AGNICO EAGLE MINES LTD, 40-F filed on 3/27/2020
Annual Report (foreign private issuer)
v3.20.1
Document and Entity Information
12 Months Ended
Dec. 31, 2019
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, 2019
Amendment Flag false
Current Fiscal Year End Date --12-31
Entity Current Reporting Status Yes
Entity Interactive Data Current Yes
Entity Emerging Growth Company false
Entity Common Stock, Shares Outstanding 239,619,035
Document Fiscal Year Focus 2019
Document Fiscal Period Focus FY
v3.20.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 321,897 $ 301,826
Short- term investments 6,005 6,080
Trade receivables (Notes 6 and 19) 8,320 10,055
Inventories (Note 7) 580,068 494,150
Income taxes recoverable (Note 25) 2,281 17,805
Equity securities (Notes 6 and 8) 86,252 76,532
Fair value of derivative financial instruments (Notes 6 and 21) 9,519 180
Other current assets (Note 9A) 179,218 165,824
Total current assets 1,193,560 1,072,452
Non- current assets:    
Goodwill (Notes 23 and 24) 407,792 407,792
Property, plant and mine development (Notes 10 and 13) 7,003,665 6,234,302
Other assets (Note 9B) 184,868 138,297
Total assets 8,789,885 7,852,843
Current liabilities:    
Accounts payable and accrued liabilities (Note 11) 345,572 310,597
Reclamation provision (Note 12) 12,455 5,411
Interest payable 16,752 16,531
Income taxes payable (Note 25) 26,166 18,671
Lease obligations (Note 13) 14,693 1,914
Current portion of long-term debt (Note 14) 360,000  
Fair value of derivative financial instruments (Notes 6 and 21)   8,325
Total current liabilities 775,638 361,449
Non-current liabilities:    
Long-term debt 1,364,108 1,721,308
Lease obligations (Note 13) 102,135  
Reclamation provision (Note 12) 427,346 380,747
Deferred income and mining tax liabilities (Note 25) 948,142 796,708
Other liabilities (Note 15) 61,002 42,619
Total liabilities 3,678,371 3,302,831
EQUITY    
Outstanding - 240,167,790 common shares issued, less 548,755 shares held in trust 5,589,352 5,362,169
Stock options (Notes 16 and 17) 180,160 197,597
Contributed surplus 37,254 37,254
Deficit (647,330) (988,913)
Other reserves (Note 18) (47,922) (58,095)
Total equity 5,111,514 4,550,012
Total liabilities and equity 8,789,885 7,852,843
Commitments and contingencies (Note 28)
v3.20.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares
Dec. 31, 2019
Dec. 31, 2018
CONSOLIDATED BALANCE SHEETS    
Common shares issued 240,167,790 235,025,507
Common shares held in trust 548,755 566,910
v3.20.1
CONSOLIDATED STATEMENTS OF INCOME (LOSS) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
REVENUES    
Revenues from mining operations (Note 19) $ 2,494,892 $ 2,191,221
COSTS, EXPENSES AND OTHER INCOME    
Production(i) [1] 1,247,705 1,160,355
Exploration and corporate development 104,779 137,670
Amortization of property, plant and mine development (Note 10) 546,057 553,933
General and administrative 120,987 124,873
Finance costs (Note 14) 105,082 96,567
(Gain) loss on derivative financial instruments (Note 21) (17,124) 6,065
Environmental remediation (Note 12) 2,804 14,420
Impairment (reversal) loss (Note 24) (345,821) 389,693
Foreign currency translation loss 4,850 1,991
Other income (Note 22) (13,169) (35,294)
Income (loss) before income and mining taxes 738,742 (259,052)
Income and mining taxes expense (Note 25) 265,576 67,649
Net income (loss) for the year $ 473,166 $ (326,701)
Net income (loss) per share - basic (Note 16) $ 2.00 $ (1.40)
Net income (loss) per share - diluted (Note 16) 1.99 (1.40)
Cash dividends declared per common share $ 0.55 $ 0.44
[1] Exclusive of amortization, which is shown separately.
v3.20.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)    
Net income (loss) for the year $ 473,166 $ (326,701)
Derivative financial instruments (Note 21):    
Changes in fair value of cash flow hedges   (6,984)
Net change in costs of hedging   (3,092)
Total other comprehensive income that will be reclassified to profit or loss, net of tax   (10,076)
Pension benefit obligations:    
Remeasurement (loss) gain of pension benefit obligations (Note 15) (4,296) 841
Income tax impact (Note 25) 572 (38)
Equity securities (Note 8):    
Net change in fair value of equity securities at FVOCI 12,238 (39,585)
Total other comprehensive income that will not be reclassified to profit or loss, net of tax 8,514 (38,782)
Other comprehensive income (loss) for the year 8,514 (48,858)
Comprehensive income (loss) for the year $ 481,680 $ (375,559)
v3.20.1
CONSOLIDATED STATEMENTS OF EQUITY - USD ($)
$ in Thousands
Common Shares Outstanding
Stock Options
Contributed Surplus
Deficit
Other Reserves
Total
Balance at the beginning of the year at Dec. 31, 2017 $ 5,288,432 $ 186,754 $ 37,254 $ (559,504) $ (5,945) $ 4,946,991
Balance at the beginning of the year (in Shares) at Dec. 31, 2017 232,250,441          
Net income (loss)       (326,701)   (326,701)
Other comprehensive income (loss)       803 (49,661) (48,858)
Comprehensive income (loss) for the year       (325,898) (49,661) (375,559)
Transfer of (loss) gain on disposal of equity securities at FVOCI to deficit       (1,290) 1,290  
Hedging gains and costs of hedging transferred to property, plant and mine development         (3,779) (3,779)
Shares issued under employee stock option plan (Notes 16 and 17A) $ 39,923 (8,961)       30,962
Shares issued under employee stock option plan (Notes 16 and 17A) (in shares) 1,220,921          
Stock options (Notes 16 and 17A)   19,804       19,804
Shares issued under incentive share purchase plan (Note 17B) $ 20,595         20,595
Shares issued under incentive share purchase plan (Note 17B) (in Shares) 515,432          
Shares issued under dividend reinvestment plan $ 18,286         18,286
Shares issued under dividend reinvestment plan (in Shares) 495,819          
Dividends declared       (102,221)   (102,221)
Restricted Share Unit plan, Performance Share Unit plan and Long Term Incentive Plan (Notes 16 and 17C,D) $ (5,067)         (5,067)
Restricted Share Unit plan, Performance Share Unit plan and Long Term Incentive Plan (Notes 16 and 17C,D) (in shares) (24,016)          
Balance at the end of the year at Dec. 31, 2018 $ 5,362,169 197,597 37,254 (988,913) (58,095) 4,550,012
Balance at the end of the year (in Shares) at Dec. 31, 2018 234,458,597          
Net income (loss)       473,166   473,166
Other comprehensive income (loss)       (3,724) 12,238 8,514
Comprehensive income (loss) for the year       469,442 12,238 481,680
Transfer of (loss) gain on disposal of equity securities at FVOCI to deficit       2,065 (2,065)  
Shares issued under employee stock option plan (Notes 16 and 17A) $ 174,885 (34,258)       140,627
Shares issued under employee stock option plan (Notes 16 and 17A) (in shares) 4,214,332          
Stock options (Notes 16 and 17A)   16,821       16,821
Shares issued under incentive share purchase plan (Note 17B) $ 23,208         23,208
Shares issued under incentive share purchase plan (Note 17B) (in Shares) 435,420          
Shares issued under dividend reinvestment plan $ 24,555         24,555
Shares issued under dividend reinvestment plan (in Shares) 492,531          
Dividends declared       (129,924)   (129,924)
Restricted Share Unit plan, Performance Share Unit plan and Long Term Incentive Plan (Notes 16 and 17C,D) $ 4,535         4,535
Restricted Share Unit plan, Performance Share Unit plan and Long Term Incentive Plan (Notes 16 and 17C,D) (in shares) 18,155          
Balance at the end of the year at Dec. 31, 2019 $ 5,589,352 $ 180,160 $ 37,254 $ (647,330) $ (47,922) $ 5,111,514
Balance at the end of the year (in Shares) at Dec. 31, 2019 239,619,035          
v3.20.1
CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
CONSOLIDATED STATEMENTS OF EQUITY    
Cash dividends declared per common share $ 0.55 $ 0.44
v3.20.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
OPERATING ACTIVITIES    
Net income (loss) for the year $ 473,166 $ (326,701)
Add (deduct) items not affecting cash:    
Amortization of property, plant and mine development (Note 10) 546,057 553,933
Deferred income and mining taxes (Note 25) 152,595 (30,961)
Stock-based compensation (Note 17) 54,261 50,658
Impairment (reversal) loss (Note 24) (345,821) 389,693
Foreign currency translation loss 4,850 1,991
Other (10,707) 11,610
Adjustment for settlement of reclamation provision (7,108) (4,685)
Changes in non-cash working capital balances:    
Trade receivables 1,735 1,945
Income taxes 22,223 (2,291)
Inventories (91,436) (52,316)
Other current assets (2,742) (18,326)
Accounts payable and accrued liabilities 84,844 29,034
Interest payable (225) 2,066
Cash provided by operating activities 881,692 605,650
INVESTING ACTIVITIES    
Additions to property, plant and mine development (Note 10) (882,664) (1,089,100)
Acquisition (Note 27)   (162,479)
Proceeds from sale of property, plant and mine development (Note 10) 3,692 35,246
Net sales of short- term investments 75 4,839
Net proceeds from sale of equity securities and other investments (Note 8) 43,733 17,499
Purchases of equity securities and other investments (Note 8) (33,498) (11,163)
Payments for financial assets at amortized cost (5,222)  
Decrease in restricted cash   790
Cash used in investing activities (873,884) (1,204,368)
FINANCING ACTIVITIES    
Dividends paid (105,408) (83,961)
Repayment of lease obligations (Note 13) (15,451) (3,382)
Proceeds from long- term debt (Note 14) 220,000 300,000
Repayment of long- term debt (Note 14) (220,000) (300,000)
Notes issuance (Note 14)   350,000
Long- term debt financing costs (Note 14)   (3,215)
Repurchase of common shares for stock-based compensation plans (Notes 16 and 17C,D) (24,669) (30,062)
Proceeds on exercise of stock options (Note 17A) 140,627 30,962
Common shares issued (Note 16) 15,511 13,757
Cash provided by financing activities 10,610 274,099
Effect of exchange rate changes on cash and cash equivalents 1,653 (6,533)
Net increase (decrease) in cash and cash equivalents during the year 20,071 (331,152)
Cash and cash equivalents, beginning of year 301,826 632,978
Cash and cash equivalents, end of year 321,897 301,826
SUPPLEMENTAL CASH FLOW INFORMATION    
Interest paid 101,523 91,079
Income and mining taxes paid $ 90,694 $ 106,568
v3.20.1
CORPORATE INFORMATION
12 Months Ended
Dec. 31, 2019
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 27, 2020.

v3.20.1
BASIS OF PRESENTATION
12 Months Ended
Dec. 31, 2019
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”).

B)   Basis of Presentation

Overview

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. The consolidated financial statements are presented in US dollars and all values are rounded to the nearest thousand, except where otherwise indicated.

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.

v3.20.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 31, 2019
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 (loss), 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 (loss) 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.

B)   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.

C)   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. Cash and cash equivalents are classified as financial assets measured at amortized cost.

D)   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 financial assets measured at amortized cost, which approximates fair value given the short-term nature of these investments.

E)   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 on 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.

F)   Financial Instruments

The Company’s financial assets and liabilities (financial instruments) include cash and cash equivalents, short-term investments, restricted cash, trade receivables, equity securities, accounts payable and accrued liabilities, long-term debt and derivative financial instruments. Financial instruments are classified at initial recognition and subsequently measured at amortized cost, fair value through other comprehensive income ("FVOCI"), or fair value through profit or loss ("FVTPL"). All financial instruments are recorded at fair value at recognition. Subsequent to initial recognition, financial instruments classified as cash and cash equivalents, short-term investments, 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 subsequent to initial recognition.

Equity Securities

The Company’s equity securities consist primarily of investments in common shares of entities in the mining industry recorded using trade date accounting. On initial recognition of an equity investment, the Company may irrevocably elect to measure the investment at FVOCI where changes in the fair value of equity securities are permanently recognized in other comprehensive income (loss) and will not be reclassified to profit or loss. The election is made on an investment-by-investment basis.

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 recognizes all derivative financial instruments in the consolidated financial statements at fair value and they are classified based on contractual maturity. Derivative instruments are classified as either hedges of highly probable forecasted transactions (cash flow hedges) or non-hedge derivatives. Derivatives designated as a cash flow hedge that are expected to be highly effective in achieving offsetting changes in cash flows are assessed on an ongoing basis to determine that they have actually been highly effective throughout the financial reporting periods for which they were designated. Derivative assets and derivative liabilities are shown separately in the balance sheet unless there is a legal right to offset and intent to settle on a net basis.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income (loss). The gain or loss relating to the ineffective portion is recognized in the loss (gain) on derivative financial instruments line item of the consolidated statements of income (loss). Amounts deferred in other comprehensive income (loss) are reclassified when the hedged transaction has occurred.

Derivative instruments that do not qualify for hedge accounting are recorded at fair value at the balance sheet date, with changes in fair value recognized in the loss (gain) on derivative financial instruments line item of the consolidated statements of income(loss).

Expected Credit Loss Impairment Model

An assessment of the expected credit loss related to a financial asset is undertaken upon initial recognition and at the end of each reporting period based on the credit quality of the debtor and any changes that impact the risk of impairment.

G)   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 recorded in the consolidated statements of income (loss) and they are not subsequently 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.

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

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 statements of income (loss) 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, 2019 range from an estimated 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 30 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.

I)    Leases

The Company has adopted IFRS 16 - Leases (“IFRS 16”) with the date of initial application of January 1, 2019 using the modified retrospective approach. Comparative information has not been restated and continues to be reported under IAS 17 - Leases (“IAS 17”) (the accounting standard in effect for those periods). The impact of adoption of IFRS 16 is disclosed in Note 5. Both accounting policies are described below.

Policy applicable from January 1, 2019

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses whether:

·

The contract involves the use of an explicitly or implicitly identified asset;

·

The Company has the right to obtain substantially all of the economic benefits from the use of the asset throughout the contract term;

·

The Company has the right to direct the use of the asset.

The Company recognizes a right-of-use asset and a lease obligation at the commencement date of the lease (i.e. the date the underlying asset is available for use).

Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease obligations. The cost of right-of-use assets includes the initial amount of lease obligations recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.

Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life and the lease term. Right-of-use assets are subject to impairment.

At the commencement date of the lease, the Company recognizes lease obligations measured at the present value of lease payments to be made over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The lease payments include fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees and the exercise price of a purchase option reasonably certain to be exercised by the Company.

After the commencement date, the amount of lease obligations is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease obligations is remeasured if there is a modification, a change in the lease term, a change in the fixed lease payments, changes based on an index or rate or a change in the assessment to purchase the underlying asset.

The Company presents right-of-use assets in the property, plant and mine development line item on the consolidated balance sheets and lease obligations in the lease obligations line item on the consolidated balance sheets.

The Company has elected not to recognize right-of-use assets and lease obligations for leases that have a lease term of 12 months or less and do not contain a purchase option, for leases related to low value assets, or for leases with variable lease payments. Payments on short-term leases, leases of low value assets, and leases with variable payment amounts are recognized as an expense in the consolidated statements of income (loss).

Policy applicable prior to January 1, 2019

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 (loss) 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 (loss) 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.

Revenue from metal sales prior to the achievement of commercial production is deducted from mine development costs in the consolidated balance sheets and is not included in revenue from mining operations.

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 and Impairment Reversal of Long‑lived Assets

At the end of each reporting period the Company assesses whether there is any indication that long-lived assets other than goodwill 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. If the CGU includes goodwill, 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. Impairment losses are recorded in the consolidated statements of income (loss) in the period in which they occur.

Any impairment charge that is taken on a long‑lived asset other than 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, the recoverable amount of the asset is calculated in order to determine if any impairment reversal is required. A recovery is 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. The impairment reversal is allocated on a pro-rata basis to the existing long-lived assets of the CGU based on their carrying amounts. Impairment reversals are recorded in the consolidated statements of income (loss) 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 (loss) 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 (loss).

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 (loss).

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 (loss). 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 (loss).

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 57. 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 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 (loss).

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 (loss) 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 (loss) 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 from Contracts with Customers

Gold and Silver

The Company sells gold and silver to customers in the form of bullion and dore bars.

The Company recognizes revenue from these sales when control of the gold or silver has transferred to the customer. This is generally at the point in time when the gold or silver is credited to the metal account of the customer. Once the gold or silver has been credited to the customer’s metal account, the customer has legal title to, physical possession of, and the risks and rewards of ownership of the gold or silver; therefore, the customer is able to direct the use of and obtain substantially all of the remaining benefits from the gold or silver.

Under certain contracts with customers the transfer of control may occur when the gold or silver is in transit from the mine to the refinery. At this point in time, the customer has legal title to and the risk and rewards of ownership of the gold or silver; therefore, the customer is able to direct the use of and obtain substantially all of the remaining benefits from the gold or silver.

Revenue is measured at the transaction price agreed under the contract. Payment of the transaction price is due immediately when control of the gold or silver is transferred 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.

Metal Concentrates

The Company sells concentrate from certain of its mines to third-party smelter customers. These concentrates predominantly contain zinc and copper, along with quantities of gold and silver.

The Company recognizes revenue from these concentrate sales when control of the concentrate has transferred to the customer, which is the point in time that the concentrate is delivered to the customer. Upon delivery, the customer has legal title to, physical possession of, and the risks and rewards of ownership of the concentrate. The customer is also committed to accept and pay for the concentrates once delivered; therefore, the customer is able to direct the use of and obtain substantially all of the remaining benefits from the concentrate.

The final prices for metals contained in the concentrate are generally determined based on the prevailing spot market metal prices on a specific future date, which is established as of the date the concentrate is delivered to the customer. Upon transfer of control at delivery, the Company measures revenue under these contracts based on forward prices at the time of delivery and the most recent determination of the quantity of contained metals less smelting and refining charges charged by the customer. This reflects the best estimate of the transaction price expected to be received at final settlement. A receivable is recognized for this amount and subsequently measured at fair value to reflect variability associated with the embedded derivative for changes in the market metal prices. These changes in the fair value of the receivable are adjusted through revenue from other sources at each subsequent financial statement date.

Under certain contracts with customers, the sale of gold contained in copper concentrate occurs once the metal has been processed into refined gold and is sold separately similar to the gold and silver dore bar terms described above. The transaction price for the sale of gold contained in concentrate is determined based on the spot market price upon delivery and provisional pricing does not apply.

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 (loss) 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.

v3.20.1
SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS
12 Months Ended
Dec. 31, 2019
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.

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,  particularly in circumstances where there is limited operating history of the asset or CGU. Judgment is also required in determining the appropriate valuation method for mineralization and ascribing anticipated economics to mineralization in cases where only limited or no comprehensive economic study has been completed. 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 (loss).

Mineral Reserve and Mineral Resource Estimates

Mineral reserves and mineral resources are estimates of the amount of ore that can be 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 is 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 proven and probable mineral reserves may change. Such changes may affect the Company’s consolidated balance sheets and consolidated statements of income (loss), 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 (loss) 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 CGUs 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(J) 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.

Leases

The Company applies judgment to determine the lease term for certain lease contracts that include renewal options  The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which may significantly affect the amount of lease obligations and right-of-use assets recognized.

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 set out 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 of 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 joint operators are required to 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.

v3.20.1
CHANGE IN ACCOUNTING POLICY
12 Months Ended
Dec. 31, 2019
CHANGE IN ACCOUNTING POLICY  
CHANGE IN ACCOUNTING POLICY

5.   CHANGE IN ACCOUNTING POLICY

The Company adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of January 1, 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option and lease contracts for which the underlying asset is of low value.

On adoption of IFRS 16, the Company recognized right-of-use assets and lease obligations in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17. The right-of-use assets were recognized based on the amount equal to the lease obligations, adjusted for any related prepaid and accrued lease payments previously recognized.

The lease obligations were measured at the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate as of January 1, 2019.

The Company used the following practical expedients when applying IFRS 16:

·

applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term remaining at   January 1, 2019;

·

excluded initial direct costs from measuring the right-of-use asset at the date of initial application;

·

used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

For leases that were classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and the lease obligation at January 1, 2019 are determined at the carrying amount of the lease asset and lease obligation under IAS 17 immediately before that date.

Upon transition to IFRS 16, the Company recognized an additional $81.8 million of right-of-use assets and $81.8 million of lease obligations. When measuring lease obligations, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted average incremental borrowing rate applied to the lease obligations on January 1, 2019 was 2.3%.  

The lease obligations at January 1, 2019 can be reconciled to the operating lease commitments as of December 31, 2018 as follows:

 

 

 

 

Operating lease commitments as at December 31, 2018

    

$

92,249

Discounting using the January 1, 2019 incremental borrowing rates

 

 

(7,986)

Discounted operating lease commitments as at January 1, 2019

 

 

84,263

Less:

 

 

  

Commitments relating to short-term leases

 

 

(1,423)

Commitments relating to leases of low value assets

 

 

(1,011)

Lease commitments on initial application of IFRS 16

 

 

81,829

Add:

 

 

  

Commitments relating to leases previously classified as finance leases

 

 

1,914

Lease obligations recognized at January 1, 2019

 

$

83,743

 

 

 

 

Current lease obligation

 

$

15,179

Non-current lease obligation

 

 

68,564

Lease obligations recognized at January 1, 2019

 

$

83,743

 

v3.20.1
FAIR VALUE MEASUREMENT
12 Months Ended
Dec. 31, 2019
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.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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, 2019, 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, equity securities, accounts payable and accrued liabilities, long‑term debt and derivative financial instruments.

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

The following table sets out the Company's financial assets and liabilities measured at fair value on a recurring basis as at December 31, 2019 using the fair value hierarchy:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Level 1

    

Level 2

    

Level 3

    

Total

Financial assets:

 

 

  

 

 

  

 

 

  

 

 

  

Trade receivables

 

$

 —

 

$

8,320

 

$

 —

 

$

8,320

Equity securities (FVOCI)

 

 

69,967

 

 

16,285

 

 

 —

 

 

86,252

Other securities (FVTPL)

 

 

9,119

 

 

 —

 

 

 —

 

 

9,119

Fair value of derivative financial instruments

 

 

 —

 

 

9,519

 

 

 —

 

 

9,519

Total financial assets

 

$

79,086

 

$

34,124

 

$

 —

 

$

113,210

 

The following table sets out the Company’s financial assets and liabilities measured at fair value on a recurring basis as at December 31, 2018 using the fair value hierarchy:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Level 1

    

Level 2

    

Level 3

    

Total

Financial assets:

 

 

  

 

 

  

 

 

  

 

 

  

Trade receivables

 

$

 —

 

$

10,055

 

$

 —

 

$

10,055

Equity securities (FVOCI)

 

 

61,245

 

 

15,287

 

 

 —

 

 

76,532

Fair value of derivative financial instruments

 

 

 —

 

 

180

 

 

 —

 

 

180

Total financial assets

 

$

61,245

 

$

25,522

 

$

 —

 

$

86,767

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

  

 

 

  

 

 

 

 

 

  

Fair value of derivative financial instruments

 

$

 —

 

$

8,325

 

$

 —

 

$

8,325

Total financial liabilities

 

$

 —

 

$

8,325

 

$

 —

 

$

8,325

 

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).

Equity and Other Securities

Equity 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). Equity securities representing shares of non‑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.

Fair Value of Financial Assets and Liabilities Not Measured and Recognized at Fair Value

Long-term debt is recorded on the consolidated balance sheets at December 31, 2019 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, 2019, the Company's long-term debt had a fair value of $1,878.9 million (2018 - $1,762.2 million). See Note 14.

Lease obligations are recorded on the consolidated balance sheets at December 31, 2019 at amortized cost. The fair value of lease obligations is the present value of the future lease payments discounted at the Company's current incremental borrowing rate. It is remeasured when there is a change in the lease term, future lease payments or changes in the assessment of whether the Company will exercise a purchase, extension or termination option. The fair value of lease obligations is not materially different from the carrying amounts since the incremental borrowing rates used at the initial recognition date are close to current market rates at December 31, 2019.

v3.20.1
INVENTORIES
12 Months Ended
Dec. 31, 2019
INVENTORIES  
INVENTORIES

7.   INVENTORIES

 

 

 

 

 

 

 

 

    

As at

    

As at

 

 

December 31, 

 

December 31, 

 

 

2019

 

2018

Ore in stockpiles and on leach pads

 

$

82,192

 

$

65,616

Concentrates and dore bars

 

 

124,225

 

 

100,420

Supplies

 

 

373,651

 

 

328,114

Total current inventories

 

$

580,068

 

$

494,150

Non-current ore in stockpiles and on leach pads (Note 9B)(i)

 

 

145,675

 

 

116,762

Total inventories

 

$

725,743

 

$

610,912


Note:

(i)

The inventory balance associated with the ore that is not expected to be processed within 12 months is classified as non-current and is recorded in the other assets line item in the consolidated balance sheets.

During the year ended December 31, 2019, a charge of $13.2 million (2018 - $16.0 million) was recorded within production costs to reduce the carrying value of inventories to their net realizable value.

v3.20.1
EQUITY SECURITIES
12 Months Ended
Dec. 31, 2019
EQUITY SECURITIES  
EQUITY SECURITIES

8.   EQUITY SECURITIES

The following table sets out the Company's equity securities which have been designated at FVOCI:

 

 

 

 

 

 

 

 

 

 

As at
December 31,

 

As at
December 31,

 

    

2019

    

2018

Orla Mining Ltd.

 

$

27,125

 

$

13,563

White Gold Corp.

 

 

18,735

 

 

25,029

Other (i)

 

 

40,392

 

 

37,940

Total equity securities

 

$

86,252

 

$

76,532


Note:

(i)

The balance is comprised of 16 equity investments that are individually immaterial.

Disposal of Equity Securities

During the year ended December 31, 2019, the Company sold its interest in certain equity securities as they no longer fit the Company’s investment strategy. The fair value at the time of sale was $7.8 million (2018- $17.5 million) and the Company recognized a cumulative net gain on disposal of $2.1 million (2018 -loss on disposal of $1.3 million) which was transferred to from other reserves to deficit in the consolidated balance sheets.

v3.20.1
OTHER ASSETS
12 Months Ended
Dec. 31, 2019
OTHER ASSETS  
OTHER ASSETS

9.   OTHER ASSETS

A)    Other Current Assets

 

 

 

 

 

 

 

 

 

    

As at

    

As at

 

 

December 31, 

 

December 31, 

 

 

2019

 

2018

Federal, provincial and other sales taxes receivable

 

$

78,841

 

$

93,294

Prepaid expenses

 

 

70,986

 

 

55,146

Financial asset at FVTPL (i)

 

 

9,119

 

 

 —

Other

 

 

20,272

 

 

17,384

Total other current assets

 

$

179,218

 

$

165,824


Note:

(i)

During the year, the Company purchased a $25.0 million financial asset which is classified as FVTPL. A realized gain on partial disposition of the asset and a mark-to-market adjustment on the remaining asset totaling $19.9 million was recognized in the other income line item in the consolidated statements of income (loss) for the year (see to Note 22).

B)    Other Assets

 

 

 

 

 

 

 

 

 

    

As at

    

As at

 

 

December 31, 

 

December 31, 

 

 

2019

 

2018

Non-current ore in stockpiles and on leach pads

 

$

145,675

 

$

116,762

Non-current prepaid expenses

 

 

18,035

 

 

13,736

Non-current other receivables

 

 

18,918

 

 

5,101

Other

 

 

2,240

 

 

2,698

Total other assets

 

$

184,868

 

$

138,297

 

v3.20.1
PROPERTY, PLANT AND MINE DEVELOPMENT
12 Months Ended
Dec. 31, 2019
PROPERTY, PLANT AND MINE DEVELOPMENT  
PROPERTY, PLANT AND MINE DEVELOPMENT

10.  PROPERTY, PLANT AND MINE DEVELOPMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Mine

    

 

 

 

 

Mining

 

Plant and

 

Development

 

 

 

 

Properties

 

Equipment

 

Costs

 

Total

As at December 31, 2017

 

$

1,665,527

 

$

1,991,121

 

$

1,969,904

 

$

5,626,552

Additions

 

 

335,938

 

 

247,655

 

 

681,882

 

 

1,265,475

Impairment loss (Note 24)

 

 

(100,676)

 

 

 

 

 

 

(100,676)

Disposals

 

 

(8,554)

 

 

(5,590)

 

 

 

 

(14,144)

Amortization

 

 

(146,793)

 

 

(268,028)

 

 

(128,084)

 

 

(542,905)

Transfers between categories

 

 

29,621

 

 

19,709

 

 

(49,330)

 

 

As at December 31, 2018

 

$

1,775,063

 

 

1,984,867

 

 

2,474,372

 

 

6,234,302

Additions

 

 

63,305

 

 

314,469

 

 

635,030

 

 

1,012,804

Impairment reversal (Note 24)

 

 

172,484

 

 

 —

 

 

173,337

 

 

345,821

Disposals

 

 

(937)

 

 

(19,434)

 

 

 —

 

 

(20,371)

Amortization

 

 

(152,160)

 

 

(300,027)

 

 

(116,704)

 

 

(568,891)

Transfers between categories

 

 

150,796

 

 

1,207,920

 

 

(1,358,716)

 

 

 —

As at December 31, 2019

 

$

2,008,551

 

$

3,187,795

 

$

1,807,319

 

$

7,003,665

As at December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

$

3,135,284

 

$

4,839,166

 

$

3,281,066

 

$

11,255,516

Accumulated amortization and impairments

 

 

(1,360,221)

 

 

(2,854,299)

 

 

(806,694)

 

 

(5,021,214)

Carrying value - December 31, 2018

 

$

1,775,063

 

$

1,984,867

 

$

2,474,372

 

$

6,234,302

As at December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

$

3,348,912

 

$

6,182,372

 

$

2,540,534

 

$

12,071,818

Accumulated amortization and impairments

 

 

(1,340,361)

 

 

(2,994,577)

 

 

(733,215)

 

 

(5,068,153)

Carrying value - December 31, 2019

 

$

2,008,551

 

$

3,187,795

 

$

1,807,319

 

$

7,003,665

 

Additions to Plant and Equipment include $81.8 million of transitional adjustments for the recognition of leased right-of-use assets upon the Company's adoption of IFRS 16 on January 1, 2019 (see Note 5), and $46.8 million of right-of-use assets for lease arrangements entered into during the year ended December 31, 2019.

As at December 31, 2019, major assets under construction, and therefore not yet being depreciated, included in the carrying value of property, plant and mine development amounted to $244.9 million (2018 - $1,424.2 million).

During the year ended December 31, 2019, the Company produced and sold pre-commercial production ounces from the Meliadine mine, Amaruq satellite deposit at the Meadowbank Complex, and Barnat deposit at the Canadian Malartic mine. The Company deducts revenues from mining operations earned prior to commercial production from the cost of the related property, plant and mine development. During the year ended December 31, 2019, the Company earned $91.1 million of pre-commercial production revenue.

During the year ended December 31, 2019, the Company disposed of property, plant and mine development with a carrying value of $20.4 million (2018 - $14.1 million). The loss of $11.9 million on disposal (2018 - gain of $22.8 million) was recorded in the other income line item in the consolidated statements of income (loss).

Geographic Information:

 

 

 

 

 

 

 

 

 

    

As at

    

As at

 

 

December 31, 

 

December 31, 

 

 

2019

 

2018

Northern Business:

 

 

  

 

 

  

Canada

 

$

5,000,544

 

$

4,386,051

Finland

 

 

1,205,935

 

 

996,946

Sweden

 

 

13,812

 

 

13,812

 

 

 

 

 

 

 

Southern Business:

 

 

 

 

 

 

Mexico

 

 

780,877

 

 

835,797

United States

 

 

2,497

 

 

1,696

Total property, plant and mine development

 

$

7,003,665

 

$

6,234,302

 

v3.20.1
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
12 Months Ended
Dec. 31, 2019
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES  
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

11.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

 

 

 

 

 

 

 

 

    

As at

    

As at

 

 

December 31, 

 

December 31, 

 

 

2019

 

2018

Trade payables

 

$

158,317

 

$

163,032

Wages payable

 

 

51,588

 

 

51,378

Accrued liabilities

 

 

102,957

 

 

75,287

Other liabilities

 

 

32,710

 

 

20,900

Total accounts payable and accrued liabilities

 

$

345,572

 

$

310,597

 

In 2019 and 2018, the other liabilities balance consisted primarily of various employee benefits, employee payroll tax withholdings and other payroll taxes.

v3.20.1
RECLAMATION PROVISION
12 Months Ended
Dec. 31, 2019
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, 2019 ranged between 0.75% and 1.86% (2018 - between 0.79% and 2.64%).

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 2063.

 

 

 

 

 

 

 

 

 

    

As at

    

As at

 

 

December 31, 

 

December 31, 

 

 

2019

 

2018

Asset retirement obligations - long-term, beginning of year

 

$

371,132

 

$

341,077

Asset retirement obligations - current, beginning of year

 

 

3,856

 

 

8,609

Current year additions and changes in estimate, net

 

 

36,032

 

 

45,470

Current year accretion

 

 

5,791

 

 

7,500

Liabilities settled

 

 

(3,839)

 

 

(2,315)

Foreign exchange revaluation

 

 

15,822

 

 

(25,353)

Reclassification from long-term to current, end of year

 

 

(9,377)

 

 

(3,856)

Asset retirement obligations - long-term, end of year

 

$

419,417

 

$

371,132

 

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 2026.

 

 

 

 

 

 

 

 

 

    

As at

    

As at

 

 

December 31, 

 

December 31, 

 

 

2019

 

2018

Environmental remediation liability - long-term, beginning of year

 

$

9,615

 

$

4,191

Environmental remediation liability - current, beginning of year

 

 

1,555

 

 

1,429

Current year additions and changes in estimate, net

 

 

2,600