TSX:SAM
starcore.com
OUR FOCUS IS STEADFAST.
ANNUAL REPORT 2015
Starcore International Mines Ltd.
TABLE OF CONTENTS
Company Overview & Mission Statement
Letter from the CEO and President
By the Numbers
Corporate Social Responsibility
San Martin Mine and Operations Overview 2015
Exploration Project Highlights
Why Starcore?
1
2
3
4
6
8
10
c | Starcore International Mines Ltd. / TSX:SAM
TSX:SAM
starcore.com
MISSION STATEMENT: To remain a leader in the Mexican mining
community and by combining an unwavering commitment to
social and environmental stewardship with a proven mineral
production and exploration model, in order to build a strong
platform of growth.
Starcore International Mines Ltd. is engaged
in the acquisition, exploration, development
and production of mineral resources in North
America, with our precious metals operations
focused on Mexico. With a combined total
of over 100 years of experience, we have
assembled a strategic blend of experienced
professionals and seasoned veterans in fields
such as: Corporate Finance, International
Law, Engineering and Geology. Our focus on
corporate transparency and open dialogue
has attracted a wealth of experience and
expertise to our technical advisory board.
Starcore has relied on the fundamental
aspects of our proven exploration and
production model at the San Martin gold
mine to build a portfolio that will act as our
platform for growth. The company now owns
a precious metals toll processing business in
Matehuala, Mexico, a large moly deposit in
Sonora, Mexico and several low risk/high
reward exploration properties throughout
North America. Our unwavering commitment
to remain a leader in operational excellence
is tied closely with our commitment to social
and environmental stewardship. Our goal is
shareholder value – our focus is steadfast.
TSX:SAM / Annual Report 2015 | 1
Letter from the CEO and President
DEAR FELLOW SHAREHOLDERS,
Our primary goal has always been, and continues to be, building shareholder value.
And although 2015 was a challenging year, Starcore remained committed to our goal
by acquiring three companies, giving our shareholders a portfolio that now consists
of precious metals producers and low risk/high reward exploration properties.
Looking back, we are pleased to review the highlights of 2015,
which include the following:
• We acquired American Consolidated Minerals, and with it,
the Toiyabe Gold Exploration Property in Nevada, the Lone
Ranch Property in Washington State and the Sierra Rosario
project in Sinaloa, Mexico.
• We acquired Creston Moly Corp. from the Trustee in
Bankruptcy. Its most significant asset is the El Creston
property, a large moly-copper deposit in Sonora, Mexico.
• We acquired Cortez Gold Corp. and its gold and silver
processing plant in Matehuala (“Atliplano”), a historic
mining district in Mexico that is home to numerous
mining operations.
• We secured a $4.5 million bond financing to advance
our exploration program at San Martin and to commence
operations at the Altiplano processing plant.
• We ended the year with cash and short-term investments
of $5.985 million, in line with our objective of maintaining
$5 million as operating capital.
The current outlook for the industry remains mixed, but I
believe the outlook for Starcore remains strong. We remain
committed to building this company for shareholders by
growing our new and existing assets and seizing the accretive
opportunities that we will encounter in the coming year.
Specifically, we look to:
• Commence operations and stabilize the precious metals
processing business that we have acquired in the Altiplano
processing facility.
• Expand the underground exploration program at the San
Martin gold mine to find the source of the mineralization
and expand our resources.
• Continue to package and organize the data for the
significant El Creston Molybdenum deposit project in
Sonora, Mexico.
Our work ethic of sustainable and environmentally sensitive
mine development continues to make an impact in the Mexican
mining community. Our entrepreneurial approach to doing
business, our focus on cultural values and the people of our
organization, and our commitment to an open dialogue with
shareholders will build future increased value.
An investor in the mining industry at this current time requires
tremendous patience and understanding. I would like to
personally, and on behalf of the team at the mine site and
corporate head office, thank you for investing in Starcore.
Our focus remains steadfast.
Robert Eadie
President & CEO
2 | Starcore International Mines Ltd. / TSX:SAM
Canada
6
5
3
U.S.A.
4
Mexico
2
1
1. San Martin Mine
2. Altiplano Processing Plant
3. Toiyabe: Gold Exploration
4. El Creston: Moly Deposit
5. Lone Ranch: Gold Exploration
6. Ajax Project: Moly Deposit
7. Molybrook: Moly Deposit
7
US$1,087
25 TPD
19,635
313
PER
EqOz AISC
CAPACITY AT
ALTIPLANO
AuEq OUNCES
PRODUCED
TOTAL
EMPLOYEES
$6 MILLION
IN CASH AND
SHORT-TERM
INVESTMENTS*
By the Numbers
18%
EBITDA
MARGIN
85.1%
GOLD
RECOVERY
* At July 31, 2015
53.1%
SILVER
RECOVERY
311,900
TONNES
MILLED
3
COMPANIES
ACQUIRED
TSX:SAM / Annual Report 2015 | 3
STARCORE’S COMMITMENT
TO COMMUNITY
In keeping with our commitment to
sustainability and long-term growth for
shareholders, Starcore is dedicated to driving
sustainable development and positive change
in the communities in which we operate. At
Starcore, we believe that our unwavering
efforts toward social and environmental
stewardship are as integral to our key
objectives as our lean operations and
robust mineral production and exploration
model. With this combination we continue
to secure investment certainty to our
shareholders through the application of
sound business and human ethics. Our
commitment to community is deeply rooted
in the very foundations of our corporate
ethics, and Starcore will continue to uphold
this ethos as a hallmark of our company.
4 | Starcore International Mines Ltd. / TSX:SAM
Corporate Social Responsibility
Starcore’s management team is committed to driving and developing our companies
towards our growth and valuation objectives while maintaining an unwavering
commitment to social and environmental stewardship.
PAINT THE TOWN
ENVIRONMENTAL STEWARDSHIP
Through this initiative, Querétaro townsfolk can enhance their
homes with the paint colour of their choice. Residents can
apply, and Starcore provides the paint to them free of charge.
Starcore believes that everyone is entitled to feel pride in
themselves and their surroundings, and that this starts with
one’s home. We are proud to be able to offer many services
like this to the residents of Querétaro, a vibrant community
of dedicated individuals, and skillful miners.
SUMMER CAMP IN QUERÉTARO
This summer, Starcore’s annual camp for children in Querétaro,
Mexico, was phenomenal. Over 250 children had the opportunity
to learn from dedicated teachers, build friendships, and develop
their creativity through mural paintings, field trips, and more.
This is one of many ways Starcore looks to make a sustainable
difference in the lives of others. Our commitment to sowing the
seeds for positive growth in the community around us is not
an empty promise. It is a pledge in action throughout our
efforts, and it is the foundation of our company operations.
Recognizing that we are all stewards of the natural environment,
Starcore has adopted the technology of dry stacked tailings at a
considerable added cost to the operations. However, we believe
the benefits far outweigh the cost considerations and will bring
long-lasting values. This ethic embraces responsible planning
and quality management of the resources. The benefits of dry
stack tailings include:
• More of the process solutions are recycled within the plant.
• Water consumption is reduced by 80-85% as well as a
reduction in windborne dust.
• Risk of discharging harmful solutions to the environment
is eliminated.
• Reduced impact on the environment in terms of
land area used for tailings, as dry stack facilities require
a smaller footprint compared to other surface tailings
disposal systems, while creating a much more stable
impoundment geotechnically.
• Groundwater contamination through seepage is eliminated
• Land is revegetated with greater efficiency and ease.
VIVERO PRODUCTION
393 KG
TOMATOES
55 KG
CHILI
216 PIECES
95 PIECES
LETTUCE
HEADS
CABBAGE
29 KG
CHARD
TSX:SAM / Annual Report 2015 | 5
SAN MARTIN – GOLD AND SILVER
IN QUERÉTARO, MEXICO
The flagship property of Starcore
International Mines is the San Martin gold
and silver mine. The mine has been in
operation since 1993 at 350 tpd and
currently operates at 850 tpd. Acquired by
Starcore in February of 2008 from Goldcorp,
the mine is an underground epithermal
deposit with gold quartz based limestone and
has an average gold grade of 2.31 grams
and 18 grams of silver (NI 43-101 2014
Dave Gunning, Joe Campbell). The historical
production of the mine is over half a million
ounces and the mine sits on a 100%-owned
mining claims package of 12,992 hectares,
which offers the upside of exploration and
the possibility of discovering the source of
the current mineralization.
6 | Starcore International Mines Ltd. / TSX:SAM
A view down the
San Martin Haulage Ramp
The San Martin Mine
Operational Overview 2015
The San Martin mine has completed nearly another year of production. It is expected
that by the end of 2015, the mill will have processed roughly 309,000 tons at a head
grade of 2.1 g/t gold and 19 g/t silver. During 2015, recoveries have remained above
86% for gold and almost 53% for silver. The production is estimated to be between
19,300 and 19,500 ounces equivalent gold, based on the results at the end of November.
Since Luismin began operations in 1993, the mine has processed
more than 5.7 million tons and recovered over 609,000 gold
equivalent ounces.
A total of 10,000 metres of diamond drilling will have been
completed underground by year end. The drilling is used
primarily to guide exploration tunnels to targets of interest.
The mine also uses production equipment to drill percussion
holes to test for small displacements of known structures.
The year was highlighted by the discovery of a section of
manto ore in area 30 that was previously unknown. This
small block is expected to contain 20,000 tons at grades of
6 g/t gold and 40 g/t silver. This block was found by drifting
and raising in an area where there seemed to be a segment
of manto missing.
25,000
20,000
10,000
5,000
0
Average silver grade: 35 g/t
Average gold grade: 2.22 g/t
2010
2011
2012
2013
2014
2015
Au/Ag Oz Produced
It has been providing mill feed since July of 2015.
Complex structural geology combined with limited access
and depths below surface have made the discovery of these
relatively small orebodies difficult but not impossible. The result
is that we continue to explore with drilling and drifting to
define ore blocks that were missed by the previous operators.
In addition to area 30, we have developed some reserves in
the Guadalupe vein at an elevation above where we previously
thought that the vein was no longer economic. We do not
know where the upper limit of Guadalupe is and continue
to define the limits of this vein.
The strong US dollar has meant that our operation has remained
profitable in spite of decreasing gold prices. Our costs are almost
entirely based in pesos and Canadian dollars. During 2015
total cost and Capex has averaged US$915 per equivalent gold
ounce produced or US$60 per tonne milled. These numbers
represent a decrease of US$100 per ounce and US$15 per
tonne milled from 2014.
Signed “Dave Gunning”
Dave Gunning
COO
TSX:SAM / Annual Report 2015 | 7
ALTIPLANO PROCESSING
FACILITY – MEXICO’S NEWEST
TOLL PROCESSOR
With a capacity of 25 tpd and 100% ability to
expand, Altiplano provides excellent options
for local miners in the area to process their
high grade ore and concentrates. Altiplano
will provide competitive pricing for the local
miners and is in a strategic location for supply
in Matehuala, Mexico. Additional revenue
streams are expected through the marketing
of high-grade tailings to regional smelters at
market value.
Project Highlights:
• Designed to process 25 tpd at 90 hours
leach time with ability to expand to 50 tpd
with extra leaching tanks.
• Strategic service offering for miners to
sell their concentrates with competitive
processing payment plans.
• Great location – Matehuala has
approximately 20 small and medium sized
miners that are consistently producing
high grade concentrates. Many of these
concentrates are currently transported on
the highway, 500 metres from our leach
tanks, on their way to the smelter (Peñoles)
at Torreon.
• Silver and fine gold are produced from
the concentrates, which, along with the
remnants of gold and silver, will be
marketed with foundries or traders.
Leach tanks ready to
receive concentrates
8 | Starcore International Mines Ltd. / TSX:SAM
Exploration Project Highlights
EL CRESTON MOLY DEPOSIT
TOIYABE GOLD EXPLORATION
In February 2015, Starcore International Mines, through its
acquisition of Creston Moly Corp., acquired a 100% interest in
the El Creston Property. The El Creston Property hosts a 5.5 km
long x up to 1.5 km wide trend of hydrothermal alteration in
which several zones of molybdenum +/- copper +/- silver
mineralization occur. At the El Creston Main/Red Hill Zone
a significant resource of molybdenum and copper has been
outlined. In addition, there are five other zones, Alejandra,
A-37, Red Hill West, Red Hill Deep and the West Copper,
with potential to host significant resources of molybdenum
and/or copper.
Acquired in December 2014, the Toiyabe gold exploration
property is located in one of the world’s premier gold mining
districts of Nevada. The property lies south of significant
deposits, namely Cortez Hills, in the Battle Mountain/Cortez
Trend, and past work has identified gold mineralization on the
property. Starcore believes that the Toiyabe property is a low
risk/high reward property that management will look to
develop or seek joint venture partners to move it forward.
Management group inspecting
construction progress
TSX:SAM / Annual Report 2015 | 9
Why Starcore?
DEDICATED
MANAGEMENT
AND
EMPLOYEES
EXPLORATION
UPSIDE
STRATEGIC
ASSETS IN GOOD
JURISDICTIONS
OPERATIONAL
EFFICIENCY
CORPORATE
SOCIAL
RESPONSIBILITY
10 | Starcore International Mines Ltd. / TSX:SAM
MANAGEMENT DISCUSSION & ANALYSIS
MANAGEMENT DISCUSSION & ANALYSIS
For the year ended July 31, 2015
For the year ended July 31, 2015
MANAGEMENT DISCUSSION & ANALYSIS
For the year ended July 31, 2015
Directors:
Directors and Officers as at October 27, 2015:
Directors and Officers as at October 27, 2015:
Directors and Officers as at October 27, 2015:
Directors:
Directors:
Gary Arca
Gary Arca
Gary Arca
Serge Depatie
Serge Depatie
Serge Depatie
Robert Eadie
Robert Eadie
Robert Eadie
Jordan Estra
Jordan Estra
Jordan Estra
David R. Gunning
David R. Gunning
David R. Gunning
Michael Gunning
Michael Gunning
Michael Gunning
Cory Kent
Cory Kent
Cory Kent
Ken Sumanik
Ken Sumanik
Ken Sumanik
Federico Villaseñor
Federico Villaseñor
Federico Villaseñor
Officers:
Officers:
Executive Chairman, Chief Executive Officer & President – Robert Eadie
Executive Chairman, Chief Executive Officer & President – Robert Eadie
Executive Chairman, Chief Executive Officer & President – Robert Eadie
Chief Financial Officer – Gary Arca
Chief Financial Officer – Gary Arca
Chief Financial Officer – Gary Arca
Chief Operating Officer – Dave Gunning
Chief Operating Officer – Dave Gunning
Chief Operating Officer – Dave Gunning
Corporate Secretary – Cory Kent
Corporate Secretary – Cory Kent
Corporate Secretary – Cory Kent
Officers:
Contact Name:
Contact Name:
Contact Name:
Contact e-mail address:
Contact e-mail address:
TSX Symbol:
TSX Symbol:
Contact e-mail address:
TSX Symbol:
Gary Arca
Gary Arca
Gary Arca
garca@starcore.com
garca@starcore.com
SAM
SAM
garca@starcore.com
SAM
Suite 750 – 580 Hornby Street, Box 113, Vancouver, British Columbia, Canada V6C 3B6
Telephone: (604) 602-4935 Fax: (604) 602-4936 e-mail. info@starcore.com website: www.starcore.com
Suite 750 – 580 Hornby Street, Box 113, Vancouver, British Columbia, Canada V6C 3B6
Telephone: (604) 602-4935 Fax: (604) 602-4936 e-mail. info@starcore.com website: www.starcore.com
Suite 750 – 580 Hornby Street, Box 113, Vancouver, British Columbia, Canada V6C 3B6
Telephone: (604) 602-4935 Fax: (604) 602-4936 e-mail. info@starcore.com website: www.starcore.com
TSX:SAM / Annual Report 2015 | 11
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 2
Form 51-102-F1
STARCORE INTERNATIONAL MINES LTD.
MANAGEMENT DISCUSSION & ANALYSIS
For the Year Ended July 31, 2015
1.
Date of This Report
This MD&A is prepared as of October 27, 2015.
This Management Discussion and Analysis (“MD&A”) should be read in conjunction with the audited consolidated
financial statements of Starcore International Mines Ltd. (“Starcore”, or the “Company”) for the year ended July 31,
2015. Monetary amounts throughout this MD&A are shown in thousands of Canadian dollars, unless
otherwise stated.
This MD&A includes certain statements that may be deemed “forward-looking statements”. Such statements and
information include without limitation: statements regarding timing and amounts of capital expenditures and other
assumptions; estimates of future reserves, resources, mineral production and sales; estimates of mine life; estimates
of future mining costs, cash costs, minesite costs and other expenses; estimates of future capital expenditures and
other cash needs, and expectations as to the funding thereof; statements and information as to the projected
development of certain ore deposits, including estimates of exploration, development and production and other
capital costs, and estimates of the timing of such exploration, development and production or decisions with respect
to such exploration, development and production; estimates of reserves and resources, and statements and
information regarding anticipated future exploration; the anticipated timing of events with respect to the
Company’s minesite and; statements and information regarding the sufficiency of the Company’s cash resources.
Such statements and information reflect the Company’s views as at the date of this document and are subject to
certain risks, uncertainties and assumptions, and undue reliance should not be placed on such statements and
information. Many factors, known and unknown could cause the actual results to be materially different from
those expressed or implied by such forward looking statements and information. Such risks include, but are not
limited to: the volatility of prices of gold and other metals; uncertainty of mineral reserves, mineral resources,
mineral grades and mineral recovery estimates; uncertainty of future production, capital expenditures, and other
costs; currency fluctuations; financing of additional capital requirements; cost of exploration and development
programs; mining risks, risks associated with foreign operations; risks related to title issues; governmental and
environmental regulation; and the volatility of the Company’s stock price. Investors are cautioned that any such
statements are not guarantees of future performance and that actual results or developments may differ materially
from those projected in the forward-looking statements.
2.
Overall Performance
Description of Business
Starcore is engaged in exploring, extracting and processing gold and silver through its wholly-owned subsidiary,
Compañia Minera Peña de Bernal, S.A. de C.V. (“Bernal”), which owns the San Martin mine in Queretaro, Mexico.
The Company is a public reporting issuer on the Toronto Stock Exchange (“TSX”). The Company is also engaged in
owning, acquiring, exploiting, exploring and evaluating mineral properties, and either joint venturing or developing
these properties further or disposing of them when the evaluation is completed. The Company has interests in
properties which are exclusively located in Mexico, USA and Canada.
12 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 3
Financial Highlights for year ending July 31, 2015
• Cash and cash equivalents on hand is $3.4 million at July 31, 2015 compared to $5.5 million at July 31, 2014, due
largely to the acquisition of Creston Moly and dividends issued to shareholders;
• Gold and silver sales of $6.6 and $28.1 million for the three and twelve months ended July 31, 2015 compared to
$7.7 million and $33.1 million for the three and twelve months ended July 31, 2014, decreases of 14% and 15%,
respectively;
• Net income of $0.2 million for the twelve months ended July 31, 2015 compared to net income of $3.0 million for
the twelve months ended July 31, 2014;
• Equivalent gold production of 19,635 ounces in year ended July 31, 2015 compared to 24,037 ounces in year
ended July 31, 2014, a decrease of 18%;
• Mine operating cash cost is US$903/EqOz for the year ended July 31, 2015 compared to US$750/EqOz for the
year ended July 31, 2014, an increase of 20%;
• All-in sustaining costs of US$1,087/EqOz for the year ended July 31, 2015 compared to US$1,093 for the year
ended July 31, 2014, a decrease of 1%;
• EBITDA(1) of $4,976 for the year ended July 31, 2015 compared to $11,002 for the year ended July 31, 2014, a
decrease of $6,026 or 55%.
Reconciliation of Net income to EBITDA
For the year ending July 31,
Net Income
Income tax recovery
Interest
Depreciation and depletion
EBITDA
EBITDA MARGIN(2)
2015
$
210
(1,920)
-
6,686
$ 4,976
2014
$ 2,965
2,066
-
5,971
$ 11,002
18%
33%
(1) EBITDA (“Earnings before Interest, Taxes, Depreciation and Amortization”) is a non-GAAP financial performance measure with no standard definition under
IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another Corporation. The Corporation uses this non-GAAP
measure which can also be helpful to investors as it provides a result which can be compared with the Corporation market share price.
(2) EBITDA MARGIN is a measurement of a company’s operating profitability calculated as EBITDA divided by total revenue. EBITDA MARGIN is a non-GAAP
financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of
another Corporation. The Corporation uses this non-GAAP measure which can also be helpful to investors as it provides a result which can be compared with the
Corporation market share price.
Recent News
Q4 Review
The Company announced production results for the fiscal 2015 and the 4th quarter, ending July 31, 2015, at its San
Martin Mine in Queretaro, Mexico.
During Q4, a total of 77,279 tonnes were milled at an average grade of 2.00 g/t gold and 19 g/t silver resulting in the
production of 4,694 gold equivalent ounces. Mill recoveries averaged 86.9% for gold and 57.4% for silver. Equivalent
gold ounce calculation is based on the actual daily average gold:silver ratio of 73.01 during the quarter.
Operations have resulted in a 6% increase in equivalent ounce production compared to Q3.
In terms of the fiscal year ended July 31, 2015: The plant achieved 85.1% recovery of gold and 53.1% for silver from
the 311,897 tonnes milled during the fiscal year. Head grades averaged 2.14 g/t gold and 18.24 g/t silver resulting in
19,635 equivalent gold ounces of production during the fiscal year. Equivalent gold ounce calculation is based on the
actual daily average gold:silver ratio of 71.62 during the fiscal year.
TSX:SAM / Annual Report 2015 | 13
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 4
The discovery of previously unknown manto mineralization during early July in area 30 has enabled the mine to
maintain head grades to those typical of the last few years. Development continues to define this block of ore while
exploration looks for its extension. The location of these high grade zones has been common in the past few years and
validates the approach we take in underground exploration.
Closing of Plan of Arrangement
On April 28, 2015, the Company signed of a letter of intent with Cortez Gold Corp. (“Cortez or “CUT”) (TSXV:
CUT) (the “LOI”) that would see the Company acquire all of the outstanding securities of CUT in an all-share
transaction (the “Transaction”) to be completed pursuant to a court approved Plan of Arrangement under the Business
Corporations Act (British Columbia) (the “Arrangement”). Under the terms of the planned acquisition, each CUT
shareholder would receive three Starcore common shares for every one CUT common share held (the “Exchange
Ratio”). Cortez owns the Altiplano gold and silver processing plant in Matehuala, Mexico.
Shareholders of Cortez approved the Arrangement on July 9, 2015 and, in accordance with the Business Corporations
Act (British Columbia), the Arrangement was approved by the British Columbia Supreme Court on August 5, 2015.
As a result, the former Cortez shareholders now hold 28,667,550 common shares of Starcore, representing 15.87%, of
the 180,614,397 outstanding common shares of Starcore. In addition, each holder of the outstanding common share
purchase warrants of CUT will, upon exercise of the CUT warrants, receive such number of common shares of
Starcore based upon the Exchange Ratio.
Debt settlement
Further to its press release of August 10, 2015 announcing the closing of the Company’s amalgamation with Cortez
Gold Corp., on September 3, 2015, the Company announced that it issued 15,972,810 Subscription Receipts (the
“Receipts”), in full and complete settlement of outstanding debt as at July 31, 2015 in the aggregate amount of USD
$1,725 owed to certain creditors. The Receipts were issued at a deemed price of $0.14 per Receipt.
The debt relates to outstanding loans that were incurred in 2014 to complete construction of the Altiplano gold and
silver processing plant in Matehuala, Mexico, by CUT. The Receipts are subject to a four month hold.
The Subscription Receipts are convertible, with no further action required by the creditors, into one common share of
the Company upon receipt of shareholder approval at the Company’s annual general meeting to be held in January
2016. If shareholder approval is not received, no shares will be issued and the Receipt holders will receive a cash
settlement.
Starcore advances funds to Cortez
During the year ended July 31, 2015, the Company advanced Cortez $250 to enable them to purchase the equipment
required to commence operations at its Processing Plant. The loan bears interest at 10% and is secured with a floating
charge security on the Processing Plant and all of the assets of Cortez, subordinated only to the existing first priority
security interest and mortgage held by other Cortez lenders. The loan facility and all interest would have been due if
the shareholders of Cortez did not approve the proposed amalgamation.
3. Selected Annual Information
The highlights of financial data for the Company for the three most recently completed financial years are as follows:
July 31, 2013
30,246
(21,948)
8,298
(4,245)
649
July 31, 2015
28,405
(27,760)
645
(2,355)
1,920
July 31, 2014
33,136
(24,548)
8,588
(3,557)
(2,066)
$
$
$
$
$
$
$
$
210
0.00
0.00
67,197
15,141
$
$
$
$
$
2,965
0.02
0.02
65,094
14,295
$
$
$
$
$
4,702
0.03
0.03
59,537
11,897
Revenues
Cost of Sales
Earnings from mining operations
Administrative Expenses
Income tax (expense) recovery
Total earnings
(i) Total earnings
(ii) Earnings per share – basic
(iii) Earnings per share – diluted
Total assets
Total long-term liabilities
14 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 5
4.
Results of Operations
Discussion of Acquisitions, Operations and Financial Condition
The following should be read in conjunction with the audited consolidated financial statements of the Company and
notes attached thereto for the year ended July 31, 2015.
4.1
San Martín Mine, Queretaro, Mexico
Reserves
The San Martin Mine, an ISO 9001 certified facility located approximately 50km east of the City of Queretaro, State
of Queretaro, Mexico, consists of mining concessions covering 12,992 hectares and includes seven underground
mining units and four units under exploration, as well as an additional property, San Pedrito, located 50 km west of
San Martin. Luismin (now “Goldcorp Mexico”) operated the mine from 1993 to January, 2007 when it was purchased
by Starcore, who has been mining at San Martin at a rate of approximately 300,000 tonnes per year. Starcore expects
to continue to operate the mine over an expected mine life of at least 5 years based on the current expected conversion
of known resources and exploration is able to maintain approximately two years proven and probable reserves
replacing those mined with new reserves, such that the total resource remains relatively constant from year to year.
The Company last filed on SEDAR results for “RESERVES AND RESOURCES IN THE SAN MARTIN MINE,
MEXICO AS OF JULY 31, 2014”, dated October 6, 2014, prepared by Joseph Campbell, P. Eng.. (the “Technical
Report”), which is also available on the Company website www.starcore.com.
Production
The following table is a summary of mine production statistics for the San Martin mine for the three and twelve
months ended July 31, 2015 and for the year ended July 31, 2014.
Unit of measure
thousand ounces
thousand ounces
thousand ounces
Actual results for
3 months ended
July 31, 2015
4.3
27.1
4.7
Actual results for
12 months ended
July 31, 2015
18.3
97.1
19.6
Actual results for
12 months ended
July 31, 2014
22.0
126.5
24.0
Mine production of gold in dore
Mine production of silver in dore
Total mine production – equivalent ounces
Silver to Gold equivalency ratio
Mine Gold grade
Mine Silver grade
Mine Gold recovery
Mine Silver recovery
grams/tonne
grams/tonne
percent
percent
Milled
Mine development, preparation and
exploration
thousands of tonnes
meters
Mine operating cash cost per tonne milled
US dollars/tonne
Mine operating cash cost per equivalent ounce US dollars/ounces
Number of employees and contractors at
minesite
73:1
2.00
19.0
86.9%
57.4%
77.3
1,592
52
849
301
71.6:1
2.14
18.2
85.1%
53.1%
311.9
6,055
57
903
301
62.7:1
2.55
24.2
87.1%
52.7%
308.6
6,381
58
750
330
TSX:SAM / Annual Report 2015 | 15
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 6
During the quarter ended July 31, 2015, the mill operated at a rate of approximately 840 milled tonnes/calendar day.
Gold and silver grades in the current quarter were 2.00 g/t and 19.0 g/t, respectively, compared to prior quarter grades
of 1.98 g/t and 16.78 g/t. Overall equivalent gold production from the mine of 4,694 ounces was higher than the
previous quarter production of 4,429 due to an increase in gold and silver ore grades and slightly higher overall
production tonnage of 77,279 tonnes compared to 76,168 tonnes last quarter. Despite an increase in production
compared to the prior quarter, the recoveries and ore grades for gold were generally lower than the average for the
year ended July 31, 2014, resulting in lower equivalent gold production per quarter compared to the 6,000 ounces per
quarter averaged for the July 31, 2014 year.
Production cash costs of the mine for the current quarter were US$849/EqOz. This was lower than the previous
quarter amount of US$906/EqOz. due mainly to lower realized costs from actual cost savings in mine development
and exploitation and due to a much stronger US Dollar. This year’s costs are higher than the prior year average of
US$750/EqOz due to both lower average metal production and increased costs at the mine due to a reclassification of
certain mine development expenditures which were generally capitalized in the prior year.
Management believes a more conservative expensing of certain costs was appropriate resulting in higher cash costs
and lower CAPEX expenditures overall. Operating cash costs of US$52/t, were lower than the prior quarter’s US$53/t
due mainly to the favourable exchange rate lowering Mexican pesos operating costs. Operating cash costs were lower
than the twelve months ended July 31, 2014 of US$58/t due to the favourable US Dollar exchange rate and due to key
costs reductions in labour costs, general supply and electrical costs. The mine plan has been developed to ensure the
mine is properly developed and mined so as to ensure a constant supply of ore in accordance with currently planned
production capacity and ore grades. Changes to the plan that may involve increased production and capital investment
is continually being assessed by management. Currently, the Company is continuing underground exploration in order
to identify higher grade ore zones and has allocated an adequate budget to support year-long exploration, exceeding
11,000 metres of underground exploration drilling for the 2015 calendar year.
During the quarter ended July 31, 2015, the Company incurred approximately US$384 in mine capital expenditures,
which includes mine development drifting and drilling, machinery and equipment leases and purchases and
construction and tailings dam remediation, compared to US$292 in the prior quarter.
4.2 Property Activity
San Martin properties – Queretaro, Mexico
The San Martin mine properties are comprised of mining concessions covering 12,992 hectares, excluding the San
Pedrito property located approximately 50km west of the San Martin mine. In addition to the ongoing mine
exploration and development that is currently being performed in development of the mine, management is continually
assessing the potential for further exploration and development of the San Martin properties and continually modifying
the exploration budget accordingly.
The mine operates three underground drill rigs to provide information to assist with mine planning in addition to
exploration, with the intent of increasing the reserves and resources on the property, and the Company has budgeted
approximately 11,000 metres of underground exploration drilling in calendar 2015.
David Gunning, P.Eng., a director of the Company and Chief Operating Officer, is the Company’s qualified person
under NI 43-101, and has reviewed and approved the scientific and technical disclosure on the San Martin Mine
disclosed in this MD&A.
Acquisition of Creston Moly
On February 19, 2015, the Company closed the transaction to acquire all of the shares of Creston Moly from Deloitte
Restructuring Inc. in its capacity as trustee in bankruptcy of Mercator Minerals Ltd. at a purchase price of CDN $2
Million.
In June, 2011, Mercator Minerals Ltd. (“Mercator”), a TSX listed company, acquired Creston Moly in a cash and
shares deal valuing Creston Moly at approximately $194 million. At that time, the Board of Directors of Creston
Moly, after receiving the recommendation of its special committee and consultation with its financial and legal
16 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
Starcore International Mines Ltd.
MD&A
MD&A
July 31, 2015
July 31, 2015
Page 7
Page 7
advisors, unanimously supported the arrangement whereby Mercator would acquire all of the issued and outstanding
common shares of Creston.
advisors, unanimously supported the arrangement whereby Mercator would acquire all of the issued and outstanding
common shares of Creston.
BMO Capital Markets, financial advisor to Creston Moly and its Board, provided a fairness opinion to the effect that
the consideration (of $194 million) was fair, from a financial point of view, to the shareholders of Creston Moly.1
Creston shareholders voted in favour of the acquisition. The most significant asset in this acquisition was the El
Creston project in Sonora, Mexico which has been advanced to a completed Preliminary Economic Assessment
("PEA").
BMO Capital Markets, financial advisor to Creston Moly and its Board, provided a fairness opinion to the effect that
the consideration (of $194 million) was fair, from a financial point of view, to the shareholders of Creston Moly.1
Creston shareholders voted in favour of the acquisition. The most significant asset in this acquisition was the El
Creston project in Sonora, Mexico which has been advanced to a completed Preliminary Economic Assessment
("PEA").
On September 5, 2014, pursuant to the Bankruptcy and Insolvency Act (Canada), Mercator and Creston Moly were
deemed to have filed assignments in bankruptcy. Creston Moly is a British Columbia company that owns, through its
subsidiaries, a 100% interest in the following properties:
On September 5, 2014, pursuant to the Bankruptcy and Insolvency Act (Canada), Mercator and Creston Moly were
deemed to have filed assignments in bankruptcy. Creston Moly is a British Columbia company that owns, through its
subsidiaries, a 100% interest in the following properties:
• The El Creston Project in Sonora, Mexico;
• The Ajax Project in British Columbia; and
• The Molybrook Project in Newfoundland.
• The El Creston Project in Sonora, Mexico;
• The Ajax Project in British Columbia; and
• The Molybrook Project in Newfoundland.
Creston Moly Corp.
(British Columbia)
Creston Moly Corp.
(British Columbia)
100%
100%
100%
100%
Creston Mining Corporation
(Ontario)
Creston Mining Corporation
(Ontario)
Tenajon Resources Corp.
(British Columbia)
Tenajon Resources Corp.
(British Columbia)
100%
100%
Mexican Subsidiary
(Mexico)
Mexican Subsidiary
(Mexico)
El Creston
Property
El Creston
Property
Ajax
Property
Ajax
Property
Molybrook
Property
Molybrook
Property
El Creston Project, Sonora, Mexico:2
El Creston Project, Sonora, Mexico:2
The El Creston molybdenum property is located in the State of Sonora, Mexico, 175 kilometres south of the US
Border and 145 kilometers northeast of the city of Hermosillo. In 2010, a PEA was prepared on the project by an
independent consulting firm. The result of this study indicated that the El Creston molybdenum-copper deposit had a
US $561.9million net present value after tax (using an 8% discount rate). The internal rate of return (after tax) was
calculated to be 22.3% and a capital cost payback was calculated to be four years.
The El Creston molybdenum property is located in the State of Sonora, Mexico, 175 kilometres south of the US
Border and 145 kilometers northeast of the city of Hermosillo. In 2010, a PEA was prepared on the project by an
independent consulting firm. The result of this study indicated that the El Creston molybdenum-copper deposit had a
US $561.9million net present value after tax (using an 8% discount rate). The internal rate of return (after tax) was
calculated to be 22.3% and a capital cost payback was calculated to be four years.
Other highlights of the report include:
Other highlights of the report include:
1 The information in this report relating to the acquisition of Creston Moly by Mercator has been drawn from documents filed under the Creston Moly Corp.
issuer profile on SEDAR, more specifically: Creston’s Management Information Circular dated May 9, 2011 and filed on SEDAR on May 16, 2011, and
Creston’s news release of June 6, 2011 as filed on SEDAR on June 7, 2011.
2 The technical information in this news release relating to the El Creston Project is based on the technical report entitled “Preliminary Economic
Assessment, El Creston Project, Opodepe, Sonora, Mexico”, dated December 16, 2010, filed under the Creston Moly Corp. issuer profile on SEDAR..
Information regarding the effective date of the mineral resources, key assumptions, parameters and methods used to estimate the mineral resources, and
known risks that materially affect the mineral resources can be found in the technical report.
1 The information in this report relating to the acquisition of Creston Moly by Mercator has been drawn from documents filed under the Creston Moly Corp.
issuer profile on SEDAR, more specifically: Creston’s Management Information Circular dated May 9, 2011 and filed on SEDAR on May 16, 2011, and
Creston’s news release of June 6, 2011 as filed on SEDAR on June 7, 2011.
2 The technical information in this news release relating to the El Creston Project is based on the technical report entitled “Preliminary Economic
Assessment, El Creston Project, Opodepe, Sonora, Mexico”, dated December 16, 2010, filed under the Creston Moly Corp. issuer profile on SEDAR..
Information regarding the effective date of the mineral resources, key assumptions, parameters and methods used to estimate the mineral resources, and
known risks that materially affect the mineral resources can be found in the technical report.
TSX:SAM / Annual Report 2015 | 17
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MD&A
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July 31, 2015
July 31, 2015
Page 8
Page 8
• Large moly-copper deposit in a mining-friendly jurisdiction. Total Measured and Indicated Resources of 215
million tonnes grading 0.071% Mo and 0.06% Cu, containing 336 Mlbs Mo and 281 Mlbs Cu. Mineral
resources that are not mineral reserves do not have demonstrated economic viability;
• Large moly-copper deposit in a mining-friendly jurisdiction. Total Measured and Indicated Resources of 215
million tonnes grading 0.071% Mo and 0.06% Cu, containing 336 Mlbs Mo and 281 Mlbs Cu. Mineral
resources that are not mineral reserves do not have demonstrated economic viability;
•
•
Initial Capital cost: US$655.9million with payback of 4 years, based on metal prices of $15/lb Mo and $2.60/lb
Cu. Metal recoveries were estimated at 88% for Mo and 84% for Cu;
Initial Capital cost: US$655.9million with payback of 4 years, based on metal prices of $15/lb Mo and $2.60/lb
Cu. Metal recoveries were estimated at 88% for Mo and 84% for Cu;
• Low Operating Cost: operating cost of $US4.12/lb Mo, net of copper credits, 0.84:1 waste to ore strip ratio
within an optimized pit containing an additional 7.6 million tonnes of Inferred Resources responsible for $20M
of the NPV;
• Low Operating Cost: operating cost of $US4.12/lb Mo, net of copper credits, 0.84:1 waste to ore strip ratio
within an optimized pit containing an additional 7.6 million tonnes of Inferred Resources responsible for $20M
of the NPV;
• Excellent infrastructure: Road accessible with a 230kV power grid within 50 km;
• Excellent infrastructure: Road accessible with a 230kV power grid within 50 km;
• Apart from the PEA, recommendations have been made to test known mineralization below the current pit-
limiting “Creston Fault” where results such as drill hole EC08-54 returned 241.4m at 0.083% Mo and 0.059%
Cu to a depth of 495m in the Red Hill Deep zone.
• Apart from the PEA, recommendations have been made to test known mineralization below the current pit-
limiting “Creston Fault” where results such as drill hole EC08-54 returned 241.4m at 0.083% Mo and 0.059%
Cu to a depth of 495m in the Red Hill Deep zone.
David Gunning, P.Eng., a director of the Company and Chief Operating Officer, is the Company’s qualified person
under NI 43-101, and has reviewed and approved the scientific and technical disclosure on the El Creston Project
disclosed in this report.
David Gunning, P.Eng., a director of the Company and Chief Operating Officer, is the Company’s qualified person
under NI 43-101, and has reviewed and approved the scientific and technical disclosure on the El Creston Project
disclosed in this report.
Ajax, British Columbia, Canada3
Ajax, British Columbia, Canada3
Ajax Molybdenum Property is comprised of 11,718 hectares and is located 13 km north of Alice Arm, British
Columbia. The Ajax Property, one of North America's largest undeveloped molybdenum deposits occupying a
surface area of approximately 600 by 650 metres, is a world class primary molybdenum property in the advanced stage
of exploration.
Ajax Molybdenum Property is comprised of 11,718 hectares and is located 13 km north of Alice Arm, British
Columbia. The Ajax Property, one of North America's largest undeveloped molybdenum deposits occupying a
surface area of approximately 600 by 650 metres, is a world class primary molybdenum property in the advanced stage
of exploration.
Molybrook, Newfoundland, Canada4
Molybrook, Newfoundland, Canada4
Creston’s Molybrook molybdenum property located on the south coast of Newfoundland is centred 2.5 km from the
outport of Grey River less than 4 kilometres from a deep water, ice free navigable fjord. The property hosts a 3 km
long trend in which at least three zones of at surface molybdenum mineralization occur: Molybrook, Wolf and
Chimney Pond. To date, almost all exploration has been completed on the Molybrook Zone where a large porphyry
molybdenum deposit has been outlined.
Creston’s Molybrook molybdenum property located on the south coast of Newfoundland is centred 2.5 km from the
outport of Grey River less than 4 kilometres from a deep water, ice free navigable fjord. The property hosts a 3 km
long trend in which at least three zones of at surface molybdenum mineralization occur: Molybrook, Wolf and
Chimney Pond. To date, almost all exploration has been completed on the Molybrook Zone where a large porphyry
molybdenum deposit has been outlined.
The Company now owns 100% of 27 mineral claims of the Moly Brook molybdenum property, located 2.5 km from
the Hamlet of Grey River on the southern coast of Newfoundland, pursuant to the acquisition of Creston Moly Corp.
The Moly Brook property is subject to a 2% net smelter royalty (“NSR”), of which 1.5% can be purchased by the
Company for $1.5 million. In addition, the Company acquired:
The Company now owns 100% of 27 mineral claims of the Moly Brook molybdenum property, located 2.5 km from
the Hamlet of Grey River on the southern coast of Newfoundland, pursuant to the acquisition of Creston Moly Corp.
The Moly Brook property is subject to a 2% net smelter royalty (“NSR”), of which 1.5% can be purchased by the
Company for $1.5 million. In addition, the Company acquired:
• The Moly Brook Extension property, which consists of 4 mineral claims and adjoins the southern boundary of
the Company’s Moly Brook molybdenum property. The extension property is subject to a 2% NSR, of which
1.5% can be purchased by the Company for $1.5 million.
• The Moly Brook Extension property, which consists of 4 mineral claims and adjoins the southern boundary of
the Company’s Moly Brook molybdenum property. The extension property is subject to a 2% NSR, of which
1.5% can be purchased by the Company for $1.5 million.
• The Grey River Gold property immediately to the east of the Moly Brook molybdenum property. The
property consists of 5 mineral claims is subject to a 2% NSR, of which 1% can be purchased back for $1.5
million.
• The Grey River Gold property immediately to the east of the Moly Brook molybdenum property. The
property consists of 5 mineral claims is subject to a 2% NSR, of which 1% can be purchased back for $1.5
million.
• The Grey River West property, which consists of 40 mineral claims. The property is subject to a 2% NSR, of
• The Grey River West property, which consists of 40 mineral claims. The property is subject to a 2% NSR, of
which 1% can be purchased back for $1.5 million.
which 1% can be purchased back for $1.5 million.
3 Technical information in this report relating to the Ajax Project is based on the NI 43-101 Resource Estimate Press Release entitled “Tenajon Announces
75% Increase in Indicated Molybdenum Resources at Ajax Project”, dated May 15, 2008 and the technical report entitled “Update of Resource Estimation,
Ajax Property, Alice Arm, British Columbia”, dated April 18, 2007, both of which are filed under the Tenajon Resources Corp. issuer profile on SEDAR.
4 Technical information in this report relating to the Moly Brook property is based on the technical report entitled “Technical Report, Moly Brook Property,
Grey River Area, Newfoundland, Canada”, dated June 15, 2009, filed under the Tenajon Resources Corp. issuer profile on SEDAR.
3 Technical information in this report relating to the Ajax Project is based on the NI 43-101 Resource Estimate Press Release entitled “Tenajon Announces
75% Increase in Indicated Molybdenum Resources at Ajax Project”, dated May 15, 2008 and the technical report entitled “Update of Resource Estimation,
Ajax Property, Alice Arm, British Columbia”, dated April 18, 2007, both of which are filed under the Tenajon Resources Corp. issuer profile on SEDAR.
4 Technical information in this report relating to the Moly Brook property is based on the technical report entitled “Technical Report, Moly Brook Property,
Grey River Area, Newfoundland, Canada”, dated June 15, 2009, filed under the Tenajon Resources Corp. issuer profile on SEDAR.
18 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 9
• The Moly Brook North which consists of 18 claims which border on the northern side of the Moly Brook
Property, and borders the Grey River West property. The property will be subject to a 2% NSR of which 1 %
can be purchased by the Company for $1.5 million. The Company also owned 100% of 51 mineral claims
north of the Moly Brook North property.
Acquisition of American Consolidated Minerals Corp.
On November 20, 2014, the Company announced the approval of the proposed acquisition of American Consolidated
Minerals Corp (“AJC”) pursuant to a plan of arrangement (the “Transaction”) by the AJC shareholders.
The Transaction was completed on December 1, 2014 upon the satisfaction of all of the conditions set out in the
arrangement agreement entered into by AJC and the Company on October 1, 2014, including approval by the Supreme
Court of British Columbia.
Pursuant to the acquisition of AJC, the Company has acquired the right to 3 properties as follows:
Sierra Rosario, Sinaloa, Mexico
Pursuant to the acquisition of AJC, the Company acquired a 50% interest in two claims over the 500-hectare Sierra
Rosario Property, located in the state of Sinaloa, Mexico.
During the year ended July 31, 2015, the Company acquired the remaining 50% interest from the optionor for $25 and
a 1% NSR over the entire property.
Toiyabe, Nevada, USA
Pursuant to the acquisition of AJC, the Company has the right to acquire a 100% undivided interest, subject to a 3%
NSR, in 165 mining claims located in Lander County, Nevada, United States of America (“Toiyabe”) from MinQuest.
Consideration to be paid for the interest is US$900 and the Company must incur total exploration expenditures of
US$1,025 (US$1,025 incurred) on the property, by the fifth anniversary of the “New Effective Date” as agreed by
MinQuest. The New Effective Date shall be the earlier of October 15, 2018 or the date the Company enters into a
joint venture agreement over Toiyabe or the date that the Company completes a bankable feasibility study on the
property.
The optionor has also granted the Company the right to purchase up to one-half of the NSR (or 1.5%) on the basis of
US$2 million per each 1% of the royalty.
Lone Ranch, Washington, USA
Pursuant to the acquisition of AJC, the Company has acquired the right to a 100% undivided interest, subject to a 3%
NSR in 73 mining claims located in Ferry County, Washington State, United States of America (“Lone Ranch”) from
MinQuest Inc. (“MinQuest”).
Consideration to be paid for the interest is US$410, and the Company must incur total exploration expenditures of
US$1,225 ($175 incurred) on the property, by the third anniversary of the “New Effective Date” as agreed by
MinQuest. The New Effective Date shall be the earlier of October 15, 2018 or the date the Company enters into a joint
venture agreement over the property or the date that the Company completes a bankable feasibility study on the
property.
The optionor has also granted the Company the right to purchase up to one-half of the NSR (or 1.5%) on the basis of
US$1.5 million per each 1% of the royalty. If the Company does not incur the exploration expenditures as specified,
the unpaid portions may be paid to the optionor to maintain the option.
TSX:SAM / Annual Report 2015 | 19
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 10
4.3 Results of Operations
The Company recorded earnings for the year ended July 31, 2015 of $210 compared with $2,965 for the comparative
year ended July 31, 2014. The details of the Company’s operating results and related revenues and expenses are as
follows:
For the year ended July 31,
Revenues
Mined ore
Purchased concentrate
Total Revenue
Cost of Sales
Mined ore
Purchased concentrate
Depreciation and depletion
2015
2014
Variance
$
28,073 $
332
28,405
$
33,136
-
33,136
(20,768)
(306)
(6,686)
(18,577)
-
(5,971)
(5,063)
332
(4,731)
(2,191)
(306)
(715)
Total Cost of Sales
(27,760)
(24,548)
(3,212)
Earnings from mining operations
645
8,588
(7,943)
Financing income (costs)
Foreign exchange gain
Professional and consulting fees
Management fees and salaries
Office and administration
Other expenses
Shareholder relations
Write-down for obsolete equipment
Earnings (Loss) before taxes
Income tax recovery
Earnings for the year
3
1,742
(1,115)
(1,210)
(1,556)
(91)
(128)
-
(1,710)
1,920
(286)
494
(402)
(1,538)
(1,467)
-
(233)
(125)
289
1,248
(713)
328
(89)
(91)
105
125
5,031
(6,741)
(2,066)
3,986
$
210 $
2,965
$
(2,755)
Overall, revenue from mill production decreased to $28.4 million from $33.1 million in the prior year due mainly to
lower metal prices per ounce and the lower metal production in the current year compared to the prior comparative
year. During the current year, the Company also generated $332 in revenue from purchased concentrates. Cost of
sales increased in the current year due to higher tonnage processed and partly to higher overall mine development
costs and costs of labour and supplies, including chemicals and electricity. As a percentage of mined ore revenue,
earnings from mining operations decreased to 2% of mined ore revenue compared to 26% in the comparative year, due
to higher overall mine costs and lower revenue per ounce as a result of lower gold and silver prices.
Sales of metals for the year ended July 31, 2015 approximated 18,762 ounces of gold and 101,830 ounces of silver
sold at average prices in the year of US$1,210 and US$16.87 per ounce, respectively. This is a decrease in sale ounces
from the comparative year ended July 31, 2014 where sales of metal approximated 22,018 ounces of gold and 126,519
ounces of silver, sold at higher average prices of US$1,294 and US$21 per ounce, respectively. The overall revenue
was lower compared to the prior year due to decrease in the price of gold and silver for the current year and due to the
reduced production of metals in the current year.
20 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 11
The total cost of sales above includes non-cash expenses for depreciation and depletion of $6,686, compared to $5,971
in the comparable period last year, which is calculated based on the units of production from the mine over the
expected mine production as a denominator. This calculation is based solely on the San Martin mine proven and
probable reserves and a percentage of inferred resources in accordance with the Company’s policy of recognizing the
value of expected Resources which will be converted to Proven and Probable Reserves, as assessed by management.
For the year of operations to July 31, 2015, the Company produced earnings from mine operations of $645 compared
to $8,588 for the year ended July 31, 2014. As discussed above, average gold ore grades of 2.14 g/t and silver ore
grades of 18.2 g/t for the year ended July 31, 2015 were lower as compared to the July 31, 2014 year where grades
averaged 2.55 g/t and 24.2 g/t, respectively. This, in combination with lower recoveries of 85.1% for gold and 53.1%
for silver in the current year compared to 87.1% for gold and 52.7% for silver in the prior comparable year ending
July 31, 2014, resulted in substantially lower production and revenue.
Costs for the year ended July 31, 2015 were much higher at an average operating cash cost of US$903/EqOz.
compared to an average operating cash cost of US$750/EqOz. during the year ended July 31, 2014, resulting in
reported mined ore costs which were $3,212 higher at $27,760. Also included in mined ore costs in the current year is
non-cash stock based compensation expense of $18 and depletion of $6,686 compared to $48 and $5,971, respectively,
for the year ended July 31, 2014. The Company uses the Black-Scholes option valuation model to calculate the fair
value of share purchase options at the date of grant.
Other Items
Changes in other items for the year ended July 31, 2015, resulted in the following significant changes from the year
ended July 31, 2014:
•
•
•
•
•
•
•
Financing costs during the year decreased by $289 due to the full repayment of the Loan Facility in
August, 2013. The Company has not incurred any additional financing costs during the year;
Office and administration increased by $89 to $1,556 due higher corporate costs relating to loan repayment
activity, general regulatory administration and office related costs.
Shareholder’s communication decreased by $105 to $128 due to decreased participation in conventions and
events.
Foreign exchange gain increased by $1,248 to a gain of $1,742 for the year ended July 31, 2015 due to the
weakening of the Mexican peso and Canadian dollar in relation to the US dollar, the functional currency of the
mining operations. Cash balances are mainly held in US dollars.
Professional fees increased in the current year by $713 to $1,115 due to increase in tax and audit fees as well as
services related to improving mine efficiency and to re-class of certain contractors. The Company also incurred
additional legal costs to acquire Creston and AJC during the year ended July 31, 2015.
Management fees and salaries decreased by $328 to $1,210 due to lower bonuses paid to management in the
current year compared to the prior year. Included in management fees and salaries is a non-cash, stock based
compensation expense to management and to the members to the Company’s technical advisory committee of
$120 in the current year, compared to $365 in the prior year.
The Company recorded an impairment of an investment in a Mexican subsidiary purchased in the current
quarter of $175. While the subsidiary has significant tax assets available, management believes a write off of
subsidiary costs is warranted based on an impairment analysis of existing assets of the subsidiary.
Sustaining Costs
In conjunction with a non-GAAP initiative being undertaken within the gold mining industry, the Company has
adopted an “all-in sustaining cash cost” non-GAAP performance measure that the Company believes more fully
defines the total costs associated with producing gold; however this performance measure has no standardized
meaning. As the measure seeks to reflect the full cost of equivalent gold production from current operations, new
project capital is not included in the calculation. Accordingly it is intended to provide additional information and
should not be considered in isolation or as a substitute for measures of performance prepared in accordance with
GAAP. The Company reports this measure on a sales basis:
TSX:SAM / Annual Report 2015 | 21
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 12
(In Canadian Dollars unless indicated)
For the year ended July 31,
Total cost of sales cash costs1
Total corporate and administration cash costs2
Foreign exchange gain
Reclamation and closure accretion
Sustaining capital expenditures and exploration
$
All-in sustaining cash costs
Foreign exchange adjustment
Sustaining Costs
(in 000’s)
Sustaining Costs Per Ounce
(in $/oz)
2015
2014
2015
2014
$
$
$
20,768
4,006
(1,742)
79
3,147
26,258
(4,169)
18,577
3,927
(494)
251
5,967
28,228
(2,215)
1,029
199
(86)
4
156
1,302
(207)
780
165
(21)
11
251
1,186
(93)
All-in sustaining USD cash costs
22,089
$
26,013
1,095
$
1,093
Total equivalent ounces sold
20,181
23,811
1 Excludes non-cash depletion of $6,686 for the year ended July 31, 2015 (July 31, 2014: $5,971) and includes non-cash share-based compensation
of $18 (July 31, 2014: $48).
2 Includes non-cash share-based compensation of $126 for the year ended July 31, 2015 (July 31: 2014: $419).
Cash Flows
Cash flows generated from operating activities were $3,229 during the year ended July 31, 2015, compared to $11,745
for the comparative year ended July 31, 2014. Cash flows from operating activities were determined by removing non-
cash expenses from the earnings and adjusting for non-cash working capital amounts. Cash used for financing
activities resulted in an outflow of $1,240 mainly due to the dividend paid in the year of $2,922 and debt raised by the
Company of $1,289. Cash used for investing activities resulted in an outflow of $3,906 due to investment of $3,299 in
mining interest, plant and equipment, $303 in exploration and evaluation assets, and $2,188 in investment in
subsidiaries. Overall cash decreased during the year ended July 31, 2015 by $1,917.
Investor Relations Activities
During the year ended July 31, 2015, the Company responded directly to investor inquiries.
Financings, Principal Purposes & Milestones
During the year ended July 31, 2015, the Company did not have any financings.
22 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 13
5.
Summary of Quarterly Results
The following is a summary of the Company’s financial results for the eight most recently completed quarters:
Total Revenue
Earnings from mining
operations
Earnings/(loss)
Per share – basic
Per share – diluted
Total Revenue
Earnings from mining
operations
Earnings (loss)
Per share – basic
Per share – diluted
Q4
31-Jul-15
Q3
30-Apr-15
Q2
31-Jan-15
Q1
31-Oct-14
$
$
$
$
$
6,366
(393)
(60)
(0.00)
(0.00)
$
$
$
$
$
7,227
374
(484)
(0.00)
(0.00)
$
$
$
$
$
7,143
213
(116)
(0.01)
(0.01)
$
$
$
$
$
7,669
451
870
0.01
0.01
Q4
31-Jul-14
Q3
30-Apr-14
Q2
31-Jan-14
Q1
31-Oct-13
$
$
$
$
$
7,742
1,126
(2,170)
(0.01)
(0.01)
$
$
$
$
$
8,267
1,957
1,239
0.01
0.01
$
$
$
$
$
8,378
2,388
1,600
0.01
0.01
$
$
$
$
$
8,749
3,117
2,296
0.02
0.02
Discussion
The Company reports loss of $60 for the quarter compared to loss of $2,170 in the comparative quarter ended July 31,
2014. Revenue from mining operations decreased in this quarter to $6,366 from the comparative quarter of $7,742 as a
result of lower ore production. For more detailed discussion on the quarterly production results and financial results
for the quarter ended July 31, 2015, please refer to Sections 4.1 and 4.3 under “Results of Operations”.
6.
Liquidity, Commitments
The Company expects to continue to receive income and cash flows from the mining operations at San Martin (section
4.1). Management expects that this will result in sufficient working capital and liquidity for the Company for the next
twelve months.
As at July 31, 2015, the Company had the following commitments:
a)
b)
c)
As at July 31, 2015, the Company has shared lease commitments for office space of approximately $144 per
year, expiring at various dates up to September 2017, which includes minimum lease payments and estimated
taxes, but excluded operating costs, taxes and utilities, to expiry.
As at July 31, 2015, the Company has a land lease agreement commitments with respect to the land at the mine
site, for $132 per year until December 2017.
As at July 31, 2015, the Company has management contracts to officers and directors totaling $600 per year,
payable monthly, expiring in January 2017.
Obligations due within twelve months of
July 31:
2015
2016-2017
2018 and
beyond
Trade and other payables
Rehabilitation and closure cost provision
$
1,950 $
-
$
-
-
-
1,615
TSX:SAM / Annual Report 2015 | 23
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 14
7.
Capital Resources
The capital resources of the Company are the mining interests, plant and equipment, with an amortized historical cost
of $49,846 as at July 31, 2015. The Company is committed to further expenditures of capital required to maintain and
to further develop the San Martin mine which management believes will be funded directly from the operating cash
flows of the mine.
8.
9.
Off Balance Sheet Arrangements
The Company has no off balance sheet transactions.
Transactions with Related Parties
There were no material reportable related party transactions.
10. Fourth Quarter
Due to mine operating activity of the San Martin mine discussed throughout this MD&A and as detailed in Section
4.1, the operations and activities are similar to previous quarters which are discussed in Section 4.3 – Results of
Operations.
11. Proposed Transactions
N/A
12. Critical Accounting Estimates
The Company makes estimates and assumptions about the future that affect the reported amounts of assets and
liabilities. Estimates and judgements are continually evaluated based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions.
The effect of a change in accounting estimate is recognized prospectively by including it in the Company’s profit or
loss in the period of the change, if it affects that period only, or in the period of the change and future periods, if the
change affects both.
Information about critical judgements in applying accounting policies that have the most significant risk of causing
material adjustment to the carrying amounts of assets and liabilities recognized in the consolidated financial statements
within the next financial year are discussed below:
a) Economic Recoverability and Profitability of Future Economic Benefits of Mining Interests
Management has determined that mining interests, evaluation, development and related costs incurred which
have been capitalized are economically recoverable. Management uses several criteria in its assessments of
economic recoverability and probability of future economic benefit including geologic and metallurgic
information, history of conversion of mineral deposits to proven and probable reserves, scoping and feasibility
studies, accessible facilities, existing permits and life of mine plans.
b) Rehabilitation Provisions
Rehabilitation provisions have been created based on the Company’s internal estimates. Assumptions, based on
the current economic environment, have been made which management believes are a reasonable basis upon
which to estimate the future liability. These estimates take into account any material changes to the assumptions
that occur when reviewed regularly by management. Estimates are reviewed annually and are based on current
regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques
will result in changes to provisions from period to period. Actual rehabilitation costs will ultimately depend on
future market prices for the rehabilitation costs, which will reflect the market condition at the time of the
24 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 15
rehabilitation costs are actually incurred. The final cost of the currently recognized rehabilitation provision may
be higher or lower than currently provided for.
The inflation rate applied to estimated future rehabilitation and closure costs is 3.5% and the discount rate
currently applied in the calculation of the net present value of the provision is 8%
c)
Impairments
The Company assesses its mining interest, plant and equipment assets annually to determine whether any indication
of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made,
which is considered to be the higher of the fair value less costs to sell and value in use. These assessments require
the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital
requirements, exploration potential and operating performance.
d)
Income Taxes
Significant judgment is required in determining the provision for income taxes. There are many transactions and
calculations undertaken during the ordinary course of business for which the ultimate tax determination is
uncertain. The company recognizes liabilities and contingencies for anticipated tax audit issues based on the
Company’s current understanding of tax law. For matters where it is probable that an adjustment will be made,
the Company records its best estimate of the tax liability including the related interest and penalties in the current
tax provision. Management believes they have adequately provided for the probable outcome of these matters;
however, the final outcome may result in a materially different outcome than the amount included in the tax
liabilities.
In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there
are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and
the same taxable entity against which the unused tax losses can be utilized. However, utilization of the tax losses
also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recuperated.
e)
Share-Based Payment Transactions
The Company measures the cost of equity-settled transactions with employees, and some with non-employees,
by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair
value for share-based payment transactions requires determining the most appropriate valuation model, which is
dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate
inputs to the valuation model including the expected life of the share option, volatility and dividend yield and
making assumptions about them.
f) Mineral Reserves and Mineral Resource Estimates
Mineral reserves are estimates of the amount of ore that can be economically and legally extracted from the
Company’s mining properties. The Company estimates its mineral reserve and mineral resources based on
information compiled by Qualified Persons as defined by Canadian Securities Administrators National
Instrument 43-101 Standards for Disclosure of Mineral Projects. Such information includes geological data on
the size, depth and shape of the mineral deposit, and requires complex geological judgments to interpret the data.
The estimation of recoverable reserves is based upon factors such as estimates of commodity prices, future
capital requirements, and production costs along with geological assumptions and judgments made in estimating
the size and grade that comprise the mineral reserves. Changes in the mining reserve or mineral resource
estimates may impact the carrying value of mineral properties and deferred development costs, property, plant
and equipment, provision for site reclamation and closure, recognition of deferred income tax assets and
depreciation and amortization charges.
TSX:SAM / Annual Report 2015 | 25
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 16
g) Units of production depletion
Estimated recoverable reserves are used in determining the depreciation of mine specific assets. This results in
depreciation charges proportional to the depletion of the anticipated remaining life of mine production. Each
item’s life, which is assessed annually, has regard to both its physical life limitations and to present assessments
of economically recoverable reserves of the mine property at which the asset is located. These calculations
require the use of estimates and assumption, including the amount of recoverable reserves and estimate of future
capital expenditure. Changes are accounted for prospectively.
13. Changes in Accounting Policies
Effective August 1, 2014, the Company adopted new and revised International Financial Reporting Standards
that were issued by IASB as detailed in Note 3(n) to the audited consolidated financial statements. The
application of these new and revised standards and interpretations has not had any material impact on the
amounts reported for the current and prior years but may affect the accounting for future transactions or
arrangements.
14. Financial and Other Instruments
All significant financial assets, financial liabilities and equity instruments of the Company are either recognized or
disclosed in the audited consolidated financial statements together with other information relevant for making a
reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of
financial assets and financial liabilities have been determined and disclosed; otherwise only available information
pertinent to fair value has been disclosed.
In the normal course of business, the Company’s assets, liabilities and forecasted transactions are impacted by various
market risks, including currency risks associated with inventory, revenues, cost of sales, capital expenditures, interest
earned on cash and the interest rate risk associated with floating rate debt.
Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange rates and the
degree of volatility of these rates. The primary currency the Company exposed to is the United States dollar which is
also the functional currency of the San Martin Mine. The Company does not use derivative instruments to reduce its
exposure to foreign currency risk. At July 31, 2015 the Company had the following financial assets and liabilities
denominated in Canadian dollars (CDN) and denominated in Mexican Pesos:
In ‘000 of
CDN Dollars
Mexican Pesos (MP)
Cash and cash equivalents
Other working capital amounts – net
$
$
202
183
MP
MP
1,555
31,080
At July 31, 2015, US dollar amounts were converted at a rate of $1.305 Canadian dollars to $1 US dollar and Mexican
Pesos were converted at a rate of MP16.064 to $1 US Dollar.
26 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
Starcore International Mines Ltd.
Starcore International Mines Ltd.
MD&A
MD&A
MD&A
July 31, 2015
July 31, 2015
July 31, 2015
Page 17
Page 17
Page 17
15. Other
15. Other
15. Other
15.1 Disclosure of Outstanding Share Capital as at October 27, 2015
15.1 Disclosure of Outstanding Share Capital as at October 27, 2015
15.1 Disclosure of Outstanding Share Capital as at October 27, 2015
Common Shares
Common Shares
Common Shares
Number
180,614,397
Number
Number
180,614,397
180,614,397
$
Book Value
48,221
Book Value
Book Value
48,221
48,221
$
$
The following is a summary of changes in options from July 31, 2015 to October 27, 2015:
The following is a summary of changes in options from July 31, 2015 to October 27, 2015:
The following is a summary of changes in options from July 31, 2015 to October 27, 2015:
Grant
Date
Grant
Grant
Date
Date
mm/dd/yy mm/dd/yy
Expiry
Date
mm/dd/yy mm/dd/yy
mm/dd/yy mm/dd/yy
Expiry
Expiry
Date
Date
Exercise Opening
Exercise Opening
Exercise Opening
Balance
Price
Price
Balance
Balance
Price
During the Period
During the Period
During the Period
Granted
Granted
Granted
Exercised
Exercised
Exercised
Closing
Closing
Closing
Cancelled/
Forfeited
Cancelled/
Cancelled/
Forfeited
Forfeited
Closing,
Vested and
Exercisable
Closing,
Closing,
Vested and
Vested and
Exercisable
Exercisable
05/06/11
01/16/12
01/27/12
04/13/12
08/22/13
08/22/13
09/06/13
09/12/13
01/15/14
05/06/11
05/06/11
01/16/12
01/16/12
01/27/12
01/27/12
04/13/12
04/13/12
08/22/13
08/22/13
08/22/13
08/22/13
09/06/13
09/06/13
09/12/13
09/12/13
01/15/14
01/15/14
05/06/16
01/16/17
01/27/17
04/13/17
08/22/18
08/22/18
09/06/18
09/12/18
01/15/19
05/06/16
05/06/16
01/16/17
01/16/17
01/27/17
01/27/17
04/13/17
04/13/17
08/22/18
08/22/18
08/22/18
08/22/18
09/06/18
09/06/18
09/12/18
09/12/18
01/15/19
01/15/19
$0.15
$0.20
$0.25
$0.37
$0.20
$0.25
$0.23
$0.25
$0.22
$0.15
$0.15
$0.20
$0.20
$0.25
$0.25
$0.37
$0.37
$0.20
$0.20
$0.25
$0.25
$0.23
$0.23
$0.25
$0.25
$0.22
$0.22
150,000
400,000
1,940,000
3,250,000
275,000
800,000
200,000
200,000
4,170,000
150,000
150,000
400,000
400,000
1,940,000
1,940,000
3,250,000
3,250,000
275,000
275,000
800,000
800,000
200,000
200,000
200,000
200,000
4,170,000
4,170,000
11,385,000
11,385,000
11,385,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
400,000
1,940,000
3,250,000
275,000
800,000
200,000
200,000
4,170,000
150,000
150,000
400,000
400,000
1,940,000
1,940,000
3,250,000
3,250,000
275,000
275,000
800,000
800,000
200,000
200,000
200,000
200,000
4,170,000
4,170,000
150,000
400,000
1,940,000
3,250,000
275,000
800,000
200,000
200,000
4,170,000
150,000
150,000
400,000
400,000
1,940,000
1,940,000
3,250,000
3,250,000
275,000
275,000
800,000
800,000
200,000
200,000
200,000
200,000
4,170,000
4,170,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,385,000
11,385,000
11,385,000
11,385,000
11,385,000
11,385,000
-
-
Weighted Average Exercise Price
Weighted Average Exercise Price
Weighted Average Exercise Price
$0.27
$0.27
$0.27
-
-
-
-
-
-
-
-
-
$0.27
$0.27
$0.27
$0.27
$0.27
$0.27
At October 27, 2015, there were 557,135 warrants exercisable to purchase one common share for each warrant held at
$0.30 per share until June 16, 2016.
At October 27, 2015, there were 557,135 warrants exercisable to purchase one common share for each warrant held at
At October 27, 2015, there were 557,135 warrants exercisable to purchase one common share for each warrant held at
$0.30 per share until June 16, 2016.
$0.30 per share until June 16, 2016.
15.2 Disclosure Controls and Procedures
15.2 Disclosure Controls and Procedures
15.2 Disclosure Controls and Procedures
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the Company’s disclosure controls and procedures. Based upon the results of that
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of
the period covered by this report, the Company’s disclosure controls and procedures were effective to provide
reasonable assurance that the information required to be disclosed by the Company in reports it files is recorded,
processed, summarized and reported, within the appropriate time periods and forms.
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the Company’s disclosure controls and procedures. Based upon the results of that
evaluated the effectiveness of the Company’s disclosure controls and procedures. Based upon the results of that
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of
the period covered by this report, the Company’s disclosure controls and procedures were effective to provide
the period covered by this report, the Company’s disclosure controls and procedures were effective to provide
reasonable assurance that the information required to be disclosed by the Company in reports it files is recorded,
reasonable assurance that the information required to be disclosed by the Company in reports it files is recorded,
processed, summarized and reported, within the appropriate time periods and forms.
processed, summarized and reported, within the appropriate time periods and forms.
Internal Controls Over Financial Reporting
Internal Controls Over Financial Reporting
Internal Controls Over Financial Reporting
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, are
responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision
of the Chief Financial Officer, the Company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with IFRS. The Company’s controls include policies and procedures
that:
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, are
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, are
responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision
responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision
of the Chief Financial Officer, the Company’s internal control over financial reporting is a process designed to provide
of the Chief Financial Officer, the Company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial
reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with IFRS. The Company’s controls include policies and procedures
statements for external purposes in accordance with IFRS. The Company’s controls include policies and procedures
that:
that:
•
•
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
•
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated
financial statements in accordance with IFRS; and
•
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the annual consolidated financial
statements or interim financial statements.
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated
provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated
financial statements in accordance with IFRS; and
financial statements in accordance with IFRS; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the annual consolidated financial
disposition of the Company’s assets that could have a material effect on the annual consolidated financial
statements or interim financial statements.
statements or interim financial statements.
TSX:SAM / Annual Report 2015 | 27
Starcore International Mines Ltd.
MD&A
July 31, 2015
Page 18
There has been no change in the Company’s internal control over financial reporting during the Company’s year ended
July 31, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.
Limitations of Controls and Procedures
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that any
disclosure controls and procedures or internal controls over financial reporting, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they
cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been
prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty,
and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The
design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to
error or fraud may occur and not be detected.
28 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
Consolidated Financial Statements
For the years ended July 31, 2015 and 2014
TSX:SAM / Annual Report 2015 | 29
Deloitte LLP
2800 - 1055 Dunsmuir Street
4 Bentall Centre
P.O. Box 49279
Vancouver BC V7X 1P4
Canada
Tel: (604) 669-4466
Fax: (778) 374-0496
www.deloitte.ca
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of
Starcore International Mines Ltd.
We have audited the accompanying consolidated financial statements of Starcore International Mines Ltd., which
comprise the consolidated statements of financial position as at July 31, 2015 and July 31, 2014, and the
consolidated statements of operations and comprehensive income, consolidated statements of changes in equity and
consolidated statements of cash flows for the years then ended, and 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.
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
Starcore International Mines Ltd. as at July 31, 2015 and July 31, 2014, and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards.
Chartered Accountants
October 29, 2015
Vancouver Canada
30 | Starcore International Mines Ltd. / TSX:SAM
Starcore International Mines Ltd.
Starcore International Mines Ltd.
Consolidated Statements of Financial Position
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
(in thousands of Canadian dollars)
As at
As at
Assets
Assets
Current
Current
Cash
Cash
Short-term investments (note 6)
Short-term investments (note 6)
Amounts receivable (note 7)
Amounts receivable (note 7)
Inventory (note 8)
Inventory (note 8)
Prepaid expenses and advances (note 20)
Prepaid expenses and advances (note 20)
Total Current Assets
Total Current Assets
Non-Current
Non-Current
Mining interest, plant and equipment (note 9)
Mining interest, plant and equipment (note 9)
Exploration and evaluation assets (note 10)
Exploration and evaluation assets (note 10)
Reclamation deposits
Reclamation deposits
Deferred tax assets (note 19)
Deferred tax assets (note 19)
Total Non-Current Assets
Total Non-Current Assets
Total Assets
Total Assets
Liabilities
Liabilities
Current
Current
Trade and other payables
Trade and other payables
Total Current Liabilities
Total Current Liabilities
Non-Current
Non-Current
Rehabilitation and closure cost provision (note 12)
Rehabilitation and closure cost provision (note 12)
Loan payable (notes 11 & 20)
Loan payable (notes 11 & 20)
Deferred tax liabilities (note 19)
Deferred tax liabilities (note 19)
Total Non-Current Liabilities
Total Non-Current Liabilities
Total Liabilities
Total Liabilities
July 31,
July 31,
2015
2015
July 31,
July 31,
2014
2014
$
$
$
$
$
$
$
$
$
$
3,370
3,370
2,615
2,615
3,435
3,435
2,037
2,037
1,349
1,349
12,806
12,806
49,846
49,846
3,411
3,411
165
165
2,969
2,969
56,391
56,391
69,197 $
69,197 $
$
$
1,950
1,950
1,950
1,950
1,162
1,162
1,305
1,305
12,674
12,674
15,141
15,141
17,091
17,091
$
$
5,454
5,454
4,324
4,324
3,409
3,409
2,464
2,464
891
891
16,542
16,542
44,488
44,488
-
-
-
-
4,064
4,064
48,552
48,552
65,094
65,094
3,252
3,252
3,252
3,252
1,128
1,128
-
-
13,167
13,167
14,295
14,295
17,547
17,547
The accompanying notes form an integral part of these consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
TSX:SAM / Annual Report 2015 | 31
3
3
Starcore International Mines Ltd.
Starcore International Mines Ltd.
Consolidated Statements of Financial Position
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
(in thousands of Canadian dollars)
As at
As at
Equity
Equity
Share capital (note 13)
Share capital (note 13)
Equity reserve
Equity reserve
Foreign currency translation reserve
Foreign currency translation reserve
Accumulated deficit
Accumulated deficit
Total Equity
Total Equity
Total Liabilities and Equity
Total Liabilities and Equity
Commitments (notes 13, 15 and 20)
Commitments (notes 13, 15 and 20)
Subsequent events (note 20)
Subsequent events (note 20)
Approved by the Directors:
Approved by the Directors:
July 31,
2015
July 31,
2015
July 31,
2014
July 31,
2014
$
$
$
45,354
$
11,173
5,065
(9,486)
45,354
11,173
5,065
(9,486)
44,023
11,213
(915)
(6,774)
44,023
11,213
(915)
(6,774)
52,106
52,106
47,547
47,547
$
$
69,197 $
69,197 $
65,094
65,094
“Robert Eadie”
“Robert Eadie”
Director
Director
“Gary Arca”
“Gary Arca”
Director
Director
The accompanying notes form an integral part of these consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
32 | Starcore International Mines Ltd. / TSX:SAM
4
4
Starcore International Mines Ltd.
Starcore International Mines Ltd.
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars except per share amounts)
(in thousands of Canadian dollars except per share amounts)
For the years ended July 31,
For the years ended July 31,
Revenues
Revenues
Mined ore
Mined ore
Purchased concentrate
Purchased concentrate
Total Revenues (note 16)
Total Revenues (note 16)
Cost of Sales
Cost of Sales
Mined ore
Mined ore
Purchased concentrate
Purchased concentrate
Depreciation and depletion
Depreciation and depletion
Total Cost of Sales
Total Cost of Sales
Earnings from mining operations
Earnings from mining operations
Financing income (costs) (note 11)
Financing income (costs) (note 11)
Foreign exchange gain
Foreign exchange gain
Professional and consulting fees
Professional and consulting fees
Management fees and salaries (notes 14 and 16)
Management fees and salaries (notes 14 and 16)
Office and administration
Office and administration
Other expenses
Other expenses
Shareholder relations
Shareholder relations
Write-down for obsolete equipment
Write-down for obsolete equipment
(Loss) earnings before taxes
(Loss) earnings before taxes
Income tax recovery (provision) (note 19)
Income tax recovery (provision) (note 19)
Current
Current
Deferred
Deferred
Earnings for the year
Earnings for the year
Other comprehensive income
Other comprehensive income
Item that may subsequently be reclassified to income
Item that may subsequently be reclassified to income
Foreign currency translation differences
Foreign currency translation differences
Comprehensive income for the year
Comprehensive income for the year
Basic earnings per share (note 18)
Basic earnings per share (note 18)
Diluted earnings per share (note 18)
Diluted earnings per share (note 18)
2015
2015
2014
2014
28,073
28,073
332
332
28,405
28,405
20,768
20,768
306
306
6,686
6,686
27,760
27,760
645
645
3
3
1,742
1,742
(1,115)
(1,115)
(1,210)
(1,210)
(1,556)
(1,556)
(91)
(91)
(128)
(128)
-
-
(1,710)
(1,710)
299
299
1,621
1,621
210
210
5,980
5,980
6,190
6,190
0.00
0.00
0.00
0.00
$ 33,136
$ 33,136
-
-
33,136
33,136
18,577
18,577
-
-
5,971
5,971
24,548
24,548
8,588
8,588
(286)
(286)
494
494
(402)
(402)
(1,538)
(1,538)
(1,467)
(1,467)
-
-
(233)
(233)
(125)
(125)
5,031
5,031
(601)
(601)
(1,465)
(1,465)
2,965
2,965
1,627
1,627
4,592
4,592
0.02
0.02
0.02
0.02
$
$
$
$
$
$
$
$
$
$
$
$
$
$
The accompanying notes form an integral part of these consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
TSX:SAM / Annual Report 2015 | 33
5
5
Starcore International Mines Ltd.
Starcore International Mines Ltd.
Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(in thousands of Canadian dollars)
For the years ended July 31,
For the years ended July 31,
2015
2015
2014
2014
Cash provided by
Cash provided by
Operating activities
Operating activities
Earnings for the year
Earnings for the year
Items not involving cash:
Items not involving cash:
Depreciation and depletion
Depreciation and depletion
Employee profit sharing provision (note 12)
Employee profit sharing provision (note 12)
Other expenses (note 5)
Other expenses (note 5)
Income tax (recovery) expense (note 19)
Income tax (recovery) expense (note 19)
Interest on long-term debt (note 11)
Interest on long-term debt (note 11)
Interest revenue
Interest revenue
Rehabilitation and closure cost accretion (note 12)
Rehabilitation and closure cost accretion (note 12)
Share-based payments (note 13)
Share-based payments (note 13)
Unwinding of discount on long-term debt (note 11)
Unwinding of discount on long-term debt (note 11)
Write-down for obsolete equipment
Write-down for obsolete equipment
Cash generated by operating activities before working capital
Cash generated by operating activities before working capital
changes
changes
Change in non-cash working capital items
Change in non-cash working capital items
Amounts receivable
Amounts receivable
Income tax paid
Income tax paid
Inventory
Inventory
Prepaid expenses and advances
Prepaid expenses and advances
Trade and other payables
Trade and other payables
Cash provided by operating activities
Cash provided by operating activities
Financing activities
Financing activities
Advance (repayment) of loan payable (note 11)
Advance (repayment) of loan payable (note 11)
Dividends paid (note 13)
Dividends paid (note 13)
Interest received (paid)
Interest received (paid)
Share issuances
Share issuances
Cash outflows for financing activities
Cash outflows for financing activities
Investing activities
Investing activities
Cash acquired on acquisition of AJC (note 5)
Cash acquired on acquisition of AJC (note 5)
Interest received
Interest received
Investment in exploration and evaluation assets
Investment in exploration and evaluation assets
Investment in subsidiaries
Investment in subsidiaries
Purchase of mining interest, plant and equipment
Purchase of mining interest, plant and equipment
Reclamation deposits
Reclamation deposits
Sale (purchase) of short-term investments (note 6)
Sale (purchase) of short-term investments (note 6)
Cash outflows for investing activities
Cash outflows for investing activities
Total (decrease) increase in cash
Total (decrease) increase in cash
Effect of foreign exchange rate changes on cash
Effect of foreign exchange rate changes on cash
Cash, beginning of year
Cash, beginning of year
Cash, end of year
Cash, end of year
Non-cash transactions - note 13
Non-cash transactions - note 13
$
$
210 $
210 $
6,688
6,688
-
-
175
175
(1,920)
(1,920)
-
-
(20)
(20)
79
79
144
144
-
-
-
-
5,356
5,356
-
-
16
16
519
519
(557)
(557)
(2,105)
(2,105)
3,229
3,229
1,289
1,289
(2,922)
(2,922)
7
7
386
386
(1,240)
(1,240)
4
4
-
-
(303)
(303)
(2,188)
(2,188)
(3,299)
(3,299)
(122)
(122)
2,002
2,002
(3,906)
(3,906)
(1,917)
(1,917)
(167)
(167)
5,454
5,454
3,370 $
3,370 $
$
$
2,965
2,965
6,004
6,004
(424)
(424)
-
-
2,066
2,066
33
33
(4)
(4)
84
84
466
466
104
104
125
125
11,419
11,419
(1,307)
(1,307)
192
192
(671)
(671)
1,675
1,675
437
437
11,745
11,745
(3,583)
(3,583)
-
-
(33)
(33)
19
19
(3,597)
(3,597)
-
-
4
4
-
-
-
-
(5,967)
(5,967)
-
-
(1,620)
(1,620)
(7,583)
(7,583)
565
565
(749)
(749)
5,638
5,638
5,454
5,454
The accompanying notes form an integral part of these consolidated financial statements.
The accompanying notes form an integral part of these consolidated financial statements.
34 | Starcore International Mines Ltd. / TSX:SAM
6
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Starcore International Mines Ltd.
Consolidated Statements of Changes in Equity
For the years ended July 31, 2015 and 2014
(in thousands of Canadian dollars except for number of shares)
u
q
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v
r
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Balance, July 31, 2013
Issued for cash pursuant to:
- Exercise of options
- at $0.15
Deferred tax effect of share issue costs
Share-based payments
Foreign currency translation differences
Earnings for the year
.
Balance, July 31, 2014
Issued for cash pursuant to:
- Acquisition of AJC
- Exercise of options
y
t
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n
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l
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Earnings for the year
n
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Balance, July 31, 2015
f
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h
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,
f
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,
-
$
-
-
-
Foreign
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Translation
Reserve
4
5
3
,
5
4
Accumulated
Deficit
(note 11)
Total
$ 43,752
$
10,754
$
(2,542) $
$
(9,739) $
42,225
0
0
0
,
5
2
1
-
-
-
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26
245
-
-
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-
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2,965
19
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466
1,627
2,965
143,515,465
44,023
11,213
(915)
(6,774)
47,547
5,856,382
2,575,000
-
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151,946,847
3
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5
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7
.
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The accompanying notes form an integral part of these consolidated financial statements.
TSX:SAM / Annual Report 2015 | 35
7
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
1.
Corporate Information
Starcore International Mines Ltd. is the parent company of its consolidated group (the “Company” or
“Starcore”) and was incorporated in Canada with its head office located at Suite 750 – 580 Hornby Street,
Vancouver, British Columbia, V6C 3B6.
Starcore is engaged in extracting and processing gold and silver in Mexico through the San Martin mine in
Queretaro, Mexico owned by Compañia Minera Peña de Bernal, S.A. de C.V. (“Bernal”), which was
purchased by the Company in 2007. The San Martin mine, which has been in operation since 1993 producing
gold and silver, is a self-sustaining mining operation in Mexico and is the Company’s sole source of
operating cash flows. The Company is also engaged in acquiring exploration assets in North America directly
and through corporate acquisitions (see notes 5 and 20).
2.
Basis of Preparation
a) Statement of Compliance
These consolidated financial statements for the Company have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”).
The financial statements were authorized for issue by the Board of Directors on October 27, 2015.
b) Basis of Measurement
The consolidated financial statements have been prepared on a historical cost basis, except certain
financial instruments, which are measured at fair value, as explained in the Company’s accounting
policies discussed in note 3.
The consolidated financial statements are presented in Canadian dollars, which is also the parent
company’s functional currency, and all values are rounded to the nearest thousand dollars, unless
otherwise indicated.
The preparation of consolidated financial statements in compliance with IFRS requires management to
make certain critical accounting estimates. It also requires management to exercise judgment in
applying the Company’s accounting policies. The areas involving a higher degree of judgment of
complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in note 4.
c) Basis of Consolidation
These consolidated financial statements include the accounts of the Company and all of its subsidiaries,
which are entities controlled by the Company. Control exists when the Company has the power to
govern the financial and operating policies of an entity so as to obtain benefits from the entity’s
activities. Subsidiaries are included in the consolidated financial results of the Company from the
effective date of acquisition up to the effective date of disposal or loss of control. The Company’s
wholly-owned subsidiary, Bernal, along with various other subsidiaries, carry out their operations in
Mexico, U.S.A. and in Canada.
All intra-group transactions, balances, income and expenses are eliminated, in full, on consolidation.
36 | Starcore International Mines Ltd. / TSX:SAM
8
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
3.
Summary of Significant Accounting Policies
The accounting policies set out below were applied consistently to all periods presented in these consolidated
financial statements, unless otherwise indicated.
a) Foreign Currency Translation
The functional currency of Starcore, the parent, is the Canadian dollar (“CAD”) and the functional
currency of its subsidiaries is the United States dollar (“USD”) (collectively “Functional Currency”).
Foreign currency accounts are translated into the Functional Currency as follows:
• At the transaction date, each asset, liability, revenue and expense denominated in a foreign
currency is translated into the Functional Currency by the use of the exchange rate in effect at
that date. At the period end date, unsettled monetary assets and liabilities are translated into
the Functional Currency by using the exchange rate in effect at the period end.
Foreign exchange gains and losses are recognized in net earnings and presented in the Consolidated
Statement of Operations and Comprehensive Income in accordance with the nature of the transactions
to which the foreign currency gains and losses relate, except for foreign exchange gains and losses from
translating available-for-sale investments in marketable securities which are recognized in other
comprehensive income as part of the total change in fair values of the securities. Unrealized foreign
exchange gains and losses on cash and cash equivalent balances denominated in foreign currencies are
disclosed separately in the Consolidated Statements of Cash Flows.
b) Foreign Operations
The assets and liabilities of foreign operations with Functional Currencies differing from the
presentation currency, including fair value adjustments arising on acquisition, are translated to CAD at
exchange rates in effect at the reporting date. The income and expenses of foreign operations with
Functional Currencies differing from the presentation currency are translated into CAD at the year-to-
date average exchange rates.
The Company’s foreign currency differences are recognised and presented in other comprehensive
income as a foreign currency translation reserve (“Foreign Currency Translation Reserve”), a
component of equity. When a foreign operation is disposed of such that control, significant influence or
joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is
reclassified to profit or loss as part of the gain or loss on disposal.
c) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and
other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of cash and subject to an insignificant risk of change in value.
At July 31, 2015, the Company has no cash equivalents.
d) Short term investments
Short term investments, which consist of fixed term deposits held at a bank with a maturity with a
maturity of more than three months at the time of issuance, are recorded at fair value.
TSX:SAM / Annual Report 2015 | 37
9
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
3.
Summary of Significant Accounting Policies – (cont’d)
e) Revenue Recognition
Revenue from the sale of metals is recognized when the significant risks and rewards of ownership
have passed to the buyer, it is probable that economic benefits associated with the transaction will flow
to the Company, the sale price can be measured reliably, the Company has no significant continuing
involvement and the costs incurred or to be incurred in respect of the transaction can be measured
reliably.
Revenues from metal concentrate sales are subject to adjustment upon final settlement of metal prices,
weights, and assays as of a date that may be up to two weeks after the shipment date. The Company
records adjustments to revenues monthly based on quoted forward prices for the expected settlement
period. Adjustments for weights and assays are recorded when results are determinable or on final
settlement. Accounts receivable for metal concentrate sales are therefore measured at fair value.
f)
Inventory
Finished goods and work-in-process are measured at the lower of average cost and net realizable value.
Net realizable value is calculated as the estimated price at the time of sale based on prevailing and long-
term metal prices less estimated future costs to convert the inventories into saleable form and estimated
costs to sell.
Ore extracted from the mines is processed into finished goods (gold and by-products in doré). Costs are
included in work-in-process inventory based on current costs incurred up to the point prior to the
refining process, including applicable depreciation and depletion of mining interests, and removed at
the average cost per recoverable ounce of gold. The average costs of finished goods represent the
average costs of work-in-process inventories incurred prior to the refining process, plus applicable
refining costs.
Supplies are measured at average cost. In the event that the net realizable value of the finished product,
the production of which the supplies are held for use in, is lower than the expected cost of the finished
product, the supplies are written down to net realizable value. Replacement costs of supplies are
generally used as the best estimate of net realizable value. The costs of inventories sold during the year
are presented in the Company’s profit and loss.
g) Mining Interest, Plant and Equipment
Mining interests represent capitalized expenditures related to the development of mining properties and
related plant and equipment.
Recognition and Measurement
On initial recognition, equipment is valued at cost, being the purchase price and directly attributable
cost of acquisition or construction required to bring the asset to the location and condition necessary to
be capable of operating in the manner intended by the Company, including appropriate borrowing costs
and the estimated present value of any future unavoidable costs of dismantling and removing items.
The corresponding liability is recognized within provisions.
38 | Starcore International Mines Ltd. / TSX:SAM
10
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
3.
Summary of Significant Accounting Policies – (cont’d)
g) Mining Interest, Plant and Equipment – (cont’d)
Recognition and Measurement – (cont’d)
Mining expenditures incurred either to develop new ore bodies or to develop mine areas in advance of
current production are capitalized. Mine development costs incurred to maintain current production are
included in the consolidated statement of operations. Exploration costs relating to the current mine in
production are expensed to net income as incurred due to the immediate exploitation of these areas or
an immediate determination that they are not exploitable.
Borrowing costs that are directly attributable to the acquisition and preparation for use, are capitalized.
Capitalization of borrowing costs, begins when expenditures are incurred and activities are undertaken
to prepare the asset for its intended use. The amount of borrowing costs capitalized cannot exceed the
actual amount of borrowing costs incurred during the period. All other borrowing costs are expensed as
incurred.
The capitalization of borrowing costs is discontinued when substantially all of the activities necessary
to prepare the qualifying asset for its intended use or sale are complete. Capitalized borrowing costs are
amortized over the useful life of the related asset.
Major Maintenance and Repairs
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that the future economic benefits associated with the item will
flow to the Company and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the Company’s profit or loss during the financial year in which they are
incurred.
Subsequent Costs
The cost of replacing part of an item of equipment is recognized in the carrying amount of the item if it
is probable that the future economic benefits embodied within the part will flow to the Company and its
costs can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of
the day-to-day servicing of equipment are recognized in the Company’s profit or loss as incurred.
Leased Equipment
Leased assets in which the Company receives substantially all of the risks and rewards of ownership of
the asset are capitalized as finance leases at the lower of the fair value of the asset or the estimated
present value of the minimum lease payments. The corresponding lease obligation is recorded within
debt on the statement of financial position.
Assets under operating leases are not capitalized and rental payments are included in earnings based on
the terms of the lease.
Derecognition
TSX:SAM / Annual Report 2015 | 39
11
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
Upon sale or abandonment, the cost of the property, plant, and equipment and related accumulated
depreciation or depletion, are removed from the accounts and any gains or losses thereon are included
in operations.
3.
Summary of Significant Accounting Policies – (cont’d)
g) Mining Interest, Plant and Equipment – (cont’d)
Depreciation and Impairment
Mining interest, plant and equipment are subsequently measured at cost less accumulated depreciation,
less any accumulated impairment losses, with the exception of land which is not depreciated. Depletion
of mine properties is charged on a unit-of-production basis over proven and probable reserves and
resources expected to be converted to reserves. Currently the depletion base is approximately 6 years of
expected production. Depreciation of plant and equipment and corporate office equipment, vehicles,
software and leaseholds is calculated using the straight-line method, based on the lesser of economic
life of the asset and the expected life of mine of approximately 6 years. Where components of an asset
have different useful lives, depreciation is calculated on each separate part. Depreciation commences
when an asset is available for use. At the end of the each calendar year estimates of proven and
probable gold reserves and a portion of resources expected to be converted to reserves are updated and
the calculations of amortization of mining interest, plant and equipment is prospectively revised.
The Company reviews and evaluates its mining interests, plant and equipment for impairment at least
annually or when events or changes in circumstances indicate that the related carrying amounts may not
be recoverable. Impairment is considered to exist if the recoverable value of a cash generating unit is
less than the carrying amount of the assets. An impairment loss is measured and recorded based on the
greater of the cash generating unit’s fair value less cost to sell or its value in use versus its carrying
value. Future cash flows are estimated based on expected future production, commodity prices,
operating costs and capital costs.
Mining interests, plant and equipment that have been impaired in prior periods are tested for possible
reversal of impairment whenever events or changes in circumstances indicate that the impairment has
reversed. If the impairment has reversed, the carrying amount of the asset is increased to its recoverable
amount but not beyond the carrying amount that would have been determined had no impairment loss
been recognized for the asset in the prior periods. A reversal of an impairment loss is recognized in the
consolidated statement of operations.
h) Rehabilitation and Closure Cost Provision
The Company records a provision for the estimated future costs of rehabilitation and closure of
operating and inactive mines and development projects, which are discounted to net present value using
the risk free interest rates applicable to the future cash outflows. Estimates of future costs represent
management’s best estimates which incorporate assumptions on the effects of inflation, movements in
foreign exchange rates and the effects of country and other specific risks associated with the related
liabilities. The provision for the Company’s rehabilitation and closure cost obligations is accreted over
time to reflect the unwinding of the discount with the accretion expense included in finance costs in the
Consolidated Statement of Operations and Comprehensive Income. The provision for rehabilitation and
closure cost obligations is re-measured at the end of each reporting period for changes in estimates and
circumstances. Changes in estimates and circumstances include changes in legal or regulatory
requirements, increased obligations arising from additional mining and exploration activities, changes
to cost estimates and changes to risk free interest rates.
40 | Starcore International Mines Ltd. / TSX:SAM
12
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
3.
Summary of Significant Accounting Policies – (cont’d)
h) Rehabilitation and Closure Cost Provision – (cont’d)
Rehabilitation and closure cost obligations relating to operating mines and development projects are
initially recorded with a corresponding increase to the carrying amounts of related mining properties.
Changes to the obligations are also accounted for as changes in the carrying amounts of related mining
properties, except where a reduction in the obligation is greater than the capitalized rehabilitation and
closure costs, in which case, the capitalized rehabilitation and closure costs is reduced to nil and the
remaining adjustment is included in production costs in the Consolidated Statement of Operations and
Comprehensive Income. Rehabilitation and closure cost obligations related to inactive mines are
included in production costs in the Consolidated Statement of Operations and Comprehensive Income
on initial recognition and subsequently when re-measured.
i)
Exploration and Evaluation Expenditures
Once the legal right to explore a property has been acquired, costs directly related to exploration and
evaluation (“E&E”) expenditures are recognized and capitalized, in addition to the acquisition costs.
These direct expenditures include such costs as materials used, surveying and sampling costs, drilling
costs, payments made to contractors, geologists, consultants, and depreciation on plant and equipment
during the exploration phase. Costs not directly attributable to E&E activities, including general and
administrative overhead costs, are expensed in the period in which they occur.
When a project is determined to no longer have commercially viable prospects to the Company, E&E
expenditures in respect of that project are deemed to be impaired. As a result, those E&E expenditures,
in excess of estimated recoveries, are written off to the Company’s profit or loss.
The Company assesses E&E assets for impairment when facts and circumstances suggest that the
carrying amount of an asset may exceed its recoverable amount.
Once the technical feasibility and commercial viability of extracting the mineral resource has been
determined, the property is considered to be a mine under development and is classified as “mines
under construction”. E&E assets are tested for impairment before the assets are transferred to
development properties.
Any incidental revenues earned in connection with exploration activities are applied as a reduction to
capitalized exploration costs.
j)
Financial Instruments
Financial instruments are classified as one of the categories below based upon the purpose for which
the asset was acquired. All transactions related to financial instruments are recorded on a trade date
basis. The Company’s accounting policy for each category is as follows:
Loans and Receivables
Loans and receivables are non-derivative financial assets resulting from the delivery of cash or other
assets by a lender to a borrower in return for a promise to repay on a specified date or dates, or on
demand. They are initially recognized at fair value plus transaction costs that are directly attributable to
their acquisition or issue, and subsequently carried at amortised cost using the effective interest rate
method, less any impairment losses.
TSX:SAM / Annual Report 2015 | 41
13
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
3.
Summary of Significant Accounting Policies – (cont’d)
j)
Financial Instruments – (cont’d)
Loans and Receivables
Amortised cost is calculated taking into account any discount or premium on acquisition and includes
fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are
recognized in the profit or loss when the loans and receivables are derecognized or impaired, as well as
through the amortization process.
The Company’s cash, short-term investments and amounts receivable are all accounted for as loans and
receivables.
Available-for-Sale
Non-derivative financial assets not included in the above category are classified as available-for-sale.
Available-for-sale investments are carried at fair value with changes in fair value recognized in
accumulated other comprehensive loss/ income. Where there is a significant or prolonged decline in
the fair value of an available-for-sale financial asset, which constitutes objective evidence of
impairment, the full amount of the impairment, including any amount previously recognized in other
comprehensive loss/income is recognized in the Company’s profit or loss. If there is no quoted market
price in an active market and fair value cannot be readily determined, available-for-sale investments are
carried at cost.
Purchases and sales of available-for-sale financial assets are recognized on a trade date basis. On sale
or impairment, the cumulative amount recognized in other comprehensive loss/income is reclassified
from accumulated other comprehensive loss/income to the Company’s profit or loss.
Impairment of Financial Assets
At each reporting date, the Company assesses whether there is any objective evidence that a financial
asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed
to be impaired if, there is objective evidence of impairment as a result of one or more events that has
occurred subsequent to the initial recognition of the asset and that event has an impact on the estimated
future cash flows of the financial asset or the group of financial assets.
Financial Liabilities
Financial liabilities are classified as other financial liabilities, based on the purpose for which the
liability was incurred, and comprised of trade and other payables, and loan payable. These liabilities
are recognized at fair value, net of any transaction costs directly attributable to the issuance of the
instrument and subsequently carried at amortised cost using the effective interest rate method. This
ensures that, any interest expense over the period to repayment is at a constant rate on the balance of the
liability carried in the statement of financial position. Interest expense in this context includes initial
transaction costs and premiums payable on redemption, as well as any interest or coupon payable while
the liability is outstanding.
Trade and other payables represent goods and services provided to the Company prior to the end of the
period which are unpaid. Trade payable amounts are unsecured and are usually paid within 30 days of
recognition.
42 | Starcore International Mines Ltd. / TSX:SAM
14
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
3.
Summary of Significant Accounting Policies – (cont’d)
j)
Financial Instruments – (cont’d)
Fair value hierarchy
Financial instruments recognized at fair value on the consolidated balance sheets must be classified into
one of the three following fair value hierarchy levels:
Level 1 – measurement based on quoted prices (unadjusted observed in active markets for
identical assets or liabilities;
Level 2 – measurement based on inputs other than quoted prices included in Level 1, that are
observable for the asset or liability;
Level 3 – measurement based on inputs that are not observable (supported by little or no market
activity) for the asset or liability.
The Company’s financial instruments recognized at fair value consist of short term investments
having a fair value of $2,615 (2014 – $4,324) measured in accordance with Level 1.
k)
Income Taxes
Current tax and deferred taxes are recognized in the Company’s profit or loss, except to the extent that
it relates to a business combination or items recognized directly in equity or in other comprehensive
loss/income.
Current income taxes are recognized for the estimated taxes payable or receivable on taxable income or
loss for the current year and any adjustment to income taxes payable in respect of previous years.
Current income taxes are determined using tax rates and tax laws that have been enacted or
substantively enacted by the period end date.
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability
differs from its tax base, except for taxable temporary differences arising on the initial recognition of
goodwill and temporary differences arising on the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of the transaction affects neither
accounting nor taxable profit or loss.
Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary
differences is restricted to those instances where it is probable that future taxable profit will be available
against which the deferred tax asset can be utilised. At the end of each reporting period, the Company
reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized
deferred tax asset to the extent that it has become probable that future taxable profit will allow the
deferred tax asset to be recovered.
l)
Share Capital
Financial instruments issued by the Company are classified as equity, only to the extent that they do not
meet the definition of a financial liability or asset. The Company’s common shares, share warrant and
share options are classified as equity instruments.
TSX:SAM / Annual Report 2015 | 43
15
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
Incremental costs, directly attributable to the issue of new shares, warrants or options, are shown in
equity as a deduction, net of tax, from proceeds.
Summary of Significant Accounting Policies – (cont’d)
3.
m) Profit or Loss per Share
Basic profit or loss per share is computed by dividing the Company’s profit or loss applicable to
common shares by the weighted average number of common shares outstanding for the relevant period.
Diluted profit or loss per share is computed by dividing the Company’s profit or loss applicable to
common shares, by the sum of the weighted average number of common shares outstanding and all
additional common shares that would have been outstanding if potentially dilutive instruments were
converted at the beginning of the period.
n)
Share-based Payments
Where equity-settled share options are awarded to employees or non-employees, the fair value of the
options at the date of grant is charged to the Company’s profit or loss over the vesting period. The
number of equity instruments expected to vest at each reporting date, are taken into account so that the
cumulative amount recognized over the vesting period is based on the number of options that eventually
vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the
options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of
whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value
of the options, measured immediately before and after the modifications, is charged to the Company’s
profit or loss over the remaining vesting period.
Where equity instruments are granted to employees, they are recorded at the fair value of the equity
instrument granted at the grant date. The grant date fair value is recognized in the Company’s profit or
loss over the vesting period, described as the period during which all the vesting conditions are to be
satisfied.
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods
or services received in the Company’s profit or loss, unless they are related to the issuance of shares.
Amounts related to the issuance of shares are recorded as a reduction of share capital.
When the value of goods or services received in exchange for the share-based payment cannot be
reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the
model is adjusted, based on management’s best estimate, for effects of non-transferability, exercise
restrictions and behavioural considerations.
All equity-settled share based payments are reflected in equity reserve, until exercised. Upon exercise,
shares are issued from treasury and the amount reflected in equity reserve is credited to share capital,
adjusted for any consideration paid.
Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when
vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an
acceleration of vesting and immediately recognizes the amount that otherwise would have been
recognized for services received over the remainder of the vesting period.
44 | Starcore International Mines Ltd. / TSX:SAM
16
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
3.
Summary of Significant Accounting Policies – (cont’d)
n)
Share-based Payments – (cont’d)
Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity
interest except to the extent that the payment exceeds the fair value of the equity instrument granted,
measured at the repurchase date. Any such excess is recognized as an expense.
Where vesting conditions are not satisfied and options are forfeited, the Company reverses the fair
value amount of the unvested options which had been recognized over the vesting period.
o) New and Revised Accounting Standards
The following accounting standards have been issued or amended but are not yet effective. The
Company has not early adopted these new and amended standards. The Company continues to evaluate
the new standards but currently no material impact is expected as a result of the adoptions of these new
and amended standards:
•
•
IFRS 9 “Financial Instruments”
IFRS 15 “Revenue from Contracts with Customers”
• Amendments to IAS 16 “Property Plant and Equipment” and IAS 38 “Intangible Assets”
• Financial instruments
4.
Critical Accounting Estimates and Judgments
The Company makes estimates and assumptions about the future that affect the reported amounts of assets
and liabilities. Estimates and judgments are continually evaluated based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances. In
the future, actual experience may differ from these estimates and assumptions.
The effect of a change in accounting estimate is recognized prospectively by including it in the Company’s
profit or loss in the period of the change, if it affects that period only, or in the period of the change and
future periods, if the change affects both.
Information about critical judgments in applying accounting policies that have the most significant risk of
causing material adjustment to the carrying amounts of assets and liabilities recognized in the consolidated
financial statements within the next financial year are discussed below:
a) Economic Recoverability and Profitability of Future Economic Benefits of Mining Interests
Management has determined that mining interests, evaluation, development and related costs incurred
which have been capitalized are economically recoverable. Management uses several criteria in its
assessments of economic recoverability and probability of future economic benefit including geologic
and metallurgic information, history of conversion of mineral deposits to proven and probable reserves,
scoping and feasibility studies, accessible facilities, existing permits and life of mine plans.
TSX:SAM / Annual Report 2015 | 45
17
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
4.
Critical Accounting Estimates and Judgments – (cont’d)
b)
Impairments
The Company assesses its mining interest, plant and equipment assets annually to determine whether
any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the
recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and
value in use. These assessments require the use of estimates and assumptions such as long-term
commodity prices, discount rates, future capital requirements, exploration potential and operating
performance.
c) Rehabilitation Provisions
Rehabilitation provisions have been created based on the Company’s internal estimates. Assumptions,
based on the current economic environment, have been made which management believes are a
reasonable basis upon which to estimate the future liability. These estimates take into account any
material changes to the assumptions that occur when reviewed regularly by management. Estimates are
reviewed annually and are based on current regulatory requirements. Significant changes in estimates
of contamination, restoration standards and techniques will result in changes to provisions from period
to period. Actual rehabilitation costs will ultimately depend on future market prices for the
rehabilitation costs, which will reflect the market condition at the time that the rehabilitation costs are
actually incurred. The final cost of the currently recognized rehabilitation provision may be higher or
lower than currently provided.
The inflation rate applied to estimated future rehabilitation and closure costs is 3.5% and the discount
rate currently applied in the calculation of the net present value of the provision is 8%.
d)
Income Taxes
Significant judgment is required in determining the provision for income taxes. There are many
transactions and calculations undertaken during the ordinary course of business for which the ultimate
tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated
tax audit issues based on the Company’s current understanding of tax law. For matters where it is
probable that an adjustment will be made, the Company records its best estimate of the tax liability
including the related interest and penalties in the current tax provision. Management believes they have
adequately provided for the probable outcome of these matters; however, the final outcome may result
in a materially different outcome than the amount included in the tax liabilities.
In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the
extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same
taxation authority and the same taxable entity against which the unused tax losses can be utilized.
However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain
tests at the time the losses are recuperated.
e)
Share-based Payment
The Company measures the cost of equity-settled transactions with employees, and some with non-
employees, by reference to the fair value of the equity instruments at the date at which they are granted.
Estimating fair value for share-based payment transactions requires determining the most appropriate
valuation model, which is dependent on the terms and conditions of the grant.
46 | Starcore International Mines Ltd. / TSX:SAM
18
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
4.
Critical Accounting Estimates and Judgments – (cont’d)
e)
Share-based Payment – (cont’d)
This estimate also requires determining the most appropriate inputs to the valuation model including the
expected life of the share option, expected forfeiture rate, volatility and dividend yield and making
assumptions about them. The assumptions and models used for estimating fair value for share-based
payment transactions are disclosed in note 13.
f) Mineral Reserves and Mineral Resource Estimates
Mineral reserves are estimates of the amount of ore that can be economically and legally extracted from
the Company’s mining properties. The Company estimates its mineral reserve and mineral resources
based on information compiled by Qualified Persons as defined by Canadian Securities Administrators
National Instrument 43-101 Standards for Disclosure of Mineral Projects. Such information includes
geological data on the size, depth and shape of the mineral deposit, and requires complex geological
judgments to interpret the data. The estimation of recoverable reserves is based upon factors such as
estimates of commodity prices, future capital requirements, and production costs along with geological
assumptions and judgments made in estimating the size and grade that comprise the mineral reserves.
Changes in the mining reserve or mineral resource estimates may impact the carrying value of mineral
properties and deferred development costs, property, plant and equipment, provision for site
reclamation and closure, recognition of deferred income tax assets and depreciation and amortization
charges.
g) Units of production depletion
Estimated recoverable reserves are used in determining the depreciation of mine specific assets. This
results in depreciation charges proportional to the depletion of the anticipated remaining life of mine
production. Each item’s life, which is assessed annually, has regard to both its physical life limitations
and to present assessments of economically recoverable reserves of the mine property at which the asset
is located. These calculations require the use of estimates and assumption, including the amount of
recoverable reserves and estimate of future capital expenditure. Changes are accounted for
prospectively.
5.
Acquisition of Subsidiaries
Acquisition of Creston Moly Corp.
On February 19, 2015, the Company entered into an agreement to acquire all of the shares of Creston Moly
Corp. (“Creston Moly”) from Deloitte Restructuring Inc, in its capacity as trustee in bankruptcy of Mercator
Minerals Ltd. (the “Trustee”), at a purchase price of $2,013 (the “Creston Transaction”).
The Supreme Court of Canada discharged Creston Moly from bankruptcy which was formerly a wholly-
owned subsidiary of the Trustee. Creston Moly is a British Columbia company that owns, through its wholly-
owned subsidiaries, a 100% interest in three molybdenum-copper projects (see note 10):
•
•
•
The El Creston Project in Sonora, Mexico;
The Ajax Project in British Columbia, Canada; and
The Molybrook Project in Newfoundland, Canada.
TSX:SAM / Annual Report 2015 | 47
19
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
5.
Acquisition of Subsidiaries – (cont’d)
Acquisition of Creston Moly Corp. – (cont’d)
The Creston Transaction was accounted for as an acquisition of assets. The purchase price of $2,013 has been
allocated to the assets acquired based on their relative fair value on the closing date. The purchase price
allocation is a result of management’s best estimates and assumptions after taking into account all relevant
information available.
The purchase price has been allocated entirely to the mineral properties acquired as the Company assumed no
liabilities or other assets in the Creston Transaction.
Acquisition of American Consolidated Minerals Corp.
On November 20, 2014, the Company announced the approval of the proposed acquisition of American
Consolidated Minerals Corp. (“AJC”) by the AJC shareholders pursuant to a plan of arrangement (the “AJC
Transaction”). Before the AJC Transaction, AJC and Starcore had directors in common.
AJC shareholders received one common share of the Company (a “Starcore Share”) for three (3) common
shares of AJC (the “AJC Shares”) held by such AJC shareholder (the “Exchange Ratio”). In addition, each
holder of the outstanding stock options and common share purchase warrants of AJC (the “AJC Options”)
received replacement options or warrants of the Company (the “Starcore Options”) based upon the Exchange
Ratio, and the exercise price of the replacement Starcore Options was adjusted based upon the Exchange
Ratio.
The Company issued 5,856,382 shares at $0.13 per share for total consideration of $761. Prior to the
acquisition, there were 17,569,191 AJC Shares, Nil AJC Options and 1,671,416 common share purchase
warrants outstanding. In connection with the Transaction, the Company issued 5,856,382 Starcore shares, and
557,135 common share purchase warrants. Following completion of the Transaction, former AJC
shareholders held less than 4% of the outstanding Company shares and AJC has been de-listed from the TSX
Venture Exchange.
The AJC Transaction was accounted for as acquisition of assets. The purchase price of $761 has been
allocated to the assets acquired based on their relative fair values on the closing date. The purchase price
allocation is a result of management’s best estimates and assumptions after taking into account all relevant
information available. The purchase price has been allocated as follows:
Assets
Cash
Amounts receivable
Reclamation deposits
Mineral properties (note 10)
Total assets
Less: Trade and other payables
Net assets acquired
Net assets Consideration:
$
4
25
43
1,029
1,101
340
761
48 | Starcore International Mines Ltd. / TSX:SAM
20
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
6.
Short-term Investments
Shares (5,856,382 shares issued at $0.13 per share)
$
761
At July 31, 2015, the Company held a Guaranteed Investment Certificate (“GIC”) denominated in USD with
a market value of $2,615 (2014 - $3,924), earning interest income at 0.2% per annum and maturing on
November 5, 2015. The Company no longer holds any GIC’s denominated in Mexican Pesos (2014 - $400).
These GICs are cashable at the Company’s option and are considered to be highly liquid. The Company’s
short-term investments are held at one financial institution and as such the Company is exposed to the risks
of those financial institutions.
7.
Amounts Receivable
As at July 31,
Taxes receivable
Trade receivables
Other
8.
Inventory
As at July 31,
Carrying value of inventory:
Doré
Work-in-process
Stockpile
Supplies
2015
2014
$
3,202
-
233
3,435
$
2,856
351
202
3,409
2015
2014
$
1,051
112
118
756
2,037
$
1,141
190
238
895
2,464
$
$
$
$
TSX:SAM / Annual Report 2015 | 49
21
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
9. Mining Interest, Plant and Equipment
Cost
Balance, July 31, 2013
Additions
Write-down of equipment
Effect of foreign exchange
Balance, July 31, 2014
Additions
Effect of foreign exchange
Balance, July 31, 2015
Depreciation
Balance, July 31, 2013
Depreciation for the year
Write-down of equipment
Effect of foreign exchange
Balance, July 31, 2014
Depreciation for the year
Effect of foreign exchange
Balance, July 31, 2015
Carrying amounts
Balance, July 31, 2014
Balance, July 31, 2015
Mining
Interest
Plant and
Equipment
Corporate
Office
Equipment
Total
$
49,358 $
11,685 $
3,464
-
3,037
55,859
2,038
11,162
2,503
(253)
958
14,893
1,109
3,054
325 $
-
-
-
325
152
-
61,368
5,967
(253)
3,995
71,077
3,299
14,216
$
$
$
$
$
69,059 $
19,056 $
477 $
88,592
14,634 $
5,012
-
933
20,579
5,482
4,219
4,417 $
1,041
(129)
409
5,738
1,204
1,250
239 $
33
-
-
272
2
-
19,290
6,086
(129)
1,342
26,589
6,688
5,469
30,280 $
8,192 $
274 $
38,746
35,280 $
38,779 $
9,155 $
10,864 $
53 $
203 $
44,488
49,846
50 | Starcore International Mines Ltd. / TSX:SAM
22
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
10.
Exploration and Evaluation Assets
Acquisition costs:
Balance, August 1, 2014
Acquisition Payments
Total option payments
Exploration costs:
Balance, August 1, 2014
Geological
Land taxes
Maintenance
Total exploration expenditures
Effect of foreign exchange
AJC
Properties
Creston
Properties
Total
$
$
$
-
1,079
$
-
2,001
$
-
3,080
1,079
$
2,001
$
3,080
$
-
2
10
13
25
80
$
-
1
-
225
226
-
-
3
10
238
251
80
Balance, July 31, 2015
$
1,184
$
2,227
$
3,411
a) Acquisition of AJC
Pursuant to the Acquisition of AJC (note 5), the Company has acquired the right to 3 properties as
follows:
i)
Lone Ranch, U.S.A
The Company has acquired the right to a 100% undivided interest, subject to a 3% net smelter
royalty (“NSR”), in 73 mining claims located in Ferry County, Washington State, United States of
America (“Lone Ranch”) from MinQuest Inc. (“MinQuest”). Consideration to be paid for the
interest is USD$410, and the Company must incur total exploration expenditures of USD$1,225
($175 incurred) on the property, by the third anniversary of the “New Effective Date” as agreed by
MinQuest.
The New Effective Date shall be the earlier of October 15, 2018 or the date the Company enters
into a joint venture agreement over the property or the date that the Company completes a bankable
feasibility study on the property.
The optionor has also granted the Company the right to purchase up to one-half of the Net Smelter
Return (“NSR”) (or 1.5%) on the basis of USD$1,500 per each 1% of the royalty. If the Company
does not incur the exploration expenditures as specified, the unpaid portions may be paid to the
optionor to maintain the option.
TSX:SAM / Annual Report 2015 | 51
23
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
10. Exploration and Evaluation Assets – (cont’d)
a) Acquisition of AJC – (cont’d)
ii)
Toiyabe, U.S.A
The Company has the right to acquire a 100% undivided interest, subject to a 3% NSR, in 165
mining claims located in Lander County, Nevada, United States of America (“Toiyabe”) from
MinQuest. Consideration to be paid for the interest is USD$900 and the Company must incur total
exploration expenditures of USD$1,025 (USD$1,025 incurred) on the property, by the fifth
anniversary of the “New Effective Date” as agreed by MinQuest.
The New Effective Date shall be the earlier of October 15, 2018 or the date the Company enters
into a joint venture agreement over Toiyabe or the date that the Company completes a bankable
feasibility study on the property.
The optionor has also granted the Company the right to purchase up to one-half of the NSR (or
1.5%) on the basis of USD$2,000 per each 1% of the royalty.
iii) Sierra Rosario, Mexico
The Company acquired a 50% interest in the 978-hectare Sierra Rosario Property, over 2 claims
that are located in the state of Sinaloa, Mexico (“Sierra Rosario”). During the year ended July 31,
2015, the Company acquired the remaining 50% interest from the optionor for $25 and a 1% NSR
over the entire property.
b) Acquisition of Creston Moly
Pursuant to the acquisition of Creston (note 5), the Company has acquired the right to 3 properties as
follows:
i)
El Creston Project, Mexico
The Company acquired 100% interest in the 11,363 hectare El Creston molybdenum property over
9 claims. The property, centered 145 kilometres northeast of Hermosillo, State of Sonora, Mexico
near the village of Opodepe, hosts several zones of porphyry-style molybdenum (“Mo”)/copper
(“Cu”) mineralization including the Main and Red Hill Zones. The mineral concessions are subject
to a 3% net profits interest retained by the vendors.
ii) Ajax Project, Canada
Ajax Molybdenum Property is comprised of 11,718 hectares and is located 13 km north of Alice
Arm, British Columbia. The Ajax Property occupies a surface area of approximately 600 by 650
meters and is in the advanced stage of exploration.
The Company maintains a 100% interest in six mineral claims known as the Ajax Claims in B.C.
52 | Starcore International Mines Ltd. / TSX:SAM
24
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
10. Exploration and Evaluation Assets – (cont’d)
b) Acquisition of Creston Moly – (cont’d)
iii) Molybrook Project, Canada
The Company now owns 100% of 27 mineral claims of the Moly Brook molybdenum property,
located 2.5 km from the Hamlet of Grey River on the southern coast of Newfoundland, pursuant to
the acquisition of Creston Moly Corp. The Moly Brook property is subject to a 2% net smelter
royalty (“NSR”), of which 1.5% can be purchased by the Company for $1,500. In addition, the
Company acquired:
•
•
•
•
The Moly Brook Extension property, which consists of 4 mineral claims and adjoins the
southern boundary of the Company’s Moly Brook molybdenum property. The extension
property is subject to a 2% NSR, of which 1.5% can be purchased by the Company for
$1,500.
The Grey River Gold property immediately to the east of the Moly Brook molybdenum
property. The property consists of 5 mineral claims and is subject to a 2% NSR, of which
1% can be purchased back for $1,500.
The Grey River West property, which consists of 40 mineral claims. The property is
subject to a 2% NSR, of which 1% can be purchased back for $1,500.
The Moly Brook North which consists of 18 claims which border on the northern side of
the Moly Brook Property, and borders the Grey River West property. The property will be
subject to a 2% NSR of which 1% can be purchased by the Company for $1,500. The
Company also owned 100% of 51 mineral claims north of the Moly Brook North property.
To date, almost all exploration has been completed on the Molybrook Zone where a large
porphyry molybdenum deposit has been outlined.
11. Loan Payable
During the year ended July 31, 2012, the Company secured an $11 million credit facility (the “Facility”) with
Sprott Resource Lending. The facility was used to settle the hedge liability originally entered into with
Investec Bank PLC pursuant to a Loan Facility entered into on purchase of the mine in 2007. On August 30,
2013, the Company paid the remaining $3,583 of the Facility, settling its obligation in full and without
penalty. The Company made payments consisting of $3,583 in repayment of principal and $33 of interest. In
the quarter ended October 31, 2013, the remaining $104 of the Discount was recognized as a financing cost
in the Company’s total earnings and the Company paid $69 in legal fees pursuant to the settlement of the
Facility which were recognized in the Consolidated Statements of Operations and Comprehensive Income as
incurred.
During the year ended July 31, 2015, the Company secured a USD $1,000 (CDN $1,305) loan with a lender.
The funds will be used to advance the Altiplano Project (note 20). The loan is secured against certain assets
of the Company and bears interest at 11% per annum, compounded monthly with interest payment payable
monthly on the last business day of each month. The full principal plus accrued interest on the loan shall be
repayable to the lender on August 31, 2017.
TSX:SAM / Annual Report 2015 | 53
25
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
11. Loan Payable – (cont’d)
The Company’s financing (income) costs for the years ended July 31, 2015 and 2014 as reported on its
Consolidated Statement of Operations and Comprehensive Income can be summarized as follows:
For the year ended July 31,
2015
2014
Unwinding of discount on rehabilitation and closure accretion (note 12)
Facility discount unwinding
Facility interest expense
Facility settlement legal fees
Interest income
Gain on forgiveness of debt
Interest revenue
$
$
79
-
-
-
(53)
(9)
(20)
84
104
33
69
-
-
(4)
$
(3)
$
286
12. Rehabilitation and Closure Cost Provision
The Company’s asset retirement obligations consist of reclamation and closure costs for the mine. At
July 31, 2015, the present value of obligations is estimated at $1,162 (2014 - $1,128) based on expected
undiscounted cash-flows at the end of the mine life of 19,866,000 Mexican Pesos (“MP”) or $1,615 (2014 -
$1,693), which is calculated annually over 5 to 10 years. Such liability was determined using a discount rate
of 8% (2014 – 8%) and an inflation rate of 3.5% (2014 – 3.5%).
Significant reclamation and closure activities include land rehabilitation, demolition of buildings and mine
facilities, closing portals to underground mining areas and other costs.
Changes to the reclamation and closure cost balance during the year are as follows:
Balance, beginning of year
Accretion expense
Foreign exchange fluctuation
July 31, 2015
July 31, 2014
$
$
$
1,128
79
(45)
1,053
84
(9)
1,162
$
1,128
54 | Starcore International Mines Ltd. / TSX:SAM
26
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
13.
Share Capital
a)
Common Shares
The Company is authorized to issue an unlimited number of common shares, issuable in series.
The holders of common shares are entitled to one vote per share at meetings of the Company and to
receive dividends, which may be declared from time-to-time. All shares are ranked equally with
regard to the Company’s residual assets.
During the year ended July 31, 2015, the Company issued:
-
2,575,000 shares pursuant to the exercise of options at $0.15 per share for proceeds of $386. The
fair value of the options as determined on the date of issuance, being $184, was transferred to the
Company’s share capital from equity reserve on exercise.
5,856,382 shares pursuant to the plan of arrangement at $0.13 per share whereby the Company
acquire all of the outstanding common shares of AJC (note 5).
-
During the year ended July 31, 2014, the Company issued:
-
125,000 shares pursuant to the exercise of options at $0.15 per share for proceeds of $19. The fair
value of the options as determined on the date of issuance, being $7, was transferred to the
Company’s share capital from equity reserve on exercise.
b) Warrants
During the year ended July 31, 2015, in conjunction with the acquisition of AJC (note 5), the
Company issued 557,135 warrants. The fair value of these warrants was minimal and as such, no
amount was recorded for the issued warrants. Each warrant entitles the holder to acquire one common
share of the Company, at $0.30 until June 16, 2016. Before the issuance of these warrants there were
no warrants outstanding.
The Company calculated the fair value of the share component to be equal of the market price for the
shares on the date of AJC acquisition, which was $0.13 per share. A summary of the Company’s
outstanding share purchase warrants at July 31, 2015 and 2014 and the changes during the years then
ended is presented below:
Outstanding at July 31, 2013
Warrants expired
Outstanding at July 31, 2014
Warrants issued
Outstanding at July 31, 2015
Number of
warrants
4,505,000
(4,505,000)
-
557,135
557,135
Weighted
average
exercise price
$
$
$
$
0.35
0.35
-
0.30
0.30
A summary of the Company’s outstanding warrants at July 31, 2015 is as follows:
TSX:SAM / Annual Report 2015 | 55
27
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
Number
Outstanding
557,135
Weighted
Average Price
$0.30
Weighted
Average Life
0.88
13.
Share Capital – (cont’d)
c)
Share-based Payments
The Company, in accordance with the policies of the TSX, was previously authorized to grant options
to directors, officers, and employees to acquire up to 20% of the amount of common stock
outstanding. Options could be granted for a maximum term of 5 years. No options were granted in the
year ended July 31, 2015.
In January 2014, the Company’s shareholders voted to cancel the Company’s option plan and, as a
result, the Company’s Board of Directors may not grant further options. The Company’s management
and directors are reviewing alternative compensation arrangements for the Company’s employees and
directors. The following is a summary of changes in options from July 31, 2013, 2014 and 2015:
Number of
Shares
Weighted Average
Exercise Price
Balance at July 31, 2013
Granted
Exercised
Forfeited/expired
Balance at July 31, 2014
Exercised
Forfeited/expired
13,180,000
5,645,000
(125,000)
(100,000)
18,600,000
(2,575,000)
(4,640,000)
Outstanding and Exercisable at July 31, 2015
11,385,000
The following is a summary of outstanding stock options at July 31, 2015:
$0.23
$0.22
$0.15
$0.15
$0.23
$0.15
$0.16
$0.27
Number
Outstanding
150,000
400,000
1,940,000
3,250,000
800,000
275,000
200,000
200,000
4,170,000
Weighted
Average
Exercise Price
$0.15
$0.20
$0.25
$0.37
$0.25
$0.20
$0.23
$0.25
$0.22
11,385,000
$0.27
Weighted
Average Life
0.77
1.46
1.49
1.70
3.06
3.06
3.10
3.12
3.46
2.47
56 | Starcore International Mines Ltd. / TSX:SAM
28
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
13.
Share Capital – (cont’d)
c)
Share-based Payments – (cont’d)
The fair values of stock options granted have been estimated using the Black-Scholes Option Pricing
Model based on the following weighted average assumptions:
Weighted average share price
Weighted average exercise price
Risk-free interest rate
Expected life
Expected volatility
Expected dividend yield
2014
$0.22
$0.22
1.62%
5 years
74.01%
0%
During the year ended July 31, 2015, the Company had share-based compensation expense of $144
(2014: $466), which has been recorded in the statement of comprehensive income and credited to
equity reserve. These amounts have been expensed as follows:
For the year ended July 31,
2015
2014
Cost of sales – Mined ore
Management fees and salaries
Office and administration
d)
Dividend Paid and Declared
$
$
$
18
120
6
144
$
48
365
53
466
During the year ended July 31, 2015, the Board of Directors declared the first annual dividend in the
Company’s history. A dividend of $0.02 per share (total of $2,922) was paid on the Common Shares
of the Company on September 30, 2014 to shareholders of record on August 29, 2014.
14.
Financial Instruments
All significant financial assets, financial liabilities and equity instruments of the Company are either
recognized or disclosed in the consolidated financial statements together with other information relevant for
making a reasonable assessment of future cash flows, interest rate risk and credit risk. Cash and short-term
investments are carried at their fair value. There are no other material differences between the carrying
values and the fair values of any financial assets or liabilities.
In the normal course of business, the Company’s assets, liabilities and future transactions are impacted by
various market risks, including currency risks associated with inventory, revenues, cost of sales, capital
expenditures, interest earned on cash and the interest rate risk associated with floating rate debt.
a) Currency Risk
Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange
rates and the degree of volatility of these rates. The Company does not use derivative instruments to
reduce its exposure to foreign currency risk. At July 31, 2015, the Company had the following financial
assets and liabilities denominated in CAD and denominated in MP:
TSX:SAM / Annual Report 2015 | 57
29
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
14.
Financial Instruments – (cont’d)
a) Currency Risk – (cont’d)
Cash
Other working capital amounts - net
CAD
Dollars
$ 202
$ 183
Mexican Pesos
(MP)
MP
1,555
MP 31,080
At July 31, 2015, US dollar amounts were converted at a rate of $1.305 Canadian dollars to $1 US dollar
and Mexican Pesos were converted at a rate of MP16.064 to $1 US Dollar. A 10% increase or decrease in
the US dollar exchange may increase or decrease annual earnings from mining operations by
approximately $46. A 10% increase or decrease in the MP exchange rate will decrease or increase annual
earnings from mining operations by approximately $21.
b)
Interest Rate Risk
The Company’s cash earns interest at variable interest rates. While fluctuations in market rates do not
have a material impact on the fair value of the Company’s cash flows, future cash flows may be affected
by interest rate fluctuations. The Company is not significantly exposed to interest rate fluctuations and
interest rate risk consists of two components:
(i)
To the extent that payments made or received on the Company’s monetary assets and liabilities
are affected by changes in the prevailing market interest rates, the Company is exposed to interest
rate cash flow risk.
(ii) To the extent that changes in prevailing market interest rates differ from the interest rates in the
Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk.
c) Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and
cause the other party to incur a financial loss. The Company is exposed to credit risk with respect to its
cash and short-term investments, the balance of which at July 31, 2015 is $3,370 (2014 - $5,454) and
$2,615 (2014 - $4,324), respectively. Cash of $1,371 (2014 - $151) and short-term investments of $Nil
(2014 - $400) are held at a Mexican financial institution, the remainder of $1,999 (2014 - $5,303) and
the short-term investment of $2,615 (2014 - $3,924) are held at a chartered Canadian financial
institution; the Company is exposed to the risks of those financial institutions. There are no trade
receivables owed and the taxes receivable are comprised of Mexican VAT taxes receivable of $3,167
and GST receivable of $35, which are subject to review by the respective tax authority.
d) Liquidity Risk
Liquidity risk arises from the excess of financial obligations over available financial assets due at any
point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily
available reserves in order to meet its liquidity requirements. The Company accomplishes this by
achieving profitable operations and maintaining sufficient cash reserves. As at July 31, 2015, the
Company was holding cash of $3,370 (2014 - $5,454) and short-term investments of $2,615 (2014 -
$4,324).
58 | Starcore International Mines Ltd. / TSX:SAM
30
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
14.
Financial Instruments – (cont’d)
d) Liquidity Risk – (cont’d)
Obligations due within twelve months
of July 31,
2015
2016
2017
2018
2019 and
beyond
Trade and other payables
Reclamation and closure obligations
$
1,950 $
-
- $
-
- $
-
- $
-
-
1,615
The Company’s trade and other payables are due in the short term. Long-term obligations include the
Company’s reclamation and closure cost obligations, other long-term liabilities and deferred income
taxes. Management believes that profits generated from the mine will be sufficient to meet its financial
obligations.
e) Commodity Risk
Mineral prices and marketability fluctuate and any decline in mineral prices may have a negative effect
on the Company. Mineral prices, particularly gold and silver prices, have fluctuated widely in recent
years. The marketability and price of minerals which may be produced and sold by the Company will be
affected by numerous factors beyond the control of the Company. These other factors include delivery
uncertainties related to the proximity of its resources to processing facilities and extensive government
regulations related to price, taxes, royalties, allowable production land tenure, the import and export of
minerals and many other aspects of the mining business. Declines in mineral prices may have a negative
effect on the Company. A 10% decrease or increase in metal prices may result in a decrease or increase
of USD $2,000 in revenue and net income.
15. Commitments and Related Party Transactions
Except as disclosed elsewhere in these consolidated financial statements, the Company has the following
commitments outstanding at July 31, 2015:
a) As at July 31, 2015, the Company has shared lease commitments for office space of approximately
$144 per year, expiring at various dates up to April 2020, which includes minimum lease payments and
estimated taxes, but excluded operating costs, taxes and utilities, to expiry.
b) As at July 31, 2015, the Company has a land lease agreement commitment with respect to the land at
the mine site, for $132 per year until December 2017.
c) As at July 31, 2015 the Company has management contracts to officers and directors totaling $600 per
year, payable monthly, expiring in January 2017.
TSX:SAM / Annual Report 2015 | 59
31
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
15. Commitments and Related Party Transactions – (cont’d)
During the years ended July 31, 2015 and 2014, the Company paid the following amounts to key
management and directors:
For the year ended July 31,
2015
2014
Management fees
Legal fees
Directors fees
Share-based payments
Total
$
$
840
95
60
107
900
14
41
215
$
1,102
$
1,170
16.
Segmented Information
The Company operates in three reportable geographical and one operating segment. Selected financial
information by geographical segment is as follows:
Revenue
Earnings (loss) for the year
Mining interest, plant and equipment
Non-current assets
Total assets
Revenue
Earnings (loss) for the year
Mining interest, plant and equipment
Total assets
$
$
Mexico
28,405
2,563
49,492
55,375
65,324
$
Canada
$
-
(2,379)
273
2,545
4,786
Mexico
Canada
$
33,136
5,859
44,429
59,020
-
(2,894)
59
6,074
USA
-
26
81
205
821
$
July 31, 2015
Total
$
28,405
210
49,846
58,125
70,931
July 31, 2014
Total
33,136
2,965
44,488
65,094
During the years ended July 31, 2015 and 2014, the Company earned all of its revenues from one customer.
As at July 31, 2015, the Company does not consider itself to be economically dependent on this customer as
transactions with this party can be easily replaced by transactions with other parties on similar terms and
conditions. The balance owing from this customer on July 31, 2015 was $Nil (2014 - $351).
17. Capital Disclosures
The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a
going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders.
The Company considers the items included in the consolidated statements of changes in equity as capital.
The Company manages the capital structure and makes adjustments to it in light of changes in economic
conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Company may issue new shares through private placements, sell assets to reduce debt or return
capital to shareholders. The Company is not subject to externally imposed capital requirements.
60 | Starcore International Mines Ltd. / TSX:SAM
32
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
18. Earnings per Share
The Company calculates the basic and diluted income per common share using the weighted average number
of common shares outstanding during each period and the diluted income per share assumes that the
outstanding vested stock options and share purchase warrants had been exercised at the beginning of the year.
The denominator for the calculation of income per share, being the weighted average number of common
shares, is calculated as follows:
For the year ended July 31,
2015
2014
Issued common share, beginning of year
Weighted average issuances
Basic weighted average common shares
Effect of dilutive warrants and options
143,515,465
6,269,985
149,785,450
-
143,390,465
53,082
143,443,547
918,929
Diluted weighted average common shares
149,785,450
144,362,476
Vested share purchase options totalling 11,385,000 at July 31, 2015, were not included in the computation of
diluted earnings per share as the effect was anti-dilutive.
19. Income Taxes
Current and deferred income tax expenses differ from the amount that would result from applying the
Canadian statutory income tax rates to the Company’s earnings before income taxes. This difference is
reconciled as follows:
Year ended July 31,
2015
2014
(Loss) Earnings before income taxes
$
(1,710)
$
Canadian statutory income tax rate
Income tax expense (recovery) at statutory rate
Difference from higher statutory tax rates on earnings of
foreign subsidiaries
Effect of change in substantively enacted tax rate in Mexico on
deferred income tax liabilities
Effect of Mexican mining royalty tax (SMD) on deferred
income tax liabilities
Mexican mining royalty tax (SMD)
Recovery of Mexican flat tax (IETU)
Recognition of previously unrecognized non-capital loss carry
forward and other deductible tax benefits
Unrecognized benefit of temporary differences and others
26%
(445)
(147)
-
-
114
-
(1,442)
-
Income tax (recovery) expense
$
(1,920)
$
5,031
26%
1,308
127
625
2,362
135
-
(2,305)
(186)
2,066
TSX:SAM / Annual Report 2015 | 61
33
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
19. Income Taxes – (cont’d)
The Company’s statutory rate is 26% for the year ended July 31, 2015 (2014 - 26%). The significant
components of the Company’s deferred income tax assets and liabilities are as follows:
July 31,
2015
2014
Deferred income tax assets (liabilities):
Mining interest, plant and equipment
Payments to defer
Insurance
Reclamation and closure costs provision
Expenses reserve
Pension-fund reserve
Share issuance costs
Non-capital losses and other deductible tax benefits
Other
$
$
(13,096)
(601)
(3)
883
80
63
-
2,969
-
Deferred income tax liabilities, net
$
(9,705)
$
(13,606)
(469)
(21)
689
81
202
22
3,750
249
(9,103)
Unrecognized deductible temporary differences, unused tax losses and unused tax credits are attributable to
the following:
July 31,
Share issuance costs
Net capital losses
Non-capital losses
Resource pools
Unrealized foreign exchange losses
$
$
2015
-
369
1,625
640
-
$
2,634
$
2014
-
369
-
865
1,603
2,837
At July 31, 2015, the Company has tax losses of approximately $8,767 (2014 - $4,893) in Canada and $626
(2014 - $Nil) in Mexico available for carry-forward to reduce future years’ taxable income, expiring between
2029 and 2033 in Canada. In addition the Company has tax resource pools and other deductible amounts
available of $8,953 (July 31, 2014 - $4,978), amortizable at various rates from 100% to 10% without expiry.
The Company also has net capital losses, in Canada, of approximately $369 (July 31, 2014 - $369) for carry-
forward to reduce future years’ taxable capital gains. Deferred income tax assets have been recognized only to
the extent the Company believes it is probable they will be utilized in the future.
In accordance with Mexican tax law, Bernal is subject to income tax. Income tax is computed taking into
consideration the taxable and deductible effects of inflation, such as depreciation calculated on restated asset
values. Taxable income is increased or reduced by the effects of inflation on certain monetary assets and
liabilities through an inflationary component.
Mexico Tax Reform
During December 2013, the 2014 Tax Reform (the “Tax Reform”) was published in Mexico’s official gazette
with changes taking effect January 1, 2014. The Tax Reform included the implementation of a 7.5% Special
Mining Duty (“SMD”) and a 0.5% Extraordinary Mining Duty (“EMD”).
62 | Starcore International Mines Ltd. / TSX:SAM
34
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
19. Income Taxes – (cont’d)
The Company has taken the position that SMD is an income tax under IAS 12 Income tax, as it is calculated
based on a form of earnings before income tax less certain specified costs. The EMD is a calculation based on
gross revenue and is therefore not considered an income tax. Both the SMD and EMD will be deductible for
income tax purposes.
In the year ended July 31, 2014, the effect of this change in the rate at which taxes are determined for SMD
resulted in a further one time charge to the provision for deferred taxes, with a corresponding one-time
increase to net deferred tax liabilities of $2,362.
Management is currently disputing the SMD, in a joint action lawsuit with other Mexican mining companies,
with the applicable Mexican government authority. Management believes that the SMD is unconstitutional
and should be overturned. In accordance with IFRS reporting standards, however, the estimated effect of the
SMD has been accrued to the current and deferred income tax provisions as stated above. Should the
Company be successful in overturning the SMD, in whole or in part, the accrued tax liabilities stated above
will be reversed to recovery of income taxes in the applicable period.
20. Subsequent Events
Acquisition of Cortez Gold Corp.
On April 28, 2015, the Company signed a letter of intent with Cortez Gold Corp. (“Cortez or “CUT”) (TSXV:
CUT) (the “LOI”) that would see the Company acquire all of the outstanding securities of CUT in an all-share
transaction (the “Transaction”) to be completed pursuant to a court approved Plan of Arrangement under the
Business Corporations Act (British Columbia) (the “Arrangement”). Under the terms of the planned
acquisition, each CUT shareholder would receive three Starcore common shares for every one CUT common
share held (the “Exchange Ratio”). Cortez owns the Altiplano gold and silver processing plant in Matehuala,
Mexico.
Shareholders of Cortez approved the Arrangement on July 9, 2015 and, in accordance with the Business
Corporations Act (British Columbia), the Arrangement was approved by the British Columbia Supreme Court
on August 5, 2015. As a result, the former Cortez shareholders now hold 28,667,550 common shares of
Starcore, representing 15.87%, of the 180,614,397 outstanding common shares of Starcore. In addition, each
holder of the outstanding common share purchase warrants of CUT may receive such number of replacement
warrants of Starcore based upon the Exchange Ratio, and the exercise price of the replacement Starcore
Warrants will be adjusted based upon the Exchange Ratio.
During the year ended July 31, 2015, the Company advanced Cortez $250 to enable them to purchase the
equipment required to commence operations at its processing plant. The loan bears interest at 10% and is
secured with a floating charge security on the processing plant and all of the assets of Cortez, subordinated
only to the existing first priority security interest and mortgage held by other Cortez lenders. The loan facility
and all interest would have been due if the shareholders of Cortez did not approve the proposed amalgamation.
TSX:SAM / Annual Report 2015 | 63
35
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
July 31, 2015
20. Subsequent Events – (cont’d)
Debt Settlement
On September 3, 2015, the Company announced that it issued 15,972,810 Subscription Receipts (the
“Receipts”), in full and complete settlement of outstanding debt as at July 31, 2015 in the aggregate amount of
USD $1,725 owed to certain creditors. The Receipts were issued at a deemed price of $0.14 per Receipt.
The debt relates to outstanding loans that were incurred in 2014 to complete construction of the Altiplano gold
and silver processing plant in Matehuala, Mexico, by CUT. The Receipts are subject to a four month hold.
The Subscription Receipts are convertible, with no further action required by the creditors, into one common
share of the Company upon receipt of shareholder approval at the Company’s annual general meeting to be
held in January 2016. If shareholder approval is not received, no shares will be issued and the Receipt holders
will receive a cash settlement.
64 | Starcore International Mines Ltd. / TSX:SAM
36
TSX:SAM
starcore.com
MANAGEMENT TEAM
Robert Eadie
CEO, Executive Chairman, President & Director
Michael Gunning, BSc (Hons), MSc, PhD, PGeo.
Director
David Gunning
P. Eng., COO & Director
Gary Arca CPA
Chief Financial Officer & Director
Jordan Estra
Director
Federico Villaseñor
Director
CORPORATE INFORMATION
TSX:SAM
FK:V4J
Investor Relations
info@starcore.com
Corporate Office: Vancouver
Suite 750 – 580 Hornby Street
Vancouver, B.C., Canada V6C 3B6
Telephone: 604-602-4935
Toll Free: 1-866-602-4935
Facsimile: 604-602-4936
Corporate Office: Toronto
Suite 904 – 85 Richmond Street West
Toronto, Ontario, Canada M5H 2C9
Telephone: 416-640-1936
Toll Free: 1-866-602-4935
Cory Kent LLB
Corporate Secretary & Director
Ken Sumanik M.Sc.
Director
Serge Depatie
Director
Auditor
Deloitte LLP
Suite 2800 – 1055 Dunsmuir Street
Vancouver, B.C., Canada V7X 1P4
Legal Advisors
McMillan LLP
Suite 1500 – 1055 West Georgia Street
Vancouver, B.C. Canada V6E 4N7
Stock Transfer Agent
Computershare Investor Services
510 Burrard Street, 3rd Floor
Vancouver, B.C., Canada V6C 3B9
Bankers
Bank of Montreal
595 Burrard Street
Vancouver, B.C., Canada V7X 1L7
TSX:SAM / Annual Report 2015 | 65
“ We are committed to building
Starcore for shareholders by growing
our new and existing assets and seizing
accretive opportunities.”
Robert Eadie
President & CEO
TSX:SAM
starcore.com
416-640-1936
info@starcore.com