ANNUAL REPORT AND ACCOUNTS
Registered Number: 10669766 (England and
Wales)
For the year ended 31 December 2021
(Expressed in Canadian dollars)
Mangazeisky Silver Project – Open Pit
Independent auditor’s report to the shareholders of Silver Bear Resources
Plc
Opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
Group’s affairs as at 31 December 2021 and 31 December 2020 and of its financial performance and its cashflows
for the years then ended in accordance with IFRS as issued by the International Auditing Standards Board (‘IASB’).
We have audited the consolidated financial statements of Silver Bear Resources Plc (“the parent company”) and
its subsidiaries (the ‘Group’) for the years ended 31 December 2021 and 31 December 2020 which comprises the
Consolidated Statement of Comprehensive Profit/(Loss), the Consolidated Statement of Financial Position, the
Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flow and notes to the
consolidated financial statements, including a summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant
to our audit of the consolidated financial statements, including the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2 in the consolidated financial statements which sets out the Directors’ considerations
regarding the future potential impacts that the Russian geopolitical situation and the resulting sanctions imposed
by and against Russia or the Russian imposed capital controls could have on the Group’s operations, and the
absence of a contractual agreement for the Group to continue to defer interest and capital repayments on its loans
from its shareholders. As a result thereof, there is uncertainty relating to the Group’s ability to maintain working
capital liquidity to service the Group’s financing arrangements which may result in the need for additional funding.
As stated in note 2, these events or conditions, along with the other matters as set out in note 2, indicate that a
material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
We have highlighted going concern as a key audit matter based on our assessment of the significance of the risk
and the effect on our audit strategy.
Our response to the key audit matter included:
• We critically assessed the directors’ base case cash flow forecasts for the period to December 2023 and
the underlying assumptions, which have been approved by the Board. Our testing included a comparison
of forecast silver prices to both prices currently being achieved and spot prices together with
consideration of broker consensus pricing ranges.
• We evaluated the forecast production levels against 2021 actuals and the life of mine plan and
considered the impact of plant upgrades on the achievability of forecasts.
• We compared the forecast operational expenditure to 2021 actuals and confirmed that planned capital
expenditure is consistent with the life of mine plan.
• We compared the Group’s actual operational results to the budget for 2021 to assess the quality of
Directors’ budgetary process.
• We assessed the integrity of the cash flow forecast by performing a mathematical check on the model.
• We reviewed the contractual terms attached to the shareholders’ loan facility, including future capital and
interest repayments and considered the Directors’ assumption that despite there being no contractual
agreement to defer interest and capital payments, it was not unreasonable to include such deferrals
within the cash flow forecasts based on the history of successful deferrals and the Directors’ long term
relationship with their shareholders.
• We obtained the Directors’ evaluation of the current and future impacts of the Russian geopolitical
situation on the Group’s operations and sanctions implemented against and by Russia and assessed the
impact thereof on the cash flow forecast.
• We reviewed and considered the adequacy and consistency of the disclosure within the consolidated
financial statements relating to the Directors’ assessment of going concern basis of preparation.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement
team. In addition to the matter described in the Material uncertainty related to going concern section of our report,
we have determined the matter below to be the key audit matter to be communicated in our report These matters
were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Page | 4
Key audit matter
How the scope of our audit addressed the key audit matter
Carrying
value of
Mineral
Properties
and Plant
and
Equipment
Refer to the
accounting
in
policies
note 2 and
detailed
disclosure in
note 9 and 10
The Group’s project mining
assets, including capitalised
mineral property and property,
plant and equipment represent
the Group’s most significant
assets.
At the year-end, Management
performed an impairment test
to determine the recoverable
amount of its mining
properties. The recoverable
amount was determined with
reference to a discounted cash
flow which is based on
estimates of future cash flows.
Given the significant estimates
regarding silver and other
commodity prices, foreign
exchange rates, reserves and
resources, production levels,
operating and development
costs and capital expenditure
as well as economic variables
such as discount rates, and the
material value of the mining
assets we consider the
carrying value of the Mineral
Properties and Plant and
Equipment to be a significant
audit risk and a key audit
matter.
Our procedures included the following:
• Visiting the Mangazeisky mine site to understand the
operations, verify the existence of the assets and
discuss future mine operating plans with technical
management.
• We obtained management’s discounted cash flow
models and performed data integrity and mechanical
checks on the models using our proprietary tool.
• We determined that the basis of preparation of the
models was in line with the applicable accounting
standards, our expectations and valuation
methodology.
• We compared the actual performance during 2021 to
budgets for the period in order to assess the quality
of management’s forecasting.
• We critically challenged the NPV model, focussing
on the appropriateness of estimates with reference to
empirical data and external evidence with specific
emphasis on the following assumptions: silver prices,
foreign exchange rates, reserves and resources and
production levels, operating and development costs,
capital expenditure and discount rates.
• We benchmarked forecast silver and other
commodity prices against publicly available third-
party information.
• We reconciled the production profiles and capital
expenditure forecasts to the third-party Competent
Person’s report and approved budget for 2022. We
obtained explanations for any differences and
corroborated differences to relevant support.
• We reconciled the resources used in the life of mine
model to the updated mineral resources statement
included in the third-party Competent Person’s report
and performed procedures to assess their
independence, objectivity and competence.
• We reviewed management’s sensitivity analysis and
performed our own sensitivity analysis on key inputs
to assess the impact of changes in assumptions.
• We involved our internal valuations experts to
support our assessment of the discount rate applied
and discussed the judgments regarding the
calculation with the Audit Committee.
• We read the key licence agreements and confirmed
that the Group holds valid licences. We considered
management’s judgment that the exploration licence
would be capable of being extended beyond 2023
taking into consideration the legislative process and
risks and uncertainties within the operating
environments. We assessed the commitments and
obligations associated with the licences to confirm
compliance with the licences.
Page | 5
Key observations:
We found the judgements and estimates applied by
Management in preparing the forecasts to be supportable,
although the net present value remains sensitive to changes
in the key inputs set out above. We found Management’s
conclusion that no impairment charge was required as at 31
December 2021 to be supported by the underlying model.
Other information
The Directors are responsible for the other information including the Management Discussion and Analysis (MDA).
The other information comprises the information included in the annual report and accounts and the MDA, other
than the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the consolidated financial statements
As explained more fully in the Directors responsibility for financial reporting, the Directors are responsible for the
preparation and fair presentation of the consolidated financial statements, and for such internal control as the
Directors determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
Page | 6
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the Group audit. We remain solely responsible for the audit
opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Page | 7
Other Matter
The engagement partner on the audit resulting in this independent auditors’ report is Peter Acloque.
BDO LLP
Chartered Accountants
London, UK
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Page | 8
Silver Bear Resources Plc
Consolidated Statement of Financial Position
(Canadian dollars)
Note
31 December
2021
31 December
2020
ASSETS
Non-current assets
Property, plant and equipment
Mineral property
Intangible assets
Prepaid non-current assets
Other non-current assets
Total non-current assets
Current assets
Inventories
Receivables
Cash and cash equivalents
Prepaid expenses
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Non-current liabilities
Long-term loans
Asset retirement obligation
Lease obligation
Total non-current liabilities
Current liabilities
Advances received
Short-term loans
Account payable and accrued liabilities
Lease obligation
Total current liabilities
Total liabilities
Equity
Share Capital
Share Premium
Shareholders Contribution
Contributed surplus
Cumulative translation adjustment
Accumulated deficit
Total equity (deficiency)
TOTAL EQUITY AND LIABILITIES
10
9
8
6
7
5
4
3
6
13
14
12
13
11
12
15
15
15
78,949,060
10,247,095
180,583
881,469
4,040,580
94,298,787
18,473,628
3,670,038
1,879,447
2,484,281
26,507,394
120,806,181
167,639,194
3,609,228
2,277,726
173,526,148
639
27,925,556
3,515,620
2,931,455
34,373,270
207,899,418
99,568,972
23,106,647
5,381,283
16,765,939
14,591,860
(246,507,938)
(87,093,237)
120,806,181
The accompanying notes are an integral part of these consolidated financial statements
74,096,536
11,923,604
299,528
2,871,150
2,965,765
92,156,583
18,134,273
3,050,392
1,302,165
2,789,641
25,276,471
117,433,054
165,062,833
4,040,784
1,237,793
170,341,410
144
3,085,133
3,682,160
1,688,373
8,455,810
178,797,220
99,561,998
22,570,500
5,381,283
16,960,163
13,460,394
(219,298,504)
(61,364,166)
117,433,054
Page | 9
The financial statements on pages 35 to 77 were approved by the Board of Directors on 8 July 2022, and
signed on its behalf by:
“Vadim Ilchuk”
_______________________________
Vadim Ilchuk
Director, President, CEO
“Maxim Matveev”
_______________________________
Maxim Matveev
Director
Page | 10
Silver Bear Resources Plc
Consolidated Statement of Comprehensive Profit/(Loss)
For the years ended 31 December 2021 and 2020
(Canadian dollars)
Note
18
5
18
7
17
17
19
19
25
Revenue:
Metal Sales
Cost of Sales:
Production cost
Depreciation and amortization
Impairment of inventory
Gross (loss)/profit
Exploration and evaluation expenses
General and administrative expenses
Write-off other non-current assets
Write-off of PPE
Other income
Other expenses
Operating loss
Finance income
Finance expenses
Foreign exchange loss
Loss before tax
Tax charge
Loss for the year
Other comprehensive loss
Items, that may be reclassified subsequently to profit or
loss:
Exchange differences on translating foreign operations
Total comprehensive loss for the year
2021
2020
45,315,268
51,887,094
(36,612,528)
(10,330,423)
-
(1,627,683)
(16,738)
(4,154,745)
(909,898)
(180,418)
503,766
(1,855,944)
(8,241,660)
24,129
(18,098,949)
(1,144,304)
(27,460,784)
(30,190,696)
(19,444,324)
(347,057)
1,905,017
(122,568)
(3,832,518)
-
(9,495)
486,274
(2,083,075)
(3,656,365)
8,069,035
(17,873,567)
(33,539,947)
(47,000,844)
(17,754)
(27,478,538)
(10,782)
(47,011,626)
1,131,466
(26,347,072)
15,701,375
(31,310,251)
Basic and diluted loss per ordinary share, cents per
ordinary share
15
(0.04)
(0.07)
The accompanying notes are an integral part of these consolidated financial statements
Page | 11
Silver Bear Resources Plc
Consolidated Statement of Changes in Equity
For the years ended 31 December 2021 and 2020
(Canadian dollars)
Share capital
Share
premium
Shareholder’s
contribution
Contributed
surplus
Cumulative
translation
adjustment
Accumulated
Deficit
Total equity
Balance - 31 December 2019
99,559,336
22,410,054
5,381,283
16,975,267
(2,240,981)
(172,416,878)
(30,331,919)
Net loss for the period
Other comprehensive profit:
Cumulative translation adjustment
Comprehensive loss for the period
Shares issued under share subscription
plan, Note 15
Shares issued under share bonus plan,
Note 15
Share-based payments, Note 15
Cancelled and expired options, Note 15
Balance - 31 December 2020
Net loss for the period
Other comprehensive profit:
Cumulative translation adjustment
Comprehensive loss for the period
Shares issued under share subscription
plan, Note 15
Shares issued under stock option plan,
Note 15
Share-based payments, Note 15
Cancelled and expired options, Note 15
Balance - 31 December 2021
-
-
-
-
-
-
2,234
160,446
428
-
-
-
-
-
-
-
-
-
-
-
-
-
-
114,896
(130,000)
-
(47,011,626)
(47,011,626)
15,701,375
15,701,375
-
15,701,375
(47,011,626)
(31,310,251)
-
-
-
-
162,680
-
130,000
428
114,896
-
99,561,998
22,570,500
5,381,283
16,960,163
13,460,394
(219,298,504)
(61,364,166)
-
-
-
-
-
-
6,862
524,736
-
-
-
-
-
-
-
-
-
(27,478,538)
(27,478,538)
1,131,466
1,131,466
-
1,131,466
(27,478,538)
(26,347,072)
-
-
531,598
112
-
-
99,568,972
11,411
-
-
23,106,647
-
-
-
5,381,283
(12,340)
86,403
(268,287)
16,765,939
-
-
-
14,591,860
817
-
268,287
(246,507,938)
-
86,403
-
(87,093,237)
The accompanying notes are an integral part of these consolidated financial statements
Page | 12
Silver Bear Resources Plc
Consolidated Statement of Cash Flow
For the years ended 31 December 2021 and 2020
(Canadian dollars)
Cash provided by (used in)
Operating activities
Total loss for the year
Adjustments for items not affecting cash:
Depreciation
Amortization
Share-based payments (Note 18)
Accretion expenses
Unrealized FX movement
Write-off of PPE
Write-off of other non-current assets (Note 7)
Impairment of inventory
Non-substantive modification gain (Note13)
Interest income (Note 19)
Interest expense (Note 19)
Net change in non-cash working capital (Note 20)
Net cash generated from operations
Purchases of property, plant and equipment (Note 10)
Purchases of intangible assets
Exploration and evaluation capital expenditure (Note 10)
Interest income
Net cash used in investing activities
Repayment of principal on lease obligations
Repayment of interest on lease obligations
Short-term and long-term loans drawn (Note 13)
Short-term and long-term loans Interest repayment (Note 13)
Net cash generated from/(used in) financing activities
Effect of exchange rate changes on cash and cash equivalents and
translation differences
Increase/(decrease) 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
2021
2020
(27,478,538)
(47,011,626)
10,237,558
212,980
86,403
235,090
1,144,304
180,418
909,898
-
-
(24,129)
17,863,859
(1,009,107)
2,358,736
(9,288,040)
(96,938)
(722,532)
24,129
(10,083,381)
(3,229,861)
(837,496)
12,752,624
(699,242)
7,986,025
315,902
577,282
1,302,165
1,879,447
19,364,209
151,081
114,896
230,207
33,539,947
-
-
347,057
(8,050,595)
(18,440)
17,643,360
(3,891,869)
12,418,227
(7,504,308)
(168,645)
-
18,440
(7,654,513)
(3,082,029)
(524,505)
2,351,454
(6,855,421)
(8,110,501)
(795,336)
(4,142,123)
5,444,288
1,302,165
1,879,447
1,302,165
Page | 13
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
1. NATURE OF OPERATIONS
Silver Bear Resources Plc was incorporated in United Kingdom on 14 March 2017 under the Companies Act 2006, registered office
address 2nd Floor Regis House, 45 King William Street, London, United Kingdom, EC4R 9AN.
Silver Bear Resources Plc became the parent company of Silver Bear Resources Inc. on 30 June 2017 following a plan of
arrangement transaction involving a one-for-one share exchange of all then outstanding common shares of Silver Bear Resources
Inc. for ordinary shares of Silver Bear Resources Plc.
Silver Bear Resources Plc became the direct parent company of AO Prognoz on 16 November 2020. AO Prognoz was acquired
from Silver Bear Resources B.V. following a plan of reorganization of the Group structure.
Silver Bear Resources Inc. was incorporated under the Business Corporations Act of the Province of Ontario, Canada, on 8 April
2004 and continued under Articles of Continuance dated 30 August 2004 under the Business Corporations Act (Yukon) and 1
February 2005 under the Business Corporations Act (Ontario).
The primary business of the Group is the acquisition, exploration, evaluation and development of precious metal properties. The
head office of the Group is registered in London, United Kingdom. The strategy of the Group is to focus on the exploration and
development of precious metal deposits. The principal asset of the Group is its right to explore and develop the Mangazeisky project
(“Mangazeisky”), located approximately 400 kilometers north of Yakutsk in the Republic of Sakha (Yaktutia), in the Russian
Federation. On June 22, 2018, the Group announced that it had achieved first silver production in April 2018 as a result of its
commissioning activities.
Under the license No. YAKU 12692 BP registered on September 28, 2004, the Group carries out a geological study of the Endybal
area - prospecting and evaluation of silver and gold deposits. According to Supplement No. 1, registered on 12 September 2016, the
expiry date of the above license is 31 December 2023. The license area is located on the territory of the Kobyai region of the Republic
of Sakha (Yakutia).
In 2013, the Group obtained a subsoil license No. YAKU 03626 BE, registered on August 28, 2013, for the exploration and production
of silver, copper, lead, zinc at the Vertikalny deposit. The license area is located on the territory of the Kobyai region of the Republic
of Sakha (Yakutia). The license expires on September 1, 2033. In 2015 the Group 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 1 July 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.
2. BASIS OF PREPARATION
These audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS.
The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). The Group 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 audited consolidated financial statements comprise the financial statements of Silver Bear Resources Plc and its 100% owned
subsidiaries: Silver Bear Resources Inc. (a Canadian corporation), Silver Bear Resources B.V. (a Netherlands corporation) and AO
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 8
July 2022.
The financial information for the year ended 31 December 2021 and the year ended 31 December 2020 does not constitute the
company's statutory accounts for those years. Statutory accounts for the year ended 31 December 2019 have been delivered to the
Registrar of Companies. The statutory accounts for the year ended 31 December 2020 will be delivered to the Registrar of Companies
in due course. The auditors' reports on the accounts for 31 December 2020 is unqualified but draw attention to matters by way of
emphasis in relation to going concern and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The auditors'
reports on the accounts for 31 December 2019 is unqualified but draw attention to matters by way of emphasis in relation to going
concern and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006Basis of consolidation
Following Silver Bear Resources Plc becoming the parent company of the Group (as detailed in note 1) and becoming direct parent
of AO Prognoz, these transactions were not treated as a business combination under IFRS 3 “Business combinations” but was
considered as a capital reorganisation, as these entities are under common control.
Page | 14
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
2. BASIS OF PREPARATION (Continued)
Basis of consolidation
Following Silver Bear Resources Plc becoming the parent company of the Group (as detailed in note 1) and becoming direct parent
of AO Prognoz, these transactions were not treated as a business combination under IFRS 3 “Business combinations” but was
considered as a capital reorganisation, as these entities are under common control.
On 22 April 2021 Silver Bear Resources B.V. (a Netherlands corporation) was liquidated. Impact on financial statement was nil, as it
was empty company.
The consolidated financial statements of Silver Bear Resources Plc are presented using the values from the consolidated financial
statements of Silver Bear Resources Inc. The equity structure (that is, the issued share capital) reflects that of Silver Bear Resources
Plc, with other amounts in equity being those from the consolidated financial statements of the previous group holding entity, Silver
Bear Resources Inc. The resulting difference that will arise was recognised as a component of equity.
Going Concern
These audited consolidated financial statements have been prepared on a going concern basis which contemplates that the Group
and Company will be able to realize its assets and settle its liabilities in the normal course as they come due for a period of at least
12 months form the date of approval of the financial statements.
The Directors have prepared a cash flow forecast for the 18 month period from the date of approval of these financial statements.
Cash forecasts for the Group and Company are regularly produced based on management's best estimate of:
• The Group's production and expenditure forecasts;
• Future silver prices; and
• Foreign exchange rate.
The ability of the Group and Company to operate as a going concern is dependent upon future production volumes and silver prices
as they impact cash flows required to both fund working capital and meet the Group’s and Company’s liabilities as and when they fall
due. These are in turn also impacted by the geopolitical situation between Russia and Ukraine, and the uncertain future potential
impacts of Sanctions.
The Group’s and Company’s cash flow forecast was run with average silver price of $US 23.5/oz for 2022 and 25.0/oz for 2023 based
on independent forecasts for silver sold in Russia.
The Directors have analysed the Group’s and Company’s expected liquidity position over the forecast period and believe that it is
reasonable to apply the going concern principle for the preparation of the Group’s and Company’s financial statements. When
assessing the going concern status, the Directors have taken into consideration the following factors:
-
-
-
-
As at 31 December 2021, the Group had $1,879,447 (2020: 1,302,165) cash and cash equivalents, and net current liabilities
of $7,865,876, (2020: net current assets $16,820,661). These current liabilities include short-term loans and interest from
short and long-term loans from major shareholders.
In addition to the current liabilities, the Group has long term debt of $167,639,194 with its major shareholders, Inflection
and Aterra, for which interest accrues monthly that matures in 2023. The Group has agreed with major shareholder to
extend their loans to 2028, however for this to be executed it requires approval from TSX. While the Directors are confident
of obtaining this approval, at the date of signing these financial statements this approval had not been obtained.
In 2021 the Group generated total operating cash inflow of $2,358,736. Since year end there has been no deterioration is
production or sales as a result of the geopolitical situation between Russia and Ukraine or imposed sanctions.
In the Group’s cashflow forecast, the Directors have assumed that the Group is able to defer interest repayments on its
loans and obtain loan extensions from its shareholders for loans that matures in 2023. This forecast shows that cash
remains positive for the 18 month period from the date of approval of these financial statements. In the event that the
Group is unable to defer interest payments or obtain a loan extension from its shareholders the Group would have
insufficient cash to satisfy these liabilities.
Page | 15
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
2. BASIS OF PREPARATION (Continued)
Going concern (Continued)
- While there is currently no contracted written agreement to defer interest repayments to the Group’s shareholders, the
Group’s Directors note that in the past they have been successful in both securing financing from its Shareholders and
deferring interest repayments to them. For this reason and based on the Group’s long-term relationships with their
shareholders, the Directors have a reasonable expectation that they will be able to continue deferring interest payments
and obtaining loan extensions during the forecast period, and that additional funding will be received if required.
-
-
In the first half of 2022, due to the geopolitical situation between Russia and Ukraine multiple sanctions were declared against
Russia by Western countries. There are no sanctions against the Group, however sanctions that were implemented against
Russia meant some brands ceased their operations in Russia. The Directors have prepared a plan to respond to this risk
such as diversifying revenue channels and considering the use of aftermarket spare parts for mining equipment that can no
longer be sourced directly from suppliers. While the effect from the sanctions to date has had minimal impacts on the Group’s
operations, there is no certainty over the future impacts of sanctions imposed against Russia.
Also, in the first half of 2022 Russia implemented sanctions against Western countries. Since the Russian sanctions have
been implemented, capital controls have been put in place that put restrictions on payments outside of Russia. Given the
parent Company is reliant on cash from its Russian subsidiaries, this temporarily prevented the Parent Company fulfilling
its obligation to creditors. Subsequently the Parent Company has received cash from its subsidiary through management
service contracts which has enabled it to resume fulfilling its obligations to creditors. While the sanctions are in effect, the
Group will be unable to pay dividends from Russia to UK and further to shareholders. There is no certainty over the future
impact of sanctions imposed by Russia or Russian imposed capital controls.
In the light of the future potential impacts the Russian geopolitical situation and the resulting sanctions imposed by and against Russia
or the Russian imposed capital controls could have on the Group’s and Company’s operations, and in the absence of a contractual
agreement for the Group and Company to continue to defer interest and capital repayments on its loans from its shareholders, together
with the other factors described above, the Group’s and Company’s Directors have identified a material uncertainty relating to the
Group’s and Company's ability to maintain working capital liquidity to service the Group’s and Company's financing arrangements
which may result in the need for additional funding.
These material uncertainties may cast significant doubt upon the Group’s and Company’s ability to continue as a going concern.
Notwithstanding these material uncertainties, the Directors have a reasonable expectation that the Group and Company have
adequate resources to continue in existence for a period of at least 12 months form the date of approval of the financial statements
and have concluded it is appropriate to adopt the going concern basis of accounting in the preparation of the financial statements.
The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a
going concern.
Page | 16
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
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 the
functional currency of Silver Bear Resources Inc., and Silver Bear Resources B.V. Silver Bear Resources Plc has changed its
functional currency as of 1 January 2018 from Canadian dollars to Russian roubles when it was deemed that the majority of underlying
transactions now took place in roubles. Silver Bear Resources Plc functional currency is different to presentation currency, because
the group is listed on TSX and presentation of financial statements in Canadian dollars is considered to be beneficial for potential and
current shareholders in Canada. The financial statements of AO Prognoz have the Russian rouble as their functional currency. The
results of both Silver Bear Resources Plc and AO Prognoz 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 profit or 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.
Developing costs and licenses depreciated through unit of production basis calculated based on the ratio of silver ore mined during a
period to the total volume of silver ore to be mined based on the estimated commercial resources.
Asset associated with the obligation for environmental rehabilitation depreciated on straight line basis during life of mine.
Intangible assets
Intangible assets are carried at cost, less accumulated amortization. All intangible assets are amortized on a straight-line basis over
one to eleven years.
Property, plant and equipment
Property, plant and equipment are carried at cost, less accumulated depreciation and impairment losses.
Mining properties are depleted on ‘unit of production basis’ calculated based on the ratio of silver ore mined during a period to the
total volume of silver ore to be mined based on the estimated commercial resources. Commercial resources are mineral resources
that are considered probable of economic extraction and include measured, indicated and inferred resources. While inferred
resources have a lower degree of geological certainty, they are included in the depletion calculation due to the nature of the ore
body which enables their presence being able to be inferred without a high concentration of drilling
Leased equipment 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. Depreciation of
underlying property, plant and equipment which directly contributed the developing the mining properties are capitalized as additions
in mineral properties.
Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and
condition necessary for it to be capable of operating in the manner intended by management.
In order to determine whether the project is ready to operate as intended by management, judgement was applied taking into account
commercial production indicators such as pre-production output has reached a nominated percentage, the internal project
management team has transferred the mine to the operational team, the majority of the assets necessary for the mining project are
substantially complete and ready for use and the project’s ability to sustain commercial levels of production. These indicators provided
guidance to recognize that the mine development phase was ceased and the production phase commenced from 1 July 2019.
Page | 17
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
BASIS OF PREPARATION (Continued)
Exploration and development assets
Mineral exploration and evaluation costs, including geophysical, topographical, geological and similar types of costs, are capitalized
into exploration assets if management concludes that future economic benefits are likely to be realized based on current internal
assessment of exploration results and identified mineral resources.
In accordance with IFRS 6 Exploration for and evaluation of mineral resources, the potential indicators of impairment include:
management’s plans to discontinue the exploration activities, lack of further substantial exploration expenditure planned, expiry of
exploration licenses in the period or in the nearest future, or existence of other data indicating the expenditure capitalized is not
recoverable. At the end of each reporting period, management assesses whether such indicators exist for the exploration and
evaluation assets capitalized.
Exploration and evaluation expenditures are transferred to development assets when commercially-viable resources are identified,
respective mining plan and model are prepared and approved. At the time of reclassification exploration and evaluation assets are
assessed for impairment based on the economic models prepared.
The costs to remove any overburden and other waste materials to initially expose the ore body, referred to as stripping costs, are
capitalized as a part of development assets when these costs are incurred.
Impairment of non-financial assets
The Group reviews and evaluates the recoverable amount of its mineral properties, property, plant and equipment and other non-
current assets 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.
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 include 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 Group 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.
Page | 18
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
2. BASIS OF PREPARATION (Continued)
Significant Accounting Policies (Continued)
Financial instruments
Financial assets:
Financial assets within the scope of IFRS 9 are initially recognised at fair value and are classified financial assets at amortised cost.
The Group determines the classification of its financial assets at initial recognition.
The Group’s financial assets include cash and cash equivalents, accounts receivable. Regular purchases and sales of financial assets
are recognized on the trade-date, being the date on which the Group commits to purchase or sell assets.
The Group recognises a loss allowance for expected credit losses (‘ECL’) on financial assets that are measured at amortised cost
which comprise mainly trade receivables. The amount of expected credit losses is updated at each reporting date to reflect changes
in credit risk since initial recognition of the respective financial instrument. The Group always recognises lifetime ECL on trade
receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s
historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment
of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate
Financial assets are derecognized when the rights to receive cash flows from investments and the Group has transferred substantially
all risks and rewards of ownership.
Financial liabilities:
Financial liabilities within the scope of IFRS 9 are initially recognised at fair value and are classified as financial liabilities at fair value
through profit or loss, financial liabilities, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
The Group’s current 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,
short-term loans, lease liabilities and accounts payable and accrued liabilities approximate their recorded amounts because of their
short-term nature. The fair value of long-term loans and non-current lease liabilities is shown at their carrying values as any differences
are not material.
In determining if a modification of a financial liability is substantial, which includes a comparison of the cash flows before and after
the modification, discounted at the original effective interest rate (EIR), referred to as the ‘10% test’. If the difference between these
discounted cash flows is more than 10%, the financial liability is derecognized and a new financial liability recognized at fair value.
If, a modified financial liability does not result in derecognition, the original EIRs retained and the Group recalculates carrying
amount based on reviewed cash flow of financial liability and recognized modification gain or loss.
Gain on modification of shareholder loans is recognised either as finance income in the Consolidated Statement of Comprehensive
Profit / (Loss) or as an increase in shareholder contribution in Equity. Management makes assessment of each modification and if
change in terms, for example, reduction of interest rate, represents terms which are more favourable at the time than market and
indicative of the lender acting in capacity of shareholder, then it is recognised through shareholder contribution, otherwise, it is
recognised as finance income.
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.
Page | 19
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
2. BASIS OF PREPARATION (Continued)
Significant Accounting Policies (Continued)
Revenue recognition
Timing of recognition is governed by IFRS 15. Entity recognizes revenues when a performance obligation is satisfied, which is when
“control” of the goods has transferred to the customer. Control of goods is transferred at the point of time, when silver is passed to
the buyer at the refinery site. Payments terms allows 80% prepayment in advance and the remaining payment based on the final
Price, dependent on silver weight per Act of Acceptance and London price on London Market of metals, adjusted for the prepaid
amount under provisional price.
Current and deferred income Taxes
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years.
The Group 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.
The Group did not recognised deferred taxes raised during pre-production stage.
Earnings per share
Basic earnings per share is computed by dividing the profit/(loss) for the period by the weighted average number of common shares
outstanding.
Diluted earnings per share is computed by dividing the profit/(loss) for the period by the diluted weighted average number of common
shares outstanding.
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 15. 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 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, using the average exchange rate prevailing for that period. Translation differences associated
with borrowings costs are expensed.
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.
Page | 20
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
2. BASIS OF PREPARATION (Continued)
Significant Accounting Policies (Continued)
Inventories
Costs incurred in bringing each product to its present location and conditions are accounted for as follows:
Raw materials: purchase price plus transportation cost plus any applicable customs duties and taxes.
Ore stockpiles comprises direct labour, other direct costs and related production overheads (based on normal operating capacity) but
excludes borrowing costs.
The cost of silver for sale and silver in circuit comprises raw materials, direct labour, other direct costs and related production
overheads (based on normal operating capacity) but excludes borrowing costs.
Inventories are accounted for using weighted average basis. Net realizable value is the estimated selling price in the ordinary course
of business, less estimated costs of completion and the estimated costs necessary to make the sale.
Inventories related to construction supplies accounted as other non-current assets.
Inventory measured at lower of cost and net realisable value.
Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
Leases of low value assets; and leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount
rate determined by reference to the rate inherent in the lease.
On initial recognition, the carrying value of the lease liability also includes amounts expected to be payable under any residual value
guarantee, the exercise price of any purchase option granted in favour of the group if it is reasonably certain to assess that option,
any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being
exercised.
Lease liabilities accounted under a separate line in financial statement.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased
for:
Lease payments made at or before commencement of the lease, initial direct costs incurred and the amount of any provision
recognised where the group is contractually required to dismantle, remove or restore the leased asset.
Right of the use assets related to mining equipment under leased contracts are disclosed in property plant and equipment.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining
term of the lease.
Amounts payable for leases covered by the short-term exemption are charged to the income statement on a straight-line basis over
the term of the relevant lease.
Page | 21
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
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 AO Prognoz, an operating subsidiary of the Group, 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.
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 Group.
The functional currency of Silver Bear Resources Plc changed from Canadian dollars to Russian rouble in 2018 as it is now
deemed that the majority of underlying transactions for this entity are undertaken in roubles and therefore it is appropriate
for this to be its functional currency.
The functional currency of Silver Bear Resources Inc. has been determined to be the Canadian Dollar reflecting the current
principal equity and financing structure.
• Modification gain on shareholder contribution (prior year)
On 26 May 2020, the Group’s major shareholders Aterra and Inflection agreed to further reduce the interest rate applicable
to all funds drawn under the Facilities Agreement, as amended, from 9% to 7% per annum and capitalize accrued interest
to the principals of loans effectively from 1 April 2020. As this reduction of interest rate was reflective of market conditions
having been benchmarked against Russian bank lending rates offered to the Group it has been recognized through finance
income.
31 December 2020, the Group further amended its existing Facilities Agreement major shareholders Aterra and Inflection,
extending the maturity dates of certain components of Tranches F, G, H and I, issued by Inflection from 31 July 2021 and 20
September 2022, as applicable, to 1 January 2023. The modification of the loan in 31 December 2020 was considered to be
non-substantial modification resulting in a gain that was recognized in finance income of $233,058.
There was no amendments to loans in 2021.
On 20 January 2022, the Group announced an amendment to its existing loan agreement between the Company’s wholly-
owned subsidiary, Joint Stock Company Prognoz, and SKA Assets with respect to a loan in the principal amount of
750,000,000 rubles (equivalent to approximately C$12,000,000) by extending the maturity date of the loan from 31 December
2021 to 31 December 2022 and increasing the interest rate of the loan from 8.27% per annum to 10.27% per annum effective
from 01 January 2022 (“SKA Loan Amendment”). All other provisions of the Loan Agreement have remain unchanged. The
Company filed a material change report in respect to the SKA Loan Agreement on 20 January 2022. (Note 13). As this
change was effective in 2022 there is no impact of this modification in the 2021 financial statements.
Page | 22
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
2. BASIS OF PREPARATION (Continued)
Significant Accounting Policies (Continued)
Key sources of estimation uncertainty:
• Mineral resource estimate
Mineral resource estimates are estimates of the amount of silver that can be economically and legally extracted from the
Group’s mining properties. Such resource estimates and their changes may impact the Group’s reported financial position
and results in the following ways:
(a) The carrying value of exploration and evaluation assets, mining properties and property, plant and equipment may be
affected due to changes in estimated future cash flows.
(b) Depreciation and amortisation charges in the statement comprehensive income may change where such charges are
determined using the unit of production method.
(c) Provisions for rehabilitation and environmental provisions may change where resource estimate changes affect
expectations about when such activities will occur and the associated cost of these activities.
The Group estimates mineral resources based on information compiled by appropriately qualified Competent Persons
relating to the geological and technical data on the size, depth, shape and grade of the ore body and suitable production
techniques and recovery rates. Such an analysis requires complex geological judgements to interpret the data. The
estimation of recoverable resources is based upon factors such as estimates of foreign exchange rates, commodity prices,
future capital requirements and production costs, along with geological assumptions and judgements made in estimating
the size and grade of the ore body.
The Group reviews its mineral resource estimates on regular basis and as at 1 April 2020 the Group obtained a mineral
resource (not reserve) estimate from a third party, Wardell Armstrong. Wardell Armstrong has issued their report on 10
November 2021 the delay in issuing report due to COVID-19 travel restrictions. This report has superseded the Companies
previous estimate of recoverable reserves and resources that was prepared in 2017.
The difference between a resource statement (as obtained in 2020) and reserves and resources statement (as obtained
previously in 2017) is the level of confidence of the presence of economically viable minerals.
•
Impairment of mineral properties and property, plant and equipment
The carrying value of mineral properties and property, plant and equipment is $10,247,095 and $78,949,060, respectively,
as disclosed in Note 9 and Note 10. While assessing whether any indications of impairment exist for mineral properties,
consideration is given to both external and internal sources of information. Information that management considers includes,
changes in the market, and changes in the economic and legal environment in which the Group 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 Group’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 Group’s mineral properties.
On 22 June 2020, the Group announced that it has received a draft report from Wardell Armstrong (Moscow) that provides
a review of the Company’s current mineral resources, as well as draft revised mine and processing plans, for its Vertikalny
and Mangazeisky North deposits. The Group had previously disclosed that it had engaged Wardell Armstrong (Moscow) to
conduct this review of the mineral resources as well as reassessing mine and processing plans for these deposits. Wardell
Armstrong (Moscow) have issued their final report on 10 November 2021.Following additional exploration activities, this
included a material change in the mineral resource estimates of both Vertikalny and Mangazeisky North deposits.
In accordance with IAS 36, the impairment review was undertaken.
Page | 23
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
2. BASIS OF PREPARATION (Continued)
Significant Accounting Policies (Continued)
•
Impairment of mineral properties and property, plant and equipment (continued)
Key Assumption used in the impairment test:
•
•
•
•
•
The economic life of the Vertikalny and Mangazeisky North deposits is currently expected to be around 2028 as per
management’s expectation as of 31 December 2021. While the Mangazeisky North deposit licence expires in 2023, the
directors have a high degree of confidence that it will be extended given the renewal process is routine.
For the following seven years Silver price is US$24.7/ounce as per management’s expectation as of 31 December 2021.
For the following seven years RUB/USD foreign exchange rate 75 as per management’s expectation as of 31 December
2021.
For the following seven years Annual inflation of costs expressed in USD is 2% as per management’s expectation as of 31
December 2021.
For the following seven years Annual inflation of costs expressed in RUB is 4% as per management’s expectation as of 31
December 2021.
• Post tax nominal discount rate of 10.8% (pre-tax of 13.5%). This was based on a Capital Asset Pricing Model analysis.
•
The situation in Ukraine is considered to be a non- adjusting post balance sheet event.
Based on the key assumptions set out above:
The recoverable amount of Vertikalny and Mangazeisky North deposits ($93.26 mln) exceeds its carrying value of the mining assets
less asset retirement obligation of ($88.91 mln) by $4.35 mln and therefore assets were not impaired.
Sensitivity analysis:
Impact if metal prices
Impact if RUB/USD exchange rate
Impact if future capex
Impact if post-tax discount rate:
Increased by 20%
Decreased by 20%
Increased by 20%
Decreased by 20%
Increased by 20%
Decreased by 20%
Increased by 20%
Decreased by 20%
In millions of CAD
71
(74)
32
(50)
(9)
9
(6)
7
Page | 24
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
2. BASIS OF PREPARATION (Continued)
Significant Accounting Policies (Continued)
• Depreciation rates
Once a mine development phase ceases and the production phase commences mining assets are depreciated using a unit-
of production method based on estimated economically recoverable resources, which results in a depreciation charge
proportional to the depletion of reserves.
The Group proven and probable mineral reserves at the beginning of commercial production was 717 thousand tonnes,
depletion for the period 1 July 2019 - 31 March 2020 was 95 thousand tonnes.
Starting from 1 April 2020 management of the group has changed its depreciation base for the unit of production method
from mineral reserves to mineral resources. In making this change, the UoP calculation has been adjusted to include the
estimated future costs to access and process resources expected to be converted to reserves. The most material impact of
this is in respect of costs required to enable the processing facility to process sulphide ores that will be mined in the future,
in addition to the oxide ores currently being processed. Management believes that this change in accounting estimate
represent the most accurate and fair view for the depreciation charge calculation.
On 1 April 2020, the change in accounting estimate occurred, resources were 810 thousand tonnes and depletion for the
period 1 April 2020 - 31 December 2020 was 79 thousand tonnes.
On 1 January 2021 the change in accounting estimate occurred, management reassess estimation of existing resources
based on available data and resources used for “life of mine model” were 1,504,232 tonnes. This estimation includes
“inferred” resources, that was not included into Wardell Armstrong mineral resource report. Depletion for the period was 90
tonnes.
The effect of changing in estimate is decreasing depreciation charge for the year from $17,110,528 to $10,330,423. The
effect in future periods is not disclosed because estimating it is impracticable.
• Rehabilitation provisions and asset retirement obligations
The carrying value of the asset retirement obligation is $3,609,228 as disclosed in Note 14. Exploration and development
activities carried out by the Group 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 for a
7-year zero coupon year bond is used in discounting future cash flows as a pre-tax discount rate.
The expected life of the mine is used as the discounting period. If the estimated discount rate used in the calculation had
been higher for 20% than the management estimate, the carrying amount of the provision would have been lower for
$346,813 and the interest expense higher for $23,450.
•
Ore stocks
Stock is valued at the lower of cost or net realisable value. Costs that are incurred in or benefit the production process are
accumulated as ore stockpiles, silver in process and silver bullion. Although the quantities of recoverable metal are reconciled
by comparing the grades of ore to the quantities of silver actually recovered (metallurgical balancing), the nature of the
process inherently limits the ability to precisely monitor recoverability levels. Net realisable value tests are performed at least
annually and represent the estimated future sales price of the product based on contained silver and metals prices, less
estimated costs to complete production and bring the product to sale. These net realisable tests take into account
management’s estimate of the maximum values to be realised from ore stockpiles, in some instances through blending of
different ore stockpile grades, prior to these being added to future processing plant feeds. Judgement is required in assessing
whether stockpiles of different grades should be tested individually, or tested as inputs to the silver production process.
Page | 25
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
2. BASIS OF PREPARATION (Continued)
New standards adopted by the Group
There were no new accounting standards that became applicable for annual reporting periods commencing on or after 1
January 2021.There is no material impact on the Group, related to the Interest Rate Benchmark Reform (amendments to
IFRS 9Financial Instruments) and impact of the initial application of COVID-19-Rent Concessions beyond 30 June 2021
(amendment to IFRS 16 Leases), as these amendments are not applicable to the Group.
New accounting standards issued but not yet effective
The following amendments to the accounting standards were in issue but not yet effective as of date of authorization of these
consolidated financial statements:
• IFRS 9 Financial Instruments Amendments resulting from Annual Improvements to IFRS Standards 2018–2020 (fees in
the ‘10 percent’ test for derecognition of financial liabilities), effective for annual periods beginning on or after 1 January 2022;
• Amendments to IAS 1Presentation of Financial Statements regarding the classification of liabilities as current and non-
current, effective for annual periods beginning on or after 1 January 2023;
• Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets regarding the costs to include when
assessing whether a contract is onerous, effective for annual periods beginning on or after 1 January 2022;
• IFRS 17 Insurance Contracts, effective for annual period beginning on or after 1 January 2023 with earlier application
permitted;
• Amendments to IAS 1 and IFRS Practice Statement 2 requiring that an entity discloses its material accounting policies,
instead of its significant accounting policies, effective for annual period beginning on or after 1 January 2023 with earlier
application permitted;
• Amendments to IAS 8 replacing the definition of a change in accounting estimates with a definition of accounting estimates,
effective for annual period beginning on or after 1 January 2023 with earlier application permitted;
• Amendments to IAS 12 clarifying that the initial recognition exemption does not apply to transactions in which equal amounts
of deductible and taxable temporary differences arise on initial recognition, effective for annual period beginning on or after
1 January 2023 with earlier application permitted; and
• Amendments to IFRS 10 Consolidated Financial Statements and IAS 28Investments in Associates and Joint Ventures
regarding the sale or contribution of assets between an investor and its associate or joint venture, the effective date of the
amendments has yet to be set. However, earlier application of the amendments is permitted.
The Group has determined these standards and interpretations are unlikely to have a material impact on its consolidated
financial statements or are not applicable to the Group.
.
Page | 26
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
3. CAPITAL MANAGEMENT AND FINANCIAL RISK FACTORS
The Group manages its capital structure and makes adjustments to it, based on the funds available to the Group, in order to support
the current production operations, acquisition, exploration and development of precious metal properties.
The Group 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 Group’s management
to sustain the future development of the business.
The property in which the Group currently has an interest is in production stage.
In order to fund the ongoing development activities, the Group will spend existing working capital and plans to raise additional amounts
as needed through equity and/or debt. The Group 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 Group, is reasonable.
There were no changes in the Group’s approach to capital management during the period ended 31 December 2021 compared to
the year ended 31 December 2020. The Group is not subject to externally imposed capital requirements.
FINANCIAL RISK FACTORS
The Group is exposed to credit and liquidity risks and market risk. The risk management policies employed by the Group to manage
these risks are discussed below:
Market risk
The Group takes on exposure to market risks. Market risks arise from open positions in (a) silver prices (b) foreign currencies,
(c) interest bearing assets and liabilities and (d) equity products, all of which are exposed to general and specific market movements.
Management sets limits on the value of risk that may be accepted, which is monitored on a daily basis. However, the use of this
approach does not prevent losses outside of these limits in the event of more significant market movements.
Sensitivities to market risks included below are based on a change in a factor while holding all other factors constant. In practice this
is unlikely to occur and changes in some of the factors may be correlated – for example, changes in interest rate and changes in
foreign currency rates.
Credit risk
The Group has no significant concentration of credit risk arising from operations. Cash equivalents consist of interest earning bank
accounts held in banks in the Russia and Canada which in the presentational currency total $1,853,168 (2020: $1,275,402) and
$26,279(2020: $26,763), respectively. The Group’s Canadian chartered banks have a credit rating of at least A2 (Moody’s). At 31
December 2021 the Group’s Russian banks have a credit rating of at least ba1 (Moody’s) same as in comparative period.
Miscellaneous receivables other than tax refunds due from the Canadian and Russian tax authorities are insignificant.
The Group and Company’s maximum exposure to credit risk by class of individual financial instrument is shown in the table below:
Receivables from customers
Cash and cash equivalents
Group
31 December 31 December
2020
1,350,634
1,302,165
2,652,799
2021
1,244,898
1,879,447
3,124,345
Company
31 December
2021
284,528
28,503
313,031
31 December
2020
386,756
81,897
468,653
Management believes that the credit risk concentration with respect to accounts receivable is not higher than the country credit risk.
Page | 27
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
3. CAPITAL MANAGEMENT AND FINANCIAL RISK FACTORS (Continued)
Liquidity risk
The Group’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. The Group’s current
assets and current liabilities are show in the table below:
Total current assets
Total current liabilities
31 December 31 December
2020
2021
26,507,394
34,373,270
25,276,471
8,455,810
As at 31 December 2021 the Group had total current assets of $26,507,394 (31 December 2020 – $25,276,471) to settle total current
liabilities of $34,373,270 (31 December 2020 – $8,455,810), as well as its commitments outlined in Note 21. Total liabilities of
$207,899,418 include long-term loans totalling $170,705,444 , fair value gain on modification of loans of $3,066,250 and accrued
interest of $15,169,075 on long-term shareholders loans.
As at 31 December 2021, the Group had cash balances of $1,879,447 (31 December 2020 – $1,302,165)
The Group had total lease obligations of $5,209,181 at 31 December 2021 (31 December 2020 – $2,926,166) under a combination
of three and five-year leases for equipment in relation to the development of Mangazeisky, as outlined in Note 12.
The contractual maturities of the Group’s financial liabilities (which are all carried at amortised cost) are shown in the table below:
31 December
2021
Current liabilities
Accounts payable & accrued
liabilities
Short-term loans principal
Short-term loans interest
Lease liabilities
Non-current liabilities
Long-term loans principal
Long-term loans interest
Lease liabilities
Carrying
amount
Contractual cash
flows
6 months or
less
6 to 12
months
12 to 36
months
36 to 72
months
3,515,620
12,667,507
15,258,049
2,931,455
167,639,194
-
2,277,726
204,289,551
3,515,620
12,667,507
28,022,810
3,426,188
170,705,444
2,568,159
2,439,383
223,642,939
3,515,620
21,385,452
1,791,088
-
12,667,507
6,637,358
1,635,100
-
-
-
-
-
26,839,850 21,090,103
170,705,444
2,568,159
2,439,383
175,712,986
-
-
-
-
-
The Group has agreed with major shareholder to extend the long term debt of $167,639,194 with its major shareholders, Inflection
and Aterra, that currently matures in 2023, to 2028, however for this to be executed it requires approval from TSX. While Management
are confident of obtaining this approval, at the date of signing these financial statements this approval had not been obtained.
31 December
2020
Current liabilities
Accounts payable & accrued liabilities
Loans interest
Lease liabilities
Non-current liabilities
Long-term loans principal
Long-term loans interest
Lease liabilities
Carrying
amount
Contractual
cash flows
6 months
or less
6 to 12
months
12 to 36
months
36 to 72
months
3,682,160
3,085,133
1,688,373
3,682,160
18,139,540
1,973,324
3,682,160
12,059,986
1,081,516
-
6,079,554
891,808
-
-
-
-
165,062,833 172,460,849
11,696,534
1,321,378
174,756,292 209,273,785
-
1,237,793
-
-
16,823,662
- 172,460,849
-
-
11,696,534
-
1,321,378
-
6,971,362 13,017,912 172,460,849
Page | 28
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
3. CAPITAL MANAGEMENT AND FINANCIAL RISK FACTORS (Continued)
Interest rate risk
The Group has cash balances and interest-bearing debt on short term loans and long-term loans at commercial fixed rates. The
Group’s current policy is to invest excess cash in interest-earning bank accounts with Canadian and Russian financial institutions.
The Group periodically monitors the investments it makes and is satisfied with the credit ratings of its banks.
Foreign currency risk
The Group has funded certain exploration, project construction and administrative expenses on a transaction by transaction basis
using U.S. dollar and Russian ruble. USD funding has been provided directly to AO Prognoz in Russia and converted to Russian
ruble. This exposes the Group to changes in foreign exchange rates for U.S. dollar and Russian ruble.
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s
borrowings (when borrowing is denominated in a different currency from functional currencies of the Group companies).
31 December 2021
31 December 2020
GBP
USD
CAD
EUR
GBP
USD
CAD
EUR
Current assets:
Cash and cash equivalents
Receivables
Total current assets
Current liabilities:
2
-
2
Accounts payable and accrued liabilities
273,679
-
273,679
Lease liabilities
Total current liabilities
Non-current liabilities:
Long-term loans
Lease liabilities
Total non-current liabilities
4,759
-
4,759
109,890
808,753
918,643
21,941
-
21,941
-
-
-
49
-
49
7,792
22,282
-
-
7,792
22,282
-
-
-
58,304
134,284
215,442
739,781
60,346
13,451
-
-
-
778,864
-
58,304
134,284
215,442
1,518,645
60,346
13,451
-
-
-
182,808,269
113,764
182,922,033
-
-
-
-
-
-
-
-
168,147,966
943,451
169,091,417
-
-
-
-
-
The following table presents sensitivities of profit and loss to reasonably possible changes in exchange rates applied at the end of the
reporting period relative to the functional currency of the respective Group entities, with all other variables held constant:
31 December
2021
31 December
2020
Impact on profit or loss
Impact on profit or loss
US Dollar strengthening by 20% (2020: strengthening by 20%)
US Dollar weakening by 20% (2020: weakening by 20%)
CAD strengthening by 20% (2020: strengthening by 20%)
CAD weakening by 20% (2020: weakening by 20%)
GBP strengthening by 20% (2020: strengthening by 20%)
GBP weakening by 20% (2020: weakening by 20%)
EUR strengthening by 20% (2020: strengthening by 20%)
EUR weakening by 20% (2020: weakening by 20%)
(37,437,427)
37,437,427
(1,127)
1,127
(55,103)
55,103
(27,041)
27,041
(38,059,125)
38,059,125
(1,321)
1,321
(49,738)
49,738
(2,906)
2,906
Page | 29
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
4. RECEIVABLES
Russian Value Added Tax
Deferred Russian Value Added Tax
Receivables from customers
31 December
2021
1,531,695
893,445
1,244,898
3,670,038
31 December
2020
1,411,585
288,173
1,350,634
3,050,392
Deferred Russian Value Added Tax relates to the VAT paid on acquisition of materials and services and the costs incurred on the
construction of both building and technological equipment. This VAT can be claimed once the assets the VAT relates to are ready for
use. The VAT recognized here is on assets that are expected to be available for use in the first quarter of 2022 therefore the asset
has been recognized as current.
The amount of VAT recovered in cash during the period was RUB 383,631,294 (CAD: $6,523,074). All VAT is expected to be received.
Receivables from customer mainly consist of receivables from fuel sales. Sales of fuel was accounted on net basis in other income,
which comprise of the selling price less cost of fuel.
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
Reagents
Silver for sale
Ore stockpile
Silver in circuit
31 December
2021
3,247,752
7,724,864
3,086,556
236,898
559,810
3,617,748
18,473,628
31 December
2020
3,515,118
3,800,097
3,037,333
174,086
1,719,479
5,888,160
18,134,273
The total cost of inventory recognized in cost of sales is $46,942,951 (2020: $49,635,020). Impairment was $nil (2020: $347,057).
.
Page | 30
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
6. PREPAID EXPENSES AND NON-CURRENT ASSETS
Prepaid expenses consist of the following:
Prepayments to suppliers
Taxes
Prepaid non-current assets consist of the following:
Prepayments for property, plant and equipment
31 December
2021
2,445,757
38,524
2,484,281
31 December
2021
881,469
881,469
31 December
2020
2,639,357
150,284
2,789,641
31 December
2020
2,871,150
2,871,150
Non-current prepayments consist of prepayments that will be converted to non-current assets – property, plant and equipment. The
equipment will be delivered and transferred to construction in progress within next twelve months.
7. OTHER NON-CURRENT ASSETS
Construction supplies
Non-current inventory
31 December
2021
4,040,580
-
4,040,580
31 December
2020
2,152,680
813,085
2,965,765
During period there was a write-off of non-current inventory in amount of $909,898 (2020 $nil), this write-off related to electrolysis
section that will be not used in existing technological scheme of processing plant.
8.
INTANGIBLE ASSETS
Software
Balance at the beginning of the year
Additions
Amortization
Translation adjustment
Balance at the end of the period
31 December
2021
299,528
1,854
(116,681)
(4,118)
180,583
31 December
2020
281,073
115,933
(47,572)
(49,906)
299,528
Page | 31
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
9. MINERAL PROPERTY
Mineral property includes the cost of acquiring exploration and mining licenses, as well as the value of assets associated with asset
retirement obligations and capitalized project development costs.
Mineral property consists of the following:
Mangazeisky
Balance at the beginning of the year
Depreciation
Change in estimate
Translation adjustment
Balance at the end of the year
Licenses and
Development
costs
8,869,213
(518,975)
-
(6,984)
8,343,254
Asset
Retirement
Obligation
3,054,391
(504,422)
(617,167)
(28,961)
1,903,841
31 December
2021
31 December
2020
2021 Total
2020 Total
11,923,604
(1,023,397)
(617,167)
(35,945)
10,247,095
13,896,077
(1,788,892)
514,682
(698,263)
11,923,604
Mineral property is made up of the following classes of assets; licenses $570,808 (2019: $584,553, asset retirement obligation
$1,903,841 (2020: $3,054,391) and development costs of $7,772,446 (2020: $8,284,660).
The Group acquired the exploration license in respect of the Mangazeisky property when it acquired all the shares of AO Prognoz on
21 October 2004. In September 2016, the Mangazeisky exploration license was extended by the Federal Subsoil Use Agency in the
Russian Federation (“Rosnedra”) through to 31 December 2023.
In September 2013, the Group acquired the mining license in respect of the Mangazeisky property which is valid for a period of 20
years from the grant date.
The licenses and development cost are depreciated on unit of production basis in proportion of depletion of total tonnes mined.
10. PROPERTY, PLANT AND EQUIPMENT
Reconciliation of the carrying amount at the beginning and end of the periods ended 31 December 2021 and 31 December 2020:
Right of the use
assets
Mining Assets
Assets under
construction
Total
Carrying amount at 31 December 2019
Additions
Transfers
Disposal at cost
Depreciation
Depreciation eliminated on disposal
Translation adjustment
Carrying amount at 31 December 2020
Additions
Transfers
Disposal at cost
Depreciation
Depreciation eliminated on disposal
Translation adjustment
Carrying amount at 31 December 2021
2,075,691
5,523,849
-
-
(2,915,927)
-
(1,026,366)
3,657,247
6,780,319
-
-
(4,597,124)
-
499,274
6,339,716
85,032,998
-
9,850,731
-
(14,709,308)
-
(12,399,635)
67,774,786
744,170
3,898,241
(716,611)
(4,869,781)
532,091
(1,597,119)
65,765,777
9,981,372
4,578,092
(9,850,731)
(52,814)
-
-
(1,991,416)
2,664,503
8,534,687
(3,898,241)
(427,428)
-
-
(29,954)
6,843,567
97,090,061
10,101,941
-
(52,814)
(17,625,235)
-
(15,417,417)
74,096,536
16,059,176
-
(1,144,039)
(9,466,905)
532,091
(1,127,799)
78,949,060
Page | 32
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
10. PROPERTY, PLANT AND EQUIPMENT (Continued)
The property, plant and equipment as of the period ended 31 December 2021 included $6,843,567 (31 December 2020: $2,664,503)
of assets that are not yet ready for use. During the period ended 31 December 2021, $3,898,241 (2020: $8,178,857) of these assets
became available for use, they were transferred into property, plant and equipment and depreciation was charged on them. Leased
assets are pledged as security for the related lease obligations.
The Group acquires property, plant and equipment on prepayment terms. Cash paid to suppliers of property, plant and equipment
and capitalized expenses paid by cash during the period was $10,083,381 (31 December 2020 - $7,504,308).
All the property plant and equipment of the Group is pledged to shareholders under borrowings agreements.
Mining assets depreciated on unit of production basis in proportion of depletion of resources.
Right of the use assets depreciated on straight line basis in accordance with lease agreements and consist from the following
classes of underlying assets:
Carrying amount at 31 December 2019
Additions
Depreciation
Translation adjustment
Carrying amount at 31 December 2020
Additions
Depreciation
Translation adjustment
Carrying amount at 31 December 2021
Processing
plant
Mining
vehicles
Infrastructure
and other
Total
769,618
1,420,191
(678,505)
(311,779)
1,199,525
-
(729,484)
77,277
547,318
894,724
4,103,658
(1,913,050)
(666,838)
2,418,494
5,627,833
(3,472,793)
378,917
4,952,451
411,349
-
(324,372)
(47,749)
39,228
1,152,486
(394,847)
43,080
839,947
2,075,691
5,523,849
(2,915,927)
(1,026,366)
3,657,247
6,780,319
(4,597,124)
499,274
6,339,716
Page | 33
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
Trade and other payables
Accrued liabilities
Property tax liabilities
Other taxes and other liabilities
Amounts owed to group undertakings
12. LEASES
31 December
2021
1,492,224
1,151,434
373,436
498,526
-
3,515,620
31 December
2020
1,817,224
1,060,010
397,214
407,712
-
3,682,160
The Group have long and short-term lease agreements for the purchase of equipment in relation to the development of the
Mangazeisky project payable in monthly instalments of circa US$ 259,000. The lease payments have been discounted at rates of
between 11.02% and 20.00%. The Group made down payments of 20% of the cost of the equipment.
During 2021 group has entered into new lease agreements for total amount of $5,582,944, these new agreements related to purchases
of mining vehicles.
Interest expenses on lease liabilities were $832,243, total cash outflow for leases was $4,067,357.
Future minimum lease payments under leases, together with the present value of the minimum lease payments, are as follows:
Within one year
Within two to five years
Over 5 years
Future finance charges on finance leases
Present value of the net lease payments
Current portion
Long-term portion
Total obligations under leases
31 December
2021
3,426,188
2,439,383
-
5,865,571
(656,390)
5,209,181
2,931,455
2,277,726
5,209,181
31 December
2020
1,973,324
1,321,378
-
3,294,702
(368,536)
2,926,166
1,688,373
1,237,793
2,926,166
Page | 34
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
13. LONG-TERM AND SHORT-TERM LOANS
Lender
Principal
Interest
Total
Principal
Interest
Total
31 December
2021
31 December
2020
Long-term shareholder loans:
Unifirm Ltd (formerly A.B. Aterra Resources Ltd)
Inflection Management Corp.
Fair value gain on modification of loans
Total long-term shareholders loans
Short-term shareholder loans:
Unifirm Ltd (formerly A.B. Aterra Resources Ltd)
Inflection Management Corp.
SKA Assets Management
34,311,410
136,394,034
(3,066,250)
167,639,194
-
-
-
-
34,664,242
34,311,410
136,394,034 137,796,607
(7,398,016)
(3,066,250)
167,639,194 165,062,833
-
-
-
-
34,664,242
137,796,607
(7,398,016)
165,062,833
3,048,950
3,048,950
12,120,125
12,120,125
12,667,507
88,974
12,756,481
620,105
620,105
2,465,028
2,465,028
-
Total short-term shareholders loans
12,667,507 15,258,049
27,925,556
- 3,085,133
3,085,133
Total shareholders loans
180,306,701 15,258,049
195,564,750 165,062,833 3,085,133
168,147,966
Movement in long-term loans and short-term interest is analyzed as follows in USD:
Unifirm (formerly Aterra)
Principal
USD
Interest
USD
19,601,242
7,296,898
Principal
USD
79,695,628
Inflection
Gain on
modification
of loans
Interest
USD
USD
Total
USD
25,164,392
(2,805,832)
128,952,328
25,360,652
9,440,938 103,112,504
32,558,417
(3,630,267)
166,842,244
-
-
-
7,742,827
-
1,908,076
(972,993)
(7,742,827)
2,000,000
-
-
27,001,968
-
7,649,878
(3,867,823)
(27,001,968)
-
2,992,392
-
-
2,000,000
12,550,346
(4,840,816)
-
-
-
-
-
(5,847,969)
(5,847,969)
As at 31 December 2019 (USD)
As at 31 December 2019 (CAD)
Principal amounts received
Interest accrued
Principal and interest repayment
Capitalization of interest
Gain on modification of loans
recognized through finance
income
As at 31 December 2020 (USD)
As at 31 December 2020 (CAD)
27,344,069
34,664,242
489,155 108,697,596
620,105 137,796,607
1,944,479
2,465,028
(5,661,408)
(7,398,016)
132,813,890
168,147,966
Principal amounts received
Interest accrued
Principal and interest repayment
As at 31 December 2021 (USD)
As at 31 December 2021 (CAD)
-
-
-
27,344,069
34,311,410
-
1,940,669
-
-
-
-
2,429,824 108,697,596
3,048,950 136,394,034
-
7,714,510
-
9,658,989
12,120,125
-
3,217,797
-
(2,443,611)
(3,066,250)
-
12,872,976
-
145,686,867
182,808,269
Gain on modification of shareholder loans is recognised either as finance income in the Consolidated Statement of Comprehensive
Profit / (Loss) or as an increase in shareholder contribution in Equity. Management makes assessment of each modification and if
change in terms, for example, reduction of interest rate, represents terms which are more favourable at the time than market and
indicative of the lender acting in capacity of shareholder, then it is recognised through shareholder contribution, otherwise, it is
recognised as finance income.
Page | 35
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
13. LONG-TERM AND SHORT-TERM LOANS (Continued)
Movement in long term loans is analyzed as follows in CAD:
As at 31 December 2019
Principal amounts received
Interest accrued
Principal and interest repayment
Capitalization of interest
Foreign exchange loss
Gain on modification of loans
recognized through finance income
Translation adjustment
As at 31 December 2020
Principal amounts received
Interest accrued
Principal and interest repayment
Foreign exchange loss
Translation adjustment
Unifirm (formerly Aterra)
Inflection
Principal
CAD$
25,360,652
-
-
-
11,151,990
4,198,677
Interest
CAD$
Principal
CAD$
Interest
CAD$
9,440,937
-
2,607,065
(1,380,091)
(11,151,990)
2,461,964
103,112,504
2,351,454
-
-
38,890,925
17,852,811
32,558,418
-
10,448,965
(5,475,330)
(38,890,925)
8,536,927
Gain on
modificatio
n of loans
FV gain
CAD$
CAD$
(3,630,267)
-
4,000,216
-
-
-
166,842,244
2,351,454
17,056,246
(6,855,421)
-
33,050,379
-
-
-
-
(8,050,595)
(8,050,595)
(6,047,077)
(1,357,780)
(24,411,087)
(4,713,027)
282,630
(36,246,341)
34,664,242
-
-
-
248,950
(601,782)
620,105
-
2,437,601
-
22,329
(31,085)
137,796,607
-
-
-
989,622
(2,392,195)
2,465,028
-
9,689,904
-
88,763
(123,570)
(7,398,016)
-
4,029,896
-
-
301,870
168,147,966
-
16,157,401
-
1,349,664
(2,846,762)
182,808,269
As at 31 December 2021
34,311,410
3,048,950
136,394,034
12,120,125
(3,066,250)
On 1 January 2019, the Group’s major shareholders Aterra and Inflection agreed to further reduce the interest rate applicable to all
funds drawn under the Facilities Agreement, as amended, from 10% to 9% per annum. The accrued interest accrued quarterly, and
is payable on 1 January, 1 April, 1 July and 1 October in each calendar year starting from 31 December 2019 and on the maturity
date, being 20 March 2023. The modification of the loan interest from 10% to 9% in 2019 was considered to be non-substantive and
resulted recognition of shareholders contribution reserve of $3,574,206.
On 24 December 2019, the Group entered into an amendment and restatement deed relating to the Facilities Agreement. Under this
agreement, the lenders have agreed to provide an additional US$4 million of working capital of which US$2 million was drawn down
in December 2019.
On 26 May 2020, the Group’s major shareholders Aterra and Inflection agreed to further reduce the interest rate applicable to all funds
drawn under the Facilities Agreement, as amended, from 9% to 7% per annum. The accrued interest accrued quarterly, and is payable
on 1 January, 1 April, 1 July and 1 October in each calendar year starting from 1 April 2020 and on the maturity date, being 20 March
2023. Accrued interest at 1 April 2020 was capitalized to the loan principal. The modification of the loan interest from 9% to 7% in
2020 was considered to be non-substantive. As this reduction of interest rate was reflective of market conditions having been
benchmarked against Russian bank lending rates offered to the Group it has been recognized through finance income in amount of
$7,817,537.
31 December 2020, the Group further amended its existing Facilities Agreement major shareholders Aterra and Inflection, extending
the maturity dates of certain components of Tranches F, G, H and I, issued by Inflection from 31 July 2021 and 20 September 2022,
as applicable, to 1 January 2023. The modification of the loan in 31 December 2020 was considered to be non-substantive and has
been recognized through finance income in amount of $233,058.
The Secured Loan Funding is secured and the parent and subsidiaries of the Group will act as guarantor of each other’s obligations
under the Facilities Agreement and all related security documents.
Page | 36
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
13. LONG-TERM AND SHORT-TERM LOANS (Continued)
Movement in short-term loan is analyzed as follows in CAD:
As at 31 December 2020
Principal amounts received
Interest accrued
Principal and interest repayment
Translation adjustment
As at 31 December 2021
SKA Assets Management
Principal
Interest
Total
-
12,752,624
-
-
(85,117)
12,667,507
-
-
788,814
(699,242)
(598)
88,974
-
12,752,624
788,814
(699,242)
(85,715)
12,756,481
On 4 February 2021, the Group entered into a loan agreement with SKA ASSETS MANAGEMENT LIMITED, a company under
common control with Inflection, in the amount of RUB 750,000,000 (equivalent to approximately C$12,000,000) with an interest rate
of 8.27% per annum, accruing interest on a monthly basis. The Principal will be due and payable on 31 December 2021.
On 19 January 2022, the Group entered into an amendment of agreement with SKA ASSETS MANAGEMENT LIMITED, a company
under common control with Inflection extending the maturity date to 31 December 2022, with an interest rate of 10.27% per annum
effectively from 1 January 2022.
14. PROVISION FOR DECOMMISSIONING AND RESTORATION LIABILITY
The Group’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 Group has made, and intends to make in the future, expenditures to comply with such laws and regulations. The Group 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 Group’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
31 December
2021
4,040,784
235,090
-
(617,167)
(49,479)
3,609,228
31 December
2020
4,034,245
230,207
-
514,682
(738,350)
4,040,784
At 31 December 2021, the expected life of the Mangazeisky project has been assessed to be 7 years. The projected cost for
reclamation and closure of the Mangazeisky project in 2026 has been estimated to be $4.4m. A Russian Government 7-year zero
coupon year bond of 8.45% (2020 5.87%) has been used in discounting of future cash flows
Page | 37
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
15. SHAREHOLDERS’ EQUITY
Common shares
Authorized: Unlimited number of common shares with a par value of GBP 0.001.
All issued shares are fully paid. Reconciliation of the number and value of common shares at the beginning and end of the period
ended 31 December 2021 and 31 December 2020:
Common shares
Balance - Beginning of the year
Issued under stock option plan
Issued under share subscription plan
Issued under share bonus plan
Shares issued during the period
Balance - End of the year
31 December
2021
Number of common
$
Number of
common
31 December
2020
$
shares
673,690,423
64,017
3,991,642
-
-
677,746,082
99,561,998
112
6,862
-
-
99,568,972
shares
672,140,902
-
1,304,521
245,000
-
673,690,423
99,559,336
-
2,234
428
-
99,561,998
Share premium
Balance - Beginning of the year
Shares issued under share subscription plan
Shares issued under stock option plan
Balance - End of the year
31 December
2021
31 December
2020
22,570,500
524,736
11,411
23,106,647
22,410,054
160,446
-
22,570,500
Share premium comprises the amount subscribed for share capital in excess of nominal value.
Share Subscription Plan
On 27 June 2019, the board of directors resolved, and the Group obtained approval from the TSX and the shareholders an amendment
to the Share Bonus Plan. The number of the Bonus Shares issued to insiders of the Group, within any one-year period, and issuable
to insiders of the Group, at any time, under the Share Bonus Plan, or when combined with all of the Group’s other security based
compensation arrangements, shall not exceed 10% of the Group’s total issued and outstanding Shares, respectively.
On 30 January 2020, the Group issued 205,668 common shares under the non-executive director subscription plan for the nominal
fee of £0.001.
On 9 April 2020, the Group issued 399,714 common shares under the non-executive director subscription plan for the nominal fee of
£0.001.
On 17 July 2020, the Group issued 328,800 common shares under the non-executive director subscription plan for the nominal fee
of £0.001.
On 2 October 2020, the Group issued 167,250 common shares under the non-executive director subscription plan for the nominal fee
of £0.001.
On 6 October 2020, the Group issued 119,464 common shares under the non-executive director subscription plan for the nominal fee
of £0.001.
On 16 October 2020, the Group issued 83,625 common shares under the non-executive director subscription plan for the nominal fee
of £0.001.
On 4 December 2020, the Group issued 245,000 common shares under the share bonus plan for the nominal fee of £0.001.
Page | 38
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
15. SHAREHOLDER’S EQUITY (Continued)
Share Subscription Plan(Continued)
On 5 January 2021, the Group issued 274,714 common shares under the non-executive director subscription plan for the nominal fee
of £0.001.
On 27 January 2021, the Group issued 80,125 common shares under the non-executive director subscription plan for the nominal fee
of £0.001.
On 12 February 2021, the Group issued 64,017 common shares under exercising of stock option for the nominal fee of £0.001.
On 23 April 2021, the Group issued 270,000 common shares under the non-executive director subscription plan for the nominal fee
of £0.001.
On 26 April 2021, the Group issued 78,750 common shares under the non-executive director subscription plan for the nominal fee of
£0.001.
On 16 July 2021, the Group issued 2,389,771 common shares in settlement of debts of up to $327,398 owed to certain directors of
the Group
On 16 July 2021, the Group issued 353,630 common shares under the non-executive director subscription plan for the nominal fee
of £0.001
On 21 December 2021, the Group issued 544,652 common shares under the non-executive director subscription plan for the nominal
fee of £0.001.
Stock options
The Group has a stock option plan which is intended to provide an incentive to officers, employees, directors and consultants of the
Group. 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 Group’s common stock on the “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.
The maximum aggregate number of Shares reserved by the Group 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 18 May 2016, 2,900,000 options were granted to directors, officers and consultants of the Group. The exercise price of the options
is $0.19 per option. Granted stock options vest immediately on the day of grant and expire on 18 May 2021.
On 21 December 2017, 18,000,000 options were grated to directors of the Group. 6,000,000 of these options have an exercise price
of $0.17 per option, 6,000,000 have an exercise price of $0.25 per share and the remaining 6,000,000 have an exercise price of $0.30
per share.
On 4 April 2018, 2,600,000 options were granted to directors, officers and consultants of the Group. 866,667 of these options have
an exercise price of $0.22 per option, 866,667 have an exercise price of $0.30 per share and the remaining 866,666 have an exercise
price of $0.35 per share.
On 14 November 2018, 3,000,000 options were granted to directors, officers and consultants of the Group. 1,000,000 of these options
have an exercise price of $0.18 per option and will fully invest on 14 November 2019, 1,000,000 have an exercise price of $0.25 per
share and will be fully vested on 14 November 2020, and the remaining 1,000,000 have an exercise price of $0.30 per share and will
be fully vested on 14 November 2021.
On 24 May 2019, 500,000 options were granted to officer of the Group 166,667 of these options have an exercise price of $0.11 per
option and will fully vested on 24 May 2020, 166,667 have an exercise price of $0.25 per share and will be fully vested on 24 May
2021, and the remaining 166,666 have an exercise price of $0.30 per share and will be fully vested on 24 May 2022.
Page | 39
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
15. SHAREHOLDERS’ EQUITY (Continued)
Stock options (Continued)
During the period ended 31 December 2021, options generated a share-based payments expense of $86,403 (31 December 2020:
$114,896). 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 periods ended 31 December 2021 and 31 December 2020
follows:
31 December
2021
Number
24,251,000
-
(166,667)
(1,651,000)
22,433,333
Weighted average
exercise price,
$
0.25
-
0.11
0.19
0.25
31 December
2020
Weighted
average
Number
25,051,000
-
-
(800,000)
24,251,000
exercise price, $
0.25
-
-
0.19
0.25
Balance - Beginning of the year
Granted
Exercised
Expired / Cancelled / Forfeited
Balance - End of the year
As at 31 December 2021, the Group had share options outstanding and exercisable as follows:
Expiry year
2022
2023
2024
Outstanding
Exercisable
Weighted average
Weighted average
Number
18,000,000
4,100,000
333,333
22,433,333
exercise price,
$
0.24
0.26
0.27
0.25
Number
18,000,000
4,100,000
166,667
22,266,667
exercise price, $
0.24
0.26
0.25
0.24
The weighted average remaining contractual life of share options outstanding at the end of the period was 442 days (2020: 782 days).
Contributed surplus consists of the following:
Balance - Beginning of the year
Share-based payments
Exercised options
Expired / Cancelled / Forfeited options
Balance - End of the year
31 December
2021
16,960,163
86,403
(12,340)
(268,287)
16,765,939
31 December
2020
16,975,267
114,896
-
(130,000)
16,960,163
Page | 40
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
15. SHAREHOLDERS’ EQUITY (Continued)
Earnings per share
The calculation of the basic and diluted profit/(loss) per share attributable to the owners of the Group is based on the following data
Net Loss
Weighted average number of shares used in basic EPS
Basic loss per share
Exercisable stock options
Weighted average number of shares used in diluted EPS
Diluted loss per share
31 December 2021
31 December 2020
(27,478,538)
676,065,239
(0.04)
22,266,667
698,331,906
(0.04)
(47,011,626)
672,872,643
(0.07)
22,917,667
695,790,310
(0.07)
Diluted earnings per share equates to earning per share due to loss resulting in an anti-dilutive impact.
16. RELATED PARTY DISCLOSURES
(a) Financing transactions
The Group has entered into a series of financing transactions with major shareholders. As set out in Note 13.
(b) Purchases from related parties
During the period ended 31 December 2021 the Group has acquired construction materials from TechnoNicol, the company
under common control, with Inflection in amount of $281,441 (2020: $9,469), prepayment balance as at 31 December 2021 was
$7,218 (2020: prepayment $454)
(c) Compensation of key management
Key management are the Group’s directors. Compensation awarded to key management comprised:
Salaries, fees and short-term employee benefits
Share-based payments
(d) Interest in other entities
2021
520,501
69,048
589,649
2020
538,116
81,187
619,303
Name of subsidiary
undertaking
Registered address/ Principal place of
business
Description of
shares held
Silver Bear Resources Inc.
Suite 2500, 120 Adelaide Street West, Toronto,
Ontario, Canada, M5H 1T1
Ordinary CAD
120,863,139
shares
AO Prognoz
36/1 Ordzhonikidze Street, Yakutsk, Republic of
Sakha (Yakutia), 677000, Russian Federation
Ordinary RUB
10,000 shares
Proportion of
nominal value of
issued shares held by:
Group
Company
%
%
100
100
100
100
Page | 41
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
16. RELATED PARTY DISCLOSURES (Continued)
All subsidiary undertakings have been included in the consolidation. The voting rights in the subsidiary undertakings are in proportion
to the amount of shares held.
The prinicipal activites of the Group’s subsidaries are as follows:
-
-
Silver Bear Resources Inc. – holding company; and
AO Prognoz - acquisition, exploration, evaluation and development of precious metal properties.
17. OTHER INCOME AND EXPENSES
OTHER INCOME
Meals distribution
Winter road maintenance
Rent
Income from fuel sales
Other income
OTHER EXPENSES
Property tax
Penalties
Other expenses
18. PRODUCTION COST, GENERAL AND ADMINISTRATIVE EXPENSES
Production cost:
Employee compensation
Process reagents
Repair and maintenance
Fuel
Mining tax
Blasting
Energy
Refinery
Other
Change in finished goods and work in progress
2021
45,198
-
89,271
84,860
284,437
503,766
2020
64,449
123,197
212,510
62,942
23,176
486,274
2021
(1,599,840)
(15,079)
(241,025)
(1,855,944)
2020
(1,794,249)
-
(288,826)
(2,083,075)
2021
(10,056,545)
(1,971,807)
(4,421,972)
(5,068,282)
(2,936,304)
(3,246,325)
(1,117,786)
(267,890)
(4,097,698)
(3,427,919)
(36,612,528)
2020
(8,472,345)
(3,884,044)
(3,315,320)
(3,337,644)
(3,274,267)
(2,627,575)
(1,339,515)
(360,964)
(4,092,750)
513,728
(30,190,696)
Page | 42
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
18. PRODUCTION COST, GENERAL AND ADMINISTRATIVE EXPENSES (Continued)
General and administrative expenses:
Employee compensation
Professional fees
Auditors' remuneration – subsidiary audit
Auditors' remuneration – Group audit
Office expenses
Travel expenses
Legal fees
Investor relations expenses
Depreciation
Amortisation
Rent
IT and communications
Other expenses
2021
(2,311,378)
(297,874)
(53,419)
(371,547)
(56,239)
(15,560)
(180,945)
(101,942)
(25,213)
(94,904)
(241,534)
(192,145)
(212,045)
(4,154,745)
2020
(2,301,506)
(240,947)
(51,456)
(242,148)
(24,833)
(17,593)
(306,094)
(100,601)
(26,287)
(44,680)
(180,785)
(63,305)
(232,283)
(3,832,518)
The average number of employees during the period was 433 (2020: 354).
The following table provides the breakdown of Group’s employee compensation charged to the income statement:
Salaries, fees and short-term employee benefits
Share-based payments
19. FINANCE INCOME AND EXPENSE
Finance Expense
Interest accrued from loans
Interest accrued from prepayments
Interest accrued from lease obligations
Accretion expenses
Finance Income
Non-substantive modification gain
Interest from deposits
2021
(12,281,520)
(86,403)
2020
(10,658,955)
(114,896)
(12,367,923)
(10,773,851)
2021
(16,946,215)
(117,122)
(800,522)
(235,090)
(18,098,949)
2020
(17,056,246)
(48,417)
(538,697)
(230,207)
(17,873,567)
2021
-
24,129
24,129
2020
8,050,595
18,440
8,069,035
Page | 43
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
20. NET CHANGE IN NON-CASH WORKING CAPITAL
Net change in non-cash working capital consists of the following:
Receivables
Advances received
Inventories
Prepaid expenses
Accounts payable and accrued liabilities
2021
(685,796)
(110,235)
(385,651)
225,116
(52,541)
(1,009,107)
2020
(105,316)
(48,262)
(2,504,658)
(405,252)
(828,381)
(3,891,869)
Net changes in non-cash working capital for cash flow statement calculated for each company of the Group in their functional
currencies. Then translated to the reporting currency using the average rates and consolidated.
21. CAPITAL COMMITMENTS AND CONTINGENCIES
The Group is party to certain management contracts and severance obligations. These contracts contain clauses requiring that
additional payments of up to $70,000 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 Group 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 the Group’s financial position,
results of operations or cash flows. There were no material outstanding legal proceedings as of 31 December 2021.
22. SEGMENTED INFORMATION
The Group has one operating segment based on geographical location being the property in the Russian Federation (Mangazeisky).
The Corporate balances are provided below to allow reconciliation back to the primary statements.
As at 31 December 2021
Country/Property
Russia -
Mangazeisky
Cash
Inventories
Prepaid
Receivables
Mineral
Properties
Property
plant and
equipment
Depreciation
Interest
expense
Loss before
tax
1,824,665
18,473,628
3,224,500
3,670,038
10,247,095
78,949,060
(10,237,558)
(18,098,949)
(27,219,124)
Corporate
54,782
-
141,250
-
-
-
-
-
(241,660)
1,879,447
18,473,628
3,365,750
3,670,038
10,247,095
78,949,060
(10,237,558)
(18,098,949)
(27,460,784)
As at 31 December 2020
Country/Property
Russia -
Mangazeisky
Cash
Inventories
Prepaid
Receivables
Mineral
Properties
Property
plant and
equipment
Depreciation
Interest
expense
Loss before
tax
1,193,504
18,134,273
5,437,388
3,050,392
11,923,604
74,096,536
(19,364,209)
(17,873,567)
(46,668,221)
Corporate
108,661
-
223,403
-
-
-
-
-
(332,623)
1,302,165
18,134,273
5,660,791
3,050,392
11,923,604
74,096,536
(19,364,209)
(17,873,567)
(47,000,844)
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Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
23. 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 Group’s current financial instruments consist of cash, accounts receivable, short-term loans, lease liabilities and accounts payable
and accrued liabilities. These financial assets and liabilities are measured at amortised cost. The fair value of these financial
instruments approximates their carrying values due to the short-term nature of these instruments. The Group’s non-current financial
instruments consist of long-term loans and lease liabilities. The fair value of these instruments approximates their carrying values as
any differences are not material. Financial assets and financial liabilities as at 31 December 2021 and 31 December 2020 were as
follows:
31 December 2021
Cash and cash equivalents
Accounts receivable
Short-term loans
Long-term loans
Advances received
Accounts payables and accrued liabilities
Lease liabilities
Cash and
receivables
Loans and other
liabilities
1,879,447
1,244,898
-
-
-
-
-
3,124,345
-
-
(27,925,556)
(167,639,194)
(639)
(2,643,658)
(5,209,181)
(203,418,228)
31 December 2020
Cash and cash equivalents
Accounts receivable
Short-term loans
Long-term loans
Advances received
Accounts payables and accrued liabilities
Lease liabilities
Cash and receivables
Loans and other
liabilities
1,302,165
1,350,634
-
-
-
-
-
2,652,799
-
-
(3,085,133)
(165,062,833)
(144)
(2,877,234)
(2,926,166)
(173,951,510)
TOTAL
1,879,447
1,244,898
(27,925,556)
(167,639,194)
(639)
(2,643,658)
(5,209,181)
(200,293,883)
TOTAL
1,302,165
1,350,634
(3,085,133)
(165,062,833)
(144)
(2,877,234)
(2,926,166)
(171,298,711)
The carrying value of cash equivalents, amounts receivable, short-term loans, long-term loans, accounts payable and accrued
liabilities and lease liabilities reflected in the consolidated statement of financial position approximate fair value.
Page | 45
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
24. NET DEBT RECONCILIATION
Net Debt as 31 December 2019
Cash flow
Non-cash changes:
New leases
Accrual of interest
Modification gain
FX differences
Translation differences
Net Debt as 31 December 2020
Cash flow
Non-cash changes:
New leases
Accrual of interest
Modification gain
FX differences
Long and short-
term loans
Long and
short-term
lease
obligation
Subtotal
Cash and
cash
equivalents
(166,842,243)
4,503,967
(888,300)
3,606,534
(167,730,543)
8,110,501
5,444,288
(3,346,787)
-
(17,056,246)
8,050,595
(33,050,379)
36,246,340
(4,507,822)
(538,697)
-
(433,932)
(163,949)
(4,507,822)
(17,594,943)
8,050,595
(33,484,311)
36,082,391
-
-
-
63,266
(858,602)
(168,147,966)
(12,053,382)
(2,926,166)
4,067,357
(171,074,132)
(7,986,025)
1,302,165
261,380
Total
(162,286,255
)
4,763,714
(4,507,822)
(17,594,943)
8,050,595
(33,421,045)
35,223,789
(169,771,967
)
(7,724,646)
-
(16,946,215)
-
(1,349,664)
(5,582,944)
(832,243)
-
13,891
(5,582,944)
(17,778,458)
-
(1,335,773)
-
-
-
1,227
(5,582,944)
(17,778,458)
-
(1,334,546)
Translation differences
2,932,477
50,924
2,983,401
314,675
3,298,077
Net Debt as 31 December 2021
(195,564,750)
(5,209,181)
(200,773,931)
1,879,447
(198,894,484
)
25. INCOME TAXES
Current tax expense
Total tax expense
2021
(17,754)
(17,754)
2020
(10,782)
(10,782)
Reconciliation between tax expense and the product of accounting loss multiplied by the Corporation's domestic tax rate is as follows:
Profit/(Loss) before taxation
Statutory tax rate
Tax benefit of statutory rate
Expenses not deductible for income tax purposes
Recognition of previously written off deferred tax asset
Deferred taxes not recognized for the period
Tax losses carried forward not recognized
Total tax expense
2021
(27,460,784)
20.00%
5,492,157
(2,219,852)
-
316,013
(3,606,072)
(17,754)
2020
(47,000,844)
20.00%
9,400,169
(2,466,633)
-
(516,856)
(6,427,462)
(10,782)
The Group 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.
In addition, ZAO Prognoz has approximately $37,516,663 (2020: $33,894,607) of non-capital losses for Russian income tax purposes.
Silver Bear PLC has approximately $2,728,990 (2020: $2,192,837) in non-capital losses that can be carried forward indefinitely.
Page | 46
Silver Bear Resources Plc
Notes to Consolidated Financial Statements
For the years ended 31 December 2021 and 2020
26. CONTROLLING AND ULTIMATE CONTROLLING PARTY
The controlling and ultimate controlling party is Kolesnikov Sergei Anatolievich.
27. SUBSEQUENT EVENTS
Loan Extension
On 20 January 2022, the Group announced an amendment to its existing loan agreement between the Company’s wholly-owned
subsidiary, Joint Stock Company Prognoz, and SKA Assets with respect to a loan in the principal amount of 750,000,000 rubles
(equivalent to approximately C$12,000,000) by extending the maturity date of the loan from 31 December 2021 to 31 December 2022
and increasing the interest rate of the loan from 8.27% per annum to 10.27% per annum effective from 01 January 2022 (“SKA Loan
Amendment”). All other provisions of the Loan Agreement have remain unchanged. The Company filed a material change report in
respect to the SKA Loan Agreement on 20 January 2022.
Geopolitical situation
In the first half of 2022, due to the geopolitical situation between Russia and Ukraine multiple sanctions were declared against Russia
by Western countries. There are no sanctions against the Group, however sanctions that were implemented against Russia meant
some brands ceased their operations in Russia. Management has prepared a plan to respond to this risk such as diversifying revenue
channels and considering the use of aftermarket spare parts for mining equipment that can no longer be sourced directly from
suppliers. While the effect from the sanctions to date has had minimal impacts on the Group’s operations, there is no certainty over
the future impacts of sanctions imposed against Russia.
Also, in the first half of 2022 Russia implemented sanctions against Western countries. Since the Russian sanctions have been
implemented, capital controls have been put in place that put restrictions on payments outside of Russia. Given the parent Company
is reliant on cash from its Russian subsidiaries, this temporarily prevented the Parent Company fulfilling its obligation to creditors.
Subsequently the Parent Company has received cash from its subsidiary through management service contracts which has enabled
it to resume fulfilling its obligations to creditors. While the sanctions are in effect, the Group will be unable to pay dividends from
Russia to UK and further to shareholders. There is no certainty over the future impact of sanctions imposed by Russia or Russian
imposed capital controls.
Cease trade order
On 01 April 2022 the Company announced that it had been issued a cease trade order (“CTO”) by the Ontario Securities Commission
(“OSC”) for not filing the following periodic disclosure documents (collectively “Annual Filings”) by the filing deadline of 31 March 2022.
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