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MINERAL PROPERTY INTERESTS AND ASSET RETIREMENT OBLIGATIONS | 12 Months Ended
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Dec. 31, 2011
MINERAL PROPERTY INTERESTS AND ASSET RETIREMENT OBLIGATIONS |
MINERAL PROPERTY INTERESTS AND ASSET RETIREMENT OBLIGATIONS |
NOTE 4 MINERAL PROPERTY INTERESTS AND ASSET RETIREMENT OBLIGATIONS At December 31, 2011, the Company holds mineral interests in Nevada, and mineral concessions in west central Mexico, including the Magistral Mine, a former producing mine. The Magistral Mine was held on a care and maintenance basis with active exploration in the area of the mine and surrounding areas. In August 2011, the Company announced the decision to put the Magistral Mine back into production as part of Phase 1 production of the El Gallo Complex, with mining expected to commence during the second quarter of 2012. The Company anticipates spending approximately $15 million to expand and upgrade the current infrastructure. During the fourth quarter of 2011, the Company performed its annual impairment test of its mineral property interests. The Company used the market approach to estimate the fair value of the properties by using the observed market value per square mile in the region. Based on this approach, it was determined that the carrying values of these mineral property interests did not exceed their fair value and as a result there was no impairment recorded. In July 2011, the Company completed the purchase of the Tonkin North claims at its Tonkin property in Nevada for an aggregate of CDN$8.4 million ($8.7 million) and a 2% net smelter return royalty interest on any gold produced from the claims in excess of 682,000 ounces of gold. During 2011, the Company increased its mineral property interests by $10.6 million, of which $1.9 million was in Mexico and $8.7 million was in Nevada as noted above. During 2011, 2010 and 2009, the Company has incurred expenses of $43.0 million, $19.2 million and $8.2 million, respectively, in total exploration and related expenditure costs. The Company is responsible for reclamation of certain past and future disturbances at its properties. The two most significant properties subject to these obligations are the historic Tonkin property and the Magistral Mine. The current undiscounted estimate of the reclamation costs for existing disturbances on the Tonkin property to the degree required by the U.S. Bureau of Land Management ("BLM") and the Nevada Department of Environmental Protection ("NDEP") is $3.8 million. The costs of undiscounted projected reclamation of the Magistral Mine are currently estimated at $4.6 million. Under Mexican regulations, surety bonding of projected reclamation costs is not required. For mineral properties in the United States, the Company maintains required reclamation bonding with various governmental agencies, and at December 31, 2011 and 2010, had cash bonding in place of $5.2 million and $4.8 million, respectively. The Company submitted a mine closure plan to the BLM for the Tonkin property during the fourth quarter of 2010. Based on the Company's estimate, the change in its bonding requirements was insignificant. The closure plan is currently under review by the BLM and NDEP. It is possible that this reclamation plan cost estimate and bonding requirement may increase as a result of the BLM's review. The Company, however, is unable to estimate possible increases at this time. Under the 2007 update, property-wide reclamation activities at the historic Tonkin Property are currently projected to be incurred primarily through 2015 with water management into 2040. Reclamation expenditures covering all United States properties during 2011 and 2010 remained consistent at $0.1 million. The Company's asset retirement obligations for years ended December 31, 2011 and 2010 are as follows (in thousands):
|  | 2011 |  | 2010 |
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Asset retirement obligation liability—opening balance |  | $ | 6,153 |  | $ | 6,063 |
Settlements |  |  | (82 | ) |  | (98 | )
Accretion of liability |  |  | 524 |  |  | 515 |
Adjustment reflecting updated estimates |  |  | (342 | ) |  | (327 | )
Asset retirement obligation liability—ending balance |  | $ | 6,253 |  | $ | 6,153 |
Assumptions used to compute the asset retirement obligations for the year ended December 31, 2011 for the Tonkin property included a credit adjusted risk free rate and inflation rate of 8.7% (2010, 2009—8.7%) and 3.0% (2010—2.0%, 2009—4.0%) respectively. Assumptions used to compute the asset retirement obligations for the year ended December 31, 2011 for the Magistral Mine included a credit adjusted risk free rate and inflation rate of 6.4% (2010, 2009—8.7%) and 3.8% (2010, 2009—3.3%) respectively. It is anticipated that the capitalized asset retirement costs will be charged to expense based on the units of production method commencing with gold and silver production at the Company's properties, if any. There was no amortization recorded during 2011, 2010 or 2009 related to the capitalized asset retirement cost since the properties were not in operation. Reclamation expenditures are expected to be incurred between 2012 and 2040. As at December 31, 2011, the current portion of the asset retirement obligation was $0.5 million (December 31, 2010—$0.5 million).

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- Definition Description of the mineral property interests and the asset retirement obligations associated with long-lived assets. Mineral property interests are carried at acquisition cost, net of write-offs and impairments. 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. This element may be used for all the disclosures related to asset retirement obligations. + References No definition available. + Details
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