Item 3. Key Information
A. Selected financial data
The selected historical consolidated financial information set forth below has been derived from our annual audited consolidated financial statements for the year ended December 31, 2017. For the years ended December 31, 2016, 2015, 2014 and 2013, the Company’s consolidated financial information was presented in Canadian dollars, and has been translated in this Form 20-F into United States dollars using the applicable exchange rates.
For the years ended December 31, 2017, 2016, 2015, 2014, and 2013, we have prepared our consolidated financial statements in accordance with IFRS, as issued by the IASB. We adopted IFRS with a transition date of January 1, 2010.
The selected historical consolidated financial information presented below is condensed and may not contain all of the information that you should consider. This selected financial data should be read in conjunction with our annual audited consolidated financial statements, the notes thereto and the section entitled ‘‘Item 5 — Operating and Financial Review and Prospects.’’
In accordance with IFRS
The tables below set forth selected consolidated financial data under IFRS for the years ended, and as at, December 31, 2017, 2016, 2015, 2014, and 2013. The information has been derived from our annual audited consolidated financial statements set forth in ‘‘Item 18 — Financial Statements.’’
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Years Ended December 31,
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2017
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2016
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2015
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2014
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2013
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Summary of Operations:
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Revenue
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$
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33,358,641
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$
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30,105,336
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$
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14,924,798
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$
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17,467,372
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$
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15,625,087
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Cost of sales
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21,975,130
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19,160,800
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8,573,200
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10,312,639
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8,706,727
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Mine operating income
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11,383,511
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10,944,536
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6,351,598
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7,154,733
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6,918,360
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Operating expenses
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5,330,795
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5,007,570
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3,329,166
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3,750,467
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4,123,499
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Income (loss) before other items and income taxes
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6,052,716
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5,936,966
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3,022,432
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3,404,266
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2,794,861
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Net income (loss)
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2,653,461
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1,503,531
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378,087
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2,275,678
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823,463
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Earnings (Loss) per share
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Basic
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$
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0.05
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$
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0.04
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$
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0.01
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$
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0.07
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$
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0.03
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Diluted
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$
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0.05
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$
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0.03
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$
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0.01
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$
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0.07
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$
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0.03
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Weighted average number of shares outstanding
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Basic
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52,523,454
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42,695,999
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36,229,424
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32,333,224
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27,405,179
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Diluted
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53,320,009
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43,791,451
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36,723,725
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33,273,740
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27,701,403
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2017
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2016
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2015
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2014
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2013
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Balance Sheet Data:
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Total assets
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$
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102,627,862
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$
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93,797,897
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$
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63,108,377
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$
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52,940,390
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$
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32,486,127
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Cash
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3,419,532
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11,779,718
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5,401,109
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3,663,300
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3,609,999
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Total liabilities
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33,690,545
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32,337,647
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25,580,413
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14,107,194
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9,406,936
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Shareholders’ equity
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68,937,317
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61,456,250
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37,527,964
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38,833,196
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23,079,191
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Share capital
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81,467,603
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80,784,973
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58,240,661
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55,381,240
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41,060,036
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Shares outstanding
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52,718,153
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52,431,001
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37,298,009
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35,374,813
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27,488,834
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Exchange Rates
The following table sets forth information as to the period end, average, the high and the low exchange rate for Canadian Dollars and U.S. Dollars for the periods indicated based on the noon buying rate in New York City for cable transfers in Canadian Dollars as certified for customs purposes by the Federal Reserve Bank of New York (Canadian dollar = US$1).
Fiscal Year Ended
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Average
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Period End
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High
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Low
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2013
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1.0301
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1.0636
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|
|
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1.0704
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|
|
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0.9838
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2014
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1.1045
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|
|
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1.1601
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|
|
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1.1643
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|
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1.0614
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2015
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1.2791
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|
|
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1.3839
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|
|
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1.3989
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|
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1.1725
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2016
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1.3243
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1.3426
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|
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1.4592
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|
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1.2544
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2017
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1.2984
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|
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1.2517
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|
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1.3745
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|
|
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1.2131
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The following table sets forth the high and low exchange rates for the past six months based on the noon buying rate. As of March
23
, 2018, the exchange rate was C$1.2870 for each US$1.
Month
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High
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Low
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September 2017
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1.2509
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|
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1.2131
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October 2017
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|
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1.2894
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|
|
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1.2470
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November 2017
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1.2890
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|
|
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1.2693
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December 2017
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1.2900
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1.2517
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January 2018
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|
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1.2534
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|
|
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1.2293
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February 2018
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|
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1.2806
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1.2280
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B. Capitalization and indebtedness
Not Applicable.
C. Reasons for the offer and use of proceeds
Not Applicable.
D. Risk factors
An investment in our common shares involves a high degree of risk and should be considered speculative. You should carefully consider the following risks set out below and other information before investing in our common shares. If any event arising from these risks occurs, our business, prospects, financial condition, results of operations or cash flows could be adversely affected, the trading price of our common shares could decline and all or part of any investment may be lost.
Our operations are highly speculative due to the high-risk nature of our business, which include the acquisition, financing, exploration, development of mineral properties and operation of mines. The risks and uncertainties set out below are not the only ones we face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial, may also impair our operations. If any of the risks actually occur, our business, financial condition and operating results could be adversely affected. As a result, the trading price of our common shares could decline and investors could lose part or all of their investment. Our business is subject to significant risks and past performance a is not a guarantee of future performance.
We will be required to raise additional capital to mine our properties.
The Company is currently focusing on further defining plans to mine its San Gonzalo and Avino mineralized material and on exploring and evaluating the Bralorne Mine project. The Company will be required to raise capital to further advance the San Gonzalo and Avino mines and its infrastructure. Our ability to raise funds will depend on several factors, including, but not limited to, current economic conditions, our perceived value for our properties, our prospects, metal prices, businesses competing for financing and our financial condition. There can be no assurance that we will be able to raise funds, or to raise funds on commercially reasonable terms. Historically, the Company has raised funds through equity and debt financing and the exercise of options and warrants. The raising of capital may have a dilutive effect on the Company’s per share book value.
We have only recently become profitable and no assurances can be given we will continue to be profitable in the future.
We began extracting and processing resources at levels intended by management at the San Gonzalo Mine during the fourth quarter of 2012 and at the Avino Mine in the second quarter of 2016. For the years ended December 31, 2017, 2016, 2015, 2014, and 2013, we earned net income of $2,653,461, $1,503,531, $378,087, $2,275,678, and $823,463, respectively. Prior to the 2013 fiscal year, we had not been profitable. There is no assurance that our operations will continue to be profitable in the future.
We have no proven or probable reserves, and our decision to commence extracting and processing resources at levels intended by management was not based on a study demonstrating economic recovery of any mineral reserves and is therefore inherently risky.
We have not established the presence of any proven or probable mineral reserves, as defined by the SEC, at any of our properties. Under Guide 7, the SEC has defined a “reserve” as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Any mineralized material discovered or produced by us should not be considered proven or probable reserves.
In order to demonstrate the existence of proven or probable reserves, it would be necessary for us to perform additional exploration to demonstrate the existence of sufficient mineralized material with satisfactory continuity and obtain a positive feasibility study which demonstrates with reasonable certainty that the deposit can be economically and legally extracted and produced. We have not completed a feasibility study with regard to all or a portion of any of our properties to date. Since we commenced extracting and processing resources of mineralized material at levels intended by management at the San Gonzalo Mine and the Avino Mine without a feasibility study, there is inherent uncertainty as to whether the mineralized material can be economically produced or if so, for what period of time. The absence of proven or probable reserves makes it more likely that our properties may cease to be profitable and that the money we spend on exploration and evaluation may never be recovered.
We decided to begin extracting and processing resources at levels intended by management at the San Gonzalo Mine and the Avino Mine without preparing a pre-feasibility study or bankable feasibility study which may subject us to more risks.
We decided to begin extracting and processing resources at levels intended by management at the San Gonzalo Mine and the Avino Mine without preparing a pre-feasibility study or bankable feasibility study which is a more common practice within the mining industry and therefore may subject us to more business risks. Our decision to begin extracting and processing resources at the San Gonzalo Mine and the Avino Mine were based on limited prior historical information, bulk sample drilling programs, small pilot plant and bench scale testing. Therefore our decision to begin extracting and processing resources at the San Gonzalo Mine and the Avino Mine were based on limited information which may or may not be representative of information regarding the mines had we otherwise prepared a more comprehensive study. In addition, basing our decision to begin extracting and processing resources on limited information may make us susceptible to risks including:
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certain difficulties in obtaining expected metallurgical recoveries when scaling up to extracting and processing activities at levels intended by management from pilot plant scale;
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·
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the preliminary nature of mine plans and processing concepts and applying them to full scale extracting and processing activities at levels intended by management;
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·
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determining operating/capital cost estimates and possible variances associated with constructing, commissioning and operating the San Gonzalo and Avino facilities based on limited information;
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·
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that metallurgical flow sheets and recoveries are based on information at the time and may not be representative of results of the San Gonzalo Mine and/or the Avino Mine; and
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·
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that we may underestimate capital and operating costs without a comprehensive bankable feasibility study.
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Exploration and development.
The business of exploration and development for minerals involves a high degree of risk and few properties become producing mines. Unprofitable efforts result not only from the failure to discover mineral deposits, but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. There is no assurance that the Company’s future exploration and development activities will result in any discoveries of commercial bodies of ore. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of mining facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection, the combination of which factors may result in the Company not receiving an adequate return on invested capital.
The mining industry is highly speculative and involves substantial risks.
Even when mining is conducted on properties known to contain significant quantities of mineral deposits it is generally accepted in the mining industry that most exploration projects do not result in the discovery of mineable deposits of ore that can be extracted in a commercially economic manner. There may be limited availability of water, which is essential to milling operations, and interruptions may be caused by adverse weather conditions. Operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air quality standards, pollution and other environmental protection controls. Mining activities are subject to substantial operating hazards, some of which are not insurable or may not be insured for economic reasons.
The commercial quantities of ore cannot be accurately predicted.
Whether an ore body will be commercially viable depends on a number of factors including the particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as minerals prices and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in a mineral deposit being unprofitable.
There are no assurances that we can produce minerals on a commercially viable basis.
The Company’s ability to generate revenue and profit is expected to occur through exploration, evaluation, advancement and operation of its existing properties as well as through acquisitions of interests in new properties. Substantial expenditures will be incurred in an attempt to establish the economic feasibility of mining activities by identifying mineral deposits and establishing ore reserves through drilling and other techniques, developing metallurgical processes to extract metals from ore, designing facilities and planning mining activities. The economic feasibility of a project depends on numerous factors, including the cost of mining and production facilities required to extract the desired minerals, the total mineral deposits that can be mined using a given facility, the proximity of the mineral deposits to refining facilities, and the market price of the minerals at the time of sale. There is no assurance that existing or future exploration programs or acquisitions will result in the identification of deposits that can be mined profitably.
Mining activities and exploration activities are subject to various federal, provincial and local laws and regulations.
Laws and regulations govern the development, mining, production, importing and exporting of minerals, taxes, labour standards, occupational health, waste disposal, protection of the environment, mine safety, toxic substances, and other matters. In many cases, licenses and permits are required to conduct mining operations. Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a substantial adverse impact on the Company. Applicable laws and regulations will require the Company to make certain capital and operating expenditures to initiate new activity. Under certain circumstances, the Company may be required to suspend an activity once it is started until a particular problem is remedied or to undertake other remedial actions.
Mining activities are inherently risky.
Mining activities are risky and heavily regulated. Despite our attempts to minimize accidents through strict safety procedures, individuals may be injured or harmed working in our mines. Should any accidents occur, our mine may be partially or fully shut down to aid regulators in their investigation, even if it is determined we are not at fault for the cause of the accident. In this regard, there were two accidental deaths at the Company’s San Gonzalo mine in March 2016, and an accidental death at the Avino mine complex processing facility in June 2014. We do not believe that we were at fault in these accidents and, unfortunately, believe that the accidents were the result of the employees not following the proper safety protocols. Following the accidents, local authorities allowed us to resume mining activities. Notwithstanding our belief that we were not at fault for the accidents, we may nevertheless be found liable and subject to fines and/or penalties or we may be required to revise and implement new safety procedures that would make it more costly to operate our mines. Currently, we do not have insurance covering accidents, but may obtain insurance in the future.
Mining operations and uninsured risks.
Mining operations generally involve a high degree of risk which even a combination of experience, knowledge and careful evaluation may not be able to overcome. The business of mining and exploration is subject to a variety of risks including, but not limited to, fires, power outages, labour disruptions, industrial accidents, flooding, explosions, cave-ins, landslides, environmental hazards, technical failures, and the inability to obtain suitable or adequate machinery, equipment or labour. Such occurrences, against which the Company cannot, or may elect not to insure, may delay production, increase production costs or result in liabilities. The payment of such liabilities may have a material adverse effect on the Company’s financial position. The economics of developing mineral properties are affected by such factors as the cost of operations, variations in the grade and metallurgy of the ore mined, fluctuations in mineral markets, costs of processing and equipment, transportation costs, government regulations including regulations relating to royalties, allowable production, importing and exporting of mineral product, and environmental protection rules and regulations.
Market forces.
There is no assurance that, even if commercial quantities of mineral resources are discovered, that these can be sold at a profit. Factors beyond the control of the Company may affect the marketability of any mineral occurrences discovered. The prices of silver, gold and copper have experienced volatile and significant movements over short periods of time, and are affected by numerous factors beyond the control of the Company, including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically, the United States dollar relative to the Canadian dollar and other currencies), interest rates and global or regional consumption patterns (such as the development of gold coin programs), speculative activities and increased production due to improved mining and production methods.
Foreign corrupt practices legislation.
The Company is subject to the
Foreign Corrupt Practices Act
(the “
FCPA
”), the
Corruption of Foreign Public Officials Act
(Canada) (“
CFPOA
”), and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by persons and issuers as defined by the statutes, for the purpose of obtaining or retaining business. It is our policy to implement safeguards to discourage these practices by our employees; however, our existing safeguards and any future improvements may prove to be less than effective and our employees, consultants, sales agents or distributors may engage in conduct for which the Company might be held responsible. Violations of the FCPA, CFPOA, and/or other laws may result in criminal or civil sanctions and the Company may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. Beginning with our fiscal year ending December 31, 2016, the Company is also subject to the
Extractive Sector Transparency Measures Act
(Canada) (“
ESTMA
”), which requires us to maintain records of specific payments (including taxes, royalties, fees, production entitlements, bonuses, dividends, and infrastructure improvements) to all government entities in Canada and abroad, and to publicly disclose payments of $100,000 or more in any payment category on an annual basis within 150 days of our fiscal year end, to increase transparency and deter corruption in the extractive industry sector.
The validity of the title to our mining properties may be challenged.
In those jurisdictions where the Company has property interests, the Company undertakes searches of mining records and obtains title opinions from reputable counsel in accordance with mining industry practices to confirm satisfactory title to properties in which it holds or intends to acquire an interest, but does not obtain title insurance with respect to such properties. The possibility exists that title to one or more of its properties, particularly title to undeveloped properties, might be defective because of errors or omissions in the chain of title, including defects in conveyances and defects in locating or maintaining such claims, prior unregistered agreements or transfers, and title may be affected by undetected defects or native land claims. For unsurveyed mineral claims, the boundaries of such mining claims may be in doubt. The ownership and validity of mining claims are often uncertain and may be contested. The Company is not aware of any challenges to the location or area of its mineral claims. There is, however, no guarantee that title to the Company’s properties will not be challenged or impugned in the future. The properties may be subject to prior unregistered agreements or transfers.
In Mexico and British Columbia legal rights applicable to mining concessions or mineral claims, as applicable, are different and separate from legal rights applicable to surface lands; accordingly, title holders of mining concessions or mineral claims must accommodate and agree with surface land owners on compensation in respect of mining activities conducted on such land.
Dividend policy
We have never paid, and we do not intend to pay, any cash dividends in the foreseeable future.
Certain provisions of organizational documents may discourage takeovers and business combinations that our shareholders may consider in their best interests, which could negatively affect our stock price.
Certain provisions of our Articles of Incorporation (“Articles”) may have the effect of delaying or preventing a change in control of our Company or deterring tender offers for our common shares that other shareholders may consider in their best interests.
Our Articles authorize us to issue an unlimited number of common shares. Shareholder approval is not necessary to issue our common shares. Issuance of these common shares could have the effect of making it more difficult and more expensive for a person or group to acquire control of us, and could effectively be used as an anti-takeover device.
Our Articles provide for an advance notice procedure for shareholders to nominate director candidates for election or to bring business before an annual meeting of shareholders, including proposed nominations of persons for election to our board of directors, and require that special meetings of shareholders be called by the board or shareholders who hold at least 5% of the total issued and outstanding shares.
Competition
.
There is a limited supply of desirable mineral lands available for acquisition, claim staking or leasing in the areas where the Company contemplates expanding its operations and conducting exploration activities. Many participants are engaged in the mining business, including large, established mining companies. There can be no assurance that the Company will be able to compete successfully for new mining properties. The resource industry is intensely competitive in all of its phases, and the Company competes with many companies possessing greater financial resources and technical facilities than itself. Competition could adversely affect the Company’s ability to acquire suitable producing properties or prospects exploration in the future.
Uncertainty of exploration and evaluation programs
.
The Company’s profitability is significantly affected by the costs and results of its exploration and evaluation programs. As mines have limited lives, the Company actively seeks to expand its mineral resources, primarily through exploration, evaluation and strategic acquisitions. Exploration for minerals is highly speculative in nature, involves many risks and is frequently unsuccessful. Among the many uncertainties inherent in any silver, gold, and/or copper exploration and evaluation program are the location of economic ore bodies, the development of appropriate metallurgical processes, the receipt of necessary governmental permits and the construction of mining and processing facilities. Assuming the discovery of an economic deposit, depending on the type of mining operation involved, several years may elapse from the initial phases of drilling until commercial operations are commenced and, during such time, the economic feasibility of extracting and processing resources may change. Accordingly, the Company’s exploration and evaluation programs may not result in any new economically viable mining operations or yield new mineral resources to expand current mineral resources.
Permitting.
Existing and possible future environmental legislation, regulations and actions could give rise to additional expense, capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be predicted. Regulatory requirements and environmental standards are subject to constant evaluation and may become more restrictive, which could materially affect the business of the Company or its ability to develop its properties. Before production can commence on any of its mineral properties, the Company must obtain regulatory and environmental approvals. There is no assurance that such approvals will be obtained, or if they are obtained, if they will be granted on a timely basis. The cost of compliance with existing and future governmental regulations has the potential to reduce the profitability of operations or preclude entirely the economic development of the Company’s mineral projects and properties.
Permitting of exploration programs in Mexico requires the completion of agreements with the indigenous communities in the vicinity of the project. The timing for the completion of such agreements is unpredictable. The process of obtaining such agreements is also affected by the two-year election cycle for the councils of the indigenous communities.
Political
or economic instability or unexpected regulatory change
.
Our primary property is located in a foreign country that may be subject to political and economic instability, or unexpected legislative change, than is usually the case in certain other countries, provinces and states. Our mineral exploration and mining activities could be adversely effected by:
·
|
political instability and violence;
|
·
|
war and civil disturbances;
|
·
|
expropriation or nationalization;
|
·
|
changing fiscal regimes;
|
·
|
fluctuations in currency exchange rates;
|
·
|
high rates of inflation;
|
·
|
underdeveloped industrial and economic infrastructure;
|
·
|
changes in the regulatory environment governing exploration and evaluation assets; and
|
·
|
unenforceability of contractual rights, any of which may adversely affect our business in that country.
|
We may be adversely affected by fluctuations in foreign exchange rates
.
We maintain our bank accounts in Canadian and U.S. Dollars and Mexican pesos. Any appreciation in the currency of Mexico or other countries where we may carry out exploration and mining activities against the Canadian or U.S. Dollar will increase our costs of carrying out operations in such countries. In addition, any increase in the Canadian Dollar against the U.S Dollar will result in a loss on our financial statements to the extent we hold funds in Canadian Dollars. Copper, gold and silver are typically sold in U.S. dollars. As a result, the Company is subject to foreign exchange risks relating to the relative value of the U.S. dollar as compared to the Canadian dollar and the Mexican peso. To the extent that the Company generates revenues at the Avino Mine or San Gonzalo Mine, it will be subject to foreign exchange risks as revenues will be received in U.S. dollars while certain operating and capital costs will be incurred primarily in Mexican pesos. A decline in the U.S. dollar would result in a decrease in the Company’s revenues and adversely impact the Company’s financial performance.
Land reclamation requirements
.
Although variable, depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration and mining companies in order to minimize the long term effects of land disturbance. Reclamation may include requirements to control dispersion of potentially deleterious effluents and reasonably re-establish pre-disturbance land forms and vegetation. In order to carry out reclamation obligations imposed on us in connection with our mineral exploration and mining activities we must allocate financial resources that might otherwise be spent on further exploration or acquisition programs.
Acquisitions
the Company may undertake may change our business or expose us to risks.
The Company undertakes evaluations of opportunities to acquire additional silver and gold mining properties. Any resultant acquisitions may be significant in size, may change the scale of the Company’s business, and may expose the Company to new geographic, political, operating, financial and geological risks. The Company’s success in its acquisition activities depends on its ability to identify suitable acquisition candidates, acquire them on acceptable terms, and integrate their operations successfully. Any acquisitions would be accompanied by risks, such as a significant decline in the price of silver or gold, the mineralized material proving to be below expectations, the difficulty of assimilating the operations and personnel of any acquired companies, the potential disruption of the Company’s ongoing business, the inability of management to maximize the financial and strategic position of the Company through the successful integration of acquired assets and businesses, the maintenance of uniform standards, controls, procedures and policies, the impairment of relationships with customers and contractors as a result of any integration of new management personnel and the potential unknown liabilities associated with acquired mining properties. There can be no assurance that the Company would be successful in overcoming these risks or any other problems encountered in connection with such acquisitions.
Current global financial conditions.
Financial markets globally have been subject to increased volatility. Access to financing has been negatively affected by liquidity crises and uncertainty with respect to sovereign defaults throughout the world. These factors may impact the ability of the Company to obtain loans and other forms of financing in the future and, if obtained, on terms favourable to the Company. If these levels of volatility and market turmoil continue or worsen, the Company may not be able to secure appropriate debt or equity financing when needed, any of which could affect the trading price of the Company’s securities in an adverse manner.
Dilution.
There are a number of outstanding securities and agreements pursuant to which Common Shares of the Company may be issued in the future. If these Common Shares are issued, this will result in further dilution to the Company’s shareholders. An investor’s equity interest in the Company may also be diluted by future equity financings of the Company.
Conflicts of interest
.
There are potential conflicts of interest to which all of the directors, officers, insiders and promoters of the Company will be subject in connection with the operations of the Company. All of the directors, officers, insiders and promoters are engaged in and will continue to be engaged in corporations or businesses which may be in competition with the Company. Accordingly, situations may arise where all of the directors, officers, insiders and promoters will be in direct competition with the Company. The Company has a process to identify and declare any conflicts. Conflicts, if any, will be subject to the procedures and remedies as provided under the Business Corporations Act of British Columbia.
Dependence on management
.
We are dependent on the services of key executives including our President and Chief Executive Officer and other highly skilled and experienced executives and personnel focused on advancing our corporate objectives as well as the identification of new opportunities for growth and funding. Due to our relatively small size, the loss of these persons or our inability to attract and retain additional highly skilled employees required for our activities may have a material adverse effect on our business and financial condition.
Competition for recruitment and retention of qualified personnel
.
We compete with other exploration and mining companies, many of which have greater financial resources than us or are further in their advancement, for the recruitment and retention of qualified employees and other personnel. Competition for exploration and mining resources at all levels is highly cyclical and can quickly become very intense, particularly affecting the availability of manpower, drill rigs and supplies. Recruiting and retaining qualified personnel in the future is critical to the Company’s success. As the Company explores its Avino Mine and San Gonzalo Mine and other properties, the need for skilled labour will increase. The number of persons skilled in the exploration of mining properties is limited and competition for this workforce is intense. The exploration and other initiatives of the Company may be significantly delayed or otherwise adversely affected if the Company cannot recruit and retain qualified personnel and/or obtain other exploration and mining resources as and when required.
Limited and volatile trading volume
.
Although the Company’s common shares are listed on the NYSE American, the Toronto Stock Exchange, referred to as the “TSX” (the Company graduated from the TSX Venture Exchange on January 8, 2018), the Frankfurt Stock Exchange, referred to as the “FSE”, and the Berlin Stock Exchange, the volume of trading has been limited and volatile in the past and is likely to continue to be so in the future, reducing the liquidity of an investment in the Company’s common shares and making it difficult for investors to readily sell their common shares in the open market. Without a liquid market for the Company’s common shares, investors may be unable to sell their shares at favorable times and prices and may be required to hold their shares in declining markets or to sell them at unfavorable prices.
Volatility of share price
.
In recent years, securities markets in general have experienced a high level of price volatility. The market price of many resource companies, particularly those, like the Company, that are considered speculative exploration and mining companies, have experienced wide fluctuations in price, resulting in substantial losses to investors who have sold their shares at a low price point. These fluctuations are based only in part on the level of progress of exploration, and can reflect general economic and market trends, world events or investor sentiment, and may sometimes bear no apparent relation to any objective factors or criteria. Significant fluctuation in the Company’s common share price is likely to continue.
Difficulty for United States investors to effect services of process against the Company.
The Company is incorporated under the laws of the Province of British Columbia, Canada. Consequently, it will be difficult for United States investors to affect service of process in the United States upon the directors or officers of the Company, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the Exchange Act. The majority of the Company’s directors and officers are residents of Canada and many of the Company’s assets are located outside of the United States. A judgment of a United States court predicated solely upon such civil liabilities would probably be enforceable in Canada by a Canadian court if the United States court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities.
Item 4. Information on the Company
A. History and development of the Company
The Company was incorporated by Memorandum of Association under the laws of the Province of British Columbia on May 15, 1968, and on August 22, 1969, by virtue of an amalgamation with Ace Mining Company Ltd., became a public company whose common shares are registered under the Exchange Act, changing its name to Avino Mines & Resources Limited. On April 12, 1995, the Company changed its corporate name to International Avino Mines Ltd. and effected a reverse stock split of one common share for every five common shares outstanding. On August 29, 1997, the Company changed its corporate name to Avino Silver & Gold Mines Ltd., its current name, to better reflect the business of the Company of exploring for and mining silver and gold. In January 2008, the Company announced the change of its financial year end from January 31 to December 31. The change was completed in order to align the Company’s financial statement reporting requirements with its Mexico subsidiaries which operate on a calendar fiscal year.
The Company is a reporting issuer in all of the Provinces of Canada, except for Quebec, a foreign private issuer with the SEC and is listed on the Toronto Stock Exchange (the Company graduated from the TSX Venture Exchange on January 8, 2018), under the symbol “ASM”, on the NYSE-American under the symbol “ASM”, and on the Berlin and Frankfurt Stock Exchanges under the symbol “GV6”. The principal executive office of the Company is located at Suite 900, 570 Granville Street, Vancouver, British Columbia V6C 3P1, and its telephone number is 604-682-3701.
The Company is a natural resource company, primarily engaged in the extracting and processing of gold, silver, and copper and the acquisition and exploration of natural resource properties. The Company’s principal business activities have been the exploration for and extracting and processing of gold, silver, and copper at mineral properties located in the State of Durango, Mexico. The Company also owns other exploration and evaluation assets in British Columbia and the Yukon Territory, Canada.
B. Business overview
Operations and Principal Activities
The Company is a Canadian-based resource firm focused on silver, gold, and copper exploration, extraction and processing. The Company has a long prior history of operation, beginning in 1968 with the development of the Avino Silver Mine, located in the state of Durango, Mexico (the “Avino Mine”). From 1974 to 2001, the Avino Mine produced silver, gold, copper and lead and provided hundreds of jobs for the Durango region before closing due to depressed metal prices and closing of a smelter. Beginning in 2002, the Company re-directed its corporate strategy to focus almost entirely on silver, and began acquiring silver properties in North America. The Company acquired the Eagle property in Canada’s Yukon Territory and the Aumax silver and gold property in British Columbia. Each property produced encouraging assays for silver through drilling and sampling, however, in late April 2012, the Company relinquished its interest in the Aumax silver and gold property to focus on its property in Mexico. In October 2014, Avino acquired the past producing Bralorne Gold Mine in British Columbia as a wholly owned subsidiary. The Avino Mine in Mexico, the Bralorne Mine in British Columbia, and surrounding mineral leases continue to hold silver and gold potential. The Company also has an Option Agreement with Alexco Resources Corp. on its wholly-owned Eagle Property located in the Yukon Territory. These properties, along with other silver and gold projects, will remain the Company’s principal focus for the foreseeable future.
Presently, the Company is an exploration-stage company pursuant to SEC Industry Guide 7 as it has not yet established mineral reserves. On October 1, 2012, the Company declared that extracting and processing resources at levels intended by management had been achieved at the San Gonzalo Mine. The decision was based on the following criteria:
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All major capital expenditures to bring the San Gonzalo Mine into the condition necessary for it to be capable of operating in the manner intended by management had been completed;
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The Company completed testing of the mine plant for a significant period of time and tuned it to a level appropriate for efficient profitable operations;
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The Company proved the ability to produce a saleable bulk concentrate – this was established by conducting the bulk sample program in 2010 and 2011;
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The mine is operated by the Company’s own operating personnel with the exception of underground mine advancement for which it uses a mining contractor to achieve more efficiency;
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The mill has reached the pre-determined percentage of design capacity which is 250 tpd for processing San Gonzalo mineralized material;
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Mineral recoveries are at and above expected extracting and processing levels; and
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The Company has demonstrated the ability to sustain ongoing extraction and processing of mineralized material at a steady level.
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The above factors were considered in making the decision that extracting and processing resources at levels intended by management had been achieved as at October 1, 2012, and management is confident that its decision is appropriate and accurately reflects the stage the Company is in.
In the second quarter of 2016, the Company declared that effective April 1, 2016 extracting and processing resources at levels intended by management had been achieved at the Avino Mine following an advancement and test period of 19 months. The decision was based on the following criteria:
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All critical capital components have been acquired and installed to achieve desired mining and processing results;
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The necessary labor force, including production and development mining contractors, has been secured to mine and process at planned levels of output;
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The mill has consistently processed at levels above design capacity and budgeted production levels of 1,250 tpd with consistent recoveries and grades; and
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As previously disclosed, the Company has entered into a long term sales agreement with Samsung C&T U.K. Limited (“Samsung”). Further, Samsung has provided Avino with a term facility which has provided capital to facilitate further expansion and development of the Avino Mine.
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The above factors were considered in making the decision that extracting and processing resources at levels intended by management had been achieved as at April 1, 2016, and management is confident that its decision is appropriate and accurately reflects the stage the Company is in.
On July 8, 2014, Avino acquired a 33.33% interest in Bralorne from an unrelated party on the open market for cash consideration of C$2,660,000 in connection with its intention to acquire all of the outstanding common shares of Bralorne. With the acceptance of the TSX-V, Avino also made a C$1,250,000 loan to Bralorne (in three tranches) to provide immediate working capital. The loan carried interest at 12% per annum, and the principal amount and accrued interest were secured by a general security agreement against all of the assets of Bralorne. On October 20, 2014, under the plan of arrangement, Bralorne shareholders received 2,636,845 common shares of Avino, resulting in Bralorne becoming a wholly-owned subsidiary of Avino. All unexercised outstanding stock options of Bralorne were cancelled, and Bralorne’s common shares were delisted from the TSX Venture Exchange and the OTCQX.
In August 2014, Avino and Bralorne Gold Mines Ltd. (“Bralorne”) entered into a binding arrangement agreement, whereby Avino would acquire all of the outstanding common shares of Bralorne, which Avino did not already own, by way of a plan of arrangement under the Business Corporations Act (British Columbia). Bralorne holds an undivided 100% interest in the Bralorne Mine project in British Columbia.
Avino’s remaining Mexican properties other than San Gonzalo and Avino as well as its Canadian properties are all in the exploration stage. In order to determine if a commercially viable mineral deposit exists in any of these properties, further geological work will need to be done, and based upon the results of that work a final evaluation will need to be made to conclude on economic and legal feasibility. The Company is currently focusing on extracting and processing resources at the San Gonzalo Mine and the Avino Mine, and exploration of the Avino property in Mexico and the Bralorne Mine project in British Columbia, Canada. The Company’s other Canadian properties are not deemed to be material and are subject to care and maintenance for further exploration and evaluation, if any.
Competition
The mining industry in which the Company is engaged is highly competitive. Competitors include well-capitalized mining companies, independent mining companies and other companies having financial and other resources far greater than those of the Company. The Company competes with other mining companies in connection with the acquisition of gold, silver and other base metal properties. In general, properties with a higher grade of recoverable minerals and/or which are more readily mined afford the owners a competitive advantage in that the cost of production of the final mineral product is lower.
Seasonality
Certain of our operations are conducted in British Columbia and the Yukon Territory. The weather during the colder seasons in these areas can be extreme and can cause interruptions or delays in our operations. As a result, the preferable time for activities in these regions is spring and summer when costs are more reasonable and access to the properties is easier. In the summer months, however, if the weather has been unusually hot and dry, access to the Company’s properties may be limited as a result of access restrictions being imposed to monitor the risks of forest fires.
Governmental Regulation
The current and anticipated future operations of the Company, including exploration and evaluation activities and extracting and processing resources on its properties, require permits from various federal, territorial and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that the Company obtain permits from various governmental agencies. The Company believes it is in substantial compliance with all material laws and regulations which currently apply to its activities. There can be no assurance, however, that all permits which the Company may require for construction of mining facilities and conduct of mining activities will be obtainable on reasonable terms or that such laws and regulations, or that new legislation or modifications to existing legislation, would not have an adverse effect on any exploration or mining project which the Company might undertake.
The Company believes it has obtained all necessary permits and authorizations required for its current exploration and mining activities. The Company has had no material costs related to compliance and/or permits in recent years, and anticipates incurring necessary expenditures to maintain compliance in the future. Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Company and cause increases in capital expenditures which could result in a cessation of operations by the Company.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in exploration and mining activities may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations.
The enactment of new laws or amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or costs of extracting and processing resources or reductions in levels of extracting and processing resources at its mining properties or require abandonment or delays in the exploration and evaluation of new mining properties.
Governmental Regulation - Mexico
Mineral exploration and mining in Mexico is covered under the Mining Law as first published in June 1992, and most recently amended in August 2014. Mining activities in Mexico are administered by the Ministry of Economy. Environmental regulations are covered under “Ley General del Equilibrio Ecológio y la Protección al Ambiente” (General Law of Ecological Balance and Environmental Protection) and its regulations. Certain other environmental laws, including “Ley de Aguas Nacionales” (Law of National Waters) and “Ley Forestal” (Forestry Law) and their associated regulations may also cover certain operations. The kind of permits or authorizations required to conduct mining or mineral exploration operations in Mexico depend upon the type of operation. Common exploration activities do not require prior environmental authorization or licenses, but it is advisable to request a confirmation from the National Water Commission that planned operations will not affect the water table. It is also necessary to confirm that any planned operations will not be conducted in protected natural areas.
Governmental Regulation - British Columbia
The Bralorne Mine holds a Mining Permit M-207 under the Mining Act of British Columbia as administered by the Ministry of Energy, Mines and Petroleum Resources (“EMPR”). A permit amendment for Permit M-207 was received in November 2017 updating the Permit to current standards and allowing the company to restart the Bralorne Mine at 100 tons per day, which included incorporation of the updated Interim Closure and Reclamation Plan (“ICRP”). An additional permit amendment to Permit M-207 to allow for expansion beyond the 100 tons per day is currently being worked on by the Company.
The Bralorne Mine holds an emissions
Permit 14479
and an effluent Permit
14480
under the Ministry of Environment (British Columbia). Both environmental Permits are current. Bralorne Mines has applied for a Permit amendment for expanded water treatment under the effluent Permit 14480. The Permit amendment is underway
with the Technical Assessment Report submitted
.
Mining activities in British Columbia are subject to the Mines Act and the Health, Safety and Reclamation Code (the “Code”), which are administered by the EMPR, and in particular its Mines and Minerals Resource Division, as well as the Chief Inspector of Mines. Mining permits are issued upon meeting certain conditions, including the provision of a security reclamation bond, and mining activities are regularly inspected for compliance with the Code.
C.
Organizational structure
The Company’s Mexican subsidiaries are the wholly owned subsidiary Oniva Silver and Gold Mines S.A. de C.V., referred to as “Oniva”, Promotora, in which the Company has direct ownership of 79.09%, and Avino Mexico in which the Company has a 98.45% direct ownership and an additional 1.22% indirect ownership held through Promotora. The Company’s total effective ownership interest in Avino Mexico is 99.67%. All of these subsidiaries are incorporated under the laws of Mexico. The Company also owns 100% of Bralorne Gold Mines Ltd., incorporated in British Columbia, Canada.
D. Property, plant and equipment
The Company is extracting resources and processing it to yield a bulk silver/gold concentrate at the San Gonzalo Mine and a copper concentrate from the Avino Mine, both of which are located on the Avino property in Durango, Mexico. The Company is also exploring options to re-process a large tailings resource left from past mining on the Avino property. In addition, we have optioned the Eagle Claims in the Yukon to Alexco Resource Corp. and are exploring our remaining gold and silver projects in Canada.. All of the Company’s mineral property interests in Canada are wholly-owned by the Company. In Mexico, the Company has a 99.67% interest in Avino Mexico, a Mexican company which is involved in the mining of commercial resources and resource exploration and evaluation, including the operation of the Avino and San Gonzalo Mines.
The Company owns and manages its Canadian properties. Exploration in Canada is focused on the Bralorne Mine project in southwest British Columbia which was acquired by the Company in 2014. The Bralorne Mine project is considered in the advanced exploration phase and extracting and processing resources at trial levels took place between 2011 and 2014. In addition to the Bralorne Mine project, Avino has in recent years conducted limited prospecting, trenching and drill programs on the Eagle (which has been optioned to Alexco Resource Corp.), Olympic-Kelvin, and Minto properties.
The Company uses detailed sampling to provide the basis for quality estimates and grades of its mineral discoveries. Samples are collected under the supervision of a qualified person who then follows procedures for the collection, sample preparation and chain of custody guidelines for the shipment of the samples to a certified commercial laboratory as set out in National Instrument 43-101. These commercial labs have standard Quality Assurance/Quality Control protocols in place for the various assaying methods that are being used on the samples. In addition, blanks, standards and duplicates are generally used to confirm the validity of the results before they are reported.
Avino Property, Durango, Mexico
Location
The property is located in Durango State in North Central Mexico, within the Sierra Madre Silver Belt on the eastern edge of the Sierra Madre Occidental mountain range. The nearest major center is the city of Durango, 82 km to the southwest of the property. The property is within the municipality of Pánuco de Coronado between the towns of Pánuco de Coronado and San José de Avino. The property is located at latitude N 24° 53’, longitude W 104° 31’, 14 km northwest of Highway 40D.
The property is situated as illustrated in the figures below:
General Property Location Map
Regional Property Location Map
Accessibility and Local Resources
The property is accessible by road and is an important part of the local community from which skilled workers are available. Access is provided by Highway 40, a four-lane highway leading from Durango, past the airport and on to the city of Torreon in Coahuila. Successive turn-offs for the property are at Francisco I Madero, Ignacio Zaragoza, and San José de Avino (Slim 2005d). The Avino mineral concessions are covered by a network of dirt roads which provide easy transport access between all areas of interest on the Property and the mill at the main Avino Mine (Gunning 2009).
The nearest major city is Durango, with a population of approximately 600,000. Durango is a major mining center in Mexico where experienced labour and services can be obtained. The two towns nearest the mine are Pánuco de Coronado and San José de Avino, where the majority of the employees live while working at the mine. Pánuco de Coronado has a population of approximately 12,000, and San José de Avino is a small center with a population of less than 1,000.
Geology
and Mineralization
The property is located within the Sierra de Gamon, on the east flank of the Sierra Madre Occidental. The area is a geological window into the Lower Volcanic series and consists mainly of volcanic flows, sills, and tuffaceous layers of andesite, rhyolite, and trachyte. Individual rock units vary from 300 to 800 m in thickness. Andesitic rocks outcrop over most of the region with other rock types occurring more sparsely to the north (Slim, 2005d).
A large monzonitic intrusion is observed in the region in the form of dykes and small stocks, which appear to be linked to the onset of the Avino vein mineralization. Other post-mineralization dykes of intermediate to felsic composition outcrop in various areas and appear to cause minor structural displacements. Several mafic sills are also found in various parts of the region and are related to recent volcanism.
Regionally, the Avino concession is situated within a 12 km north-south by 8.5 km caldera, which hosts numerous low sulphidation epithermal veins, breccias, stockwork and silicified zones. These zones grade into a “near porphyry” environment, particularly in the Avino Mine area. The caldera has been uplifted by regional north trending block faulting (a graben structure), exposing a window of andesitic pyroclastic rocks of the lower volcanic sequence, a favourable host rock, within the caldera. This sequence is overlain by rhyolite to trachytes with extensive ignimbrite layers forming the upper volcanic sequence and is intruded by monzonite bodies. The basal andesite-bearing conglomerate and underlying Paleozoic basement sedimentary rocks (consisting of shales, sandstones and conglomerates) have been identified on the Avino concession in the south-central portion of the caldera, covering the Guadalupe, Santiago, San Jorge, the San Gonzalo Trend, Malinche, Porterito and Yolanda areas. A northerly trending felsic dyke, probably a feeder to the upper volcanic sequence, transects the Property and many of the veins. The Aguila Mexicana low temperature vein system, with significant widths but overall low precious metal values, trends north-northwest, similar to the felsic dyke and with similar continuity across the property. The two structures may occupy deep crustal faults that controlled volcanism and mineralization, with the felsic dyke structure controlling the emplacement of the Avino, Nuestra Senora and El Fuerte-Potosina volcanic centres and the Aguila Mexicana controlling the Cerro San Jose and El Fuerte-Potosina volcanic centres (Paulter 2006).
Silver- and gold-bearing veins cross-cut the various lithologies, and are generally oriented north-northwest to south-southeast and northwest to southeast. The rocks have been weathered and leached in the upper sections, as a result of contact with atmospheric waters. The oxide tailings material is primarily from this source, whereas the sulphide tailings are predominantly from material sourced at depth from the underground workings. In Mexico, these types of deposits can have large lateral extents, but can be limited in the vertical continuity of grades.
The valuable minerals found during the period of mining of the oxide zone were reported to be argentite, bromargyrite, chalcopyrite, chalcocite, galena, sphalerite, bornite, native silver, gold and native copper. The gangue minerals include hematite, chlorite, quartz, barite, pyrite, arsenopyrite and pyrrhotite. Malachite, anglesite, and limonite are common in the quartz zones of the weathered parts of the oxide material.
Property Ownership
The current Property is comprised of 23 mineral concessions, totalling 1,103.934 ha.
In 1968, Avino Mines and Resources Ltd. acquired a 49% interest in Avino Mexico and Minera San José de Avino SA, which together held mineral claims totalling 2,626 ha (6,488 ac). Avino Mines and Resources Ltd. retained Vancouver-based Cannon-Hicks & Associates Ltd. (Cannon-Hicks), a mining consulting firm, to conduct the exploration and development of the Property. Cannon-Hicks exploration activities included surface and underground sampling and diamond drilling (VSE 1979).
In early 1970, Avino Mines and Resources Ltd. signed a letter of intent with Denison Mines Ltd. for the future development of the Avino Mine. However, a formal agreement was never signed.
In May 1970, Avino Mines and Resources Ltd. signed a formal agreement with Selco Mining and Development (Selco), a division of Selection Trust Company. Due to other commitments, Selco abandoned its interest in the Project in 1973 (VSE 1979).
In October 1973, Avino Mines and Resources Ltd. signed a new agreement with S.G.L. Ltd. and Sheridan Geophysics Ltd. Under the terms of the agreement, S.G.L. Ltd. was to provide up to $500,000 plus the management to erect a resource processing plant. The agreement provided for the return of the capital from first cash flow, plus a management fee and interest payment together with an option to convert a portion of the advanced funds to common shares. The agreement with S.G.L. Ltd. was terminated in mid-1976.
On July 17, 2006, the Company completed the acquisition of Compañía Minera Mexicana de Avino, S.A. de C.V. (“Avino Mexico”), a Mexican corporation, through the acquisition of an additional 39.25% interest in Avino Mexico, which combined with the Company’s pre-existing 49% share of Avino Mexico, brought the Company’s ownership interest in Avino Mexico to 88.25%. The additional 39.25% interest in Avino Mexico was obtained through the acquisition of 79.09% of the common shares of Promotora Avino S.A. de C.V., referred to as “Promotora”, which in turn owns 49.75% of Avino Mexico’s common shares, and the direct acquisition of 1% of the common shares of Avino Mexico.
The July 17, 2006, acquisition was accomplished by a share exchange by which the Company issued 3,164,702 shares as consideration, which we refer to as the “Payment Shares”, for the purchase of the additional 39.25% interest in Avino Mexico. The Payment Shares were valued based on the July 17, 2006 closing market price of the Company’s shares on the TSX-V.
The Company acquired a further 1.1% interest in Avino Mexico through the acquisition from an estate subject to approval and transfer of the shares to the Company by the trustee for the estate. On December 21, 2007, approval was received and the Company obtained the 1.1% interest from the estate for no additional consideration.
On February 16, 2009, the Company converted existing loans advanced to Avino Mexico into new additional shares of Avino Mexico. As a result, the Company’s ownership interest in Avino Mexico increased to 99.28%.
On June 4, 2013, the Company converted existing loans advanced to Avino Mexico into new additional shares of Avino Mexico, resulting in the Company’s ownership increasing by 0.38% to an effective 99.67%. The issuance of shares to the Company by Avino Mexico on June 4, 2013 resulted in a reduction in the non-controlling interest from 0.72% to 0.34%.
On August 26, 2015, the Company converted existing loans advanced to Avino Mexico into new additional shares, resulting in an increase of the Company’s ownership by 0.01% to an effective 99.67%. The intercompany loans and investments are eliminated upon consolidation of the financial statements. The Company had a pre-existing effective ownership interest of 99.66% in Avino Mexico prior to the 0.01% increase. The issuance of shares to the Company by Avino Mexico on August 26, 2015, resulted in a reduction in the non-controlling interest from 0.34% to 0.33%.
Summary of Property Ownership
Company
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Relationship to Avino
Silver & Gold Mines Ltd.
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Effective Ownership of
Avino Mine Property
(%)
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Avino Mexico
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Subsidiary
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98.45
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Promotora Avino, S.A. de C.V.
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Subsidiary
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1.22
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Total Effective Ownership of Avino Mine Property
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99.67
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Estate of Ysita
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Non-controlling interest
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0.33
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Total
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100.00
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Mineral Concessions and Agreements
The current Property is comprised of 23 mineral concessions, totalling 1,103.934 ha. Of these, 22 mineral concessions totalling 1,005.104 ha, are held by Avino Mexico (Avino’s Mexican subsidiary company), Promotora Avino SA de CV, and Susesion de la Sra. Elena del Hoyo Algara de Ysita. Ownership proportions and mineral concessions are summarized in the tables following the next paragraphs regarding Claim Staking and Mineral Tenure in Mexico.
Claim
Staking and Mineral Tenure in Mexico
In 1992, a new Mining Law was enacted and has been amended from time to time since then. In general, and for North American companies in particular, Mexican law permits direct or indirect 100% foreign ownership of exploration and mining properties. For practical purposes, most foreign companies establish Mexican subsidiaries. Mining companies are subject to the normal corporate income tax rate of 30%. Further, in 2014 the Mexican Government enacted a new tax reform which includes a 7.5% mining royalty calculated as taxable revenues (except interest and inflationary adjustment), less allowable deductions for income tax purposes (excluding interest, inflationary adjustment, mining concessions and depreciation and depletion), less exploration expenses, and a 0.50% mining royalty on the sale of silver and gold.
In December 2005, amendments to the mining law eliminated the distinction between “exploration” and “exploitation” concessions. Currently, the mining act and regulations provide solely for mining concessions (Concesiones Mineras), which are issued for a term of fifty years, renewable for an additional term of fifty years.
Owners of mining concessions are obliged to:
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Execute work under the terms and conditions established in the mining law;
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Pay fees to the Secretaria de Economia on a semi-annual basis;
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Locate on the ground a starting point (mojonera) for the location of the concession, and maintain the mojonera in good condition;
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Begin work on the concession within 90 days of receiving the mining title;
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File annual reports describing the work completed and the amount spent doing the reported work;
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The Direccion General de Minas (“DGM”) has the right to audit the receipts and verify that reported work was completed in the field; and
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Failure to comply with the obligations or to assist the DGM with an audit will result in cancellation of the mining concession.
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Mineral Concessions – Avino Property
Concession Name
|
|
Concession No.
|
|
|
Claim
Type
|
|
Location
|
|
Hectares
(ha)
|
|
|
Date Acquired
|
|
Expiration Date
|
|
Cost
(US$/ha)
|
|
|
Payment (US$)
|
|
Agrupamiento San Jose (Purisma Chica)
|
|
|
155597
|
|
|
Lode
|
|
Pánuco
|
|
|
136.708
|
|
|
30/09/1971
|
|
29/09/2021
|
|
|
124.74
|
|
|
|
17,052.91
|
|
Agrupamiento (San Jose)
|
|
|
164985
|
|
|
Lode
|
|
Pánuco
|
|
|
8
|
|
|
13/08/1979
|
|
12/8/2029
|
|
|
124.74
|
|
|
|
997.92
|
|
Agrupamiento San Jose (El Trompo)
|
|
|
184397
|
|
|
Lode
|
|
Pánuco
|
|
|
81.547
|
|
|
13/10/1989
|
|
12/10/2039
|
|
|
124.74
|
|
|
|
10,172.12
|
|
Agrupamiento San Jose (Gran Lucero)
|
|
|
189477
|
|
|
Lode
|
|
Pánuco
|
|
|
161.468
|
|
|
5/12/1990
|
|
4/12/2040
|
|
|
124.74
|
|
|
|
20,141.57
|
|
Agrupamiento San Jose (San Carlos)
|
|
|
117411
|
|
|
Lode
|
|
Pánuco
|
|
|
4.451
|
|
|
5/2/1961
|
|
16/12/2061
|
|
|
124.74
|
|
|
|
555.16
|
|
Agrupamiento San Jose (San Pedro Y San Pablo)
|
|
|
139615
|
|
|
Lode
|
|
Pánuco
|
|
|
12
|
|
|
22/06/1959
|
|
21/06/2061
|
|
|
124.74
|
|
|
|
1,496.88
|
|
Aguila Mexicana
|
|
|
215733
|
|
|
Lode
|
|
Pánuco
|
|
|
36.768
|
|
|
12/3/2004
|
|
29/06/2044
|
|
|
70.88
|
|
|
|
2,606.12
|
|
Ampliacion La Malinche
|
|
|
204177
|
|
|
Lode
|
|
Pánuco
|
|
|
6.01
|
|
|
18/12/1996
|
|
17/12/2046
|
|
|
124.74
|
|
|
|
749.72
|
|
Ampliacion San Gonzalo
|
|
|
191837
|
|
|
Lode
|
|
Pánuco
|
|
|
5.85
|
|
|
19/12/1991
|
|
18/12/2041
|
|
|
124.74
|
|
|
|
729.67
|
|
Avino Grande Ix
|
|
|
216005
|
|
|
Lode
|
|
Pánuco
|
|
|
19.558
|
|
|
2/4/2002
|
|
1/4/2052
|
|
|
70.88
|
|
|
|
1,386.24
|
|
Avino Grande Viii
|
|
|
215224
|
|
|
Lode
|
|
Pánuco
|
|
|
22.882
|
|
|
14/02/2002
|
|
13/02/2052
|
|
|
70.88
|
|
|
|
1,621.85
|
|
El Caracol
|
|
|
215732
|
|
|
Lode
|
|
Pánuco
|
|
|
102.382
|
|
|
12/3/2002
|
|
28/04/2044
|
|
|
70.88
|
|
|
|
7,256.84
|
|
El Potrerito
|
|
|
185328
|
|
|
Lode
|
|
Pánuco
|
|
|
9
|
|
|
14/12/1989
|
|
13/12/2039
|
|
|
124.74
|
|
|
|
1,122.66
|
|
Fernando
|
|
|
205401
|
|
|
Lode
|
|
Pánuco
|
|
|
72.129
|
|
|
29/08/1997
|
|
28/08/2047
|
|
|
124.74
|
|
|
|
8,997.33
|
|
La Estela
|
|
|
179658
|
|
|
Lode
|
|
Pánuco
|
|
|
14
|
|
|
11/12/1986
|
|
12/12/2036
|
|
|
124.74
|
|
|
|
1,746.36
|
|
La Malinche
|
|
|
203256
|
|
|
Lode
|
|
Pánuco
|
|
|
9
|
|
|
28/06/1996
|
|
27/06/2046
|
|
|
124.74
|
|
|
|
1,122.66
|
|
Los Angeles
|
|
|
154410
|
|
|
Lode
|
|
Pánuco
|
|
|
23.713
|
|
|
25/03/1971
|
|
24/03/2021
|
|
|
124.74
|
|
|
|
2,957.96
|
|
Negro Jose
|
|
|
218252
|
|
|
Lode
|
|
Pánuco
|
|
|
58
|
|
|
17/10/2002
|
|
16/10/2052
|
|
|
70.88
|
|
|
|
4,111.04
|
|
San Gonzalo
|
|
|
190748
|
|
|
Lode
|
|
Pánuco
|
|
|
12
|
|
|
29/04/1991
|
|
28/04/2041
|
|
|
124.74
|
|
|
|
1,496.88
|
|
San Martin De Porres
|
|
|
222909
|
|
|
Lode
|
|
Pánuco
|
|
|
30
|
|
|
15/09/2004
|
|
14/09/2054
|
|
|
70.88
|
|
|
|
2,126.40
|
|
Santa Ana
|
|
|
195678
|
|
|
Lode
|
|
Pánuco
|
|
|
136.182
|
|
|
14/09/1992
|
|
13/09/2042
|
|
|
124.74
|
|
|
|
16,987.38
|
|
Yolanda
|
|
|
191083
|
|
|
Lode
|
|
Pánuco
|
|
|
43.458
|
|
|
29/04/1991
|
|
28/04/2041
|
|
|
124.74
|
|
|
|
5,420.91
|
|
Total hectares
|
|
|
|
|
|
|
|
|
|
|
1,005.106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Concession “La Platosa” is not included because it is not held by Avino.
Map of Avino Mine Property Concessions
On February 18, 2012, through its subsidiary company Avino Mexico, Avino re-entered into an agreement (the Agreement) with Minerales de Avino, S.A. de C.V. (“Minerales”), whereby Minerales has indirectly granted to Avino the exclusive mining and occupation rights to the La Platosa concession. The La Platosa concession covers 98.83 ha and hosts the Avino vein and ET Zone.
Pursuant to the Agreement, Avino has the exclusive right to explore and mine the concession for an initial period of 15 years, with the option to extend the agreement for another 5 years. In consideration of the grant of these rights, Avino must pay to Minerales the sum of $250,000, by the issuance of common shares of Avino. Avino will have a period of 24 months for the development of mining facilities.
Avino has agreed to pay to Minerales a royalty equal to 3.5% of NSRs. If at the commencement of commercial production from the property the monthly processing rate of the mine facilities is less than 15,000 tonnes, then Avino must pay to Minerales in any event a minimum royalty equal to the applicable NSR royalty based on processing at a minimum monthly rate of 15,000 tonnes. In the event of a force majeure, Avino shall pay the minimum royalty as follows:
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·
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first quarter: payment of 100% of the minimum royalty;
|
|
·
|
second quarter: payment of 75% of the minimum royalty;
|
|
·
|
third quarter: payment of 50% of the minimum royalty;
|
|
·
|
fourth quarter: payment of 25% of the minimum royalty; and
|
|
·
|
in the case of force majeure still in place after one year of payments, payment shall recommence at a rate of 100% of the minimum royalty and shall continue being made as per the quarterly schedule.
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Minerales has also granted to Avino the exclusive right to purchase a 100% interest in the concession at any time during the term of the Agreement (or any renewal thereof), upon payment of $8 million within 15 days of Avino’s notice of election to acquire the Property. The purchase would be completed under a separate purchase agreement for the legal transfer of the concession. This agreement replaces all other previous agreements.
During the month of May of each year, Avino must file assessment work made on each concession for the immediately preceding calendar year. During the months of January and July of each year, Avino must pay in advance the mining taxes which are based on the surface of the concession and the number of years that have elapsed since it was issued.
Consistent with the mining regulations of Mexico, cadastral surveys have been carried out for all the listed mineral concessions as part of the field staking prior to recording (Slim 2005d). It is believed that all concessions are current and up to date. Mineral concessions in Mexico do not include surface rights. Avino has entered into agreements with communal land owners (Ejidos) of San José de Avino, for the temporary occupation and surface rights of the concessions.
Based on a review of documents, issued title certificates and the unhindered residence on the Property, Tetra Tech has verified that Avino owns the concessions through its Mexican subsidiary company, Avino Mexico, and that there is no indication of any encumbrances at the site. Furthermore, the legal document prepared by Jesús Bermúdez Fernández, dated February 18, 2012, delineating the terms of the agreement on the La Platosa concession has been sourced for information.
History
Avino Mine
The Avino deposit was originally discovered around 1555 by the Spanish conquistador, Don Francisco de Ibarra. In 1562, Francisco de Ibarra, was appointed governor of the newly formed province of Nueva Vizcaya, in the Viceroyalty of Nueva España (New Spain) and, in 1563, founded the town of Durango. Francisco de Ibarra led several expeditions in search of silver deposits in the region and is recognized as having established Minas de Avino, present day Avino Mine; San Martín, Durango; and Pánuco, Sinaloa. Mining activities at the Avino Mine are said to have commenced in 1562-1563 and have been in production until the early 1900s. Operations at the Avino Mine continued up to the onset of the War of Independence (1810) when operations were interrupted but continued through to the early 1900s.
In 1880, the mines were taken over by Avino Mines Ltd., a company controlled by American and English interests. With aid of new industrial technology the Avino Mine developed into a more efficient mining operation. By 1908, the Avino Mine was considered one of the largest open pit mines in the world and equipped with one of the largest lixification smelters (Gallegos 1960; Bannon 1970; VSE 1977; Slim 2005d).
During the outbreak of the Mexican Revolution in 1910, proceeds from the mine supplied funds to the revolutionary forces. Since much of the fighting occurred in and around Durango and the risk posed by brigands hiding in the mountains was high, the mine was abandoned in 1912.
Between 1912 and 1968, the mine was worked intermittently on a very small scale (Avino Annual Report 1980). There is no known historical record of production from the Avino Mine during this period. The Avino Property was acquired under current ownership in 1968.
In 1968, the current operators of the Avino property acquired an initial 49% interest in the property. Initial mining was by open-cut in the oxide material from 1976 until 1992 when the stripping ratio was becoming excessive and sulphide content increasing, at which date the extraction was transferred to underground. This necessitated a mill change from the prior lead concentrate production to one of copper carrying silver and gold. In the 1990s a larger ball mill was installed to increase throughput to 1,000 t/d.
During the underground mining period starting in 1992, Trackless mining was adopted, with all underground advancement headings sized at 4m x 4m. Mine access from surface was by a spiral ramp from a portal on the south side of the hill and there is a secondary ramp– Rampo El Trompo – on the north side, close to the maintenance shop.
Production was by sub-level stoping with a sub-vertical increment restricted from 11m to 15m to countermine dilution arising from an occasional, semi-incompetent hanging-wall. Stopes were started by raising, and then slashing to the designated width. Blasting was by parallel holes drilled with a traditional drill wagon. Rib and sill pillars were left but are generally considered as non–recoverable.
Standard mine development was by using boom jumbo with waste being dumped where possible into old stopes. Ore mucking and haulage was by scoop tram and dumped on surface at the main portal. The ore was then picked up and transferred to the plant ROM hopper about 300 m away.
A surface-stacked, downstream tailings-system was adopted with cyclones on the tails discharge line to provide coarse wall-material. Decant water was recovered by a back-slope gradient and pumping, for mill re-circulation. A second, stepped-back bench was created, possibly about 1986 or 1987. A third bench was started, apparently in 1990, with about two years placement of final oxide material then continued with the sulphide tails.
The Avino Mine and processing plant were serviced by a heavy equipment repair shop, mechanical and electrical shops, assay office, metallurgical laboratory, warehouse and other auxiliary facilities. Electric power was supplied by the government-owned Federal Electricity Commission.
In November 2001, delays in payments, low metals prices and the closure of the toll smelter led to the suspension of mine operations. During the 27 year period of extracting and processing resources starting in 1974, output from the Avino mine totalled approximately 497 tons of silver, three tons of gold, and 11,000 tons of copper. When mining activities stopped, level 12 of the mine had been reached.
The property was mainly dormant from 2002 to 2006, largely due to low copper and silver prices.
San Gonzalo Mine
The history of the San Gonzalo deposit is not well known. Shallow workings from an old mine are present in the San Gonzalo vein, and consist of small underground workings which were originally accessed by a five-level vertical shaft. These workings were sampled by M. Evans in 1954. The workings are accessible through a raise that was driven in 2012 which is being used for ventilation. No attempts have been made to duplicate the results of the 1954 sampling. The limits of past workings have been taken from old maps but are assumed to be reasonably accurate (Gunning 2009).
Current Condition
San Gonzalo Mine
Avino gained control of the property in July 2006 and exploration (see exploration section below) resumed that year; this led to the discovery of new mineralization at San Gonzalo.
The original underground workings extend over an area approximately 150 m along strike and 136 m in depth. In 2007-08 Avino conducted a 42-hole, 9,204 meter drill program to explore the San Gonzalo deposit. Drilling produced encouraging results which were input into a resource calculation in 2009.
Following a 2009 mineral resource estimate, independently verified preliminary metallurgical testing on a composite sample of San Gonzalo material was completed at SGS Minerals Services in Durango, Mexico. The results indicated the silver and gold minerals from the San Gonzalo vein at lower levels would respond favorably to flotation with gold recoveries of 89 to 90% and silver recoveries of 92 to 93%.
The San Gonzalo mining activities began in January 2010. DMG, the mining contractor, was contracted to provide this service. Their original scope of work was to drive the main haulage decline to level 2 and to intersect the vein; drift and sample to the east and the west on the vein, and to determine the extent of the mineralized zones and to extract the 10,000 tonne bulk sample for testing as per the recommendations of the Orequest Mineral Resource Estimate Report. A smaller decline to level 1 was also commissioned and its purpose was for ventilation and an escape route once the two levels were connected by raises from level 2 to level 1. This scope of work was extended with the successful completion of the bulk sample program, and mining continued with the aim of developing San Gonzalo to a state whereby it could provide mill feed at the rate of 250 tonnes per day on a sustained basis.
Processing of San Gonzalo material began in late November 2010 in the newly refurbished 250 tonne per day bulk flotation circuit. Testing with extracted material was performed initially to ensure the circuit was operating satisfactorily before the bulk sample test with material from the stopes began in January of 2011. The bulk sample test continued until early April 2011 when the limit of 10,000 tonnes was achieved for the independent verification. Processing of the remaining San Gonzalo material on stockpile continued until the middle of May. During this period of November 2010 to May 2011, the plant processed a total of 19,850 tonnes leaving approximately 14,798 tonnes remaining on stockpile in inventory by calculation.
The majority of the concentrate processed during the bulk sample test was sold and the assays from the concentrate sale were used to reconcile the mill balance as reported following the verification of the bulk sampling results. All the remaining concentrate processed from the extracted material was shipped and sold early in 2012.
Following the completion of the bulk sample which was comprised of material from levels 1 and 2, mine advancement at San Gonzalo has been ongoing. In 2012, the remaining material from the stopes on level 2 was mined and brought to the surface. During 2012, level 3 was the main focus of mining activities with two stopes having been developed and partially extracted by the end of the year. By the end of July, a decline from level 3 to level 4 had been completed and work on the ramp to level 5 had commenced. By year-end, level 5 had been reached and stope advancement on level 4 was underway. Underground advancement for 2012 totaled 2,558 meters consisting of ramp advancement, cross cuts, drifts and raises.
During 2013 the extraction of resources came mainly from level 4. Advancement of level 5 was ongoing and by year end a sampling program totaling 440 meters had been completed. The ramp from level 5 to level 6 had been completed by April 2014.
During 2014, mine exploration and advancement included the discovery of significant additional mineralization along strike to the southeast while drifting on level 5. These areas had not previously been considered for mining. Following this discovery, the extension of this new mineralized zone was explored on levels 2 through 6. Previous exploration did not encounter this area as the vein had pinched out and an offset of the vein was not considered at that time. During 2014, extraction of resources came primarily from levels 5 and 6 as well as from mined material from the new zone on level 3. Advancement work on level 6 continued throughout the fourth quarter, and by year end the main haulage ramp had progressed past the level 7 elevation of 2,043 meters above sea level towards level 8.
During 2015, San Gonzalo mill feed came primarily from stopes on levels 4, 5 and 6. During the second quarter, the ramp advance was deferred (at 70 metres below level 7) in favor of using the mining equipment to advance levels 5, 6 and 6.5 laterally along the San Gonzalo structure to the East and West where the new mineralized zones were identified in 2014.
During 2016, San Gonzalo mill feed came from stopes on level 4, 5, 6 and 7 with the bulk of the tonnage coming from stopes 4-050, 5-030, 5-500, 5-600, 6-030, 6-100 and 7-070.
Access to the underground at San Gonzalo is via a 4m by 4m decline developed at -12%. The decline is developed at about 20m to 25m from the mineralized material. San Gonzalo is using shrinkage mining for the narrower mineralized material, ~1.4m in width and cut and fill mining for mineralized material wider than 2m.
The San Gonzalo Mine has been the subject of three mineral resource estimates, the most recent of which was published on October 28, 2016; please see the section below on
Mineral Resource Estimates
for more details.
Avino Mine
In February 2012, a new long-term royalty agreement was signed to grant Avino mining rights to the main Avino vein. At the time of signing this agreement, Avino planned to refurbish the existing 1,000 TPD circuit to process the material from the main Avino vein.
To resume underground advancement at the Avino Mine, the existing underground workings had to be de-watered; the dewatering process was completed in May 2014. The process lasted for a total of 482 days, and successfully removed 1,013,069 cubic meters of acidic water which was then treated for the removal of base metals using lime. The treated water, which met agricultural standards for discharge, was used for mill processes and the excess was gravity fed to the Company-built La Caricol dam; sludge from the water treatment plant was disposed of in the tailings storage facility.
Following dewatering and rehabilitation of the haulage ramp, underground mining activities re-commenced at the Avino Mine. Full scale mining began at level 11.5 with drifts heading east and west along the vein during the third quarter of 2014. By the end of 2014, a total of 877 metres of underground advancement had taken place on levels 11.0 and 12.0 with the haulage ramp advancing to level 12.5.
Initially, new material from underground at Avino was processed on a limited scale using the existing 250 TPD Mill Circuit 2. By year end, rehabilitation of the 1,000 TPD Mill Circuit 3 had been completed and sufficient material had been stockpiled; on January 1, 2015, the Company commenced testing of mining and milling methods at levels anticipated for full-scale activities.
During 2015, underground advancement totalled 5,056 metres and took place mainly in levels 12.5 to 14.5 with the ramp advancing to level 15. The breakdown of the advance in 2015 consisted of 2,855 metres of drifts, 785 metres of ramp, 1,050 metres of crosscuts and 366 metres of raises.
During 2016, underground advancement totaled 3,901 metres with the ramp advancing to level 16. Breakdown of the advance consisted of 1,489 metres of drifts, 415 metres of ramp 1,609 metres of crosscuts and 390 metres of raises. Production mining with the Trac Drill took place on levels 12, 12.5 and 14.5. Mill feed from development mining came from levels 14.5, 15, 15.5 and the crosscuts towards the hanging wall breccia on levels 12.5 and 14.5 where high gold values were encountered.
During 2017, underground advancement totaled 2905 metres with the ramp advancing to level 16.5. Breakdown of the advance consisted of 961 metres of drifts, 287 metres of ramp, 1,375 metres of crosscuts and 283 metres of raises. Production mining with the Trac Drill took place on all the developed levels up to level 15. Some mill feed from development mining came from levels 15.5 and 16.
The Avino Mine has been the subject of two mineral resource estimates, the most recent of which was published on October 28, 2016; please see the section below on
Mineral Resource Estimates
for more details.
Tailings Resource
Avino continues to explore options for exploiting the mine’s tailings resource left from past mining of the Avino Vein. The tailings are situated approximately 500 m west-southwest of the main shaft to the main Avino mine.
This asset includes oxide and sulphide tailings, each requiring separate treatment methods. The tailings resource was created during between 1976 and 2001 during Avino’s previous operation from both open pit (oxide tailings) then later underground (sulphide tailings) mining. Improved metals markets now potentially enable Avino to process the remaining silver and gold in the tailings.
The existing tailings storage facility is presently being used in connection with the operation of Mill Circuits 1, 2, and 3. In 2017, the Company continued to evaluate plans to build a new tailings storage facility which is necessary to allow the existing TSF to be decommissioned, which will enable Avino to begin assessing the upper sulphide bench as well as the lower oxide bench in areas that are currently being used to store tailings from our active operations. The assessment work is part of the recommendations contained in a 2013 technical report intended to advance the Tailings Resource towards a production decision for an agglomerated heap leach Merrill-Crowe precipitation operation.
The oxide tailings were produced between 1974 and 1993 from open pit mining of the main Avino vein. For further details regarding the oxide tailings, please see the sections below titled:
Mineral Resource Estimates
and
Preliminary Economic Assessment on the Oxide Tailings Resource
or the Company’s Technical Report on the Avino Property, dated April 11, 2017.
Project Infrastructure
The Avino Mine is connected to the local power grid with a line capacity quoted at 4 MW when the mine last operated in 2001. With the shutdown, much of this excess power was diverted to the surrounding towns in the district. Between 2001 and 2016 the powerline provided only 1,000 kW of power with 500 kW servicing the mill, 400 kW for San Gonzalo and the balance for the well at Galeana, the employee accommodation facility and water reclamation from the tailings dam. In 2009 a power line to the San Gonzalo Mine was built to replace the contractor’s diesel generator used during mine advancement.
Discussions with CFE, the federal electricity commission in Mexico, on a new 34.5kV power line were completed in 2014 along with a study covering the proposed locations of towers and power poles. Additionally, in October 2014, CFE informed the Company that it had completed internal upgrades to several transformers that would enable CFE to provide Avino with sufficient grid power to operate all three mill circuits and both underground locations in the interim period prior to the commissioning of the new power line. Construction of the new power line was completed in 2015; and energized in June 2016. The new line is now fully functional at the design capacity of 5 megawatts (“MW”). Current power consumption at the mine is approximately 2MW, leaving sufficient additional power for near-term expansion projects that are currently being organized, such as the Oxide Tailings Heap Leach/Merril-Crowe Precipitation Project (which would require 1 MW) and expansion of the processing plant, which will require a further 1 MW.
While water supply was found to be limiting in the past, Avino has taken the necessary steps to secure adequate supply. To supplement the 1 Mm
3
dam built by Avino in 1989, a well (Galeana) was drilled to the west of the mine site in 1996 to a depth of 400 m and is reported to have a water level at 40 m below the collar. From this, a pipeline connection has been installed to the mine. Additionally, Avino Mexico, in cooperation with the government, has repaired a government dam (El Caracol) and raised the dam wall by 6 m. A pipeline to the mine has also been installed. This dam is shared with the population of Pánuco de Coronado for their irrigation needs, as 60% for the mine and 40% for the town, with government setting the annual total take to which percent sharing applies. Mine site water use is from a combination of tailings water reclaim, El Caracol, and Galeana with preference given to mine site sources for which no water conservation charge was applicable (Slim 2005).
Both the San Gonzalo and Avino mines are equipped with two mine dewatering pumps. The pumps at San Gonzalo are each capable of pumping 20L/s to surface via 2 six inch lines. One pump operates 24 hours per day and the other 10 hours per day. At Avino one pump operates constantly with the second on standby. Each pump is capable of handling the entire inflow via a 6 inch line. Water from both mines is pumped to the surface and is sent to the process water tanks in the plant. Any water not used in the plant flows by gravity to the La Caricol Dam for agricultural use.
Processing Plant
In September 2006, the Company conducted a review of the plant, including the condition of all equipment, capacity of each circuit, and efficiency of the plant. The review was an order of magnitude cost estimate for putting the plant back into operation at the rate of 1,000 tpd, which was approximately $3 million. In the property valuation, the replacement cost of the mill was estimated at roughly $40 million.
The Company’s processing plant was built in the 1970’s and was refurbished to accommodate increased capacity in 1993. Most of the infrastructure was in place for two 250 tpd circuits and one 1,000 tpd circuit. At the time of shutdown in 2001 due to low commodity prices and the closure of a smelter, the mill was operating at an average rate of 1,130 tpd.
In order to perform the bulk sample program at San Gonzalo, major infrastructure spending and mill repairs were required. Most of these expenditures took place in 2008 and 2009 with additional spending required more recently as further needs arose to meet the demands of mining activities.
Beginning in May 2011, when the San Gonzalo stockpiled material was depleted following the bulk sample, the process plant was used to treat old stockpiles from historic extraction at the Avino Mine. These were lower-grade stockpiles which were originally considered marginal or waste due to prevailing metal prices at the time. These stockpiles were processed until underground advancement at San Gonzalo was sufficient to provide mill feed at a sustained rate of 250 tonnes per day. On October 1, 2012, Avino made the transition to San Gonzalo mill feed and declared that resource extraction and processing had reached levels intended by management at San Gonzalo.
During the second quarter of 2013, a second 250 tpd circuit (“Mill Circuit 2”) in the mill was commissioned and put into operation for the processing of remaining Avino Mine surface stockpiles. In September 2014, Mill Circuit 2 began processing new mineralized material from the Avino Mine during the mine’s commissioning phase. On January 1, 2015, Mill Circuit 2 transitioned to processing feed material from the San Gonzalo Mine stockpile which continued throughout the first half of 2015 apart from May, when Mill Circuit 2 was once again used to process Avino Mine surface stockpiles. During the second half of 2015, Mill Circuit 2 was used to process mineralized material from the Avino Mine underground in July, August, November and December; and mineralized material from the San Gonzalo Mine during September and October. In 2016, Mill Circuit 2 is expected to primarily process mineralized material from the Avino Mine.
In November 2014, Avino completed its Mill Circuit 3 expansion in preparation for the re-opening of the main Avino Mine. The refurbished circuit was initially commissioned using historic above ground Avino Mine stockpiles during November and December of 2014. Mill Circuit 3 began processing new mill feed from underground at the Avino Mine beginning on January 1, 2015. During 2015, Mill Circuit 3 was optimized to process approximately 1,150 tonnes per day. During 2015, Mill Circuit 3 was optimized to process approximately 1,150 tonnes per day. In the second quarter of 2016, the Company declared that effective April 1, 2016, extraction and processing had reached levels intended by management at the Avino Mine.
Circuit #
|
|
|
Operating Throughput (TPD)
|
|
|
Sources of Mill Feed
|
|
Operating Status
|
|
1
|
|
|
|
250
|
|
|
San Gonzalo Mine (“SG”)
|
|
Now Online
|
|
2
|
|
|
|
250
|
|
|
Avino Mine Stockpiles, SG, Avino Mine*
|
|
Now Online
|
|
3
|
|
|
|
1,150
|
|
|
Avino Mine*
|
|
Now Online
|
|
4
|
|
|
|
1,150
|
|
|
Avino Mine
|
|
Online in 2018
|
|
|
·
|
Circuit 1 is expected to continue to process high-grade mill feed from the San Gonzalo Mine.
|
|
·
|
Circuit 2 is expected to continue to primarily process mineralized material from the Avino Mine.
|
|
·
|
Circuit 3 is expected to continue to process mineralized material from the Avino Mine.
|
|
·
|
Circuit 4 is expected to process mineralized material from the newly discovered San Luis area of the Avino Mine.
|
______
*No feasibility study or preliminary economic assessment has been carried out on the Avino Mine and San Gonzalo Mine resources. The Company has determined extraction and processing of resources at levels intended by management without undertaking any further formal studies.
In January 2017, Avino announced plans to further expand the mill to an overall throughput capacity of 2,800 tonnes per day. The addition of Mill Circuit 4, which will be an exact duplication of Mill Circuit 3, commenced in January 2017, and was expected take approximately one year to complete. As at the end of December 31, 2017, Mill Circuit 4 was approximately 90% complete. The outstanding items at year end were the installation of the filter press for the concentrate and the flotation cells. Circuit 4 is expected to be completed by the first quarter of 2018 with commissioning to take place using mill feed from the historic Avino Mine stockpiles. It is planned that Mill Circuit 4 will be used to process material from the San Luis area of the Avino Mine.
Mining Fleet
To operate the Avino and San Gonzalo Mines, Avino’s mining fleet currently consists of 3 front end loaders, a D6R Cat dozer, 12 scoop trams, 5 jumbos, 2 combination backhoe and rock breakers, 2 excavators, a forklift, 2 surface and an underground diamond drill, 2 mini loaders, a CAT grader suitable for both surface and underground, 20 contractor provided haulage trucks, a shotcrete machine, a welding machine, 32 light service passenger vehicles, a contractor provided water truck, a 15 tonne capacity contractor provided truck to distribute explosives and a contractor provided fuel truck, 3 power generators, 8 air compressors, a mobile crane, a mobile crushing plant and an ambulance.
Costs Incurred to Date
The table below for the years ended December 31, 2011 to December 31, 2017 contains selected financial data prepared in accordance with IFRS derived from our audited consolidated financial statements for the periods ending on such dates. The financial data presented for the 2006 to 2009 fiscal years was prepared in accordance withCanadian GAAP and is not comparable to information prepared in accordance with IFRS.
|
|
Exploration and Evaluation Expenditures
|
|
|
Capital
Expenditures
|
|
|
Operating and Administrative Expenses*
|
|
|
Total
|
|
2006
|
|
|
62,018
|
|
|
|
15,744
|
|
|
|
3,448,195
|
|
|
|
3,525,957
|
|
2007
|
|
|
2,319,761
|
|
|
|
786,951
|
|
|
|
878,987
|
|
|
|
3,985,699
|
|
2008
|
|
|
1,441,057
|
|
|
|
76,345
|
|
|
|
1,286,880
|
|
|
|
2,804,282
|
|
2009
|
|
|
305,848
|
|
|
|
268,929
|
|
|
|
639,383
|
|
|
|
1,214,160
|
|
2010
|
|
|
1,849,081
|
|
|
|
326,121
|
|
|
|
1,116,673
|
|
|
|
3,291,875
|
|
2011
|
|
|
4,513,600
|
|
|
|
1,458,656
|
|
|
|
3,975,071
|
|
|
|
9,947,327
|
|
2012
|
|
|
2,400,011
|
|
|
|
951,137
|
|
|
|
1,939,638
|
|
|
|
5,290,786
|
|
2013
|
|
|
2,687,076
|
|
|
|
4,001,633
|
|
|
|
3,993,448
|
|
|
|
10,682,157
|
|
2014
|
|
|
3,099,462
|
|
|
|
7,317,986
|
|
|
|
3,434,275
|
|
|
|
13,851,723
|
|
2015
|
|
|
1,309,761
|
|
|
|
3,946,820
|
|
|
|
3,199,877
|
|
|
|
8,456,458
|
|
2016
|
|
|
3,867,285
|
(1)
|
|
|
4,600,829
|
|
|
|
4,940,479
|
|
|
|
13,408,593
|
|
2017
|
|
|
1,055,264
|
|
|
|
7,560,344
|
|
|
|
5,328,660
|
|
|
|
13,944,268
|
|
Total
|
|
|
24,910,224
|
|
|
|
31,311,495
|
|
|
|
34,181,566
|
|
|
|
90,403,285
|
|
___________
*Operating and administrative expenses do not reflect other income or expenses or other comprehensive income or loss.
(1)
Before concentrate sales of $4,587,005 capitalized to exploration and evaluation assets prior to commencement of production effective April 1, 2016.
Below is a table summarizing the estimated planned future costs for 2018. The Company will need to raise capital to meet its planned future costs. No assurance can be given that the Company will be able to raise the amounts in the table below or that actual future costs will equal the amounts in the table below. If the Company is unable to raise capital to meet its planned future costs, it may have to curtail planned activities.
Year
|
|
Operating Expenses
|
|
|
Capital Expenditures
|
|
|
TOTAL
|
|
2018
|
|
$
|
29,600,000
|
|
|
$
|
14,500,000
|
|
|
$
|
45,100,000
|
|
Mineral Reserve Estimates
There are currently no mineral reserves on the Property.
Mineral Resource Estimates
Below is a summary of current mineral resources at the San Gonzalo and Avino Mines as well as the oxide tailings resource (as reported in the April 11, 2017 Technical Report on the Avino Property, Durango, Mexico) grouped into the measured, indicated and inferred categories. The effective date of the resource estimates is April 11, 2017.
The resource estimates were prepared by Michael O’Brien P.Geo., Pr.Sci.Nat., who is a “Qualified Person” within the meaning of National Instrument 43-101 and who is an employee of QG Australia Pty Ltd (an ARANZ Geo Company) and independent of Avino, as defined by Section 1.5 of NI 43-101.
Measured & Indicated Mineral Resources
|
|
|
Grade
|
|
|
Metal Contents
|
|
Resource Category
|
|
Deposit
|
|
Cut-off (AgEQ g/t)
|
|
|
Metric Tonnes
|
|
|
AgEQ g/t
|
|
|
Ag g/t
|
|
|
Au g/t
|
|
|
Cu%
|
|
|
Ag Million Tr Oz
|
|
|
Au Thousand Tr Oz
|
|
|
Cu T
|
|
Measured
|
|
Avino System
|
|
|
55
|
|
|
|
950,000
|
|
|
|
143
|
|
|
|
74
|
|
|
|
0.33
|
|
|
|
0.69
|
|
|
|
2.3
|
|
|
|
10.0
|
|
|
|
6,550
|
|
Measured
|
|
San Gonzalo System
|
|
|
125
|
|
|
|
170,000
|
|
|
|
357
|
|
|
|
272
|
|
|
|
1.50
|
|
|
|
0.00
|
|
|
|
1.5
|
|
|
|
8.2
|
|
|
|
0
|
|
Total Measured
|
|
All Deposits
|
|
|
|
|
|
|
1,120,000
|
|
|
|
176
|
|
|
|
105
|
|
|
|
0.51
|
|
|
|
0.58
|
|
|
|
3.8
|
|
|
|
18.2
|
|
|
|
6,550
|
|
Indicated
|
|
Avino System
|
|
|
55
|
|
|
|
500,000
|
|
|
|
129
|
|
|
|
68
|
|
|
|
0.36
|
|
|
|
0.56
|
|
|
|
1.1
|
|
|
|
5.7
|
|
|
|
2,800
|
|
Indicated
|
|
San Gonzalo System
|
|
|
125
|
|
|
|
320,000
|
|
|
|
310
|
|
|
|
237
|
|
|
|
1.30
|
|
|
|
0.00
|
|
|
|
2.4
|
|
|
|
13.3
|
|
|
|
0
|
|
Indicated
|
|
Oxide Tailings
|
|
|
50
|
|
|
|
1,330,000
|
|
|
|
124
|
|
|
|
98
|
|
|
|
0.46
|
|
|
|
0.00
|
|
|
|
4.2
|
|
|
|
19.8
|
|
|
|
0
|
|
Total Indicated
|
|
All Deposits
|
|
|
|
|
|
|
2,150,000
|
|
|
|
152
|
|
|
|
111
|
|
|
|
0.56
|
|
|
|
0.13
|
|
|
|
7.7
|
|
|
|
38.8
|
|
|
|
2,800
|
|
Total Measured & Indicated
|
|
All Deposits
|
|
|
|
|
|
|
3,270,000
|
|
|
|
160
|
|
|
|
109
|
|
|
|
0.54
|
|
|
|
0.29
|
|
|
|
11.5
|
|
|
|
57.0
|
|
|
|
9,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inferred Mineral Resources
|
|
|
Grade
|
|
|
Metal Contents
|
Resource Category
|
|
Deposit
|
|
Cut-off (AgEQ g/t)
|
|
|
Metric Tonnes
|
|
|
AgEQ g/t
|
|
|
Ag g/t
|
|
|
Au g/t
|
|
|
Cu%
|
|
|
Ag Million Tr Oz
|
|
|
Au Thousand Tr Oz
|
|
|
Cu T
|
|
Inferred
|
|
Avino System
|
|
|
55
|
|
|
|
5,790,000
|
|
|
|
155
|
|
|
|
81
|
|
|
|
0.57
|
|
|
|
0.58
|
|
|
|
15.1
|
|
|
|
105.8
|
|
|
|
33,550
|
|
Inferred
|
|
San Gonzalo System
|
|
|
125
|
|
|
|
540,000
|
|
|
|
403
|
|
|
|
314
|
|
|
|
1.58
|
|
|
|
0.00
|
|
|
|
5.5
|
|
|
|
27.5
|
|
|
|
0
|
|
Inferred
|
|
Oxide Tailings
|
|
|
50
|
|
|
|
1,810,000
|
|
|
|
113
|
|
|
|
88
|
|
|
|
0.44
|
|
|
|
0.00
|
|
|
|
5.1
|
|
|
|
25.6
|
|
|
|
0
|
|
Total Inferred
|
|
All Deposits
|
|
|
|
|
|
|
8,140,000
|
|
|
|
162
|
|
|
|
98
|
|
|
|
0.61
|
|
|
|
0.41
|
|
|
|
25.6
|
|
|
|
158.9
|
|
|
|
33,550
|
|
Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred resources as an Indicated or Measured mineral resource and it is uncertain if further exploration will result in upgrading them to the Indicated or Measured mineral resource category.
Figures in the table may not add to the totals shown due to rounding.
The mineral resource estimate is classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum’s “CIM Definition Standards - For Mineral Resources and Mineral Reserves” incorporated by reference into National Instrument 43-101 “Standards of Disclosure for Mineral Projects”.
Mineral Resources are reported at cut-off grades 55, 125 and 50 g/t silver equivalent grade for the Avino, San Gonzalo and oxide tailings respectively as indicated in the table.
Method of Calculation
The estimation methods used were substantially the same for all three deposits, providing a consistent baseline for strategic planning.
Mineral resources were estimated by ordinary kriging, optimized using kriging neighborhood analysis and verification by means of nearest neighbor and inverse distance methods, swathplot comparisons of estimates and visual inspections. Block models were created for the San Gonzalo and Avino Vein Systems and the oxide Tailings deposit and estimates were made into blocks of sizes 10m easting x 5m northing x10m elevation (San Gonzalo and Avino) and 40m easting x 40m northing x 2m elevation (oxide Tailings).
Classification of the mineral resource was based on kriging variance as a measure of uncertainty with adjustment to practical geometries using geological knowledge of the deposit.
Silver equivalent cut-off grades were applied to satisfy the condition of reasonable prospects for eventual economic extraction and were calculated using conversion formulas AgEQ = Ag + 55.9 * Au + 72.99 * Cu for Avino Vein, AgEQ = Ag + 69.37 * Au for oxide tailings and AgEQ = Ag + 56.38 * Au for San Gonzalo vein System.
Cut-off grades were calculated using current costs, silver price of US$19.50/oz, gold price of US$1,250/oz and copper price of US$2.10/lb.
Since 2013, Avino has drilled 57 new holes on the oxide tailings deposit, nearly three thousand channel samples representing 14,470 metres of vein material have been obtained on the Avino and San Gonzalo Veins, and 46 surface drill holes, (totaling 7,960 m) have been drilled on the San Gonzalo and Avino vein systems. This investment has significantly increased the amount of information available for resource estimation.
Fundamental changes since the previous mineral resource estimates are (1) depletion due to mining (over 1 million tonnes milled since the beginning of 2013), significant new sampling information (almost double in the case of the Oxide Tailings) (3) changes to silver equivalent calculation and cut-offs and (4) reclassification of mineral resources in the light of improved understanding of confidence in the deposits at distances from the underground channel samples and drill hole samples. More sampling information does not always lead to direct increases in resource tonnages and metal. In some cases, the new information provides improved understanding (developed by variogram modelling and kriging neighborhood analysis) that may demote some portions of mineral resource from high confidence categories such as measured and indicated to a lower confidence category such as inferred. Currently, for the San Gonzalo and Avino Vein Systems, estimated blocks more than thirty metres from sampling are not considered to be of sufficient confidence to be indicated category resources and have been classified as inferred resources. Consequently, the total indicated resources for the Avino Property are significantly less than those were reported previously. For the Oxide Tailings, estimated blocks more than fifty metres from sampling are not considered to be of sufficient confidence to be indicated category resources.
Preliminary Economic Assessment on the Oxide Tailings Resource
An update to the Preliminary Economic Assessment (“PEA”) on the Oxide Tailings Resource was published in the April 11, 2017 Technical Report on the Avino Property, Durango, Mexico.
The PEA incorporated Base Case metal prices of $18.50/oz silver, and $1,250/oz gold. Highlights of the Base Case economic estimates for the Oxide Tailings Resource are shown in the following table:
The PEA focuses on the Oxide Tailings Retreatment of the Avino mine as a stand-alone project with an initial 7 year life of mine plan (“LOMP”). The Sulphides will be considered during the pre-feasibility study stage, and evaluated as to their own economic viability. This approach provides attractive economic returns using lower initial capital costs.
The Financial results for the base case are presented in the table below:
Description
|
|
Base Case
|
|
Gold Price ($/oz)
|
|
|
1,250
|
|
Silver Price ($/oz)
|
|
|
18.5
|
|
Total Payable Metal Value ($’000)
|
|
|
148,892
|
|
Refining ($’000)
|
|
|
6,123
|
|
Transportation, Insurance ($’000)
|
|
|
214
|
|
At-mine Revenue ($’000)
|
|
|
142,555
|
|
Operating Costs ($’000)
|
|
|
47,034
|
|
Operating Cash Flow ($’000)
|
|
|
95,521
|
|
Pre-production Capital ($’000)
|
|
|
24,363
|
|
Sustaining Capital ($’000)
|
|
|
4,352
|
|
Salvage Value ($’000)
|
|
|
-861
|
|
Reclamation Cost ($’000)
|
|
|
606
|
|
Total Capital Expenditure, Including Reclamation and Salvage ($’000)
|
|
|
28,460
|
|
Cash Operating Costs ($/oz Ag Payable, net of Au credit)
|
|
|
2.21
|
|
Capital Costs ($/oz Ag Payable)
|
|
|
4.85
|
|
Total Costs ($/oz Ag Payable)
|
|
|
7.07
|
|
Net Cash Flow ($’000)
|
|
|
67,061
|
|
Discounted Cash Flow NPV ($’000) at 5.00%
|
|
|
48,922
|
|
Discounted Cash Flow NPV ($’000) at 8.00%
|
|
|
40,554
|
|
Discounted Cash Flow NPV ($’000) at 10.00%
|
|
|
35,786
|
|
Payback (years)
|
|
|
2.0
|
|
IRR (%)
|
|
|
48.4
|
|
The life of project average material tonnages, grades and metal production are shown below:
Description
|
|
Value
|
|
Total Tonnes to Mill
|
|
|
3,122,000
|
|
Design Annual Tonnes to Mill
|
|
|
500,000
|
|
Plant availability
|
|
|
90
|
%
|
Mine Life (Years)
|
|
|
7
|
|
Average Grades
|
Gold (g/t)
|
|
|
0.43
|
|
Silver (g/t)
|
|
|
87.75
|
|
Total Production
|
Gold (ozs)
|
|
|
33,000
|
|
Silver (ozs)
|
|
|
6,173,000
|
|
Average Annual Production
|
Gold (ozs)
|
|
|
4,660
|
|
Silver (ozs)
|
|
|
881,920
|
|
|
·
|
Excluding 1 year pre-production
|
PEA Study Parameters and basis of Financial Evaluations
The production schedule was incorporated into the 100% equity pre-tax financial model to develop annual recovered metal production from the relationships of tonnage processed, head grades, and recoveries.
Gold and silver payable values were calculated utilizing base case metal prices. Net invoice value was calculated each year by subtracting the applicable refining charges from the payable metal value. At-mine revenues are then estimated by subtracting transportation and insurance costs. Operating costs for mining, processing, and G&A were deducted from the at-mine revenues to derive annual operating cash flow.
Initial and sustaining capital costs as well as working capital have been incorporated on a year-by-year basis over the mine life. Salvage value and mine reclamation costs are applied to the capital expenditure in the last production year. Capital expenditures are then deducted from the operating cash flow to determine the net cash flow before taxes.
Initial capital expenditures include costs accumulated prior to first production of dore. Sustaining capital includes any capital expenditures required during the production period. Initial and sustaining capital costs applied in the economic analysis are US$24.36 million and US$4.35 million, respectively.
The Company cautions that the PEA is preliminary in nature in that it is based on Inferred Mineral Resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Sensitivity Analysis
Sensitivities of the project’s NPV, IRR and payback period to the Project key variables were investigated. Using the base case as reference, all of the key variables were changed between -30%/+30% at a 10% interval while holding the other variables constant. The project NPV is most sensitive to the silver price, and in descending order gold price, operating costs; and capitals costs. The project IRR is most sensitive to the capital costs and the silver price, followed by the gold price and operating costs and the gold price. The payback period is also most sensitive to the silver price, followed by capital costs, operating costs and the gold price.
Post-Tax Economic Analysis
Avino commissioned an independent accounting firm in Mexico to prepare the tax component for the post-tax economic evaluation for this updated PEA with the inclusion of applicable income and mining taxes, and the results are as follows:
|
·
|
Federal income taxes in Mexico are calculated using the currently enacted corporate rate of 30%
|
|
·
|
A special mining duty (SMD) of 7.5% is applied to net profits and is paid annually and is deductible for tax purposes, resulting in an effective tax rate of 5.25%
|
|
·
|
At the base-case gold and silver prices, the total estimated taxes payable are $26.32 million over the 7 year LOM, as shown below:
|
|
|
Unit
|
|
Base Case
|
|
Gold
|
|
$/oz
|
|
|
1,250
|
|
Silver
|
|
$/oz
|
|
|
18.50
|
|
Extraordinary Mining Duty
|
|
$ million
|
|
|
0.71
|
|
Special Mining Duty
|
|
$ million
|
|
|
7.16
|
|
Income Tax
|
|
$ million
|
|
|
18.45
|
|
Total Tax
|
|
$ million
|
|
|
26.32
|
|
Summary of Post-tax Financial Results
|
|
Unit
|
|
Base Case
|
|
Gold
|
|
$/oz
|
|
|
1,250
|
|
Silver
|
|
$/oz
|
|
|
18.50
|
|
Undiscounted NCF
|
|
$ million
|
|
|
40.74
|
|
NPV (at 5%)
|
|
$ million
|
|
|
28.01
|
|
NPV (at 8%)
|
|
$ million
|
|
|
22.19
|
|
NPV (at 10%)
|
|
$ million
|
|
|
18.8
|
|
IRR
|
|
%
|
|
|
32
|
|
Payback
|
|
Years
|
|
|
2.6
|
|
Capital and Operating Costs
All estimates are based on mining the Oxide Tailing resource only. The total capital costs including reclamation and salvage are estimated to be $28.5 million. The process operating costs include agglomeration, heap leaching, followed by Merrill-Crowe refinery plant to produce a silver/gold doré. The operating cost estimate is reported in US dollars with an exchange rate of Mexican Peso to US Dollars at 12.5. The operating cost estimate is sensitive to the exchange rate. The annual operating costs include:
|
·
|
Staffing and maintenance manpower
|
|
·
|
Power consumption based on the estimated power drawn by the equipment
|
|
·
|
Reagent consumption rates and associated costs have been based on recent prices received from reagent suppliers
|
|
·
|
Estimated maintenance cost
|
The operating cost summary for the processing facility and the G&A costs is based on a processing design rate of 1,370 t/d (500,000 tonnes per year) with an availability of 90% and 365 operating days per year resulting in an effective annual production rate pf 450,000 tonnes.
The yearly average annual operating cost for the process facilities is estimated to be $15.06/tonne of tailings treated at the processing rate of 1,370 tonnes per day, as shown in the table below:
Operating Cost Summary:
Description
|
|
Personnel
|
|
|
Unit Cost
($/treated)
|
|
Mining
|
|
|
15
|
|
|
|
1.13
|
|
Process
|
|
|
39
|
|
|
|
12.53
|
|
G&A
|
|
|
11
|
|
|
|
1.41
|
|
Total Operating Cost
|
|
|
65
|
|
|
|
15.06
|
|
Mineral Processing, Metallurgical Testing and Recovery Methods
Tetra Tech used the estimated grade values and test work results as reported by MineStart Management Inc. (MMI) and Process Research Associates Ltd. (PRA), who conducted the metallurgical tests, to develop the process flowsheet. The investigated metal recovery methods included gravity separation, flotation, tank cyanide leach, and heap leach processing options. According to preliminary economical evaluations, a heap leach followed by gold and silver recovery using Merrill Crowe process was selected for the PEA study.
Mining Methods
The oxide tailings mineral resource will be mined/moved using a conventional truck/loader surface mining method. The Production cycle consists of loading and trucking. The Loading/trucking operations will be conducted in two 12 hour shifts per day. A 3.85 m3 rated (5.0 yd3) front-end loader will be used to load three, 24 tonne articulated trucks that will either deliver the sulphide tailings to the sulphide waste stockpile or the oxide tailings to the oxide tailings hopper. The Production schedule has been developed for the oxide tailings based on a treatment rate of 500 kt/a, this would be equivalent to a throughput rate of 1,370 t/d. This will give an overall project duration of approximately eight years. This eight-year period includes a one-year pre-production period and excludes the time required for remediation of the heap after the leaching process has been completed. Only oxide tailings will be considered for treatment while sulphide materials will be considered waste at this time. The LOM total oxide tailings materials treated is 3.12 million tonnes with average grades of 87.75 g/t silver and 0.43 g/t gold.
Environmental
Environmental parameters, permits and registrations, and environmental management strategies that may be required for the Project will be summarized in the technical report. Permits and authorizations required for the operation of the Project may include an operating permit, an application for surface tenures, a waste water discharge registration, a hazardous waste generator’s registration, and an Environmental Impact Assessment (EIA) or Evaluación de Impacto Ambiental. Acid-base accounting (ABA) tests have indicated that mild acid generation may already have started on the tailings dam. A gap analysis and additional tests to further characterize current conditions of the tailings should be completed to properly design a tailings management plan.
Mineral Resource Discussions
Oxide Tailings
A mineral resource was estimated for the oxide tailings generated from prior historical mining operations, using ordinary kriging (OK) interpolation and uncapped grades. The assay values for this estimate are based on 28 drill holes, which were completed on the tailings by CMMA in 1990, and include 407.75 m of drilling and 383 assays of both gold and silver. The oxide tailings are estimated to contain a 2.34 Mt inferred mineral resource at a grade of 91.3 g/t silver and 0.54 g/t gold, with a 50 g/t silver cut-off. The entire resource is classified as an inferred mineral resource, based on the historical nature of the drilling (prior to the institution of NI 43-101 and associated quality assurance/quality control (QA/QC) requirements). Verification samples collected confirmed the presence of gold and silver mineralization at grades similar to those obtained in the original tailings drilling campaign and confirmed that the Mine’s lab assays are not materially different from those of external labs. It is QG Australia (Pty) Ltd.’s opinion that the oxide tailings sampling data are considered sufficient to support the purpose of the Technical Report and a current inferred mineral resource.
Mineral Resources
The Company’s August 2016 mineral resource estimate was used as the resource base for the PEA. This new estimate includes data from 57 holes drilled during the last two years. Due to closer drill hole spacing, there is sufficient information to justify elevating 1,330,000 tonnes of the previous 2,340,000 tonnes of inferred resources to the indicated category. However, there is still an additional inferred resource of 1,810,000 tonnes in the new estimate. The oxide tailings resource is accessible on surface and contains significant gold and silver grades. The resource estimate used in the PEA for the oxide tailing resource is outlined in the table below at a cut-off grade of 50 AgEQ g/t.
Measured & Indicated Mineral Resources
|
|
|
Grade
|
|
|
Metal Contents
|
|
Resource Category
|
|
Deposit
|
|
Cut-off
(AgEQ
g/t)
|
|
|
Metric Tonnes
|
|
|
AgEQ g/t
|
|
|
Ag g/t
|
|
|
Au g/t
|
|
|
Cu%
|
|
|
Ag Million Tr Oz
|
|
|
Au Thousand Tr Oz
|
|
|
Cu T
|
|
Indicated
|
|
Oxide Tailings
|
|
|
50
|
|
|
|
1,330,000
|
|
|
|
124
|
|
|
|
98
|
|
|
|
0.46
|
|
|
|
0.00
|
|
|
|
4.2
|
|
|
|
19.8
|
|
|
|
0
|
|
Inferred
|
|
Oxide Tailings
|
|
|
50
|
|
|
|
1,810,000
|
|
|
|
113
|
|
|
|
88
|
|
|
|
0.44
|
|
|
|
0.00
|
|
|
|
5.1
|
|
|
|
25.6
|
|
|
|
0
|
|
Note on Mineral Resources
Mineral resources that are not mineral reserves do not have demonstrated economic viability. The PEA is preliminary in nature as it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable to them to be categorized as mineral reserves. At this time there is no certainty that the results of the PEA will be realized.
Recommendations
The Technical Report contains the following recommendations for further work:
Resource Estimates
In order to improve confidence in the inferred mineral resource of the oxide tailings and evaluate the overlying sulphide tailings, a sonic drill program of 90 holes with 50 m x 50 m drill collar spacing totaling 1,800 m is recommended.
Resource estimates for the ET Zone of the Avino vein, the San Gonzalo vein and tailings should be completed for mine planning purposes.
The drill hole database should be consolidated and mining depletions updated before the estimation is performed.
Process
Take sufficient amounts of samples from both oxide and sulphide tailings to obtain representative samples for assay and metallurgical test work to confirm the grade of the deposit and the recovery of silver and gold from the heap leach process.
Use the results from the metallurgical test work program to confirm/define the duration of leaching on the pad, the reagent consumption values and the silver and gold precipitation efficiencies.
Investigate the metallurgical performance of the sulphide tailings materials and develop the process method for the sulphide tailings materials, including co-processing the sulphide tailings with the oxide tailings.
Environmental
A detailed trade-off study should be undertaken to characterize current conditions of the sulphide tailings and to determine whether the re-treatment of this material would contribute to the profitability of the Project.
Qualified Person(s)
The Qualified Persons as defined by NI 43-101, who supervised and are responsible for the Technical Report on the Oxide Tailings Retreatment of the Avino Mine, and have reviewed the scientific, technical and financial content of this Annual Report, are Hassan Ghaffari, MASc., P.Eng., P.Eng, Jianhui Huang, PhD., P.Eng, of Tetra Tech Canada Inc., Sabry Abdel‐Hafez, PhD., (previously with Tetra Tech Canada Inc.) and Michael O’Brien P.Geo., Pr.Sci.Nat., who is an employee of QG Australia Pty Ltd (an ARANZ Geo Company) and independent of Avino, as defined by Section 1.5 of NI 43-101.
San Gonzalo Mine – Resource Depletion
The mineral resource estimate at San Gonzalo factors in depletion from ongoing mining activities up to the effective date of August 31, 2016. Between the effective date and December 31, 2017 a total of 117,298 tonnes were extracted.
Avino Mine – Resource Depletion
The mineral resource estimate at San Gonzalo factors in depletion from ongoing mining activities up to the effective date of August 31, 2016. Between the effective date and December 31, 2017, a total of 539,206 tonnes were extracted.
Exploration - Avino Vein
Early
Drilling (Prior to Mine Closure), 1968 to 2001
Between 1968 and 2001, at least 25 diamond drill holes, ranging in length from 132 to 575 m, are reported to have been drilled from surface into the Avino vein. Included in this total are 10 holes that were drilled by Selco in 1970 when they were re-habilitating some of the old underground workings to provide access for sampling (Slim 2005d). No further information on these drill holes was available to Tetra Tech and they are not included in the resource estimate for the Avino vein.
Oxide Tailings, 1990 to 1991
Between November 10 and December 5, 1990, and March 8 and May 30, 1991, Avino completed six trenches and 28 vertical drill holes in the tailings along 7 fences at a spacing of roughly 50 m by 50 m (Benitez Sanchez 1991). Drilling was completed transversely to the drainage pattern of the tailings. Cut at 1 m vertical increments, 461 samples were assayed for silver and gold at the mine assay lab and occasional moisture contents were reported. Assay results from these drill holes have been previously reported (Tetra Tech 2013).
Recent
Drilling (Post Mine Closure), 2001 to Present
A total of 156 surface and underground drill holes have been completed on the Avino and San Gonzalo veins, totalling 35,846.5 m. Additional exploration holes have been drilled elsewhere on the Property, but those drilling results are not considered material. Most holes were surveyed down hole using a Tropari single-shot magnetic instrument. Of those holes for which down hole surveys were completed, the majority contain three or fewer measurements, typically at the collar and near the end of hole, and sometimes part-way down the hole. Many holes were not surveyed to within 10 m of the end of the hole.
Geophysical
Surveys: Induced Polarization (IP)
In December 2006, Avino conducted an 80 km line deep penetrating IP survey at the property. IP geophysics helps identify drill targets. The IP survey was completed in 2007. Avino did follow-up soil geochemical, satellite imagery and other surveys to better define targets in the covered areas.
Avino Vein (including ET Zone) and Nearby Veins
Since 2001, Avino has drilled 34 holes below Level 12, where mining ceased, for a total of 11,523.2 m. Drilling has targeted the ET Zone in particular. There were 5 holes completed in 2006 (2,166.85 m), 12 holes in 2007 (3,906.5 m), 8 holes in 2008 (2,186.7 m), and 9 holes in 2012 (3,263.15 m).
In September 2016, Avino began an exploration diamond drilling program between the San Luis Mine, which was last mined in the 1990’s, and the ET Mine, which is the area of current production; both areas are part of the Avino Mine. The area between the two mines is approximately 300 metres long and 220 metres deep and was recently the subject of a geological review where it was determined that the main Avino vein showed economically viable values, was open at depth and was largely underexplored. The 22-hole program, comprising approximately 3,374 metres, was extended from the original 18-hole program to fully evaluate the tonnage and the grade of the new area of the Avino Vein System and was completed in August 2017. The drill results support the continuation of the extensive Avino vein system. This new area is close to surface and accessible from the existing Avino Mine underground workings.
Additional drilling around the Avino Vein in 2017 was focused on the El Chirumbo and San Juventino areas. The historic El Chirumbo area is located at the east end of Avino vein and was previously mined prior to 1940 and is characterized by gold rich mineralization in narrow veins. In 2017, 10 diamond drill holes were completed totalling approximately 2,000 metres. An additional five holes totalling 1,300 meteres were drilled at the San Juventino area which is located where the Avino-San Juventino and Footwall Breccia intersect north of the main Avino Vein system.
Since the Avino deposit strikes approximately east-west and dips at 60° to 70° to the south, holes are generally oriented from south to north at various bearings and dip angles in order to intersect the structure at a target depth. Holes were drilled using Avino’s Longyear 44 core rig at thin wall NQ diameter.
San Gonzalo and Nearby Veins
At San Gonzalo, Avino drilled 40 holes in 2007 (9,222.9 m), 6 in 2008 (1,782.65 m), 18 in 2011 (3,618.57 m), 15 in 2014 (3,631.93 m), and 25 in 2015 (3,197.60m) for a total of 104 drill holes and 21,453.65 m. All holes were of thin wall NQ size core diameter and were completed using Avino’s Longyear 44 core rig with the exception of 6 underground holes in 2014 and 14 in 2015. Additional holes also explored the nearby Guadalupe, San Juventino, San Lucerno, Mercedes, San Jorge, and Yolanda veins.
According to Gunning (2009), the collars for 2007 and 2008 drill holes were marked by concrete monuments and the collars have been surveyed. A check of the coordinates with a handheld global positioning system (GPS) revealed a possible 10 m constant error which may simply mean that all of the mine coordinates are not precisely Universal Transverse Mercator (UTM). However, this could also indicate the existence of a small surveying error on the Property.
In 2011, 69 holes totalling 9,862.97 m were drilled principally in the following locations: San Gonzalo (18 holes, as above), Aguila Mexicana (2 holes), Guadalupe (25 holes), La Potosina (9 holes), Mercedes (1 hole), San Jorge (3 holes), San Juventino (3 holes), San Lucero (5 holes), Tucero (1 hole), and Yolanda (2 holes). With the exception of the San Gonzalo vein, all of these locations are considered targets for further exploration.
In 2014, Avino undertook a 15 hole (3,631.93 m) surface and underground definition drill program to test the San Gonzalo vein at depth. In April 2014, a 70 meter cross cut was completed on level 6, and the underground drill program started on May 2. Three holes were drilled from the cross cut (SG-14-01 through SG-14-03).
Surface drill holes SG-14-04 through SG-14-10 were drilled between June and October 2014. Hole SG-14-11 was an underground hole drilled in October 2014 from the end of the San Gonzalo level 6 crosscut (same location as SG-14-01 through SG-14-03).
Holes SG-14-12 and SG-14-13 were drilled during October and November 2014 from the end of a crosscut on level 7. A sudden inflow of water on November 17, 2014 caused hole SG-14-13 to be terminated. Surface drilling later resumed and holes SG-14-14 and SG-14-15 were drilled by December 31, 2014.
In 2015, the Company continued its definition drill program intended to define the boundaries of the San Gonzalo structure. In total, 25 holes were completed totaling 3,197.60m metres. From January 2015, through the end of April, 19 holes were drilled of which 5 were from surface and 14 were underground holes (SG-15-1 through SG-15-16). Drilling resumed in September 2015 with Hole CH-07-01 which was the deepening of a hole drilled in 2007 on the Chihuahua vein, which is an extension of the San Gonzalo structure. Drilling then resumed at San Gonzalo to test the southeast extension of the structure; drilling for the year concluded in November with the completion of hole SG-15-24. No holes were drilled at San Gonzalo in 2016.
In 2017, seven holes were drilled at the Guadalupe area totalling 936 metres. The Guadalupe area is located on surface at the west end of the San Gonzalo mine.
Reclamation
The Company has mine closure and reclamation plans for the Avino and San Gonzalo Mines and has estimated the undiscounted value of reclamation at approximately $1.3 million for the Avino Mine and approximately $0.3 million for the San Gonzalo Mine as at December 31, 2017.
As per Federal Mexican regulations (LGEEPA), both the SEMARNAT and PROFEPA ministries require Avino to present in its first semi-annual report a “General Plan to Remediate the Site” including dates, activities, techniques, and costs that will ensure restoration of affected areas, considering complete reforestation of impacted sites, removal of foundations and infrastructure that are no longer useful, roads that no longer have any use, removal and proper disposal of all rubbish, closing off adits that are no longer needed and restoration of the tailings facility at the end of its operational life. Avino will also need to present a reforestation program for the entire surface area affected during mining activities. This program will include caveats to safeguard flora and fauna.
Avino Property Activity Summary
The table below presents material mined, material processed, concentrate produced, concentrate sold, and average realized concentrate pricing for each of the San Gonzalo Mine, the historic Avino stockpiles, and the Avino Mine.
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
San Gonzalo
|
|
|
Avino Mine
(1)
|
|
|
San Gonzalo
|
|
|
Avino Mine
(1)
|
|
|
San Gonzalo
|
|
|
Avino Mine
(1)
|
|
|
Avino Mine Stockpiles
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Processed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tonnes
|
|
|
81,045
|
|
|
|
460,890
|
|
|
|
115,047
|
|
|
|
429,289
|
|
|
|
121,774
|
|
|
|
389,191
|
|
|
|
6,922
|
|
Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold (g/t)
|
|
|
1.32
|
|
|
|
0.52
|
|
|
|
1.25
|
|
|
|
0.42
|
|
|
|
1.48
|
|
|
|
0.28
|
|
|
|
0.71
|
|
Silver (g/t)
|
|
|
269
|
|
|
|
64
|
|
|
|
267
|
|
|
|
67
|
|
|
|
279
|
|
|
|
65
|
|
|
|
87
|
|
Copper (%)
|
|
|
N/A
|
|
|
|
0.5
|
|
|
|
N/A
|
|
|
|
0.5
|
|
|
|
N/A
|
|
|
|
0.63
|
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentrate Produced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tonnes
|
|
|
3,167
|
|
|
|
9,782
|
|
|
|
4,115
|
|
|
|
9,390
|
|
|
|
4,517
|
|
|
|
8,958
|
|
|
|
99.98
|
|
Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold (g/t)
|
|
|
26.27
|
|
|
|
16.72
|
|
|
|
25.9
|
|
|
|
12.23
|
|
|
|
28.34
|
|
|
|
9.24
|
|
|
|
29.78
|
|
Silver (g/t)
|
|
|
5,800
|
|
|
|
2,560
|
|
|
|
6,220
|
|
|
|
2,620
|
|
|
|
6,237
|
|
|
|
2,449
|
|
|
|
3,926
|
|
Copper (%)
|
|
|
N/A
|
|
|
|
20.28
|
|
|
|
N/A
|
|
|
|
20.32
|
|
|
|
N/A
|
|
|
|
23.93
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentrate Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tonnes
|
|
|
2,895.08
|
|
|
|
9,139.73
|
|
|
|
3,229.97
|
|
|
|
10,761.81
|
|
|
|
4,481.94
|
|
|
|
7,695.15
|
|
|
|
236.681
|
|
Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold (g/t)
|
|
|
17.16
|
|
|
|
16.27
|
|
|
|
20.56
|
|
|
|
11.48
|
|
|
|
27.409
|
|
|
|
10.113
|
|
|
|
28.129
|
|
Silver (g/t)
|
|
|
5,129.31
|
|
|
|
2,381.36
|
|
|
|
5,175.13
|
|
|
|
2,448.42
|
|
|
|
5,776.91
|
|
|
|
1,947.82
|
|
|
|
3,320.44
|
|
Copper (%)
|
|
|
n/a
|
|
|
|
18.38
|
%
|
|
|
n/a
|
|
|
|
19.01
|
|
|
|
N/A
|
|
|
|
23.3
|
|
|
|
7.68
|
|
|
|
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|
|
|
|
|
|
|
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|
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|
|
Average Realized Pricing (US$/oz)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold ($/oz)
|
|
|
1,270.75
|
|
|
|
1,267.09
|
|
|
|
1,249.70
|
|
|
|
1,257.91
|
|
|
|
1,144.62
|
|
|
|
1,130.49
|
|
|
|
1,205.76
|
|
Silver ($/oz)
|
|
|
17.01
|
|
|
|
17.07
|
|
|
|
17.09
|
|
|
|
17.74
|
|
|
|
15.43
|
|
|
|
15.03
|
|
|
|
16.12
|
|
Copper ($/lb)
|
|
|
n/a
|
|
|
|
2.84
|
|
|
|
n/a
|
|
|
|
2.19
|
|
|
|
N/A
|
|
|
|
2.31
|
|
|
|
2.49
|
|
________
(1) In accordance with the Company’s accounting policies, prior to the date that management’s intended levels of extracting and processing resources have been achieved, concentrate sales incidental to the exploration of mineral properties are recorded as a reduction of capitalized exploration and evaluation costs. For the three months ended March 31, 2016 and the years ended December 31, 2015 and 2014, concentrate sales from the Avino Mine and from Avino Mine stockpiles used for circuit testing were recorded as a reduction of capitalized costs rather than as revenue.
Bralorne Property—British Columbia, Canada
Introduction
The Bralorne property consists of approximately 11,189 acres (4,528 hectares) of mineral claims located in southwestern British Columbia, Canada, which cover three former gold mines with historic production of 4 million ounces of gold between 1928 and 1971. Since these mines closed, exploration has been carried out by various companies. A new vein was discovered in 2006 that spurred renewed exploration drilling followed by test mining and processing between 2011 and 2014 for a total of 18,436 ounces of gold recovered.
Assets include underground mining equipment, tailings storage facility, water treatment plant, and associated surface shops, accommodation and office buildings. Historically, the property was permitted for extracting and processing resources at a rate of up to 450 tonnes (approximately 500 tons) per day. More recently, the mine was permitted to operate at 100 tons per day until its shutdown in 2014. On October 21, 2016, Avino announced the results of an updated NI 43-101 resource estimate for the Bralorne property. The resource estimate has been included in an updated NI 43-101 technical report, prepared by Kirkham Geosystems Ltd., which was filed on SEDAR and EDGAR on October 27, 2016 and is discussed in more detail in the Resource Estimate section below. Continued exploration and trial mining is planned with the aim of lowering costs and outlining sufficient additional resources for an expansion of activities.
Location and Access
The Bralorne Property is located northeast of Vancouver, British Columbia, Canada and is accessible by road from Vancouver 322km through the Fraser Valley along Highway 1 to Lytton, and then to Lillooet on Highway 12, or alternatively 255 km from Vancouver on Highway 99 through Squamish, Whistler and Pemberton to Lillooet. From Lillooet it is another 105 km on Highway 40 through Gold Bridge to the town of Bralorne.
The property is situated as illustrated in the figure below:
The community of Bralorne lies in the centre of the property. This town site was built to support historic mining operations and now has about 70 full-time residents. The community of Gold Bridge lies 11 kilometres northwest of Bralorne and including the surrounding area has a population of approximately 50. There are limited facilities in Gold Bridge, including two motels, a restaurant, gas station, grocery store, and one school covering kindergarten to grade seven levels. Additional services are available in Lillooet or Pemberton.
Geology and Mineralization
The Bralorne property is situated at a tectonic boundary between the regionally extensive Cache Creek and Stikine allochthonous terranes. The Bridge River terrane, part of the Cache Creek terrane, is comprised of Mississippian to Middle Jurassic accretionary complexes of oceanic basalt and gabbro and related ultramafic rocks, chert, basalt, shale and argillite. It is juxtaposed with Late Triassic to Early Jurassic island arc volcanic rocks and mostly marine, arc-marginal clastic strata of the Cadwallader terrane, interpreted as part of the Stikine terrane.
The region has been intruded by a wide range of Cretaceous and Tertiary plutonic and volcanic rocks and their hypabyssal equivalents. Most significant among these are the dominantly Cretaceous granitoid bodies that form the Coast Plutonic Complex, which locally is characterized by the 92 Ma Dickson McClure intrusions, and the large individual bodies of the Late Cretaceous Bendor plutonic suite. Hypabyssal magmatism is reflected by emplacement of porphyritic dikes between 84 and 66 Ma, with the youngest magmatic event being 44 Ma lamprophyre dikes (Hart et. al. 2008).
The district was deformed by mid-Cretaceous contractional deformation within the westerly-trending Shulaps thrust belt, and by contractional and oblique-sinistral deformation associated with the Bralorne-Eldorado fault system. The timing of this deformation and metamorphism is bracketed around 130–92 Ma. The Bridge River and Cadwallader terranes are juxtaposed along the Bralorne-Eldorado fault system, which consists of a 1 to 3 km wide linear zone of tectonized and serpentinized slices of late Paleozoic mafic and ultramafic rocks.
The main gold-forming event in the Bridge River district is interpreted to have taken place at around 68 to 64 Ma at the Bralorne-Pioneer deposit. Mineralization pre-dated or was synchronous with the emplacement of the Bendor batholith, and the gold event overlaps initiation of dextral strike-slip on the regional fault systems in this region.
The principal stratigraphic assemblages of the local area include the Bridge River Complex and Cadwallader Group. The Bridge River Complex is subdivided into two packages, sedimentary and volcanic, with a thickness of 1,000 m or more of ribbon chert and argillite with very minor discontinuous limestone lenses, and large volumes of basalt. The Cadwallader Group has been subdivided into three formations: the lowermost sedimentary Noel Formation, the Pioneer Formation greenstones, and the upper Hurley Formation sedimentary rocks. The Pioneer Formation ranges from fine-grained, massive amygdaloidal flows and medium-grained dykes or sills, to coarse lapilli tuffs and aquagene breccias. It is estimated to be at least 300 m thick in the Cadwallader Valley, but may be thicker elsewhere. The Hurley Formations is comprised of rhythmically layered green volcanic wacke and darker argillite. The Noel Formation consists of black argillites that are less calcareous than those of the Hurley.
Igneous rocks within the Bralorne area include Upper Paleozoic ultramafic rocks and associated Bralorne intrusive suite, Mesozoic Coast Plutonic rocks, Tertiary Bendor intrusive rocks, and dykes of Cretaceous-Tertiary age. Ultramafic rocks, called the President ultramafics, form narrow serpentinized bodies and with the pillow basalts and radiolarian ribboned cherts of the Bridge River Complex, they complete the trinity of a typical ophiolite package. The ultramafic rocks in the Bralorne area range from dunite to pyroxenite, but peridotites are most common. Usually they are partly to completely serpentinized, or altered to talc-antigorite-tremolite-carbonate, and are intruded by diorite. The Bralorne intrusive suite includes augite diorite and “Soda Granite” (trondhjemite or albite tonalite), which commonly occur together. The main mass is called Bralorne Diorite (hornblende quartz diorite) and occurs between the bounding Fergusson and Cadwallader faults. The Bralorne Diorite complex is cross cut by intrusions of soda granite with complex dyke relations. The main body of Soda Granite is found along the northeast side of the Bralorne Diorite, but also forms many dykes cutting the diorite. Typically, the Soda Granite is a leucocratic, coarse-grained granitic rock. Cretaceous-Tertiary dykes, including grey plagioclase porphyry, albitite, green hornblende porphyry, Bendor porphyry and lamprophyre, intrude all the units. All the rocks in the Bralorne area, except the Bendor and lamprophyre dykes, are affected by low-grade metamorphism.
The Bralorne-Pioneer gold-quartz vein system is hosted in variably altered rocks of the Bralorne Diorite complex and Pioneer Greenstone that occur as fault-bounded lenses in a structurally complex zone between the Cadwallader and Fergusson faults referred to as the Bralorne-Pioneer fault lens or Bralorne Block. This lens has an approximate 4.5 km strike length, mostly along, adjacent to, or between these two faults. All of the significant historic gold production in the Bridge River area came from within the Bralorne Block.
Property Ownership
The Bralorne property is comprised of different types of legal mineral properties registered under and subject to the Mineral Tenure Act and Mineral Land Tax Act of the Province of British Columbia. The Property consists of 154 Crown granted mineral claims, two reverted Crown granted claims and eighteen metric unit mineral claims, all of which are contiguous. Bralorne Gold Mines Ltd. (in this section, “BGM”) owns 100% of the property. During 2016, the Company also acquired a 100% interest in nine mineral claims from Great Thunder Gold Corp. (“GTG”) located in the Lillooet Mining Division of British Columbia, known as the BRX Property.
Mineral Concessions and Agreements
There is an underlying agreement on twelve Crown grants in which the Company is required to pay 1.6385% of Net Smelter Proceeds of Production from the claims, and has to pay fifty cents (C$0.50) per ton of material produced from these claims if the material grade exceeds ¾ (0.75) ounce per ton gold. No extraction or processing has come from these claims in the past and none is planned in the near future. The Crown grants subject to this agreement include:
DL 5742 Sunbeam
DL 5743 Comstock No. 5
DL 5744 Comstock No. 2
DL 5745 Homestake
DL 5746 Sunshine
DL 5747 Comstock No. 3
DL 5748 Lorenzo
DL 5750 Orion No. 4
DL 5751 Orion
DL 5752 Comstock No. 8
DL 5754 Comstock No. 7
DL 5755 Comstock No. 6
Crown granted mineral claims may also include surface rights, water rights and timber rights. At the Bralorne property, surface rights are currently held by BGM on 9 of its 154 Crown Grants as listed below:
DL 456 Pioneer
DL 457 Ida May
DL 539 Little Joe
DL 579 Wood Chuck
DL 670 Telephone
DL 671 Wood Duck (Lot 1)
DL 5489 Telephone Fr.
DL 5484 Polnud (Lot 20)
DL 5582 Millbank
DL 7883 Cora Fr (Lots 3, 4, 6, and 7 – no Crown granted mineral claim, surveyed lot only)
Claim
Staking and Mineral Tenure in British Columbia
Crown granted mineral claims are legacy claims in British Columbia that confer rights to subsurface minerals. The Crown granted claims are subject to the Mineral Land Tax Act, which requires the owner to pay to the BC Ministry of Finance a tax at C$1.25 per hectare up to a holding of 20,235 ha if no commercial production has been declared to maintain the claims in good standing for one year. The total annual tax payable for all of the Crown granted mineral claims in the Bralorne property was C$2,248.37 in 2016. All of BGM’s Crown granted mineral claims are in good standing until July 2017 and it is expected that the annual taxes will be paid again prior to that date.
Reverted Crown grants are treated the same as mineral cell claims in terms of holding costs. Below is the required work value for mineral cell claims.
First and second anniversary years
|
|
C$5.00 per hectare per year
|
Third and fourth anniversary years
|
|
C$10.00 per hectare per year
|
Fifth and sixth anniversary year
|
|
C$15.00 per hectare per year
|
Subsequent anniversary years
|
|
C$20.00 per hectare per year
|
Instead of applying a work value to claims the claim owner can pay cash in lieu of expenditure to the British Columbia government (“cash-in-lieu”). To maintain the claim by paying cash-in-lieu, double the minimum value of exploration and development for the respective anniversary year as noted above would need to be paid.
Any mineral cells which have a border with each other are considered to be contiguous and the work value performed on one claim can be applied proportionally to all connected cells.
All of Bralorne’s reverted Crown granted mineral claims and mineral cell claims are contiguous.
All of the Crown granted mineral claims and reverted Crown granted mineral claims have been legally surveyed. The mineral claims have not been surveyed.
All of BGM’s reverted Crown granted mineral claims and mineral cell claims are in good standing with the first expiry date being September 23, 2026, with the exception of one mineral cell claim (tenure number 1051046) which has a good to date of March 29, 2018. It is expected that new exploration work prior to that date will be completed and work credit been applied to all claims to bring them to the same good to date as they are all contiguous. Alternatively, cash-in-lieu can be paid for this claim to extend the expiry date.
Mineral and Placer Claims are acquired using the British Columbia Mineral Titles Online (MTO) system. The online MTO system allows clients to acquire and maintain mineral and placer claims. Cell claims are registered by selecting one or more adjoining cells on the electronic MTO map. Mineral Titles can be acquired anywhere in the province where there are no other impeding interests (other mineral titles, reserves, parks, etc.). No two MTO users can select the same cells simultaneously, since the database is live and updated instantly; once a selection is made, the cells selected will no longer be available to another user, unless payment is not successfully completed within 30 minutes.
Bralorne Area Crown Grants owned by Avino Silver & Gold Mines Ltd.:
Bralorne Area Mineral Cell Claims and Reverted Crown Grants Owned by BGM:
This list is considered to be accurate as of March 20, 2018, according to the MTO database. Note that the Mineral Titles Online database lists only the reverted Crown Grants and the metric cell unit claims.
Map of Bralorne Property Concessions
History
The Bralorne property has an extensive history of exploration and mining, starting in the late 1800’s, when placer miners followed gold up the Fraser River and its tributaries and eventually discovered lode gold in the area of Cadwallader Creek. The first claims on the property were staked in 1896 and small scale production began in the area of the Pioneer Mine shortly thereafter. Larger scale commercial production from underground mining commenced in 1928, and production at Pioneer and Bralorne Mines was expanded to 450 tonnes per day at each mine. Bralorne subsequently merged with Pioneer and continued production until 1971, when operations were closed for economic factors when the gold price was fixed at $35 per ounce. The mine never ran out of gold mineralization.
Total historic production from the Bralorne-Pioneer gold mine is recorded as 4.2 million ounces of gold (equating to 129.14 tonnes) from 7.3 million tonnes of material grading 17.7 grams gold per tonne (8.0 million short tons at 0.52 ounce per ton). Silver production from the deposits is recorded as 29.61 tonnes (952,000 ounces).
The current Bralorne mineral property encompasses several historic mine workings, of which the major ones are the King, Bralorne, and Pioneer mines. A total of 30 veins on the property were mined in the various workings by 80 kilometres of tunneling on 44 levels, the deepest of which traced the 77 vein to a depth of 1,800 meters below surface at the deepest part (~ 670 meters below sea level).
With the acquisition of the “BRX” claims to the North of the Bralorne claims in August 2016, it expanded to include the former California and Arizona mine workings among others.
Since 1971, considerable work by a number of companies has been carried out on the property. Major exploration programs were carried out on the old mine areas of the property in 1973 by Bralorne Resources and in 1980 to 1984 by E & B Explorations, Inc., who acquired the main historic deposits in 1980, and also in 1988 by a successor company to E & B, Corona Corporation. In 1973 and 1974 Love Oil carried out exploration work on the northeast sector of the property. In 1987, Levon Resources carried out surface exploration over the same area, and underground mine advancement including an adit and a cross cut plus 20 meters of drifting on the Peter vein was carried out. In 1986, Mascot Gold Mines Limited conducted surface and underground diamond drilling and drifting.
Avino Mines and Resources Limited became involved in the Bralorne area in 1987, and subsequently acquired 100% ownership from Love Oil Company, Coral Gold Corporation and Levon Resources. Avino then purchased the Bralorne-Pioneer property from Corona in 1991. This was a major accomplishment for management, and marked the first time in the history of the mining camp that all of the major deposits were held by the same company. In 1991, Avino Mines and Resources conducted surface and underground exploration including surface drilling, rehabilitation of the King Mine 800 level, and underground drilling to explore the Peter Vein.
In 1993, Bralorne Pioneer Gold Mines Ltd. (“Bralorne Pioneer”) optioned the property from Avino and conducted surface exploration over the northeastern part of the property. In 1994, the same company carried out a diamond drill program on the Peter Vein and other nearby veins. In 1995, Bralorne Pioneer carried out 700 feet of underground drifting on the Peter Vein on the 800 level and underground drilling to test the Peter and Big Solley Veins. Also in 1995, Bralorne Pioneer carried out surface trenching followed by drilling. Further surface drilling was done in 1997. In 2001, Bralorne Pioneer drove a raise from the upper Peter drift through to surface and a second raise was driven part way to surface from the same level.
Bralorne Pioneer acquired 100% interest in the property from Avino Silver and Gold Mines Ltd in 2002. In 2002 and 2003, Bralorne Pioneer drilled 24 surface diamond drill holes and carried out a trenching program on the Peter Vein.
In 2003 and 2004, Bralorne Pioneer rehabilitated part of the 800 level, prepared both the 800 level drift on the Peter Vein and the Upper Peter cross-cut (4,230 level) for stoping, and commenced stoping the vein in the Upper Peter workings. Between 2004 and 2005, Bralorne Pioneer drove a trackless decline on the Peter vein from the 4,230 Level to the 4,130 Level and developed stopes on both these levels. A total of 3,500 tons of material grading 0.35 ounces of gold per ton is estimated to have been produced from the Peter vein before mining was stopped in 2005. Also in 2004 and 2005, Bralorne Pioneer carried out a surface drilling program consisting of 5,691.2 meters of NQ core in 43 holes. This program was targeted mainly at the 51BFW vein in the historic gap between the Bralorne and Pioneer Mines.
In 2005, Bralorne Pioneer collared an adit and drove a crosscut to access the 51BFW vein at the 4,140 elevation. A sill drift was driven in this vein and a trial shrinkage stope was developed. In the process of constructing the access road to the new adit, a mineralized quartz vein was discovered. This zone remains a valid exploration target and is now interpreted to be the top of the 52 vein.
Bralorne Pioneer changed its name to Bralorne Gold Mines Ltd. and operated the mill intermittently on a trial basis in 2004 and 2005 to process material from the Peter and 51BFW veins, plus low grade material from old mine dumps and tailings. The combined total for all of the old tailings and low grade stockpile material that was processed between March 2004 and January 2005 was 22,642 tons at a feed grade of 3.15 g/T gold (0.092 oz/ton Au) with an overall gold recovery rate of 73.89%. The mill was operated again from March 2005 to November 2005 with feed from the Peter and 51BFW veins. Production totalled 8,552 tons at 8.67 g/t gold (0.253 oz/ton Au) with a recovery rate of 92.33% (of which 46% was in the flotation concentrate). Material from the Peter vein had about 35% of the gold reporting to the cleaned gravity concentrate (smelted on site). The balance of the gold (to a total of approximately 92%) was recovered into a flotation concentrate which averaged 62 g/T Au. The 51BFW material was found to be much coarser grained and yielded 61% gravity recovery and produced a flotation concentrate grading over 186 g/T Au.
In 2005, a Preliminary Economic Assessment (Beacon Hill 2005) showed that an average grade of at least 15.5 g/T gold would be required to sustain a viable operation, based upon the operating costs at a production rate of 100 tons/day. The study recommended programs to delineate sufficient resources to support a production rate of 280 tons/day at 12 g/T gold (0.35 oz/ton). This analysis was based on a gold price of US$400 per ounce.
In 2006, BGM conducted surface and underground exploration, including a MMI geochemical survey, surface diamond drilling (26 holes; 5,667.8m), underground drilling (4 holes; 980.9m), and digitization and compilation of current and historic data. Significant drill intercepts were identified including two high-grade intercepts in the Bralorne-King area. SB06-109B intersected 0.61 m of 15.87 g/T gold and then intersected two smaller zones of high grade gold; a 0.34 m vein assaying 402.58 g/T gold and a 0.37 m vein assaying 246.99 g/T gold.
In 2007, BGM conducted underground drilling (47 holes; 8,603m) in the area of the high grade intercepts obtained in 2006. Significant intercepts obtained in the underground drill program were modeled by Beacon Hill as a new zone (BK Zone).
In 2008, BGM conducted underground advancement including a track drift to cross cut to the BK Zone, and drifting along the zone. Drift muck from the mineralized structure was stockpiled for mill feed.
2009-2015 Exploration, Development and Advancement Activity
BGM continued exploration and evaluation of the property between 2009 and 2014, and conducted diamond drilling, underground advancement plus trial mining and milling. The purpose of this work was to locate new gold resources and evaluate production at higher gold prices.
Between 2010 and 2014, a total of 83,462 tonnes of material were extracted from the underground mine for mill feed at an estimated grade of 10.01 grams of gold per tonne, and 7,025 tonnes at an estimated grade of 3.44 grams of gold per tonne were extracted from surface stockpiles.
BGM operated the processing plant from May 2011 until December 2014. The output of the plant consisted of gold and silver in doré bars and flotation concentrate, with gold making up the majority of sales. BGM sold to refiners and concentrate traders to offset the costs of exploration and advancement work.
Between 2011 and 2014, BGM produced a total of 18,436 ounces of gold, of which 10,670 ounces were contained in gold doré and the balance contained in flotation concentrate. These totals include 590.1 ounces produced after the acquisition of BGM by Avino in 2014.
The Beacon 2012 technical report recognized that the Bralorne mine extracts and processes resources and has the potential for delineating additional resources below the area presently being mined. Thus, there is opportunity for continued extracting and processing and the potential for expanded extracting and processing should these resources be delineated. The process of resource expansion combined with operational expansion, if applicable, should be completed in a controlled manner. The recommended expansion program at the time of the 2012 technical report had a cost estimate of CAD $17,963,000 (Beacon Hill, 2012).
In October 2014, BGM was acquired as a wholly owned subsidiary of Avino Silver & Gold Mines Ltd. Under Avino’s ownership, BGM continued its trial mining program and carried out diamond drilling in the winter of 2014 and 2015.
Annual drilling is summarized in the table below. From 2009 to 2013, a total of 100 holes totaling 16,114.6 metres were drilled on the Bralorne property from underground and surface.
After the acquisition of BGM by Avino in 2014, surface drilling was carried out totaling 7,628.5 meters on 10 holes on the Prince and Shaft veins in 2014, and 25 holes on the Alhambra and 77 / 52 Veins in 2015.
Summary of drilling performed between 2009 and 2015:
Year
|
|
|
Type
|
|
Number of Holes
|
|
|
Total Meters
|
|
|
Core Size
|
|
2009
|
|
|
Surface
|
|
|
16
|
|
|
|
3,658.9
|
|
|
NQ
|
|
2010
|
|
|
Surface
|
|
|
11
|
|
|
|
2,655.4
|
|
|
NQ
|
|
2011
|
|
|
Surface
|
|
|
30
|
|
|
|
5,202.9
|
|
|
NQ
|
|
|
|
|
Underground
|
|
|
5
|
|
|
|
902.2
|
|
|
NQ
|
|
2012
|
|
|
Surface
|
|
|
2
|
|
|
|
569.1
|
|
|
NQ
|
|
|
|
|
Underground
|
|
|
17
|
|
|
|
2,274.3
|
|
|
NQ
|
|
|
|
|
|
|
|
9
|
|
|
|
137.8
|
|
|
AW
|
|
2013
|
|
|
Underground
|
|
|
4
|
|
|
|
600.0
|
|
|
NQ
|
|
|
|
|
|
|
|
6
|
|
|
|
114.0
|
|
|
AW
|
|
2014
|
|
|
Surface
|
|
|
10
|
|
|
|
1,054.3
|
|
|
NQ2
|
|
2015
|
|
|
Surface
|
|
|
25
|
|
|
|
6,574.2
|
|
|
NQ2
|
|
The Bralorne underground mine is operated under EMPR Permit M-207. This permit was based on a mine plan for an underground operation of 100 tons per day.
Historic and recent underground advancement in the form of drifting, raising and stoping was carried out in the area of the discovery made in 2006 on the BK zone. Stope mining (stoping) was performed using the shrinkage method. In this approach, raises are driven in the material under geological control from the sill horizon at horizontal intervals dictated by the continuity of the material zone and connected to drifts at the upper end of the stope for access and ventilation. The material is excavated in horizontal slices from the bottom of the stope and advancing upwards. Part of the broken material is mined out of the stope and the remaining material acts as a working platform for mining the next lift and also to support the stope walls. Approximately 35 to 40% is drawn out during mining advancement and when all the material has been broken within a stope the remainder is extracted. This approach results in limited extraction during mining, but a significant increase in the extraction rate from each stope when all the material is broken. As a result of this process, a number of stopes will be in a breaking mode while a number will be in a pulling mode to ensure continuous feed to the plant.
A total of 1,283.2 meters of drifting, 618.6 meters of raising and 6,884.5 tonnes of material were mined from stopes in 2012 and 2013. In 2014, underground advancement continued in the BK zone, with 546 meters (1,791 feet) of exploration drifting along veins on the 3700, 3800, 3840 and 3900 elevation sublevels, and 155 meters (510 feet) of waste drifts in extraction drifts and draw points for mining. Exploration advancement on veins was carried out on the 3700 and 3900 levels, including 310 meters (1,016 feet) of raises. The table below summarizes the underground advancement carried out in the BK zone from 2009 to 2015, no underground advancement occurred in 2016.
Summary of underground exploration advancement – BK zone:
Year
|
|
Location
|
|
Type
|
|
Amount
|
|
|
Units
|
|
2009
|
|
BK Portal
|
|
Trackless Decline (11’x9’)
|
|
|
391.8
|
|
|
ft.
|
|
|
|
Taylor Access
|
|
Trackless Drifting (track installed) (11’x9’)
|
|
|
431.0
|
|
|
ft.
|
|
|
|
BK Exploration Raises
|
|
Raising (5’x5’)
|
|
|
216.2
|
|
|
ft.
|
|
2010
|
|
Taylor Access
|
|
Trackless Drifting (track installed) (11’x9’)
|
|
|
459.1
|
|
|
ft.
|
|
|
|
8L BK (ext./DP)
|
|
Track Drift (6’x7’)
|
|
|
699.1
|
|
|
ft.
|
|
|
|
BK Exploration Raises
|
|
Raising (5’x5’)
|
|
|
20.0
|
|
|
ft.
|
|
|
|
BK Stope (lifts)
|
|
Stoping
|
|
|
4,434.6
|
|
|
tons
|
|
|
|
8L North Drifting
|
|
Track Drift
|
|
|
245.0
|
|
|
ft.
|
|
|
|
North Subdrifting
|
|
Subdrift
|
|
|
567.6
|
|
|
ft.
|
|
|
|
North Slot Raises
|
|
Slot Raising in Stope
|
|
|
477.2
|
|
|
ft.
|
|
|
|
North Vein Stoping
|
|
Stoping
|
|
|
650.6
|
|
|
tons
|
|
|
|
Taylor Access
|
|
Underground Rehab
|
|
|
368.0
|
|
|
ft.
|
|
2011
|
|
BK Stope (lifts)
|
|
Stoping
|
|
|
7,966.7
|
|
|
tons
|
|
|
|
North Slot Raises
|
|
Slot Raising in Stope
|
|
|
118.5
|
|
|
ft.
|
|
|
|
North Stoping tons/slashes
|
|
Stoping/slashes
|
|
|
153.0
|
|
|
tons
|
|
|
|
Alhambra DD Cutout
|
|
Cut out from track drift
|
|
|
11.7
|
|
|
ft.
|
|
|
|
Pass Raise and Chute
|
|
Raising (6’x5’)
|
|
|
382.6
|
|
|
ft.
|
|
|
|
Manway Raise
|
|
Raising (6’x5’)
|
|
|
90.4
|
|
|
ft.
|
|
|
|
BK Portal Ramps
|
|
Trackless Decline / Incline (11’x9’)
|
|
|
1,560.1
|
|
|
ft.
|
|
|
|
Alhambra Drift
|
|
Underground Rehab
|
|
|
222.7
|
|
|
ft.
|
|
|
|
Sumps and Remucks
|
|
Trackless Drifting (11’x9’)
|
|
|
168.6
|
|
|
ft.
|
|
|
|
BK Access
|
|
Trackless Drifting (11’x9’)
|
|
|
71.5
|
|
|
ft.
|
|
|
|
BK Refuge
|
|
Trackless Drifting (11’x9’)
|
|
|
32.6
|
|
|
ft.
|
|
|
|
BK Safety Bays
|
|
Jackleg Drifting (5’x6’)
|
|
|
66.0
|
|
|
ft.
|
|
2012
|
|
BK Portals
|
|
Trackless Decline / Incline (11’x9’)
|
|
|
472.0
|
|
|
ft.
|
|
|
|
Sumps and Remucks
|
|
Trackless Drifting (11’x9’)
|
|
|
40.0
|
|
|
ft.
|
|
|
|
BK Access
|
|
Trackless Drifting (11’x9’)
|
|
|
206.4
|
|
|
ft.
|
|
|
|
BK Safety Bays
|
|
Jackleg Drifting (5’x6’)
|
|
|
20.0
|
|
|
ft.
|
|
|
|
Extraction Drifts
|
|
Trackless Drifting (11’x9’)
|
|
|
370.0
|
|
|
ft.
|
|
|
|
Drawpoints
|
|
Trackless Drifting (9’x9’)
|
|
|
199.0
|
|
|
ft.
|
|
|
|
Drifts
|
|
Trackless Drifting (8’x9’)
|
|
|
1,652.1
|
|
|
ft.
|
|
|
|
Stope Manway Raises
|
|
Raising (6’x5’)
|
|
|
693.1
|
|
|
ft.
|
|
|
|
Manway Raises
|
|
Raising (6’x5’)
|
|
|
394.7
|
|
|
ft.
|
|
2013
|
|
BK Access
|
|
Trackless Drifting (11’x9’)
|
|
|
31.7
|
|
|
ft.
|
|
|
|
Sumps and Remucks
|
|
Trackless Drifting (11’x9’)
|
|
|
6.0
|
|
|
ft.
|
|
|
|
Exploration Raises
|
|
Raising (6’x5’)
|
|
|
876.4
|
|
|
ft.
|
|
|
|
Stope Manway Raises
|
|
Raising (6’x5’)
|
|
|
65.2
|
|
|
ft.
|
|
|
|
Drifts
|
|
Trackless Drifting (8’x9’)
|
|
|
443.8
|
|
|
ft.
|
|
|
|
Subdrift
|
|
Trackless Drifting (6’x6’)
|
|
|
171.7
|
|
|
ft.
|
|
|
|
Extraction Drifts / Drawpoints
|
|
Trackless Drifting (11’x9’)
|
|
|
462.5
|
|
|
ft.
|
|
|
|
BK Portal
|
|
Trackless Decline / Incline (11’x9’)
|
|
|
134.9
|
|
|
ft.
|
|
|
|
BK Stopes
|
|
Stoping
|
|
|
7,588.9
|
|
|
tons
|
|
2014
|
|
Drifts
|
|
Trackless Drifting (8’x9’)
|
|
|
1,791.0
|
|
|
ft.
|
|
|
|
Extraction Drifts / Drawpoints
|
|
Trackless Drifting (11’x9’)
|
|
|
510.0
|
|
|
ft.
|
|
|
|
Exploration Raises
|
|
Raising (6’x5’)
|
|
|
1,016.0
|
|
|
ft.
|
|
|
|
BK Stopes
|
|
Stoping
|
|
|
20,953.9
|
|
|
tons
|
|
2015
|
|
BK Access
|
|
Trackless Drifting (11’x9’)
|
|
|
685.2
|
|
|
ft
|
|
The table below presents material mined, material processed, concentrate and doré bars produced, concentrate and doré bars sold, and average realized pricing for the Bralorne Mine property since the acquisition by Avino in October 2014:
|
|
2014
Bralorne Mine
|
|
Mined
|
|
|
|
tonnes
|
|
|
3,865
|
|
Gold (g/t)
|
|
|
7.4
|
|
Processed
|
|
|
|
|
tonnes
|
|
|
4,900
|
|
Gold (g/t)
|
|
|
3.97
|
|
Doré Bar Produced
|
|
|
|
|
Gold (oz)
|
|
|
291.84
|
|
Doré Bar Sold
|
|
|
|
|
Gold (oz)
|
|
|
428.85
|
|
Average Realized Pricing - Doré Bar
|
|
|
|
|
Gold ($/oz)
|
|
|
1,187.78
|
|
Concentrate Produced
|
|
|
|
|
tonnes
|
|
|
77.32
|
|
Gold (g/t)
|
|
|
120.00
|
|
Concentrate Sold
|
|
|
|
|
tonnes
|
|
|
108.72
|
|
Gold (g/t)
|
|
|
112.80
|
|
Average Realized Pricing – Concentrate
|
|
|
|
|
Gold ($/oz)
|
|
|
1,215.53
|
|
Recent Exploration, Development and Advancement – 2015 - 2017
During 2015 and 2016, Avino worked to provide a route to Bralorne’s growth with manageable sequenced capital expenditures. Independent mining engineers continued to review potential scenarios to develop a long term mine plan which includes a change to narrow vein long hole mining wherever possible, to replace the historic labor intensive shrinkage and cut and fill mining methods.
By mid-year of 2017
t
he Company completed its review of potential scenarios for developing an operating plan. The original plan was for the future start-up of a small tonnage operation, and during the course of work being completed, our onsite consultants identified ground and safety issues in the existing 800 level tunnel. It was determined that the 800 level needed rehabilitative work, and consultants were engaged to review and develop a plan for the repairs. In view of the proposed repairs, which would have restricted mine throughput, the consultant’s recommendations were to construct a new tunnel on the 800 level, due to the age and limiting size of the original main access tunnel. The future construction of a new 800 tunnel should allow earlier access to the resources below the 800 level.
The recommended new 800 level tunnel would be sized for mechanized equipment (4.5 metres x 4.5 metres) for the long term development of the mine to depth. The portal entrance would be near the mill, and replace the old 800 tunnel (2.5 metres x 2.5 metres) which was only accessible by small track equipment. The old tunnel would be made safe and would still be used for ventilation, secondary egress, and mine water drainage.
The proposed new mine plan also contemplates testing a different mining method, sub level long hole retreat mining on veins where the hanging wall, foot wall, and mineralization are conducive to this method, which should be safer and more productive than the shrinkage and cut & fill mining methods used in the past. Combined with the larger new tunnel, the mining operation should be more mechanized and efficient than in the past and enable operating at a higher mining rate.
During this past year, an independent consulting engineering firm has reviewed the processing plant and infrastructure to determine which buildings and equipment should be replaced. Most of the equipment was configured for a 100 ton per day operation and will need to be updated for the anticipated higher processing plant operating rate. Accordingly, new or refurbished equipment is being proposed for the processing plant. A separate crushing building is being considered for the plant, with separate fine ore storage, which will provide more space in the current mill building for the larger equipment being considered. Other building and surface infrastructure will either be upgraded to meet the current required capacity, or they will be removed / demolished, and replaced.
On November 3, 2017, the Company received an approved Permit Amendment from the EMPR. The Permit Amendment provides a comprehensive and responsible permit, which is updated to modern environmental and permitting standards, and is an important step in the Company’s strategic plan to re-open the Bralorne Gold Mine. With the receipt of this modern permit, the Company anticipates an easier and quicker transition to an amended permit that will allow for future expansion. A surface and underground drill program is set to begin in January of 2018.
The Company is maintaining open lines of communication with First Nations communities, and management continues its efforts to build meaningful progressive relationships with its stakeholders. In 2017, Avino continued with the underground mining training for members of the St’at’imc communities, and the third training program with North Island College began in November in Pemberton, B.C. In addition to the training program through North Island College, Avino has been working with the Center for Training Excellence in Mining, the BC government, Thompson Rivers University, New Gold, Seabridge Gold and Sandvik, amongst others, on the development of the curriculum for a new accredited underground mining training program aligned with the Mining Industry Human Resources Council’s Canadian Mining Certification Program.
During 2017, Avino announced the signing of a non-binding Letter of Intent (“LOI”) to recognize the opportunity for collaboration and the establishment of joint ventures to allow the St’át’imc First Nations (the “St’át’imc”) to economically participate in the development and ongoing operations of the Bralorne Gold Mine project. St’át’imc Eco-Resources Ltd. is owned by 9 of the 11 St’át’imc Communities.
Tailings Storage Facility
The tailings storage facility (“TSF”) is permitted under the existing mine permit, M-207 with the Province of British Columbia, Canada.
Construction of the TSF commenced in 2003 and initial construction was completed in 2004. Tailings were deposited in the TSF up until December 2014. Approximately 32,000 tons of tailings were deposited in the TSF between April 2004 and November 2005, and a further 108,180 tons deposited between 2011 and 2014, for a combined total of approximately 140,000 tons deposited. The Concentrator Mill was temporarily shut down in December 2014. No tailings were produced or deposited in 2015-2016.
Tetra-Tech EBA Inc. has been supplying the Engineer of Record and has undertaken the annual TSF inspections since 2011 and is familiar with site conditions and background data.
The current TSF consists of the following components:
|
·
|
The main tailings dam, comprised of a North, Middle and South Section;
|
|
·
|
South Seepage Collection Pond;
|
|
·
|
South Settling Pond;
|
|
·
|
Settling Pond Embankment;
|
|
·
|
Middle Seepage Collection Pond;
|
|
·
|
Middle Seepage Collection Ditch;
|
|
·
|
North Seepage Collection Pond;
|
|
·
|
North Seepage Collection Ditch.
|
TetraTech EBA was contracted to design and oversee construction of a TSF raise. A Raise was constructed on the existing approximately 17m wide embankment crest in 2015. The Raise included a compacted key trench and a spillway in the design. Approximately 8600 cubic metres of material was used in the construction. The raised dam elevations vary between 991.422 masl and 991.500 masl. The spillway invert is at 990.9 masl and the required freeboard is 1 metre. Approval from British Columbia Ministry of Energy & Mines (now the Ministry of Energy, Mines & Petroleum Resources “EMPR”) to operate the TSF with the raise was received on 11 December 2015. However, holes drilled through the dam to install piezometers and check the quality of the material below the bottom of the dam in November of 2015 plus additional holes drilled in January of 2016 and subsequent geo-technical evaluation in early 2016 indicated that construction of a Buttress would be required along part of the dam to stabilize this area. Thus, the TSF could not be used to store water or tailings until the Buttress work was completed. This work was completed in August of 2016 and approval received for use in September of 2016.
With the raise in place, it was estimated by TetraTech EBA that there is capacity for 126,000 cubic metres of tailings storage when the design storm volume of 62,500 cubic metres is taken into account.
The third party Dam Safety Review by SRK Consulting was completed in December 2016.
Three seepage zones, north, south and middle, have been noted since impoundment of water within the TSF. Rates and quality of the discharge fluctuates seasonally. The water quality and volume flowrates have not exceeded the British Columbia Ministry of Environment (“MOE”) Permitted quality and flow limits.
Water level and water quality monitoring includes groundwater monitoring wells installed downstream of the TSF, standpipe and vibrating wire piezometers installed downstream and in the TSF embankment, and H flumes in the seepage ditches.
Tailings are delivered to the TSF from the mill by a tailings pipeline constructed of 3” diameter butt fused HDPE DR17 pipe. Tailings disposal requires pumping from the mill to the TSF by a multi-stage pump in the mill. The tailings pipeline crosses Cadwallader creek on a suspended wire crossing. New anchors for the crossing were engineered and installed in a project overseen by SNC Lavalin in 2015. New cables were also installed at this time. With the Company anticipating expanded mill throughput, the tailings pumps and tailings lines will need to be upgraded.
Water Treatment
A water treatment system was commissioned and operational in May 2013. The Water Treatment System was expanded in 2015 to double the treatment capacity up to 8 L/s. The Water Treatment System has either Mine drainage (MD800) water or TSF supernatant water for inlet. The Water Treatment System is in place to remove naturally occurring arsenic prior to discharge. Arsenic is the only parameter of concern in the mine drainage water.
TetraTech was engaged in January of 2016 to review the Water Tiger treatment system for its adequacy and what would be best for the long term. SNC Lavalin had carried out a number of studies in 2015 to determine what could be expected for high flows at freshet, what treatment processes should be considered and also what was the reason for the high flows from the mine in 2015. Tetra Tech reviewed the SNC Lavalin work and recommended the rental of the Pall System to treat the water. The Pall system removes arsenic through precipitation with Ferric chloride followed by Microfiltration. Tetra Tech also designed the system to manage the sludge generated by the Pall System, which included the use of Geo-Tubes. A portable Pall System was available immediately which could treat 35l/s using two trains. This system was rented and on site for use by April 1
st
the usual start of freshet. The Company purchased the plant and has enclosed the total water treatment system in a new building to protect it from the elements.
SNC Lavalin indicated that the high flows in 2015 could be from new openings from surface, new flows from underground, caving from old stopes underground. The Company inspected the surface for water flowing to the underground and stopped or diverted water in these areas.
In 2017, Lorax carried out some hydro-geological work on surface and a review of the underground to determine whether there are any areas of inflow that could be mitigated, and this work is in progress.
In 2015 and 2016 maximum flows from underground reached 35l/s. The Pall System can treat this level of flow. The Water Tiger treatment system will be maintained as standby, which can treat another 8l/s. The water treatment system is used to minimize mine drainage water pumped to the TSF and can be used to treat TSF supernatant to further reduce TSF water levels. During 2017, the Pall System operated well.
The Interim Closure and Reclamation Plan (“ICRP”) and review process is underway and was completed in the first quarter of 2017. The new Water Treatment Plant (“WTP”) was enclosed in a new building in November to protect it from the elements, and was ready for freshet in early 2017. The work on the TSF, the ICRP, WTP and the strategic operating plan are all contributing to the Company’s goal of obtaining the permits from EMPR and MOE to resume processing and mining activities.
Project Infrastructure
The infrastructure at the Bralorne Mine is well developed. A 100 ton per day plant was in place and was operated from 2011 through 2014 on a trial basis, processing 100-120 t/d of material. In 2017, it was decided to remove all of the equipment for the 100 ton per day operation from the mill building to allow expansion for a larger processing plant. The access roads to the minesite are provincially maintained and open year-round. All other buildings on site are being reviewed for upgrading or replacement. The minesite has high speed internet communications.
The Bralorne Mine is supplied with electrical power from BC Hydro. The main BC Hydro service is estimated to be rated for a maximum demand of 1,500 kVA based on the single line diagrams provided and existing transformer capacities, consisting of 500 kVA for the surface buildings and 800 portal, and 1,000 kVA for the mill. The load distribution between the surface buildings/underground feeder and the mill feeder is understood to be divided in proportion to the two transformer bank capacities, therefore the surface buildings/underground feeder take one third of the combined load and the mill feeder takes two thirds. The maximum electrical demand measured at the BC Hydro service point in 2012 was 660 kW. At unity power factor, this translates to an estimated peak demand load of 220 kVA on the surface buildings/underground feeder and 440 kVA on the mill feeder.
There is also a second BC Hydro electrical service to the BK Mine which is rated 600V 400A and which supplies an estimated existing peak demand load of about 100 kVA. Engineering work in 2017 determined that there is sufficient power to expand the operating rate to about 500tpd with minimal capital expenditures.
Offices, Dry, Warehouse and Camp
The facilities at the Bralorne Mine were in good condition and were adequate for the past extracting and processing activities. The camp can house up to 45 people, however, with the Company planning and expansion, the camp will need to be expanded or a new one constructed.
Processing Plant
The process plant was a conventional flotation plant designed to produce both gravity and flotation concentrates. The quantity and quality of these processes were dependent on the material being treated. The plant, including the crushing circuit, was housed in a single building along with both coarse and fine material bins.
The crushing circuit was capable of 50 t/hr, and would operate with single shift crushing; however, feed storage was limited at 90t coarse material and 180t fine material (in two bins). The feed was reclaimed from the fine material bins and fed to a 6.5’ x 6’ ball mill fitted with a 150HP motor. The ball mill operated at 72% critical speed and drew 80HP at the pinion.
The feed to the mill was determined by belt cuts. Processing experience indicated that as tonnage was increased beyond approximately 3.7 t/hr (80 t/day), an excessive amount of pebble was rejected by the mill; this problem was addressed by the installation of a reverse spiral on the output trommel.
Mill discharge was passed over a jig. Jig tailing was cyclone feed, the cyclone underflow being returned to the mill and overflow reporting to the conditioning tank ahead of flotation.
The flotation circuit was conventional, the small 15 cu ft Minpro cells being supplemented by a single 100 cu ft Wemco cell which was used as the first rougher cell. Rougher and scavenger concentrates were cleaned to produce a final concentrate.
The tailings from the flotation circuit, representing final tailings, were pumped to the tailings storage facility using a four-stage pumping system.
The flotation concentrate was pumped to a concentrate thickener. This thickener was adequate at expected processing rates. Thickener underflow was pumped to a 4ft. drum filter. Filtered concentrate was bagged in super sacks for shipment.
During this past year, an independent consulting engineering firm has reviewed the processing plant and infrastructure to determine which buildings and equipment should be replaced. Most of the equipment was configured for a 100tpd operation and will need to be updated for the anticipated higher processing plant operating rate. Accordingly, new or refurbished equipment is being proposed for the processing plant. A separate crushing building is being considered for the plant, with separate fine ore storage, which will provide more space in the current mill building for the larger equipment being considered and all of the equipment for the 100 tpd mill has been removed. Other building and surface infrastructure will either be upgraded to meet the current required capacity, or they will be removed / demolished, and replaced.
Mining Fleet
The Bralorne mining fleet in 2017 includes an excavator, 2 loaders, 5 scoop trams, 3 electric locomotives with 5 mine cars, a rock breaker, a jumbo and an emergency transport vehicle. The excavator and one of the loaders were replaced with new ones and, two of the 5 scoops were replaced with new ones.
Costs Incurred to Date
The table below for the period from acquisition on October 20, 2014 to December 31, 2017 contains selected financial data prepared in accordance with IFRS derived from our audited consolidated financial statements.
|
|
Exploration and Evaluation Expenditures
|
|
|
Capital
Expenditures
|
|
|
Operating and Administrative Expenses*
|
|
|
Total
|
|
2014
|
|
|
754,294
|
|
|
|
78,712
|
|
|
|
137,413
|
|
|
|
970,419
|
|
2015
|
|
|
6,976,189
|
|
|
|
1,054,829
|
|
|
|
5,868
|
|
|
|
8,036,886
|
|
2016
|
|
|
7,707,201
|
|
|
|
2,956,955
|
|
|
|
1,825
|
|
|
|
10,665,981
|
|
2017
|
|
|
11,490,870
|
|
|
|
243,291
|
|
|
|
2,135
|
|
|
|
11,736,296
|
|
Total
|
|
|
26,928,554
|
|
|
|
4,333,787
|
|
|
|
147,241
|
|
|
|
31,409,582
|
|
__________
*Operating and administrative expenses do not reflect other income or expense or other comprehensive income or loss.
Below is a table summarizing the estimated planned future costs for 2018. The Company will need to raise capital to meet its planned future costs. No assurance can be given that the Company will be able to raise the amounts in the table below or that actual future costs will equal the amounts in the table below. If the Company is unable to raise capital to meet its planned future costs, it may have to curtail planned activities.
Year
|
|
Operating Expenses
|
|
|
Capital Expenditures
|
|
|
TOTAL
|
|
2018
|
|
$
|
2,800,000
|
|
|
$
|
1,700,000
|
|
|
$
|
4,500,000
|
|
Mineral Reserve Estimates
There are currently no mineral reserves on the property.
Mineral Resource Estimates
The estimates described below are for Mineral Resources and are categorized as Measured, Indicated or Inferred according to the CIM Definition Standards for Mineral Resources and Mineral Reserves, as adopted on November 27, 2010. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimates are not categorized as Mineral Reserves at this time since they do not take into account other economic factors including mining outlines or mining recovery. However, a reasonable requirement of a minimum mining width is incorporated in the estimate by compositing assays to a minimum mining width of 1.2 meters (4 feet), and by addition of 10% dilution at zero grade to each resource model.
Resource Estimates – Methodology
The drill hole database was supplied in electronic format by Bralorne. This included collars, down hole surveys, lithology data, vein intersections and Au opt along with down-hole from and to intervals in imperial units. A total of 3,396 collars with 15,897 individual assays were supplied which included 321 drillholes, 2 trenches, 266 back samples, 1,187 face samples, 386 historic channels, 256 raises and 972 stope samples.
In addition, composites within the vein structures was supplied which is included 3,878 assay intervals with uncut Au opt and the application of a 3 opt top cut at varying stages.
A solid model of the 51bFW, 51bHW/FW, Alhambra, BK, BK-9870, BKN, Prince, Shaft, Taylor zones was supplied by Bralorne. These are based upon assay intersections, visual inspection and site knowledge.
Intersections were inspected against the corresponding solid for which it was assigned. The challenge for vein type deposits relate to geometric precision due to the lack of relative precision with the downhole and sample survey information. Therefore, although the intercepts may not exactly align with the vein solid, the composites are tagged to appropriate solid for use within the interpolation process. Once the solid volumes are created, they are used to code the drill hole and sample assays and composites for subsequent statistical and geostatistical analysis. In addition, these vein solids volumes are coded into the block model in order to derive a partial percentage which is important for weighting the calculations for volumes and tonnages. The solid volumes are also then utilized to constrain the block model by matching assays to those within the zones. The orientation and ranges (distances) utilized for search ellipsoids used in the estimation process were derived from strike and dip of the mineralized zone and site knowledge and on-site observations.
The composite database was supplied in electronic format by Bralorne. This included collars, down hole surveys and composite gold assays along with vein assignments.
It was determined that the 4’ composite lengths offered the best balance between supplying common support for samples and minimizing the smoothing of the grades. The 4’ sample length also was consistent with the distribution of sample lengths within the mineralized domains.
The method employed for capping was to limit the range of influence for gold values greater than 3 opt to 25 feet, which equates to the adjacent, adjoining two blocks. Outside of this range, the gold values are capped to 3 opt.
The block models are orthogonal and non-rotated with the exception of the Alhambra and the 51b models which are reflective of the orientation of each deposit. The block size chosen was 16’ x 4’ x 16’ for all models with the exception of the 51b veins which are 20’ x 20’ x 4’. These block sizes differ considerably from previous models which utilized significantly smaller blocks but the author feels that the larger block size is a better reflection of the distribution of the data.
The search strategy employed for all zones was using inverse distance squared (ID2) as the interpolator, using a 200’ omni-directional search with a minimum of 3 composites, a maximum of 9 and a maximum of 3 composites per drillhole.
The average bulk dry density for ore-grade mineralized vein is 12.1 ft
3
/ton (2.63 cubic meters per tonne). This is the value historically used on-site and is based measurements and on production experience. All tonnage calculation utilizes this value. It is recommended that densities be revised and continually verified.
Solids volumes have been created of the mined out areas that must be accounted for and extracted from the resource calculation. These volumes have been coded into the block model and utilized for resource reporting.
During the block model estimation process, the distance to nearest composite, average distance, number of composites and number of drillholes stored.
The following details the grid spacing for each resource category to classify resources are;
|
·
|
Measured
|
|
|
|
|
|
Note that based on the Canadian Institute of Mining (CIM) definitions, continuity must be demonstrated in the designation of measured (and indicated) resources; therefore, no measured resources can be declared based on one hole. The uncertainty based on current information suggests a spacing of 25 ft may be required to classify measured resources.
|
|
·
|
Indicated
|
|
|
|
|
|
Resources in this category could be delineated from multiple drill holes located on a nominal 50 ft square grid pattern.
|
|
|
|
|
·
|
Inferred
|
|
|
|
|
|
Resources in this category include any material not falling in the categories above, and within a maximum 100 ft.
|
The spacing distances are intended to define contiguous volumes, and they should allow for some irregularities due to actual drill hole placement. The final classification volume results typically must be smoothed manually to come to a coherent classification scheme. Subsequently, each of the zones were evaluated and digitized to insure continuity of the classification and eliminate the “spotted dog” effect.
Resource Estimates – Bralorne Property
The following is a summary of current resources at the Bralorne Property, grouped into the measured, indicated, and inferred categories. The effective date of the resource estimates is October 20, 2016. The resource estimates were prepared by Garth Kirkham, P. Geo., who is a “qualified person” within the meaning of National Instrument 43-101, and who is an employee of Kirkham Geosystems Ltd. and independent of Avino, as defined by Section 1.5 of NI 43-101.
Class
|
|
Measured
|
|
|
Indicated
|
|
|
Measured and Indicated
|
|
|
Inferred
|
|
|
|
Tons
|
|
|
Au opt
|
|
|
Au Ounces
|
|
|
Tons
|
|
|
Au opt
|
|
|
Au Ounces
|
|
|
Tons
|
|
|
Au opt
|
|
|
Au Ounces
|
|
|
Tons
|
|
|
Au opt
|
|
|
Au Ounces
|
|
51b FW
|
|
|
8,294
|
|
|
|
0.26
|
|
|
|
2,176
|
|
|
|
33,466
|
|
|
|
0.2
|
|
|
|
6,596
|
|
|
|
41,760
|
|
|
|
0.21
|
|
|
|
8,772
|
|
|
|
147,691
|
|
|
|
0.19
|
|
|
|
28,785
|
|
51bFW/HW
|
|
|
15,713
|
|
|
|
0.27
|
|
|
|
4,313
|
|
|
|
26,717
|
|
|
|
0.62
|
|
|
|
16,639
|
|
|
|
42,430
|
|
|
|
0.49
|
|
|
|
20,953
|
|
|
|
39,072
|
|
|
|
0.38
|
|
|
|
14,828
|
|
Alhambra
|
|
|
21,915
|
|
|
|
0.46
|
|
|
|
10,153
|
|
|
|
16,462
|
|
|
|
0.26
|
|
|
|
4,259
|
|
|
|
38,377
|
|
|
|
0.38
|
|
|
|
14,412
|
|
|
|
10,454
|
|
|
|
0.19
|
|
|
|
2,001
|
|
BK
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,501
|
|
|
|
0.33
|
|
|
|
16,822
|
|
|
|
50,501
|
|
|
|
0.33
|
|
|
|
16,822
|
|
|
|
50,430
|
|
|
|
0.16
|
|
|
|
8,064
|
|
BK-9870
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,754
|
|
|
|
0.53
|
|
|
|
3,058
|
|
|
|
5,754
|
|
|
|
0.53
|
|
|
|
3,058
|
|
|
|
7,327
|
|
|
|
0.27
|
|
|
|
1,986
|
|
BKN
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,546
|
|
|
|
0.36
|
|
|
|
13,569
|
|
|
|
37,546
|
|
|
|
0.36
|
|
|
|
13,569
|
|
|
|
46,972
|
|
|
|
0.30
|
|
|
|
14,007
|
|
Prince
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,790
|
|
|
|
0.17
|
|
|
|
2,138
|
|
Shaft
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,300
|
|
|
|
0.28
|
|
|
|
11,432
|
|
|
|
41,300
|
|
|
|
0.28
|
|
|
|
11,432
|
|
|
|
25,781
|
|
|
|
0.27
|
|
|
|
6,994
|
|
Taylor
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,455
|
|
|
|
0.16
|
|
|
|
2,510
|
|
|
|
15,455
|
|
|
|
0.16
|
|
|
|
2,510
|
|
|
|
23,010
|
|
|
|
0.22
|
|
|
|
5,097
|
|
Total
|
|
|
45,922
|
|
|
|
0.36
|
|
|
|
16,643
|
|
|
|
227,201
|
|
|
|
0.32
|
|
|
|
74,855
|
|
|
|
273,123
|
|
|
|
0.33
|
|
|
|
91,528
|
|
|
|
363,527
|
|
|
|
0.22
|
|
|
|
83,900
|
|
Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred resources as an Indicated or Measured mineral resource and it is uncertain if further exploration will result in upgrading them to the Indicated or Measured mineral resource category.
Figures in the table may not add to the totals shown due to rounding.
The mineral resource estimate is classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum’s “CIM Definition Standards - For Mineral Resources and Mineral Reserves” incorporated by reference into National Instrument 43-101 “Standards of Disclosure for Mineral Projects”.
Mineral Resources are reported at cut-off grades 0.1 ounces per ton gold.
We advise U.S. investors that while the terms “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize these terms. U.S. investors are cautioned not to assume that any part or all of a mineral resource will ever be converted into reserves. Mineral resources are not mineral reserves and do not have demonstrated economic viability. The mineral resources reported represent estimated contained metal in the ground and have not been adjusted for metallurgical recovery. The potential exploration for and evaluation of mineral resources may be materially affected by legal, political, environmental or other risks.
Under National Instrument 43-101, BGM is required to disclose that it has not based its extracting and processing resources decisions on NI 43-101-compliant reserve estimates, or feasibility studies, and historically projects without such reports have increased uncertainty and risk of economic viability. BGM’s decision to extract and process resources, expand a mine, make other extracting- and processing-related decisions, or otherwise carry out mining and processing activities is largely based on internal non-public Company data, and on reports based on exploration and mining work by BGM and by geologists and engineers engaged by BGM.
Resource Depletion
Since the resource estimate was published on October 27, 2016, there has been no mining activity on the property.
Reclamation
On November 3, 2017, Bralorne received approval of the Interim Closure and Reclamation Plan (ICRP) through an Amended Mines Act Permit, M-207. The plan outlines Bralorne’s reclamation objectives for the Bralorne property which include:
|
·
|
Long-term preservation of water quality and the aquatic environment downstream of decommissioned operations;
|
|
·
|
Long-term stability of engineered structures, including the tailings storage facility, waste rock storage areas, and post-closure water management system;
|
|
·
|
Removal and proper disposal of all structures and equipment not required beyond the end-of-mine life, and removal of roads where no further use is planned;
|
|
·
|
Natural integration of disturbed areas to be compatible with the surrounding landscape, and restoration of a natural appearance to the disturbed areas after mining ceases, to the extent practicable; and,
|
|
·
|
Establishment of a self-sustaining cover of vegetation that is consistent with existing wildlife use.
|
Reclamation Projects in 2017 included field work for the Terrestrial Plan with Risk Assessment. The Terrestrial Plan will be completed in early 2018 and will inform pre and post-closure reclamation prescriptions.
The Preliminary Site investigation for 2 pre-closure reclamation areas was completed in 2017 by TetraTech. This was followed by a Risk Assessment and Feasibility study to determine the reclamation method and next steps. This report will be completed in early 2018.
In 2017, the report for the small scale Bioreactor project was issued. The bioreactor is potentially a viable solution for post-closure passive water treatment. The pilot scale system was designed and constructed in 2017. Commissioning will occur in early 2018. The results of the pilot scale will inform the design of the full scale system.
BRX Property – Not Active
Ownership.
The wholly owned BRX was acquired in 2016 when Avino purchased a 100% interest in nine mineral claims from Great Thunder Gold Corp. (“GTG”). In consideration for the for the claims, Avino paid C$65,000 and issued 10,000 common shares to GTG and will pay GTG a 1% net smelter returns royalty to a maximum of C$250,000 on the sale of ore or other products from the BRX property. The BRX Property also has a pre-existing 2½% net smelter returns royalty payable to Levon Resources Ltd.
Property Description and Location.
The 2,114 ha property is located in the Lillooet Mining Division of British Columbia near the town of Gold Bridge. The property lies east of the Hurley River, in the Gwyneth Lake area, south of the Eldorado basin, and near the west end and along the south shore of Carpenter Lake. Gold Bridge can be reached from Vancouver via Hope and Lillooet, a distance of 445 kilometers, or via Pemberton using the four-wheel-drive Hurley Pass route, a distance of 225 km.
Proposed Work Program.
No further work is proposed at this time.
Eagle
Property – Not Active
Ownership.
The wholly owned Eagle property was acquired in 2003 when Avino purchased a 100% interest in 14 quartz leases by issuing 200,000 common shares at a price of C$0.50 per share for total consideration of C$100,000. The property was written down to a nominal value of $1 in fiscal 2006 and currently has a deferred value of $1.
In July 2017, an option agreement was signed between Avino and Alexco Resource Corp. (“Alexco”), granting Alexco the right to acquire a 65% interest in the Eagle Property. To exercise the option, Alexco must pay Avino a total of C$70,000 in instalments over 4 years, issue Avino a total of 70,000 Alexco common shares in instalments over 4 years, incur C$550,000 in exploration work by the second anniversary of the option agreement date, and a further C$2.2 million in exploration work on the Eagle Property by the fourth anniversary of the option agreement date.
In the event that Alexco earns its 65% interest in the Eagle Property, Alexco and Avino will form a joint venture for the future exploration and development of the Eagle Property, and may contribute towards expenditures in proportion to their interests (65% Alexco / 35% Avino). If either company elects to not contribute its share of costs, then its interest will be diluted. If either company’s joint venture interest is diluted to less than 10%, its interest will convert to a 5.0% net smelter returns royalty, subject to the other’s right to buy-down the royalty to 2.0% for $2.5 million.
Property Description and Location.
The 516 ha property is located in the Yukon Territory roughly 38 kilometres northeast of Mayo and 350 kilometres due north of the capital of Whitehorse. It is currently in its Phase I stage of exploration. The property is accessed by a road. Whitehorse, the nearest major city, is approximately 380 kilometres to the south of the village of Mayo. The village of Mayo is 60 kilometers to the southeast of Keno City. The Eagle property lies on the south-east facing slope of Galena Hill where the elevations range from about 1350 m to 1540 m. Permafrost, while thin to non-existent in places, is reported to be found under accumulations of surface rubble left from glaciation.
Proposed Work Program.
No further work is proposed by Avino at this time as the property has been optioned to Alexco.
Olympic-
Kelvin Property – Not Active
Ownership.
The Olympic-Kelvin property is wholly owned by the Company and was acquired in 1987 when it acquired a 100% interest in 20 reverted Crown-granted mineral claims, one located mineral claim and three fractions located in the Lillooet Mining Division of British Columbia. The property was written down entirely in fiscal 2002. During the fiscal year ended January 31, 2007, these original mineral claims and fractions were converted into six claims encompassing all of the original claims. The Company recommenced exploration of the property in fiscal 2004 and ceased exploration activities in fiscal 2006. During the fiscal year ended December 31, 2009, the Company wrote down the value of these exploration costs to a nominal value of $1. The Company will maintain these claims in good standing and may decide to commence exploration again on the Olympic-Kelvin Property.
Property Description and Location.
The Olympic-Kelvin property totals approximately 662.5 hectares and is located on the south side of Carpenter Lake, five kilometers northeast of Gold Bridge in the Lillooet Mining Division, British Columbia.
The Olympic-Kelvin property is easily accessible by the all-weather, publicly maintained, Gray Rock logging road which runs northeast from Gold Bridge. Access on the Olympic-Kelvin property is possible on a number of cat trails built by the Company and previous operators.
The Olympic-Kelvin property covers rocks of the Pioneer Formation and Bridge River Terrane. These rocks are cut by northwest trending regional scale structures sub-parallel to the Ferguson and Cadwallader Structures. The structures on the Olympic-Kelvin property are roughly the same distance from the Upper Cretaceous-Tertiary granitic Bendor Intrusions as the Bralorne/Pioneer mines. A similar flexure is present in the northwest trending structures on the Olympic-Kelvin property. These structures on the property are mineralized with silver and gold and have received considerable past work, including at least four adits.
Proposed Work Program.
No further work is proposed at this time.
Minto Property – Not Active
Ownership.
The Minto Property is wholly owned by the Company and was acquired in early 1985 when it acquired its 100% interest in eight Crown granted mineral claims, eight reverted Crown granted mineral claims and one located mineral claim, situated in the Lillooet Mining Division of British Columbia. During the January 31, 2007 year end these mineral claims were converted into one claim encompassing all of the original claims. The property was written down to a nominal value of $1 in fiscal 2002. The Company recommenced exploration of the property in fiscal 2006 and ceased exploration activities in fiscal 2007 and during the 2009 year end wrote down the value to a nominal amount of $1. The Company will maintain these claims in good standing and may decide to commence exploration again on the Minto Property.
Property Description and Location.
The Minto Property is situated about ten kilometers east of Gold Bridge in the Bridge River gold district of British Columbia and adjoins the Olympic-Kelvin Property. The property covers approximately 204 hectares. The claims occupy the lake bed and north side of Carpenter Lake. Access from Gold Bridge is made via an all-weather gravel road which skirts the north shore of Carpenter Lake.
Gold Bridge can be reached from Vancouver via Hope and Lillooet, a distance of 445 kilometers, or via Pemberton using the four-wheel-drive Hurley Pass route, a distance of 225 km.
The terrain is rugged, typical of the eastern margin of the Coast Range Mountains. The claim group ranges in elevation from 650 meters on Carpenter Lake to a maximum of 1020 meters.
The climate of the Bridge River District is transitional between humid coastal belt and more arid interior plateau. Annual precipitation is modest with a significant proportion falling as snow in the winter. Summers tend to be warm to hot depending on the altitude, and winters are moderately cold.
Proposed Work Program.
No further work is proposed at this time.
El Laberinto Property – Not Active
Ownership.
Avino is, directly or through its wholly-owned Mexican subsidiary Compañía Minera Mexicana de Avino, S.A. de C.V., a Mexican corporation, the sole legal and beneficial owner of 100% of the rights, title and interest in and to the El Laberinto Property located in Durango State, Mexico.
Property Description and Location.
The El Laberinto property is situated 60 kilometres NE of Durango, Mexico and 25 kilometres west of Avino’s main mine. It occurs in the Sierra La Silla (hills) which form part of a large volcanic caldera which also contains Avino’s main holdings. The Sierra La Silla area contains many silver, gold, lead, zinc and copper veins similar to those at Avino which are also situated in the lower volcanic Andesite sequence
.
History.
El Laberinto is a small property today and is a remnant of a much larger land package in the area once controlled by Avino
.
During 1995 Avino mapped the La Silla area and sampled the principal veins. Avino had assembled the land package in the district in search of another Avino main vein.
Avino drove an adit on the Veta Grande (“Big Vein”) in late 1995. Values of silver and gold were sub-economic. The adit was stopped at a length of approximately 300 meters before it reached the main shoot described in the 1995 report. Three holes were drilled below the adit, for which assays are unavailable.
Avino does not consider that the Big Vein has been adequately explored to date. Although the adit showed low values, it did not reach the principal shoot and was likely too high on the vein structure.
In July 2012, the Company entered into an option and joint venture agreement with Endeavour Silver Corp. (“Endeavour”), whereby Endeavour was granted the option to acquire up to a 75% interest in the El Laberinto property, consisting of approximately 91.7 hectares. In order to exercise the option, Endeavour must pay up to $200,000 in annual installments over 4 years to Avino in option payments, and incur up to $3 million in exploration work on the El Laberinto property over the next 4 years.
In July 2014, the Company’s option and joint venture agreement with Endeavour Silver Corp. was terminated. Up to the termination date, Endeavour had met its obligations by incurring exploration expenditures of at least $300,000 and making option payments of $50,000.
Proposed Work Program.
No further work is proposed at this time.
Other Properties (Durango, Mexico) – Not Active
Avino also has mineral rights for 5 other properties in the Durango State of Mexico, described below:
The El Hueco property,
located near Silver Standard’s Pitarilla mine close to the town of Santiago Papasquiaro is comprised of 5 adjoining concessions and covers approximately 1,312.42 hectares. Avino assembled the land package between 1999 and 2005.
The Ana Maria property,
located near Gomez Palacio, consists of 9 adjoining concessions and covers approximately 2,545 hectares. Avino assembled the land package in 2001 and 2002.
The La Potosina, El Fuerte and Aranjuez concessions,
used to be contiguous with the Avino Mine property where the bulk of the work has been taking place, but claims in between these mining concessions and the Avino Mine property have been dropped.
Avino considers these properties to be of merit, but has no current plans for exploration and evaluation at this time.
Item 6. Directors, Senior Management and Employees
A. Directors and senior management
The following is a list of the Company’s directors and senior management as at April 2, 2018. The directors are elected for a term of one year at the annual meeting of shareholders. This year’s annual meeting will be held on May 24, 2018.
Name and Present Position with the Company
|
|
Principal Occupation
|
|
Director/Officer Since
|
Michael Baybak
Director
|
|
Business Consultant; Principal of Michael Baybak & Co. Inc. – marketing and communications
|
|
June 1990
|
|
|
|
|
|
Gary Robertson
Director
|
|
Certified Financial Planner. Director of Coral Gold Resources Ltd., Levon Resources Ltd., and Sage Gold Inc.
|
|
August 2005
|
|
|
|
|
|
David Wolfin
Director/President/CEO
|
|
President and CEO of Avino Silver & Gold Mines Ltd. Director of Berkley Renewables Inc. President and Director of Coral Gold Resources Ltd. and Gray Rock Resources Ltd. and Director of Great Thunder Gold Corp
|
|
October 1995
|
|
|
|
|
|
Ross Glanville
Director
|
|
Mining Consultant; Professional Engineer. Director of Archon Minerals Limited and Silver Crest Metals
|
|
December 2014
|
|
|
|
|
|
Jasman Yee
Director
|
|
Professional Engineer and Metallurgist
|
|
January 2011
|
|
|
|
|
|
J.C. Rodríguez
Chief Operating Officer
|
|
Geology Professional
|
|
December 2012
|
|
|
|
|
|
Dorothy Chin
Corporate Secretary
|
|
Corporate Secretary of Avino Silver & Gold Mines Ltd., Coral Gold Resources Ltd., and Gray Rock Resources Ltd.
|
|
September 2008
|
|
|
|
|
|
Malcolm Davidson
Chief Financial Officer
|
|
CPA, CA; Chief Financial Officer of Avino Silver & Gold Mines Ltd; also Chief Financial Officer of Coral Gold Resources Ltd., and Gray Rock Resources Ltd.
|
|
March 2012
|
B. Compensation
During the last completed fiscal year of the Company, the Company had three executive officers, namely, David Wolfin, Chief Executive Officer; Malcolm Davidson, Chief Financial Officer, and J.C. Rodríguez, Chief Operating Officer.
1)
Compensation Discussion and Analysis
The executive compensation program is comprised of fixed and variable elements of compensation; base salary, discretionary bonus, and equity based incentive award in the form of stock options and Restricted Share Units (“RSUs”) to its executive officers. The Company recognizes the need to provide a compensation package that will attract and retain qualified and experienced executives, as well as align the compensation level of each executive to that executive’s level of responsibility. The three components of the compensation package are included to enable the Company to meet different objectives.
The objectives of base salary are to recognize market pay, and acknowledge the competencies and skills of individuals. The objective of discretionary bonuses (paid in the form of cash payments) is to add a variable component of compensation to recognize corporate and individual performances for executive officers and employees. The objectives of equity based incentive award are to align the interest of executive officers with that of Shareholders by encouraging equity ownership through awards of stock options and RSUs, to motivate executive and other key employees to contribute and increase in corporate performance and shareholder value, and to attract talented individuals and reward achievement of long-term financial and operating performance and focus on key activities and achievements critical to the ongoing success of the Company. Implementation of incentive stock options and RSUs plans and amendments thereto are the responsibility of the Company’s Compensation Committee.
The compensation of the executive officers is reviewed and recommended for Board approval by the Company’s Compensation Committee. Although the Board has not formally evaluated the risks associated with the Company’s compensation policies and practices, the Board has no reason to believe that any risks that arise from the Company’s compensation policies and practices are reasonably likely to have a material impact on the Company.
The members of the Compensation Committee are Ross Glanville (Chair), Michael Baybak, Jasman Yee and Gary Robertson, all of whom are independent, except for Jasman Yee, applying the definition set out in Section 1.4 of NI 52-110 since he provided consulting services to the Company. See “
Corporate Governance – Compensation Committee
” for a discussion of the role and responsibilities of the Compensation Committee. Mr. Yee is, however, deemed, an independent director under the rules of the NYSE American.
The general objectives of the Company’s compensation strategy are to:
|
(a)
|
compensate management in a manner that encourages and rewards a high level of performance and outstanding results with a view to increasing long term shareholder value;
|
|
|
|
|
(b)
|
align management’s interests with the long term interests of shareholders;
|
|
|
|
|
(c)
|
provide a compensation package that is commensurate with other comparable companies to enable the Company to attract and retain talent; and
|
|
|
|
|
(d)
|
ensure that the total compensation package is designed in a manner that takes into account the Company’s present stage of exploration, evaluation, extraction, and processing activities and its available financial resources. The Company’s compensation packages have been designed to provide a blend of a non-cash stock option component and a reasonable salary. In addition, extraordinary efforts which enhance shareholder value are rewarded with cash bonuses.
|
Other than discussed above, the Company has no other forms of compensation. Payments may be made from time to time to individuals or companies that they control for the provision of consulting services which may be deemed a form of compensation. Such consulting services are paid for by the Company at competitive industry rates for work of a similar nature by reputable arm’s length services providers.
Actual compensation will vary based on the performance of the executives relative to the achievement of goals and the price of the Company’s securities.
Compensation Element
|
|
Description
|
|
Compensation Objectives
|
Annual Base Salary
|
|
Salary is market-competitive, fixed level of compensation
|
|
Retain qualified leaders, motivate strong business performance.
|
Incentive Bonuses
|
|
Discretionary cash payment
|
|
Reward individual performance in achieving corporate goals
|
Equity Based Incentive Awards
|
|
Equity-based incentive awards are made in the form of incentive stock options and Restricted Share Units (“RSU”). The amount of each grant will be dependent on individual and corporate performance.
|
|
Reward long-term financial and operating performance and align interests of key employees with those of shareholders
|
The Company relies on the discretion and judgment of the directors in establishing and amending contracts for all forms of compensation, including stock options and RSUs to be granted to the CEO and the directors, and for reviewing the CEO’s recommendations respecting compensation of the other officers of the Company, to ensure such arrangements reflect the responsibilities and risks associated with each position. There is no formal process using objectives, criteria, or analysis, for determining compensation. However, the Compensation Committee considers a number of key factors (including cash cost per ounce of silver equivalent, all-in sustaining cost per ounce of silver equivalent, operating margin and net income, share price relative to a competitive set of silver producers, safety and environmental issues, changes in amounts and categories of reserves and resources, total silver equivalent ounces produced and sold, investor and community relations, exploration results, financings, etc.), and considers these in comparison to other similar silver producers (that have comparable market capitalizations, revenues, and total assets). When determining the compensation of its officers, the Compensation Committee and the Board are guided by the general objectives of the Company’s compensation strategy as set out above.
2)
Summary Compensation Table
The following table sets forth particulars concerning the compensation paid or accrued for services rendered to the Company in all capacities during the most recently completed financial year ended December 31, 2017 of the Company to its executive officers:
Name and principal position
|
|
Year
|
|
Salary
($)
|
|
|
Share-
based
awards
($)
(1)
|
|
|
Option-
based
awards
($)
(2)
|
|
|
Non-equity incentive
plan compensation
($)
(3)
|
|
Pension value
($)
(4)
|
|
All
other compensation
($)
(5)
|
|
|
Total compensation
($)
|
|
David Wolfin
(6) (8)
|
|
2017
|
|
|
231,018
|
|
|
|
282,019
|
|
|
|
219,467
|
|
|
NIL
|
|
NIL
|
|
NIL
|
|
|
|
732,504
|
|
President, CEO
|
|
2016
|
|
|
226,381
|
|
|
|
113,276
|
|
|
|
30,184
|
|
|
NIL
|
|
NIL
|
|
|
277,090
|
|
|
|
646,931
|
|
and Director
|
|
2015
|
|
|
215,079
|
|
|
NIL
|
|
|
NIL
|
|
|
NIL
|
|
NIL
|
|
|
405,287
|
|
|
|
620,366
|
|
Malcolm Davidson CFO
(8)
|
|
2017
|
|
|
149,007
|
|
|
|
85,528
|
|
|
|
109,734
|
|
|
NIL
|
|
NIL
|
|
NIL
|
|
|
|
344,269
|
|
|
|
2016
|
|
|
132,056
|
|
|
|
33,983
|
|
|
|
60,368
|
|
|
NIL
|
|
NIL
|
|
|
49,125
|
|
|
|
275,532
|
|
|
|
2015
|
|
|
129,172
|
|
|
NIL
|
|
|
NIL
|
|
|
NIL
|
|
NIL
|
|
|
7,579
|
|
|
|
136,751
|
|
J.C. Rodríguez COO
(7)
|
|
2017
|
|
|
177,192
|
|
|
|
85,528
|
|
|
|
109,734
|
|
|
NIL
|
|
NIL
|
|
NIL
|
|
|
|
372,456
|
|
|
|
2016
|
|
|
160,762
|
|
|
|
33,983
|
|
|
|
60,368
|
|
|
NIL
|
|
NIL
|
|
|
47,540
|
|
|
|
302,653
|
|
|
|
2015
|
|
|
176,321
|
|
|
NIL
|
|
|
NIL
|
|
|
NIL
|
|
NIL
|
|
|
40,669
|
|
|
|
216,960
|
|
__________
1
The Share Based Awards are in the form of RSUs. The RSU Plan was approved by shareholders on May 27, 2016. During the year ended December 31, 2017, 80,500 RSUs were granted to officers, directors, employees and consultants. None of the 80,500 RSUs have yet been vested. The value of the RSUs above is based on the closing price of the Common Shares on the September 20, 2017 grant-date. The closing market price on September 20, 2017 was C$1.98 per common share. The RSUs vest one-third annually over three years, and the amount above reflects the accrual for unvested share-based awards issued in the current and previous years, as at December 31, 2017.
2
The methodology used to calculate the grant-date fair value is based on the Black-Scholes Option Pricing Model. During the year ended December 31, 2017, 1,475,000 new option-based awards were granted to officers, directors, employees, and consultants. The fair value was estimated using the following weighted-average assumptions: risk-free interest rate of 1.80%, expected dividend yield of 0%, expected option life of 5 years, and expected share price volatility of 68.23%.
3
The Company does not have a non-equity incentive plan.
4
The Company does not have any pension plans.
5
Discretionary cash payment of incentive bonuses.
6
On June 24, 2010, Mr. David Wolfin was appointed CEO. Mr. Wolfin’s salary was paid to Intermark Capital Corp., a private BC corporation controlled by Mr. Wolfin.
7
Mr. Rodríguez receives his salary in Mexican Pesos (“MXP”). For 2017, Mr. Rodriguez’ salary of MXP 3,349,594, was converted into US dollars by applying an exchange rate of 1MXP = US$0.0529.
8
All compensation to Mr. David Wolfin and Mr. Malcolm Davidson are paid in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$1.2986 for 2017, US$1.00 = C$1.3252 for 2016, and US$1.00 = C$1.2786 for 2015, based on the average exchange rate for the year quoted by the Bank of Canada.
Annual Base Salary
Base Salary for the executive officers is determined by the Board based upon the recommendation of the Compensation Committee and its recommendations are reached primarily by comparison of the remuneration paid by other reporting issuers similar in size and within the industry and review of other publicly available information on remuneration that the Compensation Committee feels is suitable.
The Annual Base Salary paid to the executive officers is, for the purpose of establishing appropriate increases, reviewed annually by the Board upon the recommendation of the Compensation Committee as part of the annual review of executive officers. The decision on whether to grant an increase to the executive’s base salary and the amount of any such increase is in the sole discretion of the Board and Compensation Committee.
Non-Equity Incentive Plan Compensation
One of the three components of the Company’s compensation package is a discretionary annual cash bonus, paid to recognize individual performance in attaining corporate goals and objectives. The Company does not have a long-term incentive plan.
Equity-Based Incentive Awards
Equity-based incentive awards are in the form of the grant of incentive stock options and RSUs. The objective of the equity-based incentive award is to reward executive officers, employees and directors’ individual performance at the discretion of the Board upon the recommendation of the Compensation Committee.
The Company currently maintains formal stock option and RSUs plans (the “Plans”), under which stock options have been granted and may be granted to purchase a number equal to up to 10% of the Company’s issued capital from time to time. On April 15, 2016, the board of directors of Avino, acting upon the recommendations of the Compensation Committee, implemented a restricted share unit plan (the “RSU Plan”) for the issuance of up to a maximum of 870,560 restricted share units (“RSUs”) to qualifying directors, officers, employees, and consultants, upon certain vesting restrictions to be determined by the board of directors, for any RSUs awarded. The RSU Plan was approved by the shareholders of Avino on May 27, 2016. On September 2, 2016, 790,000 RSUs were granted to officers, directors, employees, and consultants and on September 20, 2017, a total of 80,500 RSUs were granted to officers, directors, employees, and consultants. The RSUs vest at the rate of one-third annually, until fully vested over three years from the date of the awards, and provided that these designated persons are continuously employed with or providing services to Avino. 18,676 RSUs were subsequently cancelled during 2017.
The Plans are administered by the Compensation Committee. The process the Company uses to grant equity based incentive awards is upon the recommendations of the Compensation Committee.
The role of the Compensation Committee is to recommend to the Board the compensation of the Company’s directors and the executive officers which the Committee feels is suitable. All previous grants of equity-based incentive awards are taken into account when considering new grants.
3)
Equity-Based Incentive Plan Awards
Outstanding share-based awards and option-based awards
The following table sets forth the options and RSUs granted to the executive officers to purchase or acquire securities of the Company outstanding at December 31, 2017:
|
|
Option-based Awards
|
|
|
Share-based Awards
|
|
Name
|
|
Number of securities underlying unexercised options
(#)
|
|
|
Option exercise price
(C$)
(3)
|
|
|
Option expiration date
|
|
Value of unexercised in-the-money options
($)
(1)( 4)
|
|
|
Number of shares or units of shares that have not vested
(#)
(2)
|
|
|
Market or payout value of share-based awards that have not vested
($)
(2)(4)
|
|
|
Market or payout value of vested share-based awards not paid out or distributed
($)
(2) (4)
|
|
David Wolfin
|
|
|
30,000
|
|
|
$
|
1.62
|
|
|
Sept 9, 2018
|
|
|
2,310
|
|
|
|
166,667
|
|
|
|
378,614
|
|
|
Nil
|
|
President, CEO and Director
|
|
|
100,000
|
|
|
$
|
1.90
|
|
|
Sept 19, 2019
|
|
Nil
|
|
|
|
13,000
|
|
|
|
19,821
|
|
|
Nil
|
|
|
|
|
25,000
|
|
|
$
|
2.95
|
|
|
Sept 2, 2021
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
250,000
|
|
|
$
|
1.98
|
|
|
Sept. 20, 2022
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Malcolm Davidson CFO
|
|
|
25,000
|
|
|
$
|
1.60
|
|
|
Feb 18, 2018
|
|
|
2,310
|
|
|
|
50,000
|
|
|
|
113,584
|
|
|
Nil
|
|
|
|
|
15,000
|
|
|
$
|
1.62
|
|
|
Sept 9, 2018
|
|
|
1,115
|
|
|
|
7,500
|
|
|
|
11,435
|
|
|
Nil
|
|
|
|
|
50,000
|
|
|
$
|
1.90
|
|
|
Sept 19, 2019
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
50,000
|
|
|
$
|
2.95
|
|
|
Sept 2, 2021
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
125,000
|
|
|
$
|
1.98
|
|
|
Sept. 20, 2022
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
J.C. Rodríguez COO
|
|
|
25,000
|
|
|
$
|
1.60
|
|
|
Feb 18, 2018
|
|
|
2,310
|
|
|
|
50,000
|
|
|
|
113,584
|
|
|
Nil
|
|
|
|
|
10,000
|
|
|
$
|
1.62
|
|
|
Sept 9, 2018
|
|
|
770
|
|
|
|
7,500
|
|
|
|
11,435
|
|
|
Nil
|
|
|
|
|
50,000
|
|
|
$
|
1.90
|
|
|
Sept 19, 2019
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
50,000
|
|
|
$
|
2.95
|
|
|
Sept 2, 2021
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
125,000
|
|
|
$
|
1.98
|
|
|
Sept. 20, 2022
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
__________
1
In-the-Money Options are the difference between the market value of the underlying securities at December 31, 2017 and the exercise price of the option. The closing market price for the Company’s common shares as at December 31, 2017 was C$1.72 per common share.
2
The Share Based Awards is in the form of RSUs. The RSU Plan was approved by shareholders on May 27, 2016. During the year ended December 31, 2016, 790,000 RSUs were granted to officers, directors, employees and consultants and during the year ended December 31, 2017, 80,500 RSUs were granted to officers, directors, employees, and consultants. The value of the RSUs above is based on the closing price of the Common Shares on the date of each grant. The closing market price on September 2, 2016 was C$2.95 per common share and the closing market price on September 20, 2017 was C$1.98 per common share. On September 15, 2017, the first tranche of the September 2, 2016 RSU grant were vested and 257,152 common shares were issued to officers, directors, employees and consultants.
3
The option exercise price is quoted in Canadian dollars as they relate specifically to the Canadian dollar share price as quoted on the Toronto Stock Exchange.
4
The Awards are calculated in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$1.2986, which represents the average exchange rate for the year quoted by the Bank of Canada.
Incentive plan awards – value vested or earned during the year
An “incentive plan” is any plan providing compensation that depends on achieving certain performance goals or similar conditions within a specific period. An “incentive plan award” means compensation awarded, earned, paid or payable under an incentive plan.
The following table sets forth the value vested or earned during the year of option-based awards, share-based awards and non-equity incentive plan compensation paid to executive officers during the most recently completed financial year ended December 31, 2017:
Name
|
|
Option-based awards – Value vested during the year
($)
(1)(3)
|
|
Share-based
awards – Value vested during
the year
($)
(2)(3)
|
|
|
Non-equity incentive plan compensation – Value earned during the year
($)
(3)
|
|
David Wolfin President, CEO and Director
|
|
Nil
|
|
|
137,969
|
|
|
Nil
|
|
Malcolm Davidson CFO
|
|
Nil
|
|
|
41,391
|
|
|
Nil
|
|
J.C. Rodríguez COO
|
|
Nil
|
|
|
41,391
|
|
|
Nil
|
|
__________
1
The aggregate dollar value that would have been realized if the options granted during the year had been exercised on the vesting date.
2
The RSU Vesting price was C$2.15, which represents the share price on September 2, 2017, the date in which the RSUs vested.
3
The Awards are calculated in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$1.2986, which represents the average exchange rate for the year quoted by the Bank of Canada.
4)
Pension Plan Benefits
No pension plan or retirement benefit plans have been instituted by the Company and none are proposed at this time.
Use of Financial Instruments
The Company does not have in place policies which restrict the ability of directors or executive officers to purchase financial instruments, such as prepaid variable forward contracts, equity swaps, collars, or units of exchange funds, that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by a director or executive officers. However, any such purchases would be subject to applicable insider reporting requirements.
5)
Termination and Change of Control Benefits
On January 1, 2016, the Company entered into a consulting agreement with Intermark Capital Corporation, a company owned by David Wolfin, and on March 23, 2016 the Company further amended the consulting agreement which contains certain provisions in connection with termination of employment or change of control.
This Agreement can be terminated at any time as follows:
|
(a)
|
by the Consultant electing to give the Company not less than 3 months prior notice of such termination;
|
|
|
|
|
(b)
|
by the Company electing to give the Consultant 3 months prior notice of such termination along with a termination payment equal to the annual Consulting Fee; and
|
|
|
|
|
(c)
|
by the Consultant electing to give the Company notice, in the event that there occurs a Change of Control (as defined below) within six (6) months of the effective date of such Change of Control, and if the Consultant so elects to terminate this Agreement, then the Consultant will be immediately entitled to a termination payment equal to C$2 million.
|
On January 1, 2014, the Company entered into an employment agreement with Malcolm Davidson, the named executive officer of the Company. The agreement contains certain provisions in connection with termination of employment or change of control.
This Agreement may be terminated at any time as follows:
|
(a)
|
by the Executive electing to give the Company not less than 1 month’s prior notice of such termination for which Executive will be paid his salary, accrued bonuses, if any, and vacation earned and other amounts due to him up to the termination date;
|
|
|
|
|
(b)
|
by the Company upon 1 month’s prior notice of such termination along with a termination payment equal to the Executive’s salary and accrued bonus earned during the preceding 12 months prior to the month notice of termination was given, plus any accrued vacation and other amounts due to him up to the termination date; or
|
|
(c)
|
(1) by the Executive electing to give the Company notice, in the event that there occurs a Change of Control (as defined below) within 6 months of the effective date of such Change of Control, and if the Executive so elects to terminate this Agreement, or (2) by the Company upon notice to the Executive within 3 months prior to or within 6 months after a Change of Control is announced by the Company, then the Executive will be entitled receive on the date of termination a termination payment equal to 3 times the Executive’s salary and accrued bonus earned during the preceding 12 months prior to the month notice of termination was given, plus any accrued vacation and other amounts due to him up to the termination date.
|
On July 1, 2013, the Company entered into an employment agreement with J.C. Rodríguez, the named executive officer of the Company. The employment agreement was further amended on April 14, 2014.
|
(a)
|
by the Employee electing to give the Employer not less than 3 months prior notice of such termination;
|
|
|
|
|
(b)
|
by the Employer electing to give the Employee 3 months prior notice of such termination along with a termination payment equal to the sum of Employee’s Fee earned pursuant to Section TEN during the preceding 12 months prior to the month notice of termination was given plus any unpaid vacation and other amounts due to him up to the termination; and
|
|
|
|
|
(c)
|
(1) by the Employee electing to give the Employer notice, in the event that there occurs a Change of Control (as defined below) within 6 months of the effective date of such Change of Control, and if the Employee so elects to terminate this Agreement, or (2) by the Employer upon notice to the Employee within 3 months prior to or within 6 months after a Change of Control is announced by the Employer, or its parent, then the Employer will be entitled to a termination payment equal to 3 times the sum of Employee’s Fee earned pursuant to Section Ten of the employment agreement during the preceding 12 months prior to the month notice of termination was given, plus any accrued vacation and other amounts due to him up to the termination.
|
|
|
|
|
A Change of Control shall be deemed to have occurred when:
|
|
(i)
|
any person, entity or group becomes the beneficial owner of 20% or more of the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors, and such person, entity or group uses such effective voting control to change a majority of the Board of Directors of the Company, either all at once or through any series of elections and appointments when considered together; or
|
|
|
|
|
(ii)
|
completion of the sale or other disposition by the Company of all or substantially all of the Company’s assets or a reorganization or merger or consolidation of the Company with any other entity or corporation, other than:
|
|
(A)
|
a reorganization or merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent, either by remaining outstanding or by being converted into voting securities of another entity, more than 50.1% of the combined voting power of the voting securities of the Company or such other entity outstanding immediately after such reorganization or merger or consolidation; or
|
|
|
|
|
(B)
|
a reorganization or merger or consolidation effected to implement a recapitalization or reincorporation of the Company (or similar transaction) that does not result in a material change in beneficial ownership of the voting securities of the Company or its successor.
|
6)
Director Compensation
The following table sets forth the value of all compensation paid or accrued to the directors, excluding Mr. Wolfin who is paid as an officer and not as a director, in their capacity as directors for the year ended December 31, 2017:
Name
|
|
Fees earned
(6)
($)
|
|
|
Share-based awards
(1)(6)
($)
|
|
|
Option-based
awards
(2)(6)
($)
|
|
|
Non-equity incentive plan compensation
(3)(6)
($)
|
|
Pension value
(4)(6)
($)
|
|
All other compensation
(6)
($)
|
|
|
Total
(6)
($)
|
|
Michael Baybak*
|
|
|
36,193
|
|
|
|
57,019
|
|
|
|
87,787
|
|
|
Nil
|
|
Nil
|
|
Nil
|
|
|
|
180,998
|
|
Gary Robertson*
|
|
|
55,444
|
|
|
|
86,169
|
|
|
|
131,680
|
|
|
Nil
|
|
Nil
|
|
Nil
|
|
|
|
273,293
|
|
Jasman Yee
|
|
|
30,802
|
|
|
|
85,528
|
|
|
|
109,734
|
|
|
Nil
|
|
Nil
|
|
|
58,217
|
(5)
|
|
|
284,281
|
|
Ross Glanville*
|
|
|
35,423
|
|
|
|
57,019
|
|
|
|
87,787
|
|
|
Nil
|
|
Nil
|
|
Nil
|
|
|
|
180,229
|
|
___________
*Independent and Non-Employee Directors
1
The Share Based Awards are in the form of RSUs. The RSU Plan was approved by shareholders on May 27, 2016. During the year ended December 31, 2017, 80,500 RSUs were granted to officers, directors, employees and consultants. None of such RSUs have yet been vested. The value of the RSUs above is based on the closing price of the Common Shares on the September 20, 2017 grant-date. The closing market price on September 20, 2017 was C$1.98 per common share. The RSUs vest one-third annually over three years, and the amount above reflects the accrual for unvested share-based awards as at December 31, 2017.
2
The methodology used to calculate the grant-date fair value is based on the Black-Scholes Option Pricing Model. During the year ended December 31, 2017, 1,475,000 new option-based awards were granted to officers, directors, employees, and consultants. The fair value was estimated using the following weighted-average assumptions: risk-free interest rate of 1.80%, expected dividend yield of 0%, expected option life of 5 years, and expected share price volatility of 68.23%.
3
The Company does not have a non-equity incentive plan
4
The Company does not have any pension plans.
5
Mr. Yee also received compensation in his capacity as a consultant to the Company.
6
All director compensation is paid in Canadian dollars and is converted into US dollars by applying an exchange rate of US$1.00 = C$1.2986, which represents the average exchange rate for the 2017 quoted by the Bank of Canada.
The Board, on recommendation of the Compensation Committee, determines director compensation. The objective in determining such director compensation is to ensure that the Company can attract and retain experienced and qualified individuals to serve as directors. The Company compensates its non-executive directors through the payment of directors fees, plus annual retainer for board and committee chair, and per meeting fees, and through the grant of incentive stock options and RSUs. All retainers are paid pro rata on a quarterly basis. The non-executive directors receive the following annual retainers and other fees for their services as directors:
Annual Retainer per Director
|
|
$
|
23,102
|
*
|
Annual Retainer for Board Chair
|
|
$
|
23,100
|
*
|
Annual Retainer for Audit Committee Chair
|
|
$
|
6,160
|
*
|
Annual Retainer for Compensation Committee Chair
|
|
$
|
3,850
|
*
|
Annual Retainer for Governance & Nominating Committee Chair
|
|
$
|
3,850
|
*
|
Meeting Attendance Fee per Meeting
|
|
$
|
770
|
*
|
_________
*All director compensation is paid in Canadian dollars and is converted into US dollars by applying an exchange rate of US$1.00 = C$1.2986, which represents the average exchange rate for the 2017 quoted by the Bank of Canada
The Company may grant incentive stock options and RSUs to Directors of the Company from time to time pursuant to the stock option and RSUs plans of the Company and in accordance with the policies of the Toronto Stock Exchange (the “TSX”). The Company graduated from the TSX Venture Exchange on January 8, 2018.
Outstanding share-based awards and option-based awards
The following table sets forth the options and RSUs granted to the directors to purchase or acquire securities of the Company outstanding at December 31, 2017:
|
|
Option-based Awards
|
|
|
Share-based Awards
|
|
Name
(1)
|
|
Number of securities underlying unexercised options
(#)
|
|
|
Option exercise price
(C$)
(4)
|
|
|
Option expiration date
|
|
Value of unexercised in-the-money options
($)
(2)(5)
|
|
|
Number of shares or units of shares that have not vested
(#)
(3)
|
|
|
Market or payout value of share-based awards that have not vested
($)
(3)(5)
|
|
|
Market or payout value of share-based awards not paid out or distributed
($)
(3)(5)
|
|
Michael Baybak
|
|
|
25,000
|
|
|
$
|
1.60
|
|
|
Feb 18, 2018
|
|
$
|
2,310
|
|
|
|
33,334
|
|
|
|
75,724
|
|
|
Nil
|
|
|
|
|
30,000
|
|
|
$
|
1.62
|
|
|
Sept 9, 2018
|
|
$
|
2,310
|
|
|
|
5,000
|
|
|
|
7,624
|
|
|
Nil
|
|
|
|
|
75,000
|
|
|
$
|
1.90
|
|
|
Sept 19, 2019
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
75,000
|
|
|
$
|
2.95
|
|
|
Sept 2, 2021
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
100,000
|
|
|
$
|
1.98
|
|
|
Sept 20, 2022
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Gary Robertson
|
|
|
25,000
|
|
|
$
|
1.60
|
|
|
Feb 18, 2018
|
|
$
|
2,310
|
|
|
|
50,000
|
|
|
|
113,584
|
|
|
Nil
|
|
|
|
|
30,000
|
|
|
$
|
1.62
|
|
|
Sept 9, 2018
|
|
$
|
2,310
|
|
|
|
10,000
|
|
|
|
15,247
|
|
|
Nil
|
|
|
|
|
75,000
|
|
|
$
|
1.90
|
|
|
Sept 19, 2019
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
100,000
|
|
|
$
|
2.95
|
|
|
Sept 2, 2021
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
150,000
|
|
|
$
|
1.98
|
|
|
Sept 20, 2022
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Jasman Yee
|
|
|
25,000
|
|
|
$
|
1.60
|
|
|
Feb 18, 2018
|
|
$
|
2,310
|
|
|
|
50,000
|
|
|
|
113,584
|
|
|
Nil
|
|
|
|
|
30,000
|
|
|
$
|
1.62
|
|
|
Sept 9, 2018
|
|
$
|
2,310
|
|
|
|
7,500
|
|
|
|
11,435
|
|
|
Nil
|
|
|
|
|
75,000
|
|
|
$
|
1.90
|
|
|
Sept 19, 2019
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
50,000
|
|
|
$
|
2.95
|
|
|
Sept 2, 2021
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
125,000
|
|
|
$
|
1.98
|
|
|
Sept 20, 2022
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Ross Glanville
|
|
|
75,000
|
|
|
$
|
1.90
|
|
|
Sept 19, 2019
|
|
Nil
|
|
|
|
33,334
|
|
|
|
75,724
|
|
|
Nil
|
|
|
|
|
75,000
|
|
|
$
|
2.95
|
|
|
Sept 2, 2021
|
|
Nil
|
|
|
|
5,000
|
|
|
|
7,624
|
|
|
Nil
|
|
|
|
|
100,000
|
|
|
$
|
1.98
|
|
|
Sept 20, 2022
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
__________
1
For the compensation of David Wolfin, the named executive officer of the Company, see “Incentive Plan Awards” above.
2
The in-the-money option value is the difference between the market value of the underlying securities as at December 31, 2017 and the exercise price of the option. The closing market price of the Company’s common shares as at December 31, 2017 was C$1.72 per common share.
3
The Share Based Awards is in the form of RSUs. The RSU Plan was approved by shareholders on May 27, 2016. During the year ended December 31, 2017, 80,500 RSUs were granted to officers, directors, employees, and consultants. The value of the RSUs above is based on the closing price of the Common Shares on the date of each grant. The closing market price on September 2, 2016 was C$2.95 per common share and the closing market price on September 20, 2017 was C$1.98 per common share. On September 15, 2017, the first tranche of the September 2, 2016 RSU grant were vested and 257,152 common shares were issued to officers, directors, employees and consultants.
4
The option exercise price is quoted in Canadian dollars as they relate specifically to the Canadian dollar share price as quoted on the Toronto Stock Exchange.
5
The Awards are calculated in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$1.2986, which represents the average exchange rate for the year quoted by the Bank of Canada.
Incentive plan awards – value vested or earned during the year
An “incentive plan” is any plan providing compensation that depends on achieving certain performance goals or similar conditions within a specific period. An “incentive plan award” means compensation awarded, earned, paid or payable under an incentive plan.
The following table sets forth the value vested or earned during the year of option-based awards, share-based awards and non-equity incentive plan compensation paid to directors during the year ended December 31, 2017:
Name
(1)
|
|
Option-based awards – Value vested during the year
($)
(2)(4)
|
|
Share-based awards – Value vested during the year
($)
(3)(4)
|
|
|
Non-equity incentive plan compensation – Value earned during the year
($)
(4)
|
|
Michael Baybak
|
|
Nil
|
|
|
27,593
|
|
|
Nil
|
|
Gary Robertson
|
|
Nil
|
|
|
41,391
|
|
|
Nil
|
|
Jasman Yee
|
|
Nil
|
|
|
41,391
|
|
|
Nil
|
|
Ross Glanville
|
|
Nil
|
|
|
27,593
|
|
|
Nil
|
|
___________
1
For the compensation of David Wolfin, the named executive officer of the Company, see “Incentive Plan Awards” above.
2
The aggregate dollar value that would have been realized if the options granted during the year had been exercised on the vesting date.
3
The RSU Vesting price was C$2.15, which represents the share price on September 2, 2017, the date in which the RSUs vested.
4
The Awards are calculated in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$1.2986, which represents the average exchange rate for the year quoted by the Bank of Canada.
Termination of Employment, Changes in Responsibilities and Employment Contracts
On January 1, 2016, the Company entered into a consulting agreement with Intermark Capital Corporation, a company wholly owned by David Wolfin, the named executive officer of the Company. The consulting agreement was further amended on March 23, 2016.
On January 1, 2014, the Company entered into an employment agreement with Malcolm Davidson, the named executive officer of the Company.
On July 1, 2013, the Company entered into an employment agreement with J.C. Rodríguez, the named executive officer of the Company. The employment agreement was further amended on April 14, 2014.
Please see “
Termination and Change of Control Benefits”
above for details
.
C. Board practices
The Board is currently comprised of five directors. The size and experience of the Board is important for providing the Company with effective governance in the mining industry. The Board’s mandate and responsibilities can be effectively and efficiently administered at its current size. The Board has functioned, and is of the view that it can continue to function, independently of management as required. Directors are elected for a term of one year at the annual general meeting. At the Annual General and Special Meeting, held on May 25, 2017, the shareholders elected Messrs. Michael Baybak, Gary Robertson, David Wolfin, Jasman Yee and Ross Glanville as directors of the Company.
The Board has considered the relationship of each director to the Company and currently considers three of the five directors to be “unrelated” (Messrs. Baybak, Robertson, and Glanville). “Unrelated director” means a director who is independent of management and free from any interest and any business or other relationship which could reasonably be perceived to materially interfere with the director’s ability to act with a view to the best interest of the Company, other than interests and relationships arising solely from shareholdings.
Procedures are in place to allow the Board to function independently. At the present time, the Board has experienced directors that have made a significant contribution to the Company’s success, and are satisfied that it is not constrained in its access to information, in its deliberations or in its ability to satisfy the mandate established by law to supervise the business and affairs of the Company. Committees meet independent of management and other directors.
Mandate of the Board of Directors, its Committees and Management
The role of the Board is to oversee the conduct of the Company’s business, including the supervision of management, and determining the Company’s strategy. Management is responsible for the Company’s day to day operations, including proposing its strategic direction and presenting budgets and business plans to the Board for consideration and approval. The strategic plan takes into account, among other things, the opportunities and risks of the Company’s business. Management provides the Board with periodic assessments as to those risks and the implementation of the Company’s systems to manage those risks. The Board reviews the personnel needs of the Company from time to time, having particular regard to succession issues relating to senior management. Management is responsible for the training and development of personnel. The Board assesses how effectively the Company communicates with shareholders, but has not adopted a formal communications policy. Through the Audit Committee, and in conjunction with its auditors, the Board assesses the adequacy of the Company’s internal control and management information systems. The Board looks to management to keep it informed of all significant developments relating to or affecting the Company’s operations. Major financings, acquisitions, dispositions and investments are subject to board approval. A formal Code of Ethics (“Code”) has been adopted and applies to all directors, officers and employees. The Board meets on at least a quarterly basis and following the annual meeting of shareholders. The frequency of the meetings and nature of the meeting agendas are dependent on the nature of the business and affairs which the Company faces from time to time. During the year ended December 31, 2017, the Board met eight times.
To facilitate the functioning of the Board independently of management, the Audit Committee, Compensation Committee and Governance and Nominating Committee consist of majority independent directors. When appropriate, members of management are not present for the discussion and determination of certain matters at meetings of the Board. The independent directors hold regularly scheduled meetings at which non-independent directors and members of management are not in attendance.
The Board and committees may take action at these meetings or at a meeting by conference call or by written consent.
Committees
Audit Committee
Under Canadian National Instrument 52-110 – Audit Committees (“
NI 52-110
”) a reporting issuer in those jurisdictions which have adopted NI 52-110 and that is not a “venture issuer” is required to provide disclosure with respect to its Audit Committee including the text of the Audit Committee’s Charter, composition of the Committee, and the fees paid to the external auditor. Accordingly, the Company provides the following disclosure with respect to its Audit Committee:
Audit Committee Charter
1.
|
Purpose of the Committee
|
|
|
1.1
|
1 The purpose of the Audit Committee is to assist the Board of Directors in its oversight of the integrity of the Company’s financial statements and other relevant public disclosures, the Company’s compliance with legal and regulatory requirements relating to financial reporting, the external auditors’ qualifications and independence and the performance of the internal audit function and the external auditors.
|
|
|
2.
|
Members of the Audit Committee
|
|
|
2.1
|
All Members of the Audit Committee must be “financially literate” as defined under NI 52-110, having sufficient accounting or related financial management expertise to read and understand a set of financial statements, including the related notes, that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.
|
|
|
2.2
|
The Audit Committee shall consist of no less than three Directors.
|
|
|
2.3
|
All Members of the Audit Committee must be “independent” as defined under NI 52-110.
|
|
|
3.
|
Relationship with External Auditors
|
|
|
3.1
|
The external auditors are the independent representatives of the shareholders, but the external auditors are also accountable to the Board of Directors and the Audit Committee.
|
|
|
3.2
|
The external auditors must be able to complete their audit procedures and reviews with professional independence, free from any undue interference from the management or directors.
|
|
|
3.3
|
The Audit Committee must direct and ensure that the management fully co-operates with the external auditors in the course of carrying out their professional duties.
|
|
|
3.4
|
The Audit Committee will have direct communications access at all times with the external auditors.
|
4.
|
Non-Audit Services
|
|
|
4.1
|
The external auditors are prohibited from providing any non-audit services to the Company, without the express written consent of the Audit Committee. In determining whether the external auditors will be granted permission to provide non-audit services to the Company, the Audit Committee must consider that the benefits to the Company from the provision of such services, outweighs the risk of any compromise to or loss of the independence of the external auditors in carrying out their auditing mandate.
|
|
|
4.2
|
Notwithstanding section 4.1, the external auditors are prohibited at all times from carrying out any of the following services, while they are appointed the external auditors of the Company:
|
|
(i)
|
acting as an agent of the Company for the sale of all or substantially all of the undertaking of the Company; and
|
|
|
|
|
(ii)
|
performing any non-audit consulting work for any director or senior officer of the Company in their personal capacity, but not as a director, officer or insider of any other entity not associated or related to the Company.
|
5.
|
Appointment of Auditors
|
|
|
5.1
|
The external auditors will be appointed each year by the shareholders of the Company at the annual general meeting of the shareholders.
|
|
|
5.2
|
The Audit Committee will nominate the external auditors for appointment, such nomination to be approved by the Board of Directors.
|
|
|
6.
|
Evaluation of Auditors
|
|
|
6.1
|
The Audit Committee will review the performance of the external auditors on at least an annual basis, and notify the Board of Directors and the external auditors in writing of any concerns in regards to the performance of the external auditors, or the accounting or auditing methods, procedures, standards, or principles applied by the external auditors, or any other accounting or auditing issues which come to the attention of the Audit Committee.
|
|
|
7.
|
Remuneration of the Auditors
|
|
|
7.1
|
The remuneration of the external auditors will be determined by the Board of Directors, upon the annual authorization of the shareholders at each general meeting of the shareholders.
|
|
|
7.2
|
The remuneration of the external auditors will be determined based on the time required to complete auditing procedures as determined by the external auditors in accordance with the Canadian Auditing Standards and the stands of the PCAOB.
|
|
|
8.
|
Termination of the Auditors
|
|
|
8.1
|
The Audit Committee has the power to terminate the services of the external auditors, with or without the approval of the Board of Directors, provided the Committee is acting reasonable and responsible.
|
|
|
9.
|
Funding of Auditing and Consulting Services
|
|
|
9.1
|
Auditing expenses will be funded by the Company. The auditors must not perform any other consulting services for the Company, which could impair or interfere with their role as the independent auditors of the Company.
|
|
|
10.
|
Role and Responsibilities of the Internal Auditor
|
|
|
10.1
|
Due to the Company’s size and limited financial resources, the CEO and CFO of the Company shall be responsible for implementing internal controls and performing the role of the internal auditor to ensure that such controls are adequate.
|
|
|
11.
|
Oversight of Internal Controls
|
|
|
11.1
|
The Audit Committee will have the oversight responsibility for ensuring that the internal controls are implemented and monitored, and that such internal controls are effective.
|
|
|
12.
|
Continuous Disclosure Requirements
|
|
|
12.1
|
Due to the Company’s size and limited financial resources, the Corporate Secretary of the Company is responsible for ensuring that the Company’s continuous reporting requirements are met and in compliance with applicable regulatory requirements.
|
13.
|
Other Auditing Matters
|
|
|
13.1
|
The Audit Committee may meet with the Auditors independently of the management of the Company at any time, provided the Committee is acting reasonable and responsible.
|
|
|
13.2
|
The Auditors are authorized and directed to respond to all enquiries from the Audit Committee in a thorough and timely fashion, without reporting these enquiries or actions to the Board of Directors or the management of the Company.
|
|
|
14.
|
Annual Review
|
|
|
14.1
|
The Audit Committee Charter will be reviewed annually by the Board of Directors and the Audit Committee to assess the adequacy of this Charter.
|
|
|
15.
|
Independent Advisers
|
|
|
15.1
|
The Audit Committee shall have the power to retain legal, accounting or other advisors to assist the Committee.
|
Composition of Audit Committee
As of April 2, 2018, the following are the members of the Audit Committee:
Name
|
|
Independent
(1)
|
|
Financially Literate
(2)
|
|
Education and Experience
|
Michael Baybak
|
|
Yes
|
|
Yes
|
|
Marketing and Communications
|
Gary Robertson
|
|
Yes
|
|
Yes
|
|
Certified Financial Planner and director of several reporting issuers
|
Ross Glanville
|
|
Yes
|
|
Yes
|
|
Professional Mining Engineer, MBA, Chartered Professional Accountant (formerly Certified General Accountant), Mine Valuator
|
__________
(1)
A member of an audit committee is independent if the member has no direct or indirect material relationship with the Company, which could, in the view of the Board of Directors, reasonably interfere with the exercise of a member’s independent judgment.
(2)
An individual is financially literate if he has the ability to read and understand a set of financial statements that present a breadth of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.
Relevant Education and Experience
The relevant education and/or experience of each member of the Audit Committee is as follows:
Michael Baybak
:
Mr. Baybak is a graduate from Columbia University and attended Yale Law School. Mr. Baybak is the founder and principal of Michael Baybak and Company Inc. headquartered in Florida with affiliate offices in California. The company serves a diversified North American clientele of financial advisors and resources-sector public companies. Mr. Baybak and the firm have acted for leading Canadian companies in the resource sector for more than thirty years.
Gary Robertson
:
Mr. Robertson is a Certified Financial Planner. He has worked in the financial industry for the past twenty years, and has acted as director of several public mining companies. Mr.
Robertson has gained considerable financial and business experience through his involvement in various businesses in the mining industries.
Ross Glanville
:
Mr. Glanville graduated from the University of British Columbia in 1970 with a Bachelor of Applied Science degree (Mining Engineering) and became a member of the Association of Professional Engineers of British Columbia in 1972 (P.Eng.). In 1974, he obtained a Master of Business Administration degree (MBA), specializing in finance and securities analysis; and in 1980 he became a member of the Certified General Accountants of B.C. (CGA). Since 1985, Mr. Glanville has specialized in valuations, fairness opinions, and litigation support related to the natural resource industry. He has served as a director of several producing mining companies, and the Chair of Audit and Compensation Committees.
Audit Committee Oversight
At no time since the commencement of the Company’s most recently completed financial year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board of Directors.
Reliance on Certain Exemptions
At no time since the commencement of the Company’s most recently completed financial year has the Company relied on the exemption in Section 2.4 of NI 52-110 (De Minimis Non-audit Services), or an exemption from NI 52-110, in whole or in part, granted under Part 8 of National Instrument 52-110.
Pre-Approval Policies and Procedures
The Audit Committee is authorized by the Board of Directors to review the performance of the Company’s external auditors and approve in advance provision of services other than auditing and to consider the independence of the external auditors, including a review of the range of services provided in the context of all consulting services bought by the Company. The Audit Committee is authorized to approve in writing any non-audit services or additional work which the Chairman of the Audit Committee deems is necessary, and the Chairman will notify the other members of the Audit Committee of such non-audit or additional work and the reasons for such non-audit work for the Committee’s consideration, and if thought fit, approval in writing.
External Auditor Service Fees
The fees billed by the Company’s external auditors in each of the last two fiscal years for audit and non-audit related services provided to the Company or its subsidiaries (if any) are as follows:
Financial Year Ending
|
|
Audit Fees
|
|
|
Audit Related Fees
(2)
|
|
|
Tax Fees
(3)(1)
|
|
|
All other Fees
(4)
|
|
December 31, 2017
(1)
|
|
$
|
176,000
|
|
|
$
|
7,700
|
|
|
$Nil
|
|
|
$
|
6,000
|
|
December 31, 2016
|
|
$
|
146,468
|
|
|
$
|
7,546
|
|
|
$
|
6,037
|
|
|
$
|
17,827
|
|
________
(1)
Estimated
(2)
Travel and expenses
(3)
Preparation of corporate tax returns
(4)
Procedures and letters related to financings
(5)
The fees are in Canadian dollars and are converted into US dollars by applying an exchange rate of US$1.00 = C$1.2986, which represents the average exchange rate for the year quoted by the Bank of Canada.
Compensation Committee
The Compensation Committee of the Company is responsible for, among other things, evaluating the performance of the Company’s executive officers, determining or making recommendations to the Board with respect to the compensation of the Company’s executive officers, making recommendations to the Board with respect to director compensation, incentive compensation plans and equity-based plans, making recommendations to the Board with respect to the compensation policy for the employees of the Company or its subsidiaries and ensuring that the Company is in compliance with all legal requirements with respect to compensation disclosure. In performing its duties, the Compensation Committee has the authority to engage such advisors, including executive compensation consultants, as it considers necessary.
The Compensation Committee is currently composed of Jasman Yee, Gary Robertson, Ross Glanville, and Michael Baybak, three of whom are independent directors within the meaning set out in NI 58-101. Jasman Yee is not independent as he serves as the Company’s consultant. All four members of the Compensation Committee are experienced participants in the business world who have sat on the board of directors of other companies, charities or business associations, in addition to the Board of the Company.
The recommendations of the Compensation Committee are based primarily on a benchmarking analysis which compares the Company’s pay levels and compensation practices with other reporting issuers of similar size, and which are active in the industry and/or market in which the Company competes for talent. This analysis provides valuable information that will allow the Company to make adjustments, if necessary, to attract and retain the best individuals to meet the Company’s needs and provide value to the Company’s shareholders. In formulating its recommendations, the Compensation Committee benchmarked the compensation of the Company’s directors and executive officers against companies with similar market capitalization, assets, and revenue including the following companies: America Silver, Amerigo Resources, Atico Mining, Aura Minerals, Caledonia Mining, Excellon Resources, GoGold Resources, Golden Minerals, Gran Colombia, Great Panther, Jaguar Mining, Marlin Gold, Serabi Gold, and several others.
The Compensation Committee has not engaged the services of independent compensation consultants to assist it in making recommendations to the Board with respect to director and executive officer compensation.
In performing its duties, the Compensation Committee has considered the implications of risks associated with the Company’s compensation policies and practices. At its present early stage of development and considering its present compensation policies, the Company currently has no compensation policies or practices that would encourage an executive officer or other individual to take inappropriate or excessive risks.
The charter of the Compensation Committee is available at the Company’s website at www.avino.com.
Governance and Nominating Committee
The Governance and Nominating Committee review/recommend matters to the Board with respect to the governance and nominating matters. In this regard, the purpose of the Governance and Nominating Committee is to:
|
i.
|
manage the corporate governance system for the Board;
|
|
|
|
|
ii.
|
assist the Board to fulfill its duty to meet the applicable legal, regulatory and (self-regulatory) business principles and ‘codes of best practice’ of corporate behaviour and conduct;
|
|
|
|
|
iii.
|
assist in the creation of a corporate culture and environment of integrity and accountability;
|
|
|
|
|
iv.
|
monitor the quality of the relationship between the Board and management of the Company;
|
|
|
|
|
v.
|
review the Chief Executive Officer’s succession plan;
|
|
|
|
|
vi.
|
recommend to the Board nominees for appointment of the Board;
|
|
|
|
|
vii.
|
lead the Board’s annual review of the Chief Executive Officer’s performance; and
|
|
|
|
|
viii.
|
annually review and set an agenda of the Board on an ongoing basis.
|
The Governance and Nominating Committee currently consists of three directors, Jasman Yee, Michael Baybak, and Ross Glanville, two of the three directors to be “independent” (Messrs. Glanville and Baybak).
The charter of the Governance and Nominating Committee is available at the Company’s website at www.avino.com.
D. Employees
As at December 31, 2017, the Company had 510 employees and contractors located in Mexico and 25 employees and contractors in Canada. Certain of the Company’s senior management as well as administrative and corporate services are located in Canada and are contracted by the Company through their companies or through the Company’s cost sharing agreement for overhead and corporate services with Oniva International Services Corp. However, because these people are hired through companies, they are not technically deemed employees of the Company.
As at December 31, 2016, the Company had 478 employees and contractors located in Mexico, and as at December 31, 2015 the Company had 443 employees and contractors located in Mexico.
E. Share ownership
The following table sets forth the share ownership of the individuals referred to in “Compensation” as of April 2, 2018:
Name of Beneficial Owner
|
|
Number of
Shares
|
|
|
Percent
|
|
Michael Baybak
|
|
|
281,366
|
|
|
*
|
|
Gary Robertson
|
|
|
473,416
|
|
|
*
|
|
David Wolfin
|
|
|
1,364,316
|
|
|
|
2.44
|
%
|
Jasman Yee
|
|
|
255,020
|
|
|
*
|
|
Ross Glanville
|
|
|
16,666
|
|
|
*
|
|
J.C. Rodríguez
|
|
|
175,000
|
|
|
*
|
|
Malcolm Davidson
|
|
|
85,500
|
|
|
*
|
|
__________
*Less than one percent
Outstanding Options
The following information, as of April 2, 2018 reflects outstanding options held by the individuals referred to in “Compensation”:
|
|
No. of Shares
|
|
|
Date of Grant
|
|
Exercise Price*
|
|
|
Expiration Date
|
|
David Wolfin
|
|
|
30,000
|
|
|
Sept 9, 2013
|
|
$1.62
|
|
|
Sept 9, 2018
|
|
President, CEO and Director
|
|
|
100,000
|
|
|
Sept 19, 2014
|
|
$1.90
|
|
|
Sept 19, 2019
|
|
|
|
|
25,000
|
|
|
Sept 2, 2016
|
|
$2.95
|
|
|
Sept 2, 2021
|
|
|
|
|
250,000
|
|
|
Sept. 20, 2017
|
|
$1.98
|
|
|
Sept. 20, 2022
|
|
Malcolm Davidson
|
|
|
15,000
|
|
|
Sept 9, 2013
|
|
$1.62
|
|
|
Sept 9, 2018
|
|
CFO
|
|
|
50,000
|
|
|
Sept 19, 2014
|
|
$1.90
|
|
|
Sept 19, 2019
|
|
|
|
|
50,000
|
|
|
Sept 2, 2016
|
|
$2.95
|
|
|
Sept 2, 2021
|
|
|
|
|
125,000
|
|
|
Sept 20, 2017
|
|
$1.98
|
|
|
Sept. 20, 2022
|
|
J.C. Rodríguez
|
|
|
10,000
|
|
|
Sept 9, 2013
|
|
$1.62
|
|
|
Sept 9, 2018
|
|
COO
|
|
|
50,000
|
|
|
Sept 19, 2014
|
|
$1.90
|
|
|
Sept 19, 2019
|
|
|
|
|
50,000
|
|
|
Sept 2, 2016
|
|
$2.95
|
|
|
Sept 2, 2021
|
|
|
|
|
125,000
|
|
|
Sept. 20, 2017
|
|
$1.98
|
|
|
Sept. 20, 2022
|
|
Michael Baybak
|
|
|
30,000
|
|
|
Sept 9, 2013
|
|
$1.62
|
|
|
Sept 9, 2018
|
|
Director
|
|
|
75,000
|
|
|
Sept 19, 2014
|
|
$1.90
|
|
|
Sept 19, 2019
|
|
|
|
|
75,000
|
|
|
Sept 2, 2016
|
|
$2.95
|
|
|
Sept 2, 2021
|
|
|
|
|
100,000
|
|
|
Sept. 20, 2017
|
|
$1.98
|
|
|
Sept. 20, 2022
|
|
Gary Robertson
|
|
|
30,000
|
|
|
Sept 9, 2013
|
|
$1.62
|
|
|
Sept 9, 2018
|
|
Director
|
|
|
75,000
|
|
|
Sept 19, 2014
|
|
$1.90
|
|
|
Sept 19, 2019
|
|
|
|
|
100,000
|
|
|
Sept 2, 2016
|
|
$2.95
|
|
|
Sept 2, 2021
|
|
|
|
|
150,000
|
|
|
Sept. 20, 2017
|
|
$1.98
|
|
|
Sept. 20, 2022
|
|
Jasman Yee
|
|
|
30,000
|
|
|
Sept 9, 2013
|
|
$1.62
|
|
|
Sept 9, 2018
|
|
Director
|
|
|
75,000
|
|
|
Sept 9, 2014
|
|
$1.90
|
|
|
Sept 19, 2019
|
|
|
|
|
50,000
|
|
|
Sept 2, 2016
|
|
$2.95
|
|
|
Sept 2, 2021
|
|
|
|
|
125,000
|
|
|
Sept. 20, 2017
|
|
$1.98
|
|
|
Sept. 20, 2022
|
|
Ross Glanville
|
|
|
75,000
|
|
|
Sept 19, 2014
|
|
$1.90
|
|
|
Sept.19, 2019
|
|
|
|
|
75,000
|
|
|
Sept 2, 2016
|
|
$2.95
|
|
|
Sept 2, 2021
|
|
|
|
|
100,000
|
|
|
Sept. 20, 2017
|
|
$1.98
|
|
|
Sept. 20, 2022
|
|
__________
*The option exercise price is quoted in Canadian dollars as they relate specifically to the Canadian dollar share price as quoted on the Toronto Stock Exchange.