Silver Standard Resources, Inc.
SILVER STANDARD RESOURCES INC (Form: 6-K, Received: 05/04/2017 06:04:17)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For May 4, 2017
Commission File Number: 000-26424
SILVER STANDARD RESOURCES INC.
(Translation of registrant's name into English)

#800 - 1055 Dunsmuir Street
PO Box 49088, Bentall Postal Station
Vancouver, British Columbia
Canada V7X 1G4
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

[ ] Form 20-F   [x] Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [        ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [             ]

INCORPORATION BY REFERENCE

Exhibits 99.1 and 99.2 hereto are each hereby incorporated by reference into the registration statements on Form S-8 (File No. 333-185498, 333-196116 and 333-198092) of Silver Standard Resources Inc.

DOCUMENTS FILED AS PART OF THIS FORM 6-K

See the Exhibit Index hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
Silver Standard Resources Inc.
 
(Registrant)
 
 
 
Date: May 4, 2017
By:
Signed: “ Gregory J. Martin
 
 
Gregory J. Martin
 
Title:
Chief Financial Officer





SILVERSTANDARDLOGOA10.GIF

SUBMITTED HEREWITH

Exhibits

 
 
 
 
 
 
 
 







Silver Standard Resources Inc.
Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2017 and 2016
(unaudited)








Silver Standard Resources Inc.
Condensed Consolidated Interim Financial Statements for the three months ended
March 31, 2017

CONTENTS
 
Financial Statements
 
 
 
 
 
 
 
 
 
Notes to the Condensed Consolidated Interim Financial Statements
 
 
 
 
 
 
 
 
Statements of Financial Position
 
 
 
 
 
Statements of Income
 
 
 
 
Statements of Shareholders’ Equity
 
 
 
 
Additional Disclosures
 
 
 
 



 
 
2 | Page


Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Financial Position
(expressed in thousands of United States dollars)
 
Note
March 31

December 31

 
 
2017

2016

 
 

$

Current assets
 
 
 
Cash and cash equivalents
 
340,585

327,127

Trade and other receivables
 
55,981

58,437

Marketable securities
 
190,631

148,944

Inventory
4
167,443

154,915

Held for sale
 
12,100

12,097

Other
 
2,334

2,720

 
 
769,074

704,240

Non-current assets
 
 
 
Property, plant and equipment
 
644,508

663,828

Deferred income tax assets
 
1,173

1,096

Goodwill
 
49,786

49,786

Other
 
19,683

19,738

Total assets
 
1,484,224

1,438,688

 
 
 
 
Current liabilities
 
 
 
Trade and other payables
 
61,330

61,500

Provisions
5
19,507

82,806

 
 
80,837

144,306

Non-current liabilities
 
 
 
Deferred income tax liabilities
 
123,440

116,887

Provisions
5
103,252

55,562

Debt
 
223,258

220,054

Total liabilities
 
530,787

536,809

 
 
 
 
Shareholders' equity
 
 
 
Share capital
 
1,044,368

1,043,555

Other reserves
 
34,684

(1,014
)
Equity component of convertible notes
 
68,347

68,347

Deficit
 
(193,962
)
(209,009
)
Total shareholders' equity attributable to our shareholders
 
953,437

901,879

Total liabilities and equity
 
1,484,224

1,438,688

 
 
 
 
Events after the reporting period (note 11)
 
 
 
The accompanying notes are an integral part of the condensed consolidated interim financial statements
Approved by the Board of Directors and authorized for issue on May 3, 2017
"Richard D. Paterson"
 
"Paul Benson"
Richard D. Paterson, Director
 
Paul Benson, Director

 
 
3 | Page


Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Comprehensive Income
(expressed in thousands of United States dollars, except per share amounts)

 
Note
Three months ended March 31
 
 
 
2017

2016

 
 
$

$

 
 
 
 
Revenue
 
117,905

101,513

Cost of sales
8
(77,816
)
(78,215
)
Income from mine operations
 
40,089

23,298

 
 
 
 
General and administrative expenses
 
(7,890
)
(4,157
)
Exploration, evaluation and reclamation expenses
 
(7,390
)
(4,527
)
Operating income
 
24,809

14,614

 
 
 
 
Interest earned and other finance income
 
1,027

281

Interest expense and other finance costs
 
(6,646
)
(6,621
)
Other (expense) income
 
(1,283
)
971

Foreign exchange gain (loss)
 
560

(3,387
)
Income before income tax
 
18,467

5,858

 
 
 
 
Income tax (expense)
 
(3,420
)
(3,558
)
 
 
 
 
Net income and net income attributable to shareholders
 
15,047

2,300

 
 
 
 
Items that will not be reclassified to net income:
 
 
 
Gain on marketable securities at fair value through other comprehensive income, net of tax ($5,039) and ($905), respectively
 
35,646

6,246

Items that will be reclassified to net income:
 
 
 
Unrealized (loss) gain on effective portion of derivative, net of tax $63 and ($5), respectively
 
(115
)
9

Other comprehensive income
 
35,531

6,255

Total comprehensive income
 
50,578

8,555

 
 
 
 
Net income per share
 
 
 
Basic
6
$0.13
$0.03
Diluted
6
$0.12
$0.03
The accompanying notes are an integral part of the condensed consolidated interim financial statements

 
 
4 | Page


Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
(expressed in thousands of United States dollars)

 
 
 
 
Equity

 
 
 
 
Common Shares
Other

component of

 
Total

 
 
Shares

Amount

reserves

convertible notes

Deficit

equity

 
 
000's

$

$

$

$

$

Balance, January 1, 2016
 
80,826

707,607

(54,805
)
68,347

(273,966
)
447,183

Equity-settled share-based compensation
 


557



557

Total comprehensive income for the period
 


6,255


2,300

8,555

Balance, March 31, 2016
 
80,826

707,607

(47,993
)
68,347

(271,666
)
456,295

 
 
 
 
 
 
 
 
Balance, January 1, 2017
 
119,401

1,043,555

(1,014
)
68,347

(209,009
)
901,879

Exercise of stock options
 
86

813

(419
)


394

Equity-settled share-based compensation
 


586



586

Total comprehensive income for the period
 


35,531


15,047

50,578

Balance, March 31, 2017
 
119,487

1,044,368

34,684

68,347

(193,962
)
953,437

The accompanying notes are an integral part of the condensed consolidated interim financial statements

 
 
5 | Page


Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Cash Flows
(expressed in thousands of United States dollars)

 
Note
Three months ended March 31
 
 
 
2017

2016

 
 
$

$

Cash flows from operating activities
 
 
 
Net income for the period
 
15,047

2,300

Adjustments for:
 
 
 
Depreciation, depletion and amortization
 
24,018

20,031

Share-based payments
 
586

557

Net non-cash finance expense
 
5,319

5,913

Export duties adjustment in cost of sales
5
(4,303
)

Revaluation of close down and restoration provision
 
3,578


Other expense (income)
 
2,145

(708
)
Income tax expense
 
3,420

3,558

Non-cash foreign exchange (gain)
 
(588
)
(1,284
)
Net changes in non-cash working capital items
10
(11,339
)
(10,126
)
Cash generated by operating activities before interest and taxes (paid)
 
37,883

20,241

Tax moratorium (paid)
 
(3,431
)

Interest (paid)
 
(3,809
)
(4,602
)
Income taxes (paid)
 

(2,915
)
Cash generated by operating activities
 
30,643

12,724

Cash flows from investing activities
 
 
 
Purchase of plant and equipment
 
(8,743
)
(5,073
)
Capitalized stripping costs
 
(6,745
)
(1,435
)
Underground mine development costs
 
(2,514
)

Capitalized exploration costs
 
(1,112
)
(1,076
)
Interest received
 
696

237

Other
 
300

1,503

Cash (used) by investing activities
 
(18,118
)
(5,844
)
Cash flows from financing activities
 
 
 
Proceeds from exercise of stock options
 
335


Repayment of bank loan
 

(1,069
)
Cash generated (used) by financing activities
 
335

(1,069
)
Effect of foreign exchange rate changes on cash and cash equivalents
 
598

(39
)
Increase in cash and cash equivalents
 
13,458

5,772

Cash and cash equivalents, beginning of period
 
327,127

211,862

Cash and cash equivalents, end of period
 
340,585

217,634


The accompanying notes are an integral part of the condensed consolidated interim financial statements

 
 
6 | Page

Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2017
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)


1.
NATURE OF OPERATIONS

Silver Standard Resources Inc. ("we", "us", "our" or "Silver Standard") is a company incorporated under the laws of the Province of British Columbia, Canada and our shares are publicly listed on the Toronto Stock Exchange in Canada and the NASDAQ Global Market in the United States. Together with our subsidiaries, we (the “Group”) are principally engaged in the operation, acquisition, exploration and development of precious metal resource properties located in the Americas. We have three producing mines and a portfolio of precious metal dominant projects located throughout the Americas. Silver Standard Resources Inc. is the ultimate parent of the Group.

Our address is Suite 800, 1055 Dunsmuir Street, PO Box 49088, Vancouver, British Columbia, V7X 1G4.

Our strategic focus is on safe, profitable gold and silver production from our Marigold mine in Nevada, U.S., Seabee Gold Operation in Saskatchewan, Canada and Pirquitas mine in Jujuy, Argentina, and to advance, as market and project conditions permit, our other principal development projects towards development and commercial production.


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set out below.

a)
Basis of preparation
These condensed consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2016 .
These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting . The comparative information has also been prepared on this basis.
These statements were authorized for issue by our Board of Directors on May 3, 2017 .

b)
Significant accounting judgments and estimates
The preparation of financial statements in conformity with IFRS requires the use of judgments and/or estimates that affect the amounts reported and disclosed in the consolidated financial statements and related notes. These judgments and estimates are based on management’s best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ materially from the amounts included in the financial statements. The critical judgments and estimates applied in the preparation of the unaudited condensed consolidated interim financial statements for the three months ended March 31, 2017 are consistent with those applied and disclosed in note 2(u) to our audited consolidated financial statements for the year ended December 31, 2016 other than those discussed below.

(i)
Export duties on Pirquitas mine
Following the resolution of the export duty claim (note 5), we have measured the resulting liability at fair value. This required an estimate of the most appropriate discount rate to use for such an Argentine peso ("ARS") liability.

(ii)
Mine life extension of the Pirquitas mine
Following our exercise of the option to proceed with forming the Pirquitas / Chinchillas joint venture (note 3), we have re-assessed our estimates for: (a) the carrying value of plant assets that were previously impaired; (b) depreciable lives of remaining plant assets; (c) value added tax collection; (d) inventory usage; and (e) timing of cash flows for our close down and restoration provision. The result of these changes in estimates was a reduction to our close down and restoration provision of $5,377,000.

 
 
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Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2017
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

3.
PIRQUITAS / CHINCHILLAS JOINT VENTURE

On March 31, 2017, we provided Golden Arrow Resources Corporation ("Golden Arrow") with the required notice to exercise our option on the Chinchillas project and form a jointly owned company with Golden Arrow for the development of the property. The jointly owned company, holding our Pirquitas property and Golden Arrow's Chinchillas property, will be owned 75% by Silver Standard and we will have control and be the operator. This transaction is expected to extend the Pirquitas operating life by approximately eight years.

At March 31, 2017, the option exercise payment to Golden Arrow is currently estimated at $15,000,000 and is payable on closing, which is expected on or before May 31, 2017.


4.
INVENTORY
 
March 31, 2017

December 31, 2016

 

$

Current:
 
 
Finished goods
15,459

11,627

Stockpiled ore
25,189

30,574

Leach pad inventory
94,153

86,696

Materials and supplies
32,642

26,018

 
167,443

154,915

Non-current materials and supplies
1,842

1,811

 
169,285

156,726


The cost of inventory held at its net realizable value at March 31, 2017 was $6,634,000 ( December 31, 2016 - $7,246,000).


 
 
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Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2017
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

5.
PROVISIONS
 
March 31, 2017
December 31, 2016
 
Current

Non-current

Current

Non-current

 
$

$

$

$

Moratorium (1)
8,836

52,565

67,130


Restructuring provision  (2)
2,324


7,329

 
Close down and restoration provision  (3)
8,347

50,687

8,347

55,562

 
19,507

103,252

82,806

55,562


(1)  
We entered into a fiscal stability agreement with the Federal Government of Argentina in 1998 for production from the Pirquitas mine. In December 2007, the National Customs Authority of Argentina (Dirección Nacional de Aduanas) ("Customs") levied an export duty of approximately 10% from concentrate for projects with fiscal stability agreements pre-dating 2002 and Customs has asserted that the Pirquitas mine is subject to this duty. We had previously challenged the legality of the export duty applied to silver concentrate.

On March 31, 2017, we entered into the tax moratorium system in Argentina to resolve the export duty dispute. Under the conditions of the moratorium, which converts the export duty liability to ARS, we have agreed to pay ARS 1,057,444,000 ($68,621,000 undiscounted) with 5% down payment initially and the balance in installments over 60 months. Outstanding ARS amounts are subject to interest at a minimum rate of 1.5% per month.

With our entry into the tax moratorium for resolution of our export duty dispute, we are no longer challenging the legality of the application of the export duty other than with respect to our right for reimbursement of the $6,646,000 of export duty that we paid. Export duties were removed effective February 12, 2016. At December 31, 2016 we had accrued a provision for $67,130,000 for unpaid duties but had not accrued for potential interest and penalties.

Entering the tax moratorium resolves the existing liability, and we have recognized the new ARS liability at fair value by discounting expected future payments using a discount rate of 20% per annum over the 60 month period. We paid 5%, or $3,431,000, when entering the moratorium on March 31, 2017 and have recognized the reduction in the liability of $4,303,000 within cost of sales.

(2)  
As at March 31, 2017 , we have provided for various employee termination benefits as a result of anticipated mine and associated employee reductions at Pirquitas mine in 2017.

(3)  
Following notice of our intent to exercise our option on the Chinchillas project in Argentina (note 3), as at March 31, 2017, we have re-assessed the estimated timing of reclamation cash flows for the Pirquitas property. The extension of the life of the plant has resulted in cash flows related to decommissioning the plant, being delayed by approximately 8 years. The impact was a net reduction of our close down and restoration provision of $5,377,000, of which there was a reduction recorded against the carrying value of the plant of $8,954,000, and an increase in other costs of reclamation due to inflation in our cost estimates of $3,578,000.


 
 
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Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2017
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

6.
NET INCOME PER SHARE

The calculations of basic and diluted earnings per share are based on the following:
 
Three months ended March 31
 
2017
2016
 
 
 
Basic net income
$15,047
$2,300
Net income used in the calculation of diluted net income per share
15,047
2,300
 
 
 
Weighted average number of common shares issued (thousands)
119,425
80,826
Adjustments for dilutive instruments:
 
 
Stock options (thousands)
1,364
249
Weighted average number of common shares for diluted net income per share (thousands)
120,789
81,075
 
 
 
Basic net income per share
$0.13
$0.03
Diluted net income per share
$0.12
$0.03


7.
SHARE-BASED COMPENSATION

Total share-based compensation, including all equity and cash-settled arrangements, for the three months ended March 31, 2017 and 2016 has been recognized in the condensed consolidated interim financial statements as follows:
 
Three months ended March 31
 
 
2017

2016

 
$

$

Equity-settled plans


Cost of inventory
32

(3
)
General and administrative expenses
544

552

Exploration, evaluation and reclamation expenses
10

8

Cash-settled plans


Cost of inventory
300

276

General and administrative expenses
3,384

(108
)
Exploration, evaluation and reclamation expenses
55

4

 
4,325

729



 
 
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Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2017
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

8.
OPERATING SEGMENTS

The following is a summary of the reported amounts of income or loss, and the carrying amounts of assets and liabilities by operating segment:
Three months ended March 31, 2017
Marigold mine

Seabee Gold Operation

Pirquitas mine

Exploration and evaluation properties

Other reconciling items (i)

Total

 


$

$

$

$

Revenue
63,762

27,609

26,534



117,905

Cost of inventory
(30,699
)
(12,839
)
(14,247
)


(57,785
)
Depletion, depreciation and amortization
(11,736
)
(9,775
)
(2,426
)


(23,937
)
Export duty (note 5)


4,303



4,303

Restructuring costs


(397
)


(397
)
Cost of sales
(42,435
)
(22,614
)
(12,767
)


(77,816
)
Income from mine operations
21,327

4,995

13,767



40,089

 
 
 
 
 
 
 
Exploration, evaluation and reclamation expenses
(287
)
(1,612
)
(3,578
)
(1,641
)
(272
)
(7,390
)
Operating income (loss)
21,040

3,384

10,014

(1,916
)
(7,713
)
24,809

Income (loss) before income tax
21,019

3,354

8,083

(5,219
)
(8,770
)
18,467

 
 
 
 
 
 
 
Interest expense and other finance costs
(384
)
(78
)
(835
)
(13
)
(5,336
)
(6,646
)
Income tax (expense) recovery
(3,815
)
871


224

(700
)
(3,420
)
 
 
 
 
 
 
 
As at March 31, 2017
 
 
 
 
 
 
Total assets
415,595

426,472

77,578

83,893

480,686

1,484,224

Non-current assets
247,127

368,777

14,941

70,603

950

702,398

Total liabilities
(74,422
)
(95,833
)
(98,769
)
(6,863
)
(254,900
)
(530,787
)
Three months ended March 31, 2016
Marigold mine

Seabee Gold Operation

Pirquitas mine

Exploration and evaluation properties

Other reconciling items (i)

Total

 
$

$

$

$

$

$

Revenue
57,742


43,771



101,513

Cost of inventory
(34,828
)

(22,023
)


(56,851
)
Depletion, depreciation and amortization
(11,687
)

(8,165
)


(19,852
)
Export duties


(1,512
)


(1,512
)
Cost of sales
(46,515
)

(31,700
)


(78,215
)
Income from mine operations
11,227


12,071



23,298

 
 
 
 
 
 
 
Exploration, evaluation and reclamation expenses
(122
)

(125
)
(3,502
)
(778
)
(4,527
)
Operating income (loss)
11,106


11,842

(3,505
)
(4,829
)
14,614

Income (loss) before income tax
10,255


6,047

(2,259
)
(8,185
)
5,858

 
 
 
 
 
 
 
Interest expense and other finance costs
(158
)

(1,083
)
(33
)
(5,347
)
(6,621
)
Income tax (expense)
(2,540
)


(85
)
(933
)
(3,558
)
 
 
 
 
 
 
 
As at December 31, 2016
 
 
 
 
 
 
Total assets
394,963

420,796

94,876

84,184

443,869

1,438,688

Non-current assets
253,373

370,141

26,007

71,441

994

721,956

Total liabilities
(75,101
)
(91,627
)
(117,091
)
(7,146
)
(245,844
)
(536,809
)

(i) Other reconciling items refer to items that are not reported as part of segment performance as they are managed on a corporate basis.

 
 
11 | Page

Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2017
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

9.
FAIR VALUE MEASUREMENTS

Assets and liabilities that are held at fair value are categorized based on a valuation hierarchy which is determined by the following valuation methodology utilized:
 
Fair value at March 31, 2017
Fair value at December 31, 2016
 
Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

 

$

$

$


$

$

$

Recurring measurements
 
 
 
 
 
 
 
 
Trade receivables

31,424


31,424


35,590


35,590

Marketable securities
188,574


2,057

190,631

146,887


2,057

148,944

Other financial assets


5,669

5,669



5,873

5,873

Accrued liabilities

14,333


14,333


12,170


12,170

 
188,574

45,757

7,726

242,057

146,887

47,760

7,930

202,577

 
 
 
 
 
 
 
 
 
Fair values disclosed
 
 
 
 
 
 
 
 
Convertible notes
260,999



260,999

245,515



245,515

 
260,999



260,999

245,515



245,515


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 during the three months ended March 31, 2017 or during 2016 .


10.
SUPPLEMENTAL CASH FLOW INFORMATION

Chan ges in workin g capital items during three months ended March 31, 2017 and 2016 are as follows:
 
Three months ended March 31
 
 
2017

2016

 
$

$

Trade and other receivables
5,307

(6,622
)
Inventory
(8,647
)
4,238

Trade and other payables
(2,390
)
(8,597
)
Provisions
(5,609
)
855

 
(11,339
)
(10,126
)


11.
EVENTS AFTER THE REPORTING PERIOD

Reverse takeover of Huayra Minerals Corporation
On April 24, 2017, Huayra Minerals Corporation ("HMC") completed a reverse takeover of AbraPlata Resource Corporation ("AbraPlata"). As a result of the reverse takeover, our Class A Shares in HMC were exchanged on an one-for-one basis for 11,295,000 common shares of AbraPlata, representing 19.9% of the total issued and outstanding common shares of AbraPlata as of April 24, 2017. We also received a cash installment of $500,000 on May 1, 2017.

Sale of Berenguela project
On May 2, 2017, we completed the sale of our 100% interest in the Berenguela project in Peru to Valor Resources Limited ("Valor") for consideration of $12,000,000 in deferred cash and a 9.9% equity interest in Valor.



 
 
12 | Page


SILVER STANDARD RESOURCES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2017


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SILVER STANDARD RESOURCES INC.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2017


This Management's Discussion and Analysis ("MD&A") is intended to supplement the unaudited condensed consolidated interim financial statements of Silver Standard Resources Inc. ("we", "us", "our" or "Silver Standard") for the three months ended March 31, 2017 , and the related notes thereto, which have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"), applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting .

All figures are expressed in U.S. dollars except where otherwise indicated. References to C$ refer to Canadian dollars. References to ARS are to Argentine Pesos. This MD&A has been prepared as of May 3, 2017 , and should be read in conjunction with the unaudited condensed consolidated interim financial statements for the three months ended March 31, 2017 .

Additional information, including our Annual Information Form and Annual Report on Form 40-F for the year ended December 31, 2016, is available on SEDAR at www.sedar.com , and on the EDGAR section of the U.S. Securities and Exchange Commission ("SEC") website at www.sec.gov .

This MD&A contains "forward-looking statements" that are subject to risk factors set out in a cautionary note contained in section 15 herein. We use certain non-GAAP and additional GAAP financial measures in this MD&A; for a description of each of these measures, please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 11 of this MD&A.


1. FIRST QUARTER 2017 HIGHLIGHTS

Strong financial performance: Achieved quarterly revenue of $117.9 million , net income of $15.0 million or $0.13 per share and adjusted net income of $19.7 million or $0.17 per share.

Increased cash balance: Quarter-end cash increased by $13.5 million to $340.6 million . Cash generated by operating activities totaled $30.6 million . Marketable securities increased by $41.7 million to $190.6 million .

Consistent production: Produced 97,851 gold equivalent ounces at cash costs of $646 and AISC of $977 per payable gold equivalent ounce.

Low cost gold production at Marigold:  Produced 55,215 ounces of gold at cash costs of $585 and AISC of $799 per payable ounce of gold sold.

Robust gold production at Seabee:  Achieved production of 21,023 ounces of gold as higher grade ore was sourced from the Santoy mine at cash costs of $574 and AISC of $986 per payable ounce of gold sold.

Strong operating fundamentals at Pirquitas: Concluded open pit mining in January and commenced stockpile processing for quarterly production of 1.5 million ounces of silver at cash costs of $12.68 and AISC of $14.82 per payable ounce of silver sold.

Exercised option on the Chinchillas project: Creates a joint venture to extend the Pirquitas operating life with the Chinchillas silver-lead-zinc deposit. Silver Standard will be the operator.

Resolved export duty claim: We entered into the tax moratorium system in Argentina, which resolves our export duty claim. We have agreed to pay approximately ARS 1 billion with 5% paid upon entry and the balance in installments over 60 months.


2



2.
OUTLOOK

This section of the MD&A provides management's production and cost estimates. See "Cautionary Notes Regarding Forward-Looking Statements and Mineral Reserves and Mineral Resources Estimates" in section 15 of this MD&A.
Our operating guidance remains unchanged from that provided in our fourth quarter 2016 MD&A Outlook. For the full year 2017, we expect:

Operating Guidance
 
Marigold mine

Seabee Gold Operation

Pirquitas mine

Gold Production
oz
205,000 - 215,000

72,000 - 82,000


Silver Production
Moz


4.5 - 5.5

Cash Costs per Payable Ounce Sold (1)
$/oz
655 - 705

575 - 625

13.50 - 16.00

Capital Expenditures
$M
30

8

5

Capitalized Stripping / Capitalized Development
$M
17

11


Exploration Expenditures (2)
 
5

5



(1)  
We report the non-GAAP financial measure of cash costs per payable ounce of gold and silver sold to manage and evaluate operating performance at the Marigold mine, the Seabee Gold Operation and the Pirquitas mine. See “Non-GAAP and Additional GAAP Financial
Measures” in section 11.
(2)  
Includes capitalized and expensed exploration expenses.

In 2017, on a consolidated basis at mid-point of guidance, we expect to produce 355,000 gold equivalent ounces at gold equivalent cash costs of $735 per ounce. Cash costs and capital guidance are based on $55 per barrel oil price and 1.30 Canadian to U.S. dollar exchange rate. Gold equivalent figures are based on $1,250 per ounce gold price and $17.50 per ounce silver price.


3



3.
BUSINESS OVERVIEW

Strategy

We are a resource company focused on the operation, acquisition, exploration and development of precious metal resource properties located in the Americas. We have three producing mines and a portfolio of precious metal dominant projects located throughout the Americas. Our focus is on safe, profitable gold and silver production from our Marigold mine in Nevada, U.S., our Seabee Gold Operation in Saskatchewan, Canada, and our Pirquitas mine in Jujuy, Argentina.

Corporate summary

On March 31, 2017, we entered into the tax moratorium system in Argentina to resolve the dispute regarding the application of export duties relating to production from our Pirquitas mine. Under the conditions of the moratorium, which converts the tax liability to ARS, we agreed to pay approximately ARS 1 billion with 5% down payment initially and the balance in installments over 60 months. Outstanding ARS amounts are subject to interest at a minimum rate of 1.5% per month. Upon completion of these payments all liabilities related to historical export duties and interest will be extinguished.

Also on March 31, 2017, we exercised the option on the Chinchillas project to form a joint venture with Golden Arrow Resources Corporation ("Golden Arrow") for development of the property. The joint venture will be comprised of our Pirquitas property and Golden Arrow's Chinchillas property and will be owned on a 75%/25% basis by each company, respectively. We will be the operator. Based on and subject to the permitting process, we anticipate construction at the Chinchillas property to begin during the third quarter of 2017 with ore delivery to the Pirquitas mill expected in the second half of 2018.

Subsequent to the quarter end, on April 24, 2017, the final step in the sale of our Diablillos and M-18 projects (the “Projects”), located in Argentina, to Huayra Minerals Corp. (“Huarya”) was completed with the reverse take-over (“RTO”) of Huayra by AbraPlata Resource Corp. (“AbraPlata”). This transaction was previously announced in our new releases dated September 19, 2016 and April 25, 2017.

As a result of the RTO and under the terms of the definitive agreement, Silver Standard: received 19.9% of AbraPlata as partial consideration for the sale of the Projects, with a free carried interest in AbraPlata until the completion of a financing of $5 million or more (the “Financing”); has appointed one member to the Board of Directors of AbraPlata; maintains the right to participate in future equity financings after the Financing to maintain our ownership level in AbraPlata for as long as Silver Standard continues to hold more than ten percent of the then issued and outstanding shares of AbraPlata on a non-diluted basis; is entitled to cash payments to Silver Standard of approximately $1.6 million, of which $0.6 million was received by March 31, 2017, over the first two years and $12.5 million over the following three to five years; and retains a 1.0% net smelter returns royalty on production from each of the Projects.

Subsequent to the quarter end, AbraPlata paid Silver Standard its $0.5 million installment due April 30, 2017. 

On April 26, 2017, we announced that we entered into an option agreement with Eskay Mining Corp. to acquire up to a 60% undivided interest in the SIB project, located in British Columbia, Canada.

On May 2, 2017, we completed the sale of 100% of our Berenguela project in Peru to Valor Resources Limited.

Macro-economic environment

Our financial performance is impacted by gold and silver prices. Precious metals prices in the first quarter of 2017 remained at comparable levels with the fourth quarter of 2016, with gold averaging $1,219 per ounce and silver averaging $17.41 per ounce. Gold and silver prices improved towards the end of the quarter and closed at $1,243

4



per ounce of gold and $18.06 per ounce of silver on March 31, 2017. Gold continued to improve above these levels following the quarter end.

The principal factors impacting precious metals prices in the first quarter were the increase of the U.S. interest rates and expectations of further increases later this year, and expectations of rising inflation. Additionally, there is uncertainty resulting from increased geopolitical risk and trade protectionism.

The Canadian dollar remained at levels comparable with the end of the fourth quarter of 2016. During the first quarter, the Canadian dollar averaged and closed at approximately 1.33 Canadian dollars per 1 U.S. dollar. Our exposure to the Canadian dollar is significant due to our Canadian Seabee Gold Operation and we have continued with our risk management hedging program to protect a portion of our Canadian dollar operating costs through 2017 and 2018.

The ARS was stable in the first quarter of 2017 and strengthened by 3%, closing at 15.40 ARS per 1 U.S. dollar on March 31, 2017. ARS devaluation offsets inflation in Argentina, so the strengthening of the ARS in the quarter has had a negative impact on our operating costs.

West Texas Intermediate oil prices in the first quarter of 2017 were comparable to the fourth quarter of 2016, averaging $51.70 per barrel and closing at $50.60 per barrel. Diesel, a product of oil, is a significant consumable at our operations and the movement in diesel prices can have a significant impact on the cost structure at all of our mines. We hedge a portion of our diesel usage to manage price risk of this consumable through 2018.




5



Consolidated financial summary

Selected Financial Data   (1)
 
 
 
Three months ended March 31
 
2017

2016

 
$

$

Revenue
117,905

101,513

Income from mine operations
40,089

23,298

Operating income
24,809

14,614

Net income for the period
15,047

2,300

Basic income per share
0.13

0.03

Adjusted income before tax
23,161

12,581

Adjusted net income (2)
19,741

9,023

Adjusted basic income per share (2)
0.17

0.11

Cash generated by operating activities
30,643

12,724

Cash (used in) investing activities
(18,118
)
(5,844
)
Cash generated by (used in) financing activities
335

(1,069
)
 
 
Financial Position
March 31, 2017

December 31, 2016

Cash and cash equivalents
340,585

327,127

Marketable securities
190,631

148,944

Current assets (including cash and cash equivalents)
769,074

704,240

Current liabilities
80,837

144,306

Working capital
688,237

559,934

Total assets
1,484,224

1,438,688


(1)  
All values are presented in thousands of U.S. dollars, except per share amounts.
(2)  
We report non-GAAP measures including adjusted income before- and after-tax and adjusted basic income per share, to manage and evaluate our operating performance. See "Non-GAAP and Additional GAAP Financial Measures" in section 11.

Quarterly financial summary

The 16% increase in quarterly revenue compared to the first quarter of 2016 was due to higher realized prices of gold by 3% and silver by 16%, combined with an 8% increase in equivalent payable gold ounces sold. The increase in ounces sold was largely due to sales from the Seabee Gold Operation, which we did not own in the first quarter of 2016, partially offset by 55% lower ounces sold from the Pirquitas mine.

Income from mine operations in the first quarter of 2017 generated a gross margin of 34%, significantly higher than the 23% margin in the first quarter of 2016 due to higher precious metals prices, lower cost of sales at Marigold and the addition of the Seabee Gold Operation. In addition, the resolution of our export duty claim in Argentina resulted in a $4.3 million reduction to cost of sales.

Cash generated by operating activities increased significantly to $30.6 million compared to $12.7 million in the first quarter of 2016. Higher prices of gold and silver and higher volumes of gold sold at lower unit costs generated significantly higher cash from operating activities. We used $18.1 million in investing activities in the first quarter of 2017 compared to $5.8 million in the first quarter of 2016. Investments in property and plant were higher by $3.7 million mainly due to the addition of the Seabee Gold Operation and we also capitalized $2.5 million of underground development. Capitalized stripping at Marigold was $5.3 million higher than in the comparative quarter in 2016.

6



4.
RESULTS OF OPERATIONS

Consolidated results of operations

The following table presents consolidated operating information for our Marigold and Pirquitas mines and our Seabee Gold Operation. Additional operating information is provided in the sections relating to the individual mines.
 
 Three months ended
Operating data (1)
March 31 2017

December 31 2016

September 30 2016

June 30 2016

March 31 2016

Consolidated production and sales:
 
 
 
 
 
Gold produced (oz)
76,238

79,656

67,598

53,916

50,520

Silver produced ('000 oz)
1,520

2,210

3,047

2,526

2,639

 
 
 
 
 
 
Gold sold (oz)
74,939

78,537

69,189

58,430

48,605

Silver sold ('000 oz)
1,443

2,633

2,947

2,594

3,223

 
 
 
 
 
 
Cash costs ($/oz) - payable gold from Marigold mine (2)
585

585

636

663

719

Cash costs ($/oz) - payable gold from Seabee Gold Operation (2,5)
574

595

661

663


Cash costs ($/oz) - payable silver from Pirquitas mine (2)
12.68

9.80

8.48

8.87

8.93

 
 
 
 
 
 
Gold equivalent production (oz) (3)
97,851

110,130

112,559

86,956

83,680

 
 
 
 
 
 
Realized gold price ($/oz) (2)
1,220

1,243

1,331

1,263

1,189

Realized silver price ($/oz) (2)
17.35

17.14

19.64

16.52

14.94

 
 
 
 
 
 
Consolidated costs:
 
 
 
 
 
Cash Costs per equivalent gold ounce sold ($/oz) (2,3,5)
646

625

618

669

715

AISC per equivalent gold ounce sold ($/oz) (2,3,5)
977

845

940

1,061

859

 
 
 
 
 
 
 Financial data ($000s)
 
 
 
 
 
Revenue
117,905

127,317

143,381

118,775

101,513

Income from mine operations (4)
40,089

27,456

59,190

44,062

23,298


(1)  
The data presented includes results from the Seabee Gold Operation for the period from May 31, 2016, to March 31, 2017, the period for which we were entitled to all economic benefits of the Seabee Gold Operation, following our acquisition of Claude Resources Inc. ("Claude Resources").
(2)  
We report the non-GAAP financial measures of cash costs, realized metal prices and all-in sustaining costs ("AISC") per payable ounce of precious metals sold to manage and evaluate operating performance at our mines. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 11.
(3)  
Gold equivalent ounces have been established using the realized gold and silver prices in the period and applied to the recovered metal content produced by the mines.
(4)  
The income from mine operations in the quarter ended March 31, 2017, includes a non-cash benefit of $4.3 million from the resolution of the export duty claim in Argentina. Income from mine operations for the quarter and year ended December 31, 2016, includes $5.7 million of severance provision related to the Pirquitas mine and $3.7 million of non-cash write-down of supplies inventory and VAT receivable.
(5)  
The non-GAAP financial measure of cash costs from the Seabee Gold Operation was adjusted to eliminate the adjustment of inventory to fair value as at the date of our acquisition of Claude Resources.


7



Marigold mine, U.S.

 
 Three months ended
 Operating data
March 31 2017

December 31 2016

September 30 2016

June 30 2016

March 31 2016

Total material mined (kt)
16,736

19,559

19,558

18,685

17,291

Waste removed (kt)
11,062

13,123

14,741

12,005

11,611

Total ore stacked (kt)
5,674

6,436

4,817

6,680

5,680

Strip ratio
1.9

2.0

3.1

1.8

2.0

Mining cost ($/t mined)
1.65

1.52

1.48

1.55

1.45

Gold stacked grade (g/t)
0.42

0.48

0.42

0.44

0.47

Processing cost ($/t processed)
0.89

0.80

0.95

0.70

0.71

Gold recovery (%)
74.0

75.0

71.0

70.7

70.0

General and admin costs ($/t processed)
0.52

0.46

0.56

0.38

0.47

 
 
 
 
 
 
Gold produced (oz)
55,215

59,945

47,456

47,195

50,520

Gold sold (oz)
52,528

61,308

47,278

47,124

48,605

 
 
 
 
 
 
Realized gold price ($/oz) (1)
1,214

1,247

1,330

1,259

1,189

 
 
 
 
 
 
Cash costs ($/oz) (1)
585

585

636

663

719

AISC ($/oz) (1)
799

835

1,139

1,067

841

 
 
 
 
 
 
Financial data ($000s)
 
 
 
 
 
Revenue
63,762

77,047

62,831

59,197

57,742

Income from mine operations
21,327

28,648

23,156

17,641

11,227

Capital investments
3,043

3,271

8,310

10,154

8,796

Capitalized stripping
6,745

10,171

13,787

7,231

1,435

Exploration expenditures (2)
1,024

1,276

1,145

1,597

1,102


(1)  
We report the non-GAAP financial measures of realized gold prices, cash costs and AISC per payable ounce of gold sold to manage and evaluate operating performance at the Marigold mine. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 11.
(2)  
Includes capitalized and expensed exploration expenses.

Mine production

In the first quarter of 2017, the Marigold mine produced 55,215 ounces of gold, in line with our plan.

A total of 16.7 million tonnes were mined in the first quarter of 2017, 14% less than the fourth quarter of 2016, primarily due to weather-related impacts in January and February, which caused the open pit to cease operations intermittently due to unsafe work conditions. Additionally, the rope shovel was down for planned maintenance for five days during the month of March. We expect to recover the tonnage in the second half of 2017 as we will have significantly shorter hauls available due to backfilling previously mined areas.

Approximately 5.7 million tonnes of ore were delivered to the heap leach pads at an average gold grade of 0.42 g/t. This compares to 6.4 million tonnes of ore delivered to the heap leach pads at a gold grade of 0.48 g /t in the fourth quarter of 2016. Gold grade mined in the first quarter was 13% lower than the fourth quarter due to planned pit phase sequencing. The strip ratio declined to 1.9:1 in the quarter, a 5% reduction compared to the previous quarter.




8



Mine operating costs

Cash costs and AISC per payable ounce of gold sold are non-GAAP financial measures. Please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 11.

Cash costs, which include all costs of inventory, refining costs and royalties, of $585 per payable ounce of gold sold in the first quarter of 2017 were equal to cash costs in the fourth quarter of 2016. Total mining costs were lower in the first quarter of 2017 than in the fourth quarter of 2016. However, costs per tonne mined increased by 9% to $1.65 per tonne in the first quarter, due to a decrease in total tonnes mined. Processing unit costs were 11% higher in the first quarter of 2017 than in the fourth quarter of 2016 due to fewer tonnes stacked. General and administrative unit costs were also higher in the first quarter of 2017 than in the fourth quarter of 2016 due to fewer tonnes stacked but were comparable on an absolute basis.

AISC of $799 per payable ounce of gold sold in the first quarter of 2017 decreased from $835 in the fourth quarter of 2016 predominantly due to lower capitalized stripping.

Mine sales

A total of 52,528 ounces of gold were sold at an average price of $1,214 per ounce during the first quarter of 2017, compared to 61,308 ounces of gold sold at a 3% higher average price of $1,247 per ounce during the fourth quarter of 2016.

Exploration

Exploration activities during the first quarter of 2017 focused on the conversion of Mineral Resources to Mineral Reserves in areas proximal to the 2016 Mineral Reserve pit. During the quarter we completed 10,255 meters of reverse circulation drilling in 44 drillholes on four targets. Positive drill results demonstrate the potential to increase and convert Mineral Resources and warrant further follow up drilling, which is currently underway. The drill results from our fourth quarter 2016 and first quarter 2017 were reported in our news release dated May 1, 2017.


9



Seabee Gold Operation, Canada

 
Three months ended
 
 
Operating data

March 31 2017

December 31 2016

September 30 2016

Period from Acquisition to June 30, 2016 (1)

Three months ended
June 30, 2016 (2)

Total ore milled (t)
72,394

84,526

82,756

18,856

71,218

Ore milled per day (t/day)
804

919

900

629

783

Gold mill feed grade (g/t)
9.22

7.40

7.40

7.79

7.97

Mining costs ($/t mined)
68

62

58

110

N/A

Processing costs ($/t processed)
23

19

19

29

N/A

Gold recovery (%)
97.7

97.0

96.5

96.6

96.8

General and admin costs ($/t processed)
59

44

37

61

N/A

 
 
 
 


Gold produced (oz)
21,023

19,711

20,142

6,721

17,524

Gold sold (oz)
22,411

17,229

21,911

11,306

16,305

 
 
 
 


Realized gold price ($/oz) (3)
1,233

1,230

1,334

1,278

1,271

 
 
 
 


Cash costs ($/oz) (3,5)
574

595

661

663

N/A

AISC ($/oz) (3,5)
986

833

840

776

N/A

 
 
 
 


Financial data ($000s)
 
 
 




Revenue
27,609

21,175

29,214

14,437

N/A

Income from mine operations
4,995

2,864

4,126

1,216

N/A

Capitalized development
2,514

2,432

2,104

803

N/A

Capital investments
4,760

1,010

579

337

N/A

Exploration expenditures (4)
1,953

829

1,206

117

N/A


(1)  
The data presented in this column is for the period from May 31, 2016, to June 30, 2016, the period for which we were entitled to all economic benefits of the Seabee Gold Operation following our acquisition of Claude Resources.
(2)  
The data presented in this column includes operating results for the Seabee Gold Operation for the entire second quarter of 2016, including the period from April 1 to May 30, 2016 prior to our acquisition of Claude Resources.
(3)  
We report the non-GAAP financial measures of realized gold prices, cash costs and AISC per payable ounce of gold sold to manage and evaluate operating performance at the Seabee Gold Operation. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 11.
(4)  
Includes capitalized and expensed exploration expenses.
(5)  
The non-GAAP financial measures of cash costs per payable ounce of gold sold and AISC per payable ounce of gold sold from the Seabee Gold Operation were adjusted to eliminate the adjustment of inventory to fair value as at the date of our acquisition of Claude Resources.

Mine production

The Seabee Gold Operation consists of the Seabee and Santoy underground mines, both of which feed a single processing facility. In the first quarter of 2017, the Seabee Gold Operation produced 21,023 ounces of gold, a 7% increase from the 19,711 ounces of gold produced during the fourth quarter of 2016, primarily due to higher grade ore from the Santoy mine complex.

A total of 72,394 tonnes of ore was milled at an average gold grade of 9.22 g/t and recovery of 97.7% during the first quarter of 2017. This compares to a total of 84,526 tonnes of ore milled at an average gold grade of 7.40 g/t and recovery of 97.0% in the fourth quarter of 2016.

10



During the first quarter, the mill was maintained at a throughput of 804 tonnes per day, lower than the previous quarter as ore delivery from the mine constrained mill throughput due to ventilation system requirements. The need for additional ventilation was identified in the fourth quarter of 2016. A solution to deliver more fresh air, especially in deeper sections of the Santoy mine, was developed with equipment delivered to site in the first quarter of 2017, with installation and operability expected by the end of the second quarter.

The Santoy mine complex supplied 98% of ore milled in the first quarter, predominantly from long hole stopes. We continue to develop new mine plans to achieve a higher, sustainable production rate.

Mine operating costs

Cash costs and AISC per payable ounce of gold sold are non-GAAP financial measures. Please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 11.

Cash costs per payable ounce of gold sold, which include all costs of inventory, refining costs and royalties, were $574 in the first quarter of 2017, lower than the $595 in the fourth quarter of 2016. Costs per tonne mined were $68 per tonne in the first quarter of 2017, 10% higher than in the previous quarter due to lower tonnes mined. Processing and general and administration unit costs were higher by 21% and 34%, respectively, in the first quarter of 2017 compared to the fourth quarter of 2016 due to lower tonnes milled; however, the mill feed grade was 25% higher in the current quarter than in the preceding period driving higher production which resulted in lower cash costs in the period.

AISC per payable ounce of gold sold, were $986 in the first quarter of 2017, higher than the $833 in the fourth quarter of 2016 as a significant portion of planned capital spending was incurred due to the delivery of capital items over the ice road. Exploration spending also increased, consistent with our objective of adding Mineral Reserves and Mineral Resources at the mine.

Mine sales

A total of 22,411 ounces of gold were sold at an average price of $1,233 per ounce during the first quarter of 2017, 30% higher than the 17,229 ounces of gold sold at a comparable price of $1,230 per ounce in the fourth quarter of 2016.

Exploration

For 2017, the Seabee Gold Operation plans to complete up to 60,000 meters of underground drilling and 28,500 meters of surface drilling with the objective to increase and convert Mineral Resources into Mineral Reserves. In the first quarter of 2017, we completed 16,267 meters of underground drilling and 11,394 meters of surface drilling in 42 and 24 drillholes, respectively. Drill results continue to be encouraging and additional exploration drilling has been planned for 2017 across the Seabee Gold Operation to define, increase and convert Mineral Resources. The drill results for fourth quarter 2016 and first quarter 2017 were reported in our news release dated May 1, 2017.


11



Pirquitas mine, Argentina

 
Three months ended
Operating data
March 31 2017

December 31 2016

September 30 2016

June 30 2016

March 31 2016

Total material mined (kt) (1)
89

1,694

2,385

2,543

2,520

Ore mined (kt) (1)
53

501

801

729

794

Silver mined grade (g/t) (1)
205

168

190

189

181

Mining costs ($/t mined) (1)
25.80

4.84

3.80

3.54

2.97

Ore milled (kt)
449

476

455

425

418

Silver mill feed grade (g/t)
145

194

264

238

247

Processing cost ($/t milled)
13.66

14.17

14.78

15.10

13.58

Silver recovery (%)
72.6

74.5

79.0

77.6

79.7

General and admin costs ($/t milled)
5.22

6.19

5.84

6.22

5.68

 
 
 
 




Silver produced ('000 oz)
1,520

2,210

3,047

2,526

2,639

Silver sold ('000 oz)
1,443

2,633

2,947

2,594

3,223

 
 
 
 




Realized silver price ($/oz) (2)
17.35

17.14

19.64

16.52

14.94

 
 
 
 

 
Cash costs ($/oz) (2)
12.68

9.80

8.48

8.87

8.93

AISC ($/oz) (2)
14.82

11.47

9.87

10.00

9.67

 
 
 
 

 
Financial Data ($000s)
 
 
 


Revenue
26,534

29,095

51,336

45,141

43,771

Income (loss) from mine operations (3)
13,767

(4,056
)
31,908

25,205

12,071

Capital investments
2,261

3,467

3,158

2,057

1,578

Exploration expenditures

11

7

25

22


(1)  
Data for the quarter ended March 31, 2017, represent mining until mid-January 2017. We will stop reporting these metrics beginning in the second quarter of 2017.
(2)  
We report the non-GAAP financial measures of cash costs per payable ounce of silver sold, realized silver prices and AISC to manage and evaluate operating performance at the Pirquitas mine. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income, please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 11.
(3)  
The income from mine operations in the quarter ended March 31, 2017, includes a non-cash impact of $4.3 million relating to the resolution of the export duty claim in Argentina. Income (loss) from mine operations for the quarter ended December 31, 2016, includes $5.7 million of severance provision and a non-cash write-down of supplies inventory and VAT receivable of $3.7 million.

Mine production

Mining from the San Miguel open pit ceased in January 2017 and medium grade stockpile material is being processed through the plant. Lower grade stockpiles may be processed in late 2017, and potentially in early 2018, once the medium grade stockpiles have been consumed, depending on prevailing economic conditions. The operation produced a total of 1.5 million ounces of silver from ore mined and stockpiles processed.
 
Ore was milled at an average rate of 4,994 tonnes per day in the first quarter, 25% above the mill’s nominal throughput of 4,000 tonnes per day. Ore milled in the first quarter of 2017 contained an average silver grade of 145 g/t, 25% lower than the 194 g/t reported in the fourth quarter of 2016 as the majority of mill feed was sourced from medium grade stockpiles. The jig circuit was not utilized to treat stockpile material. The average silver recovery in the first quarter was 72.6%, lower than the 74.5% recovery in the previous quarter, in line with reduced silver mill feed grade.

Mine operating costs

Cash costs and AISC per payable ounce of silver sold are non-GAAP financial measures. Please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 11.

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Cash costs, which include cost of inventory, treatment and refining costs and by-product credits, increased by 29% to $12.68 per payable ounce of silver sold in the first quarter of 2017 from $9.80 per payable ounce of silver sold in the fourth quarter of 2016, principally due to the transition to processing lower grade stockpiled ore. While unit processing costs declined as the pre-concentration circuit was idled, the transition to processing stockpiles added re-handling costs and stockpile inventory costs of approximately $2.00 per payable ounce that were previously incurred.

AISC of $14.82 per payable ounce of silver sold were higher in the first quarter of 2017 than the $11.47 per payable ounce of silver sold in the fourth quarter of 2 016 due to higher cash costs per payable ounce of silver sold and higher capital spend per ounce sold.

Mine sales

We recognized sales of 1.4 million ounces of silver in the first quarter of 2017, lower than the 2.6 million ounces in the fourth quarter of 2016, as a result of lower production due to processing of lower grade stockpiles.

Chinchillas project, Argentina

On March 31, 2017, we provided notice to Golden Arrow to exercise our option on the Chinchillas project and form a joint venture comprised of our Pirquitas property and Golden Arrow's Chinchillas property owned on a 75%/25% basis by us and Golden Arrow, respectively. The transaction is expected to close on or before May 31, 2017 and we will be the operator.

The Chinchillas project provides operating life extension to Pirquitas with a modest capital investment of $81 million on a 100% basis. With construction expected to begin in the third quarter of 2017, subject to permitting, Chinchillas is expected to produce 8.4 million ounces of annual silver equivalent production over an eight-year operating life. Chinchillas ore delivery to the Pirquitas mill is expected in the second half of 2018.

A news release on the Chinchillas pre-feasibility study was reported by Golden Arrow on March 31, 2017. The associated National Instrument 43-101 technical report will be filed within 45 days. Subject to closing the transaction, we approved the development of the project and expect construction to commence in the third quarter of 2017, following the receipt of environmental permits.

Export duties

We entered into a fiscal stability agreement with the Federal Government of Argentina in 1998 for production from the Pirquitas mine. In December 2007, the National Customs Authority of Argentina (Dirección Nacional de Aduanas) ("Customs") levied an export duty of approximately 10% from concentrate for projects with fiscal stability agreements pre-dating 2002 and Customs has asserted that the Pirquitas mine is subject to this duty. We had previously challenged the legality of the export duty applied to silver concentrate.

On March 31, 2017, we entered into the tax moratorium system in Argentina to resolve the export duty dispute. Under the conditions of the moratorium, which converts the export duty liability to ARS, we have agreed to pay approximately ARS 1 billion with 5% down payment initially and the balance in installments over 60 months. Outstanding ARS amounts are subject to interest at a minimum rate of 1.5% per month.

With our entry into the tax moratorium for resolution of our export duty dispute, we are no longer challenging the legality of the application of the export duty other than with respect to our right for reimbursement of the $6.6 million of export duty that we paid. Export duties were removed effective February 12, 2016. At December 31, 2016 we had accrued a provision for $67.1 million for unpaid duties but had not accrued for potential interest and penalties.

Entering the tax moratorium resolves the existing liability, and we have recognized the new ARS liability at amortized cost by discounting expected future payments using a discount rate of 20% per annum over the 60-month period. We

13



paid 5%, or ARS 52.9 million ($3.4 million), when entering the moratorium on March 31, 2017 and have recognized the reduction in the liability of $4.3 million within cost of sales.



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5.
SUMMARIZED FINANCIAL RESULTS

The following table sets out selected financial results for each of the eight most recently completed quarters, expressed in thousands of U.S. dollars, except per share amounts:

 
2017
2016
2015
 
31-Mar

31-Dec

30-Sep

30-Jun

31-Mar

31-Dec

30-Sep

30-Jun

 
 
 
 
 
 
 
 
 
 
$000s

$000s

$000s

$000s

$000s

$000s

$000s

$000s

Revenue
117,905

127,317

143,381

118,775

101,513

90,592

77,191

95,818

 
 
 
 
 
 
 
 
 
Gold equivalent ounces sold payable
94,576

113,308

110,618

90,579

87,320

87,924

75,171

81,758

 
 
 
 
 
 
 
 
 
Realized gold price ($/oz) (1)
1,220

1,243

1,331

1,263

1,189

1,084

1,110

1,205

Realized silver price ($/oz) (1)
17.35

17.14

19.64

16.52

14.94

15.00

14.97

16.72

 
 
 
 
 
 
 
 
 
Income (loss) from mine operations (2)
40,089

27,456

59,190

44,062

23,298

(20,485
)
(7,396
)
16,319

Net income (loss) before tax
18,467

18,606

40,999

15,521

5,858

(60,353
)
(62,556
)
(3,316
)
Net income(loss) after tax
15,047

12,132

38,042

12,482

2,300

(66,722
)
(59,416
)
(7,327
)
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share
0.13

0.10

0.32

0.13

0.03

(0.83
)
(0.74
)
(0.09
)
Diluted earnings (loss) per share
0.12

0.10

0.31

0.13

0.03

(0.83
)
(0.74
)
(0.09
)
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
340,585

327,127

277,544

232,619

217,634

211,862

200,017

217,228

Total assets
1,484,224

1,438,688

1,454,618

1,432,263

880,501

871,677

954,766

996,549

Working capital
688,237

559,934

556,263

530,196

354,999

340,883

373,068

379,767

Non-current financial liabilities
223,258

220,054

216,977

213,955

210,994

208,085

205,277

202,517


(1)  
We report the non-GAAP financial measure of realized metal prices per payable ounce of precious metals sold to manage and evaluate operating performance at our mines. For a better understanding and a reconciliation of this measure, please refer to “Non-GAAP and
Additional GAAP Financial Measures” in section 11.
(2)  
The income from mine operations in the quarter ended March 31, 2017, includes a non-cash impact of $4.3 million relating to the resolution of the export duty claim in Argentina. Income from mine operations for the quarter ended December 31, 2016, includes $5.7 million of severance provision and non-cash adjustments to supplies inventory and VAT of $3.7 million related to the Pirquitas mine. Loss from mine operations for the quarters ended December 31, 2015 and September 30, 2015, include $23.6 million and $7.7 million, respectively, of non-cash adjustments to stockpile and supplies inventory at the Pirquitas mine to its net realizable value and severance provision.

The volatility in revenue over the past eight quarters has resulted from variable precious metal prices, which are not under our control, and sales volumes. There are no significant seasonal fluctuations in the results for the presented periods. Metal prices in the first quarter of 2017 weakened slightly compared to the previous quarter but still remained comparable to the average prices for the whole of 2016. Metal prices in the second, third and fourth quarters of 2016 improved significantly after a period of weaker metal prices in the second half of 2015 and the first quarter of 2016. In the first quarter of 2017 and in 2016, higher income from mine operations is a result of improved metal prices and increasing volumes of gold and silver sold, the acquisition of the Seabee Gold Operation on May 31, 2016 and operating improvements at Pirquitas, as well as lower cost of sales per ounce at our Marigold and Pirquitas mines. The income from mine operations in the first quarter of 2017 was impacted by the resolution of the export duty claim in Argentina which resulted in a non-cash reduction to cost of sales of $4.3 million . Income (loss) from mine operations in the fourth quarter of 2016 and the third and fourth quarters of 2015 were affected by non-cash write-downs of inventory at the Pirquitas mine to its net realizable value. The income from mine operations in the fourth quarter of 2016 and in the fourth quarter of 2015 were also impacted by $5.7 million and $4.7 million, respectively, of severance provision related to the Pirquitas mine. Excluding the effect of these inventory write-downs, income from mine operations followed a similar trend to revenue over the two-year period presented.


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Net income (loss) before and after income tax has fluctuated significantly over the past eight quarters, heavily influenced by impairments and adjustments. In the fourth and third quarters of 2015, we recorded non-cash impairment charges and inventory adjustments totaling $38.7 million and $42.2 million, respectively, against the carrying value of the Pirquitas mine.

Three months ended March 31, 2017 , compared to the three months ended March 31, 2016

Net income for the three months ended March 31, 2017 , was $15.0 million ( $0.13 per share), compared to $2.3 million ( $0.03 per share) in the same period of 2016. In the first quarter of 2017, we recognized a non-cash adjustment to cost of sales due to the resolution of the export duty claim in Argentina of $4.3 million . The following is a summary and discussion of the other significant components of income and expenses recorded during the current quarter compared to the same period in the prior year.

Revenue

Realized silver and gold price is a non-GAAP financial measure. Please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 11.

In the three months ended March 31, 2017 , we recognized total revenues of $117.9 million , compared to $101.5 million recognized in the comparative period of 2016 , with the increase due to the impact of the Seabee Gold Operation, which we acquired on May 31, 2016, and higher gold and silver prices, which were partially offset by lower sales from the Pirquitas mine.

At the Marigold mine, we recognized revenues of $63.8 million in the first quarter of 2017 from the sale of 52,500 payable ounces of gold at an average realized price of $1,214 per ounce. In the first quarter of 2016 , revenues were $57.7 million from the sale of 48,500 payable ounces of gold at an average realized gold price of $1,189 per ounce.

At the Seabee Gold Operation, we recognized revenues of $27.6 million in the first quarter of 2017 from the sale of 22,400 payable ounces of gold, at an average realized gold price of $1,233 per ounce. We did not own the Seabee Gold Operation in the comparative period.

At the Pirquitas mine, we recognized revenues of $26.5 million in the first quarter of 2017 , lower than the $43.8 million in the same period in 2016 . Sales volumes were lower as the mine ceased to operate January 2017 and we are currently processing lower grade stockpiled ore. We sold 1.4 million payable ounces of silver in the first quarter of 2017 , significantly lower than the 3.1 million payable ounces sold in the comparative period. Lower sales were partially offset by higher realized silver prices in the first quarter of 2017 , which averaged $17.35 per ounce, excluding the impact of period-end price adjustments, compared to $14.94 per ounce in the same period in 2016. In addition, we had a positive mark to market increase of $4.9 million in the first quarter of 2017, compared to $1.9 million in the first quarter of 2016. At March 31, 2017 , sales contracts containing 1.4 million ounces of silver were subject to final price settlement over the next four months.

Cost of sales

Cost of sales for the first quarter of 2017 was $77.8 million , compared to $78.2 million in the first quarter of 2016. Consolidated cost of sales was lower in the current period as the addition of the Seabee Gold Operation was more than offset by a significant reduction at the Pirquitas mine due to lower sales and the impact of the export duty resolution .

At the Marigold mine, cost of sales in the first quarter of 2017 was $42.4 million , generating income from mine operations of $21.3 million , equal to a gross margin of 33.4%. This compares to cost of sales of $46.5 million in the first quarter of 2016, generating an income from mine operations of $11.2 million and a gross

16



margin of 19.4%. The increase in the gross margin is partly due to higher realized prices of gold sold in the first quarter of 2017 and by lower cost of sales per ounce of gold sold.

At the Seabee Gold Operation, cost of sales in the first quarter was $22.6 million , generating income from operations of $5.0 million , equal to a gross margin of 18.1%. We did not own the operation in the comparative period.

At the Pirquitas mine, cost of sales in the first quarter of 2017 was $12.8 million , generating income from mine operations of $13.8 million , equal to a gross margin of 52.1%. The cost of sales in the first quarter of 2017 was positively impacted by a non-cash impact of $4.3 million of export duties following the resolution of the export duty claim in Argentina. Excluding the effect of this non-cash impact, the gross margin was 35.8%. This compared to cost of sales of $31.7 million in the first quarter of 2016, generating an income from mine operations of $12.1 million and a gross margin of 27.6%. The improved margin in the current quarter was mainly due to significantly higher realized prices and the mark-to-market adjustments to revenue, partially offset by higher cost of inventory in the first quarter of 2017 compared to the first quarter of 2016.

Other operating costs

General and administrative expenses in the three months ended March 31, 2017 , of $7.9 million were higher than the $4.2 million recorded in the three months ended March 31, 2016 . This was due to cash-settled share-based compensation expense of $3.7 million in the first quarter of 2017 compared to an expense of $0.2 million in the three months ended March 31, 2016 , due to stronger relative and absolute share price performance.

Exploration and evaluation costs of $7.4 million for the three months ended March 31, 2017 , were higher than the $4.5 million for the three months ended March 31, 2016 . Expenditures in the first quarter of 2017 related to greenfield exploration work performed at the Seabee Gold Operation and $3.5 million was due to the re-measurement of the reclamation liability at the Pirquitas mine. In the first quarter of 2016, exploration and evaluation work related mainly to funding the drilling and evaluation work at the Chinchillas project.

Non-operating items

During the first quarter of 2017 , we recorded interest expense and other finance costs of $6.6 million compared to $6.6 million recorded in the first quarter of 2016. In each period, the interest expense is mainly attributable to our 2.875% convertible senior notes (the “Notes”).

We recorded a foreign exchange gain for the three months ended March 31, 2017 , of $0.6 million compared with a loss of $3.4 million in the three months ended March 31, 2016 . Our main foreign exchange exposures are related to net monetary assets denominated in Argentine pesos and Canadian dollars. During the three months ended March 31, 2017 , this gain resulted mainly from a strengthening Argentine peso while the Canadian dollar was unchanged against the U.S. dollar.

Taxation

For the three months ended March 31, 2017 , we recorded an income tax expense of $3.4 million compared to $3.6 million in the three months ended March 31, 2016 . The total income tax expense in the quarter consists of a current tax expense of $2.3 million and a deferred tax expense of $1.2 million. Income tax expense is a result of profitable operations at the Marigold and Seabee mines and concentrate and gold sales activities in Canada. Offsets to the income tax expense items include the general and administrative expenses in Canada.

The tax expense of $3.6 million for the three months ended March 31, 2016 , was the result of profitable operations at the Marigold mine, and concentrate and gold sales activities in Canada.



17



Other comprehensive income

During the first quarter of 2017 , we recognized a gain of $35.6 million on marketable securities, compared to a gain of $6.2 million in the first quarter of 2016, primarily driven by valuation movements in our investment in Pretium Resources Inc. ("Pretium").


6.
LIQUIDITY

At March 31, 2017 , we had $340.6 million of cash and cash equivalents, an increase of $13.5 million from December 31, 2016 . Our cash flows from operations were $30.6 million , while $8.7 million was invested in plant and equipment, $6.7 million was invested in capitalized stripping at the Marigold mine and $2.5 million was invested in capitalized development at the Seabee Gold Operation, which will benefit future periods.

At March 31, 2017 , compared to December 31, 2016 , our working capital position increased by $128.3 million to $688.2 million from $559.9 million , mainly due to the appreciation in value of our marketable securities, positive cash flows from operations and the restructuring of the export duty liability. We manage our liquidity position with the objectives of ensuring sufficient funds available to meet planned operating requirements and providing support to fund strategic growth initiatives. Our cash balance at March 31, 2017 , along with projected operating cash flows, are expected to be sufficient to fund planned activities over the next twelve months from the date of this MD&A. We continue to focus on capital allocation and our cost reduction strategy while also implementing various optimization activities at our operations to improve the cash generating capacity of each mine.

Of our cash and cash equivalents balance, $332.7 million was held in Canada and the United States. At March 31, 2017 , we held $6.6 million cash in Argentina. All cash is invested in short-term investments or high interest savings accounts under our investment policy with maturities of 90 days or less providing us with sufficient liquidity to meet our foreseeable corporate needs.


7.
CAPITAL RESOURCES
Our objectives when managing capital are:
to safeguard our ability to continue as a going concern in order to develop and operate our current projects and pursue strategic growth initiatives;
to maintain a flexible capital structure which lowers the cost of capital.
In assessing our capital structure, we include in our assessment the components of shareholders’ equity and our Notes. In order to facilitate the management of capital requirements, we prepare annual expenditure budgets and continuously monitor and review actual and forecasted cash flows. The annual and updated budgets are monitored and approved by the Board of Directors.
To maintain or adjust the capital structure, we may, from time to time, issue new shares, issue new debt, repay debt or dispose of non-core assets. We expect our current capital resources will be sufficient to carry out our exploration plans and support operations through the current operating period.
As of March 31, 2017 , we were in compliance with externally-imposed financial covenants in relation to our $75 million senior secured revolving credit facility. Our Notes do not contain any financial covenants.

As at March 31, 2017 , we had 119,487,666 common shares and 3,327,386 stock options outstanding which are exercisable into common shares at exercise prices ranging between C$2.54 and C$28.78 per share.

18




Outstanding share data

The authorized capital consists of an unlimited number of common shares without par value. As at May 3, 2017 , the following common shares and options were outstanding:

 
Number of shares

Exercise price
Remaining life
 
 
C$
(years)
Capital stock
119,514,076

 
 
Stock options
3,406,129

2.54 - 28.78
0.67 - 6.92
Fully diluted
122,920,205

 
 



8.
FINANCIAL INSTRUMENTS AND RELATED RISKS
We are exposed to a variety of financial risks as a result of our operations, including market risk (which includes price risk, currency risk and interest rate risk), credit risk and liquidity risk. Our overall risk management strategy seeks to reduce potential adverse effects on our financial performance. Risk management is carried out under policies approved by our Board of Directors.
We may, from time to time, use foreign exchange contracts, commodity price contracts, equity hedges and interest rate swaps to manage our exposure to fluctuations in foreign currency, metal and energy prices, marketable security values and interest rates. We do not have a practice of trading derivatives. Our use of derivatives is limited to specific programs to manage fluctuations in foreign exchange, diesel prices and marketable securities risks, which are subject to the oversight of our Board of Directors.
The risks associated with our financial instruments, and the policies on how we mitigate those risks are set out below. This is not intended to be a comprehensive discussion of all risks.
a) Market Risk
This is the risk that the fair values of financial instruments will fluctuate owing to changes in market prices. The significant market risks to which we are exposed are price risk, currency risk and interest rate risk.
(i)   Price Risk
This is the risk that the fair values or future cash flows of our financial instruments will fluctuate because of changes in market prices. Income from mine operations in the next year depends on the metal prices for gold and silver and also prices of input commodities such as diesel. These prices are affected by numerous factors that are outside of our control, such as:
global or regional consumption patterns;
the supply of, and demand for, these metals;
speculative activities;
the availability and costs of metal substitutes;
inflation; and
political and economic conditions, including interest rates and currency values.
The principal financial instruments that we hold which are impacted by commodity prices are our silver concentrate trade receivables. The majority of our sales agreements are subject to pricing terms that settle within one to three months after delivery of concentrate, and this adjustment period represents our trade receivable exposure to variations in commodity prices.
We have not hedged the price of any precious metal as part of our overall corporate strategy.

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We hedge a portion of our diesel consumption at the Marigold mine with the objective of securing future costs during this period of lower prices. We executed swap and option contracts under a risk management policy approved by our Board of Directors. In addition, due to the ice road supply at the Seabee Gold Operation, we purchase annual consumable supplies in advance at prices, which are generally fixed at time of purchase, not during period of use.
There has been no significant change in our objectives and policies for managing this risk and no significant change in our exposure to this risk during the three months ended March 31, 2017 .
(ii) Currency Risk
Currency risk is the risk that the fair values or future cash flows of our financial instruments and other assets and liabilities will fluctuate because of changes in foreign currency rates. Our financial instruments are exposed to currency risk where those instruments are denominated in currencies that are not the same as the functional currency of the entity that holds them; exchange gains and losses in these situations impact earnings.
We monitor and manage this risk with the objective of ensuring our group-wide exposure to negative fluctuations in currencies against the U.S. dollar is managed. There has been no significant change in our objectives and policies for managing this risk and no significant change in our exposure to this risk during the three months ended March 31, 2017 , except for the settlement of the export duty claim which resulted in a U.S. dollar liability being converted into an ARS liability. This materially impacts our exposure to ARS but if the ARS devalues against the U.S. dollar, this will reduce our net liability in U.S. dollar terms.
(iii)  Interest Rate Risk
Interest rate risk is the risk that the fair values or future cash flows of our financial instruments will fluctuate because of changes in market interest rates. Interest rate risk arises from the interest rate impact on our cash and cash equivalents because these are the only financial instruments we hold that are impacted by interest based on variable market interest rates. The Notes have a fixed interest rate and are not exposed to fluctuations in interest rates. A change in interest rates would impact the fair value of the Notes, but because we record the Notes at amortized cost, there would be no impact on our financial results. We monitor our exposure to interest rates closely and have not entered into any derivative contracts to manage our risk.
There has been no significant change in our objectives and policies for managing this risk and no significant change in our exposure to this risk during the three months ended March 31, 2017 , except that, under the tax moratorium in Argentina, the outstanding liability incurs interest based on variable rates with a floor of 1.5% per month. At the current time, we consider the rate 1.5% to be unlikely to change in the near future.
b) Credit Risk
Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial contract. Our credit risk is limited to the following instruments:
Credit risk related to financial institutions and cash deposits Under our investment policy, investments are made only in highly-rated financial institutions and corporate and government securities. We diversify our holdings and consider the risk of loss associated with investments to be low.
Credit risk related to trade receivables We are exposed to credit risk through our trade receivables on concentrate sales, which are principally with internationally-recognized counterparties. Payments of receivables are scheduled, routine and received within a contractually agreed time frame. We manage this risk by requiring provisional payments of at least 75% of the value of the concentrate shipped and through utilizing multiple counterparties.
Credit risk related to other financial assets Our credit risk with respect to other financial assets includes deferred consideration following the sales of various mineral properties. We have security related to these payments in the event of default.
We also have credit risk through our significant VAT receivables balance that is collectible from the government of Argentina. The balance is expected to be recoverable in full, however due to legislative rules and the complex collection

20



process, a significant portion of the asset is classified as non-current until government approval of the recovery claim is approved.
c) Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our obligations under our financial instruments as they fall due. We manage our liquidity risk through a rigorous planning and budgeting process, which is reviewed and updated on a regular basis, to help determine the funding requirements to support our current operations, expansion and development plans, and by managing our capital structure. Our objective is to ensure that there are sufficient committed financial resources to meet our business requirements for a minimum of twelve months.
A detailed discussion of our liquidity position as at March 31, 2017 , is included in section 6.


9.
OTHER RISKS AND UNCERTAINTIES

We are subject to a number of risks and uncertainties, each of which could have an adverse effect on our operating results, business prospects or financial position.

For a comprehensive list of the risks and uncertainties affecting our business, please refer to the section entitled "Risk Factors" in our most recent Annual Information Form, which is available at www.sedar.com , and our most recent Annual Report on Form 40-F, which is available on the EDGAR section of the SEC website at www.sec.gov.


10.
RELATED PARTY TRANSACTIONS

We did not enter into any related party transactions other than normal course compensation arrangements with senior management and our Board of Directors during the three months ended March 31, 2017 .

21




11.
NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES

The non-GAAP financial measures presented in the MD&A do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be directly comparable to similar measures presented by other issuers. The data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-GAAP measures should be read in conjunction with our consolidated financial statements.

Additional GAAP measures are line items, headings or subtotals that are relevant to an understanding of the financial statements but are not mandated by IFRS.

Non-GAAP financial measures - Cash costs and AISC per payable ounce of precious metals sold

We use the non-GAAP financial measures of cash costs and AISC per payable ounce of precious metals sold to manage and evaluate operating performance. We believe that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate our performance and ability to generate cash flows. Cash costs per ounce metrics, net of by-product credits, are also used in our internal decision making processes. Accordingly, the data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.