91
CONSOLIDATED FINANCIAL STATEMENTS
DRIVING GROWTH FROM WITHIN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(All amounts in US$‘000’s unless otherwise stated)
In view of the uncertainties concerning environmental reclamation, the ultimate cost of reclamation activities could differ
materially from the estimated amount recorded. The estimate of the Company’s decommissioning and restoration liability
relating to the Caylloma and San Jose mines are subject to change based on amendments to laws and regulations and
as new information regarding the Company’s operations becomes available.
Future changes, if any, to the estimated liability as a result of amended requirements, laws, regulations, operating
assumptions, estimated timing and amount of obligations may be significant and would be recognized prospectively as
a change in accounting estimate. Any such change would result in an increase or decrease to the liability and a
corresponding increase or decrease to the mineral properties, plant and equipment balance. Adjustments to the carrying
amounts of the related mineral properties, plant and equipment balance can result in a change to the future depletion
expense.
12. Income Tax
a) Income tax expense differs from the amount that would be computed by applying the Canadian statutory income tax
rate of 26% (2013: 25.75%) to income before income taxes. The reasons for the differences are as follows:
December 31,
December 31,
2014
2013
Income before tax
$ 32,879
$ (9,970)
Statutory income tax rate
26.00%
25.75%
Expected income tax
$
8,549
$ (2,567)
Items non-deductible for income tax purposes
1,665
1,458
Difference between Canadian and foreign tax rates
2,046
407
Effect of change in tax rates
(41)
306
Impact of foreign exchange on tax assets and liabilities
790
1,244
Special Mining Royalty
1,715
7,677
Other items
128
(766)
Unused tax losses and tax offsets not recognized in tax asset
2,425
1,371
Total income taxes
$ 17,277
$ 9,130
Represented by:
Current income tax
$ 13,510
$
4,926
Deferred income tax
3,767
4,204
$ 17,277
$
9,130
The Canadian Federal corporate tax rate remained unchanged at 15% throughout 2013, and the British Columbia
provincial tax rate increased from 10% to 11% effective April 1, 2013. For 2014, the overall increase in tax rates has
resulted in an increase in the Company’s statutory tax rate from 25.75% to 26%.
In the fourth quarter 2014, a tax rate change was enacted in Peru, reducing corporate income tax rates. The Company
has a legal stability agreement with the Peruvian government and it is valid until 2017. The reduction in tax rate would
impact the temporary difference that will reverse subsequent to 2017. This resulted in a deferred tax recovery of $34
due to recording the deferred tax liability in Peru at the lower rates. The Company will be subject to a Peruvian income
tax rate of 27% in 2018 and 26% thereafter.
In December 2013, the Mexican President signed a bill approving significant tax reforms which have an effective date of
January 1, 2014. These tax reforms include a tax-deductible special mining royalty of 7.5% on EBITDA and an extraordinary
mining royalty of 0.5% on precious metals revenue. In addition, the Mexican corporate tax rate is to remain at 30%,
while previously expected to decrease to 28% in 2015.
The special mining royalty is an annual tax with the first payment due in March 2015 for 2014 activities. The Company
recognized an initial deferred tax liability of $7,677 in 2013 related to the special mining royalty of 7.5%. The balance
for 2014 is $5,870 resulting in a deferred tax recovery of $1,807 which offsets the current tax special mining royalty
expense of $3,522 in 2014. The deferred tax liability will be drawn down to $nil as a reduction to tax expense over the
life of mine as the mine and its related assets are depleted or depreciated.
Income taxes payable of $9,745 (December 31, 2013: $50) of which $6,223 relates to current taxes (December 31,
2013: $50) and $3,522 (December 31, 2013: $nil) relates to special mining royalty.
11. Provisions (Continued)
