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INCOME TAXES
 12 Months Ended
Dec. 31, 2011
INCOME TAXES  
INCOME TAXES

 

NOTE 7 INCOME TAXES

        In various transactions entered into on February 21, 1992, as well as transactions during 2005, the Company had ownership changes, as that term is defined under the Internal Revenue Code ("IRC") Section 382 (g). As a result, the tax net operating loss carryforwards and the investment tax credit carryforwards are subject to annual limitations under IRC Section 382, following the date of such ownership change. Except as noted below, the Company may receive delayed future benefits from net operating loss carryforwards or investment tax credit carryforwards existing as of the dates of the ownership change. At December 31, 2011 and 2010, the Company estimates those tax loss carry forwards to be $140.5 million and $125.7 million, respectively expiring starting in 2012 and going through 2031.

        The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010 respectively, are presented below:

 
   2011   2010  
 
   (in thousands)
  

Deferred tax assets:

              

Alternative minimum tax (AMT) credit carryforward

   $ 41   $ 41  

Net operating loss carryforward

     46,211     40,396  

Mineral Property

     2,528     2,468  

Other temporary differences

     5,330     2,468  

Capital loss carryforward

     241     242  
           

Total gross deferred tax assets

     54,351     45,615  

Less: valuation allowance

     (53,578 )   (37,543 )
           

Net deferred tax assets

   $ 773   $ 8,072  
           

Deferred tax liabilities:

              

Reclamation obligation

     282     189  

Mineral Property

     (41 )   (7,246 )

Basis in TSVLP

     (1,014 )   (1,015 )

Acquisition related deferred tax liability

     (78,786 )   (78,966 )
           

Total Deferred tax liabilities

   $ (79,559 ) $ (87,038 )
           

Total net deferred tax liability

   $ (78,786 ) $ (78,966 )
           

Breakdown between current and non-current:

              

Current deferred tax liability

     —     (393 )

Non-current deferred tax liability

     (78,786 )   (78,573 )
           

Total net deferred tax liability

   $ (78,786 ) $ (78,966 )
           

        The Company believes that it is unlikely that the gross deferred tax asset will be realized. Therefore, a valuation allowance has been provided for most of the gross deferred tax assets. The change in valuation allowance of approximately $16.0 million primarily reflects an increase of net operating loss carryforwards. The acquisition related deferred tax liability for 2011 consists of $78.4 million and $0.4 million for mineral properties and fixed assets, respectively.

        A reconciliation of the tax provision for 2011, 2010 and 2009 at statutory US Federal and State income tax rates to the actual tax provision recorded in the financial statement is comprised of the following components:

 
   2011   2010   2009  
 
   (in thousands)
  

US Federal and State tax recovery at statutory rate

   $ (21,098 ) $ (11,895 ) $ (12,047 )

Reconciling items:

                    

FIN 48 adjustment due to tax years becoming statute barred

     (180 )   —     (784 )

Prior year true ups/acquisitions

     (8,074 )   56     103  

Adjustment for foreign tax rate

     1,342     853     1,041  

Tax rate changes

     (24 )   2     (44 )

Imputed interest

     119     104     99  

Other permanent differences

     8,838     1,760     220  

NOL expired

     2,862     746     571  

Valuation allowance

     16,035     6,376     4,465  
               

Tax Recovery

   $ (180 ) $ (1,998 ) $ (6,376 )
               

        As at January 1, 2007, the Company did not have any unrecognized tax benefits. As a result of the 2007 acquisitions, the Company recognized a $0.6 million liability plus $0.7 million of accrued interest and penalties which relate to the Mexican properties and was accounted for as a part of the purchase price allocation. During 2009, $0.4 million of the liability and $0.4 million of the accrued interest and penalties were reversed due to a lapse of the statute of limitations for those tax years. During 2011, the remainder of the liability and accrued interest and penalties were reversed due to a lapse of the statute of limitations for the remaining outstanding tax year. As a result, the balance for the liability and accrued interest and penalties were nil as at December 31, 2011.

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 
   Liability For Unrecognized
Tax Benefits 		 
 
   (in thousands)
  

Balance at January 1, 2011

   $ 501  

Additions for Tax Positions of Current Period

     —  

Reductions for Tax Positions of Current Period

     —  

Additions for Tax Positions of Prior Years

     —  

Reductions for Tax Positions of Prior Years

     —  

Reduction for Lapse of Statute of Limitations

     (501 )

Other

     —  
       

Balance at December 31, 2011

   $ —  
       

        The Company or its subsidiaries file income tax returns in Canada, the United States, and Mexico. These tax returns are subject to examination by local taxation authorities provided the tax years remain open to audit under the relevant statute of limitations. The following summarizes the open tax years by major jurisdiction:

  • United States:    2007 to 2011
    Canada:    2004 to 2011
    Mexico:    2005 to 2011