Consolidated Financial Statements
(Expressed in Canadian dollars)
Silver Bear Resources Inc.
For the year ended December 31, 2014
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.
“Graham Hill”
_______________________________
Graham Hill
Director, President and
Chief Executive Officer
Toronto, Ontario, Canada
March 26, 2015
“Deborah Battiston”
_______________________________
Deborah Battiston
Chief Financial Officer
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March 26, 2015
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, 2014 and
December 31, 2013 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, 2014 and December 31, 2013 and
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
Toronto, Ontario
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Silver Bear Resources Inc.
Consolidated Statement of Financial Position
(Canadian dollars)
Approved by the Board of Directors on March 26, 2015
“Graham Hill”
_______________________________
Graham Hill
Director
“Trevor Eyton”
_______________________________
Trevor Eyton
Director
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Deceember 31, 2014December 31, 2013ASSETSCurrent assetsCash and cash equivalents 1,593,133 276,909 Receivable (note 4) 349,942 409,905 Inventories (note 5) 518,604 1,133,556 Prepaid expenses (note 6) 355,855 60,602 Total current assets 2,817,534 1,880,972 Non-current assetsMineral property (note 7) 1,607,824 2,519,401 Property, plant and equipment (note 8) 1,017,864 1,770,284 Total assets 5,443,222 6,170,657 LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities (note 9) 463,886 1,534,232 Finance lease (note 11) 146,981 303,683 Total current liabilities 610,867 1,837,915 Non-current liabilitiesAsset retirement obligation (note 18) 826,758 1,241,223 Finance lease (note 11) 139,555 50,685 Total liabilities 1,577,180 3,129,823 EQUITYEquity attributable to owners of Silver Bear Resources Inc.Share capital (note 12) 98,265,379 87,542,402 Contributed surplus (note 12) 14,009,495 13,499,050 Accumulated other comprehensive loss (1,880,025) (554,144)Deficit (106,528,807) (97,446,474)Total equity 3,866,042 3,040,834 Total liabilities and shareholders' equity 5,443,222 6,170,657 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, 2014 and 2013
(Canadian dollars)
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20142013IncomeInterest income 12,608 440 12,608 440 Expenses (Note 14)Exploration costs 4,994,803 3,243,003 General and administrative 2,451,467 1,915,563 Depreciation 254,071 282,448 Share-based payments 738,320 312,236 Accretion expense 95,566 105,873 Interest expense 133,957 269,453 Foreign exchange loss 426,757 50,647 Expenses from operations 9,094,941 6,179,223 Net loss for the year (9,082,333) (6,178,783)Other comprehensive lossItems that may be reclassified subsequently to profit or loss:Exchange differences on translating foreign operations (1,325,881) (37,090)Comprehensive loss for the year (10,408,214) (6,215,873)Weighted average number of common shares outstanding 126,128,878 61,161,041 Basic and diluted loss per share(0.07)(0.10)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, 2014 and 2013
(Canadian dollars)
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Share capitalContributed surplusAccumulated other comprehensive lossDeficitTotal equityBalance - December 31, 2012 83,580,384 11,473,112.00 (517,054) (91,267,691) 3,268,751 Net loss for the year - - - (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, 2013 87,542,402 13,499,050 (554,144) (97,446,474) 3,040,834 Balance - December 31, 2013 87,542,402 13,499,050 (554,144) (97,446,474) 3,040,834 Net loss for the year - - - (9,082,333) (9,082,333)Other comprehensive loss:Cumulative translation adjustment - - (1,325,881) - (1,325,881)Comprehensive loss for the year - - (1,325,881) (9,082,333) (10,408,214) Net proceeds from issuance shares in private placement 10,466,420 - - - 10,466,420 Shares issued for debt 28,682 - - - 28,682 Shares issued under share bonus plan 227,875 227,875 Share-based payments - 510,445 - - 510,445 Balance -December 31, 2014 98,265,379 14,009,495 (1,880,025) (106,528,807) 3,866,042 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, 2014 and 2013
(Canadian dollars)
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20142013Cash provided by (used in)Operating activitiesTotal loss for the year (9,082,333) (6,178,783)Adjustments for items not affecting cash:Depreciation 254,071 282,448 Share-based payments 738,320 312,236 Accretion expense 95,566 105,873 Interest expense (35,818) 35,818 Net change in non-cash working capital (note 15) (867,839) 803,712 Net cash used in operations (8,898,033) (4,638,696)Investing activitiesAcquisition of property, plant and equipment (146,818) (738,854)Net cash used in investing activities (146,818) (738,854)Financing activitiesNet proceeds from issuance shares in private placement 10,466,420 5,675,720 Finance lease repayment (142,075) (147,854)Short-term loans drawn 1,250,000 2,679,400 Short-term loans repaid (1,250,000) (2,729,400)Net cash generated from financing activities 10,324,345 5,477,866 Effect of exchange rate changes on cash and cash equivalents 36,730 34,924 Increase (decrease) in cash and cash equivalents during the year 1,316,224 135,240 Cash and cash equivalents - beginning of the year 276,909 141,669 Cash and cash equivalents - end of the year 1,593,133 276,909 Cash and cash equivalents consist of:Cash 1,593,133 241,909 Cash equivalents - 35,000 1,593,133 276,909 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, 2014 and 2013
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, 2014, the Company had no source of operating cash flows and reported a net loss for the year of
$9,082,333 and a deficit of $106,528,807. 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 26, 2015.
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Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
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 the functional currency of Silver Bear
Holdings. The financial statements of ZAO Prognoz have the Russian rouble as its functional currency and are
translated into the Canadian dollar presentation currency 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 the cost of assets
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 property,
plant and equipment are recorded and depreciated separately. Residual values, the 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 the 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 its 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, 2014 and 2013
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 approximates 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, being 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 Company’s financial liabilities include accounts payable, accrued liabilities and short-term loans. Initially they
are recognized at fair value, and subsequently measured at amortized cost using the effective interest method.
Amortized cost approximates 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, 2014 and 2013
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
share-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, 2014 and 2013
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 proceedings 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 judgements in applying accounting policies:
Determination of functional currency
Based on the primary indicators in IAS 21 – The Effects of Change in Foreign Exchange Rates – the
Russian rouble has been determined as the functional currency of ZAO Prognoz, an operating subsidiary of
Silver Bear, because the 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, 2014 and 2013
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 does not yet generate any revenue. Effects of
changes in foreign exchange rates on the consolidation of the financial statements are recorded in other
comprehensive income and carried in the form of a 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 recoverable
amount of the asset, which is the higher of value in use or fair value less costs to sell in the case of assets,
and at objective evidence of significant or prolonged decline in 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
useful life. If the estimated life had been longer than management’s estimate, the carrying amount of the
asset would have been higher.
Rehabilitation provisions and asset retirement obligations
Exploration activities carried out by the Company give rise to obligations for environmental rehabilitation.
Significant uncertainty exists as 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, 2014 and 2013
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 than management’s estimates, the carrying amount of the provision would have
been lower as would have been 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, 2014. 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 therein.
IAS 32 - Financial Instruments: Presentation ("IAS 32") was amended by the IASB in December 2011 to clarify
certain aspects of the requirements on offsetting. The amendments focus on the criterion that an entity currently has
a legally enforceable right to set off the recognized amounts and the criterion that an entity intends either to settle on
a net basis, or to realize the asset and settle the liability simultaneously.
At January 1, 2014, the Company adopted this pronouncement and there was no material impact on the Company’s
consolidated financial statements.
IFRIC 21, Levies - In May 2013, the IASB issued IFRIC 21, Levies. This IFRIC is effective for annual periods
commencing on or after January 1, 2014 and is to be applied retrospectively. The IFRIC provides guidance on
accounting for levies in accordance with the requirements of IAS 37, Provisions, Contingent Liabilities and
Contingent Assets. The interpretation defines a levy as an outflow from an entity imposed by a government in
accordance with legislation. It also notes that levies do not arise from executor contracts or other contractual
arrangements. The interpretation also confirms that an entity recognizes a liability for a levy only when the
triggering event specified in the legislation occurs. At January 1, 2014, the Company adopted this pronouncement
and there was no material impact on the Company’s consolidated 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.
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.
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Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
2. BASIS OF PREPARATION (Continued)
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.
Amendments to IAS 1, Presentation of Financial Statements (“IAS 1)
On December 18, 2014, the IASB issued amendments to IAS 1 as part of its major initiative to improve presentation
and disclosure in financial reports. The amendments are effective for annual periods beginning on or after January
1, 2016 with early adoption permitted. The Company intends to adopt these amendments in its financial statements
for the annual period beginning on January 1, 2016. The extent of the impact of adoption of the amendments has
not yet been determined.
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 (shareholders’ equity) 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 through equity and/or debt. 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,
2014 compared to the year ended December 31, 2013. 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 balances consist of
interest earning bank accounts, which are invested with Canadian chartered banks and a major Russian bank with
credit rating of AA for the Canadian banks and BB for the 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 with respect to accounts receivable is low.
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, 2014, the Company had a cash balance of $1,593,133 (December 31, 2013 –
$276,909).
Page | 16
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
3. CAPITAL MANAGEMENT AND FINANCIAL RISK FACTORS (Continued)
Liquidity risk (continued)
The Company had total obligations of $286,536 at December 31, 2014 (December 31, 2013 – $354,368) under a
three-year finance lease of exploration equipment.
At December 31, 2014 the Company had total current assets of $2,817,534 (December 31, 2013 - $1,880,972) to
settle current liabilities of $610,867 (December 31, 2013 – $1,837,915), as well as its commitments outlined in Note
16.
Interest rate risk
The Company has cash balances and no 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 currencies 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. The Company doesn’t keep substantial balances in Russian rubles for a long period
of time to minimize impact of volatile exchange rates.
Sensitivity analysis
The effect of changes in foreign exchange rates on net loss is medium due to a number and amount of foreign-
currency transactions. The Company minimizes impact of changes in foreign exchange rates by converting into
Russian rubles only amounts required for immediate use. 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 $107,774.
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, 2014 December 31, 2013 Russian Value Added Tax $ 256,676 $ 143,821 Canadian Harmonized Sales Tax 31,322 $ 46,463 Other 61,944 219,621 $ 349,942 $ 409,905 December 31, 2014 December 31, 2013 Fuel and lubricants $ 76,412 $ 259,937 Parts and supplies 442,192 873,619 $ 518,604 $ 1,133,556
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
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 the value of assets
associated with asset retirement obligations.
Mineral property consists of the following:
The change in value of the asset is due to 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 which is valid
for a period of 20 years from the grant date.
The cumulative exploration costs incurred and expensed from inception to date are as follows:
8.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, less accumulated depreciation and consist of the following:
Page | 18
December 31, 2014 December 31, 2013 Insurance $ 19,844 $ 16,207 Exploration services and goods 326,576 31,104 Rent and administrative costs 9,435 13,291 $ 355,855 $ 60,602 December 31, 2014 December 31, 2013 Balance at the beginning of the year $ 1,241,223 $ 1,143,383 Accretion expense 95,566 105,873 Translation adjustment (510,031) (8,033)Balance at the end of the year $ 826,758 $ 1,241,223 December 31, 2014 December 31, 2013 Mangazeisky $ 58,915,506 $ 53,920,703 CostAccumulated depreciationNet book valueCostAccumulated depreciationNet book valueProperty plant and equipment: Mangazeisky site $ 3,515,540 $ 2,497,676 $ 1,017,864 $ 5,667,799 $ 3,897,515 $ 1,770,284 Yakutsk office 76,094 76,094 - 123,988 123,988 - Other office furniture, equipment and leasehold improvements 59,620 59,620 - 59,620 59,620 - $ 3,651,254 $ 2,633,390 $ 1,017,864 $ 5,851,407 $ 4,081,123 $ 1,770,284 December 31, 2014December 31, 2013
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
8. PROPERTY, PLANT AND EQUIPMENT (Continued)
Reconciliation of the carrying amount at the beginning and end of the years ended December 31, 2014 and 2013:
The carrying value of equipment held under finance leases as at December 31, 2014 was $284,409 (December 31,
2013 - $662,023). The Company aquired capital assets for $146,818 during the year ended December 31, 2014 and
disposed of a number of fully depreciated capital assets. 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 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. Interest on the loan was calculated at a rate of 25% per annum and
was payable monthly. 1039593 Ontario Ltd. is 100% owned by Mr. Mark Trevisiol, a former president and CEO of
the Company. The principal of the loan and accrued interest of $12,500 were repaid on May 23, 2014.
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. Interest was calculated at rate of 25% per
annum and was payable monthly. On April 17, 2014, the Company entered into another loan agreement with Aterra
Investments Ltd. Aterra Investments Ltd. agreed to provide an unsecured loan in the amount of $250,000. Interest
was calculated at rate of 25% per annum and was 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 former director of the Company, was an officer of Aterra Capital, a management company
for Aterra Investments Ltd. The principal of both loans and accrued interest of $38,897 were repaid on August 18,
2014.
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 was
calculated at rate of 25% per annum and was payable monthly. Mr. Stan Bharti, a former director of the Company,
is the Executive Chairman of Forbes & Manhattan Inc. The principal of the loan and accrued interest of $25,685
were repaid on August 18, 2014.
On April 17, 2014, the Company entered into a loan agreement with Inflection Management Corp. (“Inflection”).
Inflection agreed to provide an unsecured loan in the amount of $250,000 repayable on July 17, 2014.
Page | 19
Mangazeisky site equipment TotalCarrying amount at January 1, 20132,065,814$ 2,065,814$ Additions- - Disposals- - Depreciation(282,448) (282,448) Exchange differences(13,082) (13,082) Carrying amount at December 31, 20131,770,284$ 1,770,284$ Additions146,818 146,818 Disposals- - Depreciation(254,071) (254,071) Exchange differences(645,167) (645,167) Carrying amount at December 31, 20141,017,864$ 1,017,864$ December 31, 2014 December 31, 2013 Exploration costs - Mangazeisky project $ 99,859 $ 271,736 Corporate - accounts payable and accrued liabilities 364,027 1,262,496 $ 463,886 $ 1,534,232
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
10. SHORT-TERM LOANS (Continued)
Interest was calculated at rate of 25% per annum and was payable monthly. The principal of the loan and accrued
interest of $4,966 was repaid on May 20, 2014. Mr. Alexey Sotskov, a director of the Company, is a board
representative of Inflection - a significant shareholder of Silver Bear resources Inc.
11. FINANCE LEASE
The Company entered into a long-term lease agreement, extended in 2014, with Caterpillar Financial Ltd. for the
purchase of certain exploration equipment payable in monthly installments of USD 11,300 until December 2016.
The lease payments were discounted at a rate of 11.5%. The Company made a down-payment for 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.
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, 2014 and 2013:
On March 6, 2014 the Company issued 220,630 common shares of the Company at a price of $0.13 per common
share, which is the market price on the date preceding the date of the agreement between parties, to settle
outstanding amount payable in relation to past services provided by Exploration Services UK Ltd.
On May 20, 2014 the Company completed the first tranche of private placement financing through the issuance of
23,700,000 common shares of the Company at a price of $0.17 per common share for gross proceeds in the amount
of $4,029,000. A finder’s fee of $184,817 was paid in connection with the first tranche of private placement
financing. Cost of issue also includes TSX listing fees.
Page | 20
Payments due by period December 31, 2014 December 31, 2013 Within one year $ 157,319 $ 314,344 With two to five years 170,430 62,869 327,749 377,213 Future finance charges on finance lease (41,213) (22,845)Present value of the net lease payments 286,536 354,368 Current portion 146,981 303,683 Long-term portion 139,555 50,685 Total obligations under finance lease $ 286,536 $ 354,368 Number of common shares$Number of common shares$Balance - Beginning of year 94,642,170 87,542,402 53,866,307 83,580,384 Issued pursuant to private placement, net 64,420,467 10,466,420 40,500,863 3,927,643 Issued for debt 220,630 28,682 - - Issued under share bonus plan 1,806,250 227,875 275,000 34,375 Balance - End of year 161,089,517 98,265,379 94,642,170 87,542,402 December 31, 2014December 31, 2013
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
12. SHAREHOLDERS’ EQUITY (Continued)
On August 15, 2014 the Company completed the second tranche of private placement financing through the
issuance of 40,720,467 common shares of the Company at a price of $0.17 per share for gross proceeds in the
amount of $6,922,479. A finder’s fee of $254,713 was paid in connection with the second tranche of private
placement financing. Cost of issues also includes TSX listing fees.
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 and on February 21, 2014
the allocation issuance of up to a 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 January 2, 2014, April 1, 2014, July 1, 2014, and October 1, 2014, 275,000, 618,750, 618,750 and 297,750
common shares respectively under the share bonus plan were issued to certain officers, directors and consultants of
the Company priced at $0.08, $0.135, $0.155 and $0.09 per share respectively which is TSX closing price on the
date preceding the date of the grant. A share bonus of $227,875 was included under the share-based payments in the
Statement of comprehensive loss.
Subsequent to December 31, 2014, on January 2, 2015, 237,500 common shares under the share bonus plan were
issued to certain officers, directors and consultants of the Company valued at $0.05 per share.
See Note 21 for the events after reporting period.
Stock options and warrants
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, 2014 the total number of options available for issue was 15,690,202. A total of 3,117,702
options are available for future issue as at December 31, 2014.
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.
Page | 21
October 1, 2013-275,000 common sharesJanuary 1, 2014-275,000 common sharesApril 1, 2014-618,750 common sharesJuly 1, 2014-618,750 common sharesOctober 1, 2014-343,750 common sharesJanuary 1, 2015-343,750 common shares
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
12. SHAREHOLDERS’ EQUITY (Continued)
Stock Options and Warrants (continued)
The fair value of these options was estimated to be $295,402 with the following assumptions: expected volatility of
132%, dividend yield of 0%, risk-free interest rate of 1.25% and expected life of 3.3 years.
On November 17, 2014, 6,500,000 options were granted to the Chief Executive Officer of the Company, as follows:
2,500,000 stock options at an exercise price of $0.175 per option, 2,500,000 stock options at an exercise price of
$0.25 per option and 1,500,000 stock options at an exercise price of $0.30 per option. Granted stock options vest in
three equal tranches from the date of grant over a two-year period and expire on November 17, 2019. The fair value
of these options was estimated to be $355,802 with the following assumptions: expected volatility of 140%,
dividend yield of 0%, risk-free interest rate of 1.19% and expected life of 3.3 years.
During the year ended December 31, 2014, options generated a share based payments expense of $510,445 (year
ended December 31, 2013: $312,236). 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 4 years. The expected life of the option was calculated based on the history of option exercises.
Reconciliation of the number of options at the beginning and end of the year ended December 31, 2014 and 2013
follows:
As at December 31, 2014, the Company had share options outstanding and exercisable as follows:
Contributed surplus consists of the following:
Share purchase warrant transactions are summarized as follows:
Page | 22
Weighted averageWeighted averageexercise price, $exercise price, $Balance - Beginning of the year 4,522,500 0.68 4,844,167 0.69 Granted 8,740,000 0.22 475,000 0.20 Expired / Cancelled / Forfeited (690,000) 0.56 (796,667) 0.39 Balance - End of the year 12,572,500 0.37 4,522,500 0.68 December 31, 2014December 31, 2013NumberNumberWeighted averageWeighted averageexercise price, $exercise price, $2015895,000 0.59 895,000 0.59 20161,830,000 0.91 1,830,000 0.91 2017892,500 0.54 892,500 0.54 2018475,000 0.20 358,333 0.20 20198,480,000 0.22 4,146,666 0.23 12,572,500 0.37 8,122,499 0.46 Expiry yearNumberNumberOutstandingExercisable December 31, 2014 December 31, 2013 Balance-Beginning of year $ 13,499,050 $ 11,473,112 Share-based payments 510,445 312,236 Warrants - 1,713,702 Balance- End of year $ 14,009,495 $ 13,499,050 Weighted averageWeighted averageexercise price, $exercise price, $Balance - Beginning of the year38,383,422 0.26 2,643,703 0.58 Granted- - 35,739,719 0.25 Balance - End of the year38,383,422 0.26 38,383,422 0.26 December 31, 2014December 31, 2013Number of share purchase warrantsNumber of share purchase warrants
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
12. SHAREHOLDERS’ EQUITY (Continued)
Stock Options and Warrants (continued)
At December 31, 2014, 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.
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 was charged by Forbes &
Manhattan Inc. pursuant to a management agreement entered into between the companies. Subsequent to December
31, 2014, an agreement to terminate the management agreement between the companies was reached. Mr. Stan
Bharti, a former director of the Company, is the Executive Chairman of Forbes & Manhattan Inc.
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. Interest on the loan was calculated at a rate of 25% per annum and
was payable monthly. 1039593 Ontario Ltd. is 100% owned by Mr. Mark Trevisiol, a former president and CEO of
the Company. The principal of the loan and accrued interest of $12,500 were repaid on May 23, 2014.
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. Interest was calculated at rate of 25% per
annum and was payable monthly. On April 17, 2014, the Company entered into another loan agreement with Aterra
Investments Ltd. Aterra Investments Ltd. agreed to provide an unsecured loan in the amount of $250,000. Interest
was calculated at rate of 25% per annum and was 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 former director of the Company, was an officer of Aterra Capital, a management company
for Aterra Investments Ltd. The principal of both loans and accrued interest of $38,897 were repaid on August 18,
2014.
Page | 23
ExpiryExercise price, $Number of warrantsGrant date fair value recorded, $June 7, 2015 0.58 1,753,703 264,254 July 16, 2015 0.58 890,000 129,281 October 17, 2015 0.245 3,892,308 168,667 October 21, 2015 0.245 3,846,153 187,500 December 18, 2015 0.245 24,478,760 1,060,746 June 4, 2016 0.33 3,522,498 296,789 38,383,422 2,107,237 December 31, 2014 December 31, 2013 Net loss (9,082,333) (6,178,783)Weighted average number of common shares outstanding 126,128,878 61,161,041 Basic and dilutes loss per share $ (0.07) $ (0.10)Year ended
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
13. RELATED PARTY DISCLOSURES (Continued)
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 was
calculated at rate of 25% per annum and was payable monthly. Mr. Stan Bharti, a former director of the Company,
is the Executive Chairman of Forbes & Manhattan Inc. The principal of the loan and accrued interest of $25,685
were repaid on August 18, 2014.
On April 17, 2014, the Company entered into a loan agreement with Inflection Management Corp. (“Inflection”).
Inflection agreed to provide an unsecured loan in the amount of $250,000 repayable on July 17, 2014. Interest was
calculated at rate of 25% per annum and was payable monthly. The principal of the loan and accrued interest of
$4,966 was repaid on May 20, 2014. Mr. Alexey Sotskov, a director of the Company, is a board representative of
Inflection - a significant shareholder of Silver Bear resources Inc.
During the years ended December 31, 2014 and 2013 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:
A one-time fee of $499,992 has been paid to the Chief Executive Officer of the Company. The fee was paid as a
result of a change of control provision in his contract. The amount has been included in the line item, general and
administrative expenses in the Consolidated Statement of Comprehensive Loss.
Page | 24
Goods and services received from (provided to):December 31, 2014December 31, 20132227929 Ontario Inc. 172,724 218,004 Forbes & Manhattan Inc. 300,000 300,000 Aterra Investments Ltd. - 52,500 $ 472,724 $ 570,504 Goods and services receivedOutstanding balancesDecember 31, 2014December 31, 20132227929 Ontario Inc. 401 247,835 Other entities of F&M Group - 10,700 $ 401 $ 258,535 Amounts owed to related parties20142013Salaries, fees and short-term employee benefits $ 1,473,755 $ 1,209,597 Share-based payments 586,851 277,403 $ 2,060,606 $ 1,487,000
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
14. EXPENSES BY NATURE
The following table provides the breakdown of Company’s expenses by nature.
Certain comparative figures have been reclassified to conform to the current period’s presentation.
Employee benefits expense for the years ended December 31, 2014 and 2013 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 2014. Drilling and trenching
in 2014 exceeded minimum requirement for that year.
Minimum requirements under the exploration license for 2015 are the same as for 2014, namely 3,000 metres of
drilling and 5,000 cubic metres of trenching that will require funds of approximately $4.5 million.
Minimum requirement under the mining license for the 2015-2017 period is 15,000 metres of drilling and 15,000
cubic metres of trenching.
The Company has completed a required Russian Feasibility Study (“RFS”) and submitted it along with a Russian
reserve estimate to the Russian government.
In 2013, 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$11,300 over a three-year period until
December 2016.
Page | 25
20142013Employee compensation $ 3,523,048 $ 2,733,159 Drilling and trenching 1,524,735 637,843 Depreciation 245,472 281,057 Professional fees 436,476 323,063 Geological & environmental studies 1,243,613 188,349 Transportation 310,934 89,905 Camp maintenance 342,844 589,836 Taxes 32,425 13,676 Office expenses 302,302 326,343 Travel expenses 157,507 293,843 Accretion expense 92,107 105,764 Interest expense 132,576 269,324 Foreign exchange 462,539 50,766 Other expenses 288,363 276,295 $ 9,094,941 $ 6,179,223 20142013Salaries, fees and short-term employee benefits $ 2,784,729 $ 2,420,923 Share-based payments 738,319 312,236 $ 3,523,048 $ 2,733,159 20142013Receivable $ (107,387) $ (57,424)Inventories 250,945 634,937 Prepaid expenses (380,344) 25,602 Accounts payable and accrued liabilities (631,053) 200,597 $ (867,839) $ 803,712
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
16. COMMITMENTS AND CONTINGENCIES (Continued)
The Company is party to certain management contracts and severance obligations. These contracts contain clauses
requiring that additional payments of up to $717,300 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 $426,535, 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, 2014.
17. SEGMENTED INFORMATION
The Company’s operating segments are based on geographical location and include one property in the Russian
Federation (Mangazeisky) and a corporate office in Toronto, Canada.
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.
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Country / PropertyCash and cash equivalentsInventories Prepaid expensesReceivablesMineral PropertiesProperty, plant and equipment DepreciationInterest expense Net Loss for the periodRussia - Mangazeisky58,357$ 518,604$ 200,298$ 318,620$ 1,607,824$ 1,017,864$ 254,071$ 42,605$ 5,024,978$ Canada - corporate1,534,776 - 155,557 31,322 - - - 91,352 4,057,355 1,593,133$ 518,604$ 355,855$ 349,942$ 1,607,824$ 1,017,864$ 254,071$ 133,957$ 9,082,333$ As at December 31, 2014Country / 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
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
18. PROVISION FOR DECOMMISSIONING AND RESTORATION LIABILITY (Continued)
Asset retirement obligation consists of the following:
The estimated value of the obligation to rehabilitate the site expressed in Canadian dollars is $956,750. A Russian
Central bank borrowing rate of 8.25% has been used in discounting of future cash flows.
19. FINANCIAL INSTRUMENTS
Financial instruments measured at fair value on the consolidated statements of financial position are classified into
one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the
fair values. The three levels of the fair value hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or
indirectly; and
Level 3 – Inputs that are not based on observable market data.
The Company’s financial instruments consist of cash, restricted cash, accounts receivable, and accounts payable and
accrued liabilities. The fair value of these financial instruments approximates their carrying values due to the short-
term nature of these instruments. The Company has no financial instruments recorded at fair value. Financial assets
and financial liabilities as at December 31, 2014 and 2013 were as follows:
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.
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December 31, 2014 December 31, 2013 Balance at the beginning of the year $ 1,241,223 $ 1,143,383 Accretion expense 95,566 105,873 Translation adjustment (510,031) (8,033)Balance at the end of the year $ 826,758 $ 1,241,223 At December 31, 2014Loans and receivablesOther liabilitiesTOTALCash and cash equivalents 1,593,133 - 1,593,133 Accounts Receivable 349,942 - 349,942 Short-term loans - - - Accounts payables and accrued liabilities - 463,886 463,886 Finance lease 286,536 286,536 At December 31, 2013Loans and receivablesOther liabilitiesTOTALCash and cash equivalents 276,909 - 276,909 Accounts Receivables 409,905 - 409,905 Accounts payables and accrued liabilities - 1,534,232 1,534,232 Finance lease 354,368 354,368
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
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 2014 statutory tax rate of 26.50% is consistent with the 2013 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, 2014, the Company has unclaimed non-capital losses that expire as follows:
In addition, ZAO Prognoz has approximately $493,031 (2012 – $261,979) of non-capital losses for Russian income
tax purposes that expire at the end of the years 2017 through 2024 (2012 – 2017 through 2023).
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20142013Statutory tax rate26.50%26.50%Tax benefit at statutory rate $ (2,406,818) $ (1,637,378)Expenses not deductible for income tax purposes 390,575 223,387 Prior year true-upTax effect of unrecognized temporary difference 1,690,728 1,180,650 Losses not previously recognizedForeign tax rate differential 325,515 233,341 Total tax expense $ - $ - Deductible Temporary Differences December 31,2014December 31,2013Tax loss carry-forwards27,609,428 24,736,283 Exploration and Development28,969,247 42,336,637 Share issue costs458,269 105,786 Asset Retirement Obligation826,758 1,241,223 Property plant and equipment6,812,560 5,956,313 64,676,262 74,376,242 Expiry DateAmount2015 2,260,735 2026 2,104,195 2027 2,934,330 2028 3,240,724 2029 3,527,150 2030 2,401,498 2031 3,109,109 2032 2,484,534 2033 2,076,956 2034 2,669,955 $ 26,809,186
Silver Bear Resources Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
21. EVENTS AFTER THE REPORTING PERIOD
On January 1, 2015, 237,500 common shares under the share bonus plan were issued to certain officers, directors
and consultants of the Company at an exercise price of $0.05 per share which is TSX closing price on the date
preceding the date of the grant.
On March 2, 2015, the Company entered into an unsecured non-convertible promissory notes with FrontDeal
Limited ("FrontDeal") and with Inflection, pursuant to which FrontDeal and Inflection have each agreed to lend the
Company USD$3,500,000 respectively for a total of USD$7,000,000. Amounts outstanding under the promissory
notes will incur interest at a rate of 15% per year and the principal and interest payable thereon will mature on June
27, 2015. FrontDeal is indirectly wholly-owned by Alexey Mordashov, who is also the owner of Aterra Investments
Limited, an insider and related party to the Company. Mr. Boris Granovsky, a director of the Company, is a
managing partner of Aterra Capital, a management company for Aterra Investments Ltd. Inflection is an insider and
related party of Silver Bear. Mr. Alexey Sotskov, a director of the Company, is also a director of Inflection.
On March 17, 2015, an agreement was reached between the Company and Forbes & Manhattan Inc. to terminate the
management agreement between the companies. Mr. Stan Bharti, a former director of the Company, is the
Executive Chairman of Forbes & Manhattan Inc.
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