Investment in Affiliates

3 Months Ended

Mar. 31, 2022

12. Investment in Affiliate

During the three months ended March 31, 2022 and 2021, the Company recognized $24,614 and $2,701 of income, respectively, on its investment in the LGJV Entities, representing its ownership share of the LGJV Entities’ results. The equity income in affiliates includes amortization of the carrying value of the investment in excess of the underlying net assets of the LGJV Entities. This basis difference is being amortized as the LGJV Entities’ proven and probable reserves are processed.

The Company provided an updated technical report compliant with Regulation S-K subpart 1300 (the “Los Gatos Technical Report”) dated November 10, 2022. The Los Gatos Technical Report indicated a significant decrease in the mineral reserve and mineral resource from the previously issued technical report in 2020. The Company considered this reduction in the mineral reserve and mineral resources as an indicator of a possible other-than-temporary impairment and as a result compared the carrying value of the LGJV on December 31, 2021 to the fair value of the LGJV.

The fair value of the LGJV was estimated based on the net present value of the expected cash flows to be generated by the LGJV on 70% basis. The discount rate used was 5.00%. The fair value of the investment in the LGJV was estimated to be $355,310 and the carrying value at December 31, 2021 was $406,874. Since the carrying value exceeded the fair value, an impairment charge of $51,564 was recorded during the fourth quarter of 2021. See Note 8 - Fair Value Measurements for additional detail of the assumptions used in the determination of the fair value of the long-lived assets tested for impairment.

For the year ended December 31, 2021, the Company contributed $260,039 to the LGJV to repurchase 18.5% of the ownership of the LGJV, to retire the WCF and the Term Loan and in support of exploration activities.

The LGJV Entities combined balance sheets as of March 31, 2022, and December 31, 2021, and the combined statements of income for the three months ended March 31, 2022 and 2021, are as follows:

LOS GATOS JOINT VENTURE

COMBINED BALANCESHEETS (UNAUDITED)

(in thousands)


	March 31,		December 31,
	2022		2021
ASSETS
Current Assets
Cash and cash equivalents	$	41,231	$	20,280
Receivables		19,396		11,263
Inventories		12,156		11,062
VAT receivable		31,845		46,242
Other current assets		9,434		4,515
Total current assets		114,062		93,362
Non‑Current Assets
Mine development, net		232,950		229,076
Property, plant and equipment, net		192,940		190,896
Net deferred tax assets		21,623		9,226
Total non‑current assets		447,513		429,198

Total Assets	$	561,575	$	522,560

LIABILITIES AND OWNERS' CAPITAL

Current Liabilities
Accounts payable and accrued liabilities	$	35,854	$	33,179
Related party payable		632		1,609
Accrued interest		27		51
Income taxes		9,965		6,315
Equipment loans		3,855		5,534
Unearned Revenue		—		1,714
Total current liabilities		50,333		48,402

Non‑Current Liabilities
Equipment loans		204		478
Lease liability		313		—
Reclamation obligations		14,982		14,706
Total non‑current liabilities		15,499		15,184

Owners' Capital
Capital contributions		540,638		540,638
Paid‑in capital		18,219		18,370
Accumulated deficit		(63,114)		(100,034)
Total owners' capital		495,743		458,974
Total Liabilities and Owners' Capital	$	561,575	$	522,560

LOS GATOS JOINT VENTURE

COMBINED STATEMENTS OF INCOME (UNAUDITED)

(in thousands)


	Three Months Ended
	March 31,
	2022		2021
Revenue	$	87,608	$	46,330

Expenses
Cost of sales		25,088		19,805
Royalties		1,494		884
Exploration		2,121		649
General and administrative		2,820		3,246
Depreciation, depletion and amortization		16,342		10,949
Total operating expenses		47,865		35,533
Other expense
Interest expense		91		2,117
Accretion expense		276		228
Other income		(1,339)		(30)
Foreign exchange (gain) loss		(691)		1,630
Total other (income) expense		(1,663)		3,945

Income before income and mining taxes		41,406		6,852

Income and mining tax expense		(4,486)		—

Net income	$	36,920	$	6,852