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4. Joint Ventures

9 Months Ended

Sep. 30, 2015

4. Joint Ventures

For joint ventures where the Company holds more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of non-controlling interest. For joint ventures in which the Company does not have joint control or significant influence, the cost method is used. For those joint ventures in which there is joint control between the parties, and the Company has significant influence, the equity method is utilized.

At September 30, 2015 and December 31, 2014, the Company’s percentage ownership and method of accounting for each joint venture is as follows:

	September 30, 2015			December 31, 2014
Joint Venture	% Ownership	Significant Influence?	Accounting Method	% Ownership	Significant Influence?	Accounting Method
New Jersey Mill Joint Venture(“NJMJV”)	67%	Yes	Consolidated	66%	Yes	Consolidated
Golden Chest LLC Joint Venture (“GC”)	48%	No	Cost	48%	No	Cost

New Jersey Mill Joint Venture Agreement

In June of 2012, Crescent Silver Corp. (“Crescent”) completed its buy-in for 35% of the New Jersey Mill Joint Venture (the “Mill JV” or “NJMJV”) with a cumulative $3.2 million contribution to bring the capacity of the mill to 15 tonnes/hr. As of September 30, 2015 and December 31, 2014, an account receivable existed with Crescent for $51,489 and $33,846, respectively, for monthly operating costs as defined in the JV agreement.

On March 19, 2015, Crescent Silver, LLC, an affiliate of Hale Capital Partners, LP and minority owner of the New Jersey Mill Joint Venture, filed an action against the Company as manager of the mill, seeking damages for, among other claims, alleged breach of the Joint Venture Agreement in connection with meetings, programs, budgets, and the milling of ore from the Company’s properties. The plaintiff seeks damages in excess of $75,000, as claimed in the complaint, which was filed in the Federal District Court of Idaho. While the outcome of any litigation is difficult to predict, the Company believes the claims are without merit and the Company is vigorously defending the lawsuit as manager of the New Jersey Mill Joint Venture.

Golden Chest LLC Joint Venture

As of September 30, 2015 the Golden Chest LLC Joint Venture (“GCJV”) was owned 52% by Marathon Gold Corporation and 48% by the Company. On September 3, 2013 GCJV signed a lease agreement with Juniper Resources, LLC (Juniper) of Boise, Idaho for a defined portion of the Golden Chest mine property known as the Skookum Shoot (a 400 meter strike length along the Idaho vein below the No. 3 Level). The lease with Juniper calls for an initial payment of $50,000 to GCJV, which was received in 2013, and a work requirement of 1,500 to 3,000 meters of core drilling which has also been completed. Juniper signed the lease and made a payment of $200,000 to GCJV at the end of November 2013. Juniper is required to make land payments of $125,000 per quarter on the promissory note on behalf of GCJV which it also has done. Additionally, Juniper will pay a 2% net smelter royalty to GCJV on all gold production from the leased area with the $250,000 initial payments treated as an advance on this royalty. The lease was subsequently assigned to Gold Hill Reclamation and Mining Inc., (“Gold Hill”) an affiliated company. The lease has a term of 39 months. Gold Hill began shipping ore in the 4^th quarter of 2014 and 40,843 tonnes have been processed at the New Jersey Mill through September 30, 2015. In September 2015 Juniper terminated the lease agreement and stopped supply ore under the agreement. The quarterly promissory note payments are now the responsibility of GCJV and a balance remains of $1,375,000.

During the nine months ended September 30, 2015, the mill processed 38,920 tonnes of ore from the Golden Chest Mine owned by GCJV which is being mined under an agreement with Gold Hill. To facilitate the startup costs for milling of the Golden Chest ore, Gold Hill advanced $200,000 interest-free to the Company on November 7, 2014, at the beginning of the ramp–up phase. Of these funds $75,000 was deducted from milling receipts in 2015 and the remaining $125,000 was forfeited by Juniper at the lease termination and accounted for as a gain on forfeiture of milling advance.