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