AGNICO EAGLE MINES LTD, 40-F filed on 3/23/2018
Annual Report (foreign private issuer)
v3.8.0.1
Document and Entity Information
12 Months Ended
Dec. 31, 2017
shares
Document and Entity Information  
Entity Registrant Name AGNICO EAGLE MINES LTD
Entity Central Index Key 0000002809
Document Type 40-F
Document Period End Date Dec. 31, 2017
Amendment Flag false
Current Fiscal Year End Date --12-31
Entity Well-known Seasoned Issuer No
Entity Voluntary Filers No
Entity Current Reporting Status Yes
Entity Common Stock, Shares Outstanding 232,699,237
Document Fiscal Year Focus 2017
Document Fiscal Period Focus FY
v3.8.0.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Current assets:    
Cash and cash equivalents $ 632,978 $ 539,974
Short- term investments 10,919 8,424
Restricted cash 422 398
Trade receivables (notes 6 and 17) 12,000 8,185
Inventories (note 7) 500,976 443,714
Income taxes recoverable (note 23) 13,598  
Available- for- sale securities (notes 6 and 8) 122,775 92,310
Fair value of derivative financial instruments (notes 6 and 20) 17,240 364
Other current assets (note 9(a)) 150,626 136,810
Total current assets 1,461,534 1,230,179
Non- current assets:    
Restricted cash 801 764
Goodwill 696,809 696,809
Property, plant and mine development (note 10) 5,626,552 5,106,036
Other assets (note 9(b)) 79,905 74,163
Total assets 7,865,601 7,107,951
Current liabilities:    
Accounts payable and accrued liabilities (note 11) 290,722 228,566
Reclamation provision (note 12) 10,038 9,193
Interest payable (note 14) 12,894 14,242
Income taxes payable (note 23) 16,755 35,070
Finance lease obligations (note 13(a)) 3,412 5,535
Current portion of long-term debt (note 14)   129,896
Fair value of derivative financial instruments (notes 6 and 20)   1,120
Total current liabilities 333,821 423,622
Non-current liabilities:    
Long-term debt (note 14) 1,371,851 1,072,790
Reclamation provision (note 12) 345,268 265,308
Deferred income and mining tax liabilities (note 23) 827,341 819,562
Other liabilities (note 15) 40,329 34,195
Total liabilities 2,918,610 2,615,477
EQUITY    
Outstanding - 232,793,335 common shares issued, less 542,894 shares held in trust 5,288,432 4,987,694
Stock options (notes 16 and 18) 186,754 179,852
Contributed surplus 37,254 37,254
Deficit (595,797) (744,453)
Accumulated other comprehensive income 30,348 32,127
Total equity 4,946,991 4,492,474
Total liabilities and equity 7,865,601 7,107,951
Commitments and contingencies (note 25)
v3.8.0.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares
Dec. 31, 2017
Dec. 31, 2016
CONSOLIDATED BALANCE SHEETS    
Common shares issued 232,793,335 225,465,654
Common shares held in trust 542,894 500,514
v3.8.0.1
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
REVENUES    
Revenues from mining operations (note 17) $ 2,242,604 $ 2,138,232
COSTS, EXPENSES AND OTHER INCOME    
Production(i) [1] 1,057,842 1,031,892
Exploration and corporate development 141,450 146,978
Amortization of property, plant and mine development (note 10) 508,739 613,160
General and administrative 115,064 102,781
Impairment loss on available-for- sale securities (note 8) 8,532  
Finance costs (note 14) 78,931 74,641
Gain on derivative financial instruments (note 20) (20,990) (9,468)
Gain on sale of available-for-sale securities (note 8) (168) (3,500)
Environmental remediation (note 12) 1,219 4,058
Gain on impairment reversal (note 22)   (120,161)
Foreign currency translation loss 13,313 13,157
Other (income) expenses (3,709) 16,233
Income before income and mining taxes 342,381 268,461
Income and mining taxes expense (note 23) 98,494 109,637
Net income for the year $ 243,887 $ 158,824
Net income per share - basic (note 16) $ 1.06 $ 0.71
Net income per share - diluted (note 16) 1.05 0.70
Cash dividends declared per common share $ 0.41 $ 0.36
COMPREHENSIVE INCOME    
Net income for the year $ 243,887 $ 158,824
Available-for-sale securities and other investments (note 8):    
Unrealized change in fair value of available- for- sale securities (21,179) 36,757
Reclassification to impairment loss on available- for- sale securities 8,532  
Reclassification to gain on sale of available- for- sale securities (168) (3,500)
Derivative financial instruments (note 20): unrealized gain 10,763  
Income tax impact of reclassification items (note 23) (1,117) 467
Income tax impact of other comprehensive income (loss) items (note 23) 1,390 (4,925)
Total (1,779) 28,799
Pension benefit obligations:    
Remeasurement (loss) gain of pension benefit obligations (note 15(a)) (1,772) 612
Income tax impact (note 23) 399 76
Total (1,373) 688
Other comprehensive income (loss) for the year (3,152) 29,487
Comprehensive income for the year $ 240,735 $ 188,311
[1] Exclusive of amortization, which is shown separately.
v3.8.0.1
CONSOLIDATED STATEMENTS OF EQUITY - USD ($)
$ in Thousands
Common Shares Outstanding
Stock Options
Contributed Surplus
Deficit
Accumulated Other Comprehensive Income
Total
Balance at the beginning of the year at Dec. 31, 2015 $ 4,707,940 $ 216,232 $ 37,254 $ (823,734) $ 3,328 $ 4,141,020
Balance at the beginning of the year (in Shares) at Dec. 31, 2015 217,650,795          
Net income       158,824   158,824
Other comprehensive income (loss)       688 28,799 29,487
Total comprehensive income (loss)       159,512 28,799 188,311
Shares issued under employee stock option plan (notes 16 and 18(a)) $ 245,128 (53,025)       192,103
Shares issued under employee stock option plan (notes 16 and 18(a))( in shares) 6,492,907          
Stock options (notes 16 and 18(a))   16,645       16,645
Shares issued under incentive share purchase plan (note 18(b)) $ 15,443         15,443
Shares issued under incentive share purchase plan (note 18(b)) (in Shares) 344,778          
Shares issued under dividend reinvestment plan $ 8,893         8,893
Shares issued under dividend reinvestment plan (in Shares) 224,732          
Shares issued under flow through share private placement (note 16) $ 13,593         13,593
Shares issued under flow through share private placement (note 16) (in shares) 374,869          
Dividends declared       (80,231)   (80,231)
Restricted Share Unit plan, Performance Share Unit plan, and Long Term Incentive Plan (note 16 and 18(c,d)) $ (3,303)         (3,303)
Restricted Share Unit plan, Performance Share Unit plan, and Long Term Incentive Plan (note 16 and 18(c,d)) (in shares) (122,941)          
Balance at the end of the year at Dec. 31, 2016 $ 4,987,694 179,852 37,254 (744,453) 32,127 4,492,474
Balance at the end of the year (in Shares) at Dec. 31, 2016 224,965,140          
Net income       243,887   243,887
Other comprehensive income (loss)       (1,373) (1,779) (3,152)
Total comprehensive income (loss)       242,514 (1,779) 240,735
Shares issued under employee stock option plan (notes 16 and 18(a)) $ 56,802 (12,603)       44,199
Shares issued under employee stock option plan (notes 16 and 18(a))( in shares) 1,538,729          
Stock options (notes 16 and 18(a))   19,505       19,505
Shares issued under incentive share purchase plan (note 18(b)) $ 17,379         17,379
Shares issued under incentive share purchase plan (note 18(b)) (in Shares) 382,663          
Shares issued under dividend reinvestment plan $ 17,816         17,816
Shares issued under dividend reinvestment plan (in Shares) 402,877          
Equity issuance (net of transaction costs) (note 16) $ 215,013         215,013
Equity issuance (net of transaction costs) (note 16) (in shares) 5,003,412          
Dividends declared       (93,858)   (93,858)
Restricted Share Unit plan, Performance Share Unit plan, and Long Term Incentive Plan (note 16 and 18(c,d)) $ (6,272)         (6,272)
Restricted Share Unit plan, Performance Share Unit plan, and Long Term Incentive Plan (note 16 and 18(c,d)) (in shares) (42,380)          
Balance at the end of the year at Dec. 31, 2017 $ 5,288,432 $ 186,754 $ 37,254 $ (595,797) $ 30,348 $ 4,946,991
Balance at the end of the year (in Shares) at Dec. 31, 2017 232,250,441          
v3.8.0.1
CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
CONSOLIDATED STATEMENTS OF EQUITY    
Cash dividends declared per common share $ 0.41 $ 0.36
v3.8.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
OPERATING ACTIVITIES    
Net income for the year $ 243,887 $ 158,824
Add (deduct) items not affecting cash:    
Amortization of property, plant and mine development (note 10) 508,739 613,160
Deferred income and mining taxes (note 23) 10,855 7,609
Gain on sale of available-for-sale securities (note 8) (168) (3,500)
Stock-based compensation (note 18) 43,674 33,804
Impairment loss on available-for-sale securities (note 8) 8,532  
Gain on impairment reversal (note 22)   (120,161)
Foreign currency translation loss 13,313 13,157
Other 15,362 14,012
Adjustment for settlement of reclamation provision (4,824) (2,719)
Changes in non-cash working capital balances:    
Trade receivables (3,815) (471)
Income taxes (31,913) 28,082
Inventories (64,889) 20,355
Other current assets (13,722) 53,009
Accounts payable and accrued liabilities 44,694 (35,408)
Interest payable (2,168) (1,136)
Cash provided by operating activities 767,557 778,617
INVESTING ACTIVITIES    
Additions to property, plant and mine development (note 10) (874,153) (516,050)
Acquisitions, net of cash and cash equivalents acquired (note 5) (71,989) (12,434)
Net purchases of short- term investments (2,495) (980)
Net proceeds from sale of available-for-sale securities and other investments (note 8) 333 9,461
Purchases of available- for- sale securities and other investments (note 8) (51,724) (33,774)
(Increase) decrease in restricted cash (24) 287
Cash used in investing activities (1,000,052) (553,490)
FINANCING ACTIVITIES    
Dividends paid (76,075) (71,375)
Repayment of finance lease obligations (note 13(a)) (5,252) (10,004)
Proceeds from long- term debt (note 14) 280,000 125,000
Repayment of long- term debt (note 14) (410,412) (405,374)
Notes issuance (note 14) 300,000 350,000
Long- term debt financing (note 14) (3,505) (3,415)
Repurchase of common shares for stock-based compensation plans (notes 16 and 18(c,d)) (24,684) (15,576)
Proceeds on exercise of stock options (note 18(a)) 44,199 192,103
Common shares issued (note 16) 224,896 29,027
Cash provided by financing activities 329,167 190,386
Effect of exchange rate changes on cash and cash equivalents (3,668) 311
Net increase in cash and cash equivalents during the year 93,004 415,824
Cash and cash equivalents, beginning of year 539,974 124,150
Cash and cash equivalents, end of year 632,978 539,974
SUPPLEMENTAL CASH FLOW INFORMATION    
Interest paid (note 14) 78,885 71,401
Income and mining taxes paid $ 127,915 $ 105,184
v3.8.0.1
CORPORATE INFORMATION
12 Months Ended
Dec. 31, 2017
CORPORATE INFORMATION  
CORPORATE INFORMATION

 

1.   CORPORATE INFORMATION

Agnico Eagle Mines Limited ("Agnico Eagle" or the "Company") is principally engaged in the production and sale of gold, as well as related activities such as exploration and mine development. The Company's mining operations are located in Canada, Mexico and Finland and the Company has exploration activities in Canada, Europe, Latin America and the United States. Agnico Eagle is a public company incorporated under the laws of the Province of Ontario, Canada with its head and registered office located at 145 King Street East, Suite 400, Toronto, Ontario, M5C 2Y7. The Company's common shares are listed on the Toronto Stock Exchange and the New York Stock Exchange. Agnico Eagle sells its gold production into the world market.

These consolidated financial statements were authorized for issuance by the Board of Directors of the Company (the "Board") on March 23, 2018.

 

v3.8.0.1
BASIS OF PRESENTATION
12 Months Ended
Dec. 31, 2017
BASIS OF PRESENTATION  
BASIS OF PRESENTATION

2.   BASIS OF PRESENTATION

A)     Statement of Compliance

The accompanying consolidated financial statements of Agnico Eagle have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") in United States ("US") dollars.

These consolidated financial statements were prepared on a going concern basis under the historical cost method except for certain financial assets and liabilities which are measured at fair value. Significant accounting policies are presented in note 3 to these consolidated financial statements and have been consistently applied in each of the periods presented.

B)     Basis of Presentation

Subsidiaries

These consolidated financial statements include the accounts of Agnico Eagle and its consolidated subsidiaries. All intercompany balances, transactions, income and expenses and gains or losses have been eliminated on consolidation. Subsidiaries are consolidated where Agnico Eagle has the ability to exercise control. Control of an investee exists when Agnico Eagle is exposed to variable returns from the Company's involvement with the investee and has the ability to affect those returns through its power over the investee. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control.

Joint Arrangements

A joint arrangement is defined as an arrangement in which two or more parties have joint control. Joint control is the contractually agreed sharing of control over an arrangement between two or more parties. This exists only when the decisions about the relevant activities that significantly affect the returns of the arrangement require the unanimous consent of the parties sharing control.

A joint operation is a joint arrangement whereby the parties have joint control of the arrangement and have rights to the assets and obligations for the liabilities relating to the arrangement. These consolidated financial statements include the Company's interests in the assets, liabilities, revenues and expenses of the joint operations, from the date that joint control commenced. Agnico Eagle's 50% interest in each of Canadian Malartic Corporation ("CMC") and Canadian Malartic GP ("the Partnership"), the general partnership that holds the Canadian Malartic mine located in Quebec, has been accounted for as a joint operation.

 

v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 31, 2017
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A)     Business Combinations

In a business combination, the acquisition method of accounting is used, whereby the purchase consideration is allocated to the fair value of identifiable assets acquired and liabilities assumed at the date of acquisition. Preliminary fair values allocated at a reporting date are finalized as soon as the relevant information is available, within a period not to exceed twelve months from the acquisition date with retroactive restatement of the impact of adjustments to those preliminary fair values effective as at the acquisition date. Acquisition related costs are expensed as incurred.

Purchase consideration may also include amounts payable if future events occur or conditions are met. Any such contingent consideration is measured at fair value and included in the purchase consideration at the acquisition date. Subsequent changes to the estimated fair value of contingent consideration are recorded through the consolidated statements of income and comprehensive income, unless the preliminary fair value of contingent consideration as at the acquisition date is finalized before the twelve month measurement period in which case the adjustment is allocated to the identifiable assets acquired and liabilities assumed retrospectively to the acquisition date.

Where the cost of the acquisition exceeds the fair values of the identifiable net assets acquired, the difference is recorded as goodwill. A gain is recorded through the consolidated statements of income and comprehensive income if the cost of the acquisition is less than the fair values of the identifiable net assets acquired.

Non-controlling interests represent the fair value of net assets in subsidiaries that are not held by the Company as at the date of acquisition. Non-controlling interests are presented in the equity section of the consolidated balance sheets.

In a business combination achieved in stages, the Company remeasures any previously held equity interest at its acquisition date fair value and recognizes any gain or loss in the consolidated statements of income and comprehensive income.

B)     Non-current Assets and Disposal Groups Held For Sale and Discontinued Operations

The Company classifies a non-current asset or disposal group as held for sale if it is highly probable that they will be sold in their current condition within one year from the date of classification. Assets and disposal groups that meet the criteria to be classified as an asset held for sale are measured at the lower of carrying amount and fair value less costs to dispose and the Company stops amortizing such assets from the date they are classified as held for sale. Assets and disposal groups that meet the criteria to be classified as held for sale are presented separately in the consolidated balance sheets.

If the carrying amount of the asset prior to being classified as held for sale is greater than the fair value less costs to dispose, the Company recognizes an impairment loss. Any subsequent change in the measurement amount of items classified as held for sale is recognized as a gain, to the extent of any cumulative impairment charges previously recognized to the related asset or disposal group, or as a further impairment loss.

A discontinued operation is a component of the Company that can be clearly distinguished from the rest of the entity, both operationally and for financial reporting purposes, that has been disposed of or is classified as held for sale and represents: a) a separate significant line of business or geographical area of operations; b) a part of a single co-ordinated plan to dispose of an area of operations; or c) a subsidiary acquired exclusively for resale. The results of the disposal groups or regions which are discontinued operations are presented separately in the consolidated statements of income and comprehensive income.

C)     Foreign Currency Translation

The functional currency of the Company, for each subsidiary and for joint arrangements, is the currency of the primary economic environment in which it operates. The functional currency of all of the Company's operations is the US dollar.

Once the Company determines the functional currency of an entity, it is not changed unless there is a significant change in the relevant underlying transactions, events and circumstances. Any change in an entity's functional currency is accounted for prospectively from the date of the change, and the consolidated balance sheets are translated using the exchange rate at that date.

At the end of each reporting period, the Company translates foreign currency balances as follows:

       Monetary items are translated at the closing rate in effect at the consolidated balance sheet date;

       Non-monetary items that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Items measured at fair value are translated at the exchange rate in effect at the date the fair value was measured; and

       Revenue and expense items are translated using the average exchange rate during the period.

D)     Cash and Cash Equivalents

The Company's cash and cash equivalents include cash on hand and short-term investments in money market instruments with remaining maturities of three months or less at the date of purchase. The Company places its cash and cash equivalents and short-term investments in high quality securities issued by government agencies, financial institutions and major corporations and limits the amount of credit exposure by diversifying its holdings.

E)     Short-term Investments

The Company's short-term investments include financial instruments with remaining maturities of greater than three months but less than one year at the date of purchase. Short-term investments are designated as held to maturity for accounting purposes and are carried at amortized cost, which approximates market value given the short-term nature of these investments.

F)     Inventories

Inventories consist of ore stockpiles, concentrates, dore bars and supplies. Inventories are carried at the lower of cost and net realizable value ("NRV"). Cost is determined using the weighted average basis and includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost of inventories includes direct costs of materials and labour related directly to mining and processing activities, including production phase stripping costs, amortization of property, plant and mine development directly involved in the related mining and production process, amortization of any stripping costs previously capitalized and directly attributable overhead costs. When interruptions to production occur, an adjustment is made to the costs included in inventories, such that they reflect normal capacity. Abnormal costs are expensed in the period they are incurred.

The current portion of ore stockpiles, ore in leach pads and inventories is determined based on the expected amounts to be processed within the next twelve months. Ore stockpiles, ore on leach pads and inventories not expected to be processed or used within the next twelve months are classified as long-term.

NRV is estimated by calculating the net selling price less costs to be incurred in converting the relevant inventories to saleable product and delivering it to a customer. Costs to complete are based on management's best estimate as at the consolidated balance sheet date. An NRV impairment may be reversed in a subsequent period if the circumstances that triggered the impairment no longer exist.

G)     Financial Instruments

The Company's financial assets and liabilities (financial instruments) include cash and cash equivalents, short-term investments, restricted cash, trade receivables, available-for-sale securities, accounts payable and accrued liabilities, long-term debt and derivative financial instruments. All financial instruments are recorded at fair value at recognition. Subsequent to initial recognition, financial instruments classified as trade receivables, accounts payable and accrued liabilities and long-term debt are measured at amortized cost using the effective interest method. Other financial assets and liabilities are recorded at fair value through the consolidated statements of income and comprehensive income.

Available-for-sale Securities

The Company's investments in available-for-sale securities consist primarily of investments in common shares of entities in the mining industry recorded using trade date accounting. Investments are designated as available-for-sale based on the criteria that the Company does not hold these for trading purposes. The cost basis of available-for-sale securities is determined using the average cost method and they are carried at fair value. Unrealized gains and losses recorded to measure available-for-sale securities at fair value are recognized in other comprehensive income.

In the event that a decline in the fair value of an investment in available-for-sale securities occurs and the decline in value is considered to be significant or prolonged, an impairment charge is recorded in the consolidated statements of income and comprehensive income. The Company assesses whether a decline in value is considered to be significant or prolonged by considering available evidence, including changes in general market conditions, specific industry and investee data, the length of time and the extent to which the fair value has been less than cost and the financial condition of the investee.

Derivative Instruments and Hedge Accounting

The Company uses derivative financial instruments (primarily option and forward contracts) to manage exposure to fluctuations in by-product metal prices, interest rates and foreign currency exchange rates and may use such means to manage exposure to certain input costs. The Company does not hold financial instruments or derivative financial instruments for trading purposes.

The Company recognizes all derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized periodically in the consolidated statements of income and comprehensive income or in equity as a component of accumulated other comprehensive income, depending on the nature of the derivative financial instrument and whether it qualifies for hedge accounting. Financial instruments designated as hedges are tested for effectiveness at each reporting period. Realized gains and losses on those contracts that are proven to be effective are reported as a component of the related transaction.

H)     Goodwill

Goodwill is recognized in a business combination if the cost of the acquisition exceeds the fair values of the identifiable net assets acquired. Goodwill is then allocated to the cash generating unit ("CGU") or group of CGUs that are expected to benefit from the synergies of the combination. A CGU is the smallest identifiable group of assets that generates cash inflows which are largely independent of the cash inflows from other assets or groups of assets.

The Company performs goodwill impairment tests on an annual basis as at December 31 each year. In addition, the Company assesses for indicators of impairment at each reporting period end and, if an indicator of impairment is identified, goodwill is tested for impairment at that time. If the carrying value of the CGU or group of CGUs to which goodwill is assigned exceeds its recoverable amount, an impairment loss is recognized. Goodwill impairment losses are not reversed.

The recoverable amount of a CGU or group of CGUs is measured as the higher of value in use and fair value less costs of disposal.

I)     Mining Properties, Plant and Equipment and Mine Development Costs

During the year ended December 31, 2017, the Company made a voluntary change to its accounting policy on Mining Properties, Plant and Equipment and Mine Development Costs, which is set out below.

The Company's previous accounting policy was to use proven and probable reserves as the denominator for calculating depreciation when using the units-of-production method. The Company has updated its policy to also include the mineral resources included in the current life of mine plan as the denominator for calculating depreciation when using the units-of-production method as the Company believes it is probable that mineral resources included in a current life of mine plan will be economically extracted. The Company believes this information is more useful to financial statement users by better representing management's best estimate of the remaining useful life of the corresponding assets and, consequently, the revised treatment results in more reliable and relevant information. The change in accounting policy has been adopted retrospectively in accordance with IAS 8 and there was no impact on previously disclosed financial information.

Mining properties, plant and equipment and mine development costs are recorded at cost, less accumulated amortization and accumulated impairment losses.

Mining Properties

The cost of mining properties includes the fair value attributable to proven and probable mineral reserves and mineral resources acquired in a business combination or asset acquisition, underground mine development costs, deferred stripping, capitalized exploration and evaluation costs and capitalized borrowing costs.

Significant payments related to the acquisition of land and mineral rights are capitalized as mining properties at cost. If a mineable ore body is discovered, such costs are amortized to income when commercial production commences, using the units-of-production method, based on estimated proven and probable mineral reserves and the mineral resources included in the current life of mine plan. If no mineable ore body is discovered, such costs are expensed in the period in which it is determined that the property has no future economic value. Cost components of a specific project that are included in the capital cost of the asset include salaries and wages directly attributable to the project, supplies and materials used in the project, and incremental overhead costs that can be directly attributable to the project.

Assets under construction are not amortized until the end of the construction period or once commercial production is achieved. Upon achieving the production stage, the capitalized construction costs are transferred to the appropriate category of plant and equipment.

Plant and Equipment

Expenditures for new facilities and improvements that can extend the useful lives of existing facilities are capitalized as plant and equipment at cost. The cost of an item of plant and equipment includes: its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and the estimate of the costs of dismantling and removing the item and restoring the site on which it is located other than costs that arise as a consequence of having used the item to produce inventories during the period.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of income and comprehensive income when the asset is derecognized.

Amortization of an asset begins when the asset is in the location and condition necessary for it to operate in the manner intended by management. Amortization ceases at the earlier of the date the asset is classified as held for sale or the date the asset is derecognized. Assets under construction are not amortized until the end of the construction period or once commercial production is achieved. Amortization is charged according to either the units-of-production method or on a straight-line basis, according to the pattern in which the asset's future economic benefits are expected to be consumed. The amortization method applied to an asset is reviewed at least annually.

Useful lives of property, plant and equipment are based on the lesser of the estimated mine lives as determined by proven and probable mineral reserves and the mineral resources included in the current life of mine plan and the estimated useful life of the asset. Remaining mine lives at December 31, 2017 range from 1 to 17 years.

The following table sets out the useful lives of certain assets:

                                                                                                                                                                                    

 

 

Useful Life

 

 


Building

 

5 to 30 years

Leasehold Improvements

 

15 years

Software and IT Equipment

 

1 to 10 years

Furniture and Office Equipment

 

3 to 5 years

Machinery and Equipment

 

1 to 26 years

 

Mine Development Costs

Mine development costs incurred after the commencement of commercial production are capitalized when they are expected to have a future economic benefit. Activities that are typically capitalized include costs incurred to build shafts, drifts, ramps and access corridors which enables the Company to extract ore underground.

The Company records amortization on underground mine development costs on a units-of-production basis based on the estimated tonnage of proven and probable mineral reserves and the mineral resources included in the current life of mine plan of the identified component of the ore body. The units-of-production method defines the denominator as the total tonnage of proven and probable mineral reserves and the mineral resources included in the current life of mine plan.

Deferred Stripping

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of mining overburden and waste materials is referred to as stripping.

During the development stage of the mine, stripping costs are capitalized as part of the cost of building, developing and constructing the mine and are amortized once the mine has entered the production stage.

During the production stage of a mine, stripping costs are recorded as a part of the cost of inventories unless these costs are expected to provide a future economic benefit and, in such cases, are capitalized to property, plant and mine development.

Production stage stripping costs provide a future economic benefit when:

       It is probable that the future economic benefit (e.g., improved access to the ore body) associated with the stripping activity will flow to the Company;

       The Company can identify the component of the ore body for which access has been improved; and

       The costs relating to the stripping activity associated with that component can be measured reliably.

Capitalized production stage stripping costs are amortized over the expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity.

Borrowing Costs

Borrowing costs are capitalized to qualifying assets. Qualifying assets are assets that take a substantial period of time to prepare for the Company's intended use, which includes projects that are in the exploration and evaluation, development or construction stages.

Borrowing costs attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognized as finance costs in the period in which they are incurred. Where the funds used to finance a qualifying asset form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to the relevant borrowings during the period.

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, including whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset.

Leasing arrangements that transfer substantially all the risks and rewards of ownership of the asset to the Company are classified as finance leases. Finance leases are recorded as an asset with a corresponding liability at an amount equal to the lower of the fair value of the leased assets and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance costs using the effective interest rate method, whereby a constant rate of interest expense is recognized on the balance of the liability outstanding. The interest element of the lease is charged to the consolidated statements of income and comprehensive income as a finance cost. An asset leased under a finance lease is amortized over the shorter of the lease term and its useful life.

All other leases are recognized as operating leases. Operating lease payments are recognized as an operating expense in the consolidated statements of income and comprehensive income on a straight-line basis over the lease term.

J)     Development Stage Expenditures

Development stage expenditures are costs incurred to obtain access to proven and probable mineral reserves or mineral resources and provide facilities for extracting, treating, gathering, transporting and storing the minerals. The development stage of a mine commences when the technical feasibility and commercial viability of extracting the mineral resource has been determined. Costs that are directly attributable to mine development are capitalized as property, plant and mine development to the extent that they are necessary to bring the property to commercial production.

Abnormal costs are expensed as incurred. Indirect costs are included only if they can be directly attributed to the area of interest. General and administrative costs are capitalized as part of the development expenditures when the costs are directly attributed to a specific mining development project.

Commercial Production

A mine construction project is considered to have entered the production stage when the mine construction assets are available for use. In determining whether mine construction assets are considered available for use, the criteria considered include, but are not limited to, the following:

       Completion of a reasonable period of testing mine plant and equipment;

       Ability to produce minerals in saleable form (within specifications); and

       Ability to sustain ongoing production of minerals.

When a mine construction project moves into the production stage, amortization commences, the capitalization of certain mine construction costs ceases and expenditures are either capitalized to inventories or expensed as incurred. Exceptions include costs incurred for additions or improvements to property, plant and mine development and open-pit stripping activities.

K)     Impairment of Long-lived Assets

At the end of each reporting period the Company assesses whether there is any indication that long-lived assets may be impaired. If an indicator of impairment exists, the recoverable amount of the asset is calculated in order to determine if any impairment loss is required. If it is not possible to estimate the recoverable amount of the individual asset, assets are grouped at the CGU level for the purpose of assessing the recoverable amount. An impairment loss is recognized for any excess of the carrying amount of the CGU over its recoverable amount. The impairment loss related to a CGU is first allocated to goodwill and the remaining loss is allocated on a pro-rata basis to the remaining long-lived assets of the CGU based on their carrying amounts.

Any impairment charge that is taken on a long-lived asset except goodwill is reversed if there are subsequent changes in the estimates or significant assumptions that were used to recognize the impairment loss that result in an increase in the recoverable amount of the CGU. If an indicator of impairment reversal has been identified, a recovery should be recognized to the extent the recoverable amount of the asset exceeds its carrying amount. The amount of the reversal is limited to the difference between the current carrying amount and the amount which would have been the carrying amount had the earlier impairment not been recognized and amortization of that carrying amount had continued. Impairments and subsequent reversals are recorded in the consolidated statements of income and comprehensive income in the period in which they occur.

L)     Debt

Debt is initially recorded at fair value, net of financing costs incurred. Debt is subsequently measured at amortized cost. Any difference between the amounts received and the redemption value of the debt is recognized in the consolidated statements of income and comprehensive income over the period to maturity using the effective interest rate method.

M)     Reclamation Provisions

Asset retirement obligations ("AROs") arise from the acquisition, development and construction of mining properties and plant and equipment due to government controls and regulations that protect the environment on the closure and reclamation of mining properties. The major parts of the carrying amount of AROs relate to tailings and heap leach pad closure and rehabilitation, demolition of buildings and mine facilities, ongoing water treatment and ongoing care and maintenance of closed mines. The Company recognizes an ARO at the time the environmental disturbance occurs or a constructive obligation is determined to exist based on the Company's best estimate of the timing and amount of expected cash flows expected to be incurred. When the ARO provision is recognized, the corresponding cost is capitalized to the related item of property, plant and mine development. Reclamation provisions that result from disturbance in the land to extract ore in the current period is included in the cost of inventories.

The timing of the actual environmental remediation expenditures is dependent on a number of factors such as the life and nature of the asset, the operating licence conditions and the environment in which the mine operates. Reclamation provisions are measured at the expected value of future cash flows discounted to their present value using a risk-free interest rate. AROs are adjusted each period to reflect the passage of time (accretion). Accretion expense is recorded in finance costs each period. Upon settlement of an ARO, the Company records a gain or loss if the actual cost differs from the carrying amount of the ARO. Settlement gains or losses are recorded in the consolidated statements of income and comprehensive income.

Expected cash flows are updated to reflect changes in facts and circumstances. The principal factors that can cause expected cash flows to change are the construction of new processing facilities, changes in the quantities of material in mineral reserves and mineral resources and a corresponding change in the life of mine plan, changing ore characteristics that impact required environmental protection measures and related costs, changes in water quality that impact the extent of water treatment required and changes in laws and regulations governing the protection of the environment.

Each reporting period, provisions for AROs are remeasured to reflect any changes to significant assumptions, including the amount and timing of expected cash flows and risk-free interest rates. Changes to the reclamation provision resulting from changes in estimate are added to or deducted from the cost of the related asset, except where the reduction of the reclamation provision exceeds the carrying value of the related assets in which case the asset is reduced to nil and the remaining adjustment is recognized in the consolidated statements of income and comprehensive income.

Environmental remediation liabilities ("ERLs") are differentiated from AROs in that ERLs do not arise from environmental contamination in the normal operation of a long-lived asset or from a legal or constructive obligation to treat environmental contamination resulting from the acquisition, construction or development of a long-lived asset. The Company is required to recognize a liability for obligations associated with ERLs arising from past acts. ERLs are measured by discounting the expected related cash flows using a risk-free interest rate. The Company prepares estimates of the timing and amount of expected cash flows when an ERL is incurred. Each reporting period, the Company assesses cost estimates and other assumptions used in the valuation of ERLs to reflect events, changes in circumstances and new information available. Changes in these cost estimates and assumptions have a corresponding impact on the value of the ERL. Any change in the value of ERLs results in a corresponding charge or credit to the consolidated statements of income and comprehensive income. Upon settlement of an ERL, the Company records a gain or loss if the actual cost differs from the carrying amount of the ERL in the consolidated statements of income and comprehensive income.

N)     Post-employment Benefits

In Canada, the Company maintains a defined contribution plan covering all of its employees (the "Basic Plan"). The Basic Plan is funded by Company contributions based on a percentage of income for services rendered by employees. In addition, the Company has a supplemental plan for designated executives at the level of Vice-President or above (the "Supplemental Plan"). Under the Supplemental Plan, an additional 10.0% of the designated executives' income is contributed by the Company.

The Company provides a defined benefit retirement program (the "Retirement Program") for certain eligible employees that provides a lump-sum payment upon retirement. The payment is based on age and length of service at retirement. An eligible employee is entitled to a benefit if they have completed more than 10 years as a permanent employee and have attained a minimum age of 55. The Retirement Program is not funded.

The Company also provides a non-registered supplementary executive retirement defined benefit plan for certain current and former senior officers (the "Executives Plan"). The Executives Plan benefits are generally based on the employee's years of service and level of compensation. Pension expense related to the Executives Plan is the net of the cost of benefits provided (including the cost of any benefits provided for past service), the net interest cost on the net defined liability/asset, and the effects of settlements and curtailments related to special events. Pension fund assets are measured at their current fair values. The costs of pension plan improvements are recognized immediately in expense when they occur. Remeasurements of the net defined benefit liability are recognized immediately in other comprehensive income (loss) and are subsequently transferred to retained earnings.

Defined Contribution Plan

The Company recognizes the contributions payable to a defined contribution plan in exchange for services rendered by employees as an expense, unless another policy requires or permits the inclusion of the contribution in the cost of an asset. After deducting contributions already paid, a liability is recorded throughout each period to reflect unpaid but earned contributions. If the contribution paid exceeds the contribution due for the service before the end of the reporting period, the Company recognizes that excess as an asset to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

Defined Benefit Plan

Plan assets are measured at their fair value at the consolidated balance sheet date and are deducted from the present value of plan liabilities to arrive at a net defined benefit liability/asset. The defined benefit obligation reflects the expected future payments required to settle the obligation resulting from employee service in the current and prior periods.

Current service cost represents the actuarially calculated present value of the benefits earned by the active employees in each period and reflects the economic cost for each period based on current market conditions. The current service cost is based on the most recent actuarial valuation. The net interest on the net defined benefit liability/asset is the change during the period in the defined benefit liability/asset that arises from the passage of time.

Past service cost represents the change in the present value of the defined benefit obligation resulting from a plan amendment or curtailment. Past service costs from plan amendments that increase or decrease vested or unvested benefits are recognized immediately in net income at the earlier of when the related plan amendment occurs or when the entity recognizes related restructuring costs or termination benefits.

Gains or losses on plan settlements are measured as the difference in the present value of the defined benefit obligation and settlement price. This results in a gain or loss being recognized when the benefit obligation settles. Actuarial gains and losses are recorded on the consolidated balance sheets as part of the benefit plan's funded status. Gains and losses are recognized immediately in other comprehensive income and are subsequently transferred to retained earnings and are not subsequently recognized in net income.

O)     Contingent Liabilities and Other Provisions

Provisions are recognized when a present obligation exists (legal or constructive), as a result of a past event, for which it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the expenditure required to settle the obligation at the consolidated balance sheet date, measured using the expected cash flows discounted for the time value of money. The increase in provision (accretion) due to the passage of time is recognized as a finance cost in the consolidated statements of income and comprehensive income.

Contingent liabilities are possible obligations whose existence will be confirmed only on the occurrence or non-occurrence of uncertain future events outside the entity's control, or present obligations that are not recognized because it is not probable that an outflow of economic benefits would be required to settle the obligation or the amount cannot be measured reliably. Contingent liabilities are not recognized but are disclosed and described in the notes to the consolidated financial statements, including an estimate of their potential financial effect and uncertainties relating to the amount or timing of any outflow, unless the possibility of settlement is remote. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, with assistance from its legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

P)     Stock-based Compensation

The Company offers equity-settled awards (the employee stock option plan, incentive share purchase plan, restricted share unit plan and performance share unit plan) to certain employees, officers and directors of the Company.

Employee Stock Option Plan ("ESOP")

The Company's ESOP provides for the granting of options to directors, officers, employees and service providers to purchase common shares. Options have exercise prices equal to the market price on the day prior to the date of grant. The fair value of these options is recognized in the consolidated statements of income and comprehensive income or in the consolidated balance sheets if capitalized as part of property, plant and mine development over the applicable vesting period as a compensation cost. Any consideration paid by employees on exercise of options or purchase of common shares is credited to share capital.

Fair value is determined using the Black-Scholes option valuation model, which requires the Company to estimate the expected volatility of the Company's share price and the expected life of the stock options. Limitations with existing option valuation models and the inherent difficulties associated with estimating these variables create difficulties in determining a reliable single measure of the fair value of stock option grants. The cost is recorded over the vesting period of the award to the same expense category of the award recipient's payroll costs and the corresponding entry is recorded in equity. Equity-settled awards are not remeasured subsequent to the initial grant date. The dilutive impact of stock option grants is factored into the Company's reported diluted net income per share. The stock option expense incorporates an expected forfeiture rate, estimated based on expected employee turnover.

Incentive Share Purchase Plan ("ISPP")

Under the ISPP, directors (excluding non-executive directors), officers and employees (the "Participants") of the Company may contribute up to 10.0% of their basic annual salaries and the Company contributes an amount equal to 50.0% of each Participant's contribution. All common shares subscribed for under the ISPP are issued by the Company.

The Company records an expense equal to its cash contribution to the ISPP. No forfeiture rate is applied to the amounts accrued. Where an employee leaves prior to the vesting date, any accrual for contributions by the Company during the vesting period related to that employee is reversed.

Restricted Share Unit ("RSU") Plan

The RSU plan is open to directors and certain employees, including senior executives, of the Company. Common shares are purchased and held in a trust until they have vested. The cost is recorded over the vesting period of the award to the same expense category as the award recipient's payroll costs. The cost of the RSUs is recorded within equity until settled. Equity-settled awards are not remeasured subsequent to the initial grant date.

Performance Share Unit ("PSU") Plan

The PSU plan is open to senior executives of the Company. Common shares are purchased and held in a trust until they have vested. PSUs are subject to vesting requirements based on specific performance measurements by the Company. The fair value for the portion of the PSUs related to market conditions is based on the application of pricing models at the grant date and the fair value for the portion related to non-market conditions is based on the market value of the shares at the grant date. Compensation expense is based on the current best estimate of the outcome for the specific performance measurement established by the Company and is recognized over the vesting period based on the number of units estimated to vest. The cost of the PSUs is recorded within equity until settled. Equity-settled awards are not remeasured subsequent to the initial grant date.

Q)     Revenue Recognition

Revenue from mining operations consists of gold revenues, net of smelting, refining, transportation and other marketing charges. Revenues from by-product metal sales are shown net of smelter charges as part of revenues from mining operations.

Revenue from the sale of gold and silver is recognized when the following conditions have been met:

       The Company has transferred to the buyer the significant risks and rewards of ownership;

       The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

       The amount of revenue can be measured reliably;

       It is probable that the economic benefits associated with the transaction will flow to the Company; and

       The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from gold and silver in the form of dore bars and gold contained in copper concentrate is recorded when the refined gold or silver is sold and delivered to the customer. Generally, all of the gold and silver in the form of dore bars recovered in the Company's milling process is sold in the period in which it is produced.

Under the terms of the Company's concentrate sales contracts with third-party smelters, final prices for the metals contained in the concentrate are determined based on the prevailing spot market metal prices on a specified future date, which is established as of the date the concentrate is delivered to the smelter. The Company records revenues under these contracts based on forward prices at the time of delivery, which is when the risks and rewards of ownership of the concentrate passes to the third-party smelters. The terms of the contracts result in differences between the recorded estimated price at delivery and the final settlement price. These differences are adjusted through revenue at each subsequent financial statement date.

R)     Exploration and Evaluation Expenditures

Exploration and evaluation expenditures are the costs incurred in the initial search for mineral deposits with economic potential or in the process of obtaining more information about existing mineral deposits. Exploration expenditures typically include costs associated with prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore. Evaluation expenditures are the costs incurred to establish the technical and commercial viability of developing mineral deposits identified through exploration activities or by acquisition.

Exploration and evaluation expenditures are expensed as incurred unless it can be demonstrated that the project will generate future economic benefit. When it is determined that a project can generate future economic benefit the costs are capitalized in the property, plant and mine development line item of the consolidated balance sheets.

The exploration and evaluation phase ends when the technical feasibility and commercial viability of extracting the mineral is demonstrable.

S)     Net Income Per Share

Basic net income per share is calculated by dividing net income for a given period by the weighted average number of common shares outstanding during that same period. Diluted net income per share reflects the potential dilution that could occur if holders with rights to convert instruments to common shares exercise these rights. The weighted average number of common shares used to determine diluted net income per share includes an adjustment, using the treasury stock method, for stock options outstanding. Under the treasury stock method:

       The exercise of options is assumed to occur at the beginning of the period (or date of issuance, if later);

       The proceeds from the exercise of options plus the future period compensation expense on options granted are assumed to be used to purchase common shares at the average market price during the period; and

       The incremental number of common shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) is included in the denominator of the diluted net income per share calculation.

T)     Income Taxes

Current and deferred tax expenses are recognized in the consolidated statements of income and comprehensive income except to the extent that they relate to a business combination, or to items recognized directly in equity or in other comprehensive income (loss).

Current tax expense is based on substantively enacted statutory tax rates and laws at the consolidated balance sheet date.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax basis of such assets and liabilities measured using tax rates and laws that are substantively enacted at the consolidated balance sheet date and effective for the reporting period when the temporary differences are expected to reverse.

Deferred taxes are not recognized in the following circumstances:

       Where a deferred tax liability arises from the initial recognition of goodwill;

       Where a deferred tax asset or liability arises on the initial recognition of an asset or liability in a transaction which is not a business combination and, at the time of the transaction, affects neither net income nor taxable profits; and

       For temporary differences relating to investments in subsidiaries and jointly controlled entities to the extent that the Company can control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognized for unused tax losses and tax credits carried forward and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized except as noted above. At each reporting period, previously unrecognized deferred tax assets are reassessed to determine whether it has become probable that future taxable profits will allow the deferred tax assets to be recovered.

Recently Adopted Accounting Pronouncements

In January 2016, the IASB amended IAS 7 Statement of Cash Flows. The amendments require entities to provide disclosure that enables users of financial statements to evaluate changes in liabilities arising from financing activities. The amendments are effective for annual periods beginning on or after January 1, 2017. The Company has adopted the amendments effective January 1, 2017 and has included the additional disclosure in the consolidated financial statements.

Recently Issued Accounting Pronouncements

IFRS 15 – Revenue from Contracts with Customers

In May 2014, IFRS 15 – Revenue from Contracts with Customers ("IFRS 15") was issued which establishes a five-step model to account for revenue arising from contracts with customers. The standard sets out the principles required to report useful information to financial statement users about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a modified retrospective application or a full retrospective application is required for annual periods beginning on or after January 1, 2018. The Company will adopt the new standard beginning January 1, 2018 using the modified retrospective approach.

The Company reviewed its sales contracts and applied the five-step model established in IFRS 15 to assess the implications of adopting the new standard on existing contracts. Based on the work completed to date, the Company has not identified any material changes in either the timing or measurement of revenue recognition under IFRS 15. The Company has concluded that the point of transfer of risks and rewards for its metals under IAS 18 – Revenue and the point of transfer of control under IFRS 15 occur at the same time.

Provisionally priced sales

For sales of metal in concentrate, control of the concentrate generally passes to the customer at the time of delivery. Certain concentrate sales contracts contain provisional pricing. Under IFRS 15, the Company expects that revenue from provisionally priced sales will be measured on the date that control transfers based on a forward price for a specified future date. Subsequent changes in the measurement of receivables relating to provisionally priced concentrate sales will continue to be recorded as revenue and these amounts will be separately disclosed in the Company's revenue note disclosure. During the year ended December 31, 2017, revenue from provisional price adjustments was $3.0 million.

Other presentation and disclosure requirements

IFRS 15 contains presentation and disclosure requirements that are more detailed than the current standards. The presentation requirements represent a significant change from current practice and will increase the amount of disclosure required in the financial statements. Many of the disclosure requirements in IFRS 15 are completely new. During 2017, the Company has continued to consider the systems, internal controls, policies and procedures necessary to collect and disclose the required information.

The estimated impact of the adoption of IFRS 15 is based on the assessments undertaken by the Company to date.The actual impact of adopting this new standard at January 1, 2018 may be different should there be any changes in the Company's assessment of the impact of the adoption of IFRS 15 or interpretations of the new standard in the industry prior to the Company presenting its first consolidated financial statements that include the date of initial adoption.

IFRS 9 – Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments ("IFRS 9") that replaces IAS 39 – Financial Instruments: Recognition and Measurement ("IAS 39") and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Except for hedge accounting, retrospective application is required, but the provision of comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The Company adopted IFRS 9 with an effective date of January 1, 2018 on a modified retrospective basis. The Company has completed its assessment of the impact of the IFRS 9 and a summary of these impacts is provided below.

Classification and measurement

The Company will apply the irrevocable election available under IFRS 9 to designate equity investments as financial assets at fair value through other comprehensive income. This election will be applied to all equity investments held upon adoption. As a result, changes in the fair value of equity investments will be recognized permanently in other comprehensive income with no reclassification to the profit or loss even upon eventual disposition. On adoption, all accumulated impairment losses on equity investments held on the date of adoption that had previously been recorded in profit or loss will be reclassified from deficit to accumulated other comprehensive income. This adjustment will be $44.1 million and will reduce the opening deficit.

The Company has determined that the classification of certain other financial assets will change to conform to the revised model for classifying financial assets; however, the Company expects there will be no impact on the recognition or measurement of the Company's other financial assets. There will be no significant impact on the classification and measurement of the Company's financial liabilities.

Impairment

The impairment requirements are based on a forward-looking expected credit loss model. The adoption of the expected credit loss model is not expected to have a significant impact on the Company's financial statements.

Hedge accounting

The Company has reassessed all of its existing hedging relationships that qualify for hedge accounting under IAS 39 and concluded that these will continue to qualify for hedge accounting under IFRS 9. The Company will not apply hedge accounting under IFRS 9 for any economic hedges that did not qualify for hedge accounting under IAS 39.

Upon adoption of IFRS 9, there will be a change in the presentation of the time value portion of changes in the value of an option that is a hedging item. Under IFRS 9, the time value component of options in designated hedging relationships will be recorded in other comprehensive income, rather than in the gain on derivative financial instruments line item of the consolidated statements of income and comprehensive income. Amounts accumulated in other comprehensive income will be transferred to net income in the period when the forecasted transaction affects net income.

The Company will reflect the retrospective impact of the adoption of IFRS 9 due to the change in accounting for the time value of options as an adjustment to opening deficit on January 1, 2018. There will be a corresponding adjustment to accumulated other comprehensive income. This adjustment will be $3.1 million and will increase the opening deficit.

IFRS 16 – Leases

In January 2016, IFRS 16 – Leases was issued, which requires lessees to recognize assets and liabilities for most leases, as well as corresponding amortization and finance expense. Application of the standard is mandatory for annual reporting periods beginning on or after January 1, 2019, with earlier application permitted. The Company plans to adopt the new standard beginning January 1, 2019.

The Company expects that the new standard will result in an increase in assets and liabilities, as well as a corresponding increase in amortization and finance expense. The Company also expects that cash flow from operating activities will increase under the new standard because lease payments for most leases will be recorded as cash outflows from financing activities in the statements of cash flows. The magnitude of these impacts of adopting the new standard have not yet been determined.

The Company has established an implementation plan to assess the accounting impacts of the new standard and the related impacts on internal controls over the remainder of 2018. The Company is currently conducting a review of its contracts with suppliers to assess the impact of the new standard and to collect data necessary for adoption of the new standard. The Company expects to report more detailed information, including the quantitative impact, if material, in its consolidated financial statements as the effective date approaches.

IFRIC 23 – Uncertainty Over Income Tax Treatments

In June 2017, the IASB issued IFRIC Interpretation 23 – Uncertainty over Income Tax Treatments ("IFRIC 23"). IFRIC 23 clarifies the application of recognition and measurement requirements in IAS 12 – Income Taxes when there is uncertainty over income tax treatments. More specifically, it will provide guidance in the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when uncertainty exists. IFRIC 23 is applicable for annual reporting periods beginning on or after January 1, 2019, but earlier application is permitted. The Company will determine the extent of the impact on the Company's current and deferred income tax balances as a result of the adoption of IFRIC 23 in the future.

 

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SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS
12 Months Ended
Dec. 31, 2017
SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS  
SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS

 

4.   SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes that the estimates used in the preparation of the consolidated financial statements are reasonable; however, actual results may differ materially from these estimates. The key areas where significant judgments, estimates and assumptions have been made are summarized below.

Mineral Reserve and Mineral Resource Estimates

Mineral reserves and mineral resources are estimates of the amount of ore that can be economically and legally extracted from the Company's mining properties. The estimates are based on information compiled by "qualified persons" as defined under the Canadian Securities Administrators' National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101"). Such an analysis 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 requires complex geological judgments to interpret the data. The estimation of mineral reserves and mineral resources are based upon factors such as estimates of commodity prices, future capital requirements and production costs, geological and metallurgical assumptions and judgments made in estimating the size and grade of the ore body and foreign exchange rates.

As the economic assumptions used may change and as additional geological information is acquired during the operation of a mine, estimates of mineral reserves and mineral resources may change. Such changes may impact the Company's consolidated balance sheets and consolidated statements of income and comprehensive income, including:

 

 

 

 

 

           

•      

The carrying value of the Company's property, plant and mine development and goodwill may be affected due to changes in estimated future cash flows;

           

•      

Amortization charges in the consolidated statements of income and comprehensive income may change where such charges are determined using the units-of-production method or where the useful life of the related assets change;

           

•      

Capitalized stripping costs recognized in the consolidated balance sheets as either part of mining properties or as part of inventories or charged to income may change due to changes in the ratio of ore to waste extracted;

           

•      

Reclamation provisions may change where changes to the mineral reserve and mineral resource estimates affect expectations about when such activities will occur and the associated cost of these activities; and

           

•      

Mineral reserve and mineral resource estimates are used to calculate the estimated recoverable amounts of CGU's for impairment tests of goodwill and non-current assets.

Exploration and Evaluation Expenditures

The application of the Company's accounting policy for exploration and evaluation expenditures requires judgment to determine whether future economic benefits are likely to arise and whether activities have reached a stage where the technical feasibility and commercial viability of extracting the mineral resource is demonstrable.

Production Stage of a Mine

As each mine is unique, significant judgment is required to determine the date that a mine enters the commercial production stage. The Company considers the factors outlined in note 3 to these consolidated financial statements to make this determination.

Contingencies

Contingencies can be either possible assets or possible liabilities arising from past events which, by their nature, will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence and potential impact of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.

Reclamation Provisions

Environmental remediation costs will be incurred by the Company at the end of the operating life of the Company's mining properties. Management assesses its reclamation provision each reporting period and when new information becomes available. The ultimate environmental remediation costs are uncertain and cost estimates can vary in response to many factors, including estimates of the extent and costs of reclamation activities, technological changes, regulatory changes, cost increases as compared to the inflation rate and changes in discount rates. These uncertainties may result in future actual expenditures differing from the amount of the current provision. As a result, there could be significant adjustments to the provisions established that would affect future financial results. The reclamation provision at each reporting date represents management's best estimate of the present value of the future environmental remediation costs required.

Income and Mining Taxes

Management is required to make estimates regarding the tax basis of assets and liabilities and related deferred income and mining tax assets and liabilities, amounts recorded for uncertain tax positions, the measurement of income and mining tax expense, and estimates of the timing of repatriation of income. Several of these estimates require management to make assessments of future taxable profit and, if actual results are significantly different than the Company's estimates, the ability to realize the deferred income and mining tax assets recorded on the consolidated balance sheets could be affected.

Amortization

Property, plant and mine development comprise a large portion of the Company's total assets and as such the amortization of these assets has a significant effect on the Company's consolidated financial statements. Amortization is charged according to the pattern in which an asset's future economic benefits are expected to be consumed. The determination of this pattern of future economic benefits requires management to make estimates and assumptions about useful lives and residual values at the end of the asset's useful life. Actual useful lives and residual values may differ significantly from current assumptions.

Impairment and Impairment Reversals

The Company evaluates each asset or CGU (excluding goodwill, which is assessed for impairment annually regardless of indicators and is not eligible for impairment reversals) in each reporting period to determine if any indicators of impairment or impairment reversal exist. When completing an impairment test, the Company calculates the estimated recoverable amount of CGUs, which requires management to make estimates and assumptions with respect to items such as future production levels, operating and capital costs, long-term commodity prices, foreign exchange rates, discount rates, amounts of recoverable reserves, mineral resources and exploration potential, and closure and environmental remediation costs. These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will have an impact on these projections, which may impact the recoverable amount of assets or CGUs. Accordingly, it is possible that some or the entire carrying amount of the assets or CGUs may be further impaired or the impairment charge reversed with the impact recognized in the consolidated statements of income and comprehensive income.

Development Stage Expenditures

The application of the Company's accounting policy for development stage expenditures requires judgment to determine when the technical feasibility and commercial viability of extracting a mineral resource has been determined.

Some of the factors that the Company may consider in its assessment of technical feasibility and commercial viability are listed below:

 

 

 

 

 

           

•      

The level of geological certainty of the mineral deposit;

           

•      

Life of mine plans or economic models to support the economic extraction of reserves and mineral resources;

           

•      

A preliminary economic assessment, prefeasibility study or feasibility study that demonstrates the reserves and mineral resources will generate a positive commercial outcome;

           

•      

Reasonable expectations that operating permits will be obtained; and

           

•      

Approval by the Board of Directors for development of the project.

Joint Arrangements

Judgment is required to determine when the Company has joint control of a contractual arrangement, which requires a continuous assessment of the relevant activities and when the decisions in relation to those activities require unanimous consent. Judgment is also continually required to classify a joint arrangement as either a joint operation or a joint venture when the arrangement has been structured through a separate vehicle. Classifying the arrangement requires the Company to assess its rights and obligations arising from the arrangement. Specifically, the Company considers the legal form of the separate vehicle, the terms of the contractual arrangement and other relevant facts and circumstances. This assessment often requires significant judgment, and a different conclusion on joint control, or whether the arrangement is a joint operation or a joint venture, may have a material impact on the accounting treatment.

Management evaluated its joint arrangement with Yamana Gold Inc. ("Yamana") to each acquire 50.0% of the shares of Osisko (now CMC) under the principles of IFRS 11 – Joint Arrangements. The Company concluded that the arrangement qualified as a joint operation upon considering the following significant factors:

 

 

 

 

 

           

•     

The requirement that the joint operators purchase all output from the investee and investee restrictions on selling the output to any third party;

           

•     

The parties to the arrangement are substantially the only source of cash flow contributing to the continuity of the arrangement; and

           

•     

If the selling price drops below cost, the joint operators are required to cover any obligations the Partnership cannot satisfy.

 

v3.8.0.1
ACQUISITIONS
12 Months Ended
Dec. 31, 2017
ACQUISITIONS  
ACQUISITIONS

 

5.   ACQUISITIONS

Santa Gertrudis Project

On November 1, 2017, the Company acquired 100% of the issued and outstanding shares of Animas Resources Ltd. ("Animas"), a wholly-owned Canadian subsidiary of GoGold Resources Inc. ("GoGold") by way of a subscription and share purchase agreement (the "Animas Agreement") dated September 5, 2017. On the closing of the transactions relating to the Animas Agreement, Animas owned a 100% interest in the Santa Gertrudis exploration project located in Sonora, Mexico, indirectly, through three wholly-owned Mexican subsidiaries.

Pursuant to the Animas Agreement, consideration for the acquisition of the shares of Animas totaled $80.0 million less a working capital adjustment of $0.4 million, comprised of $72.0 million in cash payable at closing and the extinguishment of a $7.5 million loan advanced to GoGold on the date of the Animas Agreement that bore interest at a rate of 10% per annum. The principal amount of the loan, along with all accrued interest, was repaid upon closing of the Animas Agreement by way of a set-off against the purchase price.

In connection with the transaction, GoGold was granted a 2.0% net smelter return royalty on production from the Santa Gertrudis project, 50% of which may be repurchased by the Company at any time for $7.5 million.

The acquisition was accounted for by the Company as an asset acquisition and transaction costs associated with the acquisition totaling $0.9 million were capitalized to the mining properties acquired separately from the purchase price allocation set out below.

The following table sets out the allocation of the purchase price to assets acquired and liabilities assumed, based on management's estimates of fair value:

                                                                                                                                                                                    

Total purchase price:

 

 

 

 

 


Cash paid for acquisition

 

$

71,999

 

 


Loan obligation set-off

 

 

7,621

 

 


Total purchase price to allocate

 

$

79,620

 

 



Fair value of assets acquired and liabilities assumed:


 


 


 


 


 


Mining properties

 

$

79,201

 

 


Cash and cash equivalents

 

 

10

 

 


Other current assets

 

 

1,214

 

 


Accounts payable and accrued liabilities

 

 

(805

)

 


Net assets acquired

 

$

79,620

 

 


 

v3.8.0.1
FAIR VALUE MEASUREMENT
12 Months Ended
Dec. 31, 2017
FAIR VALUE MEASUREMENT  
FAIR VALUE MEASUREMENT

 

6.   FAIR VALUE MEASUREMENT

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described, as follows, based on the lowest-level input that is significant to the fair value measurement as a whole:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

For items that are recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing their classification at the end of each reporting period.

During the year ended December 31, 2017, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements.

The Company's financial assets and liabilities include cash and cash equivalents, short-term investments, restricted cash, trade receivables, available-for-sale securities, accounts payable and accrued liabilities, long-term debt and derivative financial instruments.

The fair values of cash and cash equivalents, short-term investments, restricted cash and accounts payable and accrued liabilities approximate their carrying values due to their short-term nature.

Long-term debt is recorded on the consolidated balance sheets at December 31, 2017 at amortized cost. The fair value of long-term debt is determined by applying a discount rate, reflecting the credit spread based on the Company's credit rating, to future related cash flows which is categorized within Level 2 of the fair value hierarchy. As at December 31, 2017, the Company's long-term debt had a fair value of $1,499.4 million (2016 – $1,319.7 million).

The following table sets out the Company's financial assets measured at fair value on a recurring basis as at December 31, 2017 using the fair value hierarchy:

                                                                                                                                                                                    

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 


Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 


Trade receivables

 

$

 

$

12,000

 

$

 

$

12,000

 


Available-for-sale securities

 

 

110,664

 

 

12,111

 

 

 

 

122,775

 


Fair value of derivative financial instruments

 

 

 

 

17,240

 

 

 

 

17,240

 


Total financial assets

 

$

110,664

 

$

41,351

 

$

 

$

152,015

 


The following table sets out the Company's financial assets and liabilities measured at fair value on a recurring basis as at December 31, 2016 using the fair value hierarchy:

                                                                                                                                                                                    

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 


Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 


Trade receivables

 

$

 

$

8,185

 

$

 

$

8,185

 


Available-for-sale securities

 

 

86,736

 

 

5,574

 

 

 

 

92,310

 


Fair value of derivative financial instruments

 

 

 

 

364

 

 

 

 

364

 


Total financial assets

 

$

86,736

 

$

14,123

 

$

 

$

100,859

 



Financial liabilities:


 


 


 


 


 


 


 


 


 


 


 


 


 


Fair value of derivative financial instruments

 

$

 

$

1,120

 

$

 

$

1,120

 


Total financial liabilities

 

$

 

$

1,120

 

$

 

$

1,120

 


Valuation Techniques

Trade Receivables

Trade receivables from provisional invoices for concentrate sales are valued using quoted forward rates derived from observable market data based on the month of expected settlement (classified within Level 2 of the fair value hierarchy).

Available-for-sale Securities

Available-for-sale securities representing shares of publicly traded entities are recorded at fair value using quoted market prices (classified within Level 1 of the fair value hierarchy). Available-for-sale securities representing shares of non-publicly traded entities or non-transferable shares of publicly traded entities are recorded at fair value using external broker-dealer quotations corroborated by option pricing models (classified within Level 2 of the fair value hierarchy).

Derivative Financial Instruments

Derivative financial instruments classified within Level 2 of the fair value hierarchy are recorded at fair value using external broker-dealer quotations corroborated by option pricing models or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs.

 

v3.8.0.1
INVENTORIES
12 Months Ended
Dec. 31, 2017
INVENTORIES  
INVENTORIES

 

7.   INVENTORIES

                                                                                                                                                                                                  

 

 

 

As at
December 31,
2017

 

 

As at
December 31,
2016

 

 

 


 

Ore in stockpiles and on leach pads

 

$

108,161

 

$

90,536

 


 

Concentrates and dore bars

 

 

123,047

 

 

108,193

 


 

Supplies

 

 

269,768

 

 

244,985

 


 

Total current inventories

 

$

500,976

 

$

443,714

 


 

Non-current ore in stockpiles and on leach pads(i)

 

 

69,587

 

 

62,780

 


 

Total inventories

 

$

570,563

 

$

506,494

 


 

Note:

 

 

 

 

 

(i)      

Ore that the Company does not expect to process within 12 months is classified as long-term and is recorded in the other assets line item on the consolidated balance sheets.

During the year ended December 31, 2017, a charge of $2.5 million (2016 – $6.6 million) was recorded within production costs to reduce the carrying value of inventories to their net realizable value.

 

v3.8.0.1
AVAILABLE-FOR-SALE SECURITIES
12 Months Ended
Dec. 31, 2017
AVAILABLE-FOR-SALE SECURITIES  
AVAILABLE-FOR-SALE SECURITIES

 

8.   AVAILABLE-FOR-SALE SECURITIES

                                                                                                                                                                                    

 

 

 

As at
December 31,
2017

 

 

As at
December 31,
2016

 

 

 


 

Cost

 

$

142,546

 

$

91,200

 


 

Accumulated impairment losses

 

 

(44,070

)

 

(36,017

)


 

Unrealized gains in accumulated other comprehensive income

 

 

24,669

 

 

37,634

 


 

Unrealized losses in accumulated other comprehensive income

 

 

(370

)

 

(507

)


 

Total estimated fair value of available-for-sale securities

 

$

122,775

 

$

92,310

 


 

During the year ended December 31, 2017, the Company received net proceeds of $0.3 million (2016 – $6.0 million) and recognized a gain before income taxes of $0.2 million (2016 – $3.5 million) on the sale of certain available-for-sale securities.

During the year ended December 31, 2017, the Company recorded an impairment loss of $8.5 million (2016 – nil) on certain available-for-sale securities that were determined to have an impairment that was significant or prolonged.

 

v3.8.0.1
OTHER ASSETS
12 Months Ended
Dec. 31, 2017
OTHER ASSETS  
OTHER ASSETS

 

9.   OTHER ASSETS

 

 

 

 

 

           

(A)          

Other Current Assets

                                                                                                                                                                                    

 

 

 

As at
December 31,
2017

 

 

As at
December 31,
2016

 

 

 


Federal, provincial and other sales taxes receivable

 

$

83,593

 

$

77,380

 


Prepaid expenses

 

 

53,503

 

 

47,416

 


Other

 

 

13,530

 

 

12,014

 


Total other current assets

 

$

150,626

 

$

136,810

 


 

 

 

 

 

 

           

(B)          

Other Assets

                                                                                                                                                                                    

 

 

 

As at
December 31,
2017

 

 

As at
December 31,
2016

 

 

 


Non-current ore in stockpiles and on leach pads

 

$

69,587

 

$

62,780

 


Other assets

 

 

10,318

 

 

11,383

 


Total other assets

 

$

79,905

 

$

74,163

 


 

v3.8.0.1
PROPERTY, PLANT AND MINE DEVELOPMENT
12 Months Ended
Dec. 31, 2017
PROPERTY, PLANT AND MINE DEVELOPMENT  
PROPERTY, PLANT AND MINE DEVELOPMENT

 

10. PROPERTY, PLANT AND MINE DEVELOPMENT

                                                                                                                                                                                    

 

 

 

Mining
Properties

 

 

Plant and
Equipment

 

 

Mine
Development
Costs

 

 

Total

 

 

 

 


As at December 31, 2015

 

$

1,665,610

 

$

2,064,406

 

$

1,358,951

 

$

5,088,967

 

 


Additions

 

 

53,072

 

 

244,018

 

 

279,119

 

 

576,209

 

 


Gain on impairment reversal

 

 

83,992

 

 

36,169

 

 

 

 

120,161

 

 


Disposals

 

 

(1,890

)

 

(17,658

)

 

 

 

(19,548

)

 


Amortization

 

 

(207,383

)

 

(342,208

)

 

(110,162

)

 

(659,753

)

 


Transfers between categories

 

 

12,135

 

 

39,556

 

 

(51,691

)

 

 

 


As at December 31, 2016

 

 

1,605,536

 

 

2,024,283

 

 

1,476,217

 

 

5,106,036

 

 


Additions

 

 

174,374

 

 

221,924

 

 

648,242

 

 

1,044,540

 

 


Disposals

 

 

(6,750

)

 

(9,354

)

 

 

 

(16,104

)

 


Amortization

 

 

(127,579

)

 

(276,493

)

 

(103,848

)

 

(507,920

)

 


Transfers between categories

 

 

19,946

 

 

30,761

 

 

(50,707

)

 

 

 


As at December 31, 2017

 

$

1,665,527

 

$

1,991,121

 

$

1,969,904

 

$

5,626,552

 

 


As at December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Cost

 

$

2,593,659

 

$

4,233,945

 

$

2,050,980

 

$

8,878,584

 

 


Accumulated amortization and net impairments

 

 

(988,123

)

 

(2,209,662

)

 

(574,763

)

 

(3,772,548

)

 


Carrying value – December 31, 2016

 

$

1,605,536

 

$

2,024,283

 

$

1,476,217

 

$

5,106,036

 

 


As at December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Cost

 

$

2,782,732

 

$

4,602,106

 

$

2,648,514

 

$

10,033,352

 

 


Accumulated amortization and net impairments

 

 

(1,117,205

)

 

(2,610,985

)

 

(678,610

)

 

(4,406,800

)

 


Carrying value – December 31, 2017

 

$

1,665,527

 

$

1,991,121

 

$

1,969,904

 

$

5,626,552

 

 


As at December 31, 2017, assets under construction, and therefore not yet being depreciated, included in the carrying value of property, plant and mine development amounted to $910.6 million (2016 – $532.3 million).

During the year ended December 31, 2017, the Company disposed of property, plant and mine development with a carrying value of $16.1 million (2016 – $19.5 million). The loss on disposal was recorded in the other (income) expenses line item in the consolidated statements of income and comprehensive income.

Geographic Information:

                                                                                                                                                                                    

 

 

 

As at
December 31,
2017

 

 

As at
December 31,
2016

 

 

 


Northern Business:

 

 

 

 

 

 

 

Canada

 

$

3,730,809

 

$

3,266,594

 


Finland

 

 

889,610

 

 

853,445

 


Sweden

 

 

13,812

 

 

13,812

 



Southern Business:


 


 


 


 


 


 


 

Mexico

 

 

982,115

 

 

961,943

 


United States

 

 

10,206

 

 

10,242

 


Total property, plant and mine development

 

$

5,626,552

 

$

5,106,036

 


 

v3.8.0.1
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
12 Months Ended
Dec. 31, 2017
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES  
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                                                                                                                                                                    

 

 

 

As at
December 31,
2017

 

 

As at
December 31,
2016

 

 

 


Trade payables

 

$

144,135

 

$

111,173

 


Wages payable

 

 

50,380

 

 

42,522

 


Accrued liabilities

 

 

76,562

 

 

55,893

 


Other liabilities

 

 

19,645

 

 

18,978

 


Total accounts payable and accrued liabilities

 

$

290,722

 

$

228,566

 


In 2017 and 2016, the other liabilities balance consisted primarily of various employee payroll tax withholdings and other payroll taxes.

v3.8.0.1
RECLAMATION PROVISION
12 Months Ended
Dec. 31, 2017
Reclamation  
RECLAMATION PROVISION  
RECLAMATION PROVISION

12. RECLAMATION PROVISION

Agnico Eagle's reclamation provision includes both asset retirement obligations and environmental remediation liabilities. Reclamation provision estimates are based on current legislation, third party estimates, management's estimates and feasibility study calculations. Assumptions based on current economic conditions, which the Company believes are reasonable, have been used to estimate the reclamation provision. However, actual reclamation costs will ultimately depend on future economic conditions and costs for the necessary reclamation work. Changes in reclamation provision estimates during the period reflect changes in cash flow estimates as well as assumptions including discount and inflation rates. The discount rates used in the calculation of the reclamation provision at December 31, 2017 ranged between 1.14% and 2.39% (2016 – between 0.74% and 2.35%).

The following table reconciles the beginning and ending carrying amounts of the Company's asset retirement obligations. The settlement of the obligation is estimated to occur through to 2067. 

                                                                                                                                                                                    

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended
December 31,
2017

 

 

Year Ended
December 31,
2016

 

 

 

 


Asset retirement obligations – long-term, beginning of year

 

$

259,706

 

$

269,068

 

 


Asset retirement obligations – current, beginning of year

 

 

5,953

 

 

4,443

 

 


Current year additions and changes in estimate, net

 

 

58,891

 

 

(9,112

)

 


Current year accretion

 

 

5,247

 

 

3,847

 

 


Liabilities settled

 

 

(1,115

)

 

(1,113

)

 


Foreign exchange revaluation

 

 

21,004

 

 

(1,474

)

 


Reclassification from long-term to current, end of year

 

 

(8,609

)

 

(5,953

)

 


Asset retirement obligations – long-term, end of year

 

$

341,077

 

$

259,706

 

 


 

The following table reconciles the beginning and ending carrying amounts of the Company's environmental remediation liability. The settlement of the obligation is estimated to occur through to 2025.

                                                                                                                                                                                    

 

 

 

Year Ended
December 31,
2017

 

 

Year Ended
December 31,
2016

 

 

 

 


Environmental remediation liability – long-term, beginning of year

 

$

5,602

 

$

7,231

 

 


Environmental remediation liability – current, beginning of year

 

 

3,240

 

 

1,802

 

 


Current year additions and changes in estimate, net

 

 

850

 

 

243

 

 


Liabilities settled

 

 

(4,559

)

 

(1,606

)

 


Foreign exchange revaluation

 

 

487

 

 

1,172

 

 


Reclassification from long-term to current, end of year

 

 

(1,429

)

 

(3,240

)

 


Environmental remediation liability – long-term, end of year

 

$

4,191

 

$

5,602

 

 


 

v3.8.0.1
LEASES
12 Months Ended
Dec. 31, 2017
LEASES  
LEASES

 

13. LEASES

     

       (A)    Finance Leases

The Company has entered into sale-leaseback agreements with third parties for various fixed and mobile equipment within Canada. These arrangements represent sale-leaseback transactions in accordance with IAS 17 – Leases ("IAS 17"). The sale-leaseback agreements have an average effective annual interest rate of 3.3% and maturities up to 2019.

All of the sale-leaseback agreements have end of lease clauses that qualify as bargain purchase options that the Company expects to execute. As at December 31, 2017, the total net book value of assets recorded under sale-leaseback finance leases amounted to $3.3 million (2016 – $5.3 million).

The Company has agreements with third party providers of mobile equipment with an average effective annual interest rate of 4.3% and maturities up to 2019. These arrangements represent finance leases in accordance with the guidance in IAS 17. As at December 31, 2017, the Company's attributable finance lease obligations were $3.3 million (2016 – $5.9 million).

The following table sets out future minimum lease payments under finance leases together with the present value of the net minimum lease payments:

                                                                                                                                                                                    

 

 

As at
December 31, 2017
 


 

As at
December 31, 2016


 

 

 

 

Minimum
Finance
Lease
Payments

 

 

Interest

 

 

Present
Value

 

 

Minimum
Finance
Lease
Payments

 

 

Interest

 

 

Present
Value

 

 

 


Within 1 year

 

$

3,570

 

$

158

 

$

3,412

 

$

5,955

 

$

420

 

$

5,535

 


Between 1 – 5 years

 

 

1,971

 

 

56

 

$

1,915

 

 

6,630

 

 

311

 

 

6,319

 


Total

 

$

5,541

 

$

214

 

$

5,327

 

$

12,585

 

$

731

 

$

11,854

 


 

 

 

 

 

 

           

           

As at December 31, 2017, the total net book value of assets recorded under finance leases, including sale-leaseback finance leases, was $8.4 million (2016 – $21.1 million). The amortization of assets recorded under finance leases is included in the amortization of property, plant and mine development line item of the consolidated statements of income and comprehensive income.

           

(B)          

Operating Leases

           

           

The Company has a number of operating lease agreements involving office facilities and equipment. Some of the leases for office facilities contain escalation clauses for increases in operating costs and property taxes. Future minimum lease payments required to meet obligations that have initial or remaining non-cancellable lease terms in excess of one year are as follows:

                                                                                                                                                                                    

 

 

 

As at
December 31,
2017

 

 

As at
December 31,
2016

 

 

 


Within 1 year

 

$

4,305

 

$

3,691

 


Between 1 – 3 years

 

 

7,415

 

 

4,780

 


Between 3 – 5 years

 

 

7,484

 

 

2,127

 


Thereafter

 

 

9,429

 

 

9,543

 


Total

 

$

28,633

 

$

20,141

 


During the year ended December 31, 2017, $6.3 million (2016 – $2.1 million) of operating lease payments were recognized in the consolidated statements of income and comprehensive income.

v3.8.0.1
LONG-TERM DEBT
12 Months Ended
Dec. 31, 2017
LONG-TERM DEBT  
LONG TERM DEBT

 

14. LONG-TERM DEBT

                                                                                                                                                                                    

 

 

 

As at
December 31,
2017

 

 

As at
December 31,
2016

 

 

 

 

 


 

Credit Facility(i)(ii)

 

$

(6,181

)

$

(6,416

)

 

 


 

2017 Notes(i)(iii)

 

 

297,784

 

 

 

 

 


 

2016 Notes(i)(iii)

 

 

348,002

 

 

347,716

 

 

 


 

2015 Note(i)(iii)

 

 

49,495

 

 

49,429

 

 

 


 

2012 Notes(i)(iii)

 

 

199,063

 

 

198,894

 

 

 


 

2010 Notes(i)(iii)

 

 

483,688

 

 

598,167

 

 

 


 

Other attributable debt instruments

 

 

 

 

14,896

 

 

 


 

Total debt

 

$

1,371,851

 

$

1,202,686

 

 

 


 

Less: current portion

 

 

 

 

129,896

 

 

 


 

Total long-term debt

 

$

1,371,851

 

$

1,072,790

 

 

 


 

Note:

 

 

 

 

 

(i)    

Inclusive of unamortized deferred financing costs.

(ii)   

There were no amounts outstanding under the Credit Facility (as defined below) as at December 31, 2017 and December 31, 2016. The December 31, 2017 and December 31, 2016 balances relate to deferred financing costs which are being amortized on a straight-line basis until the maturity date of June 22, 2022. Credit Facility availability is reduced by outstanding letters of credit, amounting to $0.8 million as at December 31, 2017.

(iii)   

The terms 2017 Notes, 2016 Notes, 2015 Note, 2012 Notes and 2010 Notes are defined below.

Scheduled Debt Principal Repayments

                                                                                                                                                                                    

 

 

 

2018

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023 and
Thereafter

 

 

Total

 

 

 


2017 Notes

 

$

 

$

 

$

 

$

 

$

 

$

300,000

 

$

300,000

 


2016 Notes