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Published: 2020-02-26
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AVINO SILVER & GOLD MINES LTD.
Consolidated Financial Statements
For the years ended December 31, 2019, 2018 and 2017
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements of Avino Silver & Gold Mines Ltd. (the “Company”) are the responsibilityof the Company’s management. The consolidated financial statements are prepared in accordance withInternational Financial Reporting Standards as issued by the International Accounting Standards Board, andreflect 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’sassets are safeguarded, transactions are authorized and properly recorded, and financial information is reliable.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities. The AuditCommittee reviews the results of the annual audit and reviews the consolidated financial statements prior totheir submission to the Board of Directors for approval.
The consolidated financial statements as at December 31, 2019 and 2018, and for the years ended December31, 2019, 2018 and 2017, have been audited by Manning Elliott LLP, an independent registered publicaccounting firm, and their report outlines the scope of their examination, and gives their opinion on theconsolidated financial statements.
“David Wolfin”“Nathan Harte”
David WolfinNathan Harte, CPA
President & CEOChief Financial Officer
February 26, 2020February 26, 2020
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors ofAvino 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 itssubsidiaries (the “Company”), which comprise the consolidated statements of financial position as at December 31,2019 and 2018, and the consolidated statements of operations and comprehensive income (loss), consolidatedstatements of changes in equity and consolidated statements of cash flows for the years ended December 31, 2019,2018 and 2017, and the related notes, including a summary of significant accounting policies and other explanatoryinformation (col ectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of theCompany as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years endedDecember 31, 2019, 2018 and 2017 in accordance with International Financial Reporting Standards as issued by theInternational Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these consolidated financial statements based on our audits. We are a public accounting firmregistered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent withrespect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations ofthe 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 andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged toperform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain anunderstanding of internal control over financial reporting but not for the purpose of expressing an opinion on theeffectiveness 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 financialstatements, whether due to fraud or error, and performing procedures that respond to those risks. Such proceduresinclude examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financialstatements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide areasonable basis for our audit opinion.
/s/ Manning Elliott LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, British Columbia, Canada
February 26, 2020
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,
 Note20192018
ASSETSCurrent assets
Cash$9,625 $3,252
Amounts receivable1,4774,091
Taxes recoverable65,4835,343
Prepaid expenses and other assets5941,030
Inventory75,5929,231
Total current assets22,77122,947
Exploration and evaluation assets99,82746,781
Plant, equipment and mining properties1135,65838,743
Long-term investments84,31110
Other assets4107
Total assets$72,571 $108,588
LIABILITIESCurrent liabilities
Accounts payable and accrued liabilities$4,907  $5,885
Amounts due to related parties12(b)156157
Taxes payable46167
Current portion of term facility133,3841,017
Current portion of equipment loans14199517
Current portion of finance lease obligations15692950
Deferred revenue17-573
Current portion of reclamation provision18-296
Other liabilities178279
Total current liabilities9,5629,841
Term facility132,5135,884
Equipment loans1490411
Finance lease obligations15442869
Warrant liability161,5792,009
Reclamation provision181,52410,503
Deferred income tax liabilities272,9383,903
Total liabilities18,64833,420
EQUITYShare capital
1996,39688,045
Equity reserves9,3919,849
Treasury shares (14,180 shares, at cost)(97)(97)
Accumulated other comprehensive loss(4,563)(6,124)
Accumulated deficit(47,204)(16,505)
Total equity53,92375,168
Total liabilities and equity$72,571  $108,588
Commitments – Note 22Subsequent Events – Note 28
Approved by the Board of Directors on February 26, 2020:
Gary Robertson                      DirectorDavid 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
2019
2017
Revenue from mining operations20$31,746 $33,359
Cost of sales2032,01622,106
Mine operating income (loss)(270)11,253
Operating expenses:
General and administrative expenses213,1933,327
Share-based payments199372,018
Income (loss) before other items(4,400)5,908
Other items:
Interest and other income545246
Unrealized gain (loss) on long-term investments1,2825
Fair value adjustment on warrant liability16520563
Unrealized foreign exchange gain (loss)(663)(933)
Finance cost(84)(157)
Accretion of reclamation provision18(104)(93)
Interest expense(64)(103)
Income (loss) from continuing operationsbefore income taxes
(2,968)5,436
Income taxes:
Current income tax expense27(327)(2,911)
Deferred income tax recovery27960140
Income tax recovery (expense)633(2,771)
Net income (loss) from continuing operations(2,335)2,665
Loss from discontinued operations and ondisposal
5(29,126)(143)
Net income (loss)(31,461)2,522
Other comprehensive income (loss):
Currency translation differences1,6032,383
Reclassification of foreign exchange on translationinto net loss on sale of discontinued operations
(42)-
Total comprehensive income (loss)$(29,900) $4,905
Earnings (loss) per share from continuingoperations
19(e)
Basic$(0.03) $0.05
Diluted$(0.03) $0.05
Earnings (loss) per share19(e)
Basic$(0.45) $0.05
Diluted$(0.45) $0.05
Weighted average number of commonshares outstanding
19(e)
Basic69,980,178 52,523,454
Diluted69,980,178 53,320,009
The accompanying notes are an integral part of the consolidated financial statements
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AVINO SILVER & GOLD MINES LTD.Consolidated Statements of Changes in Equity(Expressed in thousands of US dollars)
EQUITY STATEMENT
Number ofShareAccumulated Other
CommonCapitalEquityTreasuryComprehensiveAccumulated
SharesAmountReservesSharesIncome (Loss)DeficitTotal Equity
Balance, January 1, 201752,431,001 $  80,785 $9,100 $(97)$(6,456) $ (21,538)  $61,794
Common shares issued for cash:
Brokered public offerings10,00017----17
Less share issuance cost-(1)----(1)
Exercise of stock options20,00025----25
Carrying value of stock options exercised-20(20)----
Stock options cancelled or expired--(139)--139-
Carrying value of RSUs exercised257,152623(623)----
Less share issuance cost-(1)----(1)
Share-based payments--2,263---2,263
Net income for the year-----2,5222,522
Currency translation differences----2,383-2,383
Balance, December 31, 201752,718,153  $  81,468  $  10,581 $(97)$(4,073) $ (18,877)  $69,002
Common shares issued for cash:
Brokered public offerings10,105,6586,547----6,547
Less: Issuance costs-(895)----(895)
At the market issuances151,800136----136
Less: Issuance costs-(4)----(4)
Exercise of stock options87,500112----112
Carrying value of stock options exercised-84(84)----
Less: share issuance costs-(5)---- (5)
Carrying value of RSUs exercised274,658602(602)----
Options cancelled or expired--(746)--746-
Share-based payments--700---700
Net income for the year-----1,6261,626
Currency translation differences----(2,051)-(2,051)
Balance, December 31, 201863,337,769  $  88,045  $ $(97)$(6,124)  $  (16,505)  $75,168
Common shares issued for cash:
Brokered public offerings197,735,3604,877----4,877
Less: Issuance costs-(472)----(472)
At the market issuances4,954,0002,924----2,924
Less: Issuance costs-(162)----(162)
Options cancelled or expired--(762)--762-
Carrying value of RSUs exercised565,259835(835)----
Fair value of warrants issued--116---116
Shares to be issued-349----349
Share-based payments19--1,023---1,023
Net loss for the year-----   (31,461)(31,461)
Currency translation differences----1,561-1,561
Balance, December 31, 201976,592,388  $  96,396  $ $(97)$(4,563)   $  (47,204)  $53,923
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)
201920182017
Cash generated by (used in):
Operating ActivitiesNet income (loss)
(31,461) $1,626   $2,522
Adjustments for non-cash items:
Deferred income tax expense (recovery)(960)(645)(140)
Depreciation and depletion3,7233,2562,703
Inventory net realizable value adjustment387--
Accretion of reclamation provision10412293
Unrealized loss (gain) on investments(1,282)5(5)
Foreign exchange (gain) loss1,461270139
Fair value adjustment on warrant liability(520)(1,304)(563)
Fair value adjustment on modification of term facility-234-
Unwinding of fair value adjustment of term facility(170)--
Loss from discontinued operations and on disposal29,12631143
Share-based payments9376302,018
1,3454,2256,910
Net change in non-cash working capital items4,1624,999(9,077)
5,5079,224(2,167)
Financing ActivitiesShares and units issued for cash, net of issuance costs
7,2838,46640
Finance lease payments(956)(1,166)(1,581)
Equipment loan payments(524)(1,445)(847)
Term facility payments(833)(2,000)(667)
4,9703,855(3,055)
Investing ActivitiesExploration and evaluation expenditures
(5,723)(5,361)(5,527)
Additions to plant, equipment and mining properties(3,276)(9,416)(6,608)
Proceeds from sale of long-term investments23--
Cash proceeds from sale of discontinued operations6,599--
Cash disposed of in discontinued operations(1,459)--
Redemption of short-term investments-1,0009,000
Redemption of reclamation bonds102548-
(3,734)(13,229)(3,135)
Change in cash6,743(150)(8,357)
Effect of exchange rate changes on cash(370)(18)(3)
Cash, Beginning3,2523,42011,780
Cash, Ending9,625 $3,252   $3,420
Supplementary Cash Flow Information (Note 23)
The accompanying notes are an integral part of the consolidated financial statements
- 4 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(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 theProvince of British Columbia, Canada. The Company is engaged in the production and sale of silver, gold,and copper and the acquisition, exploration, and advancement of mineral properties.
The Company’s head office and principal place of business is Suite 900, 570 Granville Street, Vancouver,BC, Canada. The Company is a reporting issuer in Canada and the United States, and trades on the TorontoStock Exchange (“TSX”), the NYSE American, and the Frankfurt and Berlin Stock Exchanges.
The Company owns interests in mineral properties located in Durango, Mexico, as well as in BritishColumbia and the Yukon, Canada. On October 1, 2012, the Company commenced production of silver andgold at levels intended by management at its San Gonzalo Mine, and on July 1, 2015, the Companycommenced production of copper, silver, and gold at levels intended by management at its Avino Mine; bothmines are located on the historic Avino property in the state of Durango, Mexico.
2.  BASIS OF PRESENTATION
Statement of Compliance
These consolidated financial statements have been prepared in accordance with International FinancialReporting 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 historicalcost basis except for financial instruments that have been measured at fair value.  In addition, theseconsolidated financial statements have been prepared using the accrual basis of accounting on a goingconcern basis. The accounting policies set out below have been applied consistently to all periods presentedin 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’sMexican subsidiaries is the US dollar, which is determined to be the currency of the primary economicenvironment in which the subsidiaries operate.
Foreign currency transactions
Transactions in currencies other than the functional currency are recorded at the rates of exchangeprevailing on the dates of the transactions. At each financial position reporting date, monetary assets andliabilities that are denominated in foreign currencies are translated at the rates prevailing at the date ofthe statement of financial position.  Non-monetary items that are measured in terms of historical cost in aforeign currency are not re-translated.
- 5 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
Foreign operations
Subsidiaries that have functional currencies other than the US dollar translate their statement ofoperations items at the average rate during the year. Assets and liabilities are translated at exchangerates prevailing at the end of each reporting period. Exchange rate variations resulting from theretranslation at the closing rate of the net investment in these subsidiaries, together with differencesbetween their statement of operations items translated at actual and average rates, are recognized inaccumulated other comprehensive income (loss). On disposition or partial disposition of a foreignoperation, the cumulative amount of related exchange difference is recognized in the statement ofoperations.
Significant Accounting Judgments and Estimates
The Company’s management makes judgments in its process of applying the Company’s accounting policiesto the preparation of its consolidated financial statements. In addition, the preparation of financial datarequires that the Company’s management make assumptions and estimates of the impacts on the carryingamounts of the Company’s assets and liabilities at the end of the reporting period from uncertain futureevents and on the reported amounts of revenues and expenses during the reporting period. Actual resultsmay differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed onan ongoing basis based on historical experience and other factors that are considered to be relevant underthe circumstances. Revisions to estimates and the resulting impacts on the carrying amounts of theCompany’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:
i. Economic recoverability and probability of future economic benefits from exploration and
evaluation costs
Management has determined that mine and camp, exploratory drilling, and other exploration andevaluation-related costs that were capitalized have future economic benefits and are economicallyrecoverable. Management uses several criteria in its assessments of economic recoverability andprobability of future economic benefits including geologic and metallurgic information, scoping studies,accessible facilities, existing permits, and mine plans.
ii. Commencement of production at levels intended by management
Prior to reaching production levels intended by management, costs incurred are capitalized as part ofthe costs of related exploration and evaluation assets, and proceeds from concentrate sales are offsetagainst costs capitalized. Depletion of capitalized costs for mining properties and depreciation of plantand equipment begin when operating levels intended by management have been reached.Management considers several factors in determining when a mining property has reached theintended production levels, including production capacity, recoveries, and number of uninterruptedproduction days. The results of operations of the Company during the periods presented in theseconsolidated financial statements have been impacted by management’s determination that the SanGonzalo Mine and Avino Mine had achieved production levels intended by management as of October1, 2012 and July 1, 2015, respectively, and that none of the Company’s exploration and evaluationassets had achieved production levels intended by management as at December 31, 2019.
- 6 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
The basis for achievement of production levels intended by management as indicated by technicalfeasibility 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, combinedwith pre-production operating statistics and other factors. In cases where the Company does not havea 43-101-compliant reserve report, on which to base a production decision, the technical feasibilityand commercial viability of extracting a mineral resource are considered in light of additional factorsincluding 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 andare 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 mill 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 theabove criteria and other factors, the Company performs an impairment assessment and records animpairment loss, if any, before reclassifying exploration and evaluation costs to plant, equipment, andmining properties.
iii. Functional currency
The functional currency for the Company and its subsidiaries is the currency of the primary economicenvironment, in which the entity operates. The Company has determined the functional currency of theCompany to be the Canadian dollar. The Company has determined the functional currency of itsMexican subsidiaries to be the US dollar. Determination of functional currency may involve certainjudgments to determine the primary economic environment. The Company reconsiders the functionalcurrency of its entities, if there is a change in events and conditions, which determine the primaryeconomic environment.
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 materialadjustment to the carrying amounts of assets and liabilities in the event that actual results differ fromassumptions 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 netrealizable value. The assumptions used in the valuation of concentrate and stockpile mineralizedmaterial include estimates of copper, silver, and gold contained in the stockpiles and finished goodsassumptions for the amount of copper, silver, and gold that is expected to be recovered from theconcentrate. If these estimates or assumptions prove to be inaccurate, the Company could berequired to write down the recorded value of its concentrate and stockpile mineralized materialinventory, which would result in an increase in the Company’s expenses and a reduction in its workingcapital.
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AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
ii. Estimated reclamation provisions
The Company’s provision for reclamation represents management’s best estimate of the present valueof the future cash outflows required to settle estimated reclamation and closure costs at the Avino andSan Gonzalo properties. The provision reflects estimates of future costs, inflation, foreign exchangerates and assumptions of risks associated with the future cash outflows, and the applicable risk-freeinterest rates for discounting the future cash outflows. Changes in the above factors could result in achange to the provision recognized by the Company.
Changes to reclamation and closure cost obligations are recorded with a corresponding change to thecarrying amounts of the related exploration and evaluation assets or mining properties. Adjustments tothe carrying amounts of related mining properties result in a change to future depletion expense.
iii. Valuation of share-based payments and warrants
The Company uses the Black-Scholes Option Pricing Model for valuation of share-based paymentsand warrants. Option pricing models require the input of subjective assumptions including expectedprice volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affectfair value estimates and the Company’s net income or net loss and its equity reserves. Warrantliabilities 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 thereare any indications that the Company’s plant, equipment, and mining properties, and exploration andevaluation assets are impaired. External sources of information management considers includechanges in the market, economic and legal environments, in which the Company operates, that arenot within its control and that affect the recoverable amount of its plant, equipment, and miningproperties. Internal sources of information that management considers include the manner in whichmining properties and plant and equipment are being used, or are expected to be used, andindications 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 derivedfrom the Company’s mining properties, and the appropriate discount rate. Reductions in metal priceforecasts, increases in estimated future costs of production, increases in estimated future nonexpansionary capital expenditures, reductions in the amount of recoverable resources and explorationpotential, and adverse current economic conditions are examples of factors that could result in a writedown of the carrying amounts of the Company’s plant, equipment and mining properties, andexploration and evaluation assets.
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 revisedlife or rate would be reflected prospectively through profit and loss.
- 8 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
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 therelevant authorities. This occurs subsequent to the issuance of the consolidated financial statementsand 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 will be affected by the amount thatestimates differ from the final tax return. Estimates of future taxable income are based on forecastedcash flows from operations and the application of existing tax laws in each jurisdiction. Forecastedcash flows from operations are based on projections internally developed and reviewed bymanagement. 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 positionstaken will be sustained upon examination by applicable tax authorities is assessed based on individualfacts and circumstances of the relevant tax position evaluated in light of all available evidence. Whereapplicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it isreasonably possible that changes in these estimates can occur that could materially affect theamounts of deferred tax assets and liabilities.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its Mexican subsidiaries asfollows:
Nature ofOperations
SubsidiaryOwnership InterestJurisdiction
Oniva Silver and Gold Mines S.A.de C.V.100%MexicoMexicanadministration
Nueva Vizcaya Mining, S.A. deC.V.100%MexicoMexicanadministration
Promotora Avino, S.A. de C.V.(“Promotora”)79.09%MexicoHoldingcompany
Compañía Minera Mexicana deAvino, S.A. de C.V.(“Avino Mexico”)98.45% direct1.22% indirect (Promotora)99.67% effectiveMexicoMining andexploration
Up until the sale of Bralorne Gold Mines Ltd. (“Bralorne”) on December 13, 2019 (see Note 5), theconsolidated financial statements included the 100% ownership interest of Bralorne, a mining andexploration company located in Canada.
Intercompany balances and transactions, including unrealized income and expenses arising fromintercompany 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-termdeposits with an original maturity of three months or less, which are readily convertible into a known amountof cash.
- 9 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
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 areexpensed. The Company’s capitalized exploration and evaluation costs are classified as intangible assets.Such costs include, but are not limited to, certain camp costs, geophysical studies, exploratory drilling,geological and sampling expenditures, and depreciation of plant and equipment during the exploration stage.Costs not directly attributable to exploration and evaluation activities, including general administrativeoverhead costs, are expensed in the period in which they occur. Proceeds from the sale of mineral productsor 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 arepresent. In the case of undeveloped properties, there may be only inferred resources to allow managementto form a basis for the impairment review. The review is based on the Company’s intentions for thedevelopment of such properties. If a mineral property does not prove to be viable, all unrecoverable costsassociated with the property are charged to the consolidated statement of comprehensive income (loss) atthe time the determination is made.
When the technical feasibility and commercial viability of extracting mineral resources have beendemonstrated, exploration and evaluation costs are assessed for impairment, reclassified to miningproperties and become subject to depletion. Management considers the technical feasibility and commercialviability of extracting a mineral resource to be demonstrable upon the completion of a positive feasibilitystudy and the establishment of mineral reserves. For certain mineral projects, management may determinethe completion of a feasibility study to be cost prohibitive, unnecessary or to present undue risk to thestructural integrity of the ore body. Under such circumstances, management considers technical feasibility tobe demonstrable when the Company has obtained the necessary environmental and mining permits, landsurface and mineral access rights, and the mineral project can be physically constructed and operated in atechnically sound manner to produce a saleable mineral product. In assessing whether commercial viabilityis demonstrable, management considers if its internal economic assessment indicates that the mineralproject can be mined to generate a reasonable return on investment for the risk undertaken, and markets orlong-term contracts for the product exist.
(ii) Development expenditures
Mine Development Costs are capitalized until the mineral property is capable of operating in the mannerintended by management. The Company evaluates the following factors in determining whether a miningproperty is capable of operating in the manner intended by management:
·  The completion and assessment of a reasonable commissioning period of the mill and mining facilities;
·  Consistent operating results are achieved during the test period;
·  Existence of clear indicators that operating levels intended by management will be sustainable for the
foreseeable future;
·  Plant / mill has reached a pre-determined percentage of design capacity;
·  Adequate funding is available and can be allocated to the operating activities; 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.
- 10 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
Plant, equipment and mining properties
Upon demonstrating the technical feasibility and commercial viability of extracting mineral resources, allexpenditures incurred to that date for the mine are reclassified to mining properties. Expenditures capitalizedto mining properties include all costs related to obtaining or expanding access to resources includingextensions of the haulage ramp and installation of underground infrastructure, and the estimated reclamationprovision. Expenditures incurred with respect to a mining property are capitalized when it is probable thatadditional future economic benefits will flow to the Company. Otherwise, such expenditures are classified asa cost of sales.
Plant and equipment are recorded at historical cost less accumulated depreciation and any accumulatedimpairment losses. Historical costs include expenditures that are directly attributable to bringing the asset toa location and condition necessary to operate in a manner intended by management. Such costs areaccumulated as construction in progress until the asset is available for use, at which point the asset isclassified as plant, equipment and mining properties and depreciation commences.
After the date that management’s intended production levels have been achieved, mining properties aredepleted using the straight-line method over the estimated remaining life of the mine. The Companyestimates the remaining life of its producing mineral properties on an annual basis using a combination ofquantitative and qualitative factors including historical results, mineral resource estimates, andmanagement’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, 2019 and 2018, the Company estimated a remaining mine life for San Gonzalo of Nil,and 0.8, respectively.
As at December 31, 2019 and 2018, the Company estimated a remaining mine life for the Avino Mine of 8.5and 9.5 years, respectively.
Accumulated mill, machinery, plant facilities, and certain equipment are depreciated using the straight-linemethod over their estimated useful lives, not to exceed the life of the mine for any assets that areinseparable from the mine. When parts of an item of plant and equipment have different useful lives, they areaccounted 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 officeequipment, 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 depreciatedusing the declining balance method. The change in depreciation has been applied prospectively as a changein estimate. The Company believes that the new method better reflects the pattern of consumption of futureeconomic benefits to be derived from the assets being depreciated.
Plant and equipment are depreciated using the following annual rates and methods:
Office equipment, furniture, and fixtures 3 years straight line balance
Computer equipment5 years straight line balance
Mine machinery and transportation equipment5 years straight line balance
Mill machinery and processing equipment5 - 20 years straight line
Buildings5 - 20 years straight line
Impairment
At each financial position reporting date, the carrying amounts of the Company’s assets are reviewed todetermine whether there is any indication that those assets are impaired. If any such indication exists, therecoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.
- 11 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
Where the asset does not generate cash flows that are independent from other assets, the Companyestimates 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 isdetermined as the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. In assessing value in use, the estimatedfuture cash flows are discounted to their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to the asset. If the recoverable amountof an asset or cash generating unit is estimated to be less than its carrying amount, the carrying amount ofthe asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for theperiod.
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 doesnot exceed the carrying amount that would have been determined had no impairment loss been recognizedfor the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognizedimmediately in profit or loss.
Leases
Leases in which the Company assumes substantially all risks and rewards of ownership are classified asfinance leases. Assets held under finance leases are recognized at the lower of the fair value and presentvalue of the minimum lease payments at inception of the lease, less accumulated depreciation andimpairment losses. The corresponding liability is recognized as a finance lease obligation. Lease paymentsare apportioned between finance charges and reduction of the lease obligation to achieve a constant rate ofinterest 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 anothersystematic basis is more representative of the time pattern in which economic benefits from the leased assetare consumed, in which case that systematic basis is used. Operating lease payments are recorded withinprofit 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. Processmaterial represents mineralized material that, at the time of extraction, the Company expects to process intoa saleable form and sell at a profit, while waste is considered uneconomic to process and its extraction costis included in direct mining costs. Raw materials are comprised of process material stockpiles. Processmaterial is accumulated in stockpiles that are subsequently processed into bulk copper, silver, and goldconcentrate in a saleable form. The Company has bulk copper, silver, and gold concentrate inventory insaleable form that has not yet been sold. Mine operating supplies represent commodity consumables andother raw materials used in the production process, as well as spare parts and other maintenance suppliesthat are not classified as capital items.
Inventories are valued at the lower of cost and net realizable value (“NRV”). Cost is determined on aweighted average basis and includes all costs incurred, based on normal production capacity, in bringingeach product to its present location and condition. Cost of inventories comprises direct labor, materials andcontractor expenses, depletion and depreciation on mining properties, plant and equipment, and anallocation of mine site costs. As mineralized material is removed for processing, costs are removed based onthe average cost per tonne in the stockpile. Stockpiled process material tonnages are verified by periodicsurveys.
NRV of mineralized material is determined with reference to relevant market prices less applicable variableselling expenses and costs to bring the inventory into its saleable form. NRV of materials and supplies isgenerally calculated by reference to salvage or scrap values when it is determined that the supplies are
- 12 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
obsolete. NRV provisions are recorded within cost of sales in the consolidated statement of operations, andare reversed to reflect subsequent recoveries where the inventory is still on hand.
Revenue from Contracts with Customers
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Companyand the revenue and costs to sell can be reliably measured. Revenue is measured at the fair value of theconsideration 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 theprimary performance obligation relating to its sales contracts is the delivery of concentrates. Shipping andinsurance services arranged by the Company for concentrate sales that occur after the transfer of control arealso considered performance obligations.
Transfer of Control
Based on the criteria outlined in IFRS 15, the Company applied significant judgment in determining when thetransfer of control occurs. Management based its assessment on a number of indicators of control, whichinclude but are not limited to, whether the Company has the present right of payment and whether thephysical possession of the goods, significant risks and rewards, and legal title have been transferred to thecustomer.
Provisional Pricing
Based on the criteria outlined in IFRS 15, the Company applied significant judgment in determining variableconsideration. The Company identified two provisional pricing components in concentrate sales, representsvariable consideration in the form of a) adjustments between original and final assay results relating to thequantity and quality of concentrate shipments, as well as b) pricing adjustments between provisional andfinal 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 historicaladjustments relating to assay differences, the Company concluded the variability in consideration caused bythe assaying results is negligible. The Company does not expect a significant amount of reversal related toassaying differences. The Company records revenues based on provisional invoices based on quotedmarket prices of the London Bullion Market Association and the London Metal Exchange during thequotation period outlined in the concentrate sales agreement. The Company applied judgment to determinethe amount of variable consideration to be recognized during the period for which the likelihood of significantreversal is low.
Financial Instruments
Measurement – initial recognition
All financial assets and financial liabilities are initially recorded on the Company’s consolidated statement offinancial position when the Company becomes a party to the contractual provisions of the instrument. Allfinancial asset and liabilities are initially recorded at fair value, net of attributable transaction costs, except forthose classified as fair value through profit or loss (“FVTPL”). Subsequent measurement of financial assetsand financial liabilities depends on the classifications of such assets and liabilities.
- 13 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
Classification – financial assets
Amortized cost:
Financial assets that are held within a business model whose objective is to hold financial assets in order tocollect contractual cash flows, and that the contractual terms of the financial assets give rise on specifieddate to cash flows that are solely payments of principal and interest on the principal amount outstanding, aremeasured 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 initialrecognition minus the principal repayments, plus the cumulative amortization using the effective interestmethod of any difference between that initial amount and the maturity amount, adjusted for any lossallowance. Interest income is recognized using the effect interest method, and is recognized in Interest andother 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 ofconcentrate, 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 toboth collect contractual cash flows and selling financial assets, and that the contractual terms of the financialassets give rise on specified date to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.
Upon initial recognition of equity securities, the Company may make an irrevocable election (on aninstrument-by-instrument basis) to designate its equity securities that would otherwise be measured atFVTPL to present subsequent changes in fair value in other comprehensive income. Designation at FVTOCIis not permitted if the equity investment is held for trading or if it is contingent consideration recognized by anacquirer in a business combination. Investments in equity instruments at FVTOCI are initially measured atfair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arisingfrom changes in fair value recognized in other OCI. The cumulative gain or loss is not reclassified to profit orloss 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 amountsreceivable from concentrate sales.
Classification – financial liabilities
Financial liabilities that are not contingent consideration of an acquirer in a business combination, held fortrading or designated as at FVTPL, are measured at amortized cost using the effective interest method.
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 liabilitiesdesignated upon initial recognition as FVTPL. Fair value changes on financial liabilities classified as FVTPLare recognized in the consolidated statements of operations. The Company has classified share purchasewarrants with an exercise price in US dollars (see Note 16) as financial liabilities at FVTPL. As thesewarrants are exercised, the fair value of the recorded warrant liability on date of exercise is included in sharecapital along with the proceeds from the exercise. If these warrants expire, the related decrease in warrantliability is recognized in the consolidated statements of operations.
- 14 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
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 whennecessary. The amount of expected credit losses is updated at each reporting period to reflect changes incredit 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, whichincludes 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 totalequity. When treasury shares are sold or reissued subsequently, the amount received is recognized asan increase in equity, and the resulting surplus or deficit on the transaction is transferred to accumulateddeficit.
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 theCompany’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 theCompany’s common shares on that date, and each tranche is recognized using the graded vesting methodover the period during which the RSUs vest. At each financial position reporting date, the amount recognizedas an expense is adjusted to reflect the actual number of RSUs that are expected to vest.
All options and RSUs are recognized in the consolidated statements of operations and comprehensiveincome (loss) as an expense or in the consolidated statements of financial position as exploration andevaluation assets over the vesting period with a corresponding increase in equity reserves in theconsolidated statements of financial position.
Reclamation and other provisions
Provisions are recognized where a legal or constructive obligation has been incurred as a result of pastevents, it is probable that an outflow of resources embodying economic benefit will be required to settle theobligation, and a reliable estimate of the amount of the obligation can be made. If material, provisions aremeasured at the present value of the expenditures expected to be required to settle the obligation. Theincrease 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 torestore properties in the period in which the obligation is incurred. The nature of these restoration activitiesincludes dismantling and removing structures, rehabilitating mines and restoration, reclamation, and re-vegetation of affected areas.
- 15 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
The fair value of the liability for a rehabilitation provision is recorded when it is incurred. When the liability isinitially recognized, the present value of the estimated cost is capitalized by increasing the carrying amountof the related mining property or exploration and evaluation asset. Over time, the discounted liability isincreased for the change in present value based on the discount rates that reflect current marketassessments and the risks specific to the liability, which is accreted over time through periodic charges toincome or loss. A revision in estimates or new disturbance will result in an adjustment to the provision withan offsetting adjustment to the mineral property or the exploration and evaluation asset. Additionaldisturbances, changes in costs, or changes in assumptions are recognized as adjustments to thecorresponding 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 bydividing the earnings attributable to common shareholders of the Company by the weighted average numberof common shares outstanding during the year. Diluted earnings per share is determined by adjusting theearnings attributable to common shareholders and the weighted average number of common sharesoutstanding for the effects of all potentially dilutive common shares.
Income taxes
Income taxes in the years presented are comprised of current and deferred tax. Income tax is recognized inprofit or loss except to the extent that it relates to items recognized directly in equity, in which case it isrecognized as equity.
Deferred tax is recognized using the statement of financial position asset and liability method, which providesfor temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for taxation purposes. The amount of deferred tax recognized is based onthe expected manner of realization or settlement of the carrying amount of assets and liabilities, using taxrates enacted or substantively enacted at the consolidated statement of financial position date. A deferredtax asset is recognized only to the extent that it is probable that future taxable profits will be available againstwhich the asset can be utilized.
Deferred tax assets and liabilities are not recognized if the temporary differences arise from the initialrecognition of goodwill or an asset or liability in a transaction other than a business combination that affectsneither accounting profit nor taxable profit.
4.  RECENT ACCOUNTING PRONOUNCEMENTS
Application of new and revised accounting standards:
IFRS 16 - Leases (“IFRS 16”)
In January 2016, the IASB issued IFRS 16 – Leases (“IFRS 16”) which replaces IAS 17 – Leases and itsassociated interpretative guidance. IFRS 16 applies a control model to the identification of leases,distinguishing between a lease and a service contract based on whether the customer controls the asset. Forthose assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to theaccounting by lessees, introducing a single, on-balance sheet accounting model that is similar to the currentfinance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessoraccounting remains similar to current accounting practice. IFRS 16 is effective for annual periods beginningon or after January 1, 2019, with early adoption permitted, provided the Company has adopted IFRS 15. Thisstandard sets out a new model for lease accounting. A lessee can choose to apply IFRS 16 using either afull retrospective approach or a modified retrospective approach. The Company has applied IFRS 16 at thedate it became effective using a modified retrospective approach. By applying this method, the comparativeinformation for the 2018 fiscal year has not been restated.
- 16 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
At the inception of a contract, the Company assesses whether a contract is or contains a lease. If so, theCompany recognizes a right-of-use asset and a lease liability at the lease commencement date. The rightof use asset is initially measured at cost, which consists of:
·  The amount of the initial measurement of the lease liability
·  Any lease payments made at or before the commencement date
·  Any indirect costs incurred
·  An estimate of costs to dismantle or remove the underlying asset or to restore the site on which the
asset is located
·  Any incentives received from the lessor
The Company has elected not to recognize right of use assets and lease liabilities for short-term lease thathave a lease term of 12 months or less and leases of low value assets. The lease payments associated withthese leases are expensed on a straight-line basis over the lease term.
The majority of the Company’s leases were already capitalized as finance lease assets on its consolidatedstatement of financial position under the Company’s previous accounting policy at the time of adoption ofIFRS 16. The Company has elected to apply the practical expedients in IFRS 16 and reviewed all existingleases and concluded that all leases that were previously expensed over the lease term where considered tobe either short-term leases or leases of low value assets, and therefore there is no impact to theconsolidated financial statements upon adoption of IFRS 16.
IFRIC 23 - Uncertainty over Income Tax Treatments
On June 7, 2017, the IASB issued IFRIC 23 Uncertainty over Income Tax Treatments. The interpretationprovides guidance on the accounting for current and deferred income tax liabilities and assets when there isuncertainty over income tax treatments. IFRIC 23 was applicable for annual periods beginning on or afterJanuary 1, 2019.
IFRIC 23 requires an entity to determine whether uncertain tax positions are assessed separately or as agroup; and assess whether it is probable that a tax authority will accept an uncertain tax treatment used, orproposed to be used, by an entity in its income tax filings. If the treatment is likely to be accepted, the entityshould determine its accounting tax position consistently with the tax treatment used or planned to be usedin its income tax filings. If not, the entity should reflect the effect of uncertainty in determining its accountingtax position. The Interpretation is effective for annual periods beginning on or after January 1, 2019.
The Company adopted IFRIC 23 in its consolidated financial statements for the annual period beginning onJanuary 1, 2019, with no impact on the financial statements.
Changes in accounting standards not yet effective:
The Company has not early adopted any amendment, standard or interpretation that has been issued by theIASB but is not yet effective.
IFRS 3 – Definition of a Business
In October 2018, the IASB issued amendments to IFRS 3 – Definition of a Business which:
·  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 tocreate 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 illustrative examples to help entities assess whether a substantive process has
been acquired;
- 17 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
·  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 thebeginning of the first annual reporting period beginning on or after January 1, 2020, and to asset acquisitionsthat occurred on or after the beginning of that period. Earlier application is permitted. The Company does notexpect any material impact upon adoption.
5.  DISPOSITION OF DISCONTINUED OPERATIONS – BRALORNE GOLD MINES LTD.
On December 13, 2019, the Company completed the sale of its 100% wholly-owned subsidiary BralorneGold Mines Ltd. (“Bralorne”) to Talisker Resources Ltd. (“Talisker”). The sale includes the Bralorne GoldMine and is part of the Company’s plan to focus on its core mining operations in Mexico.
The consideration includes:
·  C$8.7 million (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’scommon shares is great than C$0.35 per share for 20 or more consecutive trading days at any timefollowing April 14, 2020;
The sale includes the Bralorne claims, as well as nine mineral claims covering approximately 2,114 hectaresin the Lillooet Mining Division of British Columbia, known as the BRX Property.
The Company also received future consideration of a $2.5 million cash payment, contingent upon thecommencement of commercial production at the Bralorne Mine, for which a fair value has been determinedto be Nil at this time.
The Company recognized a loss on disposition, net of tax, calculated as follows:
Cash proceeds    $6,599
Talisker shares2,243
Talisker warrants716
Total proceeds    $9,558
Net assets sold and derecognized:Cash
1,495
Other current assets242
Exploration and evaluation assets45,613
Plant and equipment1,745
Other long-term assets19
Current portion of finance lease obligations and equipment loans(175)
Non-current portion of finance lease obligations and equipment loans(111)
Site restoration obligation(10,828)
Foreign currency translation adjustments(42)
37,958
Loss on disposition before selling costs(28,400)
Selling costs(490)
Loss on disposition, net(28,890)
- 18 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
As a result of the sale, the comparative net income (loss) for the current period, as well as previous twoyears, have been reclassified from continuing operations to discontinued operations:
201920182017
Revenue from mining operations$- $-    $-
Cost of sales---
Mine operating income (loss)---
Operating expenses (income)16(45)(14)
Accretion of reclamation provision217256154
Gain on sale of assets2(175)-
Other items1(5)3
Loss on disposition28,890--
Net loss before income taxes(29,126)(31)(143)
Income taxes---
Net loss from discontinued operations and ondisposal
$(29,126)$(31)  $             (143)
The results of discontinued operations included in the consolidated statements of cash flows for the yearsended December 31, 2019, 2018 and 2017, are as follows:
Cash generated by (used in):201920182017
Cash flow used in operating activities$(19)$(7)  $                 12
Cash flow used in financing activities(258)(590)(871)
Cash flow used in investing activities(5,583)(4,178)(5,270)
Net cash decrease from discontinuedoperations
$(5,860)$(4,775)  $          (6,129)
6.  TAXES RECOVERABLE
The Company’s taxes recoverable consist of the Mexican I.V.A. (“VAT”) and income taxes recoverable andCanadian sales taxes (“GST”) recoverable.
December 31,December 31,
20192018
VAT recoverable $2,652  $3,144
GST recoverable4282
Income taxes recoverable2,7892,117
 $5,483  $5,343
7. INVENTORY
December 31,December 31,
20192018
Process material stockpiles$1,079   $4,486
Concentrate inventory3,0553,095
Materials and supplies1,4581,650
$5,592  $9,231
The amount of inventory recognized as an expense for the year ended December 31, 2019 totalled $32,016(2018 – $27,850, 2017 - $22,106), and includes production costs and depreciation and depletion directlyattributable to the inventory production process.
- 19 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
8.  LONG-TERM INVESTMENTS
The Company classifies its long-term investments as designated at fair value through profit and loss underIFRS 9. Long-term investments are summarized as follows:
Fair ValueMovements inFair valueFair Value
December 31,  Net AdditionsforeignadjustmentsDecember 31,
2018(Disposals)exchangefor the year2019
Talisker Resources CommonShares
$- $2,243 $63$891$3,197
Talisker Resources Warrants-716213771,114
Other long-term investments10(24)-14-
$10 $2,935 $84$1,282$4,311
9.  EXPLORATION AND EVALUATION ASSETS
The Company has accumulated the following acquisition, exploration and evaluation costs which are notsubject to depletion:
Durango,British Columbia
Mexico& Yukon, CanadaTotal
Balance, January 1, 2018$9,034$34,304 $43,338
Costs incurred during 2018:
Mine and camp costs-3,1433,143
Drilling and exploration3461,1421,488
Depreciation of plant and equipment-540540
Interest and financing costs-414414
Geological and related services-205205
Water treatment and tailing storage facility costs--5353
Assessments and taxes8629115
Assays-1313
Effect of movements in exchange rates226(2,754)(2,528)
Balance, December 31, 2018$9,692$37,089 $46,781
Costs incurred during 2019:
Mine and camp costs-2,5372,537
Drilling and exploration502,3332,383
Depreciation of plant and equipment-317317
Interest and other costs-325325
Provision for reclamation-1,3381,338
Assessments and taxes9031121
Geological and related services-116116
Assays-130130
Water treatment and tailing storage facility costs-112112
Effect of movements in exchange rates(6)1,2861,280
Disposition of Bralorne Mine-(45,613)(45,613)
Balance, December 31, 2019$9,826$1 $9,827
- 20 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
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 thestate of Durango, Mexico. The Company’s mineral claims in Mexico are divided into the following fourgroups:
(i)  Avino mine area property
The Avino mine area property is situated around the towns of Panuco de Coronado and San Jose deAvino and surrounding the historic Avino mine site. There are four exploration concessions covering154.4 hectares, 24 exploitation concessions covering 1,284.7 hectares, and one leased exploitationconcession covering 98.83 hectares. Within the Avino mine site area is the Company’s San GonzaloMine, which achieved production at levels intended by management as of October 1, 2012, and onthis date accumulated exploration and evaluation costs were transferred to mining properties.
(ii) Gomez Palacio property
The Gomez Palacio property is located near the town of Gomez Palacio, and consists of nineexploration concessions covering 2,549 hectares.
(iii) Santiago Papasquiaro property
The Santiago Papasquiaro property is located near the village of Santiago Papasquiaro, and consistsof four exploration concessions covering 2,552.6 hectares and one exploitation concession covering602.9 hectares.
(iv)  Unification La Platosa properties
The Unification La Platosa properties, consisting of three leased concessions in addition to the leasedconcession described in note (i) above, are situated within the Avino mine area property near thetowns of Panuco de Coronado and San Jose de Avino and surrounding the Avino Mine.
In February 2012, the Company’s wholly-owned Mexican subsidiary entered into a new agreementwith Minerales de Avino, S.A. de C.V. (“Minerales”) whereby Minerales has indirectly granted to theCompany 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 wasachieved on July 1, 2015.
Under the agreement, the Company has obtained the exclusive right to explore and mine the propertyfor an initial period of 15 years, with the option to extend the agreement for another 5 years. Inconsideration of the granting of these rights, the Company issued 135,189 common shares with a fairvalue of C$0.25 million 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 isless than 15,000 tonnes, then the Company must pay to Minerales a minimum royalty equal to theapplicable 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 theproperty at any time during the term of the agreement (or any renewal thereof), upon payment of $8million within 15 days of the Company’s notice of election to acquire the property. The purchase wouldbe subject to a separate purchase agreement for the legal transfer of the property.
- 21 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
(b) British Columbia, Canada
(i)  Minto and Olympic-Kelvin properties
The Company’s mineral claims in British Columbia encompass two additional properties, Minto andOlympic-Kelvin, each of which consists of 100% owned Crown-granted mineral claims located in theLillooet 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.
During the year ended December 31, 2017, an option agreement was signed between Avino and AlexcoResource Corp. (“Alexco”), granting Alexco the right to acquire a 65% interest in all 14 quartz miningleases. To exercise the option, Alexco must pay Avino a total of C$70,000 in instalments over 4 years,issue Avino a total of 70,000 Alexco common shares in instalments over 4 years, incur C$0.55 million inexploration work by the second anniversary of the option agreement date, and a further C$2.2 million inexploration work on the Eagle Property by the fourth anniversary of the option agreement date.
In the event that Alexco earns its 65% interest in the Eagle Property, Alexco and Avino will form a jointventure for the future exploration and development of the Eagle Property, and may contribute towardsexpenditures in proportion to their interests (65% Alexco / 35% Avino). If either company elects to notcontribute its share of costs, then its interest will be diluted.  If either company’s joint venture interest isdiluted to less than 10%, its interest will convert to a 5.0% net smelter returns royalty, subject to theother’s right to buy-down the royalty to 2.0% for C$2.5 million.
During the year ended December 31, 2019, Alexco terminated the option agreement as structured. TheEagle Property was previously inactive and held by Avino as a non-essential asset to its currentoperations, with a nominal carrying value.
10.  NON-CONTROLLING INTEREST
At December 31, 2019, the Company had an effective 99.67% (2018 - 99.67%, 2017 – 99.67%) interest in itssubsidiary Avino Mexico and the remaining 0.33% (2018 - 0.33%, 2017 – 0.33%) interest represents a non-controlling interest. The accumulated deficit and current year income attributable to the non-controllinginterest are insignificant and accordingly have not been recognized in the consolidated financial statements.
- 22 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
11.  PLANT, EQUIPMENT AND MINING PROPERTIES
Mine machinery
Office equipment,andMill machinery
Miningfurniture, andComputertransportationand processing
propertiesfixturesequipmentequipmentequipmentBuildingsTotal
$$$$$$$
COST
Balance at January 1, 201812,48213328316,3779,8665,62544,766
Additions / Transfers58817779907,8561,13410,662
Disposals----(33)-(33)
Effect of movements inexchange rates
(108)(1)(2)(110)(86)(49)(356)
Balance at December 31, 201812,96214935817,25717,6036,71055,039
Additions / Transfers664381(6)(648)1482,7703,289
Disposals-(6)(12)(3,723)(231)(206)(4,178)
Effect of movements inexchange rates
31-1333413112
Balance at December 31, 201913,63752434112,91917,5549,28754,262
ACCUMULATED DEPLETIONAND DEPRECIATION
Balance at January 1, 20184,592481446,0841,13960112,608
Additions / Transfers1,54917327991,2871123,796
Effect of movements inexchange rates
(39)-(1)(53)(10)(5)(108)
Balance at December 31, 20186,102651756,8302,41670816,296
Additions / Transfers1,9522249511,6197144,407
Disposals-(3)(11)(2,040)(27)(49)(2,130)
Effect of movements inexchange rates
12--135131
Balance at December 31, 20198,066842134,8544,0131,37418,604
NET BOOK VALUE
At December 31, 20195,5714401288,06513,5417,91335,658
At December 31, 20186,8608418310,42715,1876,00238,743
Included in Buildings above are assets under construction of $3,746 as at December 31, 2019 (December 31, 2018 - $3,655) on which no depreciationwas charged in the years then ended. Once the assets are put into service, they are transferred to the appropriate class of plant, equipment and miningproperties.
- 23 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
12.  RELATED PARTY TRANSACTIONS AND BALANCES
All related party transactions are recorded at the exchange amount which is the amount agreed to bythe Company and the related party.
(a) Key management personnel
The Company has identified its directors and certain senior officers as its key managementpersonnel. The compensation costs for key management personnel for the year ended December31, 2019, 2018 and 2017, were as follows:
201920182017
Salaries, benefits, and consulting fees  $723  $956  $860
Share-based payments6595311,718
 $  1,382  $  1,487  $  2,578
(b) Amounts due to/from related parties
In the normal course of operations the Company transacts with companies related to Avino’sdirectors or officers. All amounts payable and receivable are non-interest bearing, unsecured anddue on demand. Advances to Oniva International Services Corp. (“Oniva”) of $Nil (December 31,2018 - $212) for expenditures to be incurred on behalf of the Company are included in prepaidexpenses and other assets on the consolidated statements of financial position as at December 31,2019. The following table summarizes the amounts due to related parties:
December 31,December 31,
20192018
Oniva International Services Corp.$105$107
Directors5147
Jasman Yee & Associates, Inc.-3
$156$157
(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 will reimburse Oniva for the Company’spercentage of overhead and corporate expenses and for out-of-pocket expenses incurred on behalfof the Company. David Wolfin, President & CEO, and a director of the Company, is the sole ownerof Oniva. The cost sharing agreement may be terminated with one-month notice by either partywithout penalty.
- 24 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
The transactions with Oniva during the years ended December 31, 2019, 2018 and 2017, aresummarized below:
201920182017
Salaries and benefits  $665  $594  $450
Office and miscellaneous322560567
Exploration and evaluation assets206353352
 $ 1,193  $ 1,507  $ 1,369
For services provided to the Company as President and Chief Executive Officer, the Companypays Intermark Capital Corporation (“ICC”), a company controlled by David Wolfin, the Company’spresident and CEO and also a director, for consulting services. For the years ended December 31,2019, 2018 and 2017, the Company paid $226, $232 and $231, 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’smanaging director is a director of the Company. For the years ended December 31, 2019, 2018and 2017, the Company paid $33, $66 and $80, 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 withstakeholders and license holders. For the years ended December 31, 2019, 2018 and 2017, theCompany paid $Nil, $12 and $23, respectively, to WWD.
13.  TERM FACILITY
In July 2015, the Company entered into a ten million dollar 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) plus4.75%, and the facility was to be repaid in 15 consecutive equal monthly instalments starting in June2016. Pursuant to the agreement, in August 2015, Avino commenced selling concentrates producedduring ramp advancement and ongoing evaluation and extraction at the Avino Mine on an exclusivebasis to Samsung. Samsung pays for the concentrates at the prevailing metal prices for their silver,copper, and gold content at or about the time of delivery, less interest, treatment, refining, shipping,and insurance charges.
During the year ended December 31, 2018, the Company and Samsung amended the existing termfacility by extending the repayment period. Under the new amendment, Samsung granted theCompany a 12 month deferral period from October 2018, through and including September 2019,during which there will be no principal repayments. The Company will repay the remaining balance in23 equal monthly instalments of $278 commencing in October 2019 and ending August 2021. Intereston the amended facility is now charged at a rate of US dollar LIBOR (3 month) plus 6.75% during the12 month deferral period, reverting to US dollar LIBOR (3 month) plus 4.75% for the remainder of therepayment period ending August 2021. Other material terms of the facility remain unchanged. TheCompany is committed to selling Avino Mine concentrate on an exclusive basis to Samsung untilDecember 31, 2024.
The facility is secured by the concentrates produced under the agreement and by 33% of the commonshares of the Company’s wholly-owned 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 anddoes not include concentrates produced from the San Gonzalo Mine.
- 25 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
The continuity of the term facility with Samsung is as follows:
December 31,December 31,
20192018
Balance, beginning$6,901$8,667
Repayments(833)(2,000)
Unwinding of fair value adjustment(170)-
Fair value adjustment for modification-234
Balance, ending5,8976,901
Less: Current portion(3,384)(1,017)
Non-current portion$2,513$5,884
14.  EQUIPMENT LOANS
The Company has entered into loans for mining equipment maturing in between 2020 and 2021 withfixed interest rates of 6.29% per annum. The Company’s obligations under the loans are secured bythe mining equipment. As at December 31, 2019, plant, equipment, and mining properties includes anet carrying amount of $559 (December 31, 2018 - $2,232) for this mining equipment.
The contractual maturities and interest charges in respect of the Company’s obligations under theequipment loans are as follows:
December 31,December 31,
20192018
Not later than one year$   228$   550
Later than one year and not later than five years  73  428
Less: Future interest charges  (12)  (50)
Present value of loan payments  289  928
Less: current portion  (199)  (517)
Non-current portion$   90$   411
The equipment loan credit facilities are a component of the master credit facilities described in Note15.
15.  FINANCE LEASE OBLIGATIONS
The Company has entered into office space and mining equipment leases expiring between 2020 and2025, with interest rates ranging from Nil% to 14.99% per annum. The Company has the option topurchase the mining equipment at the end of the lease term for a nominal amount. The Company’sobligations under finance leases are secured by the lessor’s title to the leased assets. As at December31, 2019, plant, equipment and mining properties includes a net carrying amount of $2,697 (December31, 2018 - $3,461) for this leased mining equipment.
- 26 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
The contractual maturities and interest charges in respect of the Company’s finance lease obligationsare as follows:
December 31,December 31,
20192018
Not later than one year$   716$   943
Later than one year and not later than five years444947
Later than five years28-
Less: Future interest charges(54)(71)
Present value of lease payments1,1341,819
Less: current portion(692)(950)
Non-current portion$   442$   869
The Company has a master credit facility with an equipment supplier for a total of $5,000. The facilityis used to acquire equipment necessary for maintaining operations and exploration activities at theAvino Mine. As of December 31, 2019, the Company had $4,780 in available credit remaining underthese facilities.
16.  WARRANT LIABILITY
The Company’s warrant liability arises as a result of the issuance of warrants exercisable in U.S.dollars. As the denomination is different from the Canadian dollar functional currency of the entityissuing 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 inrespect of the Company’s warrant liability are as follows:
December 31,December 31,
20192018
Balance, beginning  $2,009  $1,161
US dollar warrants issued during the year-2,296
Fair value adjustment(520)(1,304)
Effect of movement in exchange rates90(144)
Balance, ending  $1,579  $2,009
Less: current portion--
Non-current portion  $1,579  $2,009
The Company also has warrants outstanding that are denominated in Canadian dollars. Thesewarrants are recognized through the consolidated statement of changes in equity upon issuance usingthe Black-Scholes model, and are not remeasured at the end of each reporting period.
Continuity of all warrants is as follows:
Weighted
UnderlyingAverage
SharesExercise Price
Warrants outstanding and exercisable, January 1, 20183,602,215$1.99
Issued7,175,846$0.80
Warrants outstanding and exercisable, December 31, 201810,778,061$1.20
Issued464,122C$0.85
Expired(3,602,215)$1.99
Warrants outstanding and exercisable, December 31, 20197,639,968$0.79
- 27 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
All Warrants
Outstanding and Exercisable
Exercise Price  December 31,December 31,
Expiry Dateper Share20192018
March 14, 2019$1.00-40,000
November 28, 2019$2.00-3,562,215
July 30, 2020C$0.85464,122-
September 25, 2023$0.807,175,8467,175,846
7,639,96810,778,061
As at December 31, 2019, the weighted average remaining contractual life of warrants outstandingwas 3.55 years (December 31, 2018 – 3.46 years).
Valuation of the warrant liability requires the use of highly subjective estimates and assumptionsincluding the expected stock price volatility. The expected volatility used in valuing warrants is basedon volatility observed in historical periods. Changes in the underlying assumptions can materiallyaffect 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,
20192018
Weighted average assumptions:
Risk-free interest rate1.68%1.88%
Expected dividend yield0%0%
Expected warrant life (years)3.573.46
Expected stock price volatility61.61%61.47%
Weighted average fair value$0.22$0.19
17.  DEFERRED REVENUE
During the year ended December 31, 2018, the Company entered into a sales agreement with MKMetal Trading Mexico S.A. de C.V., a subsidiary of Ocean Partners, to sell San Gonzalo concentratefor a 12 month period. As per the agreement, the Company received an unsecured upfront payment of$2 million, which is to be repaid in equal monthly installments over the 12 month period ending March2019. Interest is charged on the outstanding balance at a rate of US dollar LIBOR (3 month) plus4.75%.
As of December 31, 2019, the outstanding balance (including IVA) was $Nil (December 31, 2018 -$573).
18.  RECLAMATION PROVISION
Management’s estimate of the reclamation provision at December 31, 2019, is $1,524 (December 31,2018 – $10,799), and the undiscounted value of the obligation is $1,985 (December 31, 2018 –$16,356).
The present value of the obligation was calculated using a risk-free interest rate of 6.86% (December31, 2018 – 8.62%) and an inflation rate of 3.54% (December 31, 2018 – 3.80%). Reclamationactivities are estimated to begin in 2021 for the San Gonzalo Mine and in 2028 for the Avino Mine.
- 28 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
A reconciliation of the changes in the reclamation provision during the years ended December 31,2019, and 2018, is as follows:
December 31,December 31,
20192018
Balance, beginning$10,799$11,638
Changes in estimates840(437)
Disposition of Bralorne (Note 5)(10,828)-
Unwinding of discount related to Bralorne217256
Unwinding of discount related to continuing operations104122
Effect of movements in exchange rates392(780)
Balance, ending$1,524 $10,799
Less: current portion-(296)
Non-current portion$1,524 $10,503
19.  SHARE CAPITAL AND SHARE-BASED PAYMENTS
(a) Authorized: Unlimited common shares without par value.
(b) Issued:
(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-throughshares at the price of C$0.99 for gross proceeds of $5,240 (C$6,900). The financing was madeby way of prospectus supplement in July 2019, so the Company’s existing Canadian short-formbase shelf prospectus dated December 21, 2018.
Of the $5,240 total aggregate proceeds raised, $116 was attributed to 464,122 warrants issuedas commission, leaving a residual amount of $5,124. This amount includes a flow-throughpremium, which represents the difference between the C$0.85 price in which the commonshares 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” onthe condensed consolidated interim 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, andincurred additional legal and professional costs of $115. Costs of $10 were allocated to the fairvalue of the warrants and have been reflected in the condensed consolidated interimstatements of operations as a finance cost, and costs of $472 have been reflected as shareissuance 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 inan at-the-market offering under prospectus supplement for gross proceeds of $2,924. TheCompany paid a 3% cash commission of $87 on gross proceeds and incurred an additional $75in issuance costs during the period.
During the year ended December 31, 2019, the Company issued 565,259 common shares uponexercise of RSUs.
(ii) During the year ended December 31, 2018, the Company closed a bought-deal financing,
issuing 7,105,658 units at the price of $0.65 per unit for gross proceeds of $4,619. Each unitconsisted of one common share and one share purchase warrant, with each share purchasewarrant exercisable to purchase one additional common share at an exercise price of $0.80until expiry on September 25, 2023. The financing was made by way of prospectus supplement
- 29 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
in September 2018, to the short-form base shelf prospectus dated November 10, 2016 and theshelf registration statement dated August 22, 2018, for up to $25 million.
Of the $4,619 total aggregate proceeds raised in this financing, the $2,296 fair value of thewarrants was attributed to warrant liability (Note 16), and the residual amount of $2,323 wasattributed to common shares. The Company paid a 7% cash commission on the gross proceedin the amount of $324, and incurred additional legal costs of $185. Costs of $253 were allocatedto the fair value of the warrants and have been reflected in the consolidated statement ofoperations as a finance cost, and costs of $256 have been reflected as share issuance costs inthe consolidated statement of changes in equity. An additional $168 in issuance costs relatingto the shelf registration statement have also been reflected in the consolidated statement ofchanges in equity
During the year ended December 31, 2018, the Company issued 3 million common shares byway of flow-through financing for gross proceeds of $4,667 (C$6,000). This amount includes aflow-through premium, which represents the difference between the Company’s share price onthe date of issuance, and the offering price of C$2.00 per share. Based on the C$ to US$exchange rate on the date of the transaction, $444 was recorded as the flow-through premium,for a net share capital allocation of $4,223. This premium is presented in “Other liabilities” onthe balance sheet as at December 31, 2018. The Company incurred $471 in commission andissuance costs in relation to the offering.
During the year ended December 31, 2018, the Company issued 151,800 common shares in anat-the-market offering under prospectus supplement for gross proceeds of $137. The Companypays a 3% cash commission on gross proceeds and incurred $4 in issuance costs during theperiod.
During the year ended December 31, 2018, the Company issued 87,500 common shares uponthe exercise of stock options for gross proceeds of $112. The Company also issued 274,658common shares upon exercise of RSUs. The Company incurred $5 in issuance costs in relationto these exercises.
(c) Stock options:
The Company has a stock option plan to purchase the Company’s common shares, under which itmay grant stock options of up to 10% of the Company’s total number of shares issued andoutstanding on a non-diluted basis. The stock option plan provides for the granting of stock optionsto directors, officers, and employees, and to persons providing investor relations or consultingservices, the limits being based on the Company’s total number of issued and outstanding sharesper year. The stock options vest on the date of grant, except for those issued to persons providinginvestor relations services, which vest over a period of one year. The option price must be greaterthan or equal to the discounted market price on the grant date, and the option term cannot exceedten years from the grant date.
- 30 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
Continuity of stock options for the years ended December 31, 2019, and 2018, is as follows:
UnderlyingWeighted Average
SharesExercise Price (C$)
Stock options outstanding and exercisable, January 1, 20183,311,000$2.12
Granted497,500$1.30
Cancelled / Forfeited(497,500)$2.14
Expired(306,000)$1.61
Exercised(87,500)$1.61
Stock options outstanding, December 31, 20182,917,500$2.04
Stock options exercisable, December 31, 20182,576,250$2.14
   Granted526,000$0.79
   Cancelled / Forfeited(255,000)$2.09
   Expired(550,000)$1.90
Stock options outstanding, December 31, 20192,638,500$1.82
Stock options exercisable, December 31, 20192,244,000$2.00
The following table summarizes information about the Company’s stock options outstanding andexercisable at December 31, 2019:
OutstandingExercisable
WeightedWeighted
AverageAverage
RemainingRemaining
Number ofContractualLife (Years)Number ofContractual Life
Expiry DatePrice (C$)OptionsOptions(Years)
September 2, 2021$2.95502,5001.67502,5001.67
September 20, 2022$1.981,162,5002.721,162,5002.72
October 6, 2022$1.9815,0002.7715,0002.77
August 28, 2023$1.30432,5003.66432,5003.66
August 21, 2024$0.79526,0004.64131,5004.64
2,638,5003.062,244,0002.78
Option pricing requires the use of highly subjective estimates and assumptions including theexpected stock price volatility. The expected volatility used in valuing stock options is based onvolatility observed in historical periods. Changes in the underlying assumptions can materiallyaffect the fair value estimates. The fair value of the options granted during the years endedDecember 31, 2019, 2018 and 2017, was calculated using the Black-Scholes model with thefollowing weighted average assumptions and resulting grant date fair value:
- 31 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
201920182017
Weighted average assumptions:
 Risk-free interest rate1.27%2.25%1.80%
 Expected dividend yield0%0%0%
 Expected option life (years)5.005.005.00
 Expected stock price volatility59.01%60.26%68.24%
Weighted average fair value at grant dateC$0.40C$0.53C$1.14
During the year ended December 31, 2019, the Company charged $144 (2018 - $130, 2017 -$1,177) to operations as share-based payments and capitalized $37 (2018 - $20, 2017 - $127) toexploration and evaluation assets.
(d)  Restricted Share Units:
On April 19, 2018, the Company’s Restricted Share Unit (“RSU”) Plan was approved by itsshareholders. The RSU Plan is administered by the Compensation Committee under thesupervision of the Board of Directors as compensation to officers, directors, consultants, andemployees. The Compensation Committee determines the terms and conditions upon which agrant is made, including any performance criteria or vesting period.
Upon vesting, each RSU entitles the participant to receive one common share, provided that theparticipant is continuously employed with or providing services to the Company. RSUs track thevalue of the underlying common shares, but do not entitle the recipient to the underlying commonshares until such RSUs vest, nor do they entitle a holder to exercise voting rights or any otherrights attached to ownership or control of the common shares, until the RSU vests and the RSUparticipant receives common shares.
During the year ended December, 2019, 1,730,500 RSUs (year ended December 31, 2018 –1,081,500) were granted. All RSUs granted vest one-third annually from the date of the grant untilfully vested at the end of the three-year term. For the RSUs granted during the year endedDecember 31, 2019, the weighted average fair value at the measurement date was C$0.79 (foryear ended December 31, 2018 was C$1.31), based on the TSX market price of the Company’sshares on the date the RSUs were granted.
At December 31, 2019, there were 2,372,875 RSUs outstanding (December 31, 2018 – 1,235,300)with a weighted average remaining life of 2.37 years.
During the nine months ended December 31, 2019, the Company charged $793 (December 31,2018 - $500) to operations as share-based payments and capitalized $49 (December 31, 2018 -$50) to exploration and evaluation assets for the fair value of the RSUs vested. The fair value ofthe RSUs is recognized over the vesting period with reference to vesting conditions and theestimated RSUs expected to vest.
- 32 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
(e)  Earnings per share:
The calculations for basic and diluted earnings per share are as follows:
201920182017
Net income (loss) for the year$(2,335)  $1,657  $2,655
Basic weighted average number of sharesoutstanding
69,980,178   56,851,62652,523,454
Effect of dilutive share options, warrants,and RSUs
-3,149,011796,555
Diluted weighted average number of sharesoutstanding
69,980,178   60,000,63753,320,009
Basic earnings (loss) per share$(0.03)  $0.03  $0.05
Diluted earnings (loss) per share$(0.03)  $0.03  $0.05
20.  REVENUE AND COST OF SALES
The Company’s revenues for the year ended December 31, 2018 of $31,746 (2018 - $34,116, 2017 -$33,359) are all attributable to Mexico, from shipments of concentrate produced by the Avino Mine,the San Gonzalo Mine, and processing of Historical Above Ground Stockpiles.
201920182017
Concentrate sales$         31,417$         34,551  $       33,327
Provisional pricing adjustments329 (435) 32
 $         31,746 $         34,116$       33,359
Cost of sales consists of changes in inventories, direct costs including personnel costs, mine sitecosts, energy costs (principally diesel fuel and electricity), maintenance and repair costs, operatingsupplies, external services, third party transport fees, depreciation and depletion, and other expensesfor the periods. Direct costs include the costs of extracting co-products. Cost of sales is based on theweighted average cost of inventory sold for the periods and consists of the following:
201920182017
Production costs  $         27,949$ 24,619$19,418
Inventory net realizable adjustment387--
Depreciation and depletion3,6803,2312,688
$         32,016$ 27,850$22,106
- 33 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
21.  GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses on the consolidated statements of operations consist of thefollowing:
201920182017
Salaries and benefits$1,347$1,244$1,196
Office and miscellaneous286359464
Management and consulting fees461354460
Investor relations171401363
Travel and promotion110226323
Professional fees470529247
Directors fees162161158
Regulatory and compliance fees143311101
Depreciation432515
$3,193 $3,610 $3,327
22. COMMITMENTS
The Company has a cost sharing agreement to reimburse Oniva for a percentage of its overheadexpenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the Company, and topay a percentage fee based on Oniva’s total overhead and corporate expenses. The agreement maybe terminated with one-month notice by either party. Transactions and balances with Oniva aredisclosed 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,
20192018
Not later than one year $1,269  $3,092
Later than one year and not later than five years2074
Later than five years510
 $1,294  $3,176
Included in the above amount as at December 31, 2019, is the Company’s commitment to renounceflow-through eligible expenditures of $1,262 (C$1,639) that must be incurred in Canada.
Office lease payments recognized as an expense during the year ended December 31, 2019, totalled$72 (2018 - $81, 2017 - $81).
- 34 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
23.  SUPPLEMENTARY CASH FLOW INFORMATION
201920182017
Net change in non-cash working capital items:
Deferred revenues  $(573)   $573  $-
Accounts payable and accrued liabilities(941)2,329(136)
Prepaid expenses and other assets287981(1,672)
Amounts receivable2,615543(1,585)
Taxes payable(121)(358)(292)
Amounts due to related parties6(44)1
Taxes recoverable(193)1,017(2,828)
Other liabilities(100)-
Inventory3,182(42)(2,565)
  $4,162  $4,999  $(9,077)
201920182017
Interest paid  $618  $959  $445
Taxes paid  $2,373  $4,991  $5,765
Equipment acquired under finance leases
and equipment loans  $122  $1,771  $1,228
24.  FINANCIAL INSTRUMENTS
The fair values of the Company’s amounts due to related parties and accounts payable approximatetheir carrying values because of the short-term nature of these instruments. Cash, amountsreceivable, short- and long-term investments, and warrant liability are recorded at fair value. Thecarrying amounts of the Company’s term facility, equipment loans, and finance lease obligations are areasonable approximation of their fair values based on current market rates for similar financialinstruments.
The Company’s financial instruments are exposed to certain financial risks, including credit risk,liquidity risk, and market risk.
(a) Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the otherparty by failing to discharge an obligation. The Company has exposure to credit risk through itscash, short-term investments and amounts receivable. The Company manages credit risk, inrespect of cash and short-term investments, by maintaining the majority of cash and short-terminvestments at highly rated financial institutions.
The Company is exposed to a significant concentration of credit risk with respect to its tradeaccounts receivable balance because all of its concentrate sales are with six (December 31, 2018– six) counterparties (see Note 26). However, the Company has not recorded any allowanceagainst 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 carryingamount of these financial assets as recorded in the consolidated statement of financial position. AtDecember 31, 2019, no amounts were held as collateral.
- 35 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
(b) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligationsas they become due. The Company manages its liquidity risk by forecasting cash flows required byits operating, investing and financing activities. The Company had cash at December 31, 2019, inthe amount of $9,625 and working capital of $13,209 in order to meet short-term businessrequirements. Accounts payable have contractual maturities of approximately 30 to 90 days, or aredue 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 consolidatedstatement of financial position date. Amounts due to related parties are without stated terms ofinterest or repayment.
The maturity profiles of the Company’s contractual obligations and commitments as at December31, 2019, are summarized as follows:
Less ThanMore Than 5
Total1 Year1-5 yearsYears
Accounts payable andaccrued liabilities
  $4,907  $4,907  $-    $-
Due to related parties156156--
Minimum rental and leasepayments
1,2941,269205
Term facility6,1993,6282,571-
Equipment loans30122873-
Finance lease obligations1,188716444 28
Total $  14,045  $  10,904  $3,108  $33
(c) Market Risk
Market risk consists of interest rate risk, foreign currency risk and price risk. These are discussedfurther 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 isexposed to interest rate cash flow risk.
(ii)  To the extent that changes in prevailing market rates differ from the interest rates on the
Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk.
In management’s opinion, the Company is exposed to interest rate risk primarily on its outstandingterm facility, as the interest rate is subject to floating rates of interest. A 10% change in the interestrate would not a result in a material impact on the Company’s operations.
- 36 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate due to changes in foreign exchange rates. The Company is exposed to foreign currencyrisk to the extent that the following monetary assets and liabilities are denominated in Mexicanpesos and Canadian dollars:
December 31, 2019December 31, 2018
MXNCDNMXNCDN
Cash  $2,780  $5,902  $8,378  $2,421
Long-term investments-5,599-14
Reclamation bonds-6-146
Amounts receivable-54-114
Accounts payable andaccrued liabilities
(51,307)(442)(85,951)(891)
Due to related parties-(202)-(215)
Equipment loans---(301)
Finance lease obligations(1,037)(522)(13,907)(533)
Net exposure(49,564)10,395(91,480)755
US dollar equivalent  $(2,627)  $8,004  $(4,656)   $554
Based on the net US dollar denominated asset and liability exposures as at December 31, 2019, a10% fluctuation in the US/Mexican and Canadian/US exchange rates would impact the Company’searnings (loss) for the year ended December 31, 2019, by approximately $465 (December 31,2018 - $452). The Company has not entered into any foreign currency contracts to mitigate thisrisk.
Price Risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuatedue to changes in market prices, other than those arising from interest rate risk or foreign currencyrisk.
The Company is exposed to price risk with respect to its accounts receivable, as certain tradeaccounts receivable are recorded based on provisional terms that are subsequently adjustedaccording to quoted metal prices at the date of final settlement. Quoted metal prices are affectedby numerous factors beyond the Company’s control and are subject to volatility, and the Companydoes not employ hedging strategies to limit its exposure to price risk. At December 31, 2019, basedon outstanding accounts receivable that were subject to pricing adjustments, a 10% change inmetals prices would have an impact on net earnings (loss) of approximately $70 (December 31,2018 - $419).
The Company is exposed to price risk with respect to its long-term investments, as theseinvestments are carried at fair value based on quoted market prices. Changes in market pricesresult in gains or losses being recognized in net income (loss). At December 31, 2019, a 10%change in market prices would have an impact on net earnings (loss) of approximately $467 (2018- $1, 2017 - $3).
The Company’s profitability and ability to raise capital to fund exploration, evaluation andproduction activities is subject to risks associated with fluctuations in mineral prices. Managementclosely monitors commodity prices, individual equity movements, and the stock market todetermine the appropriate course of action to be taken by the Company.
- 37 -
AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
(d)  Classification of Financial Instruments
IFRS  7 Financial Instruments: Disclosures establishes a fair value hierarchy that prioritizes theinputs 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 orliability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); andLevel 3 – inputs for the asset or liability that are not based on observable market data(unobservable inputs).
The following table sets forth the Company’s financial assets and financial liabilities measured atfair value on a recurring basis by level within the fair value hierarchy as at December 31, 2019:
Level 1Level 2Level 3
Financial assetsCash
  $9,625  $-    $-
Amounts receivable-1,477-
Long-term investments – common shares3,197--
Long-term investments – warrants--1,114
Total financial assets  $12,822$          1,477 $        1,114
Financial liabilitiesWarrant liability
--(1,579)
Total financial liabilities$                -  $                 -   $ (1,579)
During 2019, changes in Level 3 measurements were comprised of the recognition of the Taliskerwarrants received in the sale of Bralorne (see Note 5) of $716, and its subsequent fair valueincrease of $398 for a total fair value of $1,114 at December 31, 2019. Additionally, there was a fairvalue adjustment of $520 for the warrant liability.
The Company uses Black-Scholes model to measure its Level 3 financial instruments. Thewarrants of Talisker are measured on acquisition and at December 31, 2019, using the followingassumptions:
December 31,  December 13,
20192019
Weighted average assumptions:
 Risk-free interest rate1.71%1.67%
 Expected dividend yield0%0%
 Expected life (years)2.953.00
 Expected stock price volatility106.79%108.41%
Weighted average fair value at grant dateC$0.23C$0.15
For the Company’s warrant liability valuation, see Note 16.
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AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
25.  CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to safeguard the Company’s ability to continueas a going concern in order to pursue the exploration and expansion of its properties and to maintain aflexible capital structure for its projects for the benefit of its stakeholders. In the management ofcapital, the Company includes equity (comprising of all issued share capital, equity reserves, retainedearnings or accumulated deficit, and other comprehensive income (loss)), the term facility, equipmentloan obligations, and finance lease, are listed as follows:
December 31,December 31,
20192018
Equity  $53,923  $75,168
Term Facility5,8976,901
Finance Lease Obligations1,1341,819
Equipment Loans289928
 $61,243  $84,816
The Company manages its capital structure and makes adjustments to it in light of changes ineconomic conditions and the risk characteristics of the underlying assets. To maintain or adjust itscapital structure, the Company may attempt to incur new debt or issue new shares. Managementreviews the Company’s capital structure on an ongoing basis and believes that this approach, giventhe relative size of the Company, is reasonable. At December 31, 2019, the Company expects itscapital resources and projected future cash flows from operations to support its normal operatingrequirements on an ongoing basis, and planned development and exploration of its mineral propertiesand other expansionary plans. At December 31, 2019, there was no externally imposed capitalrequirement to which the Company was subject and with which the Company did not comply.
26.  SEGMENTED INFORMATION
The Company’s revenues for the year ended December 31, 2019 of $31,746 (2018 - $34,116; 2017 –$33,359) are all attributable to Mexico, from shipments of concentrate produced by the Avino Mine,the San Gonzalo Mine and the Avino Historic Above Ground stockpiles.
On the consolidated statements of operations, the Company had revenue from the following productmixes:
201920182017
Silver$ 14,030     $17,259     $20,159
Copper 13,95312,9968,227
Gold 10,3269,86610,131
Penalties, treatment costs and refining charges(6,563)(6,005)  (5,158)
Total revenue from mining operations$ 31,746     $34,116 $         33,359
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AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
For the year ended December 31, 2019, the Company had six customers (2018 – six, 2017 – three)that accounted for total revenues as follows:
201920182017
Customer #1$ 21,810   $  23,314   $  24,845
Customer #24,8613211,062
Customer #33,3508,071-
Customer #41,246--
Customer #5469--
Customer #610519-
Customer #7-1,5477,452
Customer #8-344-
Total revenue from mining operations$31,746     $34,116   $  33,359
Geographical information relating to the Company’s non-current assets (other than financialinstruments) is as follows:
December 31,December 31,
20192018
Exploration and evaluation assets - Mexico $9,826  $  9,692
Exploration and evaluation assets - Canada1   37,089
Total exploration and evaluation assets $9,827  $ 46,781
December 31,December 31,
20192018
Plant, equipment, and mining properties - Mexico $ 35,239  $ 36,484
Plant, equipment, and mining properties - Canada4192,259
Total plant, equipment, and mining properties $ 35,658  $ 38,743
On December 13, 2019, the Company sold Bralorne (see Note 5) which held substantially all of theCompany’s non-current assets in Canada.
27.  INCOME TAXES
(a) Income tax expense
Income tax expense included in the consolidated statements of operations and comprehensiveincome (loss) is as follows:
201920182017
Current income tax expense  $327  $1,052  $2,911
Deferred income tax recovery(960)(645)(140)
Total income tax expense (recovery)  $(633)   $407  $2,771
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AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(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 taxexpense recognized in the year is as follows:
201920182017
Net income (loss) before income taxes  $(2,968)   $2,064  $5,436
Net loss from discontinued operations beforeincome taxes
(29,126)(31)(143)
Net income (loss) before income taxes  $(32,094)   $2,033  $5,293
Combined statutory tax rate27.00%27.00%26.00%
Income tax expense (recovery) at the Canadianstatutory rate
(8,665)5491,376
Reconciling items:
Effect of difference in foreign tax rates(120)48285
Non-deductible/non-taxable items6,449(121)602
Change in unrecognized deductible temporarydifferences
1,263(257)1,086
Impact of foreign exchange222915(491)
Special mining duties231117511
Impact of change of tax rates--(322)
Revisions to estimates58(368)(248)
Share issue costs(174)(231)-
Other items103(245)(106)
Income tax expense (recovery) recognized in theyear
  $(633)   $407  $2,771
The Company recognized a non-cash recovery of $235 for the year ended December 31, 2019(2018 – expense of $379; 2017 – expense of $51) related to the deferred tax impact of the specialmining 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 theconsolidated financial statements.
December 31,  December 31,
20192018
Deferred income tax assets  $2,755  $4,654
Deferred income tax liabilities(5,693)(8,557)
  $(2,938)  $(3,903)
The approximate tax effects of each type of temporary difference that gives rise to potentialdeferred income tax assets and liabilities are as follows:
December 31,December 31,
20192018
Reclamation provision  $571   $491
Non-capital losses1,1713,104
Other deductible temporary differences1,0131,059
Inventory(243)(94)
Exploration and evaluation assets(3,340)(6,378)
Plant, equipment and mining properties(2,110)(2,085)
Net deferred income tax liabilities  $(2,938)   $(3,903)
The net deferred tax liability presented in these consolidated financial statements is due to thedifference in the carrying amounts and tax bases of the Mexican plant, equipment and mining
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AVINO SILVER & GOLD MINES LTD.Notes to the consolidated financial statementsFor the years ended December 31, 2019, 2018 and 2017(Expressed in thousands of US dollars, except where otherwise noted)
properties which were acquired in the purchase of Avino Mexico. The carrying values of theMexican plant, equipment and mining properties includes an estimated fair value adjustmentrecorded upon the July 17, 2006, acquisition of control of Avino Mexico that was based on a shareexchange, while the tax bases of these assets are historical undeducted tax amounts that were nilon 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 deferredincome tax assets due to the fact that management has determined it is not probable that sufficientfuture taxable profits will be earned in Canada to recover such assets.  Unrecognized deductibletemporary differences are summarized as follows:
December 31,December 31,
20192018
Tax losses carried forward $24,229  $13,790
Share issue costs1,3521,263
Plant, equipment and mining properties1706,096
Exploration and evaluation assets1,2371,207
Investments(1,273)44
Reclamation provision and other-9,489
Unrecognized deductible temporary differences $25,721  $31,889
The Company has capital losses of $14,156 carried forward and $10,073 in non-capital tax lossescarried forward available to reduce future Canadian taxable income. The capital losses can becarried forward indefinitely until used. The non-capital losses have an expiry date range of 2022 to2039. As at December 31, 2019, the Company had no Mexican tax losses available to offset futureMexican taxable income.
28.  SUBSEQUENT EVENTS
Subsequent to December 31, 2019, the Company issued 675,145 common shares as settlement ofaccrued advisory services provided by Cantor Fitzgerald Canada Corporate (“Cantor”) for thecompletion of the sale of Bralorne.
In February 2020, the Company exercised 6,290,000 share purchase warrants in Talisker Resources(“Talisker”) at a price of C$0.25 per share. To fund the exercise, the Company sold 3,000,000common shares of Talisker at an average price of C$0.57 per share.
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