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14. Forward Gold Contracts

12 Months Ended

Dec. 31, 2017

Notes

14. Forward Gold Contracts

14. Forward Gold Contracts

On July 13, 2016, the Company entered into a forward gold contract with Ophir Holdings LLC, a company owned by three of the Company’s officers, for net proceeds of $467,500 to fund startup costs at the Golden Chest. The agreement calls for the Company to deliver a total of 500 ounces of gold to the purchasers in quarterly payments starting December 1, 2016 for a period of two years as gold is produced from the Golden Chest Mine and New Jersey Mill. Ophir Holdings agreed to delay receipt of its December 1, 2016 payment until 2017. The equivalent of 80.5 ounces were delivered to Ophir Holdings in 2017. At December 31, 2017, future gold deliveries are 113 ounces in 2018, 222 ounces in 2019, and 84.5 ounces in 2020.

On July 29, 2016, the Company entered into a forward gold contract through GVC Capital LLC for net proceeds of $772,806 to fund startup costs at the Golden Chest. The agreement calls for the Company to deliver a total of 904 ounces of gold to the purchasers in quarterly payments starting December 1, 2016 for a period of two years as gold is produced from the Golden Chest Mine and New Jersey Mill. The December 1, 2016 payment and 4 payments in 2017 were paid with an ounce equivalent of 565 ounces. At December 31, 2017, future gold deliveries are 339 ounces in 2018.

The gold to be delivered does not need to be produced from the Golden Chest property. In addition, the counterparties can request cash payment instead of gold ounces for each quarterly payment. The cash payments are based on average gold prices for the applicable quarter. The contracts are accounted for as derivatives requiring their value to be adjusted to fair value each period end. The change in balance for the forward gold contracts for the year ended December 31, 2017 and 2016 is as follows:

		2017		2016
Beginning balance	$	1,386,228
Proceeds from contracts			$	1,240,306
Payments:
In cash		(357,766)		(60,626)
In gold purchased by the Company		(319,344)		(89,550)
Change in fair value		211,461		296,098
Ending balance		920,579		1,386,228
Current		568,609		845,198
Long term	$	351,970	$	541,030

The fair value was calculated using the market approach with Level 2 inputs for forward gold contract rates and a discount rate of 10%.

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- Definition

The entire disclosure for freestanding option contracts issued by an entity that are indexed to, and potentially settled in, an entity's own stock. Includes disclosure on the strike price and the number of shares to which the contract is indexed, the settlement date or dates of the contract, and the issuer's accounting for the contract. If the terms of the contract provide settlement alternatives, those settlement alternatives are disclosed, including who controls the settlement alternatives, and the maximum number of shares that could be required to be issued, to net share settle the contract, if applicable. If a contract does not have a fixed or determinable maximum number of shares that could be required to be issued, the fact that a potentially infinite number of shares that may be required to be issued to settle the contract is disclosed. Disclosure also includes the contract's current fair value for each settlement alternative and how changes in the price of the issuer's equity instruments affect those settlement amounts.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-URI http://asc.fasb.org/subtopic&trid=2229355

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