EX-99.1 2 a2014q2fs.htm EXHIBIT 2014 Q2 FS



Silver Standard Resources Inc.
Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014 and 2013
(unaudited)







Silver Standard Resources Inc.
Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 2014
 

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


2 | Page

Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Financial Position
(expressed in thousands of United States dollars)
 
Note
June 30

December 31

 
 
2014

2013

 
 
$ 

$

Current assets
 
 
 
Cash and cash equivalents
 
102,162

415,657

Trade and other receivables
4
81,427

69,247

Marketable securities
 
180,378

129,267

Other current assets
5
20,423

10,000

Inventory
6
138,931

50,892

Assets held for sale
 
3,885

13,140

 
 
527,206

688,203

Non-current assets
 
 
 
Property, plant and equipment
7
640,385

400,409

Deferred income tax assets
 
15,110

12,041

Value added tax receivable
8
37,266

62,423

Other non-current assets
5
32,601

28,165

Total assets
 
1,252,568

1,191,241

 
 
 
 
Current liabilities
 
 
 
Trade and other payables
9
99,662

104,124

 
 
 
 
Non-current liabilities
 
 
 
Deferred income tax liabilities
 
31,791

24,736

Close down and restoration provision
 
57,376

32,973

Convertible notes
10
192,050

187,130

Total liabilities
 
380,879

348,963

 
 
 
 
Shareholders' equity
 
 
 
Share capital
 
707,034

707,034

Other reserves
 
23,903

(29,628
)
Equity component of convertible notes
10
68,347

68,347

Retained earnings
 
72,405

96,525

Total shareholders' equity attributable to our shareholders
 
871,689

842,278

Total liabilities and equity
 
1,252,568

1,191,241

 
 
 
 
Events after the reporting date (note 17)
 
 
 
The accompanying notes are an integral part of the consolidated financial statements
Approved by the Board of Directors and authorized for issue on August 6, 2014
“Richard D. Paterson”
 
“John Smith”
Richard D. Paterson, Director
 
John Smith, Director

3 | Page

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

 
Note
Three months ended June 30
 
 
Six months ended June 30
 
 
 
2014

2013

 
2014

2013

 
 
$

$

 
$

$

 
 
 
 
 
 
 
Revenue
 
64,287

32,654

 
98,023

81,716

Cost of sales
12
(53,265
)
(51,625
)
 
(81,077
)
(86,249
)
Income (loss) from mine operations
 
11,022

(18,971
)
 
16,946

(4,533
)
 
 
 
 
 
 
 
General and administrative expenses
 
(4,584
)
(5,894
)
 
(11,498
)
(10,758
)
Exploration, evaluation and reclamation expenses
 
(1,195
)
(2,166
)
 
(1,909
)
(2,746
)
Business acquisition costs
 
(3,064
)
—

 
(5,036
)
—

Impairment charges
 
—

(202,440
)
 
—

(202,440
)
Operating income (loss)
 
2,179

(229,471
)
 
(1,497
)
(220,477
)
 
 
 
 
 
 
 
Gain on sale of mineral property
7
—

—

 
9,240

—

Gain on derecognition of investment in associate
 
—

21,959

 
—

21,959

Interest earned and other finance income
 
624

1,368

 
2,189

2,273

Interest expense and other finance costs
 
(5,325
)
(5,125
)
 
(10,479
)
(12,680
)
Unrealized gain on derivatives
 
386

—

 
2,094

—

Other (expense)
13
(4,080
)
(16,360
)
 
(6,834
)
(17,169
)
Foreign exchange (loss)
 
(1,009
)
(7,056
)
 
(17,791
)
(13,039
)
(Loss) before tax
 
(7,225
)
(234,685
)
 
(23,078
)
(239,133
)
 
 
 
 
 
 
 
Income tax (expense)
 
(37
)
(1,260
)
 
(1,042
)
(1,371
)
 
 
 
 
 
 
 
Net (loss) and net (loss) attributable to shareholders
 
(7,262
)
(235,945
)
 
(24,120
)
(240,504
)
 
 
 
 
 
 
 
Weighted average shares outstanding (thousands)
 
 
 
 
 
 
Basic
 
80,754

80,755

 
80,754

80,753

Diluted
 
80,754

80,755

 
80,754

80,753

 
 
 
 
 
 
 
(Loss) per share
 
 
 
 
 
 
Basic
 
$(0.09)
$(2.92)
 
$(0.30)
$(2.98)
Diluted
 
$(0.09)
$(2.92)
 
$(0.30)
$(2.98)
The accompanying notes are an integral part of the consolidated financial statements

4 | Page

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

 
 
Three months ended June 30
 
 
Six months ended June 30
 
 
 
2014

2013

 
2014

2013

 
 
$

$

 
$

$

 
 
 
 
 
 
 
Net (loss) for the period attributable to shareholders
 
(7,262
)
(235,945
)
 
(24,120
)
(240,504
)
Other comprehensive income (loss)
 
 

 

 
 
 
Items that may be reclassified to net income or loss:
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
 
39,287

(25,032
)
 
51,252

(28,980
)
     Realized loss (gain) recycled to net income or
     loss
 
1,271

(131
)
 
1,271

(131
)
Share of other comprehensive (loss) of associate
 
—

1,682

 
—

(641
)
    Cumulative translation adjustment
 
—

(17
)
 
—

(24
)
Other comprehensive income (loss)
 
40,558

(23,498
)
 
52,523

(29,776
)
Total comprehensive income (loss) attributable to shareholders
 
33,296

(259,443
)
 
28,403

(270,280
)
Total comprehensive income (loss)
 
33,296

(259,443
)
 
28,403

(270,280
)
The accompanying notes are an integral part of the consolidated financial statements

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

 
Note
Common Shares
Other

Equity component

Retained

Total

 
 
Shares

Amount

reserves

of convertible notes

earnings

equity

 
 
000's

$

$

$

$

$

Balance, January 1, 2013
 
80,748

706,901

24,016

—

321,522

1,052,439

   Exercise of stock options
11
7

133

(56
)
—

—

77

   Equity-settled share-based compensation
11
—

—

395

—

—

395

   Equity component of convertible debt
10
—

—

—

68,347

—

68,347

Total comprehensive (loss) for the period
 
—

—

(29,776
)
—

(240,504
)
(270,280
)
Balance, June 30, 2013
 
80,755

707,034

(5,421
)
68,347

81,018

850,978

 
 
 
 
 
 
 
 
Balance January 1, 2014
 
80,755

707,034

(29,628
)
68,347

96,525

842,278

   Equity-settled share-based compensation
11
—

—

1,008

—

—

1,008

Total comprehensive income (loss) for the period
 
—

—

52,523

—

(24,120
)
28,403

Balance, June 30, 2014
 
80,755

707,034

23,903

68,347

72,405

871,689

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

6 | Page

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

 
Note
Three months ended June 30
 
 
Six months ended June 30
 
 
 
2014

2013

 
2014

2013

 
 
$

$

 
$

$

Cash flows from operating activities
 
 

 

 
 
 
Net (loss) for the period
 
(7,262
)
(235,945
)
 
(24,120
)
(240,504
)
Adjustments for:
 
 

 

 
 
 
Depreciation, depletion and amortization
 
6,834

11,394

 
12,000

20,511

Share-based payments
 
629

689

 
1,078

294

Net finance expense
 
4,701

3,757

 
8,290

10,407

(Gain) on sale of mineral property
 
—

—

 
(9,240
)
—

Impairment charges and inventory write-downs
 
—

214,633

 
—

214,633

(Gain) on derivative instrument
 
(386
)
—

 
(2,094
)
—

Net (gains) on investment in associate
 
—

(22,103
)
 
—

(23,037
)
Other loss
 
3,585

15,876

 
6,262

17,708

Income tax expense
 
37

1,260

 
1,042

1,371

Non-cash foreign exchange loss
 
(217
)
4,804

 
13,071

10,075

Net changes in non-cash working capital items
16
(7,709
)
14,846

 
760

13,081

Cash generated in operating activities before interest and income taxes paid
 
212

9,211

 
7,049

24,539

Interest paid
 
—

—

 
(3,809
)
(3,105
)
Income taxes paid
 
(1,258
)
(5,093
)
 
(2,733
)
(8,368
)
Cash (used) generated in operating activities
 
(1,046
)
4,118

 
507

13,066

Cash flows from investing activities
 
 

 

 
 
 
Purchase of Marigold mine
 
(275,000
)
—

 
(275,000
)
—

(Increase) in restricted cash
 
(15,750
)
—

 
(15,750
)
—

Purchase of property, plant and equipment
 
(4,984
)
(8,370
)
 
(6,935
)
(16,098
)
Production stripping capitalized costs
 
(10,468
)
(10,228
)
 
(14,696
)
(20,554
)
Mineral property expenditures
 
(6,570
)
(5,091
)
 
(10,055
)
(12,085
)
Value added tax payments
 
(4,446
)
(4,639
)
 
(7,554
)
(10,214
)
Value added tax receipts
 
3,348

—

 
6,351

—

Proceeds from sale of mineral property
7
10,000

—

 
17,500

—

Proceeds from sale of marketable securities
7
10,240

—

 
10,240

—

Taxes paid on sale of mineral properties
 
—

—

 
(15,853
)
—

Interest received
 
221

1,368

 
1,403

2,273

Dividends received
 
166

—

 
166

—

Cash (used) by investing activities
 
(293,243
)
(26,960
)
 
(310,183
)
(56,678
)
Cash flows from financing activities
 
 

 

 
 
 
Net proceeds from issuance of convertible notes
 
—

—

 
—

256,083

Repayment of convertible notes
 
—

—

 
—

(138,000
)
Proceeds from exercise of stock options
 
—

—

 
—

77

Cash generated by financing activities
 
—

—

 
—

118,160

Effect of foreign exchange rate changes on cash and cash equivalents
 
38

(3,199
)
 
(3,819
)
(5,690
)
(Decrease) increase in cash and cash equivalents
 
(294,251
)
(26,041
)
 
(313,495
)
68,858

Cash and cash equivalents, beginning of period
 
396,413

461,846

 
415,657

366,947

Cash and cash equivalents, end of period
 
102,162

435,805

 
102,162

435,805


Supplemental cash flow information (note 16)
The accompanying notes are an integral part of the consolidated financial statements

7 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)


1.
NATURE OF OPERATIONS

Silver Standard Resources Inc. ("we", "us" or "our") is a company incorporated under the laws of the Province of British Columbia, Canada and our shares are publicly listed on the Toronto Stock Exchange in Canada and the NASDAQ Global Markets in the United States. Together with our subsidiaries, we (the “Group”) are principally engaged in the acquisition, exploration, development and operation of precious metal resource properties located in the Americas. With the acquisition of the Marigold mine on April 4, 2014, we have two producing mines and a portfolio of silver resource dominant projects located throughout the Americas. Silver Standard Resources Inc. is the ultimate parent of the Group.

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

Our strategic focus is to optimize the production of silver and gold from our Pirquitas mine in Argentina and Marigold mine in Nevada, USA and to advance other principal development projects including the Pitarrilla project in Mexico and the San Luis project in Peru and our other projects within our project pipeline towards development and commercial production.


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

a)
Basis of preparation
These condensed consolidated interim financial statements should be read in conjunction with our audited consolidated annual financial statements for the year ended December 31, 2013.
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting ("IAS 34") 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 condensed consolidated interim financial statements are based on International Financial Reporting Standards ("IFRS") interpretations and were approved on August 6, 2014 by our Board of Directors. Following the acquisition of the Marigold mine on April 4, 2014, we have applied the following new accounting policies that were not previously applicable to the business. All other applicable accounting policies to the Marigold mine are consistent with those disclosed in our audited consolidated financial statements for the year ended December 31, 2014.

(i)
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred. The results of businesses acquired during the period are included in the consolidated financial statements from the effective date of acquisition. The identifiable assets, liabilities and contingent liabilities of the businesses which can be measured reliably are recorded at provisional fair values at the date of acquisition. Provisional fair values are finalized within 12 months of the acquisition date. Acquisition-related costs are expensed as incurred. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

(ii)
Revenue recognition for gold bullion
Revenue from the sale of gold bullion is recognized when the significant risks and rewards of ownership have passed to the buyer; it is probable that economic benefits associated with the transaction will flow to us; the sale price can be measured reliably; we have no significant continuing involvement; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Typically, this is on the trade settlement date.

8 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

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

(iii)
Leach pad inventory
The recovery of gold and by-products from certain oxide ore is achieved through a heap leaching process. Under this method, ore is stacked on leach pads and treated with a chemical solution that dissolves the gold contained within the ore. The resulting pregnant solution is further processed in a plant where the gold is recovered in doré. Costs are included in heap leach ore inventory based on current mining and leaching costs, including applicable depreciation and depletion of mineral properties, and removed from heap leach ore inventory as ounces of gold are recovered at the average cost per recoverable ounce of gold on the leach pads. Estimates of recoverable gold on the leach pads are calculated based on the quantities of ore placed on the leach pads (measured tonnes added to the leach pads), the grade of ore placed on the leach pads (based on assay data), and a recovery percentage.

(iv)
Property, plant and equipment
The following significant classes of depreciable plant and equipment were acquired with Marigold mine and their estimated useful lives are as follows:
Buildings
life of mine
Mobile equipment components
3 to 15 years

b)Significant accounting judgments and estimates
The preparation of financial statements in conformity with IFRS requires the use of judgments and/or estimates that affect the amounts reported and disclosed in the condensed 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, 2013 other than those which related to the sale of the Challacollo project and the acquisition of the Marigold mine, as discussed below.

(i)
Deferred consideration
During the six months ended June 30, 2014, we completed the sale of our 100% interest in the Challacollo project (note 7) of which a portion of sale consideration is deferred. The deferred consideration is dependent on various uncertain events and assumptions, including estimation of the year in which commercial production may be reached, the share price of Mandalay Resources Corporation ("Mandalay") for the deferred shares, and the price of silver for the deferred silver bullion. The fair value of the deferred consideration is determined by considering various scenarios of discounting the expected cash flows using a risk-adjusted discount rate and applying probability aspects to the cash flows.

(ii)
Acquisition of the Marigold mine
Judgment is required to determine whether we acquired a business under the definition of IFRS 3, Business combinations, and also the acquisition date when we obtained control over the acquiree, which was the date that consideration is transferred and when we assumed the assets and liabilities of the acquiree.

Business combinations are accounted for using the acquisition method whereby identifiable assets acquired and liabilities assumed, including contingent liabilities, are recorded at their fair values at the date of acquisition. The valuation of certain assets and liabilities requires significant management estimates and judgment. The value of the leach pad inventory requires an estimation of recoverable ounces, production profile, future metal prices and estimation of costs to complete the production process. Property, plant and equipment requires judgment over the appropriate fair value methodology to appraise the assets and various assumptions around estimated useful lives and current replacement costs. The mineral property valuation is based upon estimates of mineral reserves and mineral resources used in the life of mine plan, as well as estimates of future metal prices, production, costs, and economic assumptions around inflation rates and discount rates.

9 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

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

(iii)
Cost of sales and valuation of leach pad inventory
In determining cost of sales recognized in the consolidated statements of loss, we make estimates of quantities of ore stacked on leach pads and in process, and the recoverable gold in this material to determine the average costs of inventory sold during the period. Changes in these estimates can result in a change in cost of sales of future periods and carrying amounts of inventory.

(iv)
Estimated recoverable ounces
The carrying amounts of our mineral properties are depleted based on recoverable ounces contained in proven and probable mineral reserves. Changes to estimates of recoverable ounces and depletable costs including changes resulting from revisions to our mine plans and changes in metal price forecasts can result in a change to future depletion rates.

c)Pronouncements affecting our financial statements presentation or disclosure
The following new and amended IFRS pronouncements were adopted during the six months ended June 30, 2014:

Levies imposed by governments
IFRIC 21, Levies (“IFRIC 21”), an interpretation of IAS 37, Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”), on the accounting for levies imposed by governments, was effective for annual periods beginning on January 1, 2014. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (“obligating event”). IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. This did not have any significant impact on our current accounting for levies imposed by governments.
Impairment of assets
IAS 36, Impairment of assets, was amended to clarify disclosure requirements when recoverable amount is determined based on fair value less costs of disposal. The amendment was effective for annual periods beginning on January 1, 2014 and does not have a material impact on our consolidated financial statements.

Revenue from contracts with customers
The IASB has replaced IAS 18 - Revenue in its entirety with IFRS 15 - Revenue from contracts with customers (“IFRS 15”) which is intended to establish a new control-based revenue recognition model and change the basis for deciding whether revenue is to be recognized over time or at a point in time. IFRS 15 is effective for annual periods commencing on or after January 1, 2017. We are currently evaluating the impact the standard is expected to have on our financial statements.


3.
PURCHASE OF MARIGOLD MINE

On April 4, 2014, we completed the acquisition of a 100% interest in the Marigold mine, an open pit operating gold mine in Nevada, USA, from subsidiaries of Goldcorp Inc. and Barrick Gold Corporation for a purchase price of $275,000,000. Subsequent to June 30, 2014, we settled post-closing adjustments with the sellers that resulted in an adjustment in favor of us of $7,268,000 for total cash consideration of $267,732,000. The acquisition of Marigold accomplishes our strategic goal of adding an operating mine in a well-established, low-risk mining jurisdiction. The purchase price was paid in cash from our existing cash on hand. In addition, we pledged cash of $15,750,000 million to support the bonding requirements for Marigold’s long term environmental and reclamation obligations.

The acquisition is a business combination and has been accounted for in accordance with the measurement and recognition provisions of IFRS 3, Business Combinations. IFRS 3 requires that the purchase consideration be allocated to the assets acquired and liabilities assumed in a business combination based upon their estimated fair values at the date of acquisition.


10 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

3.
PURCHASE OF MARIGOLD MINE (Cont'd)

The purchase price has been preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Fair values are determined based on third party appraisals, discounted cash flow models, and quoted market prices, as deemed appropriate. This allocation is preliminary in nature as we are in the process of finalizing certain fair value assumptions, and this allocation may require adjustment in future periods. Acquisition costs, in the form of advisory, legal and other professional fees, which were associated with the transaction to acquire Marigold were expensed as incurred during the six months ended June 30, 2014 were $5,036,000.

The following table shows the preliminary allocation of the purchase price to assets acquired and liabilities assumed, based on estimates of fair value, including a summary of major classes of consideration transferred, and the recognized amounts of assets acquired and liabilities assumed at the acquisition date:

 
$

Purchase consideration
275,000

Working capital adjustment
(7,268
)
Consideration
267,732

 
 
Trade and other receivables
5,162

Inventory
76,104

Property, plant and equipment
 
Mineral properties
50,823

Plant and equipment
157,880

Assets under construction
9,561

Trade and other payables
(17,067
)
Close-down and restoration provision
(14,731
)
Net identifiable assets acquired
267,732


Had the Marigold mine been consolidated from the start of January 1, 2014, our consolidated revenue for the six months ended June 30, 2014 would have been approximately $143,659,000 and our consolidated net loss for the six months ended June 30, 2014 would have been $23,851,000.


11 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

4.
TRADE AND OTHER RECEIVABLES

 
June 30, 2014

December 31, 2013

 
$

$

Trade receivables
27,139

43,516

Tax receivables
18,257

13,969

Value added tax receivables
19,565

5,915

Prepayments and deposits
5,562

4,853

Other receivables (1)
10,904

994

 
81,427

69,247


(1) 
Other receivables includes the net working capital adjustment of $7,268,000 relating to the acquisition of the Marigold mine (note 3), which was received on July 10, 2014. Other receivables also includes $2,898,000 relating to marketable securities sold during the six months ended June 30, 2014,

We expect full recovery of the trade receivable amounts outstanding and, therefore, no allowance has been recorded against these receivables. No trade receivables are past due and all are expected to be settled within twelve months.


5.
OTHER ASSETS

 
June 30, 2014
December 31, 2013
 
Current

Non-current

Current

Non-current

 
$

$

$

$

Financial assets:
 
 
 
 
Restricted cash (1)
—

17,734

—

1,983

Derivative asset (note 15)
1,786

—

—

—

Deferred consideration
18,637

1,954

10,000

17,864

 
20,423

19,688

10,000

19,847

Other assets:
 
 
 
 
Non-current inventory (note 6)
—

12,913

—

8,318

 
20,423

32,601

10,000

28,165


(1) 
We have cash and security deposits in relation to our close down and restoration provisions.


12 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

6.
INVENTORY

 
June 30, 2014

December 31, 2013

 
$ 

$

Current:
 
 
Finished goods
24,348

16,181

Stockpiled ore
18,308

18,918

Leach pad inventory
69,703

—

Materials and supplies
26,572

15,793

 
138,931

50,892

Non-current:
 
 
Non-current inventory (1)
12,913

8,318

 
151,844

59,210


(1) 
We hold low grade stockpiled ore and supplies that are expected to be used after one year, both of which are classified as non-current inventory. As of June 30, 2014, non-current inventory consisted of stockpiled ore of $5,255,000 (December 31, 2013 - $4,253,000) and materials and supplies of $7,658,000 (December 31, 2013 - $4,065,000).

The cost of inventory held at net realizable value ("NRV") at June 30, 2014 was $Nil (December 31, 2013 - $3,656,000).


7.
PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment comprise the following:
 
June 30, 2014
 
Plant and equipment

Mineral properties

Assets under construction

Exploration and development expenditure

Total

Cost
 
 
 
 
 
Balance, January 1, 2014
261,195

34,160

10,337

238,508

544,200

Additions
3,804

16,767

5,713

7,945

34,229

Acquisition of Marigold mine (note 3)
157,880

50,823

9,561

—

218,264

Disposals
(3,288
)
—

—

—

(3,288
)
Costs written off (1)
—

—

—

(699
)
(699
)
Change in estimate of close down and restoration provision
—

8,130

—

—

8,130

Transfers
10,260

—

(10,260
)
—

—

Balance, end of period
429,851

109,880

15,351

245,754

800,836

 
 
 
 
 
 
Accumulated depreciation
 
 
 
 
 
Balance, January 1, 2013
(112,699
)
(31,092
)
—

—

(143,791
)
Charge for the period
(18,000
)
(1,435
)
—

—

(19,435
)
Disposals
2,775

—

—

—

2,775

Balance, end of period
(127,924
)
(32,527
)
—

—

(160,451
)
 
 
 
 
 
 
Net book value at June 30, 2014
301,927

77,353

15,351

245,754

640,385


13 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

7.
PROPERTY, PLANT AND EQUIPMENT (Cont'd)
 
December 31, 2013
 
Plant and equipment

Mineral properties

Assets under construction

Exploration and development expenditure

Total

Cost
 
 
 
 
 
Balance, January 1, 2013
295,987

141,092

18,791

234,547

690,417

Additions
1,082

27,188

28,085

19,905

76,260

Disposals and reclassifications (2)
(5,032
)
—

—

(9,264
)
(14,296
)
Costs written off (1)
—

—

—

(7,155
)
(7,155
)
Change in estimate of close down and restoration provision
—

939

—

475

1,414

Impairment charges
(67,381
)
(135,059
)
—

—

(202,440
)
Transfers
36,539

—

(36,539
)
—

—

Balance, end of period
261,195

34,160

10,337

238,508

544,200

 
 
 
 
 
 
Accumulated depreciation
 
 
 
 
 
Balance, January 1, 2013
(90,792
)
(18,976
)
—

—

(109,768
)
Charge for the period
(25,067
)
(12,116
)
—

—

(37,183
)
Disposals
3,160

—

—

—

3,160

Balance, end of period
(112,699
)
(31,092
)
—

—

(143,791
)
 
 
 
 
 
 
Net book value at December 31, 2013
148,496

3,068

10,337

238,508

400,409


(1) 
Following reviews of our exploration and development property portfolio, we concluded that certain exploration properties had no future value and were written off.

(2) 
On December 19, 2013, we entered into an agreement to sell our 100% interest in the Challacollo project in Chile. As such, the project was classified as held for sale at December 31, 2013 and removed from exploration and development expenditure.

Sale of Challacollo
On February 6, 2014, we completed the sale of our 100% interest in the Challacollo project located in Chile to Mandalay. Under the terms of the agreement, the total aggregate consideration was comprised of $7,500,000 in cash, 12,000,000 common shares of Mandalay with the fair value of $9,188,000, deferred consideration of 5,000,000 common of shares of Mandalay issued at the end of the first quarter in which commercial production has commenced, and cash equivalent of 240,000 ounces of silver paid in eight quarterly installments (based on the average quarterly silver price) beginning the quarter immediately following the quarter in which commercial production has commenced. In addition, we received a 2% net smelter return royalty on silver sales in excess of 36 million ounces, up to a maximum of $5,000,000 from the project. The fair value of consideration received was $18,644,000 and we recorded a gain on the sale of this mineral property of $9,240,000 before tax expense of $1,773,000.

During the six months ended June 30, 2014, we sold all of the Mandalay shares received for proceeds of $9,279,000 recognizing a loss on disposal of $112,000.


14 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

8.
VALUE ADDED TAX RECEIVABLE

 
June 30, 2014

December 31, 2013

 
$ 

$

Current
19,565

5,915

Non-current
37,266

62,423

 
56,831

68,338


VAT paid in Argentina in relation to the Pirquitas mine became recoverable under Argentine law once the mine reached the production stage and we apply to the Argentine government to recover the applicable VAT on an ongoing basis. There have, at times, been significant delays in obtaining final approvals and, therefore, the collection of VAT and the classification reflects best estimates of timing of recoveries. Despite the procedural delays, we believe that the remaining balance is fully recoverable and have not provided an allowance.


9.
TRADE AND OTHER PAYABLES

Trade payables and accrued liabilities are comprised of the following items:
 
June 30, 2014

December 31, 2013

 
$

$

Trade payables
18,844

11,014

Accrued liabilities
71,709

63,373

Value added tax payable
—

6,467

Income taxes payable
2,069

15,885

Current portion of close down and restoration provision
3,914

4,228

Accrued interest on convertible notes (note 10)
3,126

3,157

 
99,662

104,124


As at June 30, 2014, accrued liabilities includes export duties on silver concentrate of $51,667,000 (December 31, 2013 - $48,169,000) (note 12).


10.
CONVERTIBLE NOTES

On January 16, 2013, we sold $265,000,000 in senior convertible unsecured notes (the "Notes") for net proceeds of $256,083,000 after payment of commissions and expenses related to the offering. The 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 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 Notes may be entitled to an increased conversion rate. The Notes are convertible into our common shares at an initial conversion rate of 50 common shares per $1,000 principal amount of Notes converted, representing an initial conversion price of $20.00 per common share.

We may not redeem the 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 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 Notes in full or in part, for cash.

15 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

10.
CONVERTIBLE NOTES (Cont'd)

Holders of the Notes have the right to require us to repurchase all or part of their 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 Notes being converted, plus accrued and unpaid interest to the repurchase date.

At initial recognition, the net proceeds of the Notes were 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 Notes had a fair value of $224,959,000 as at June 30, 2014.

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

The movement in the debt portion of the Notes during the six months ended June 30, 2014 and the year ended December 31, 2013 comprised of the following:
 
June 30, 2014

December 31, 2013

 
$

$

Balance, beginning of period
190,287

—

Debt portion of net proceeds
—

178,358

Accretion of discount
4,920

8,772

Interest accrued in period
3,778

7,262

Interest paid
(3,809
)
(4,105
)
Balance, end of period
195,176

190,287

Accrued interest outstanding
(3,126
)
(3,157
)
Non-current portion of Notes outstanding
192,050

187,130



11.
SHARE CAPITAL AND SHARE-BASED PAYMENTS

(a)Stock options
The changes in stock options issued during the six months ended June 30, 2014 and the year ended December 31, 2013 are as follows:
 
June 30, 2014
December 31, 2013
 
Number of stock options

Weighted average exercise price (C$/option)

Number of stock options

Weighted average exercise price (C$/option)

 
 
 
 
 
Outstanding, beginning of period
1,754,944

16.05

2,023,563

20.49

     Granted
966,578

8.15

680,150

11.87

     Exercised
—

—

(6,667
)
(11.50
)
     Expired
—

—

(225,498
)
(30.32
)
     Forfeited
(200,686
)
(19.17
)
(716,604
)
(20.17
)
Outstanding, end of period
2,520,836

12.78

1,754,944

16.05


16 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

11.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)

For options granted during the six months ended June 30, 2014, the option valuations were based on an average expected option life of 4.2 years, a risk free interest rate of 1.6%, a dividend yield of nil, and volatility of 51.9%.
During the six months ended June 30, 2014, we granted 966,578 options to purchase shares to officers, employees, directors and other eligible persons at an exercise price of C$8.15, with an average fair value of C$3.42 per option.
(b)Deferred Share Units (“DSUs”)
During the six months ended June 30, 2014 and the year ended December 31, 2013, the following DSUs were outstanding to non-executive directors:
 
June 30, 2014

December 31, 2013

 
Number of DSUs

Number of DSUs

Outstanding, beginning of period
251,019

150,117

     Granted
50,811

100,902

Outstanding, end of period
301,830

251,019

The DSUs granted in the six months ended June 30, 2014 had a fair value of C$8.69 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. As at June 30, 2014, the weighted average fair value was C$9.23 per unit.
(c)Restricted Share Units (“RSUs”)
During the six months ended June 30, 2014 and the year ended December 31, 2013, the following RSUs were outstanding to employees:
 
June 30, 2014

December 31, 2013

 
Number of RSUs

Number of RSUs

Outstanding, beginning of period
129,498

141,810

     Granted
297,480

118,300

     Settled
(45,989
)
(53,286
)
     Forfeited
(5,668
)
(77,326
)
Outstanding, end of period
375,321

129,498


The RSUs granted in the six months ended June 30, 2014 had a weighted average fair value of C$9.41 per unit. RSUs settled in the six months ended June 30, 2014 were settled at a fair value of C$11.49 per unit. As at June 30, 2014, the weighted average fair value was C$9.23 per unit.

17 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

11.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)

(d)Performance Share Units (“PSUs”)
During the six months ended June 30, 2014 and the year ended December 31, 2013, the following PSUs were outstanding to senior executives:
 
June 30, 2014

December 31, 2013

 
Number of PSUs

Number of PSUs

Outstanding, beginning of period
177,729

201,220

     Granted
253,600

137,500

     Settled
—

(46,700
)
     Forfeited
(18,227
)
(114,291
)
Outstanding, end of period
413,102

177,729

The PSUs granted in the six months ended June 30, 2014 had a weighted average fair value of C$7.37 per unit. As at June 30, 2014, the weighted average fair value was C$10.65 per unit.
(e)Share-based compensation
Total share-based compensation, including all equity and cash-settled arrangements, for the three and six months ended June 30, 2014 and 2013 has been recognized in the condensed consolidated interim financial statements as follows:
 
Three months ended June 30
 
 
Six months ended June 30
 
 
2014

2013

 
2014

2013

 
$

$

 
$

$

Equity-settled
 
 
 
 
 
General and administrative expense
629

689

 
1,078

294

Property, plant and equipment
23

52

 
(74
)
101

Cost of inventory
4

—

 
4

—

Cash-settled
 
 
 
 
 
General and administrative (recovery) expense
(206
)
(695
)
 
1,832

(1,966
)
Property, plant and equipment
15

(15
)
 
125

84

Cost of inventory
138

4

 
263

86

Total
603

35

 
3,228

(1,401
)


18 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

12.
COST OF SALES

 
Three months ended June 30
 
 
Six months ended June 30
 
 
2014

2013

 
2014

2013

 
$ 

$

 
$ 

$

Cost of inventory
44,234

24,568

 
64,139

46,306

Depletion, depreciation and amortization
6,741

11,295

 
11,821

20,357

Export duties (1)
2,290

3,569

 
5,117

7,393

Write-down of stockpiles to NRV
—

12,193

 
—

12,193

 
53,265

51,625

 
81,077

86,249


(1) 
We entered into a fiscal stability agreement (the “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) 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 concentrates and the matter is currently under review by the Federal Court (Jujuy) 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 (the “Injunction”), pending the decision of the courts with respect to our challenge of the legality of the application of the export duty. The Injunction was appealed by the Federal Government but upheld by each of the Federal Court of Appeal (Salta) on December 5, 2012 and the Federal Supreme Court of Argentina on September 17, 2013. The Federal Government 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; however, on May 3, 2013, such appeal was dismissed by the Federal Court of Appeal (Salta).

As of June 30, 2014, we have 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 concentrates but continue to accrue duties in full until the outcome of our challenge of the legality of the application of the export duty is known with certainty. However, the Federal Government has enacted legislation limiting the term of effectiveness of injunctions ordered against it, and we are assessing the potential impact of such legislation on the Injunction, including as it relates to the payment of any accrued export duties. As at June 30, 2014, we have accrued a liability totaling $51,667,000 (December 31, 2013 - $48,169,000), with a corresponding increase in cost of sales in the relevant period. If this export duty is successfully overturned, the benefit will be recognized in the consolidated statement of (loss) income for the full amount of paid and unpaid duty in the period that recovery becomes virtually certain.


19 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

13.
OTHER (EXPENSES)

 
Three months ended June 30
 
 
Six months ended June 30
 
 
2014

2013

 
2014

2013

 
$

$

 
$

$

Unrealized (loss) on marketable securities (1)
(1,930
)
(9,190
)
 
(4,240
)
(11,022
)
(Loss) on sale of marketable securities
(1,489
)
—

 
(1,489
)
—

Write-down of mineral properties
(332
)
(3,193
)
 
(699
)
(3,193
)
Gain on dilution of associate
—

254

 
—

2,112

Share of net (loss) of associate
—

(110
)
 
—

(1,033
)
Write-down of assets held for sale
—

(3,875
)
 
—

(3,875
)
Dividend income
166

178

 
166

178

Other (expenses)
(495
)
(424
)
 
(572
)
(336
)
 
(4,080
)
(16,360
)
 
(6,834
)
(17,169
)

(1)  
During the three and six months ended June 30, 2014, we recorded unrealized losses on previously impaired marketable securities and marketable securities classified as held-for-trading.


14.
OPERATING SEGMENTS

We are a resource company focused on the acquisition, exploration, development and operation of precious metal 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 our 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, exploration and development projects have been aggregated into a single reportable segment ‘exploration and development properties’ where they all have similar characteristics and do not exceed the quantitative thresholds for individual disclosure. The Pitarrilla project which, as of June 30, 2014, exceeds 10% of our total assets, has therefore been disclosed separately as a component.

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;
▪
Marigold mine;
▪
Pitarrilla project; and
▪
Other exploration and development properties.

20 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

14.
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 June 30, 2014
Pirquitas mine

Marigold mine

Pitarrilla project

Exploration and development properties

Other reconciling items (i)

Total

 
$ 

$

$

$

$

$

Revenue
36,261

28,026

—

—

—

64,287

Cost of inventory and export duties
(22,466
)
(24,058
)
—

—

—

(46,524
)
Depletion, depreciation and amortization
(6,037
)
(704
)
—

—

—

(6,741
)
Cost of sales
(28,503
)
(24,762
)
—

—

—

(53,265
)
Income from mine operations
7,758

3,264

—

—

—

11,022

 
 
 
 
 
 
 
Operating income (loss)
7,451

2,865

(132
)
(415
)
(7,590
)
2,179

Income (loss) before income tax
4,218

2,604

(147
)
204

(14,104
)
(7,225
)
 
 
 
 
 
 
 
Interest income and other finance income
289

1

—

—

334

624

Interest expense and other finance costs
(983
)
(157
)
(2
)
(25
)
(4,158
)
(5,325
)
Income tax (expense) recovery
—

74

—

(25
)
(86
)
(37
)
 
 
 
 
 
 
 
As at June 30, 2014
 
 
 
 
 
 
Total assets
326,725

335,701

128,291

143,912

317,939

1,252,568

Non-current assets
219,181

236,175

127,834

119,769

22,403

725,362

Total liabilities
(102,947
)
(37,780
)
(9,507
)
(5,627
)
(225,018
)
(380,879
)

Three months ended June 30, 2013
    Pirquitas mine

Marigold mine

Pitarrilla project

Exploration and development properties

Other reconciling items (i, ii)

Total

 
$

$

$

$

$

$

Revenue
32,654

—

—

—

—

32,654

Cost of inventory and export duties
(40,330
)
—

—

—

—

(40,330
)
Depletion, depreciation and amortization
(11,295
)
—

—

—

—

(11,295
)
Cost of sales
(51,625
)
—

—

—

—

(51,625
)
(Loss) from mine operations
(18,971
)
—

—

—

—

(18,971
)
 
 
 
 
 
 
 
Impairment charges
(202,440
)
—

—

—

—

(202,440
)
Operating (loss) income
(222,734
)
—

3

(157
)
(6,583
)
(229,471
)
Write-down of assets
—

—

(3,875
)
(3,193
)
—

(7,068
)
(Loss) income before income tax
(230,818
)
—

(3,874
)
(3,374
)
3,381

(234,685
)
 
 
 
 
 
 
 
Interest income and other finance income
946

—

—

—

422

1,368

Interest expense and other finance costs
(907
)
—

(2
)
(27
)
(4,189
)
(5,125
)
Income tax (expense) recovery
(1,311
)
—

(1,243
)
916

378

(1,260
)
 
 
 
 
 
 
 
As at December 31, 2013
 
 
 
 
 
 
Total assets
383,978

—

127,828

184,937

494,498

1,191,241

Non-current assets
241,739

—

124,858

134,586

1,855

503,038

Total liabilities
(106,118
)
—

(10,445
)
(29,156
)
(203,244
)
(348,963
)

21 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

14.
OPERATING SEGMENTS (Cont'd)

Six months ended June 30, 2014
Pirquitas mine

Marigold mine

Pitarrilla project

Exploration and development properties

Other reconciling items (i)

Total

 
$ 

$

$

$

$

$

Revenue
69,997

28,026

—

—

—

98,023

Cost of inventory and export duties
(45,198
)
(24,058
)
—

—

—

(69,256
)
Depletion, depreciation and amortization
(11,117
)
(704
)
—

—

—

(11,821
)
Cost of sales
(56,315
)
(24,762
)
—

—

—

(81,077
)
Income from mine operations
13,682

3,264

—

—

—

16,946

 
 
 
 
 
 
 
Operating income (loss)
13,318

2,866

(132
)
(830
)
(16,719
)
(1,497
)
(Loss) income before income tax
(5,721
)
2,605

(416
)
(349
)
(19,197
)
(23,078
)
 
 
 
 
 
 
 
Interest income and other finance income
1,234

1

—

—

954

2,189

Interest expense and other finance costs
(1,753
)
(157
)
(2
)
(63
)
(8,504
)
(10,479
)
Income tax (expense) recovery
(75
)
74

—

(63
)
(978
)
(1,042
)

Six months ended June 30, 2013
    Pirquitas mine

Marigold mine

Pitarrilla project

Exploration and development properties

Other reconciling items (i, ii)

Total

 
$

$

$

$

$

$

Revenue
81,716

—

—

—

—

81,716

Cost of inventory and export duties
(65,892
)
—

—

—

—

(65,892
)
Depletion, depreciation and amortization
(20,357
)
—

—

—

—

(20,357
)
Cost of sales
(86,249
)
—

—

—

—

(86,249
)
(Loss) from mine operations
(4,533
)
—

—

—

—

(4,533
)
 
 
 
 
 
 
 
Impairment charges
(202,440
)
—

—

—

—

(202,440
)
Operating (loss) income
(208,530
)
—

3

(467
)
(11,483
)
(220,477
)
Write-down of assets
—

—

(3,875
)
(3,193
)
—

(7,068
)
(Loss) before income tax
(222,087
)
—

(3,874
)
(3,809
)
(9,363
)
(239,133
)
 
 
 
 
 
 
 
Interest income and other finance income
1,527

—

—

—

746

2,273

Interest expense and other finance costs
(1,810
)
—

(2
)
(51
)
(10,817
)
(12,680
)
Income tax (expense) recovery
(5,922
)
—

—

1,025

3,526

(1,371
)

(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 our investment in Pretium Resources Inc ("Pretium") until we discontinued equity accounting.

22 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

14.
OPERATING SEGMENTS (Cont'd)

Segment revenue by product
 
Three months ended June 30
 
 
Six months ended June 30
 
 
2014

2013

 
2014

2013

 
%

%

 
%

%

Silver
50

96

 
60

97

Gold
43

—

 
29

—

Zinc
6

4

 
10

3

Other
1

—

 
1

—


Segment revenue by location and major customers
Our Pirquitas mine sales are made to external customers of various geographical areas. For the Pirquitas mine segment, we had six customers who accounted for 23%, 19%, 17%, 14%, 12% and 11% of total revenue during the six months ended June 30, 2014, and four customers who accounted for 26%, 25%, 22% and 15% of total revenue during the six months ended June 30, 2013. Marigold mine's principal product is gold doré with the refined gold bullion sold to one customer.

Non-current assets by location
 
June 30, 2014

December 31, 2013

 
$

$

United States
262,767

21,007

Argentina
229,207

259,450

Mexico
142,903

153,145

Peru
69,165

65,783

Canada
20,714

3,195

Chile
606

458

Total
725,362

503,038



23 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

15.
FAIR VALUE MEASUREMENTS

Assets and liabilities that are held at fair value are categorized based on a valuation hierarchy which is determined by the valuation methodology utilized:
 
Fair value at June 30, 2014
Fair value at December 31, 2013
 
Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

 
$ 

$

$

$

$ 

$

$

$

Recurring measurements
 
 
 
 
 
 
 
 
Trade and other receivables
—

27,139

—

27,139

—

43,516

—

43,516

Marketable securities
161,084

19,294

—

180,378

103,700

25,567

—

129,267

Derivative asset
—

1,786

—

1,786

—

—

—

—

Deferred consideration
—

—

1,954

1,954

—

—

—

—

Trade and other payables
—

4,469

—

4,469

—

2,805

—

2,805

 
161,084

52,688

1,954

215,726

103,700

71,888

—

175,588

 
 
 
 
 
 
 
 
 
Non-recurring measurements
 
 
 
 
 
 
 
 
Assets held for sale
—

—

—

—

—

—

3,876

3,876

Property, plant and equipment
—

—

—

—

—

—

222,169

222,169

 
—

—

—

—

—

—

226,045

226,045

 
 
 
 
 
 
 
 
 
Fair values disclosed
 
 
 
 
 
 
 
 
Convertible notes (note 10)
224,959

—

—

224,959

191,487

—

—

191,487

 
224,959

—

—

224,959

191,487

—

—

191,487


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. The fair value disclosed for our convertible notes is also included in Level 1, as the basis of valuation uses a quoted price in an active market.

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)

Marketable securities with certain trading restrictions and derivative instruments are included in Level 2, as are trade receivables from provisional invoices for concentrate sales, as the basis of valuation uses quoted commodity prices.

Our derivative asset is recognized on equity collars. The fair value of the hedge is calculated using a model which utilizes a combination of quoted prices and market-derived inputs, including volatility estimates.

Accrued liabilities relating to DSUs, RSUs, and PSUs are included in Level 2, as the basis of valuation uses quoted prices in active markets.

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

The deferred consideration from the sale of the Challacollo project (note 7) is included in Level 3, as certain assumptions used in the calculation of the fair value are not based on observable market data as detailed in Note 2.

There were no transfers between Level 1 and Level 2 or transfers into and out of Level 3 during the six months ended June 30, 2014 or 2013.


24 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2014
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

16.
SUPPLEMENTAL CASH FLOW INFORMATION

Changes in working capital items during the three and six months ended June 30, 2014 and 2013 are as follows:

 
Three months ended June 30
 
 
Six months ended June 30
 
 
2014

2013

 
2014

2013

 
$ 

$

 
 
 
Trade and other receivables
7,089

3,990

 
20,024

9,950

Inventory
(9,848
)
3,876

 
(12,114
)
1,359

Trade and other payables
(4,950
)
6,980

 
(7,150
)
1,772

 
(7,709
)
14,846

 
760

13,081

During the three and six months ended June 30, 2014 and 2013 we conducted the following non-cash investing and financing transactions:
 
Three months ended June 30
 
 
Six months ended June 30
 
 
2014

2013

 
2014

2013

 
$

$

 
$

$

Shares received for sale of mineral property (note 7)
—

—

 
9,188

—

Deferred consideration received for sale of mineral property (note 7)
—

—

 
1,954

—

Transfer of share-based payment reserve upon exercise of stock options
—

—

 
—

(56
)


17.
EVENTS AFTER THE REPORTING DATE

Subsequent to the period end, Pretium Resources Inc. ("Pretium") announced a common share offering and entered into an underwriting agreement with a syndicate of underwriters to purchase its common shares. We participated in this offering and sold 1,449,000 of our Pretium shares for net cash proceeds of approximately $10,000,000. The after-tax portion of proceeds will be used to support Marigold's reclamation obligations.


25 | Page