Silver Bear Resources plc Annual Report 2013

FY2013 Annual Report · Silver Bear Resources plc

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Consolidated Financial Statements
(Expressed in Canadian dollars)

Silver Bear Resources Inc.

For the year ended December 31, 2013

Management’s Responsibility for Financial Reporting

The consolidated financial statements of Silver Bear Resources Inc. have been prepared by, and are the
responsibility of the Company’s management.

The consolidated financial statements are prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board which have been adopted in
Canada. In the opinion of management the accounting practices utilized are appropriate in the circumstances
and the consolidated financial statements fairly reflect the financial position and results of operations of the
Company within reasonable limits of materiality.

Management has developed and is maintaining a system of internal controls to obtain reasonable assurance
that the Company’s assets are safeguarded, transactions are authorized, and financial information is reliable.
All internal control systems have inherent limitations, including the possibility of circumvention and
overriding controls, and, therefore, can provide only reasonable assurance as to financial statement
preparation and safeguarding of assets.

The Board of Directors is responsible for ensuring management fulfills its responsibilities. The Audit
Committee meets with the Company’s management and external auditors to discuss the results of the audit
and to review the annual consolidated financial statements prior to the Audit Committee’s submission to the
Board of Directors for approval. The Audit Committee also reviews the quarterly financial statements and
recommends them for approval to the Board of Directors, reviews with management the systems of internal
control and security, approves the scope of the external auditors audit and non-audit work. The Audit
Committee is composed entirely of directors not involved in the daily operations of the Company and thus is
considered to be free from any relationship that could interfere with the exercise of independent judgment as a
Committee member.

The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, Chartered
Accountants and their report outlines the scope of their examination and gives their opinion on the
consolidated financial statements.

“Mark Trevisiol”
_______________________________
Mark Trevisiol
Director, President and
Chief Executive Officer

Toronto, Ontario, Canada
March 31, 2014

“Deborah Battiston”
_______________________________
Deborah Battiston
Chief Financial Officer

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March 31, 2014

Independent Auditor’s Report

To the Shareholders of
Silver Bear Resources Inc.

We have audited the accompanying consolidated financial statements of Silver Bear Resources Inc. and its
subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2013 and
December 31, 2012 and the consolidated statements of loss and comprehensive loss, the consolidated
statements of changes in equity, and the consolidated statements of cash flows for the years then ended,
and the related notes, which comprise a summary of significant accounting policies and other explanatory
information.

Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards (IFRS), and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.

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Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Silver Bear Resources Inc. and its subsidiaries as at December 31, 2013 and December 31, 2012
their financial performance and their cash flows for the years then ended in accordance with IFRS.

Emphasis of matter
Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements which
describes matters and conditions that indicate the existence of a material uncertainty that may cast
significant doubt about the corporation’s ability to continue as a going concern.

(Signed) “PricewaterhouseCoopers LLP”

Chartered Professional Accountants, Licensed Public Accountants

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Silver Bear Resources Inc.
Consolidated Statement of Financial Position

(Canadian dollars)

Approved by the Board of Directors on March 31, 2014

“Mark Trevisiol”
_______________________________
Mark Trevisiol
Director

“Trevor Eyton”
_______________________________
Trevor Eyton
Director

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December 31, 2013December 31, 2012ASSETSCurrent assetsCash and cash equivalents276,909 141,669 Receivable (note 4)409,905 354,677 Inventories (note 5)1,133,556 1,781,914 Prepaid expenses (note 6)60,602 86,181 Total current assets1,880,972 2,364,441 Non-current assetsMineral property (note 7)2,519,401 1,791,068 Property, plant and equipment (note 8)1,770,284 2,065,814 Total assets6,170,657 6,221,323 LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities (note 9)1,534,232 1,294,795 Short-term loans (note 10)- 50,000 Finance lease (note 11)303,683 221,212 Total current liabilities1,837,915 1,566,007 Non-current liabilitiesDecommissioning and restoration obligations (note 18)1,241,223 1,143,383 Finance lease (note 11)50,685 243,182 Total liabilities3,129,823 2,952,572 EQUITYEquity attributable to owners of Silver Bear Resources Inc.Share capital (note 12)87,542,402 83,580,384 Contributed surplus (note 12)13,499,050 11,473,112 Accumulated other comprehensive loss(554,144) (517,054) Deficit(97,446,474) (91,267,691) Total equity3,040,834 3,268,751 Total liabilities and shareholders' equity6,170,657 6,221,323 Going concern (note 1)Commitments and contingencies (note 16)The accompanying notes are an integral part of these consolidated financial statements

Silver Bear Resources Inc.
Consolidated Statement of Comprehensive Loss
For the years ended December 31, 2013 and 2012

(Canadian dollars)

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20132012IncomeInterest income440 11,128 440 11,128 Expenses (Note 14)Exploration costs3,243,003 5,869,428 General and administrative 1,915,563 2,242,888 Depreciation282,448 230,369 Share-based payments312,236 998,421 Accretion expense105,873 - Gain on disposal of property, plant and equipment- (2,702) Interest expense269,453 52,652 Foreign exchange loss50,647 6,464 Expenses from operations6,179,223 9,397,520 Net loss for the year(6,178,783) (9,386,392) Other comprehensive lossItems that may be reclassified subsequently to profit or loss:Exchange differences on translating foreign operations(37,090) (19,747) Comprehensive loss for the year(6,215,873) (9,406,139) Weighted average number of common shares outstanding61,161,041 50,487,994 Basic and diluted loss per share(0.10)(0.19)The accompanying notes are an integral part of these consolidated financial statements

Silver Bear Resources Inc.
Consolidated Statement of Changes in Equity
For the years ended December 31, 2013 and 2012

(Canadian dollars)

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Share capitalContributed surplusAccumulated other comprehensive lossDeficitTotal equityBalance - December 31, 201178,730,574 10,081,156 (497,307) (81,881,299) 6,433,124 Net loss for the period- - - (9,386,392) (9,386,392) Other comprehensive loss:Cumulative translation adjustment- - (19,747) - (19,747) Comprehensive loss for the year- - (19,747) (9,386,392) (9,406,139) Share based payments- 998,421 - - 998,421 Net proceeds from issuance shares in private placement 4,849,810 - - - 4,849,810 Warrants 393,535 393,535 Balance -December 31, 201283,580,384 11,473,112 (517,054) (91,267,691) 3,268,751 Net loss for the period- - - (6,178,783) (6,178,783) Other comprehensive loss:Cumulative translation adjustment- - (37,090) - (37,090) Comprehensive loss for the year- - (37,090) (6,178,783) (6,215,873) Net proceeds from issuance shares in private placement 3,962,018 - - - 3,962,018 Share based payments- 312,236 - - 312,236 Warrants - 1,713,702 - - 1,713,702 Balance -December 31, 201387,542,402 13,499,050 (554,144) (97,446,474) 3,040,834 The accompanying notes are an integral part of these consolidated financial statements

Silver Bear Resources Inc.
Consolidated Statement of Cash Flow
For the years ended December 31, 2013 and 2012

(Canadian dollars)

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20132012Cash provided by (used in)Operating activitiesTotal loss for the year(6,178,783) (9,386,392) Adjustments for items not affecting cash:Depreciation282,448 230,369 Share-based payments312,236 998,421 Accretion expense105,873 - Interest expense35,818 - Gain on disposal of property, plant and equipment- (2,702) Net change in non-cash working capital (note 15)803,712 (7,875) Net cash used in operations(4,638,696) (8,168,179) Investing activitiesAcquisition of property, plant and equipment- (1,138,891) Acquisition of mineral property(738,854) - Proceeds from sale of property, plant and equipment- 2,702 Net cash used in investing activities(738,854) (1,136,189) Financing activitiesNet proceeds from issuance units in private placement5,675,720 5,243,345 Finance lease repayment(147,854) (130,575) Short-term loans drawn2,679,400 50,000 Short-term loans repaid(2,729,400) - Net cash generated from financing activities5,477,866 5,162,770 Effect of exchange rate changes on cash and cash equivalents34,924 384 Increase/(decrease) in cash and cash equivalents during the year135,240 (4,141,214) Cash and cash equivalents - beginning of the year141,669 4,282,883 Cash and cash equivalents - end of the year276,909 141,669 Cash and cash equivalents consist of:Cash241,909 106,669 Cash equivalents35,000 35,000 276,909 141,669 The accompanying notes are an integral part of these consolidated financial statements

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

1. NATURE OF OPERATIONS AND GOING CONCERN

Silver Bear Resources Inc. (“Silver Bear”) was incorporated under the Business Corporations Act of the Province of
Ontario, Canada, on April 8, 2004 and continued under Articles of Continuance dated August 30, 2004 under the
Business Corporations Act (Yukon) and February 1, 2005 under the Business Corporations Act (Ontario). The
primary business of Silver Bear and its subsidiaries (‘the Company”) is the evaluation, acquisition, exploration and
development of precious metal properties. The head office of the Company is located in Toronto, Canada. The
principal asset of the Company is the project described in Note 7. The exploration strategy of the Company is to
focus on the discovery of precious metal deposits. To date, Silver Bear has not earned revenue from operations and
is considered to be in the exploration stage.

These audited consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) applicable to a going concern which contemplates that the Company will be able to
realize its assets and settle its liabilities in the normal course as they come due for the foreseeable future. As at
December 31, 2013, the Company had no source of operating cash flows and reported a net loss for the year of
$6,178,783 and a deficit of $97,446,474. In order to fund operations and maintain rights under licenses and
agreements, the Company must secure sufficient future funding. In these circumstances, there exists significant
doubt as to the ability of the Company to continue to meet its obligations as they come due and, hence the ultimate
appropriateness of the use of accounting principles applicable to a going concern. The Company has a need for
additional capital and while it has been successful in obtaining short term bridge financing in order to meet its
funding requirements to date (see Notes 10 and 21), there can be no assurance that it will be able to do so in the
future.

These consolidated financial statements do not include adjustments or disclosures that may result should the
Company not be able to continue as a going concern. If the going concern assumption were not appropriate for these
consolidated financial statements, then adjustments would be necessary to the carrying value of assets and
liabilities, the expenses, the reported comprehensive loss and balance sheet classifications used that would be
necessary if the company were unable to realize its assets and settle its liabilities as a going concern in the normal
course of operations. These adjustments could be material.

2. BASIS OF PREPARATION

These consolidated financial statements have been prepared in accordance with the Handbook of the Canadian
Institute of Charted Accountants, in accordance with IFRS, as issued by International Accounting Standards Board
(“IASB”), applicable to the preparation of consolidated financial statements and in accordance with accounting
policies based on IFRS standards and International Financial Reporting Interpretations Committee (“IFRIC”)
interpretations. The Company has consistently applied the accounting policies used in the preparation of its IFRS
statement of financial position throughout all periods presented, as if these policies had always been in effect.

These consolidated financial statements comprise the financial statements of the Company and its 100% owned
subsidiaries: Silver Bear Holdings Limited (a Barbados corporation) (“Holdings”), and ZAO Prognoz (a Russian
Federation corporation). All significant inter-company accounts and transactions have been eliminated on
consolidation.

These audited consolidated financial statements were reviewed, approved and authorized for issue by the Board of
Directors on March 31, 2014.

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Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

2. BASIS OF PREPARATION (Continued)

Significant Accounting Policies

Foreign currency translation

Items included in the financial statements of each entity are measured using the currency of the primary economic
environment in which it operates (“functional currency”). The consolidated financial statements are presented in
Canadian dollars which is Silver Bear’s functional currency, as well as functional currency of Silver Bear Holdings.
The financial statements of ZAO Prognoz have a Russian rouble as its functional currency and are translated into
presentation currency of Canadian dollars for consolidation purposes as follows: assets and liabilities – at the
closing rate at the date of the statements of financial position, and income and expenses at the average rate for each
quarter (as this is considered a reasonable approximation to actual rates). All resulting changes are recognized in
other comprehensive income as cumulative translation adjustments.

Foreign currency transactions are translated into the functional currency of the entity in which they occur using the
exchange rates prevailing at the dates of transactions. Foreign exchange gains and losses resulting from the
settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated
in currencies other than functional currency at period-end exchange rates are recognized in the statement of
comprehensive loss.

Mineral properties
Mineral properties include the costs of acquiring exploration and mining licenses, as well as cost of an asset
associated with the obligation for environmental rehabilitation. Licenses are valued at cost at the date of acquisition
less impairment.

Property, plant and equipment
Property, plant and equipment are carried at cost, less accumulated depreciation and impairment losses. All
property, plant and equipment, with the exception of leasehold improvements, are depreciated on a straight line
basis over three to five years.

Leasehold improvements are amortized over the remaining life of the lease. Significant components of the property,
plant and equipment are recorded and depreciated separately. Residual values, method of depreciation and the
useful lives of assets are revised annually and adjusted prospectively, if appropriate, if there is an indicator of a
significant change since the last reporting date.

Exploration costs
Field exploration, supervisory costs and costs associated with maintaining a mineral property are expensed until the
Company has a reasonable expectation that the property is capable of commercial production, supported by a
positive economic analysis and approved by the Board of Directors.

Impairment of non-financial assets
The Company reviews and evaluates the recoverable amount of its mineral properties, property, plant and
equipment annually and when events or changes in circumstances indicate that the carrying amounts of related
assets or groups of assets might not be recoverable.
For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units).The recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant
asset). Any resulting write-down of the excess of carrying value over the recoverable amount is charged to the
consolidated statement of operations.

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Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

2. BASIS OF PREPARATION (Continued)

Provision for decommissioning and restoration liability
Mining and exploration activities normally give rise to obligations for environmental rehabilitation. Rehabilitation
work may include facility decommissioning and dismantling; removal or treatment of waste materials; site and land
rehabilitation, including compliance with and monitoring of environmental regulations; security and other site-
related costs required to perform the rehabilitation work; and operation of equipment designed to reduce or
eliminate environmental effects. The extent of work required and the associated costs are dependent on the
requirements of relevant authorities and our environmental policies. Routine operating costs that may impact the
ultimate closure and rehabilitation activities, such as waste material handling conducted as an integral part of a
mining or exploration process, are not included in the provision. The timing of the actual rehabilitation expenditure
is dependent upon a number of factors such as the life and nature of the asset, the license conditions and the
operating environment. Expenditures may occur before and after the site closure and can continue for an extended
period of time depending on rehabilitation requirements. Rehabilitation provisions are measured at the expected
value of future cash flows, associated with the settlement of the obligation and discounted to their present value
using a pre-tax discount rate which reflects current assessments of the time value of money. The expected future
cash flows exclude the effect of inflation. The unwinding of the discount in subsequent periods is presented as
interest expense. The asset associated with retirement obligations represents the part of the cost of acquiring the
future economic benefits of the operation and is capitalized to mineral properties as part of the carrying amount of
the long-lived asset and amortized over the expected economic life of the operation to which it relates. The
Company re-measures the liability at each reporting date. Changes in estimates are recorded using current discount
rate assumptions. Adjustments are also accounted for as a change in the corresponding value of the related assets.

Financial instruments

Financial assets:
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit and loss,
loans and receivables, held-to-maturity investments, available-for-sale financial assets, or derivatives. The Company
determines the classification of its financial assets at initial recognition.
The Company’s financial assets include cash and amounts receivable. Initially they are recognized at fair value,
subsequently measured at amortized cost using the effective interest method. Amortized cost approximate fair value
due to the short-term maturity of these assets. They are included in current assets, except for maturities greater than
twelve months after the year-end.

Regular purchases and sales of financial assets are recognized on the trade-date the date on which the Company
commits to purchase or sell assets.

Financial assets are derecognized when the rights to receive cash flows from investments and the Company has
transferred substantially all risks and rewards of ownership.

Financial liabilities:

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or
loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as
appropriate.

The Companies financial liabilities include accounts payable, accrued liabilities and short-term loans. Initially they
are recognized at fair value, subsequently measured at amortized cost using the effective interest method. Amortized
cost approximate fair value due to the short-term maturity of these liabilities.

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Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

2. BASIS OF PREPARATION (Continued)

Financial instruments are initially recorded at fair value. The fair values of cash and cash equivalents, receivable
from related party (Note 13), miscellaneous receivables and, accounts payable and accrued liabilities approximate
their recorded amounts because of their short-term nature.

Cash and cash equivalents
Cash represents cash on hand and demand deposits. Cash equivalents represent short-term, highly liquid
investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in
value. Such short-term investments include treasury bills with original maturities of less than 90 days. Treasury bills
with original maturities in excess of 90 days are classified under short-term investments. Equity investments are
excluded from cash equivalents.

Income Taxes
The Company uses the asset and liability method of accounting for income taxes, under which deferred income tax
assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the
financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates
or laws is recognized as part of the provision for income tax in the year the changes are considered substantively
enacted. Deferred tax benefits attributable to these differences, if any, are recognized to the extent that the
realization of such benefits is more likely than not.

Loss per share
Basic loss per share is computed by dividing loss for the period by the weighted average number of common shares
outstanding for the year. In the event of the Company reporting net profit, the diluted loss per share will be similar
to basic earnings per share, except that the denominator will be increased to include the number of additional shares
that would have been outstanding if the dilutive potential common shares in connection with the issued share
options had been issued using the treasury stock method.

Share-based payments
The fair value of any stock options granted to directors, officers, consultants and employees is recognized as an
expense over the vesting period with a corresponding increase recorded to contributed surplus. The fair value of
stock based compensation is determined using the Black-Scholes option pricing model and management's
assumptions as disclosed in Note 12. An estimate for forfeitures is made when determining the number of equity
instruments expected to vest. Upon exercise of the stock options, consideration paid by the option holder together
with the amount previously recognized in contributed surplus is recorded as an increase to share capital.

Prepaid expenses
Prepaid expenses represent payments made or obligations incurred in advance of the receipt of goods or rendering
of services. Prepaid expenses are typically included in other current assets on the consolidated statement of financial
position.

Inventories
Inventories consist of fuel, supplies and spare parts to be consumed in exploration activities and are stated at the
lower of weighted average cost and net realizable value.

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Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

2. BASIS OF PREPARATION (Continued)

Contingencies

In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that
may result in such proceedings, the Company and its legal counsel evaluate the perceived merits of any legal
proceedings or unasserted claims of the amount of relief sought or expected to be sought.

If the assessment of a contingency suggests that a loss is probable, the amount can be reliably estimated, and there is
a present obligation as a result of a past event, then a loss is recorded. The details of a contingent loss are disclosed
unless the possibility of any outflow in settlement is remote. Legal fees incurred with pending legal proceeding are
expensed as incurred.

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the agreement at
the inception date.

Finance leases
Finance leases which transfer substantially all the risks and rewards incidental to ownership of the leased item to
the Company as a lessee, are capitalized at the inception of the lease at the fair value of the leased asset, or, if
lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance
charges and the reduction of the lease liability. Finance charges are recognized in finance cost in the consolidated
statements of earnings. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the
asset and the lease term, if there is no reasonable certainty that the Company will obtain ownership by the end of the
term of the lease.

Operating leases
Leases that do not transfer substantially all the risks and rewards incidental to ownership to the Company as a lessee
are classified as operating leases. Operating lease payments are recognized as an expense in the consolidated
statements of earnings on a straight-line basis over the lease term.

Accounting estimates and management judgments
The preparation of consolidated financial statements in accordance with IFRS requires management to make
judgments, estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and
expenses during the reported period. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and in any future periods affected.

The significant areas of estimation and uncertainties considered by management in preparing the consolidated
financial statements include:

Critical judgement in applying accounting policies:
 Determination of functional currency

Based on the primary indicators in IAS 21 – The Effects of Change in Foreign Exchange Rates – Russian
rouble has been determined as the functional currency of ZAO Prognoz, operating subsidiary of Silver Bear,
because Russian rouble is the currency that mainly influences labour, material and other costs of providing
goods or services, and is the currency in which these costs are denominated and settled.

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Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

2. BASIS OF PREPARATION (Continued)

Significant management judgment was exercised, since the second primary indicator related to the currency
influencing the sales price is not applicable, as ZAO Prognoz that does not yet generate any revenue.
Effects of changes in foreign exchange rates at the consolidation of financial statements are recorded in the
other comprehensive income and carried in the form of cumulative translation adjustment in the
accumulated other comprehensive income section of the Statement of financial position of the Company.
If the functional currency of the Russian entity had been Canadian dollar, the effect of changes in foreign
exchange rates would have been reflected in net income as foreign exchange gain (loss) on the Statement of
comprehensive loss.

 Assets’ carrying values and impairment charges

In the determination of carrying values and impairment charges, management looks at the higher of
recoverable amount or fair value less costs to sell in the case of assets and at objective evidence, significant
or prolonged decline of fair value on financial assets indicating impairment. These determinations and their
individual assumptions require that management make a decision based on the best available information at
each reporting period.



Impairment of mineral properties
While assessing whether any indications of impairment exist for mineral properties, consideration is given
to both external and internal sources of information. Information the Company considers includes changes
in the market, economic and legal environment in which the Company operates that are not within its
control that could affect the recoverable amount of mineral properties. Internal sources of information
include the manner in which mineral properties are being used or are expected to be used and indications of
expected economic performance of the assets. Estimates include but are not limited to estimates of the
discounted future after-tax cash flows expected to be derived from the Company’s mineral properties, costs
to sell the properties and the appropriate discount rate. Reductions in metal price forecasts reductions in the
amount of recoverable mineral reserves and mineral resources and/or adverse current economics can result
in a write-down of the carrying amounts of the Company’s mineral properties.

 Contingencies

Refer to Note 16.

Key sources of estimation uncertainty:

 Depreciation rates

All property, plant and equipment, with the exception of leasehold improvements, are depreciated on a
straight line basis over three to five years, which the Company believes is the best approximation of the
asset utility to the Company. If the estimated life had been longer by than management’s estimate, the
carrying amount of the asset would have been higher.

 Rehabilitation provisions and asset retirement obligations

Exploration activities carried by the Company give rise to obligations for environmental rehabilitation.
Significant uncertainty exists to the amount and timing of associated cash flows and regulatory
requirements. A Russian Central Bank borrowing rate is used in discounting of future cash flows as a pre-
tax discount rate.
The term of the exploration license is used as the discounting period. If the estimated pre-tax discount rate
used in the calculation had been higher than the management estimate, the carrying amount of the provision
would have been lower and interest expense higher.

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Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

2. BASIS OF PREPARATION (Continued)

If the estimated period over which the cash flows associated with the asset retirement obligations are calculated had
been longer that the management estimates, the carrying amount of the provision would have been lower as would
be interest expense.

 Share-based payment transactions

The Company records share-based compensation at fair value over the vesting period. The fair value of the
grant is determined using the Black-Scholes options pricing model and management assumptions regarding
dividend yield, expected volatility, forfeiture rate, risk free rate and expected life. Should the underlying
assumptions change, it will impact the fair value of the share-based compensation.

New accounting standards

The Company has adopted the following new and revised accounting standards, along with any consequential
amendments, effective January 1, 2013. These changes were made in accordance with the applicable transitional
provisions. Updates that are not applicable or are not consequential to the Company have been excluded thereof.

IAS 1 – Financial Statements Presentation (“IAS 1”).

On 16 June 2011 the IASB issued amendments to IAS 1Financial Statement Presentation. These amendments
improve presentation of components of other comprehensive income require entities to separate items presented in
other comprehensive income (“OCI”) into two groups, based on whether or not items may be recycled in the future.

Entities that choose to present OCI items before tax will be required to show the amount of tax related to the two
groups separately. The amendment is effective for annual periods beginning on or after July 1, 2012. There is no
significant impact of the amendments to IAS 1 on the Company’s financial statements.

IFRS 10 – Consolidated Financial Statements (“IFRS 10”)

IFRS 10 (issued in May 2011) provides a single consolidation model that identifies control as the basis for
consolidation for all types of entities and establishes principles for the preparation and presentation of consolidated
financial statements when an entity controls one or more entities. IFRS 10 replaces IAS 27 Consolidated and
Separate Financial Statements and SIC-12 Consolidation—Special Purpose Entities. The Company adopted IFRS
10 in its financial statements for the annual period beginning January 1, 2013 and determined that there were no
changes to the consolidated status of any of its subsidiaries.

The Company’s subsidiary is 100% owned and the Company is in compliance with IFRS 10. There is no change to
the presentation of the Company’s financial statement as a result of adoption IFRS 10.

IFRS 12 – Disclosure of Interest in Other Entities (“IFRS 12”)

IFRS 12 (issued in May 2011) sets the disclosure requirements for an entity’s interest in subsidiaries, joint
arrangements, special purpose and off balance sheet vehicles. IFRS 12 is effective for annual periods beginning on
or after January 1, 2013. Adoption of IFRS 12 has no impact on the Company’s financial statements.

IFRS 13 – Fair Value Measurement (“IFRS 13”)
IFRS 13 converges IFRS and US GAAP on how to measure fair value and the related fair value disclosures. The
new standard creates a single source of guidance for fair value measurements, where fair value is required or
permitted under IFRS, by not changing how fair value is used but how it is measured. IFRS 13 is effective for
annual periods beginning on or after January 1, 2013. There is no impact of the standard on the Company’s financial
statements.
The following new accounting standards and amendments to existing standards and interpretations that have been
issued by the IASB are not yet applied by the Company when preparing these consolidated financial statements.

Page | 15

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

2. BASIS OF PREPARATION (Continued)

IFRS 9 – Financial Instruments (“IFRS 9”)

IFRS 9 was issued in November 2009 and contained requirements for financial assets. This standard addresses
classification and measurement of financial assets and replaces the multiple category and measurement models in
IAS 39 for debt instruments with a new mixed measurement model having only two categories: amortized cost and
fair value through profit or loss. IFRS 9 also replaces the models for measuring equity instruments, and such
instruments are either recognized at fair value through profit or loss or at fair value through other comprehensive
income. Where such equity instruments are measured at fair value through other comprehensive income, dividends
are recognized in profit or loss to the extent not clearly representing a return of investment; however, other gains
and losses (including impairments) associated with such instruments remain in accumulated comprehensive income
indefinitely.

Requirements for financial liabilities were added in October 2010 and they largely carried forward existing
requirements in IAS 39, Financial Instruments – Recognition and Measurement, except that fair value changes due
to credit risk for liabilities designated at fair value through profit and loss would generally be recorded in other
comprehensive income. The effective date of the standard has been deferred by the IASB. The Company has not yet
assessed the impact of the standard or determined whether it will adopt the standard early.

3. CAPITAL MANAGEMENT AND FINANCIAL RISK FACTORS

The Company manages its capital structure and makes adjustments to it, based on the funds available to the
Company, in order to support the acquisition and exploration of precious metal properties.

The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on
the expertise of management to sustain future development of the business.

The property in which the Company currently has an interest is in the exploration stage; as such the Company is
dependent on external financing to fund ongoing activities.

In order to carry out the planned exploration and pay for administrative costs, the Company will spend existing
working capital and plan to raise additional amounts as needed. The Company will continue to assess new
properties and seek to acquire an interest in additional properties where sufficient geologic or economic potential
are noted and if financial resources exist to do so. Management reviews its capital management approach on an
ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

There were no changes in the Company’s approach to capital management during the year ended December 31,
2013 compared to the year ended December 31, 2012. Neither the Company nor its subsidiaries are subject to
externally imposed capital requirements.

FINANCIAL RISK FACTORS

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

Credit risk
The Company has no significant concentration of credit risk arising from operations. Cash equivalents consist of
interest earning bank accounts, which are invested with Canadian chartered banks and a major Russian bank with
credit rating from AA for Canadian banks and BB for Russian bank and a stable future outlook.
Miscellaneous receivables and prepaid expenses other than taxes due from the Federal Government of Canada and
Russian Value Added Tax refunds from the Russian tax authorities are insignificant. Management believes that the
credit risk concentration with respect to accounts receivable is low.

Page | 16

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

3. CAPITAL MANAGEMENT AND FINANCIAL RISK FACTORS (Continued)

Liquidity risk
The Company’s approach to managing liquidity risk is to ensure it will have sufficient liquidity to meet liabilities
when due. As at December 31, 2013, the Company had a cash balance of $276,909 (December 31, 2012 –
$141,669). The Company had total obligations of $354,368 at December 31, 2013 (December 31, 2012 – $464,394)
under a three-year finance lease of exploration equipment.

At December 31, 2013 the Company had total current assets of $1,880,972 (December 31, 2012 - $2,364,441) to
settle current liabilities of $1,837,915 (December 31, 2012 – $1,566,007), as well as its commitments outlined in
Note 16.

Interest rate risk

The Company has cash balances interest-bearing debt. The Company’s current policy is to invest excess cash in
interest-earning bank accounts with Canadian and Russian financial institutions. The Company periodically
monitors the investments it makes and is satisfied with the credit ratings of its banks.

Foreign currency risk

The Company has funded certain exploration and administrative expenses on a transaction by transaction basis
using U.S. dollar and Russian rouble currency converted from its Canadian dollar bank accounts held in Canada.
Management believes the foreign exchange risk derived from currency conversions is low and therefore does not
hedge its foreign exchange risk.

Sensitivity analysis

The carrying amount of accounts receivable equals fair market value. The effect of changes in foreign exchange
rates on net loss is deemed to insignificant as number and amount of foreign-currency transactions are relatively
small. Had the foreign exchange rates been higher (lower) by 5%, the cumulative translation adjustment in the other
comprehensive income section of the Statement of financial position would have been lower (higher) by $186,161.

4. RECEIVABLE

5. INVENTORIES

Material and supplies inventories are stated at the lower of weighted average costs and net realizable value.
Inventories consist of the following:

Page | 17

December 31, 2013 December 31, 2012 Russian Value Added Tax $ 143,821 $ 121,370 Canadian Harmonized Sales Tax 46,463 $ 50,754 Other 219,620 182,553 409,905$ 354,677$ December 31, 2013 December 31, 2012 Fuel and lubricants259,937$ 588,486$ Parts and supplies873,619 1,193,428 1,133,556$ 1,781,914$

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

6. PREPAID EXPENSES

Prepaid expenses consist of the following:

7. MINERAL PROPERTY

Mineral property includes the cost of acquiring exploration and mining licenses, as well as value of asset associated
with asset retirement obligations.

Mineral property consists of the following:

The change in value of the asset is due to additional cost incurred in the process of obtaining mining license, and
foreign exchange difference on translation of the asset.
The Company acquired the exploration licence in respect of the Mangazeisky property when it acquired all the
shares of ZAO Prognoz on October 21, 2004. On December 27, 2012, the Mangazeisky License was extended by
the Federal Subsoil Use Agency in the Russian Federation (“Rosnedra”) through December 31, 2016.
In September 2013, the Company acquired the mining license in respect of the Mangazeisky property that is valid
for a period of 20 years.
The cumulative exploration costs incurred and expensed from inception to date are as follows:

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost, less accumulated depreciation and consist of the following:

Page | 18

December 31, 2013 December 31, 2012 Insurance $ 16,207 $ 25,880 Exploration services and goods 31,104 3,109 Consulting services - 52,500 Employee advances - 345 Rent and administrative costs 13,291 4,347 60,602$ 86,181$ Mangazeisky December 31, 2013 December 31, 2012 Balance at the beginning of the period $ 1,791,068 $ 1,212,964 Additions 739,842 545,940 Translation adjustment (11,509) 32,164 Balance at the end of the period2,519,401$ 1,791,068$ December 31, 2013 December 31, 2012 Mangazeisky $ 53,920,703 $ 50,677,700 CostAccumulated depreciationNet book valueCostAccumulated depreciationNet book valueProperty plant and equipment: Mangazeisky site $ 5,667,799 $ 3,897,515 $ 1,770,284 $ 5,728,711 $ 3,662,897 $ 2,065,814 Yakutsk office 123,988 123,988 - 124,869 124,869 - Other office furniture, equipment and leasehold improvements 59,620 59,620 - 59,620 59,620 - $ 5,851,407 $ 4,081,123 $ 1,770,284 $ 5,913,200 $ 3,847,386 $ 2,065,814 December 31, 2013December 31, 2012

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

8. PROPERTY, PLANT AND EQUIPMENT (Continued)

Reconciliation of the carrying amount at the beginning and end of the years ended December 31, 2013 and 2012:

The carrying value of equipment held under finance leases as at December 31, 2013 was $662,023 (December 31,
2012 - $866,748). There were no addtions or disposals of capital assets during the year ended December 31, 2013.
Leased assets are pledged as security for the related finance lease obligations.

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following:

10. SHORT-TERM LOANS

On January 30, 2013, amended March 12, 2013, the Company entered into a loan agreement with Forbes &
Manhattan Inc. Forbes & Manhattan Inc. agreed to provide an unsecured bridge loan in the amount of $350,000 in
three tranches originally repayable in cash on the earlier of (a) July 30, 2013 and (b) the date on which the Company
completed an equity financing. Mr. Stan Bharti, the Executive Chairman of Forbes & Manhattan Inc., is a director
of the Company. Interest was calculated at rate of 8% per annum and was payable on maturity of the loan. On June
28, 2013 Forbes & Manhattan Inc. advanced the Company $25,000 and a further $150,000 in July 2013. The loan
and all accrued interest were repaid on December 18, 2013.

On September 18, 2013 the Company entered into another loan agreement with Forbes & Manhattan Inc. Forbes &
Manhattan Inc. agreed to provide an unsecured loan in the amount of $500,000 due on December 9, 2013. Interest
was calculated at rate of 20% per annum and was payable on maturity of the loan. The loan was repaid on
December 18, 2013.

On March 25, 2013, the Company entered into a loan agreement with Aberdeen International Inc. Aberdeen
International Inc. agreed to provide an unsecured loan in the amount of $400,000 repayable on the earlier of (a)
October 2, 2013 and (b) the date on which the Company completed an equity financing. Interest was calculated at a
rate of 30% per annum and was prepaid at the time the loan was advanced. Mr. Bharti, a director of the Company, is
the Chairman of the Board of Aberdeen International Inc. The first tranche of $50,000 was received on March 25,
2013, the second tranche of $350,000 was received on April 4, 2013. The loan was partially repaid on June 4, 2013,
with the balance of $31,000 repaid on December 18, 2013.

Page | 19

Mangazeisky site equipment Yakutsk equipment Office equipment TotalCarrying amount at January 1, 2012622,930$ 3,142$ 9,936$ 636,008$ Additions1,687,304 - - 1,687,304 Disposals- - - - Depreciation(217,240) (3,193) (9,936) (230,369) Exchange differences(27,180) 51 - (27,129) Carrying amount at December 31, 2012 $ 2,065,814 -$ -$ 2,065,814$ Additions- - - - Disposals- - - - Depreciation(282,448) - - (282,448) Exchange differences(13,082) - (13,082) Carrying amount at December 31, 2013 $ 1,770,284 -$ -$ 1,770,284$ December 31, 2013 December 31, 2012 Exploration costs - Mangazeisky project $ 271,736 $ 432,170 Corporate - accounts payable and accrued liabilities $ 1,262,496 862,625 1,534,232$ 1,294,795$

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

10. SHORT-TERM LOANS (Continued)

On April 24, 2013, the Company entered into a loan agreement with Aterra Investments Ltd. Aterra Investments
Ltd. agreed to provide an unsecured loan in the amount of $400,000. Interest was calculated at a rate of 30% per
annum and was prepaid at the time the loan was advanced. The loan was repaid on December 18, 2013.

On August 7, 2013, the Company entered into a loan agreement with Aterra Investments Ltd., who agreed to
provide an unsecured loan in the amount of $30,000 repayable on or before February 7, 2014. Interest on the loan
was calculated at a rate of 20% per annum and was payable on maturity of the loan. The loan was repaid on
December 18, 2013.

On September 18, 2013 the Company entered into a loan agreement with Aterra Investments Ltd. Aterra
Investments Ltd. agreed to provide an unsecured loan in the amount of $500,000 due on December 9, 2013. Interest
was calculated at rate of 20% per annum and was payable on maturity of the loan. The loan was repaid on
December 18, 2013.

On October 8, 2013, the Company entered into a loan agreement with Aterra Investments Ltd. Aterra Investments
Ltd. agreed to provide an unsecured loan in the amount of $200,000 repayable on or before February 7, 2014.
Interest was calculated at rate of 20% per annum and was payable on maturity of the loan. The loan was repaid on
October 21, 2013.

On December 12, 2013, the Company entered into a loan agreement with Aterra Investments Ltd. Aterra
Investments Ltd. agreed to provide an unsecured loan in the amount of $150,000. Interest was calculated at rate of
20% per annum and was payable on maturity of the loan. The loan was repaid on December 18, 2013.

Mr. Boris Granovsky, a director of the Company, is a managing partner of Aterra Capital, a management company
for Aterra Investments Ltd.

11. FINANCE LEASE

The Company entered into a long-term lease agreement with Caterpillar Financial Ltd. for the purchase of certain
exploration equipment payable in monthly installments over a three-year period. The lease payments were
discounted at a rate of 11.5%. The Company made a down-payment for the 50% of the cost of equipment.

Future minimum lease payments under finance lease, together with the present value of the net minimum lease
payments, are as follows:

12. SHAREHOLDERS’ EQUITY

Common shares

Authorized: Unlimited number of common shares and preferred shares issued with no par value.

Page | 20

Payments due by period December 31, 2013 December 31, 2012 Within one year314,344$ 235,232$ With two to five years62,869 294,040 377,213 529,272 Future finance charges on finance lease(22,845) (64,878) Present value of the net lease payments354,368 464,394 Current portion303,683 221,212 Long-term portion50,685 243,182 Total obligations under finance lease354,368$ 464,394$

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

12. SHAREHOLDERS’ EQUITY (Continued)

All issued shares are fully paid. Reconciliation of the number and value of common shares at the beginning and end
of the year ended December 31, 2013 and 2012:

On June 4, 2013 the Company closed a private placement financing through the sale of 7,044,998 units (the "Units")
at a price of $0.18 per Unit for gross proceeds of $1,268,100. Each Unit consists of one common share of the
Company (a "Common Share") and one-half of one common share purchase warrant (each whole warrant, a
"Warrant"). Each Warrant will entitle the holder thereof to acquire a Common Share at the exercise price of $0.33
per share until June 4, 2016. The Common Shares, the Warrants, and the shares issuable upon the exercise of the
Warrants, were subject to statutory resale restrictions for a period until October 5, 2013. The Company used the
gross proceeds of the Offering to finance its exploration program and Feasibility Study for the Mangazeisky Silver
Project, to repay debt and supplement general working capital.
On June 25, 2013 the Company issued 1,238,644 common shares of the Company at a deemed price of $0.187 per
common share to settle outstanding debt in relation to past services provided by Landdrill International Inc.
On October 17, 2013, the Company closed the first tranche of a private placement financing through the sale of
3,892,308 units at a price of $0.13 per Unit for gross proceeds of approximately $506,000. Each unit consists of one
common share of the Company and one common share purchase warrant. Each warrant entitles the holder thereof to
acquire a common share of the Company at the exercise price of $0.245 per share until October 17, 2015.
On October 21, 2013, the Company closed a further tranche of its previously announced private placement
financing through the sale of 3,846,153 units to Aterra Investments Limited at a price of $0.13 per unit for gross
proceeds of approximately $500,000. Each unit consists of one common share of the Company and one common
share purchase warrant. Each warrant entitles the holder thereof to acquire a common share of the Company at the
exercise price of $0.245 per share until October 21, 2015.
On December 18, 2013, the Company closed a final tranche of its previously announced private placement
financing through the sale of 24,478,760 units at a price of $0.13 per unit for gross proceeds of approximately
$3,182,239. Each unit consists of one common share of the Company and one common share purchase warrant.
Each warrant entitles the holder thereof to acquire a common share of the Company at the exercise price of $0.245
per share until December 18, 2015.
See Note 21 for the events after the reporting period.

Share Bonus Plan

In June 2013, the shareholders of the Company approved a share bonus plan whereby an aggregate of up to 2.5
million common shares of the Company have been reserved for issuance to officers, directors and employees of the
Company.
On August 22, 2013 the board approved the issuance of up to 1,100,000 common shares pursuant to the share bonus
plan, subject to the terms of the share bonus plan and final approval by the President prior to issuance on or about
the following dates:

Page | 21

Number of common shares$Number of common shares$Balance - Beginning of year53,866,307 83,580,384 44,203,902 78,730,574 Issued pursuant to private placement, net40,775,863 3,962,018 9,662,405 4,849,810 Balance - End of year94,642,170 87,542,402 53,866,307 83,580,384 December 31, 2013December 31, 2012October 1, 2013-275,000 common sharesJanuary 1, 2014-275,000 common sharesApril 1, 2014-275,000 common sharesJuly 1, 2014-275,000 common shares

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

12. SHAREHOLDERS’ EQUITY (Continued)

On October 1, 2013, 275,000 common shares under the share bonus plan were issued to certain officers, directors
and consultants of the Company valued at $0.125 per share.

Subsequent to December 31, 2013, 275,000 common shares under the share bonus plan were issued to certain
officers, directors and consultants of the Company valued at $0.08 per share.

See Note 21 for the events after reporting period.

Stock Options

The Company has a stock option plan which is intended to provide an incentive to officers, employees, directors
and consultants of the Company. Stock options are granted from time to time and the option price is determined by
the Compensation Committee of the Board of Directors at its sole discretion but shall not be less than the closing
price of the Company’s common stock on the Toronto Stock Exchange on the last trading date preceding the date of
the grant. The term of each option is granted for a period not exceeding five years from the date of the grant. Except
as expressly provided for in the option holder’s employment, consulting or termination contract, the option holder
may exercise the option to the extent exercisable on the date of such termination at any time within twelve months
after the date of termination.
The maximum aggregate number of Shares reserved by the Company for issuance and which may be purchased
upon the exercise of all Options granted under its option plan together will all shares reserved for issuance under the
share bonus plan must not exceed 10% of the outstanding Shares (on a non-diluted basis) issued and outstanding at
the time of the granting of the Options.
As at December 31, 2013 the total number of options available for issue was 8,364,217. A total of 3,841,717 options
are available for future issue as at December 31, 2013.
During the year ended December 31, 2013 options generated a share based payments expense of $312,236 (year
ended December 31, 2012: $998,421). The fair value of options is estimated on the date of grant using the Black-
Scholes option pricing model. Where relevant, the expected life used in the model has been adjusted based on
management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of
meeting market conditions attached to the option. Expected volatility is based on the historical share price volatility
over the past 5 years. The expected life of the option was calculated based on the history of option exercises.
On April 9, 2013 350,000 options were granted to a director and executive officer of the Company at an exercise
price of $0.24. Options vest in three equal installments: 1/3 on the day of the grant, 1/3 on the first and second
anniversary of the grant. The fair value of these options was estimated to be $57,172 with the following
assumptions: expected volatility of 107%, dividend yield of 0%, risk-free interest rate of 1.11% and expected life of
3.4 years.
On November 12, 2013, 125,000 options were granted to consultants of the Company at an exercise price of $0.10
per option. The granted stock options vested immediately on the day of the grant and expire on November 12, 2018.
The fair value of these options was estimated to be $9,580 with the following assumptions: expected volatility of
112%, dividend yield of 0%, risk-free interest rate of 1.19% and expected life of 3.5 years.
See Note 21 for events after the reporting period.
Reconciliation of the number of options at the beginning and end of the year ended December 31, 2013 and 2012
follows:

Page | 22

Weighted averageWeighted averageexercise price, $exercise price, $Balance - Beginning of the year4,844,167 0.69 4,036,667 0.73 Granted475,000 0.20 932,500 0.55 Expired / Cancelled / Forfeited (796,667) 0.39 (125,000) 1.07 Balance - End of the year4,522,500 0.68 4,844,167 0.69 December 31, 2013December 31, 2012NumberNumber

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

12. SHAREHOLDERS’ EQUITY (Continued)

As at December 31, 2013, the Company had share options outstanding and exercisable as follows:

Contributed surplus consists of the following:

Share purchase warrant transactions are summarized as follows:

At December 31, 2013, the following warrants were outstanding:

The fair value of warrants is estimated on the date of grant using the Black-Scholes pricing model with the
following assumptions: risk free rate of return 1.11%-1.20%, volatility of 116%-133% and expected life of 2-3
years.

Loss per share

Basic and diluted loss per share is calculated by dividing the net loss by the weighted average number of shares in
issue during the year. As a result of net losses in each of the periods, the potential effect of exercising stock options
and warrants has not been included in the calculation of loss per share because to do so would be anti-dilutive.

Page | 23

Weighted averageWeighted averageexercise price, $exercise price, $20151,070,000 0.59 1,070,000 0.59 20162,055,000 0.91 1,491,665 0.91 2017922,500 0.55 786,667 0.54 2018475,000 0.20 241,667 0.17 4,522,500 0.68 3,589,999 0.68 OutstandingExercisableExpiry yearNumberNumber December 31, 2013 December 31, 2012 Balance-Beginning of period $ 11,473,112 $ 10,081,156 Share-based payments 312,236 998,421 Warrants 1,713,702 393,535 Balance- End of period $ 13,499,050 $ 11,473,112 Weighted averageWeighted averageexercise price,exercise price$$Balance - Beginning of the year2,643,703 0.58 - - Granted35,739,719 0.25 2,643,703 0.58 Balance - End of the year38,383,422 0.26 2,643,703 0.58 December 31, 2013December 31, 2012Number of share purchase warrantsNumber of share purchase warrantsExpiryExercise price, $Number of warrantsGrant date fair value recorded, $June 7, 20150.58 1,753,703 264,254 July 16, 20150.58 890,000 129,281 June 4, 20160.33 3,522,498 296,789 October 17, 20150.245 3,892,308 168,667 October 21, 20150.245 3,846,153 187,500 December 18, 20150.245 24,478,760 1,060,746 38,383,422 2,107,237 December 31, 2013 December 31, 2012 Net loss(6,178,783) (9,386,392) Weighted average number of common shares outstanding61,161,041 50,487,994 Basic and dilutes loss per share(0.10)$ (0.19)$

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

13. RELATED PARTY DISCLOSURES

The Company shares office space with companies that have officers or directors in common with the Company. The
costs associated with this space and certain other services are administered by 2227929 Ontario Inc.
In addition, effective May 11, 2011, an administration fee of $25,000 per month is charged by Forbes & Manhattan
Inc. pursuant to a consulting agreement entered into between the companies. Mr. Stan Bharti, a director of the
Company, is the Executive Chairman of Forbes & Manhattan Inc.

On January 30, 2013, amended March 12, 2013, the Company entered into a loan agreement with Forbes &
Manhattan Inc. Forbes & Manhattan Inc. agreed to provide an unsecured bridge loan in the amount of $350,000 in
three tranches repayable in cash on the earlier of (a) July 30, 2013 and (b) the date on which the Company
completes an equity financing. Mr. Stan Bharti, the Executive Chairman of Forbes & Manhattan Inc., is a director of
the Company. Interest was calculated at rate of 8% per annum and was payable on maturity of the loan. On June 28,
2013 Forbes & Manhattan Inc. advanced the Company $25,000 and another $150,000 in July 2013.The loan was
repaid on December 18, 2013.

On March 25, 2013, the Company entered into a loan agreement with Aberdeen International Inc. Aberdeen
International Inc. agreed to provide an unsecured loan in the amount of $400,000 repayable on the earlier of (a)
October 2, 2013 and (b) the date on which the Company completes an equity financing. Interest was calculated at a
rate of 30% per annum and was prepaid at the time the loan was advanced. Mr. Bharti, a director of the Company, is
the Chairman of the Board of Aberdeen International Inc. The first tranche of $50,000 was received on March 25,
2013, the second tranche of $350,000 was received on April 4, 2013. The loan was partially repaid on June 4, 2013,
with a balance of $31,000 repaid on December 18, 2013.

On September 18, 2013 the Company entered into another loan agreement with Aterra Investments Ltd. Aterra
Investments Ltd. agreed to provide an unsecured loan in the amount of $500,000 due on December 9, 2013. Interest
was calculated at rate of 20% per annum and was payable on maturity of the loan. The loan was repaid on
December 18, 2013.

On October 8, 2013, the Company entered into another loan agreement with Aterra Investments Ltd. Aterra
Investments Ltd. agreed to provide an unsecured loan in the amount of $200,000 repayable on or before February 7,
2014. Interest was calculated at rate of 20% per annum and was payable on maturity of the loan. The loan was
repaid on October 21, 2013.

On December 12, 2013, the Company entered into another loan agreement with Aterra Investments Ltd. Aterra
Investments Ltd. agreed to provide an unsecured loan in the amount of $150,000. Interest was calculated at rate of
20% per annum and was payable on maturity of the loan. The loan was repaid on December 18, 2013.

Mr. Boris Granovsky, a director of the Company, is a managing partner of Aterra Capital, a management company
for Aterra Investments Ltd.

Page | 24

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

13. RELATED PARTY DISCLOSURES (Continued)

The Company entered into an agreement with Aterra Investments Ltd. (formerly Tabac Ventures Limited)
(“Aterra”) whereby Aterra provided certain consulting services related to government relations in Russia.
The services included guidance with respect to exploration and mining license processes, as well as
guidance with respect to correspondence, government submittals, approvals and permits.

During the years ended December 31, 2013 and 2012 the Company entered into transactions for goods and services
with the following related parties:

The following balances related to goods and services were outstanding at the end of the reporting period:

These amounts are unsecured, non-interest bearing with no fixed terms of repayment. The related party transactions
are in the normal course of operations and are measured at the exchange amount, which is the amount of
consideration established and agreed to by the related parties.
See Note 21 for events after the reporting period.

Compensation of key management

Key management includes the Company’s directors and officers. Compensation awarded to key management
included:

14. EXPENSES BY NATURE

The following table provides the breakdown of Company’s expenses by nature.

Page | 25

Goods and services received from (provided to):December 31, 2013December 31, 20122227929 Ontario Inc.218,004 292,635 Forbes & Manhattan Inc.300,000 300,000 Aterra Investments Ltd.52,500 157,500 570,504$ 750,135$ Goods and services receivedOutstanding balancesDecember 31, 2013December 31, 20122227929 Ontario Inc.247,835 19,760 Forbes & Manhattan Inc.- 226,000 Aterra Investments Ltd.- 210,000 Other entities of F&M Group10,700 - 258,535$ 455,760$ Amounts owed to related parties2013 2012 Salaries, fees and short-term employee benefits1,209,597$ 789,800$ Share-based payments277,403 607,442 1,487,000$ 1,397,242$ 2013 2012 Employee compensation2,733,159$ 3,631,390$ Drilling and trenching637,843 2,000,444 Depreciation281,057 232,640 Professional fees323,063 711,389 Geological & environmental studies188,349 342,799 Transportation89,905 750,208 Camp maintenance589,836 479,318 Taxes13,676 56,877 Office expenses326,343 384,871 Travel expenses293,843 410,485 Accretion expense105,764 - Interest expense269,324 52,031 Foreign exchange50,766 6,461 Other expenses276,296 338,607 6,179,223$ 9,397,520$

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

14. EXPENSES BY NATURE (Continued)

Certain comparative figures have been reclassified to conform to the current period’s presentation.

Employee benefits expense for the years ended December 31, 2013 and 2012 consisted of the following:

15. NET CHANGE IN NON-CASH WORKING CAPITAL

Net change in non-cash working capital consists of the following:

16. COMMITMENTS AND CONTINGENCIES

In order to maintain the exploration license at the Mangazeisky Project in good standing, Silver Bear is required to
conduct certain minimum levels of exploration activity. The Company is required to undertake 5,000 cubic metres
of trenching and 3,000 metres of drilling to satisfy license agreement requirements in 2013.
Minimum requirements under the exploration license for 2014 are the same as for 2013, namely 3,000 metres of
drilling and 5,000 cubic metres of trenching that will require funds of approximately $4.5 million.
The Company has completed a required Russian Feasibility Study (“RFS”) and submitted it along with a Russian
reserve estimate to the Russian government.
The Company entered into a long-term lease agreement with Caterpillar Financial Ltd. for the purchase of certain
exploration equipment payable in monthly installments of US$19,703 over a three-year period.
The Company is party to certain management contracts and severance obligations. These contracts contain clauses
requiring additional payments of up to $1,073,200 be made upon the occurrence of certain events such as a change
of control. As the likelihood of these events taking place is not determinable, the contingent payments have not been
reflected in these consolidated financial statements. Additional minimum management contractual commitments
remaining under the agreements are approximately $582,998, all due within one year.
The Company may be involved in legal proceedings from time to time, arising in the ordinary course of its business.
The amount of ultimate liability with respect to these actions will not, in the opinion of management, materially
affect Silver Bear’s financial position, results of operations or cash flows. There were no material outstanding legal
proceedings as of December 31, 2013.

17. SEGMENTED INFORMATION

The Company’s operating segments include one property in the Russian Federation (Mangazeisky) and a corporate
office in Toronto, Canada.

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2013 2012 Salaries, fees and short-term employee benefits2,420,923$ 2,632,969$ Share-based payments312,236 998,421 2,733,159$ 3,631,390$ 2013 2012 Receivable(57,424)$ 377,943$ Inventories634,937 (1,185,085) Prepaid expenses25,602 127,344 Accounts payable and accrued liabilities200,597 671,923 803,712$ (7,875)$ Country / PropertyCash and cash equivalentsInventories Prepaid expensesReceivablesMineral PropertiesProperty, plant and equipment DepreciationInterest expense Net Loss for the periodRussia - Mangazeisky11,015$ 1,781,914$ 6,035$ 303,923$ 1,791,068$ 2,065,814$ 220,433$ 52,016$ 5,551,091$ Canada - corporate130,654 - 80,146 50,754 - - 9,936 636 3,835,301 141,669$ 1,781,914$ 86,181$ 354,677$ 1,791,068$ 2,065,814$ 230,369$ 52,652$ 9,386,392$ As at December 31, 2012

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

17. SEGMENTED INFORMATION (Continued)

18. PROVISION FOR DECOMMISSIONING AND RESTORATION LIABILITY

The Company’s mining and exploration activities are subject to various governmental laws and regulations relating
to the protection of the environment. These environmental regulations are continually changing and are generally
becoming more restrictive. The Company has made, and intends to make in the future, expenditures to comply with
such laws and regulations. The Company has recorded a liability and corresponding asset for the estimated future
cost of reclamation and closure, including site rehabilitation and long-term treatment and monitoring costs,
discounted to net present value. Such estimates are, however, subject to change based on negotiations with
regulatory authorities, or changes in laws and regulations.

The Company’s provision for decommissioning and restoration liability consist of management’s best estimate of
reclamation and closure costs for Mangazeisky exploration project located in the Republic of Sakha, Yakutia in the
Russian Federation.

Significant reclamation and closure activities include land rehabilitation, demolition of buildings and site facilities
and other costs defined by the license requirements.

Asset retirement obligation consists of the following:

The estimated value of the obligation to rehabilitate the site expressed in Canadian dollars is $1,570,014. A Russian
Central bank borrowing rate of 8.25% has been used in discounting of future cash flows.

19. FINANCIAL INSTRUMENTS

Financial assets and financial liabilities as at December 31, 2013 and 2012 were as follows:

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Country / PropertyCash and cash equivalentsInventories Prepaid expensesReceivablesMineral PropertiesProperty, plant and equipment DepreciationInterest expense Net Loss for the periodRussia - Mangazeisky47,021$ 1,133,556$ 11,847$ 264,405$ 2,519,401$ 1,770,284$ 282,448$ 44,973$ 3,195,290$ Canada - corporate229,888 - 48,755 145,500 - - - 224,480 2,983,493 276,909$ 1,133,556$ 60,602$ 409,905$ 2,519,401$ 1,770,284$ 282,448$ 269,453$ 6,178,783$ As at December 31, 2013 December 31, 2013 December 31, 2012 Balance at the beginning of the year1,143,383$ 579,478$ Increase in liability- 545,940 Accretion expense105,873 - Translation adjustment(8,033) 17,965 Balance at the end of the year1,241,223$ 1,143,383$ At December 31, 2012Loans and receivablesAssets/liabilities at fair value through profit and lossOther liabilitiesTOTALCash and cash equivalents141,669 - - 141,669 Accounts Receivables354,677 - - 354,677 Short-term loans50,000 - - 50,000 Accounts payables and accrued liabilities- - 1,294,795 1,294,795 Finance lease464,394 464,394

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

19. FINANCIAL INSTRUMENTS (Continued)

The carrying value of cash equivalents, amounts receivable, and accounts payable and accrued liabilities reflected in
the consolidated statement of financial position approximate fair value because of the relatively short-term
maturities.

20. INCOME TAXES

Reconciliation between tax expense and the product of accounting loss multiplied by the Company's domestic tax
rate is as follows:

The 2013 statutory tax rate of 26.50% consistent with the 2012 statutory tax rate of 26.50%.

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off the current
tax assets and current tax liabilities or deferred tax assets and liabilities and they relate to taxes levied by the same
tax authority.

The tax benefit of the following unused tax losses and deductible temporary differences has not been recognized in
the financial statements due to the unpredictability of future earnings:

At December 31, 2013, the Company has the unclaimed non-capital losses that expire as follows:

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At December 31, 2013Loans and receivablesAssets/liabilities at fair value through profit and lossOther liabilitiesTOTALCash and cash equivalents276,909 - - 276,909 Accounts Receivables409,905 - - 409,905 Short-term loans- - - - Accounts payables and accrued liabilities- - 1,534,232 1,534,232 Finance lease354,368 354,368 20132012Statutory tax rate26.50%26.50%Tax benefit of statutory rate(1,637,378)$ (2,487,394)$ Expenses not deductible for income tax purposes223,387 418,212 Tax effect of unrecognized temporary difference1,180,650 1,727,044 Foreign tax rate differential233,341 342,138 Total tax expense-$ -$ Deductible Temporary Differences December 31,2013December 31,2012Tax loss carry-forwards24,736,283$ 22,342,145$ Exploration and Development42,336,637 39,456,005 Share issue costs105,786 95,101 Asset Retirement Obligation1,241,223 1,143,383 Property plant and equipment5,956,313 5,895,806 74,376,242$ 68,932,440$ Expiry DateAmount201477,604$ 20152,260,735 20262,104,195 20272,934,330 20283,240,724 20293,527,150 20302,401,498 20313,109,109 20322,484,534 20332,334,425 24,474,304$

Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012

20. INCOME TAXES (Continued)

In addition, ZAO Prognoz has approximately $261,979 (2012 – $79,424) of non-capital losses for Russian income
tax purposes that expire at the end of the years 2017 through 2023 (2012 – 2017 through 2022).

21. EVENTS AFTER THE REPORTING PERIOD

On January 1, 2014, 275,000 common shares under the share bonus plan were issued to certain officers, directors
and consultants of the Company valued at $0.08 per share.

On February 21, 2014 the board approved the allocation issuance of up to further 1,375,000 common shares
pursuant to the share bonus plan, subject to the terms of the share bonus plan and final approval by the President
prior to issuance on or about the following dates:

On February 28, 2014, 2,240,000 options were granted to directors, officers and consultants of the Company. The
exercise price of the options is $0.17 per option. Granted stock options vest immediately on the day of the grant and
expire on February 28, 2019.
On March 6, 2014, the Company issued 220,630 common shares of the Company at a deemed price of $0.13 per
common share to settle outstanding debt in relation to past services provided by Exploration Services UK Limited.
On March 10, 2014, the Company entered into a loan agreement with 1039593 Ontario Ltd., who agreed to provide
an unsecured loan in the amount of $250,000 repayable on June 9, 2014. Interest on the loan is calculated at a rate
of 25% per annum and is payable monthly. 1039593 Ontario Ltd. is 100% owned by Mr. Mark Trevisiol, a
president and CEO of the Company.

On March 14, 2014, the Company entered into a loan agreement with Aterra Investments Ltd. Aterra Investments
Ltd. agreed to provide an unsecured loan in the amount of $250,000 repayable on June 13, 2014. Interest is
calculated at rate of 25% per annum and is payable monthly. Mr. Boris Granovsky, a director of the Company, is a
managing partner of Aterra Capital, a management company for Aterra Investments Ltd. Ms Anastasia Gracheva, a
director of the Company is an officer of Aterra Capital, a management company for Aterra Investments Ltd.

On March 20, 2014, the Company entered into a loan agreement with Forbes & Manhattan Inc. Forbes & Manhattan
Inc. agreed to provide an unsecured loan in the amount of $250,000 repayable on June 18, 2014. Interest is
calculated at rate of 25% per annum and is payable monthly. Mr. Stan Bharti, a director of the Company, is the
Executive Chairman of Forbes & Manhattan Inc.

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April 1, 2014-343,750 common sharesJuly 1, 2014-343,750 common sharesOctober 1, 2014-343,750 common sharesJanuary 1, 2015-343,750 common shares