Avino Silver & Gold Mines Ltd. — FY2020 Form 20-F
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS and presented in U.S. dollars unless noted otherwise.
Business context
Avino is a Canadian mining company focused primarily on silver, gold and copper operations in Durango, Mexico. San Gonzalo ceased mining in the fourth quarter of 2019 after reaching the end of its current resources. Avino’s operations were temporarily suspended in 2020 amid COVID-19 restrictions and a labor strike. Although the strike was resolved in October, resumption remained subject to approval of the settlement by Mexican labor authorities. The company sold its Bralorne mine in 2019 and is concentrating on Mexico.
Key financial metrics
| Metric (US$ unless stated) | FY2020 | FY2019 |
|---|---|---|
| Revenue | $16.022 million | $31.746 million |
| Cost of sales | $15.832 million | $32.016 million |
| Mine operating income (loss) | $0.190 million | $(0.270) million |
| Loss from continuing operations | $(7.482) million | $(2.335) million |
| Net loss | $(7.651) million | $(31.461) million |
| Basic loss per share | $(0.09) | $(0.45) |
| Cash and cash equivalents at year-end | $11.713 million | $9.625 million |
| Working capital | $14.680 million | $13.209 million |
| Total assets / total liabilities | $68.780 million / $9.772 million | $72.571 million / $18.648 million |
| Operating cash flow | $0.072 million | $5.507 million |
Mine operating margin was approximately 1.2% in 2020, versus a negative margin in 2019. Year-end borrowings and lease obligations included a $2.513 million term facility, $0.072 million of equipment loans and $0.486 million of finance leases. The term facility was due to be repaid by September 2021; Avino had an exclusive concentrate sales commitment to Samsung through December 2024. Cash included $2.062 million held by Mexican subsidiaries, which could incur Canadian tax if repatriated.
Operating performance and changes
- Revenue fell about 49% year over year, principally because COVID-related restrictions and the strike curtailed production and shipments. Higher realized silver and gold prices partly offset the decline.
- Avino Mine processed 199,575 tonnes in 2020, versus 427,147 in 2019; reported silver-equivalent production was 835,370 ounces versus 1,656,091. San Gonzalo had no 2020 production.
- Operating cash flow declined to $72,000. Investing cash outflow was $2.167 million and financing cash inflow was $4.203 million. Year-end cash increased by $2.108 million.
- Continuing-operations losses increased, while the smaller total net loss compared with 2019 mainly reflects the prior-year $28.890 million loss on the Bralorne disposal. The 2020 loss also included a $2.733 million non-cash realized warrant-exercise loss and other fair-value and foreign-exchange effects.
- Avino reported no mineral reserves. The January 2021 technical report estimated 20.253 million tonnes of measured and indicated resources and 6.545 million tonnes inferred across the Avino and San Gonzalo systems and oxide tailings. Resources are not reserves and do not demonstrate economic viability.
Outlook, risks and unusual items
- Management estimated 2021 mine operating and administrative expenses of $24.865 million and capital plus exploration spending of $10.308 million, totaling $35.173 million. The filing says capital must be raised to fund these plans; activities could be curtailed if financing is unavailable. These are planned costs, not production or earnings guidance.
- Subsequent to year-end, the company reported $17.732 million of gross proceeds from ATM share sales, plus $0.717 million from warrant exercises and C$0.305 million from option exercises. The ATM proceeds involved substantial additional share issuance.
- COVID-19, labor and regulatory approvals, metal-price volatility, foreign exchange, financing access, customer concentration and permitting are key risks. One customer accounted for more than 75% of 2020 revenue; the financial statements identify three concentrate customers.
- Management reported no impairment indicators at December 31, 2020, but the auditor identified assessment of impairment indicators for the Avino Mine as a critical audit matter. The auditor’s opinion on the financial statements was unqualified; it did not express an opinion on internal-control effectiveness.
- Reclamation provision was $0.808 million on a present-value basis; the estimated undiscounted obligation was $1.275 million. The company does not expect to pay dividends in the foreseeable future.
Important facts for investors to verify
- Whether Mexican labor-authority approval was obtained and when operations resumed, including actual subsequent production and shipment levels.
- Whether available cash, operating receipts and financing can cover the stated 2021 spending plan and scheduled debt repayments.
- The assumptions, confidence classifications and economic limitations of the resource estimates; the filing reports no proven or probable reserves and no feasibility study for the producing mines.
- Customer concentration, concentrate sales terms and the status of the Samsung facility and exclusive sales arrangement.
- Post-year-end share issuance, remaining ATM capacity, and the resulting dilution; also verify the value and liquidity of the Talisker investment.