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 the month of May, 2015.
Commission File Number 001-32399
BANRO CORPORATION
(Translation of registrants name into English)
1 First Canadian Place
100 King Street West, Suite
7070
Toronto, Ontario, Canada
M5X 1E3
(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): [ ]
Note: Regulation S-T Rule 101(b)(1) only permits the
submission in paper of a Form 6-K if submitted solely to provide an attached
annual report to security holders.
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): [ ]
Note: Regulation S-T Rule 101(b)(7) only permits the
submission in paper of a Form 6-K if submitted to furnish a report or other
document that the registrant foreign private issuer must furnish and make public
under the laws of the jurisdiction in which the registrant is incorporated,
domiciled or legally organized (the registrants home country), or under the
rules of the home country exchange on which the registrants securities are
traded, as long as the report or other document is not a press release, is not
required to be and has not been distributed to the registrants security
holders, and, if discussing a material event, has already been the subject of a
Form 6-K submission or other Commission filing on EDGAR.
SIGNATURE
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.
|
|
BANRO CORPORATION |
|
|
|
|
|
/s/ Kevin Jennings |
Date: |
May 13, 2015 |
Kevin Jennings |
|
|
Chief Financial Officer
|
-2-
INDEX TO EXHIBITS
-3-
INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015
(Expressed in U.S. dollars)
(Unaudited)
Banro Corporation |
CONTENTS |
Page 2 of 34
Banro Corporation |
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION |
(Expressed in
thousands of U.S. dollars) (unaudited) |
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
Notes |
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
$ |
|
|
$ |
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
5 |
|
|
3,024 |
|
|
1,002 |
|
Trade and other
receivables |
|
6 |
|
|
6,643 |
|
|
7,261 |
|
Prepaid
expenses and deposits |
|
7 |
|
|
9,542 |
|
|
6,164 |
|
Current portion of inventories |
|
8 |
|
|
28,527 |
|
|
28,893 |
|
|
|
|
|
|
47,736 |
|
|
43,320 |
|
Non-Current Assets |
|
|
|
|
|
|
|
|
|
Long-term
investment |
|
9 |
|
|
256 |
|
|
1,061 |
|
Property, plant and
equipment |
|
10 |
|
|
288,434 |
|
|
295,010 |
|
Exploration and evaluation |
|
11 |
|
|
132,167 |
|
|
129,959 |
|
Non-current portion of
inventories |
|
8 |
|
|
4,178 |
|
|
3,874 |
|
Mine under construction |
|
12 |
|
|
430,718 |
|
|
414,258 |
|
|
|
|
|
|
855,753 |
|
|
844,162 |
|
TOTAL ASSETS |
|
|
|
|
903,489 |
|
|
887,482 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Trade and
other payables |
|
13 |
|
|
75,238 |
|
|
86,396 |
|
Deferred revenue |
|
14 |
|
|
- |
|
|
3,000 |
|
Current
portion of bank loans |
|
15 |
|
|
18,628 |
|
|
17,123 |
|
Employee retention
allowance |
|
16 |
|
|
3,558 |
|
|
3,405 |
|
Current portion of derivative
instruments - mark-to-market |
|
17 |
|
|
9,310 |
|
|
1,393 |
|
|
|
|
|
|
106,734 |
|
|
111,317 |
|
Non-Current
Liabilities |
|
|
|
|
|
|
|
|
|
Non-current portion of
bank loans |
|
15 |
|
|
- |
|
|
3,869 |
|
Provision
for closure and reclamation |
|
18 |
|
|
7,941 |
|
|
7,755 |
|
Non-current portion of
derivative instruments - mark-to-market |
|
17 |
|
|
13,567 |
|
|
- |
|
Long-term
debt |
|
19 |
|
|
204,055 |
|
|
200,921 |
|
Preference shares |
|
20 |
|
|
72,204 |
|
|
71,116 |
|
|
|
|
|
|
297,767 |
|
|
283,661 |
|
Total Liabilities |
|
|
|
|
404,501 |
|
|
394,978 |
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
Share
capital |
|
21 |
|
|
518,615 |
|
|
518,615 |
|
Warrants |
|
21b |
|
|
13,356 |
|
|
13,356 |
|
Contributed surplus |
|
22 |
|
|
43,035 |
|
|
42,526 |
|
Accumulated other
comprehensive (loss)/income |
|
|
|
|
(425 |
) |
|
380 |
|
Deficit |
|
|
|
|
(75,593 |
) |
|
(82,373 |
) |
|
|
|
|
|
498,988 |
|
|
492,504 |
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
903,489 |
|
|
887,482 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
23 |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
Page 3 of 34
Banro Corporation |
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE
INCOME/(LOSS) |
(Expressed in
thousands of U.S. dollars) (unaudited) |
|
|
|
|
|
For the three months ended |
|
|
|
Notes |
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
|
|
$ |
|
|
$ |
|
Operating revenue |
|
|
|
|
41,003 |
|
|
30,439 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
Production costs |
|
26 |
|
|
(17,895 |
) |
|
(20,007 |
) |
Depletion and depreciation |
|
10 |
|
|
(6,386 |
) |
|
(4,391 |
) |
Total mine operating expenses |
|
|
|
|
(24,281 |
) |
|
(24,398 |
) |
|
|
|
|
|
|
|
|
|
|
Gross earnings from operations |
|
|
|
|
16,722 |
|
|
6,041 |
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
27 |
|
|
(2,787 |
) |
|
(1,466 |
) |
Share-based payments |
|
22 |
|
|
(403 |
) |
|
(61 |
) |
Other charges and provisions, net |
|
29 |
|
|
(744 |
) |
|
(1,903 |
) |
Net income from
operations |
|
|
|
|
12,788
|
|
|
2,611 |
|
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
28 |
|
|
(6,055 |
) |
|
(3,325 |
) |
Foreign exchange gain |
|
|
|
|
46 |
|
|
8 |
|
Interest income |
|
|
|
|
1 |
|
|
2 |
|
Net income/(loss) |
|
|
|
|
6,780 |
|
|
(704 |
) |
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified to profit
or loss: |
|
|
|
|
|
|
|
|
|
Foreign currency translation
differences of foreign investment in associate |
|
9 |
|
|
- |
|
|
(51 |
) |
Fair
value loss on available-for-sale financial asset |
|
9 |
|
|
(805 |
) |
|
- |
|
Total comprehensive income/(loss) |
|
|
|
|
5,975 |
|
|
(755 |
) |
|
|
|
|
|
|
|
|
|
|
Income/(loss) per
share |
|
|
|
|
|
|
|
|
|
Basic |
|
21c |
|
|
0.03 |
|
|
(0.00 |
) |
Diluted |
|
21c |
|
|
0.03 |
|
|
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding |
|
|
|
|
|
|
|
|
|
Basic |
|
21c |
|
|
252,101 |
|
|
252,101 |
|
Diluted |
|
21c |
|
|
252,221 |
|
|
252,101 |
|
The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
Page 4 of 34
Banro Corporation |
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY |
(Expressed in
thousands of U.S dollars) (unaudited) |
|
|
|
|
|
Share capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
Currency |
|
|
Available- |
|
|
|
|
|
Total |
|
|
|
Notes |
|
|
common |
|
|
|
|
|
|
|
|
Contributed |
|
|
Translation |
|
|
for-sale
|
|
|
|
|
|
Shareholders' |
|
|
|
|
|
|
shares |
|
|
Amount |
|
|
Warrants |
|
|
Surplus |
|
|
Adjustment |
|
|
asset |
|
|
Deficit |
|
|
Equity |
|
|
|
|
|
|
(in thousands) |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Balance as at January 1,
2014 |
|
|
|
|
252,101
|
|
|
518,615
|
|
|
13,356 |
|
|
41,793 |
|
|
(87 |
) |
|
- |
|
|
(82,693 |
) |
|
490,984
|
|
Net loss for the period |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(704 |
) |
|
(704 |
) |
Share-based payments |
|
22 |
|
|
- |
|
|
- |
|
|
- |
|
|
127 |
|
|
- |
|
|
- |
|
|
- |
|
|
127 |
|
Foreign currency translation differences of foreign investment
in associate |
|
9 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(51 |
) |
|
- |
|
|
- |
|
|
(51 |
) |
Balance as at March 31, 2014 |
|
|
|
|
252,101 |
|
|
518,615 |
|
|
13,356 |
|
|
41,920 |
|
|
(138 |
) |
|
- |
|
|
(83,397 |
) |
|
490,356 |
|
Net income for the period |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,024 |
|
|
1,024 |
|
Share-based payments |
|
22 |
|
|
- |
|
|
- |
|
|
- |
|
|
620 |
|
|
- |
|
|
- |
|
|
- |
|
|
620 |
|
Long-term investment |
|
9 |
|
|
- |
|
|
- |
|
|
- |
|
|
(14 |
) |
|
110 |
|
|
- |
|
|
- |
|
|
96 |
|
Foreign currency translation
differences of foreign investment in associate |
|
9 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
28 |
|
|
- |
|
|
- |
|
|
28 |
|
Fair
value gain on available-for-sale financial asset |
|
9 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
380 |
|
|
- |
|
|
380 |
|
Balance as at December 31, 2014 |
|
|
|
|
252,101 |
|
|
518,615 |
|
|
13,356 |
|
|
42,526 |
|
|
- |
|
|
380 |
|
|
(82,373 |
) |
|
492,504 |
|
Net income for the period |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
6,780 |
|
|
6,780 |
|
Share-based payments |
|
22 |
|
|
- |
|
|
- |
|
|
- |
|
|
509 |
|
|
- |
|
|
- |
|
|
- |
|
|
509 |
|
Fair
value loss on available-for-sale financial asset |
|
9 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(805 |
) |
|
- |
|
|
(805 |
) |
Balance as at March 31, 2015 |
|
|
|
|
252,101 |
|
|
518,615 |
|
|
13,356 |
|
|
43,035 |
|
|
- |
|
|
(425 |
) |
|
(75,593 |
) |
|
498,988 |
|
The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
Page 5 of 34
Banro Corporation |
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOW |
(Expressed in
thousands of U.S dollars) (unaudited) |
|
|
|
|
|
For the three months ended |
|
|
|
Notes |
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
|
|
$ |
|
|
$ |
|
Cash flows from operating
activities |
|
|
|
|
|
|
|
|
|
Net income/(loss) for the period |
|
|
|
|
6,780 |
|
|
(704 |
) |
Adjustments for: |
|
|
|
|
|
|
|
|
|
Recognition of deferred
revenue |
|
14 |
|
|
(3,000 |
) |
|
(7,369 |
) |
Depletion
and depreciation |
|
10
|
|
|
6,411 |
|
|
4,405 |
|
Unrealized foreign
exchange loss/(gain) |
|
|
|
|
16 |
|
|
(81 |
) |
Share-based payments |
|
22
|
|
|
403 |
|
|
61
|
|
Employee retention
allowance |
|
16 |
|
|
154 |
|
|
155 |
|
Finance
expense excluding bank charges, net of interest income |
|
28
|
|
|
5,518 |
|
|
2,990 |
|
Accretion on closure and
reclamation |
|
18 |
|
|
186 |
|
|
155 |
|
Other
charges and provisions, net |
|
29
|
|
|
744 |
|
|
1,903 |
|
Interest paid |
|
|
|
|
(1,372 |
) |
|
(1,772 |
) |
Interest received |
|
|
|
|
- |
|
|
2 |
|
Operating cash flows before working capital
adjustments |
|
|
|
|
15,840 |
|
|
(255 |
) |
Working capital adjustments |
|
32 |
|
|
(8,152 |
) |
|
723 |
|
Net cash flows provided by operating
activities |
|
|
|
|
7,688 |
|
|
468 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
Acquisition of property,
plant, and equipment |
|
10
|
|
|
(2,235 |
)
|
|
(4,571 |
)
|
Exploration and evaluation expenditures and
associated working capital movements |
|
11 |
|
|
(3,505 |
) |
|
(3,890 |
) |
Expenditures on mine under
construction and associated working capital movements, net of
pre-production revenue |
|
12
|
|
|
(6,822 |
)
|
|
(10,772 |
)
|
Interest paid |
|
|
|
|
(8,348 |
) |
|
(8,370 |
) |
Advances - Long-term investment |
|
9 |
|
|
- |
|
|
(1 |
) |
Net cash used in investing activities
|
|
|
|
|
(20,910 |
) |
|
(27,604 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
Bank overdraft |
|
13
|
|
|
(1,280 |
)
|
|
3,764 |
|
Net proceeds from derivative liabilities |
|
17 |
|
|
19,700 |
|
|
- |
|
Net proceeds from shares
issuance |
|
20, 21 |
|
|
-
|
|
|
39,096 |
|
Payment of dividends |
|
20 |
|
|
(750 |
) |
|
(737 |
) |
Net proceeds from (repayments of) bank loans |
|
15 |
|
|
(2,364 |
) |
|
(1,996 |
) |
Net cash provided by financing
activities |
|
|
|
|
15,306 |
|
|
40,127 |
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange on cash and cash equivalents
|
|
|
|
|
(62 |
) |
|
(10 |
) |
Net increase in cash and
cash equivalents |
|
|
|
|
2,022 |
|
|
12,981 |
|
Cash and cash equivalents, beginning of the period |
|
|
|
|
1,002 |
|
|
4,452 |
|
Cash and cash equivalents, end of the period |
|
|
|
|
3,024 |
|
|
17,433 |
|
Other cash flow items and non-cash transactions (Note 32)
The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
Page 6 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
Banro Corporations business focus is the exploration,
development and production of mineral properties in the Democratic Republic of
the Congo (the Congo). Banro Corporation (the Company) was continued under
the Canada Business Corporations Act on April 2, 2004. The Company was
previously governed by the Ontario Business Corporations Act.
These interim condensed consolidated financial statements as at
and for the three months ended March 31, 2015 include the accounts of the
Company and of its wholly-owned subsidiary incorporated in the United States,
Banro American Resources Inc., as well as its subsidiary in the Congo, Banro
Hydro SARL, and its subsidiary in Barbados, Banro Group (Barbados) Limited. The
Company is a publicly traded company whose outstanding common shares are listed
for trading on the Toronto Stock Exchange and on the NYSE MKT LLC. The head
office of the Company is located at 1 First Canadian Place, 100 King St. West,
Suite 7070, Toronto, Ontario, M5X 1E3, Canada.
a) |
Statement of compliance |
These interim condensed consolidated
financial statements as at and for the three months ended March 31, 2015,
including comparatives, have been prepared in accordance with International
Accounting Standards (IAS) 34 Interim Financial Reporting (IAS 34) using
accounting policies consistent with the International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board
(IASB). The disclosure contained in these interim condensed consolidated
financial statements does not include all the requirements in IFRS. Accordingly,
these interim condensed consolidated financial statements should be read in
conjunction with the Companys annual consolidated financial statements as at
and for the year ended December 31, 2014, which includes information necessary
to understand the Companys business and financial statement presentation.
Certain comparative figures have been reclassified and aggregated to conform to
the current periods presentation. Royalties of $304 have been reclassified from
General and Administrative expense to Production Costs; Share of loss from
investment in associate of $17 and Loss on change in fair value of derivative
financial instruments of $1,886 have been reclassified to Other Charges and
Provisions, net; and Transaction Costs of $904, Interest and Bank Charges of
$1,684, and Dividends paid on Preferred Shares of $737 are now presented as
Finance Expenses.
The date the Companys Board of
Directors approved these interim condensed consolidated financial statements was
May 13, 2015.
b) |
Continuation of Business |
These interim condensed consolidated
financial statements have been prepared on a going concern basis, under the
historical cost basis, except for certain financial instruments which are
presented at fair value.
The Company earned net income of $6,780
for the three months ended March 31, 2015 (three months ended March 31, 2014
net loss of $704) and as at March 31, 2015 had a working capital deficit of
$58,998 (December 31, 2014 - $67,997).
The Companys ability to continue
operations in the normal course of business is dependent on several factors,
including its ability to secure additional funding. Management is exploring all
available options to secure additional funding, including forward sale
agreements, equity financing and strategic partnerships. In addition, the
recoverability of the amount shown for exploration and evaluation assets is
dependent upon the existence of economically recoverable reserves, the ability
of the Company to obtain financing to continue to perform exploration activity
or complete the development of the properties where necessary, or alternatively,
upon the Companys ability to recover its incurred costs through a disposition
of its interests, all of which are uncertain.
In the event the Company is unable to
identify recoverable resources, receive the necessary permitting, or arrange
appropriate financing, the carrying value of the Companys assets and
liabilities could be subject to material adjustment. Furthermore, market
conditions may raise substantial doubt on the Companys ability to continue as a
going concern.
These interim condensed consolidated
financial statements do not include any additional adjustments to the
recoverability and classification of recorded asset amounts, classification of
liabilities and changes to the statements of comprehensive income/(loss) that
might be necessary if the Company was unable to continue as a going concern.
Page 7 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
ESTIMATES AND JUDGMENTS |
These interim condensed consolidated financial statements have
been prepared using the same accounting policies and methods of computation as
presented in Note 3 of the annual consolidated financial statements of the
Company as at and for the year ended December 31, 2014, except for those newly
adopted accounting standards noted below.
a) |
Newly Applied Accounting Standards |
The following amended standards were
applied as of January 1, 2015:
|
|
IFRS 8, Operating Segments (amendment); and
|
|
|
IAS 24, Related Party Disclosures
(amendment). |
The adoption of these amended standards
did not have a significant impact on the Companys interim condensed
consolidated financial statements.
b) |
Accounting Standards Issued But Not Yet Effective
|
The Company has reviewed new and
revised accounting pronouncements that have been issued but are not yet
effective and determined that the following may have an impact on the Company:
IFRS 9, Financial instruments (IFRS
9) was issued by the IASB on July 24, 2014 and will replace IAS 39 Financial
Instruments: Recognition and Measurement. IFRS 9 is intended to reduce the
complexity for the classification, measurement, and impairment of financial
instruments. The mandatory effective date is for annual periods beginning on or
after January 1, 2018. The Company is evaluating the impact of this standard on
its consolidated financial statements.
Amendments to IFRS 10, Consolidated
Financial Statements (IFRS 10), IFRS 12 Disclosure of Interests in Other
Entities (IFRS 12), and IAS 28 Investments in Associates and Joint Ventures
(IAS 28) were published by the IASB in December 2014. The amendments define
the application of the consolidation exception for investment entities. They are
effective for annual periods beginning on or after January 1, 2016. The Company
is evaluating the impact of these standards but does not expect these standards
to have a material impact on its consolidated financial statements.
IFRS 15, Revenue from Contracts with
Customers (IFRS 15) was issued by the IASB on May 28, 2014 and will replace
IAS 18 Revenue and IAS 11 Construction Contracts and related interpretations.
IFRS 15 provides a more detailed framework for the timing of revenue recognition
and increased requirements for disclosure of revenue. IFRS 15 uses a
control-based approach to recognize revenue which is a change from the risk and
reward approach under the current standard. The mandatory effective date is for
annual periods beginning on or after January 1, 2018. The Company is evaluating
the impact of this standard on its consolidated financial statements.
Amendments
to IAS 1, Presentation of Financial Statements (IAS 1) were issued by the IASB
in December 2014. The amendments clarify principles for the presentation and
materiality consideration for the financial statements and notes to improve
understandability and comparability. The amendments to IAS 1 are effective for
annual periods beginning on or after January 1, 2016. The Company is evaluating
the impact of this standard on its consolidated financial statements.
Amendments to IAS 16, Property, Plant
and Equipment (IAS 16) were issued by the IASB in May 2014. The amendments
prohibit the use of a revenue-based depreciation method for property, plant and
equipment as it is not reflective of the economic benefits of using the asset.
They clarify that the depreciation method applied should reflect the expected
pattern of consumption of the future economic benefits of the asset. The
amendments to IAS 16 are effective for annual periods beginning on or after
January 1, 2016. The Company does not expect the standard to have a material
impact on its consolidated financial statements.
Amendments to IAS 38 Intangible Assets
(IAS 38) were issued by the IASB in May 2014. The amendments prohibit the use
of a revenue-based depreciation method for intangible assets. Exceptions are
allowed where the asset is expressed as a measure of revenue or revenue and
consumption of economic benefits for the asset are highly correlated. The
amendments to IAS 38 are effective for annual periods beginning on or after
January 1, 2016. The Company is evaluating the impact of this standard but does
not expect the standard to have a material impact on its consolidated financial
statements.
Page 8 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
The following table lists subsidiaries of the Company:
Name of Subsidiary |
Place of Incorporation
|
Proportion of
Beneficial Common Share Ownership Interest |
Principal Activity
|
Twangiza Mining SA1 |
Congo |
100% |
Mining |
Namoya Mining SA1 |
Congo |
100% |
Mining |
Lugushwa Mining SA1 |
Congo |
100% |
Mining |
Kamituga Mining SA1 |
Congo |
100% |
Mining |
Banro Congo Mining SA1 |
Congo |
100% |
Mining |
Banro Hydro SARL |
Congo |
100% |
Inactive |
Banro American Resources Inc. |
United States of America |
100% |
Inactive |
Twangiza (Barbados) Limited |
Barbados |
100% |
Holding and Financing |
Namoya (Barbados) Limited |
Barbados |
100% |
Holding and Financing |
Lugushwa (Barbados) Limited |
Barbados |
100% |
Holding |
Kamituga (Barbados) Limited |
Barbados |
100% |
Holding |
Banro Congo (Barbados) Limited |
Barbados |
100% |
Holding |
Banro Group (Barbados) Limited |
Barbados |
100% |
Holding and Financing |
1 During the three months ended September 30, 2014,
these entities were reincorporated as "SA" entities in the Congo as per changes
in the country's corporate laws.
5. |
CASH AND CASH EQUIVALENTS |
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Cash |
|
2,827 |
|
|
786 |
|
Cash
equivalents |
|
197 |
|
|
216 |
|
|
|
3,024 |
|
|
1,002 |
|
Cash and cash equivalents of the Company include cash on hand,
deposits held at financial institutions, and other short-term, highly liquid
investments with original maturities of three months or less that is readily
convertible to known amounts of cash.
6. |
TRADE AND OTHER RECEIVABLES |
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Advances to employees |
|
246 |
|
|
211 |
|
VAT receivable |
|
6,160 |
|
|
6,797 |
|
Other receivables |
|
237 |
|
|
253 |
|
|
|
6,643 |
|
|
7,261 |
|
As at March 31, 2015, there was no allowance on the value-added
taxes (VAT) or advances to employees as all amounts are expected to be fully
recovered (December 31, 2014 - $nil).
Page 9 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
7. |
PREPAID EXPENSES AND DEPOSITS |
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Supplier prepayments and
deposits - Twangiza |
|
4,896 |
|
|
3,066 |
|
Supplier prepayments and deposits - Namoya
|
|
3,126 |
|
|
1,959 |
|
Prepaid insurance and rent |
|
1,520 |
|
|
1,139 |
|
|
|
9,542 |
|
|
6,164 |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Ore in stockpiles |
|
1,151 |
|
|
709 |
|
Gold in process |
|
512 |
|
|
723 |
|
Gold bullion |
|
3,195 |
|
|
2,143 |
|
Mine
operating supplies |
|
23,669 |
|
|
25,318 |
|
Total current portion |
|
28,527 |
|
|
28,893 |
|
|
|
|
|
|
|
|
Non-current ore in stockpiles1 |
|
4,178 |
|
|
3,874 |
|
Total non-current portion |
|
4,178 |
|
|
3,874 |
|
|
|
|
|
|
|
|
Total |
|
32,705 |
|
|
32,767 |
|
1 Includes low-grade material not scheduled for
processing within the next twelve months.
During the three months ended March 31, 2015, the Company
recognized $17,895 (three months ended March 31, 2014 - $20,007) of parts and
supplies inventory as an expense within production costs in the interim
condensed consolidated statement of comprehensive income/(loss).
The Companys investment in Delrand Resources Limited
(Delrand), which met the definition of an associate of the Company until May
2014, is classified as an available for sale financial asset as at March 31,
2015 and December 31, 2014, and is summarized as follows:
|
|
March 31, 2015 |
|
|
December 31, 2014 |
|
Delrand Resources Limited |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of ownership
interest |
|
7.06% |
|
|
7.06% |
|
Common shares held |
|
1,539 |
|
|
1,539 |
|
Total investment |
$ |
256 |
|
$ |
1,061 |
|
Delrand, a publicly listed entity on the Toronto Stock Exchange
and the JSE Limited in South Africa, is involved in the acquisition and
exploration of mineral properties in the Congo. It has an annual reporting date
of June 30.
Page 10 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
The fair value of the Companys investment in Delrand, based on
the closing price of Delrands shares on the Toronto Stock Exchange as at March
31, 2015, is $256 (December 31, 2014 - $1,061). For the three months ended March
31, 2015, the Company's fair value loss of $805 was reflected in other comprehensive income/(loss) (three
months ended March 31, 2014 share of loss in the results of Delrand of $17 was
included in the interim condensed statement of comprehensive income/(loss) and a
loss from foreign currency translation differences of foreign investment in
associate of $51 reflected in other comprehensive income/(loss)).
Page 11 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
10. |
PROPERTY, PLANT AND EQUIPMENT
|
The Companys property, plant and equipment are summarized as
follows:
|
|
Mining assets |
|
|
Construction
in progress |
|
|
Plant and
equipment |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
I) Cost |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as
at January 1, 2014 |
|
54,771 |
|
|
35,293 |
|
|
276,596 |
|
|
366,660 |
|
Additions |
|
-
|
|
|
14,249 |
|
|
4,421 |
|
|
18,670 |
|
Transfers
|
|
- |
|
|
(48,010 |
) |
|
48,010 |
|
|
- |
|
Disposals |
|
- |
|
|
- |
|
|
(1,619 |
) |
|
(1,619 |
) |
Balance as at December
31, 2014 |
|
54,771 |
|
|
1,532 |
|
|
327,408 |
|
|
383,711 |
|
Additions |
|
- |
|
|
1,204 |
|
|
1,031 |
|
|
2,235 |
|
Balance as at March 31, 2015 |
|
54,771 |
|
|
2,736 |
|
|
328,439 |
|
|
385,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
II) Accumulated Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2014 |
|
12,750 |
|
|
- |
|
|
41,805 |
|
|
54,555 |
|
Depreciation for the year |
|
- |
|
|
- |
|
|
27,914 |
|
|
27,914 |
|
Depletion for the year |
|
7,698 |
|
|
-
|
|
|
-
|
|
|
7,698 |
|
Disposals |
|
- |
|
|
- |
|
|
(1,466 |
) |
|
(1,466 |
) |
Balance as at December 31, 2014 |
|
20,448 |
|
|
- |
|
|
68,253 |
|
|
88,701 |
|
Depreciation for the period |
|
- |
|
|
- |
|
|
7,381 |
|
|
7,381 |
|
Depletion for the period
|
|
1,430 |
|
|
- |
|
|
- |
|
|
1,430 |
|
Balance as at March 31, 2015 |
|
21,878 |
|
|
- |
|
|
75,634 |
|
|
97,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
III) Carrying amounts |
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at
December 31, 2014 |
|
34,323 |
|
|
1,532 |
|
|
259,155 |
|
|
295,010 |
|
Balance as at March 31,
2015 |
|
32,893 |
|
|
2,736 |
|
|
252,805 |
|
|
288,434 |
|
During the three months ended March 31, 2015 and 2014, no
assets were disposed of. The Companys property, plant and equipment in the
Congo are pledged as security.
Page 12 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
11. |
EXPLORATION AND EVALUATION ASSETS |
The following table summarizes the Companys tangible
exploration and evaluation expenditures with respect to its five properties in
the Congo:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banro |
|
|
|
|
|
|
Twangiza |
|
|
Namoya |
|
|
Luguswha |
|
|
Kamituga |
|
|
Congo |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining |
|
|
|
|
Cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Balance as at January 1, 2014 |
|
28,595 |
|
|
15,051 |
|
|
50,270 |
|
|
21,002 |
|
|
2,802 |
|
|
117,720 |
|
Additions |
|
2,431 |
|
|
1,792 |
|
|
3,163 |
|
|
3,408 |
|
|
1,425 |
|
|
12,219 |
|
Balance as at December 31, 2014 |
|
31,026 |
|
|
16,843 |
|
|
53,433 |
|
|
24,410 |
|
|
4,227 |
|
|
129,939 |
|
Additions |
|
368 |
|
|
284 |
|
|
609 |
|
|
610 |
|
|
337 |
|
|
2,208 |
|
Balance as at March 31, 2015 |
|
31,394 |
|
|
17,127 |
|
|
54,042 |
|
|
25,020 |
|
|
4,564 |
|
|
132,147 |
|
There is approximately $20 of intangible exploration and
evaluation expenditures as at March 31, 2015 (December 31, 2014 - $20). The
intangible exploration and evaluation expenditures, representing mineral rights
held by Banro Congo Mining, have not been included in the table above.
12. |
MINE UNDER CONSTRUCTION |
Development expenditures with respect to the construction of
the Companys Namoya mine are as follows:
|
|
Namoya Mine
|
|
Cost |
|
$ |
|
Balance as at January 1, 2014 |
|
337,203 |
|
Additions |
|
98,742 |
|
Pre-commercial production revenue |
|
(21,687 |
) |
Balance as at December 31,
2014 |
|
414,258 |
|
Additions |
|
27,943 |
|
Pre-commercial production revenue |
|
(11,483 |
) |
Balance as at March 31, 2015 |
|
430,718 |
|
Mines under construction are not depreciated until construction
is completed. This is signified by the formal commissioning of a mine for
production. Revenues realized before commencement of commercial production
(pre-commercial production revenue) are recorded as a reduction of the
respective mining asset. A capitalization rate of 10.2% was used for general
borrowings.
13. |
TRADE AND OTHER PAYABLES |
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Bank overdrafts |
|
2,373 |
|
|
3,653 |
|
Accounts payable |
|
66,821 |
|
|
70,358 |
|
Accrued liabilities |
|
6,044 |
|
|
12,385 |
|
|
|
75,238 |
|
|
86,396 |
|
Page 13 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
Accounts payable and accrued liabilities are mainly comprised
of amounts outstanding for purchases relating to exploration, development, and
production activities and amounts payable for professional services. The credit
term period for purchases typically ranges from 30 to 120 days.
In October 2014, the Company entered into a prepayment
arrangement with Auramet International, LLC (Auramet) (the organization
through which the Company currently sells gold produced from its mines) for
$6,000 to deliver a total of 5,228 ounces of gold in equal monthly deliveries of
1,307 ounces from November 2014 to February 2015. As per the agreement, the
Company delivered gold in November and December 2014 with a remaining balance of
$3,000 for the delivery of 2,614 ounces as of December 31, 2014. The Company
delivered 1,307 ounces each in January and February 2015.
Deferred revenue of $7,369 as at December 31, 2013, represented
a prepayment arrangement for the delivery of 6,250 ounces of gold to Auramet in
January 2014.
As at March 31, 2015, all deliveries on the Companys deferred
revenue arrangements were completed.
In determining the appropriate recognition and presentation of
the deferred revenue, the Company made judgments with regards to the arrangement
with Auramet including the Companys quantity and timing of expected future
production, intent of the arrangement, and the option to settle in cash.
During the three months ended March 31, 2015, the Company made
repayments on outstanding bank loans as per the terms of the loan agreements.
|
|
$ |
|
Balance at January 1, 2014
|
|
42,500 |
|
Withdrawals |
|
3,000 |
|
Renegotiation Fee |
|
106 |
|
Repayments |
|
(24,614 |
) |
Balance at December 31, 2014
|
|
20,992 |
|
Repayments |
|
(2,364 |
) |
Balance at March 31, 2015 |
|
18,628 |
|
The Company has accrued interest on the credit facilities of
$106 as of March 31, 2015 (December 31, 2014 - $154) under accrued liabilities
in its interim condensed consolidated statement of financial position. The
Company has recorded interest expense of $nil, for the three months ended March
31, 2015 (March 31, 2014 - $341) and $434 was recorded in mine under
construction for the three months ended March 31, 2015 (March 31, 2014 - $504)
in relation to the bank loans.
16. |
EMPLOYEE RETENTION ALLOWANCE |
The Company has an employee retention incentive plan under
which an amount equal to one-month salary per year of service is accrued to each
qualified employee up to a maximum of 10 months (or 10 years of service with the
Company). To qualify for this retention allowance, an employee must complete two
years of service with the Company. The full amount of retention allowance
accumulated by a particular employee is paid out when the employee is no longer
employed with the Company, unless there is a termination due to misconduct, in
which case the retention allowance is forfeited. There is uncertainty about the
timing of these outflows but with the information available and assumption that
eligible employees will not be terminated due to misconduct, as at March 31,
2015, the Company had accrued a liability of $3,558 (December 31, 2014 -
$3,405).
The following table summarizes information about changes to the
Companys employee retention allowance during the three months ended March 31,
2015.
Page 14 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
|
|
$ |
|
Balance as at January 1, 2014
|
|
2,777 |
|
Additions |
|
899 |
|
Forfeitures |
|
(92 |
)
|
Payments to employees |
|
(179 |
) |
Balance as at December 31,
2014 |
|
3,405 |
|
Additions |
|
268 |
|
Forfeitures |
|
(42 |
)
|
Payments to employees |
|
(73 |
) |
Balance as at March 31, 2015 |
|
3,558 |
|
17. |
DERIVATIVE INSTRUMENTS
|
|
a) |
Gold Prepayment Arrangement |
In February 2015, the Company closed a gold forward sale
agreement relating to the Twangiza mine. The agreement provided for the
prepayment by the purchaser of $20,000 for its purchase of 22,248 ounces of gold
from the Twangiza mine, with the gold deliverable over three years, at 618
ounces per month. The forward sale may be terminated at any time upon payment to
the purchaser of a one-time termination amount that would result in the
purchaser receiving an internal rate of return of 20%. The terms of the forward
sale also include a gold floor price mechanism whereby, if the gold price falls
below $1,100 per ounce in any month, additional ounces are deliverable to ensure
a realized gold price of $1,100 per ounce for that month. The Company has
classified the obligation under the agreement as a financial instrument at fair
value through profit or loss based on the intent, terms and nature of the
agreement. Transaction costs of $300 were expensed to the interim condensed
consolidated statement of comprehensive income/(loss). As at March 31, 2015, a
fair value of $20,351 was included in derivative instruments and a loss of $351
relating to the revaluation of the instrument was reflected in the interim
condensed consolidated statement of comprehensive income/(loss). The Company has
classified $13,567 as non-current based on the expected timing of extinguishing
the instrument.
In February 2015, the Company closed a gold prepayment
arrangement with Auramet for $3,000 to deliver 840 ounces each for three
consecutive months. The Company classified the obligation under the agreement as
a financial instrument at fair value through profit or loss based on the intent,
terms and nature of the agreement. The first delivery was made in March 2015. As
at March 31, 2015, the liability to deliver the remaining 1,680 ounces was
recorded as a derivative instrument at a fair value of $1,994 and a loss of $2
relating to the revaluation of the instrument was reflected in the interim
condensed consolidated statement of comprehensive income/(loss).
As at December 31 2014, the Company had an outstanding
obligation, valued at $1,291, for the delivery of 535 ounces per month in
January and February 2015. As of March 31, 2015, the Company had delivered all
ounces for this arrangement and a fair value loss of $111 on this obligation was
reflected in the interim condensed consolidated statement of comprehensive
income/(loss).
In connection with the gold prepayment arrangement in February
2015, the Company issued call options for the purchase of 6,000 ounces of gold
in September 2015 at a price of $1,300 per ounce. The call options were
initially recognized at their fair value of $96 and subsequently revalued as at
March 31, 2015 to $50. During the three months ended March 31, 2015, the Company
reflected an unrealized fair value gain of $46 on these call options in the
interim condensed consolidated statement of comprehensive income/(loss) (March
31, 2014 - $nil).
As at March 31, 2015, the Company has outstanding call options
for the purchase of 1,250 ounces of gold per month for 4 months starting in June
2015 at a price of $1,400 per ounce. The call options were revalued as at March
31, 2015 to $3 (December 31, 2014 - $16). During the three months ended March
31, 2015, the Company reflected an unrealized fair value gain of $13 on these
call options in the interim condensed consolidated statement of comprehensive
income/(loss) (March 31, 2014 - $nil).
|
c) |
Warrants to Purchase Common Shares |
On August 18, 2014, warrants were issued as a part of a debt
facility arranged by the Company (see Note 19). The warrants entitle the holders
thereof to acquire 13.3 million common shares of the Company at a price of
Cdn$0.269 per share for a period of 3 years, expiring August 18, 2017. As at March 31, 2015, all warrants issued were
outstanding. For the three months ended March 31, 2015, the Company reflected a
fair value loss on the revaluation of these warrants of $393 in the statement of
comprehensive income/(loss) (March 31, 2014 - $nil). As of March 31, 2015, the
Company recorded a fair value derivative liability of $479 (December 31, 2014 -
$86).
Page 15 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
18. |
PROVISION FOR CLOSURE AND RECLAMATION
|
The Company recognizes a provision related to its constructive
and legal obligations in the Congo to restore its properties. The cost of this
obligation is determined based on the expected future level of activity and
costs related to decommissioning the mines and restoring the properties. The
provision for the Twangiza mine is calculated at the net present value of the
estimated future undiscounted cash flows using an interest rate of 9.57%, a mine
life of 10 years, and estimated future undiscounted liability of $9,060
(December 31, 2014 - $9,060). The provision for the Namoya mine is calculated at
the net present value of the future estimated undiscounted liability using an
interest rate of 9.57%, a mine life of 10 years, and estimated future
undiscounted liability of $10,281 (December 31, 2014 - $10,281). For the three
months ended March 31, 2015, the Company recorded an accretion expense of $186
(March 31, 2014 - $18) in the interim condensed consolidated statement of
comprehensive income/(loss). As at March 31, 2015, the Company recorded a
provision for mine rehabilitation of $7,941 (December 31, 2014 - $7,755).
|
|
Twangiza |
|
|
Namoya |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Mine |
|
|
Mine |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
Balance at January 1, 2014
|
|
2,023 |
|
|
2,195 |
|
|
4,218 |
|
Change in discount rate |
|
1,371 |
|
|
1,557 |
|
|
2,928 |
|
Unwinding of the discount
rate |
|
293 |
|
|
327 |
|
|
620 |
|
Addition/(decrease) in obligation |
|
(54 |
) |
|
43 |
|
|
(11 |
) |
Balance at December 31, 2014 |
|
3,633 |
|
|
4,122 |
|
|
7,755 |
|
Unwinding of the discount rate |
|
87 |
|
|
99 |
|
|
186 |
|
Balance at March 31, 2015 |
|
3,720 |
|
|
4,221 |
|
|
7,941 |
|
On August 18, 2014, the Company closed a liquidity backstop
facility (the Facility) for gross aggregate proceeds of up to $35,000. The
Facility provides for the issuance by the Company of two classes of notes,
defined as Priority Lien Notes and Parity Lien Notes, as well as common share
purchase warrants of the Company (see Note 17c). The notes mature on July 31,
2016, but may be prepaid at any time in whole or in part without penalty. The
notes bear initial interest rates of 10% and 15% for the Priority Lien Notes and
Parity Lien Notes, respectively, accruing and payable monthly in arrears, with
semi-annual step up provisions in interest to as high as 20% and 25% for the
Priority Lien Notes and Parity Lien Notes, respectively, seven months before
expiry. Any interest payable on or before July 31, 2015 may be capitalized
monthly by the Company by adding the accrued interest to the outstanding
principal of the notes. The interest rate applicable to any such capitalized
interest will be 2% higher.
On August 18, 2014, the Company drew down under the Facility a
total of $27,700 ($19,700 in Priority Lien Notes and $8,000 in Parity Lien
Notes). On August 29, 2014, the Company drew down under the Facility an
additional $3,000 (evidenced by Priority Lien Notes). The monthly interest
payable on the notes from August 31 to December 31 was capitalized. On October
17, 2014, the Company drew down the remaining balance of $4,300 in Priority Lien
Notes. On December 9, 2014, the Facility was amended to increase the aggregate
proceeds limit to $37,000 and the Company drew down an additional $2,000 in
Parity Lien Notes.
The Company recognized the long-term debt portion of the
securities issued under the Facility, at a fair value of $36,640 less
transaction costs of $1,143, in its interim condensed consolidated statement of
financial position. As a portion of the proceeds from the Facility is
attributable to the construction of the Namoya mine, the Company will capitalize
100% of borrowing costs for the $2,000 in Parity Lien Notes and the related
portion of all other borrowing costs calculated using a rate of 21.91% . As at
March 31, 2015, the fair value of the long-term debt approximates its carrying
value. For the three months ended March 31, 2015, the Company capitalized
borrowing costs of $505 (March 31, 2014 $nil) to Mine under Construction and
recognized $1,361 (March 31, 2014 - $nil) of borrowing costs under finance
expense in its interim condensed consolidated statement of comprehensive
income/(loss). As of March 31, 2015, the Company included capitalized interest
on the outstanding principal of $4,235 (December 31, 2014 - $2,369) under
long-term debt in its interim condensed consolidated statement of financial
position as the capitalized interest will remain outstanding until the date of
extinguishment, in whole or part.
Page 16 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
On March 2, 2012, the Company closed a debt offering for gross
proceeds of $175,000 (the Offering). A total of 175,000 units (the
Units) of the Company were issued. Each Unit consisted of $1 principal
amount of notes (the Notes) and 48 common share purchase warrants (the
Warrants) of the Company. The Notes will mature March 1, 2017 and bear interest
at a rate of 10%, accruing and payable semi-annually in arrears on March 1 and
September 1 of each year. Each Warrant entitles the holder thereof to acquire
one common share of the Company at a price of $6.65 for a period of five years,
expiring March 1, 2017.
The Company recognized the long-term debt portion of the Units,
at its fair value of $160,959 less transaction costs of $9,197, in its interim
condensed consolidated statement of financial position. The residual value of
$14,041 less $789 in transaction costs has been attributed to the Warrants. As a
portion of the proceeds from the Offering is attributable to the construction of
the Namoya mine, the Company will capitalize the related portion, 88%, of all
borrowing costs. As at March 31, 2015, the fair value of the long-term debt is
$86,625 (December 31, 2014 - $113,750) which is valued using a market approach.
For the three months ended March 31, 2015, the Company capitalized borrowing
costs of $4,955 (March 31, 2014 $4,819) to Mine under Construction and
recognized $617 (March 31, 2014 - $670) of borrowing costs under finance expense
in its interim condensed consolidated statement of comprehensive income/(loss).
As of March 31, 2015, the Company included accrued interest on the long-term
debt of $1,458 (December 31, 2014 - $5,833) under accrued liabilities in its
interim condensed consolidated statement of financial position.
The Company has complied with its long-term debt covenants as
at March 31, 2015.
|
|
Offering |
|
|
Facility |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
Balance at January 1,
2014 |
|
158,599
|
|
|
- |
|
|
158,599
|
|
|
|
|
|
|
|
|
|
|
|
Debt issued |
|
- |
|
|
35,497 |
|
|
35,497 |
|
Accretion and capitalized interest |
|
4,456 |
|
|
2,369 |
|
|
6,825 |
|
Balance at December 31, 2014 |
|
163,055 |
|
|
37,866 |
|
|
200,921 |
|
|
|
|
|
|
|
|
|
|
|
Accretion and capitalized interest |
|
1,268 |
|
|
1,866 |
|
|
3,134 |
|
Balance at March 31, 2015 |
|
164,323 |
|
|
39,732 |
|
|
204,055 |
|
The table below details the timing of payments for principal
and interest on the long-term debt:
|
|
|
|
|
Payments due by period |
|
|
|
|
|
|
Less than |
|
|
One to three |
|
|
Three to
four |
|
|
After four |
|
|
|
Total |
|
|
one year |
|
|
years |
|
|
years |
|
|
years |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Offering debt |
|
175,000 |
|
|
- |
|
|
175,000 |
|
|
- |
|
|
- |
|
Offering debt interest |
|
35,000 |
|
|
17,500 |
|
|
17,500 |
|
|
- |
|
|
- |
|
Facility debt |
|
37,000 |
|
|
- |
|
|
37,000 |
|
|
- |
|
|
- |
|
Facility debt interest |
|
13,848 |
|
|
5,265 |
|
|
8,583 |
|
|
- |
|
|
- |
|
Page 17 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
The Company may issue preference shares at any time and from
time to time in one or more series with designations, rights, privileges,
restrictions and conditions fixed by the board of directors. The preference
shares of each series shall be ranked on a parity with the preference shares of
every other series and are entitled to priority over the common shares and any
other shares of the Company ranking junior to the preference shares, with
respect to priority in payment of dividends and the return of capital and the
distribution of assets of the Company in the event of liquidation, dissolution
or winding up of the Company.
On April 25, 2013 (the Closing Date), the Company issued
116,000 series A preference shares of the Company at a price of $25 per series A
preference share (Series A Shares) and 1,200,000 preferred shares of a
subsidiary (Subco) of the Company (the Subco Shares) combined with 1,200,000
associated series B preference shares (Series B Shares) of the Company at a
price of $25 per combined Subco Share and Series B Share, for gross aggregate
proceeds of $32,900. Collectively, the Series A Shares and Subco Shares are
referred to as the Preference Shares.
Quarterly preferential cumulative cash dividends will accrue
and, if, as and when declared by the applicable board of directors are payable
on the last day of each of March, June, September and December in each year from
the date of issuance. The amount of dividends that will accrue on the Preference
Shares on any dividend payment date shall be an amount per share equal to the
product obtained by multiplying (i) the Dividend Liquidation Preference (as
defined below) on such dividend payment date by (ii) the quotient obtained by
dividing (A) the Production Schedule Yield (as defined below) on such dividend
payment date by (B) four.
The Dividend Liquidation Preference of a Preference Share on
any dividend payment date means an amount equal to (i) the simple average of the
afternoon London Gold Fix price per troy ounce for each trading day during the
three month period ending on the immediately preceding dividend payment date
multiplied by (ii) 0.017501.
The Production Schedule Yield means for any dividend payment
date the percentage rate appearing under the heading Annual Dividend Yield in
the table below corresponding to the Monthly Production Level for such dividend
payment date (where Monthly Production Level for any dividend payment date
refers to the average monthly production level during the three-month period
ending on the immediately preceding dividend payment date).
Monthly Production |
Annual Dividend |
Level (ounces) |
Yield (%) |
< 8,001 |
10.00 |
8,001 - 9,000 |
10.50 |
9,001 - 10,000 |
11.00 |
10,001 - 11,000 |
11.50 |
11,001 - 12,000 |
12.00 |
12,001 - 13,000 |
12.50 |
13,001 - 14,000 |
13.00 |
14,001 - 15,000 |
13.50 |
15,001 - 16,000 |
14.00 |
16,001 - 17,000 |
14.50 |
> 17,000 |
15.00 |
The Preference Shares are not redeemable at the option of the
Company or Subco, as applicable, until the later of (i) the first date on which
the Company and its subsidiaries have achieved total cumulative gold production
of 800,000 ounces from and including the Closing Date and (ii) the date that is
five years from the Closing Date.
Page 18 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
Commencing on the first day after the date that is five years
from the Closing Date, for so long as the Company and its subsidiaries have
achieved total cumulative gold production that is less than 800,000 ounces from
the Closing Date, each holder of the Preference Shares will have the option at
any time to require the Company or Subco, as applicable, to redeem all or a part
of its Preference Shares.
Commencing on the tenth anniversary of the Closing Date, each
holder of a Preference Share will have the option at any time to require the
Company or Subco, as applicable, to redeem the Preference Shares legally
available for such purpose.
The Series B Shares were issued for a nominal price and are
held by the sole holder of all of the Subco Shares. The terms of the Series B
Shares provide that, in the event that two quarterly dividend payments (whether
or not consecutive) on the Subco Shares or the Series A Shares shall have
accrued and been unpaid, the holders of the Series B Shares will be entitled to
notice of, and to attend, at each annual and special meeting of shareholders or
action by written consent at which directors of the Company will be elected and
will be entitled to a separate class vote, together with the holders of the
Series A Shares and the holders of any other series of shares of the Company
ranking on a parity with such Series B Shares or Series A Shares either as to
dividends or the distribution of assets upon liquidation, dissolution or winding
up and upon which like voting rights have been conferred and are exercisable to
elect two members to the board of directors of the Company (each a "Preferred
Holder Director") until dividends on the Subco Shares or Series A Shares have
been paid in full or declared and set apart in trust for payment (whereupon such
right shall cease unless and until another quarterly dividend payment on the
Subco Shares or Series A Shares shall have accrued and been unpaid).
The Company has classified the Preference Shares as financial
instruments measured at fair value through profit or loss for reporting purposes
given that the shares contain an embedded derivative since they may possibly be
redeemed at the option of the holder at a future date at a value based on future
circumstances. The Preference Shares are revalued at each reporting date, with a
gain or loss reported in the Companys interim condensed consolidated statement
of comprehensive income/(loss). On issuance, the Company recognized the
Preference Shares at their fair value of $32,900 in its interim condensed
consolidated statement of financial position. As at March 31, 2015, the Company
has recognized the Preference Shares at their fair value of $33,120 (December
31, 2014 - $32,626). For the three months ended March 31, 2015, a loss of $395
was recorded in the statement of comprehensive income/(loss) for the change in
fair value of the derivative financial liability (March 31, 2014 loss of
$1,877). The fair value of the Preference Shares was obtained by using a market
approach. On December 31, 2014 and March 31, 2015, the Company and Subco elected
not to declare a dividend on the Preference Shares. As at March 31, 2015,
accrued dividends of $849 was included in the Preference Shares balance
(December 31, 2014 - $1,590). During the three months ended March 31, 2015,
dividends of $750 relating to the three-month period ended September 30, 2014
were declared and paid. For the three months ended March 31, 2015, $142 of
dividends was capitalized to mine under construction (three months ended March
31, 2014 - $nil).
In February 2014, the Company completed a $40,000 financing
through a non-brokered private placement (the "Private Placement") involving the
issuance of preferred shares (collectively, the Private Placement Preferred
Shares) of two of the Company's subsidiaries (Namoya (Barbados) Limited and
Twangiza (Barbados) Limited). The Private Placement Preferred Shares pay an 8%
cumulative preferential cash dividend, payable quarterly, and mature on June 1,
2017. At the option of the holders and at any time before the maturity date, the
holders will be entitled to exchange their Private Placement Preferred Shares
into 63 million common shares of the Company at a strike price of $0.5673 per
common share. A portion of the proceeds from the Private Placement were used
towards the completion of the Namoya Mine; therefore, a portion of the dividends
accrued and paid were capitalized to mine under construction. The first four
dividend payments on the Private Placement Preferred Shares may be deferred by
the Company and accumulated at an annual rate of 10%. The dividend payments due
on September 2, 2014, December 1, 2014 and March 1, 2015 were deferred.
The Company has elected to classify the Private Placement
Preferred Shares as financial instruments measured at fair value through profit
or loss for reporting purposes given that the shares comprise multiple embedded
derivatives. The Private Placement Preferred Shares are revalued at each
reporting date, with a gain or loss reported in the Companys interim condensed
consolidated statement of comprehensive income/(loss). On issuance, the Company
recognized the Private Placement Preferred Shares at their fair value of $40,000
in its interim condensed consolidated statement of financial position. As at
March 31, 2015, the Company has recognized the Private Placement Preferred
Shares at their fair value of $39,084 (December 31, 2014 - $38,490). For the
three months ended March 31, 2015, a gain of $449 was included in the interim
condensed consolidated statement of comprehensive income/(loss) for the change
in fair value of the derivative financial liability (March 31, 2014 loss of
$94). The fair value of the Private Placement Preferred Shares was obtained by
using a market approach. As at March 31, 2015, capitalized dividends of $3,634
were included in the Private Placement Preferred Shares balance of $39,084
(December 31, 2014 capitalized dividends of $2,591). For the three months
ended March 31, 2015, dividends of $342 were capitalized to mine under
construction (March 31, 2014 - $nil) and dividend expense of $701 was reflected in
the interim condensed consolidated statement of comprehensive income/(loss).
Page 19 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
Issued and outstanding preference/preferred shares are as
follows (number of shares in thousands):
|
|
Number of |
|
|
|
|
|
|
Shares |
|
|
Fair Value
|
|
|
|
(in thousands) |
|
|
$ |
|
Series A Preference
Shares |
|
|
|
|
|
|
Balance as at January 1, 2014 |
|
116 |
|
|
2,466 |
|
Accrued cumulative dividends
|
|
- |
|
|
140 |
|
Change in fair value during the year |
|
- |
|
|
271 |
|
Balance as at December 31, 2014 |
|
116 |
|
|
2,877 |
|
Divident payments |
|
- |
|
|
(66 |
) |
Accrued cumulative dividends
|
|
- |
|
|
75
|
|
Change in fair value during the period |
|
- |
|
|
35 |
|
Balance as at March 31, 2015 |
|
116 |
|
|
2,921 |
|
|
|
|
|
|
|
|
Subco Shares* |
|
|
|
|
|
|
Balance as at January 1, 2014 |
|
1,200 |
|
|
25,506 |
|
Accrued cumulative dividends
|
|
- |
|
|
1,450 |
|
Change in fair value during the year |
|
- |
|
|
2,793 |
|
Balance as at December 31, 2014 |
|
1,200 |
|
|
29,749 |
|
Divident payments |
|
- |
|
|
(684 |
) |
Accrued cumulative dividends
|
|
- |
|
|
774 |
|
Change in fair value during the period |
|
- |
|
|
360 |
|
Balance as at March 31, 2015 |
|
1,200 |
|
|
30,199 |
|
|
|
|
|
|
|
|
Namoya Barbados Private
Placement Preferred Shares |
|
|
|
|
|
|
Issued on February 28, 2014 |
|
20 |
|
|
20,000 |
|
Issued as dividends-in-kind
|
|
1 |
|
|
- |
|
Change in fair value during the year |
|
- |
|
|
(755 |
) |
Balance as at December 31, 2014 |
|
21 |
|
|
19,245 |
|
Issued as dividends-in-kind |
|
1 |
|
|
|
|
Change in fair value during the period |
|
- |
|
|
297 |
|
Balance as at March 31, 2015 |
|
22 |
|
|
19,542 |
|
|
|
|
|
|
|
|
Twangiza Barbados Private Placement
Preferred Shares |
|
|
|
|
|
|
Issued on February 28, 2014
|
|
20 |
|
|
20,000 |
|
Issued as dividends-in-kind |
|
1 |
|
|
- |
|
Change in fair value during the year |
|
- |
|
|
(755 |
) |
Balance as at December 31, 2014 |
|
21 |
|
|
19,245 |
|
Issued as dividends-in-kind
|
|
1 |
|
|
- |
|
Change in fair value during the period |
|
- |
|
|
297 |
|
Balance as at March 31, 2015 |
|
22 |
|
|
19,542 |
|
|
|
|
|
|
|
|
Total Balance as at December 31, 2014 |
|
|
|
|
71,116 |
|
Total Balance as at March 31, 2015 |
|
|
|
|
72,204 |
|
*There are another 1,200 series B
preference shares of the Company associated with the Subco Shares.
The authorized share capital of the Company consists of an
unlimited number of common shares and an unlimited number of preference shares,
issuable in series, with no par value. All share, option and warrant amounts are
presented in thousands.
The holders of common shares are entitled to receive notice of
and to attend all meetings of the shareholders of the Company and shall have one
vote for each common share held at all meetings of shareholders of the Company,
except for meetings at which only holders of another specified class or series
of shares are entitled to vote separately as a class or series. Subject to the
prior rights of the holders of the preference shares or any other share ranking senior to the common shares,
the holders of the common shares are entitled to (a) receive any dividend as and
when declared by the board of directors, out of the assets of the Company
properly applicable to payment of dividends, in such amount and in such form as
the board of directors may from time to time determine, and (b) receive the
remaining property of the Company in the event of any liquidation, dissolution
or winding up of the Company.
Page 20 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
The Company may issue preference shares at any time and from
time to time in one or more series with designation, rights, privileges,
restrictions and conditions fixed by the board of directors. The preference
shares of each series are ranked on parity with the preference shares of every
series and are entitled to priority over the common shares and any other shares
of the Company ranking junior to the preference shares, with respect to priority
in payment of dividends and the return of capital and the distribution of assets
of the Company in the event of liquidation, dissolution or winding up of the
Company.
As of March 31, 2015, the Company had 252,101 common shares
issued and outstanding (December 31, 2014 252,101).
|
|
Number of shares |
|
|
|
|
|
|
(in thousands) |
|
|
Amount |
|
Balance as at Jan 1, 2014 |
|
252,101 |
|
$ |
518,615 |
|
|
|
|
|
|
|
|
Balance as at December 31, 2014 |
|
252,101 |
|
$ |
518,615 |
|
|
|
|
|
|
|
|
Balance as at March 31, 2015 |
|
252,101 |
|
$ |
518,615 |
|
|
b) |
Share purchase warrants (in thousands) |
As part of the Offering disclosed in Note 19, the Company
issued to the investors 8,400 Warrants, each of which is exercisable to acquire
one common share of the Company at a price of $6.65 until March 1, 2017. As of
March 31, 2015, the Company had 8,400 Warrants outstanding (December 31, 2014
8,400).
In April 2013, the Company issued 735 broker warrants each of
which is exercisable to acquire one common share of the Company at a price of
Cdn$3.25 until February 24, 2015. As of March 31, 2015, none of these warrants
were outstanding (December 31, 2014 735).
On August 18, 2014, warrants were issued as a part of a debt
facility arranged by the Company (see Note 19). The warrants entitle the holders
thereof to acquire 13.3 million common shares of the Company at a price of
Cdn$0.269 per share for a period of 3 years, expiring August 18, 2017.
|
c) |
Income/(loss) per share |
Income/(loss) per share was calculated on the basis of the
weighted average number of common shares outstanding for the three months ended
March 31, 2015, amounting to 252,101 (three months ended March 31, 2014
252,101) common shares. Diluted income/(loss) per share was calculated using the
treasury stock method. The diluted weighted average number of common shares
outstanding for the three months ended March 31, 2015 is 252,221 common shares
(March 31, 2014 252,101).
The Company has an incentive Stock Option Plan under which
non-transferable options to purchase common shares of the Company may be granted
to directors, officers, employees or service providers of the Company or any of
its subsidiaries. No amounts are paid or payable by the recipient on receipt of
the option, and the exercise of the options granted is not dependent on any
performance-based criteria. In accordance with these programs, options are
exercisable at a price not less than the closing market price of the shares on
the day prior to the grant date.
Options granted typically have a contractual life of five years
from the date of grant. Options granted during 2015 had a vesting schedule of
one-third of the options vesting on the grant date, one-third on the 12 month
anniversary, and the remaining third on the 24 month anniversary.
Page 21 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
The following tables summarize information about stock options
(option numbers in thousands):
For the three months ended March 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the Period |
|
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
Exercise Price Range |
|
Opening |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing |
|
|
|
|
|
Vested & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
remaining |
|
|
|
|
|
Unvested |
|
(Cdn$) |
|
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
|
|
|
Exercisable |
|
|
|
|
|
|
|
|
|
Granted |
|
|
Exercised |
|
|
Forfeiture |
|
|
Expired |
|
|
|
|
|
contractual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
life (years) |
|
|
|
|
|
|
|
0.18 - 0.79 |
|
- |
|
|
9,910 |
|
|
- |
|
|
- |
|
|
|
|
|
9,910 |
|
|
4.81 |
|
|
3,304 |
|
|
6,606 |
|
0.80 - 1.00 |
|
5,690 |
|
|
- |
|
|
- |
|
|
(30 |
) |
|
- |
|
|
5,660 |
|
|
3.91 |
|
|
2,873 |
|
|
2,787 |
|
1.01 - 2.35 |
|
1,935 |
|
|
- |
|
|
- |
|
|
(701 |
) |
|
(277 |
) |
|
957 |
|
|
0.43 |
|
|
957 |
|
|
- |
|
2.36 - 4.75 |
|
7,921 |
|
|
- |
|
|
- |
|
|
(1,085 |
) |
|
- |
|
|
6,836 |
|
|
1.81 |
|
|
6,836 |
|
|
- |
|
|
|
15,546 |
|
|
9,910 |
|
|
- |
|
|
(1,816 |
) |
|
(277 |
) |
|
23,363 |
|
|
3.54 |
|
|
13,970 |
|
|
9,393 |
|
Weighted Average Exercise Price (Cdn$) |
|
2.89 |
|
|
0.20 |
|
|
|
|
|
3.63 |
|
|
2.31 |
|
|
1.68 |
|
|
|
|
|
2.55 |
|
|
0.39 |
|
For the three months ended March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
During the Period
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
Exercise Price Range |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing |
|
|
|
|
|
Vested & |
|
|
|
|
|
|
Opening Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
remaining |
|
|
|
|
|
Unvested |
|
(Cdn$) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
|
|
|
Exercisable |
|
|
|
|
|
|
|
|
|
Granted |
|
|
Exercised |
|
|
Forfeiture |
|
|
Expired |
|
|
|
|
|
contractual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
life (years) |
|
|
|
|
|
|
|
0.80 - 1.00 |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
1.01 - 2.35 |
|
6,651 |
|
|
60 |
|
|
- |
|
|
(180 |
) |
|
(1,740 |
) |
|
4,791 |
|
|
3.19 |
|
|
2,082 |
|
|
2,709 |
|
2.36 - 4.75 |
|
8,985 |
|
|
- |
|
|
- |
|
|
(488 |
) |
|
- |
|
|
8,497 |
|
|
2.82 |
|
|
8,398 |
|
|
99 |
|
|
|
15,636 |
|
|
60 |
|
|
- |
|
|
(668 |
) |
|
(1,740 |
) |
|
13,288 |
|
|
2.94 |
|
|
10,480 |
|
|
2,808 |
|
Weighted Average Exercise Price (Cdn$) |
|
3.26 |
|
|
1.00 |
|
|
|
|
|
3.56 |
|
|
2.15 |
|
|
3.38 |
|
|
|
|
|
3.99 |
|
|
1.12 |
|
The fair value at grant date is determined using a
Black-Scholes option pricing model that takes into account the exercise price
based on the historic share price movement, the term of the stock option, the
expected life based on past experience, the share price at grant date, expected
price volatility of the underlying share based on the historical weekly share
price, the expected dividend yield and the risk free interest rate as per the
Bank of Canada for the term of the stock option.
There were 9,910 stock options granted during the three months
ended March 31, 2015. The assessed fair value, using the Black-Scholes option
pricing model, of stock options granted during the three months ended March 31,
2015 was a weighted average Cdn$0.20 per stock option.
The model inputs for stock options granted during the three
months ended March 31, 2015 and year ended December 31, 2014:
Year ended |
|
March 31, 2015 |
|
|
December 31, 2014 |
|
Risk free interest rate |
|
0.46 - 1.00% |
|
|
1.05 - 1.10% |
|
Expected life |
|
3 years |
|
|
3 years |
|
Annualized volatility |
|
85.64 - 85.87% |
|
|
75.99 - 76.27% |
|
Dividend yield |
|
0.00% |
|
|
0.00% |
|
Forfeiture rate |
|
2.00% |
|
|
2.00% |
|
Grant date fair
value |
$ |
0.09
- $0.11 |
|
$ |
0.16
- $0.27 |
|
During the three months ended March 31, 2015, the Company
recognized in the interim condensed consolidated statement of comprehensive
income/(loss) an expense of $403 (March 31, 2014 $61) representing the fair
value at the date of grant of stock options previously granted to employees, directors and officers under the Companys Stock
Option Plan. In addition, an amount of $106 for the three months ended March 31,
2015, respectively, (March 31, 2014 $63) related to stock options issued to
employees of the Companys subsidiaries in the Congo was capitalized to the
exploration and evaluation asset and to mine under construction.
Page 22 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
These amounts were credited accordingly to contributed surplus
in the interim condensed consolidated statements of financial position.
|
b) |
Share Appreciation Rights Plan |
In June 2013, the Company established an incentive Share
Appreciation Rights (SARs) Plan under which non-transferable cash-settled SARs
may be granted to directors, officers, or employees of the Company or any of its
subsidiaries. No amounts are paid or payable by the recipient on receipt of the
SAR, and the exercise of the SARs granted is not dependent on any
performance-based criteria.
Under this SARs Plan, all of the SARs granted to date vest on
the 12 month anniversary of their grant date. SARs granted to date have a
contractual life of two years from the date of grant.
The following tables summarize information about SARs (number
of SARS in thousands)-:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
During the Period
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
Exercise Price Range |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing |
|
|
|
|
|
Vested & |
|
|
|
|
|
|
Opening Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
remaining |
|
|
|
|
|
Unvested |
|
(Cdn$) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
|
|
|
Exercisable |
|
|
|
|
|
|
|
|
|
Granted |
|
|
Exercised |
|
|
Forfeiture |
|
|
Expired |
|
|
|
|
|
contractual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
life (years) |
|
|
|
|
|
|
|
$2.30 |
|
500 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
500 |
|
|
0.20 |
|
|
500 |
|
|
- |
|
|
|
500 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
500 |
|
|
0.20 |
|
|
500 |
|
|
- |
|
Weighted Average Exercise Price (Cdn$) |
|
2.30 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2.30 |
|
|
- |
|
|
2.30 |
|
|
- |
|
The model inputs and grant date fair value for SARs outstanding
as at March 31, 2015 included:
Risk free interest rate |
|
1.09% |
|
Expected life |
|
1 year |
|
Annualized
volatility |
|
69.61% |
|
Dividend yield |
|
0.00% |
|
Forfeiture rate
|
|
2.00% |
|
Grant date fair value |
|
0.1880 |
|
The fair value at grant date and at each reporting date is
determined using a Black-Scholes option pricing model. The expected price
volatility is based on the historic volatility (based on the remaining life of
the SARs), adjusted for any expected changes to future volatility due to
publicly available information.
During the three months ended March 31, 2015, the Company
recognized in the interim condensed consolidated statement of comprehensive
income/(loss) a change in fair value of $nil, (March 31, 2014 - $3) representing
the fair value at the date of grant of SARs, less changes in fair value,
previously granted under the Companys SARs Plan.
23. |
COMMITMENTS AND CONTINGENCIES |
The Company has entered into a number of leases for buildings
with renewal terms whereby the lease agreements can be extended based on market
prices at the time of renewal. There are no restrictions placed upon the lessee
by entering into these leases.
The Company's future minimum operating lease commitments for
office premises as at March 31, 2015 are as follows:
Page 23 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
2015 |
$ |
609 |
|
2016 |
|
615 |
|
2017 |
|
436 |
|
|
$ |
1,660 |
|
The Company is committed to the payment of surface fees and
taxes on its 14 exploration permits. The surface fees and taxes are required to
be paid annually under the Congo Mining Code in order to keep exploration
permits in good standing.
In addition to the above matters, the Company and its
subsidiaries are also subject to routine legal proceedings and tax audits. The
Company does not believe that the outcome of any of these matters, individually
or in aggregate, would have a material effect on its consolidated income/(loss),
cash flow or financial position.
24. |
RELATED PARTY TRANSACTIONS |
Balances and transactions between the Company and its
subsidiaries, which are related parties of the Company, have been eliminated on
consolidation, and are not disclosed in this note.
|
a) |
Key Management Remuneration |
The Companys related parties include key management. Key
management includes directors (executive and non-executive), the Chief Executive
Officer (CEO), the Chief Financial Officer, and the Vice Presidents reporting
directly to the CEO. The remuneration of the key management of the Company as
defined above, during the three months ended March 31, 2015 and 2014 was as
follows:
|
|
Three months ended |
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Short-term employee benefits
|
|
1,170 |
|
|
647 |
|
Other benefits |
|
20 |
|
|
16 |
|
Employee retention allowance
|
|
63
|
|
|
46
|
|
Settlement |
|
- |
|
|
2,325 |
|
|
|
1,253 |
|
|
3,034 |
|
As of March 31, 2015, the Company had an outstanding balance of
$1,292 owed as a part of the 2013 settlement with the former CEO. It is payable
in monthly installments expiring in the second quarter of 2016.
During the three months ended March 31, 2015, directors fees of
$58 (three months ended March 31, 2014 - $92) were incurred for non-executive
directors of the Company. As of March 31, 2015, $81 was included in accrued
liabilities as a payable to three directors (December 31, 2014 - $86).
The Company has three reportable segments: mining operations,
mineral exploration, and the development of precious metal projects in the
Congo. The operations of the Company are located in two geographic locations:
Canada and the Congo. The Companys corporate head office is located in Canada
and is not an operating segment. All of the Companys operating revenues are
earned from production in the Congo and its mining, exploration and development
projects are located in the Congo. All of the Companys revenues from the sale
of gold bullion in the Congo are to a single customer.
Page 24 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
For
the three months ended |
|
Mining |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015 |
|
Operations |
|
|
Exploration |
|
|
Development |
|
|
Corporate |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Operating revenue |
|
41,003 |
|
|
- |
|
|
- |
|
|
- |
|
|
41,003 |
|
Total mine operating expenses |
|
(24,281 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(24,281 |
) |
Gross earnings from
operations |
|
16,722 |
|
|
- |
|
|
- |
|
|
- |
|
|
16,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
(1,133 |
) |
|
- |
|
|
- |
|
|
(1,654 |
) |
|
(2,787 |
) |
Share-based payments |
|
(60 |
) |
|
- |
|
|
- |
|
|
(343 |
) |
|
(403 |
) |
Other charges and provisions |
|
(464 |
) |
|
- |
|
|
- |
|
|
(280 |
) |
|
(744 |
) |
Net income/(loss) from operations |
|
15,065 |
|
|
- |
|
|
- |
|
|
(2,277 |
) |
|
12,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
(492 |
) |
|
- |
|
|
(98 |
) |
|
(5,465 |
) |
|
(6,055 |
) |
Foreign exchange (loss)/gain
|
|
(17 |
) |
|
- |
|
|
- |
|
|
63 |
|
|
46 |
|
Interest income |
|
- |
|
|
- |
|
|
- |
|
|
1 |
|
|
1 |
|
Net income/(loss) |
|
14,556 |
|
|
- |
|
|
(98 |
) |
|
(7,678 |
) |
|
6,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross capital expenditures |
|
1,825 |
|
|
2,208 |
|
|
28,352 |
|
|
- |
|
|
32,385 |
|
For the three
months ended |
|
Mining |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2014 |
|
Operations |
|
|
Exploration |
|
|
Development |
|
|
Corporate |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Operating revenue |
|
30,439 |
|
|
- |
|
|
- |
|
|
- |
|
|
30,439 |
|
Total mine
operating expenses |
|
(24,398 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(24,398 |
)
|
Gross earnings from operations |
|
6,041 |
|
|
- |
|
|
- |
|
|
- |
|
|
6,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
(21 |
) |
|
- |
|
|
- |
|
|
(1,445 |
) |
|
(1,466 |
) |
Share-based payments |
|
48 |
|
|
- |
|
|
- |
|
|
(109 |
) |
|
(61 |
) |
Other charges and provisions |
|
- |
|
|
- |
|
|
- |
|
|
(1,903 |
) |
|
(1,903 |
) |
Net income/(loss) from operations |
|
6,068 |
|
|
- |
|
|
- |
|
|
(3,457 |
) |
|
2,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
(1,072 |
) |
|
|
|
|
- |
|
|
(2,253 |
) |
|
(3,325 |
) |
Foreign exchange gain |
|
- |
|
|
- |
|
|
- |
|
|
8 |
|
|
8 |
|
Interest income
|
|
- |
|
|
- |
|
|
- |
|
|
2 |
|
|
2 |
|
Net income/(loss) |
|
4,996 |
|
|
- |
|
|
- |
|
|
(5,700 |
) |
|
(704 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross capital expenditures |
|
3,349 |
|
|
4,600 |
|
|
21,751 |
|
|
13 |
|
|
29,713 |
|
Certain items from the Companys statements of financial
position are as follows:
Page 25 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
March 31, 2015
|
|
Mining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations |
|
|
Exploration |
|
|
Development |
|
|
Corporate |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Total non-current assets |
|
276,605 |
|
|
132,603 |
|
|
446,122 |
|
|
423 |
|
|
855,753 |
|
Total assets |
|
313,353 |
|
|
134,022 |
|
|
454,496 |
|
|
1,618 |
|
|
903,489 |
|
Provision for closure and reclamation |
|
(3,720 |
) |
|
- |
|
|
(4,221 |
) |
|
- |
|
|
(7,941 |
) |
Long-term debt |
|
- |
|
|
- |
|
|
- |
|
|
(204,055 |
) |
|
(204,055 |
) |
December 31,
2014 |
|
Mining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations |
|
|
Exploration |
|
|
Development |
|
|
Corporate |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Total non-current assets |
|
281,278 |
|
|
130,464 |
|
|
431,167 |
|
|
1,253 |
|
|
844,162 |
|
Total assets |
|
315,599 |
|
|
131,313 |
|
|
438,241 |
|
|
2,329 |
|
|
887,482 |
|
Provision for closure and reclamation |
|
(3,633 |
) |
|
- |
|
|
(4,122 |
) |
|
- |
|
|
(7,755 |
) |
Long-term debt |
|
- |
|
|
- |
|
|
- |
|
|
(200,921 |
) |
|
(200,921 |
) |
Long-term portion of bank loans |
|
- |
|
|
- |
|
|
(3,869 |
) |
|
- |
|
|
(3,869 |
) |
Page 26 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
Geographic segmentation of non-current assets is as follows:
March 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and |
|
|
Mine Under |
|
|
Exploration and |
|
|
Long-term |
|
|
Inventory |
|
|
|
|
|
|
Equipment |
|
|
Construction |
|
|
Evaluation |
|
|
Investment |
|
|
|
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Congo |
|
288,267 |
|
|
430,718 |
|
|
132,167 |
|
|
- |
|
|
4,178 |
|
|
855,330 |
|
Canada |
|
167 |
|
|
- |
|
|
- |
|
|
256 |
|
|
- |
|
|
423 |
|
|
|
288,434 |
|
|
430,718 |
|
|
132,167 |
|
|
256 |
|
|
4,178 |
|
|
855,753 |
|
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and |
|
|
Mine Under |
|
|
Exploration and |
|
|
Long-term |
|
|
Inventory |
|
|
|
|
|
|
Equipment |
|
|
Construction |
|
|
Evaluation |
|
|
Investment |
|
|
|
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Congo |
|
294,818 |
|
|
414,258 |
|
|
129,959 |
|
|
- |
|
|
3,874 |
|
|
842,909 |
|
Canada |
|
192 |
|
|
- |
|
|
- |
|
|
1,061 |
|
|
- |
|
|
1,253 |
|
|
|
295,010 |
|
|
414,258 |
|
|
129,959 |
|
|
1,061 |
|
|
3,874 |
|
|
844,162 |
|
Production costs for the Companys Twangiza Mine for the three
months ended March 31, 2015 and 2014 are as follows:
|
|
For the three months ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Raw materials and consumables
|
|
(9,311 |
) |
|
(8,309 |
) |
Salaries |
|
(4,011 |
) |
|
(3,496 |
) |
Contractors |
|
(2,948 |
) |
|
(3,178 |
) |
Other overhead |
|
(2,867 |
) |
|
(2,267 |
) |
Inventory adjustments |
|
1,242 |
|
|
(2,757 |
) |
|
|
(17,895 |
) |
|
(20,007 |
) |
27. |
GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
For the three months ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
$ |
|
|
$ |
|
Salaries and employee
benefits |
|
(858 |
) |
|
(727 |
) |
Consulting, management, and professional fees
|
|
(188 |
) |
|
(124 |
) |
Office and sundry |
|
(519 |
) |
|
(395 |
) |
Congo corporate office |
|
(960 |
) |
|
- |
|
Depreciation |
|
(24 |
) |
|
(14 |
) |
Other |
|
(238 |
) |
|
(206 |
) |
|
|
(2,787 |
) |
|
(1,466 |
) |
Page 27 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
|
|
|
|
|
For the three months ended |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
Note |
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
$ |
|
|
$ |
|
Dividends on Preference
Shares |
|
20 |
|
|
(707 |
) |
|
(737 |
) |
Dividends on Private Placement Preferred
Shares |
|
20 |
|
|
(701 |
) |
|
- |
|
Transaction costs |
|
19, 20 |
|
|
(1,297 |
) |
|
(904 |
) |
Interest and bank charges |
|
|
|
|
(3,164 |
) |
|
(1,611 |
) |
Accretion |
|
18 |
|
|
(186 |
) |
|
(73 |
) |
|
|
|
|
|
(6,055 |
) |
|
(3,325 |
) |
29. |
OTHER CHARGES AND PROVISIONS, NET
|
|
|
For the three months ended |
|
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
$ |
|
|
$ |
|
Loss on change in fair value
of financial instruments |
|
(744 |
) |
|
(1,886 |
) |
Share of loss from investment in associate |
|
- |
|
|
(17 |
) |
|
|
(744 |
) |
|
(1,903 |
) |
In March 2014, the Company purchased 54,000 European put
options (the Put Options) with a strike price of $1,200 per ounce of gold with
six monthly expiries starting from March 31, 2014 through to August 31, 2014.
The Company classified the Put Options as financial assets at fair value through
profit or loss for reporting purposes given that the Put Options are a
derivative financial instrument as their value corresponds to the price of gold.
On issuance, the Company recognized the Put Options at their fair value of $701
in its interim condensed consolidated statement of financial position. For the
three months ended March 31, 2014, a gain of $85 was included in the interim
condensed consolidated statement of comprehensive income/(loss) for the change
in fair value of the derivative financial instruments. The fair value of the Put
Options was obtained by using a quoted market price. All of the Put Options
expired unexercised during the year ended December 31, 2014.
31. |
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
|
a) |
Fair value of financial assets and liabilities
|
The interim condensed consolidated
statements of financial position carrying amounts for cash and cash equivalents,
trade and other receivables, bank loans, and trade and other payables
approximate fair value due to their short-term nature.
Fair value hierarchy
The following provides a description of
financial instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which the fair
value is observable:
|
|
Level 1 fair value measurements are those
derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities; |
|
|
|
|
|
Level 2 fair value measurements are those derived from
inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and |
Page 28 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
|
|
Level 3 fair value measurements are those
derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable
inputs). |
The fair values of financial assets and
liabilities carried at amortized cost (excluding the Offering) are approximated
by their carrying values.
The following table provides
information about financial assets and liabilities measured at fair value in the
statement of financial position and categorized by level according to the
significance of the inputs used in making the measurements:
|
|
|
|
|
|
March 31, 2015 |
|
|
|
|
|
|
|
Quoted prices in active
|
|
|
Significant other
observable |
|
|
Significant other |
|
|
|
|
markets for identical
assets |
|
|
inputs |
|
|
unobservable inputs |
|
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
Long-term investment |
|
256 |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
Derivative instruments -
mark-to-market |
|
- |
|
|
22,877 |
|
|
- |
|
|
Preference Shares |
|
- |
|
|
33,120 |
|
|
- |
|
|
Private Placement Preferred Shares |
|
- |
|
|
39,084 |
|
|
- |
|
|
|
|
|
|
|
December 31, 2014 |
|
|
|
|
|
|
|
Quoted prices in active
|
|
|
Significant other
observable |
|
|
Significant other |
|
|
|
|
markets for identical
assets |
|
|
inputs |
|
|
unobservable inputs |
|
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
Long-term investment |
|
1,061 |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
Derivative instruments -
mark-to-market |
|
- |
|
|
1,393 |
|
|
- |
|
|
Preference Shares |
|
- |
|
|
32,626 |
|
|
- |
|
|
Private Placement Preferred Shares |
|
- |
|
|
38,490 |
|
|
- |
|
b) |
Risk Management Policies |
The Company is sensitive to changes in
commodity prices and foreign-exchange. The Companys Board of Directors has
overall responsibility for the establishment and oversight of the Companys risk
management framework. Although the Company has the ability to address its
price-related exposures through the use of options, futures and forward
contracts, it currently does not typically enter into such arrangements.
Foreign currency risk is the risk that
a variation in exchange rates between the United States dollar and Canadian
dollar or other foreign currencies will affect the Companys operations and
financial results. A portion of the Companys transactions are denominated in
Canadian dollars, Congolese francs, South African rand, British pounds,
Australian dollars and European Euros. The Company is also exposed to the impact
of currency fluctuations on its monetary assets and liabilities. Significant
foreign exchange gains or losses are reflected as a separate component of the
interim condensed consolidated statement of comprehensive income/(loss). The
Company does not use derivative instruments to reduce its exposure to foreign
currency risk.
The following table indicates the
impact of foreign currency exchange risk on net working capital as at March 31,
2015. The table below also provides a sensitivity analysis of a 10 percent
strengthening of the US dollar against foreign currencies as identified which
would have increased (decreased) the Companys net income/(loss) by
the amounts shown in the table below. A 10 percent weakening of the US dollar
against the same foreign currencies would have had the equal but opposite effect
as at March 31, 2015.
Page 29 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
|
|
|
Canadian |
|
|
South African |
|
|
Congolese |
|
|
British |
|
|
Australian |
|
|
European |
|
|
|
|
Dollar |
|
|
Rand |
|
|
Franc |
|
|
Pound |
|
|
Dollar |
|
|
Euro |
|
|
|
|
CDN$ |
|
|
ZAR |
|
|
CDF |
|
|
£ |
|
|
AUD |
|
|
EUR |
|
|
Cash and cash equivalents |
|
(18 |
) |
|
3,627 |
|
|
88,863 |
|
|
- |
|
|
- |
|
|
- |
|
|
Short-term investments |
|
272 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Prepaid expenses |
|
205 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Accounts payable |
|
(7,255 |
) |
|
(77,216 |
) |
|
(512,779 |
) |
|
(419 |
) |
|
(184 |
) |
|
(536 |
) |
|
Retention allowance |
|
(1,013 |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Total foreign currency financial
assets and liabilities |
|
(7,809 |
) |
|
(73,589 |
) |
|
(423,916 |
) |
|
(419 |
) |
|
(184 |
) |
|
(536 |
) |
|
Foreign exchange rate at March 31, 2015 |
|
0.7895 |
|
|
0.0827 |
|
|
0.0011 |
|
|
1.4834 |
|
|
0.7689 |
|
|
1.0850 |
|
|
Total foreign currency financial assets and
liabilities in US $ |
|
(6,165 |
) |
|
(6,086 |
) |
|
(466 |
) |
|
(622 |
) |
|
(141 |
) |
|
(582 |
) |
|
Impact of a 10% variance of the US $ on net
income |
|
(617 |
) |
|
(609 |
) |
|
(47 |
) |
|
(62 |
) |
|
(14 |
) |
|
(58 |
) |
Credit risk is the risk that a third
party might fail to fulfill its performance obligations under the terms of a
financial instrument. Financial instruments, which are potentially subject to
credit risk for the Company, consist primarily of cash and cash equivalents and
trade and other receivables. Cash and cash equivalents are maintained with
several financial institutions of reputable credit and may be redeemed upon
demand. Cash and cash equivalents are held in Canada and the Congo. The sale of
goods exposes the Company to the risk of non-payment by customers. The Company
manages this risk by monitoring the creditworthiness of its customers. It is
therefore the Companys opinion that such credit risk is subject to normal
industry risks and is considered minimal.
The Company limits its exposure to
credit risk on investments by investing only in securities rated R1 (the highest
rating) by credit rating agencies such as the DBRS (Dominion Bond Rating
Service). Management continuously monitors the fair value of its investments to
determine potential credit exposures. Short-term excess cash is invested in R1
rated investments including money market funds, bankers acceptances and other
highly rated short-term investment instruments. Any credit risk exposure on cash
balances is considered negligible as the Company places deposits only with major
established banks in the countries in which it carries on operations. The
Company does not have any short-term investments.
The carrying amount of financial assets
represents the maximum credit exposure. The Companys gross credit exposure at
March 31, 2015 and December 31, 2014 is as follows:
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
$ |
|
|
$ |
|
|
Cash and cash equivalents |
|
3,024 |
|
|
1,002 |
|
|
Trade and other receivables |
|
6,643 |
|
|
7,261 |
|
|
|
|
9,667 |
|
|
8,263 |
|
Page 30 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
Liquidity risk is the risk that the
Company will not be able to meet its financial obligations as they become due.
The Company attempts to ensure that there is sufficient cash to meet its
liabilities when they are due and manages this risk by regularly evaluating its
liquid financial resources to fund current and long-term obligations and to meet
its capital commitments in a cost-effective manner. Temporary surplus funds of
the Company are invested in short-term investments. The Company arranges the
portfolio so that securities mature approximately when funds are needed. The key
to success in managing liquidity is the degree of certainty in the cash flow
projections. If future cash flows are fairly uncertain, the liquidity risk
increases. The Companys liquidity requirements are met through a variety of
sources, including cash and cash equivalents, existing credit facilities and
capital markets. Should the Company experience further production shortfalls at
Twangiza, delays in ramp up at Namoya, equipment breakdowns, or delays in
completion schedules, or should the price of gold decrease further, the Company
may need to further examine funding options. The Company has the following
financial obligations, excluding preferred shares classified as financial
liabilities:
|
March 31, 2015 |
|
|
|
|
Payments due by period |
|
|
|
|
Total |
|
|
Less than one year |
|
|
One to three years |
|
|
Three to four years |
|
|
After four years |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Trade and other payables |
|
75,238 |
|
|
75,238 |
|
|
- |
|
|
- |
|
|
- |
|
|
Long-term debt, including interest |
|
260,848 |
|
|
22,765 |
|
|
238,083 |
|
|
- |
|
|
- |
|
|
Bank loans |
|
18,628 |
|
|
18,628 |
|
|
- |
|
|
- |
|
|
- |
|
|
Derivative instruments |
|
22,877 |
|
|
9,310 |
|
|
13,567 |
|
|
- |
|
|
- |
|
|
December 31, 2014 |
|
|
|
|
Payments due by period |
|
|
|
|
Total |
|
|
Less than one year |
|
|
One to three years |
|
|
Three to four years |
|
|
After four years |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Trade and other payables |
|
86,396 |
|
|
86,396 |
|
|
- |
|
|
- |
|
|
- |
|
|
Long-term debt, including interest |
|
269,598 |
|
|
20,464 |
|
|
249,134 |
|
|
- |
|
|
- |
|
|
Bank loans |
|
20,992 |
|
|
17,123 |
|
|
3,869 |
|
|
- |
|
|
- |
|
|
Derivative instruments |
|
1,393 |
|
|
1,393 |
|
|
- |
|
|
- |
|
|
- |
|
|
Deferred revenue |
|
3,000 |
|
|
3,000 |
|
|
- |
|
|
- |
|
|
- |
|
The Companys operations in the Congo
are exposed to various levels of political risk and uncertainties, including
political and economic instability, government regulations relating to
exploration and mining, military repression and civil disorder, all or any of
which may have a material adverse impact on the Companys activities or may
result in impairment or loss of part or all of the Company's assets. In recent
years, the Congo has experienced two wars and significant political unrest.
Operating in the Congo may make it more difficult for the Company to obtain any
required financing because of the perceived investment risk.
Market risk is the potential for
financial loss from adverse changes in underlying market factors, including
foreign-exchange rates, commodity prices, interest rate and share based payment
costs.
The price of gold has fluctuated
widely. The future direction of the price of gold will depend on numerous
factors beyond the Company's control including international, economic and
political trends, expectations of inflation, currency exchange fluctuations,
interest rates, global or regional consumption patterns, speculative activities
and increased production due to new extraction developments and improved
extraction and production methods. The effect of these factors on the price of
gold, and therefore on the economic viability of the Company's properties,
cannot accurately be predicted. To date the Company has not adopted specific
strategies for controlling the impact of fluctuations in the price of gold. The
following table demonstrates the impact of a 10% weakening in the spot price of
gold:
Page 31 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
|
|
|
Three months ended |
|
|
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
Net income |
|
6,780 |
|
|
(704 |
)
|
|
Impact of a 10% weakening of the spot price of gold |
|
(4,100 |
) |
|
(3,044 |
) |
|
Net income/(loss) after impact |
|
2,680 |
|
|
(3,748 |
) |
Title to mineral properties involves
certain inherent risks due to the difficulties of determining the validity of
certain claims as well as the potential for problems arising from the frequently
ambiguous conveyancing history characteristic of many mining properties.
Although the Company has investigated title to all of its mineral properties for
which it holds concessions or other mineral licenses, the Company cannot give
any assurance that title to such properties will not be challenged or impugned
and cannot be certain that it will have valid title to its mineral properties.
The Company relies on title opinions by legal counsel who base such opinions on
the laws of countries in which the Company operates.
The Company manages its bank overdraft,
net of cash, bank loans, preference shares, long-term debt, common shares,
warrants and stock options as capital. The Companys policy is to maintain a
sufficient capital base in order to meet its short term obligations and at the
same time preserve investors confidence required to sustain future development
of the business.
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
$ |
|
|
$ |
|
|
Bank overdraft, net of cash
|
|
(651 |
)
|
|
2,651 |
|
|
Short-term bank loans |
|
18,628 |
|
|
17,123 |
|
|
Long-term bank loans |
|
-
|
|
|
3,869 |
|
|
Preference shares |
|
72,204 |
|
|
71,116 |
|
|
Long term debt |
|
204,055 |
|
|
200,921 |
|
|
Share capital |
|
518,615 |
|
|
518,615 |
|
|
Warrants |
|
13,356 |
|
|
13,356 |
|
|
Contributed surplus |
|
43,035 |
|
|
42,526 |
|
|
Deficit |
|
(75,593 |
) |
|
(82,373 |
) |
|
|
|
793,649 |
|
|
787,804 |
|
Page 32 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
a) |
Operating Cash Flows Working Capital Adjustments
|
|
|
|
For the three months ended |
|
|
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
$ |
|
|
$ |
|
|
Trade and other receivables
|
|
590 |
|
|
(488 |
)
|
|
Prepaid expenses and deposits |
|
(3,379 |
) |
|
1,907 |
|
|
Inventories |
|
409 |
|
|
4,219 |
|
|
Trade and other payables |
|
(6,304 |
) |
|
(4,862 |
) |
|
Employee retention allowance
|
|
(58 |
) |
|
(53 |
)
|
|
Derivative instruments - mark-to-market |
|
590 |
|
|
- |
|
|
|
|
(8,152 |
) |
|
723 |
|
b) |
Investing Cash Flows Non-Cash Additions |
|
|
|
|
|
|
For the three months ended |
|
|
|
|
Notes |
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Exploration and
evaluation |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
10 |
|
|
173 |
|
|
222 |
|
|
Share-based
payments |
|
22
|
|
|
83
|
|
|
38
|
|
|
Employee retention allowance |
|
16 |
|
|
29 |
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mine under construction |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
10
|
|
|
1,881 |
|
|
1,866 |
|
|
Share-based payments |
|
22 |
|
|
23 |
|
|
25 |
|
|
Employee
retention allowance |
|
16
|
|
|
93
|
|
|
56
|
|
|
Accrued interest |
|
15 |
|
|
1,892 |
|
|
2,425 |
|
Page 33 of 34
Banro Corporation |
NOTES TO THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
As at and for the three months ended March 31, 2015
|
(Expressed in
thousands of U.S. dollars, except per share amounts) (unaudited)
|
c) |
Financing Cash Flows Issuance Proceeds and Costs
|
|
|
|
For the three months ended |
|
|
Gross proceeds |
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
$ |
|
|
$ |
|
|
Derivative instruments |
|
20,000 |
|
|
-
|
|
|
Preference shares |
|
- |
|
|
40,000 |
|
|
|
|
20,000 |
|
|
40,000 |
|
|
|
|
For the three months ended |
|
|
Issuance costs |
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
$ |
|
|
$ |
|
|
Derivative instruments |
|
300 |
|
|
-
|
|
|
Preference shares |
|
- |
|
|
904 |
|
|
|
|
300 |
|
|
904 |
|
33. |
EVENTS AFTER THE REPORTING PERIOD |
In April 2015, the Company closed the $70 million balance of
its previously announced financings, such balance involving a second gold
forward sale transaction relating to the Twangiza mine and a gold streaming
transaction relating to the Namoya mine. The forward sale transaction provides
for the prepayment by the purchaser of $20 million for its purchase of 22,248
ounces of gold from the Twangiza mine, with the gold deliverable over three
years, at 618 ounces per month. The forward sale may be terminated at any time
upon payment to the purchaser of a one-time termination amount that would result
in the purchaser receiving an internal rate of return of 20%. The terms of the
forward sale also include a gold floor price mechanism whereby, if the gold
price falls below $1,100 per ounce in any month, additional ounces are
deliverable to ensure a realized gold price of $1,100 per ounce for that month.
The gold streaming transaction provides for the payment by the purchaser of a
deposit of $50 million for the delivery to the purchaser of 8.33% of the
life-of-mine gold production from the Namoya mine (or any other projects located
within 20 kilometres from the current Namoya gold mine). The ongoing payments to
Namoya upon delivery of the gold are $150 per ounce.
Page 34 of 34
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
FOR THE FIRST QUARTER OF 2015
|
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
The following managements discussion and analysis
("MD&A"), which is dated as of May 13, 2015, provides a review of the
activities, results of operations and financial condition of Banro Corporation
(Banro or the "Company") as at and for the three-month period
ended March 31, 2015 as well as an outlook for the Company based on a defined
strategy. This MD&A should be read in conjunction with the unaudited interim
condensed consolidated financial statements of the Company as at and for the
three-month period ended March 31, 2015 (the Interim Financial
Statements) together with the MD&A and audited consolidated financial
statements of the Company as at and for the year ended December 31, 2014 (the
Annual Financial Statements). All dollar amounts in this MD&A are
expressed in thousands of dollars and, unless otherwise specified, in United
States dollars (the Companys financial statements are prepared in United States
dollars). All share, share option and warrant amounts (except per share amounts)
are presented in thousands. Additional information relating to the Company,
including the Company's annual report on Form 20-F dated April 6, 2015, is
available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
FORWARD-LOOKING STATEMENTS
The following MD&A contains forward-looking statements. All
statements, other than statements of historical fact, that address activities,
events or developments that the Company believes, expects or anticipates will or
may occur in the future (including, without limitation, statements regarding
estimates and/or assumptions in respect of costs, cash flows, future gold
production (including the timing thereof), Mineral Resource and Mineral Reserve
estimates, potential mineralization, exploration results and future plans
and objectives of the Company) are forward-looking statements. These
forward-looking statements reflect the current expectations or beliefs of the
Company based on information currently available to the Company. Forward-looking
statements are subject to a number of risks and uncertainties that may cause the
actual results of the Company to differ materially from those discussed in the
forward-looking statements, and even if such actual results are realized or
substantially realized, there can be no assurance that they will have the
expected consequences to, or effects on the Company. Factors that could cause
actual results or events to differ materially from current expectations include,
among other things, uncertainty of estimates of capital and operating costs,
production estimates and estimated economic return, the possibility that actual
circumstances will differ from the estimates and assumptions used in the
economic studies of the Company's projects, failure to establish estimated
Mineral Resources or Mineral Reserves (the Company's Mineral Resource and
Mineral Reserve figures are estimates and no assurances can be given that the
indicated levels of gold will be produced), the possibility that future
exploration results will not be consistent with the Company's expectations,
changes in world gold markets and equity markets, political developments in the
Democratic Republic of the Congo (the "DRC"), uncertainties relating to
the availability and costs of financing needed in the future, fluctuations in
currency exchange rates, inflation, changes to regulations affecting the
Company's activities, the uncertainties involved in interpreting drilling
results and other geological data and the other risks disclosed under the
heading Risk Factors and elsewhere in the Companys annual report on Form 20-F
dated April 6, 2015 filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Any forward-looking statement speaks only as of the date on which it is made
and, except as may be required by applicable securities laws, the Company
disclaims any intent or obligation to update any forward-looking statement,
whether as a result of new information, future events or results or otherwise.
Although the Company believes that the assumptions inherent in the
forward-looking statements are reasonable, forward-looking statements are not
guarantees of future performance and accordingly undue reliance should not be
put on such statements due to the inherent uncertainty therein.
Page 2 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
CONTENT
Page 3 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
CORE BUSINESS
Banro is a Canadian gold mining company focused on production
from the Twangiza mine, which began commercial production on September 1, 2012,
and the commissioning of and production from its second gold mine at Namoya
located approximately 200 kilometres southwest of the Twangiza gold mine. The
Companys longer term objectives include the development of two additional
major, wholly-owned gold projects, Lugushwa and Kamituga. The four projects,
each of which has a mining license, are located along the 210 kilometre long
Twangiza-Namoya gold belt in the South Kivu and Maniema provinces of the DRC.
The Company also undertakes exploration activities at its DRC properties with
the objective of delineating additional oxide and free-milling mineral
resources. As well, the Companys DRC subsidiary, Banro Congo Mining SA, holds
title to 14 exploration permits covering ground located between and contiguous
to the Companys Twangiza, Kamituga and Lugushwa properties, covering an area of
2,638 square kilometers.
Led by a proven management team with extensive gold and African
experience, the initial focus of the Company is on the mining of gold from oxide
and free-milling material, which has a low capital intensity to develop but also
attracts a lower technical and financial risk to the Company. All business
activities are followed in a socially and environmentally responsible manner.
For the purpose of this document, cash costs, all-in-sustaining
costs, gold margin and EBITDA are non-International Financial Reporting
Standards (Non-IFRS) measures. Refer to the Non-IFRS section of
this MD&A for additional information.
FIRST QUARTER OF 2015
HIGHLIGHTS
(I) FINANCIAL
The table below provides a summary of financial and operating
results for the three month periods ended March 31, 2015 and 2014, as well as
the fourth quarter of 2014:
|
|
Q1
2015 |
|
|
Q1 2014
|
|
|
Q4 2014
|
|
Selected
Financial Data |
|
|
|
|
|
|
|
|
|
Revenues |
|
41,003 |
|
|
30,439 |
|
|
35,178 |
|
Total mine operating
expenses1 |
|
(24,281 |
) |
|
(24,398 |
) |
|
(24,782 |
) |
Gross earnings from
operations |
|
16,722 |
|
|
6,041 |
|
|
10,396 |
|
Net income/(loss)
|
|
6,780 |
|
|
(704 |
) |
|
272 |
|
Basic net earnings/(loss) per share ($/share) |
|
0.03 |
|
|
(0.00 |
) |
|
0.00
|
|
Key Operating Statistics |
|
|
|
|
|
|
|
|
|
Average gold price
received ($/oz) |
|
1,208 |
|
|
1,246 |
|
|
1,202 |
|
Gold sales (oz) |
|
33,956 |
|
|
24,427 |
|
|
29,264 |
|
Gold production (oz)
|
|
35,943 |
|
|
20,137 |
|
|
29,445 |
|
All-in sustaining
cost per ounce ($/oz) |
|
581 |
|
|
865 |
|
|
689 |
|
Cash cost per ounce
($/oz) |
|
527 |
|
|
819 |
|
|
592 |
|
Gold margin ($/oz)3 |
|
681 |
|
|
427
|
|
|
610
|
|
Financial Position |
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
3,024 |
|
|
17,433 |
|
|
1,002 |
|
Gold bullion
inventory at market value2 |
|
4,922 |
|
|
1,231 |
|
|
2,834 |
|
Total assets |
|
903,489 |
|
|
852,574 |
|
|
887,482 |
|
Long term debt |
|
204,055 |
|
|
159,713 |
|
|
200,921 |
|
(1) Includes depletion and
depreciation.
(2) This represents 4,147 ounces of gold bullion inventory,
with a total cost of $770 per ounce, shown at the March 31, 2015 closing market
price of $1,187 per ounce of gold.
|
Revenues for the three months ended March 31, 2015 were
$41,003, a 35% increase compared to the prior years quarter of $30,439.
During the first quarter of 2015, ounces of gold sold increased by 39% to
33,956 ounces compared to sales of 24,427 ounces during the first quarter of 2014. The average gold price
per ounce sold in the period was $1,208 compared to an average price of $1,246
per ounce obtained during the corresponding prior year period. |
Page 4 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
|
Mine operating expenses, including depletion and
depreciation, for the three months ended March 31, 2015 were $24,281
compared to the prior year of $24,398. The decrease in costs was due to
increased milling throughput of 70%, for a total of 428,844 tonnes,
representing an annualized rate of 101% of the 1.7 million tonnes per
annum (Mtpa) design capacity. Improved mining and processing
productivity resulted in significant year over year unit cost reductions
as gross spending was contained. |
|
|
|
Gross earnings from operations for the three months ended
March 31, 2015 was $16,722 compared to $6,041 in 2014. The 35% higher gold
sales with a corresponding 0.5% decrease in mine operating expenses
translated into improving gross margins to 41%. The gross earnings
increase was partially offset by the decrease in revenue per ounce,
resulting in a gold margin per ounce increase from $427 per ounce in Q1
2014 to $681 per ounce in Q1 2015. |
|
|
|
Cash costs per ounce on a sales basis for the first
quarter of 2015 were $527 per ounce of gold (compared to $819 per ounce of
gold for Q1 2014). Cash costs for first quarter of 2015 were lower than
the prior year quarter as a result of increased mine and plant
productivity as Twangiza achieved steady state production levels and
normalized production costs in line with life of mine expectations.
|
|
|
|
All-in sustaining costs declined in the current quarter
to $581 per ounce (compared to $865 per ounce of gold in Q1 2014) driven
by lower cash costs in the period. |
|
|
|
In February 2015, the Company signed definitive
agreements for financing transactions of $90 million and closed the first
tranche of $20 million (refer to corporate development below). The $70
million remainder of the financing transactions were closed in April 2015
(refer to subsequent events below). With the completion of these
transactions in April 2015, the Company has extinguished certain debt
instruments and improved its financial leverage. |
(II) OPERATIONAL
- TWANGIZA
|
During the first quarter of 2015, Twangiza was
loss time injury (LTI) free, progressing to over one year and 6 million
LTI free hours since the last recorded LTI. |
|
|
|
During the first quarter of 2015, the plant at the
Twangiza Mine processed 428,844 tonnes of ore (compared to 252,691 tonnes
during the first quarter of 2014) achieving 101% of design capacity. This
improvement was due to better management of the seasonal weather
conditions and the full benefit of the upgrade project that was completed
in Q3 of 2014. Ore was processed during the first quarter of 2015 at an
indicated head grade of 3.21g/t Au (compared to 2.73 g/t Au during the
first quarter of 2014) with a recovery rate of 80.7% (compared to 84.97%
during the first quarter of 2014) to produce 35,943 (compared to 20,137
during the first quarter of 2014) ounces of gold. |
|
|
|
During the first quarter of 2015, Twangiza processed up
to 28% of transition material to assist with the feed blend, even though
this material is not included in the Companys mineral reserves.
|
Page 5 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
(III) MINE UNDER
CONSTRUCTION NAMOYA
|
Mine Under Construction - Investment |
|
Q1 2015 |
|
|
Change |
|
|
Q4 2014 |
|
|
|
|
($000's |
) |
|
(%) |
|
|
($000's |
) |
|
Additions1 |
|
16,460
|
|
|
1% |
|
|
16,372 |
|
|
Balance as at March 31 |
|
430,718 |
|
|
4% |
|
|
414,258 |
|
(1) Net of pre-commercial revenue of
$11,483 and $10,007 in Q1 2015 and Q4 2014, respectively.
|
During the first quarter of 2015, the Namoya Mine
produced 9,254 ounces of gold from a total of 255,323 tonnes of ore,
stacked and sprayed on the heap leach pads, at an indicated head grade of
1.97 g/t Au. Now that the financing has been completed, the mine fleet can
be expanded to increase the waste stripping and ore mining to meet the
planned stacking rates required for commercial production. |
|
|
|
With the commissioning of the agglomeration drum in the
first quarter of 2015, Namoyas focus is on ore delivery in order to
increase the stacking rate towards commercial levels as well as optimizing
the stacking process with the agglomerated heap leach in order to improve
percolation and gold extraction. Management will continually assess the
optimal utilization of the Carbon-In- Leach (CIL) circuit as ongoing ore
extraction enhances expectation with respect to fines content and the heap
leach circuit is optimized. |
(IV)
EXPLORATION
|
Consistent with 2014, during the first quarter of 2015,
exploration activities were limited as the Company focused on the
development at Namoya and incremental operational achievements at
Twangiza. |
(V) CORPORATE
DEVELOPMENT
|
In February 2015, the Company signed definitive
agreements for two gold forward sale transactions relating to the Twangiza
mine and a gold streaming transaction relating to the Namoya mine,
providing total gross proceeds to the Company of $90 million. Each of the
two forward sale transactions provide for the prepayment by the purchaser
of $20 million for its purchase of 22,248 ounces of gold from the Twangiza
mine, with the gold deliverable over three years, at 618 ounces per month.
The first $20 million forward sale closed on February 27, 2015. The
forward sales may be terminated at any time upon payment to the purchaser
of a one-time termination amount that would result in the purchaser
receiving an internal rate of return of 20%. The terms of the forward
sales also include a gold floor price mechanism whereby, if the gold price
falls below $1,100 per ounce in any month, additional ounces are
deliverable to ensure a realized gold price of $1,100 per ounce for that
month. The streaming transaction provides for the payment by the purchaser
of a deposit in the amount of $50 million and the delivery to the
purchaser over time of 8.33% of the life- of-mine gold production from the
Namoya mine (or any other projects located within 20 kilometres from the
current Namoya gold mine). The ongoing payments to Namoya upon delivery of
the gold are $150 per ounce. |
(VI) SUBSEQUENT
EVENTS
|
On April 30, 2015, the Company closed the second $20
million forward sale and the $50 million gold streaming transactions, as
described above. In connection with the closing of these financing
transactions, the Company extinguished all of the outstanding backstop
facility notes issued in the third and fourth quarter of 2014.
|
Page 6 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
TWANGIZA MINE
During the first quarter of 2015, the Twangiza Mine achieved
its third consecutive quarter of record production as the site continued to
benefit from the plant expansion activities completed in 2014 while focusing on
incremental operational efficiencies. These efficiencies allowed for the
continuous improvement of ore delivery and throughput levels to achieve 101% of
the upgraded design capacity of 1.7 Mtpa. Management plans, over the next 2
quarters, to continue to debottleneck the process to ensure this capacity can be
maintained permanently, before pursuing higher targets. Twangiza processed up to
28% of transition material to assist with the ore blend, even though this
material is not included in the Companys mineral reserves. The transition
material performed well when mixed with the oxide reserves and hence provided
the basis for some non-oxide material to be incorporated into the on-going
updated NI 43-101 reserves and resources statement.
TWANGIZA MINE |
Q1
2015 |
Q4 2014 |
Prior Quarter |
Q1 2014 |
Prior Year |
|
|
|
Change % |
|
Change % |
Gold sales (oz) |
33,956 |
29,264 |
16% |
24,427 |
39% |
Gold produced (oz) |
35,943 |
29,445 |
22% |
20,137 |
78% |
Material mined (t) |
975,716 |
969,062 |
1% |
727,423 |
34% |
Ore mined (t)1 |
632,264 |
556,856 |
14% |
296,324 |
113% |
Valley fill mined (t) |
- |
- |
- |
49,854 |
(100%) |
Waste mined (t) |
343,452 |
412,206 |
(17%) |
381,245 |
(10%) |
Strip ratio (t:t)2 |
0.54 |
0.74 |
(27%) |
1.29 |
(58%) |
Ore milled (t)1 |
428,844 |
370,881 |
16% |
252,691 |
70% |
Head grade (g/t)3 |
3.21 |
3.01 |
7% |
2.73 |
18% |
Recovery (%) |
80.70 |
81.40 |
(1%) |
84.97 |
(5%) |
Cash cost per ounce ($US/oz) |
527 |
592 |
(11%) |
819 |
(36%) |
(1) The difference between ore mined
and ore milled is, generally, the result of the stockpiling of lower grade
ore.
(2) Strip ratio is calculated as waste mined divided by ore
mined.
(3) Head grade refers to the indicated grade of ore milled.
In the first quarter of 2015, Twangiza achieved production
levels above the 2015 monthly average production guidance of 9,000 ounces per
month. Cash costs during the quarter were consistent with the fourth quarter of
2014 and represented a 36% reduction from the first quarter of 2014. Similar to
H2 2014, the improved operating results continue to be driven by the ability for
the operations to increase mining and milling productivity, a 34% and 70%
increase in tonnage compared to the same prior year period, respectively, while
maintaining similar gross expenditures.
Gross spending and unit costs for Q1 2015 in comparison to Q4
2014 and Q1 2014 are as follows:
Mine Operating Costs |
(In '000s) |
Cost per tonne Milled ($/t)
|
|
Q1 2015 |
Q4 2014 |
Q1 2014 |
Q1
2015 |
Q4 2014 |
Q1
2014 |
Mining Costs |
4,503 |
4,600 |
4,653 |
10.5 |
12.4 |
18.4
|
Processing Costs |
9,679 |
9,415 |
8,122 |
22.6 |
25.4 |
32.1
|
Overhead |
4,955 |
6,105 |
4,742 |
11.6 |
16.5 |
18.8
|
Inventory Adjustments |
(1,242) |
(2,804) |
2,490
|
(2.9) |
(7.6) |
9.9 |
Total Mine operating cost |
17,895 |
17,316 |
20,007 |
41.8 |
46.7 |
79.2 |
Total tonnes milled (tonnes) |
428,844 |
370,881 |
252,691 |
|
|
|
Page 7 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Mining
A total of 975,716 tonnes of material (Q1 2014 727,423
tonnes) were mined during the three month period ended March 31, 2015. Total ore
mined was 632,264 tonnes (Q1 2014 296,324 tonnes). The strip ratio for the
quarter decrease to 0.54 as compared to 1.29 during the first quarter of 2014 in
accordance with the mine schedule which decreased the mining cost per tonne
milled from $18.4 to $10.5 per tonne, or a decrease of 43%.
Processing & Engineering
For the three month period ended March 31, 2015, the plant at
the Twangiza Mine processed 428,844 tonnes of ore (2014 252,691 tonnes),
representing a 70% increase over the prior year period, as the operations
exceeded the annualized rate of 1.7 Mtpa. Increased throughput levels reduced
the processing cost per tonne milled from $32.1 per tonne to $22.6 per tonne,
representing a decrease of 30%. The mill productivity achieved in the current
period represented a continuation, as well as additional incremental
improvements, of the operational achievements made in H2 2014. Recoveries during
the period decreased compared from the corresponding prior year period to an
average rate of 80.7% (2014 84.97%) . Activities underway to improve the
recoveries include optimizing the crushing and grinding to appropriate fineness,
reagent consumption levels, and leach tank residency time. Site management
continues to focus on incremental operational efficiencies to consistently
maintain increased throughput rates and improve recoveries. The processing costs
were $1.6 million higher compared to Q1 2014 as a result of the 70% increase in
throughput, partially offset by lower power costs per tonne due to lower
realized diesel prices. Due to the nature of the processing costs, economies of
scale allow the operation to benefit significantly from the increased throughput
and production rates.
Sustaining Capital Activities
Following the completion of the plant expansion activities in
2014, capital spending at Twangiza is focused on upgrades to the mobile fleet
and continued construction of the Tailings Management Facility (TMF). Mobile
fleet upgrades during the quarter included the replacement of critical
components to extend the life of the existing fleet. The TMF construction
continued at lower activity levels, with activity levels expected to increase
during the dryer periods of the second and third quarter of 2015.
Cash cost and All-in sustaining cost
Cash costs per ounce for the first quarter of 2015 were
significantly lower than the prior year period, primarily due to increased sales
of 9,529 ounces or 39%, due to increased production over the first quarter of
2014, while gross spending increased slightly as a result of higher throughput
in line with the design capacity of the mill. The all-in sustaining cost
decreased from $865 in Q1 2014 to $581 per ounce in Q1 2015, primarily due to
the lower cash cost.
Cash Cost per ounce sold |
($US/ounce) |
|
Q1 2015 |
Q4 2014 |
Q1
2014 |
Mining Costs |
133 |
157 |
190
|
Processing Costs |
285 |
322 |
333
|
Overhead |
146 |
209 |
194
|
Inventory Adjustments |
(37) |
(96)
|
102 |
Total cash costs per ounce |
527 |
592
|
819 |
Total ounces
sold (ounces) |
33,956 |
29,264 |
24,427 |
All-in sustaining costs per ounce |
581 |
689
|
865 |
Page 8 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
NAMOYA - MINE UNDER
CONSTRUCTION
During the first quarter of 2015, the key objective for Namoya
management was to position the operation to reach commercial production levels
by H2 2015. The agglomeration drum that was procured in late 2014, was
commissioned by the in-house team ahead of schedule on January 27, 2015. The
commissioning of the agglomeration drum will be followed by activities to
de-bottleneck the heap leach operation including increasing the speed and
capacity of the conveyor system as well as activities to prepare and improve the
CIL plant.
As a result of the delay in the financing, the original ramp-up
plans were modified including the pre-stripping of the Kakula reserve pit
earlier than planned in order to open up more mining faces to improve
flexibility in mine scheduling and provide additional time for the delivery of
the mobile truck fleet that would commence waste stripping activities. With the
procurement of additional mobile fleet, the stacking levels are expected to
increase to up to 190,000 tonnes per month following the ramp up towards
commercial production levels.
Mining continued at the Seketi and Mwendamboko pits as well as
the newly opened Kakula pit during the first quarter of 2015 comprising 702,793
tonnes of material of which 178,800 tonnes were ore at a strip ratio of 2.93.
The strip ratio increased in the current period as a result of increased waste
material mined in order to provide access to ore in the Kakula pit.
Additions to Mine under Construction during the first quarter
of 2015 consisted of the costs associated with the completion of the
agglomeration drum, costs associated with commissioning activities, as well as
pre-commercial operating losses due to the mine operating at levels which are
below break-even. The costs associated with the agglomeration drum represent the
only significant capital amounts spent on project construction during the
period.
During the first quarter of 2015, the Namoya mine produced
9,254 ounces of gold from a total of 255,323 tonnes of ore, stacked and sprayed
on the heap leach pads, at an indicated head grade of 1.97 g/t Au. Ore stacked
during the period was comprised of semi-agglomerated material prior to the
commissioning of the agglomeration drum, followed by material that was processed
through the agglomeration drum. Stacking levels during the quarter were impacted
by processing shutdowns surrounding the installation and commissioning of the
drum and the availability of mobile fleet to mine waste. The CIL circuit was not
utilized during the first quarter of 2015 as the Companys focus and resources
were targeted on the progression of the heap leach operation, however, small
scale project activities were carried out on the CIL plant in order to assess
the circuit needs and associated timelines to incrementally contribute to
production. Namoyas production will continue to benefit incrementally from the
increasing stacking rates that are being achieved and as the heap leach curve
progresses toward steady state operating levels.
EXPLORATION
Consistent with the Companys focus on cash flow management
during the completion of development at Namoya as well as the seasonality of
exploration activities in the DRC, exploration activities during the first
quarter of 2015 was comprised of desktop project and target prioritization
reviews in preparation of the 2015 field work, in addition to ground maintenance
activities.
As previously reported, to support the Twangiza and Namoya
operations, near term exploration will focus on the following:
|
Deliver sufficient drilling to allow mine
operations to define a mineable high grade reserve at the Filon B target
at Namoya to incorporate incremental ounce production for 2015; |
|
Development and execution of the drill program
to convert inferred and indicated resources to higher confidence resources
and mineral reserves within the existing open pits; and |
|
Delineate resources from identified targets
within a 5 kilometre radius of the current operations.
|
Page 9 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Qualified Person
Daniel K. Bansah, the Company's Head of Projects and Operations
and a "Qualified Person" as such term is defined in National Instrument 43-101,
has approved the technical information in this MD&A.
Page 10 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
SELECTED FINANCIAL
RESULTS
Selected Financial Data |
Q1
2015 |
Q1 2014
|
Q4 2014 |
|
|
|
|
Revenues ($000's)
|
41,003 |
30,439 |
35,178
|
Production costs
($000's) |
(17,895) |
(20,007) |
(17,316) |
Depletion and
depreciation ($000's) |
(6,386) |
(4,391) |
(7,466) |
Gross earnings from
operations ($000's) |
16,722 |
6,041 |
10,396
|
|
|
|
|
General &
administration ($000's) |
(2,787) |
(1,466) |
(4,135) |
Finance expenses
($000's) |
(6,055) |
(3,325) |
(4,522) |
Net income/(loss)
($000's) |
6,780 |
(704) |
3,750
|
EBITDA ($000's) |
18,895 |
6,846 |
15,566
|
Basic net earnings/(loss) per share ($/share) |
0.03 |
(0.00) |
0.01 |
Revenues
Revenues increased $10.6M, or 35%, in the three months ended
March 31, 2015 as compared to the corresponding period of 2014 as a result of a
39% increase in gold ounces sold, partially offset by lower average realized
gold prices. The average gold price received on ounces sold in Q1 2015 was
$1,208 per ounce compared to $1,246 per ounce received in Q1 2014. The average
realized gold price was lower than the average spot price as a result of the
timing of gold sales such that there were increased levels of gold sales when
the market price was more depressed.
Production costs by element
Production Costs |
Q1
2015 |
Q1 2014
|
Change |
$/oz Sold |
|
($000's) |
($000's) |
(%)
|
Q1 2015 |
Q1 2014 |
Change % |
Raw materials and consumables |
5,416 |
4,051 |
34%
|
160 |
166 |
(4%)
|
Diesel |
3,895 |
4,258 |
(9%)
|
115 |
174 |
(34%)
|
Salaries |
4,011 |
3,496 |
15%
|
118 |
143 |
(17%)
|
Contractors |
2,948 |
3,178 |
(7%)
|
87 |
130 |
(33%)
|
Other overhead |
2,867 |
2,267 |
26%
|
84 |
93 |
(10%)
|
Inventory adjustments |
(1,242) |
2,757
|
(145%) |
(37)
|
113
|
(133%) |
Total production costs |
17,895 |
20,007 |
(11%) |
527 |
819
|
(36%) |
Production costs, excluding inventory
adjustments, for the three months ended March 31, 2015 increased 11% from the
same prior year period, as a result of increased mine and mill productivity,
however, as a result of improved operating efficiencies the per unit costs
decreased. Details of changes in production cost categories are included below:
Raw materials and consumables
Raw materials and consumables increased
by 34% in the three month period ended March 31, 2015 as compared to the
corresponding period in 2014 as a result of increased mine and mill productivity
of 34% and 70%, respectively. While the gross spending on raw materials and
consumables increased during the period, the cost per ounce sold decreased by 4%
due to the benefits of increased throughput. During the first quarter of 2014,
the plant expansion was in progress and the operation was not yet increasing
productivity levels towards the upgraded design capacity.
Diesel
Diesel costs decreased 9% during the
three month period ended March 31, 2015 as compared to the corresponding period
in 2014 as a result of favorable market conditions. As a result of the decrease
in the cost of diesel coupled with the aforementioned increases in mine and mill
productivity, on a per ounce sold basis diesel decreased 34% from Q1 2014 to Q1
2015.
Page 11 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Salaries
Salaries increased 15% in the three
months ended March 31, 2015 compared to the corresponding period of 2014
primarily due to the increase in the scale of the operational activities as a
result of the completion of the plant upgrade in 2014 as well as the impact of
using increased levels of internal resources in the place of certain contractors
and normal course inflationary increases. On a per ounce sold basis, salaries
decreased 17% as a result of operational efficiencies with the increased levels
of productivity.
Contractors
Contractors decreased 7% in the three
month period ended March 31, 2015 compared to the corresponding period of 2014
as a result of using increased levels of internal resources in place of certain
contractors. On a per ounce sold basis, contractors decreased 33% as a result of
operational efficiencies with the increased levels of productivity.
Other overhead
Other overhead expense, which includes
on-site administrative sundry costs, IT expenses, human resources expenditures,
camp costs and travel and camp costs, increased 26% in the three month period
ended March 31, 2015 compared to the corresponding period of 2014 as a result of
the increased levels of production and the resulting sales.
Inventory adjustments
Inventory adjustments decreased in the
three month period ended March 31, 2015 compared to the corresponding period of
2014 as a result of increases in ore stockpile inventory and higher gold bullion
inventory levels compared to a drawdown of gold bullion in the prior year
period.
General and administrative expenses
The table below provides the general and administrative
expenses for the three month periods ended March 31, 2015 and 2014.
General & administrative expenses |
Q1
2015 |
Q1 2014
|
Change |
$/oz Sold |
|
($000's) |
($000's) |
(%)
|
Q1 2015 |
Q1 2014 |
Change % |
Salaries and employee benefits |
858 |
727 |
18%
|
25 |
30 |
(17%)
|
Consulting, management, and professional fees |
188 |
124 |
52%
|
6 |
5 |
20%
|
Office and sundry |
519 |
395 |
31%
|
15 |
16 |
(6%)
|
DRC corporate office |
960 |
- |
- |
28 |
- |
100%
|
Depreciation |
24 |
14 |
71%
|
1 |
1 |
0%
|
Other |
238 |
206
|
16% |
7 |
8 |
(13%) |
General and administrative expenses |
2,787 |
1,466
|
90% |
82 |
60
|
37% |
|
|
|
|
|
|
|
Other charges & provisions |
744 |
1,903
|
(61%) |
22 |
78
|
(72%) |
General and administrative expenses
increased to $2,787 for the three months ended March 31, 2015, as compared to
$1,466 for the corresponding period in 2014. Details of changes in the general
and administrative expenses category are as follows:
Salaries and employee benefits
Salaries and employee benefits
increased 18% in the three months ended March 31, 2015 as compared to the
corresponding period in 2014 as a result of the impact of increased number of
personnel coupled with the impact of year over year inflationary increases.
Consulting, management, and
professional fees
Consulting, management, and
professional fees, which include mainly legal and auditing fees, increased to
$188 for the three months ended March 31, 2015, compared to $124 for the
corresponding period of 2014, as a result of increased costs related to
financing activities.
Page 12 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Office and Sundry
Office and sundry increased to $519 for
the three months ended March 31, 2015, compared to $395 for the corresponding
period of 2014, as a result of the additional costs associated with government
fees.
DRC corporate office
The DRC corporate office provides
in-country support for the operations. For the three months ended March 31,
2015, DRC regional office support expenses were $960. The increase in the
expense was due to support resources now focusing more on the requirements of
mine operations as opposed to exploration activities in the corresponding prior
year period.
Other expenses
Other general and administrative
expenses include travel and promotion expenses relating to being a publicly
traded company and contributions to the Banro Foundation.
Other charges and provisions
Other charges and provisions were $744 for the three months
ended March 31, 2015 compared to $1,903 in the corresponding period of 2014,
predominately representing the fair value losses on financial instruments.
Finance expenses
Finance expenses increased significantly in the three months
ended March 31, 2015 compared to the corresponding period of 2014 as a result of
increases in interest and dividends due to changes in the capital structure of
the Company during 2014 including the issuance of preferred shares and notes as
well as increases in transaction costs associated with the financing activities
carried out during the period.
Net income
The Companys net income for the three months ended March 31,
2015 was $6,780 as compared to a loss of $704 in the prior year period. The net
income is a result of increased gross earnings from operations as revenues
increased with a limited corresponding increase in production costs, partially
offset by increases in general and administrative and finance expenses.
EBITDA
EBITDA for the three months ended March 31, 2015 increased 176%
compared to the prior year period, from $6,846 to $18,895, primarily due to an
increase in gold ounces sold while operating expenses were contained, partially
offset by increased corporate costs.
EXPLORATION AND DEVELOPMENT
PROJECT EXPENDITURES
Exploration and evaluation expenditures
The Company incurred exploration and evaluation expenditures of
$2,208 in the three months ended March 31, 2015, a decrease of 51% compared to
the same prior year period, capitalized as exploration and evaluation assets in
the Companys consolidated statement of financial position. The allocation of
such exploration and evaluation expenditures by project was as follows:
Exploration and evaluation expenditu |
Q1 2015 |
Q1 2014
|
Change |
|
($000's) |
($000's) |
(%)
|
Twangiza project |
368 |
1,305 |
(72%)
|
Namoya project |
284 |
491 |
(42%)
|
Lugushwa project |
609 |
1,258 |
(52%)
|
Kamituga project |
610 |
1,436 |
(58%)
|
Banro Congo Mining SARL |
337 |
62
|
444% |
|
2,208 |
4,552
|
(51%) |
Page 13 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
As a part of managing costs across the Company, exploration
work has been reduced and some support activities redirected to assist the
operations as the Company transitions primarily to an operations focused company
in the near term.
Mine development expenditures
During Q1 2015, the Company incurred development expenditures
of $16,460 (Q1 2014 - $20,645), net of pre-production revenue of $11,483 (Q1
2014 - $4,051), with respect to the development of the Namoya mine, which are
capitalized in the consolidated statement of financial position as mine under
construction asset.
Mine Development Expenditures |
Q1
2015 |
Q1 2014
|
Change |
|
($000's) |
($000's) |
%
|
Mine development
expenditures |
27,943 |
24,696 |
13%
|
Pre-commercial production revenue |
(11,483) |
(4,051) |
183% |
Net expenditures |
16,460 |
20,645 |
(20%) |
Mine development expenditures relate to project capital,
pre-operating expenses and capitalized interest. Included in the $16,460 of mine
development expenditures is $1,881 of depreciation and $6,709 of capitalized
interest. Pre-commercial production revenue at Namoya consists of revenue from
the sale of 9,441 ounces of gold sold at an average price of $1,216 per ounce.
SUMMARY OF QUARTERLY
RESULTS
The following table sets out certain unaudited interim
consolidated financial information of the Company for each of the last eight
quarters, beginning with the first quarter of 2015. This financial information
has been prepared using accounting policies consistent with International
Accounting Standard (IAS) 34 Interim Financial Reporting issued
by IASB.
|
Q1
2015 |
Q4 2014 |
Q3 2014
|
Q2 2014
|
Q1 2014
|
Q4 2013 |
Q3 2013
|
Q2 2013 |
|
|
|
|
|
|
|
|
|
Revenues |
41,003 |
35,178
|
33,285 |
26,534 |
30,439 |
27,022
|
27,133 |
24,484
|
Gross earnings from
operations |
16,722 |
10,396
|
8,093 |
4,291 |
6,041 |
3,090
|
2,950 |
2,288
|
Net income/(loss)
|
6,780 |
272 |
3,750 |
(2,998) |
(704) |
2,086
|
(3,671) |
(3,054) |
Earnings/(loss) per
share, basic ($/share) |
0.03 |
0.00
|
0.01 |
(0.01) |
(0.00) |
0.01
|
(0.01) |
(0.01)
|
Earnings/(loss) per share, diluted ($/share) |
0.03 |
0.00 |
0.01
|
(0.01) |
(0.00) |
0.01 |
(0.01) |
(0.01) |
The Company recorded revenue of $41,003 for the three month
period ended March 31, 2015 and a net income of $6,780. Revenue and gross
earnings from operations for the three month period ended March 31, 2015 were
higher than the prior quarter due to an increase in productivity resulting in a
reduction in unit costs and an increase in ounces of gold sold from improved
production at Twangiza. The increase in net income was driven by increased gross
earnings from operations being partially offset by increased general and
administrative and finance costs.
The Company recorded revenue of $35,178 for the three month
period ended December 31, 2014 and a net income of $272. Revenue and gross
earnings from operations for the three month period ended December 31, 2014 were
higher than the prior quarter due to an increase in productivity resulting in a
reduction in unit costs and an increase in ounces of gold sold from improved
production at Twangiza. The decrease in net income in the fourth quarter was
driven by increased finance costs and losses from the re-valuation of financial
instruments.
The Company recorded revenue of $33,285 for the three month
period ended September 30, 2014 and a net income of $3,750. Revenue and gross
earnings from operations for the three month period ended September 30, 2014
were higher than the prior quarter due to there being approximately 6,460 more
ounces of gold sold in the third quarter of 2014 from improved production at
Twangiza. Increase in net income in the third quarter was driven by higher gross
earnings from operations, and gains from the re-valuation of financial
instruments partially offset by higher general and administrative expenses and
interest costs.
Page 14 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
The Company recorded revenue of $26,534 for the three month
period ended June 30, 2014 and a net loss of $2,998. Revenue and gross earnings
from operations for the three month period ended June 30, 2014 were lower than
the prior quarter due to there being approximately 4,000 more ounces of gold
sold in Q1 2014 due to gold produced in December 2013 and sold in January 2014.
In addition to the lower gross earnings from operations, increased general and
administrative expenses were incurred as a result of increased legal and
shareholder services that resulted from dissident shareholder nominations for
the election of directors, which were subsequently withdrawn, in connection with
the annual shareholders meeting.
The Company recorded revenue of $30,439 for the three month
period ended March 31, 2014 and a net loss of $704. Revenue and gross earnings
from operations for the three months ended March 31, 2014 were higher than the
prior quarter due to there being approximately 4,000 more ounces of gold sold in
Q1 2014 as compared to Q4 2013. Although revenue was higher during the quarter,
transactions costs, dividends on preferred shares, and a loss on the change in
the fair value of preferred shares were all expenses that contributed to the net
loss of $704 for the quarter.
The Company recorded revenues of $27,022 for the three month
period ended December 31, 2013 and net income of $2,086. Revenue and gross
earnings from operations for the three months ended December 31, 2013 remained
consistent with revenues and gross earnings from operations incurred during the
three-month period ended September 30, 2013 even though the gold price declined
during the fourth quarter as the Company sold more ounces of gold during the
fourth quarter. The net profit recognized in the fourth quarter was driven by a
gain on a change in the fair value of preferred shares as compared to the third
quarter of 2013.
The Company recorded revenues of $27,133 for the three month
period ended September 30, 2013, compared to $24,484 for the second quarter of
2013. The increase in revenue was primarily a result of greater ounces sold as
compared to the prior quarter. The net loss for the third quarter of 2013 was
driven by a $3,248 loss on change in fair value of the Companys issued
preference shares during the third quarter. Further adding to the net loss
recorded in the third quarter was the higher mining-related costs, including
fuel and replacement parts, from the Twangiza mine as compared to prior
quarters.
LIQUIDITY AND CAPITAL
RESOURCES
As at March 31, 2015, the Company had cash and cash equivalents
of $3,024 compared to cash and cash equivalents of $1,002 as at December 31,
2014. As a result of the minimal liquidity available as at December 31, 2014,
and the Companys need to continue to fund operations until production from
Namoya reaches commercial production levels, it was necessary to carry out a
further financing of $20 million in February 2015 in the form of a gold forward
sale.
During the three months ended March 31, 2015, the Company spent
$3,505 in cash for exploration and evaluation expenditures and $6,822 in cash
(net of pre-production revenue) for the development of the Namoya mine (compared
to $3,890 spent on exploration and evaluation expenditures and $10,722 spent on
the development of the Namoya mine during Q1 2014). In addition, during Q1 2015,
the Company spent $2,235 on capital assets (compared to $4,571 spent during Q1
2014) to carry on its projects in the DRC.
In February 2015, the Company signed definitive agreements for
two gold forward sale transactions relating to the Twangiza mine and a gold
streaming transaction relating to the Namoya mine, providing total gross
proceeds to the Company of $90 million. Each of the two forward sale
transactions provide for the prepayment by the purchaser of $20 million for its
purchase of 22,248 ounces of gold from the Twangiza mine, with the gold
deliverable over three years, at 618 ounces per month. The first $20 million
forward sale closed on February 27, 2015. The forward sales may be terminated at
any time upon payment to the purchaser of a one-time termination amount that
would result in the purchaser receiving an internal rate of return of 20%. The
terms of the forward sales also include a gold floor price mechanism whereby, if
the gold price falls below $1,100 per ounce in any month, additional ounces are
deliverable to ensure a realized gold price of $1,100 per ounce for that month.
The streaming transaction provides for the payment by the purchaser of a deposit
in the amount of $50 million and the delivery to the purchaser over time of
8.33% of the life-of-mine gold production from the Namoya mine (or any other
projects located within 20 kilometres from the current Namoya gold mine). The
ongoing payments to Namoya upon delivery of the gold are $150 per ounce. On
April 30, 2015, the Company closed the second $20 million forward sale and the
$50 million gold streaming transactions, as described above. In connection with
the closing of these financing transactions, the Company extinguished of all the
outstanding backstop facility notes issued in the third and fourth quarter of
2014.
Based on the revenues expected to be generated from the
Companys Twangiza and Namoya mines, together with the Companys cash on hand,
and the financing transactions executed in February and April 2015, the Company
expects to have access to sufficient funds to carry out its proposed 2015
operating and capital budgets for the Twangiza and Namoya mines and for
corporate overhead. If at any time during the year it becomes apparent that there may be a strain on the
Companys cash flows, the Company may elect to defer non-essential capital
expenditures to a future year.
Page 15 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
As a result of restrictive covenants in the Indenture under
which the Companys outstanding Notes were issued, the Companys ability to
incur additional debt is currently limited. Should the Company experience
production shortfalls at Twangiza, delays in ramp up at Namoya, suspension or
delays in the receipt of goods and services, equipment breakdowns, or should the
price of gold decrease further, the Company may need to further examine funding
options.
CONTRACTUAL OBLIGATIONS
The Companys contractual obligations as at March 31, 2015 are
described in the following table:
Contractual Obligations |
Payments due by period |
|
|
Less than one |
One to three |
Four to five |
|
Total |
year |
years |
years |
|
($000's) |
($000's) |
($000's) |
($000's) |
Operating leases |
523 |
343 |
180 |
- |
Bank loans |
18,628 |
18,628 |
- |
- |
Derivative
instruments |
22,877 |
9,310 |
13,567 |
- |
Long-term debt -
2012 Offering |
175,000 |
- |
175,000 |
- |
Interest on
long-term debt - 2012 Offering |
35,000 |
17,500 |
17,500 |
- |
Long-term debt -
2014 Facility |
37,000 |
- |
37,000 |
- |
Interest on long-term debt - 2014 Facility |
13,848 |
5,265 |
8,583 |
- |
RELATED PARTY
TRANSACTIONS
The Companys related parties include key management. Key
management includes directors (executive and non-executive), the Chief Executive
Officer (CEO), the Chief Financial Officer, and the Vice Presidents reporting
directly to the CEO. The remuneration of the key management of the Company as
defined above, during the three months ended March 31, 2015 and 2014 was as
follows:
|
|
Three months ended March 31,
|
|
|
|
2015 |
|
|
2014 |
|
|
|
($000's) |
|
|
($000's) |
|
Short-term employee benefits |
|
1,170 |
|
|
647 |
|
Other benefits |
|
20 |
|
|
16 |
|
Employee retention allowance |
|
63 |
|
|
46 |
|
Settlement |
|
- |
|
|
2,325
|
|
|
|
1,253 |
|
|
3,034
|
|
During the three months ended March 31, 2015, directors fees of
$58 (three months ended March 31, 2014 - $92) were incurred for non-executive
directors of the Company. As of March 31, 2015, $81 was included in accrued
liabilities as a payable to three directors (December 31, 2014 - $86).
CRITICAL ACCOUNTING
ESTIMATES
The preparation of the Interim Financial Statements in
conformity with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ
from these estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Information about critical judgments in applying accounting policies that have the most
significant effect on the amounts recognized in the Companys Interim Financial
Statements included the following:
Page 16 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Provision for closure and reclamation
The Companys operation is subject to environmental regulations
in the DRC. Upon establishment of commercial viability of a site, the Company
estimates the cost to restore the site following the completion of commercial
activities and depletion of reserves. These future obligations are estimated by
taking into consideration closure plans, known environmental impacts, and
internal and external studies, which estimate the activities and costs that will
be carried out to meet the decommissioning and environmental rehabilitation
obligations. The Company records a liability and a corresponding asset for the
present value of the estimated costs of legal and constructive obligations for
future mine rehabilitation. During the mine rehabilitation process, there will
be a probable outflow of resources required to settle the obligation and a
reliable estimate can be made of those obligations. The present value is
determined based on current market assessments using the risk-free rate of
borrowing which is approximated by the yield of government bonds with a maturity
similar to that of the mine life. The discounted liability is adjusted at the
end of each period with the passage of time. The provision represents
managements best estimate of the present value of the future mine
rehabilitation costs, which may not be incurred for several years or decades,
and, as such, actual expenditures may vary from the amount currently estimated.
The decommissioning and environmental rehabilitation cost estimates could change
due to amendments in laws and regulations in the DRC. Additionally, actual
estimated costs may differ from those projected as a result of an increase over
time of actual remediation costs, a change in the timing for utilization of
reserves and the potential for increasingly stringent environmental regulatory
requirements.
Impairment
Assets, including property, plant and equipment, exploration
and evaluation and mine under construction, are reviewed for impairment whenever
events or changes in circumstances indicate that their carrying amounts exceed
their recoverable amounts, which is the higher of fair value less cost to sell
and value in use. The assessment of the recoverable amounts often requires
estimates and assumptions such as discount rates, exchange rates, commodity
prices, rehabilitation and restoration costs, future capital requirements and
future operating performance. Changes in such estimates could impact recoverable
values of these assets. Estimates are reviewed regularly by management.
Mineral reserve and resource estimates
Mineral reserves and resources are estimates of the amount of
ore that can be economically and legally extracted from the Companys mineral
properties. The Company estimates its mineral reserves and mineral resources
based on information compiled by appropriately qualified persons relating to the
geological data on the size, depth and shape of the ore body. This exercise
requires complex geological judgments to interpret the data. The estimation of
recoverable reserves is based upon factors such as commodity prices, future
capital requirements, and production costs along with geological assumptions and
judgments made in estimating the size and grade of the ore body. Changes in the
reserve or resource estimates may impact upon the carrying value of exploration
and evaluation assets, mine under construction assets, property, plant and
equipment, recognition of deferred tax assets, and expenses.
Share-based payment transactions
The Company measures the cost of equity-settled transactions
with employees by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value at grant date is determined using
a Black-Scholes option pricing model that takes into account the exercise price
based on the historic share price movement, the term of the stock option, the
expected life based on past experience, the share price at grant date and
expected price volatility of the underlying share, the expected dividend yield
and the risk free interest rate as per the Bank of Canada for the term of the
stock option.
The model inputs for stock options granted during the three
months ended March 31, 2015 included:
|
March 31, 2015 |
Risk
free interest rate |
0.46%
- 1.00% |
Expected life |
3
years |
Annualized volatility |
85.64
- 85.87% |
Dividend yield |
0.00%
|
Forfeiture rate |
2.00%
|
Grant date fair value |
$0.09 - $0.11 |
Page 17 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Depreciation of mining assets
The Company applies the units of production method for
amortization of its mine assets in commercial production based on reserve ore
tons mined. These calculations require the use of estimates and assumptions.
Significant judgment is required in assessing the available reserves to be
amortized under this method. Factors that are considered in determining reserves
are the economic feasibility of the reserves, expected life of the project and
proven and probable mineral reserves, the complexity of metallurgy, markets and
future developments. Estimates of proven and probable reserves are prepared by
experts in extraction, geology and reserve determination. When these factors
change or become known in the future, such differences will impact pre-tax
profit and carrying value of assets.
Depreciation of property, plant and equipment
Each property, plant and equipment life, which is assessed
annually, is assessed for both its physical life limitations and the economic
recoverable reserves of the property at which the asset is located. For those
assets depreciated on a straight-line basis, management estimates the useful
life of the assets. These assessments require the use of estimates and
assumptions including market conditions at the end of the assets useful life.
Asset useful lives and residual values are re-evaluated annually.
Commercial production
Prior to reaching pre-determined levels of operating capacity
intended by management, costs incurred are capitalized as part of mines under
construction and proceeds from sales are offset against capitalized costs.
Depletion of capitalized costs for mining properties begins when pre-determined
levels of operating capacity intended by management have been reached.
Management considers several factors in determining when a mining property has
reached levels of operating capacity intended by management, including:
|
|
when the mine is substantially complete and
ready for its intended use; |
|
|
the ability to produce a saleable product;
|
|
|
the ability to sustain ongoing production at a
steady or increasing level; |
|
|
the mine has reached a level of pre-determined
percentage of design capacity; |
|
|
mineral recoveries are at or near the expected
production level; and |
|
|
the completion of a reasonable period of
testing of the mine plant and equipment. |
The results of operations of the Company during the periods
presented in the Companys consolidated financial statements have been impacted
by managements determination that its Twangiza mine had reached the commercial
production phase on September 1, 2012. When a mine development project moves
into the production stage, the capitalization of certain mine development and
construction costs ceases. Subsequent costs are either regarded as forming part
of the cost of inventory or expensed. However, any costs relating to mining
asset additions or improvements, underground mine development or mineable
reserve development are assessed to determine whether capitalization is
appropriate.
Provisions and contingencies
The amount recognized as provision, including legal,
contractual, constructive and other exposures or obligations, is the best
estimate of the consideration required to settle the related liability,
including any related interest charges, taking into account the risks and
uncertainties surrounding the obligation. In addition, contingencies will only
be resolved when one or more future events occur or fail to occur. Therefore
assessment of contingencies inherently involves the exercise of significant
judgment and estimates of the outcome of future events. The Company assesses its
liabilities and contingencies based upon the best information available,
relevant laws and other appropriate requirements.
Exploration and evaluation expenditure
The application of the Companys accounting policy for
exploration and evaluation expenditure requires judgment in determining whether
it is likely that future economic benefits will flow to the Company, which may
be based on assumptions about future events or circumstances. Estimates and
assumptions made may change if new information becomes available. There are a
few circumstances that would warrant a test for impairment, which include: the
expiry of the right to explore, substantive expenditure on further exploration
is not planned, exploration for and evaluation of the mineral resources in the
area have not led to discovery of commercially viable quantities, and/or
sufficient data exists to show that the carrying amount of the asset is unlikely
to be recovered in full from successful development or by sale. If information
becomes available suggesting impairment, the amount capitalized is written off
in the consolidated statement of comprehensive income/(loss) during the period
the new information becomes available.
Page 18 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Income taxes
The Company is subject to income taxes in various jurisdictions
and subject to various rates and rules of taxation. Significant judgment is
required in determining the provision for income taxes. There are many
transactions and calculations undertaken during the ordinary course of business
for which the ultimate tax determination is uncertain. The Company recognizes
liabilities for anticipated tax audit issues based on the Companys current
understanding of the tax law. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will
impact the current and deferred tax provisions in the period in which such
determination is made.
In addition, the Company has recognized deferred tax assets
relating to tax losses carried forward to the extent there is sufficient taxable
income relating to the same taxation authority and the same subsidiary against
which the unused tax losses can be utilized. However, future realization of the
tax losses also depends on the ability of the entity to satisfy certain tests at
the time the losses are recouped, including current and future economic
conditions, production rates and production costs.
Functional and presentation currency
Judgment is required to determine the functional currency of
the parent and its subsidiaries. These judgments are continuously evaluated and
are based on managements experience and knowledge of the relevant facts and
circumstances.
NEWLY APPLIED ACCOUNTING
STANDARDS
The following amended standards were applied as of January 1,
2015:
|
|
IFRS 8, Operating Segments (amendment); and
|
|
|
IAS 24, Related Party Disclosures
(amendment). |
The adoption of these amended standards did not have a
significant impact on the Companys Interim Financial Statements.
ACCOUNTING STANDARDS
ISSUED BUT NOT YET
EFFECTIVE
The Company has reviewed new and revised accounting
pronouncements that have been issued but are not yet effective and determined
that the following may have an impact on the Company:
IFRS 9, Financial instruments (IFRS 9) was issued by the IASB
on July 24, 2014 and will replace IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 is intended to reduce the complexity for the classification,
measurement, and impairment of financial instruments. The mandatory effective
date is for annual periods beginning on or after January 1, 2018. The Company is
evaluating the impact of this standard on its consolidated financial statements.
Amendments to IFRS 10, Consolidated Financial Statements (IFRS
10), IFRS 12 Disclosure of Interests in Other Entities (IFRS 12), and IAS 28
Investments in Associates and Joint Ventures (IAS 28) were published by the
IASB in December 2014. The amendments define the application of the
consolidation exception for investment entities. These are effective for annual
periods beginning on or after January 1, 2016. The Company is evaluating the
impact of these standards but does not expect these standards to have a material
impact on its consolidated financial statements.
IFRS 15, Revenue from Contracts with Customers (IFRS 15) was
issued by the IASB on May 28, 2014 and will replace IAS 18 Revenue and IAS 11
Construction Contracts and related interpretations. IFRS 15 provides a more
detailed framework for the timing of revenue recognition and increased
requirements for disclosure of revenue. IFRS 15 uses a control-based approach to
recognize revenue which is a change from the risk and reward approach under the
current standard. The mandatory effective date is for annual periods beginning
on or after January 1, 2018. The Company is evaluating the impact of this
standard on its consolidated financial statements.
Amendments to IAS 1, Presentation of Financial Statements (IAS
1) were issued by the IASB in December 2014. The amendments clarify principles
for the presentation and materiality consideration for the financial statements
and notes to improve understandability and comparability. The amendments to IAS
1 are effective for annual periods beginning on or after January 1, 2016. The
Company is evaluating the impact of this standard on its consolidated financial
statements.
Page 19 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Amendments to IAS 16, Property, Plant and Equipment (IAS 16)
were issued by the IASB in May 2014. The amendments prohibit the use of a
revenue-based depreciation method for property, plant and equipment as it is not
reflective of the economic benefits of using the asset. They clarify that the
depreciation method applied should reflect the expected pattern of consumption
of the future economic benefits of the asset. The amendments to IAS 16 are
effective for annual periods beginning on or after January 1, 2016. The Company
does not expect the standard to have a material impact on its consolidated
financial statements.
Amendments to IAS 38 Intangible Assets (IAS 38) were issued
by the IASB in May 2014. The amendments prohibit the use of a revenue-based
depreciation method for intangible assets. Exceptions are allowed where the
asset is expressed as a measure of revenue or revenue and consumption of
economic benefits for the asset are highly correlated. The amendments to IAS 38
are effective for annual periods beginning on or after January 1, 2016. The
Company is evaluating the impact of this standard but does not expect the
standard to have a material impact on its consolidated financial statements.
FINANCIAL INSTRUMENTS
Fair value of financial assets and liabilities
The consolidated statements of financial position carrying
amounts for cash and cash equivalents, trade and other receivables, bank loans,
and trade and other payables approximate fair value due to their short-term
nature.
Fair value hierarchy
The following provides a description of financial instruments
that are measured subsequent to initial recognition at fair value, grouped into
Levels 1 to 3 based on the degree to which the fair value is observable:
|
Level 1 fair value measurements are those
derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities; |
|
|
|
Level 2 fair value measurements are those derived from
inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and |
|
|
|
Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability that
are not based on observable market data (unobservable inputs).
|
The fair values of financial assets and liabilities carried at
amortized cost (excluding Notes as defined below) are approximated by their carrying
values.
RISKS AND UNCERTAINTIES
The Company is subject to a number of risks and uncertainties
that could significantly impact its operations and future prospects. The
following discussion pertains to certain principal risks and uncertainties but
is not, by its nature, all inclusive.
Risk Management Policies
The Company is sensitive to changes in commodity prices and
foreign-exchange. The Companys Board of Directors has overall responsibility
for the establishment and oversight of the Companys risk management framework.
Although the Company has the ability to address its price-related exposures
through the use of options, futures and forward contracts, it currently does not
typically enter into such arrangements.
Foreign Currency Risk
Foreign currency risk is the risk that a variation in exchange
rates between the United States dollar and Canadian dollar or other foreign
currencies will affect the Companys operations and financial results. A portion
of the Companys transactions are denominated in Canadian dollars, Congolese
francs, South African rand, British pounds, Australian dollars and European
Euros. The Company is also exposed to the impact of currency fluctuations on its
monetary assets and liabilities. Significant foreign exchange gains or losses
are reflected as a separate component of the interim condensed consolidated
statement of comprehensive income/(loss). The Company does not use derivative
instruments to reduce its exposure to foreign currency risk. See Note 31(c) of
the Interim Financial Statements for additional details.
Page 20 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Credit Risk
Credit risk is the risk that a third party might fail to
fulfill its performance obligations under the terms of a financial instrument.
Financial instruments, which are potentially subject to credit risk for the
Company, consist primarily of cash and cash equivalents and trade and other
receivables. Cash and cash equivalents are maintained with several financial
institutions of reputable credit and may be redeemed upon demand. Cash and cash
equivalents are held in Canada and the DRC. The sale of goods exposes the
Company to the risk of non-payment by customers. The Company manages this risk
by monitoring the creditworthiness of its customers. It is therefore the
Companys opinion that such credit risk is subject to normal industry risks and
is considered minimal.
Any credit risk exposure on cash balances is considered
negligible as the Company places deposits only with major established banks in
the countries in which it carries on operations.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they become due. The Company attempts to
ensure that there is sufficient cash to meet its liabilities when they are due
and manages this risk by regularly evaluating its liquid financial resources to
fund current and long-term obligations and to meet its capital commitments in a
cost-effective manner. Temporary surplus funds of the Company are invested in
short-term investments. The Company arranges the portfolio so that securities
mature approximately when funds are needed. The key to success in managing
liquidity is the degree of certainty in the cash flow projections. If future
cash flows are fairly uncertain, the liquidity risk increases. The Companys
liquidity requirements are met through a variety of sources, including cash and
cash equivalents, existing credit facilities and capital markets. Should the
Company experience further production shortfalls at Twangiza, delays in ramp up
at Namoya, equipment breakdowns, or delays in completion schedules, or should
the price of gold decrease further, the Company may need to further examine
funding options. See Note 31(e) of the Interim Financial Statements for
additional details.
Market Risk
Market risk is the potential for financial loss from adverse
changes in underlying market factors, including foreign-exchange rates,
commodity prices, interest rate and share based payment costs.
Foreign Operations and Political Risk
The Companys operations in the DRC are exposed to various
levels of political risk and uncertainties, including political and economic
instability, government regulations relating to exploration and mining, military
repression and civil disorder, all or any of which may have a material adverse
impact on the Companys activities or may result in impairment or loss of part
or all of the Company's assets. In recent years, the DRC has experienced two
wars and significant political unrest. Operating in the DRC may make it more
difficult for the Company to obtain required financing because of the perceived
investment risk.
Access to Capital Markets and Indebtedness Obligation Risk
In March 2012, the Company closed a $175,000 debt financing,
which included the issuance by the Company of $175,000 aggregate principal
amount of senior secured notes (Notes) with an interest rate of 10% and a
maturity date of March 1, 2017. As a result of this financing, together with
additional debt financings carried out during 2013 and 2014, the Company has a
significant amount of indebtedness. The Company and certain of its subsidiaries
also have financial obligations with respect to outstanding preferred shares.
The Companys high level of indebtedness and preferred share obligations could
have important adverse consequences, including: limiting the Companys ability
to obtain additional financing to fund future working capital, capital
expenditures, acquisitions or other general corporate requirements; requiring a
substantial portion of the Companys cash flows to be dedicated to debt service
payments and preferred share dividends instead of other purposes, thereby
reducing the amount of cash flows available for working capital, capital
expenditures, acquisitions and other general corporate purposes; increasing the
Companys vulnerability to general adverse economic and industry conditions;
limiting the Companys flexibility in planning for and reacting to changes in
the industry in which it competes; placing the Company at a disadvantage
compared to other, less leveraged competitors; and increasing the cost of
borrowing.
Banros inability to generate sufficient cash flows to satisfy
its debt obligations would materially and adversely affect the Companys
financial position and results of operations. If the Company cannot make
scheduled payments on its debt, the Company will be in default and holders of
the debt could declare all outstanding principal and interest to be due and
payable, and the Company could be forced into bankruptcy or liquidation.
The Indenture under which the Notes were issued contains a
number of restrictive covenants that impose significant operating and financial
restrictions on the Company and may limit the Companys ability to engage in
acts that may be in its long-term best interest. A breach of the covenants under this Indenture could result in an event of
default. In the event the Noteholders accelerate the repayment of the Companys
indebtedness, Banro may not have sufficient assets to repay that indebtedness.
As a result of these restrictions, Banro may be: limited in how it conducts its
business; unable to raise additional debt or equity financing to operate during
general economic or business downturns; or unable to compete effectively or to
take advantage of new business opportunities. These restrictions may affect the
Companys ability to grow in accordance with its strategy.
Page 21 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
Exploration and Development Risk
Certain of the Company's properties are in the exploration or
development stage only and have not commenced commercial production. The Company
currently does not generate income from properties under exploration and
development. The exploration and development of mineral deposits involve
significant financial risks over a significant period of time, which even a
combination of careful evaluation, experience and knowledge may not eliminate.
Few properties which are explored are ultimately developed into producing mines.
Major expenditures are required to establish reserves by drilling and to
construct mining and processing facilities at a site. It is impossible to ensure
that the Company's exploration or development programs will result in a
profitable commercial mining operation.
Mineral Reserve and Mineral Resources Estimates Risk
The Company's mineral resources and mineral reserves are
estimates and no assurance can be given that the indicated levels of gold will
be produced. Such estimates are expressions of judgment based on knowledge,
mining experience, analysis of drilling results and industry practices. Valid
estimates made at a given time may significantly change when new information
becomes available. While the Company believes that the resource and reserve
estimates for its properties are well established, by their nature resource and
reserve estimates are imprecise and depend, to a certain extent, upon
statistical inferences, which may ultimately prove unreliable. If such estimates
are inaccurate or are reduced in the future, this could have a material adverse
impact on the Company. In addition, there can be no assurance that gold
recoveries or other metal recoveries in small-scale laboratory tests will be
duplicated in larger scale tests under on-site conditions or during production.
Environmental, Health and Safety Risk
The Companys mining operation, exploration and development
activities are subject to extensive laws and regulations governing the
protection of the environment, waste disposal, worker safety and other related
hazards and risks normally incident to gold mining operations, exploration and
development, any of which could result in damage to life or property,
environmental damage and possible legal liability for any or all damage. A
breach of such laws and regulations may result in significant fines and
penalties. The Company intends to fully comply with all environmental and safety
regulation applicable in the DRC and comply with prudent international
standards.
Commodity Price Risk
The price of gold has fluctuated widely. The future direction
of the price of gold will depend on numerous factors beyond the Company's
control including international, economic and political trends, expectations of
inflation, currency exchange fluctuations, interest rates, global or regional
consumption patterns, speculative activities and increased production due to new
extraction developments and improved extraction and production methods. The
effect of these factors on the price of gold, and therefore on the economic
viability of the Company's properties, cannot accurately be predicted. To date
the Company has not adopted specific strategies for controlling the impact of
fluctuations in the price of gold.
Reference is made to the Company's annual report on Form 20-F
dated April 6, 2015 for additional risk factor disclosure (a copy of such
document can be obtained from SEDAR at www.sedar.com and EDGAR at
www.sec.gov).
OUTSTANDING SHARE
DATA
The authorized share capital of the Company consists of an
unlimited number of common shares and an unlimited number of preference shares,
issuable in series. As at May 13, 2015, the Company had outstanding 252,151
common shares, 116 series A preference shares, 1,200 series B preference shares,
stock options to purchase an aggregate of 23,016 common shares, 8,400 warrants
(with each such warrant entitling the holder to purchase one common share of the
Company at a price of $6.65 until March 1, 2017), additional warrants entitling
the holders to purchase a total of 13,300 common shares of the Company at a
price of Cdn$0.269 per share until August 18, 2017. Reference is also made to
the private placement completed in February 2014, pursuant to which preferred
shares of two subsidiaries of the Company were issued. At the option of the
holders of such preferred shares and at any time before the maturity date of
such preferred shares of June 1, 2017, the holders are entitled to exchange their preferred shares
into 63,000 common shares of the Company at a strike price of $0.5673 per common
share.
Page 22 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
DISCLOSURE CONTROLS AND
PROCEDURES
Management is responsible for establishing and maintaining
adequate internal controls over disclosure controls and procedures, as defined
in National Instrument 52-109 Certification of Disclosure in Issuers Annual
and Interim Filings of the Canadian Securities Administrators and Rules
13a-15(e) and Rule 15d-15(e) under the United States Exchange Act of
1934, as amended. Disclosure controls and procedures are designed to provide
reasonable assurance that all relevant information is gathered and reported to
senior management, including the Companys Chief Executive Officer and Chief
Financial Officer, on a timely basis so that appropriate decisions can be made
regarding public disclosure. As at December 31, 2014 management of the Company,
with the participation of the Chief Executive Officer and the Chief Financial
Officer, evaluated the effectiveness of the Companys disclosure controls and
procedures as required by Canadian securities laws. Based on that evaluation,
the Chief Executive Officer and the Chief Financial Officer concluded that, as
of December 31, 2014, the disclosure controls and procedures were ineffective
due to the identification of a material weakness in the information technology
general controls (ITGC) and in the controls over financial reporting relating
to the preparation and review of the statement of cash flow and sufficiency of
documentary evidence supporting the precision of review over the completeness
and accuracy of inputs, assumptions and formulas included in the impairment
models, as discussed in the internal control over financial reporting section
below. As such, there is a possibility that the internal control over financial
reporting will fail to detect a material misstatement in the financial
statements on a timely basis.
INTERNAL CONTROL OVER
FINANCIAL REPORTING
Internal controls have been designed to provide reasonable
assurance regarding the reliability of the Companys financial reporting and the
preparation of financial statements for external purposes in accordance with
IFRS. As at December 31, 2014, the Companys Chief Executive Officer and Chief
Financial Officer evaluated or caused to be evaluated under their supervision
the effectiveness of the Companys internal control over financial reporting. In
making this assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission in Internal Control
Integrated Framework of 1992. Based on that evaluation, the Chief Executive
Officer and the Chief Financial Officer concluded that, as of December 31, 2014,
there was a material weakness in ITGC and in the internal controls over
financial reporting relating to the preparation and review of the statement of
cash flow and sufficiency of documentary evidence supporting the precision of
review over the completeness and accuracy of inputs, assumptions and formulas
included in the impairment models.
With respect to ITGC, in H1 of 2014, the Company embarked on
SAP implementation that was fully operational by Q3 2014. The intention of the
system implementation was to improve the business processes on both an
operational control basis and ITGC basis. Due to limited resources and change in
personnel responsible for the SAP implementation, the Company focused its
efforts on system implementation and training but fell short of properly
implementing the new ITGC features in H2 of 2014, which has been deemed a
material weakness due to ineffective controls over access security and change
management resulting in a potential impact on the reliability of information
produced by the system. Management has hired external consultants to ensure that
the ITGC will be operating effectively by H2 2015.
With respect to internal controls in 2014 over the preparation
and review of the statement of cash flow, it came to managements attention that
the accounting treatment of a deferred revenue transaction first accounted for
in 2013 should have been classified in the consolidated statement of cash flow
as operating and investing activities instead of financing activities. The
Company restated the statement of cash flow as disclosed in note 34 of the 2014
Annual Financial Statements. As a result, the Company concluded that a material
weakness in internal controls over the preparation and review of the statement
of cash flow existed given the application of this inappropriate accounting
treatment in 2014. In the third quarter of 2014, the Company added two
additional chartered professional accountants to the finance team with extensive
experience in IFRS with major publicly traded companies in the mining industry.
Management believes that the enhanced finance team is capable of addressing the
preparation and review of the statement of cash flow.
With respect to internal controls in 2014 over the sufficiency
of documentary evidence supporting the precision of review over the completeness
and accuracy of inputs, assumptions and formulas included in the impairment
models, it came to managements attention that the level of documentary evidence
supporting the precision of the review was insufficient to appropriately
evidence the precision to which management reviewed the impairment models.
During the relevant reporting period, managements key focus in performing the
impairment analysis was on ensuring that the information included in the models
was complete and accurate in order to ensure appropriate conclusions were
reached for financial reporting. As no issues were identified with respect to
the inputs, assumptions and formulas that would change the conclusions reached in the impairment models, management
intends to enhance the level of documentation maintained in the review process
in relevant reporting periods through the establishment of enhanced standard
documentation procedures.
Page 23 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
The Company is required under Canadian securities laws to
disclose herein any change in the Companys internal control over financial
reporting that occurred during the Companys most recent interim period that has
materially affected, or is reasonably likely to materially affect, the Companys
internal control over financial reporting. Refer to the discussion above for the
Companys remediation plan with respect to material weaknesses identified in
2014.
It should be noted that a control system, including the
Companys disclosure controls and procedures system and internal control over
financial reporting system, no matter how well conceived, can provide only
reasonable, but not absolute, assurance that the objective of the control system
will be met and it should not be expected that the Companys disclosure controls
and procedures system and internal control over financial reporting will prevent
or detect all reporting deficiencies whether caused by either error or fraud.
Page 24 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
NON-IFRS MEASURES
Management uses cash cost, all-in sustaining cost, gold margin
and EBITDA to monitor financial performance and provide additional information
to investors and analysts. These metrics do not have a standard definition under
IFRS and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with IFRS. As these metrics do not have a
standardized meaning, it may not be comparable to similar measures provided by
other companies. However, the methodology used by the Company to determine cash
cost per ounce is based on a standard developed by the Gold Institute, which was
an association which included gold mining organizations, amongst others, from
around the world.
The Company defines cash cost, as recommended by the Gold
Institute standard, as all direct costs that the Company incurs relating to mine
production, transport and refinery costs, general and administrative costs,
movement in production inventories and ore stockpiles, less depreciation and
depletion. Cash cost per ounce is determined on a sales basis.
Cash Cost |
|
Q1 2015 |
|
|
Q1 2014 |
|
|
Q4 2014 |
|
|
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
Mine operating expenses |
|
24,281 |
|
|
24,398 |
|
|
24,782 |
|
Less: Depletion
and depreciation |
|
(6,386 |
) |
|
(4,391 |
) |
|
(7,466 |
)
|
Total cash costs |
|
17,895 |
|
|
20,007 |
|
|
17,316 |
|
Gold sales (oz)
|
|
33,956 |
|
|
24,427 |
|
|
29,264 |
|
Cash cost per ounce ($/oz) |
|
527 |
|
|
819 |
|
|
592 |
|
The Company defines all-in sustaining costs as all direct costs
that the Company incurs relating to mine production, transport and refinery
costs, general and administrative costs, movement in production inventories and
ore stockpiles, less depreciation and depletion plus all sustaining capital
costs (excluding exploration). All-in sustaining cost per ounce is determined on
a sales basis.
All-In Sustaining Cost |
|
Q1 2015 |
|
|
Q1 2014 |
|
|
Q4 2014 |
|
|
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
Mine operating expenses |
|
24,281 |
|
|
24,398 |
|
|
24,782 |
|
Less: Depletion
and depreciation |
|
(6,386 |
) |
|
(4,391 |
) |
|
(7,466 |
)
|
Total cash costs |
|
17,895 |
|
|
20,007 |
|
|
17,316 |
|
Sustaining capital
|
|
1,825 |
|
|
1,130
|
|
|
2,844
|
|
All-in cash costs |
|
19,720 |
|
|
21,137 |
|
|
20,160 |
|
Gold sales (oz)
|
|
33,956 |
|
|
24,427 |
|
|
29,264 |
|
All-in cash cost per ounce ($/oz) |
|
581 |
|
|
865 |
|
|
689 |
|
The Company defines gold margin as the difference between the
cash cost per ounce disclosed and the average price per ounce of gold sold
during the reporting period.
Banro calculates EBITDA as net income or loss for the period
excluding: interest, income tax expense, and depreciation and amortization.
EBITDA is intended to provide additional information to investors and analysts.
It does not have any standardized meaning prescribed by IFRS and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with IFRS. EBITDA excludes the impact of cash costs of financing
activities and taxes, and the effects of changes in operating working capital
balances, and therefore is not necessarily indicative of operating profit or
cash flow from operations as determined under IFRS. Other companies may
calculate EBITDA differently. A reconciliation between net profit for the period
and EBITDA is presented below:
EBITDA |
|
Q1 2015 |
|
|
Q1 2014 |
|
|
Q4 2014 |
|
|
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
Net income/(loss) |
|
6,780 |
|
|
(704 |
) |
|
3,750 |
|
Interest |
|
5,704 |
|
|
2,990 |
|
|
4,775 |
|
Taxes |
|
- |
|
|
- |
|
|
- |
|
Depletion and depreciation |
|
6,411 |
|
|
4,560
|
|
|
7,041
|
|
EBITDA |
|
18,895 |
|
|
6,846 |
|
|
15,566 |
|
Page 25 of 26
Banro Corporation |
MANAGEMENTS DISCUSSION AND ANALYSIS
- FIRST QUARTER 2015 |
CAUTIONARY NOTE TO U.S.
INVESTORS REGARDING RESERVE AND
RESOURCE ESTIMATES
This MD&A has been prepared in accordance with the
requirements of securities laws in effect in Canada, which differ from the
requirements of U.S. securities laws. Without limiting the foregoing, the
Company uses the terms "measured", "indicated" and "inferred" resources. U.S.
investors are advised that, while such terms are recognized and required by
Canadian securities laws, the U.S. Securities and Exchange Commission (the
"SEC") does not recognize them. Under U.S. standards, mineralization may
not be classified as a "reserve" unless the determination has been made that the
mineralization could be economically and legally produced or extracted at the
time the reserve determination is made. U.S. investors are cautioned not to
assume that all or any part of measured or indicated resources will ever be
converted into reserves. Further, "inferred resources" have a great amount of
uncertainty as to their existence and as to whether they can be mined legally or
economically. It cannot be assumed that all or any part of the "inferred
resources" will ever be upgraded to a higher category. Therefore, U.S. investors
are also cautioned not to assume that all or any part of the inferred resources
exist, or that they can be mined legally or economically. Disclosure of
"contained ounces" is permitted disclosure under Canadian regulations, however,
the SEC normally only permits issuers to report mineral deposits that do not
constitute "reserves" as in place tonnage and grade without reference to unit
measures. Accordingly, information concerning descriptions of mineralization and
resources disclosed by the Company, may not be comparable to information made
public by U.S. companies subject to the reporting and disclosure requirements of
the SEC.
National Instrument 43-101 - Standards of Disclosure for
Mineral Projects ("NI 43-101") is a rule of the Canadian Securities
Administrators which establishes standards for all public disclosure an issuer
makes of scientific and technical information concerning mineral projects.
Unless otherwise indicated, the Companys reserve and resource estimates have
been prepared in accordance with NI 43-101 and the Canadian Institute of Mining,
Metallurgy and Petroleum Classification System. These standards differ
significantly from the requirements of the SEC, and reserve and resource
information disclosed by the Company may not be comparable to similar
information disclosed by U.S. companies. One consequence of these differences is
that "reserves" calculated in accordance with Canadian standards may not be
"reserves" under the SEC standards.
U.S. investors are urged to consider closely the disclosure in
the Company's Form 20-F Annual Report (File No. 001-32399), which may be secured
from the Company, or from the SEC's website at http://www.sec.gov
Page 26 of 26
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, John Clarke, Chief Executive Officer and President of Banro
Corporation, certify the following: 1. Review: I have reviewed the
interim financial report and interim MD&A (together, the "interim filings")
of Banro Corporation (the "issuer") for the interim period ended March 31,
2015.
2. No misrepresentations: Based on my knowledge,
having exercised reasonable diligence, the interim filings do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated or that is necessary to make a statement not misleading in light of
the circumstances under which it was made, with respect to the period covered by
the interim filings.
3. Fair presentation: Based on my knowledge,
having exercised reasonable diligence, the interim financial report together
with the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial performance
and cash flows of the issuer, as of the date of and for the periods presented in
the interim filings.
4. Responsibility: The issuer's other certifying
officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (DC&P) and internal control over financial reporting
(ICFR), as those terms are defined in National Instrument 52-109
Certification of Disclosure in Issuers' Annual and Interim Filings, for
the issuer.
5. Design: Subject to the limitations, if any,
described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s)
and I have, as at the end of the period covered by the interim filings
|
(a) |
designed DC&P, or caused it to be designed under our
supervision, to provide reasonable assurance that |
|
|
|
|
|
|
(i) |
material information relating to the issuer is made known
to us by others, particularly during the period in which the interim
filings are being prepared; and |
|
|
|
|
|
|
(ii) |
information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it
under securities legislation is recorded, processed, summarized and
reported within the time periods specified in securities legislation;
and |
|
|
|
|
|
(b) |
designed ICFR, or caused it to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with the issuer's
GAAP. |
5.1 Control framework: The control framework the
issuer's other certifying officer(s) and I used to design the issuer's ICFR is
Internal Control Integrated Framework (1992) issued by The Committee of
Sponsoring Organizations of the Treadway Commission.
5.2 N/A. 5.3 N/A.
6. Reporting changes in ICFR: The issuer has
disclosed in its interim MD&A any change in the issuer's ICFR that occurred
during the period beginning on January 1, 2015 and ended on March 31, 2015 that
has materially affected, or is reasonably likely to materially affect, the
issuer's ICFR.
Date: May 13, 2015.
(signed) "John
Clarke"
Name: John Clarke
Title: Chief Executive Officer and
President
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Kevin Jennings, Chief Financial Officer of Banro
Corporation, certify the following:
1. Review: I have reviewed the interim financial
report and interim MD&A (together, the "interim filings") of Banro
Corporation (the "issuer") for the interim period ended March 31, 2015.
2. No misrepresentations: Based on my knowledge,
having exercised reasonable diligence, the interim filings do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated or that is necessary to make a statement not misleading in light of
the circumstances under which it was made, with respect to the period covered by
the interim filings.
3. Fair presentation: Based on my knowledge,
having exercised reasonable diligence, the interim financial report together
with the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial performance
and cash flows of the issuer, as of the date of and for the periods presented in
the interim filings.
4. Responsibility: The issuer's other certifying
officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (DC&P) and internal control over financial reporting
(ICFR), as those terms are defined in National Instrument 52-109
Certification of Disclosure in Issuers' Annual and Interim Filings, for
the issuer.
5. Design: Subject to the limitations, if any,
described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s)
and I have, as at the end of the period covered by the interim filings
|
(a) |
designed DC&P, or caused it to be designed under our
supervision, to provide reasonable assurance that |
|
|
|
|
|
|
(i) |
material information relating to the issuer is made known
to us by others, particularly during the period in which the interim
filings are being prepared; and |
|
|
|
|
|
|
(ii) |
information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it
under securities legislation is recorded, processed, summarized and
reported within the time periods specified in securities legislation;
and |
|
|
|
|
|
(b) |
designed ICFR, or caused it to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with the issuer's
GAAP. |
5.1 Control framework: The control framework the
issuer's other certifying officer(s) and I used to design the issuer's ICFR is
Internal Control Integrated Framework (1992) issued by The Committee of
Sponsoring Organizations of the Treadway Commission.
5.2 N/A. 5.3 N/A.
6. Reporting changes in ICFR: The issuer has
disclosed in its interim MD&A any change in the issuer's ICFR that occurred
during the period beginning on January 1, 2015 and ended on March 31, 2015 that
has materially affected, or is reasonably likely to materially affect, the
issuer's ICFR.
Date: May 13, 2015.
(signed) "Kevin
Jennings"
Name: Kevin Jennings
Title: Chief Financial Officer
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