15.
| Financial instruments and fair values |
The following table shows the carrying values of the Company’s financial assets and liabilities as at December 31, 2017 and 2016:
| | | December 31, 2017 | | December 31, 2016 | |
| | | $ | | $ | |
| Loans and receivables | | | | | | | |
| Cash and cash equivalents | | | 22,102,526 | | | 20,195,199 | |
| Short-term investments | | | 25,338,081 | | | 31,410,880 | |
| Receivables | | | 612,140 | | | 541,293 | |
| Due from related parties | | | - | | | 163,167 | |
| | | December 31, 2017 | | December 31, 2016 | |
| | | $ | | $ | |
| Other financial liabilities | | | | | | | |
| Due to related party | | | 27,523 | | | 205,145 | |
| Accounts payable and accrued liabilities | | | 474,699 | | | 424,635 | |
| Accounts payable to minority shareholders | | | 164,000 | | | - | |
Financial assets and liabilities that are recognized on the balance sheet at fair value can be classified in a hierarchy that is based on the significance of the inputs used in making the measurements. The levels in the hierarchy are:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
Financial instruments that are not measured at fair value on the balance sheet are represented by cash and cash equivalent, short-term investments, receivables, due to and from related parties, account payable and accrued liabilities. The fair values of these financial instruments approximate their carrying value due to their short-term nature.
Financial risk factors
The company’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), and liquidity risk. Risk management activities are carried out by management, who identifies and evaluates the financial risks.
Foreign exchange risk
The functional currency of Minco Silver is the Canadian dollar and the functional currency of its Chinese subsidiaries is RMB. Most of the foreign currency risk is related to US dollar funds held by Minco Silver and its Chinese subsidiaries. Therefore, the Company’s net loss is impacted by fluctuations in the valuation of the US dollar in relation to the Canadian dollar and RMB.
The Company does not hedge its exposure to currency fluctuations. The Company has completed a sensitivity analysis to estimate the impact that a change in foreign exchange rates would have on the net loss of the Company, based on the Company’s net US$15.8 million monetary assets at year-end. This sensitivity analysis shows that a change of +/- 10% in US$ foreign exchange rate would have a -/+ US$1.6 million impact on net loss.
Interest rate risk
Financial instruments that expose the Company to interest rate risk are cash and cash equivalents and short-term investments.
The Company mainly holds short-term investments such as guaranteed investment certificates at fixed interest rates. As a result, the Company is not exposed to significant interest rate risk.
Liquidity risk
Liquidity risk includes the risk that the Company cannot meet its financial obligations as they fall due. The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements and its exploration and development plans. The annual budget is approved by the Company’s board of directors. The Company ensures that there are sufficient cash balances to meet its short-term business requirements. As at December 31, 2017, the Company has a positive working capital of approximately $47.6 million and therefore has sufficient funds to meet its current operating and exploration and development obligations. However, the Company will require significant additional funds to complete its plans for the construction of the Fuwan project.
