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Form 6-K SILVER STANDARD RESOURCE For: Sep 30

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November 9, 2016 6:02 AM 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 November 8, 2016
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: November 8, 2016
By:
Signed: “Gregory Martin”
 
 
Gregory Martin
 
Title:
Chief Financial Officer




silverstandardlogoa07.gif

SUBMITTED HEREWITH

Exhibits








Silver Standard Resources Inc.
Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016 and 2015
(unaudited)







Silver Standard Resources Inc.
Condensed Consolidated Interim Financial Statements for the three and nine months ended
September 30, 2016

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



 
 
2 | Page

Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Financial Position
(expressed in thousands of United States dollars)
 
Note
September 30

December 31

 
 
2016

2015

 
 
$ 

$

Current assets
 
 
 
Cash and cash equivalents
 
277,544

211,862

Trade and other receivables
4
69,726

36,733

Marketable securities
5
178,117

88,184

Inventory
6
152,447

135,976

Other
7
12,372

3,979

 
 
690,206

476,734

Non-current assets
 
 
 
Property, plant and equipment
8
686,290

348,712

Income tax receivable
9
—

18,243

Deferred income tax assets
 
836

—

Value added tax receivable
10
20,765

20,792

Goodwill
3
49,786

—

Other
7
6,735

7,196

Total assets
 
1,454,618

871,677

 
 
 
 
Current liabilities
 
 
 
Trade and other payables
11
57,079

53,352

Provisions
12
76,864

78,226

Debt
 
—

4,273

 
 
133,943

135,851

Non-current liabilities
 
 
 
Deferred income tax liabilities
 
121,824

29,026

Provisions
12
61,672

51,532

Debt
13
216,977

208,085

Total liabilities
 
534,416

424,494

 
 
 
 
Shareholders' equity
 
 
 
Share capital
 
1,043,076

707,607

Other reserves
 
29,920

(54,805
)
Equity component of convertible notes
 
68,347

68,347

Deficit
 
(221,141
)
(273,966
)
Total shareholders' equity attributable to our shareholders
 
920,202

447,183

Total liabilities and equity
 
1,454,618

871,677

 
 
 
 
Events after the reporting period (note 7)
 
 
 
The accompanying notes are an integral part of the condensed consolidated interim financial statements
Approved by the Board of Directors and authorized for issue on November 8, 2016
"Richard D. Paterson"
 
"Paul Benson"
Richard D. Paterson, Director
 
Paul Benson, Director

 
 
3 | Page

Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Income (Loss)
(expressed in thousands of United States dollars, except per share amounts)

 
Note
Three months ended September 30
 
 
Nine months ended September 30
 
 
 
2016

2015

 
2016

2015

 
 
$

$

 
$

$

 
 
 
 
 
 
 
Revenue
 
143,381

77,191

 
363,669

284,730

Cost of sales
15
(84,191
)
(84,587
)
 
(237,119
)
(245,405
)
Income (loss) from mine operations
 
59,190

(7,396
)
 
126,550

39,325

 
 
 
 
 
 
 
General and administrative expenses
 
(4,061
)
(5,700
)
 
(20,684
)
(18,067
)
Exploration, evaluation and reclamation expenses
 
(4,280
)
(3,147
)
 
(12,238
)
(11,012
)
Business acquisition costs
3
(601
)
—

 
(4,529
)
—

Impairment charges
 
—

(34,490
)
 
—

(34,490
)
Operating income (loss)
 
50,248

(50,733
)
 
89,099

(24,244
)
 
 
 
 
 
 
 
Interest earned and other finance income
 
508

194

 
1,247

1,069

Interest expense and other finance costs
 
(6,461
)
(6,361
)
 
(19,571
)
(19,060
)
Other income (expenses)
16
(48
)
(2,447
)
 
(1,861
)
(4,536
)
Foreign exchange (loss)
 
(3,248
)
(3,209
)
 
(6,535
)
(6,533
)
Income (loss) before income tax
 
40,999

(62,556
)
 
62,379

(53,304
)
 
 
 
 
 
 
 
Income tax (expense) recovery
 
(2,957
)
3,140

 
(9,554
)
(4,276
)
 
 
 
 
 
 
 
Net income (loss) and net income (loss) attributable to shareholders
 
38,042

(59,416
)
 
52,825

(57,580
)
 
 
 
 
 
 
 
Weighted average shares outstanding (thousands)
 
 
 
 
 
 
Basic
17
119,163

80,754

 
97,851

80,754

Diluted
17
134,336

80,754

 
99,145

80,754

 
 
 
 
 
 
 
Earnings (loss) per share
 
 
 
 
 
 
Basic
17
$0.32
$(0.74)
 
$0.54
$(0.71)
Diluted
17
$0.31
$(0.74)
 
$0.53
$(0.71)
The accompanying notes are an integral part of the condensed consolidated interim financial statements

 
 
4 | Page

Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(expressed in thousands of United States dollars)

 
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
 
2016

2015

 
2016

2015

 
 
$

$

 
$

$

 
 
 
 
 
 
 
Net income (loss) for the period attributable to shareholders
 
38,042

(59,416
)
 
52,825

(57,580
)
 
 
 

 

 
 
 
Items that will not be reclassified to net income or loss:
 
 
 
 
 
 
Gain (loss) on marketable securities at FVTOCI, net of tax $1,969, ($1,251), ($12,233) and ($484)
 
(13,132
)
8,431

 
82,232

2,824

Items that will be reclassified to net income or loss:
 
 
 
 
 
 
Unrealized gain (loss) on effective portion of derivative, net of tax $47, $nil, ($207) and $nil
 
108

(329
)
 
578

(329
)
Realized gain on effective portion of derivative, net of tax $nil, $nil, $nil and $nil
 
—

108

 
—

108

Other comprehensive (loss) income
 
(13,024
)
8,210

 
82,810

2,603

Total comprehensive income (loss) attributable to shareholders
 
25,018

(51,206
)
 
135,635

(54,977
)
Total comprehensive income (loss)
 
25,018

(51,206
)
 
135,635

(54,977
)
The accompanying notes are an integral part of the condensed consolidated interim financial statements

 
 
5 | Page

Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
(expressed in thousands of United States dollars)

 
 
 
 
Equity

 
 
 
 
Common Shares
Other

component of

 
Total

 
 
Shares

Amount

reserves

convertible notes

Deficit

equity

 
Note
000's

$

$

$

$

$

Balance, January 1, 2015 (restated)
2(a)
80,754

707,034

(46,467
)
68,347

(149,664
)
579,250

   Equity-settled share-based compensation
14
—

—

1,996

—

—

1,996

Total comprehensive income (loss) for the period
 
—

—

2,603

—

(57,580
)
(54,977
)
Balance, September 30, 2015
 
80,754

707,034

(41,868
)
68,347

(207,244
)
526,269

 
 
 
 
 
 
 
 
Balance, January 1, 2016
 
80,826

707,607

(54,805
)
68,347

(273,966
)
447,183

Shares and options issued pursuant to the acquisition of Claude Resources, net of share issuance costs
3
37,394

324,990

4,045

—

—

329,035

   Exercise of stock options
14
1,129

10,479

(4,115
)
—

—

6,364

   Equity-settled share-based compensation
14
—

—

1,985

—

—

1,985

Total comprehensive income for the period
 
—

—

82,810

—

52,825

135,635

Balance, September 30, 2016
 
119,349

1,043,076

29,920

68,347

(221,141
)
920,202

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

 
 
6 | Page

Silver Standard Resources Inc.
Condensed Consolidated Interim Statements of Cash Flows
(expressed in thousands of United States dollars)

 
Note
Three months ended September 30
 
 
Nine months ended September 30
 
 
 
2016

2015

 
2016

2015

 
 
$

$

 
$

$

Cash flows from operating activities
 
 

 

 
 
 
Net income (loss) for the period
 
38,042

(59,416
)
 
52,825

(57,580
)
Adjustments for:
 
 

 

 
 
 
Depreciation, depletion and amortization
 
19,103

19,957

 
51,777

57,303

Share-based payments
 
690

711

 
1,985

1,996

Net non-cash finance expense
 
4,863

5,897

 
16,685

16,815

Impairment charges and inventory write-downs
 
—

42,206

 
—

42,206

Other expense
 
994

1,300

 
3,625

3,497

Income tax (recovery) expense
 
2,957

(3,140
)
 
9,554

4,276

Non-cash foreign exchange loss (gain)
 
1,993

2,367

 
733

4,983

Net changes in non-cash working capital items
20
(5,829
)
(2,458
)
 
(19,718
)
(6,332
)
Cash generated by operating activities before value added taxes, interest and income taxes (paid) recovered
 
62,813

7,424

 
117,466

67,164

Value added taxes (paid)
 
(2,901
)
(3,647
)
 
(7,752
)
(10,098
)
Value added taxes recovered
 
1,710

2,945

 
5,476

10,730

Interest (paid)
 
(3,901
)
(3,994
)
 
(8,179
)
(8,749
)
Income taxes (paid)
 
(4,655
)
(1,730
)
 
(10,457
)
(5,487
)
Cash generated by operating activities
 
53,066

998

 
96,554

53,560

Cash flows from investing activities
 
 

 

 
 
 
Purchase of property, plant and equipment
 
(12,068
)
(13,023
)
 
(31,237
)
(27,711
)
Production stripping capitalized costs
 
(13,787
)
—

 
(22,453
)
(12,540
)
Underground mine development costs
 
(2,141
)
—

 
(2,944
)
—

Capitalized exploration costs
 
(1,564
)
(11,846
)
 
(4,392
)
(12,384
)
Proceeds from sale of property, plant and equipment
 
—

—

 
1,002

—

Proceeds from sale of mineral property
 
261

—

 
261

20,000

Proceeds from sale of marketable securities
 
—

—

 
4,422

—

Cash received on Claude Resources acquisition
3
—

—

 
16,908

—

Share exchange cash payment on Claude Resources acquisition
3
—

—

 
(155
)
—

(Increase) decrease in restricted cash
 
(453
)
7,500

 
(453
)
17,701

Interest received
 
928

81

 
1,576

399

Tax deposit received (paid)
9
18,243

—

 
18,243

(19,231
)
Cash (used) by investing activities
 
(10,581
)
(17,288
)
 
(19,222
)
(33,766
)
Cash flows from financing activities
 
 

 

 
 
 
Proceeds from exercise of stock options
 
2,599

—

 
6,364

—

Repayment of bank loan
 
—

—

 
(3,845
)
(1,649
)
Repayment of Claude Resources credit facility
13
—

—

 
(13,707
)
—

Share issuance fees on Claude Resources acquisition
 
—

—

 
(212
)
—

Cash generated (used) by financing activities
 
2,599

—

 
(11,400
)
(1,649
)
Effect of foreign exchange rate changes on cash and cash equivalents
 
(159
)
(921
)
 
(250
)
(2,771
)
Increase (decrease) in cash and cash equivalents
 
44,925

(17,211
)
 
65,682

15,374

Cash and cash equivalents, beginning of period
 
232,619

217,228

 
211,862

184,643

Cash and cash equivalents, end of period
 
277,544

200,017

 
277,544

200,017

Supplemental cash flow information (note 20)
The accompanying notes are an integral part of the condensed consolidated interim financial statements

 
 
7 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)


1.
NATURE OF OPERATIONS

Silver Standard Resources Inc. ("we", "us", "our" or "Silver Standard") 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 Market 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 Claude Resources Inc. ("Claude Resources") on May 31, 2016 (note 3), we have three producing mines and a portfolio of precious metal 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 strategic focus is on safe, profitable gold and silver production from our Marigold mine in Nevada, U.S., Seabee Gold Operation in Saskatchewan, Canada and Pirquitas mine in Jujuy, Argentina, and to advance, as market and project conditions permit, our other principal development projects towards development and commercial production.


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set out below.

a)
Basis of preparation
These condensed consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2015.
These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The comparative information has also been prepared on this basis.
On April 1, 2015, we adopted all of the requirements of IFRS 9, Financial Instruments: Recognition and Measurement. The 2015 balances shown in the condensed consolidated interim statements of changes in shareholders' equity reflect this change.

These statements were authorized for issue by our Board of Directors on November 8, 2016.

Following our acquisition of Claude Resources on May 31, 2016, we have applied the following accounting policies that were not previously applicable to our business. All other accounting policies applied in the preparation of these condensed interim consolidated financial statements are consistent with those applied and disclosed in our audited consolidated financial statements for the year ended December 31, 2015.

(i)
Underground mineral properties
At our underground mining operation, we incur development costs to build new shafts, drifts and ramps that enable us to access ore underground. The time over which we will continue to incur these costs depends on the mine life. These underground development costs are capitalized as incurred.

Capitalized underground development costs incurred to enable access to specific areas of the underground mine, and which only provide an economic benefit over the period of mining that area, are depreciated on a units-of-production basis, whereby the denominator is estimated recoverable ounces of gold in Proven and Probable Mineral Reserves in the related areas.

 
 
8 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

(ii)
Property, plant and equipment
The valuation attributed to estimated Mineral Resources conversion from the acquisition of Claude Resources is considered to be a mineral property not yet subject to depreciation. As these Mineral Resources are converted into Mineral Reserves, the asset is subject to depreciation over the recoverable ounces corresponding to the specific area of the mine plan. Exploration potential is recognized as an exploration and evaluation asset.

(iii)
Goodwill
Business acquisitions are accounted for using the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with the excess of the acquisition amount over such fair value being recorded as goodwill and allocated to cash generating units ("CGUs"). CGUs are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Each individual mining interest that is an operating mine is typically a CGU.

Goodwill arises principally because of the following factors: (1) the going concern value of our capacity to sustain and grow by replacing and augmenting Mineral Reserves through new discoveries; (2) the ability to capture buyer-specific synergies arising upon a transaction; and (3) the requirement to record a deferred tax liability for the difference between the assigned values and the tax bases of the assets acquired and liabilities assumed in a business combination.

Goodwill is not amortized; instead it is tested annually for impairment. In addition, at each reporting period we assess whether there is an indication that goodwill is impaired and, if there is such an indication, we would test for goodwill impairment at that time.

b)
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. The critical judgments and estimates applied in the preparation of the unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2016 are consistent with those applied and disclosed in note 2(u) to our audited consolidated financial statements for the year ended December 31, 2015 other than those which related to the acquisition of Claude Resources, as discussed below.

(i)
Business combination: Acquisition of Claude Resources
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 acquiree, which was the date that consideration is transferred and when we assumed the assets and liabilities of the acquiree.

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. 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 assets valuations are based upon estimates of Mineral Reserves and Mineral Resources used in the life of mine plan, as well as estimates of future metal prices, production, costs, and economic assumptions around inflation rates and discount rates. The exploration and evaluation assets valuations are based upon estimates of future Mineral Resource discovery. The inventory valuation requires estimates of costs to convert inventory into saleable form. The reclamation provision requires an estimate of the timing of future reclamation cash flows and economic assumptions around inflation and discount rates.

 
 
9 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

(ii)
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. We have determined that the functional currency of Claude Resources is the U.S. dollar, as it is the currency in which Claude Resources primarily generates cash.

c)
Future accounting changes
The following new standards have been issued but are not yet effective:

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, 2018. We are currently evaluating the impact the standard is expected to have on our consolidated financial statements.

Leases
The IASB has replaced IAS 17, Leases in its entirety with IFRS 16, Leases (“IFRS 16”), which will require lessees to recognize nearly all leases on the balance sheet to reflect their right to use an asset for a period of time and the associated liability to pay rentals. IFRS 16 is effective for annual periods commencing on or after January 1, 2019. We are currently evaluating the impact the standard is expected to have on our consolidated financial statements.

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


3.
PURCHASE OF CLAUDE RESOURCES

On May 31, 2016, we completed the acquisition of a 100% interest in Claude Resources and its Seabee Gold Operation, an underground operating gold mine in Saskatchewan, Canada for a total purchase price of $329,402,000. The acquisition of Claude Resources accomplishes our strategic goal of adding another operating mine in a well-established, low risk mining jurisdiction. The purchase price for the acquisition of all of the issued and outstanding shares of Claude Resources consisted of 0.185 of a Silver Standard common share plus C$0.001 in cash for each common share of Claude Resources.

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.

The purchase price has been preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Fair values are determined based on third party appraisals, discounted cash flow models, and quoted market prices, as deemed appropriate. This allocation is preliminary in nature as we are in the process of finalizing certain fair value assumptions, and this allocation may require adjustment in future periods. Acquisition costs, in the form of advisory, legal and other professional fees, associated with the transaction to acquire Claude Resources of $601,000 and $4,529,000 were expensed as incurred during the three and nine months ended September 30, 2016 respectively.


 
 
10 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

3.
PURCHASE OF CLAUDE RESOURCES (Cont'd)

Upon the acquisition of Claude Resources, we identified goodwill of $49,786,000. This goodwill was calculated as the difference between the fair value of the consideration issued for the acquisition of Claude Resources and the fair value of all other assets and liabilities acquired. The goodwill arose primarily as a result of the increase in our share price from the date of announcing the acquisition of Claude Resources (C$7.89) to the completion of the acquisition (C$11.35). Goodwill relates to tax synergies of $30,170,000 and also $19,616,000 which arose due to the recognition of deferred income tax liabilities on the transaction. We are required to record a deferred tax liability for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed. None of the goodwill is deductible for tax purposes.

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

37,394,000 common shares issued (1)
325,202

809,000 stock options issued (2)
4,045

Share exchange cash payment of C$0.001 per Claude Resources share
155

Consideration
329,402

 
 
Cash and cash equivalents
16,908

Trade and other receivables
814

Marketable securities
351

Inventory
34,801

Property, plant and equipment
 
Plant and equipment
52,318

Mineral properties subject to depreciation
62,229

Mineral properties not yet subject to depreciation
128,100

Exploration and evaluation assets
88,734

Goodwill
49,786

Trade and other payables
(4,657
)
Debt
(13,707
)
Close-down and restoration provisions
(5,464
)
Deferred income tax liabilities
(80,811
)
Net identifiable assets acquired
329,402


(1) 
The common shares were valued at the closing price of our shares on the Toronto Stock Exchange on May 30, 2016 (C$11.35), converted to U.S. dollars at the rate of CAD/USD 0.7662.
(2) 
The fair value of options issued were calculated using a Black-Scholes option pricing model. The weighted average option valuations were based on an expected option life of 1.6 years, a risk free interest rate of 0.6%, a dividend yield of nil, volatility of 60.6% and share price of C$11.35, converted to the U.S. dollars at the rate of 0.7662.

If the Seabee Gold Operation had been consolidated into our operations from January 1, 2016, our consolidated revenue for the nine months ended September 30, 2016 would have been approximately $395,135,000 and our consolidated net income for the nine months ended September 30, 2016 would have been $54,165,000.


 
 
11 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

4.
TRADE AND OTHER RECEIVABLES
 
September 30, 2016

December 31, 2015

 
$

$

Trade receivables
57,277

20,907

Value added tax receivables (note 10)
5,319

6,003

Prepayments and deposits
5,019

6,224

Income tax receivable
1,170

2,847

Other receivables
941

752

 
69,726

36,733


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.

We do not hold any collateral for any receivable amounts outstanding at September 30, 2016 or December 31, 2015.


5.
MARKETABLE SECURITIES

The movement of marketable securities during the nine months ended September 30, 2016 and the year ended December 31, 2015 is comprised of the following:
 
September 30, 2016

December 31, 2015

 
$

$

Balance, beginning of period
88,184

104,785

Additions
—

1,062

Additions from the acquisition of Claude Resources (note 3)
351

—

Disposals
(4,517
)
(2,113
)
Fair value adjustments
91,644

2,595

Foreign exchange adjustments
2,455

(18,145
)
Balance, end of period
178,117

88,184



 
 
12 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

6.
INVENTORY
 
September 30, 2016

December 31, 2015

 
$ 

$

Current:
 
 
Finished goods
10,217

22,432

Stockpiled ore
29,013

17,150

Leach pad inventory
84,073

79,016

Materials and supplies
29,144

17,378

 
152,447

135,976

Non-current:
 


Materials and supplies (note 7)
1,656

2,990

 
154,103

138,966


The cost of inventory held at its net realizable value at September 30, 2016 was $nil (December 31, 2015 - $8,819,000).


7.
OTHER ASSETS
 
September 30, 2016
December 31, 2015
 
Current

Non-current

Current

Non-current

 
$

$

$

$

Financial assets:
 
 
 
 
Restricted cash (1)
—

3,097

—

2,832

Deferred consideration
—

1,982

—

1,374

Non-financial assets:
 
 
 
 
Assets held for sale (2,3)
12,372

—

3,979

—

Non-current inventory (note 6)
—

1,656

—

2,990

 
12,372

6,735

3,979

7,196


(1) 
We have cash and security deposits related to our close down and restoration provisions of $1,868,000 (December 31, 2015 - $1,899,000).

(2) 
On September 13, 2016 we entered into a definitive agreement with Endeavour Silver Corp. ("Endeavour Silver") to sell our Parral properties in Chihuahua, Mexico, including the Veta Colorada, La Palmilla, and San Patricio properties for consideration of;
- 1,198,083 shares of Endeavour Silver;
- The right to receive $200,000 of Endeavour Silver shares for each one million silver ounces included in an estimate of Measured and Indicated Mineral Resources in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects to be prepared by Endeavour Silver in respect of the San Patricio and La Palmilla properties; and
- 1.0% net smelter returns royalty on all mineral products from the San Patricio and La Palmilla properties.

The transaction closed on October 31, 2016.

(3) 
On August 23, 2016 we entered into a definitive agreement to sell our Diablillos and M-18 properties in Argentina to Huayra Minerals Corporation (Huayra) for consideration of;
 


 
 
13 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)


- A 19.9% equity stake in Huayra, with free carried interest until the completion of a public offering of $5.0 million or more;
- Cash payments of approximately $1.5 million over the first two years and $12.5 million over the following three to five years; and
- 1.0% net smelter returns royalty on production from each of the projects.

The transaction closed on November 1, 2016.



 
 
14 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

8.
PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment comprise the following:
 
September 30, 2016
 
Plant and equipment

Mineral properties subject to depreciation

Mineral properties not yet subject to depreciation(1)

Exploration and evaluation assets

Total

 
$

$

$

$

$

Cost
 
 
 
 
 
Balance, January 1, 2016
421,345

142,397

3,812

78,182

645,736

Acquisition of Claude Resources (note 3)
52,318

62,229

128,100

88,734

331,381

Additions
1,112

34,141

34,270

533

70,056

Disposals
(8,151
)
—

(285
)
—

(8,436
)
Change in estimate of close down and restoration provision
—

2,798

—

—

2,798

Transfers (3)
29,457

144

(29,601
)
(8,635
)
(8,635
)
Balance, end of period
496,081

241,709

136,296

158,814

1,032,900

 
 
 
 
 
 
Accumulated depreciation
 
 
 
 
 
Balance, January 1, 2016
(233,023
)
(64,001
)
—

—

(297,024
)
Charge for the period
(29,510
)
(23,400
)
—

—

(52,910
)
Disposals
3,324

—

—

—

3,324

Balance, end of period
(259,209
)
(87,401
)
—

—

(346,610
)
 
 
 
 
 
 
Net book value at September 30, 2016
236,872

154,308

136,296

158,814

686,290

 
December 31, 2015
 
Plant and equipment

Mineral properties subject to depreciation

Mineral properties not yet subject to depreciation(1)

Exploration and evaluation assets (2)

Total

 
$

$

$

$

$

Cost
 
 
 
 
 
Balance, January 1, 2015
439,415

118,277

19,988

64,241

641,921

Additions
367

20,034

30,502

13,086

63,989

Disposals and reclassifications
(7,247
)
—

—

—

(7,247
)
Change in estimate of close down and restoration provision
(8,592
)
4,086

—

—

(4,506
)
Impairment charges
(48,421
)
—

—

—

(48,421
)
Transfers
45,823

—

(46,678
)
855

—

Balance, end of period
421,345

142,397

3,812

78,182

645,736

 
 
 
 
 
 
Accumulated depreciation
 
 
 
 
 
Balance, January 1, 2015
(164,246
)
(38,601
)
—

—

(202,847
)
Charge for the year
(70,774
)
(25,400
)
—

—

(96,174
)
Disposals
1,997

—

—

—

1,997

Balance, end of period
(233,023
)
(64,001
)
—

—

(297,024
)
 
 
 
 
 
 
Net book value at December 31, 2015
188,322

78,396

3,812

78,182

348,712


(1) 
Includes assets under construction of $7,664,000 at September 30, 2016 (December 31, 2015 - $3,812,000).

(2) 
On September 24, 2015, we completed the acquisition of the Valmy property, which is contiguous with our Marigold mine in Nevada, U.S., for $11,685,000 (inclusive of transaction costs) in cash from Newmont Mining Corporation.

 
 
15 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

(3) 
During the three months ended September 30, 2016 we reclassified $8,635,000 of exploration and evaluation assets associated with the Diablillos project and Parral properties to being held for sale (note 7), due to their divestiture in the fourth quarter of 2016.

9.
INCOME TAX RECEIVABLE

On January 27, 2015, we received a Notice of Reassessment (“NOR”) from the Canada Revenue Agency (“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. In order to appeal the NOR, we were 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. On February 26, 2015, we paid the required C$24,090,000 ($19,231,000) (the “Deposit”) to the CRA and recorded this amount plus accrued interest as an income tax receivable. On April 20, 2015, we filed a Notice of Objection with the CRA and, on September 15, 2015, we filed a Notice of Appeal with the Tax Court of Canada to dispute the NOR.

In August 2016, we announced that we executed minutes of settlement (the “Settlement Agreement”) with the Department of Justice (“DOJ”) to resolve the NOR in our favor. Pursuant to the terms of the Settlement Agreement, the CRA has issued a new notice of reassessment for each of the 2010 and 2011 taxation years reversing the NOR, and refunded to us the Deposit, plus accrued interest from the date of payment of the Deposit.


10.
VALUE ADDED TAX RECEIVABLE
 
September 30, 2016

December 31, 2015

 
$ 

$

Current (note 4)
5,319

6,003

Non-current
20,765

20,792

 
26,084

26,795


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.

The VAT receivables balance in Argentina is denominated in Argentine pesos. Accordingly, foreign currency fluctuations could materially impact the value of the VAT receivables in U.S. dollars.

Certain VAT receivables in Argentina are only recoverable against local sales. We believe these are fully recoverable through potential sale of assets at the Pirquitas mine and have not provided an allowance.


 
 
16 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

11.
TRADE AND OTHER PAYABLES
 
September 30, 2016

December 31, 2015

 
$

$

Trade payables
15,845

17,697

Accrued liabilities
34,490

25,866

Accrued royalties
5,486

5,393

Derivative liabilities
—

901

Income taxes payable
—

338

Accrued interest on convertible notes (note 13)
1,258

3,157

 
57,079

53,352


Claude Resources royalty agreements
During 2006 and 2007, Claude Resources entered into separate royalty agreements (collectively, the “Agreements” and each an "Agreement") whereby it sold a basic royalty and a net profit interest ("NPI") on gold production at the Seabee Gold Operation. Claude Resources received cash consideration consisting of royalty income, indemnity fee income and interest income. As at September 30, 2016, only the NPI remains outstanding on the 2006 Agreement but both the basic royalty and the NPI remains outstanding on the 2007 Agreement.

(a)
Basic royalty
Under the terms of the 2007 Agreement, Claude Resources is required to make royalty payments at fixed amounts per ounce of gold produced; these amounts vary over the term of the 2007 Agreement. A portion of the cash received at the inception of the 2007 Agreement was placed with a financial institution; in return, Claude Resources received a promissory note which is classified as restricted for accounting purposes. Claude Resources utilizes interest earned from the restricted promissory note and, if necessary, a portion of the principal to fund the basic royalty payments pursuant to the 2007 Agreement. Over the life of the 2007 Agreement, it is expected that interest earned and principal from the restricted promissory note will be sufficient to fund the expected basic royalty payments.

With respect to the 2007 Agreement, there is the legal right of offset and the intention to settle on a net basis. As such, these transactions are presented on a net basis on the condensed consolidated interim statements of financial position.
 
Note
2007 Agreement
Restricted promissory notes
 
 
 
Principal balance (1)
(b)(d)
$19,447
 
Interest receivable (1)
 
$848
 
Interest rate
 
7 percent
 
Maturity
(d)
February 15, 2017
 
 
 
Royalty payments
 
 
 
Royalty rate per ounce of gold produced (2)
 
C$65.20 to C$147.05
 
Royalty payable (1)
(b)(d)
$834
 
Royalty obligation payable (1)
(b)(d)
$19,476

(1) 
As at September 30, 2016.
(2) 
Over the remaining life of the Agreement to December 31, 2017.



 
 
17 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

11.
TRADE AND OTHER PAYABLES (Cont'd)

(b)Claude Resources net royalty obligation
The following schedule outlines the different components of the transaction that are presented on a net basis on our condensed consolidated interim statements of financial position:
 
September 30, 2016

 
$

Current assets
 
Interest receivable on restricted promissory notes
848

Restricted promissory note
19,447

 
20,295

Current liabilities
 
Current portion of deferred revenue
118

Interest payable on royalty obligations
834

Royalty obligation
19,476

 
20,428

Current net royalty obligation in accrued royalties
133


The interest income and the indemnity fees received are being amortized into income over the prepayment period and the life of the respective agreements. The interest income and the indemnity fees are netted against interest expense and are reflected in “interest expense and other finance costs” on the condensed consolidated interim statement of income.

 
 
18 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

11.
TRADE AND OTHER PAYABLES (Cont'd)

(c)NPI payment
In addition to the royalty, Claude Resources granted an NPI of varying percentages under the Agreements, payable only if gold prices exceed a pre-determined threshold.
 
2006 Agreement
2007 Agreement
Applicable years (1)
2016
2016 - 2017
Percent
3.75%, 4.00% or 4.25%
3.50%, 3.70% or 3.90%
Price of gold thresholds (CAD) (2)
$975, $1,175 or $1,375
$1,250, $1,500 or $1,675

(1) 
The NPI pursuant to the 2006 Agreement expires on December 31, 2016, and the 2007 Agreement expires on December 31, 2017.
(2)London PM Fix.

Prior to any NPI payment, we are entitled to first recover the NPI expenditures (including capital expenditures), working capital, operating losses, interest charges and asset retirement obligations relating to the production of ore at the Seabee Gold Operation. These expenditures are calculated on a cumulative basis from the commencement of each of the Agreements. At September 30, 2016, the cumulative carry forward amounts remained in a deficiency position under each of the Agreements and no payments are expected during 2016.

(d)Call and put
Under certain circumstances, we have the right to purchase (“call”) the equity of the holder of the royalties or right to receive the royalties at an amount no greater than the fair market value thereof at the time of the call. The call price will be paid from the balance owing to us under the promissory notes. Under certain circumstances, the purchaser of the royalties will have the right to sell (“put”) their interest in the royalty to us at an amount no greater than the fair market value thereof at the time of the put. However, such right is subject to our pre-emptive right to exercise the call in advance of any put being exercised and completed.



 
 
19 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

12.
PROVISIONS
 
September 30, 2016
December 31, 2015
 
Current

Non-current

Current

Non-current

 
$

$

$

$

Export duties on silver concentrate (1)
67,130

—

65,633

—

Restructuring provision (2)
2,492

—

5,205

 
Close down and restoration provision (3)
7,242

61,672

7,388

51,532

 
76,864

61,672

78,226

51,532


(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) ("Customs") levied an export duty of approximately 10% from concentrate for projects with fiscal stability agreements pre-dating 2002 and Customs has asserted that the Pirquitas mine is subject to this duty. We have challenged the legality of the export duty applied to silver concentrate 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 Customs from withholding the 10% export duty on silver concentrate (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 Tax Authority 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 Tax Authority 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.

On June 21, 2016 the Federal Court (Jujuy) ruled that the Injunction would remain in place subject to certain conditions, including the provision by August 5, 2016 of a guarantee by Silver Standard against liabilities arising from export duties and applicable interest as well as security from Mina Pirquitas LLC on certain assets at the Pirquitas mine. We have appealed the condition to provide the parent guarantee. The requirement for the guarantee and security is suspended pending the outcome of that appeal. We are also continuing discussions with the Federal Tax Authority and other government officials for potential resolution of the claim. We cannot predict the outcome of the court proceedings and those discussions. If we do not reach a successful resolution of the matter, the Federal Tax Authority may make further application to the court to have the Injunction lifted and, upon that initiate proceedings to collect the accrued export duties and its claimed interest. The lifting of the Injunction does not impact our underlying challenge of the legality of the application of export duties or remedies available under the Fiscal Agreement.

As of September 30, 2016, we have paid $6,646,000 in export duties, for which we have filed for recovery. In accordance with the Injunction, we did not pay export duties on silver concentrate but continued to accrue export duties until February 12, 2016, when the Federal Government of Argentina announced the removal of export duties on mineral concentrates. At September 30, 2016, we have accrued a liability totaling $67,130,000 (December 31, 2015 - $65,633,000) for export duties with no accrual for interest charges, and have recorded a corresponding increase in cost of sales in the relevant period. The Federal Tax Authority has claimed that interest penalties at the proscribed rate applicable to general peso-based tax liabilities of 3% per month should be applied to the US dollar export duty from the dates that each duty was accrued. The application of this rate results in a material interest claim of an amount approximately equivalent to the underlying duties that we have not accrued due to its uncertainty. In addition to our challenges on the underlying application of the export duties, we are also challenging the Federal Tax Authority’s claim for interest and the rate upon which it claims interest.

 
 
20 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

12.
PROVISIONS (Cont'd)

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. We continue to assess the implications of the February 12, 2016 elimination of export duties and the other recent developments on our financial reporting position related to the historical liability recorded. Changes in our assessment of this matter could result in material adjustments to our consolidated statements of income (loss).

(2) 
As at September 30, 2016, we have provided for various employee termination benefits as a result of anticipated employee reductions at Pirquitas mine in 2016 and 2017.

(3) 
The changes in the close down and restoration provision during the nine months ended September 30, 2016 and the year ended December 31, 2015 were as follows:
 
September 30, 2016

December 31, 2015

 
$ 

$

Balance, January 1
58,920

62,190

 
 
 
Provisions on acquisition of Claude Resources (note 3)
5,464

—

Liabilities settled during the period
(946
)
(2,414
)
Accretion expense
2,705

3,733

Foreign exchange (gain)
(27
)
(83
)
Revisions and new estimated cash flows
2,798

(4,506
)
 
 
 
Balance, end of period
68,914

58,920

 
 
 
Less: current portion of close down and restoration provision
(7,242
)
(7,388
)
Non-current close down and restoration provision
61,672

51,532



 
 
21 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

13.
NON-CURRENT DEBT AND CREDIT FACILITY

(a)Non-current debt
The movement in the debt portion of the convertible notes during the nine months ended September 30, 2016 and the year ended December 31, 2015 is comprised of the following:
 
September 30, 2016

December 31, 2015

 
$

$

Balance, beginning of period
211,242

200,291

Accretion of discount
8,893

10,951

Interest accrued in period
5,719

7,619

Interest paid
(7,619
)
(7,619
)
Balance, end of period
218,235

211,242

Accrued interest outstanding (note 11)
(1,258
)
(3,157
)
Non-current portion of convertible notes outstanding
216,977

208,085


(b)Credit facility
On August 4, 2015, we entered into a $75,000,000 senior secured revolving credit facility (the "Credit Facility") with a syndicate of banks. The Credit Facility may be used for reclamation bonding, working capital and other general corporate purposes.

The term of the Credit Facility is three years, maturing on August 4, 2018. Amounts that are borrowed under the Credit Facility will incur variable interest at London Interbank Offered Rate plus an applicable margin ranging from 2.75% to 3.75% determined based on our net leverage ratio. The Credit Facility also provides for financial letters of credit at 66% of the applicable margin and undrawn fees are 25% of the applicable margin.

All debts, liabilities and obligations under the Credit Facility are guaranteed by our material subsidiaries and secured by certain of our assets, certain of our material subsidiaries, and pledges of the securities of our material subsidiaries. In connection with the Credit Facility, we must also maintain certain net tangible worth and ratios for interest coverage and net leverage. As at September 30, 2016 we were in compliance with these covenants.

As at September 30, 2016, we had utilized $7,600,000 (December 31, 2015 - $7,500,000) of the Credit Facility to support letters of credit.

(c)Claude Resources debt
Upon our acquisition of Claude Resources (note 3) on May 31, 2016, we immediately fully repaid amounts outstanding on its credit facility of $13,707,000. Claude Resources' credit facility was immediately terminated upon repayment.


 
 
22 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

14.
SHARE-BASED COMPENSATION

(a)Stock options
The changes in stock options issued during the nine months ended September 30, 2016 and the year ended December 31, 2015 are as follows:
 
September 30, 2016
December 31, 2015
 
Number of stock options

Weighted average exercise price (C$/option)

Number of stock options

Weighted average exercise price (C$/option)

 
 
 
 
 
Outstanding, beginning of period
3,193,106

8.97

2,377,065

12.68

     Granted
798,020

7.19

1,519,656

6.70

Issued in connection with the acquisition of Claude Resources (note 3)
809,286

6.35

—

—

     Exercised
(1,128,521
)
(7.23
)
(72,050
)
(7.37
)
     Forfeited
(201,784
)
(9.04
)
(631,565
)
(17.64
)
Outstanding, end of period
3,470,107

8.53

3,193,106

8.97


For options granted during the nine months ended September 30, 2016, the weighted average option valuations were based on an expected option life of 4.2 years, a risk free interest rate of 0.6%, a dividend yield of nil, and volatility of 59.4%.
During the nine months ended September 30, 2016, options granted had a weighted average fair value of C$3.34 per option.

(b)Deferred Share Units (“DSUs”)
During the nine months ended September 30, 2016 and the year ended December 31, 2015, the following DSUs were outstanding to non-executive directors:
 
September 30, 2016

December 31, 2015

 
Number of DSUs

Number of DSUs

Outstanding, beginning of period
439,261

335,680

     Granted
80,789

136,514

     Redeemed
—

(32,933
)
Outstanding, end of period
520,050

439,261


The DSUs granted in the nine months ended September 30, 2016 had a weighted average fair value of C$8.97 per unit. 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. As at September 30, 2016, the fair value of outstanding DSUs was C$15.81 per unit.

 
 
23 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

14.
SHARE-BASED COMPENSATION (Cont'd)

(c)Restricted Share Units (“RSUs”)
During the nine months ended September 30, 2016 and the year ended December 31, 2015, the following RSUs were outstanding to employees:
 
September 30, 2016

December 31, 2015

 
Number of RSUs

Number of RSUs

Outstanding, beginning of period
640,077

330,414

     Granted
409,279

473,815

     Settled
(244,982
)
(124,548
)
     Forfeited
(81,411
)
(39,604
)
Outstanding, end of period
722,963

640,077


The RSUs granted in the nine months ended September 30, 2016 had a weighted average fair value of C$7.27 per unit. RSUs settled in the nine months ended September 30, 2016 were settled at a weighted average fair value of C$8.08 per unit. The RSUs are cash-settled instruments and, therefore, the fair value of the outstanding RSUs at the end of each reporting period is recognized as an accrued liability. As at September 30, 2016, the fair value of outstanding RSUs was C$15.81 per unit.

(d)Performance Share Units (“PSUs”)
During the nine months ended September 30, 2016 and the year ended December 31, 2015, the following PSUs were outstanding to senior executives:
 
September 30, 2016

December 31, 2015

 
Number of PSUs

Number of PSUs

Outstanding, beginning of period
413,150

323,000

     Granted
276,000

390,850

     Settled
—

(190,183
)
     Forfeited
(38,650
)
(110,517
)
Outstanding, end of period
650,500

413,150


The PSUs granted in the nine months ended September 30, 2016 had a weighted average fair value of C$7.17 per unit. The PSUs are cash-settled instruments and, therefore, the fair value of the outstanding PSUs at the end of each reporting period is recognized as an accrued liability. As at September 30, 2016, the weighted average fair value of outstanding PSUs was C$17.07 per unit.


 
 
24 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

14.
SHARE-BASED COMPENSATION (Cont'd)

(e)Share-based compensation
Total share-based compensation, including all equity and cash-settled arrangements, for the nine months ended September 30, 2016 and 2015 has been recognized in the condensed consolidated interim financial statements as follows:
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2016

2015

 
2016

2015

 
$

$

 
$

$

Equity-settled
 
 
 
 
 
Cost of inventory
33

33

 
64

73

General and administrative expenses
648

667

 
1,893

1,898

Exploration, evaluation and reclamation expenses
9

11

 
28

25

Cash-settled
 
 
 
 
 
Cost of inventory
833

447

 
2,364

1,005

General and administrative expenses
(218
)
1,437

 
7,867

4,251

Exploration, evaluation and reclamation expenses
29

26

 
102

58

 
1,334

2,621

 
12,318

7,310



15.
COST OF SALES
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2016

2015

 
2016

2015

 
$ 

$

 
$ 

$

Cost of inventory
65,224

53,731

 
184,397

172,253

Depletion, depreciation and amortization
18,967

19,802

 
51,210

56,833

Export duties (note 12)
—

3,338

 
1,512

8,603

Write-down of stockpiles
—

7,716

 
—

7,716

 
84,191

84,587

 
237,119

245,405



16.
OTHER INCOME (EXPENSES)
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2016

2015

 
2016

2015

 
$

$

 
$

$

(Loss) on disposal of fixed assets
(744
)
(2,449
)
 
(3,294
)
(4,435
)
Revaluation of deferred consideration
(78
)
—

 
531

—

Gain on sale of mineral properties
261

—

 
261

—

Other
513

2

 
641

(101
)
 
(48
)
(2,447
)
 
(1,861
)
(4,536
)


 
 
25 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

17.
EARNINGS PER SHARE

The calculations of basic and diluted earnings per share are based on the following:
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2016

2015

 
2016

2015

 
 
 
 
 
 
Basic net earnings (loss)
$38,042
$(59,416)
 
$52,825
(57,580
)
Adjustment for dilutive instruments:
 
 
 
 
 
Interest saving on convertible notes, net of tax
3,646

—

 
—

—

Earnings (loss) used in the calculation of diluted earnings per share
41,688
(59,416
)
 
52,825
(57,580
)
 
 
 
 
 
 
Weighted average number of common shares issued (thousands)
119,163
80,754
 
97,851
80,754
Adjustments for dilutive instruments:
 
 
 
 
 
Stock options (thousands)
1,923
—

 
1,294
—

Convertible notes (thousands)
13,250

—

 
—

—

Weighted average number of common shares for diluted earnings per share (thousands)
134,336
80,754
 
99,145
80,754
 
 
 
 
 
 
Basic earnings (loss) per share
$0.32
$(0.74)
 
$0.54
$(0.71)
Diluted earnings (loss) per share
$0.31
$(0.74)
 
$0.53
$(0.71)


 
 
26 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

18.
OPERATING SEGMENTS

Following the acquisition of Claude Resources (note 3), we have included the Seabee Gold Operation as an operating segment. Other operating segments have not changed as our President and Chief Executive Officer (who is considered to be our chief operating decision maker) continues to review operating results of these segments and they continue to exceed the quantitative threshold for individual disclosure.

The following is a summary of the reported amounts of income or loss, and the carrying amounts of assets and liabilities by operating segment:
Three months ended September 30, 2016
Marigold mine

Seabee Gold Operation

Pirquitas mine

Exploration and evaluation properties

Other reconciling items (i)

Total

 
$ 

$ 

$

$

$

$

Revenue
62,831

29,214

51,336

—

—

143,381

Cost of inventory
(29,928
)
(16,723
)
(18,573
)
—

—

(65,224
)
Depletion, depreciation and amortization
(9,747
)
(8,365
)
(855
)
—

—

(18,967
)
Cost of sales
(39,675
)
(25,088
)
(19,428
)
—

—

(84,191
)
Income from mine operations
23,156

4,126

31,908

—

—

59,190

 
 
 
 
 
 
 
Exploration, evaluation and reclamation expenses
(64
)
(758
)
(32
)
(3,237
)
(189
)
(4,280
)
Operating income (loss)
23,068

3,344

32,074

(3,524
)
(4,714
)
50,248

Income (loss) before income tax
21,664

3,293

28,984

(6,814
)
(6,128
)
40,999

 
 
 
 
 
 
 
Interest expense and other finance costs
(336
)
(14
)
(857
)
(21
)
(5,233
)
(6,461
)
Income tax (expense) recovery
(5,342
)
(509
)
—

(4
)
2,898

(2,957
)
 
 
 
 
 
 
 
As at September 30, 2016
 
 
 
 
 
 
Total assets
391,583

412,363

92,722

98,977

458,973

1,454,618

Non-current assets
245,228

374,675

41,790

87,484

15,235

764,412

Total liabilities
(73,775
)
(91,920
)
(114,516
)
(8,042
)
(246,163
)
(534,416
)

 
 
27 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

18.
OPERATING SEGMENTS (Cont'd)

Three months ended September 30, 2015
Marigold mine

Seabee Gold Operation

Pirquitas mine

Exploration and evaluation properties

Other reconciling items (i)

Total

 
$

$

$

$

$

$

Revenue
43,836

—

33,355

—

—

77,191

Cost of inventory
(28,356
)
—

(25,375
)
—

—

(53,731
)
Depletion, depreciation and amortization
(8,192
)
—

(11,610
)
—

—

(19,802
)
Export duties
—

—

(3,338
)
—

—

(3,338
)
Write-down of stockpiles
—

—

(7,716
)
—

—

(7,716
)
Cost of sales
(36,548
)
—

(48,039
)
—

—

(84,587
)
Income from mine operations
7,288

—

(14,684
)
—

—

(7,396
)
 
 
 
 
 
 
 
Exploration, evaluation and reclamation expenses
(572
)
—

(994
)
(1,209
)
(372
)
(3,147
)
Impairment charge
—

—

(34,490
)
—

—

(34,490
)
Operating income (loss)
6,483

—

(50,441
)
(1,304
)
(5,471
)
(50,733
)
Income (loss) before income tax
(759
)
—

(53,517
)
(1,585
)
(6,695
)
(62,556
)
 
 
 
 
 
 
 
Interest expense and other finance costs
(201
)
—

(1,140
)
(19
)
(5,001
)
(6,361
)
Income tax recovery (expense)
2,196

—

(32
)
20

956

3,140

 
 
 
 
 
 
 
As at December 31, 2015
 
 
 
 
 
 
Total assets
362,911

—

97,820

97,610

313,336

871,677

Non-current assets
239,958

—

39,169

92,100

23,716

394,943

Total liabilities
(67,644
)
—

(122,274
)
(8,678
)
(225,898
)
(424,494
)

Nine months ended September 30, 2016
Marigold mine

Seabee Gold Operation

Pirquitas mine

Exploration and evaluation properties

Other reconciling items (i)

Total

 
$ 

$ 

$

$

$

$

Revenue
179,770

43,651

140,248

—

—

363,669

Cost of inventory
(95,991
)
(29,944
)
(58,462
)
—

—

(184,397
)
Depletion, depreciation and amortization
(31,755
)
(8,365
)
(11,090
)
—

—

(51,210
)
Export duties
—

—

(1,512
)
—

—

(1,512
)
Cost of sales
(127,746
)
(38,309
)
(71,064
)
—

—

(237,119
)
Income from mine operations
52,024

5,342

69,184

—

—

126,550

 
 
 
 
 
 
 
Exploration, evaluation and reclamation expenses
(304
)
(809
)
(104
)
(9,880
)
(1,141
)
(12,238
)
Operating income (loss)
51,726

4,476

68,343

(9,922
)
(25,524
)
89,099

Income (loss) before income tax
46,335

4,649

58,307

(12,886
)
(34,026
)
62,379

 
 
 
 
 
 
 
Interest expense and other finance costs
(1,051
)
(30
)
(2,859
)
(75
)
(15,556
)
(19,571
)
Income tax (expense) recovery
(11,363
)
(471
)
—

(96
)
2,376

(9,554
)

 
 
28 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

18.
OPERATING SEGMENTS (Cont'd)

Nine months ended September 30, 2015
Marigold mine

Seabee Gold Operation

Pirquitas mine

Exploration and evaluation properties

Other reconciling items (i)

Total

 
$

$

$

$

$

$

Revenue
169,360

—

115,370

—

—

284,730

Cost of inventory
(96,982
)
—

(75,271
)
—

—

(172,253
)
Depletion, depreciation and amortization
(22,741
)
—

(34,092
)
—

—

(56,833
)
Export duties
—

—

(8,603
)
—

—

(8,603
)
Write-down of stockpiles
—

—

(7,716
)
—

—

(7,716
)
Cost of sales
(119,723
)
—

(125,682
)
—

—

(245,405
)
Income (loss) from mine operations
49,637

—

(10,312
)
—

—

39,325

 
 
 
 
 
 
 
Exploration, evaluation and reclamation expenses
(2,226
)
—

(4,110
)
(4,058
)
(618
)
(11,012
)
Impairment charge
—

—

(34,490
)
—

—

(34,490
)
Operating income (loss)
47,302

—

(49,656
)
(4,234
)
(17,656
)
(24,244
)
Income (loss) before income tax
39,188

—

(58,738
)
(3,559
)
(30,195
)
(53,304
)
 
 
 
 
 
 
 
Interest expense and other finance costs
(421
)
—

(3,913
)
(57
)
(14,669
)
(19,060
)
Income tax (expense) recovery
(11,292
)
—

(232
)
3,663

3,585

(4,276
)

(i) 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
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2016

2015

 
2016

2015

 
%

%

 
%

%

Gold
61

57

 
62

59

Silver
39

42

 
38

38

Zinc
—

1

 
—

2

Other
—

1

 
—

1


Segment revenue by location and major customers
Marigold mine's principal product is gold doré with the refined gold bullion sold to two customers who individually accounted for 66% and 34% of Marigold mine's sales during the nine months ended September 30, 2016. Marigold mine sold to principally one customer during the nine months ended September 30, 2015. Marigold mine accounted for 49% of total revenue during the nine months ended September 30, 2016 and 57% of total revenue during the nine months ended September 30, 2015.

Seabee Gold Operation's principal product is gold doré with the refined gold bullion sold to two customers who individually accounted for 75% and 25% of Seabee Gold Operation's sales for the period from May 31, 2016 to September 30, 2016, the period for which we were entitled to all economic benefits of the Seabee Gold Operation following our acquisition of Claude Resources. The Seabee Gold Operation accounted for 12% of total revenue during the nine months ended September 30, 2016.

Our Pirquitas mine sales are made to external customers located in various geographical areas. For the Pirquitas mine, we had one customer who accounted for 16% of total revenue during the nine months ended September 30, 2016, and one customer who accounted for 14% of total revenue during the nine months ended September 30, 2015.

 
 
29 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

18.
OPERATING SEGMENTS (Cont'd)

Non-current assets by location
 
September 30, 2016

December 31, 2015

 
$

$

Canada
381,676

23,788

United States
260,386

243,016

Argentina
43,019

44,710

Mexico
67,918

71,891

Peru
11,413

11,538

Total
764,412

394,943



 
 
30 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

19.
FAIR VALUE MEASUREMENTS

Assets and liabilities that are held at fair value are categorized based on a valuation hierarchy which is determined by the following valuation methodology utilized:
 
Fair value at September 30, 2016
Fair value at December 31, 2015
 
Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

 
$ 

$

$

$

$ 

$

$

$

Recurring measurements
 
 
 
 
 
 
 
 
Trade receivables
—

57,277

—

57,277

—

20,907

—

20,907

Marketable securities
178,117

—

—

178,117

88,184

—

—

88,184

Other financial assets
—

—

1,982

1,982

—

—

1,374

1,374

Accrued liabilities
—

9,979

—

9,979

—

6,547

—

6,547

Derivative liabilities
—

—

—

—

—

901

—

901

Current debt
—

—

—

—

4,273

—

—

4,273

 
178,117

67,256

1,982

247,355

92,457

28,355

1,374

122,186

 
 
 
 
 
 
 
 
 
Fair values disclosed
 
 
 
 
 
 
 
 
Convertible notes (note 13)
262,053

—

—

262,053

178,544

—

—

178,544

 
262,053

—

—

262,053

178,544

—

—

178,544


Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities
Marketable securities, consisting of fair value through other comprehensive income ("FVTOCI") 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 Argentine peso-denominated loan facility was valued using the official foreign exchange rate on the loan balance at the end of the period. The fair value disclosed for our convertible 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)
Trade receivables from provisional invoices are included in Level 2 as the basis of valuation uses quoted commodity forward prices.

Accrued liabilities relating to DSUs, RSUs, and PSUs and derivative liabilities 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)

The deferred consideration from the sale of the Challacollo project is included in Level 3, as certain assumptions used in the calculation of the fair value are not based on observable market data.

There were no transfers into or out of Level 3 during the nine months ended September 30, 2016 or during 2015.


 
 
31 | Page
Silver Standard Resources Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016
(tabular amounts expressed in thousands of United States dollars unless otherwise stated)

20.
SUPPLEMENTAL CASH FLOW INFORMATION

Changes in working capital items during the three and nine months ended September 30, 2016 and 2015 are as follows:
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2016

2015

 
2016

2015

 
$ 

$

 
$

$

Trade and other receivables
(12,402
)
825

 
(34,732
)
(1,561
)
Inventory
9,502

(14,269
)
 
15,354

(15,868
)
Trade and other payables
1,273

8,070

 
3,061

4,602

Current provisions
(4,202
)
2,916

 
(3,401
)
6,495

 
(5,829
)
(2,458
)
 
(19,718
)
(6,332
)

During the three and nine months ended September 30, 2016 and 2015 we conducted the following non-cash investing transactions:
 
Three months ended September 30
 
 
Nine months ended September 30
 
 
2016

2015

 
2016

2015

 
$ 

$

 
$

$

Common shares issued pursuant to the acquisition of Claude Resources (note 3)
—

—

 
(325,202
)
—

Options issued pursuant to the acquisition of Claude Resources (note 3)
—

—

 
(4,045
)
—

Transfer of share-based payment reserve upon exercise of stock options
(2,090
)
—

 
(4,115
)
—

Marketable securities provided as consideration for exploration and evaluation expenses
—

—

 
(388
)
—

Shares received in exchange of marketable securities
—

—

 
—

1,062

Shares disposed in exchange of marketable securities
—

—

 
—

(1,315
)
 
(2,090
)
—

 
(333,750
)
(253
)


 
 
32 | Page


SILVER STANDARD RESOURCES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016


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








SILVER STANDARD RESOURCES INC.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016


This Management's Discussion and Analysis ("MD&A") is intended to supplement the unaudited condensed consolidated interim financial statements of Silver Standard Resources Inc. ("we", "us", "our" or "Silver Standard") for the three and nine months ended September 30, 2016, 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"), applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting.

All figures are expressed in U.S. dollars except where otherwise indicated. References to C$ refer to Canadian dollars.
This MD&A has been prepared as of November 8, 2016, and should be read in conjunction with the unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2016.

Additional information, including our Annual Information Form and Annual Report on Form 40-F for the year ended December 31, 2015, 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 16 herein. We use certain non-GAAP and additional GAAP financial measures in this MD&A; for a description of each of these measures, please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 12 of this MD&A.


1.THIRD QUARTER 2016 HIGHLIGHTS

▪
Strong financial performance: Achieved record quarterly revenue of $143.4 million, net income of $38.0 million or $0.32 per share and adjusted net income of $37.2 million or $0.31 per share.

▪
Increased cash balance: Quarter-end balance increased by $44.9 million to $277.5 million. Cash generated by operating activities totaled $53.1 million.

▪
Demonstrated scale and margin from three operations: Record quarterly production of 112,559 gold equivalent ounces at cash costs of $618 per equivalent gold ounce sold. 

▪
Lowered cash costs guidance at Marigold: Reported cash costs of $636 per payable ounce of gold sold, 4% lower compared to the previous quarter, and reduced cash costs guidance to between $640 and $680 per payable ounce of gold sold. Produced 47,456 ounces of gold, on track to meet annual guidance.

▪
Strong production at Seabee: Produced 20,142 ounces of gold at cash costs of $661 per payable ounce of gold sold.

▪
Improved production and cash costs guidance at Pirquitas: Produced a record 3.0 million ounces of silver, 21% higher than the second quarter of 2016, at record low cash costs of $8.48 per payable ounce of silver sold. Increased production guidance to between 9.5 and 10.5 million ounces of silver and decreased cash costs guidance to between $9.00 and $9.50 per payable ounce of silver sold.

▪
Favorable resolution of tax dispute with Canada Revenue Agency: Settled in our favor the tax dispute with the CRA which resulted in the repayment of our deposit of $18.2 million plus accrued interest.

▪
Realized value through project portfolio: Subsequent to quarter end, completed the sale of our Parral properties in Mexico and our Diablillos and M-18 projects in Argentina, for future cash installments and shares valued at approximately $20 million.

2


2.
OUTLOOK

This section of the MD&A provides management's production and cost estimates. See "Cautionary Notes Regarding Forward-Looking Statements and Mineral Reserves and Mineral Resources Estimates" in section 16 of this MD&A.
We completed the acquisition of Claude Resources Inc. ("Claude Resources"), which owned the Seabee Gold Operation in northern Saskatchewan, Canada, on May 31, 2016. The operation has been in continuous production since 1991 and consists of two operating mines (the Seabee mine and Santoy mine complex), a central milling facility, camp facilities and important regional exploration targets. We also acquired the 40,400 hectare Amisk gold project in northeastern Saskatchewan.

With strong operating performance through the third quarter of 2016 combined with our outlook for the fourth quarter, we are able to improve certain guidance metrics.

At the Marigold mine, for the third time this year, annual cash costs guidance is being reduced to between $640 and $680 per payable ounce of gold sold from previous guidance of between $650 and $700 per payable ounce of gold sold reflecting continued lower diesel prices and the overcall of mined ounces from the Mackay open pit. Production, capital and capitalized stripping guidance at Marigold remain unchanged.

Annual silver production guidance for the Pirquitas mine has been revised upward for the second time this year to between 9.5 and 10.5 million ounces from previous guidance of between 9.0 and 10.0 million ounces, due to additional ore tonnes being mined from the lower benches of the San Miguel open pit. Additionally, for the third time this year, cash costs guidance is being reduced to between $9.00 and $9.50 per payable ounce of silver sold, reflecting lower diesel prices, continued stronger operating performance and effective cost control. Capital expenditure guidance at Pirquitas remains unchanged.

Operating Guidance
 
Marigold mine

Seabee Gold Operation(2)

Pirquitas mine

Gold Production
oz
200,000 - 210,000

32,000 - 35,000

—

Silver Production
Moz
—

—

9.5 - 10.5

Cash costs per payable ounce sold (1)
$/oz
640 - 680

610 - 640

9.00 - 9.50

Capital Expenditures
$M
32

2

12

Capitalized Stripping Costs / Underground Development
$M
30

6

—


(1) 
We report the non-GAAP financial measure of cash costs per payable ounce of gold and silver sold to manage and evaluate operating performance at the Marigold mine, the Seabee Gold Operation and the Pirquitas mine. See “Non-GAAP and Additional GAAP Financial Measures” in section 12.
(2) 
Guidance for the Seabee Gold Operation is for the period from July 1, 2016 to December 31, 2016, and is estimated based on an exchange rate of 1.30 CAD/USD.

3


3.
BUSINESS OVERVIEW

Strategy
We are a resource company focused on the operation, acquisition, exploration and development of precious metal resource properties located in the Americas. We have three producing mines and a portfolio of precious metal dominant projects located throughout the Americas. Our focus is on safe, profitable gold and silver production from our Marigold mine in Nevada, U.S., our Seabee Gold Operation in Saskatchewan, Canada, and our Pirquitas mine in Jujuy, Argentina.

Macro-economic environment
Our financial performance is impacted by gold and silver prices. Precious metals prices in the third quarter of 2016 improved compared to the second quarter of 2016, with gold averaging $1,335 per ounce and silver averaging $19.61 per ounce, compared to $1,259 per ounce and $16.78 per ounce, respectively. Gold and silver prices started the third quarter of 2016 strong and fluctuated significantly during the quarter, closing at $1,325 per ounce of gold and $19.35 per ounce of silver on September 30, 2016. Subsequent to the quarter, gold and silver prices have weakened.

The principal factors impacting precious metal prices in the third quarter were the decreased expectations regarding U.S. interest rate increases and uncertainty created through the Brexit vote. These were somewhat moderated by weaker Chinese demand due to slower growth in that country.

The U.S. dollar remained at levels comparable with the end of the second quarter. During the third quarter, the Canadian dollar averaged and closed at approximately 1.3 Canadian dollars per 1 U.S. dollar. Our exposure to Canadian dollar-based costs increased significantly following our acquisition of Claude Resources on May 31, 2016.

The Argentine peso devalued by 18% in the first three quarters of 2016, closing at 15.33 Argentine pesos per 1 U.S. dollar on September 30, 2016. While a weaker currency is positive for our Argentine operating costs, we expect the inflation rate in Argentina to somewhat offset the benefits of the devaluation of the currency.

West Texas Intermediate oil prices in the third quarter of 2016 were comparable to the second quarter of 2016, averaging $46.06 per barrel and closing at $48.24 per barrel. Oil prices have increased further subsequent to quarter end. Diesel is a significant consumable at our operations and the increase in diesel prices had a negative impact on our cost structure at our Marigold and Pirquitas mines. We hedge a portion of our diesel usage to manage price risk of this consumable through 2017.




4


Consolidated financial summary

Selected Financial Data (1)
 
 
 
 
 
Three months ended September 30
Nine months ended September 30
 
2016

2015

2016

2015

 
$

$

$

$

Revenue
143,381

77,191

363,669

284,730

Income (loss) from mine operations (2)
59,190

(7,396
)
126,550

39,325

Operating income (loss) (2)
50,248

(50,733
)
89,099

(24,244
)
Net income (loss) for the period (2)
38,042

(59,416
)
52,825

(57,580
)
Basic income (loss) per share
0.32

(0.74
)
0.54

(0.71
)
Adjusted income (loss) before tax (3)
45,168

(11,844
)
83,996

7,037

Adjusted net income (loss) (3)
37,214

(10,127
)
69,405

(5,891
)
Adjusted basic income (loss) per share (3)
0.31

(0.13
)
0.71

(0.07
)
Cash generated by operating activities
53,066

998

96,554

53,560

Cash (used in) investing activities
(10,581
)
(17,288
)
(19,222
)
(33,766
)
Cash generated by (used in) financing activities
2,599

—

(11,400
)
(1,649
)
 
 
 
 
Financial Position
September 30, 2016

December 31, 2015

 
 
Cash and cash equivalents
277,544

211,862

 
 
Current assets (including cash and cash equivalents)
690,206

476,734

 
 
Current liabilities
133,943

135,851

 
 
Working capital
556,263

340,883

 
 
Total assets
1,454,618

871,677

 
 

(1) 
All values are presented in thousands of U.S. dollars, except per share amounts.
(2) 
Loss from mine operations for the three and nine months ended September 30, 2015 includes a $7.7 million non-cash write-down of stockpile inventory to its net realizable value at the Pirquitas mine. Operating Loss and Net Loss for the three and nine months ended September 30, 2015 include non-cash, pre-tax impairment charge and write-downs of $42.2 million related to the Pirquitas mine.
(3) 
We report non-GAAP measures including adjusted income before- and after-tax and adjusted basic income per share, to manage and evaluate our operating performance. See "Non-GAAP and Additional GAAP Financial Measures" in section 12.

Quarterly financial summary

The 86% increase in quarterly revenue compared to the third quarter of 2015 was due to higher realized prices of gold by 20% and silver by 31%, combined with a 48% increase in gold equivalent ounces sold, largely due to sales from the newly-acquired Seabee Gold Operation and stronger sales and production from the Pirquitas mine.

Income from mine operations in the third quarter of 2016 generated a positive gross margin of 41%, significantly higher than the negative 10% margin in the third quarter of 2015 due to higher precious metals prices, lower cost of sales, particularly at the Pirquitas mine, and the addition of the Seabee Gold Operation. The loss from mining operations in the third quarter of 2015 was also negatively impacted by the write-down of low grade stockpiles at the Pirquitas mine in the amount of $7.7 million. Operating income in the third quarter of 2015 was negatively impacted by a $34.5 million impairment of the Pirquitas mine.

Cash generated by operating activities increased significantly to $53.1 million compared to $1.0 million in the third quarter of 2015. The higher prices of gold and silver and the higher volumes sold at lower unit cost generated significantly higher cash from operating activities. We used $10.6 million in investing activities in the third quarter of 2016 compared to $17.3 million in the third quarter of 2015. Investments relating to the addition of the Seabee Gold Operation, seasonally higher investments at Marigold and capitalized stripping totaling $30.8 million were partially offset by receipt of our deposit of $18.2 million plus accrued interest from the Canada Revenue Agency ("CRA"). In the comparative quarter of 2015, we invested $13.0 million in plant and equipment at the Marigold

5


mine, and acquired the Valmy property for $11.5 million and this was offset by the release of $7.5 million of restricted cash.

Year-to-date financial summary

The increase in revenue for the nine months ended September 30, 2016, of 28%, compared to the nine months ended September 30, 2015, resulted from higher sales of gold equivalent payable ounces by 17% due to sales from the newly-acquired Seabee Gold Operation and strong performance at the Pirquitas mine and also higher prices of gold by 7.5% and silver by 6%.

Income from mine operations in the nine months ended September 30, 2016, generated a gross margin of 35%, higher than the 14% in the nine months ended September 30, 2015, mainly due to higher precious metals prices and lower cost of sales, particularly at the Pirquitas mine. The income from mine operations in the nine months ended September 30, 2015, was also negatively impacted by the write-down of low grade stockpiles at the Pirquitas mine in the amount of $7.7 million. Operating income in the nine months ended September 30, 2016, was significantly higher than in the comparative period which was also negatively impacted by a $34.5 million impairment of the Pirquitas mine.

Cash generated from operating activities was $96.6 million in the nine months ended September 30, 2016, compared to $53.6 million in the comparative period of 2015 as a result of improved margins at Marigold and Pirquitas and the addition of the strong cash producing Seabee Gold Operation in May 2016. In the nine months ended September 30, 2016, we invested $31.2 million in plant and equipment and $22.5 million in capitalized stripping primarily at the Marigold mine, higher by $3.5 million and $9.9 million, respectively, than in the comparative period. Cash used in investing activities was significantly lower in the nine months ended September 30, 2016, than in the nine months ended September 30, 2015, as we received $16.9 million of cash in the Claude Resources acquisition, collected the CRA deposit of $18.2 million plus accrued interest and received $4.4 million from the sale of marketable securities. In the comparative period, we paid the deposit to CRA but received $20.0 million as a final payment from the sale of the San Agustin project. Cash used in financing activities in the nine-month period includes repayment of Claude Resources' $13.7 million credit facility, full repayment of the short-term debt in Argentina and receipt of $6.4 million from the exercise of stock options.

Corporate summary

The tax dispute with the CRA has now been settled in our favor. On August 24, 2016, the CRA issued a new notice of reassessment for each of the 2010 and 2011 taxation years reversing the Notice of Reassessment (“NOR”) issued to us in January 2015 and, on September 2, 2016, refunded the deposit we paid to the CRA to appeal, plus accrued interest from the date of payment of the deposit. Following the receipt of the deposit, with accrued interest, the Department of Justice (“DOJ”) filed a notice of discontinuance of our appeal with the Tax Court of Canada.

In September 2016, we announced the sale of 100% of our Parral properties in Chihuahua, Mexico, including the Veta Colorada, La Palmilla, and San Patricio properties (collectively, the “Parral properties”) to Endeavour Silver Corp. (“Endeavour Silver”) for $6.0 million of Endeavour Silver shares (based on the average of the closing prices of Endeavour Silver shares sold on the NYSE during the ten trading days prior to September 13, 2016). We also announced a transaction on our Diablillos and M-18 projects, located in Argentina, with Huayra Minerals Corporation ("Huayra") for cash payments of approximately $1.5 million over the first two years and $12.5 million over the following three to five years, a 19.9% equity interest in Huayra, with free carried interest until the completion of a public offering of $5.0 million or more, and a 1.0% net smelter returns royalty on production from each of the projects. Each of these transactions were completed subsequent to quarter end.

On August 19, 2016, we sold 100% of our Juncal and La Flora projects in Region II, Chile to Austral Gold Limited (ASX: AGD) for aggregate consideration of $250,000 in cash and a 1.0% net smelter return royalty on production from the projects.


6


4.
RESULTS OF OPERATIONS

Consolidated results of operations

The following table presents consolidated operating information for our Marigold and Pirquitas mines and our Seabee Gold Operation. Additional operating information is provided in the sections relating to the individual mines.
 
 Three months ended
Operating data (1)
September 30 2016

June 30 2016

March 31 2016

December 31 2015

September 30 2015

Consolidated production and sales:
 
 
 
 
 
Gold produced (oz)
67,598

53,916

50,520

61,461

41,262

Silver produced ('000 oz)
3,047

2,526

2,639

2,588

2,576

 
 
 
 
 
 
Gold sold (oz)
69,189

58,430

48,605

62,827

39,525

Silver sold ('000 oz)
2,947

2,594

3,223

1,943

2,819

 
 
 
 
 
 
Cash costs ($/oz) - payable gold from Marigold mine (2)
636

663

719

727

719

Cash costs ($/oz) - payable gold from Seabee Gold Operation (2,5)
661

663

—

—

—

Cash costs ($/oz) - payable silver from Pirquitas mine (2)
8.48

8.87

8.93

10.96

11.02

 
 
 
 
 
 
Gold equivalent production (oz) (3)
112,559

86,956

83,680

97,273

76,003

 
 
 
 
 
 
Realized gold price ($/oz) (2)
1,331

1,263

1,189

1,084

1,110

Realized silver price ($/oz) (2)
19.64

16.52

14.94

15.00

14.97

 
 
 
 
 
 
Consolidated costs:
 
 
 
 
 
Cash Costs per equivalent gold ounce sold ($/oz) (2,3,5)
618

669

715

746

765

AISC per equivalent gold ounce sold ($/oz) (2,3,5)
940

1,062

859

883

1,046

 
 
 
 
 
 
 Financial data ($000s)
 
 
 
 
 
Revenue
143,381

118,775

101,513

90,592

77,191

Income (loss) from mine operations (4)
59,190

44,062

23,298

(20,485
)
(7,396
)

(1) 
The data presented includes results from the Seabee Gold Operation for the period from May 31, 2016, to September 30, 2016, the period for which we were entitled to all economic benefits of the Seabee Gold Operation, following our acquisition of Claude Resources.
(2) 
We report the non-GAAP financial measures of cash costs, realized metal prices and all-in sustaining costs ("AISC") per payable ounce of precious metals sold 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 (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12.
(3) 
Gold and silver equivalent ounces have been established using the realized gold and silver prices in the period and applied to the recovered metal content produced by the mines.
(4) 
Income (loss) from mine operations for the quarters ended December 31, 2015 and September 30, 2015 include $24.6 million and $7.7 million, respectively, of non-cash adjustments to stockpile, warehouse inventory and severance provision at the Pirquitas mine.
(5) 
The non-GAAP financial measure of cash costs from the Seabee Gold Operation was adjusted to eliminate the adjustment of inventory to fair value as at the date of our acquisition of Claude Resources.


7


Marigold mine, U.S.

 
 Three months ended
 Operating data
September 30 2016


June 30 2016


March 31 2016

December 31 2015

September 30 2015

Total material mined (kt)
19,558

18,685

17,291

18,560

18,425

Waste removed (kt)
14,741

12,005

11,611

13,788

11,242

Total ore stacked (kt)
4,817

6,680

5,680

4,772

7,183

Strip ratio
3.1

1.8

2.0

2.9

1.6

Mining cost ($/t mined)
1.48

1.55

1.45

1.54

1.65

Gold stacked grade (g/t)
0.42

0.44

0.47

0.48

0.43

Processing cost ($/t processed)
0.95

0.70

0.71

0.86

0.66

Gold recovery (%)
71.0

70.7

70.0

69.9

69.7

General and admin costs ($/t processed)
0.56

0.38

0.47

0.47

0.41

 
 
 
 
 
 
Gold produced (oz)
47,456

47,195

50,520

61,461

41,262

Gold sold (oz)
47,278

47,124

48,605

62,827

39,525

 
 
 
 
 
 
Realized gold price ($/oz) (1)
1,330

1,259

1,189

1,084

1,110

 
 
 
 
 
 
Cash costs ($/oz) (1)
636

663

719

727

719

AISC ($/oz) (1)
1,139

1,067

841

799

998

 
 
 
 
 
 
Financial data ($000s)
 
 
 
 
 
Revenue
62,831

59,197

57,742

67,936

43,836

Income from mine operations
23,156

17,641

11,227

7,902

7,288

Capital investments
8,310

10,154

8,796

3,641

8,931

Capitalized stripping
13,787

7,231

1,435

—

—

Exploration expenditures (2)
1,145

1,597

1,102

731

1,944


(1) 
We report the non-GAAP financial measures of realized gold prices, cash costs and AISC per payable ounce of gold sold 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 (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12.
(2) 
Includes capitalized and expensed exploration expenses.

Mine production

We produced 47,456 ounces of gold in the third quarter of 2016, in line with our second quarter gold production and on target to meet previously increased annual guidance. The construction of a new leach pad was completed on schedule and under budget in the latter half of the third quarter. The additional leach pad capacity and higher amount of ore tonnes stacked earlier in the year are expected to result in strong fourth quarter gold production.

A total of 19.6 million tonnes of material was mined in the third quarter, 5% higher than the second quarter of 2016 and a record for the mine, due to increased hauling capacity added to the fleet earlier in the year and shorter haul distances relating to the higher strip ratio. Approximately 4.8 million tonnes of ore were delivered to the leach pads at a gold grade of 0.42 g/t, containing approximately 47,000 recoverable ounces of gold stacked during the quarter. The strip ratio increased to 3.1:1 in the third quarter as we began stripping of the next phase of the Mackay pit. Gold recovery was 71% in the third quarter.





8


Mine operating costs

Cash costs and AISC per payable ounce of gold sold are non-GAAP financial measures. Please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 12.

Cash costs, which include all costs of inventory, refining costs and royalties, of $636 per payable ounce of gold sold in the third quarter of 2016 were lower than cash costs of $663 per payable ounce of gold sold in the second quarter of 2016 as costs of inventory decreased due to improved mining costs and increased capitalized stripping. Costs per tonne mined decreased to $1.48 per tonne in the third quarter of 2016, 5% lower than in the second quarter of 2016 due to maintaining expenditure levels despite the increase in total tonnes mined. Processing unit costs were 36% higher in the third quarter of 2016 than in the second quarter of 2016 due to fewer tonnes stacked resulting from the higher strip ratio. General and administrative unit costs were also higher in the third quarter of 2016 than in the second quarter of 2016 due to fewer tonnes stacked but were comparable on an absolute basis.

AISC of $1,139 per payable ounce of gold sold in the third quarter of 2016 increased from $1,067 in the second quarter of 2016 due to higher capitalized stripping and capital expenditures related to the construction of the new leach pad during the second and third quarters of 2016.

Mine sales

A total of 47,278 ounces of gold were sold at an average price of $1,330 per ounce during the third quarter of 2016, compared to 47,124 ounces of gold sold at a 6% lower average price of $1,259 per ounce during the second quarter of 2016.

Exploration

Exploration activities in the third quarter of 2016 focused on drilling at the HideOut target and the Valmy property. The objective of these drilling activities is to convert Mineral Resources to Mineral Reserves and to expand Mineral Resources, in certain instances. As reported on November 7, 2016, two track-mounted rigs completed 13,408 meters of reverse circulation drilling in 50 drillholes on targets where previous results show potential for Mineral Resource additions or Mineral Reserve conversion. The 500-meter long corridor between HideOut and the 8 South pit extension area has been a focus of drilling activity. At the Valmy property, drilling during the quarter continued to extend the zone of mineralization to the south and east of the known mineralization at the Valmy pit. Results to date are expected to expand Mineral Resources. We expect to continue drilling outside of the current pit areas, including the eastern extension of the Basalt pit mineralization.

We expanded our gravity survey coverage at Marigold to include the additional lands to the east, south and west of the original mineral claims. These data, together with our understanding of the sub-surface geology, have been used to select drill sites for the deep sulphide exploration program targeting a high grade style of mineralization similar to that found at the Turquoise Ridge mine located 56 kilometers north of the Marigold mine. We expect to complete one deep core hole by the end of the fourth quarter of 2016, representing the sixth deep core hole targeting higher-grade sulphide mineralization. We plan to complete a total of three deep core holes by the end of the first quarter of 2017.

The results from our ongoing exploration program and the completed Assay Program will be included in our annual 2016 Mineral Reserves and Mineral Resources estimate to be published in the first quarter of 2017.




9


Seabee Gold Operation, Canada

 
 
 
 
Operating data

Three months ended September 30, 2016

Period from Acquisition to June 30, 2016 (1)

Three months ended
June 30, 2016 (2)

Total ore milled (t)
82,756

18,856

71,218

Ore milled per day (t/day)
900

629

783

Gold mill feed grade (g/t)
7.40

7.79

7.97

Mining costs ($/t mined)
58

110

N/A

Processing costs ($/t processed)
19

29

N/A

Gold recovery (%)
96.5

96.6

96.8

General and admin costs ($/t processed)
37

61

N/A

 
 


Gold produced (oz)
20,142

6,721

17,524

Gold sold (oz)
21,911

11,306

16,305

 
 


Realized gold price ($/oz) (3)
1,334

1,278

1,271

 
 


Cash costs ($/oz) (3,5)
661

663

N/A

AISC ($/oz) (3,5)
840

776

N/A

 
 


Financial data ($000s)
 




Revenue
29,214

14,437

N/A

Income from mine operations
4,126

1,216

N/A

Capital development
2,104

803

N/A

Capital investments
579

337

N/A

Exploration expenditures (4)
1,206

117

N/A


(1) 
The data presented in this column is for the period from May 31, 2016, to June 30, 2016, the period for which we were entitled to all economic benefits of the Seabee Gold Operation following our acquisition of Claude Resources.
(2) 
The data presented in this column includes operating results for the Seabee Gold Operation for the entire second quarter of 2016, including the period from April 1 to May 30, 2016 prior to our acquisition of Claude Resources.
(3) 
We report the non-GAAP financial measures of realized gold prices, cash costs and AISC per payable ounce of gold sold to manage and evaluate operating performance at the Seabee Gold Operation. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12.
(4) 
Includes capitalized and expensed exploration expenses.
(5) 
The non-GAAP financial measure of cash costs from the Seabee Gold Operation was adjusted to eliminate the adjustment of inventory to fair value as at the date of our acquisition of Claude Resources.

Mine production

The Seabee Gold Operation consists of the Seabee and Santoy underground mines, both of which feed a single processing facility. The mine produced 20,142 ounces of gold in the third quarter of 2016 despite a three-day continuation of the ten-day unplanned power outage which commenced in June 2016.

A total of 82,756 tonnes of ore were milled at a gold grade of 7.4 g/t in the third quarter of 2016. The gold recovery was 96.5%. As part of our initial Operational Excellence plan for the Seabee Gold Operation, we successfully trialed higher mill throughput during the month of August. The mill processed ore at or above 1,000 tonnes per day, with an average of 998 tonnes per day in the month. We achieved this with minor modifications to the processing facility, while maintaining gold recovery. As a result, we were able to increase mill throughput in the third quarter by 15% to 900

10


tonnes per day, compared to the second quarter of 2016. We are reviewing the long-term mine plan to determine the feasibility of higher, sustainable throughput rates.

During the third quarter of 2016, the Santoy mine provided approximately 82% of total ore milled, while the Seabee mine provided 18%.

Mine operating costs

Cash costs and AISC per payable ounce of gold sold are non-GAAP financial measures. Please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 12.

Cash costs per payable ounce of gold sold, which include all costs of inventory, refining costs and royalties and exclude the effect of the fair value adjustment at our acquisition of Claude Resources, were $661 in the third quarter of 2016. Costs per tonne mined were $58 per tonne in the third quarter, processing unit costs were $19 per tonne processed and general and administration unit costs were $37 per tonne. The decrease in the costs per tonne mined and milled in the third quarter of 2016 from June 2016 is due to higher tonnes mined and milled in total and also per day. Additionally, only a three-day unplanned power outage affected the third quarter of 2016, whereas in June 2016 the power outage lasted seven days.

AISC per payable ounce of gold sold, which also exclude the effect of the fair value adjustment at acquisition, were $840 in the third quarter of 2016, as capital spending remained modest with exploration spending increasing consistent with our objective of adding Mineral Reserves and Mineral Resources at the mine.

Mine sales

A total of 21,911 ounces of gold were sold at an average price of $1,334 per ounce during the third quarter of 2016.

Exploration

For 2016, the Seabee Gold Operation planned 65,000 meters of underground drilling and 18,000 meters of surface drilling with the objective to increase and convert Mineral Resources into Mineral Reserves. As reported on November 7, 2016, during the third quarter, we completed 13,540 meters of underground diamond drilling to upgrade Inferred Mineral Resources and explore further the extensions to the Santoy 8A and Santoy Gap deposits. From surface, we completed 6,172 meters of drilling exploring the down plunge extension of Santoy Gap 9A, 9B, and 9C deposits. Drilling intersected the projections of the mineralized structures at expected depths with anomalous results. Seven surface and underground drillholes were completed at the Santoy 8A target, of which five results were notable. Highlighted drill results from the third quarter include 5.8 meters at a grade of 27.86 g/t gold (SUG-16-920) from the 8A zone, 4.1 meters at a grade of 33.8 g/t gold (SUG-16-063) from the 9C zone and 5.0 meters at a grade of 31.94 g/t gold (SUG-16-919) from the 8A zone.
For the fourth quarter of 2016 at the Seabee Gold Operation, our focus underground and from surface will be on infill drilling at Santoy Gap with the objective to convert Inferred Mineral Resources to Measured and Indicated Mineral Resources.
On October 6, 2016, we announced an option agreement to acquire an 80% interest in the adjacent Fisher property which lies south on strike from the ore deposits at Santoy Gap and 8A. This agreement doubles our prospective land position at the Seabee Gold Operation and planning for exploration work is underway.


11


Pirquitas mine, Argentina

 
Three months ended
Operating data
September 30 2016

June 30 2016

March 31 2016

December 31 2015

September 30 2015

Total material mined (kt)
2,385

2,543

2,520

2,712

2,746

Waste removed (kt)
1,584

1,814

1,726

1,966

2,219

Ore mined (kt)
801

729

794

746

527

Strip ratio
2.0

2.5

2.2

2.6

4.2

Silver mined grade (g/t)
190

189

181

187

188

Mining costs ($/t mined)
3.80

3.54

2.97

3.78

3.94

Ore milled (kt)
455

425

418

421

410

Silver mill feed grade (g/t)
264

238

247

237

238

Processing cost ($/t milled)
14.78

15.10

13.58

20.60

21.53

Silver recovery (%)
79.0

77.6

79.7

80.8

82.0

General and admin costs ($/t milled)
5.84

6.22

5.68

8.09

8.13

 
 








Silver produced ('000 oz)
3,047

2,526

2,639

2,588

2,576

Silver sold ('000 oz)
2,947

2,594

3,223

1,943

2,819

 
 








Realized silver price ($/oz) (1)
19.64

16.52

14.94

15.00

14.97

 
 




Cash costs ($/oz) (1)
8.48

8.87

8.93

10.96

11.02

AISC ($/oz) (1)
9.87

10.03

9.67

12.78

12.68

 
 




Financial Data ($000s)
 




Revenue
51,336

45,141

47,711

22,656

33,355

Income (loss) from mine operations (2)
31,908

25,205

12,071

(28,387
)
(14,684
)
Capital investments
3,158

2,057

1,578

2,305

2,500

Capitalized stripping
—

—

—

—

—

Exploration expenditures
7

25

22

234

1,124


(1) 
We report the non-GAAP financial measures of cash costs, realized silver prices and AISC per payable ounce of silver sold 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 (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12.
(2) 
Income (loss) from mine operations for the quarters ended December 31, 2015, and September 30, 2015, include $24.6 million and $7.7 million, respectively, of non-cash adjustments to stockpile, warehouse inventory and severance provision at the Pirquitas mine.

Mine production

The Pirquitas mine produced 3.0 million ounces of silver during the third quarter of 2016, a quarterly record for the mine, which enabled our 2016 production guidance to be increased. Higher silver production is a result of record ore tonnes milled, higher silver mill feed grade and higher silver recovery.

Ore was milled at an average rate of 4,946 tonnes per day in the third quarter. During August 2016, the mill operated at an average rate of over 5,200 tonnes per day, a record for the mill since it began operating, a result of one of our ongoing Operational Excellence programs. Ore milled contained an average silver grade of 264 g/t, 11% higher than the 238 g/t reported in the second quarter as additional tonnes of higher grade ore, relative to the production model, encountered in the lower benches of the San Miguel open pit enabled selective milling of higher grades and stockpiling of lower grades. Detailed planning and consultation for the cessation of open pit mining in the first quarter of 2017 is well underway. Thereafter, medium and lower grade stockpile material will be processed through the plant in 2017. The average recovery rate for silver in the third quarter of 79.0% was 2% higher than the 77.6% in the previous quarter.




12


Mine operating costs

Cash costs and AISC per payable ounce of silver sold are non-GAAP financial measures. Please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 12.

Cash costs, which include cost of inventory, treatment and refining costs and by-product credits, decreased by 4% to $8.48 per payable ounce of silver sold in the third quarter of 2016 from $8.87 per payable ounce of silver sold in the second quarter of 2016. Mining costs per tonne increased due primarily to longer hauls, higher diesel prices and inflation which increased at a rate greater than the Argentine peso devalued. This increase was more than offset by the lower processing costs and general and administration costs per tonne due to higher plant throughput. The second quarter of 2016 benefited marginally from residual by-product revenue from zinc of about $0.20 per payable ounce of silver sold whereas, as planned, there were no zinc sales in the current quarter.

AISC of $9.87 per payable ounce of silver sold were lower in the third quarter of 2016 than the $10.03 per payable ounce of silver sold in the second quarter of 2016 despite higher capital spend as we commenced the construction on the phase 5 tailings lift required to process stockpiles to the end of 2017.

Mine sales

We recognized sales of 2.9 million ounces of silver, higher than the 2.6 million in the second quarter, as a result of higher production and timing of concentrate shipments.

Chinchillas project, Argentina

During the second quarter of 2016, Golden Arrow Resources Corporation ("Golden Arrow") released a revised Mineral Resources estimate and technical report for the Chinchillas project following an infill drilling program of 115 core drillholes comprising 15,142 meters of drilling. As part of the continuing engineering studies, a program of condemnation drilling commenced beneath areas selected for major infrastructure, such as the waste rock facility. During the third quarter, 16 core drillholes for 3,252 meters were completed to investigate the presence of near surface mineralization underlying and proximal to the proposed waste rock facility. The results of this work were reported by Golden Arrow in news releases on September 7, 2016, and October 3, 2016. In addition to this work, geotechnical, hydrological, metallurgical and environmental baseline studies, along with community engagement programs, continued. In the third quarter of 2016, we funded approximately $2.9 million for work on the Chinchillas project, bringing total expenditures to date to $10.5 million.
We are undertaking the relevant engineering studies to determine the economic viability of the Chinchillas project as a satellite mine feeding the Pirquitas plant and extending the life of the operation. Our option agreement with Golden Arrow requires the notice of exercise in regards to forming a joint venture by March 31, 2017. All technical work is scheduled for completion in advance of that date to enable a decision with regards to such notice.
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) ("Customs") levied an export duty of approximately 10% from concentrate for projects with fiscal stability agreements pre-dating 2002 and Customs has asserted that the Pirquitas mine is subject to this duty. We have challenged the legality of the export duty applied to silver concentrate 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 Customs from withholding the 10% export duty on silver concentrate (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 Tax Authority 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 Tax Authority also appealed the refund we claimed for the

13


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.

On June 21, 2016 the Federal Court (Jujuy) ruled that the Injunction would remain in place subject to certain conditions, including the provision by August 5, 2016, of a guarantee by Silver Standard against liabilities arising from export duties and applicable interest as well as security from Mina Pirquitas, LLC on certain assets at the Pirquitas mine. We have appealed the condition to provide the parent guarantee. The requirement for the guarantee and security is suspended pending the outcome of that appeal. We are also continuing discussions with the Federal Tax Authority and other government officials for potential resolution of the claim. We cannot predict the outcome of the court proceedings and those discussions. If we do not reach a successful resolution of the matter, the Federal Tax Authority may make further application to the court to have the Injunction lifted and, upon that, initiate proceedings to collect the accrued export duties and its claimed interest. The lifting of the Injunction does not impact our underlying challenge of the legality of the application of export duties or remedies available under the Fiscal Agreement.

As of September 30, 2016, we have paid $6.6 million in export duties, for which we have filed for recovery. In accordance with the Injunction, we did not pay export duties on silver concentrate but continued to accrue export duties until February 12, 2016, when the Federal Government of Argentina announced the removal of export duties on mineral concentrates. At September 30, 2016, we have accrued a liability totaling $67.1 million (December 31, 2015 - $65.6 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 Federal Tax Authority has claimed that interest penalties at the prescribed rate applicable to general peso-based tax liabilities of 3% per month should be applied to the U.S. dollar export duty from the dates that each duty was accrued. The application of this rate results in a material interest claim of an amount approximately equivalent to the underlying duties that we have not accrued due to its uncertainty. In addition to our challenges on the underlying application of the export duties, we are also challenging the Federal Tax Authority’s claim for interest and the rate upon which it claims interest.

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. We continue to assess the implications of the February 12, 2016 elimination of export duties and the other recent developments on our financial reporting position related to the historical liability recorded. Changes in our assessment of this matter could result in material adjustments to our consolidated statements of income (loss).



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5.
REVIEW OF PROJECTS

Chinchillas Project, Argentina

The progress on the Chinchillas project is described in section 4.

Perdito Project, California, U.S.

On March 31, 2016, we announced that we entered into an option agreement to acquire a 100% interest in the Perdito project. The project is located 240 kilometers west of Las Vegas, Nevada in Inyo County, California and covers an area of approximately 5,780 hectares.

During the third quarter, we completed field work, including detailed bedrock mapping with accompanying rock and soil sampling, to enhance our understanding of the controls to mineralization prior to drilling. We have budgeted $1.5 million for drilling and field work at the project in 2016.

Other Projects

At our Pitarrilla project in Mexico, we continue to keep the properties in good standing and fulfill our community and other project-related commitments.

At our San Luis project in Peru, we continue to progress strategies for community engagement and for advancing the project.

At our Berenguela project in Peru, we have placed the project on care and maintenance and are developing value realization strategies for the project.




15



6.
SUMMARIZED FINANCIAL RESULTS

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:

 
2016
2015
2014 (1)
 
30-Sep

30-Jun

31-Mar

31-Dec

30-Sep

30-Jun

31-Mar

31-Dec

 
 
 
 
 
 
 
 
 
 
 
$000s


$000s

$000s

$000s

$000s

$000s

$000s

Revenue
143,381

118,775

101,513

90,592

77,191

95,818

111,721

122,830

 
 
 
 
 
 
 
 
 
Realized gold price ($/oz) (3)
1,331

1,263

1,189

1,084

1,110

1,205

1,210

1,200

Realized silver price ($/oz) (3)
19.64

16.52

14.94

15.00

14.97

16.72

16.67

17.18

 
 
 
 
 
 
 
 
 
Income (loss) from mine operations (2)
59,190

44,062

23,298

(20,485
)
(7,396
)
16,319

30,402

12,996

Net income (loss) before tax
40,999

15,521

5,858

(60,353
)
(62,556
)
(3,316
)
12,501

(56,788
)
Net income(loss) after tax
38,042

12,482

2,300

(66,722
)
(59,416
)
(7,327
)
9,096

(86,221
)
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share
0.32

0.13

0.03

(0.83
)
(0.74
)
(0.09
)
0.11

(1.07
)
Diluted earnings (loss) per share
0.31

0.13

0.03

(0.83
)
(0.74
)
(0.09
)
0.11

(1.07
)
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
277,544

232,619

217,634

211,862

200,017

217,228

175,595

184,643

Total assets
1,454,618

1,432,263

880,501

871,677

954,766

996,549

989,260

986,249

Working capital
556,263

530,196

354,999

340,883

373,068

379,767

358,288

368,948

Non-current financial liabilities
216,977

213,955

210,994

208,085

205,277

202,517

199,813

197,134


(1) 
Restated for the change in exploration and evaluation costs accounting policy.
(2) 
Income (loss) from mine operations for the quarters ended December 31, 2015, September 30, 2015, and December 31, 2014, include $24.6 million, $7.7 million and $11.3 million, respectively, of non-cash adjustments to stockpile, warehouse inventory and severance provision at the Pirquitas mine.
(3) 
We report the non-GAAP financial measure of realized metal prices per payable ounce of precious metals sold to manage and evaluate operating performance at our mines. For a better understanding and a reconciliation of this measure, please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12.

The volatility in revenue over the past eight quarters has resulted from variable precious metal prices, which are not under our control, and sales volumes. There are no significant seasonal fluctuations in the results for the presented periods. Metal prices in the second and third quarters of 2016 improved significantly after a period of weak metal prices in the second half of 2015 and in the first quarter of 2016. Income (loss) from mine operations in the third and fourth quarters of 2015 and fourth quarter of 2014 were affected by the non-cash write-down of inventory at the Pirquitas mine to its net realizable value ("NRV"). In the first three quarters of 2016, increasing income from mine operations is a result of improved metal prices and increasing volumes of gold and silver sold, with the acquisition of the Seabee Gold Operation on May 31, 2016 and operating improvements at Pirquitas, as well as lower cost of sales per ounce at our Marigold and Pirquitas mines. The loss from mine operations in the fourth quarter of 2015 was also impacted by $4.7 million of severance provision related to the Pirquitas mine. Excluding the effect of these inventory write-downs, income from mine operations followed a similar trend to revenue over the two-year period presented.

Net income (loss) before income tax has fluctuated significantly over the past eight quarters, heavily influenced by impairments and adjustments. In the fourth and third quarters of 2015 and in the fourth quarter of 2014, we recorded non-cash impairment charges and inventory adjustments totaling $38.7 million, $42.2 million and $51.6 million, respectively, against the carrying value of the Pirquitas mine.




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Three months ended September 30, 2016, compared to the three months ended September 30, 2015

Net income for the three months ended September 30, 2016 was $38.0 million ($0.32 per share), compared to a net loss of $59.4 million ($0.74 per share) in the same period of 2015. In the third quarter of 2015, we recognized a non-cash impairment charge of $34.5 million against the Pirquitas mine and non-cash write-down of $7.7 million of low grade stockpiles. The following is a summary and discussion of the other significant components of income and expenses recorded during the current quarter compared to the same period in the prior year.

Revenue

Realized silver and gold price is a non-GAAP financial measure. Please see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 12.

In the three months ended September 30, 2016, we recognized total revenues of $143.4 million, compared to $77.2 million recognized in the comparative period of 2015, with the increase due to the full quarter impact of the Seabee Gold Operation which we acquired on May 31, 2016, and to higher gold and silver prices.

▪
At the Marigold mine, we recognized revenues of $62.8 million in the third quarter of 2016 from the sale of 47,100 payable ounces of gold at an average realized price of $1,330 per ounce. In the third quarter of 2015, revenues were $43.8 million from the sale of 39,500 payable ounces of gold at an average realized gold price of $1,110 per ounce.

▪
At the Seabee Gold Operation, we recognized revenues of $29.2 million in the third quarter of 2016 from the sale of 21,900 payable ounces of gold, at an average realized gold price of $1,334 per ounce. We did not own the Seabee Gold Operation in the comparative period.

▪
At the Pirquitas mine, we recognized revenues of $51.3 million in the third quarter of 2016, higher than the $33.4 million recognized in the same period in 2015. Sales volumes were broadly consistent at 2.8 million payable ounces but the third quarter of 2016 had significantly higher realized silver prices, as well as a positive valuation adjustment of $0.7 million, compared to a negative valuation adjustment of $4.3 million in the comparative quarter. Realized silver prices in the third quarter of 2016 averaged $19.64 per ounce, excluding the impact of period-end price adjustments, compared to $14.97 per ounce in the same period in 2015. In line with our mine plan, there were no zinc sales in the third quarter of 2016, compared to 2.4 million pounds sold in the third quarter of 2015. At September 30, 2016, sales contracts containing 3.2 million ounces of silver were subject to final price settlement over the next four months.

Cost of sales

Cost of sales for the third quarter of 2016 was $84.2 million, compared to $84.6 million in the third quarter of 2015. Consolidated cost of sales was comparable in the current period as a significant reduction at the Pirquitas mine was offset by the addition of the Seabee Gold Operation.

▪
At the Marigold mine, cost of sales in the third quarter of 2016 was $39.7 million, generating income from mine operations of $23.2 million, equal to a gross margin of 36.6%. This compares to cost of sales of $36.5 million in the third quarter of 2015, generating an income from mine operations of $7.3 million and a gross margin of 16.6%. The increase in the gross margin is partly due to higher realized prices per ounce of gold sold in the third quarter of 2016 than in the comparative period and by lower cost of sales per ounce of gold sold.

▪
At the Seabee Gold Operation, cost of sales in the third quarter was $25.1 million, generating income from operations of $4.1 million, equal to a gross margin of 14.4%. The margin was reduced by a significant one-time increase of bullion and other inventories to fair value upon our acquisition of the Seabee Gold Operation.

17


▪
At the Pirquitas mine, cost of sales in the third quarter of 2016 was $19.4 million, generating income from mine operations of $31.9 million, equal to a gross margin of 61.5%. This compared to cost of sales of $48.0 million in the third quarter of 2015, generating a loss from mine operations of $14.7 million and a negative gross margin of 44.0%. The third quarter of 2015 was negatively impacted by a non-cash write-down of low grade stockpile inventory of $7.7 million. Excluding the inventory write-down, in the third quarter of 2015, the Pirquitas mine recognized a negative gross margin of 21%. The improved margin in the current quarter was mainly due to significantly higher realized prices, the above-noted mark-to-market adjustments to revenue and also due to lower cost of inventory in the third quarter of 2016 compared to the third quarter of 2015. This cost reduction was due to lower operating costs following the significant devaluation of the Argentine peso, the elimination of export duties in February 2016 and lower depreciation following the impairment recorded in 2015.

Other operating costs

General and administrative expenses in the three months ended September 30, 2016, of $4.1 million were lower than the $5.7 million recorded in the three months ended September 30, 2015. Cash-settled share-based compensation expense recognized a recovery of $0.2 million in the third quarter of 2016 compared to an expense of $1.4 million in the three months ended September 30, 2015, due to relative and absolute share price performance.

Exploration and evaluation costs of $4.3 million for the three months ended September 30, 2016, were higher than the $3.1 million for the three months ended September 30, 2015. Expenditures in the third quarter of 2016 related to funding of the drilling and evaluation work at the Chinchillas project and the addition of the Seabee Gold Operation. In the third quarter of 2015, exploration and evaluation work was primarily performed at the Marigold and Pirquitas mines.

In the third quarter of 2016, we incurred $0.6 million of business acquisition expenses relating to the Claude Resources acquisition. There were no such expenses in the comparative period.

Non-operating items

During the third quarter of 2016, we recorded interest expense and other financing costs of $6.5 million compared to $6.4 million recorded in the third quarter of 2015. In each period, the interest expense is mainly attributable to our 2.875% convertible senior notes issued in 2013 (the “2013 Notes”). We also incurred finance expense on discounts on the sale of our VAT credits in Argentina and from an Argentine peso-denominated local loan.

We recorded foreign exchange losses for the three months ended September 30, 2016, of $3.2 million consistent with losses of $3.2 million in the three months ended September 30, 2015. Our main foreign exchange exposures are related to net monetary assets denominated in Argentine pesos and Canadian dollars. During the three months ended September 30, 2016, this loss resulted mainly from the Argentine peso while the Canadian dollar was fairly stable against the U.S. dollar.

Taxation

For the three months ended September 30, 2016, we recorded an income tax expense of $3.0 million compared to an income tax recovery of $3.1 million in the three months ended September 30, 2015. The total income tax expense in the quarter consists of a current tax expense of $4.4 million and a deferred tax recovery of $1.4 million. Income tax expense is primarily the result of profitable operations at the Marigold mine, Seabee Gold Operation and concentrate and gold sales activities in Canada.

The tax recovery of $3.1 million for the three months ended September 30, 2015, was the result of profitable operations at the Marigold mine and concentrate and gold sales activities in Canada. Offsets to the income tax expense items include a reversal of certain deferred income tax liability from December 31, 2014, as well as the reversal of a prior year tax accrual.

18



Other comprehensive income

During the third quarter of 2016, we recognized losses of $13.1 million on marketable securities, compared to a gain of $8.4 million in the third quarter of 2015, primarily driven by valuation movements in our investment in Pretium Resources Inc. ("Pretium").

Nine months ended September 30, 2016, compared to the nine months ended September 30, 2015

Net income for the nine months ended September 30, 2016, was $52.8 million ($0.54 per share), compared to a net loss of $57.6 million ($0.71 per share) in the same period of 2015. In the nine months ended September 30, 2015, we recognized a non-cash impairment charge of $34.5 million against the Pirquitas mine and non-cash write-down of $7.7 million of stockpiles. The following is a summary and discussion of the other significant components of income and expenses recorded during the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015.

Revenue

Realized silver and gold price is a non-GAAP financial measure. Please, see the discussion under "Non-GAAP and Additional GAAP Financial Measures" in section 12.

In the nine months ended September 30, 2016, we recognized total revenues of $363.7 million, compared to $284.7 million in the comparative period of 2015, with the increase mainly due to higher realized prices and sales from the newly acquired Seabee Gold Operation.

▪
At the Marigold mine, we recognized revenues of $179.8 million in the nine months ended September 30, 2016, from the sale of 142,700 payable ounces of gold at an average realized price of $1,258 per ounce. In the nine months ended September 30, 2015, revenues were $169.4 million from the sale of 143,430 payable ounces of gold at an average realized price of $1,181 per ounce.

▪
At the Seabee Gold Operation, we recognized revenues of $43.7 million in the period from acquisition of Claude Resources on May 31, 2016, to September 30, 2016, from the sale of 33,200 payable ounces of gold at an average realized price of $1,315 per ounce. We did not own the Seabee Gold Operation in the comparative period.

▪
At the Pirquitas mine, we recognized revenues of $140.2 million in the nine months ended September 30, 2016, higher than the $115.4 million recognized in the same period in 2015. Higher realized silver prices offset by low zinc sales were in addition to a positive valuation adjustment at the end of September 2016 in the amount of $10.8 million compared to a negative valuation adjustment of $7.0 million at the end of the comparative period of 2015. Volumes of silver sold in the nine months ended September 30, 2016, were higher than in the nine months ended September 30, 2015, (8.4 million payable ounces of silver compared to 7.8 million payable ounces of silver) as certain shipments containing 0.5 million payable ounces of silver planned for the fourth quarter of 2015 were recognized in 2016. Realized silver prices in the nine months ended September 30, 2016, averaged $17.02 per ounce, excluding the impact of period-end price adjustments, compared to $16.13 per ounce in the same period in 2015. In line with our mine plan, there were low zinc sales in the nine months ended September 30, 2016, compared to 8.6 million pounds sold in the nine months ended September 30, 2015. At September 30, 2016, sales contracts containing 3.2 million ounces of silver were subject to final price settlement over the next four months.






19


Cost of sales

Cost of sales for the nine months ended September 30, 2016, was $237.1 million, compared to $245.4 million in the same period of 2015. Consolidated cost of sales were lower in the current period as a significant reduction at the Pirquitas mine was partially offset by an increase at the Marigold mine and the addition of the Seabee Gold Operation.

▪
At the Marigold mine, cost of sales in the nine months ended September 30, 2016, was $127.7 million, generating income from mine operations of $52.0 million, equal to a gross margin of 28.9%. This compares to cost of sales of $119.7 million in the nine months ended September 30, 2015, generating an income from mine operations of $49.6 million and a gross margin of 29.3%. The slight decrease in the gross margin is due higher cost of sales per ounce of gold sold in the nine months ended September 30, 2016, than in the comparative period, largely due to higher capital stripping in the nine months ended September 30, 2015, shifting operating costs from cost of sales to capital expenditures, and higher depreciation charges.

▪
At the Seabee Gold Operation, cost of sales in the period from acquisition of Claude Resources on May 31, 2016 to September 30, 2016, was $38.3 million, generating income from operations of $5.3 million, equal to a gross margin of 12.5%. The margin was impacted by a significant one-time increase of bullion and other inventories to fair value upon our acquisition of Claude Resources.

▪
At the Pirquitas mine, cost of sales in the nine months ended September 30, 2016, was $71.1 million, generating income from mine operations of $69.2 million, equal to a gross margin of 49.1%. This compared to cost of sales of $125.7 million in the nine months ended September 30, 2015, generating a loss from mine operations of $10.3 million and a negative gross margin of 9.0%. The improved margin was mainly due to lower cost of inventory in the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015. This cost reduction was due to lower operating costs following the significant devaluation of the Argentine peso, the elimination of export duties in February 2016 and lower depreciation following the impairment recorded in 2015. In addition, the large positive mark-to-market valuation adjustment due to higher prices at September 30, 2016, contributed significantly to the improved gross margin. The comparative period was also negatively impacted by a non-cash write-down of low grade stockpile inventory of $7.7 million.

Other operating costs

General and administrative expenses in the nine months ended September 30, 2016, of $20.7 million were higher than the $18.1 million recorded in the nine months ended September 30, 2015. Cash-settled share-based compensation expenses of $7.9 million were higher in the nine months ended September 30, 2016, compared to $4.3 million in the same period of 2015, due to relative and absolute share price performance.

Exploration and evaluation costs of $12.2 million for the nine months ended September 30, 2016, were higher than the $11.0 million for the nine months ended September 30, 2015. Expenditures in the nine months ended September 30, 2016 related to funding of the drilling and evaluation work at the Chinchillas project and the addition of the Seabee Gold Operation. In the nine months ended September 30, 2015, exploration and evaluation work was primarily performed at the Marigold and Pirquitas mines.

In the nine months ended September 30, 2016, we incurred $4.5 million of business acquisition expenses relating to the Claude Resources acquisition. There were no such expenses in the comparative period.

Non-operating items

During the nine months ended September 30, 2016, we recorded interest expense and other financing costs of $19.6 million compared to $19.1 million recorded in the nine months ended September 30, 2015. In each period, the interest expense is mainly attributable to our 2013 Notes.


20


We recorded foreign exchange losses for the nine months ended September 30, 2016, of $6.5 million compared to losses of $6.5 million in the nine months ended September 30, 2015. Our main foreign exchange exposures are related to net monetary assets denominated in Argentine pesos and Canadian dollars. During the nine months ended September 30, 2016, this loss resulted from the Argentine peso weakening against the U.S. dollar. The Argentine peso continued to weaken against the U.S. dollar in the nine months ended September 30, 2016, following the removal of currency controls by the new Federal Government of Argentina in December 2015. These losses were partially offset by the Canadian dollar strengthening against the U.S. dollar during the nine months ended September 30, 2016. In the comparative period of 2015, the Argentine peso devalued at a lower rate, however we had a larger Argentine peso-denominated net asset base.

Taxation

For the nine months ended September 30, 2016, we recorded an income tax expense of $9.6 million compared to an income tax expense of $4.3 million in the nine months ended September 30, 2015. The total income tax expense in the quarter consists of a current tax expense of $10.8 million and a deferred tax recovery of $1.2 million. Income tax expense is primarily the result of profitable operations at the Marigold mine, Seabee Gold Operation and concentrate and gold sales activities in Canada.

The tax expense of $4.3 million for the nine months ended September 30, 2015, was the result of profitable operations at the Marigold mine and concentrate and gold sales activities in Canada. Offsets to the income tax expense items include a reversal of certain deferred income tax liability from December 31, 2014, as well as the reversal of a prior year tax accrual.

Other comprehensive income

During the nine months ended September 30, 2016, we recognized gains of $82.2 million on marketable securities, compared to a loss of $2.8 million in the comparative period of 2015, primarily driven by valuation movements in our investment in Pretium.


7.
LIQUIDITY

At September 30, 2016, we had $277.5 million of cash and cash equivalents, an increase of $65.7 million from December 31, 2015. Our cash flows from operations were $96.6 million, while $31.2 million was invested in plant and equipment and $22.5 million was invested in capitalized stripping at the Marigold mine, which will benefit future periods. We acquired $16.9 million of cash held by Claude Resources pursuant to our acquisition and immediately after the acquisition we repaid in full Claude Resources’ credit facility of $13.7 million and our short-term loan in Argentina of $3.8 million. We also received $18.2 million from the refund of our deposit with the CRA, plus interest, as discussed below. In addition, we received $6.4 million from the exercise of stock options and $4.4 million from sales of marketable securities.

At September 30, 2016, compared to December 31, 2015, our working capital position increased by $215.4 million to $556.3 million from $340.9 million, mainly due to the appreciation in value of our marketable securities, positive cash flows from operations and Claude Resources working capital acquired. 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. Our cash balance at September 30, 2016, along with projected operating cash flows, are expected to be sufficient to fund planned activities over the next twelve months from the date of this MD&A. We continue to focus on capital allocation and our cost reduction strategy, while also implementing various optimization activities at our operations to improve the cash generating capacity of each mine.

Of our cash and cash equivalents balance, $268.9 million was held in Canada and the United States. At September 30, 2016, we held $4.8 million cash in Argentina. All cash is invested in short-term investments or high interest savings

21


accounts under our investment policy with maturities of 90 days or less providing us with sufficient liquidity to meet our foreseeable corporate needs.

On January 27, 2015, we received the 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. To appeal the NOR, we were required to make a minimum payment to the CRA in an amount equal to 50% of the reassessed amount claimed by the CRA under the NOR plus interest accrued to the date of the NOR. On April 20, 2015, we filed a Notice of Objection with the CRA and, on September 15, 2015, we filed a Notice of Appeal with the Tax Court of Canada to dispute the NOR.

On August 8, 2016, we announced that we executed the minutes of settlement (the “Settlement Agreement”) with the DOJ to resolve the NOR in our favor. Pursuant to the terms of the Settlement Agreement, the CRA issued a new notice of reassessment for each of the 2010 and 2011 taxation years reversing the NOR, and refunded to us the deposit, plus accrued interest from the date of payment of the deposit. On September 7, 2016, the DOJ filed a notice of discontinuance of our appeal with the Tax Court of Canada. This dispute has now been resolved in our favor.


8.
CAPITAL RESOURCES
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; and
▪
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 the 2013 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 our Board of Directors.
To maintain or adjust our capital structure, we may, from time to time, issue new shares, issue new debt, repay debt or dispose of non-core assets. On May 31, 2016, we issued 37,393,924 common shares to acquire Claude Resources, which maintained our strong liquidity position and positions us to enhance value from our assets and pursue further growth opportunities. We expect our current capital resources will be sufficient to carry out our exploration plans and support operations through the current operating period.
As of September 30, 2016, we were in compliance with the financial covenants under our $75 million senior secured revolving credit facility and had utilized $7.6 million of the facility to support letters of credit.

As at September 30, 2016, we had 119,348,929 common shares and 3,470,107 stock options outstanding which are exercisable into common shares at exercise prices ranging between C$1.78 and C$28.78 per share.

Outstanding share data

The authorized capital consists of an unlimited number of common shares without par value. As at November 8, 2016, the following common shares and options were outstanding:

 
Number of shares

Exercise price
Remaining life
 
 
C$
(years)
Capital stock
119,401,795

 
 
Stock options
3,417,241

1.78 - 28.78
0.15 - 6.40
Fully diluted
122,819,036

 
 




22



9.
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.
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 and silver. 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 instruments that we hold which are impacted by commodity prices are our silver concentrate trade receivables. The majority of our 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.
We hedge a portion of our diesel consumption at the Marigold mine with the objective of securing future costs during this period of lower prices. We executed swap and option contracts under a risk management policy approved by our Board of Directors. In addition, due to the ice road supply at the Seabee Gold Operation, we purchase annual consumable supplies in advance at prices, which are generally fixed at time of purchase, not during period of use.
There has been no significant change in our objectives and policies for managing this risk and no significant change in our exposure to this risk during the nine months ended September 30, 2016.
(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 the functional currency of the entity that holds them; exchange gains and losses in these situations impact comprehensive income.
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 September 30, 2016, we have not entered into any derivatives to mitigate this risk.

23


There has been no significant change in our objectives and policies for managing this risk, however the closing of our acquisition of the Seabee Gold Operation in the second quarter of 2016 has materially increased our exposure to Canadian dollar operating and capital costs. The refund of the deposit by the CRA during the third quarter of 2016 eliminated a significant Canadian-dollar denominated asset decreasing our currency exposure.
(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 mainly arises from the interest rate impact on our cash and cash equivalents and our Argentine peso-denominated loan facility in Argentina, because these are the only financial instruments we hold that are impacted by interest based on variable market interest rates. Our 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 our 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.
There has been no significant change in our objectives and policies for managing this risk and other than repaying the Argentine peso-denominated loan facility, no significant change in our exposure to this risk during the nine months ended September 30, 2016.
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.
We also have credit risk through our significant VAT 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.
c)Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our financial obligations 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.
A detailed discussion of our liquidity position as at September 30, 2016, is included in section 7.


10.
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.


24


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 Annual Report on Form 40-F, which is available on the EDGAR section of the SEC website at www.sec.gov.

The following are additional risks from those disclosed in our Annual Information Form resulting from the acquisition of Claude Resources which closed on May 31, 2016:

Failure to effectively manage our tailings facilities at the Seabee Gold Operation could negatively impact production

Managing the tailings produced at the Seabee Gold Operation is integral to gold production. The Seabee Gold Operation’s tailings management facilities have the capacity to store tailings from milling ore from the Seabee mill until approximately 2020. We are currently in the process of planning tailings capacity expansion beyond 2020. This will support the extension of the Seabee Gold Operation’s mine life and provide additional tailings capacity to process ore from the Santoy mine complex. If we do not receive regulatory approval for new or expanded tailings facilities, gold production could be constrained.

Extreme weather conditions may adversely impact production and profitability at the Seabee Gold Operation

Extreme weather events (such as increased frequency or intensity of rain, increased snow pack or warmer winter) may adversely affect access to and disrupt operations at our Seabee Gold Operation. Where appropriate, we have developed emergency plans at our Seabee Gold Operation for managing extreme weather conditions; however, extended disruptions to supply lines could result in interruption to production, which may adversely affect our business and financial condition.

Our facilities at the Seabee Gold Operation depend on regular supplies of consumables (including diesel, tires, sodium cyanide and reagents) to operate efficiently. In the event that the effects of extreme weather events cause prolonged disruption to the delivery of essential commodities or affect the prices of these commodities, our production efficiency at the Seabee Gold Operation may be reduced.

Although we make efforts to mitigate these risks by ensuring that extreme weather conditions are included in emergency response plans at our Seabee Gold Operation as required, there can be no assurance that these efforts will be effective and that these risks will not have an adverse effect on our Seabee Gold Operation and therefore profitability.


11.
RELATED PARTY TRANSACTIONS

We did not enter into any related party transactions other than normal course compensation arrangements with senior management and our Board of Directors during the nine months ended September 30, 2016.


25



12.
NON-GAAP AND ADDITIONAL 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. These non-GAAP measures should be read in conjunction with our consolidated financial statements.

Additional GAAP measures are line items, headings or subtotals that are relevant to an understanding of the financial statements but are not mandated by IFRS.

Non-GAAP financial measures - Cash costs and AISC per payable ounce of precious metals sold

We use the non-GAAP financial measures of cash costs and AISC 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. Cash costs per ounce metrics, net of by-product credits, are also used in our internal decision making processes. Accordingly, 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 GAAP.

In line with the guidance published by the World Gold Council, AISC reflect the full cost of operating our consolidated business as they include the cost of replacing ounces through exploration, cost of sustaining capital and general and administrative expenses. Expansionary capital is not included in this measure.

The following table provides a reconciliation of our condensed consolidated interim statements of income (loss) to cash costs and AISC per payable ounce of precious metals sold for the three month periods indicated below:



























26


 
Q3

Q2

Q1

Q4

Q3

 
2016

2016

2016

2015

2015

 
$000s

$000s

$000s

$000s

$000s

Marigold mine
 
 
 
 
 
Cost of sales (A)
39,675

41,556

46,515

60,034

36,548

Add: Treatment and refining costs
59

21

61

54

39

Less: By-product revenue
(14
)
(9
)
(9
)
(8
)
(13
)
Less: Depreciation, depletion and amortization
(9,747
)
(10,321
)
(11,687
)
(14,513
)
(8,192
)
Cash costs
29,973

31,247

34,880

45,567

28,382

Sustaining capital expenditure
8,310

9,660

3,233

3,641

8,931

Exploration and evaluation costs (sustaining)
1,145

1,597

1,102

731

1,944

Reclamation cost
433

535

158

157

156

Capitalized stripping costs
13,787

7,231

1,435

—

—

AISC
53,648

50,270

40,808

50,096

39,413

 
 
 
 
 
 
Seabee Gold Operation (1)
 
 
 
 
 
Cost of sales (B)
25,088

13,221

—

—

—

Add: Treatment and refining costs
30

6

—

—

—

Less: By-product revenue
—

(28
)
—

—

—

Less: Adjustment for fair value at acquisition
(2,283
)
(5,708
)
—

—

—

Less: Depreciation, depletion and amortization
(8,365
)
—

—

—

—

Cash costs
14,470

7,491

—

—

—

Sustaining capital expenditure
2,674

1,140

—

—

—

Exploration and evaluation costs (sustaining)
1,206

117

—

—

—

Reclamation cost
48

16

—

—

—

AISC
18,398

8,764

—

—

—

 
 
 
 
 
 
Pirquitas mine
 
 
 
 
 
Cost of sales (C)
19,428

19,936

31,700

51,043

48,039

Add: Treatment and refining costs
5,355

4,454

5,555

3,181

4,633

Less: By-product revenue
—

(503
)
—

(186
)
(1,206
)
Less: Inventory NRV write-down
—

—

—

(19,922
)
(7,716
)
Less: Restructuring costs
—

—

—

(4,654
)
—

Less: Depreciation, depletion and amortization
(855
)
(2,070
)
(8,165
)
(8,022
)
(11,610
)
Less: Export duties on silver concentrate
—

—

(1,497
)
(1,444
)
(2,995
)
Cash costs
23,928

21,817

27,593

19,996

29,145

Sustaining capital expenditure
3,164

2,136

1,578

2,305

2,500

Exploration and evaluation costs (sustaining)
—

—

—

234

1,124

Reclamation cost
743

725

707

770

770

AISC
27,835

24,678

29,878

23,305

33,539

 
 
 
 
 
 
Cost of sales, per consolidated statement of income (loss) (A+B+C)
84,191

74,713

78,215

111,077

84,587

 
 
 
 
 
 
AISC (total for all mines)
99,881

83,712

70,686

73,401

72,952

General and administrative costs
4,061

12,466

4,361

4,274

5,700

Consolidated AISC
103,942

96,178

75,047

77,675

78,652

 
 
 
 
 
 
 
 
 
 
 
 

27


 
Q3

Q2

Q1

Q4

Q3

 
2016

2016

2016

2015

2015

 
$000s

$000s

$000s

$000s

$000s

Marigold mine
 
 
 
 
 
Payable ounces of gold sold (oz)
47,100

47,100

48,500

62,685

39,500

Cash costs per gold ounce sold ($/oz)
636

663

719

727

719

AISC per gold ounce sold ($/oz)
1,139

1,067

841

799

998

 
 
 
 
 
 
Seabee Gold Operation (1)
 
 
 
 
 
Payable ounces of gold sold (oz)
21,900

11,300

—

—

—

Cash costs per gold ounce sold ($/oz)
661

663

—

—

—

AISC per gold ounce sold ($/oz)
840

776

—

—

—

 
 
 
 
 
 
Pirquitas mine
 
 
 
 
 
Payable ounces of silver sold (oz)
2,820,419

2,460,205

3,089,476

1,823,970

2,644,933

Cash costs per silver ounce sold ($/oz)
8.48

8.87

8.93

10.96

11.02

AISC per silver ounce sold ($/oz)
9.87

10.03

9.67

12.78

12.68

 
 
 
 
 
 
Realized gold price ($/oz)
1,331

1,263

1,189

1,084

1,110

Realized silver price ($/oz)
19.64

16.52

14.94

15.00

14.97

 
 
 
 
 
 
Precious metals equivalency
 
 
 
 
 
Equivalent payable gold ounces sold (2) 
110,618

90,579

87,320

87,924

75,171

Cash costs per equivalent gold ounce sold ($/oz)
618

669

715

746

765

Consolidated AISC per equivalent gold ounce sold ($/oz)
940

1,062

859

883

1,046


(1) The data presented for the Seabee Gold Operation is for the period from May 31, 2016, to September 30, 2016, the period for which we were entitled to all economic benefits of the Seabee Gold Operation following our acquisition of Claude Resources.
(2) Gold equivalent ounces have been established using realized gold and silver prices in the period and applied to the recovered metal content of the gold and silver sold by the Marigold mine, the Seabee Gold Operation and the Pirquitas mine. We have not included zinc as it is considered a by-product.

Non-GAAP financial measures - realized 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 income (loss) before tax, adjusted income tax (expense), adjusted net income (loss) and adjusted basic earnings (loss) per share. Adjusted net income (loss) 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 income (loss) to provide a measure which allows investors to evaluate the operating results of our underlying core operations 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, 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 GAAP.


28


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

Three months ended September 30

2016

2015


$000s

 $000s




Net income before tax per consolidated statement of income
40,999

(62,556
)
Adjusted for:


Business acquisition costs
601

—

Non-cash finance income and expense
3,932

3,705

Non-recurring disposals of fixed assets
—

1,457

Write-down of inventory to NRV
—

7,716

Gain on sale of mineral properties
(261
)
—

Impairment charges
—

34,490

Non-cash foreign exchange loss
365

3,128

Other items
(468
)
216

Adjusted income before tax
45,168

(11,844
)





Income tax expense per consolidated statement of income
(2,957
)
3,140






Adjusted for:




Change in prior period estimates
(2,377
)
47

Other items
(2,620
)
(1,470
)
Adjusted income tax expense
(7,954
)
1,717




Adjusted net income (loss)
37,214

(10,127
)



Weighted average shares outstanding (000's), per consolidated statement of income
119,163

80,754




Adjusted basic income (loss) per share ($)
0.31

(0.13
)



29


 
Nine months ended September 30
 
2016

2015

 
$000s

 $000s

 
 
 
Net income before tax per consolidated statement of income
62,379

(53,304
)
Adjusted for:
 
 
Business acquisition costs
4,529

—

Non-cash finance income and expense
11,597

10,373

Non-recurring disposals of fixed assets
—

1,457

Write-down of inventory to NRV
—

7,716

Gain on sale of mineral properties
(261
)
—

Impairment charges
—

34,490

Non-cash foreign exchange loss
2,730

5,468

Other items
3,022

837

Adjusted income before tax
83,996

7,037

 
 
 
Income tax expense per consolidated statement of income
(9,554
)
(4,276
)
 
 
 
Adjusted for:
 
 
Change in prior period estimates
(2,377
)
(3,713
)
Other items
(2,660
)
(4,939
)
Adjusted income tax expense
(14,591
)
(12,928
)
 
 
 
Adjusted net income
69,405

(5,891
)
 
 
 
Weighted average shares outstanding (000's), per consolidated statement of income
97,851

80,754

 
 
 
Adjusted basic income per share ($)
0.71

(0.07
)

Additional GAAP financial measures - income (loss) from mine operations

Income (loss) from mine operations represents the amount of revenues less mining and processing expenses, export duties, royalties, and depreciation and depletion expense. It also includes non-cash adjustments to inventories and restructuring provision, where applicable.

Additional GAAP financial measures - gross margin from mine operations

Gross margin from mine operations is the difference between revenue and cost of sales, divided by revenue, expressed as a percentage.

Additional GAAP financial measures - operating income (loss)

Operating income (loss) represents the income from mine operations less operating costs, such as general and administrative expenses, exploration and evaluation costs and impairment charges. This measure excludes foreign exchange, interest and other non-operating costs.


13.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Basis of preparation and accounting policies
Our condensed consolidated interim financial statements have been prepared in accordance with IFRS as issued by the IASB applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The comparative information has also been prepared on this basis.

30


The accounting policies applied in the preparation of our condensed consolidated interim financial statements are consistent with those applied and disclosed in our audited consolidated financial statements for the year ended December 31, 2015.
On April 1, 2015, we adopted all of the requirements of IFRS 9, Financial Instruments: Recognition and Measurement. The 2015 balances shown in the condensed consolidated interim statements of changes in shareholders' equity reflect this change.
Following our acquisition of Claude Resources on May 31, 2016, we have applied the following new accounting policies that were not previously applicable to our business. All other accounting policies applied in the preparation of our condensed interim consolidated financial statements are consistent with those applied and disclosed in our audited consolidated financial statements for the year ended December 31, 2015.
(i)
Underground mineral properties
At our underground mining operation, we incur development costs to build new shafts, drifts and ramps that enable us to access ore underground. The time over which we will continue to incur these costs depends on the mine life. These underground development costs are capitalized as incurred.
Capitalized underground development costs incurred to enable access to specific areas of the underground mine, and which only provide an economic benefit over the period of mining that area, are depreciated on a units-of-production basis, whereby the denominator is estimated recoverable ounces of gold in Proven and Probable Mineral Reserves in the related areas.
(ii)
Property, plant and equipment
The valuation attributed to estimated Mineral Resources conversion from the acquisition of Claude Resources is considered to be a mineral property not yet subject to depreciation. As these Mineral Resources are converted into Mineral Reserves, the asset is subject to depreciation over the recoverable ounces corresponding to the specific area of the mine plan. Exploration potential is recognized as an exploration and evaluation asset.
(iii)
Goodwill
Business acquisitions are accounted for using the acquisition method whereby acquired assets and liabilities are recorded at fair value as of the date of acquisition with the excess of the acquisition amount over such fair value being recorded as goodwill and allocated to cash generating units ("CGUs"). CGUs are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Each individual mining interest that is an operating mine is typically a CGU.
Goodwill arises principally because of the following factors: (1) the going concern value of our capacity to sustain and grow by replacing and augmenting Mineral Reserves through new discoveries; (2) the ability to capture buyer-specific synergies arising upon a transaction; and (3) the requirement to record a deferred tax liability for the difference between the assigned values and the tax bases of the assets acquired and liabilities assumed in a business combination.
Goodwill is not amortized; instead it is tested annually for impairment. In addition, at each reporting period we assess whether there is an indication that goodwill is impaired and, if there is such an indication, we would test for goodwill impairment at that time.
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. 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. The critical judgments and estimates applied in the preparation of the unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2016 are consistent with those applied and disclosed

31


in note 2(u) to our audited consolidated financial statements for the year ended December 31, 2015 other than those which related to the acquisition of Claude Resources, as discussed below.

(i)
Business combination: Acquisition of Claude Resources
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 acquiree, which was the date that consideration is transferred and when we assumed the assets and liabilities of the acquiree.

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. 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 assets valuations are based upon estimates of Mineral Reserves and Mineral Resources used in the life of mine plan, as well as estimates of future metal prices, production, costs, and economic assumptions around inflation rates and discount rates. The exploration and evaluation assets valuations are based upon estimates of future Mineral Resource discovery. The inventory valuation requires estimates of costs to convert inventory into saleable form. The reclamation provision requires an estimate of the timing of future cash flows and economic assumptions around inflation and discount rates.

(ii)
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. We have determined that the functional currency of Claude Resources is the U.S. dollar, as it is the currency in which Claude Resources primarily generates cash.


14.
FUTURE ACCOUNTING CHANGES

The below new standards have been issued but are not yet effective:

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, 2018. We are currently evaluating the impact the standard is expected to have on our consolidated financial statements.

Leases
The IASB has replaced IAS 17, Leases in its entirety with IFRS 16, Leases (“IFRS 16”), which will require lessees to recognize nearly all leases on the balance sheet to reflect their right to use an asset for a period of time and the associated liability to pay rentals. IFRS 16 is effective for annual periods commencing on or after January 1, 2019. We are currently evaluating the impact the standard is expected to have on our consolidated financial statements.

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


15.
INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES

Management is responsible for establishing and maintaining adequate internal control over financial reporting and disclosure controls and procedures. Any system of internal control over financial reporting, no matter how well

32


designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. There have been no changes in our internal control over financial reporting or disclosure controls and procedures during the three months ended September 30, 2016, that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

The scope of our internal control over financial reporting or disclosure controls and procedures for the period covered by this report excludes the Seabee Gold Operation. We completed the acquisition of the Seabee Gold Operation on May 31, 2016, and proceeded to integrate the operations and administration of the acquired operation immediately thereafter. Although the Seabee Gold Operation is currently subject to similar controls as our other operations for the consolidation and financial reporting of period-end results, we will formally expand our internal control over financial reporting or disclosure controls and procedures to include the Seabee Gold Operation in the second quarter of 2017. The Seabee Gold Operation represents $333.0 million of net assets (36%), $29.2 million of consolidated revenues (20% and 8% for the three and nine months ended September 30, 2016, respectively), and $0.3 million and $3.2 million of net earnings as at and for the three and nine months ended September 30, 2016, respectively.


16.
CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS AND MINERAL RESERVES AND MINERAL RESOURCES ESTIMATES

This MD&A contains forward-looking information within the meaning of Canadian securities laws and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (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,” “believes,” 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: future production of gold, silver and other metals; future costs of inventory, and cash costs, total costs and AISC per payable ounce of gold, silver and other metals sold; expected exploration and development expenditures; the prices of gold, silver and other metals; the timing of cessation of San Miguel open pit mining activities and stockpile processing at the Pirquitas mine; the effects of laws, regulations and government policies affecting our operations or potential future operations; future successful development of our projects; the anticipated benefits from the acquisition of Claude Resources; expected timing to complete engineering studies at the Chinchillas project and make a decision about whether to move forward with the project; the sufficiency of our current working capital, anticipated operating cash flow or our ability to raise necessary funds; estimated production rates for gold, silver and other metals produced by us; timing of production and the cash costs and total costs of production at the Marigold mine, the Seabee Gold Operation and the Pirquitas mine; the estimated cost of sustaining capital; ongoing or future development plans and capital replacement, improvement or remediation programs; the expected benefits of the new leach pad at the Marigold mine; the timing for discontinuing zinc data; the estimates of expected or anticipated economic returns from our mining projects, including future sales of metals, concentrate or other products produced by us; our ability to expand Mineral Resources and convert Mineral Resources into Mineral Reserves; 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 Marigold mine, the Seabee Gold Operation, the Pirquitas mine and our projects; our ability to replace Mineral Reserves; our ability to successfully integrate the acquisition of Claude Resources; subject to exercising our election to proceed, our ability to complete and successfully integrate Golden Arrow’s Chinchillas project, on a joint venture basis, into our current operations; commodity price fluctuations; political or economic instability and unexpected regulatory changes; currency

33


fluctuations; the possibility of future losses; general economic conditions; fully realizing the value of our shareholdings in Pretium and our other marketable securities, due to changes in price, liquidity or disposal cost of such marketable securities; potential export duty and related interest on past production and sales of silver concentrate from the Pirquitas mine; counterparty and market risks related to the sale of our concentrate and metals; uncertainty in the accuracy of Mineral Reserves and Mineral Resources estimates and in our ability to extract mineralization profitably; differences in U.S. and Canadian practices for reporting Mineral Reserves and Mineral Resources; lack of suitable infrastructure or damage to existing infrastructure; future development risks, including start-up delays and cost overruns; our ability to obtain adequate financing for further exploration and development programs and opportunities; uncertainty in acquiring additional commercially mineable mineral rights; delays in obtaining or failure to obtain governmental permits, or non-compliance with our permits; our ability to attract and retain qualified personnel and management; potential labour unrest, including labour actions by our unionized employees at the Pirquitas mine; the impact of governmental regulations, including health, safety and environmental regulations, including increased costs and restrictions on operations due to compliance with such regulations; reclamation and closure requirements for our mineral properties; failure to effectively manage our tailings facilities; social and economic changes following closure of a mine, including the expected closure of the Pirquitas mine in 2017, may lead to adverse impacts and unrest; unpredictable risks and hazards related to the development and operation of a mine or mineral property that are beyond our control; indigenous peoples’ title claims and rights to consultation and accommodation may affect our existing operations as well as development projects and future acquisitions; assessments by taxation authorities in multiple jurisdictions; recoverability of VAT and changes to the collection process in Argentina; claims and legal proceedings, including adverse rulings in litigation against us and/or our directors or officers; compliance with anti-corruption laws and internal controls, and increased regulatory compliance costs; complying with emerging climate change regulations and the impact of climate change, including extreme weather conditions; uncertainties related to title to our mineral properties and the ability to obtain surface rights; the sufficiency of our insurance coverage; civil disobedience in the countries where our mineral properties are located; operational safety and security risks; actions required to be taken by us under human rights law; competition in the mining industry for mineral properties; shortage or poor quality of equipment or supplies; an event of default under our 2013 Notes may significantly reduce our liquidity and adversely affect our business; failure to meet covenants under our senior secured revolving credit facility; conflicts of interest that could arise from certain of our directors' involvement with other natural resource companies; information systems security threats; 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 Annual Report on 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 those approvals and permits required for successful project permitting, construction and operation of our projects, 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 Marigold mine, the Seabee Gold Operation and the Pirquitas 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.


34




Qualified Persons

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 and a Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”). Mr. Rice is our Technical Services Manager and Mr. Carver is our Chief Geologist at the Marigold mine. The scientific and technical data contained in this MD&A relating to the Seabee Gold Operation has been reviewed and approved by Gordon Reed, P.Eng., and F. Carl Edmunds, P. Geo., each of whom is a Qualified Person under NI 43-101. Mr. Reed is our General Manager at the Seabee Gold Operation and Mr. Edmunds is our Chief Geologist, Exploration. The scientific and technical information contained in this MD&A relating to the Pirquitas mine has been reviewed and approved by Bruce Butcher, P.Eng., and F. Carl Edmunds, P. Geo., each of whom is a Qualified Person under NI 43-101. Mr. Butcher is our Director, Mine Planning.

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


35


Form 52-109F2
Certification of Interim Filings
Full Certificate

I, Paul Benson, Chief Executive Officer of Silver Standard Resources Inc., certify the following:
1.
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Silver Standard Resources Inc. (the “issuer”) for the interim period ended September 30, 2016.

2.
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3.
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4.
Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

5.
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b)
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1
Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is based on criteria established in “Internal Control - Integrated Framework (2013)” issued by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2
N/A





5.3
The issuer has disclosed in its interim MD&A

(a)
the fact that the issuer’s other certifying officer(s) and I have limited the scope of our design of DC&P and ICFR to exclude controls, policies and procedures of a business that the issuer acquired not more than 365 days before the last day of the period covered by the interim filings; and
(b)
summary financial information about the business that the issuer acquired that has been proportionately consolidated or consolidated in the issuer’s financial statements.
6.
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2016 and ended on September 30, 2016 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: November 8, 2016



Signed "Paul Benson"        
Paul Benson
Chief Executive Officer





Form 52-109F2
Certification of Interim Filings
Full Certificate

I, Gregory Martin, Chief Financial Officer of Silver Standard Resources Inc., certify the following:
1.
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Silver Standard Resources Inc. (the “issuer”) for the interim period ended September 30, 2016.

2.
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3.
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4.
Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

5.
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b)
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1
Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is based on criteria established in “Internal Control - Integrated Framework (2013)” issued by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2
N/A





5.3
The issuer has disclosed in its interim MD&A

(a)
the fact that the issuer’s other certifying officer(s) and I have limited the scope of our design of DC&P and ICFR to exclude controls, policies and procedures of a business that the issuer acquired not more than 365 days before the last day of the period covered by the interim filings; and
(b)
summary financial information about the business that the issuer acquired that has been proportionately consolidated or consolidated in the issuer’s financial statements.
6.
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2016 and ended on September 30, 2016 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: November 8, 2016



Signed "Gregory Martin"        
Gregory Martin
Chief Financial Officer





image0a01a06.jpg
November 8, 2016
News Release 16-30
SILVER STANDARD REPORTS THIRD QUARTER 2016 RESULTS
VANCOUVER, B.C. - Silver Standard Resources Inc. (NASDAQ: SSRI) (TSX: SSO) (“Silver Standard”) reports consolidated financial results for the third quarter ended September 30, 2016.

Paul Benson, President and CEO said, “In the third quarter of 2016 we demonstrated increased scale and healthy margin with our record quarterly production, among other operating records. We produced nearly 113,000 gold equivalent ounces at all-in sustaining costs of $940 per ounce, and have improved guidance at our Marigold and Pirquitas mines. Importantly, we continued to drive our Operational Excellence programs, which delivered tangible results at all operations, including our updated five-year outlook at Marigold, a successful plant trial at Seabee and record production and quarterly throughput at Pirquitas.”

“We further strengthened our balance sheet, which boasts $278 million of cash and cash equivalents and $178 million of marketable securities. Our three cash-flowing mines generated $53 million of operating cash flow, while we continued investing in our future. We also demonstrated once again the value held within our project portfolio with our announced project sales in the latter part of the quarter. The team delivered solid results in the third quarter and we remain focused on generating shareholder value through all parts of our business going forward.”

Third Quarter 2016 Highlights:
(All figures are in U.S. dollars unless otherwise noted)

▪
Strong financial performance: Achieved record quarterly revenue of $143.4 million, net income of $38.0 million or $0.32 per share and adjusted net income of $37.2 million or $0.31 per share.

▪
Increased cash balance: Quarter-end balance increased by $44.9 million to $277.5 million. Cash generated by operating activities totaled $53.1 million.

▪
Demonstrated scale and margin from three operations: Record quarterly production of 112,559 gold equivalent ounces at cash costs of $618 per equivalent gold ounce sold. 

▪
Lowered cash costs guidance at Marigold: Reported cash costs of $636 per payable ounce of gold sold, 4% lower compared to the previous quarter, and reduced cash costs guidance to between $640 and $680 per payable ounce of gold sold. Produced 47,456 ounces of gold, on track to meet annual guidance.

▪
Strong production at Seabee: Produced 20,142 ounces of gold at cash costs of $661 per payable ounce of gold sold.

▪
Improved production and cash costs guidance at Pirquitas: Produced a record 3.0 million ounces of silver, 21% higher than the second quarter of 2016, at record low cash costs of $8.48 per payable ounce of silver sold. Increased production guidance to between 9.5 and 10.5 million ounces of silver and decreased cash costs guidance to between $9.00 and $9.50 per payable ounce of silver sold.

▪
Favorable resolution of tax dispute with Canada Revenue Agency: Settled in our favor the tax dispute with the CRA which resulted in the repayment of our deposit of $18.2 million plus accrued interest.


Page 1


▪
Realized value through project portfolio: Subsequent to quarter end, completed the sale of our Parral properties in Mexico and our Diablillos and M-18 projects in Argentina, for future cash installments and shares valued at approximately $20 million.

Marigold mine, U.S.

 
 Three months ended
Operating data
September 30 2016

June 30 2016

March 31 2016

December 31 2015

September 30 2015

Total material mined (kt)
19,558

18,685

17,291

18,560

18,425

Waste removed (kt)
14,741

12,005

11,611

13,788

11,242

Total ore stacked (kt)
4,817

6,680

5,680

4,772

7,183

Strip ratio
3.1

1.8

2.0

2.9

1.6

Mining cost ($/t mined)
1.48

1.55

1.45

1.54

1.65

Gold stacked grade (g/t)
0.42

0.44

0.47

0.48

0.43

Processing cost ($/t processed)
0.95

0.70

0.71

0.86

0.66

Gold recovery (%)
71.0

70.7

70.0

69.9

69.7

General and admin costs ($/t processed)
0.56

0.38

0.47

0.47

0.41

 
 
 
 
 
 
Gold produced (oz)
47,456

47,195

50,520

61,461

41,262

Gold sold (oz)
47,278

47,124

48,605

62,827

39,525

 
 
 
 
 
 
Realized gold price ($/oz) (1)
1,330

1,259

1,189

1,084

1,110

 
 
 
 
 
 
Cash costs ($/oz) (1)
636

663

719

727

719

AISC ($/oz) (1)
1,139

1,067

841

799

998

 
 
 
 
 
 
Financial data ($000s)
 
 
 
 
 
Revenue
62,831

59,197

57,742

67,936

43,836

Income from mine operations
23,156

17,641

11,227

7,902

7,288

Capital investments
8,310

10,154

8,796

3,641

8,931

Capitalized deferred stripping
13,787

7,231

1,435

—

—

Exploration expenditures (2)
1,145

1,597

1,102

731

1,944


(1)
We report the non-GAAP financial measures of realized gold prices, cash costs and all-in sustaining costs ("AISC") per payable ounce of gold sold 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 (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our management's discussion and analysis of the financial position and results of operation for the three and nine months ended September 30, 2016 ("MD&A").
(2)
Includes capitalized and expensed exploration expenses.

Mine production

We produced 47,456 ounces of gold in the third quarter of 2016, in line with our second quarter gold production and on target to meet previously increased annual guidance. The construction of a new leach pad was completed on schedule and under budget in the latter half of the third quarter. The additional leach pad capacity and higher amount of ore tonnes stacked earlier in the year are expected to result in strong fourth quarter gold production.

A total of 19.6 million tonnes of material was mined in the third quarter, 5% higher than the second quarter of 2016 and a record for the mine, due to increased hauling capacity added to the fleet earlier in the year and shorter haul distances relating to the higher strip ratio. Approximately 4.8 million tonnes of ore were delivered

Page 2


to the leach pads at a gold grade of 0.42 g/t, containing approximately 47,000 recoverable ounces of gold stacked during the quarter. The strip ratio increased to 3.1:1 in the third quarter as we began stripping of the next phase of the Mackay pit. Gold recovery was 71% in the third quarter.

Mine operating costs

Cash costs and AISC per payable ounce of gold sold are non-GAAP financial measures. Please see “Cautionary Note Regarding Non-GAAP Measures”.

Cash costs, which include all costs of inventory, refining costs and royalties, of $636 per payable ounce of gold sold in the third quarter of 2016 were lower than cash costs of $663 per payable ounce of gold sold in the second quarter of 2016 as costs of inventory decreased due to improved mining costs and increased capitalized stripping. Costs per tonne mined decreased to $1.48 per tonne in the third quarter of 2016, 5% lower than in the second quarter of 2016 due to maintaining expenditure levels despite the increase in total tonnes mined. Processing unit costs were 36% higher in the third quarter of 2016 than in the second quarter of 2016 due to fewer tonnes stacked resulting from the higher strip ratio. General and administrative unit costs were also higher in the third quarter of 2016 than in the second quarter of 2016 due to fewer tonnes stacked but were comparable on an absolute basis.

AISC of $1,139 per payable ounce of gold sold in the third quarter of 2016 increased from $1,067 in the second quarter of 2016 due to higher capitalized stripping and capital expenditures related to the construction of the new leach pad during the second and third quarters of 2016.

Mine sales

A total of 47,278 ounces of gold were sold at an average price of $1,330 per ounce during the third quarter of 2016, compared to 47,124 ounces of gold sold at a 6% lower average price of $1,259 per ounce during the second quarter of 2016.

Exploration

Exploration activities in the third quarter of 2016 focused on drilling at the HideOut target and the Valmy property. The objective of these drilling activities is to convert Mineral Resources to Mineral Reserves and to expand Mineral Resources, in certain instances. As reported on November 7, 2016, two track-mounted rigs completed 13,408 meters of reverse circulation drilling in 50 drillholes on targets where previous results show potential for Mineral Resource additions or Mineral Reserve conversion. The 500-meter long corridor between HideOut and the 8 South pit extension area has been a focus of drilling activity. At the Valmy property, drilling during the quarter continued to extend the zone of mineralization to the south and east of the known mineralization at the Valmy pit. Results to date are expected to expand Mineral Resources. We expect to continue drilling outside of the current pit areas, including the eastern extension of the Basalt pit mineralization.

We expanded our gravity survey coverage at Marigold to include the additional lands to the east, south and west of the original mineral claims. These data, together with our understanding of the sub-surface geology, have been used to select drill sites for the deep sulphide exploration program targeting a high grade style of mineralization similar to that found at the Turquoise Ridge mine located 56 kilometers north of the Marigold mine. We expect to complete one deep core hole by the end of the fourth quarter of 2016, representing the sixth deep core hole targeting higher-grade sulphide mineralization. We plan to complete a total of three deep core holes by the end of the first quarter of 2017.


Page 3


The results from our ongoing exploration program and the completed Assay Program will be included in our annual 2016 Mineral Reserves and Mineral Resources estimate to be published in the first quarter of 2017.

Seabee Gold Operation, Canada

Operating data
Three months ended
September 30, 2016

Period from Acquisition to June 30, 2016 (1)

Three months ended
June 30, 2016 (2)

Total ore milled (t)
82,756

18,856

71,218

Ore milled per day (t/day)
900

629

783

Gold mill feed grade (g/t)
7.40

7.79

7.97

Mining costs ($/t mined)
58

110

N/A

Processing costs ($/t processed)
19

29

N/A

Gold recovery (%)
96.5

96.6

96.8

General and admin costs ($/t processed)
37

61

N/A

 
 
 
 
Gold produced (oz)
20,142

6,721

17,524

Gold sold (oz)
21,911

11,306

16,305

 
 
 
 
Realized gold price ($/oz) (3)
1,334

1,278

1,271

 
 
 
 
Cash costs ($/oz) (3,5)
661

663

N/A

AISC ($/oz) (3,5)
840

776

N/A

 
 
 
 
Financial data ($000s)
 
 
 
Revenue
29,214

14,437

N/A

Income from mine operations
4,126

1,216

N/A

Capital development
2,104

803

N/A

Capital investments
579

337

N/A

Exploration expenditures (4)
1,206

117

N/A


(1)
The data presented in this column is for the period from May 31, 2016, to June 30, 2016, the period for which we were entitled to all economic benefits of the Seabee Gold Operation following our acquisition of Claude Resources Inc. ("Claude Resources").
(2)
The data presented in this column includes operating results for the Seabee Gold Operation for the entire second quarter of 2016, including the period from April 1 to May 30, 2016 prior to our acquisition of Claude Resources.
(3)
We report the non-GAAP financial measures of realized gold prices, cash costs and AISC per payable ounce of gold sold to manage and evaluate operating performance at the Seabee Gold Operation. For a better understanding and a reconciliation of these measures to cost of sales, as shown in our consolidated statements of comprehensive income (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our MD&A.
(4)
Includes capitalized and expensed exploration expenses.
(5)
The non-GAAP measure of cash costs from the Seabee Gold Operation was adjusted to eliminate the adjustment of inventory to fair value as at the date of our acquisition of Claude Resources.

Mine production

The Seabee Gold Operation consists of the Seabee and Santoy underground mines, both of which feed a single processing facility. The mine produced 20,142 ounces of gold in the third quarter of 2016 despite a three-day continuation of the ten-day unplanned power outage which commenced in June 2016.


Page 4


A total of 82,756 tonnes of ore were milled at a gold grade of 7.4 g/t in the third quarter of 2016. The gold recovery was 96.5%. As part of our initial Operational Excellence plan for the Seabee Gold Operation, we successfully trialed higher mill throughput during the month of August. The mill processed ore at or above 1,000 tonnes per day, with an average of 998 tonnes per day in the month. We achieved this with minor modifications to the processing facility, while maintaining gold recovery. As a result, we were able to increase mill throughput in the third quarter by 15% to 900 tonnes per day, compared to the second quarter of 2016. We are reviewing the long-term mine plan to determine the feasibility of higher, sustainable throughput rates.

During the third quarter of 2016, the Santoy mine provided approximately 82% of total ore milled, while the Seabee mine provided 18%.

Mine operating costs

Cash costs and AISC per payable ounce of gold sold are non-GAAP financial measures. Please see “Cautionary Note Regarding Non-GAAP Measures”.

Cash costs per payable ounce of gold sold, which include all costs of inventory, refining costs and royalties and exclude the effect of the fair value adjustment at our acquisition of Claude Resources, were $661 in the third quarter of 2016. Costs per tonne mined were $58 per tonne in the third quarter, processing unit costs were $19 per tonne processed and general and administration unit costs were $37 per tonne. The decrease in the costs per tonne mined and milled in the third quarter of 2016 from June 2016 is due to higher tonnes mined and milled in total and also per day. Additionally, only a three-day unplanned power outage affected the third quarter of 2016, whereas in June 2016 the power outage lasted seven days.

AISC per payable ounce of gold sold, which also exclude the effect of the fair value adjustment at acquisition, were $840 in the third quarter of 2016, as capital spending remained modest with exploration spending increasing consistent with our objective of adding Mineral Reserves and Mineral Resources at the mine.

Mine sales

A total of 21,911 ounces of gold were sold at an average price of $1,334 per ounce during the third quarter of 2016.

Exploration

For 2016, the Seabee Gold Operation planned 65,000 meters of underground drilling and 18,000 meters of surface drilling with the objective to increase and convert Mineral Resources into Mineral Reserves. As reported on November 7, 2016, during the third quarter, we completed 13,540 meters of underground diamond drilling to upgrade Inferred Mineral Resources and explore further the extensions to the Santoy 8A and Santoy Gap deposits. From surface, we completed 6,172 meters of drilling exploring the down plunge extension of Santoy Gap 9A, 9B, and 9C deposits. Drilling intersected the projections of the mineralized structures at expected depths with anomalous results. Seven surface and underground drillholes were completed at the Santoy 8A target, of which five results were notable. Highlighted drill results from the third quarter include 5.8 meters at a grade of 27.86 g/t gold (SUG-16-920) from the 8A zone, 4.1 meters at a grade of 33.8 g/t gold (SUG-16-063) from the 9C zone and 5.0 meters at a grade of 31.94 g/t gold (SUG-16-919) from the 8A zone.
For the fourth quarter of 2016 at the Seabee Gold Operation, our focus underground and from surface will be on infill drilling at Santoy Gap with the objective to convert Inferred Mineral Resources to Measured and Indicated Mineral Resources.

Page 5


On October 6, 2016, we announced an option agreement to acquire an 80% interest in the adjacent Fisher property which lies south on strike from the ore deposits at Santoy Gap and 8A. This agreement doubles our prospective land position at the Seabee Gold Operation and planning for exploration work is underway.

Pirquitas mine, Argentina

 
Three months ended
Operating data
September 30 2016

June 30 2016

March 31 2016

December 31 2015

September 30 2015

Total material mined (kt)
2,385

2,543

2,520

2,712

2,746

Waste removed (kt)
1,584

1,814

1,726

1,966

2,219

Ore mined (kt)
801

729

794

746

527

Strip ratio
2.0

2.5

2.2

2.6

4.2

Silver mined grade (g/t)
190

189

181

187

188

Mining costs ($/t mined)
3.80

3.54

2.97

3.78

3.94

Ore milled (kt)
455

425

418

421

410

Silver mill feed grade (g/t)
264

238

247

237

238

Processing cost ($/t milled)
14.78

15.10

13.58

20.60

21.53

Silver recovery (%)
79.0

77.6

79.7

80.8

82.0

General and admin costs ($/t milled)
5.84

6.22

5.68

8.09

8.13

 
 
 
 
 
 
Silver produced ('000 oz)
3,047

2,526

2,639

2,588

2,576

Silver sold ('000 oz)
2,947

2,594

3,223

1,943

2,819

 
 
 
 
 
 
Realized silver price ($/oz) (1)
19.64

16.52

14.94

15.00

14.97

 
 
 
 
 
 
Cash costs ($/oz) (1)
8.48

8.87

8.93

10.96

11.02

AISC ($/oz) (1)
9.87

10.03

9.67

12.78

12.68

 
 
 
 
 
 
Financial Data ($000s)
 
 
 
 
 
Revenue
51,336

45,141

47,711

22,656

33,355

Income (loss) from mine operations (2)
31,908

25,205

12,071

(28,387
)
(14,684
)
Capital investments
3,158

2,057

1,578

2,305

2,500

Capitalized stripping
—

—

—

—

—

Exploration expenditures
7

25

22

234

1,124


(1)
We report the non-GAAP financial measures of realized silver prices, cash costs and AISC per payable ounce of silver sold 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 (loss), please refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our MD&A.
(2)
Income (loss) from mine operations for the quarters ended December 31, 2015, and September 30, 2015, include $24.6 million and $7.7 million, respectively, of non-cash adjustments to stockpile, warehouse inventory and severance provision at the Pirquitas mine.

Mine production

The Pirquitas mine produced 3.0 million ounces of silver during the third quarter of 2016, a quarterly record for the mine, which enabled our 2016 production guidance to be increased. Higher silver production is a result of record ore tonnes milled, higher silver mill feed grade and higher silver recovery.

Ore was milled at an average rate of 4,946 tonnes per day in the third quarter. During August 2016, the mill operated at an average rate of over 5,200 tonnes per day, a record for the mill since it began operating, a result of one of our ongoing Operational Excellence programs. Ore milled contained an average silver grade

Page 6


of 264 g/t, 11% higher than the 238 g/t reported in the second quarter as additional tonnes of higher grade ore, relative to the production model, encountered in the lower benches of the San Miguel open pit enabled selective milling of higher grades and stockpiling of lower grades. Detailed planning and consultation for the cessation of open pit mining in the first quarter of 2017 is well underway. Thereafter, medium and lower grade stockpile material will be processed through the plant in 2017. The average recovery rate for silver in the third quarter of 79.0% was 2% higher than the 77.6% in the previous quarter.

Mine operating costs

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

Cash costs, which include cost of inventory, treatment and refining costs and by-product credits, decreased by 4% to $8.48 per payable ounce of silver sold in the third quarter of 2016 from $8.87 per payable ounce of silver sold in the second quarter of 2016. Mining costs per tonne increased due primarily to longer hauls, higher diesel prices and inflation which increased at a rate greater than the Argentine peso devalued. This increase was more than offset by the lower processing costs and general and administration costs per tonne due to higher plant throughput. The second quarter of 2016 benefited marginally from residual by-product revenue from zinc of about $0.20 per payable ounce of silver sold whereas, as planned, there were no zinc sales in the current quarter.

AISC of $9.87 per payable ounce of silver sold were lower in the third quarter of 2016 than the $10.03 per payable ounce of silver sold in the second quarter of 2016 despite higher capital spend as we commenced the construction on the phase 5 tailings lift required to process stockpiles to the end of 2017.

Mine sales

We recognized sales of 2.9 million ounces of silver, higher than the 2.6 million in the second quarter, as a result of higher production and timing of concentrate shipments.

Chinchillas project, Argentina

During the second quarter of 2016, Golden Arrow Resources Corporation ("Golden Arrow") released a revised Mineral Resources estimate and technical report for the Chinchillas project following an infill drilling program of 115 core drillholes comprising 15,142 meters of drilling. As part of the continuing engineering studies, a program of condemnation drilling commenced beneath areas selected for major infrastructure, such as the waste rock facility. During the third quarter, 16 core drillholes for 3,252 meters were completed to investigate the presence of near surface mineralization underlying and proximal to the proposed waste rock facility. The results of this work were reported by Golden Arrow in news releases on September 7, 2016, and October 3, 2016. In addition to this work, geotechnical, hydrological, metallurgical and environmental baseline studies, along with community engagement programs, continued. In the third quarter of 2016, we funded approximately $2.9 million for work on the Chinchillas project, bringing total expenditures to date to $10.5 million.
We are undertaking the relevant engineering studies to determine the economic viability of the Chinchillas project as a satellite mine feeding the Pirquitas plant and extending the life of the operation. Our option agreement with Golden Arrow requires the notice of exercise in regards to forming a joint venture by March 31, 2017. All technical work is scheduled for completion in advance of that date to enable a decision with regards to such notice.



Page 7


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) ("Customs") levied an export duty of approximately 10% from concentrate for projects with fiscal stability agreements pre-dating 2002 and Customs has asserted that the Pirquitas mine is subject to this duty. We have challenged the legality of the export duty applied to silver concentrate 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 Customs from withholding the 10% export duty on silver concentrate (the “Injunction”), pending the decision of the courts with respect to our challenge of the legality of the application of the export duty. On June 21, 2016 the Federal Court (Jujuy) ruled that the Injunction would remain in place subject to certain conditions, including the provision by August 5, 2016, of a guarantee by Silver Standard against liabilities arising from export duties and applicable interest as well as security from Mina Pirquitas, LLC on certain assets at the Pirquitas mine. We have appealed the condition to provide the parent guarantee. The requirement for the guarantee and security is suspended pending the outcome of that appeal. We are also continuing discussions with the Federal Tax Authority and other government officials for potential resolution of the claim. We cannot predict the outcome of the court proceedings and those discussions. If we do not reach a successful resolution of the matter, the Federal Tax Authority may make further application to the court to have the Injunction lifted and, upon that, initiate proceedings to collect the accrued export duties and its claimed interest. The lifting of the Injunction does not impact our underlying challenge of the legality of the application of export duties or remedies available under the Fiscal Agreement. Changes in our assessment of this matter could result in material adjustments to our consolidated statements of income (loss).


Page 8


Outlook

This section of the news release provides management's production and cost estimates. See "Cautionary Note Regarding Forward-Looking Statements."
We completed the acquisition of Claude Resources Inc. ("Claude Resources"), which owned the Seabee Gold Operation in northern Saskatchewan, Canada, on May 31, 2016. The operation has been in continuous production since 1991 and consists of two operating mines (the Seabee mine and Santoy mine complex), a central milling facility, camp facilities and important regional exploration targets. We also acquired the 40,400 hectare Amisk gold project in northeastern Saskatchewan.

With strong operating performance through the third quarter of 2016 combined with our outlook for the fourth quarter, we are able to improve certain guidance metrics.

At the Marigold mine, for the third time this year, annual cash costs guidance is being reduced to between $640 and $680 per payable ounce of gold sold from previous guidance of between $650 and $700 per payable ounce of gold sold reflecting continued lower diesel prices and the overcall of mined ounces from the Mackay open pit. Production, capital and capitalized stripping guidance at Marigold remain unchanged.

Annual silver production guidance for the Pirquitas mine has been revised upward for the second time this year to between 9.5 and 10.5 million ounces from previous guidance of between 9.0 and 10.0 million ounces, due to additional ore tonnes being mined from the lower benches of the San Miguel open pit. Additionally, for the third time this year, cash costs guidance is being reduced to between $9.00 and $9.50 per payable ounce of silver sold, reflecting lower diesel prices, continued stronger operating performance and effective cost control. Capital expenditure guidance at Pirquitas remains unchanged.

Operating Guidance
 
Marigold mine

Seabee Gold Operation(2)

Pirquitas mine

Gold Production
oz
200,000 - 210,000

32,000 - 35,000

—

Silver Production
Moz
—

—

9.5 - 10.5

Cash costs per payable ounce sold (1)
$/oz
640 - 680

610 - 640

9.00 - 9.50

Capital Expenditures
$M
32

2

12

Capitalized Stripping Costs
$M
30

6

—

(1)
We report the non-GAAP financial measure of cash costs per payable ounce of gold and silver sold to manage and evaluate operating performance at the Marigold mine, the Seabee Gold Operation and the Pirquitas mine. See “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our MD&A.
(2)
Guidance for the Seabee Gold Operation is for the period from July 1, 2016 to December 31, 2016, and is estimated based on an exchange rate of 1.30 CAD/USD.


Page 9


Consolidated Financial Summary

Selected Financial Data (1)
 
 
Three months ended September 30
Nine months ended September 30
 
2016

2015

2016

2015

 
$

$

$

$

Revenue
143,381

77,191

363,669

284,730

Income (loss) from mine operations (2)
59,190

(7,396
)
126,550

39,325

Operating income (loss) (2)
50,248

(50,733
)
89,099

(24,244
)
Net income (loss) for the period (2)
38,042

(59,416
)
52,825

(57,580
)
Basic income (loss) per share
0.32

(0.74
)
0.54

(0.71
)
Adjusted income (loss) before tax (3)
45,168

(11,844
)
83,996

7,037

Adjusted net income (loss) (3)
37,214

(10,127
)
69,405

(5,891
)
Adjusted basic income (loss) per share (3)
0.31

(0.13
)
0.71

(0.07
)
Cash generated by operating activities
53,066

998

96,554

53,560

Cash (used in) investing activities
(10,581
)
(17,288
)
(19,222
)
(33,766
)
Cash generated by (used in) financing activities
2,599

—

(11,400
)
(1,649
)
 
 
 
 
Financial Position
September 30, 2016

December 31, 2015

 
 
Cash and cash equivalents
277,544

211,862

 
 
Current assets - total
690,206

476,734

 
 
Current liabilities - total
133,943

135,851

 
 
Working capital
556,263

340,883

 
 
Total assets
1,454,618

871,677

 
 
(1)
All values are presented in thousands of U.S. dollars, except per share values.
(2)
Loss from mine operations for the three and nine months ended September 30, 2015 includes a $7.7 million non-cash write-down of stockpile inventory to its net realizable value at the Pirquitas mine. Operating Loss and Net Loss for the three and nine months ended September 30, 2015 include non-cash, pre-tax impairment charge and write-downs of $42.2 million related to the Pirquitas mine.
(3)
We report non-GAAP measures including adjusted income before- and after-tax, to manage and evaluate our operating performance. Please see "Cautionary Note Regarding Non-GAAP Measures".

Quarterly financial summary

The 86% increase in quarterly revenue compared to the third quarter of 2015 was due to higher realized prices of gold by 20% and silver by 31%, combined with a 48% increase in gold equivalent ounces sold, largely due to sales from the newly-acquired Seabee Gold Operation and stronger sales and production from the Pirquitas mine.

Income from mine operations in the third quarter of 2016 generated a positive gross margin of 41%, significantly higher than the negative 10% margin in the third quarter of 2015 due to higher precious metals prices, lower cost of sales, particularly at the Pirquitas mine, and the addition of the Seabee Gold Operation. The loss from mining operations in the third quarter of 2015 was also negatively impacted by the write-down of low grade stockpiles at the Pirquitas mine in the amount of $7.7 million. Operating income in the third quarter of 2015 was negatively impacted by a $34.5 million impairment of the Pirquitas mine.

Cash generated by operating activities increased significantly to $53.1 million compared to $1.0 million in the third quarter of 2015. The higher prices of gold and silver and the higher volumes sold at lower unit cost generated significantly higher cash from operating activities. We used $10.6 million in investing activities in the third quarter of 2016 compared to $17.3 million in the third quarter of 2015. Investments relating to

Page 10


the addition of the Seabee Gold Operation, seasonally higher investments at Marigold and capitalized stripping totaling $30.8 million were partially offset by receipt of our deposit of $18.2 million plus accrued interest from the Canada Revenue Agency ("CRA"). In the comparative quarter of 2015, we invested $13.0 million in plant and equipment at the Marigold mine, and acquired the Valmy property for $11.5 million and this was offset by the release of $7.5 million of restricted cash.

Year-to-date financial summary

The increase in revenue for the nine months ended September 30, 2016, of 28%, compared to the nine months ended September 30, 2015, resulted from higher sales of gold equivalent payable ounces by 17% due to sales from the newly-acquired Seabee Gold Operation and strong performance at the Pirquitas mine and also higher prices of gold by 7.5% and silver by 6%.

Income from mine operations in the nine months ended September 30, 2016, generated a gross margin of 35%, higher than the 14% in the nine months ended September 30, 2015, mainly due to higher precious metals prices and lower cost of sales, particularly at the Pirquitas mine. The income from mine operations in the nine months ended September 30, 2015, was also negatively impacted by the write-down of low grade stockpiles at the Pirquitas mine in the amount of $7.7 million. Operating income in the nine months ended September 30, 2016, was significantly higher than in the comparative period which was also negatively impacted by a $34.5 million impairment of the Pirquitas mine.

Cash generated from operating activities was $96.6 million in the nine months ended September 30, 2016, compared to $53.6 million in the comparative period of 2015 as a result of improved margins at Marigold and Pirquitas and the addition of the strong cash producing Seabee Gold Operation in May 2016. In the nine months ended September 30, 2016, we invested $31.2 million in plant and equipment and $22.5 million in capitalized stripping primarily at the Marigold mine, higher by $3.5 million and $9.9 million, respectively, than in the comparative period. Cash used in investing activities was significantly lower in the nine months ended September 30, 2016, than in the nine months ended September 30, 2015, as we received $16.9 million of cash in the Claude Resources acquisition, collected the CRA deposit of $18.2 million plus accrued interest and received $4.4 million from the sale of marketable securities. In the comparative period, we paid the deposit to CRA but received $20.0 million as a final payment from the sale of the San Agustin project. Cash used in financing activities in the nine-month period includes repayment of Claude Resources' $13.7 million credit facility, full repayment of the short-term debt in Argentina and receipt of $6.4 million from the exercise of stock options.

Corporate Summary

The tax dispute with the CRA has now been settled in our favor. On August 24, 2016, the CRA issued a new notice of reassessment for each of the 2010 and 2011 taxation years reversing the Notice of Reassessment (“NOR”) issued to us in January 2015 and, on September 2, 2016, refunded the deposit we paid to the CRA to appeal, plus accrued interest from the date of payment of the deposit. Following the receipt of the deposit, with accrued interest, the Department of Justice (“DOJ”) filed a notice of discontinuance of our appeal with the Tax Court of Canada.

In September 2016, we announced the sale of 100% of our Parral properties in Chihuahua, Mexico, including the Veta Colorada, La Palmilla, and San Patricio properties (collectively, the “Parral properties”) to Endeavour Silver Corp. (“Endeavour Silver”) for $6.0 million of Endeavour Silver shares (based on the average of the closing prices of Endeavour Silver shares sold on the NYSE during the ten trading days prior to September 13, 2016). We also announced a transaction on our Diablillos and M-18 projects, located in Argentina, with Huayra Minerals Corporation ("Huayra") for cash payments of approximately $1.5 million over the first two years and $12.5 million over the following three to five years, a 19.9% equity interest in Huayra, with free

Page 11


carried interest until the completion of a public offering of $5.0 million or more, and a 1.0% net smelter returns royalty on production from each of the projects. Each of these transactions were completed subsequent to quarter end.

On August 19, 2016, we sold 100% of our Juncal and La Flora projects in Region II, Chile to Austral Gold Limited (ASX: AGD) for aggregate consideration of $250,000 in cash and a 1.0% net smelter return royalty on production from the projects.

Qualified Persons
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 National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). Mr. Rice is our Technical Services Manager and Mr. Carver is our Chief Geologist at the Marigold mine. The scientific and technical data contained in this news release relating to the Seabee Gold Operation has been reviewed and approved by Gordon Reed, P.Eng., and F. Carl Edmunds, P. Geo., each of whom is a Qualified Person under NI 43-101. Mr. Reed is our General Manager at the Seabee Gold Operation and Mr. Edmunds is our Chief Geologist, Exploration. The scientific and technical information contained in this news release relating to the Pirquitas mine has been reviewed and approved by Bruce Butcher, P.Eng., and F. Carl Edmunds, P. Geo., each of whom is a Qualified Person under NI 43-101. Mr. Butcher is our Director, Mine Planning.

Management Discussion & Analysis and Conference Call

This news release should be read in conjunction with our unaudited condensed consolidated interim financial statements and our 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: Wednesday, November 9, 2016, at 11:00 a.m. EST.
 
Toll-free in U.S. and Canada:
+1 (800) 319-4610
 
All other callers:
+1 (416) 915-3239
 
Webcast:
ir.silverstandard.com

▪
The conference call will be archived and available at ir.silverstandard.com.
Audio replay will be available for two weeks by calling:
 
Toll-free in U.S. and Canada:
+1 (855) 669-9658, replay code 0879
 
All other callers:
+1 (412) 317-0088, replay code 0879

About Silver Standard

Silver Standard is a Canadian-based precious metals producer with three wholly-owned and operated mines, including the Marigold gold mine in Nevada, U.S., the Seabee Gold Operation in Saskatchewan, Canada and the Pirquitas silver mine in Jujuy Province, Argentina. We also have two feasibility stage projects and an extensive portfolio of exploration properties throughout North and South America. We are committed to delivering safe production through relentless emphasis on Operational Excellence. We are also focused on growing production and Mineral Reserves through the exploration and acquisition of assets for accretive growth, while maintaining financial strength.


Page 12


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.

Cautionary Note Regarding Forward-Looking Statements

This news release contains forward-looking information within the meaning of Canadian securities laws and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (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,” “believes,” 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: future production of gold, silver and other metals; future costs of inventory, and cash costs, total costs and AISC per payable ounce of gold, silver and other metals sold; expected exploration and development expenditures; the prices of gold, silver and other metals; the timing of cessation of San Miguel open pit mining activities and stockpile processing at the Pirquitas mine; the effects of laws, regulations and government policies affecting our operations or potential future operations; future successful development of our projects; the anticipated benefits from our acquisition of Claude Resources; expected timing to complete engineering studies at the Chinchillas project and make a decision about whether to move forward with the project; the sufficiency of our current working capital, anticipated operating cash flow or our ability to raise necessary funds; estimated production rates for gold, silver and other metals produced by us; timing of production and the cash costs and total costs of production at the Marigold mine, the Seabee Gold Operation and the Pirquitas mine; the estimated cost of sustaining capital; ongoing or future development plans and capital replacement, improvement or remediation programs; the expected benefits of the new leach pad at the Marigold mine; the estimates of expected or anticipated economic returns from our mining projects, including future sales of metals, concentrate or other products produced by us; our ability to expand Mineral Resources and convert Mineral Resources into Mineral Reserves; 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 Marigold mine, the Seabee Gold Operation, the Pirquitas mine and our projects; our ability to replace Mineral Reserves; our ability to successfully integrate our acquisition of Claude Resources; subject to exercising our election to proceed, our ability to complete and successfully integrate Golden Arrow’s Chinchillas project, on a joint venture basis, into our current operations; commodity price fluctuations; political or economic instability and unexpected regulatory changes; currency fluctuations; the possibility of future losses; general economic conditions; fully realizing the value of our shareholdings in Pretium Resources Inc. and our other marketable securities, due to changes in price, liquidity or disposal cost of such marketable securities; potential export duty and related interest on past production and sales of silver concentrate from the Pirquitas mine; counterparty and market risks related to the sale of our concentrate and metals; uncertainty in the accuracy of Mineral Reserves and Mineral Resources estimates and in our ability to extract mineralization profitably; differences in U.S. and Canadian practices for reporting Mineral Reserves and Mineral Resources; lack of

Page 13


suitable infrastructure or damage to existing infrastructure; future development risks, including start-up delays and cost overruns; our ability to obtain adequate financing for further exploration and development programs and opportunities; uncertainty in acquiring additional commercially mineable mineral rights; delays in obtaining or failure to obtain governmental permits, or non-compliance with our permits; our ability to attract and retain qualified personnel and management; potential labour unrest, including labour actions by our unionized employees at the Pirquitas mine; the impact of governmental regulations, including health, safety and environmental regulations, including increased costs and restrictions on operations due to compliance with such regulations; reclamation and closure requirements for our mineral properties; failure to effectively manage our tailings facilities; social and economic changes following closure of a mine, including the expected closure of the Pirquitas mine in 2017, may lead to adverse impacts and unrest; unpredictable risks and hazards related to the development and operation of a mine or mineral property that are beyond our control; indigenous peoples' title claims and rights to consultation and accommodation may affect our existing operations as well as development projects and future acquisitions; assessments by taxation authorities in multiple jurisdictions; recoverability of value added tax and changes to the collection process in Argentina; claims and legal proceedings, including adverse rulings in litigation against us and/or our directors or officers; compliance with anti-corruption laws and internal controls, and increased regulatory compliance costs; complying with emerging climate change regulations and the impact of climate change, including extreme weather conditions; uncertainties related to title to our mineral properties and the ability to obtain surface rights; the sufficiency of our insurance coverage; civil disobedience in the countries where our mineral properties are located; operational safety and security risks; actions required to be taken by us under human rights law; competition in the mining industry for mineral properties; shortage or poor quality of equipment or supplies; an event of default under our convertible notes may significantly reduce our liquidity and adversely affect our business; failure to meet covenants under our senior secured revolving credit facility; conflicts of interest that could arise from certain of our directors' involvement with other natural resource companies; information systems security threats; 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 Annual Report on Form 40-F filed with the U.S. Securities and Exchange Commission (“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 those approvals and permits required for successful project permitting, construction and operation of our projects, 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 Marigold mine, the Seabee Gold Operation and the Pirquitas 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 SEC 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

Page 14


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 cash costs, total costs and AISC per payable ounce of precious metals sold, realized metal prices, adjusted income (loss) before tax, adjusted income tax (expense), adjusted net income (loss) and adjusted basic earnings (loss) per share. Non-GAAP financial measures do not have any standardized meaning prescribed under IFRS and, therefore, they may not be comparable to similar measures reported by other companies. 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. Readers should refer to “Non-GAAP and Additional GAAP Financial Measures” in section 12 of our MD&A, available under our corporate profile at www.sedar.com or on our website at www.silverstandard.com, for a more detailed discussion of how we calculate such measures and for a reconciliation of such measures to IFRS terms.

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