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Commitments and Contingencies
 3 Months Ended
Mar. 31, 2013
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

10. Commitments and Contingencies

 

The Company has third party minimum lease obligations with certain of its mineral properties and related party leases. Minimum annual third party lease payments payable are $57,600 and related party lease payments payable are $880,500. For most of the mineral properties and leases, the Company is subject to a range of royalty obligations from 0.5% to 6% of net smelter revenues from minerals produced on the properties. Certain factors that will influence the amount of the royalties include ounces extracted and prices of gold.

 

Included in the related party leases is an operating agreement with Northern Comstock Mining, LLC; a related party and an entity controlled by a member of the Board of Directors. The terms of this agreement provide that the Company will make a total of $34.5 million in annual payments of $862,500, in the form of either cash or Series A-1 preferred stock. The operating agreement requires these payments, at least annually, through October, 2049. At March 31, 2013, $30.7 million remained due and may be prepaid without penalty.

 

In January 2013, the Company determined that an accelerated payment may be required pursuant to the operating agreement of Northern Comstock Mining, LLC. Pursuant to the operating agreement, $5,000,000 in accelerated payments are triggered when an additional 200,000 gold equivalent ounces are estimated by the Company and validated by a third party technical report accepted by the Board. The payments are expected to be made in the form of Series A-1 convertible preferred stock. The Company expects to approve and issue the stock during the second quarter of 2013.

 

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.

 

On April 24, 2013, the Company received notice from the Court that CRA's complaint and motion for injunction was denied in conjunction with the summary judgment issued in favor of the Company and the County.

 

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.

 

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.