EX-99.2 3 ex992.htm UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

Exhibit 99.2

Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2019 and 2018

(Expressed in thousands of United States dollars, unless otherwise stated)

Unaudited

Condensed Consolidated Statements of Financial Position

(Unaudited, expressed in thousands of United States dollars)

	Note		June 30, 2019		December 31, 2018

Assets

Current assets
Cash and cash equivalents		$	33,046	$	60,822
Accounts receivable, prepaid expenses and deposits			21,511		21,838
Inventory	5		57,820		49,671
Marketable securities			1,568		1,782
Restricted cash - current			624		633
			114,569		134,746

Non-current inventory	5		66,795		50,114
Restricted cash			13,868		14,963
Exploration and evaluation assets	6		146,808		171,709
Mineral properties, plant and equipment	7		410,355		366,162
Equity accounted for investment	3(b), 14		5,691		-
Other assets	6, 14		16,657		9,092
Deferred tax assets			4,784		5,319
Total assets		$	779,527	$	752,105

Liabilities and Equity

Current liabilities
Accounts payable and accrued liabilities		$	41,249	$	55,461
Current portion of loans and borrowings	8		40,410		54,704
			81,659		110,165

Loans and borrowings	8		221,031		159,855
Derivative liabilities	9		22,555		18,861
Reclamation obligations			24,753		23,546
Other long-term liabilities			6,788		10,596
Deferred tax liabilities			9,059		9,552
Total liabilities			365,845		332,575

Shareholders’ equity
Share capital	10		503,477		491,100
Reserves			26,693		15,402
Deficit	4		(116,488)		(101,491)

Equity attributable to Equinox Gold shareholders			413,682		405,011

Non-controlling interests	3(b), 14		-		14,519
Total equity			413,682		419,530
Total liabilities and equity		$	779,527	$	752,105

Commitments and contingencies (note 17)
Subsequent event (note 3(a))

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

Condensed Consolidated Statements of Loss and Comprehensive Loss

(Unaudited, expressed in thousands of United States dollars, except share and per share amounts)

		Three months ended June 30,				Six months ended June 30,
	Note		2019		2018		2019		2018

Revenue		$	35,396	$	-	$	70,780	$	-
Operating expenses	11		(21,311)		-		(42,172)		-
Depreciation and depletion			(4,475)		-		(9,122)		-
Earnings from mine operations			9,610		-		19,486		-

Exploration			(3,160)		(2,727)		(6,088)		(5,684)
General and administration	12		(3,690)		(3,306)		(6,798)		(6,741)
Income (loss) from operations			2,760		(6,033)		6,600		(12,425)

Finance expense			(3,314)		(741)		(7,102)		(1,533)
Finance income			487		2,288		1,255		3,068
Other income (expense)	13		(10,648)		4,191		(14,949)		6,908
Net loss before taxes			(10,715)		(295)		(14,196)		(3,982)
Tax recovery (expense)			48		(1,383)		(2,262)		(1,383)
Net loss from continuing operations			(10,667)		(1,678)		(16,458)		(5,365)
Loss from discontinued operations			-		(25,824)		-		(26,576)
Net loss and comprehensive loss		$	(10,667)	$	(27,502)	$	(16,458)	$	(31,941)


Net loss from continuing operations attributable to
Equinox Gold shareholders		$	(9,585)	$	(1,661)	$	(14,494)	$	(5,348)
Non-controlling interests	14		(1,082)		(17)		(1,964)		(17)
		$	(10,667)	$	(1,678)	$	(16,458)	$	(5,365)

Net loss and comprehensive loss attributable to
Equinox Gold shareholders		$	(9,585)	$	(26,954)	$	(14,494)	$	(31,287)
Non-controlling interests	14		(1,082)		(548)		(1,964)		(654)
		$	(10,667)	$	(27,502)	$	(16,458)	$	(31,941)


Net loss per share from continuing operations, basic and diluted		$	(0.02)	$	(0.00)	$	(0.03)	$	(0.01)
Net loss per share, basic and diluted		$	(0.02)	$	(0.06)	$	(0.03)	$	(0.07)
Weighted average shares outstanding, basic and diluted			553,436,166		446,312,089		553,132,608		440,730,814


The accompanying notes form an integral part of these condensed consolidated interim financial statements.

Condensed Consolidated Statements of Cash Flows

(Unaudited, expressed in thousands of United States dollars)

		Three months ended June 30,				Six months ended June 30,
	Note		2019		2018		2019		2018

Cash provided by (used in):

Operations
Net loss for the period		$	(10,667)	$	(27,502)	$	(16,458)	$	(31,941)
Adjustments for:
Tax expense (recovery)			(48)		1,383		2,262		1,383
Depreciation and depletion			4,544		177		9,265		348
Share-based compensation			989		1,001		2,132		2,585
Change in fair value of derivative liabilities	13		(1,311)		(9,951)		3,980		(14,533)
Impairment			-		24,135		-		24,135
Unrealized foreign exchange (gain) loss			(376)		2,858		(1,605)		3,093
Finance expense			3,314		741		7,102		1,533
Finance fees paid			(5,951)		(1,483)		(7,857)		(1,636)
Loss on settlement of debt and production-linked liability			13,903		-		13,903		1,299
Gain on disposal of assets			(1,250)		-		(1,042)		-
Other			(1,494)		(1,463)		(3,274)		(592)
Changes in non-cash working capital:
Accounts receivable, prepaid expenses and deposits			883		4,855		932		2,342
Inventory			(15,563)		350		(25,089)		(65)
Accounts payable and accrued liabilities			924		(1,068)		(1,431)		(8,499)

			(12,103)		(5,967)		(17,180)		(20,548)
Investing
Expenditures on Aurizona construction			(17,031)		(19,537)		(45,863)		(38,404)
Other capital expenditures			(6,107)		(128)		(10,620)		(247)
Mesquite acquisition working capital adjustment	4		-		-		(12,451)		-
Proceeds from Serabi Gold plc receivable			-		4,741		-		4,741
Other			(1,324)		2,290		(1,264)		2,473

			(24,462)		(12,634)		(70,198)		(31,437)
Financing
Draw down of debt facilities	8		159,661		40,000		169,661		40,000
Repayment of debt and production-payment liability	8		(116,888)		(800)		(116,888)		(800)
Proceeds from equity financings, net of issuance costs			-		-		-		14,750
Restricted cash			1,385		-		1,385		-
Other			1,340		248		4,237		524

			45,498		39,448		58,395		54,474

Effect of foreign exchange on cash and cash equivalents			108		(4,620)		1,207		(4,779)

Increase (decrease) in cash and cash equivalents			9,041		16,227		(27,776)		(2,290)

Cash and cash equivalents, beginning of period			24,005		49,441		60,822		67,958
Cash and cash equivalents, end of period		$	33,046	$	65,668	$	33,046	$	65,668

Non-cash investing and financing activities:
Shares issued to settle debt		$	10,110	$	-	$	10,110	$	15,504
Non-cash proceeds from sale of Elk Gold included in other assets			4,431		-		4,431		-
Non-cash changes in accounts payable in relation to capital expenditures			(1,048)		474		(6,353)		1,973
Right-of-use assets recognized			-		-		537		-

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

Condensed Consolidated Statements of Changes in Equity

(Unaudited, expressed in thousands of United States dollars, except share amounts)

	Share Capital
	Shares	Amount		Foreign currency translation		Equity component of Convertible Notes		Other reserves		Deficit		Non- controlling interests		Total
December 31, 2018	552,127,299	$	491,100	$	(752)	$	-	$	16,154	$	(101,491)	$	14,519	$	419,530
Shares issued to settle Debenture	11,139,175		10,110		-		-		-		-		-		10,110
Shares issued on exercise of warrants, stock options and RSUs	2,183,954		2,267		-		-		(1,167)		-		-		1,100
Equity component of Convertible Notes (note 8(b))	-		-		-		10,217		-		-		-		10,217
Share-based compensation	-		-		-		-		2,241		-		-		2,241
Changes in non-controlling interest from equity offerings and other (note 14)	-		-		-		-		-		(503)		3,949		3,446
Deconsolidation of Solaris Copper (note 14)	-		-		-		-		-		-		(16,504)		(16,504)
Net loss and comprehensive loss	-		-		-		-		-		(14,494)		(1,964)		(16,458)
Balance June 30, 2019	565,450,428	$	503,477	$	(752)	$	10,217	$	17,228	$	(116,488)	$	-	$	413,682

	Share Capital
	Shares	Amount		Foreign currency translation		Equity component of Convertible Notes		Other reserves		Deficit		Non- controlling interests		Total
December 31, 2017	404,749,044	$	383,297	$	(752)	$	-	$	13,494	$	(38,793)	$	8,131	$	365,377
Shares issued to settle Debenture	18,518,518		15,504		-		-		-		-		-		15,504
Shares issued on exercise of shareholder anti-dilution right	21,000,000		15,239		-		-		-		-		-		15,239
Shares issued on exercise of warrants, stock options and RSUs	2,215,971		2,654		-		-		(1,873)		-		-		781
Share issue costs	-		(489)		-		-		-		-		-		(489)
Share-based compensation	-		-		-		-		2,585		-		-		2,585
Net loss and comprehensive loss	-		-		-		-		-		(31,287)		(654)		(31,941)
Balance June 30, 2018	446,483,533	$	416,205	$	(752)	$	-	$	14,206	$	(70,080)	$	7,477	$	367,056

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

1. Nature of operations

Equinox Gold Corp. (the “Company” or “Equinox Gold”) was incorporated under the Business Corporations Act of British Columbia on March 23, 2007. Equinox Gold’s primary listing is on the TSX Venture Exchange (“TSX-V”) in Canada where its common shares trade under the symbol “EQX” and its warrants trade under the symbol “EQX.WT”. The Company’s shares and warrants also trade on the OTC markets in the United States under the symbol “EQXFF” and “EQXWF”, respectively.

Equinox Gold is a gold mining company engaged in the development and operation of mineral properties. Its principal assets are the Mesquite Mine (“Mesquite”) in the United States, which is in production, the Aurizona Mine (“Aurizona”) in Brazil that is in production as of July 1, 2019, and the Castle Mountain Mine (“Castle Mountain”) in the United States, which is a development-stage project the Company expects to advance to production in 2020.

On August 3, 2018, the Company distributed 60% of the shares of Solaris Copper Inc. (“Solaris Copper”), a subsidiary of the Company formed to hold its copper assets, to its shareholders and on August 21, 2018, disposed of its 83% interest in the Koricancha Mill Joint Venture (“Koricancha”) in Peru. On October 30, 2018, the Company completed its acquisition of Mesquite from New Gold Inc. (“New Gold”) (note 4). The results of Solaris Copper were consolidated with those of the Company to June 30, 2019 (notes 3(b) and 14) and the results of operations of Koricancha are presented as discontinued operations in these condensed consolidated interim financial statements.

These condensed consolidated interim financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.

At June 30, 2019, the Company had cash and cash equivalents of $33.0 million (December 31, 2018 - $60.8 million), working capital of $32.9 million (December 31, 2018 - $24.6 million) and $30.0 million in undrawn loan facilities. Subsequent to June 30, 2019, the Company announced the commencement of commercial production at Aurizona. The Company believes cash flows from operations at Aurizona and Mesquite are sufficient to achieve the Company’s current business objectives for the next 12 months. The Company may require additional funding for future development activities, including Castle Mountain construction. The Company has incurred operating losses to date and has limited history of revenue from operations. The Company’s ability to continue as a going concern in the longer term is dependent on successful execution of its business plan and ultimately generating net income and positive cash flow from mining operations.

2. Basis of preparation

(a) Statement of compliance and basis of presentation

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, and do not include all of the information required for full annual financial statements prepared using International Financial Reporting Standards (“IFRS”). These condensed consolidated interim financial statements should be read in conjunction with the Company’s most recent annual audited consolidated financial statements for the year ended December 31, 2018. Except as described in note 2(b), the accounting policies followed in these condensed consolidated interim financial statements are the same as those applied in the Company’s annual audited consolidated financial statements for the year ended December 31, 2018.

These condensed consolidated interim financial statements were approved and authorized for issuance by the Board of Directors on August 1, 2019.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

2. Basis of preparation (CONTINUED)

(b) Changes in significant accounting policies

The Company adopted IFRS 16, Leases (“IFRS 16”) on January 1, 2019. A number of other new standards are effective from January 1, 2019, including IFRIC 23, Uncertainty over Income Tax Treatments, but they do not have a material effect on the Company’s consolidated financial statements.

IFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Company, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. The Company may elect to not apply IFRS 16 to leases with a term of less than 12 months or leases where the underlying asset is of low value. Lessor accounting remains similar to previous accounting policies.

Previously, the Company determined at contract inception whether an arrangement was or contained a lease under IFRIC 4, Determining Whether an Arrangement contains a Lease. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

Transition

The Company adopted IFRS 16 using the modified retrospective approach. Accordingly, the comparative information presented for 2018 has not been restated.

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after January 1, 2019.

The Company leases various assets including equipment and offices that had previously been classified as operating leases under IAS 17. On transition, lease liabilities for these leases were measured at the present value of remaining lease payments, discounted at the Company’s incremental borrowing rate as of January 1, 2019. The average incremental borrowing rate at January 1, 2019 was 6.5%. The Company elected to measure the right-of-use assets at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

On initial adoption, the Company used the following practical expedients as permitted by the standard when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

• Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term remaining.

• Applied a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic environment).

• Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

• Used hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

2. Basis of preparation (CONTINUED)

The Company did not have any leases classified as finance leases under IAS 17 on the adoption date. On transition to IFRS 16, the Company recognized right-of-use assets and lease liabilities for its office leases, resulting in an increase to property, plant and equipment of $0.2 million at January 1, 2019. A corresponding lease liability was recognized for $0.2 million in other long-term liabilities. Right-of-use assets are presented as other property and equipment within mineral property, plant and equipment and lease liabilities are presented in other liabilities in the statement of financial position.
A reconciliation of lease commitments as reported at December 31, 2018 to the lease liabilities recorded at January 1, 2019 is as follows:

	Operating lease commitments at December 31, 2018	$	307
	Impact of discounting using the incremental borrowing rate at January 1, 2019		(25)
	Recognition exemption for leases with less than 12 months of lease term at transition		(53)
	Lease liabilities recognized as at January 1, 2019	$	229
Significant accounting policies
The following is the new accounting policy for leases under IFRS 16:
A contract is or contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The Company recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability. The cost of the right of use asset includes the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, less any lease incentives received, any initial direct costs; and if applicable, an estimate of costs to be incurred by the Company in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Generally, the Company uses its incremental borrowing rate as the discount rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or, as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. The Company does not recognize right-of-use assets and lease liabilities for leases of low-value assets and leases with lease terms that are less than 12 months. Lease payments associated with these leases are instead recognized as an expense over the lease term on either a straight-line basis, or another systematic basis if more representative of the pattern of benefit.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

2. Basis of preparation (CONTINUED)

The Company has applied judgment to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized. Right-of-use assets are presented in the same line item as it presents underlying assets of the same nature that it owns. The Company presents lease liabilities in other liabilities in the statement of financial position.
Impact on financial statements
Information about leases for which the Company is a lessee is presented below.
Right-of-use assets

	Balance - January 1, 2019	$	229
	Additions		537
	Depreciation		(108)
	Balance - June 30, 2019	$	658
Lease liabilities
			June 30, 2019
	Current lease liabilities included in accounts payable and accrued liabilities	$	245
	Non-current lease liabilities included in other long-term liabilities		575
		$	820

3. Use of judgements and estimates

In preparing these condensed consolidated interim financial statements, management has made judgements, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ. Significant judgements made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied in the most recent annual audited consolidated financial statements for the year ended December 31, 2018 except as follows:

(a) Commencement of commercial production

Management considers several factors in determining when a mining property is capable of operating at levels intended by management. Until a mine is capable of operating at levels intended by management, costs incurred are capitalized as part of the costs of the related mining properties and proceeds from mineral sales are offset against costs capitalized. Depletion of capitalized costs for mining properties begins when the mine is capable of operating at levels intended by management. Amongst other quantitative and qualitative factors, throughput, mill grades and recoveries were assessed over a reasonable period to make this determination. A minimum of 80% of planned output and/or design capacity measures over a 30-day period were utilized in determining the appropriate timing. The Company determined that Aurizona was capable of operating at levels intended by management effective July 1, 2019.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

3. Use of judgements and estimates (continued)

(b) Investments

Management applies judgement in assessing whether the facts and circumstances pertaining to each investment result in the Company having control, joint control or significant influence over an investee. During the three months ended June 30, 2019, the Company determined that Solaris Copper was no longer a controlled subsidiary as the Company’s ownership interest reduced to approximately 32% as a result of the completion of external financings, and Solaris Copper was self-sustaining for an extended period with no capital injections made by Equinox Gold. The Company determined that it retained significant influence over Solaris Copper, and accounts for its interest using the equity method effective June 30, 2019.

4. Acquisition of Mesquite
On October 30, 2018, the Company completed the acquisition of Mesquite in California from New Gold for cash consideration of $158 million before closing adjustmen ts (the “Mesquite Acquisition”). At December 31, 2018, the purchase consideration included a working capital adjustment estimated at $9.1 million. As part of the purchase agreement, Equinox Gold also agreed to distribute to New Gold certain Alternative Minimum Tax (“AMT”) credits recorded as of the closing date as the AMT credit amounts are realized by the Company.
During the first quarter of 2019, the Company finalized the working capital adjustment with New Gold, resulting in an increase in consideration paid of $3.4 million. As a result of the change in fair value of consideration transferred, the bargain purchase gain recognized on acquisition was reduced by $5.5 million and is accounted for retrospectively. Certain comparative figures have been recast to reflect these adjustments.
		Preliminary		Adjustments		Total
	Cash consideration paid	$	158,000	$	-	$	158,000
	Working capital adjustment		9,063		3,388		12,451
	Total consideration	$	167,063	$	3,388	$	170,451

The purchase consideration was provisionally allocated as follows:
		Reported as of December 31, 2018		Adjustments		Reported as of June 30, 2019
	Net assets/(liabilities) acquired as of October 30, 2018
	Cash and cash equivalents	$	13,665	$	-	$	13,665
	Accounts receivables, prepaids expenses and deposits		1,842		-		1,842
	Inventory		91,975		-		91,975
	Current tax receivable		2,779		(1,574)		1,205
	Mineral property, plant and equipment		95,736		-		95,736
	Other assets		75		-		75
	Deferred tax assets		5,319		-		5,319
	Accounts payable and accrued liabilities		(11,267)		(494)		(11,761)
	Reclamation obligation		(17,675)		-		(17,675)
	Other liabilities		(150)		-		(150)
	Fair value of Mesquite net assets acquired	$	182,299	$	(2,068)	$	180,231
	Bargain purchase gain recognized in net loss at October 30, 2018	$	15,236	$	(5,456)	$	9,780

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

4. Acquisition of Mesquite (CONTINUED)
As of the date of these condensed consolidated interim financial statements, the allocation of the Mesquite Acquisition purchase price has not been finalized. The determination of the fair values of heap leach inventory, mineral property, AMT and deferred income taxes are all subject to change. Any further adjustments made will be recognized retrospectively and comparative information will be revised.

5. Inventory
			June 30, 2019		December 31, 2018
	Heap leach ore (current and non-current)	$	107,167	$	81,522
	Less: Non-current portion of heap leach ore		(66,795)		(50,114)

	Current portion of heap leach ore		40,372		31,408
	Work-in-process		5,961		7,058
	Supplies		11,114		10,005
	Finished goods		373		1,200
	Current inventory	$	57,820	$	49,671
Non-current inventory relates to heap leach ore at Mesquite not expected to be recovered in the next 12 months.

6. Exploration and evaluation Assets

On May 16, 2019, the Company sold its 100% interest in the Elk Gold project for gross proceeds of $7.4 million (C$10.0 million) comprised of: (i) $0.7 million (C$1.0 million) cash payment received on closing; and a (ii) $6.7 million (C$9.0 million) non-interest bearing promissory note payable in annual instalments of $2.2 million (C$3.0 million) commencing two years from closing. The total amount due under the promissory note may be adjusted such that if the buyer pays an additional C$7 million within two years from closing, that will represent full and final payment; or if the buyer pays an additional C$8.5 million within three years from closing, that will represent full and final payment.

The fair value of consideration received was determined to be $5.2 million, of which $4.4 million is included in other receivables. The fair value of the consideration was determined by discounting the expected cash flows using a discount rate of 15%. For the three and six months ended June 30, 2019, the Company recorded a gain on disposal of Elk Gold of $0.1 million in other income.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

7. Mineral properties, plant and equipment
Net carrying costs at June 30, 2019 and December 31, 2018 are as follows:
		Mineral properties		Plant and equipment		Pre- development assets		Construction in-progress		Other property and equipment			Total
	Cost

	Balance - December 31, 2017	$	72,592	$	47,873	$	44,194	$	-	$	223	$	164,882
	Transfers		-		-		(44,194)		44,194		-		-
	Acquisition of Mesquite		36,116		59,121		-		499		-		95,736
	Additions/expenditures		308		2,285		-		123,124		38		125,755
	Impairment		-		(4,448)		-		(206)		(13)		(4,667)
	Disposals		-		(9,270)		-		(570)		(89)		(9,929)
	Change in reclamation cost asset		1,465		-		-		-		-		1,465
	Balance - December 31, 2018		110,481		95,561		-		167,041		159		373,242
	Additions/expenditures		10,635		759		-		41,986		868		54,248
	Transfers		-		1,071		-		(1,071)		-		-
	Disposals		-		(1,683)		-		(2)		(74)		(1,759)
	Change in reclamation cost asset		776		-		-		-		-		776
	Balance - June 30, 2019	$	121,892	$	95,708	$	-	$	207,954	$	953	$	426,507

	Accumulated depreciation

	Balance - December 31, 2017	$	-	$	1,167	$	-	$	-	$	43	$	1,210
	Additions		1,783		5,969		-		-		87		7,839
	Disposals		-		(1,939)		-		-		(30)		(1,969)
	Balance - December 31, 2018		1,783		5,197		-		-		100		7,080
	Additions		3,202		6,506		-		-		127		9,835
	Disposals		-		(729)		-		-		(34)		(763)
	Balance - June 30, 2019	$	4,985	$	10,974	$	-	$	-	$	193	$	16,152

	Net book value
	At December 31, 2018	$	108,698	$	90,364	$	-	$	167,041	$	59	$	366,162
	At June 30, 2019	$	116,907	$	84,734	$	-	$	207,954	$	760	$	410,355
During the six months ended June 30, 2019, the Company capitalized to construction-in-progress $41.7 million of costs at Aurizona, which includes interest and accretion on the Aurizona project debt totaling $5.1 million. During the six months ended June 30, 2019, $5.6 million proceeds from the sale of gold during the ramp-up of Aurizona was deducted from construction-in-progress.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

8. Loans and borrowings
		Note		June 30, 2019		December 31, 2018
	Revolving Credit Facility	(a)	$	96,526	$	97,858
	Convertible Notes	(b)		124,505		-
	Short-term Loan	(c)		19,684		-
	Sprott Facility	(b)		-		18,249
	Aurizona Construction Facility	(b)		-		68,831
	Standby Loan			11,899		11,803
	Debenture			8,827		17,818

				261,441		214,559
	Current portion			40,410		54,704
	Non-current portion		$	221,031	$	159,855

(a) Revolving Credit Facility
On April 11, 2019, the Company converted its $100 million Mesquite Acquisition Credit Facility into a senior secured $130 million corporate revolving credit facility (the “Revolving Credit Facility”) with the existing syndicate of lenders led by the Bank of Nova Scotia. Under the terms of the Revolving Credit Facility, $100 million was available immediately and outstanding at closing. The remaining $30 million was made available in late June 2019 upon registration of certain security documents, the achievement of certain production metrics at Aurizona and the satisfaction of customary conditions. The Revolving Credit Facility matures on October 30, 2022, at which date it must be repaid in full, and incurs interest at an annual rate of LIBOR plus 2.5% to 4%, subject to certain leverage ratios. Until certain operating performance criteria are met at Aurizona, credit availability reductions of $40 million will be required on December 31, 2020 and 2021 and amounts drawn in excess of the reduced credit availability would become due. On achievement of the performance criteria, no further principal payments will be due until maturity of the facility. As at June 30, 2019, these criteria had not been met. The Company determined that amending the Mesquite Acquisition Credit Facility to become the Revolving Credit Facility was a non-substantial modification of the existing outstanding debt. The Company recognized a gain on modification of debt of $0.9 million to reflect the adjusted amortized cost of the drawn portion of the Revolving Credit Facility. Additional transaction costs of $1.0 million were incurred in relation to the Revolving Credit Facility, of which $0.8 million was allocated to the drawn portion and $0.2 million has been recognized as deferred financing costs within other assets related to the remaining $30 million loan commitment. The carrying value of the drawn portion is accreted to the principal amount over the term of the Revolving Credit Facility using an effective interest rate of 7.4%.
(b) Convertible Notes
On April 11, 2019, the Company issued $130 million in Convertible Notes to Mubadala Investment Company (“Mubadala”) and on May 7, 2019, pursuant to a pre-existing investor rights agreement, the Company issued $9.7 million in additional convertible notes (referred to together with the Mubadala notes as the “Notes”) to Pacific Road Resources Funds (“Pacific Road”).

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

8. Loans and borrowings (continued)
The following is a summary of the changes in loans and borrowings arising from investing and financing activities:

	Balance - December 31, 2017	$	43,461
	Carrying value of debt extinguished by issuance of shares		(14,205)
	$60 million draw from Aurizona Construction Facility, net of deferred financing costs		51,829
	$120 million draw from Mesquite acquisition facilities, net of deferred financing costs		114,576
	$12 million draw from Standby Loan, net of deferred financing costs		11,760
	Accretion and accrued interest		6,692
	Recognition of embedded derivative and change in fair value		1,283
	Repayment of long-term debt		(837)
	Balance - December 31, 2018		214,559
	$10 million draw from Aurizona Construction Facility, net of deferred financing costs		8,814
	$20 million draw from Short-term Loan, net of deferred financing costs (note 8(c))		19,600
	Modification gain and transaction costs on conversion of Mesquite Acquisition Credit Facility to Revolving Credit Facility (note 8(a))		(1,804)
	Debt component of Convertible Notes, net of deferred financing costs (note 8(b))		123,942
	Repayment of Sprott loans (note 8(b))		(111,211)
	Loss on extinguishment of Sprott debt (note 8(b))		13,320
	Debenture principal repayment settled by issuance of shares		(10,450)
	Accretion and accrued interest		4,671
	Balance - June 30, 2019	$	261,441

9. Derivative liabilities
The functional currency of the Company is the US dollar. As the exercise price of the Company’s share purchase warrants is fixed in Canadian dollars, these warrants are considered a derivative as a variable amount of cash in the Company’s functional currency will be received on exercise. Accordingly, these share purchase warrants are classified and accounted for as a derivative liability at fair value through net income or loss. The fair value of the warrants is determined using the Black-Scholes option pricing model at the period-end date or the market price on the TSX-V for warrants that are trading.

	Balance - December 31, 2017	$	37,784
	Warrants issued		336
	Warrants exercised		(257)
	Change in fair value		(19,002)
	Balance - December 31, 2018		18,861
	Warrants exercised		(287)
	Change in fair value		3,980
	Balance - June 30, 2019	$	22,554

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

9. Derivative liabilities (CONTINUED)
The fair value for 40.6 million non-traded warrants was calculated with the following weighted average assumptions:
		June 30, 2019		December 31, 2018
	Risk-free rate		1.6%	1.9%
	Warrant expected life		1.7 years	2.2 years
	Expected volatility		44.7%	46.2%
	Expected dividend		0%	0%
	Share price (C$)		$1.22	$1.05
The fair value of 80.5 million traded warrants was based on the market price of C$0.19 per warrant on June 30, 2019 (December 31, 2018 - C$0.17).

10. Share capital
(a) Authorized and issued
The Company is authorized to issue an unlimited number of common shares with no par value. At June 30, 2019, 565.5 million common shares were issued and outstanding.
(b) Share purchase options
During the six months ended June 30, 2019, the Company granted 1.7 million (six months ended June 30, 2018 - 2.6 million) share purchase options to directors, officers, employees and consultants of the Company. The fair value of options granted was determined using the Black-Scholes option pricing model using the following weighted average assumptions:
				2019	2018
	Exercise price (C$)			$1.05		$1.15
	Risk-free interest rate			1.9%		2.1%
	Volatility			65.7%		68.6%
	Dividend yield			0.0%		0.0%
	Expected life			5.0 years		4.8 years
Total share-based compensation expense for the three and six months ended June 30, 2019 related to the vesting of stock options was $0.2 million and $0.5 million, respectively (three months ended June 30, 2018 - $0.3 million; six months ended June 30, 2018 - $0.6 million).
A summary of the Company’s share purchase options is as follows:
			Shares issuable on exercise of options		Weighted average exercise price (C$)
		Outstanding, December 31, 2017	13,178,869		$	1.40
		Granted	2,715,260			1.09
		Exercised	(792,600)			0.62
		Expired/forfeited	(1,219,891)			2.14
		Outstanding, December 31, 2018	13,881,638			1.27
		Granted	1,741,514			1.05
		Exercised	(248,625)			0.43
		Expired/forfeited	(893,918)			2.50
		Outstanding, June 30, 2019	14,480,609		$	1.18

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

10. SHARE CAPITAL (CONTINUED)
At June 30, 2019, the Company had the following number of shares issuable for options issued and outstanding:
	Options Outstanding					Options Exercisable
	Range of exercise price (C$)	Number of shares issuable on exercise of options		Weighted average exercise price (C$)	Weighted average remaining contractual life (years)	Number of shares issuable on exercise of options		Weighted average exercise price (C$)
	$0.43 - $0.99	5,660,425	$	0.61	1.82	5,645,425	$	0.61
	$1.00 - $1.99	6,921,899		1.11	3.62	4,073,505		1.15
	$2.00 - $2.99	783,105		2.67	1.44	783,105		2.67
	$3.00 - $3.43	1,115,180		3.40	2.06	1,115,180		3.40
		14,480,609				11,617,215

The weighted average exercise price of options exercisable at June 30, 2019, was C$1.21.

A continuity of the Company’s share purchase warrants is as follows:

	Shares issuable on exercise of warrants	Weighted average exercise price (C$)
Outstanding, December 31, 2017	117,285,909	$	2.49
Issued	7,875,000		1.07
Exercised	(639,579)		0.47
Expired	(1,692,012)		4.63
Outstanding, December 31, 2018	122,829,318		2.38
Exercised	(1,041,176)		1.01
Expired	(757,185)		2.92
Outstanding, June 30, 2019	121,030,957	$	2.39

Pursuant to the distribution of shares of Solaris Copper, upon the exercise of any Equinox Gold warrant for the original exercise price, Equinox Gold warrant holders will receive one Equinox Gold share and one-tenth of a Solaris Copper share. The Company, as agent for Solaris Copper, will collect and pay to Solaris Copper an amount for each one-tenth of a Solaris Copper share issued that is equal to the exercise price under the Equinox Gold warrant multiplied by one-tenth.

At June 30, 2019, the Company had the following number of shares issuable for share purchase warrants issued and outstanding:

Range of exercise price (C$)	Shares issuable on exercise of warrants	Weighted average exercise price (C$)		Expiry dates
$0.73 - $0.99	18,162,272	$	0.89	June 2020 - May 2021
$1.00 - $1.99	17,570,231		1.12	June 2020 - May 2023
$2.00 - $2.99	4,152,485		2.31	December 2020 - August 2021
$3.00 - $3.99	80,466,919		3.00	October 2021
$4.00 - $4.17	679,050		4.17	June 2020 - July 2020
	121,030,957

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

10. SHARE CAPITAL (CONTINUED)
(d) Restricted share units
During the six months ended June 30, 2019, the Company granted 2.9 million RSUs (six months ended June 30, 2018 - 2.9 million) and 0.6 million pRSUs (six months ended June 30, 2018 - 0.1 million) to directors, officers and employees. The pRSUs vest three years from the date of grant and the actual number of shares issued will range from 50% to 150% of the pRSU grant based on the Company’s share price performance compared to the Junior Gold Miner’s Index (GDXJ). The weighted average share price for RSUs and pRSUs granted in the six months ended June 30, 2019 was C$1.08.
Total share-based compensation expense for the three and six months ended June 30, 2019 related to the vesting of RSUs and pRSUs was $0.7 million and $1.3 million, respectively (three months ended June 30, 2018 - $0.7 million; six months ended June 30, 2018 - $2.0 million).
A continuity table of the RSUs and pRSUs outstanding is as follows:
		RSUs	pRSUs
	Outstanding, December 31, 2017	716,866	2,210,000
	Granted	3,454,993	4,110,500
	Issued	(1,438,201)	(607,753)
	Forfeited	(17,250)	-
	Outstanding, December 31, 2018	2,716,408	5,712,747
	Granted	2,877,800	618,700
	Issued	(838,903)	(55,250)
	Forfeited	(2,500)	(221,000)
	Outstanding, June 30, 2019	4,752,805	6,055,197

11. operating expenses
		Three months ended June 30,			Six months ended June 30,
				2019			2019
	Operating costs
	Raw materials and consumables		$	19,337		$	34,935
	Salaries and employee benefits			6,741			13,022
	Contractors			3,165			5,958
	Repairs and maintenance			5,047			8,976
	General and administrative			1,325			2,443
	Royalties			951			1,899

				36,566			67,233
	Less: Change in inventories			(15,255)			(25,061)
	Total operating costs		$	21,311		$	42,172

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

12. General and administration
General and administration for the Company consists of the following components by nature:
		Three months ended June 30,				Six months ended June 30,
			2019		2018		2019		2018
	Salaries and benefits	$	974	$	818	$	2,054	$	1,684
	Professional fees		650		741		920		1,047
	Office and other expenses		1,008		726		1,550		1,384
	Share-based compensation		989		1,001		2,132		2,585
	Amortization		69		20		142		41
	Total general and administration	$	3,690	$	3,306	$	6,798	$	6,741

13. Other income (expense)
Other income (expense) consists of the following components:
		Three months ended June 30,				Six months ended June 30,
			2019		2018		2019		2018
	Change in fair value of derivative liabilities	$	1,311	$	9,951	$	(3,980)	$	14,533
	Foreign exchange gain (loss)		366		(4,876)		1,431		(5,272)
	Loss on settlement of debt and production-linked liability		(13,903)		-		(13,903)		(1,299)
	Other income (expense)		1,578		(884)		1,503		(1,054)
	Total other income (expense)	$	(10,648)	$	4,191	$	(14,949)	$	6,908

14. Non-controlling interests

On March 19, 2019, Solaris Copper completed a private placement issuing 15.7 million common shares at a price of C$0.25 per common share for gross proceeds of $3.0 million (C$3.9 million). Transaction costs of $0.1 million were incurred in connection with the private placement.

On June 20, 2019, Solaris Copper completed a further private placement issuing 2.5 million common shares at a price of C$0.25 per common share for gross proceeds of $0.5 million (C$0.6 million). Transaction costs incurred were nominal. For the three and six months ended June 30, 2019, the Company recorded a dilution loss of $0.2 million and $0.5 million, respectively.

During the three months ended June 30, 2019, the Company determined that Solaris Copper was no longer a controlled subsidiary due to the dilution of its interest in Solaris Copper to approximately 32% and the fact that Solaris Copper was self-sustaining for an extended period. On deconsolidation, the Company recorded its interest retained in Solaris Copper at fair value and amounts receivable from Solaris Copper of $1.5 million were included in other assets. For the three and six months ended June 30, 2019, the Company recorded a gain of $1.8 million on deconsolidation in other income.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

15. Segmented information
The Company manages its operating segments by operating mines, development projects and exploration projects. Results from operations for these segments are summarized below:
		Mesquite		Aurizona		Castle Mountain		Other		Corporate		Total
	Three months ended June 30, 2019

	Revenues	$	35,396	$	-	$	-	$	-	$	-	$	35,396
	Operating expenses		(21,311)		-		-		-		-		(21,311)
	Depreciation and depletion		(4,475)		-		-		-		-		(4,475)
	Earnings from mine operations		9,610		-		-		-		-		9,610
	Exploration		-		(220)		(1,823)		(1,117)		-		(3,160)
	General and administration		-		-		-		(555)		(3,135)		(3,690)
	Income (loss) from operations		9,610		(220)		(1,823)		(1,672)		(3,135)		2,760
	Finance expense		(1,940)		(92)		(5)		-		(1,277)		(3,314)
	Finance income		4		33		-		24		426		487
	Other income (expense)		(1,809)		(13,599)		20		(34)		4,774		(10,648)
	Income (loss) before taxes		5,865		(13,878)		(1,808)		(1,682)		788		(10,715)
	Tax expense		(2,827)		539		-		-		2,336		48
	Net income (loss)	$	3,038	$	(13,339)	$	(1,808)	$	(1,682)	$	3,124	$	(10,667)

				Aurizona		Castle Mountain		Other		Corporate		Total
	Three months ended June 30, 2018

	Exploration			$	(447)	$	(1,713)	$	(567)	$	-	$	(2,727)
	General and administration				-		-		-		(3,306)		(3,306)
	Loss from operations				(447)		(1,713)		(567)		(3,306)		(6,033)
	Finance expense				(75)		-		-		(666)		(741)
	Finance income				2,016		-		-		272		2,288
	Other income (expense)				(5,016)		93		120		8,994		4,191
	Income (loss) from continuing operations before taxes				(3,522)		(1,620)		(447)		5,294		(295)
	Tax expense				(1,383)		-		-		-		(1,383)
	Loss from discontinued operation				-		-		(25,824)		-		(25,824)
	Net income (loss)			$	(4,905)	$	(1,620)	$	(26,271)	$	5,294	$	(27,502)

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

15. Segmented information (continued)
			Mesquite			Aurizona				Castle Mountain		Other				Corporate				Total
		Six months ended June 30, 2019

		Revenues	$	70,780		$	-			$	-	$		-		$	-			$	70,780
		Operating expenses		(42,172)			-				-			-			-				(42,172)
		Depreciation and depletion		(9,122)			-				-			-			-				(9,122)
		Earnings from mine operations		19,486			-				-			-			-				19,486
		Exploration		-			(505)				(3,580)			(2,003)			-				(6,088)
		General and administration		-			-				-			(1,115)			(5,683)				(6,798)
		Loss from operations		19,486			(505)				(3,580)			(3,118)			(5,683)				6,600
		Finance expense		(4,533)			(181)				(36)			-			(2,352)				(7,102)
		Finance income		7			120				-			28			1,100				1,255
		Other income (expense)		(1,755)			(13,336)				-			-			142				(14,949)
		Income (loss) before taxes		13,205			(13,902)				(3,616)			(3,090)			(6,793)				(14,196)
		Tax expense		(5,024)			426				-			-			2,336				(2,262)
		Net income (loss)	$	8,181		$	(13,476)			$	(3,616)	$		(3,090)		$	(4,457)			$	(16,458)

						Aurizona				Castle Mountain		Other				Corporate				Total
		Six months ended June 30, 2018

		Exploration				$	(759)			$	(3,443)	$		(1,482)		$	-			$	(5,684)
		General and administration					-				-			-			(6,741)				(6,741)
		Loss from operations					(759)				(3,443)			(1,482)			(6,741)				(12,425)
		Finance expense					(170)				-			-			(1,363)				(1,533)
		Finance income					2,505				-			-			563				3,068
		Other income (expense)					(4,500)				63			74			11,271				6,908
		Income (loss) from continuing operations before taxes					(2,924)				(3,380)			(1,408)			3,730				(3,982)
		Tax expense					(1,383)				-			-			-				(1,383)
		Loss from discontinued operation					-				-			(26,576)			-				(26,576)
		Net income (loss)				$	(4,307)			$	(3,380)	$		(27,984)		$	3,730			$	(31,941)

				Total assets									Total liabilities
					June 30, 2019				December 31, 2018						June 30, 2019				December 31, 2018
	Mesquite			$	231,043			$	220,582				$		(137,407)			$	(162,703)
	Aurizona				341,520				321,223						(31,873)				(111,165)
	Castle Mountain				134,913				134,843						(1,667)				(2,466)
	Other				-				25,736						-				(241)
	Corporate				72,051				49,721						(194,898)				(56,000)
				$	779,527			$	752,105				$		(365,845)			$	(332,575)

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

15. Segmented information (continued)
All revenue is attributable to the sale of doré from Mesquite in the United States. Information about the Company’s non-current assets by jurisdiction is detailed below:
		June 30, 2019		December 31, 2018
	Brazil	$	330,789	$	294,343
	United States		302,363		283,304
	Canada		31,806		19,800
	Mexico		-		19,460
	Other		-		452
		$	664,958	$	617,359

16. Fair value measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels in which to classify the inputs of valuation techniques used to measure fair values.

Level 1 - quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly, such as prices, or indirectly (derived from prices).

Level 3 - inputs are unobservable (supported by little or no market activity) such as non-corroborative indicative prices for a particular instrument provided by a third party.

As at June 30, 2019, marketable securities and traded warrants are measured at fair value using Level 1 inputs and non-traded warrants are measured at fair value using Level 2 inputs. The fair value of long-term receivables, Notes, Debenture, Revolving Credit Facility, Short-term Loan and Standby Loan, for disclosure purposes, are determined using Level 2 inputs. The carrying values of cash and cash equivalents, accounts receivable, reclamation bonds, and accounts payable and accrued liabilities approximate fair value due to their short terms to maturity.

The fair value of marketable securities is measured based on the quoted market price of the related common shares at each reporting date, and changes in fair value are recognized in net income (loss).

The fair value of the traded warrants is measured based on the quoted market price of the warrants at each reporting date. The fair value of the non-traded warrants is determined using an option pricing formula (note 9).

The fair value of long-term receivables, Notes, Debenture, Revolving Credit Facility, Short-term Loan and Standby Loan for disclosure purposes is determined using discounted cash flows based on the expected amounts and timing of the cash flows discounted using a market rate of interest adjusted for appropriate credit risk.

There were no transfers between fair value levels during the period.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

16. Fair value measurements
The following table provides the fair value of each classification of financial instrument:
			June 30, 2019		December 31, 2018
	Loans and receivables:
	Cash and cash equivalents	$	33,046	$	60,822
	Restricted cash		14,492		15,596
	Receivable from Serabi		11,442		10,909
	Long term receivables		14,241		7,629
	Reclamation bonds and other receivables		1,560		767
	Financial asset at FVTPL:
	Marketable securities		1,568		1,782
	Total financial assets	$	76,349	$	97,505

	Financial liabilities at FVTPL:
	Traded warrants	$	11,380	$	9,730
	Non-traded warrants		11,174		9,131
	Other:
	Accounts payable and accrued liabilities		41,416		55,460
	Convertible Notes		127,570		-
	Revolving Credit Facility		97,756		84,844
	Debenture		9,047		17,746
	Sprott Facility		-		18,452
	Aurizona Credit Facility		-		67,627
	Standby Loan		12,000		12,000
	Short-term Loan		20,000		-
	Production-linked liability		-		5,024
	Other liabilities		1,697		1,706
	Total financial liabilities	$	332,040	$	281,720

17. Commitments and contingencies
At June 30, 2019, the Company had the following contractual obligations outstanding:
			Total		Within 1 year		1-2 years		2-3 years		3-4 years		4-5 years		Thereafter
	Loans and borrowings and accrued interest	$	338,985	$	57,970	$	13,086	$	13,086	$	109,692	$	145,151	$	-
	Accounts payable and liabilities		40,596		40,596		-		-		-		-		-
	Reclamation obligations⁽¹⁾		32,214		408		1,611		3,329		6,155		4,363		16,348
	Purchase commitments		23,048		22,407		586		49		3		3		-
	Lease payments		967		318		189		158		163		139		-
(1) Amount represents undiscounted future cash flows.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited, tables expressed in thousands of United States dollars, except share and per share amounts)

For the three and six months ended June 30, 2019 and 2018

17. Commitments and contingencies (CONTINUED)

Due to the nature of the Company’s operations, various legal, tax, environmental and regulatory matters are outstanding from time to time. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events. While the outcomes of these matters are uncertain, based upon the information currently available, the Company does not believe that these matters in aggregate will have a material adverse effect on its condensed consolidated interim financial statements. In the event that management’s estimate of the future resolution of these matters changes, the Company will recognize the effects of these changes in its condensed consolidated interim financial statements in the period in which such changes occur.

The Company is a defendant in various lawsuits and legal actions, principally for alleged fines, taxes and labour related matters in Brazil. Management regularly reviews these lawsuits and legal actions with outside counsel to assess the likelihood that the Company will ultimately incur a material cash outflow to settle the claim. To the extent management believes it is probable that a cash outflow will be incurred to settle the claim, a provision for the estimated settlement amount is recorded. At June 30, 2019, the Company recorded a legal provision for these items totaling $3.8 million (December 31, 2018 - $2.9 million) which is included in other long-term liabilities.

The Company is contesting federal income and municipal VAT assessments in Brazil. Brazilian courts often require a taxpayer to post cash or a guarantee for the disputed amount before hearing a case. It can take up to five years to complete an appeals process and receive a final verdict. At June 30, 2019, the Company has recorded restricted cash of $13.6 million (December 31, 2018 - $7.5 million) in relation to insurance bonds for tax assessments in the appeals process.

The Company may in the future have to post security, by way of cash, insurance bonds or equipment pledges, with respect to certain federal income and municipal tax assessments being contested, the amounts and timing of which are uncertain. The Company and its advisor believe that the federal income and municipal tax assessments which are under appeal are wholly without merit and no provision has been recorded with respect to these matters.

In certain jurisdictions where the Company operates, entities that are exporters are permitted to maintain offshore bank accounts and are required to register all transactions resulting in deposits into and payments out of those accounts. The Company has identified that in certain instances it has not registered all transactions prior to 2017. The Company has been advised by its tax and foreign trade legal advisors that the maximum fines imposable under statute that could result from non-compliance are up to 15% of the unreported foreign currency transaction, with a five-year statute of limitations. At June 30, 2019, a provision for $0.4 million (December 31, 2018 - $0.9 million) has been included in the provision for legal matters with respect to noncompliance with the foreign currency registration requirements.

If the Company is unable to resolve all these matters favourably, there may be an adverse impact on the Company’s financial performance, cash flows and results of operations.

8. Loans and borrowings (continued)

The Notes mature on April 12, 2024 and bear interest at a fixed rate of 5% per year payable quarterly in arrears. The Notes are convertible at the holder’s option into common shares of the Company at a fixed conversion price of US$1.05 per share. Holders may exercise their conversion option at any time, provided that the holder owns less than 20% of the outstanding common shares of the Company. On or after October 11, 2022, the Company has a call right that may be exercised if the 90-day VWAP of the Company’s shares exceeds US$1.365 for a period of 30 consecutive days. If the call right is exercised, the holders would be required to either (i) exercise the conversion option on the remaining principle outstanding or (ii) demand cash payment from the Company subject to a predetermined formula based on the conversion price of US$1.05 per share and the Company’s share price at the time of redemption.

Gross proceeds from the Notes of $139.7 million was allocated to the debt and equity components. The fair value of the debt portion of $126.8 million was estimated using a discounted cash flow model based on an expected term of 5 years and a discount rate of 7.5%. The residual of $10.5 million ($12.8 million net of deferred tax expense of $2.3 million) was recognized in other equity reserves. The debt component is recorded at amortized cost, net of transaction costs, and is accreted to the principal amount over the term of the Notes using an effective interest rate of 7.7%. Transaction costs of $3.2 million were incurred and allocated on a pro-rata basis with $2.9 million allocated to the debt component and $0.3 million allocated to the equity component.

The Notes are secured by all assets of the Company and are subordinate to the Revolving Credit Facility.

On April 11, 2019, in conjunction with the issuance of the Notes, the Company used $116.9 million of available proceeds from the Notes to repay in full principal and accrued interest outstanding under the Sprott Facility and the Aurizona Construction Facility and terminate the associated Aurizona production-linked payment obligation to Sprott. The Company recorded a loss on settlement of debt of $13.3 million and loss on settlement of the production-payment liability of $0.6 million for the three and six months ended June 30, 2019.

(c) Short-term Loan

On April 11, 2019, the Company entered into a one-year, unsecured $20 million revolving credit facility (the “Short-term Loan”) with the Company’s Chairman, Ross Beaty, which is a related party transaction, to provide short-term financing for general corporate and working capital purposes. The facility bears interest at 8% per annum, payable monthly, and matures on April 12, 2020, at which date it must be repaid in full.

In connection with the Short-term Loan, the Company incurred a standby fee of 1% and commitment fee of 1%, totaling $0.4 million, which are included in the carrying value of the Short-term Loan and are amortized using an effective interest rate of 10.1%.