avino_corresp.htm

CORRESP 1 filename1.htm avino_corresp.htm

ASM: TSX/NYSE American

Avino Silver & Gold Mines Ltd.

Suite 900-570 Granville Street

Vancouver, BC V6C 3P1

T (604) 682 3701

F (604) 682 3600

www.avino.com

June 29, 2018

VIA EDGAR

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

Attention: Blaise Rhodes

Re:

Avino Silver & Gold Mines Ltd.

Form 20-F for the Year Ended December 31, 2016

Filed March 10, 2017

File No. 001-35254

Dear Mr. Rhodes:

This letter will follow up our conversations with the staff of the Securities and Exchange Commission (the “Staff”) on June 27, 2018 in connection with the Staff’s review of our Form 20-F for the year ended December 31, 2016. We are responding as follows.

I. Voluntary Change in Accounting Policy

Upon further review of our experience at the Avino and San Gonzalo mines we have concluded to change our accounting policy under IFRS 6 and IAS 16 in accounting for our Exploration and Evaluation Assets and Development Costs, including our determination that we commenced production effective July 1, 2015. The voluntary change in accounting policy is intended to provide shareholders with a better reflection of our business activities to enhance the comparability of our financial statements to our peers and to make the financial statements more relevant to the economic decision-making needs of users.

Accordingly, we plan to adopt the following accounting policy regarding Exploration and Evaluation Assets and Development Costs in our financial statements for the quarter ended June 30, 2018.

Exploration and Evaluation Assets and Development Costs

(i) Exploration and evaluation expenditures

The Company capitalizes all costs relating to the acquisition, exploration and evaluation of mineral claims. Expenditures incurred before the Company has obtained the legal rights to explore a specific area are expensed. The Company’s capitalized exploration and evaluation costs are classified as intangible assets. Such costs include, but are not limited to, certain camp costs, geophysical studies, exploratory drilling, geological and sampling expenditures, and depreciation of plant and equipment during the exploration stage. Costs not directly attributable to exploration and evaluation activities, including general administrative overhead costs, are expensed in the period in which they occur. Proceeds from the sale of mineral products or farm outs during the exploration and evaluation stage are deducted from the related capitalized costs.

The carrying values of capitalized amounts are reviewed annually, or when indicators of impairment are present. In the case of undeveloped properties, there may be only inferred resources to allow management to form a basis for the impairment review. The review is based on the Company’s intentions for the development of such properties. If a mineral property does not prove to be viable, all unrecoverable costs associated with the property are charged to the consolidated statement of comprehensive income (loss) at the time the determination is made.

When the technical feasibility and commercial viability of extracting mineral resources have been demonstrated, exploration and evaluation costs are assessed for impairment, reclassified to mining properties and become subject to depletion. Management considers the technical feasibility and commercial viability of extracting a mineral resource to be demonstrable upon the completion of a positive feasibility study and the establishment of mineral reserves. For certain mineral projects, management may determine the completion of a feasibility study to be cost prohibitive, unnecessary or to present undue risk to the structural integrity of the ore body. Under such circumstances, management considers technical feasibility to be demonstrable when the Company has obtained the necessary environmental and mining permits, land surface and mineral access rights, and the mineral project can be physically constructed and operated in a technically sound manner to produce a saleable mineral product. In assessing whether commercial viability is demonstrable, management considers if its internal economic assessment indicates that the mineral project can be mined to generate a reasonable return on investment for the risk undertaken, and markets or long-term contracts for the product exist.

(ii) Development Expenditures

Mine Development Costs are capitalized until the mineral property is capable of operating in the manner intended by management. The Company evaluates the following factors in determining whether a mining property is capable of operating in the manner intended by management:

· The completion and assessment of a reasonable commissioning period of the mill and mining facilities;

· Consistent operating results are achieved during the test period;

· Existence of clear indicators that operating levels intended by management will be sustainable for the foreseeable future;

· Plant / mill has reached a pre-determined percentage of design capacity;

· Adequate funding is available and can be allocated to the operating activities;

· Long term sales arrangements have been secured;

The carrying values of capitalized development costs are reviewed annually, or when indicators are present, for impairment.

II. Effect of Change in Accounting Policy

As a result of applying the change in accounting policy, we have determined that we would have been deemed to be in the production phase effective July 1, 2015. Accordingly, we have determined that the impact on our Statement of Financial Position would be the decrease/increase in Exploration and Evaluation Assets since we are not capitalizing such assets during production and the impact of our Statement of Operations and comprehensive Income (Loss) would be an increase/decrease in Revenue from Mining Operations and Costs of Sales as such amounts are not offset during production. The retrospective application of this change in accounting policy for (i) the nine months ended September 30, 2015; (ii) the year ended December 31, 2015; and (iii) the year ended December 31, 2016 are as follows:

Effect on Statement of Financial Position

September 30, 2015

As Reported

Adjustment

Retrospective Application

ASSETS

Current assets

Cash and cash equivalents

9,145,588

Amounts receivable

4,960,710

Sales taxes recoverable

2,604,105

Prepaid expenses and other assets

920,393

Inventory

4,270,720

21,901,516

Exploration and Evaluation Assets

36,300,850

(702,525

)

35,598,325

Plant, Equipment and Mining Properties

23,135,683

Investments

84,449

Reclamation Bonds

145,500

Total Assets

81,567,998

(702,525

)

80,865,473

LIABILITIES

Current liabilities

Accounts payable and accrued liabilities

4,516,134

Current portion of concentrate prepayment

3,558,663

Current portion of equipment loan

174,639

Current portion of finance lease obligations

1,766,906

Taxes payable

115,041

Amounts due to related parties

220,421

10,351,804

Warrant Liability

27,572

Concentrate Prepayment

9,786,337

Equipment Loan

291,065

Finance Lease Obligations

2,068,623

Reclamation Provision

2,120,224

Deferred Income Tax Liabilities

6,829,451

Total Liabilities

31,475,076

EQUITY

Share Capital

60,701,371

Equity Reserves

10,507,916

Treasury Shares (14,180 shares, at cost)

(101,869

)

(101,869

)

Accumulated Other Comprehensive Income

4,783,111

Accumulated Deficit

(25,797,607

)

(702,525

)

(26,500,132

)

Total Equity

50,092,922

(702,525

)

49,390,397

Total Liabilities and Equity

81,567,998

(702,525

)

80,865,473

Effect on Statement of Operations and Comprehensive Income (Loss)

September 30, 2015

As Reported

Adjustment

Retrospective Application

Revenue from Mining Operations

$ 15,222,738

$ 14,860,807

$ 30,083,545

Cost of Sales

8,573,411

15,563,332

24,136,743

Mine Operating Income

6,649,327

(702,525 )

5,946,802

General and administrative expenses

3,192,866

-

3,192,866

Income before other income (expenses)

3,456,461

(702,525 )

2,753,936

Other Income (Expenses)

Fair value adjustment on warrant liability

212,118

-

212,118

Interest and other income

50,169

-

50,169

Foreign exchange loss

(1,035,368 )

-

(1,035,368 )

Interest expense

(136,178 )

-

(136,178 )

Accretion of reclamation provision

(101,929 )

-

(101,929 )

Unrealized loss on investments

(9,440 )

-

(9,440 )

Net Income Before Income Taxes

2,435,833

(702,525 )

1,733,308

Income Taxes

Current income tax recovery (expense)

(1,522,232 )

-

(1,522,232 )

Deferred income tax expense

(786,852 )

-

(786,852 )

(2,309,084 )

-

(2,309,084 )

Net Income (Loss)

126,749

(702,525 )

(575,776 )

Other Comprehensive Income - Items that

may be reclassified subsequently to income or loss

Currency translation differences of foreign operations

3,111,102

-

3,111,102

Comprehensive Income

$ 3,237,851

$ (702,525 )

$ 2,535,326

Earnings (Loss) per Share

Basic

$ 0.00

$ (0.02 )

$ (0.02 )

Diluted

$ 0.00

$ (0.02 )

$ (0.02 )

Weighted Average Number of Common Shares Outstanding

Basic

36,037,472

-

36,037,472

Diluted

36,600,853

-

36,600,853

Effect on Statement of Financial Position

Year Ended December 31, 2015

As Reported

Adjustment

Retrospective Application

ASSETS

Current assets

Cash

7,475,134

Amounts receivable

3,730,317

Taxes recoverable

3,053,035

Prepaid expenses and other assets

1,177,053

Inventory

4,612,234

20,047,773

Exploration and Evaluation Assets

41,376,974

(51,191

)

41,325,783

Plant, Equipment and Mining Properties

25,733,033

Investments

38,712

Reclamation Bonds

145,500

Total Assets

87,341,992

(51,191

)

87,290,801

LIABILITIES

Current liabilities

Accounts payable and accrued liabilities

4,178,571

Amounts due to related parties

217,822

Current portion of term facility

6,458,660

Current portion of equipment loans

222,192

Current portion of finance lease obligations

1,815,747

Taxes payable

1,151,224

14,044,216

Warrant Liability

Term Facility

7,381,340

Equipment Loans

731,918

Finance Lease Obligations

2,305,534

Reclamation Provision

6,047,369

Deferred Income Tax Liabilities

4,892,916

Total Liabilities

35,403,293

EQUITY

Share Capital

62,262,954

Equity Reserves

9,531,512

Treasury Shares (14,180 shares, at cost)

(101,869

)

(101,869

)

Accumulated Other Comprehensive Income

5,652,534

Accumulated Deficit

(25,406,432

)

(51,191

)

(25,457,623

)

Total Equity

51,938,699

(51,191

)

51,887,508

Total Liabilities and Equity

87,341,992

(51,191

)

87,290,801

Effect on Statement of Operations and Comprehensive Income

Year Ended December 31, 2015

As Reported

Adjustment

Retrospective Application

Revenue from Mining Operations

$ 19,082,847

$ 21,501,272

$ 40,584,119

Cost of Sales

10,961,694

21,552,463

32,514,157

Mine Operating Income

8,121,153

(51,191 )

8,069,962

General and Administrative Expenses

4,256,672

-

4,256,672

Income before other income (expenses)

3,864,481

(51,191 )

3,813,290

Other Income (Expenses)

Fair value adjustment on warrant liability

239,690

-

239,690

Interest and other income

59,098

-

59,098

Foreign exchange loss

(833,822 )

-

(833,822 )

Interest expense

(180,079 )

-

(180,079 )

Accretion of reclamation provision

(136,925 )

-

(136,925 )

Unrealized loss on investments

(55,177 )

-

(55,177 )

Finance cost

(14,238 )

-

(14,238 )

Net Income Before Income Taxes

2,943,028

(51,191 )

2,891,837

Income Taxes

Current income tax expense

(3,587,796 )

-

(3,587,796 )

Deferred income tax recovery

1,128,192

-

1,128,192

(2,459,604 )

-

(2,459,604 )

Net Income

483,424

(51,191 )

432,233

Other Comprehensive Income

Items that may be reclassified subsequently to income or loss Currency translation differences of foreign operations

3,980,525

--

3,980,525

Comprehensive Income

$ 4,463,949

$ (51,191 )

$ 4,412,758

Earnings per Share

Basic

$ 0.01

-

$ 0.01

Diluted

$ 0.01

-

$ 0.01

Weighted Average Number of Common Shares Outstanding

Basic

36,229,424

-

36,229,424

Diluted

36,723,725

-

36,723,725

Effect on Statement of Financial Position

Year Ended December 31, 2016

As Reported

Adjustment

Retrospective Application

ASSETS

Current assets

Cash

15,816,628

Short-term investments

13,427,000

Amounts receivable

4,095,249

Taxes recoverable

4,738,945

Prepaid expenses and other assets

1,295,942

Inventory

7,793,047

47,166,811

Exploration and evaluation assets

41,344,065

856,847

42,200,912

Plant, equipment and mining properties

37,244,816

Long-term investments

35,873

Reclamation bonds

145,500

Total Assets

125,937,065

856,847

126,793,912

LIABILITIES

Current liabilities

Accounts payable and accrued liabilities

5,004,583

Amounts due to related parties

267,726

Current portion of term facility

6,265,934

Current portion of equipment loans

1,311,753

Current portion of finance lease obligations

1,926,427

Taxes payable

1,097,369

15,873,792

Term facility

6,265,933

Equipment loans

1,598,798

Finance lease obligations

1,848,807

Warrant liability

2,188,328

Reclamation provision

9,349,100

Deferred income tax liabilities

6,295,000

Total Liabilities

43,419,758

EQUITY

Share capital

91,527,462

Equity reserves

9,679,584

Treasury shares (14,180 shares, at cost)

(101,869

)

(101,869

)

Accumulated other comprehensive Income

4,593,133

Accumulated deficit

(23,181,003

)

856,847

(22,324,156

)

Total Equity

82,517,307

856,847

83,374,154

Total liabilities and Equity

125,937,065

856,847

126,793,912

Effect on Statement of Operations and Comprehensive Income

Year Ended December 31, 2016

As Reported

Adjustment

Retrospective Application

Revenue from mining operations

39,895,591

5,912,324

45,807,915

Cost of sales

25,391,891

5,055,477

30,447,368

Mine operating income

14,503,700

856,847

15,360,547

Operating expenses

General and administrative expenses

5,021,006

Share-based payments

1,615,025

Income before other items

7,867,669

856,847

8,724,516

Other items

Foreign exchange gain

207,076

Interest and other income

69,073

Fair value adjustment on warrant liability

10,862

Accretion of reclamation provision

(284,636

)

(284,636

)

Finance cost

(188,940

)

(188,940

)

Interest expense

(166,636

)

(166,636

)

Unrealized gain loss on long-term investments

(2,839

)

(2,839

)

Net income before income taxes

7,511,629

856,847

8,368,476

Income taxes

Current income tax expense

(4,187,048

)

(4,187,048

)

Deferred income tax expense

(1,332,102

)

(1,332,102

)

(5,519,150

)

(5,519,150

)

Net income

1,992,479

856,847

2,849,326

Other comprehensive income (loss)

Items that may be reclassified subsequently to income or

Loss Currency translation differences of foreign operations

(1,059,401

)

(1,059,401

)

Total Comprehensive income

933,078

856,847

1,789,925

Earnings per share

Basic

0.05

0.02

0.07

Diluted

0.05

0.02

0.07

Weighted average number of common shares outstanding

Basic

42,695,999

Diluted

43,791,451

We are applying this change in accounting policy on a retrospective basis for informational purposes only.

Further, we do not believe that the change in accounting policy affects our Internal Control Over Financial Reporting in that neither a significant deficiency nor a material weakness exists in applying this change in accounting policy on a retrospective basis.

III. Disclosure

In accordance with IAS 8, we will make the proposed change in accounting policy to make the financial statements more relevant to the economic decision-making needs of users. In making the Form 6-K filing, we will disclose the items in I and II above including:

· the nature of the change in accounting policy;

· the reasons why applying the new accounting policy provides reliable and more relevant information;

· for the current period and each prior period presented, the opening balance and comparative amounts as if the new accounting policy had always been applied;

· for basic and diluted earnings per share; and

· the amount of the adjustment relating to periods before those presented, to the extent practicable.

We hope that the foregoing addresses the Staff’s comments. Please contact the undersigned if you have additional questions.

Respectfully submitted,

/s/ Malcolm Davidson

Chief Financial Officer