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ASSET RETIREMENT OBLIGATION: | 12 Months Ended
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Dec. 31, 2020
ASSET RETIREMENT OBLIGATION: |
ASSET RETIREMENT OBLIGATION: | NOTE 10—ASSET RETIREMENT OBLIGATION: ​ Peruvian operations: ​ The Company maintains an asset retirement obligation for its mining properties in Peru, as required by the Peruvian Mine Closure Law. In accordance with the requirements of this law the Company’s closure plans were approved by the Peruvian Ministry of Energy and Mines (“MINEM”). As part of the closure plans, the Company is required to provide annual guarantees over the estimated life of the mines, based on a present value approach, and to furnish the funds for the asset retirement obligation. This law requires a review of closing plans every five years. ​ On June 24, 2019, MINEM approved a change to the guarantees required for the mining closure plans. The new regulation specifies that the annual guarantees can be secured with real estate up to a maximum of 50% and the remaining amount with credit instruments. Currently, the Company has pledged the value of its Lima office complex for the 50% of the guarantee and with a stand-by letter of credit for the other 50% as security for this obligation. Through January 2021, the Company provided total guarantees of $56.5 million. ​ The closure cost recognized for this liability includes the cost, as outlined in its closure plans, of dismantling the Toquepala and Cuajone concentrators, the Ilo smelter and refinery, and the shops and auxiliary facilities at the three units. In March 2016, MINEM approved the Mining Closure Plan for the Toquepala expansion project and the revised closure plans for the Cuajone mine and the Ilo facilities were approved in January and October 2019, respectively. As result of these new estimates, the Company increased the asset retirement obligation by $28.1 million in 2019. The closure plan for the Tia Maria project was approved in February 2017. The Company, however, has not recorded a retirement obligation for the project because the work on the project is on hold. The Company believes that under these circumstances the recording of a retirement obligation is not appropriate. ​ Mexican operations: ​ The Company has recognized an estimated asset retirement obligation for its mining properties in Mexico as part of its environmental commitment. Even though there is currently no enacted law, statute, ordinance, written or oral contract requiring the Company to carry out mine closure and environmental remediation activities, the Company believes that an obligation presently exists based on historical government requirements for the closure of any facility. The overall cost recognized for mining closure in Mexico includes the estimated costs of dismantling concentrators, smelter and refinery plants, shops and other facilities. ​ During 2020, the Company made a change in the estimate for the asset retirement obligation for its Mexican operations, mainly due to a detailed review of the closing activities required for each facility. The effect of this change was an increase in the asset retirement obligation of $269.3 million, which was recorded in December 2020. ​ The following table summarizes the asset retirement obligation activity for the years ended December 31, 2020 and 2019 (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019
Balance as of January 1 | ​ | $ | 262.3 | ​ | $ | 217.7
Changes in estimates | ​ |  | 269.3 | ​ |  | 36.4
Closure payments | ​ |  | (1.2) | ​ |  | (5.3)
Accretion expense | ​ |  | 14.6 | ​ |  | 13.5
Balance as of December 31, | ​ | $ | 545.0 | ​ | $ | 262.3
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- Definition The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 410 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2175671 + Details
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