NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(All amounts in US$’000’s unless otherwise stated)
96
FORTUNA SILVER MINES INC. | 2014 ANNUAL REPORT
15. Capital Disclosure
The Company’s objectives when managing capital are to provide shareholder returns through maximization of the profitable
growth of the business and to maintain a degree of financial flexibility relevant to the underlying operating and metal
price risks while safeguarding the Company’s ability to continue as a going concern.
The capital of the Company consists of equity and available credit facility, net of cash. The Board of Directors has not
established a quantitative return on capital criteria for management. The Company manages the capital structure and
makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets.
The management of the Company believes that the capital resources of the Company as at December 31, 2014, are
sufficient for its present needs for at least the next 12 months. The Company is not subject to externally imposed capital
requirements.
The Company’s overall strategy with respect to capital risk management remained unchanged during the year.
16. Management of Financial Risk
The Company is exposed to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk, and price
risk. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk
management framework and reviews the Company’s policies on an ongoing basis
a) Fair Value of Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the
principal (or most advantageous) market at the measurement date under current market conditions (an exit price)
regardless of whether that price is directly observable or estimated using another valuation technique. The fair value
hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1
inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices
in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted
prices that are observable for the asset or liability (interest rate, yield curves), or inputs that are derived principally from
or corroborated observable market data or other means. Level 3 inputs are unobservable (supported by little or no market
activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
During the year ended December 31, 2014, there have been no transfers of amounts between Level 1, Level 2, and
Level 3 of the fair value hierarchy.
i.
Assets and Liabilities Measured At Fair Value on a Recurring Basis
Quoted Prices in Significant and
Significant
Active Markets for other Observable
Unobservable
Identical Assets
Inputs
Inputs
Aggregate Fair
At December 31, 2014
Level 1
Level 2
Level 3
Value Total
Cash and cash equivalents
$
42,867 $
–
$
– $
42,867
Short term investments
34,391
–
–
34,391
Trade receivable from concentrate sales
1
–
16,573
–
16,573
$ 77,258 $ 16,573 $
– $
93,831
1
Trade receivable from concentrate sales includes provisional pricing, and final price and assay adjustments. The fair value of trade
receivable from concentrate sales resulting from provisional pricing reflect observable market commodity prices and thereby classified
within Level 2 of the fair value hierarchy.
1
The Company's trade receivables arose from provisional concentrate sales and are valued using quoted market prices based on the
forward London Metal Exchange ("LME") for zinc and lead, the average London Bullion Market Association A.M. and P.M. fix ("London
A.M. fix" and "London P.M. fix") for gold and silver, and the London Bullion Market Association P.M. fix ("London P.M. fix") for gold and
silver.
