UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K/A

(Amendment No. 1 to Form 6-K filed on November 9, 2022)

 

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 2022

 

Commission File Number: 001-35254

 

AVINO SILVER & GOLD MINES LTD.

 

Suite 900, 570 Granville Street, Vancouver, BC V6C 3P1

(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

 

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): ☐

 

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): ☐

 

 

 

 

EXPLANATORY NOTE

 

Avino Gold and Silver (the “Company”) is furnishing this Amendment No. 1 on Form 6-K/A (the “Amendment”) to provide its three and nine months interim financial statements using Inline XBRL in accordance with Section 405 of Regulation S-T and to incorporate such financial statements into the Company’s registration statements referenced below.

 

This Form 6-K, including exhibit 99.1 attached hereto, are hereby incorporated by reference into the Company’s Registration Statements on Form F-3 (Registration file number 333-252081 and 333-226963) and Form S-8 (Registration file number 333-195120) to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.

 

Exhibit:

 

99.1

Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2022 and 2021

 

 

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

 

 

2

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Avino Silver & Gold Mines, Ltd.

    

Date: November 15, 2022

By:

/s/ Nathan Harte

 

 

Nathan Harte

 
  

Chief Financial Officer

 
    

 

 

3

 

EXHIBIT 99.1

 

avino_ex991img3.jpg

  

 AVINO SILVER & GOLD MINES LTD.

 

Condensed Consolidated Interim Financial Statements

 

For the nine months ended September 30, 2022 and 2021

 

(Unaudited)

 

 
1

 

  

AVINO SILVER & GOLD MINES LTD.

Condensed Consolidated Interim Statements of Financial Position

(Expressed in thousands of US dollars)

 

 

 

Note

 

 

September 30,

2022

 

 

December 31,

2021

 

ASSETS

 

 

 

(unaudited)

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash

 

 

 

 

$10,920

 

 

$24,765

 

Amounts receivable

 

 

 

 

 

656

 

 

 

1,208

 

Taxes recoverable

 

 

5

 

 

 

4,473

 

 

 

3,364

 

Prepaid expenses and other assets

 

 

 

 

 

 

1,465

 

 

 

962

 

Inventory

 

 

6

 

 

 

7,173

 

 

 

5,179

 

Total current assets

 

 

 

 

 

 

24,687

 

 

 

35,478

 

Exploration and evaluation assets

 

 

8

 

 

 

46,371

 

 

 

11,053

 

Plant, equipment and mining properties

 

 

10

 

 

 

42,895

 

 

 

35,675

 

Long-term investments

 

 

7

 

 

 

1,353

 

 

 

3,939

 

Other assets

 

 

 

 

 

 

4

 

 

 

133

 

Total assets

 

 

 

 

 

$115,310

 

 

$86,278

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

 

 

 

$5,611

 

 

$3,260

 

Amounts due to related parties

 

 

11(b)

 

 

72

 

 

 

163

 

Taxes payable

 

 

 

 

 

 

718

 

 

 

31

 

Note payable

 

 

12

 

 

 

4,842

 

 

 

-

 

Current portion of lease liability

 

 

 

 

 

 

953

 

 

 

389

 

Current portion of warrant liability

 

 

13

 

 

 

218

 

 

 

-

 

Total current liabilities

 

 

 

 

 

 

12,414

 

 

 

3,843

 

Lease liability

 

 

 

 

 

 

991

 

 

 

680

 

Warrant liability

 

 

13

 

 

 

-

 

 

 

741

 

Reclamation provision 

 

 

14

 

 

 

767

 

 

 

726

 

Deferred income tax liabilities

 

 

 

 

 

 

4,617

 

 

 

1,781

 

Total liabilities

 

 

 

 

 

 

18,789

 

 

 

7,771

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

 

 

15

 

 

 

145,515

 

 

 

129,953

 

Equity reserves

 

 

 

 

 

 

9,446

 

 

 

9,573

 

Treasury shares

 

 

 

 

 

 

(97)

 

 

(97)

Accumulated other comprehensive loss

 

 

 

 

 

 

(5,021)

 

 

(4,969)

Accumulated deficit

 

 

 

 

 

 

(53,322)

 

 

(55,953)

Total equity

 

 

 

 

 

 

96,521

 

 

 

78,507

 

Total liabilities and equity

 

 

 

 

 

$115,310

 

 

$86,278

 

 

Commitments – Note 18

 

Approved by the Board of Directors on November 9, 2022:

 

 

Peter Bojtos

Director

 

David Wolfin

Director

 

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

  

 
2

 

  

AVINO SILVER & GOLD MINES LTD.

Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)

(Expressed in thousands of US dollars)

 

 

 

 

 

Three months ended

 September 30,

 

 

Nine months ended

September 30,

 

 

 

Note

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue from mining operations

 

 

16

 

 

$9,118

 

 

$1,881

 

 

$29,538

 

 

$1,910

 

Cost of sales

 

 

16

 

 

 

7,058

 

 

 

1,043

 

 

 

18,832

 

 

 

2,769

 

Mine operating income (loss)

 

 

 

 

 

 

2,060

 

 

 

838

 

 

 

10,706

 

 

 

(859)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

17

 

 

 

997

 

 

 

815

 

 

 

3,469

 

 

 

2,726

 

Share-based payments

 

 

15

 

 

 

556

 

 

 

277

 

 

 

1,618

 

 

 

1,391

 

Income (loss) before other items

 

 

 

 

 

 

507

 

 

 

(254)

 

 

5,619

 

 

 

(4,976)

Other items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

 

 

 

 

15

 

 

 

14

 

 

 

67

 

 

 

143

 

Loss on long-term investments

 

 

7

 

 

 

(1,221)

 

 

(1,103)

 

 

(2,503)

 

 

(1,002)

Fair value adjustment on warrant liability

 

 

13

 

 

 

86

 

 

 

516

 

 

 

2,692

 

 

 

1,560

 

Realized loss on warrants exercised

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,111)

Unrealized foreign exchange gain (loss)

 

 

 

 

 

 

251

 

 

 

716

 

 

 

(231)

 

 

(187)

Project evaluation expenses

 

 

 

 

 

 

(5)

 

 

-

 

 

 

(80)

 

 

-

 

Finance cost

 

 

 

 

 

 

(87)

 

 

(8)

 

 

(188)

 

 

(46)

Accretion of reclamation provision

 

 

14

 

 

 

(11)

 

 

(13)

 

 

(32)

 

 

(36)

Interest expense

 

 

 

 

 

 

(23)

 

 

(13)

 

 

(66)

 

 

(15)

Income (loss) before income taxes

 

 

 

 

 

 

(488)

 

 

(145

)

 

 

(5,278)

 

 

(5,670

)

Income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current income tax expense

 

 

 

 

 

 

(142)

 

 

(13)

 

 

(642)

 

 

(25)

Deferred income tax recovery (expense)

 

 

 

 

 

 

(499)

 

 

(56)

 

 

(2,836)

 

 

1,009

 

Income tax recovery (expense)

 

 

 

 

 

 

(641)

 

 

(69)

 

 

(3,478)

 

 

984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

(1,129)

 

 

(214)

 

 

1,800

 

 

 

(4,686)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation differences

 

 

 

 

 

 

(290)

 

 

(1,235)

 

 

(52)

 

 

(128)

Total comprehensive income (loss)

 

 

 

 

 

$(1,419)

 

$(1,449)

 

$1,748

 

 

$(4,814)

Income (loss) per share

 

 

15(e)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

$(0.01)

 

$(0.00)

 

$0.02

 

 

$(0.05)

Diluted

 

 

 

 

 

$(0.01)

 

$(0.00)

 

$0.02

 

 

$(0.05)

Weighted average number of common shares outstanding

 

 

15(e)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

117,876,825

 

 

 

101,559,946

 

 

 

113,027,305

 

 

 

99,457,201

 

Diluted

 

 

 

 

 

 

117,876,825

 

 

 

101,559,946

 

 

 

116,275,433

 

 

 

99,457,201

 

 

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

  

 
3

 

 

AVINO SILVER & GOLD MINES LTD.

Condensed Consolidated Interim Statements of Changes in Equity

(Expressed in thousands of US dollars - Unaudited)

 

 

Note

 

 

Number of Common Shares

 

 

Share Capital Amount

 

 

Equity Reserves

 

 

Treasury Shares

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Accumulated Deficit

 

 

Total  Equity

 

Balance, January 1, 2021

 

 

 

 

89,568,682

 

 

$108,303

 

 

$9,951

 

 

$(97)

 

$(4,810)

 

$(54,339)

 

$59,008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued for cash:

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

At the market issuances

 

 

 

 

10,050,000

 

 

 

18,497

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,497

 

Exercise of warrants

 

 

 

 

1,030,362

 

 

 

1,911

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,911

 

Exercise of options

 

 

 

 

264,000

 

 

 

364

 

 

 

(127)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

237

 

Issuance costs

 

 

 

 

-

 

 

 

(388)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(388)

Options cancelled or expired

 

 

 

 

-

 

 

 

-

 

 

 

(443)

 

 

-

 

 

 

-

 

 

 

443

 

 

 

-

 

Carrying value of exercise of RSUs

 

 

 

 

1,330,167

 

 

 

1,278

 

 

 

(1,278)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based payments

 

 

 

 

-

 

 

 

-

 

 

 

1,391

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,391

 

Net loss for the period

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,686)

 

 

(4,686)

Currency translation differences

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(128)

 

 

-

 

 

 

(128)

Balance, September 30, 2021

 

 

 

 

102,243,211

 

 

$129,965

 

 

$9,494

 

 

$(97)

 

$(4,938)

 

$(58,582)

 

$75,842

 

Balance, January 1, 2022

 

 

 

 

102,243,211

 

 

$129,953

 

 

$9,573

 

 

$(97)

 

$(4,969)

 

$(55,953)

 

$78,507

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares issued for cash:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 15

 

 

 

48,000

 

 

 

46

 

 

 

(15)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

31

 

Common shares issued for acquisition of La Preciosa

 15

 

 

 

15,075,000

 

 

 

14,630

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,630

 

Issuance costs

 15

 

 

 

-

 

 

 

(13)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(13)

Options cancelled or expired

 15

 

 

 

-

 

 

 

-

 

 

 

(831)

 

 

-

 

 

 

-

 

 

 

831

 

 

 

-

 

Carrying value of exercise of RSUs

 15

 

 

 

982,879

 

 

 

899

 

 

 

(899)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based payments

 15

 

 

 

-

 

 

 

-

 

 

 

1,618

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,618

 

Net income for the period

 15

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,800

 

 

 

1,800

 

Currency translation differences

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(52)

 

 

-

 

 

 

(52)

Balance, September 30, 2022

 

 

 

 

118,349,090

 

 

$145,515

 

 

$9,446

 

 

$(97)

 

$(5,021)

 

$(53,322)

 

$96,521

 

 

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

 

 
4

 

 

AVINO SILVER & GOLD MINES LTD.

Condensed Consolidated Interim Statements of Cash Flows

(Expressed in thousands of US dollars - Unaudited)

 

 

 

 

 

 

Nine months ended September 30

 

 

 

Note

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

Cash generated by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

$1,800

 

 

$(4,686)

Adjustments for non-cash items:

 

 

 

 

 

 

 

 

 

 

 

Deferred income tax expense (recovery)

 

 

 

 

 

2,836

 

 

 

(1,009)

Depreciation and depletion

 

 

 

 

 

1,558

 

 

 

1,338

 

Accretion of reclamation provision

 

 

14

 

 

 

32

 

 

 

36

 

Loss on investments

 

 

7

 

 

 

2,503

 

 

 

1,002

 

Unrealized (gain) loss foreign exchange

 

 

 

 

 

 

(88)

 

 

26

 

Unwinding of fair value adjustment on note payable

 

 

12

 

 

 

177

 

 

 

-

 

Unwinding of fair value adjustment on term facility

 

 

 

 

 

 

-

 

 

 

(13)

Fair value adjustment on warrant liability

 

 

13

 

 

 

(2,692)

 

 

(1,560)

Realized loss on warrants exercised

 

 

 

 

 

 

-

 

 

 

1,111

 

Share-based payments

 

 

 

 

 

 

1,618

 

 

 

1,391

 

Cash provided by (used in) operating activities before working capital items

 

 

 

 

 

 

7,744

 

 

 

(2,364)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in non-cash working capital items

 

 

19

 

 

 

768

 

 

 

(1,045)

Cash provided by (used in) operating activities

 

 

 

 

 

 

8,512

 

 

 

(3,409)

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Shares and units issued for cash, net of issuance costs

 

 

 

 

 

 

-

 

 

 

18,110

 

Proceeds from option exercise

 

 

 

 

 

 

30

 

 

 

237

 

Proceeds from warrant exercise

 

 

 

 

 

 

-

 

 

 

803

 

Term facility payments

 

 

 

 

 

 

-

 

 

 

(2,500)

Finance lease payments

 

 

 

 

 

 

(933)

 

 

(437)

Equipment loan payments

 

 

 

 

 

 

-

 

 

 

(72)

Cash provided by (used in) financing activities

 

 

 

 

 

 

(903)

 

 

16,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Exploration and evaluation expenditures

 

 

 

 

 

 

(793)

 

 

(981)

Additions to plant, equipment and mining properties

 

 

 

 

 

 

(5,347)

 

 

(1,152)

Acquisition of La Preciosa

 

 

 

 

 

 

(15,289)

 

 

-

 

Cash used in investing activities

 

 

 

 

 

 

(21,429)

 

 

(2,133)

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in cash

 

 

 

 

 

 

(13,820)

 

 

10,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

 

 

 

 

(25)

 

 

29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, beginning

 

 

 

 

 

 

24,765

 

 

 

11,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, ending

 

 

 

 

 

$10,920

 

 

$22,341

 

 

Supplementary Cash Flow Information (Note 19)

 

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

 

 
5

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

1.  NATURE OF OPERATIONS

 

Avino Silver & Gold Mines Ltd. (the “Company” or “Avino”) was incorporated in 1968 under the laws of the Province of British Columbia, Canada. The Company is engaged in the production and sale of silver, gold, and copper and the acquisition, exploration, and advancement of mineral properties.

 

The Company’s head office and principal place of business is Suite 900, 570 Granville Street, Vancouver, BC, Canada. The Company is a reporting issuer in Canada and the United States, and trades on the Toronto Stock Exchange (“TSX”), the NYSE American, and the Frankfurt and Berlin Stock Exchanges.

 

The Company operates the Avino Mine which produces copper, silver and gold at the historic Avino property in the state of Durango, Mexico. The Company also holds 100% interest in Proyectos Mineros La Preciosa S.A. de C.V . (“La Preciosa”), a Mexican corporation which owns the La Preciosa Property. The Company also owns interests in mineral properties located in British Columbia and Yukon, Canada.

 

Risks associated with Public Health Crises, including COVID-19

 

The Company's business, operations and financial condition could be materially adversely affected by the outbreak of epidemics, pandemics or other health crises, such as the outbreak of COVID-19 that was designated as a pandemic by the World Health Organization on March 11, 2020. The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in consumer activity. Such public health crises can result in operating, supply chain and project development delays and disruptions, global stock market and financial market volatility, declining trade and market sentiment, reduced movement of people and labour shortages, and travel and shipping disruption and shutdowns, including as a result of government regulation and prevention measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest rates, credit risk and inflation. In addition, the current COVID-19 pandemic, and any future emergence and spread of similar pathogens could have an adverse impact on global economic conditions which may adversely impact the Company's operations, and the operations of suppliers, contractors and service providers, including smelter and refining service providers, and the demand for the Company's production.

 

The Company may experience business interruptions, including suspended (whether government mandated or otherwise) or reduced operations relating to COVID-19 and other such events outside of the Company's control, which could have a material adverse impact on its business, operations and operating results, financial condition and liquidity.

 

As at the date of the condensed consolidated interim financial statements, the duration of the business disruptions internationally and related financial impact of COVID-19 cannot be reasonably estimated. It is unknown whether and how the Company may be affected if the pandemic persists for an extended period of time. In particular, the region in which we operate may not have sufficient public infrastructure to adequately respond or efficiently and quickly recover from such event, which could have a materially adverse effect on the Company's operations. The Company's exposure to such public health crises also includes risks to employee health and safety. Should an employee, contractor, community member or visitor become infected with a serious illness that has the potential to spread rapidly, this could place the Company's workforce at risk.

 

 
6

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

2. BASIS OF PRESENTATION

 

Statement of Compliance

 

These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 – Interim Financial Reporting under International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). These unaudited condensed consolidated interim financial statements follow the same accounting policies and methods of application as the most recent annual audited consolidated financial statements of the Company. These unaudited condensed consolidated interim financial statements do not contain all of the information required for full annual consolidated financial statements. Accordingly, these unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s December 31, 2021, annual consolidated financial statements, which were prepared in accordance with IFRS as issued by the IASB.

 

These unaudited condensed consolidated interim financial statements are expressed in US dollars and have been prepared on a historical cost basis except for financial instruments that have been measured at fair value. In addition, these unaudited condensed consolidated interim financial statements have been prepared using the accrual basis of accounting on a going concern basis. The accounting policies set out below have been applied consistently to all periods presented in these unaudited condensed consolidated interim financial statements as if the policies have always been in effect.

 

Significant Accounting Judgments and Estimates

 

The Company’s management makes judgments in its process of applying the Company’s accounting policies to the preparation of its unaudited condensed consolidated interim financial statements. In addition, the preparation of financial data requires that the Company’s management make assumptions and estimates of the impacts on the carrying amounts of the Company’s assets and liabilities at the end of the reporting period from uncertain future events and on the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to estimates and the resulting impacts on the carrying amounts of the Company’s assets and liabilities are accounted for prospectively.

 

The critical judgments and estimates applied in the preparation of the Company’s unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2022, are consistent with those applied and disclosed in Note 2 to the Company’s audited consolidated financial statements for the year ended December 31, 2021.

 

 
7

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

Basis of Consolidation

 

The unaudited condensed consolidated interim financial statements include the accounts of the Company and its Mexican subsidiaries as follows:

 

Subsidiary

 

Ownership Interest

 

 

Jurisdiction

 

Nature of Operations

 

Oniva Silver and Gold Mines S.A. de C.V.

 

 

100%

 

Mexico

 

Mexican operations and administration

 

Nueva Vizcaya Mining, S.A. de C.V.

 

 

100%

 

Mexico

 

Mexican administration

 

Promotora Avino, S.A. de C.V. (“Promotora”)

 

 

79.09%

 

Mexico

 

Holding company

 

Compañía Minera Mexicana de Avino, S.A. de C.V. (“Avino Mexico”)

 

98.45% direct 1.22% indirect (Promotora) 99.67% effective

 

 

Mexico

 

Mining and exploration

 

La Luna Silver & Gold Mines Ltd.

 

 

100%

 

Canada

 

Holding company

 

La Preciosa Silver & Gold Mines Ltd.

 

 

100%

 

Canada

 

Holding company

 

Proyectos Mineros La Preciosa S.A. de C.V.

 

 

100%

 

Mexico

 

Mining and exploration

 

Cervantes LLP

 

 

100%

 

U.S.

 

Holding company

 

 

Intercompany balances and transactions, including unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the unaudited condensed consolidated interim financial statements.

 

3. RECENT ACCOUNTING PRONOUNCEMENTS

 

Application of new and revised accounting standards:

 

Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16)

 

The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss. The amendments are applied on or after the first annual reporting period beginning on or after January 1, 2022, with early application permitted. The amendments are applied retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the Company first applies the amendments. This amendment will impact the Company’s accounting for proceeds from mineral sales prior to reaching commercial production at levels intended by management. The Company adopted the amendments to IAS 16 with no material impact on the financial statements.

 

 

 
8

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

Future Changes in Accounting Policies Not Yet Effective as at September 30, 2022:

 

Certain new accounting standards and interpretations have been published that are not mandatory for the current period and have not been early adopted. These standards are not expected to have a material impact on the Company in the current or future reporting periods.

 

4. ACQUISITION OF LA PRECIOSA

 

On March 21, 2022, the Company closed the acquisition with Coeur Mining Inc. (“Coeur”) of all of the issued and outstanding shares of Proyectos Mineros La Preciosa S.A de C.V, a Mexican corporation, and Cervantes LLC, a Delaware LLC, that together hold the La Preciosa property in Mexico (“La Preciosa”).

 

Total consideration paid to Coeur was comprised of:

 

 

a)

Cash consideration of $15.3 million paid;

 

b)

A promissory note for $5 million in favour of Coeur, payable without interest on or before March 21, 2023;

 

c)

14,000,000 common shares of Avino, with a value of $13.65  million on issuance;

 

d)

7,000,000 share purchase warrants with a total value at $2.24 million exercisable at $1.09 per share until September 21, 2023, representing a 25% premium to Avino’s 20-day volume weighted average trading price as of October 26, 2021;

 

Additionally, Avino issued the following consideration for which payment is contingent on a future event and due to acquisition date uncertainty these are valued at Nil. A liability for these contingent payments will be recognized when related activity and events occur.

 

 

e)

An additional cash payment of $8.75 million, to be paid no later than 12 months after initial production at La Preciosa, up to one-half of which may be paid in common shares of Avino (provided Coeur’s total shareholdings cannot exceed 19.9% of the Company’s total issued and outstanding shares);

 

f)

A 1.25% net smelter returns royalty on the Gloria and Abundancia areas of La Preciosa, and a 2.00% gross value royalty on all other areas of La Preciosa; and

 

g)

A payment of $0.25 per silver equivalent ounce (subject to inflationary adjustment) of new mineral reserves (as defined by NI 43-101) discovered and declared outside of the current mineral resource area at La Preciosa, subject to a cap of $50 million, and any such payments will be credited against any existing or future payments owing on the gross value royalty.

 

The transaction has been accounted for as an asset acquisition as La Preciosa is in the exploration and evaluation stage and had not demonstrated technical feasibility, commercial viability, or the ability to provide economic benefits. La Preciosa did not have the workforce, resources and/or reserves, mine plan, or financial resources to meet the definition of a business for accounting purposes.

 

 
9

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

The purchase consideration has been assigned based on the relative fair values of the assets acquired and liabilities assumed and is summarized as follows:

 

Cash paid

$15,301

Note payable

4,665

Common shares

14,630

Share purchase warrants

2,240

Total purchase consideration

36,836

Transaction costs

270

Total acquisition cost

$37,106

Cash

$168

Other current assets

1,121

Plant and equipment

1,621

Exploration and evaluation assets

34,524

Accounts payable

(328)

Net assets acquired

$37,106

 

5. TAXES RECOVERABLE

 

The Company’s taxes recoverable consist of the Mexican I.V.A. (“VAT”) and income taxes recoverable and Canadian sales taxes (“GST/HST”) recoverable.

 

September 30,

2022

 

 

December 31,

2021

VAT recoverable

$1,862$790

GST recoverable

1626

Income taxes recoverable

2,5952,548
$4,473$3,364

 

6. INVENTORY

 

September 30,

2022

 

 

December 31,

2021

 

Process material stockpiles

$1,661$1,083

Concentrate inventory

3,2632,467

Materials and supplies

2,2491,629
$7,173$5,179

 

The amount of inventory recognized as an expense for the nine months ended September 30, 2022 totalled $18,842 (September 30, 2021 – $2,769). See Note 16 for further details.

 

 
10

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

7. LONG-TERM INVESTMENTS

 

The Company classifies its long-term investments as designated at fair value through profit and loss under IFRS 9. Long-term investments are summarized as follows:

 

 

 

Fair Value

December 31,

 

 

Net 

 

 

Movements in foreign

 

 

Fair value adjustments

 

 

Fair Value

September 30,

 

 

 

2021

 

 

Additions

 

 

exchange

 

 

for the period

 

 

2022

 

Talisker Resources Common Shares

 

$3,880

 

 

$-

 

 

$(132)

 

$(2,475)

 

$1,273

 

Silver Wolf Exploration Ltd. Common Shares

 

 

59

 

 

 

31

 

 

 

(5)

 

 

(34)

 

 

51

 

Endurance Gold Corp. Common Shares

 

 

-

 

 

 

26

 

 

 

(3)

 

 

6

 

 

 

29

 

 

 

$3,939

 

 

$57

 

 

$(140)

 

$(2,503)

 

$1,353

 

 

Silver Wolf Exploration Ltd.

 

During the nine months ended September 30, 2022, the Company received 250,000 common shares (September 30, 2021 - received 131,718 common shares and 300,000 share purchase warrant at an exercise price of C$0.20) as part of the terms in the Option Agreement with Silver Wolf Exploration Ltd. Upon acquisition, the fair value of these common shares were recorded as “Option Income” as a credit to exploration and evaluation assets (see Note 8). Any subsequent revaluation under IFRS 9 at fair value through profit and loss will be recorded as a gain or loss on long-term investments.

 

See Note 8 for full details of the Option Agreement.

 

Endurance Gold Corp.

 

During the nine months ended September 30, 2022, the Company received 100,000 common shares as part of the terms of the Option Agreement with Endurance Gold Corp. Upon acquisition, the fair value of these common shares were recorded as “Other Income” on the statement of profit and loss. Any subsequent revaluation under IFRS 9 at fair value through profit and loss will be recorded as a gain or loss on long-term investments.

 

See Note 8 for full details of the Option Agreement.

 

 
11

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

8. EXPLORATION AND EVALUATION ASSETS

 

The Company has accumulated the following acquisition, exploration and evaluation costs which are not subject to depletion:

 

Avino,

Mexico

 

 

La Preciosa,

Mexico

 

 

British Columbia & Yukon, Canada

 

 

Total

Balance, January 1, 2021

$10,051$-$1$10,052

Costs incurred during 2021:

Drilling and exploration

1,047--1,047

Assessments and taxes

68--68

Effect of movements in exchange rates

3--3

Option income (Note 7)

(117)--(117)

Balance, December 31, 2021

$11,052$-$1$11,053

Costs incurred during 2022:

Acquisition costs – Note 4

-34,524-34,524

Drilling and exploration

58889-677

Assessments and taxes

9561-156

Effect of movements in exchange rates

(9)--(9)

Option income (Note 7)

(30)--(30)

Balance, September 30, 2022

$11,696$34,674$1$46,371

 

 
12

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

Additional information on the Company’s exploration and evaluation properties by region is as follows:

 

(a)

Avino, Mexico

 

The Company’s subsidiary Avino Mexico owns 42 mineral claims and leases four mineral claims in the state of Durango, Mexico. The Company’s mineral claims in Mexico are divided into the following four groups:

 

 

(i)

Avino mine area property

 

The Avino mine area property is situated around the towns of Panuco de Coronado and San Jose de Avino and surrounding the historic Avino mine site. There are four exploration concessions covering 154.4 hectares, 24 exploitation concessions covering 1,284.7 hectares, and one leased exploitation concession covering 98.83 hectares.

 

 

(ii)

Gomez Palacio/Ana Maria property

 

The Ana Maria property is located near the town of Gomez Palacio, and consists of nine exploration concessions covering 2,549 hectares, and is also known as the Ana Maria property.

 

Option Agreement – Silver Wolf Exploration Ltd. (formerly Gray Rock Resources Ltd.) (“Silver Wolf”)

 

On March 11, 2021, the Company was informed that Silver Wolf received TSX Venture Exchange approval on the previously-announced entrance into an option agreement to grant Silver Wolf the exclusive right to acquire a 100% interest in the Ana Maria and El Laberinto properties in Mexico (the “Option Agreement”). In exchange, Avino received Silver Wolf share purchase warrants to acquire 300,000 common shares of Silver Wolf at an exercise price of C$0.20 per share for a period of 36 months from the date of the TSX Venture Exchange’s final acceptance of the Option Agreement (the “Approval Date”). In order to exercise the option, Silver Wolf will:

 

 

1.

Issue to Avino a total of C$600 in cash or common shares of Silver Wolf as follows:

 

 

 

a.

C$50 in common shares of Silver Wolf within 30 days of March 8, 2021 (received on March 26, 2021 – see Note 7 for details);

 

 

 

 

 

 

b.

A further C$50 in cash or shares of Silver Wolf at Avino’s discretion on or before March 8, 2022 (received on March 30, 2022 – See Note 7 for details);

 

 

 

 

 

 

c.

A further C$100 in cash or shares of Silver Wolf at Avino’s discretion on or before March 8, 2023;

 

 

 

 

 

 

d.

A further C$200 in cash or shares of Silver Wolf at Avino’s discretion on or before March 8, 2024; and

 

 

 

 

 

 

e.

A further C$200 in cash or shares of Silver Wolf at Avino’s discretion on or before March 8, 2025; and

 

 

2.

Incur a total of C$750 in exploration expenditures on the properties, as follows:

 

 

 

a.

C$50 on or before March 8, 2022;

 

 

 

 

 

 

b.

A further C$100 on or before March 8, 2023; and

 

 

 

 

 

 

c.

A further C$600 on or before March 8, 2025.

 

Under the Option Agreement, all share issuances will be based on the average volume weighted trading price of Silver Wolf’s shares on the TSX Venture Exchange for the ten (10) trading days immediately preceding the date of issuance of the shares, and the shares will be subject to resale restrictions under applicable securities legislation for 4 months and a day from their date of issue.

 

The Option Agreement between the Company and Silver Wolf is considered a related party transaction as the two companies have directors in common.

 

 
13

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

 

(iii)

Santiago Papasquiaro property

 

The Santiago Papasquiaro property is located near the village of Santiago Papasquiaro, and consists of four exploration concessions covering 2,552.6 hectares and one exploitation concession covering 602.9 hectares.

 

 

(iv)

Unification La Platosa properties

 

The Unification La Platosa properties, consisting of three leased concessions in addition to the leased concession described in note (i) above, are situated within the Avino mine area property near the towns of Panuco de Coronado and San Jose de Avino and surrounding the Avino Mine.

 

In February 2012, the Company’s wholly-owned Mexican subsidiary entered into a new agreement with Minerales de Avino, S.A. de C.V. (“Minerales”) whereby Minerales has indirectly granted to the Company the exclusive right to explore and mine the La Platosa property known as the “ET zone”. The ET zone includes the Avino Mine, where production at levels intended by management was achieved on July 1, 2015.

 

Under the agreement, the Company has obtained the exclusive right to explore and mine the property for an initial period of 15 years, with the option to extend the agreement for another 5 years. In consideration of the granting of these rights, the Company issued 135,189 common shares with a fair value of C$250 during the year ended December 31, 2012.

 

The Company has agreed to pay to Minerales a royalty equal to 3.5% of net smelter returns (“NSR”). In addition, after the start of production, if the minimum monthly processing rate of the mine facilities is less than 15,000 tonnes, then the Company must pay to Minerales a minimum royalty equal to the applicable NSR royalty based on the processing at a monthly rate of 15,000 tonnes.

 

Minerales has also granted to the Company the exclusive right to purchase a 100% interest in the property at any time during the term of the agreement (or any renewal thereof), upon payment of $8 million within 15 days of the Company’s notice of election to acquire the property. The purchase would be subject to a separate purchase agreement for the legal transfer of the property.

 

(b)

La Preciosa, Mexico

 

During the nine months ended September 30, 2022, the Company received approval for the closing of the acquisition of the La Preciosa property from Coeur Mining Inc. (“Coeur”).

 

La Preciosa consists of 15 exploration concessions totaling 6,011 hectares located in Durango, Mexico, within the municipalities of Panuco de Coronado and Canatlan. The property is located within 20 kilometres of the Company’s current Avino mining operations.

 

For further details on the transaction, see Note 4.

 

 
14

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

(c)

British Columbia, Canada

 

 

(i)

Minto and Olympic-Kelvin properties

 

On May 2, 2022, the Company has granted Endurance Gold Corp. (“Endurance”) the right to acquire an option to earn 100% ownership of the former Minto Gold Mine, Olympic and Kelvin gold prospects contained within a parcel of crown grant and mineral claims (the “Olympic Claims”).

 

Under the terms of the letter agreement, Endurance can earn a 100% interest in the Olympic Claims if they pay Avino a total cash consideration in the aggregate amount of C$100, issue up to a total of 1,500,000 common shares (“Shares”) of Endurance and incur exploration expenditures in the aggregate amount of C$300; all of which is to be incurred by December 31, 2024. In the event that Endurance earns the 100% interest, the Olympic Claims will be subject to a 2% net smelter return royalty (“NSR”), of which 1% NSR can be purchased by the Endurance for C$750 and the remaining balance of the NSR can be purchased for C$1,000.

 

As part of the final requirement to earn its interest, Endurance agreed to grant to Avino 750,000 share purchase warrants (“Warrants”) by December 31, 2024, that offer Avino the option to purchase additional shares in the Company for a period of three years from the date of issuance. The exercise price of the Warrants will be set at a 25% premium to the 20-day VWAP share price at the issuance date. During the Option term, if Endurance is successful in defining a compliant mineral resource of at least 500,000 gold-equivalent ounces on the Olympic Claims then Endurance will be obliged to pay Avino a C$1,000 discovery bonus.

 

The Option agreement is subject to the TSX Venture Exchange acceptance, and any Shares or Warrants to be issued will be subject to a four-month hold period on issuance as per the policies of the TSX Venture Exchange.

 

During the nine months ended September 30, 2022, Endurance granted 100,000 common shares and paid C$10 as per the terms of the agreement, which required payment upon signing of a letter agreement between the two parties. As of September 30, 2022, Endurance was in compliance with all terms of the Option agreement.

 

 

(ii)

Yukon, Canada

 

The Company has a 100% interest in 14 quartz leases located in the Mayo Mining Division of Yukon, Canada, which collectively comprise the Eagle property.

 

9. NON-CONTROLLING INTEREST

 

At September 30, 2022, the Company had an effective 99.67% (December 31, 2021 - 99.67%) interest in its subsidiary Avino Mexico and the remaining 0.33% (December 31, 2021 - 0.33%) interest represents a non-controlling interest. The accumulated deficit and current period income attributable to the non-controlling interest are insignificant and accordingly have not been recognized in the unaudited condensed consolidated interim financial statements.

 

 
15

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

10. PLANT, EQUIPMENT AND MINING PROPERTIES

 

 

 

Mining

properties

 

 

 

Office equipment, furniture, and fixtures

 

 

Computer equipment

 

 

Mine machinery and transportation equipment

 

 

Mill machinery and processing equipment

 

 

Buildings and construction in process

 

 

Total

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

 $

 

 

$

 

COST

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

13,149

 

 

 

563

 

 

 

347

 

 

 

12,955

 

 

 

17,483

 

 

 

11,263

 

 

 

55,760

 

Additions / Transfers

 

 

(113)

 

 

31

 

 

 

(12)

 

 

1,285

 

 

 

1,130

 

 

 

508

 

 

 

2,829

 

Effect of movements in exchange rates

 

 

2

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7

 

 

 

10

 

Balance at December 31, 2021

 

 

13,038

 

 

 

595

 

 

 

335

 

 

 

14,240

 

 

 

18,613

 

 

 

11,778

 

 

 

58,599

 

Additions / Transfers

 

 

1,009

 

 

 

170

 

 

 

434

 

 

 

2,018

 

 

 

3,728

 

 

 

2,857

 

 

 

10,216

 

Effect of movements in exchange rates

 

 

-

 

 

 

(20)

 

 

(2)

 

 

-

 

 

 

-

 

 

 

(3)

 

 

(25)

Balance at September 30, 2022

 

 

14,047

 

 

 

745

 

 

 

767

 

 

 

16,258

 

 

 

22,341

 

 

 

14,632

 

 

 

68,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCUMULATED DEPLETION AND DEPRECIATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

8,643

 

 

 

187

 

 

 

256

 

 

 

4,907

 

 

 

5,297

 

 

 

1,624

 

 

 

20,914

 

Additions

 

 

213

 

 

 

107

 

 

 

11

 

 

 

37

 

 

 

1,370

 

 

 

272

 

 

 

2,010

 

Effect of movements in exchange rates

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance at December 31, 2021

 

 

8,856

 

 

 

294

 

 

 

267

 

 

 

4,944

 

 

 

6,667

 

 

 

1,896

 

 

 

22,924

 

Additions

 

 

175

 

 

 

116

 

 

 

314

 

 

 

318

 

 

 

987

 

 

 

1,061

 

 

 

2,971

 

Effect of movements in exchange rates

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance at September 30, 2022

 

 

9,031

 

 

 

410

 

 

 

581

 

 

 

5,262

 

 

 

7,654

 

 

 

2,957

 

 

 

25,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET BOOK VALUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2022

 

 

5,016

 

 

 

335

 

 

 

186

 

 

 

10,996

 

 

 

14,687

 

 

 

11,675

 

 

 

42,895

 

At December 31, 2021

 

 

4,182

 

 

 

301

 

 

 

68

 

 

 

9,296

 

 

 

11,946

 

 

 

9,882

 

 

 

35,675

 

At December 31, 2020

 

 

4,506

 

 

 

376

 

 

 

91

 

 

 

8,048

 

 

 

12,186

 

 

 

9,639

 

 

 

34,846

 

 

 
16

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

Included in Buildings and construction in process above are assets under construction of $9,752 as at September 30, 2022 (December 31, 2021 - $6,348) on which no depreciation was charged in the periods then ended. Once the assets are put into service, they will be transferred to the appropriate class of plant, equipment and mining properties.

 

As at September 30, 2022, plant, equipment and mining properties included a net carrying amount of $2,500 (December 31, 2021 - $1,306) for mining equipment and right of use assets under lease.

 

11. RELATED PARTY TRANSACTIONS AND BALANCES

 

All related party transactions are recorded at the exchange amount which is the amount agreed to by the Company and the related party.

 

(a)

Key management personnel

 

The Company has identified its directors and certain senior officers as its key management personnel. The compensation costs for key management personnel for the three and nine months ended September 30, 2022 and 2021 is as follows:

 

 

 

Three months ended

 September 30,

 

 

Nine months ended

 September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Salaries, benefits, and consulting fees

 

$237

 

 

$243

 

 

$975

 

 

$742

 

Share-based payments

 

 

427

 

 

 

230

 

 

 

1,251

 

 

 

1,133

 

 

 

$664

 

 

$473

 

 

$2,226

 

 

$1,875

 

 

(b) 

 Amounts due to/from related parties

 

In the normal course of operations the Company transacts with companies related to Avino’s directors or officers. All amounts payable and receivable are non-interest bearing, unsecured and due on demand.

 

The following table summarizes the amounts were due to related parties:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Oniva International Services Corp.

 

$99

 

 

$107

 

Directors

 

 

31

 

 

 

56

 

Silver Wolf Exploration

 

 

(58)

 

 

-

 

 

 

$72

 

 

$163

 

 

For services provided to the Company as President and Chief Executive Officer, the Company pays Intermark Capital Corporation (“ICC”), a company controlled by David Wolfin, the Company’s president and CEO and also a director, for consulting services. For the three and nine months ended September 30, 2022, the Company paid $66 and $263 (September 30, 2021 - $60 and $180 respectively) to ICC.

 

(c)

Other related party transactions

 

The Company has a cost sharing agreement with Oniva International Services Corp. (“Oniva”) for office and administration services. Pursuant to the cost sharing agreement, the Company will reimburse Oniva for the Company’s percentage of overhead and corporate expenses and for out-of-pocket expenses incurred on behalf of the Company. David Wolfin, President & CEO, and a director of the Company, is the sole owner of Oniva. The cost sharing agreement may be terminated with one-month notice by either party without penalty.

 

 
17

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

The transactions with Oniva during the three and nine months ended September 30, 2022 and 2021 are summarized below:

 

 

 

Three months ended

September 30,

 

 

Nine months ended

 September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Salaries and benefits

 

$218

 

 

$172

 

 

$670

 

 

$550

 

Office and miscellaneous

 

 

119

 

 

 

91

 

 

 

325

 

 

 

273

 

 

 

$337

 

 

$263

 

 

$995

 

 

$823

 

 

12. NOTE PAYABLE

 

On March 21, 2022, the Company closed the acquisition of the La Preciosa property from Coeur Mining Inc. (see Note 4 for further details). As part of the agreement, the Company issued a promissory note payable of $5 million due on or before March 21, 2023. The present value of the note payable was calculated using a discount interest rate of 6.71%.

 

The note is unsecured and non-interest bearing assuming that the note is repaid in full on or before March 21, 2023. If the note is not repaid by March 21, 2023, a sum of $1 million shall be added to the principal amount and the note shall bear interest at a rate of 7% per annum and will be payable on demand.

 

The continuity of the note payable is as follows:

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Balance at beginning of the period

 

$-

 

 

$-

 

Additions

 

 

4,665

 

 

 

-

 

Repayments

 

 

-

 

 

 

-

 

Unwinding of fair value adjustment

 

 

177

 

 

 

-

 

Balance at end of the period

 

$4,842

 

 

$-

 

 

 
18

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

13. WARRANT LIABILITY

 

The Company’s warrant liability arises as a result of the issuance of warrants exercisable in US dollars. As the denomination is different from the Canadian dollar functional currency of the entity issuing the underlying shares, the Company recognizes a derivative liability for these warrants and re-measures the liability at the end of each reporting period using the Black-Scholes model. Changes in respect of the Company’s warrant liability are as follows:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Balance at beginning of the period

 

$741

 

 

$2,295

 

Warrants issued

 

 

2,240

 

 

 

-

 

Fair value adjustment

 

 

(2,692)

 

 

(1,581)

Effect of movement in exchange rates

 

 

(71)

 

 

27

 

Balance at end of the period

 

$218

 

 

$741

 

 

Continuity of warrants during the periods is as follows:

 

 

 

Underlying

Shares

 

 

Weighted Average Exercise Price

 

Warrants outstanding and exercisable, January 1, 2021

 

 

2,980,774

 

 

$0.80

 

Exercised

 

 

(1,030,362)

 

$0.80

 

Warrants outstanding and exercisable, December 31, 2021

 

 

1,950,412

 

 

$0.80

 

Issued

 

 

7,000,000

 

 

$1.09

 

Warrants outstanding and exercisable, September 30, 2022

 

 

8,950,412

 

 

$1.03

 

 

 

 

 

 

All Warrants

Outstanding and Exercisable

 

Expiry Date

 

Exercise Price

per Share

 

 

September 30,

2022

 

 

December 31,

 2021

 

September 21, 2023

 

$1.09

 

 

 

7,000,000

 

 

 

-

 

September 25, 2023

 

$0.80

 

 

 

1,950,412

 

 

 

1,950,412

 

 

 

 

 

 

 

 

8,950,412

 

 

 

1,950,412

 

 

As at September 30, 2022, the weighted average remaining contractual life of warrants outstanding was 0.98 years (December 31, 2021 – 1.73 years).

 

Valuation of the warrant liability requires the use of estimates and assumptions including the expected stock price volatility. The expected volatility used in valuing warrants is based on volatility observed in historical periods. Changes in the underlying assumptions can materially affect the fair value estimates. The fair value of the warrant liability was calculated using the Black-Scholes model with the following weighted average assumptions and resulting fair values:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Weighted average assumptions:

 

 

 

 

 

 

 Risk-free interest rate

 

 

3.76%

 

 

0.91%

 Expected dividend yield

 

 

0%

 

 

0%

 Expected warrant life (years)

 

 

0.98

 

 

 

1.73

 

 Expected stock price volatility

 

 

55.79%

 

 

83.13%

Weighted average fair value

 

$0.02

 

 

$0.38

 

 

During the nine months ended September 30, 2022, the Company recorded no realized loss on the exercise of warrants (December 31, 2021 - $1,106, as result of the exercise of 1,030,362 warrants for the issuance of 1,030,362 common shares).

 

 
19

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

14.  RECLAMATION PROVISION

 

Management’s estimate of the reclamation provision at September 30, 2022, is $767 (December 31, 2021 – $726), and the undiscounted value of the obligation is $1,292 (December 31, 2021 – $1,252).

 

The present value of the obligation was calculated using a risk-free interest rate of 7.78% (December 31, 2021 – 7.78%) and an inflation rate of 7.36% (December 31, 2021 – 7.36%). Reclamation activities are estimated to begin in 2023 for the San Gonzalo Mine and in 2041 for the Avino Mine.

 

A reconciliation of the changes in the Company’s reclamation provision is as follows:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

 

 

 

 

 

 

 

Balance at beginning of the period

 

$726

 

 

$808

 

Changes in estimates

 

 

-

 

 

 

(105)

Unwinding of discount related to continuing operations

 

 

32

 

 

 

47

 

Effect of movements in exchange rates

 

 

9

 

 

 

(24)

Balance at end of the period

 

$767

 

 

$726

 

 

15. SHARE CAPITAL AND SHARE-BASED PAYMENTS

 

(a)

Authorized:Unlimited common shares without par value, 14,180 treasury shares issued at cost of $97

 

(b)

Issued:

 

 

(i)

During the nine months ended September 30, 2022, the Company issued 14,000,000 common shares as part of the acquisition of La Preciosa from Coeur Mining Inc.. As a result, $13,650 was recorded to share capital, and exploration and evaluation assets as acquisition costs, representing the closing price on the Toronto Stock Exchange on March 21, 2022, the date of the issuance and closing.

 

 

 

 

 

The Company further issued 1,075,000 common shares as payment for services provided during the acquisition, and as a result $980 was recorded to share capital and exploration and evaluation assets as acquisition costs.

 

 

 

 

 

During the nine months ended September 30, 2022, the Company issued 48,000 common shares following the exercise of 48,000 options. As a result, $46 was recorded to share capital, representing cash proceeds of $31 and the fair value upon issuance of $15.

 

 

 

 

 

During the nine months ended September 30, 2022, the Company issued 982,879 common shares upon exercise of RSUs. As a result, $899 was recorded to share capital.

 

 

 

 

(ii)

During the year ended December 31, 2021, the Company issued 10,050,000 common shares in an at-the-market offering under prospectus supplement for gross proceeds of $19,020. The Company paid a 2.75% cash commission of $523 on gross proceeds, for net proceeds of $18,497, and incurred additional $400 in issuance costs during the period.

 

 

 

 

 

During the year ended December 31, 2021, the Company issued 1,030,362 common shares following the exercise of 1,030,362 warrants. As a result, $1,911 was recorded to share capital, representing cash proceeds of $824, fair value of the warrants on the date of exercise (see Note 14 for valuation methodology of $US denominated warrants) of $1,106, and movements in foreign exchange of $(19).

 

 

 

 

 

During the year ended December 31, 2021, the Company issued 264,000 common shares following the exercise of 264,000 options. As a result, $364 was recorded to share capital, representing cash proceeds of $237 and the fair value upon issuance of $127.

 

 

 

 

 

During the year ended December 31, 2021, the Company issued 1,330,167 common shares upon exercise of RSUs. As a result, $1,278 was recorded to share capital.

 

 
20

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

(c)

Stock options:

 

The Company has a stock option plan to purchase the Company’s common shares, under which it may grant stock options of up to 10% of the Company’s total number of shares issued and outstanding on a non-diluted basis. The stock option plan provides for the granting of stock options to directors, officers, and employees, and to persons providing investor relations or consulting services, the limits being based on the Company’s total number of issued and outstanding shares per year. The stock options vest on the date of grant, except for those issued to persons providing investor relations services, which vest over a period of one year. The option price must be greater than or equal to the discounted market price on the grant date, and the option term cannot exceed ten years from the grant date.

 

Continuity of stock options is as follows:

 

 

 

Underlying

Shares

 

 

Weighted Average Exercise Price (C$)

 

 

 

 

 

 

 

 

Stock options outstanding, January 1, 2021

 

 

3,483,000

 

 

$1.77

 

Exercised

 

 

(264,000)

 

$1.16

 

Expired

 

 

(360,000)

 

$2.95

 

Forfeited

 

 

(20,000)

 

$1.64

 

Stock options outstanding, December 31, 2021

 

 

2,839,000

 

 

$1.68

 

Granted

 

 

2,390,000

 

 

$1.20

 

Exercised

 

 

(48,000)

 

$0.79

 

Expired

 

 

(880,000)

 

$1.98

 

Forfeited

 

 

(45,000)

 

$1.40

 

Stock options outstanding, September 30, 2022

 

 

4,256,000

 

 

$1.36

 

Stock options exercisable, September 30, 2022

 

 

3,067,250

 

 

$1.42

 

 

The following table summarizes information about the stock options outstanding and exercisable at September 30, 2022:

 

 

 

 

 

Outstanding

 

 

Exercisable

 

Expiry Date

 

Price (C$)

 

 

Number of Options

 

 

Weighted Average Remaining Contractual Life (Years)

 

 

Number of Options

 

 

Weighted Average Remaining Contractual Life (Years)

 

August 28, 2023

 

$1.30

 

 

 

105,000

 

 

 

0.91

 

 

 

105,000

 

 

 

0.91

 

August 21, 2024

 

$0.79

 

 

 

126,000

 

 

 

1.89

 

 

 

126,000

 

 

 

1.89

 

August 4, 2025

 

$1.64

 

 

 

1,660,000

 

 

 

2.85

 

 

 

1,660,000

 

 

 

2.85

 

March 25, 2027

 

$1.20

 

 

 

2,340,000

 

 

 

4.48

 

 

 

1,170,000

 

 

 

4.48

 

May 4, 2027

 

$0.92

 

 

 

25,000

 

 

 

4.59

 

 

 

6,250

 

 

 

4.59

 

 

 

 

 

 

 

 

4,256,000

 

 

 

3.68

 

 

 

3,067,250

 

 

 

3.37

 

 

Valuation of stock options requires the use of estimates and assumptions including the expected stock price volatility. The expected volatility used in valuing stock options is based on volatility observed in historical periods. Changes in the underlying assumptions can materially affect the fair value estimates. The fair value of the stock options was calculated using the Black-Scholes model with the following weighted average assumptions and resulting fair values:

 

 
21

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Weighted average assumptions:

 

 

 

 

 

 

 Risk-free interest rate

 

 

2.49%

 

-%

 

 Expected dividend yield

 

 

0.00%

 

-%

 

 Expected option life (years)

 

 

5.00

 

 

 

-

 

 Expected stock price volatility

 

 

59.98%

 

-%

 

 Expected forfeiture rate

 

 

20%

 

-%

 

Weighted average fair value

 

$0.63

 

 

 

-

 

 

During the nine months ended September 30, 2022, the Company charged $748 (nine months ended September 30, 2021 - $362) to operations as share-based payments for the fair value of stock options granted.

 

(d)

Restricted Share Units:

 

On April 19, 2018, the Company’s Restricted Share Unit (“RSU”) Plan was approved by its shareholders. The RSU Plan is administered by the Compensation Committee under the supervision of the Board of Directors as compensation to officers, directors, consultants, and employees. The Compensation Committee determines the terms and conditions upon which a grant is made, including any performance criteria or vesting period.

 

Upon vesting, each RSU entitles the participant to receive one common share, provided that the participant is continuously employed with or providing services to the Company. RSUs track the value of the underlying common shares, but do not entitle the recipient to the underlying common shares until such RSUs vest, nor do they entitle a holder to exercise voting rights or any other rights attached to ownership or control of the common shares, until the RSU vests and the RSU participant receives common shares.

 

Continuity of RSUs is as follows:

 

 

 

Underlying

Shares

 

 

Weighted Average Price (C$)

 

 

 

 

 

 

 

 

RSUs outstanding, January 1, 2021

 

 

2,874,000

 

 

$1.28

 

Exercised

 

 

(1,330,167)

 

$1.22

 

Forfeited

 

 

(104,356)

 

$1.54

 

RSUs outstanding, December 31, 2021

 

 

1,439,477

 

 

$1.32

 

Granted

 

 

1,799,000

 

 

$1.19

 

Exercised

 

 

(982,879)

 

$1.18

 

Forfeited

 

 

(64,932)

 

$1.40

 

RSUs outstanding, September 30, 2022

 

 

2,190,666

 

 

$1.27

 

 

The following table summarizes information about the RSUs outstanding at September 30, 2022:

 

Issuance Date

 

Price (C$)

 

 

Number of RSUs Outstanding

 

August 4, 2020

 

$1.64

 

 

 

412,666

 

March 25, 2022

 

$1.19

 

 

 

1,778,000

 

 

 

 

 

 

 

 

2,190,666

 

 

During the nine months ended September 30, 2022, 1,799,000 RSUs (year ended December 31, 2021 – Nil) were granted. The weighted average fair value at the measurement date was C$1.19, based on the TSX market price of the Company’s shares on the date the RSUs were granted.

 

During the nine months ended September 30, 2022, the Company charged $870 (September 30, 2021 - $1,028) to operations as share-based payments for the fair value of the RSUs vested. The fair value of the RSUs is recognized over the vesting period with reference to vesting conditions and the estimated RSUs expected to vest.

 

 
22

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

(e)

Earnings (loss) per share:

 

The calculations for basic earnings (loss) per share and diluted earnings (loss) per share are as follows:

 

 

 

Three months ended

 September 30,

 

 

Nine months ended

 September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss) for the period

 

$(1,129)

 

$(214)

 

$1,800

 

 

$(4,686)

Basic weighted average number of shares outstanding

 

 

117,876,825

 

 

 

101,559,946

 

 

 

113,027,305

 

 

 

99,457,201

 

Effect of dilutive share options, warrants, and RSUs (‘000)

 

 

-

 

 

 

-

 

 

 

3,248,128

 

 

 

-

 

Diluted weighted average number of shares outstanding

 

 

117,876,825

 

 

 

101,559,946

 

 

 

116,275,433

 

 

 

99,457,201

 

Basic loss per share

 

$(0.01)

 

$(0.00)

 

$0.02

 

 

$(0.05)

Diluted loss per share

 

$(0.01)

 

$(0.00)

 

$0.02

 

 

$(0.05)

 

16.  REVENUE AND COST OF SALES

 

The Company’s revenues for the nine months ended September 30, 2022 and 2021, are all attributable to Mexico, from shipments of concentrate from the Avino Mine.

 

Three months ended

September 30,

 

 

Nine months ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Concentrate sales

 

$9,445

 

 

$1,881

 

 

$30,423

 

 

$1,881

 

Provisional pricing adjustments

 

 

(327)

 

 

-

 

 

 

(885)

 

 

29

 

 

 

$9,118

 

 

$1,881

 

 

$29,538

 

 

$1,910

 

 

Cost of sales consists of changes in inventories, direct costs including personnel costs, mine site costs, energy costs (principally diesel fuel and electricity), maintenance and repair costs, operating supplies, external services, third party transport fees, depreciation and depletion, and other expenses for the periods. Direct costs include the costs of extracting co-products. Stand-by costs consists of care and maintenance costs incurred during the work stoppage at the Avino Mine during the nine months ended September 30, 2021.

 

Cost of sales is based on the weighted average cost of inventory sold for the periods and consists of the following:

 

 

 

Three months ended

 September 30,

 

 

Nine months ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Production costs

 

$6,544

 

 

$724

 

 

$17,378

 

 

$724

 

Stand-by and ramp-up costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

800

 

Depreciation and depletion

 

 

514

 

 

 

319

 

 

 

1,454

 

 

 

1,245

 

 

 

$7,058

 

 

$1,043

 

 

$18,832

 

 

$2,769

 

 

 
23

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

17. GENERAL AND ADMINISTRATIVE EXPENSES

 

General and administrative expenses on the condensed consolidated interim statements of operations consist of the following:

 

 

 

Three months ended

September 30,

 

 

Nine months ended

 September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Salaries and benefits

 

$321

 

 

$326

 

 

$1,123

 

 

$1,068

 

Office and miscellaneous

 

 

261

 

 

 

92

 

 

 

855

 

 

 

333

 

Management and consulting fees

 

 

110

 

 

 

124

 

 

 

345

 

 

 

411

 

Investor relations

 

 

84

 

 

 

28

 

 

 

234

 

 

 

183

 

Travel and promotion

 

 

29

 

 

 

10

 

 

 

75

 

 

 

29

 

Professional fees

 

 

89

 

 

 

103

 

 

 

501

 

 

 

343

 

Directors fees

 

 

30

 

 

 

43

 

 

 

116

 

 

 

133

 

Regulatory and compliance fees

 

 

36

 

 

 

55

 

 

 

116

 

 

 

133

 

Depreciation

 

 

37

 

 

 

34

 

 

 

104

 

 

 

93

 

 

 

$997

 

 

$815

 

 

$3,469

 

 

$2,726

 

 

18. COMMITMENTS

 

The Company has a cost sharing agreement to reimburse Oniva for a percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the Company, and to pay a percentage fee based on Oniva’s total overhead and corporate expenses. The agreement may be terminated with one-month notice by either party. Transactions and balances with Oniva are disclosed in Note 11.

 

The Company and its subsidiaries have various operating lease agreements for their office premises, use of land, and equipment. Commitments in respect of these lease agreements are as follows:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Not later than one year

 

$84

 

 

$96

 

Later than one year and not later than five years

 

 

331

 

 

 

330

 

Later than five years

 

 

396

 

 

 

462

 

 

 

$811

 

 

$888

 

 

Office lease payments recognized as an expense during the nine months ended September 30, 2022, totalled $12 (September 30, 2021 - $11).

 

 
24

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

19.  SUPPLEMENTARY CASH FLOW INFORMATION

 

 

 

September 30,

2022

 

 

September 30,

2021

 

Net change in non-cash working capital items:

 

 

 

 

 

 

Inventory

 

$(1,986)

 

$(2,896)

Prepaid expenses and other assets

 

 

(535)

 

 

(22)

Taxes recoverable

 

 

28

 

 

 

1,773

 

Taxes payable

 

 

687

 

 

 

(2)

Accounts payable and accrued liabilities

 

 

2,101

 

 

 

1,066

 

Amounts receivable

 

 

552

 

 

 

(985)

Amounts due to related parties

 

 

(79)

 

 

21

 

 

 

$768

 

 

$(1,045)

 

 

 

September 30,

2022

 

 

September 30,

2021

 

Interest paid

 

$73

 

 

$78

 

Taxes paid

 

$-

 

 

$240

 

Equipment acquired under finance leases and equipment loans

 

$1,589

 

 

$1,007

 

 

20.  FINANCIAL INSTRUMENTS

 

The fair values of the Company’s amounts due to related parties and accounts payable approximate their carrying values because of the short-term nature of these instruments. Cash, amounts receivable, long-term investments, and warrant liability are recorded at fair value. The carrying amounts of the Company’s term facility, equipment loans, and finance lease obligations are a reasonable approximation of their fair values based on current market rates for similar financial instruments.

 

The Company’s financial instruments are exposed to certain financial risks, including credit risk, liquidity risk, and market risk.

 

(a)

Credit Risk

 

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company has exposure to credit risk through its cash, long-term investments and amounts receivable. The Company manages credit risk, in respect of cash and short-term investments, by maintaining the majority of cash and short-term investments at highly rated financial institutions.

 

The Company is exposed to a significant concentration of credit risk with respect to its trade accounts receivable balance because primarily all of its concentrate sales are with two (December 31, 2021 – two) counterparties (see Note 21). However, the Company has not recorded any allowance against its trade receivables because to-date all balances owed have been settled in full when due (typically within 60 days of submission) and because of the nature of the counterparties.

 

The Company’s maximum exposure to credit risk at the end of any period is equal to the carrying amount of these financial assets as recorded in the unaudited condensed consolidated interim statement of financial position. At September 30, 2022, no amounts were held as collateral.

 

(b)

Liquidity Risk

 

Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows required by its operating, investing and financing activities. The Company had cash at September 30, 2022, in the amount of $10,920 and working capital of $12,273 in order to meet short-term business requirements. Accounts payable have contractual maturities of approximately 30 to 90 days, or are due on demand and are subject to normal trade terms. The current portions of note payable and finance lease obligations are due within 12 months of the condensed consolidated interim statement of financial position date. Amounts due to related parties are without stated terms of interest or repayment.

 

 
25

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

The maturity profiles of the Company’s contractual obligations and commitments as at September 30, 2022, are summarized as follows:

 

 

 

Total

 

 

Less Than

1 Year

 

 

1-5 years

 

 

More Than 5

 Years

 

Accounts payable and accrued liabilities

 

$5,611

 

 

$5,611

 

 

$-

 

 

$-

 

Amounts due to related parties

 

 

72

 

 

 

72

 

 

 

-

 

 

 

-

 

Note payable

 

 

5,000

 

 

 

5,000

 

 

 

-

 

 

 

-

 

Lease liability

 

 

2,072

 

 

 

1,039

 

 

 

1,033

 

 

 

-

 

Total

 

$12,755

 

 

$11,722

 

 

$1,033

 

 

$-

 

 

(c) 

Market Risk

 

Market risk consists of interest rate risk, foreign currency risk and price risk. These are discussed further below.

 

Interest Rate Risk

 

Interest rate risk consists of two components:

 

 

(i)

To the extent that payments made or received on the Company’s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk.

 

 

 

 

(ii)

To the extent that changes in prevailing market rates differ from the interest rates on the Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk.

 

In management’s opinion, the Company is exposed to interest rate risk primarily on its outstanding term facility, as the interest rate is subject to floating rates of interest. A 10% change in the interest rate would not a result in a material impact on the Company’s operations.

 

 
26

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

Foreign Currency Risk

 

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company is exposed to foreign currency risk to the extent that the following monetary assets and liabilities are denominated in Mexican pesos and Canadian dollars:

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

MXN

 

 

CDN

 

 

MXN

 

 

CDN

 

Cash

 

$6,064

 

 

$392

 

 

$3,576

 

 

$1,450

 

Long-term investments

 

 

-

 

 

 

1,855

 

 

 

-

 

 

 

4,976

 

Reclamation bonds

 

 

-

 

 

 

4

 

 

 

-

 

 

 

6

 

Amounts receivable

 

 

-

 

 

 

21

 

 

 

-

 

 

 

33

 

Accounts payable and accrued liabilities

 

 

(17,454)

 

 

(56)

 

 

(57,604)

 

 

(211)

Due to related parties

 

 

-

 

 

 

(176)

 

 

-

 

 

 

(206)

Finance lease obligations

 

 

(992)

 

 

(110)

 

 

(1)

 

 

(394)

Net exposure

 

 

(12,382)

 

 

1,930

 

 

 

(54,029)

 

 

5,654

 

US dollar equivalent

 

$(609)

 

$1,409

 

 

$(2,363)

 

$(4,054)

 

Based on the net US dollar denominated asset and liability exposures as at September 30, 2022, a 10% fluctuation in the US/Mexican and Canadian/US exchange rates would impact the Company’s earnings for the nine months ended September 30, 2022, by approximately $67 (year ended December 31, 2021 - $143). The Company has not entered into any foreign currency contracts to mitigate this risk.

 

Price Risk

 

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk.

 

The Company is exposed to price risk with respect to its amounts receivable, as certain trade accounts receivable are recorded based on provisional terms that are subsequently adjusted according to quoted metal prices at the date of final settlement. Quoted metal prices are affected by numerous factors beyond the Company’s control and are subject to volatility, and the Company does not employ hedging strategies to limit its exposure to price risk. At September 30, 2022, based on outstanding accounts receivable that were subject to pricing adjustments, a 10% change in metals prices would have an impact on net earnings (loss) of approximately $69 (December 31, 2021 - $26).

 

The Company is exposed to price risk with respect to its long-term investments, as these investments are carried at fair value based on quoted market prices. Changes in market prices result in gains or losses being recognized in net income (loss). At September 30, 2022, a 10% change in market prices would have an impact on net earnings (loss) of approximately $132 (December 31, 2021 - $330).

 

The Company’s profitability and ability to raise capital to fund exploration, evaluation and production activities is subject to risks associated with fluctuations in mineral prices. Management closely monitors commodity prices, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company.

 

(d)

Classification of Financial Instruments

 

IFRS 7 Financial Instruments: Disclosuresestablishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:

 

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

Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

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

 

 
27

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

The following table sets forth the Company’s financial assets and financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as at September 30, 2022:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial assets

 

 

 

 

 

 

 

 

 

Cash

 

$10,920

 

 

$-

 

 

$-

 

Amounts receivable

 

 

-

 

 

 

656

 

 

 

-

 

Long-term investments

 

 

1,353

 

 

 

-

 

 

 

-

 

Total financial assets

 

$12,273

 

 

$656

 

 

$-

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

 

-

 

 

 

-

 

 

 

(218)

Total financial liabilities

 

$-

 

 

$-

 

 

$(218)

 

The Company uses Black-Scholes model to measure its Level 3 financial instruments. As at September 30, 2022, the Company’s Level 3 financial instruments consisted of the warrant liability.

 

For the Company’s warrant liability valuation and fair value adjustments during the nine months ended September 30, 2022 and the year ended December 31, 2021, see Note 13.

 

21. SEGMENTED INFORMATION

 

The Company’s revenues for the three and nine months ended September 30, 2022 are all attributable to Mexico, from shipments of concentrate produced by the Avino Mine, and is considered to be one single reportable operating segment.

 

On the condensed consolidated interim statements of operations, the Company had revenue from the following product mixes:

 

 

 

Three months ended

 September 30,

 

 

Nine months ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Silver

 

$3,454

 

 

$683

 

 

$10,722

 

 

$698

 

Copper

 

 

5,625

 

 

 

398

 

 

 

17,884

 

 

 

407

 

Gold

 

 

2,310

 

 

 

1,179

 

 

 

7,141

 

 

 

1,184

 

Penalties, treatment costs and refining charges

 

 

(2,271)

 

 

(379)

 

 

(6,209)

 

 

(379)

Total revenue from mining operations

 

$9,118

 

 

$1,881

 

 

$29,538

 

 

$1,910

 

 

For the three and nine months ended September 30, 2022 and 2021, the Company had the following customers that accounted for total revenues:

 

 

 

Three months ended

September 30,

 

 

Nine months ended

 September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Customer #1

 

$7,710

 

 

$429

 

 

$25,569

 

 

$429

 

Customer #2

 

 

1,415

 

 

 

-

 

 

 

3,161

 

 

 

-

 

Other customers

 

 

(7)

 

 

1,452

 

 

 

808

 

 

 

1,481

 

Total revenue from mining operations

 

$9,118

 

 

$1,881

 

 

$29,538

 

 

$1,910

 

 

 
28

 

 

AVINO SILVER & GOLD MINES LTD.

Notes to the unaudited condensed consolidated interim financial statements

For the nine months ended September 30, 2022 and 2021

(Expressed in thousands of US dollars, except where otherwise noted - Unaudited)

 

Geographical information relating to the Company’s non-current assets (other than financial instruments) is as follows:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Exploration and evaluation assets - Mexico

 

$46,370

 

 

$11,052

 

Exploration and evaluation assets - Canada

 

 

1

 

 

 

1

 

Total exploration and evaluation assets

 

$46,371

 

 

$11,053

 

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Plant, equipment, and mining properties - Mexico

 

$42,631

 

 

$35,390

 

Plant, equipment, and mining properties - Canada

 

 

264

 

 

 

285

 

Total plant, equipment, and mining properties

 

$42,895

 

 

$35,675

 

 

 

29

 

 

EXHIBIT 99.2

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

The following discussion and analysis of the operations, results, and financial position of Avino Silver & Gold Mines Ltd. (the “Company” or “Avino”) should be read in conjunction with the Company’s condensed consolidated interim financial statements for the nine months ended September 30, 2022, and the Company’s audited consolidated financial statements as at and for the year ended December 31, 2021, and the notes thereto.

 

This Management’s Discussion and Analysis (“MD&A”) is dated November 9, 2022 and discloses specified information up to that date. The condensed interim consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Unless otherwise cited, references to dollar amounts are in US dollars. This MD&A contains “forward-looking statements” that are subject to risk factors including those set out in the “Cautionary Statement” at the end of this MD&A. All information contained in this MD&A is current and has been approved by the Company’s Board of Directors as of November 9, 2022, unless otherwise indicated. Throughout this report we refer to “Avino”, the “Company”, “we”, “us”, “our”, or “its”. All these terms are used in respect of Avino Silver & Gold Mines Ltd. We recommend that readers consult the “Cautionary Statement” on the last page of this report. Additional information relating to the Company is available on the Company’s website at www.avino.com and on SEDAR at www.sedar.com.

 

Business Description

 

Founded in 1968, the Company is engaged in the production and sale of silver, gold, and copper bulk concentrate, and the acquisition, exploration, and evaluation of mineral properties. The Company holds mineral claims and leases in Durango, Mexico, and in British Columbia and Yukon, Canada. Avino is a reporting issuer in all of the provinces of Canada, except for Quebec, and a foreign private issuer with the Securities and Exchange Commission in the United States. The Company’s shares trade on the Toronto Stock Exchange (“TSX”) and the NYSE American under the symbol “ASM”, and on the Berlin and Frankfurt Stock Exchanges under the symbol “GV6”.

 

Discussion of Operations

 

The Company’s production, exploration, and evaluation activities during the nine months ended September 30, 2022, have been conducted primarily on its Avino Property.

 

The Company holds a 99.67% effective interest in Compañía Minera Mexicana de Avino, S.A. de C.V. (“Avino Mexico”), a Mexican corporation which owns the Avino Property. The Avino Property covers approximately 1,104 contiguous hectares, and is located approximately 80 km north-east of the city of Durango. The Avino Property is equipped with milling and processing facilities that presently process all output from the Avino Mine located on the property. The Company also holds 100% interest in Proyectos Mineros La Preciosa S.A. de C.V. (“La Preciosa”), a Mexican corporation which owns the La Preciosa Property. La Preciosa covers approximately 6,011 hectares in Durango, Mexico, within the municipalities of Panuco de Coronado and Canatlan. The property is located within 20 kilometres of the Company’s mill facility and production mining area at the Avino Property,

 

 
1 | Page

 

  

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Operational Highlights

 

HIGHLIGHTS

(Expressed in US$)

Third    Quarter 2022

 

Third    Quarter 2021

 

Change1

YTD

2022

YTD

2021

Change1

Operating

 

 

 

 

 

 

 

 

Tonnes Milled

 

 162,169

 

 

 58,258

 

 178%

 

 391,531

 

 61,791 534%

Silver Ounces Produced

 

 285,444

 

 

 77,935

 

 266%

 

 675,339

 

 81,439 729%

Gold Ounces Produced

 

 1,201

 

 

 1,183

 

 1%

 

 3,352

 

 1,228 173%

Copper Pounds Produced

 

 2,101,635

 

 

 685,535

 

 207%

 

 4,963,327

 

 740,578 570%

Silver Equivalent Ounces1 Produced

 

 778,008

 

 

 285,464

 

 173%

 

 1,885,375

 

 300,941 526%

Concentrate Sales and Cash Costs

 

 

 

 

 

 

 

 

 

 

 

 

Silver Equivalent Payable Ounces Sold2

 

 603,360

 

 

 107,112

 

 463%

 

 1,693,168

 

 107,112

1481%

Cash Cost per Silver Equivalent Payable Ounce1,2,3

 $ 10.29

 

 $ 3.87

 

 166% $ 9.71 $ 3.87 151%

All-in Sustaining Cash Cost per Silver Equivalent Payable Ounce1,2,3

 $ 17.32

 

 $ 25.60

 

 -32% $ 17.59 $ 51.85 -66%

 

1. In Q3 2022, AgEq was calculated using metals prices of $19.32 oz Ag, $1,734 oz Au and $3.51 lb Cu. In Q3 2021, AgEq was calculated using metals prices of $24.36 oz Ag, $1,789 oz Au and $4.25 lb Cu. For YTD 2022, AgEq was calculated using metal prices of $22.05 oz Ag, $1,856 oz Au, and $4.10 lb Cu. For YTD 2021, AgEq was calculated using metals prices of $24.36 oz Ag, $1,789 oz Au and $4.25 lb Cu.

 

2. “Silver equivalent payable ounces sold” for the purposes of cash costs and all-in sustaining costs consists of the sum of payable silver ounces, gold ounces and copper tonnes sold, before penalties, treatment charges, and refining charges, multiplied by the ratio of the average spot gold and copper prices to the average spot silver price for the corresponding period.

 

3. The Company reports non-IFRS measures which include cash cost per silver equivalent payable ounce and all-in sustaining cash cost per payable ounce. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning and the calculation methods may differ from methods used by other companies with similar reported measures. See Non-IFRS Measures section for further information and detailed reconciliations.

 

Financial Highlights

 

HIGHLIGHTS

(Expressed in 000’s of US$)

 

Third Quarter 2022

 

 

Third Quarter 2021

 

Change

YTD

2022

 

YTD

2021

 

Change

Financial Operating Performance

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

9,118

 

 

$

1,881

 

385%

$

29,538

 

$

1,910

 

1446%

Mine operating income (loss)

 

$

2,060

 

 

$

838

 

146%

$

10,706

 

$

(859

)

1346%

Net income (loss)

 

$

(1,129

)

 

$

(214

)

-428%

$

1,800

 

$

(4,686

)

138%

Earnings (loss) before interest, taxes and amortization (“EBITDA”)1

 

$

170

 

 

$

(227

)

175%

$

7,056

 

$

(4,378

)

261%

Adjusted earnings (losses)1

 

$

389

 

 

$

(728

)

153%

$

6,213

 

$

(2,449

)

354%

Cash flow from operations before working capital changes

 

$

1,588

 

 

$

102

 

1457%

$

7,744

 

$

(2,364

)

417%

Per Share Amounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share

 

$

(0.01

)

 

$

(0.00

)

-100%

$

0.02

 

$

(0.05

)

140%

Adjusted earnings (loss) per share1

 

$

0.00

 

 

$

(0.00

)

-%

$

0.05

 

$

(0.02

)

350%

Cash flow per share1

 

$

0.01

 

 

$

0.00

 

100%

$

0.07

 

$

(0.02

)

450%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HIGHLIGHTS

(Expressed in 000’s of US$)

 

September 30, 2022

 

 

September 30, 2021

 

Change

September 30, 2022

 

 

December 31, 2021

Change

Liquidity & Working Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

10,920

 

 

$

22,341

 

-51%

$

10,920

 

$

24,765

 

-56%

Working capital1

 

$

12,273

 

 

$

28,903

 

-58%

$

12,273

 

$

31,635

 

-61%

 

1. The Company reports non-IFRS measures which include EBITDA, adjusted earnings, adjusted earnings per share, cash flow per share and working capital. These measures are widely used in the mining industry as a benchmark for performance, but do not have a standardized meaning and the calculation methods may differ from methods used by other companies with similar reported measures. See Non-IFRS Measures section for further information and detailed reconciliations.

 

 
2 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

3rd Quarter 2022 Highlights

 

Record Quarterly Production at Avino

 

 

·

 A record 778,008 silver equivalent ounces were produced in Q3 2022, marking a 20% increase over Q2 2022. Q3 2022 marks the fourth full quarter following the restart of operations in August 2021.

 

Avino ET Area Drills High Grade Silver and Copper in Multiple Holes

 

 

·

On October 11, 2022, the Company announced drill results from a further six holes at the Avino Elena Tolosa Area (“ET”) to define the continuity of widths and grades of the Avino vein extending significant potential depth of at least 290 metre down dip below the deepest levels of development. The results confirm the mineralization continues and also contains significantly higher copper mineralization in the ET area.

 

Commissioning of Dry-Stack Tailings Facility

 

 

·

 During Q3 2022, the Company completed construction of the dry-stack tailings facility

 

Working Capital & Liquidity at September 30, 2022

 

 

·

The Company’s cash balance at September 30, 2022, totaled $10.9 million compared to $24.8 million at December 31, 2021 and $22.3 million at September 30, 2021. Working capital totaled $12.3 million at September 30, 2022, compared to $31.6 million at December 31, 2021 and $28.9 million at September 30, 2021.

 

Financial Results – Three months ended September 30, 2022, compared to three months ended September 30, 2021

 

Revenues

 

The Company recognized revenues net of penalties, treatment costs and refining charges, of $9.1 million on the sale of Avino Mine bulk copper/silver/gold concentrate, compared to $1.9 million revenues for Q3 2021, an increase of $7.2 million.

 

Metal prices for revenues recognized during the period were $19.32 per ounce of silver, $1,734 per ounce of gold, and $7,730 per tonne of copper, compared to averages of $24.61, $1,803, and $9,402, respectively, for the third quarter of 2021.

 

Cost of Sales & Mine Operating Income

 

Cost of sales was $7.1 million, compared to $1.0 million in Q3 2021, an increase of $6.1 million. The increase in cost of sales is attributable to increasing mining operations in Q3 2022 compared to Q3 2021.

 

Mine operating income, after depreciation and depletion, was $2.0 million, compared to a loss of $0.8 million in Q3 2021. The increase in mine operating income is a direct result of the Company being in production for Q3 2022 and making consistent concentrate deliveries.

 

 
3 | Page

 

  

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

General and Administrative Expenses & Share-Based Payments

 

General and administrative expenses was $1.0 million, compared to $0.8 million in Q3 2021, with the increases coming from the increased corporate activity surrounding ramp up procedures and the acquisition of La Preciosa.

 

Share-based payments was $0.6 million, compared to $0.3 million in Q3 2021, an increase of $0.2 million. The increase is a direct result of the 2022 option and RSU grants carrying a higher expense when compared to the vesting of option and RSU issuances from 2020 and prior years.

 

Other Items

 

Other Items totaled a loss of $1.0 million for the period, a change of $1.1 million compared to income of $0.1 million related to other items in Q3 2021.

 

Unrealized loss on long-term investment was $1.2 million, a decrease to income of $0.1 million compared to a loss of $1.1 million in Q3 2021. This is a direct result of fluctuations in the Company’s investment in shares of Talisker Resources from period to period, as well as the Company’s investment in shares of Silver Wolf Exploration and Endurance Gold.

 

Fair value adjustment on warrant liability was a gain of $0.1 million, a decrease to income of $0.4 million compared to a gain of $0.5 million in Q3 2021. The fair value adjustment on the Company’s warrant liability relates to the issuance of US dollar-denominated warrants, which are re-valued each reporting period, and the value fluctuates with changes in the US-Canadian dollar exchange rate, and in the variables used in the valuation model, such as the Company’s US share price, and expected share price volatility.

 

Foreign exchange gain for the period was $0.3 million, a decrease to income of $0.4 million compared to a gain of $0.7 million in Q3 2021. Foreign exchange gains or losses result from transactions in currencies other than the Canadian dollar functional currency. During the three months ended September 30, 2022 and 2021, the US dollar appreciated in relation to the Canadian dollar and the Mexican peso, resulting in an unrealized foreign exchange gain.

 

The remaining Other Items resulted in a change of $0.2 million compared to Q3 2021.

 

Current and Deferred Income Taxes

 

Current income tax expense increased to $0.2 million in Q3 2022, compared to Nil in income tax expense for Q3 2021. Given the return to profitable mining operations, the higher amount of current income tax expenses in Q3 2022 is a result of income generated in the current quarter.

 

Deferred income tax expense was $0.5 million, a change of $0.4 million compared to $0.1 million in Q3 2021. Deferred income tax fluctuates due to movements in taxable and deductible temporary differences related to the special mining duty in Mexico and to changes in inventory, plant, equipment and mining properties, and exploration and evaluation assets, amongst other factors. The changes in current income taxes and deferred income taxes during the current and comparable periods primarily relate to movements in the tax bases and mining profits and/or losses in Mexico.

 

Net Income/Loss

 

Net loss from all operations was $1.1 million for the period, or $0.01 per share, compared to a loss of $0.3 million, or Nil per share during Q3 2021. The changes are a result of the items noted above, which are primarily increases in revenues and mine operating income, and movements in the fair value adjustment of the warrant liability and unrealized foreign exchange. The positive movement in income/loss was offset by increases to share-based payments, an increase to general and administrative expenses and an increased unrealized loss on investments, as well as increased current and deferred income tax expense, as noted above.

 

 
4 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

EBITDA & Adjusted Income/Loss (see “Non-IFRS Measures”)

 

EBITDA was $0.2 million, a positive increase of $0.4 million when compared to losses of $0.2 million for Q3 2021. The changes in EBITDA are primarily a factor of the items above, excluding any changes in depreciation and depletion, and any changes in income taxes. See Non-IFRS Measures for a reconciliation for EBITDA.

 

Adjusted earnings for the period was $0.4 million, a positive increase of $1.1 million when compared to adjusted losses of $0.7 million in the corresponding quarter in 2021. Changes to adjusted losses are a result of the items noted above in EBITDA, further excluding share-based payments, gains and losses related to warrants, and movements in unrealized foreign exchange. See Non-IFRS Measures for a reconciliation for adjusted losses.

 

Cash Costs & All-in Sustaining Cash Costs (see “Non-IFRS Measures”)

 

Cash costs per silver equivalent payable ounce was $10.29, compared to $3.87 Q3 2021 excluding stand-by-cost. Throughout Q3 2022, mining activities continued to ramp-up and thus certain incremental and non-recurring costs were incurred to reach the current mill throughput.

 

All-in sustaining cash costs per silver equivalent payable ounce was $17.29, compared to $25.60 for Q3 2021. The decrease is a result of higher ounces produced and sold, with a similar level of administrative and support costs, which resulted in a decrease in overall all-in sustaining cash costs.

 

See Non-IFRS Measures for a reconciliation for cash costs and all-in sustaining cash costs.

 

Financial Results – nine months ended September 30, 2022, compared to nine months ended September 30, 2021

 

Revenues

 

The Company recognized revenues net of penalties, treatment costs and refining charges, of $29.5 million on the sale of Avino Mine bulk copper/silver/gold concentrate, compared to $1.9 million in revenues for the nine month period ended September 30, 2022, an increase of $27.6 million.

 

The increase in revenues is a direct result of the restart of mining operations in August 2021, with the only no production or sales in the nine month period ended September 30, 2021. The only revenues in the comparable period were from the finalization of provisionally priced invoices issued during Q3 and Q4 2020.

 

Metal prices for revenues recognized during the period were $22.05 per ounce of silver, $1,856 per ounce of gold, and $9,045 per tonne of copper, compared to averages of $24.61, $1,803, and $9,402, respectively, for the same period in 2021.

 

Cost of Sales & Mine Operating Income

 

Cost of sales was $18.9 million, compared to $2.8 million in 2021, an increase of $16.1 million. The increase in cost of sales is attributable to mining operations being active during the nine month period ended September 30, 2022, with minimal tonnage being mined and milled during the same period in 2021, with these activities recommending during Q3 2021.

 

Mine operating income, after depreciation and depletion, was $10.7 million, compared to a loss of $0.9 million in the corresponding period. The increase in mine operating income is a direct result of the Company being in production for the nine months of 2022 and making consistent concentrate deliveries, which was not the case in the same period of 2021.

 

 
5 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

General and Administrative Expenses & Share-Based Payments

 

General and administrative expenses was $3.5 million, compared to $2.7 million in 2021, with the increases coming from the increased corporate activity surrounding ramp up procedures and the acquisition of La Preciosa.

 

Share-based payments was $1.6 million, compared to $1.3 million in 2021. Movements in share-based payments are a direct result of the 2022 option and RSU grants carrying a higher expense when compared to the vesting of option and RSU issuances from 2020 and prior years.

 

Other Items

 

Other Items totaled a loss of $0.3 million for the period, an positive change to income of $0.4 million compared to a loss of $0.7 million related to other items in 2021.

 

Unrealized loss on long-term investment was $2.5 million, a decrease in income of $1.5 million compared to a loss of $1.0 million in the comparable period for 2021. This is a direct result of fluctuations in the Company’s investment in shares of Talisker Resources from period to period, as well as the Company’s investment in shares of Silver Wolf Exploration and Endurance Gold.

 

Fair value adjustment on warrant liability was a gain of $2.7 million, in increase to income of $1.1 million compared to a gain of $1.6 million in 2021. The fair value adjustment on the Company’s warrant liability relates to the issuance of US dollar-denominated warrants, which are re-valued each reporting period, and the value fluctuates with changes in the US-Canadian dollar exchange rate, and in the variables used in the valuation model, such as the Company’s US share price, and expected share price volatility.

 

Realized loss on warrants exercised was Nil for 2022, an increase to income of $1.1 million compared to a loss of $1.1 million in the comparable period for 2021, in which 1.0 million warrants were exercised. No warrants were exercised in the current period.

 

Foreign exchange loss for the period was $0.2 million, unchanged from in the comparable period for 2021. Foreign exchange gains or losses result from transactions in currencies other than the Canadian dollar functional currency. During the nine months ended September 30, 2022, the Canadian dollar and the US dollar depreciated slightly in relation to the Mexican peso, resulting in a foreign exchange loss. During the nine months ended September 30, 2021, the US dollar appreciated slightly in relation to the Canadian dollar but remained consistent to the Mexican peso, resulting in a foreign exchange loss.

 

The remaining Other Items resulted in a loss of $0.3 million, a change of $0.3 million compared to Nil for the nine months ended September 30, 2021.

 

Current and Deferred Income Taxes

 

Current income tax expense increased to $0.6 million in 2022, compared to Nil in income tax expense for 2021. Given the return to profitable mining operations, the higher amount of current income tax expenses in 2022 is a result of income generated in the current period and relates specifically to the special mining duties tax on profits in Mexico.

 

Deferred income tax expense was $2.8 million, a change of $3.8 million compared to a recovery of $1.0 million in 2021. Deferred income tax fluctuates due to movements in taxable and deductible temporary differences related to the special mining duty in Mexico and to changes in inventory, plant, equipment and mining properties, and exploration and evaluation assets, amongst other factors. The changes in current income taxes and deferred income taxes during the current and comparable periods primarily relate to movements in the tax bases and mining profits and/or losses in Mexico.

 

 
6 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Net Income/Loss

 

Net income from all operations was $1.8 million for the nine months ended September 30, 2022, or $0.02 per share, compared to a loss of $4.7 million, or $0.05 per share during the nine months ended September 30, 2021. The changes are a result of the items noted above, which are primarily increases in revenues and mine operating income, and movements in the fair value adjustment of the warrant liability, realized loss on warrants exercised, and unrealized foreign exchange. The positive movement in income/loss was partially offset by increases to share-based payments, an increase to general and administrative expenses and an increased unrealized loss on investments, as well as increased current and deferred income tax expense, as noted above.

 

EBITDA & Adjusted Income/Loss (see “Non-IFRS Measures”)

 

EBITDA was $7.1 million, a positive increase of $11.5 million when compared to losses of $4.4 million for 2021. The changes in EBITDA are primarily a factor of the items above, excluding any changes in depreciation and depletion, and any changes in income taxes. See Non-IFRS Measures for a reconciliation for EBITDA.

 

Adjusted earnings for the period was $7.1 million, a positive increase of $9.5 million when compared to adjusted losses of $2.4 million in the corresponding period in 2021. Changes to adjusted losses are a result of the items noted above in EBITDA, further excluding share-based payments, gains and losses related to warrants, movements in unrealized foreign exchange, and stand-by costs (only applicable for 2021). See Non-IFRS Measures for a reconciliation for adjusted earnings/losses.

 

Cash Costs & All-in Sustaining Cash Costs (see “Non-IFRS Measures”)

 

Cash costs per silver equivalent payable ounce, excluding stand-by costs, was $9.71, compared to $3.87 excluding stand-by cost for the comparable period in 2021. Throughout 2022, mining activities continued to ramp-up and thus certain incremental and non-recurring costs were incurred to reach the current mill throughput. Cash costs at the Avino Mine are expected to stabilize at these levels moving forward.

 

All-in sustaining cash costs per silver equivalent payable ounce was $17.58, compared to $51.85 including stand-by cost for the comparable period in 2021. The decrease is a result of higher ounces produced and sold, with a similar level of administrative and support costs, which resulted in a decrease in overall all-in sustaining cash costs.

 

See Non-IFRS Measures for a reconciliation for cash costs and all-in sustaining cash costs.

 

 
7 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Three months ended September 30, 2022, compared to the three months ended September 30, 2021:

 

 (000’s)

 

2022

 

 

2021

 

Revenue from mining operations

 

 $ 9,118

 

 

 $ 1,881

 

Cost of sales

 

 

 7,058

 

 

 

 1,043

 

Mine operating income

 

 

 2,060

 

 

 

 838

 

Operating expenses

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

 997

 

 

 

 815

 

Share-based payments

 

 

 556

 

 

 

 277

 

Income (loss) before other items

 

 

 507

 

 

 

 (254 )

Other items

 

 

 

 

 

 

 

 

Interest and other income

 

 

 15

 

 

 

 14

 

Gain (loss) on long-term investments

 

 

 (1,221 )

 

 

 (1,103 )

Fair value adjustment on warrant liability

 

 

 86

 

 

 

 516

 

Unrealized foreign exchange gain (loss)

 

 

 251

 

 

 

 716

 

Project evaluation expenses

 

 

 (5 )

 

 

 -

 

Finance costs

 

 

 (87 )

 

 

 (8 )

Accretion of reclamation provision

 

 

 (11 )

 

 

 (13 )

Interest expense

 

 

 (23 )

 

 

 (13 )

Net loss before income taxes

 

 

 (488 )

 

 

 (145 )

Income taxes

 

 

 

 

 

 

 

 

Current income tax expense

 

 

 (142 )

 

 

 (13 )

Deferred income tax expense

 

 

 (499 )

 

 

 (56 )

Income tax expense

 

 

 (641 )

 

 

 (69 )

 

 

 

 

 

 

 

 

 

Net loss

 

 $ (1,129 )

 

 $ (214 )

 

 

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

 

 

 

Basic

 

 $ (0.01 )

 

 $ (0.00 )

Diluted

 

 $ (0.01 )

 

 $ (0.00 )

 

 
8 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Nine months ended September 30, 2022, compared to the Nine months ended September 30, 2021:

 

 (000’s)

 

2022

 

 

2021

 

Revenue from mining operations

 

 $ 29,538

 

 

 $ 1,910

 

Cost of sales

 

 

 18,832

 

 

 

 2,769

 

Mine operating income (loss)

 

 

 10,706

 

 

 

 (859 )

Operating expenses

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

 3,469

 

 

 

 2,726

 

Share-based payments

 

 

 1,618

 

 

 

 1,391

 

Income (loss) before other items

 

 

 5,619

 

 

 

 (4,976 )

Other items

 

 

 

 

 

 

 

 

Interest and other income

 

 

 67

 

 

 

 143

 

Gain (loss) on long-term investments

 

 

 (2,503 )

 

 

 (1,002 )

Fair value adjustment on warrant liability

 

 

 2,692

 

 

 

 1,560

 

Realized loss on exercise of warrants

 

 

 -

 

 

 

 (1,111 )

Unrealized foreign exchange loss

 

 

 (231 )

 

 

 (187 )

Project evaluation expenses

 

 

 (80 )

 

 

 -

 

Finance costs

 

 

 (188 )

 

 

 (46 )

Accretion of reclamation provision

 

 

 (32 )

 

 

 (36 )

Interest expense

 

 

 (66 )

 

 

 (15 )

Net income (loss) before income taxes

 

 

 5,278

 

 

 

 (5,670 )

Income taxes

 

 

 

 

 

 

 

 

Current income tax expense

 

 

 (642 )

 

 

 (25 )

Deferred income tax (expense) recovery

 

 

 (2,836 )

 

 

 1,009

 

Income tax (expense) recovery

 

 

 (3,478 )

 

 

 984

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 $ 1,800

 

 

 $ (4,686 )

 

 

 

 

 

 

 

 

 

Earnings (loss) per share

 

 

 

 

 

 

 

 

Basic

 

 $ 0.02

 

 

 $ (0.05 )

Diluted

 

 $ 0.02

 

 

 $ (0.05 )

 

 
9 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Avino Mine Production Highlights

 

Q3

2022

Q2

20221

Change1

 

YTD

2022

FY

20211

Change1

162,169

118,224

37%

Total Mill Feed (dry tonnes)

391,531

165,304

137%

59

65

-9%

Feed Grade Silver (g/t)

58

53

9%

0.31

0.46

-33%

Feed Grade Gold (g/t)

0.35

0.84

-61%

0.66

0.69

-4%

Feed Grade Copper (%)

0.64

0.57

12%

92%

91%

1%

Recovery Silver (%)

92%

87%

6%

74%

78%

-5%

Recovery Gold (%)

76%

75%

1%

89%

92%

-3%

Recovery Copper (%)

90%

88%

2%

285,444

225,537

27%

Total Silver Produced (oz)

675,339

245,372

175%

1,201

1,350

-11%

Total Gold Produced (oz)

3,352

3,386

-1%

2,101,635

1,644,342

28%

Total Copper Produced (Lbs)

4,963,327

1,869,306

166%

778,008

649,569

20%

Total Silver Equivalent Produced (oz)2

1,885,375

842,373

124%

 

1Q2 2022 was the most recent three-month period of consolidated production and is most appropriate for comparison purposes, as there was limited production for Q3 2021. Full Year 2021 was used as a comparison for YTD 2022, as it includes the most recent 9 month period of production prior to 2022.

 

2In Q3 2022, AgEq was calculated using metals prices of $19.22 per oz Ag, $1,729 per oz Au and $3.51 per lb Cu. In Q2 2022, AgEq was calculated using metals prices of $22.64 per oz Ag, $1,873 per oz Au and $4.32 per lb Cu. In YTD 9M 2022, AgEq was calculated using metal prices of $21.94 per oz Ag, $1,825 per oz Au and $4.12 per lb Cu. In FY 2021, AgEq was calculated using metal prices of $23.84 per oz Ag, $1,786 per oz Au and $4.32 per lb Cu.

 

Under National Instrument 43-101, the Company is required to disclose that it has not based its production decisions on NI 43-101-compliant reserve estimates, preliminary economic assessments, or feasibility studies, and historically projects without such reports have increased uncertainty and risk of economic viability. The Company’s decision to place a mine into operation at levels intended by management, expand a mine, make other production-related decisions, or otherwise carry out mining and processing operations is largely based on internal non-public Company data, and on reports based on exploration and mining work by the Company and by geologists and engineers engaged by the Company. The results of this work are evident in the Company’s discovery of the San Gonzalo and Avino Mine resources, and in the Company’s record of mineral production and financial returns since operations at levels intended by management commenced at the San Gonzalo Mine in 2012.

 

Exploration

 

The Company has budgeted 15,000 metres of drilling in 2022, with a focus on the area at depth below the current Elena Tolosa production area, further drilling of 17 additional holes on the Oxide Tailings project, and La Potosina. The Company has completed 11,253 metres of drilling in nine months ended September 30, 2022.

 

Avino – Elena Tolosa Area

 

On October 11, 2022, Avino announced further drill results from the Avino Elena Tolosa (“ET”) area below the current Level 17 mining area. These drill results continue to confirm the downdip continuity of widths and grades of the Avino vein extending significant potential to a depth of at least 290 metres down dip below the deepest levels of development. Avino is advancing geological modelling to determine the potential geometry and controls of the mineralization. Currently, three drills are turning to include a further 14 drill holes for 7,000 metres. For full news release, visit our website here.

 

Selected high grade intercepts include:

 

 

-

Hole ET 22-08: 95 AgEq g/t over 43.80 metres, including 673 AgEq g/t over 0.66 metres

 

-

Hole ET 22-09: 150 AgEq g/t over 26.77 metres, including 1,037 AgEq g/t over 0.46 metres and 1,800 AgEq g/t over 0.28 meters

 

 
10 | Page

 

  

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Results from the program are shown below:

 

Structure

Hole Number

From

(m)

To

(m)

Drill Intercept Length (m)

True width

(m)

Au

(g/t)

Ag

(g/t)

Cu

(%)

AgEq¹

(g/t)

AVINO VEIN

ET-22-04

432.85

435.30

2.45

2.12

0.02

2

0.02

5

AVINO VEIN

ET-22-05

494.75

512.00

17.25

14.40

0.17

30

0.19

62

Including

505.45

505.85

0.40

0.34

0.42

430

0.42

524

HW BX

ET-22-06

70.50

74.80

4.30

3.72

0.07

8

0.16

36

AVINO VEIN

And

566.35

603.85

37.50

27.25

0.02

8

0.10

23

 

Including

585.40

585.60

0.20

0.14

0.49

132

1.92

436

HW STW

ET-22-07

213.80

223.90

10.10

9.95

0.25

17

0.40

93

 

Including

223.00

223.90

0.90

0.90

1.85

37

0.22

232

AVINO VEIN

And

555.60

569.15

13.55

10.90

0.06

25

1.05

172

 

Including

563.70

564.70

1.00

0.74

0.06

65

2.84

454

HW STW

ET-22-08

510.15

513.70

3.55

3.20

0.02

12

0.98

146

 

Including

510.15

510.40

0.25

0.22

0.06

41

7.78

1,099

AVINO VEIN

And

519.00

576.65

57.65

43.80

0.15

15

0.49

95

 

Including

533.00

534.00

1.00

0.66

4.19

36

1.94

673

AVINO VEIN

ET-22-09

548.25

581.25

33.00

26.77

0.15

40

 0.71

150

 

Including

548.25

548.65

0.40

0.28

2.96

155

 10.20

1,800

 

Including

556.65

557.25

0.60

0.46

1.98

260

 4.43

1,037

 

1.

 AgEq in drill results above assumes $1,700 oz Au and $19.00 oz Ag, and $3.75 lb Cu, and 100% metallurgical recovery

2.

 HW BX = Hanging Wall Breccia and HW STW = Hanging Wall Stockworks

 

 
11 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Avino – Oxide Tailings

 

No new drilling was performed on the oxide tailings, however internal analyses were performed to estimate the total resource. Results will be released in a forthcoming property-wide mineral resource update.

 

Qualified Person(s)

 

Peter Latta, P.Eng, MBA, VP Technical Services, Avino, is a qualified person within the context of National Instrument 43-101, and has reviewed and approved the technical data in this document.

 

Non – IFRS Measures

 

EBITDA and Adjusted earnings

 

Earnings, or loss, before interest, taxes and amortization (“EBITDA”) is a non IFRS financial measure which excludes the following items from net earnings:

 

 

·

 Income tax expense

 

·

 Finance cost

 

·

 Amortization and depletion

 

Adjusted earnings excludes the following additional items from EBITDA

 

·

 Share based compensation;

 

·

 Non-operational items including foreign exchange movements, fair value adjustments on outstanding warrants and other non-recurring items

 

Management believes EBITDA and adjusted earnings provides an indication of continuing capacity to generate operating cash flow to fund capital needs, service debt obligations and fund capital expenditures. These measures are intended to provide additional information to investors and analysts. There are not standardized definitions under IFRS and should not be considered in isolation or as a substitute for measures of operating performance prepared in accordance with IFRS.

 

Adjusted earnings excludes share-based payments, and non-operating or recurring items such as foreign exchange gains and losses and fair value adjustments on outstanding warrants. Under IFRS, entities must reflect within compensation expense the cost of share-based payments. In the Company’s circumstances, share-based compensation can involve significant amounts that will not be settled in cash but are settled by issuance of shares in exchange. The Company discloses adjusted earnings to aid in understanding the results of the company.

 

 
12 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

The following table provides a reconciliation of net earnings in the financial statements to EBITDA and adjusted earnings:

 

Expressed in 000’s of US$, unless otherwise noted

 

Q3 2022

 

 

Q3 2021

 

 

YTD 2022

 

 

YTD 2021

 

Net income (loss) for the period

 

 $ (1,129 )

 

 $ (214 )

 

 $ 1,800

 

 

 $ (4,686 )

Depreciation and depletion

 

 

 551

 

 

 

 352

 

 

 

 1,558

 

 

 

 1,338

 

Interest income and other

 

 

 (14 )

 

 

 (14 )

 

 

 (66 )

 

 

 (143 )

Interest expense

 

 

 23

 

 

 

 13

 

 

 

 66

 

 

 

 15

 

Finance cost

 

 

 87

 

 

 

 8

 

 

 

 188

 

 

 

 46

 

Accretion of reclamation provision

 

 

 11

 

 

 

 13

 

 

 

 32

 

 

 

 36

 

Current income tax expense

 

 

 142

 

 

 

 13

 

 

 

 642

 

 

 

 25

 

Deferred income tax expense (recovery)

 

 

 499

 

 

 

 56

 

 

 

 2,836

 

 

 

 (1,009 )

EBITDA

 

 $ 170

 

 

 $ 227

 

 

 $ 7,056

 

 

 $ (4,378 )

Fair value adjustment on warrant liability

 

 

 (86 )

 

 

 (516 )

 

 

 (2,692 )

 

 

 (1,560 )

Realized loss on warrants exercised

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

1,111

 

Share-based payments

 

 

 556

 

 

 

 277

 

 

 

 1,618

 

 

 

 1,391

 

Stand-by costs during strike action

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 800

 

Foreign exchange loss (gain)

 

 

 (251 )

 

 

 (716 )

 

 

 231

 

 

 

 187

 

Adjusted earnings (loss)

 

 $ 389

 

 

 $ (728 )

 

 $ 6,213

 

 

 $ (2,449 )

Shares outstanding (diluted)

 

 

 120,386,601

 

 

 

 101,559,946

 

 

 

 113,814,123

 

 

 

 99,457,201

 

Adjusted earnings (loss) per share

 

 $ 0.00

 

 

 $ (0.01 )

 

 $ 0.05

 

 

 $ (0.02 )

 

Cash cost per payable ounce, all-in sustaining cash cost per payable ounce, and cash flow per share

 

Cash cost per payable ounce, all-in sustaining cash cost per payable ounce, and cash flow per share are measures developed by mining companies in an effort to provide a comparable standard. However, there can be no assurance that our reporting of these non-IFRS measures is similar to that reported by other mining companies. Total cash cost per payable ounce, all-in sustaining cash cost per payable ounce, and cash flow per share are measures used by the Company to manage and evaluate operating performance of the Company’s mining operations, and are widely reported in the silver and gold mining industry as benchmarks for performance, but do not have standardized meanings prescribed by IFRS, and are disclosed in addition to IFRS measures.

 

Management believes that the Company’s ability to control the cash cost per payable silver equivalent ounce is one of its key performance drivers impacting both the Company’s financial condition and results of operations. Achieving a low silver equivalent production cost base allows the Company to remain profitable from mining operations even during times of low commodity prices, and provides more flexibility in responding to changing market conditions. In addition, a profitable operation results in the generation of positive cash flows, which then improve the Company’s financial condition.

 

The Company has adopted the reporting of “all-in sustaining cash cost per silver equivalent payable ounce”. This measure has no standardized meaning throughout the industry. However, it is intended to provide additional information. Avino presents all-in sustaining cash cost, because it believes that it more fully defines the total current cost associated with producing a silver equivalent payable ounce. Further, the Company believes that this measure allows investors of the Company to better understand its cost of producing silver equivalent payable ounces, and better assess the Company’s ability to generate cash flow from operations. Although the measure seeks to reflect the full cost per silver equivalent ounce of production from current operations, it does not include capital expenditures attributable to mine expansions, exploration, and evaluation costs attributable to growth projects, income tax payments, and financing costs. In addition, the calculation of all-in sustaining cash costs does not include depreciation and depletion expense as it does not reflect the impact of expenditures incurred in prior periods.

 

 
13 | Page

 

  

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

The Company’s calculation of all-in sustaining cash costs includes sustaining capital expenditures of $2,834 for the nine months ended September 30, 2022 (September 30, 2021 - $1,015) and all of which is attributable to the Avino Mine

 

The Company also presents cash flow per share, as it believes it assists investors and other stakeholders in evaluating the Company’s overall performance and its ability to generate cash flow from current operations. To facilitate a better understanding of these measures as calculated by the Company, detailed reconciliations between the non-IFRS measures and the Company’s consolidated financial statements are provided below. The measures presented are intended to provide additional information, and should not be considered in isolation nor should they be considered substitutes for IFRS measures. Calculated figures may not add up accurately due to rounding.

 

Cash Cost and All-in Sustaining Cash Cost per Silver Equivalent Payable Ounce

 

The following table provide a reconciliation of cost of sales from the consolidated financial statements to cash cost and all-in sustaining cash cost per silver equivalent payable ounce sold. In each table, “silver equivalent payable ounces sold” consists of the sum of payable silver ounces, gold ounces and copper tonnes sold, before penalties, treatment charges, and refining charges, multiplied by the ratio of the average spot gold and copper prices for the corresponding period.

 

 
14 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

The following table reconciles cost of sales to cash cost per payable AgEq oz and all-in sustaining cash cost per payable AgEq oz for the preceding quarters:

 

Expressed in 000’s of US$, unless otherwise noted

Avino – Consolidated

 

 

Q3 2022

 

Q2 2022

 

Q1 2022

 

Q4 2021

 

Q3 2021

 

Q2 2021

 

Q1 2021

 

Q4 2020

 

Cost of sales

 $ 7,058

 

 $ 5,468

 

$

 6,306

 

$

 4,912

 

$

 1,043

 

$

 1,017

 

$

 709

 

 $ 2,658

 

Exploration expenses

 

 (336 )

 

 (305 )

 

 (296 )

 

 (214 )

 

 (308 )

 

 (129 )

 

 -

 

 

 -

 

Stand-by costs during strike action

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 (425 )

 

 (246 )

 

 (1,519 )

Depletion and depreciation

 

 (514 )

 

 (481 )

 

 (459 )

 

 (741 )

 

 (319 )

 

 (463 )

 

 (463 )

 

 (303 )

Cash production cost

 

 6,208

 

 

 4,682

 

 

 5,551

 

 

 3,957

 

 

 416

 

 

 -

 

 

 -

 

 

 836

 

Payable silver equivalent ounces sold

 

 603,360

 

 

 594,700

 

 

 495,109

 

 

 435,885

 

 

 107,112

 

 

 -

 

 

 -

 

 

 59,710

 

Cash cost per silver equivalent ounce

 $ 10.29

 

 $ 7.87

 

$

 11.21

 

$

 9.08

 

$

 3.87

 

$

 -

 

$

 -

 

 $ 14.01

 

General and administrative expenses

 

 1,553

 

 

 2,218

 

 

 1,316

 

 

 967

 

 

 1,094

 

 

 1,475

 

 

 1,550

 

 

 1,633

 

Treatment & refining charges

 

 568

 

 

 700

 

 

 766

 

 

 529

 

 

 127

 

 

 -

 

 

 -

 

 

 47

 

Penalties

 

 1,705

 

 

 897

 

 

 1,578

 

 

 1,200

 

 

 255

 

 

 -

 

 

 -

 

 

 45

 

Sustaining capital expenditures

 

 672

 

 

 1,586

 

 

 576

 

 

 774

 

 

 855

 

 

 57

 

 

 103

 

 

 1,106

 

Exploration expenses

 

 336

 

 

 305

 

 

 296

 

 

 214

 

 

 308

 

 

 129

 

 

 -

 

 

 -

 

Stand-by costs during stoppages

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 425

 

 

 246

 

 

 1,519

 

Share-based payments and G&A depreciation

 

 (591 )

 

 (899 )

 

 (230 )

 

 (125 )

 

 (312 )

 

 (528 )

 

 (645 )

 

 (824 )

Cash operating cost

 $ 10,451

 

 $ 9,489

 

$

 9,853

 

$

 7,516

 

$

 2,743

 

$

 1,558

 

$

 1,254

 

 $ 4,362

 

AISC per silver equivalent ounce

 $ 17.32

 

 $ 15.95

 

$

 19.90

 

$

 17.24

 

$

 25.60

 

$

 -

 

$

 -

 

 $ 73.08

 

 

 
15 | Page

 

  

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

The following table reconciles cash cost per AgEq oz production cost to all-in sustaining cash cost per AgEq oz for the nine months ended September 30, 2022 and 2021:

 

Expressed in 000’s of US$, unless otherwise noted

Avino

Consolidated

 

 

 

YTD 2022

 

YTD 2021

 

YTD 2022

 

 

YTD 2021

 

Cost of sales

 

 $ 18,832

 

 $ 2,769

 

 $ 18,832

 

 

 $ 2,769

 

Exploration expenses

 

 

 (937 )

 

 (437 )

 

 (937 )

 

 

 (437 )

Stand-by costs during strike action

 

 

 -

 

 

 (671 )

 

 -

 

 

 

 (671 )

Depletion and depreciation

 

 

 (1,454 )

 

 (1,245 )

 

 (1,454 )

 

 

 (1,245 )

Cash production cost

 

 

 16,441

 

 

 416

 

 

 16,441

 

 

 

 416

 

Payable silver equivalent ounces sold

 

 

 1,693,198

 

 

 107,112

 

 

 1,693,198

 

 

 

 107,112

 

Cash cost per silver equivalent ounce

 

 $ 9.71

 

 $ 3.87

 

 $ 9.71

 

 

 $ 3.87

 

General and administrative expenses

 

 

 5,086

 

 

 4,117

 

 

 5,086

 

 

 

 4,117

 

Treatment & refining charges

 

 

 2,034

 

 

 127

 

 

 2,034

 

 

 

 127

 

Penalties

 

 

 4,179

 

 

 255

 

 

 4,179

 

 

 

 255

 

Sustaining capital expenditures

 

 

 2,834

 

 

 1,015

 

 

 2,834

 

 

 

 1,015

 

Exploration expenses

 

 

 937

 

 

 437

 

 

 937

 

 

 

 437

 

Stand-by costs during stoppages

 

 

 -

 

 

 671

 

 

 -

 

 

 

 671

 

Share-based payments and G&A depreciation

 

 

 (1,721 )

 

 (1,484 )

 

 (1,721 )

 

 

 (1,484 )

Cash operating cost

 

 $ 29,790

 

 $ 5,554

 

 $ 29,790

 

 

 $ 5,554

 

AISC per silver equivalent ounce

 

 $ 17.59

 

 $ 51.85

 

 $ 17.59

 

 

 $ 51.85

 

 

Operating Cash Flow & Cash Flow per Share

 

Cash flow per share is determined based on operating cash flows before movements in working capital, as illustrated in the consolidated statements of cash flows, divided by the diluted weighted average shares outstanding during the three and nine month periods ended September 30, 2022 and 2021.

 

 

 

Q3 2022

 

 

Q3 2021

 

 

YTD 2022

 

 

YTD 2021

 

Cash provided by (used in) operating activities before working capital items

 

 $ 1,588

 

 

 $ 82

 

 

 $ 7,744

 

 

 $ (2,364 )

Weighted average number of shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 117,876,825

 

 

 

 101,559,946

 

 

 

 113,027,305

 

 

 

 99,457,201

 

Diluted

 

 

117,876,825

 

 

 

 101,559,946

 

 

 

 116,275,433

 

 

 

 99,457,201

 

Cash Flow per Share – diluted

 

 $ 0.01

 

 

 $ 0.00

 

 

 $ 0.07

 

 

 $ (0.02 )

 

Working Capital

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Current assets

 

 $ 24,687

 

 

 $ 35,478

 

Current liabilities

 

 

 (12,414 )

 

 

 (3,843 )

Working capital

 

 $ 12,273

 

 

 $ 31,635

 

 

 
16 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Results of Operations

 

Summary of Quarterly Results

 

(000’s)

 

2022

 

 

2022

 

 

2021

 

 

2021

 

 

2021

 

 

2021

 

 

2021

 

 

2020

 

Quarter ended

 

Sep 30

Q3

 

 

Jun 30

Q2

 

 

Mar 31

Q1

 

 

Dec 31

Q4

 

 

Sep 30

Q3

 

 

Jun 30

Q2

 

 

Mar 31

Q1

 

 

Dec 30

Q4

 

Revenue

 

 $ 9,118

 

 

 $ 9,370

 

 

 $ 11,050

 

 

 $ 9,318

 

 

 $ 1,881

 

 

 $ -

 

 

 $ 29

 

 

 $ 1,407

 

Net income (loss) from operations for the quarter

 

 

 (1,129 )

 

 

 2,283

 

 

 

 646

 

 

 

 2,629

 

 

 

 (214 )

 

 

 (2,654 )

 

 

 (1,818 )

 

 

 (1,555 )

Earnings (loss) per share from operations - basic

 

 $ (0.01 )

 

 $ 0.02

 

 

 $ 0.01

 

 

 $ 0.03

 

 

 $ (0.00 )

 

 $ (0.03 )

 

 $ (0.02 )

 

 $ (0.02 )

Earnings (loss) per share from operations - diluted

 

 $ (0.01 )

 

 $ 0.02

 

 

 $ 0.01

 

 

 $ 0.04

 

 

 $ (0.00 )

 

 $ (0.03 )

 

 $ (0.02 )

 

 $ (0.02 )

Total

Assets

 

 $ 115,310

 

 

 $ 114,998

 

 

 $ 111,413

 

 

 $ 86,264

 

 

 $ 82,109

 

 

 $ 83,024

 

 

 $ 84,550

 

 

 $ 68,780

 

 

 

·

 Revenue maintained constant in four most recent quarters compared to previous quarters, due to the restart of operations during Q3 2021 and the commencement of sales in September 2021.

 

 

 

 

·

 Net income was generated in the three most recent quarters primarily due to higher mine operating income compared with prior quarters, partially offset by higher current and deferred income taxes.

 

 

 

 

·

 Total assets increased at September 30, 2022 compared to previous quarters, as result of the acquisition of La Preciosa as well as the increased operating cash flow generation.

 

Quarterly results will fluctuate with changes in revenues, cost of sales, general and administrative expenses, including non-cash items such as share-based payments, and other items including foreign exchange and deferred income taxes.

 

Liquidity and Capital Resources

 

The Company’s ability to generate sufficient amounts of cash, in both the short term and the long term, to maintain existing capacity and to fund ongoing exploration, is dependent upon the discovery of economically recoverable reserves or resources and the ability of the Company to obtain the financing necessary to generate and sustain profitable operations.

 

 
17 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Management expects that the Company’s ongoing liquidity requirements will be funded from cash generated from current operations and from further financing, as required, in order to fund ongoing exploration activities, and meet its objectives, including ongoing advancement at the Avino Mine. The Company continues to evaluate financing opportunities to advance its projects. The Company’s ability to secure adequate financing is, in part, dependent on overall market conditions, the prices of silver, gold, and copper, and other factors outside the Company’s control. There is no guarantee the Company will be able to secure any or all necessary financing in the future. The Company’s recent financing activities are summarized in the table below.

 

Intended Use of Proceeds

Actual Use of Proceeds

During 2021, the Company received net proceeds of $18.1 million in connection with a brokered at-the-market offering issued under prospectus supplements, $0.8 million in connection with warrants exercised and $0.2 million in connection with stock options exercised.

 

The intended use of the funds is to fund the acquisition of La Preciosa mine and exploration and evaluation expenses.

As of the date of this MD&A, the Company has used the funds as intended. During 2021, the Company announced an increase to its exploration from 12,000 to 30,600 metres of exploration and resource drilling. As of the date of this MD&A, over 20,000 metres of the program had been completed.

 

In supporting mining operations in Mexico, the Company acquired la Preciosa for net cash consideration of $15.4 million. During the nine months ended September 30, 2022, the remaining $3.7 million was used for exploration and evaluation activities, the acquisition of property and equipment, the repayment of capital equipment acquired under lease and loan.

 

During 2020, the Company received net proceeds of $4.7 million in connection with a brokered at-the-market offering issued under prospectus supplements and $3.7 million in connection with warrants exercised.

 

The intended use of the funds is to fund ongoing operations in Mexico. 

As of the date of this MD&A, the Company had used all of the funds as intended. There has been no impact on the ability of the Company to achieve its business objectives and milestones.

  

The Company intends to continue to explore its properties, as described above, subject to market conditions and the ability to continue to obtain suitable financing.

 

 

Discussion and analysis relating to the Company’s liquidity as at September 30, 2022 and December 31, 2021, as well as movements in cash flow during the nine months ended September 30, 2022 and 2021, is as follows:

 

Statement of Financial Position

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Cash

 

 $ 10,920

 

 

 $ 24,765

 

Working capital

 

 

 12,273

 

 

 

 31,635

 

Accumulated Deficit

 

 

 (53,322 )

 

 

 (55,953 )

 

 
18 | Page

 

  

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Cash Flow

 

 

 

September 30,

2022

 

 

September 30,

2021

 

Cash generated by operating activities

 

 $ 8,512

 

 

 $ (3,409 )

Cash generated by (used in) financing activities

 

 

 (903 )

 

 

 16,141

 

Cash used in investing activities

 

 

 (21,429 )

 

 

 (2,133 )

Change in cash

 

 

 (13,820 )

 

 

 10,599

 

Effect of exchange rate changes on cash

 

 

 (25 )

 

 

 29

 

Cash, beginning of period

 

 

 24,765

 

 

 

 11,713

 

Cash, end of period

 

 $ 10,920

 

 

 $ 22,341

 

 

Operating Activities

 

Cash generated by operating activities for the nine months ended September 30, 2022, was $8.5 million compared to $3.4 million used for the nine months ended September 30, 2021. Cash movements from operating activities can fluctuate with changes in net income, non-cash items, such as foreign exchange and deferred income tax expenses, and working capital.

 

Financing Activities

 

Cash used in financing activities was $0.9 million for the nine months ended September 30, 2022, compared to $16.1 million for the nine months ended September 30, 2021. Cash generated by financing activities for the nine months ended September 30, 2021, relates to the issuance of shares for cash, by way of at-the-market sales and the exercise of warrants and stock options. Cash used in financing activities relates to the repayment of the term facility, as well as on its existing equipment loans and finance leases for mining equipment.

 

During the nine months ended September 30, 2022, the Company received net proceeds from issuance of shares for cash of Nil (September 30, 2021 - $18.1 million), received proceeds from warrants exercise of Nil (September 30, 2021 - $0.8 million) and received proceeds from stock options exercised by $0.03 million (September 30, 2021 - $0.2 million). The Company also made term facility repayments of Nil (September 30, 2021 - $2.5 million) and made finance lease and equipment loan payments totalling $0.9 million (September 30, 2021 - $0.5 million).

 

Investing Activities

 

Cash used in investing activities for the nine months ended September 30, 2022, was $21.4 million compared to $2.1 million for the nine months ended September 30, 2021. Cash used in investing activities included cash capital expenditures and exploration and evaluation expenditures of $6.1 million (September 30, 2021 - $2.1 million) on the acquisition of property and equipment and exploration expenditures, as well as $15.3 million related to the acquisition of La Preciosa.

  

Off-Balance Sheet Arrangements

 

The Company has no off-balance sheet arrangements.

 

 
19 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Transactions with Related Parties

 

All related party transactions are recorded at the exchange amount which is the amount agreed to by the Company and the related party.

 

(a)

Key management personnel

 

The Company has identified its directors and certain senior officers as its key management personnel. The compensation costs for key management personnel for the three and nine months ended September 30, 2022 and 2021 is as follows:

 

 

 

Three months ended

 September 30,

 

 

Nine months ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Salaries, benefits, and consulting fees

 

 $ 237

 

 

 $ 243

 

 

 $ 975

 

 

 $ 742

 

Share-based payments

 

 

 427

 

 

 

 230

 

 

 

 1,251

 

 

 

 1,133

 

 

 

 $ 664

 

 

 $ 473

 

 

 $ 2,226

 

 

 $ 1,875

 

 

(b)

Amounts due to related parties

 

In the normal course of operations the Company transacts with companies related to Avino’s directors or officers. All amounts payable and receivable are non-interest bearing, unsecured and due on demand. The following table summarizes the amounts due to related parties:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Oniva International Services Corp.

 

 $ 99

 

 

 $ 107

 

Directors

 

 

 31

 

 

 

 56

 

Silver Wolf Exploration Ltd.

 

 

 (58 )

 

 

 -

 

 

 

 $ 72

 

 

 $ 163

 

 

For services provided to the Company as President and Chief Executive Officer, the Company pays Intermark Capital Corporation (“ICC”), a company controlled by David Wolfin, the Company’s president and CEO and also a director, for consulting services. For the three and nine months ended September 30, 2022, the Company paid $66 and $263, respectively (September 30, 2021 - $60 and $180, respectively), to ICC.

 

 
20 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

(c)

Other related party transactions

 

The Company has a cost sharing agreement with Oniva International Services Corp. (“Oniva”) for office and administration services. Pursuant to the cost sharing agreement, the Company will reimburse Oniva for the Company’s percentage of overhead and corporate expenses and for out-of-pocket expenses incurred on behalf of the Company. David Wolfin, President & CEO, and a director of the Company, is the sole owner of Oniva. The cost sharing agreement may be terminated with one-month notice by either party without penalty.

 

The transactions with Oniva during the three and nine months ended September 30, 2022 and 2021 are summarized below:

 

 

 

Three months ended

September 30,

 

 

Nine months ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Salaries and benefits

 

 $ 218

 

 

 $ 172

 

 

 $ 670

 

 

 $ 550

 

Office and miscellaneous

 

 

 119

 

 

 

 91

 

 

 

 325

 

 

 

 273

 

 

 

 $ 337

 

 

 $ 263

 

 

 $ 995

 

 

 $ 823

 

 

Financial Instruments and Risks

 

The fair values of the Company’s amounts due to related parties and accounts payable approximate their carrying values because of the short-term nature of these instruments. Cash, amounts receivable, long-term investments, and warrant liability are recorded at fair value. The carrying amounts of the Company’s term facility, equipment loans, and finance lease obligations are a reasonable approximation of their fair values based on current market rates for similar financial instruments.

 

The Company’s financial instruments are exposed to certain financial risks, including credit risk, liquidity risk, and market risk.

 

(a)

Credit Risk

 

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company has exposure to credit risk through its cash, long-term investments and amounts receivable. The Company manages credit risk, in respect of cash and short-term investments, by maintaining the majority of cash and short-term investments at highly rated financial institutions.

 

The Company is exposed to a significant concentration of credit risk with respect to its trade accounts receivable balance because all of its concentrate sales are with four (December 31, 2021 – two) counterparties. However, the Company has not recorded any allowance against its trade receivables because to-date all balances owed have been settled in full when due (typically within 60 days of submission) and because of the highly-rated nature of the counterparties.

 

The Company’s maximum exposure to credit risk at the end of any period is equal to the carrying amount of these financial assets as recorded in the unaudited consolidated statement of financial position. At September 30, 2022, no amounts were held as collateral.

 

 
21 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

(b)

Liquidity Risk

 

Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows required by its operating, investing and financing activities. The Company had cash at September 30, 2022, in the amount of $10,920 and working capital of $12,273 in order to meet short-term business requirements. Accounts payable have contractual maturities of approximately 30 to 90 days, or are due on demand and are subject to normal trade terms. The current portions of note payable and finance lease obligations are due within 12 months of the condensed consolidated interim statement of financial position date. Amounts due to related parties are without stated terms of interest or repayment.

 

The maturity profiles of the Company’s contractual obligations and commitments as at September 30, 2022, are summarized as follows:

 

 

 

Total

 

 

Less Than

1 Year

 

 

1-5 years

 

 

More Than 5 Years

 

Accounts payable and accrued liabilities

 

 $ 5,611

 

 

 $ 5,611

 

 

 $ -

 

 

 $ -

 

Amounts due to related parties

 

 

 72

 

 

 

 72

 

 

 

 -

 

 

 

 -

 

Note payable

 

 

 5,000

 

 

 

 5,000

 

 

 

 -

 

 

 

 -

 

Lease liability

 

 

 2,072

 

 

 

 1,039

 

 

 

 1,033

 

 

 

 -

 

Total

 

 $ 12,755

 

 

 $ 11,722

 

 

 $ 1,033

 

 

 $ -

 

 

(c)

Market Risk

 

Market risk consists of interest rate risk, foreign currency risk and price risk. These are discussed further below.

 

Interest Rate Risk

 

Interest rate risk consists of two components:

 

 

(i)

To the extent that payments made or received on the Company’s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk.

 

 

 

 

(ii)

To the extent that changes in prevailing market rates differ from the interest rates on the Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk.

 

In management’s opinion, the Company is exposed to interest rate risk primarily on its outstanding term facility, as the interest rate is subject to floating rates of interest. A 10% change in the interest rate would not result in a material impact on the Company’s operations.

 

 
22 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Foreign Currency Risk

 

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company is exposed to foreign currency risk to the extent that the following monetary assets and liabilities are denominated in Mexican pesos and Canadian dollars:

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

MXN

 

 

CDN

 

 

MXN

 

 

CDN

 

Cash

 

 $ 6,064

 

 

 $ 392

 

 

 $ 3,576

 

 

 $ 1,450

 

Long-term investments

 

 

 -

 

 

 

 1,855

 

 

 

 -

 

 

 

 4,976

 

Reclamation bonds

 

 

 -

 

 

 

 4

 

 

 

 -

 

 

 

 6

 

Amounts receivable

 

 

 -

 

 

 

 21

 

 

 

 -

 

 

 

 33

 

Accounts payable and accrued liabilities

 

 

 (17,454 )

 

 

 (56 )

 

 

 (57,604 )

 

 

 (211 )

Due to related parties

 

 

 -

 

 

 

 (176 )

 

 

 -

 

 

 

 (206 )

Finance lease obligations

 

 

 (992 )

 

 

 (110 )

 

 

 (1 )

 

 

 (394 )

Net exposure

 

 

 (12,382 )

 

 

 1,930

 

 

 

 (54,029 )

 

 

 5,654

 

US dollar equivalent

 

 $ (609 )

 

 $ 1,409

 

 

 $ (2,363 )

 

 $ (4,054 )

 

Based on the net US dollar denominated asset and liability exposures as at September 30, 2022, a 10% fluctuation in the US/Mexican and Canadian/US exchange rates would impact the Company’s earnings for the nine months ended September 30, 2022, by approximately $67 (year ended December 31, 2021 - $143). The Company has not entered into any foreign currency contracts to mitigate this risk.

 

Price Risk

 

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk.

 

The Company is exposed to price risk with respect to its amounts receivable, as certain trade accounts receivable are recorded based on provisional terms that are subsequently adjusted according to quoted metal prices at the date of final settlement. Quoted metal prices are affected by numerous factors beyond the Company’s control and are subject to volatility, and the Company does not employ hedging strategies to limit its exposure to price risk. At September 30, 2022, based on outstanding accounts receivable that were subject to pricing adjustments, a 10% change in metals prices would have an impact on net earnings (loss) of approximately $69 (December 31, 2021 - $26).

 

The Company is exposed to price risk with respect to its long-term investments, as these investments are carried at fair value based on quoted market prices. Changes in market prices result in gains or losses being recognized in net income (loss). At September 30, 2022, a 10% change in market prices would have an impact on net earnings (loss) of approximately $132 (December 31, 2021 - $330).

 

The Company’s profitability and ability to raise capital to fund exploration, evaluation and production activities is subject to risks associated with fluctuations in mineral prices. Management closely monitors commodity prices, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company.

 

 
23 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

(d)

Classification of Financial Instruments

 

IFRS 7 Financial Instruments: Disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:

 

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

Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

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

 

The following table sets forth the Company’s financial assets and financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as at September 30, 2022:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial assets

 

 

 

 

 

 

 

 

 

Cash

 

 $ 10,920

 

 

 $ -

 

 

 $ -

 

Amounts receivable

 

 

 -

 

 

 

 656

 

 

 

 -

 

Long-term investments

 

 

 1,353

 

 

 

 -

 

 

 

 -

 

Total financial assets

 

 $ 12,273

 

 

 $ 656

 

 

 $ -

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

 

 -

 

 

 

 -

 

 

 

 (218 )

Total financial liabilities

 

 $ -

 

 

 $ -

 

 

 $ (218 )

 

The Company uses Black-Scholes model to measure its Level 3 financial instruments. As at September 30, 2022, the Company’s Level 3 financial instruments consisted of the warrant liability.

 

For the Company’s warrant liability valuation and fair value adjustments during the nine months ended September 30, 2022 and the year ended December 31, 2021.

 

Risks associated with Public Health Crises, including COVID-19

 

The Company’s business, operations and financial condition could be materially adversely affected by the outbreak of epidemics, pandemics or other health crises, such as the outbreak of COVID-19 that was designated as a pandemic by the World Health Organization on March 11, 2020. The international response to the spread of COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in consumer activity. Such public health crises can result in operating, supply chain and project development delays and disruptions, global stock market and financial market volatility, declining trade and market sentiment, reduced movement of people and labour shortages, and travel and shipping disruption and shutdowns, including as a result of government regulation and prevention measures, or a fear of any of the foregoing, all of which could affect commodity prices, interest rates, credit risk and inflation. In addition, the current COVID-19 pandemic, and any future emergence and spread of similar pathogens could have an adverse impact on global economic conditions which may adversely impact the Company’s operations, and the operations of suppliers, contractors and service providers, including smelter and refining service providers, and the demand for the Company’s production.

 

The Company may experience business interruptions, including suspended (whether government mandated or otherwise) or reduced operations relating to COVID-19 and other such events outside of the Company’s control, which could have a material adverse impact on its business, operations and operating results, financial condition and liquidity.

 

 
24 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

As at the date of this MD&A, the duration of the business disruptions internationally and related financial impact of COVID-19 cannot be reasonably estimated. It is unknown whether and how the Company may be affected if the pandemic persists for an extended period of time. In particular, the region in which we operate may not have sufficient public infrastructure to adequately respond or efficiently and quickly recover from such event, which could have a materially adverse effect on the Company’s operations. The Company’s exposure to such public health crises also includes risks to employee health and safety. Should an employee, contractor, community member or visitor become infected with a serious illness that has the potential to spread rapidly, this could place the Company’s workforce at risk.

 

Mexico has been particularly impacted by the COVID-19 pandemic. The Company’s mining operations have been temporarily shut-down since April 2020, first as a result of governmental COVID-19 quarantine and containment measures, and later in July 2020 due to a labour strike, which was resolved in October 2020. The labour settlement agreement must be approved by the Mexican governmental labour authority. On August 3, 2021, the Company announced that mining operations had resumed. Although the Company takes appropriate measures and safeguards to protect its staff from infection, these events can result in volatility and disruption to supply chains, operations, transportation, and mobility of people, which are beyond the control of the Company, and which have had and could continue to adversely affect the availability of components, supplies and materials, labour, interest rates, credit ratings, credit risk, inflation, business operations, financial markets, exchange rates, and other factors material to the Company, including in particular, the Company’s revenues and concentrate delivery schedule.

 

Commitments

 

The Company has a cost sharing agreement to reimburse Oniva for a percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the Company, and to pay a percentage fee based on Oniva’s total overhead and corporate expenses. The agreement may be terminated with one-month notice by either party. Transactions and balances with Oniva are disclosed in the “Transactions with Related Parties” section.

 

The Company and its subsidiaries have various operating lease agreements for their office premises, use of land, and equipment. Commitments in respect of these lease agreements are as follows:

 

 

September 30,

2022

December 31,

2021

Not later than one year

$

84

$

96

Later than one year and not later than five years

331

330

Later than five years

396

462

 

$

811

$

888

  

 
25 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Outstanding Share Data

 

The Company’s authorized share capital consists of an unlimited number of common shares without par value.

 

As at November 9, 2022, the following common shares, warrants, and stock options were outstanding:

 

 

Number of shares

Exercise price

Remaining life (years)

Share capital

118,349,090

-

-

Warrants (US$)

8,950,412

$0.80 - $1.09

0.87 – 0.88

Restricted Share Units (“RSUs”)

2,190,666

-

0.73 – 2.38

Stock options

4,256,000

C$0.79 - C$1.64

0.80 – 4.48

Fully diluted

133,746,168

 

 

 

The following are details of outstanding stock options as at September 30, 2022 and November 9, 2022:

 

Expiry Date

Exercise Price Per Share

Number of Shares Remaining Subject to Options

(September 30, 2022)

Number of Shares Remaining Subject to Options (November 9, 2022)

August 28, 2023

C$1.30

105,000

105,000

August 21, 2024

C$0.79

126,000

126,000

August 4, 2025

C$1.64

1,660,000

1,660,000

March 25, 2027

C$1.20

2,340,000

2,340,000

May 4, 2027

C$0.92

25,000

25,000

Total:

 

4,256,000

4,256,000

 

The following are details of outstanding warrants as at September 30, 2022 and November 9, 2022:

 

Expiry Date

Exercise Price Per Share

Number of Underlying Shares

(September 30, 2022)

Number of Underlying Shares

(November 9, 2022)

September 21, 2023

$1.09

7,000,000

7,000,000

September 25, 2023

$0.80

1,950,412

1,950,412

Total:

 

8,950,412

8,950,412

 

The following are details of outstanding RSUs as at September 30, 2022 and November 9, 2022:

 

Expiry Date

Number of Shares Remaining Subject to RSUs

(September 30, 2022)

Number of Shares Remaining Subject to RSUs

(November 9, 2022)

August 4, 2023

412,666

412,666

March 25, 2025

1,778,000

1,778,000

Total:

2,190,666

2,190,666

  

 
26 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Recent Accounting Pronouncements

 

Application of new and revised accounting standards:

 

Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16)

 

The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss. The amendments are applied on or after the first annual reporting period beginning on or after January 1, 2022, with early application permitted. The amendments are applied retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the Company first applies the amendments. This amendment will impact the Company’s accounting for proceeds from mineral sales prior to reaching commercial production at levels intended by management. The Company adopted the amendments to IAS 16 with no material impact on the financial statements.

  

Future Changes in Accounting Policies Not Yet Effective as at September 30, 2022:

 

Certain new accounting standards and interpretations have been published that are not mandatory for the current period and have not been early adopted. These standards are not expected to have a material impact on the Company in the current or future reporting periods.

 

Disclosure Controls and Procedures

 

Management has designed and evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures on financial reporting (as defined in NI 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings) and has concluded that, based on its evaluation, they are effective as of September 30, 2022, to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries is made known to management and disclosed in accordance with applicable securities regulations.

 

 
27 | Page

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

 

Internal Controls over Financial Reporting (“ICFR”)

 

The management of the Company is responsible for establishing and maintaining adequate internal controls over financial reporting. Internal controls over financial reporting is a process to provide reasonable assurance regarding the reliability of the Company’s financial reporting for external purposes in accordance with IFRS. Internal controls over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the Company’s transactions and dispositions of the assets of the Company; providing reasonable assurance that transactions are recorded as necessary for preparation of the Company’s consolidated financial statements in accordance with IFRS; providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and providing reasonable assurance that unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements would be prevented or detected on a timely basis. Our management and the Board of Directors do not expect that our disclosure controls and procedures or internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable (not absolute) assurance that the control system’s objectives will be met. Further, the design, maintenance and testing of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.

 

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control gaps and instances of fraud have been detected. These inherent limitations include the reality that judgment in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design, maintenance and testing of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any control system may not succeed in achieving its stated goals under all potential future conditions.

 

Management conducted an evaluation of the effectiveness of the Company’s internal controls over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013) (‘COSO’). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation.

 

Based on this evaluation, management concluded that as of September 30, 2022, the Company’s internal controls over financial reporting, as defined in NI 52-109 - Certification of Disclosure in Issuer’s Annual and Interim Filings, are effective to achieve the purpose for which they have been designed.

 

Cautionary Statement

 

This MD&A is based on a review of the Company’s operations, financial position and plans for the future based on facts and circumstances as of November 9, 2022. Except for historical information or statements of fact relating to the Company, this document contains “forward-looking statements” within the meaning of applicable Canadian securities regulations. Forward-looking statements in this document include, but are not limited to, those regarding the economic outlook for the mining industry, expectations regarding metals prices, expectations regarding production output, production costs, cash costs and other operating results, expectations regarding growth prospects and the outlook for the Company’s operations, and statements regarding the Company’s liquidity, capital resources, and capital expenditures. There can be no assurance that such statements will prove to be accurate, and future events and actual results could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from our expectations are disclosed in the Company’s documents filed from time to time via SEDAR with the Canadian regulatory agencies to whose policies we are bound. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made, and we do not undertake any obligation to update forward-looking statements should conditions or our estimates or opinions change, except as required by applicable securities regulations. These statements involve known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

 
28 | Page

 

EXHIBIT 99.3

 

Form 52-109F2

Certification of Interim Filings

Full Certificate

 

I, David Wolfin, Chief Executive Officer, of Avino Silver & Gold Mines Ltd., certify the following:

 

1.

Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Avino Silver & Gold Mines Ltd. (the “issuer”) for the interim period ended September 30, 2022.

 

 

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 Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

 

 

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, 2022 and ended on September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

 

Date: November 9, 2022

 

“David Wolfin”                                                        

David Wolfin

Chief Executive Officer

 

EXHIBIT 99.4

 

Form 52-109F2

Certification of Interim Filings

Full Certificate

 

I, Nathan Harte, Chief Financial Officer, of Avino Silver & Gold Mines Ltd., certify the following:

 

1.

Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Avino Silver & Gold Mines Ltd. (the “issuer”) for the interim period ended September 30, 2022.

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 Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

 

 

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, 2022 and ended on September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

 

 

Date: November 9, 2022

 

“Nathan Harte”                                                

Nathan Harte

Chief Financial Officer