UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION
12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2014
OR
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______
OR
[ ] SHELL COMPANY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report:
Commission file number: 001-32399
BANRO CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Canada
(Jurisdiction of Incorporation
of Organization)
1 First Canadian Place, 100 King Street West, Suite 7070,
Toronto, Ontario, M5X 1E3, Canada
(Address of Principal
Executive Offices)
Contact: Geoffrey G. Farr; Phone: (416) 366-2221; Fax:
(416) 366-7722; Address: 1 First Canadian Place,
100
King Street West, Suite 7070, Toronto, Ontario, M5X 1E3,
Canada
(Name, Telephone, E-mail and/or Facsimile Number and Address
of Company Contact Person)
Securities registered or to be registered pursuant to Section
12(b) of the Act:
| Title of Class |
Name of each exchange on which registered
|
| Common Shares |
NYSE MKT LLC |
Securities registered or to be registered pursuant to Section
12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the
issuer's classes of capital or common stock as of December 31,
2014:
252,100,672 common shares
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
[ ] No [X]
If this is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes [ ]
No [X]
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes
[X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes [
] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer [
] Accelerated
filer [X]
Non-accelerated filer [
]
Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:
| U.S. GAAP [ ] |
International Financial Reporting
|
Other [ ] |
| |
Standards as issued by the
International |
|
| |
Accounting Standards
Board [X] |
|
If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow:
[ ] Item
17 [ ]
Item 18
If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
-ii-
BANRO CORPORATION - FORM 20-F
TABLE OF
CONTENTS
-iii-
TABLE OF CONTENTS
(continued)
-iv-
TABLE OF CONTENTS
(continued)
-v-
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F ("Form 20-F") and the
documents (or excerpts therefrom) incorporated by reference herein contains
"forward-looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and "forward-looking information"
within the meaning of Canadian provincial securities laws (such forward-looking
statements and forward-looking information are referred to herein as
"forward-looking statements"). Forward-looking statements are necessarily based
on a number of estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies.
All statements, other than statements which are reporting results as well as
statements of historical fact, that address activities, events or developments
that Banro Corporation (the "Company" or "Banro") believes,
expects or anticipates will or may occur in the future (including, without
limitation, statements regarding estimates and/or assumptions in respect of gold
production, revenue, cash flow and costs, estimated project economics, mineral
resource and mineral reserve estimates, potential mineralization, potential
mineral resources and mineral reserves, projected timing of future gold
production, the Company's exploration, development and production plans and
objectives with respect to its projects, and the closing of the second Twangiza
gold forward sale and the Namoya gold streaming transactions announced in the
Company’s February 27, 2015 press release and the anticipated effect of the said
transactions on the Company's operations and financial condition) are
forward-looking statements. These forward-looking statements reflect the current
expectations or beliefs of the Company based on information currently available
to the Company. Forward-looking statements are subject to a number of risks and
uncertainties that may cause the actual events or results of the Company to
differ materially from those discussed in the forward-looking statements, and
even if such actual events or results are realized or substantially realized,
there can be no assurance that they will have the expected consequences to, or
effects on, the Company. Factors that could cause actual results or events to
differ materially from current expectations include, among other things:
uncertainty of estimates of capital and operating costs, production and economic
returns; uncertainties relating to the estimates and assumptions used in the
economic studies of the Company's projects; the early stage of gold production
at the Company’s Twangiza and Namoya mines; delay in achieving commercial gold
production at the Company’s Namoya mine; the Company’s current level of
indebtedness; failure to complete the second Twangiza gold forward sale and the
Namoya gold streaming transactions announced in the Company’s February 27, 2015
press release; failure to establish estimated mineral resources or
mineral reserves; fluctuations in gold prices and currency exchange rates;
inflation; gold recoveries being less than those indicated by the metallurgical
testwork carried out to date (there can be no assurance that gold recoveries in
small scale laboratory tests will be duplicated in large tests under on-site
conditions or during production); changes in equity markets; political
developments in the Democratic Republic of the Congo (the "DRC"); lack of
infrastructure; implementation of rules adopted by the U.S. Securities and
Exchange Commission that may affect mining operations in the DRC; failure to
procure or maintain, or delays in procuring or maintaining, permits and
approvals; lack of availability at a reasonable cost or at all, of plants,
equipment or labour; inability to attract and retain key management and
personnel; changes to regulations or policies affecting the Company's
activities; uncertainties relating to the availability and costs of financing in
the future; the uncertainties involved in interpreting drilling results and
other geological data; the Company's history of losses; the Company's ability to
acquire additional commercially mineable mineral rights; risks related to the
integration of any new acquisitions into the Company's existing operations;
increased competition in the mining industry; and the other risks disclosed
under the heading "Risk Factors" in this Form 20-F.
Any forward-looking statement speaks only as of the date on
which it is made and, except as may be required by applicable securities laws,
the Company disclaims any intent or obligation to update any forward-looking
statement, whether as a result of new information, future events or results or
otherwise. Although the Company believes that the assumptions inherent in the
forward-looking statements are reasonable, forward-looking statements are not
guarantees of future performance and accordingly undue reliance should not be
put on such statements due to the inherent uncertainty therein.
-1-
The mineral resource and mineral reserve figures referred to in
this Form 20-F are estimates and no assurances can be given that the indicated
levels of gold will be produced. Such estimates are expressions of judgment
based on knowledge, mining experience, analysis of drilling results and industry
practices. Valid estimates made at a given time may significantly change when
new information becomes available. While the Company believes that the resource
and reserve estimates included in this Form 20-F are well established, by their
nature, resource and reserve estimates are imprecise and depend, to a certain
extent, upon statistical inferences which may ultimately prove unreliable. If
such estimates are inaccurate or are reduced in the future, this could have a
material adverse impact on the Company.
Due to the uncertainty that may be attached to inferred mineral
resources, it cannot be assumed that all or any part of an inferred mineral
resource will be upgraded to an indicated or measured mineral resource as a
result of continued exploration. Confidence in the estimate is insufficient to
allow meaningful application of the technical and economic parameters to enable
an evaluation of economic viability sufficient for public disclosure, except in
certain limited circumstances. Inferred mineral resources are excluded from
estimates forming the basis of a feasibility study.
Statements concerning actual mineral reserve and mineral
resource estimates are also deemed to constitute forward-looking statements to
the extent that they involve estimates of the mineralization that will be
encountered if (or as) the relevant project or property is developed (or mined).
Mineral resources that are not mineral reserves do not have demonstrated
economic viability. There is no certainty that mineral resources can be upgraded
to mineral reserves through continued exploration.
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING
RESERVE AND RESOURCE ESTIMATES
This Form 20-F, including the documents (or excerpts therefrom)
incorporated by reference herein, has been prepared in accordance with the
requirements of securities laws in effect in Canada, which differ from the
requirements of U.S. securities laws. Without limiting the foregoing, this Form
20-F, including the documents (or excerpts therefrom) incorporated by reference
herein, uses the terms "measured", "indicated" and "inferred" resources. U.S.
investors are advised that, while such terms are recognized and required by
Canadian securities laws, the U.S. Securities and Exchange Commission (the
"SEC") does not recognize them. Under U.S. standards, mineralization may
not be classified as a "reserve" unless the determination has been made that the
mineralization could be economically and legally produced or extracted at the
time the reserve determination is made. U.S. investors are cautioned not to
assume that all or any part of measured or indicated resources will ever be
converted into reserves. Further, "inferred resources" have a great amount of
uncertainty as to their existence and as to whether they can be mined legally or
economically. It cannot be assumed that all or any part of the "inferred
resources" will ever be upgraded to a higher category. Therefore, U.S. investors
are also cautioned not to assume that all or any part of the inferred resources
exist, or that they can be mined legally or economically. Disclosure of
"contained ounces" is permitted disclosure under Canadian regulations, however,
the SEC normally only permits issuers to report mineral deposits that do not
constitute "reserves" as in place tonnage and grade without reference to unit
measures. Accordingly, information concerning descriptions of mineralization and
resources contained in this Form 20-F or in the documents (or excerpts
therefrom) incorporated by reference, may not be comparable to information made
public by U.S. companies subject to the reporting and disclosure requirements of
the SEC.
National Instrument 43-101 - Standards of Disclosure for
Mineral Projects ("NI 43-101") is a rule of the Canadian Securities
Administrators which establishes standards for all public disclosure an issuer
makes of scientific and technical information concerning mineral projects.
Unless otherwise indicated, all reserve and resource estimates contained in or
incorporated by reference in this Form 20-F have been prepared in accordance
with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum
Classification System. These standards differ significantly from the requirements of the
SEC, and reserve and resource information contained herein and incorporated by
reference herein may not be comparable to similar information disclosed by U.S.
companies. One consequence of these differences is that "reserves" calculated in
accordance with Canadian standards may not be "reserves" under the SEC
standards.
-2-
U.S. investors are urged to closely consider all of the
disclosures in this Form 20-F and other reports filed pursuant to the United
States Securities Exchange Act of 1934, as amended, which may be secured
from the Company, or from the SEC's website at http://www.sec.gov/edgar.shtml.
CURRENCY
All dollar amounts in this Form 20-F are expressed in United
States dollars, except as otherwise indicated. References to "$" or "US$" are to
United States dollars and references to "Cdn$" are to Canadian dollars, except
as otherwise indicated. For reporting purposes, the Company prepares its
financial statements in United States dollars and in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board.
-3-
PART 1
Item 1. Identity of Directors, Senior Management and
Advisors
This Form 20-F is being filed as an annual report under the
United States Securities Exchange Act of 1934, as amended, (the "U.S.
Exchange Act") and, as such, there is no requirement to provide any
information under this item.
Item 2. Offer Statistics and Expected Timetable
This Form 20-F is being filed as an annual report under the
U.S. Exchange Act and, as such, there is no requirement to provide any
information under this item.
Item 3. Key Information
A. Selected Financial Data
The selected consolidated financial information set forth below
for each of the five years ended December 31, 2014, 2013, 2012, 2011 and 2010,
which is expressed in United States dollars (the Company prepares its financial
statements in United States dollars), has been derived from the Company's
audited consolidated financial statements as at and for the financial years
ended December 31, 2014, 2013, 2012, 2011 and 2010. These consolidated financial
statements have been prepared in accordance with International Financial
Reporting Standards ("IFRS") issued by the International Accounting
Standards Board, which differ in certain respects from the principles the
Company would have followed had its consolidated financial statements been
prepared in accordance with generally accepted accounting principles in the
United States. The selected consolidated financial information should be read in
conjunction with the information in Item 5 and item 18 of this Form 20-F.
Historical results from any prior period are not necessarily indicative of
results to be expected for any future period.
| |
|
(in $000 except share data) |
|
| |
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating revenue |
$ |
125,436 |
|
$ |
111,808 |
|
$ |
42,631 |
|
$ |
- |
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) from
operations |
|
16,380 |
|
|
11,792 |
|
|
(2,420 |
) |
|
(10,168 |
) |
|
(9,756 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) for the year |
|
320 |
|
|
1,630 |
|
|
(4,561 |
) |
|
(9,325 |
) |
|
(2,276 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income (loss)
for the year |
|
700 |
|
|
1,535 |
|
|
(4,526 |
) |
|
(9,450 |
) |
|
(2,878 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted net income
(loss) per share |
|
0.00 |
|
|
0.01 |
|
|
(0.02 |
) |
|
(0.05 |
) |
|
(0.02 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets |
|
43,320 |
|
|
53,718 |
|
|
60,631 |
|
|
12,187 |
|
|
79,707 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
887,482 |
|
|
822,033 |
|
|
635,787 |
|
|
429,141 |
|
|
337,369 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
111,317 |
|
|
127,010 |
|
|
57,040 |
|
|
39,364 |
|
|
12,074 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
394,978 |
|
|
331,049 |
|
|
212,502 |
|
|
40,131 |
|
|
12,074 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net assets |
|
492,504 |
|
|
490,984 |
|
|
423,285 |
|
|
389,010 |
|
|
325,295 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share capital |
|
518,615 |
|
|
518,615 |
|
|
456,738 |
|
|
440,738 |
|
|
373,945 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total shareholders' equity |
|
492,504 |
|
|
490,984 |
|
|
423,285 |
|
|
389,010 |
|
|
325,295 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common
shares outstanding (in thousands) |
|
252,101 |
|
|
236,278 |
|
|
200,607 |
|
|
190,015 |
|
|
147,325 |
|
-4-
Exchange Rates
On March 20, 2015, the buying rate in New York City for cable
transfers in Canadian dollars, as certified for customs purposes by the Federal
Reserve Bank of New York, was US$1.00 = Cdn$1.2593. The following table sets
forth, for each of the years or, as applicable, months indicated, additional
information with respect to the noon buying rate for US$1.00 in Canadian dollars
and are based upon the rates quoted by the Federal Reserve Bank of New York.
| Rate |
2014 |
2013 |
2012 |
2011 |
2010 |
| Average (1) |
1.1083 |
1.03467 |
0.9996 |
0.9858 |
1.0353
|
__________________________
(1) The average rate means the average of the exchange rates on
the last day of each month during the year.
| |
October |
November |
December |
January |
February |
March |
| Rate |
2014 |
2014 |
2014 |
2015 |
2015 |
2015(1) |
| High |
1.1291 |
1.1426 |
1.1644 |
1.2716 |
1.2635 |
1.2803 |
| Low |
1.1150 |
1.1237 |
1.1343 |
1.1725 |
1.2401 |
1.2439 |
__________________________
(1) Provided for the period from March 1, 2015 to March 20,
2015.
B. Capitalization and Indebtedness
This Form 20-F is being filed as an annual report under the
U.S. Exchange Act and, as such, there is no requirement to provide any
information under this item.
C. Reason for the Offer and Use of Proceeds
This Form 20-F is being filed as an annual report under the
U.S. Exchange Act and, as such, there is no requirement to provide any
information under this item.
D. Risk Factors
There are a number of risks that may have a material and
adverse impact on the future operating and financial performance of Banro and
could cause the Company's operating and financial performance to differ
materially from the estimates described in forward-looking statements relating
to the Company. These include widespread risks associated with any form of
business and specific risks associated with Banro's business and its involvement
in the gold exploration, development and mining industry.
An investment in the Company's common shares is considered
speculative and involves a high degree of risk due to, among other things, the
nature of Banro's business (which is the mining, development and exploration of
gold properties) the present stage of its development and the location of
Banro's projects in the DRC. In addition to the other information presented in
this Form 20-F, a prospective investor should carefully consider the risk
factors set out below and the other information that Banro files with the SEC
and with Canadian securities regulators before investing in the Company's common
shares. The Company has identified the following non-exhaustive list of inherent
risks and uncertainties that it considers to be relevant to its operations and
business plans. Such risk factors could materially affect the Company's future
operating results and could cause actual events to differ materially from those
described in forward-looking statements relating to the Company. As well, while
the following sets out the material risk factors which the Company is aware of,
there may be additional risks that the Company is unaware of or that are currently believed to be
immaterial that may become important factors that affect the Company's
business.
-5-
The assets and operations of Banro are subject to
political, economic and other uncertainties as a result of
being located in the DRC.
Banro's projects are located in the DRC. The assets and
operations of the Company are therefore subject to various political, economic
and other uncertainties, including, among other things, the risks of war and
civil unrest, expropriation, nationalization, renegotiation or nullification of
existing licenses, permits, approvals and contracts, taxation policies, foreign
exchange and repatriation restrictions, changing political conditions,
international monetary fluctuations, currency controls and foreign governmental
regulations that favour or require the awarding of contracts to local
contractors or require foreign contractors to employ citizens of, or purchase
supplies from, a particular jurisdiction. Changes, if any, in mining or
investment policies or shifts in political climate in the DRC may adversely
affect Banro's operations. Operations may be affected in varying degrees by
government regulations with respect to, but not limited to, restrictions on
production, price controls, export controls, currency remittance, income taxes,
foreign investment, maintenance of claims, environmental legislation, land use,
land claims of local people, water use and mine safety. Failure to comply
strictly with applicable laws, regulations and local practices relating to
mineral rights, could result in loss, reduction or expropriation of
entitlements. In addition, in the event of a dispute arising from operations in
the DRC, the Company may be subject to the exclusive jurisdiction of foreign
courts or may not be successful in subjecting foreign persons to the
jurisdiction of courts in Canada. The Company also may be hindered or prevented
from enforcing its rights with respect to a governmental instrumentality because
of the doctrine of sovereign immunity. It is not possible for the Company to
accurately predict such developments or changes in laws or policy or to what
extent any such developments or changes may have a material adverse effect on
the Company's operations. There are also risks associated with the
enforceability of the Company's mining convention with the DRC and the
government of the DRC could choose to review the Company's titles at any time.
Should the Company's rights, its mining convention or its titles not be honoured
or become unenforceable for any reason, or if any material term of these
agreements is arbitrarily changed by the government of the DRC, the Company's
business, financial condition and prospects will be materially adversely
affected.
Some or all of the Company's properties are located in regions
where political instability and violence is ongoing (for example, in November
2012, the M23 rebel group took over the city of Goma (Banro's operations are
located about 200 kilometres southwest of Goma), but subsequently withdrew from
Goma under international pressure). Some or all of the Company's properties are
inhabited by artisanal miners. These conditions may interfere with work on the
Company's properties and present a potential security threat to the Company's
employees. There is a risk that operations of the Company may be delayed or
interfered with, due to the conditions of political instability, violence and
the inhabitation of the properties by artisanal miners. The Company uses its
best efforts to maintain good relations with the local communities in order to
minimize such risks.
The DRC is a developing nation which recently emerged from a
period of civil war and conflict. Physical and institutional infrastructure
throughout the DRC is in a debilitated condition. The DRC is in transition from
a largely state controlled economy to one based on free market principles, and
from a non-democratic political system with a centralized ethnic power base, to
one based on more democratic principles. There can be no assurance that these
changes will be effected or that the achievement of these objectives will not
have material adverse consequences for Banro and its operations. The DRC
continues to experience instability in parts of the country due to certain
militia and criminal elements. While the government and United Nations forces
are working to support the extension of central government authority throughout
the country, there can be no assurance that such efforts will be successful.
-6-
No assurance can be given that the Company will be able to
maintain effective security in connection with its assets or personnel in the
DRC where civil war and conflict have disrupted exploration and mining
activities in the past and may affect the Company's operations or plans in the
future.
HIV/AIDS, malaria and other diseases represent a serious threat
to maintaining a skilled workforce in the mining industry in the DRC. HIV/AIDS
is a major healthcare challenge faced by the Company's operations in the
country. There can be no assurance that the Company will not lose members of its
workforce or workforce man-hours or incur increased medical costs, which may
have a material adverse effect on the Company's operations.
The DRC has historically experienced relatively high rates of
inflation.
No assurances can be given regarding the Company’s
future production.
As is typically the case with the mining industry, no
assurances can be given that future gold production estimates will be achieved.
Estimates of future production for the Company’s mining operations are derived
from the Company’s mining plans. These estimates and plans are subject to
change. The Company cannot give any assurance that it will achieve its
production estimates. The Company’s failure to achieve its production estimates
could have a material and adverse effect on the Company’s future cash flows,
results of operations, production cost, financial condition and prospects. The
plans are developed based on, among other things, mining experience, reserve
estimates, assumptions regarding ground conditions, hydrologic conditions and
physical characteristics of ores (such as hardness and presence or absence of
certain metallurgical characteristics) and estimated rates and costs of
production. Actual production may vary from estimates for a variety of reasons,
including risks and hazards of the types discussed above, and as set out below,
including:
- equipment failures;
- shortages of principal supplies needed for operations;
- natural phenomena such as inclement weather conditions, floods, droughts,
rock slides and earthquakes;
- accidents;
- mining dilution;
- encountering unusual or unexpected geological conditions;
- changes in power costs and potential power shortages;
- strikes and other actions by labour; and
- regulatory restrictions imposed by government agencies.
Such occurrences could, in addition to stopping or delaying
gold production, result in damage to mineral properties, injury or death to
persons, damage to the Company’s property or the property of others, monetary
losses and legal liabilities. These factors may also cause a mineral deposit
that has been mined profitably in the past to become unprofitable. Estimates of
production from properties not yet in production or from operations that are to
be expanded are based on similar factors (including, in some instances,
feasibility studies prepared by the Company’s personnel and outside consultants)
but it is possible that actual operating costs and economic returns will differ
significantly from those currently estimated. It is not unusual in new mining
operations or mine expansion to experience unexpected problems during the
start-up phase. Delays often can occur in the commencement of production.
-7-
The Company may be adversely affected by fluctuations
in gold prices.
The future price of gold will significantly affect the
development of Banro's projects and results of its mining operations. Gold
prices are subject to significant fluctuation and are affected by a number of
factors which are beyond Banro's control. Such factors include, but are not
limited to, interest rates, inflation or deflation, fluctuation in the value of
the United States dollar and foreign currencies, global and regional supply and
demand, and the political and economic conditions of major gold-producing
countries throughout the world. The price of gold has fluctuated widely in
recent years, and future price declines could cause development of and
commercial production from Banro's mineral interests to be impracticable. If the
price of gold decreases, projected cash flow from planned mining operations may
not be sufficient to justify ongoing operations and Banro could be forced to
discontinue development and sell its projects. Future production from Banro's
projects is dependent on gold prices that are adequate to make these projects
economic.
Mineral reserve calculations and life-of-mine plans using lower
gold prices could result in material write-downs of the Company’s investment in
mining properties and increased amortization, reclamation and closure
charges.
As fuel costs are a significant component of the Company’s
operating costs, changes in the price of diesel could have a significant effect
on the Company’s operating costs.
Risks Related to the Notes Issued under the Debt
Financing and Other Financial Obligations
The Company’s substantial indebtedness could adversely
affect the Company’s financial condition.
In March 2012 the Company closed a US$175 million debt
financing involving an issuance of notes (the "2012 Notes") (see item
10.B. of this Form 20-F). As well, during 2013 and 2014 the Company secured
additional short term loans (the "Short Term Loans") from several
lenders. The Company therefore has a significant amount of indebtedness. The
Company’s high level of indebtedness could have important adverse consequences,
including:
- limiting the Company’s ability to obtain additional financing to fund
future working capital, capital expenditures, acquisitions or other general
corporate requirements;
- requiring a substantial portion of the Company’s cash flows to be
dedicated to debt service payments instead of other purposes, thereby reducing
the amount of cash flows available for working capital, capital expenditures,
acquisitions and other general corporate purposes;
- increasing the Company’s vulnerability to general adverse economic and
industry conditions;
- limiting the Company’s flexibility in planning for and reacting to changes
in the industry in which it competes;
- placing the Company at a disadvantage compared to other, less leveraged
competitors; and
- increasing the cost of borrowing.
The Company may not be able to generate sufficient cash
to service all of its indebtedness (including the 2012 Notes and the Short Term
Loans) and obligations with respect to outstanding preferred shares, and may be
forced to take other actions to satisfy its obligations under such indebtedness
or with respect to such preferred shares, which may not be successful.
The Company’s ability to make scheduled payments on or
refinance the Company’s debt obligations (including the 2012 Notes and the Short
Term Loans) and to make payments with respect to outstanding preferred and
preference shares (see item 10.B. of this Form 20-F regarding the outstanding
preferred and preference shares (collectively, the "preferred shares") of the
Company and certain of its subsidiaries) depends on its financial condition and
operating performance, which are subject to prevailing economic and competitive
conditions and to certain financial, business, legislative, regulatory and other
factors beyond its control. The Company may be unable to maintain a level of cash flows from operating
activities sufficient to permit it to pay the principal, premium, if any, and
interest on its indebtedness or to make required payments with respect to
outstanding preferred shares.
-8-
If the Company’s cash flows and capital resources are
insufficient to fund its debt service obligations or required preferred share
payments, the Company could face substantial liquidity problems and could be
forced to reduce or delay investments and capital expenditures or to dispose of
material assets or operations, seek additional debt or equity capital or
restructure or refinance the Company’s indebtedness. Banro may not be able to
effect any such alternative measures on commercially reasonable terms or at all
and, even if successful, those alternatives may not allow the Company to meet
its scheduled financial obligations. The indenture under which the 2012 Notes
were issued (the "Note Indenture") restricts the Company’s ability to
dispose of assets and use the proceeds from those dispositions and may also
restrict the Company’s ability to raise debt or equity capital to be used to
repay other indebtedness when it becomes due. The Company may not be able to
consummate those dispositions or to obtain proceeds in an amount sufficient to
meet any financial obligations then due.
In addition, Banro is a holding company, and as such it
conducts all operations through subsidiaries. Accordingly, repayment of
indebtedness (including the 2012 Notes and the Short Term Loans) and payments in
relation to preferred shares are dependent on the generation of cash flow by
subsidiaries and their ability to make cash available to make such payments.
Banro’s subsidiaries may not be able to, or may not be permitted to, make
distributions to enable such payments to be made. Each subsidiary is a distinct
legal entity, and, under certain circumstances, legal and contractual
restrictions may limit the ability to obtain cash from subsidiaries. In the
event that distributions are not received from subsidiaries, it may not be
possible to make required principal and interest payments on indebtedness or
payments with respect to preferred shares.
Banro’s inability to generate sufficient cash flows to satisfy
its debt or preferred share obligations, or to refinance the Company’s
indebtedness on commercially reasonable terms or at all, would materially and
adversely affect the Company’s financial position and results of operations and
its ability to satisfy its financial obligations.
If the Company cannot make scheduled payments on its debt, the
Company will be in default and holders of the 2012 Notes could declare all
outstanding principal and interest to be due and payable, causing a
cross-acceleration or cross-default under certain of the Company’s other debt
agreements, and the Company could be forced into bankruptcy or liquidation. The
Company could also be forced into bankruptcy or liquidation if required payments
with respect to preferred shares are not made.
The terms of the Note Indenture restrict the Company’s
current and future operations, particularly the Company’s ability to respond to
changes or to take certain actions.
The Note Indenture contains a number of restrictive covenants
that impose significant operating and financial restrictions on the Company and
may limit the Company’s ability to engage in acts that may be in its long-term
best interest, including restrictions on the Company’s ability to:
- incur additional indebtedness;
- pay dividends or make other distributions or repurchase or redeem capital
stock;
- prepay, redeem or repurchase certain debt;
- make loans and investments;
- sell assets;
- incur liens;
- enter into transactions with affiliates;
- alter the businesses it conducts;
- enter into agreements restricting its subsidiaries’ ability to pay
dividends; and
-9-
- consolidate, amalgamate, merge or sell all or substantially all of its
assets.
A breach of the covenants under the Note Indenture or the
Company’s other debt instruments from time to time could result in an event of
default under the applicable indebtedness. Such a default may allow the
creditors to accelerate the related debt and may result in the acceleration of
any other debt to which a cross-acceleration or cross-default provision applies.
In the event the noteholders or lenders accelerate the repayment of the
Company’s borrowings, Banro may not have sufficient assets to repay that
indebtedness.
As a result of these restrictions, Banro may be:
- limited in how it conducts its business;
- unable to raise additional debt or equity financing to operate during
general economic or business downturns; or
- unable to compete effectively or to take advantage of new business
opportunities.
These restrictions may affect the Company’s ability to grow in
accordance with its strategy.
The Company must rely on expatriates and third-party
nationals to operate its mines.
The Company’s Twangiza mine was the first new commercial gold
mining operation in the DRC in over 50 years. As a result, the Company is
reliant on attracting and retaining expatriate and third-party nationals with
mining experience to staff key operations and administration management
positions. The Company’s inability to attract and retain personnel with the
skills and experience to manage the operation and train and develop staff, due
to the intense international competition for such individuals, may adversely
affect its business and future operations.
The Company will need to continuously add to its
mineral reserve base.
Given that mines have limited lives based on proven and
probable mineral reserves, the Company must continually replace and expand its
reserves at its mines. The life-of-mine estimates included in the Company’s
continuous disclosure documents filed on SEDAR and EDGAR are subject to
adjustment. The Company’s ability to maintain or increase its annual production
of gold will be dependent in significant part on its ability to bring new mines
into production and to expand reserves at existing mines.
Relations between the Company and its employees may be
impacted by changes in labour relations.
The Company is dependent on its workforce to extract and
process minerals, and is therefore sensitive to a labour disruption of the
Company's mining activities. The Company endeavours to maintain good relations
with its workforce in order to minimize the possibility of strikes, lock-outs
and other stoppages at its work sites. Relations between the Company and its
employees may be impacted by changes in labour relations which may be introduced
by, among other things, employee groups, unions, and the relevant governmental
authorities.
The Company is subject to risks and delays related to
the construction and start-up of new mines and of the
expansion of existing mines.
The Company anticipates reaching commercial production levels
at its second mine, at Namoya, early in the second half of 2015 and its first
mine, at Twangiza, completed a plant upgrade in 2014. The success of
construction projects, plant expansions and the start-up of new mines by the
Company is subject to a number of factors including the availability and
performance of engineering and construction contractors, suppliers and
consultants, the receipt of required governmental approvals and permits in
connection with the construction of mining facilities and the conduct of mining
operations, including environmental permits, price escalation on all components of construction and
start-up, the underlying characteristics, quality and unpredictability of the
exact nature of mineralogy of a deposit and the consequent accurate
understanding of dore or concentrate production, the successful completion and
operation of ore passes and conveyors to move ore and other operational
elements. Any delay in the performance of any one or more of the contractors,
suppliers, consultants or other persons on which the Company is dependent in
connection with its construction activities, a delay in or failure to receive
the required governmental approvals and permits in a timely manner or on
reasonable terms, or a delay in or failure in connection with the completion and
successful operation of the operational elements in connection with new mines
could delay or prevent the construction and start-up of new mines as planned.
There can be no assurance that current or future construction and start-up plans
implemented by the Company will be successful.
-10-
The SEC has Adopted Rules That May Affect Mining
Operations in the DRC
The Company’s business is subject to evolving corporate
governance and public disclosure regulations that have increased both the
Company’s compliance costs and the risk of noncompliance, which could have an
adverse effect on the Company’s stock price.
The Company is subject to changing rules and regulations
promulgated by a number of United States and Canadian governmental and
self-regulated organizations, including the SEC, the Canadian Securities
Administrators, the New York Stock Exchange, the Toronto Stock Exchange, and the
International Accounting Standards Board. These rules and regulations continue
to evolve in scope and complexity and many new requirements have been created in
response to laws enacted by the United States Congress, making compliance more
difficult and uncertain. For example, on July 21, 2010, the United States
Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act,
which resulted in the SEC adopting rules that will require the Company to
disclose on an annual basis certain payments made by the Company, its
subsidiaries or entities controlled by it, to the U.S. government and foreign
governments, including sub-national governments. The SEC has also adopted rules
under the Dodd Frank Act that will require a company filing reports with the SEC
to disclose on an annual basis, beginning in 2014, whether certain “conflict
minerals” necessary to the functionality or production of a product manufactured
by such company originated in the DRC or any adjoining country. The Company
currently holds properties located in the DRC. It is possible that the new SEC
rules regarding conflict minerals could adversely affect the value of the
minerals mined in the DRC, which may impact the value of the Company’s interests
in those properties. The Company’s efforts to comply with the Dodd-Frank Act,
the rules and regulations promulgated thereunder, and other new rules and
regulations have resulted in, and are likely to continue to result in, increased
general and administration expenses and a diversion of management time and
attention from revenue-generating activities to compliance activities.
-11-
The Company has no history of profitability with
respect to its development properties
The Company's properties are in the exploration or development
stage, other than the Company’s first mine in commercial production at Twangiza.
The development of properties found to be economically feasible requires the
construction and operation of mines, processing plants and related
infrastructure. As a result, Banro is subject to all of the risks associated
with establishing new mining operations and business enterprises including: the
timing and cost, which can be considerable, of the construction of mining and
processing facilities; the availability and costs of skilled labour and mining
equipment; the availability and costs of appropriate smelting and/or refining
arrangements; the need to obtain necessary environmental and other governmental
approvals and permits, and the timing of those approvals and permits; and, the
availability of funds to finance construction and development activities. The
costs, timing and complexities of mine construction and development are
increased by the remote location of the Company's properties. It is common in
new mining operations to experience unexpected problems and delays during
construction, development, and mine start-up. In addition, delays in the
commencement of mineral production often occur. Accordingly, there are no
assurances that the Company's activities at one of its development projects will
result in profitable mining operations or that the Company will successfully
establish mining operations or profitably produce gold at one of its development
projects.
The Company’s activities are subject to various laws
and government approvals and no assurance can be given
that the Company will be successful in obtaining or maintaining
such approvals or that it will successfully
comply with all applicable laws.
Banro's mineral exploration, development and mining activities
are subject to various laws governing prospecting, mining, development,
production, taxes, labour standards and occupational health, mine safety, toxic
substances, land use, water use, land claims of local people and other matters.
Although Banro's exploration, development and mining activities are currently
carried out in accordance with applicable rules and regulations, no assurance
can be given that new rules and regulations will not be enacted or that existing
rules and regulations will not be applied in a manner which could limit or
curtail development.
Many of Banro's mineral rights and interests are subject to
government approvals, licenses and permits. Such approvals, licenses and permits
are, as a practical matter, subject to the discretion of the DRC government. No
assurance can be given that Banro will be successful in maintaining any or all
of the various approvals, licenses and permits in full force and effect without
modification or revocation. To the extent such approvals are not maintained,
Banro may be delayed, curtailed or prohibited from continuing or proceeding with
planned exploration, development or mining of mineral properties.
Failure to comply with applicable laws, regulations and
permitting requirements may result in enforcement actions thereunder, including
orders issued by regulatory or judicial authorities causing operations to cease
or be delayed or curtailed, and may include corrective measures requiring
capital expenditures, installation of additional equipment, or remedial actions.
Parties engaged in the exploration, development or mining of mineral properties
may be required to compensate those suffering loss or damage by reason of the
activities and may have civil or criminal fines or penalties imposed for
violations of applicable laws or regulations.
Amendments to current laws and regulations governing operations
or more stringent implementation thereof could have a substantial adverse impact
on Banro and cause increases in expenses, capital expenditures or require
abandonment or delays in development of mineral interests.
-12-
Most of the Company’s properties are in the
exploration and development stage, and there can be no
assurance that these activities will result
in commercially viable properties.
The Company's properties are in the exploration or development
stage, other than the Company’s first mine in commercial production at Twangiza.
The exploration for and development of mineral deposits involves significant
risks that even a combination of careful evaluation, experience and knowledge
may not eliminate. While the discovery of an ore body may result in substantial
rewards, few properties that are explored are ultimately developed into
producing mines. Major expenditures are required to locate and establish mineral
reserves, to develop metallurgical processes and to construct mining and
processing facilities at a particular site. Whether a mineral deposit, once
discovered, will be commercially viable depends on a number of factors, some of
which are: the particular attributes of the deposit, such as size, grade and
proximity to infrastructure; metal prices which are highly cyclical; and
government regulations, including regulations relating to prices, taxes,
royalties, land tenure, land use, importing and exporting of minerals and
environmental protection. The exact effect of these factors cannot be accurately
predicted, but the combination of these factors may result in Banro not
receiving an adequate return on invested capital.
There is no certainty that the expenditures made by Banro
towards the search for and evaluation of mineral deposits will result in
discoveries that are commercially viable. In addition, in the case of a
commercial ore-body, depending on the type of mining operation involved, several
years can elapse from the initial phase of drilling until commercial operations
are commenced.
Exploration, development and mining involve a high
degree of risk.
Mining operations generally involve a high degree of risk. Such
operations are subject to all the hazards and risks normally encountered in the
exploration for, and development and production of gold and other precious or
base metals, including unusual and unexpected geologic formations, seismic
activity, rock bursts, fires, cave-ins, flooding and other conditions involved
in the drilling and removal of material as well as industrial accidents, labour
force disruptions, fall of ground accidents in underground operations,
unanticipated increases in gold lockup and inventory levels at heap-leach
operations and force majeure factors, any of which could result in damage to, or
destruction of, mines and other producing facilities, damage to person or
property, environmental damage, delays, increased production costs, monetary
losses and possible legal liability. Milling operations are subject to hazards
such as equipment failure or failure of mining pit slopes and retaining dams
around tailings disposal areas, which may result in environmental pollution and
consequent liability. The Company may not be able to obtain insurance to cover
these risks at economically feasible premiums. Insurance against certain
environmental risks, including potential liability for pollution or other
hazards as a result of the disposal of waste products occurring from production,
is not generally available to the Company or to other companies within the
mining industry. The Company may suffer a material adverse effect on its
business if it incurs losses related to any significant events that are not
covered by insurance policies.
There can be no assurance that an active market for
the Company’s securities will be sustained.
The market price of the Company's securities may fluctuate
significantly based on a number of factors, some of which are unrelated to the
financial performance or prospects of the Company. These factors include
macroeconomic developments in North America and globally, market perceptions of
the attractiveness of particular industries, short-term changes in commodity
prices, other precious metal prices, the attractiveness of alternative
investments, currency exchange fluctuation, the political environment in the DRC
and the Company's financial condition or results of operations as reflected in
its financial statements. Other factors unrelated to the performance of the
Company that may have an effect on the price of the securities of the Company
include the following: the extent of analytical coverage available to investors
concerning the business of the Company may be limited if investment banks with
research capabilities do not follow the Company's securities; lessening in
trading volume and general market interest in the Company's securities may
affect an investor's ability to trade significant numbers of securities of the Company; the size of
the Company's public float may limit the ability of some institutions to invest
in the Company's securities; the Company's operating performance and the
performance of competitors and other similar companies; the public's reaction to
the Company's press releases, other public announcements and the Company's
filings with the various securities regulatory authorities; changes in estimates
or recommendations by research analysts who track the Company's securities or
the shares of other companies in the resource sector; the arrival or departure
of key personnel; acquisitions, strategic alliances or joint ventures involving
the Company or its competitors; the factors listed in this Form 20-F under the
heading "Cautionary Statement Regarding Forward-Looking Statements"; and
a substantial decline in the price of the securities of the Company that
persists for a significant period of time could cause the Company's securities
to be delisted from any exchange on which they are listed at that time, further
reducing market liquidity. If there is no active market for the securities of
the Company, the liquidity of an investor's investment may be limited and the
price of the securities of the Company may decline. If such a market does not
develop, investors may lose their entire investment in the Company's
securities.
-13-
The Company will require a significant amount of funds
in order to carry out plans to fully develop all of
its projects and there can be no
assurance that such funds will be available to the Company.
The Company has only a short history of commercial mining
operations (the Company’s first mine at Twangiza commenced commercial production
on September 1, 2012; the Company anticipates reaching commercial production
levels at its second mine, at Namoya, early in the second half of 2015), and
there is no assurance that it will operate profitably or provide a return on
investment in the future. The Company's ability to continue as a going concern
is dependent upon its ability to generate or secure the funds necessary to meet
its obligations and repay liabilities arising from normal business operations
when they come due.
The Company will require a significant amount of funds in order
to carry out plans to fully develop all of its projects. There can be no
assurance that such funds will be available to the Company. If additional
financing is raised through the issuance of equity or convertible debt
securities of the Company, the interests of the Company's shareholders in the
net assets of the Company may be diluted. Any failure of the Company to generate
the required funding could have a material adverse effect on the Company's
financial condition, results of operations, liquidity, and its ability to
continue as a going concern, and may require the Company to cancel or postpone
planned capital expenditures.
A holder of shares or warrants may suffer adverse U.S.
federal income tax consequences if the Company is
determined to be a passive foreign investment company or
"PFIC"
The Company believes it should not be classified as a "passive
foreign investment company" ("PFIC") for its tax year ended December 31,
2014. However, the Company believes that it was classified as a PFIC for its tax
year ended December 31, 2011 and in prior tax years. Whether the Company will be
a PFIC for the current or future tax year will depend on the Company's assets
and income over the course of each such tax year and, as a result, cannot be
predicted with certainty as of the date of this Form 20-F. Accordingly, there
can be no assurance that the Internal Revenue Service will not challenge the
determination made by the Company concerning its PFIC status for any tax year.
U.S. federal income tax laws contain rules which result in materially adverse
tax consequences to U.S. taxpayers that own shares of a corporation which has
been classified as a PFIC during any tax year of such holder's holding period. A
U.S. taxpayer who holds stock in a foreign corporation during any year in which
such corporation qualifies as a PFIC may mitigate such negative tax consequences
by making certain U.S. federal income tax elections, which are subject to
numerous restrictions and limitations. Holders of the Company's shares
and warrants are urged to consult their own tax advisors regarding the
acquisition, ownership, and disposition of the Company's shares and
warrants.
-14-
The Company's projects are located in remote areas of
the DRC, which lack basic infrastructure.
The Company's projects are located in remote areas of the DRC,
which lack basic infrastructure, including sources of power, water, housing,
food and transport. In order to develop any of its projects Banro needs to
establish the facilities and material necessary to support operations in the
remote locations in which they are situated. The remoteness of each project
affects the potential viability of mining operations, as Banro also needs to
establish substantially greater sources of power, water, physical plant and
transport infrastructure than are present in the area. The transportation of
equipment and supplies into the DRC and the transportation of resources out of
the DRC may also be subject to delays that adversely affect the ability of the
Company to proceed with its mineral projects in the country in a timely manner.
Shortages of the supply of diesel, mechanical parts and other items required for
the Company's operations could have an adverse effect on the Company's business,
operating results and financial condition. The lack of availability of such
sources may adversely affect mining feasibility and, in any event, requires
Banro to arrange significant financing, locate adequate supplies and obtain
necessary approvals from national, provincial and regional governments, none of
which can be assured. The Company's interests in the DRC are accessed over lands
that may also be subject to the interests of third parties which may result in
further delays and disputes in the carrying out of the Company's operational
activities.
There is uncertainty in the estimation of mineral
reserves and mineral resources.
The mineral resource and mineral reserve figures referred to in
this Form 20-F and in the Company's filings with the SEC and applicable Canadian
securities regulatory authorities, press releases and other public statements
that may be made from time to time are estimates. These estimates are imprecise
and depend upon geological interpretation and statistical inferences drawn from
drilling and sampling analysis, which may prove to be unreliable. There can be
no assurance that these estimates will be accurate or that this mineralization
could be mined or processed profitably.
The Company has not commenced commercial production on any of
its properties other than Twangiza, and has not defined or delineated any proven
or probable reserves on any of its properties other than Twangiza and Namoya.
Mineralization estimates for the Company's properties may require adjustments or
downward revisions based upon further exploration or development work or actual
production experience. In addition, the grade of ore ultimately mined, if any,
may differ from that indicated by drilling results. There can be no assurance
that minerals recovered in small scale tests will be duplicated in large scale
tests under on-site conditions or in production scale.
The resource and reserve estimates referred to in this Form
20-F have been determined and valued based on assumed future prices, cut-off
grades and operating costs that may prove to be inaccurate. Extended declines in
the market price for gold may render portions of the Company's mineralization
uneconomic and result in reduced reported mineralization. Any material
reductions in estimates of mineralization, or of the Company's ability to
extract this mineralization, could have a material adverse effect on the
Company's results of operations or financial condition.
The Company has not established the presence of any proven or
probable reserves at any of its properties other than Twangiza and Namoya. There
can be no assurance that subsequent testing or future studies will establish
proven and probable reserves on such properties. The failure to establish proven
and probable reserves on such properties could severely restrict the Company's
ability to successfully implement its strategies for long-term growth.
There is uncertainty relating to inferred mineral
resources.
There is a risk that the inferred mineral resources referred to
in this Form 20-F cannot be converted into mineral reserves as the ability to
assess geological continuity is not sufficient to demonstrate economic
viability. Due to the uncertainty that may attach to inferred mineral resources,
there is no assurance that inferred mineral resources will be upgraded to resources with sufficient geological
continuity to constitute proven and probable mineral reserves as a result of
continued exploration.
-15-
The Company is exposed to a heightened degree of risk
due to the lack of property diversification.
The Twangiza, Lugushwa, Namoya and Kamituga properties account
for the Company's principal mineral properties. Any adverse development
affecting the progress of any of these properties may have a material adverse
effect on the Company's financial performance and results of operations.
Negative market perception of junior gold companies
could adversely affect the Company.
Market perception of junior gold companies such as the Company
may shift such that these companies are viewed less favourably. This factor
could impact the value of investors' holdings and the ability of the Company to
raise further funds, which could have a material adverse effect on the Company's
business, financial condition and prospects.
The Company is not insured to cover all potential
risks.
Although the Company maintains insurance to protect against
certain risks in such amounts as it considers to be reasonable, its insurance
will not cover all the potential risks associated with a mining company’s
operations. The Company may also be unable to maintain insurance to cover these
risks at economically feasible premiums. Insurance coverage may not continue to
be available or may not be adequate to cover any resulting liability
If the Company fails to maintain an effective system
of internal control, the Company may not be able to accurately report financial
results or prevent fraud.
Effective internal controls are necessary to provide reliable
financial reports and to assist the effective prevention of fraud. The Company
must annually evaluate its internal control procedures to satisfy the
requirements of applicable United States and Canadian securities laws, which
require management and, in the case of U.S. securities laws, auditors to assess
the effectiveness of internal controls. As further described in item 15 of this
Form 20-F, management has concluded that, because of material weaknesses in
information technology general controls and in the internal controls over
financial reporting relating to the presentation and review of the statement of
cash flow and sufficiency of documentary evidence supporting the precision of review over the completeness and accuracy of inputs, assumptions and formulas included in the impairment models, the Company’s disclosure controls and procedures were not effective
as of December 31, 2014. If the Company fails to correct these material
weaknesses in its internal controls, or having corrected such material
weaknesses, thereafter fails to maintain the adequacy of its internal controls,
the Company could be subjected to regulatory scrutiny, penalties or litigation.
In addition, continued or future failure to maintain adequate internal controls
could result in financial statements that do not accurately reflect the
Company’s financial condition.
The Company’s operations may be adversely affected by
environmental hazards on the properties and related
environmental regulations.
All phases of Banro's operations are subject to environmental
regulation. These regulations mandate, among other things, the maintenance of
air and water quality standards and land reclamation. They also set forth
limitations on the generation, transportation, storage and disposal of solid and
hazardous waste. Environmental legislation is evolving in a manner which will
require stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects
and a heightened degree of responsibility for companies and their officers,
directors and employees. Compliance with environmental laws and regulations may
require significant capital outlays on behalf of the Company and may cause
material changes or delays in the Company's intended activities. There is no
assurance that future changes in environmental regulation, if any, will not
adversely affect Banro's operations. Environmental hazards may exist on the
properties on which Banro holds interests which are unknown to Banro at present
and which have been caused by previous owners or operators of the properties.
Reclamation costs are uncertain and planned expenditures may differ from the
actual expenditures required. Banro has acquired its principal mineral
properties through a cession from Société Zaïroise Minière et Industrielle du
Kivu S.A.R.L. ("SOMINKI"). As such, Banro will be liable to the DRC State
for any environmental damage caused by SOMINKI as previous owner and operator of
such properties.
There are difficulties for investors in foreign
jurisdictions in bringing actions and enforcing judgments
The Company is organized under the laws of Canada and its
principal executive office is located in Toronto, Canada. All of the Company's
directors and executive officers, and all of the experts referred to in this
Form 20-F, reside outside of the United States, and all or a substantial portion
of their assets, and a substantial portion of the Company's assets, are located
outside of the United States. As a result, it may be difficult for investors in
the United States or otherwise outside of Canada to bring an action against
directors, officers or experts who are not resident in the United States or in
other jurisdictions outside Canada. It may also be difficult for an investor to
enforce a judgment obtained in a United States court or a court of another
jurisdiction of residence predicated upon the civil liability provisions of federal securities laws
or other laws of the United States or any state thereof or the equivalent laws
of other jurisdictions outside Canada against those persons or the Company.
-16-
There is uncertainty regarding the Company’s ability
to acquire additional commercially mineable mineral
rights.
Most exploration projects do not result in the discovery of
commercially mineable ore deposits and no assurance can be given that any
anticipated level of recovery of ore reserves will be realized or that any
identified mineral deposit will ever qualify as a commercially mineable (or
viable) ore body which can be legally and economically exploited. Estimates of
reserves, resources, mineral deposits and production costs can also be affected
by such factors as environmental permitting regulations and requirements,
weather, environmental factors, unforeseen technical difficulties, unusual or
unexpected geological formations and work interruptions. Material changes in ore
reserves, grades, stripping ratios or recovery rates may affect the economic
viability of any project.
Banro's future growth and productivity will depend, in part, on
its ability to identify and acquire additional commercially mineable mineral
rights, and on the costs and results of continued exploration and development
programs. Mineral exploration is highly speculative in nature and is frequently
non-productive. Substantial expenditures are required to: establish ore reserves
through drilling and metallurgical and other testing techniques; determine metal
content and metallurgical recovery processes to extract metal from the ore; and
construct, renovate or expand mining and processing facilities.
In addition, upon an ore discovery, it takes several years from
the initial phases of exploration until production is possible. During this
time, the economic feasibility of production may change. As a result of these
uncertainties, there can be no assurance that the Company will successfully
acquire additional commercially mineable (or viable) mineral rights.
Litigation may adversely affect the Company’s
financial position, results of operations or the Company’s
project development operations.
The Company may from time to time be involved in various legal
proceedings. While the Company believes it is unlikely that the final outcome of
any such proceedings will have a material adverse effect on the Company's
financial position or results of operation, defence and settlement costs can be
substantial, even with respect to claims that have no merit. Due to the inherent
uncertainty of the litigation process, there can be no assurance that the
resolution of any particular legal matter will not have a material adverse
effect on the Company's future cash flow, results of operations or financial
condition.
Future hedging activities may result in selling
products at a price lower than could have otherwise been
received.
The Company has entered into forward contracts to sell gold
that it expects to produce in the future, and may do so again in the future.
Forward contracts obligate the holder to sell hedged production at a price set
when the holder enters into the contract, regardless of what the price is when
the product is actually mined. Accordingly, there is a risk that the price of
the product is higher at the time it is mined than when the Company entered into
the contracts, so that the product must be sold at a price lower than could have
been received if the contract was not entered. There is also the risk that the
Company may have insufficient gold production to deliver into forward sales
positions. The Company may enter into option contracts for gold to mitigate the
effects of such hedging.
-17-
Increased sales of the Company’s common shares by
shareholders could lower the trading price of the shares.
Sales of a large number of the Company's common shares in the
public markets, or the potential for such sales, could decrease the trading
price of such shares and could impair Banro's ability to raise capital through
future sales of common shares.
Fluctuations in currency could have a material impact
on the Company’s financial statements.
The Company uses the United States dollar as its functional
currency. Fluctuations in the value of the United States dollar relative to
other currencies (including the Canadian dollar) could have a material impact on
the Company's consolidated financial statements by creating gains or losses. No
currency hedge policies are in place or are presently contemplated.
The loss of key management personnel or the inability
to recruit additional qualified personnel may adversely
affect the Company’s business.
The success of the Company depends on the good faith,
experience and judgment of the Company's management and advisors in supervising
and providing for the effective management of the business and the operations of
the Company. The Company is dependent on a relatively small number of key
personnel, the loss of any one of whom could have an adverse effect on the
Company. The Company currently does not have key person insurance on these
individuals. The Company may need to recruit additional qualified personnel to
supplement existing management and there is no assurance that the Company will
be able to attract such personnel.
The Company may not be able to compete with current
and potential gold companies, some of whom have
greater resources and technical facilities.
The natural resource industry is intensely competitive in all
of its phases. Significant competition exists for the acquisition of properties
producing, or capable of producing, gold or other metals. The Company competes
with many companies possessing greater financial resources and technical
facilities than itself. The Company may also encounter increasing competition
from other mining companies in its efforts to hire experienced mining
professionals. As well, there is competition for exploration resources at all
levels, particularly affecting the availability of manpower, drill rigs and
helicopters. Increased competition could also adversely affect the Company's
ability to attract necessary capital funding or acquire suitable producing
properties or prospects for mineral exploration in the future.
Certain directors and officers may be in a position of
conflict of interest with respect to the Company due to
their relationship with other resource
companies.
A number of directors and officers of the Company also serve as
directors and/or officers of other companies involved in the mineral resource
industry. As a result, conflicts may arise between the obligations of these
individuals to the Company and to such other companies.
Item 4. Information on the Company
A. History and Development of the Company
Banro’s head office and registered office is located at 1 First
Canadian Place, Suite 7070, 100 King Street West, Toronto, Ontario, M5X 1E3,
Canada, and its telephone number is (416) 366-2221. The Company was incorporated
under the Canada Business Corporations Act (the "CBCA") on May 3,
1994 by articles of incorporation. Pursuant to articles of amendment effective
May 7, 1996, the name of the Company was changed from Banro International
Capital Inc. to Banro Resource Corporation. The Company was continued under the
Ontario Business Corporations Act by articles of continuance effective on
October 24, 1996. By articles of amendment effective on January 16, 2001, the name of the
Company was changed to Banro Corporation. The Company was continued under the
CBCA by articles of continuance dated April 2, 2004.
-18-
Background
In 1996, the Company acquired, by way of several transactions,
72% of the outstanding shares of the DRC company, Société Zaïroise Minière et
Industrielle du Kivu S.A.R.L. ("SOMINKI"). The DRC government held the
remaining 28% of SOMINKI's shares as a participating interest. SOMINKI, which
held 100% of the Twangiza, Namoya, Lugushwa and Kamituga properties, was an
operating, very well-established mining company in the DRC with a long
production history. With the acquisition of control of SOMINKI, the Company also
acquired SOMINKI's significant library of geological and exploration data that
had accumulated since the early 1920s.
In early 1997, the DRC government ratified a new 25 year
(subsequently extended to 30 years) mining convention (the "Mining
Convention") among itself, SOMINKI and the Company. The Mining Convention
provided for the transfer of all of the mineral assets and real property of
SOMINKI to a newly created DRC company, Société Aurifère du Kivu et du Maniema
S.A.R.L. ("SAKIMA"), and that 93% of SAKIMA's shares were to be held by
the Company, with the remaining 7% to be owned by the DRC government as a
non-dilutive interest. The Mining Convention also provided for, among other
things, confirmation of title in respect of all of the Twangiza, Namoya,
Lugushwa and Kamituga properties.
Commencing in August 1997 and ending in April 1998, the Company
carried out a phase I exploration program on the Twangiza property which
consisted of geological mapping, surveying, data verification, airborne
geophysical surveying, diamond drilling and resource modeling.
In July 1998, the DRC government, without prior warning or
consultation, issued Presidential decrees which effectively resulted in the
expropriation of the Company's properties.
In April 2002, the DRC government formally signed a settlement
agreement (the "Settlement Agreement") with the Company. The Settlement
Agreement called for, among other things, the Company to hold a 100% interest in
the Twangiza, Namoya, Lugushwa and Kamituga properties under a revived Mining
Convention. In accordance with the Settlement Agreement, the Company reorganized
the said properties by transferring them from SAKIMA to four newly-created,
wholly-owned DRC subsidiaries of the Company (which are now named Twangiza
Mining S.A., Namoya Mining S.A., Lugushwa Mining S.A. and Kamituga Mining S.A.),
each of which owns 100% of its respective property.
In late 2003, the Company re-opened its exploration office in
the town of Bukavu in eastern DRC.
Recruitment of Management
During 2004, the Company recruited a management team with
extensive African and gold industry experience. Included in the people who
joined the Company during 2004 were Peter N. Cowley as Chief Executive Officer,
President and a director, Simon F.W. Village as Chairman of the Board and a
director, Michael B. Skead as Exploration Manager (later promoted to Vice
President, Exploration) and Dr. John A. Clarke as a director (Dr. Clarke was
appointed Chief Executive Officer and President of the Company in 2013; see
below).
-19-
Resumption of Exploration
In November 2004, the Company commenced exploration activities
at the Namoya property and in January 2005 the Company commenced exploration
activities at the Lugushwa property. The Company commenced the second phase of
exploration at the Twangiza property in October 2005.
Stock Exchange Listings
On March 28, 2005, the Company's common shares began trading on
the American Stock Exchange (which is now called the NYSE MKT LLC) (the "NYSE
MKT"). On November 10, 2005, the Company's common shares began trading on
the Toronto Stock Exchange (the "TSX") and ceased trading on the TSX
Venture Exchange concurrent with the TSX listing. RBC Capital Markets acted as
sponsor to Banro in its application for listing on the TSX.
Financings (2004 to 2006)
In March 2004, the Company completed a Cdn$16,000,000 private
placement financing.
In July 2005, the Company completed an Cdn$18,375,000 private
placement financing. This placement was made to an investment fund managed by
Capital Research and Management Company and to institutional accounts managed by
affiliates of Capital Group International, Inc.
In October 2005, the Company completed a non-brokered
Cdn$13,000,000 private placement financing. The subscribers in respect of this
financing were an investment fund managed by Actis Capital LLP and an investment
fund co-managed by Actis Capital LLP and Cordiant Capital Inc.
In May 2006, the Company completed an equity financing
for total gross proceeds of Cdn$56,012,800. The underwriters who conducted this
financing were RBC Capital Markets as lead manager, Raymond James Ltd. and MGI
Securities Inc.
Acquisition of Additional Properties
In March 2007, the Company announced that its wholly-owned DRC
subsidiary, Banro Congo Mining S.A., had acquired 14 exploration permits
covering certain ground located between and contiguous to the Company's
Twangiza, Kamituga and Lugushwa properties. The applications for these permits
were originally filed with the Mining Cadastral shortly after implementation of
the DRC's new Mining Code in June 2003.
2007 Preliminary Assessments of Twangiza and Namoya
In July 2007, the Company announced the results of its
preliminary assessments (i.e. "scoping studies") of its Namoya and Twangiza
properties.
Hiring of New CEO in 2007
Michael J. Prinsloo was appointed Chief Executive Officer of
the Company effective September 17, 2007. Mr. Prinsloo was hired to lead the
Company's transition from gold explorer to developer. Prior to joining Banro,
Mr. Prinsloo had accumulated some 35 years of experience in the gold mining
industry, including acting as Head of South African Operations of Gold Fields
Limited from 2002 to 2006. Mr. Prinsloo was also appointed President of the
Company in March 2008 following the retirement of Peter N. Cowley as
President.
-20-
Twangiza Pre-Feasibility Study
In July 2008, the Company announced results of the
pre-feasibility study of the Company's Twangiza property.
2008 Financing
In September 2008, the Company completed an equity financing
for total gross proceeds of US$21,000,000. This financing was completed through
a syndicate of underwriters led by RBC Capital Markets and including CIBC World
Markets Inc., UBS Securities Canada Inc. and Raymond James Ltd.
Twangiza Feasibility Study
In January 2009, the Company announced results of the
feasibility study of the Company's Twangiza property.
Twangiza Updated Feasibility Study
In June 2009, the Company announced updated results of the
feasibility study of the Company's Twangiza property.
2009 Financings
In February 2009, the Company completed a non-brokered equity
financing for total gross proceeds of US$14,000,000.
In June 2009, the Company completed an equity financing for
total gross proceeds of Cdn$100,001,700. The financing was conducted through a
syndicate of underwriters co-led by GMP Securities L.P. and CIBC World Markets
Inc.
Title Confirmation and Ratification of Fiscal
Arrangement
In February 2009, the Company announced that following
discussions it has received official confirmation from the DRC government that
all aspects of the Company's Mining Convention and its mining licenses
respecting the Twangiza, Namoya, Lugushwa and Kamituga properties are in
accordance with Congolese law.
In August 2009, the DRC government ratified the fiscal
arrangement between the DRC government and the Company. The Company has agreed
to enhance its existing commitment to the DRC and the local communities of South
Kivu and the Maniema provinces through:
-
An advance payment of US$2 million to the DRC government when the Company
completes the equity and debt financing process for construction of the mine
at Twangiza, with the funds to be used to support social infrastructure
development in the Twangiza and Luhwindja communities and to be credited
against future taxes;
-
A pledge of US$200,000 to settle legacy issues with SOMINKI and the
transfer to the central government of certain real estate assets redundant to
the Company's operations;
-
4% of net profits, after return of capital, allocated through the central
government to the communities of South Kivu and Maniema provinces for the
building of infrastructure projects, including roads and bridges, schools and
health care facilities; and
-
A royalty of 1% on gold revenues.
-21-
Purchase of Gold Plant and Commencement of Construction of
Gold Mine at Twangiza
The Company completed in September 2009 the purchase of a
refurbished gold processing plant capable of achieving an upgraded throughput
capacity of 1.3 million tonnes per annum. SENET Engineering was selected as the
overall project manager and also to manage the erection and commissioning of the
plant. The Company began mobilizing equipment at Twangiza in January 2010 in
order to facilitate the commencement of construction activities in February
2010. The resettlement process involving all consultative activities with local
community members and the construction of resettlement houses commenced during
the fourth quarter of 2009. Work on bridge upgrades and roads to the Twangiza
site commenced in February 2010.
2010 Financing
In May 2010, the Company completed an equity financing for
total gross proceeds of Cdn$137,555,000. The financing was conducted through a
syndicate of underwriters co-led by GMP Securities L.P. and CIBC World Markets
Inc.
Management Changes in 2010
In August 2010, the Company announced the restructuring of its
executive management group and that it had fully staffed the mine development
team responsible for constructing the Twangiza gold mine. The restructuring
included the departure of Michael J. Prinsloo as President and Chief Executive
Officer of the Company in September 2010. Simon F.W. Village, who was Banro’s
Chairman of the Board at the time of Mr. Prinsloo’s departure, succeeded Mr.
Prinsloo as President and Chief Executive Officer of the Company. Gary Chapman,
who joined Banro in July 2010, took over responsibility for mine development
from Mr. Prinsloo.
2011 Preliminary Assessment of Namoya Heap Leach Project
In January 2011, the Company announced the results of a
preliminary assessment of a heap leach project at Namoya (the "2011 Namoya
Study"). The 2011 Namoya Study, which was prepared with input from a number
of independent consultants, followed on from the 2007 preliminary assessment of
Namoya (see "Preliminary Assessments of Twangiza and Namoya" above) which
assumed a CIL (carbon-in-leach) only processing route for the mineral resources.
The 2011 Namoya Study assumed a heap leach only processing route and was
undertaken to assess a lower capital cost alternative to the previous CIL
option.
2011 Financing
In February 2011, the Company completed an equity financing for
total gross proceeds of Cdn$56,875,000. The financing was conducted through a
syndicate of investment dealers led by GMP Securities L.P. and included CIBC
World Markets Inc., Cormark Securities Inc. and Raymond James Canada
Inc.
Twangiza Oxide Project Economic Assessment
In March 2011, the Company announced the results of an economic
assessment in respect of the Twangiza oxide project. This economic assessment
was prepared with input from a number of independent consultants.
Commencement of Gold Production at Twangiza
In October 2011, the Company announced first gold production at
its Twangiza property.
-22-
Updated Economic Assessment of Namoya Project
In January 2012, the Company announced the results of an
updated economic assessment for the Namoya project (the "2012 Namoya
Study"). The Namoya project was planned to have two phases, with Phase 1
involving a CIL/gravity and heap leach process ("gravity heap leach") for the
recovery of easily leachable oxide and transitional ores and Phase II involving
a milling/carbon-in-leach (CIL) plant to treat the fresh rock and optimize
recoveries. The 2012 Namoya Study relates only to the Namoya project Phase 1
production potential.
The 2011 Namoya Study, which utilized the delineated measured,
indicated and inferred mineral resources at that time, was based on an
agglomerated heap leach model for ore processing. The 2012 Namoya Study was
based on a gravity heap leach operation without the need to agglomerate, and
uses the updated measured and indicated mineral resources for Namoya announced
by the Company in December 2011.
2012 Debt Financing
In March 2012, the Company closed a brokered private placement
debt financing for total gross proceeds of US$175 million. The financing was
conducted by a syndicate of investment dealers comprising GMP Securities and BMO
Capital Markets (as co-lead managers and co-book-runners) and CIBC World Markets
Inc., Cormark Securities Inc. and Dundee Securities Ltd. as co-managers.
This debt financing involved an offering by the Company of
175,000 units consisting of US$175,000,000 aggregate principal amount of senior
secured notes with an interest rate of 10% and a maturity date of March 1, 2017
and 8,400,000 warrants to purchase an aggregate of 8,400,000 common shares of
the Company. Each such unit consisted of US$1,000 principal amount of notes and
48 warrants, with each such warrant entitling the holder to purchase one common
share of the Company at a price of US$6.65 for a period of five years from the
date of issuance of the warrant.
Commencement of Construction of Banro’s Second Gold Mine
The Company commenced construction of its second gold mine, at
Namoya, in 2012.
Commencement of Commercial Production at Twangiza
Effective September 1, 2012, commercial production was declared
by the Company at its Twangiza gold mine.
New CEO in 2013
In March 2013, the Company announced that Simon F.W. Village
had stepped down from his roles as President and Chief Executive Officer of the
Company, and that the board of directors of the Company had appointed Dr. John
A. Clarke (who has served on Banro's board of directors since 2004) to the role
of interim President and Chief Executive Officer of the Company. In December
2013, the Company announced that Dr. Clarke has been appointed to the permanent
role of President and Chief Executive Officer from the interim President and
Chief Executive Officer role he had been filling since March 2013.
2013 Financings
In April 2013, the Company closed a short form prospectus
offering (the "Offering") of common shares of the Company and series A
preference shares of the Company, together with a concurrent private placement
(the "Concurrent Offering") of preferred shares of a subsidiary of the
Company ("Subco Shares") and associated series B preference shares of the
Company ("Series B Shares"). The Offering consisted of 50,218,634 common
shares of the Company priced at Cdn$1.35 per share for gross aggregate proceeds
of Cdn$67,795,156 and 116,000 series A preference shares of the Company priced at
US$25.00 per share for gross aggregate proceeds of US$2,900,000. The Concurrent
Offering consisted of 1,200,000 Subco Shares and 1,200,000 associated Series B
Shares priced at US$25.00 per Subco Share and Series B Share for gross aggregate
proceeds of US$30,000,000. The Offering was conducted by a syndicate of agents.
Reference is made to item 10.B. of this Form 20-F for additional information
with respect to the said series A preference shares, Subco Shares and Series B
Shares.
-23-
The Company also secured during 2013 US$53 million in short
term loans from several lenders.
Commencement of Gold Production at Banro’s Second Mine
In December 2013, the Company announced first gold production
at its Namoya project. Banro anticipates reaching commercial production levels
at Namoya early in the second half of 2015.
2014 Financings
In February 2014 the Company closed a US$40 million financing
involving the issue of exchangeable preferred shares to investment funds managed
by Gramercy Funds Management LLC by way of a non-brokered private placement.
Reference is made to item 10.B. of this Form 20-F for additional information
with respect to the said preferred shares.
In August 2014 Banro closed a liquidity backstop facility to
provide for the private placement of securities comprising senior secured notes
("2014 Notes") and warrants ("2014 Warrants") for gross aggregate
proceeds of up to US$35 million. This facility, which was subsequently increased
to US$37 million and fully drawn down by the Company, was provided by investment
funds managed by Gramercy Funds Management LLC. The 2014 Warrants have a
three-year term and entitle the holders to purchase a total of 13.3 million
common shares of the Company at an exercise price of Cdn$0.269 per share. It is
planned to repay the 2104 Notes from the proceeds of the financing announced by
the Company in February 2015 (see "2015 Financing" below).
Senior Management Changes
Kevin Jennings joined Banro as Senior Vice President and Chief
Financial Officer effective September 1, 2014. In February 2015, Banro announced
the appointment of Richard Brissenden to the role of Executive Chairman of the
Board. Mr. Brissenden had joined the Banro board in December 2013 as an
independent director.
2015 Financing
In February 2015 the Company announced that it has signed
definitive agreements for two gold forward sale transactions relating to the
Twangiza mine and a gold streaming transaction relating to the Namoya mine,
providing total gross proceeds to the Company of US$100 million. The purchasers
under these financing transactions are funded in part by investment funds
managed by Gramercy Funds Management LLC which have committed to fund the US$40
million in gold forward sales and US$50 million of the gold stream, for a total
committed funding of US$90 million. The Company and its financial advisor, CIBC
World Markets Inc., will seek to obtain commitments for the remainder of the
gold stream transaction prior to the expected close in April. Each of the two
forward sale transactions provide for the prepayment by the purchaser of US$20
million for its purchase of 22,248 ounces of gold from the Twangiza mine, with
the gold deliverable over three years, at 618 ounces per month (i.e. 1,236
ounces per month for the two Twangiza forward sales). The first US$20 million
forward sale closed on February 27, 2015. The second US$20 million forward sale
is expected to close in April. The terms of the forward sales also include a
gold floor price mechanism whereby, if the gold price falls below US$1,100 per
ounce in any month, additional ounces are deliverable to ensure a realized gold
price of US$1,100 per ounce for that month. The streaming transaction provides
for the payment by the purchaser of a deposit in the amount of US$60 million and
the delivery to the purchaser over time of 10% of the life-of-mine gold
production from the Namoya mine (or any other projects located within 20
kilometres from the current Namoya gold mine). The ongoing payments to Namoya
upon delivery of the gold are US$150 per ounce. The streaming transaction is
expected to close in April.
-24-
B. Business Overview
General
Banro is a Canadian gold mining company focused on
production from the Twangiza gold mine in the DRC, which began commercial
production September 1, 2012, and completion of its second gold mine at Namoya
located in the DRC approximately 200 kilometres southwest of the Twangiza gold
mine. Namoya commenced gold production in December 2013, with commercial
production planned to be achieved at Namoya early in the second half of 2015.
The Company's longer term objectives include the development of two additional
major, wholly-owned gold projects, Lugushwa and Kamituga, each of which has
mining licenses. The four projects are located along the 210 kilometre long
Twangiza-Namoya gold belt in the South Kivu and Maniema provinces of the
DRC.
The Company holds a 100% interest in its said four gold
properties (Twangiza, Namoya, Lugushwa and Kamituga) through four DRC
subsidiaries (which in turn are held by Barbados subsidiaries of the Company;
see the chart in item 4.C. of this Form 20-F). These properties, totalling
approximately 2,612 square kilometres, are covered by a total of 13 exploitation
permits (or mining licenses) and cover all the major, historical producing areas
of the gold belt. See item 4.D. of this Form 20-F for additional information
relating to the said four properties. The Company also holds, through its fifth
DRC subsidiary (Banro Congo Mining S.A.), 14 exploration permits covering an
aggregate of 2,638 square kilometres. Ten of the exploration permits are located
in the vicinity of the Company's Twangiza property and four are located in the
vicinity of the Company's Namoya property. The diagram below illustrates the
location of the Company's four principal properties and the related exploitation
permits.
-25-
Under DRC mining law, an exploitation permit entitles the
holder thereof to the exclusive right to carry out, within the perimeter over
which it is granted and during its term of validity, exploration, development,
construction and exploitation works in connection with the mineral substances
for which the permit has been granted and associated substances if the holder
has obtained an extension of the permit. In addition, an exploitation permit
entitles the holder to: (a) enter the exploitation perimeter to conduct mining
operations; (b) build the installations and infrastructures required for mining
exploitation; (c) use the water and wood within the mining perimeter for the
requirements of the mining exploitation, provided that the requirements set
forth in the environmental impact study and the environmental management plan of
the project are complied with; (d) use, transport and freely sell the holder's
products originating from within the exploitation perimeter; (e) proceed with
concentration, metallurgical or technical treatment operations, as well as the
transformation of the mineral substances extracted from the exploitation
perimeter; and (f) proceed to carry out works to extend the mine.
Without an exploitation permit, the holder of an exploration
permit may not conduct exploitation work on the perimeter covered by the
exploration permit. So long as a perimeter is covered by an exploitation permit,
no other application for a mining or quarry right for all or part of the same
perimeter can be processed.
An exploration permit entitles the holder thereof to the
exclusive right, within the perimeter over which it is granted and for the term
of its validity, to carry out mineral exploration work for mineral substances,
substances for which the licence is granted and associated substances if an
extension of the permit is obtained. However, the holder of an exploration
permit cannot commence work on the property without obtaining approval in
advance of its mitigation and rehabilitation plan. An exploration permit also
entitles its holder to the right to obtain an exploitation permit for all or
part of the mineral substances and associated substances, if applicable, to
which the exploration permit or any extension thereto applies if the holder
discovers a deposit which can be economically exploited.
On February 13, 1997, the Company entered into a mining
convention with the Republic of Zaire (now called the Democratic Republic of the
Congo) and SOMINKI (the "Mining Convention"). In July 1998, the Company
was expropriated of all its properties, rights and titles by Presidential
decree. The Company initiated arbitration procedures against the DRC State
seeking compensation for this expropriation. The Settlement Agreement between
the DRC State and the Company was signed in April 2002. The Settlement Agreement
effectively revived the expropriated Mining Convention. Under the revived Mining
Convention, the Company held a 100% equity interest in its Twangiza, Namoya,
Lugushwa and Kamituga properties and was entitled to a ten-year tax holiday from
the start of production.
On July 11, 2002, the DRC State enacted a Mining Code (the
"Mining Code") to govern all the exploration and exploitation of mineral
resources in the DRC. Holders of mining rights who derived their rights from
previously existing mining conventions had the option to choose between being
governed, either exclusively by the terms and conditions of their own mining
convention with the DRC State or by the provisions of the Mining Code. Pursuant
to this right of option which is prescribed in Section 340 paragraph 1 of the
Mining Code, the Company elected to remain subject to the terms and conditions
of its Mining Convention with respect to its 13 exploitation permits it acquired
before the enactment of the Mining Code. Nevertheless, the 14 exploration
permits (which were acquired by the Company after the implementation of the
Mining Code) are exclusively governed by the provisions of the Mining Code and
related mining regulations.
Sales of Gold
The Company commenced commercial production at its Twangiza
gold mine on September 1, 2012. The Company recorded revenues from the Twangiza
mine of US$42.631 million on sales of 24,963 ounces of gold during the four
month period of September 1, 2012 to December 31, 2012. During the twelve months
ended December 31, 2013, the Company recorded revenues from the Twangiza mine of
US$111.808 million on sales of 80,497 ounces of gold, and during the twelve
months ended December 31, 2014, the Company recorded revenues from the Twangiza mine of US$125.436 million on sales
of 101,225 ounces of gold. The Company’s second gold mine, Namoya, is planned to
commence commercial production early in the second half of 2015. There are
numerous purchasers of gold, therefore the Company is not dependent upon any one
purchaser. Current production from Twangiza is in the form of doré bars which
are flown from the Twangiza site to the capital city of Kinshasa, DRC, and then
shipped by air to a refinery in South Africa. The Company carries out
owner-operated mining at Twangiza.
-26-
Skill and Knowledge
The Company has built a management team of skilled mining,
environmental, financial and administrative personnel. The specialized knowledge
and skills required in all areas of mining include engineering, geology,
metallurgy, environmental permitting, drilling and exploration program planning.
The Twangiza mine was the first new commercial gold mining operation in the DRC
in over 50 years. Training and re-training of local staff in all aspects of
mining operations is and has been a priority of the Company.
Social and Environmental Policies
(a) The Banro Foundation
Since launching its current exploration programs in late 2004,
Banro has been working with local communities to promote development. In late
2005, the Company formalized this commitment to community development with the
creation of the Banro Foundation. The Banro Foundation is a registered charity
in the DRC with a mandate to support education, health and infrastructure
improvements, principally in the local communities where Banro operates. The
Banro Foundation also provides humanitarian assistance as required. In 2014, the
Banro Foundation launched its first agricultural initiative near the Namoya
site, with the goal of transferring agricultural skills to local growers,
generating employment, opening new markets for locally grown produce and
providing a food supply for Banro employees. The Company funds the Banro
Foundation and has created a management structure that ensures local
participation in decision-making. The Foundation focuses on needs that have been
identified by local committees of community leaders and invests in improvements
that will benefit communities as a whole. Promotion of opportunities for women
is an important guiding principle of the Foundation. To the extent possible, the
Foundation employs local labour in all initiatives. Since 2009, the projects
completed by the Banro Foundation include the construction of 10 new schools and
the rehabilitation of two schools (the 12 schools are educating a current total
of over 7,000 students), the building of potable water delivery systems serving
over 30,000 people, the construction or re-construction of over 100 kilometres
of roads and bridges, four health care facilities, a women’s resource centre and
three separate distributions of medical equipment from Canada to regional
hospitals and clinics in South Kivu province. Additional information with
respect to the Banro Foundation, including a list of projects undertaken by the
Banro Foundation to date, can be found on the Company's web site at www.banro.com. The Company has included its website
address in this Form 20-F only as inactive textual references and does not
intend it to be an active link to its websites. The contents of the website, and
information accessible through it, do not form part of this Form 20-F.
(b) Job Creation
Banro is committed to the creation of jobs and economic
opportunities for local Congolese. In a short period of time, Banro has gone
from having no presence in the eastern DRC to being one of the largest private
employers in the region. As it has grown, the Company has deliberately created
opportunities for many local Congolese. As of December 31, 2014, the Company
employed 1,466 Congolese directly and an additional 1,126 Congolese indirectly
through contractors and local labour hire companies.
-27-
(c) Environmental Protection and Workplace Safety
As set out in the Business Conduct Policy adopted by the
Company (a copy of this policy can be obtained from the System for Electronic
Document Analysis and Retrieval ("SEDAR") at www.sedar.com; the
contents of this website, and the information accessible through it, do not form
part of this Form 20-F), the Company believes that effectiveness in
environmental standards, along with occupational health and safety, is an
essential part of achieving success in the mineral exploration, development and
mining business. The Business Conduct Policy states that Banro will therefore
work at continuous improvement in these areas and will be guided by the
following principles: (a) creating a safe work environment; (b) minimizing the
environmental impacts of its activities; (c) building cooperative working
relationships with local communities and governments in the Company's areas of
operations; (d) reviewing and monitoring environmental and safety performance;
and (e) prompt and effective response to any environmental and safety
concerns.
Banro adheres to the E3 Environmental Excellence in Exploration
guidelines, which were developed by the Prospectors and Developers Association
of Canada.
Banro's management has also taken steps to ensure that all
employees and suppliers respect and adhere to the laws of the DRC with respect
to the protection of threatened and endangered species.
The Company is working to international best practice standards
in environmental and social appraisal. SRK Consulting (South Africa) (Pty) Ltd.
was contracted to develop an Equator Principles 2-compliant environmental and
social impact assessment report and associated environmental and social impact
mitigation and management plan in respect of the development of the Twangiza and
Namoya mines. This work was completed by SLR Consulting (Africa) (Pty) Ltd.
C. Organizational Structure
The following diagram presents, as of the date of this Form
20-F, the names of Banro’s significant subsidiaries and the jurisdiction where
they are incorporated, as well as the percentage of votes attaching to all
voting securities of each such subsidiary beneficially owned, or controlled or
directed, directly or indirectly, by Banro:
__________________________
Notes to the above chart:
| (1) |
Banro Group (Barbados) Limited also has outstanding
preferred shares which were issued pursuant to the US$30 million private
placement financing transaction completed in April 2013. See item 10.B. of
this Form 20-F for additional information in respect of this transaction
and the said preferred shares. |
| |
|
| (2) |
Each of Namoya (Barbados) Limited and Twangiza (Barbados)
Limited also has outstanding preferred shares which were issued pursuant
to the US$40 million private placement financing transaction completed in
February 2014 (US$20 million private placement in respect of each such
subsidiary). See item 10.B. of this Form 20-F for additional information
in respect of this transaction and the said preferred
shares. |
- 28 -
D. Property, Plants and Equipment
Banro’s Gold Properties
In consideration of potentially depressed gold prices in the
foreseeable future and the Company’s intent to replace and grow depleted ounces,
the Company has developed several key objectives for 2015. These objectives are
aimed at increasing gold production while containing costs, and increasing the
Company’s mineral resources to potentially prolong the life of its mines thereby
increasing shareholder value. These objectives include:
-
Completing the installation and commissioning of the agglomeration drum at
the Namoya mine in the first quarter of 2015, with a target of achieving
commercial production early in the third quarter of 2015;
-
Ramp up to steady production at Namoya with a focus on the heap leach
operations and utilizing the CIL for enhanced recoveries on higher grade fine
ore and improve the quality of heap leach material;
-
Maintain steady state production levels at Twangiza while continuing to
optimize the plant and rationalize costs;
-
Mine plan optimization of Twangiza’s current reserves and measured and
indicated resources; and
-
Focusing exploration initiatives on identifying high value near-mine
targets to enhance near term production and replace mineral resources through
near-mine delineation drilling at Namoya and Twangiza, while undertaking
limited, but focused regional exploration at Kamituga and Lugushwa.
Twangiza
Certain of the following disclosure relating to the Company’s
Twangiza gold project is derived from the technical report (the "Twangiza
Technical Report") dated March 9, 2011 (as revised on March 24, 2011) and
entitled "Economic Assessment NI 43-101 Technical Report, Twangiza Phase 1 Gold
Project, South Kivu Province, Democratic Republic of the Congo". A copy of the
Twangiza Technical Report can be obtained from SEDAR at www.sedar.com and EDGAR at www.sec.gov. The Company has included these website
addresses in this Form 20-F only as inactive textual references and does not
intend it to be an active link to these websites. The contents of these
websites, and information accessible through them, do not form part of this Form
20-F.
Any statement contained in a document (or excerpt therefrom) incorporated by reference
herein is not incorporated by reference to the extent that any such statement is
modified or superseded by a statement contained herein. Any such modifying or
superseding statement need not state that it has modified or superseded a prior
statement or include any other information set forth in the document that it
modifies or supersedes.
-29-
Property Description and Location
The 1,156 square kilometre Twangiza property is located in the
South Kivu Province of the DRC, approximately 35 kilometres west of the Burundi
border and approximately 45 kilometres to the south southwest of the town of
Bukavu, the provincial capital. The Twangiza property consists of six
exploitation permits, which are held by Banro’s DRC subsidiary, Twangiza Mining
S.A., and which are numbered PE40, PE41, PE42, PE43, PE44 and PE68. See Figure 1
below. The said exploitation permits entitle Twangiza Mining S.A. to the
exclusive right to carry out exploration, development, construction and
exploitation works within the perimeter over which they have been granted.
Accessibility, Climate, Local Resources, Infrastructure
and Physiography
Twangiza is situated in the Mitumba Mountains, which form part
of the western escarpment of the Albertine Rift Valley. The area is mountainous
with deeply incised valleys with slopes typically greater than 30o,
forming a dendritic drainage pattern. The mining area occupies a steep ridge
running north/south between two fast-flowing rivers. Elevation in the area
ranges from 1,500 metres to 2,400 metres above sea level, rising to 3,000 metres
in the Ntombwe massif 50 kilometres to the south. Vegetation on the Twangiza
property is a mosaic of transformed, agricultural plots and woodlots of cypress
and eucalyptus, and montane grassland. One small, 2.18 ha patch of indigenous
forest remains to the east of the mine area, the Lusirwe sacred forest.
Road access from Bukavu (the capital city of South Kivu
Province) to the Twangiza property is some 55 kilometres on the N2 National Road
and then 30 kilometres on the Twangiza access road. The journey time is 2.5
hours during the dry season and extends to 4 hours under wet conditions. The
property is also serviced by a helicopter and the journey between Bukavu and
Twangiza is some 14 minutes. Bukavu has an airport, Kavumu. There are commercial
flights between Bukavu and Goma (North Kivu) and Bukavu and Kindu (Maniema).
Bukavu is about a one hour drive from Kavuma airport. The preferred means of
access to Bukavu is via Kamembe Airport in Rwanda which is a 30 minute drive
from Bukavu including border crossing time. There are two commercial ferries on
Lake Kivu between Goma - North Kivu and Bukavu that run daily.
The climate at Twangiza can be classified as tropical to
sub-tropical with the wet season falling between September and April, and the
main dry season from May to August. Due to its close proximity to the equator,
Twangiza experiences daylight and night hours that are almost equal, with
daylight lasting between 6 am and 6 pm. The relative humidity generally exceeds
85% during the entire year.
Twangiza has an average annual rainfall of 1,796 mm. Regionally
the highest monthly rainfall is 242 mm, as recorded at nearby meteorological
stations (Bukavu, Confomeka, Tshibinda and Kailo), occurred during December; and
a minimum of 35 mm has been recorded during July. Rain generally occurs as soft,
lengthy rainfall in the mid to late afternoons, but violent thunderstorms are
also frequent.
The Twangiza property is remotely located and there was no
existing supply of power suitable for the project requirements prior to the
construction of the Twangiza mine. A diesel-generator power plant has therefore
been established to provide the power required to the Twangiza project.
-30-
Figure 1 - Map of the Twangiza Property
-31-
History
See item 4.A. of this Form 20-F for ownership history
information with respect to the Twangiza property. There have been three major
field exploration programs on the Twangiza property prior to 2005. The first was
between 1957 and 1966 by MGL and consisted of the driving of approximately
12,100 metres of adits and 8,200 metres of trenches at the Twangiza deposit. A
total of 17,400 channel samples were collected at two metre intervals from both
the trenches and adits. Secondly, from 1974 to 1976, Charter Consolidated
Limited undertook an evaluation program of the Twangiza area in order to verify
the results obtained by MGL and to look for possible extensions to the
mineralization. Soil sampling was conducted over a 4.6 square kilometre area to
the north of the Twangiza deposit. Anomalous soil samples were tested by 11
pits, 6 trenches and 5 adits. Work also included the re-sampling of three MGL
adits (Levels 2100, 2130, and 2220). The third historical program was undertaken
by Banro between August 1997 and April 1998. The program was managed by CME and
consisted of:
| • |
topographical surveying (31.65
square kilometres); |
| |
|
| • |
LANDSAT acquisition and interpretation, completed during
1997 by R. Eyers of the Remote Sensing Group at Imperial College London.
High resolution digital satellite images for an area covering 60,000
square kilometre between latitude 2°30’S and 4°30’S and longitude 26°30’E
and 29°30’E were created. Results indicated the Twangiza property lies on
a complex north-south trending structure composed of a number of
curvilinear segments which trend toward northwest –southeast orientations
away from the axis; |
| |
|
| • |
helicopter-supported airborne magnetic surveying (10,490
line-kilometres) conducted during 1997 – 1998 by High Sense Geophysics
(now Fugro geophysics) of Harare, Zimbabwe. The survey provided high
resolution magnetic maps in a digital format, which were used to define
anomalous zones, and to assist in detailed structural evaluation and
identification of lithological trends. The investigation covered five of
the six Twangiza permit areas (PE40, PE41, PE42, PE43, PE44), and was
based on a 200 metre flight line spacing orientated at 045°, with
tie-lines at 135° at a spacing of 2,000 metres. The results confirmed the
Twangiza deposit is characterized by a high magnetic field adjacent to a
large low magnetic anomaly in the north and a smaller low anomaly to the
southwest. The magnetic lows probably represent an intrusive body which
may have provided the fluid and/or heating source for the gold
mineralization and the porphyry sills found at the Twangiza deposit;
|
| |
|
| • |
geological mapping and rock sampling of the Twangiza area
completed during the 1997–1998 exploration programme and covering an area
extending 2.6 kilometres south and 5.2 kilometres north of the Twangiza
deposit. The regional mapping is bounded to the east and west by
north–south trending conglomerates. Grab samples and channel samples were
taken and after sample preparation at Banro’s on-site sample preparation
laboratory were sent to Acme Analytical Laboratory in Vancouver, Canada
for analysis; |
| |
|
| • |
detailed geological mapping and channel sampling of 16
adits covering the southern portion of the Twangiza area previously worked
by artisanal miners. Grab samples and channel samples were taken and after
on-site sample preparation were sent to Acme Analytical Laboratory;
|
| |
|
| • |
petrographic studies completed by Dr J. F. Harris of
Vancouver Petrographics Ltd, based on polished and thin sections.
Investigation observed that native gold occurs in veins against pyrite
crystals and fine grained gold occurs at the boundary of sulphides or
along fractures within sulphide grains; |
| |
|
| • |
diamond drilling (20 holes, 9,122 metres, 8,577 samples,
HQ and NQ core size) completed between September 1997 and March 1998. The
drilling covered an 800 metre strike length of mineralization within the
hinge of the Twangiza Anticline, with holes drilled at different
orientations. Due to the extreme topography at Twangiza, an A-Star 350 B2
helicopter was utilized for moving drilling rigs, materials and personnel
from site to site. Drilling was performed by Rosond International Limited
of South Africa utilizing two Longyear 38 drill rigs with a maximum depth
potential of 600 metres. All drillhole collars were surveyed using a
Sokkia SET4100 Total Station, with inclination and azimuth at surface
measured with handheld compasses. Downhole surveying of all holes was
completed using a Sperry Sun Single Shot instrument which recorded both
azimuth and inclination; and |
-32-
| • |
density testing performed on behalf of Banro by CME in
1998 on a variety of rock types that make up the Twangiza deposit. The
purpose of the study was to assign rock densities to specific lithological
and mineralogical units for inclusion in the resource estimates. A total
of 165 bulk density determinations were undertaken by CME.
|
Geological Setting
The Twangiza property can be divided into three distinct
litho-structural terrains. The eastern terrain is characterised by N-S trending
Neoproterozoic sediments, which are part of the Itombwe synclinorium, a
regional-scale fold which extends southwards from the Twangiza area for about
150 kilometres. Exploration activities on the property to date have all been
within the Neoproterozoic domain. The western domain has a distinct NW-SE
tectonic grain, and is believed to be Palaeoproterozoic in age. The third domain
occurs in the north, where recent basalts blanket the Proterozoic rocks.
The sediments in the Neoproterozoic terrain are generally very
weakly metamorphosed. The dominant lithology is mudstone, often with a
significant amount of carbonaceous material. Subordinate units of siltstone are
commonly interbedded with the mudstone, being slightly coarser, more siliceous
and harder. Quartz wacke and sandstone occur locally, but are usually confined
to relatively thin beds or lenses which lack continuity. A characteristic
feature of the Twangiza area is the presence of a conglomerate consisting of
clasts of granite, mudstone and siltstone supported by a matrix of dark grey
silty mud. It frequently contains a significant amount of detrital magnetite,
and forms the relatively highly magnetic unit that clearly defines the geometry
of the concession-scale folds in the magnetic images.
In the vicinity of the Twangiza Main and North deposits, the
Neoproterozoic sediments have been intruded by porphyritic sills, ranging in
thickness from less than 1 metre to over 50 metres. The sills have undergone
extensive hydrothermal alteration and the original composition is difficult to
determine. However, it is possible that the sills are part of a suite of
alkaline intrusive rocks that were emplaced along the line of the present-day
Western Rift, at about 750 Ma. Small granitic intrusions have been found in the
Neoproterozoic rocks, and have been locally exploited for tin by colonial
prospectors and artisanal miners. It is believed these granites are younger than
the G4 tin granites which were emplaced at 975 Ma, and may also be related to
the same 750 Ma intrusive event as the porphyry sills.
The Neoproterozoic terrain at Twangiza is characterised by a
series of N-S trending, concession-scale folds, which plunge to the north. These
folds vary from being open to almost isoclinal, although the average limb dips
are usually between 50° and 80°. Smaller-scale folds, probably parasitic to the
larger structures, are commonly seen on a prospect scale; they display plunges
to the north and south, or are doubly-plunging like the fold hosting the
Twangiza orebodies. The folding is considered to have developed in response to
E-W compression in the Pan African orogeny at about 550 Ma. Faulting in the
Neoproterozoic terrain is common, the main trends being NE-SW to E-W. In
addition, zones of shearing and/or brecciation have been mapped sub-parallel to
the fold axes at several prospects, and may have had a control on the
mineralization.
The contact between the Neoproterozoic terrain and the western
Palaeoproterozoic block as defined by aeromagnetic and radiometric studies is
sharp, and is possibly thrusted. The contact appears to have been locally
displaced by NE-SW faulting. The western terrain is characterised by a NW-SE
tectonic trend, which is sub-parallel to the Rusizian trend that developed
during the Eburnean orogeny at the end of the Palaeoproterozoic.
-33-
However, it is possible that the rocks in the western domain
are Mesoproterozoic or younger, having been affected by the reactivation of deep
seated Rusizian structures.
Reference is made to section 6 of the Twangiza Technical Report
(which section is entitled “Geological Setting”) for additional information in
respect of the geological setting. Section 6 of the Twangiza Technical Report is
filed as an exhibit to and is incorporated by reference into, and forms part of,
this Form 20-F. A copy of the Twangiza Technical Report can be obtained from
SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Exploration
Twangiza Exploration Program - October 2005 to December
2006
Banro resumed its exploration program at Twangiza after the
Congolese government had established control and authority in the area in
October 2005. The following summarizes the exploration program carried out by
the Company at Twangiza from October 2005 to December 2006.
Soil Geochemical Program
A soil geochemical program designed to test the immediate
northern, eastern, western and southern extensions of the known Twangiza
mineralization was completed by the Company in 2006. The 7 kilometre soil
geochemical grid had its base line orientated along the hinge of the anticline
at 350º. Soil sampling was undertaken at 40 metre intervals on lines spaced at
80 metres. The baseline origin for the soil geochemical grid was pegged at UTM
coordinate 9682698.2N / 693500.5E, which corresponds to a local grid coordinate
of 10000N/20000E. The soil geochemical grid was initially surveyed using
compass, tape and ranging rods. All sample points were marked with a wooden peg
with local grid co-ordinates clearly labelled on each peg. All sample points
were subsequently surveyed using a Trimble Differential GPS. The survey used the
WGS-84 zone 35 south coordinate system. By the end of December 2006, a total of
275.44 line kilometres had been cut and 6,589 soil samples collected and sent
for analysis. The geochemical results outlined an 800 metre long by 450 metre
wide, +100 ppb gold in soil anomaly to the immediate north of Twangiza Main
deposit. The anomaly splits into three roughly parallel trends to the south of
the Lukungurhi workings. A 1.5 kilometre long, 80 metre to 160 metre wide
north-northwest trending +100 ppb Au soil anomaly occurs to the south of the
Lukugurha artisanal workings.
Trenching Program
A trenching program was initiated to test the gold-in-soil
geochemical anomalies and the continuity of mineralisation on the northern
extension of the Twangiza Main deposit, as well as the southern and northern
extensions of the Lukungurhi workings. Trenches were located to the north of the
baseline origin and were oriented at 080°. The lithological units encountered in
the trenches are intensely weathered with limonite staining occurring
predominantly in the sediments and feldspar porphyries within the mineralised
areas. Kaolinite is the dominant weathering product in the feldspar porphyries.
Hydrothermal silicification is mainly encountered at the contacts between
feldspar porphyry the sediments. Silicification is usually intense at the
contacts and decreases away from the contact into the wall rock. A total of 785
channel samples were collected from 1,159 metres of trenching.
-34-
Prospect Scale Mapping
A detailed mapping project was carried out in the Twangiza
artisanal workings in order to gain a better understanding of the geology and
mineralisation controls and to verify and compliment the diamond drilling data.
The study reviewed all aspects of the geology including lithology, structure and
alteration. Structural mapping at the Twangiza Main deposit (workings, trenches
and road cuts) demonstrates that the bedding strikes dominantly NW-SE. The
intersection of bedding planes indicates an anticlinal fold axis plunging at 37º
towards 120º. The quartz veins measured in the workings are either parallel to
or cross-cut the bedding. The Lukungurhi artisanal workings are located
approximately 1.5 kilometres north of the Twangiza deposit and measure about 600
metres in strike length and are 70 metres wide on average. The axis of the
workings is orientated at 350°. Work carried out during 2005 included trenching,
geological/structural mapping of trenches and artisanal pits as well as rock
chip/channel sampling. Two trenches TWT 3 and TWT 4 located respectively at the
southern and northern extensions of the workings were excavated to test the
continuity of the Lukungurhi mineralisation. Structural mapping from trenches
and artisanal workings reveals the bedding is dominantly north - south.
Limonite-quartz veins within the porphyries have a dominant orientation of
080º/71º strike dip right. Kaolinite alteration is the product of intense
weathering of feldspars in both the feldspar porphyry and mafic intrusives.
Further mapping and trenching was completed at artisanal workings in the
vicinity, notably at Kashegeshe, Muhona and Bugoy.
Twangiza Exploration Program - January 2007 to November
2008
The following summarizes the exploration program carried out by
the Company at Twangiza from January 2007 to November 2008.
Geophysical Exploration - Airborne magnetic and
radiometric surveys were completed over the entire Twangiza property, utilising
a flight line spacing of 100 metres with tie lines at 1,000 metre intervals;
several promising new targets were identified for follow-up work.
LIDAR Survey - LIDAR utilises airborne laser technology
to create accurate topographic maps of the region. In addition, colour aerial
digital photography has been rectified to create accurate orthophotos.
Additional Regional Work - During late 2007, the Company
began exploration of the Twangiza property outside the main trend. The following
targets were investigated:
Mufwa
Located 13 kilometres
northwest of the Twangiza Main deposit, Mufwa is the focus of intense artisanal
activity, where miners are exploiting a series of quartz veins within mudstone.
The structural setting is very similar to Twangiza, with the mineralization
occurring close to the axis of a plunging anticline. However, feldspar porphyry
sills are absent at Mufwa, and the mineralization tends to be in quartz rather
than sulphide-associated. The workings cover an area of approximately 500 metres
east-west, by 350 metres north south, although recent exploration indicates good
potential for extending the mineralized zones in both directions. Exploration
consisted of surface mapping and rock-chip sampling, mapping and channel
sampling of 27 artisanal adits, and soil sampling of a 4 x 2 kilometre area
around the workings on an 80 x 40 metre grid. A total of 445 rock samples, 957
adit channels and 2,676 soil samples were collected.
Kaziba
Located 11 kilometres
east of the Twangiza Main deposit, the Kaziba target was discovered towards the
end of 2008. Sulphide-associated, disseminated mineralization similar in style
to that at Twangiza Main, occurs within mudstones and siltstones on the western
limb of a northerly plunging anticline. Exploration during 2008 consisted of
mapping and sampling of artisanal workings, and soil sampling of a 2 x 1
kilometre area around the workings on an 80 x 40 metre grid. A total of 290 rock
samples and 573 soil samples were collected. The data indicates the presence of
gold mineralization over a strike of 250 metres, potentially with a thickness of
up to 30 metres.
-35-
Tshondo
Preliminary work at
Tshondo, an old colonial discovery located 9 kilometres west of Twangiza Main,
indicates that gold is associated both with quartz veins and within the
surrounding hydrothermally silicified mudstone and siltstone. The mineralization
is associated with the axis of a northerly plunging syncline. Artisanal mining
is focusing on the relatively high-grade quartz mineralization over a strike of
500 metres. Soil geochemical sampling in tandem with rock chip sampling,
trenching and adit mapping and sampling was undertaken in late 2010.
Radiometric Anomaly
This
prospect is approximately 5 kilometres west of Twangiza Main, and was targeted
due to the presence of a coincident uranium-thorium radiometric anomaly similar
to that at Twangiza, located on a well-defined anticline axis. Work during 2008
comprised a programme of stream sediment sampling (117 samples) and regional
mapping. The stream results define three anomalous areas with values of up to
1,840 ppb Au.
Southern Anomaly
This target
is located 10 kilometres south of Twangiza Main. It is situated on the axis of a
tightly folded syncline, and is associated with a coincident uranium-thorium
radiometric anomaly. Historical records indicate that alluvial gold was
exploited in colonial times, and alluvial artisanal mining is still carried out
locally. The 2008 programme comprised stream sediment sampling (185 samples) and
regional mapping. Anomalous values of up to 470 ppb Au will be followed up
initially by soil sampling.
Twangiza Exploration Program - 2009 to 2012
The exploration program on the Twangiza property for the period
2009 to 2012 focused on (a) the near mine targets to fully evaluate the Twangiza
East and West flanking structures, and (b) regional targets located outside the
Twangiza anticline, which have the potential to add substantial resources to the
current mineral resource of Twangiza. The near mine exploration at Twangiza
focused on generating new targets outside the Twangiza Main and North deposits.
Field activities included soil, rock chip and channel sampling, pitting, auger
drilling, diamond and reverse circulation drilling. Delineation drilling was
undertaken in the Twangiza East and West mineralization trends. Forty diamond
drill holes totaling 3,854.6 meters were completed on the Twangiza West and East
zones to facilitate the resource evaluation of the deposits. Regional
exploration at Twangiza during the same period focused on the Ntula, Mufwa,
Luntukuru, Kaziba and Tshondo prospects, the Lukungurhi area and the Ntula
extensions. Field activities included soil, rock chip and channel sampling,
geological mapping, pitting, auger drilling and diamond drilling. Nine (9) holes
totalling 1,151 meters of drilling were completed during the period and the
first phase of drilling was carried out at the Ntula prospect.
Twangiza Exploration Program - 2013 and 2014
Exploration at Twangiza for both 2013 and 2014 was scaled down
to conserve funds to support the construction of the Namoya mine and the
Twangiza mine expansion. In 2013, exploration activities in the Twangiza
concession were focused on the Ntula-Mufwa corridor and prospects around the
Luntukulu area. These activities involved geological mapping, auger drilling and
an orientation stream sediments Bulk Leach Extractable Gold ("BLEG")
program. In 2014, exploration activities in the Twangiza concession focused on
the regional prospects, Mufwa and Kadubo, (the latter prospect was discovered by
the Company during 2014) and involved geological mapping and rock chip and
channel sampling.
Mineralization
The Twangiza Main ore body consists of a wide (up to 200
metres) zone of pervasively altered mudstone, siltstone and porphyry sills, with
abundant sulphidic veins. The veins form a complex irregular network, although veining parallel to bedding is relatively common. Hydrothermal
fluids have exploited both the fracture system which developed during folding
due to competency contrasts between the lithologies, and dilational zones
between bedding planes to form saddle reefs. The style of mineralization in the
sediments and sills varies, but can be sub-divided into two main types as
discussed below:
-36-
Sills
| • |
The mineralized sills are characterised by the presence
of pyrite and arsenopyrite. The relative proportion of these sulphides is
variable, but is estimated to average approximately 65% pyrite: 35%
arsenopyrite; |
| • |
The total abundance of sulphide is also very variable,
averaging about 3% of the rock, but locally comprising up to about 30% of
a 1 metre sample. There is a positive correlation between grade and
sulphide content; |
| • |
The sulphides occur in a variety of habits: (a)
disseminated crystals, (b) stringers, (c) coarsely crystalline veins up to
10 centimetres in width, but usually 1 to 3 centimetres across, and often
with intergrown quartz, and (d) irregular massive patches.
|
Sediments
| • |
The sediments contain the same sulphides in similar
proportions, but the quantity of sulphides in the sediments is generally
lower; |
| • |
The disseminated sulphides in the sediments are generally
finer grained and are more common in the relatively porous siltstone
units; |
| • |
The sulphide veins in the sediments generally contain
more quartz, either intergrown with the pyrite and arsenopyrite, or
forming borders to the veins. |
In the oxidised zone, the veins in both the porphyry and
sediments have weathered to limonite-silica intergrowths. This limonite-silica
veining is a common feature of the mineralization in outcrop. Limonite-filled
boxworks, and irregular limonite patches and coated vugs have formed due to
oxidation of the disseminated sulphides and patches.
Hydrothermal alteration associated with the gold mineralization
has formed three broad assemblages:
| • |
Proximal alteration in the sills
(feldspar porphyry): albite, dolomite, pyrite, arsenopyrite, gold; |
| • |
Proximal alteration in the
sediments: albite, quartz, pyrite, arsenopyrite, gold; |
| • |
Distal alteration in the sills
(mafic porphyry): chlorite, calcite. |
Drilling
February 2006 to May 2008
The aim of this initial drilling at Twangiza was to convert the
inferred mineral resources into indicated and measured categories. A total of
17,037.34 metres of diamond drilling involving 71 holes were completed between
February and December 2006.
In January 2007, a major drilling campaign commenced with the
aim of converting the remaining inferred mineral resources at Twangiza Main into
the indicated and measured categories and to identify additional inferred
mineral resources particularly at Twangiza North. At the end of May 2007, 100
diamond drill holes totalling 23,873.12 metres of PQ, HQ and NQ had been
completed. Drilling tested the 800 metre long zone of mineralisation within the
hinge of the Twangiza Anticline, in addition to the Twangiza North soil
geochemical anomalies. A total of 61 resource holes were drilled at 40 metre
centres to infill the holes drilled in 1997/98 with the objective of upgrading
the inferred mineral resources to the higher confidence measured and indicated
resources. In addition, 39 exploration holes were drilled to test the Twangiza
North geochemical anomaly. Four drill rigs were deployed at the Twangiza
property, with two additional rigs mobilized in 2008.
-37-
The remainder of the programme between May 2007 and May 2008
consisted of a total of 24,231.3 metres of PQ, HQ and NQ diamond drilling
involving 116 holes. The focus of the drilling was to infill the drilling grids
and potential resources within the Twangiza North area of the deposit. Ninety
eight (98) holes were drilled at 40 metre centres to infill the holes drilled in
2006 and early 2007 in the Twangiza North deposit and 18 holes were drilled in
Twangiza Main.
An A-Star 350 B3 helicopter (owned and operated by Savannah
Helicopters) was used for the moving of drills, materials and personnel between
the drill site and the exploration camp. The diamond drilling was performed by
Geosearch International Limited of South Africa utilizing four portable CS1000
and two Longyear 38 drill rigs with a maximum depth capability of 600 metres.
All drill hole collars were surveyed with RTK GPS equipment. Drill hole collar
azimuths and inclinations were established at surface by using hand held
compasses. Down-hole surveying of drill holes utilized a Reflex Single Shot or
Flexit instrument, which measures both azimuth and inclination of the hole. All
drill core was orientated. Orientation was carried out by the "Spear" method or
the Ezy Mark system. The majority of the drill holes have been drilled to the
east on an azimuth of between 70 - 80°, and at inclinations of between 50 – 55°.
A portion of the programme has been drilled in the opposite direction on an
azimuth of 260° to improve the definition of the 3D wireframes.
May 2008 to November 2008
One hundred and two (102) diamond drill holes totalling
21,952.26 metres of PQ, HQ and NQ was completed between May 2008 and November
2008. Drilling tested the mineralised interpretation at depth with the aim of
increasing both confidence and grade in the previous estimates, particularly in
Twangiza Main. Resource holes were drilled on 40 metre centres to infill the
holes drilled during previous campaigns with the objective of upgrading the
inferred mineral resources to the higher confidence measured and indicated
mineral resources and improving the estimation at depth. The same drilling
procedures were used in terms of rig set-up and rig movement as in the previous
drilling campaign.
The majority of the holes in the program were drilled to the
east on an azimuth of between 70 - 80° at dips of between 50 – 55°. A portion of
the program was drilled in the opposite direction on an azimuth of 260° to
improve the definition of the 3D wireframes.
2009 to 2014
See the disclosure above under "Twangiza – Exploration".
Sampling and Analysis
Reference is made to sections 11, 12 and 13 of the Twangiza
Technical Report (which sections are entitled "Sampling Method and Approach",
"Sample Preparation, Analyses and Security" and "Data Verification"
respectively) for information in respect of sampling and analysis at Twangiza.
Sections 11, 12 and 13 of the Twangiza Technical Report are filed as an exhibit
to and are incorporated by reference into, and form part of, this Form 20-F. A
copy of the Twangiza Technical Report can be obtained from SEDAR at
www.sedar.com and EDGAR at www.sec.gov.
-38-
Security of Samples
Reference is made to sections 11 and 12 of the Twangiza
Technical Report (which sections are entitled “Sampling Method and Approach” and
“Sample Preparation, Analyses and Security” respectively) for information in
respect of security of samples at Twangiza. Sections 11 and 12 of the Twangiza
Technical Report are filed as an exhibit to and are incorporated by reference
into, and form part of, this Form 20-F. A copy of the Twangiza Technical Report
can be obtained from SEDAR at www.sedar.com and EDGAR at
www.sec.gov.
Mineral Resource and Mineral Reserve Estimates
In a press release dated March 27, 2014, the Company announced
updated mineral resource estimates and mineral reserve estimates for the
Twangiza property, which are set out in the following tables. The said press
release is filed as an exhibit to and is incorporated by reference into, and
forms part of, this Form 20-F. A copy of the said press release can be obtained
from SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Twangiza Mineral Resources (effective date: December 31,
2013)
Category |
Tonnes
(Mt) |
Grade
(g/t Au) |
Gold
(Moz) |
| (Oxide) |
| Measured |
6.56 |
2.62 |
0.55 |
| Indicated |
9.00 |
1.89 |
0.55 |
| Measured & Indicated |
15.56 |
2.21 |
1.10 |
| Inferred |
1.27 |
1.35 |
0.06 |
| (Transition & Fresh) |
| Measured |
5.97 |
2.23 |
0.43 |
| Indicated |
92.87 |
1.43 |
4.26 |
| Measured & Indicated |
98.85 |
1.48 |
4.69 |
| Inferred |
12.10 |
1.22 |
0.47 |
Note: The above estimates use a 0.5 g/t Au cut-off grade.
Cautionary Statements
Mineral resources that are not mineral reserves do not have
demonstrated economic viability. There is no assurance that any mineral
resources will ultimately be reclassified as proven or probable reserves. U.S.
investors should read the "Cautionary Note to U.S. Investors Concerning Reserve
and Resource Estimates" above concerning the difference between "resources" and
"reserves".
-39-
Twangiza Mineral Reserves (effective date: December 31,
2013)
| Category |
Tonnes
(Mt) |
Grade
(g/t Au) |
Gold
(Moz) |
| Proven |
5.62 |
2.49 |
0.45 |
| Probable |
8.07 |
2.23 |
0.57 |
| Total Proven and Probable |
13.69 |
2.34 |
1.03 |
Note: Rounding of numbers may result in computational
discrepancies. Mineral reserves are included in the mineral resources.
The key assumptions used for the determination of the mineral
reserves at Twangiza are set out below:
|
Input Data |
Units |
|
Gold price |
US$1,200 per ounce |
|
Mining costs |
US$3.35/tonne mined |
|
Processing costs |
US$20.13/tonne processed |
|
General and administration costs |
US$8.21/tonne processed |
|
Royalties and selling costs |
US$33.80/ounce |
|
Mining dilution |
5% at zero grade |
|
Reserves cut-off grade |
0.75 g/t Au recoverable |
|
Mining recovery |
95% |
|
Pit slopes |
30 to 50 degrees |
|
Metallurgical recovery |
Oxides (90.2%), Trasition (87%), Fresh (86%) for Twangiza
North deposit. Oxides (87%), Transition (79%), Fresh (74.5%) for all other
Twangiza deposits. |
Mining Operations
The ore body at Twangiza has been free digging. Mining is
conventional open pit mining with both free digging and some blasting planned
going forward. The Twangiza mine processing plant consists of a crushing,
milling and Carbon in Leach (CIL) process.
During the first half of 2014, the Twangiza mine focused on the
completion of the plant expansion project, improving ore delivery and throughput
levels in line with the upgraded design capacity of 1.7 million tonnes per annum
("Mtpa"). Following ore delivery and throughput achievements during the third
quarter of 2014, whereby 90% of the upgraded design capacity on an annualized
rate was achieved, site management’s focus shifted to incremental operational
efficiencies. Production during the year included two consecutive quarters of
record production as well as numerous record setting months with December 2014
production reaching 11,549 ounces of gold. These operational milestones were a
result of the successful plant expansion activities including the ROM Pad
sheltered storage which effectively mitigated the adverse impact that the
rainfall associated with the wet season has previously had on operating
performance.
-40-
In the second half of 2014, with the completion of the plant
expansion activities, Twangiza increased productivity levels towards steady
state operations. The steady state operating productivity has allowed Twangiza
to reduce cash costs by 23% from US$781 per ounce in the first half of 2014 to
US$605 per ounce in the second half of 2014. The improved operating results are
driven by the ability for the operations to increase mining and milling
productivity, a 25% and 29% increase in tonnage, respectively, while maintaining
similar gross expenditures. Going forward, Twangiza will continue to focus on
achieving incremental efficiencies through process optimization to further
enhance the steady state operations.
TWANGIZA MINE
|
2014
|
H2 2014
|
H1 2014
|
|
2013
|
Prior Year
Change % |
| Gold sales (oz) |
101,225 |
56,269 |
44,964 |
|
80,497 |
26% |
| Gold produced (oz) |
98,184 |
56,616 |
41,568 |
|
82,591 |
19% |
| Material mined (t) |
3,595,645 |
1,996,373 |
1,599,272 |
|
4,116,657 |
(13%) |
| Ore mined (t)1 |
1,927,744 |
1,146,144 |
781,600 |
|
1,758,972 |
10% |
| Valley fill mined (t) |
49,854 |
- |
49,854 |
|
- |
100% |
| Waste mined (t) |
1,618,047 |
850,229 |
767,818 |
|
2,357,685 |
(31%) |
| Strip ratio (t:t)2 |
0.84 |
0.74 |
0.98 |
|
1.35 |
(38%) |
| Ore milled (t)1 |
1,358,726 |
765,381 |
593,345 |
|
1,023,981 |
33% |
| Head grade (g/t)3 |
2.70 |
2.80 |
2.56 |
|
2.98 |
(9%) |
| Recovery (%) |
83.00 |
81.81 |
84.59 |
|
83.80 |
(1%) |
| Cash cost per ounce ($US/oz)4 |
683 |
605 |
781 |
|
836 |
(18%) |
| (1) |
The difference between ore mined and ore milled is,
generally, the result of the stockpiling of lower grade ore. |
| (2) |
Strip ratio is calculated as waste mined divided by ore
mined. |
| (3) |
Head grade refers to the indicated grade of ore
milled. |
| (4) |
Cash cost per ounce is a non-IFRS measure. Refer to the
non-IFRS measures section of the MD&A for additional
information. |
Mining
A total of 3,595,645 tonnes of material (2013 – 4,115,657
tonnes) were mined at Twangiza during the year ended December 31, 2014. Total
ore mined was 1,927,744 tonnes (2013 – 1,758,972 tonnes). The strip ratio for
the year fell to 0.84 as compared to 1.35 during 2013 in accordance with the
mine schedule which decreased the mining cost per tonne milled from US$14.7 to
US$11.6 per tonne, or a decrease of 21%. During the fourth quarter of 2014, a
total of 969,062 tonnes of material (Q4 2013 – 902,416 tonnes) were mined at
Twangiza, including 556,856 tonnes of ore (Q4 2013 – 366,625 tonnes), at a strip
ratio of 0.74 (Q4 2013 – 1.46) .
Processing & Engineering
For the year ended December 31, 2014, the plant at the Twangiza
mine processed 1,358,726 tonnes of ore (2013 – 1,023,981 tonnes), representing a
33% increase over the prior year. Increased throughput levels reduced the
processing cost per tonne milled from US$31.7 per tonne to US$25.9 per tonne or
a decrease of 19%. Throughput in the second half of 2014, following the
completion of the plant expansion, increased to over 90% of the upgraded design
capacity. Improved mill productivity was assisted by dryer weather conditions
than the previous year, and dryer material available aided by the new sheltered
ROM storage area along with improvements in pre-screening and ore crushing circuits.
Recoveries during the year decreased marginally compared to the prior year to an
average rate of 83.0% (2013 – 83.8%) driven mainly by the processing of lower
head grade ore. With the achievement of design throughput levels following the
expansion, site management focus transferred to incremental operational
efficiencies to increase throughput on a consistent basis and improve
recoveries. The processing costs were US$2.7 million higher compared to 2013 as
a result of the 33% increase in throughput, partially offset by lower
consumption of mill consumables per tonne processed.
-41-
Twangiza Plant Optimization and Expansion
The Twangiza plant upgrade was completed at the end of April
2014, expanding the plant throughput capacity to 1.7 Mtpa. The upgrade was
commissioned during the second quarter of 2014, enabling the plant throughput to
ramp up to over 90% of design throughput. Site management continues to optimize
the plant in order to incrementally increase the benefits from upgrade program.
Sustaining Capital Activities
Throughout 2014, project capital at Twangiza totaling US$9.945
million included plant expansion activities, ROM Pad roofing, mobile mine
equipment and the tailings management facility. Capital spending decreased
throughout the year as the plant expansion activities were completed including
the ROM Pad roofing.
General
Under the Mining Convention, income taxes are not payable by
Twangiza Mining S.A. for a period of 10 years. An administrative tax of 5% for
the importation of plant, machinery and consumables is payable by Twangiza
Mining S.A., as is a royalty of 1% on gold revenues and, after return of
capital, a 4% net profits tax.
Twangiza Exploration Program Planned for 2015
Consistent with the Company’s strategy to focus on cash flow
management and the completion of the Namoya mine, exploration at Twangiza for
2015 will be limited to low level ground maintenance and target generation
exploration activities prioritizing extensions to the Twangiza Main
mineralization trend. The planned activities include geochemical soil sampling,
geological mapping, channel and rock chip sampling, limited auger drilling and
wide coverage low cost regional BLEG sampling. Planned drilling has been
deferred to the second half of the year and is dependent on funds availability.
Namoya
Certain of the following disclosure relating to the Company’s
Namoya gold project is derived from the technical report (the "Namoya
Technical Report") dated May 12, 2014 and entitled "Independent National
Instrument 43-101 Technical Report on the Namoya Gold Project, Maniema Province,
Democratic Republic of the Congo". A copy of the Namoya Technical Report can be
obtained from SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Property Description and Location
The Namoya project is located in the Maniema Province of the
DRC, approximately 195 kilometres west of Lake Tanganyika, crossing the
provincial border of South Kivu Province, as shown in Figure 2. Kinshasa, the
capital city of the DRC, is 1,355 kilometres west of the Namoya project, while
the business districts of Bukavu (South Kivu Province, DRC), Bujumbura in
Burundi and Kigali in Rwanda are each located more than 200 kilometres to the
northeast of the project.
-42-
The project consists of one exploitation permit (No.18), which
occupies an area of 174 km2. See Figure 3. Within this project area,
six prospects have been identified. Namoya Mining S.A., a DRC subsidiary of
Banro, holds the said exploitation permit, which entitles Namoya Mining S.A. to
carry out exploration, development, construction and mining on the property. The
said exploitation permit expires July 2016, subject to renewal for consecutive
15 year periods. According to DRC law, the surface rights and the mineral rights
pertaining to one property are not separated. Therefore, Namoya Mining S.A. has
access to both the surface and mineral rights to the Namoya project under its
exploitation permit.
Namoya Mining S.A. has committed that, following closure of
operations, that waste and tailings disposal infrastructure will be
decommissioned and rehabilitated in a manner that does not present a long term
safety and/or stability risk.
Accessibility, Climate, Local Resources, Infrastructure
and Physiography
The Namoya area can be divided into two main topographic
domains, namely the broad flat flood plains to the south of Namoya village, and
the mountainous domain to the north. The plains lie between 800 metres above
mean sea level (amsl) and 900 metres amsl. The summit of Mount Mwendamboko, to
the north, peaks at approximately 1,300 metres amsl. The northern region is cut
by deep valleys with a well-formed drainage system made up of a dense dendritic
network of short streams, less than 10 kilometres in length. The rivers are
generally narrow and shallow with many rapids along their course. A schematic
plan of the property is given in Figure 3, which provides views of the
topography and physiography around the Namoya project. Many of the streams and
rivers draining the hills are being mined and used for washing ore by artisanal
miners, and an area of processed washings exists in the valley next to
Mwendamboko village.
The climate in the eastern DRC is tropical. It is hot and humid
in the equatorial river basin and cooler and wetter in the eastern highlands.
The wet season takes place in April to October and the dry season from December
to February. The climate allows for exploration and mining activities all year
round. Activities are more challenging during the wet season, as roads become
muddy and slippery, pits are rapidly filled by water and field work can be
extremely difficult.
The land around the Namoya project is mainly equatorial rain
forest, with very tall trees and grass. The plains south of the village of
Namoya consist of equatorial forest interspersed with savannah and agricultural
land, while the mountainous northern region is covered by extensive equatorial
forest. There are several rivers which can provide water for the project.
The Namoya project lies far from business districts and built
up areas and is therefore situated a considerable distance away from the major
road and rail networks and the power grid. Infrastructure in the DRC is
generally limited and in poor condition. The general lack of maintenance and
destruction of bridges in recent times also contributes to the challenging
access conditions. Namoya Mining S.A. is continuously carrying out basic repairs
to improve access around the site.
-43-
Figure 2
-44-
Figure 3
The N2 road and accompanying bridges have been reconstructed
between Bukavu and the Namoya project area by Namoya Mining S.A., and the area
is now fully accessible by all forms of vehicle. The road is maintained by
Namoya Mining S.A. The Namoya site can also be accessed via a small dirt
airstrip approximately 1,000 metres long, which currently provides access for
personnel and equipment.
There are a number of small villages inhabited by artisanal
miners in proximity to the property, notably the village of Namoya to the south
of the known deposits. The village of Kama lies 4 kilometres southwest of the
project area. A labour force is available locally from these and other villages,
and includes semi-skilled laborers, tradesmen and prospectors remaining as a
result of historical activity in the area.
History
See item 4.A. of this Form 20-F for ownership history
information with respect to the Namoya property.
Historical Exploration
Exploration activities in the Namoya area can be divided into
pre-2004 and post-2004 activities. All pre-2004 exploration and assay
information for the area was conducted by Compagnie Zairoise d’Enterprises
Minières ("Cobelmin"). The historical exploration data from Cobelmin
includes the following:
-45-
| • |
10,820 prospecting samples from 1,237 pits over
an area of 4.5 km2; |
| • |
519 samples from 12 trenches totalling 519
metres; |
| • |
10,144 samples from 103 adits and crosscuts
totalling 8,530 metres; |
| • |
6,462 samples from 112 diamond drill holes
totalling some 9,540 metres; and |
| • |
2,751 samples from four bench levels in the
Mwendamboko open pit. |
Cobelmin ceased operations in 1961 due to civil unrest, and no
further work appears to have been conducted in the area prior to 2004. Artisanal
miners continue to work in the area to this day.
Historical Production
Filon B has been extensively mined by Cobelmin and has also
been the main target for artisanal mining since the closure in 1961. Underground
mining conducted at Filon B between 1947 and 1955 is believed to have produced
between 5,000tpa and 6,000tpa. The mill feed at the beginning of this period is
reported as 65g/t from tailings, to 25g/t Au towards the end of the period.
Between 1947 and 1955, an average gold recovery from the Filon B ore was 34g/t.
The gravity plant was unable to deal with the sulphide mineralization, and
tailings of up to 7g/t Au were stockpiled.
The workings at Mwendamboko justified the construction of a
10,000tpm capacity processing plant, which was commissioned in 1955. Production
from the Mwendamboko open pit took place between 1955 and 1960, producing 800 to
1,000kg of gold per year. The material extracted from the open pit at
Mwendamboko has been calculated to be 318,230m3.
Geological Setting and Mineralization
Reference is made to sections 6.1 and 6.2 of the Namoya
Technical Report (which sections are entitled "Regional Geology" and "Local
Geology" respectively) for information in respect of regional and local geology.
Sections 6.1 and 6.2 of the Namoya Technical Report are filed as an exhibit to
and incorporated by reference into, and form part of, this Form 20-F. A copy of
the Namoya Technical Report can be obtained from SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Property Geology and Mineralisation
Namoya consists of six separate prospects, namely Mwendamboko,
Muviringu, Kakula, Namoya Summit, Seketi and Kangurube. Namoya Mining S.A. is
currently focussing further investigation on the occurrence of gold at Kakula
West, Kakula-Namoya Summit, Kimbala, Matongo and Filon B.
Mwendamboko
The main lithologies of
the Mwendamboko and Muviringu deposits are Proterozoic in age, and have
undergone low grade greenschist facies metamorphism. These consist of schists of
varying compositions, and darker green bands of dolerite. These units are
generally steeply dipping towards the northeast and have a general
northwest-southeast strike. The mineralized quartz veins are sub-vertical with
numerous pinch and swell features. These stockworks dip steeply to the northeast
but the schistosity is sub-vertical. At Mwendamboko and the northeastern part of
Muviringu, the stockwork zones are parallel to schistosity and strike
northwest-southeast and have a subvertical dip.
The width of the mineralized veins varies from less than a
metre to more than 20 metres in places and they occur in lenticular folds, which
become compressed at depth and are displaced both vertically and horizontally.
Some tourmalinization is associated with the quartz veins in the upper levels
and pyrite is the dominant sulphide present in minor quantities. The mineralized
zones remain open-ended both along strike to the north and at depth for the southeasterly plunging shoots. The southeasterly plunging shoot
at Mwendamboko has been drilled to level 640 metre relative level (mRL) and
remains open. This shoot achieved an intersection of 21.33 metres at an average
grade of 6.56g/t Au.
-46-
Muviringu
With the exception of a more
pronounced pinching and swelling nature of quartz veins, the local geology at
Muviringu is identical to Mwendamboko as Muviringo is a conjugate set of
mineralization to Mwendamboko. At Muviringu, the stockwork zones transect
regional fabric with a northwest orientation and a steep sub-vertical dip to the
southwest.
Kakula
The Kakula deposit is situated
approximately 750 metres southeast along strike from the Mwendamboko deposit and
is roughly in the centre of the currently delineated northwest-southeast
trending mineralized zone. Kakula is noteworthy, as the mineralized zone is
discordant to the regional fabric as opposed to being concordant at Mwendamboko.
The geological information that is available for Kakula reflects similar
lithologies and mineralization to those seen at Mwendamboko. It is primarily
composed of interbedded light brown sericite schists and green chlorite-sericite
schists striking approximately north-northwest and dipping northeast. The
mineralization is hosted in a series of quartz veins and stockworks, with an
approximate angle of 080° and dip sub-vertically to the northwest. The overall
gold grade at Kakula appears to be lower than that of Mwendamboko.
Namoya Summit and Filon B
Namoya
Summit is located on the southeastern end of the mineralized trend, and has a
strike length of approximately 110 metres. The quartz stockwork zone strikes
northwest-southeast, parallel to the foliation in the schists and has a maximum
width of about 30 metres. Like Mwendamboko and Kakula, the mineralization
plunges to the southeast, at about 70°. The mineralization occurs within a
package of greenish sericite schists, with graphitic schist in the footwall, and
sericite schist in the hanging wall. An intrusion of quartz porphyry has been
intersected at depth in some drill holes. The intrusion is pre-mineralization,
as it contains sporadic, weakly mineralized quartz veins, but it does not form
part of the Namoya Summit orebody and is restricted to the footwall.
Filon B is an extension of the Namoya Summit area and is
currently under exploration by Namoya Mining S.A. but is only considered an
occurrence at this stage. The Filon B mineralized vein system appears to run
against the trend of the other deposits, trending approximately east-west. It
was originally believed to have been a stockwork deposit compressed, due to
regional tectonics, into a series of robust quartz veins. It was extremely high
grade, often exceeding 1,000g/t Au. Due to its high grades and relative ease of
access, Filon B has been extensively mined and has been the main target for
artisanal mining since the closure in 1961. Therefore, it can be safely assumed
that little or none of the main mineralized body remains in the top 100 metres
to 150 metres from surface where sample data exists. Dip and strike extensions
of this vein system have yet to be fully tested, as has the existence of other
similarly trending bodies noted to exist nearby.
The Filon B prospect comprises an approximately east-west
trending, high-grade quartz vein system, located to the south of Namoya Summit.
The vein was mined by underground methods during colonial times, and has since
been the focus of intensive artisanal activity. The workings indicate that the
vein was exploited over a strike of about 200 metres, and for about 80 metres
down dip (that is to 1,144 metres elevation).
Possible extensions to the Filon B zone could constitute an
important underground resource. The deep weathering profile of Filon B,
continuing up to vertical depths of 150 metres to 200 metres, could imply
favourable metallurgical recoveries for Filon B. The most significant recent
intersections of Filon B are steeply easterly plunging mineralized shoots and
include a 32 metre intersection at a grade of 7.85g/t Au from 40.00 metres and
16 metres at a grade of 4.83g/t Au from 173.50 metres.
-47-
Seketi
The Seketi prospect lies 1
kilometre west of Kakula. It comprises two zones, with Seketi North lying 175
metres northeast of the Main Seketi prospect. The dominant lithological units of
Seketi are sericite schist and dolerite. The schistocity fabric generally trends
northwest-southeast, that is parallel to the main Namoya-Mwendamboko shear zone
and dips to the northeast at an average of 65°. The main alteration types are
quartz and pyrite. Quartz occurs as irregular, massive or foliation parallel
veins whereas pyrite occurs in disseminated form or boxworks in the upper
weathered profiles. For dolerite, carbonate alteration occurs as irregular veins
and veinlets and in some places as quartz-carbonate veins. At relatively deeper
levels pyrrhotite occurs in blebby style hosted by the dolerite. Thus far, at
Namoya it is only the Seketi dolerite that hosts gold mineralized quartz veins.
Dolerite sills and dykes in all the other prospects at Namoya are barren. More
drilling is required to determine the number of mineralized zones and their
correlation and continuity along strike as soil data suggests that
mineralization continues over a strike of about 200 metres.
Kangurube
The Kangurube prospect is
located 1.5 kilometres east of the Namoya Summit prospect, and was discovered
when a soil anomaly of 40ppb to 200ppb was found. The follow-up trench
intersected three zones of mineralization associated with quartz veining in
sericite schist. The intersections cover 8.00 metres at a grade of 8.51g/t Au,
6.60 metres at a grade of 18.36g/t Au and 19.60 metres at a grade of 2.69g/t Au.
Kangurube mineralization strikes approximately north-south, and the prospect
appears to be associated with either a possible tensional gash in a parallel
structure to the main Namoya shear, or a separate north-south trending
structure. Drilling along strike indicates that the Kangurube mineralized zone
may have a limited strike extent. However, additional exploration work is
required to ascertain this preliminary observation. Thickening of the regolith
on the flanks of the hill has probably suppressed the geochemical response, and
given the pinch-and-swell nature of the mineralization at Namoya, the zone may
continue to the north and south.
Deposit Types
The Namoya project, even though segmented into separate
prospects, boasts one type of gold mineralisation style. The following deposit
characteristics have been noted:
- gold mineralisation hosted within quartz veins and quartz stockworks,
striking in a northwest- southeast direction;
- prevalence of tourmaline crystals within the quartz veins;
- deformation structures within the quartz veins, resulting in irregular
sheets, nested vein sets, ladder veins and micro-veinlets, characteristic of
shearing;
- no granitic intrusions in the immediate area of the Namoya orebody (as a
possible source of tourmaline) although quartz porphyry intrusions have been
intersected by drill holes at Namoya Summit and Muviringu signifying potential
for a deep seated granitic body; and
- sericite/chlorite schists, sometimes with carbonates, indicative of a
magmatic and hydrothermal processes.
The deposit characteristics are typical of the
intrusion-related, tungsten/tin-associated type. This class of
magmatic-hydrothermal deposits occurs within magmatic provinces best known for
tungsten and/or tin mineralization. This type of deposit contains a metal suite
that includes some combination of bismuth, tungsten, arsenic, tin, molybdenum,
tellurium and antimony and contrasts with that found in more widely-developed
gold-rich porphyry copper deposits. They are located specifically on cratonic
margins or within continental collision settings and are related to felsic
domes, stocks and plutons of intermediate oxidation state (both magnetite and
ilmenite series). The mineralization may occur within the intrusive body itself,
and/or more distally (1 kilometre to 3 kilometres) from the intrusion.
Intrusion related gold deposits occur in a number of forms,
including:
-48-
- sheeted quartz veins and veinlets;
- flat quartz veins;
- quartz breccias and stockworks;
- disseminated greisens; and
- dyke/sill hosted veinlets.
Exploration (including Drilling)
Namoya Mining S.A. has carried out extensive exploration since
2004, which commenced by regional investigations, including Landsat imagery
interpretation, regional mapping and soil sampling. Advanced exploration
entailed adit and trench mapping and sampling, twinning of historical drill
holes and drilling of new exploration holes. Reference is made to sections 8 and
9 of the Namoya Technical Report (which sections are entitled "Exploration" and
"Drilling" respectively) for information in respect of exploration, including
drilling, carried out by Namoya Mining S.A. from 2004 to the end of 2012.
Sections 8 and 9 of the Namoya Technical Report are filed as an exhibit to and
are incorporated by reference into, and form part of, this Form 20-F. A copy of
the Namoya Technical Report can be obtained from SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Namoya 2013 Exploration Program
In 2013, the Namoya geological team focused on works related to
Namoya mine development. The activities included the following:
| |
- |
reverse circulation drilling and water pumping test of
boreholes on and around the tailings management facility (TMF) and heap
leach pad to determine underground water quality as mining operations draw
near; |
| |
- |
diamond drilling for geotechnical studies on proposed
heap leach site, TMF site and waste dump site; |
| |
- |
selective auger drilling and pitting programs at the heap
leach and TMF sites; |
| |
- |
investigation and identification of local source for
collecting gravels for construction of water monitoring holes to replace
the external supply sources; |
| |
- |
complete reverse circulation drilling of six boreholes
for the processing plant water supply; excavation of pits for geotechnical
test works for raw water supply at the historical plant water supply dam
site; |
| |
- |
mapping and diamond drilling of dolerite body at Kibiswa
for demarcation and use as construction aggregates quarry; |
| |
- |
reverse circulation drilling of 462 blastholes for
blasting of Kibiswa dolerites; |
| |
- |
oxidation logging of reverse circulation holes drilled at
the heap leach pad and also oxidation re-logging of selected diamond drill
holes selected across all the Namoya deposits; |
| |
- |
undertaking trial and operational grade control at Seketi
and Mwendamboko; |
| |
- |
pitting program at Matete site proposed for the
relocation of artisanal miners from the Namoya mine foot print.
|
Namoya 2014 Exploration Program
An exploration review for potential brownfield targets was
carried out during the last quarter of 2014. The aim was to identify potential
definition drilling targets for quick resource and reserve additions. This
involved a desk review of all previous work undertaken, and targets for
potential resource upgrade and growth were refined. The review was followed by
two months of field work which included trenching, channeling and pit sampling.
Initial focus was on the Namoya Summit-Filon B area and other new exposures made
available in road cuts in Seketi and Kakula due to mine development.
-49-
Sampling and Analysis
Reference is made to sections 10 and 11 of the Namoya Technical
Report (which sections are entitled "Sample Preparation, Analyses and Security"
and "Data Verification" respectively) for information in respect of sampling and
analysis at Namoya. Sections 10 and 11 of the Namoya Technical Report are filed
as an exhibit to and are incorporated by reference into, and form part of, this
Form 20-F. A copy of the Namoya Technical Report can be obtained from SEDAR at
www.sedar.com and EDGAR at www.sec.gov.
Security of Samples
Reference is made to section 10 the Namoya Technical Report
(which section is entitled "Sample Preparation, Analyses and Security") for
information in respect of security of samples at Namoya. Section 10 of the
Namoya Technical Report is filed as an exhibit to and is incorporated by
reference into, and forms part of, this Form 20-F. A copy of the Namoya
Technical Report can be obtained from SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Mineral Resource and Mineral Reserve Estimates
Namoya Mineral Resources (effective date: December 31, 2013)
Category |
Tonnes
(Mt) |
Grade
(g/t Au) |
Gold
(Moz) |
| (Oxide, Transition & Fresh) |
| Measured |
23.75 |
1.98 |
1.51 |
| Indicated |
6.03 |
1.62 |
0.31 |
| Measured and Indicated |
29.78 |
1.91 |
1.83 |
| Inferred |
6.52 |
1.61 |
0.34 |
|
Note: The above estimates use a 0.4 g/t Au cut-off grade. |
The mineral resource occurs from surface and the model has been
constrained at a depth of 500 metres below the surface. As set out in the above
table, mineral resources have been classified into measured, indicated and
inferred. Where closely spaced sampling data, within one Variogram range search
ellipsoid, supported by positive kriging efficiency, measured and indicated
mineral resources are declared. Areas beyond the indicated mineral resource
limit, but where there is geological continuity, supported by wider spaced
drilling data, inferred mineral resources are declared. Inferred mineral
resources were limited to an optimised pit shell at US$1,600/oz. Regolith is
classified as indicated mineral resources due to the closely spaced auger
drilling on surface. This has been modelled as a separate zone.
Cautionary Statements
Mineral resources that are not mineral reserves do not have
demonstrated economic viability. There is no assurance that any mineral
resources will ultimately be reclassified as proven or probable reserves. U.S.
investors should read the "Cautionary Note to U.S. Investors Concerning Reserve
and Resource Estimates" above concerning the difference between "resources" and
"reserves".
-50-
Namoya Mineral Reserves (effective date: December 31, 2013)
Category |
Tonnes
(Mt) |
Grade
(g/t Au) |
Gold
(Moz) |
| Proven |
22.39 |
1.78 |
1.28 |
| Probable |
1.31 |
1.34 |
0.06 |
| Total Proven and Probable |
23.70 |
1.75 |
1.34 |
Note: Rounding of numbers may result in computational
discrepancies. Mineral reserves are included in the mineral resources.
The key assumptions used for the determination of the mineral
reserves at Namoya are set out below:
| Input Data |
Units |
| Gold price |
US$1,200 per ounce |
| Mining costs |
US$3.85/tonne mined |
| Processing costs |
US$11.38/tonne processed |
| General and administration costs |
US$5.89/tonne processed |
| Royalties and selling costs |
US$33.05/ounce |
| Mining dilution |
5% at zero grade |
| Reserves cut-off grade |
0.45 g/t Au recoverable |
| Mining recovery |
95% |
| Pit slopes |
40 to 50 degrees |
| Metallurgical recovery |
Oxides (88%), Transitional (84%), Fresh (80%)
|
Reference is made to section 14 the Namoya Technical Report
(which section is entitled "Mineral Reserve Estimates") for additional
information in respect of the Namoya mineral reserve estimates. Section 14 of
the Namoya Technical Report is filed as an exhibit to and is incorporated by
reference into, and forms part of, this Form 20-F. A copy of the Namoya
Technical Report can be obtained from SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Exploration and Development
Namoya Gold Mine under Construction
Development at the Namoya project includes basic mine
infrastructure such as offices, maintenance facilities, accommodation facilities
and maintenance workshops. The project is also equipped with road, power
(diesel) and water infrastructure which the Company has constructed as none of
this infrastructure existed before the project commenced. Conventional open pit,
shovel-truck methods are being used for mining. Main mining functions of the
operation are carried out in-house by the Namoya Mining S.A. mining team,
contractor only being used for selected aspects if, and when required. Mining
activities are based on owner mined open pit operations.
The mine site terrain at Namoya is well suited for a heap leach
facility with the gentle slopes favourable for the location of leach pads and
ponds, away from the small range of hills that contain the four pits. The total
installed power for the mine is estimated at 4.75 MW and provided by diesel
generators.
-51-
Seasonal rainfall continues to play a role in logistics
deliverables. Roads are constructed and maintained and movement schedules are
adapted to suit weather conditions to protect vehicles, equipment and the road
from deteriorating.
Under the Mining Convention, income taxes are not payable by
Namoya Mining S.A. for a period of 10 years. An administrative tax of 5% for the
importation of plant, machinery and consumables is payable by Namoya Mining
S.A., as is a royalty of 1% on gold revenues and, after return of capital, a 4%
net profits tax.
During the first half of 2014, Namoya development activity
progressed towards the completion of construction of the hybrid plant and the
subsequent commissioning. During the hot commissioning activities, the Company
identified that the Namoya hybrid CIL/heap leach plant was unable to run at
design capacity as the percentage of fine material was found to be higher than
expected, and as such, higher than the hybrid plant was designed to process.
During the third quarter of 2014, management worked with internal expertise and
external consultants in order to evaluate, assess and determine a remediation
plan to address the issues identified during the hot commissioning stage and
best utilize the Namoya mine. The Company determined that the most appropriate
course of action was the addition of a traditional agglomeration drum to the
existing circuit while continuing to evaluate the most optimal manner to utilize
the CIL circuit. During the fourth quarter of 2014, a lightly used agglomeration
drum was procured and transported into the region with delivery to site
occurring in early January 2015. This procurement significantly reduced the time
requirements of procuring and shipping a new drum for Namoya which is estimated
to have taken in excess of 12 months. Processing continued at Namoya during the
procurement process through the stacking of semi-agglomerated material through
the addition of cement on the transport conveyors to the stacker.
The agglomeration drum was installed and successfully
commissioned at the beginning of February 2015. Stacking levels are expected to
increase to up to 190,000 tonnes per month following the ramp up towards
commercial production levels.
Mining continued at the Seketi and Mwendamboko pits throughout
2014 comprising 2,745,530 tonnes of material of which 1,103,611 tonnes were ore
at a strip ratio of 1.49. Management slowed down mining activities during the
third quarter due to a lower achievable feed rate through the wet scrubbing
circuit. During the fourth quarter of 2014, mining activities returned to levels
more consistent with the first two quarters, mining 343,753 tonnes of ore at a
strip ratio of 1.08 for total material of 715,012 tonnes. In addition to the
continuation of mining activities at more normal levels during the fourth
quarter of 2014, the mining fleet began activities for the opening of the Kakula
pit for grade control and mining activities in 2015.
Additions during 2014 to the “Mine under Construction” item on
the Company’s balance sheet consisted of the completion construction, costs
associated with initial commissioning activities, work performed in the
determination of the optimal remediation plan as well as pre-commercial
operating losses due to the mine operating at levels which are below break-even.
There were no significant capital amounts spent on project construction or on
the acquisition of new property, plant and equipment in the second half of 2014,
with the exception of costs associated with the agglomeration drum.
During 2014, the Namoya mine produced 18,282 ounces of gold
from a total of 565,350 tonnes of ore, stacked and sprayed on the heap leach
pads and processed through the CIL circuit, at an indicated head grade of 2.13
g/t Au. During the fourth quarter of 2014, Namoya produced 8,791 ounces through
the stacking of 218,248 tonnes of semi-agglomerated material on the heap leach
pads. The CIL circuit was not utilized during the fourth quarter as management’s
main focus remained on the heap leach operation. Namoya’s production is expected
to continue to benefit incrementally from the increasing stacking rates that are
being achieved as the heap leach curve progresses toward steady state operating
levels.
-52-
Namoya Exploration Program Planned for 2015
Several potential oxide generating targets have been generated
from the previous year’s exploration activities which require follow up work.
The main resource upgrade or generation activities which would involve drilling
will be limited to Namoya mine brownfields, where the aim will be to upgrade
inferred resources within the current Namoya Summit-Filon B pit into higher
confidence for conversion into reserves by the end of the year and also to
delineate additional oxide resources within haulage distance (5 kilometres) of
the current operations to feed the existing plant. Up to 2,900 metres of
drilling has been planned for the Namoya Summit-Filon B work and, depending on
the availability of funds and rigs, drilling will be undertaken in the second
and third quarters of 2015. The drilling will be preceded by geological mapping,
and various sampling including channeling, auger drilling and trenching to
refine the drilling targets. Geophysical IP surveys are also planned to be
undertaken between the gaps of the current Namoya deposits to determine whether
there is any deep seated mineralization within the gaps.
Lugushwa
The Lugushwa property consists of three exploitation permits
covering an area of 641 square kilometres and is located approximately 150
kilometres southwest of the town of Bukavu in the South Kivu Province in the
east of the DRC. Banro's DRC subsidiary, Lugushwa Mining S.A., has a 100%
interest in the said permits.
Between 1958 and 1996, some 457,000 ounces of gold were
reportedly produced from alluvial and primary sources at Lugushwa. The primary
gold mineralization identified at Lugushwa is quartz vein hosted, and is either
in single high grade veins or in swarms of several parallel veins and pods. At
the close of operations in 1996 there remained unexploited resources in the
various deposits as well as several primary anomalous targets that had not been
fully explored.
The majority of the historical information for Lugushwa relates
to surface work (trenching and geochemical pits) comprising 7,378 individual
records. Based mainly on this historical database, Banro's independent
consultants, SRK, derived an inferred mineral resource estimate for Lugushwa
which was reported in the “SRK Technical Report” (as defined below) in February
2005.
An exploration camp was established at Lugushwa by Banro in
January 2005. Exploration work consisting of gridding, geological mapping, soil,
trench and adit sampling continued during 2006, with core drilling commencing in
February 2006. A total of 54 core holes totaling 8,332 metres were drilled in
2006. Drilling was focused on prospects G20/21, D18/19, Carriere A and Kimbangu.
In 2007 exploration continued to evaluate the G20/21 and D18/18
prospects at Lugushwa. To achieve this objective, 12,000 meters of core drilling
was budgeted for but due to poor performance only 11 core holes totaling
2,493.06 metres were drilled resulting in the termination of the drilling
program in May 2007. Regional exploration encompassing LIDAR, aeromagnetic and
radiometric surveys over the Lugushwa concessions was also undertaken during the
period.
The 2008 exploration focused on the evaluation of the G20/21
and D18/18 prospects. To achieve this objective, 32 holes totaling 5,518.16
meters of core drilling were completed. In total, the Company drilled 97 core
holes totaling 16,333.06 metres since the commencement of drilling in 2006. The
target generation and ground follow-up exercise that was initiated in 2007 was
continued, leading to the definition of new drill targets. Metallurgical
testwork on the various ore types (oxide, transitional and sulphide) was
initiated.
In 2009, following the downturn in funding as a result of the
global economic crisis, exploration focus was restricted to regional low-cost
activities involving trenching, rock sampling, auger drilling and geological
mapping. Focus was directed on the Kimbangu–Mpongo mineralised trend.
-53-
In 2010, exploration activities focused on refining the
geological understanding of the Kimbangu–Mpongo mineralised trend to assist with
drill targets generation. Low cost exploration techniques involving auger
drilling and trenching were applied prior to shallow depth drilling. As a
result, better understanding and extensions to known mineralisation at G20-21,
D18-19, Carriere A, Mpongo, Kimbangu, and G7-Mapale were delineated. The
exploration coverage also involved surface and drainage geological mapping which
assisted in the refining of previous deposit and prospect mineralisation models.
Minimal exploration activities were conducted over the
reconnaissance and target generation areas mainly, ground truthing, drainage
mapping and interpretation of geophysical data. Reconnaissance targets are
Kelekele, Simali, Kilima, G8, Kolo, Bata and Kilunga. Target generation areas on
the Lugushwa property include the following; Kabonzo, Miasa, Tunkele, Kinsulya,
Zhibo, Minkumbu, Mapale, Kitemba, Shabangonga, Mabondo, G3-Byombi, and River
terrace alluvials.
Field work in 2011 was focused on (a) extension of the Lugushwa
existing soil grid in its southern and western parts respectively in Minkumbu
and Kinsulya areas, (b) auger drilling program to test stream sediment anomalies
catchments at Kabonzo-Miasa area and soil anomalies in the Kimbangu-Mpongo belt
and (c) diamond drilling program for metallurgical samples and delineation of
oxide resource from the 4.5 kilometre long Kimbangu–Mpongo trend. Forty three
(43) diamond holes totaling 3,351.96 metres, 243 auger holes totaling 1,811.65
metres, and 17 trenches totaling 327.50 metres were achieved. A total of 20.72
line kilometers were opened and 546 soil samples and 25 rock chips samples were
collected during geological surface mapping.
Field work in 2012 was focused on (a) diamond drilling for
oxide resource delineation and (b) target generation using auger drilling and
trenching. Regional exploration work conducted during 2012 involved surface
mapping and sampling, stream sediment sampling and channel sampling in the
Kamwanga and Kabikokole areas respectively located over the Lugushwa eastern and
northwestern geophysical targets. During the year, an orientation IP survey
program was conducted over the G7- Mapale area to test the viability of using
geophysics in delineating disseminated sulphide zones. At the same time surface
mapping concurrent with the trenching/channeling program and rock chip sampling
on the G20-21 deposit, Carrière A and G8-Kolo prospects and regolith mapping and
sampling in old drill pads were undertaken. Apart from field operations, work
also focused on routine data entry, geological modeling, map compilation and
Lineament Interpretation based on the regional aeromagnetic data of the
Kimbangu-Mpongo mineralized trend and regional structural setting. At the end of
2012, work statistics were as follows: 57 diamond holes totalling 5,185.25
metres, 489 auger holes totaling 2,698.30 metres and 35 trenches/channels
totalling 489.30 metres were achieved. A total of 90 stream samples, 103 rock
chips samples and 202 regolith samples were collected during surface geological
mapping. A total of 13.60 line kilometres were opened for IP survey work.
Overall, project-wide diamond drilling statistics at the
Lugushwa project since 2005 to the end of 2012 stood at 24,894.00 metres for 200
diamond drill holes from which a total of 26,464 core samples were collected for
gold assaying. The comparative diamond drilling production in Lugushwa since
2005 to December 2012 is representing in the figure below.
-54-
Lugushwa Exploration Activities in 2013
In 2013, the planned exploration program at Lugushwa was
significantly reduced to accommodate the focus of completing the construction of
the Namoya mine and the Twangiza mine expansion. As a result, there was no
diamond or reverse circulation drilling at Lugushwa in 2013. Exploration
activities at the Lugushwa project in 2013 involved (a) extension of soil
geochemistry coverage of the Lugushwa grid, (b) follow-up auger drilling in
various prospects, (c) trenching/channeling, (d) alluvial/terrace pit sampling,
and (e) surface/drainage geological mapping of selected areas. Prospects and
areas where exploration activities were focused included G7-Mapale, Carriere A,
Mpongo, Mulezi (west of Mpongo prospect) and Kamasani (south of Mpongo
prospect), Minkumbu, G8-Kolo, Duru (East of Carriere A) and the alluvial
terraces of Kakangala. By the end of the year, the following work statistics
were realized:
| |
- |
a total of 76.36 kilometres lines
were opened for a total of 2,010 soil samples; |
| |
- |
1,073 auger holes representing
5,699.60 metres generating 7,253 auger samples; |
| |
- |
406.30 metres representing 423
trench/channel samples were achieved; |
| |
- |
a total of 11 stream sediments;
|
| |
- |
10 orientation stream sediments
BLEG samples were collected; |
| |
- |
14 rock chips collected from
surface mapping; |
| |
- |
a total of 136 pit terrace
samples were collected during the year. |
Lugushwa Exploration Activities in 2014
In 2014, field activities at Lugushwa included (a) limited
auger drilling, channel/trenching and surface/drainage geological mapping in
selected areas located along the 15.3 kilometre Minkumbu – Kabonzo Miasa
Northeast- southwest trend, (b) a wide scale BLEG sampling program over the
Lugushwa concession, and (c) IP survey work at the Manungu and Kimbangu
prospects. The 2014 exploration activities resulted in the discovery via auger sampling of the Manungu prospect, which is located in workings
with narrow high grade sheeted quartz veins occurring in zones varying from
between 15 metres to 25 metres wide with a strike length of about 500
metres.
-55-
Lugushwa Exploration Program Planned for 2015
Consistent with the Company’s strategy to focus on cash flow
management and the completion of the Namoya mine, Lugushwa exploration for 2015
will be limited to low level ground maintenance and target generation activities
along extensions to the known 15.3 kilometre northeast–southwest mineralized
trends. The planned activities include geological mapping, channel and rock chip
sampling, limited auger drilling, pitting and wide coverage, but low cost
regional BLEG sampling.
Lugushwa Mineral Resources
In a press release dated March 27, 2014, the Company announced
updated mineral resource estimates for the Lugushwa project, which are set out
in the following table (the effective date of these estimates is December 31,
2013). The said press release is filed as an exhibit to and is incorporated by
reference into, and forms part of, this Form 20-F. A copy of the said press
release can be obtained from SEDAR at www.sedar.com and EDGAR at
www.sec.gov.
Category |
Tonnes
(Mt) |
Grade
(g/t Au) |
Gold
(Moz) |
| (Oxide) |
| Indicated |
16.91 |
1.35 |
0.73 |
| Inferred |
6.17 |
1.56 |
0.31 |
| (Transition & Fresh) |
| Inferred |
65.01 |
1.54 |
3.22 |
There are currently no mineral reserve estimates for the
Lugushwa project.
Lugushwa Technical Report
Reference is made to the technical report on the Lugushwa project dated March 15, 2013 and entitled "Independent National
Instrument 43-101 Technical Report on the Lugushwa Gold Project, South Kivu
Province, Democratic Republic of the Congo" (the "Lugushwa Technical
Report"), a copy of which report can be obtained from SEDAR at www.sedar.com and EDGAR at www.sec.gov. The Lugushwa
Technical Report is filed as an exhibit to and is incorporated by reference
into, and forms part of, this Form 20-F.
Kamituga
Previous Exploration and Mining
The Kamituga project is located approximately 100 kilometres
south west of the city of Bukavu in the South Kivu Province of the eastern DRC.
The Kamituga project is comprised of three exploitation permits, namely PE37,
PE39 and PE 40.
Gold was first reported in the Kamituga region from rich
alluvial sources in the 1920s. Regional infrastructure was developed from 1930
to 1938, when intense alluvial exploration and exploitation took place.
Exploration in the Mobale River was carried out from 1933 to 1935 with
exploitation being undertaken from 1937 to 1996. Historical records suggests
approximately 850,000 ounces of gold were recovered from the period 1924 to
1960. Mining of the rich quartz reefs started in 1937, with commissioning of a
cyanide flotation plant. The principle mining method employed was underground
room and pillar, utilizing 50 metre panels and approximately 20% pillars. It is
estimated that from 1936 to 1966, more than 804,000 ounces of gold were
recovered from the D3-Mobale mine. Limited open pit mining was also undertaken
in the Tshanda area, east of the Mobale mine. The mining activities at Kamituga
were stopped in 1996 following civil unrest.
-56-
Banro commenced exploration work on the Kamituga project in
1998 by reviewing the geology, gold mining and resources using an independent
consultant (SRK (UK)).
In the technical report of SRK (UK) (formerly Steffen,
Robertson and Kirsten (UK) Ltd.) dated February 2005 and entitled "NI 43-101
Technical Report Resource Estimation and Exploration Potential at the Kamituga,
Lugushwa and Namoya Concessions, Democratic Republic of Congo" (the "SRK
Technical Report") (a copy of which report can be obtained from SEDAR at
www.sedar.com and EDGAR at www.sec.gov), SRK (UK) outlined the following mineral
resource estimate for Kamituga, using a 1.0 g/t cut-off grade and based on
polygonal methods using historical assay results from underground and surface
channel sampling:
| |
|
Tonnes |
|
Grade |
|
Gold Ounces |
| Resource
Category |
|
(Millions) |
|
(Au g/t) |
|
(Millions) |
| Inferred |
|
7.26 |
|
3.90 |
|
0.915 |
Cautionary Statements: Mineral resources that are not
mineral reserves do not have demonstrated economic viability. There is no
assurance that any mineral resources will ultimately be reclassified as proven
or probable reserves. U.S. investors should read the "Cautionary Note to U.S.
Investors Concerning Reserve and Resource Estimates" above concerning the
difference between "resources" and "reserves".
Section 2 (entitled "Regional Geology") and section 3 (entitled
"Kamituga") of the SRK Technical Report are filed as an exhibit to and are
incorporated by reference into, and form part of, this Form 20-F.
There are currently no mineral reserve estimates for the
Kamituga project.
From 2005 to 2010, Banro undertook extensive regional
exploration of the Kamituga project utilizing airborne geophysics (magnetic and
radiometric surveying) and remote sensing (LiDar surveys). Subsequent
interpretation of the regional dataset led to the planning of a ground follow-up
program, which was launched in February of 2011. The primary focus of the 2011
exploration campaign was to review, verify and ground-truth known mineralised
zones within the 5 kilometre-long central Kamituga area. This area consists of 5
known prospects and mining centres which were operational during the SOMINKI
period. They include Mobale (including D3, Tobola and Tshanda), G15, G22, Filon
20 and Kalingi. The program comprised of soil geochemistry, geological mapping,
auger drilling and trenching. The 2011 exploration work at the Kamituga project
included the following:
- 8.64 kilometre by 3.72 kilometre area covered by soil geochemistry;
- 4,867 soil samples collected over the grid;
- 691 auger drill holes representing 3,664 samples collected;
- 133.40 metres of adit sampling completed;
- 3,339.45 metres of trenching representing 3,374 samples completed;
- 530 rock chip samples collected and submitted for Au assaying; and
- 4 RC drill holes completed representing 374 samples.
-57-
By using a threshold of 100 ppb gold over the completed grid,
the soil geochemistry results received from laboratory outlined 5 significant
gold-in-soil anomalies. The anomalies include the following:
- Mobale (including Tshanda, D3 and Tobola) – 2.00 kilometre long by 1.00
kilometre wide;
- Kibukila prospect (including Filon 20) – 2.5 kilometre long by 0.30
kilometre wide;
- G15 prospect – 1.0 kilometre long by 0.20 kilometre wide;
- G22 prospect – 0.5 kilometre long by 0.30 kilometre wide;
- Kalingi prospect – 3.0 kilometre long by up to 0.20 kilometre wide zone of
spot anomalies.
In addition to the field activities, office work included:
detailed review and interpretation of the regional geophysical and remote
sensing datasets, aimed at developing a regional geology and mineralisation
model. Priority targets outlined from the review include the northwestern part
of the Kamituga project where a circular structure was noted from the dataset.
This structure is interpreted to represent a refolded fold of competent
Paleoproterozoic terrain and has known artisanal workings. Other targets are the
southwestern extension of the workings from the current grid coverage and
numerous spot anomalies located to the northeast of the current grid.
The 2012 exploration activities in the Kamituga project
included: gridding, soil sampling, geological mapping, trenching, Auger
drilling, RC drilling, diamond drilling and geophysics survey (Induced Polarity
(IP) and Pole-Dipole (PDP)). Gridding during 2012 focused on the extension of
the central Kamituga soil grid to the southwest (Kobokobo) and northwest
(Manungu) with the aim of generating additional targets. A total of 3,311 soil
samples were collected (at a grid spacing of 160 metres x 40 metres) for gold
analysis. Using a threshold value of 100 ppb, assay results received from the
laboratory highlighted an open ended zone gold-in-soil anomaly at the
southwestern part of the Kobokobo grid.
During 2012, and in tandem with the soil sampling program,
geological mapping and rock chip sampling were conducted on workings and
exposures covering the soil grids, with the aim of understanding the geology,
structure and style of mineralization of the area. A total of 24 rock chips
samples were collected during this campaign. Some of the rock chips samples
returned significant assay results (2.68 g/t Au, 1.65 g/t Au, 1.53 g/t Au, 0.60
g/t Au).
During 2012, no adit works (mapping and sampling) were carried
out in the Kamituga area. Assay results for adit MOB-AD2 (Mobale prospect)
mapped and sampled in 2011 was received from the laboratory. Significant
intersections include 42.00 metres at 1.07g/t Au from 4.00 metres. As a
follow-up to the soil geochemistry program, auger drilling was undertaken at the
Kibukila, Filon20 and Kobokobo prospects with the aim of delineating bedrock
mineralization. 484 auger holes totaling 2,464.65 metres were drilled, and 2,801
samples were collected for gold analysis. Thirty percent (30%) of the assay
results returned values ranging between 0.10 g/t Au and 7.04g/t Au.
A trenching, channel sampling and mapping program was conducted
at Mobale, Kibukila, Filon20, G15, Kalingi and Kobokobo prospects during 2012.
The program was aimed at (a) testing gold-in-soil anomalies, (b) following-up
the mineralization resulting from rock chip samples, and (c) testing gold
mineralization of exposures showing significant hydrothermal alteration. Forty
nine (49) trenches totaling 1,351 metres were excavated from which 1,376 channel
samples were collected.
Exploration diamond drilling (DD) was conducted at the
Kibukila, Mobale, G22 and Filon 20 prospects while reverse circulation (RC)
drilling was conducted at the Kibukila, Mobale and G22 prospects. The drilling
was aimed at confirming and following-up the historical data (Mobale, Filon20
and G22 prospects), and to test the down-dip and strike extensions of the
intersected anomalies in the trenches/channels and other previously drilled
holes within the prospects. A total of 36 DD holes totaling 4,771.55 metres and
27 RC holes totalling 2,959 metres were drilled during 2012. The samples
generated from the above programs were respectively 5,012 and 2,909 for DD and
RC drilling.
-58-
Details of the results of the Company’s exploration activities
in Kamituga during 2012 are included in the press release of the Company dated
November 15, 2012 entitled "Banro Provides Exploration Update for Projects in
the DRC, Including Significant Drill Intersections at Namoya, Lugushwa and
Kamituga". The said press release is filed as an exhibit to and is incorporated
by reference into, and forms part of, this Form 20-F. A copy of the said press
release can be obtained from SEDAR at www.sedar.com
and EDGAR at www.sec.gov.
The geology of the Kamituga project comprises of weakly
metamorphosed sediments, with metapelite with metasiltstone intercalation, which
have been intruded by weakly metamorphosed diorite sills and irregulars
pegmatite. Basaltic flow of neogene age overlay the metasediments-intrusive rock
package especially to the northeastern, eastern, southeastern and southerly part
of the Kamituga project. The metasediments predominantly trend northeast with
shallow to moderate dips to the southeast. Several east west trending structures
with southerly dips have been documented in the Filon20, D3, Mobale, Kobokobo
and G15 prospects.
Results received to date indicate that the gold mineralization
at the Kamituga project is hosted largely within, and on the margins of the
quartz veins; and locally within the quartz stock-work veining and in the
metadiorite with sulfide mineralization. Minor components were also intersected
in the strongly and moderate altered metasediments in association with sulphides
(pyrite and arsenopyrite). The vein ranges from 0.5 metres to 3 metres thick but
there is variation in thickness along strike and down dip.
DGPS surveying started in April 2012, by establishing 11
control points at the Tukolo camp, Tshanda camp and at different prospects
within the Kamituga project. As of year-end, all holes (RC and DD) drilled at
different prospect were surveyed. An orientation Induced Polarization (IP)
survey at Kibukila and nearby prospects was completed during the year by
GEOSPEC, a geophysical company from Botswana. A total of 11 lines covering 13
kilometres with NW-SE orientation lines were analyzed for resistivity and
chargeability. The readings were recorded at 25 metre spacing along lines 100
metres apart. The Pole Dipole survey was conducted on 4 lines (Line500, line600,
line700 and line1000) that crossed the central Kibukila prospect with the aim of
studying the down-dip and strike extension of the best intersected zones during
the drilling program, as well as understanding the 3D orientation of the sub
surface geology.
Kamituga Exploration Program for 2013
Exploration activities at Kamituga for 2013 were scaled down to
conserve funds to support the construction of the Namoya mine and the Twangiza
mine expansion. Exploration activities on the Kamituga project during 2013
included the following activities:
| |
- |
gridding for soil geochemistry
sampling; |
| |
- |
geological mapping; |
| |
- |
rock chips sampling; |
| |
- |
trenching; |
| |
- |
adits sampling; |
| |
- |
orientation BLEG sampling; |
| |
- |
auger and diamond drilling.
|
Exploration focus was directed at extending coverage of the
Kibukila prospect by using diamond and auger drilling, surface and adit mapping
and rock chips sampling. Other areas of focus were the G15 and Mobale prospects,
and areas in the north east (Lubyala) and south of the Kamituga soil grid
(Miseghe).
-59-
Kamituga Exploration Program for 2014
Exploration activities at the Kamituga project during the year
2014 included geological mapping, trenching, adit sampling, auger drilling, BLEG
sampling and geophysics surveys (Induced Polarity (IP) and Pole-Dipole (PDP)).
These programs were conducted in the Mobale, Kibukila, Filon20, G15, G22,
Lubiala, Kobokobo, Miseghe, Kiloboze and Itabi-Bikolongo prospects. The results
from the BLEG sampling showed a very good correlation between known
mineralization locations which have been identified using other geological
exploration methods.
Kamituga Exploration Program Planned for 2015
Consistent with the Company’s strategy to focus on cash flow
management and the completion of the Namoya mine, Kamituga exploration for 2015
is planned to be limited to low level ground maintenance and target generation
activities along extensions to the known 14 kilometre northeast–southwest
mineralized trends. The planned activities include geological mapping, channel
and rock chip sampling, limited auger drilling, pitting and wide coverage, but
low cost regional BLEG sampling.
Other Exploration Properties
The Company's DRC subsidiary, Banro Congo Mining S.A., holds 14
exploration permits covering a total of 2,710.91 square kilometres of ground
located between and contiguous to the Company's Twangiza, Kamituga and Lugushwa
properties and northwest of Namoya. The applications for these permits were
originally filed with the Mining Cadastral in the DRC shortly after
implementation of the DRC's new Mining Code in June 2003, and were awarded to
Banro Congo Mining S.A. in March 2007.
No ground field work has been conducted in respect of these
properties. Two of the exploration permit areas (located between Kamituga and
Lugushwa) were covered by the LiDAR, aeromagnetic and radiometric surveys that
were carried out during 2007 as part of the regional program. During 2008, the
Company continued its regional program, and covered a further ten of the permit
areas with aeromagnetic and radiometric surveys. Target generation was carried
out in 2012.
Qualified Person
Daniel K. Bansah, the Company’s Head of Projects and Operations
and a "qualified person" (as such term is defined in NI 43-101), has reviewed
and approved the technical information in this Form 20-F relating to the
Company’s mineral properties.
Item 4A. Unresolved Staff Comments
Not applicable.
Item 5. Operating and Financial Review and Prospects
See the management's discussion and analysis of the Company for
the year ended December 31, 2014 ("MD&A") incorporated by reference
into this Form 20-F as Exhibit 15.1.
A. Operating Results
See the MD&A incorporated by reference into this Form 20-F
as Exhibit 15.1.
B. Liquidity and Capital Resources.
See the MD&A incorporated by reference into this Form 20-F
as Exhibit 15.1.
-60-
C. Research and Development, Patents and Licenses, etc.
Not applicable.
D. Trend Information
The Company has two gold mines, Twangiza and Namoya. Twangiza
began commercial production September 1, 2012. Namoya commenced gold production
in December 2013 and commercial production is planned to be achieved at Namoya
early in the second half of 2015. In a press release dated January 5, 2015, the
Company reported that it has purchased the agglomeration drum required for the
Namoya processing plant enhancement. With installation of the drum having now
been completed and with heap leach operations taking several months of
continuous percolation to fully recover the leachable gold, the full benefits of
the improvements to the Namoya heap leach circuit are expected to build up to a
monthly gold production rate of up to 8,000 ounces per month by mid-year 2015.
With commercial production expected early in the second half of 2015, gold
production at Namoya for the second half of 2015 is forecast to be 9,000 to
11,000 ounces per month.
The cyclical nature of the price of gold is expected to have an
effect on the Company's future operating results, liquidity and capital
resources. If the price of gold or the worldwide demand for gold decreases,
there would be an adverse effect on the profitability of the Company’s two gold
mines.
E. Off-Balance Sheet Arrangements.
The Company does not have any off-balance sheet
arrangements.
F. Tabular Disclosure of Contractual Obligations
The following information is as of December 31, 2014 and in
thousands of United States dollars:
Contractual
Obligations |
Payments due by period |
Total |
Less
than
1 year |
1-3
years |
3-5
years |
More
than
5 years |
| Operating leases |
$ 689 |
$ 509 |
$ 180 |
- |
- |
| Bank loans |
$ 20,992 |
$ 17,123 |
$ 3,869 |
- |
- |
| Long term debt – principle and interest |
$ 269,598 |
$ 20,464 |
$ 249,134 |
- |
- |
| Total |
$ 291,279 |
$ 38,096 |
$ 253,183 |
- |
- |
G. Safe Harbor
Not applicable.
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
The following table sets forth, as of the date hereof, the name
and municipality of residence of the directors and senior management of the
Company, as well as their current position(s) with the Company and period of
service as a director (if applicable).
-61-
| Name and |
Current Position(s) |
|
| Municipality of Residence |
with the Company
|
Director Since
|
| |
|
|
Richard W. Brissenden (2)
Toronto, Ontario, Canada |
Executive
Chairman of the Board and a director |
December 11,
2013 |
| |
|
|
John A. Clarke (3)
Cardiff,
United Kingdom |
Chief Executive
Officer, President and a director |
February 3, 2004
|
| |
|
|
Maurice J. Colson (1)(2)
Toronto, Ontario, Canada |
Director |
June 28, 2013
|
| |
|
|
Peter N. Cowley (1)(2)(3)
Surrey, United Kingdom |
Director |
January 13, 2004
|
| |
|
|
Derrick H. Weyrauch (1)
Stouffville, Ontario, Canada |
Director |
December 11,
2013 |
| |
|
|
Daniel K. Bansah
East Legon, Accra,
Ghana |
Head of Projects
and Operations |
Not applicable
|
| |
|
|
Geoffrey G. Farr
Toronto, Ontario,
Canada |
Vice President,
General Counsel and Corporate Secretary |
Not applicable
|
| |
|
|
Kevin Jennings
Oakville, Ontario,
Canada |
Senior Vice
President and Chief Financial Officer |
Not applicable
|
| |
|
|
Arnold T. Kondrat
Toronto, Ontario,
Canada |
Executive Vice
President |
Not applicable
|
| |
|
|
Donat K. Madilo
Mississauga, Ontario,
Canada |
Senior Vice
President, Commercial and DRC Affairs |
Not applicable
|
| |
|
|
Jacobus P. Nel
Johannesburg, South
Africa |
Vice President,
Stakeholder Relations & Security |
Not applicable
|
| |
|
|
Désire Sangara
Kinshasa, Democratic
Republic of the Congo |
Vice President,
Government Relations |
Not applicable
|
-62-
__________________________
| (1) |
Member of the audit committee of the board of directors
of the Company (the "Audit Committee"). |
| (2) |
Member of the compensation and nominating committee of
the board of directors of the Company (the "Compensation
Committee"). |
| (3) |
Member of the health, safety, environment and technical
committee of the board of directors of the Company (the "Technical
Committee"). |
Richard W. Brissenden - Mr. Brissenden is a mining
executive and corporate director with over thirty years of experience in the
resource sector. A Chartered Professional Accountant (CPA, CA) and Certified
Director (ICD.D), he serves on the board and audit committee for several
TSX-listed mining companies, including McEwen Mining, Ryan Gold Corp., and
Corona Gold Corporation. As chairman and president of TSX-listed Excellon
Resources Inc. from 1991 to 2008, he led the company through the discovery,
development and production stages of a high-grade silver/lead/zinc mine in
Northeastern Mexico. He was also president of a gold producer in Alaska, and
president of a mine finance house with interests in over fifty junior mining
companies. He is a member of the Institute of Chartered Accountants of Ontario
and the Institute of Corporate Directors.
John A. Clarke – Dr. Clarke has served as the Chief
Executive Officer of Nevsun Resources Limited, which successfully brought the
Bisha Mine into production in Eritrea. Prior to joining Nevsun in 1997, Dr.
Clarke was an Executive Director of Ashanti Goldfields Company Limited of Ghana,
where he established Ashanti's gold exploration program throughout sub-Saharan
Africa. Dr. Clarke holds a Ph.D. in metallurgy from Cambridge University and
M.B.A. from the University of Middlesex. He is also a non-executive director of
Great Quest Fertilizer Ltd.
Maurice J. Colson – Mr. Colson has worked in the
investment industry for more than 37 years and was for many years managing
director for a major Canadian investment dealer in the United Kingdom. He is
actively involved in providing strategic counsel and assistance with financing
to emerging private and public companies in Canada and to Canadian companies
operating in China, Africa and South America. He is a director, and a member of
the audit committee, of several Toronto Stock Exchange and TSX Venture Exchange
listed companies, and is the former President and Chief Executive Officer of the
TSX Venture-listed company, Lithium One Resources. Mr. Colson holds a Masters of
Business Administration degree from McGill University in Montreal.
Peter N. Cowley – Mr. Cowley is a geologist with over 40
years international experience in the minerals industry, mainly in Africa. From
June 2004 until September 2007, Mr. Cowley was Chief Executive Officer of Banro
and from June 2004 until March 2008 he was President of Banro, where he led the
exploration program over Banro’s properties in the DRC. He has a B.Sc. (Honours)
degree in Geology from Bedford College (University of London), a M.Sc. in
Mineral Exploration from the Royal School of Mines and a M.B.A. from the
Strathclyde Business School. Mr Cowley is also a Fellow of the Institute of
Materials, Minerals and Mining. From 1989 to 1996, Mr Cowley was Technical
Director of Cluff Resources and during this period was directly responsible for
the discovery and development of the Ayanfuri mine in Ghana and the Geita mine
in Tanzania. In 1996, with the acquisition of Cluff Resources PLC by Ashanti
Goldfields Company Limited, Mr. Cowley was appointed Managing Director of
Ashanti Exploration, where he managed the exploration activities of Ashanti
Goldfields Company Limited throughout Africa. He was Managing Director of
Ashanti Exploration until the end of May 2004 when he joined Banro. Peter is
currently a director of Amara Mining plc and Cluff Natural Resources plc.
-63-
Derrick H. Weyrauch - Mr. Weyrauch is a Chartered
Professional Accountant ("CPA CA") with over 25 years of experience that
includes corporate financial management, corporate restructuring, financings,
strategic planning and merger & acquisition transactions. Currently, he serves
as the Chief Financial Officer of a publically listed gold mining company, where
he previously served on the audit, health & safety committee and chaired two
special committees for the board of directors. Prior to its sale in 2013, Mr.
Weyrauch served as the Chief Financial Officer of TSX-V exchange listed Andina
Minerals Inc. Mr. Weyrauch earned his Chartered Accountant designation in 1990
while working at KPMG, he is a member of CPA Ontario and the Institute of
Corporate Directors and he holds a Bachelors of Arts degree in Economics.
Daniel K. Bansah – Mr. Bansah has over 25
years-experience in the gold mining industry. He has an MSc in Mineral
Exploration with Distinction from Leicester University, UK and is a Member and a
Chartered Professional of AusIMM. Mr. Bansah was Banro's Vice President of
Exploration from 2007 to 2013. Prior to joining Banro in 2004, he was the Group
Mineral Resource Manager with Ashanti Goldfields, with responsibilities for the
coordination, auditing and compilation of Ashanti's Mineral Resources and Ore
Reserves in Africa.
Geoffrey G. Farr – From February 2011 to present, Mr.
Farr has been Vice President, General Counsel and Corporate Secretary of Banro,
and Corporate Secretary of each of Gentor Resources Inc., Loncor Resources Inc.
and Delrand Resources Limited. He is also currently a director of Delrand
Resources Limited. Prior to February 2011, Mr. Farr practised corporate and
securities law in Toronto for 17 years, which included extensive experience in
representing public companies. He holds a LL.B. from the University of Ottawa
and a B.Comm. from Queen’s University.
Kevin Jennings – Mr. Jennings has over 20 years'
experience in corporate finance, corporate development, strategy and senior
management positions with global mining companies. Most recently, He served as
CFO of SUN Gold. Prior to that, he led the successful IPO of African Barrick
Gold where he held the role of CFO and, over his career, has managed mining
international acquisitions, divestitures and project investments worth more than
US$10 billion. Mr. Jennings has also served in senior corporate roles with
Barrick Gold, (Vice President, Corporate Development), Xstrata Nickel,
(Director, Business Optimization), Falconbridge (Director, Business
Development), and American Racing Equipment (CFO). He is a Chartered Accountant
with a BA in Administrative studies (Honours Accounting) from York University
and a BA in Economics from the University of Western Ontario.
Arnold T. Kondrat - Mr. Kondrat is the Company's
principal founder and has over 30 years of management experience in the resource
exploration industry. During this time he has been an officer and director of a
number of publicly-traded resource exploration companies, in both Canada and the
United States. Mr. Kondrat is the principal founder, and Chief Executive
Officer, President and a director, of Loncor Resources Inc. (a gold exploration
company listed on the Toronto Stock Exchange with projects in the eastern DRC),
Gentor Resources Inc. (a mineral exploration company listed on the TSX Venture
Exchange) and Delrand Resources Limited (a mineral exploration company listed on
the Toronto Stock Exchange and the JSE). He is also President of Sterling
Portfolio Securities Inc. (a private venture capital firm based in Toronto).
Donat K. Madilo – Mr. Madilo has over 25 years of
experience in accounting, administration and finance in the DRC and North
America. He is Senior Vice President, Commercial and DRC Affairs at Banro, Chief
Financial Officer of each of Loncor Resources Inc. and Gentor Resources Inc.,
and Treasurer of Delrand Resources Limited. Mr. Madilo’s previous experience
includes Chief Financial Officer of Banro, director of finance of Coocec-ceaz (a
credit union chain in the DRC) and senior advisor at Conseil Permanent de la
Comptabilité au Congo, the accounting regulation board in the DRC. He holds a
Bachelor of Commerce (Honours) degree from Institut Supérieur de Commerce de Kinshasa, a B.Sc. (Licence)
in Applied Economics from University of Kinshasa and a Masters of Science in
Accounting (Honours) from Roosevelt University in Chicago.
-64-
Jacobus P. Nel – Mr. Nel has 25 years experience in the
mining industry in the gold, platinum, coal and base metals sectors. He has
Diplomas in Human Resources Management and Labour Relations, and has attended
Executive Development Programs (EPD) at the Wits Business School in South Africa
and the IMD at Lausanne. Over the past decade he has had responsibility for the
Human Resources function, the Global security function, and the Business and
Leadership Academy within Goldfields. Mr. Nel heads up the Human Resources and
Security functions for Banro and has specific responsibility for the Twangiza
Mine Resettlement Project.
Désire Sangara – Mr. Sangara has over 17 years
professional experience in the DRC’s exploration and mining sector. He
previously held senior positions with the Belgium-Luxemburg mining company,
Mindev, and with Ashanti Goldfields, where for seven years he was the company's
country manager. He has a Masters degree in management from E.D.C. (Paris).
There are no family relationships among any of the Company's
directors or senior management.
There is no arrangement or understanding with major
shareholders, customers, suppliers or others, pursuant to which any person
referred to above was selected as a director or officer of the Company.
The following directors of the Company are presently directors
of other issuers that are public companies:
| Name of Director |
Names of Other Issuers
|
| |
|
Richard W. Brissenden
|
Corona Gold
Corporation
Lexam VG Gold Inc.
McEwen Mining Inc.
PC Gold Inc.
Ryan Gold Corp. |
| |
|
| John A. Clarke |
Great Quest
Fertilizer Ltd. |
| |
|
Maurice J. Colson
|
Stetson Oil &
Gas Ltd.
Loncor Resources Inc.
Hornby Bay Mineral Exploration Ltd.
Delrand Resources Limited
Aberdeen International Inc. |
| |
|
Peter N. Cowley
|
Amara Mining plc
Cluff Natural Resources plc |
| |
|
| Derrick H. Weyrauch |
Not applicable
|
Other than the board of directors, the Company does not have an
administrative, supervisory or management body.
-65-
B. Compensation
Executive Officers
Summary Compensation Table
The following table provides a summary of the compensation
earned by the following named executive officers of the Company (the
"NEOs") for services rendered in all capacities during the fiscal year
ended December 31, 2014: John A. Clarke, President and Chief Executive Officer
of the Company ("CEO"); Donat K. Madilo, Chief Financial Officer of the
Company ("CFO") until September 1, 2014 and thereafter Senior Vice
President, Commercial and DRC Affairs; Kevin Jennings, Senior Vice President and
CFO from September 1, 2014; Arnold T. Kondrat, Executive Vice President of the
Company; Geoffrey G. Farr, Vice President, General Counsel and Corporate
Secretary of the Company; and Daniel K. Bansah, Head of Projects and Operations
for the Company.
Name and
Principal
Position(s)
|
Year
|
Salary
(US$)
|
Share-
based
awards
(US$)
|
Option-based
awards
(1)
(US$)
|
Non-equity
incentive plan
compensation -
Annual Incentive
Plan
(US$) |
All other
Compensation(2)
(US$)
|
Total
Compensation
(US$)
|
John A. Clarke
CEO |
2014
|
$550,000
|
N/A
|
$115,474
|
Nil
|
$54,664
|
$720,138
|
Donat K. Madilo
CFO and Senior VP(3) |
2014
|
$370,003
|
N/A
|
$76,982
|
Nil
|
$48,154
|
$495,139
|
Kevin Jennings
Senior VP and CFO(3) |
2014
|
$116,668
|
N/A
|
Nil
|
Nil
|
$16,062
|
$132,730
|
Arnold T. Kondrat
Executive Vice
President |
2014
|
$550,000
|
N/A
|
Nil
|
Nil
|
$50,998
|
$600,998
|
Geoffrey G. Farr
Vice President,
General Counsel
(4) |
2014
|
$350,000
|
N/A
|
$76,982
|
Nil
|
$48,783
|
$475,765
|
Daniel K. Bansah
Head of Projects
and Operations
|
2014
|
$250,000
|
N/A
|
$46,190
|
Nil
|
$28,460
|
$324,650
|
__________________________
| (1) |
These amounts represent the grant date fair value of the
stock options awarded in 2014, calculated in Canadian dollars and then
converted to U.S. dollars using an average exchange rate for 2014 of
Cdn$1.00 = US$0.9504. Grant date fair value of the stock options granted
in 2014 to the NEOs was calculated in accordance with the Black-Scholes
model using the share price on the date of grant of Cdn$0.46, with the key
valuation assumptions being stock price volatility of 76.27%, risk free
interest rate of 1.05%, no dividend yield and expected life of 3
years. |
| |
|
| (2) |
Each of the amounts shown in this column of the table for
each NEO represents life insurance premiums paid by the Company and the
"Retention Allowance" (as such term is defined below) accrued in respect
of the NEO. The amount of the life insurance premiums paid by the Company
in respect of the NEOs in 2014 is as follows: Dr. Clarke: US$8,831; Mr.
Madilo: US$17,320; Mr. Jennings: US$1,478; Mr. Kondrat: US$5,165; Mr.
Farr: US$19,616; Mr. Bansah: US$7,627. The amount of the Retention
Allowance accrued in respect of the NEOs in 2014 is as follows: Dr.
Clarke: US$45,833; Mr. Madilo: US$30,834; Mr. Jennings: US$14,584; Mr.
Kondrat: US$45,833; Mr. Farr: US$29,167; Mr. Bansah:
US$20,833. |
-66-
| (3) |
Mr. Jennings joined the Company as Senior Vice President
and CFO on September 1, 2014. Also effective September 1, 2014, Mr. Madilo
ceased being CFO and was appointed by the Company to the role of Senior
Vice President, Commercial and DRC Affairs. The compensation shown in the
above table for Mr. Madilo for 2014 represents compensation earned up to
September 1, 2014 as CFO and compensation earned thereafter as Senior Vice
President, Commercial and DRC Affairs. |
| |
|
| (4) |
Mr. Farr also holds the position of Corporate Secretary
of the Company. |
Banro employees are entitled to receive a retention allowance
(the "Retention Allowance") on termination of their employment with the
Company, provided the employee has been with the Company for a minimum of two
years and provided that termination is not due to misconduct (in the case of
misconduct, the Retention Allowance is forfeited). The amount of the Retention
Allowance is equal to the employee's monthly base salary multiplied by the
number of years the employee was with the Company (up to a maximum of 10 years),
with any partial year being recognized on a pro rata basis.
The Company does not have any long-term incentive programs
other than its Stock Option Plan and does not have any defined or actuarial
plans.
Incentive Plan Awards
The following table provides details regarding outstanding NEO
option and share-based awards as at December 31, 2014:
| Outstanding share-based awards and option-based
awards |
| |
Option-based Awards |
Share-based Awards |
Name
|
Option grant
date
|
Number of
securities
underlying
unexercised
options
(1)
(#) |
Option exercise
price
(2)
($)
|
Option
expiration
date
|
Aggregate
value of
unexercised
in-the-
money
options
(US$) (3) |
Number
of shares
or
units
that have
not vested
(#)
|
Market or
payout value
of share-
based awards
that have not
vested
(US$) |
| John A. Clarke |
May 30, 2014 |
750,000 |
Cdn$0.80 (US$0.69) |
May 30, 2019 |
Nil |
N/A |
N/A |
| |
Oct. 25, 2013 |
200,000 |
Cdn$1.00 (US$0.86) |
Oct. 25, 2018 |
Nil |
|
|
| |
Feb. 9, 2012 |
100,000 |
Cdn$4.75 (US$4.09) |
Feb. 9, 2017 |
Nil |
|
|
| |
Sept. 10, 2010 |
50,000 |
Cdn$2.05 (US$1.77) |
Sept. 10, 2015 |
Nil |
|
|
| |
Jan. 6, 2010 |
50,000 |
Cdn$2.31 (US$1.99) |
Jan. 6, 2015 |
Nil |
|
|
| |
|
|
|
|
|
|
|
| Donat K. Madilo |
May 30, 2014 |
500,000 |
Cdn$0.80 (US$0.69) |
May 30, 2019 |
Nil |
N/A |
N/A |
| |
Oct. 25, 2013 |
150,000 |
Cdn$1.00 (US$0.86) |
Oct. 25, 2018 |
Nil |
|
|
| |
Feb. 9, 2012 |
250,000 |
Cdn$4.75 (US$4.09) |
Feb. 9, 2017 |
Nil |
|
|
| |
Sept. 10, 2010 |
25,000 |
Cdn$2.05 (US$1.77) |
Sept. 10, 2015 |
Nil |
|
|
| |
|
|
|
|
|
|
|
| Kevin Jennings |
|
Nil |
|
|
|
|
|
| |
|
|
|
|
|
|
|
-67-
| Outstanding share-based awards and option-based
awards |
| |
Option-based Awards |
Share-based Awards |
Name
|
Option grant
date
|
Number of
securities
underlying
unexercised
options
(1)
(#) |
Option exercise
price
(2)
($)
|
Option
expiration
date
|
Aggregate
value of
unexercised
in-the-
money
options
(US$) (3) |
Number
of shares
or
units
that have
not vested
(#)
|
Market or
payout value
of share-
based awards
that have not
vested
(US$) |
| Arnold T. Kondrat |
Oct. 25, 2013 |
200,000 |
Cdn$1.00 (US$0.86) |
Oct. 25, 2018 |
Nil |
N/A |
N/A |
| |
Feb. 9, 2012 |
1,000,000 |
Cdn$4.75 (US$4.09) |
Feb. 9, 2017 |
Nil |
|
|
| |
Sept. 10, 2010 |
701,511 |
Cdn$2.05 (US$1.77) |
Sept. 10, 2015 |
Nil |
|
|
| |
|
|
|
|
|
|
|
| Geoffrey G. Farr |
May 30, 2014 |
500,000 |
Cdn$0.80 (US$0.69) |
May 30, 2019 |
Nil |
N/A |
N/A |
| |
Oct. 25, 2013 |
150,000 |
Cdn$1.00 (US$0.86) |
Oct. 25, 2018 |
Nil |
|
|
| |
Feb. 9, 2012 |
200,000 |
Cdn$4.75 (US$4.09) |
Feb. 9, 2017 |
Nil |
|
|
| |
Feb. 11, 2011 |
100,000 |
Cdn$3.25 (US$2.80) |
Feb. 11, 2016 |
Nil |
|
|
| |
Jan. 20, 2010 |
50,000 |
Cdn$2.30 (US$1.98) |
Jan. 20, 2015 |
Nil |
|
|
| |
|
|
|
|
|
|
|
| Daniel K. Bansah |
May 30, 2014 |
300,000 |
Cdn$0.80 (US$0.69) |
May 30, 2019 |
Nil |
N/A |
N/A |
| |
Oct. 17, 2013 |
150,000 |
Cdn$1.00 (US$0.86) |
Oct. 17, 2018 |
Nil |
|
|
| |
Feb. 13, 2012 |
94,737 |
Cdn$4.75 (US$4.09) |
Feb. 13, 2017 |
Nil |
|
|
| |
Sept. 10, 2010 |
12,500 |
Cdn$2.05 (US$1.77) |
Sept. 10, 2015 |
Nil |
|
|
__________________________
| (1) |
3/4 of the stock options granted to each optionee vest on
the 12 month anniversary of the grant date and the balance vest on the 18
month anniversary of the grant date. |
| |
|
| (2) |
The exercise price of each of the stock options held by
the NEOs is in Canadian dollars. The U.S. dollar figures set out in this
column of the table were calculated using the noon exchange rate on
December 31, 2014 as reported by the Bank of Canada for the conversion of
Canadian dollars into U.S. dollars of Cdn$1.00 = US$0.862. |
| |
|
| (3) |
This is based on (a) the last closing sale price per
share of the Company’s common shares as at December 31, 2014 of Cdn$0.15
as reported by the Toronto Stock Exchange, and (b) converting that price
into a price of US$0.13 using the noon exchange rate on December 31, 2014
as reported by the Bank of Canada for the conversion of Canadian dollars
into U.S. dollars of Cdn$1.00 = US$0.862. |
The following table provides details regarding outstanding NEO
option-based awards, share-based awards and non-equity incentive plan
compensation, which vested and/or were earned during the year ended December 31,
2014:
-68-
| Incentive plan awards - value vested or earned during
the year |
Name
|
Option-based awards -
Value
vested during the
year (1)
(US$) |
Share-based awards - Value
vested during the year
(US$)
|
Non-equity incentive plan
compensation - Value
earned during the year
(US$) |
| John A. Clarke |
Nil |
N/A |
N/A |
| Donat K. Madilo |
Nil |
N/A |
N/A |
| Kevin Jennings |
Nil |
N/A |
N/A |
| Arnold T. Kondrat |
Nil |
N/A |
N/A |
| Geoffrey G. Farr |
Nil |
N/A |
N/A |
| Daniel K. Bansah |
Nil |
N/A |
N/A |
__________________________
| (1) |
Identifies the aggregate dollar value that would have
been realized by the NEO if the NEO had exercised all options exercisable
under the option-based award on the vesting date(s)
thereof. |
Non-Executive Directors
The director compensation program is designed to achieve the
following goals: (a) compensation should attract and retain the most qualified
people to serve on the board of directors of the Company (the "Board");
(b) compensation should align directors' interests with the long-term interests
of shareholders; (c) compensation should fairly pay directors for risks and
responsibilities related to being a director of an entity of the Company's size
and scope; and (d) the structure of the compensation should be simple,
transparent and easy for shareholders to understand.
The fees paid by the Company to the non-executive directors of
the Company during the financial year ended December 31, 2014 are set out in
the table below under "Director Summary Compensation Table".
Non-executive directors are entitled to receive stock option
grants under the Company's Stock Option Plan, as recommended by the Compensation
Committee and determined by the Board. The exercise price of such stock options
is determined by the Board, but shall in no event be less than the last closing
price of the Company’s common shares on the Toronto Stock Exchange prior to the
date the stock options are granted.
Non-executive directors of the Company are also reimbursed for
all reasonable out-of-pocket expenses incurred in attending Board or committee
meetings and otherwise incurred in carrying out their duties as directors of the
Company.
Executive directors of the Company are compensated as employees
of the Company and are not entitled to additional compensation for performance
of director duties. The executive directors of the Company during 2014 were
Messrs. Clarke and Kondrat.
Director Summary Compensation Table
The following compensation table sets out the compensation paid
to each of the Company's non-executive directors in the year ended December 31,
2014. See "Summary Compensation Table" above for details regarding the
compensation paid to the Company's executive directors as executives of the
Company in respect of services rendered during 2014 (the executive directors of
the Company during 2014 were Dr. Clarke and Mr. Kondrat).
-69-
Name (4)
|
Fees earned (1)
(US$)
|
Share-based
awards
(US$)
|
Option-based
awards(2)
(US$)
|
Non-equity
incentive plan
compensation
(US$) |
All other
Compensation
(US$) |
Total
(US$)
|
| Richard W. Brissenden |
$67,821 |
N/A |
$23,095 |
N/A |
Nil |
$90,916 |
| Maurice J. Colson |
$71,250 |
N/A |
$23,095 |
N/A |
Nil |
$94,345 |
| Peter N. Cowley |
$71,750 |
N/A |
$23,095 |
N/A |
Nil |
$94,845 |
| Peter V. Gundy |
$15,005 |
N/A |
N/A |
N/A |
Nil |
$15,005 |
| Richard J. Lachcik |
$25,000 |
N/A |
N/A |
N/A |
Nil (3) |
$25,000 |
| Matthys J. Terblanche |
$11,833 |
N/A |
$23,095 |
N/A |
Nil |
$34,928 |
| Bernard R. van Rooyen |
$43,333 |
N/A |
N/A |
N/A |
Nil |
$43,333 |
| Derrick H. Weyrauch |
$76,152 |
N/A |
$23,095 |
N/A |
Nil |
$99,247
|
__________________________
| (1) |
During 2014, non-executive directors were entitled to
directors' fees of US$50,000, members of the Audit Committee were entitled
to additional fees of US$12,000, members of the Compensation Committee
were entitled to additional fees of US$9,000, members of the Technical
Committee were entitled to additional fees of US$9,000, the Chairman of
the Audit Committee was entitled to additional fees of US$17,000, the
Chairman of the Compensation Committee was entitled to additional fees of
US$9,000 and the Chairman of the Technical Committee was entitled to
additional fees of US$9,000. |
| |
|
| (2) |
These amounts represent the grant date fair value of the
stock options awarded in 2014, calculated in Canadian dollars and then
converted to U.S. dollars using an average exchange rate for 2014 of
Cdn$1.00 = US$0.9504. Grant date fair value of these stock options was
calculated in accordance with the Black-Scholes model using the share
price on the date of grant of Cdn$0.46, with the key valuation assumptions
being stock price volatility of 76.27%, risk free interest rate of 1.05%,
no dividend yield and expected life of 3 years. No stock options were
received by Messrs. Gundy, Lachcik and van Rooyen during 2014. |
| |
|
| (3) |
During the financial year ended December 31, 2014, the
Company incurred legal expenses (and related costs) of US$1,308,831 to
Norton Rose Fulbright Canada LLP (which acts as legal counsel to the
Company). Mr. Lachcik is a partner of Norton Rose Fulbright Canada
LLP. |
| |
|
| (4) |
Messrs. Gundy, Lachcik, Terblanche and van Rooyen were
directors of the Company for only part of 2014. |
Incentive Plan Awards
The following table provides details regarding the outstanding
option and share based awards held by non-executive directors of the Company as
at December 31, 2014. See "Executive Officers - Incentive Plan Awards" above for
a details regarding the outstanding stock options held by the Company's
executive director (Dr. Clarke) as at December 31, 2014.
-70-
| Outstanding share-based awards and option-based
awards |
| |
Option-based Awards |
Share-based Awards |
Name
|
Option grant
date
|
Number of
securities
underlying
unexercised
options (1)
(#) |
Option exercise
price (2)
($)
|
Option
expiration date
|
Aggregate
value of
unexercised
in-the-
money
options
(3)
(US$) |
Number of
shares or
units of
shares that
have not
vested
(#) |
Market or
payout value
of share-
based awards
that have
not
vested
(US$) |
| Richard W. Brissenden |
May 30, 2014 |
150,000 |
Cdn$0.80 (US$0.69) |
May 30, 2019 |
Nil |
N/A |
N/A |
| |
|
|
|
|
|
|
|
| Maurice J. Colson |
May 30, 2014 |
150,000 |
Cdn$0.80 (US$0.69) |
May 30, 2019 |
Nil |
N/A |
N/A |
| |
Oct. 25, 2013 |
100,000 |
Cdn$1.00 (US$0.86) |
Oct. 25, 2018 |
Nil |
|
|
| |
|
|
|
|
|
|
|
| Peter N. Cowley |
May 30, 2014 |
150,000 |
Cdn$0.80 (US$0.69) |
May 30, 2019 |
Nil |
N/A |
N/A |
| |
Oct. 25, 2013 |
100,000 |
Cdn$1.00 (US$0.86) |
Oct. 25, 2018 |
Nil |
|
|
| |
Feb. 9, 2012 |
100,000 |
Cdn$4.75 (US$4.09) |
Feb. 9, 2017 |
Nil |
|
|
| |
Sept. 10, 2010 |
12,500 |
Cdn$2.05 (US$1.77) |
Sept. 10, 2015 |
Nil |
|
|
| |
Jan. 6, 2010 |
12,500 |
Cdn$2.31 (US$1.99) |
Jan. 6, 2015 |
Nil |
|
|
| |
|
|
|
|
|
|
|
| Derrick H. Weyrauch |
May 30, 2014 |
150,000 |
Cdn$0.80 (US$0.69) |
May 30, 2019 |
Nil |
N/A |
N/A |
__________________________
| (1) |
3/4 of the stock options granted to each optionee vest on
the 12 month anniversary of the grant date and the balance vest on the 18
month anniversary of the grant date. |
| |
|
| (2) |
The exercise price of each of the stock options held by
the directors is in Canadian dollars. The U.S. dollar figures set out in
this column of the table were calculated using the noon exchange rate on
December 31, 2014 as reported by the Bank of Canada for the conversion of
Canadian dollars into U.S. dollars of Cdn$1.00 = US$0.862. |
| |
|
| (3) |
This is based on (a) the last closing sale price per
share of the Company’s common shares as at December 31, 2014 of Cdn$0.15
as reported by the Toronto Stock Exchange, and (b) converting that price
into a price of US$0.13 using the noon exchange rate on December 31, 2014
as reported by the Bank of Canada for the conversion of Canadian dollars
into U.S. dollars of Cdn$1.00 = US$0.862. |
The following table provides details regarding outstanding
option-based awards, share-based awards and non-equity incentive plan
compensation in respect of the non-executive directors of the Company, which
vested and/or were earned during the year ended December 31, 2014. See
"Executive Compensation: Tables and Narrative - Incentive Plan Awards" above for
such details in respect of executive directors of the Company.
-71-
| Incentive plan awards - value vested or earned during
the year |
Name
|
Option-based awards -
Value
vested during the
year (1)
(US$) |
Share-based awards - Value
vested during the year
(US$)
|
Non-equity incentive plan
compensation - Value
earned during the year
(US$) |
| Richard W. Brissenden |
Nil |
N/A |
N/A |
| Maurice J. Colson |
Nil |
N/A |
N/A |
| Peter N. Cowley |
Nil |
N/A |
N/A |
| Peter V. Gundy |
N/A |
N/A |
N/A |
| Richard J. Lachcik |
Nil |
N/A |
N/A |
| Matthys J. Terblanche |
Nil |
N/A |
N/A |
| Bernard R. van Rooyen |
Nil |
N/A |
N/A |
| Derrick H. Weyrauch |
Nil |
N/A |
N/A |
__________________________
| (1) |
Identifies the aggregate dollar value that would have
been realized by the director if the director had exercised all options
exercisable under the option-based award on the vesting date(s) thereof.
Mr. Gundy did not hold any stock options of the Company during
2014. |
Other Information
The Company maintains directors' and officers' liability
insurance for the benefit of directors and officers of the Company carrying
coverage in the amount of Cdn$10,000,000 as an aggregate limit of liability in
each policy year. The total annual premium payable by the Company for the policy
is Cdn$135,500 and there is a deductible in the amount of Cdn$250,000.
Neither the Company nor its subsidiaries provides pension,
retirement or similar benefits.
C. Board Practices
Each director will hold office until the close of the next
annual meeting of shareholders of the Company unless his office is earlier
vacated in accordance with the by-laws of the Company. See item 6.A. of this
Form 20-F for the dates the directors of the Company were first elected or
appointed to the Company's Board. No director of the Company has any service
contract with the Company or any subsidiary of the Company providing for
benefits upon termination of service. However, the terms of the Company’s stock
option plan accelerate the vesting of stock options granted under such plan in
the event of a take-over bid in respect of the Company (see "Incentive Stock
Option Plan" under item 6.E. of this Form 20-F).
Audit Committee
The Board has an Audit Committee, the members of which are
Maurice J. Colson, Peter N. Cowley and Derrick H. Weyrauch. Each such member is
independent within the meaning of Canadian National Instrument 52-110 - Audit
Committees ("NI 52-110") and Section 803A of the NYSE MKT Company Guide.
At no time since the commencement of the Company's financial year ended December
31, 2014 was a recommendation of the Audit Committee to nominate or compensate
an external auditor not adopted by the Board. Each member of the Audit Committee
is "financially literate" within the meaning of NI 52-110. The Audit Committee's
charter is incorporated by reference into this Form 20-F as Exhibit 1.8.
-72-
Compensation Committee
The Board has a Compensation Committee, the members of which
are Richard W. Brissenden, Maurice J. Colson and Peter N. Cowley. The primary
function of the Compensation Committee is to assist the Board in fulfilling its
oversight responsibilities with respect to: (a) human resources policies; and
(b) executive compensation. To carry out its oversight responsibilities, the
compensation committee's duties include the following:
| |
1. |
review and recommend for approval to the Board the
compensation and benefits policy and plans (including incentive
compensation plans) for the Company; |
| |
|
|
| |
2. |
review and recommend for approval to the Board, the
Company's key human resources policies; |
| |
|
|
| |
3. |
review and recommend to the Board the employment
agreements of the Company's executive officers; |
| |
|
|
| |
4. |
evaluate annually the performance of the Chief Executive
Officer of the Company and recommend to the Board his annual compensation
package and performance objectives; |
| |
|
|
| |
5. |
review annually and recommend to the Board the annual
compensation package and performance objectives of the other executive
officers of the Company; |
| |
|
|
| |
6. |
review annually and recommend to the Board the annual
salaries (or percentage change in salaries) for the Company's
non-executive staff; |
| |
|
|
| |
7. |
review annually and recommend to the Board the adequacy
and form of the compensation of the Company's directors and be satisfied
the compensation realistically reflects the responsibilities and risk
involved in being such a director; |
| |
|
|
| |
8. |
review annually and recommend for approval to the Board
the executive compensation disclosure of the Company in its information
circular, and be satisfied that the overall compensation philosophy and
policy for senior officers is adequately disclosed and describes in
sufficient detail the rationale for salary levels, incentive payments,
share options and all other components of executive compensation as
prescribed by applicable securities laws; |
| |
|
|
| |
9. |
determine grants of options to purchase shares of the
Company under the Company's Stock Option Plan and recommend same to the
Board for approval; |
| |
|
|
| |
10. |
engage, at the Company's expense, any external
professional or other advisors which it determines necessary in order to
carry out its duties hereunder; and |
| |
|
|
| |
11. |
perform any other activities consistent with this mandate
as the compensation committee or the Board deems necessary or
appropriate. |
D. Employees
The following sets out the number of employees which the
Company and its subsidiaries had as at December 31, 2014, December 31, 2013 and
December 31, 2012:
-73-
| |
Dec. 31, |
Dec. 31, |
Dec. 31, |
| Location/Project |
2014 |
2013 |
2012 |
| |
|
|
|
| Office in Toronto, Canada |
11 |
10 |
11 |
| |
|
|
|
| Office in Kinshasa, DRC |
16 |
17 |
17 |
| |
|
|
|
| Twangiza mine |
726 |
682 |
650 |
| |
|
|
|
| Namoya project (development)
|
670 |
463 |
299 |
| |
|
|
|
| Exploration and office in
Bukavu, DRC |
176 |
175 |
233 |
| |
|
|
|
| Banro Foundation |
11 |
11 |
11 |
| |
|
|
|
| Totals: |
1,610 |
1,358 |
1,221
|
The significant increase in employees at the Namoya project in
2014 relates to the continued development of the mine at Namoya, with commercial
production planned to be achieved at this mine early in the second half of 2015.
Neither the Company nor any of its subsidiaries has any unionized employees.
Neither the Company nor any of its subsidiaries employ a significant number of
temporary employees. Contractors and local labour hire companies engaged by the
Company’s DRC subsidiaries employed a total of 1,126 employees as at December
31, 2014 in respect of the Company’s DRC projects.
E. Share Ownership
The following table sets out the directors and officers of the
Company who hold common shares of the Company as at March 20, 2015, together
with the number of common shares of the Company so held and the percentage of
the Company's outstanding common shares represented by such shares. See item
6.B. of this Form 20-F for information regarding the stock options of the
Company held by the Company's directors and NEOs as of December 31, 2014.
| |
|
Percentage of |
| |
Number of Common |
Outstanding |
| Name |
Shares Owned |
Common Shares |
| |
|
|
| John A. Clarke |
488,000 |
0.09% |
| Geoffrey G. Farr |
51,998 |
0.02% |
| Arnold T. Kondrat |
1,296,048 |
0.51% |
| Donat K. Madilo |
20,000 |
0.01% |
Incentive Stock Option Plan
The Company has a Stock Option Plan (the "Option Plan"),
the principal purposes of which are: (A) to retain and attract qualified
directors, officers, employees and consultants which the Company and its
subsidiaries require; (B) to promote a proprietary interest in the Company and
its subsidiaries; (C) to provide an incentive element in compensation; and (D) to promote the development of the Company
and its subsidiaries. The following summarizes the terms of the Option Plan:
-74-
| |
|
|
| |
(a) |
Stock options may be granted from time to time by the
Board to such directors, officers, employees and consultants of the
Company or a subsidiary of the Company, and in such numbers, as are
determined by the Board at the time of the granting of the stock
options. |
| |
|
|
| |
(b) |
The total number of common shares of the Company
("Common Shares") issuable upon the exercise of all outstanding
stock options granted under the Option Plan shall not at any time exceed
9.5% of the total number of outstanding Common Shares. 9.5% of the number
of Common Shares outstanding as of the date of this Form 20-F is equal to
23,949,563 Common Shares. |
| |
|
|
| |
|
Having regard to the said percentage figure, the Option
Plan is considered an "evergreen" plan, since (i) the Common Shares
covered by stock options which have been exercised or cancelled will be
available for subsequent grants under the Option Plan, and (ii) the number
of stock options available to grant increases as the number of outstanding
Common Shares increases. |
| |
|
|
| |
(c) |
As at March 20, 2015, there were outstanding under the
Option Plan 23,362,884 stock options entitling the holders to purchase an
aggregate of 23,362,884 Common Shares (which is equal to 9.26% of the
number of outstanding Common Shares). As at March 20, 2015, the number of
new stock options available for future grants under the Option Plan was
stock options to purchase an aggregate of 586,679 Common Shares (which is
equal to 0.23% of the number of outstanding Common Shares). |
| |
|
|
| |
(d) |
The exercise price of each stock option shall be
determined in the discretion of the Board at the time of the granting of
the stock option, provided that the exercise price shall not be lower than
the "Market Price". "Market Price" means the last closing price of the
Common Shares on the Toronto Stock Exchange prior to the date the stock
option is granted. |
| |
|
|
| |
(e) |
All stock options shall be for a term (the "Term")
determined in the discretion of the Board at the time of the granting of
the stock options, provided that no stock option shall have a Term
exceeding ten years and, unless otherwise determined by the Board in its
discretion in accordance with the terms of the Option Plan as referred to
in the next paragraph below, a stock option and all rights to purchase
Common Shares pursuant thereto shall expire and terminate immediately upon
the optionee who holds such stock option ceasing to be at least one of a
director, officer, employee or consultant of the Company or a subsidiary
of the Company for any reason whatsoever. |
| |
|
|
| |
|
Provided a departing optionee has been with the Company
for at least 12 months, the Board may in its discretion determine that any
vested stock options held by such departing optionee will continue to be
exercisable after the departure from the Company of the optionee for a
period of time not to exceed the balance of the Term of such stock
options. |
| |
|
|
| |
(f) |
Unless otherwise determined by the Board, 3/4 of the
stock options granted pursuant to the Option Plan vest on the 12 month
anniversary of their grant date and the remaining 1/4 of such stock
options vest on the 18 month anniversary of the grant date. |
| |
|
|
| |
(g) |
Except in limited circumstances in the case of the death
of an optionee, stock options shall not be assignable or
transferable. |
| |
|
|
| |
(h) |
Shareholder approval is required prior to any reduction
in the exercise price of a stock option or any extension of the Term of a
stock option (if the optionee holding such stock option is an insider of
the Company, disinterested shareholder approval is
required). |
-75-
| |
(i) |
The Option Plan contains the following restrictions
relating to the number of stock options that may be granted to insiders or
non-employee directors of the Company: |
| |
|
|
|
| |
|
(i) |
The total number of Common Shares issued to insiders of
the Company, within any one year period, under all "security based
compensation arrangements" (within the meaning of the rules of the Toronto
Stock Exchange) of the Company shall not exceed 10% of the total number of
outstanding Common Shares. |
| |
|
|
|
| |
|
(ii) |
The total number of Common Shares issuable to insiders of
the Company, at any time, under all "security based compensation
arrangements" (within the meaning of the rules of the Toronto Stock
Exchange) of the Company shall not exceed 10% of the total number of
outstanding Common Shares. |
| |
|
|
|
| |
|
(iii) |
The total number of Common Shares issuable to
non-employee directors of the Company, at any time, under all "security
based compensation arrangements" (within the meaning of the rules of the
Toronto Stock Exchange) of the Company shall not exceed 1% of the total
number of outstanding Common Shares. |
| |
|
Subject to the above restrictions on insiders and
non-employee directors of the Company, there are no restrictions in the
Option Plan on the number of stock options that may be granted to any one
person or company. |
| |
|
|
| |
(j) |
In the event a "take-over bid" (as such term is defined
under Ontario securities laws) is made in respect of the Common Shares,
all unvested stock options shall become exercisable (subject to any
necessary regulatory approval) so as to permit the holders of such stock
options to tender the Common Shares received upon exercising such stock
options pursuant to the take-over bid. |
| |
|
|
| |
(k) |
The Company may amend from time to time or terminate the
terms and conditions of the Option Plan by resolution of the Board. Any
amendments shall be subject to the prior consent of all applicable
regulatory bodies, including the Toronto Stock Exchange (to the extent
such consent is required). Amendments and termination shall take effect
only with respect to stock options granted thereafter, provided that they
may apply to any stock options previously granted with the mutual consent
of the Company and the optionees holding such stock options. The Board has
the authority to approve amendments relating to the Option Plan or to
stock options, without further approval of the Company's shareholders, to
the extent that such amendments relate to: |
| |
(i) |
altering the terms of vesting applicable to any stock
options; |
| |
|
|
| |
(ii) |
changes to the date a stock option terminates upon the
optionee ceasing to be a director, officer, employee or consultant of the
Company or any of its subsidiaries; |
| |
|
|
| |
(iii) |
accelerating the expiry date in respect of stock
options; |
| |
|
|
| |
(iv) |
determining the adjustment provisions pursuant to section
10 of the Option Plan (section 10 of the Option Plan provides, among other
things, that, in the event of any change in the Company's Common Shares
through subdivision, consolidation, amalgamation, merger or otherwise,
then in any such case the Board may make such adjustment in the Option
Plan and in the stock options granted under the Option Plan as the Board
may in its sole discretion deem appropriate to prevent substantial
dilution or enlargement of the rights granted to, or available for,
holders of stock options); |
-76-
| |
(v) |
amending the definitions contained in the Option Plan;
or |
| |
|
|
| |
(vi) |
amendments of a "housekeeping"
nature. |
| |
|
Any amendment to the Option Plan or to stock options
which does not relate to items (i) to (vi) above, shall require approval
of the Company’s shareholders. |
| |
|
|
| |
(l) |
Except if not permitted by the Toronto Stock Exchange, if
any stock options may not be exercised due to any black-out period (as
defined in the Option Plan) at any time within the three business day
period prior to the normal expiry date of such stock options, the expiry
date of such stock options shall be extended for a period of 10 business
days following the end of the black-out period (or such longer period as
permitted by the Toronto Stock Exchange and approved by the
Board). |
| |
|
|
| |
(m) |
The Board has full and final discretion to interpret the
provisions of the Option Plan, and all decisions and interpretations made
by the Board shall be binding and conclusive upon the Company and all
optionees, subject to shareholder approval if required by the Toronto
Stock Exchange. |
| |
|
|
| |
(n) |
The Plan does not provide for financial assistance by the
Company to an optionee in connection with an option
exercise. |
A copy of the Option Plan is incorporated by reference into
this Form 20-F as Exhibit 4.1.
Item 7. Major Shareholders and Related Party Transactions
A. Major Shareholders
To the knowledge of management of the Company, based on a
review of publicly available filings, the following is the only person or
company who, as at March 20, 2015, beneficially owns 5% or more of the
outstanding common shares of the Company.
| |
Number of Shares |
Percentage of Outstanding |
| Name of Shareholder |
Beneficially Owned |
Common Shares |
| |
|
|
| BlackRock, Inc. |
26,567,276 (1) |
10.54%
|
__________________________
| (1) |
This share figure is derived from BlackRock Inc.’s most
recent filing with the SEC in respect of its Banro shareholding, which
filing was as at December 31, 2014. |
The shareholder disclosed above does not have any voting rights
with respect to its common shares of the Company that are different from any
other holder of common shares of the Company.
As of March 20, 2015, based on the Company’s shareholders’
register, there were 463 shareholders of record of the Company’s common shares
in the United States, holding 4.96% of the outstanding common shares of the
Company.
-77-
Control by Foreign Government or Other
Persons
To the best of the knowledge of management of the Company, the
Company is not directly or indirectly owned or controlled by another
corporation, any foreign government, or any other natural or legal person,
severally or jointly.
Change of Control
As of the date of this Form 20-F, there are no arrangements
known to the Company which may at a subsequent date result in a change in
control of the Company.
B. Related Party Transactions
Based on public filings, the Company understands that
institutional accounts (the "BlackRock Accounts") managed by affiliates
of BlackRock, Inc. held, in the aggregate, at the relevant times indicated below
more than 10% of the outstanding common shares of the Company.
In March 2012, the Company closed a Debt Financing for total
gross proceeds US$175 million. The Debt Financing involved an offering by the
Company of 175,000 units of the Company consisting of US$175,000,000 aggregate
principal amount of notes and 8,400,000 warrants. See item 10.B. of this
Form 20-F for additional information in respect of this financing and the said
notes and warrants. Donat K. Madilo (who was at the time Chief Financial Officer
of the Company) purchased US$150,000 aggregate principal amount of notes and
7,200 warrants under this financing. The Company understands that BlackRock
Accounts purchased notes and warrants under this financing.
In April 2013, the Company closed a short form prospectus
offering (the "2013 Offering") of common shares of the Company and series
A preference shares of the Company, together with a concurrent private placement
(the "2013 Concurrent Offering") of preferred shares ("Subco
Shares") of Banro Group (Barbados) Limited (a subsidiary of the Company) and
associated series B preference shares of the Company ("Series B Shares").
The 2013 Offering consisted of 50,218,634 common shares of the Company priced at
Cdn$1.35 per share for gross aggregate proceeds of Cdn$67,795,156 and 116,000
series A preference shares of the Company priced at US$25.00 per share for gross
aggregate proceeds of US$2,900,000. The 2013 Concurrent Offering consisted of
1,200,000 Subco Shares and 1,200,000 associated Series B Shares priced at
US$25.00 per Subco Share and Series B Share for gross aggregate proceeds of
US$30,000,000. The 2013 Offering was conducted by a syndicate of agents. See
item 10.B. of this Form 20-F for additional information in respect of the 2013
Offering and 2013 Concurrent Offering. BlackRock World Mining Trust plc (an
affiliate of BlackRock, Inc.) was the sole purchaser under the 2013 Concurrent
Offering. The Company understands that BlackRock Accounts purchased common
shares under the 2013 Offering. Each of John A. Clarke (Chief Executive Officer
and President and a director of the Company) and Arnold T. Kondrat (Executive
Vice President and a director of the Company) purchased 100,000 common shares of
the Company issued under the 2013 Offering.
C. Interests of Experts and Counsel
This Form 20-F is being filed as an annual report under the
U.S. Exchange Act and, as such, there is no requirement to provide any
information under this item.
-78-
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information
Consolidated Financial Statements
The consolidated financial statements of the Company and audit
report of the Company’s independent auditor are filed as part of this Form 20-F
under Item 18.
Legal or Arbitration Proceedings
The Company currently is not a party to any material
legal or arbitration proceeding.
The Company is not aware of any material proceeding in which
any director, member of senior management or affiliate of the Company is either
a party adverse to the Company or any of its subsidiaries or has a material
interest adverse to the Company or any of its subsidiaries.
Dividend Policy
The Company has not paid any dividend or made any other
distribution in respect of its outstanding common shares and management does not
anticipate that the Company will pay dividends or make any other distribution in
respect on its common shares in the foreseeable future. The Company's Board,
from time to time, and on the basis of any earnings and the Company's financial
requirements or any other relevant factor, will determine the future dividend or
distribution policy of the Company with respect to its common shares.
B. Significant Changes
There have been no significant changes in the affairs of the
Company since the date of the audited annual consolidated financial statements
of the Company as at and for the year ended December 31, 2014, other than as
discussed in this Form 20-F.
Item 9. The Offer and Listing
A. Offer and Listing Details
Common Shares
The Company's common shares are listed for trading on the
Toronto Stock Exchange (the "TSX") and on the NYSE MKT LLC, in each case
under the symbol "BAA". The Company's common shares commenced trading on the
predecessor stock exchange to the NYSE MKT LLC on March 28, 2005 and commenced
trading on the TSX on November 10, 2005. Prior to November 10, 2005, such shares
traded on the TSX Venture Exchange.
Toronto Stock Exchange
The following table discloses the annual high and low sales
prices in Canadian dollars for the common shares of the Company for the five
most recent financial years of the Company as traded on the TSX:
-79-
| Year |
High (Cdn$) |
Low (Cdn$) |
| 2014 |
$0.84 |
$0.13 |
| 2013 |
$3.09 |
$0.43 |
| 2012 |
$5.78 |
$2.53 |
| 2011 |
$5.25 |
$2.35 |
| 2010 |
$4.08 |
$1.60 |
The following table discloses the high and low sales prices in
Canadian dollars for the common shares of the Company for each quarterly period
within the two most recent financial years of the Company as traded on the
TSX:
| Quarter Ended |
High (Cdn$) |
Low (Cdn$) |
| December 31, 2014 |
$0.225 |
$0.13 |
| September 30, 2014 |
$0.52 |
$0.165 |
| June 30, 2014 |
$0.63 |
$0.43 |
| March 31, 2014 |
$0.84 |
$0.53 |
| December 31, 2013 |
$0.96 |
$0.43 |
| September 30, 2013 |
$1.22 |
$0.60 |
| June 30, 2013 |
$1.78 |
$0.67 |
| March 31, 2013 |
$3.09 |
$1.715 |
The following table discloses the monthly high and low sales
prices in Canadian dollars for the common shares of the Company for the most
recent six months as traded on the TSX:
| Month |
High (Cdn$) |
Low (Cdn$) |
| March 2015 (to March 20) |
$0.325 |
$0.185 |
| February 2015 |
$0.295 |
$0.17 |
| January 2015 |
$0.21 |
$0.15 |
| December 2014 |
$0.185 |
$0.14 |
| November 2014 |
$0.205 |
$0.15 |
| October 2014 |
$0.225 |
$0.13 |
| September 2014 |
$0.29 |
$0.165 |
NYSE MKT LLC (the "NYSE MKT")
The following table discloses the annual high and low sales
prices in United States dollars for the common shares of the Company for the
five most recent financial years of the Company as traded on the NYSE MKT:
-80-
| Year |
High (US$) |
Low (US$) |
| 2014 |
$0.76 |
$0.12 |
| 2013 |
$3.15 |
$0.41 |
| 2012 |
$6.05 |
$2.58 |
| 2011 |
$5.27 |
$2.45 |
| 2010 |
$4.03 |
$1.55 |
The following table discloses the high and low sales prices in
United States dollars for the common shares of the Company for each quarterly
period within the two most recent financial years of the Company as traded on
the NYSE MKT:
| Quarter Ended |
High (US$) |
Low (US$) |
| December 31, 2014 |
$0.20 |
$0.12 |
| September 30, 2014 |
$0.48 |
$0.15 |
| June 30, 2014 |
$0.59 |
$0.39 |
| March 31, 2014 |
$0.76 |
$0.48 |
| December 31, 2013 |
$0.92 |
$0.41 |
| September 30, 2013 |
$1.19 |
$0.59 |
| June 30, 2013 |
$1.74 |
$0.62 |
| March 31, 2013 |
$3.15 |
$1.69 |
The following table discloses the monthly high and low sales
prices in United States dollars for the common shares of the Company for the
most recent six months as traded on the NYSE MKT:
| Month |
High (US$) |
Low (US$) |
| March 2015 (to March 20) |
$0.26 |
$0.15 |
| February 2015 |
$0.24 |
$0.14 |
| January 2015 |
$0.18 |
$0.13 |
| December 2014 |
$0.17 |
$0.12 |
| November 2014 |
$0.19 |
$0.13 |
| October 2014 |
$0.20 |
$0.12 |
| September 2014 |
$0.26 |
$0.15 |
Series A Preference Shares
The Company's series A preference shares (the "Series A
Shares") are listed for trading on the Canadian Securities Exchange (the
"CNSX") under the symbol "BAA.PR.A". Such shares commenced trading on the
CNSX on April 25, 2013. See item 10.B. of this Form 20-F for information in
respect of the financing transaction (which closed on April 25, 2013) pursuant
to which the Series A Shares were issued. During 2013, there was only one trade of the Series A Shares on the CNSX: 100 Series A Shares
were traded on the CNSX on May 6, 2013 at a price of US$25 per share. During
2014, there was only one trade of the Series A Shares on the CNSX: 100 Series A
Shares were traded on the CNSX on November 17, 2014 at a price of US$23.75 per
share.
-81-
B. Plan of Distribution
This Form 20-F is being filed as an annual report under the
U.S. Exchange Act and, as such, there is no requirement to provide any
information under this item.
C. Markets
The Company's outstanding common shares are listed on both the
TSX and the NYSE MKT.
D. Selling Shareholder
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. Additional Information
A. Share Capital
This Form 20-F is being filed as an annual report under the
U.S. Exchange Act and, as such, there is no requirement to provide any
information under this item.
B. Memorandum and Articles of Association
A copy of the Company's articles of continuance is incorporated
by reference into this Form 20-F as Exhibit 1.1. The Company's by-laws are
incorporated by reference into this Form 20-F as Exhibit 1.2.
The Company is a corporation governed by the Canada Business
Corporations Act (the "CBCA"). Under the CBCA, the articles of the
Company may, by "special resolution" (see below for definition), be amended to
add, change or remove any rights, privileges, restrictions and conditions,
including rights to accrued dividends, in respect of all or any of its shares,
whether issued or unissued. Under the CBCA, "special resolution" means a
resolution passed by a majority of not less than two-thirds of the votes cast by
the shareholders who voted in respect of that resolution or signed by all the
shareholders entitled to vote on that resolution.
The Company’s articles provide that there are no restrictions
on the business the Company may carry on and there are no restrictions on the
powers the Company may exercise.
Under the Company's by-laws, a director of the Company who is a
party to, or who is a director or officer of a party to, or has a material
interest in any person who is a party to, a material contract or material
transaction or proposed material contract or proposed material transaction with
the Company, must disclose the nature and extent of their interest at the time
and in the manner provided by the CBCA and such material interest must be entered in the minutes of the meetings of directors or
otherwise noted in the records of the Company. Any such material contract or
material transaction or proposed material contract or proposed material
transaction must be referred to the Board or shareholders for approval even if
such contract is one that in the ordinary course of the Company's business would
not require approval by the Board or shareholders. Such a director must not vote
on any resolution to approve the same except as provided by the CBCA.
-82-
Also under the Company's by-laws, the Company's directors may
be paid such remuneration for their services as the Board may from time to time
determine. The directors are also entitled to be reimbursed for travelling and
other expenses properly incurred by them in attending meetings of the Board or
any committee thereof.
With respect to borrowing powers, the Company's by-laws provide
that, without limiting the borrowing powers of the Company as set forth in the
CBCA, the Board may from time to time on behalf of the Company, without
authorization of the shareholders:
| |
(a) |
borrow money upon the credit of the Company; |
| |
|
|
| |
(b) |
issue, reissue, sell or pledge debt obligations of the
Company; |
| |
|
|
| |
(c) |
subject to the CBCA, give a guarantee on behalf of the
Company to secure performance of an obligation to any person;
and |
| |
|
|
| |
(d) |
mortgage, hypothecate, pledge, or otherwise create a
security interest in all or any property of the Company, owned or
subsequently owned, to secure any obligation of the
Company. |
A director of the Company need not be a shareholder of the
Company. There is no age limit requirement for a director of the Company.
The annual meeting of shareholders of the Company is held at
such time in each year (but not later than 15 months after holding the last
preceding annual meeting of shareholders) and at such place as the Board may
from time to time determine. The Board has the power to call a special meeting
of shareholders of the Company at any time.
The only persons entitled to be present at a meeting of
shareholders are those entitled to vote thereat, the directors and auditor of
the Company and others who, although not entitled to vote, are entitled or
required under any provision of the CBCA or the articles or by-laws to be
present at the meeting. Any other person may be admitted only on the invitation
of the chairperson of the meeting or with the consent of the meeting.
A quorum for the transaction of business at any meeting of
shareholders is two persons entitled to vote thereat present in person or represented by proxy.
The Company's authorized share capital consists of an unlimited
number of common shares and an unlimited number of preference shares, issuable
in series, of which 252,100,672 common shares, 116,000 series A preference
shares and 1,200,000 series B preference shares were issued and outstanding as
of the date of this Form 20-F. The following is a summary of the material
provisions attaching to the Company’s common shares and preference shares as a
class.
Common Shares
The holders of the common shares are entitled to receive notice
of and to attend all meetings of the shareholders of the Company and shall have
one vote for each common share held at all meetings of the shareholders of the
Company, except for meetings at which only holders of another specified class or
series of shares are entitled to vote separately as a class or series. Subject to the prior
rights of the holders of the preference shares or any other shares ranking
senior to the common shares, the holders of the common shares are entitled to
(a) receive any dividends as and when declared by the Board, out of the assets
of the Company properly applicable to the payment of dividends, in such amount
and in such form as the Board may from time to time determine, and (b) receive
the remaining property of the Company in the event of any liquidation,
dissolution or winding-up of the Company.
-83-
Preference Shares
The Board may issue the preferences shares at any time and from
time to time in one or more series, each series of which shall have the
designations, rights, privileges, restrictions and conditions fixed by the
directors. The preference shares of each series shall rank on a parity with the
preference shares of every other series, and shall be entitled to priority over
the common shares and any other shares of the Company ranking junior to the
preference shares, with respect to priority in the payment of dividends and the
return of capital and the distribution of assets of the Company in the event of
the liquidation, dissolution or winding-up of the Company.
Series A Preference Shares and Subco Shares
On April 25, 2013 (the "Closing Date"), the Company
closed a short form prospectus offering (the "2013 Offering") of common
shares of the Company and series A preference shares of the Company ("Series
A Shares"), together with a concurrent private placement (the "2013
Concurrent Offering") of preferred shares ("Subco Shares") of Banro
Group (Barbados) Limited (a subsidiary of the Company) ("Subco") and
associated series B preference shares of the Company ("Series B Shares").
The 2013 Offering consisted of 50,218,634 common shares of the Company priced at
Cdn$1.35 per share for gross aggregate proceeds of Cdn$67,795,156 and 116,000
series A preference shares of the Company priced at US$25.00 per share for gross
aggregate proceeds of US$2,900,000. The 2013 Concurrent Offering consisted of
1,200,000 Subco Shares and 1,200,000 associated Series B Shares priced at
US$25.00 per Subco Share and Series B Share for gross aggregate proceeds of
US$30,000,000.
With respect to both the series A preference shares of the
Company and the Subco Shares (both such shares shall be referred to in this
paragraph and the next three paragraphs as the "Preference Shares"),
quarterly preferential cumulative cash dividends will accrue and, if, as and
when declared by the applicable board of directors are payable on the last day
of each of March, June, September and December in each year from the date of
issuance. The amount of dividends that will accrue on the Preference Shares on
any dividend payment date shall generally be an amount per share equal to the
product obtained by multiplying (i) the Dividend Liquidation Preference (which
is defined in the Company’s articles of amendment dated April 23, 2013, a copy
of which can be obtained from SEDAR at www.sedar.com and EDGAR at
www.sec.gov) on such dividend payment date by (ii) the quotient obtained
by dividing (A) the Production Schedule Yield (which is defined in the Company’s
articles of amendment dated April 23, 2013 and which generally will vary between
10% and 15% depending on the aggregate monthly production level at the Company’s
operating mines) on such dividend payment date by (B) four.
The Preference Shares are not redeemable at the option of the
Company or Subco, as applicable, until the later of (i) the first date on which
the Company and its subsidiaries have achieved total cumulative gold production
of 800,000 ounces from and including the Closing Date and (ii) the date that is
five years from the Closing Date.
Commencing on the first day after the date that is five years
from the Closing Date, for so long as the Company and its subsidiaries have
achieved total cumulative gold production that is less than 800,000 ounces from
the Closing Date, each holder of the Preference Shares will have the option at
any time to require the Company or Subco, as applicable, to redeem all or a part
of its Preference Shares.
-84-
Commencing on the tenth anniversary of the Closing Date, each
holder of a Preference Share will have the option at any time to require the
Company or Subco, as applicable, to redeem the Preference Shares legally
available for such purpose.
Series B Preference Shares
The Series B Shares are held by the sole holder of all of the
Subco Shares. The terms of the Series B Shares provide that, in the event that
two quarterly dividend payments (whether or not consecutive) on the Subco Shares
or the Series A Shares shall have accrued and been unpaid, the holders of the
Series B Shares will be entitled to notice of, and to attend, at each annual and
special meeting of shareholders or action by written consent at which directors
of the Company will be elected and will be entitled to a separate class vote,
together with the holders of the Series A Shares and the holders of any other
series of shares of the Company ranking on a parity with such Series B Shares or
Series A Shares either as to dividends or the distribution of assets upon
liquidation, dissolution or winding up and upon which like voting rights have
been conferred and are exercisable (such other series of shares being herein
referred to as "Other Voting Stock") (it being understood that each
Series B Share and each share of Other Voting Stock shall for such purpose be
entitled to one vote per share) to elect two members to the Board (each a
"Preferred Holder Director") until dividends on the Subco Shares or
Series A Shares have been paid in full or declared and set apart in trust for
payment (whereupon such right shall cease unless and until another quarterly
dividend payment on the Subco Shares or Series A Shares shall have accrued and
been unpaid). In any such case, the Board will be increased by two directors,
and the holders of the Series B Shares (either alone or with the holders of the
Other Voting Stock) will have the exclusive right as members of such class, as
outlined herein, to elect two directors at the next annual meeting of
shareholders or at any special meeting or action by written consent at which
directors of the Company will be elected.
2012 Notes
In March 2012, the Company closed a brokered private placement
debt financing for total gross proceeds of US$175 million (the "Debt
Financing"). The Debt Financing involved an offering by the Company of
175,000 units ( the "Units") consisting of US$175,000,000 aggregate
principal amount of senior secured notes with an interest rate of 10% and a
maturity date of March 1, 2017 (the "2012 Notes") and 8,400,000
warrants to purchase an aggregate of 8,400,000 common shares of the Company.
Each such Unit consisted of US$1,000 principal amount of 2012 Notes and 48
warrants, with each such warrant entitling the holder to purchase one common
share of the Company at a price of US$6.65 for a period of five years from the
date of issuance of the warrant.
The following summarizes the terms of the 2012 Notes, and is
subject to, and qualified by reference to, the provisions of the Note Indenture.
A copy of the Note Indenture has been filed on, and can be obtained from, SEDAR
at www.sedar.com and EDGAR at www.sec.gov.
| Total Principal Amount of |
|
| 2012 Notes Outstanding: |
US$175,000,000 |
| |
|
| Maturity Date: |
March 1, 2017 |
| |
|
| Interest Rate: |
10% per year. |
| |
|
|
Interest Payment Dates: |
March 1 and September 1, commencing September 1, 2012.
Interest started accruing from March 2, 2012. |
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| Guarantees: |
The 2012 Notes are guaranteed (the "Note
Guarantees") on a senior basis by the Company’s existing and future
subsidiaries, other than certain immaterial subsidiaries. |
| |
|
| Security: |
The 2012 Notes and the Note Guarantees are secured on a
second priority basis by liens on (a) all of the existing and after
acquired property of the Company, including any and all capital stock the
Company holds in its subsidiaries and other investments, (b) all of the
existing and after acquired capital stock and other investments held by
the Company's subsidiaries, and (c) all of the existing and after acquired
property, including accounts receivable, letter of credit rights,
inventory, deposit accounts, securities accounts, instruments and chattel
paper, general intangibles, records related to any of the foregoing and
certain assets related thereto, in each case held by the Company and the
Company’s subsidiaries, but excluding any mining assets or other assets in
respect of which the Company or the Company’s subsidiaries would be
required to obtain approval from any governmental or regulatory authority
in the DRC in order to incur liens on such assets, in each case, subject
to specified permitted liens and certain exceptions. |
| |
|
| Ranking: |
The 2012 Notes and the Note Guarantees are senior
obligations of the Company and the guarantors and:
|
| |
• |
rank equally in right of payment with all of the
Company’s and the guarantors’ existing and future senior indebtedness;
|
| |
• |
rank senior in right of payment to all of the Company’s
and the guarantors’ existing and future subordinated indebtedness;
|
| |
• |
are secured on a second priority basis by liens on the
"Collateral" (as defined in the Note Indenture); |
| |
• |
are effectively junior to any of the Company’s secured
indebtedness that is either secured by assets that are not Collateral or
which is secured by a lien senior to or prior to liens securing the 2012
Notes to the extent of the value of the assets securing such indebtedness;
and |
| |
• |
are structurally subordinated to all of the existing and
future liabilities (including trade payables) of each of the Company’s
subsidiaries that does not guarantee the 2012 Notes.
|
|
Optional Redemption: |
The 2012 Notes are redeemable at the Company’s option, in
whole or in part, at any time on or after March 1, 2014, at the redemption
prices (expressed as a percentage of principal amount of the 2012 Notes to
be redeemed) set forth below plus accrued and unpaid interest on the 2012
Notes, if any, to the date of redemption, if redeemed during the 12-month
period beginning on March 1 of each of the years indicated below:
|
| |
Year |
Percentage |
|
| |
2014 |
110.0% |
|
| |
2015 |
105.0% |
|
| |
2016 and thereafter |
100.0%
|
|
Prior to March 1, 2014, the Company
could have redeemed some or all of the 2012 Notes at a price equal to 100% of
the principal amount of the 2012 Notes plus a “make-whole” premium, plus accrued and
unpaid interest, if any, to the date of redemption.
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|
At any time prior to March 1, 2014, the Company could
also have redeemed up to 35% of the original principal amount of the 2012
Notes with the proceeds of certain equity offerings at a redemption price
of 110% of the principal amount of the 2012 Notes, plus accrued and unpaid
interest, if any, to the date of redemption. |
| |
|
Special Mandatory
Redemption: |
In the event that (a) properties and assets of the
Company and its subsidiaries from which a majority of the Company and its
subsidiaries’ consolidated earnings before interest, taxes, depreciation
and amortization is derived are seized, confiscated or nationalized by, or
become subject to forfeiture to, any governmental, quasi-governmental,
military or other similar authority, or any similar action shall have been
taken or shall have occurred and the Company receives any compensation as
a result of such event by way of settlement, judicial or arbitral award or
otherwise, then the Company will be required to redeem all of the 2012
Notes at the "Asset Seizure Redemption Price" (as such term is defined in
the Note Indenture). |
| |
|
| Change of Control Offer: |
Upon the occurrence of specific kinds of changes of
control, holders of 2012 Notes will have the right to cause the Company to
repurchase some or all of their 2012 Notes at 101% of the principal amount
of the 2012 Notes, plus accrued and unpaid interest, if any, to the date
of purchase. |
| |
|
| Certain Covenants: |
The Company issued the 2012 Notes under the Note
Indenture with Equity Financial Trust Company, as trustee. The Note
Indenture, among other things, limits the Company’s ability and the
ability of its subsidiaries to: |
| |
• |
incur additional indebtedness; |
| |
• |
pay dividends or make other distributions or repurchase
or redeem |
| |
|
capital stock; |
| |
• |
prepay, redeem or repurchase certain debt; |
| |
• |
make loans and investments; |
| |
• |
sell assets; |
| |
• |
incur liens; |
| |
• |
enter into transactions with affiliates; |
| |
• |
enter into agreements restricting the Company’s
subsidiaries’ ability to pay dividends; and |
| |
• |
consolidate, amalgamate, merge or sell all or
substantially all of the Company’s assets. |
These covenants are subject to a
number of exceptions and qualifications as set forth in the Note Indenture.
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Warrants
The Company issued 8,400,000 warrants pursuant to the Debt
Financing. Each such warrant entitles the holder to acquire one common share of
the Company upon payment of US$6.65, subject to adjustment from time to time
upon the occurrence of certain changes in the common share of the Company and
certain issuances by the Company of common shares, options or convertible
securities. The said warrants may be exercised at any time until March 2, 2017.
A holder of such warrants does not, by virtue of holding the warrants, have any
rights as a shareholder of the Company.
The Company issued additional warrants to the lenders in
connection with the August 2014 liquidity backstop facility transaction. These
warrants expire August 18, 2017 and entitle the holders to purchase a total of
13.3 million common shares of the Company at an exercise price of Cdn$0.269 per
share. The warrants will be exercisable for cash, or by a cashless exercise, at
the option of the holder.
Shareholder Rights Plan
Effective April 29, 2005, the Board adopted a Shareholder
Rights Plan (the "Rights Plan"). The Rights Plan was implemented by way
of a shareholder rights plan agreement (the "Rights Plan Agreement")
dated as of April 29, 2005 between the Company and Equity Transfer Services Inc.
(now named Equity Financial Trust Company), as rights agent. The Rights Plan
Agreement was approved by shareholders of the Company at the annual and special
meeting of shareholders held on June 29, 2005. Shareholders of the Company, at
the annual and special meeting of shareholders held on June 27, 2008, approved
an extension to the term of the Rights Plan Agreement to the termination of the
annual meeting of shareholders of the Company in the year 2011. Shareholders of
the Company, at the annual and special meeting of shareholders held on June 29,
2011, approved an extension to the term of the Rights Plan Agreement to the
termination of the annual meeting of shareholders of the Company in the year
2014. Shareholders of the Company, at the annual and special meeting of
shareholders held on June 27, 2014, approved an extension to the term of the
Rights Plan Agreement to the termination of the annual meeting of shareholders
of the Company in the year 2017.
The objectives of the Rights Plan are to ensure, to the extent
possible, that all shareholders of the Company are treated equally and fairly in
connection with any take-over bid for the Company. The Rights Plan discourages
discriminatory, coercive or unfair take-overs of the Company and gives the
Company's Board time if, in the circumstances, the Board determines it is
appropriate to take such time, to pursue alternatives to maximize shareholder
value in the event an unsolicited take-over bid is made for all or a portion of
the outstanding common shares of the Company (the "Common Shares").
The Rights Plan discourages coercive hostile take-over bids by
creating the potential that any Common Shares which may be acquired or held by
such a bidder will be significantly diluted. The potential for significant
dilution to the holdings of such a bidder can occur as the Rights Plan provides
that all holders of Common Shares who are not related to the bidder will be
entitled to exercise rights ("Rights") issued to them under the Rights
Plan and to acquire Common Shares at a substantial discount to prevailing market
prices. The bidder or the persons related to the bidder will not be entitled to
exercise any Rights under the Rights Plan. Accordingly, the Rights Plan will
encourage potential bidders to make take-over bids by means of a "Permitted Bid"
(as such term is defined in the Rights Plan Agreement) or to approach the Board
to negotiate a mutually acceptable transaction. The Permitted Bid provisions of
the Rights Plan are designed to ensure that in any take-over bid for outstanding
Common Shares all shareholders are treated equally and are given adequate time
to properly assess such take-over bid on a fully-informed basis.
The Board authorized the issuance of one Right in respect of
each Common Share outstanding at the close of business on April 29, 2005 (the
"Record Time"). In addition, the Board authorized the issuance of one
Right in respect of each additional Common Share issued after the Record Time.
The Rights trade with and are represented by the Company's Common Share certificates,
including certificates issued prior to the Record Time. Until such time as the
Rights separate from the Common Shares and become exercisable, Rights
certificates will not be distributed to shareholders. At any time prior to the
Rights becoming exercisable, the Board may waive the operation of the Rights
Plan with respect to certain events before they occur. The issuance of the
Rights is not dilutive until the Rights separate from the underlying Common
Shares and become exercisable or until the exercise of the Rights.
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A copy of the Rights Plan Agreement, together with the three
amending agreements to the Rights Plan Agreement (which amending agreements
related to the three extensions to the term of the Rights Plan Agreement), can
be obtained from SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Reference is made to the Rights Plan Agreement, as amended, for additional
information with respect to the Rights Plan.
Exchangeable Preferred Shares
In February 2014, the Company closed a US$40 million financing
involving the issue of 40,000 exchangeable preferred shares (the
"Exchangeable Preferred Shares") to investment funds managed by Gramercy
Funds Management LLC by way of a non-brokered private placement (the "2014
Private Placement Financing"). The Exchangeable Preferred Shares were issued
by two Banro subsidiaries (Namoya (Barbados) Limited and Twangiza (Barbados)
Limited; 20,000 shares issued by each such subsidiary), pay an 8% cumulative
preferential cash dividend, payable quarterly on May 31, August 31, November 30
and February 28/29, and will mature on June 1, 2017 (the "Maturity
Date"). At the option of the holders and at any time before the Maturity
Date, the holders will be entitled to exchange their Exchangeable Preferred
Shares into 63 million common shares of Banro at a strike price of US$0.5673 per
common share. The Company does not have any rights to require the exchange of
the Exchangeable Preferred Shares into common shares of the Company. In the
event that all of the Exchangeable Preferred Shares have not been exchanged for
common shares of the Company by the Maturity Date, the holders of the
Exchangeable Preferred Shares will have the right to receive an amount equal to
US$1,000 per Exchangeable Preferred Share held by them at that time plus any
accrued but unpaid dividends.
Disclosure of Share Ownership
In general, under applicable securities regulation in Canada, a
person or company who beneficially owns, directly or indirectly, voting
securities of an issuer or who exercises control or direction over voting
securities of an issuer or a combination of both, carrying more than 10% of the
voting rights attached to all the issuer's outstanding voting securities is an
insider and must, within 10 days of becoming an insider, file a report in the
required form effective the date on which the person became an insider. The
report must disclose any direct or indirect beneficial ownership of, or control
or direction over, securities of the reporting issuer. Additionally, securities
regulation in Canada provides for the filing of a report by an insider of a
reporting issuer whose holdings change, which report must be filed within five
days from the day on which the change takes place.
The rules in the U.S. governing the ownership threshold above
which shareholder ownership must be disclosed are more stringent than those
discussed above. Section 13 of the U.S. Exchange Act imposes reporting
requirements on persons who acquire beneficial ownership (as such term is
defined in Rule 13d-3 under the U.S. Exchange Act) of more than 5% of a class of
an equity security registered under Section 12 of the U.S. Exchange Act. In
general, such persons must file, within 10 days after such acquisition, a report
of beneficial ownership with the SEC containing the information prescribed by
the regulations under Section 13 of the U.S. Exchange Act. This information is
also required to be sent to the issuer of the securities and to each exchange
where the securities are traded.
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C. Material Contracts
Except for contracts entered into in the ordinary course of
business and other than as disclosed elsewhere in this Form 20-F and the
contracts set forth below, there are no material contracts to which the Company
is currently a party that were entered into by the Company or any of its
subsidiaries during the two years immediately preceding the date of this Form
20-F:
| |
1. |
a share purchase agreement dated April 12, 2013 among
Banro, Banro Group (Barbados) Limited, BlackRock World Mining Trust plc
and GMP Securities L.P., which provided for the issuance of the Subco
Shares and Series B Shares pursuant to the 2013 Concurrent Offering (see
items 7.B. and 10.B. (under the heading "Preference Shares") of this Form
20-F for additional information in respect of the 2013 Concurrent
Offering); |
| |
|
|
| |
2. |
an exchange and support agreement dated April 25, 2013
entered into among Banro, Banro Group (Barbados) Limited ("Subco")
and BlackRock World Mining Trust plc pursuant to the terms of the 2013
Concurrent Offering (see items 7.B. and 10.B. (under the heading
"Preference Shares") of this Form 20-F for additional information in
respect of the 2013 Concurrent Offering). Pursuant to this agreement, (a)
Banro has granted to each holder of Subco Shares the right to exchange
with Banro all or any part of such holder’s Subco Shares on the basis of
one Series A Share for one Subco Share and one Series B Share, (b) Banro
has agreed that Banro shall not declare or pay any dividends on the Series
A Shares unless Subco simultaneously declares or pay dividends (as
applicable) on the Subco Shares in the same amount, in the same currency,
and using the same record date and same payment date, (c) Banro has agreed
to make certain other covenants in favour of the holders of Subco Shares
to provide for the economic equivalency of one Series A Share with the one
Subco Share; |
| |
|
|
| |
3. |
an agency agreement dated April 12, 2013 entered into
between Banro and GMP Securities L.P., BMO Nesbitt Burns Inc., CIBC World
Markets Inc. and Cormark Securities Inc., with respect to the 2013
Offering (see items 7.B. and 10.B. (under the heading "Preference Shares")
of this Form 20-F for additional information in respect of the 2013
Offering); |
| |
|
|
| |
4. |
a securities purchase agreement dated February 28, 2014
among Namoya (Barbados) Limited, Twangiza (Barbados) Limited, Banro and
the investors listed on the Schedule of Buyers attached to the said
agreement, which provided for the issuance of the Exchangeable Preferred
Shares pursuant to the 2014 Private Placement Financing (see item 10.B. of
this Form 20-F under the heading "Exchangeable Preferred Shares" for
additional information in respect of the 2014 Private Placement
Financing); |
| |
|
|
| |
5. |
a securities purchase agreement dated August 18, 2014
among Banro and the investors listed on the Schedule of Buyers attached to
the said agreement, which provided for the private placement of the 2014
Notes and 2014 Warrants (see item 4.A. of this Form 20-F under the heading
"2014 Financings" for additional information in respect of this
financing); |
| |
|
|
| |
6. |
a gold purchase and sale agreement dated February 27,
2015 between Banro, Twangiza Mining S.A. and Twangiza GFSA Holdings, which
provided for the first tranche of the Twangiza gold forward sale
transaction (see item 4.A. of this Form 20-F under the heading "2015
Financing" for additional information in respect of this
transaction); |
| |
|
|
| |
7. |
a second gold purchase and sale agreement dated February
27, 2015 between Banro, Twangiza Mining S.A. and Twangiza GFSA Holdings,
which provides for the second tranche of the Twangiza gold forward sale
transaction (see item 4.A. of this Form 20-F under the heading "2015
Financing" for additional information in respect of this transaction);
and |
-90-
| |
8. |
a gold purchase and sale agreement dated February 27,
2015 between Banro, Namoya Mining S.A. and Namoya GSA Holdings, which
provides for the Namoya gold streaming transaction (see item 4.A. of this
Form 20-F under the heading "2015 Financing" for additional information in
respect of this transaction). |
A copy of each of the above agreements has been filed on, and
can be obtained from, SEDAR at www.sedar.com
and EDGAR at www.sec.gov.
D. Exchange Controls
There are no governmental laws, decrees, regulations or other
legislation, including foreign exchange controls, in Canada which may affect the
export or import of capital or that may affect the remittance of dividends,
interest or other payments to non-resident holders of the Company's securities.
Any remittances of dividends to United States residents, however, are subject to
a withholding tax pursuant to the Income Tax Act (Canada) and the Canada-U.S.
Income Tax Convention (1980), each as amended. Remittances of interest to U.S.
residents entitled to the benefits of such Convention are generally not subject
to withholding taxes except in limited circumstances involving participating
interest payments. Certain other types of remittances, such as royalties paid to
U.S. residents, may be subject to a withholding tax depending on all of the
circumstances.
Restrictions on Share Ownership by
Non-Canadians
There are no limitations under the laws of Canada or in the
organizational documents of the Company on the right of foreigners to hold or
vote securities of the Company, except that the Investment Canada Act
(the "ICA") may require review and approval by the Minister of
Industry (Canada) of certain acquisitions of "control" of the Company by a
"non-Canadian". The threshold for acquisitions is generally defined as being
one-third or more of the voting shares of the Company. "Non-Canadian" generally
means an individual who is not a Canadian citizen, or a corporation,
partnership, trust or joint venture that is ultimately controlled by
non-Canadians.
Under the ICA, transactions exceeding certain financial
thresholds, and which involve the acquisition of control of a Canadian business
by a non-Canadian, are subject to review and cannot be implemented unless the
Minister of Industry and/or, in the case of a Canadian business engaged in
cultural activities, the Minister of Canadian Heritage, are satisfied that the
transaction is likely to be of "net benefit to Canada". If a transaction is
subject to review (a "Reviewable Transaction"), an application for review
must be filed with the Investment Review Division of Industry Canada and/or the
Department of Canadian Heritage prior to the implementation of the Reviewable
Transaction. The responsible Minister is then required to determine whether the
Reviewable Transaction is likely to be of net benefit to Canada, taking into
account, among other things, certain factors specified in the ICA and any
written undertakings that may have been given by the applicant. The ICA
contemplates an initial review period of up to 45 days after filing; however, if
the responsible Minister has not completed the review by that date, he may
unilaterally extend the review period by up to 30 days (or such longer period as
may be agreed to by the applicant and the Minister) to permit completion of the
review. If the responsible Minister is not satisfied that the investment is
likely to be of net benefit to Canada, he may prohibit the investment or order a
divestiture (if the investment has already been completed).
Even if the transaction is not reviewable because it does not
meet or exceed the applicable financial threshold, the non-Canadian investor
must still give notice to Industry Canada and, in the case of a Canadian
business engaged in cultural activities, Canadian Heritage, of its acquisition
of control of a Canadian business within 30 days of the implementation of the
investment.
Furthermore, under the ICA, every investment in, or acquisition
of control of, a Canadian business by a non-Canadian is potentially subject to a "national
security" review which examines whether the transaction could be injurious to
Canada’s national security. There is no minimum threshold for the size of
transaction potentially subject to such review. If the Minister of Industry,
after consultation with the Minister of Public Safety and Emergency Preparedness and the investor, is satisfied that the investment
would be injurious to national security, the Minister may deny the investment,
ask for undertakings, provide terms or conditions for the investment or order a
divestiture (if the investment has already been completed).
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E. Certain United States Federal Income Tax Considerations
The following is a general summary of certain material U.S.
federal income tax considerations applicable to a U.S. Holder (as defined below)
arising from and relating to the acquisition, ownership, and disposition of
common shares of the Company ("Common Shares").
This summary is for general information purposes only and does
not purport to be a complete analysis or listing of all potential U.S. federal
income tax considerations that may apply to a U.S. Holder arising from and
relating to the acquisition, ownership, and disposition of Common Shares. In
addition, this summary does not take into account the individual facts and
circumstances of any particular U.S. Holder that may affect the U.S. federal
income tax consequences to such U.S. Holder, including without limitation
specific tax consequences to a U.S. Holder under an applicable tax treaty.
Accordingly, this summary is not intended to be, and should not be construed as,
legal or U.S. federal income tax advice with respect to any U.S. Holder. This
summary does not address the U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and foreign tax consequences to U.S.
Holders of the acquisition, ownership, and disposition of Common Shares. In
addition, except as specifically set forth below, this summary does not discuss
applicable tax reporting requirements. Each prospective U.S. Holder should
consult its own tax advisor regarding the U.S. federal, U.S. federal alternative
minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax
consequences relating to the acquisition, ownership, and disposition of Common
Shares.
No legal opinion from U.S. legal counsel or ruling from the
Internal Revenue Service (the "IRS") has been requested, or will be
obtained, regarding the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of Common Shares. This summary is not binding on the
IRS, and the IRS is not precluded from taking a position that is different from,
and contrary to, the positions taken in this summary. In addition, because the
authorities on which this summary are based are subject to various
interpretations, the IRS and the U.S. courts could disagree with one or more of
the conclusions described in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations (whether final, temporary, or
proposed), published rulings of the IRS, published administrative positions of
the IRS, the Convention Between Canada and the United States of America with
Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended
(the "Canada-U.S. Tax Convention"), and U.S. court decisions that are
applicable and, in each case, as in effect and available, as of the date of this
Form 20-F. Any of the authorities on which this summary is based could be
changed in a material and adverse manner at any time, and any such change could
be applied retroactively. This summary does not discuss the potential effects,
whether adverse or beneficial, of any proposed legislation.
U.S. Holders
For purposes of this summary, the term "U.S. Holder"
means a beneficial owner of Common Shares that is for U.S. federal income tax
purposes:
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- an individual who is a citizen or resident of the United States;
- a corporation (or other entity treated as a corporation for U.S. federal
income tax purposes) organized under the laws of the United States, any state
thereof or the District of Columbia;
- an estate whose income is subject to U.S. federal income taxation
regardless of its source; or
- a trust that (1) is subject to the primary supervision of a court within
the United States and the control of one or more U.S. persons for all
substantial decisions or (2) has a valid election in effect under applicable
Treasury Regulations to be treated as a U.S. person.
U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed
This summary does not address the U.S. federal income tax
considerations applicable to U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, the following U.S. Holders that:
(a) are tax-exempt organizations, qualified retirement plans, individual
retirement accounts, or other tax-deferred accounts; (b) are financial
institutions, underwriters, insurance companies, real estate investment trusts,
or regulated investment companies; (c) are broker-dealers, dealers, or traders
in securities or currencies that elect to apply a mark-to-market accounting
method; (d) have a "functional currency" other than the U.S. dollar; (e) own
Common Shares as part of a straddle, hedging transaction, conversion
transaction, constructive sale, or other arrangement involving more than one
position; (f) acquired Common Shares in connection with the exercise of employee
stock options or otherwise as compensation for services; (g) hold Common Shares
other than as a capital asset within the meaning of Section 1221 of the Code
(generally, property held for investment purposes); or (h) own, have owned or
will own (directly, indirectly, or by attribution) 10% or more of the total
combined voting power of the outstanding shares of the Company. This summary
also does not address the U.S. federal income tax considerations applicable to
U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the
U.S.; (b) persons that have been, are, or will be a resident or deemed to be a
resident in Canada for purposes of the Income Tax Act (Canada) (the "Tax
Act"); (c) persons that use or hold, will use or hold, or that are or will
be deemed to use or hold Common Shares in connection with carrying on a business
in Canada; (d) persons whose Common Shares constitute “taxable Canadian
property” under the Tax Act; or (e) persons that have a permanent establishment
in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that
are subject to special provisions under the Code, including, but not limited to,
U.S. Holders described immediately above, should consult their own tax advisor
regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and foreign tax consequences relating to
the acquisition, ownership and disposition of Common Shares.
If an entity or arrangement that is classified as a partnership
(or other "pass-through" entity) for U.S. federal income tax purposes holds
Common Shares, the U.S. federal income tax consequences to such entity and the
partners (or other owners) of such entity generally will depend on the
activities of the entity and the status of such partners (or owners). This
summary does not address the tax consequences to any such owner. Partners (or
other owners) of entities or arrangements that are classified as partnerships or
as "pass-through" entities for U.S. federal income tax purposes should consult
their own tax advisors regarding the U.S. federal income tax consequences
arising from and relating to the acquisition, ownership, and disposition of
Common Shares.
Ownership and Disposition of Common Shares
The following discussion is subject in its entirety to the
rules described below under the heading "Passive Foreign Investment Company
Rules".
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Taxation of Distributions
A U.S. Holder that receives a distribution, including a
constructive distribution, with respect to a Common Share will be required to
include the amount of such distribution in gross income as a dividend (without
reduction for any foreign income tax withheld from such distribution) to the
extent of the current or accumulated "earnings and profits" of the Company, as
computed for U.S. federal income tax purposes. To the extent that a distribution
exceeds the current and accumulated "earnings and profits" of the Company, such
distribution will be treated first as a tax-free return of capital to the extent
of a U.S. Holder's tax basis in the Common Shares and thereafter as gain from
the sale or exchange of such Common Shares (see "Sale or Other Taxable
Disposition of Common Shares" below). However, the Company may not maintain the
calculations of its earnings and profits in accordance with U.S. federal income
tax principles, and each U.S. Holder may have to assume that any distribution by
the Company with respect to the Common Shares will constitute ordinary dividend
income. Dividends received on Common Shares by corporate U.S. Holders generally
will not be eligible for the "dividends received deduction". Subject to
applicable limitations and provided the Company is eligible for the benefits of
the Canada-U.S. Tax Convention, dividends paid by the Company to non-corporate
U.S. Holders, including individuals, generally will be eligible for the
preferential tax rates applicable to long-term capital gains for dividends,
provided certain holding period and other conditions are satisfied, including
that the Company not be classified as a PFIC (as defined below) in the tax year
of distribution or in the preceding tax year. The dividend rules are complex,
and each U.S. Holder should consult its own tax advisor regarding the
application of such rules.
Sale or Other Taxable Disposition of Common Shares
A U.S. Holder will recognize gain or loss on the sale or other
taxable disposition of Common Shares in an amount equal to the difference, if
any, between (a) the amount of cash plus the fair market value of any property
received and (b) such U.S. Holder’s tax basis in such Common Shares sold or
otherwise disposed of. Any such gain or loss generally will be capital gain or
loss, which will be long-term capital gain or loss if, at the time of the sale
or other disposition, such Common Shares are held for more than one year.
Preferential tax rates apply to long-term capital gains of a
U.S. Holder that is an individual, estate, or trust. There are currently no
preferential tax rates for long-term capital gains of a U.S. Holder that is a
corporation. Deductions for capital losses are subject to significant
limitations under the Code.
Passive Foreign Investment Company Rules
If the Company were to constitute a "passive foreign investment
company" ("PFIC") for any year during a U.S. Holder’s holding period,
then certain potentially adverse rules would affect the U.S. federal income tax
consequences to a U.S. Holder resulting from the acquisition, ownership and
disposition of Common Shares. The Company believes that it was not a PFIC for
the tax year ended December 31, 2014. PFIC classification is fundamentally
factual in nature, generally cannot be determined until the close of the tax
year in question, and is determined annually. Additionally, the analysis
depends, in part, on the application of complex U.S. federal income tax rules,
which are subject to differing interpretations. Consequently, there can be no
assurance that the Company has never been and will not become a PFIC for any tax
year during which U.S. Holders hold Common Shares.
In addition, in any year in which the Company is classified as
a PFIC, a U.S. Holder will be required to file an annual report with the IRS
containing such information as Treasury Regulations and/or other IRS guidance
may require. A failure to satisfy such reporting requirements may result in an
extension of the time period during which the IRS can assess a tax. U.S. Holders
should consult their own tax advisors regarding the requirements of filing such
information returns under these rules, including the requirement to file an IRS
Form 8621.
-94-
The Company generally will be a PFIC under Section 1297 of the
Code if, after the application of certain "look-through" rules with respect to
subsidiaries in which the Company holds at least 25% of the value of such
subsidiary, for a tax year, (a) 75% or more of the gross income of the Company
for such tax year is passive income (the "income test") or (b) 50% or more of
the value of the Company’s assets either produce passive income or are held for
the production of passive income (the "asset test"), based on the quarterly
average of the fair market value of such assets. "Gross income" generally
includes all sales revenues less the cost of goods sold, plus income from
investments and from incidental or outside operations or sources, and "passive
income" generally includes, for example, dividends, interest, certain rents and
royalties, certain gains from the sale of stock and securities, and certain
gains from commodities transactions. Active business gains arising from the sale
of commodities generally are excluded from passive income if substantially all
(85% or more) of a foreign corporation’s commodities are stock in trade or
inventory, depreciable property used in a trade or business or supplies
regularly used or consumed in the ordinary course of its trade or business, and
certain other requirements are satisfied.
If the Company were a PFIC in any tax year during which a U.S.
Holder held Common Shares, such holder generally would be subject to special
rules with respect to "excess distributions" made by the Company on the Common
Shares and with respect to gain from the disposition of Common Shares. An
"excess distribution" generally is defined as the excess of distributions with
respect to the Common Shares received by a U.S Holder in any tax year over 125%
of the average annual distributions such U.S. Holder has received from the
Company during the shorter of the three preceding tax years, or such U.S.
Holder’s holding period for the Common Shares. Generally, a U.S. Holder would be
required to allocate any excess distribution or gain from the disposition of the
Common Shares ratably over its holding period for the Common Shares. Such
amounts allocated to the year of the disposition or excess distribution would be
taxed as ordinary income, and amounts allocated to prior tax years would be
taxed as ordinary income at the highest tax rate in effect for each such year
and an interest charge at a rate applicable to underpayments of tax would
apply.
While there are U.S. federal income tax elections that
sometimes can be made to mitigate these adverse tax consequences (including the
"QEF Election" under Section 1295 of the Code and the "Mark-to-Market Election"
under Section 1296 of the Code), such elections are available in limited
circumstances and must be made in a timely manner.
U.S. Holders should be aware that, for each tax year, if any,
that the Company is a PFIC, the Company can provide no assurances that it will
satisfy the record keeping requirements of a PFIC, or that it will make
available to U.S. Holders the information such U.S. Holders require to make a
QEF Election with respect to the Company or any subsidiary that also is
classified as a PFIC. U.S. Holders should consult their own tax advisors
regarding the potential application of the PFIC rules to the ownership and
disposition of Common Shares, and the availability of certain U.S. tax elections
under the PFIC rules.
Additional Considerations
Additional Tax on Passive Income
Certain individuals, estates and trusts whose income exceeds
certain thresholds will be required to pay a 3.8% Medicare surtax on "net
investment income" including, among other things, dividends and net gain from
disposition of property (other than property held in certain trades or
businesses). U.S. Holders should consult their own tax advisors regarding the
effect, if any, of this tax on their ownership and disposition of Common
Shares.
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Receipt of Foreign Currency
The amount of any distribution paid to a U.S. Holder in foreign
currency, or on the sale, exchange or other taxable disposition of Common
Shares, generally will be equal to the U.S. dollar value of such foreign
currency based on the exchange rate applicable on the date of receipt
(regardless of whether such foreign currency is converted into U.S. dollars at
that time). A U.S. Holder will have a basis in the foreign currency equal to its
U.S. dollar value on the date of receipt. Any U.S. Holder who converts or
otherwise disposes of the foreign currency after the date of receipt may have a
foreign currency exchange gain or loss that would be treated as ordinary income
or loss, and generally will be U.S. source income or loss for foreign tax credit
purposes. Different rules apply to U.S. Holders who use the accrual method with
respect to foreign currency received upon the sale, exchange or other taxable
disposition of the Common Shares. Different rules apply to U.S. Holders who use
the accrual method. Each U.S. Holder should consult its own U.S. tax advisor
regarding the U.S. federal income tax consequences of receiving, owning, and
disposing of foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above, a U.S. Holder that
pays (whether directly or through withholding) Canadian income tax with respect
to dividends paid on the Common Shares generally will be entitled, at the
election of such U.S. Holder, to receive either a deduction or a credit for such
Canadian income tax. Generally, a credit will reduce a U.S. Holder’s U.S.
federal income tax liability on a dollar-for-dollar basis, whereas a deduction
will reduce a U.S. Holder’s income subject to U.S. federal income tax. This
election is made on a year-by-year basis and applies to all foreign taxes paid
(whether directly or through withholding) by a U.S. Holder during a year.
Complex limitations apply to the foreign tax credit, including
the general limitation that the credit cannot exceed the proportionate share of
a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s
"foreign source" taxable income bears to such U.S. Holder’s worldwide taxable
income. In applying this limitation, a U.S. Holder’s various items of income and
deduction must be classified, under complex rules, as either "foreign source" or
"U.S. source". Generally, dividends paid by a foreign corporation should be
treated as foreign source for this purpose, and gains recognized on the sale of
stock of a foreign corporation by a U.S. Holder should be treated as U.S. source
for this purpose, except as otherwise provided in an applicable income tax
treaty, and if an election is properly made under the Code. However, the amount
of a distribution with respect to the Common Shares that is treated as a
"dividend" may be lower for U.S. federal income tax purposes than it is for
Canadian federal income tax purposes, resulting in a reduced foreign tax credit
allowance to a U.S. Holder. In addition, this limitation is calculated
separately with respect to specific categories of income. The foreign tax credit
rules are complex, and each U.S. Holder should consult its own U.S. tax advisor
regarding the foreign tax credit rules.
Backup Withholding and Information Reporting
Under U.S. federal income tax law, certain categories of U.S.
Holders must file information returns with respect to their investment in, or
involvement in, a foreign corporation. For example, U.S. return disclosure
obligations (and related penalties) are imposed on individuals who are U.S.
Holders that hold certain specified foreign financial assets in excess of
certain threshold amounts. The definition of specified foreign financial assets
includes not only financial accounts maintained in foreign financial
institutions, but also, unless held in accounts maintained by a financial
institution, any stock or security issued by a non-U.S. person, any financial
instrument or contract held for investment that has an issuer or counterparty
other than a U.S. person and any interest in a foreign entity. U. S. Holders may
be subject to these reporting requirements unless their Common Shares are held
in an account at certain financial institutions. Penalties for failure to file
certain of these information returns are substantial. U.S. Holders should
consult their own tax advisors regarding the requirements of filing information
returns, including the requirement to file an IRS Form 8938.
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Payments made within the U.S. or by a U.S. payor or U.S.
middleman, of dividends on, and proceeds arising from the sale or other taxable
disposition of, Common Shares will generally be subject to information reporting
and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to
furnish such U.S. Holder’s correct U.S. taxpayer identification number
(generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification
number, (c) is notified by the IRS that such U.S. Holder has previously failed
to properly report items subject to backup withholding tax, or (d) fails to
certify, under penalty of perjury, that such U.S. Holder has furnished its
correct U.S. taxpayer identification number and that the IRS has not notified
such U.S. Holder that it is subject to backup withholding tax. However, certain
exempt persons generally are excluded from these information reporting and
backup withholding rules. Backup withholding is not an additional tax. Any
amounts withheld under the U.S. backup withholding tax rules will be allowed as
a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or
will be refunded, if such U.S. Holder furnishes required information to the IRS
in a timely manner.
The discussion of reporting requirements set forth above is not
intended to constitute a complete description of all reporting requirements that
may apply to a U.S. Holder. A failure to satisfy certain reporting requirements
may result in an extension of the time period during which the IRS can assess a
tax, and under certain circumstances, such an extension may apply to assessments
of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder
should consult its own tax advisor regarding the information reporting and
backup withholding rules.
F. Dividends and Paying Agents
This Form 20-F is being filed as an annual report under the
U.S. Exchange Act and, as such, there is no requirement to provide any
information under this item.
G. Statement By Experts
This Form 20-F is being filed as an annual report under the
U.S. Exchange Act and, as such, there is no requirement to provide any
information under this item.
H. Documents on Display
The documents referred to and/or incorporated by reference in
this Form 20-F can be viewed at the office of the Company at 1 First Canadian
Place, 100 King Street West, Suite 7070, Toronto, Ontario, M5X 1E3, Canada. The
Company is required to file financial statements and other information with the
securities regulatory authorities in each of the Canadian provinces (other than
Quebec), electronically through the Canadian System for Electronic Document
Analysis and Retrieval (SEDAR), which can be viewed at www.sedar.com. The Company is subject to the
informational requirements of the U.S. Exchange Act and files reports and other
information with the SEC. You may read and copy any of the Company’s reports and
other information at, and obtain copies upon payment of prescribed fees from,
the Public Reference Room maintained by the SEC at 100 F Street, N.E.,
Washington, D.C., U.S., 20549. In addition, the SEC maintains a website that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC at
http://www.sec.gov. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330.
I. Subsidiary Information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About
Market Risk.
See Note 31 to the Company's audited consolidated financial
statements as at and for the financial years ended December 31, 2014, 2013 and
2012 filed as part of this Form 20-F under Item 18.
-97-
Item 12. Descriptions of Securities Other than Equity
Securities
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and
Delinquencies.
Not applicable.
Item 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds.
14.A.-B. Modifications to the Rights of Security Holders
The Company was incorporated under the Canada Business
Corporations Act (the "CBCA") on May 3, 1994 by articles of
incorporation. Pursuant to articles of amendment effective May 7, 1996, the name
of the Company was changed from Banro International Capital Inc. to Banro
Resource Corporation and the authorized share capital of the Company was
increased by creating an unlimited number of a new class of shares designated as
preference shares, issuable in series. The Company was continued under the
Ontario Business Corporations Act by articles of continuance effective on
October 24, 1996. By articles of amendment effective on January 16, 2001, the
name of the Company was changed to Banro Corporation and the Company's
outstanding common shares were consolidated on a three old for one new basis.
The Company was continued under the CBCA by articles of continuance dated
April 2, 2004. By articles of amendment dated December 17, 2004, the Company's
outstanding common shares were subdivided by changing each one of such shares
into two common shares. Pursuant to articles of amendment dated April 23, 2013,
(a) a series of preference shares of the Company was created consisting of an
unlimited number of shares designated as Series A Preference Shares, and (b) a
second series of preference shares of the Company was created consisting of an
unlimited number of shares designated as Series B Preference Shares. The said
articles of amendment dated April 23, 2013, attached hereto as exhibit 1.5, also
provided for the rights, privileges, restrictions and conditions attaching to
the said Series A Preference Shares and Series B Preference Shares.
14.C.
Not applicable.
14.D.
Not applicable.
14.E. Use of Proceeds
Not applicable.
-98-
Item 15. Controls and Procedures.
(a) Disclosure Controls and
Procedures
The Company’s management is required to adequately design
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the U.S.
Exchange Act are recorded, processed, summarized and reported within the time
periods specified in applicable rules and forms, and that such information is
accumulated and communicated to management, to allow timely decisions regarding
required disclosure. Under the supervision and with the participation of the
Company's management, including its Chief Executive Officer and Chief Financial
Officer, the Company evaluated the effectiveness of the design and operation of
its disclosure controls and procedures (as defined in Rule 13a-15(e) or
15d-15(e) under the U.S. Exchange Act) for the year ended December 31, 2014.
Based on the evaluation as of December 31, 2014, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, has determined that the Company's disclosure controls and procedures were ineffective due to the identification of a material weakness in the information technology general controls (“ITGC”) and in the controls over financial reporting relating to the preparation and review of the statement of cash flow and sufficiency of documentary evidence supporting the precision of review over the completeness and accuracy of inputs, assumptions and formulas included in the impairment models, as discussed in the internal control over financial reporting section below. As such, there is a possibility that the internal control over financial reporting will fail to detect a material misstatement in the financial statements on a timely basis.
(b) Management’s Annual Report on Internal Control over
Financial Reporting
The Company's management is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the U.S. Exchange Act. The Company's
management has employed a framework consistent with U.S. Exchange Act Rule
13a-15(c), to evaluate the Company's internal control over financial reporting
described below. The Company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation and fair presentation of financial
statements for external purposes in accordance with IFRS.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management, including the Company’s CEO and CFO, conducted an
evaluation of the design and operation of the Company's internal control over
financial reporting as of December 31, 2014 based on the criteria set forth in
Internal Control - Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. This evaluation included
review of the documentation of controls, evaluation of the design effectiveness
of controls, testing of the operating effectiveness of controls and a conclusion
on this evaluation. Based on this evaluation, the Chief Executive Officer and
the Chief Financial Officer concluded that, as of December 31, 2014, there was a
material weakness in the information technology general controls (“ITGC”)
and in the internal controls over financial reporting relating to the
preparation and review of the statement of cash flow and sufficiency of documentary evidence supporting the precision of review over the completeness and accuracy of inputs, assumptions and formulas included in the impairment models.
With respect to ITGC, in H1 of 2014, the Company embarked on
SAP implementation that was fully operational by Q3. The intention of the system
implementation was to improve the business processes on both an operational
control basis and ITGC basis. Due to limited resources and change in personnel
responsible for the SAP implementation, the Company focused its efforts on
system implementation and training but fell short of properly implementing the
new ITGC features in H2 of 2014, which has been deemed a material weakness due
to ineffective controls over access security and change management resulting in
a potential impact on the reliability of information produced by the system.
Management has hired external consultants to ensure that the ITGC will be
operating effectively by H2 2015.
With respect to internal controls over the preparation and
review of the statement of cash flow, it has come to management’s attention that
the accounting treatment of a deferred revenue transaction first accounted for
in 2013 should have been classified in the consolidated statement of cash flow
as operating and investing activities instead of financing activities. The
Company has agreed to restate the statement of cash flow as disclosed in note 34
of the Annual Financial Statements. As a result, the Company concluded that a
material weakness in internal controls over the preparation and review of the
statement of cash flow exists given the application of this inappropriate
accounting treatment in 2014. In the third quarter of 2014, the Company added
two additional chartered professional accountants to the finance team with
extensive experience in IFRS with major publicly traded companies in the mining
industry. Management believes that the enhanced finance team is capable of
addressing the preparation and review of the statement of cash flow in the
future.
With respect to internal controls over the sufficiency of documentary evidence supporting the precision of review over the completeness and accuracy of inputs, assumptions and formulas included in the impairment models, it has come to management’s attention that the level of documentary evidence supporting the precision of the review was insufficient to appropriately evidence the precision to which management reviewed the impairment models. During the current reporting period, management’s key focus in performing the impairment analysis was on ensuring that the information included in the models was complete and accurate in order to ensure appropriate conclusions were reached for financial reporting. As no issues were identified with respect to the inputs, assumptions and formulas that would change the conclusions reached in the impairment models, management intends to enhance the level of documentation maintained in the review process in future reporting periods through the establishment of enhanced standard documentation procedures.
The Company is required to disclose herein any change in the
Company’s internal control over financial reporting that occurred during the
year ended December 31, 2014 that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting. Refer to the discussion above for the Company’s remediation plan with respect to material weaknesses identified.
This Form 20-F includes an attestation report of the Company’s
independent auditors regarding internal control over financial reporting (see
item 18 ("Financial Statements")).
The Company's management, including the Chief Executive Officer
and Chief Financial Officer, does not expect that its disclosure controls and
procedures or internal controls and procedures will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
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Item 16.A. Audit Committee Financial Expert
The Company's Board has determined that Derrick H. Weyrauch
satisfies the requirements as an audit committee financial expert, in that he
has an understanding of IFRS and financial statements; is able to assess the
general application of such principles in connection with the accounting for
estimates, accruals and reserves; has experience preparing, auditing, analyzing
or evaluating financial statements that present a breadth and level of
complexity of accounting issues that can reasonably be expected to be raised by
the Company's financial statements (or experience actively supervising one or
more persons engaged in such activities); has an understanding of internal
controls over financial reporting; and has an understanding of audit committee
functions.
Mr. Weyrauch is also independent within the meaning of Section
803 of the NYSE MKT Company Guide.
Item 16.B. Code of Ethics.
The Company has adopted a code of business conduct and ethics
for directors, officers and employees (including the Company’s principal
executive officer, principal financial officer and principal accounting officer)
(the "Code"). A copy of the Code is incorporated by reference into this
Form 20-F as Exhibit 11.1. A copy of the Code may also be obtained from the
Chief Financial Officer of the Company at (416) 366-2221 and is also available
on SEDAR at www.sedar.com, EDGAR at www.sec.gov
and the Company's website at www.banro.com. Information contained on these websites
does not form part of this Form 20-F. Each director, officer and employee of the
Company is provided with a copy of the Code and is required to confirm annually
that he or she has complied with the Code. Any observed breaches of the Code
must be reported to the Company's Chief Executive Officer.
No amendment was made to the Code during the Company's most
recently completed financial year and no waiver from a provision of the Code was
granted by the Company during the Company's most recently completed financial
year.
In accordance with the Canada Business Corporations Act
(the Corporation's governing corporate legislation), directors of the
Company who are a party to, or are a director or an officer of or have a
material interest in a party to, a material contract or material transaction or
a proposed material contract or proposed material transaction, are required to
disclose the nature and extent of their interest and not to vote on any
resolution to approve the contract or transaction. In addition, in certain cases, an independent
committee of the Board may be formed to deliberate on such matters in the
absence of the interested party.
-100-
The Company has also adopted a "whistleblower" policy which
provides employees, consultants, officers and directors with the ability to
report, on a confidential and anonymous basis, violations within the Company's
organization including, (but not limited to), questionable accounting practices,
disclosure of fraudulent or misleading financial information, instances of
corporate fraud, or harassment. The Company believes that providing a forum for
such individuals to raise concerns about ethical conduct and treating all
complaints with the appropriate level of seriousness fosters a culture of
ethical business conduct. The Company has also adopted an insider trading policy
to encourage and further promote a culture of ethical business conduct.
Item 16.C. Principal Accountant Fees and Services
The following table summarizes the total fees billed by
Deloitte LLP ("Deloitte"), the external auditors of the Company, for each
of the financial years of the Company ended December 31, 2014 and December 31,
2013. All dollar amounts in the following table are expressed in Canadian
dollars, and are exclusive of applicable taxes and a 7% administration fee.
| |
2014 |
2013 |
| Audit Fees |
$860,306 |
$355,200 |
| Audit-Related Fees |
$8,500 (1) |
$221,348 (2) |
| Tax Fees |
Nil |
$14,006 (3) |
| All Other Fees |
$115,000 (4) |
Nil
|
__________________________
| (1) |
The services comprising these fees related to work
performed in relation to the 2013 COSO framework. |
| |
|
| (2) |
The services comprising these fees related to quarterly
reviews of the interim consolidated financial statements ($113,348), due
diligence matters in respect of the Company’s preference share financing
($100,500) and consultation regarding finance structure
($7,500). |
| |
|
| (3) |
The services comprising these fees related to
international tax planning. |
| |
|
| (4) |
The services comprising these fees related to the
compilation of a NI 43-101 technical report. |
In accordance with existing Audit Committee policy and the
requirements of the Sarbanes-Oxley Act of 2002, all services to be provided
Deloitte LLP are subject to pre-approval by the Audit Committee. This includes
audit services, audit-related services, tax services and other services. In some
cases, pre-approval is provided by the full Audit Committee for up to a year,
and relates to a particular category or group of services and is subject to a
specific budget. All of the fees listed above have been approved by the Audit
Committee.
Item 16.D. Exemptions from the Listing Standards for Audit
Committees
Not applicable.
Item 16.E. Purchase of Equity Securities by the Issuer and
Affiliated Purchasers
The Company did not purchase any of its common shares during
the financial year ended December 31, 2014.
Item 16.F. Change in Registrant's Certifying Accountant
Not applicable.
-101-
Item 16.G. Corporate Governance
The Common Shares are listed on NYSE MKT. Section 110 of the
NYSE MKT Company Guide permits NYSE MKT to consider the laws, customs and
practices of foreign issuers, and to grant exemptions from NYSE MKT listing
criteria based on these considerations. A company seeking relief under these
provisions is required to provide written certification from independent local
counsel that the non-complying practice is not prohibited by home country law. A
description of the significant ways in which the Company’s governance practices
differ from those followed by domestic companies pursuant to NYSE MKT standards
is as follows:
Shareholder Meeting Quorum
Requirement: NYSE MKT minimum quorum requirement for a shareholder meeting
is one-third of the outstanding shares of common stock. In addition, a company
listed on NYSE MKT is required to state its quorum requirement in its by-law.
The Company’s quorum requirement is set forth in its by-law, which provides that
a quorum for the transaction of business at any meeting of shareholders shall be
two persons entitled to vote thereat present in person or represented by proxy.
Proxy Delivery Requirement: NYSE
MKT requires the solicitation of proxies and delivery of proxy statements for
all shareholder meetings, and requires that these proxies be solicited pursuant
to a proxy statement that conforms to SEC proxy rules. The Company is a “foreign
private issuer” as defined in Rule 3b-4 under the Exchange Act, and the equity
securities of the Company are accordingly exempt from the proxy rules set forth
in Sections 14(a), 14(b), 14(c) and 14(f) of the Exchange Act. The Company
solicits proxies in accordance with applicable rules and regulations in Canada.
Shareholder Approval
Requirements: NYSE MKT requires a listed company to obtain the approval of
its shareholders for certain types of securities issuances, including private
placements that may result in the issuance of common shares (or securities
convertible into common shares) equal to 20% or more of presently outstanding
shares for less than the greater of book or market value of the shares. In
general, the rules of the Toronto Stock Exchange are similar, but there are some
differences including the threshold for shareholder approval set at 25% of
outstanding shares. The Company will seek a waiver from NYSE MKT’s shareholder
approval requirements in circumstances where the securities issuance does not
trigger such a requirement under the rules of the Toronto Stock Exchange.
Nominating Process: NYSE MKT
requires that director nominations must be either selected or recommended to the
Board by either a nominating committee or a majority of independent directors.
In addition, the NYSE MKT requires a formal written charter or board resolution
addressing the nominations process. The Company has such a nominating committee
but has not adopted a formal written charter or board resolution addressing the
nominations process. Such adoption is not required under applicable Canadian law
or the rules of the Toronto Stock Exchange.
The foregoing are consistent with the laws, customs and
practices in Canada.
In addition, the Company may from time-to-time seek relief from
NYSE MKT corporate governance requirements on specific transactions under
Section 110 of the NYSE MKT Company Guide by providing written certification
from independent local counsel that the non-complying practice is not prohibited
by our home country law, in which case, the Company shall make the disclosure of
such transactions available on its website at www.banro.com. Information
contained on the Company’s website is not part of this Form 20-F.
The Company has elected not to adopt Section 805(c) of the NYSE
MKT Company Guide applicable to charters and independence of compensation
committees of U.S. domestic issuers. As a foreign private issuer, the Company is
not required to comply with these rules.
-102-
Item 16.H. Mine Safety Disclosure
Not applicable.
PART III
Item 17. Financial Statements
Not applicable.
Item 18. Financial Statements
The financial statements appear on pages F-1 through F-52.
Item 19. Exhibits
The following exhibits are filed as part of this Form 20-F:
| EXHIBIT |
|
| NUMBER |
DESCRIPTION |
| |
|
| |
Constating
Documents |
| 1.1 |
Banro Corporation By-law No. 3 |
| 1.2 |
Banro Corporation
By-law No. 4 |
| 1.3 |
Certificate and Articles of
Continuance dated April 2, 2004 |
| 1.4 |
Certificate and
Articles of Amendment dated December 17, 2004 |
| 1.5 |
Certificate and Articles of
Amendment dated April 23, 2013 |
| 1.6 |
Shareholders
Rights Plan dated April 29, 2005(1) |
| 1.7 |
Third Shareholder Rights Plan
Amendment Agreement dated June 27, 2014(2) |
| 1.8 |
Audit Committee
Charter |
| |
|
| |
Material
Contracts |
| 4.1 |
Company's stock option plan
(3) |
| 4.2 |
Warrant Indenture
dated March 2, 2012(4) |
| 4.3 |
Note Indenture dated March 2,
2012(4) |
| 4.4 |
Underwriting
Agreement dated February 24, 2012(4) |
| 4.5 |
Security Agreement dated March 2,
2012(4) |
| 4.6 |
Collateral Trust
Agreement dated March 2, 2012(4) |
| 4.7 |
Amended and Restated Security
Agreement dated January 21, 2013(5) |
| 4.8 |
Agency Agreement
dated April 12, 2013(6) |
| 4.9 |
Share Purchase Agreement dated
April 12, 2013(7) |
| 4.10 |
Letter Agreement
between the Company and GMP Securities L.P. dated April 12,
2013(7) |
| 4.11 |
Exchange and Support Agreement
dated April 25, 2013(7) |
| 4.12 |
Securities
Purchase Agreement dated February 28, 2014(8) |
-103-
4.13 |
Securities Purchase Agreement dated August 18,
2014(9) |
4.14 |
Guaranty dated August 18, 2014(9) |
4.15 |
Form of Warrant(9) |
4.16 |
Form of Note(9) |
4.17 |
Form of Lock-up Agreement(9) |
4.18 |
Namoya Gold Purchase and Sale Agreement dated February
27, 2015(10) |
4.19 |
BlackRock Support Agreement dated February 27,
2015(10) |
4.20 |
Twangiza GFSA Holdings Gold Purchase and Sale Agreement
dated February 27, 2015(10) |
4.21 |
Twangiza GFSA Holdings Gold Purchase and Sale Agreement
(tranche 2) dated February 27, 2015(10) |
4.22 |
Gramercy Funds Management LLC Support Agreement dated
February 27, 2015(10) |
| |
|
| |
Subsidiaries |
|
List of subsidiaries of the Company |
| |
|
| |
Code of Conduct |
|
Business Conduct Policy |
| |
|
| |
Certifications |
|
Certification of the President and Chief Executive
Officer of the Company pursuant to Section 302 of Sarbanes-Oxley Act of
2002 |
|
Certification of the Chief Financial Officer of the
Company pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |
|
Certification of the President and Chief Executive
Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
|
Certification of the Chief Financial Officer of the
Company pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 |
| |
|
| |
Other Exhibits |
|
Management's discussion and analysis of the Company for
the year ended December 31, 2014 |
15.2 |
Sections 6, 11, 12 and 13 (which sections are entitled
“Geological Setting”, “Sampling Method and Approach”, “Sample Preparation,
Analyses and Security” and “Data Verification” respectively) of the
Technical Report dated March 9, 2011 (as revised on March 24, 2011)
entitled “Economic Assessment NI 43-101 Technical Report, Twangiza Phase 1
Gold Project, South Kivu Province, Democratic Republic of the Congo”
(11) |
15.3 |
Sections 6.1, 6.2, 8, 9, 10, 11 and 14 (which sections are
entitled “Regional Geology”, “Local Geology”, “Exploration”,
“Drilling”,“Sample Preparation, Analyses and Security”, “Data
Verification” and “Mineral Reserve Estimates” respectively) of the Technical Report entitled “Independent National
Instrument 43-101 Technical Report on the Namoya Gold Project,
Maniema Province, Democratic Republic of the Congo," dated May 12,
2014(12) |
15.4 |
Technical Report dated March 15, 2013 entitled
"Independent National Instrument 43-101 Technical Report on the Lugushwa
Gold Project, South Kivu Province, Democratic Republic of the Congo"
(13) |
-104-
15.5 |
Section 2 (entitled "Regional Geology") and section 3
(entitled "Kamituga") of the Technical Report entitled "NI 43-101
Technical Report Resource Estimation and Exploration Potential at the
Kamituga, Lugushwa and Namoya Concessions, Democratic Republic of Congo,"
dated February 2005(14) |
15.6 |
Press release dated March 27, 2014 entitled “Banro
Announces A Mineral Reserve Estimate At Its Namoya Gold Mine, Democratic
Republic of the Congo” (15) |
15.7 |
Press release dated November 15, 2012 entitled “Banro
Provides Exploration Update for Projects in the DRC, Including Significant
Drill Intersections at Namoya, Lugushwa and Kamituga”
(16) |
Notes:
(1) Previously filed as exhibit 4.1 to the Company’s Registration
Statement on Form 8-A filed with the SEC on July 13, 2012.
(2) Previously filed
as exhibit 99.1 to the Company’s Current Report on Form 6-K furnished to the SEC
on July 7, 2014.
(3) Previously filed as exhibit 99.2 to the Company’s Current
Report on Form 6-K furnished to the SEC on June 8, 2012.
(4) Previously filed as
an exhibit to the Company’s Current Report on Form 6-K furnished to the SEC on
March 26, 2012.
(5) Previously filed as exhibit 99.1 to the Company’s
Current Report on Form 6-K furnished to the SEC on April 16, 2013.
(6) Previously filed
as exhibit 99.1 to the Company’s Current Report on Form 6-K furnished to the SEC
on April 25, 2013.
(7) Previously filed as an exhibit to the Company’s Current
Report on Form 6-K furnished to the SEC on May 7, 2013.
(8) Previously filed as
exhibit 99.3 to the Company’s Current Report on Form 6-K furnished to the SEC on
February 28, 2014.
(9) Previously filed as an exhibit to the Company’s Current
Report on Form 6-K furnished to the SEC on August 19, 2014.
(10) Previously filed
as an exhibit to the Company’s Current Report on Form 6-K furnished to the SEC
on March 12, 2015.
(11) Previously filed
as exhibit 99.1 to the Company’s Current Report on Form 6-K furnished to the SEC
on March 28, 2011.
(12) Previously filed as Exhibit 99.1 to the Company’s Current
Report on Form 6-K furnished to the SEC on May 20, 2014.
(13) Previously filed
as an exhibit to the Company’s Current Report on Form 6-K furnished to the SEC
on March 21, 2013.
(14) Previously filed as an exhibit to the Company’s
Current Report on Form 6-K furnished to the SEC on August 19, 2008.
(15) Previously filed
as an exhibit to the Company’s Current Report on Form 6-K furnished to the SEC
on March 27, 2014.
(16) Previously filed as an exhibit to the Company’s Current
Report on Form 6-K furnished to the SEC on November 16, 2012.
SIGNATURES
The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.
Date: April 6, 2015
BANRO CORPORATION
(Registrant)
| |
By: (signed) "Richard W.
Brissenden " |
| |
Richard W. Brissenden |
| |
Executive Chairman of the Board |
-105-
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014 and 2013
(Expressed in U.S. dollars)
|
Banro Corporation |
|
CONTENTS |
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Page F-2 of F-52
Management’s Responsibility for Financial Statements
The consolidated financial statements, the notes thereto and
other financial information contained in the Management’s Discussion and
Analysis have been prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board and are the
responsibility of the management of Banro Corporation. The financial information
presented elsewhere in the Management’s Discussion and Analysis is consistent
with the data that is contained in the consolidated financial statements. The
consolidated financial statements, where necessary, include amounts which are
based on the best estimates and judgments of management.
In order to discharge management’s responsibility for the
integrity of the financial statements, the Company maintains a system of
internal controls. These controls are designed to provide reasonable assurance
that the Company’s assets are safeguarded, transactions are executed and
recorded in accordance with management’s authorization, proper records are
maintained and relevant and reliable information is produced. These controls
include maintaining quality standards in hiring and training of employees,
policies and procedures manuals, a corporate code of conduct and ensuring that
there is proper accountability for performance within appropriate and
well-defined areas of responsibility. The system of internal controls is further
supported by a compliance function, which is designed to ensure that we and our
employees comply with securities legislation and conflict of interest rules.
The Board of Directors is responsible for overseeing
management’s performance of its responsibilities for financial reporting and
internal control. The Audit Committee, which is composed of non-executive
directors, meets with management as well as the external auditors to ensure that
management is properly fulfilling its financial reporting responsibilities to
the Directors who approve the consolidated financial statements. The external
auditors have full and unrestricted access to the Audit Committee to discuss the
scope of their audits, the adequacy of the system of internal controls and
review reporting issues.
The consolidated financial statements for the year ended
December 31, 2014 have been audited by Deloitte LLP, Independent Registered
Public Accounting firm, in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board
(United States).
|
(Signed) “John
Clarke” |
|
(Signed) “Kevin Jennings” |
|
John Clarke |
|
Kevin Jennings |
|
Chief Executive Officer |
|
Chief Financial Officer |
|
|
|
|
|
Toronto, Canada |
|
|
|
April 6, 2015 |
|
|
Page F-3 of F-52
Internal Control Over Financial Reporting
The Company’s management is responsible for
establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
International Financial Reporting Standards, as issued by the International
Accounting Standards Board.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk thatntrols may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the design and
operation of the Company’s internal control over financial reporting as of
December 31, 2014, based on the criteria set forth in Internal Control -
Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. This evaluation included review of the
documentation of controls, evaluation of the design effectiveness of controls,
testing of the operating effectiveness of controls and a conclusion on this
evaluation. Based on this evaluation, management has concluded that there was a
material weakness in the Information technology general controls (ITGC) and a
material weakness of the internal controls on financial reporting related to
preparation and review of the statement of cash flow and sufficiency of documentary evidence supporting the precision of review over the completeness and accuracy of inputs, assumptions and formulas included in the impairment models.
The effectiveness of the Company’s internal controls over
financial reporting as at December 31, 2014 has been audited by Deloitte LLP,
Independent Registered Public Accounting firm, as stated in their report located
on page 6 of the Annual Financial Statements.
|
(Signed) “John
Clarke” |
|
(Signed) “Kevin Jennings” |
|
John Clarke |
|
Kevin Jennings |
|
Chief Executive Officer |
|
Chief Financial Officer |
|
|
|
|
|
Toronto, Canada |
|
|
|
April 6, 2015 |
|
|
Page F-4 of F-52
|
Report of Independent Registered Public
Accounting Firm |
|
|
To the Board of Directors and Shareholders of Banro
Corporation
We have audited the accompanying consolidated
financial statements of Banro Corporation and subsidiaries (the “Company”),
which are comprised of the consolidated statements of financial position as at
December 31, 2014 and 2013 and the consolidated statements of comprehensive
income/(loss), consolidated statements of changes in equity, and consolidated
statements of cash flow for each of the years in the three-year period ended
December 31, 2014 and a summary of significant accounting
policies and other explanatory information.
Management's Responsibility for the Consolidated
Financial Statements
Management is responsible for the preparation and
fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards and the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's judgment, including
the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances. An
audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained
in our audits is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company
as at December 31, 2014 and 2013 and its financial performance and its cash
flows for each of the years in the three-year period ended December 31, 2014 in
accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
Emphasis of Matter
As discussed in Note 34 to the consolidated financial
statements, the 2013 consolidated statement of cash flow has been restated to
correct an error in the classification of certain transactions between
operating, investing, and financing cash flows.
Without modifying our opinion, we draw attention to
Note 2(b) in the consolidated financial statements, which indicates that there
exists a material uncertainty as to the Company’s ability to secure additional
financing that may raise substantial doubt on the Company’s ability to continue
as a going concern.
Other Matter
We have also audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
Company's internal control over financial reporting as of December 31, 2014,
based on the criteria established in Internal Control-Integrated Framework
(1992) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated April 6, 2015 expressed an adverse opinion on
the Company’s internal control over financial reporting because of material
weaknesses.
/s/ Deloitte LLP
Chartered Professional Accountants, Chartered
Accountants
Licensed Public Accountants
Toronto, Canada
April 6, 2015
Page F-5 of F-52
|
Report of Independent Registered Public Accounting Firm
|
To the Board of Directors and Shareholders of Banro
Corporation
We have audited the internal control over financial
reporting of Banro Corporation and subsidiaries (the “Company”) as of December
31, 2014, based on the criteria established in Internal Control-Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on the Company's internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting
is a process designed by, or under the supervision of, the company's principal
executive and principal financial officers, or persons performing similar
functions, and effected by the company's board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board. A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal
control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error or
fraud may not be prevented or detected on a timely basis. Also, projections of
any evaluation of the effectiveness of the internal control over financial
reporting to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination
of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the company’s annual
or interim financial statements will not be prevented or detected on a timely
basis. The following material weaknesses have been identified and included in
management’s assessment. Management has identified material weaknesses in
internal controls over financial reporting relating to preparation and review of
the statement of cash flow; documentary evidence supporting the precision of review over the completeness and accuracy of inputs, assumptions and formulas included in the impairment models; and logical access and program change management
controls related to certain information systems that are relevant to information
and reports produced by certain information systems. These material weaknesses
were considered in determining the nature, timing and extent of audit tests
applied in our audit of the consolidated financial statements as of and for the
year ended December 31, 2014, of the Company and this report does not affect our
report on such financial statements.
In our opinion, because of the effects of the
material weaknesses identified above on the achievement of the objectives of the
control criteria, the Company has not maintained effective internal control over
financial reporting as of December 31, 2014, based on the criteria established
in Internal Control - Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with Canadian
generally accepted auditing standards and the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended December 31, 2014 of the Company and our
report dated April 6, 2015 expressed an unqualified opinion on those financial
statements and included an emphasis of matter paragraph regarding a restatement
of the 2013 consolidated statement of cash flow and the Company’s ability to
continue as a going concern.
/s/ Deloitte LLP
Chartered Professional Accountants, Chartered
Accountants
Licensed Public Accountants
Toronto, Canada
April 6, 2015
Page F-6 of F-52
|
Banro Corporation |
|
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
|
(Expressed in
thousands of U.S. dollars) |
|
|
|
Notes |
|
December 31,
2014 |
|
|
December 31,
2013 |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
5 |
|
1,002 |
|
|
4,452 |
|
|
Trade and other
receivables |
|
6 |
|
7,261 |
|
|
8,884 |
|
|
Prepaid expenses and deposits |
|
7 |
|
6,164 |
|
|
8,446 |
|
|
Current portion of inventory |
|
8 |
|
28,893 |
|
|
31,936 |
|
|
|
|
|
|
43,320 |
|
|
53,718 |
|
|
Non-Current Assets |
|
|
|
|
|
|
|
|
|
Long-term investment |
|
9 |
|
1,061 |
|
|
1,267 |
|
|
Property, plant and
equipment |
|
10 |
|
295,010 |
|
|
312,105 |
|
|
Exploration and evaluation |
|
11 |
|
129,959 |
|
|
117,740 |
|
|
Non-current portion of
inventories |
|
8 |
|
3,874 |
|
|
- |
|
|
Mine under construction |
|
12 |
|
414,258 |
|
|
337,203 |
|
|
|
|
|
|
844,162 |
|
|
768,315 |
|
|
TOTAL
ASSETS |
|
|
|
887,482 |
|
|
822,033 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
13 |
|
86,396 |
|
|
77,614 |
|
|
Deferred revenue |
|
14 |
|
3,000 |
|
|
17,369 |
|
|
Current portion of bank loans |
|
15 |
|
17,123 |
|
|
29,250 |
|
|
Employee retention
allowance |
|
16 |
|
3,405 |
|
|
2,777 |
|
|
Derivative instruments - mark-to-market |
|
17 |
|
1,393 |
|
|
- |
|
|
|
|
|
|
111,317 |
|
|
127,010 |
|
|
Non-Current Liabilities |
|
|
|
|
|
|
|
|
|
Non-current portion of
bank loans |
|
15 |
|
3,869 |
|
|
13,250 |
|
|
Provision for closure and reclamation |
|
18 |
|
7,755 |
|
|
4,218 |
|
|
Long-term debt |
|
19 |
|
200,921 |
|
|
158,599 |
|
|
Preference shares |
|
20 |
|
71,116 |
|
|
27,972 |
|
|
|
|
|
|
283,661 |
|
|
204,039 |
|
|
Total
Liabilities |
|
|
|
394,978 |
|
|
331,049 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
Share capital |
|
21 |
|
518,615 |
|
|
518,615 |
|
|
Warrants |
|
21b |
|
13,356 |
|
|
13,356 |
|
|
Contributed surplus |
|
21b |
|
42,526 |
|
|
41,793 |
|
|
Accumulated other comprehensive income |
|
|
|
380 |
|
|
(87 |
) |
|
Deficit |
|
|
|
(82,373 |
) |
|
(82,693 |
) |
|
|
|
|
|
492,504 |
|
|
490,984 |
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
887,482 |
|
|
822,033 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
23 |
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Approved and authorized for issue by the Board of Directors on
April 6, 2015. Signed on behalf of the Board of Directors by:
|
/s/ John Clarke |
/s/ Richard Brissenden |
|
|
|
|
John Clarke, President and CEO |
Richard Brissenden, Executive Chairman
|
Page F-7 of F-52
|
Banro Corporation |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) |
|
(Expressed in
thousands of U.S. dollars) |
|
|
|
|
For the years ended |
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
Notes |
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Operating revenue |
|
|
125,436 |
|
|
111,808 |
|
|
42,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
Production costs |
26 |
|
(69,148 |
) |
|
(67,305 |
) |
|
(22,490 |
) |
|
Depletion and depreciation |
10 |
|
(26,897 |
) |
|
(25,552 |
) |
|
(8,057 |
) |
|
Total mine
operating expenses |
|
|
(96,045 |
) |
|
(92,857 |
) |
|
(30,547 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross earnings from operations |
|
|
29,391 |
|
|
18,951 |
|
|
12,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
27 |
|
(11,318 |
) |
|
(5,723 |
) |
|
(6,207 |
) |
|
Share-based payments |
22 |
|
(552 |
) |
|
(2,642 |
) |
|
(7,929 |
) |
|
Other charges and
provisions, net |
29 |
|
(1,141 |
) |
|
1,206 |
|
|
(368 |
) |
|
Net income/(loss) from operations |
|
|
16,380 |
|
|
11,792 |
|
|
(2,420 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses |
28 |
|
(15,623 |
) |
|
(10,096 |
) |
|
(2,316 |
) |
|
Foreign exchange loss |
|
|
(442 |
) |
|
(192 |
) |
|
(143 |
) |
|
Interest income |
|
|
5 |
|
|
126 |
|
|
318 |
|
|
Net income/(loss) |
|
|
320 |
|
|
1,630 |
|
|
(4,561 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences of
foreign investment in associate |
9 |
|
- |
|
|
(95 |
) |
|
35 |
|
|
Fair value gain on
available-for-sale financial asset |
9 |
|
380 |
|
|
- |
|
|
- |
|
|
Total comprehensive income/(loss) |
|
|
700 |
|
|
1,535 |
|
|
(4,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) per share |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
21c |
|
0.00 |
|
|
0.01 |
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
21c |
|
252,101 |
|
|
236,278 |
|
|
200,607 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
Page F-8 of F-52
|
Banro Corporation |
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
|
(Expressed in thousands of U.S dollars)
|
|
|
|
|
Share capital |
|
|
|
|
|
|
|
|
Currency |
|
|
|
|
|
|
|
|
Total |
|
|
|
Notes |
|
Number of |
|
|
|
|
|
|
|
|
Contributed |
|
|
Translation |
|
|
Available-for- |
|
|
|
|
|
Shareholders' |
|
|
|
|
|
common
shares |
|
|
Amount |
|
|
Warrants |
|
|
Surplus |
|
|
Adjustment |
|
|
sale asset |
|
|
Deficit |
|
|
Equity |
|
|
|
|
|
(in thousands) |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Balance as at January 1,
2012 |
|
|
197,076 |
|
|
440,738 |
|
|
- |
|
|
28,061 |
|
|
(27 |
) |
|
- |
|
|
(79,762 |
) |
|
389,010 |
|
|
Net loss for the year |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,561 |
) |
|
(4,561 |
) |
|
Issued broker warrants |
|
|
- |
|
|
- |
|
|
13,252 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
13,252 |
|
|
Broker warrants exercised |
|
|
80 |
|
|
355 |
|
|
- |
|
|
(93 |
) |
|
- |
|
|
- |
|
|
- |
|
|
262 |
|
|
Stock options exercised |
|
|
4,726 |
|
|
15,645 |
|
|
- |
|
|
(5,176 |
) |
|
- |
|
|
- |
|
|
- |
|
|
10,469 |
|
|
Share-based payments |
22 |
|
- |
|
|
- |
|
|
- |
|
|
14,818 |
|
|
- |
|
|
- |
|
|
- |
|
|
14,818 |
|
|
Foreign currency translation differences
of foreign investment in associate |
9 |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
35 |
|
|
- |
|
|
- |
|
|
35 |
|
|
Balance as at December 31, 2012 |
|
|
201,882 |
|
|
456,738 |
|
|
13,252 |
|
|
37,610 |
|
|
8 |
|
|
- |
|
|
(84,323 |
) |
|
423,285 |
|
|
Net income for the year |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,630 |
|
|
1,630 |
|
|
Issued common shares |
21 |
|
50,219 |
|
|
61,877 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
61,877 |
|
|
Issued broker warrants |
|
|
- |
|
|
- |
|
|
104 |
|
|
104 |
|
|
- |
|
|
- |
|
|
- |
|
|
208 |
|
|
Share-based payments |
22 |
|
- |
|
|
- |
|
|
- |
|
|
4,079 |
|
|
- |
|
|
- |
|
|
- |
|
|
4,079 |
|
|
Foreign currency translation differences
of foreign investment in associate |
9 |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(95 |
) |
|
- |
|
|
- |
|
|
(95 |
) |
|
Balance as at December 31, 2013 |
|
|
252,101 |
|
|
518,615 |
|
|
13,356 |
|
|
41,793 |
|
|
(87 |
) |
|
- |
|
|
(82,693 |
) |
|
490,984 |
|
|
Net income for the year |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
320 |
|
|
320 |
|
|
Share-based payments |
22 |
|
- |
|
|
- |
|
|
- |
|
|
747 |
|
|
- |
|
|
- |
|
|
- |
|
|
747 |
|
|
Long-term investment |
9 |
|
- |
|
|
- |
|
|
- |
|
|
(14 |
) |
|
110 |
|
|
- |
|
|
- |
|
|
96 |
|
|
Foreign currency translation differences
of foreign investment in associate |
9 |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(23 |
) |
|
- |
|
|
- |
|
|
(23 |
) |
|
Fair value gain on available-for-sale
financial asset |
9 |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
380 |
|
|
- |
|
|
380 |
|
|
Balance as at December 31, 2014 |
|
|
252,101 |
|
|
518,615 |
|
|
13,356 |
|
|
42,526 |
|
|
- |
|
|
380 |
|
|
(82,373 |
) |
|
492,504 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
Page F-9 of F-52
|
Banro Corporation |
|
CONSOLIDATED STATEMENTS OF CASH FLOW
|
|
(Expressed in
thousands of U.S dollars) |
| |
|
|
|
|
|
|
| |
|
|
|
|
For the years ended |
|
| |
|
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
| |
|
|
|
|
2014 |
|
|
2013 (Restated - |
|
|
2012 |
|
| |
|
Notes |
|
|
|
|
|
Note
34) |
|
|
|
|
| |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
| Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income for the year |
|
|
|
|
320 |
|
|
1,630 |
|
|
(4,561 |
) |
| Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
| Recognition of
deferred revenue |
|
14 |
|
|
(13,369 |
) |
|
- |
|
|
- |
|
| Depletion and
depreciation |
|
10 |
|
|
26,985 |
|
|
25,603 |
|
|
8,096 |
|
| Unrealized foreign exchange
loss/(gain) |
|
|
|
|
348 |
|
|
(492 |
) |
|
97 |
|
| Share-based
payments |
|
22 |
|
|
552 |
|
|
2,642 |
|
|
7,929 |
|
| Employee retention allowance |
|
16 |
|
|
501 |
|
|
250 |
|
|
275 |
|
| Finance expense
excluding bank charges, net of interest income |
|
28 |
|
|
11,745 |
|
|
7,061 |
|
|
2,135 |
|
| Accretion on closure and
reclamation |
|
18 |
|
|
620 |
|
|
129 |
|
|
10 |
|
| Other charges
and provisions, net |
|
29 |
|
|
50 |
|
|
(4,806 |
) |
|
368 |
|
| Interest paid |
|
|
|
|
(4,741 |
) |
|
(3,512 |
) |
|
(1,070 |
) |
| Interest received |
|
|
|
|
5 |
|
|
126 |
|
|
- |
|
| Operating cash flows before deferred revenue and working
capital adjustments |
|
|
|
|
23,016 |
|
|
28,631 |
|
|
13,279 |
|
| Proceeds from deferred revenue |
|
14 |
|
|
6,000 |
|
|
15,291 |
|
|
- |
|
| Working capital
adjustments |
|
32
|
|
|
12,512 |
|
|
(2,714 |
) |
|
(18,780 |
) |
| Net cash flows provided by/(used in)
operating activities |
|
|
|
|
41,528 |
|
|
41,208 |
|
|
(5,501 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| Acquisition of property, plant, and equipment |
|
10 |
|
|
(15,754 |
) |
|
(34,082 |
) |
|
(32,081 |
) |
| Disposal of property, plant, and equipment
|
|
10 |
|
|
- |
|
|
- |
|
|
10 |
|
| Expenditures on exploration and evaluation |
|
11 |
|
|
(8,658 |
) |
|
(21,668 |
) |
|
(31,481 |
) |
| Expenditures on mine under construction,
net of pre-production revenue |
|
12 |
|
|
(49,031 |
) |
|
(126,583 |
) |
|
(76,057 |
) |
| Interest paid |
|
|
|
|
(19,091 |
) |
|
(16,744 |
) |
|
(7,704 |
) |
| (Repayment of)/Proceeds from deferred
revenue |
|
14 |
|
|
(2,000 |
) |
|
2,000 |
|
|
- |
|
| Advances -
Long-term investment |
|
9
|
|
|
(1 |
) |
|
(11 |
) |
|
- |
|
| Net cash used in investing
activities |
|
|
|
|
(94,535 |
) |
|
(197,088 |
) |
|
(147,313 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bank overdraft |
|
13 |
|
|
3,163 |
|
|
491 |
|
|
- |
|
| Net proceeds on long-term debt and
associated warrants |
|
19 |
|
|
31,547 |
|
|
- |
|
|
- |
|
| Net proceeds from shares issuance |
|
20, 21 |
|
|
38,790 |
|
|
92,599 |
|
|
175,744 |
|
| Payment of dividends |
|
20 |
|
|
(2,287 |
) |
|
(2,277 |
) |
|
- |
|
| Net proceeds from
(repayments of) bank loans |
|
15
|
|
|
(21,614 |
) |
|
42,500 |
|
|
(5,625 |
) |
| Net cash provided by financing
activities |
|
|
|
|
49,599 |
|
|
133,313 |
|
|
170,119 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of foreign exchange on cash and cash
equivalents |
|
|
|
|
(42 |
) |
|
(30 |
) |
|
48 |
|
| Net decrease in cash and cash equivalents |
|
|
|
|
(3,450 |
) |
|
(22,597 |
) |
|
17,353 |
|
| Cash and cash equivalents, beginning of the year
|
|
|
|
|
4,452 |
|
|
27,049 |
|
|
9,696 |
|
| Cash and cash
equivalents, end of the year |
|
|
|
|
1,002 |
|
|
4,452 |
|
|
27,049 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
Page F-10 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012
|
|
(Expressed in
thousands of U.S. dollars, except per share amounts)
|
1. CORPORATE INFORMATION
Banro Corporation’s business focus is the exploration,
development and production of mineral properties in the Democratic Republic of
the Congo (the “Congo”). Banro Corporation (the “Company”) was continued under
the Canada Business Corporations Act on April 2, 2004. The Company was
previously governed by the Ontario Business Corporations Act.
These consolidated financial statements as at December 31, 2014
and 2013 and for the years ended December 31, 2014, 2013 and 2012 include the
accounts of the Company and of its wholly-owned subsidiary incorporated in the
United States, Banro American Resources Inc., as well as its subsidiary in the
Congo, Banro Hydro SARL, and its subsidiary in Barbados, Banro Group (Barbados)
Limited. In June 2013, the Company completed a reorganization of its
wholly-owned subsidiaries incorporated in the Congo, Banro Congo Mining SA
(formerly Banro Congo Mining SARL), Kamituga Mining SA (formerly Kamituga Mining
SARL), Lugushwa Mining SA (formerly Lugushwa Mining SARL), Namoya Mining SA
(formerly Namoya Mining SARL) and Twangiza Mining SA (formerly Twangiza Mining
SARL), to now be held under the respective subsidiaries of Banro Group
(Barbados) Limited, comprising of Banro Congo (Barbados) Limited, Kamituga
(Barbados) Limited, Lugushwa (Barbados) Limited, Namoya (Barbados) Limited, and
Twangiza (Barbados) Limited.The Company is a publicly traded company whose
outstanding common shares are listed for trading on the Toronto Stock Exchange
and on the NYSE MKT LLC. The head office of the Company is located at 1 First
Canadian Place, 100 King St. West, Suite 7070, Toronto, Ontario, M5X 1E3,
Canada.
2. BASIS OF PREPARATION
|
a) |
Statement of compliance |
|
|
|
|
|
These consolidated financial statements as at
December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013
and 2012 have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”). The consolidated financial statements as at
December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013
and 2012, has been prepared in accordance with IFRS and IFRS
Interpretation Committee (“IFRIC”) interpretations issued and effective,
at December 31, 2014, 2013 and 2012, respectively. Certain comparative
figures have been reclassified and aggregated to conform to the current
period’s presentation. Specifically, a termination settlement of $3,600
(2012: $nil) has been reclassified from General and Administrative expense
to Other Charges and Provisions, net; Transaction Costs of $2,360 (2012:
$nil), Interest and Bank Expenses of $5,459 (2012: 2,306) and Dividends
paid on Preferred Shares of $2,277 (2012: $nil) are now presented as
Finance Expenses; and Gain on change in fair value of preferred shares of
$4,928 (2012: $nil) has been presented as Other Charges and Provisions,
net. |
|
|
|
|
|
The date the Company’s Board of Directors approved these
consolidated financial statements was April 6, 2015. |
|
|
|
|
b) |
Continuation of Business |
|
|
|
|
|
These consolidated financial statements have been
prepared on a going concern basis, under the historical cost basis, except
for certain financial instruments which are presented at fair
value. |
|
|
|
|
|
The Company earned net income of $320 for the
year ended December 31, 2014 (year ended December 31, 2013: net income of
$1,630 and year ended December 31, 2012 - net loss of $4,561) and as at
December 31, 2014 had a working capital deficit of $67,997 (December 31,
2013: $73,292). |
|
|
|
|
|
The Company’s ability to continue operations in the
normal course of business is dependent on several factors, including its
ability to secure additional funding. Management is exploring all
available options to secure additional funding, including forward sale
agreements, equity financing and strategic partnerships. In addition, the
recoverability of the amount shown for exploration and evaluation assets
is dependent upon the existence of economically recoverable reserves, the
ability of the Company to obtain financing to continue to perform
exploration activity or complete the development of the properties where
necessary, or alternatively, upon the Company’s ability to recover its
incurred costs through a disposition of its interests, all of which are
uncertain. |
|
|
|
|
|
In the event the Company is unable to identify
recoverable resources, receive the necessary permitting, or arrange
appropriate financing, the carrying value of the Company’s assets and
liabilities could be subject to material adjustment. Furthermore, market
conditions, as referred in Note 31g, may raise substantial doubt on the
Company’s ability to continue as a going concern. |
|
|
|
|
|
These consolidated financial statements do not include
any additional adjustments to the recoverability and classification of
recorded asset amounts, classification of certain liabilities and
changes to the statements of comprehensive income that might be necessary
if the Company was unable to continue as a going
concern. |
Page F-11 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES, ESTIMATES AND JUDGMENTS
The accounting policies set out below have been applied
consistently by all group entities and for all periods presented in these
consolidated financial statements.
|
a) |
Basis of Consolidation |
|
|
i. |
Subsidiaries |
|
|
|
|
|
|
|
Subsidiaries are entities controlled by the Company.
Control exists when the Company has power over an entity, exposure or
rights to variable returns from the Company’s involvement with the entity,
and the ability to use its power over the entity to affect the amount of
the Company’s returns. The financial statements of subsidiaries are
included in the consolidated financial statements of the Company from the
date that control commences until the date that control ceases. The
consolidated financial statements include the accounts of the Company and
its subsidiaries. |
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ii. |
Associate |
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Where the Company has the power to significantly
influence but not control the financial and operating policy decisions of
another entity, it is classified as an associate. Associates are initially
recognized in the consolidated statement of financial position at cost and
adjusted thereafter for the post-acquisition changes in the Company’s
share of the net assets of the associate, under the equity method of
accounting. The Company's share of post-acquisition profits and losses is
recognized in the consolidated statement of comprehensive income, except
that losses in excess of the Company's investment in the associate are not
recognized unless there is a legal or constructive obligation to recognize
such losses. If the associate subsequently reports profits, the Company’s
share of profits is recognized only after the Company’s share of the
profits equals the share of losses not recognized. |
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Profits and losses arising on transactions between the
Company and its associates are recognized only to the extent of unrelated
investor’s interests in the associate. The investor's share in the
associate's profits and losses resulting from these transactions is
eliminated against the carrying value of the associate. |
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Any premium paid for an associate above the fair value of
the Company's share of the identifiable assets, liabilities and contingent
liabilities acquired is capitalized and included in the carrying amount of
the Company’s investment in an associate. Where there is objective
evidence that the investment in an associate has been impaired, the
carrying amount of the investment is tested for impairment in the same way
as other non-financial assets. |
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iii. |
Transactions eliminated on consolidation |
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Inter-company balances, transactions, and any unrealized
income and expenses, are eliminated in preparing the consolidated
financial statements. |
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Unrealized gains arising from transactions with
associates are eliminated against the investment to the extent of the
Company’s interest in the investee. Unrealized losses are eliminated in
the same way as unrealized gains, but only to the extent that there is no
evidence of impairment. |
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b) |
Use of Estimates and Judgments |
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The preparation of these consolidated financial
statements in conformity with IFRS as issued by the IASB requires
management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these
estimates. |
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Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future periods
affected. Information about critical judgments in applying accounting
policies that have the most significant effect on the amounts recognized
in these consolidated financial statements is included in the following
notes: |
Page F-12 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
Estimates:
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i. |
Provision for closure and reclamation |
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The Company’s operation is subject to environmental
regulations in the Congo. Upon establishment of commercial viability of a
site, the Company estimates the cost to restore the site following the
completion of commercial activities and depletion of reserves. These
future obligations are estimated by taking into consideration closure
plans, known environmental impacts, and internal and external studies,
which estimate the activities and costs that will be carried out to meet
the decommissioning and environmental rehabilitation obligations. The
Company records a liability and a corresponding asset for the present
value of the estimated costs of legal and constructive obligations for
future mine rehabilitation. During the mine rehabilitation process, there
will be a probable outflow of resources required to settle the obligation
and a reliable estimate can be made of those obligations. The present
value is determined based on current market assessments using the
risk-free rate of borrowing which is approximated by the yield of
government bonds with a maturity similar to that of the mine life. The
discounted liability is adjusted at the end of each period with the
passage of time. The provision represents management’s best estimate of
the present value of the future mine rehabilitation costs, which may not
be incurred for several years or decades, and, as such, actual
expenditures may vary from the amount currently estimated. The
decommissioning and environmental rehabilitation cost estimates could
change due to amendments in laws and regulations in the Congo.
Additionally, actual estimated costs may differ from those projected as a
result of an increase over time of actual remediation costs, a change in
the timing for utilization of reserves and the potential for increasingly
stringent environmental regulatory requirements. |
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ii. |
Impairment |
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Assets, including property, plant and equipment,
exploration and evaluation and mine under construction, are reviewed for
impairment whenever events or changes in circumstances indicate that their
carrying amounts exceed their recoverable amounts, which is the higher of
fair value less cost to sell and value in use. The assessment of the
recoverable amounts often requires estimates and assumptions such as
discount rates, exchange rates, commodity prices, rehabilitation and
restoration costs, future capital requirements and future operating
performance. Changes in such estimates could impact recoverable values of
these assets. Estimates are reviewed regularly by management. |
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iii. |
Mineral reserve and resource estimates |
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Mineral reserves and resources are estimates of the
amount of ore that can be economically and legally extracted from the
Company’s mineral properties. The Company estimates its mineral reserves
and mineral resources based on information compiled by appropriately
qualified persons relating to the geological data on the size, depth and
shape of the ore body. This exercise requires complex geological judgments
to interpret the data. The estimation of recoverable reserves is based
upon factors such as commodity prices, future capital requirements, and
production costs along with geological assumptions and judgments made in
estimating the size and grade of the ore body. Changes in the reserve or
resource estimates may impact upon the carrying value of exploration and
evaluation assets, mine under construction assets, property, plant and
equipment, recognition of deferred tax assets, and expenses. |
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iv. |
Share-based payment transactions |
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The Company measures the cost of equity-settled
transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. Estimating fair value
for share-based payment transactions requires determining the most
appropriate valuation model, which is dependent on the terms and
conditions of the grant. This estimate also requires determining the most
appropriate inputs to the valuation model including the expected life of
the stock option, volatility and dividend yield and making assumptions
about them. The assumptions and models used for estimating fair value for
share-based payment transactions are disclosed in Note
22. |
Page F-13 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
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v. |
Depreciation of mining assets |
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The Company applies the units of production method for
amortization of its mine assets in commercial production based on reserve
ore tonnes mined. These calculations require the use of estimates and
assumptions. Significant judgment is required in assessing the available
reserves to be amortized under this method. Factors that are considered in
determining reserves are the economic feasibility of the reserves,
expected life of the project and proven and probable mineral reserves, the
complexity of metallurgy, markets and future developments. Estimates of
proven and probable reserves are prepared by experts in extraction,
geology and reserve determination. When these factors change or become
known in the future, such differences will impact pre-tax profit and
carrying value of assets. |
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vi. |
Depreciation of property, plant and
equipment |
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Each property, plant and equipment life, which is
assessed annually, is assessed for both its physical life limitations and
the economic recoverable reserves of the property at which the asset is
located. For those assets depreciated on a straight-line basis, management
estimates the useful life of the assets. These assessments require the use
of estimates and assumptions including market conditions at the end of the
assets useful life. Asset useful lives and residual values are
re-evaluated annually. |
Judgments:
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i. |
Commercial production |
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Prior to reaching pre-determined levels of operating
capacity intended by management, costs incurred are capitalized as part of
mines under construction and proceeds from sales are offset against
capitalized costs. Depletion of capitalized costs for mining properties
begins when pre-determined levels of operating capacity intended by
management have been reached. Management considers several factors in
determining when a mining property has reached levels of operating
capacity intended by management, including: |
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• |
when the mine is substantially
complete and ready for its intended use; |
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• |
the ability to produce a saleable
product; |
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• |
the ability to sustain ongoing
production at a steady or increasing level; |
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• |
the mine has reached a level of
pre-determined percentage of design capacity; |
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• |
mineral recoveries are at or near
the expected production level, and; |
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• |
the completion of a reasonable
period of testing of the mine plant and equipment.
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The results of operations of the Company during the
periods presented in these consolidated financial statements have been
impacted by management’s determination that its Twangiza mine had reached
the commercial production phase on September 1, 2012. When a mine
development project moves into the production stage, the capitalization of
certain mine development and construction costs ceases. Subsequent costs
are either regarded as forming part of the cost of inventory or expensed.
However, any costs relating to mining asset additions or improvements or
mineable reserve development are assessed to determine whether
capitalization is appropriate. |
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ii. |
Provisions and contingencies |
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The amount recognized as provision, including legal,
contractual, constructive and other exposures or obligations, is the best
estimate of the consideration required to settle the related liability,
including any related interest charges, taking into account the risks and
uncertainties surrounding the obligation. In addition, contingencies will
only be resolved when one or more future events occur or fail to occur.
Therefore assessment of contingencies inherently involves the exercise of
significant judgment and estimates of the outcome of future events. The
Company assesses its liabilities and contingencies based upon the best
information available, relevant laws and other appropriate
requirements. |
Page F-14 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
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iii. |
Exploration and evaluation expenditure |
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The application of the Company’s accounting policy for
exploration and evaluation expenditure requires judgment in determining
whether it is likely that future economic benefits will flow to the
Company, which may be based on assumptions about future events or
circumstances. Estimates and assumptions made may change if new
information becomes available. There are a few circumstances that would
warrant a test for impairment, which include: the expiry of the right to
explore, substantive expenditure on further exploration is not planned,
exploration for and evaluation of the mineral resources in the area have
not led to discovery of commercially viable quantities, and/or sufficient
data exists to show that the carrying amount of the asset is unlikely to
be recovered in full from successful development or by sale. If
information becomes available suggesting impairment, the amount
capitalized is written off in the consolidated statement of comprehensive
income during the period the new information becomes available. |
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iv. |
Income taxes |
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The Company is subject to income taxes in various
jurisdictions and subject to various rates and rules of taxation.
Significant judgment is required in determining the provision for income
taxes. There are many transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is
uncertain. The Company recognizes liabilities for anticipated tax audit
issues based on the Company’s current understanding of the tax law. Where
the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and
deferred tax provisions in the period in which such determination is
made. |
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In addition, the Company has recognized deferred tax
assets relating to tax losses carried forward to the extent there is
sufficient taxable income relating to the same taxation authority and the
same subsidiary against which the unused tax losses can be utilized.
However, future realization of the tax losses also depends on the ability
of the entity to satisfy certain tests at the time the losses are
recouped, including current and future economic conditions, production
rates and production costs. |
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v. |
Functional and presentation currency |
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Judgment is required to determine the functional currency
of the parent and its subsidiaries. These judgments are continuously
evaluated and are based on management’s experience and knowledge of the
relevant facts and circumstances. |
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c) |
Foreign Currency
Translation |
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i. |
Functional and presentation currency |
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These consolidated financial statements are presented in
United States dollars (“$”), which is the Company’s and its subsidiaries’
functional and presentation currency and all values are rounded to the
nearest thousand, unless otherwise indicated. |
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ii. |
Foreign currency transactions |
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The functional currency for each of the Company’s
subsidiaries and associates is the currency of the primary economic
environment in which the entity operates. Transactions entered into by the
Company’s subsidiaries and associates in a currency other than the
currency of the primary economic environment in which they operate (their
"functional currency") are recorded at the rates ruling when the
transactions occur except depreciation and amortization which are
translated at the rates of exchange applicable to the related assets, with
any gains or losses recognized in the consolidated statement of
comprehensive income. Foreign currency monetary assets and liabilities are
translated at current rates of exchange with the resulting gain or losses
recognized in the consolidated statement of comprehensive income. Exchange
differences arising on the retranslation of unsettled monetary assets and
liabilities are recognized immediately in profit or loss. Non-monetary
assets and liabilities are translated using the historical exchange rates.
Non- monetary assets and liabilities measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair
value is determined. |
Page F-15 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
d) |
Cash and Cash Equivalents
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Cash and cash equivalents includes cash on hand, deposits
held at financial institutions, and other short-term, highly liquid
investments with original maturities of three months or less that are
readily convertible to known amounts. |
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e) |
Financial Assets |
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A financial asset is classified as either financial
assets at fair value through profit or loss (“FVTPL”), loans and
receivables, held to maturity investments (“HTM”), or available for sale
financial assets (“AFS”), as appropriate at initial recognition and,
except in very limited circumstances, the classification is not changed
subsequently. The classification is determined at initial recognition and
depends on the nature and purpose of the financial asset. A financial
asset is derecognized when contractual rights to the asset’s cash flows
expire or if substantially all the risks and rewards of the asset are
transferred. |
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i. |
Financial assets at FVTPL |
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A financial asset is classified as FVTPL when the
financial asset is held for trading or it is designated upon initial
recognition as at FVTPL. A financial asset is classified as held for
trading if (1) it has been acquired principally for the purpose of selling
or repurchasing in the near term; (2) it is part of an identified
portfolio of financial instruments that the Company manages and has an
actual pattern of short term profit taking; or (3) it is a derivative that
is not designated and effective as a hedging instrument. Financial assets
at FVTPL are carried in the consolidated statement of financial position
at fair value with changes in fair value recognized in profit or loss.
Transaction costs are expensed as incurred. |
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ii. |
Loans and receivables |
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Trade receivables, loans and other receivables that have
fixed or determinable payments that are not quoted in an active market are
classified as loans and receivable. |
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Loans and receivables are initially recognized at fair
value plus transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortized cost less
losses for impairment. The impairment loss of loans and receivables is
based on a review of all outstanding amounts at period end. Bad debts are
written off during the period in which they are identified. Amortized cost
is calculated taking into account any discount or premium on acquisition
and includes fees that are an integral part of the effective interest rate
and transaction costs. Gains and losses are recognized in the statements
of comprehensive income when the loans and receivables are derecognized or
impaired, as well as through the amortization process. The Company has
classified cash and cash equivalents, and trade and other receivables as
loans and receivables. |
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iii. |
HTM investments |
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HTM financial instruments, which include short-term
investments and the related transaction costs, are initially measured at
fair value. Subsequently, HTM financial assets are measured at amortized
cost using the effective interest rate method, less any impairment
losses. |
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iv. |
AFS financial assets |
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Non-derivative financial assets not included in the above
categories are classified as AFS financial assets. They are carried at
fair value with changes in fair value generally recognized in other
comprehensive loss and accumulated in the AFS reserve. Impairment losses
are recognized in profit or loss. Purchases and sales of AFS financial
assets are recognized on settlement date with any change in fair value
between trade date and settlement date being recognized in the AFS
reserve. On sale, the cumulative gain or loss recognized in other
comprehensive income is reclassified from the AFS reserve to profit or
loss. |
Page F-16 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
|
v. |
Impairment of financial assets |
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The Company assesses at each reporting date whether a
financial asset or a group of financial assets is impaired. A financial
asset or group of financial assets is deemed to be impaired if, and only
if, there is objective evidence of impairment as a result of one or more
events that has occurred after the initial recognition of the asset and
that event has an impact on the estimated future cash flows of the
financial asset or the group of financial assets that can be reliably
estimated. |
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For financial assets carried at amortized cost, the
amount of the impairment is the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at
the asset’s original effective rate.
The carrying amount of all financial
assets, excluding advances and other receivables, is directly reduced by
the impairment loss. The carrying amount of receivables is reduced through
the use of an allowance account. Associated allowances are written off
when there is no realistic prospect of future recovery and all collateral
has been realized or has been transferred to the Company. Subsequent
recoveries of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the allowance account
are recognized in profit or loss. A provision for impairment is made in
relation to advances and other receivables, and an impairment loss is
recognized in profit and loss when there is objective evidence that the
Company will not be able to collect all of the amounts due under the
original terms. The carrying amount of the receivable is reduced through
the use of an allowance account.
With the exception of AFS equity
instruments, if in a subsequent period the amount of impairment loss
decreases and the decrease relates to an event occurring after the
impairment was recognized, the previously recognized impairment loss is
reversed through profit or loss. On the date of impairment reversal, the
carrying amount of the financial asset cannot exceed its amortized cost
had the impairment not been recognized. Reversals for AFS equity
instruments are not recognized in profit or loss. |
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vi. |
Effective interest method |
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The effective interest method calculates the amortized
cost of a financial instrument asset or liability and allocates interest
income or cost over the corresponding period. The effective interest rate
is the rate that discounts estimated future cash receipts or payments over
the expected life of the financial asset or liability, or where
appropriate, a shorter period. Income is recognized on an effective
interest basis for debt instruments other than those financial assets
classified as FVTPL. |
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f) |
Financial Liabilities |
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Financial liabilities are classified as FVTPL, or other
financial liabilities, as appropriate upon initial recognition. A
financial liability is derecognized when the obligation under the
liability is discharged, cancelled or expired. |
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i. |
Financial liabilities classified as other financial
liabilities are initially recognized at fair value less directly
attributable transaction costs. Subsequent to the initial recognition,
other financial liabilities are measured at amortized cost using the
effective interest method. The Company’s other financial liabilities
include trade and other payables. |
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ii. |
Financial liabilities classified as FVTPL include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as FVTPL. Financial liabilities are
classified as held-for-trading if they are acquired for the purpose of
selling in the near term. This category includes derivative financial
instruments (including separated embedded derivatives) held for trading
unless they are designated as effective hedging instruments. Gains or
losses on liabilities held for trading are recognized in the consolidated
statement of comprehensive income. The Company has derivative liabilities
and preferred shares classified as FVTPL. |
Page F-17 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
g) |
Borrowing Costs |
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Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their
intended use, are added to the cost of those assets, until such time as
the assets are substantially ready for their intended use. All other costs
are expensed. |
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h) |
Commercial Production |
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The Company assesses the stage of each mine under
construction to determine when a mine has moved into the commercial
production phase. Capitalization of costs, including certain mine
development and construction costs, ceases when the related mining
property has reached a pre-determined level of operating capacity intended
by management. Costs incurred prior to this point, including depreciation
of related plant and equipment, are capitalized and proceeds from sales
during this period are offset against capitalized costs. During the
production phase of a mine, costs incurred relating to mining asset
additions or improvements or mineable reserve development are assessed to
determine whether capitalization is appropriate. |
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i) |
Revenue Recognition |
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Revenue is measured at the fair value of the
consideration received or receivable and represents amounts for gold sold
in the normal course of business, net of discounts and sales related
taxes. Revenue from the sale of gold is recognized when control of the
gold and the significant risks and rewards of ownership are transferred to
the customer, which is usually when title has passed to the customer, the
Company retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods
sold, the amount of revenue can be measured reliably, collection is
reasonably assured, and costs can be measured reliably. |
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j) |
Income Per Share |
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Basic income per share is computed by dividing the net
income applicable by the weighted average number of common shares
outstanding during the reporting period. Diluted income per share is
computed by dividing the net income by the sum of the weighted average
number of common shares issued and outstanding during the reporting period
and all additional common shares for the assumed exercise of stock options
and warrants outstanding for the reporting period, if dilutive. The
treasury stock method is used for the assumed proceeds upon the exercise
of stock options and warrants that are used to purchase common shares at
the average market price during the reporting period. |
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k) |
Inventories |
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Inventories include gold bullion, gold-in-process,
stockpiled ore, and parts and supplies. Inventories are valued at the
lower of cost and net realizable value. The cost of stockpiled ore is
based on the weighted average cost per tonnes. The cost of gold bullion
and gold-in-process is based on the average cost of production, which
includes all costs attributable to the extraction and processing of ore.
The costs of production include: i) materials, equipment, labor and
contractor expenses directly attributable to the extraction and processing
of ore; ii) depletion and depreciation of property, plant, and equipment
used in the extraction and processing of ore; and iii) related production
overheads based on normal operating capacity. Net realizable value is the
estimated selling price in the ordinary course of business less all
estimated costs of completion and costs necessary to make the
sale. |
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l) |
Property, Plant and Equipment
(“PPE”) |
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i. |
Recognition and measurement |
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Items of PPE are measured at cost less accumulated
depreciation and accumulated impairment losses. Cost includes expenditures
that are directly attributable to the acquisition of the asset. The cost
of self-constructed assets includes the cost of materials, direct labor
and any other cost directly attributable to bring the asset to the
location and condition necessary to be capable of operating in the manner
intended by the Company. Assets in the course of construction are
capitalized in the capital construction in progress category and
transferred to the appropriate category of PPE upon completion. When
components of an asset have different useful lives, depreciation is
calculated on each separate component. |
Page F-18 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
|
ii. |
Subsequent costs |
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The cost of replacing part of an item of PPE is
recognized in the carrying amount of the item if it is probable that the
future economic benefits embodied within the part will flow to the Company
and its cost can be measured reliably. The carrying amount of the replaced
part is derecognized and included in net income. If the carrying amount of
the replaced component is not known, it is estimated based on the cost of
the new component less estimated depreciation. The costs of the day-to-day
servicing of property, plant and equipment are recognized in profit or
loss as incurred. |
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iii. |
Depreciation |
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Depreciation is based on the cost of an asset less its
residual value. PPE associated with mining operations are depreciated over
the estimated useful lives of the assets on a unit of production basis
which is measured by the portion of the mine’s economically recoverable
ore reserves produced during the period. All other equipment is
depreciated over the estimated useful life of the asset using the straight
line method or declining balance method at a rate of 20% to 30% as
appropriate. |
|
|
|
|
|
|
|
Depreciation methods, useful lives and residual values
are reviewed at each annual reporting period and adjusted, if appropriate.
Changes in estimates are accounted for prospectively. Depreciation
commences when an asset is available for use or in production. |
|
|
|
|
|
|
iv. |
Gains and losses |
|
|
|
|
|
|
|
Gains and losses on disposal of an item of PPE are
determined by comparing the net proceeds from disposal with the carrying
amount of the PPE, and are recognized net within other charges and
provisions in the consolidated statement of comprehensive
income. |
|
|
|
|
|
|
v. |
Repairs and maintenance |
|
|
|
|
|
|
|
Repairs and maintenance costs are charged to production
costs as incurred, except major inspections or overhauls that are
performed at regular intervals over the useful life of an asset are
capitalized as part of PPE. |
|
|
|
|
|
|
vi. |
Derecognition |
|
|
|
|
|
|
|
An item of PPE is derecognized upon disposal or when no
future economic benefits are expected to arise from the continued use of
the asset. Any gain or loss arising on derecognition of the assets
(calculated as the difference between the net proceeds from disposal and
the carrying amount of the item) is included in net income in the period
the item is derecognized. |
|
m) |
Exploration and Evaluation
Assets |
|
|
|
|
|
All direct costs related to exploration and
evaluation of mineral properties, net of incidental revenues, are
capitalized under exploration and evaluation assets. Exploration and
evaluation expenditures include such costs as acquisition of rights to
explore; sampling, trenching and surveying costs; costs related to
topography, geology, geochemistry and geophysical studies; drilling costs
and costs in relation to technical feasibility and commercial viability of
extracting a mineral resource.
A regular review of each property is undertaken
to determine the appropriateness of continuing to carry forward costs in
relation to exploration and evaluation of mineral properties. Should the
carrying value of the expenditure not yet amortized exceed its estimated
recoverable amount in any year, the excess is written off to the
consolidated statement of comprehensive income. |
Page F-19 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
n) |
Mine Under Construction |
|
|
|
|
|
Upon completion of a technical feasibility study
determining the commercial viability of extracting a mineral resource,
exploration and development expenditures are transferred to mine under
construction. All subsequent expenditures on the construction,
installation or completion of infrastructure facilities are capitalized to
mine under construction until the commencement of commercial production.
Development expenditures are net of proceeds from sale of ore extracted
during the development phase. After commercial production starts, all
assets included in mine under construction are transferred to PPE.
Capitalized development expenditures are not depreciated until the assets
are ready for their intended use. Upon completion of construction, mining
assets are amortized on a unit of production basis which is measured by
the portion of the mine’s economically recoverable ore reserves produced
during the period. Impairment is tested in the same way as other
non-financial assets. |
|
|
|
|
o) |
Impairment of Non-financial Assets |
|
|
|
|
|
The Company’s PPE is assessed for indication of
impairment at each consolidated statement of financial position date.
Exploration and evaluation assets are assessed for impairment when facts
and circumstances suggest that the carrying amount of an exploration and
evaluation asset may exceed its recoverable amount. When facts and
circumstances suggest that the carrying amount exceeds the recoverable
amount, an entity shall measure, present and disclose any resulting
impairment in accordance with IAS 36 Impairment of Assets. Internal
factors, such as budgets and forecasts, as well as external factors, such
as expected future prices, costs and other market factors are also
monitored to determine if indications of impairment exist. If any
indication of impairment exists, an estimate of the asset’s recoverable
amount is calculated. The recoverable amount is determined as the higher
of the fair value less costs to sell the asset and the asset’s value in
use. This is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other
assets or the Company’s assets. If this is the case, the individual assets
are grouped together into cash generating units (“CGU”) for impairment
purposes. Such CGUs represent the lowest level for which there are
separately identifiable cash inflows that are largely independent of the
cash flows from other assets. Exploration and evaluation assets are
assessed to determine whether they are to be grouped into an operating CGU
or if they must be assessed individually if no relevant CGU exists for the
purpose of grouping for impairment purposes. |
|
|
|
|
|
If the carrying amount of the asset exceeds its
recoverable amount, the asset is impaired and an impairment loss is
charged to the consolidated statement of comprehensive income as to reduce
the carrying amount to its recoverable amount (i.e., the higher of fair
value less cost to sell and value in use). Fair value less cost to sell is
the amount obtainable from the sale of an asset or CGU in an arm’s length
transaction between knowledgeable, willing parties, less the costs of
disposal. Value in use is determined as the present value of the future
cash flows expected to be derived from an asset or CGU. The estimated
future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which estimates of future
cash flows have not been adjusted. Estimated future cash flows are
calculated using estimated future prices, mineral reserves and resources,
and operating and capital costs. All assumptions used are those that an
independent market participant would consider appropriate. |
|
|
|
|
|
To date the Company has not recognized any impairment of
its non-financial assets. |
|
|
|
|
p) |
Income Taxes |
|
|
|
|
|
Income tax expense consists of current and deferred tax
expense. Income tax expense is recognized in profit and loss, except to
the extent that it relates to items recognized in other comprehensive
income or directly in equity. In this case, the tax is also recognized in
other comprehensive income or directly in equity. |
|
|
|
|
|
Current income tax assets and liabilities for the current
and prior periods are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws used to
compute current income tax assets and liabilities are measured at future
anticipated tax rates, which have been enacted or substantively enacted at
the reporting date. Current tax assets and current tax liabilities are
only offset if a legally enforceable right exists to set off the amounts,
and the Company intends to settle on a net basis, or to realize the asset
and settle the liability simultaneously. |
Page F-20 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
|
Deferred taxation is provided on all qualifying
temporary differences at the reporting date between the tax basis of
assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred tax assets are only recognized to the extent that it is
probable that future taxable profit will be available against which the
temporary difference can be utilized.
Deferred tax liabilities and assets are not
recognized for temporary differences between the carrying amount and tax
bases of investments in subsidiaries and associates where the parent
entity is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in
the foreseeable future. |
|
|
|
|
|
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation
authority. |
|
|
|
|
q) |
Share-Based Payments |
|
|
|
|
|
Equity-settled share-based payments for directors,
officers and employees are measured at fair value at the date of grant and
recorded as share-based payments expense in the financial statements. The
fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period
based on the Company’s estimate of the number of share-based awards that
will eventually vest. The number of forfeitures likely to occur is
estimated on grant date and is revised as deemed necessary. Any
consideration paid by directors, officers and employees on exercise of
equity-settled share-based payments is credited to share capital. Shares
are issued from treasury upon the exercise of equity-settled share-based
instruments. |
|
|
|
|
|
Compensation expense on stock options granted to
non-employees is measured on the date when the goods or services are
received at the fair value of goods or services received. When the value
of goods or services received in exchange for the share-based payment
cannot be reliably estimated, the fair value of the share-based payments,
which is measured by use of a Black-Scholes valuation model, is used. The
expected life used in the model is adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions,
and behavioural considerations. |
|
|
|
|
r) |
Provisions and Contingencies |
|
|
|
|
|
Provisions are recognized when a legal or constructive
obligation exists, as a result of past events, and it is probable that an
outflow of resources that can be reliably estimated will be required to
settle the obligation. Where the effect is material, the provision is
discounted using an appropriate current market-based pre-tax discount
rate. The increase in the provision due to the time value of money is
recognized as interest expense. |
|
|
|
|
|
When a contingency substantiated by confirming events,
can be reliably measured and is probable to result in an economic outflow,
a liability is recognized as the best estimate required to settle the
obligation. A contingent liability is disclosed where the existence of an
obligation will only be confirmed by future events, or where the amount of
a present obligation cannot be measured reliably or will likely not result
in an economic outflow. Contingent assets are only disclosed when the
inflow of economic benefits is probable. When the economic benefit becomes
virtually certain, the asset is no longer contingent and is recognized in
the consolidated financial statements. |
|
|
|
|
s) |
Newly Applied Accounting Standards |
|
|
|
|
|
The following new and revised standards and
interpretations were applied as of January 1,
2014: |
|
|
• |
IAS 32, “Financial Instruments:
Presentation” (amendment); |
|
|
• |
IAS 36, “Impairment of Assets”
(amendment); |
|
|
• |
IAS 39, “Financial Instruments:
Recognition” (amendment); |
|
|
• |
IFRS 13, “Fair Value Measurement”
(amendment); and |
|
|
• |
IFRIC 21, “Levies” (new).
|
The adoption of these new and revised
standards and interpretations did not have a significant impact on the Company’s
consolidated financial statements.
Page F-21 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
t) |
Accounting Standards Issued But Not Yet
Effective |
|
|
|
|
|
The Company has reviewed new and revised accounting
pronouncements that have been issued but are not yet effective and
determined that the following may have an impact on the Company:
Amendments to IFRS 8, Operating Segments (“IFRS 8”) were issued by the
IASB in December 2013. The amendments add a disclosure requirement for the
aggregation of operating segments and clarify the reconciliation of the
total reportable segments' assets to the entity's assets. The amendments
are effective for annual periods beginning on or after July 1, 2014. The
Company is evaluating the impact of this standard but does not expect the
standard to have a material impact on its consolidated financial
statements. |
|
|
|
|
|
IFRS 9, Financial instruments (“IFRS 9”) was issued by
the IASB on July 24, 2014 and will replace IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 is intended to reduce the complexity
for the classification, measurement, and impairment of financial
instruments. The mandatory effective date is for annual periods beginning
on or after January 1, 2018. The Company is evaluating the impact of this
standard on its consolidated financial statements. |
|
|
|
|
|
Amendments to IFRS 10, Consolidated Financial Statements
(“IFRS 10”), IFRS 12 Disclosure of Interests in Other Entities (“IFRS
12”), and IAS 28 Investments in Associates and Joint Ventures (“IAS 28”)
were published by the IASB in December 2014. The amendments define the
application of the consolidation exception for investment entities. They
are effective for annual periods beginning on or after January 1, 2016.
The Company is evaluating the impact of this standard but does not expect
the standard to have a material impact on its consolidated financial
statements. |
|
|
|
|
|
IFRS 15, Revenue from Contracts with Customers (“IFRS
15”) was issued by the IASB on May 28, 2014 and will replace IAS 18
Revenue and IAS 11 Construction Contracts and related interpretations.
IFRS 15 provides a more detailed framework for the timing of revenue
recognition and increased requirements for disclosure of revenue. IFRS 15
uses a control-based approach to recognize revenue which is a change from
the risk and reward approach under the current standard. The mandatory
effective date is for annual periods beginning on or after January 1,
2017. The Company is evaluating the impact of this standard on its
consolidated financial statements. |
|
|
|
|
|
Amendments to IAS 1, Presentation of Financial Statements
(“IAS 1”) were issued by the IASB in December 2014. The amendments clarify
principles for the presentation and materiality consideration for the
financial statements and notes to improve understandability and
comparability. The amendments to IAS 1 are effective for annual periods
beginning on or after January 1, 2016. The Company is evaluating the
impact of this standard on its consolidated financial
statements. |
|
|
|
|
|
Amendments to IAS 16, Property, Plant and Equipment (“IAS
16”) were issued by the IASB in May 2014. The amendments prohibit the use
of a revenue-based depreciation method for property, plant and equipment
as it is not reflective of the economic benefits of using the asset. They
clarify that the depreciation method applied should reflect the expected
pattern of consumption of the future economic benefits of the asset. The
amendments to IAS 16 are effective for annual periods beginning on or
after January 1, 2016. The Company does not expect the standard to have a
material impact on its consolidated financial statements. |
|
|
|
|
|
Amendments to IAS 24, Related Party Disclosures (“IAS
24”) were issued by the IASB in December 2013. It clarifies the
identification and disclosure requirements for related party transactions
when key management personnel services are provided by a management
entity. The amendments are effective for annual periods beginning on or
after July 1, 2014. The Company is evaluating the impact of this standard
on its consolidated financial statements. |
|
|
|
|
|
Amendments to IAS 38 Intangible Assets (“IAS 38”) were
issued by the IASB in May 2014. The amendments prohibit the use of a
revenue- based depreciation method for intangible assets. Exceptions are
allowed where the asset is expressed as a measure of revenue or revenue
and consumption of economic benefits for the asset are highly correlated.
The amendments to IAS 38 are effective for annual periods beginning on or
after January 1, 2016. The Company is evaluating the impact of this
standard but does not expect the standard to have a material impact on its
consolidated financial statements. |
Page F-22 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
4. SUBSIDIARIES
The following table lists subsidiaries of the Company:
|
Name of Subsidiary |
Place of Incorporation |
Proportion of Beneficial Common
Share Ownership Interest |
Principal Activity |
|
Twangiza Mining SA |
Democratic Republic of the
Congo |
100% |
Mining |
|
Namoya Mining SA |
Democratic Republic of the Congo |
100% |
Mining |
|
Lugushwa Mining SA |
Democratic Republic of the
Congo |
100% |
Mining |
|
Kamituga Mining SA |
Democratic Republic of the Congo |
100% |
Mining |
|
Banro Congo Mining SA |
Democratic Republic of the
Congo |
100% |
Mining |
|
Banro Hydro SARL |
Democratic Republic of the Congo |
100% |
Inactive |
|
Banro American Resources Inc. |
United States of America |
100% |
Inactive |
|
Twangiza (Barbados) Limited |
Barbados |
100% |
Holding and Financing |
|
Namoya (Barbados) Limited |
Barbados |
100% |
Holding and Financing |
|
Lugushwa (Barbados) Limited |
Barbados |
100% |
Holding |
|
Kamituga (Barbados) Limited |
Barbados |
100% |
Holding |
|
Banro Congo (Barbados) Limited |
Barbados |
100% |
Holding |
|
Banro Group (Barbados) Limited |
Barbados |
100% |
Holding and Financing |
5. CASH AND CASH
EQUIVALENTS
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
$ |
|
|
$ |
|
|
Cash |
|
786 |
|
|
4,121 |
|
|
Cash
equivalents |
|
216
|
|
|
331
|
|
|
|
|
1,002 |
|
|
4,452 |
|
Cash and cash equivalents of the Company include cash on hand,
deposits held at financial institutions, and other short-term, highly liquid
investments with original maturities of three months or less that is readily
convertible to known amounts of cash.
6. TRADE AND OTHER RECEIVABLES
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
$ |
|
|
$ |
|
|
Advances to employees |
|
211 |
|
|
368 |
|
|
VAT receivable |
|
6,797 |
|
|
8,453 |
|
|
Due from related parties |
|
- |
|
|
63 |
|
|
Other receivables |
|
253
|
|
|
- |
|
|
|
|
7,261 |
|
|
8,884 |
|
As at December 31, 2014, there was no allowance on the
value-added taxes (“VAT”) or advances to employees as all amounts are expected
to be fully recovered.
Details of balances owing from and transactions with related
parties are disclosed in Note 24.
Page F-23 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
7. PREPAID EXPENSES AND DEPOSITS
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
$ |
|
|
$ |
|
|
Supplier prepayments and deposits -
Twangiza |
|
3,066 |
|
|
4,652 |
|
|
Supplier prepayments and deposits - Namoya |
|
1,959 |
|
|
1,503 |
|
|
Prepaid insurance and rent |
|
1,139 |
|
|
2,291 |
|
|
|
|
6,164 |
|
|
8,446 |
|
8. INVENTORIES
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
$ |
|
|
$ |
|
|
Ore in stockpiles |
|
709 |
|
|
1,094 |
|
|
Gold in process |
|
723 |
|
|
1,051 |
|
|
Gold bullion |
|
2,143 |
|
|
4,201 |
|
|
Mine operating
supplies |
|
25,318 |
|
|
25,590 |
|
|
Total current portion |
|
28,893 |
|
|
31,936 |
|
|
|
|
|
|
|
|
|
|
Non-current ore in stockpiles1 |
|
3,874 |
|
|
- |
|
|
Total non-current
portion |
|
3,874
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total |
|
32,767 |
|
|
31,936 |
|
1 Includes low-grade
material not scheduled for processing within the next twelve months.
During the year ended December 31, 2014, the Company recognized
$34,441 (years ended December 31, 2013 and 2012 - $33,112 and $10,744,
respectively) of parts and supplies inventory as an expense within production
costs in the consolidated statement of comprehensive income/(loss).
9. LONG-TERM
INVESTMENT
The Company’s investment in Delrand Resources Limited
(“Delrand”), which met the definition of an associate of the Company as at
December 31, 2013, is classified as an available for sale financial asset as at
December 31, 2014, and is summarized as follows:
|
Delrand Resources Limited |
|
December 31,
2014
|
|
|
December 31,
2013
|
|
|
Percentage of ownership interest |
|
7.06% |
|
|
28.65% |
|
|
Common shares held |
|
1,539 |
|
|
17,717 |
|
|
Total investment |
$ |
1,061 |
|
$ |
1,267 |
|
Delrand, a publicly listed entity on the Toronto Stock Exchange
and the JSE Limited in South Africa, is involved in the acquisition and
exploration of mineral properties in the Congo. It has an annual reporting date
of June 30. In May 2014, the Company disposed of 13,100 common shares of Delrand
for proceeds of $488, retaining ownership of 4,617 shares. This disposition
reduced the Company's ownership percentage of Delrand to 7.23%, resulting in the
Company no longer being able to exert significant influence over Delrand. Upon the disposal of the
shares, the Company derecognized the investment in associate, resulting in a
loss on disposition of $40, and recognized the balance of the shares as
financial assets at fair value. Delrand also carried out a 3 to 1 share
consolidation, reducing the number of shares owned by the Company from 4,617 to
1,539.
Page F-24 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
The fair value of the Company’s investment in Delrand, based on
the closing price of Delrand’s shares on the Toronto Stock Exchange as at
December 31, 2014, is $1,061 (December 31, 2013 - $1,499). For the year ended
December 31, 2014, the Company’s share of loss in the results of Delrand was $29
(year ended December 31, 2013 –$80). For the year ended December 31, 2014, the
Company's fair value gain was $380 was reflected in other comprehensive income
(year ended December 31, 2013 – dilution loss of $28 reflected in net income).
The Company’s investment in Delrand is summarized as follows:
|
Balance at January 1, 2013 |
$ |
1,459 |
|
|
Share of loss |
|
(80 |
) |
|
Dilution loss |
|
(28 |
) |
|
Repayment of advances |
|
11 |
|
|
Cumulative translation adjustment |
|
(95 |
) |
|
Balance at
December 31, 2013 |
$ |
1,267 |
|
|
Share of loss |
|
(29 |
) |
|
Repayment of advances |
|
(1 |
) |
|
Cumulative translation adjustment |
|
(23 |
) |
|
Balance at May 8,
2014 prior to disposition, before the following item |
$ |
1,214 |
|
|
Transfer of amounts receivable to related party
receivables |
|
(5 |
) |
|
Balance at May 8,
2014 prior to disposition |
$ |
1,209 |
|
|
|
|
|
|
|
Proceeds of disposition |
$ |
488 |
|
|
Fair value of 4,617 shares retained on
disposition |
|
681 |
|
|
Value of
investment in associate prior to disposition |
|
(1,209 |
) |
|
Loss of disposition |
|
(40 |
) |
|
Derecognition of cumulative translation adjustment related
to investment in associate |
|
(110 |
) |
|
Derecognition of contributed surplus
related to investment in associate |
|
14 |
|
|
Fair value
gain on common shares |
|
184 |
|
|
Gain on investment, net of loss on disposition |
$ |
48 |
|
|
|
|
|
|
|
Balance at May 8, 2014 upon recognition as
available for sale financial asset |
|
681 |
|
|
Fair value
gain on common shares |
|
380 |
|
|
Balance as at December 31, 2014 |
$ |
1,061 |
|
Page F-25 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
10. PROPERTY, PLANT AND
EQUIPMENT
The Company’s property, plant and equipment are summarized as
follows:
|
|
|
Mining assets |
|
|
Construction
in progress |
|
|
Plant and
equipment |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
I) Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2013 |
|
54,771 |
|
|
8,880 |
|
|
266,876 |
|
|
330,527 |
|
|
Additions |
|
- |
|
|
26,413 |
|
|
10,307 |
|
|
36,720 |
|
|
Disposals |
|
- |
|
|
- |
|
|
(587 |
) |
|
(587 |
) |
|
Balance as at December 31,
2013 |
|
54,771 |
|
|
35,293 |
|
|
276,596 |
|
|
366,660 |
|
|
Additions |
|
- |
|
|
14,249 |
|
|
4,421 |
|
|
18,670 |
|
|
Transfers |
|
- |
|
|
(48,010 |
) |
|
48,010 |
|
|
- |
|
|
Disposals |
|
- |
|
|
- |
|
|
(1,619 |
) |
|
(1,619 |
) |
|
Balance as at December 31, 2014 |
|
54,771 |
|
|
1,532 |
|
|
327,408 |
|
|
383,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
II) Accumulated Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2013 |
|
3,942 |
|
|
- |
|
|
18,846 |
|
|
22,788 |
|
|
Depreciation for
the year |
|
- |
|
|
- |
|
|
23,290 |
|
|
23,290 |
|
|
Depletion for the year |
|
8,808 |
|
|
- |
|
|
- |
|
|
8,808 |
|
|
Disposals |
|
- |
|
|
- |
|
|
(331 |
) |
|
(331 |
) |
|
Balance as at
December 31, 2013 |
|
12,750 |
|
|
- |
|
|
41,805 |
|
|
54,555 |
|
|
Depreciation for
the year |
|
- |
|
|
- |
|
|
27,914 |
|
|
27,914 |
|
|
Depletion for the year |
|
7,698 |
|
|
- |
|
|
- |
|
|
7,698 |
|
|
Disposals |
|
- |
|
|
- |
|
|
(1,466 |
) |
|
(1,466 |
) |
|
Balance as at December 31,
2014 |
|
20,448 |
|
|
- |
|
|
68,253 |
|
|
88,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
III) Carrying amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2013 |
|
42,021 |
|
|
35,293 |
|
|
234,791 |
|
|
312,105 |
|
|
Balance as at
December 31, 2014 |
|
34,323 |
|
|
1,532 |
|
|
259,155 |
|
|
295,010 |
|
During the year ended December 31, 2014, the Company removed
assets with a total cost of $1,619 and accumulated depreciation of $1,466 from
its accounting records that were no longer in use and a loss on disposition of
assets of $153 was reported in the consolidated statement of comprehensive
income. During the year ended December 31, 2013, assets with a total cost of
$587 and accumulated depreciation of $331 were removed from the accounting
records and a loss of $256 was reflected in the consolidated statement of
comprehensive income. The Company’s property, plant and equipment in the Congo
are pledged as security.
Page F-26 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
11. EXPLORATION AND EVALUATION
ASSETS
The following table summarizes the Company’s tangible
exploration and evaluation expenditures with respect to its five properties in
the Congo:
|
|
|
Twangiza |
|
|
Namoya |
|
|
Luguswha |
|
|
Kamituga |
|
|
Banro
Congo
Mining |
|
|
Total |
|
|
Cost |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Balance as at January 1,
2013 |
|
22,679 |
|
|
10,021 |
|
|
44,848 |
|
|
15,471 |
|
|
2,694 |
|
|
95,713 |
|
|
Additions |
|
5,916
|
|
|
5,030
|
|
|
5,422
|
|
|
5,531
|
|
|
108
|
|
|
22,007 |
|
|
Balance as at December 31, 2013
|
|
28,595 |
|
|
15,051 |
|
|
50,270 |
|
|
21,002 |
|
|
2,802 |
|
|
117,720 |
|
|
Additions |
|
2,431
|
|
|
1,792
|
|
|
3,163
|
|
|
3,408
|
|
|
1,425
|
|
|
12,219 |
|
|
Balance as at December 31, 2014 |
|
31,026 |
|
|
16,843 |
|
|
53,433 |
|
|
24,410 |
|
|
4,227 |
|
|
129,939 |
|
There is approximately $20 of intangible exploration and
evaluation expenditures as at December 31, 2014 (December 31, 2013 - $20). The
intangible exploration and evaluation expenditures, representing mineral rights
held by Banro Congo Mining, have not been included in the table above.
12. MINE UNDER CONSTRUCTION
Development expenditures with respect to the construction of
the Company’s Namoya mine are as follows:
|
|
|
Namoya Mine |
|
|
Cost |
|
$ |
|
|
Balance as at January 1, 2013 |
|
170,225 |
|
|
Additions |
|
166,978 |
|
|
Balance as at December 31, 2013 |
|
337,203 |
|
|
Additions |
|
98,742 |
|
|
Pre-commercial production revenue |
|
(21,687 |
) |
|
Balance as at
December 31, 2014 |
|
414,258 |
|
Mines under construction are not depreciated until construction
is completed. This is signified by the formal commissioning of a mine for
production. Revenues realized before commencement of commercial production
(“pre-commercial production revenue”) are recorded as a reduction of the
respective mining asset. A capitalization rate of 9.9% was used for general
borrowings.
13. TRADE AND OTHER
PAYABLES
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
$ |
|
|
$ |
|
|
Bank overdrafts |
|
3,653 |
|
|
491 |
|
|
Accounts payable |
|
70,358 |
|
|
65,197 |
|
|
Accrued liabilities |
|
12,385 |
|
|
11,291 |
|
|
Due
to related parties |
|
- |
|
|
635
|
|
|
|
|
86,396 |
|
|
77,614 |
|
Page F-27 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
Accounts payable and accrued liabilities are mainly comprised
of amounts outstanding for purchases relating to exploration, development, and
production activities and amounts payable for professional services. The credit
term period for purchases typically ranges from 30 to 120 days.
Details of balances owing to and transactions with related
parties are disclosed in Note 24.
14. DEFERRED REVENUE
In October 2014, the Company entered into a prepayment
arrangement with Auramet Trading, LLC (“Auramet”) (the organization through
which the Company currently sells gold produced from its mines) for $6,000 to
deliver a total of 5,228 ounces of gold in equal monthly deliveries of 1,307
ounces from November 2014 to February 2015. As per the agreement, the Company
delivered gold in November and December 2014 with a remaining balance of $3,000
for the delivery of 2,614 ounces.
Deferred revenue of $7,369 as at December 31, 2013, represented
a prepayment arrangement for the delivery of 6,250 ounces of gold to Auramet in
January 2014.
As at December 31, 2013, there was an additional $10,000
prepayment arrangement involving a total of 9,348 ounces of gold to be delivered
to Auramet in equal monthly gold deliveries of 1,558 ounces each, from July 2014
to December 2014. During 2014, the Company delivered 4,833 ounces of gold as per
the arrangement. In October 2014, the Company paid Auramet $4,300 in lieu of
delivering 3,445 ounces of gold, resulting in the de-recognition of deferred
revenue and recognition of a loss on financial instrument of $614. As at
December 31, 2014, there was a balance of 1,070 ounces to be delivered in 2015,
recognized in derivative liabilities (See Note 17).
In determining the appropriate recognition and presentation of
the deferred revenue, the Company made judgments with regards to the arrangement
with Auramet including the Company’s quantity and timing of expected future
production, intent of the arrangement, and the option to settle in cash.
15. BANK LOANS
In February 2013, the Company announced the arrangement of two
credit facilities. The credit facilities for $30,000 were completed with two
commercial banks in the Congo, Rawbank and Ecobank, each for $15,000, and at
rates of 9% and 8.5% interest, respectively. The Rawbank facility was made
available to Twangiza Mining SA, while the Ecobank facility was to Namoya Mining
SA. Both facilities were fully drawn.
The Ecobank facility was renegotiated in May 2014 to be
repayable in four quarterly payments from May 31, 2015. The restructuring of the
Ecobank agreement represents a modification of the agreement and has been
reflected in the current year.
The Rawbank facility (including accrued interest) referred to
above was renegotiated in October 2013 to be repayable in ten equal monthly
installments starting in April 2014. The said facility was fully repaid in
August 2014.
During the year ended December 31, 2014, $3,000 was received as
a short-term loan from Ecobank, which was repaid in its entirety during the
year.
In July 2013, an additional $3,000 credit facility was received
from Rawbank. The loan bears interest of 10% and is repayable over 24 equal
monthly installments starting in September 2013.
In September 2013, the Company received a $10 million credit
facility from a bank in the Congo, Banque Commerciale du Congo ("BCDC"), at a
rate of 8% interest. The facility was fully drawn. The BCDC loan was repayable,
starting February 2014, in ten equal monthly installments of $1,000 and a final
installment of $384. Subsequent to the first monthly installment, the remainder
of the BCDC facility was renegotiated to be repayable in monthly installments of
$500 for the remaining 16 months and final installment of $197. The interest
rate was increased to 9.5% per annum. The restructuring of the BCDC agreement
represents a modification of the agreement and has been reflected in the current
year.
| |
|
$ |
|
| Balance at December 31, 2012 |
|
- |
|
| Withdrawals |
|
53,000 |
|
| Repayments |
|
(10,500 |
) |
| Balance at December 31, 2013 |
|
42,500 |
|
| Withdrawals |
|
3,000 |
|
| Renegotiation Fee |
|
106 |
|
| Repayments |
|
(24,614 |
) |
| Balance at
December 31, 2014 |
|
20,992 |
|
The Company has accrued interest on the credit facilities of
$154 as of December 31, 2014 (December 31, 2013 - $419) under accrued
liabilities in its consolidated statement of financial position. The Company has
recorded interest expense of $1,070, for the year ended December 31, 2014
(December 31, 2013 - $1,253) and $2,070 was recorded in mine under construction
for the year ended December 31, 2014 (December 31, 2013 - $1,688) in relation to
the bank loans.
Page F-28 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
16. EMPLOYEE RETENTION ALLOWANCE
The Company has an employee retention incentive plan under
which an amount equal to one-month salary per year of service is accrued to each
qualified employee up to a maximum of 10 months (or 10 years of service with the
Company). To qualify for this retention allowance, an employee must complete two
years of service with the Company. The full amount of retention allowance
accumulated by a particular employee is paid out when the employee is no longer
employed with the Company, unless there is a termination due to misconduct, in
which case the retention allowance is forfeited. There is uncertainty about the
timing of these outflows but with the information available and assumption that
eligible employees will not be terminated due to misconduct, as at December 31,
2014, the Company had accrued a liability of $3,405 (December 31, 2013 -
$2,777).
The following table summarizes information about changes to the
Company’s employee retention allowance during the year ended December 31, 2014.
|
|
|
$ |
|
|
Balance as at December 31, 2012 |
|
2,170 |
|
|
Additions |
|
842 |
|
|
Payments to employees |
|
(235 |
) |
|
Balance as at December 31, 2013 |
|
2,777 |
|
|
Additions |
|
899 |
|
|
Forfeitures |
|
(92 |
) |
|
Payments to employees |
|
(179 |
) |
|
Balance as at
December 31, 2014 |
|
3,405 |
|
17. DERIVATIVE LIABILITIES
a) Call Options
In connection with the deferred revenue recognized in October
2014, the Company issued call options for the purchase of 1,250 ounces per month
for 4 months starting in June 2015 at a price of $1,400. The call options were initially recognized
at their fair value of $53 and subsequently revalued as at December 31, 2014 to
$16, resulting in an unrealized fair value gain of $37.
b) Warrants to Purchase Common Shares
On August 18, 2014, warrants were issued as a part of a debt
facility arranged by the Company (see Note 19). The warrants entitle the holders
thereof to acquire 13.3 million common shares of the Company at a price of
Cdn$0.269 per share for a period of 3 years, expiring August 18, 2017. These
warrants were recognized at an initial fair value of $360. For the year ended
December 31, 2014, transaction costs of $10 and a fair value gain of $274 were
included in the statement of comprehensive income related to the issuance and
revaluation of these warrants, respectively. As of December 31, 2014, the
Company recorded a fair value derivative liability of $86 (December 31, 2013 -
$nil).
c) Gold Prepayment Arrangement
In December 2014, the Company renegotiated the delivery of the
1,070 ounces to 535 ounces each in January and February 2015 for a remaining
balance of $1,291 that was moved to derivative liabilities (see Note 14).
18. PROVISION FOR CLOSURE AND
RECLAMATION
The Company recognizes a provision related to its constructive
and legal obligations in the Congo to restore its properties. The cost of this
obligation is determined based on the expected future level of activity and
costs related to decommissioning the mines and restoring the properties. The
provision for the Twangiza mine is calculated at the net present value of the
estimated future undiscounted liability using an interest rate of 9.57%, a mine
life of 10 years, and estimated future undiscounted liability of $9,060
(December 31, 2013 - $9,404). The provision for the Namoya mine is calculated at
the net present value of the future estimated undiscounted liability using an
interest rate of 9.57%, a mine life of 10 years, and estimated future
undiscounted liability of $10,281(December 31, 2013 - $10,204). For the year
ended December 31, 2014, the Company recorded an accretion expense of $620 (year
ended December 31, 2013 - $129) in the consolidated statement of comprehensive
income. As at December 31, 2014, the Company recorded a provision for mine
rehabilitation of $7,755 (December 31, 2013 - $4,218).
Page F-29 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
|
|
Twangiza Mine |
|
|
Namoya
Mine |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Balance at December 31, 2011
|
|
767 |
|
|
- |
|
|
767 |
|
|
Additions |
|
10
|
|
|
- |
|
|
10
|
|
|
Balance at December 31, 2012
|
|
777 |
|
|
- |
|
|
777 |
|
|
Unwinding of the discount rate |
|
129 |
|
|
- |
|
|
129 |
|
|
Additions |
|
1,117 |
|
|
2,195 |
|
|
3,312 |
|
|
Balance at December 31, 2013 |
|
2,023 |
|
|
2,195 |
|
|
4,218 |
|
|
Change in discount rate |
|
1,371 |
|
|
1,557 |
|
|
2,928 |
|
|
Unwinding of the discount rate |
|
293 |
|
|
327 |
|
|
620 |
|
|
Addition/(decrease) in obligation |
|
(54 |
) |
|
43 |
|
|
(11 |
) |
|
Balance at December 31, 2014 |
|
3,633 |
|
|
4,122 |
|
|
7,755 |
|
19. LONG-TERM DEBT
On August 18, 2014, the Company closed a liquidity backstop
facility (the “Facility”) for gross aggregate proceeds of up to $35,000. The
Facility provides for the issuance by the Company of two classes of notes,
defined as Priority Lien Notes and Parity Lien Notes, as well as common share
purchase warrants of the Company (see Note 17b). The notes will mature on July
31, 2016, but may be prepaid at any time in whole or in part without penalty.
The notes bear initial interest rates of 10% and 15% for the Priority Lien Notes
and Parity Lien Notes, respectively, accruing and payable monthly in arrears,
with semi-annual step up provisions in interest to as high as 20% and 25% for
the Priority Lien Notes and Parity Lien Notes, respectively, seven months before
expiry. Any interest payable on or before July 31, 2015 may be capitalized
monthly by the Company by adding the accrued interest to the outstanding
principal of the notes. The interest rate applicable to any such capitalized
interest will be 2% higher.
On August 18, 2014, the Company drew down under the Facility a
total of $27,700 ($19,700 in Priority Lien Notes and $8,000 in Parity Lien
Notes). On August 29, 2014, the Company drew down under the Facility an
additional $3,000 (evidenced by Priority Lien Notes). The monthly interest
payable on the notes from August 31 to December 31 was capitalized. On October
17, 2014, the Company drew down the remaining balance of $4,300 in Priority Lien
Notes. On December 9, 2014, the Company renegotiated the aggregate proceeds
limit to $37,000 and drew down an additional $2,000 in Parity Lien Notes.
The Company recognized the long-term debt portion of the
securities issued under the Facility, at a fair value of $36,640 less
transaction costs of $1,143, in its consolidated statement of financial
position. As a portion of the proceeds from the Facility is attributable to the
construction of the Namoya mine, the Company will capitalize 100% of borrowing
costs for the $2,000 in Parity Lien Notes and the related portion of all other
borrowing costs calculated using a rate of 21.91% . As at December 31, 2014, the
fair value of the long-term debt approximates its carrying value. For the year
ended December 31, 2014, the Company capitalized borrowing costs of $542
(December 31, 2013 and 2012 – $nil) to Mine under Construction and recognized
$1,827 (December 31, 2013 and 2012 - $nil) of borrowing costs under finance
expense in its consolidated statement of comprehensive income. As of December
31, 2014, the Company included capitalized interest on the outstanding principal
of $2,369 (December 31, 2013 - $nil) under long-term debt in its consolidated
statement of financial position as the capitalized interest will remain
outstanding until the date of extinguishment, in whole or part.
On March 2, 2012, the Company closed a debt offering for gross
proceeds of $175,000 (the ‘‘Offering’’). A total of 175,000 units (the
‘‘Units’’) of the Company were issued. Each Unit consisted of $1 principal
amount of notes (“the Notes”) and 48 common share purchase warrants (“the
Warrants”) of the Company. The Notes will mature March 1, 2017 and bear interest
at a rate of 10%, accruing and payable semi-annually in arrears on March 1 and
September 1 of each year. Each Warrant entitles the holder thereof to acquire
one common share of the Company at a price of $6.65 for a period of five years,
expiring March 1, 2017.
Page F-30 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
The Company recognized the long-term debt portion of the Units,
at its fair value of $160,959 less transaction costs of $9,197, in its
consolidated statement of financial position. The residual value of $14,041 less
$789 in transaction costs has been attributed to the Warrants. As a portion of
the proceeds from the Offering is attributable to the construction of the Namoya
mine, the Company will capitalize the related portion, 88%, of all borrowing
costs. As at December 31, 2014, the fair value of the
long-term debt is $113,750 (December 31, 2013 - $120,646) which is valued using
a market approach and applying an indicated yield of 34.01% . For the year ended
December 31, 2014, the Company capitalized borrowing costs of $19,277 (December
31, 2013 and 2012 – $18,801 and $15,363, respectively) to Mine under
Construction and recognized $2,677 (December 31, 2013 and 2012 - $2,612 and
$2,135, respectively) of borrowing costs under finance expense in its
consolidated statement of comprehensive income/(loss). As of December 31, 2014,
the Company included accrued interest on the long-term debt of $5,833 (December
31, 2013 - $5,833) under accrued liabilities in its consolidated statement of
financial position.
The Company has complied with its long-term debt covenants as
at December 31, 2014.
|
|
|
Offering |
|
|
Facility |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Gross proceeds received March
2, 2012 |
|
175,000 |
|
|
- |
|
|
175,000 |
|
|
Transaction costs |
|
(9,197 |
) |
|
- |
|
|
(9,197 |
) |
|
Value of warrants |
|
(14,041 |
) |
|
- |
|
|
(14,041 |
) |
|
Fair value at issuance |
|
151,762 |
|
|
- |
|
|
151,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion |
|
2,923
|
|
|
- |
|
|
2,923
|
|
|
Balance at December 31, 2012 |
|
154,685 |
|
|
- |
|
|
154,685 |
|
|
Accretion |
|
3,914
|
|
|
- |
|
|
3,914
|
|
|
Balance at December 31, 2013 |
|
158,599 |
|
|
- |
|
|
158,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issued |
|
- |
|
|
35,497 |
|
|
35,497 |
|
|
Accretion and capitalized interest |
|
4,456
|
|
|
2,369
|
|
|
6,825
|
|
|
Balance at December 31, 2014 |
|
163,055 |
|
|
37,866 |
|
|
200,921 |
|
The table below details the timing of payments for principal
and interest on the long-term debt:
|
|
|
Payments due by period |
|
|
|
|
|
|
|
Less than |
|
|
One to three |
|
|
Three to |
|
|
After four |
|
|
|
|
Total |
|
|
one year |
|
|
years |
|
|
four years |
|
|
years |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Offering debt |
|
175,000 |
|
|
- |
|
|
175,000 |
|
|
- |
|
|
- |
|
|
Offering debt interest |
|
43,750 |
|
|
17,500 |
|
|
26,250 |
|
|
- |
|
|
- |
|
|
Facility debt |
|
37,000 |
|
|
- |
|
|
37,000 |
|
|
- |
|
|
- |
|
|
Facility debt interest |
|
13,848 |
|
|
2,964 |
|
|
10,884 |
|
|
- |
|
|
- |
|
20. PREFERENCE SHARES
a) Authorized
The Company may issue preference shares at any time and from
time to time in one or more series with designations, rights, privileges,
restrictions and conditions fixed by the board of directors. The preference
shares of each series shall be ranked on a parity with the preference shares of
every other series and are entitled to priority over the common shares and any
other shares of the Company ranking junior to the preference shares, with
respect to priority in payment of dividends and the return of capital and the
distribution of assets of the Company in the event of liquidation, dissolution
or winding up of the Company.
Page F-31 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
b) Issued
On April 25, 2013 (the “Closing Date”), the Company issued
116,000 series A preference shares of the Company at a price of $25 per series A
preference share (“Series A Shares”) and 1,200,000 preferred shares of a
subsidiary (“Subco”) of the Company (the “Subco Shares”) combined with 1,200,000
associated series B preference shares (“Series B Shares”) of the Company at a
price of $25 per combined Subco Share and Series B Share, for gross aggregate
proceeds of $32,900. Collectively, the Series A Shares and Subco Shares are
referred to as the “Preference Shares”.
Quarterly preferential cumulative cash dividends will accrue
and, if, as and when declared by the applicable board of directors are payable
on the last day of each of March, June, September and December in each year from
the date of issuance. The amount of dividends that will accrue on the Preference
Shares on any dividend payment date shall be an amount per share equal to the
product obtained by multiplying (i) the Dividend Liquidation Preference (as
defined below) on such dividend payment date by (ii) the quotient obtained by
dividing (A) the Production Schedule Yield (as defined below) on such dividend
payment date by (B) four.
The “Dividend Liquidation Preference” of a Preference Share on
any dividend payment date means an amount equal to (i) the simple average of the
afternoon London Gold Fix price per troy ounce for each trading day during the
three month period ending on the immediately preceding dividend payment date
multiplied by (ii) 0.017501.
The “Production Schedule Yield” means for any dividend payment
date the percentage rate appearing under the heading “Annual Dividend Yield” in
the table below corresponding to the Monthly Production Level for such dividend
payment date (where Monthly Production Level for any dividend payment date
refers to the average monthly production level during the three-month period
ending on the immediately preceding dividend payment date).
|
Monthly
Production |
Annual Dividend |
|
Level
(ounces) |
Yield (%) |
|
< 8,001 |
10.00 |
|
8,001 - 9,000 |
10.50 |
|
9,001 - 10,000 |
11.00 |
|
10,001 - 11,000 |
11.50 |
|
11,001 - 12,000 |
12.00 |
|
12,001 - 13,000 |
12.50 |
|
13,001 - 14,000 |
13.00 |
|
14,001 - 15,000 |
13.50 |
|
15,001 - 16,000 |
14.00 |
|
16,001 - 17,000 |
14.50 |
|
> 17,000 |
15.00 |
The Preference Shares are not redeemable at the option of the
Company or Subco, as applicable, until the later of (i) the first date on which
the Company and its subsidiaries have achieved total cumulative gold production
of 800,000 ounces from and including the Closing Date and (ii) the date that is
five years from the Closing Date.
Commencing on the first day after the date that is five years
from the Closing Date, for so long as the Company and its subsidiaries have
achieved total cumulative gold production that is less than 800,000 ounces from
the Closing Date, each holder of the Preference Shares will have the option at
any time to require the Company or Subco, as applicable, to redeem all or a part
of its Preference Shares.
Commencing on the tenth anniversary of the Closing Date, each
holder of a Preference Share will have the option at any time to require the
Company or Subco, as applicable, to redeem the Preference Shares legally
available for such purpose.
Page F-32 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
The Series B Shares were issued for a nominal price and are
held by the sole holder of all of the Subco Shares. The terms of the Series B
Shares provide that, in the event that two quarterly dividend payments (whether
or not consecutive) on the Subco Shares or the Series A Shares shall have
accrued and been unpaid, the holders of the Series B Shares will be entitled to
notice of, and to attend, at each annual and special meeting of shareholders or
action by written consent at which directors of the Company will be elected and
will be entitled to a separate class vote, together with the holders of the
Series A Shares and the holders of any other series of shares of the Company
ranking on a parity with such Series B Shares or Series A Shares either as to
dividends or the distribution of assets upon liquidation, dissolution or winding
up and upon which like voting rights have been conferred and are exercisable to
elect two members to the board of directors of the Company (each a "Preferred
Holder Director") until dividends on the Subco Shares or Series A Shares have
been paid in full or declared and set apart in trust for payment (whereupon such
right shall cease unless and until another quarterly dividend payment on the
Subco Shares or Series A Shares shall have accrued and been unpaid).
The Company has classified the Preference Shares as financial
instruments measured at fair value through profit or loss for reporting purposes
given that the shares contain an embedded derivative since they may possibly be
redeemed at the option of the holder at a future date at a value based on future
circumstances. The Preference Shares are revalued at each reporting date, with a
gain or loss reported in the Company’s consolidated statement of comprehensive
income. On issuance, the Company recognized the Preference Shares at their fair
value of $32,900 in its consolidated statement of financial position. As at
December 31, 2014, the Company has recognized the Preference Shares at their
fair value of $32,626 (December 31, 2013 - $27,972). For the year ended December
31, 2014, a loss of $3,064 was recorded in the statement of comprehensive income
for the change in fair value of the derivative financial liability (December 31,
2013 – gain of $4,928). The fair value of the Preference Shares was obtained by
using a market approach. On September 30, 2014 and December 31, 2014, the
Company and Subco elected not to declare a dividend on the Preference Shares. As
at December 31, 2014, accrued dividends of $1,590 was included in the Preference
Shares balance. For the year ended December 31, 2014, $774 of dividends was
capitalized to mine under construction (year ended December 31, 2013 - $nil).
In February 2014, the Company completed a $40,000 financing
through a non-brokered private placement (the "Private Placement") involving the
issuance of preferred shares (collectively, the “Private Placement Preferred
Shares”) of two of the Company's subsidiaries (Namoya (Barbados) Limited and
Twangiza (Barbados) Limited). The Private Placement Preferred Shares pay an 8%
cumulative preferential cash dividend, payable quarterly, and mature on June 1,
2017. At the option of the holders and at any time before the maturity date, the
holders will be entitled to exchange their Private Placement Preferred Shares
into 63 million common shares of the Company at a strike price of $0.5673 per
common share. A portion of the proceeds from the Private Placement were used towards
the completion of the Namoya Mine; therefore, a portion of the dividends accrued
and paid were capitalized to mine under construction. The first four dividend
payments on the Private Placement Preferred Shares may be deferred by the
Company and accumulated at an annual rate of 10%. The dividend payments due on
September 2, 2014 and December 1, 2014 were deferred.
The Company has elected to classify the Private Placement
Preferred Shares as financial instruments measured at fair value through profit
or loss for reporting purposes given that the shares comprise multiple embedded
derivatives. The Private Placement Preferred Shares are revalued at each
reporting date, with a gain or loss reported in the Company’s consolidated
statement of comprehensive income. On issuance, the Company recognized the
Private Placement Preferred Shares at their fair value of $40,000 in its
consolidated statement of financial position. As at December 31, 2014, the
Company has recognized the Private Placement Preferred Shares at their fair
value of $38,490 (December 31, 2013 - $nil). For the year ended December 31,
2014, a gain of $4,101 was included in the consolidated statement of
comprehensive income for the change in fair value of the derivative financial
liability. The fair value of the Private Placement Preferred Shares was obtained
by using a market approach. As at December 31, 2014, capitalized dividends of
$2,591 were included in the Private Placement Preferred Shares balance of
$38,490. For the year ended December 31, 2014, dividends of $1,110 were
capitalized to mine under construction.
Issued and outstanding preference shares are as follows (number
of shares in thousands):
Page F-33 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
|
|
Number of |
|
|
|
|
|
|
|
Shares |
|
|
Fair Value |
|
|
|
|
(in thousands) |
|
|
$ |
|
|
Series A Preference Shares |
|
|
|
|
|
|
|
Issued on April 25, 2013 |
|
116 |
|
|
2,900 |
|
|
Change in fair value during the year |
|
- |
|
|
(434 |
) |
|
Balance as at December 31, 2013 |
|
116 |
|
|
2,466 |
|
|
Accrued cumulative dividends |
|
|
|
|
140 |
|
|
Change in fair value during the year |
|
|
|
|
271 |
|
|
Balance as at December 31, 2014 |
|
116 |
|
|
2,877 |
|
|
|
|
|
|
|
|
|
|
Subco Shares* |
|
|
|
|
|
|
|
Issued on April 25, 2013 |
|
1,200 |
|
|
30,000 |
|
|
Change in fair value during the year |
|
-
|
|
|
(4,494 |
) |
|
Balance as at December 31, 2013 |
|
1,200 |
|
|
25,506 |
|
|
Accrued cumulative dividends |
|
|
|
|
1,450 |
|
|
Change in fair value during the year |
|
|
|
|
2,793 |
|
|
Balance as at December 31, 2014 |
|
1,200 |
|
|
29,749 |
|
|
|
|
|
|
|
|
|
|
Namoya Barbados Private Placement
Preferred Shares |
|
|
|
|
|
|
|
Issued on February 28, 2014
|
|
20 |
|
|
20,000 |
|
|
Issued as dividends-in-kind |
|
1 |
|
|
- |
|
|
Change in fair value during the year |
|
|
|
|
(755 |
) |
|
Balance as at December 31, 2014 |
|
21
|
|
|
19,245 |
|
|
|
|
|
|
|
|
|
|
Twangiza Barbados Private Placement
Preferred Shares |
|
|
|
|
|
|
|
Issued on February 28, 2014
|
|
20 |
|
|
20,000 |
|
|
Issued as dividends-in-kind |
|
1 |
|
|
- |
|
|
Change in fair value during the year |
|
|
|
|
(755 |
) |
|
Balance as at December 31, 2014 |
|
21
|
|
|
19,245 |
|
|
|
|
|
|
|
|
|
|
Total Balance as at December 31, 2013 |
|
|
|
|
27,972 |
|
|
Total Balance as at December 31, 2014 |
|
|
|
|
71,116 |
|
*There are another 1,200 series B preference shares of the
Company associated with the Subco Shares.
21. SHARE CAPITAL
a) Authorized
The authorized share capital of the Company consists of an
unlimited number of common shares and an unlimited number of preference shares,
issuable in series, with no par value. All share, option and warrant amounts are
presented in thousands.
The holders of common shares are entitled to receive notice of
and to attend all meetings of the shareholders of the Company and shall have one
vote for each common share held at all meetings of shareholders of the Company,
except for meetings at which only holders of another specified class or series
of shares are entitled to vote separately as a class or series. Subject to the prior rights of the holders of the preference shares or any
other share ranking senior to the common shares, the holders of the common
shares are entitled to (a) receive any dividend as and when declared by the
board of directors, out of the assets of the Company properly applicable to
payment of dividends, in such amount and in such form as the board of directors
may from time to time determine, and (b) receive the remaining property of the
Company in the event of any liquidation, dissolution or winding up of the
Company.
Page F-34 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
The Company may issue preference shares at any time and from
time to time in one or more series with designation, rights, privileges,
restrictions and conditions fixed by the board of directors. The preference
shares of each series are ranked on parity with the preference shares of every
series and are entitled to priority over the common shares and any other shares
of the Company ranking junior to the preference shares, with respect to priority
in payment of dividends and the return of capital and the distribution of assets
of the Company in the event of liquidation, dissolution or winding up of the
Company.
As of December 31, 2014, the Company had 252,101 common shares
issued and outstanding (December 31, 2013 – 252,101).
|
|
|
Number of shares |
|
|
|
|
|
|
|
(in thousands) |
|
|
Amount |
|
|
Balance as at Jan 1, 2013
|
|
201,882 |
|
$ |
456,738 |
|
|
Shares issued for: |
|
|
|
|
|
|
|
Cash |
|
50,219 |
|
|
61,877 |
|
|
Balance as at December 31, 2013 |
|
252,101 |
|
$ |
518,615 |
|
|
|
|
|
|
|
|
|
|
Balance as at December 31, 2014 |
|
252,101 |
|
$ |
518,615 |
|
b) Share purchase warrants (in
thousands)
As part of the Offering disclosed in Note 19, the Company
issued to the investors 8,400 Warrants, each of which is exercisable to acquire
one common share of the Company at a price of $6.65 until March 1, 2017. As of
December 31, 2014, the Company had 8,400 Warrants outstanding (December 31, 2013
– 8,400).
In April 2013, the Company issued 735 broker warrants each of
which is exercisable to acquire one common share of the Company at a price of
Cdn$3.25 until February 24, 2015. As of December 31, 2014, all of these warrants
were outstanding (December 31, 2013 – 735).
On August 18, 2014, warrants were issued as a part of a debt
facility arranged by the Company (see Note 19). The warrants entitle the holders
thereof to acquire 13.3 million common shares of the Company at a price of
Cdn$0.269 per share for a period of 3 years, expiring August 18, 2017.
c) Income/(loss) per share
Income per share was calculated on the basis of the weighted
average number of common shares outstanding for the year ended December 31,
2014, amounting to 252,101 (December 31, 2013 and 2012 – 236,278 and 200,607,
respectively) common shares. Diluted income per share was calculated using the
treasury stock method. The diluted weighted average number of common shares
outstanding for the year ended December 31, 2014 is 252,101 common shares
(December 31, 2013 and 2012 – 236,278 and 200,607, respectively).
22. SHARE-BASED
PAYMENTS
a) Stock option plan
The Company has an incentive Stock Option Plan under which
non-transferable options to purchase common shares of the Company may be granted
to directors, officers, employees or service providers of the Company or any of
its subsidiaries. No amounts are paid or payable by the recipient on receipt of
the option, and the exercise of the options granted is not dependent on any performance-based criteria. In accordance with these
programs, options are exercisable at a price not less than the closing market
price of the shares on the day prior to the grant date.
Page F-35 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
Under this Stock Option Plan, 75% of options granted to each
optionee vest on the 12 month anniversary of their grant date and the remaining
25% of the options vest on the 18 month anniversary of their grant date. Options
granted typically have a contractual life of five years from the date of grant.
The following tables summarize information about stock options
(option numbers in thousands):
For the year ended December 31, 2014:
|
Exercise Price Range
(Cdn$) |
Opening
Balance |
During the Period |
Closing
Balance
|
Weighted
average
remaining
contractual
life (years) |
Vested &
Exercisable |
Unvested
|
|
Granted |
Exercised |
Forfeiture |
Expired |
|
0.80 - 1.00 |
2,830 |
3,525 |
- |
(665) |
- |
5,690 |
4.15 |
1,815 |
3,875 |
|
1.01 - 2.35 |
3,822 |
0 |
- |
(21) |
(1,865) |
1,936 |
0.59 |
1,935 |
- |
|
2.36 - 4.75 |
8,984 |
- |
- |
(1,013) |
(50) |
7,921 |
2.07 |
7,921 |
- |
|
|
15,636 |
3,525 |
- |
(1,699) |
(1,915) |
15,547 |
2.65 |
11,672 |
3,875 |
|
Weighted Average
Exercise Price (Cdn$) |
3.26 |
0.80 |
|
3.00 |
2.18 |
2.87 |
|
3.54 |
0.83 |
For the year ended December 31, 2013:
|
Exercise Price Range
(Cdn$) |
Opening
Balance |
During the Period |
Closing Balance |
Weighted
average
remaining
contractual
life (years)
|
Vested &
Exercisable |
Unvested |
|
Granted |
Exercised |
Forfeiture |
Expired |
|
1.00 - 2.35 |
4,003 |
2,860 |
- |
(212) |
- |
6,651 |
2.59 |
3,822 |
2,829 |
|
2.40 - 4.75 |
10,616 |
- |
- |
(1,571) |
(60) |
8,985 |
3.09 |
8,491 |
494 |
|
|
14,619 |
2,860 |
- |
(1,783) |
(60) |
15,636 |
2.88 |
12,313 |
3,323 |
|
Weighted Average
Exercise Price (Cdn$) |
3.79 |
1.00 |
- |
3.99 |
3.10 |
3.26 |
- |
3.74 |
1.49 |
The fair value at grant date is determined using a
Black-Scholes option pricing model that takes into account the exercise price
based on the historic share price movement, the term of the stock option, the
expected life based on past experience, the share price at grant date, expected
price volatility of the underlying share based on the historical weekly share
price, the expected dividend yield and the risk free interest rate as per the
Bank of Canada for the term of the stock option.
There were 3,525 stock options granted during the year ended
December 31, 2014. The assessed fair value, using the Black-Scholes option
pricing model, of stock options granted during the year ended December 31, 2014
was a weighted average Cdn$0.16 per stock option.
The model inputs for stock options granted during the years
ended December 31, 2014, 2013 and 2012 included:
Page F-36 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
Period ended |
December 31, 2014 |
December 31, 2013 |
December 31, 2012 |
|
Risk free interest rate |
1.05% - 1.10% |
1.21% |
0.98% - 1.91% |
|
Expected life |
3 years |
3 years |
3 years |
|
Annualized volatility |
75.99 - 76.27% |
70.78% - 72.25% |
58.77% - 73.46% |
|
Dividend yield |
0.00% |
0.00% |
0.00% |
|
Forfeiture rate |
2.00% |
2.00% |
2.00% |
|
Grant date fair value |
$0.16 - $0.27 |
$0.24 - $0.44 |
$1.24 - $2.32 |
During the year ended December 31, 2014, the Company recognized
in the consolidated statement of comprehensive income an expense of $576 (year
ended December 31, 2013 and 2012 – $2,642 and $7,929, respectively) representing
the fair value at the date of grant of stock options previously granted to
employees, directors and officers under the Company’s Stock Option Plan. In
addition, an amount of $171 for the year ended December 31, 2014, respectively,
(year ended December 31, 2013 and 2012 – $1,564 and $7,351, respectively)
related to stock options issued to employees of the Company’s subsidiaries in
the Congo was capitalized to the exploration and evaluation asset and to mine
under construction.
These amounts were credited accordingly to contributed surplus
in the consolidated statements of financial position.
b) Share Appreciation Rights Plan
In June 2013, the Company established an incentive Share
Appreciation Rights (“SARs”) Plan under which non-transferable cash-settled SARs
may be granted to directors, officers, or employees of the Company or any of its
subsidiaries. No amounts are paid or payable by the recipient on receipt of the
SAR, and the exercise of the SARs granted is not dependent on any
performance-based criteria.
Under this SARs Plan, all of the SARs granted to date vest on
the 12 month anniversary of their grant date. SARs granted to date have a
contractual life of two years from the date of grant.
The following tables summarize information about SARs (number
of SARS in thousands)-:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
During the Year |
|
|
|
|
|
average |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
remaining |
|
|
|
|
|
|
|
| |
|
Opening |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing |
|
|
contractual |
|
|
Vested & |
|
|
|
|
| Exercise
Price (Cdn$) |
|
Balance |
|
|
Granted |
|
|
Exercised |
|
|
Forfeiture |
|
|
Expired |
|
|
Balance |
|
|
life (years) |
|
|
Exercisable |
|
|
Unvested |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $2.30 |
|
- |
|
|
500 |
|
|
- |
|
|
- |
|
|
- |
|
|
500 |
|
|
0.95 |
|
|
500 |
|
|
- |
|
| |
|
- |
|
|
500
|
|
|
- |
|
|
- |
|
|
- |
|
|
500
|
|
|
0.95
|
|
|
500
|
|
|
- |
|
|
Weighted Average Exercise Price (Cdn$)
|
|
- |
|
|
2.30 |
|
|
- |
|
|
- |
|
|
- |
|
|
2.30 |
|
|
- |
|
|
2.30 |
|
|
- |
|
The model inputs and grant date fair value for SARs outstanding as at December 31, 2014
included:
|
Risk
free interest rate |
1.09% |
|
Expected life |
1 year |
|
Annualized volatility |
69.61% |
|
Dividend yield |
0.00% |
|
Forfeiture rate |
2.00% |
|
Grant date fair
value |
0.1880 |
The fair value at grant date and at each reporting date is
determined using a Black-Scholes option pricing model. The expected price
volatility is based on the historic volatility (based on the remaining life of
the SARs), adjusted for any expected changes to future volatility due to
publicly available information.
During the year ended December 31, 2014, the Company recognized
in the consolidated statement of comprehensive income a change in fair value of
$24, (year ended December 31, 2013 - $24) representing the fair value at the
date of grant of SARs, less changes in fair value, previously granted under the
Company’s SARs Plan.
Page F-37 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
23. COMMITMENTS AND CONTINGENCIES
The Company has entered into a number of leases for buildings
with renewal terms whereby the lease agreements can be extended based on market
prices at the time of renewal. There are no restrictions placed upon the lessee
by entering into these leases.
The Company's future minimum operating lease commitments for
office premises as at December 31, 2014 are as follows:
The Company is committed to the payment of surface fees and
taxes on its 14 exploration permits. The surface fees and taxes are required to
be paid annually under the Congo Mining Code in order to keep exploration
permits in good standing.
In addition to the above matters, the Company and its
subsidiaries are also subject to routine legal proceedings and tax audits. The
Company does not believe that the outcome of any of these matters, individually
or in aggregate, would have a material effect on its consolidated income, cash
flow or financial position.
24. RELATED PARTY
TRANSACTIONS
Balances and transactions between the Company and its
subsidiaries, which are related parties of the Company, have been eliminated on
consolidation, and are not disclosed in this note.
a) Key Management Remuneration
The Company’s related parties include key management. Key
management includes directors (executive and non-executive), the Chief Executive
Officer (“CEO”), the Chief Financial Officer, and the Vice Presidents reporting
directly to the CEO. The remuneration of the key management of the Company as
defined above, during the years ended December 31, 2014, 2013 and 2012 was as
follows:
|
|
|
Years
Ended |
|
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Short-term employee benefits |
|
3,589 |
|
|
4,438 |
|
|
15,305 |
|
|
Other benefits |
|
73 |
|
|
76 |
|
|
108 |
|
|
Employee retention allowance |
|
220 |
|
|
204 |
|
|
242 |
|
|
Settlement |
|
- |
|
|
2,498 |
|
|
- |
|
|
|
|
3,882 |
|
|
7,216 |
|
|
15,655 |
|
As of December 31, 2014, the Company had an outstanding balance
of $1,808 owed as a part of the 2013 settlement with the former CEO. It is
payable in monthly installments expiring in the second quarter of 2016.
During the year ended December 31, 2014, directors fees of $378
(year ended December 31, 2013 and 2012 - $273 and $271, respectively) were
incurred for non-executive directors of the Company. As of December 31, 2014,
$86 was included in accrued liabilities as a payable to seven directors
(December 31, 2013 - $nil).
b) Other Related Parties
Page F-38 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
$ |
|
|
$ |
|
|
Due from related parties |
|
- |
|
|
63 |
|
|
Due to related
parties |
|
- |
|
|
635
|
|
During the year ended December 31, 2013, legal fees of $1,376
(year ended December 31, 2012 - $812), incurred in connection with the Company’s
financings as well as general corporate matters, were paid to a law firm of
which one partner, Richard Lachcik, was a director of the Company and another
law firm of which one partner, Lambert Djunga, is a director of a subsidiary of
the Company. As at December 31, 2013, the balance of $575 owing to both legal
firm was included in due to related parties in the consolidated statements of
financial position.
During the year ended December 31, 2013, the Company incurred
common expenses of $197 (year ended December 31, 2012 - $385) in the Congo
together with Loncor Resources Inc. (“Loncor”), a corporation with common
directors. As at December 31, 2013, an amount of $60 owing to Loncor was
included in due to related parties in the consolidated statements of financial
position.
During the year ended December 31, 2013, the Company incurred
common expenses of $129 (year ended December 31, 2012 - $395) with Gentor
Resources Inc. (“Gentor”), a corporation with common directors. As at December
31, 2013, an amount of $63 owing from Gentor was included in due from related
parties in the consolidated statements of financial position.
During the year ended December 31, 2014, there was no repayment
to Delrand Resources Limited (“Delrand”) with respect to the Company’s share of
prior period common expenses in the Congo (year ended December 31, 2013 - $11).
As at December 31, 2014, an amount of $4 (December 31, 2013 - $5) was due from
Delrand. Amounts due from Delrand as at December 31, 2013 were included in
Long-term investment. Delrand ceased to be a related party during 2014.
These transactions are in the normal course of operations and
are measured at the exchange amount.
25. SEGMENTED REPORTING
The Company has three reportable segments: mining operations,
mineral exploration, and the development of precious metal projects in the
Congo. The operations of the Company are located in two geographic locations:
Canada and the Congo. The Company’s corporate head office is located in Canada
and is not an operating segment. All of the Company’s operating revenues are
earned from production in the Congo and its mining and exploration and
development projects are located in the Congo. All of the Company’s revenues
from the sale of gold bullion in the Congo are to a single customer.
Page F-39 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
For
the year ended December 31, 2014 |
|
Mining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations |
|
|
Exploration |
|
|
Development |
|
|
Corporate |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Operating revenue |
|
125,436 |
|
|
|
|
|
|
|
|
|
|
|
125,436 |
|
|
Total mine operating expenses |
|
(96,045 |
) |
|
|
|
|
|
|
|
|
|
|
(96,045 |
) |
|
Gross earnings from
operations |
|
29,391 |
|
|
- |
|
|
- |
|
|
- |
|
|
29,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
(4,104 |
) |
|
|
|
|
|
|
|
(7,214 |
) |
|
(11,318 |
) |
|
Share-based payments |
|
9 |
|
|
- |
|
|
- |
|
|
(561 |
) |
|
(552 |
) |
|
Other charges and provisions |
|
(337 |
) |
|
- |
|
|
- |
|
|
(804 |
) |
|
(1,141 |
) |
|
Net income/(loss) from operations |
|
24,959 |
|
|
- |
|
|
- |
|
|
(8,579 |
) |
|
16,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
(4,423 |
) |
|
- |
|
|
(327 |
) |
|
(10,873 |
) |
|
(15,623 |
) |
|
Foreign exchange loss |
|
(373 |
) |
|
- |
|
|
- |
|
|
(69 |
) |
|
(442 |
) |
|
Interest income |
|
- |
|
|
- |
|
|
- |
|
|
5 |
|
|
5 |
|
|
Net income/(loss) |
|
20,163 |
|
|
- |
|
|
(327 |
) |
|
(19,516 |
) |
|
320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross capital expenditures |
|
14,025 |
|
|
12,415 |
|
|
100,085 |
|
|
189 |
|
|
126,714 |
|
|
For
the year ended December 31, 2013 |
|
Mining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations |
|
|
Exploration |
|
|
Development |
|
|
Corporate |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Operating revenue |
|
111,808 |
|
|
- |
|
|
- |
|
|
- |
|
|
111,808 |
|
|
Total mine operating expenses |
|
(92,857 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(92,857 |
) |
|
Gross earnings from
operations |
|
18,951 |
|
|
- |
|
|
- |
|
|
- |
|
|
18,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
(85 |
) |
|
- |
|
|
- |
|
|
(5,638 |
) |
|
(5,723 |
) |
|
Share-based payments |
|
(1,135 |
) |
|
- |
|
|
- |
|
|
(1,507 |
) |
|
(2,642 |
) |
|
Other charges and provisions |
|
(13 |
) |
|
- |
|
|
- |
|
|
1,219 |
|
|
1,206 |
|
|
Net income/(loss) from operations |
|
17,718 |
|
|
- |
|
|
- |
|
|
(5,926 |
) |
|
11,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
(2,710 |
) |
|
- |
|
|
- |
|
|
(7,386 |
) |
|
(10,096 |
) |
|
Foreign exchange loss |
|
- |
|
|
- |
|
|
- |
|
|
(192 |
) |
|
(192 |
) |
|
Interest income |
|
- |
|
|
- |
|
|
- |
|
|
126
|
|
|
126
|
|
|
Net income/(loss) |
|
15,008 |
|
|
- |
|
|
- |
|
|
(13,378 |
) |
|
1,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross capital expenditures |
|
26,413 |
|
|
22,007 |
|
|
166,978 |
|
|
23 |
|
|
215,421 |
|
Page F-40 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
For the year ended
December 31, 2012 |
|
Mining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations |
|
|
Exploration |
|
|
Development |
|
|
Corporate |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Operating revenue |
|
42,631 |
|
|
- |
|
|
- |
|
|
- |
|
|
42,631 |
|
|
Total mine
operating expenses |
|
(30,547 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(30,547 |
) |
|
Gross earnings from operations |
|
12,084 |
|
|
- |
|
|
- |
|
|
- |
|
|
12,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
(25 |
) |
|
- |
|
|
- |
|
|
(6,182 |
) |
|
(6,207 |
) |
|
Share-based payments |
|
(1,195 |
) |
|
- |
|
|
- |
|
|
(6,734 |
) |
|
(7,929 |
) |
|
Other charges and provisions |
|
(287 |
) |
|
|
|
|
|
|
|
(81 |
) |
|
(368 |
) |
|
Net income/(loss) from operations |
|
10,577 |
|
|
- |
|
|
- |
|
|
(12,997 |
) |
|
(2,420 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses |
|
(116 |
) |
|
- |
|
|
- |
|
|
(2,200 |
) |
|
(2,316 |
) |
|
Foreign exchange loss |
|
- |
|
|
- |
|
|
- |
|
|
(143 |
) |
|
(143 |
) |
|
Interest income
|
|
- |
|
|
- |
|
|
- |
|
|
318
|
|
|
318
|
|
|
Net income/(loss) |
|
10,461 |
|
|
- |
|
|
- |
|
|
(15,022 |
) |
|
(4,561 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross capital expenditures |
|
81,412 |
|
|
34,192 |
|
|
118,304 |
|
|
130 |
|
|
234,038 |
|
Certain items from the Company’s statements of financial
position are as follows:
|
December 31,
2014 |
|
Mining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations |
|
|
Exploration |
|
|
Development |
|
|
Corporate |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Total non-current assets |
|
281,278 |
|
|
130,464 |
|
|
431,167 |
|
|
1,253 |
|
|
844,162 |
|
|
Total assets |
|
315,599 |
|
|
131,313 |
|
|
438,241 |
|
|
2,329 |
|
|
887,482 |
|
|
Provision for closure and reclamation |
|
(3,633 |
) |
|
- |
|
|
(4,122 |
) |
|
- |
|
|
(7,755 |
) |
|
Long-term debt |
|
- |
|
|
- |
|
|
- |
|
|
(200,921 |
) |
|
(200,921 |
) |
|
Long-term portion of bank loans |
|
- |
|
|
- |
|
|
(3,869 |
) |
|
- |
|
|
(3,869 |
) |
|
December 31,
2013 |
|
Mining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations |
|
|
Exploration |
|
|
Development |
|
|
Corporate |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Total non-current assets |
|
288,886 |
|
|
119,546 |
|
|
358,525 |
|
|
1,358 |
|
|
768,315 |
|
|
Total assets |
|
330,688 |
|
|
121,133 |
|
|
367,720 |
|
|
2,492 |
|
|
822,033 |
|
|
Provision for closure and reclamation |
|
(2,023 |
) |
|
- |
|
|
(2,195 |
) |
|
- |
|
|
(4,218 |
) |
|
Long-term debt |
|
- |
|
|
- |
|
|
- |
|
|
(158,599 |
) |
|
(158,599 |
) |
|
Long-term portion of bank loans |
|
- |
|
|
- |
|
|
(13,250 |
) |
|
- |
|
|
(13,250 |
) |
Page F-41 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
Geographic segmentation of non-current assets is as follows:
|
December 31, 2014
|
|
Property, Plant and
Equipment |
|
|
Mine Under
Construction |
|
|
Exploration and
Evaluation |
|
|
Long-term
Investment
|
|
|
Inventory |
|
|
Total
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Congo |
|
294,818 |
|
|
414,258 |
|
|
129,959 |
|
|
- |
|
|
3,874 |
|
|
842,909 |
|
|
Canada |
|
192
|
|
|
- |
|
|
- |
|
|
1,061
|
|
|
- |
|
|
1,253
|
|
|
|
|
295,010 |
|
|
414,258 |
|
|
129,959 |
|
|
1,061 |
|
|
3,874 |
|
|
844,162 |
|
|
December 31, 2013
|
|
Property, Plant and
Equipment |
|
|
Mine Under
Construction |
|
|
Exploration and
Evaluation |
|
|
Long-term
Investment
|
|
|
Inventory |
|
|
Total |
|
|
Congo |
|
312,014 |
|
|
337,203 |
|
|
117,740 |
|
|
- |
|
|
- |
|
|
766,957 |
|
|
Canada |
|
91
|
|
|
- |
|
|
- |
|
|
1,267
|
|
|
- |
|
|
1,358
|
|
|
|
|
312,105 |
|
|
337,203 |
|
|
117,740 |
|
|
1,267 |
|
|
- |
|
|
768,315 |
|
26. PRODUCTION COSTS
Production costs for the Company’s Twangiza Mine for the year
ended December 31, 2014 and 2013 are as follows:
|
|
|
|
|
|
Years
ended |
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Raw materials and consumables |
|
(34,441 |
) |
|
(33,112 |
) |
|
(10,774 |
) |
|
Salaries |
|
(15,441 |
) |
|
(14,669 |
) |
|
(4,516 |
) |
|
Contractors |
|
(9,780 |
) |
|
(12,276 |
) |
|
(3,398 |
) |
|
Other overhead |
|
(10,589 |
) |
|
(9,003 |
) |
|
(4,269 |
) |
|
Inventory adjustments |
|
1,103 |
|
|
1,755 |
|
|
467 |
|
|
|
|
(69,148 |
) |
|
(67,305 |
) |
|
(22,490 |
) |
1 Production costs for 2012 represent the four
months of production subsequent to the declaration of commercial production
effective September 1, 2012.
27. GENERAL AND ADMINISTRATIVE
EXPENSES
|
|
|
|
|
|
Years
ended |
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Salaries and employee benefits |
|
(3,102 |
) |
|
(2,582 |
) |
|
(2,491 |
) |
|
Consulting, management, and professional fees |
|
(2,106 |
) |
|
(1,193 |
) |
|
(1,043 |
) |
|
Office and sundry |
|
(1,394 |
) |
|
(982 |
) |
|
(1,082 |
) |
|
DRC corporate office |
|
(3,755 |
) |
|
- |
|
|
- |
|
|
Depreciation |
|
(89 |
) |
|
(51 |
) |
|
(44 |
) |
|
Other |
|
(872 |
) |
|
(915 |
) |
|
(1,547 |
) |
|
|
|
(11,318 |
) |
|
(5,723 |
) |
|
(6,207 |
) |
Page F-42 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
28. FINANCE EXPENSES
|
|
|
|
|
|
Years
ended |
|
|
|
|
Note |
|
|
December 31,
2014 |
|
|
December 31,
2013 |
|
|
December 31,
2012 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Dividends on preferred shares |
|
20 |
|
|
(4,584 |
) |
|
(2,277 |
) |
|
- |
|
|
Transaction costs |
|
19, 20 |
|
|
(1,565 |
) |
|
(2,360 |
) |
|
- |
|
|
Interest and bank charges |
|
|
|
|
(8,854 |
) |
|
(5,330 |
) |
|
(2,306 |
) |
|
Accretion |
|
18 |
|
|
(620 |
) |
|
(129 |
) |
|
(10 |
) |
|
|
|
|
|
|
(15,623 |
) |
|
(10,096 |
) |
|
(2,316 |
) |
29. OTHER CHARGES AND
PROVISIONS,NET
|
|
|
Years ended |
|
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Legal and shareholder services1
|
|
(671 |
) |
|
- |
|
|
- |
|
|
Settlement |
|
- |
|
|
(3,600 |
) |
|
- |
|
|
(Loss)/gain on change in fair value of
financial instruments |
|
(336 |
) |
|
4,928 |
|
|
- |
|
|
(Loss) on disposal of property, plant and equipment |
|
(153 |
) |
|
(14 |
) |
|
(287 |
) |
|
Share of loss from investment in associate |
|
(29 |
) |
|
(80 |
) |
|
(130 |
) |
|
Dilution gain/(loss) from investment in associate |
|
- |
|
|
(28 |
) |
|
49 |
|
|
Gain on investment, net of loss on disposition |
|
48 |
|
|
- |
|
|
- |
|
|
|
|
(1,141 |
) |
|
1,206 |
|
|
(368 |
) |
1 Legal and shareholder services incurred in the
year ended December 31, 2014 resulted from dissident shareholder nominations for
the election of directors, which nominations were subsequently withdrawn.
30. PUT OPTIONS
In March 2014, the Company purchased 54,000 European put
options (“the Put Options”) with a strike price of $1,200 per ounce of gold with
six monthly expiries starting from March 31, 2014 through to August 31, 2014.
The Company classified the Put Options as financial assets at fair value through
profit or loss for reporting purposes given that the Put Options are a
derivative financial instrument as their value corresponds to the price of gold.
On issuance, the Company recognized the Put Options at their fair value of $701
in its consolidated statement of financial position. For the year ended December
31, 2014, a loss of $701, was included in the consolidated statement of
comprehensive income for the change in fair value of financial instruments. The
fair value of the Put Options was obtained by using a quoted market price. All
of the Put Options expired unexercised during the year ended December 31, 2014.
31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND
POLICIES
|
a) |
Fair value of financial assets and
liabilities |
|
|
|
|
|
The consolidated statements of financial position
carrying amounts for cash and cash equivalents, trade and other
receivables, bank loans, and trade and other payables approximate fair
value due to their short-term nature. |
Page F-43 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
Fair value hierarchy
The following provides a description of
financial instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which the fair
value is observable:
|
|
• |
Level 1 fair value measurements are those derived from
quoted prices (unadjusted) in active markets for identical assets or
liabilities; |
|
|
|
|
|
|
• |
Level 2 fair value measurements are those derived from
inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and |
|
|
|
|
|
|
• |
Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability that
are not based on observable market data (unobservable inputs).
|
The fair values of financial assets and
liabilities carried at amortized cost (excluding the Offering) are approximated
by their carrying values.
The following table provides
information about financial assets and liabilities measured at fair value in the
statement of financial position and categorized by level according to the
significance of the inputs used in making the measurements:
|
|
|
|
|
|
|
December 31, 2014 |
|
|
|
|
|
|
|
|
Quoted prices in active |
|
|
Significant other |
|
|
Significant other |
|
|
|
|
|
markets for identical |
|
|
observable inputs |
|
|
unobservable inputs |
|
|
|
|
|
assets (Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
Long-term investment |
|
1,061 |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments -
mark-to-market |
|
- |
|
|
1,393 |
|
|
- |
|
|
|
Preference Shares |
|
- |
|
|
32,626 |
|
|
- |
|
|
|
Private Placement Preferred Shares |
|
- |
|
|
38,490 |
|
|
- |
|
|
|
|
|
|
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
Quoted prices in active |
|
|
Significant other |
|
|
Significant other |
|
|
|
|
|
markets for identical |
|
|
observable inputs |
|
|
unobservable inputs |
|
|
|
|
|
assets (Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
Long-term investment |
|
1,267 |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
Preference Shares |
|
- |
|
|
27,972 |
|
|
- |
|
|
b) |
Risk Management Policies |
|
|
|
|
|
The Company is sensitive to changes in commodity prices
and foreign-exchange. The Company’s Board of Directors has overall
responsibility for the establishment and oversight of the Company’s risk
management framework. Although the Company has the ability to address its
price-related exposures through the use of options, futures and forward
contracts, it currently does not typically enter into such
arrangements. |
Page F-44 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
c) |
Foreign Currency Risk |
|
|
|
|
|
Foreign currency risk is the risk that a variation in
exchange rates between the United States dollar and Canadian dollar or
other foreign currencies will affect the Company’s operations and
financial results. A portion of the Company’s transactions are denominated
in Canadian dollars, Congolese francs, South African rand, British pounds,
Australian dollars and European Euros. The Company is also exposed to the
impact of currency fluctuations on its monetary assets and liabilities.
Significant foreign exchange gains or losses are reflected as a separate
component of the consolidated statement of comprehensive income. The
Company does not use derivative instruments to reduce its exposure to
foreign currency risk. |
|
|
|
|
|
The following table indicates the impact of foreign
currency exchange risk on net working capital as at December 31, 2014. The
table below also provides a sensitivity analysis of a 10 percent
strengthening of the US dollar against foreign currencies as identified
which would have increased (decreased) the Company’s net income by the
amounts shown in the table below. A 10 percent weakening of the US dollar
against the same foreign currencies would have had the equal but opposite
effect as at December 31, 2014. |
|
|
|
|
Canadian |
|
|
South African |
|
|
Congolese |
|
|
British |
|
|
Australian |
|
|
European |
|
|
|
|
|
Dollar |
|
|
Rand |
|
|
Franc |
|
|
Pound |
|
|
Dollar |
|
|
Euro |
|
|
|
|
|
CDN$ |
|
|
ZAR |
|
|
CDF |
|
£ |
|
|
|
AUD |
|
|
EUR |
|
|
|
Cash and cash equivalents |
|
18 |
|
|
- |
|
|
163,151 |
|
|
- |
|
|
- |
|
|
- |
|
|
|
Short-term investments |
|
271 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
Prepaid expenses |
|
260 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
Accounts payable |
|
(7,573 |
) |
|
(81,911 |
) |
|
(2,551,296 |
) |
|
(405 |
) |
|
(184 |
) |
|
(517 |
) |
|
|
Retention allowance |
|
(909 |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
Total foreign currency financial assets and
liabilities |
|
(7,933 |
) |
|
(81,911 |
) |
|
(2,388,145 |
) |
|
(405 |
) |
|
(184 |
) |
|
(517 |
) |
|
|
Foreign exchange rate at December 31, 2014 |
|
0.8620 |
|
|
0.0861 |
|
|
0.0011 |
|
|
1.5532 |
|
|
0.8156 |
|
|
1.2155 |
|
|
|
Total foreign
currency financial assets and liabilities in US $ |
|
(6,838 |
) |
|
(7,053 |
) |
|
(2,627 |
) |
|
(629 |
) |
|
(150 |
) |
|
(628 |
) |
|
|
Impact of a 10% variance of the US $ on net
income |
|
(684 |
) |
|
(705 |
) |
|
(263 |
) |
|
(63 |
) |
|
(15 |
) |
|
(63 |
) |
|
d) |
Credit Risk |
|
|
|
|
|
Credit risk is the risk that a third party might fail to
fulfill its performance obligations under the terms of a financial
instrument. Financial instruments, which are potentially subject to credit
risk for the Company, consist primarily of cash and cash equivalents and
trade and other receivables. Cash and cash equivalents are maintained with
several financial institutions of reputable credit and may be redeemed
upon demand. Cash and cash equivalents are held in Canada and the Congo.
The sale of goods exposes the Company to the risk of non-payment by
customers. The Company manages this risk by monitoring the
creditworthiness of its customers. It is therefore the Company’s opinion
that such credit risk is subject to normal industry risks and is
considered minimal. |
|
|
|
|
|
The Company limits its exposure to credit risk on
investments by investing only in securities rated R1 (the highest rating)
by credit rating agencies such as the DBRS (Dominion Bond Rating Service).
Management continuously monitors the fair value of its investments to
determine potential credit exposures. Short-term excess cash is invested
in R1 rated investments including money market funds, bankers’ acceptances
and other highly rated short-term investment instruments. Any credit risk
exposure on cash balances is considered negligible as the Company places
deposits only with major established banks in the countries in which it
carries on operations. The Company does not have any short-term
investments. |
Page F-45 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
The carrying amount of financial assets
represents the maximum credit exposure. The Company’s gross credit exposure at
December 31, 2014 and December 31, 2013 is as follows:
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013
|
|
|
|
|
$ |
|
|
$ |
|
|
Cash and cash equivalents |
|
1,002 |
|
|
4,452 |
|
|
Trade and other receivables |
|
7,261
|
|
|
8,884
|
|
|
|
|
8,263 |
|
|
13,336 |
|
|
e) |
Liquidity Risk |
|
|
|
|
|
Liquidity risk is the risk that the Company will not be
able to meet its financial obligations as they become due. The Company
attempts to ensure that there is sufficient cash to meet its liabilities
when they are due and manages this risk by regularly evaluating its liquid
financial resources to fund current and long-term obligations and to meet
its capital commitments in a cost-effective manner. Temporary surplus
funds of the Company are invested in short-term investments. The Company
arranges the portfolio so that securities mature approximately when funds
are needed. The key to success in managing liquidity is the degree of
certainty in the cash flow projections. If future cash flows are fairly
uncertain, the liquidity risk increases. The Company’s liquidity
requirements are met through a variety of sources, including cash and cash
equivalents, existing credit facilities and capital markets. Should the
Company experience further production shortfalls at Twangiza, delays in
ramp up at Namoya, equipment breakdowns, or delays in completion
schedules, or should the price of gold decrease further, the Company may
need to further examine funding options. The Company has the following
financial obligations, excluding preferred shares classified as financial
liabilities: |
|
|
December 31, 2014 |
|
Payments due by period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Less than one year |
|
|
One to three years |
|
|
Three to four years |
|
|
After four years |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Trade and other payables |
|
86,396 |
|
|
86,396 |
|
|
- |
|
|
- |
|
|
- |
|
|
|
Long-term debt, including interest |
|
269,598 |
|
|
20,464 |
|
|
249,134 |
|
|
- |
|
|
- |
|
|
|
Bank loans |
|
20,992 |
|
|
17,123 |
|
|
3,869 |
|
|
- |
|
|
- |
|
|
|
Derivative instruments |
|
1,393 |
|
|
1,393 |
|
|
- |
|
|
- |
|
|
- |
|
|
|
Deferred revenue |
|
3,000 |
|
|
3,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
|
December 31, 2013 |
|
Payments due by period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Less than one year |
|
|
One to three years |
|
|
Three to four years |
|
|
After four years |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Trade and other payables |
|
77,614 |
|
|
77,614 |
|
|
- |
|
|
- |
|
|
- |
|
|
|
Long-term debt, including interest |
|
230,417 |
|
|
17,500 |
|
|
212,917 |
|
|
- |
|
|
- |
|
|
|
Bank loans |
|
42,500 |
|
|
29,250 |
|
|
13,250 |
|
|
- |
|
|
- |
|
|
|
Deferred revenue |
|
17,369 |
|
|
17,369 |
|
|
- |
|
|
- |
|
|
- |
|
|
f) |
Mineral Property Risk |
|
|
|
|
|
The Company’s operations in the Congo are exposed to
various levels of political risk and uncertainties, including political
and economic instability, government regulations relating to exploration
and mining, military repression and civil disorder, all or any of which
may have a material adverse impact on the Company’s activities or may
result in impairment or loss of part or all of the Company's assets. In
recent years, the Congo has experienced two wars and significant political
unrest. Operating in the Congo may make it more difficult for the Company
to obtain any required financing because of the perceived investment
risk. |
Page F-46 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
g) |
Market Risk |
|
|
|
|
|
Market risk is the potential for financial loss from
adverse changes in underlying market factors, including foreign-exchange
rates, commodity prices, interest rate and share based payment
costs. |
|
|
|
|
h) |
Commodity Price Risk |
|
|
|
|
|
The price of gold has fluctuated widely. The future
direction of the price of gold will depend on numerous factors beyond the
Company's control including international, economic and political trends,
expectations of inflation, currency exchange fluctuations, interest rates,
global or regional consumption patterns, speculative activities and
increased production due to new extraction developments and improved
extraction and production methods. The effect of these factors on the
price of gold, and therefore on the economic viability of the Company's
properties, cannot accurately be predicted. To date the Company has not
adopted specific strategies for controlling the impact of fluctuations in
the price of gold. The following table demonstrates the impact of a 10%
weakening in the spot price of gold: |
|
|
|
|
|
|
|
Years
Ended |
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
Net income |
|
320 |
|
|
1,630 |
|
|
(4,561 |
) |
|
|
Impact of a 10% weakening of the |
|
|
|
|
|
|
|
|
|
|
|
spot price of gold |
|
(12,544 |
) |
|
(11,181 |
) |
|
(4,263 |
) |
|
|
Net
loss after impact |
|
(12,224 |
) |
|
(9,551 |
) |
|
(8,824 |
) |
|
i) |
Title Risk |
|
|
|
|
|
Title to mineral properties involves certain inherent
risks due to the difficulties of determining the validity of certain
claims as well as the potential for problems arising from the frequently
ambiguous conveyancing history characteristic of many mining properties.
Although the Company has investigated title to all of its mineral
properties for which it holds concessions or other mineral licenses, the
Company cannot give any assurance that title to such properties will not
be challenged or impugned and cannot be certain that it will have valid
title to its mineral properties. The Company relies on title opinions by
legal counsel who base such opinions on the laws of countries in which the
Company operates. |
|
|
|
|
j) |
Capital Management |
|
|
|
|
|
The Company manages its bank overdraft, net of cash, bank
loans, preference shares, long-term debt, common shares, warrants and
stock options as capital. The Company’s policy is to maintain a sufficient
capital base in order to meet its short term obligations and at the same
time preserve investors’ confidence required to sustain future development
of the business. |
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
2014 |
|
|
2013
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
Bank overdraft, net of cash
|
|
2,651 |
|
|
(3,961 |
) |
|
|
Short-term bank loans |
|
17,123 |
|
|
29,250 |
|
|
|
Long-term bank loans |
|
3,869 |
|
|
13,250 |
|
|
|
Preference shares |
|
71,116 |
|
|
27,972 |
|
|
|
Long term debt |
|
200,921 |
|
|
158,599 |
|
|
|
Share capital |
|
518,615 |
|
|
518,615 |
|
|
|
Warrants |
|
13,356 |
|
|
13,356 |
|
|
|
Contributed surplus |
|
42,526 |
|
|
41,793 |
|
|
|
Deficit |
|
(82,373 |
) |
|
(82,693 |
) |
|
|
|
|
787,804 |
|
|
716,181 |
|
Page F-47 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
32. CASH FLOWS
|
a) |
Operating Cash Flows – Working Capital
Adjustments |
| |
|
|
For the years ended |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
| |
|
|
December 31, |
|
|
2013 (Restated |
|
|
December 31, |
|
|
|
|
|
2014 |
|
|
Note 34) |
|
|
2012 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Trade and other receivables |
|
1,606 |
|
|
(1,587 |
) |
|
(6,224 |
) |
|
|
Prepaid expenses and deposits |
|
2,282 |
|
|
(180 |
) |
|
(6,821 |
) |
|
|
Inventories |
|
(638 |
) |
|
(13,937 |
) |
|
(1,805 |
) |
|
|
Trade and other payables |
|
9,441 |
|
|
13,225 |
|
|
(3,837 |
) |
|
|
Employee retention allowance |
|
(179 |
) |
|
(235 |
) |
|
(93 |
) |
|
|
|
|
12,512 |
|
|
(2,714 |
) |
|
(18,780 |
) |
|
b) |
Investing Cash Flows – Non-Cash Items
Capitalized |
| |
|
|
For the years ended |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
|
December 31, |
|
|
2013 (Restated |
|
|
December 31, |
|
|
|
|
|
2014 |
|
|
Note 34) |
|
|
2012 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Exploration and evaluation |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
805 |
|
|
211 |
|
|
683 |
|
|
|
Share-based payments |
|
144 |
|
|
102 |
|
|
1,565 |
|
|
|
Employee retention allowance |
|
204 |
|
|
202 |
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mine under construction |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
7,628 |
|
|
1,599 |
|
|
2,352 |
|
|
|
Share-based payments |
|
28 |
|
|
136 |
|
|
2,089 |
|
|
|
Employee retention allowance |
|
192 |
|
|
435 |
|
|
483 |
|
|
|
Accrued interest |
|
6,492 |
|
|
5,567 |
|
|
- |
|
Page F-48 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
c) |
Financing Cash Flows – Issuance Proceeds and
Costs |
| |
|
|
For the years ended |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
Gross proceeds |
|
|
|
|
December 31, |
|
|
|
|
| |
|
|
December 31, |
|
|
2013 (Restated |
|
|
December 31, |
|
| |
|
|
2014 |
|
|
Note
34) |
|
|
2012 |
|
| |
|
|
$ |
|
|
$ |
|
|
$ |
|
| |
Derivative instruments |
|
360 |
|
|
- |
|
|
- |
|
| |
Long-term debt |
|
32,340 |
|
|
- |
|
|
175,000 |
|
| |
Preference shares |
|
- |
|
|
32,900 |
|
|
- |
|
| |
Private placement preferred shares |
|
40,000 |
|
|
- |
|
|
- |
|
| |
Common shares |
|
- |
|
|
66,412 |
|
|
11,255 |
|
| |
|
|
72,700 |
|
|
99,312 |
|
|
186,255 |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
For the years ended |
|
| |
|
|
|
|
|
|
|
|
, |
|
| |
Issuance costs |
|
|
|
|
December 31, |
|
|
|
|
| |
|
|
December 31, |
|
|
2013 (Restated |
|
|
December 31 |
|
| |
|
|
2014 |
|
|
Note
34) |
|
|
2012
|
|
| |
|
|
$ |
|
|
$ |
|
|
$ |
|
| |
Derivative instruments |
|
(10 |
) |
|
- |
|
|
- |
|
| |
Long-term debt |
|
(1,143 |
) |
|
- |
|
|
(9,986 |
) |
| |
Preference shares |
|
- |
|
|
(2,178 |
) |
|
- |
|
| |
Private placement preferred shares |
|
(1,210 |
) |
|
- |
|
|
- |
|
| |
Common shares |
|
- |
|
|
(4,535 |
) |
|
(525 |
) |
| |
|
|
(2,363 |
) |
|
(6,713 |
) |
|
(10,511 |
) |
33. INCOME TAXES
The following table reconciles the income taxes calculated at
statutory rates with the income tax expense in the consolidated statement of
comprehensive income:
|
|
|
Years
Ended December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Net income for the year |
|
320 |
|
|
1,630 |
|
|
(4,561 |
) |
|
Combined federal and provincial income tax
rates |
|
26.50% |
|
|
26.50% |
|
|
26.50% |
|
|
Income tax expense at
Canadian federal and provincial statutory rates |
|
85 |
|
|
432 |
|
|
(1,209 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign operation taxed at
lower rates |
|
2,504 |
|
|
- |
|
|
- |
|
|
Non deductible amounts |
|
(3,642 |
) |
|
(3,616 |
) |
|
1,744 |
|
|
Change in unrecognized net deductible temporary differences |
|
1,053 |
|
|
3,184 |
|
|
(69 |
) |
|
Foreign exchange
on revaluation |
|
- |
|
|
- |
|
|
(466 |
) |
|
|
|
- |
|
|
- |
|
|
- |
|
The Company has net deductible temporary differences of $99,169
(December 31, 2013 and 2012 - $98,027 and $87,355, respectively) for which no
deferred tax asset was recognized.
Page F-49 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
|
|
|
Years
Ended December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Non-capital losses |
|
83,018 |
|
|
77,717 |
|
|
59,074 |
|
|
Capital losses |
|
23,284 |
|
|
22,357 |
|
|
22,357 |
|
|
Financing costs |
|
9,716 |
|
|
14,258 |
|
|
16,213 |
|
|
Investments |
|
(140 |
) |
|
951 |
|
|
778 |
|
|
Fixed assets |
|
47 |
|
|
118 |
|
|
51 |
|
|
Deductible temporary differences |
|
115,925 |
|
|
115,401 |
|
|
98,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compound financial
instrument and others |
|
(16,756 |
) |
|
(17,374 |
) |
|
(11,118 |
) |
|
Taxable temporary differences |
|
(16,756 |
) |
|
(17,374 |
) |
|
(11,118 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net deductible temporary differences |
|
99,169 |
|
|
98,027 |
|
|
87,355 |
|
The Company also has deductible temporary differences of
approximately $60,550 in relation to its operations in the Congo for which no
deferred tax asset has been recognized.
As at December 31, 2014, the Company has available non-capital
losses in Canada of $83,018 that if not utilized will expire as follows:
|
|
|
$ |
|
|
2025 |
|
4,444 |
|
|
2027 |
|
4,301 |
|
|
2028 |
|
7,775 |
|
|
2029 |
|
11,115 |
|
|
2030 |
|
13,377 |
|
|
2031 |
|
12,798 |
|
|
2032 |
|
3,590 |
|
|
2033 |
|
20,316 |
|
|
2034 |
|
5,302 |
|
|
|
|
83,018 |
|
As at December 31, 2014, the Company has available net capital
losses in Canada of approximately $23,284 which can be carried forward
indefinitely.
In the Congo, the Company is subject to a mining convention
signed with the Congolese government that provides the Company with a 10-year
tax holiday from the date of commercial production. The tax holiday enables the
Company to earn income in the Congo that is exempt from corporate income tax
during this period of the tax holiday.
34. RESTATEMENT OF 2013 CONSOLIDATED
STATEMENT OF CASH FLOWS
Subsequent to the original issuance of the Company’s
consolidated financial statements as at and for the year ended December 31,
2013, the Company determined that the classification of certain cash inflows on
the consolidated statement of cash flows as financing activities were associated
with operating and investing activities of the Company. The Company has
determined that the appropriate classification of the $17,291 classified as net
proceeds from unearned revenue in the consolidated statement of cash flows as a
cash inflow from financing activities is $15,291 to be classified as a cash flow
from operating activities as they relate to the Company’s operating mine and $2,000 to be
classified as a cash flow from investing activities as they relate to the
Company’s mine under construction. The following table reflects the correction
in the previously issued consolidated statement of cash flow for the
year ended December 31, 2013, conforming to the current year presentation:
Page F-50 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
| |
|
|
|
|
December 31, |
|
|
Adjustment |
|
|
December 31, |
|
| |
|
Notes |
|
|
2013
(As Issued) |
|
|
|
|
|
2013
(Restated) |
|
| |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
| Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income for the year |
|
|
|
|
1,630 |
|
|
- |
|
|
1,630 |
|
| Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
| Recognition of deferred revenue |
|
14 |
|
|
- |
|
|
- |
|
|
- |
|
| Depletion and
depreciation |
|
10 |
|
|
25,603 |
|
|
- |
|
|
25,603 |
|
| Unrealized foreign exchange gain |
|
|
|
|
(492 |
) |
|
- |
|
|
(492 |
) |
| Share-based payments
|
|
22 |
|
|
2,642 |
|
|
- |
|
|
2,642 |
|
| Employee retention allowance |
|
16 |
|
|
250 |
|
|
- |
|
|
250 |
|
| Finance expense
excluding bank charges, net of interest income |
|
28 |
|
|
7,061 |
|
|
- |
|
|
7,061 |
|
| Accretion on closure and reclamation
|
|
18 |
|
|
129 |
|
|
- |
|
|
129 |
|
| Other charges and
provisions, net |
|
29 |
|
|
(4,806 |
) |
|
- |
|
|
(4,806 |
) |
| Interest paid |
|
|
|
|
(3,512 |
) |
|
- |
|
|
(3,512 |
) |
| Interest received |
|
|
|
|
126 |
|
|
- |
|
|
126 |
|
| Operating cash flows before deferred revenue and working
capital adjustments |
|
|
|
|
28,631 |
|
|
- |
|
|
28,631 |
|
| Proceeds from deferred revenue |
|
|
|
|
- |
|
|
15,291 |
|
|
15,291 |
|
| Working capital
adjustments |
|
32
|
|
|
(2,714 |
) |
|
- |
|
|
(2,714 |
) |
| Net cash flows provided by operating
activities |
|
|
|
|
25,917 |
|
|
15,291 |
|
|
41,208 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| Acquisition of property, plant, and equipment |
|
10 |
|
|
(34,082 |
) |
|
- |
|
|
(34,082 |
) |
| Disposal of property, plant, and equipment
|
|
10 |
|
|
- |
|
|
- |
|
|
- |
|
| Expenditures on exploration and evaluation |
|
11 |
|
|
(21,668 |
) |
|
- |
|
|
(21,668 |
) |
| Expenditures on mine under construction,
net of pre-production revenue |
|
12 |
|
|
(126,583 |
) |
|
- |
|
|
(126,583 |
) |
| Interest paid |
|
|
|
|
(16,744 |
) |
|
- |
|
|
(16,744 |
) |
| Net movement of deferred revenue |
|
|
|
|
- |
|
|
2,000 |
|
|
2,000 |
|
| Advances -
Long-term investment |
|
9
|
|
|
(11 |
) |
|
- |
|
|
(11 |
) |
| Net cash used in investing
activities |
|
|
|
|
(199,088 |
) |
|
2,000 |
|
|
(197,088 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bank overdraft |
|
13 |
|
|
491 |
|
|
- |
|
|
491 |
|
| Net proceeds from unearned revenue (Gross
$17,369, Issuance costs $78) |
|
14 |
|
|
17,291 |
|
|
(17,291 |
) |
|
- |
|
| Net proceeds on long-term debt and associated warrants |
|
19 |
|
|
- |
|
|
- |
|
|
- |
|
| Net proceeds from shares issuance |
|
20, 21 |
|
|
92,599 |
|
|
- |
|
|
92,599 |
|
| Payment of dividends |
|
20 |
|
|
(2,277 |
) |
|
- |
|
|
(2,277 |
) |
| Net proceeds from bank loans |
|
15 |
|
|
42,500 |
|
|
- |
|
|
42,500 |
|
| Net cash provided by financing activities |
|
|
|
|
150,604 |
|
|
(17,291 |
) |
|
133,313 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of
foreign exchange on cash and cash equivalents |
|
|
|
|
(30 |
) |
|
- |
|
|
(30 |
) |
| Net decrease in cash and cash
equivalents |
|
|
|
|
(22,597 |
) |
|
- |
|
|
(22,597 |
) |
| Cash and cash
equivalents, beginning of the year |
|
|
|
|
27,049 |
|
|
- |
|
|
27,049 |
|
| Cash and cash equivalents, end of the year |
|
|
|
|
4,452 |
|
|
- |
|
|
4,452 |
|
Page F-51 of F-52
|
Banro Corporation |
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
|
For the years ended December 31, 2014, 2013 and 2012 |
|
(Expressed in
thousands of U.S. dollars, except per share amounts) |
35. EVENTS AFTER THE REPORTING
PERIOD
In February 2015, the Company signed definitive agreements for
two gold forward sale transactions relating to the Twangiza mine and a gold
streaming transaction relating to the Namoya mine, providing total gross
proceeds to the Company of $100 million. Each of the two forward sale
transactions provide for the prepayment by the purchaser of $20 million for its
purchase of 22,248 ounces of gold from the Twangiza mine, with the gold
deliverable over three years, at 618 ounces per month. The first $20 million
forward sale closed on February 27, 2015. The second $20 million forward sale is
expected to close in April. The forward sales may be terminated at any time upon
payment to the purchaser of a one-time termination amount that would result in
the purchaser receiving an internal rate of return of 20%. The terms of the
forward sales also include a gold floor price mechanism whereby, if the gold
price falls below $1,100 per ounce in any month, additional ounces are
deliverable to ensure a realized gold price of $1,100 per ounce for that month.
The streaming transaction provides for the payment by the purchaser of a
deposit in the amount of $60 million and the delivery to the purchaser over time
of 10% of the life-of-mine gold production from the Namoya mine (or any other
projects located within 20 kilometres from the current Namoya gold mine). The
ongoing payments to Namoya upon delivery of the gold are $150 per ounce. The
streaming transaction is expected to close in April 2015.
In March 2015, the Company and Banro Group (Barbados) Limited
declared and paid a dividend of $0.57 per Banro Series A Share and Barbados
Preference Share.
Page F-52 of F-52
BANRO CORPORATION
(the "Corporation")
BY-LAW NO. 3
A by-law relating generally to the transaction of the business
and affairs of the Corporation.
TABLE OF CONTENTS
ARTICLE 1
INTERPRETATION
ARTICLE 2
BUSINESS OF THE CORPORATION
ARTICLE 3
BORROWING AND SECURITIES
ARTICLE 4
DIRECTORS
ARTICLE 5
COMMITTEES
ARTICLE 6
OFFICERS
ARTICLE 7
PROTECTION OF DIRECTORS, OFFICERS AND
OTHERS
ARTICLE 8
SHARES
ARTICLE 9
DIVIDENDS AND RIGHTS
ARTICLE 10
MEETINGS OF SHAREHOLDERS
ARTICLE 11
NOTICES
ARTICLE 12
EFFECTIVE DATE
1
BE IT ENACTED as a by-law of the
Corporation as follows:
ARTICLE 1
INTERPRETATION
| (1) |
In the by-laws of the Corporation, unless the context
otherwise requires: |
"Act" means the Canada
Business Corporations Act, and any statute that may be substituted
therefor, as from time to time amended.
"appoint" includes
"elect" and vice versa.
"articles" means the articles of
the Corporation as from time to time amended or restated.
"board" means the board of
directors of the Corporation.
"by-laws" means this by-law and
all other by-laws of the Corporation from time to time in force and effect.
"cheque" includes a draft.
"Corporation" means the
corporation continued under the Act on April 2, 2004 and named Banro
Corporation.
"meeting of shareholders"
includes an annual meeting of shareholders and a special meeting of
shareholders.
"non-business day" means
Saturday, Sunday and any other day that is a holiday as defined in the
Interpretation Act (Canada) as from time to time amended.
"ordinary resolution" means a
resolution passed by a majority of the votes cast by the shareholders who voted
in respect of that resolution or signed by all of the shareholders entitled to
vote on that resolution.
"recorded address" means in the
case of a shareholder, the person's address as recorded in the securities
register; and in the case of joint shareholders the address appearing in the
securities register in respect of such joint holding or the first address so
appearing if there are more than one; and in the case of a director (subject to
the provisions of section 11.1), officer, auditor or member of a committee of
the board, their latest address as recorded in the records of the Corporation.
"resident Canadian" means an
individual who is:
| |
(a) |
a Canadian citizen ordinarily resident in
Canada; |
| |
|
|
| |
(b) |
a Canadian citizen not ordinarily resident in Canada who
is a member of a class of persons prescribed in the regulations to the
Act, as amended from time to time; or |
2
| |
(c) |
a permanent resident within the meaning of subsection
2(1) of the Immigration and Refugee Protection Act and
ordinarily resident in Canada, except a permanent resident who has been
ordinarily resident in Canada for more than one year after the time at
which they first became eligible to apply for Canadian
citizenship. |
"signing officer" means, in
relation to any instrument, any person authorized to sign the same on behalf of
the Corporation by or pursuant to section 2.4.
"special meeting of
shareholders" includes a meeting of any class or classes of shareholders and
a special meeting of all shareholders entitled to vote at an annual meeting of
shareholders.
"special resolution" means a
resolution passed by a majority of not less than two-thirds of the votes cast by
the shareholders who voted in respect of that resolution or signed by all the
shareholders entitled to vote on that resolution.
"unanimous shareholder
agreement" means a written agreement among all the shareholders of the
Corporation or among all such shareholders and one or more persons who are not
shareholders or a written declaration of the beneficial owner of all of the
issued shares of the Corporation that restricts, in whole or in part, the powers
of the directors to manage, or supervise the management of, the business and
affairs of the Corporation, as from time to time amended.
| (2) |
Save as aforesaid, words and expressions defined in the
Act have the same meanings when used herein. Words importing the singular
number include the plural and vice versa; words importing gender include
the masculine, feminine and neuter genders; and words importing a person
include an individual, partnership, association, body corporate,
unincorporated organization, and personal
representative. |
| Section 1.2 |
Conflict With Unanimous Shareholder
Agreement. |
Where any provision in the
by-laws conflicts with any provision of a unanimous shareholder agreement the
provision of such unanimous shareholder agreement shall govern.
ARTICLE 2
BUSINESS OF THE CORPORATION
| Section 2.1 |
Registered Office. |
The registered office of the
Corporation shall be in the province within Canada from time to time specified
in the articles as the board may from time to time determine.
| Section 2.2 |
Corporate Seal. |
Until changed by the board, the
corporate seal of the Corporation shall be in such form as the board may from
time to time approve by resolution.
| Section 2.3 |
Financial Year. |
The financial year of the
Corporation shall end on such date in each year as shall be determined from time
to time by resolution of the board.
3
| Section 2.4 |
Execution of Instruments.
|
Deeds, transfers, assignments,
contracts, obligations, certificates and other instruments may be signed, either
manually or by electronic means in accordance with the Act, on behalf of the
Corporation by two persons, one of whom holds the office of chairperson of the
board, managing director, president, vice-president or director and the other of
whom holds one of the said offices or the office of secretary, treasurer,
assistant secretary or assistant treasurer or any other office created by by-law
or by resolution of the board. In addition, the board may from time to time
direct the manner in which and the person or persons by whom any particular
instrument or class of instruments may or shall be signed. Any signing officer
may affix the corporate seal to any instrument requiring the same.
| Section 2.5 |
Banking Arrangements.
|
The banking business of the
Corporation including, without limitation, the borrowing of money and the giving
of security therefor, shall be transacted with such banks, trust companies or
other bodies corporate or organizations or persons as may from time to time be
designated by or under the authority of the board. Such banking business or any
part thereof shall be transacted under such agreements, instructions and
delegations of powers as the board may from time to time prescribe or authorize.
| Section 2.6 |
Voting Rights in Other Bodies Corporate.
|
The person or persons authorized
under section 2.4 may execute and deliver proxies and arrange for the issuance
of voting certificates or other evidence of the right to exercise the voting
rights attaching to any securities held by the Corporation. Such instruments,
certificates or other evidence shall be in favour of such person or persons as
may be determined by the said person or persons executing such proxies or
arranging for the issuance of voting certificates or such other evidence of the
right to exercise such voting rights. In addition, the board may from time to
time direct the manner in which and the person or persons by whom any particular
voting rights or class of voting rights may or shall be exercised.
The board may cause the business
and operations of the Corporation, or any part thereof, to be divided or
segregated into one or more divisions upon such basis, including, without
limitation, character or type of businesses or operations, geographical
territories, product lines or goods or services, as the board may consider
appropriate in each case. From time to time the board or, if authorized by the
board, the chief executive officer, may authorize, upon such basis as may be
considered appropriate in each case:
| |
(a) |
Sub -Division and Consolidation. The further division of
the business and operations of any such division into sub-units and the
consolidation of the business and operations of any such divisions and
sub-units; |
| |
|
|
| |
(b) |
Name. The designation of any such division or sub-unit
by, and the carrying on of the business and operations of any such
division or sub-unit under, a name other than the name of the Corporation,
provided that the Corporation shall set out its name in legible characters
in all contracts, invoices, negotiable instruments and orders for goods or
services issued or made by or on behalf of the Corporation; and |
| |
|
|
| |
(c) |
Officers. The appointment of officers for any such
division or sub-unit, the determination of their powers and duties, and
the removal of any such officer so appointed without prejudice to such
officer's rights under any employment contract or in law, provided that
any such officers shall not, as such, be officers of the Corporation,
unless expressly designated as such. |
4
ARTICLE 3
BORROWING AND SECURITIES
| Section 3.1 |
Borrowing Power. |
| (1) |
Without limiting the borrowing powers of the Corporation
as set forth in the Act, the board may from time to time on behalf of the
Corporation, without authorization of the shareholders: |
| |
|
|
|
(a) |
borrow money upon the credit of the
Corporation; |
| |
|
|
|
(b) |
issue, reissue, sell or pledge bonds, debentures, notes
or other evidences of indebtedness or guarantee of the Corporation,
whether secured or unsecured; |
| |
|
|
|
(c) |
to the extent permitted by the Act, give a guarantee on
behalf of the Corporation to secure performance of any present or future
indebtedness, liability or obligation of any person; and |
| |
|
|
|
(d) |
charge, mortgage, hypothecate, pledge, or otherwise
create a security interest in all or any currently owned or subsequently
acquired real or personal, movable or immovable, property of the
Corporation, including book debts, rights, powers, franchises and
undertakings, to secure any such bonds, debentures, notes or other
evidences of indebtedness or guarantee or any other present or future
indebtedness, liability or obligation of the Corporation. |
| |
|
|
| (2) |
Nothing in this section limits or restricts the borrowing
of money by the Corporation on bills of exchange or promissory notes made,
drawn, accepted or endorsed by or on behalf of the
Corporation. |
The board may from time to time
delegate to a committee of the board, one or more directors or officers of the
Corporation or any other person as may be designated by the board all or any of
the powers conferred on the board by section 3.1 or by the Act to such extent
and in such manner as the board shall determine at the time of each such
delegation.
ARTICLE 4
DIRECTORS
| Section 4.1 |
Number of Directors and Quorum.
|
Until changed in accordance with
the Act, the board shall consist of not fewer than the minimum number and not
more than the maximum number of directors provided for in the articles. Subject
to section 4.8, the quorum for the transaction of business at any meeting of the
board shall consist of a majority of the members of the board or such greater or
lesser number of directors as the board may from time to time determine.
5
| Section 4.2 |
Qualification. |
No person shall be qualified for
election as a director if the person is less than 18 years of age; if the person
is of unsound mind and has been so found by a court in Canada or elsewhere; if
the person is not an individual; or if the person has the status of a bankrupt.
A director need not be a shareholder. At least 25% of the directors shall
be resident Canadians.
| Section 4.3 |
Election and Term. |
The election of directors shall
take place at the first meeting and thereafter at each annual meeting of
shareholders and all the directors then in office shall retire but, if
qualified, shall be eligible for reelection. The number of directors to be
elected at any such meeting shall, if a minimum and maximum number of directors
is authorized, be the number of directors then in office unless the directors or
the shareholders otherwise determine or shall, if a fixed number of directors is
authorized, be such fixed number. The election shall be by ordinary resolution.
If an election of directors is not held at the proper time, the incumbent
directors shall continue in office until their successors are elected.
| Section 4.4 |
Removal of Directors.
|
Subject to the provisions of the
Act, the shareholders may by ordinary resolution passed at a special meeting of
shareholders called for such purpose remove any director from office and the
vacancy created by such removal may be filled at the same meeting, failing which
it may be filled by the board.
| Section 4.5 |
Termination of Office.
|
A director ceases to hold office
when the director dies; the director is removed from office by the shareholders;
the director ceases to be qualified for election as a director; or the
director's written resignation is sent or delivered to the Corporation, or, if a
time is specified in such resignation, at the time so specified, whichever is
later.
Subject to the provisions of the
Act, a quorum of the board may fill a vacancy in the board, except a vacancy
resulting from an increase in the number or the minimum or maximum number of
directors specified in the articles or from a failure of the shareholders to
elect the number or minimum number of directors specified in the articles. In
the absence of a quorum of the board, or if the vacancy has arisen from a
failure of the shareholders to elect the number or minimum number of directors
specified in the articles, the directors then in office shall without delay call
a special meeting of shareholders to fill the vacancy. If such directors fail to
call such meeting or if there are no such directors then in office, any
shareholder may call the meeting.
| Section 4.7 |
Action by the Board.
|
Subject to any unanimous
shareholder agreement, the board shall manage, or supervise the management of,
the business and affairs of the Corporation. Subject to sections 4.8 and 4.9,
the powers of the board may be exercised by resolution passed at a meeting at
which a quorum is present or by resolution in writing signed by all the
directors entitled to vote on that resolution at a meeting of the board. Where
there is a vacancy in the board, the remaining directors may exercise all the
powers of the board so long as a quorum remains in office. Where the Corporation
has only one director, that director may constitute a meeting.
6
| Section 4.8 |
Transacting Business.
|
The board shall not transact
business at a meeting, other than filling a vacancy in the board, unless at
least 25% of the directors present are resident Canadians, except where:
| |
(a) |
a resident Canadian director who is unable to be present
approves in writing, or by telephonic, electronic or other communications
facility, the business transacted at the meeting; and |
| |
|
|
| |
(b) |
the required number of resident Canadian directors would
have been present had that director been present at the
meeting. |
| Section 4.9 |
Meeting by Telephonic, Electronic or Other
Communication Facility. |
If all the directors of the
Corporation consent, a director may participate in a meeting of the board or of
a committee of the board by such telephonic, electronic or other communication
facility as permits all persons participating in the meeting to communicate with
each other, and a director participating in such a meeting by such means is
deemed to be present at the meeting. Any such consent shall be effective whether
given before or after the meeting to which it relates and may be given with
respect to all meetings of the board and of committees of the board.
| Section 4.10 |
Place of Meetings. |
Meetings of the board may be held at any place in or outside
Canada.
| Section 4.11 |
Calling of Meetings.
|
Meetings of the board shall be
held from time to time at such time and at such place as the board, the
chairperson of the board, the managing director, the president or any two
directors may determine.
| Section 4.12 |
Notice of Meeting. |
Notice of the time and place of
each meeting of the board shall be given in the manner provided in Article
Eleven to each director not less than 48 hours before the time when the meeting
is to be held. A notice of a meeting of directors need not specify the purpose
of or the business to be transacted at the meeting except where the Act requires
such purpose or business to be specified, including, if required by the Act, any
proposal to:
| |
(a) |
submit to the shareholders any question or matter
requiring approval of the shareholders; |
| |
|
|
| |
(b) |
fill a vacancy among the directors or in the office of
auditor; |
| |
|
|
| |
(c) |
issue securities, except in the manner and on the terms
authorized by the directors; |
| |
|
|
| |
(d) |
declare dividends; |
| |
|
|
| |
(e) |
purchase, redeem or otherwise acquire shares issued by
the Corporation; |
| |
|
|
| |
(f) |
pay a commission for the sale of shares; |
| |
|
|
| |
(g) |
approve a management proxy circular referred to in the
Act; |
7
| |
(h) |
approve a take-over bid circular or directors'
circular; |
| |
|
|
| |
(i) |
approve any annual financial statements referred to in
the Act; or |
| |
|
|
| |
(j) |
adopt, amend or repeal
by-laws. |
| Section 4.13 |
First Meeting of New Board.
|
Provided a quorum of directors is
present, each newly elected board may hold its first meeting, without notice,
immediately following the meeting of shareholders at which such board is
elected.
| Section 4.14 |
Adjourned Meeting. |
Notice of an adjourned meeting of
the board is not required if the time and place of the adjourned meeting is
announced at the original meeting.
| Section 4.15 |
Regular Meetings. |
The board may appoint a day or
days in any month or months for regular meetings of the board at a place and
hour to be named. A copy of any resolution of the board fixing the place and
time of such regular meetings shall be sent to each director forthwith after
being passed, but no other notice shall be required for any such regular meeting
except where the Act requires the purpose thereof or the business to be
transacted thereat to be specified.
| Section 4.16 |
Chairperson. |
The chairperson of any meeting of
the board shall be the first mentioned of such of the following officers as have
been appointed and who is a director and is present at the meeting: chairperson
of the board, managing director, president or a vice-president. If no such
officer is present, the directors present shall choose one of their number to be
chairperson. If the secretary of the Corporation is absent, the chairperson
shall appoint some person, who need not be a director, to act as secretary of
the meeting.
| Section 4.17 |
Votes to Govern. |
At all meetings of the board
every question shall be decided by a majority of the votes cast on the question.
In case of an equality of votes the chairperson of the meeting shall not
be entitled to a second or casting vote.
| Section 4.18 |
Conflict of Interest.
|
A director or officer who is a
party to, or who is a director or officer, or an individual acting in a capacity
similar to a director or officer, of a party to, or has a material interest in
any person who is a party to, a material contract or material transaction or
proposed material contract or proposed material transaction with the Corporation
shall disclose the nature and extent of their interest at the time and in the
manner provided by the Act and such material interest shall be entered in the
minutes of the meetings of directors or otherwise noted in the records of the
Corporation. Any such material contract or material transaction or proposed
material contract or proposed material transaction shall be referred to the
board or shareholders for approval even if such contract is one that in the
ordinary course of the Corporation's business would not require approval by the
board or shareholders. Such a director shall not vote on any resolution to
approve the same except as provided by the Act.
8
| Section 4.19 |
Remuneration and Expenses.
|
Subject to any unanimous
shareholder agreement, the directors shall be paid such remuneration for their
services as the board may from time to time determine. The directors shall also
be entitled to be reimbursed for travelling and other expenses properly incurred
by them in attending meetings of the board or any committee thereof. Nothing
herein contained shall preclude any director from serving the Corporation in any
other capacity and receiving remuneration therefor.
ARTICLE 5
COMMITTEES
| Section 5.1 |
Committees of the Board.
|
The board may appoint one or more
committees of the board, however designated, and delegate to any such committee
any of the powers of the board except those which pertain to items which, under
the Act, a committee of the board has no authority to exercise.
| Section 5.2 |
Transaction of Business.
|
Subject to the provisions of
section 5.1, the powers of a committee of the board may be exercised by a
meeting at which a quorum is present or by resolution in writing signed by all
members of such committee who would have been entitled to vote on that
resolution at a meeting of the committee. Meetings of any such committee may be
held at any place in or outside of Canada.
| Section 5.3 |
Advisory Bodies. |
The board may from time to time appoint such advisory bodies as
it may deem advisable.
Unless otherwise determined by
the board, each committee and advisory body shall have power to fix its quorum
at not less than a majority of its members, to elect its chairperson, and to
regulate its procedure.
ARTICLE 6
OFFICERS
Subject to any unanimous
shareholder agreement, the board may from time to time appoint a president, one
or more vice-presidents (to which title may be added words indicating seniority
or function), a secretary, a treasurer and such other officers as the board may
determine, including one or more assistants to any of the officers so appointed.
The board may specify the duties of and, in accordance with this by-law and
subject to the provisions of the Act, delegate to such officers powers to manage
the business and affairs of the Corporation. Subject to sections 6.2 and 6.3, an
officer may, but need not be, a director and one person may hold more than one
office.
9
| Section 6.2 |
Chairperson of the Board.
|
The board may from time to time
also appoint a chairperson of the board who shall be a director. If appointed,
the board may assign to the chairperson any of the powers and duties that are by
any provisions of this by-law assigned to the managing director or to the
president, and the chairperson shall, subject to the provisions of the Act, have
such other powers and duties as the board may specify. During the absence or
disability of the chairperson, the chairperson's duties shall be performed, and
the chairperson's powers exercised, by the managing director, if any, or by the
president.
| Section 6.3 |
Managing Director. |
The board may from time to time
also appoint a managing director who shall be a resident Canadian and a
director. If appointed, the managing director shall be the chief executive
officer and, subject to the authority of the board, shall have general
supervision of the business and affairs of the Corporation; and the managing
director shall, subject to the provisions of the Act, have such other powers and
duties as the board may specify. During the absence or disability of the
president, or if no president has been appointed, the managing director shall
also have the powers and duties of that office.
If appointed, the president shall
be the chief operating officer and, subject to the authority of the board, shall
have general supervision of the business of the Corporation; and the president
shall have such other powers and duties as the board may specify. During the
absence or disability of the managing director, or if no managing director has
been appointed, the president shall also have the powers and duties of that
office.
| Section 6.5 |
Vice-President. |
A vice-president shall have such
powers and duties as the board or the chief executive officer may specify.
The secretary shall enter or
cause to be entered minutes of all proceedings of all meetings of the board,
shareholders and committees of the board in records kept for that purpose; the
secretary shall give or cause to be given, as and when instructed, all notices
to shareholders, directors, officers, auditors and members of committees of the
board; the secretary shall be the custodian of the stamp or mechanical device
generally used for affixing the corporate seal of the Corporation and of all
books, papers, records, documents, and instruments belonging to the Corporation,
except when some other officer or agent has been appointed for that purpose; and
the secretary shall have such other powers and duties as the board or the chief
executive officer may specify.
The treasurer shall keep or cause
to be kept proper accounting records in compliance with the Act and shall be
responsible for the deposit of money, the safekeeping of securities and the
disbursement of the funds of the Corporation; the treasurer shall render or
cause to be rendered to the board whenever required an account of all their
transactions as treasurer and of the financial position of the Corporation; and
the treasurer shall have such other powers and duties as the board or the chief
executive officer may specify.
10
| Section 6.8 |
Powers and Duties of Other Officers.
|
The powers and duties of all
other officers shall be such as the terms of their engagement call for or as the
board or the chief executive officer may specify. Any of the powers and duties
of an officer to whom an assistant has been appointed may be exercised and
performed by such assistant, unless the board or the chief executive officer
otherwise directs.
| Section 6.9 |
Variation of Powers and Duties.
|
The board may from time to time
and subject to the provisions of the Act, vary, add to or limit the powers and
duties of any officer.
| Section 6.10 |
Term of Office. |
The board, in its discretion, may
remove any officer of the Corporation, without prejudice to such officer's
rights under any employment contract. Otherwise each officer appointed by the
board shall hold office until the officer's successor is appointed, or until the
officer's earlier resignation.
| Section 6.11 |
Terms of Employment and Remuneration.
|
The terms of employment and the
remuneration of an officer appointed by the board shall be settled by it from
time to time.
| Section 6.12 |
Conflict of Interest.
|
An officer shall disclose the
officer's interest in any material contract or proposed material contract with
the Corporation in accordance with section 4.18.
| Section 6.13 |
Agents and Attorneys.
|
Subject to the provisions of the
Act, the Corporation, by or under the authority of the board, shall have power
from time to time to appoint agents or attorneys for the Corporation in or
outside Canada with such powers of management, administration or otherwise
(including the power to sub-delegate) as may be thought fit.
| Section 6.14 |
Fidelity Bonds. |
The board may require such
officers, employees and agents of the Corporation as the board deems advisable
to furnish bonds for the faithful discharge of their powers and duties, in such
form and with such surety as the board may from time to time determine.
ARTICLE 7
PROTECTION OF DIRECTORS, OFFICERS AND
OTHERS
| Section 7.1 |
Limitation of Liability.
|
Every director and officer of the
Corporation in exercising their powers and discharging their duties shall act
honestly and in good faith with a view to the best interests of the Corporation
and exercise the care, diligence and skill that a reasonably prudent person
would exercise in comparable circumstances. Subject to the foregoing, no
director or officer shall be liable for the acts, receipts, neglects or defaults
of any other director, officer or employee, or for joining in any receipt or
other act for conformity, or for any loss, damage or expense happening to the
Corporation through the insufficiency or deficiency of title to any property
acquired for or on behalf of the Corporation, or for the insufficiency or
deficiency of any security in or upon which any of the monies of the Corporation
shall be invested, or for any loss or damage arising from the bankruptcy,
insolvency or tortious acts of any person with whom any of the monies,
securities or effects of the Corporation shall be deposited, or for any loss
occasioned by any error of judgment or oversight on their part, or for any other
loss, damage or misfortune whatever which shall happen in the execution of the
duties of their office or in relation thereto; provided that nothing herein
shall relieve any director or officer from the duty to act in accordance with
the Act and the regulations thereunder or from liability for any breach thereof.
11
| (1) |
Subject to the limitations contained in the Act, the
Corporation shall indemnify a director or officer, a former director or
officer, or a person who acts or acted at the Corporation's request as a
director or officer, or an individual acting in a similar capacity, of
another entity, and their heirs and personal representatives, against all
costs, charges and expenses, including an amount paid to settle an action
or satisfy a judgment, reasonably incurred by them in respect of any
civil, criminal, administrative, investigative or other proceeding to
which the individual is made a party by reason of being or having been a
director or officer of the Corporation, or as a director or officer, or
acting in a similar capacity, of such other entity at the Corporation's
request, if: |
| |
|
|
|
(a) |
they acted honestly and in good faith with a view to the
best interests of the Corporation or, as the case may be, to the best
interests of the other entity for which they acted as director or officer,
or in a similar capacity, at the Corporation's request; and |
| |
|
|
|
(b) |
in the case of a criminal, administrative, investigative
or other proceeding that is enforced by a monetary penalty, they had
reasonable grounds for believing that their conduct was lawful. |
| |
|
|
| (2) |
The Corporation shall also indemnify such person in such
other circumstances as the Act permits or requires. Nothing in this by-law
shall limit the right of any person entitled to indemnity to claim
indemnity apart from the provisions of this
by-law. |
Subject to the Act, the
Corporation may purchase and maintain insurance for the benefit of any person
referred to in section 7.2 against such liabilities and in such amounts as the
board may from time to time determine and as are permitted by the Act.
ARTICLE 8
SHARES
| Section 8.1 |
Allotment of Shares.
|
Subject to the Act, the articles
and any unanimous shareholder agreement, the board may from time to time allot
or grant options to purchase the whole or any part of the authorized and
unissued shares of the Corporation at such times and to such persons and for
such consideration as the board shall determine, provided that no share shall be
issued until it is fully paid as provided by the Act.
12
The board may from time to time
authorize the Corporation to pay a reasonable commission to any person in
consideration of their purchasing or agreeing to purchase shares of the
Corporation, whether from the Corporation or from any other person, or procuring
or agreeing to procure purchasers for any such shares.
| Section 8.3 |
Registration of Share Transfer.
|
Subject to the provisions of the
Act, no transfer of a share in respect of which a certificate has been issued
shall be registered in a securities register except upon presentation of the
certificate representing such share with an endorsement which complies with the
Act made thereon or delivered therewith duly executed by an appropriate person
as provided by the Act, together with such reasonable assurance that the
endorsement is genuine and effective as the board may from time to time
prescribe, upon payment of all applicable taxes and any reasonable fee, not to
exceed $3, prescribed by the board, upon compliance with such restrictions on
transfer as are authorized by the articles.
| Section 8.4 |
Transfer Agents and Registrars.
|
The board may from time to time
appoint one or more agents to maintain, in respect of each class of securities
of the Corporation issued by it in registered form, a central securities
register and one or more branch securities registers. Such a person may be
designated as transfer agent or registrar according to their functions and one
person may be designated both registrar and transfer agent. The board may at any
time terminate such appointment.
| Section 8.5 |
Non-Recognition of Trusts.
|
Subject to the provisions of the
Act, the Corporation may treat as absolute owner of any share the person in
whose name the share is registered in the securities register as if that person
had full legal capacity and authority to exercise all rights of ownership,
irrespective of any indication to the contrary through knowledge or notice or
description in the Corporation's records or on the share certificate.
| Section 8.6 |
Share Certificates.
|
Every holder of one or more
shares of the Corporation shall be entitled, at their option, to a share
certificate, or to a non-transferable written certificate of acknowledgement of
the right to obtain a share certificate, stating the number and class or series
of shares held by them as shown on the securities register. Such certificates
and certificates of acknowledgement of a shareholder's right to a share
certificate, respectively, shall be in such form as the board may from time to
time approve. Any share certificate shall be signed in accordance with section
2.4 and need not be under the corporate seal; provided that, unless the board
otherwise determines, certificates representing shares in respect of which a
transfer agent and/or registrar has been appointed shall not be valid unless
countersigned by or on behalf of such transfer agent and/or registrar. The
signature of one of the signing officers or, in the case of a certificate which
is not valid unless countersigned by or on behalf of a transfer agent and/or
registrar, the signatures of both signing officers, may be printed or
mechanically reproduced in facsimile thereon. Every such facsimile signature
shall for all purposes be deemed to be the signature of the officer whose
signature it reproduces and shall be binding upon the Corporation. A certificate
executed as aforesaid shall be valid notwithstanding that one or both of the
officers whose facsimile signature appears thereon no longer holds office at the
date of issue of the certificate.
13
| Section 8.7 |
Replacement of Share Certificates.
|
The board or any officer or agent
designated by the board may in their discretion direct the issue of a new share
or other such certificate in lieu of and upon cancellation of a certificate that
has been mutilated or in substitution for a certificate claimed to have been
lost, destroyed or wrongfully taken, on payment of such reasonable fee, not to
exceed $3, and on such terms as to indemnity, reimbursement of expenses and
evidence of loss and of title as the board may from time to time prescribe,
whether generally or in any particular case.
| Section 8.8 |
Joint Holders. |
If two or more persons are
registered as joint holders of any share, the Corporation shall not be bound to
issue more than one certificate in respect thereof, and delivery of such
certificate to one of such persons shall be sufficient delivery to all of them.
Any one of such persons may give effectual receipts for the certificate issued
in respect thereof or for any dividend, bonus, return of capital or other money
payable or warrant issuable in respect of such share.
| Section 8.9 |
Deceased Shareholders.
|
In the event of the death of a
holder, or of one of the joint holders, of any share, the Corporation shall not
be required to make any entry in the securities register in respect thereof or
to make any dividend or other payments in respect thereof; except upon
production of all such documents as may be required by law and upon compliance
with the reasonable requirements of the Corporation and its transfer agents.
ARTICLE 9
DIVIDENDS AND RIGHTS
Subject to the provisions of the
Act, the board may from time to time declare dividends payable to the
shareholders according to their respective rights and interest in the
Corporation. Dividends may be paid in money or property or by issuing fully paid
shares of the Corporation.
| Section 9.2 |
Dividend Payments. |
A dividend payable in money shall
be paid by cheque, or such other manner prescribed by the board, drawn on the
Corporation's bankers or one of them to the order of each registered holder of
shares of the class or series in respect of which it has been declared and sent
to such registered holder at their recorded address, unless such holder
otherwise directs. In the case of joint holders, the cheque or other manner of
payment shall, unless such joint holders otherwise direct, be made payable to
the order of all of such joint holders and sent to them at their recorded
address. The sending of such payment as aforesaid, unless the same is not paid
on due presentation, shall satisfy and discharge the liability for the dividend
to the extent of the sum represented thereby plus the amount of any tax which
the Corporation is required to and does withhold.
| Section 9.3 |
Non-Receipt of Payment.
|
In the event of non-receipt of
any dividend payment by the person to whom it is sent as aforesaid, the
Corporation shall issue re-payment of the dividend to such person for a like
amount on such terms as to indemnity, reimbursement of expenses, and evidence of
non-receipt and of title as the board may from time to time prescribe, whether
generally or in any particular case.
14
| Section 9.4 |
Record Date for Dividends and Rights.
|
The board may fix in advance a
date, preceding by not more than 60 days the date for the payment of any
dividend or the date for the issue of any warrant or other evidence of the right
to subscribe for securities of the Corporation, as a record date for the
determination of the persons entitled to receive payment of such dividend or to
exercise the right to subscribe for such securities; and notice of any such
record date shall be given not less than 7 days before such record date in the
manner provided for by the Act. If no record date is so fixed, the record date
for the determination of the persons entitled to receive payment of any dividend
or to exercise the right to subscribe for securities of the Corporation shall be
at the close of business on the day on which the resolution relating to such
dividend or right to subscribe is passed by the board.
| Section 9.5 |
Unclaimed Dividends.
|
Any dividend unclaimed after a
period of 6 years from the date on which the same has been declared to be
payable shall be forfeited and shall revert to the Corporation.
ARTICLE 10
MEETINGS OF SHAREHOLDERS
| Section 10.1 |
Annual Meetings. |
The annual meeting of
shareholders shall be held at such time in each year and, subject to section
10.3, at such place as the board, the chairperson of the board, the managing
director, or the president may from time to time determine, for the purpose of
considering the financial statements and reports required by the Act to be
placed before the annual meeting, electing directors, appointing an auditor, and
for the transaction of such other business as may properly be brought before the
meeting.
| Section 10.2 |
Special Meetings. |
The board, the chairperson of the
board, the managing director, or the president shall have power to call a
special meeting of shareholders at any time.
| Section 10.3 |
Meeting by Telephonic, Electronic or Other
Communication Facility. |
Meeting of shareholders may be
held entirely by telephonic, electronic or other communication facility as
permits all participants participating in the meeting to communicate with each
other, and any person participating in such a meeting by such means is deemed to
be present at the meeting. Any vote at such a meeting may be held entirely by
means of a telephonic, electronic or other communication facility.
| Section 10.4 |
Place of Meetings. |
Meetings of shareholders shall be
held at the registered office of the Corporation or at some other place in
Canada as the board shall so determine. Meetings of shareholders may also be
held outside Canada at the place or places specified in the articles, or, if all
the shareholders entitled to vote at the meeting so agree, at some other place
outside Canada.
15
| Section 10.5 |
Notice of Meetings. |
Notice of the time and place of
each meeting of shareholders shall be given in the manner provided in Article
Eleven not less than 21 nor more than 60 days before the date of the
meeting to each director, to the auditor, and to each shareholder who at the
close of business on the record date for notice is entered in the securities
register as the holder of one or more shares carrying the right to vote at the
meeting. Notice of a meeting of shareholders called for any purpose other than
consideration of the financial statements and auditor's report, election of
directors and reappointment of the incumbent auditor shall state the nature of
such business in sufficient detail to permit the shareholder to form a reasoned
judgment thereon and shall state the text of any special resolution to be
submitted to the meeting. A shareholder and any other person entitled to attend
a meeting of shareholders may in any manner waive notice of or otherwise consent
to a meeting of shareholders.
| Section 10.6 |
List of Shareholders Entitled to Notice.
|
For every meeting of
shareholders, the Corporation shall prepare a list of shareholders entitled to
receive notice of the meeting, arranged in alphabetical order and showing the
number of shares held by each shareholder. If a record date for notice of the
meeting is fixed pursuant to section 10.8, the shareholders listed shall be
those registered at the close of business on such record date. If no such record
date is fixed, the shareholders listed shall be those registered at the close of
business on the day immediately preceding the day on which notice of the meeting
is given or, where no such notice is given, on the day on which the meeting is
held. The list shall be available for examination by any shareholder during
usual business hours at the registered office of the Corporation or at the place
where the central securities register is maintained and at the meeting for which
the list was prepared.
| Section 10.7 |
List of Shareholders Entitled to Vote
|
For every meeting of
shareholders, the Corporation shall prepare a list of shareholders entitled to
vote at the meeting, arranged in alphabetical order and showing the number of
shares held by each such shareholder. If a record date for voting at the meeting
is fixed pursuant to section 10.8, the shareholders listed shall be those
registered at the close of business on such record date. If no such record date
is fixed, the shareholders listed shall be those registered at the close of
business on the day immediately preceding the day on which notice of the meeting
is given or, where no such notice is given, on the day on which the meeting is
held. The list shall be available for examination by any shareholder during
usual business hours at the registered office of the Corporation or at the place
where the central securities register is maintained and at the meeting for which
the list was prepared.
| Section 10.8 |
Record Date for Notice or Voting.
|
The board may fix in advance a
date, preceding the date of any meeting of shareholders by not more than 60 days
and not less than 21 days, as a record date for the determination of the
shareholders entitled to notice of the meeting and/or vote at the meeting, and
notice of any such record date shall be given not less than 7 days before such
record date, by newspaper advertisement in the manner provided in the Act. If no
record date for notice is so fixed, the record date for the determination of the
shareholders entitled to receive notice of the meeting shall be at the close of
business on the day immediately preceding the day on which the notice is given
or, if no notice is given, the day on which the meeting is held.
16
| Section 10.9 |
Meetings Without Notice.
|
A meeting of shareholders may be
held without notice at any time and place permitted by the Act: (a) if all the
shareholders entitled to vote thereat are present in person or represented by
proxy or if those not present or represented by proxy waive notice of or
otherwise consent to such meeting being held; and (b) if the auditor and the
directors are present or waive notice of or otherwise consent to such meeting
being held; so long as such shareholders, auditor or directors present are not
attending for the express purpose of objecting to the transaction of any
business on the grounds that the meeting is not lawfully called. At such a
meeting any business may be transacted which the Corporation at a meeting of
shareholders may transact. If the meeting is held at a place outside Canada,
shareholders not present or represented by proxy, but who have waived notice of
or otherwise consented to such meeting, shall also be deemed to have consented
to the meeting being held at such place.
| Section 10.10 |
Chairperson, Secretary and Scrutineers.
|
The chairperson of any meeting of
shareholders shall be the first mentioned of such of the following officers as
have been appointed and who is present at the meeting: managing director,
president, chairperson of the board, or a vice-president who is a shareholder.
If no such officer is present within 15 minutes from the time fixed for holding
the meeting, the persons present and entitled to vote shall choose one of their
number to be chairperson. If the secretary of the Corporation is absent, the
chairperson shall appoint some person, who need not be a shareholder, to act as
secretary of the meeting. If desired, one or more scrutineers, who need not be
shareholders, may be appointed by a resolution or by the chairperson with the
consent of the meeting.
| Section 10.11 |
Persons Entitled to be Present.
|
The only persons entitled to be
present at a meeting of shareholders shall be those entitled to vote thereat,
the directors and auditor of the Corporation and others who, although not
entitled to vote, are entitled or required under any provision of the Act or the
articles or by-laws to be present at the meeting. Any other person may be
admitted only on the invitation of the chairperson of the meeting or with the
consent of the meeting.
A quorum for the transaction of
business at any meeting of shareholders shall be two persons entitled to vote
thereat present in person or represented by proxy. If a quorum is present at the
opening of any meeting of shareholders, the shareholders present or represented
by proxy may proceed with the business of the meeting notwithstanding that a
quorum is not present throughout the meeting. If a quorum is not present at the
opening of any meeting of shareholders, the shareholders present or represented
by proxy may adjourn the meeting to a fixed time and place but may not transact
any other business.
| Section 10.13 |
Right to Vote. |
Subject to the provisions of the
Act as to authorized representatives of any other body corporate or association,
at any meeting of shareholders, every person named in the list respecting the
entitlement to vote referred to in section 10.7 shall be entitled to vote the
shares shown thereon opposite their name at the meeting to which such list
relates.
17
| Section 10.14 |
Proxyholders and Representatives.
|
| (1) |
Every shareholder entitled to vote at a meeting of
shareholders may appoint a proxyholder, or one or more alternate
proxyholders, who need not be shareholders, to attend and act as their
representative at the meeting in the manner and to the extent authorized
and with the authority conferred by the proxy. A proxy shall be in writing
executed by the shareholder or their attorney and shall conform with the
requirements of the Act. |
| |
|
| (2) |
Alternatively, every such shareholder which is a body
corporate or association may authorize by resolution of its directors or
governing body an individual to represent it at a meeting of shareholders
and such individual may exercise on the shareholder's behalf all the
powers it could exercise if it were an individual shareholder. The
authority of such an individual shall be established by depositing with
the Corporation a certified copy of such resolution, or in such other
manner as may be satisfactory to the secretary of the Corporation or the
chairperson of the meeting. Any such representative need not be a
shareholder. |
| Section 10.15 |
Time for Deposit of Proxies.
|
The board may specify in a notice
calling a meeting of shareholders a time, preceding the time of such meeting by
not more than 48 hours exclusive of non-business days, before which time proxies
to be used at such meeting must be deposited. A proxy shall be acted upon only
if, prior to the time so specified, it shall have been deposited with the
Corporation or an agent thereof specified in such notice or if, no such time
having been specified in such notice, it has been received by the secretary of
the Corporation or by the chairperson of the meeting or any adjournment thereof
prior to the time of voting.
| Section 10.16 |
Joint Shareholders. |
If two or more persons hold
shares jointly, any one of them present in person or duly represented by proxy
at a meeting of shareholders may, in the absence of the other or others, vote
the shares; but if two or more of those persons are present in person or
represented by proxy and vote, they shall vote as one the shares jointly held by
them.
| Section 10.17 |
Votes to Govern. |
At any meeting of shareholders
every question shall, unless otherwise required by the articles or by-laws or by
law, be determined by a majority of the votes cast on the question. In case of
an equality of votes either upon a show of hands or upon a poll, the chairperson
of the meeting shall not be entitled to a second or casting vote.
| Section 10.18 |
Show of Hands. |
Subject to the provisions of the
Act, any question at a meeting of shareholders may be decided by a show of
hands, unless a ballot thereon is required or demanded as hereinafter provided.
Upon a show of hands every person who is present and entitled to vote shall have
one vote. Whenever a vote by show of hands shall have been taken upon a
question, unless a ballot thereon is so required or demanded, a declaration by
the chairperson of the meeting that the vote upon the question has been carried
or carried by a particular majority or not carried and an entry to that effect
in the minutes of the meeting shall be prima facie evidence of the fact without
proof of the number or proportion of the votes recorded in favour of or against
any resolution or other proceeding in respect of the said question, and the
result of the vote so taken shall be the decision of the shareholders upon the
said question.
18
On any question proposed for
consideration at a meeting of shareholders, and whether or not a show of hands
has been taken thereon, the chairperson or any person who is present and
entitled to vote, whether as shareholder or proxyholder, on such question at the
meeting may demand a ballot. A ballot so required or demanded shall be taken in
such manner as the chairperson shall direct. A requirement or demand for a
ballot may be withdrawn at any time prior to the taking of the ballot. If a
ballot is taken each person present shall be entitled, in respect of the shares
which they are entitled to vote at the meeting upon the question, to that number
of votes provided by the Act or the articles, and the result of the ballot so
taken shall be the decision of the shareholders upon the said question.
| Section 10.20 |
Adjournment. |
The chairperson at a meeting of
shareholders may, with the consent of the meeting and subject to such conditions
as the meeting may decide, adjourn the meeting from time to time and place to
place. If a meeting of shareholders is adjourned for less than 30 days, it shall
not be necessary to give notice of the adjourned meeting, other than by
announcement at the earliest meeting that is adjourned. Subject to the Act, if a
meeting of shareholders is adjourned by one or more adjournments for an
aggregate of 30 days or more, notice of the adjourned meeting shall be given as
for an original meeting.
| Section 10.21 |
Resolution in Writing.
|
A resolution in writing signed by
all the shareholders entitled to vote on that resolution at a meeting of
shareholders is as valid as if it had been passed at a meeting of the
shareholders unless a written statement with respect to the subject matter of
the resolution is submitted by a director or the auditor in accordance with the
Act.
| Section 10.22 |
Only One Shareholder.
|
Where the Corporation has only
one shareholder or only one holder of any class or series of shares, the
shareholder present in person or duly represented by proxy constitutes a
meeting.
ARTICLE 11
NOTICES
| Section 11.1 |
Method of Giving Notices.
|
Any notice or document to be
given pursuant to the Act, the regulations thereunder, the articles or the
by-laws to a shareholder or director of the Corporation may be sent (a) by
prepaid mail addressed to, or may be delivered personally to, the shareholder at
the shareholder's latest address as shown in the records of the Corporation or
its transfer agent and the director at the director's latest address as shown on
the records of the Corporation or in the last notice of directors or notice of
change of directors filed under the Act, and a notice or document sent in
accordance with the foregoing to a shareholder or director of the Corporation
shall be deemed to be received by them at the time it would be delivered in the
ordinary course of mail unless there are reasonable grounds for believing that
the shareholder or director did not receive the notice or document at the time
or at all or (b) by electronic means as permitted by, and in accordance with,
the Act and the regulations thereunder. The secretary may change or cause to be
changed the recorded address of any shareholder, director, officer, auditor or
member of a committee of the board in accordance with any information believed
by the secretary to be reliable. The foregoing shall not be construed so as to
limit the manner or effect of giving notice by any other means of communication
otherwise permitted by law.
19
| Section 11.2 |
Notice to Joint Holders.
|
If two or more persons are
registered as joint holders of any share, any notice shall be addressed to all
of such joint holders but notice addressed to one of such persons shall be
sufficient notice to all of them.
| Section 11.3 |
Computation of Time.
|
In computing the date when notice
must be given under any provision requiring a specified number of days' notice
of any meeting or other event, the date of giving the notice shall be excluded
and the date of the meeting or other event shall be included.
| Section 11.4 |
Undelivered Notices.
|
If any notice given to a
shareholder pursuant to section 11.1 is returned on two consecutive occasions
because the shareholder cannot be found, the Corporation shall not be required
to give any further notices to such shareholder until the shareholder informs
the Corporation in writing of the shareholder's new address.
| Section 11.5 |
Omissions and Errors.
|
The accidental omission to give
any notice to any shareholder, director, officer, auditor or member of a
committee of the board or the non-receipt of any notice by any such person or
any error in any notice not affecting the substance thereof shall not invalidate
any action taken at any meeting held pursuant to such notice or otherwise
founded thereon.
| Section 11.6 |
Persons Entitled by Death or Operation of
Law. |
Every person who, by operation of
law, transfer, death of a shareholder or any other means whatsoever, shall
become entitled to any share, shall be bound by every notice in respect of such
share which shall have been duly given to the shareholder from whom they derive
their title to such share prior to their name and address being entered on the
securities register (whether such notice was given before or after the happening
of the event upon which they became so entitled) and prior to their furnishing
to the Corporation the proof of authority or evidence of their entitlement
prescribed by the Act.
| Section 11.7 |
Waiver of Notice. |
Any shareholder, proxyholder,
other person entitled to attend a meeting of shareholders, director, officer,
auditor or member of a committee of the board may at any time waive any notice,
or waive or abridge the time for any notice, required to be given to them under
any provision of the Act, the regulations thereunder, the articles, the by-laws
or otherwise and such waiver or abridgement, whether given before or after the
meeting or other event of which notice is required to be given, shall cure any
default in the giving or in the time of such notice, as the case may be. Any
such waiver or abridgement shall be in writing except a waiver of notice of a
meeting of shareholders or of the board or of a committee of the board which may
be given in any manner.
20
ARTICLE 12
EFFECTIVE DATE
| Section 12.1 |
Effective Date. |
This by-law shall come into force when enacted by the
board.
All previous by-laws of the
Corporation are repealed as of the coming into force of this by-law. Such repeal
shall not affect the previous operation of any by-law so repealed or affect the
validity of any act done or right, privilege, obligation or liability acquired
or incurred under, or the validity of any contract or agreement made pursuant
to, or the validity of any articles or predecessor charter documents of the
Corporation obtained pursuant to, any such by-law prior to its repeal. All
officers and persons acting under any by-law so repealed shall continue to act
as if appointed under the provisions of this by-law and all resolutions of the
shareholders or the board or a committee of the board with continuing effect
passed under any repealed by-law shall continue to be good and valid except to
the extent inconsistent with this bylaw and until amended or repealed.
ENACTED by the board as of the 5th day of April,
2004.
| |
(signed) "Arnold T. Kondrat" |
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President |
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(signed) "Geoffrey G. Farr" |
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Secretary |
| BY-LAW NO. 4 |
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| A by-law relating to the nomination of directors
|
| |
| BANRO CORPORATION |
| (the
"Corporation") |
INTRODUCTION
The Corporation is committed to: (i) facilitating an orderly
and efficient annual or, where the need arises, special meeting, process; (ii)
ensuring that all shareholders receive adequate notice of director nominations
and sufficient information with respect to all nominees; (iii) allowing the
Corporation and shareholders to evaluate all nominees’ qualifications and
suitability as a director of the Corporation; and (iv) allowing shareholders to
cast an informed vote.
The purpose of this By-law No. 4 (the "By-law") is to
provide shareholders, directors and management of the Corporation with guidance
on the nomination of directors. This By-law is the framework by which the
Corporation seeks to fix a deadline by which holders of record of common shares
of the Corporation must submit director nominations to the Corporation prior to
any annual or special meeting of shareholders and sets forth the information
that a shareholder must include in the notice to the Corporation for the notice
to be in proper written form.
It is the position of the Corporation that this By-law is
beneficial to shareholders and other stakeholders. This By-law will be subject
to an annual review, and will reflect changes as required by securities
regulatory agencies or stock exchanges, or so as to meet industry standards.
NOMINATIONS OF DIRECTORS
| 1. |
Nomination Procedures - Subject only to the
Canada Business Corporations Act (the "Act") and the
articles of the Corporation (the "Articles"), only persons who are
nominated in accordance with the following procedures shall be eligible
for election as directors of the Corporation. Nominations of persons for
election to the board of directors of the Corporation (the "Board")
may be made at any annual meeting of shareholders, or at any special
meeting of shareholders if one of the purposes for which the special
meeting was called is the election of directors: |
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a. |
by or at the direction of the Board, including pursuant
to a notice of meeting; |
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b. |
by or at the direction or request of one or more
shareholders pursuant to a proposal made in accordance with the provisions
of the Act, or a requisition of the shareholders made in accordance with
the provisions of the Act; or |
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c. |
by any person (a "Nominating Shareholder"): (A)
who, at the close of business on the date of the giving of the notice
provided for below in this By-law and on the record date for notice of
such meeting, is entered in the securities register as a holder of one or
more shares carrying the right to vote at such meeting or who beneficially
owns shares that are entitled to be voted at such meeting; and (B) who
complies with the notice procedures set forth below in this
By-law. |
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| 2. |
Timely Notice - In addition to any other
applicable requirements, for a nomination to be made by a Nominating
Shareholder, the Nominating Shareholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation at the
principal executive offices of the
Corporation. |
| 3. |
Manner of Timely Notice - To be timely, a
Nominating Shareholder’s notice to the Secretary of the Corporation must
be made: |
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a. |
in the case of an annual meeting of shareholders, not
less than 30 nor more than 65 days prior to the date of the annual meeting
of shareholders; provided, however, that in the event that the annual
meeting of shareholders is to be held on a date that is less than 50 days
after the date (the "Notice Date") on which the first public
announcement of the date of the annual meeting was made, notice by the
Nominating Shareholder may be made not later than the close of business on
the tenth (10th) day following the Notice Date; and |
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b. |
in the case of a special meeting (which is not also an
annual meeting) of shareholders called for the purpose of electing
directors (whether or not called for other purposes), not later than the
close of business on the fifteenth (15th) day following the day on which
the first public announcement of the date of the special meeting of
shareholders was made. In no event shall any adjournment or postponement
of a meeting of shareholders or the announcement thereof commence a new
time period for the giving of a Nominating Shareholder’s notice as
described above. |
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| 4. |
Proper Form of Timely Notice - To be in proper
written form, a Nominating Shareholder’s notice to the Secretary of the
Corporation must set forth: |
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a. |
as to each person whom the Nominating Shareholder
proposes to nominate for election as a director: (A) the name, age,
business address and residential address of the person; (B) the principal
occupation or employment of the person; (C) the class or series and number
of shares in the capital of the Corporation which are controlled or which
are owned beneficially or of record by the person as of the record date
for the meeting of shareholders (if such date shall then have been made
publicly available and shall have occurred) and as of the date of such
notice; and (D) any other information relating to the person that would be
required to be disclosed in a dissident’s proxy circular in connection
with solicitations of proxies for election of directors pursuant to the
Act and Applicable Securities Laws (as defined below); and |
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b. |
as to the Nominating Shareholder giving the notice, any
proxy, contract, arrangement, understanding or relationship pursuant to
which such Nominating Shareholder has a right to vote any shares of the
Corporation and any other information relating to such Nominating
Shareholder that would be required to be made in a dissident’s proxy
circular in connection with solicitations of proxies for election of
directors pursuant to the Act and Applicable Securities Laws (as defined
below). |
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The Corporation may require any proposed nominee to
furnish such other information, including a written consent to act, as may
reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as an independent director of the
Corporation or that could be material to a reasonable shareholder’s
understanding of the independence, or lack thereof, of such proposed
nominee. |
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| 5. |
Eligibility for Nomination as a Director - No
person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the provisions of this By-law;
provided, however, that nothing in this By-law shall be deemed to preclude
discussion by a shareholder (as distinct from the nomination of directors)
at a meeting of shareholders of any matter in respect of which it would
have been entitled to submit a proposal pursuant to the provisions of the
Act. The Chairman of the meeting shall have the power and duty to
determine whether a nomination was made in accordance with the procedures
set forth in the foregoing provisions and, if any proposed nomination is
not in compliance with such foregoing provisions, to declare that such
defective nomination shall be disregarded. |
2
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| 6. |
Terms - For purposes of this By-law: |
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a. |
“public announcement” shall mean disclosure in a
press release reported by a national news service in Canada, or in a
document publicly filed by the Corporation under its profile on the System
of Electronic Document Analysis and Retrieval at www.sedar.com;
and |
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b. |
“Applicable Securities Laws” means the applicable
securities legislation of each province of Canada other than Quebec, as
amended from time to time, the rules, regulations and forms made or
promulgated under any such statute and the published national instruments,
multilateral instruments, policies, bulletins and notices of the
securities commission and similar regulatory authority of each province of
Canada other than Quebec. |
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| 7. |
Delivery of Notice - Notwithstanding any other
provision of this By-law, notice given to the Secretary of the Corporation
pursuant to this By-law may only be given by personal delivery, facsimile
transmission or by email (at such email address as stipulated from time to
time by the Secretary of the Corporation for purposes of this notice), and
shall be deemed to have been given and made only at the time it is served
by personal delivery, email (at the aforesaid address) or sent by
facsimile transmission (provided that receipt of confirmation of such
transmission has been received) to the Secretary at the address of the
principal executive offices of the Corporation; provided that if such
delivery or electronic communication is made on a day which is a not a
business day or later than 5:00 p.m. (Toronto time) on a day which is a
business day, then such delivery or electronic communication shall be
deemed to have been made on the subsequent day that is a business
day. |
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| 8. |
Board Discretion - Notwithstanding the foregoing,
the Board may, in its sole discretion, waive any requirement in this
By-law. |
ENACTED by the Board on May 31, 2013 and confirmed by
the shareholders of the Corporation on June 28, 2013.
3
| Banro Corporation |
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| Terms of Reference |
| Audit Committee of the Board of Directors |
| Banro Corporation |
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| November 23,
2004 |
Mandate
| A. |
Role and Objectives |
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The Audit Committee (the "Committee") is a committee of
the Board of Directors (the "Board") of Banro Corporation ("Banro")
established for the purpose of overseeing the accounting and financial
reporting process of Banro and external audits of the consolidated
financial statements of Banro. In connection therewith, the Committee
assists the Board in fulfilling its oversight responsibilities in relation
to Banro's internal accounting standards and practices, financial
information, accounting systems and procedures, financial reporting and
statements and the nature and scope of the annual external audit. The
Committee also recommends for Board approval Banro’s audited annual
consolidated financial statements and other mandatory financial
disclosure. |
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Banro’s external auditor is accountable to the Board and
the Committee as representatives of shareholders of Banro. The Committee
shall be directly responsible for overseeing the relationship of the
external auditor. The Committee shall have such access to the external
auditor as it considers necessary or desirable in order to perform its
duties and responsibilities. The external auditor shall report directly to
the Committee. |
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The objectives of the Committee are as follows: |
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1. |
to be satisfied with the credibility and integrity of
financial reports; |
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2. |
to support the Board in meeting its oversight
responsibilities in respect of the preparation and disclosure of financial
reporting, including the consolidated financial statements of
Banro; |
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3. |
to facilitate communication between the Board and the
external auditor and to receive all reports of the external auditor
directly from the external auditor; |
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4. |
to be satisfied with the external auditor's independence
and objectivity; and |
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5. |
to strengthen the role of independent directors by
facilitating in-depth discussions between members of the Committee,
management and Banro’s external auditor. |
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| B. |
Composition |
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1. |
The Committee shall comprise at least 3 directors, none
of whom shall be an officer or employee of Banro or any of its
subsidiaries or any affiliate thereof. Each Committee member shall satisfy
the independence, financial literacy and experience requirements of
applicable securities laws, rules or guidelines, any applicable stock
exchange requirements or guidelines and any other applicable regulatory
rules. In particular, each member of the Committee shall have
no direct or indirect material relationship with Banro or
any affiliate thereof which could reasonably interfere with the exercise
of the member's independent judgment. Determinations as to whether a
particular director satisfies the requirements for membership on the
Committee shall be made by the full Board. |
2
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2. |
Members of the Committee shall be appointed by the Board.
Each member shall serve until his successor is appointed, unless he shall
resign or be removed by the Board or he shall otherwise cease to be a
director of Banro. |
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3. |
The Chair of the Committee may be designated by the Board
or, if it does not do so, the members of the Committee may elect a Chair
by vote of a majority of the full Committee membership. The Committee
Chair shall satisfy the independence, financial literacy and experience
requirements (as described above). |
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4. |
The Committee shall have access to such officers and
employees of Banro and to such information respecting Banro as it
considers to be necessary or advisable in order to perform its duties and
responsibilities. |
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| C. |
Meetings |
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1. |
At all meetings of the Committee, every question shall be
decided by a majority of the votes cast. In case of an equality of votes,
the matter will be referred to the Board for decision. |
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2. |
A quorum for meetings of the Committee shall be a
majority of its members. |
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3. |
Meetings of the Committee shall be scheduled at least
quarterly and at such other times during each year as it deems
appropriate. Minutes of all meetings of the Committee shall be taken. The
Chief Financial Officer shall attend meetings of the Committee, unless
otherwise excused from all or part of any such meeting by the Committee
Chair. The Chair of the Committee shall hold in camera sessions of
the Committee, without management present, at every meeting. |
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4. |
The Committee shall report the results of meetings and
reviews undertaken and any associated recommendations to the
Board. |
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5. |
The Committee shall meet periodically with Banro’s
external auditor (in connection with the preparation of the annual
consolidated financial statements and otherwise as the Committee may
determine), part or all of each such meeting to be in the absence of
management. |
Responsibilities
As discussed above, the Committee is
established to assist the Board in fulfilling its oversight responsibilities
with respect to the accounting and financial reporting processes of Banro and
external audits of Banro’s consolidated financial statements. In that regard,
the Committee shall:
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1. |
satisfy itself on behalf of the Board with respect to
Banro's internal control systems including identifying, monitoring and
mitigating business risks as well as compliance with legal, ethical and
regulatory requirements. The Committee shall also review with management,
the external auditor and, if necessary, legal counsel, any litigation, claim or other contingency
(including tax assessments) that could have a material effect on the
financial position or operating results of Banro (on a consolidated
basis), and the manner in which these matters may be, or have been,
disclosed in the financial statements; |
3
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2. |
review with management and the external auditor the
annual consolidated financial statements of Banro, the reports of the
external auditor thereon and related financial reporting, including
Management's Discussion and Analysis and any earnings press releases,
(collectively, "Annual Financial Disclosure") prior to their submission to
the Board for approval. This process should include, but not be limited
to: |
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(a) |
reviewing changes in accounting principles, or in their
application, which may have a material impact on the current or future
year's financial statements; |
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(b) |
reviewing significant accruals, reserves or other
estimates; |
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(c) |
reviewing accounting treatment of unusual or
non-recurring transactions; |
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(d) |
reviewing adequacy of reclamation fund; |
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(e) |
reviewing disclosure requirements for commitments and
contingencies; |
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(f) |
reviewing financial statements and all items raised by
the external auditor, whether or not included in the financial statements;
and |
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(g) |
reviewing unresolved differences between Banro and the
external auditor. |
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Following such review, the Committee shall recommend to
the Board for approval all Annual Financial Disclosure; |
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3. |
review with management all interim consolidated financial
statements of Banro and related financial reporting, including
Management's Discussion and Analysis and any earnings press releases,
(collectively "Quarterly Financial Disclosure") and, if thought fit,
approve all Quarterly Financial Disclosure; |
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4. |
be satisfied that adequate procedures are in place for
the review of Banro’s public disclosure of financial information extracted
or derived from Banro’s financial statements, other than Annual Financial
Disclosure or Quarterly Financial Disclosure, and shall periodically
assess the adequacy of those procedures; |
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5. |
review with management and recommend to the Board for
approval, any financial statements of Banro which have not previously been
approved by the Board and which are to be included in a prospectus of
Banro; |
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6. |
review with management and recommend to the Board for
approval, Banro’s Annual Information Form; |
4
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7. |
with respect to the external auditor: |
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(a) |
receive all reports of the external auditor directly from
the external auditor; |
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(b) |
discuss with the external auditor: |
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(i) |
critical accounting policies; |
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(ii) |
alternative treatments of financial information within
GAAP discussed with management (including the ramifications thereof and
the treatment preferred by the external auditor); and |
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(iii) |
other material, written communication between management
and the external auditor; |
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(c) |
consider and make a recommendation to the Board as to the
appointment or re-appointment of the external auditor, being satisfied
that such auditor is a participant in good standing pursuant to applicable
securities laws; |
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(d) |
review the terms of engagement of the external auditor,
including the appropriateness and reasonableness of the auditor's fees and
make a recommendation to the Board as to the compensation of the external
auditor; |
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(e) |
when there is to be a replacement of the external
auditor, review with management the reasons for such replacement and the
information to be included in any required notice to securities regulators
and recommend to the Board for approval the replacement of the external
auditor along with the content of any such notice; |
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(f) |
oversee the work of the external auditor in performing
its audit or review services and oversee the resolution of any
disagreements between management and the external auditor; |
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(g) |
review and discuss with the external auditor all
significant relationships that the external auditor and its affiliates
have with Banro and its affiliates in order to determine the external
auditor's independence, including, without limitation: |
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(i) |
requesting, receiving and reviewing, on a periodic basis,
written or oral information from the external auditor delineating all
relationships that may reasonably be thought to bear on the independence
of the external auditor with respect to Banro; |
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(ii) |
discussing with the external auditor any disclosed
relationships or services that the external auditor believes may affect
the objectivity and independence of the external auditor; and |
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(iii) |
recommending that the Board take appropriate action in
response to the external auditor's information to satisfy itself of the
external auditor's independence; |
5
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(h) |
as may be required by applicable securities laws, rules
and guidelines, either: |
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(i) |
pre-approve all non-audit services to be provided by the
external auditor to Banro (and its subsidiaries, if any), or, in the case
of de minimus non-audit services, approve such non-audit services
prior to the completion of the audit; or |
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(ii) |
adopt specific policies and procedures for the engagement
of the external auditor for the purposes of the provision of non-audit
services; |
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(i) |
review and approve the hiring policies of Banro regarding
partners, employees and former partners and employees of the present and
former external auditor of Banro; |
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8. |
(a) |
establish procedures for: |
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(i) |
the receipt, retention and treatment of complaints
received by Banro regarding accounting, internal accounting controls or
auditing matters; and |
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(ii) |
the confidential, anonymous submission by employees of
Banro of concerns regarding questionable accounting or auditing matters;
and |
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(b) |
review with the external auditor its assessment of the
internal controls of Banro, its written reports containing recommendations
for improvement, and Banro's response and follow-up to any identified
weaknesses; |
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9. |
with respect to risk management, be satisfied that Banro
has implemented appropriate systems of internal control over financial
reporting (and review senior management's assessment thereof) to ensure
compliance with any applicable legal and regulatory
requirements; |
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10. |
review annually with management and the external auditor
and report to the Board on insurable risks and insurance coverage;
and |
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11. |
engage independent counsel and other advisors as it
determines necessary to carry out its duties and set and pay the
compensation for any such advisors. |
Exhibit 8.1
_______________________________
Notes to the above
chart:
| (1) |
Banro Group (Barbados) Limited also has outstanding
preferred shares which were issued pursuant to the US$30 million private
placement financing transaction completed in April 2013. See item 10.B. of
this Form 20-F for additional information in respect of this transaction
and the said preferred shares. |
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| (2) |
Each of Namoya (Barbados) Limited and Twangiza (Barbados)
Limited also has outstanding preferred shares which were issued pursuant
to the US$40 million private placement financing transaction completed in
February 2014 (US$20 million private placement in respect of each such
subsidiary). See item 10.B. of this Form 20-F for additional information
in respect of this transaction and the said preferred
shares. |
| Banro Corporation |
| Business Conduct Policy |
| November 23,
2004 |
Ethical Behaviour
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legality |
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honesty |
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fair dealing |
All activities by Banro Corporation (“Banro” or the "Company")
and its employees must be lawful.
Lawfulness, however, is merely a starting point. It is equally
important that all activities be conducted in an ethical manner. Ethical conduct
means conduct that is honest, fair and free from deception and impropriety.
Employees and other representatives of Banro must, at all times, act in
accordance with a high standard of ethical behaviour and with constant regard
for Banro’s reputation. As discussed in the next several pages, these
requirements apply to dealings with Banro, fellow employees, shareholders, other
businesses and the community at large.
Ultimately, each individual should test his or her own
behaviour by asking: “Is there any reason why I would not want another person -
Banro, a co-worker, a business associate, the government - to be fully aware of
my conduct and motives?” If this question causes any discomfort the individual
should reconsider his or her conduct.
Ethical Business Practices
For Banro’s reputation in the business community to be
maintained, all dealings on Banro’s behalf must reflect high standards of
ethical behaviour. In particular, the following specific principles must be
observed:
Banro must be aware of and comply with
all relevant laws and regulations in all jurisdictions in which it conducts
business. Individual employees have a duty to inform themselves of any laws
relevant to their particular activities. Anyone with questions regarding legal
issues should consult with the Chief Executive Officer, who will consult with
our counsel.
| B |
Integrity in Business
Dealings |
Employees must act with integrity in
dealings with all persons inside and outside the Company, including government
officials, customers, suppliers and members of the community. Employees must
follow established standards in procurement, and must treat tenderers fairly and
equally.
2
No person may give to outside companies
or individuals, or accept from them, any material gift or extravagant
entertainment, or any similar benefit. (A “material” gift is one of such value
that it constitutes a personal enrichment for the recipient such that it could
be a factor in influencing that person’s behaviour. Entertainment will be
considered “extravagant” if it would appear excessive to an objective observer
and would typically be of a value greater than US$500). Employees must properly
record in Banro’s accounts any amounts spent on gifts or entertainment.
| D |
Questionable or Improper
Payments |
Where commissions, consultants’ fees,
retainers and similar payments are required to be made and can be justified in
the normal course of business, those payments must be clearly commensurate with
the services performed and must be properly recorded in the accounts of Banro.
No other payments may be given or received. In particular, no employee may, in
the context of his or her employment, receive any payment that is not for the
direct and exclusive benefit of Banro.
All political contributions made on
Banro’s behalf will be made directly by Banro’s Chief Executive Officer,
provided that any amount greater than US$500 will be approved by the Board of
Directors.
| F |
Compliance with Accounting
Policies |
Employees must comply strictly with
prescribed accounting policies, audit procedures and other such controls. All
accounts must properly describe and accurately reflect the transactions recorded
and all assets, liabilities, revenues and expenses must be properly recorded in
the books of Banro. No secret or unrecorded funds or other assets are to be
established or maintained.
The Company considers that the
compliance obligations arising out of this Policy apply not only to employees of
the Company, but also to independent contract workers to the extent that they
conduct activities on the Company’s behalf. The Company therefore expects all
such contractor personnel to familiarize themselves with this Policy, and to
comply with it, in the same manner as is expected of Banro employees.
| H. |
Business Associates |
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The Company will make all reasonable efforts to promote
the application of these ethical business practices by our third party
suppliers. |
3
International Business
Banro’s growth has been accompanied by increased exposure to
legal and ethical issues arising in international business activities.
| A. |
Compliance with Anti-Bribery
Legislation |
Banro is subject to legislation in both
Canada and the United States that prohibits corrupt practices in dealing with
foreign governments. The Canadian Corruption of Foreign Public Officials
Act, as well as the U.S. Foreign Corrupt Practices Act, make it an
offence to make or offer a payment, gift or benefit to a foreign government
official in order to induce favourable business treatment, such as obtaining or
retaining business or some other advantage in the course of business. Violation
of this legislation may result in substantial penalties to Banro and to
individuals.
Banro, as well as individual employees,
must take all reasonable steps to ensure that the requirements of this
legislation are strictly met. No payments, material gifts or other benefits are
to be given, directly or indirectly, to foreign government officials, political
parties or political candidates for the purpose of influencing government
decisions in Banro’s favour. Furthermore, no such payments are to be made to
agents or other third parties in circumstances where it is likely that part or
all of the payment will be passed on to a foreign government official, political
party or political candidate. For the purpose of this paragraph, a material gift
or benefit has a value in excess of US$500.
| B. |
"Facilitation"
Payments |
There are certain types of payments to
foreign government officials that are allowed under both the Canadian and U.S.
legislation, called “facilitation” or “facilitating” payments. These are small
payments or tips that are accepted custom in certain foreign countries in the
context of having routine administrative actions performed by government
officials. Employees should be aware that such payments are permissible only
under very limited circumstances and must be properly documented. As well, they
must advise the Chief Financial Officer in advance of any anticipated payments
and provide written request for reimbursement of any such payment. If there are
any questions regarding the permissibility of any particular payment, advice
should be sought from the Chief Executive Officer. Moreover, employees must
ensure that any such payments are properly recorded in accordance with the
Company’s accounting procedures.
A copy of the Canadian and U.S. foreign
corrupt practices legislation is available from the Chief Executive Officer.
Anyone with questions regarding these legal issues should consult the Chief
Executive Officer.
Personal Conduct
| A. |
Work-related Conduct and Conflicts of
Interest |
Banro employees must comply with the
standards of ethical behaviour in all aspects of their employment. This includes
their dealings with people outside the Company as well as their relationships
with their fellow employees and with Banro as their employer. In addition, Banro
expects that employees will act with loyalty to the Company at all times.
4
In particular, individuals must not:
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• |
pursue personal gain or advantage from their
employment activities; |
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• |
misuse Company resources, including computer
systems; |
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• |
engage in insider trading; |
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• |
compromise the confidentiality of corporate
information; and |
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• |
permit any actual or perceived conflict of interest
between their personal interests and those of the Company. Employees must
not enter into outside activities, including business interests or other
employment, that might interfere with or be perceived to interfere with
their performance at Banro or otherwise compromise their duty of loyalty
to Banro . |
| B. |
Personal Conduct |
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In general, Banro does not wish to dictate the personal
conduct of individual employees outside working hours. Nevertheless, it
expects employees to act lawfully at all times and to conduct their
personal affairs as good and responsible citizens, in such a manner that
reflects well on Banro. |
Employment Practices
Banro recognizes that it must earn the loyalty that it expects
from its employees. Banro is committed to treating its employees ethically and
fairly. In particular, Banro strives to ensure the following:
|
• |
no discrimination on the basis of gender, physical or
mental disability, age, marital status, sexual orientation, religious
belief, race, colour, ancestry or place of origin; |
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• |
fair and competitive compensation; |
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fairness in performance appraisals and job
advancement; |
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protection of employees from harassment; and
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• |
confidentiality of employee records.
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All employees, and particularly managers, must maintain and
promote these principles in their hiring practices and in their relationships
with other employees.
5
Health, Safety and Environment
Effectiveness in occupational health, safety and environmental
standards is an essential part of achieving efficiency and profitability in the
Company's industry. Banro will therefore work at continuous improvement in these
areas and will be guided by the following principles:
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• |
creating a safe work environment; |
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• |
minimizing the environmental impacts of its
activities; |
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• |
building co -operative working relationships with local
communities and governments in the Company’s areas of operation;
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• |
reviewing and monitoring environmental and
safety performance; and |
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• |
prompt and effective response to any
environmental and safety concerns. |
Disclosure of Information
All corporate information is the property of Banro. Corporate
information includes trademarks, patents, software developments and
applications, strategic and operational knowledge and financial information. It
also includes any confidential information received by Banro from third parties.
Employees are in a position of trust with respect to corporate
information in the same manner as with any other corporate property. Employees
must take care to protect the confidentiality of corporate information. In
particular:
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• |
employees must not use corporate information
for personal gain; |
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• |
employees may not disclose corporate information other
than for legitimate Banro purposes and with appropriate safeguards, unless
written approval is obtained from the appropriate manager; |
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• |
media and investor communications are to be handled by
the Chief Executive Officer and Chief Financial Officer; |
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• |
employees must not disclose undisclosed corporate
information in public speeches. Employees who give public speeches on
behalf of Banro must remit to the Company any payments or material gifts
received. |
Ensuring Compliance with this Policy
As part of its efforts to ensure
compliance with this Policy, Banro requires that each employee complete an
annual Compliance Certificate certifying compliance with this Policy. Employees
whose positions may include involvement with foreign operations may be asked to
complete more frequent Compliance Certificates so as to ensure corporate
compliance with anti-bribery legislation (see previous section entitled
“International Business”). Completed certificates are to be returned directly to
the Chief Executive Officer.
6
Any proposed non-compliance such as a
proposed material gift, must be pre-approved by the Board of Directors.
The Company demands that employees
report any observed breaches of this Policy to the Chief Executive Officer.
An employee or consultant who
violates this Policy may face disciplinary action up to and including
termination of employment, in the case of an employee, and, in the case
of a consultant, termination of the consulting contract with the Company.
Violation of this Policy may also cause violation of certain laws. If it is
discovered that laws have been violated, this matter may be referred to the
appropriate regulatory authorities. Questions with respect to this Policy may be
referred to the Company's Secretary.
CERTIFICATION
I, John Clarke, certify that:
1. I have reviewed this annual report on Form 20-F of Banro
Corporation;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report;
4. The company’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the company and have:
(a) Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal
control over financial reporting, or caused such internal control over financial
reporting 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 generally accepted
accounting principles;
(c) Evaluated the effectiveness of the
company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any
change in the company’s internal control over financial reporting that occurred
during the period covered by the annual report that has materially affected, or
is reasonably likely to materially affect, the company’s internal control over
financial reporting; and
5. The company’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the company’s auditors and the audit committee of the
company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
company’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the company’s internal control over financial reporting.
| Date: April 6, 2015 |
By: |
/s/
John Clarke |
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John Clarke |
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|
President & Chief Executive Officer
|
CERTIFICATION
I, Kevin Jennings, certify that:
1. I have reviewed this annual report on Form 20-F of Banro
Corporation;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report;
4. The company’s other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the company and have:
(a) Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal
control over financial reporting, or caused such internal control over financial
reporting 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 generally accepted
accounting principles;
(c) Evaluated the effectiveness of the
company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any
change in the company’s internal control over financial reporting that occurred
during the period covered by the annual report that has materially affected, or
is reasonably likely to materially affect, the company’s internal control over
financial reporting; and
5. The company’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the company’s auditors and the audit committee of the
company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
company’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the company’s internal control over financial reporting.
| Date: April 6, 2015 |
By: |
/s/
Kevin Jennings |
| |
|
|
| |
|
Kevin Jennings |
| |
|
Chief Financial Officer
|
| CERTIFICATION PURSUANT TO |
| 18 U.S.C. §1350, |
| AS ADOPTED PURSUANT TO |
| SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
|
In connection with the annual report of Banro Corporation (the
“Company”) on Form 20-F for the period ended December 31, 2014 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, John
Clarke, President and Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in this
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
| April 6, 2015 |
/s/
John Clarke |
| |
|
| |
John Clarke |
| |
President & Chief Executive Officer
|
A signed original of this written statement required by Section
906 has been provided to Banro Corporation and will be retained by Banro
Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.
| CERTIFICATION PURSUANT TO |
| 18 U.S.C. §1350, |
| AS ADOPTED PURSUANT TO |
| SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
|
In connection with the annual report of Banro Corporation (the
“Company”) on Form 20-F for the period ended December 31, 2014 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin
Jennings, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in this
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
| April 6, 2015 |
/s/
Kevin Jennings |
| |
|
| |
Kevin Jennings |
| |
Chief Financial Officer
|
A signed original of this written statement required by Section
906 has been provided to Banro Corporation and will be retained by Banro
Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER
31,2014
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
The following management’s discussion and analysis
("MD&A"), which is dated as of April 6, 2015, provides a review of
the activities, results of operations and financial condition of Banro
Corporation (“Banro” or the "Company") as at and for the year
ended December 31, 2014 as well as an outlook for the Company based on a defined
strategy. This MD&A should be read in conjunction with the audited
consolidated financial statements of the Company as at and for the years ended
December 31, 2014 and December 31, 2013 (the “Annual Financial
Statements”). All dollar amounts in this MD&A are expressed in thousands
of dollars and, unless otherwise specified, in United States dollars (the
Company’s financial statements are prepared in United States dollars). All
share, share option and warrant amounts (except per share amounts) are presented
in thousands. Additional information relating to the Company, including the
Company's annual report on Form 20-F dated April 6, 2015, is available on SEDAR
at www.sedar.com and on EDGAR at www.sec.gov.
FORWARD-LOOKING STATEMENTS
The following MD&A contains forward-looking statements. All
statements, other than statements of historical fact, that address activities,
events or developments that the Company believes, expects or anticipates will or
may occur in the future (including, without limitation, statements regarding
estimates and/or assumptions in respect of costs, cash flows, future gold
production (including the timing thereof), Mineral Resource and Mineral Reserve
estimates, potential mineralization, exploration results and future plans
and objectives of the Company) are forward-looking statements. These
forward-looking statements reflect the current expectations or beliefs of the
Company based on information currently available to the Company. Forward-looking
statements are subject to a number of risks and uncertainties that may cause the
actual results of the Company to differ materially from those discussed in the
forward-looking statements, and even if such actual results are realized or
substantially realized, there can be no assurance that they will have the
expected consequences to, or effects on the Company. Factors that could cause
actual results or events to differ materially from current expectations include,
among other things, uncertainty of estimates of capital and operating costs,
production estimates and estimated economic return, the possibility that actual
circumstances will differ from the estimates and assumptions used in the
economic studies of the Company's projects, failure to establish estimated
Mineral Resources or Mineral Reserves (the Company's Mineral Resource and
Mineral Reserve figures are estimates and no assurances can be given that the
indicated levels of gold will be produced), the possibility that future
exploration results will not be consistent with the Company's expectations,
changes in world gold markets and equity markets, political developments in the
Democratic Republic of the Congo (the "DRC"), uncertainties relating to
the availability and costs of financing needed in the future, fluctuations in
currency exchange rates, inflation, changes to regulations affecting the
Company's activities, the uncertainties involved in interpreting drilling
results and other geological data and the other risks disclosed under the
heading “Risk Factors” and elsewhere in the Company’s annual report on
Form 20-F
dated April 6, 2015 filed on SEDAR at www.sedar.com and on EDGAR at
www.sec.gov. Any forward-looking statement speaks only as of the date on which
it is made and, except as may be required by applicable securities laws, the
Company disclaims any intent or obligation to update any forward-looking
statement, whether as a result of new information, future events or results or
otherwise. Although the Company believes that the assumptions inherent in the
forward-looking statements are reasonable, forward-looking statements are not
guarantees of future performance and accordingly undue reliance should not be
put on such statements due to the inherent uncertainty therein.
Page 2 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
CONTENT
Page 3 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
CORE BUSINESS
Banro is a Canadian gold mining company focused on production
from the Twangiza mine, which began commercial production on September 1, 2012,
and the commissioning of and production from its second gold mine at Namoya
located approximately 200 kilometres south of the Twangiza gold mine. The
Company’s longer term objectives include the development of two additional
major, wholly-owned gold projects, Lugushwa and Kamituga. The four projects,
each of which has a mining license, are located along the 210 kilometre long
Twangiza-Namoya gold belt in the South Kivu and Maniema provinces of the DRC.
The Company also undertakes exploration activities at its DRC properties with
the objective of delineating additional oxide and free-milling mineral
resources. As well, the Company’s DRC subsidiary, Banro Congo Mining SA, holds
title to 14 exploration permits covering ground located between and contiguous
to the Company’s Twangiza, Kamituga and Lugushwa properties, covering an area of
2,638 square kilometers.
Led by a proven management team with extensive gold and African
experience, the initial focus of the Company is on the mining of gold from oxide
and free-milling material, which has a low capital intensity to develop but also
attracts a lower technical and financial risk to the Company. All business
activities are followed in a socially and environmentally responsible manner.
2014 HIGHLIGHTS
(I) FINANCIAL
The table below provides a summary of financial and operating
results for the three month periods and years ended December 31, 2014 and
2013:
| |
Q4
2014 |
Q4 2013 |
Change % |
|
2014 |
2013 |
Change % |
| Selected
Financial Data |
|
|
|
|
|
|
|
| Revenues |
35,178 |
27,022 |
30% |
|
125,436 |
111,808 |
12% |
| Total mine operating
expenses1 |
(24,782) |
(23,661) |
5% |
|
(96,045) |
(92,857) |
3% |
| Gross earnings from
operations |
10,396 |
3,361 |
209% |
|
29,391 |
18,951 |
55% |
| Net income |
272 |
2,086 |
(87%) |
|
320 |
1,630 |
(80%) |
| Basic net earnings per share ($/share) |
0.00 |
0.01 |
(100%) |
|
0.00 |
0.01 |
(100%) |
| Key Operating Statistics |
|
|
|
|
|
|
|
| Average gold price
received ($/oz) |
1,202 |
1,264 |
(5%) |
|
1,239 |
1,389 |
(11%) |
| Gold sales (oz) |
29,264 |
21,379 |
37% |
|
101,225 |
80,497 |
26% |
| Gold production (oz)
|
29,445 |
22,858 |
29% |
|
98,184 |
82,591 |
19% |
| All-in sustaining
cost per ounce ($/oz)2 |
689 |
899 |
(23%) |
|
781 |
1,067 |
(27%) |
| Cash cost per ounce
($/oz)2 |
592 |
813 |
(27%) |
|
683 |
836 |
(18%) |
| Gold margin ($/oz)2 |
610 |
451 |
35% |
|
556 |
553 |
1% |
| Financial Position |
|
|
|
|
|
|
|
| Cash and cash
equivalents |
1,002 |
4,452 |
|
|
1,002 |
4,452 |
|
| Gold bullion
inventory at market value3 |
2,834 |
6,281 |
|
|
2,834 |
6,281 |
|
| Total assets |
887,482 |
822,033 |
|
|
887,482 |
822,033 |
|
| Long term debt |
200,921 |
158,599 |
|
|
200,921 |
158,599 |
|
(1) Includes depletion and depreciation.
(2) All-in
sustaining cost per ounce, cash cost per ounce and gold margin are non-IFRS
measures. Refer to the non-IFRS measures section of this MD&A for additional
information.
(3) This represents 2,350 ounces of gold bullion inventory shown
at the December 31, 2014 closing market price of $1,206 per ounce of gold.
Page 4 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
-
Revenues for the year ended December 31, 2014 were $125,436 a 12% increase
compared to the prior year of $111,808. During 2014, ounces of gold sold
increased by 26% to 101,225 ounces compared to sales of 80,497 ounces during
2013. The average gold price per ounce sold during 2014 was $1,239 compared to
an average price of $1,389 per ounce obtained during 2013. Revenues for the
fourth quarter of 2014 were $35,178 compared with revenue of $27,022 for the
fourth quarter of 2013.
-
Mine operating expenses, including depletion and depreciation, for the year
ended December 31, 2014 were $96,054 compared to the prior year of $91,739.
The increase in costs was due to increased milling throughput of 33%, for a
total of 1,358,726 tonnes, following the commissioning of the plant upgrade
and the completion of the sheltered Run-of-Mine (“ROM”) Pad sheltered storage.
These costs were partially offset by lower mining tonnes moved to achieve
planned ore production. Mine operating expenses, including depletion and
depreciation, for the fourth quarter of 2014 were $24,782 compared to $23,661
for the same period in 2013. Production costs for the fourth quarter of 2014
were $17,316 compared to $17,379 in the fourth quarter of 2013.
-
Gross earnings from operations for the year ended December 31, 2014 was
$29,391, and $20,069 for 2013. The 12% higher gold sales with only a
corresponding 3% increase in mine operating expenses translated into improved
gross margins to 23%. The gross earnings increase was partially offset by the
decrease in revenue per ounce, pushing the overall gold margin per ounce
downward from $574 per ounce in 2013 to $535 per ounce in 2014.
-
Cash costs per ounce on a production basis for 2014 were $683 per ounce of
gold (compared to $836 per ounce of gold for 2013). Cash costs for 2014 were
lower than the prior year as a result of increased mine and plant productivity
as Twangiza progressed forward towards steady state production levels and
normalized production costs in line with life of mine expectations during the
second half of the year. Cash costs per ounce for the fourth quarter of 2014
were $592 compared to $813 in the fourth quarter of 2013. Refer to the
non-International Financial Reporting Standards (“IFRS”) measures section of
this MD&A for additional information.
-
During the second half of 2014 (“H2”), the Twangiza operations reached
operating levels consistent with steady state production levels. Costs at the
increased productivity levels remained consistent with those incurred during
the first half of 2014 (“H1”), contributing to a decrease in cash costs per
ounce of 23%.
-
All-in sustaining costs declined in the current year to $781 per ounce
(compared to $1,067 per ounce of gold for 2013) driven by lower cash costs and
lower levels of sustaining capital expenditures in the period.
-
In February 2015, the Company signed definitive agreements for a financing
transaction of up to $100 million (refer to subsequent events below). With the
completion of these transactions, the Company expects to extinguish certain
debt instruments which would result in the long-term debt of the Company
returning to levels consistent with December 31, 2013.
(II) OPERATIONAL
- TWANGIZA
-
During 2014, Twangiza recorded one loss time injury (“LTI”) in the first
quarter and subsequently progressed through the remainder of the year with no
incidents noted, achieving over 5 million LTI free hours.
-
During 2014, the plant at the Twangiza Mine processed 1,358,726 tonnes of
ore (compared to 1,023,981 tonnes during 2013) achieving 80% of the design
capacity for the year, but 90% of design capacity in H2 of 2014 as the plant
expansion increasing the capacity from 1.3 million tonnes per annum (“Mtpa”)
to 1.7 Mtpa was completed in the second quarter. Ore was processed at an
indicated head grade of 2.70g/t Au (compared to 2.98 g/t Au during 2013) with
a recovery rate of 83.0% (compared to 83.8% during 2013) to produce 98,184
(compared to 82,591 during 2013) ounces of gold.
-
The Run-of-Mine (“ROM”) Pad sheltered storage area was completed prior to
the commencement of the rainy season in the third quarter, providing 40,000
tonnes of dry material storage capacity to ensure the availability of
sufficient tonnes of acceptable moisture content to the processing plant. This
upgrade contributed to the throughput levels achieved during the year and is
expected to continue to secure the improved throughput of the processing
plant.
Page 5 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
-
Through the third quarter of the year, site management focused on securing
ore delivery and throughput levels along with the completion of the plant
upgrade. Following the achievements made in the third quarter on these
priorities, site management’s focus moved from the expansion mode to
delivering incremental operational efficiencies.
(III) MINE UNDER
CONSTRUCTION – NAMOYA
| Mine Under Construction - Investment |
2014 |
Change |
2013 |
| |
($000's) |
(%) |
($000's) |
| Additions1
|
77,055 |
(54%)
|
166,978 |
| Balance as at December 31 |
414,258 |
23% |
337,203 |
(1) 2014 net of pre-commercial
revenue of $21,687.
-
During 2014, the Namoya Mine produced 18,282 ounces of gold from a total of
565,350 tonnes of ore, stacked and sprayed on the heap leach pads and
processed through the Carbon-In-Leach (“CIL”) circuit, at an indicated head
grade of 2.13 g/t Au.
-
At the Namoya Mine, following the completion of construction of the hybrid
gravity/CIL and heap leach processing plant in the second quarter of 2014, wet
commissioning identified that the CIL circuit was hampered by the quantity of
fines content in the ore, as it exceeded the design capacity. Management,
along with internal expertise and external consultants, evaluated the issues
identified. The Company determined that the optimal plan of action was through
the acquisition of an agglomeration drum to run the mine as an agglomerated
heap leach operation while pursuing options to best utilize the CIL plant to
process the fines material. An agglomeration drum was procured in the fourth
quarter of 2014 and installed in January 2015.
-
With the commissioning of the agglomeration drum in the first quarter of
2015, Namoya’s focus is on ore delivery in order to increase the stacking rate
towards commercial levels as well as optimizing the stacking process with the
agglomerated heap leach in order to improve percolation and gold extraction.
Management will continually assess the optimal utilization of the CIL circuit
as ongoing ore extraction enhances expectation with respect to fines content
and the heap leach circuit is optimized.
(IV)
EXPLORATION
-
Throughout 2014, as the Company focused on the development at Namoya and
incremental operational achievements at Twangiza, exploration activities were
limited to low level exploration and ground maintenance activities in the
Twangiza Regional (Mufwa), Kamituga, Lugushwa and Namoya projects. Exploration
activities mainly involved geological mapping, channel and trench sampling,
rock chips sampling, limited orientation IP survey work as well as the
analysis of geological results from field work carried out in prior periods.
(V) CORPORATE
DEVELOPMENT
-
In February 2014, the Company completed a $40 million financing through a
non-brokered private placement (the "Private Placement") involving the
issuance of preferred shares of two of the Company's subsidiaries. The
preferred shares issued under the Private Placement pay an 8% cumulative
preferential cash dividend, payable quarterly, and mature on June 1, 2017. At
the option of the holders and at any time before the maturity date, the
holders will be entitled to exchange their preferred shares into 63 million
common shares of the Company at a strike price of $0.5673 per common share.
-
In March 2014, the Company renegotiated for the remaining principal of its
$10 million loan from Banque Commerciale du Congo (“BCDC”) to be repayable in
monthly installments of $500 compared to the original repayment terms of ten
equal monthly installments of $1 million.
-
In May 2014, the Company renegotiated the terms of its $15 million facility
with Ecobank to be repayable in four equal quarterly payments commencing May
30, 2015, with the subsequent three quarterly payments occurring in August
2015, November 2015, and February 2016. The Ecobank facility was originally
repayable in four equal quarterly payments commencing May 30, 2014.
Page 6 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
- In August 2014, the Company closed a liquidity backstop facility through
the private placement of securities comprised of senior secured notes and
warrants for gross proceeds of up to $35 million (subsequently increased to
$37 million). As of the date of this MD&A, the Company has drawn the
maximum amount available under the facility. A portion of the proceeds from
the initial notes issued under the facility were used for the repayment of
certain bank loans in the DRC totaling $12.8 million.
(VI) SUBSEQUENT
EVENTS
-
In February 2015, the Company signed definitive agreements for two gold
forward sale transactions relating to the Twangiza mine and a gold streaming
transaction relating to the Namoya mine, providing total gross proceeds to the
Company of $100 million. Each of the two forward sale transactions provide for
the prepayment by the purchaser of $20 million for its purchase of 22,248
ounces of gold from the Twangiza mine, with the gold deliverable over three
years, at 618 ounces per month. The first $20 million forward sale closed on
February 27, 2015. The second $20 million forward sale is expected to close in
April. The forward sales may be terminated at any time upon payment to the
purchaser of a one-time termination amount that would result in the purchaser
receiving an internal rate of return of 20%. The terms of the forward sales
also include a gold floor price mechanism whereby, if the gold price falls
below $1,100 per ounce in any month, additional ounces are deliverable to
ensure a realized gold price of $1,100 per ounce for that month. The streaming
transaction provides for the payment by the purchaser of a deposit in the
amount of $60 million and the delivery to the purchaser over time of 10% of
the life-of-mine gold production from the Namoya mine (or any other projects
located within 20 kilometres from the current Namoya gold mine). The ongoing
payments to Namoya upon delivery of the gold are $150 per ounce. The streaming
transaction is expected to close in April 2015.
-
In March 2015, the Company and Banro Group (Barbados) Limited declared and
paid a dividend in relation to the gold linked preferred shares issued in 2013
of $0.57 per Banro Series A Share and Barbados Preferred Share.
Page 7 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
OUTLOOK
| Banro Guidance |
2015 |
| Twangiza (oz),
full year |
100,000 to 110,000 |
| Namoya
(oz)2, full year including pre-commercial production |
90,000 to 100,000 |
| |
|
| Twangiza cash cost
per ounce ($US/oz)1 |
650 to 750 |
| Namoya cash cost
per ounce ($US/oz)1,2 |
725 to 825 |
(1) Cash cost per ounce is a non-GAAP measure. Refer to the
non-GAAP measures section of this MD&A for additional information.
(2) The Namoya ounces include pre-commercial production of
30,000 to 35,000 ounces. Cash cost above only takes into consideration Namoya in
commercial production, i.e. H2 2015
In consideration of potentially depressed gold prices in the
foreseeable future and the Company’s intent to replace and grow depleted ounces,
the Company has developed several key objectives for 2015. These objectives are
aimed at increasing gold production while containing costs, and increasing the
Company’s Mineral Resources to potentially prolong the life of its mines thereby
increasing shareholder value. These objectives include:
-
Completing the installation and commissioning of the agglomeration drum at
the Namoya Mine in the first quarter of 2015 with a target of achieving
commercial production early in the third quarter of 2015;
-
Ramp up to steady production at Namoya with a focus on the heap leach
operations and utilizing the CIL for enhanced recoveries on higher grade fine
ore and improve the quality of heap leach material;
-
Maintain steady state production levels at Twangiza while continuing to
optimize the plant and rationalize costs;
-
Mine plan optimization of Twangiza’s current reserves and measured and
indicated resources; and
-
Focusing exploration initiatives on identifying high value near-mine
targets to enhance near term production and replace Mineral Resources through
near-mine delineation drilling at Namoya and Twangiza while undertaking
limited, but focused regional exploration at Kamituga and Lugushwa.
The Company’s capital expenditure forecast for 2015 as compared
to 2014 is set out below:
| Project |
2015 |
Change |
2014 |
| |
($000's) |
(%) |
($000's) |
| Twangiza Mine1 |
19,000 |
35% |
14,026 |
| Namoya Mine1 |
4,000 |
100% |
- |
| Exploration |
5,000 |
(59%) |
12,219 |
(1) Comprises sustaining capital
expenditures for the year.
Twangiza capital expenditures forecast for 2015 consist
primarily of sustaining capital, including the continued construction of the
Tailings Management Facility (“TMF”) and upgrades to the mobile fleet.
The capital expenditures for Twangiza in 2014 consisted mainly of sustaining
capital relating to the construction of the TMF as well as the completion of the
plant expansion project.
Namoya capital expenditures forecast for 2015 consists
primarily of sustaining capital and does not include pre-commercial operating
expenses being capitalized for accounting purposes. The Company will need to
refurbish and/or replace elements of the old mining fleet that were purchased to
facilitate the construction of the mine, purchase critical spares to provide
operational security for the new plant, and continue the scheduled buildup of
the walls of the TMF.
Exploration expenditures, which are capitalized under the
Company’s accounting policy, are expected to decrease by 59% from 2014
expenditures.
Page 8 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
TWANGIZA MINE
During the first half of 2014, the Twangiza Mine focused on the
completion of the plant expansion project, improving ore delivery and throughput
levels in line with the upgraded design capacity of 1.7 Mtpa. Following ore
delivery and throughput achievements during the third quarter, whereby 90% of
the upgraded design capacity on an annualized rate was achieved, site
management’s focus shifted to incremental operational efficiencies. Production
during the year included two consecutive quarters of record production as well
as numerous record setting months with December 2014 production reaching 11,549
ounces. These operational milestones were a result of the successful plant
expansion activities including the ROM Pad sheltered storage which effectively
mitigated the adverse impact that the rainfall associated with the wet season
has previously had on operating performance.
| TWANGIZA MINE |
2014 |
H2 2014 |
H1 2014 |
|
2013 |
Prior Year |
| |
|
|
|
|
|
Change % |
| Gold sales (oz) |
101,225 |
56,269 |
44,964 |
|
80,497 |
26% |
| Gold produced (oz) |
98,184 |
56,616 |
41,568 |
|
82,591 |
19% |
| Material mined (t) |
3,595,645 |
1,996,373 |
1,599,272 |
|
4,116,657 |
(13%) |
| Ore mined (t)1 |
1,927,744 |
1,146,144 |
781,600 |
|
1,758,972 |
10% |
| Valley fill mined (t) |
49,854 |
- |
49,854 |
|
- |
100% |
| Waste mined (t) |
1,618,047 |
850,229 |
767,818 |
|
2,357,685 |
(31%) |
| Strip ratio (t:t)2 |
0.84 |
0.74 |
0.98 |
|
1.35 |
(38%) |
| Ore milled (t)1 |
1,358,726 |
765,381 |
593,345 |
|
1,023,981 |
33% |
| Head grade (g/t)3 |
2.70 |
2.80 |
2.56 |
|
2.98 |
(9%) |
| Recovery (%) |
83.00 |
81.81 |
84.59 |
|
83.80 |
(1%) |
| Cash cost per ounce ($US/oz)4 |
683 |
605 |
781 |
|
836 |
(18%) |
| |
(1) |
The difference between ore mined and ore milled is,
generally, the result of the stockpiling of lower grade ore. |
| |
(2) |
Strip ratio is calculated as waste mined divided by ore
mined. |
| |
(3) |
Head grade refers to the indicated grade of ore
milled. |
| |
(4) |
Cash cost per ounce is a non-IFRS measure. Refer to the
non-IFRS measures section of this MD&A for additional
information. |
In H2 2014, with the completion of the plant expansion
activities, Twangiza increased productivity levels towards steady state
operations. The steady state operating productivity has allowed Twangiza to
reduce cash costs by 23% from $781/oz in H1 2014 to $605/oz in H2 2014. The
improved operating results are driven by the ability for the operations to
increase mining and milling productivity, a 25% and 29% increase in tonnage,
respectively, while maintaining similar gross expenditures. Going forward,
Twangiza will continue to focus on achieving incremental efficiencies through
process optimization to further enhance the steady state operations.
Gross spending and unit costs for 2014 full year and fourth
quarter in comparison to 2013.
| Mine Operating Costs |
(In '000s) |
Cost per tonne Milled ($/t) |
| |
2014 |
Q4 2014 |
2013 |
Q4
2013 |
2014 |
Q4 2014 |
2013 |
Q4
2013 |
| Mining Costs |
15,742 |
4,600 |
15,039 |
5,079 |
11.6 |
12.4 |
14.7 |
18.0 |
| Processing Costs |
35,119 |
9,415 |
32,479 |
8,432 |
25.8 |
25.4 |
31.7 |
29.8 |
| Overhead |
19,390 |
6,298 |
21,542 |
6,041 |
14.3 |
17.0 |
21.0 |
21.4 |
| Inventory Adjustments |
(1,103) |
(2,997) |
(1,755) |
(2,173) |
(0.8) |
(8.1) |
(1.7) |
(7.7) |
| Total Mine operating cost |
69,148 |
17,316 |
67,305 |
17,379 |
50.9 |
46.7 |
65.7 |
61.5 |
| Total tonnes milled (tonnes) |
1,358,726 |
370,881 |
1,023,981 |
282,831 |
|
|
|
|
Page 9 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
Gross spending and unit costs for 2014 full year in comparison
to 2013 full year are as follows:
| Mine Operating Costs |
(In
'000s) |
Cost per tonne Milled ($/t) |
| |
2014 |
2013 |
Change % |
2014 |
2013 |
Change % |
| Mining Costs |
15,742 |
15,039 |
5% |
11.6 |
14.7 |
(21%) |
| Processing Costs |
35,119 |
32,479 |
8% |
25.8 |
31.7 |
(19%) |
| Overhead |
19,390 |
21,542 |
(10%) |
14.3 |
21.0 |
(32%) |
| Inventory Adjustments |
(1,103) |
(1,755) |
(37%) |
(0.8) |
(1.7) |
(53%) |
| Total Mine operating cost |
69,148 |
67,305 |
3% |
50.9 |
65.7
|
(23%) |
| Total tonnes milled (tonnes) |
1,358,726 |
1,023,981 |
33% |
|
|
|
Mining
A total of 3,595,645 tonnes of material (2013 – 4,115,657
tonnes) were mined during the year ended December 31, 2014. Total ore mined was
1,927,744 tonnes (2013 – 1,758,972 tonnes). The strip ratio for the year fell to
0.84 as compared to 1.35 during 2013 in accordance with the mine schedule which
decreased the mining cost per tonne milled from $14.7 to $11.6 per tonne, or a
decrease of 21%. During the fourth quarter of 2014, a total of 969,062 tonnes of
material (Q4 2014 – 902,416 tonnes) were mined, including 556,856 tonnes of ore
(Q4 2013 – 366,625 tonnes), at a strip ratio of 0.74 (Q4 2013 – 1.46) .
Processing & Engineering
For the year ended December 31, 2014, the plant at the Twangiza
Mine processed 1,358,726 tonnes of ore (2013 – 1,023,981 tonnes), representing a
33% increase over the prior year. Increased throughput levels reduced the
processing cost per tonne milled from $31.7 per tonne to $25.9 per tonne or a
decrease of 19%. Throughput in the second half of 2014, following the completion
of the plant expansion, increased to over 90% of the upgraded design capacity.
Improved mill productivity was assisted by dryer weather conditions than the
previous year, and dryer material available aided by the new sheltered ROM
storage area along with improvements in pre-screening and ore crushing circuits.
Recoveries during the year decreased marginally compared to the prior year to an
average rate of 83.0% (2013 – 83.8%) driven mainly by the processing of lower
head grade ore. With the achievement of design throughput levels following the
expansion, site management focus transferred to incremental operational
efficiencies to increase throughput on a consistent basis and improve
recoveries. The processing costs were $2.7 million higher compared to 2013 as a
result of the 33% increase in throughput, partially offset by lower consumption
of mill consumables per tonne processed.
Twangiza Plant Optimization and Expansion
The Twangiza plant upgrade was completed at the end of April
2014, expanding the plant throughput capacity to 1.7 Mtpa. The upgrade was
commissioned during the second quarter of 2014, enabling the plant throughput to
ramp up to over 90% of design throughput. Site management continues to optimize
the plant in order to incrementally increase the benefits from upgrade program.
Sustaining Capital Activities
Throughout 2014, project capital at Twangiza totaling $9,945
included plant expansion activities, ROM Pad roofing, mobile mine equipment and
the Tailings Management Facility (“TMF”). Capital spending decreased throughout
the year as the plant expansion activities were completed including the ROM Pad
roofing.
During 2014 and subsequently up to the date of this MD&A,
the following progress was made in the key areas indicated below with respect to
sustaining capital activities at the Twangiza Mine:
| • |
ROM Pad Roofing |
|
The ROM Pad roofing was completed during the third
quarter of 2014, successfully mitigating the impact of weather conditions
during the wet season in the fourth quarter. |
| |
|
| • |
TMF |
|
The Phase 3 and 3.5 lifts of the TMF were completed in
the third and fourth quarters of 2014, respectively. Due to the impact of
adverse weather conditions, limited work on the TMF was carried out during
the first four months of the year after which work continued at levels
more consistent with management’s plan allowing for the completion of the
aforementioned lifts. |
Page 10 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
Cash Cost and All-in sustaining costs
Cash costs per ounce for the fourth
quarter of 2014 were significantly lower than the prior year period, primarily
due to increased sales of 7,893 ounces or 37%, due to increased production over
the fourth quarter of 2013, while gross spending decreased slightly as a result
of achieved operational efficiencies. The all-in sustaining costs decreased from
$1,202 in Q4 2013 to $689 per ounce in Q4 2014, mainly due to the lower cash
costs as well as contributions from reduced capital expenditures in the fourth
quarter of 2014.
| Cash Cost per ounce sold |
|
($US/ounce) |
|
|
($US/ounce) |
|
| |
2014 |
2013 |
Change % |
Q4 2014 |
Q4 2013 |
Change % |
|
Mining Costs |
156 |
187 |
(17%) |
157 |
238 |
(34%) |
|
Processing Costs |
347 |
403 |
(14%) |
322 |
394 |
(18%) |
|
Overhead |
190 |
268 |
(29%) |
209 |
283 |
(26%) |
| Inventory Adjustments |
(9) |
(22) |
(59%) |
(96) |
(102) |
(6%) |
| Total cash costs per ounce |
683 |
836 |
(18%) |
592 |
813 |
(27%) |
| Total ounces sold (ounces)
|
101,233 |
80,497 |
26% |
29,272 |
21,379 |
37% |
| All-in sustaining costs per ounce |
781 |
1,067 |
(27%) |
689 |
1,202 |
(43%) |
NAMOYA - MINE UNDER
CONSTRUCTION
During the first half of 2014, Namoya development activity
progressed towards the completion of construction of the hybrid plant and the
subsequent commissioning. During the hot commissioning activities, the Company
identified that the Namoya hybrid CIL/heap leach plant was unable to run at
design capacity as the percentage of fine material was found to be higher than
expected, and as such, higher than the hybrid plant was designed to process.
During the third quarter of 2014, management worked with internal expertise and
external consultants in order to evaluate, assess and determine a remediation
plan to address the issues identified during the hot commissioning stage and
best utilize the Namoya Mine. The Company determined that the most appropriate
course of action was the addition of a traditional agglomeration drum to the
existing circuit while continuing to evaluate the most optimal manner to utilize
the CIL circuit. During the fourth quarter of 2014, a lightly used agglomeration
drum was procured and transported into the region with delivery to site
occurring in early January 2015. This procurement significantly reduced the time
requirements of procuring and shipping a new drum for Namoya which is estimated
to have taken in excess of 12 months. Processing continued at Namoya during the
procurement process through the stacking of semi-agglomerated material through
the addition of cement on the transport conveyors to the stacker.
The agglomeration drum was installed and successfully
commissioned at the beginning of February 2015. Stacking levels are expected to
increase to up to 190,000 tonnes per month following the ramp up towards
commercial production levels.
Mining continued at the Seketi and Mwendamboko pits throughout
2014 comprising 2,745,530 tonnes of material of which 1,103,611 tonnes were ore
at a strip ratio of 1.49. Management slowed down mining activities during the
third quarter due to a lower achievable feed rate through the wet scrubbing
circuit. During the fourth quarter, mining activities returned to levels more
consistent with the first two quarters, mining 343,753 tonnes of ore at a strip
ratio of 1.08 for total material of 715,012 tonnes. In addition to the
continuation of mining activities at more normal levels during the fourth
quarter of 2014, the mining fleet began activities for the opening of the Kakula
pit for grade control and mining activities in 2015.
Additions to Mine under Construction during 2014 consisted of
the completion construction, costs associated with initial commissioning
activities, work performed in the determination of the optimal remediation plan
as well as pre-commercial operating losses due to the mine operating at levels
which are below break-even. There were no significant capital amounts spent on
project construction or on the acquisition of new property, plant and equipment
in the second half of the year, with the exception of costs associated with the
agglomeration drum.
Page 11 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
During 2014, the Namoya mine produced 18,282 ounces of gold
from a total of 565,350 tonnes of ore, stacked and sprayed on the heap leach
pads and processed through the CIL circuit, at an indicated head grade of 2.13
g/t Au. During the fourth quarter of 2014, Namoya produced 8,791 ounces through
the stacking of 218,248 tonnes of semi-agglomerated material on the heap leach
pads. The CIL circuit was not utilized during the fourth quarter as management’s
main focus remained on the heap leach operation. Namoya’s production will
continue to benefit incrementally from the increasing stacking rates that are
being achieved as the heap leach curve progresses toward steady state operating
levels.
EXPLORATION
Consistent with the Company’s focus on cash flow management
during the completion of development at Namoya and the expansion activities at
Twangiza, exploration work during the year 2014 was comprised of low level
exploration and ground maintenance activities in the Twangiza Regional (Mufwa),
Kamituga, Lugushwa and Namoya projects. Low level exploration activities
included geological mapping, channel and trench sampling, rock chip sampling and
limited orientation induced polarization survey works.
To support the Twangiza and Namoya operations, near term
exploration will focus on the following:
| • |
Deliver sufficient drilling to allow mine operations to
define a mineable high grade reserve at the Filon B target at Namoya to
incorporate incremental ounce production for 2015; |
| • |
Development and execution of the drill program to covert
inferred and indicated resources to reserves within the existing open
pits; |
| • |
Delineate resources from beneath current open pits for
underground mine production; and |
| • |
Delineate resources from identified targets within a 5
kilometres radius of the current operations. |
Qualified Person
Daniel K. Bansah, the Company's Head of Projects and Operations
and a "qualified person" as such term is defined in National Instrument 43-101,
has approved the technical information in this MD&A.
Page 12 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
SELECTED FINANCIAL
RESULTS
The following financial data is derived from the Company’s
consolidated financial statements for each of the three most recently completed
financial years. Fiscal years 2014, 2013, and 2012 have been prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”).
| Selected Financial Data |
|
2014 |
|
|
2013
|
|
|
Change
% |
|
|
2012
|
|
| Revenues ($000's)
|
|
125,436 |
|
|
111,808 |
|
|
12% |
|
|
42,631 |
|
| Production costs
($000's) |
|
(69,148 |
) |
|
(67,305 |
) |
|
3% |
|
|
(22,490 |
) |
| Depletion and
depreciation ($000's) |
|
(26,897 |
) |
|
(25,552 |
) |
|
5%
|
|
|
(8,057 |
) |
| Gross earnings from
operations ($000's) |
|
29,391 |
|
|
18,951 |
|
|
55% |
|
|
12,084 |
|
| General &
administration ($000's) |
|
(11,318 |
) |
|
(5,723 |
) |
|
98% |
|
|
(6,207 |
) |
| Finance expenses
($000's) |
|
(15,623 |
) |
|
(10,096 |
) |
|
55% |
|
|
(2,316 |
) |
| Net income/(loss)
($000's) |
|
320 |
|
|
1,630 |
|
|
(80% |
) |
|
(4,561 |
) |
| EBITDA1
($000's) |
|
44,793 |
|
|
34,294 |
|
|
31% |
|
|
4,605 |
|
| Basic and diluted
net earnings per share |
|
0.00 |
|
|
0.00 |
|
|
- |
|
|
(0.02 |
) |
| Total assets
($000's) |
|
887,482 |
|
|
822,033 |
|
|
8% |
|
|
635,787 |
|
| Long term debt and
non-current bank loans ($0 |
|
204,790 |
|
|
171,849 |
|
|
19% |
|
|
154,685 |
|
| Preferred shares
($000's) |
|
71,116 |
|
|
27,972 |
|
|
154% |
|
|
- |
|
| Dividends paid on preferred shares ($000's) |
|
2,287 |
|
|
2,277
|
|
|
0%
|
|
|
- |
|
(1) EBITDA is a non-IFRS measure.
Refer to the non-IFRS measures section of this MD&A for additional information.
For fiscal 2014, the Company has a net income of $320, a
decrease of 80% from 2013, as a result of increases in general and
administration and finance expenses, partially offset by increased revenues.
Total assets increased 8% to $887,482 as a result of the continued development
of Namoya. Long term debt and preferred shares increased by 19% and 154%,
respectively, due to the issuance of additional notes and preferred shares
during the year.
For fiscal 2013, the Company had a net income of $1,630. 2013
was the first full year of commercial production at the Twangiza Mine, which
contributed $18,951 of gross earnings from operations toward the net income, as
compared to the $12,084 of gross earnings from operations realized in 2012.
However, the gross earnings were offset by higher general and administrative
costs of $10,441 in 2013, as compared to $6,568 in 2012 primarily due to a
settlement with the Company’s former CEO, as well as $2,277 of dividends paid in
2013 on preferred shares that did not exist in prior years.
For fiscal 2012, the Company entered into commercial production
at its Twangiza Mine, resulting in the recognition of revenues from the sale of
gold produced by the Company. The net loss of $4,561 in 2012 was a result of the
revenue earned, offset by production costs and the depletion of previously
capitalized exploration and development costs related to the Twangiza Mine. The
total value of assets increased by approximately 48% as a result of the
development of the Namoya and Twangiza mines.
Revenues
Revenues increased $13.6M, or 12%, in the year ended December
31, 2014 as compared to 2013 as a result of a 26% increase in gold ounces sold,
partially offset by lower average realized gold prices. The average gold price
received on ounces sold in 2014 was $1,239 per ounce compared to $1,389 per
ounce received in 2013. The average realized gold price was lower than the
average spot price as a result of the timing of gold sales whereby the volume of
gold sales increased through the year when the spot price was depressed.
Revenues in 2012 represent the four month period of commercial operations ended
December 31, 2012 at the Twangiza mine.
Production costs by element
| Production Costs |
2014 |
2013 |
Change |
|
2012 |
|
$/oz
Sold |
|
|
|
| |
($000's) |
($000's) |
(%) |
|
($000's) |
2014 |
2013 |
Change % |
|
2012 |
| Raw materials and consumables |
16,694 |
18,433 |
(9%) |
|
6,831 |
165 |
229 |
(28%) |
|
274 |
| Diesel |
17,747 |
14,679 |
21% |
|
3,913 |
175 |
182 |
(4%) |
|
157 |
| Salaries |
15,441 |
14,669 |
5% |
|
4,516 |
153 |
182 |
(16%) |
|
181 |
| Contractors |
9,780 |
12,276 |
(20%) |
|
3,398 |
97 |
153 |
(37%) |
|
136 |
| Other overhead |
10,589 |
9,003 |
18% |
|
4,299 |
104 |
112 |
(7%) |
|
172 |
| Inventory adjustments |
(1,103) |
(1,755) |
(37%) |
|
(467) |
(11) |
(22) |
(50%) |
|
(19) |
| Total production costs |
69,148 |
67,305 |
3% |
|
22,490 |
683 |
836 |
(18%) |
|
901 |
Production costs, excluding inventory
adjustments, for the year ended December 31, 2014 increased slightly from the
prior year, as mine and mill productivity contributed to improved operating
efficiencies allowing for increased production while containing costs. Details
of changes in production cost categories are included below:
Raw materials and consumables
Raw materials and consumables decreased
slightly in the year ended December 31, 2014 as compared to the corresponding
period in 2013 as a result of increased mine and mill productivity coupled with
achieving operational efficiencies allowing for the reduction of consumables per
tonne. Raw materials and consumables increased substantially from 2012 to 2013
as a result of the 2012 results reflecting Twangiza entering commercial
production on September 1, 2012.
Diesel
Diesel consumption increased during the
year as a result of the 33% increase in plant throughput from the plant upgrade
program. As a result of the improved plant productivity as well as favorable
market conditions late in the year, the cost of diesel per ounce produced decreased
from 2013 to 2014. Diesel increased substantially from 2012 to 2013 as a result
of the 2012 results reflecting Twangiza entering commercial production on
September 1, 2012.
Page 13 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
Salaries
Salaries increased 5% in the year ended
December 31, 2014 compared to 2013 primarily due to the payment of a year end
bonus as well as increased levels of activity in the process plant and the
Company using increased levels of internal resources in the place of certain
contractors, partially offset by the reduction of management layers at site.
Salaries increased substantially from 2012 to 2013 as a result of the 2012
results reflecting Twangiza entering commercial production on September 1, 2012.
Contractors
Contractors decreased 20% in the year
ended December 31, 2014 compared to the corresponding period of 2013 as a result
of using increased levels of internal resources in place of certain contractors.
Contractors increased substantially from 2012 to 2013 as a result of the 2012
results reflecting Twangiza entering commercial production on September 1, 2012.
Other overhead
Other overhead expense, which includes
costs such as travel and royalties, increased 18% in the year ended December 31,
2014 compared to the corresponding period of 2013 as a result of the increased
levels of production and the resulting sales. Other overheads increased
substantially from 2012 to 2013 as a result of the 2012 results reflecting
Twangiza entering commercial production on September 1, 2012.
Inventory adjustments
Inventory adjustments decreased in the
year ended December 31, 2014 compared to the corresponding period of 2013 as a
result of lower per unit production costs and a reduction in the quantity of
gold bullion held as at December 31, 2014. The inventory adjustment decreased
from 2012 to 2013 as a result of the increased levels of activity, including the
stockpiling of ore in 2013.
General and administrative expenses
The table below provides the general and administrative
expenses for the years ended December 31, 2014 and 2013, as well as year ended
December 31, 2012.
| General & administrative expenses |
2014 |
2013 |
Change |
|
2012 |
|
$/oz
Sold |
|
|
|
| |
($000's) |
($000's) |
(%) |
|
($000's) |
2014 |
2013 |
Change % |
|
2012 |
| Salaries and employee benefits |
3,102 |
2,582 |
20% |
|
2,491 |
31 |
32 |
(3%) |
|
100 |
| Consulting, management, and professional fees |
2,106 |
1,193 |
77% |
|
1,043 |
21 |
15 |
40% |
|
42 |
| Office and sundry |
1,394 |
982 |
42% |
|
1,082 |
14 |
12 |
17% |
|
43 |
| DRC corporate office |
3,755 |
- |
- |
|
- |
37 |
- |
100% |
|
- |
| Depreciation |
89 |
51 |
75% |
|
44 |
1 |
1 |
0% |
|
2 |
| Other |
872 |
915 |
(5%) |
|
1,547 |
9 |
11 |
(18%) |
|
62 |
| General and administrative expenses |
11,318 |
5,723 |
98% |
|
6,207 |
113 |
71 |
59% |
|
249 |
General and administrative expenses
increased to $11,318 for the year ended December 31, 2014, as compared to $5,723
and $6,207 for the corresponding period in 2013 and 2012, respectively. Details
of changes in the general and administrative expenses category are as
follows:
Salaries and employee benefits
Salaries and employee benefits
increased 21% in the year ended December 31, 2014 as compared to 2013 as a
result of the impact of increased number of personnel coupled with the impact of
year over year inflationary increases. Salaries increased slightly from 2012 to
2013 as a result of the impact of year over year inflationary increases.
Page 14 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
Consulting, management, and
professional fees
Consulting, management, and
professional fees include mainly legal and auditing fees, which increased to
$2,106 for the year ended December 31, 2014, compared to $1,193 for 2013, as a
result of increased costs related to financing activities and higher regulatory
compliance costs. Consulting, management, and professional fees increased by
approximately 14% from 2012 to 2013 as the overall activity of the Company
increased significantly with the operations of Twangiza and development of
Namoya.
Office and Sundry
Office and sundry increased to $1,394
for the year ended December 31, 2014, compared to $982 for 2013, as a result of
the additional costs associated with government fees and taxes related to the
preferred share dividends. Office and sundry decreased from 2012 to 2013 as a
result of the rationalization of office expenditures.
DRC corporate office
The DRC corporate office provides in
country support for the operations. For the year ended December 31, 2014, DRC
regional office support expenses were $3,775. The increase in the expense was
due to support resources now focusing more on the requirements of mine
operations as opposed to exploration activities in the previous year.
Other expenses
Other general and administrative
expenses include travel and promotion expenses relating to a publicly traded
company and contributions to the Banro Foundation. The expenses decreased from
the respective prior periods as a result of the Company focusing efforts and
resources on achieving productivity at Twangiza and the issues identified at
Namoya.
Finance expenses
Finance expenses increased significantly in the year ended
December 31, 2014 compared to 2013 as a result of the Company requiring
additional financing in order to provide improved liquidity while ramping the
Twangiza operations up to levels consistent with the life-of-mine.
Other charges and provisions
Other charges and provisions were $1,141 for the year ended
December 31, 2014 compared to a gain of $1,206 in 2013, representing legal and
shareholder services resulting from dissident shareholder nominees for the
election of directors that were subsequently withdrawn as well as fair value
losses on financial instruments compared to a fair value gain on financial
instruments.
Net income
The Company’s net income for the year ended December 21, 2014
was $320, a decrease of 80% from 2013 of $1,630. The decrease in net income is a
result of increased general and administrative and finance expenses, offset by
increased gross earnings from operations.
EBITDA
EBITDA for the year ended December 31, 2014 increased 31%
compared to the prior year, from $34,294 to $44,793, primarily due to an
increase in gold ounces sold while operating expenses remained relatively flat,
partially offset by increased corporate costs.
Page 15 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
EXPLORATION AND DEVELOPMENT PROJECT EXPENDITURES
Exploration and evaluation expenditures
The Company incurred exploration and evaluation expenditures of
$12,219 in the year ended December 31, 2014, a decrease of 44% compared to 2013,
capitalized as exploration and evaluation assets in the Company’s consolidated
statement of financial position. The allocation of such exploration and
evaluation expenditures by project was as follows:
| Exploration and evaluation expenditures |
2014 |
2013 |
Change |
| |
($000's) |
($000's) |
(%) |
| Twangiza project |
2,431 |
5,916 |
(59%) |
| Namoya project |
1,792 |
5,030 |
(64%) |
| Lugushwa project |
3,163 |
5,422 |
(42%) |
| Kamituga project |
3,408 |
5,531 |
(38%) |
| Banro Congo Mining SARL |
1,425 |
108 |
1,219% |
| |
12,219 |
22,007 |
(44%) |
As a part of managing costs across the Company, exploration
work has been reduced and some support activities redirected to assist the
operations as the Company transitions primarily to an operations focused company
in the near term.
Mine development expenditures
During 2014, the Company incurred development expenditures of
$76,875 (2013 - $166,978), net of pre-production revenue of $21,867, with
respect to the development of the Namoya mine, which are capitalized in the
consolidated statement of financial position as mine under construction
asset.
| Mine Development Expenditures |
2014 |
H2
2014 |
H1
2014 |
2013 |
Year over Year |
| |
($000's) |
($000's) |
($000's) |
($000's) |
Change % |
| Mine development
expenditures |
98,742 |
49,129 |
49,613 |
166,978 |
(41%) |
| Pre-commercial production revenue |
(21,867) |
(15,456) |
(6,411) |
- |
- |
| Net expenditures |
76,875 |
33,673 |
43,202 |
166,978 |
(54%) |
Mine development expenditures relate to project capital,
pre-operating expenses and capitalized interest. Included in the $76,875 of mine
development expenditures is $7,628 of depreciation and $19,000 of capitalized
interest. Pre-commercial production revenue at Namoya consists of revenue from
the sale of 17,691 ounces of gold sold at an average price of $1,236 per ounce.
SUMMARY OF QUARTERLY
RESULTS
The following table sets out certain unaudited interim
consolidated financial information of the Company for each of the quarters of
fiscal 2014 and 2013. This financial information has been prepared using
accounting policies consistent with International Accounting Standard
(“IAS”) 34 Interim Financial Reporting issued by IASB.
| |
Q4 2014 |
Q3 2014 |
Q2 2014 |
Q1 2014 |
Q4 2013 |
Q3 2013 |
Q2 2013 |
Q1 2013 |
| |
|
|
|
|
|
|
|
|
| Revenues ($000's)
|
35,178 |
33,285 |
26,534 |
30,439 |
27,022 |
27,133 |
24,484 |
33,169 |
| Gross earnings from
operations ($000's) |
10,396 |
8,093 |
4,291 |
6,611 |
3,090 |
2,950 |
2,288 |
10,622 |
| Net income/(loss)
($000's) |
272 |
3,750 |
(2,998) |
(704) |
2,086 |
(3,671) |
(3,054) |
6,269 |
| Earnings/(loss) per
share, basic ($/share) |
0.00 |
0.01 |
(0.01) |
(0.00) |
0.01 |
(0.01) |
(0.01) |
0.03 |
| Earnings/(loss) per share, diluted ($/share) |
0.00 |
0.01 |
(0.01) |
(0.00) |
0.01 |
(0.01) |
(0.01) |
0.03 |
The Company recorded revenue of $35,178 for the three month
period ended December 31, 2014 and a net income of $272. Revenue and gross
earnings from operations for the three month period ended December 31, 2014 were
higher than the prior quarter due to an increase in productivity resulting in a
reduction in unit costs and an increase in ounces of gold sold from improved
production at Twangiza. The decrease in net income in the fourth quarter was
driven by increased finance costs and losses from the re-valuation of financial
instruments.
Page 16 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
The Company recorded revenue of $33,285 for the three month
period ended September 30, 2014 and a net income of $3,750. Revenue and gross
earnings from operations for the three month period ended September 30, 2014
were higher than the prior quarter due to there being approximately 6,460 more
ounces of gold sold in the third quarter of 2014 from improved production at
Twangiza. Increase in net income in the third quarter was driven by higher gross
earnings from operations, and gains from the re-valuation of financial
instruments partially offset by higher general and administrative expenses and
interest costs.
The Company recorded revenue of $26,534 for the three month
period ended June 30, 2014 and a net loss of $2,998. Revenue and gross earnings
from operations for the three month period ended June 30, 2014 were lower than
the prior quarter due to there being approximately 4,000 more ounces of gold
sold in Q1 2014 due to gold produced in December 2013 and sold in January 2014.
In addition to the lower gross earnings from operations, increased general and
administrative expenses were incurred as a result of increased legal and
shareholder services that resulted from dissident shareholder nominations for
the election of directors, which were subsequently withdrawn, in connection with
the annual shareholders’ meeting.
The Company recorded revenue of $30,439 for the three month
period ended March 31, 2014 and a net loss of $704. Revenue and gross earnings
from operations for the three months ended March 31, 2014 were higher than the
prior quarter due to there being approximately 4,000 more ounces of gold sold in
Q1 2014 as compared to Q4 2013. Although revenue was higher during the quarter,
transactions costs, dividends on preferred shares, and a loss on the change in
the fair value of preferred shares were all expenses that contributed to the net
loss of $704 for the quarter.
The Company recorded revenues of $27,022 for the three month
period ended December 31, 2013 and net income of $2,086. Revenue and gross
earnings from operations for the three months ended December 31, 2013 remained
consistent with revenues and gross earnings from operations incurred during the
three-month period ended September 30, 2013 even though the gold price declined
during the fourth quarter as the Company sold more ounces of gold during the
fourth quarter. The net profit recognized in the fourth quarter was driven by a
gain on a change in the fair value of preferred shares as compared to the third
quarter of 2013.
The Company recorded revenues of $27,133 for the three month
period ended September 30, 2013, compared to $24,484 for the second quarter of
2013. The increase in revenue was primarily a result of greater ounces sold as
compared to the prior quarter. The net loss for the third quarter of 2013 was
driven by a $3,248 loss on change in fair value of the Company’s issued
preference shares during the third quarter. Further adding to the net loss
recorded in the third quarter was the higher mining-related costs, including
fuel and replacement parts, from the Twangiza mine as compared to prior
quarters.
The Company recorded revenues of $24,484 for the three month
period ended June 30, 2013, compared to $33,169 for the first quarter of 2013.
The lower revenues were primarily a result of the 17% decline in the average
spot gold price received for gold sold during the period as well as 11% less
gold sold during the period as compared to the first quarter of 2013. The
settlement with the Company’s former CEO reduced the Company’s gross earnings
from mining operations to a net loss for the quarter.
During the first quarter of 2013, the Company recorded revenue
of $33,169, which was lower than the fourth quarter of 2012 as the price of gold
had decreased during the quarter, however net income increased as the Company
reduced costs following the first full quarter of commercial production.
LIQUIDITY AND CAPITAL
RESOURCES
As at December 31, 2014, the Company had cash and cash
equivalents of $1,002 compared to cash and cash equivalents of $4,452 as at
December 31, 2013. As a result of the minimal liquidity available as at December
31, 2013, and the Company’s need to continue to fund operations until production
from Namoya reaches commercial production levels, it was necessary to carry out
a further financing of $40 million in February 2014 in the form of preferred
shares. In addition, a liquidity back-stop facility for up to $35 million in
August 2014 in the form of notes as well as an additional $2 million in notes
issued through an amendment of the said facility were drawn down.
Page 17 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
In February 2014, the Company completed a $40 million financing
through a non-brokered private placement (the "Private Placement") involving the
issuance of preferred shares of two of the Company's subsidiaries. The preferred
shares issued under the Private Placement pay a 8% cumulative preferential cash
dividend, payable quarterly, and mature on June 1, 2017. At the option of the
holders and at any time before the maturity date, the holders will be entitled
to exchange their preferred shares into 63,000 common shares of the Company at a
strike price of $0.5673 per common share.
On August 18, 2014, the Company closed a liquidity backstop
facility (the “Facility”) for gross aggregate proceeds of up to $35,000. The
Facility provides for the issuance by the Company of two classes of notes,
defined as Priority Lien Notes and Parity Lien Notes, as well as common share
purchase warrants of the Company. The warrants entitle the holders thereof to
acquire 13,300 common shares of the Company at a price of Cdn$0.269 per share
for a period of 3 years, expiring August 17, 2017. The notes will mature on July
31, 2016, but may be prepaid at any time in whole or in part without penalty.
The notes bear initial interest rates of 10% and 15% for the Priority Lien Notes
and Parity Lien Notes, respectively, accruing and payable monthly in arrears,
with semi-annual step up provisions in interest to as high as 20% and 25% for
the Priority Lien Notes and Parity Lien Notes, respectively, seven months before
expiry. Any interest payable on or before July 31, 2015 may be capitalized
monthly by the Company. The interest rate applicable to any such capitalized
interest will be 2% higher.
During the year ended December 31, 2014, the Company spent
$8,658 in cash for exploration and evaluation expenditures (of which two-thirds
of the cost was for support services in the DRC) and $54,826 in cash (net of
pre-production revenue) for the development of the Namoya mine (compared to
$21,668 spent on exploration and evaluation expenditures and $126,583 spent on
the development of the Namoya mine during 2013). In addition, during 2014, the
Company spent $15,754 on capital assets (compared to $34,082 spent during 2013)
to carry on its projects in the DRC.
Based on the revenues expected to be generated from the
Company’s Twangiza and Namoya mines, together with the Company’s cash on
hand, and the financing transactions executed in February 2015, the Company
expects to have access to sufficient funds to carry out its proposed 2015
operating and capital budgets for the Twangiza and Namoya mines and for
corporate overhead. If at any time during the year it becomes apparent that
there may be a strain on the Company’s cash flows, the Company may elect to
defer non-essential capital expenditures to a future year.
As a result of restrictive covenants in the Indenture under
which certain of the Company’s outstanding Notes were issued, the Company’s
ability to incur additional debt is currently limited. Should the Company
experience further production shortfalls at Twangiza, delays in ramp up at
Namoya, suspension or delays in the receipt of goods and services, equipment
breakdowns, or should the price of gold decrease further, the Company may need
to further examine funding options.
CONTRACTUAL OBLIGATIONS
The Company’s contractual obligations as at December 31, 2014
are described in the following table:
| Contractual Obligations |
Payments due by period |
| |
|
Less than one |
One to three |
Four to five |
| |
Total |
year |
years |
years |
| |
($000's) |
($000's) |
($000's) |
($000's) |
| Operating leases |
689 |
509 |
180 |
- |
| Bank loans |
20,992 |
17,123 |
3,869 |
- |
| Long-term debt -
2012 Offering |
175,000 |
- |
175,000 |
- |
| Interest on
long-term debt - 2012 Offering |
43,750 |
17,500 |
26,250 |
- |
| Long-term debt -
2014 Facility |
37,000 |
- |
37,000 |
- |
| Interest on long-term debt - 2014 Facility |
13,848 |
2,964 |
10,884 |
- |
Page 18 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
RELATED PARTY
TRANSACTIONS
The Company’s related parties include key management. Key
management includes directors (executive and non-executive), the Chief Executive
Officer (“CEO”), the Chief Financial Officer, and the Vice Presidents reporting
directly to the CEO. The remuneration of the key management of the Company as
defined above, during the year ended December 31, 2014 and 2013 was as follows:
| |
|
Year Ended December 31, |
|
| |
|
2014 |
|
|
2013 |
|
| |
|
($000's) |
|
|
($000's) |
|
| Short-term employee benefits |
|
3,589 |
|
|
4,438 |
|
| Other benefits |
|
73 |
|
|
76 |
|
| Employee retention allowance |
|
220 |
|
|
204 |
|
| Settlement |
|
- |
|
|
2,498 |
|
| |
|
3,882 |
|
|
7,216 |
|
During the year ended December 31, 2014, directors fees of $378
were incurred for non-executive directors of the Company (2013 - $273). As of
December 31, 2014, $86 was included in accrued liabilities as a payable to
directors.
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2014 |
|
|
2013 |
|
| |
|
($000's) |
|
|
($000's) |
|
| Due from related
parties |
|
- |
|
|
63 |
|
| Due to related parties |
|
- |
|
|
635 |
|
During the year ended December 31, 2013, legal fees of $1,376,
incurred in connection with the Company’s financings as well as general
corporate matters, were paid to a law firm of which one partner, Richard Lachik,
was a director of the Company and another law firm of which one partner, Lambert
Djunga, is a director of a subsidiary of the Company. As at December 31, 2013,
the balance of $575 owing to both legal firms was included in due to related
parties in the consolidated statements of financial position.
During the year ended December 31, 2013, the Company incurred
common expenses of $197 in the DRC together with Loncor Resources Inc.
(“Loncor”), a corporation with common directors. As at December 31, 2013, an
amount of $60 owing to Loncor was included in due to related parties in the
consolidated statements of financial position.
During the year ended December 31, 2013, the Company incurred
common expenses of $129 with Gentor Resources Inc. (“Gentor”), a
corporation with common directors. As at December 31, 2013, an amount of $63
(December 31, 2012 - $3) owing from Gentor was included in due from related
parties in the consolidated statements of financial position.
During the year ended December 31, 2014, there was no repayment
to Delrand Resources Limited (“Delrand”) with respect to the Company’s share of
prior period common expenses in the DRC (year ended December 31, 2013 - $11). As
at December 31, 2014, an amount of $4 (December 31, 2013 - $5) was due from
Delrand. Amounts due from Delrand as at December 31, 2013 were included in
Long-term Investment. Delrand ceased to be a related party during 2014.
These transactions are in the normal course of operations and
are measured at the exchange amount.
CRITICAL ACCOUNTING
ESTIMATES
The preparation of the consolidated financial statements in
conformity with IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ
from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Information about critical judgments in
applying accounting policies that have the most significant effect on the
amounts recognized in the Financial Statements included the following:
Page 19 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
Provision for closure and reclamation
The Company’s operation is subject to environmental regulations
in the DRC. Upon establishment of commercial viability of a site, the Company
estimates the cost to restore the site following the completion of commercial
activities and depletion of reserves. These future obligations are estimated by
taking into consideration closure plans, known environmental impacts, and
internal and external studies, which estimate the activities and costs that will
be carried out to meet the decommissioning and environmental rehabilitation
obligations. The Company records a liability and a corresponding asset for the
present value of the estimated costs of legal and constructive obligations for
future mine rehabilitation. During the mine rehabilitation process, there will
be a probable outflow of resources required to settle the obligation and a
reliable estimate can be made of those obligations. The present value is
determined based on current market assessments using the risk-free rate of
borrowing which is approximated by the yield of government bonds with a maturity
similar to that of the mine life. The discounted liability is adjusted at the
end of each period with the passage of time. The provision represents
management’s best estimate of the present value of the future mine
rehabilitation costs, which may not be incurred for several years or decades,
and, as such, actual expenditures may vary from the amount currently estimated.
The decommissioning and environmental rehabilitation cost estimates could change
due to amendments in laws and regulations in the Congo. Additionally, actual
estimated costs may differ from those projected as a result of an increase over
time of actual remediation costs, a change in the timing for utilization of
reserves and the potential for increasingly stringent environmental regulatory
requirements.
Impairment
Assets, including property, plant and equipment, exploration
and evaluation and mine under construction, are reviewed for impairment whenever
events or changes in circumstances indicate that their carrying amounts exceed
their recoverable amounts, which is the higher of fair value less cost to sell
and value in use. The assessment of the recoverable amounts often requires
estimates and assumptions such as discount rates, exchange rates, commodity
prices, rehabilitation and restoration costs, future capital requirements and
future operating performance. Changes in such estimates could impact recoverable
values of these assets. Estimates are reviewed regularly by management.
Mineral reserves and resource estimates
Mineral reserves and resources are estimates of the amount of
ore that can be economically and legally extracted from the Company’s mineral
properties. The Company estimates its mineral reserves and mineral resources
based on information compiled by appropriately qualified persons relating to the
geological data on the size, depth and shape of the ore body. This exercise
requires complex geological judgments to interpret the data. The estimation of
recoverable reserves is based upon factors such as commodity prices, future
capital requirements, and production costs along with geological assumptions and
judgments made in estimating the size and grade of the ore body. Changes in the
reserve or resource estimates may impact upon the carrying value of exploration
and evaluation assets, mine under construction assets, property, plant and
equipment, recognition of deferred tax assets, and expenses.
Share-based payment transactions
The Company measures the cost of equity-settled transactions
with employees by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value at grant date is determined using
a Black-Scholes option pricing model that takes into account the exercise price
based on the historic share price movement, the term of the stock option, the
expected life based on past experience, the share price at grant date and
expected price volatility of the underlying share, the expected dividend yield
and the risk free interest rate as per the Bank of Canada for the term of the
stock option.
The model inputs for stock options granted during the year
ended December 31, 2014 included:
Page 20 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
| |
December 31, 2014 |
| Risk free interest
rate |
1.05% - 1.10% |
| Expected life |
3 years |
| Annualized
volatility |
75.99 - 76.27% |
| Dividend yield |
0.00% |
| Forfeiture rate |
2.00% |
| Grant date fair value |
$0.16 - $0.27
|
Depreciation of mining assets
The Company applies the units of production method for
amortization of its mine assets in commercial production based on reserve ore
tons mined. These calculations require the use of estimates and assumptions.
Significant judgment is required in assessing the available reserves to be
amortized under this method. Factors that are considered in determining reserves
are the economic feasibility of the reserves, expected life of the project and
proven and probable mineral reserves, the complexity of metallurgy, markets and
future developments. Estimates of proven and probable reserves are prepared by
experts in extraction, geology and reserve determination. When these factors
change or become known in the future, such differences will impact pre-tax
profit and carrying value of assets.
Depreciation of property, plant and equipment
Each property, plant and equipment life, which is assessed
annually, is assessed for both its physical life limitations and the economic
recoverable reserves of the property at which the asset is located. For those
assets depreciated on a straight-line basis, management estimates the useful
life of the assets. These assessments require the use of estimates and
assumptions including market conditions at the end of the assets useful life.
Asset useful lives and residual values are re-evaluated annually.
Commercial production
Prior to reaching pre-determined levels of operating capacity
intended by management, costs incurred are capitalized as part of mines under
construction and proceeds from sales are offset against capitalized costs.
Depletion of capitalized costs for mining properties begins when pre-determined
levels of operating capacity intended by management have been reached.
Management considers several factors in determining when a mining property has
reached levels of operating capacity intended by management, including:
| |
• |
when the mine is substantially
complete and ready for its intended use; |
| |
• |
the ability to produce a saleable
product; |
| |
• |
the ability to sustain ongoing
production at a steady or increasing level; |
| |
• |
the mine has reached a level of
pre-determined percentage of design capacity; |
| |
• |
mineral recoveries are at or near
the expected production level, and; |
| |
• |
the completion of a reasonable
period of testing of the mine plant and equipment. |
The results of operations of the Company during the periods
presented in the Company’s consolidated financial statements have been impacted
by management’s determination that its Twangiza mine had reached the commercial
production phase on September 1, 2012. When a mine development project moves
into the production stage, the capitalization of certain mine development and
construction costs ceases. Subsequent costs are either regarded as forming part
of the cost of inventory or expensed. However, any costs relating to mining
asset additions or improvements, underground mine development or mineable
reserve development are assessed to determine whether capitalization is
appropriate.
Provisions and contingencies
The amount recognized as provision, including legal,
contractual, constructive and other exposures or obligations, is the best
estimate of the consideration required to settle the related liability,
including any related interest charges, taking into account the risks and
uncertainties surrounding the obligation. In addition, contingencies will only
be resolved when one or more future events occur or fail to occur. Therefore
assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future
events. The Company assesses its liabilities and contingencies based upon the
best information available, relevant laws and other appropriate requirements.
Page 21 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
Exploration and evaluation expenditure
The application of the Company’s accounting policy for
exploration and evaluation expenditure requires judgment in determining whether
it is likely that future economic benefits will flow to the Company, which may
be based on assumptions about future events or circumstances. Estimates and
assumptions made may change if new information becomes available. There are a
few circumstances that would warrant a test for impairment, which include: the
expiry of the right to explore, substantive expenditure on further exploration
is not planned, exploration for and evaluation of the mineral resources in the
area have not led to discovery of commercially viable quantities, and/or
sufficient data exists to show that the carrying amount of the asset is unlikely
to be recovered in full from successful development or by sale. If information
becomes available suggesting impairment, the amount capitalized is written off
in the consolidated statement of comprehensive income during the period the new
information becomes available.
Income taxes
The Company is subject to income taxes in various jurisdictions
and subject to various rates and rules of taxation. Significant judgment is
required in determining the provision for income taxes. There are many
transactions and calculations undertaken during the ordinary course of business
for which the ultimate tax determination is uncertain. The Company recognizes
liabilities for anticipated tax audit issues based on the Company’s current
understanding of the tax law. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will
impact the current and deferred tax provisions in the period in which such
determination is made.
In addition, the Company has recognized deferred tax assets
relating to tax losses carried forward to the extent there is sufficient taxable
income relating to the same taxation authority and the same subsidiary against
which the unused tax losses can be utilized. However, future realization of the
tax losses also depends on the ability of the entity to satisfy certain tests at
the time the losses are recouped, including current and future economic
conditions, production rates and production costs
Functional and presentation currency
Judgment is required to determine the functional currency of
the parent and its subsidiaries. These judgments are continuously evaluated and
are based on management’s experience and knowledge of the relevant facts and
circumstances.
NEWLY APPLIED ACCOUNTING
STANDARDS
The following new and revised standards and interpretations
were applied as of January 1, 2014:
| |
• |
IAS 32, “Financial Instruments:
Presentation” (amendment); |
| |
• |
IAS 36, “Impairment of Assets”
(amendment); |
| |
• |
IAS 39, “Financial Instruments:
Recognition” (amendment); |
| |
• |
IFRS 13, “Fair Value Measurement”
(amendment); and |
| |
• |
IFRIC 21, “Levies” (new).
|
The application of these new and revised standards and
interpretations did not have a significant impact on the Company’s consolidated financial statements.
ACCOUNTING STANDARDS
ISSUED BUT NOT YET
EFFECTIVE
The Company has reviewed new and revised accounting
pronouncements that have been issued but are not yet effective and determined
that the following may have an impact on the Company: Amendments to IFRS 8,
Operating Segments (“IFRS 8”) were issued by the IASB in December 2013. The
amendments add a disclosure requirement for the aggregation of operating
segments and clarify the reconciliation of the total reportable segments' assets
to the entity's assets. The amendments are effective for annual periods
beginning on or after July 1, 2014.
Page 22 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
The Company is evaluating the impact of this standard but does
not expect the standard to have a material impact on its consolidated financial
statements.
IFRS 9, Financial instruments (“IFRS 9”) was issued by the IASB
on July 24, 2014 and will replace IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 is intended to reduce the complexity for the classification,
measurement, and impairment of financial instruments. The mandatory effective
date is for annual periods beginning on or after January 1, 2018. The Company is
evaluating the impact of this standard on its consolidated financial statements.
Amendments to IFRS 10, Consolidated Financial Statements (“IFRS
10”), IFRS 12 Disclosure of Interests in Other Entities (“IFRS 12”), and IAS 28
Investments in Associates and Joint Ventures (“IAS 28”) were published by the
IASB in December 2014. The amendments define the application of the
consolidation exception for investment entities. They are effective for annual
periods beginning on or after January 1, 2016. The Company is evaluating the
impact of this standard but does not expect the standard to have a material
impact on its consolidated financial statements.
IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) was
issued by the IASB on May 28, 2014 and will replace IAS 18 Revenue and IAS 11
Construction Contracts and related interpretations. IFRS 15 provides a more
detailed framework for the timing of revenue recognition and increased
requirements for disclosure of revenue. IFRS 15 uses a control-based approach to
recognize revenue which is a change from the risk and reward approach under the
current standard. The mandatory effective date is for annual periods beginning
on or after January 1, 2017. The Company is evaluating the impact of this
standard on its consolidated financial statements.
Amendments to IAS 1, Presentation of Financial Statements (“IAS
1”) were issued by the IASB in December 2014. The amendments clarify principles
for the presentation and materiality consideration for the financial statements
and notes to improve understandability and comparability. The amendments to IAS
1 are effective for annual periods beginning on or after January 1, 2016. The
Company is evaluating the impact of this standard on its consolidated financial
statements.
Amendments to IAS 16, Property, Plant and Equipment (“IAS 16”)
were issued by the IASB in May 2014. The amendments prohibit the use of a
revenue-based depreciation method for property, plant and equipment as it is not
reflective of the economic benefits of using the asset. They clarify that the
depreciation method applied should reflect the expected pattern of consumption
of the future economic benefits of the asset. The amendments to IAS 16 are
effective for annual periods beginning on or after January 1, 2016. The Company
does not expect the standard to have a material impact on its consolidated
financial statements.
Amendments to IAS 24, Related Party Disclosures (“IAS 24”) were
issued by the IASB in December 2013. It clarifies the identification and
disclosure requirements for related party transactions when key management
personnel services are provided by a management entity. The amendments are
effective for annual periods beginning on or after July 1, 2014. The Company is
evaluating the impact of this standard on its consolidated financial statements.
Amendments to IAS 38 Intangible Assets (“IAS 38”) were issued
by the IASB in May 2014. The amendments prohibit the use of a revenue-based
depreciation method for intangible assets. Exceptions are allowed where the
asset is expressed as a measure of revenue or revenue and consumption of
economic benefits for the asset are highly correlated. The amendments to IAS 38
are effective for annual periods beginning on or after January 1, 2016. The
Company is evaluating the impact of this standard but does not expect the
standard to have a material impact on its consolidated financial statements.
FINANCIAL INSTRUMENTS
Fair value of financial assets and liabilities
The consolidated statements of financial position carrying
amounts for cash and cash equivalents, trade and other receivables, bank loans,
and trade and other payables approximate fair value due to their short-term
nature.
Page 23 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
Fair value hierarchy
The following provides a description of financial instruments
that are measured subsequent to initial recognition at fair value, grouped into
Levels 1 to 3 based on the degree to which the fair value is observable:
-
Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;
-
Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices); and
-
Level 3 fair value measurements are those derived from valuation techniques
that include inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The fair values of financial assets and liabilities carried at
amortized cost are approximated by their carrying values.
RISKS AND UNCERTAINTIES
The Company is subject to a number of risks and uncertainties
that could significantly impact its operations and future prospects. The
following discussion pertains to certain principal risks and uncertainties but
is not, by its nature, all inclusive.
Risk Management Policies
The Company is sensitive to changes in commodity prices and
foreign-exchange. The Company’s Board of Directors has overall responsibility
for the establishment and oversight of the Company’s risk management framework.
Although the Company has the ability to address its price-related exposures
through the use of options, futures and forward contracts, it does not typically
enter into such arrangements.
Foreign Currency Risk
Foreign currency risk is the risk that a variation in exchange
rates between the United States dollar and Canadian dollar or other foreign
currencies will affect the Company’s operations and financial results. A portion
of the Company’s transactions are denominated in Canadian dollars, Congolese
francs, South African rand, British pounds, Australian dollars and European
euros. The Company is also exposed to the impact of currency fluctuations on its
monetary assets and liabilities. Significant foreign exchange gains or losses
are reflected as a separate component of the consolidated statement of
comprehensive income. During the year ended December 31, 2014 and 2013, the
Company recorded foreign exchange losses of $442 and $192, respectively, due to
the variation in the value of the United States dollar relative to the Canadian
dollar. The Company does not use derivative instruments to reduce its exposure
to foreign currency risk. See Note 31(c) of the Annual Financial Statements for
additional details.
Credit Risk
Financial instruments, which are potentially subject to credit
risk for the Company, consist primarily of cash and cash equivalents and trade
and other receivables. Cash and cash equivalents are maintained with several
financial institutions of reputable credit and may be redeemed upon demand. Cash
and cash equivalents are held in Canada and the DRC. The sale of goods exposes
the Company to the risk of non-payment by customers. Banro manages this risk by
monitoring the creditworthiness of its customers. It is therefore the Company’s
opinion that such credit risk is subject to normal industry risks and is
considered minimal.
Any credit risk exposure on cash balances is considered
negligible as the Company places deposits only with major established banks in
the countries in which it carries on operations.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they become due. The Company attempts to
ensure that there is sufficient cash to meet its liabilities when they are due
and manages this risk by regularly evaluating its liquid financial resources to
fund current and long-term obligations and to meet its capital commitments in a
cost-effective manner. Temporary surplus funds of the Company are invested in
short-term investments. The Company arranges the portfolio so that securities
mature approximately when funds are needed. The key to success in managing
liquidity is the degree of certainty in the cash flow projections. If future
cash flows are fairly uncertain, the liquidity risk increases. The Company’s liquidity requirements are met through
a variety of sources, including cash and cash equivalents, existing credit
facilities and capital markets. Should the Company experience further production
shortfalls at Twangiza, delays in ramp up at Namoya, equipment breakdowns, or
delays in completion schedules, or should the price of gold decrease further,
the Company may need to further examine funding options. See Note 31(e) of the
Annual Financial Statements for additional details.
Page 24 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
Market Risk
Market risk is the potential for financial loss from adverse
changes in underlying market factors, including foreign-exchange rates,
commodity prices, interest rate and share based payment costs.
Foreign Operations and Political Risk
The Company’s operations in the DRC are exposed to various
levels of political risk and uncertainties, including political and economic
instability, government regulations relating to exploration and mining, military
repression and civil disorder, all or any of which may have a material adverse
impact on the Company’s activities or may result in impairment or loss of part
or all of the Company's assets. In recent years, the DRC has experienced two
wars and significant political unrest. Operating in the DRC may make it more
difficult for the Company to obtain required financing because of the perceived
investment risk.
Access to Capital Markets and Indebtedness Obligation Risk
In March 2012, the Company closed a $175,000 debt financing,
which included the issuance by the Company of $175,000 aggregate principal
amount of senior secured notes (“Notes”) with an interest rate of 10% and a
maturity date of March 1, 2017. As a result of this financing, together with
additional debt financings carried out during 2013 and 2014, the Company has a
significant amount of indebtedness. The Company and certain of its subsidiaries
also have financial obligations with respect to outstanding preferred shares.
The Company’s high level of indebtedness could have important adverse
consequences, including: limiting the Company’s ability to obtain additional
financing to fund future working capital, capital expenditures, acquisitions or
other general corporate requirements; requiring a substantial portion of the
Company’s cash flows to be dedicated to debt service payments instead of other
purposes, thereby reducing the amount of cash flows available for working
capital, capital expenditures, acquisitions and other general corporate
purposes; increasing the Company’s vulnerability to general adverse economic and
industry conditions; limiting the Company’s flexibility in planning for and
reacting to changes in the industry in which it competes; placing the Company at
a disadvantage compared to other, less leveraged competitors; and increasing the
cost of borrowing.
Banro’s inability to generate sufficient cash flows to satisfy
its debt obligations would materially and adversely affect the Company’s
financial position and results of operations. If the Company cannot make
scheduled payments on its debt, the Company will be in default and holders of
the debt could declare all outstanding principal and interest to be due and
payable, and the Company could be forced into bankruptcy or liquidation.
The Indenture under which the Notes were issued contains a
number of restrictive covenants that impose significant operating and financial
restrictions on the Company and may limit the Company’s ability to engage in
acts that may be in its long-term best interest. A breach of the covenants under
this indenture could result in an event of default. In the event the Noteholders
accelerate the repayment of the Company’s indebtedness, Banro may not have
sufficient assets to repay that indebtedness. As a result of these restrictions,
Banro may be: limited in how it conducts its business; unable to raise
additional debt or equity financing to operate during general economic or
business downturns; or unable to compete effectively or to take advantage of new
business opportunities. These restrictions may affect the Company’s ability to
grow in accordance with its strategy.
Exploration and Development Risk
Certain of the Company's properties are in the exploration or
development stage only and have not commenced commercial production. The Company
currently does not generate income from properties under exploration and
development. The exploration and development of mineral deposits involve
significant financial risks over a significant period of time, which even a
combination of careful evaluation, experience and knowledge may not eliminate.
Few properties which are explored are ultimately developed into producing mines.
Major expenditures are required to establish reserves by drilling and to
construct mining and processing facilities at a site. It is impossible to ensure
that the Company's exploration or development programs will result in a
profitable commercial mining operation.
Page 25 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
Mineral Reserve and Mineral Resources Estimates Risk
The Company's mineral resources and mineral reserves are
estimates and no assurance can be given that the indicated levels of gold will
be produced. Such estimates are expressions of judgment based on knowledge,
mining experience, analysis of drilling results and industry practices. Valid
estimates made at a given time may significantly change when new information
becomes available. While the Company believes that the resource and reserve
estimates for its properties are well established, by their nature resource and
reserve estimates are imprecise and depend, to a certain extent, upon
statistical inferences, which may ultimately prove unreliable. If such estimates
are inaccurate or are reduced in the future, this could have a material adverse
impact on the Company. In addition, there can be no assurance that gold
recoveries or other metal recoveries in small-scale laboratory tests will be
duplicated in larger scale tests under on-site conditions or during production.
Environmental, Health and Safety Risk
The Company’s mining operation, exploration and development
activities are subject to extensive laws and regulations governing the
protection of the environment, waste disposal, worker safety and other related
hazards and risks normally incident to gold mining operations, exploration and
development, any of which could result in damage to life or property,
environmental damage and possible legal liability for any or all damage. A
breach of such laws and regulations may result in significant fines and
penalties. The Company intends to fully comply with all environmental and safety
regulation applicable in the DRC and comply with prudent international
standards.
Commodity Price Risk
The price of gold has fluctuated widely. The future direction
of the price of gold will depend on numerous factors beyond the Company's
control including international, economic and political trends, expectations of
inflation, currency exchange fluctuations, interest rates, global or regional
consumption patterns, speculative activities and increased production due to new
extraction developments and improved extraction and production methods. The
effect of these factors on the price of gold, and therefore on the economic
viability of the Company's properties, cannot accurately be predicted. To date
the Company has not adopted specific strategies for controlling the impact of
fluctuations in the price of gold.
Reference is made to the Company's annual report on Form 20-F
dated April 6, 2015 for additional risk factor disclosure (a copy of such
document can be obtained from SEDAR at www.sedar.com and EDGAR at
www.sec.gov).
OUTSTANDING SHARE
DATA
The authorized share capital of the Company consists of an
unlimited number of common shares and an unlimited number of preference shares,
issuable in series. As at April 6, 2015, the Company had outstanding 252,101
common shares, 116 series A preference shares, 1,200 series B preference shares,
stock options to purchase an aggregate of 16,177 common shares, 8,400 warrants
(with each such warrant entitling the holder to purchase one common share of the
Company at a price of $6.65 until March 1, 2017), additional warrants entitling
the holders to purchase a total of 13,300 common shares of the Company at a
price of Cdn$0.269 per share until August 17, 2017 and 735 broker warrants (with
each such broker warrant entitling the holder to purchase one common share of
the Company at a price of Cdn$3.25 until February 24, 2015). Reference is also
made to the Private Placement completed in February 2014 as referred to under
“Liquidity and Capital Resources” above, pursuant to which preferred shares of
two subsidiaries of the Company were issued. At the option of the holders of
such preferred shares and at any time before the maturity date of such preferred
shares of June 1, 2017, the holders are entitled to exchange their preferred
shares into 63,000 common shares of the Company at a strike price of $0.5673 per
common share.
DISCLOSURE CONTROLS AND
PROCEDURES
Management is responsible for establishing and maintaining adequate internal controls over disclosure controls and procedures, as defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings of the Canadian Securities Administrators and Rules 13a-15(e) and Rule 15d-15(e) under the United States Exchange Act of 1934, as amended. Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s Chief Executive Officer and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. As at December 31, 2014 management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as required by Canadian securities laws. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of December 31, 2014, the disclosure controls and procedures were ineffective due to the identification of a material weakness in the information technology general controls (“ITGC”) and in the controls over financial reporting relating to the preparation and review of the statement of cash flow and sufficiency of documentary evidence supporting the precision of review over the completeness and accuracy of inputs, assumptions and formulas included in the impairment models, as discussed in the internal control over financial reporting section below. As such, there is a possibility that the internal control over financial reporting will fail to detect a material misstatement in the financial statements on a timely basis.
Page 26 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
INTERNAL CONTROL OVER
FINANCIAL REPORTING
Internal controls have been designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. As at December 31, 2014, the Company’s Chief Executive Officer and Chief Financial Officer evaluated or caused to be evaluated under their supervision the effectiveness of the Company’s internal control over financial reporting. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework of 1992. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of December 31, 2014, there was a material weakness in ITGC and in the internal controls over financial reporting relating to the preparation and review of the statement of cash flow and sufficiency of documentary evidence supporting the precision of review over the completeness and accuracy of inputs, assumptions and formulas included in the impairment models.
With respect to ITGCs, in H1 of 2014, the Company embarked on
SAP implementation that was fully operational by Q3. The intention of the system
implementation was to improve the business processes on both an operational
control basis and ITGC basis. Due to limited resources and change in personnel
responsible for the SAP implementation, the Company focused its efforts on
system implementation and training but fell short of properly implementing the
new ITGC features in H2 of 2014, which has been deemed a material weakness due
to ineffective controls over access security and change management resulting in
a potential impact on the reliability of information produced by the system.
Management has hired external consultants to ensure that the ITGC will be
operating effectively by H2 2015.
With respect to internal controls over the preparation and
review of the statement of cash flow, it has come to management’s attention that
the accounting treatment of a deferred revenue transaction first accounted for
in 2013 should have been classified in the consolidated statement of cash flow
as operating and investing activities instead of financing activities. The
Company has agreed to restate the statement of cash flow as disclosed in note 34
of the Annual Financial Statements. As a result, the Company concluded that a
material weakness in internal controls over the preparation and review of the
statement of cash flow exists given the application of this inappropriate
accounting treatment in 2014. In the third quarter of 2014, the Company added
two additional chartered professional accountants to the finance team with
extensive experience in IFRS with major publicly traded companies in the mining
industry. Management believes that the enhanced finance team is capable of
addressing the preparation and review of the statement of cash flow in the
future.
With respect to internal controls over the sufficiency of documentary evidence supporting the precision of review over the completeness and accuracy of inputs, assumptions and formulas included in the impairment models, it has come to management’s attention that the level of documentary evidence supporting the precision of the review was insufficient to appropriately evidence the precision to which management reviewed the impairment models. During the current reporting period, management’s key focus in performing the impairment analysis was on ensuring that the information included in the models was complete and accurate in order to ensure appropriate conclusions were reached for financial reporting. As no issues were identified with respect to the inputs, assumptions and formulas that would change the conclusions reached in the impairment models, management intends to enhance the level of documentation maintained in the review process in future reporting periods through the establishment of enhanced standard documentation procedures.
The Company is required under Canadian securities laws to
disclose herein any change in the Company’s internal control over financial
reporting that occurred during the Company’s most recent interim period that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting. Refer to the discussion above for the Company’s remediation plan with respect to material weaknesses identified.
The effectiveness of Banro’s internal control over financial
reporting as at December 31, 2014 has been audited by Deloitte LLP, Banro’s
independent registered public accounting firm.
It should be noted that a control system, including the
Company’s disclosure controls and procedures system and internal control over
financial reporting system, no matter how well conceived, can provide only
reasonable, but not absolute, assurance that the objective of the control system
will be met and it should not be expected that the Company’s disclosure controls
and procedures system and internal control over financial reporting will prevent
or detect all reporting deficiencies whether caused by either error or fraud.
Page 27 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
NON-IFRS MEASURES
Management uses cash cost, all in sustaining cost, gold margin
and EBITDA to monitor financial performance and
provide additional information to investors and analysts. These metrics do not
have a standard definition under IFRS and should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with IFRS.
As these metrics do not have a standardized meaning, it may not be comparable to
similar measures provided by other companies. However, the methodology used by
the Company to determine cash cost per ounce is based on a standard developed by
the Gold Institute, which was an association which included gold mining
organizations, amongst others, from around the world.
The Company defines cash cost, as recommended by the Gold
Institute standard, as all direct costs that the Company incurs relating to mine
production, transport and refinery costs, general and administrative costs,
movement in production inventories and ore stockpiles, less depreciation and
depletion. Cash cost per ounce is determined on a sales basis.
| Cash Cost |
|
2014 |
|
|
Q4 2014 |
|
|
2013 |
|
|
Q4 2013 |
|
|
2012 |
|
| |
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
| Mine operating expenses |
|
96,045 |
|
|
24,782 |
|
|
92,857 |
|
|
23,661 |
|
|
30,547 |
|
| Less: Depletion
and depreciation |
|
(26,897 |
) |
|
(7,466 |
) |
|
(25,552 |
) |
|
(6,282 |
) |
|
(8,057 |
) |
| Total cash costs |
|
69,148 |
|
|
17,316 |
|
|
67,305 |
|
|
17,379 |
|
|
22,490 |
|
| Gold sales (oz)
|
|
101,225 |
|
|
29,264 |
|
|
80,497 |
|
|
21,379 |
|
|
24,963 |
|
| Cash cost per ounce ($/oz) |
|
683 |
|
|
592 |
|
|
836 |
|
|
813 |
|
|
901 |
|
The Company defines all-in sustaining costs as all direct costs
that the Company incurs relating to mine production, transport and refinery
costs, general and administrative costs, movement in production inventories and
ore stockpiles, less depreciation and depletion plus all sustaining capital
costs (excluding exploration). All-in sustaining cost per ounce is determined on
a sales basis.
| All-In Sustaining Cost |
|
2014 |
|
|
Q4 2014 |
|
|
2013 |
|
|
Q4 2013 |
|
|
2012 |
|
| |
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
| Mine operating expenses |
|
96,045 |
|
|
24,782 |
|
|
92,857 |
|
|
23,661 |
|
|
30,547 |
|
| Less: Depletion
and depreciation |
|
(26,897 |
) |
|
(7,466 |
) |
|
(25,552 |
) |
|
(6,282 |
) |
|
(8,057 |
) |
| Total cash costs |
|
69,148 |
|
|
17,316 |
|
|
67,305 |
|
|
17,379 |
|
|
22,490 |
|
| Sustaining capital
|
|
9,945 |
|
|
2,844 |
|
|
18,586 |
|
|
1,838 |
|
|
8,320 |
|
| All-in sustaining costs |
|
79,093 |
|
|
20,160 |
|
|
85,891 |
|
|
19,217 |
|
|
30,810 |
|
| Gold sales (oz)
|
|
101,225 |
|
|
29,264 |
|
|
80,497 |
|
|
21,379 |
|
|
24,963 |
|
| All-in sustaining cash cost per ounce ($/oz) |
|
781 |
|
|
689 |
|
|
1,067 |
|
|
899 |
|
|
1,234 |
|
The Company defines gold margin as the difference between the
cash cost per ounce disclosed and the average price per ounce of gold sold
during the reporting period.
Banro calculates EBITDA as net income or loss for the period
excluding: interest, income tax expense, and depreciation and amortization.
EBITDA is intended to provide additional information to investors and analysts.
It does not have any standardized meaning prescribed by IFRS and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with IFRS. EBITDA excludes the impact of cash costs of financing
activities and taxes, and the effects of changes in operating working capital
balances, and therefore is not necessarily indicative of operating profit or
cash flow from operations as determined under IFRS. Other companies may
calculate EBITDA differently. A reconciliation between net profit for the period
and EBITDA is presented below:
| EBITDA |
|
2014 |
|
|
2013 |
|
|
2012 |
|
| |
|
($000's) |
|
|
($000's) |
|
|
($000's) |
|
| Net income/(loss) |
|
320 |
|
|
1,630 |
|
|
(4,561 |
) |
| Interest |
|
17,488 |
|
|
7,061 |
|
|
1,070 |
|
| Taxes |
|
- |
|
|
- |
|
|
- |
|
| Depletion and depreciation |
|
26,985 |
|
|
25,603 |
|
|
8,096
|
|
| EBITDA |
|
44,793 |
|
|
34,294 |
|
|
4,605
|
|
Page 28 of 29
| Banro Corporation |
| MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR
ENDED DECEMBER 31, 2014 |
CAUTIONARY NOTE TO U.S.
INVESTORS REGARDING RESERVE AND
RESOURCE ESTIMATES
This MD&A has been prepared in accordance with the
requirements of securities laws in effect in Canada, which differ from the
requirements of U.S. securities laws. Without limiting the foregoing, the
Company uses the terms "measured", "indicated" and "inferred" resources. U.S.
investors are advised that, while such terms are recognized and required by
Canadian securities laws, the U.S. Securities and Exchange Commission (the
"SEC") does not recognize them. Under U.S. standards, mineralization may
not be classified as a "reserve" unless the determination has been made that the
mineralization could be economically and legally produced or extracted at the
time the reserve determination is made. U.S. investors are cautioned not to
assume that all or any part of measured or indicated resources will ever be
converted into reserves. Further, "inferred resources" have a great amount of
uncertainty as to their existence and as to whether they can be mined legally or
economically. It cannot be assumed that all or any part of the "inferred
resources" will ever be upgraded to a higher category. Therefore, U.S. investors
are also cautioned not to assume that all or any part of the inferred resources
exist, or that they can be mined legally or economically. Disclosure of
"contained ounces" is permitted disclosure under Canadian regulations, however,
the SEC normally only permits issuers to report mineral deposits that do not
constitute "reserves" as in place tonnage and grade without reference to unit
measures. Accordingly, information concerning descriptions of mineralization and
resources contained in this MD&A, may not be comparable to information made
public by U.S. companies subject to the reporting and disclosure requirements of
the SEC.
National Instrument 43-101 - Standards of Disclosure for
Mineral Projects ("NI 43-101") is a rule of the Canadian Securities
Administrators which establishes standards for all public disclosure an issuer
makes of scientific and technical information concerning mineral projects.
Unless otherwise indicated, any reserve and resource estimates contained in this
MD&A have been prepared in accordance with NI 43-101 and the Canadian
Institute of Mining, Metallurgy and Petroleum Classification System. These
standards differ significantly from the requirements of the SEC, and reserve and
resource information contained herein may not be comparable to similar
information disclosed by U.S. companies. One consequence of these differences is
that "reserves" calculated in accordance with Canadian standards may not be
"reserves" under the SEC standards.
U.S. investors are urged to consider closely the disclosure in
the Company's Form 20-F Annual Report (File No. 001-32399), which may be secured
from the Company, or from the SEC's website at http://www.sec.gov
Page 29 of 29
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