ASSET RETIREMENT OBLIGATIONS

3 Months Ended

Mar. 31, 2015

NOTE 4 ASSET RETIREMENT OBLIGATIONS

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 in Nevada and the El Gallo 1 mine in Mexico.

A reconciliation of the Company’s asset retirement obligations for the three months ended March 31, 2015 and for the year ended December 31, 2014 is as follows:

	Three Months Ended		Year Ended
	March 31, 2015		December 31, 2014
	(in thousands)
Asset retirement obligation liability, beginning balance	$	7,471	$	7,247
Settlements	—		(52		)
Accretion of liability	101		407
Adjustment reflecting updated estimates	—		(131		)
Asset retirement obligation liability, ending balance	$	7,572	$	7,471

As at March 31, 2015, the current portion of the asset retirement obligation was $2.5 million (December 31, 2014 - $2.4 million).

Amortization of Mineral Property Interests and Asset Retirement Costs

The definition of proven and probable reserves is set forth in SEC Industry Guide 7. If proven and probable reserves exist at the Company’s properties, the relevant capitalized mineral property interests and asset retirement costs are to be charged to expense based on the units of production method upon commencement of production. Since the Company has not completed feasibility or other studies sufficient to characterize the mineralized material at El Gallo 1 as proven or probable reserves under the SEC definition, the amortization of the capitalized mineral property interests and asset retirement costs are charged to expense based on the straight-line method over the estimated useful life of the mine. For the three months ended March 31, 2015, the Company recorded $0.3 million (March 31, 2014 — $0.3 million) of amortization expense related to El Gallo 1, which is included in Production Costs Applicable to Sales in the Statement of Operations and Comprehensive Income for the three months ended March 31, 2015, of which $0.1 million (2014 — $0.1 million) related to the amortization of capitalized asset retirement costs.