilities at amortized cost Financial liabilities at amortized cost are initially recognized at the amount required to be paid, less, when material, a discount to reduce the payables to fair value. Subsequently, they are measured at amortized cost using the effective interest method. Financial liabilities are classified as current liabilities if payment is due within twelve months. Otherwise, they are presented as non-current liabilities. The Company has classified its financial instruments as follows: Category Financial instrument Financial assets and liabilities at fair value through profit and loss Loans and receivables Financial liabilities at amortized cost Derivative financial assets and liabilities Cash and cash equivalents Restricted cash Accounts receivable Other current assets Loan receivable from a related party Bank indebtedness Trade and accrued liabilities Long-term debt Convertible debentures Long-term payable Transaction costs Transaction costs related to financial instruments that are not classified as assets and liabilities at fair value through profit or loss, are recognized in consolidated statement of financial position as an adjustment to the cost of the financial instrument upon initial recognition and amortized using the effective interest rate method. Fees paid on the establishment of loan facilities are recognized as deferred costs under non-current assets and are amortized over the term of the facility. Impairment of financial assets At each reporting date, the Company assesses whether there is objective evidence that a financial asset is impaired. A financial asset is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after initial recognition (a “loss event”) and that loss event has an impact on the estimated cash flows of the financial assets that can be reliably estimated. If such evidence exists, the Company recognizes an impairment loss, as follows: 5N PLUS + 2014 ANNUAL REPORT 40 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) a) Financial assets carried at amortized cost The impairment loss is the difference between the amortized cost of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s original effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through the use of an allowance account. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized. Impairment losses as well as reversals are recognized in the consolidated statement of earnings. b) Available-for-sale financial assets The impairment loss is the difference between the original cost of the asset and its fair value at the measurement date, less any impairment losses previously recognized in the consolidated statement of earnings. This amount represents the cumulative loss in accumulated other comprehensive income that is reclassified to the consolidated statement of earnings. Impairment losses on available-for-sale financial assets may not be reversed. Derivative financial instruments and hedging activities Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The Company designates certain derivatives as hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge). The fair values of various derivative instruments used for hedging purposes are disclosed in Note 17. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than twelve months and as a current asset or liability when the remaining maturity of the hedged item is less than twelve months. Trading derivatives are classified as a current asset or liability. The Company applies cash flow hedge accounting to certain foreign exchange forward contracts and interest-rate derivatives entered into to hedge forecasted transactions. In a cash flow hedge relationship, the portion of gains or losses on the hedging item that is determined to be an effective hedge is recognized in other comprehensive income (loss), while the ineffective portion is recorded in consolidated statement of earnings. The amounts recognized in other comprehensive income (loss) are reclassified in consolidated statement of earnings as a reclassification adjustment when the hedged item affects net earnings. Embedded derivatives Embedded derivatives, which include debenture conversion option, are recorded at fair value separately from the host contract when their economic characteristics and risks are not clearly and closely related to those of the host contract. Subsequent changes in fair value are recorded in financial expenses in the consolidated statement of earnings. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits. Restricted cash Restricted cash represents restricted cash held to secure certain liabilities of the Company. 5N PLUS + 2014 ANNUAL REPORT 41 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Inventories Inventories are stated at the lower of cost and net realizable value. Cost includes all expenditures directly attributable to the manufacturing process as well as suitable portions of related production overheads based on normal operating capacity. Costs of ordinarily interchangeable items are assigned using weighted average cost. Net realizable value is the estimated selling price in the ordinary course of business less costs of completion and any applicable selling expenses. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the impairment is reversed (i.e. the reversal is limited to the amount of the original impairment) so that the new carrying amount is the lower of the cost and the revised net realizable value. From time to time, when substantially all required raw materials are in inventory, the Company may choose to enter into long-term sales contracts at fixed prices. The quantity of raw materials required to fulfill these contracts is specifically assigned, and the average cost of these raw materials are accounted for separately throughout the duration of the contract. Income taxes The tax expense for the year comprises current and deferred tax. Tax is recognized in the consolidated statement of earnings, except to the extent that it relates to items recognized in other comprehensive income (loss) or directly in equity. In which case, the tax is also recognized in other comprehensive income (loss) or directly in equity, respectively. a) Current tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the consolidated statement of financial position in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. b) Deferred tax Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that are enacted or substantively enacted at the date of the consolidated statement of financial position and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be used. Deferred income tax is provided for on temporary differences arising on investments in subsidiaries and joint ventures, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 5N PLUS + 2014 ANNUAL REPORT 42 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Provisions A provision is recognized when the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense. Research and development expenses Research expenses are charged to the consolidated statement of earnings in the period they are incurred. Development expenses are charged to the consolidated statement of earnings, except for those that meet the following criteria and are capitalized: the feasibility of the product has been established, management intends to manufacture the product and has the capacity to use or sell it, the future economic benefits are likely to occur, the market for the product is defined, and the Company has the resources to complete the project and can reliably measure development costs. Research and development expenses charged to the consolidated statement of earnings for the year are included under other expenses (income), net. Employee future benefits The Company contributes to a defined benefit pension plan. The significant policies related to employee future benefits are as follows:  The cost of pension and other post-retirement benefits earned by employees is actuarially determined using the projected benefit method pro-rated on service, market interest rates and management’s best estimate of expected plan investment performance, retirement ages of employees and expected health care costs;  Fair value is used to value the plan assets for the purpose of calculating the expected return on plan assets; and  Actuarial gains and losses arising from experience adjustment and changes in actuarial assumptions are charged or credited to equity in other comprehensive income (loss) in the period in which they arise. Share-based payments The fair value of the equity-settled share-based payment plan is determined using the Black-Scholes model on the grant date. Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility, weighted average expected life of the instrument, expected dividends, expected forfeiture rate, and the risk- free interest rate. The impact of service and non-market vesting conditions is not taken into account in determining fair value. The compensation expense of the equity-settled awards is recognized in the consolidated statement of earnings over the graded vesting period, where the fair value of each tranche is recognized over its respective vesting period. For cash-settled share-based payment plans, the compensation expense is determined based on the fair value of the liability incurred at each reporting date until the award is settled. The fair value of the liability is measured using the Black-Scholes model, taking into consideration the terms and conditions attached to each grant and the extent to which the employees have rendered service to date. 5N PLUS + 2014 ANNUAL REPORT 43 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Earnings per share Basic earnings per share is calculated by dividing net earnings for the period attributable to equity owners of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share assume the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on the income per share. The treasury stock method is used to determine the dilutive effect of the warrants and share options and the if-converted method is used for convertible debentures. Significant management estimation and judgment in applying accounting policies The following are significant management judgments used in applying the accounting policies of the Company that have the most significant effect on the consolidated financial statements. Estimation uncertainty When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about the significant judgments, estimates and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, revenues and expenses are discussed below. Impairment of non-financial assets An impairment loss is recognized for the amount by which an asset’s or CGU’s carrying amount exceeds its recoverable amount, which is the higher of fair value less cost of disposal and value in use. To determine value in use, management estimates expected future cash flows from each asset or CGU and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary and may cause significant adjustments to the Company’s assets in future periods. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and to asset-specific risk factors (Notes 7 and 8). Inventories Inventories are measured at the lower of cost and net realizable value, with cost determined using the average cost method. In estimating net realizable values, management takes into account the most reliable evidence available at the time the estimates are made. The Company’s core business is subject to changes in foreign policies and internationally accepted metal prices which may cause future selling prices to change rapidly. The Company evaluates its inventories using a group of similar items basis and considers expected future prices as well as events that have occurred between the consolidated statement of financial position date and the date of the completion of the consolidated financial statements. Net realizable value for inventory to satisfy a specific sales contract is measured at the contract price. Debenture conversion option The convertible debentures issued by the Company included conversion and early redemption options, which are considered as Level 3 financial instruments. The derivative is measured at fair value through profit or loss, and its fair value must be measured at each reporting period, with subsequent changes in fair value recorded in the consolidated statement of earnings. A derivative valuation model is used, and includes assumptions, to estimate the fair value. Detailed assumptions used in the model to determine the fair value of the embedded derivative, upon inception and as at December 31, 2014, are provided in note 13. 5N PLUS + 2014 ANNUAL REPORT 44 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Income taxes The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of the Company’s deferred income tax assets is largely dependent on its achievement of projected future taxable income and the continued applicability of ongoing tax planning strategies. The Company’s judgments regarding future profitability may change due to future market conditions, changes in tax legislation and other factors that could adversely affect the ongoing value of the deferred income tax assets. These changes, if any, may require a material adjustment of these deferred income tax asset balances through an adjustment to the carrying value thereon in the future. This adjustment would reduce the deferred income tax asset to the amount that is considered to be more likely than not to be realized and would be recorded in the period such a determination was to be made. 5N PLUS + 2014 ANNUAL REPORT 45 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 3 – CHANGES IN ACCOUNTING POLICIES AND FUTURE CHANGES IN ACCOUNTING POLICIES Changes in accounting policies On January 1, 2014, the Company applied the new standard described below. IFRS Interpretations Committee Interpretation 21, “Levies”, provides guidance on accounting for levies in accordance with the requirements of IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”. The interpretation defines a levy as an outflow from an entity imposed by a government in accordance with legislation and confirms that a liability for a levy is recognized only when the triggering event specified in the legislation occurs. The Company has applied IFRIC 21 on a retrospective basis in compliance with the transitional requirements of IFRIC 21. The application of IFRIC 21 did not have any impact to the consolidated financial statements. Future changes in accounting policies The following standards have been issued but are not yet effective: In May 2014, the IASB issued IFRS 15, “Revenues from Contracts with Customers”, to specify how and when to recognize revenue as well as requiring the provision of more information and relevant disclosure. IFRS 15 supersedes IAS 18, “Revenue”, IAS 11, “Construction Contracts”, and other revenue-related interpretations. The standard will be effective on January 1, 2017 for the Company with earlier adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements. In July 2014, the IASB amended IFRS 9, “Financial Instruments”, to bring together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39, “Financial Instruments: Recognition and Measurement”. The standard supersedes all previous versions of IFRS 9 and will be effective on January 1, 2018 for the Company with earlier application permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements. NOTE 4 – BUSINESS ACQUISITIONS Purchase of a subsidiary’s non-controlling interests On April 3, 2014, the Company acquired for an amount of $2,975 the remaining 33.33% ownership interest in its subsidiary, Sylarus Technologies LLC, a germanium substrate supplier, and changed its name to 5N Plus Semiconductors LLC. As a result, Sylarus became a wholly owned subsidiary of the Company. The consideration paid and the related transaction costs have been recorded in equity. Acquisition of AM&M Advanced Machine and Materials Inc. On May 5, 2014, the Company acquired all of the issued and outstanding shares in the capital of AM&M Advanced Machine and Materials Inc. (“AM&M”) for a total consideration of $2,290 (CA$2,517), mostly representing a technology. AM&M is a Kanata, Ontario based corporation specialized in manufacturing micron-sized metallic powders which can be used in a variety of electronic markets, including solder powders, silver-based powders and CIGS powders. The total consideration includes amounts outstanding to be paid up to May 2015 and a contingent consideration. 5N PLUS + 2014 ANNUAL REPORT 46 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 5 – ACCOUNTS RECEIVABLE Gross trade receivables Allowance for doubtful accounts Trade receivables Sales taxes receivable Other receivables Total accounts receivable 2014 $ 62,537 (104) 62,433 6,319 3,639 72,391 2013 $ 54,008 (218) 53,790 4,413 2,413 60,616 All of the Company’s accounts receivable are short term. The net carrying value of accounts receivable is considered a reasonable approximation of fair value. The Company reviews all amounts periodically for indications of impairment and the amounts impaired have been provided for as an allowance for doubtful accounts. The Company’s exposure to credit risks and impairment losses related to accounts receivable is disclosed in Note 25. Most of the accounts receivable are pledged as security for the revolving credit facility (Note 12). NOTE 6 – INVENTORIES Raw materials Finished goods Total inventories 2014 $ 54,219 150,235 204,454 2013 $ 45,356 129,018 174,374 For the year ended December 31, 2014, a total of $386,025 of inventories was included as an expense in cost of sales (2013 – $373,548). This includes $5,251 of impairment of inventories ($4,395 for the Eco Friendly Materials segment and $856 for the Electronic Materials segment) (2013 – $10,182 [$10,032 for the Eco-Friendly Materials segment and $150 for the Electronic Materials segment]). For the year ended December 31, 2014, a total of $6,100 previously written down was recognized as a reduction of expenses in cost of sales ($2,160 for the Eco-Friendly Materials segment and $3,940 for the Electronic Materials segment) (2013 – $25,627 [$19,623 for the Eco-Friendly Materials segment and $6,004 for the Electronic Materials segment]). The majority of inventories are pledged as security for the revolving credit facility (Note 12). 5N PLUS + 2014 ANNUAL REPORT 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 7 – PROPERTY, PLANT AND EQUIPMENT 47 Net book value at December 31, 2012 Additions Disposals Depreciation Effect of foreign exchange and others Net book value at December 31, 2013 Additions Disposals Business acquisition Depreciation Effect of foreign exchange and others Net book value at December 31, 2014 As at December 31, 2013 Cost Accumulated depreciation Net book value As at December 31, 2014 Cost Accumulated depreciation Net book value Land and buildings $ 22,662 1,187 (41) (1,297) 93 22,604 1,346 (651) - (1,046) 78 22,331 27,140 (4,536) 22,604 27,056 (4,725) 22,331 Production equipment $ 30,083 9,498 (182) (4,676) (65) 34,658 14,318 (172) 66 (5,885) (145) 42,840 Furniture, office equipment and rolling stock $ 1,497 621 (22) (925) 1 1,172 826 (39) - (864) 34 1,129 44,016 (9,358) 34,658 55,404 (12,564) 42,840 3,060 (1,888) 1,172 2,986 (1,857) 1,129 Leasehold improvements $ 1,306 - - (124) (2) 1,180 907 - - (162) 36 1,961 1,952 (772) 1,180 2,826 (865) 1,961 Total $ 55,548 11,306 (245) (7,022) 27 59,614 17,397 (862) 66 (7,957) 3 68,261 76,168 (16,554) 59,614 88,272 (20,011) 68,261 Depreciation has not started on $9,480 (mainly production equipment) because those assets are not ready for intended use. Most of the property, plant and equipment are pledged as security for the revolving credit facility (Note 12). 5N PLUS + 2014 ANNUAL REPORT 48 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 8 – INTANGIBLE ASSETS Customer relationships $ Technology $ Trade name and non-compete agreements $ Software, intellectual property and development costs $ Net book value at December 31, 2012 Additions Amortization Net book value at December 31, 2013 Additions Disposals and others Business acquisition Amortization Net book value at December 31, 2014 As at December 31, 2013 Cost Accumulated amortization Net book value As at December 31, 2014 Cost Accumulated amortization Net book value 8,630 - (1,048) 7,582 - - - (1,040) 6,542 10,458 (2,876) 7,582 10,458 (3,916) 6,542 3,763 - (1,157) 2,606 - - 3,026 (1,164) 4,468 5,625 (3,019) 2,606 8,651 (4,183) 4,468 1,645 - (372) 1,273 - (10) - (260) 1,003 3,062 (1,789) 1,273 2,992 (1,989) 1,003 1,972 797 (1,087) 1,682 2,784 (24) - (727) 3,715 4,503 (2,821) 1,682 7,160 (3,445) 3,715 Total $ 16,010 797 (3,664) 13,143 2,784 (34) 3,026 (3,191) 15,728 23,648 (10,505) 13,143 29,261 (13,533) 15,728 Amortization has not started on $2,945 (mainly development costs) because those assets are not yet ready for intended use. 5N PLUS + 2014 ANNUAL REPORT 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 9 – INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD 49 Beginning of year Share of loss from joint ventures End of year 2014 $ 444 (128) 316 2013 $ 503 (59) 444 The following summarizes financial information of Ingal Stade GmbH (“Ingal”), in which the Company holds a 50% interest. Total current assets Total non-current assets Total current liabilities Total non-current liabilities due to venturers Total revenues Total net loss NOTE 10 – OTHER ASSETS Deferred costs Deposit Loan receivable from a related party (Notes 9 and 24) Other Total other assets NOTE 11 – TRADE AND ACCRUED LIABILITIES Trade payables Accrued liabilities Total trade and accrued liabilities 2014 $ 3,918 3,554 69 6,761 6,035 (256) 2014 $ 2,426 86 3,259 864 6,635 2013 $ 4,808 4,726 854 7,716 9,713 (118) 2013 $ 1,243 106 4,014 1,682 7,045 2014 $ 47,791 12,495 60,286 2013 $ 54,556 10,460 65,016 5N PLUS + 2014 ANNUAL REPORT 50 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 12 – BANK INDEBTEDNESS AND LONG-TERM DEBT a) Bank indebtedness The Company has credit lines with financial institutions in China. These credit lines are guaranteed by certain assets of the Company in China. The Chinese renminbi (“RMB”) credit line bears interest at 50% of the RMB base rate. Contractual Currency RMB 10,000 6,000 2014 Reporting Currency US$ 1,625 975 Contractual Currency RMB 155,000 63,911 2013 Reporting Currency US$ 23,374 10,462 Facility available Amount drawn b) Long-term debt Senior secured revolving facility of $125,000 with a syndicate of banks, maturing in August 2018(1) Senior secured revolving facility of $100,000 with a syndicate of banks, maturing in August 2015 (refinanced)(1) Unsecured balance of holdback to the former shareholders of MCP for an amount of €2,500. The holdback was paid in April 2014 Term loan, non-interest bearing, repayable under certain conditions, maturing in 2023. If the loan has not been repaid in full by the end of 2023, the balance will be forgiven(2) Other loans Less: Current portion of long-term debt 2014 $ 51,095 - - 657 71 51,823 667 51,156 2013 $ - 68,020 3,448 733 584 72,785 4,439 68,346 (1) In August 2014, the Company signed a senior secured multi-currency revolving credit facility of $125,000 maturing in August 2018 to replace its existing $100,000 senior secured revolving facility maturing in August 2015. At any time, the Company has the option to request that the credit facility be expanded to $150,000 through the exercise of an additional $25,000 accordion feature, subject to review and approval by the lenders. This revolving credit facility can be drawn in US dollars, Canadian dollars or Hong Kong dollars. Drawings bear interest at either the Canadian prime rate, US base rate, Hong Kong base rate or LIBOR, plus a margin based on the Company’s senior consolidated debt to EBITDA ratio. The facility is subject to covenants. As at December 31, 2014, the Company has met all covenants. In addition, in August 2014, the Company’s subsidiary in Belgium entered into a bi-lateral credit facility of 5,000 Euros which is coterminous with the new senior secured multi-currency revolving credit facility, and guaranteed by the same security pool. This bi-lateral facility can be drawn in Euros or US dollars and bears interest at similar rates as the revolving credit facility. No amount was used as at December 31, 2014. (2) The term loan is classified as short-term debt since these amounts could become payable on demand. In order to comply with these covenants, the Company has prepared and will need to execute on its budgeted EBITDA and cash flow estimates. Management believes that the assumptions used by the Company in preparing its budgets are reasonable and that it is not likely that the financial covenants will be violated in the next twelve months. 5N PLUS + 2014 ANNUAL REPORT 51 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 13 – CONVERTIBLE DEBENTURES In June 2014, the Company issued convertible unsecured subordinated debentures for CA$60,000 (US$55,266) and an additional over-allotment option for CA$6,000 (US$5,580) for a total of CA$66,000 (US$60,846). The convertible unsecured subordinated debentures bear interest at a rate of 5.75% per annum, payable semi-annually on June 30 and December 31, commencing on December 31, 2014. The convertible debentures are convertible at the holder’s option into the Company’s common shares at a conversion price of CA$6.75 per share, representing a conversion rate of 148.1 common shares per CA$1,000 principal amount of convertible debentures. The convertible debentures will mature on June 30, 2019 and may be redeemed by the Company, in certain circumstances, after June 30, 2017. The debenture conversion option was recorded as a derivative liability (Note 17). In accordance with IFRS, an obligation to issue shares for a price that is not fixed in the Company’s functional currency must be classified as a derivative liability and measured at fair value, with changes recognized in change in fair value of debenture conversion option in the consolidated statement of earnings. The fair value of the debenture conversion option, which consists of the holder’s conversion option subject to the Company’s early redemption options, was estimated based on a methodology for pricing convertible bonds using partial differential equations (PDE), with the following assumptions: risk-free interest rate of 2.00%; average expected volatility of 40%; expected dividend per share of nil; entity-specific credit spread, and expected life of 5 years. As a result, the initial fair value of the liability representing the debenture conversion option for the two tranches of the issuance of the debenture was estimated at CA$10,484 (US$9,666). Assumptions were reviewed in the valuation as at December 31, 2014, and remained the same except for the expected life of 4.5 years. NOTE 14 – RETIREMENT BENEFIT OBLIGATION The Company operates a defined pension plan in Germany based on employee pensionable earnings and length of service. Former general and senior managers had been provided with direct benefit commitments. Employees had been provided with indirect benefit commitments via the Unterstützungseinrichtung der HEK GmbH e.V. Such promises had been made for employees with entry date of December 31, 1993 or earlier. Present value of unfunded obligations Movement in the defined benefit obligation is as follows: Beginning of year Current service cost Interest cost Effect of foreign exchange Benefits paid Actuarial losses (gains) End of year The principal actuarial assumptions as at year ended were as follows: Discount rate Salary growth rate Pension growth rate 2014 $ 16,928 2014 $ 15,887 81 508 (2,181) (732) 3,365 16,928 2014 2.0% 2.0% 2.0% 2013 $ 15,887 2013 $ 16,667 94 509 689 (734) (1,338) 15,887 2013 3.4% 2.0% 2.0% 5N PLUS + 2014 ANNUAL REPORT 52 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) The sensitivity of the defined benefit obligation to changes in assumptions is set out below. The effects on each plan of a change in an assumption are weighted proportionately to the total plan obligations to determine the total impact for each assumption presented. Discount rate Salary growth rate Pension growth rate Life expectancy Change in assumption 0.50% 0.50% 0.50% Impact on defined benefit obligation Increase in assumption (6.86)% 0.59% 6.10% Decrease in assumption 7.70% (0.57)% (5.58)% Increase by 1 year in assumption 4.04% Decrease by 1 year in assumption (3.59)% The weighted average duration of the defined benefit obligation is 14.47 years (2013 – 13.50 years). Expected maturity analysis of undiscounted pension liability: Less than a year Between 1 and 5 years Over 5 years Total Expected contributions to pension benefit plans for year ending December 31, 2015 are $685. Long-term payable $ Deferred revenues $ - - - - 12,821 - 12,821 10 215 (161) 64 2,694 (427) 2,331 NOTE 15 – OTHER LIABILITIES As at December 31, 2012 Additions Utilized As at December 31, 2013 Additions Utilized As at December 31, 2014 NOTE 16 – INCOME TAX Current tax: Current tax for the year Adjustment in respect of prior years Total current tax Deferred tax: Recognition and reversal of temporary differences Total deferred tax Income tax expense 2014 $ 686 2,868 19,696 23,250 Other $ 1,550 224 (774) 1,000 145 (586) 559 2014 $ 4,975 (100) 4,875 3,979 3,979 8,854 2013 $ 762 3,196 22,792 26,750 Total $ 1,560 439 (935) 1,064 15,660 (1,013) 15,711 2013 $ 4,744 (406) 4,338 (2,425) (2,425) 1,913 5N PLUS + 2014 ANNUAL REPORT 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) A reconciliation of income taxes at Canadian statutory rates with the reported income taxes is as follows: Earnings before income tax Canadian statutory income tax rates Income tax on earnings at Canadian statutory rate Increase (decrease) resulting from: Unrecorded losses carried forward Non-deductible expenses (non-taxable gain) for tax purposes(1) Benefits arising from a financing structure Non-deductible (taxable) foreign exchange Effect of difference of foreign tax rates compared to Canadian tax rates Prior year adjustments Other Total income tax expense 2014 $ 19,527 26.9% 5,253 2,658 (207) (598) 1,832 (293) 162 47 8,854 53 2013 $ 44,693 26.9% 12,038 1,405 (11,044) (938) 171 527 (162) (84) 1,913 (1) The effective tax rate for the year ended December 31, 2013, is mainly affected by the gain related to the settlement of the purchase price of MCP, which decreases the effective rate by 26.33%. The Company’s applicable tax rate is the Canadian combined rates applicable in the jurisdiction in which the Company operates. The analysis of deferred tax assets and deferred tax liabilities is as follows: Deferred tax assets: To be recovered within 12 months To be recovered after 12 months Deferred tax liabilities: To be settled within 12 months To be settled after 12 months Deferred tax assets (liabilities), net Movement in the deferred income tax amounts is as follows: Beginning of year Tax charge relating to components of other comprehensive income (loss) Charged (credited) to consolidated statement of earnings Business acquisition End of year 2014 $ 1,666 9,371 - (3,111) 7,926 2014 $ 11,787 932 (3,979) (814) 7,926 2013 $ 2,313 11,074 - (1,600) 11,787 2013 $ 10,018 (656) 2,425 - 11,787 5N PLUS + 2014 ANNUAL REPORT 54 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) $ The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same l a t jurisdiction, is as follows: o e T m a s 7 8 3 , 3 1 7 3 0 , 1 1 0 5 6 , 2 1 l a t o T 2 3 6 , 2 1 1 1 , 3 0 0 6 , 1 0 3 $ ) 8 3 1 , 9 ( Inventories $ ) Intangible 1 3 assets 7 , 8 $ ( Loss carry forward $ Retirement benefit obligation $ Others $ Total $ Offset by jurisdiction Total $ $ - - - - 515 - 515 8,243 (966) - 7,277 (1,655) - 5,622 1,012 3,932 19,539 (6,889) 12,650 1,545 (414) 2,143 (353) 1,043 2,833 (1,054) (242) 2,636 (429) (111) 2,096 3,642 (656) 22,525 (3,689) 932 19,768 (9,138) 13,387 (8,731) 11,037 Inventories $ 58 Intangible assets $ 4,480 Convertible debentures $ - 1,556 1,614 - (465) 1,149 (204) 4,276 814 294 5,384 Others $ 1,296 (456) 840 - Total $ 9,521 1,217 10,738 814 Offset by jurisdiction $ (6,889) Total $ 2,632 (9,138) 1,600 - - - 1,859 1,859 (314) 526 290 11,842 (8,731) 3,111 30 e h t y b t e s f f n o i t c i d s i r u j n Deferred tax assets i h t i $ ) 9 8 8 , 6 ( ) 8 3 1 , 9 ( ) 1 3 7 , 8 ( l a t o T of earnings w O As at December 31, 2012 s e Charged (credited) to consolidated statements c n ) a 9 9 $ l 3 8 a Charged to comprehensive income (loss) 5 6 b , , 9 3 f As at December 31, 2013 1 ( o g Charged (credited) to consolidated statements n 2 i t 3 t 9 e Credited (charged) to comprehensive income (loss) , s 3 f f As at December 31, 2014 o of earnings s r e h t O ) 4 5 0 , 1 ( 8 6 7 , 9 1 5 2 5 , 2 2 6 9 0 , 2 2 4 6 , 3 6 3 6 , 2 ) 9 2 4 ( ) 1 1 1 ( ) 2 4 2 ( ) 6 5 6 ( 2 3 9 $ e h t ) 4 1 4 ( ) 3 5 3 ( $ $ 3 4 1 , 2 2 1 0 , 1 3 3 8 , 2 5 4 5 , 1 3 4 0 , 1 t i f e n e b n o i t a g i l b o t n n e o m i t e a r r i Deferred tax liabilities t e e d R i s n As at December 31, 2012 o 3 c y Charged (credited) to consolidated statements 4 r o 2 r t a , 8 n c i s As at December 31, 2013 g s o n L i From business acquisition k a Charged (credited) to consolidated statements of t e 5 s t l 1 t b e earnings u 5 s i o g s a n h As at December 31, 2014 a t i t w n I d r a of earnings w r o f ) 5 5 6 , 1 ( 2 2 6 , 5 7 7 2 , 7 ) 6 6 9 ( 5 1 5 $ - - - - - - - $ 3 4 7 , 1 - 0 7 5 3 1 3 , 2 7 - 0 2 3 , 2 s e i r o t n e v n I $ 9 0 6 , 4 7 4 5 , 3 - 6 5 1 , 8 ) 4 7 7 , 1 ( - 2 8 3 , 6 , y t r e p o r P d n a t n a l p t n e m p i u q e Property, ) y $ n plant and 9 b o 8 i equipment 8 t t e c , 6 s i d $ f ( f s i r u j 4,609 O l a t o T 3,547 1 $ 2 - 5 , 9 8,156 s r e h t O (1,774) 6 $ 9 2 - , 1 6,382 7 1 2 , 1 8 3 7 , 0 1 ) 6 5 4 ( 0 4 8 1,743 0 9 2 4 1 8 570 - 2,313 ) 4 1 3 ( - 7 - 2,320 9 5 8 , 1 2 4 8 , 1 1 6 2 5 9 5 8 , 1 $ - - - - e l b i t r e v n o C s e r u t n e b e d s t e s s a $ 0 8 4 , 4 e l b i g n a t n I Property, plant and equipment $ 3,687 4 1 8 6 7 2 , 4 ) 4 0 2 ( 321 4,008 - 4 9 2 4 8 3 , 5 $ 8 5 6 5 5 , 1 4 1 6 , 1 ) 5 6 4 ( 9 4 1 , 1 - (1,084) 2,924 $ 7 8 6 , 3 1 2 3 8 0 0 , 4 - ) 4 8 0 , 1 ( 4 2 9 , 2 s e i r o t n e v n I t n e m p i u q e , y t r e p o r P d n a t n a l p ) s s o l ( e m o c n i e v i s n e h e r p m o c o t ) d e g r a h c ( d e t i d e r C 4 1 0 2 , 1 3 r e b m e c e D t a s A 2 1 0 2 , 1 3 r e b m e c e D t a s A s e i t i l i b a i l x a t d e r r e f e D f o s t n e m e t a t s d e t a d i l o s n o c o t ) d e t i d e r c ( s g n i n r a e d e g r a h C 4 1 0 2 , 1 3 r e b m e c e D t a s A 3 1 0 2 , 1 3 r e b m e c e D t a s A n o i t i s i u q c a s s e n i s u b m o r F s t n e m e t a t s d e t a d i l o s n o c o t ) d e t i d e r c ( d e g r a h C s g n i n r a e f o s t n e m e t a t s d e t a d i l o s n o c o t ) d e t i d e r c ( d e g r a h C 3 1 0 2 , 1 3 r e b m e c e D t a s A s g n i n r a e f o ) s s o l ( e m o c n i e v i s n e h e r p m o c o t d e g r a h C s t n e m e t a t s d e t a d i l o s n o c o t ) d e t i d e r c ( d e g r a h C 2 1 0 2 , 1 3 r e b m e c e D t a s A s g n i n r a e f o s t e s s a x a t d e r r e f e D , r a e y e h t g n i r u d s e i t i l i b a i l d n a s t e s s a x a t e m o c n i d e r r e f e d n i t n e m e v o m e h T : s w o l l o f s a s i , n o i t c i d s i r u j S T N E M E T A T S L A I C N A N I F D E T A D I L O S N O C O T S E T O N . C N I S U L P N 5 ) s r a l l o d s e t a t S d e t i n U f o s d n a s u o h t n i s e r u g i F ( 5N PLUS + 2014 ANNUAL REPORT 55 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Deferred tax assets of $5,332 (2013 – $13,387), included in the consolidated statements of financial position, are dependent on projection of future taxable profits for entities that have suffered a loss in the current period. Deferred income tax liabilities have not been recognized for the withholding tax and taxes that would be payable on the unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested. Unremitted earnings totalled $49,691 as at December 31, 2014 (2013 – $40,448). As at December 31, 2014, the Company had the following operating tax losses available for carryforward for which no deferred tax benefit has been recorded in the account. United Kingdom Belgium United States Laos Peru China Total $ 24,813 4,916 25,212 83 339 8,641 64,004 Expiry No limit No limit 2031–2033 No limit 2015–2016 2018–2019 NOTE 17 – CATEGORIES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Fair value All financial assets classified as loans and receivables, as well as financial liabilities classified as other liabilities, are initially measured at their fair values and subsequently at their amortized cost using the effective interest method. All financial assets and financial liabilities classified as held for trading are measured at their fair values. Gains and losses related to periodic revaluations are recorded in net earnings. The Company has determined that the fair value of its short-term financial assets and financial liabilities, including cash and cash equivalents, restricted cash, accounts receivable, bank indebtedness and trade and accrued liabilities approximates their carrying value due to the short-term maturities of these instruments. As at December 31, 2014 and 2013, the fair value of long-term debt approximates its carrying value and is calculated using the present value of future cash flows at the year-end rate for similar debt with similar terms and remaining maturities. As at December 31, 2014, the fair value of the convertible debentures including the debenture conversion option, as quoted on the market, is CA$57,585 (US$49,517). The fair value of a long-term payable approximates its carrying value and is estimated based on discounted cash flow using current interest rates for instruments with similar terms and remaining maturities. The following table presents financial assets and financial liabilities measured at fair value in the consolidated statements of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and financial liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and financial liabilities. The fair value hierarchy has the following levels:  Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;  Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Inputs for the asset or liability that are not based on observable market data (unobservable inputs).  Level 3: 31 5N PLUS + 2014 ANNUAL REPORT 56 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) The convertible debentures are included in Level 1 and the long–term payable is included in Level 3. The level in which the financial asset or financial liability is classified is determined based on the lowest level of significant input to the fair value measurement. The financial assets and financial liabilities measured at fair value in the consolidated statements of financial position are grouped into the fair value hierarchy as follows as at December 31: December 31, 2014 Financial assets (liabilities) Derivative forward contracts Debenture conversion option (Note 13) Total December 31, 2013 Financial assets (liabilities) Interest rate swap Foreign exchange forward contracts Derivative forward contracts Warrants Total Derivative assets and liabilities Level 1 $ Level 2 $ Level 3 $ - - - 147 - 147 - (2,093) (2,093) Level 1 $ Level 2 $ Level 3 $ - - - (181) (181) (2,588) (1,468) 955 - (3,101) - - - - - As at December 31, 2014 and 2013, the Company has derivative financial instruments which relate to the following:  Interest rate swap to fix the interest rate on part of its revolving credit facility;  Foreign exchange forward contracts to sell US dollars in exchange for Euros or Canadian dollars; and to sell Euros in exchange for US dollars, related to hedge strategies;  Derivative forward contracts to sell precious metals at a fixed price;  Debenture conversion option; and  Warrants. Assets (liabilities) Debenture conversion option (Note 13) (1) Interest rate swap(2) Foreign exchange forward contracts(3) Derivative forward contracts(4) Warrants(5) Total 2014 $ (2,093) - - 147 - (1,946) 2013 $ - (2,588) (1,468) 955 (181) (3,282) (1) This instrument is classified as a Level 3 financial instrument, since the implied volatility is an unobservable input. The change in fair value of debenture conversion option of $7,179 (2013 – nil) was recognized in the consolidated statement of earnings as at December 31, 2014. An increase of 5% in the volatility would have increased the fair value of the debenture conversion option by $587 and a decrease of 5% would have decreased the fair value of the debenture conversion by $1,217. (2) The interest rate swap has a nominal value of $100,000 commencing in January 2013 and ending in August 2015. Under this swap, the Company will pay a fixed interest rate of 1.82%. The Company received $1,700 when entering into this forward starting interest rate swap in September 2011. This amount forms part of the fair value that is recorded as a long-term liability. The Company initially designated this contract as a cash flow hedge of anticipated variable payments of interest on a nominal amount of $100,000 of the revolving line of credit, and the change in its fair value was recorded in the consolidated statement of comprehensive income. On September 4, 2012, the Company repaid part of its credit facility and de-designated $30,000 of nominal value of the swap. In August 2014, following the refinancing of its credit facility (Note 12), the Company terminated the interest rate swap. 32 5N PLUS + 2014 ANNUAL REPORT 57 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) (3) The foreign exchange contracts are to cover projected Euro surpluses and Canadian dollar requirements. As at December 31, 2013, the contracts were as follows:  The Company entered into twelve monthly foreign exchange collar contracts in June 2013, effective from July 2013 to June 2014, to sell US dollars in exchange for Canadian dollars. The six remaining contracts covering January to June 2014 were amended in December 2013. Under these collars, if the US$/CA$ rate is between 0.9950 and 1.0700, a monthly nominal amount of $750 is exchanged at the rate of 1.0700. If the US$/CA$ rate is higher than 1.0700, a monthly nominal amount of $1,500 is exchanged at the rate of 1.0700. If the US$/CA$ rate is below 0.9950, no nominal amount is exchanged and the monthly contract is terminated.  The Company entered into six monthly foreign exchange collar contracts in December 2013, effective from July 2014 to December 2014, to sell US dollars in exchange for Canadian dollars. Under these collars, if the US$/CA$ rate is below $1.0620, a monthly nominal amount of $750 is exchanged at the rate of 1.0620. If the US$/CA$ rate is between 1.0620 and 1.1100, no nominal amount is exchanged. If the US$/CA$ rate is above 1.1100, a monthly nominal amount of $1,500 is exchanged at the rate of 1.0700.  The Company entered into twelve monthly foreign exchange collar contracts in October 2013, effective from January 2014 to December 2014, to sell Euros in exchange for US dollars. Under these contracts, if the Euro/US$ rate is between 1.2750 and 1.4025, a monthly nominal amount of $3,000 is exchanged at the rate of 1.4025. If the Euro/US$ rate is higher than 1.4025, a monthly nominal amount of $6,000 is exchanged at the rate of 1.4025. If the Euro/US$ rate is below 1.2750, no nominal amount is exchanged, and the monthly contract is terminated.  The Company entered into a foreign exchange synthetic collar contract in December 2013, maturing on December 15, 2014, to sell Euros in exchange for US dollars, in order to cover its expected excess Euro cash flows in the first quarter of fiscal year 2015. Under this contract, the Company bought a put for 12,000 Euros at 1.3025 Euro/US$, and sold a call on 18,000 Euros at 1.3625 Euro/US$. (4) In February 2014, the Company entered into two derivative forward contracts to sell silver at a fixed price to cover purchases of materials containing the precious metal. The first contract fixed the price at $21.83 per ounce as at August 5, 2014 and its nominal value was approximately $1,900. The second contract fixes the price at $20.86 per ounce as at February 3, 2015 and its nominal value is approximately $2,200. Gains or losses on these derivative forward contracts are recorded as part of the cost of sales. In May 2014, the Company entered into two new derivative forward contracts in opposite position in order to crystallize its gain and to neutralize the impacts in the consolidated statement of earnings. As at September 30, 2014, the first contract and the contract in the opposite position matured. (5) On June 6, 2012, the Company issued 6,451,807 warrants, which expired on June 6, 2014. The warrants were recorded as a derivative liability. In accordance with IFRS, an obligation to issue shares for a price that is not fixed in the Company’s functional currency and that does not qualify as a rights offering to all shareholders of that class must be classified as a derivative liability and measured at fair value. Gains or losses on these warrants are recorded in foreign exchange and derivative loss (gain). Interest rate swap: Estimated by discounting expected future cash flows using period-end interest rate yield curves; Foreign exchange forward contracts: Estimated by discounting expected future cash flows using period-end currency rate; The following methods were used to estimate fair value:    Derivative forward contracts: Estimated by discounting expected future cash flows using period-end market price of the precious metal (silver);  Debenture conversion option: Refer to Note 13 for details valuation models; and  Warrants: Fair value based on the TSX closing price. The ticker symbol of the publicly traded warrants is VNP.WT. NOTE 18 – OPERATING SEGMENTS The following tables summarize the information reviewed by the Company’s management when measuring performance: For the year ended December 31, 2014 Segment revenues(3) Adjusted EBITDA(1) (4) Interest on long-term debt, imputed interest and other interest expense Litigation and restructuring costs Impairment of inventories (Note 6) Change in fair value of debenture conversion option Foreign exchange and derivative loss (gain)(2) Gain on disposal of property, plant and equipment Depreciation and amortization Earnings (loss) before income tax Capital expenditures Eco-Friendly Materials $ 338,828 22,167 Electronic Materials $ 169,367 23,642 Corporate and unallocated $ - (10,764) - 1,109 4,395 - - (748) 2,783 14,628 9,137 - 652 856 - - (564) 8,205 14,493 4,298 8,769 191 - (7,179) (3,111) - 160 (9,594) 176 Total $ 508,195 35,045 8,769 1,952 5,251 (7,179) (3,111) (1,312) 11,148 19,527 13,611 33 5N PLUS + 2014 ANNUAL REPORT 58 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) For the year ended December 31, 2013 Segment revenues(3) Adjusted EBITDA(1) (4) Interest on long-term debt and other interest expense Litigation and restructuring costs Impairment of inventories (Note 6) Gain related to the settlement of the purchase price of MCP Foreign exchange and derivative loss (gain)(2) Depreciation and amortization Earnings before income tax Capital expenditures As at December 31, 2014 Eco-Friendly Materials $ 279,644 16,285 - 1,080 10,032 - - 3,957 1,216 6,776 Electronic Materials $ 179,368 22,466 - 441 150 - - 6,569 15,306 4,287 Corporate and unallocated $ - (8,376) 8,524 2,547 - (45,188) (2,590) 160 28,171 - Eco-Friendly Materials $ Electronic Materials $ Corporate and unallocated $ Total assets excluding the following: Investment accounted for using the equity method Deferred tax asset 187,116 - 7,831 192,865 316 3,206 8,197 - - As at December 31, 2013 Total assets excluding the following: Investment accounted for using the equity method Deferred tax asset Eco-Friendly Materials $ 154,309 - 9,451 Electronic Materials $ 189,397 444 3,936 Corporate and unallocated $ 7,703 - - Total $ 459,012 30,375 8,524 4,068 10,182 (45,188) (2,590) 10,686 44,693 11,063 Total $ 388,178 316 11,037 Total $ 351,409 444 13,387 (1) Earnings before income tax, depreciation and amortization, financial expense (revenues), litigation and restructuring costs, impairment of inventories, gain related to the settlement of the purchase price of MCP and gain or loss on disposal of property, plant and equipment. (2) The foreign exchange and derivative loss (gain) excludes the loss (gain) on foreign exchange forward contracts on US$/CA$ recorded as part of wages and salaries and the loss (gain) on derivative forward contracts to sell silver metal recorded as part of cost of goods sold. (3) The total revenues of $37,866 (2013 – $42,416) from the recycling and trading of complex materials is allocated to the Eco-Friendly materials and Electronic materials segments. (4) The total adjusted EBITDA of $7,363 (2013 – $8,644) from the recycling and trading of complex materials is allocated to the Eco-Friendly materials and Electronic materials segments. 34 5N PLUS + 2014 ANNUAL REPORT 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) The geographic distribution of the Company’s revenues based on the location of the customers for the years ended December 31, 2014 and 2013, and the identifiable non-current assets as at December 31, 2014 and 2013 are summarized as follows: 59 Revenues Asia China Japan Other(1) Americas United States Other Europe France Germany United Kingdom Other(1) Other Total Non-current assets (other than deferred tax assets) Asia Hong Kong Other(1) United States Canada Europe Belgium Germany Other Total (1) None exceeding 10% 2014 $ 47,802 11,114 94,964 99,281 14,207 31,456 77,814 22,400 90,498 18,659 508,195 2014 $ 6,367 18,494 6,918 19,434 10,049 24,485 5,193 90,940 2013 $ 50,578 7,633 94,274 82,764 19,982 27,668 66,611 22,628 79,264 7,610 459,012 2013 $ 8,510 11,295 5,973 16,857 7,832 24,371 5,408 80,246 For the year ended December 31, 2014, one customer represented approximately 10.59% (2013 – 11.58%) of the revenues, and is included in the Electronic Materials revenues. NOTE 19 – SUPPLEMENTAL CASH FLOW INFORMATION Net change in non-cash working capital balances related to operations consists of the following: Decrease (increase) in assets: Accounts receivable Inventories Income tax receivable Other current assets Increase in liabilities: Trade and accrued liabilities Income tax payable Net change 2014 $ (11,765) (34,249) 5,639 921 2,285 2,404 (34,765) 2013 $ 28,104 (14,263) 10,235 466 1,945 1,443 27,930 35 5N PLUS + 2014 ANNUAL REPORT 60 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) The consolidated statements of cash flows exclude or include the following transactions: a) Excluded additions unpaid at end of year: Additions to property, plant and equipment b) Included additions unpaid at beginning of year: Additions to property, plant and equipment c) Excluded a reclassification from trade and accrued liabilities to other liabilities following new agreements with a supplier NOTE 20 – SHARE CAPITAL Authorized: 2014 $ 5,423 1,637 8,941 2013 $ 1,637 1,394 -  An unlimited number of common shares, participating, with no par value, entitling the holder to one vote per share; and  An unlimited number of preferred shares, issuable in one or more series with specific terms, privileges and restrictions to be determined for each class by the Board of Directors. As at December 31, 2014 and 2013, no preferred shares were issued. On November 17, 2014, the Toronto Stock Exchange has approved the Company’s normal course issuer bid. Under this normal course issuer bid, the Company has the right to purchase for cancellation, from November 19, 2014 to November 18, 2015, a maximum of 4,691,230 common shares, representing 10% of the publicly-held common shares. No common shares were repurchased as at December 31, 2014. NOTE 21 – EARNINGS PER SHARE The following table reconciles the numerators and denominators used for the computation of basic and diluted earnings per share: Numerators Net earnings attributable to equity holders of 5N Plus Inc. Dilutive effect: Convertible debentures Net earnings attributable to equity holders of 5N Plus Inc. adjusted for dilution effect Net earnings for the period Dilutive effect: Convertible debentures Net earnings for the period adjusted for dilution effect Denominators Basic weighted average number of shares Dilutive effect: Stock options Convertible debentures Diluted weighted average number of shares 2014 $ 10,812 (6,294) 4,518 10,673 (6,294) 4,379 2014 83,948,943 210,242 5,258,564 89,417,749 2013 $ 42,661 - 42,661 42,780 - 42,780 2013 83,908,269 67,123 - 83,975,392 36 5N PLUS + 2014 ANNUAL REPORT 61 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) As at December 31, 2014, a total number of 1,042,510 stock options were excluded from the diluted weighted average number of shares due to their anti-dilutive effect because of the Company’s stock price. The same applies to the warrants which expired on June 6, 2014. As at December 31, 2013, a total number of 1,629,951 stock options and a total number of 6,451,807 warrants were excluded from the diluted weighted average number of shares due to their anti-dilutive effect because of the Company’s stock price. NOTE 22 – SHARE-BASED COMPENSATION As at December 31, 2014, the Company had the following share-based compensation plans. Stock Option Plan On April 11, 2011, the Company adopted a new stock option plan replacing the previous plan (the “Old Plan”), in place since October 2007, with the same features as the Old Plan with the exception of a maximum number of options granted which cannot exceed 5,000,000. The aggregate number of shares which could be issued upon the exercise of options granted under the Old Plan could not exceed 10% of the issued shares of the Company at the time of granting the options. Options granted under the Old Plan may be exercised during a period not exceeding ten years from the date of grant. The stock options outstanding as at December 31, 2014 may be exercised during a period not exceeding six years from their date of grant. Options vest at a rate of 25% (100% for directors) per year, beginning one year following the grant date of the options. Any unexercised options will expire one month after the date a beneficiary ceases to be an employee, director or officer and one year for retired directors. Restricted Share Unit Plan On June 7, 2010, the Company adopted a Restricted Share Unit (“RSU”) Plan to complement the stock option plan. The RSU Plan enables the Company to award to eligible participants phantom share units that vest after a three-year period. The RSU is settled in cash and is recorded as a liability. The measurement of the compensation expense and corresponding liability for these awards is based on the fair value of the award, and is recorded as a charge to selling, general and administrative (“SG&A”) expenses over the vesting period of the award. At the end of each financial period, changes in the Company’s payment obligation due to changes in the market value of the common shares on the TSX are recorded as a charge to SG&A expenses. For the year ended December 31, 2014, the Company granted 281,000 RSUs (2013 – 190,000), 12,478 of RSUs were paid (2013 – 26,720) and 124,127 RSUs were cancelled (2013 – nil). As at December 31, 2014, 387,155 RSUs were outstanding (2013 – 242,760). Stock Appreciation Rights Plan On June 7, 2010, the Company adopted a Restricted Share Unit for Foreign Employees plan (the “RSUFE Plan”) which was slightly amended on November 7, 2012 by the Company to become the Stock Appreciation Rights plan (the “SAR Plan”) which replaced the RSUFE Plan. The SAR Plan enables the Company to award eligible participants phantom stock options to foreign directors, officers and employees. SARs usually have a six year term and vest equally over a four-year period at an annual rate of 25% per year beginning one year following the SARs grant date. The amount of cash payout is equal to the sum of the positive differences between the volume weighted average trading price of the common shares of the Company on the TSX in the last twenty (20) trading days immediately preceding the exercise date and the grant price of each SAR redeemed. At the end of each financial period, changes in the Company’s payment obligations due to changes in the market value of the common shares on the TSX are recorded as an expense. For the year ended December 31, 2014, the Company granted 230,000 SARs (2013 – 15,000), 48,197 of SARs were paid (2013 – 51,816) and 80,000 SARs were cancelled (2013 – 24,878). As at December 31, 2014, 217,640 SARs were outstanding (2013 – 115,837). 37 5N PLUS + 2014 ANNUAL REPORT 62 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Deferred Share Unit Plan On May 7, 2014, the Company adopted a Deferred Share Unit Plan (the “DSU Plan”) which enables the Company to provide Board directors and key officers and employees designated by the Board with phantom share units to enhance the Company's ability to attract and retain individuals with the right combination of skills and experience to serve on the Company’s Board or as Company’s executives. DSUs vest entirely at their date of grant and become payable in cash upon termination of services of a director or designated officer or employee with the Company. The amount of cash payout is equal to the volume weighted average trading price of the common shares of the Company on the TSX on the twenty (20) trading days immediately preceding the date of payment of the DSU. For the year ended December 31, 2014, the Company granted 122,878 DSUs. As at December 31, 2014, 122,878 DSUs were outstanding (2013 – nil). The following table presents information concerning all outstanding stock options: 2014 Weighted average exercise price CA$ 4.19 3.99 4.16 2.46 7.80 4.21 4.37 Number of options 1,637,951 352,000 (206,463) (71,388) (10,000) 1,702,100 1,192,918 Number of options 1,585,448 546,939 (141,386) - (353,050) 1,637,951 1,001,826 Outstanding, beginning of year Granted Cancelled Exercised Expired Outstanding, end of year Exercisable, end of year The outstanding stock options as at December 31, 2014 are as follows: Maturity January and December 2015 June 2016 June and September 2017 April and November 2018 May 2019 March to August 2020 Exercise price High CA$ 5.47 4.91 8.64 3.61 2.20 4.29 Low CA$ 5.25 4.87 8.50 2.22 2.20 3.33 2013 Weighted average exercise price CA$ 4.67 2.39 5.55 - 3.00 4.19 4.94 Number of options 305,000 143,624 212,889 329,837 368,750 342,000 1,702,100 The fair value of stock options at the grant date was measured using the Black-Scholes option pricing model. The historical share price of the Company’s common shares is used to estimate expected volatility, and government bond rates are used to estimate the risk-free interest rate. The following table illustrates the inputs used in the average 38 5N PLUS + 2014 ANNUAL REPORT 63 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) measurement of the fair values of the stock options at the grant date granted during the years ended December 31, 2014 and 2013: Expected stock price volatility Dividend Risk-free interest rate Expected option life Fair value – weighted average of options issued 2014 60% None 1.33% 4 years CA$1.88 2013 59% None 1.10% 4 years CA$1.00 The following table shows the share-based compensation expense recorded in the consolidated statements of earnings for the years ended December 31, 2014 and 2013: Expense Stock options SARs RSUs DSUs Total 2014 $ 237 26 144 261 668 2013 $ 567 15 148 - 730 The following table shows the carrying amount and the intrinsic value of the share-based compensation liabilities: Liability RSUs SARs DSUs Total 2014 $ 313 74 261 648 2013 $ 182 128 - 310 NOTE 23 – COMMITMENTS AND CONTINGENCIES Commitments In September 2014, the Company signed a loan agreement with one of its suppliers for the construction of manufacturing equipment in Asia. The loan bears an interest rate of 8.5%, and is guaranteed by the supplier’s corporate entity. Under this agreement, the total amount can reach up to $7,000 upon achievement of certain milestones. The initial tranche was disbursed on October 15, 2014. As at December 31, 2014, the amount receivable under the loan is $1,840. Each tranche is to be reimbursed on a monthly basis over a term of 12 months starting after each drawdown. The Company rents certain premises and equipment under the terms of operating leases. Future minimum payments excluding operating costs are as follows: Within one year After one year but not more than five years Total commitments 2014 $ 2,881 5,100 7,981 2013 $ 2,265 3,635 5,900 In the normal course of business, the Company contracted letters of credit for an amount of up to $439 as at December 31, 2014. 39 5N PLUS + 2014 ANNUAL REPORT 64 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) Contingencies In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or assets. As at the date of issue of the consolidated financial statements, the Company was not aware of any significant events that would have a material effect on its consolidated financial statements, except for the following. In 2013, the Company settled its case with the former shareholders of MCP, Group SA (“MCP”) thereby prohibiting further related action by either party involved in the settlement. As of the date hereof, the Company does not believe that it is probable that an outflow of resources, which could be material to the consolidated financial statements, will be required by the Company following potential third party claims pertaining to actions or events related to the alleged breaches of representations and warranties by the former shareholders of MCP (“Vendors”). NOTE 24 – RELATED PARTY TRANSACTIONS The Company’s related parties are its joint venture, directors and executive members. Unless otherwise stated, none of the transactions incorporates special terms and conditions and no guarantees were given or received. Outstanding balances are settled in cash. Ingal, a 50% joint venture, supplies gallium metal to other companies of the group. During the year ended December 31, 2014, the Company purchased $2,790 worth of gallium from Ingal (2013 – $4,850). As at December 31, 2014, the Company has a loan receivable from Ingal of $3,259 (€2,684) (2013 – $4,014 [€2,911]) (Note 10). NOTE 25 – FINANCIAL RISK MANAGEMENT In the normal course of operations, the Company is exposed to various financial risks. These risk factors include market risk (currency risk, interest rate risk and other price risk), credit risk and liquidity risk. Market risk Market risk is the risk that changes in market price, such as foreign exchange rates, equity prices and interest rates, will affect the Company’s net earnings or the value of financial instruments. The objective of market risk management is to mitigate exposures within acceptable limits, while maximizing returns. (i) Foreign currency risk Foreign currency risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments as a result of fluctuations in foreign exchange rates. The Company is exposed to foreign exchange rate variability primarily in relation to certain sale commitments, expected purchase transactions and debt denominated in a foreign currency. In addition, these operations have exposure to foreign exchange rates primarily through cash and cash equivalents and other working capital accounts denominated in currencies other than their functional currencies. 40 5N PLUS + 2014 ANNUAL REPORT 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) The following table summarizes in US dollar equivalents the Company’s major currency exposures as at December 31, 2014: 65 Cash and cash equivalents Restricted cash Accounts receivable Bank indebtedness Trade and accrued liabilities Long-term debt Convertible debentures Net financial assets (liabilities) CA$ $ 256 - 1,083 - (2,884) - (46,101) (47,646) EUR $ 3,896 2,089 14,729 - (14,046) (61) - 6,607 GBP $ 724 29 2,358 - (2,514) - - 597 RMB $ 1,864 16 8,640 (975) (3,491) - - 6,054 2014 Other $ 264 - 649 - (697) - - 216 The following table shows the impact on earnings before income tax of a one-percentage point strengthening or weakening of foreign currencies against the US dollar as at December 31, 2014 for the Company’s financial instruments denominated in non-functional currencies: 1% Strengthening Earnings before tax 1% Weakening Earnings before tax CA$ $ (476) 476 EUR $ GBP $ RMB $ Other $ 66 (66) 6 (6) 61 (61) 2 (2) Occasionally, the Company will enter into foreign exchange forward contracts to sell US dollars in exchange for Canadian dollars, Euros, Hong Kong dollars and British pounds sterling. These contracts would hedge a portion of ongoing foreign exchange risk on the Company’s cash flows since much of its non-US dollar expenses outside China are incurred in Canadian dollars, Euros, Hong Kong dollars and British pounds sterling. The Company will also enter into foreign exchange contracts to sell Euros for US dollars. (ii) Interest rate risk Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company’s policy is to limit its exposure to interest rate risk fluctuation by ensuring that a reasonable portion of its bank advance, long-term debt and convertible debentures are at fixed rate. The Company is exposed to interest rate fluctuations on its revolving credit facility, which bears a floating interest rate. A 1% increase/decrease in interest rates would not have a significant impact on the Company’s net earnings. (iii) Other price risk Other price risk is the risk that fair value or future cash flows will fluctuate because of changes in market prices, other than those arising from interest rate risk or currency risk. The Company is exposed to other price risk with respect to the underlying risks of the held-for-trading financial instruments included in the consolidated statements of financial position. Credit risk Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract and, as a result, create a financial loss for the Company. The Company has a credit policy that defines standard credit practice. This policy dictates that all new customer accounts be reviewed prior to approval and establishes the maximum amount of credit exposure per customer. The creditworthiness and financial well-being of the customer are monitored on an ongoing basis. 41 5N PLUS + 2014 ANNUAL REPORT 66 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) The Company establishes an allowance for doubtful accounts as determined by management based on its assessment of collection; therefore, the carrying amount of accounts receivable generally represents the maximum credit exposure. As at December 31, 2014 and 2013, the Company has an allowance for doubtful accounts of $104 and $218 respectively. The provision for doubtful accounts, if any, is included in selling, general and administrative expenses in the consolidated statement of earnings, and is net of any recoveries that were provided for in prior periods. Counterparties to financial instruments may expose the Company to credit losses in the event of non-performance. Counterparties for derivative and cash transactions are limited to high credit quality financial institutions, which are monitored on an ongoing basis. Counterparty credit assessments are based on the financial health of the institutions and their credit ratings from external agencies. As at December 31, 2014, no financial assets are past due except for trade receivables. The aging analysis of the latter two categories of trade receivables is as follows: Up to 3 months More than 3 months 2014 $ 23,174 738 23,912 The following table summarizes the changes in the allowance for doubtful accounts for trade receivables: Beginning of year Provision for impairment Unused amounts reversed End of year 2014 $ 218 - (114) 104 2013 $ 20,889 625 21,514 2013 $ 168 50 - 218 Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages liquidity risk through the management of its capital structure. It also manages liquidity risk by continually monitoring actual and projected cash flows, taking into account the Company’s sales and receipts and matching the maturity profile of financial assets and financial liabilities. The Board of Directors reviews and approves the Company’s annual operating and capital budgets as well as any material transactions out of the ordinary course of business, including proposals on acquisitions and other major investments. The following table reflects the contractual maturity of the Company’s financial liabilities as at December 31, 2014: Bank indebtedness Trade and accrued liabilities Long-term debt Convertible debentures Long-term payable (including in other liabilities) Total Carrying amount $ 975 60,286 51,823 46,101 12,577 171,762 1 year $ 1,030 60,286 3,224 3,263 - 67,803 2-3 years $ - - 5,136 6,527 15,064 26,727 4-5 years Beyond 5 years $ - - 52,837 61,635 - 114,472 $ - - - - - - 2014 Total $ 1,030 60,286 61,197 71,425 15,064 209,002 42 5N PLUS + 2014 ANNUAL REPORT 67 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 26 – CAPITAL MANAGEMENT The Company’s objective when managing capital is to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may amend the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company requires the approval of its lenders on some of the capital transactions such as the payment of dividends and capital expenditures over a certain level. The Company monitors capital on the basis of the debt-to-equity ratio. This ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings (comprising bank indebtedness, long-term debt and convertible debentures in the consolidated statement of financial position) less cash and cash equivalents and restricted cash. Total equity is the equity attributable to equity holders of 5N Plus Inc. in the consolidated statement of financial position. Debt-to-equity ratios as at December 31, 2014 and 2013 are as follows: Bank indebtedness Long-term debt including current portion Convertible debentures Total debt Less: Cash and cash equivalents, and restricted cash Net debt Shareholders’ equity Debt-to-equity ratio 2014 $ 975 51,823 46,101 98,899 (14,892) 84,007 196,443 43% 2013 $ 10,462 72,785 - 83,247 (24,917) 58,330 190,052 31% 43 5N PLUS + 2014 ANNUAL REPORT 68 5N PLUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Figures in thousands of United States dollars) NOTE 27 – KEY MANAGEMENT COMPENSATION AND EXPENSES BY NATURE Key management compensation Key management includes directors (executive and non-executive) and certain senior management. The compensation expense paid or payable to key management for employee services is as follows: Key management compensation Wages and salaries Share-based compensation Total Expenses by nature Wages and salaries(1) Share-based compensation expense Depreciation of property, plant and equipment and amortization of intangible assets Amortization of other assets Research and development, net of tax credit Litigation and restructuring costs Impairment of inventories Gain related to the settlement of the purchase price of MCP(2) 2014 $ 5,162 652 5,814 2014 $ 41,200 668 11,148 732 3,343 1,952 5,251 - 2013 $ 4,427 636 5,063 2013 $ 39,525 730 10,686 2,017 3,758 4,068 10,182 (45,188) (1) Includes gain on foreign exchange forward contracts related to US$/CA$ (Note 17) (2) In 2013, the Company entered into a full and final settlement agreement with the Vendors, which were all former shareholders of MCP, in relation to a dispute. The Company acquired MCP from the Vendors on April 11, 2011. The Company filed a counterclaim in arbitration proceeding against the Vendors, as it estimated that the Vendors had breached the representation and warranties of the acquisition agreement. 44 5N PLUS + 2014 ANNUAL REPORT 5N PLUS + 2014 ANNUAL REPORT STOCK EXCHANGE 5N Plus is listed on the Toronto Stock Exchange, under the symbol VNP. TRANSFER AGENT AND REGISTRAR Computershare Investor Services Inc. AUDITORS PricewaterhouseCoopers LLP HEAD OFFICE 4385 Garand Street Montreal, Quebec H4R 2B4 ANNUAL MEETING The annual shareholders meeting will be held on Wednesday, May 6, 2015 at 10:30 a.m. Club Saint-James 1145 Union Avenue Montreal, Quebec For more information, please contact: INVESTOR RELATIONS 5N Plus Inc. 4385 Garand Street Montreal, Quebec H4R 2B4 T: 514-856-0644 F: 514-856-9611 invest@5nplus.com Si vous souhaitez obtenir une copie en français de ce rapport annuel, communiquez avec : RELATIONS AVEC LES INVESTISSEURS 5N Plus inc. 4385, rue Garand Montréal (Québec) H4R 2B4 Aussi disponible à l’adresse : www.5nplus.com Printed in Canada 100% 5NCORPORATE INFORMATION5N Plus Inc. 4385 Garand Street Montreal, Quebec H4R 2B4 Canada www.5nplus.com 5N++UNITED STATES GERMANY BELGIUM ENGLAND LAOS CHINA MALAYSIA CANADA BELGIUM UNITED STATES GERMANY BELGIUM ENGLAND

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