NOTE 4 MINERAL PROPERTY INTERESTS AND ASSET RETIREMENT OBLIGATIONS

Mineral Property Interests

The Company conducts a review of potential triggering events for all its mineral projects on a quarterly basis. When events or changes in circumstances indicate that the related carrying amounts may not be recoverable, the Company carries out a review and evaluation of its long-lived assets for impairment, in accordance with its accounting policy. During the quarter ended June 30, 2015, the Company performed a strategic review of its mineral property interests in Nevada. A decision was made to allow certain non-essential claims and portions of claims, included within the Gold Bar Complex and Tonkin Complex, to lapse on the September 1, 2015 renewal date and therefore reduce property holding costs that otherwise would have been incurred in the third quarter of 2015. This resulted in a pre-tax impairment charge of $19.7 million for the Gold Bar project and $8.9 million for the Tonkin Project, and an income tax recovery of $10.0 million recognized in the Statement of Operations and Comprehensive Loss for the three and six months ended June 30, 2015.

During the second quarter of 2014, the Company recorded an impairment charge of $120.4 million relating to its Los Azules copper exploration project (“Los Azules Project”). The triggering event identified was a recently announced acquisition of a copper project located in Argentina, which shared similarities with the Los Azules Project due to its scale, location, and stage of development. Based on the announcement day value of the similar project, the estimated market value per pound of copper equivalent mineralized material from this transaction was below the carrying value per pound of copper equivalent mineralized material of the Los Azules Project, indicating a potential significant decrease in the market price of the Company’s Los Azules Project, and therefore a requirement to test the Los Azules Project for recoverability. To assist in performing a recoverability test, the Company engaged a third-party valuation firm which determined that the carrying value of the property exceeded its estimated fair value, resulting in an impairment charge of $120.4 million, along with a resulting deferred income tax recovery of $22.5 million, being recorded in the Statement of Operations and Comprehensive Loss for the three and six months ended June 30, 2014.

Based on the above, impairment changes were recorded on the following mineral property interests for the three and six months ended June 30, 2015 and 2014:

		Three months ended June 30,				Six months ended June 30,
Name of Property/Complex	Segment	2015		2014		2015		2014
		(in thousands)
Gold Bar Project	Nevada	$	19,686	$	—	$	19,686	$	—
Tonkin Project	Nevada	8,856		—		8,856		—
Los Azules Copper Project	Argentina	—		120,398		—		120,398

Total impairments		$	28,542	$	120,398	$	28,542	$	120,398

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 six months ended June 30, 2015 and for the year ended December 31, 2014 are as follows:

	Six months ended		Year ended
	June 30, 2015		December 31, 2014
	(in thousands)
Asset retirement obligation liability, beginning balance	$	7,471	$	7,247
Settlements	—		(52		)
Accretion of liability	232		407
Adjustment reflecting updated estimates	354		(131		)

Asset retirement obligation liability, ending balance	$	8,057	$	7,471

As at June 30, 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 the 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 and 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, 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 and six months ended June 30, 2015, the Company recorded $0.3 million and $0.6 million, respectively (June 30, 2014 $0.3 million and $0.6 million respectively), of amortization expense related to El Gallo 1, which is included in Production Costs Applicable to Sales in the Statement of Operations and Comprehensive Loss for the three and six months ended June 30, 2015, of which $0.1 million and $0.1 million, respectively, related to the amortization of capitalized asset retirement costs (June 30, 2014 $0.1 and $0.1 respectively).