S T A R C O R E I N T E R N A T I O N A L M I N E S L T D .
Investing in Social Good
A N N U A L R E P O R T 2 0 1 7
TSX:SAM
Starcore International Mines Ltd.
Mission
Statement
To remain a leader in the Mexican
mining community 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 for growth.
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Mission Statement
Insights from the CEO
Letter from the CFO
Starcore Assets
Company Values
Investing in Social Good
Environmental Initiatives
By the Numbers
Why Mexico?
Why Gold?
San Pedrito Sale
Why Starcore?
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Starcore International Mines
TSX:SAM
TSX:SAM
Annual Report 2017
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Insights from the CEO
Dear Fellow Shareholders,
I begin this letter with a strong sense of pride and gratitude regarding Starcore
International: 2017 marks ten years of being steadfast in creating value for our
shareholders.
We have built a small cap mining company with the
infrastructure to grow organically, a foundation that is resilient to the economic
and political changes around the world, and most importantly, a company that
reinvests our profits for the greater social good. The chart below highlights a
snapshot of a few milestones we’ve achieved over the years:
Value Creation for Shareholders
Declares
Dividend
Acquires
American
Consolidated
Acquires
El Creston
Acquires Cortez
Gold Corporation
Sells San Pedrito for
C13.5 Million
120%
100%
80%
60%
40%
20%
0%
SAM-CA
TSX
GDXJ-US
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“Approaching 2018, our focus remains on our ability to grow
our asset base at a non-dilutive cost to our shareholders.”
Robert Eadie
San Martin
Our primary mine, San Martin, has continued to have
success in producing: 15,159 gold equivalent ounces at an
AISC of $1,112/EqOz. While bridging the gap between the
departure of our previous COO, the interim COO, Ralf Klein,
helped to return the mine to normal tonnage and metal
production. San Martin remains a difficult mine to operate
because of the complex geology, but we are confident that
with the expertise on the ground combined with our explora-
tion efforts, the mine will continue to yield more high-grade
zones and consistent production. The San Martin mine
continues to be the cornerstone asset of the company.
Altiplano
Our goal in purchasing the Altiplano processing facility in
2015 was to add another cornerstone cashflow producing
asset in our portfolio. Making that possible is a lot more
complicated than simply signing contracts and producing
doré - something we want to express to our shareholders.
However, moving the project along, we have taken the
Altiplano facility from construction to completion and now,
operational, in the last two quarters of 2017 fiscal year. Since
becoming operational over the past two quarters, the
Altiplano Facility received approximately:
185.15 tonnes of concentrate (net of 67.6 tonnes
returned to a supplier which was received in Q3)
5.8 tonnes of precipitates and 7.8 tonnes of slag
containing approximately 752 ounces of gold and
46,000 ounces of silver
To April 30, 2017, we’ve sold 583 ounces of gold and
30,690 ounces of silver from the amounts received at
Altiplano
These results are not excellent, and the board of directors
and management recognize that. Our ongoing efforts in
securing contracts and concentrates to fill the facility are
affected by many variables; however it is important to
remember that seeking contracts that will fill our plant
consistently and produce predictable cashflow will ultimately
generate more shareholder value. We ask your patience in
this process and to remember “Rome wasn’t built in a day,
but they were laying bricks every hour”. Our focus on
Altiplano remains steadfast!
Investment In Social Good
This year was especially remarkable because of our invest-
ment in the San Martin community or how we call it, our
investment in social good. The children from the town of San
Martin organized and designed a park that would utilize a
donated space in town from a resident of the community,
and we contributed the funds and resources to complete it.
The impact was so large that we saw the Canadian Ambas-
sador to Mexico and the Natural Resources Minister of
Canada attend the opening ceremony. It was truly a special
event that focused on community involvement, positive
engagement and planning, and a focus on the bright future of
the community near the mine.
Looking Ahead
Approaching 2018, our focus remains on our ability to grow
our asset base at a non-dilutive cost to our shareholders. I
remain cautious about the micro/macro environment but I
also believe that the price of gold has room to move higher,
taking advantage of the political instability in the world, the
excessive money printing and the flight from the US dollar as
a safe haven. On behalf of the board of directors and
management, I wish to thank all our employees for embrac-
ing Starcore and our core values in helping to build a great
company fit for the demands of the precious metals industry.
I also wish to thank you, our shareholders and stakeholders
for your continued investment and support. Our focus is
steadfast - our goal is long term sustainable shareholder
value.
Robert Eadie
President and CEO
TSX:SAM
Annual Report 2017
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The overriding objective in 2017 was to integrate the
properties we’ve acquired into our mining profile. Our
company owns a diverse chain of mining assets from
low-risk, high-reward exploration properties to a producing
mine, San Martin. A good integration process isn’t only about
checklists, status reports, or templates. It’s about capturing
value and mitigating risk.
While we understand the time sensitivity of these operations
contributing to our bottom line, we also acknowledge the
cohesiveness that it takes in properly uniting all business
models to achieve long term sustainable value. I highlight
some updates next:
generated
C$13.5million
from the sale of the Peditro property
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Starcore International Mines
TSX:SAM
Letter from our CFO
“Despite lower production, we were able to
generate positive operating cash flow of
C$2million.”
Gary Arca
Adaptability and Diversity
Financially, the past year was a time of change and adapt-
ability for Starcore and its subsidiaries. We increased
exploration and mining of the flagship San Martin mine,
opening up new zones in continuing the 23 year history of
the mine. While we experienced lower overall ore grades and
production as a result of entering new zones and mining old
stopes, we were able to adapt by lowering costs and
improving efficiency at the mine.
As a smaller operation, we have the advantage of being able
to respond quickly to production changes and also to take
advantage of opportunities as they arise. This was especially
evidenced by closing the sale of the San Pedrito property
near the city of Queretaro for over C$13million. This property
was converted from an infeasible mining property to a
residential/industrial zoned property by the us over the past 6
years.
Despite lower production, we were able to generate positive
operating cash flow of C$2million. This operating cash flow,
coupled with the sale of San Pedrito, allowed us to pay out
C$5million of debt and invest a further C$4.9million in
CAPEX in the year while still increasing overall cash reserves
by C$1.3million.
We also experienced the growing pains of starting up the
Altiplano operations, which, despite proving that we can
successfully and profitably process concentrate and other
mining products, did not generate enough volume to have an
impact on our earnings. We continue to develop this new
operation and expect to achieve profitable operations in the
coming year.
Finally, we were able to use some of cash reserves to develop
and explore other properties in the United States and Mexico.
This diversity in operations will lead to opportunities that will
ensure the future of our Company.
Overall the Company generated significant earnings of
C$7.2million, or $0.15 per share, and EBITDA of C$3.5million,
which excludes the C$7.1million gain on the sale of San
Pedrito. In addition to lowering costs and improving efficien-
cy at the mine, we were also able to take advantage of the
weaker Mexican peso to keep costs below US$55 per tonne
and not experience a significant decrease in revenue, due
partially to stronger metal prices. Despite our low cost per
tonne our AISC still increased to US$1,112 per ounce with the
lower production and we continue to remain vigilant over
costs to ensure the mining operations continue to produce
positive cash flow into the future.
This next year will continue to test our adaptability to the
changing landscape both within our operations and with
market factors affecting metal prices and cost inputs. We are
continually looking for new investment and profit opportuni-
ties while still ensuring we have sufficient cash reserves to
weather any storm and assure the continued success of our
operations.
Gary Arca
CFO
generated earnings of
C$7.2million
or $0.15 per share, and
EBITDA of C$3.5million
Adaptability
& Diversity
A view of the revegetation on the dry
tailings stack at the San Martin Mine.
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Starcore International Mines
TSX:SAM
TSX:SAM
Annual Report 2017
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Starcore
Assets
Ajax Molybdenum
Project
British Columbia, Canada
Lone Ranch
Washington, U.S.A.
Toiyabe
Nevada, U.S.A.
El Creston
Sonora, Mexico
Types
of Metals
Au
Jewellery accounted for 47% of world gold demand in 2016.
Various technologies (electronics, industrial uses and
dentistry) used 8%, investments (bars, coins, ETFs and
similar products) accounted for 36%, and central bank and
other institutions accounted for 9%. It can be readily sold on
numerous markets world-wide, although benchmark prices
are generally based on London Bullion Market Association
quotations.
Ag
Silver has a wide variety of uses due to its malleability,
eflectivity and lustre. It is commonly used in jewelry and
silverware, and also used in medical, batteries, circuit
boards, the glass industry and photography. Silver is also
used to make mirrors, as it is the best known reflector of
visible light.
Mo
Molybdenum is used primarily as an alloying agent in steels
and cast irons. It is most often applied to steels to enhance
strength and resistance to corrosion at high temperatures. It
is a key element in high performance stainless steels,
increasing resistance to acids, salt and seawater corrosion.
High-molybdenum content steels are often used in building
applications such as bridges, swimming pool and water tank
linings, and ship building. Steels used for cutting have high
molybdenum content. Molybdenum can be used as a
catalyst in petroleum refining and plastics. It is one of the
primary alloys in jet engine parts.
Molybrook
Newfoundland, Canada
Altiplano
Matehaula, Mexico
San Martin
Querétaro, Mexico
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Starcore International Mines
TSX:SAM
TSX:SAM
Annual Report 2017
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Company
Values
Act with Integrity
We are committed to being honest,
straightforward and accountable in all
our business practices.
Engage Openly
We believe that clear, comprehensive
disclosure, high standards of corporate
governance and ethical business practices
are the only ways to do business.
Operate Safely
People come first. We implement industry
best practices, adhere to all safety
regulations and have strict management
systems in place to promote a culture of
safety wherever we operate.
Enrich Lives
We aim to create real, lasting and
tangible benefits for the people
whose lives our operations touch.
Behave Responsibly
We strive to demonstrate that mining can be done
responsibly. We do this by emphasizing
environmental stewardship at every stage of the
project life cycle.
TSX:SAM
Annual Report 2017
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It’s In
Our DNA
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Starcore International Mines
TSX:SAM
Investing in
Social Good
The management team of Starcore International Mines Ltd.
is committed to driving and developing our company
towards our growth and valuation objectives while maintain-
ing an unwavering commitment to social and environmental
stewardship. These commitments are met through a robust
corporate social responsibility mandate that provides
significant investment certainty to our shareholders through
the application of sound business and international ethics.
Our mandate includes a healthy dialogue with communities
and charities, good stewardship and a cooperative approach
to improving the lives surrounding our operations in Mexico.
Our largest involvement flows directly through our biggest
asset in Mexico, the San Martin gold mine, located in
Querétaro state. The mine has approximately 320 employ-
ees with families that live in the nearby town of San Martin.
Our participation in youth education includes ongoing
donations to improve kindergarten and elementary
programs, purchasing of school supplies, annual summer
camps and maintaining the grounds and entrances of the
school areas. We recognize our responsibility in providing
the best tools for the children of the community to succeed
and be prepared for the future. On a public health front, we
provide our employees with annual medical check-ups free
of charge, including prostrate antigens exams, audiometry
exams, physical exams, glucose, triglycerides and cholester-
ol exams, and thorax x-rays. Involvement in the San Martin
community improves the lives of our employees and their
families, but also provides a stronger sense of family and
motivation when working.
“Investing in social good as a core value of the
company is one of the main reasons we have been
successful in Mexico,” said Robert Eadie, President
and CEO of the Company
We are stewards of our natural environment and through
that recognition, we have adopted the technology of dry
stacked tailings at a considerable added cost to our
operations. We are one of the few companies in Mexico to
apply this method. The dry stack tailings method provides
many benefits to the surrounding environment including the
ability to recycle more of our process solutions within the
plant, reducing water consumption by as much as 80%,
decreasing land usage, creating a more stable impoundment
geotechnically, and it also helps with revegetating the
surrounding area. As part of the revegetation process, we
provide a nursery for plants in the region, and an estimated
7,500 plants per year. As a joint effort among staff, commu-
nity and children, we ensure that the planting season from
May- June goes smoothly. We believe that the benefits of a
dry stack tailings facility far outweigh the cost consider-
ations, and will bring long lasting environmental values to the
community.
The most successful community programs are ones that
have been orchestrated through cooperation. Through
friendly engagement of the community, the children from the
San Martin primary and secondary schools submitted ideas
based on the perceived needs of the community for an
unused piece of land. The ideas were submitted to a panel
that consisted of mine staff and community members, and
the best idea that focused most on a sustainable and an
equitable solution would win. The submissions reflected an
incredible amount of passion and vision, clearly demonstrat-
ing that the desire to create a park for the generations to
come was instinctive to the children. The inauguration of the
park included mine staff, community members and the
children, and political ambassadors to Mexico from Canada.
The participation by various parties echoed the harmony that
is created when community and company work together, and
the power of investing in social goods.
Companies large and small have found that an investment in
social good has a greater return that is not limited to the
bottom line. For the management team of Starcore Interna-
tional, its staff and the communities involved, it has been a
core aspect behind why we have been successful in Mexico.
The Canadian Ambassador to Mexico,
Pierre Alarie, playing with the children in
the newly built park at San Martin
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Starcore International Mines
TSX:SAM
TSX:SAM
Annual Report 2017
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Environmental
Initiatives
Committed to Reclamation
Recognizing that we are all stewards of the natural environ-
ment, Starcore has adopted the technology of dry stacked
tailings at a considerable added cost to the operations.
However, we believe the benefits far outweigh the cost
considerations and will bring long-lasting values. This ethic
embraces responsible planning and quality management of
the resources. The benefits of dry stack tailings include:
More of the process solutions are recycled
within the plant
Water consumption is reduced by 80-85%
as well as a reduction in windborne dust
Risk of discharging harmful solutions to the
environment is eliminated
Reduces the impact on the environment in
terms of land area used for tailings, as dry
stack facilities require a smaller footprint
compared to other surface tailings disposal
systems, while creating a much more stable
impoundment geo-technically
Groundwater contamination through seep-
age is eliminated
Land is re-vegetated with greater efficiency
and ease
Greenhouse Production 2017
478 pieces
lettuce
376 kg tomato
63 kg chili
43 kg chard
90 pieces
cabbage
35 kg cherry
tomatoes
41 kg cucumber
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Starcore International Mines
TSX:SAM
TSX:SAM
Annual Report 2017
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By the Numbers
$9.6 million
Cash and short-term investments on
hand as at April 30, 2017
$0.195
Cash per Issued and Outstanding Shares
$27.2 million
Gold and Silver Sales
$7.2 million
Net income, or $0.15 per share
12.8%
EBITDA Margin
C$13.50 Million
Sale of Real Estate Asset in Mexico
15,159 ounces
Equivalent Gold Production
US$969/EqOz
Mine operating cash cost
US$1,112/EqOz
All-in sustaining costs of
Why
Mexico?
100 billion USD investment by the
federal government to National
Infrastructure Program for Trans-
port and Communications between
2014 and 2018
Mexico is the world’s leading
silver exporter and producer
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
Investment in Mexico’s mining
sector rose to US$17.8 million
dollars between 1999 and 2013
Average hours worked
per week, either full time
or part time is 43.6
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
Mexico is the second largest
gold producer in Latin Ameri-
can and eighth in the world
Recent reduction in electricity
prices of an average of 26.8%
translates to substantial cost
benefits to the mining
companies
A study by Behre Dolbear of “where to
invest in 2016, ranking of countries
for mining investments,” rated Mexico
as the 5th best destination for
investing in mining
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Starcore International Mines
TSX:SAM
TSX:SAM
Annual Report 2017
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Interesting Facts About Gold
11.2m If all of the existing gold in the world
was pulled into a 5 micron thick wire,
it could wrap around the world 11.2
million times.
2808 The boiling point of gold is 2808
degrees centigrade.
31g There are just over
31 grams in a troy
ounce of gold.
1oz It is rarer to find a one
ounce nugget of gold than
a five carat diamond
400 A “London Good Delivery
Bar”, the standard unit of
traded gold, is made from
400 troy ounces of gold.
200 Julius Caesar gave 200
gold coins to each of his
soldiers from the spoils of
war in defeating Gaul.
San Martin produces
15,159
gold equivelant ounces
Why Gold?
Gold has been around for centuries occupying various
important roles in society and culture. The metal has
decorated crowns and tombs of the once great leaders. It
has played an important role in the international monetary
system when gold coins were first struck on the order of
King Croesus of Lydia. It’s used as a dominant feature in
festivals and celebrations as gifts and sacred rituals.
Empires flourished by possessing the yellow metal. The
Egyptians considered it flesh of the gods, and the Aztecs
thought of it as excrements of the gods. In ancient Rome
and medieval Europe, there were laws against people
wearing too much gold if they weren’t of a noble blood! The
fascination with gold is as old as time itself; the bible even
refers to gold over 400 times- that’s more than Mary, Joseph
and St John the Baptist combined. Gold also has certain
characteristics that make it unique. A few are that it doesn’t
corrode, rust or tarnish, so it can be endlessly recycled. Just
think, the gold in your jewellery could once have belonged to
Moctezuma or Cleopatra.
Has the 20th century allure of gold changed? Think of the
platinum album rappers flaunting their gold “bling” around
the streets and on the television. Investment managers often
recommend to hold at least 10% of your portfolio in gold.
There are new developments in health care that illustrate the
inflammatory effects and thus the importance of the metal.
Golden awards such as the Nobel Prize, an Oscar, and the
Olympic medals are presented to people who display rare
talents to which the prize is rare itself. The answer is no- the
allure for gold hasn’t tarnished. Gold has value to many
different people which makes them buy it across the globe.
Starcore sits on the cross roads of supplying the demand for
gold. 75% of gold is mined each year while the other portion
is recycled. The long process from exploration to production
and the rarity of the metal creates a price that makes
companies like us profitable for mining it, and in turn, gives
us the ability to return value to our shareholders. And that’s
why we mine gold.
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Starcore International Mines
TSX:SAM
TSX:SAM
Annual Report 2017
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Low Risk
High Rewards
San Pedrito Sale
Starcore’s operations are a direct extension of management’s commitment to build
sustainable, shareholder value for the present and future of the company.
estate zoning last year. In March 2017, the company
announced that it closed the sale of its San Pedrito Property
for C$13.5 Million (MXN $192,784,331). 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.
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
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Starcore International Mines
TSX:SAM
Why
Starcore?
Strategic Blend of Credible Management
Cash flow Oriented Assets in Mexico
Consistent Gold Production
All Gold and Silver Production is Unhedged
Low Risk/High Reward Exploration Assets in
North America
Committed to Being a Leader in Corporate
Social Responsibility
1 | Starcore International Mines | TSX:SAM
TSX:SAM
Annual Report 2017
20
MANAGEMENT DISCUSSION & ANALYSIS
For the year ended April 30, 2017
Directors and Officers as at July 27, 2017:
Directors:
Gary Arca
Robert Eadie
Jordan Estra
Tanya Lutzke
Cory Kent
Ken Sumanik
Federico Villaseñor
Officers:
Executive Chairman, Chief Executive Officer & President – Robert Eadie
Chief Financial Officer – Gary Arca
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
21 Form 51-102-F1
STARCORE INTERNATIONAL MINES LTD.
MANAGEMENT DISCUSSION & ANALYSIS
For the year ended April 30, 2017
1.
Date of This Report
This MD&A is prepared as of July 27, 2017.
This Management Discussion and Analysis (“MD&A”) should be read in conjunction with the audited consolidated
financial statements of Starcore International Mines Ltd. (“Starcore”, or the “Company”) for the year ended
April 30, 2017.
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, Altiplano plant 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.
22
2.
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 12 months ending April 30, 2017 and the nine months ended April 30, 2016 (note: the year
end was changed to April 30 in the prior year so that the results are for a nine month period. See the Management Discussion and Analysis filed
on the Company’s website, www.starcore.com for a comparison based on 12 months ended April 30, 2016):
• Cash and short-term investments on hand is $9.6 million at April 30, 2017 compared to $10 million at April 30,
2016;
• Gold and silver sales of $27.2 million for the twelve months ended April 30, 2017 compared to $20.3 million for
the nine months ended April 30, 2016;
• Net income of $7.2 million for the year ended April 30, 2017 compared to net income of $0.2 million for the nine
months ended April 30, 2016;
• Sale of San Pedrito property during the year generated a gain of $7.1 million before taxes;
• Equivalent gold production of 15,159 ounces in year ended April 30, 2017 compared to production of 17,909
ounces for the twelve months ended April 30, 2016;
• Mine operating cash cost is US$969/EqOz for the year ended April 30, 2017 compared to cost of US$847/EqOz
for the twelve months ended April 30, 2016, an increase of 14%;
• All-in sustaining costs of US$1,112/EqOz for the year ended April 30, 2017 compared to costs of US$1,091/EqOz
for the twelve months ended April 30, 2016, an decrease of 1%;
• EBITDA(1) of $3,487 for the year ended April 30, 2017 compared to $2,727 for the nine months ended April 30,
2016.
Reconciliation of Net income to EBITDA
For the,
Net income
Sale of San Pedrito
Income tax recovery
Interest
Depreciation and depletion
EBITDA
EBITDA MARGIN(2)
12 months ended
April 30, 2017
7,222
(7,128)
(2,861)
626
5,628
3,487
$
$
12.8%
9 months ended April
30, 2016
$
$
195
-
(2,639)
387
4,784
2,727
13.4%
(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.
23
Recent News
Starcore repays $4.5 million bonds
On April 12, 2017, the Company repaid its outstanding secured bonds in the aggregate principal amount of CDN$4.5
million (the “Bonds”). The Bonds were to mature on May 12, 2017. As provided for by the terms of the Bonds,
Starcore elected an early repayment of the Bonds, with total payout of Cdn$4,678,520, which included interest in the
amount of Cdn$178,520.
Director and officer resignation and new interim COO
The Company also reported that David Gunning has resigned as a director and Chief Operating Officer of the
Company. Ralf Kleine, who has been involved in Starcore’s San Martin Mine operations since 2010, assumes the
position of Interim COO. (See news release of April 15, 2010 for Mr. Kleine’s background.) Mr. Kleine has served as
technical consultant at the mine, as well as having assumed the position of President of Starcore in 2010 and 2011.
3.
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
Sale of San Pedrito
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, 2017
27,228
(26,402)
826
7,128
(3,593)
2,861
7,222
0.15
0.15
82,096
13,036
$
$
$
$
$
$
$
$
$
$
$
$
$
Nine months ended
April 30, 2016
20,326
(18,807)
1,519
-
(3,963)
2,639
July 31, 2015
28,405
(27,760)
645
-
(2,355)
1,920
195
0.00
0.00
78,907
13,324
$
$
$
$
$
210
0.00
0.00
69,197
15,141
4.
Results of Operations
Discussion of Acquisitions, Operations and Financial Condition
The following should be read in conjunction with the audited consolidated financial statements of the Company and
notes attached thereto for the year ended April 30, 2017.
24
4.1
San Martín Mine, Queretaro, Mexico
Reserves
The San Martin Mine, 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, which was recently sold.
Luismin (now “Goldcorp Mexico”) operated the mine from 1993 to January, 2007 when it was purchased by Starcore.
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 .
Production
The following table is a summary of mine production statistics for the San Martin mine for the three and twelve
months ended April 30, 2017 and for the previous 12 months ended April 30, 2016.
Actual results for
Unit of measure
thousand ounces
thousand ounces
thousand ounces
3 months ended
April 30, 2017
3.2
14.2
3.4
12 months ended
April 30, 2017
14.2
66.1
15.2
12 months ended
April 30, 2016
16.6
97.3
17.9
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
Milled
Mine development, preparation and
exploration
grams/tonne
grams/tonne
percent
percent
thousands of
tonnes
meters
Mine operating cash cost per tonne milled
US dollars/tonne
Mine operating cash cost per equivalent ounce US dollars/ounces
Number of employees/contractors at minesite
69.6
1.82
13.6
81.9%
49.7%
65.8
1,175
58
1,129
314
70.2
1.97
16.1
81.5%
46.5%
275.1
5,293
53
969
314
75.3
1.97
18.5
85.4%
53.2%
306.9
5,671
49
847
299
During the quarter ended April 30, 2017, the mill operated at a rate of approximately 773 milled tonnes/calendar day.
Gold and silver grades during the quarter ending April 30, 2017 was 1.82 g/t and 13.6 g/t, respectively, compared to
prior quarter grades of 1.91 g/t and 14.7 g/t, respectively. Gold and silver grades during the yesr ending April 30, 2017
was 1.97 g/t and 16.1 g/t, respectively, compared to prior year grades of 1.97 g/t and 18.5 g/t, respectively. Overall
equivalent gold production from the mine during the year ending April 30, 2017 of 15,159 ounces was lower than the
previous year production of 17,909 due mainly to lower overall production tonnage of 275,072 tonnes compared to
306,866 tonnes in prior year.
Production cash costs of the mine for the current period ending April 30, 2017 were US$969/EqOz. This was higher
than the prior comparable year amount of US$847/EqOz. The increase in production costs were largely due to lower
metal production coupled the higher costs incurred in mine development and exploitation.
25
Operating cash costs of US$53/t were higher than the prior period of US$49/t due to increased costs combined with
higher input costs such as fuel, electricity, chemicals and labour. 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 18,000 metres of underground exploration drilling for the 2017 calendar year.
In addition to this, Altiplano secured the purchase of approximately 3.9 tonnes of granulated carbon which was
processed at the new CIL/ADR plant at the San Martin Mine in Queretaro. This carbon was processed to produce
approximately 185.4 ounces of gold and 342.2 ounces of silver which was sold directly by the mine operations in Q3,
but which is in addition to the mine production results reported above. Subsequent to year end, the company has
processed additional carbon from another supplier and is actively pursuing supply of carbon for processing using the
CIL/ADR plant.
During the period ended April 30, 2017, the Company incurred approximately US$1,689 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$1,376 in the prior comparable period ending
April 30, 2016.
4.2 Property Activity
San Martin properties – Queretaro, Mexico
The San Martin mine properties are comprised of mining concessions covering 12,992 hectares. 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.
Ralf Kleine, P.Eng., interim 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
On March 21, 2017 the Company closed the sale of its San Pedrito Property, a non-core asset located in Queretaro,
Mexico for C$13.50 million* (MXN$ 192,784,331). As reported on March 9, 2016, the Company entered into a sale
agreement of the San Pedrito Property, receiving a deposit of $50 million pesos.
The sale agreement was subject to various confirmations, including compliance with state and municipal regulations
and confirmation that the property was in good standing so conveyancing could proceed. Various requirements have
been met, whereupon the buyer has removed several subject conditions and has made the first parcel payment to the
Company of MXN$ 137,671,371 (C$ 9,640,852)* plus interest on this amount from March, 9, 2016, of MXN$
7,576,445 (C$ 530,563)*, for a total payment of MXN$ 145,247,816 (C$ 10,171,415)*.
Details of the transaction are as follows: Total surface area sold covers 74.0831.544 hectares (740,831.544 square
meters) sold at $250 pesos per square meter.
26
Payments are staged as follows:
Surface Area in
hectares (ha)
Equivalent in
square meters
(sm)
Mexican Pesos
Canadian
Dollars*
Status
55.068 ha
550,685.485 sm
MXN$ 137,671,371 C$ 9,640,852
Interest Received
MXN$ 7,576,445
C$ 530,563
MXN$ 145,247,816 C$ 10,171,415
Payment received
Parcel of 12 ha¹
120,000.000 sm
MXN$ 30,000,000 C$ 2,100,840
Pending clearance
Parcel of 2.014 ha¹
20,146.059 sm
MXN$ 5,036,515 C$ 352,697
Pending clearance
Parcel of 5 ha¹
50,000.000 sm
MXN$ 12,500,000 C$ 875,350
Pending clearance
¹ The remaining three parcels await various confirmations from different local and federal authorities. As the Company
receives these confirmations, the buyer will immediately remit the corresponding payment for each parcel of land. It is
expected that these clearances will be confirmed within the next 18 months.
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. The disposition of San Pedrito was recorded during the year ended
April 30, 2017 and a gain of $7,128 is reported on the Statement of Operations and Comprehensive Income. The gain
recorded is net of an allowance for MXN$ 10.5 million for amounts that management has deemed uncertain for
collectability.
* Based on exchange rate of 14.28 Pesos/CAD$ as at close of March 21, 2017.
Acquisition of Cortez Gold Corp.
On August 5, 2015, the Company acquired Cortez Gold Corp. (“Cortez”) (TSXV: CUT) in an all-share transaction
completed pursuant to a court approved Plan of Arrangement under the Business Corporations Act (British Columbia)
(the “Arrangement”). Under the terms of the acquisition, each CUT shareholder received three Starcore common
shares for every one CUT common share held by CUT shareholders (the “Exchange Ratio”). Cortez was 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.
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 purchase price was allocated based on management’s best estimates and assumptions, after
taking into account all relevant information available. As a result, apart from working capital allocations, $6,094 was
allocated to plant, machinery and equipment.
27
Altiplano 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”).
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.
The construction of the Processing Plant was completed in 2015 the Company announced that as of February 15, 2016,
the Altiplano plant poured its first doré bar, weighing in at 21.131 kg.
The Company’s management determined the commencement of commercial production to be on November 1, 2016.
In making this judgement, management assessed various sources of information including but not limited to operation
management expertise, projected cash flow and determining sustainable level of production inputs available. As a
result, prior to commencement of commercial production, all of the pre-operational costs and any test production
revenue were capitalized to Plant costs until the facility was of sufficient operational status with the ability to function
as management intended.
The Altiplano Facility received approximately 185.15 tonnes of concentrate (net of 67.6 tonnes returned to a supplier
which was received in Q3), 5.8 tonnes of precipitates and 7.8 tonnes of slag containing approximately 752 ounces of
gold and 46,000 ounces of silver. To April 30, 2017, the Company has sold 583 ounces of gold and 30,690 ounces of
silver from the amounts received at Altiplano.
The Company sold gold and silver at an average prices in the period of US$1,188 and US$17.02 per ounce,
respectively.
American Consolidated Minerals Corp.
On November 20, 2014, the Company announced the approval of the proposed acquisition of American Consolidated
Minerals Corp (“AJC”) pursuant to a plan of arrangement (the “Transaction”) by the AJC shareholders.
The Transaction was completed on December 1, 2014 upon the satisfaction of all of the conditions set out in the
arrangement agreement entered into by AJC and the Company on October 1, 2014, including approval by the Supreme
Court of British Columbia.
Pursuant to the acquisition of AJC, the Company has acquired the right to 3 properties as follows:
Sierra Rosario, Sinaloa, Mexico
Pursuant to the acquisition of AJC, the Company acquired a 50% interest in two claims over the 500-hectare Sierra
Rosario Property, located in the state of Sinaloa, Mexico.
During the year ended July 31, 2015, the Company acquired the remaining 50% interest from the optionor for $25 and
a 1% NSR over the entire property.
28
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.
During the period ending October 31, 2016, the Company completed Phase 1 drilling on the Toiyabe property. A total
of 3,011 meters of RC/core were drilled in 15 holes. Shallow RC drill holes have identified a possible extension of the
near-surface resource and the first deep core hole has identified high-grade gold mineralization (1.5 m of 12.9 g/t Au)
at depth.
Reverse Circulation (RC) drilling, including two pre-collar holes, consisted of fifteen holes for a total footage of 2,537
meters. Core drilling totalled 474 meters in two holes. A summary of assay results received to date are shown below.
A map of drill hole locations can be found on the Company website https://www.starcore.com .
Toiyabe Project 2016 Phase 1 Initial Assay Results
Hole ID
T-1601
T-1601C
T-1602
T-1607
T-1608
T-1609
T-1611
T-1612
T-1613
T-1615
T1616
T-1618
T-1619
T-1620
T-1621
T-1622
AZIMUTH
NA
NA
includes
includes
NA
NA
NA
45
NA
NA
NA
45
45
45
45
45
45
45
INCL
-90
-90
-90
-90
-90
-60
-90
-90
-90
-45
-45
-45
-45
-45
-45
-45
T DEPTH
(m)
FROM (m) TO (m)
THICKNESS
(meters)
140.2
390.4
134.1
196.6
208.8
91.4
213.3
342.9
315.5
163.1
152.4
91.4
121.9
121.9
121.9
121.9
77.7
269.1
255.4
255.4
67.1
13.7
120.4
132.6
146.3
179.8
32.0
NSV
193.5
76.2
82.3
99.1
41.1
36.6
7.6
82.3
38.1
108.2
68.6
50.3
112.8
294.1
258.5
256.9
80.8
16.8
123.4
138.7
164.6
192.0
33.5
201.2
89.9
89.9
103.6
48.8
76.2
12.2
83.8
44.2
114.3
74.7
53.3
35.1
40.2
3
1.5
13.7
3
3
6.1
18.3
12.2
1.5
7.6
13.7
7.6
4.6
7.6
39.6
4.6
1.5
6.1
6.1
6.1
3
Au g/t
0.31
1.30
7.70
12.90
0.16
1.90
0.16
0.32
0.46
0.13
0.88
0.11
0.27
0.23
0.24
0.13
0.15
0.28
0.82
1.07
0.16
1.08
3.10
29
Assays from T-1601C, the first deep core hole, show a broad mineralized zone from 254 to 294 meters (40 m) which
averages 1.3 g/t Au. This zone includes 3 meters of 7.7 g/t Au (255.4-258.4 m) or 1.5 meters of 12.9 g/t Au (255’4-
256.9 m). The mineralized intervals coincide closely with highly altered breccia within broad fault zones.
The RC program targeted a combination of resistivity high anomalies as well as offsets and extensions to
mineralization associated with the Courtney fault zones. A near-surface NI43-101 resource of 173,562 contained
ounces of gold was published in 2009. Fifteen of the initially proposed RC holes were completed for a total drilling
footage of 2,537 meters. Seven of the fifteen RC holes were lost short of targeted horizons. Even with these drilling
limitations, fourteen of the fifteen RC holes encountered anomalous gold values as shown in the table above.
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 1.5 meter lengths or geologic/structural
breaks, sawed and half core assayed the same as the RC procedure mentioned above.
Richard Kern, Certified Professional Geologist (#11494) is the Qualified Person who has prepared and reviewed the
technical information on the Toiyabe property in accordance with NI 43-101 reporting standards.
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.
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:
1 The information in this report relating to the acquisition of Creston Moly by Mercator has been drawn from documents filed under the Creston Moly Corp.
issuer profile on SEDAR, more specifically: Creston’s Management Information Circular dated May 9, 2011 and filed on SEDAR on May 16, 2011, and
Creston’s news release of June 6, 2011 as filed on SEDAR on June 7, 2011.
30
• The Ajax Project in British Columbia; and
• The Molybrook Project in Newfoundland.
• The El Creston Project in Sonora, Mexico;
Creston Moly Corp.
(British Columbia)
100%
100%
Creston Mining Corporation
(Ontario)
Tenajon Resources Corp.
(British Columbia)
100%
Mexican Subsidiary
(Mexico)
El Creston
Property
Ajax
Property
Molybrook
Property
Ajax, British Columbia, Canada2
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, Canada3
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, 2017, the Company reduced its claims to focus on the core project and to reduce its
holding costs.
2 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.
3 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.
31
El Creston Project, Sonora, Mexico4
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.
David Visagie, P.Geo., an independent consultant, is the Company’s qualified person under NI 43-101, and has
reviewed and approved the scientific and technical disclosure on the El Creston Project disclosed in this report.
4 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.
32
4.3 Results of Operations
The Company recorded earnings for the year ended April 30, 2017 of $7,222 compared with $681 for the comparative
12 month period ended April 30, 2016. The details of the Company’s operating results and related revenues and
expenses are as follows:
2017
2016
Variance
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
Management fees and salaries
Office and administration
Professional and consulting fees
Regulatory and transfer agent fees
Shareholder relations
Loss before other income
Other Income
Income tax recovery
Current
Deferred
Earnings for the year
$
24,642 $
2,586
27,514 $
-
27,228
27,514
(18,641)
(2,151)
(5,610)
(18,772)
-
(6,075)
(26,402)
(24,847)
826
(626)
1,283
(1,642)
(1,368)
(731)
(218)
(291)
(2,767)
2,667
(599)
549
(1,284)
(1,578)
(1,421)
(302)
(185)
(2,153)
(2,872)
2,586
(286)
131
(2,151)
465
(1,555)
(1,841)
(27)
734
(358)
210
690
84
(106)
(614)
7,128
6,514
(57)
84
Gain on sale of San Pedrito (net of taxes)
7,128
-
Earnings (loss) before taxes
$
4,361 $
(2,153) $
-
2,861
57
2,777
$
7,222 $
681 $
6,541
Overall, revenue from milled ore decreased by $2.9 million compared to the 12 month period due mainly to lower
metal production form lower tonnage processed and lower gold and silver recovery in the current year compared to the
prior year. Mined ore costs decreased in the current period due mainly to lower tonnage processed. As a percentage of
mined ore revenue, earnings from mining operations decreased to 3% of mined ore revenue compared to 10% in the
comparative period.
Sales of metals for the year ended April 30, 2017 approximated 14,791 ounces of gold and 80,421 ounces of silver
sold at average prices in the year of US$1,264 and US$18.04 per ounce, respectively. This is a decrease in sale ounces
from the comparative period ended April 30, 2016 where sales of metal approximated 16,720 ounces of gold and
100,293 ounces of silver, sold at lower average prices of US$1,147 and US$15.11 per ounce, respectively.
The total cost of sales above includes non-cash expenses for depreciation and depletion of $5,610, compared to $6,075
in the comparable 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
33
and a percentage of inferred resources in accordance with the Company’s policy of recognizing the value of expected
Resources which will be converted to Proven and Probable Reserves, as assessed by management.
For the period ending April 30, 2017, the Company produced $826 in earnings from mine operations compared to
$2,667 for the period ended April 30, 2016. The change resulted mainly due to a decrease in the sale of metal ounces
when compared to the prior period despite a higher average price for the commodity. The combination of slightly
lower recoveries for gold and silver also resulted in metal production and, therefore, revenue as compared to the prior
period.
Costs per ounce for the period ended April 30, 2017 were US$969/EqOz. which are higher than the average operating
cash cost of US$847/EqOz. during the comparable period ended April 30, 2016. This resulted in comparable reported
mined ore costs at $18,641 compared to $18,772 in the previous comparable period ended April 30, 2016 despite the
lower tonnage of ore processed and lower metal production. The Company also processed purchased concentrate at
the newly commissioned Altiplano plant and the San Martin mine in the year ended April 30, 2017 for revenue of
$2,586 and cost of purchasing concentrate of $2,151, for a net profit of $435.
Other Items
Changes in other items for the twelve month year ended April 30, 2017, resulted in the following significant changes
from the twelve month period ended April 30, 2016:
•
•
•
•
•
•
•
•
Financing costs during the period increased by $27 due to the debt extension charges of $45 which were
incurred during the year.;
Office and administration decreased by $210 due higher corporate costs relating to acquisition of its
subsidiaries, general regulatory administration and office related costs in the prior period.
Management fees and salaries increased by $358 primarily due to the costs related to share based compensation
that were granted during the year;
Foreign exchange gain increased by $734 for the period ended April 30, 2017. The increase relates primarily to
the weakening of the Mexican peso and Canadian dollar and strengthening of the US dollar, the functional
currency of the mining operations;
Professional and consulting fees decreased by $690 to $731 due to higher fees charged in relations to legal, tax
and audit fees (related to the 20F filing requirements) in the prior period;
Regulatory and transfer agent fees decreased by $84 due to costs relating to registration on the United States
markets that were incurred in the prior period;
Deferred Income Tax Recovery increased by $84 due to the Company recognizing its ability to use additional,
previously unrecognized, non-capital loss carry forwards in the current and future years.
Sale of San Pedrito during the year resulted in a gain of $7,128. This is a transaction that was not in the normal
course of business.
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:
34
(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)
2017
2016
2017
2016
$
$
18,641
4,257
(1,283)
80
1,658
23,353
(5,628)
$
19,307
4,590
(384)
83
2,307
25,903
(6,229)
1,170
267
(81)
5
104
1,465
(353)
1,070
254
(21)
5
128
1,436
(345)
All-in sustaining USD cash costs
$
17,725
$
19,674
$
1,112
$
1,091
Total equivalent ounces sold
15,939
18,037
1 Excludes non-cash depletion of $5,610 for the twelve months ended April 30, 2017 (April 30, 2016: $6,075) and includes non-cash share-based
compensation of $Nil (April 30, 2016: $16).
2 Includes share-based compensation of $267 for the period ended April 30, 2017 (April 30, 2016: $Nil).
3 Certain capital expenditures costs that are non-sustaining costs have been excluded in accordance with AISC guidelines. This includes capital
costs of the CIL/ADR plant of $860 (2016 - $1,144) and Altiplano processing plant costs of $119 (2016 - $ 588).
Cash Flows
Cash flows received from operating activities were $2,060 during the period ended April 30, 2017, compared to
$5,359 of cash inflows for the comparative period ended April 30, 2016. Cash flows from operating activities were
determined by removing non-cash expenses from the earnings and adjusting for non-cash working capital amounts.
Cash spent for financing activities resulted in an outflow of $5,083 mainly due to the debt repayment in the period of
$4,500. Cash was also spent on interest payments in the amount of $538. Cash flows received from investing activities
were $7,220 primarily due to sale of San Pedrito property which earned the company cash of $10,171. Cash was also
received from sale of short term investment of $1,769 and spent on investment in mining interest, plant and equipment
for $2,709 and investment in exploration and evaluation assets of $2,068. Overall cash increased during the period
ended April 30, 2017 by $4,197.
Investor Relations Activities
During the period ended April 30, 2017, the Company responded directly to investor inquiries.
Financings, Principal Purposes & Milestones
During the year ended April 30, 2017, the Company did not have any financings
On April 12, 2017, the Company repaid its outstanding secured bonds in the aggregate principal amount of CDN$4.5
million (the “Bonds”). The Bonds were to mature on May 12, 2017. As provided for by the terms of the Bonds,
Starcore elected an early repayment of the Bonds, with total payout of Cdn$4,678,520, which included interest in the
amount of Cdn$178,520. The bonds carried interest of 8% per annum, payable on maturity.
35
5.
Summary of Quarterly Results
The following is a summary of the Company’s financial results for the eight most recently completed quarters:
Total Revenue
Earnings (loss) from
mining operations
Earnings (loss) for
period
Per share – basic
Per share – diluted
Q4
30-Apr-17
Q3
31-Jan-17
Q2
31-Oct-16
Q1
31-Jul-16
$
$
$
$
$
6,815
(1,096)
8,095
0.17
0.17
$
$
$
$
$
6,164
(495)
(1,546)
(0.03)
(0.03)
$
$
$
$
$
7,061
1,269
187
0.00
0.00
$
$
$
$
$
7,188
1,148
486
0.01
0.01
Total Revenue
Earnings (loss) from
mining operations
Earnings (loss) for
period
Per share – basic
Per share – diluted
30-Apr-16
31-Jan-16
31-Oct-15
31-Jul-15
$
$
$
$
$
5,668
(287)
(283)
(0.01)
(0.01)
$
$
$
$
$
6,954
670
240
0.00
0.00
$
$
$
$
$
7,704
1,136
562
0.01
0.01
$
$
$
$
$
6,366
(393)
(96)
(0.00)
(0.00)
Discussion
The Company reports earnings of $8,095 for the quarter compared to loss of $283 in the comparative quarter ended
April 30, 2016. Revenue from operations increased in this quarter to $6,815 from the comparative quarter of $5,668 as
a result of higher metal prices and currency exchange rates. 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”.
6.
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, 2017, the Company had the following commitments:
a)
b)
c)
As at April 30, 2017, 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, 2017, 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, 2017, the Company has management contracts to officers and directors totaling $840 per year,
payable monthly, expiring in January 2020.
36
Obligations due within twelve months of
April 30:
2017
2018-2019
2020 and
beyond
Trade and other payables
Current portion of loan payable
Rehabilitation and closure cost provision
$
2,496 $
1,646
-
-
-
-
$
-
-
1,347
7.
Capital Resources
The capital resources of the Company are the mining interests, plant and equipment, with an amortized historical cost
of $52,921 as at April 30, 2017. 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
Total
Twelve months
year ended
April 30, 2017
Nine months
year ending
April 30, 2016
$
$
$
958
116
187
1,261
$
624
256
70
950
10.
Fourth Quarter
Due to mine operating activity of the San Martin mine discussed throughout this MD&A and as detailed in Section
4.1, the operations and activities are similar to previous quarters which are discussed in Section 4.3 – Results of
Operations.
11.
Proposed Transactions
N/A
12. Critical Accounting Estimates
The Company makes estimates and assumptions about the future that affect the reported amounts of assets and
liabilities. Estimates and judgements are continually evaluated based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions.
The effect of a change in accounting estimate is recognized prospectively by including it in the Company’s profit or
loss in the period of the change, if it affects that period only, or in the period of the change and future periods, if the
change affects both.
Information about critical judgements in applying accounting policies that have the most significant risk of causing
material adjustment to the carrying amounts of assets and liabilities recognized in the consolidated financial statements
within the current financial period are discussed below:
37
a) Economic Recoverability and Profitability of Future Economic Benefits of Mining Interests
Management has determined that mining interests, evaluation, development and related costs incurred which
have been capitalized are economically recoverable. Management uses several criteria in its assessments of
economic recoverability and probability of future economic benefit including geologic and metallurgic
information, history of conversion of mineral deposits to proven and probable reserves, scoping and feasibility
studies, accessible facilities, existing permits and life of mine plans.
b) Rehabilitation Provisions
Rehabilitation provisions have been created based on the Company’s internal estimates. Assumptions, based on
the current economic environment, have been made which management believes are a reasonable basis upon
which to estimate the future liability. These estimates take into account any material changes to the assumptions
that occur when reviewed regularly by management. Estimates are reviewed annually and are based on current
regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques
will result in changes to provisions from period to period. Actual rehabilitation costs will ultimately depend on
future market prices for the rehabilitation costs, which will reflect the market condition at the time of the
rehabilitation costs are actually incurred. The final cost of the currently recognized rehabilitation provision may
be higher or lower than currently provided for.
The inflation rate applied to estimated future rehabilitation and closure costs is 3.5% and the discount rate
currently applied in the calculation of the net present value of the provision is 8%
c)
Impairments
The Company assesses its mining interest, plant and equipment assets annually to determine whether any indication
of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made,
which is considered to be the higher of the fair value less costs to sell and value in use. These assessments require
the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital
requirements, exploration potential and operating performance.
d)
Income Taxes
Significant judgment is required in determining the provision for income taxes. There are many transactions and
calculations undertaken during the ordinary course of business for which the ultimate tax determination is
uncertain. The company recognizes liabilities and contingencies for anticipated tax audit issues based on the
Company’s current understanding of tax law. For matters where it is probable that an adjustment will be made,
the Company records its best estimate of the tax liability including the related interest and penalties in the current
tax provision. Management believes they have adequately provided for the probable outcome of these matters;
however, the final outcome may result in a materially different outcome than the amount included in the tax
liabilities.
In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there
are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and
the same taxable entity against which the unused tax losses can be utilized. However, utilization of the tax losses
also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recuperated.
e)
Share-Based Payment Transactions
The Company measures the cost of equity-settled transactions with employees, and some with non-employees,
by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair
value for share-based payment transactions requires determining the most appropriate valuation model, which is
dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate
inputs to the valuation model including the expected life of the share option, volatility and dividend yield and
making assumptions about them.
38
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, 2016, 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.
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, 2017 the Company had the following financial assets and liabilities
denominated in CDN and denominated in Mexican Pesos:
In ‘000 of
Cash
Other working capital amounts – net
Mexican Pesos (MP)
CDN Dollars
74,353
268
MP
102,516
(157) MP
$
$
At April 30, 2017, US dollar amounts were converted at a rate of $1.3658 Canadian dollars to $1 US dollar and
Mexican Pesos were converted at a rate of MP18.82 to $1 US Dollar.
39
15. Other
15.1 Disclosure of Outstanding Share Capital as at July 27, 2017
Common Shares
Number
49,146,851
Book Value
50,605
$
The following is a summary of changes in options from April 30, 2017 to July 27:
Grant
Date
Expiry
Date
mm/dd/yy mm/dd/yy
Exercise Opening
Balance
Price
During the Period
Granted
Exercised
08/22/13
08/22/13
09/06/13
09/12/13
01/15/14
08/22/18
08/22/18
09/06/18
09/12/18
01/15/19
$1.00
$0.80
$0.92
$1.00
$0.88
200,000
50,000
50,000
50,000
998,750
1,348,750
-
-
-
-
-
-
-
-
-
-
-
-
Cancelled/
Forfeited
-
-
-
-
(175,000)
Closing,
Vested and
Exercisable
200,000
50,000
50,000
50,000
823,750
Closing
200,000
50,000
50,000
50,000
823,750
(175,000)
1,173,750
1,173,750
Weighted Average Exercise Price
$0.90
-
-
$0.88
$0.90
$0.90
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, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
40
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.
41
Starcore International Mines Ltd.
Consolidated Financial Statements
For the periods ended April 30, 2017 and April 30, 2016
(Audited)
42
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors 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 of April 30, 2017 and 2016, and the related
consolidated statements of operations and comprehensive income, cash flows and changes in equity for the year
ended April 30, 2017 and the nine month period ended April 30, 2016, 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 as issued by the International Accounting Standards
Board, 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 and the standards of the
Public Company Accounting Oversight Board (United States). 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, 2017 and 2016 and its financial performance and its cash flows
for the year ended April 30, 2017 and the nine month period ended April 30, 2016 in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
Vancouver, Canada
July 27, 2017
“DAVIDSON & COMPANY LLP”
Chartered Professional Accountants
Starcore International Mines Ltd.
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
As at
Assets
Current
Cash
Short-term Investments (note 5)
Amounts Receivable (notes 6)
Inventory (note 7)
Prepaid Expenses and Advances
Total Current Assets
Non-Current
Mining Interest, Plant and Equipment (notes 8 & 11)
Exploration and Evaluation Assets (note 9)
Reclamation Deposits
Deferred Tax Assets (note 18)
Total Non-Current Assets
Total Assets
Liabilities
Current
Trade and Other Payables
Current Portion of Loan Payable (note 10)
Total Current Liabilities
Non-Current
Loan Payable (note 10)
Rehabilitation and Closure Cost Provision (note 11)
Deferred Tax Liabilities (note 18)
Total Non-Current Liabilities
Total Liabilities
Equity
Share Capital (note 12)
Equity Reserve
Foreign Currency Translation Reserve
Accumulated Deficit
Total Equity
Total Liabilities and Equity
Commitments (notes 11 and 14)
Approved by the Directors:
April 30,
2017
April 30,
2016
$
$
$
$
$
5,558 $
4,005
4,777
2,921
349
4,248
5,742
2,221
1,877
191
17,610
14,279
52,921
5,955
165
5,445
64,486
56,618
3,864
165
3,981
64,628
82,096 $
78,907
2,496 $
1,646
4,142
-
1,131
11,905
13,036
3,091
4,619
7,710
1,369
1,091
10,864
13,324
17,178 $
21,034
50,605 $
11,173
5,209
(2,069)
64,918
50,605
11,173
5,386
(9,291)
57,873
$
82,096 $
78,907
“Robert Eadie”
Director
“Gary Arca”
Director
44
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 costs (note 10)
Foreign exchange gain (loss)
Management fees and salaries (notes 12 & 14)
Office and administration
Professional and consulting fees
Regulatory and transfer agent fees
Shareholder relations
Loss before other income
Other Income
Gain on sale of San Pedrito (note 8)
Earnings (loss) before taxes
Income tax recovery (note 18)
Current
Deferred
Earnings for the year
Other comprehensive income (loss)
Item that may subsequently be reclassified to income (loss)
Foreign currency translation differences
Comprehensive income for the year
Basic earnings per share (note 16)
Diluted earnings per share (note 16)
Twelve months ended
April 30, 2017
Nine months
ended April 30,
2016
$
$
$
$
24,642
2,586
27,228
(18,641)
(2,151)
(5,610)
(26,402)
826
(626)
1,283
(1,642)
(1,368)
(731)
(218)
(291)
(2,767)
7,128
4,361
-
2,861
7,222
(177)
7,045
0.15
0.15
$
$
$
$
20,326
-
20,326
(14,093)
-
(4,714)
(18,807)
1,519
(387)
(159)
(918)
(1,114)
(1,031)
(244)
(110)
(2,444)
-
(2,444)
57
2,582
195
321
516
0.00
0.00
45
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
Gain on sale of San Pedrito
Income tax (recovery) (note 18)
Interest on long-term debt (note 10)
Interest revenue
Rehabilitation and closure cost accretion (note 11)
Unwinding of discount on long-term debt (note 10)
Share-based compensation (note 12)
Write-down for obsolete equipment (note 8)
Cash generated by operating activities before working capital changes
Change in non-cash working capital items
Amounts receivable (note 6)
Inventory (note 7)
Prepaid expenses and advances
Trade and other payables
Cash inflow for operating activities
Financing activities
Advance (repayment) of loan payable (note 10)
Interest paid (note 10)
Financing fees (note 10)
Cash inflow (outflows) for financing activities
Investing activities
Cash acquired on sale of San Pedrito (note 8)
Interest received
Investment in exploration and evaluation assets (note 9)
Purchase of mining interest, plant and equipment (note 8)
Sale (purchase) of short-term investments (note 5)
Cash inflow (outflows) for investing activities
Total increase in cash
Effect of foreign exchange rate changes on cash
Cash, beginning of period
Cash, end of period
Non-cash transactions – note 12
Twelve months
ended
April 30,
2017
Nine Months
ended
April 30,
2016
$
7,222
$
195
5,628
(7,128)
(2,861)
536
-
80
48
267
37
3,829
(559)
(1,591)
(214)
595
2,060
(4,500)
(538)
(45)
(5,083)
10,171
57
(2,068)
(2,709)
1,769
7,220
4,197
(2,887)
4,248
$
5,558
$
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
46
Starcore International Mines Ltd.
Consolidated Statements of Changes in Equity
For the year ended April 30, 2017 and April 30, 2016
(in thousands of Canadian dollars, except for number of shares)
Number of
Shares
Share
Equity
Foreign
Currency
Translation Accumulated
Outstanding
Capital
Reserve
Reserve
Income
(Deficit)
Total
Balance, July 31, 2015
37,986,760
$
45,354
$ 11,173
$
5,065
$
(9,486)
$
52,106
Issued for cash pursuant to:
- Acquisition of Cortez Gold Corp.
- Share subscriptions conversion
- at $0.42
- at $0.56
Foreign currency translation
Earnings for the period
7,166,888
3,993,203
-
-
3,010
2,241
-
-
-
-
-
-
-
-
321
-
-
-
-
195
3,010
2,241
321
195
Balance, April 30, 2016
49,146,851
50,605
11,173
5,386
(9,291)
57,873
Foreign currency translation
Earnings for the year
Balance, April 30, 2017
-
-
-
-
-
-
(177)
-
-
7,222
(177)
7,222
49,146,851
$
50,605
$ 11,173
$
5,209
$
(2,069)
$
64,918
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless stated otherwise)
April 30, 2017
1.
Corporate Information
Starcore International Mines Ltd. is the parent company of its consolidated group (the “Company” or
“Starcore”) and was incorporated in Canada with its head office located at Suite 750 – 580 Hornby Street,
Vancouver, British Columbia, V6C 3B6.
Starcore is engaged in extracting and processing gold and silver in Mexico through the San Martin mine in
Queretaro, Mexico owned by Compañia Minera Peña de Bernal, S.A. de C.V. (“Bernal”), which was
purchased by the Company in 2007. The San Martin mine, which has been in operation since 1993 producing
gold and silver, is a self-sustaining mining operation in Mexico and is the Company’s sole source of
operating cash flows. The Company is also engaged in acquiring mining related operating assets and
exploration assets in North America directly and through corporate acquisitions.
2.
Basis of Preparation
a)
Statement of Compliance
These consolidated financial statements for the Company have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”).
end change, the Company reported a one
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 April
year
30, 2016.
‐
‐
Effective December 14, 2015, the Company completed a 4:1 share consolidation (note 12). 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 27, 2017.
b) Basis of Measurement
The consolidated financial statements have been prepared on a historical cost basis, except certain
financial instruments, which are measured at fair value, as explained in the Company’s accounting
policies discussed in note 3.
The consolidated financial statements are presented in Canadian dollars, which is also the parent
company’s functional currency, and all values are rounded to the nearest thousand dollars, unless
otherwise indicated.
The preparation of consolidated financial statements in compliance with IFRS requires management to
make certain critical accounting estimates. It also requires management to exercise judgment in
applying the Company’s accounting policies. The areas involving a higher degree of judgment of
complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in note 4.
48
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
2.
Basis of Preparation – (cont’d)
c) Basis of Consolidation
These consolidated financial statements include the accounts of the Company and all of its subsidiaries,
which are entities controlled by the Company. Control exists when the Company has the power to
govern the financial and operating policies of an entity so as to obtain benefits from the entity’s
activities. Subsidiaries are included in the consolidated financial results of the Company from the
effective date of acquisition up to the effective date of disposal or loss of control. The Company’s
wholly-owned 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.
3.
Summary of Significant Accounting Policies
The accounting policies set out below were applied consistently to all periods presented in these consolidated
financial statements, unless otherwise indicated.
a) Foreign Currency Translation
The functional currency of Starcore, the parent, is the Canadian dollar (“CAD”) and the functional
currency of its subsidiaries is the United States dollar (“USD”) (collectively “Functional Currency”).
Foreign currency accounts are translated into the Functional Currency as follows:
• At the transaction date, each asset, liability, revenue and expense denominated in a foreign
currency is translated into the Functional Currency by the use of the exchange rate in effect at
that date. At the period end date, unsettled monetary assets and liabilities are translated into
the Functional Currency by using the exchange rate in effect at the period end.
Foreign exchange gains and losses are recognized in net earnings and presented in the Consolidated
Statement of Operations and Comprehensive Income in accordance with the nature of the transactions
to which the foreign currency gains and losses relate, except for foreign exchange gains and losses from
translating available-for-sale investments in marketable securities which are recognized in other
comprehensive income as part of the total change in fair values of the securities. Unrealized foreign
exchange gains and losses on cash and cash equivalent balances denominated in foreign currencies are
disclosed separately in the Consolidated Statements of Cash Flows.
b) Foreign Operations
The assets and liabilities of foreign operations with Functional Currencies differing from the
presentation currency, including fair value adjustments arising on acquisition, are translated to CAD at
exchange rates in effect at the reporting date. The income and expenses of foreign operations with
Functional Currencies differing from the presentation currency are translated into CAD at the year-to-
date average exchange rates.
The Company’s foreign currency differences are recognised and presented in other comprehensive
income as a foreign currency translation reserve (“Foreign Currency Translation Reserve”), a
component of equity. When a foreign operation is disposed of such that control, significant influence or
joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is
reclassified to profit or loss as part of the gain or loss on disposal.
3.
Summary of Significant Accounting Policies – (cont’d)
49
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
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, 2017 and April 30, 2016, 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.
f)
Inventory
Finished goods and work-in-process are measured at the lower of average cost and net realizable value.
Net realizable value is calculated as the estimated price at the time of sale based on prevailing and long-
term metal prices less estimated future costs to convert the inventories into saleable form and estimated
costs to sell.
Ore extracted from the mines is processed into finished goods (gold and by-products in doré). Costs are
included in work-in-process inventory based on current costs incurred up to the point prior to the
refining process, including applicable depreciation and depletion of mining interests, and removed at
the average cost per recoverable ounce of gold. The average costs of finished goods represent the
average costs of work-in-process inventories incurred prior to the refining process, plus applicable
refining costs.
Supplies are measured at average cost. In the event that the net realizable value of the finished product,
the production of which the supplies are held for use in, is lower than the expected cost of the finished
product, the supplies are written down to net realizable value. Replacement costs of supplies are
generally used as the best estimate of net realizable value. The costs of inventories sold during the year
are presented in the Company’s profit and loss.
50
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
3.
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.
51
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
3.
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.
52
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
3.
Summary of Significant Accounting Policies – (cont’d)
h) Rehabilitation and Closure Cost Provision
The Company records a provision for the estimated future costs of rehabilitation and closure of
operating and inactive mines and development projects, which are discounted to net present value using
the risk free interest rates applicable to the future cash outflows. Estimates of future costs represent
management’s best estimates which incorporate assumptions on the effects of inflation, movements in
foreign exchange rates and the effects of country and other specific risks associated with the related
liabilities. The provision for the Company’s rehabilitation and closure cost obligations is accreted over
time to reflect the unwinding of the discount with the accretion expense included in finance costs in the
Consolidated Statement of Operations and Comprehensive Income. The provision for rehabilitation and
closure cost obligations is re-measured at the end of each reporting period for changes in estimates and
circumstances. Changes in estimates and circumstances include changes in legal or regulatory
requirements, increased obligations arising from additional mining and exploration activities, changes
to cost estimates and changes to risk free interest rates.
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.
53
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
3.
Summary of Significant Accounting Policies – (cont’d)
j) Financial Instruments
Financial instruments are classified as one of the categories below based upon the purpose for which
the asset was acquired. All transactions related to financial instruments are recorded on a trade date
basis. The Company’s accounting policy for each category is as follows:
Loans and Receivables
Loans and receivables are non-derivative financial assets resulting from the delivery of cash or other
assets by a lender to a borrower in return for a promise to repay on a specified date or dates, or on
demand. They are initially recognized at fair value plus transaction costs that are directly attributable to
their acquisition or issue, and subsequently carried at amortised cost using the effective interest rate
method, less any impairment losses.
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.
54
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
3.
Summary of Significant Accounting Policies – (cont’d)
j)
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 & loan payable 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 $4,005 (2016 – $5,742) measured in accordance with Level 1.
k)
Income Taxes
Current tax and deferred taxes are recognized in the Company’s profit or loss, except to the extent that
it relates to a business combination or items recognized directly in equity or in other comprehensive
loss/income.
Current income taxes are recognized for the estimated taxes payable or receivable on taxable income or
loss for the current year and any adjustment to income taxes payable in respect of previous years.
Current income taxes are determined using tax rates and tax laws that have been enacted or
substantively enacted by the period end date.
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability
differs from its tax base, except for taxable temporary differences arising on the initial recognition of
goodwill and temporary differences arising on the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of the transaction affects neither
accounting nor taxable profit or loss.
55
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
3.
Summary of Significant Accounting Policies – (cont’d)
k)
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.
l)
Share Capital
Financial instruments issued by the Company are classified as equity, only to the extent that they do not
meet the definition of a financial liability or asset. The Company’s common shares, share 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.
m) Profit or Loss per Share
Basic profit or loss per share is computed by dividing the Company’s profit or loss applicable to
common shares by the weighted average number of common shares outstanding for the relevant period.
Diluted profit or loss per share is computed by dividing the Company’s profit or loss applicable to
common shares, by the sum of the weighted average number of common shares outstanding and all
additional common shares that would have been outstanding if potentially dilutive instruments were
converted at the beginning of the period.
n)
Share-based Payments
Where equity-settled share options are awarded to employees or non-employees, the fair value of the
options at the date of grant is charged to the Company’s profit or loss over the vesting period. The
number of equity instruments expected to vest at each reporting date, are taken into account so that the
cumulative amount recognized over the vesting period is based on the number of options that eventually
vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the
options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of
whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value
of the options, measured immediately before and after the modifications, is charged to the Company’s
profit or loss over the remaining vesting period.
Where equity instruments are granted to employees, they are recorded at the fair value of the equity
instrument granted at the grant date. The grant date fair value is recognized in the Company’s profit or
loss over the vesting period, described as the period during which all the vesting conditions are to be
satisfied.
56
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
3.
Summary of Significant Accounting Policies – (cont’d)
n)
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 15 “Revenue from Contracts with Customers”
IFRS 16 “Leases”
IFRS 17 Insurance Contracts
• Annual Improvements to IFRSs 2012–2014 Cycle
•
•
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRIC 23 Uncertainty over Income Tax Treatments
• Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
• Classification and Measurement of Share-based Payment Transactions (Amendments to
IFRS 2)
57
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
4.
Critical Accounting Estimates and Judgments
The Company makes estimates and assumptions about the future that affect the reported amounts of assets
and liabilities. Estimates and judgments are continually evaluated based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances. In
the future, actual experience may differ from these estimates and assumptions.
The effect of a change in accounting estimate is recognized prospectively by including it in the Company’s
profit or loss in the period of the change, if it affects that period only, or in the period of the change and
future periods, if the change affects both.
Information about critical judgments in applying accounting policies that have the most significant risk of
causing material adjustment to the carrying amounts of assets and liabilities recognized in the consolidated
financial statements within the next financial year are discussed below:
a) Economic Recoverability and Profitability of Future Economic Benefits of Mining Interests
Management has determined that mining interests, evaluation, development and related costs incurred
which have been capitalized are economically recoverable. Management uses several criteria in its
assessments of economic recoverability and probability of future economic benefit including geologic
and metallurgic information, history of conversion of mineral deposits to proven and probable reserves,
scoping and feasibility studies, accessible facilities, existing permits and life of mine plans.
b)
Impairments
The Company assesses its mining interest, plant and equipment assets annually to determine whether
any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the
recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and
value in use. These assessments require the use of estimates and assumptions such as long-term
commodity prices, discount rates, future capital requirements, exploration potential and operating
performance.
c) Rehabilitation Provisions
Rehabilitation provisions have been created based on the Company’s internal estimates. Assumptions,
based on the current economic environment, have been made which management believes are a
reasonable basis upon which to estimate the future liability. These estimates take into account any
material changes to the assumptions that occur when reviewed regularly by management. Estimates are
reviewed annually and are based on current regulatory requirements. Significant changes in estimates
of contamination, restoration standards and techniques will result in changes to provisions from period
to period. Actual rehabilitation costs will ultimately depend on future market prices for the
rehabilitation costs, which will reflect the market condition at the time that the rehabilitation costs are
actually incurred. The final cost of the currently recognized rehabilitation provision may be higher or
lower than currently provided.
The inflation rate applied to estimated future rehabilitation and closure costs is 3.5% and the discount
rate currently applied in the calculation of the net present value of the provision is 8%.
58
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
4.
Critical Accounting Estimates and Judgments – (cont’d)
d)
Income Taxes
Significant judgment is required in determining the provision for income taxes. There are many
transactions and calculations undertaken during the ordinary course of business for which the ultimate
tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated
tax audit issues based on the Company’s current understanding of tax law. For matters where it is
probable that an adjustment will be made, the Company records its best estimate of the tax liability
including the related interest and penalties in the current tax provision. Management believes they have
adequately provided for the probable outcome of these matters; however, the final outcome may result
in a materially different outcome than the amount included in the tax liabilities.
In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the
extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same
taxation authority and the same taxable entity against which the unused tax losses can be utilized.
However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain
tests at the time the losses are recuperated.
e) Share-based Payment
The Company measures the cost of equity-settled transactions with employees, and some with non-
employees, by reference to the fair value of the equity instruments at the date at which they are granted.
Estimating fair value for share-based payment transactions requires determining the most appropriate
valuation model, which is dependent on the terms and conditions of the grant.
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 the notes.
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.
59
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
4.
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.
5.
Short-term Investments
At April 30, 2017, the Company held a Guaranteed Investment Certificate (“GIC”) denominated in USD and
Mexican Pesos (“MP”). The GIC denominated in USD has a market value of $409 (April 30, 2016 - $3,766),
earning interest income at 0.2% per annum and maturing on March 22, 2018. The Company also held a GIC
denominated in MP with a market value of $3,596 (April 30, 2016 - $1,976) earning an average interest at
4.00% 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 three financial institutions and as such the Company is exposed to the risks
of those financial institutions.
6.
Amounts Receivable
Taxes receivable
San Pedrito sale (note 8)
Trades receivable
Other
7.
Inventory
Carrying value of inventory:
Doré
Goods in transit
Work-in-process
Concentrate
Stockpile
Supplies
$
$
$
April 30,
2017
April 30,
2016
$
1,911
2,644
148
74
4,777
$
1,955
-
-
266
2,221
April 30,
2017
April 30,
2016
$
922
429
377
189
196
808
1,097
53
35
-
13
679
1,877
$
2,921
$
60
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
8. Mining Interest, Plant and Equipment
Mining
Interest
Plant and
Equipment
Mining
Plant and
Equipment
Altiplano
Corporate
Office
Equipment
Total
$
69,845
1,333
-
-
(1,160)
70,018
484
-
(5,249)
7,795
$
19,056
1,701
-
-
(449)
20,308
2,034
(37)
-
1,394
- $
588
6,040
-
(301)
6,327
119
-
-
559
$
477
78
54
(4)
-
605
72
-
-
-
89,378
3,700
6,094
(4)
(1,910)
97,258
2,709
(37)
(5,249)
9,748
73,048
$
23,699
$
7,005 $
677
$ 104,429
$
30,280
3,707
-
(2,206)
31,781
3,786
4,090
$
8,192
1,007
-
(683)
8,516
1,532
1,142
- $
-
-
-
-
220
8
$
274
70
(1)
-
343
90
-
38,746
4,784
(1)
(2,889)
40,640
5,628
5,240
39,657
$
11,190
$
228 $
433
$
51,508
38,237
33,391
$
$
11,792
12,509
$
$
6,327 $
6,777 $
262
244
$
$
56,618
52,921
Cost
Balance, July 31, 2015
Additions
Acquisition of Cortez assets
Write-down of equipment
Effect of foreign exchange
Balance, April 30, 2016
Additions
Write-down of equipment
Disposal of San Pedrito
Effect of foreign exchange
Balance, April 30, 2017
Depreciation
Balance, July 31, 2015
Depreciation for the period
Write-down of equipment
Effect of foreign exchange
Balance, April 30, 2016
Depreciation for the year
Effect of foreign exchange
Balance, April 30, 2017
Carrying amounts
Balance, April 30, 2016
Balance, April 30, 2017
Sale of San Pedrito
$
$
$
$
$
$
On March 21, 2017, the Company finalized the sale of its San Pedrito Property, a non-core asset located in
Queretaro, Mexico for MXN$ 192,784,331 ($13.50 million*). As reported on March 9, 2016, the Company
entered into a sale agreement of the San Pedrito Property, receiving a deposit of $50 million pesos. The sale
agreement was subject to various confirmations, including compliance with state and municipal regulations
and confirmation that the property was in good standing so conveyancing could proceed.
Various requirements have been met, whereupon the buyer has removed several subject conditions and has
made the first parcel payment to the Company of MXN$ 137,671,371 ($ 9,640,852) plus interest on this
amount from March, 9, 2016, of MXN$ 7,576,445 ($ 530,563)*, for a total payment of MXN$ 145,247,816
(C$ 10,171,415)*.
* Based on exchange rate of 14.28 Pesos/CAD$ as at close of March 21, 2017.
61
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
8. Mining Interest, Plant and Equipment – (cont’d)
Sale of San Pedrito – (cont’d)
Details of the transaction are as follows: Total surface area sold covers 74.0831.544 hectares (740,831.544
square meters) sold at $250 pesos per square meter. Payments are staged as follows:
Surface Area in
hectares (ha)
Equivalent in
square meters (sm)
Mexican Pesos
Canadian
Dollars*
Status
55.068 ha
550,685.485 sm
MXN$ 137,671,371
C$ 9,640,852
Interest Received
MXN$ 7,576,445
C$ 530,563
MXN$ 145,247,816
C$ 10,171,415 Payment received
Parcel of 12 ha¹
120,000.000 sm
MXN$ 30,000,000
C$ 2,100,840
Pending clearance
Parcel of 2.014 ha¹
20,146.059 sm
MXN$ 5,036,515
C$ 352,697
Pending clearance
Parcel of 5 ha¹
50,000.000 sm
MXN$ 12,500,000
C$ 875,350
Pending clearance
¹ The remaining three parcels await various confirmations from different local and federal authorities. As the Company receives these
confirmations, the buyer will immediately remit the corresponding payment for each parcel of land. It is expected that these clearances
will be confirmed within the next 18 months.
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. The disposition of San Pedrito was recorded during the
year ended April 30, 2017 and a gain of $7,128 is reported on the Statement of Operations and
Comprehensive Income. The gain recorded is net of an allowance for MXN$ 10.5 million for amounts that
management has deemed uncertain for collectability.
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.
62
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
8. Mining Interest, Plant and Equipment – (cont’d)
Acquisition of Cortez Gold Corp. – (cont’d)
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)
9.
Exploration and Evaluation Assets
a) American Consolidated Minerals (“AJC”) properties
$
$
$
$
$
350
5
6,094
6,449
503
2,936
3,439
3,010
Pursuant to the Acquisition of AJC, the Company has acquired the rights to three exploration properties
as follows:
i)
Lone Ranch, U.S.A
The Company has acquired the right to a 100% undivided interest, subject to a 3% net smelter
royalty (“NSR”), in 73 mining claims located in Ferry County, Washington State, United States of
America (“Lone Ranch”) from MinQuest Inc. (“MinQuest”). Consideration to be paid for the
interest is USD$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.
63
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
9.
Exploration and Evaluation Assets – (cont’d)
a) American Consolidated Minerals (“AJC”) properties – (cont’d)
i)
Lone Ranch, 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 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 (incurred) on the property, by the fifth anniversary of the
“New Effective Date” as agreed by MinQuest.
The New Effective Date shall be the earlier of October 15, 2018 or the date the Company enters
into a joint venture agreement over Toiyabe or the date that the Company completes a bankable
feasibility study on the property.
The optionor has also granted the Company the right to purchase up to one-half of the NSR (or
1.5%) on the basis of USD $2,000 per each 1% of the royalty.
iii)
Sierra Rosario, Mexico
The Company acquired a 100% interest in the 978-hectare Sierra Rosario Property, over 2 claims
that are located in the state of Sinaloa, Mexico (“Sierra Rosario”). The properties are subject to a
1% NSR.
b) Creston Moly (“Creston”) properties
i)
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.
64
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
9.
Exploration and Evaluation Assets – (cont’d)
b) Creston Moly (“Creston”) properties – (cont’d)
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 ended April 30, 2016, the Company reduced its claims to focus of the core project
and to reduce its holding costs.
Acquisition costs:
Balance, August 1, 2015
Effect of foreign exchange
Balance, April 30, 2016
Effect of foreign exchange
Balance, April 30, 2017
Exploration costs:
Balance, August 1, 2015
Geological
Legal fees
Maintenance
Effect of foreign exchange
Balance, April 30, 2016
Assays
Exploration cost
Drilling
Geological
Legal fees
Maintenance
Effect of foreign exchange
AJC
Properties
Creston
Properties
Total
$
1,159
$
2,001
$
3,160
(76)
1,083
131
-
2,001
(76)
3,084
-
131
1,214
2,001
3,215
25
-
-
59
37
121
82
96
1,288
178
-
56
(109)
226
115
228
90
-
659
-
-
-
139
41
189
-
251
115
228
149
37
780
82
96
1,288
317
41
245
(109)
Balance, April 30, 2017
$
1,712
$
1,028
$
2,740
Total exploration and evaluation assets
Balance, April 30, 2016
Balance, April 30, 2017
$
$
1,204
2,926
$
$
2,660
3,029
$
$
3,864
5,955
10. Loan payable
65
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
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 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 12) during the period ended
April 30, 2016.
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 carried interest of 8% per annum, payable on November 12, 2016 and were secured against all of
the Company’s asset that ranks pari passu with the existing debt obligations of the Company. During the year
ended April 30, 2017, the bonds were extended by 6 months to May 12, 2017. As consideration for the
extension of the Bonds, the Company agreed to pay a prolongation fee of one (1%) percent at the end of the
extended term. The extension was considered as a modification and not as an extinguishment and reissue.
On April 12, 2017, the Company elected an early repayment of the Bonds in the aggregate principal amount
of $4.5 million, with total payout of $4,678, which included interest in the amount of $178.
Principal
Interest
Discount
Total
Balance, July 31, 2015
$
1,305
$
-
$
-
$
1,305
Acquisition of Cortez Debt
Repayment on debt
Financing, November 17, 2015
Interest accrual
Unwinding of discount
Foreign exchange adjustment
Balance, April 30, 2016
Repayment on debt
Interest accrual
Foreign exchange adjustment
2,609
(2,609)
4,500
-
-
(51)
5,754
(4,500)
-
112
378
(378)
-
282
-
-
282
(538)
536
-
(51)
51
(90)
-
42
-
(48)
48
-
-
2,936
(2,936)
4,410
282
42
(51)
5,988
(4,990)
536
112
Balance, April 30, 2017
$
1,366
$
280
$
-
$
1,646
Current
Non-Current
April 30, 2017
April 30, 2016
$
$
1,646
-
$
1,646
$
4,619
1,369
5,988
66
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
10. Loan payable – (cont’d)
The Company’s financing costs for the year ended April 30, 2017 and the comparative period ending on
April 30, 2016 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 11)
Discount unwinding on debt repaid
Discount unwinding on existing debt
Extension fee
Interest expense on debt
Interest revenue
Twelve
months
ended
April 30,
2017
Nine
months
ended
April 30,
2016
$
$
80
48
-
45
536
(83)
65
51
42
-
282
(53)
$
626
$
387
11. Rehabilitation and Closure Cost Provision
The Company’s asset retirement obligations consist of reclamation and closure costs for the mine. At
April 30, 2017, the present value of obligations is estimated at $1,131 (2016 - $1,091) based on expected
undiscounted cash-flows at the end of the mine life of MXN$ 18,545,000or $1,347 (2016 - $1,401), which is
calculated annually over 5 to 10 years. Such liability was determined using a discount rate of 8% (2016 –
8%) and an inflation rate of 3.5% (2016 – 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
April 30,
2017
April 30,
2016
$
$
1,091
80
(40)
1,162
65
(136)
$
1,131
$
1,091
67
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
12.
Share Capital
a)
Common Shares
The Company is authorized to issue an unlimited number of common shares, issuable in series.
The holders of common shares are entitled to one vote per share at meetings of the Company and to
receive dividends, which may be declared from time-to-time. All shares are ranked equally with
regard to the Company’s residual assets.
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 year ended April 30, 2017, the Company did not issue any common shares.
During the period ended April 30, 2016, 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.
- 3,993,203 Subscription Receipts (the “Receipts”), to settle the outstanding debt pursuant to the
acquisition of Cortez 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.
b) Warrants
During the year ending April 30, 2017, 139,284 warrants expired and no additional warrants were
issued.
No warrants were issued during the period ended April 30, 2016.
A summary of the Company’s outstanding share purchase warrants at April 30, 2017 and 2016 and the
changes during the year ended is presented below:
Number of
warrants
Weighted
average
exercise price
Outstanding at July 31, 2015 & April 30, 2016
Warrants expired
139,284
(139,284)
$1.20
$1.20
Outstanding at April 30, 2017
-
$
-
68
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
12.
Share Capital – (cont’d)
c)
Share-based Payments
The Company, in accordance with the policies of the TSX, was previously authorized to grant options
to directors, officers, and employees to acquire up to 20% of the amount of 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, 2017 and 2016:
Number of Shares Weighted Average
Exercise Price
Balance at July 31, 2015 & April 30, 2016
Forfeited/expired
Outstanding and Exercisable at April 30, 2017
2,846,250
(1,497,500)
1,348,750
$1.07
$1.23
$0.90
During the year ending April 30, 2017, 672,500 options expired naturally and 825,000 options were
forfeited.
The following is a summary of the Company’s outstanding and exercisable options at April 30, 2017:
Number
Outstanding
200,000
50,000
50,000
50,000
998,750
Weighted
Average
Exercise Price
$1.00
$0.80
$0.92
$1.00
$0.88
1,348,750
$0.90
Weighted
Average Life
1.31
1.31
1.35
1.37
1.71
1.61
d)
Deferred Share Units (“DSU”) & Restricted Share Units (“RSU”)
Effective August 1, 2016, The Board of Directors has approved the adoption of a Restricted Share
Unit and Deferred Share Unit Plan (the “RSU/DSU Plan”) as part of the Company’s compensation
arrangements for directors, officers, employees or consultants of the Company or a related entity of
the Company.
Although the RSU/DSU Plan is share-based, all vested RSUs and DSUs will be settled in cash. No
common shares will be issued.
69
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
12.
Share Capital – (cont’d)
d)
Deferred Share Units (“DSU”) & Restricted Share Units (“RSU”) – (cont’d)
RSU
The RSU plan is for eligible members of the Board of Directors, eligible employees and eligible
contractors. The RSUs will vest over a period of three years from the date of grant, vesting as to one-
third at the end of each calendar year. In addition to the vesting period, the Company has also set
Performance Conditions that will accompany vested RSUs.
The Performance Conditions to be met are established by the Board at the time of grant of the RSU.
RSUs that are permitted to be carried over to the succeeding years shall expire no later than August 1st
of the third calendar year after the year in which the RSUs have been granted, and will be terminated
to the extent the performance objectives or other vesting criteria have not been met. The RSU share
plan transactions during the period were as follows:
Balance, July 31, 2015 & April 30, 2016
Granted
Exercised
Cancelled
Balance, April 30, 2017
Number of Share Units
-
961,000
-
(204,000)
757,000
Management has determined that 50% of the RSU’s will be deemed payable on the vesting dates
based on current performance criteria measures. As such only 50% of the RSU’s have been valued at
fair value of $0.51 per share and the amortized portion of this for the year ended April 30, 2017 is $88
which has been expensed to management fees and salaries on the Statement of Operations and
Comprehensive Income.
DSU
The Company introduced a DSU plan for eligible directors. The DSUs are paid in full in the form of a
lump sum payment no later than August 1st of the calendar year immediately following the calendar
year of termination of service.
DSU Awards will vest for current DSU participants as to 25% of DSUs on the date of grant; and 25%
on each anniversary date of the grant over a period of 3 years.
The DSU share plan transactions during the period were as follows:
Balance, April 30, 2015 & April 30, 2016
Granted
Exercised
Cancelled
Balance, April 30, 2017
Number of Shares
Units
-
760,000
(20,000)
(140,000)
600,000
70
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
12.
Share Capital – (cont’d)
d) Deferred Share Units (“DSU”) & Restricted Share Units (“RSU”) – (cont’d)
Management has determined that 140,000 (25%) of the DSU’s will be deemed payable immediately.
Based on the fair value of $0.51 per share, the Company has expensed $71 to management fees and
salaries on the Statement of Operations and Comprehensive Income. The remainder of 460,000 DSUs will
vest on their vesting dates accordingly and as such, the DSUs have been valued at fair value of $0.51 per
share. The amortized portion of this for the period ended April 30, 2017 is $108 and has been expensed to
management fees and salaries on the Statement of Operations and Comprehensive Income.
During the year ended April 30, 2017, 20,000 DSU’s were exercised for a fair value of $0.54 and a
payment of $11 was made which reduced the liability.
13.
Financial Instruments
All significant financial assets, financial liabilities and equity instruments of the Company are either
recognized or disclosed in the consolidated financial statements together with other information relevant
for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Cash and short-
term investments are carried at their fair value. There are no material differences between the carrying
values and the fair values of any other financial assets or liabilities.
In the normal course of business, the Company’s assets, liabilities and future transactions are impacted by
various market risks, including currency risks associated with inventory, revenues, cost of sales, capital
expenditures, interest earned on cash and the interest rate risk associated with floating rate debt.
a) Currency Risk
Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange
rates and the degree of volatility of these rates. The Company does not use derivative instruments to
reduce its exposure to foreign currency risk. At April 30, 2017, the Company had the following
financial assets and liabilities denominated in CAD and denominated in MXN$:
In ‘000 of
CAD Dollars
MXN$
Cash
Other working capital amounts - net
$
$
268
(157)
MP
74,353
MP 102,516
At April 30, 2017, US dollar amounts were converted at a rate of $1.3658 Canadian dollars to $1 US
dollar and MP were converted at a rate of MP18.82 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 $83. A 10% increase or decrease in the MP exchange rate will decrease or increase
annual earnings from mining operations by approximately $51.
71
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
13.
Financial Instruments – (cont’d)
b)
Interest Rate Risk
The Company’s cash earns interest at variable interest rates. While fluctuations in market rates do not
have a material impact on the fair value of the Company’s cash flows, future cash flows may be
affected by interest rate fluctuations. The Company is not significantly exposed to interest rate
fluctuations and interest rate risk consists of two components:
(i) To the extent that payments made or received on the Company’s monetary assets and liabilities
are affected by changes in the prevailing market interest rates, the Company is exposed to
interest rate cash flow risk.
(ii) To the extent that changes in prevailing market interest rates differ from the interest rates in the
Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk.
c) Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and
cause the other party to incur a financial loss. The Company is exposed to credit risk with respect to
its cash and short-term investments, the balance of which at April 30, 2017 is $5,558 (2016- $4,248)
and $4,005 (2016 - $5,742), respectively. Cash of $1,982 (2016- $566) and short-term investments of
$3,596 (2016- $1,976) are held at a Mexican financial institution, cash of $3 (2016– $19) are held at a
US financial institution and the remainder of $3,573 (2016- $3,663) and the short-term investment of
$409 (2016- $3,766) are held at a chartered Canadian financial institution; the Company is exposed to
the risks of those financial institutions. There are trade receivables owed by a customer of $148, the
taxes receivable are comprised of Mexican VAT taxes receivable of $1,875 and GST receivable of
$36, which are subject to review by the respective tax authority, and $2,644 related to amount owed
from the sale of its San Pedrito Property (note 8).
d) Liquidity Risk
Liquidity risk arises from the excess of financial obligations over available financial assets due at any
point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily
available reserves in order to meet its liquidity requirements. The Company accomplishes this by
achieving profitable operations and maintaining sufficient cash reserves. As at April 30, 2017, the
Company was holding cash of $5,558 (2016 - $4,248) and short-term investments of $4,005 (2016 -
$5,742).
Obligations due within twelve months
of April 30,
2017
2018
2019
2020
2021 and
beyond
Trade and other payables
Current portion of loan payable
Reclamation and closure obligations
$
$
2,496 $
1,646
- $
$
-
-
- $
-
-
-
$
$
-
-
-
$
$
-
-
1,347
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.
72
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
13.
Financial Instruments – (cont’d)
e) Commodity Risk
Mineral prices and marketability fluctuate and any decline in mineral prices may have a negative
effect on the Company. Mineral prices, particularly gold and silver prices, have fluctuated widely in
recent years. The marketability and price of minerals which may be produced and sold by the
Company will be affected by numerous factors beyond the control of the Company. These other
factors include delivery uncertainties related to the proximity of its resources to processing facilities
and extensive government regulations related to price, taxes, royalties, allowable production land
tenure, the import and export of minerals and many other aspects of the mining business. Declines in
mineral prices may have a negative effect on the Company. A 10% decrease or increase in metal
prices may result in a decrease or increase of $2,723 in revenue and net income.
14.
Commitments and related party transactions
Except as disclosed elsewhere in these consolidated financial statements, the Company has the following
commitments outstanding at April 30, 2017:
a)
b)
c)
As at April 30, 2017, 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, 2017, 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, 2017, the Company has management contracts to officers and directors totaling $840
per year, payable monthly, expiring in January 2020.
The Company paid the following amounts to key management and directors in the period:
For the
Management fees
Legal fees
Directors fees
Total
Twelve months
ended
April 30, 2017
Nine months
ended
April 30, 2016
$
$
$
958
116
187
1,261
$
624
256
70
950
73
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
15. Capital Disclosures
The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a
going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders.
The Company considers the items included in the consolidated statements of changes in equity as capital.
The Company manages the capital structure and makes adjustments to it in light of changes in economic
conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Company may issue new shares through private placements, sell assets to reduce debt or return
capital to shareholders. The Company is not subject to externally imposed capital requirements and there
were no changes to the capital management in the year ended April 30, 2017.
16. 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 periods ended
April 30, 2017
April 30, 2016
Issued common share, beginning of year
Weighted average issuances
Basic weighted average common shares
Effect of dilutive warrants and options
49,146,851
-
49,146,851
-
37,986,761
8,470,313
46,457,074
-
Diluted weighted average common shares
49,146,851
46,457,074
Vested share purchase options totalling 1,348,750 at April 30, 2017 (2016 - 2,846,250) and share purchase
warrants totaling Nil (2016 – 139,284) were not included in the computation of diluted earnings per share
as the effect was anti-dilutive.
74
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless stated otherwise)
April 30, 2017
17.
Segmented Information
The Company operates in three reportable geographical and one operating segment. Selected financial information by geographical segment is as follows:
Revenue
Mined Ore
Purchase Concentrate
Cost of sales:
Mined Ore
Purchase Concentrate
Depreciation
Earnings (loss) from operations
Corporate costs and taxes
Sale of San Pedrito
Earnings (loss) for the period
Mining interest, plant and equipment
Non-Current Assets
Total assets
Revenue
Cost of sales:
Mined Ore
Depreciation
Earnings (loss) from operations
Corporate costs and taxes
Earnings (loss) for the period
Mining interest, plant and equipment
Non-Current Assets
Total assets
Mexico
Canada
USA
Bernal
Altiplano
Total
$
-
$
24,642
418
$
-
2,168
$
24,642
2,586
$
-
-
(18,641)
(287)
(5,360)
772
3,302
7,128
11,202
45,899
47,559
61,401
-
(1,864)
(250)
54
(308)
-
(254)
6,777
8,804
11,165
(18,641)
(2,151)
(5,610)
826
2,994
7,128
10,948
52,676
56,363
72,566
-
-
-
-
(3,707)
-
(3,707)
245
6,186
7,559
-
-
-
(19)
-
(19)
-
1,937
1,971
Bernal
20,326
$
Altiplano
Total
$
-
$
20,326
$
-
$
-
$
(14,093)
(4,714)
1,519
(786)
4,020
50,037
54,996
64,762
-
-
-
(367)
(367)
6,327
6,327
7,113
(14,093)
(4,714)
1,519
(1,153)
3,653
56,364
61,323
71,875
-
-
-
(2,781)
(3,429)
254
3,045
5,180
-
-
-
(29)
(29)
-
260
1,852
April 30, 2017
Total
$
-
-
24,642
2,586
(18,641)
(2,151)
(5,610)
826
(732)
7,128
7,222
52,921
64,486
82,096
April 30, 2016
Total
20,326
(14,093)
(4,714)
1,519
(3,963)
195
56,618
64,628
78,907
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless stated otherwise)
April 30, 2017
17.
Segmented Information - (cont’d)
During the periods ended April 30, 2017 and 2016, the Company earned all of its revenues from one
customer. As at April 30, 2017, 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, 2017 was $148 (2016 - $Nil).
18.
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 periods ended
April 30, 2017
April 30, 2016
(Loss) Earnings before income taxes
$
4,361
$
(2,444)
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
Recognition of previously unrecognized non-capital loss carry
26%
1,134
-
(1,286)
(3,568)
26%
(635)
(310)
(1,773)
(361)
forward and other deductible tax benefits
859
440
Income tax (recovery) expense
$
(2,861)
$
(2,639)
The Company’s statutory rate is 26% for the year ended April 30, 2017 (2016 - 26%). The significant
components of the Company’s deferred income tax assets and liabilities are as follows:
76
Starcore International Mines Ltd.
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars unless otherwise stated)
April 30, 2017
18. Income Taxes – (cont’d)
Deferred income tax assets (liabilities):
Mining interest, plant and equipment
Payments to defer
Insurance
Reclamation and closure costs provision
Exploration assets
Expenses reserve
Pension-fund reserve
Deferred mining tax
Non-capital losses and other deductible tax benefits
Sale on San Pedrito
Other
April 30, 2017
April 30, 2016
$
$
(7,805)
(31)
(14)
1,018
(346)
146
121
(1,670)
4,982
(2,138)
(723)
(7,288)
(527)
(4)
960
-
131
76
(2,004)
1,680
93
Deferred income tax liabilities, net
$
(6,460)
$
(6,883)
At April 30, 2017, the Company has tax losses of approximately $6,282 (2016- $11,894) in Canada and $4,307
(2016- $12,439) in Mexico available for carry-forward to reduce future years’ taxable income, expiring
between 2026 and 2037 in Canada. In addition, the Company has tax resource pools and other deductible
amounts available of $12,320 (2016- $5,259), 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.
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.
77