UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 or 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
  
 
For the month of  November, 2018
 
Commission File Number  001-37982
 
AMERICAS SILVER CORPORATION
(Translation of registrant’s name into English)
 
145 King Street West, Suite 2870
Toronto, Ontario, Canada
M5H 1J8
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F
 
Form 20-F
      ☐
Form 40-F
  x
 
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):   ☐               
 
 
Note:   Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):     ☐             
 
 
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
AMERICAS SILVER CORPORATION
 
Date:   November 5, 2018
    /s/ Peter McRae                  
Peter McRae
Chief Legal Officer and Senior Vice President Corporate Affairs

-2-
INDEX TO EXHIBITS


99.1              Quarterly Financial Statements
99.2              Quarterly Management Discussion and Analysis
99.3              Certification of Interim Filings - CEO
99.4              Certification of Interim Filings - CFO
 
 
-3-
Exhibit 99.1


















AMERICAS SILVER CORPORATION

Condensed Interim Consolidated Financial Statements

For the nine months ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)








Americas Silver Corporation
Condensed interim consolidated statements of financial position
(In thousands of U.S. dollars, unaudited)

 
 
September 30,
   
December 31,
 
As at
 
2018
   
2017
 
Assets
           
Current assets
           
Cash and cash equivalents
 
$
3,111
   
$
9,325
 
Trade and other receivables (Note 5)
   
5,646
     
6,631
 
Inventories (Note 6)
   
8,250
     
9,366
 
Prepaid expenses
   
1,774
     
869
 
Forward contracts (Note 16)
   
263
     
-
 
 
   
19,044
     
26,191
 
Non-current assets
               
Restricted cash
   
709
     
335
 
Property, plant and equipment (Note 7)
   
106,048
     
100,301
 
Total assets
 
$
125,801
   
$
126,827
 
 
               
Liabilities
               
Current liabilities
               
Trade and other payables
 
$
10,410
   
$
10,393
 
Pre-payment facility (Note 9)
   
5,355
     
4,000
 
 
   
15,765
     
14,393
 
Non-current liabilities
               
Other long-term liabilities
   
735
     
564
 
Pre-payment facility (Note 9)
   
6,875
     
11,000
 
Post-employment benefit obligations
   
8,631
     
8,618
 
Decommissioning provision
   
3,850
     
3,948
 
Deferred tax liabilities (Note 15)
   
236
     
246
 
Total liabilities
   
36,092
     
38,769
 
 
               
Equity
               
Share capital (Note 10)
   
212,498
     
207,012
 
Equity reserve
   
34,629
     
34,760
 
Foreign currency translation reserve
   
6,458
     
6,284
 
Deficit
   
(163,876
)
   
(159,998
)
Total equity
   
89,709
     
88,058
 
 
               
Total liabilities and equity
 
$
125,801
   
$
126,827
 

 
Contingencies (Note 18), Subsequent events (Note 19)

The accompanying notes are an integral part of the condensed interim consolidated financial statements.
Page 1
Americas Silver Corporation
Condensed interim consolidated statements of loss and comprehensive loss
(In thousands of U.S. dollars, except share and per share amounts, unaudited)

 
 
For the three-month period ended
   
For the nine-month period ended
 
 
 
September 30,
   
September 30,
   
September 30,
   
September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
 
                       
Revenue (Note 12)
 
$
11,734
   
$
9,814
   
$
49,468
   
$
42,234
 
 
                               
Cost of sales (Note 13)
   
(12,809
)
   
(7,694
)
   
(37,943
)
   
(30,357
)
Depletion and amortization (Note 7)
   
(2,443
)
   
(1,715
)
   
(7,044
)
   
(5,795
)
Care, maintenance and restructuring costs
   
(129
)
   
(136
)
   
(990
)
   
(589
)
Corporate general and administrative expenses (Note 14)
   
(1,659
)
   
(1,515
)
   
(5,227
)
   
(4,777
)
Exploration costs
   
(539
)
   
(1,307
)
   
(2,528
)
   
(1,915
)
Accretion on decommissioning provision
   
(48
)
   
(45
)
   
(144
)
   
(134
)
Interest and financing income (expense)
   
(234
)
   
19
     
(746
)
   
(594
)
Foreign exchange loss
   
(87
)
   
(181
)
   
(271
)
   
(72
)
Gain on disposal of assets (Note 7)
   
15
     
-
     
870
     
-
 
Gain on forward contracts (Note 16)
   
254
     
-
     
857
     
-
 
Gain (loss) on investment in equity instruments
   
-
     
(3
)
   
-
     
8
 
Write-down of equipment (Note 7)
   
(65
)
   
-
     
(65
)
   
-
 
Contingency on value added taxes (Note 18)
   
-
     
-
     
(125
)
   
-
 
Loss before income taxes
   
(6,010
)
   
(2,763
)
   
(3,888
)
   
(1,991
)
Income tax recovery (expense) (Note 15)
   
219
     
(9
)
   
10
     
(116
)
Net loss
   
(5,791
)
   
(2,772
)
   
(3,878
)
   
(2,107
)
 
                               
Other comprehensive income (loss)
                               
Items that may be reclassified subsequently
                               
to net income
                               
Foreign currency translation reserve
   
3
     
(49
)
   
174
     
(259
)
Change in fair value of investment in equity instruments
   
-
     
(38
)
   
-
     
(182
)
Other comprehensive income (loss)
   
3
     
(87
)
   
174
     
(441
)
Comprehensive loss
 
$
(5,788
)
 
$
(2,859
)
 
$
(3,704
)
 
$
(2,548
)
 
                               
Loss per share
                               
Basic and diluted
   
(0.13
)
   
(0.07
)
   
(0.09
)
   
(0.05
)
 
                               
Weighted average number of common shares
                               
outstanding
                               
Basic and diluted (Note 11)
   
43,019,794
     
40,137,013
     
42,424,147
     
39,862,124
 

 
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
Page 2
Americas Silver Corporation
Condensed interim consolidated statements of changes in equity
For the nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, except share amounts, unaudited)

 
                   
Foreign
   
Change in
             
 
                   
currency
   
fair value of
             
 
 
Share capital
   
Equity
   
translation
   
investment in
         
Total
 
 
 
Shares (000s)
   
Amount
   
reserve
   
reserve
   
equity instruments
   
Deficit
   
equity
 
 
                                         
Balance at January 1, 2018
   
41,497
   
$
207,012
   
$
34,760
   
$
6,284
   
$
-
   
$
(159,998
)
 
$
88,058
 
Net loss for the period
   
-
     
-
     
-
     
-
     
-
     
(3,878
)
   
(3,878
)
Other comprehensive income for the period
   
-
     
-
     
-
     
174
     
-
     
-
     
174
 
Share-based payments
   
-
     
-
     
1,777
     
-
     
-
     
-
     
1,777
 
Proceeds from exercise of options and warrants
   
1,598
     
5,486
     
(1,908
)
   
-
     
-
     
-
     
3,578
 
Balance at September 30, 2018
   
43,095
   
$
212,498
   
$
34,629
   
$
6,458
   
$
-
   
$
(163,876
)
 
$
89,709
 
 
                                                       
Balance at January 1, 2017
   
39,540
   
$
202,191
   
$
34,400
   
$
6,454
   
$
237
   
$
(156,138
)
 
$
87,144
 
Net loss for the period
   
-
     
-
     
-
     
-
     
-
     
(2,107
)
   
(2,107
)
Other comprehensive loss for the period
   
-
     
-
     
-
     
(259
)
   
(182
)
   
-
     
(441
)
Share-based payments
   
-
     
-
     
1,241
     
-
     
-
     
-
     
1,241
 
Proceeds from exercise of options and warrants
   
1,264
     
2,359
     
(749
)
   
-
     
-
     
-
     
1,610
 
Balance at September 30, 2017
   
40,804
   
$
204,550
   
$
34,892
   
$
6,195
   
$
55
   
$
(158,245
)
 
$
87,447
 


The accompanying notes are an integral part of the condensed interim consolidated financial statements.
Page 3
Americas Silver Corporation
Condensed interim consolidated statements of cash flows
For the nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unaudited)

 
 
September 30,
   
September 30,
 
 
 
2018
   
2017
 
Cash flow generated from (used in)
           
 
           
Operating activities
           
Net loss for the period
 
$
(3,878
)
 
$
(2,107
)
Adjustments for the following items:
               
Depletion and amortization
   
7,044
     
5,795
 
Deferred income tax expense (recovery)
   
(10
)
   
116
 
Accretion and decommissioning costs
   
12
     
134
 
Share-based payments
   
1,675
     
1,568
 
Unrealized loss on non-current assets
   
2
     
22
 
Provision on other long-term liabilities
   
21
     
163
 
Deferred costs on credit facilities
   
-
     
173
 
Net charges on post-employment benefit obligations
   
13
     
76
 
Gain on forward contracts
   
(183
)
   
-
 
Gain on investment in equity instruments
   
-
     
(8
)
Write-down of equipment
   
65
         
Contingency on value added taxes
   
125
     
-
 
 
   
4,886
     
5,932
 
Changes in non-cash working capital items:
               
Trade and other receivables
   
985
     
(5,108
)
Inventories
   
1,116
     
(1,229
)
Prepaid expenses
   
(905
)
   
94
 
Forward contracts
   
(80
)
   
-
 
Trade and other payables
   
(152
)
   
79
 
Net cash generated from (used in) operating activities
   
5,850
     
(232
)
 
               
Investing activities
               
Expenditures on property, plant and equipment
   
(10,670
)
   
(5,532
)
Net development costs on San Rafael
   
-
     
(11,482
)
Net development costs on El Cajón
   
-
     
460
 
Purchase of San Felipe property option
   
(2,000
)
   
(7,108
)
Bond on decommissioning costs
   
(370
)
   
-
 
Net cash used in investing activities
   
(13,040
)
   
(23,662
)
 
               
Financing activities
               
Financing from (repayments to) pre-payment facility
   
(2,770
)
   
15,000
 
Repayments to credit facilities
   
-
     
(8,005
)
Sale of investment in equity instruments
   
-
     
163
 
Proceeds from exercise of options and warrants
   
3,578
     
1,610
 
Net cash generated from financing activities
   
808
     
8,768
 
 
               
Effect of foreign exchange rate changes on cash
   
168
     
(206
)
Decrease in cash and cash equivalents
   
(6,214
)
   
(15,332
)
Cash and cash equivalents, beginning of period
   
9,325
     
24,055
 
Cash and cash equivalents, end of period
 
$
3,111
   
$
8,723
 
 
               
Cash and cash equivalents consist of:
               
Cash
 
$
3,111
   
$
8,723
 
Term deposits
   
-
     
-
 
 
 
$
3,111
   
$
8,723
 
 
               
Interest paid during the period
 
$
757
   
$
925
 


The accompanying notes are an integral part of the condensed interim consolidated financial statements.
Page 4
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
1.   Corporate information
 
Americas Silver Corporation (the “Company" or "Americas Silver") was incorporated under the Canada Business Corporations Act on May 12, 1998 and conducts mining exploration, development and production in the Americas. The address of the Company’s registered office is 145 King Street West, Suite 2870, Toronto, Ontario, Canada, M5H 1J8. The Company’s common shares are listed on the Toronto Stock Exchange under the symbol “USA” and on the New York American Stock Exchange under the symbol “USAS”.

The condensed interim consolidated financial statements of the Company for the three and nine months ended September 30, 2018 were approved and authorized for issue by the Board of Directors of the Company on November 2, 2018.
 
2.   Basis of presentation
 
These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) which the Canadian Accounting Standards Board has approved for incorporation into Part 1 of the Handbook of Chartered Professional Accountants of Canada   applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting. These condensed interim consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Company’s annual consolidated financial statements as at and for the year ended December 31, 2017. In particular, the Company’s significant accounting policies were summarized in Note 3 of the consolidated financial statements for the year ended December 31, 2017 and have been consistently applied in the preparation of these condensed interim consolidated financial statements with the exception of adoption of new accounting policies as described under Note 3 below. These unaudited condensed interim consolidated financial statements were prepared on a going concern basis.
 
3.   Changes in accounting policies and recent accounting pronouncements
 
The Company has adopted the following new accounting standards effective for annual periods beginning on or after January 1, 2018:

(i)              Financial instruments

IFRS 9 - Financial Instruments - The standard was issued in its final version by the IASB in July 2014 bringing together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39, “Financial instruments: recognition and measurement” (“IAS 39”). The standard retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The mandatory effective date of IFRS 9 would be annual periods beginning on or after January 1, 2018, with early adoption permitted. The adoption of IFRS 9 did not result in any changes to the classification or measurement of the Company’s existing financial instruments on transition date.

The following accounting policy was adopted as at January 1, 2018 retrospectively and replaces the Company’s previously existing accounting policy on financial instruments summarized in Note 3(o) of the consolidated financial statements for the year ended December 31, 2017.

The Company classifies and measures its financial instruments at fair value, with changes in fair value recognized in profit or loss as they arise, unless restrictive criteria regarding the objective and contractual cash flows of the instrument are met for classifying and measuring at either amortized cost or fair value through other comprehensive income.

Cash and cash equivalents and trade and other receivables are classified and measured as financial assets at amortized cost. Embedded derivatives arising from subsequent adjustments in provisional sales revenue are classified and measured as financial instruments at fair value through profit or loss. Trade and other payables are classified and measured as financial liabilities at amortized cost, and investment in equity instruments are classified and measured as financial assets at fair value through other comprehensive income.
Page 5
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
(ii)              Revenue from contracts with customers

IFRS 15 - Revenue from Contracts with Customers - The final standard on revenue from contracts with customers was issued in May 2014 and is effective for annual reporting periods beginning on or after January 1, 2018 for public entities with early adoption permitted. The standard covers principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt the guidance. The adoption of IFRS 15 did not impact the revenue recognition process of the Company’s existing provisional pricing arrangements on concentrate sales with the exception of disaggregating the Company’s revenue for note disclosure purposes.

The following accounting policy was adopted as at January 1, 2018 using the modified retrospective approach and replaces, effective January 1, 2018, the Company’s previously existing accounting policy on revenue recognition summarized in Note 3(e) of the consolidated financial statements for the year ended December 31, 2017.

The Company applies the following five-step approach in recognizing revenue from contracts with customers:

·
Identify the enforceable contract with the customer
·
Identify the separate performance obligations in the contract from transferring the distinct good or service
·
Determine the transaction price for consideration of transferring the good or service
·
Allocate the transaction price to the separate performance obligations identified
·
Recognize revenue when each separate performance obligation is satisfied

The Company recognizes revenue through entering into concentrate sales contracts with customers with the performance obligation of delivering its concentrate production in exchange for consideration valued under provisional pricing arrangements where the final sale prices are determined by quoted market prices in a period subsequent to the date of sale. In these circumstances, revenue from sales is recorded at the time of delivery based on forward prices for the expected date of final settlement.

Subsequent variations in metal prices are recognized as derivative pricing adjustments as they occur and are not considered as revenue from contracts with customers.

The following are future changes in accounting policies not yet effective as at September 30, 2018:

(i)              Leases

IFRS 16 - Leases - The standard on leases was issued in January 2016 and is effective for annual reporting periods beginning on or after January 1, 2019 for public entities with early adoption permitted, provided IFRS 15 has been applied or is applied at the same date as IFRS 16. The standard requires lessees to recognize assets and liabilities for most leases. The Company is assessing the impact of this standard.
 
4.   Significant accounting judgments and estimates
 
The preparation of the condensed interim consolidated financial statements in conformity with IFRS requires management to make judgments and estimates that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.
 
In preparing these condensed interim consolidated financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Company’s annual consolidated financial statements as at and for the year ended December 31, 2017.
Page 6
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
5.   Trade and other receivables
 
 
 
September 30,
   
December 31,
 
 
 
2018
   
2017
 
 
           
Trade receivables
 
$
3,711
   
$
3,779
 
Value added taxes receivable
   
1,746
     
2,751
 
Other receivables
   
189
     
101
 
 
 
$
5,646
   
$
6,631
 

 
6.   Inventories
 
 
 
September 30,
   
December 31,
 
 
 
2018
   
2017
 
 
           
Concentrates
 
$
1,230
   
$
1,391
 
Ore stockpiles
   
1,436
     
2,877
 
Spare parts and supplies
   
5,584
     
5,098
 
 
 
$
8,250
   
$
9,366
 

The amount of inventories recognized as an expense was $12.8 million during the three-month period ended September 30, 2018 (2017: $7.7 million) and $37.9 million during the nine-month period ended September 30, 2018 (2017: $30.4 million). The concentrates and ore stockpiles, and spare parts and supplies write-down (recovery) to net realizable value included in cost of sales were $0.5 million and ($0.2) million, respectively, during the three-month period ended September 30, 2018 (2017: nil and $0.2 million, respectively) and $0.5 million and ($0.2) million, respectively, during the nine-month period ended September 30, 2018 (2017: $0.1 million and $0.2 million, respectively).
 
7.   Property, plant and equipment
 
 
 
Mining
   
Non-producing
   
Plant and
   
Corporate office
       
 
 
interests
   
properties
   
equipment
   
equipment
   
Total
 
Cost
                             
Balance at January 1, 2017
 
$
67,571
   
$
77,390
   
$
40,013
   
$
81
   
$
185,055
 
Asset additions
   
5,233
     
5,526
     
8,795
     
3
     
19,557
 
Property purchase option acquired
   
-
     
7,108
     
-
     
-
     
7,108
 
Change in decommissioning provision
   
(37
)
   
38
     
-
     
-
     
1
 
Reclassification
   
31,595
     
(31,595
)
   
-
     
-
     
-
 
Balance at December 31, 2017
   
104,362
     
58,467
     
48,808
     
84
     
211,721
 
Asset additions
   
6,489
     
-
     
4,467
     
10
     
10,966
 
Property purchase option acquired
   
-
     
2,000
     
-
     
-
     
2,000
 
Change in decommissioning provision
   
(110
)
   
-
     
-
     
-
     
(110
)
Balance at September 30, 2018
 
$
110,741
   
$
60,467
   
$
53,275
   
$
94
   
$
224,577
 
 
                                       
Accumulated depreciation and depletion
                                       
Balance at January 1, 2017
 
$
31,410
   
$
50,502
   
$
22,566
   
$
29
   
$
104,507
 
Depreciation/depletion for the year
   
3,438
     
-
     
3,261
     
10
     
6,709
 
Write-down of equipment
   
-
     
-
     
204
     
-
     
204
 
Balance at December 31, 2017
   
34,848
     
50,502
     
26,031
     
39
     
111,420
 
Depreciation/depletion for the period
   
4,439
     
-
     
2,599
     
6
     
7,044
 
Write-down of equipment
   
-
     
-
     
65
     
-
     
65
 
Balance at September 30, 2018
 
$
39,287
   
$
50,502
   
$
28,695
   
$
45
   
$
118,529
 
 
                                       
Carrying value
                                       
   at December 31, 2017
 
$
69,514
   
$
7,965
   
$
22,777
   
$
45
   
$
100,301
 
   at September 30, 2018
 
$
71,454
   
$
9,965
   
$
24,580
   
$
49
   
$
106,048
 


Page 7
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)

On March 2, 2017, the Company entered into an option acquisition agreement with Impulsora Minera Santacruz S.A. de C.V., a wholly-owned subsidiary of Santacruz Silver Mining Ltd. (“Santacruz”), to acquire an existing option with Minera Hochschild Mexico S.A. de C.V. (“Hochschild”) for the right to acquire a 100% interest of the San Felipe property located in Sonora, Mexico for total consideration of $15 million in cash, payable in two installments. The purchase of the option of $5 million to Santacruz plus an initial option payment of $2 million to Hochschild, plus applicable VAT, was paid with cash on hand by the Company in March while the final option payment of $8 million, plus applicable VAT, was payable to Hochschild on or before December 15, 2017. On December 1, 2017, the final option payment of $8 million plus applicable VAT was amended to become option payments of $0.5 million paid on January 1, 2018, $0.5 million paid on April 1, 2018, $1.0 million paid on July 1, 2018, with the remaining balance of $6.0 million payable on or before December 31, 2018.

Effective December 19, 2017, the San Rafael mine declared commercial production which the Company defined as operating at an average of 80% designed production capacity with saleable concentrate recoveries within 5% of its mining feasibility study over a two-week period. The Company transferred $31.6 million in net book value from non-producing properties to mining interests including the historical carrying value of $25.2 million, net of pre-commercial production revenue of $4.0 million.

Non-current assets are tested for impairment or impairment reversals when events or changes in circumstances suggest that the carrying amount may not be recoverable. A write-down of $0.2 million related to the U.S. operations was recorded for the year ended December 31, 2017 as a result of writing down carrying amounts of equipment to recoverable amounts. No other impairment or impairment reversal indicators were identified for the nine-month period ended September 30, 2018.

The Company recognized a gain of $0.8 million in the second quarter of 2018 related to proceeds received through an insurance claim for equipment damaged from mining operations during fiscal 2017.

The amount of borrowing costs capitalized as property, plant and equipment was nil during the three-month period ended September 30, 2018 (2017: $0.2 million) and nil during the nine-month period ended September 30, 2018 (2017: $0.5 million).
 
8.   Credit facilities
 
On August 7, 2013, the Company signed a credit agreement with Royal Capital Management Corp. as security agent, and certain lenders (the “RCM Credit Agreement”). The RCM Credit Agreement provided for the issuance of notes with an aggregate principal amount of $6.4 million ($8.5 million CAD) maturing in December 2017 at an interest rate of 12% per annum payable on a monthly basis. On March 30, 2017, the remaining principal portion of the RCM Credit Agreement of $5.6 million was repaid in full.

On February 11, 2016, the Company closed a subordinated, secured credit agreement with its two existing lenders (the “New Credit Facility”) for principal amount of $2.9 million for a term of one year at an interest rate of 10% per annum payable on a quarterly basis in cash or shares at the option of the lenders with the full balance due on maturity. On October 3, 2016, the principal portion for one lender of the New Credit Facility of $1.3 million was repaid in full. On February 10, 2017, the remaining principal portion for the other lender of New Credit Facility of $1.6 million was repaid in full on maturity.
 
9.   Pre-payment facility
 
On January 29, 2017, the Company entered into a pre-payment facility for $15.0 million with Metagri S.A. de C.V., a subsidiary of Glencore PLC (“Glencore”), to fund a portion of the development costs for the San Rafael project within the Cosalá district of Sinaloa, Mexico (the “Pre-Payment Facility”). The Pre-Payment Facility was drawn in full on March 30, 2017, has a term of four years at an interest of U.S. LIBOR rate plus 5% per annum, and is secured by a promissory note in the amount of up to $15.0 million issued by the Company, a corporate guarantee in favour of Glencore, and limited asset level security on the San Rafael project. The Company has also entered into four-year offtake agreements with Glencore for the zinc and lead concentrates produced from the San Rafael project where Glencore will pay for the concentrates at the prevailing market prices for silver, zinc and lead, less customary treatment, refining and penalty charges. Repayment of principal on the Pre-Payment Facility began in January 2018 as additional tonnage charges on shipments of concentrate with minimum annual principal repayments of $4.0 million during 2018, $5.5 million during 2019, and $5.5 million during 2020.
Page 8
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
10.   Share capital
 
a.   Authorized
 
Authorized share capital consists of an unlimited number of common shares.
 
 
 
September 30,
   
December 31,
 
 
 
2018
   
2017
 
 
           
Issued
           
43,094,657 (2017: 41,496,950) common shares
 
$
212,498
   
$
207,012
 

 
b.   Stock option plan
 
The number of shares reserved for issuance under the Company’s stock option plan is limited to 10% of the number of common shares which are issued and outstanding on the date of a particular grant of options. Under the plan, the Board of Directors determines the term of a stock option to a maximum of 10 years, the period of time during which the options may vest and become exercisable as well as the option exercise price which shall not be less than the closing price of the Company’s share on the Toronto Stock Exchange on the date immediately preceding the date of grant. The Compensation Committee determines and makes recommendations to the Board of Directors as to the recipients of, and nature and size of, share-based compensation awards in compliance with applicable securities law, stock exchange and other regulatory requirements.

A summary of changes in the Company’s outstanding stock options is presented below:

 
       
September 30,
         
December 31,
 
 
       
2018
         
2017
 
 
       
Weighted
         
Weighted
 
 
       
average
         
average
 
 
       
exercise
         
exercise
 
 
 
Number
   
price
   
Number
   
price
 
 
 
(thousands)
   
CAD
   
(thousands)
   
CAD
 
 
                       
Balance, beginning of period
   
2,316
   
$
3.06
     
1,771
   
$
4.64
 
Granted
   
1,395
     
4.61
     
1,058
     
3.86
 
Exercised
   
(471
)
   
2.29
     
(261
)
   
3.22
 
Expired
   
(120
)
   
5.14
     
(252
)
   
17.31
 
Balance, end of period
   
3,120
   
$
3.79
     
2,316
   
$
3.06
 


The following table summarizes information on stock options outstanding and exercisable as at September 30, 2018:

 
 
Weighted
                         
 
 
average
         
Weighted
         
Weighted
 
 
 
remaining
         
average
         
average
 
 Exercise
 
contractual
         
exercise
         
exercise
 
 price
 
life
   
Outstanding
   
price
   
Exercisable
   
price
 
 CAD
 
(years)
   
(thousands)
   
CAD
   
(thousands)
   
CAD
 
 
                             
 2.00 to 3.00
   
0.40
     
691
   
$
2.04
     
691
   
$
2.04
 
 3.01 to 4.00
   
1.32
     
1,025
     
3.85
     
683
     
3.85
 
 4.01 to 5.00
   
2.26
     
1,364
     
4.58
     
462
     
4.58
 
 5.01 to 6.00
   
2.32
     
40
     
5.55
     
13
     
5.55
 
 
           
3,120
   
$
3.79
     
1,849
   
$
3.37
 
 
 
Page 9
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
c.   Share-based payments
 
The weighted average fair value at grant date of the Company’s stock options granted during the nine-month period ended September 30, 2018 was $1.50 (2017: $1.58).

The Company used the Black-Scholes Option Pricing Model to estimate fair value using the following weighted-average assumptions:
 
 
 
Three-month
   
Three-month
   
Nine-month
   
Nine-month
 
 
 
period ended
   
period ended
   
period ended
   
period ended
 
 
 
September 30,
   
September 30,
   
September 30,
   
September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
 
                       
Expected share price volatility (1)
   
-
     
81
%
   
59
%
   
83
%
Risk free interest rate
   
-
     
1.30
%
   
1.74
%
   
0.87
%
Expected life
   
-
   
3 years
   
3 years
   
3 years
 
Expected forfeiture rate
   
-
     
3.67
%
   
3.36
%
   
4.18
%
Expected dividend yield
   
-
     
0
%
   
0
%
   
0
%
 
                               
Share-based payments included in cost of sales
 
$
-
   
$
-
   
$
-
   
$
-
 
Share-based payments included in general and
                               
   administrative expenses
   
334
     
278
     
1,711
     
1,241
 
Total share-based payments
 
$
334
   
$
278
   
$
1,711
   
$
1,241
 

(1)
Expected volatility has been based on historical volatility of the Company’s publicly traded shares.

d.   Warrants
 
The warrants that are issued and outstanding as at September 30, 2018 are as follows:
 
Number of
 Exercise
 Issuance
 Expiry
 warrants
 price (CAD)
 date
 date
                                                                               799,065
                                                                                           4.68
 Jul 2016
 Jun 14, 2021
                                                                          1,447,426
                                                                                           4.68
 Jun 2016
 Jun 9, 2021
                                                                          1,537,355
                                                                                            1.20
 Feb 2016
 Feb 10, 2019
                                                                               307,777
                                                                                            1.20
 Nov 2015
 Nov 10, 2018
                                                                          4,091,623
 
 
 

e.   Restricted Share Units:
 
The Company has a Restricted Share Unit Plan under which eligible directors, officers and key employees of the Company are entitled to receive awards of restricted share units. Each restricted share unit is equivalent in value to the fair market value of a common share of the Company on the date of grant with the value of each cash settled award charged to compensation expense over the period of vesting. At each reporting date, the compensation expense and associated liability (which is included in trade and other payables and other long-term liabilities in the consolidated statement of financial position) are adjusted to reflect changes in market value. As at September 30, 2018, 86,692 (December 31, 2017: 208,722) restricted share units are outstanding at an aggregate value of $0.2 million (December 31, 2017: $0.8 million).

f.   Deferred Share Units:
 
The Company has a Deferred Share Unit Plan under which eligible directors of the Company are entitled to receive awards of deferred share units on a quarterly basis as payment for 20% to 100% of their director fees earned. Deferred share units are settled in either cash or common shares at the Company’s discretion when the director leaves the Company’s Board of Directors. The Company recognizes a cost in director fees and a corresponding increase in equity reserve upon issuance of deferred share units. As at September 30, 2018, 314,029 (December 31, 2017: 286,920) deferred share units are issued and outstanding.
Page 10
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
11.   Weighted average basic and diluted number of common shares outstanding
 
 
 
Three-month
   
Three-month
   
Nine-month
   
Nine-month
 
 
 
period ended
   
period ended
   
period ended
   
period ended
 
 
 
September 30,
   
September 30,
   
September 30,
   
September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
 
                       
Basic weighted average number of shares
   
43,019,794
     
40,137,013
     
42,424,147
     
39,862,124
 
Effect of dilutive stock options and warrants
   
-
     
-
     
-
     
-
 
Diluted weighted average number of shares
   
43,019,794
     
40,137,013
     
42,424,147
     
39,862,124
 

Diluted weighted average number of common shares for the three-month periods ended September 30, 2018 excludes 3,119,993 anti-dilutive stock options (2017: 2,316,264) and 4,091,623 anti-dilutive warrants (2017: 5,859,843).and nine-month periods ended September 30, 2018 excludes 3,119,993 anti-dilutive stock options (2017: 2,316,264) and 4,091,623 anti-dilutive warrants (2017: 5,859,843).
 
12.   Revenue
 
The following is a disaggregation of revenue categorized by commodities sold:

 
 
Three-month
   
Three-month
   
Nine-month
   
Nine-month
 
 
 
period ended
   
period ended
   
period ended
   
period ended
 
 
 
September 30,
   
September 30,
   
September 30,
   
September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
 
                       
Silver
                       
Provisional sales revenue
 
$
4,563
   
$
5,813
   
$
16,501
   
$
23,986
 
Derivative pricing adjustments
   
(298
)
   
151
     
(343
)
   
1,466
 
 
   
4,265
     
5,964
     
16,158
     
25,452
 
Zinc
                               
Provisional sales revenue
 
$
8,941
   
$
1,406
   
$
32,104
   
$
7,655
 
Derivative pricing adjustments
   
(2,494
)
   
330
     
(2,726
)
   
544
 
 
   
6,447
     
1,736
     
29,378
     
8,199
 
Lead
                               
Provisional sales revenue
 
$
6,785
   
$
5,475
   
$
22,641
   
$
18,461
 
Derivative pricing adjustments
   
(489
)
   
213
     
(440
)
   
312
 
 
   
6,296
     
5,688
     
22,201
     
18,773
 
Other by-products
                               
Provisional sales revenue
 
$
133
   
$
300
   
$
360
   
$
1,927
 
Derivative pricing adjustments
   
(12
)
   
1
     
3
     
2
 
 
   
121
     
301
     
363
     
1,929
 
 
                               
Gross revenue
 
$
17,129
   
$
13,689
   
$
68,100
   
$
54,353
 
Treatment and selling costs
   
(5,395
)
   
(3,875
)
   
(18,632
)
   
(12,119
)
 
 
$
11,734
   
$
9,814
   
$
49,468
   
$
42,234
 

Derivative pricing adjustments represent subsequent variations in revenue recognized as an embedded derivative from contracts with customers and are accounted for as financial instruments (see Note 16). Revenue from contracts with customers is recognized net of treatment and selling costs if payment of those amounts is enforced at the time of sale.
Page 11
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
13.   Cost of sales
 
Cost of sales is costs that directly relate to production at the mine operating segments and excludes depletion and amortization. The following are components of cost of sales:

 
 
Three-month
   
Three-month
   
Nine-month
   
Nine-month
 
 
 
period ended
   
period ended
   
period ended
   
period ended
 
 
 
September 30,
   
September 30,
   
September 30,
   
September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
 
                       
Salaries and employee benefits
 
$
6,119
   
$
5,277
   
$
17,599
   
$
16,544
 
Raw materials and consumables
   
4,754
     
2,560
     
14,034
     
10,105
 
Utilities
   
1,237
     
772
     
3,246
     
3,006
 
Other costs
   
447
     
343
     
1,948
     
1,931
 
Changes in inventories
   
252
     
(1,258
)
   
1,116
     
(1,229
)
 
 
$
12,809
   
$
7,694
   
$
37,943
   
$
30,357
 
 
14.   Corporate general and administrative expenses
 
Corporate general and administrative expenses are costs incurred at corporate and other segments that do not directly relate to production. The following are components of corporate general and administrative expenses:

 
 
Three-month
   
Three-month
   
Nine-month
   
Nine-month
 
 
 
period ended
   
period ended
   
period ended
   
period ended
 
 
 
September 30,
   
September 30,
   
September 30,
   
September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
 
                       
Salaries and employee benefits
 
$
446
   
$
423
   
$
1,333
   
$
1,306
 
Directors’ fees
   
95
     
72
     
241
     
196
 
Share-based payments
   
271
     
521
     
1,609
     
1,568
 
Professional fees
   
479
     
102
     
851
     
511
 
Office and general
   
368
     
397
     
1,193
     
1,196
 
 
 
$
1,659
   
$
1,515
   
$
5,227
   
$
4,777
 
 
15.   Income taxes
 
Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual rate used for the nine-month period ended September 30, 2018 was 26.5% and for the year ended December 31, 2017 was 26.5%.

The Company’s net deferred tax liability relates to the Mexican mining royalty and arises principally from the following:

 
 
September 30,
   
December 31,
 
 
 
2018
   
2017
 
 
           
Property, plant and equipment
 
$
837
   
$
900
 
Other
   
25
     
-
 
Total deferred tax liabilities
   
862
     
900
 
 
               
Alternative minimum tax credits
   
626
     
626
 
Other
   
-
     
28
 
Total deferred tax assets
   
626
     
654
 
Net deferred tax liabilities
 
$
236
   
$
246
 
 
 
Page 12
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
16.   Financial risk management
 
a.   Financial risk factors
 
The Company’s risk exposures and the impact on its financial instruments are summarized below:

(i)              Credit Risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash and cash equivalents and trade and other receivables. The credit risk on cash and cash equivalents is limited because the Company invests its cash in deposits with well-capitalized financial institutions with strong credit ratings in Canada and the United States. Under current concentrate offtake agreements, risk on trade receivables related to concentrate sales is managed by receiving payments for 85% to 100% of the estimated value of the concentrate within one month following the time of shipment.

As of September 30, 2018, the Company’s exposure to credit risk with respect to trade receivables amounts to $3.7 million (December 31, 2017: $3.8 million). The Company believes credit risk for Mexican Value Added Taxes of $1.7 million (December 31, 2017: $2.8 million) is not significant as they relate to current amounts receivable from Mexican taxation authorities. There are no receivables that are past due as at September 30, 2018.

(ii)              Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they arise. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. The Company’s liquidity requirements are met through a variety of sources, including cash, cash generated from operations, existing credit facilities and debt and equity capital markets. The Company’s trade payables have contractual maturities of less than 30 days and are subject to normal trade terms.

The following table presents the contractual maturities of the Company’s financial liabilities on an undiscounted basis:

 
 
September 30, 2018
 
 
       
Less than
               
Over 5
 
 
 
Total
   
1 year
   
2-3 years
   
4-5 years
   
years
 
 
                             
Trade and other payables
 
$
10,410
   
$
10,410
   
$
-
   
$
-
   
$
-
 
Pre-payment facility
   
12,230
     
5,355
     
6,875
     
-
     
-
 
Interest on pre-payment facility
   
1,019
     
694
     
325
     
-
     
-
 
Operating leases
   
1,179
     
274
     
535
     
370
     
-
 
Other long-term liabilities
   
735
     
-
     
245
     
-
     
490
 
 
 
$
25,573
   
$
16,733
   
$
7,980
   
$
370
   
$
490
 


(iii)              Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and price risk.

(1)
Interest rate risk

The Company is subject to the interest rate risk of U.S. LIBOR rate plus 5% per annum from the existing pre-payment facility.

(2)
Currency risk

As at September 30, 2018, the Company is exposed to foreign currency risk through financial assets and liabilities denominated in CAD and Mexican pesos (“MXP”):
Page 13
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
Financial instruments that may impact the Company’s net earnings or other comprehensive income due to currency fluctuations include CAD and MXP denominated assets and liabilities which are included in the following table:

 
 
As at September 30, 2018
 
 
 
CAD
   
MXP
 
 
           
Cash and cash equivalents
 
$
206
   
$
133
 
Trade and other receivables
   
39
     
1,871
 
Trade and other payables
   
1,004
     
4,506
 

As at September 30, 2018, the CAD/USD and MXP/USD exchange rates were 1.29 and 18.81, respectively. The sensitivity of the Company’s net income and comprehensive income due to changes in the exchange rates for the nine-month period ended September 30, 2018 is included in the following table:

 
 
CAD/USD
   
MXP/USD
 
 
 
Exchange rate
   
Exchange rate
 
 
   
+/- 10%
 
   
+/- 10%
 
 
               
Approximate impact on:
               
Net income
 
$
523
   
$
1,331
 
Other comprehensive income
   
39
     
(57
)

The Company may, from time to time, employ derivative financial instruments to manage exposure to fluctuations in foreign currency exchange rates.

At September 30, 2018, the Company had non-hedge foreign exchange forward contracts to buy approximately 33.7 million MXP at average exchange rate of 21.00 MXP/USD to be settled within the fourth quarter of 2018 valued at approximately $1.6 million, with $0.1 million or 5% held as fund deposit. The average forward exchange rate on settlement as at September 30, 2018 was approximately 18.85 MXP/USD with the currencies having a fair value of approximately $1.8 million. Accordingly, the Company recorded an unrealized gain of $0.1 million through profit or loss during the three-month period ended September 30, 2018 (unrealized gain of $0.2 million for the nine-month period ended September 30, 2018). The Company settled non-hedge foreign exchange forward contracts to buy approximately 44.1 million MXP and recorded realized gains of $0.2 million through profit or loss during the three-month period ended September 30, 2018. For the nine-month period ended September 30, 2018, the Company settled non-hedge foreign exchange forward contracts to buy approximately 68.9 million MXP and recorded realized gains of $0.1 million.

(3)
Price risk

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments in the market. As at September 30, 2018, the Company had certain amounts related to the sales of concentrates that have only been provisionally priced. A ±10% fluctuation in silver, zinc, lead, copper and gold prices would affect trade receivables by approximately $0.4 million.

The Company settled non-hedge commodity forward contracts to sell approximately 0.7 million pounds of zinc and recorded realized gains of $0.1 million through profit or loss during the three-month period ended September 30, 2018. For the nine-month period ended September 30, 2018, the Company settled non-hedge commodity forward contracts to sell approximately 1.4 million pounds of zinc and 2.6 million pounds of lead and recorded realized gains of $0.2 million and $0.3 million, respectively.
Page 14
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
b.   Fair values
 
The fair value of cash, restricted cash, trade and other payables, and other long-term liabilities approximate their carrying amounts. The methods and assumptions used in estimating the fair value of other financial assets and liabilities are as follows:

·
Cash and cash equivalents: The fair value of cash equivalents is valued using quoted market prices in active markets. The Company’s cash equivalents consist of money market accounts held at financial institutions which have original maturities of less than 90 days.
·
Trade and other receivables: The fair value of trade receivables from silver sales contracts that contain provisional pricing terms is determined using the appropriate quoted forward price from the exchange that is the principal active market for the particular metal. As such, there is an embedded derivative feature within trade receivables.
·
Embedded derivatives: Revenues from the sale of metals produced since the commencement of commercial production are based on provisional prices at the time of shipment. Variations between the price recorded at the time of sale and the actual final price received from the customer are caused by changes in market prices for metals sold and result in an embedded derivative in revenues and accounts receivable.
·
Derivatives: The Company uses derivative and non-derivative instruments to manage financial risks, including commodity and foreign exchange risks. The use of derivative contracts is governed by documented risk management policies and approved limits. The Company does not use derivatives for speculative purposes. The fair value of the Company’s derivative instruments is based on quoted market prices for similar instruments and at market prices at the valuation date.

The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value:

·
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
·
Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value foreign exchange and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means.
·
Level 3 inputs are unobservable (supported by little or no market activity).

 
 
September 30,
   
December 31,
 
 
 
2018
   
2017
 
 
           
Level 1
           
   Cash and cash equivalents
 
$
3,111
   
$
9,325
 
   Restricted cash
   
709
     
335
 
 
               
Level 2
               
   Trade and other receivables
   
5,646
     
6,631
 
   Forward contracts
   
263
     
-
 
   Pre-payment facility
   
12,230
     
15,000
 

 
17.   Segmented and geographic information, and major customers
 
a.   Segmented information
 
The Company’s operations comprise of three reporting segments engaged in acquisition, exploration, development and exploration of mineral resource properties in Mexico and the United States. Management has determined the operating segments based on the reports reviewed by the chief operating decision makers that are used to make strategic decisions.
Page 15
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
b.   Geographic information
 
All revenues from sale of concentrates for the three-month and nine-month periods ended September 30, 2018 and 2017 were earned in Mexico and the United States.

The following segmented information is presented as at September 30, 2018 and December 31, 2017, and for the three-month and nine-month periods ended September 30, 2018 and 2017.
 
 
 
As at September 30, 2018
   
As at December 31, 2017
 
 
 
Mexican Operations
   
U.S. Operations
   
Corporate and Other
   
Total
   
Mexican Operations
   
U.S. Operations
   
Corporate and Other
   
Total
 
 
                                               
Cash and cash equivalents
 
$
2,789
   
$
31
   
$
291
   
$
3,111
   
$
5,963
   
$
1,791
   
$
1,571
   
$
9,325
 
Trade and other receivables
   
4,262
     
1,345
     
39
     
5,646
     
4,901
     
1,711
     
19
     
6,631
 
Inventories
   
5,583
     
2,667
     
-
     
8,250
     
6,301
     
3,065
     
-
     
9,366
 
Prepaid expenses
   
558
     
920
     
296
     
1,774
     
346
     
305
     
218
     
869
 
Forward contracts
   
263
     
-
     
-
     
263
     
-
     
-
     
-
     
-
 
Restricted cash
   
168
     
541
     
-
     
709
     
160
     
171
     
4
     
335
 
Property, plant and equipment
   
63,163
     
42,836
     
49
     
106,048
     
59,686
     
40,570
     
45
     
100,301
 
Total assets
 
$
76,786
   
$
48,340
   
$
675
   
$
125,801
   
$
77,357
   
$
47,613
   
$
1,857
   
$
126,827
 
 
                                                               
Trade and other payables
 
$
5,684
   
$
3,370
   
$
1,356
   
$
10,410
   
$
5,893
   
$
2,608
   
$
1,892
   
$
10,393
 
Other long-term liabilities
   
-
     
673
     
62
     
735
     
-
     
469
     
95
     
564
 
Pre-payment facility
   
12,230
     
-
     
-
     
12,230
     
15,000
     
-
     
-
     
15,000
 
Post-employment benefit obligations
   
-
     
8,631
     
-
     
8,631
     
-
     
8,618
     
-
     
8,618
 
Decommissioning provision
   
1,956
     
1,894
     
-
     
3,850
     
1,904
     
2,044
     
-
     
3,948
 
Deferred tax liabilities (assets)
   
862
     
(626
)
   
-
     
236
     
872
     
(626
)
   
-
     
246
 
Total liabilities
 
$
20,732
   
$
13,942
   
$
1,418
   
$
36,092
   
$
23,669
   
$
13,113
   
$
1,987
   
$
38,769
 


 
 
Three-month period ended September 30, 2018
   
Three-month period ended September 30, 2017
 
 
 
Mexican Operations
   
U.S. Operations
   
Corporate and Other
   
Total
   
Mexican Operations
   
U.S. Operations
   
Corporate and Other
   
Total
 
 
                                               
Revenue
 
$
6,303
   
$
5,431
   
$
-
   
$
11,734
   
$
2,650
   
$
7,164
   
$
-
   
$
9,814
 
Cost of sales
   
(6,085
)
   
(6,724
)
   
-
     
(12,809
)
   
(343
)
   
(7,351
)
   
-
     
(7,694
)
Depletion and amortization
   
(1,587
)
   
(855
)
   
(1
)
   
(2,443
)
   
(707
)
   
(1,005
)
   
(3
)
   
(1,715
)
Care, maintenance and restructuring costs
   
(8
)
   
(121
)
   
-
     
(129
)
   
-
     
(136
)
   
-
     
(136
)
Corporate general and administrative expenses
   
-
     
-
     
(1,659
)
   
(1,659
)
   
-
     
-
     
(1,515
)
   
(1,515
)
Exploration costs
   
(462
)
   
(77
)
   
-
     
(539
)
   
(1,180
)
   
(127
)
   
-
     
(1,307
)
Accretion on decommissioning provision
   
(37
)
   
(11
)
   
-
     
(48
)
   
(35
)
   
(10
)
   
-
     
(45
)
Interest and financing income (expense)
   
(234
)
   
-
     
-
     
(234
)
   
21
     
-
     
(2
)
   
19
 
Foreign exchange gain (loss)
   
(88
)
   
-
     
1
     
(87
)
   
(187
)
   
-
     
6
     
(181
)
Gain on disposal of assets
   
15
     
-
     
-
     
15
     
-
     
-
     
-
     
-
 
Gain on forward contracts
   
256
     
-
     
(2
)
   
254
     
-
     
-
     
-
     
-
 
Loss on investment in equity instruments
   
-
     
-
     
-
     
-
     
-
     
-
     
(3
)
   
(3
)
Write-down of equipment
   
-
     
(65
)
   
-
     
(65
)
   
-
     
-
     
-
     
-
 
Income (loss) before income taxes
   
(1,927
)
   
(2,422
)
   
(1,661
)
   
(6,010
)
   
219
     
(1,465
)
   
(1,517
)
   
(2,763
)
Income tax recovery (expense)
   
219
     
-
     
-
     
219
     
(9
)
   
-
     
-
     
(9
)
Net income (loss) for the period
 
$
(1,708
)
 
$
(2,422
)
 
$
(1,661
)
 
$
(5,791
)
 
$
210
   
$
(1,465
)
 
$
(1,517
)
 
$
(2,772
)


Page 16
Americas Silver Corporation
Notes to the condensed interim consolidated financial statements
For the three-month and nine-month periods ended September 30, 2018 and 2017
(In thousands of U.S. dollars, unless otherwise stated, unaudited)
 
 
 
Nine-month period ended September 30, 2018
   
Nine-month period ended September 30, 2017
 
 
 
Mexican Operations
   
U.S. Operations
   
Corporate and Other
   
Total
   
Mexican Operations
   
U.S. Operations
   
Corporate and Other
   
Total
 
 
                                               
Revenue
 
$
28,986
   
$
20,482
   
$
-
   
$
49,468
   
$
16,975
   
$
25,259
   
$
-
   
$
42,234
 
Cost of sales
   
(17,278
)
   
(20,665
)
   
-
     
(37,943
)
   
(7,576
)
   
(22,781
)
   
-
     
(30,357
)
Depletion and amortization
   
(4,533
)
   
(2,505
)
   
(6
)
   
(7,044
)
   
(2,862
)
   
(2,925
)
   
(8
)
   
(5,795
)
Care, maintenance and restructuring costs
   
(30
)
   
(960
)
   
-
     
(990
)
   
(60
)
   
(362
)
   
(167
)
   
(589
)
Corporate general and administrative expenses
   
-
     
-
     
(5,227
)
   
(5,227
)
   
-
     
-
     
(4,777
)
   
(4,777
)
Exploration costs
   
(2,362
)
   
(166
)
   
-
     
(2,528
)
   
(1,615
)
   
(300
)
   
-
     
(1,915
)
Accretion on decommissioning provision
   
(110
)
   
(34
)
   
-
     
(144
)
   
(103
)
   
(31
)
   
-
     
(134
)
Interest and financing income (expense)
   
(746
)
   
-
     
-
     
(746
)
   
94
     
-
     
(688
)
   
(594
)
Foreign exchange gain (loss)
   
(281
)
   
-
     
10
     
(271
)
   
(161
)
   
-
     
89
     
(72
)
Gain on disposal of assets
   
870
     
-
     
-
     
870
     
-
     
-
     
-
     
-
 
Gain on forward contracts
   
319
     
165
     
373
     
857
     
-
     
-
     
-
     
-
 
Gain on investment in equity instruments
   
-
     
-
     
-
     
-
     
-
     
-
     
8
     
8
 
Write-down of equipment
   
-
     
(65
)
   
-
     
(65
)
   
-
     
-
     
-
     
-
 
Contingency on value added taxes
   
(125
)
   
-
     
-
     
(125
)
   
-
     
-
     
-
     
-
 
Income (loss) before income taxes
   
4,710
     
(3,748
)
   
(4,850
)
   
(3,888
)
   
4,692
     
(1,140
)
   
(5,543
)
   
(1,991
)
Income tax recovery (expense)
   
10
     
-
     
-
     
10
     
(116
)
   
-
     
-
     
(116
)
Net income (loss) for the period
 
$
4,720
   
$
(3,748
)
 
$
(4,850
)
 
$
(3,878
)
 
$
4,576
   
$
(1,140
)
 
$
(5,543
)
 
$
(2,107
)

Revenue includes derivative pricing adjustments of ($2.9) million and ($3.0) million for the three-month and nine-month periods ended September 30, 2018, respectively, from the Mexican Operations (2017: $0.5 million and $1.3 million) and ($0.4) million and ($0.5) million for the three-month and nine-month periods ended September 30, 2018, respectively, from the U.S. Operations (2017: $0.2 and $1.0 million) accounted for as financial instruments (see Note 12).

c.   Major customers
 
The Company sold concentrates to one customer during the three-month period ended September 30, 2018 (2017: two customers), accounting for 100% (2017: 86% and 14%) of revenues, respectively. For the nine-month period ended September 30, 2018, the Company sold concentrates to two customers (2017: two customers), accounting for 70% and 30% (2017: 72% and 28%) of revenues, respectively.
 
18.   Contingencies
 
Due to the size, complexity and nature of the Company’s operations, various legal and tax matters arise in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. The Company accrued $0.1 million (MXP 2.5 million) in the consolidated financial statements as at September 30, 2018 as a probable obligation for the disallowance of value added taxes related to a Mexican tax reassessment originally received in December 2010. Further details of the reassessment are disclosed in Note 22 of the consolidated financial statements for the year ended December 31, 2017.
 
19.   Subsequent events
 
On September 28, 2018, the Company entered into a definitive agreement to complete a business combination with Pershing Gold Corporation (“Pershing”). Under the terms of the combination transaction, shareholders of Pershing will receive 0.715 common shares of the Company for each outstanding Pershing common shares held and the right to receive 461.440 common shares of the Company for each outstanding Pershing preferred shares held. A special meeting of shareholders will be held to approve the proposed combination transaction with closing of the combination transaction expected during the first quarter of 2019.

On October 1, 2018, in connection with the proposed Pershing combination transaction, the Company entered into a short-term secured convertible loan agreement with Pierre Lassonde and two other lenders for $5.5 million CAD with interest payable at 15% per annum. The net proceeds of this loan will be used by the Company to fund a $4.0 million short-term secured first lien convertible loan to Pershing with interest payable at 16% per annum to address Pershing’s near-term working capital requirements.

Page 17
Exhibit 99.2









AMERICAS SILVER CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018
DATED NOVEMBER 4, 2018
 








 
Americas Silver Corporation
Management’s Discussion and Analysis
Table of Contents
 
Forward-Looking Statements
1
Management’s Discussion and Analysis
2
Overview
2
Recent Developments and Operational Discussion
3
Results of Operations
9
Summary of Quarterly Results
11
Liquidity
12
Capital Resources
13
Off-Balance Sheet Arrangements
13
Transactions with Related Parties
13
Risk Factors
13
Accounting Standards and Pronouncements
14
Financial Instruments
14
Capital Structure
14
Controls and Procedures
14
Non-IFRS Measures: Cash Cost per Ounce and All-In Sustaining Cost per Ounce
15

 

Unless otherwise indicated, in this Management Discussion and Analysis all reference to “dollar” or the use of the symbol “$” are to the United States of America dollar and all references to “C$” are to the Canadian dollar. Additionally, percentage changes in this Management Discussion and Analysis are based on dollar amounts before rounding.


Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

Forward-Looking Statements

Statements contained in this MD&A that are not current or historical factual statements may constitute forward-looking information or forward-looking statements within the meaning of applicable Canadian and United States securities laws. All statements other than statements of historical fact included in this MD&A that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including without limitation, statements regarding any objectives, expectations, intentions, plans, results, levels of activity, goals or achievements, estimates of mineral reserves and resources, the realization of mineral reserve estimates, the ramp up of San Rafael mining operations, impairment of mining interests and non-producing properties, the timing and amount of estimated future production, production guidance, costs of production, capital expenditures, costs and timing of development, success of exploration and development activities, permitting timelines, government regulation of mining operations, environmental risks, the going concern assumption, and the timing and possible outcomes of pending disputes or litigation, negotiations or regulatory investigations are or involve forward-looking statements. Although forward-looking statements contained in this MD&A are based on what management considers to be reasonable assumptions based on information currently available to it, there can be no assurances that actual events, performance or results will be consistent with these forward-looking statements, and management’s assumptions may prove to be incorrect. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as “anticipates”, “assumes”, “believes”, “budget”, “could”, “estimates”, “expects”, “forecasts”, “guidance”, “indicates”, “intends”, “likely”, “may”, “objective”, “outlook”, “plans”, “potential”, “predicts”, “scheduled”, “should”, “target”, “trends”, “will”, or “would” or the negative or other variations of these words or other comparable words or phrases. This MD&A and its appendices, including those set out under “Risk Factors” in this MD&A, contain forward-looking statements including, but not limited to those relating to the Company. All such forward-looking statements are subject to important risks, uncertainties and assumptions. These statements are forward-looking because they are based on current expectations, estimates and assumptions. It is important to know that: (i) unless otherwise indicated, forward-looking statements in this MD&A and its appendices describe expectations as at the date hereof; (ii) actual results and events could differ materially from those expressed or implied in the forward-looking statements in this MD&A and its appendices, if known or unknown risks affect the respective businesses of the Company, or if their estimates or assumptions turn out to be inaccurate. As a result, the Company cannot guarantee that the results or events expressed or implied in any forward-looking statement will materialize, and accordingly, you are cautioned not to place undue reliance on these forward-looking statements; and (iii) the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events or for any other reason, except in accordance with applicable securities laws. The Company has made a number of assumptions in making forward-looking statements in this MD&A and its appendices.
 
The list above is not exhaustive of the factors that may affect the Company’s forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further in the MD&A. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward‑looking statements.
Page 1
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018
 
Management’s Discussion and Analysis

This MD&A of the results of operations, liquidity and capital resources of Americas Silver Corporation (“Americas Silver” or the “Company”) constitutes management’s review of the Company’s financial and operating performance for the three and nine months ended September 30, 2018, including the Company’s financial condition and future prospects. Except as otherwise noted, this discussion is dated November 4, 2018 and should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements and the notes thereto for the three and nine months ended September 30, 2018 and 2017. The unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2018 and 2017 are prepared in accordance with International Accounting Standards (“IAS”) 34 under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The Company prepared its latest financial statements in U.S. dollars and all amounts in this MD&A are expressed in U.S. dollars, unless otherwise stated. These documents along with additional information relating to the Company are available on SEDAR at www.sedar.com and on the Company’s website at www.americassilvercorp.com .

In this report, the management of the Company presents operating highlights for the three months ended September 30, 2018 (“Q3-2018”) compared to the three months ended September 30, 2017 (“Q3-2017”) and for the nine months ended September 30, 2018 (“YTD-2018”) compared to the nine months ended September 30, 2017 (“YTD-2017”) as well as comments on plans for the future. Throughout this MD&A, references to silver equivalent ounces produced are based on the average silver, zinc, lead and copper realized metal prices during each respective period, except as otherwise noted.

Securities regulators encourage companies to disclose forward-looking information to help investors understand a company’s future prospects. This discussion contains statements about the Company’s future financial condition, results of operations and business. See page 1 of this report for more information on forward-looking statements.

The Company was incorporated under the Canada Business Corporations Act on May 12, 1998 and conducts mining exploration, development and production in the Americas.

Overview

The Company has operations in two of the world's leading silver regions: the Cosalá Operations in Sinaloa, Mexico and the Galena Complex in Idaho, USA.

In Sinaloa, Mexico, the Company operates the 100%-owned, producing, San Rafael silver-zinc-lead mine (“San Rafael”) after declaring commercial production in December 2017. Prior to that time, it operated the 100%-owned Nuestra Señora silver-zinc-copper-lead mine after commissioning the Los Braceros processing facility and declaring commercial production in January 2009. The Cosalá area land holdings also host several other known deposits, past-producing mines, and prospects including the Zone 120 silver-copper-gold deposit and the El Cajón silver-copper deposit (“El Cajón”). These properties are located in close proximity to the Los Braceros processing plant.

In Idaho, USA, the Company operates the 100%-owned producing Galena Complex whose primary assets are the operating Galena mine, the Coeur mine, and the contiguous Caladay development project in the Coeur d’Alene Mining District of the northern Idaho Silver Valley. The Galena Complex has recorded production of over 230 million ounces of silver along with associated by-product metals of copper and lead over a modern production history of more than sixty years. The Coeur mine has been put on care and maintenance pending an improvement in the silver price.

The Company’s mission is to profitably expand its precious metals production through the development of its own projects and consolidation of complementary projects. The Company’s current strategy is focused on extending the mine life of its current assets through exploration, optimizing the recently developed San Rafael mine, and charting a path to profitability at Galena. Exploration will continue evaluating early stage targets with an emphasis on the Cosalá District, and prospective areas near existing infrastructure at the Galena Complex.
Page 2
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

The Company’s management and Board of Directors (the “Board”) are comprised of senior mining executives who have extensive experience identifying, acquiring, developing, financing, and operating precious metals deposits globally.  The head office of the Company is located at 145 King Street West, Suite 2870, Toronto, Ontario, Canada, M5H 1J8. The Company is a reporting issuer in the jurisdictions of Ontario, British Columbia, Alberta, and Quebec, and is listed on the TSX trading under the symbol “USA” and on the NYSE American trading under the symbol “USAS”.

Recent Developments and Operational Discussion

Q3-2018 Highlights

·
Production of 1.4 million consolidated silver equivalent ounces, an increase of 27% year-over-year, including 0.3 million silver ounces.
·
Revenue of $11.7 million and net loss of $5.8 million for the quarter or ($0.13) per share, an increase in revenue of 20% and an increase in net loss of 109% compared to Q3-2017, including $3.3 million of negative provisional pricing adjustments.
·
Consolidated zinc production of 7.9 million pounds and lead production of 7.5 million pounds, increases of 451% and 40%, respectively.
·
Realized prices on sales of silver, zinc and lead decreased by 11%, 22%, and 18%, respectively, during the quarter compared to the first half of 2018, and were also lower when compared to Q3-2017.
·
Cost of sales of $9.08/oz. equivalent silver, by-product cash cost of $4.95/oz. silver, and all-in sustaining cost of $15.94/oz. silver for the quarter, representing year-over-year decreases of 1% and 61%, and an increase of 1%, respectively. Cost of sales of $8.46/oz. equivalent silver, by-product cash cost of negative ($1.31/oz.) silver, and all-in sustaining cost of $9.03/oz. silver for the first nine months of 2018, representing year-over-year decreases of 16%, 114%, and 31%, respectively.
·
San Rafael achieved its goal of sustaining a milling rate of over 1,700 tonnes per operating day.
·
The Galena Complex resumed normal operations in mid-July following hoist repairs completed late in Q2-2018.
·
Updated mineral reserves and resource with an effective date of June 30, 2018 are highlighted by a consolidated silver inventory containing 26 million ounces of proven and probable reserves, 70 million ounces of measured and indicated resources, and 28 million ounces of inferred resources.
·
The Company entered into a definitive agreement with Pershing Gold Corporation to complete a business combination.
·
The Company had a cash balance of $3.1 million and working capital balance of $3.3 million as at September 30, 2018.

Consolidated Operations

Consolidated silver equivalent production increased 27% over Q3-2017 driven by a strong performance at the Cosalá Operations. There the Los Braceros processing plant reached a performance milestone by sustaining a milling rate of over 1,700 tonnes per operating day by the end of the quarter. The San Rafael mine continued as the sole source of ore for the processing plant while advancing underground development into the Main Zone. With contributions from the Galena Complex, there was a significant gain in year-over-year base metal production with increases in consolidated zinc, and lead production of 451% and 40%, respectively. This strong performance was tempered by reduced mill throughput at the Cosalá Operations due to an unplanned mill repair lasting approximately 10 days, in addition to approximately 120 hours of lost operating time at the process plant due to periodic power outages stemming from delivery problems originating with the electricity provider. Additionally, the Galena Complex milled tonnage was lower as the mine resumed normal operations in mid-July following hoist repairs completed on June 30, 2018.
Page 3
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

Metal prices came off sharply late in Q2-2018 and were sustained at lower levels through Q3-2018 as the impact of U.S./Chinese trade discussions are felt widely across markets. Year-over-year, the silver spot price decreased from an average of $16.83 per ounce in Q3-2017 to $14.99 per ounce in Q3-2018 decreasing to a low of $14.13 per ounce in September 2018. Additionally, the market prices for the Company’s zinc and lead by-product metals also decreased year-over-year. The zinc spot price decreased to an average of $1.15 per pound during Q3-2018 compared to an average of $1.34 per pound year-over-year, while the lead spot price decreased to an average of $0.95 per pound during Q3-2018 compared to an average of $1.06 per pound year-over-year. The decrease in metal prices was the primary driver as the Company’s cash balance decreased to $3.1 million at the end Q3-2018 . Despite lower realized prices, the Company continued development of the San Rafael Main Zone. Capital development will decrease by the end of the fourth quarter and into 2019.

During Q3-2018, the Company produced 1.4 million consolidated silver equivalent ounces including 0.3 million silver ounces, compared to production of 1.1 million consolidated silver equivalent ounces including 0.6 million silver ounces during Q3-2017. Consolidated silver equivalent production increased due to the greater output of zinc and lead by-product metals at the Cosalá Operations though tempered by lower silver-lead tonnage at the Galena Complex due to the hoist issues in June .

In Q3-2018, consolidated costs of sales were $9.08/oz. equivalent silver, by-product cash costs were $4.95/oz. silver, and all-in sustaining costs were $15.94/oz. silver, representing year-over-year decreases of 1% and 61%, and an increase of 1%, respectively. The improvement in cash costs was a result of the significant increase in zinc and lead production primarily from the Cosalá Operations compared to Q3-2017 when the Company had not yet migrated from the Nuestra Señora mine to San Rafael . The base metal production increases were offset by decreases in the realized prices for zinc and lead during the period which negatively impacted by-product cash costs, and all-in sustaining costs.

On September 28, 2018, the Company entered into a definitive agreement to complete a business combination with Pershing Gold Corporation (“Pershing”). The combination will add an attractive gold-silver development project in Nevada with significant precious metal growth to the Company’s production profile. Under the terms of the combination transaction, shareholders of Pershing will receive 0.715 common shares of the Company for each outstanding Pershing common shares held. A special meeting of shareholders will be held to approve the proposed combination transaction with closing of the combination transaction expected during the first quarter of 2019. Details on the Pershing combination transaction can be found on the Company’s website at www.americassilvercorp.com .

On October 11, 2018, the Company updated mineral reserve and resource estimates for the Cosalá Operations and Galena Complex with an effective date of June 30, 2018. The estimate also includes the San Felipe property located in Sonora, Mexico on which the Company holds an option. The estimated silver inventory contained 26 million ounces of proven and probable reserves, a decrease of 2 million ounces or 9%, and 70 million ounces of measured and indicated resources, an increase of 12 million ounces or 21%.  Total silver contained in the inferred category decreased by 23% to 28.3 million ounces primarily due to the resource conversion at Zone 120 and adoption of stricter estimation parameters at Galena offset by the inclusion of 3.1 million ounces from the San Felipe Project.

Drilling completed in early 2018 at the Company’s Zone 120 deposit improved the confidence and understanding of the deposit.  The tonnage and silver contained in the indicated resources increased to 2.7 million tonnes and 16.2 million ounces grading 186 g/t silver and 0.46% copper, an improvement of approximately 30%, or 0.6 million tonnes and 3.7 million ounces. Given the similarities in ore characteristics with the El Cajón measured and indicated resource (1.1 million tonnes and 5.7 million ounces), and critical mass of the combined measured and indicated resource between Zone 120 and El Cajón, the Company is internally assessing the economic viability of the joint development of these deposits. The evaluation is expected to be completed in Q4, 2018. Future development of the deposit is expected to require low initial capital to reach production given the proximity of the deposit to existing infrastructure at San Rafael and El Cajón , and knowledge attained from the Company’s recent mine development.
Page 4
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

Mineral reserve and resource estimates and exploration results from the 2018 drill programs can be found on the Company’s website at www.americassilvercorp.com .

A subsidiary of the Company was party, with the United Steel Workers Union, to a collective bargaining agreement that covers all of the hourly employees at the Galena Complex with a term from June 29, 2014 to June 28, 2017. Effective August 29, 2018, union membership at the Galena Complex ratified a collective bargaining agreement between a subsidiary of the Company and the United Steel Workers Union.  The agreement runs until August 28, 2022 and covers substantially all of the operation’s hourly employees.

Consolidated Results and Developments

 
   
Q3-2018
     
Q3-2017
   
YTD-2018
   
YTD-2017
 
Revenues ($ M)
 
$
11.8
   
$
9.8
   
$
49.5
   
$
42.2
 
Silver Produced (oz)
   
323,497
     
564,833
     
1,022,243
     
1,646,472
 
Zinc Produced (lbs)
   
7,906,601
     
1,433,961
     
23,995,780
     
6,727,468
 
Lead Produced (lbs)
   
7,536,660
     
5,369,482
     
21,377,937
     
17,965,262
 
Copper Produced (lbs)
   
-
     
507,285
     
-
     
1,088,860
 
Total Silver Equivalent Produced (oz) 1
   
1,410,909
     
1,107,873
     
4,486,790
     
3,387,946
 
Cost of Sales/Ag Eq Oz Produced ($/oz) 3
 
$
9.08
   
$
9.17
   
$
8.46
   
$
10.13
 
Cash Cost/Ag Oz Produced ($/oz) 2,3
 
$
4.95
   
$
12.61
   
$
(1.31
)
 
$
9.64
 
All-In Sustaining Cost/Ag Oz Produced ($/oz) 2,3
 
$
15.94
   
$
15.92
   
$
9.03
   
$
13.06
 
Net Loss ($ M)
 
$
(5.8
)
 
$
(2.8
)
 
$
(3.9
)
 
$
(2.1
)
Comprehensive Loss ($ M)
 
$
(5.8
)
 
$
(2.9
)
 
$
(3.7
)
 
$
(2.5
)

1
Throughout this MD&A, silver equivalent production was calculated based on average silver, zinc, lead and copper realized prices during each respective period.
2
Refer to “Non-IFRS Measures: Cash Cost per Ounce and All-In Sustaining Cost per Ounce” section in this MD&A.
3
Calculation excludes pre-production of 160,128 silver ounces and 238,919 silver equivalent ounces mined in Q3-2017 and 245,391 silver ounces and 360,530 silver equivalent ounces mined in YTD-2017 from El Cajón during its commissioning period, and 5,146 silver ounces and 30,161 silver equivalent ounces mined in Q3-2017 and YTD-2017 from San Rafael during its commissioning period. Pre-production revenue and cost of sales from El Cajón and San Rafael are capitalized as an offset to development costs .

During Q3-2018, the Company produced 1,410,909 silver equivalent ounces, including 323,497 ounces of silver, at cost of sales of $9.08/oz. equivalent silver, by-product cash cost of $4.95/oz. silver, and all-in sustaining cost of $15.94/oz. silver. These results compare to 1,107,873 silver equivalent ounces, including 564,833 ounces of silver, at cost of sales of $9.17/oz. equivalent silver, by-product cash cost of $12.61/oz. silver, and all-in sustaining cost of $15.92/oz. silver during Q3-2017, a 27% and 1% increase in production of silver equivalent ounces, and all-in sustaining cost per ounce, respectively, and a 43%, 1% and 61% decrease in production of silver ounces, cost of sales per equivalent silver ounce, and by-product cash cost per ounce, respectively.

During YTD-2018, the Company produced 4,486,790 silver equivalent ounces, including 1,022,243 ounces of silver, at cost of sales of $8.46/oz. equivalent silver, by-product cash cost of negative ($1.31/oz). silver, and all-in sustaining cost of $9.03/oz. silver. These results compare 3,387,946 silver equivalent ounces, including 1,646,472 ounces of silver, at cost of sales of $10.13/oz. equivalent silver, by-product cash cost of $9.64/oz. silver, and all-in sustaining cost of $13.06/oz. silver during YTD-2017, a 32%  increase in production of silver equivalent ounces, and a 38%, 16%, 114% and 31% decrease in production of silver ounces, cost of sales per equivalent silver ounce, by-product cash cost per ounce, and all-in sustaining cost per ounce, respectively.

Consolidated silver production during Q3-2018 was lower by 43% compared to Q3-2017 and during YTD-2018 was lower by 38% compared to YTD-2017. The decreases were the result of lower silver grade and metallurgical recovery at the Cosalá Operations, in addition to the previously announced production interruptions at the Galena mine.   San Rafael will initially provide lower silver production compared to the previously mined deposits at the Cosalá Operations until mining sequences to the higher silver grade areas of the ore body later in 2020.
Page 5
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

The consolidated silver equivalent production and all-in sustaining costs increased by 27% and 1%, respectively, and the consolidated cash costs decreased by 61%, when compared to Q3-2017. The consolidated silver equivalent production increased by 32% and the consolidated cash costs and all-in sustaining costs decreased by 114% and 31%, respectively, when compared to YTD-2017, due to comparatively higher base metal grades generally present in the San Rafael deposit.

As a result of the increased silver equivalent production, revenues increased by $7.3 million or 17% from $42.2 million for the nine months ended September 30, 2017 to $49.5 million for the nine months ended September 30, 2018. However, net loss increased by $1.8 million from $2.1 million for the nine months ended September 30, 2017 to $3.9 million for the nine months ended September 30, 2018. Increase in net loss was primarily attributable to higher cost of sales, higher depletion and amortization, and higher exploration costs, offset by higher net revenue from increased silver equivalent production and by-product pricing, gain on the disposal of assets, and gains related to forward contracts. The Company generated cash from operating activities before non-cash working capital items of $4.9 million during the nine months ended September 30, 2018 compared to $5.9 million during the nine months ended September 30, 2017. These variances are further discussed in the following sections.

In March 2017, the Company entered into an option acquisition agreement with Santacruz Silver Mining Ltd. (“Santacruz”) to acquire an existing option with Minera Hochschild Mexico S.A. de C.V. (“Hochschild”) for the right to acquire a 100% interest of the San Felipe property located in Sonora, Mexico for total consideration of $15 million in cash, payable in two installments. The purchase of the option for $5 million plus an initial option payment for $2 million was paid to Santacruz and Hochschild, respectively, with cash on hand by the Company in March 2017 while the final option payment of $8 million was payable to Hochschild on or before December 15, 2017. On December 1, 2017, the final option payment of $8 million plus applicable VAT was amended to become option payments of $0.5 million paid on January 1, 2018, $0.5 million paid on April 1, 2018, $1.0 million paid on July 1, 2018, with the remaining balance of $6.0 million payable on or before December 31, 2018. Upon completion of the final option payment, the Company will have acquired 100% of the San Felipe property, a silver-zinc-lead development property free of any underlying third-party royalties. The Company is in discussions with Hochschild to restructure the remaining payments in light of the expected funding requirements for the Pershing combination.

In September 2018, the Company entered into a definitive agreement to complete a business combination with Pershing. Under the terms of the combination transaction, shareholders of Pershing will receive 0.715 common shares of the Company for each outstanding Pershing common shares held. A special meeting of shareholders will be held to approve the proposed combination transaction with closing of the combination transaction expected during the first quarter of 2019.

On October 1, 2018, in connection with the proposed Pershing combination transaction, the Company entered into a short-term secured convertible loan agreement with Pierre Lassonde and two other lenders for $5.5 million CAD with interest payable at 15% per annum. The net proceeds of this loan will be used by the Company to fund a $4.0 million short-term secured first lien convertible loan to Pershing with interest payable at 16% per annum to address Pershing’s near-term working capital requirements.
Page 6
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018
 
Cosalá Operations
 
   
Q3-2018
     
Q3-2017
   
YTD-2018
   
YTD-2017
 
Tonnes Milled
   
132,902
     
134,273
     
394,895
     
397,628
 
Silver Grade (g/t)
   
44
     
74
     
43
     
70
 
Zinc Grade (%)1
   
3.44
     
1.39
     
3.50
     
1.34
 
Lead Grade (%)1
   
1.36
     
0.73
     
1.38
     
0.66
 
Copper Grade (%)1
   
-
     
0.22
     
-
     
0.18
 
Silver Recovery (%)
   
54.2
     
87.0
     
50.8
     
86.3
 
Zinc Recovery (%)
   
78.4
     
71.8
     
78.8
     
79.7
 
Lead Recovery (%)
   
70.7
     
76.1
     
70.6
     
78.3
 
Copper Recovery (%)
   
-
     
81.2
     
-
     
70.6
 
Silver Produced (oz)
   
102,521
     
277,752
     
276,134
     
770,571
 
Zinc Produced (lbs)
   
7,906,601
     
1,433,961
     
23,995,780
     
6,727,468
 
Lead Produced (lbs)
   
2,815,885
     
793,058
     
8,477,686
     
3,268,780
 
Copper Produced (lbs)
   
-
     
507,285
     
-
     
1,088,860
 
Total Silver Equivalent Produced (oz)
   
888,342
     
528,823
     
2,877,669
     
1,626,696
 
Silver Sold (oz)
   
99,940
     
259,764
     
275,086
     
754,073
 
Zinc Sold (lbs)
   
7,813,957
     
1,258,532
     
23,578,424
     
6,506,030
 
Lead Sold (lbs)
   
2,722,329
     
669,281
     
8,467,496
     
3,135,551
 
Copper Sold (lbs)
   
-
     
460,227
     
-
     
1,049,841
 
Realized Silver Price ($/oz)
 
$
14.89
   
$
16.88
   
$
15.98
   
$
17.19
 
Realized Zinc Price ($/lb)
 
$
1.14
   
$
1.33
   
$
1.37
   
$
1.24
 
Realized Lead Price ($/lb)
 
$
0.95
   
$
1.05
   
$
1.07
   
$
1.02
 
Realized Copper Price ($/lb)
   
-
   
$
2.92
     
-
   
$
2.76
 
Cost of Sales/Ag Eq Oz Produced ($/oz)3
 
$
6.85
   
$
1.32
   
$
6.00
   
$
6.13
 
Cash Cost/Ag Oz Produced ($/oz)2,3
 
$
(22.42
)
 
$
3.16
   
$
(45.95
)
 
$
(0.09
)
All-In Sustaining Cost/Ag Oz Produced ($/oz)2,3
 
$
(0.67
)
 
$
3.16
   
$
(24.89
)
 
$
(0.07
)

1
Zinc and lead grades only refer to grades from silver-zinc-lead-copper and silver-zinc-lead ores, and copper grades only refer to grades from silver-zinc-lead-copper and silver-copper ores.
2
Refer to “Non-IFRS Measures: Cash Cost per Ounce and All-In Sustaining Cost per Ounce” section in this MD&A.
3
Calculation excludes pre-production of 160,128 silver ounces and 238,919 silver equivalent ounces mined in Q3-2017 and 245,391 silver ounces and 360,530 silver equivalent ounces mined in YTD-2017 from El Cajón during its commissioning period, and 5,146 silver ounces and 30,161 silver equivalent ounces mined in Q3-2017 and YTD-2017 from San Rafael during its commissioning period. Pre-production revenue and cost of sales from El Cajón and San Rafael are capitalized as an offset to development costs .

Despite 10 days of reduced throughput due to unplanned mill repairs, the Cosalá Operations processed 132,902 tonnes of ore at an average grade of 44 g/t of silver to produce 102,521 ounces of silver at cost of sales of $6.85/oz. equivalent silver, by-product cash cost of negative ($22.42/oz.) silver, and all-in sustaining cost of negative ($0.67/oz.) silver during Q3-2018. These results compare to 134,273 tonnes of ore at an average grade of 74 g/t of silver to produce 277,752 ounces of silver at cost of sales of $1.32/oz. equivalent silver, by-product cash cost of $3.16/oz. silver, and all-in sustaining cost of $3.16/oz. silver during Q3-2017, a 1% and 63% decrease in tonnes of ore milled and ounces of silver produced, respectively, significant decreases in by-product cash cost per ounce and all-in sustaining cost per ounce by well above 100%, and a significant increase in cost of sales per equivalent silver ounce by well above 100%. Silver equivalent production at Cosalá increased to 888,342 ounces from 528,823 ounces due to the production of 7.9 million pounds of zinc and 2.8 million pounds of lead, increases of 451% and 255%, respectively. Silver recovery to concentrate was 54.2% in Q3-2018 (Q3-2017 – 87.0%).

During YTD-2018, the Cosalá Operations processed 394,895 tonnes of ore at an average grade of 43 g/t of silver to produce 276,134 ounces of silver at cost of sales of $6.00/oz. equivalent silver, by-product cash cost of negative ($45.95/oz.) silver, and all-in sustaining cost of negative ($24.89/oz.) silver. These results compare to 397,628 tonnes of ore at an average grade of 70 g/t of silver to produce 770,571 ounces of silver at cost of sales of $6.13/oz. equivalent silver, by-product cash cost of negative ($0.09/oz.) silver, and all-in sustaining cost of negative ($0.07/oz.) silver during YTD-2017, a 1%, 64%, and 2% decrease in tonnes of ore milled, ounces of silver produced, and cost of sales per equivalent silver ounce, respectively, and significant decreases in by-product cash cost per ounce and all-in sustaining cost per ounce by well above 100%. Silver equivalent production at Cosalá increased to 2,877,669 ounces from 1,626,696 ounces due to the production of 24.0 million pounds of zinc and 8.5 million pounds of lead, increases of 257% and 159%, respectively. Silver recovery to concentrate   was 50.8% in YTD-2018 (YTD-2017 – 86.3%).
Page 7
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

Silver production during Q3-2018 and YTD-2018 from the Cosalá Operations was lower compared to Q3-2017 and YTD-2017 as the Company completed its first nine months of operations from its new San Rafael mine after declaring commercial production in December 2017. San Rafael is expected to produce ore containing lower grade silver and higher-grade base metals compared to the previously mined deposits at the Cosalá Operations until mining operations move to higher silver grade areas of ore body later next year. Additionally, the initial development in the San Rafael ore body was in an area closest to the portal where the silver grade is less than half of the reserve silver grade. As a result, the silver production was lower by 63% in Q3-2018 compared to Q3-2017 and lower by 64% in YTD-2018 compared to YTD-2017. However, the Cosalá Operations had a significant increase in silver equivalent production as well as a significant reduction in cash costs and all-in sustaining costs during Q3-2018 and YTD-2018, primarily due to the by-product metal production from zinc and lead during the period, which increased by 451% and 255%, respectively, when compared to Q3-2017 and increased by 257% and 159%, respectively, when compared to YTD-2017.

Realized silver price at $14.89/oz. and $15.98/oz. for Q3-2018 and YTD-2018, respectively (Q3-2017 – $16.88/oz. and YTD-2017 – $17.19/oz., respectively), are comparable to the average London silver spot price of $14.99/oz. and $16.10/oz. for Q3-2018 and YTD-2018, respectively (Q3-2017 – $16.83/oz. and YTD-2017 – $17.17/oz., respectively). The realized silver price decreased by 12% from Q3-2017 to Q3-2018 and 7% from YTD-2017 to YTD-2018. Realized silver prices is a measurement of gross silver revenues over silver ounces sold during the period, excluding unrealized mark-to-market gains and losses on provisional pricing and treatment and refining charges.

Galena Complex

 
   
Q3-2018
     
Q3-2017
   
YTD-2018
   
YTD-2017
 
Tonnes Milled
   
37,477
     
40,404
     
103,672
     
123,969
 
Silver Grade (g/t)
   
195
     
233
     
236
     
231
 
Lead Grade (%)
   
6.26
     
5.68
     
6.17
     
5.91
 
Silver Recovery (%)
   
93.9
     
94.9
     
94.9
     
95.0
 
Lead Recovery (%)
   
91.3
     
90.5
     
91.5
     
90.9
 
Silver Produced (oz)
   
220,976
     
287,081
     
746,109
     
875,901
 
Lead Produced (lbs)
   
4,720,775
     
4,576,424
     
12,900,251
     
14,696,482
 
Total Silver Equivalent Produced (oz)
   
522,567
     
579,051
     
1,609,121
     
1,761,250
 
Silver Sold (oz)
   
209,732
     
282,534
     
750,906
     
891,531
 
Lead Sold (lbs)
   
4,471,878
     
4,555,041
     
12,974,781
     
14,933,766
 
Realized Silver Price ($/oz)
 
$
14.66
   
$
16.89
   
$
16.12
   
$
17.18
 
Realized Lead Price ($/lb)
 
$
0.94
   
$
1.08
   
$
1.07
   
$
1.04
 
Cost of Sales/Ag Eq Oz Produced ($/oz)
 
$
12.87
   
$
12.69
   
$
12.84
   
$
12.93
 
Cash Cost/Ag Oz Produced ($/oz)1
 
$
17.65
   
$
16.31
   
$
15.21
   
$
15.42
 
All-In Sustaining Cost/Ag Oz Produced ($/oz)1
 
$
23.65
   
$
20.92
   
$
21.59
   
$
20.85
 


1
Refer to “Non-IFRS Measures: Cash Cost per Ounce and All-In Sustaining Cost per Ounce” section in this MD&A.

Page 8
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018
 
The Galena Complex processed 37,477 tonnes of ore at an average grade of 195 g/t of silver to produce 220,976 ounces of silver at cost of sales of $12.87/oz. equivalent silver, by-product cash cost of $17.65/oz. silver, and all-in sustaining cost of $23.65/oz. silver during Q3-2018, compared to 40,404 tonnes of ore at an average grade of 233 g/t of silver to produce 287,081 ounces of silver at cost of sales of $12.69/oz. equivalent silver, by-product cash cost of $16.31/oz. silver, and all-in sustaining cost of $20.92/oz. silver during Q3-2017, a 7% and 23% decrease in tonnes of ore milled and ounces of silver produced, respectively, and a 1%, 8% and 13% increase in cost of sales per equivalent silver ounce, by-product cash cost per ounce, and all-in sustaining cost per ounce, respectively.

During YTD-2018, the Galena Complex processed 103,672 tonnes of ore at an average grade of 236 g/t of silver to produce 746,109 ounces of silver at cost of sales of $12.84/oz. equivalent silver, by-product cash cost of $15.21/oz. silver, and all-in sustaining cost of $21.59/oz. silver, compared to 123,969 tonnes of ore at an average grade of 231 g/t of silver to produce 875,901 ounces of silver at cost of sales of $12.93/oz. equivalent silver, by-product cash cost of $15.42/oz. silver, and all-in sustaining cost of $20.85/oz. silver during YTD-2017, a 16%, 15%, 1% and 1% decrease in tonnes of ore milled, ounces of silver produced, cost of sales per equivalent silver ounce, and by-product cash cost per ounce, respectively, and a 4% increase in all-in sustaining cost per ounce.

As previously announced on June 14, 2018, production at the Galena Complex was negatively impacted by two issues affecting the No.3 Shaft: a 10-day suspension of hoisting in late April to allow the repair of steel sets in the shaft, and a 17-day shutdown of the hoist in June to address a mechanical failure in the hoist brake mechanism. The Complex was assessed to temporarily be on care and maintenance for the 17-day shutdown as repairs were performed with certain costs excluded from the cash costs and all-in sustaining costs calculations. Repairs were completed by the end of June 2018 and the Galena Complex resumed normal operations in Q3-2018. The Company is focused on returning Galena to an acceptable level of operating performance.

Realized silver price at $14.66/oz. and $16.12/oz. for Q3-2018 and YTD-2018, respectively (Q3-2017 – $16.89/oz. and YTD-2017 – $17.18/oz., respectively), are comparable to the average London silver spot price of $14.99/oz. and $16.10/oz. for Q3-2018 and YTD-2018, respectively (Q3-2017 – $16.83/oz. and YTD-2017 – $17.17/oz., respectively). The realized silver price decreased by 13% from Q3-2017 to Q3-2018 and decreased by 6% from YTD-2017 to YTD-2018. Realized silver prices is a measurement of gross silver revenues over silver ounces sold during the period, excluding unrealized mark-to-market gains and losses on provisional pricing and treatment and refining charges.

Guidance

The Company experienced a number of unexpected events that have impacted year-to-date production, specifically: Galena’s 10-day shutdown for shaft maintenance (April); Galena’s 17-day No.3 hoist issue (June-July); at Cosalá, a 10-day slowdown for repairs to one of the primary grinding mills; and approximately 120 hours of cumulative mill downtime due to periodic power outages stemming from delivery problems originating with the electricity provider. The metals industry has also experienced a sharp decrease in spot and realized prices as previously discussed, impacting silver equivalency, cost of sales per ounce, cash costs, and AISC. As a result, the Company is re-assessing its guidance for the year and intends to update the market later in the Q4-2018.

Results of Operations

Analysis of the three months ended September 30, 2018 vs. the three months ended September 30, 2017

The Company recorded net loss of $5.8 million for the three months ended September 30, 2018 compared to net loss of $2.8 million for the three months ended September 30, 2017. The increase in net loss was primarily attributable to higher cost of sales ($5.1 million), and higher depletion and amortization ($0.7 million), offset by higher net revenue from increased silver equivalent production ($1.9 million), and lower exploration costs ($0.8 million), each of which are described in more detail below.
Page 9
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

Revenue increased by $1.9 million from $9.8 million for the three months ended September 30, 2017 to $11.7 million for the three months ended September 30, 2018. The increase is primarily due to $3.6 million in increased revenues due to an increase in zinc and lead production from the San Rafael mine during the period compared to Q3-2017 when production was from the lower-grade Nuestra Señora mine, less $1.7 million in decreased revenues   due to a decrease in silver production and sales at the Galena Complex during the period. Revenue was impacted by negative provisional pricing adjustments of $3.3 million (2017 – positive $0.7 million) during the quarter.

Cost of sales increased by $5.1 million from $7.7 million for the three months ended September 30, 2017 to $12.8 million for the three months ended September 30, 2018. The increase is primarily due to the timing of commercial production at San Rafael in December 2017. In Q3-2017, development costs and any pre-productions revenues were capitalized to fixed assets instead of expensed as cost of sales. In Q3- 2017, Nuestra Señora was still operating though with lower levels of capital development as the mine would down operations toward closure. There was a $0.6 million decrease in cost of sales at the Galena Complex due to lower employee-related medical costs incurred during the period.

Depletion and amortization increased by $0.7 million from $1.7 million for the three months ended September 30, 2017 to $2.4 million for the three months ended September 30, 2018. The increase is primarily due to declaration of commercial production of San Rafael at the Cosalá Operations in December 2017 resulting in the depletion of its mining interests during the period . With declaration of San Rafael commercial production in December 2017, the Company transferred $6.4 million of deferred development costs and $25.2 million of historical carrying value related to San Rafael to mining interests and began amortizing these costs based on the Company’s depletion and amortization policies.

Exploration costs   decreased by $0.8 million from $1.3 million for the three months ended September 30, 2017 to $0.5 million for the three months ended September 30, 2018. The decrease is primarily due to increased drilling at Zone 120 in Q3-2017 that highlighted the potential of this deposit.

Analysis of the nine months ended September 30, 2018 vs. the nine months ended September 30, 2017

The Company recorded net loss of $3.9 million for the nine months ended September 30, 2018 compared to net loss of $2.1 million for the nine months ended September 30, 2017. The increase in net loss was primarily attributable to higher cost of sales ($7.5 million), higher depletion and amortization ($1.2 million), and higher exploration costs ($0.6 million), offset by higher net revenue from increased silver equivalent production and by-product pricing ($7.3 million), gain on the disposal of assets ($0.9 million), and gains related to forward contracts ($0.9 million), each of which are described in more detail below.

Revenues increased by $7.3 million from $42.2 million for the nine months ended September 30, 2017 to $49.5 million for the nine months ended September 30, 2018. The increase is primarily due to $12.0 million in increased revenues due to an increase in zinc and lead production and related realized prices from the San Rafael mine during the period compared to YTD-2017 when production was from the lower-grade Nuestra Señora mine, less $4.8 million in decreased revenues   due to a decrease in silver production and sales at the Galena Complex from resolved issues affecting the No.3 Shaft during the period. Revenue was impacted by negative provisional pricing adjustments of $3.5 million (2017 – positive $2.3 million) during the year to date.

Cost of sales increased by $7.5 million from $30.4 million for the nine months ended September 30, 2017 to $37.9 million for the nine months ended September 30, 2018. The increase is primarily due to a $9.7 million increase in cost of sales from the Cosalá Operations. In Q3-2017, development costs, net of pre-productions revenues related to San Rafael and El Cajón were capitalized to fixed assets instead of expensed as cost of sales. This increase was offset by a $2.1 million decrease in cost of sales from the Galena Complex from resolved issues affecting the No.3 Shaft negatively impacting production during the period.
Page 10
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

Depletion and amortization increased by $1.2 million from $5.8 million for the nine months ended September 30, 2017 to $7.0 million for the nine months ended September 30, 2018. The increase is primarily due to declaration of commercial production of San Rafael at the Cosalá Operations in December 2017 resulting in the depletion of its mining interests during the period . With declaration of San Rafael commercial production in December 2017, the Company transferred $6.4 million of deferred development costs and $25.2 million of historical carrying value related to San Rafael to mining interests and began amortizing these costs based on the Company’s depletion and amortization policies.

Exploration costs   increased by $0.6 million from $1.9 million for the nine months ended September 30, 2017 to $2.5 million for the nine months ended September 30, 2018. The change is primarily due to increased exploration drilling at Zone 120 at the Cosalá Operations earlier this year.

Gain on disposal of assets   increased by $0.9 million from nil for the nine months ended September 30, 2017 to $0.9 million for the nine months ended September 30, 2018. The gain is primarily due to proceeds received through an insurance claim for equipment damaged from mining operations during fiscal 2017.

Gain on forward contracts   increased by $0.9 million from nil for the nine months ended September 30, 2017 to $0.9 million for the nine months ended September 30, 2018. The increase is primarily due to the gains recognized from foreign exchange and commodity forward contracts related to by-product metal production during the period.

Summary of Quarterly Results

The following table presents a summary of the consolidated operating results for each of the most recent eight quarters ending with September 30, 2018.

   
Q3
     
Q2
     
Q1
     
Q4
     
Q3
     
Q2
     
Q1
     
Q4
 
 
   
2018
     
2018
     
2018
     
2017
     
2017
     
2017
     
2017
     
2016
 
Revenues ($ M)
 
$
11.8
   
$
17.3
   
$
20.4
   
$
12.1
   
$
9.8
   
$
17.2
   
$
15.2
   
$
14.4
 
Net Income (Loss) ($ M)
   
(5.8
)
   
1.4
     
0.5
     
(1.4
)
   
(2.8
)
   
0.9
     
(0.2
)
   
(2.4
)
Comprehensive Income (Loss) ($ M)
   
(5.8
)
   
1.3
     
0.8
     
(1.8
)
   
(2.9
)
   
0.8
     
(0.5
)
   
(1.0
)
 
                                                               
Silver Produced (oz)
   
323,497
     
301,711
     
397,035
     
409,545
     
564,833
     
557,892
     
523,747
     
564,475
 
Zinc Produced (lbs)
   
7,906,601
     
8,756,201
     
7,332,978
     
4,895,670
     
1,433,961
     
2,904,374
     
2,389,133
     
2,671,391
 
Lead Produced (lbs)
   
7,536,660
     
6,216,592
     
7,624,685
     
7,427,357
     
5,369,482
     
6,435,048
     
6,160,732
     
7,277,346
 
Copper Produced (lbs)
   
-
     
-
     
-
     
78,541
     
507,285
     
273,475
     
308,100
     
260,018
 
Cost of Sales/Ag Eq Oz Produced ($/oz)
 
$
9.08
   
$
8.20
   
$
8.14
   
$
10.16
   
$
9.17
   
$
11.00
   
$
9.93
   
$
9.91
 
Cash Cost/Ag Oz Produced ($/oz) 1
 
$
4.95
   
$
(6.15
)
 
$
(2.73
)
 
$
8.75
   
$
12.61
   
$
7.21
   
$
9.89
   
$
8.91
 
All-In Sustaining Cost/Ag Oz Produced ($/oz) 1
 
$
15.94
   
$
5.40
   
$
6.17
   
$
14.20
   
$
15.92
   
$
10.65
   
$
13.37
   
$
11.57
 
 
                                                               
Current Assets (qtr. end) ($ M)
 
$
19.0
   
$
25.8
   
$
25.8
   
$
26.2
   
$
27.0
   
$
29.9
   
$
36.0
   
$
36.6
 
Current Liabilities (qtr. end) ($ M)
   
15.8
     
13.7
     
14.9
     
14.4
     
12.1
     
11.6
     
11.1
     
16.5
 
Working Capital (qtr. end) ($ M)
   
3.2
     
12.1
     
10.9
     
11.8
     
14.9
     
18.3
     
24.9
     
20.1
 
 
                                                               
Total Assets (qtr. end) ($ M)
 
$
125.8
   
$
130.5
   
$
128.8
   
$
126.8
   
$
126.1
   
$
127.7
   
$
127.1
   
$
117.3
 
Total Liabilities (qtr. end) ($ M)
   
36.1
     
35.6
     
38.3
     
38.8
     
38.6
     
38.6
     
39.1
     
30.1
 
Total Equity (qtr. end) ($ M)
   
89.7
     
94.9
     
90.5
     
88.0
     
87.5
     
89.1
     
88.0
     
87.2
 


1
Refer to “Non-IFRS Measures: Cash Cost per Ounce and All-In Sustaining Cost per Ounce” section in this MD&A.


Page 11
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018
 
Liquidity

The change in cash since December 31, 2017 can be summarized as follows (in millions of U.S. dollars):

Opening cash balance as at December 31, 2017
 
$
9.3
 
Cash generated from operations
   
4.9
 
Expenditures on property, plant and equipment
   
(10.6
)
Purchase of San Felipe property option
   
(2.0
)
Repayments to pre-payment facility
   
(2.8
)
Bond on decommissioning costs
   
(0.4
)
Proceeds from exercise of options and warrants
   
3.6
 
Decrease in trade and other receivables
   
1.0
 
Change in inventories
   
1.1
 
Increase in prepaid expenses
   
(0.9
)
Decrease in trade and other payables
   
(0.1
)
Closing cash balance as at September 30, 2018
 
$
3.1
 

The Company’s cash balance decreased from $9.3 million to $3.1 million mainly due to $2.5 million on expensed exploration at the Company’s operations, expenditures of property, plant and equipment at both Cosalá Operations and Galena Complex, option payments on the San Felipe property, and repayments on outstanding pre-payment facility with Glencore, offset by proceeds received from exercise of options and warrants. Current liabilities as at September 30, 2018 were $15.8 million which is $1.4 million higher than at December 31, 2017 mainly due to a $1.4 million increase in current repayment obligations on outstanding pre-payment facility.

The Company operates in a cyclical industry where cash flow has historically been correlated to market prices for commodities. The Company’s cash flow is dependent upon its ability to achieve profitable operations, obtain adequate equity or debt financing, or, alternatively, dispose its non-core properties on an advantageous basis to fund its near-term operations, development and exploration plans, while meeting production targets at current commodity price levels. Management evaluates viable financing alternatives to ensure sufficient liquidity including debt instruments, concentrate offtake agreements, sales of non-core assets, private equity financing, and the issuance of equity. The Company believes that it has sufficient cash flow to fund its 2018 operations and development and exploration plans while meeting production targets at current commodity price levels. The Company is in the process of assessing funding options for the development of Relief Canyon in the event it successfully completes the acquisition of Pershing Gold Corporation. In the longer term, as production from the Cosalá Operations and Galena Complex continues to improve and if the outlook for metal prices remains positive, the Company believes that cash flows will be sufficient to fund ongoing operations.

The Company’s financial instruments consist of cash, trade receivables, restricted cash, long-term investments, trade and other payables, pre-payment facility, and other long-term liabilities. The fair value of these financial instruments approximates their carrying values, unless otherwise noted. The Company is not exposed to significant interest or credit risk arising from financial instruments. The majority of the funds of the Company are held in accounts at major banks in Canada, Mexico and the United States.

The Company’s liquidity has been, and will continue to be, impacted by pension funding commitments as required by the terms of the defined benefit pension plans offered to both its hourly and salaried workers at the Galena Complex (See note 11 in the audited consolidated financial statements of the Company and the notes thereto for the year ended December 31, 2017). Although both pension plans are under-funded due to actuarial losses incurred from market conditions and changes in discount rates, the Company intends to fund to the minimum levels required by applicable law. The Company currently estimates total annual funding requirements for both pension plans to be approximately $0.9 million per year for each of the next 5 years, with no further pension contribution spending expected for the remainder of 2018 (as of November 4, 2018).
Page 12
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

Capital Resources

The Company’s cash flow is dependent on delivery of its concentrates to market. The Company’s contracts with the concentrate purchasers provide for provisional payments based on timing of concentrate deliveries. The Company has not had any problems collecting payments from concentrate purchasers in a reliable and timely manner and expects no such difficulties in the foreseeable future. However, this cash flow is dependent on continued mine production which can be subject to interruption for various reasons including fluctuations in metal prices and concentrate shipment difficulties. Additionally, unforeseen cessation in the counterparty’s capabilities could severely impact the Company’s capital resources.

The Company made capital expenditures of $12.7 million during the nine months ended September 30, 2018 and $23.7 million for the same period of 2017, of which $6.5 million was spent towards drilling and underground development costs, while $6.2 million was spent on purchase of property, plant and equipment. The Company expects funding of fiscal 2018 capital expenditures to be provided from internally-generated, operating cash flow from the San Rafael mine.

The following table sets out the Company’s contractual obligations as of September 30, 2018:

 
       
Less than
               
Over 5
 
 
 
Total
   
1 year
   
2-3 years
   
4-5 years
   
years
 
Trade and other payables
 
$
10,410
   
$
10,410
   
$
-
   
$
-
   
$
-
 
Pre-payment facility
   
12,230
     
5,355
     
6,875
     
-
     
-
 
Interest on pre-payment facility
   
1,019
     
694
     
325
     
-
     
-
 
Operating leases
   
1,179
     
274
     
535
     
370
     
-
 
Other long-term liabilities
   
735
     
-
     
245
     
-
     
490
 
Total
 
$
25,573
   
$
16,733
   
$
7,980
   
$
370
   
$
490
 
 
1 - All operating leases can be cancelled upon proper notice periods by the Company.
 
2 - Certain of these estimates are dependent on market conditions and assumed rates of return on assets. Therefore, the estimated obligation of the Company may vary over time.

Off-Balance Sheet Arrangements

As of the date of this filing, the Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company including, without limitation, such considerations as liquidity and capital resources that have not previously been discussed.

Transactions with Related Parties

There were no related party transactions for the nine months ended September 30, 2018.

Risk Factors

The Company manages a number of risks to achieve an acceptable level of risk without appreciably hindering its ability to maximize returns. Management has procedures in place to identify and manage significant operational and financial risks. A discussion of risk factors relating to the Company is found under the heading “Risk Factors” in the Company’s Annual Information Form dated March 5, 2018 and its MD&A for the year ended December 31, 2017. Each of the discussions referred to above is incorporated by reference herein. The documents referred to above are available on SEDAR at www.sedar.com .
Page 13
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

Accounting Standards and Pronouncements
 
Accounting standards issued but not yet applied
 
There have been no new accounting pronouncements issued in the first nine months of 2018 that are expected to impact the Company. For a summary of recent pronouncements, see note 3 in the Company’s unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2018.

Financial Instruments
 
The Company may, from time to time, employ derivative financial instruments to manage exposure to fluctuations in foreign currency exchange rates and commodity prices.

At September 30, 2018, the Company had non-hedge foreign exchange forward contracts to buy approximately 33.7 million MXP at average exchange rate of 21.00 MXP/USD to be settled within the fourth quarter of 2018 valued at approximately $1.6 million, with $0.1 million or 5% held as fund deposit. The average forward exchange rate on settlement as at September 30, 2018 was approximately 18.85 MXP/USD with the currencies having a fair value of approximately $1.8 million. Accordingly, the Company recorded an unrealized gain of $0.1 million through profit or loss during the three-month period ended September 30, 2018 (unrealized gain of $0.2 million for the nine-month period ended September 30, 2018). The Company settled non-hedge foreign exchange forward contracts to buy approximately 44.1 million MXP and recorded realized gains of $0.2 million through profit or loss during the three-month period ended September 30, 2018. For the nine-month period ended September 30, 2018, the Company settled non-hedge foreign exchange forward contracts to buy approximately 68.9 million MXP and recorded realized gains of $0.1 million.

The Company settled non-hedge commodity forward contracts to sell approximately 0.7 million pounds of zinc and recorded realized gains of $0.1 million through profit or loss during the three-month period ended September 30, 2018. For the nine-month period ended September 30, 2018, the Company settled non-hedge commodity forward contracts to sell approximately 1.4 million pounds of zinc and 2.6 million pounds of lead and recorded realized gains of $0.2 million and $0.3 million, respectively.

Capital Structure
 
The Company is authorized to issue an unlimited number of common shares, where each common share provides the holder with one vote. As at September 30, 2018, there were 43,094,657 common shares issued and outstanding.

As at November 4, 2018, there were 43,094,657 common shares of the Company issued and outstanding and 3,119,993 options outstanding which are exchangeable in common shares of the Company. The number of common shares issuable on the exercise of warrants is 5,166,622.

Controls and Procedures
 
Management is responsible for establishing and maintaining disclosure controls and procedures ("DC&P") and internal controls over financial reporting ("ICFR"), as those terms are defined in National Instrument 52 ‐ 109 ‐ Certification of Disclosure in Issuers’ Annual and Interim Filings ("NI 52 ‐ 109").

The Company’s DC&P are designed to ensure that all important information about the Company, including operating and financial activities, is communicated fully, accurately and in a timely way and that they provide the Company with assurance that the financial reporting is accurate.
Page 14
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018

ICFR means a process by or under the supervision of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

As at September 30, 2018, the Company’s CEO and CFO have certified that the DC&P are effective and that during the quarter ended September 30, 2018, the Company did not make any material changes in the ICFR that materially affected or are reasonably likely to materially affect the Company’s ICFR.

The internal controls are not expected to prevent and detect all misstatements due to error or fraud.

Non-IFRS Measures: Cash Cost per Ounce and All-In Sustaining Cost per Ounce

The Company reports cash cost per ounce and all-in sustaining cost per ounce of silver produced, non-IFRS measures, in accordance with measures widely reported in the silver mining industry as a benchmark for performance measurement. Management uses these measures internally to better assess performance trends and understands that a number of investors, and others who follow the Company’s performance, also assess performance in this manner.

These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardized meaning and may differ from methods used by other companies with similar descriptions. The methods do not include depletion, depreciation, exploration or corporate administrative costs and is therefore not directly reconcilable to costs as reported under International Financial Reporting Standards. All-in sustaining cost is the silver mining industry cash cost plus all development, capital expenditures, and exploration spending.

Reconciliation of Consolidated Cash Cost per Ounce
                       
                         
 
   
Q3 2018
     
Q3-2017
   
YTD-2018
   
YTD-2017
 
Cost of sales ('000)
 
$
12,809
   
$
7,694
   
$
37,943
   
$
30,357
 
Non-cash costs ('000)1
   
(18
)
   
1,715
     
(274
)
   
907
 
Direct mining costs ('000)
 
$
12,791
   
$
9,409
   
$
37,669
   
$
31,264
 
Smelting, refining and royalty expenses ('000)
   
3,161
     
2,342
     
9,589
     
7,169
 
Less by-product credits ('000)
   
(14,350
)
   
(6,714
)
   
(48,597
)
   
(24,977
)
Total cash costs ('000)
 
$
1,602
   
$
5,037
   
$
(1,339
)
 
$
13,456
 
Divided by silver produced (oz)2
   
323,497
     
399,559
     
1,022,243
     
1,395,935
 
Silver cash costs ($/oz)
 
$
4.95
   
$
12.61
   
$
(1.31
)
 
$
9.64
 

Reconciliation of Cosalá Operations Cash Cost per Ounce
                       
                         
 
   
Q3 2018
     
Q3-2017
   
YTD-2018
   
YTD-2017
 
Cost of sales ('000)
 
$
6,085
   
$
343
   
$
17,278
   
$
7,576
 
Non-cash costs ('000)1
   
(341
)
   
1,798
     
(398
)
   
1,437
 
Direct mining costs ('000)
 
$
5,744
   
$
2,141
   
$
16,880
   
$
9,013
 
Smelting, refining and royalty expenses ('000)
   
2,061
     
373
     
6,234
     
1,784
 
Less by-product credits ('000)
   
(10,104
)
   
(2,159
)
   
(35,803
)
   
(10,846
)
Total cash costs ('000)
 
$
(2,299
)
 
$
355
   
$
(12,689
)
 
$
(49
)
Divided by silver produced (oz)2
   
102,521
     
112,478
     
276,134
     
520,034
 
Silver cash costs ($/oz)
 
$
(22.42
)
 
$
3.16
   
$
(45.95
)
 
$
(0.09
)
 
Page 15
Americas Silver Corporation
Management’s Discussion & Analysis
For the three and nine months ended September 30, 2018
 
Reconciliation of Galena Complex Cash Cost per Ounce
                               
                                 
 
   
Q3 2018
     
Q3-2017
   
YTD-2018
   
YTD-2017
 
Cost of sales ('000)
 
$
6,724
   
$
7,351
   
$
20,665
   
$
22,781
 
Non-cash costs ('000)1
   
323
     
(83
)
   
124
     
(530
)
Direct mining costs ('000)
 
$
7,047
   
$
7,268
   
$
20,789
   
$
22,251
 
Smelting, refining and royalty expenses ('000)
   
1,100
     
1,969
     
3,355
     
5,385
 
Less by-product credits ('000)
   
(4,246
)
   
(4,555
)
   
(12,794
)
   
(14,131
)
Total cash costs ('000)
 
$
3,901
   
$
4,682
   
$
11,350
   
$
13,505
 
Divided by silver produced (oz)
   
220,976
     
287,081
     
746,109
     
875,901
 
Silver cash costs ($/oz)
 
$
17.65
   
$
16.31
   
$
15.21
   
$
15.42
 

Reconciliation of Consolidated All-In Sustaining Cost per Ounce
                       
 
                       
 
   
Q3 2018
     
Q3-2017
   
YTD-2018
   
YTD-2017
 
Total cash costs ('000)
 
$
1,602
   
$
5,037
   
$
(1,339
)
 
$
13,456
 
Capital expenditures ('000)
   
3,466
     
1,199
     
10,395
     
4,597
 
Exploration costs ('000)
   
89
     
126
     
179
     
172
 
Total all-in sustaining costs ('000)
 
$
5,157
   
$
6,362
   
$
9,235
   
$
18,225
 
Divided by silver produced (oz)2
   
323,497
     
399,559
     
1,022,243
     
1,395,935
 
Silver all-in sustaining costs ($/oz)
 
$
15.94
   
$
15.92
   
$
9.03
   
$
13.06
 

Reconciliation of Cosalá Operations All-In Sustaining Cost per Ounce
                       
                         
 
   
Q3 2018
     
Q3-2017
   
YTD-2018
   
YTD-2017
 
Total cash costs ('000)
 
$
(2,299
)
 
$
355
   
$
(12,689
)
 
$
(49
)
Capital expenditures ('000)
   
2,217
     
-
     
5,802
     
14
 
Exploration costs ('000)
   
13
     
-
     
13
     
-
 
Total all-in sustaining costs ('000)
 
$
(69
)
 
$
355
   
$
(6,874
)
 
$
(35
)
Divided by silver produced (oz)2
   
102,521
     
112,478
     
276,134
     
520,034
 
Silver all-in sustaining costs ($/oz)
 
$
(0.67
)
 
$
3.16
   
$
(24.89
)
 
$
(0.07
)

Reconciliation of Galena Complex All-In Sustaining Cost per Ounce
                       
                         
 
   
Q3 2018
     
Q3-2017
   
YTD-2018
   
YTD-2017
 
Total cash costs ('000)
 
$
3,901
   
$
4,682
   
$
11,350
   
$
13,505
 
Capital expenditures ('000)
   
1,249
     
1,199
     
4,593
     
4,583
 
Exploration costs ('000)
   
76
     
126
     
166
     
172
 
Total all-in sustaining costs ('000)
 
$
5,226
   
$
6,007
   
$
16,109
   
$
18,260
 
Divided by silver produced (oz)
   
220,976
     
287,081
     
746,109
     
875,901
 
Silver all-in sustaining costs ($/oz)
 
$
23.65
   
$
20.92
   
$
21.59
   
$
20.85
 

1
Non-cash costs consist of non-cash related charges to cost of sales including inventory movements and write-downs to net realizable value of concentrates, ore stockpiles, and spare parts and supplies.
2
Calculation excludes pre-production of 160,128 silver ounces and 238,919 silver equivalent ounces mined in Q3-2017 and 245,391 silver ounces and 360,530 silver equivalent ounces mined in YTD-2017 from El Cajón during its commissioning period, and 5,146 silver ounces and 30,161 silver equivalent ounces mined in Q3-2017 and YTD-2017 from San Rafael during its commissioning period. Pre-production revenue and cost of sales from El Cajón and San Rafael are capitalized as an offset to development costs .

Page 16
Exhibit 99.3

 
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
 

I, Darren Blasutti, Chief Executive Officer of Americas Silver Corporation, certify the following:

1.
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Americas Silver Corporation   (the “issuer”) for the interim period ended September 30, 2018.
 
2.
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
 
3.
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
 
4.
Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
 
5.
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
 
(a)
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
 
(i)
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
 
(ii)
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
 
(b)
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
 
5.1
Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Committee of Sponsoring Organizations framework.
 
5.2
ICFR – material weakness relating to design: N/A

5.3
Limitation on scope of design:  N/A

6.
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2018   and ended on September 30, 2018   that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
 
Date: November 5, 2018
 
 
 

“Darren Blasutti”
 
Darren Blasutti
 
President & Chief Executive Officer
Exhibit 99.4

 
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
 

I, Warren Varga, Chief Financial Officer of Americas Silver Corporation, certify the following:

1.
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Americas Silver Corporation   (the “issuer”) for the interim period ended September 30, 2018.
 
2.
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
 
3.
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
 
4.
Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
 
5.
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
 
(a)
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
 

(i)
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
 

(ii)
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
 

(b)
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
 

5.1
Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Committee of Sponsoring Organizations framework.

5.2
ICFR – material weakness relating to design: N/A

5.3
Limitation on scope of design:  N/A
 
6.
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2018   and ended on September 30, 2018   that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
 
Date: November 5, 2018
 
 
 
“Warren Varga”
 
Warren Varga
 
Chief Financial Officer