The Boston Beer Company, Inc. Annual Report 2016

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FY2016 Annual Report · The Boston Beer Company, Inc.

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“ We have proven the ability to process

various types of concentrate and expect
to do this proﬁtably with a consistent
supply of concentrates and production.”

Robert Eadie, President of the Company

TSX:SAM
starcore.com

OUR FOCUS IS STEADFAST

2016 ANNUAL REPORT

TSX:SAM
starcore.com

WHY
STARCORE?

• Strategic Blend and Credible Management

• Cash ﬂow Oriented Assets in Mexico

•

Consistent Gold Production between 18-24k oz over the
Past 5 Years

• All Gold and Silver Production is Unhedged

• Low Risk/High Reward Exploration Assets in North America

•

Cash/Short Term Investments of $10 USD Million
as of year-end April 31, 2016

• Committed to Being a Leader in Corporate Social Responsibility

TABLE OF CONTENTS

Company Overview & Mission Statement

Letter from the President and CEO

Property Locations

By the Numbers

Why Mexico: The Upward Trend of Mexican Mining

Corporate Social Responsibility

Operational Review San Martin 2016

Advancing Our Exploration

Low Risk/High Rewards

Why Starcore?

b | Starcore International Mines Ltd. / TSX:SAM

TSX:SAM / Annual Report 2016 | 15

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, 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.

Photos: Roger Eberhard

TSX:SAM / Annual Report 2016 | 1

LETTER FROM THE
PRESIDENT AND CEO

DEAR SHAREHOLDERS,

In many respects, 2016 was a building year for
Starcore. We remained committed to integrating
our new acquisitions of precious metal producers
and low/risk high reward exploration properties
to set the company up for growth on behalf of
our shareholders. Looking in the rearview mirror,
we are pleased to share these highlights:

• We commenced pre-commercial production at the

Altiplano processing facility.

• We are nearing completion of the CIL plant at the

San Martin Mine.

• We initiated a US$1 million drill program at the Toiyabe

Gold Project in Nevada.

• We entered into a US$7 million Sale Agreement for San Pedrito.

Despite the uncertain conditions that we currently face, the
long-term outlook for our sector remains positive. The current
negative interest rate environment and quantitative easing are
factors that will drive demand for the metals that we produce.
As we approach our ﬁscal year 2017, we look forward to:

• Completing the CIL plant and mining our carbonaceous ore;

• Continuing to develop our concentrate processing business

at Altiplano;

• Expanding our underground exploration at the San Martin

Mine to ﬁnd the source of the mineralization; and

• Packaging the data for the signiﬁcant El Creston

Molybdenum Project for eventual sale.

I would like to congratulate our diverse team of talented
employees around the world. Without their enthusiasm
and commitment to integrity, we would not be the strong
value-driven company we are. On behalf of the board, thank
you for your continued support.

Robert Eadie
President & CEO

“ This has been a trying year for the industry; however,
we have continued to perform at the mine, reporting
net income overall and operating cash ﬂow for
the year while also making signiﬁcant corporate
acquisitions that have expanded our base of
exploration properties and furthered our resources.”

Robert Eadie
President & CEO

2 | Starcore International Mines Ltd. / TSX:SAM

PROPERTY
LOCATIONS

Canada

U.S.

Mexico

Exploration

Processing

Operating mine

TSX:SAM / Annual Report 2016 | 3

4 | Starcore International Mines Ltd. / TSX:SAM

BY THE
NUMBERS

Cash and short-term
investments on hand is
$10 MILLION
at April 30, 2016

Gold and
silver sales of
$20.3 MILLION
for the nine months
ended April 30, 2016

Net income of
$0.2 MILLION
for the nine months
ended April 30, 2016

Starcore Produces
5,196
equivalent gold ounces
in ﬁscal Q1

Completes
$4.5 MILLION
bond offering

EBITDA(1) of
$2,747
for the period

US$7 MILLION
potentially from the
sale of the San Pedrito
Property

Starcore drills
10.25 METRES
of 65.17 g/t Au and
128.26 g/t Ag

Mine operating
cash cost is
US$846/EqOz
and $49/TON
for the nine months
ended April 30, 2016

40.16 KG
of metal doré bars,
which included 2.01kg
of gold and 38.15kg of
silver. Produced from
Altiplano gold/silver
processing facility

All-in sustaining
costs of

US$1,169/EqOz

for the nine months
ended April 30, 2016

Produces

4,543

equivalent gold ounces
in ﬁscal Q2

Processed over

90 TONNES

of concentrate
purchased from
3 different suppliers

Equivalent gold
production of

Exploration drilling
intersects

13,215 OUNCES

40 METRES

in nine months ended
April 30, 2016

averaging 1.30 g/t
Au at Toiyabe Gold
Project, Nevada

TSX:SAM / Annual Report 2016 | 5

WHY MEXICO:
THE UPWARD TREND OF MEXICAN MINING

A land with only approximately 27% of its mineral
wealth explored, Mexico remains an untapped
resource and a major investment magnet.

According to the Mining Chamber of
Mexico, investment in the national
mining sector reached $5.2 billion in
2015, which is an increase of 5.1%
over 2014.

100 billion USD investment
by the federal government
to National Infrastructure
Program for Transport
and Communications
between 2014 and 2018.

A study by the ﬁrm Behre Dolbear
of “where to invest in 2016,
ranking of countries for mining
investments” ranked Mexico as
the 5th best destination for
investing in mining.

Recent reduction
in electricity prices of
an average of 26.8%
translates to substantial
cost beneﬁts to the
mining companies.

6 | Starcore International Mines Ltd. / TSX:SAM

Average hours
worked per week,
either full time
or part time is 43.6.

Investment in Mexico’s
mining sector rose to
US$17.8 million dollars
between 1999 and 2013.

GOLD

Mexico is the second largest gold
producer in Latin America and
eighth in the world.

Current working age
population (between
15-64 years) accounts
for more than 65% of
the total population
and will remain unchanged
for two more decades.

SILVER

Mexico is the world’s
leading silver exporter
and producer.

Rich in mineral endowment and superlative geology, the majority
of Mexico remains underexplored, and all that amounts to an
investment opportunity. It is not surprising that foreign direct
investment reached almost 30 billion dollars in 2015.

TSX:SAM / Annual Report 2016 | 7

VIVERO PRODUCTION

239 PIECES

256 KG

30 KG

26 KG

92 PIECES

25 KG

19 KG

Lettuce

Tomatoes

Chili

Chard

Cabbage

Cherry tomatoes Cucumber

8 | 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.

MINERA PEÑA DE BERNAL

Within the past year, an effort to improve the relations between
the mine and the San Martin community has been made.

In March, a community relations manager was hired by the
company in order to establish a new link between community
and mine.

The ﬁrst objective was to produce a census of the community´s
population, for this, an assembly was held in which the leaders
explained that they had a bad experience with census because
in the past this was used for incorrect objectives.

In the assembly the people expressed some of their needs and
requests for the community, the main ones were:

1. Drain for the nearby water dam because in recent years

the village had suffered from ﬂoods.

2. A Soccer ﬁeld.

3. A Park (next to the Church)

With the mine´s management team, the park proposal was
approved and a budget of US$19,000. In order to involve
the community in the process, a contest will be held on late
November for the park´s design.

Recently the community leaders invited Cokis, the CSR manager,
on site for lunch where a renewed commitment to community
relations was developed.

The objectives for the rest of the year are to hold the contest for
the design of the park, complete construction of the park and
get the conﬁdence to construct the base line study of community
relations at the beginning of 2017.

A budget of

US$19,000

was approved

TSX:SAM / Annual Report 2016 | 9

OPERATIONAL REVIEW
SAN MARTIN 2016

The San Martin mine has completed nearly another
year of production. As of September 30, 2016 the
mill has processed 215,000 tons at a head grade of
1.9 g/t gold and 16 g/t silver. During 2016, recoveries
have averaged 85% for gold and 47% for silver.
The mine has produced 11,900 gold equivalent
ounces in the ﬁrst 9 months of 2016.

Since Luismin began operations in 1993, the mine has processed
roughly 6 million tons and recovered approximately 620,000 gold
equivalent ounces.

A total of 11,000 metres of diamond drilling have been completed
underground in nine months this year. This is a signiﬁcant increase
in exploration drilling as we try to augment our reserves and
resources. 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.

Once again the year was highlighted by the discovery of a section
of manto ore in area 31 that was previously unknown. Several
small fault offset pieces of manto mineralization have been
found and mined which enhance the average mill head grade.
In areas 30 and 31, work around old stopes has also located
economic mineralization.

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 continued strong US dollar helps our operation to
remain proﬁtable. Our costs are almost entirely based in pesos and
Canadian dollars. During 2016, total cost and Capex have averaged
US$995 per equivalent gold ounce produced or US$55 per
tonne milled.

At the end of 2015, management decided to proceed with plans to
adapt the mill to Carbon in Leach (CIL) technology. Work is nearly
complete and unit process testing will begin in October. The CIL
adaptation will enable the treatment of preg-robbing ore which
was previously prone to extremely low recoveries.

Signed “Dave Gunning”

Dave Gunning
COO

Starcore drills

10.25 METRES

of 65.17 g/t Au and
128.26 g/t Ag in Area 31

10 | Starcore International Mines Ltd. / TSX:SAM

Once completed, the transaction is yet another milestone for
Starcore. It will enable the Company to pay its outstanding
debt, and still have a healthy budget with additional funds
to be allocated for exploration and geology programs at our
San Martin mine and our other properties.

TSX:SAM / Annual Report 2016 | 11

With the ramp up of our Altiplano processing facility, we
are fully active in exploration, mining and industrial milling
of concentrates, covering all facets of mining activity.

12 | Starcore International Mines Ltd. / TSX:SAM

ADVANCING OUR
EXPLORATION

TOIYABE DRILL PROGRAM

As a company we are always looking to capitalize on ways to
build shareholder value and we were pleased to announce
the commencement of drilling on our Toiyabe Project, located
10 kilometers south of the Cortez Hills Mine in northeastern
Nevada. We recognize the best way to bring shareholder value
to the forefront, is through investment in our assets for organic
growth. In saying this, reverse circulation (RC) drilling began on
May 24, 2016 and core drilling on June 20th, 2016.

The drilling program at Toiyabe will target Pipeline/Cortez Hills/
Gold Rush style gold mineralization associated with CSMT
resistivity highs, extensions of deep gold intercepts on Section
900 North associated with the 805 Fault, extensions of the near
surface resource associated with the Courtney A and B faults,
and gold anomalies associated with surface sampling or historic
drilling. Previous drilling of the 805 Fault included T-0902C
which averaged 3.62 g/t over 9.0 meters true width from 267
to 282 meters. Included within this interval is 0.9 meters true
width of 16.19 g/t. The 2016 program will consist of 5,486 meters
of RC and 1,219 meters of core drilling in 23 holes.

CONCENTRATING ON CONCENTRATES:

UPDATE FROM THE ALTIPLANO FACILITY

Acquiring the Altiplano processing facility in Matehuala set
in stone the growth plan for Starcore. With the completion
and ramp up of the facility, we now have a value chain of
exploration, production and processing assets to deliver value to
our shareholders. The company reported its pre-productions results
for Altiplano in February 2016 with the pouring of its ﬁrst doré bar,
weighing in at 21.131kg from purchased precipitates. Since that
date, the plant has been receiving concentrate deliveries to test
the full facilities of the plant and procedures. Overall, we have
processed 90 tonnes of concentrate purchased from various

suppliers to produce 40.16 kg of metal doré bars, which include
2.01kg of gold and 39.15kg of silver.

Our ﬁnal step in processing the concentrates is pouring doré
bars, which are shipped to a reﬁnery and sold at spot rates for
gold and silver at the time of shipment. At the current time, all
proceeds of sales have been capitalized to the development
costs of the company, in accordance with accounting standards,
until we are receiving a consistent supply of concentrates and
achieving consistent operation results. While we are in the early
days of processing and surveying the market for the best possible
materials and customers, our results are encouraging. We look
forward to the year ahead, as the building of Altiplano as a
strategic cash ﬂow arm of the company becomes reality.

EL CRESTON

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.

In 2016 the Company moved all core and pulp samples to a
storage facility located on the property. In addition, all the data
was organized and put in to an electronic format to allow easy
access to potential buyers when/if the property is put up for sale.
Limited ﬁeld work was completed in the northwestern portion of
the Creston Property in the vicinity of the previously producing
San Riccardo Gold Mine.

We produced over

The El Creston Deposit is located in a

40 KG

of metal doré bars at
the Altiplano Facility

5.5 KM

trend of mineralization

TSX:SAM / Annual Report 2016 | 13

LOW RISK/
HIGH REWARDS

Starcore’s operations are a direct extension
of management’s commitment to build
sustainable, shareholder value for the present
and future of the company.

SAN PEDRITO SALE

The San Pedrito property was part of Starcore’s original acquisition in 2007, when
the Company acquired the San Martin Mine from Goldcorp for US $26 million.
While the property had an inferred resource at the time and some ore was mined
from this site by Goldcorp, management determined that the property would not be
a viable mining operation. Given the proximity to the city of Queretaro, management
began the process of rezoning the property in 2010 and was successful in obtaining
commercial real estate zoning last year. In March 2016, the Company announced an
agreement to sell the property to a Mexican buyer for approximately US $7 million
dollars. Closing of the sale is awaiting various conﬁrmations, including compliance
with state and municipal regulations and evidence that the property is in good
standing before conveyancing can proceed. The sale of San Pedrito illustrates how
Starcore’s management team works to create shareholder value in projects for the
Company’s long term proﬁtability.

14 | Starcore International Mines Ltd. / TSX:SAM

TSX:SAM
starcore.com

WHY
STARCORE?

• Strategic Blend and Credible Management

• Cash ﬂow Oriented Assets in Mexico

•

Consistent Gold Production between 18-24k oz over the
Past 5 Years

• All Gold and Silver Production is Unhedged

• Low Risk/High Reward Exploration Assets in North America

•

Cash/Short Term Investments of $10 USD Million
as of year-end April 31, 2016

• Committed to Being a Leader in Corporate Social Responsibility

TABLE OF CONTENTS

Company Overview & Mission Statement

Letter from the President and CEO

Property Locations

By the Numbers

Why Mexico: The Upward Trend of Mexican Mining

Corporate Social Responsibility

Operational Review San Martin 2016

Advancing Our Exploration

Low Risk/High Rewards

Why Starcore?

b | Starcore International Mines Ltd. / TSX:SAM

TSX:SAM / Annual Report 2016 | 15

MANAGEMENT DISCUSSION & ANALYSIS
For the period ended April 30, 2016

Directors and Officers as at July 22, 2016:

Directors:

Gary Arca
Robert Eadie
Jordan Estra
David R. Gunning
Michael Gunning
Cory Kent
Ken Sumanik
Federico Villaseñor

Officers:

Executive Chairman, Chief Executive Officer & President – Robert Eadie
Chief Financial Officer – Gary Arca
Chief Operating Officer – Dave Gunning
Corporate Secretary – Cory Kent

Contact Name:

Gary Arca

Contact e-mail address:

garca@starcore.com

TSX Symbol:

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

16 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 2

Form 51-102-F1

STARCORE INTERNATIONAL MINES LTD.

MANAGEMENT DISCUSSION & ANALYSIS
For the period ended April 30, 2016

Date of This Report

This MD&A is prepared as of July 22, 2016.

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 period ended
April 30, 2016.

end change, the
On May 13, 2016, the Company changed its fiscal year end from July 31 to April 30. With this year
Company will report a one
time transitional period for the nine months ended April 30, 2016. Due to the difference in
period lengths, the Statement of Operations and Comprehensive income and statement of cash flows is not directly
comparable.

‐

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.

TSX:SAM / Annual Report 2016 | 17

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 3

Overall Performance

Description of Business

Starcore is engaged in exploring, extracting and processing gold and silver through its wholly-owned subsidiaries,
Compañia Minera Peña de Bernal, S.A. de C.V. (“Bernal”), which owns the San Martin mine in Queretaro, Mexico
and Altiplano GoldSilver S.A. de C.V (“Altiplano”), which owns the gold and silver processing plant in Matehuala,
Mexico. The Company is a public reporting issuer on the Toronto Stock Exchange (“TSX”). The Company is also
engaged in acquiring mining related operating assets and exploration assets in North America directly and through
corporate acquisitions. The Company has interests in properties which are exclusively located in Mexico, USA and
Canada.

Financial Highlights for period ending April 30, 2016 (audited) compared to the year ended July 31, 2015 (audited)
and period ended April 30, 2015 (unaudited):

• Cash and short-term investments on hand is $10 million at April 30, 2016 compared to $6 million at July 31, 2015;
• Gold and silver sales of $20.3 million for the nine months ended April 30, 2016 compared to $21.7 million for the

nine months ended April 30, 2015, a decrease of 6%;

• Net income of $0.2 million for the period ended April 30, 2016 compared to net income of $0.3 million for the nine

months ended April 30, 2015;

• Equivalent gold production of 13,215 ounces in period ended April 30, 2016 compared to production of 14,941

ounces in period ended April 30, 2015, a decrease of 11%;

• Mine operating cash cost is US$846/EqOz for the period ended April 30, 2016 compared to cost of US$920/EqOz

for the period ended April 30, 2015, a decrease of 8%;

• All-in sustaining costs of US$1,146/EqOz for the period ended April 30, 2016 compared to costs of US$1,080/EqOz

for the period ended April 30, 2015, an increase of 6%;

• EBITDA(1) of $2,747 for the period ended April 30, 2016 compared to $4,429 for the nine months ended April 30,

2015, an decrease of 38%.

Reconciliation of Net income to EBITDA

For the period ending April 30, (Unaudited)

Net income (loss)
Income tax recovery
Interest
Depreciation and depletion
EBITDA
EBITDA MARGIN(2)

2016
195
(2,639)
387
4,784
2,727

13.4%

2015
306
(1,049)
-
5,172
4,429

20.1%

(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.

18 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 4

Recent News

Exploration Drilling on Toiyabe property

On July 13th, 2016, the Company announced commencement of drilling on its Toiyabe Project, located 10 kilometers
south of the Cortez Hills Mine in northeastern Nevada. Reverse Circulation (RC) drilling began on May 24, 2016 and
core drilling on June 20th, 2016. Six RC holes were completed including two pre-collar holes for core drilling. The
core rig is drilling its first hole. Total footage drilled to July 13th was 1,482 meters. Geochemical results are pending.

The drilling program will target Pipeline/Cortez Hills/Gold Rush style gold mineralization associated with CSMT
resistivity highs, extensions of deep gold intercepts on Section 900 North associated with the 805 Fault, extensions of
the near surface resource associated with the Courtney A and B faults, and gold anomalies associated with surface
sampling or historic drilling. Previous drilling of the 805 Fault included T-0902C which averaged 3.62 g/t over 9.0
meters true width from 267 to 282 meters. Included within this interval is 0.9 meters true width of 16.19 g/t. The 2016
program will consist of 5,486 meters of RC and 1,219 meters of core drilling in 23 holes.

All RC drilling samples are collected in 1.5-meter intervals, logged and securely shipped to ALS Chemex Labs Inc. in
Reno, Nevada to be analyzed for gold and silver by fire assay. A second sample split is kept on site for possible re-
testing or future metallurgy. Standards and blanks are included with the sample submittals and numerous repeat assays
conducted. The core is logged, sample intervals marked on the core either in five-foot lengths or geologic/structural
breaks, sawed and half core assayed the same as the RC procedure mentioned above.

San Martin Mine Drill Update

The Company is pleased to announce that mining crews arrived at the 31-79 drill hole intersection at its San Martin
Mine in Queretaro, Mexico. The Company has confirmed the existence of the intersection in drill hole 31-79 reported
in its news release dated May 11, 2016. Drifting along the drill hole defined a 2-meter thick segment of manto
mineralization bounded by steep faults on the north and south and a horizontal fault above. Subsequent exploration in
the area has defined a 3-meter thick piece of mineralization above the flat fault displaced roughly 15 meters to the east.

In May of 2016, 536 tons were mined from the west block with an average grade of 11.47 g/t Au and 76 g/t Ag. In
June, the east (upper) block was explored by drifting and raising and through June 20th, a total of 986 tons have been
produced at 8.92g/t Au and 67 g/t Ag. Geologists estimate that 1500 tons remain to be extracted from this zone at
similar grades.

The assay results are the average of muck samples from the mine lab results. Sample results are balanced each month
end with the doré bars produced in the plant.

Drill hole 31-92 was recently completed to test the small remaining segment between these blocks and the previously
mined stope to the north. This hole has returned a 9.1-meter interval grading 50.7 g/t gold and 115 g/t silver. This hole
appears to have located another of these fault bounded ore segments.

“This new area, although relatively small, gives us the opportunity to understand the nature of the mineralization in the
northern part of the mine which was extracted prior to Starcore purchasing the mine. We expect this perception to aid
us in our endeavours to expand reserves and resources to the north.” Said Robert Eadie, President and CEO of the
Company.

TSX:SAM / Annual Report 2016 | 19

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 5

Fatality at its San Martin Mine

On June 22nd, 2016, the Company regretfully reported the fatality of an employee that occurred at the San Martin Mine
in Queretaro, Mexico.

“We are deeply saddened over the loss of our colleague, an experienced underground miner at our San Martin Mine,”
said Robert Eadie, President & Chief Executive Officer of the Company, who flew to Mexico upon hearing of the fatal
accident. “Work-related losses are tragic and felt grievously by Starcore and our communities, and we extend our
deepest sympathies to our colleague’s family and friends. The safety of our employees is of utmost importance for
Starcore and we will continue to take every measure to eliminate all workplace accidents and ensure the workplace is
safe for everyone.”

The accident was an isolated incident that occurred during wall and ceiling ground support installation in a cut-and-fill
stope in the mine’s San Martin area. Starcore is working with the local authorities on completing a final report on their
investigation. Operations at the mine outside of this stope continue and all crews have been fully debriefed on the
accident. In the meantime, the plant is operating normally.

Appointment of New Auditors

The Company reports that it has appointed Davidson & Company LLP, Chartered Professional Accountants, as
auditors of the Company for the new April 30th, 2016 year-end. The appointment follows the resignation of the former
auditors, Deloitte LLP, Chartered Professional Accountants, at the request of the Company. The Company reports that
there have been no reservations in the report of Deloitte LLP for the audits of the most recently completed fiscal
period and, in the opinion of the Company, prior to the appointment of Davidson & Company LLP, there were no
reportable events.

Starcore Announces Pre-production Results from Altiplano Plant

The Company reported its pre-production results from the Altiplano Plant located in Matehuala, Mexico. The
Company previously reported that it had poured its first doré bar, weighing in at 21.131 kg., from purchased
precipitates. Since then, the plant has been receiving concentrate deliveries to test the full facilities of the plant and
procedures. To date, the Company has processed over 90 tonnes of concentrate purchased from 3 different suppliers to
produce 40.16 kg of metal doré bars, which included 2.01kg of gold and 38.15kg of silver.

“We have proven the ability to process various types of concentrate and expect to do this profitably with a consistent
supply of concentrates and production,” said Robert Eadie, President of the Company. “Having tested concentrates
received from 14 different suppliers, we are currently negotiating concentrate purchase agreements for the best quality
concentrate that will bring a consistent supply. As stated before, we see the Altiplano Plant as a synergistic cash-flow
producing arm of the Company, growing our asset base for our shareholders.”

The doré bars were shipped to a refinery and sold at spot rates for gold and silver at the time of shipment. All proceeds
of sales have been capitalized to the development costs of the facility, in accordance with accounting standards, until
such time as Altiplano is receiving consistent supply of concentrates and is achieving consistent operating results.

20 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 6

Selected Annual Information

The highlights of financial data for the Company for the three most recently completed financial years are as follows:

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

April 30, 2016
20,326
(18,807)
1,519
(3,963)
2,639

195
0.00
0.00
78,907
13,324

July 31, 2015
28,405
(27,760)
645
(2,355)
1,920

210
0.00
0.00
69,197
15,141

$
$
$
$
$

July 31, 2014
33,136
(24,548)
8,588
(3,557)
(2,066)

2,965
0.02
0.02
65,094
14,295

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 period ended April 30, 2016.

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’s last Resource estimate was filed on SEDAR “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 .

TSX:SAM / Annual Report 2016 | 21

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 7

Production

The following table is a summary of mine production statistics for the San Martin mine for the periods ended
April 30, 2016 and 2015 and for the previous year ended July 31, 2015.

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

Unit of measure
thousand ounces
thousand ounces
thousand ounces

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
US dollars/ounces
Mine operating cash cost per equivalent
ounce

Number of employees and contractors at
minesite

Actual results
for
9 months ended
April 30, 2016
12.3
70.2
13.2

Actual results
for
9 months ended
April 30, 2015
14.0
70.1
14.9

Actual results
for
12 months
ended
July 31, 2015
18.3
97.1
19.6

76.2

1.96
18.4
84.9%
51.7%

229.6
4,079

49
846

299

71.1

2.19
18.0
84.6%
51.6%

234.6
4,464

59
920

299

71.6:1

2.14
18.2
85.1%
53.1%

311.9
6,055

57
903

301

During the quarter ended April 30, 2016, the mill operated at a rate of approximately 823 milled tonnes/calendar day.
Gold and silver grades during the period ending April 30, 2016 was 1.96 g/t and 18.4 g/t, respectively, compared to
prior comparable period grades of 2.19 g/t and 18.0 g/t. Overall equivalent gold production from the mine during the
period ending April 30, 2016 of 13,215 ounces was lower than the previous comparable period production of 14,941
due to a decrease in ore grades and lower overall production tonnage of 74,070 tonnes compared to 76,168 tonnes in
prior comparable period.

Production cash costs of the mine for the current period ending April 30, 2016 were US$846/EqOz. This was
significantly lower than the prior comparable period ending April 30, 2015 amount of US$920/EqOz. The decrease in
production EqOz. was largely due to the strength of the US dollar and due to cost savings in mine development and
exploitation. This period’s costs are lower than the prior year average of US$903/EqOz as well.

Operating cash costs of US$49/t were lower than the prior period of US$59/t. Operating cash costs were also lower
than the previous year end July 31, 2015 of US$57/t due to the favourable US Dollar exchange rate and due to
reductions in overall mine operating 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 are
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
12,000 metres of underground exploration drilling for the 2016 calendar year.

During the quarter ended April 30, 2016, the Company incurred approximately US$215 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 comparable period ending April 30, 2015.

22 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 8

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 achieved
budgeted targets of approximately 11,000 metres of underground exploration drilling in calendar 2016.

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.

San Pedrito

The Company entered into a Binding Agreement (“Agreement”) to sell the San Pedrito Property located in Queretaro,
Mexico. The sale is expected to net the Company approximately USD $7 Million. The Agreement requires the buyer
to deposit 50 million Mexican Pesos (“MP”) (approximately USD $2.8 million), which has been received in trust and
may only be released pending various confirmations, including compliance with state and municipal regulations and
evidence that the property is in good standing.

The agreement is subject to a 50 million MP penalty clause in case of non-performance that will be effective if either
the purchaser does not pay the owed amount when all the conditions have been met or if the Company does not wish
to continue with the sale. Upon receipt of the required confirmations, the agreement provides for the subject conditions
to be removed and the balance of funds to be paid immediately to the Company. The Company has not recorded the
sale or deposit in these Financial Statements due to the pending conditions precedent.

The San Pedrito property was part of Starcore’s original acquisition in 2007, when the Company acquired the San
Martin Mine from Goldcorp for USD $26 million. The Company has allocated a cost base of approximately $3,750 to
this property.

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
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 had 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:

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.

TSX:SAM / Annual Report 2016 | 23

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 9

•
•
•

The El Creston Project in Sonora, Mexico;
The Ajax Project in British Columbia; and
The Molybrook Project in Newfoundland.

Creston Moly Corp.
(British Columbia)

100%

Creston Mining Corporation
(Ontario)

Tenajon Resources Corp.
(British Columbia)

100%

Mexican Subsidiary
(Mexico)

El Creston
Property

Ajax
Property

Molybrook
Property

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 which has
completed a Preliminary Economic Assessment on the property based on zones of porphyry-style molybdenum
(“Mo”)/Copper (“Cu”) mineralization. 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:

•

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;

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;

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.

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.

24 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 10

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.

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.

The Company owns 100% of the 44 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. During the period ended April 30, 2016, the Company reduced its claims to focus on the
core project and to reduce its holding costs.

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:

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.

TSX:SAM / Annual Report 2016 | 25

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 11

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 acquired the right to 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$360, 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.

Acquisition of Cortez Gold Corp.

During the year ended July 31, 2015, the Company signed of a letter of intent with Cortez Gold Corp. (“Cortez or
“CUT”) (TSXV: CUT) to acquire all of the outstanding securities of CUT in an all-share 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 by CUT shareholders (the “Exchange Ratio”). Cortez is a
Vancouver-based junior resource company that owns the Altiplano gold and silver processing plant in Matehuala,
Mexico and has a director and officer in common with the Company.

Shareholders of Cortez approved the Arrangement which was finalised on approval by the British Columbia Supreme
Court on August 5, 2015. Pursuant to the Arrangement, the former Cortez shareholders hold 7,166,888 common shares
of Starcore, representing 15.87%, of the 45,153,599 outstanding common shares of Starcore after issue of shares
pursuant to the Arrangement. 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 at the exercise price
adjusted based upon the Exchange Ratio.

26 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 12

The Company valued the 7,166,888 shares at the fair market value on date of issue of $0.42 per share, for total
consideration of $3,010, which was accounted for as acquisition of assets allocated based on their relative fair values
on the closing date. The following purchase price allocation is based on management’s best estimates and assumptions
after taking into account all relevant information available.

Altiplano Goldsilver Processing Plant, Matehuala, Mexico

Altiplano has title to 20 hectares of land in Matehuala, S.L.P., Mexico, and to the buildings and equipment located
thereon (the “Processing Plant”).

The construction of the Processing Plant was completed in 2015 and Altiplano is ready to accept concentrates for
processing. The Company announced that as of February 15, 2016, the Altiplano plant poured its first doré bar,
weighing in at 21.131 kg. The Plant is currently in a pre-commissioning phase and any incidental revenue or expenses
generated during this process has been capitalized under IAS 16 guidelines. The Company shall cease to record costs
as part of the carrying amount of the Plant when the assets are in the condition necessary for it to be capable of
operating in the manner intended by management.

Located within a historic mining district in an area that is home to numerous medium-sized mining operations, the
Altiplano Plant is designed to employ a cleaner and more economical treatment production process that will enable the
facility to offer lower processing rates than those currently available to concentrate producers in the area.

TSX:SAM / Annual Report 2016 | 27

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 13

4.3

Results of Operations

The Company recorded earnings for the period ended April 30, 2016 of $195 compared with $306 for the comparative
period ended April 30, 2015. The details of the Company’s operating results and related revenues and expenses are as
follows:

For the period ended April 30,
Revenues

Mined ore
Purchased concentrate

Total Revenue

Cost of Sales
Mined ore
Purchased concentrate
Depreciation and depletion

Total Cost of Sales

Earnings from mining operations

Financing costs
Foreign exchange gain (loss)
Professional and consulting fees
Management fees and salaries
Office and administration
Other income
Shareholder relations
Regulatory and transfer agent fees
Impairment on investment

Loss before taxes

Income tax recovery

Current
Deferred

2016

2015

Variance

20,326
-

20,326

21,707
332

22,039

(1,381)
(332)

(1,713)

(14,093)
-
(4,714)

(15,554)
(306)
(5,141)

(18,807)

(21,001)

1,519

(387)
(159)
(1,031)
(918)
(1,114)
-
(110)
(244)
-

(2,444)

57
2,582

1,038

(68)
1,199
(924)
(733)
(981)
82
(82)
(99)
(175)

(743)

309
740

1,461
306
427

2,194

481

(319)
(1,358)
(107)
(185)
(133)
(82)
(28)
(145)
175

(1,701)

(252)
1,842

Earnings for the period

195

306

(111)

Overall, revenue from milled ore decreased by $1.7 million compared to the prior period due mainly to lower metal
production and lower gold and silver recovery in the current period compared to prior year. Cost of sales decreased in
the current period due to lower tonnage processed and lower 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
increased to 7% of mined ore revenue compared to 5% in the comparative period.

Sales of metals for the period ended April 30, 2016 approximated 12,666 ounces of gold and 72,105 ounces of silver
sold at average prices in the period of US$1,142 and US$14.87 per ounce, respectively. This is a decrease in sale
ounces from the comparative period ended April 30, 2015 where sales of metal approximated 14,709 ounces of gold
and 73,642 ounces of silver, sold at higher average prices of US$1,224 and US$17.30 per ounce, respectively.

The total cost of sales above includes non-cash expenses for depreciation and depletion of $4,714, compared to $5,141
in the comparable period last period, 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.

28 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 14

For the period ending April 30, 2016, the Company produced $1,519 in earnings from mine operations compared to
$1,038 for the period ended April 30, 2015. The increase resulted partially due to the strengthening USD which
converted into Canadian Dollar (“CDN”) at $1.255 in the current period compared to $1.210 at April 30, 2015, which
increased revenues and concurrently lowered costs. The combination of slightly higher recoveries for gold and silver,
despite a lower metal price per ounce, resulted in higher revenue as compared to the prior period.

Costs per ounce for the period ended April 30, 2016 were much lower at an average operating cash cost of
US$846/EqOz. compared to an average operating cash cost of US$920/EqOz. during the period ended April 30, 2015,
resulting in reported mined ore costs which were $2,194 lower at $18,807. Also included in mined ore costs in the
current period is depletion of $4,714 compared to $5,141 for the period ended April 30, 2015.

Other Items

Changes in other items for the period ended April 30, 2016, resulted in the following significant changes from the
period ended April 30, 2015:

•

•
•

Financing costs during the period increased by $319 due to the debt that was raised by the Company to finance
the Altiplano project;
Office and administration increased by $133 due higher corporate costs relating to acquisition of CUT, general
regulatory administration and office related costs.
Foreign exchange decreased by $1,358 for the period ended April 30, 2016. The decrease relates primarily due
to the weakening of the Mexican peso and Canadian dollar in relation to the US dollar, the functional currency
of the mining operations in the prior comparable period.
Professional and consulting fees increased by $107 to $1,031 due to higher fees charged in relations to legal, tax
and audit fees in the prior comparative period.
Transfer Agent Fees increased by $145 due to costs relating to registration on the United States markets.
Deferred Income Tax Recovery increased by $1,842 due to the Company recognizing its ability to use its non-
capital loss carry forwards in the current and future years.

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:

(In Canadian Dollars unless indicated)
For the period ended April 30,

Total cost of sales cash costs1
Total corporate and administration cash costs2
Foreign exchange gain
Reclamation and closure accretion
Sustaining capital expenditures and exploration3

All-in sustaining cash costs
Foreign exchange adjustment

Sustaining Costs
(in 000’s)

Sustaining Costs Per Ounce
(in $/oz)

2016

2015

2016

2015

14,093
3,415
159
65
3,534

21,266
(5,365)

15,554
2,831
(1,199)
61
2,642

19,889
(2,887)

1,036
251
12
5
260

1,563
(394)

988
180
(76)
4
168

1,264
(183)

All-in sustaining USD cash costs

15,901

17,002

1,169

1,081

Total equivalent ounces sold

13,605

15,749

1 Excludes non-cash depletion of $4,714 for the period ended April 30, 2016 (April 30, 2015: $5,141) and includes non-cash share-based

compensation of $Nil (April 30, 2015: $16).

2 Includes non-cash share-based compensation of $Nil for the period ended April 30, 2016 (April 30, 2015: $119).
3 Certain capital expenditures costs that are non-sustaining costs have been excluded in accordance with AISC guidelines.

TSX:SAM / Annual Report 2016 | 29

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 15

Cash Flows

Cash flows generated from operating activities were $5,359 during the period ended April 30, 2016, compared to
$3,229 for the comparative period ended July 31, 2015. Cash flows from operating activities were determined by
removing non-cash expenses from the earnings and adjusting for non-cash working capital amounts. Cash raised for
financing activities resulted in an inflow of $3,663 mainly due to the debt borrowing in the period of $3,850. Cash
used for investing activities resulted in an outflow of $7,372 due to purchase of short term investment of $3,162,
investment in mining interest, plant and equipment of $3,700 and investment in exploration and evaluation assets of
$517. Overall cash increased during the period ended April 30, 2016 by $1,650.

Investor Relations Activities

During the period ended April 30, 2016, the Company responded directly to investor inquiries.

Financings, Principal Purposes & Milestones

During the period ended April 30, 2016, the Company completed a private placement of secured bonds in the
aggregate principal amount of $4.5 million. The bonds bear interest of 8% per annum, payable on maturity, and mature
November 12, 2016.

During the period the Company issued 7,166,888 shares were issued pursuant to the plan of arrangement at $0.42
whereby the Company acquire all of the outstanding shares of Cortez Gold Corp.

The Company also issued 3,993,203 shares to settle the outstanding debt as at July 31, 2015 in the aggregate amount
of $2,241 owed to certain creditors. The Receipts were issued at a deemed price of $0.56 per Receipt.

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 (loss) from
mining operations

Earnings (loss) for
period

Per share – basic

Per share – diluted

Total Revenue

Earnings (loss) from
mining operations

Earnings (loss) for
period

Per share – basic

Per share – diluted

Q3
30-Apr-16

Q2
31-Jan-16

Q1
31-Oct-15

Q4
31-Jul-15

5,668

(287)

(283)

(0.01)

Q3
30-Apr-15

7,227

374

(484)

(0.01)

6,954

670

240

0.00

Q2
31-Jan-15

7,143

213

(116)

(0.01)

7,704

1,136

562

0.02

Q1
31-Oct-14

7,669

451

906

0.02

6,366

(393)

(96)

(0.00)

Q4
31-Jul-14

7,742

1,126

(2,170)

(0.06)

Discussion

The Company reports a loss of $283 for the quarter compared to loss of $484 in the comparative quarter ended
April 30, 2015. Revenue from mining operations decreased in this quarter to $5,668 from the comparative quarter of
$7,227 as a result of lower ore production. For more detailed discussion on the quarterly production results and
financial results for the quarter ended April 30, 2016, please refer to Sections 4.1 and 4.3 under “Results of
Operations”.

30 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 16

Liquidity and 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 April 30, 2016, the Company had the following commitments:

As at April 30, 2016, 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.

As at April 30, 2016, the Company has a land lease agreement commitment with respect to the land at the mine
site, for $132 per year until December 2017. The Company also has ongoing commitments on the exploration
and evaluation assets of approximately $220 per year.

As at April 30, 2016, the Company has management contracts to officers and directors totaling $840 per year,
payable monthly, expiring in January 2017.

Obligations due within twelve months of
April 30:

2016

2017-2019

Trade and other payables
Current portion of loan payable
Non-current portion of loan payable
Rehabilitation and closure cost provision

3,091
4,619
-
-

-
-
1,369
-

2020 and
beyond

-
-
-
1,401

7. Capital Resources

The capital resources of the Company are the mining interests, plant and equipment, with an amortized historical cost
of $56,618 as at April 30, 2016. 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. Off Balance Sheet Arrangements

The Company has no off balance sheet transactions.

9. Transactions with Related Parties

The Company paid the following amounts to key management and directors in the period:

For the

Management fees
Legal fees
Directors fees
Share-based payments

Total

Nine months ending
April 30, 2016

Year ending
July 31, 2015

624
256
70
-

950

840
95
60
107

1,102

There were no other material reportable related party transactions other than the acquisition of Cortez Gold Corp.
discussed in section 4.2.

10. Third 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.

TSX:SAM / Annual Report 2016 | 31

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 17

11. Proposed Transactions

San Pedrito

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 current financial period are discussed below:

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.

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
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%

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.

32 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 18

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.

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.

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, 2015, the Company adopted new and revised International Financial Reporting Standards that
were issued by IASB as detailed in Note 3(o) 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.

TSX:SAM / Annual Report 2016 | 33

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 19

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 April 30, 2016 the Company had the following financial assets and liabilities
denominated in CDN and denominated in Mexican Pesos:

In ‘000 of

Cash and cash equivalents
Long term liabilities
Other working capital amounts – net

CDN Dollars

Mexican Pesos (MP)

$
$
$

431
2,163
(4,619)

35,112
-
(105,118)

At April 30, 2016, US dollar amounts were converted at a rate of $1.2549 Canadian dollars to $1 US dollar and
Mexican Pesos were converted at a rate of MP17.19 to $1 US Dollar.

15. Other

15.1 Disclosure of Outstanding Share Capital as at July 22, 2016

Common Shares

Number
49,146,851

Book Value
50,605

The following is a summary of changes in options from April 30, 2016 to July 22:

Grant
Date

Expiry
Date

mm/dd/yy mm/dd/yy

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

05/06/16
01/16/17
01/27/17
04/13/17
08/22/18
08/22/18
09/06/18
09/12/18
01/15/19

Exercise Opening
Balance

Price

Granted

Exercised

Cancelled/
Forfeited

During the Period

$0.60
$0.80
$1.00
$1.48
$1.00
$0.80
$0.92
$1.00
$0.88

37,500
100,000
485,000
812,500
200,000
68,750
50,000
50,000
1,042,500

2,846,250

-
-
-
-
-
-
-
-
-

37,500
-
-
-
-
-
-
-
-

Closing,
Vested and
Exercisable

-
100,000
485,000
812,500
200,000
68,750
50,000
50,000
1,042,500

Closing

-
100,000
485,000
812,500
200,000
68,750
50,000
50,000
1,042,500

2,808,750

Weighted Average Exercise Price

$1.07

$0.60

$1.08

Subsequent to the period ended April 30, 2016, 139,284 warrants and 37,500 options expired due to natural expiry.

34 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
MD&A
April 30, 2016
Page 20

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.

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:

•

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.

There has been no change in the Company’s internal control over financial reporting during the Company’s period
ended April 30, 2016 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.

TSX:SAM / Annual Report 2016 | 35

Starcore International Mines Ltd.

Consolidated Financial Statements

For the period ended April 30, 2016 and the year ended July 31, 2015

(Audited)

36 | Starcore International Mines Ltd. / TSX:SAM

INDEPENDENT AUDITORS' 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 April 30, 2016 and July 31, 2015 and the consolidated statements of
operations and comprehensive income, cash flows and changes in equity for the nine month period ended April 30, 2016 and
the year ended July 31, 2015, 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.

Auditors’ 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 auditors’ 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, these consolidated financial statements present fairly, in all material respects, the financial position of
Starcore International Mines Ltd. as at April 30, 2016 and July 31, 2015 and its financial performance and its cash flows for
the nine month period ended April 30, 2016 and the year ended July 31, 2015 in accordance with International Financial
Reporting Standards.

Vancouver, Canada

July 22, 2016

“DAVIDSON & COMPANY LLP”

Chartered Professional Accountants

TSX:SAM / Annual Report 2016 | 37

Starcore International Mines Ltd.
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)

As at

Assets

Current
Cash
Short-term Investments (note 6)
Amounts Receivable (notes 5 & 7)
Inventory (note 8)
Prepaid Expenses and Advances

Total Current Assets

Non-Current

Mining Interest, Plant and Equipment (notes 5 & 9)
Exploration and Evaluation Assets (note 10)
Reclamation Deposits
Deferred Tax Assets

Total Non-Current Assets

Total Assets

Liabilities

Current

Trade and Other Payables
Current Portion of Loan Payable (note 11)

Total Current Liabilities

Non-Current

Loan Payable (note 11)
Rehabilitation and Closure Cost Provision (note 12)
Deferred Tax Liabilities

Total Non-Current Liabilities

Total Liabilities

Equity

Share Capital (note 13)
Equity Reserve
Foreign Currency Translation Reserve
Accumulated Deficit

Total Equity

Total Liabilities and Equity

Subsequent Events (notes 9 & 13)
Commitments (notes 10 and 15)

Approved by the Directors:

April 30,
2016

July 31,
2015

4,248
5,742
2,221
1,877
191

3,370
2,615
3,435
2,037
563

14,279

12,020

56,618
3,864
165
3,981

64,628

78,907

3,091
4,619

7,710

1,369
1,091
10,864

13,324

21,034

50,605
11,173
5,386
(9,291)

57,873

50,632
3,411
165
2,969

57,177

69,197

1,950
-

1,950

1,305
1,162
12,674

15,141

17,091

45,354
11,173
5,065
(9,486)

52,106

78,907

69,197

“Robert Eadie”

Director

“Gary Arca”

Director

The accompanying notes form an integral part of these consolidated financial statements.

38 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Consolidated Statements of Operations and Comprehensive Income
(in thousands of Canadian dollars except per share amounts)

For the

Revenues

Mined ore
Purchased concentrate

Total Revenues

Cost of Sales
Mined ore
Purchased concentrate
Depreciation and depletion

Total Cost of Sales

Earnings from mining operations

Financing income (costs) (note 11)
Foreign exchange gain (loss)
Professional and consulting fees
Management fees and salaries (notes 13 & 15)
Office and administration
Other expenses
Shareholder relations
Regulatory and transfer agent fees

(Loss) earnings before taxes

Income tax recovery (note 19)

Current
Deferred

Earnings for the year

Other comprehensive income
Item that may subsequently be reclassified to income

Foreign currency translation differences

Comprehensive income for the year

Basic earnings per share (note 18)

Diluted earnings per share (note 18)

Nine months ended
April 30,
2016

Year ended
July 31,
2015

20,326
-

20,326

14,093
-
4,714

18,807

1,519

(387)
(159)
(1,031)
(918)
(1,114)
-
(110)
(244)

(2,444)

57
2,582

195

321

516

0.00

28,073
332

28,405

20,768
306
6,686

27,760

645

3
1,742
(1,115)
(1,210)
(1,446)
(91)
(128)
(110)

(1,710)

299
1,621

210

5,980

6,190

0.00

The accompanying notes form an integral part of these consolidated financial statements.

TSX:SAM / Annual Report 2016 | 39

Starcore International Mines Ltd.
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)

For the

Cash provided by
Operating activities

Earnings for the period
Items not involving cash:

Depreciation and depletion
Other expenses
Income tax (recovery) (note 19)
Interest on long-term debt (note 11)
Interest revenue
Rehabilitation and closure cost accretion (note 12)
Share-based payments (note 13)
Unwinding of discount on long-term debt (note 11)
Write-down for obsolete equipment

Cash generated by operating activities before working capital changes

Change in non-cash working capital items

Amounts receivable
Income tax paid
Inventory
Prepaid expenses and advances
Trade and other payables

Cash provided by operating activities

Financing activities

Advance (repayment) of loan payable (note 11)
Dividends paid (note 13)
Interest paid
Financing fees
Share issuances

Cash provided by (outflows) for financing activities

Investing activities

Cash acquired on acquisition of subsidiaries
Interest received
Investment in exploration and evaluation assets (note 10)
Investment in subsidiaries
Purchase of mining interest, plant and equipment (note 9)
Reclamation deposits
Sale (purchase) of short-term investments (note 6)

Cash outflows for investing activities

Total (decrease) increase in cash

Effect of foreign exchange rate changes on cash

Cash, beginning of period

Cash, end of period

Non-cash transactions – notes 11 & 13

Nine months ended
April 30,
2016

Year ended
July 31,
2015

195

210

4,784
-
(2,639)
283
(12)
65
-
42
3

2,721

1,214
-
152
482
790

5,359

3,850
-
(97)
(90)
-

3,663

-
7
(517)
-
(3,700)
-
(3,162)

(7,372)

1,650

(772)

3,370

4,248

6,688
175
(1,920)
-
(20)
79
144
-
-

5,356

-
16
519
(557)
(2,105)

3,229

1,289
(2,922)
-
-
386

(1,247)

4
7
(303)
(2,188)
(3,299)
(122)
2,002

(3,899)

(1,917)

(167)

5,454

3,370

The accompanying notes form an integral part of these consolidated financial statements.

40 | Starcore International Mines Ltd. / TSX:SAM

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TSX:SAM / Annual Report 2016 | 41

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless stated otherwise)

April 30, 2016

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 mining related operating assets and
exploration assets in North America directly and through corporate acquisitions (see notes 5 & 10).

Basis of Preparation

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”).

On May 13, 2016, the Company changed its fiscal year end from July 31 to April 30. With this
time transitional period for the nine months ended
year
April 30, 2016.

end change, the Company will report a one

‐

Effective December 14, 2015, the Company completed a 4:1 share consolidation (note 13). All common
share and per share amounts have been retroactively restated.

The financial statements were authorized for issue by the Board of Directors on July 22, 2016.

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.

42 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Basis of Preparation

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 subsidiaries, Bernal and Altiplano, 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.

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.

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.

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.

TSX:SAM / Annual Report 2016 | 43

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Summary of Significant Accounting Policies – (cont’d)

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 April 30, 2016 and 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.

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.

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.

44 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Summary of Significant Accounting Policies – (cont’d)

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.

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.

TSX:SAM / Annual Report 2016 | 45

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Summary of Significant Accounting Policies – (cont’d)

g) Mining Interest, Plant and Equipment – (cont’d)

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

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.

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.

46 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Summary of Significant Accounting Policies – (cont’d)

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.

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.

TSX:SAM / Annual Report 2016 | 47

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Summary of Significant Accounting Policies – (cont’d)

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.

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 accounted for at fair value 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.

48 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Summary of Significant Accounting Policies – (cont’d)

Financial Instruments – (cont’d)

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.
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 $5,742 (2015 – $2,615) measured in accordance with Level 1.

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.

TSX:SAM / Annual Report 2016 | 49

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Summary of Significant Accounting Policies – (cont’d)

Income Taxes – (cont’d)

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.

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 warrants and
share options are classified as equity instruments.

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.

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.

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.

50 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Summary of Significant Accounting Policies – (cont’d)

Share-based Payments – (cont’d)

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.
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 14 “Regulatory Deferral Accounts”

IFRS 15 “Revenue from Contracts with Customers”

IFRS 16 “Leases”

IAS 12 “Income Taxes”

IAS 16 “Property Plant and Equipment”

• Annual Improvements to IFRSs 2012–2014 Cycle

TSX:SAM / Annual Report 2016 | 51

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

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:

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.

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.

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%.

52 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Critical Accounting Estimates and Judgments – (cont’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.

Share-based Payment

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.

TSX:SAM / Annual Report 2016 | 53

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Critical Accounting Estimates and Judgments – (cont’d)

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.

Acquisition of Subsidiaries

Acquisition of Cortez Gold Corp.

During the year ended July 31, 2015, the Company signed of a letter of intent with Cortez Gold Corp.
(“Cortez or “CUT”) (TSXV: CUT) to acquire all of the outstanding securities of CUT in an all-share
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 by
CUT shareholders (the “Exchange Ratio”). Cortez is a Vancouver-based junior resource company that owns
the Altiplano gold and silver processing plant in Matehuala, Mexico and has a director and officer in
common with the Company.

Shareholders of Cortez approved the Arrangement which was finalised on approval by the British Columbia
Supreme Court on August 5, 2015. Pursuant to the Arrangement, the former Cortez shareholders hold
7,166,888 common shares of Starcore, representing 15.87%, of the 45,153,599 outstanding common shares
of Starcore after issue of shares pursuant to the Arrangement. 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 at the exercise price adjusted based upon the Exchange Ratio.

The Company valued the 7,166,888 shares at the fair market value on date of issue of $0.42 per share, for
total consideration of $3,010, which was accounted for as acquisition of assets allocated based on their
relative fair values on the closing date. The following purchase price allocation is based on management’s
best estimates and assumptions after taking into account all relevant information available. The purchase
price has been allocated as follows:

Assets
Amounts receivable
Prepaid expenses and advances
Plant, machinery and equipment

Total assets

Liabilities
Less: Trade and other payables

Loan payable

Total liabilities

Net assets acquired - consideration paid (7,166,888 shares issued at

$0.42 per share)

350
5
6,094

6,449

503
2,936

3,439

3,010

54 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Acquisition of Subsidiaries – (cont’d)

Acquisition of Cortez Gold Corp. – (cont’d)

The Altiplano processing plant was in the final stages of completion and testing as at April 30, 2016 and,
therefore, is in the pre-operational phase of production. As a result, all of the costs and any test production
revenue are capitalized to Plant costs until such time as the facility is of sufficient operational status with the
ability to function as management intended.

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.

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 acquired American Consolidated Minerals Corp. (“AJC”) 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 for three (3) common shares of AJC held by
such AJC shareholder (the “Exchange Ratio”). In addition, each holder of the outstanding stock options and
common share purchase warrants of AJC 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. In total, the Company issued 1,464,095 shares at a fair
value of $0.52 per share for total consideration of $761. The Company also issued 139,284 common share
purchase warrants at a fair value of $Nil (note 13).

TSX:SAM / Annual Report 2016 | 55

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Acquisition of Subsidiaries – (cont’d)

Acquisition of American Consolidated Minerals Corp. – (cont’d)

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:

Shares (1,464,095shares issued at $0.52 per share)

Short-term Investments

4
25
43
1,029

1,101

340

761

At April 30, 2016, the Company held a Guaranteed Investment Certificate (“GIC”) denominated in CAD,
USD and Mexican Pesos (“MP”). The GIC denominated in CAD and USD has a market value of $3,766
(July 31, 2015 - $2,615), earning interest income at 0.2% per annum and maturing on November 5, 2016.
The Company also holds a GIC denominated in MP with a market value of $1,976 (July 31, 2015 - $Nil)
earning interest at 3.25% per annum on a month to month basis.

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 two financial institutions and as such the Company is exposed to the risks
of those financial institutions.

Amounts Receivable

Taxes receivable
Other

April 30,
2016

July 31,
2015

1,955
266

2,221

3,202
233

3,435

56 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Inventory

Carrying value of inventory:

Doré
Goods in transit
Work-in-process
Stockpile
Supplies

Mining Interest, Plant and Equipment

April 30,
2016

July 31,
2015

1,097
53
35
13
679

1,877

1,051
-
112
118
756

2,037

Mining
Interest

Plant and
Equipment

Corporate
Office
Equipment

Total

Cost
Balance, July 31, 2014

Additions
Effect of foreign exchange

Balance, July 31, 2015

Additions
Acquisition of Cortez assets
Write-down of equipment
Effect of foreign exchange

Balance, April 30, 2016

Depreciation
Balance, July 31, 2014

Depreciation for the year
Effect of foreign exchange

Balance, July 31, 2015

Depreciation for the period
Write-down of equipment
Effect of foreign exchange

Balance, April 30, 2016

Carrying amounts
Balance, July 31, 2015
Balance, April 30, 2016

$
$

56,102
2,581
11,162

14,893
1,109
3,054

69,845
1,333
-
-
(1,160)

19,056
2,289
6,040
-
(750)

70,018

26,635

20,579
5,482
4,219

30,280
3,707
-
(2,206)

5,738
1,204
1,250

8,192
1,007
-
(683)

31,781

8,516

39,565
38,237

$
$

10,864
18,119

$
$

325
152
-

477
78
54
(4)
-

605

272
2
-

274
70
(1)
-

343

203
262

$
$

71,320
3,842
14,216

89,378
3,700
6,094
(4)
(1,910)

97,258

26,589
6,688
5,469

38,746
4,784
(1)
(2,889)

40,640

50,632
56,618

TSX:SAM / Annual Report 2016 | 57

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

Mining Interest, Plant and Equipment – (cont’d)

The Company entered into a Binding Agreement (“Agreement”) to sell the San Pedrito Property located in
Queretaro, Mexico. The sale is expected to net the Company approximately USD $7 Million. The
Agreement requires the buyer to deposit 50 million Mexican Pesos (“MP”) (approximately USD $2.8
million), which has been received in trust and may only be released pending various confirmations, including
compliance with state and municipal regulations and evidence that the property is in good standing.

The agreement is subject to a 50 million MP penalty clause in case of non-performance that will be effective
if either the purchaser does not pay the owed amount when all the conditions have been met or if the
Company does not wish to continue with the sale. Upon receipt of the required confirmations, the agreement
provides for the subject conditions to be removed and the balance of funds to be paid immediately to the
Company. The Company has not recorded the sale or deposit in these Financial Statements due to the
pending conditions precedent.

The San Pedrito property was part of Starcore’s original acquisition in 2007, when the Company acquired the
San Martin Mine from Goldcorp for USD $26 million. The Company has allocated a cost base of
approximately $3,750 to the property.

10.

Exploration and Evaluation Assets

a) American Consolidated Minerals (“AJC”) properties

Pursuant to the Acquisition of AJC (note 5), the Company has acquired the rights to three exploration
properties as follows:

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$360, and the Company must incur total exploration expenditures of USD$1,225
(USD$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 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.

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.

58 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

10.

Exploration and Evaluation Assets – (cont’d)

a) AJC properties – (cont’d)

ii)

Toiyabe, U.S.A – (cont’d)

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) Creston Moly (“Creston”) properties

El Creston Project, Mexico

The Company acquired a 100% interest in the nine mineral claims known as the El Creston
molybdenum property located northeast of Hermosillo, State of Sonora, Mexico, which has
completed a Preliminary Economic Assessment on the property based on zones of porphyry-style
molybdenum (“Mo”)/copper (“Cu”) mineralization. The mineral concessions are subject to a 3%
net profits interest.

ii)

Ajax Project, Canada

The Company acquired a 100% interest in six mineral claims known as the Ajax molybdenum
property located in B.C.

iii) Molybrook Project, Canada

The Company owns 100% of the 44 mineral claims of the Moly Brook molybdenum property,
located on the southern coast of Newfoundland. The Moly Brook property is subject to a 2%
NSR, of which 1.5% can be purchased by the Company for $1,500.

During the year, the Company reduced its claims to focus of the core project and to reduce its
holding costs.

TSX:SAM / Annual Report 2016 | 59

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

10.

Exploration and Evaluation Assets – (cont’d)

Acquisition costs:
Balance, August 1, 2014
Acquisition Payments
Effect of foreign exchange

Balance, July 31, 2015

Effect of foreign exchange

Balance, April 30, 2016

Exploration costs:
Balance, August 1, 2014

Geological
Land taxes
Maintenance

Balance, July 31, 2015
Geological
Legal fees
Maintenance
Effect of foreign exchange

Balance, April 30, 2016

Total exploration and evaluation assets
Balance, July 31, 2015
Balance, April 30, 2016

11.

Loan payable

AJC
Properties

Creston
Properties

Total

$
$

-
1,079
80

-
2,001
-

-
3,080
80

1,159

2,001

3,160

(76)

1,083

-
2
10
13

25
-
-
59
37

121

1,184
1,204

$
$

2,001

-
1
-
225

226
115
228
90
-

659

2,227
2,660

$
$

(76)

3,084

-
3
10
238

251
115
228
149
37

780

3,411
3,864

During the year ended July 31, 2015, the Company secured a $1,305 (USD $1,000) loan with a lender. The
loan is secured against certain assets of the Company and bears interest at 11% per annum, compounded
monthly. The full principal plus accrued interest on the loan shall be repayable to the lender on August 31,
2017.

The Company amalgamated with Cortez (note 5) on August 5, 2015 and acquired the outstanding debt of
$2,936. During the period ended April 30, 2016, the Company settled this debt by paying $650 (USD$500)
and interest of $96 (USD $75) to its lenders. The Company also issued 3,993,203 Subscription Receipts (the
“Receipts”) to complete settlement of outstanding debt in the aggregate amount of $1,959 (US$1,500) and
$282 (US$225) in interest to certain creditors. The Receipts were issued at a fair value of $0.56 per Receipt.
The Receipts were subsequently converted into 3,993,203 common shares (note 13) during the period ended
April 30, 2016.

60 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

11.

Loan payable – (cont’d)

On November 17, 2015, the Company completed a private placement of secured bonds in the aggregate
principal amount of $4,500 (“the Bonds”) less structuring and finder’s fees, totaling $90 (the “Discount”).
The Bonds bear interest of 8% per annum, payable on November 12, 2016. The Bonds are secured against all
of the Company’s asset that ranks pari passu with the existing debt obligations of the Company. The
Discount is being charged to the Company’s statement of operations and comprehensive income and added to
the liability over the life of the Bonds.

Principal

Interest

Discount

Total

Financing, July 30, 2015
Foreign exchange adjustment

Balance, July 31, 2015

Acquisition of Cortez Debt
Repayment on debt
Financing, November 17, 2015
Interest accrual
Unwinding of discount
Foreign exchange adjustment

1,289
16

1,305

2,609
(2,609)
4,500
-
-
(51)

-
-

378
(378)
-
282
-
-

Balance, April 30, 2016

5,754

282

-
-

(51)
51
(90)
-
42
-

(48)

Current
Non-Current

April 30, 2016

4,619
1,369

5,988

1,289
16

1,305

2,936
(2,936)
4,410
282
42
(51)

5,988

July 31, 2015

-
1,305

1,305

The Company’s financing (income) costs for the period ended April 30, 2016 and the comparative period
ending on July 31, 2015 as reported on its Consolidated Statement of Operations and Comprehensive Income
can be summarized as follows:

For the

Unwinding of discount on rehabilitation and closure accretion (note 12)
Discount unwinding on debt repaid
Discount unwinding on existing debt
Interest expense on debt
Gain on forgiveness of debt
Interest revenue

Nine month
ending
April 30,
2016

Year ended
July 31,
2015

65
51
42
282
-
(53)

387

79
-
-
-
(9)
(73)

(3)

TSX:SAM / Annual Report 2016 | 61

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

12.

Rehabilitation and Closure Cost Provision

The Company’s asset retirement obligations consist of reclamation and closure costs for the mine. At
April 30, 2016, the present value of obligations is estimated at $1,091 (July 31, 2015 - $1,162) based on
expected undiscounted cash-flows at the end of the mine life of 19,195,000 MP or $1,401 (July 31, 2015 -
$1,615), which is calculated annually over 5 to 10 years. Such liability was determined using a discount rate
of 8% (July 31, 2015 – 8%) and an inflation rate of 3.5% (July 31, 2015 – 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

13.

Share Capital

Common Shares

April 30,
2016

July 31,
2015

1,162
65
(136)

1,128
79
(45)

1,091

1,162

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.

In December 2015, the Company’s Board of Directors approved a resolution consolidating the
Company’s share capital on the basis of one new share for up to every four outstanding shares of the
Company. The Company received acceptance from regulatory authorities and commenced trading on
a consolidated basis effective December 14, 2015. The 4:1 share consolidation has been presented
throughout the consolidated financial statements retroactively.

During the period ended April 30, 2016, the Company issued:

- 3,993,203 Subscription Receipts (the “Receipts”), to settle the outstanding debt pursuant to the
acquisition of Cortez (note 5) as at July 31, 2015 in the aggregate amount of $2,241 owed to
certain creditors. The Receipts were issued at a fair value of $0.56 per Receipt. The Receipts
were convertible into one share of the Company upon receipt of shareholder approval. On
January 19, 2016, the shareholders approved the conversion of the Receipts into shares and as a
result the Company issued 3,993,203 shares to the Receipt holders.

- 7,166,888 shares were issued pursuant to the plan of arrangement at $0.42 whereby the

Company acquire all of the outstanding shares of Cortez Gold Corp.

62 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

13.

Share Capital – (cont’d)

Common Shares – (cont’d)

During the year ended July 31, 2015, the Company issued:

- 643,750 shares pursuant to the exercise of options at $0.60 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.

- 1,464,095 shares pursuant to the plan of arrangement at $0.52 whereby the Company acquire all

of the outstanding shares of AJC (note 5).

b) Warrants

No warrants were issued during the period ended April 30, 2016.

During the year ended July 31, 2015, the Company issued 139,284 warrants pursuant to the AJC
acquisition (note 5). 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 share of the
Company, at $1.20 until June 16, 2016. These warrants expired unexercised subsequent to April 30,
2016.

A summary of the Company’s outstanding share purchase warrants at April 30, 2016 and
July 31, 2015 and the changes during the periods then ended is presented below:

Outstanding at July 31, 2014

Warrants issued

Outstanding at July 31, 2015 & April 30, 2016

Number of
warrants

Weighted
average
exercise price

-
139,284

139,284

-
1.20

1.20

A summary of the Company’s outstanding warrants at April 30, 2016 is as follows:

Number
Outstanding

Weighted
Average Price

Weighted
Average Life

139,284

$1.20

0.13

Dividend Paid and Declared

During the previous year ended July 31, 2015, a dividend of $0.08 per share (total of $2,922) was paid
on the shares of the Company on September 30, 2014 to shareholders of record.

TSX:SAM / Annual Report 2016 | 63

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

13.

Share Capital – (cont’d)

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 stock outstanding. 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 for the periods ending April 30, 2016 and July 31,
2015:

Balance at July 31, 2014
Exercised
Forfeited/expired
Outstanding and Exercisable at
July 31, 2015 & April 30, 2016

Number of
Options

Weighted Average
Exercise Price

4,650,000
(643,750)
(1,160,000)

2,846,250

$0.92
$0.60
$0.64

$1.07

Subsequent to the period ended April 30, 2016, 37,500 options expired unexercised.

The following is a summary of the Company’s outstanding and exercisable options at April 30, 2016:

Number
Outstanding

37,500
100,000
485,000
812,500
200,000
68,750
50,000
50,000
1,042,500

2,846,250

Weighted
Average
Exercise Price
$0.60
$0.80
$1.00
$1.48
$1.00
$0.80
$0.92
$1.00
$0.88

$1.07

Weighted
Average Life

0.02
0.71
0.74
0.95
2.31
2.31
2.35
2.37
2.71

1.72

During the period ended April 30, 2016, the Company had share-based compensation expense of $Nil
(July 31, 2015 - $144). These amounts have been expensed as follows:

For the

Cost of Sales – Mined ore
Management fees and salaries
Office and administration

64 | Starcore International Mines Ltd. / TSX:SAM

Nine months ending
April 30, 2016

Year ended
July 31, 2015

-
-
-
-

18
120
6
144

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

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 material differences between the carrying
values and the fair values of any other 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.

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 April 30, 2016, the Company had the following
financial assets and liabilities denominated in CAD and denominated in MP:

In ‘000 of

CAD Dollars

Cash
Long term liabilities
Other working capital amounts - net

$
$
$

451
2,163
(4,619)

35,112
-
(105,118)

At April 30, 2016, US dollar amounts were converted at a rate of $1.2549 Canadian dollars to $1 US
dollar and MP were converted at a rate of MP17.19 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 $52. A 10% increase or decrease in the MP exchange rate will decrease or increase
annual earnings from mining operations by approximately $18.

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.

TSX:SAM / Annual Report 2016 | 65

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

14.

Financial Instruments – (cont’d)

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 April 30, 2016 is $4,248 (July 31, 2015 -
$3,370) and $5,742 (July 31, 2015 - $2,615), respectively. Cash of $566 (July 31, 2015 - $1,371) and
short-term investments of $1,976 (July 31, 2015 - $Nil) are held at a Mexican financial institution,
cash of $19 (July 31, 2015 – $Nil) are held at a US financial institution and the remainder of $3,663
(July 31, 2015 - $1,999) and the short-term investment of $3,766 (July 31, 2015 - $2,615) 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 $1,910 and GST receivable of $45, which are subject to review by the
respective tax authority.

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 April 30, 2016, the
Company was holding cash of $4,248 (July 31, 2015 - $3,370) and short-term investments of $5,742
(July 31, 2015 - $2,615).

Obligations due within twelve months
of April 30,

2016

2017

2018

2019

Trade and other payables
Current portion of loan payable
Non-current portion of loan payable
Reclamation and closure obligations

3,091
4,619
-
-

-
-
1,369
-

-
-
-
-

2020 and
beyond

-
-
-
-

-
-
-
1,401

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.

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 $2,033 in revenue and net income.

66 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

15.

Commitments and related party transactions

Except as disclosed elsewhere in these consolidated financial statements, the Company has the following
commitments outstanding at April 30, 2016:

As at April 30, 2016, 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.

As at April 30, 2016, the Company has a land lease agreement commitment with respect to the land
at the mine site, for $132 per year until December 2017. The Company also has ongoing
commitments on the exploration and evaluation assets of approximately $220 per year.

As at April 30, 2016, the Company has management contracts to officers and directors totaling $840
per year, payable monthly, expiring in January 2017.

The Company paid the following amounts to key management and directors in the period:

For the

Management fees
Legal fees
Directors fees
Share-based payments

Total

16.

Capital Disclosures

Nine months ending
April 30, 2016

Year ending
July 31, 2015

624
256
70
-

950

840
95
60
107

1,102

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 and
there were no changes to the capital management in the period ended April 30, 2016.

17.

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 period
Mining interest, plant and equipment
Non-Current assets
Total assets

Mexico
20,326
3,653
56,364
61,323
71,876

Canada

USA

April 30, 2016
Total

-
(3,429)
254
3,045
5,180

-
(29)
-
260
1,851

20,326
195
56,618
64,628
78,907

TSX:SAM / Annual Report 2016 | 67

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

17.

Segmented Information - (cont’d)

Revenue
Earnings (loss) for the year
Mining interest, plant and equipment
Non-current assets
Total assets

Mexico
28,405
2,563
50,278
54,427
63,590

Canada

USA

-
(2,379)
273
2,545
4,786

-
26
81
205
821

July 31, 2015
Total

28,405
210
50,632
57,177
69,197

During the periods ended April 30, 2016 and July 31, 2015, the Company earned all of its revenues from
one customer. As at April 30, 2016, 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 April 30, 2016 was $Nil (July 31,
2015 - $Nil).

18.

Earnings per Share

The Company calculates the basic and diluted income (loss) per share using the weighted average number
of shares outstanding during each year and the diluted income (loss) 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 (loss) per share, being the weighted average number of
shares, is calculated as follows:

For the

Nine months
ended
April 30, 2016

Year ended
July 31, 2015

Issued common share, beginning of year
Weighted average issuances

Basic weighted average common shares
Effect of dilutive warrants and options

37,986,761
8,470,313

46,457,074
-

35,878,866
1,567,496

37,446,362
-

Diluted weighted average common shares

46,457,074

37,446,362

Vested share purchase options totalling 2,846,250 and share purchase warrants totalling 139,284 at
April 30, 2016 were not included in the computation of diluted earnings per share as the effect was anti-
dilutive.

68 | Starcore International Mines Ltd. / TSX:SAM

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

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:

For the

Nine months
ended
April 30, 2016

Year ended
July 31, 2015

(Loss) Earnings before income taxes

(2,444)

(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
Permanent Difference
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%

(635)

(310)
(1,773)
(361)

-
-
440

26%

(445)

(2,253)
(658)
-

114
-
1,322

Income tax (recovery) expense

(2,639)

(1,920)

The Company’s statutory rate is 26% for the period ended April 30, 2016 (July 31, 2015 - 26%). The
significant components of the Company’s deferred income tax assets and liabilities are as follows:

Deferred income tax assets (liabilities):
Mining interest, plant and equipment
Payments to defer
Insurance
Reclamation and closure costs provision
Expenses reserve
Pension-fund reserve
Deferred mining tax
Non-capital losses and other deductible tax benefits
Other

April 30, 2016

July 31, 2015

(7,288)
(527)
(4)
960
131
76
(2,004)
1,680
93

(13,096)
(601)
(3)
883
80
63
-
2,969
-

Deferred income tax liabilities, net

(6,883)

(9,705)

TSX:SAM / Annual Report 2016 | 69

Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)

April 30, 2016

19.

Income Taxes – (cont’d)

Unrecognized deductible temporary differences, unused tax losses and unused tax credits are attributable to
the following:

Net capital losses
Non-capital losses
Resource pools
Property and equipment
Canadian eligible capital

April 30, 2016

July 31, 2015

-
24,333
3,674
159
1,426

29,592

369
1,625
640
-
-

2,634

At April 30, 2016, the Company has tax losses of approximately $11,894 (July 31, 2015 - $8,767) in Canada
and $12,439 (July 31, 2015 - $626) in Mexico available for carry-forward to reduce future years’ taxable
income, expiring between 2026 and 2036 in Canada. In addition the Company has tax resource pools and other
deductible amounts available of $5,259 (July 31, 2015 - $8,953), amortizable at various rates from 100% to
10% without expiry. 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”).

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. During the current year end, the tax liability was decreased by
$358 to $2,004.

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.

70 | Starcore International Mines Ltd. / TSX:SAM

“ We have proven the ability to process

various types of concentrate and expect
to do this profitably with a consistent
supply of concentrates and production.”

Robert Eadie, President of the Company

TSX:SAM
starcore.com

investor@starcore.com

Tel: 416-640-1936

Toll Free: 866-602-4935