Enhanced Investments - Financial Portal

Published: 2021-03-03












		AVINO SILVER & GOLD MINES LTD.


				Consolidated Financial Statements

		For the years ended December 31, 2020, 2019 and 2018

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The consolidated financial statements of Avino Silver & Gold Mines Ltd. (the “Company”) are the responsibility

of the Company’s management. The consolidated financial statements are prepared in accordance with

International Financial Reporting Standards as issued by the International Accounting Standards Board, and

reflect management’s best estimates and judgments based on information currently available.

Management has developed and is maintaining a system of internal controls to ensure that the Company’s

assets are safeguarded, transactions are authorized and properly recorded, and financial information is reliable.

The Board of Directors is responsible for ensuring that management fulfil s its responsibilities. The Audit

Committee reviews the results of the annual audit and reviews the consolidated financial statements prior to

their submission to the Board of Directors for approval.

The consolidated financial statements as at December 31, 2020 and 2019, and for the years ended December

31, 2020, 2019 and 2018, have been audited by Manning El iott LLP, an independent registered public

accounting firm, and their report outlines the scope of their examination, and gives their opinion on the

consolidated financial statements.

“David Wolfin”

“Nathan Harte”

David Wolfin

Nathan Harte, CPA

President & CEO

Chief Financial Officer

March 3, 2021




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of
Avino Silver & Gold Mines Ltd.

Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Avino Silver & Gold Mines Ltd. and its
subsidiaries (together, the “Company”), which comprise the consolidated statements of financial position as at
December 31, 2020 and 2019, and the consolidated statements of operations and comprehensive income
(loss), consolidated statements of changes in equity and consolidated statements of cash flows for the years
ended December 31, 2020, 2019 and 2018, and the related notes, including a summary of significant
accounting policies and other explanatory information (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its
cash flows for the years ended December 31, 2020, 2019 and 2018 in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement, whether due to fraud or error. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error, and performing procedures that respond to those risks.
Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and
appropriate to provide a reasonable basis for our audit opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that (1) relates to accounts or disclosures that are material to the consolidated financial
statements and (2) involved challenging, subjective, or complex judgments. The communication of a critical
audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which it relates.
Assessment of the Existence of Impairment Indicators for the Avino Mine As described in Note 11 to the consolidated financial statements the carrying amount of the plant, equipment
and Avino mining properties is $34,846,000 as at December 31, 2020. Management applies significant
judgement to assess plant, equipment and Avino mining properties (collectively the “Avino Mine”) for the
existence of impairment indicators that could give rise to the requirement to conduct a formal impairment test.


Management considers both external and internal sources of information in assessing whether there are any
indictors of impairment as disclosed in Note 2 (iv). External sources of information considered by management
include changes in the market, economic and legal environments, in which the Company operates, that are not
within its control and that affect the recoverable amount of the Avino Mine. Internal sources of information that
management considers include the manner in which the Avino Mine is being used, or is expected to be used,
and indications of economic performance of the assets. We have determined that performing procedures relating to the assessment of the existence of impairment
indicators for the Avino Mine is a critical audit matter primarily due to the application of judgment by
management in assessing specific factors such as (a) significant adverse changes in the economic or legal
environment of operations, (b) significant changes with an adverse effect on the use of the asset, (c) current
period cash flow or operating losses, combined with a history of losses or a forecast of continuing losses
associated with the use of the assets. This in turn led to a high degree of auditor judgment, subjectivity and
effort in performing procedures to evaluate audit evidence relating to the judgements made by management in
their assessment of indicators of impairment that could give rise to the requirement to conduct a formal
impairment test.

Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection
with forming our overall opinion on the consolidated financial statements. Our audit procedures included
amongst others, (a) a review of management’s assessment of the existence of impairment indicators of the
Avino Mine (b) completion of our own assessment of impairment indicators in accordance with IAS 36
Impairment of Assets, (c) a review of matters that impact the Company’s ability to continue mining operations,
(d) evaluated whether there were adverse economic changes in metal prices by considering external
observable market prices, (e) compared the current performance to the Company’s historical mining results
associated with the assets, (f) compared management’s mine plans to data in the Company’s resource estimate
which was prepared by a specialist.
/s/ Manning El iott LLP CHARTERED PROFESSIONAL ACCOUNTANTS Vancouver, British Columbia, Canada March 3, 2021 We have served as the Company’s auditor since 2007.


AVINO SILVER & GOLD MINES LTD.
Consolidated Statements of Financial Position
(Expressed in thousands of US dollars)

			December 31,		December 31,
		Note		2020		2019

ASSETS
Current assets
							Cash			$		11,713 $		9,625
							Amounts receivable					529		1,477
							Taxes recoverable	6			5,044		5,483
							Prepaid expenses and other assets					757		594
							Inventory	7			1,659		5,592
Total current assets									19,702		22,771
Exploration and evaluation assets		9		10,052		9,827
Plant, equipment and mining properties		11		34,846		35,658
Long-term investments		8		4,176		4,311
Other assets									4		4
Total assets							$		68,780 $		72,571

LIABILITIES
Current liabilities
							Accounts payable and accrued liabilities			$		2,068 $		4,907
							Amounts due to related parties	12(b)			154		156
							Taxes payable					7		46
							Current portion of term facility	13			2,513		3,384
							Current portion of equipment loans	14			72		199
							Current portion of finance lease obligations	15			208		692
							Other liabilities					-		178
Total current liabilities									5,022		9,562
Term facility		13		-		2,513
Equipment loans		14		-		90
Finance lease obligations		15		278		442
Warrant liability		16		2,295		1,579
Reclamation provision		17		808		1,524
Deferred income tax liabilities		26		1,369		2,938
Total liabilities									9,772		18,648

EQUITY
Share capital		18		108,303		96,396
Equity reserves									9,951		9,391
Treasury shares (14,180 shares, at cost)									(97)		(97)
Accumulated other comprehensive loss									(4,810)		(4,563)
Accumulated deficit									(54,339)		(47,204)
Total equity									59,008		53,923
Total liabilities and equity							$		68,780 $		72,571

Commitments – Note 21
Subsequent Events – Note 27

Approved by the Board of Directors on March 3, 2021:
							Gary Robertson Director		David Wolfin Director
	The accompanying notes are an integral part of the consolidated financial statements


AVINO SILVER & GOLD MINES LTD.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Expressed in thousands of US dollars)
INCOME STATEMENT
					Note	2020		2019	2018
Revenue from mining operations					19	$		16,022 $	31,746 $		34,116
Cost of sales					19			15,832	32,016			27,850
Mine operating income (loss)								190	(270)							6,266

Operating expenses:
General and administrative expenses					20			2,902	3,193			3,610
Share-based payments					18			1,857	937									630
Income (loss) before other items								(4,569)	(4,400)		2,026

Other items:
Interest and other income								332	545									215
Unrealized gain (loss) on long-term investments								(124)	1,282			(5)
Realized loss on exercise of warrants			(2,733)	-								-
Fair value adjustment on warrant liability					16			(650)	520									1,304
Unrealized foreign exchange loss								(811)	(663)							(801)
Finance cost								(211)	(84)							(444)
Accretion of reclamation provision					17			(99)	(104)							(122)
Interest expense								(25)	(64)							(109)
Income (loss) from continuing operations
before income taxes								(8,890)	(2,968)		2,064
Income taxes:
Current income tax expense					26			(161)	(327)							(1,052)
Deferred income tax recovery					26			1,569	960									645
Income tax recovery (expense)								1,408	633									(407)
Net income (loss) from continuing operations			(7,482)	(2,335)			1,657

Loss from discontinued operations and on
disposal					5			(169)	(29,126)		(31)
Net income (loss)								(7,651)	(31,461)		1,626

Other comprehensive income (loss):
Currency translation differences								(247)	1,603			(2,051)
Reclassification of foreign exchange on translation
into net loss on sale of discontinued operations			-	(42)							-
Total comprehensive loss						$								(7,898) $	(29,900) $			(425)

Earnings (loss) per share from continuing
operations					18(e)
Basic						$		(0.09) $		(0.03) $	0.03
Diluted						$		(0.09) $		(0.03) $	0.03
Earnings (loss) per share					18(e)
Basic											$			(0.09) $			(0.45) $	0.03
Diluted											$			(0.09) $			(0.45) $	0.03
Weighted average number of common
shares outstanding					18(e)
Basic													83,180,069 69,980,178	56,851,626
Diluted													83,180,069 69,980,178	60,000,637
	The accompanying notes are an integral part of the consolidated financial statements

		- 2 -



AVINO SILVER & GOLD MINES LTD.
Consolidated Statements of Changes in Equity
(Expressed in thousands of US dollars)
EQUITY STATEMENT
			Number of	Share		Accumulated Other
			Common	Capital	Equity		Treasury	Comprehensive	Accumulated
	Note		Shares	Amount	Reserves		Shares	Income (Loss)	Deficit	Total Equity
Balance, January 1, 2018			52,718,153 $ 81,468 $ 10,581 $				(97)	$	(4,073) $ (18,877) $	69,002
Common shares issued for cash:
													Brokered public offerings			10,105,658	6,547										-	-									-			-		6,547
													Less: Issuance costs										-	(895)									-	-							-			-	(895)
													At the market issuances			151,800	136										-	-									-			-	136
													Less: Issuance costs										-	(4)			-	-									-			-	(4)
													Exercise of stock options			87,500	112										-	-									-			-		112
Carrying value of stock options exercised										-	84	(84)			-										-					-		-
Less: share issuance costs										-	(5)			-	-										-					-		(5)
Carrying value of RSUs exercised			274,658	602	(602)			-										-						-		-
Options cancelled or expired										-	-	(746)			-										-					746	-
Share-based payments										-	-	700			-										-					-		700
Net income for the year										-	-			-	-										-									1,626	1,626
Currency translation differences										-	-			-	-				(2,051)		-	(2,051)
Balance, December 31, 2018			63,337,769 $ 88,045 $	9,849 $					(97)	$	(6,124) $ (16,505) $	75,168
Common shares issued for cash:
													Brokered public offerings			7,735,360	4,877										-	-									-			-	4,877
													Less: Issuance costs										-	(472)									-	-							-			-	(472)
													At the market issuances			4,954,000	2,924										-	-									-			-	2,924
													Less: Issuance costs										-	(162)									-	-							-			-	(162)
Options cancelled or expired										-	-	(762)			-										-					762	-
Carrying value of RSUs exercised			565,259	835	(835)			-										-						-	-
Fair value of warrants issued										-	-	116			-										-					-	116
Shares to be issued										-	349										-	-									-						-	349
Share-based payments										-	-	1,023			-										-					-		1,023
Net loss for the year										-	-			-	-										-									(31,461)	(31,461)
Currency translation differences										-	-			-	-				1,561		-		1,561
Balance, December 31, 2019			76,592,388 $ 96,396 $	9,391 $					(97)	$	(4,563) $ (47,204) $	53,923
Common shares issued for cash:
													At the market issuances	18		6,730,054	4,940										-		-									-			-		4,940
													Exercise of warrants	18		4,659,194	6,528	(116)			-									-						-	6,412
													Exercise of options	18		48,000								43	(15)			-									-			-	28
Common shares issued for services	18		675,145								-			-		-										-					-	-
Issuance costs	18									-	(254)										-		-									-						-	(254)
Options cancelled or expired										-	-	(516)			-										-					516	-
Carrying value of RSUs exercised	18		863,901	650	(650)			-										-						-	-
Share-based payments	18									-	-	1,857			-										-					-	1,857
Net loss for the year										-	-			-		-										-									(7,651)	(7,651)
Currency translation differences										-	-			-		-				(247)		-	(247)
Balance, December 31, 2020			89,568,682 $ 108,303 $	9,951 $					(97)	$	(4,810) $ (54,339) $	59,008
	The accompanying notes are an integral part of the consolidated financial statements

		- 3 -

AVINO SILVER & GOLD MINES LTD.
Consolidated Statements of Cash Flows
(Expressed in thousands of US dollars)


		Note	2020	2019	2018

Cash generated by (used in):

Operating Activities
Net income (loss)						$	(7,651) $	(31,461) $	1,626
Adjustments for non-cash items:
Deferred income tax expense (recovery)							(1,569)	(960)	(645)
Depreciation and depletion							1,917	3,723	3,256
Inventory net realizable value adjustment							-	387	-
Accretion of reclamation provision							99	104	122
Unrealized loss (gain) on investments							124	(1,282)	5
Foreign exchange loss							(588)	1,461	270
Fair value adjustment on warrant liability							650	(520)	(1,304)
Realized loss on exercise of warrants							2,733	-	-
Fair value adjustment on modification of term facility							-	-	234
Unwinding of fair value adjustment of term facility							(51)	(170)	-
Loss from discontinued operations and on disposal							-	29,126	31
Share-based payments							1,857	937	630
							(2,479)	1,345	4,225
Net change in non-cash working capital items		22	2,551	4,162	4,999
							72	5,507	9,224

Financing Activities
Shares and units issued for cash, net of issuance costs							8,393	7,283	8,466
Finance lease payments							(640)	(956)	(1,166)
Equipment loan payments							(217)	(524)	(1,445)
Term facility payments							(3,333)	(833)	(2,000)
							4,203	4,970	3,855

Investing Activities
Exploration and evaluation expenditures							(231)	(5,723)	(5,361)
Additions to plant, equipment and mining properties							(2,014)	(3,276)	(9,416)
Changes in long-term investments						78	23	-
Cash proceeds from sale of discontinued operations							-	6,599	-
Cash disposed of in discontinued operations							-	(1,459)	-
Redemption of short-term investments							-	-	1,000
Redemption of reclamation bonds						-	102	548
							(2,167)	(3,734)	(13,229)

Change in cash							2,108	6,743	(150)

Effect of exchange rate changes on cash							(20)	(370)	(18)

Cash, Beginning							9,625	3,252	3,420

Cash, Ending						$	11,713 $	9,625 $	3,252

Supplementary Cash Flow Information (Note 22)
	The accompanying notes are an integral part of the consolidated financial statements

		- 4 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

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 Granvil e 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 owns interests in mineral properties located in Durango, Mexico, as wel as in British
		Columbia and the Yukon, Canada. On October 1, 2012, the Company commenced production of silver and
		gold at levels intended by management at its San Gonzalo Mine, and on July 1, 2015, the Company
		commenced production of copper, silver, and gold at levels intended by management at its Avino Mine; both
		mines are located on the historic Avino property in the state of Durango, Mexico.
		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 consolidated 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 il ness that has the potential to spread rapidly, this could place the Company's workforce at
		risk.


	- 5 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

2. BASIS OF PRESENTATION

		Statement of Compliance

		These consolidated financial statements have been prepared in accordance with International Financial
		Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

		Basis of Presentation

		These consolidated 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
		consolidated 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 consolidated financial statements as if the policies have always been in effect.

		Foreign Currency Translation

		Functional & presentation currencies

		The functional currency of the Company is the Canadian dollar. The functional currency of the Company’s
		Mexican subsidiaries is the US dollar, which is determined to be the currency of the primary economic
		environment in which the subsidiaries operate.

		Foreign currency transactions

		Transactions in currencies other than the functional currency are recorded at the rates of exchange
		prevailing on the dates of the transactions. At each financial position reporting date, monetary assets and
		liabilities that are denominated in foreign currencies are translated at the rates prevailing at the date of
		the statement of financial position. Non-monetary items that are measured in terms of historical cost in a
		foreign currency are not re-translated.

		Foreign operations

		Subsidiaries that have functional currencies other than the US dollar translate their statement of
		operations items at the average rate during the year. Assets and liabilities are translated at exchange
		rates prevailing at the end of each reporting period. Exchange rate variations resulting from the
		retranslation at the closing rate of the net investment in these subsidiaries, together with differences
		between their statement of operations items translated at actual and average rates, are recognized in
		accumulated other comprehensive income (loss). On disposition or partial disposition of a foreign
		operation, the cumulative amount of related exchange difference is recognized in the statement of
		operations.

		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 consolidated 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.
		a) Critical judgments exercised by management in applying accounting policies that have the most
		significant effect on the amounts presented in these consolidated financial statements are as follows:
	- 6 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		i. Economic recoverability and probability of future economic benefits from exploration and
		evaluation costs

		Management has determined that mine and camp, exploratory dril ing, and other exploration and
		evaluation-related costs that were capitalized have future economic benefits and are economically
		recoverable. Management uses several criteria in its assessments of economic recoverability and
		probability of future economic benefits including geologic and metallurgic information, scoping studies,
		accessible facilities, existing permits, and mine plans.

		i . Commencement of production at levels intended by management

		Prior to reaching production levels intended by management, costs incurred are capitalized as part of
		the costs of related exploration and evaluation assets, and proceeds from concentrate sales are offset
		against costs capitalized. Depletion of capitalized costs for mining properties and depreciation of plant
		and equipment begin when operating levels intended by management have been reached.
		Management considers several factors in determining when a mining property has reached the
		intended production levels, including production capacity, recoveries, and number of uninterrupted
		production days. The results of operations of the Company during the periods presented in these
		consolidated financial statements have been impacted by management’s determination that the San
		Gonzalo Mine and Avino Mine had achieved production levels intended by management as of October
		1, 2012 and July 1, 2015, respectively, and that none of the Company’s exploration and evaluation
		assets had achieved production levels intended by management as at December 31, 2020.

		The basis for achievement of production levels intended by management as indicated by technical
		feasibility and commercial viability is generally established with proven reserves based on a NI 43-
		101-compliant technical report or a comparable resource statement and feasibility study, combined
		with pre-production operating statistics and other factors. In cases where the Company does not have
		a 43-101-compliant reserve report, on which to base a production decision, the technical feasibility
		and commercial viability of extracting a mineral resource are considered in light of additional factors
		including but not limited to:
			•	Acquisition and installation of all critical capital components to achieve desired mining and
			processing results has been completed. Capital components have been acquired directly and
			are also available on an as-needed basis from the underground mining contractor;
			•	The necessary labour force, including mining contractors, has been secured to mine and
			process at planned levels of output;
			•	The mil has consistently processed at levels above design capacity and budgeted production
			levels with consistent recoveries and grades; and,
			•	Establishing sales agreements with respect to the sale of concentrates.

		When technical feasibility and commercial viability are considered demonstrable according to the
		above criteria and other factors, the Company performs an impairment assessment and records an
		impairment loss, if any, before reclassifying exploration and evaluation costs to plant, equipment, and
		mining properties.
		i i. Functional currency

		The functional currency for the Company and its subsidiaries is the currency of the primary economic
		environment, in which the entity operates. The Company has determined the functional currency of the
		Company to be the Canadian dollar. The Company has determined the functional currency of its
		Mexican subsidiaries to be the US dollar. Determination of functional currency may involve certain
		judgments to determine the primary economic environment. The Company reconsiders the functional
		currency of its entities, if there is a change in events and conditions, which determine the primary
		economic environment.

	- 7 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		b) Significant assumptions about the future and other sources of estimation uncertainty that management
		has made at the consolidated statement of financial position date that could result in a material
		adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from
		assumptions made relate to, but are not limited to, the following:

		i. Stockpile and concentrate inventory valuations
			Concentrate and stockpile mineralized material are valued at the lower of average cost or net
			realizable value. The assumptions used in the valuation of concentrate and stockpile mineralized
			material include estimates of copper, silver, and gold contained in the stockpiles and finished goods
			assumptions for the amount of copper, silver, and gold that is expected to be recovered from the
			concentrate. If these estimates or assumptions prove to be inaccurate, the Company could be
			required to write down the recorded value of its concentrate and stockpile mineralized material
			inventory, which would result in an increase in the Company’s expenses and a reduction in its working
			capital.

		i . Estimated reclamation provisions

			The Company’s provision for reclamation represents management’s best estimate of the present value
			of the future cash outflows required to settle estimated reclamation and closure costs at the Avino and
			San Gonzalo properties. The provision reflects estimates of future costs, inflation, foreign exchange
			rates and assumptions of risks associated with the future cash outflows, and the applicable risk-free
			interest rates for discounting the future cash outflows. Changes in the above factors could result in a
			change to the provision recognized by the Company.

			Changes to reclamation and closure cost obligations are recorded with a corresponding change to the
			carrying amounts of the related exploration and evaluation assets or mining properties. Adjustments to
			the carrying amounts of related mining properties result in a change to future depletion expense.

		i i. Valuation of share-based payments and warrants

			The Company uses the Black-Scholes Option Pricing Model for valuation of share-based payments
			and warrants. Option pricing models require the input of subjective assumptions including expected
			price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can material y affect
			fair value estimates and the Company’s net income or loss and its equity reserves. Warrant liabilities
			are accounting for as derivate liabilities (see Note 16).

		iv. Impairment of plant, equipment and mining properties, and exploration and evaluation assets

			Management considers both external and internal sources of information in assessing whether there
			are any indications that the Company’s plant, equipment, and mining properties, and exploration and
			evaluation assets are impaired. External sources of information management considers include
			changes in the market, economic and legal environments, in which the Company operates, that are
			not within its control and that affect the recoverable amount of its plant, equipment, and mining
			properties. Internal sources of information that management considers include the manner in which
			mining properties and plant and equipment are being used, or are expected to be used, and
			indications of economic performance of the assets.

			In determining the recoverable amounts of the Company’s plant, equipment and mining properties,
			management makes estimates of the undiscounted future pre-tax cash flows expected to be derived
			from the Company’s mining properties, and the appropriate discount rate. Reductions in metal price
			forecasts, increases in estimated future costs of production, increases in estimated future non
			expansionary capital expenditures, reductions in the amount of recoverable resources and exploration
			potential, and adverse current economic conditions are examples of factors that could result in a write
			down of the carrying amounts of the Company’s plant, equipment and mining properties, and
			exploration and evaluation assets.

	- 8 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		Impairment

		Based on the Company’s assessment with respect to possible indicators of impairment of its mineral
		properties, including the impact of COVID-19 on our operations and the prevailing market metals
		prices, the Company concluded that as of December 31, 2020, no impairment indicators were
		identified.

		v. Depreciation rate for plant and equipment and depletion rate for mining properties
		Depreciation and depletion expenses are allocated based on estimates for useful lives of assets.
		Should the asset life, depletion rates, or depreciation rates differ from the initial estimate, the revised
		life or rate would be reflected prospectively through income or loss. A change in the mineral resource
		estimate may impact depletion expense on a prospective basis.
		vi. Recognition and measurement of deferred tax assets and liabilities

		Actual amounts of income tax expense are not final until tax returns are filed and accepted by the
		relevant authorities. This occurs subsequent to the issuance of the consolidated financial statements
		and the final determination of actual amounts may not be completed for a number of years. Therefore,
		tax assets and liabilities and net income in subsequent periods wil be affected by the amount that
		estimates differ from the final tax return. Estimates of future taxable income are based on forecasted
		cash flows from operations and the application of existing tax laws in each jurisdiction. Forecasted
		cash flows from operations are based on projections internally developed and reviewed by
		management. Weight is attached to tax planning opportunities that are within the Company’s control,
		and are feasible and implementable without significant obstacles. The likelihood that tax positions
		taken wil be sustained upon examination by applicable tax authorities is assessed based on individual
		facts and circumstances of the relevant tax position evaluated in light of all available evidence. Where
		applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is
		reasonably possible that changes in these estimates can occur that could materially affect the
		amounts of deferred tax assets and liabilities.
			Basis of Consolidation

			The consolidated financial statements include the accounts of the Company and its Mexican subsidiaries as
			fol ows:

						Nature of
			Subsidiary	Ownership Interest	Jurisdiction	Operations
			Oniva Silver and Gold Mines S.A.	100%	Mexico	Mexican
			de C.V.			administration

			Nueva Vizcaya Mining, S.A. de	100%	Mexico	Mexican
			C.V.			administration

			Promotora Avino, S.A. de C.V.	79.09%	Mexico	Holding
			(“Promotora”)			company

			Compañía Minera Mexicana de	98.45% direct	Mexico	Mining and
			Avino, S.A. de C.V.	1.22% indirect (Promotora)		exploration
			(“Avino Mexico”)	99.67% effective


			Up until the sale of Bralorne Gold Mines Ltd. (“Bralorne”) on December 13, 2019 (see Note 5), the
			consolidated financial statements included the 100% ownership interest of Bralorne, a mining and
			exploration company located in Canada.
	- 9 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)


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

		Cash

		Cash in the consolidated statement of financial position comprise cash at banks and on hand and short-term
		deposits with an original maturity of three months or less, which are readily convertible into a known amount
		of cash.

3. SIGNIFICANT ACCOUNTING POLICIES

		Exploration and evaluation assets and development costs

		(i) Exploration and evaluation expenditures

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

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

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

		(i ) Development expenditures

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

		•	The completion and assessment of a reasonable commissioning period of the mil and mining facilities;
		•	Consistent operating results are achieved during the test period;
		•	Existence of clear indicators that operating levels intended by management wil be sustainable for the
		foreseeable future;
	- 10 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		•	Plant / mil has reached a pre-determined percentage of design capacity;
		•	Adequate funding is available and can be allocated to the operating activities; and,
		•	Long term sales arrangements have been secured.

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

		Plant, equipment and mining properties

		Upon demonstrating the technical feasibility and commercial viability of extracting mineral resources, all
		expenditures incurred to that date for the mine are reclassified to mining properties. Expenditures capitalized
		to mining properties include all costs related to obtaining or expanding access to resources including
		extensions of the haulage ramp and installation of underground infrastructure, and the estimated reclamation
		provision. Expenditures incurred with respect to a mining property are capitalized when it is probable that
		additional future economic benefits wil flow to the Company. Otherwise, such expenditures are classified as
		a cost of sales.

		Plant and equipment are recorded at historical cost less accumulated depreciation and any accumulated
		impairment losses. Historical costs include expenditures that are directly attributable to bringing the asset to
		a location and condition necessary to operate in a manner intended by management. Such costs are
		accumulated as construction in progress until the asset is available for use, at which point the asset is
		classified as plant, equipment and mining properties and depreciation commences.

		After the date that management’s intended production levels have been achieved, mining properties are
		depleted using the straight-line method over the estimated remaining life of the mine. The Company
		estimates the remaining life of its producing mineral properties on an annual basis using a combination of
		quantitative and qualitative factors including historical results, mineral resource estimates, and
		management’s intent to operate the property.

		The Company does not have sufficient reserve information to form a basis for the application of the units-of-
		production method for depreciation and depletion.

		As at December 31, 2020 and 2019, the Company estimated a remaining mine life for San Gonzalo of Nil.

		The Company obtained an updated resource estimate which had increased measured and indicated
		resources, and as a result management completed a review of the mine operations and updated the
		remaining life of the Avino Mine. Depletion relating to the Avino Mine has been adjusted prospectively, as of
		October 31, 2020, which was the effective report date.

		As at December 31, 2020 and 2019, the Company estimated a remaining mine life for the Avino Mine of 20.4
		and 8.5 years, respectively.

		Accumulated mil , machinery, plant facilities, and certain equipment are depreciated using the straight-line
		method over their estimated useful lives, not to exceed the life of the mine for any assets that are
		inseparable from the mine. When parts of an item of plant and equipment have different useful lives, they are
		accounted for as separate items (or components) of plant and equipment.

		Effective October 1, 2019, and as a result of a review of the remaining life and the pattern of usage of office
		equipment, furniture and fixtures, computer equipment and mine machinery and transportation equipment,
		the Company adopted a straight-line method for its plant and equipment, which were previously depreciated
		using the declining balance method. The change in depreciation has been applied prospectively as a change
		in estimate. The Company believes that the new method better reflects the pattern of consumption of future
		economic benefits to be derived from the assets being depreciated.


	- 11 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		Plant and equipment are depreciated using the following annual rates and methods:

		Office equipment, furniture, and fixtures	3 years straight line balance
		Computer equipment	5 years straight line balance
		Mine machinery and transportation equipment	5 years straight line balance
		Mil machinery and processing equipment		5 - 20 years straight line
		Buildings		5 - 20 years straight line

		Impairment

		At each financial position reporting date, the carrying amounts of the Company’s assets are reviewed to
		determine whether there is any indication that those assets are impaired. If any such indication exists, the
		recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.
		Where the asset does not generate cash flows that are independent from other assets, the Company
		estimates the recoverable amount of the cash-generating unit to which the asset belongs.

		An asset’s recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is
		determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
		transaction between market participants at the measurement date. In assessing value in use, the estimated
		future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
		market assessments of the time value of money and the risks specific to the asset. If the recoverable amount
		of an asset or cash generating unit is estimated to be less than its carrying amount, the carrying amount of
		the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the
		period.

		Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit)
		is increased to the revised estimate of its recoverable amount, provided the increased carrying amount does
		not exceed the carrying amount that would have been determined had no impairment loss been recognized
		for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized
		immediately in profit or loss.
		Leases Leases in which the Company assumes substantially all risks and rewards of ownership are classified as
		finance leases. Assets held under finance leases are recognized at the lower of the fair value and present
		value of the minimum lease payments at inception of the lease, less accumulated depreciation and
		impairment losses. The corresponding liability is recognized as a finance lease obligation. Lease payments
		are apportioned between finance charges and reduction of the lease obligation to achieve a constant rate of
		interest on the remaining liability. Finance charges are recorded as a finance expense within profit and loss,
		unless they are attributable to qualifying assets, in which case they are capitalized.

		Operating lease payments are recognized on a straight-line basis over the lease term, except where another
		systematic basis is more representative of the time pattern in which economic benefits from the leased asset
		are consumed, in which case that systematic basis is used. Operating lease payments are recorded within
		profit and loss unless they are attributable to qualifying assets, in which case they are capitalized.

		Inventory

		Material extracted from the Company's mine is classified as either process material or waste. Process
		material represents mineralized material that, at the time of extraction, the Company expects to process into
		a saleable form and sell at a profit, while waste is considered uneconomic to process and its extraction cost
		is included in direct mining costs. Raw materials are comprised of process material stockpiles. Process
		material is accumulated in stockpiles that are subsequently processed into bulk copper, silver, and gold
		concentrate in a saleable form. The Company has bulk copper, silver, and gold concentrate inventory in
		saleable form that has not yet been sold. Mine operating supplies represent commodity consumables and
	- 12 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		other raw materials used in the production process, as well as spare parts and other maintenance supplies
		that are not classified as capital items.

		Inventories are valued at the lower of cost and net realizable value (“NRV”). Cost is determined on a
		weighted average basis and includes all costs incurred, based on normal production capacity, in bringing
		each product to its present location and condition. Cost of inventories comprises direct labor, materials and
		contractor expenses, depletion and depreciation on mining properties, plant and equipment, and an
		allocation of mine site costs. As mineralized material is removed for processing, costs are removed based on
		the average cost per tonne in the stockpile. Stockpiled process material tonnages are verified by periodic
		surveys.
		NRV of mineralized material is determined with reference to relevant market prices less applicable variable
		selling expenses and costs to bring the inventory into its saleable form. NRV of materials and supplies is
		generally calculated by reference to salvage or scrap values when it is determined that the supplies are
		obsolete. NRV provisions are recorded within cost of sales in the consolidated statement of operations, and
		are reversed to reflect subsequent recoveries where the inventory is stil on hand.

		Revenue from Contracts with Customers

		Revenue is recognized to the extent that it is probable that the economic benefits wil flow to the Company
		and the revenue and costs to sell can be reliably measured. Revenue is measured at the fair value of the
		consideration received, excluding discounts, rebates, and other sales tax or duty.

		Performance Obligations

		Based on the criteria outlined in IFRS 15, the Company applied significant judgment in determining that the
		primary performance obligation relating to its sales contracts is the delivery of concentrates. Shipping and
		insurance services arranged by the Company for concentrate sales that occur after the transfer of control are
		also considered performance obligations.

		Transfer of Control

		Based on the criteria outlined in IFRS 15, the Company applied significant judgment in determining when the
		transfer of control occurs. Management based its assessment on a number of indicators of control, which
		include but are not limited to, whether the Company has the present right of payment and whether the
		physical possession of the goods, significant risks and rewards, and legal title have been transferred to the
		customer.

		Provisional Pricing

		Based on the criteria outlined in IFRS 15, the Company applied significant judgment in determining variable
		consideration. The Company identified two provisional pricing components in concentrate sales, represents
		variable consideration in the form of a) adjustments between original and final assay results relating to the
		quantity and quality of concentrate shipments, as well as b) pricing adjustments between provisional and
		final invoicing based on market prices for base and precious metals.

		Based on the Company’s historical accuracy in the assay process, as evidenced by the negligible historical
		adjustments relating to assay differences, the Company concluded the variability in consideration caused by
		the assaying results is negligible. The Company does not expect a significant amount of reversal related to
		assaying differences. The Company records revenues based on provisional invoices based on quoted
		market prices of the London Bullion Market Association and the London Metal Exchange during the
		quotation period outlined in the concentrate sales agreement. The Company applied judgment to determine
		the amount of variable consideration to be recognized during the period for which the likelihood of significant
		reversal is low.


	- 13 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		Financial Instruments

		Measurement – initial recognition

		All financial assets and financial liabilities are initial y recorded on the Company’s consolidated statement of
		financial position when the Company becomes a party to the contractual provisions of the instrument. All
		financial asset and liabilities are initially recorded at fair value, net of attributable transaction costs, except for
		those classified as fair value through profit or loss (“FVTPL”). Subsequent measurement of financial assets
		and financial liabilities depends on the classifications of such assets and liabilities.
		Classification – financial assets

		Amortized cost:

		Financial assets that are held within a business model whose objective is to hold financial assets in order to
		col ect contractual cash flows, and that the contractual terms of the financial assets give rise on specified
		date to cash flows that are solely payments of principal and interest on the principal amount outstanding, are
		measured subsequent to initial recognition at amortized cost.

		The amortized cost of a financial asset is the amount at which the financial asset is measured at initial
		recognition minus the principal repayments, plus the cumulative amortization using the effective interest
		method of any difference between that initial amount and the maturity amount, adjusted for any loss
		allowance. Interest income is recognized using the effect interest method, and is recognized in Interest and
		other income, on the consolidated statements of operations and comprehensive income (loss)

		The Company financial assets at amortized costs include its cash, amounts receivable not related to sales of
		concentrate, investments (short-term), and reclamation bonds.

		Fair value through other comprehensive income (“FVTOCI”)

		Financial assets that are held within a business model whose objective is to hold financial assets in order to
		both collect contractual cash flows and selling financial assets, and that the contractual terms of the financial
		assets give rise on specified date to cash flows that are solely payments of principal and interest on the
		principal amount outstanding.

		Upon initial recognition of equity securities, the Company may make an irrevocable election (on an
		instrument-by-instrument basis) to designate its equity securities that would otherwise be measured at
		FVTPL to present subsequent changes in fair value in other comprehensive income. Designation at FVTOCI
		is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an
		acquirer in a business combination. Investments in equity instruments at FVTOCI are initially measured at
		fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising
		from changes in fair value recognized in other OCI. The cumulative gain or loss is not reclassified to profit or
		loss on disposal of the instrument; instead, it is transferred to retained earnings.

		The Company currently has no financial assets designated as FVTOCI.

		Fair value through profit or loss (“FVTPL”)

		By default, all other financial assets are measured subsequently at FVTPL, which includes amounts
		receivable from concentrate sales.

		Classification – financial liabilities

		Financial liabilities that are not contingent consideration of an acquirer in a business combination, held for
		trading or designated as at FVTPL, are measured at amortized cost using the effective interest method.

	- 14 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		Financial liabilities at amortized cost include accounts payable, amounts due to related parties, term facility,
		equipment loans, and finance lease obligations.

		Financial liabilities classified FVTPL include financial liabilities held for trading and financial liabilities
		designated upon initial recognition as FVTPL. Fair value changes on financial liabilities classified as FVTPL
		are recognized in the consolidated statements of operations. The Company has classified share purchase
		warrants with an exercise price in US dollars (see Note 16) as financial liabilities at FVTPL. As these
		warrants are exercised, the fair value of the recorded warrant liability on date of exercise is included in share
		capital along with the proceeds from the exercise. If these warrants expire, the related decrease in warrant
		liability is recognized in the consolidated statements of operations and comprehensive income (loss).

		The Company has no hedging arrangements and does not apply hedge accounting.

		Impairment

		The Company recognizes a loss allowance for expected credit losses on its financial assets when
		necessary. The amount of expected credit losses is updated at each reporting period to reflect changes in
		credit risk since initial recognition of the respective financial instruments.

		Share capital

		a) Common shares

		Common shares are classified as equity. Transaction costs directly attributable to the issuance of
		common shares and equity warrants are recognized as a deduction from equity, net of any tax effects.
		Transaction costs directly attributable to derivative warrants are charged to operations as a finance cost.
		b) Repurchase of share capital (treasury shares)

		When share capital recognized as equity is repurchased, the amount of the consideration paid, which
		includes directly attributable costs, net of any tax effects, is recognized as a deduction from equity.
		Repurchased shares are classified as treasury shares and are presented as a deduction from total
		equity. When treasury shares are sold or reissued subsequently, the amount received is recognized as
		an increase in equity, and the resulting surplus or deficit on the transaction is transferred to accumulated
		deficit.

		Share-based payment transactions

		The Company’s share option plan and restricted share unit (“RSU”) plan allows directors, officers,
		employees, and consultants to acquire common shares of the Company.

		The fair value of options granted is measured at fair value at the grant date based on the market value of the
		Company’s common shares on that date.

		The fair value of equity-settled RSUs is measured at the grant date based on the market value of the
		Company’s common shares on that date, and each tranche is recognized using the graded vesting method
		over the period during which the RSUs vest. At each financial position reporting date, the amount recognized
		as an expense is adjusted to reflect the actual number of RSUs that are expected to vest.

		Al options and RSUs are recognized in the consolidated statements of operations and comprehensive
		income (loss) as an expense or in the consolidated statements of financial position as exploration and
		evaluation assets over the vesting period with a corresponding increase in equity reserves in the
		consolidated statements of financial position.


	- 15 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		Reclamation and other provisions

		Provisions are recognized where a legal or constructive obligation has been incurred as a result of past
		events, it is probable that an outflow of resources embodying economic benefit wil be required to settle the
		obligation, and a reliable estimate of the amount of the obligation can be made. If material, provisions are
		measured at the present value of the expenditures expected to be required to settle the obligation. The
		increase in any provision due to the passage of time is recognized as accretion expense.

		The Company records the present value of estimated costs of legal and constructive obligations required to
		restore properties in the period in which the obligation is incurred. The nature of these restoration activities
		includes dismantling and removing structures, rehabilitating mines and restoration, reclamation, and re-
		vegetation of affected areas.

		The fair value of the liability for a rehabilitation provision is recorded when it is incurred. When the liability is
		initially recognized, the present value of the estimated cost is capitalized by increasing the carrying amount
		of the related mining property or exploration and evaluation asset. Over time, the discounted liability is
		increased for the change in present value based on the discount rates that reflect current market
		assessments and the risks specific to the liability, which is accreted over time through periodic charges to
		income or loss. A revision in estimates or new disturbance wil result in an adjustment to the provision with
		an offsetting adjustment to the mineral property or the exploration and evaluation asset. Additional
		disturbances, changes in costs, or changes in assumptions are recognized as adjustments to the
		corresponding assets and reclamation liabilities when they occur.

		Earnings per share

		The Company presents basic and diluted earnings per share data for its common shares, calculated by
		dividing the earnings attributable to common shareholders of the Company by the weighted average number
		of common shares outstanding during the year. Diluted earnings per share is determined by adjusting the
		earnings attributable to common shareholders and the weighted average number of common shares
		outstanding for the effects of all potential y dilutive common shares.

		Income taxes

		Income taxes in the years presented are comprised of current and deferred tax. Income tax is recognized in
		profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is
		recognized as equity.

		Deferred tax is recognized using the statement of financial position asset and liability method, which provides
		for temporary differences between the carrying amounts of assets and liabilities for financial reporting
		purposes and the amounts used for taxation purposes. The amount of deferred tax recognized is based on
		the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax
		rates enacted or substantively enacted at the consolidated statement of financial position date. A deferred
		tax asset is recognized only to the extent that it is probable that future taxable profits wil be available against
		which the asset can be utilized.

		Deferred tax assets and liabilities are not recognized if the temporary differences arise from the initial
		recognition of goodwil or an asset or liability in a transaction other than a business combination that affects
		neither accounting profit nor taxable profit.

4. RECENT ACCOUNTING PRONOUNCEMENTS

		Application of new and revised accounting standards:
		IFRS 3 – Definition of a Business

		In October 2018, the IASB issued amendments to IFRS 3 – Definition of a Business which:
	- 16 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		•	Clarify that to be considered a business, an acquired set of activities and assets must include, at a
		minimum, an input and a substantive process that together significantly contribute to the ability to
		create outputs;
		•	Narrow the definitions of a business and of outputs by focusing on goods and services provided to
		customers and by removing the reference to an ability to reduce costs;
		•	Add guidance and il ustrative examples to help entities assess whether a substantive process has
		been acquired;
		•	Remove the assessment of whether market participants are capable of replacing any missing inputs
		or processes and continuing to produce outputs; and
		•	Add an option concentration test that permits a simplified assessment of whether an acquired set of
		activities and assets is not a business.
		The amendments are effective for business combinations for which the acquisition date is on or after the
		beginning of the first annual reporting period beginning on or after January 1, 2020, and to asset acquisitions
		that occurred on or after the beginning of that period. The Company adopted IFRS 3 with no material impact
		on the financial statements.

5. DISPOSITION OF DISCONTINUED OPERATIONS – BRALORNE GOLD MINES LTD.

		On December 13, 2019, the Company completed the sale of its 100% wholly-owned subsidiary Bralorne
		Gold Mines Ltd. (“Bralorne”) to Talisker Resources Ltd. (“Talisker”). The sale was record in the fourth quarter
		of fiscal 2019 and includes the Bralorne Gold Mine and is part of the Company’s plan to focus on its core
		mining operations in Mexico.

		The consideration included:
		•	C$8.7 mil ion (translated to $6,599) in cash
		•	The issuance of 12,580,000 common shares of Talisker, representing 9.9% on a pro-forma basis
		following the close of the transaction and subsequent financing by Talisker;
		•	The issuance of 6,290,000 share purchase warrants exercisable at C$0.25 per share for a period of
		three years after the closing, subject to acceleration in the event the closing price of Talisker’s
		common shares is great than C$0.35 per share for 20 or more consecutive trading days at any time
		following April 14, 2020;

		The sale includes the Bralorne claims, as well as nine mineral claims covering approximately 2,114 hectares
		in the Lil ooet Mining Division of British Columbia, known as the BRX Property.

		The Company also received future consideration of a $2.5 mil ion cash payment, contingent upon the
		commencement of commercial production at the Bralorne Mine, for which a fair value has been determined
		to be Nil at this time.


	- 17 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		The Company recognized a loss on disposition, net of tax, calculated as follows:


		Cash proceeds										$				6,599
		Talisker shares						2,243
		Talisker warrants			716
		Total proceeds										$				9,558
		Net assets sold and derecognized:
		Cash														1,495
		Other current assets											242
		Exploration and evaluation assets														45,613
		Plant and equipment														1,745
		Other long-term assets											19
		Current portion of finance lease obligations and equipment loans						(175)
		Non-current portion of finance lease obligations and equipment loans										(111)
		Site restoration obligation														(10,828)
		Foreign currency translation adjustments											(42)
																37,958
		Loss on disposition before selling costs														(28,400)
		Selling costs														(490)
		Loss on disposition, net														(28,890)

		As a result of the sale, the comparative net income (loss) for the current period, as well as previous two
		years, have been reclassified from continuing operations to discontinued operations:

									2020	2019	2018
		Revenue from mining operations				$	-	$	- $	-
		Cost of sales	-	-	-
		Mine operating income (loss)	-	-	-

		Operating expenses (income)					-					16	(45)
		Accretion of reclamation provision					-					217	256
		Gain on sale of assets					-					2				(175)
		Other items					-					1	(5)
		Loss on disposition					169							28,890	-
		Net loss before income taxes					(169)							(29,126)	(31)
		Income taxes					-					-	-
		Net loss from discontinued operations and on
		disposal				$	(169) $							(29,126)	$ (31)

		The results of discontinued operations included in the consolidated statements of cash flows for the years
		ended December 31, 2020, 2019 and 2018, are as follows:

		Cash generated by (used in):							2020	2019	2018

		Cash flow used in operating activities				$	-	$	(19) $ (7)
		Cash flow used in financing activities					-							(258)	(590)
		Cash flow used in investing activities					-							(5,583)	(4,178)
		Net cash decrease from discontinued
		operations				$	-	$							(5,860) $ (4,775)

	- 18 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

6. TAXES RECOVERABLE

		The Company’s taxes recoverable consist of the Mexican I.V.A. (“VAT”) and income taxes recoverable and
		Canadian sales taxes (“GST”) recoverable.
			December 31,		December 31,
				2020		2019
		VAT recoverable							$	2,328 $		2,652
		GST recoverable		16		42
		Income taxes recoverable		2,700		2,789
									$	5,044 $		5,483

7. INVENTORY

			December 31,		December 31,
				2020		2019
		Process material stockpiles							$	373 $		1,079
		Concentrate inventory		64		3,055
		Materials and supplies		1,222		1,458
									$	1,659 $		5,592

The amount of inventory recognized as an expense for the year ended December 31, 2020 total ed $15,832
(2019 – $32,016, 2018 - $27,850). See Note 19 for further details.

8. 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 fol ows:

								Fair Value	Net Additions								Movements in	Fair value		Fair Value
								December 31,	and	foreign	adjustments	December 31,
											2019	(Warrants		exchange for the period			2020
											Exercised)
Talisker Resources Common
Shares								$	3,197	$						1,184		$	100	$	(305)	$	4,176
Talisker Resources Warrants								1,114	(1,114)					-	-								-
Other	-						(1)					-	1								-
								$	4,311	$						69		$	100	$ (304)	$ 4,176


	- 19 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

9. EXPLORATION AND EVALUATION ASSETS

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

			British Columbia
	Durango, Mexico		& Yukon, Canada	Total

		Balance, January 1, 2019	$			9,692 $	37,089 $	46,781

		Costs incurred during 2019:
		Mine and camp costs						-				2,537	2,537
		Dril ing and exploration				50					2,333	2,383
		Depreciation of plant and equipment						-		317	317
		Interest and other costs						-		325	325
		Provision for reclamation						-				1,338	1,338
		Assessments and taxes				90			31	121
		Geological and related services				-			116	116
		Assays				-			130	130
		Water treatment and tailing storage facility costs				-			112	112
		Effect of movements in exchange rates				(6)					1,286	1,280
		Disposition of Bralorne Mine (Note 5)						-				(45,613)	(45,613)

		Balance, December 31, 2019	$			9,826 $	1 $	9,827
		Costs incurred during 2020:
		Dril ing and exploration				146			-	146
		Assessments and taxes				83			-	83
		Effect of movements in exchange rates			(4)		-		(4)

		Balance, December 31, 2020	$			10,051 $	1 $	10,052

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

		(a) Durango, 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. Within the Avino mine site area is the Company’s San Gonzalo
							Mine, which achieved production at levels intended by management as of October 1, 2012, and on
							this date accumulated exploration and evaluation costs were transferred to mining properties.

		(i ) 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.
	- 20 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

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

		During the year ended December 31, 2020, the Company announced that it has entered 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, Silver Wolf will issue to Avino
		share purchase warrants to acquire 300,000 common shares of Silver Wolf at an exercise price of
		$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 $600,000 in cash or common shares of Silver Wolf as follows:

		a. $50,000 in common shares of Silver Wolf within 30 days of the Approval Date;
		b. A further $50,000 in cash or shares of Silver Wolf at Avino’s discretion on or before the first
			anniversary of the Approval Date;
		c. A further $100,000 in cash or shares of Silver Wolf at Avino’s discretion on or before the
			second anniversary of the Approval Date;
		d. A further $200,000 in cash or shares of Silver Wolf at Avino’s discretion on or before the third
			anniversary of the Approval Date; and
		e. A further $200,000 in cash or shares of Silver Wolf at Avino’s discretion on or before the fourth
			anniversary of the Approval Date; and

		2. Incur a total of $750,000 in exploration expenditures on the properties, as follows:

		a. $50,000 on or before the first anniversary of the Approval Date;
		b. A further $100,000 on or before the second anniversary of the Approval Date; and
		c. A further $600,000 on or before the fourth anniversary of the Approval Date.

		Under the Option Agreement, the parties intend that the first two year’s payments ($200,000 in cash or
		shares), and first $150,000 in exploration work wil be firm commitments by Silver Wolf. All share
		issuances wil 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 wil be subject to resale restrictions under applicable securities legislation for 4
		months and a day from their date of issue. The Option Agreement is subject to approval by the TSX
		Venture Exchange.

		(i i) Santiago Papasquiaro property

		The Santiago Papasquiaro property is located near the vil age 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 whol y-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
	- 21 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		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
		mil ion 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) British Columbia, Canada
		(i) Minto and Olympic-Kelvin properties

		The Company’s mineral claims in British Columbia encompass two additional properties, Minto and
		Olympic-Kelvin, each of which consists of 100% owned Crown-granted mineral claims located in the
		Lillooet Mining Division.
			(c) 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.

10. NON-CONTROLLING INTEREST

			At December 31, 2020, the Company had an effective 99.67% (2019 - 99.67%, 2018 – 99.67%) interest in its
			subsidiary Avino Mexico and the remaining 0.33% (2019 - 0.33%, 2018 – 0.33%) interest represents a non-
			controlling interest. The accumulated deficit and current year income attributable to the non-controlling
			interest are insignificant and accordingly have not been recognized in the consolidated financial statements.


	- 22 -

AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

11. PLANT, EQUIPMENT AND MINING PROPERTIES
							Mine machinery
					Office equipment,			and	Mil machinery	Buildings and
		Mining			furniture, and	Computer	transportation		and processing	construction in
			properties	fixtures		equipment	equipment		equipment	process	Total
		$		$		$		$				$	$	$
COST
Balance at January 1, 2019		12,962		149	358							17,257			17,603	6,710	55,039
																Additions / Transfers	644		381	(6)		(648)		148	2,770	3,289
																Disposals	-		(6)	(12)		(3,723)		(231)	(206)	(4,178)
																Effect of movements in
																exchange rates		31		-	1		33		34	13	112
Balance at December 31, 2019		13,637		524	341							12,919			17,554	9,287	54,262
																Additions / Transfers	(493)		34	6		36		(71)	1,976	1,488
																Effect of movements in
																exchange rates	5		5	-								-	-	-		10
Balance at December 31, 2020		13,149		563	347							12,955			17,483	11,263	55,760


ACCUMULATED DEPLETION
AND DEPRECIATION
Balance at January 1, 2019		6,102		65	175							6,830			2,416	708	16,296
																Additions / Transfers	1,952		22	49		51		1,619	714	4,407
																Disposals	-		(3)	(11)		(2,040)		(27)	(49)	(2,130)
																Effect of movements in
																exchange rates	12		-	-		13		5	1				31
Balance at December 31, 2019		8,066		84	213							4,854			4,013	1,374	18,604
																Additions / Transfers	577		103	43		53		1,284	250	2,310
																Effect of movements in
																exchange rates	-		-	-								-	-	-	-
Balance at December 31, 2020		8,643		187	256							4,907			5,297	1,624	20,914

NET BOOK VALUE
At December 31, 2020		4,506		376	91							8,048			12,186	9,639	34,846
At December 31, 2019		5,571		440	128							8,065			13,541	7,913	35,658

Included in Buildings above are assets under construction of $5,327 as at December 31, 2020 (December 31, 2019 - $3,746) on which no depreciation
was charged in the years then ended. Once the assets are put into service, they are transferred to the appropriate class of plant, equipment and mining
properties.
	- 23 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

12. RELATED PARTY TRANSACTIONS AND BALANCES

		Al 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 year ended December
		31, 2020, 2019 and 2018, were as follows:

				2020	2019	2018
		Salaries, benefits, and consulting fees	$	757 $	723 $	956
		Share-based payments		1,468	659	531
			$	2,225 $	1,382 $	1,487

		(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. Al amounts payable and receivable are non-interest bearing, unsecured and
		due on demand. Advances to Oniva International Services Corp. (“Oniva”) of $Nil (December 31,
		2019 - $Nil) for expenditures to be incurred on behalf of the Company are included in prepaid
		expenses and other assets on the consolidated statements of financial position as at December 31,
		2020. The following table summarizes the amounts due to related parties:

				December 31,				December 31,
										2020	2019
		Oniva International Services Corp.				$	106			$	105
		Directors			48	51
		Jasman Yee & Associates, Inc.			-				-
						$	154			$	156

		(c) Other related party transactions

		The Company has a cost sharing agreement with Oniva for office and administration services.
		Pursuant to the cost sharing agreement, the Company wil 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 years ended December 31, 2020, 2019 and 2018, are
		summarized below:

				2020	2019	2018
		Salaries and benefits	$	636						$	665	$	594
		Office and miscellaneous		290							322		560
		Exploration and evaluation assets		-							206		353
			$	926						$ 1,193	$ 1,507


	- 24 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		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 years ended December 31,
		2020, 2019 and 2018, the Company paid $224, $226 and $232, respectively, to ICC.

		The Company pays Jasman Yee & Associates, Inc. (“JYAI”) for operational, managerial,
		metallurgical, engineering and consulting services related to the Company’s activities. JYAI’s
		managing director is a director of the Company. For the years ended December 31, 2020, 2019
		and 2018, the Company paid $31, $33 and $66, respectively, to JYAI.

		The Company pays Wear Wolfin Designs Ltd. (“WWD”), a company whose director is the brother-
		in-law of David Wolfin, for financial consulting services related to ongoing consultation with
		stakeholders and license holders. For the years ended December 31, 2020, 2019 and 2018, the
		Company paid $Nil, $Nil and $12, respectively, to WWD.

13. TERM FACILITY

		In July 2015, the Company entered into a ten million dol ar term facility with Samsung C&T U.K.
		Limited (“Samsung”). Interest is charged on the facility at a rate of US dollar LIBOR (3 month) plus
		4.75%. The agreement was later amended in 2018 to extend the repayment period and modify the
		monthly payments. Other material terms of the facility remained unchanged. The Company is currently
		repaying the remaining balance in monthly instalments of $278 ending September 2021, with 9
		remaining payments as at December 31, 2020. The Company is committed to selling Avino Mine
		concentrate on an exclusive basis to Samsung until December 31, 2024.

		The facility is secured by the concentrates produced under the agreement and by 33% of the common
		shares of the Company’s subsidiary Compañía Minera Mexicana de Avino, S.A. de C.V. The facility
		with Samsung relates to the sale of concentrates produced from the Avino Mine only.

		The continuity of the term facility with Samsung is as follows:

			December 31,	December 31,
					2020	2019
		Balance, beginning	$		5,897	$	6,900
		Repayments			(3,333)		(833)
		Unwinding of fair value adjustment			(51)		(170)
		Balance, ending			2,513		5,897
		Less: Current portion			(2,513)		(3,384)
		Non-current portion	$		-	$	2,513


	- 25 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

14. EQUIPMENT LOANS

		The Company has entered into loans for mining equipment maturing in 2021 with fixed interest rates
		of 6.29% per annum. The Company’s obligations under the loans are secured by the mining
		equipment. As at December 31, 2020, plant, equipment, and mining properties includes a net carrying
		amount of $442 (December 31, 2019 - $559) for this mining equipment.

		The contractual maturities and interest charges in respect of the Company’s obligations under the
		equipment loans are as follows:

			December 31, December 31,
				2020	2019
		Not later than one year							$	73		$ 228
		Later than one year and not later than five years					-		73
		Less: Future interest charges					(1)		(12)
		Present value of loan payments				72	289
		Less: current portion				(72)	(199)
		Non-current portion							$		-		$	90

		The equipment loan credit facilities are a component of the master credit facilities described in Note
		15.

15. FINANCE LEASE OBLIGATIONS

		The Company has entered into office space and mining equipment leases expiring between 2021 and
		2025, with interest rates ranging from Nil% to 14.99% per annum. The Company has the option to
		purchase the mining equipment at the end of the lease term for a nominal amount. The Company’s
		obligations under finance leases are secured by the lessor’s title to the leased assets. As at December
		31, 2020, plant, equipment and mining properties includes a net carrying amount of $1,087 (December
		31, 2019 - $2,697) for this leased mining equipment.

		The contractual maturities and interest charges in respect of the Company’s finance lease obligations
		are as follows:
						December 31,					December 31,
						2020	2019
		Not later than one year				$					213		$	716
		Later than one year and not later than five years			301			444
		Later than five years			-			28
		Less: Future interest charges			(28)			(54)
		Present value of lease payments			486			1,134
		Less: current portion			(208)			(692)
		Non-current portion				$					278		$	442

		The Company has a master credit facility with an equipment supplier for a total of $5,000. The facility
		is used to acquire equipment necessary for maintaining operations and exploration activities at the
		Avino Mine. As of December 31, 2020, the Company had $4,927 in available credit remaining under
		these facilities.


	- 26 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

16. 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 fol ows:

			December 31,		December 31,
				2020		2019
Balance at beginning of the period			$	1,579	$	2,009
Fair value adjustment				650		(520)
Effect of movement in exchange rates				66		90
Balance at end of the period			$	2,295	$	1,579

		Continuity of warrants during the periods is as fol ows:
							Underlying	Weighted Average
			Shares		Exercise Price
Warrants outstanding and exercisable, January 1, 2019							10,778,061	$1.20
Issued			464,122			C$0.85
Expired			(3,602,215)			$1.99
Warrants outstanding and exercisable, December 31, 2019			7,639,968			$0.79
Exercised			(4,195,072)			$0.80
Exercised			(464,122)			C$0.85
Warrants outstanding and exercisable, December 31, 2020			2,980,774			$0.80

					Al Warrants
								Outstanding and Exercisable
	Exercise Price		December 31,		December 31,
	Expiry Date								per Share	2020		2019
July 30, 2020								C$0.85	-		464,122
September 25, 2023								$0.80	2,980,774		7,175,846
								2,980,774		7,639,968

		As at December 31, 2020, the weighted average remaining contractual life of warrants outstanding
		was 2.73 years (December 31, 2019 – 3.55 years).

		Valuation of the warrant liability requires the use of highly subjective 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:

			December 31,		December 31,
				2020		2019
Weighted average assumptions:
Risk-free interest rate				0.20%		1.68%
Expected dividend yield				0%		0%
Expected warrant life (years)				2.73		3.57
Expected stock price volatility				73.93%		61.61%
Weighted average fair value				$0.77		$0.22


	- 27 -

AVINO SILVER & GOLD MINES LTD.

Notes to the consolidated financial statements

For the years ended December 31, 2020, 2019 and 2018

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

17. RECLAMATION PROVISION

Management’s estimate of the reclamation provision at December 31, 2020, is $808 (December 31,

2019 – $1,524), and the undiscounted value of the obligation is $1,275 (December 31, 2019 –

$1,985).

The present value of the obligation was calculated using a risk-free interest rate of 5.96% (December

31, 2019 – 6.86%) and an inflation rate of 3.15% (December 31, 2019 – 3.54%). 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 reclamation provision during the years ended December 31,

2020, and 2019, is as fol ows:

December 31,

2020

2019

Balance at beginning of the period

1,524 $

10,799

Changes in estimates

(737)

840

Disposition of Bralorne (Note 5)

(10,828)

Unwinding of discount related to Bralorne

217

Unwinding of discount related to continuing operations

104

Effect of movements in exchange rates

(78)

392

Balance at end of the period

808 $

1,524

During the year ended December 31, 2020, the Company recognized a decrease in the asset

retirement obligations in connection with the Avino and San Gonzalo Mines due to the changes in

estimated timing of reclamation activities, and closure cost estimates. As a result, a reduction of $544

was recognized in relation to the capitalized costs of the Avino Mine (Note 11 – Plant, equipment and

mining properties) and an amount of $193 was recognized in the consolidated statement of operations

and comprehensive income (loss) in relation to the reduction of the asset retirement obligation of the

San Gonzalo Mine.

18. SHARE CAPITAL AND SHARE-BASED PAYMENTS

(a) Authorized: Unlimited common shares without par value.

(b) Issued:

(i)

During the year ended December 31, 2020, the Company issued 6,730,054 common

shares in an at-the-market offering under prospectus supplement for gross proceeds of

$4,940. The Company paid a 3% cash commission of $148 on gross proceeds, for net

proceeds of $4,792, and incurred an additional $106 in issuance costs during the period.

During the year ended December 31, 2020, the Company issued 4,195,072 common

shares following the exercise of 4,195,072 warrants. As a result, $6,112 was recorded to

share capital, representing cash proceeds of $3,356, fair value of the warrants on the date

of exercise (see Note 16 for valuation methodology for $US denominated warrants) of

$2,733, and movements in foreign exchange of $69.

During the year ended December 31, 2020, the Company also issued 464,122 common

shares following the exercise of 464,122 broker warrants. As a result, $416 was recorded

to share capital, representing cash proceeds of $300 and the amount attributed to the

warrants upon issuance in 2019, representing $116.

During the year ended December 31, 2020, the Company issued 675,145 common shares

as settlement of accrued advisory services provided by Cantor Fitzgerald Canada

Corporate (“Cantor”) for the completion of the sale of Bralorne. The value of these shares

- 28 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		was accrued at December 31, 2019; however, the shares were not issued until January
		2020.

		During the year ended December 31, 2020, the Company issued 48,000 common shares
		following the exercise of 48,000 options. As a result, $43 was recorded to share capital,
		representing cash proceeds of $28 and the fair value upon issuance of $15.

		During the year ended December 31, 2020, the Company issued 863,901 common shares
		upon exercise of RSUs. As a result, $650 was recorded to share capital.

			(i )	During the year ended December 31, 2019, the Company closed a bought-deal financing,
		issuing 5,411,900 common shares at the price of C$0.85, as well as 2,323,460 flow-
		through shares at the price of C$0.99 for gross proceeds of $5,240 (C$6,900). The
		financing was made by way of prospectus supplement in July 2019, so the Company’s
		existing Canadian short-form base shelf prospectus dated December 21, 2018.

		Of the $5,240 total aggregate proceeds raised, $116 was attributed to 464,122 warrants
		issued as commission, leaving a residual amount of $5,124. This amount includes a flow-
		through premium, which represents the difference between the C$0.85 price in which the
		common shares were issued, and the offering price of C$0.99 per share. Based on the C$
		to US$ exchange rate on the date of the transaction, $247 was recorded as the flow-
		through premium, for a net share capital allocation of $4,877. This premium is presented in
		“Other liabilities” on the consolidated statements of financial position as at December 31,
		2019.

		The Company paid a 7% cash commission on the gross proceeds in the amount of $367,
		and incurred additional legal and professional costs of $115. Costs of $10 were allocated
		to the fair value of the warrants and have been reflected in the condensed consolidated
		interim statements of operations as a finance cost, and costs of $472 have been reflected
		as share issuance costs in the condensed consolidated interim statements of changes in
		equity.

		During the year ended December 31, 2019, the Company issued 4,954,000 common
		shares in an at-the-market offering under prospectus supplement for gross proceeds of
		$2,924. The Company paid a 3% cash commission of $87 on gross proceeds, for net
		proceeds of $2,837, and incurred an additional $75 in issuance costs during the period,

		During the year ended December 31, 2019, the Company issued 565,259 common shares
		upon exercise of RSUs. As a result, $835 was recorded to share capital.

			(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.


	- 29 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		Continuity of stock options is as fol ows:

				Underlying	Weighted Average
				Shares	Exercise Price (C$)

Stock options outstanding, January 1, 2019				2,917,500			$2.04
		Granted		526,000			$0.79
		Cancelled / Forfeited		(255,000)			$2.09
		Expired		(550,000)			$1.90
Stock options outstanding, December 31, 2019				2,638,500			$1.82
		Granted		1,700,000			$1.64
		Exercised		(48,000)			$0.79
		Cancelled / Forfeited		(807,500)			$1.70
Stock options outstanding, December 31, 2020			3,483,000				$1.77
Stock options exercisable, December 31, 2020				2,208,000			$1.85

		The following table summarizes information about the stock options outstanding and exercisable at
		December 31, 2020:

										Outstanding					Exercisable
													Weighted	Weighted
													Average	Average
													Remaining	Remaining
												Number of	Contractual	Number of	Contractual Life
	Expiry Date										Price (C$)		Options							Life (Years)	Options	(Years)
September 2, 2021								$2.95	360,000		0.67			360,000		0.67
September 20, 2022								$1.98	880,000		1.72			880,000		1.72
August 28, 2023								$1.30	295,000		2.66			295,000		2.66
August 21, 2024								$0.79	248,000		3.64			248,000		3.64
August 4, 2025								$1.64				1,700,000	4.59			425,000	4.59
															3,483,000	3.23		2,208,000	2.44

		Option pricing requires the use of highly subjective 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 options granted during the year ended
		December 31, 2020, was calculated using the Black-Scholes model with the following weighted
		average assumptions and resulting grant date fair value:

						2020									2019
Weighted average assumptions:
		Risk-free interest rate				0.30%									1.27%
		Expected dividend yield			0%										0%
		Expected option life (years)			5.00										5.00
		Expected stock price volatility				66.09%	59.01%
Weighted average fair value at grant date						C$0.89									C$0.40

		During the year ended December 31, 2020, the Company charged $777 (December 31, 2019 -
		$144) to operations as share-based payments and capitalized $Nil (December 31, 2019 - $37) to
		exploration and evaluation assets for the fair value of stock options vested during the period.

	- 30 -

AVINO SILVER & GOLD MINES LTD.

Notes to the consolidated financial statements

For the years ended December 31, 2020, 2019 and 2018

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

(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 fol ows:

Underlying

Weighted Average

Price (C$)

RSUs outstanding, January 1, 2019

1,235,300

$1.62

Granted

1,730,500

$0.79

Exercised

(565,259)

$1.96

Cancelled / Forfeited

(27,666)

$1.35

RSUs outstanding, December 31, 2019

2,372,875

$0.94

Granted

1,481,000

$1.64

Exercised

(863,901)

$0.99

Cancelled / Forfeited

(115,974)

$1.00

RSUs outstanding, December 31, 2020

2,874,000

$1.28

The following table summarizes information about the RSUs outstanding at December 31, 2020:

Issuance Date

Price (C$)

Number of RSUs Outstanding

August 28, 2018

$1.31

288,000

August 21, 2019

$0.79

1,105,000

August 4, 2020

$1.64

1,481,000

2,874,000

For the RSUs issued during year ended December 31, 2020, the weighted average fair value at the

measurement date was C$1.64 (December 31, 2019 - C$0.79), based on the TSX market price of

the Company’s shares on the date the RSUs were granted.

During the year ended December 31, 2020, the Company charged $1,080 (December 31, 2019 -

$793) to operations as share-based payments and capitalized $Nil (December 31, 2019 - $49) to

exploration and evaluation assets 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.

- 31 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

(e) Earnings (loss) per share:

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

			2020	2019	2018
		Net income (loss) for the year						$	(7,482)			$	(2,335)			$	1,657
		Basic weighted average number of shares
		outstanding						83,180,069 69,980,178		56,851,626
		Effect of dilutive share options, warrants,
		and RSUs			-	-				3,149,011
		Diluted weighted average number of shares
		outstanding						83,180,069 69,980,178		60,000,637
		Basic earnings (loss) per share						$	(0.09)			$	(0.03)			$	0.03
		Diluted earnings (loss) per share						$	(0.09)			$	(0.03)			$	0.03

19. REVENUE AND COST OF SALES

		The Company’s revenues for the year ended December 31, 2020 of $16,022 (2019 - $31,746, 2018 -
		$34,116) are all attributable to Mexico, from shipments of concentrate produced by the Avino Mine,
		the San Gonzalo Mine, prior to its closure in Q4 2019, and processing of Historical Above Ground
		Stockpiles.

			2020	2019	2018
		Concentrate sales				$ 15,304	$ 31,417	$ 34,551
		Provisional pricing adjustments			718	329	(435)
			$ 16,022 $ 31,746							$ 34,116

		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 year
		ended December 31, 2020.

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

			2020	2019	2018
		Production costs	$ 11,443						$	27,949			$	24,619
		Stand-by costs	2,394						-	-
		Inventory net realizable adjustment								-	387				-
		Depreciation and depletion		1,995					3,680				3,231
						$ 15,832	$	32,016			$	27,850


	- 32 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

20. GENERAL AND ADMINISTRATIVE EXPENSES

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

			2020	2019	2018
		Salaries and benefits		$	1,361 $	1,347 $	1,244
		Office and miscellaneous	117	286	359
		Management and consulting fees	406	461	354
		Investor relations	166	171	401
		Travel and promotion	46	110	226
		Professional fees	380	470	529
		Directors fees	171	162	161
		Regulatory and compliance fees	139	143	311
		Depreciation	116	43	25
				$	2,902 $	3,193 $	3,610

21. 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 12.

		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:

			December 31,				December 31,
						2020	2019
		Not later than one year	$	20 $	1,269
		Later than one year and not later than five years		14	20
		Later than five years		3	5
			$	37 $	1,294

Included in the above amount as at December 31, 2020, is the Company’s commitment to incur flow-
through eligible expenditures of $Nil (December 31, 2019 - $1,262 (C$1,639)) that must be incurred in
Canada.

Office lease payments recognized as an expense during the year ended December 31, 2020, totalled
$40 (2019 - $72, 2018 - $81).


	- 33 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

22. SUPPLEMENTARY CASH FLOW INFORMATION

			2020	2019	2018
		Net change in non-cash working capital items:
		Deferred revenues	$		- $	(573) $	573
		Accounts payable and accrued liabilities			(2,877)	(941)	2,329
		Prepaid expenses and other assets			(157)	287	981
		Amounts receivable			1,211	2,615	543
		Taxes payable			(39)	(121)	(358)
		Amounts due to related parties			1	6	(44)
		Taxes recoverable	440	(193)	1,017
		Other liabilities	(178)	(100)	-
		Inventory			4,150	3,182	(42)
			$		2,551 $	4,162 $	4,999

			2020	2019	2018
		Interest paid	$		264 $	618 $	959
		Taxes paid	$		279 $	2,373 $	4,991
		Equipment acquired under finance leases
		and equipment loans	$		- $	122 $	1,771

23. 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 wil 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 three (December 31,
		2019 – six) counterparties (see Note 25). 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 consolidated statement of financial position. At
		December 31, 2020, no amounts were held as collateral.


	- 34 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		(b) Liquidity Risk

		Liquidity risk is the risk that the Company wil 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 December 31, 2020, in
		the amount of $11,713 and working capital of $14,680 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 term facility,
		equipment loans, 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 December
		31, 2020, are summarized as follows:
			Less Than	More Than 5
			Total	1 Year	1-5 years		Years
		Accounts payable and
		accrued liabilities	$ 2,068	$ 2,068	$ -	$ -
		Amounts due to related
		parties	154					154	-	-
		Minimum rental and lease
		payments	26					7	16	3
		Term facility	2,552	2,552					-	-
		Equipment loans	72					72	-	-
		Finance lease obligations	514					213	301	-
		Total	$ 5,386	$ 5,066	$ 317	$ 3


		(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.
		(i ) 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.

		Foreign Currency Risk

		Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument wil
		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:

	- 35 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

			December 31, 2020	December 31, 2019
			MXN		CDN	MXN		CDN
		Cash					$	36,896 $		2,831 $	2,780 $		5,902
		Long-term investments	-				5,317			-	5,599
		Reclamation bonds	-								6	-		6
		Amounts receivable	-								20	-		54
		Accounts payable and
		accrued liabilities	(22,972)						(157)	(51,307)						(442)
		Due to related parties	-								(196)	-		(202)
		Finance lease obligations	(1,543)						(448)	(1,037)						(522)
		Net exposure	12,381		7,373	(49,564)		10,395
		US dollar equivalent					$	620 $				5,791 $	(2,627) $		8,004

		Based on the net US dollar denominated asset and liability exposures as at December 31, 2020, a
		10% fluctuation in the US/Mexican and Canadian/US exchange rates would impact the Company’s
		earnings for the year ended December 31, 2020, by approximately $589 (December 31, 2019 -
		$465). 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 wil 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 December 31, 2020, based
		on outstanding accounts receivable that were subject to pricing adjustments, a 10% change in
		metals prices would have an impact on net income (loss) of approximately $2 (December 31, 2019
		- $70).

		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 December 31, 2020, a 10%
		change in market prices would have an impact on net earnings (loss) of approximately $418
		(December 31, 2019 - $467).

		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: 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).
	- 36 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		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 December 31, 2020:

			Level 1	Level 2	Level 3
		Financial assets
		Cash	$		11,713 $				- $	-
		Amounts receivable						-	529			-
		Long-term investments			4,176				-	-
		Total financial assets							$ 15,889	$ 529 $	-
		Financial liabilities
		Warrant liability						-	-	(2,295)
		Total financial liabilities							$ - $	- $	(2,295)

		The Company uses Black-Scholes model to measure its Level 3 financial instruments. The
		warrants of Talisker are measured on acquisition and at December 31, 2019, using the following
		assumptions:

						December 31,	December 13,
							2019	2019
		Weighted average assumptions:
		Risk-free interest rate							1.71%				1.67%
		Expected dividend yield							0%				0%
		Expected life (years)							2.95				3.00
		Expected stock price volatility							106.79%	108.41%
		Weighted average fair value at grant date							C$0.23				C$0.15

		During the year ended December 31, 2020, all warrants of Talisker were exercised, and any
		changes in Level 3 measurements were a result of the Company exercising these warrants (see
		Note 8 of the consolidated financial statements).

		As at December 31, 2020, the Company’s Level 3 financial instruments consisted solely of the
		warrant liability. For the Company’s warrant liability valuation and fair value adjustments during the
		years ended December 31, 2020 and 2019, see Note 16 of the consolidated financial statements.

		During the year ended December 31, 2019, changes in Level 3 measurements were comprised of
		the recognition of the Talisker warrants received in the sale of Bralorne (see Note 5) of $716, and
		its subsequent fair value increase of $398 for a total fair value of $1,114 at December 31, 2019.



	- 37 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

24. CAPITAL MANAGEMENT

		The Company’s objectives when managing capital are to safeguard the Company’s ability to continue
		as a going concern in order to pursue the exploration and expansion of its properties and to maintain a
		flexible capital structure for its projects for the benefit of its stakeholders. In the management of
		capital, the Company includes equity (comprising of all issued share capital, equity reserves, retained
		earnings or accumulated deficit, and other comprehensive income (loss)), the term facility, equipment
		loan obligations, and finance lease, are listed as follows:

			December 31,	December 31,
					2020	2019
		Equity	$		59,008 $	53,923
		Term Facility			2,513	5,897
		Finance Lease Obligations			486	1,134
		Equipment Loans			72	289
			$		62,079 $	61,243

		The Company manages its capital structure and makes adjustments to it in light of changes in
		economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its
		capital structure, the Company may attempt to incur new debt or issue new shares. Management
		reviews the Company’s capital structure on an ongoing basis and believes that this approach, given
		the relative size of the Company, is reasonable. At December 31, 2020, the Company expects its
		capital resources and projected future cash flows from operations to support its normal operating
		requirements on an ongoing basis, and planned development and exploration of its mineral properties
		and other expansionary plans. At December 31, 2020, there was no externally imposed capital
		requirement to which the Company was subject and with which the Company did not comply.

25. SEGMENTED INFORMATION

		The Company’s revenues for the year ended December 31, 2020 of $16,022 (2019 - $31,746; 2018 –
		$34,116) are all attributable to Mexico, from shipments of concentrate produced by the Avino Mine,
		the San Gonzalo Mine and the Avino Historic Above Ground stockpiles.

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

			2020		2019	2018
		Silver					$	6,318 $		14,030 $	17,259
		Copper						4,662		13,953	12,996
		Gold						8,517		10,326	9,866
		Penalties, treatment costs and refining charges					(3,475)		(6,563)	(6,005)
		Total revenue from mining operations					$ 16,022 $	31,746 $ 34,116



	- 38 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		For the year ended December 31, 2020, the Company had three customers (2019 – six, 2018 – six)
		that accounted for total revenues as follows:

			2020	2019	2018
		Customer #1					$ 12,573 $	21,810 $	23,314
		Customer #2						3,206	4,861	321
		Customer #3						(19)	3,350	8,071
		Customer #4	262	1,246	-
		Customer #5	-	469	-
		Customer #6						-	10	519
		Customer #7						-	-	1,547
		Customer #8						-	-	344
		Total revenue from mining operations					$ 16,022 $	31,746 $	34,116


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

								December 31,	December 31,
				2020	2019
		Exploration and evaluation assets - Mexico							$	10,051 $	9,826
		Exploration and evaluation assets - Canada								1	1
		Total exploration and evaluation assets							$	10,052 $	9,827

								December 31,	December 31,
				2020	2019
		Plant, equipment, and mining properties - Mexico							$	34,475 $ 35,239
		Plant, equipment, and mining properties - Canada								371	419
		Total plant, equipment, and mining properties							$	34,846 $ 35,658

On December 13, 2019, the Company sold Bralorne (see Note 5) which held substantially all of the
Company’s non-current assets in Canada.

26. INCOME TAXES

		(a) Income tax expense

		Income tax expense included in the consolidated statements of operations and comprehensive
		income (loss) is as fol ows:

					2020	2019						2018


		Current income tax expense	$		161 $	327 $	1,052
		Deferred income tax recovery							(1,569)	(960)	(645)
		Total income tax expense (recovery)	$						(1,408) $	(633) $	407



	- 39 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		The reconciliation of income taxes calculated at the Canadian statutory tax rate to the income tax
		expense recognized in the year is as fol ows:

			2020	2019	2018

		Net income (loss) before income taxes	$		(8,890) $	(2,968) $	2,064
		Net loss from discontinued operations before
		income taxes			(169)	(29,126)	(31)
		Net income (loss) before income taxes	$		(9,059) $	(32,094) $	2,033
		Combined statutory tax rate			27.00%	27.00%	27.00%

		Income tax expense (recovery) at the Canadian
		statutory rate			(2,446)	(8,665)	549

		Reconciling items:
		Effect of difference in foreign tax rates			(86)	(120)	48
		Non-deductible/non-taxable items			1,467	6,449	(121)
		Change in unrecognized deductible temporary
		differences			332	1,263	(257)
		Impact of foreign exchange			(112)	222	915
		Special mining duties			(185)	231	117
		Revisions to estimates			(297)	58	(368)
		Share issue costs			(73)	(174)	(231)
		Other items			(8)	103	(245)

		Income tax expense (recovery) recognized in the
		year	$		(1,408) $	(633) $	407

		The Company recognized a non-cash recovery of $164 for the year ended December 31, 2020
		(2019 – expense of $235; 2018 – expense of $379) related to the deferred tax impact of the special
		mining duty. The Canadian income tax rate increased from 26% to 27% effective January 1, 2018,
		with a statutory impact prior to year-end. The impact of this change has been reflected in the
		consolidated financial statements.
						December 31, December 31,
				2020	2019


		Deferred income tax assets				$	4,249 $	2,755
		Deferred income tax liabilities					(5,618)	(5,693)

						$	(1,369) $	(2,938)
		The approximate tax effects of each type of temporary difference that gives rise to potential
		deferred income tax assets and liabilities are as follows:

						December 31,	December 31,
				2020	2019

		Reclamation provision				$	304 $	571
		Non-capital losses					3,383	1,171
		Other deductible temporary differences					562	1,013
		Inventory					(2)	(243)
		Exploration and evaluation assets					(3,349)	(3,340)
		Plant, equipment and mining properties					(2,267)	(2,110)

		Net deferred income tax liabilities				$	(1,369) $	(2,938)

		The net deferred tax liability presented in these consolidated financial statements is due to the
		difference in the carrying amounts and tax bases of the Mexican plant, equipment and mining
		properties which were acquired in the purchase of Avino Mexico. The carrying values of the
	- 40 -


AVINO SILVER & GOLD MINES LTD.
Notes to the consolidated financial statements
For the years ended December 31, 2020, 2019 and 2018
(Expressed in thousands of US dollars, except where otherwise noted)

		Mexican plant, equipment and mining properties includes an estimated fair value adjustment
		recorded upon the July 17, 2006, acquisition of control of Avino Mexico that was based on a share
		exchange, while the tax bases of these assets are historical undeducted tax amounts that were nil
		on acquisition. The deferred tax liability is attributable to assets in the tax jurisdiction of Mexico.

		(b) Unrecognized deductible temporary differences:

		Temporary differences and tax losses arising in Canada have not been recognized as deferred
		income tax assets due to the fact that management has determined it is not probable that sufficient
		future taxable profits wil be earned in Canada to recover such assets. Unrecognized deductible
		temporary differences are summarized as follows:

			December 31,		December 31,
				2020		2019

		Tax losses carried forward	$	18,974 $		24,229
		Share issue costs		1,144		1,352
		Plant, equipment and mining properties		263		170
		Exploration and evaluation assets		1,248		1,237
		Investments		(400)		(1,273)
		Reclamation provision and other		-		-

		Unrecognized deductible temporary differences	$	21,229 $		25,715

		The Company has capital losses of $11,396 carried forward and $7,578 in non-capital tax losses
		carried forward available to reduce future Canadian taxable income. The capital losses can be
		carried forward indefinitely until used. The non-capital losses have an expiry date range of 2027 to
		2040.

27. SUBSEQUENT EVENTS

		Warrant Exercises – Subsequent to December 31, 2020, the Company issued 896,562 common
		shares through the early exercise of share purchase warrants for proceeds of $717 at an average
		price per share of $0.80.

		At-The-Market Sales – Subsequent to December 31, 2020, the Company issued 9,050,000 common
		shares in at-the-market offerings under prospectus supplement for gross proceeds of $17,732. The
		Company paid a 2.75% cash commission of $488 on gross proceeds, for net proceeds of $17,244.

		Option Exercises – Subsequent to December 31, 2020, the Company issued 264,000 common
		shares through the exercise of incentive stock options for proceeds of C$305, at an average price of
		C$1.16.
	- 41 -