Silver Bear Resources plc
Annual Report 2016

Plain-text annual report

Corporate Office 120 Adelaide Street West Suite 2500, Richmond Adelaide Centre Toronto, ON M5H 1T1 T: 416-847-7305 info@silverbearresources.com March 31, 2017 FILED VIA SEDAR Ontario Securities Commission, Principal Regulator British Columbia Securities Commission Alberta Securities Commission Saskatchewan Securities Commission The Manitoba Securities Commission Nova Scotia Securities Commission New Brunswick Securities Commission Registrar of Securities, Prince Edward Island Securities Commission of Newfoundland and Labrador Re-filing of the Company’s Audited Consolidated Financial Statements and Management’s Discussion and Analysis for the year ended December 31, 2016 Dear Sirs/Mesdames: The attached audited consolidated financial statements of Silver Bear Resources Inc. (the “Company” or “Silver Bear”) for the year ended December 31, 2016 (“2016 Financial Statements”) are being re-filed because the Company inadvertently filed an incorrect earlier draft of these 2016 Financial Statements. Specifically, the differences represent changes to the Consolidated Statement of Financial Position, Consolidated Statement of Comprehensive Loss, and Notes 6, 7, 8, 9, 14, 15, 16, 17 and 19 to the 2016 Financial Statements. The management’s discussions and analysis for the year ended December 31, 2016 (the “MDA”) filed on SEDAR on March 29, 2017 is unaffected by these changes, however as per Form 51-102F1, Item 1.1, the date on page one has been updated to March 29, 2017, being the date of the Auditor’s report on the re-filed 2016 Financial Statements. There have been no other changes other than those referred to above. If you have any questions or concerns, please do not hesitate to contact me. Best regards, (signed) “Derk Hartman” Derk Hartman Silver Bear Resources Inc, Chief Financial Officer E: dhartman@silverbearresources.com TSX:SBR www.silverbearresources.com Page | 1 2016 CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2016 (Expressed in Canadian dollars) INDEX Audited Consolidated Financial Statements  Management’s Responsibility for Financial Reporting  Independent Auditor’s Report  Consolidated Statement of Financial Position  Consolidated Statement of Comprehensive Loss  Consolidated Statement of Changes in Equity  Consolidated Statement of Cash Flows  Notes to Consolidated Financial Statements       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. 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 27, 2017 “Derk Hartman” _______________________________ Derk Hartman Chief Financial Officer Page | 2     March 29, 2017 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, 2016 and December 31, 2015 and the consolidated statements of comprehensive loss, the consolidated statement of changes in equity, and the consolidated statement 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, 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. PricewaterhouseCoopers LLP PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2 T: +1 416 863 1133, F: +1 416 365 8215 “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Silver Bear Resources Inc. as at December 31, 2016 and December 31, 2015 and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards. 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 Silver Bear Resources Inc. Consolidated Statement of Financial Position (Canadian dollars) ASSETS Current assets Cash and cash equivalents Receivables (note 4) Inventories (note 5) Prepaid expenses (note 6) Total current assets Non-current assets Prepaid long-term assets (note 6) Mineral property (note 7) Property, plant and equipment (note 8) Total assets LIABILITIES Current liabilities Accounts payable and accrued liabilities (note 9) Short-term loans (note 10) Finance lease (note 11) Total current liabilities Non-current liabilities Long-term loans (note 12) Asset retirement obligation (note 13) Finance lease (note 11) Total liabilities EQUITY Equity attributable to owners of Silver Bear Resources Inc. Share capital (note 14) Contributed surplus (note 14) Accumulated other comprehensive loss Deficit Total deficit Total liabilities and shareholders' equity Going concern (note 1) Commitments and contingencies (note 18) December 31, 2016 December 31, 2015 15,759,123 5,691,897 4,219,346 5,305,839 30,976,205 6,805,868 15,924,780 37,693,403 60,424,051 91,400,256 8,113,710 18,020,577 1,525,369 27,659,656 73,747,793 1,172,643 2,735,911 77,656,347 105,316,003 9,966,104 910,893 734,745 1,438,383 13,050,125 3,262,320 5,891,369 4,992,398 14,146,087 27,196,212 2,995,207 31,008,577 175,348 34,179,132 - 918,910 13,634 932,544 35,111,676 98,684,330 14,578,157 (73,421) (127,104,813) (13,915,747) 91,400,256 98,277,254 14,173,136 (3,153,970) (117,211,884) (7,915,464) 27,196,212 The accompanying notes are an integral part of these consolidated financial statements Approved by the Board of Directors on March 27, 2017 “Graham Hill” _______________________________ Graham Hill Director “Trevor Eyton” _______________________________ Trevor Eyton Director Page | 5     Silver Bear Resources Inc. Consolidated Statement of Comprehensive Loss For the years ended December 31, 2016 and 2015 (Canadian dollars) Income Interest income Expenses (Note 16) Exploration and evaluation expenses General and administrative expenses Depreciation Share-based payments Accretion expense Interest expense Foreign exchange (gain)/loss Expenses from operations September 30, September 30, 2015 2016 372 372 199 199 1,755,444 1,597,096 127,236 8,740 21,207 2,460,196 (1,013,281) 4,956,638 180,708 576,243 46,052 45,332 - 372,584 637,023 1,857,942 2016 1,731 1,731 3,192,766 3,984,195 363,373 527,762 79,524 4,670,909 (2,968,587) 9,849,942 2015 2,314 2,314 4,289,170 3,939,852 256,465 175,516 68,839 1,231,670 723,879 10,685,391 Net loss for the year before tax (4,956,266) (1,857,743) (9,848,211) (10,683,077) Tax charge Net loss for the year after tax 44,718 - (9,892,929) (10,683,077) Other comprehensive loss Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations (1,006,502) 3,080,549 (1,273,945) Comprehensive loss for the year (4,956,266) (2,864,245) (6,812,380) (11,957,022) Weighted average number of common shares outstanding 161,327,017 161,835,587 161,326,366 Basic and diluted loss per share (Note 14) (0.01) (0.06) (0.07) The accompanying notes are an integral part of these consolidated financial statements Page | 6       Silver Bear Resources Inc. Consolidated Statement of Changes in Equity For the years ended December 31, 2016 and 2015 (Canadian dollars) Share capital Contributed surplus Accumulated other comprehensive loss Deficit Total equity Balance - December 31, 2014 98,265,379 14,009,495 (1,880,025) (106,528,807) 3,866,042 Net loss for the year Cumulative translation adjustment Shares issued under share bonus plan Share-based payments - - 11,875 - - - - 163,641 - (1,273,945) - - (10,683,077) - - - (10,683,077) (1,273,945) 11,875 163,641 Balance - December 31, 2015 98,277,254 14,173,136 (3,153,970) (117,211,884) (7,915,464) Balance - December 31, 2015 98,277,254 14,173,136 (3,153,970) (117,211,884) (7,915,464) Net loss for the year Other comprehensive loss: Cumulative translation adjustment Shares issued under stock option plan Share-based payments - - - (9,892,929) (9,892,929) - 407,076 - - (122,741) 527,762 3,080,549 - - - - - 3,080,549 284,335 527,762 Balance - December 31, 2016 98,684,330 14,578,157 (73,421) (127,104,813) (13,915,747) Page | 7       Silver Bear Resources Inc. Consolidated Statement of Cash Flow For the years ended December 31, 2016 and 2015 (Canadian dollars) Cash provided by (used in) Operating activities Total loss for the year Adjustments for items not affecting cash: Depreciation Share-based payments Accretion expense Unrealised FX movement Interest expense Net change in non-cash working capital (note 17) Net cash used in operations Investing activities Acquisition of property, plant and equipment Mineral property addition Long term prepayments Net cash used in investing activities Financing activities Proceeds from share options exercised Finance lease repayment Short-term and long-term loans drawn net Net cash generated from financing activities Effect of exchange rate changes on cash and cash equivalents Increase in cash and cash equivalents during the year Cash and cash equivalents - beginning of the year Cash and cash equivalents - end of the year Cash and cash equivalents consist of: Cash 2016 2015 (9,892,929) (10,683,077) 363,373 527,762 79,524 (883,084) 4,670,909 256,465 175,516 68,839 - 1,313,723 (9,940,947) (2,138,411) (15,075,392) (11,006,945) (24,368,155) (4,704,719) (2,687,822) (4,753,766) (3,312,279) (3,646,517) (31,760,696) (11,712,562) 284,335 (2,073,994) 55,818,500 54,028,841 (1,399,734) 5,793,019 9,966,104 15,759,123 - (141,398) 31,008,577 30,867,179 225,299 8,372,971 1,593,133 9,966,104 15,759,123 15,759,123 9,966,104 9,966,104 The accompanying notes are an integral part of these consolidated financial statements. Page | 8       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 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 acquisition, exploration, evaluation and development of precious metal properties. The head office of the Company is registered in Toronto, Canada. The strategy of the Company is to focus on exploration and development of precious metal deposits. The principal asset of the Company is its right to explore and develop the Mangazeisky property (“Mangazeisky”), located approximately 400 kilometres north of Yakutsk in the Republic of Sakha (Yaktutia), in the Russian Federation. To date, Silver Bear has not earned revenue from operations and its Mangazeisky project is considered to be in the development stage. In 2015 the Company commenced the development of Mangazeisky that includes the construction of a silver mine with associated processing facilities and infrastructure. It has been determined that development costs incurred from July 1, 2015 have future economic benefits and are economically recoverable. In making this judgement, management assessed various sources of information including the geological and metallurgical information, scoping and feasibility studies, proximity of operating facilities, operating management expertise and existing permits. 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, 2016, the Company had no source of operating cash flows and reported a net loss for the year of $9,892,929 and a cumulative deficit of $127,104,813. In order to fund development operations and maintain rights under licenses and agreements, the Company has secured funding in the form of short-term and long-term loans of $18,020,577 and $73,747,793 respectively and the Company may be dependent on securing additional financing until such time that it generates sufficient operating cash flow to meet its liabilities. In these circumstances, there exist material uncertainties resulting in 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. 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 required 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 financial statements throughout all periods presented, as if these policies had always been in effect. These consolidated financial statements comprise the financial statements of Silver Bear Resources Inc. and its 100% owned subsidiaries: Silver Bear Holdings Limited (a Barbados corporation) (“Holdings”), Silver Bear Resources B.V. (a Netherlands corporation) 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 27, 2017. Page | 9       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 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 and costs of developing the mining properties. Licenses are valued at cost at the date of acquisition less impairment. Mining properties under development are accounted for at cost and are not amortised until production has commenced. Cost includes expenditure that is directly attributable to the development of mining properties and preparing them for production. 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 technically feasible and commercially viable. 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 of disposal 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. Page | 10       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 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 initially recognised at fair value and 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 and 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 initially recognised at fair value and 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. Financial instruments are initially recorded at fair value. The fair values of cash and cash equivalents, miscellaneous receivables and accounts payable and accrued liabilities approximate their recorded amounts because of their short- term nature. Page | 11       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 2. BASIS OF PREPARATION (Continued) 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. Monies held within foreign exchange trading accounts are also recognised as cash equivalent. 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. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. 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. Page | 12       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 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. Page | 13       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 2. BASIS OF PREPARATION (Continued) 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. 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 Subsequent to the identification of an impairment trigger, 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.  Contingencies Refer to Note 18.  Capitalization of development costs Management has determined that development costs incurred from July 1, 2015 have future economic benefits and are economically recoverable. In making this judgement, management assessed various sources of information including the geological and metallurgical information, scoping and feasibility studies, proximity of operating facilities, operating management expertise and existing permits. Page | 14       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 2. BASIS OF PREPARATION (Continued) 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 and development 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. 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.  Impairment of mineral properties and property, plant and equipment 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. Page | 15       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 2. BASIS OF PREPARATION (Continued) New accounting standards The Company has adopted the following annual improvements to IFRS. Amendments to IAS 1, Presentation of Financial Statements (“IAS 1”) On December 18, 2014, the International Accounting Standards Board (IASB) issued amendments to IAS 1 as part of its major initiative to improve presentation and disclosure in financial reports. The adoption of the amendments has not had any material impact. Amendments to IAS 16 and IAS 38, Clarification of Acceptable Methods of Depreciation and Amortisation The amendments to IAS 16 prohibit entities from using a revenue based depreciation method for items of property, plant and equipment. The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basis for amortisation of an intangible asset. As the Company already uses the straight-line method for depreciation for its property, plant and equipment, and does not amortise intangible assets, the application of these amendments has had no impact on the Company’s consolidated financial statements. Amendments to IFRS 11, Accounting for Acquisition of Interest in Joint Operations The amendments provide guidance on how to account for the acquisition of a joint operation that constitutes a business as defined in IFRS 3 Business Combinations. Specifically, the amendments state that the relevant principles on accounting for business combinations in IFRS 3 and other standards should be applied. The same requirements should be applied to the formation of a joint operation if and only if an existing business is contributed to the joint operation by one of the parties that participate in the joint operation. The application of these amendments has had no impact on the Company’s consolidated financial statements as the Company did not have any such transactions in the current year. 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. IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration IFRIC 22 addresses how to determine the date of transaction for the purpose of determining the spot exchange rate used to translate foreign currency transactions on initial recognition in circumstances when an entity pays or receives some or all of the foreign currency consideration in advance of the recognition of the related asset, expense or income. The interpretation states that the date of the transaction, for the purpose of determining the spot exchange rate used to translate the related asset, expense or income on initial recognition, is the earlier of the date of initial recognition of the non-monetary prepayment asset or the non-monetary deferred income liability; and the date that the asset, expense or income is recognised in the financial statements. The interpretation is not expected to have any effect on the Company’s consolidated financial statements as this is the same as the policy already being applied. 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. Page | 16       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 2. BASIS OF PREPARATION (Continued) New accounting standards (Continued) 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 is January 1, 2018. The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early. IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”) IFRS 15 was issued on May 28, 2014. It provides a principles based five step model to be applied to all contracts with customers. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. New disclosures about revenue are also introduced. This standard is effective for annual periods beginning on or after January 1, 2018. The Company is still assessing the impact of this standard. On April 12, 2016, the IASB issued Clarifications to IFRS 15. These amendments do not change the underlying principles; they clarify and offer additional transitional relief and are applicable for periods beginning on or after January 1, 2018. IFRS 16 – Leases (“IFRS 16”) On January 13, 2016, IFRS 16 was issued. This standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract. IFRS 16 is effective from January 1, 2019. The Company has not yet assessed the impact of this standard. IAS 7 – Statement of Cash Flows (“IAS 7”) The objective of the amendments is to enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendments will require entities to provide disclosures that enable investors to evaluate changes in liabilities arising from financing activities, including changes arising from cash flows and non-cash changes. These amendments are mandatory for annual periods beginning on or after January 1, 2017. The Company has not yet assessed the impact of this amendment. IAS 12 – Recognition of Deferred Tax Assets for Unrealized Losses (“IAS 12”) The IASB published amendments to IAS 12 on January 19, 2016. The amendments, Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12), clarify how to account for deferred tax assets related to debt instruments measured at fair value. The revisions apply for periods beginning on or after January 1, 2017, with early adoption permitted. The Company has not yet assessed the impact of this amendment. IFRS 2 – Share based payment (“IFRS 2”) On June 20, 2016, the IASB published final amendments to IFRS 2 that clarify the classification and measurement of share-based payment transactions. These amendments deal with variations in the final settlement arrangements including: (a) accounting for cash-settled share-based payment transactions that include a performance condition, (b) classification of share-based payment transactions with net settlement features, as well as (c) accounting for modifications of share-based payment transactions from cash-settled to equity. These changes are effective for annual periods beginning on or after January 1, 2018. The Company has not yet assessed the impact of this amendment. Page | 17       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 2. 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, exploration and development of precious metal properties. The Company considers excess cash balances, all the components of shareholders’ equity and loans as capital. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The property in which the Company currently has an interest is in the exploration and development stage; as such the Company is dependent on external financing to fund ongoing activities. In order to fund the ongoing development activities, the Company will spend existing working capital and plans 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, 2016 compared to the year ended December 31, 2015. 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 held in banks in Canada and Russia. The Company’s Canadian chartered banks have a credit rating of at least Aa3 (Moody’s) and the Company’s Russian banks have a credit rating of at least Ba2 (Moody’s). Miscellaneous receivables and prepaid expenses other than tax refunds due from the Canadian and Russian tax authorities are insignificant. Management believes that the credit risk concentration with respect to accounts receivable is low. Page | 18       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 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 by continual review of budgets and forecasts and discussions with shareholders and other providers of finance as appropriate. At December 31, 2016, the Company had total current assets of $30,976,205 (December 31, 2015 – $13,050,125) to settle total current liabilities of $27,659,656 (December 31, 2015 – $34,179,132), as well as its commitments outlined in Note 18. Total liabilities of $105,316,003 include short-term and long-term loans totalling $91,768,370 and accrued interest of $5,437,746. During the year, the Company increased its short term and long term loans to $91,768,370 (December 31, 2015 – $31,008,577). As at December 31, 2016, the Company had cash balances of $15,759,123 (December 31, 2015 – $9,966,104). The Company had total obligations of $4,261,280 at December 31, 2016 (December 31, 2015 – $188,982) under a combination of three and five year leases for equipment in relation to the development of Mangazeisky, as outlined in Note 11. Interest rate risk The Company has cash balances and interest-bearing debt on short term loans and long term loans at commercial rates. 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, project construction 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. This exposes the Company to changes in foreign exchange rates for both U.S. dollar and Russian rouble. As the Company’s construction work for the project is still ongoing, management believes it is not appropriate to hedge its foreign exchange risk at this stage. As the Company’s proportion of project expenditure that is denominated in Russian rouble is increasing, the effect of changes in foreign exchange rates, in particular the Russian rouble, on the net loss is deemed to be significant as the number and amount of foreign currency transactions are relatively large. Had the Russian rouble foreign exchange rates been higher by 5%, the cumulative translation adjustment in the other comprehensive income section of the Statement of Financial Position would have been lower by $2,118,143. 4. RECEIVABLES Russian Value Added Tax Deferred Russian Value Added Tax Canadian Harmonized Sales Tax Other December 31, December 31, 2015 265,216 602,731 31,359 11,587 910,893 2016 1,955,847 3,652,007 32,804 51,239 5,691,897 $ $ Page | 19         Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 5. INVENTORIES Material and supplies inventories are stated at the lower of weighted average costs and net realizable value. Inventories consist of the following: Fuel and lubricants Parts and supplies 6. PREPAID EXPENSES Prepaid expenses consist of the following: Insurance Exploration and construction services and goods Rent and administrative costs Prepaid long-term assets consist of the following:   Construction supplies 7. MINERAL PROPERTY December 31, December 31, 2015 207,921 526,824 734,745 2016 738,483 3,480,863 4,219,346 $ $ December 31, December 31, 2015 38,315 1,332,133 67,935 1,438,383 2016 42,950 5,144,895 117,994 5,305,839 $ $ December 31, December 31, 2015 3,262,320 3,262,320 2016 6,805,868 6,805,868 $ $ Mineral property includes the cost of acquiring exploration and mining licenses, as well as the value of assets associated with asset retirement obligations and capitalised project development costs. Mineral property consists of the following: Mangazeisky Balance at the beginning of the year Development costs capitalised Borrowing costs capitalised Translation adjustment Balance at the end of the year December 31, December 31, 2015 1,607,824 4,362,308 250,679 (329,442) 5,891,369 2016 5,891,369 5,688,903 4,087,105 257,403 15,924,780 $ $ 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. In September, 2016, the Mangazeisky License was extended by the Federal Subsoil Use Agency in the Russian Federation (“Rosnedra”) through to December 31, 2023. 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. Page | 20         Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 The cumulative exploration costs incurred and expensed from inception to date are as follows: Mangazeisky December 31, December 31, 2015 $ 66,397,442 $ 63,204,676 2016 8. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost, less accumulated depreciation and consist of the following: December 31, 2016 December 31, 2015 Property, plant and equipment: Mangazeisky site Yakutsk office Other office furniture, equipment and leasehold improvements Accumulated depreciation Cost Net book value Accumulated depreciation Net book value Cost 41,651,550 85,175 3,958,147 85,175 37,693,403 - 7,602,989 72,492 2,610,591 72,492 4,992,398 - 59,620 41,796,345 $ 59,620 4,102,942 $ - 37,693,403 $ 59,620 7,735,101 $ 59,620 2,742,703 $ - 4,992,398 $ Reconciliation of the carrying amount at the beginning and end of the years ended December 31, 2015 and 2016: Carrying amount at January 1, 2015 Additions Disposals Depreciation Exchange differences Carrying amount at December 31, 2015 Additions Transfers Disposals Depreciation Exchange differences Carrying amount at December 31, 2016 Mangazeisky site Property, plant and equipment 1,017,864 651,190 - (256,465) (258,110) 1,154,479 $ Assets under construction - 4,102,576 - - (264,657) 3,837,919 $ Total 1,017,864 4,753,766 - (256,465) (522,767) 4,992,398 $ 8,230,752 1,785,311 (26,152) (1,347,556) 1,014,826 10,811,660 $ 21,872,136 (1,785,311) - - 2,956,999 26,881,742 $ 30,102,888 - (26,152) (1,347,556) 3,971,825 37,693,403 $ The carrying value of equipment held under finance leases as at December 31, 2016 was $5,885,506 (December 31, 2015 - $154,827). The Company acquired capital assets of $30,102,888 during the year ended December 31, 2016. The additions in the year ended December 31, 2016 include $21,872,136 of assets that are not yet ready for use and as such no depreciation has been charged on them. In the year ended December 31, 2015 additions included $4,102,576 of assets that were not yet ready for use, during the year ended December 31, 2016, $1,785,311 of these assets became available for use and depreciation was charged on them. Leased assets are pledged as security for the related finance lease obligations. Page | 21       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consist of the following: Trade and other payables Accrued liabilities Accrued interest (Note 10, Note 12) Tax and other liabilities December 31, December 31, 2015 1,344,067 328,894 1,313,723 8,523 2,995,207 2016 2,060,302 453,552 5,437,746 162,109 8,113,710 $ $ On September 19, 2016, the Company repaid the non-convertible short term loans (Note 10(a)) and accrued interest on those loans. The interest balance above represents the interest payable on the existing convertible short term loans (Note 10(d)) as well as the interest payable on the new Facilities Agreement (Note 12). 10. SHORT-TERM LOANS Lender A.B. Aterra Inflection Management Corp. Lender A.B. Aterra Inflection Management Corp. Principal 4,505,144 13,515,433 18,020,577 $ Principal 10,513,807 20,494,770 31,008,577 $ December 31, 2016 Total Interest 723,223 2,179,979 2,903,202 $ 5,228,367 15,695,412 20,923,779 $ December 31, 2015 Total Interest 674,051 748,183 1,422,234 $ 11,187,858 21,242,953 32,430,811 $ FrontDeal Limited ("FrontDeal") and A.B. Aterra Resources Ltd. (“Aterra”) are 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 Limited. Inflection Management Corp (“Inflection”) is an insider and related party of Silver Bear. Mr. Alexey Sotskov, a director of the Company, is also a director of Inflection (a) Unsecured non-convertible promissory notes On March 2, 2015, the Company entered into unsecured non-convertible promissory notes with FrontDeal and with Inflection, pursuant to which FrontDeal and Inflection each agreed to lend the Company US$3,500,000 respectively for a total of US$7,000,000. The promissory notes bear interest at a rate of 15% per year and the principal and accrued interest are payable on the maturity date. These loans were repaid on September 19, 2016 along with all interest incurred up to that date and replaced by new loans, the detail of which is in Note 12. (b) Contingent convertible promissory notes In October 2015, Aterra and Inflection provided additional loans to the Company of C$2,310,000 and C$3,300,000 respectively. These additional loans were made under contingent convertible promissory notes that bore interest at 15% per year and had a maturity date of December 31, 2015 and were contingently convertible into Common Shares of the Company at a price of C$0.075 per Common Share. These loan notes were consolidated into new convertible loan notes as detailed below (Note 10 (d)). Page | 22       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 10. SHORT-TERM LOANS (Continued) (c) Convertible promissory note In November 2015, Inflection advanced a further C$5,610,000 under a convertible promissory note with a maturity date of December 31, 2015 and which was convertible into Common Shares at a price of C$0.045 per Common Share. This note also bore interest at 15% per year. This loan note was consolidated into the new convertible loan notes as detailed below (Note 10 (d)). (d) Consolidated convertible loan notes In December 2015 loan notes from Aterra of C$2,310,000 originally issued in October 2015 (Note 10 (b)), accrued interest thereon of C$59,807 and an additional loan of C$3,300,000, were consolidated into a new convertible loan note for C$5,669,807 in favour of Aterra. In September 2016, Aterra reassigned C$1,164,663 of this new convertible loan note, plus interest of C$138,625, to Inflection. In December 2015, all convertible loan notes from Inflection with a combined principal amount of C$8,910,000 (Note 10 (b), Note 10 (c)), accrued interest thereon of C$140,770 and an additional loan of C$3,300,000, were also consolidated into a new convertible loan note with a value of C$12,350,770. Both these convertible loan notes bear interest at 15% per year, mature on March 31, 2017 and give the holder the right to convert the principal and any accrued interest into fully paid Common Shares of the Company at a conversion price of C$0.045 per Common Share. Management considers 15% per year to be the prevailing market rate on loans that do not have an associated equity conversion option; accordingly, all of the principal is recognised as a liability. The balance on these new convertible loans as at December 31, 2016 was C$20,923,779, of which C$5,228,367 was due to Aterra and C$15,695,412 was due to Inflection. (e) Contingent convertible loan note In December 2015, Inflection also paid C$3,300,000 as consideration for the Company issuing a contingent convertible loan note bearing interest at 15% and maturing on December 31, 2016; the loan note was issued on January 11, 2016. This loan was repaid on September 19, 2016 along with all interest of C$377,014 incurred up to that date and was replaced by new loans (Note 12). (f) Unsecured contingent non-convertible promissory notes In March 2016, Aterra and Inflection provided additional loans to the Company of US$5,500,000 and US$14,500,000 respectively. These additional loans were made under unsecured contingent non-convertible promissory notes that bore interest at 15% per year and had a maturity date of December 31, 2016. These loans were repaid on September 19, 2016 along with interest of C$1,543,356 incurred up to that date and were replaced by new loans (Note 12). 11. FINANCE LEASE The Company entered into a long-term lease agreement, extended in 2014, for the purchase of certain exploration equipment payable in monthly installments of US$11,300. The lease payments were discounted at a rate of 12.7%. The Company made a down-payment for 50% of the cost of equipment. During the year the Company entered into new long term lease agreements with for the purchase of equipment in relation to the development of the Mangazeisky project payable in monthly instalments of circa US$107,000. The lease payments have been discounted at rates of between 12.4% and 21.8%. The Company made down payments of 30% of the cost of the equipment. Page | 23       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 11. FINANCE LEASE (Continued) Future minimum lease payments under finance leases, together with the present value of the net minimum lease payments, are as follows: Within one year Within two to five years Future finance charges on finance lease Present value of the net lease payments Current portion Long-term portion Total obligations under finance lease 12. LONG-TERM LOANS Lender A.B. Aterra Inflection Management Corp. Lender A.B. Aterra Inflection Management Corp. December 31, December 31, 2015 187,682 15,640 203,322 (14,340) 188,982 175,348 13,634 188,982 2016 1,376,996 3,736,005 5,113,001 (851,721) 4,261,280 1,525,369 2,735,911 4,261,280 $ $ December 31, 2016 Total Principal 19,035,716 54,712,075 73,747,791 $ Interest 721,610 1,812,934 2,534,544 $ 19,757,325 56,525,009 76,282,334 $ Principal - - $ - December 31, 2015 Total Interest - - $ - - - $ - On September 5, 2016, the Company entered into a Facilities Agreement (the “Facilities Agreement”) and certain related security documents with the Lenders, to provide Silver Bear and its indirect wholly-owned Russian subsidiary, Joint Stock Company “Prognoz” (“Prognoz”) with financing for the final development, construction and commissioning of the Company’s Mangazeisky Silver Project (the “Project”). Pursuant to the Facilities Agreement, the Lenders have made available to Silver Bear and Prognoz secured loans in the aggregate principal amount of US$54.9 million comprising three tranches (”Secured Loan Funding”). Tranche A consisted of a term loan facility of US$42.9 million, of which Inflection has provided US$30.4 million and Aterra has provided US$12.5 million (the “Term Loan Facility”). Of the US$42.9 million total Tranche A commitment, US$32.9 million was made available to Silver Bear with the remaining US$10.0 million being made available to Prognoz (collectively “Tranche A”). On December 28, 2016, a set off agreement was entered into resulting in the amounts due to the Lenders by Silver Bear under the Facilities Agreement, plus the accrued interest, were all due from Prognoz instead. The Lenders have also made available to Prognoz, the Tranche B working capital facility of US$10.0 million (the “Working Capital Facility”) and the Tranche C contingent facility of US$2.0 million (the “Contingent Facility”, and together with the Working Capital Facility, the “Additional Facilities”). A portion of the Term Loan Facility (US$32,924,995) has been used by the Company to repay the principal and accrued interest for all outstanding non-convertible notes previously issued by the Company to the Lenders described above (Note 10 (a), Note 10 (e), Note 10 (f)). Page | 24         Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 12. LONG-TERM LOANS (Continued) The Secured Loan Funding accrues interest at a rate of 15% per annum, calculated and accrued quarterly, and is payable on January 1, April 1, July 1 and October 1 in each calendar year and on the maturity date, being the date that is forty-eight months following the date on which the Term Loan Facility has been drawn in full. Pursuant to the terms of the Facilities Agreement, all interest accrued before July 1, 2017 will be capitalized and added to the principal amount of the Term Loan Facility such that the first interest payment under the Facilities Agreement would therefore be in respect of the quarterly period ending October 1, 2017. The Secured Loan Funding is secured and the parent and subsidiaries of the Company will act as guarantor of each other’s obligations under the Facilities Agreement and all related security documents. As at December 31, 2016 this Secured Loan Funding has accrued interest of C$2,534,544. 13. PROVISION FOR DECOMMISSIONING AND RESTORATION LIABILITY The Company’s mining, exploration and development 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 consists of management’s best estimate of reclamation and closure costs for the Mangazeisky project. 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: Balance at the beginning of the year Accretion expense Impact of change to underlying cost estimate Impact of rates adjustment Translation adjustment Balance at the end of the year December 31, December 31, 2015 826,758 68,839 - 69,363 (46,050) 918,910 2016 918,910 79,524 14,754 (10,878) 170,333 1,172,643 $ $ At December 31, 2016 the expected life of the Mangazeisky project has been assessed to be 10 years. The projected cost for reclamation and closure of the Mangazeisky project in 2026 has been estimated to be $2,615,000. A Russian Central bank borrowing rate of 8.35% (2015: 8.25%) has been used in discounting of future cash flows. Page | 25       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 14. 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, 2016 and 2015: Balance - Beginning of the year Issued under stock option plan Issued under share bonus plan Balance - End of the year December 31, 2016 December 31, 2015 Number of common shares 161,327,017 1,603,334 - 162,930,351 $ 98,277,254 407,076 - 98,684,330 Number of common shares 161,089,517 - 237,500 161,327,017 $ 98,265,379 - 11,875 98,277,254 Share Bonus Plan In June 2013, the shareholders of the Company approved a share bonus plan whereby an aggregate of up to 2,500,000 common shares of the Company have been reserved for issuance to officers, directors and employees of the Company. On June 8, 2016, the board of directors resolved, and the Company obtained approval from the TSX and the shareholders, an amendment to the Share Bonus Plan to increase the maximum number of Common Shares available for issuance under such plan from 2,500,000 to 5,400,000. 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 and Chief Executive Officer (“CEO”) prior to issuance on or about the following dates: October 1, 2013 January 1, 2014 April 1, 2014 July 1, 2014 October 1, 2014 January 1, 2015 Total - - - - - - 275,000 common shares 275,000 common shares 618,750 common shares 618,750 common shares 293,750 common shares 237,500 common shares 2,318,750 The total number of bonus shares that are currently issued under the share bonus plan is 2,318,750. As shareholders approved an aggregate of up to 5,400,000 common shares for issuance, a further 3,081,250 common shares may be issued under the share bonus plan as at 31 December, 2016. 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 (“TSX”) 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. Page | 26       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 14. SHAREHOLDERS’ EQUITY Stock options and warrants (Continued) 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. On May 18, 2016, 2,900,000 options were granted to directors, officers and consultants of the Company. The exercise price of the options is $0.19 per option. Granted stock options vest immediately on the day of grant and expire on May 18, 2021. As at December 31, 2016 the total number of options available for issue was 16,293,035. A total of 4,572,619 options or shares for issuance under the share bonus plan (subject to a maximum of 3,081,250 common shares that can be issued under the share bonus plan as at December 31, 2016) are available for future issue as at December 31, 2016. During the year ended December 31, 2016, options generated a share based payments expense of $527,762 (December 31, 2015: $175,516). 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 and 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, 2016 and 2015 follows: Balance - Beginning of the year Granted Exercised Expired / Cancelled / Forfeited Balance - End of the year December 31, 2016 Number 10,140,000 2,900,000 (1,603,334) (2,215,000) 9,221,666 Weighted average exercise price, $ 0.33 0.19 0.18 0.64 0.24 December 31, 2015 Weighted average exercise price, $ 0.37 - - 0.52 0.33 Number 12,572,500 - - (2,432,500) 10,140,000 As at December 31, 2016, the Company had share options outstanding and exercisable as follows: Expiry year 2017 2018 2019 2021 Outstanding Exercisable Weighted average exercise price, $ 0.57 0.24 0.24 0.19 0.24 Number 325,000 300,000 5,796,666 2,800,000 9,221,666 Weighted average exercise price, $ 0.57 0.24 0.24 0.19 0.24 Number 325,000 300,000 5,796,666 2,800,000 9,221,666 Page | 27       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 14. SHAREHOLDERS’ EQUITY (Continued) Stock Options and Warrants (Continued) Contributed surplus consists of the following: Balance - Beginning of the year Share-based payments Exercised options Balance - End of the year December 31, December 31, 2015 14,009,495 163,641 - 14,173,136 2016 14,173,136 527,762 (122,741) 14,578,157 $ $ Share purchase warrant transactions are summarized as follows: Balance - Beginning of the year Expired / Cancelled / Forfeited Balance - End of the year December 31, 2016 Number of share purchase warrants 3,522,498 (3,522,498) - Weighted average exercise price, $ 0.33 - - Number of share purchase warrants 38,383,422 (34,860,924) 3,522,498 December 31, 2015 Weighted average exercise price, $ 0.26 0.27 0.33 At December 31, 2016, there were no warrants outstanding. The fair value of warrants had been estimated on the date of grant using the Black-Scholes pricing model with the following assumptions: risk free rate of return 1.17%, volatility of 116.2% and expected life of 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. Net loss Weighted average number of common shares outstanding Basic and diluted loss per share December 31, December 31, 2015 (10,683,077) 161,326,366 (0.07) 2016 (9,892,929) 161,835,587 (0.06) $ $ Page | 28         Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 15. RELATED PARTY DISCLOSURES (a) Goods and services The Company shared office space and services with companies that had officers or directors in common with the Company. The costs associated with this space and certain other services were administered by 2227929 Ontario Inc. A fee of $14,000 per month was charged by 2227929 Ontario Inc. On June 1, 2015, an agreement was reached between the Company and 2227929 Ontario Inc. to terminate the management agreement between the companies. A termination fee of $84,000 was paid pursuant to the agreement. This fee is included in the table below. In addition, effective May 11, 2011, an administration fee of $25,000 per month was charged by Forbes & Manhattan Inc. pursuant to a consulting agreement entered into between the companies. Mr. Stan Bharti, a former director of the Company, is the Executive Chairman of Forbes & Manhattan Inc. On March 17, 2015, an agreement was reached between the Company and Forbes & Manhattan Inc. to terminate the management agreement between the companies. A termination fee of $75,000 was paid pursuant to the agreement. This fee is included in the table below. The Company has appointed TechnoNICOL Corporation (“TechnoNICOL”), a company controlled by the same beneficial owner of Inflection, a major shareholder of the Company, to provide services specific to the Mangazeisky Project. In accordance with contracts entered into as at December 31, 2016, TechnoNICOL has provided goods to the value of RUB 13,386,807 (C$283,418) excluding VAT. During the year ended December 31, 2016 and 2015 the Company entered into transactions for goods and services with the following related parties: Goods and services received from (provided to): 2227929 Ontario Inc. Forbes & Manhattan Inc. TechnoNICOL Corporation December 31, December 31, 2015 170,952 150,000 - 320,952 There were no balances outstanding at the end of the reporting period related to goods and services received from related parties. 2016 - - 283,418 283,418 $ $ (b) Financing transactions The Company has entered into a series of financing transactions with major shareholders. Refer to notes 10 and 12. (c) Compensation of key management Key management includes the Company’s directors and officers. Compensation awarded to key management comprised:  Salaries, fees and short-term employee benefits Termination payments Share-based payments December 31, December 31, December 31, December 31, 2015 887,121 91,800 175,516 1,154,437 2016 1,164,624 30,000 527,762 1,722,386 2015 155,317 - - 155,317 2016 237,940 - 8,740 246,680 $ $ $ $ As at December 31, 2016 the Company owed key management $290,554 (2015: $40,046) for fees and bonuses payable in accordance with contracts and agreements. Page | 29       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 16. EXPENSES BY NATURE The following table provides the breakdown of Company’s expenses by nature.  Employee compensation Drilling and trenching Depreciation Professional fees Geological & environmental studies Transportation Camp maintenance Taxes Office expenses Project expenses Travel expenses Air transportation Accretion expense Interest expense Foreign exchange Loss on disposal of fixed assets Other expenses December 31, December 31, December 31, December 31, 2015 2,760,500 1,097,112 257,887 981,084 1,722,825 131,296 341,855 6,326 230,527 113,490 211,603 173,231 69,212 1,208,313 761,505 - 618,625 10,685,391 2016 1,772,879 2,658,561 363,373 1,676,611 534,204 - - - 75,986 - 218,723 - 79,524 4,670,910 (2,968,587) 26,152 741,606 9,849,942 2016 432,478 2,062,527 19,525 1,235,949 534,204 - - - 48,994 - 168,597 - 41,455 3,077,606 (2,404,691) - 579,956 5,796,600 2015 366,578 180,708 42,563 40,340 - - 26,715 - 11,103 - - - 68,179 372,269 635,779 - 113,708 1,857,942 $ $ $ $ Expenses relating to the development and construction of the Mangazeisky Project have been capitalised from July 1, 2015. This means that certain categories of expenses are no longer charged to the income statement. As at December 31, 2016 depreciation of property, plant and equipment totalling $984,183 has been capitalised on the basis that the equipment being depreciated is being used in the construction of the Mangazeisky Project. Employee benefits relating to the construction of the Mangazeisky Project are capitalised within mineral properties. Employee benefits expensed for the year ended December 31, 2016 and 2015 consisted of the following:  Salaries, fees and short-term employee benefits Employee compensation costs capitalised Termination payments Share-based payments December 31, December 31, December 31, December 31, 2015 2,369,957 - 215,027 175,516 2,760,500 2016 1,456,922 (241,805) 30,000 527,762 1,772,879 2016 665,543 (241,805) - 8,740 432,478 2015 321,246 - - 45,332 366,578 $ $ $ $ Page | 30       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 17. NET CHANGE IN NON-CASH WORKING CAPITAL Net change in non-cash working capital consists of the following: Receivables Inventories Prepaid expenses Accounts payable and accrued liabilities December 31, December 31, 2015 (1,152,023) (269,032) (1,606,957) 889,601 (2,138,411) 2016 (4,561,998) (3,034,323) (2,961,432) 616,807 (9,940,947) $ $ 18. COMMITMENTS AND CONTINGENCIES The Company previously entered into a long-term lease agreement for the purchase of certain exploration equipment payable in monthly installments of US$11,300 over a three-year period until December 2016. The Company has also entered into further long-term lease agreements during 2016 for the purchase of additional necessary equipment. These leases require monthly installments of circa US$28,000 over three to five years. The Company is party to certain management contracts and severance obligations. These contracts contain clauses requiring that additional payments of up to $515,000 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. 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, 2016. Page | 31       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 19. SEGMENTED INFORMATION The Company’s operating segments are based on geographical location and include one property in the Russian Federation (Mangazeisky) and a corporate registered office in Toronto, Canada. Country/Property Cash Inventories Prepaid Receivables Mineral Properties Property plant and equipment Depreciation Interest expense Net loss for the year As at December 31, 2016 Russia - Mangazeisky 10,407,498 4,219,346 11,982,190 5,659,093 15,924,780 37,693,403 363,373 875,707 4,502,269 Canada - Corporate 5,351,625 - 129,517 32,804 - - - 3,795,202 5,345,942 $ 15,759,123 $ 4,219,346 $ 12,111,707 $ 5,691,897 $ 15,924,780 $ 37,693,403 $ 363,373 $ 4,670,909 $ 9,848,211 Country/Property Cash Inventories Prepaid Receivables Mineral Properties Property plant and equipment Depreciation Interest expense Net loss for the year As at December 31, 2015 Russia - Mangazeisky 1,450,741 734,745 4,952,550 539,475 5,891,369 4,992,398 256,465 30,291 5,992,369 Canada - Corporate 8,515,363 - 86,518 33,054 - - - 1,201,379 4,690,708 $ 9,966,104 $ 734,745 $ 5,039,068 $ 572,529 $ 5,891,369 $ 4,992,398 $ 256,465 $ 1,231,670 $ 10,683,077 20. 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. Financial assets and financial liabilities as at December 31, 2016 and 2015 were as follows: As at December 31, 2016 Cash and cash equivalents Accounts Receivable Short-term loans Long-term loans Accounts payables and accrued liabilities Finance lease Loans and receivables 15,759,123 5,691,897 - - - - Other liabilities - - 18,020,577 73,747,793 8,113,710 4,261,280 TOTAL 15,759,123 5,691,897 18,020,577 73,747,793 8,113,710 4,261,280 Page | 32       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 20. FINANCIAL INSTRUMENTS (Continued) As at December 31, 2015 Cash and cash equivalents Accounts Receivables Short-term loans Long-term loans Accounts payables and accrued liabilities Finance lease Loans and receivables 9,966,104 910,893 - - - - Other liabilities - - 31,008,577 - 2,995,207 188,982 TOTAL 9,966,104 910,893 31,008,577 - 2,995,207 188,982 The carrying value of cash equivalents, amounts receivable, short-term loans, and accounts payable and accrued liabilities reflected in the consolidated statement of financial position approximate fair value because of the relatively short-term maturities. 21. INCOME TAXES Reconciliation between tax expense and the product of accounting loss multiplied by the Corporation's domestic tax rate is as follows: Statutory tax rate Tax benefit of statutory rate Expenses not deductible for income tax purposes Prior year true-up Tax effect of unrecognized temporary difference Losses not previously recognized Foreign tax rate differential Total tax expense 2016 26.50% (2,609,776) 834,588 - 2,218,213 1,317,559 (1,715,866) 44,718 2015 26.50% (2,815,664) 702,199 - 1,938,148 - 175,318 - The 2016 statutory tax rate of 26.50% consistent with the 2015 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: Deductible Temporary Differences Tax loss carry-forwards Exploration and Development Share issue costs Asset Retirement Obligation Property plant and equipment December 31, 2016 40,688,164 25,272,738 763,018 1,172,643 7,635,286 75,531,849 December 31, 2015 31,639,683 25,931,390 325,694 849,547 7,090,934 65,837,247 Page | 33       Silver Bear Resources Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2016 and 2015 21. INCOME TAXES (Continued) At December 31, 2016, the Company has the unclaimed non-capital losses that expire as follows: Expiry Date 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Amount $ - $ 2,934,330 $ 3,240,724 $ 3,527,150 $ 2,401,498 $ 3,109,109 $ 2,484,534 $ 2,076,956 $ 2,669,955 $ 4,888,144 $ 11,474,310 $ 38,806,710 In addition, ZAO Prognoz has approximately $625,482 (2015 – $705,708) of non-capital losses for Russian income tax purposes that expire at the end of the years 2017 through 2026 (2017 through 2025). 22. EVENTS AFTER THE REPORTING PERIOD On March 27 2017, further to its press release of February 1, 2017, the Company executed the agreements with its major shareholders, Aterra and Inflection, which increased the previously provided project facilities by a further US$15 million (the “Facilities Agreement Increase”). In addition, on March 20, 2017, the Company and major shareholders, Aterra and Inflection executed the agreement in relation to the extension of the maturity datesmaturity dates of their outstanding convertible notes from March 31, 2017 to December 31, 2017 (the “Note Extension”). Under the Facilities Agreement Increase, Aterra and Inflection have provided an additional working capital tranche of US$10 million to meet expenses during the rescheduled ramp-up plus a discretionary US$5 million cost over-run tranche, should that be required. No other principal terms of the existing project facilities have been changed. Reference is made to the Company’s press release of August 5, 2016 for full details of the terms of the project facilities. The Note Extension will provide the Company with additional time to finalize a beneficial restructuring of Aterra's and Inflection’s outstanding convertible notes as previously announced by the Company and support the Company's pursuit of additional equity financing to reduce leverage once the production schedule is certain. The convertible notes have an outstanding aggregate principal amount of approximately CDN$18 million. The TSX has provided its conditional approval for the Facilities Agreement Increase and the Note Extension. The Note Extension is not subject to shareholder approval. Payment of interest on the US$10 million working capital tranche after June 30, 2017 and utilization of the US$5 million cost-over run tranche under the Facilities Agreement Increase are both subject to disinterested shareholder approval, as Aterra and Inflection are insiders (as such term is defined in the TSX Company Manual) of Silver Bear. The Company may draw the full US$10 million working capital tranche at any time. Silver Bear intends to seek disinterested shareholder approval at its AGM to be held prior to June 30, 2017. Page | 34       

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