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ASSET RETIREMENT OBLIGATION: | 6 Months Ended
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Jun. 30, 2023
ASSET RETIREMENT OBLIGATION: |
ASSET RETIREMENT OBLIGATION: | ​ NOTE 8 — 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 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 a security for this obligation. Through January 2023, the Company has provided total guarantees of $77.1 million. ​ On July 20, 2021, the Peruvian Government published Law 31347, which requires companies in the production stage to set aside additional guarantees for progressive closure of its operations. The resources that back these guarantees will be returned to the Company when activities cease and the regulatory agency verifies that all closure measures have been satisfactorily completed. Under this Law, companies must include activities for environmental remediation within the closure schedule and assume costs associated with environmental impacts that are identified during audits. As of June 30, 2023, the regulation attached to this Law had yet to be published. The Company is currently evaluating the possible financial impact of the Law but cannot fully estimate the magnitude until the Law’s regulation is published. ​ 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 a 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. ​ In 2022, the Company made a change in the estimate for the asset retirement obligation for its Peruvian operations, mainly due to a detailed review of the closing activities required for each facility. The effect of this change was a decrease in the asset retirement liability by $59.5 million, which was recorded in December 2022, reducing the asset retirement asset by $43.3 million and the difference of $16.2 million was recorded as a reduction in cost of goods sold. ​ ​ 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 a constructive obligation presently exists based on the remediation requirements caused by 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. ​ In the first quarter of 2022, the Company adjusted its estimate for the asset retirement obligation for its Mexican operations following a detailed review of the closing activities required. The effect was an increase in the asset retirement obligation to the order of $43.3 million. ​ The following table summarizes the asset retirement obligation activity for the first six months of 2023 and 2022 (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2023 |  | 2022
Balance as of January 1 | ​ | $ | 585.3 | ​ | $ | 562.9
Changes in estimates | ​ |  | — | ​ |  | 43.3
Closure payments | ​ |  | (0.3) | ​ |  | (3.6)
Accretion expense | ​ |  | 12.9 | ​ |  | 13.0
Balance as of June 30, | ​ | $ | 597.9 | ​ | $ | 615.6
​

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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://www.xbrl.org/2003/role/disclosureRef -Topic 410 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481850/410-20-50-1 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 410 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//410-20/tableOfContent Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Section 50 -Paragraph 2 -SubTopic 20 -Topic 410 -Publisher FASB -URI https://asc.fasb.org//1943274/2147481850/410-20-50-2 + Details
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