EX-99.1 2 a2014q3fs.htm EXHIBIT 2014 Q3 FS



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







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

CONTENTS
 
Financial Statements
 
 
 
 
 
 
 
 
 
 
Notes to the Condensed 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
September 30

December 31

 
 
2014

2013

 
 
$ 

$

Current assets
 
 
 
Cash and cash equivalents
 
135,174

415,657

Trade and other receivables
4
65,303

69,247

Marketable securities
5
98,450

129,267

Other current financial assets
6
19,036

10,000

Inventory
7
149,464

50,892

Assets held for sale
 
3,890

13,140

 
 
471,317

688,203

Non-current assets
 
 
 
Property, plant and equipment
8
638,415

400,409

Deferred income tax assets
 
18,742

12,041

Value added tax receivable
9
29,513

62,423

Non-current inventory
7
13,464

8,318

Other non-current financial assets
6
21,543

19,847

Total assets
 
1,192,994

1,191,241

 
 
 
 
Current liabilities
 
 
 
Trade and other payables
10
107,897

104,124

 
 
 
 
Non-current liabilities
 
 
 
Deferred income tax liabilities
 
26,625

24,736

Close down and restoration provision
 
53,523

32,973

Convertible notes
11
194,570

187,130

Total liabilities
 
382,615

348,963

 
 
 
 
Shareholders' equity
 
 
 
Share capital
 
707,034

707,034

Other reserves
 
(22,742
)
(29,628
)
Equity component of convertible notes
11
68,347

68,347

Retained earnings
 
57,740

96,525

Total shareholders' equity attributable to our shareholders
 
810,379

842,278

Total liabilities and equity
 
1,192,994

1,191,241

 
 
 
 
The accompanying notes are an integral part of the consolidated financial statements
Approved by the Board of Directors and authorized for issue on November 5, 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 September 30
 
 
Nine months ended September 30
 
 
 
2014

2013

 
2014

2013

 
 
$

$

 
$

$

 
 
 
 
 
 
 
Revenue
 
79,269

43,944

 
177,292

125,660

Cost of sales
13
(73,011
)
(38,212
)
 
(154,088
)
(124,461
)
Income from mine operations
 
6,258

5,732

 
23,204

1,199

 
 
 
 
 
 
 
General and administrative expenses
 
(4,376
)
(7,262
)
 
(15,874
)
(18,020
)
Exploration, evaluation and reclamation expenses
 
(2,560
)
(106
)
 
(4,469
)
(2,852
)
Business acquisition costs
 
(263
)
—

 
(5,299
)
—

Impairment charges
 
—

—

 
—

(202,440
)
Operating (loss)
 
(941
)
(1,636
)
 
(2,438
)
(222,113
)
 
 
 
 
 
 
 
Gain on sale of mineral property
8
—

—

 
9,240

—

Gain on derecognition of investment in associate
 
—

—

 
—

21,959

Interest earned and other finance income
 
578

1,936

 
2,767

4,209

Interest expense and other finance costs
 
(7,592
)
(5,174
)
 
(18,071
)
(17,854
)
Unrealized gain on derivatives
 
694

—

 
2,788

—

Other expense
14
(2,949
)
(1,067
)
 
(9,783
)
(18,236
)
Foreign exchange (loss)
 
(4,545
)
(7,852
)
 
(22,336
)
(20,891
)
(Loss) before tax
 
(14,755
)
(13,793
)
 
(37,833
)
(252,926
)
 
 
 
 
 
 
 
Income tax recovery (expense)
 
90

(513
)
 
(952
)
(1,884
)
 
 
 
 
 
 
 
Net (loss) and net (loss) attributable to shareholders
 
(14,665
)
(14,306
)
 
(38,785
)
(254,810
)
 
 
 
 
 
 
 
Weighted average shares outstanding (thousands)
 
 
 
 
 
 
Basic
 
80,754

80,754

 
80,754

80,754

Diluted
 
80,754

80,754

 
80,754

80,754

 
 
 
 
 
 
 
(Loss) per share
 
 
 
 
 
 
Basic
 
$(0.18)
$(0.18)
 
$(0.48)
$(3.16)
Diluted
 
$(0.18)
$(0.18)
 
$(0.48)
$(3.16)
The accompanying notes are an integral part of the consolidated financial statements

4 | Page

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

 
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
 
2014

2013

 
2014

2013

 
 
$

$

 
$

$

 
 
 
 
 
 
 
Net (loss) for the period attributable to shareholders
 
(14,665
)
(14,306
)
 
(38,785
)
(254,810
)
Other comprehensive (loss) income
 
 

 

 
 
 
Items that may be or have been reclassified to net income or loss:
 
 
 
 
 
 
Unrealized (loss) gain on marketable securities, net of tax
 
(48,037
)
6,771

 
3,215

(22,209
)
Realized loss (gain) recycled to net income or loss
 
987

93

 
2,258

(38
)
Share of other comprehensive (loss) of associate
 
—

—

 
—

(641
)
    Cumulative translation adjustment
 
—

(3
)
 
—

(26
)
Other comprehensive (loss) income
 
(47,050
)
6,861

 
5,473

(22,914
)
Total comprehensive (loss) attributable to shareholders
 
(61,715
)
(7,445
)
 
(33,312
)
(277,724
)
Total comprehensive (loss)
 
(61,715
)
(7,445
)
 
(33,312
)
(277,724
)
The accompanying notes are an integral part of the consolidated financial statements

5 | Page

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
 
80,747

706,901

24,016

—

321,522

1,052,439

   Exercise of stock options
12
7

133

(56
)
—

—

77

   Equity-settled share-based compensation
12
—

—

580

—

—

580

   Equity component of convertible debt
11
—

—

—

68,347

—

68,347

Total comprehensive (loss) for the period
 
—

—

(22,914
)
—

(254,810
)
(277,724
)
Balance, September 30, 2013
 
80,754

707,034

1,626

68,347

66,712

843,719

 
 
 
 
 
 
 
 
Balance January 1, 2014
 
80,754

707,034

(29,628
)
68,347

96,525

842,278

   Equity-settled share-based compensation
12
—

—

1,413

—

—

1,413

Total comprehensive income (loss) for the period
 
—

—

5,473

—

(38,785
)
(33,312
)
Balance, September 30, 2014
 
80,754

707,034

(22,742
)
68,347

57,740

810,379

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 September 30
 
 
Nine months ended September 30
 
 
 
2014

2013

 
2014

2013

 
 
$

$

 
$

$

Cash flows from operating activities
 
 

 

 
 
 
Net (loss) for the period
 
(14,665
)
(14,306
)
 
(38,785
)
(254,810
)
Adjustments for:
 
 

 

 
 
 
Depreciation, depletion and amortization
 
9,474

9,630

 
21,474

30,141

Share-based payments
 
447

138

 
1,529

432

Net finance expense
 
7,014

3,238

 
15,304

13,645

(Gain) on sale of mineral property
 
—

—

 
(9,240
)
—

Impairment charges and inventory write-downs
 
—

—

 
—

214,633

(Gain) on derivative instrument
 
(694
)
—

 
(2,788
)
—

Net (gains) on investment in associate
 
—

—

 
—

(23,037
)
Other loss
 
2,733

534

 
8,995

18,242

Income tax (recovery) expense
 
(90
)
513

 
952

1,884

Non-cash foreign exchange loss
 
4,526

7,377

 
17,594

17,452

Net changes in non-cash working capital items
17
(1,103
)
(3,430
)
 
584

9,651

Cash generated by operating activities before interest and income taxes recovered (paid)
 
7,642

3,694

 
15,619

28,233

Interest paid
 
(3,810
)
(4,105
)
 
(7,619
)
(7,210
)
Income taxes recovered (paid)
 
(211
)
(3,524
)
 
(2,944
)
(11,892
)
Cash generated (used) by operating activities
 
3,621

(3,935
)
 
5,056

9,131

Cash flows from investing activities
 
 

 

 
 
 
Purchase of Marigold mine
 
7,268

—

 
(267,732
)
—

(Increase) in restricted cash
 
(1,856
)
(137
)
 
(17,606
)
(137
)
Purchase of property, plant and equipment
 
(7,890
)
(10,521
)
 
(14,826
)
(26,619
)
Production stripping capitalized costs
 
(4,492
)
(6,087
)
 
(19,187
)
(26,641
)
Expenditures on exploration and development properties
 
(1,849
)
(7,005
)
 
(11,904
)
(19,090
)
Value added tax payments
 
(6,016
)
(5,978
)
 
(13,570
)
(16,192
)
Value added tax receipts
 
16,867

—

 
23,218

—

Proceeds from sale of mineral property
8
—

—

 
17,500

—

Proceeds from sale of marketable securities
 
29,027

—

 
39,267

—

Taxes paid on sale of mineral properties
 
—

—

 
(16,780
)
—

Interest received
 
193

1,936

 
1,595

4,209

Dividends received
 
—

178

 
166

178

Cash generated (used) by investing activities
 
31,252

(27,614
)
 
(279,859
)
(84,292
)
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
 
(1,861
)
(2,872
)
 
(5,680
)
(8,562
)
Increase (decrease) in cash and cash equivalents
 
33,012

(34,421
)
 
(280,483
)
34,437

Cash and cash equivalents, beginning of period
 
102,162

435,805

 
415,657

366,947

Cash and cash equivalents, end of period
 
135,174

401,384

 
135,174

401,384


Supplemental cash flow information (note 17)
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 nine months ended September 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, U.S., respectively, 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 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 as issued by the International Accounting Standards Board ("IASB"). 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") and these condensed consolidated interim financial statements were approved on November 5, 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 our business. All other accounting policies applicable to the Marigold mine are consistent with those disclosed in our audited consolidated financial statements for the year ended December 31, 2013.

(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.

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

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

(ii)
Revenue recognition for gold doré and bullion sales
Revenue from the sale of gold doré or 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 when funds are received.

(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 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
In February 2014, we completed the sale of our 100% interest in the Challacollo project (note 8) 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 ("IFRS 3"), and also the acquisition date when we obtained control over Marigold, which was the date that consideration is transferred and when we assumed the assets and liabilities.


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

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

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.

(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 nine months ended September 30, 2014:

Levies imposed by governments
International Financial Reporting Interpretations Committee's ("IFRIC") Interpretation 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.

d)Future accounting changes
The below new standard has been issued but is not yet effective:

Operating segments
IFRS 8, Operating segments was amended to require disclosure of the judgments made by management in aggregating operating segments, including a description of the segments which have been aggregated and the economic indicators which have been assessed in determining that the aggregated segments share similar economic characteristics. The amendment was effective for annual periods commencing on or after July 1, 2014.


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

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

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.

IFRS 9, Financial Instruments: Classification and Measurement
IFRS 9, Financial Instruments: Classification and Measurement ("IFRS 9") as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39") and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after January 1, 2013, but IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39), issued in November 2013, moved the mandatory effective date to January 1, 2018.

In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. We will quantify the effect in conjunction with the other phases, when the final standard, including all phases, is issued.

Amendments
Amendments to standards and interpretations include the following:

IFRS 7, Financial instruments: Disclosure: Amended to require additional disclosures on transition from IAS 39 to IFRS 9. Effective on adoption of IFRS 9, which is effective for annual periods commencing on or after January 1, 2018.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on us.


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, U.S., from subsidiaries of Goldcorp Inc. and Barrick Gold Corporation for a purchase price of $267,732,000 after post-closing adjustments. 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.

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"). 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.

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 nine months ended September 30, 2014 in the amount of $5,299,000.


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

3.
PURCHASE OF MARIGOLD MINE (Cont'd)

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 nine months ended September 30, 2014 would have been approximately $222,928,000 and our consolidated net loss for the nine months ended September 30, 2014 would have been $38,516,000.


4.
TRADE AND OTHER RECEIVABLES

 
September 30, 2014

December 31, 2013

 
$

$

Trade receivables
28,266

43,516

Tax receivables
16,511

13,969

Value added tax receivables
13,322

5,915

Prepayments and deposits
6,187

4,853

Other receivables
1,017

994

 
65,303

69,247


We expect full recovery of the trade receivables 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.


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

5.
MARKETABLE SECURITIES

The movement in marketable securities during the nine months ended September 30, 2014 and the year ended December 31, 2013 is comprised of the following:

 
September 30, 2014

December 31, 2013

 
$

$

Balance, beginning of period
129,267

34,733

Additions
9,188

170,395

Disposals
(37,322
)
(788
)
Fair value adjustments through profit and loss
(6,891
)
(12,099
)
Fair value adjustments through OCI
9,774

(54,964
)
Foreign exchange adjustments
(5,566
)
(8,010
)
Balance, end of period
98,450

129,267



6.
OTHER FINANCIAL ASSETS

 
September 30, 2014
December 31, 2013
 
Current

Non-current

Current

Non-current

 
$

$

$

$

Restricted cash (1,2)
—

19,589

—

1,983

Deferred consideration
19,036

1,954

10,000

17,864

 
19,036

21,543

10,000

19,847


(1) 
We have cash and security deposits in relation to our close down and restoration provisions.
(2) 
During the three months ended September 31, 2014, we entered into a six month Argentine peso denominated loan facility of an equivalent amount of $7,500,000 at an interest rate determined at time of draw. In the nine months ended and at September 30, 2014, no funds were drawn on this facility. The facility, which is for the purpose of funding operating needs, is secured by $7,500,000 of restricted cash in Canada.


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

7.
INVENTORY

 
September 30, 2014

December 31, 2013

 
$ 

$

Current:
 
 
Finished goods
30,770

16,181

Stockpiled ore
18,321

18,918

Leach pad inventory
73,612

—

Materials and supplies
26,761

15,793

 
149,464

50,892

Non-current inventory (1)
13,464

8,318

 
162,928

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 September 30, 2014, non-current inventory consisted of stockpiled ore of $5,794,000 (December 31, 2013 - $4,253,000) and materials and supplies of $7,670,000 (December 31, 2013 - $4,065,000).

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


8.
PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment comprise the following:
 
September 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
9,249

23,913

8,089

11,332

52,583

Acquisition of Marigold mine (note 3)
157,880

50,823

9,561

—

218,264

Disposals
(6,286
)
—

—

—

(6,286
)
Costs written off (1)
—

—

—

(904
)
(904
)
Change in estimate of close down and restoration provision
—

6,534

—

141

6,675

Transfers
10,723

—

(10,723
)
—

—

Balance, end of period
432,761

115,430

17,264

249,077

814,532

 
 
 
 
 
 
Accumulated depreciation
 
 
 
 
 
Balance, January 1, 2014
(118,707
)
(25,084
)
—

—

(143,791
)
Charge for the period
(31,189
)
(6,365
)
—

—

(37,554
)
Disposals
5,228

—

—

—

5,228

Balance, end of period
(144,668
)
(31,449
)
—

—

(176,117
)
 
 
 
 
 
 
Net book value at September 30, 2014
288,093

83,981

17,264

249,077

638,415


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

8.
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
(31,075
)
(6,108
)
—

—

(37,183
)
Disposals
3,160

—

—

—

3,160

Balance, end of period
(118,707
)
(25,084
)
—

—

(143,791
)
 
 
 
 
 
 
Net book value at December 31, 2013
142,488

9,076

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


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

9.
VALUE ADDED TAX RECEIVABLE

 
September 30, 2014

December 31, 2013

 
$ 

$

Current
13,322

5,915

Non-current
29,513

62,423

 
42,835

68,338


Value added tax ("VAT") paid in Argentina in relation to the Pirquitas mine became recoverable under Argentina law once the mine reached the production stage and we apply to the Argentina 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.

The VAT receivables balance in Argentina is denominated in Argentine peso. Accordingly, foreign currency fluctuations could materially impact the value of the VAT receivables in U.S. dollars.


10.
TRADE AND OTHER PAYABLES

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

December 31, 2013

 
$

$

Trade payables
20,188

11,014

Accrued liabilities
78,154

63,373

Value added tax payable
—

6,467

Income taxes payable
1,633

15,885

Current portion of close down and restoration provision
6,685

4,228

Accrued interest on convertible notes (note 11)
1,237

3,157

 
107,897

104,124


As at September 30, 2014, accrued liabilities includes export duties on silver concentrate of $54,248,000 (December 31, 2013 - $48,169,000) (note 13).


11.
CONVERTIBLE NOTES

On January 16, 2013, we sold $265,000,000 of 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.

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

11.
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 their 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 $204,050,000 as at September 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 nine months ended September 30, 2014 and the year ended December 31, 2013 is comprised of the following:
 
September 30, 2014

December 31, 2013

 
$

$

Balance, beginning of period
190,287

—

Debt portion of net proceeds
—

178,358

Accretion of discount
7,440

8,772

Interest accrued in period
5,699

7,262

Interest paid
(7,619
)
(4,105
)
Balance, end of period
195,807

190,287

Accrued interest outstanding
(1,237
)
(3,157
)
Non-current portion of Notes outstanding
194,570

187,130



12.
SHARE CAPITAL AND SHARE-BASED PAYMENTS

(a)Stock options
The changes in stock options issued during the nine months ended September 30, 2014 and the year ended December 31, 2013 are as follows:
 
September 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
(314,211
)
(16.12
)
(716,604
)
(20.17
)
Outstanding, end of period
2,407,311

12.87

1,754,944

16.05


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

12.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)

For options granted during the nine months ended September 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 nine months ended September 30, 2014, options granted had an average fair value of C$3.42 per option.
(b)Deferred Share Units (“DSUs”)
During the nine months ended September 30, 2014 and the year ended December 31, 2013, the following DSUs were outstanding to non-executive directors:
 
September 30, 2014

December 31, 2013

 
Number of DSUs

Number of DSUs

Outstanding, beginning of period
251,019

150,117

     Granted
75,809

100,902

Outstanding, end of period
326,828

251,019


The DSUs granted in the nine months ended September 30, 2014 had a fair value of C$8.81 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 September 30, 2014, the fair value of outstanding DSUs was C$6.83 per unit.

(c)Restricted Share Units (“RSUs”)
During the nine months ended September 30, 2014 and the year ended December 31, 2013, the following RSUs were outstanding to employees:
 
September 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
(50,405
)
(53,286
)
     Forfeited
(13,503
)
(77,326
)
Outstanding, end of period
363,070

129,498


The RSUs granted in the nine months ended September 30, 2014 had a weighted average fair value of C$9.41 per unit. RSUs settled in the nine months ended September 30, 2014 were settled at a fair value of C$11.38 per unit. As at September 30, 2014, the fair value of outstanding RSUs was C$6.83 per unit.

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

12.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)

(d)Performance Share Units (“PSUs”)
During the nine months ended September 30, 2014 and the year ended December 31, 2013, the following PSUs were outstanding to senior executives:
 
September 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
(58,524
)
(114,291
)
Outstanding, end of period
372,805

177,729


The PSUs granted in the nine months ended September 30, 2014 had a weighted average fair value of C$7.37 per unit. As at September 30, 2014, the weighted average fair value of outstanding PSUs was C$3.42 per unit.

(e)Share-based compensation
Total share-based compensation, including all equity and cash-settled arrangements, for the three and nine months ended September 30, 2014 and 2013 has been recognized in the condensed consolidated interim financial statements as follows:
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2014

2013

 
2014

2013

 
$

$

 
$

$

Equity-settled
 
 
 
 
 
Cost of inventory
18

—

 
22

—

General and administrative expense
429

138

 
1,507

432

Property, plant and equipment
(42
)
48

 
(116
)
148

Cash-settled
 
 
 
 
 
Cost of inventory
49

7

 
312

94

General and administrative (recovery) expense
(1,102
)
191

 
730

(1,775
)
Property, plant and equipment
(94
)
23

 
31

107

Total
(742
)
407

 
2,486

(994
)


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

13.
COST OF SALES

 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2014

2013

 
2014

2013

 
$ 

$

 
$ 

$

Cost of inventory
60,487

23,573

 
124,626

69,879

Depletion, depreciation and amortization
9,381

10,748

 
21,202

31,105

Export duties (1)
3,143

3,891

 
8,260

11,284

Write-down of stockpiles to NRV
—

—

 
—

12,193

 
73,011

38,212

 
154,088

124,461


(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 and the Federal Government has asserted that the Pirquitas mine is subject to this export duty. 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). In September 2014, the Federal Tax Authority in Argentina filed an application with the Federal Court (Jujuy) to lift the Injunction and require payment of the export duty and payment of applied interest charges. We filed a response to such application on October 14, 2014 and expect a decision before the end of the year.

As of September 30, 2014, we have paid $6,646,000 in export duties, against which we have filed for recovery. In accordance with the Injunction, we have not been paying export duties on silver concentrates but continue to accrue export duties. As at September 30, 2014, we have accrued a liability totaling $54,248,000 (December 31, 2013 - $48,169,000) for export duties with no accrual for interest charges, and have recorded a corresponding increase in cost of sales in the relevant period. The final amount of export duties and interest, if any, to be paid or refunded depends on a number of factors including the outcome of litigation. Changes in our assessment of this matter could result in material adjustments to our consolidated statement of loss.


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

14.
OTHER INCOME (EXPENSES)

 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2014

2013

 
2014

2013

 
$

$

 
$

$

Unrealized gain (loss) on marketable securities (1)
1,202

—

 
(3,038
)
(11,022
)
(Loss) on sale of marketable securities
(3,730
)
—

 
(5,219
)
—

Write-down of mineral properties
(205
)
(619
)
 
(904
)
(3,812
)
(Loss) on disposal of fixed assets
(362
)
—

 
(362
)
—

Gain on dilution of associate
—

—

 
—

2,112

Share of net (loss) of associate
—

—

 
—

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

—

 
—

(3,875
)
Dividend income
—

—

 
166

178

Other income (expenses)
146

(448
)
 
(426
)
(784
)
 
(2,949
)
(1,067
)
 
(9,783
)
(18,236
)

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


15.
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 September 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.

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

15.
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 September 30, 2014
Pirquitas mine

Marigold mine

Pitarrilla project

Exploration and development properties

Other reconciling items (i)

Total

 
$ 

$

$

$

$

$

Revenue
30,874

48,395

—

—

—

79,269

Cost of inventory
(22,399
)
(38,088
)
—

—

—

(60,487
)
Depletion, depreciation and amortization
(5,640
)
(3,741
)
—

—

—

(9,381
)
Export duties
(3,143
)
—

—

—

—

(3,143
)
Cost of sales
(31,182
)
(41,829
)
—

—

—

(73,011
)
(Loss) income from mine operations
(308
)
6,566

—

—

—

6,258

 
 
 
 
 
 
 
Operating (loss) income
(1,032
)
6,447

(177
)
1,274

(7,453
)
(941
)
(Loss) income before income tax
(6,461
)
5,435

(176
)
1,436

(14,989
)
(14,755
)
 
 
 
 
 
 
 
Interest income and other finance income
165

2

—

—

411

578

Interest expense and other finance costs
(2,253
)
(158
)
(1
)
(25
)
(5,155
)
(7,592
)
Income tax (expense) recovery
75

(419
)
—

36

398

90

 
 
 
 
 
 
 
As at September 30, 2014
 
 
 
 
 
 
Total assets
322,590

348,074

128,706

146,320

247,304

1,192,994

Non-current assets
218,739

226,057

128,370

122,306

26,205

721,677

Total liabilities
(109,208
)
(39,387
)
(9,410
)
(4,958
)
(219,652
)
(382,615
)
Three months ended September 30, 2013
    Pirquitas mine

Marigold mine

Pitarrilla project

Exploration and development properties

Other reconciling items (i, ii)

Total

 
$

$

$

$

$

$

Revenue
43,944

—

—

—

—

43,944

Cost of inventory
(23,573
)
—

—

—

—

(23,573
)
Depletion, depreciation and amortization
(10,748
)
—

—

—

—

(10,748
)
Export duties
(3,891
)
—

—

—

—

(3,891
)
Cost of sales
(38,212
)
—

—

—

—

(38,212
)
Income from mine operations
5,732

—

—

—

—

5,732

 
 
 
 
 
 
 
Operating income (loss)
3,738

—

(12
)
(162
)
(5,200
)
(1,636
)
Write-down of assets
—

—

—

(619
)
—

(619
)
(Loss) income before income tax
(4,298
)
—

(13
)
(764
)
(8,718
)
(13,793
)
 
 
 
 
 
 
 
Interest income and other finance income
1,651

—

—

—

285

1,936

Interest expense and other finance costs
(886
)
—

(2
)
(32
)
(4,254
)
(5,174
)
Income tax (expense) recovery
(665
)
—

—

551

(399
)
(513
)
 
 
 
 
 
 
 
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
)

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

15.
OPERATING SEGMENTS (Cont'd)

Nine months ended September 30, 2014
Pirquitas mine

Marigold mine

Pitarrilla project

Exploration and development properties

Other reconciling items (i)

Total

 
$ 

$

$

$

$

$

Revenue
100,871

76,421

—

—

—

177,292

Cost of inventory
(62,480
)
(62,146
)
—

—

—

(124,626
)
Depletion, depreciation and amortization
(16,757
)
(4,445
)
—

—

—

(21,202
)
Export duties
(8,260
)
—

—

—

—

(8,260
)
Cost of sales
(87,497
)
(66,591
)
—

—

—

(154,088
)
Income from mine operations
13,374

9,830

—

—

—

23,204

 
 
 
 
 
 
 
Operating income (loss)
12,286

9,313

(309
)
444

(24,172
)
(2,438
)
(Loss) income before income tax
(12,182
)
8,040

(592
)
1,087

(34,186
)
(37,833
)
 
 
 
 
 
 
 
Interest income and other finance income
1,399

3

—

—

1,365

2,767

Interest expense and other finance costs
(4,006
)
(315
)
(3
)
(88
)
(13,659
)
(18,071
)
Income tax (expense) recovery
—

(345
)
—

(27
)
(580
)
(952
)
Nine months ended September 30, 2013
    Pirquitas mine

Marigold mine

Pitarrilla project

Exploration and development properties

Other reconciling items (i, ii)

Total

 
$

$

$

$

$

$

Revenue
125,660

—

—

—

—

125,660

Cost of inventory
(82,072
)
—

—

—

—

(82,072
)
Depletion, depreciation and amortization
(31,105
)
—

—

—

—

(31,105
)
Export duties
(11,284
)
—

—

—

—

(11,284
)
Cost of sales
(124,461
)
—

—

—

—

(124,461
)
Income from mine operations
1,199

—

—

—

—

1,199

 
 
 
 
 
 
 
Impairment charges
(202,440
)
—

—

—

—

(202,440
)
Operating (loss)
(204,792
)
—

(9
)
(629
)
(16,683
)
(222,113
)
Write-down of assets
—

—

(3,875
)
(3,812
)
—

(7,687
)
(Loss) before income tax
(226,385
)
—

(3,887
)
(4,573
)
(18,081
)
(252,926
)
 
 
 
 
 
 
 
Interest income and other finance income
3,177

—

—

—

1,032

4,209

Interest expense and other finance costs
(2,696
)
—

(4
)
(83
)
(15,071
)
(17,854
)
Income tax (expense) recovery
(6,587
)
—

—

1,576

3,127

(1,884
)

(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 on May 10, 2013.

Segment revenue by product
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2014

2013

 
2014

2013

 
%

%

 
%

%

Silver
31

95

 
47

91

Gold
60

—

 
43

—

Zinc
8

5

 
9

9

Other
1

—

 
1

—


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

15.
OPERATING SEGMENTS (Cont'd)

Segment revenue by location and major customers
Our Pirquitas mine sales are made to external customers located in various geographical areas. For the Pirquitas mine segment, we had six customers who individually accounted for between 10% and 19% of total revenue during the nine months ended September 30, 2014, and four customers who individually accounted for between 19% and 25% of total revenue during the nine months ended September 30, 2013. Marigold mine's principal product is gold doré with the refined gold bullion sold to one customer.

Non-current assets by location
 
September 30, 2014

December 31, 2013

 
$

$

United States
256,360

21,007

Argentina
227,518

259,450

Mexico
144,266

153,145

Peru
70,422

65,783

Canada
22,476

3,195

Chile
635

458

Total
721,677

503,038



16.
FAIR VALUE MEASUREMENTS

Assets and liabilities that are held at fair value are categorized based on a valuation hierarchy which is determined by the following valuation methodology utilized:
 
Fair value at September 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
—

28,266

—

28,266

—

43,516

—

43,516

Marketable securities
98,450

—

—

98,450

103,700

25,567

—

129,267

Deferred consideration
—

—

1,954

1,954

—

—

—

—

Trade and other payables
—

3,237

—

3,237

—

2,805

—

2,805

 
98,450

31,503

1,954

131,907

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 11)
204,050

—

—

204,050

191,487

—

—

191,487

 
204,050

—

—

204,050

191,487

—

—

191,487


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

16.
FAIR VALUE MEASUREMENTS (Cont'd)

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 the 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 are included in Level 2, as are trade receivables from provisional invoices for concentrate sales, as the basis of valuation uses quoted commodity prices. During the nine months ended September 30, 2014, we transferred the full amount of the marketable securities in Level 2 to Level 1 as the trading restrictions on them were removed.

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 8) 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 into or out of Level 3 during the nine months ended September 30, 2014 or 2013.


17.
SUPPLEMENTAL CASH FLOW INFORMATION

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

 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2014

2013

 
2014

2013

 
$ 

$

 
 
 
Trade and other receivables
(6,315
)
(8,968
)
 
14,636

982

Inventory
(4,272
)
2,628

 
(16,386
)
3,987

Trade and other payables
9,484

2,910

 
2,334

4,682

 
(1,103
)
(3,430
)
 
584

9,651


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

17.
SUPPLEMENTAL CASH FLOW INFORMATION (Cont'd)
During the three and nine months ended September 30, 2014 and 2013 we conducted the following non-cash investing and financing transactions:
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2014

2013

 
2014

2013

 
$

$

 
$

$

Shares received for sale of mineral property (note 8)
—

—

 
9,188

—

Deferred consideration received for sale of mineral property (note 8)
—

—

 
1,954

—

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

—

 
—

(56
)


26 | Page