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Commitments and Contingencies
 12 Months Ended
Dec. 31, 2012
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

23. Commitments and Contingencies

 

The Company leases certain properties under operating leases expiring at various dates through 2049. Future minimum annual lease payments under these existing lease agreements are as follows as of December 31, 2012:

 

    Third Party     Related Party        
Year Ended December 31,   Leases     Leases     Total  
2013   $ 57,600     $ 880,500     $ 938,100  
2014     52,400       880,500       932,900  
2015     57,400       880,500       937,900  
2016     60,000       880,500       940,500  
2017     65,000       880,500       945,500  
Thereafter     495,000       27,660,000       28,155,000  
    $ 787,400     $ 32,062,500     $ 32,849,900  

 

Included in the related party leases above is an operating agreement with a related party and member of the Board of Directors. The terms of this agreement provide that the Company will make contributions in the amount of $862,500, in the form of Series A-1 convertible preferred stock or cash. The above disclosure assumes cash payments are made, although the actual fair value of the payment amount may differ if preferred stock is issued in lieu of cash.

 

Expense under operating leases for the years ended December 31, 2012, 2011 and 2010 was $2,010,547, $2,155,950 and $472,654, respectively.

 

The Company has minimum royalty obligations with certain of its mineral properties and leases. Minimum royalty payments payable are $64,000 per year in 2012, increasing by approximately $5,000 per year through 2017. For most of the mineral properties and leases, the Company is subject to a wide range of royalty obligations once production commences. These royalties range from 0.5% to 6% of net smelter revenues (NSR) from minerals produced on the properties. Some of the factors that will influence the amount of the royalties include ounces extracted and prices of gold. Royalties expense, including both NSR and minimum royalty obligations, was $177,379, $58,100, and $42,600 for the years ended 2012, 2011, and 2010, respectively.

 

The Company's mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.

 

On September 4, 2012, the Comstock Residents Association (the "CRA") filed a complaint in the First Judicial District Court of the State of Nevada against Storey County (the "County") in a matter involving the Company. In 2004, the County amended a Special Use Permit ("SUP") to allow substantial expansion of mining activities on certain property along Highway 342 by the Company. The CRA complaint alleges, among other things, that the failure of the County to enforce the condition was a derogation of its duties. The Court granted the CRA leave to amend in January of 2013 and the CRA filed its amended complaint shortly thereafter along with a motion for summary judgment. In February, the Company filed its opposition to the motion for summary judgment as well as its own motion for summary judgment, to which the County filed a joinder. The Company believes the complaint is without merit. In addition, the Company was notified by the BLM in February 2013 that the Company could again utilize the haul road for its mining operations. As a result, the Company began using the haul road in late February 2013 and ceased its use of Highway 342. Therefore, the conditions for the CRA lawsuit are no longer present.

 

In May 2012, the Company received a Notice of Trespass (the "Notice") from the Carson City District Field Office of the Bureau of Land Management ("BLM"). After taking corrective action, including a new right of way grant which provides an alternative route for the transportation of materials from our mine to our processing facilities, the Company has been notified by the BLM that the matter has been officially resolved and that all conditions included in the Notice have been fully satisfied.

 

From time to time, we are involved in lawsuits, claims, investigations and proceedings that arise in the ordinary course of business. There are no matters pending that we expect to have a material adverse impact on our business, results of operations, financial condition or cash flows.