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Form 6-K SILVER STANDARD RESOURCE For: Dec 31

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February 20, 2015 2:03 PM EST


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For February 20, 2015
Commission File Number: 000-26424
SILVER STANDARD RESOURCES INC.
(Translation of registrant's name into English)

#800 - 1055 Dunsmuir Street
PO Box 49088, Bentall Postal Station
Vancouver, British Columbia
Canada V7X 1G4
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

[ ] Form 20-F   [x] Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [      ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [           ]

INCORPORATION BY REFERENCE

Exhibits 99.1 and 99.2 hereto are each hereby incorporated by reference into the registration statements on Form S-8 (File No. 333-185498, 333-196116 and 333-198092) of Silver Standard Resources Inc.

DOCUMENTS FILED AS PART OF THIS FORM 6-K

See the Exhibit Index hereto.

SIGNATURES

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

 
Silver Standard Resources Inc.
 
(Registrant)
 
 
 
Date: February 20, 2015
By:
Signed: “Gregory Martin”
 
 
Gregory Martin
 
Title:
Chief Financial Officer





SUBMITTED HEREWITH

Exhibits






Silver Standard Resources Inc.
Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013








Management’s Responsibility for the Financial Statements
The preparation and presentation of the accompanying consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) are the responsibility of management and have been approved by the Board of Directors.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Financial statements, by nature, are not precise since they include certain amounts based upon estimates and judgments. When alternative methods exist, management has chosen those it deems to be the most appropriate in the circumstances.
Management, under the supervision of and the participation of the Chief Executive Officer and the Chief Financial Officer, has a process in place to evaluate disclosure controls and procedures and internal control over financial reporting as required by Canadian and U.S. securities regulations. We, as Chief Executive Officer and as Chief Financial Officer, will certify our annual filings with the Canadian Securities Administrators and the Securities and Exchange Commission as required in Canada by National Instrument 52-109 and in the United States as required by the Sarbanes-Oxley Act of 2002.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements. The Board carries out this responsibility principally through its Audit Committee which is independent from management.
The Audit Committee is appointed by the Board of Directors and reviews the consolidated financial statements and MD&A; considers the report of the external auditors; assesses the adequacy of our internal controls, including management’s assessment described below; examines the fees and expenses for audit services; and recommends to the Board the independent auditors for appointment by the shareholders. The independent auditors have full and free access to the Audit Committee and meet with it to discuss their audit work, our internal control over financial reporting and financial reporting matters. The Audit Committee reports its findings to the Board for consideration when approving the consolidated financial statements for issuance to the shareholders and management’s assessment of the internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2014. In conducting this evaluation, the Marigold mine was excluded from our assessment of effectiveness of our internal control over financial reporting because it was acquired by us in a transaction that completed during 2014. The Marigold mine is owned by a wholly-owned subsidiary, the total assets and total revenues of which represent 35% and 53%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2014.
PricewaterhouseCoopers LLP, our auditor, has audited the effectiveness of our internal control over financial reporting as of December 31, 2014, as stated in their report which appears herein.
"John Smith"
"Gregory Martin"
John Smith
Gregory Martin
President and Chief Executive Officer
Senior Vice President and Chief Financial Officer
 
 
February 19, 2015
 


2


February 19, 2015


Independent Auditor’s Report

To the Shareholders of Silver Standard Resources Inc.

We have completed integrated audits of Silver Standard Resources Inc. and its subsidiaries’ (the “Company”) December 31, 2014 and December 31, 2013 consolidated financial statements and their internal control over financial reporting as at December 31, 2014. Our opinions, based on our audits, are presented below.

Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Silver Standard Resources Inc. and its subsidiaries’, which comprise the consolidated statements of financial position as at December 31, 2014, December 31, 2013 and January 1, 2013 and the consolidated statements of loss, comprehensive loss, changes in shareholders’ equity and cash flows for the years ended December 31, 2014 and December 31, 2013 and the related notes, which comprise a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits as at December 31, 2014, December 31, 2013 and January 1, 2013 and for the years ended December 31, 2014 and December 31, 2013 in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.

An audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.



3



Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Silver Standard Resources Inc. and its subsidiaries as at December 31, 2014, December 31, 2013 and January 1, 2013 and their financial performance and their cash flows for the years ended December 31, 2014 and December 31, 2013 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Emphasis of matter
As discussed in Note 2 (t) to the consolidated financial statements, on January 1, 2014, the Company changed its accounting policy with respect to International Financial Reporting Standard 6, Exploration for and Evaluation of Mineral Resources. Our opinion is not modified with respect to this matter.

Report on internal control over financial reporting
We have also audited Silver Standard Resources Inc. and its subsidiaries’ internal control over financial reporting as at December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Management’s responsibility for internal control over financial reporting
Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting.
 
Auditor’s responsibility
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, based on the assessed risk, and performing such other procedures as we consider necessary in the circumstances.

We believe that our audit provides a reasonable basis for our audit opinion on the Company’s internal control over financial reporting.

Definition of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.



4



Inherent limitations
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Marigold mine from its assessment of internal control over financial reporting as of December 31, 2014 because it was acquired by the Company in a business combination during 2014. We have also excluded Marigold mine from our audit of internal control over financial reporting. Marigold mine is a wholly-owned subsidiary whose total assets and total revenues represent 35% and 53%, respectively, of the Company’s related consolidated financial statement amounts as of and for the year ended December 31, 2014.

Opinion
In our opinion, Silver Standard Resources Inc. and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as at December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.


signed "PricewaterhouseCoopers LLP"

Chartered Accountants



5

Silver Standard Resources Inc.
Consolidated Financial Statements
December 31, 2014 and 2013

CONTENTS
 
Financial Statements
 
 
 
 
 
 
 
 
 
 
Notes to the Consolidated Financial Statements
 
 
 
 
 
 
 
 
Statements of Financial Position
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statements of Shareholders’ Equity
 
 
 
 
 
Statements of Income
 
 
 
 
 
 
 
Additional Disclosures
 
 
 
 
 

6

Silver Standard Resources Inc.
Consolidated Statements of Financial Position
As at December 31, 2014 and 2013 and January 1, 2013
(expressed in thousands of United States dollars)
 
Note
December 31

December 31

January 1

 
 
2014

2013

2013

 
 
 
(restated note 2(t))

(restated note 2(t))

 
 
$ 

$

$

Current assets
 
 
 
 
Cash and cash equivalents
4
184,643

415,657

366,947

Trade receivables and other assets
5
49,824

69,247

83,454

Marketable securities
6
104,785

129,267

34,733

Other current financial assets
7
19,443

10,000

—

Inventory
8
129,228

50,892

74,246

Assets held for sale
9
3,895

6,406

6,344

 
 
491,818

681,469

565,724

Non-current assets
 
 
 
 
Property, plant and equipment
9
439,074

248,637

430,533

Deferred income tax assets
11
—

12,041

7,074

Value added tax receivable
12
29,473

62,423

37,363

Non-current inventory
8
4,326

8,318

5,558

Investment in associate
 
—

—

119,632

Other non-current financial assets
7
21,558

19,847

1,847

Total assets
 
986,249

1,032,735

1,167,731

 
 
 
 
 
Current liabilities
 
 
 
 
Trade and other payables
13
56,645

51,727

42,135

Current provisions
14
60,303

52,397

36,873

Current debt
15
5,922

—

135,805

 
 
122,870

104,124

214,813

 
 
 
 
 
Non-current liabilities
 
 
 
 
Deferred income tax liabilities
11
29,050

19,029

17,778

Close down and restoration provision
16
57,945

32,973

31,222

Debt
15
197,134

187,130

—

Total liabilities
 
406,999

343,256

263,813

 
 
 
 
 
Shareholders' equity
 
 
 
 
Share capital
17
707,034

707,034

706,901

Other reserves
18
(12,723
)
(28,887
)
24,016

Equity component of convertible notes
15
68,347

68,347

—

Retained (deficit) earnings
 
(183,408
)
(57,015
)
173,001

Total shareholders' equity attributable to our shareholders
 
579,250

689,479

903,918

Total liabilities and equity
 
986,249

1,032,735

1,167,731

 
 
 
 
 
Commitments (note 25(c))
 
 
 
 
Events after the reporting date (note 11)
 
 
 
 
The accompanying notes are an integral part of the consolidated financial statements
Approved by the Board of Directors and authorized for issue on February 19, 2015
"Richard D. Paterson"
 
"John Smith"
Richard D. Paterson, Director
 
John Smith, Director

7

Silver Standard Resources Inc.
Consolidated Statements of Loss
For the years ended December 31, 2014 and 2013
(expressed in thousands of United States dollars, except per share amounts)

 
Note
2014

2013

 
 
 
(restated note 2(t))

 
 
$

$

 
 
 
 
Revenue
 
300,122

174,686

Cost of sales
19
(263,922
)
(169,502
)
Income from mine operations
 
36,200

5,184

 
 
 
 
General and administrative expenses
19
(21,862
)
(23,441
)
Exploration, evaluation and reclamation expenses
 
(21,190
)
(23,457
)
Business acquisition costs
3
(5,395
)
—

Impairment charges
10
(40,250
)
(202,440
)
Operating (loss)
 
(52,497
)
(244,154
)
 
 
 
 
Gain on sale of mineral property
9
15,913

67,821

Gain on derecognition of investment in associate
6
—

21,959

Interest earned and other finance income
20
5,825

6,180

Interest expense and other finance expenses
20
(26,412
)
(23,092
)
Other (expense)
21
(13,441
)
(15,521
)
Foreign exchange (loss)
 
(25,203
)
(31,888
)
(Loss) before tax
 
(95,815
)
(218,695
)
 
 
 
 
Income tax (expense)
11
(30,578
)
(11,321
)
 
 
 
 
Net (loss) and net (loss) attributable to shareholders
 
(126,393
)
(230,016
)
 
 
 
 
Weighted average shares outstanding (thousands)
 
 
 
Basic
22
80,754

80,754

Diluted
22
80,754

80,754

 
 
 
 
(Loss) earnings per share
 
 
 
Basic
22

($1.57
)

($2.85
)
Diluted
22

($1.57
)

($2.85
)
The accompanying notes are an integral part of the consolidated financial statements

8

Silver Standard Resources Inc.
Consolidated Statements of Comprehensive Loss
For the years ended December 31, 2014 and 2013
(expressed in thousands of United States dollars)

 
Note
2014

2013

 
 
 
(restated note 2(t))

 
 
$

$

 
 
 
 
Net (loss) for the period attributable to shareholders
 
(126,393
)
(230,016
)
 
 
 

 

Items that may be reclassified to net income or loss:
 
 
 
    Unrealized gain (loss) on marketable securities, net of tax
 
11,811

(54,056
)
     Realized loss recycled to net income or loss
 
2,258

312

    Share of other comprehensive (loss) of associate
6
—

(641
)
    Cumulative translation adjustment
 
35

348

Other comprehensive income (loss)
 
14,104

(54,037
)
Total comprehensive (loss) attributable to shareholders
 
(112,289
)
(284,053
)
Total comprehensive (loss)
 
(112,289
)
(284,053
)
The accompanying notes are an integral part of the consolidated financial statements

9

Silver Standard Resources Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended December 31, 2014 and 2013
(expressed in thousands of United States dollars)

 
Note
Common Shares
Other reserves

Equity

Retained

Total

 
 
Shares

Amount

(note 18)

 component of

earnings

equity

 
 
 
 
(restated note 2(t))

convertible notes

(restated note 2(t))

(restated note 2(t))

 
 
000's

$

$

$

$

$

Balance, January 1, 2013
 
80,747

706,901

24,016

—

173,001

903,918

 
 
 
 
 
 
 
 
   Exercise of stock options
17
7

133

(56
)
—

—

77

   Equity-settled share-based compensation
17
—

—

1,190

—

—

1,190

Equity component of convertible debt
15
—

—

—

68,347

—

68,347

Total comprehensive (loss) for the year
 
—

—

(54,037
)
—

(230,016
)
(284,053
)
Balance, December 31, 2013
 
80,754

707,034

(28,887
)
68,347

(57,015
)
689,479

 
 
 
 
 
 
 
 
   Exercise of stock options
17






—

—

—

   Equity-settled share-based compensation
17
—

—

2,060

—

—

2,060

Total comprehensive income (loss) for the year
 
—

—

14,104

—

(126,393
)
(112,289
)
Balance, December 31, 2014
 
80,754

707,034

(12,723
)
68,347

(183,408
)
579,250

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

10

Silver Standard Resources Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2014 and 2013
(expressed in thousands of United States dollars)
 
Note
2014

2013

 
 
 
(restated note 2(t))

 
 
$

$

Cash flows from operating activities
 
 

 

Net (loss) for the year
 
(126,393
)
(230,016
)
Adjustments for:
 
 

 

Depreciation, depletion and amortization
 
42,311

43,029

Share-based payments
 
2,167

1,001

Net finance expense
 
20,587

16,912

(Gain) on sale of mineral property
 
(15,913
)
(67,821
)
Impairment charges and inventory write-downs
 
51,657

218,610

Net (gains) on investment in associate
 
—

(23,037
)
Other loss
 
12,994

13,035

Income tax expense
 
30,578

11,321

Non-cash foreign exchange loss
 
19,744

25,170

Net changes in non-cash working capital items
27
23,366

13,842

Cash generated in operating activities before value added taxes, interest and income taxes (paid) recovered
 
61,098

22,046

Value added taxes (paid)
 
(17,780
)
(19,374
)
Value added taxes recovered
 
30,707

5,040

Interest (paid)
 
(7,619
)
(7,210
)
Income taxes recovered (paid)
 
2,427

(14,536
)
Cash generated in operating activities
 
68,833

(14,034
)
Cash flows from investing activities
 
 

 

Purchase of Marigold Mine
 
(267,732
)
—

Increase in restricted cash
 
(17,621
)
—

Purchase of property, plant and equipment
 
(19,172
)
(31,924
)
Deferred stripping expenditures
 
(31,088
)
(28,837
)
Expenditures on exploration properties
 
(4,680
)
(4,116
)
Proceeds from sale of exploration property
9
17,500

15,000

Taxes paid on sale of exploration properties
 
(16,780
)
—

Proceeds from sale of marketable securities and other investments
 
39,249

440

Interest received
 
1,458

6,180

Dividends received
 
166

178

Cash (used) generated by investing activities
 
(298,700
)
(43,079
)
Cash flows from financing activities
 
 

 

Proceeds from loan facility
 
5,922

—

Net proceeds from issuance of convertible notes
 
—

256,083

Repayment of convertible notes
 
—

(138,000
)
Proceeds from exercise of stock options
 
—

77

Cash generated by financing activities
 
5,922

118,160

Effect of foreign exchange rate changes on cash and cash equivalents
 
(7,069
)
(12,337
)
Increase in cash and cash equivalents
 
(231,014
)
48,710

Cash and cash equivalents, beginning of period
 
415,657

366,947

Cash and cash equivalents, end of period
 
184,643

415,657

Supplemental cash flow information (note 27)
The accompanying notes are an integral part of the consolidated financial statements

11
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)


1.
NATURE OF OPERATIONS

Silver Standard Resources Inc. ("we", "us" or "our") is a company incorporated under the laws of the Province of British Columbia, Canada and our shares are publicly listed on the Toronto Stock Exchange in Canada and the NASDAQ Global Markets in the United States. Together with our subsidiaries, we (the “Group”) are principally engaged in the operation, acquisition, exploration and development of precious metal resource properties located in the Americas. With the acquisition of the Marigold mine on April 4, 2014, we have two producing mines and a portfolio of silver resource dominant projects located throughout the Americas. Silver Standard Resources Inc. is the ultimate parent of the Group.

Our address is Suite 800, 1055 Dunsmuir Street, PO Box 49088, Vancouver, British Columbia, V7X 1G4.

Our focus is on profitable production of silver from our Pirquitas mine in Argentina and gold from our Marigold mine in Nevada, U.S.

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
a)
Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”). The comparative information has also been prepared on this basis, details of which are given below, for which comparative information has been restated.
These statements were authorized for issue by the Board of Directors on February 19, 2015.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires us to exercise our judgment in the process of applying our accounting policies. The areas involving judgment or complexity, or areas where assumptions and estimates are significant and could affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period, are discussed in note 2(u).
b)
Accounting convention
These consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments, which are measured at fair value as described in note 2(q).
c)Basis of consolidation
These consolidated financial statements incorporate the financial statements of Silver Standard Resources Inc. and all of our subsidiaries (note 26(b)).
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which we have control. We control an entity when we are exposed to, or have rights to, variable returns from our involvement with the entity and have the ability to affect those returns through our power over the entity.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control is transferred to us until the date that control ceases.
All intercompany transactions and balances have been eliminated on consolidation.

12
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(ii) Associates
An associate is an entity over whose operating and financial policies we exercise significant influence. Significant influence is presumed to exist where we have between 20 per cent and 50 per cent of the voting rights, but can also arise where we hold less than 20 per cent of the voting rights, but have power to be actively involved and influential in policy decisions affecting the entity. Our share of the net assets, post-tax results and reserves of the associate are included in the consolidated financial statements using the equity accounting method. This involves recording the investment initially at cost to us, and then, in subsequent periods, adjusting the carrying amount of the investment to reflect our share of the associate’s results. Unrealized gains on transactions between us and our associate are eliminated to the extent of our interest in the associate.
d)Business combinations
A business combination is defined as an acquisition of assets and liabilities that constitute a business. A business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return to us and our shareholders. A business consists of inputs, including non-current assets, and processes, including operational processes, that when applied to those inputs have the ability to create outputs that provide a return to us and our shareholders. A business also includes those assets and liabilities that do not necessarily have all the inputs and processes required to produce outputs, but can be integrated with our inputs and processes or we could easily replicate the processes to create outputs. When acquiring a set of activities or assets in the exploration and development stage, which may not have outputs, we consider other factors to determine whether the set of activities or assets is a business. Those factors include, but are not limited to, whether the set of activities or assets:
▪
Has begun planned principal activities;
▪
Has employees, intellectual property and other inputs and processes that could be applied to those inputs;
▪
Is pursuing a plan to produce outputs; and
▪
Will be able to obtain access to customers that will purchase the outputs.
Not all of the above factors need to be present for a particular integrated set of activities or assets in the exploration and development stage to qualify as a business.
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets and liabilities transferred. The results of businesses acquired during the period are included in the consolidated financial statements from the date of acquisition. The identifiable assets, liabilities and contingent liabilities of the businesses which can be measured reliably are recorded at provisional fair values at the date of acquisition. Provisional fair values are finalized within 12 months of the acquisition date. Acquisition-related costs are expensed as incurred. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
e)Foreign currency translation
(i)    Functional and presentation currency
Items included in the financial statements of each of our subsidiaries are measured using the currency of the primary economic environment in which the particular entity operates (the "functional currency”).
The consolidated financial statements are presented in United States dollars.
(ii)   Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities are translated using the period end exchange rates. Foreign currency gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statements of loss.

13
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(iii)  Subsidiaries
The results and financial position of subsidiaries and of associates that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
▪Assets and liabilities are translated at the period-end exchange rate;
▪Income and expenses for each statement of income are translated at average exchange rates for the period; and
▪All resulting exchange differences are recognized in other comprehensive income as cumulative translation adjustments.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to the foreign currency translation reserve. When a foreign operation is sold or control is lost, such exchange differences are recognized in the consolidated statement of income as part of the gain or loss on sale.
f)Revenue recognition
Our primary source of revenue is from the sale of metal-bearing concentrate and gold doré or bullion. Revenue is recognized in the consolidated financial statements when the following conditions are met:
▪
the significant risks and rewards of ownership have passed to the customer;
▪
neither continuing managerial involvement, to the degree usually associated with ownership, nor effective control over the good sold, has been retained;
▪
the amount of revenue can be measured reliably;
▪
it is probable that economic benefits associated with the sale will flow to us; and
▪
the costs incurred or to be incurred in respect of the sale can be measured reliably.
Revenue from the sale of concentrate is recorded net of charges for treatment, refining and penalties. Net revenues from the sale of significant by-products are included within revenue. Where a by-product is not regarded as significant, sales proceeds may be credited against cost of sales.
Concentrate sales are recognized on a provisional basis using our estimate of contained metals. Final settlement is based on applicable commodity prices, based on contractually determined quotational periods, and receipt of final weights and assays, which typically occurs two to six months after shipment.
Variations between the price recorded when revenue was initially recognized and the actual final price are caused by changes in metal prices and result in an embedded derivative. The derivative is recorded at fair value each period until final settlement occurs, with value adjustments recognized in revenue.
Revenue from the sale of gold doré or bullion is typically recognized on the trade settlement date when funds are received.
g)Cash and cash equivalents
Cash and cash equivalents include cash on hand and held at banks and short-term investments with an original maturity of 90 days or less, which are readily convertible into a known amount of cash and excludes any restricted cash that is not available for use by us.
h)Inventory
Stockpiled ore, leach pad inventory and finished goods are valued at the lower of average cost and estimated net realizable value (“NRV”). Cost includes all direct costs incurred in production including direct labour and materials, production stripping, freight, depreciation, depletion and amortization and directly attributable overhead costs. The NRV is calculated using the estimated price at the time of sale based on prevailing and forecast metal prices less estimated future production costs to convert the inventory into saleable form and all associated selling costs.

14
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Any write-downs of inventory to NRV are recorded within cost of sales in the consolidated statements of loss. If there is a subsequent increase in the value of inventory, the previous write-downs to NRV are reversed up to cost to the extent that the related inventory has not been sold.
Stockpiled ore inventory represents ore that has been extracted from the mine and is available for further processing. Costs added to stockpiled ore inventory are derived from the current mining costs incurred up to the point of stockpiling the ore and are removed at average cost. Quantities of stockpiled ore are verified by periodic surveys.
The recovery of gold and by-products from certain oxide ore is achieved through a heap leaching process. Under this method, ore is stacked on leach pads and treated with a chemical solution that dissolves the gold contained within the ore. The resulting pregnant solution is further processed in a plant where the gold is recovered in doré. Costs added to heap leach inventory are derived from current mining and leaching costs and removed as ounces of gold are recovered at the average cost per recoverable ounce of gold on the leach pads. Estimates of recoverable gold in the leach pads are calculated based on the quantities of ore placed on the leach pads (measured tonnes added to the leach pads), the grade of ore placed on the leach pads (based on assay data), and a recovery percentage.
Finished goods inventory includes metal concentrates at site and in transit and doré at a site or refinery or bullion in a metal account.
Materials and supplies inventories are valued at the lower of average cost and NRV. Costs include acquisition, freight and other directly attributable costs. A regular review is undertaken to determine the extent of any provision for obsolescence.
Inventory that is not planned to be processed or used within one year is classified as non-current.
i)Mineral properties
Capitalized costs of mineral properties include the following:
▪
Costs of acquiring exploration stage properties in asset acquisitions;
▪
Economically recoverable exploration and evaluation expenses;
▪
Expenditures incurred to develop mining properties;
▪
Value attributed to properties acquired in a business combination;
▪
Deferred stripping costs;
▪
Estimates of close down and restoration assets; and
▪
Borrowing costs incurred that are attributable to qualifying mineral properties.
(i)    Exploration and evaluation expenditures
Exploration expenditures are the costs incurred in the initial search for mineral deposits with economic potential or in the process of obtaining more information about existing mineral deposits. Exploration expenditures typically include costs associated with acquiring the rights to explore, prospecting, sampling, mapping, diamond drilling and other work involved in searching for mineral resources.
Evaluation expenditures are costs incurred to establish the technical and commercial viability of developing mineral deposits identified through exploration activities or by acquisition. Evaluation expenditures include the cost of (i) further defining the volume and grade of deposits through drilling of core samples, trenching and sampling activities in an ore body that is classified as either a Mineral Resource or a Proven and Probable Mineral Reserve; (ii) determining the optimal methods of extraction and metallurgical and treatment processes; (iii) studies related to surveying, transportation and infrastructure requirements; (iv) permitting activities; and (v) economic evaluations to determine whether development of mineralized material is commercially justified including preliminary economic assessments, pre-feasibility and final feasibility studies.

15
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
The costs of acquiring exploration properties in an asset purchase, including option payments and the acquisition of mineral licenses, are capitalized as an exploration and evaluation asset at cost. The cost of acquiring Mineral Resources in a business combination are recognized as mineral property asset at fair value.
All other exploration and evaluation expenditures are expensed until it is probable that future economic benefits will flow to us. We use the following criteria to assess the economic recoverability and probability of future economic benefits:
▪
Viability: A Proven and/or Probable Mineral Reserve has been established that demonstrates a positive financial return, and/or where there is a history of conversion to Mineral Reserves at operating mines; and
▪
Authorizations: necessary permits, access to critical resources and environmental programs exist or are reasonably obtainable.
Once future economic benefits are expected, further exploration and evaluation expenditures are capitalized at cost and recognized as an exploration and evaluation asset within property, plant and equipment. Capitalized costs are considered to be tangible assets as they form part of the underlying mineral property. No amortization is charged during the evaluation and development phase as the asset is not available for use.
(ii)   Development expenditures
Once approval has been obtained to commence the development and construction of a mine, all costs are capitalized and included in the carrying amount of the related property in the period incurred. All costs, including pre-operating costs are capitalized until the point that the mineral property is operating at intended levels by us. This is determined by: (i) completion of operational commissioning of major mine and plant components; (ii) operating results being achieved consistently for a period of time; (iii) indicators that these operating results will be continued; and (iv) other factors being present, including one or more of the following: A significant portion of the plant/mill capacity being achieved; a significant portion of available funding being directed towards operating activities; a predetermined, reasonable period of time being passed; or significant milestones for the development of the mineral property being achieved.
In addition, any proceeds from sales in these periods are offset against costs capitalized.
In open pit mining operations, it is necessary to incur costs to remove waste material in order to access the ore body, which is known as stripping. Stripping costs incurred prior to the production stage of a mining property (pre-stripping costs) are capitalized as part of the carrying amount of the related mining property.
Once the mineral property is operating as intended, further operating costs, including depreciation, depletion and amortization, are included within inventory as incurred.
(iii) Production stripping costs
During the production phase of a mine, where stripping activities result in improved access to ore, we recognize a non-current 'stripping activity asset' ("SAA") when it is probable that the future economic benefit of the improved access will flow to us, the ore to which access has been improved is identifiable, and costs can be reliably measured. Typically identifiable components of an ore body correspond to the phases of a mine plan. Within each identifiable component, the average stripping ratio is determined; the cost of waste removal in excess of the stripping ratio is capitalized as a SAA, and the cost of waste and ore removal in line with the average stripping ratio is recorded in inventory. The SAA is amortized using a unit of production method over the period in which the improved access to the component of the ore body is achieved.

16
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(iv) Borrowing costs
Borrowing costs attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of the asset until the asset is substantially ready for its intended use or sale. Where funds have been borrowed specifically to finance an asset, the amount capitalized is the actual borrowing costs incurred. Where the funds used to finance an asset form part of general borrowings, the amount capitalized is calculated using a weighted average of rates applicable to our relevant general borrowings during the period.
j)Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment charges.
The cost of an item of property, plant and equipment includes the purchase price or construction cost, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use, an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and for qualifying assets, the associated borrowing costs.
Where an item of plant and equipment is comprised of major components with different useful lives, the components are accounted for as separate items of property, plant and equipment.
Costs incurred for major overhaul of existing equipment and sustaining capital are capitalized as plant and equipment and are subject to depreciation once they are available for use. Major overhauls include improvement programs that increase the productivity or extend the useful life of an asset beyond that initially envisaged. The costs of routine maintenance and repairs that do not constitute improvement programs are accounted for as a cost of inventory.
k)Depreciation
The carrying amounts of plant and equipment are depreciated to their estimated residual value over the estimated useful lives of the specific assets concerned, or the estimated life of mine or lease, if shorter. Depreciation starts on the date when commissioning is complete. The major categories of property, plant and equipment are depreciated on a units-of-production or straight-line basis using the estimated lives indicated below:
Computer equipment
3 - 5 years
Furniture and fixtures
7 years
Vehicles
3 years
Mining equipment
5 - 7 years
Mobile equipment components
3 - 15 years
Buildings
Life of mine
Mine plant equipment
Life of mine
Leasehold improvements
Lease term

Land is not depreciated.

Mineral properties, including close down and restoration assets and SAA, are depreciated using the units-of-production method. In applying the units-of-production method, depreciation is calculated using the quantity of material extracted from the mine in the period as a percentage of the total quantity of material expected to be extracted in current and future periods based on Mineral Reserves.

We conduct an annual review of residual values, useful lives and depreciation methods employed for property, plant and equipment. Any changes in estimate that arise from this review are accounted for prospectively.

17
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
l)Review of asset carrying values and impairment assessment
Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment or at any time if an indicator of impairment is considered to exist. Assets that are subject to amortization or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
We conduct reviews to assess for any indications of impairment of asset values. External factors such as changes in current and forecast metal prices, operating costs and other market factors are also monitored to assess for indications of impairment.
If any such indication exists an estimate of the recoverable amount is undertaken, being the higher of an asset’s fair value less costs to dispose ("FVLCTD") and value in use ("VIU"). If the asset’s carrying amount exceeds its recoverable amount then an impairment loss is recognized in the consolidated statement of loss.
FVLCTD is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. Fair value of mineral assets is generally determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset, including any expansion prospects.
VIU is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and from its ultimate disposal.
Impairment is normally assessed at the level of cash-generating units (“CGUs”), which are identified as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets.
Non-financial assets, other than goodwill, that have been impaired are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. When a reversal of a previous impairment is recorded, the reversal amount is adjusted for depreciation that would have been recorded had the impairment not taken place.
m)Share capital
Common shares issued by us are recorded at the net proceeds received which is the fair value of the consideration received less costs incurred in connection with the issue.
n)Share-based payments
Equity-settled share-based payment arrangements such as our stock option plan are initially measured at fair value at the date of grant and recorded within shareholders’ equity. Arrangements considered to be cash-settled such as the Directors’ Deferred Share Unit (“DSU”) Plan, the Restricted Share Unit (“RSU”) Plan and the Performance Share Unit (“PSU”) Plan are initially recorded at fair value and classified as accrued liabilities and subsequently remeasured at fair value at each reporting date.
The fair value at grant date of all share-based payments is recognized as compensation expense over the period for which benefits of services are expected to be derived, with a corresponding credit to shareholders’ equity or accrued liabilities depending on whether they are equity-settled or cash-settled. We estimate the fair value of stock options granted using the Black-Scholes option pricing model and estimate the expected forfeiture rate at the date of grant. The fair value of DSUs, PSUs, and RSUs is estimated based on the quoted market price of our common shares. When awards are forfeited because non-market based vesting conditions are not satisfied, the expense previously recognized is proportionately reversed.
o)Taxation
The income tax expense for the period is comprised of current and deferred tax, and is recognized in the consolidated statement of income except to the extent that it relates to items recognized directly in shareholders’ equity, in which case the tax is recognized in equity.
(i)    Current income tax
Current tax for each of our taxable entities is based on the local taxable profit for the period at the local statutory tax rates enacted or substantively enacted at the date of the consolidated statement of financial position.

18
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(ii)   Deferred tax
Deferred tax is recognized, using the liability method, on temporary differences between the carrying value of assets and liabilities in the consolidated statement of financial position and the corresponding tax bases used in the computation of taxable profit. Deferred tax is determined using tax rates and tax laws that are enacted or substantively enacted at the date of the consolidated statement of financial position and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.
Deferred tax assets and liabilities are not recognized if the temporary difference arises on the initial recognition of assets and liabilities in a transaction other than a business combination, that at the time of the transaction, affects neither the taxable nor the accounting profit or loss.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the timing of the reversal of the temporary difference is controlled by us and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available to be utilized against those deductible temporary differences. Deferred tax assets are reviewed at each reporting date and amended to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off the current tax assets against the current tax liabilities and when they relate to income taxes levied by the same taxation authority and we intend to settle our current tax assets and liabilities on a net basis.
(iii)  Royalties and other tax arrangements
Royalties and other arrangements are treated as taxation arrangements when they have the characteristics of tax. This is considered to be the case when they are imposed under government authority and the amount payable is calculated by reference to an income measure. Obligations arising from royalty arrangements that do not satisfy these criteria are recognized as current liabilities and included within cost of sales.
(iv)  Value added tax ("VAT")
VAT may be paid in countries where recoverability is uncertain. In these cases, VAT payments are either deferred within mineral property costs, or expensed if related to exploration and evaluation costs. If we ultimately recover the amounts that have been deferred, the amount received will be applied to reduce mineral property costs. If the amounts were previously expensed, the recovery will be recognized in the consolidated statement of loss.
p)
Loss per share
Basic loss per share is calculated by dividing the net loss attributable to our shareholders by the weighted average number of shares outstanding during the reporting period.
Diluted loss per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potentially dilutive share equivalents, such as stock options and convertible notes. The “treasury stock method” is used for the assumed proceeds upon exercise of the dilutive instruments to determine the number of shares assumed to be purchased at the average market price during the period.
A portion of the convertible notes may be converted into common shares and hence the maximum dilution impact of these is determined.
When a loss is incurred during the year, basic and diluted loss per share are the same because the exercise of options and convertible notes are considered to be anti-dilutive.

19
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
q)Financial instruments
(i)    Financial assets and liabilities
We classify our financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), loans and receivables, available-for-sale, held to maturity, and other financial liabilities. The classification depends on the purpose for which the financial assets or liabilities were obtained. Management determines the classification of financial assets and liabilities at initial recognition.
We have not classified any financial instruments as held to maturity. Our accounting policy for each of the other categories is as follows:
Financial assets and liabilities at FVTPL Financial assets and liabilities carried at FVTPL are recorded at fair value and transaction costs are expensed in the statement of loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets or liabilities held at FVTPL are included in the consolidated statement of loss in the period in which they arise. Financial assets at FVTPL are held for trading. A financial asset is classified as held for trading if acquired principally for the purpose of selling in the short term. Derivatives are held for trading unless they are designated as hedges.
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current assets or non-current assets based on their maturity date. Loans and receivables are initially recognized at fair value and subsequently carried at amortized cost less any impairment.
Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or not classified in any of the other categories.
Available-for-sale assets are initially recorded at fair value plus transaction costs, and are subsequently carried at fair value. All unrealized gains and losses arising from changes in the fair value of assets classified as available-for-sale are recognized directly in other comprehensive loss, except for unrealized foreign exchange gains or losses on monetary financial assets and impairment losses which are recognized in the statement of loss. Any reversal of a previously recognized impairment loss on a non-monetary asset is recognized directly in other comprehensive loss. Realized gains and losses from the derecognition of available-for-sale assets are recognized in the consolidated statement of loss in the period derecognized with any unrealized gains or losses being recycled from other comprehensive loss.
Other financial liabilities Other financial liabilities are recognized initially at fair value, net of transaction costs incurred and are subsequently stated at amortized cost. Any difference between the initial cost and the redemption value is recognized in the consolidated statement of income over the period to maturity using the effective interest method.
Derivative financial instruments Our policy with regard to ‘Financial Risk Management’ is set out in note 25. When we enter into derivative contracts these are designed to reduce the exposures related to assets and liabilities, or anticipated transactions.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to their host contracts. Commodity-based embedded derivatives resulting from provisional sales prices of metals in concentrate are recognized in revenue as described in note 2(f). Embedded derivatives in the 2008 convertible notes are described in note 15.
(ii)   Fair value of financial instruments
The fair values of quoted investments are based on current prices. If the market for a financial asset is not active (and for unlisted securities), we establish fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the financial asset’s specific circumstances.

20
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(iii)  Impairment of financial assets
We assess at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. An evaluation is made as to whether a decline in fair value is ‘significant’ or ‘prolonged’ based on indicators such as significant adverse changes in the market, economic or legal environment.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized.
(iv)   Derecognition of financial assets and liabilities
Financial assets are derecognized when the investments mature or are sold, and substantially all the risks and rewards of ownership have been transferred. A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired. Gains and losses on derecognition are recognized within finance income or other income and finance costs, respectively.
r)Provisions for close down and restoration and for environmental clean-up costs
Close down and restoration costs include dismantling and demolition of infrastructure, the removal of residual materials and remediation of disturbed areas. Estimated close down and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs, based on the net present value of estimated future costs. The cost estimates are updated during the life of the operation to reflect known development, e.g. revisions to cost estimates and to the estimated lives of the operations, and are subject to formal reviews at regular intervals.
The initial closure provision together with changes resulting from changes in estimated cash flows or discount rates are adjusted within mineral properties. These costs are then depreciated over the life of the asset to which they relate, typically using the units-of-production method. The accretion or unwinding of the discount applied in establishing the net present value of provisions is charged to the consolidated statement of income as a financing expense.
s)Leases
Leases which transfer substantially all of the benefits and risks incidental to the ownership of property are accounted for as finance leases. Finance leases are capitalized at the lease commencement at the lower of the fair market value of the leased property and the net present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charge. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term.
All other leases are accounted for as operating leases wherein rental payments are expensed as incurred.
t)Change in accounting policies and restatement of comparatives
(i)   Change in accounting policies
We have elected to change our accounting policy with respect to exploration and evaluation expenditures, consistent with IFRS 6, Exploration for and Evaluation of Mineral Resources and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, in order to enhance the relevance and reliability to the decision-making needs of the users of our financial statements. In prior periods, our policy was to capitalize exploration and evaluation expenditures on properties that we have the legal rights to explore, until commercially viable. We have now elected to expense all exploration and evaluation expenses until such time that we believe that further expenditures will provide probable future economic benefit. Our policy is disclosed in note 2(i).

21
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
This change in accounting policy requires full retrospective application. IAS 1, Presentation of Financial Statements also requires that a third statement of financial position be presented as at the beginning of the prior period. As at January 1, 2013 and December 31, 2013, the following adjustments were recorded to the consolidated statements of financial position:
 
 
Adjustment for change in accounting policy

 
At January 1, 2013
As previously reported (1)

Exploration and evaluation

As currently reported


$

$

$

Property, plant and equipment
580,649

(150,116
)
430,533

Deferred income tax liabilities
(19,373
)
1,595

(17,778
)
Net increase (decrease) in shareholders' equity

(148,521
)

(1) 
Effective January 1, 2013, we adopted IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine (as outlined in note 2(i)(iii)), and therefore restated the originally presented consolidated statement of financial position.




Adjustments for change in accounting policy



At December 31, 2013
As previously reported

Exploration and evaluation

As currently reported


$

$

$

Asset held for sale
13,140

(6,734
)
6,406

Property, plant and equipment
400,409

(151,772
)
248,637

Deferred income tax liabilities
(24,736
)
5,707

(19,029
)
Net (decrease) in shareholders' equity

(152,799
)


For the year ended December 31, 2013, the following adjustments were recorded to the consolidated statements of loss:



Adjustments for change in accounting policy



Year ended December 31, 2013
As previously reported

Exploration and evaluation

As currently reported


$

$

$

Exploration, evaluation and reclamation (expenses)
(4,018
)
(19,439
)
(23,457
)
Gain on sale of mineral property
64,566

3,255

67,821

Other (expense) income
(22,574
)
7,053

(15,521
)
Income tax (expense)
(15,433
)
4,112

(11,321
)
(Decrease) in net income

(5,019
)






Weighted average shares outstanding (thousands)




Basic
80,754

80,754

80,754

Diluted
80,754

80,754

80,754






(Decrease) in earnings per share




Basic

($2.79
)

($0.06
)

($2.85
)
Diluted

($2.79
)

($0.06
)

($2.85
)

22
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
As at December 31, 2014, the change in accounting policy had the following impact on the consolidated statements of financial position:
 
 
Effect of change in accounting policy

 
At December 31, 2014
Under previous accounting policy

Exploration and evaluation

As currently reported

 
$

$

$

Property, plant and equipment
600,929

(161,855
)
439,074

Deferred income tax liabilities
(34,500
)
5,450

(29,050
)
Net (decrease) in shareholders' equity
 
(156,405
)
 

For the year ended December 31, 2014, the change in accounting policy had the following impact on the consolidated statements of loss:
 
 
Effect of change in accounting policy

 
Year ended December 31, 2014
Under previous accounting policy

Exploration and evaluation

As currently reported

 
$

$

$

Exploration, evaluation and reclamation (expenses)
(9,646
)
(11,544
)
(21,190
)
Gain on sale of mineral property
9,214

6,699

15,913

Other (expense) income
(14,902
)
1,461

(13,441
)
Income tax (expense)
(30,321
)
(257
)
(30,578
)
(Decrease) in net income
 
(3,641
)
 
 
 
 
 
Weighted average shares outstanding (thousands)
 
 
 
Basic
80,754

80,754

80,754

Diluted
80,754

80,754

80,754

 
 
 
 
(Decrease) in earnings per share
 
 
 
Basic

($1.52
)

($0.05
)

($1.57
)
Diluted

($1.52
)

($0.05
)

($1.57
)

As a result of our change in accounting policy, the carrying value of our Pitarrilla project was reduced from $126,985,000 to $61,811,000 at December 31, 2014. Silver prices had declined significantly in the fourth quarter of 2014 and long-term consensus estimates had similarly declined, which has resulted in the reclassification of Pitarrilla's Mineral Reserves to Mineral Resources. We concluded that this constituted an impairment indicator and undertook an assessment of the FVLCTD of the project. Using an approach of assessing comparable values of undeveloped Mineral Resources, we determined that no impairment would have been required had we not changed our accounting policy.

The reduction in the carrying value of our Pitarrilla project, as a result of our change in accounting policy, also caused the project's assets to fall below 10% of our total assets for all periods disclosed, and therefore, it is no longer an individual reporting segment. It is included within the exploration and evaluation properties segment for all periods disclosed in note 23.
(ii)  Statement of cash flows presentation
We have changed the presentation of VAT recovered (paid) on the statements of cash flows from investing activities to operating activities to better reflect the nature of the activities.

23
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(iii) Adopted IFRS pronoucements
The following new and amended IFRS pronouncements were adopted during 2014:

Levies imposed by governments
International Financial Reporting Interpretations Committee's ("IFRIC") Interpretation 21, Levies (“IFRIC 21”), an interpretation of IAS 37, Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”), on the accounting for levies imposed by governments, was effective for annual periods beginning on January 1, 2014. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (“obligating event”). IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. This did not have any material impact on our current accounting for levies imposed by governments.

Impairment of assets
IAS 36, Impairment of assets, was amended to clarify disclosure requirements when a recoverable amount is determined based on FVLCTD. The amendment was effective for annual periods beginning on January 1, 2014 and we have adopted the amendment in note 10, which did not have a significant impact to the disclosure.
u)Significant accounting judgments and estimates
The preparation of financial statements in conformity with IFRS requires the use of judgments and/or estimates that affect the amounts reported and disclosed in the consolidated financial statements and related notes. These judgments and estimates are based on management’s best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ materially from the amounts included in the financial statements. Information about such judgments and estimation is contained in the accounting policies and/or notes to the consolidated financial statements, and the key areas are summarized below.
Areas of judgment that have the most significant effect on the amounts recognized in the consolidated financial statements are:
▪
Review of asset carrying values and impairment assessment;
▪
Mineral Reserves and Mineral Resources estimates;
▪
Determination of deferred stripping activities;
▪
Determination of useful lives of property, plant and equipment;
▪
Valuation of inventory;
▪
Close down and restoration provision;
▪
Deferred tax assets and liabilities;
▪
Functional currency;
▪
Contingencies; and
▪
Assessment of fair value of assets acquired in a business combination.
Key sources of estimation uncertainty that have the most significant effect on the amounts recognized in the consolidated financial statements are:
▪
Review of asset carrying values and impairment assessment;
▪
Mineral Reserves and Mineral Resources estimates;
▪
Valuation of inventory;
▪
Close down and restoration provision;

24
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
▪
Determination of the fair values of share-based compensation;
▪
Valuation of financial instruments;
▪
Deferred tax assets and liabilities;
▪
Contingencies;
▪
Valuation of deferred consideration; and
▪
Assessment of fair value of assets acquired in a business combination.
Each of these judgments and estimates is considered in more detail below.
Review of asset carrying values and impairment assessment
Non-current assets
In accordance with our accounting policy (note 2(l)), each asset or CGU is evaluated every reporting period to determine whether there are any indicators of impairment. If any such indicators exist, which is often judgment-based, a formal estimate of recoverable amount is performed and an impairment charge is recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount of an asset or CGU of assets is measured at the higher of FVLCTD or VIU.

The evaluation of asset carrying values for indications of impairment includes consideration of both external and internal sources of information, including such factors as market and economic conditions, metal prices and forecasts, production budgets and forecasts, and life-of-mine estimates.

The determination of FVLCTD and VIU requires management to make estimates and assumptions about expected production, sales volumes, commodity prices, discount rates, Mineral Reserves, operating costs, taxes, close down and restoration costs and future capital expenditures. The estimates and assumptions are subject to risk and uncertainty; hence, there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be further impaired or the impairment charge reversed with the impact recorded in the consolidated statements of loss.

Financial instruments
At each reporting date, we conduct a review of our marketable securities and other financial instruments to determine whether there are any indications of impairment. This determination requires significant judgment. In making this judgment, we evaluate, among other factors, the duration and extent to which the fair value of an investment is less than its carrying value; and the financial health of and business outlook for the investee, including factors such as industry and sector performance, and operational and financing cash flow.
If the declines in fair value below carrying value are considered significant or prolonged, we will recognize a loss, being the transfer of the accumulated fair value adjustments recognized in other comprehensive income on the impaired available-for-sale financial assets to the consolidated statements of loss.
Mineral Reserves and Mineral Resources estimates We estimate Mineral Reserves and Mineral Resources based on information prepared by qualified persons as defined by NI 43-101. Mineral Reserves are used in the calculation of depreciation, amortization and impairment charges, for forecasting the timing of the payment of close down and restoration costs, and future taxes. In assessing the life of a mine for accounting purposes, Mineral Resources are only taken into account where there is a high degree of confidence of economic extraction. There are numerous uncertainties inherent in estimating Mineral Reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of Mineral Reserves and may, ultimately, result in Mineral Reserves estimates being revised. Such changes in Mineral Reserves could impact on depreciation and amortization rates, asset carrying values and the provision for close down and restoration.

25
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Determination of deferred stripping activities We determine whether stripping costs incurred during the production phase of a surface mining operation provide improved access to a component of an ore body that will be mined in a future period, and whether the costs can be reliably measured. We have to apply judgment when identifying components of the mine over which stripping costs are capitalized, in estimating the average stripping ratio for each component, and in using judgment to determine the period over which the SAA is amortized.

Determination of useful lives of property, plant and equipment We use the units-of-production method to depreciate mineral property expenditures, whereby depreciation is calculated using the quantity (either tonnes or ounces) of ore extracted from the mine in the period as a percentage of the total quantity of ore expected to be extracted in current and future periods based on Mineral Reserves. As noted above, there are numerous uncertainties inherent in estimating Mineral Reserves. Other assets are depreciated using the straight-line method, which includes significant management judgment to determine useful lives and residual values.
The carrying amounts of our mineral properties are depleted based on recoverable ounces contained in Proven and Probable Mineral Reserves. Changes to estimates of recoverable ounces and depletable costs including changes resulting from revisions to our mine plans and changes in metal price forecasts can result in a change to future depletion rates.
Valuation of inventory
Stockpiled ore and finished goods
Stockpiled ore and finished goods are valued at the lower of average cost and NRV. NRV is calculated as the estimated price at the time of sale based on prevailing and forecast metal prices less estimated future production costs to convert the inventory into saleable form and associated selling costs. The determination of forecast sales price, production and selling costs requires significant assumptions that may impact the stated value of our inventory.
Leach pad inventory
In determining the value of the leach pad, we make estimates of quantities and grades of ore stacked on leach pads and in-process, and the recoverable gold in this material to determine the total inventory. Changes in these estimates can result in a change in carrying amounts of inventory, as well as cost of sales.
Close down and restoration provision Close down and restoration costs are a consequence of exploration activities and mining, and the majority of close down and restoration costs are incurred near the end of the life of a mine. Our accounting policy requires the recognition of such provisions when the obligation occurs. The initial provisions are periodically reviewed during the life of the operation to reflect known developments, e.g. updated cost estimates and revisions to the estimated lives of operations. Although the ultimate cost to be incurred is uncertain, we estimate our costs based on studies using current restoration standards and techniques. The initial closure provisions together with changes, other than those arising from the discount applied in establishing the net present value of the provision, are capitalized within property plant and equipment and depreciated over the lives of the assets to which they relate.
The ultimate magnitude of these costs is uncertain, and cost estimates can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites, local inflation rates and exchange rates when liabilities are anticipated to be settled in a currency other than the United States dollar. The expected timing of expenditure can also change, for example, in response to changes in Mineral Reserves, production rates or economic conditions. As a result there could be significant adjustments to the provision for close down and restoration, which would affect future financial results.
Determination of the fair value of share-based compensation The fair value of share options and other forms of share-based compensation granted is computed to determine the relevant charge to the consolidated statement of income. In order to compute this fair value, we use option pricing models that require management to make various estimates and assumptions in relation to the expected life of the awards, volatility, risk-free interest rates, and forfeiture rates.

26
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Valuation of financial instruments We are required to determine the valuation of our convertible notes (at inception), and the embedded derivatives within sales contracts. The convertible notes valuation required discounted cash flow analysis that involved various estimates and assumptions, whilst the valuation of the accounts receivable derivatives requires estimates of settlement dates and relies on market-based forward metal prices at those settlement dates.
Deferred tax assets and liabilities The determination of our tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgment by management. In determining these amounts, we interpret tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. We also make estimates of future earnings which affect the extent to which potential future tax benefits may be used. We are subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. We provide for such differences where known based on our best estimate of the probable outcome of these matters.
Functional currency The determination of a subsidiary’s functional currency often requires significant judgment where the primary economic environment in which the subsidiary operates may not be clear. This can have a significant impact on our consolidated results based on the foreign currency translation methods described in note 2(e).
Contingencies Contingencies can be either possible assets or liabilities arising from past events which, by their nature, will only be resolved when one or more future events not wholly within our control occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. In assessing loss contingencies related to legal, tax or regulatory proceedings that are pending against us or unasserted claims, that may result in such proceedings or regulatory or government actions that may negatively impact our business or operations, we evaluate with our legal counsel the perceived merits of any legal, tax or regulatory proceedings, unasserted claims or actions. Also evaluated are the perceived merits of the nature and amount of relief sought or expected to be sought, when determining the amount, if any, to recognize as a contingent liability or assessing the impact on the carrying value of assets. Contingent assets or liabilities are not recognized in the consolidated financial statements. In January 2015, we received a re-assessment from the Canada Revenue Agency ("CRA") for an amount of C$41,400,000. We have not provided for this amount as further described in note 11.
Deferred consideration In February 2014, we completed the sale of our 100% interest in the Challacollo project (note 9) of which a portion of sale consideration is deferred. The deferred consideration is dependent on various uncertain events and assumptions, including estimation of the year in which commercial production may be reached, the share price of Mandalay Resources Corporation ("Mandalay") for the deferred shares, and the price of silver for the deferred silver bullion. The fair value of the deferred consideration is determined by considering various scenarios of discounting the expected cash flows using a risk-adjusted discount rate and applying probability aspects to the cash flows.
Assessment of fair value of assets acquired in a business combination Judgment is required to determine whether we acquired a business under the definition of IFRS 3, Business combinations ("IFRS 3"), and also the acquisition date when we obtained control over the business, which was the date that consideration is transferred and when we assumed the assets and liabilities.
Business combinations are accounted for using the acquisition method whereby identifiable assets acquired and liabilities assumed, including contingent liabilities, are recorded at their fair values at the date of acquisition. The valuation of certain assets and liabilities requires significant management estimates and judgment. The value of the leach pad inventory requires an estimation of recoverable ounces, production profile, future metal prices and costs to complete the production process. Property, plant and equipment requires judgment over the appropriate fair value methodology to appraise the assets and various assumptions around estimated useful lives and current replacement costs. The mineral property valuation is based upon estimates of Mineral Reserves and Mineral Resources used in our life of mine plan, as well as estimates of future metal prices, production, operating and capital costs, and economic assumptions around inflation rates and discount rates.

27
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
v)Future accounting changes
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective. None of these is expected to have a significant effect on our consolidated financial statements, except the following set out below:
Operating segments
IFRS 8, Operating segments was amended to require disclosure of the judgments made by management in aggregating operating segments, including a description of the segments which have been aggregated and the economic indicators which have been assessed in determining that the aggregated segments share similar economic characteristics. The amendment is effective for annual periods commencing on or after July 1, 2014.

Revenue from contracts with customers
The IASB has replaced IAS 18, Revenue in its entirety with IFRS 15 - Revenue from contracts with customers (“IFRS 15”) which is intended to establish a new control-based revenue recognition model and change the basis for deciding whether revenue is to be recognized over time or at a point in time. IFRS 15 is effective for annual periods commencing on or after January 1, 2017. We are currently evaluating the impact the standard is expected to have on our consolidated financial statements.

IFRS 9, Financial Instruments: Classification and Measurement ("IFRS 9")
IFRS 9 as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39") and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after January 1, 2013, but the complete version of IFRS 9, issued in July 2014, moved the mandatory effective date to January 1, 2018.

In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. We will quantify the effect in conjunction with the other phases, when the final standard, including all phases, is issued.

Amendments
Amendments to standards and interpretations include the following:

IFRS 7, Financial instruments: Disclosure ("IFRS 7"): IFRS 7 was amended to require additional disclosures on transition from IAS 39 to IFRS 9. IFRS 7 is effective on adoption of IFRS 9, which is effective for annual periods commencing on or after January 1, 2018.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on our consolidated financial statements.


3.
PURCHASE OF MARIGOLD MINE

On April 4, 2014, we completed the acquisition of a 100% interest in the Marigold mine, an open pit operating gold mine in Nevada, U.S., from subsidiaries of Goldcorp Inc. and Barrick Gold Corporation for a purchase price of $267,732,000 after post-closing adjustments. The purchase price was paid in cash from our existing cash on hand.

The acquisition is a business combination and has been accounted for in accordance with the measurement and recognition provisions of IFRS 3. IFRS 3 requires that the purchase consideration be allocated to the assets acquired and liabilities assumed in a business combination based upon their estimated fair values at the date of acquisition.


28
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

3.
PURCHASE OF MARIGOLD MINE (Cont'd)

The purchase price has been allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Fair values were determined based on third party appraisals, discounted cash flow models, and quoted market prices, as deemed appropriate. Acquisition costs, in the form of advisory, legal and other professional fees, which were associated with the transaction to acquire Marigold were expensed as incurred during the year in the amount of $5,395,000.

The following table shows the allocation of the purchase price to assets acquired and liabilities assumed, based on estimates of fair value, including a summary of major classes of consideration transferred, and the recognized amounts of assets acquired and liabilities assumed at the acquisition date:
 
$

Purchase consideration
275,000

Working capital adjustment
(7,268
)
Consideration
267,732

 
 
Trade receivables and other assets
5,162

Inventory
76,104

Mineral properties
50,823

Plant and equipment
157,880

Assets under construction
9,561

Trade and other payables
(17,067
)
Close-down and restoration provision
(14,731
)
Net identifiable assets acquired
267,732


Had the Marigold mine been consolidated from January 1, 2014, our consolidated revenue for 2014 would have been approximately $345,758,000 and our consolidated net loss for 2014 would have been $126,124,000.


4.
CASH AND CASH EQUIVALENTS
       
 
December 31, 2014

December 31, 2013

January 1, 2013

 
$

$

$

Cash balances
184,371

342,201

183,636

Short-term investments
272

73,456

183,311

 
184,643

415,657

366,947



29
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

5.
TRADE RECEIVABLES AND OTHER ASSETS

 
December 31, 2014

December 31, 2013

January 1, 2013

 
$

$

$

Trade receivables
26,529

43,516

40,947

Tax receivables
5,389

13,969

2,632

Value added tax receivables (note 12)
8,054

5,915

32,796

Prepayments and deposits
6,068

4,853

6,967

Other receivables
3,784

994

112

 
49,824

69,247

83,454


We expect full recovery of the trade receivables amounts outstanding and, therefore, no allowance has been recorded against these receivables. No trade receivables are past due and all are expected to be settled within twelve months.

Credit risk is further discussed in note 25(b). We do not hold any collateral for any receivable amounts outstanding at December 31, 2014, December 31, 2013, or January 1, 2013.


6.
MARKETABLE SECURITIES

The movement in marketable securities during the years ended December 31, 2014 and 2013 are comprised of the following:

 
December 31, 2014

December 31, 2013

 
$

$

Balance, beginning of period
129,267

34,733

Additions (note 9(a) and (b))
9,188

170,395

Disposals at fair value
(37,322
)
(788
)
Fair value adjustments through profit and loss
(10,060
)
(12,099
)
Fair value adjustments through OCI
22,699

(54,964
)
Foreign exchange adjustments
(8,987
)
(8,010
)
Balance, end of period
104,785

129,267


On May 10, 2013, we determined that we no longer held significant influence over Pretium Resources Inc. ("Pretium") following changes in the composition of the Board of Directors of Pretium and our shareholding percentage; therefore, equity accounting for our investment in Pretium was no longer applicable. This resulted in the derecognition of the carrying value of our investment in associate and the recognition of our shareholding at fair value as an available-for-sale financial asset. The fair value of the shares upon initial recognition was $144,777,000. The difference between the carrying value of the investment and the fair value of the shares was recorded in the consolidated statement of loss, resulting in a gain of $21,959,000 and a corresponding foreign exchange gain of $2,497,000. Subsequent changes in fair value after May 10, 2013 are recognized in other comprehensive income.




30
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

7.
OTHER FINANCIAL ASSETS

 
December 31, 2014
December 31, 2013
January 1, 2013
 
Current

Non-current

Current

Non-current

Current

Non-current

 
$

$

$

$

$

$

Financial assets:
 
 
 
 
 
 
Restricted cash (1)
—

19,604

—

1,983

—

1,847

Deferred consideration (note 9(a) and (b))
19,443

1,954

10,000

17,864

—

—

 
19,443

21,558

10,000

19,847

—

1,847


(1) 
We have cash and security deposits in relation to our close down and restoration provisions of $12,104,000 and Argentine peso loan facility of $7,500,000 (note 15).


8.
INVENTORY

 
December 31, 2014

December 31, 2013

January 1, 2013

 
$ 

$

$

Current:
 
 
 
Finished goods
25,221

16,181

28,748

Stockpiled ore
17,896

18,918

26,318

Leach pad inventory
56,250

—

—

Materials and supplies
29,861

15,793

19,180

 
129,228

50,892

74,246

Non-current inventory (1)
4,326

8,318

5,558

 
133,554

59,210

79,804


(1) 
From time to time, we hold stockpiled ore and supplies that are expected to be used after one year, both of which are classified as non-current inventory. Non-current inventory consisted of stockpiled ore of $Nil (December 31, 2013 - $4,253,000; January 1, 2013 - $5,558,000) and materials and supplies of $4,326,000 (December 31, 2013 - $4,065,000; January 1, 2013 - $Nil).

As of December 31, 2014, it was determined that low grade stockpiles would not be processed given prevailing silver prices and were therefore written off. This resulted in a charge to cost of sales of $11,262,000 (note 19).

During the year ended December 31, 2013, we wrote-down stockpiled ore to its NRV, recording a charge of $12,193,000. The cost of inventory held at NRV at December 31, 2014 was $Nil (December 31, 2013 - $3,656,000; January 1, 2013 - $4,810,000).


31
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

9.
PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment comprise the following:
 
December 31, 2014
 
Plant and equipment (restated note 2(t))

Assets under construction

Mineral properties (restated note 2(t))

Exploration and evaluation assets (restated note 2(t))

Total

Cost
 
 
 
 
 
Balance, January 1, 2014
288,701

10,337

34,160

60,076

393,274

Additions
3,126

20,493

43,487

4,283

71,389

Acquisition of Marigold (note 3)
157,880

9,561

50,823

—

218,264

Disposals
(7,860
)
—

—

—

(7,860
)
Costs written off
—

—

—

(145
)
(145
)
Change in estimate of close down and restoration provision
—

—

7,222

27

7,249

Impairment charges (note 10)
(22,835
)
—

(17,415
)
—

(40,250
)
Transfers
20,403

(20,403
)
—

—

—

Balance, end of period
439,415

19,988

118,277

64,241

641,921

 
 
 
 
 
 
Accumulated depreciation
 
 
 
 
 
Balance, January 1, 2014
(119,553
)
—

(25,084
)
—

(144,637
)
Charge for the year
(48,828
)
—

(13,517
)
—

(62,345
)
Disposals
4,135

—

—

—

4,135

Balance, end of period
(164,246
)
—

(38,601
)
—

(202,847
)
 
 
 
 
 
 
Net book value at December 31, 2014
275,169

19,988

79,676

64,241

439,074

 
December 31, 2013
 
Plant and equipment
(restated note 2(t))

Assets under construction

Mineral properties (restated note 2(t))

Exploration and evaluation assets (restated note 2(t))

Total

Cost
 
 
 
 
 
Balance, January 1, 2013
323,278

18,791

141,092

57,140

540,301

Additions
1,553

28,085

27,188

5,313

62,139

Disposals and reclassifications (1)
(5,288
)
—

—

(2,274
)
(7,562
)
Costs written off
—

—

—

(102
)
(102
)
Change in estimate of close down and restoration provision
—

—

939

(1
)
938

Impairment charges (note 10)
(67,381
)
—

(135,059
)
—

(202,440
)
Transfers
36,539

(36,539
)
—

—

—

Balance, end of period
288,701

10,337

34,160

60,076

393,274

 
 
 
 
 
 
Accumulated depreciation
 
 
 
 
 
Balance, January 1, 2013
(90,792
)
—

(18,976
)
—

(109,768
)
Charge for the year
(31,921
)
—

(6,108
)
—

(38,029
)
Disposals
3,160

—

—

—

3,160

Balance, end of period
(119,553
)
—

(25,084
)
—

(144,637
)
 
 
 
 
 
 
Net book value at January 1, 2013
232,486

18,791

122,116

57,140

430,533

 
 
 
 
 
 
Net book value at December 31, 2013
169,148

10,337

9,076

60,076

248,637

(1) 
On December 19, 2013, we entered into an agreement to sell our 100% interest in the Challacollo project in Chile (note 9(a)). As such, the project was classified as held for sale at December 31, 2013 and removed from exploration and evaluation assets.

32
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

9.
PROPERTY, PLANT AND EQUIPMENT (Cont'd)

No items of property, plant and equipment have been pledged as security for liabilities.

(a)
Challacollo agreement

On February 6, 2014, we completed the sale of our 100% interest in the Challacollo project located in Chile to Mandalay. Under the terms of the agreement, the total aggregate consideration was comprised of $7,500,000 in cash, 12,000,000 common shares of Mandalay with a fair value of $9,188,000 at closing, deferred consideration of 5,000,000 common of shares of Mandalay issued at the end of the first quarter in which commercial production has commenced, and cash equivalent of 240,000 ounces of silver paid in eight quarterly installments (based on the average quarterly silver price) beginning the quarter immediately following the quarter in which commercial production has commenced. In addition, we received a 2% net smelter return ("NSR") royalty on silver sales in excess of 36 million ounces, up to a maximum of $5,000,000 from the project. The fair value of consideration received was $18,644,000 and we recorded a gain on the sale of this mineral property of $15,913,000 before tax expense of $1,351,000. The deferred consideration is secured against the Challacollo mineral claims and the shares of the entity holding the Challacollo project.

During 2014, we sold all of the Mandalay shares received for proceeds of $9,279,000, recognizing a loss on disposal of $112,000.

(b)
Sale of San Agustin

On December 30, 2013, we completed the sale of our 100% interest in the San Agustin project located in Mexico to Argonaut Gold Inc. ("Argonaut"). Under the terms of the agreement, we receive cash payments of $45,000,000 (of which $15,000,000 was received upon closing, $10,000,000 was received on May 5, 2014 and $20,000,000 is to be received on May 5, 2015), and 5,111,439 common shares of Argonaut with a fair value of $25,420,000 at closing. We also reserve the right to a 2% NSR royalty on sulphide ores processed from the project. After discounting the non-current cash payment, the total consideration was valued at $68,284,000 and we recorded, in 2013, a gain on the sale of this mineral property of $67,821,000 (restated note 2(t)) before tax expense of $16,264,000. We also paid VAT of $6,467,000 and received a corresponding cash amount from Argonaut. The deferred consideration is secured against the San Agustin mineral claims and technical information.

During 2014, we sold 3,630,000 shares of Argonaut under a hedging arrangement for proceeds of $16,789,000, recognizing a loss on disposal of $3,825,000 and gain on derivatives of $2,788,000.


10.
IMPAIRMENT OF NON-CURRENT ASSETS

During the years ended December 31, 2014 and December 31, 2013, the book value of our net assets has exceeded our market capitalization, which was an indicator of potential impairment of the carrying value of our long-lived assets. In addition, metal prices have been volatile and silver has experienced a significant decline overall through this period. In 2014, silver prices were consistent until September 1 but thereafter declined significantly from $19.49/oz to $15.97/oz at December 31, 2014. There was a similar trend from the beginning of 2013 to the second quarter of 2013, as silver prices declined significantly from $30.87/oz to approximately $18.86/oz. As a result, at both December 31, 2014 and June 30, 2013, we assessed the recoverable amount of the Pirquitas mine, which has been identified as a CGU.

33
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

10.
IMPAIRMENT OF NON-CURRENT ASSETS (Cont'd)

Impairment testing on the Pirquitas mine

In both impairment assessments, the recoverable amount of the Pirquitas mine was determined to be the FVLCTD, which is based upon the CGU's estimated future after-tax cash flows. The after-tax cash flows were determined based on life-of-mine (“LOM”) after-tax cash flow projections, which incorporate our estimates of forecast metal prices, production based on current estimates of recoverable Mineral Reserves and Mineral Resources, exploration potential, future operating costs and capital expenditures, inflation, and long-term foreign exchange rates. Metal prices included in the cash flow projections were based on market consensus forecasts. Projected cash flows are discounted using an estimated weighted average cost of capital of a market participant adjusted for asset specific risks. Management's estimate of the FVLCTD is classified as level 3 in the fair value hierarchy (note 24).

Significant assumptions and impact

Pricing
For the December 31, 2014 ("Q4 2014") and June 30, 2013 ("Q2 2013") impairment assessments, the real silver metal price assumptions were as follows:
Silver price assumptions
2015
2016
2017
 
Q4 2014
$17.50
$18.50
$19.00
 
Silver price assumptions
 H2 2013
2014
2015
2016
2017
Long-term price
Q2 2013
$22.99
$21.92
$22.58
$22.68
$21.95
$20.70

Inflation and foreign exchange
Argentina's current inflationary environment continues to be elevated with the Argentine peso experiencing significant devaluation. A key assumption in the Pirquitas mine's current LOM after-tax cash flow projections is that total operating costs increased by inflation would be largely offset by a devaluation of the Argentine peso. Should this assumption regarding the future macroeconomic situation in Argentina change, and sustained inflation continue, without a commensurate change in the foreign exchange rate, the estimated recoverable amount could be adversely impacted.
Discount rate
The pre-tax discount rate adjusted for asset specific risks used for the Q4 2014 impairment assessment was 10% (Q2 2013 - 10%).
At Q4 2014, the recoverable amount of $180,007,000 (Q2 2013 - $219,947,000) was lower than the carrying value of the CGU and therefore we recorded an impairment charge of $40,250,000 (Q2 2013 - $202,440,000) before tax, ($40,250,000 net of tax (Q2 2013 - $196,904,000)) against the carrying value of the Pirquitas mine and its plant and equipment.

Impairment testing on exploration and evaluation assets

Due to the aforementioned decline in silver prices, we re-assessed our core projects which resulted in the reclassification of Pitarrilla's Mineral Reserves to Mineral Resources. We concluded that this constituted an impairment indicator and undertook an assessment of the FVLCTD of the project. We completed an impairment assessment using an approach of assessing comparable values of undeveloped Mineral Resources. Our conclusion was that the FVLCTD exceeded the carrying value of approximately $0.06 per equivalent ounce of silver Mineral Resource, so no impairment charge was required (see note 2(t) for an assessment of the impact that the change in accounting policy had on our impairment assessment).



34
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

11.
CURRENT AND DEFERRED INCOME TAX

Income tax expense (recovery) differs from the amount that would be computed by applying the Canadian statutory rate of 26% (2013: 25.75%) to income (loss) before income taxes. The reasons for the differences are as follows:
Years ended December 31
2014

2013

 
 
(restated note 2(t))

 
$

$

(Loss) before taxes
(95,815
)
(218,695
)
Statutory tax rate
26.00
%
25.75
%
Expected income tax (recovery)
(24,912
)
(56,314
)
 
 
 
Increase (decrease) resulting from:
 
 
Permanent differences
(9,490
)
2,811

Foreign exchange
(9,729
)
2,332

Differences in foreign and future tax rates
(7,170
)
(22,737
)
Differences in Canadian tax rates on capital items
3,213

(1,977
)
Mining & overseas withholding tax
11,650

1,941

Adjustments in respect of prior years
508

3,570

Movement in deferred tax not recognized


 
Movement in year
8,102

83,271

Additional movement in deferred tax not recognized due to reorganization
59,525

—

Other
(1,119
)
(1,576
)
Total income tax expense
30,578

11,321

 
 
 
Current tax expense
10,631

16,948

Deferred tax expense (recovery)
19,947

(5,627
)
Total income tax expense
30,578

11,321


The applicable tax rate in Canada for the year ended December 31, 2014 was 26%, which reflects the legislated provincial tax rate increased from 25.0% to 26.0% on April 1, 2013.

Impairment of Pirquitas of $51,512,000 (including $40,250,000 relating to write-down of property, plant and equipment and $11,262,000 of write-off of inventory) gave rise to an increased deductible temporary difference with respect to Argentina assets of $51,512,000. However, any resulting deferred income tax asset was unrecognized according to IAS 12, Income Taxes, as the entity does not have evidence to prove that it will have taxable profit to utilize the deferred tax assets or any deferred tax liabilities required to be offset by the deferred tax assets in the foreseeable future.

During the year we completed a reorganization of the US entity that holds our Pirquitas mine through an Argentine branch. As a result of this reorganization this US entity will no longer be subject to US income tax. Consequently, the current year deferred tax balances relating to Pirquitas arise from the Argentine branch itself, whereas the comparative 2013 deferred tax balances relate to the US entity. Accordingly, the previously recognized deferred tax asset comprised of the foreign tax credit ($12,040,000 arising from Argentine withholding tax paid on interest in 2013) has been derecognized. The reorganization has resulted in a reduction to the unrecognized deferred tax asset relating to Pirquitas of $47,485,000. Accordingly, the total movement in the unrecognized deferred tax assets relating to the reorganization of the US entity is equal to $59,525,000. Argentine withholding tax paid on interest results in current tax expense of $5,250,000 for 2014.

35
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

11.
CURRENT AND DEFERRED INCOME TAX (Cont'd)

In the normal course of business we are subject to assessment by taxation authorities in various jurisdictions. These authorities may have different interpretations of tax legislation or tax agreements than those applied by us in computing current and future income taxes. These different interpretations may alter the timing or amounts of taxable income or deductions. The final amounts of taxes to be paid or recovered depends on a number of factors including the outcome of audits, appeals and negotiation. We provide for potential differences in interpretation based a best estimate of the probable outcome of these matters. Changes in these estimates could result in material adjustments to our current and future income taxes.

The tax effected items that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities for the years ended December 31, 2014 and 2013 are presented below:
 
 
 
 
Balance as at December 31, 2014
 
Net balance at January 1, 2014 (restated note 2(t))

Recognized in statement of loss

Recognized in OCI

Net

 
Deferred tax assets

Deferred tax liabilities

 
$

$

$

$

 
$

$

Marketable securities
(10,767
)
2,145

(2,115
)
(10,737
)
 
—

(10,737
)
Inventory
1,114

(3,075
)
—

(1,961
)
 
786

(2,747
)
Property, plant and equipment
(61,937
)
7,066

—

(54,871
)
 
—

(54,871
)
Close down and restoration provision
4,143

(257
)
—

3,886

 
8,790

(4,904
)
Convertible notes
(9,431
)
1,185

—

(8,246
)
 
—

(8,246
)
Carry forward tax loss and tax credits
60,010

(24,890
)
—

35,120

 
35,120

—

Mining and foreign withholding tax
7,097

(16,824
)
—

(9,727
)
 
—

(9,727
)
Other
2,783

14,702

—

17,485

 
17,485

—

Net deferred tax (liabilities) assets before set-off
(6,988
)
(19,948
)
(2,115
)
(29,051
)
 
62,181

(91,232
)
Set-off tax
—

—

—

—

 
(62,181
)
62,181

Net deferred tax (liabilities)
(6,988
)
(19,948
)
(2,115
)
(29,051
)
 
—

(29,051
)
 
 
 
 
 
Balance as at December 31, 2013 (restated note 2(t))
 
Net balance at January 1, 2013 (restated note 2(t))

Recognized in statement of loss (restated note 2(t))

Recognized in OCI

Recognized in equity

Net

 
Deferred tax assets

Deferred tax liabilities

 
$

$

$

$

$

 
$

$

Marketable securities
(15,800
)
(2,446
)
7,479

—

(10,767
)
 
—

(10,767
)
Inventory
9,410

(8,296
)
—

—

1,114

 
1,114

—

Property, plant and equipment
(51,110
)
(10,827
)
—

—

(61,937
)
 
1,214

(63,151
)
Close down and restoration provision
12,780

(8,637
)
—

—

4,143

 
4,143

—

Convertible notes
—

(54
)
—

(9,377
)
(9,431
)
 
—

(9,431
)
Carry forward tax loss and tax credits
21,478

38,532

—

—

60,010

 
60,010

—

Mining and foreign withholding tax
—

7,097

—

—

7,097

 
12,040

(4,943
)
Other
12,538

(9,742
)
—

(13
)
2,783

 
2,783

—

Net deferred tax (liabilities) assets before set-off
(10,704
)
5,627

7,479

(9,390
)
(6,988
)
 
81,304

(88,292
)
Set-off tax
—

—

—

—

—

 
(69,263
)
69,263

Net deferred tax (liabilities)
(10,704
)
5,627

7,479

(9,390
)
(6,988
)
 
12,041

(19,029
)

36
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

11.
CURRENT AND DEFERRED INCOME TAX (Cont'd)

As at December 31, 2014, there was a deferred tax liability of $78,697,000 (December 31, 2013 - $78,218,000) for temporary differences of $262,322,000 (December 31, 2013 - $260,727,000) related to investments in subsidiaries. However, this liability was not recognized because we control the dividend policy of our subsidiaries (i.e. we control the timing of reversal of the related taxable temporary differences and we are satisfied that they will not reverse in the foreseeable future).

We recognize tax benefits on losses or other deductible amounts generated in countries where the probable criteria for the recognition of deferred tax assets has been met. Our unrecognized deductible temporary differences and unused tax losses for which no deferred tax asset is recognized consist of the following amounts:
Years ended December 31
2014

2013

 
 
(restated note 2(t))

 
$

$

Inventory
15,455

—

Property, plant and equipment
152,883

343,619

Close down and restoration provision
36,267

12,065

Carry forward tax loss and tax credits
178,094

10,500

Other items
21,290

25,605

Unrecognized deductible temporary differences
403,989

391,789


At December 31, 2014, we had the following estimated tax operating losses available to reduce future taxable income, including both losses for which deferred tax assets are utilized to offset applicable deferred tax liabilities and losses for which deferred tax assets are not recognized as listed in the table above. Losses expire at various dates and amounts between 2014 and 2033, with the exception of losses incurred in Chile which are available indefinitely.
As at December 31, 2014
$ 

Argentina
225,733

Mexico
88,931

Peru
168

Canada
3,868

U.S.A.
9,480


Canada Revenue Agency ("CRA") Reassessment

On January 27, 2015, we received a Notice of Reassessment ("NOR") from the CRA in the amount of approximately C$41,400,000 plus interest of C$6,580,000 related to the tax treatment of the 2010 sale of shares of our subsidiary that owned and operated the Snowfield and Brucejack projects. The CRA has asserted that the sale was on account of income and not capital, as we recorded it. Our management strongly disagrees with the CRA’s position in the reassessment and we plan on filing a Notice of Objection and, if necessary, a Notice of Appeal to the Tax Court of Canada. In order to appeal the reassessment, we are required to make a minimum payment of 50% of the reassessed amount claimed by the CRA under the NOR plus interest accrued to the date of the NOR.

Although the outcome of this matter cannot be predicted with certainty, we intend to contest the matter vigorously, and believe we will ultimately prevail based on the merits of our position. At this time we have not recognized an income tax provision for this amount. However, we will continue to evaluate our tax provisions as the matter progresses through appeals and, if necessary, the litigation process. If the CRA's position is ultimately sustained, it would have a material impact on earnings and financial resources in the period that the matter is ultimately resolved.



37
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

12.
VALUE ADDED TAX RECEIVABLE

 
December 31, 2014

December 31, 2013

January 1, 2013

 
$ 

$

$

Current (note 5)
8,054

5,915

32,796

Non-current
29,473

62,423

37,363

 
37,527

68,338

70,159


Value added tax ("VAT") paid in Argentina in relation to the Pirquitas mine became recoverable under Argentina law once the mine reached the production stage and we apply to the Argentina government to recover the applicable VAT on an ongoing basis. There have, at times, been significant delays in obtaining final approvals and, therefore, the collection of VAT and the classification reflects best estimates of timing of recoveries. Despite the procedural delays, we believe that the remaining balance is fully recoverable and have not provided an allowance, as discussed further in note 25(b).

The VAT receivables balance in Argentina is denominated in Argentine peso. Accordingly, foreign currency fluctuations could materially impact the value of the VAT receivables in U.S. dollars, as discussed further in note 25(a)(ii).


13.
TRADE AND OTHER PAYABLES

Trade payables and accrued liabilities are comprised of the following items:
 
December 31, 2014

December 31, 2013

January 1, 2013

 
$

$

$

Trade payables
23,552

11,014

16,757

Accrued liabilities
28,909

15,204

22,753

Value added tax payable (note 9(b))
—

6,467

—

Income taxes payable
1,028

15,885

532

Accrued interest on convertible notes (note 15)
3,156

3,157

2,093

 
56,645

51,727

42,135



38
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

14.
CURRENT PROVISIONS

Current provisions are comprised of the following items:
 
December 31, 2014

December 31, 2013

January 1, 2013

 
$

$

$

Export duties on silver concentrate (1)
56,058

48,169

35,009

Current portion of close down and restoration provision (note 16)
4,245

4,228

1,864

 
60,303

52,397

36,873


(1) 
We entered into a fiscal stability agreement (the “Fiscal Agreement”) with the Federal Government of Argentina in 1998 for production from the Pirquitas mine. In December 2007, the National Customs Authority of Argentina (Dirección Nacional de Aduanas) levied an export duty of approximately 10% from concentrates for projects with fiscal stability agreements pre-dating 2002 and the Federal Government has asserted that the Pirquitas mine is subject to this export duty. We have challenged the legality of the export duty applied to silver concentrates and the matter is currently under review by the Federal Court (Jujuy) in Argentina.

The Federal Court (Jujuy) granted an injunction in our favor effective September 29, 2010 that prohibited the Federal Government from withholding the 10% export duty on silver concentrates (the “Injunction”), pending the decision of the courts with respect to our challenge of the legality of the application of the export duty. The Injunction was appealed by the Federal Government but upheld by each of the Federal Court of Appeal (Salta) on December 5, 2012 and the Federal Supreme Court of Argentina on September 17, 2013. The Federal Government also appealed the refund we claimed for the export duties paid before the Injunction, as well as matters of procedure related to the uncertainty of the amount reclaimed; however, on May 3, 2013, such appeal was dismissed by the Federal Court of Appeal (Salta). In September 2014, the Federal Tax Authority in Argentina filed an application with the Federal Court (Jujuy) to lift the Injunction and require payment of the export duty and payment of applied interest charges. We filed a response to such application on October 14, 2014 and a decision is pending.

As of December 31, 2014, we have paid $6,646,000 in export duties, against which we have filed for recovery. In accordance with the Injunction, we have not been paying export duties on silver concentrates but continue to accrue export duties, with no accrual for interest charges, and have recorded a corresponding increase in cost of sales in the relevant period. The application of interest charges is uncertain, but if applied from the date each duty was levied and based on current U.S. dollar rates, is estimated to be in the range of $4.0 million to $6.5 million. The final amount of export duties and interest, if any, to be paid or refunded depends on a number of factors including the outcome of litigation. Changes in our assessment of this matter could result in material adjustments to our consolidated statement of loss.



39
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

15.
DEBT

(a)
Current debt

Current debt is comprised of the following items:
 
December 31, 2014

December 31, 2013

January 1, 2013

 
$

$

$

Loan facility (1)
5,922

—

—

Convertible notes
—

—

135,805

 
5,922

—

135,805


(1) 
During 2014, we entered into an Argentine peso-denominated loan facility of an equivalent amount of $7,500,000 at an interest rate determined at time of draw. In 2014 and at December 31, 2014, the Argentine peso equivalent of $5,922,000 had been drawn on this facility at an Argentina peso interest rate of 29.3% per annum and a maturity date of January 29, 2015, which was subsequently extended for a further six months. The facility is secured by $7,500,000 of restricted cash.

In February 2008, we sold $138,000,000 in senior convertible unsecured notes (“2008 Notes”) for net proceeds of $132,754,000 after payment of commissions and expenses related to the offering. The 2008 Notes bore an interest rate of 4.5% per annum, payable semi-annually. The 2008 Notes would have been convertible into our common shares at a fixed conversion price of approximately $43.33, subject to certain anti-dilution adjustments.

Holders of the 2008 Notes had the right to require us to repurchase all or part of their 2008 Notes at specified dates and exercised this right on March 1, 2013. The repurchase price was equal to 100% of the principal amount of the 2008 Notes being converted, plus accrued and unpaid interest to the repurchase date, which was paid in cash.

The 2008 Notes contained an embedded derivative due to the fact that if the holder had elected to exercise their conversion option, we would have the option to settle in either cash or common shares. Therefore, a derivative liability was recognized as FVTPL, and re-measured at each reporting period. As at January 1, 2013, we determined that the fair value of the derivative liability was $Nil due to the time to maturity and conversion price of $43.33, and therefore, no further gains or losses were recognized through to repurchase on March 1, 2013.

The debt portion had been designated as an ‘other financial liability’ so that it was recorded at amortized cost, net of transaction costs, and was accreted over an expected life of 5 years until March 2013 using the effective interest method. At January 1, 2013, it was classified as a current liability due to expected redemption in March 2013.

The movement in the debt portion of the 2008 Notes during 2013 comprised the following:
 
$

Principal
135,805

Accrued interest (note 13)
2,093

Balance, January 1, 2013
137,898

Accretion of discount
2,195

Interest accrued
1,012

Interest paid
(3,105
)
Repayment of 2008 Notes
(138,000
)
Balance, December 31, 2013
—


40
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

15.
DEBT (Cont'd)

(b)
Non-current debt

On January 16, 2013, we sold $265,000,000 of senior convertible unsecured notes (the "2013 Notes") for net proceeds of $256,083,000 after payment of commissions and expenses related to the offering. The 2013 Notes mature on February 1, 2033 and bear an interest rate of 2.875% per annum, payable semi-annually in arrears on February 1 and August 1 of each year. The 2013 Notes are convertible into our common shares at a fixed conversion rate, subject to certain anti-dilution adjustments. In addition, if certain fundamental changes occur to us, holders of the 2013 Notes may be entitled to an increased conversion rate. The 2013 Notes are convertible into our common shares at an initial conversion rate of 50 common shares per $1,000 principal amount of 2013 Notes converted, representing an initial conversion price of $20.00 per common share.

We may not redeem the 2013 Notes before February 1, 2018, except in the event of certain changes in Canadian tax law. At any time on or after February 1, 2018, but before February 1, 2020, we may redeem all or part of the 2013 Notes for cash, but only if the last reported sale price of our common shares for 20 or more trading days in a period of 30 consecutive trading days exceeds 130% of the conversion price. On or after February 1, 2020, we may redeem the 2013 Notes in full or in part, for cash.

Holders of the 2013 Notes have the right to require us to repurchase all or part of their 2013 Notes on February 1 of each of 2020, 2023 and 2028, or upon certain fundamental corporate changes. The repurchase price will be equal to 100% of the principal amount of the 2013 Notes being converted, plus accrued and unpaid interest to the repurchase date.

At initial recognition, the net proceeds of the 2013 Notes were bifurcated into their debt and equity components. The fair value of the debt portion of $178,358,000 was estimated using a discounted cash flow model method based on an expected life of seven years and a discount rate of 8.5%. The residual of $77,723,000 ($68,347,000 net of deferred tax) was allocated to equity. The 2013 Notes had a fair value of $185,831,000 as at December 31, 2014.

The debt portion has been designated as an 'other financial liability' and is recorded at amortized cost, net of transaction costs, and is accreted over the expected life using the effective interest method.

The movement in the debt portion of the 2013 Notes during the years ended December 31, 2014 and 2013 are comprised of the following:
 
December 31, 2014

December 31, 2013

 
$

$

Balance, beginning of period
190,287

—

Debt portion of net proceeds
—

178,358

Accretion of discount
10,003

8,772

Interest accrued in period
7,619

7,262

Interest paid
(7,619
)
(4,105
)
Balance, end of period
200,290

190,287

Accrued interest outstanding (note 13)
(3,156
)
(3,157
)
Non-current portion of 2013 Notes outstanding
197,134

187,130





41
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

16.
CLOSE DOWN AND RESTORATION PROVISION

 
December 31, 2014

December 31, 2013

 
$ 

$

Balance, January 1
37,201

33,086

 
 
 
Provision from acquisition of Marigold mine (note 3)
14,731

—

Liabilities settled during the year
(1,839
)
(941
)
Accretion expense
3,640

3,671

Foreign exchange gain
(113
)
(29
)
Revisions and new estimated cash flows
8,570

1,414

 
 
 
Balance, December 31
62,190

37,201

 
 
 
Less: current portion of close down and restoration provision in trade and other payables
(4,245
)
(4,228
)
Non-current close down and restoration provision
57,945

32,973


Our close down and restoration provision relates to the restoration and closure of our mining operations and exploration and evaluation assets (note 9). The provision is initially recorded at present value, and subsequently re-measured at each reporting period. During the year ended December 31, 2014, our estimate for our close down and restoration provision increased by $8,570,000 due to changes in discount rates, certain economic assumptions and cash flow estimates. In particular, the provision for Marigold was increased by $7,222,000 following the initial fair value acquired, as provisions must exclude an assessment of our own credit risk, estimates of expected cash flows were unchanged.

The provision is calculated as the present value of estimated future net cash outflows based on the following key assumptions:
▪
Discount interest rates: ranging from 2.5% to 9.9% (2013 - 8.5% to 9.9%); and
▪
Settlement of obligations expected to occur over the next 16 years.
A 1% change in the discount rate would increase or decrease the provision by approximately $2,200,000.


17.
SHARE CAPITAL AND SHARE-BASED PAYMENTS
(a)
Authorized capital
We have unlimited authorized common shares with no par value.
(b)Stock options
We have an incentive plan, approved by our shareholders, under which options to purchase common shares may be granted to directors, officers, employees and others at the discretion of the Board of Directors. The plan provides for the issuance of incentive options to acquire up to a total of 6% of our issued and outstanding common shares. The exercise price of each option is set at the date of grant and shall not be less than the closing market price of our stock on the award date. The options can be granted for a maximum term of 10 years with vesting provisions determined by the Board of Directors. Currently, the vesting periods range up to three years, and the term is seven years. New shares from treasury are issued on the exercise of stock options.

42
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

17.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)
The changes in stock options issued during the years ended December 31, 2014 and December 31, 2013 are as follows:
Years ended December 31
2014
2013
 
Number of stock options

Weighted average exercise price (C$/option)

Number of stock options

Weighted average exercise price (C$/option)

 
 
 
 
 
Outstanding, January 1
1,754,944

16.05

2,023,563

20.49

     Granted
1,016,578

8.07

680,150

11.87

     Exercised
—

—

(6,667
)
(11.50
)
     Expired
(74,246
)
(14.14
)
(225,498
)
(30.32
)
     Forfeited
(320,211
)
(16.19
)
(716,604
)
(20.17
)
Outstanding, December 31
2,377,065

12.68

1,754,944

16.05

During the year ended December 31, 2014, options granted to officers, employees, directors and other eligible persons had exercise prices ranging from C$6.48 to C$11.18 (December 31, 2013 – C$9.50 to C$12.99) and expiry dates ranging from January 1, 2021 to December 1, 2021.
As of December 31, 2014, incentive stock options constitute 2.9% (2013 – 2.2%) of issued and outstanding common capital. The aggregate intrinsic value of vested share options (market value less exercise price) at December 31, 2014 and December 31, 2013 was $Nil.
The weighted average fair value of stock options granted during the year ended December 31, 2014 and year ended December 31, 2013 were estimated to be C$3.39 and C$5.17 per stock option, respectively, at the grant date using the Black-Scholes option pricing model, using the following assumptions:
Years ended December 31
2014

2013

 
 
 
Forfeiture rate (%)
3.0

3.0

Dividend yield (%)
0.0

0.0

Average risk-free interest rate (%)
1.56

1.34

Expected life (years)
4.2

4.2

Volatility (%)
52.1

55.4

Option pricing models require the input of highly subjective assumptions. The expected life of the options considered such factors as the average length of time similar option grants in the past have remained outstanding prior to exercise and the vesting period of the grants. Volatility was estimated based upon historical price observations over the expected term. Changes in the subjective input assumptions can materially affect the estimated fair value of the options.
The weighted average share price, at the date of grant, of stock options granted in 2014 was C$8.00 (2013 - C$11.68).
There was no exercise of stock options in 2014. The weighted average share price at the date of the exercise of stock options in 2013 was C$13.15.

43
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

17.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)
The following table summarizes information about stock options outstanding and exercisable at December 31, 2014:
 
Stock options outstanding
 
Stock options exercisable
 
 
Stock options outstanding

Weighted average remaining contractual life (years)

Stock options exercisable

Weighted average exercise price
(C$/option)

Exercise prices (C$)
 
 
 
 
 
 
 
 
 
6.48 – 8.44
765,978

6.2

—

—

8.45 – 12.34
414,334

5.7

79,664

10.25

12.35 – 16.40
409,186

4.8

172,936

14.00

16.41 – 28.78
787,567

5.0

737,567

18.59

 
2,377,065

5.5

990,167

17.11

(c)Deferred Share Units
Non-executive directors may elect to receive all or a portion of their annual compensation in the form of DSUs which are linked to the value of our common shares. DSUs are issued on a quarterly basis under the terms of the DSU Plan, at the market value of our common shares at the date of grant. The DSUs vest immediately and are redeemable in cash on the date the director ceases to be our director.
Years ended December 31
2014

2013

 
Number of DSUs

Number of DSUs

Outstanding, January 1
251,019

150,117

Granted
106,486

100,902

Redeemed
(21,825
)
—

Outstanding, December 31
335,680

251,019

The DSUs granted in the year ended December 31, 2014 had a fair value of C$8.32 per unit (2013 - C$8.45). DSUs settled in the year ended December 31, 2014 were settled at a fair value of C$6.35 per unit (2013 - C$Nil). The DSUs are cash-settled instruments and, therefore, the fair value of the outstanding DSUs at the end of each reporting period is recognized as an accrued liability with the associated compensation cost recorded in general and administrative expenses. As at December 31, 2014, the weighted average fair value was C$5.83 per unit (December 31, 2013 - C$7.37 per unit).
At December 31, 2014, an accrued liability of $1,687,000 (2013 - $1,739,000) was outstanding. For the year ended December 31, 2014, a share-based payment expense of $234,000 (2013 - $396,000 recovery) was recorded.

44
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

17.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)
(d)Restricted Share Units
RSUs are granted to employees based on the value of our share price at the date of grant. The awards have a graded vesting schedule over a three-year period. During 2014, the terms of the plan were amended to provide the directors the discretion to elect to settle the units in either cash or shares. They were previously only cash-settled immediately upon vesting.
To date, all RSUs have been cash-settled and, therefore, are recognized as a liability, with fair value remeasurement at each reporting period. The associated compensation cost is recorded in general and administrative expenses unless directly attributable to our operations, whereby it is included in cost of inventory, or exploration projects.
Years ended December 31
2014

2013

 
Number of RSUs

Number of RSUs

Outstanding, January 1
129,498

141,810

     Granted
297,480

118,300

     Settled
(53,905
)
(53,286
)
     Forfeited
(42,659
)
(77,326
)
Outstanding, December 31
330,414

129,498


The RSUs granted in the year ended December 31, 2014 had a weighted average fair value of C$9.41 per unit (2013 - C$10.27 per unit). RSUs settled in the year ended December 31, 2014 were settled at a fair value of C$11.02 per unit (2013 - C$9.92). As at December 31, 2014, the weighted average fair value was C$5.83 per unit (December 31, 2013 - C$7.37 per unit).
At December 31, 2014, an accrued liability of $888,000 (2013 - $476,000) on services received was outstanding. For the year ended December 31, 2014, a share-based payment expense of $419,000 (2013 - $374,000 recovery) was recorded.
(e)Performance Share Units
PSUs are granted to senior executives, and vest after a performance period of three years. During 2011, in addition to a normal annual grant there was also a one-off grant of transitional PSUs, which vested after a two-year performance period. The vesting of these awards is based on our total shareholder return in comparison to our peer group, and awards vested range from 0% to 200% of initial PSUs granted. During 2014, the terms of the plan were amended to provide the directors the discretion to elect to settle the PSUs in either cash or shares. They were previously only cash-settled immediately upon vesting.
To date, all PSUs have been cash-settled and, therefore, are recognized as a liability, with fair value remeasurement at each reporting period. The associated compensation cost is recorded in general and administrative expenses.
Years ended December 31
2014

2013

 
Number of PSUs

Number of PSUs

Outstanding, January 1
177,729

201,220

     Granted
253,600

137,500

     Settled
(24,903
)
(46,700
)
     Forfeited
(58,524
)
(114,291
)
Outstanding, December 31
347,902

177,729


45
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

17.
SHARE CAPITAL AND SHARE-BASED PAYMENTS (Cont'd)
The PSUs granted in the year ended December 31, 2014 had a weighted average fair value of C$7.37 per unit (2013 - C$12.99 per unit). PSUs settled in the year ended December 31, 2014 were settled at a fair value of C$5.48 per unit (December 31, 2013 - C$10.00). As at December 31, 2014, the weighted average fair value was C$5.44 per unit (2013 - C$7.37 per unit).
At December 31, 2014, an accrued liability of $707,000 (2013 - $589,000) on services received was outstanding. For the year ended December 31, 2014, a share-based payment expense of $293,000 (2013 - $103,000 recovery) was recorded.
(f)Share-based compensation
Total share-based compensation, including all equity and cash-settled arrangements, for the years ended December 31, 2014 and 2013 has been recognized in the consolidated financial statements as follows:
Years ended December 31
2014

2013

 
$

$

Equity-settled
 
 
Cost of inventory
26

—

General and administrative expense
2,141

1,001

Property, plant and equipment
(107
)
189

Cash-settled
 
 
Cost of inventory
393

38

General and administrative expense (recovery)
946

(873
)
Property, plant and equipment
28

217

Total
3,427

572



46
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

18.
OTHER RESERVES

 
2014

2013

 
 
(restated note 2(t))

 
$ 

$

Foreign currency translation reserve
 
 
At January 1
745

788

Parent company, subsidiary companies' and associate currency translation adjustments
35

(293
)
Currency translation adjustments recycled to net income on derecognition of investment in associate
—

250

At December 31
780

745

 
 
 
Available-for-sale revaluation reserves
 
 
At January 1
(44,348
)
9,646

Unrealized gains (losses) on available-for-sale securities
14,122

(61,578
)
Deferred income tax (expense) recovery
(2,311
)
7,522

Realized loss of marketable securities recycled to net income, net of tax
2,258

62

At December 31
(30,279
)
(44,348
)
 
 
 
Transactions with non-controlling interests
 
 
At January 1
(28,198
)
(28,198
)
At December 31
(28,198
)
(28,198
)
 
 
 
Share-based compensation reserve
 
 
At January 1
42,914

41,780

Stock options exercised
—

(56
)
Share-based compensation
2,060

1,190

At December 31
44,974

42,914

 
 
 
Total other reserves at December 31
(12,723
)
(28,887
)

47
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

19.
OPERATING COSTS BY NATURE

a)Cost of sales
Years ended December 31
2014

2013

 
$ 

$

Cost of inventory
200,539

100,555

Depletion, depreciation and amortization
41,401

41,808

Export duties (note 14)
10,720

14,946

Write-down of stockpiles (note 8)
11,262

12,193

 
263,922

169,502


b)General and administrative expenses
Years ended December 31
2014

2013

 
$

$

Salaries and benefits
11,096

13,214

Consulting and professional fees
2,867

5,058

Share-based compensation
3,087

128

Travel expense
870

960

Computer expenses
849

606

Insurance expense
824

769

Rent expense
744

928

Shareholder and investor relations
389

409

Depreciation and amortization
365

375

Directors fees and expenses
319

199

Listing and filing fees
204

283

Other expenses
248

512

 
21,862

23,441


c)Restructuring costs

During 2013, we incurred restructuring costs of $2,928,000 which are recorded in general and administrative expenses as salaries and benefits and $1,468,000 in cost of inventory. No restructuring costs were incurred during 2014.

48
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

20.
FINANCE INCOME AND EXPENSES
a)Interest earned and other finance income
Years ended December 31
2014

2013

 
$ 

$

Interest earned
1,458

6,180

Realized gain on derivatives (note 9(b))
2,788

—

Accretion income on deferred consideration
1,579

—

Total interest earned and other finance income
5,825

6,180


b)Interest expense and other finance expenses
Years ended December 31
2014

2013

 
$

$

Interest expense on convertible notes (note 15)
(7,619
)
(8,274
)
Accretion expense on convertible notes (note 15)
(10,003
)
(10,967
)
Accretion of close down and restoration provision (note 16)
(3,640
)
(3,671
)
Finance expenses on sale of VAT and disposal of marketable securities
(3,462
)
—

Other finance expenses
(1,688
)
(180
)
Total interest expense and other finance expenses
(26,412
)
(23,092
)


21.
OTHER INCOME (OTHER EXPENSES)
Years ended December 31
2014

2013

 
 
(restated note 2(t))

 
$

$

Unrealized (loss) on marketable securities (1, 2)
(6,208
)
(13,050
)
(Loss) on sale of marketable securities
(5,219
)
47

(Loss) on disposal of fixed assets
(1,791
)
—

Write-down of exploration and evaluation assets (note 9)
(145
)
(102
)
Dividend income
166

178

Write-down of assets held for sale
—

(3,875
)
Gain on dilution of associate
—

2,112

Share of net (loss) of associate
—

(1,033
)
Other (expense) income
(244
)
202

 
(13,441
)
(15,521
)

(1)  
During 2014, we recorded unrealized gains and losses on previously impaired marketable securities and marketable securities classified as FVTPL.
(2)  
In 2013, we recorded impairment on marketable securities, due to a significant decline in share price, resulting in a realized loss of $13,050,000. This was offset by a $47,000 gain on disposal of marketable securities.


49
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

22.
EARNINGS PER SHARE

The calculations of basic and diluted earnings per share for the years ended December 31, 2014 and 2013 are based on the following:
Years ended December 31
2014

2013

 
 
(restated note 2(t))

 
 
 
(Loss) used in the calculation of diluted (loss) earnings per share

($126,393
)

($230,016
)
 
 
 
Weighted average number of common shares issued (thousands)
80,754

80,754

Adjustments for dilutive instruments:
 
 
   Stock options (thousands)
—

—

Weighted average number of common shares for diluted (loss) earnings per share (thousands)
80,754

80,754

 
 
 
Basic (loss) earnings per share

($1.57
)

($2.85
)
Diluted (loss) earnings per share

($1.57
)

($2.85
)
As we incurred a net loss during the years ended December 31, 2014 and 2013, basic and diluted loss per share are the same because the exercise of options and convertible notes are anti-dilutive.


23.
OPERATING SEGMENTS

We are a resource company focused on the operation, development, exploration and acquisition of precious metal projects in the Americas.

An operating segment is defined as a component:
▪
that engages in business activities from which it may earn revenues and incur expenses;
▪
whose operating results are reviewed regularly by the entity’s chief operating decision maker; and
▪
for which discrete financial information is available.

We have identified operating segments based on the information used by our President and Chief Executive Officer (who is considered to be the chief operating decision maker) to manage the business. We primarily manage our business by looking at individual resource projects and typically segregate these projects between production, development and exploration.

For reporting purposes, exploration and development projects have been aggregated into a single reportable segment where they all have similar characteristics and do not exceed the quantitative thresholds for individual disclosure.

Our two operating properties, the Pirquitas mine and Marigold mine, are considered as individual operating segments which derive their revenues from the sale of silver, zinc, and gold. The corporate division earns income that is considered incidental to our activities and therefore does not meet the definition of an operating segment. Consequently, the following reporting segments have been identified:
▪
Pirquitas mine;
▪
Marigold mine; and
▪
Exploration and evaluation properties.

50
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

23.
OPERATING SEGMENTS (Cont'd)
The following is a summary of the reported amounts of income or loss, and the carrying amounts of assets and liabilities by operating segment:
Year ended and at December 31, 2014
Pirquitas mine

Marigold mine

Exploration and evaluation properties

Other reconciling items (i)

Total

 
$ 

$ 

$

$

$

Revenue
141,193

158,929

—

—

300,122

Cost of inventory
(92,663
)
(107,876
)
—

—

(200,539
)
Depletion, depreciation and amortization
(29,184
)
(12,217
)
—

—

(41,401
)
Export duties
(10,720
)
—

—

—

(10,720
)
Write-down of stockpiles
(11,262
)
 
 
 
(11,262
)
Cost of sales
(143,829
)
(120,093
)
—

—

(263,922
)
(Loss) income from mine operations
(2,636
)
38,836

—

—

36,200

 
 
 
 
 
 
Exploration, evaluation and reclamation expenses
(1,425
)
(4,128
)
(15,637
)
—

(21,190
)
Impairment charge
(40,250
)
—

—

—

(40,250
)
Operating (loss) income
(45,374
)
36,493

(15,655
)
(27,961
)
(52,497
)
Write-down of assets
—

—

(145
)
—

(145
)
(Loss) income before income tax
(72,839
)
23,950

(9,019
)
(37,907
)
(95,815
)
 
 
 
 
 
 
Interest income and other finance income
1,355

6

1,589

2,875

5,825

Interest expense and other finance costs
(6,671
)
(459
)
(92
)
(19,190
)
(26,412
)
Income tax (expense) recovery
(17,290
)
(10,995
)
(3,582
)
1,289

(30,578
)
 
 
 
 
 
 
Total assets
245,819

343,411

121,241

275,778

986,249

Non-current assets
140,856

240,893

90,981

21,701

494,431

Total liabilities
(121,191
)
(45,401
)
(13,723
)
(226,684
)
(406,999
)
Year ended and at December 31, 2013
Pirquitas mine

Marigold mine

Exploration and evaluation properties (restated note 2(t))

Other reconciling items (i)

Total (restated note 2(t))

 
$

$

$

$

$

Revenue
174,686

—

—

—

174,686

Cost of inventory
(112,748
)
—

—

—

(112,748
)
Depletion, depreciation and amortization
(41,808
)
—

—

—

(41,808
)
Export duties
(14,946
)
—

—

—

(14,946
)
Cost of sales
(169,502
)
—

—

—

(169,502
)
Income from mine operations
5,184

—

—

—

5,184

 
 
 
 
 
 
Exploration, evaluation and reclamation expenses
(2,205
)
—

(21,252
)
—

(23,457
)
Impairment charge
(202,440
)
—

—

—

(202,440
)
Operating income (loss)
(203,076
)
—

(20,664
)
(20,414
)
(244,154
)
Write-down of assets
—

—

(102
)
(3,875
)
(3,977
)
Income (loss) before income tax
(233,821
)
—

44,696

(29,570
)
(218,695
)
 
 
 
 
 
 
Interest income and other finance income
4,907

—

—

1,273

6,180

Interest expense and other finance costs
(3,658
)
—

(94
)
(19,340
)
(23,092
)
Income tax recovery (expense)
8,374

—

(21,476
)
1,781

(11,321
)
 
 
 
 
 
 
Total assets
383,978

—

154,259

494,498

1,032,735

Non-current assets
241,739

—

107,672

1,855

351,266

Total liabilities
(106,118
)
—

(33,916
)
(203,222
)
(343,256
)

51
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

23.
OPERATING SEGMENTS (Cont'd)

At January 1, 2013
Pirquitas mine

Marigold mine

Exploration and evaluation properties (restated note 2(t))

Other reconciling items (i)

Total (restated note 2(t))

 
$

$

$

$

$

Total assets
614,244

—

122,702

430,785

1,167,731

Non-current assets
394,020

—

86,923

121,064

602,007

Total liabilities
(99,995
)
—

(2,368
)
(161,450
)
(263,813
)

(1) Other reconciling items refer to items that are not reported as part of segment performance as they are managed on a corporate basis.

Segment revenue by product
Years ended December 31
2014

2013

 
%

%

Silver
39

91

Gold
53

—

Zinc
7

9

Other
1

—


Segment revenue by location and major customers
Our Pirquitas mine sales are made to external customers located in various geographical areas. For the Pirquitas mine segment, we had five customers who individually accounted for between 11% and 22% of total revenue during 2014, and four customers who individually accounted for between 17% and 23% of total revenue during 2013. Marigold mine's principal product is gold doré with the refined gold bullion sold to one customer.

Non-current assets by location
 
December 31, 2014

December 31, 2013

January 1, 2013

 
 
(restated note 2(t))

(restated note 2(t))

 
$

$

$

United States
242,013

12,743

415

Argentina
145,273

239,002

403,014

Mexico
72,967

84,398

61,508

Canada
22,277

3,109

122,318

Peru
11,901

12,014

12,222

Chile
—

—

2,530

Total
494,431

351,266

602,007



52
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

24.
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Our financial instruments include cash and cash equivalents, trade receivables and other assets, marketable securities, other financial assets, trade and other payables, and convertible notes.
a)Financial assets and liabilities by category
At December 31, 2014
Loans and receivables

FVTPL

Available-for-sale

Other financial liabilities

Total

 
$

$

$

$

$

Financial assets
 
 
 
 
 
Cash and cash equivalents (note 4)
184,643

—

—

—

184,643

Trade receivables and other assets (1)
3,784

26,529

—

—

30,313

Marketable securities (note 6)
—

2,337

102,448

—

104,785

Other financial assets (note 7) (2)
39,047

1,954

—

—

41,001

Total financial assets
227,474

30,820

102,448

—

360,742

 
 
 
 
 
 
Financial liabilities
 
 
 
 
 
Trade and other payables
—

3,281

—

52,336

55,617

Current provisions (note 14)
—

—

—

56,058

56,058

Current debt (note 15(a))
—

—

—

5,922

5,922

Debt (note 15(b)) (3)
—

—

—

197,134

197,134

Total financial liabilities
—

3,281

—

311,450

314,731


At December 31, 2013
Loans and receivables

FVTPL

Available-for-sale

Other financial liabilities

Total

 
$

$

$

$

$

Financial assets
 
 
 
 
 
Cash and cash equivalents (note 4)
415,657

—

—

—

415,657

Trade receivables and other assets (1)
994

43,516

—

—

44,510

Marketable securities (note 6)
—

25,567

103,700

—

129,267

Other financial assets (note 7) (2)
29,847

—

—

—

29,847

Total financial assets
446,498

69,083

103,700

—

619,281

 
 
 
 
 
 
Financial liabilities
 
 
 
 
 
Trade and other payables
—

2,805

—

26,570

29,375

Current provisions (note 14)
—

—

—

48,169

48,169

Debt (note 15(b)) (3)
—

—

—

187,130

187,130

Total financial liabilities
—

2,805

—

261,869

264,674


53
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

24.
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Cont'd)

At January 1, 2013
Loans and receivables

FVTPL

Available-for-sale

Other financial liabilities

Total

 
$

$

$

$

$

Financial assets
 
 
 
 
 
Cash and cash equivalents (note 4)
366,947

—

—

—

366,947

Trade receivables and other assets (1)
112

40,947

—

—

41,059

Marketable securities (note 6)
—

—

34,733

—

34,733

Other financial assets (note 7)
1,847

—

—

—

1,847

Total financial assets
368,906

40,947

34,733

—

444,586

 
 
 
 
 
 
Financial liabilities
 
 
 
 
 
Trade and other payables
—

4,633

—

36,969

41,602

Current provisions (note 14)
—

—

—

35,009

35,009

Current debt (note 15(a)) (3)
—

—

—

135,805

135,805

Total financial liabilities
—

4,633

—

207,783

212,416


(1) 
Certain trade receivables and other assets are classified as FVTPL due to the embedded derivative identified through provisional pricing arrangements discussed in note 2(f).
(2) 
Other financial assets include deferred consideration received from sale of the San Agustin project discussed in note 9(b).
(3) 
The debt portion of the convertible notes is designated as an other financial liability.

b)Fair value of financial instruments
 
December 31, 2014
December 31, 2013
January 1, 2013
 
Carrying value

Fair value

Carrying value

Fair value

Carrying value

Fair value

 
$

$

$

$

$

$

Financial assets
 
 
 
 
 
 
Trade receivables and other assets
30,313

30,313

44,510

44,510

41,059

41,059

Marketable securities (note 6)
104,785

104,785

129,267

129,267

34,733

34,733

Other financial assets (note 7)
41,001

41,001

29,847

29,847

1,847

1,847

Total financial assets
176,099

176,099

203,624

203,624

77,639

77,639

 
 
 
 
 
 
 
Financial liabilities
 
 
 
 
 
 
Current provisions (note 14)
56,058

56,058

48,169

48,169

35,009

35,009

Current debt (note 15(a))
5,922

5,922

—

—

135,805

138,000

Debt (note 15(b)) (1)
197,134

185,831

187,130

191,487

—

—

Total financial liabilities
259,114

247,811

235,299

239,656

170,814

173,009


(1) 
The fair value of the convertible notes includes both the debt and equity components.

The carrying values of cash and cash equivalents and trade and other payables, approximate their fair values due to their short maturity.

54
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

24.
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Cont'd)

Fair value hierarchy

Assets and liabilities that are held at fair value are categorized based on a valuation hierarchy which is determined by the valuation methodology utilized:
 
Fair value at December 31, 2014
 
Level 1

Level 2

Level 3

Total

 
$ 

$

$

$

Recurring measurements
 
 
 
 
Trade receivables and other assets
—

26,529

—

26,529

Marketable securities (note 6)
104,785

—

—

104,785

Other financial assets
—

—

1,954

1,954

Trade and other payables
—

3,281

—

3,281

Current debt (note 15(a))
—

5,922

—

5,922

 
104,785

35,732

1,954

142,471

 
 
 
 
 
Non-recurring measurements
 
 
 
 
Property, plant and equipment
—

—

180,007

180,007

 
—

—

180,007

180,007

 
 
 
 
 
Fair values disclosed
 
 
 
 
Debt (note 15(b))
185,831

—

—

185,831

 
185,831

—

—

185,831

 
Fair value at December 31, 2013
 
Level 1

Level 2

Level 3

Total

 
$ 

$

$

$

Recurring measurements
 
 
 
 
Trade receivables and other assets
—

43,516

—

43,516

Marketable securities (note 6)
103,700

25,567

—

129,267

Trade and other payables
—

2,805

—

2,805

 
103,700

71,888

—

175,588

 
 
 
 
 
Non-recurring measurements
 
 
 
 
Assets held for sale
—

—

3,876

3,876

Property, plant and equipment
—

—

222,169

222,169

 
—

—

226,045

226,045

 
 
 
 
 
Fair values disclosed
 
 
 
 
Debt (note 15(b))
191,487

—

—

191,487

 
191,487

—

—

191,487


55
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

24.
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Cont'd)

 
Fair value at January 1, 2013
 
Level 1

Level 2

Level 3

Total

 
$ 

$

$

$

Recurring measurements
 
 
 
 
Trade receivables and other assets
—

40,947

—

40,947

Marketable securities (note 6)
34,733

—

—

34,733

Trade and other payables
—

4,633

—

4,633

 
34,733

45,580

—

80,313

 
 
 
 
 
Fair values disclosed
 
 
 
 
Current debt (note 15(a))
138,000

—

—

138,000

 
138,000

—

—

138,000


Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities
Marketable securities, consisting of available-for-sale investments with no trading restrictions are valued using a market approach based upon unadjusted quoted prices in an active market obtained from securities exchanges. The fair value disclosed for the 2008 Notes and the 2013 Notes is also included in Level 1, as the basis of valuation uses a quoted price in an active market.
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)
Marketable securities with certain trading restrictions are included in Level 2, as are trade receivables from provisional invoices for concentrate sales and the Argentine peso loan facility, as the basis of valuation uses quoted commodity prices. During 2014, we transferred the full amount of the marketable securities in Level 2 to Level 1 as the trading restrictions on them were removed.
Accrued liabilities relating to DSUs, RSUs, and PSUs are included in Level 2, as the basis of valuation uses quoted prices in active markets.
Level 3 – inputs for an asset or liability that are not based on observable market data (unobservable inputs)
During the year ended December 31, 2014 and 2013, the Pirquitas Mine CGU was written down to its recoverable amount. During the year ended December 31, 2013, certain assets held for sale were also written down to their recoverable amounts. The recoverable amounts became the carrying values and will not be revalued, but certain assumptions used in the calculation of the recoverable amounts are categorized as Level 3 in the fair value hierarchy (note 10).

The deferred consideration from the sale of the Challacollo project (note 9(a)) is included in Level 3, as certain assumptions used in the calculation of the fair value are not based on observable market data as detailed in note 2(q)(ii).

There were no transfers into or out of Level 3 during 2014 or 2013.


56
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

25.
FINANCIAL RISK MANAGEMENT

We are exposed to a variety of financial risks as a result of our operations, including market risk (which includes price risk, currency risk and interest rate risk), credit risk and liquidity risk. Our overall risk management strategy seeks to reduce potential adverse effects on our financial performance. Risk management is carried out under policies approved by our Board of Directors.
We may, from time to time, use foreign exchange contracts, commodity price contracts, equity hedges and interest rate swaps to manage our exposure to fluctuations in market prices, foreign currency, metal and energy prices, marketable security values and interest rates. We do not have a regular practice of trading derivatives. In the past, our use of derivatives was limited to specific programs to manage fluctuations in foreign exchange and marketable securities risks, which were subject to the oversight of our Board of Directors.
The risks associated with our financial instruments and the policies on how we mitigate those risks are set out below. This is not intended to be a comprehensive discussion of all risks.
a)Market Risk
This is the risk that the fair values of financial instruments will fluctuate owing to changes in market prices. The significant market risks to which we are exposed are price risk, currency risk and interest rate risk.
(i)  Price Risk
This is the risk that the fair values or future cash flows of our financial instruments will fluctuate because of changes in market prices. Income from mine operations in the next year depends on the metal prices for gold, silver, and to a lesser extent, zinc. These prices are affected by numerous factors that are outside of our control such as:
▪
global or regional consumption patterns;
▪
the supply of, and demand for, these metals;
▪
speculative activities;
▪
the availability and costs of metal substitutes;
▪
inflation; and
▪
political and economic conditions, including interest rates and currency values.
The principal financial instrument we hold that is are impacted by commodity prices is the embedded derivative within our silver and zinc concentrate trade receivables. The majority of these sales agreements are subject to pricing terms that settle within one to three months after delivery of concentrate and this adjustment period represents our trade receivable exposure to variations in commodity prices.
We have not hedged the price of any precious metal as part of our overall corporate strategy.
A 10% increase in the silver and zinc prices as at December 31, 2014 and December 31, 2013, with all other variables held constant, would have resulted in the following impact to our trade receivables and after-tax net income:
 
2014

2013

 
$

$

10% increase in silver price
1,958

1,814

10% increase in zinc price
275

272


As we do not have trade receivables for gold sales, movements in gold prices will not impact the value of any financial instruments.

57
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

25.
FINANCIAL RISK MANAGEMENT (Cont'd)

The costs relating to our production activities vary depending on market prices on certain mining consumables including diesel fuel and electricity. A 10% increase in diesel fuel market prices would have resulted in a $1,409,000 decrease in our after-tax net income for the year ended December 31, 2014. We have not hedged any commodity prices as at December 31, 2014.

We hold certain investments in marketable securities which are measured at fair value, being the closing price of each equity investment at the balance sheet date. We are exposed to changes in share prices which would result in gains and losses being recognized in total comprehensive income. A 10% change in prices would have a $10,479,000 impact on total comprehensive income at December 31, 2014 (December 31, 2013 - $12,927,000). During 2014, we entered into hedging arrangements over certain securities that resulted in derivative gains of $2,788,000. No such arrangements were outstanding as at December 31, 2014.
(ii)  Currency Risk
Currency risk is the risk that the fair values or future cash flows of our financial instruments and VAT receivables will fluctuate because of changes in foreign currency rates. Our financial instruments are exposed to currency risk where those instruments are denominated in currencies that are not the same as the functional currency of the entity that holds them; exchange gains and losses in these situations impact earnings.
The following are the most significant areas of exposure to currency risk, shown in thousands of U.S. dollars:
 
December 31, 2014
 
Canadian dollar

Argentine peso

Australian dollar

Mexican peso

Cash
13,333

6,383

4,653

1,405

Marketable securities
102,933

—

1,852

—

Value added tax receivable
95

35,259

—

2,367

Trade and other payables (excluding VAT and income taxes)
(8,780
)
(17,985
)
—

(4
)
Current debt
—

(5,922
)
—

—

Total
107,581

17,735

6,505

3,768

 
December 31, 2013
 
Canadian dollar

Argentine peso

Australian dollar

Mexican peso

Cash
7,881

20,751

4,983

8,007

Marketable securities
126,428

—

2,839

—

Value added tax receivable
67

64,816

—

3,412

Trade and other payables (excluding VAT and income taxes)
(7,387
)
(13,606
)
—

(1,618
)
Valued added tax payable
—

—

—

(6,467
)
Income taxes payable
—

—

—

(15,885
)
Total
126,989

71,961

7,822

(12,551
)

We monitor and manage this risk with the objective of ensuring our company-wide exposure to negative fluctuations in currencies against the U.S. dollar is managed. As at December 31, 2014 we have not entered into any derivatives to mitigate this risk.

58
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

25.
FINANCIAL RISK MANAGEMENT (Cont'd)

The Argentine government requires the repatriation of export revenues into Argentina and, where cash flows exceed our current cash repatriation schedule, this results in an increase to our Argentine peso cash balance. In Argentina, the official Argentine peso exchange rate published is significantly lower than the parallel market rate (also referred to as the Blue rate). We use the official Argentine peso exchange rate for all re-measurement purposes which is consistent with the economic reality that foreign currency transactions entered into or paid out of Argentina are required to be converted at the official exchange rate. A sudden devaluation of the Argentine peso to a rate closer to the parallel rate would materially impact the value of our Argentine peso-denominated cash and VAT receivables in U.S. dollar terms, but would improve our operating costs in U.S. dollar terms, all else being equal. We are actively seeking ways to mitigate the risk on our cash balance of a devaluation of the Argentine peso, and therefore, we are repatriating cash from Argentina under a fixed schedule of debt repayments and have entered into an Argentina peso loan facility.

In early 2014, the Argentine peso saw a significant devaluation as the government reduced intervention and relaxed capital controls, although since that time the peso has reverted to a steady devaluation against the U.S. dollar. In 2014, the Argentine peso devalued 31% compared to 33% in 2013. The devaluation reduced the value of our Argentine peso-denominated assets, principally cash and VAT receivables, and decreased Argentina peso-denominated liabilities, principally accounts payable, when expressed in U.S. dollar terms.

A 10% increase in the U.S. dollar exchange rate on financial assets and liabilities denominated in the following currencies, with all other variables held constant, would have resulted in the following impact to our total comprehensive income for the years ended December 31, 2014 and December 31, 2013:
Years ended December 31
2014

2013

 
$

$

Canadian dollar
(7,988
)
(9,422
)
Argentine peso
(1,183
)
(4,826
)
Australian dollar
(456
)
(547
)
Mexican peso
(265
)
873

(iii)  Interest Rate Risk
Interest rate risk is the risk that the fair values or future cash flows of our financial instruments will fluctuate because of changes in market interest rates. Interest rate risk arises from the interest rate impact on our cash and cash equivalents and Argentine peso-denominated loan facility because these are the only financial instruments we hold that are impacted by interest based on variable market interest rates. The 2013 Notes have fixed interest rates and are not exposed to fluctuations in interest rates; a change in interest rates would impact the fair value of the instruments, but because we record the 2013 Notes at amortized cost there would be no impact on our financial results. We monitor our exposure to interest rates closely and have not entered into any derivative contracts to manage our risk.
As at December 31, 2014, the weighted average interest rate earned on our U.S. dollar cash and cash equivalents was 0.30% (2013 - 0.32%). With other variables unchanged, a 1% change in the annualized interest rate would impact after-tax net income by $1,363,000 (2013 - $3,292,000).
b)Credit Risk
Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial contract. Our credit risk is limited to the following instruments:
Credit risk related to financial institutions and cash deposits Under our investment policy, investments are made only in highly-rated financial institutions, and corporate and government securities. We diversify our holdings and consider the risk of loss associated with investments to be low.

59
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

25.
FINANCIAL RISK MANAGEMENT (Cont'd)

Credit risk related to trade receivables We are exposed to credit risk through our trade receivables on concentrate sales, which are principally with internationally-recognized counterparties. Payments of receivables are scheduled, routine and received within a contractually agreed time frame. We manage this risk by requiring provisional payments of at least 75% of the value of the concentrate shipped and through utilizing multiple counterparties.

Credit risk related to other financial assets All other receivable balances are expected to be collectible in full due to the nature of the counterparties and/or a previous history of collectability. Deferred consideration is also expected to be collectible in full and is also secured against the San Agustin mineral claims and technical information, and the Challacollo mineral claims and shares of the entity holding the Challacollo project (note 9).

We also have credit risk through our significant VAT tax receivables balance that is collectible from the government of Argentina. The balance is expected to be recoverable in full, however due to legislative rules and the complex collection process, a significant portion of the asset is classified as non-current until government approval of the recovery claim is approved.

Our maximum exposure to credit risk as at December 31, 2014 and December 31, 2013 was as follows:
 
December 31, 2014

December 31, 2013

 
$

$

Cash and cash equivalents
184,643

415,657

Value added tax receivable
37,527

68,338

Trade receivables and other assets
30,313

44,510

Other financial assets
41,001

29,847

 
293,484

558,352

At December 31, 2014, no amounts were held as collateral except those discussed above in credit risk related to other financial assets.
c)Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our obligations under our financial instruments as they fall due. We manage our liquidity risk through a rigorous planning and budgeting process, which is reviewed and updated on a regular basis, to help determine the funding requirements to support our current operations, expansion and development plans, and by managing our capital structure as described in note 25(d). Our objective is to ensure that there are sufficient committed financial resources to meet our business requirements for a minimum of twelve months.
Argentine government regulation of U.S. dollar inflows and outflows restricts the ability to repatriate cash generated by the Pirquitas mine although we repatriate cash from Argentina under a fixed schedule of debt repayments, which has an impact on overall corporate liquidity.
In order to manage our corporate liquidity, we use surety bonds to support certain environmental bonding obligations. As at December 31, 2014, we had surety bonds totaling $17,750,000 (December 31, 2013 - $Nil). In addition, we have $30,131,000 of letters of credit supporting environmental obligations which are backed by a mixture of cash and other forms of credit.

60
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

25.
FINANCIAL RISK MANAGEMENT (Cont'd)

In the normal course of business, we enter into contracts that give rise to commitments for future minimum payments. The following is a maturity profile of financial liabilities and operating and capital commitments presenting contractual undiscounted cash flows:
 
Payments due by period (as at December 31, 2014)
At December 31,
2013

Contractual obligations
Less than one year

1 - 3 years

4-5 years

After 5 years

Total

Total

 
$

$

$

$

$

$

Trade and other payables
55,617

—

—

—

55,617

35,841

Current provisions
56,058

—

—

—

56,058

48,169

Current debt
5,922

—

—

—

5,922

—

Convertible notes (i)
—

—

265,000

—

265,000

265,000

Interest on convertible notes (i)
7,619

22,856

11,428

—

41,903

49,522

Capital expenditure commitments
2,596

—

—

—

2,596

6,164

Minimum lease rental and lease payments
412

1,481

383

—

2,276

2,907

Total contractual obligations
128,224

24,337

276,811

—

429,372

407,603


(i) 
The 2013 Notes mature in 2033 but are redeemable in part or in full at the option of the holder on February 1 at each of 2020, 2023, and 2028, or upon fundamental corporate changes. They are also redeemable by us in part or in full on and after February 1, 2018. The 2013 Notes bear interest of 2.875% per annum and are convertible into common shares upon specified events at a fixed conversion price of approximately $20.00 per common share (note 15).

In our opinion, working capital at December 31, 2014 together with future cash flows from operations are sufficient to support our commitments through 2015.
d)Capital management
Our objectives when managing capital are:
▪
to safeguard our ability to continue as a going concern in order to develop and operate our current projects and pursue strategic growth initiatives;
▪
to maintain a flexible capital structure which lowers the cost of capital.
In assessing our capital structure, we include in our assessment the components of shareholders’ equity and convertible notes. In order to facilitate the management of capital requirements, we prepare annual expenditure budgets and continuously monitor and review actual and forecasted cash flows. The annual and updated budgets are monitored and approved by the Board of Directors.
To maintain or adjust the capital structure, we may, from time to time, issue new shares, issue new debt, repay debt or dispose of non-core assets. We expect our current capital resources will be sufficient to carry out our exploration plans and support operations through the current operating period.
Our 2013 Notes (note 15) do not contain any financial covenants. Accordingly, as of December 31, 2014, there were no externally-imposed capital requirements.

61
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

26.
RELATED PARTY TRANSACTIONS
a)Key management compensation
Key management includes our directors (executive and non-executive) and other key officers, including the CEO, CFO and Senior Vice President. The compensation paid or payable to key management for employee services is shown below:
Years ended December 31
2014

2013

 
$

$

Salaries and other short-term employee benefits
2,880

2,600

Post-employment benefits
22

21

Termination benefits
—

1,370

Share-based compensation (i)
2,808

1,704

Total compensation
5,710

5,695


(i) 
Share-based compensation includes mark-to-market adjustments on cumulative DSU positions as reported in the consolidated statements of income.
b)Principal Subsidiaries
The consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, the most significant as at December 31, 2014 of which are presented in the following table:
Subsidiary
Location
Ownership
Principal project
Pacific Rim Mining Corporation Argentina S.A.
Argentina
100%
Diablillos
Silver Standard Durango, S.A. de C.V.
Mexico
100%
Pitarrilla
Silver Standard Exploraciones, S.A. de C.V.
Mexico
100%
Veta Colorada
Silver Standard Mexico, S.A. de C.V.
Mexico
100%
Nazas
Reliant Ventures S.A.C.
Peru
100%
San Luis
Sociedad Minera Berenguela S.A.
Peru
100%
Berenguela
Candelaria Mining Company
USA (Delaware)
100%
Candelaria
Marigold Mining Company
USA (Nevada)
100%
Marigold
Maverick Silver Inc.
USA (Nevada)
100% (1)
Maverick Springs
Mina Pirquitas, LLC
USA (Delaware)
100%
Pirquitas

(1) 
The Maverick Springs project is held in a joint venture in which we have a 55% interest, representing all of the silver resources hosted in the project.


62
Silver Standard Resources Inc.
Notes to the Consolidated Financial Statements
December 31, 2014 and 2013 and January 1, 2013
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

27.
SUPPLEMENTAL CASH FLOW INFORMATION

Changes in working capital items during the year ended December 31, 2014 and 2013 are as follows:

Years ended December 31
2014

2013

 
$ 

$

Trade receivables and other assets
14,561

(2,922
)
Inventory
3,376

1,555

Trade and other payables
(1,773
)
3,619

Current provisions
7,202

11,590

 
23,366

13,842

During the years ended December 31, 2014 and 2013, we conducted the following non-cash investing and financing transactions:
Years ended December 31
2014

2013

 
$

$

Shares received for sale of mineral property (note 9)
9,188

25,420

Deferred consideration received for sale of mineral property (note 9(a))
1,954

—

Transfer of share-based payment reserve upon exercise of stock options
—

(56
)


63


SILVER STANDARD RESOURCES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2014



1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.



SILVER STANDARD RESOURCES INC.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2014


This Management's Discussion and Analysis ("MD&A") is intended to supplement the audited consolidated financial statements of Silver Standard Resources Inc. ("we", "us" or "our") for the year ended December 31, 2014, and the related notes thereto, which have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB").

All figures are expressed in U.S. dollars except where otherwise indicated. This MD&A has been prepared as of February 19, 2015, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2014.

Additional information, including our most recent Annual Information Form and Form 40-F is available on SEDAR at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission ("SEC") website at www.sec.gov.

This MD&A contains "forward-looking statements" that are subject to risk factors set out in a cautionary note contained in section 17. We use certain non-GAAP financial measures in this MD&A which are descibed in section 13 "Non-GAAP Financial Measures". We use Mineral Reserves and Mineral Resources classifications in this MD&A, which differ significantly from the classifications required by the SEC as set out in the cautionary note contained in section 17.


1.
FOURTH QUARTER AND FULL YEAR 2014 HIGHLIGHTS

▪
Purchased the Marigold mine for $268 million on April 4, 2014, generated $38.8 million of income from mine operations in the first nine months of ownership.

Lower cost profile
▪
Reported cash costs of $838 per payable ounce of gold sold at the Marigold mine for the period from April to December 2014, at the low end of our cash costs guidance range. Fourth quarter cash costs of $665 per payable ounce of gold sold due to strong production in the period.

▪
Reported 2014 cash costs of $12.08 per payable ounce of silver sold at the Pirquitas mine, in line with the lower end of our 2014 cost guidance. Fourth quarter cash costs at Pirquitas totaled $11.76 per payable ounce of silver sold.

Record production
▪
Produced 129,615 ounces of gold at Marigold from April to December 2014, exceeding our 2014 production guidance which had been previously increased to between 110,000 and 120,000 ounces of gold. Produced 67,113 ounces of gold in the fourth quarter, a quarterly record for the Marigold mine since it commenced production in 1988 and 66% higher than the previous quarter.

▪
Produced record 8.7 million ounces of silver and 30.0 million pounds of zinc in 2014. Achieved production guidance for the third consecutive year demonstrating consistent delivery to plan.

▪
$185 million in cash and cash equivalents as at December 31, 2014, an increase of $50 million quarter-on-quarter due to strong production and sales.

▪
2014 resource development drilling program at the Marigold mine added higher grade Mineral Resources from the 8 South pit area into the resource base, as reported in our release dated December 12, 2014.



2


▪
Adjusted income before tax of $1.1 million in the fourth quarter of 2014. Adjusted loss after tax for the fourth quarter was $6.3 million or $0.08 per share and for 2014 was $24.2 million or $0.30 per share. During the fourth quarter of 2014, non-cash, pre-tax impairment charge and write-downs of $51.5 million related to Pirquitas were recognized, including $11.3 million stockpiles within fourth quarter cost of sales and income from operations. Reported net loss for 2014 was $126.4 million.

3


2.
OUTLOOK

This section of the MD&A provides management's production and cost estimates for 2015. Major capital, exploration and development expenditures are also discussed. These are “forward-looking statements” and subject to the cautionary note regarding the risks associated with forward-looking statements contained in section 17.
For the full year 2015, we expect:

Operating Guidance
 
Pirquitas mine

Marigold mine

Gold Production
oz
—

160,000 - 175,000

Silver Production
Moz
9.0 - 10.0

—

Zinc Production
Mlb
10.0 - 12.0

—

Cash cost per payable ounce sold (1)
$/oz
11.50 - 12.50

725 - 800

Capital Expenditures
$M
10

20

Capitalized Stripping Costs
$M
—

25

(1) We report the non-GAAP financial measure of cost per payable ounce of silver and gold sold to manage and evaluate operating performance at the Pirquitas mine and the Marigold mine. See “Cautionary Note Regarding Non-GAAP Measures” in section 13.

At the Pirquitas mine, silver production is expected to increase over 2014 as mining progresses through the higher grade portions of the San Miguel Phase 2 open pit with stable cash costs per payable ounce of silver sold. Capital expenditures of $10 million in 2015 consist principally of mine and plant capital spares and initial work on the stage 5 tailings dam.

Our gold production from the Marigold mine is expected to increase due to full year ownership of the asset. Production is expected to be strongest in the first and fourth quarters of 2015 as a strong end to 2014 carries into the first quarter of 2015 and mining progresses into lower areas of the next phase of the Mackay pit later in the year. Capital expenditures of $20 million in 2015 include approximately $7 million for cell 20 leach pad construction, $9 million for maintenance and capitalized spares for mining equipment and $2 million for capitalized exploration drilling.

Exploration expenditures are forecast to remain at a reduced level of $15 million for 2015. Planned expenditures include $4 million on surface and underground drilling proximate to the Pirquitas mine and $3.5 million of resource delineation drilling at Marigold. Property holdings are being maintained in good standing with limited activities expected at Pitarrilla, while expenditures at San Luis will be conditional upon successful community agreements.


4


3.
BUSINESS OVERVIEW

We are a resource company focused on the operation, acquisition, exploration and development of precious metal resource properties located in the Americas. With the acquisition of the Marigold mine in Nevada, U.S., on April 4, 2014, for total cash consideration of $268 million after closing adjustments, we have two producing mines and a portfolio of silver resource dominant projects located throughout the Americas. Our focus is on profitable silver production from the Pirquitas mine in Argentina, and gold production from the Marigold mine in Nevada, U.S. During 2014, the Pirquitas mine continued to operate to plan, and we completed the integration of the Marigold mine into our operations, advanced performance optimization initiatives and filed a National Instrument 43-101 Technical Report (the "NI 43-101 Technical Report") dated November 19, 2014. We also completed selective works to enhance value in our large portfolio of mineral projects and properties, which are at various stages of exploration and development.

The Marigold mine is an open-pit gold mine located in Humboldt County, Nevada, U.S. at the northern end of the Battle Mountain-Eureka trend. Nevada is among the world’s most favorable exploration and mining jurisdictions with a stable tax regime, defined permitting process and access to highly qualified labor. The mine has been in continuous production since 1988. Ore is mined by conventional truck and shovel equipment and processed via a large run-of-mine heap leach operation averaging 40,000 tonnes per day.

On October 6, 2014, we released our life of mine plan for Marigold and subsequently filed the NI 43-101 Technical Report. The life of mine plan increased our Mineral Reserves by 2.1 million ounces of gold contained in 129.7 million tonnes at a grade of 0.51 grams per tonne mined over a 13-year operating life. Annual gold production is expected to average 171,500 ounces of gold per year over the next six years, followed by two higher grade years averaging 217,000 ounces of gold per year, for an overall average of 186,700 ounces produced over the nine years of active mining to 2023. Our forward focus is on further refining the Marigold mine plan to optimize activities for the prevailing metal price environment, improving the performance of the new mine fleet and shovel investments to reduce unit mining costs and exploration to add Mineral Resources and Mineral Reserves.

With the acquisition of the Marigold mine, our financial performance is impacted by both silver and gold prices. Silver prices performed negatively in 2014 with the price of silver declining 20% to an average of $19.08 per ounce in 2014 from an average of $23.82 per ounce in 2013. Most of this silver price decline occurred in the fourth quarter of 2014, with prices trading in a range between $15.30 and $17.40 per ounce. Gold prices were reasonably consistent following the acquisition of Marigold, trading within a range of $1,140 and $1,300 per ounce, with an average of $1,257 per ounce. Through 2014, silver underperformed gold, with gold to silver ratios widening from 60:1 to almost 70:1. At the end of 2014, we saw precious metals prices remaining under pressure, with silver prices closing at $15.97 per ounce and gold prices closing at $1,213 per ounce on December 31, 2014.

This downward trend in precious metal prices in the fourth quarter resulted from the increased strength of the U.S. dollar driven by renewed optimism of U.S. economic performance relative to the global economy and expectations of higher U.S. interest rates. In January of 2015, however, weaker than expected Chinese growth forecast, a surprise move by Switzerland to abandon the cap on the value of the Swiss franc against the Euro, declining oil prices and a new program of quantitative easing for the Eurozone all contributed to a rise in precious metal prices with gold rebounding above $1,290 per ounce and silver above $18.00 per ounce. Prices have subsequently retreated but silver remains above year end levels. The continued backdrop of economic uncertainty and global geographical tensions in the Middle East and Ukraine, however, continues to make the commodity price environment extremely volatile.

During the second half of 2014, there was a significant reduction in oil prices from $100.06 at June 30, 2014, to $53.70 per barrel at December 31, 2014, with further declines in early 2015. Diesel is a significant consumable at our operations and the decline in diesel prices is having a positive impact on our cost structure at the Marigold mine. In Argentina, however, diesel prices are regulated by the government so we have not experienced any significant reduction in diesel cost at the Pirquitas mine.


5


In addition to the global macroeconomic environment, the Pirquitas mine operates within a tightly-controlled regulatory environment in Argentina. Importation of goods and services into Argentina requires pre-approval, which has caused delays in obtaining certain parts and supplies. The Central Bank of Argentina regulates U.S. dollar flows into and out of the country, with Central Bank approval required for all foreign exchange transactions. Argentina continues to experience high inflation with a currency that, generally, depreciates against our reporting currency, the U.S. dollar. During January 2014, the Argentine peso underwent a devaluation of approximately 25% as a result of a government policy change, although subsequently reversed to a more gradual devaluation trajectory and closed on December 31, 2014, at an exchange rate of 8.54 Argentine pesos for 1 U.S. dollar. Even though we recovered $30.7 million of value added tax ("VAT") receivables in 2014, VAT recovery remains a highly regulated, complex and, at times, lengthy collection process. All of these factors directly impact our business in Argentina.



6


4.
RESULTS OF OPERATIONS

Consolidated results of operations

The following table presents consolidated operating information for our Pirquitas and Marigold mines. Additional operating information is provided in the sections relating to the individual mines.

 
 Three months ended
Total
 Operating data
March 31, 2014

June 30,
2014

September 30, 2014

December 31, 2014

2014

2013

 
 
 
 
 
 
 
 Consolidated production and sales:
 
 
 
 
 
 
 Silver produced ('000 oz)
1,918

2,042

2,551

2,222

8,733

8,216

 Zinc produced ('000 lbs) (1)
8,844

9,319

7,030

4,817

30,010

27,037

 Silver sold ('000 oz)
1,596

1,926

1,859

2,764

8,145

8,693

 Zinc sold ('000 lbs) (1)
10,227

5,307

8,062

8,745

32,341

23,524

 
 
 
 
 
 
 
 Gold produced (oz)
—

22,060

40,442

67,113

129,615

—

 Gold sold (oz)
—

21,990

38,245

68,748

128,983

—

 
 
 
 
 
 
 
 Silver equivalent production ('000 oz) (2)
1,918

3,467

5,114

6,910

17,409

8,216

 
 
 
 
 
 
 
 Realized silver price ($/oz) (3)
20.38

19.89

19.99

17.18

19.15

23.77

 Realized gold price ($/oz) (3)
—

1,285

1,267

1,200

1,234

—

 
 
 
 
 
 
 
Cash costs ($/oz) - payable silver from Pirquitas mine (3)
12.36

12.18

12.22

11.76

12.08

12.87

Cash costs ($/oz) - payable gold from Marigold mine (3)
—

1,103

997

665

838

—

 
 
 
 
 
 
 
 Financial data ($000s)
 
 
 
 
 
 
 Revenue
33,736

64,287

79,269

122,830

300,122

174,686

 Income from mine operations (4)
5,924

11,022

6,258

12,996

36,200

5,184


(1) 
Data for zinc production and sales relate only to zinc in zinc concentrate as any zinc metal within our silver concentrate does not generate revenue.
(2) 
Silver equivalent ounces have been established using the realized silver and gold prices in the quarter and applied to the recovered metal content of the gold bullion produced by the Marigold mine. We have not included zinc as it is considered a by-product.
(3) 
We report non-GAAP cost per payable ounce of precious metal sold and realized metal prices to manage and evaluate operating performance at our mines. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income, please refer to “Non-GAAP Financial Measures” in section 13 of this MD&A.
(4) 
Income from mine operations for the quarter ended December 31, 2014, and the year ended December 31, 2013, includes $11.3 million and $12.2 million, respectively, of write-down of stockpile inventory to its net realizable value ("NRV").











7



Pirquitas Mine, Argentina

 
 Three months ended
Total

Total

Operating data
March 31, 2014

June 30, 2014

September 30, 2014

December 31, 2014

2014

2013

Total material mined (kt)
4,208

4,052

4,315

3,816

16,391

17,423

Waste removed (kt)
3,840

3,550

3,831

3,168

14,389

15,958

Strip ratio
10.4

7.1

7.9

4.9

7.2

10.9

Silver mined grade (g/t)
163

167

160

150

159

186

Zinc mined grade (%)
1.94

2.07

1.36

0.97

1.52

2.28

Mining costs ($/t mined)
2.40

2.80

2.93

3.18

2.94

2.88

Ore milled (kt)
406

402

407

372

1,587

1,575

Silver mill feed grade (g/t)
204

213

248

222

221

217

Zinc mill feed grade (%)
2.02

2.19

1.79

1.12

1.79

1.63

Processing cost ($/t milled)
20.09

21.13

23.30

22.46

21.73

24.72

Silver recovery (%)
72.1

74.3

78.7

83.8

77.3

74.9

Zinc recovery (%) (1)
48.9

48.0

43.8

52.6

47.9

48.0

 
 
 
 
 
 
 
Silver produced ('000 oz)
1,918

2,042

2,551

2,222

8,733

8,216

Zinc Produced ('000 lbs) (1)
8,844

9,319

7,030

4,817

30,010

27,037

Silver sold ('000 oz)
1,596

1,926

1,859

2,764

8,145

8,693

Zinc Sold ('000 lbs) (1)
10,227

5,307

8,062

8,745

32,341

23,524

 
 
 
 
 
 
 
Realized silver price ($/oz) (2)
20.38

19.89

19.99

17.18

19.15

23.77

 
 
 
 
 
 
 
Cash costs ($/oz) (2)
12.36

12.18

12.22

11.76

12.08

12.87

Total costs ($/oz) (2)
17.42

16.34

17.11

17.40

17.08

19.68

 
 
 
 
 
 
 
Financial Data ($000s)
 
 
 
 
 
 
Revenue
33,736

36,261

30,874

40,322

141,193

174,686

Income (loss) from mine operations (3)
5,924

7,758

(308
)
(16,010
)
(2,636
)
5,184

Capital investments
2,514

3,200

2,376

2,033

10,123

28,102

Capitalized deferred stripping
5,580

3,156

4,435

—

13,171

8,817

Exploration expenditures
140

1,125

173

1,284

2,722

2,205


(1) 
Data for zinc production and sales relate only to zinc in zinc concentrate as any zinc metal within our silver concentrate does not generate revenue.
(2) 
We report the non-GAAP financial measure of cost per payable ounce of silver sold and realized silver prices to manage and evaluate operating performance at the Pirquitas mine. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income, please refer to “Non-GAAP Financial Measures” in section 13.
(3) 
Income (loss) from mine operations for the quarter ended and year ended December 31, 2014, and the year ended December 31, 2013, includes $11.3 million and $12.2 million, respectively, of write-down of stockpile inventory to its NRV.

Mine production

The Pirquitas mine produced 2.2 million ounces of silver during the fourth quarter of 2014, lower than the 2.6 million ounces produced in the third quarter of 2014 due to lower ore milled and mill feed silver grades, which were partially offset by improved recoveries. Mill feed in the fourth quarter was solely from ore mined from the open pit in the period while third quarter silver production benefited from higher grade stockpiled material. In the fourth quarter of 2014, zinc production declined as planned to 4.8 million pounds of zinc in zinc concentrate.

Ore was milled at an average rate of 4,045 tonnes per day in the fourth quarter. The average silver grade of ore milled was 222 g/t, slightly lower than the 248 g/t reported in the third quarter which benefited from previously mined higher grade stockpiled material. The average recovery rate for silver in the fourth quarter increased to 83.8% from 78.7% in the previous quarter as the mill processed fresh sulphide feed from the open pit and process control improvements

8


positively impacted plant operating performance. Zinc recovery to zinc concentrate was 53%, representing a 21% improvement over the previous quarter, achieved despite a drop in zinc head grade.

During 2014, the mine produced a record 8.7 million ounces of silver, higher than the 8.2 million ounces produced in 2013 primarily due to higher silver recovery in 2014.

In 2014, Pirquitas also produced 30.0 million pounds of zinc in zinc concentrate, a record for the mine, reflecting higher zinc grades as we mined more of the zinc-rich Potosi area of the San Miguel open pit, combined with improved recoveries.

Mine operating costs

We further advanced our continuous improvement initiatives at the Pirquitas mine after completing a cost restructuring program at the operation through late 2013.

Cash costs, which include cost of inventory, treatment and refining costs, and by-product credits, were $11.76 per payable ounce of silver sold in the fourth quarter of 2014 compared to $12.22 per payable ounce of silver sold in the third quarter of 2014. Cost of inventory remained similar to the third quarter of 2014 due to higher total spend required to achieve the higher production levels, in part caused by longer hauls, higher fuel consumption and higher mobile maintenance costs.

Cash costs per payable ounce of silver sold in 2014 decreased to $12.08 from $12.87 in 2013 per payable ounce of silver sold, mainly due to higher by-product credits in 2014 than in 2013.

Total costs, which add silver export duties, depreciation, depletion and amortization to cash costs, were $17.40 per payable ounce of silver sold in the fourth quarter of 2014, slightly above $17.11 per payable ounce of silver sold in the third quarter of 2014 following a reduction in estimated mine life. Depletion, depreciation and amortization was higher on a per ounce sold basis in the fourth quarter of 2014 compared to the third quarter of 2014, whereas the silver export duties were slightly lower than in the previous quarter due to timing of shipments.

Total costs per payable ounce of silver sold in 2014 decreased to $17.08 from $19.68 in 2013 mainly due to asset impairment recorded in the second quarter of 2013 which reduced depreciation being charged.

The Pirquitas mine remains focused on costs and driving further operational efficiencies that will sustain cash flows in a lower silver price environment.

Cash costs and total costs per payable ounce of silver sold are non-GAAP financial measures. Please see the discussion under "Non-GAAP Financial Measures" in section 13.

Mine sales

We sold 8.1 million ounces of silver in 2014, compared to 8.7 million ounces in 2013. Sales were lower than in 2013 due to timing of shipments and contractual revenue recognition points. In 2014, we shipped material containing 8.6 million ounces of silver, which met planned inventory levels at site. We also sold 32.3 million pounds of zinc in 2014, well in excess of the 23.5 million pounds sold in 2013, due to the increase in zinc production in 2014.

Silver sales totaled 2.8 million ounces for the quarter, a 49% increase from the third quarter, as higher scheduled shipments reduced inventory levels.

Exploration at Pirquitas

At Pirquitas, we are focused on near-mine exploration to identify additional Mineral Resources to extend the life of current operations.  In support of these activities, we secured access to explore an extensive adjacent property, which increased our land position by 4,417 hectares. We have commenced a field exploration program, which has to date

9


defined several prospective areas with drill targets, located within a three kilometre radius of the active open pit. These targets hold potential for silver-zinc mineralization in open pit and underground configurations.
Initial drill testing on these areas was performed in the fourth quarter of 2014 and we completed 3,117 metres of surface reconnaissance core drilling in 17 drill holes on prospects proximal to our current open pit operations. Results to date from this surface drilling show that two targets outside the San Miguel pit area warrant further assessment as they yielded anomalous silver results. Closer to the San Miguel pit, the Medano target yielded an intersected length of eight metres at a grade of 198 g/t of silver, which will be assessed further from underground.
Resource upgrade drilling also commenced in the San Miguel zone, on the Chocaya and Oploca vein sets, underlying the existing open pit workings. By the end of 2014, we completed five drill holes from existing underground workings, for a total of 1,717 metres. We have intersected multiple sub-parallel vein systems, with grades and mineralized widths in the main veins in line with expectations. Drilling continues and a detailed geotechnical assessment is underway. We are evaluating the option to extend the original drilling program from the planned 4,700 metres. Studies have also commenced to assess the potential for underground, high-grade mill feed from these vein systems and will continue through the first half of 2015.
Export duties

We entered into a fiscal stability agreement (the “Fiscal Agreement”) with the Federal Government of Argentina in 1998 for production from the Pirquitas mine. In December 2007, the National Customs Authority of Argentina (Dirección Nacional de Aduanas) levied an export duty of approximately 10% from concentrates for projects with fiscal stability agreements pre-dating 2002 and the Federal Government has asserted that the Pirquitas mine is subject to this duty. We have challenged the legality of the export duty applied to silver concentrates and the matter is currently under review by the Federal Court (Jujuy) in Argentina.

The Federal Court (Jujuy) granted an injunction in our favor effective September 29, 2010 that prohibited the Federal Government from withholding the 10% export duty on silver concentrates (the “Injunction”), pending the decision of the courts with respect to our challenge of the legality of the application of the export duty. The Injunction was appealed by the Federal Government but upheld by each of the Federal Court of Appeal (Salta) on December 5, 2012 and the Federal Supreme Court of Argentina on September 17, 2013. The Federal Government also appealed the refund we claimed for the export duties paid before the Injunction, as well as matters of procedure related to the uncertainty of the amount reclaimed; however, on May 3, 2013, such appeal was dismissed by the Federal Court of Appeal (Salta). In September 2014, the Federal Tax Authority in Argentina filed an application with the Federal Court (Jujuy) to lift the Injunction and requiring payment of the export duty and payment of applied interest charges. We filed a response to such application on October 14, 2014 and a decision is pending.

As of December 31, 2014, we have paid $6.6 million in export duties, for which we have filed for recovery. In accordance with the Injunction, we have not been paying export duties on silver concentrates but continue to accrue export duties. At December 31, 2014, we have accrued a liability totaling $56.1 million (December 31, 2013 - $48.2 million), for export duties with no accrual for interest charges, and have recorded a corresponding increase in cost of sales in the relevant period. The application of interest charges is uncertain, but if applied from the date each duty was levied, and based on current U.S. dollar rates, is estimated to be in the range of $4 million to $6.5 million. The final amount of export duties and interest, if any, to be paid or refunded depends on a number of factors including the outcome of litigation. Changes in our assessment of this matter could result in material adjustments to our consolidated statement of loss.









10



Marigold mine, U.S.

 
 Three months ended
Total
 Operating data
 June 30, 2014

September 30, 2014

 December 31, 2014

2014 (1)

 Total material mined (kt)
18,338

18,832

18,426

55,596

 Waste removed (kt)
15,986

13,821

14,587

44,394

 Strip ratio
6.8

2.8

3.8

4.0

 Mining cost ($/t mined)
1.70

1.61

1.62

1.64

 Total ore stacked (kt)
2,352

5,011

3,839

11,202

 Gold stacked grade (g/t)
0.34

0.53

0.84

0.60

 Processing cost ($/t processed)
1.59

0.86

1.06

1.08

 Gold recovery (%)
73.0

73.0

73.0

73.0

 
 
 
 
 
 Gold produced (oz)
22,060

40,442

67,113

129,615

 Gold sold (oz)
21,990

38,245

68,748

128,983

 
 
 
 
 
 Realized gold price ($/oz) (2)
1,285

1,267

1,200

1,234

 
 
 
 
 
 Cash costs ($/oz) (2)
1,103

997

665

838

 Total costs ($/oz) (2)
1,135

1,095

778

933

 
 
 
 
 
 Financial data ($000s)
 
 
 
 
 Revenue
28,026

48,395

82,508

158,929

 Income from mine operations
3,264

6,566

29,006

38,836

 Capital investments
2,296

4,486

4,375

11,157

 Capitalized deferred stripping
7,611

2,144

19,127

28,882

 Exploration expenditures (3)
458

796

3,224

4,478


(1) 
Data presented in this table is for the period April 1 to December 31, 2014, the period for which we were entitled to all economic benefits of the Marigold mine under the purchase and sale agreement dated February 3, 2014 entered into with subsidiaries of Goldcorp Inc. and Barrick Gold Corporation (the “Purchase and Sale Agreement").
(2) 
We report the non-GAAP financial measure of cost per payable ounce of gold sold and realized gold prices to manage and evaluate operating performance at the Marigold mine. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income, please refer to “Non-GAAP Financial Measures” in section 13 of this MD&A.
(3) 
Includes capitalized and expensed exploration expenditures.

Mine production

We produced 67,113 gold ounces in the fourth quarter of 2014, 66% higher than the third quarter production of 40,442 ounces. As planned, mined material through late third quarter and in the fourth quarter was primarily from the higher grade lower benches of the Mackay Phase 1 pit, leading to increased ounces stacked on the leach pads through this period.

A total of 18.4 million tonnes of material were mined in the fourth quarter of 2014, compared to 18.8 million tonnes mined in the third quarter. Approximately 3.8 million tonnes of ore were delivered to the heap leach pads at a gold grade of 0.84 g/t, which represents approximately 75,600 recoverable ounces of gold stacked during the quarter. This compares to 5.0 million tonnes of ore delivered to the heap leach pads at a grade of 0.53 g/t in the third quarter of 2014, representing approximately 62,500 recoverable ounces of gold. Grade mined in the fourth quarter was 59% higher than the third quarter. Stripping of the next phase of the Mackay pit commenced in the fourth quarter, leading to an expected increase in the strip ratio in the quarter.


11


Gold production for the nine months ending December 31, 2014, totaled 129,615 ounces. This was above plan due to a strong fourth quarter performance as the lower benches of Mackay Phase 1 pit delivered more ore at higher grade than expected.

During the period from acquisition to the end of 2014, the mine moved 55.6 million tonnes of material, of which 11.2 million tonnes of ore were delivered to the leach pads at a gold grade of 0.60 g/t. The average strip ratio was 4.0 over this period.

Mine operating costs

Cash costs, which include all costs of inventory, refining costs and royalties, were $665 per payable ounce of gold sold in the fourth quarter of 2014, compared to $997 per payable ounce of gold sold in the third quarter of 2014, the reduction resulting from a higher number of ounces produced in the period. Cash costs declined as expected during the period from acquisition to December 31, 2014, due to the planned production profile and were $838 per payable ounce of gold sold for the period, at the lower end of our guidance range.

Total costs, which include depreciation, depletion and amortization, were $778 per payable ounce of gold sold in the fourth quarter of 2014, compared to $1,095 per payable ounce of gold sold in the third quarter of 2014.

Cash costs since acquisition were impacted by the fair value attributed to the acquired leach pad inventory as part of the purchase price allocation required under IFRS. The entire value attributed to leach pad inventory was considered as a cash component with no allocation to previously incurred depreciation.

In the period from acquisition to December 31, 2014, total costs were $933 per payable ounce of gold sold with site operating costs at similar levels as the third quarter of 2014. Depreciation, depletion and amortization was higher in the third quarter as the initial inventory acquired did not include any depreciation. As a result, this non-cash component increased over the prior quarter, however, by the year end it was at normalized levels as depreciation was charged to inventory.

Cash costs and total costs per payable ounce of gold sold are non-GAAP financial measures. Please see the discussion under "Non-GAAP Financial Measures" in section 13.

Mine sales

A total of 68,748 ounces of gold was sold at an average price of $1,200 per ounce during the fourth quarter of 2014, an increase of 80% from the 38,245 ounces of gold sold at an average price of $1,267 per ounce during the third quarter of 2014. The increase in sales was a function of increased gold production. In the period from acquisition to December 31, 2014, a total of 128,983 ounces of gold was sold at an average price of $1,234 per ounce.

Exploration

By the end of 2014, under our exploration drill program at Marigold, we had completed a total of 21,653 metres in 116 reverse circulation drill holes on gold oxide targets in the Mackay, Hercules, 5 North and 8 South areas. A total of 81% of those drill holes reported mineralized intercepts above our Mineral Resource cut-off criteria. Positive drill results added higher grade Mineral Resources to the 8 South pit area as reported in our release dated December 12, 2014. These Mineral Resources have been included in our updated Mineral Resources estimate as at December 31, 2014.
We have continued exploration in the 8 South area into 2015 and continue to see positive results from this higher-grade mineralized area. A recently completed drill hole MR-6034 intersected a down-hole interval of 91.4 metres grading at 2.4 g/t gold from a starting depth of 140 metres, including a higher grade interval of 36.5 metres grading at 5.8 g/t gold.  This hole was drilled within the Mineral Resource announced on December 12, 2014, and reported as at December 31, 2014, and will positively impact the grade of estimated blocks proximal to the hole.

12


The deep sulphide exploration project seeks to evaluate the potential for a high-grade underground mineral deposit at Marigold. In the fourth quarter of 2014, we completed one core drill hole to 1,235 metres depth and two more were in progress at December 31, 2014, for a total of 2,829 metres drilled. Drill results have confirmed the existence of permissive rock units underlying the oxide-ore bearing Valmy formation currently being mined. Geological and structural assessment will continue through next year, with three further deep core drill holes planned for 2015.

13


5.
REVIEW OF PROJECTS

Pitarrilla, Mexico

Towards the end of 2013, the Mexican government enacted significant changes to the mining tax and royalty regime which had a significant impact on this project. On February 14, 2014, we were advised that SEMARNAT did not approve the EIA for the Pitarrilla open pit mine, primarily because sufficient water rights could not be secured.  Our ability to secure water rights is currently limited due to a temporary moratorium on subterranean water exploitation imposed in April 2013 in connection with uncontrolled and over exploited aquifers located throughout Mexico. As a result of these changes, we have limited project activities at Pitarrilla. In light of the foregoing, we have reclassified the Mineral Reserves at Pitarrilla project to Mineral Resources.

Expenditures at the Pitarrilla project during 2014 were $3.9 million, compared to $9.5 million in 2013. Project activities during 2014 were limited to surface rights acquisition, review of alternative development options and brownfields exploration activities on our land holdings adjacent to the Pitarrilla project.

The project remains an important development asset in our portfolio with significant Mineral Resources of silver, lead and zinc. We will continue to meet our community and other commitments.

San Luis, Peru

The San Luis project comprises a 35,000 hectare area which includes several vein systems across an area of land whose surface rights are held by two separate communities, Ecash and Cochabamba. A feasibility study was completed on the Ayelén vein and the EIA was approved in 2012. The execution of the mining project requires land access negotiations to be completed with both communities.

In the fourth quarter of 2014 we experienced continued delay in a continuing dialogue with Ecash community. Furthermore, discussions with the Cochabamba community concerning access for exploration activities, prompted us to deliver notice on our land access agreements with the Cochabamba community. We are pursuing revised agreements with Cochabamba that provide for a balanced and sustainable relationship between the parties. We continue to seek re-engagement opportunities with the Ecash community. Community elections for both the Ecash and Cochabamba community official representatives were held recently, and this provides an opportunity to re-open meaningful discussions going into the first half of 2015.
Expenditures at our wholly-owned San Luis project during 2014 amounted to $5.5 million compared to $6.4 million in 2013. San Luis remains a high value development asset in our portfolio and we continue to pursue community agreements to enable the project to advance.



14


6.
SUMMARIZED ANNUAL FINANCIAL RESULTS

The following table sets out selected annual financial results, expressed in thousands of U.S. dollars, except per share amounts:

 
 
Years ended December 31
 
 
2014

 
2013

 
2012

 
 
 
 
(Restated) (1)


 
(Restated) (1)


Revenue
 
300,122

 
174,686

 
241,120

Income from mine operations
 
36,200

 
5,184

 
58,105

Impairment charges
 
(40,250
)
 
(202,440
)
 
—

Operating income (loss)
 
(52,497
)
 
(244,154
)
 
21,741

Gain on sale of mineral properties
 
15,913

 
67,821

 
—

Net income (loss) attributable to shareholders
 
(126,393
)
 
(230,016
)
 
32,405

Basic earnings (loss) per share
 
(1.57
)
 
(2.85
)
 
0.40

Diluted earnings (loss) per share
 
(1.57
)
 
(2.85
)
 
0.40

Cash dividends per share
 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
As at December 31
 
 
2014

 
2013

 
2012

 
 
 
 
(Restated) (1)

 
(Restated) (1)

Cash and cash equivalents
 
184,643

 
415,657

 
366,947

Total assets
 
986,249

 
1,032,735

 
1,167,731

Non-current financial liabilities
 
197,134

 
187,130

 
—


(1) 2012 restated for adoption of IFRIC 20 and in 2012 and 2013 restated for change in exploration and evaluation expenditure accounting policy, as discussed in section 14.

Review of Annual Financial Results

The financial results for the year ended December 31, 2014, include the results of operations of the Marigold mine for the period from April 1 to December 31, 2014, the period for which we were entitled to all economic benefits under the Purchase and Sale Agreement.

Net loss for the year ended December 31, 2014 was $126.4 million ($1.57 per share) compared to a net loss of $230.0 million ($2.85 per share) in the year ended December 31, 2013. The losses in 2014 and 2013 were both materially impacted by the non-cash asset impairment charges and write downs following significant declines in silver prices in both years. In 2014, we recognized impairment charges of $51.7 million and in 2013 we had impairments of $225.7 million, whereas none were recorded in 2012. In 2014, we recognized an impairment charge of $40.3 million against the Pirquitas mine and wrote off $11.3 million of low grade stockpiles. In 2013, the write-down of the Pirquitas mine was $213.5 million and the inventory write-down was $12.2 million. In 2014, the net loss was also impacted by $12.0 million of deferred tax relating to foreign withholding taxes. The following is a summary and discussion of other significant components of income and expenses recorded during 2014 compared to 2013.

In 2014, we recognized revenues of $300.1 million, compared to $174.7 million in 2013, with the main reason for the increase being the acquisition of the Marigold mine in April 2014 which contributed revenues of $158.9 million.

•
At Pirquitas we recognized revenues of $141.2 million in 2014, a reduction of $33.5 million from the $174.7 million recognized in 2013. The decline in revenue was due to both a reduction of silver sold (8.1 million ounces were sold in 2014 compared to 8.7 million ounces in 2013) and realized prices whereby we realized an average silver price of $19.15 per ounce in 2014, excluding the impact of period-end price adjustments,

15


compared to $23.77 per ounce in 2013. These two negative variances were offset to some extent by the sale of 32.3 million pounds of zinc in 2014 compared to 23.5 million pounds in 2013 at similar prices. Sales of our silver and zinc concentrates were also impacted by period-end price adjustments for unsettled ounces which had a negative impact of $2.8 million in 2014, similar to the negative impact of $2.4 million in 2013.

•
At Marigold, we sold 128,983 ounces of gold at an average price of $1,234 per ounce, generating a total revenue of $158.9 million.

Cost of sales for the year ended December 31, 2014, was $263.9 million, compared to $169.5 million in 2013, mainly due to the acquisition of Marigold which accounted for $120.1 million of cost of sales.

•
At Pirquitas for the year ended December 31, 2014 cost of sales was $143.8 million compared to $169.5 million in 2013, with a resulting loss from mine operations of $2.6 million, compared to an income from mine operations of $5.2 million in 2013. Both periods were negatively impacted by non-cash write-downs of stockpile inventories amounting to $11.3 million and $12.2 million in 2014 and 2013, respectively. Gross margin was negative of 1.8% in 2014, compared to a positive margin of 3.1% in 2013, the reduction mainly due to the decrease in average realized silver price per ounce sold.

•
At Marigold cost of sales for the period since acquisition was $120.1 million, generating income from mine operations of $38.8 million and a gross margin of 32%.

General and administrative expenses for the year ended December 31, 2014 of $21.9 million were lower than the $23.4 million recorded in 2013. Salaries, benefits and consulting costs incurred in 2014 were $4.6 million lower than 2013 due to one off restructuring costs incurred in 2013. This reduction was somewhat offset by higher share-based payment expenses in 2014.

Expensed exploration and evaluation expenses were $21.2 million for 2014 compared to $23.5 million in 2013. These relate primarily to the drill programs at the San Luis project and preparation of the new life of mine plan, and property holding costs at other locations.

We incurred business acquisition costs of $5.4 million in the year ended December 31, 2014, relating to the acquisition of the Marigold mine. No costs of this nature were incurred in the comparative period in 2013.

During the 2013, we recorded a gain on derecognition of our investment in associate, Pretium Resources Inc. ("Pretium"), of $22.0 million. This gain arose as a result of the change in accounting treatment for this investment from equity accounting to an available-for-sale financial ("AFS") asset, which occurred during the second quarter of 2013. We also recorded a dilution gain totaling $2.1 million from our investment in Pretium in 2013 prior to derecognizing it as an asset. These non-cash gains resulted from Pretium completing several private placements in respect of which we did not participate. Now that we recognize the investment as an AFS asset, we recognize all changes in fair value of the share price within other comprehensive income.

During 2014, we completed the sale of the Challacollo project located in Chile, generating a pre-tax gain on sale of $15.9 million. On December 30, 2013, we completed the sale of our San Agustin project located in Mexico to Argonaut. The gain recorded in 2013 on the sale of this mineral property was $67.8 million (restated) before tax expense of $16.3 million. As partial consideration of the sale of the San Agustin project, we received 5.1 million common shares of Argonaut Gold Inc. ("Argonaut"). We sold 3.6 million shares of Argonaut under a hedging arrangement for pre-tax proceeds of $16.8 million, realizing a derivative gain of $2.8 million. The underlying value of the unhedged shares declined by $4.5 million, which was recorded in the consolidated statement of loss.

During 2014, we recorded $26.4 million of interest expense and other financing costs compared to $23.1 million in 2013.


16


At December 31, 2014 we held marketable securities with a value of $104.8 million compared to $129.3 million at December 31, 2013. Transactions completed in the year and fair value movements had the following impact on the consolidated statement of income and the consolidated statement of other comprehensive income:

•
Income statement - During the twelve months ended December 31, 2014, we recognized realized and unrealized losses of $11.4 million compared to $13.1 million in 2013. Realized losses in 2014 were $5.2 million following the sale of securities, while we also recorded unrealized losses of $6.2 million on securities designated at fair value through profit and loss ("FVTPL"). An unrealized loss of $13.0 million in 2013 was due to impairment charges on securities designated as AFS.

•
Other comprehensive income - During the twelve months ended December 31, 2014, we recognized an unrealized gain of $11.8 million on marketable securities compared to a loss of $54.1 million in 2013, due to fair value movements in securities designated as AFS.

We recorded foreign exchange losses for year ended December 31, 2014 of $25.2 million compared to losses of $31.9 million in 2013. Our main foreign exchange exposures are related to net monetary assets denominated in Argentine pesos, and Canadian and Australian dollars. The Argentine peso significantly weakened in January 2014 against the U.S. dollar with slow and gradual devaluation thereafter, but over the remainder of the year the devaluation was very similar to that in 2013. During 2013, the foreign exchange loss was higher because the magnitude of our Argentine peso balances was greater than in 2014. In addition, a weakening of the Canadian dollar and the Australian dollar relative to the U.S. dollar generated losses in 2014 whereas such currencies remained relatively stable in 2013.

For the year ended December 31, 2014, we recorded an income tax expense of $30.6 million compared to an income tax expense of $11.3 million in 2013. In 2014 the income tax expense includes a derecognition of deferred tax assets arising from foreign tax credits related to prior year interest withholding tax paid on interest earned from the Pirquitas operation in Argentina and current year interest withholding tax paid ($17.3 million), US AMT and Nevada Net Proceeds of Mines tax liability from the Marigold operation and movement in deferred tax attributes from the Marigold operations. The continued devaluation of the Argentine peso against the U.S. dollar and tax incurred on the sale of the Challacollo property in Chile also impacted the tax expense. Offsets to income tax expense items include deferred recovery relating to mark-to-market value changes on marketable securities and losses generated through corporate general and administrative expenses.

In 2013, the income tax expense is the result of Pirquitas operations, the continued devaluation of the Argentine peso against the U.S. dollar, the taxable sale of the San Agustin project in Mexico, the reversal of deferred tax assets at the time of the write-down of the Pirquitas mine in the second quarter of 2013 and the establishment of a deferred income tax liability due to the introduction of the Mexican mining royalty of 7.5% in December 2013. Offsets to the income tax expense items include losses generated through corporate general and administrative expenses, refunds of income taxes from past years and foreign exchange.

Realized silver and gold price is a non-GAAP financial measure. Please, see the discussion under "Non-GAAP Financial Measures" in section 13.












17



7.
QUARTERLY FINANCIAL REVIEW

The following table sets out selected financial results for each of the eight most recently completed quarters, expressed in thousands of U.S. dollars, except per share amounts:

 
2014
2013
 
31-Dec

30-Sep

30-Jun

31-Mar

31-Dec

30-Sep

30-Jun

31-Mar

 
 
(restated)(1)

(restated)(1)

(restated)(1)

(restated)(1)

(restated)(1)

(restated)(1)

(restated)(1)

 
$000s

$000s

$000s

$000s

$000s

$000s

$000s

$000s

Revenue
122,830

79,269

64,287

33,736

49,026

43,944

32,654

49,062

Income (loss) from mine operations
12,996

6,258

11,022

5,924

3,985

5,732

(18,971
)
14,438

Net income (loss) before tax
(56,789
)
(17,600
)
(10,056
)
(11,370
)
45,652

(18,470
)
(236,372
)
(9,505
)
Net income (loss) after tax
(86,222
)
(17,576
)
(10,156
)
(12,439
)
36,212

(18,980
)
(237,632
)
(9,616
)
 
 



 
 
 
 
Basic earnings (loss) per share
(1.07
)
(0.21
)
(0.13
)
(0.15
)
0.57

(0.24
)
(2.94
)
(0.13
)
Diluted earnings (loss) per share
(1.07
)
(0.21
)
(0.13
)
(0.15
)
0.57

(0.24
)
(2.94
)
(0.13
)
 
 



 
 
 
 
Cash and cash equivalents
184,643

135,174

102,162

396,413

415,657

401,384

435,805

461,846

Total assets
986,249

1,036,624

1,098,898

1,019,711

1,032,735

1,010,159

1,020,730

1,271,809

Working capital
368,948

363,420

427,544

586,979

577,345

608,165

630,414

588,178

Non-current financial liabilities
197,134

194,570

192,050

189,580

187,130

184,791

182,486

180,224


(1) Restated for the change in the exploration and evaluation costs accounting policy as discussed in section 14.

In the second, third and fourth quarters of 2014, revenue includes $28.0 million, $48.4 million and $82.5 million, respectively, of revenue generated by the Marigold mine. Otherwise, the volatility in revenue over the past eight quarters has resulted from fluctuations in commodity prices, sales volumes, and certain operational and regulatory circumstances. Except for the effect of the rainy season at the Pirquitas mine on production in the first quarter of each year, there are no significant seasonal fluctuations in the results for the presented periods. Following a significant decrease in the second half of 2013, the average realized silver price per ounce was fairly consistent in the first three quarters of 2014. Silver prices decreased again in the fourth quarter of 2014. Income (loss) from mine operations in the second quarter of 2013 and in the fourth quarter of 2014 was affected by the non-cash write-down of low grade stockpile inventories to their NRV. Excluding the effect of this inventory write-down, income from mine operations followed a similar trend to revenue over the two year period presented, except for the fourth quarter of 2014, when income from Marigold had a very positive impact.

Net income (loss) before tax has fluctuated significantly over the past eight quarters, heavily influenced by significant transactions and commodity prices. In the second, third and fourth quarters of 2014, net income includes $2.6 million, $5.3 million and $20.0 million, respectively, from the Marigold mine operations. In the fourth quarter of 2014, we recorded impairment charges of $51.6 million against the carrying value of the Pirquitas mine, including a write-down of stockpile inventory at the mine to its NRV. In the first quarter of 2014, we sold the Challacollo project in Chile, generating a gain before tax of $15.9 million. This gain was offset by a significant foreign exchange loss of $15.9 million from the devaluation of the Argentine peso. In the fourth quarter of 2013, we sold the San Agustin project in Mexico, which generated a gain before tax of $67.8 million, and in the second quarter of 2013, impairment charges of $222.3 million were recorded against the carrying value of the Pirquitas mine, assets held for sale and exploration and evaluation assets.

Three months ended December 31, 2014 compared to the three months ended December 31, 2013

Net loss for the three months ended December 31, 2014 was $86.2 million ($1.07 per share), compared to a net income of $36.2 million (0.57 per share) in the same period of 2013. In the fourth quarter of 2014, we recognized a non-cash impairment charge of $40.3 million against the Pirquitas mine and a non-cash write-down of $11.3 million

18


of low grade stockpiles. The following is a summary and discussion of the significant components of income and expenses recorded during the current quarter compared to the same period in the prior year.

In the three months ended December 31, 2014, we recognized total revenues of $122.8 million, compared to $49.0 million recognized in the comparative period of 2013. The main reason for the increase is the acquisition of the Marigold mine in April 2014 which contributed $82.5 million of revenues in the fourth quarter.

•
At the Pirquitas mine, we recognized revenues of $40.3 million in the fourth quarter, $8.7 million lower than the $49.0 million recognized in the same period in 2013. The decline in revenue was primarily the function of lower silver prices as we actually sold more silver ounces in the fourth quarter of 2014 (2.8 million ounces compared to 2.5 million ounces). Realized silver prices in the fourth quarter of 2014 averaged $17.18 per ounce, excluding the impact of period-end price adjustments, compared to $20.79 per ounce in the same period in 2013. In addition zinc sales of 8.7 million pounds in 2014 were lower than the 14.2 million pounds sold in the fourth quarter of 2013. At December 31, 2014, sales contracts containing 1.9 million ounces of silver were subject to final price settlement over the next four months.

•
Revenues in the fourth quarter of 2014 from the Marigold mine were $82.5 million from the sale of 68,748 ounces of gold, realizing an average price of $1,200 per ounce. We did not own the Marigold mine during the comparable quarter in 2013.

Cost of sales for the fourth quarter of 2014 was $109.8 million, compared to $45.0 million in the fourth quarter of 2013, again mainly due to the acquisition of Marigold which comprised $53.5 million in cost of sales.

•
In the fourth quarter of 2014, cost of sales from the Pirquitas mine was $56.3 million compared with $45.0 million in the fourth quarter of 2013, resulting in a loss from mine operations of $16.0 million in the fourth quarter of 2014, compared to an income of $4.0 million in the fourth quarter of 2013. The fourth quarter of 2014 was negatively impacted by a non-cash write-down of low grade stockpile inventory of $11.3 million. Excluding the inventory write-down, in 2014 the mine recognized a negative margin of 12% in the fourth quarter, compared to a positive margin of 8.1% in the fourth quarter of 2013. Excluding the inventory write-down, the Pirquitas mine's gross margin was lower than in 2013, which was mainly due to the lower realized silver prices in the period, as well as a higher depreciation charges reflecting a shorter mine life. On a per unit basis, the cost of inventory was similar in the fourth quarter of 2014 to the fourth quarter of 2013.

•
At Marigold, cost of sales was $82.5 million generating income from mine operations of $29.1 million, equal to a gross margin of 35%.

General and administrative expenses in the three months ended December 31, 2014 of $5.6 million were slightly higher than the $5.4 million recorded in the three months ended December 31, 2013. This increase is principally due to higher share-based compensation.

Exploration and evaluation costs of $6.3 million for the three months ended December 31, 2014 were lower than the $7.4 million for the three months ended December 31, 2013. The costs were higher in 2013 due to the drill programs at our San Luis project and the Pirquitas mine. In the fourth quarter of 2014, the exploration costs related mainly to work performed at the Marigold mine on a deep underground drill program and completion of the new life of mine plan.

On December 30, 2013, we completed the sale of the San Agustin project located in Mexico, generating a pre-tax gain on sale before tax of $67.8 million (restated). There were no such transactions in the fourth quarter of 2014.

During the fourth quarter of 2014, we recognized an unrealized loss of $3.2 million on previously impaired marketable securities and securities designated at FVTPL, compared to a loss of $2.0 million in the same period of 2013. During the fourth quarter of 2014, we also recognized an unrealized gain of $8.5 million on marketable securities in other

19


comprehensive income, compared to a loss of $32.8 million in the fourth quarter of 2013, which resulted from the significant decrease in market value of AFS securities in the comparable quarter.

During the fourth quarter of 2014, we recorded interest expense and other financing costs of $7.3 million compared to the $5.1 million recorded in the fourth quarter of 2013. In each period, $4.5 million is attributable to our $265 million of 2.875% convertible senior notes issued in 2013 (the "2013 Notes"). In the fourth quarter of 2014, we also incurred finance expense in the form of a discount on the sale of our VAT credits in Argentina.

We recorded foreign exchange losses for the three months ended December 31, 2014 of $2.8 million compared to losses of $11.0 million in the three months ended December 31, 2013. Our main foreign exchange exposures are related to net monetary assets denominated in Argentine pesos, and Canadian and Australian dollars. During the three months ended December 31, 2014, this loss resulted from the Argentine peso, Canadian dollar and Australian dollar weakening against the U.S. dollar. In the same period of 2013, the Argentine peso devalued at a higher rate against a larger Argentine peso denominated asset base, while the Canadian and Australian dollars were relatively flat compared to the U.S. dollar.

For the three months ended December 31, 2014, we recorded an income tax expense of $29.6 million compared to an income tax expense of $9.4 million in the three months ended December 31, 2013. Current income tax expense of $4.0 million is primarily due to US AMT and Nevada Net Proceeds of Mine Tax liability from the Marigold operations and payments of interest withholding tax in Argentina. At December 31, 2014, we completed a reorganization of the US entity that holds our Pirquitas mine through an Argentine branch. As a result of this reorganisation this US entity will no longer be subject to US income tax. The previously recognised deferred tax asset comprised of a foreign tax credit arising from interest withholding tax paid in Argentina in 2013 has been derecognized ($12 million). The balance of the deferred income tax expense of $13.9 million is made up of movement in Marigold tax attributes, devaluation of the Argentinian Peso and Peruvian Soles against the US currency, deferred recovery items relating to mark-to-market value changes on marketable securities and losses generated through corporate general and administrative expenses.

In the fourth quarter of 2013, the income tax expense was primarily related to the operations of Pirquitas and the establishment of a deferred income tax liability due to the introduction of the Mexican mining royalty of 7.5 % in December 2013. This was partially offset by the recognition of tax benefits from the foreign tax credit paid for Argentina withholding tax on the interest payment made from MPI Argentina to MPI US and foreign exchange losses.

Realized silver and gold price is a non-GAAP financial measure. Please, see the discussion under "Non-GAAP Financial Measures" in section 13.


8.
LIQUIDITY

At December 31, 2014, we had $184.6 million of cash and cash equivalents, a decrease of $231.0 million from December 31, 2013. The decrease in cash primarily resulted from the cash payment of $267.7 million for the Marigold mine acquisition, as well as pledging $17.6 million as cash collateral to support certain reclamation obligations and a loan facility in Argentina. These were partially offset by positive operating and financing cash flows totaling $74.6 million in 2014.

We manage our liquidity position with the objectives of ensuring sufficient funds available to meet planned operating requirements and providing support to fund strategic growth initiatives. During 2014, our cash position was materially reduced by the cash acquisition of the Marigold mine. In addition to cash flows from operations, we have supplemented our liquidity position by the strategic divestiture of certain mineral property assets and sales of certain marketable securities. We also arranged a $7.5 million Argentine peso-denominated loan facility in Argentina, of which the equivalent of $5.9 million was drawn as at December 31, 2014.


20


In the year ended December 31, 2014, we generated $68.8 million of cash flows from operating activities and used $298.7 million in investing activities, including $267.7 million relating to the Marigold mine acquisition. Cash flows from investing activities comprised outflows of $54.9 million on capital expenditures, exploration and development projects, deferred stripping and $16.8 million of taxes paid in relation to the sale of the San Agustin and Challacollo projects. Cash inflows comprised $7.5 million of proceeds from the sale of the Challacollo project, $10.0 million of deferred consideration from the sale of the San Agustin project, $39.2 million in proceeds from the disposal of marketable securities and $1.5 million of interest income. We also incurred foreign exchange losses of $7.1 million, before impacts of interest earned, on our foreign cash balances, primarily in Argentina and Canada.

At December 31, 2014, $172.6 million of our cash and cash equivalents was held in Canada, the United States, Europe and Australia. Approximately $60.0 million is invested in short term investments under our investment policy with maturities of 90 days or less providing us with sufficient liquidity to meet corporate needs. At December 31, 2014, we held $6.4 million cash in Argentina.The government of Argentina's regulation of U.S. dollar inflows and outflows restricts our ability to repatriate cash generated by the Pirquitas mine, however, we repatriate cash from Argentina under a fixed schedule of debt repayments.

At December 31, 2014, our working capital position was $368.9 million, a decrease from $584.1 million at December 31, 2013, principally as a result of the acquisition of the Marigold mine for cash.

Our cash balance at December 31, 2014, along with projected operating cash flows are expected to be sufficient to fund planned exploration, development and corporate activities over the next twelve months from the date of this MD&A. We are continuing our cost reduction strategy to preserve capital throughout the organization and to discharge liabilities as they become due, while implementing various optimization activities at both our mines to improve cash generation.

On January 27, 2015, we received a Notice of Reassessment ("NOR") from the Canada Revenue Agency ("CRA") in the aggregate amount of approximately C$41.4 million plus interest of C$6.6 million related to the tax treatment of the 2010 sale of shares of our subsidiary that owned and operated the Snowfield and Brucejack projects. The CRA has asserted that the sale was on account of income and not capital, as we recorded it. Our management strongly disagrees with the CRA’s position in the reassessment and we plan on filing a Notice of Objection and, if necessary, a Notice of Appeal to the Tax Court of Canada. In order to appeal the reassessment, we are required to make a minimum payment of 50% of the reassessed amount claimed by the CRA under the NOR plus interest accrued to the date of the NOR.

The following table summarizes our financial liabilities, operating and capital commitments at December 31, 2014:
 
Payments due by period (as at December 31, 2014)
At December 31,
2013

Contractual obligations
Less than one year

1 - 3 years

4-5 years

After 5 years

Total

Total

 
$

$

$

$

$

$

Trade and other payables
55,617

—

—

—

55,617

35,841

Current provisions
56,058

—

—

—

56,058

48,169

Current debt
5,922

—

—

—

5,922

—

Convertible notes (i)
—

—

265,000

—

265,000

265,000

Interest on convertible notes (i)
7,619

22,856

11,428

—

41,903

49,522

Capital expenditure commitments
2,596

—

—

—

2,596

6,164

Minimum lease rental and lease payments
412

1,481

383

—

2,276

2,907

Total contractual obligations
128,224

24,337

276,811

—

429,372

407,603


(i) The 2013 Notes mature in 2033 but are redeemable in part or in full at the option of the holder on February 1 at each of 2020, 2023, and 2028, or upon fundamental corporate changes. They are also redeemable by us in part or in full on and after February 1, 2018. The notes bear interest of 2.875% per annum and are convertible into common shares upon specified events at a fixed conversion price of approximately $20.00 per common share.


21



9.
CAPITAL RESOURCES

Our capital consists of items included in shareholders' equity and debt, net of cash and cash equivalents as follows:

 
December 31

December 31

 
2014

2013

 
$000s

$000s

Shareholders' equity
707,034

707,034

Convertible notes
197,134

187,130

 
904,168

894,164

 
 
 
Less: cash and cash equivalents
(184,643
)
(415,657
)
 
719,525

478,507


At December 31, 2014, there was no externally imposed capital requirement to which we are subject and with which we have not complied.

As at December 31, 2014, we had 80,754,434 common shares outstanding and 2,377,065 stock options outstanding which are exercisable into common shares at exercise prices ranging between C$6.48 and C$28.78.

Outstanding share data

The authorized capital consists of an unlimited number of common shares without par value. As at February 19, 2015, the following common shares and options were outstanding:
 
Number of shares

Exercise price
Remaining life
 
 
C$
(years)
Capital stock
80,754,434

 
 
Stock options
3,243,965

5.83 - 28.78
3.9 - 6.9
Fully diluted
83,998,399

 
 


10.
FINANCIAL INSTRUMENTS AND RELATED RISKS

We are exposed to a variety of financial risks as a result of our operations, including market risk (which includes price risk, currency risk and interest rate risk), credit risk and liquidity risk. Our overall risk management strategy seeks to reduce potential adverse effects on our financial performance. Risk management is carried out under policies approved by our Board of Directors.
We may, from time to time, use foreign exchange contracts, commodity price contracts, equity hedges and interest rate swaps to manage our exposure to fluctuations in foreign currency, metal and energy prices, marketable security values and interest rates. We do not have a practice of trading derivatives. In the past, our use of derivatives was limited to specific programs to manage fluctuations in foreign exchange risk, which are subject to the oversight of our Board of Directors.
The risks associated with our financial instruments, and the policies on how we mitigate those risks are set out below. This is not intended to be a comprehensive discussion of all risks.
a)Market Risk
This is the risk that the fair values of financial instruments will fluctuate owing to changes in market prices. The significant market risks to which we are exposed are price risk, currency risk and interest rate risk.


22


(i)  Price Risk
This is the risk that the fair values or future cash flows of our financial instruments will fluctuate because of changes in market prices. Income from mine operations in the next year depends on the metal prices for gold, silver, and to a lesser extent, zinc. These prices are affected by numerous factors that are outside of our control such as:
▪global or regional consumption patterns;
▪the supply of, and demand for, these metals;
▪speculative activities;
▪the availability and costs of metal substitutes;
▪inflation; and
▪political and economic conditions, including interest rates and currency values.
The principal financial instrument that we hold which are impacted by commodity prices is the embedded derivative within our silver and zinc concentrate trade receivables. The majority of these sales agreements are subject to pricing terms that settle within one to three months after delivery of concentrate, and this adjustment period represents our trade receivable exposure to variations in commodity prices.
We have not hedged the price of gold or silver as part of our overall corporate strategy.
A 10% increase in the average commodity price as at December 31, with all other variables held constant, would have resulted in the following impact to our after-tax net income:
 
2014

2013

Products
$000s

$000s

10% increase in silver price
1,958

1,814

10% increase in zinc price
275

272

As we do not have trade receivables for gold sales, movements in gold prices will not impact the value of any financial instruments.
The costs relating to our production activities vary depending on market prices of certain mining consumables including diesel fuel and electricity. A 10% increase in diesel fuel market prices would have resulted in a $1.4 million decrease in our after-tax net income for the year ended December 31, 2014. We have not hedged any commodity prices as at December 31, 2014.
We hold certain investments in marketable securities which are measured at fair value, being the closing price of each equity investment at the balance sheet date. We are exposed to changes in share prices which would result in gains and losses being recognized in total comprehensive income. A 10% change in prices would have a $10.5 million impact on total comprehensive income at December 31, 2014 (December 31, 2013 - $12.9 million). During 2014, we entered into hedging arrangements over certain securities that resulted in derivative gains of $2.8 million. No such arrangements were outstanding as at December 31, 2014.
(ii) Currency Risk
Currency risk is the risk that the fair values or future cash flows of our financial instruments will fluctuate because of changes in foreign currency rates. Our financial instruments are exposed to currency risk where those instruments are denominated in currencies that are not the same as their functional currency; exchange gains and losses in these situations impact earnings.




23


The following are the most significant areas of exposure to currency risk, shown in thousands of U.S. dollars:
 
December 31, 2014
 
Canadian dollar

Argentine peso

Australian dollar

Mexican peso

Cash
13,333

6,383

4,653

1,405

Marketable securities
102,933

—

1,852

—

Value added tax receivable
95

35,259

—

2,367

Trade and other payables (excluding VAT and income taxes)
(8,780
)
(17,985
)
—

(4
)
Current debt
—

(5,922
)
—

—

Total
107,581

17,735

6,505

3,768


 
December 31, 2013
 
Canadian dollar

Argentine peso

Australian dollar

Mexican peso

Cash
7,881

20,751

4,983

8,007

Marketable securities
126,428

—

2,839

—

Value added tax receivable
67

64,816

—

3,412

Trade and other payables (excluding VAT and income taxes)
(7,387
)
(13,606
)
—

(1,618
)
Valued added tax payable
—

—

—

(6,467
)
Income taxes payable
—

—

—

(15,885
)
Total
126,989

71,961

7,822

(12,551
)


We monitor and manage this risk with the objective of ensuring our group-wide exposure to negative fluctuations in currencies against the U.S. dollar is managed. As at December 31, 2014, we have not entered into any derivatives to mitigate this risk.

The Argentine government requires the repatriation of export revenues into Argentina and, where cash flows exceed our current cash repatriation schedule, this results in an increase to our Argentine peso cash balance. In Argentina, the official Argentine peso exchange rate published is significantly lower than the parallel market rate (also referred to as the Blue rate). We use the official Argentine peso exchange rate for all re-measurement purposes which is consistent with the economic reality that foreign currency transactions entered into or paid out of Argentina are required to be converted at the official exchange rate. A sudden devaluation of the Argentine peso to a rate closer to the parallel market rate would materially impact the value of our Argentine peso-denominated cash and VAT receivables in U.S. dollar terms, but would improve our operating costs in U.S. dollar terms, all else being equal. We are actively seeking ways to mitigate the risk on our cash balance of a devaluation of the Argentine peso, and therefore, we are repatriating cash from Argentina under a fixed schedule of debt repayments and have entered into an Argentina peso loan facility.

In early 2014, the Argentine peso saw a significant devaluation, as the government reduced intervention and relaxed capital controls, but since that time the peso has reverted to a steady devaluation against the U.S. dollar. In 2014, the Argentine peso devalued 31% compared to 33% in 2013. The devaluation reduced the value of our Argentine peso-denominated assets, principally cash and VAT receivables, and decreased Argentina peso-denominated liabilities, principally accounts payable, when expressed in U.S. dollar terms.

A 10% increase in the U.S. dollar exchange rate on financial assets and liabilities denominated in the following currencies, with all other variables held constant, would have resulted in the following impact to our total comprehensive income for the years ended December 31, 2014 and December 31, 2013:


24


 
2014

2013

 
$000s

$000s

Canadian dollar
(7,988
)
(9,422
)
Argentine peso
(1,183
)
(4,826
)
Australian dollar
(456
)
(547
)
Mexican peso
(265
)
873


(iii)  Interest Rate Risk
Interest rate risk is the risk that the fair values or future cash flows of our financial instruments will fluctuate because of changes in market interest rates. Interest rate risk arises from the interest rate impact on our cash and cash equivalents and Argentine peso-denominated loan facility because these are the only financial instruments we hold that are impacted by interest based on variable market interest rates. The 2013 Notes have fixed interest rates and are not exposed to fluctuations in interest rates; a change in interest rates would impact the fair value of the instruments, but because we record the 2013 Notes at amortized cost there would be no impact on our financial results. We monitor our exposure to interest rates closely and have not entered into any derivative contracts to manage our risk.
As at December 31, 2014, the weighted average interest rate earned on our U.S. dollar cash and cash equivalents was 0.30% (2013 - 0.32%). With other variables unchanged, a 1% change in the annualized interest rate would impact after-tax net income by $1.4 million (2013 - $3.3 million).
b) Credit Risk
Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial contract. Our credit risk is limited to the following instruments:
Credit risk related to financial institutions and cash deposits Under our investment policy, investments are made only in highly rated financial institutions, and corporate and government securities. We diversify our holdings and consider the risk of loss associated with investments to be low.

Credit risk related to trade receivables We are exposed to credit risk through our trade receivables on concentrate sales, which are principally with internationally-recognized counterparties. Payments of receivables are scheduled, routine and received within a contractually agreed time frame. We manage this risk by requiring provisional payments of at least 75% of the value of the concentrate shipped and through utilizing multiple counterparties.

Credit risk related to other financial assets All other receivable balances are expected to be collectible in full due to the nature of the counterparties and/or a previous history of collectability. Deferred consideration is also expected to be collectible in full and is also secured against the San Agustin mineral claims and technical information, and the Challacollo mineral claims and shares of the entity holding the Challacollo project.

We also have credit risk through our significant VAT receivable balances that is collectible from the government of Argentina. The balance is expected to be recoverable in full, however due to legislative rules and the complex collection process, a significant portion of the asset is classified as non-current until government approval of the recovery claim is approved.

Our maximum exposure to credit risk as at December 31, 2014 and December 31, 2013 was as follows:
 
December 31, 2014

December 31, 2013

 
$000s

$000s

Cash and cash equivalents
184,643

415,657

Value added tax receivable
37,527

68,338

Trade and other receivables
30,313

44,510

Other financial assets
41,001

29,847

 
293,484

558,352


25


At December 31, 2014, no amounts were held as collateral except those discussed above in credit risk related to other financial assets.
c) Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our obligations under our financial instruments as they fall due. We manage our liquidity risk through a rigorous planning and budgeting process, which is reviewed and updated on a regular basis, to help determine the funding requirements to support our current operations, expansion and development plans, and by managing our capital structure. Our objective is to ensure that there are sufficient committed financial resources to meet our business requirements for a minimum of twelve months.
Argentine government regulation of U.S. dollar inflows and outflows restricts the ability to repatriate cash generated by the Pirquitas mine although we repatriate cash from Argentina under a fixed schedule of debt repayments, which has an impact on overall corporate liquidity.
In order to manage our corporate liquidity, we use surety bonds to support certain environmental bonding obligations. As at December 31, 2014, we had surety bonds totaling $17.8 million (December 31, 2013 - $Nil). In addition, we have $30.1 million of letters of credit supporting environmental obligations which are backed by a mixture of cash and other forms of credit.
A detailed discussion of our liquidity position and the maturity profile of financial liabilities presenting contractual undiscounted cash flows as at December 31, 2014, is included in section 8.

In our opinion, working capital at December 31, 2014 together with future cash flows from operations are sufficient to support our commitments through 2015.

We have no other off balance sheet arrangements, except as discussed above.


11.
OTHER RISKS AND UNCERTAINTIES

We are subject to a number of risks and uncertainties, each of which could have an adverse effect on our operating results, business prospects or financial position.

For a comprehensive list of the risks and uncertainties affecting our business, please refer to the section entitled "Risk Factors" in our most recent Annual Information Form, which is available at www.sedar.com, and our most recent Form 40-F, which is available on the EDGAR section of the SEC website at www.sec.gov.

Income tax provisions and income tax filing positions require estimates and interpretations of income tax rules and regulations of the various jurisdictions in which we operate and judgments as to their interpretation and application to our specific situation. Our business and operations of the business and operations of our subsidiaries is complex and we have, over the course of history, undertaken a number of significant financings, acquisitions and other material transactions. The computation of income taxes payable as a result of these transactions involves many complex factors as well as our interpretation of and compliance with relevant tax legislation and regulations. While our management believes that the provision for income tax is appropriate and in accordance with IFRS and applicable legislation and regulations, tax filing positions are subject to review and adjustment by taxation authorities who may challenge our interpretation of the applicable tax legislation and regulations.

On January 27, 2015, we received a NOR from the CRA in the amount of approximately C$41.4 million plus interest of C$6.6 million related to the tax treatment of the 2010 sale of shares of our subsidiary that owned and operated the Snowfield and Brucejack projects. The CRA has asserted that the sale was on account of income and not capital, as we recorded it. Our management strongly disagrees with the CRA’s position in the reassessment and we plan on filing a Notice of Objection and, if necessary, a Notice of Appeal to the Tax Court of Canada. In order to appeal the reassessment, we are required to make a minimum payment of 50% of the reassessed amount claimed by the CRA under the NOR plus interest accrued to the date of the NOR.

26



Although the outcome of this matter cannot be predicted with certainty, we intend to contest the matter vigorously, and believe we will ultimately prevail based on the merits of our position. At this time, we have not recognized an income tax provision for this amount. However, we will continue to evaluate our tax provisions as the matter progresses through appeals and, if necessary, the litigation process. If the CRA's position is ultimately sustained, it would have a material impact on earnings and financial resources in the period that the matter is ultimately resolved.


12.
RELATED PARTY TRANSACTIONS

a) Key management compensation
Key management includes our directors (executive and non-executive) and other key officers, including the CEO, CFO and Senior Vice Presidents. The compensation paid or payable to key management for employee services is shown below:
 
2014

2013

 
$000s

$000s

Salaries and other short-term employee benefits
2,880

2,600

Post-employment benefits
22

21

Termination benefits
—

1,370

Share-based compensation (i)
2,808

1,704

Total compensation
5,710

5,695


(i) 
Share-based compensation includes mark-to-market adjustments on cumulative Deferred Share Units positions as reported in the consolidated statements of income.

b) Principal Subsidiaries
The consolidated financial statements include our accounts and the account of our wholly-owned subsidiaries, the most significant of which are presented in the following table:
Subsidiary
Location
Ownership
Principal project
Pacific Rim Mining Corporation Argentina S.A.
Argentina
100%
Diablillos
Silver Standard Durango, S.A. de C.V.
Mexico
100%
Pitarrilla
Silver Standard Exploraciones, S.A. de C.V.
Mexico
100%
Veta Colorada
Silver Standard Mexico, S.A. de C.V.
Mexico
100%
Nazas
Reliant Ventures S.A.C.
Peru
100%
San Luis
Sociedad Minera Berenguela S.A.
Peru
100%
Berenguela
Candelaria Mining Company
USA (Delaware)
100%
Candelaria
Marigold Mining Company
USA (Nevada)
100%
Marigold
Maverick Silver Inc.
USA (Nevada)
100% (1)
Maverick Springs
Mina Pirquitas, LLC
USA (Delaware)
100%
Pirquitas
(1) The Maverick Springs project is held in a joint venture in which we have a 55% interest, representing all of the silver resources hosted in the project.







27


13.
NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures presented do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be directly comparable to similar measures presented by other issuers. The data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Non-GAAP financial measures - Cash costs and total costs per payable ounce of silver and gold sold

We use the non-GAAP financial measures of cash costs and total costs per payable ounce of precious metals sold to manage and evaluate operating performance. We believe that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate our performance and ability to generate cash flows. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

The following table provides a reconciliation of our condensed consolidated interim statements of (loss) income to cash costs and total costs for each of the three month periods indicated below:



28


 
Q1

Q2

Q3

Q4

Total

Total

 
2014

2014

2014

2014

2014

2013 (restated) (2)

 
$000s

$000s

$000s

$000s

$000s

$000s

Pirquitas mine
 
 
 
 
 
 
Cost of sales (A)
27,812

28,503

31,182

56,332

143,829

169,502

Add: Treatment and refining costs
3,148

4,296

3,734

5,132

16,310

17,459

Less: By-product revenue
(6,314
)
(3,540
)
(6,166
)
(6,268
)
(22,288
)
(14,368
)
Less: Inventory NRV write-down
—

—

—

(11,262
)
(11,262
)
(12,193
)
Less: Restructuring costs
—

—

—

—

—

(1,468
)
Total Costs
24,646

29,259

28,750

43,934

126,589

158,932

 
 
 
 
 
 
 
Less: Depreciation, depletion and amortization
(5,080
)
(6,037
)
(5,640
)
(12,427
)
(29,184
)
(41,808
)
Less: Export duties on silver concentrate
(2,080
)
(1,418
)
(2,581
)
(1,810
)
(7,889
)
(13,162
)
Cash Costs
17,486

21,804

20,529

29,697

89,516

103,962

 
 
 
 
 
 
 
Marigold mine
 
 
 
 
 
 
Cost of sales (B)
—

24,762

41,829

53,502

120,093

—

Add: Treatment and refining costs
—

37

34

49

120

—

Less: By-product revenue
—

(13
)
(11
)
(15
)
(39
)
—

Total Costs
—

24,786

41,852

53,536

120,174

—

 
 
 
 
 
 
 
Less: Depreciation, depletion and amortization
—

(704
)
(3,741
)
(7,772
)
(12,217
)
—

Cash Costs
—

24,082

38,111

45,764

107,957

—

 
 
 
 
 
 
 
Cost of sales, per consolidated statement of (loss) income (A+B)
27,812

53,265

73,011

109,834

263,922

169,502

 
 
 
 
 
 
 
 Pirquitas mine
 
 
 
 
 
 
 Payable ounces of silver sold (oz)
1,415,114

1,790,117

1,680,502

2,525,166

7,410,899

8,075,103

 Total Costs per silver ounce ($/oz)
17.42

17.11

17.11

17.40

17.08

19.68

 Cash Costs per silver ounce ($/oz)
12.36

12.18

12.22

11.76

12.08

12.87

 
 
 
 
 
 
 
 Marigold mine
 
 
 
 
 
 
 Payable ounces of gold sold (oz)
—

21,836

38,218

68,801

128,855

—

 Total Costs per gold ounce ($/oz)
—

1,135

1,095

778

933

—

 Cash Costs per gold ounce ($/oz)
—

1,103

997

665

838

—

 
 
 
 
 
 
 
Precious metals equivalency
 
 
 
 
 
 
 Total cash costs (for all metals produced)
17,486

45,886

58,640

75,460

197,472

103,962

 Equivalent payable silver ounces sold (1) 
1,415,114

3,200,587

4,102,646

6,998,809

15,717,156

8,075,103

 Cash Costs per equivalent silver ounces sold ($/oz)
12.36

14.34

14.29

10.78

12.56

12.87


(1) Silver equivalent ounces have been established using realized silver and gold prices per ounce in the period and applied to the recovered metal content of the gold sold by the Marigold mine. We have not included zinc as it is considered a by-product.
(2) The quarter ended March 31, 2013 was restated as a result of an erroneous double counting of certain freight and transportation costs.

29


Non-GAAP financial measures - realized precious metal prices

Average realized price per ounce of silver sold in each reporting period excludes the period end price adjustments and final settlements on concentrate shipments. The price adjustments do not apply to gold bullion sales.

Non-GAAP financial measures - adjusted net income (loss)

We have included the non-GAAP financial performance measures of adjusted net income (loss) and adjusted basic earnings (loss) per share. Adjusted net earnings excludes gains/losses and other costs incurred for acquisitions and disposals of mineral properties, impairment charges, unrealized and realized gains/losses on financial instruments, significant non-cash foreign exchange impacts as well as other significant non-cash, non-recurring items. We exclude these items from net (loss) income to provide a measure which allows investors to evaluate the operating results of the underlying core operations of the Company and our ability to generate liquidity through operating cash flow to fund working capital requirements, future capital expenditures and service outstanding debt. We believe that, in addition to conventional measures prepared in accordance with GAAP, certain investors may use this information to evaluate our performance. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

We have revised the calculation presented for the year ended December 31, 2013 to include adjustments for certain non-cash and non-recurring items that we consider provides an improved measure to evaluate the operating results of the underlying core operations of the Company.

The following table provides a reconciliation of adjusted net income (loss) to the consolidated financial statements:


30


 
2014

2013

 
 $000's

 $000's

 
 
(restated)(1)

 
 
 
Net loss before tax
(95,815
)
(218,695
)
 
 
 
Adjusted for:
 
 
Gain on sale and write-off of mineral properties
(15,913
)
(67,821
)
Business acquisition and integration costs
7,916

—

Associate accounting
—

(23,038
)
Restructuring costs
—

2,928

Non-cash finance income and expense
12,064

14,638

Write-down of inventory to NRV
11,262

12,193

Write-down of exploration projects
145

102

Impairment charges
40,250

206,315

Loss on marketable securities
11,427

13,003

Non-cash foreign exchange loss

15,775

14,852

Other non-recurring items

(5,409
)
(1,372
)
Adjusted loss before tax
(18,298
)
(46,895
)
 
 
 
Income tax expense
(30,578
)
(11,321
)
 
 
 
Foreign tax on sale of mineral properties
2,035

16,264

Tax effects of asset impairment charges and write-downs
257

3,355

Initial recognition of deferred tax relating to Mexican royalty tax

—

7,107

Recognition of Argentine withholding taxes
17,290

—

Other non-recurring tax items
5,111

(15,896
)
Adjusted income tax expense
(5,885
)
(491
)
 
 
 
Adjusted net loss
(24,183
)
(47,386
)
 
 
 
Weighted average shares outstanding (000's)
80,754

80,754

 
 
 
Adjusted basic loss per share ($)
(0.30
)
(0.59
)

(1) Restated for the change in the exploration and evaluation costs accounting policy as discussed in section 14.


31


 
Three months ended
 
December 31, 2014

December 31, 2013

 
 $000's

 $000's

 
 
(restated)(1)

 
 
 
Net (loss) income before tax
(56,789
)
45,652

 
 
 
Adjusted for:
 
 
Gain on sale and write-off of mineral properties
—

(67,821
)
Business acquisition and integration costs
1,486

—

Restructuring costs
—

434

Non-cash finance income and expense
3,167

3,144

Write-down of inventory to NRV
11,262

—

Impairment charges
40,250

—

Loss on marketable securities
3,170

2,270

Non-cash foreign exchange loss
1,323

8,037

Other non-recurring items
(2,751
)
213

Adjusted income (loss) before tax
1,118

(8,071
)
 
 
 
Income tax (expense) recovery
(29,626
)
9,437

 
 
—

Foreign tax on sale of mineral properties
(243
)
16,264

Tax effects of asset impairment charges and write-downs
64

(4,112
)
Initial recognition of deferred tax relating to Mexican royalty tax
—

7,107

Recognition of Argentine withholding taxes
17,290

—

Other non-recurring tax items
5,090

(5,192
)
Adjusted income tax (expense) recovery
(7,425
)
23,504

 
 
 
Adjusted net (loss) income
(6,307
)
15,433

 
 
 
Weighted average shares outstanding (000's)
80,754

80,754

 
 
 
Adjusted basic (loss) earnings per share ($)
(0.08
)
0.19


(1) Restated for the change in the exploration and evaluation costs accounting policy as discussed in section 14.


14.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Basis of preparation and accounting policies
These consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). The comparative information has also been prepared on this basis, with the exception of certain items, details of which are given below, for which comparative information has been restated. Note 2 of our consolidated financial statements for the year ended December 31, 2014, provides details of the significant accounting policies and accounting policy decisions for significant or potentially significant areas that have had an impact on our financial statements or may have an impact in future periods.
The policies applied in these consolidated financial statements are based on IFRS issued and outstanding as of December 31, 2014, and were approved as of February 19, 2015, the date our Board of Directors approved the financial statements.



32


(i)  Change in accounting policies and restatement of comparatives
We have elected to change our accounting policy with respect to exploration and evaluation expenditures, consistent with IFRS 6, Exploration for and Evaluation of Mineral Resources and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, in order to enhance the relevance and reliability to the decision making needs of the users of our financial statements. In prior periods, our policy was to capitalize exploration and evaluation expenditures on properties that we have the legal rights to explore, until commercially viable. We have now elected to expense all exploration and evaluation expenses until such time that we believe that further expenditures will provide probable future economic benefit. Our policy is disclosed in Note 2(i) of our consolidated financial statements for the year ended December 31, 2014.
This change in accounting policy requires full retrospective application. IAS 1, Presentation of Financial Statements also requires that a third statement of financial position be presented as at the beginning of the prior period. As at January 1, 2013 and December 31, 2013, the following adjustments were recorded to the consolidated statements of financial position:

 
 
Adjustment for change in accounting policy

 
At January 1, 2013
As previously reported (1)

Exploration and evaluation

As currently reported


$

$

$

Property, plant and equipment
580,649

(150,116
)
430,533

Deferred income tax liabilities
(19,373
)
1,595

(17,778
)
Net increase (decrease) in shareholders' equity

(148,521
)


(1) 
Effective January 1, 2013, we adopted IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, and therefore restated the originally presented consolidated statement of financial position.




Adjustments for change in accounting policy



At December 31, 2013
As previously reported

Exploration and evaluation

As currently reported


$

$

$

Asset held for sale
13,140

(6,734
)
6,406

Property, plant and equipment
400,409

(151,772
)
248,637

Deferred income tax liabilities
(24,736
)
5,707

(19,029
)
Net (decrease) in shareholders' equity

(152,799
)











33


For the year ended December 31, 2013, the following adjustments were recorded to the consolidated statements of (loss) income:



Adjustments for change in accounting policy



Year ended December 31, 2013
As previously reported

Exploration and evaluation

As currently reported


$

$

$

Exploration, evaluation and reclamation (expenses)
(4,018
)
(19,439
)
(23,457
)
Gain on sale of mineral property
64,566

3,255

67,821

Other (expense) income
(22,574
)
7,053

(15,521
)
Income tax (expense)
(15,433
)
4,112

(11,321
)
(Decrease) in net income

(5,019
)





Weighted average shares outstanding (thousands)



Basic
80,754

80,754

80,754

Diluted
80,754

80,754

80,754





(Decrease) in earnings per share



Basic
(2.79
)
(0.06
)
(2.85
)
Diluted
(2.79
)
(0.06
)
(2.85
)
As at December 31, 2014, the change in accounting policy had the following impact on the consolidated statements of financial position:
 
 
Effect of change in accounting policy

 
At December 31, 2014
Under previous accounting policy

Exploration and evaluation

As currently reported

 
$

$

$

Property, plant and equipment
600,929

(161,855
)
439,074

Deferred income tax liabilities
(34,500
)
5,450

(29,050
)
Net (decrease) in shareholders' equity
 
(156,405
)
 

















34


For the year ended December 31, 2014, the change in accounting policy had the following impact on the consolidated statements of (loss) income:
 
 
Effect of change in accounting policy

 
Year ended December 31, 2014
Under previous accounting policy

Exploration and evaluation

As currently reported

 
$

$

$

Exploration, evaluation and reclamation (expenses)
(9,646
)
(11,544
)
(21,190
)
Gain on sale of mineral property
9,214

6,699

15,913

Other (expense) income
(14,902
)
1,461

(13,441
)
Income tax (expense)
(30,321
)
(257
)
(30,578
)
(Decrease) in net income
 
(3,641
)
 
 
 
 
 
Weighted average shares outstanding (thousands)
 
 
 
Basic
80,754

80,754

80,754

Diluted
80,754

80,754

80,754

 
 
 
 
(Decrease) in earnings per share
 
 
 
Basic

($1.52
)

($0.05
)

($1.57
)
Diluted

($1.52
)

($0.05
)

($1.57
)

As a result of our change in accounting policy, the carrying value of our Pitarrilla project was reduced from $127.0 million to $61.8 million at December 31, 2014. Silver prices had declined significantly in the fourth quarter of 2014 and long-term consensus estimates had similarly declined, which has resulted in the reclassification of Pitarrilla's Mineral Reserves to Mineral Resources. We concluded that this constituted an impairment indicator and undertook an assessment of the FVLCTD of the project. Using an approach of assessing comparable values of undeveloped Mineral Resources, we determined that no impairment would have been required had we not changed our accounting policy.

The reduction in the carrying value of our Pitarrilla project, as a result of our change in accounting policy, also caused the Pitarilla assets to fall below 10% of our total assets for all periods disclosed, and therefore, it is no longer a reporting segment. It is included within the "exploration and evaluation properties" segment for all periods disclosed in Note 23 of our consolidated financial statements for the year ended December 31, 2014.
(ii)  Statement of cash flows presentation
We have changed the presentation of VAT recovered (paid) on the statements of cash flows from investing activities to operating activities to better reflect the nature of the activities.

Adoption of new or amended IFRS pronouncements

The following new and amended IFRS pronouncements were adopted during 2014:

Levies imposed by governments
IFRIC's Interpretation 21, Levies (“IFRIC 21”), an interpretation of IAS 37, Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”), on the accounting for levies imposed by governments, was effective for annual periods beginning on January 1, 2014. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (“obligating event”). IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. This did not have any significant impact on our current accounting for levies imposed by governments.

35



Impairment of assets
IAS 36, Impairment of assets, was amended to clarify disclosure requirements when a recoverable amount is determined based on FVLCTD. The amendment was effective for annual periods beginning on January 1, 2014 and we have adopted the amendment in note 10, which did not have a significant impact to the disclosure.

Critical Accounting Estimates and Judgments

The preparation of financial statements in conformity with IFRS requires the use of judgments and/or estimates that affect the amounts reported and disclosed in the consolidated financial statements and related notes. Areas of judgment and key sources of estimation uncertainty that have the most significant effect on the amounts recognized in the consolidated financial statements are the following:

Review of asset carrying values and impairment assessment

Non-current assets
In accordance with our accounting policy (Note 2(l) of our consolidated financial statements for the year ended December 31, 2014), each asset or cash generating unit ("CGU") is evaluated every reporting period to determine whether there are any indicators of impairment. If any such indicators exist, which is often judgment based, a formal estimate of recoverable amount is performed and an impairment charge is recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount of an asset or CGU of assets is measured at the higher of FVLCTD or value in use ("VIU").

The evaluation of asset carrying values for indications of impairment includes consideration of both external and internal sources of information, including such factors as market and economic conditions, metal prices and forecasts, production budgets and forecasts, and life-of-mine estimates.

The determination of FVLCTD and VIU requires management to make estimates and assumptions about expected production, sales volumes, commodity prices, Mineral Reserves, operating costs, taxes, close down and restoration costs and future capital expenditures. The estimates and assumptions are subject to risk and uncertainty; hence, there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be further impaired or the impairment charge reversed with the impact recorded in the consolidated statements of income (loss).

Financial instruments
At each reporting date, we conduct a review of our marketable securities and other financial instruments to determine whether there are any indications of impairment. This determination requires significant judgment. In making this judgment, we evaluate, among other factors, the duration and extent to which the fair value of an investment is less than its carrying value; and the financial health of and business outlook for the investee, including factors such as industry and sector performance, and operational and financing cash flow.

If the declines in fair value below carrying value are considered significant or prolonged, we will recognize a loss, being the transfer of the accumulated fair value adjustments recognized in other comprehensive income on the impaired available-for-sale financial assets to the consolidated statements of income (loss).

Mineral Reserves and Mineral Resources estimates We estimate Mineral Reserves and Mineral Resources based on information prepared by qualified persons as defined by NI 43-101. Mineral Reserves are used in the calculation of depreciation, amortization and impairment charges, for forecasting the timing of the payment of close down and restoration costs, and future taxes. In assessing the life of a mine for accounting purposes, Mineral Resources are only taken into account where there is a high degree of confidence of economic extraction. There are numerous uncertainties inherent in estimating Mineral Reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of Mineral Reserves and may,

36


ultimately, result in Mineral Reserve estimates being revised. Such changes in Mineral Reserves could impact on depreciation and amortization rates, asset carrying values and the provision for close down and restoration.

Determination of deferred stripping activities We determine whether stripping costs incurred during the production phase of a surface mining operation provide improved access to a component of an ore body that will be mined in a future period, and whether the costs can be reliably measured. We have to apply judgment when identifying components of the mine over which stripping costs are capitalized, estimate the average stripping ratio for each component, and use judgment in determining the period over which the stripping activity asset is amortized.

Determination of useful lives of property, plant and equipment We use the units-of-production method to depreciate mineral property expenditures, whereby depreciation is calculated using the quantity (either tonnes or ounces) of ore extracted from the mine in the period as a percentage of the total quantity of ore expected to be extracted in current and future periods based on Mineral Reserves. As noted above, there are numerous uncertainties inherent in estimating Mineral Reserves. Other assets are depreciated using the straight-line method, which includes significant management judgment to determine useful lives and residual values.

The carrying amounts of our mineral properties are depleted based on recoverable ounces contained in proven and probable Mineral Reserves. Changes to estimates of recoverable ounces and depletable costs including changes resulting from revisions to our mine plans and changes in metal price forecasts can result in a change to future depletion rates.

Valuation of inventory
Stockpiled ore and finished goods
Stockpiled ore and finished goods are valued at the lower of average cost and NRV. NRV is calculated as the estimated price at the time of sale based on prevailing and forecast metal prices less estimated future production costs to convert the inventory into saleable form and associated selling costs. The determination of forecast sales price, production and selling costs requires significant assumptions that may impact the stated value of our inventory.
Leach pad inventory
In determining the value of the leach pad, we make estimates of quantities and grades of ore stacked on leach pads and in-process, and the recoverable gold in this material to determine the total inventory. Changes in these estimates can result in a change in carrying amounts of inventory, as well as cost of sales.
Close down and restoration provision Close down and restoration costs are a consequence of exploration activities and mining, and the majority of close down and restoration costs are incurred near the end of the life of a mine. Our accounting policy requires the recognition of such provisions when the obligation occurs. The initial provisions are periodically reviewed during the life of the operation to reflect known developments, e.g. updated cost estimates and revisions to the estimated lives of operations. Although the ultimate cost to be incurred is uncertain, we estimate our costs based on studies using current restoration standards and techniques. The initial closure provisions together with changes, other than those arising from the discount applied in establishing the net present value of the provision, are capitalized within property plant and equipment and depreciated over the lives of the assets to which they relate.
The ultimate magnitude of these costs is uncertain, and cost estimates can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites, local inflation rates and exchange rates when liabilities are anticipated to be settled in a currency other than the United States dollar. The expected timing of expenditure can also change, for example, in response to changes in Mineral Reserves, production rates or economic conditions. As a result there could be significant adjustments to the provision for close down and restoration, which would affect future financial results.
Determination of the fair value of share-based compensation The fair value of share options and other forms of share-based compensation granted is computed to determine the relevant charge to the consolidated statement of income. In order to compute this fair value, we use option pricing models that require management to make various estimates and assumptions in relation to the expected life of the awards, volatility, risk-free interest rates, and forfeiture rates.

37


Valuation of financial instruments We are required to determine the valuation of our convertible notes (at inception), and the embedded derivatives within sales contracts. The convertible notes valuation required discounted cash flow analysis that involved various estimates and assumptions, whilst the valuation of the revenue derivatives require estimates of settlement dates and relies on market based forward metal prices at those settlement dates.
Deferred tax assets and liabilities The determination of our tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgment by management. In determining these amounts, we interpret tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. We also make estimates of future earnings which affect the extent to which potential future tax benefits may be used. We are subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. We provide for such differences where known based on our best estimate of the probable outcome of these matters.
Functional currency The determination of a subsidiary’s functional currency often requires significant judgment where the primary economic environment in which the subsidiary operates may not be clear. This can have a significant impact on our consolidated results based on the foreign currency translation methods described in note 2(e) of the consolidated financial statements for the year ended December 31, 2014.
Contingencies Contingencies can be either possible assets or liabilities arising from past events which, by their nature, will only be resolved when one or more future events not wholly within our control occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. In assessing loss contingencies related to legal, tax or regulatory proceedings that are pending against us or unasserted claims, that may result in such proceedings or regulatory or government actions that may negatively impact our business or operations, we evaluate with our legal counsel the perceived merits of any legal, tax or regulatory proceedings, unasserted claims or actions. Also evaluated are the perceived merits of the nature and amount of relief sought or expected to be sought, when determining the amount, if any, to recognize as a contingent liability or assessing the impact on the carrying value of assets. Contingent assets or liabilities are not recognized in the consolidated financial statements. In January 2015, we received a re-assessment from the Canada Revenue Agency ("CRA") for an amount of C$41.4 million. We have not provided for this amount.
Deferred consideration In February 2014, we completed the sale of our 100% interest in the Challacollo project of which a portion of sale consideration is deferred. The deferred consideration is dependent on various uncertain events and assumptions, including estimation of the year in which commercial production may be reached, the share price of Mandalay Resources Corporation ("Mandalay") for the deferred shares, and the price of silver for the deferred silver bullion. The fair value of the deferred consideration is determined by considering various scenarios of discounting the expected cash flows using a risk-adjusted discount rate and applying probability aspects to the cash flows.
Assessment of fair value of assets acquired in a business combination Judgment is required to determine whether we acquired a business under the definition of IFRS 3, Business combinations, and also the acquisition date when we obtained control over the business, which was the date that consideration is transferred and when we assumed the assets and liabilities.
Business combinations are accounted for using the acquisition method whereby identifiable assets acquired and liabilities assumed, including contingent liabilities, are recorded at their fair values at the date of acquisition. The valuation of certain assets and liabilities requires significant management estimates and judgment. The value of the leach pad inventory requires an estimation of recoverable ounces, production profile, future metal prices and costs to complete the production process. Property, plant and equipment requires judgment over the appropriate fair value methodology to appraise the assets and various assumptions around estimated useful lives and current replacement costs. The mineral property valuation is based upon estimates of Mineral Reserves and Mineral Resources used in our life of mine plan, as well as estimates of future metal prices, production, operating and capital costs, and economic assumptions around inflation rates and discount rates.



38


15.
FUTURE ACCOUNTING CHANGES
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective. None of these is expected to have a significant effect on our consolidated financial statements, except the following set out below:
Operating segments
IFRS 8, Operating segments was amended to require disclosure of the judgments made by management in aggregating operating segments, including a description of the segments which have been aggregated and the economic indicators which have been assessed in determining that the aggregated segments share similar economic characteristics. The amendment was effective for annual periods commencing on or after July 1, 2014.

Revenue from contracts with customers
The IASB has replaced IAS 18, Revenue in its entirety with IFRS 15 - Revenue from contracts with customers (“IFRS 15”) which is intended to establish a new control-based revenue recognition model and change the basis for deciding whether revenue is to be recognized over time or at a point in time. IFRS 15 is effective for annual periods commencing on or after January 1, 2017. We are currently evaluating the impact the standard is expected to have on our consolidated financial statements.

IFRS 9, Financial Instruments: Classification and Measurement ("IFRS 9")
IFRS 9 as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39") and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after January 1, 2013, but IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39), issued in November 2013, moved the mandatory effective date to January 1, 2018.

In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. We will quantify the effect in conjunction with the other phases, when the final standard, including all phases, is issued.

Amendments
Amendments to standards and interpretations include the following:

IFRS 7, Financial instruments: Disclosure: Was amended to require additional disclosures on transition from IAS 39 to IFRS 9. Effective on adoption of IFRS 9, which is effective for annual periods commencing on or after January 1, 2018.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on our consolidated financial statements.


16.
INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES

Disclosure Controls and Procedures
Our management, with the participation of the President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures. Based upon the results of that evaluation, the President and Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this MD&A, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file is recorded, processed, summarized and reported, within the appropriate time periods and is accumulated and communicated to management, including the President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

39



Internal Control Over Financial Reporting
Our management, with the participation of the President and Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of the President and Chief Executive Officer and Chief Financial Officer, our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes policies and procedures that:

•
pertain to maintenance of records that accurately and fairly reflect, in reasonable detail, the transactions and dispositions of assets;
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS and that our receipts and expenditures are made only in accordance with authorizations of management and our Board of Directors; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.

There has been no change in our internal control over financial reporting during the year ended December 31, 2014, other than the acquisition of the Marigold mine, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2014. In conducting this evaluation, the Marigold mine was excluded from our assessment of effectiveness of our internal control over financial reporting because it was acquired by us in a transaction that completed during 2014. The Marigold mine is owned by a wholly-owned subsidiary, the total assets and total revenues of which represent 35% and 53%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2014.
The effectiveness of our internal control over financial reporting, as of December 31, 2014, has been audited by PricewaterhouseCoopers LLP, who also audited our consolidated financial statements as of and for the years ended December 31, 2014 and 2013, as stated in their report which appears on our consolidated financial statements.
Limitations of Controls and Procedures
Our management, including the President and Chief Executive Officer and Chief Financial Officer, believes that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within our organization have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

40



17.
CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS AND MINERAL RESERVE AND MINERAL RESOURCE ESTIMATES

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of Canadian securities laws (collectively, “forward-looking statements”). All statements, other than statements of historical fact, are forward-looking statements.
Generally, forward-looking statements can be identified by the use of words or phrases such as “expects,” “anticipates,” “plans,” “projects,” “estimates,” “assumes,” “intends,” “strategy,” “goals,” “objectives,” “potential,”
or variations thereof, or stating that certain actions, events or results “may,” “could,” “would,” “might” or “will” be taken, occur or be achieved, or the negative of any of these terms or similar expressions. The forward-looking statements in this MD&A relate to, among other things: our ability to successfully integrate announced acquisitions, future production of silver, gold and other metals; future costs of inventory and cash costs per payable ounce of silver, gold and other metals; the prices of silver, gold and other metals; the effects of laws, regulations and government policies affecting our operations or potential future operations; future successful development of our projects; the sufficiency of our current working capital, anticipated operating cash flow or our ability to raise necessary funds; estimated production rates for silver, gold and other metals produced by us; timing of production and the cash and total costs of production at the Pirquitas mine and the Marigold mine; the estimated cost of sustaining capital; ongoing or future development plans and capital replacement, improvement or remediation programs; the estimates of expected or anticipated economic returns from our mining projects including future sales of metals, concentrates or other products produced by us; and our plans and expectations for our properties and operations.

These forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied, including, without limitation, the following: uncertainty of production, development plans and cost estimates for the Pirquitas mine, the Marigold mine, the Pitarrilla project and the San Luis project; future development risks, including start-up delays and operational issues; our ability to replace Mineral Reserves; our ability to complete and successfully integrate an announced acquisition, including the Marigold mine acquisition; our ability to obtain adequate financing for further exploration and development programs; commodity price fluctuations; political or economic instability and unexpected regulatory changes; currency fluctuations, particularly the value of the Argentine peso against the U.S. dollar; the possibility of future losses; general economic conditions; the recoverability of our interest in Pretium and our other marketable securities, including the price of and market for Pretium’s common shares and such other marketable securities; potential export duty on current and past production of silver concentrate from the Pirquitas mine; recoverability and tightened controls over the VAT collection process in Argentina; counterparty and market risks related to the sale of our concentrates and metals; differences in U.S. and Canadian practices for reporting Mineral Reserves and Mineral Resources; uncertainty in the accuracy of Mineral Reserves and Mineral Resources estimates and in our ability to extract mineralization profitably; uncertainty in acquiring additional commercially mineable mineral rights; lack of suitable infrastructure or damage to existing infrastructure; delays in obtaining or failure to obtain governmental permits, or non-compliance with permits we have obtained; governmental regulations, including health, safety and environmental regulations, increased costs and restrictions on operations due to compliance with such regulations; reclamation requirements for our exploration properties; unpredictable risks and hazards related to the development and operation of a mine or mine property that are beyond our control; compliance with anti-corruption laws and increased regulatory compliance costs; complying with emerging climate change regulations and the impact of climate change; uncertainties related to title to our mineral properties and the ability to obtain surface rights; recoverability of deferred consideration to be received in connection with recent divestitures; our insurance coverage; civil disobedience in the countries where our properties are located; operational safety and security risks; actions required to be taken by us under human rights law; our ability to access, when required, mining equipment and services; competition in the mining industry for properties; our ability to attract and retain qualified personnel and management and potential labour unrest, including labour actions by our unionized employees at the Pirquitas mine; shortage or poor quality of equipment or supplies; conflicts of interest that could arise from some of

41


our directors' and officers' involvement with other natural resource companies; claims and legal proceedings, including adverse rulings in current or future litigation against us and/or our directors or officers, and assessments; potential difficulty in enforcing judgments or bringing actions against us or our directors or officers outside Canada and the United States; certain terms of our convertible notes; and those other various risks and uncertainties identified under the heading “Risk Factors” in our most recent Annual Information Form filed with the Canadian securities regulatory authorities and included in our most recent Form 40-F filed with the SEC.

This list is not exhaustive of the factors that may affect any of our forward-looking statements. Our forward-looking statements are based on what our management considers to be reasonable assumptions, beliefs, expectations and opinions based on the information currently available to it. Assumptions have been made regarding, among other things, our ability to carry on our exploration and development activities, our ability to meet our obligations under our property agreements, the timing and results of drilling programs, the discovery of Mineral Resources and Mineral Reserves on our mineral properties, the timely receipt of required approvals and permits including obtaining the necessary surface rights for the lands required for successful project permitting, construction and operation of the Pitarrilla project, the price of the minerals we produce, the costs of operating and exploration expenditures, our ability to operate in a safe, efficient and effective manner, our ability to obtain financing as and when required and on reasonable terms and our ability to continue operating the Pirquitas mine and the Marigold mine. You are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. We cannot assure you that actual events, performance or results will be consistent with these forward-looking statements, and management's assumptions may prove to be incorrect. Our forward-looking statements reflect current expectations regarding future events and operating performance and speak only as of the date hereof and we do not assume any obligation to update forward-looking statements if circumstances or management's beliefs, expectations or opinions should change other than as required by applicable law. For the reasons set forth above, you should not place undue reliance on forward-looking statements.

Qualified Persons

Except as otherwise set out herein, the scientific and technical information contained in this MD&A relating to the Pirquitas mine has been reviewed and approved by Trevor J. Yeomans, ACSM, P.Eng., a Qualified Person under NI 43-101 and our employee. The scientific and technical information contained in this MD&A relating to the Marigold mine has been reviewed and approved by Thomas Rice and James N. Carver, each of whom is a SME Registered Member, a Qualified Person under NI 43-101 and our employee.

Cautionary Note Regarding Mineral Reserves and Mineral Resources Estimates

This MD&A includes Mineral Reserves and Mineral Resources classification terms that comply with reporting standards in Canada and the Mineral Reserves and the Mineral Resources estimates are made in accordance with NI 43-101. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. These standards differ significantly from the requirements of the SEC set out in Industry Guide 7. Consequently, Mineral Reserves and Mineral Resources information included in this MD&A is not comparable to similar information that would generally be disclosed by domestic U.S. reporting companies subject to the reporting and disclosure requirements of the SEC. Under SEC standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically produced or extracted at the time the reserve determination is made.

In addition, the SEC’s disclosure standards normally do not permit the inclusion of information concerning “Measured Mineral Resources,” “Indicated Mineral Resources” or “Inferred Mineral Resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. U.S. investors should understand that “Inferred Mineral Resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. Moreover, the requirements of NI 43-101 for identification of “reserves” are also not the same as those of the SEC, and reserves reported by us in compliance with NI 43-101 may not qualify as “reserves” under SEC standards. Accordingly, information concerning

42


mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.



43



February 19, 2015
News Release 15-04
SILVER STANDARD REPORTS FOURTH QUARTER AND YEAR-END 2014 RESULTS
VANCOUVER, B.C. - Silver Standard Resources Inc. (NASDAQ: SSRI) (TSX: SSO) (“Silver Standard”) reports consolidated financial results for the fourth quarter and year ended December 31, 2014.

“2014 was a transformational year for Silver Standard with the acquisition of the Marigold mine,” said John Smith, President and CEO. “The transaction added a quality, long-life mine to our portfolio, doubling our production and improving cash flow. Our track record of delivery continued in 2014 with both Pirquitas and Marigold exceeding plan and, importantly, with lower cost profiles. We enter 2015 well-positioned to create value with a great management team, a strong balance sheet, and an appetite and capability for further growth.”

Fourth Quarter and Full-Year 2014 Highlights:
(All figures are in U.S. dollars unless otherwise noted)

▪
Acquired the Marigold mine: Purchased the Marigold mine for $268 million on April 4, 2014, generated $38.8 million of income from mine operations in the first nine months of ownership.
▪
Delivered lower cost profile
▪
Reported cash costs of $838 per payable ounce of gold sold at the Marigold mine for the period from April to December 2014, at the low end of our cash costs guidance range. Fourth quarter cash costs of $665 per payable ounce of gold sold due to strong production in the period.
▪
Reported 2014 cash costs of $12.08 per payable ounce of silver sold at the Pirquitas mine, in line with the lower end of our 2014 cost guidance. Fourth quarter cash costs at Pirquitas totaled $11.76 per payable ounce of silver sold.
▪
Achieved record production
▪
Produced 129,615 ounces of gold at Marigold from April to December 2014, exceeding our 2014 production guidance which had been previously increased to between 110,000 and 120,000 ounces of gold. Produced 67,113 ounces of gold in the fourth quarter, a quarterly record for the Marigold mine since it commenced production in 1988 and 66% higher than the previous quarter.
▪
Produced record 8.7 million ounces of silver and 30.0 million pounds of zinc in 2014. Achieved production guidance for the third consecutive year demonstrating consistent delivery to plan.
▪
Built strong cash position: $185 million in cash and cash equivalents as at December 31, 2014, an increase of $50 million quarter-on-quarter due to strong production and sales.
▪
Exploration program delivers: 2014 resource development drilling program at the Marigold mine added higher grade Mineral Resources from the 8 South pit area into the resource base, as reported in our release dated December 12, 2014.


Page 1


▪
Improved underlying performance: Adjusted income before tax of $1.1 million in the fourth quarter of 2014. Adjusted loss after tax for the fourth quarter was $6.3 million or $0.08 per share and for 2014 was $24.2 million or $0.30 per share. During the fourth quarter of 2014, non-cash, pre-tax impairment charge and write-downs of $51.5 million related to Pirquitas were recognized, including $11.3 million stockpiles within fourth quarter cost of sales and income from operations. Reported net loss for 2014 was $126.4 million.
Pirquitas Mine, Argentina
 
 Three months ended
Total

Total

Operating data
March 31, 2014

June 30, 2014

September 30, 2014

December 31, 2014

2014

2013

Total material mined (kt)
4,208

4,052

4,315

3,816

16,391

17,423

Waste removed (kt)
3,840

3,550

3,831

3,168

14,389

15,958

Strip ratio
10.4

7.1

7.9

4.9

7.2

10.9

Silver mined grade (g/t)
163

167

160

150

159

186

Zinc mined grade (%)
1.94

2.07

1.36

0.97

1.52

2.28

Mining costs ($/t mined)
2.40

2.80

2.93

3.18

2.94

2.88

Ore milled (kt)
406

402

407

372

1,587

1,575

Silver mill feed grade (g/t)
204

213

248

222

221

217

Zinc mill feed grade (%)
2.02

2.19

1.79

1.12

1.79

1.63

Processing cost ($/t milled)
20.09

21.13

23.30

22.46

21.73

24.72

Silver recovery (%)
72.1

74.3

78.7

83.8

77.3

74.9

Zinc recovery (%) (1)
48.9

48.0

43.8

52.6

47.9

48.0

 
 
 
 
 
 
 
Silver produced ('000 oz)
1,918

2,042

2,551

2,222

8,733

8,216

Zinc Produced ('000 lbs) (1)
8,844

9,319

7,030

4,817

30,010

27,037

Silver sold ('000 oz)
1,596

1,926

1,859

2,764

8,145

8,693

Zinc Sold ('000 lbs) (1)
10,227

5,307

8,062

8,745

32,341

23,524

 
 
 
 
 
 
 
Realized silver price ($/oz) (2)
20.38

19.89

19.99

17.18

19.15

23.77

 
 
 
 
 
 
 
Cash costs ($/oz) (2)
12.36

12.18

12.22

11.76

12.08

12.87

Total costs ($/oz) (2)
17.42

16.34

17.11

17.40

17.08

19.68

 
 
 
 
 
 
 
Financial Data ($000s)
 
 
 
 
 
 
Revenue
33,736

36,261

30,874

40,322

141,193

174,686

Income (loss) from mine operations (3)
5,924

7,758

(308
)
(16,010
)
(2,636
)
5,184

Capital investments
2,514

3,200

2,376

2,033

10,123

28,102

Capitalized deferred stripping
5,580

3,156

4,435

—

13,171

8,817

Exploration expenditures
140

1,125

173

1,284

2,722

2,205

(1)
Data for zinc production and sales relate only to zinc in zinc concentrate as any zinc metal within our silver concentrate does not generate revenue.
(2)
We report the non-GAAP financial measure of cost per payable ounce of silver sold and realized silver price to manage and evaluate operating performance at the Pirquitas mine. See “Cautionary Note Regarding Non-GAAP Measures”.
(3)
Income (loss) from mine operations for the quarter and year ended December 31, 2014, and the year ended December 31, 2013, includes $11.3 million and $12.2 million, respectively, of write-down of stockpile inventory to its net realizable value.

Mine production

The Pirquitas mine produced 2.2 million ounces of silver during the fourth quarter of 2014, lower than the 2.6 million ounces produced in the third quarter of 2014 due to lower ore milled and mill feed silver grades,

Page 2


which were partially offset by improved recoveries. Mill feed in the fourth quarter was solely from ore mined from the open pit in the period while third quarter silver production benefited from higher grade stockpiled material. In the fourth quarter of 2014, zinc production declined as planned to 4.8 million pounds of zinc in zinc concentrate.

Ore was milled at an average rate of 4,045 tonnes per day in the fourth quarter. The average silver grade of ore milled was 222 g/t, slightly lower than the 248 g/t reported in the third quarter which benefited from previously mined higher grade stockpiled material. The average recovery rate for silver in the fourth quarter increased to 83.8% from 78.7% in the previous quarter as the mill processed fresh sulphide feed from the open pit and process control improvements positively impacted plant operating performance. Zinc recovery to zinc concentrate was 53%, representing a 21% improvement over the previous quarter, achieved despite a drop in zinc head grade.

During 2014, the mine produced a record 8.7 million ounces of silver, higher than the 8.2 million ounces produced in 2013 primarily due to higher silver recovery in 2014.

In 2014, Pirquitas also produced 30.0 million pounds of zinc in zinc concentrate, a record for the mine, reflecting higher zinc grades as we mined more of the zinc-rich Potosi area of the San Miguel open pit, combined with improved recoveries.

Mine operating costs

We further advanced our continuous improvement initiatives at the Pirquitas mine after completing a cost restructuring program at the operation through late 2013.

Cash costs, which include cost of inventory, treatment and refining costs, and by-product credits, were $11.76 per payable ounce of silver sold in the fourth quarter of 2014 compared to $12.22 per payable ounce of silver sold in the third quarter of 2014. Cost of inventory remained similar to the third quarter of 2014 due to higher total spend required to achieve the higher production levels, in part caused by longer hauls, higher fuel consumption and higher mobile maintenance costs.

Cash costs per payable ounce of silver sold in 2014 decreased to $12.08 from $12.87 in 2013 per payable ounce of silver sold, mainly due to higher by-product credits in 2014 than in 2013.

Total costs, which add silver export duties, depreciation, depletion and amortization to cash costs, were $17.40 per payable ounce of silver sold in the fourth quarter of 2014, slightly above $17.11 per payable ounce of silver sold in the third quarter of 2014 following a reduction in estimated mine life. Depletion, depreciation and amortization was higher on a per ounce sold basis in the fourth quarter of 2014 compared to the third quarter of 2014, whereas the silver export duties were slightly lower than in the previous quarter due to timing of shipments.

Total costs per payable ounce of silver sold in 2014 decreased to $17.08 from $19.68 in 2013 mainly due to asset impairment recorded in the second quarter of 2013 which reduced depreciation being charged.

The Pirquitas mine remains focused on costs and driving further operational efficiencies that will sustain cash flows in a lower silver price environment.

Cash costs and total costs per payable ounce of silver sold are non-GAAP financial measures. See “Cautionary Note Regarding Non-GAAP Measures”.



Page 3


Mine sales

We sold 8.1 million ounces of silver in 2014, compared to 8.7 million ounces in 2013. Sales were lower than in 2013 due to timing of shipments and contractual revenue recognition points. In 2014, we shipped material containing 8.6 million ounces of silver, which met planned inventory levels at site. We also sold 32.3 million pounds of zinc in 2014, well in excess of the 23.5 million pounds sold in 2013, due to the increase in zinc production in 2014.

Silver sales totaled 2.8 million ounces for the quarter, a 49% increase from the third quarter, as higher scheduled shipments reduced inventory levels.

Exploration at Pirquitas

At Pirquitas, we are focused on near-mine exploration to identify additional Mineral Resources to extend the life of current operations.  In support of these activities, we secured access to explore an extensive adjacent property, which increased our land position by 4,417 hectares. We have commenced a field exploration program, which has to date defined several prospective areas with drill targets, located within a three kilometre radius of the active open pit. These targets hold potential for silver-zinc mineralization in open pit and underground configurations.
Initial drill testing on these areas was performed in the fourth quarter of 2014 and we completed 3,117 metres of surface reconnaissance core drilling in 17 drill holes on prospects proximal to our current open pit operations. Results to date from this surface drilling show that two targets outside the San Miguel pit area warrant further assessment as they yielded anomalous silver results. Closer to the San Miguel pit, the Medano target yielded an intersected length of eight metres at a grade of 198 g/t of silver, which will be assessed further from underground.
Resource upgrade drilling also commenced in the San Miguel zone, on the Chocaya and Oploca vein sets, underlying the existing open pit workings. By the end of 2014, we completed five drill holes from existing underground workings, for a total of 1,717 metres. We have intersected multiple sub-parallel vein systems, with grades and mineralized widths in the main veins in line with expectations. Drilling continues and a detailed geotechnical assessment is underway. We are evaluating the option to extend the original drilling program from the planned 4,700 metres. Studies have also commenced to assess the potential for underground, high-grade mill feed from these vein systems and will continue through the first half of 2015.










Page 4


Marigold mine, U.S.
 
 Three months ended
Total
 Operating data
 June 30, 2014

September 30, 2014

 December 31, 2014

2014 (1)

 Total material mined (kt)
18,338

18,832

18,426

55,596

 Waste removed (kt)
15,986

13,821

14,587

44,394

 Strip ratio
6.8

2.8

3.8

4.0

 Mining cost ($/t mined)
1.70

1.61

1.62

1.64

 Total ore stacked (kt)
2,352

5,011

3,839

11,202

 Gold stacked grade (g/t)
0.34

0.53

0.84

0.60

 Processing cost ($/t processed)
1.59

0.86

1.06

1.08

 Gold recovery (%)
73.0

73.0

73.0

73.0

 
 
 
 
 
 Gold produced (oz)
22,060

40,442

67,113

129,615

 Gold sold (oz)
21,990

38,245

68,748

128,983

 
 
 
 
 
 Realized gold price ($/oz) (2)
1,285

1,267

1,200

1,234

 
 
 
 
 
 Cash costs ($/oz) (2)
1,103

997

665

838

 Total costs ($/oz) (2)
1,135

1,095

778

933

 
 
 
 
 
 Financial data ($000s)
 
 
 
 
 Revenue
28,026

48,395

82,508

158,929

 Income from mine operations
3,264

6,566

29,006

38,836

 Capital investments
2,296

4,486

4,375

11,157

 Capitalized deferred stripping
7,611

2,144

19,127

28,882

 Exploration expenditures (3)
458

796

3,224

4,478

(1)
Data presented in this table is for the period April 1 to December 31, 2014, the period for which we were entitled to all economic benefits of the Marigold mine under the purchase and sale agreement dated February 3, 2014 entered into with subsidiaries of Goldcorp Inc. and Barrick Gold Corporation.
(2)
We report the non-GAAP financial measure of cost per payable ounce of gold sold and realized gold price to manage and evaluate operating performance at the Marigold mine. See “Cautionary Note Regarding Non-GAAP Measures”.
(3)
Includes capitalized and expensed exploration expenditures.

Mine production

We produced 67,113 gold ounces in the fourth quarter of 2014, 66% higher than the third quarter production of 40,442 ounces. As planned, mined material through late third quarter and in the fourth quarter was primarily from the higher grade lower benches of the Mackay Phase 1 pit, leading to increased ounces stacked on the leach pads through this period.

A total of 18.4 million tonnes of material were mined in the fourth quarter of 2014, compared to 18.8 million tonnes mined in the third quarter. Approximately 3.8 million tonnes of ore were delivered to the heap leach pads at a gold grade of 0.84 g/t, which represents approximately 75,600 recoverable ounces of gold stacked during the quarter. This compares to 5.0 million tonnes of ore delivered to the heap leach pads at a grade of 0.53 g/t in the third quarter of 2014, representing approximately 62,500 recoverable ounces of gold. Grade mined in the fourth quarter was 59% higher than the third quarter. Stripping of the next phase of the Mackay pit commenced in the fourth quarter, leading to an expected increase in the strip ratio in the quarter.


Page 5


Gold production for the nine months ending December 31, 2014, totaled 129,615 ounces. This was above plan due to a strong fourth quarter performance as the lower benches of Mackay Phase 1 pit delivered more ore at higher grade than expected.

During the period from acquisition to the end of 2014, the mine moved 55.6 million tonnes of material, of which 11.2 million tonnes of ore were delivered to the leach pads at a gold grade of 0.60 g/t. The average strip ratio was 4.0 over this period.

Mine operating costs

Cash costs, which include all costs of inventory, refining costs and royalties, were $665 per payable ounce of gold sold in the fourth quarter of 2014, compared to $997 per payable ounce of gold sold in the third quarter of 2014, the reduction resulting from a higher number of ounces produced in the period. Cash costs declined as expected during the period from acquisition to December 31, 2014, due to the planned production profile and were $838 per payable ounce of gold sold for the period, at the lower end of our guidance range.

Total costs, which include depreciation, depletion and amortization, were $778 per payable ounce of gold sold in the fourth quarter of 2014, compared to $1,095 per payable ounce of gold sold in the third quarter of 2014.

Cash costs since acquisition were impacted by the fair value attributed to the acquired leach pad inventory as part of the purchase price allocation required under IFRS. The entire value attributed to leach pad inventory was considered as a cash component with no allocation to previously incurred depreciation.

In the period from acquisition to December 31, 2014, total costs were $933 per payable ounce of gold sold with site operating costs at similar levels as the third quarter of 2014. Depreciation, depletion and amortization was higher in the third quarter as the initial inventory acquired did not include any depreciation. As a result, this non-cash component increased over the prior quarter, however, by the year end it was at normalized levels as depreciation was charged to inventory.

Cash costs and total costs per payable ounce of silver sold are non-GAAP financial measures. See “Cautionary Note Regarding Non-GAAP Measures”.

Mine sales

A total of 68,748 ounces of gold was sold at an average price of $1,200 per ounce during the fourth quarter of 2014, an increase of 80% from the 38,245 ounces of gold sold at an average price of $1,267 per ounce during the third quarter of 2014. The increase in sales was a function of increased gold production. In the period from acquisition to December 31, 2014, a total of 128,983 ounces of gold was sold at an average price of $1,234 per ounce.

Exploration

By the end of 2014, under our exploration drill program at Marigold, we had completed a total of 21,653 metres in 116 reverse circulation drill holes on gold oxide targets in the Mackay, Hercules, 5 North and 8 South areas. A total of 81% of those drill holes reported mineralized intercepts above our Mineral Resource cut-off criteria. Positive drill results added higher grade Mineral Resources to the 8 South pit area as reported in our release dated December 12, 2014. These Mineral Resources have been included in our updated Mineral Resources estimate as at December 31, 2014.

Page 6


We have continued exploration in the 8 South area into 2015 and continue to see positive results from this higher-grade mineralized area. A recently completed drill hole MR-6034 intersected a down-hole interval of 91.4 metres grading at 2.4 g/t gold from a starting depth of 140 metres, including a higher grade interval of 36.5 metres grading at 5.8 g/t gold.  This hole was drilled within the Mineral Resource announced on December 12, 2014, and reported as at December 31, 2014, and will positively impact the grade of estimated blocks proximal to the hole.
The deep sulphide exploration project seeks to evaluate the potential for a high-grade underground mineral deposit at Marigold. In the fourth quarter of 2014, we completed one core drill hole to 1,235 metres depth and two more were in progress at December 31, 2014, for a total of 2,829 metres drilled. Drill results have confirmed the existence of permissive rock units underlying the oxide-ore bearing Valmy formation currently being mined. Geological and structural assessment will continue through next year, with three further deep core drill holes planned for 2015.





Page 7


Outlook

This section of the news release provides management's production and cost estimates for 2015. Major capital, exploration expenditures and development are also discussed. See "Cautionary Note Regarding Forward-Looking Statements."
For the full year 2015, we expect:
Operating Guidance
 
Pirquitas mine

Marigold mine

Gold Production
oz
—

160,000 - 175,000

Silver Production
Moz
9.0 - 10.0

—

Zinc Production
Mlb
10.0 - 12.0

—

Cash cost per payable ounce sold (1)
$/oz
11.50 - 12.50

725 - 800

Capital Expenditures
$M
10

20

Capitalized Stripping Costs
$M
—

25

(1)
We report the non-GAAP financial measure of cost per payable ounce of silver and gold sold to manage and evaluate operating performance at the Pirquitas mine and the Marigold mine. See “Cautionary Note Regarding Non-GAAP Measures”.

At the Pirquitas mine, silver production is expected to increase over 2014 as mining progresses through the higher grade portions of the San Miguel Phase 2 open pit with stable cash costs per payable ounce of silver sold. Capital expenditures of $10 million in 2015 consist principally of mine and plant capital spares and initial work on the stage 5 tailings dam.

Our gold production from the Marigold mine is expected to increase due to full year ownership of the asset. Production is expected to be strongest in the first and fourth quarters of 2015 as a strong end to 2014 carries into the first quarter of 2015 and mining progresses into lower areas of the next phase of the Mackay pit later in the year. Capital expenditures of $20 million in 2015 include approximately $7 million for cell 20 leach pad construction, $9 million for maintenance and capitalized spares for mining equipment and $2 million for capitalized exploration drilling.

Exploration expenditures are forecast to remain at a reduced level of $15 million for 2015. Planned expenditures include $4 million on surface and underground drilling proximate to the Pirquitas mine and $3.5 million of resource delineation drilling at Marigold. Property holdings are being maintained in good standing with limited activities expected at Pitarrilla, while expenditures at San Luis will be conditional upon successful community agreements.



Financial Results

Mine Operations
▪
Revenues were $300.1 million in the year ended December 31, 2014, compared to $174.7 million in the year ended December 31, 2013. Cost of sales was $263.9 million, including $41.4 million non-cash depletion, depreciation and amortization, $7.9 million export duty accrual and $11.3 million write-down of low grade inventory, in the year ended December 31, 2014. This compares to a cost of sales of $169.5 million, including non-cash depletion, depreciation and amortization of $41.8 million, $13.2 million export duty accrual and inventory write-down of $12.2 million, in the year ended December 31, 2013.

▪
Income from mine operations was $36.2 million in the year ended December 31, 2014, compared to $5.2 million in the year ended December 31, 2013.


Page 8


Net and Adjusted Income
▪
Net loss of $126.4 million, or $1.57 per share, including $51.7 million asset impairments and write-downs, in the year ended December 31, 2014. This compares to net loss of $230.0 million, or $2.85 per share, including $225.7 million asset impairments and write-downs, in the year ended December 31, 2013.

▪
Adjusted net loss of $24.2 million, or $0.30 per share, in the year ended December 31, 2014 compared to an adjusted net loss of $47.4 million, or $0.59 per share, in the year ended December 31, 2013 (1).

Liquidity
▪
Cash and cash equivalents were $184.6 million at December 31, 2014, compared to $415.7 million as of December 31, 2013. Working capital was $368.9 million at December 31, 2014, compared to $577.3 million at December 31, 2013.

Selected Financial Data
(US$000's, except per share amounts)

This summary of selected financial data should be read in conjunction with our management's discussion and analysis of the financial position and results of operations for the year ended December 31, 2014 (“MD&A”) and our audited consolidated financial statements for the years ended December 31, 2014 and December 31, 2013.
 
Three Months
Ended December 31
Year
Ended December 31
 
2014
2013
2014
2013
Revenue
122,830

49,026

300,122

174,686

Income from mine operations
12,996

3,985

36,200

5,184

Operating loss
(41,318
)
(6,837
)
(52,497
)
(244,154
)
Net income (loss) for the period
(86,222
)
36,212

(126,393
)
(230,016
)
Basic earnings (loss) per share
(1.07
)
0.57

(1.57
)
(2.85
)
Adjusted income (loss) before tax 1

1,118

(8,071
)
(18,298
)
(46,895
)
Adjusted net income (loss) 1
(6,307
)
15,433

(24,183
)
(47,386
)
Adjusted basic income (loss) per share 1
(0.08
)
0.19

(0.30
)
(0.59
)
Cash generated by operating activities
64,672

10,281

68,833

(14,034
)
Cash generated by (used in) investing activities
(19,737
)
16,329

(298,700
)
(43,079
)
Cash generated by financing activities
5,922

—

5,922

118,160

 
Financial Position
December 31, 2014
December 31, 2013
Cash and cash equivalents
184,643
 
415,657
 
Current assets - total
491,818
 
681,469
 
Current liabilities - total
122,870
 
104,124
 
Working capital
368,948
 
577,345
 
Total assets
986,249
 
1,032,735
 
(1)
We report non-GAAP measures, including adjusted income before- and after-tax, to manage and evaluate our operating performance. See “Cautionary Note Regarding Non-GAAP Measures”.

Page 9


Principal Projects

Pitarrilla, Mexico

Towards the end of 2013, the Mexican government enacted significant changes to the mining tax and royalty regime which had a significant impact on this project. On February 14, 2014, we were advised that SEMARNAT did not approve the EIA for the Pitarrilla open pit mine, primarily because sufficient water rights could not be secured.  Our ability to secure water rights is currently limited due to a temporary moratorium on subterranean water exploitation imposed in April 2013 in connection with uncontrolled and over exploited aquifers located throughout Mexico. As a result of these changes, we have limited project activities at Pitarrilla. In light of the foregoing, we have reclassified the Mineral Reserves at Pitarrilla project to Mineral Resources.

Expenditures at the Pitarrilla project during 2014 were $3.9 million, compared to $9.5 million in 2013. Project activities during 2014 were limited to surface rights acquisition, review of alternative development options and brownfields exploration activities on our land holdings adjacent to the Pitarrilla project.

The project remains an important development asset in our portfolio with significant Mineral Resources of silver, lead and zinc. We will continue to meet our community and other commitments.

San Luis, Peru

The San Luis project comprises a 35,000 hectare area which includes several vein systems across an area of land whose surface rights are held by two separate communities, Ecash and Cochabamba. A feasibility study was completed on the Ayelén vein and the EIA was approved in 2012. The execution of the mining project requires land access negotiations to be completed with both communities.

In the fourth quarter of 2014 we experienced continued delay in a continuing dialogue with Ecash community. Furthermore, discussions with the Cochabamba community concerning access for exploration activities, prompted us to deliver notice on our land access agreements with the Cochabamba community. We are pursuing revised agreements with Cochabamba that provide for a balanced and sustainable relationship between the parties. We continue to seek re-engagement opportunities with the Ecash community. Community elections for both the Ecash and Cochabamba community official representatives were held recently, and this provides an opportunity to re-open meaningful discussions going into the first half of 2015.
Expenditures at our wholly-owned San Luis project during 2014 amounted to $5.5 million compared to $6.4 million in 2013. San Luis remains a high value development asset in our portfolio and we continue to pursue community agreements to enable the project to advance.

Mineral Reserves and Mineral Resources

At December 31, 2014, Proven and Probable silver Mineral Reserves totaled 48.0 million ounces and Proven and Probable gold Mineral Reserves totaled 2.61 million ounces. Mineral Reserves estimates for the Pirquitas and Marigold mines have been determined based on prices of $19.00 per ounce of silver and $1,200 per ounce of gold, respectively. These price levels are below those used to determine our Mineral Reserves estimate for the Pirquitas mine as at December 31, 2013 and in our Marigold NI 43-101 Technical Report, reflecting our focus on margin.
At Pirquitas, silver Mineral Reserves declined by 27.6 million ounces compared to our estimate as at December 31, 2013 principally due to mining depletion and silver price reduction. Exploration activities are focused on conversion of the underground Mineral Resources to Mineral Reserves and drill testing regional targets to add Mineral Resources.

Page 10


At Marigold, gold Mineral Reserves increased from the estimate published in our NI 43-101 Technical Report by 0.2 million ounces to 2.3 million ounces as Mineral Reserves added more than offset mining depletion and gold price reduction. A brownfields exploration program is underway at Marigold, focused on expanding the mineralization intersected recently in the 8 South pit area and also developing other similar areas with potential for near-surface higher-grade oxides.

We have reclassified the Mineral Reserves at the Pitarrilla project to Mineral Resources due to the prevailing metal price environment, increased Mexican royalty and tax burden, and regulatory delays. The Pitarrilla project remains part of our substantial Mineral Resources inventory and is an important development asset within our portfolio.
Measured and Indicated Mineral Resources (inclusive of Mineral Reserves) totaled 944.5 million ounces of silver and 5.15 million ounces of gold at December 31, 2014. Four early stage projects, Candelaria, San Marcial, Maverick Springs and Sunshine Lake, have not been included in our statement of Mineral Resources, but these projects remain part of our exploration portfolio. At December 31, 2014, Inferred Mineral Resources totaled 88.1 million ounces of silver and 0.45 million ounces of gold.
Details on Mineral Reserves and Mineral Resources by project including tonnes, grades, ounces and notes, are presented in the table below.

Mineral Reserves and Resources

(As of December 31, 2014)
 
Location
Tonnes
Silver
Gold
Lead
Zinc
Copper
Silver
Gold
 
 
millions
g/t
g/t
%
%
%
million oz
million oz
 
 
 
 
 
 
 
 
 
 
MINERAL RESERVES:
 
 
 
 
 
 
 
 
 
 
Proven Mineral Reserves
San Luis
Peru
0.06
604.5
28.3
 
 
 
1.1
0.05
Total
 
 
 
 
 
 
 
1.1
0.05
 
 
 
 
 
 
 
 
 
 
Probable Mineral Reserves
Pirquitas
Argentina
5.37
220.10
 
 
0.47
 
38.0
 
Pirquitas Stockpiles
Argentina
0.64
136.52
 
 
0.62
 
2.8
 
Marigold
U.S.
138.60
 
0.49
 
 
 
 
2.20
Marigold Leach Pad Inventory
U.S.
 
 
 
 
 
 
 
0.12
San Luis
Peru
0.45
426.20
16.70
 
 
 
6.1
0.24
Total
 
 
 
 
 
 
 
46.9
2.56
 
 
 
 
 
 
 
 
 
 
Total Proven and Probable Mineral Reserves
Pirquitas
Argentina
5.37
220.10
 
 
0.47
 
38.0
 
Pirquitas Stockpiles
Argentina
0.64
136.52
 
 
0.62
 
2.8
 
Marigold
U.S.
138.60
 
0.49
 
 
 
 
2.20
Marigold Leach Pad Inventory
U.S.
 
 
 
 
 
 
 
0.12
San Luis
Peru
0.51
447.18
18.06
 
 
 
7.2
0.29
Total Proven and Probable
 
 
 
 
 
 
48.0
2.61
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Page 11


MINERAL RESOURCES:
 
 
 
 
 
 
 
 
 
 
Measured Mineral Resource (inclusive of Proven Mineral Reserves)
Pitarrilla
Mexico
20.30
95.40
 
 
 
 
62.3
 
San Luis
Peru
0.06
757.60
34.30
 
 
 
1.3
0.06
Total
 
 
 
 
 
 
 
63.6
0.06
 
 
 
 
 
 
 
 
 
 
Indicated Mineral Resources (inclusive of Probable Mineral Reserves)
Pirquitas
Argentina
11.65
183.0
 
 
0.53
 
68.7
 
Pirquitas UG
Argentina
4.37
176.1
 
 
4.34
 
24.7
 
Pirquitas Stockpiles
Argentina
1.20
111.0
 
 
0.99
 
4.4
 
Marigold
U.S.
250.90
 
0.51
 
 
 
 
4.04
Marigold Leach Pad Inventory
U.S.
 
 
 
 
 
 
 
0.12
Pitarrilla - Ag
Mexico
240.00
81.9
 
 
 
 
632.2
 
Pitarrilla - Pb/Zn
Mexico
260.30
 
 
0.32
0.72
 
 
 
San Luis
Peru
0.43
555.0
20.80
 
 
 
7.7
0.29
Diablillos
Argentina
21.60
111.0
0.90
 
 
 
77.1
0.64
Berenguela
Peru
15.60
132.0
 
 
 
0.92
66.1
 
Total
 
 
 
 
 
 
 
880.9
5.09
 
 
 
 
 
 
 
 
 
 
Measured and Indicated Mineral Resources (inclusive of Reserves)
Pirquitas
Argentina
11.65
183.0
 
 
0.53
 
68.7
 
Pirquitas UG
Argentina
4.37
176.1
 
 
4.34
 
24.7
 
Pirquitas Stockpiles
Argentina
1.20
111.0
 
 
0.99
 
4.4
 
Marigold
U.S.
250.90
 
0.51
 
 
 
 
4.04
Marigold Leach Pad Inventory
U.S.
 
 
 
 
 
 
 
0.12
Pitarrilla - Ag
Mexico
260.30
83.0
 
 
 
 
694.5
 
Pitarrilla - Pb/Zn
Mexico
260.30
 
 
0.32
0.72
 
 
 
San Luis
Peru
0.48
578.1
22.40
 
 
 
9.0
0.35
Diablillos
Argentina
21.60
111.0
0.90
 
 
 
77.1
0.64
Berenguela
Peru
15.60
132.0
 
 
 
0.92
66.1
 
Total Measured and Indicated
 
 
 
 
 
 
944.5
5.15
 
 
 
 
 
 
 
 
 
 
Inferred Mineral Resources
Pirquitas UG
Argentina
2.85
174.0
 
 
3.61
 
15.9
 
Marigold
U.S.
18.20
 
0.44
 
 
 
 
0.26
Pitarrilla
Mexico
22.10
62.1
 
0.21
0.49
 
44.1
 
San Luis
Peru
0.02
270.1
5.60
 
 
 
0.2
 
Diablillos
Argentina
7.20
27.0
0.80
 
 
 
6.3
0.19
Berenguela
Peru
6.00
111.7
 
 
 
0.74
21.6
 
Total Inferred
 
 
 
 
 
 
 
88.1
0.45

Notes to Mineral Reserves and Mineral Resources Table:
All estimates set forth in the Mineral Reserves and Mineral Resources table have been prepared in accordance with National Instrument 43-101-Standards of Disclosure for Mineral Projects (“NI 43-101”). The estimates of Mineral Reserves and Mineral Resources for each property other than the Pirquitas mine and the Marigold mine have been reviewed and approved by Bruce Butcher, P.Eng., F. Carl Edmunds, P.Geo., and Trevor J. Yeomans, ACSM, P.Eng., each of whom is a Qualified Person and our employee.

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Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mineral Resources and Mineral Reserves figures have some rounding applied. Exact totals can be found in the corresponding technical report for each property. All ounces reported herein represent troy ounces; "g/t" represents grams per tonne.
All technical reports for the properties are available under our profile on the SEDAR website at www.sedar.com or on our website at www.silverstandard.com.
Pirquitas
▪
Mineral Reserves and Mineral Resources estimates are reported below the as-mined surface as at December 31, 2014. Mineral Reserves are presented at a cut-off of $33.26 per tonne net smelter return, using a silver price of $19.00 per ounce and a zinc price of $2,204 per tonne. Mineral Resources for the Cortaderas Area are reported above a cut-off grade of 50 g/t silver; Mineral Resources for the Mining Area (includes San Miguel, Oploca and Potosí zones) are reported at 65 g/t silver constrained to an optimized pit based on current cost and engineering information, using a silver price of $25.00 per ounce and a zinc price of $2,425 per tonne; and Mineral Resources for the underground Mining Area are reported at a cut-off grade of 200 g/t silver. Mineral Resources for the Mining Area are reported inclusive of Mineral Reserves. The Mineral Reserves and Mineral Resources estimates were prepared under the supervision of Bruce Butcher, P.Eng., F. Carl Edmunds, P.Geo., and Trevor J. Yeomans, ACSM, P.Eng., each of whom is a Qualified Person and our employee.

Marigold
▪
Mineral Reserves and Mineral Resources estimates are reported below the as-mined surface as at December 31, 2014. The Mineral Reserves estimate was prepared under the supervision of Thomas Rice, SME Registered Member, a Qualified Person and our employee, and is presented at a cut-off of 0.065 g/t payable gold grade, using a gold price of $1,200 per ounce. The Mineral Resources estimate was prepared under the supervision of James N. Carver, SME Registered Member, and Karthik Rathnam, MAusIMM (CP), each of whom is a Qualified Person and our employee. Mineral Resources are presented based on an optimized pit at a cut-off of 0.065 g/t payable gold grade (gold assay factored for recovery, royalty and net proceeds per mineral resource block), using a gold price of $1,500 per ounce.

Pitarrilla
▪
Mineral Resources estimate is reported above a cut-off grade of 30 g/t silver.

San Luis
▪
Mineral Reserves estimate is reported at a cut-off grade of 6.9 g/t gold equivalent, based on $800 per ounce gold, $12.50 per ounce silver, and recoveries of 94% gold and 90% silver. Mineral Resources estimate is reported at a cut-off grade of 6.0 g/t gold equivalent, based on $600 per ounce gold and $9.25 per ounce silver.

Diablillos
▪
Mineral Resources estimate is reported above a recoverable metal value (“RMV”) cut-off value of $10.00 RMV based on metal prices of $11.00 per ounce silver and $700 per ounce gold using metal recoveries of 40% and 65%, respectively.

Berenguela
▪
Mineral Resources estimate is reported above a 50 g/t silver cut-off.


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Qualified Persons
Except as otherwise set out herein, the scientific and technical information contained in this news release relating to the Pirquitas mine has been reviewed and approved by Trevor J. Yeomans, ACSM, P.Eng., a Qualified Person under NI 43-101 and our Director of Metallurgy. The scientific and technical information contained in this news release relating to the Marigold mine has been reviewed and approved by Thomas Rice and James N. Carver, each of whom is a SME Registered Member and a Qualified Person under NI 43-101. Mr. Rice is our Technical Services Manager and Mr. Carver is our Chief Geologist at the Marigold mine.
Risks and Uncertainties

For information regarding the risks and uncertainties affecting our business, please refer to the section entitled “Risk Factors” in our most recent Annual Information Form filed with the Canadian securities regulatory authorities, which is available at www.sedar.com, and included in our Form 40-F filed with the SEC and available on the EDGAR section of the SEC website at www.sec.gov. These documents are also available on our website at www.silverstandard.com.

Management Discussion & Analysis and Conference Call

This news release should be read in conjunction with our audited consolidated financial statements and the MD&A as filed with the Canadian Securities Administrators and available at www.sedar.com or our website at www.silverstandard.com.

▪
Conference call and webcast: Friday, February 20, 2015, at 11:00 a.m. EST.
 
Toll-free in North America:
+1 (888) 429-4600
 
All other callers:
+1 (970) 315-0481
 
Webcast:
www.silverstandard.com

▪
The conference call will be archived and available at www.silverstandard.com.
Audio replay will be available for one week by calling:
 
Toll-free in North America:
+1 (855) 859-2056, replay conference ID 62335351
 
All other callers:
+1 (404) 537-3406, replay conference ID 62335351


SOURCE: Silver Standard Resources Inc.
For further information contact:
W. John DeCooman, Jr.
Vice President, Business Development and Strategy
Silver Standard Resources Inc.
Vancouver, BC
N.A. toll-free: +1 (888) 338-0046
All others: +1 (604) 689-3846

To receive Silver Standard’s news releases by e-mail, please register using the Silver Standard website at www.silverstandard.com.




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Cautionary Note Regarding Forward-Looking Statements:

This news release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of Canadian securities laws (collectively, “forward-looking statements”). All statements, other than statements of historical fact, are forward-looking statements.
Generally, forward-looking statements can be identified by the use of words or phrases such as “expects,” “anticipates,” “plans,” “projects,” “estimates,” “assumes,” “intends,” “strategy,” “goals,” “objectives,” “potential,”
or variations thereof, or stating that certain actions, events or results “may,” “could,” “would,” “might” or “will” be taken, occur or be achieved, or the negative of any of these terms or similar expressions. The forward-looking statements in this news release relate to, among other things: our ability to successfully integrate announced acquisitions, including the Marigold mine acquisition; future production of silver, gold and other metals; future costs of inventory and cash costs per payable ounce of silver, gold and other metals; the prices of silver, gold and other metals; the effects of laws, regulations and government policies affecting our operations or potential future operations; future successful development of our projects; the sufficiency of our current working capital, anticipated operating cash flow or our ability to raise necessary funds; estimated production rates for silver, gold and other metals produced by us; timing of production and the cash and total costs of production at the Pirquitas mine and the Marigold mine; the estimated cost of sustaining capital; ongoing or future development plans and capital replacement, improvement or remediation programs; the estimates of expected or anticipated economic returns from our mining projects including future sales of metals, concentrates or other products produced by us; and our plans and expectations for our properties and operations.

These forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied, including, without limitation, the following: uncertainty of production, development plans and cost estimates for the Pirquitas mine, the Marigold mine, the Pitarrilla project and the San Luis project; future development risks, including start-up delays and operational issues; our ability to replace Mineral Reserves; our ability to complete and successfully integrate an announced acquisition; our ability to obtain adequate financing for further exploration and development programs; commodity price fluctuations; political or economic instability and unexpected regulatory changes; currency fluctuations, particularly the value of the Argentine peso against the U.S. dollar; the possibility of future losses; general economic conditions; the recoverability of our interest in Pretium Resource Inc. ("Pretium") and our other marketable securities, including the price of and market for Pretium’s common shares and such other marketable securities; potential export duty on current and past production of silver concentrate from the Pirquitas mine; recoverability and tightened controls over the VAT collection process in Argentina; counterparty and market risks related to the sale of our concentrates and metals; differences in U.S. and Canadian practices for reporting Mineral Reserves and Mineral Resources; uncertainty in the accuracy of Mineral Reserves and Mineral Resources estimates and in our ability to extract mineralization profitably; uncertainty in acquiring additional commercially mineable mineral rights; lack of suitable infrastructure or damage to existing infrastructure; delays in obtaining or failure to obtain governmental permits, or non-compliance with permits we have obtained; governmental regulations, including health, safety and environmental regulations, increased costs and restrictions on operations due to compliance with such regulations; reclamation requirements for our exploration properties; unpredictable risks and hazards related to the development and operation of a mine or mine property that are beyond our control; compliance with anti-corruption laws and increased regulatory compliance costs; complying with emerging climate change regulations and the impact of climate change; uncertainties related to title to our mineral properties and the ability to obtain surface rights; recoverability of deferred consideration to be received in connection with recent divestitures; our insurance coverage; civil disobedience in the countries where our properties are located; operational safety and security risks; actions required to be taken by us under human rights law; our ability to access, when required, mining equipment and services; competition in the mining industry for properties; our ability to attract and retain qualified personnel and management and potential labour unrest, including labour actions by our unionized employees at the Pirquitas mine; shortage or poor quality of equipment or supplies; conflicts of interest that could arise from some of our directors' and officers' involvement with other natural resource companies; claims and legal proceedings, including adverse rulings in current or future litigation against us and/or our directors or officers, and assessments; potential difficulty in enforcing judgments or bringing actions against us or our directors or officers outside Canada and the United States; certain terms of our convertible notes; and those other various risks and uncertainties identified under the heading “Risk Factors” in our most recent Annual Information Form filed with the Canadian securities regulatory authorities and included in our most recent Form 40-F filed with the SEC.

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This list is not exhaustive of the factors that may affect any of our forward-looking statements. Our forward-looking statements are based on what our management considers to be reasonable assumptions, beliefs, expectations and opinions based on the information currently available to it. Assumptions have been made regarding, among other things, our ability to carry on our exploration and development activities, our ability to meet our obligations under our property agreements, the timing and results of drilling programs, the discovery of Mineral Resources and Mineral Reserves on our mineral properties, the timely receipt of required approvals and permits including obtaining the necessary surface rights for the lands required for successful project permitting, construction and operation of the Pitarrilla project, the price of the minerals we produce, the costs of operating and exploration expenditures, our ability to operate in a safe, efficient and effective manner, our ability to obtain financing as and when required and on reasonable terms and our ability to continue operating the Pirquitas mine and the Marigold mine. You are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. We cannot assure you that actual events, performance or results will be consistent with these forward-looking statements, and management's assumptions may prove to be incorrect. Our forward-looking statements reflect current expectations regarding future events and operating performance and speak only as of the date hereof and we do not assume any obligation to update forward-looking statements if circumstances or management's beliefs, expectations or opinions should change other than as required by applicable law. For the reasons set forth above, you should not place undue reliance on forward-looking statements.

Cautionary Note to U.S. Investors

This news release includes Mineral Reserves and Mineral Resources classification terms that comply with reporting standards in Canada and the Mineral Reserves and the Mineral Resources estimates are made in accordance with NI 43-101. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. These standards differ significantly from the requirements of the SEC set out in Industry Guide 7. Consequently, Mineral Reserves and Mineral Resources information included in this news release is not comparable to similar information that would generally be disclosed by domestic U.S. reporting companies subject to the reporting and disclosure requirements of the SEC. Under SEC standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically produced or extracted at the time the reserve determination is made. In addition, the SEC’s disclosure standards normally do not permit the inclusion of information concerning “Measured Mineral Resources,” “Indicated Mineral Resources” or “Inferred Mineral Resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. U.S. investors should understand that “Inferred Mineral Resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. Moreover, the requirements of NI 43-101 for identification of “reserves” are also not the same as those of the SEC, and reserves reported by us in compliance with NI 43-101 may not qualify as “reserves” under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.

Cautionary Note Regarding Non-GAAP Measures

This news release includes certain terms or performance measures commonly used in the mining industry that are not defined under International Financial Reporting Standards (“IFRS”), including cost of inventory, cash costs and total costs per payable ounce of silver and gold sold, realized silver and gold prices per ounce, and adjusted income (loss) before tax, adjusted net income (loss) and adjusted basic earnings (loss) per share. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. The data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-GAAP measures should be read in conjunction with our consolidated financial statements.



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