SILVERMET INC. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2015

Transcription

1 SILVERMET INC. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2015 Dated April 14, 2016

2 INTRODUCTION The following management s discussion and analysis ( MD&A ) of the financial condition and results of the operations of Silvermet Inc. ( Silvermet or the Company ) constitutes management s review of the factors that affected the Company s financial and operating performance for the year ended December 31, This MD&A was written to comply with the requirements of National Instrument Continuous Disclosure Obligations. This discussion should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2015, which were prepared in accordance with International Financial Reporting Standards ( IFRS ). All amounts referred to in this MD&A are in United States dollars unless otherwise specified. Information contained herein is presented as at April 14, 2016, unless otherwise indicated. The Company is a reporting issuer under applicable securities legislation in the provinces of Alberta, British Columbia and Ontario and trades under the symbol SYI on the TSX Venture Exchange (the TSX-V ). Further information about the Company and its operations can be obtained from the offices of the Company, at or from CAUTION REGARDING FORWARD-LOOKING STATEMENTS Except for statements of historical fact relating to the Company, certain information contained in this MD&A constitutes forward-looking information under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to the potential of the Company s assets; the future prices of zinc; capital expenditure requirements; requirements for additional capital and other statements relating to the financial and business prospects of the Company. Generally, forwardlooking information can be identified by the use of forward-looking terminology such as plans, expects or does not expect, is expected, budget, scheduled, estimates, forecasts, intends, anticipates or does not anticipate, or believes, or variations of such words and phrases or statements that certain actions, events or results may, could, would, might or will be taken, occur or be achieved. Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to risks related to: unexpected events and delays during permitting; timing and availability of external financing on acceptable terms and in light of the current status of global liquidity and credit availability; future prices of zinc; currency exchange rates; government regulation; failure of equipment or processes to operate as anticipated; risks inherent in manufacturing and processing operations, including strike by unionized personnel, environmental hazards or industrial accidents; and uncertain political and economic environments. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws. Page 2

3 OVERVIEW All amounts are stated in US dollars unless otherwise noted. Silvermet is a zinc production company headquartered in Toronto, Canada. It was incorporated under the laws of the Province of Ontario and its principal business activity is the development of the electric arc furnace dust ( EAFD ) recycling business in Turkey to recover zinc in concentrate, which is sold to smelters, primarily in the European market. Silvermet began operations in 2009 through the acquisition of a shuttered plant that was restored to operating condition, in Iskenderun, Turkey. On October 27, 2010, Silvermet and Befesa Zinc S.A.U. ( Befesa ), a Spanish company that operates a number of Waelz kilns throughout Europe, established a joint venture known as Befesa Silvermet Turkey, S.L. ( BST ) to operate the existing Iskenderun plant and further develop the EAFD recycling business in Turkey, (the Turkish Operations ). BST is held 51% by Befesa and 49% by Silvermet, and owns 100% of Befesa Silvermet Iskenderun Celik Tozu Geri Donusumu A.S. ( BSI ), which holds and operates the Iskenderun facility. HIGHLIGHTS On December 17, 2015, BSI signed a US$20 million loan with the European Bank for Reconstruction and Development ( EBRD ). The loan amount is equal to 80% of the estimated US$25 million cost for the expansion and modernization of Iskenderun zinc plant ( Expansion Project ). BSI has approximately US$6 million cash, $5 million of which will be invested alongside the EBRD loan to fund the total cost of the Expansion Project. BSI plans to proceed with the Iskenderun plant expansion upon improvement in steel market conditions. The EBRD loan may be drawn down at BSI s option, any time through December 17, Silvermet and Befesa sign put/call arrangement on December 17, 2015, approved at the Special Meeting of Shareholders held on September 22, Kiln relined with refractory brick in Q Between March 2015 and March 2016, under its normal course issuer bid Silvermet purchased and cancelled 1,600,000 common shares at an average price of C$0.02 per share for a total cost of C$37,580 including fees and commissions. OUTLOOK During 2015, Turkish electric arc furnace mills operated below 52% capacity utilization ( %) due to market conditions and increased levels of steel import from South East Asia. As a result, EAFD availability was limited and the Iskenderun plant operated below capacity. Befesa is currently sourcing additional EAFD supply from other jurisdictions to augment the Turkish supply. Zinc prices remained lower than forecast due to the overall depressed commodity market, despite favourable fundamentals in the zinc supply market. During 2015, average zinc price was $0.88/lb ( $0.98/lb.); going into the first half of 2016, year-to-date April 2016 prices averaged $0.77/lb and as of date of this report, is at $0.85/lb. Page 3

4 ZINC PRICE (LME - Annual Average) $/lb zinc price ($/lb.) 0.60 Once completed, the upgraded Iskenderun facility will increase EAFD recycling capacity from the current 60,000 metric tonnes per year to 110,000 metric tonnes per year, as well as dramatically improving zinc recovery in the process, which is forecasted to significantly improve zinc concentrate production to over 50 million pounds of contained zinc per year. The modernization of the Iskenderun plant is expected to significantly increase throughput and reduce operating costs. Assuming the plant upgrade is implemented, Silvermet s annual basic EPS is projected to be higher than current levels as follows: Zinc Price (US$/lb.) (US$) Earnings per Share (1) (C$) $0.75 $0.02 C$ (1) Assumptions: EPS average for years EAFD throughput 110,000 dry metric tonnes ( DMT ), unit input costs based on current costs, zinc recovery rates and input material requirements based on Befesa s experience in other plants, smelter treatment charges based on 2015 benchmarks, EPS based on current number of shares outstanding, US$1.00 = C$1.35 Page 4

5 COMPARATIVE ANNUAL RESULTS The following table summarizes comparative results of operations of the Company: Year ended December 31, (all amounts in US$) Revenues $ 273,555 $ 399,408 $ 386,950 General and administration 657,786 1,070, ,099 Share of net loss (earnings) from joint vent 552,504 (1,954,881) (1,676,075) Finance income (1,443) (3,022) (4,540) Foreign exchange gain (213,282) (189,929) (132,630) Net (loss) income $ (722,010) $ 1,476,800 $ 1,532,096 Other comprehensive loss $ (990,171) $ (771,415) $ (1,430,928) Comprehensive (loss) income $ (1,712,181) $ 705,385 $ 101,168 Basic net (loss) income per share ($0.005) $0.010 $0.010 Diluted net (loss) income per share ($0.005) $0.010 $0.010 Basic weighted-average number of shares outstanding 143,432, ,787, ,383,984 Diluted weighted-average number of shares outstanding 143,432, ,787, ,383,984 Cash dividends declared $0.000 $0.000 $0.000 As at December 31, Total assets $ 7,629,870 $ 9,361,008 $ 9,296,815 Total non-current financial liabilities $ - $ - $ - The consolidated financial statements for the years ended December 31, 2015, 2014 and 2013 reflect the equity method of accounting for Silvermet s interest in the joint venture. The Company s share of net earnings and net assets are disclosed in the notes to the financial statements. Revenues include management fees and sales commissions received from the joint venture. Revenues in 2015 decreased by 32% to $273,555 compared to $399,408 in 2014, reflecting the impact of lower zinc prices and lower concentrate shipments by the joint venture in 2015, compared to General and administration costs at the corporate level include general office and management expenses, costs related to maintaining a public listing, professional fees, audit, legal, accounting, tax and consultants costs, insurance, travel and other miscellaneous office expenses. General and administration costs in 2015 decreased by 39% to $657,786 compared to $1,070,440 in 2014, mainly reflecting the effect of a non-recurring non-cash stock option expense booked in Other factors in the variance were lower exploration, travel, audit and office costs, partially offset by higher management and directors fees, legal expenses and costs associated with holding a special meeting of shareholders. Page 5

6 Year ended December 31, Management fees $ 399,988 $ 372,296 Stock option expense 9, ,264 Audit expense 37,310 57,881 Legal expenses 36,873 16,999 Directors fees 22,318 5,887 Exploration 30,457 64,965 Occupancy costs 31,972 44,924 Office and general expenses 13,276 53,155 Corporate secretarial services 10,180 10,866 Insurance 8,207 9,393 Listing fees 8,144 8,059 Travel expenses 19,080 28,794 Shareholders meeting 11,834 6,139 Other expense 18,661 23,818 $ 657,786 $ 1,070,440 Share of net (loss) earnings from joint venture shows the Company s share of joint venture net (loss) income as detailed in the Note 7 (Investment in Joint Venture) of the audited consolidated financial statements of the Company for the year ended December 31, The following table summarizes comparative operational metrics of the Iskenderun facility. Year ended December 31, % 100% Exchange rate (TL/US$, average) Exchange rate (TL/US$, year-end) EAFD processed (DMT) 42,679 48,792 EAFD processed (WMT) 44,570 51,696 Production (DMT) 13,043 15,376 Shipments (DMT) 12,796 15,931 Production (zinc content, 000 lb.) 19,540 23,042 Shipments (zinc content, 000 lb.) 19,170 23,874 In 2015, Silvermet s equity share of net loss from joint venture was $552,504 compared to share of net earnings of $1,954,881 in The net loss in 2015 was mainly due to lower zinc prices, lower concentrate shipments and a non-recurring impairment of technology licence, partially offset by higher foreign exchange gains. These factors are explained in detail in the following pages. Page 6

7 The following table summarizes comparative results of the joint venture at 100%. Year ended December 31, % 100% Gross sales revenues $ 13,233,536 $ 19,872,053 Treatment & transportation 3,212,261 3,643,733 Cost of sales 8,203,229 9,816,258 EBITDA (1) $ 1,818,046 $ 6,412,062 Management fees and sales commissions 558, ,118 Depreciation 466, ,102 Dis Ticaret and Izmir costs 49,021 88,388 Bank charges and interest - BST 31,867 26,678 Finance income (1,687) (5,289) Foreign exchange gain (657,825) (336,333) Loss (gain) on sale of property, plant & equipment 364,556 (10,554) Impairment of intangible assets 2,020,019 - Other (222,095) (46,481) Income tax expense 336,629 1,256,880 Net (loss) income $ (1,127,559) $ 3,989,553 Silvermet's equity share $ (552,504) $ 1,954,881 (1) EBITDA is a non-ifrs measure, does not have a standardized meaning prescribed by IFRS and may not be comparable to similar terms and measures presented by other issuers. EBITDA comprises earnings before income taxes, interest expense (income) and financing expense (income), amortization expense, foreign exchange loss (gain), and other expenses including management fees, sales commissions; gain on sale of property, plant and equipment and impairment charges. Gross Sales Revenues - During 2015, revenues decreased by 33% to $13.2 million (at 100%) compared to $19.9 million in 2014 as a result of the combination of several factors: Production and Shipment Plant utilization decreased by 10% to 55% in 2015 compared to 65% in In 2015, there were a total of 165 days of shutdowns ( days), mainly due to limited EAFD availability in both years, in addition to general maintenance stoppages. As a result, production decreased by 15% to 13,043 DMT in 2015 from 15,376 DMT in And product shipments decreased by 20% to 12,796 DMT in 2015 from 15,931 DMT in Price In 2015, the average price of zinc decreased by 11% to $0.88 per pound compared to $0.98 per pound in Inventory Inventory on hand at the beginning of Q1, 2016 was 297 DMT (Q1, 2015 nil DMT) while Q1, 2014 started with inventory of 598 DMT. Page 7

8 Treatment and Transportation Costs - Benchmark smelter treatment charges are determined annually usually during the second quarter of the year. With an increasing trend of zinc prices, the 2014 benchmarks were set at $217 per tonne, while in 2015, the newly established benchmark treatment charge of $ 237 per tonne was applied. Cost of Sales consists of raw materials (primarily coke, anthracite and lime), labour, utilities (natural gas and electricity), maintenance expenses and plant overhead costs. Cost of sales in 2015 was 16% lower than Unit cost of sales increased to $0.43 per pound of zinc from $0.41 in 2014 mainly reflecting fixed costs being allocated to a 15% lower production volume, while continuing operational improvements partially offset the effect of lower production levels. Loss on Sale of Property, Plant and Equipment in 2015 includes a $364,556 charge booked on sale of the land in Adana. Impairment of Intangible Assets was due to indefinite postponement of the construction of new plants in the cities of Adana and Izmir. In 2015 the land in Adana was sold and BST delivered notice for a full refund of its down payment for land in Izmir. Currently the Iskenderun plant expansion and modernization is the only planned project where BST can apply its new technology licence under the Technology Transfer Agreement with Befesa and this licence has been invoiced to BSI for $3 million. As a result, $2 million of the $5 million licence has been written down. Other includes a non-recurring gain on insurance recovery of $316,278 in relation to the flood that occurred in the Iskenderun organized industrial zone in July This gain was partially offset by onetime charges in relation to cancellation of long-term EAFD supply contracts. In 2015 there were no dividends received from the joint venture ( $1,125,681) because of retaining cash at joint venture level to use as funding for the Iskenderun plant expansion project. Under normal circumstances the dividends are declared once a year and consist of the Company s share of previous years net earnings of the joint venture net of legal reserves and a 5% withholding tax at the subsidiary level. Finance income is interest earned on cash invested in guaranteed income certificates. Foreign exchange gain includes foreign exchange gains incurred due to fluctuations of exchange rates between the functional currency of Canadian $ (C$) for the head office and the US $, in which most of the cash on hand and some costs are denominated. Other comprehensive loss includes share of currency translation adjustments of the joint venture, share of re-measurements of post-employment benefit obligations of the joint venture and currency translation adjustments at the consolidated level. Re-measurements of post-employment benefit obligations of the joint venture are due to actuarial losses in joint venture s defined benefit plan. Currency translation adjustments of the joint venture arise from differences between the functional currency of TL for the Turkish entities and the US $ reporting currency. All assets and liabilities of the Turkish entities are converted at year end foreign exchange rates. Revenues and most expenses are converted at either the spot rate at the date of the transaction or at average rates for expenses that were incurred evenly throughout the period, and amortization is converted at the average rate. Resulting differences are recognized as a separate component of accumulated other comprehensive income. This mainly concerns the Turkish entity whose foreign exchange gains/losses were presented in the statement of comprehensive income as items that may be reclassified subsequently to income statement. Page 8

9 SELECTED QUARTERLY FINANCIAL INFORMATION Revenues Net (loss) income Net (loss) income per share 2015 Q4 (1,2) $ 82,734 $(1,027,491) $(0.007) Q3 (1,3) 94, , Q2 (1,4) 66,198 (144,154) (0.001) Q1 (1,5) 30, , Q4 (1,6) $ 80,056 $ 180,328 $0.001 Q3 (1,7) 102, , Q2 (1,8) 161, , Q1 (1,9) 55, , (1) All quarterly values reflect Silvermet s 49% interest in the joint venture with Befesa using the equity method, with the Company s share of net earnings of the joint venture. (2) Q plant utilization was 67% due to limited EAFD availability. Q4, 2015 results include a non-recurring intangible asset impairment charge of $2 million. (3) Q plant utilization was 70% due to limited EAFD availability. (4) Q results were impacted by a $372,648 loss booked on sale of the land in Adana. In Q2, 2015, plant utilization was 45% with 50 days of plant closures due to limited EAFD availability. (5) Q plant utilization was 37% with a 56 day shutdown due to limited EAFD availability. (6) Q plant utilization was 60% with a 41 day plant shut down due to limited EAFD availability. Q figures include approximately $70,000 exploration costs, which were not incurred in (7) Q plant utilization was 58% with a 39 day plant closure due to limited EAFD availability. (8) Q plant utilization was 100%. (9) Q plant utilization was 49% with a 46 day plant closure due to maintenance and limited EAFD availability. LIQUIDITY AND FINANCIAL POSITION Working Capital The Company reported a working capital surplus of $0.7 million at December 31, 2015 compared to $2.1 million at December 31, The $1.4 million decrease in working capital surplus is mainly due to Silvermet investing C$1,250,000 for the subscription of 1,250,000 units of Global Atomic Fuels Corporation. In addition, in 2015 there were no dividends received from the joint venture ( $1,125,681) because of retaining cash at joint venture level to use as funding for the Expansion Project. Capital resources The Iskenderun plant expansion is the Company s only planned capital expenditure project, as described in the outlook section. The execution of Iskenderun plant expansion will be financed with the loan from EBRD and cash flows generated from operations. CAPITAL MANAGEMENT In managing its capital, the Company s objective is to ensure the Company is able to continue its operations and that it has sufficient ability to satisfy its capital obligations and ongoing operational expenses. The Company considers the components of shareholders equity, as well as its cash and equivalents, notes receivable, credit facilities and long-term loan obligations as capital. Management adjusts the capital structure as necessary in order to support its business strategy. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise Page 9

10 of the Company s management team to sustain current operations and future development of the business. The Company is not subject to externally imposed capital requirements. FINANCIAL RISK FACTORS The Company s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate, foreign exchange rate, and commodity and equity price risk) which are listed in Note 18 of its audited consolidated financial statements for the year ended December 31, RELATED PARTY TRANSACTIONS The Company lists its related party transactions in Note 10 of its audited consolidated financial statements for the year ended December 31, OFF BALANCE SHEET TRANSACTIONS As of the date of this filing, the Company does not have any off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company, including and without limitation, such considerations as liquidity and capital resources. SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in Canada. The preparation of the Company s consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Significant accounting policies and critical accounting estimates and judgments are described in Notes 3 and 5 of the Company s audited consolidated financial statements for the year ended December 31, CHANGES IN ACCOUNTING POLICIES The Company describes the effect of changes in accounting policies in Note 4 of its audited consolidated financial statements for the year ended December 31, RISKS AND UNCERTAINTIES Equipment failures: BST s equipment is complex and has many components. Equipment failures can occur due to the failure of individual components such as electric motors, causing a temporary halt in operations while repairs are made. Equipment downtime may also be experienced due to over-heating of the kiln, requiring a period of cooling before re-start. Potential catastrophic failures include failure of the kiln shell, failure of the kiln s brick lining or failure of the primary drive gears. Catastrophic failures may result in an extended period of shut down while repairs are made, including the lead time required to order and receive replacement equipment. Energy costs: The major cost components of BST s operations relate to energy; coke, anthracite, natural gas, diesel fuel and electricity. The costs of natural gas and electricity are regulated in Turkey. In the case of coke and anthracite, costs are driven by global events that impact these commodities and transportation costs. Significant adverse changes to such costs may impact the ability of the Company to operate profitably. Any interruption in the supply of these energy inputs may result in cessation of operations until such supplies resumed. Page 10

11 Uncertainty due to foreign legal and political factors: Risks may include political unrest, corruption, civil disturbances and terrorist actions, arbitrary changes in law or policies, changes to government regulation, foreign taxation, price and currency controls, delays in obtaining or the inability to obtain necessary governmental permits, limitations on foreign ownership, limitations on the repatriation of earnings and increased financing costs. Environmental regulations: The Company s business is subject to a variety of environmental regulations. Failure to properly process and handle EAFD in accordance with such regulations may expose the Company to liabilities and/or result in the withdrawal of operating permits. The Company has procedures in place to ensure compliance with environmental regulations. However, new laws and regulations that may be passed in the future may materially affect the Company s operations. Raw material supply: The Company requires a steady supply of EAFD in order to continue operating at an optimum level and to maintain profitable output levels. The Company relies on continued operations of local steel mills at reasonable levels in order to meet its EAFD supply requirements. The closing of or lower capacity utilization of one or more local steel mills may have an adverse impact on the available supply. Additional funding: The Company anticipates the need for additional funding to support capital expenditures to improve the current Waelz kiln facility and to support planned expansions at other sites in Turkey. Failure to obtain such additional funding may lead to the delay or indefinite postponement of such projects. There is no assurance that such funding will be available or that it will be available on favourable terms. Dependence on Key Personnel: The development of the Company s business is and will continue to be dependent on its ability to attract and retain highly qualified management personnel. The Company faces competition for personnel from other employers. Price volatility: Prices of commodities can fluctuate widely and are affected by numerous factors including demand, inflation, strength of various currencies, interest rates, forward sales by producers, global or regional political or financial events, and production and cost levels in major producing regions. In addition, commodity prices are sometimes subject to rapid short-term changes because of speculative activities. The success of the Company s Waelz kiln operations is dependent on market prices for zinc and the related smelter treatment charges. Currency risk: The Company s activities occur primarily in Turkey. All revenues and some cost items are denominated in U.S. dollars, or otherwise tied to the U.S. dollar. Most operating expenses are incurred in Turkish Lira. Head office costs are incurred in Canadian dollars. Such activities are subject to risks associated with fluctuations in the rate of exchange of these foreign currencies. Critical Accounting Estimates: Critical accounting estimates used in the preparation of the financial statements include the Company s estimate of the value of stock-based compensation. These estimates involve considerable judgment and are or could be, affected by significant factors outside Company s control. Factors affecting stock-based compensation include estimates of when stock options might be exercised and the stock price volatility. The timing for exercise of options will depend among other things, upon a variety of factors including the market value of Company s shares and the financial objectives of the holders of the options. The Company uses historical data to determine volatility in accordance with Black-Scholes modeling, however future volatility is inherently uncertain and the model has its limitations. These estimates may have a material impact on stock-based compensation and hence results of operations, however, as a non-cash item there is no impact on the Company s financial condition. Page 11

12 OUTSTANDING SHARE DATA As at April 14, 2016 the outstanding common shares and stock options are: Common shares outstanding 142,104,716 Stock options 11,300,000 Fully diluted shares outstanding 153,404,716 MANAGEMENT S RESPONSIBILITY FOR FINANCIAL INFORMATION The Company s financial statements are the responsibility of the Company s management, and have been approved by the board of directors. The consolidated financial statements were prepared by the Company s management in accordance with Canadian generally accepted accounting principles. The consolidated financial statements include certain amounts based on the use of estimates and assumptions. Management has established these amounts in a reasonable manner in order to ensure the financial statements are presented fairly in all material respects. DISCLOSURE OF INTERNAL CONTROLS Management has established processes to provide sufficient knowledge to support representations that it has exercised reasonable diligence that (i) the unaudited interim consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the unaudited interim consolidated financial statements, and (ii) the unaudited interim consolidated financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented. The Company utilizes the Venture Issuer Basic Certificate, which certificate does not include representations related to the establishment and maintenance of disclosure controls and procedures (DC&P) or internal control over financial reporting (ICFR), as defined in MI In particular, the certifying officers do not make any representations related to the establishment and maintenance of: (i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and (ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP. The Company s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in MI may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation. Page 12

13 ADDITIONAL INFORMATION Additional information can be accessed at the Company s website or through the Company s public filings at Silvermet Inc. Tel: 1 (416) King St. East, Suite 1700, Toronto, ON, M5C 1B5, Canada Stephen G. Roman Stephen G. Roman Chairman, President & Chief Executive Officer info@silvermet.ca Ian D. Atacan Ian D. Atacan Chief Financial Officer iatacan@silvermet.ca April 14, 2016 Page 13