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MINERAL PROPERTY INTERESTS AND PLANT AND EQUIPMENT

12 Months Ended

Dec. 31, 2020

MINERAL PROPERTY INTERESTS AND PLANT AND EQUIPMENT

MINERAL PROPERTY INTERESTS AND PLANT AND EQUIPMENT

NOTE 9 MINERAL PROPERTY INTERESTS AND PLANT AND EQUIPMENT

The cost and carrying value of mineral property interests and plant and equipment at December 31, 2020 and 2019 are as follows:


	December 31, 2020		December 31, 2019
Mineral property interests, cost	$	314,719	$	339,374
Less: accumulated depletion		(34,601)		(28,154)
Mineral property interests, carrying value	$	280,118	$	311,220

Plant and equipment, cost
Land	$	8,804	$	8,746
Construction in progress		2,945		2,961
Plant and equipment		72,188		133,014
Subtotal	$	83,937	$	144,721
Less: accumulated depreciation		(34,943)		(37,150)
Plant and equipment, carrying value	$	48,994	$	107,571

Mineral property interests and plant and equipment, carrying value	$	329,112	$	418,791

Additions to plant and equipment as of December 31, 2020 include $nil of capitalized interest related to the Gold Bar mine (December 31, 2019 – $1.4 million). On February 16, 2019, first production occurred at the Gold Bar mine and related construction-in-progress costs were transferred into the appropriate category of plant and equipment and amortized.

Mineral property interest carrying value at December 31, 2020 and 2019 includes the following:


Name of Property/Complex	State/Province	Country	2020		2019
Fox Complex	Ontario	Canada	$	17,580	$	14,627
Lexam	Ontario	Canada		41,595		41,595
Los Azules Copper Project	San Juan	Argentina		191,490		191,490
Tonkin Properties	Nevada	United States		4,833		4,833
Gold Bar Project	Nevada	United States		14,675		48,492
Battle Mountain Complex	Nevada	United States		785		785
El Gallo Project	Sinaloa	Mexico		3,353		3,591
Fenix Project Properties	Sinaloa	Mexico		5,807		5,807
Total mineral property interests			$	280,118	$	311,220

Black Fox and Gold Bar mineral property interest are depleted based on the units of production method from production commencement date over the estimated proven and probable reserves.

The El Gallo Project is depleted and depreciated using the straight line or units-of-production method over the stated mine life, as the project does not have proven and probable reserves compliant with Guide 7.

The definition of proven and probable reserves is set forth in the Guide 7. If proven and probable reserves exist at the Company’s properties, the relevant capitalized mineral property interests and asset retirement costs are charged to expense based on the units of production method upon commencement of production. The Company’s Gold Bar, Black Fox and San José properties have proven and probable reserves estimated in accordance with SEC Industry Guide 7.

The Company conducts a review of potential triggering events for impairment for all its mineral projects on a quarterly basis or when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

As part of the analysis conducted in Q1 2020, the Company determined that indicators of impairment existed for the long-lived assets at the Gold Bar mine and that the long-lived assets at the Gold Bar mine were likely not recoverable on an undiscounted basis. The fair value of the Gold Bar mine was estimated using the discounted cash flow method, coupled with an in-situ resource multiple for mineralized material not included in the life of mine plan. Future cash flows were estimated based on estimated quantities of recoverable mineralized material, expected gold prices, estimated production levels, operating costs, capital requirements and reclamation costs, all based on the life-of-mine plan using the preliminary estimated resources. The in-situ resource multiple applied to the mineralized material not included in the life-of-mine plan was estimated by evaluating observable market transactions. The Company concluded that the carrying value of the long-lived assets at the Gold Bar mine was impaired and recorded a non-cash impairment charge reducing plant and equipment and mineral property interests by the amount of $83.8 million.

As of December 31, 2020 no further indicators of impairment have been noted for Gold Bar.

The following table sets forth a summary of the quantitative and qualitative information related to the unobservable inputs used in the calculation of the Company’s non-recurring Level 3 fair value measurement of the Gold Bar mine:



	Date of Fair Value Measurement	Valuation Technique	Unobservable Input	Range/ Weighted Average

Gold Bar Mine	March 31, 2020	Discounted Cash Flow	Discount Rate	9%
			Long Term Gold Price	$1,430/oz
			United States Inflation Index	2%

The estimated future cash flows are based on numerous assumptions and uncertainties. It is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold prices, production levels and costs of capital are each subject to significant risks and uncertainties.