Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents our liabilities at December 31, 2013, which are measured at fair value on a recurring basis:



			Fair Value Measurements at December 31, 2013
	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Contingent debt obligation payment	$	250,000	$	—	$	250,000	$	—
Total Liabilities	$	250,000	$	—	$	250,000	$	—

The following table presents our liabilities at December 31, 2012, which are measured at fair value on a recurring basis:



			Fair Value Measurements at December 31, 2012
	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Gold call option derivative	$	16,330	$	—	$	16,330	$	—
Gold forward derivative	297,451		$	—	297,451		$	—
Contingent dividend payment	230,900		—		—		230,900
Total Liabilities	$	544,681	$	—	$	313,781	$	230,900

During the years ended December 31, 2013 and 2012, there were no transfers of assets and liabilities between Level 1, Level 2, or Level 3.

Following is a description of the valuation methodologies used for the Company’s financial instruments measured at fair value on a recurring basis as well as the general classification of such instruments pursuant to the valuation hierarchy.

Contingent dividend payment derivative - The Company’s contingent dividend payment derivative liability was valued using a Monte-Carlo model with various observable and unobservable market inputs and classified as Level 3 in the valuation hierarchy. These market inputs include volatility, stock price, maturity date, and discount rate. The contingent dividend derivative liability expired during 2013.

Contingent debt obligation payment derivative - The Company’s contingent debt obligation payment derivative is valued based on a Black-Scholes model with various observable inputs. These inputs include contractual terms, stock price, volatility, dividend yield, and risk free interest rates. This derivative is classified within Level 2 of the valuation hierarchy.

Gold call option, forward, and put derivatives - The Company’s gold forward, call options, and put derivatives are valued based on a Black-Scholes model with various observable inputs. These inputs include contractual terms, gold market prices, volatility of gold prices, and risk free interest rates. These derivatives are classified within Level 2 of the valuation hierarchy.

The following table indicates the changes in the Level 3 financial instruments for the years ended December 31, 2013 and 2012.



	Contingent Dividend Payment Derivative Liability

Balance at January 1, 2011	$	1,025,000
Issuance of convertible preferred stock	6,009
Change in fair value	(800,109		)
Balance at December 31, 2012	230,900
Change in fair value	(230,900		)
Balance at December 31, 2013	$	—

The following table sets forth a summary of the quantitative and qualitative information related to the unobservable inputs used in the valuation of the Company’s Level 3 financial instruments during the year December 31, 2013.



Description	Value at December 31, 2013		Valuation Techniques	Unobservable Input	Quantitave Inputs Used
Contingent dividend payment derivative liability	$	—	Monte-Carlo Simulation	Discount Rate	12	%

Significant changes to the unobservable inputs would result in a significantly different fair value measurement of the contingent dividend derivative liability.

The carrying amount of cash and cash equivalents and trade payables approximates fair value because of the short-term maturity of these financial instruments. At December 31, 2013, the fair value of long-term debt and capital lease obligations approximated $7,400,000, as determined by borrowing rates estimated to be available to us for debt with similar terms and conditions. At December 31, 2012 the fair value of long-term debt obligations was $14,045,000. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents (Level 1).

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details