NOTE 19 ACQUISITIONS

Acquisition of Lexam VG.

On April 26, 2017, the Company completed the acquisition of 100% of the issued and outstanding common shares of Lexam by the way of an Arrangement Agreement dated February 13, 2017 and related Plan of Arrangement (the “Arrangement”). Pursuant to the Arrangement, each common share of Lexam was exchanged for 0.056 of a common share of the Company and each option to purchase a common share of Lexam was exchanged for a replacement option entitling the holder to acquire 0.056 share of the Company’s common stock.

The Company’s total purchase price of $39.2 million was comprised of 12,687,035 common shares issued from treasury valued at $3.00 per share, share replacement awards of $0.1 million and transaction costs totaling $1.0 million. The Lexam acquisition was accounted for as an asset acquisition and transaction costs associated with the acquisition were capitalized to the Mineral Property Interests acquired, consistent with the Company’s Mineral Property Interests accounting policy. The primary purpose of the acquisition was to add gold resources to the Company’s resource base in a premier geopolitically stable mining jurisdiction.

The following table sets out the allocation of the purchase price to assets acquired and liabilities assumed, based on management’s estimates of relative fair value:


Total purchase price:
Common shares issued for acquisition	$	38,141
Transaction fees incurred		1,017
	$	39,158
Fair value of assets acquired and liabilities assumed:
Mineral property interests	$	41,595
Cash and cash equivalents		177
Other current assets		86
Other assets		312
Accounts payable and accrued liabilities		(288)
Reclamation obligations		(570)
Deferred income tax liabilities		(2,154)
	$	39,158

The Mineral property interests acquired include a 100% interest in the Buffalo Ankerite, Fuller and Davidson Tisdale prospects and a 61% interest in the Paymaster prospect all located in Timmins, Ontario. The remaining 39% interest in the Paymaster property is held by Goldcorp Inc., a joint venture partner. Certain properties are also subject to a net profit interest (“NPI”) in the 10% to 20% range, payable to an unrelated third party.

Acquisition of Black Fox Complex

On August 25, 2017, the Company entered into an Asset Purchase Agreement (the “APA”) with Primero Mining Corp. (“Primero”), whereby the Company, through its wholly-owned subsidiary, purchased and assumed the Purchased Assets and Assumed Liabilities as defined within the APA related to the Black Fox Complex for total cash consideration of $27.5 million, which is the purchase price of $35.0 million less closing adjustments. The Black Fox Complex includes the Black Fox mine site, mill, property, plant and equipment and adjacent exploration properties located in Township of Black River-Matheson, Ontario, Canada. The Company concluded that the acquired assets and assumed liabilities constitute a “business” under U.S. GAAP and accordingly, the acquisition was accounted for as a business combination rather than an asset acquisition. The transaction was completed on October 6, 2017.

Preliminary fair value measurements of assets acquired and liabilities assumed were made during the fourth quarter of 2017. The Company continues to evaluate the available information, and the purchase price allocation is subject to finalization of the Company’s analysis of the fair value of the assets and liabilities as of closing date of the transaction . Accordingly, the purchase price allocation is preliminary and adjustments, if any, could be material. The following table summarizes the amounts assigned to the assets acquired and liabilities assumed as of the acquisition date.


Total purchase price:
Purchase price	$	35,000
Adjustments to purchase price		(7,500)
	$	27,500
Fair value of assets acquired and liabilities assumed:
Cash	$	249
Accounts Receivable		470
Prepaids		63
Inventory		4,704
Mineral Property Interests		8,954
Plant and Equipment		33,683
Accounts Payable		(5,247)
Accrued Liabilities		(3,213)
Short term capital lease liability		(557)
Asset retirement obligation		(11,233)
Long term capital lease liability		(172)
Deferred tax liability		(201)
Net assets acquired in acquisition	$	27,500

The Company determined that the book value of the accounts receivables included in the purchase price allocation approximates their fair value due to their short-term nature. The gross contractual amounts of the receivables approximates their fair value as the Company has determined that the value of contractual cash flows not expected to be collected are insignificant.

The Company recognized $1.3 million of acquisition-related costs associated with the acquisition of the Black Fox Complex. These costs were expensed and were included in General and Administrative expenses.

The amounts of revenue and income from operations associated with the Black Fox Complex acquisition included in our consolidated statements of comprehensive income for 2017 are as follows:


	2017
Gold and silver sales	$	11,620
Net (loss) income		757

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents consolidated results assuming the Black Fox Complex acquisition occurred on January 1, 2016. The unaudited pro forma financial information does not give effect to potential synergies that could result from the transactions and is not necessarily indicative of the results of future operations.


	Twelve Months Ended, December 31
Unaudited Combined Pro Forma Results of Operations (in thousands)	2017 (Unaudited)		2016 (Unaudited)
Gold and silver sales	$	131,072	$	131,983
Net (loss) Income		(1,093)		17,462

Pro forma net (loss) income per share
Basic	$	(0.00)	$	0.06
Diluted		(0.00)		0.06

Significant adjustments to the pro forma information above include:

Expensed exploration costs incurred in connection with properties with no SEC Industry Guide 7 reserves.

Revision of depreciation costs to correspond to the fair value of assets acquired and the Black Fox life of mine plan.

Revision of accretion expense updated for (i) discount rate to a credit-adjusted-risk-free rate as required by US GAAP, (ii) 2017 closure costs estimate approved by the MNDM and (iii) the Company’s revised life of mine plan.

Adjustments to eliminate historical impairment charges resulting from events unrelated to the business combination and not expected to have a continuing impact on the Company post-acquisition.

Adjustments to increase interest income as the combined entity does not have outstanding debt offset by decreases to interest income as a result of increasing the finance charge related to the surety bonds and increase to lease interest expense as a result of differences identified in effective interest rates.

Various adjustments to remove one-time items not expected to have a continuing impact on the Company post acquisition.