Avino Silver & Gold Mines .(ASM) - 2023 Q4 - Annual Report

Management's Responsibility for Financial Reporting Company management is responsible for preparing consolidated financial statements in accordance with IFRS and maintaining internal controls to ensure asset safeguarding, transaction authorization, and reliable financial information Overview of Management's Responsibility for Financial Reporting Management is responsible for preparing IFRS-compliant consolidated financial statements and maintaining internal controls, with oversight from the Board and Audit Committee - Company management is responsible for preparing consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), making best estimates and judgments based on available information[2] - Management has established and maintained internal control systems to safeguard company assets, authorize and record transactions, and ensure reliable financial information[2] - The Board of Directors is responsible for ensuring management fulfills its responsibilities, with the Audit Committee reviewing annual audit results and consolidated financial statements before Board approval[3] Report of Independent Registered Public Accounting Firm Deloitte LLP issued an unqualified opinion on the company's consolidated financial statements and internal control over financial reporting, while highlighting the determination of the ET mine CGU's recoverable amount as a critical audit matter Opinion on the Financial Statements Deloitte LLP issued an unqualified opinion on the company's consolidated financial statements for 2022 and 2023, affirming fair presentation in accordance with IFRS - Deloitte LLP issued an unqualified opinion on the company's consolidated financial statements for the two years ended December 31, 2023, and December 31, 2022[3] - The financial statements fairly present, in all material respects, the financial position, financial performance, and cash flows of the company in accordance with International Financial Reporting Standards[3] Opinion on Internal Control over Financial Reporting Deloitte LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023, based on the COSO framework - Deloitte LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023[11] - The company maintained effective internal control over financial reporting in all material respects, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)[11] Critical Audit Matter A critical audit matter involved determining the recoverable amount of the ET mine CGU, requiring significant management estimates for future metal prices and discount rates due to net assets exceeding market capitalization - The company identified an indicator of impairment as of December 31, 2023, because its net assets exceeded its market capitalization[9] - The recoverable amount of the ET mine Cash Generating Unit (CGU) was determined using a discounted cash flow model based on the higher of fair value less costs to dispose and value in use[9] - Management made significant estimates and assumptions regarding future silver, gold, and copper prices and discount rates when determining the recoverable amount, which involve a high degree of subjectivity and judgment uncertainty[9][10] Consolidated Financial Statements The consolidated financial statements present the company's financial position, operational performance, equity changes, and cash flows for the reporting periods, reflecting key shifts in assets, liabilities, and profitability Consolidated Statements of Financial Position As of December 31, 2023, total assets increased to USD 128,340 thousand, total liabilities slightly decreased to USD 22,339 thousand, and total equity rose to USD 106,001 thousand Consolidated Statements of Financial Position Key Data (USD thousands) | Indicator | December 31, 2023 | December 31, 2022 | | :-------------------------------------- | :------------- | :------------- | | Assets | | | | Cash | 2,688 | 11,245 | | Accounts receivable | 3,303 | 2,672 | | Inventory | 8,826 | 6,260 | | Total current assets | 23,535 | 25,585 | | Exploration and evaluation assets | 50,111 | 49,804 | | Plant, equipment and mining properties | 53,069 | 44,056 | | Total assets | 128,340 | 121,196 | | Liabilities | | | | Accounts payable and accrued liabilities | 11,867 | 9,469 | | Total current liabilities | 13,808 | 16,764 | | Total liabilities | 22,339 | 23,175 | | Equity | | | | Share capital | 151,688 | 145,515 | | Accumulated deficit | (51,423) | (52,026) | | Total equity | 106,001 | 98,021 | - As of December 31, 2023, cash balance significantly decreased to USD 2,688 thousand from USD 11,245 thousand in 2022[17] - As of December 31, 2023, the net value of plant, equipment, and mining properties increased to USD 53,069 thousand, compared to USD 44,056 thousand in 2022[17] Consolidated Statements of Operations and Comprehensive Income (Loss) In 2023, net income significantly decreased to USD 542 thousand from USD 3,096 thousand in 2022, primarily due to increased cost of sales, resulting in USD 0.00 basic and diluted earnings per share Consolidated Statements of Operations and Comprehensive Income (Loss) Key Data (USD thousands) | Indicator | 2023 | 2022 | | :--------------------------------- | :----- | :----- | | Mining operations revenue | 43,889 | 44,187 | | Cost of sales | 36,070 | 29,125 | | Mining operations income | 7,819 | 15,062 | | Net income | 542 | 3,096 | | Total comprehensive income | 557 | 2,842 | | Basic earnings per share | 0.00 | 0.03 | | Diluted earnings per share | 0.00 | 0.03 | - Net income for 2023 was USD 542 thousand, a significant decrease from USD 3,096 thousand in 2022[20] - Mining operations income decreased from USD 15,062 thousand in 2022 to USD 7,819 thousand in 2023, primarily due to increased cost of sales[20] Consolidated Statements of Changes in Equity Total equity increased to USD 106,001 thousand as of December 31, 2023, driven by an increase in share capital from market offerings and RSU exercises, despite lower net income Consolidated Statements of Changes in Equity Key Data (USD thousands) | Indicator | December 31, 2023 | December 31, 2022 | | :--------------------- | :------------- | :------------- | | Share capital | 151,688 | 145,515 | | Equity reserves | 11,041 | 9,852 | | Accumulated deficit | (51,423) | (52,026) | | Total equity | 106,001 | 98,021 | - Share capital increased by USD 6,173 thousand in 2023, primarily from market offerings (USD 5,648 thousand) and RSU exercises (USD 1,019 thousand)[24][179] - Equity reserves increased by USD 1,189 thousand in 2023, mainly from share-based payments[24] Consolidated Statements of Cash Flows The company's cash balance significantly decreased in 2023 due to a substantial drop in cash flow from operating activities and continued outflows from investing activities Consolidated Statements of Cash Flows Key Data (USD thousands) | Indicator | 2023 | 2022 | | :----------------------- | :----- | :----- | | Cash flow from operating activities | 1,488 | 11,831 | | Cash flow from financing activities | 3,488 | (1,149) | | Cash flow from investing activities | (13,531) | (24,101) | | Change in cash | (8,555) | (13,419) | | Cash, end of period | 2,688 | 11,245 | - Cash flow from operating activities significantly decreased from USD 11,831 thousand in 2022 to USD 1,488 thousand in 2023[28] - Investing activities continued to result in outflows, totaling USD 13,531 thousand in 2023, primarily for additions to plant, equipment, and mining properties, and exploration and evaluation expenditures[28] - Financing activities provided USD 3,488 thousand in cash in 2023, mainly from share issuances, compared to a cash outflow in 2022[28] Notes to the Consolidated Financial Statements These notes provide detailed explanations of the company's business operations, accounting policies, significant judgments, and financial instrument risks, offering crucial context for the consolidated financial statements 1. Nature of Operations Avino Silver & Gold Mines Ltd., established in 1968, primarily engages in silver, gold, and copper production and sales, alongside mineral acquisition, exploration, and development in Mexico and Canada - The company is primarily engaged in the production and sale of silver, gold, and copper, as well as the acquisition, exploration, and development of mineral properties[30] - The company operates the Elena Tolosa (ET) mine in Durango, Mexico, which produces copper, silver, and gold[31] - The company holds a 100% interest in the La Preciosa property in Mexico and mineral interests in British Columbia and Yukon, Canada[31] 2. Basis of Presentation Consolidated financial statements are prepared in USD under IFRS, using historical cost and a going concern basis, involving significant management judgments and estimates across various accounting policies - Consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board[32] - Management made significant judgments and estimates regarding the economic recoverability of exploration and evaluation costs, determination of the commencement of production, functional currency, inventory valuation, reclamation provision, share-based payments and warrants valuation, asset impairment, and the recognition and measurement of depreciation/amortization rates and deferred taxes[37][38][39][40][44][46][47][48][49][55][56] Statement of Compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board - Consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board[32] Basis of Presentation_Sub Consolidated financial statements are presented in USD, prepared on a historical cost basis, with financial instruments measured at fair value, and utilize the accrual basis and going concern assumption - Consolidated financial statements are presented in US dollars and prepared on a historical cost basis, except for financial instruments measured at fair value[33] - The statements are prepared on an accrual basis and a going concern basis[33] Foreign Currency Translation Transactions in non-functional currencies are recorded at the exchange rate on the transaction date, while monetary assets and liabilities are translated at the period-end exchange rate - Transactions denominated in non-functional currencies are recorded at the exchange rate on the date of the transaction; monetary assets and liabilities are translated at the exchange rate at the end of the reporting period[34] - For subsidiaries whose functional currency is not the US dollar, operating statement items are translated at the average annual exchange rate, and assets and liabilities are translated at the exchange rate at the end of the reporting period[35] Significant Accounting Judgments and Estimates Management made significant judgments and estimates regarding the economic recoverability of exploration costs, production commencement, functional currency, inventory valuation, reclamation provisions, share-based payments, asset impairment, and deferred taxes - Management made significant judgments and estimates in assessing the economic recoverability of exploration and evaluation costs, determining the commencement of production, functional currency, inventory valuation, reclamation provision, share-based payments and warrants valuation, asset impairment, and the recognition and measurement of depreciation/amortization rates and deferred taxes[37][38][39][40][44][46][47][48][49][55][56] - As of December 31, 2023, an impairment indicator was identified because the company's net assets exceeded its market capitalization, but no impairment was recognized as the fair value less costs to dispose of the ET mine CGU was assessed to be higher than its carrying value[53][54] Basis of Consolidation The consolidated financial statements include the accounts of the company and its Mexican subsidiaries, with intercompany balances and transactions eliminated - The consolidated financial statements include the accounts of the company and its Mexican subsidiaries, with intercompany balances and transactions eliminated[59][60] 3. Material Accounting Policies This section details the company's material accounting policies for exploration assets, property, plant, and equipment, leases, inventory, revenue, financial instruments, equity, share-based payments, reclamation, EPS, and income taxes - The company capitalizes mineral property acquisition, exploration, and evaluation related costs as intangible assets, reclassifying them to mining properties and commencing amortization upon establishing technical and commercial feasibility[61][63] - Inventory is measured at the lower of cost and net realizable value, with cost determined using the weighted-average method and including direct labor, materials, contractor fees, allocated mining property amortization and depreciation, and mine site costs[83] - Revenue is recognized when economic benefits are probable and the amount can be reliably measured, primarily from concentrate sales, and considers provisional pricing adjustments[85][88] Exploration and evaluation assets and development costs The company capitalizes mineral property acquisition, exploration, and evaluation costs as intangible assets, reclassifying them to mining properties and commencing amortization upon establishing technical and commercial feasibility - The company capitalizes mineral property acquisition, exploration, and evaluation related costs as intangible assets, and upon establishing technical feasibility and commercial viability, these costs are reclassified to mining properties and amortization commences[61][63] - Mine development costs are capitalized until the mineral property is capable of operating in the manner intended by management[64] Plant, equipment and mining properties Once technical and commercial feasibility of mineral extraction is proven, all related expenditures are reclassified to mining properties and amortized over their estimated remaining life - Once the technical feasibility and commercial viability of extracting mineral resources are demonstrated, all related expenditures are reclassified to mining properties and amortization commences[66] - Mining properties are amortized on a straight-line basis over their estimated remaining life, which for the Avino mine is estimated at 19 years as of December 31, 2023[69][70] - Plant and equipment are depreciated on a straight-line basis over their estimated useful lives, ranging from 3 to 20 years[71][73] Impairment The company reviews the carrying values of non-financial or long-term assets at each reporting date to identify impairment indicators, with recoverable amounts determined as the higher of fair value less costs to dispose or value in use - The company reviews the carrying values of non-financial or long-term assets at each reporting date to determine if there is any indication of impairment[74] - The recoverable amount of an asset is the higher of its fair value less costs to dispose and its value in use[75] Leases The company recognizes right-of-use assets and corresponding lease liabilities for all lease arrangements, excluding short-term and low-value asset leases - The company recognizes right-of-use assets and corresponding lease liabilities for all lease arrangements, except for short-term leases and leases of low-value assets[78] - Lease liabilities are initially measured at the present value of unpaid lease payments, and right-of-use assets are measured at cost less accumulated depreciation and impairment losses[79][81] Inventory Inventory is measured at the lower of cost and net realizable value, with cost determined using the weighted-average method and including direct labor, materials, contractor fees, and allocated mining property amortization and depreciation - Inventory is measured at the lower of cost and net realizable value, with cost determined using the weighted-average method and including direct labor, materials, contractor fees, allocated mining property amortization and depreciation, and mine site costs[83] - Net realizable value (NRV) is determined based on relevant market prices less estimated costs to complete and costs to sell[84] Revenue from Contracts with Customers Revenue is recognized when economic benefits are probable, and the amount can be reliably measured, primarily from concentrate sales, including adjustments for provisional pricing components - Revenue is recognized when it is probable that economic benefits will flow to the company and the revenue and costs of sales can be reliably measured, and is measured at the fair value of the consideration received[85] - The primary performance obligation is the delivery of concentrate, which includes transportation and insurance services arranged by the company[86] - Concentrate sales include a provisional pricing component, representing adjustments between initial and final assay results, with the company recording revenue based on London Bullion Market Association and London Metal Exchange quotes[88][89] Financial Instruments All financial assets and liabilities are initially recorded at fair value, with subsequent classification into amortized cost, fair value through other comprehensive income (FVTOCI), or fair value through profit or loss (FVTPL) - All financial assets and liabilities are initially recorded at fair value, less transaction costs attributable to the acquisition (except for FVTPL)[91] - Financial assets are classified as amortized cost, fair value through other comprehensive income (FVTOCI), or fair value through profit or loss (FVTPL); cash, long-term investments, and accounts receivable from concentrate sales are classified as FVTPL[91][92][94] - Financial liabilities are classified as amortized cost (e.g., accounts payable) and FVTPL (e.g., US dollar-denominated warrant liability)[96][97] Share capital Common shares are classified as equity, with issuance costs directly deducted from equity, and repurchased shares (treasury stock) treated as a reduction of equity - Common shares are classified as equity, and costs directly attributable to the issuance of equity instruments are deducted from equity[99] - Repurchased share capital (treasury stock) is recognized as a deduction from equity, and upon resale or reissuance, the amount received is recognized as an increase in equity[100][101] Share-based payment transactions The company grants common shares to directors, executives, employees, and consultants through stock option and restricted share unit (RSU) plans, with fair value measured at grant date and expensed over the vesting period - The company grants common shares to directors, officers, employees, and consultants through its stock option plan and restricted share unit (RSU) plan[102] - The fair value of options and RSUs is measured at the grant date based on the market value of the company's common shares and recognized as an expense over the vesting period[102][103] Reclamation and other provisions Provisions are recognized when a legal or constructive obligation arises from past events, an outflow of economic benefits is probable, and the amount can be reliably estimated, such as for reclamation - Provisions are recognized when a legal or constructive obligation arises from past events, an outflow of economic benefits is probable, and the amount can be reliably estimated[105] - The fair value of reclamation provisions is recorded when incurred and capitalized to the carrying amount of the related mining property or exploration and evaluation assets[106] Earnings per share The company presents basic and diluted earnings per share, calculated by dividing earnings attributable to common shareholders by the weighted-average number of common shares outstanding - The company presents basic and diluted earnings per share data, calculated by dividing the earnings attributable to common shareholders by the weighted-average number of common shares outstanding[107] Income taxes Income taxes comprise current and deferred taxes, with deferred taxes recognized using the balance sheet liability method based on temporary differences between asset and liability carrying amounts and their tax bases - Income taxes comprise current and deferred taxes, with deferred taxes recognized using the balance sheet liability method based on temporary differences between the carrying amounts of assets and liabilities and their tax bases[108][109] - Deferred tax assets are recognized only to the extent that it is probable that sufficient taxable profits will be available in the future to offset the asset[109] 4. Recent Accounting Pronouncements Recent IFRS amendments effective in 2023 (IAS 1, IAS 8, IAS 12) and future amendments for 2024 (IAS 1, IFRS 16) are not expected to have a material impact on the company's financial statements - Amendments to IAS 1 (Disclosure of Accounting Policies), IAS 8 (Definition of Accounting Estimates), and IAS 12 (Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction) effective in 2023 had no material impact on the company's financial statements[111][112][113][114] - Future amendments to IAS 1 (Classification of Liabilities) and IFRS 16 (Lease Liability in a Sale and Leaseback) effective in 2024 are not expected to have a material impact on the company's financial statements[116][117][118] 5. Acquisition of La Preciosa The acquisition of La Preciosa property on March 21, 2022, involved USD 36,190 thousand in cash, notes, shares, and warrants, and was accounted for as an asset acquisition due to its exploration stage - The company completed the acquisition of the La Preciosa property on March 21, 2022[119] La Preciosa Acquisition Consideration (USD thousands) | Consideration Type | Amount | | :------------------- | :--- | | Cash consideration | 15,300 | | USD 5 million note payable | 5,000 | | 14,000,000 common shares | 13,650 | | 7,000,000 warrants | 2,240 | | Total Consideration | 36,190 | - The transaction was accounted for as an asset acquisition because La Preciosa was in the exploration and evaluation stage, without demonstrated technical feasibility, commercial viability, or ability to generate economic benefits[122] 6. Taxes Recoverable Recoverable taxes significantly increased to USD 6,580 thousand as of December 31, 2023, primarily driven by higher recoverable VAT and income taxes in Mexico Taxes Recoverable (USD thousands) | Tax Type | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | VAT recoverable | 3,231 | 1,385 | | GST recoverable | 20 | 25 | | Income tax recoverable | 3,329 | 2,327 | | Total | 6,580 | 3,737 | - Total recoverable taxes for 2023 were USD 6,580 thousand, representing a 76% increase from 2022[125] 7. Inventory Total inventory increased to USD 8,826 thousand as of December 31, 2023, mainly due to higher stockpiled materials and concentrate inventory, with USD 270 thousand impairment for obsolete materials Inventory Composition (USD thousands) | Inventory Category | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Stockpiled materials | 4,050 | 2,788 | | Concentrate inventory | 2,448 | 1,617 | | Materials and supplies | 2,328 | 1,855 | | Total | 8,826 | 6,260 | - Total inventory for 2023 was USD 8,826 thousand, a 41% increase from 2022[127] - An inventory impairment of USD 270 thousand was recognized in 2023 due to obsolete materials and supplies[127] 8. Long-Term Investments Long-term investments decreased to USD 934 thousand as of December 31, 2023, primarily due to a USD 931 thousand loss from fair value adjustments of Talisker Resources common shares Long-Term Investments Composition (USD thousands) | Investment Item | Fair Value December 31, 2023 | Fair Value December 31, 2022 | | :--------------------------------- | :--------------------- | :--------------------- | | Talisker Resources common shares | 782 | 1,640 | | Silver Wolf Exploration Ltd. common shares | 71 | 51 | | Endurance Gold Corp. common shares | 81 | 55 | | Total | 934 | 1,746 | - Total long-term investments for 2023 were USD 934 thousand, a 46.5% decrease from 2022[129] - A loss of USD 931 thousand was incurred in 2023 due to fair value adjustments of long-term investments[129] 9. Exploration and Evaluation Assets Exploration and evaluation assets totaled USD 50,111 thousand as of December 31, 2023, with increased costs for Avino Mexico properties partially offset by reduced assessments for La Preciosa Exploration and Evaluation Assets Composition (USD thousands) | Region | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Avino, Mexico | 15,698 | 11,828 | | La Preciosa, Mexico | 34,412 | 37,975 | | British Columbia and Yukon, Canada | 1 | 1 | | Total | 50,111 | 49,804 | - Exploration and evaluation costs for Avino Mexico properties increased by USD 3,870 thousand in 2023, while assessments and taxes for La Preciosa properties decreased by USD 930 thousand[134] - The company has option agreements with Silver Wolf Exploration Ltd. and Endurance Gold Corporation for the Ana Maria and El Laberinto properties in Mexico and the Olympic Claims in British Columbia, Canada[138][145] 10. Non-Controlling Interest As of December 31, 2023, the company held a 99.67% effective interest in Avino Mexico, with the 0.33% non-controlling interest not separately presented due to immaterial accumulated deficit and current earnings - As of December 31, 2023, the company held a 99.67% effective interest in its subsidiary, Avino Mexico[148] - The accumulated deficit and current earnings attributable to the non-controlling interest are not material and are therefore not separately presented in the consolidated financial statements[148] 11. Plant, Equipment and Mining Properties The net book value of property, plant, and mining properties increased to USD 53,069 thousand as of December 31, 2023, reflecting USD 12,020 thousand in new investments and USD 798 thousand in impairment Plant, Equipment and Mining Properties Net Book Value (USD thousands) | Category | December 31, 2023 | December 31, 2022 | | :----------------------- | :------------- | :------------- | | Office equipment, furniture and fixtures | 8,902 | 5,581 | | Computer equipment | 296 | 322 | | Mine machinery and transport equipment | 1,148 | 176 | | Mill machinery and processing equipment | 12,338 | 9,752 | | Buildings and construction in progress | 18,338 | 16,561 | | Mining properties | 12,047 | 11,664 | | Total | 53,069 | 44,056 | - New investments of USD 12,020 thousand were made in 2023, primarily for plant, equipment, and mining properties[152] - An impairment of USD 144 thousand was recognized in 2023 for mine and mill machinery and transport equipment due to damage and obsolescence[157] 12. Related Party Transactions and Balances All related party transactions are recorded at exchange amounts, with key management personnel compensation totaling USD 2,966 thousand in 2023, and a net USD 167 thousand receivable from related parties - All related party transactions are recorded at the exchange amount, are non-interest bearing, unsecured, and due on demand[159][161] Key Management Personnel Compensation (USD thousands) | Compensation Category | 2023 | 2022 | | :------------------- | :----- | :----- | | Salaries, benefits and consulting fees | 1,184 | 1,228 | | Share-based payments | 1,782 | 1,566 | | Total | 2,966 | 2,794 | Amounts Due From/To Related Parties (USD thousands) | Related Party | December 31, 2023 | December 31, 2022 | | :----------------------- | :------------- | :------------- | | Oniva International Services Corp. | 102 | 100 | | Silver Wolf Exploration Ltd. | (269) | (72) | | Total | (167) | 28 | 13. Note Payable The USD 5 million note payable for the La Preciosa acquisition was fully repaid before March 21, 2023, resulting in a zero balance as of December 31, 2023 - The USD 5 million note payable, incurred for the acquisition of the La Preciosa property, was fully repaid before March 21, 2023[168] Note Payable Movement (USD thousands) | Movement Item | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Beginning balance | 4,926 | - | | Additions | - | 4,665 | | Repayments | (5,000) | - | | Amortization of fair value adjustment | 74 | 261 | | Ending Balance | - | 4,926 | 14. Warrant Liability As of December 31, 2023, all warrant liabilities matured, resulting in a zero balance, with a USD 478 thousand gain from fair value adjustments in 2023 - As of December 31, 2023, all warrants had expired, and the company no longer had any warrant liability[173] Warrant Liability Movement (USD thousands) | Movement Item | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Beginning balance | 475 | 741 | | Warrants issued | - | 2,240 | | Fair value adjustment | (478) | (2,395) | | Effect of exchange rate changes | 3 | (111) | | Ending Balance | - | 475 | - Warrant liability was valued using the Black-Scholes model, with weighted average assumptions in 2022 including a 4.07% risk-free interest rate and 56.80% expected share price volatility[174][175] 15. Reclamation Provision The reclamation provision increased significantly to an estimated USD 2,195 thousand as of December 31, 2023, primarily due to changes in estimates and exchange rate fluctuations - As of December 31, 2023, the reclamation provision was estimated at USD 2,195 thousand, with an undiscounted obligation value of USD 5,491 thousand[176] Reclamation Provision Movement (USD thousands) | Movement Item | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Beginning balance | 445 | 726 | | Change in estimate | 1,615 | (364) | | Accretion of discount on continuing operations | 49 | 44 | | Effect of exchange rate changes | 86 | 39 | | Ending Balance | 2,195 | 445 | - Reclamation activities are expected to commence in 2025 for the San Gonzalo mine and 2042 for the Avino mine[176] 16. Share Capital and Share-Based Payments In 2023, the company issued 10,379,158 common shares through market offerings and RSU exercises, increasing share capital, with total share-based payment expense of USD 2,269 thousand - In 2023, the company issued 9,373,825 common shares through market offerings, generating net proceeds of USD 5,493 thousand[179] - In 2023, 1,005,333 common shares were issued due to Restricted Share Unit (RSU) exercises, increasing share capital by USD 1,019 thousand[179] Stock Options and RSUs Overview (as of December 31, 2023) | Category | Number | Weighted Average Exercise Price (CAD) | | :------------------- | :--------- | :-------------------- | | Stock options outstanding | 6,666,000 | 1.27 | | Stock options exercisable | 5,959,750 | 1.29 | | RSUs outstanding | 2,994,709 | 1.03 | - In 2023, the company recognized USD 924 thousand in share-based payment expense for stock options and USD 1,345 thousand for RSUs, totaling USD 2,269 thousand[188][193] - Basic and diluted earnings per share for 2023 were both USD 0.00[195] 17. Revenue and Cost of Sales Mining operations revenue in 2023 was USD 43,889 thousand, slightly below 2022, while cost of sales significantly increased to USD 36,070 thousand, leading to a decline in mining operating income Mining Operations Revenue (USD thousands) | Revenue Category | 2023 | 2022 | | :------------------- | :----- | :----- | | Concentrate sales | 43,199 | 43,648 | | Provisional pricing adjustments | 690 | 539 | | Total | 43,889 | 44,187 | Cost of Sales Composition (USD thousands) | Cost Category | 2023 | 2022 | | :------------------- | :----- | :----- | | Production costs | 32,872 | 26,749 | | Equipment impairment | 414 | 330 | | Depreciation and amortization | 2,784 | 2,046 | | Total | 36,070 | 29,125 | - Cost of sales for 2023 was USD 36,070 thousand, representing a 23.8% increase from 2022[199] 18. General and Administrative Expenses General and administrative expenses increased to USD 5,620 thousand in 2023, driven by significant rises in office and miscellaneous expenses and professional service fees, despite a decrease in salaries and benefits General and Administrative Expenses Composition (USD thousands) | Expense Category | 2023 | 2022 | | :------------------- | :----- | :----- | | Salaries and benefits | 1,506 | 1,892 | | Office and miscellaneous | 1,399 | 647 | | Professional services | 1,378 | 402 | | Management and consulting fees | 436 | 451 | | Investor relations | 245 | 227 | | Directors' fees | 187 | 182 | | Regulatory and compliance fees | 164 | 170 | | Depreciation | 135 | 140 | | Travel and promotion | 170 | 70 | | Total | 5,620 | 5,156 | - Office and miscellaneous expenses increased by 116% in 2023, and professional service fees increased by 243%[202] 19. Commitments Total lease commitments increased substantially to USD 5,920 thousand as of December 31, 2023, with USD 3,965 thousand committed for periods beyond five years - The company has a cost-sharing agreement with Oniva International Services Corp., terminable with one month's notice[203] Lease Commitments (USD thousands) | Term | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Within one year | 714 | 105 | | One to five years | 1,241 | 347 | | More than five years | 3,965 | 398 | | Total | 5,920 | 850 | - Total lease commitments for 2023 were USD 5,920 thousand, representing a 596% increase from 2022[205] 20. Supplementary Cash Flow Information Net changes in non-cash working capital items resulted in a negative USD 4,761 thousand in 2023, primarily due to increases in taxes recoverable and inventory Net Change in Non-Cash Working Capital Items (USD thousands) | Item | 2023 | | :----------------------- | :----- | | Accounts payable and accrued liabilities | 2,832 | | Prepaid expenses and other assets | (225) | | Accounts receivable | (631) | | Taxes payable | (768) | | Amounts due to related parties | (196) | | Taxes recoverable | (2,842) | | Inventory | (2,931) | | Net Change | (4,761) | Other Non-Cash Supplementary Information (USD thousands) | Item | 2023 | | :----------------------- | :----- | | Interest paid | 227 | | Income taxes paid | 37 | - Equipment totaling USD 3,193 thousand was acquired through finance leases and equipment loans in 2023[207] 21. Financial Instruments The company's financial instruments are exposed to credit, liquidity, and market risks, which are managed through diversification, accounts receivable monitoring, and commodity price oversight - The company's financial instruments are exposed to credit risk, liquidity risk, and market risk (interest rate risk, foreign currency risk, and price risk)[209][216] - The company manages credit risk by holding most cash and short-term investments with highly-rated financial institutions and has not recorded an allowance for trade receivables as all amounts have been settled in full to date[211] - As of December 31, 2023, the company had a net negative exposure of USD 60,251 thousand to the Mexican Peso and a net positive exposure of USD 836 thousand to the Canadian Dollar[221] - A 10% fluctuation in commodity prices would impact 2023 net income (loss) by approximately USD 134 thousand[222] Credit Risk The company manages credit risk by depositing most cash and short-term investments with highly-rated financial institutions and has not recorded an allowance for trade receivables due to full settlement to date - The company manages credit risk by holding most of its cash and short-term investments with highly-rated financial institutions[211] - The company has a significant concentration of credit risk with respect to trade accounts receivable, but all amounts have been settled in full to date, so no allowance has been recorded[211] Liquidity Risk Liquidity risk is managed by forecasting cash flows required for operating, investing, and financing activities, with USD 2,688 thousand in cash and USD 9,727 thousand in excess current assets over current liabilities as of December 31, 2023 - The company manages liquidity risk by forecasting cash flows required for operating, investing, and financing activities[213] - As of December 31, 2023, the company had USD 2,688 thousand in cash and current assets exceeded current liabilities by USD 9,727 thousand[213] Contractual Obligations and Commitments Maturity (USD thousands) | Obligation Category | Total | Within 1 Year | 1-5 Years | More than 5 Years | | :----------------------- | :----- | :----- | :---- | :------ | | Accounts payable and accrued liabilities | 11,867 | 11,867 | - | - | | Minimum lease payments | 5,920 | 714 | 1,241 | 3,965 | | Equipment loans | 405 | 188 | 217 | - | | Finance lease obligations | 3,361 | 1,830 | 1,531 | - | | Total | 21,553 | 14,599 | 2,989 | 3,965 | Market Risk Market risk encompasses interest rate, foreign currency, and price risks, with the company not significantly exposed to interest rate risk due to fixed-rate debt, but sensitive to foreign currency and commodity price fluctuations - Market risk includes interest rate risk, foreign currency risk, and price risk[216] - The company does not believe it is subject to significant interest rate risk as any significant debt obligations are at fixed rates[219] - A 10% fluctuation in Mexican/US dollar and Canadian/US dollar exchange rates as of December 31, 2023, would impact the company's earnings by approximately USD 304 thousand[221] - A 10% fluctuation in commodity prices would impact 2023 net income (loss) by approximately USD 134 thousand[222] Classification of Financial Instruments The company's financial assets and liabilities are classified into fair value hierarchy levels (Level 1, Level 2, Level 3), with no Level 3 financial instruments as of December 31, 2023 - The company's financial assets and liabilities are classified into fair value hierarchy levels (Level 1, Level 2, Level 3)[225] Financial Assets Fair Value Hierarchy (USD thousands) | Financial Asset | Level 1 | Level 2 | Level 3 | | :------------------- | :------ | :------ | :------ | | Cash | 2,688 | - | - | | Accounts receivable | - | 3,303 | - | | Long-term investments | 934 | - | - | | Total | 3,622 | 3,303 | - | - As of December 31, 2023, the company had no Level 3 financial instruments (compared to warrant liability in 2022)[227] 22. Capital Management Capital management aims to ensure going concern, pursue property exploration and expansion, and maintain a flexible capital structure, with USD 109,455 thousand in total capital as of December 31, 2023 - The company's capital management objectives are to safeguard its ability to continue as a going concern, pursue property exploration and expansion, and maintain a flexible capital structure for its projects[230] Capital Composition (USD thousands) | Item | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Equity | 106,001 | 98,021 | | Note payable | - | 4,926 | | Equipment loan obligations | 359 | - | | Finance lease obligations | 3,095 | 1,716 | | Total | 109,455 | 104,663 | - As of December 31, 2023, the company expects its capital resources and future operating cash flows to be sufficient to support normal operations and expansion plans, and it is not subject to externally imposed capital requirements[231] 23. Segmented Information All company revenue is derived from concentrate sales from the Avino mine in Mexico, treated as a single reportable operating segment, with significant revenue concentration from a major customer - All of the company's revenue is derived from concentrate sales from the Avino mine in Mexico, which is considered a single reportable operating segment[232] Product Mix Revenue (USD thousands) | Product | 2023 | 2022 | | :------------------- | :----- | :----- | | Silver | 16,642 | 16,570 | | Copper | 13,137 | 10,258 | | Gold | 20,361 | 25,875 | | Penalties, treatment costs and refining charges | (6,251) | (8,516) | | Total | 43,889 | 44,187 | - In 2023, Customer 1 contributed USD 35,053 thousand in revenue, accounting for 80% of total revenue[235] Non-Current Assets Geographical Information (USD thousands) | Region | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Exploration and evaluation assets - Mexico | 50,110 | 49,803 | | Plant, equipment and mining properties - Mexico | 52,891 | 43,812 | 24. Income Taxes Income tax expense (recovery) for 2023 was a negative USD 1,052 thousand, primarily due to current and deferred tax recoveries, with substantial unrecognized deductible temporary differences and tax loss carryforwards Income Tax Expense (Recovery) (USD thousands) | Item | 2023 | 2022 | | :------------------- | :----- | :----- | | Current income tax expense (recovery) | (527) | (1,144) | | Deferred income tax expense (recovery) | (525) | (3,440) | | Total | (1,052) | (4,584) | - Income tax expense (recovery) for 2023 was a negative USD 1,052 thousand, compared to a negative USD 4,584 thousand in 2022[239] Unrecognized Deductible Temporary Differences (USD thousands) | Item | December 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Tax loss carryforwards - Canada | 20,468 | 20,370 | | Tax loss carryforwards - Mexico | 50,889 | 42,575 | | Total | 76,124 | 66,642 | - The company has USD 7,919 thousand in capital losses and USD 12,549 thousand in non-capital tax loss carryforwards in Canada, and USD 50,889 thousand in non-capital tax loss carryforwards in Mexico[245][246] 25. Subsequent Events Subsequent to December 31, 2023, the company issued 1,886,248 common shares through a market offering, generating USD 900 thousand in gross proceeds - Subsequent to December 31, 2023, the company issued 1,886,248 common shares through a market offering, generating gross proceeds of USD 900 thousand[247]