EX-99.1 2 a2013q1financialstatements.htm EXHIBIT 2013 Q1 Financial Statements



Silver Standard Resources Inc.
Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(unaudited)




Silver Standard Resources Inc.
Consolidated Interim Financial Statements for the three months ended March 31, 2013

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


2 | Page

Silver Standard Resources Inc.
Consolidated Interim Statements of Financial Position
(expressed in thousands of United States dollars - unaudited)

 
Note
March 31

December 31

 
 
2013

2012

 
 
 
(restated note 2)

 
 
$ 

$

Current assets
 
 
 
Cash and cash equivalents
 
461,846

366,947

Trade and other receivables
6
81,017

83,454

Other current assets
3
34,510

41,077

Inventory
4
79,315

74,246

 
 
656,688

565,724

Non-current assets
 
 
 
Property, plant and equipment
 
590,071

580,649

Investment in associate
5
118,244

119,632

Deferred income tax assets
 
12,889

13,912

Value added tax receivable
6
41,436

37,363

Other non-current assets
3
6,917

7,405

Total assets
 
1,426,245

1,324,685

 
 
 
 
Current liabilities
 
 
 
Trade and other payables
 
68,510

79,007

Convertible notes
7
—

135,805

 
 
68,510

214,812

Non-current liabilities
 
 
 
Deferred income tax liabilities
 
26,417

17,007

Close down and restoration provision
 
32,209

31,222

Convertible notes
7
180,224

—

Total liabilities
 
307,360

263,041

 
 
 
 
Shareholders' equity
 
 
 
Share capital
 
707,034

706,901

Other reserves
 
17,336

24,016

Equity component of convertible notes
7
68,347

—

Retained earnings
 
326,168

330,727

Total shareholders' equity attributable to shareholders of the Company
 
1,118,885

1,061,644

Total liabilities and equity
 
1,426,245

1,324,685

 
 
 
 
Events after the reporting date (note 5)
 
 
 
The accompanying notes are an integral part of the consolidated interim financial statements
Approved by the Board of Directors and authorized for issue on May 8, 2013
“Richard D. Paterson”
 
“John Smith”
Richard D. Paterson, Director
 
John Smith, Director

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Silver Standard Resources Inc.
Consolidated Interim Statements of Loss
(expressed in thousands of United States dollars, except per share amounts - unaudited)

 
 
Three months ended March 31
 
 
Note
2013

2012

 
 
 
(restated note 2)

 
 
$

$

 
 
 
 
Revenue
 
49,062

38,406

Cost of sales
9
(34,624
)
(32,048
)
Income from mine operations
 
14,438

6,358

 
 
 
 
General and administrative expenses
 
(4,864
)
(6,523
)
Exploration and evaluation expenses
 
(580
)
(846
)
Operating income (loss)
 
8,994

(1,011
)
 
 
 
 
Gain on partial disposal of associate
 
—

3,183

Interest earned and other finance income
 
905

209

Interest expense and other finance costs
 
(7,555
)
(5,667
)
Other (loss) income
10
(809
)
5,608

Foreign exchange loss
 
(5,983
)
(480
)
(Loss) income before tax
 
(4,448
)
1,842

 
 
 
 
Income tax expense
 
(111
)
(2,881
)
 
 
 
 
Net loss and net loss attributable to shareholders
 
(4,559
)
(1,039
)
 
 
 
 
Weighted average shares outstanding (thousands)
 
 
 
Basic
 
80,752

80,737

Diluted
 
80,752

80,737

 
 
 
 
Loss per share
 
 
 
Basic
 
$
(0.06
)
$
(0.01
)
Diluted
 
$
(0.06
)
$
(0.01
)
The accompanying notes are an integral part of the consolidated interim financial statements

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Silver Standard Resources Inc.
Consolidated Interim Statements of Comprehensive (Loss) Income
(expressed in thousands of United States dollars - unaudited)

 
 
Three months ended March 31
 
 
Note
2013

2012

 
 
 
(restated note 2)

 
 
$

$

 
 
 
 
Net loss for the period attributable to shareholders
 
(4,559
)
(1,039
)
Other comprehensive (loss) income:
 
 

 

    Unrealized (loss) gain on marketable securities, net of tax
 
(3,948
)
6,167

    Share of other comprehensive (loss) income of associate
5
(2,323
)
3,496

    Cumulative translation adjustment
 
(7
)
367

Other comprehensive (loss) income
 
(6,278
)
10,030

 
 
 
 
Total comprehensive (loss) income attributable to shareholders
 
(10,837
)
8,991

Total comprehensive (loss) income
 
(10,837
)
8,991

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

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

 
Note
Common Shares
Other

Equity component

Retained

Total

 
 
Shares

Amount

reserves

of convertible

earnings

equity

 
 
 

 

 
 
(restated note 2)

(restated note 2)

 
 
000's

$

$

$

$

$

Balance, January 1, 2012
 
80,693

705,876

6,515

—

271,584

983,975

   Exercise of stock options
8
52

974

(387
)
—

—

587

   Equity-settled share-based compensation
8
—

—

1,226

—

—

1,226

Total comprehensive income (loss) for the period
 
—

—

10,030

—

(1,039
)
8,991

Balance, March 31, 2012
 
80,745

706,850

17,384

—

270,545

994,779

 
 
 
 
 
 
 
 
Balance, January 1, 2013
 
80,748

706,901

24,016

—

330,727

1,061,644

   Exercise of stock options
8
7

133

(56
)
—

—

77

   Equity-settled share-based compensation
8
—

—

(346
)
—

—

(346
)
   Equity component of convertible notes
7
—

—

—

68,347

—

68,347

Total comprehensive loss for the period
 
—

—

(6,278
)
—

(4,559
)
(10,837
)
Balance, March 31, 2013
 
80,755

707,034

17,336

68,347

326,168

1,118,885

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

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

 
 
Three months ended March 31
 
 
Note
2013

2012

 
 
 
(restated note 2)

 
 
$

$

Cash flows from operating activities
 
 

 

Net loss for the period
 
(4,559
)
(1,039
)
Adjustments for:
 
 

 

Depreciation, depletion and amortization
 
9,117

8,632

Share-based (recovery) payments
 
(395
)
1,172

Accretion of close down and restoration provision
 
955

1,603

Accretion expense on convertible notes
 
4,060

2,516

(Gain) on dilution of associate
 
(1,858
)
—

Other loss (income)
 
2,756

(5,576
)
(Gain) on partial disposal of associate
 
—

(3,183
)
Deferred income tax
 
1,911

7,865

Foreign exchange loss
 
2,819

1,718

Net changes in non-cash working capital items
13
(10,402
)
(26,087
)
 
 
 
 
Cash generated by (used in) operating activities
 
4,404

(12,379
)
 
 
 
 
Cash flows from investing activities
 
 

 

Net proceeds from partial disposal of associate
 
—

4,202

Purchase of property, plant and equipment
 
(7,728
)
(6,731
)
Mineral property expenditures
 
(6,994
)
(7,595
)
Net value added tax payments
 
(5,575
)
(5,445
)
Production stripping capitalized costs
 
(7,368
)
(8,400
)
 
 
 
 
Cash used in investing activities
 
(27,665
)
(23,969
)
 
 
 
 
Cash flows from financing activities
 
 

 

Proceeds from issuance of convertible notes
 
256,083

—

Repayment of convertible notes
 
(138,000
)
—

Proceeds from exercise of stock options
 
77

587

 
 
 
 
Cash generated by financing activities
 
118,160

587

 
 
 
 
Increase in cash and cash equivalents
 
94,899

(35,761
)
Cash and cash equivalents, beginning of period
 
366,947

329,055

Cash and cash equivalents, end of period
 
461,846

293,294


Supplemental cash flow information (note 13)
The accompanying notes are an integral part of the consolidated interim financial statements

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Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)


1.
NATURE OF OPERATIONS

Silver Standard Resources Inc. ("we", "us" or "our") is a limited liability company incorporated under the laws of the Province of British Columbia, Canada and its shares are publicly listed on the Toronto Stock Exchange in Canada and the NASDAQ in the United States. Together with our subsidiaries, we (the “Group”) are principally engaged in the acquisition, exploration, development and operation of silver-dominant resource properties located in the Americas. Silver Standard Resources Inc. is the ultimate parent of the Group.

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

Our strategic focus is to optimize the production of silver from our Pirquitas Mine in Argentina and to advance other principal development projects including Pitarrilla in Mexico and San Luis in Peru. In addition to its principal projects, we hold a geologically-diverse portfolio of other predominantly silver projects in various stages of exploration or technical evaluation.


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated interim financial statements are set out below.

a)
Basis of preparation

These consolidated interim financial statements should be read in conjunction with our audited consolidated annual financial statements for the year ended December 31, 2012.
These consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and Interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"). The comparative information has also been prepared on this basis, with the exception of certain items, details of which are given below, for which comparative information has been restated.
The policies applied in these consolidated interim financial statements are based on IFRS issued and outstanding as of March 31, 2013, and were approved as of May 8, 2013, the date the Audit Committee of the Board of Directors approved the statements.

b)
Changes in accounting policies

Pronouncements Affecting Our Financial Results

Effective January 1, 2013, we have adopted IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine. This interpretation applies to waste removal ("stripping") costs during the production phase of a surface mine. The following accounting policy for stripping costs in the production phase of a surface mine has been adopted:

In surface mining operations, waste material ("overburden") is removed to gain access to mineral ore deposits, which is known as stripping. During the production phase of a mine, where stripping activities result in improved access to ore, we recognize a non-current 'stripping activity asset' ("SAA") when it is probable that the future economic benefit of the improved access will flow to us, the ore to which access has been improved is identifiable, and costs can be reliably measured. Typically identifiable components of an ore body correspond to the phases of a mine plan. Within each identifiable component, the average stripping ratio is determined; the cost of waste removal in excess of the stripping ratio is capitalized as a SAA, and the cost of waste and ore removal in line with the average stripping ratio is recorded to inventory. The SAA is amortized using a unit of production method over the period in which the improved access to the component of the ore body is achieved.

For the quarter ended March 31, 2013, stripping costs of $7.4 million, at the Pirquitas Mine, met the criteria of IFRIC 20 and were capitalized into property, plant and equipment. The adoption of this standard also requires application on or after the beginning of the earliest period presented. For the year ended December 31, 2012, deferred stripping costs of $40.5 million, at the Pirquitas Mine were capitalized. The prior year comparatives have been restated accordingly.

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Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Adjustments to the consolidated balance sheets:
 
 
Adjustments for changes in accounting policy

 
 
As at December 31, 2012

IFRIC 20

As at December 31, 2012

 
(previously stated)

 
(restated)

Inventory (note 4)
108,383

(28,579
)
79,804

Property, plant and equipment
540,077

40,572

580,649

Deferred income tax assets
18,132

(4,220
)
13,912

Deferred income tax liabilities
(13,551
)
(3,456
)
(17,007
)
Net change in retained earnings
 
4,317

 

Adjustments to the consolidated statements of loss:
 
 
Adjustments for changes in accounting policy

 
For the three months ended March 31
2012

IFRIC 20

2012

 
(previously stated)

 
(restated)

Cost of sales
32,161

(113
)
32,048

Income tax expense
2,804

77

2,881

Increase in net income
 
(36
)
 

Pronouncements Affecting Our Financial Statements Presentation or Disclosures

The adoption of the following new and amended IFRS pronouncements has resulted in enhanced financial statement disclosures in our interim or annual consolidated financial statements or a change in financial statement presentation. These pronouncements did not affect our interim financial results and any additional disclosures required by the new pronouncements will be included in our annual consolidated financial statements for the year ended December 31, 2013.

Disclosures of interest in other entities
IFRS 12, Disclosures of Interests in Other Entities (IFRS 12) outlines the disclosure requirements for interests in subsidiaries and other entities to enable users to evaluate the risks associated with interests in other entities and the effects of those interests on an entity's financial position, financial performance and cash flows. The requirements of IFRS 12 relate to disclosures only and are applicable for the first annual period after adoption. This will include a non-controlling interest's financial statement note and include summarized financial information for significant associates and joint arrangements.

Fair value measurement
IFRS 13, Fair Value Measurement (IFRS 13) defines fair value, sets out a single IFRS framework for measuring fair value and outlines disclosure requirements for fair value measurements. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement, not an entity-specific measurement, so assumptions that market participants would use should be applied in measuring fair value. The disclosure requirements of IFRS 13 include disclosures about fair values of financial assets and liabilities measured on a recurring basis and a non-financial assets and liabilities measure on a non-recurring basis.

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Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

Interim financial reporting
IAS 34, Interim Financial Reporting (IAS 34) was amended to establish criteria for disclosing total segmented assets and require certain fair value disclosures. We have incorporated the required fair value disclosures in our consolidated interim financial statements for the period ending March 31, 2013 in note 12. The disclosures included are based on the requirements of IFRS 13 discussed above.

c)
Significant accounting judgments and estimates

The preparation of financial statements in conformity with IFRS requires the use of judgments and/or estimates that affect the amounts reported and disclosed in the consolidated interim financial statements and related notes. There have been no significant changes to our significant accounting judgments and estimates from those disclosed in note 2 of the audited consolidated annual financial statements for the year ended December 31, 2012, except for certain new estimates and judgments that have been applied as a result of the adoption of IFRIC 20 on January 1, 2013.

As a result of the adoption of IFRIC 20,  we are required to determine whether stripping costs incurred during the production phase of a property provide improved access to a component of an ore body that will be mined in a future period, and whether the costs can be reliably measured. We have to apply judgment when identifying components of the mine over which stripping costs are capitalized, estimate the average stripping ratio for each component, and use judgment determining the period over which the SAA is amortized.


3.
OTHER ASSETS

 
March 31, 2013
 
December 31, 2012
 
 
Current

Non-current

Current

Non-current

 
$

$

$

$

 
 
 
 
(restated note 2)

Financial assets:
 
 
 
 
Restricted cash (a)
—

1,847

—

1,847

Marketable securities (b)
28,166

—

34,733

—

Asset held for sale (c)
6,344

—

6,344

—

 
34,510

1,847

41,077

1,847

Other assets:
 
 
 
 
Non-current inventory (note 4)
—

5,070

—

5,558

 
34,510

6,917

41,077

7,405


(a)
We have restricted cash deposits in relation to close down and restoration provisions.

(b)
As at March 31, 2013, we assessed the possibility for impairment of any available-for-sale financial assets which had a market value below cost, and concluded that no impairment existed.

(c)
We have classified two used ball mills as assets held for sale, due to our intention to sell the units.


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Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

4.
INVENTORY

 
March 31, 2013

December 31, 2012

 
$ 

$

 
 
(restated note 2)

Current:
 
 
Finished goods
30,746

28,748

Stockpiled ore
27,931

26,318

Materials and supplies
20,638

19,180

 
79,315

74,246

Non-current:
 
 
Stockpiled ore
5,070

5,558

 
84,385

79,804


We hold low grade stockpiled ore that is expected to be processed at the end of the life of the mine. Inventory held at Net Realizable Value ("NRV") at March 31, 2013 was $4,371,000 (December 31, 2012 - $4,810,000).

5.
INVESTMENT IN ASSOCIATE

Investment in associate comprises the following:
 
March 31, 2013

December 31, 2012

 
$

$

Common shares of Pretium Resources Inc. ("Pretium")
118,244

119,632

 
118,244

119,632


Investment in associate reflects activity for the three months ended March 31, 2013 and for the year ended December 31, 2012 as follows:
 
March 31, 2013

December 31, 2012

 
$

$

Carrying amount, beginning of period
119,632

136,342

Partial disposition
—

(33,052
)
Dilution gain
1,858

15,839

Share of net loss
(923
)
(3,409
)
Share of other comprehensive (loss) income
(2,323
)
3,912

Carrying amount, end of period
118,244

119,632


On February 15, 2013, Pretium completed a private placement of 1,648,550 flow-through common shares, in which we elected not to participate. This share issuance by Pretium resulted in a dilution of our interest to 19.68%, with a dilution gain of 1,858,000 recognized in other income (other expenses) (note 10).

Subsequent to the reporting date, on April 26, 2013, Pretium completed a private placement of 5,780,346 common shares, in which the Company did not participate. This share issuance by Pretium resulted in a dilution of our interest to 18.57%, with a dilution gain of $254,000. Following this transaction and some additional changes to the composition of the Board of Directors of Pretium, we are in the process of assessing whether we still have significant influence over Pretium, and therefore whether equity accounting will remain applicable.


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Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

6.
VALUE ADDED TAX RECEIVABLE

 
March 31, 2013

December 31, 2012

 
$ 

$

Current
31,711

32,796

Non-current
41,436

37,363

 
73,147

70,159


VAT paid in Argentina in relation to the Pirquitas Mine is recoverable under Argentine law once the mine reached the production stage, which occurred on December 1, 2009. As a result, we commenced the process of collecting VAT in 2010 and continue to apply to the Argentine government to recover the applicable VAT. We believe that the remaining balance is fully recoverable and have not provided an allowance.


7.
CONVERTIBLE NOTES

During the three months ended March 31, 2013, the 2008 senior convertible unsecured notes ("2008 Notes") of $138,000,000 were fully repurchased with cash.

During the three months ended March 31, 2013, we sold $265,000,000 in senior convertible unsecured notes ("2013 Notes") for net proceeds of $256,083,000 after payment of commissions and expenses related to the offering. The 2013 Notes mature on February 1, 2033 and bear an interest rate of 2.875% per annum, payable semi-annually in arrears on February 1 and August 1 of each year. The 2013 Notes are convertible into our common shares at a fixed conversion rate, subject to certain anti-dilution adjustments. In addition, if certain fundamental changes occur to us, holders of the 2013 Notes may be entitled to an increased conversion rate. The 2013 Notes will be convertible into our common shares at an initial conversion rate of 50 common shares per $1,000 principal amount of 2013 Notes converted, representing an initial conversion price of $20.00 per common share.

We may not redeem the 2013 Notes before February 1, 2018, except in the event of certain changes in Canadian tax law. At any time on or after February 1, 2018, but before February 1, 2020, we may redeem all or part of the 2013 Notes for cash, but only if the last reported sale price of our common shares for 20 or more trading days in a period of 30 consecutive trading days exceeds 130% of the conversion price. On or after February 1, 2020, we may redeem the 2013 Notes in full or in part, for cash.
 
Holders of the 2013 Notes have the right to require us to repurchase all or part of their 2013 Notes on February 1 of each of 2020, 2023 and 2028, or upon certain fundamental corporate changes. The repurchase price will be equal to 100% of the principal amount of the 2013 Notes being converted, plus accrued and unpaid interest to the repurchase date.

At initial recognition, the net proceeds of the 2013 Notes was bifurcated into its debt and equity components. The fair value of the debt portion of $178,358,000 was estimated using a discounted cash flow model method based on an expected life of seven years and a discount rate of 8.5%. The residual of $77,723,000 ($68,347,000 net of deferred tax) was allocated to equity.

The debt portion has been designated as an 'other financial liability' so that it is recorded at amortized cost, net of transaction costs, and is accreted over the expected life using the effective interest method.

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Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

7.
CONVERTIBLE NOTES (Cont'd)

As at March 31, 2013, the accrued interest related to the 2013 Notes was $1,512,000 and is included within trade and other payables. The carrying value of the long-term liability was $180,224,000. During the three months ended March 31, 2013, accretion expense related to the 2013 Notes was $1,866,000. These notes had a fair value of $236,825,000 as at March 31, 2013.


8.
SHARE CAPITAL AND SHARE-BASED PAYMENTS
a)Stock options
The changes in stock options outstanding during the three months ended March 31, 2013 and the year ended December 31, 2012 is as follows:
 
March 31, 2013
December 31, 2012
 
Number of stock options

Weighted average exercise price (C$/option)

Number of stock options

Weighted average exercise price (C$/option)

 
 
 
 
 
Outstanding, beginning of period
2,023,563

20.49

1,878,372

23.86

     Granted
660,150

11.94

597,125

15.22

     Exercised
(6,667
)
(11.50
)
(54,335
)
(11.50
)
     Expired
(53,000
)
(36.14
)
(115,000
)
(35.74
)
     Forfeited
(324,306
)
(25.00
)
(282,599
)
(27.24
)
Outstanding, end of period
2,299,740

17.07

2,023,563

20.49


For options granted during the three months ended March 31, 2013, the option valuations were based on an average expected option life of 4.2 years, a risk free interest rate of 1.3%, a dividend yield of nil, and volatility of 55.5%.

During the three months ended March 31, 2013, we granted 660,150 options to officers, employees and executive directors at exercise prices ranging from C$10.10 to C$12.99, with an average fair value of C$8.53 per option.
b)Deferred Share Units (“DSUs”)
During the three months ended March 31, 2013 and the year ended December 31, 2012, the following DSUs were outstanding to non-executive directors:
 
March 31, 2013

December 31, 2012

 
Number of DSUs

Number of DSUs

Outstanding, beginning of period
150,117

98,289

     Granted
16,098

51,828

Outstanding, end of period
166,215

150,117


The DSUs granted during the three months ended March 31, 2013 had a fair value of $14.17 per unit. The DSUs are cash-settled instruments and therefore the fair value of the outstanding DSUs at the end of each reporting period is recognized as an accrued liability with the associated compensation cost recorded in general and administrative expenses.

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Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

8.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)
c)Restricted Share Units (“RSUs”)

During the three months ended March 31, 2013 and the year ended December 31, 2012, the following RSUs were outstanding to employees:

 
March 31, 2013

December 31, 2012

 
Number of RSUs

Number of RSUs

Outstanding, beginning of period
141,809

76,800

     Granted
108,300

104,900

     Settled
(40,536
)
(21,089
)
     Forfeited
(3,167
)
(18,802
)
Outstanding, end of period
206,406

141,809


The RSUs granted during the three months ended March 31, 2013 had a weighted average fair value of C$10.46 per unit. RSUs settled in the three months ended March 31, 2013 were settled at a weighted average fair value of C$10.65 per unit. As at March 31, 2013, the weighted average fair value was C$10.72 per unit.

d)Performance Share Units (“PSUs”)

During the three months ended March 31, 2013 and the year ended December 31, 2012, the following PSUs were outstanding to senior executives:
 
March 31, 2013

December 31, 2012

 
Number of PSUs

Number of PSUs

Outstanding, beginning of period
201,220

109,700

     Granted
137,500

110,058

     Settled
(28,250
)
—

     Forfeited
(60,729
)
(18,538
)
Outstanding, end of period
249,741

201,220


The PSUs granted during the three months ended March 31, 2013 had a weighted average fair value of C$12.99 per unit. PSUs settled in the three months ended March 31, 2013 were settled at a fair value of C$12.62 per unit. As at March 31, 2013, the weighted average fair value was C$7.42 per unit.


14 | Page
Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

8.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)

e)Share-based compensation

Total share-based compensation, including all equity and cash-settled arrangements, for the three months ended March 31, 2013 and 2012 has been recognized in the consolidated interim financial statements as follows:
Three months ended March 31
2013

2012

 
$ 

$

Equity-settled
 
 
General and administrative (recovery) expense
(395
)
1,172

Property, plant and equipment
49

54

Cash-settled
 
 
General and administrative (recovery) expense
(1,271
)
829

Property, plant and equipment
181

—

Total share-based compensation (recovery) cost
(1,436
)
2,055

9.
COST OF SALES

Three months ended March 31
2013

2012

 
 
(restated note 2)

 
$ 

$

Cost of inventory
21,738

19,395

Depreciation, depletion and amortization
9,062

8,552

Export duties (1)
3,824

4,101

 
34,624

32,048


(1) 
We entered into a fiscal agreement with the Federal Government of Argentina in 1998 for production from the Pirquitas Mine. In December 2007, the National Customs Authority of Argentina Dirección Nacional de Aduanas or (“DNA”) levied an export duty of approximately 10% from concentrates for projects with fiscal stability agreements pre-dating 2002. The Federal Government asserts that the Pirquitas Mine is subject to this export duty despite contrary rights detailed under the Fiscal Agreement. We have challenged the legality of the export duty applied to silver concentrate and the matter is currently under review by the Federal Court in Argentina. The Federal Court (Jujuy) granted an injunction in our favor effective September 29, 2010 that prohibited the Federal Government from withholding the 10% export duty on silver concentrates pending the decision of the courts. The Federal Court of Appeal (Salta) upheld the injunction in December 2012; however, the Federal Government has appealed this decision to the Federal Supreme Court of Argentina. The Federal Government has also appealed the refund we claimed for the export duties paid before the injunction, as well as matters of procedure related to the uncertainty of the amount reclaimed.

As of March 31, 2013, the Pirquitas Mine has paid $6,646,000 in export duties, against which it has filed for recovery. In accordance with the injunction, we have not been paying export duties on silver concentrate but continue to accrue duties in full until the outcome of the claim is known with certainty. For the three months ended March 31, 2013, duties on silver concentrates of $3,454,000 (three months ended March 31, 2012 - $3,622,000) have been included in cost of sales, and as of March 31, 2013, we have accrued a liability totaling $38,463,000 (December 31, 2012 - $35,009,000). If this export duty is successfully overturned, the benefit will be recognized in the consolidated statement of income (loss) for the full amount of paid and unpaid duty in the period that recovery becomes virtually certain.


15 | Page
Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

10.
OTHER INCOME (OTHER EXPENSES)
Three months ended March 31
2013

2012

 
$

$

Impairment reversal on investments
183

4,478

Gain on dilution of associate (note 5)
1,858

4,225

Share of net loss of associate
(923
)
(1,239
)
Unrealized loss on financial instruments at FVTPL (1)
—

(1,996
)
Loss on marketable securities
(1,832
)
—

Miscellaneous (expense) income
(95
)
140

 
(809
)
5,608


(1) 
Financial instruments held at fair value through profit and loss ("FVTPL") included the conversion option embedded in the 2008 Notes (note 7).

11.
OPERATING SEGMENTS

We are a resource company focused on acquisition, exploration, development and operation of silver-dominant projects in the Americas.

An operating segment is defined as a component:
▪
that engages in business activities from which it may earn revenues and incur expenses;
▪
whose operating results are reviewed regularly by the entity’s chief operating decision maker; and
▪
for which discrete financial information is available.
We have identified operating segments based on the information used by the President and Chief Executive Officer (who is considered to be the chief operating decision maker) to manage the business. We primarily manage our business by looking at individual resource projects and typically segregate these projects between production, development and exploration. For reporting purposes all exploration and development projects have been aggregated into a single reportable segment ‘exploration and development properties’ because they all have similar characteristics and none exceed the quantitative thresholds for individual disclosure. The only production property, the Pirquitas Mine, is considered a single operating segment which derives its revenues from the sale of silver and zinc concentrates. The corporate division earns income that is considered incidental to our activities and therefore does not meet the definition of an operating segment. Consequently, the following reporting segments have been identified:
▪
Pirquitas Mine; and
▪
Exploration and development properties.

16 | Page
Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

11.
OPERATING SEGMENTS (Cont'd)
The following is a summary of the reported amounts of income or loss, and the carrying amounts of assets and liabilities by operating segment:
Three months ended March 31, 2013
Pirquitas Mine

Exploration and development properties

Other reconciling items (i, ii)

Total

 
$ 

$

$

$

Revenue
49,062

—

—

49,062

Cost of inventory and export duties
(25,562
)
—

—

(25,562
)
Depreciation, depletion and amortization
(9,062
)
—

—

(9,062
)
Cost of sales
(34,624
)
—

—

(34,624
)
Income from mine operations
14,438

—

—

14,438

 
 
 
 
 
Operating income (loss)
14,204

(310
)
(4,900
)
8,994

Income before income tax
8,731

(435
)
(12,744
)
(4,448
)
 
 
 
 
 
Interest income and other finance income
581

—

324

905

Interest expense and other finance costs
(903
)
(24
)
(6,628
)
(7,555
)
Income tax (expense) recovery
(4,612
)
1,353

3,148

(111
)
 
 
 
 
 
As at March 31, 2013
 
 
 
 
Total assets
621,074

276,579

528,592

1,426,245

Non-current assets
406,455

242,758

120,344

769,557

Total liabilities
(87,839
)
(4,317
)
(215,204
)
(307,360
)

Three months ended March 31, 2012
Pirquitas Mine

Exploration and development properties

Other reconciling items (i, ii)

Total

 
$

$

$

$

 
(restated note 2)

 
 
 
Revenue
38,406

—

—

38,406

Cost of inventory and export duties
(23,496
)
—

—

(23,496
)
Depreciation, depletion and amortization
(8,552
)
—

—

(8,552
)
Cost of sales
(32,048
)
—

—

(32,048
)
Income from mine operations
6,358

—

—

6,358

 
 
 
 
 
Operating income (loss)
5,845

(347
)
(6,509
)
(1,011
)
Income (loss) before income tax
3,507

(652
)
(1,013
)
1,842

 
 
 
 
 
Interest income and other finance income
—

—

209

209

Interest expense and other finance costs
(1,524
)
(19
)
(4,124
)
(5,667
)
Income tax (expense) recovery
(6,226
)
1,776

1,569

(2,881
)
 
 
 
 
 
As at December 31, 2012
 
 
 
 
Total assets
621,082

272,818

430,785

1,324,685

Non-current assets
400,858

237,039

121,064

758,961

Total liabilities
(97,629
)
(3,944
)
(161,468
)
(263,041
)
(i) Other reconciling items refer to items that are not reported as part of segment performance as they are managed on a group basis.
(ii) Includes the equity-accounted investment in Pretium.


17 | Page
Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

11.
OPERATING SEGMENTS (Cont'd)

Segment revenue by product
Three months ended March 31
2013

2012

 
%

%

Silver
97

97

Zinc
3

3


Segment revenue by location of customer
100% of revenues are attributable to the Pirquitas Mine segment. During the three months ended March 31, 2013, revenue from five of our customers each individually represented over 10% of the total silver and zinc sales revenue. During the three months ended March 31, 2012, revenue from two of our customers each individually represented over 10% of the total silver and zinc sales revenue.

Non-current assets by location
 
March 31, 2013

December 31, 2012

 
 
(restated note 2)

 
$

$

Canada
121,686

122,393

Argentina
430,793

428,881

Mexico
133,499

130,277

Peru
60,575

59,150

United States
12,722

8,128

Chile
10,282

10,132

Total
769,557

758,961



18 | Page
Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

12.
FAIR VALUE MEASUREMENTS

Financial instruments that are held at fair value are categorized based on a valuation hierarchy which is determined by the valuation methodology utilized:
 
Fair value at March 31, 2013
 
Level 1

Level 2

Level 3

Total

 
$ 

$

$

$

Trade and other receivables
—

36,459

—

36,459

Marketable securities
28,166

—

—

28,166

 
28,166

36,459

—

64,625


Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities

Marketable securities, consisting of available-for-sale investments with no trading restrictions are valued using a market approach based upon unadjusted quoted prices in an active market obtained from securities exchanges.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and trade receivables from provisional invoices for concentrate sales are included within Level 2, as the basis of valuation uses quoted commodity prices.

Level 3 – inputs for an asset or liability that are not based on observable market data (unobservable inputs)

There were no transfers between Level 1 and Level 2 or transfers into or out of Level 3 during the three months ended March 31, 2013 or 2012.


19 | Page
Silver Standard Resources Inc.
Notes to the Consolidated Interim Financial Statements
For the three months ended March 31, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated - unaudited)

13.
SUPPLEMENTAL CASH FLOW INFORMATION

Changes in non-cash working capital items during the three months ended March 31, 2013 and 2012 are as follows:

Three months ended March 31
2013

2012

 
 
(restated note 2)

 
$ 

$

Trade and other receivables (excluding VAT)
5,960

(15,995
)
Inventory
(2,517
)
(2,902
)
Trade and other payables
(8,747
)
2,977

Taxes payable
(5,098
)
(10,167
)
 
(10,402
)
(26,087
)
During the three months ended March 31, 2013 and 2012, we conducted the following non-cash financing transactions:
Three months ended March 31
2013

2012

 
$

$

Transfer of share-based payment reserve upon exercise of stock options
(56
)
(387
)
During the three months ended March 31, 2013 and 2012, we made the following cash payments for interest and taxes:
Three months ended March 31
2013

2012

 
$

$

Interest paid
3,105

3,105

Taxes paid
3,275

5,178




20 | Page