Items included in the financial statements of each of the Company's consolidated entities are measured using the currency of the primary environment in which the entity operates.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of operations and comprehensive income.
The results and financial position of Touchstone Colombia, San Miguel S.A.S and Concesiones United Gold S.A.S are translated as follows:
-- assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that financial period end;-- income and expenses for each statement of operations and comprehensive income are translated at average exchange rate, unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions;-- equity transactions are translated using the rate of exchange on the date of the transactions; and-- all resulting exchange differences are recognized in Other Comprehensive Income.
Use of Estimates: The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The assets and liabilities which require management to make significant estimates and assumptions in determining carrying values include, but are not limited to, mineral interests, provision for income taxes and share-based payments.
The areas where management has made significant judgments include:
Reserves and resources
Proven and probable reserves are the economically mineable parts of the Company's measured and indicated mineral resources, demonstrated by a feasibility study. The Company estimates its proven and probable reserves and measured and indicated and inferred mineral resources based on information compiled by appropriately qualified persons. The information related to the geological data on the size, depth shape of the ore body requires complex geological judgments to interpret the data. The estimation of future cash flows based on proven and probable reserves is based on factors, which include but are not limited to, foreign exchange rates, commodity prices, future capital requirements and production costs and geological assumptions and judgments made in estimating the size and grade of the ore body and engineering assumptions based on the mining and processing methods to be used. Changes in proven and probable reserves, measured and indicated and inferred resources may impact carrying values of property plant and equipment and mineral interests and the recognition of deferred tax amounts.
The Company recognizes the deferred tax benefit related to deferred income and resource tax assets to the extent recovery is probable. Assessing the recoverability of deferred income tax assets requires management to make significant estimates of future taxable profit and the income tax rate at which the future tax assets will be realized. To the extent that future cash flows, taxable profit and income tax rates differ significantly from estimates, the ability of the Company to realize deferred tax assets could be impacted. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income and resource tax assets.