NOTE 9 INCOME TAXES

In various transactions entered into on February 21, 1992, as well as transactions during 2005, the Company had ownership changes, as is defined under the Internal Revenue Code ("IRC") Section 382 (g). Following the date of such ownership change, the tax net operating loss carryforwards and the investment tax credit carryforwards are subject to annual limitations under IRC Section 382. 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, 2013 and 2012, the Company estimates tax loss carry forwards to be $303.3 million and $252.9 million, respectively expiring starting in 2014 and going through 2033.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2013 and 2012 respectively are presented below:

	2013			2012

	(in thousands)
Deferred tax assets:
Alternative minimum tax (AMT) credit carryforward	$	41		$	41
Net operating loss carryforward		98,734			80,975
Mineral Properties		19,884			297
Other temporary differences		6,927			9,521
Capital loss carryforward		241			241


Total gross deferred tax assets		125,827			91,075
Less: valuation allowance		(125,202	)		(90,477	)


Net deferred tax assets	$	625		$	598


Deferred tax liabilities:
Reclamation obligation		389			416
Mineral Properties		—			—
Basis in Tonkin Springs Venture LP		(1,014	)		(1,014	)
Acquisition related deferred tax liability		(158,855	)		(229,522	)


Total deferred tax liabilities	$	(159,480	)	$	(230,120	)


Total net deferred tax liability	$	(158,855	)	$	(229,522	)

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 $34.7 million primarily reflects an increase of net operating loss carryforwards. The deferred tax liability related to the Minera Andes acquisition was $101.5 million as at December 31, 2013 (2012—$156.8 million).

On December 11, 2013, the Mexican government enacted a tax reform that increased the effective tax rate applicable to the Company's Mexican operations. The law, effective January 1, 2014, increased the future corporate income tax rate to 30%, created a 10% withholding tax on dividends paid to non-resident shareholders and created a new Extraordinary Mining duty which is equal to 0.5% of gross revenues from the sale of gold, silver and platinum. Furthermore, the reform introduced a Special Mining Duty of 7.5%. The Special Mining Duty is deductible for income tax purposes. The Special Mining Duty is generally applicable to earnings before income tax, depreciation, depletion, amortization and interest. There will be no deductions related to development type costs but exploration and prospecting costs are deductible when incurred. Certain undeducted exploration expenditures incurred prior to January 1, 2014 are also deductible in the calculation of the Special Mining Duty.

A reconciliation of the tax provision for 2013, 2012 and 2011 at statutory U.S. Federal and State income tax rates to the actual tax provision recorded in the financial statements is comprised of the following components:

	2013			2012			2011

	(in thousands)
US Federal and State tax recovery at statutory rate	$	(68,377	)	$	(31,925	)	$	(21,098	)
Reconciling items:
Equity pickup in MSC		(2,924	)		(7,292	)		—
Impact of Mexican tax reform		(1,921	)		—			—
FIN 48 adjustment due to tax years becoming statute barred		—			—			(180	)
Prior year true ups/acquisitions		(19,016	)		781			(8,074	)
Adjustment for foreign tax rates		8,680			3,245			1,342
Tax rate changes		(187	)		(1,869	)		(24	)
Imputed interest		171			135			119
Other permanent differences		22,090			(3,259	)		8,869
Unrealized foreign exchange rate (loss)/gain		(28,317	)		(21,263	)		(31	)
NOL expired		1,711			(2,696	)		2,862
Valuation allowance		34,725			36,899			16,035


Tax Recovery	$	(53,365	)	$	(27,244	)	$	(180	)

As at December 31, 2013, there are no unrecognized tax benefits.

The Company or its subsidiaries file income tax returns in Canada, the United States, Mexico, and Argentina. 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: 2010 to 2013
Canada: 2006 to 2013
Mexico: 2009 to 2013
Argentina: 2009 to 2013