XML 37 R22.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Financial Instruments and Risk Management | 12 Months Ended
--- | ---
Dec. 31, 2017
Disclosure of detailed information about financial instruments [abstract] |
Financial Instruments and Risk Management |
17. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Fair values of financial instruments The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. The Company does not have any non-recurring fair value measurements as at December 31, 2017. Levels 1 to 3 of the fair value hierarchy are defined based on the degree to which fair value inputs are observable or unobservable, as follows:
• | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
• | Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the net asset or liability, either directly or indirectly; and
• | Level 3 inputs are unobservable (supported by little or no market activity).
| December 31, 2017 | December 31, 2016
| Level 1 | Level 2 | Level 1 | Level 2
Financial assets |  |  |  |
Fair value through profit or loss |  |  |  |
Prepayment option embedded derivative | — |  | — |  | — |  | 9.6 |
Gold options | — |  | 0.5 |  | — |  | 3.3 |
Fair value through OCI |  |  |  |
Equity securities | 35.8 |  | — |  | 14.1 |  | — |
Currency hedging derivative instruments | — |  | 5.0 |  | — |  | — |
Financial liabilities |  |  |  |
Fair value through profit or loss |  |  |  |
Share purchase warrants | (0.1 | ) | — |  | (2.4 | ) | — |
Currency derivative instruments | — |  | — |  | — |  | (3.3 | )
| $35.7 |  | $5.5 |  | $11.7 |  | $9.6 |
The methods of measuring financial assets and liabilities has not changed during the year ended December 31, 2017. The Company does not have any financial assets or liabilities measured at fair value based on unobservable inputs (Level 3). The fair value of option and forwards (gold and currency) contracts are determined using a market approach with reference to observable market prices for identical assets traded in an active market. These are classified within Level 2 of the fair value hierarchy. The use of reasonably possible alternative assumptions would not significantly affect the Company’s results. Derivative Instruments The fair value of derivative instruments is as follows:
|  |  | December 31, | December 31,
|  |  | 2017 | 2016
Derivatives designated as hedging instruments |  |  |  |
Currency hedging derivative instruments |  |  | $5.0 |  | — |
Derivatives not designated as hedging instruments |  |  |  |
Gold option asset |  |  | $0.5 |  | $3.3 |
Currency derivative instruments |  |  | — |  | (3.3 | )
Share purchase warrants liability |  |  | (0.1 | ) | (2.4 | )
|  |  | $0.4 |  | ($2.4 | )
Currency derivative contracts The Company enters into option and forward contracts to protect against the risk of an increase in the value of the Canadian dollar and Mexican peso versus the US dollar. These option and forward contracts are for the purchase of local currencies and the sale of US dollars, which settle on a monthly basis, and the Company believes this is an appropriate manner of managing currency risk. During the year ended December 31, 2017, the Company designated options and forwards as cash flow hedges for the highly probable Canadian dollar and Mexican peso purchases. These derivatives meet the hedge effectiveness criteria and are designated in a hedge accounting relationship as a result of the following factors:
• | An economic relationship exists between the hedged item and hedging instrument, as notional amounts match and both the hedged item and hedging instrument fair values move in response to the same risk (foreign exchange rates). There are no significant reasons or causes for the designated hedged item and hedging instrument to be mismatched since the hedging instrument matures during the same month as the expected hedged expenditures is incurred (hedged item). The correlation between the foreign exchange rate of the hedged item and the hedging instrument should be highly correlated and closely aligned as the maturity and the notional amount are the same.
• | The hedge ratio is one to one for this hedging relationship, as the hedged item is foreign currency risk that is hedged with a foreign currency hedging instrument.
• | Credit risk is not material in the fair value of the hedging instrument.
The Company has identified two sources of potential ineffectiveness: 1) the timing of cash flow differences between the expenditure and the related derivative and 2) the inclusion of credit risk in the fair value of the derivative not replicated in the hedged item. The Company expects the impact of these sources of hedge ineffectiveness to be minimal. The timing of hedge settlements and incurred expenditures are closely aligned, as they are expected to occur within 30 days of each other. As noted above, credit risk is not a material component of the fair value of the Company’s hedging instruments, as all counterparties are reputable Canadian banking institutions and are highly rated. The effective portion of the changes in fair value of the hedging instrument for the years ended December 31, 2017 and 2016 recorded in accumulated other comprehensive income are:
| December 31, | December 31,
| 2017 | 2016
Balance, beginning of the period | — |  | — |
Gains on currency instruments | 11.2 |  | — |
Less: realized gains on CAD currency instruments | (2.2 | ) | — |
Less: realized gains on MXN currency instruments | (1.3 | ) | — |
Deferred income tax related to hedging instrument | (1.7 | ) | — |
| $6.0 |  | — |
For the year ended December 31, 2017, the Company did not recognize any ineffectiveness on the hedging instruments. The open contracts, which settle on a monthly basis, are summarized as at December 31, 2017: Canadian dollar contracts
Period Covered | Contract type | Contracts (CAD$ Millions) | Average minimum rate (USD/CAD) | Average maximum rate (USD/CAD)
2018 | Collars and forwards | 174.0 | 1.31 | 1.36
Mexican Peso contracts
Period Covered | Contract type | Contracts (MXN Millions) | Average minimum rate (MXN/USD) | Average maximum rate (MXN/USD)
2018 | Collars and forwards | 1,560.0 | 18.72 | 20.71
The fair value of these contracts was an asset of $5.0 million at December 31, 2017 (December 31, 2016 - liability of $3.3 million). For the year ended December 31, 2017, the Company realized gains of $4.3 million on the foreign currency contracts (for the year ended December 31, 2016 - realized losses of $1.6 million). Of these gains only $3.5 million were eligible to be recognized in accumulated other comprehensive income under hedge accounting for the year ended December 31, 2017 (for the year ended December 31, 2016 - $nil). The following table illustrates unrealized gains on foreign currency contracts for the years ended:
| December 31, | December 31,
| 2017 | 2016
Foreign currency hedged contracts |  |
Unrealized gains | $11.2 |  | — |
Foreign currency non-hedged contracts |  |
Unrealized gains | 2.1 |  | 2.3 |
| $13.3 |  | $2.3 |
Gold option contracts As at December 31, 2017, the Company held option contracts to protect against the risk of a decrease in the value of the gold price on a portion of gold sales. These option contracts ensure a minimum average realized gold price of $1,270 per ounce and a maximum average realized gold price of $1,444 per ounce, regardless of the movement in gold prices during 2017. The following gold collar contracts are outstanding as of December 31, 2017:
Period Covered | Ounces subject to contract |  | Average purchase put option |  | Average sold call option |
2018 | 50,100 |  | $1,270 |  | $1,444 |
The fair value of these contracts was an asset of $0.5 million at December 31, 2017 (December 31, 2016 - asset of $3.3 million). The options mature through out 2018. For the year ended December 31, 2017, the Company realized a loss of $0.6 million related to the settlement of option contracts (for the year ended December 31, 2016 - realized losses of $1.2 million). Total unrealized losses for the year ended December 31, 2017 was $2.6 million (for the year ended December 31, 2016 - unrealized gain of $3.3 million). The Company has elected to not apply hedge accounting to the gold option contracts, with changes in fair value recorded in net earnings. Risks In the normal course of operations, the Company is exposed to credit risk, liquidity risk and the following market risks: commodity price, market price, interest rate and foreign currency exchange rate. The Company has developed a risk management process to identify, analyze and assess these and other risks, and has formed a Risk Committee to monitor all significant risks to the Company. The Board of Directors has overall responsibility for the oversight of the Company’s risk management framework, and receives regular reports from the Risk Committee. Commodity price risk The profitability of the Company’s mining operations is significantly affected by changes in the market price for gold. Gold prices fluctuate on a daily basis and are affected by numerous factors beyond the Company’s control. The supply and demand for gold, the level of interest rates, the rate of inflation, investment decisions by large holders of gold, including governmental reserves, and the stability of exchange rates can all cause significant fluctuations in gold prices. Such external economic factors are in turn influenced by changes in international investment patterns and monetary systems, and political developments. From time to time, the Company will enter into zero cost collars or other financial instruments to manage short term commodity price fluctuations. Market price risk The Company’s earnings or loss, cash flows and financial condition are subject to price risk due to fluctuations in the market price of gold and silver. Gold prices have historically fluctuated widely and are affected by numerous factors beyond the Company’s control. For the year ended December 31, 2017, the Company’s revenues and cash flows were impacted by gold prices in the range of $1,146 to $1,349 per ounce. Metal price declines could cause the continued development of, and production from, the Company’s properties to be uneconomic. A 10% change in the gold price would impact the Company's net loss before tax for the year ended December 31, 2017 by $54.3 million (2016 - $48.2 million). The Company is exposed to fluctuations in the fair value of investments made in equity securities. A 10% increase or reduction in each company’s share price at December 31, 2017 would have increased or reduced other comprehensive income (loss) by $3.5 million (2016 - $1.4 million). Interest rate risk Interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. All of the Company’s outstanding debt obligations bear interest at fixed rates and are therefore not exposed to changes in market interest rates. The interest rate on the credit facility (note 10) is variable, however, the Facility was undrawn as at December 31, 2017. The Company is exposed to interest rate risk on its cash and cash equivalents. The cash and cash equivalent interest earned is based on bank account interest rates which may fluctuate. A 1.0% change in the interest rate would result in an increase or decrease of approximately $2.0 million in interest earned by the Company. The Company has not entered into any derivative contracts to manage this risk. The fair value of the prepayment option embedded derivative, that was present at December 31, 2016 was also impacted by fluctuations in interest rates. Foreign currency exchange rate risk Metal sales revenues for the Company are denominated in US dollars. The Company is exposed to currency fluctuations relative to the US dollar on expenditures that are denominated in Canadian dollars and Mexican pesos. These potential currency fluctuations could have a significant impact on production costs and thereby, the profitability of the Company. The Company is also exposed to the impact of currency fluctuations on its monetary assets and liabilities. A 10% strengthening of these currencies against the US dollar at each balance sheet date would have resulted in a gain recorded in net loss by the amounts shown below. This analysis assumes that other variables, in particular interest rates, remain constant.
| December 31, 2017 | December 31, 2016
Impact of a 10% change in foreign exchange rates |  |
Canadian dollar | $7.8 |  | $2.3 |
Mexican peso | 1.5 |  | 0.7 |
The currencies of the Company's financial instruments and other foreign currency denominated liabilities based on notional amounts, denominated in U.S dollar equivalents were as follows:
| Canadian Dollars | Mexican Peso
| December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016
Cash and cash equivalents | $17.2 |  | $22.8 |  | $6.8 |  | $7.3 |
Equity securities | 35.8 |  | 14.1 |  | — |  | — |
Amounts receivable | 7.4 |  | 3.3 |  | 22.0 |  | 38.2 |
Accounts payable and accrued liabilities | (56.1 | ) | (42.7 | ) | (14.7 | ) | (16.1 | )
Current portion of financing obligations | (4.2 | ) | (1.5 | ) | — |  | — |
Financing obligations | (3.3 | ) | (3.7 | ) | — |  | — |
Total exposure to currency risk | (3.2 | ) | (7.7 | ) | 14.1 |  | 29.4 |
Credit risk Credit risk relates to receivables and other contracts, and arises from the possibility that any counterparty to an instrument fails to perform. For cash and cash equivalents, restricted cash, and receivables, the Company’s credit risk is limited to the carrying amount on the balance sheet. The Company manages credit risk by transacting with highly-rated counterparties and establishing a limit on contingent exposure for each counterparty based on the counterparty’s credit rating. Exposure on receivables is limited as the Company sells its products to a small number of organizations, on which the historical level of defaults is minimal. The Company's maximum exposure to credit risk is as follows:
| December 31, 2017 | December 31, 2016
Cash and cash equivalents |  | $200.8 |  |  | $252.2 |
Trade receivables | 4.0 |  | 5.9 |
Total financial instrument exposure to credit risk | $204.8 |  | $258.1 |
Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company manages this risk through regular monitoring of its cash flow requirements to support ongoing operations and expansionary plans. The Company ensures that there are sufficient committed loan facilities to meet its business requirements, taking into account anticipated cash flows from operations and holdings of cash and cash equivalents. (a) Contractual commitments The following table shows the contractual maturities of debt commitments. The amount presented represents the future undiscounted principal and interest cash flows, and therefore, do not equate to the carrying amounts on the consolidated statements of financial position.
| Less than 1 year |  | 2 - 3 years |  | 4 - 5 years |  | More than 5 years |  | Total |
Operating and financing leases | 5.4 |  | 5.6 |  | 2.0 |  | 2.9 |  | 15.9 |
Accounts payable and accrued liabilities | 96.8 |  | — |  | — |  | — |  | 96.8 |
Decommissioning liability | — |  | — |  | — |  | 54.8 |  | 54.8 |
Contract mining | 47.9 |  | 72.0 |  | 47.8 |  | 38.9 |  | 206.6 |
Flow-through share obligation | 0.7 |  | — |  | — |  | — |  | 0.7 |
Capital commitments | 21.8 |  | — |  | — |  | — |  | 21.8 |
| $172.6 |  | $77.6 |  | $49.8 |  | $96.6 |  | $396.6 |
Contractual obligations exist with respect to royalties (note 20); however gold production subject to royalty cannot be ascertained with certainty and the royalty rate varies with the gold price. The obligations related to contract mining are based on current mine plans, and are subject to change. The Company’s future operating cash flow and cash position are highly dependent on gold prices, as well as other factors. Taking into consideration the Company’s current cash position, volatile equity markets, and global uncertainty in the capital markets, the Company is continually reviewing expenditures and assessing business opportunities to enhance liquidity in order to ensure adequate liquidity and flexibility to support its growth strategy, including the development of its projects, while continuing production at its current operations. A period of continuous low gold prices may necessitate the deferral of capital expenditures which may impact the timing of development work and project completion, as well as production from mining operations. In addition, in such a price environment, the Company may be required to adopt one or more alternatives to increase liquidity. (b) Equity securities As at December 31, 2017, the Company held shares in AuRico Metals Inc. ("AuRico Metals") valued at $21.8 million, and an investment in Corex Gold Corp. ("Corex") valued at $3.5 million. As part of the Richmont Mines acquisition, the Company acquired Richmont's investment in Monarques Gold Corp. that had a value of $9.4 million. The Company also has other investments valued at $1.1 million.

X
- References No definition available. + Details
Name: | ifrs-full_DisclosureOfFinancialInstrumentsAbstract
Namespace Prefix: | ifrs-full_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for financial instruments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Name IFRS -Number 7 -IssueDate 2017-01-01 -Section Scope -URI http://eifrs.ifrs.org/eifrs/XBRL?type=IFRS&num=7&date=2017-03-01&anchor=sect_Scope&doctype=Standard -URIDate 2017-03-09 + Details
Name: | ifrs-full_DisclosureOfFinancialInstrumentsExplanatory
Namespace Prefix: | ifrs-full_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration