Derivative Financial Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Derivative financial instruments consisted of the following:

	September 30,		December 31,
Derivative Type	2014		2013
Derivative liabilities
Contingent debt obligation payment	$	832,845	$	250,000
Gold call options and forwards	52,510		—
Total derivative liabilities	$	885,355	$	250,000

Contingent Debt Obligation Payment Derivative - On February 11, 2014, theCompany agreed to pay certain debt issuance costs in connection with the Revolving Credit Facility transaction (see footnote 6) via the issuance of 137,105 shares of common stock with an estimated grant date fair value of $274,210. With respect to 63,505 of such shares issued to Auramet, the Company agreed to make an additional payment to Auramet equal to the difference between $123,835 and sales proceeds received from the sale of such shares of common stock. As of September 30, 2014, the liability associated with the terms of this agreement was $46,994 and is expected to be settled before the end of the current year. During the three and nine month periods ended September 30, 2014, the Company recognized a loss of $25,612 and $46,994, respectively, on the change in the fair value of this obligation included as a component of change in fair value of derivatives in the condensed consolidated statement of operations.

During the year ended December 31, 2013, the Company entered into an agreement to issue 1,000,000 shares of common stock for a $2,000,000 principal payment on its Golden Goose debt obligation. As part of the agreement, the Company agreed to make an additional payment to the noteholder on December 31, 2014 equal to $2,000,000 less the cash proceeds received from the noteholder’s subsequent sale of the common stock shares issued less the value of any remaining unsold shares held by the noteholder on December 15, 2014. The value of the remaining unsold shares held by the noteholder will be determined based on the closing price of the Company’s common stock on December 15, 2014 multiplied by the number of remaining unsold shares as of December 15, 2014. We determined the contingent obligation to make an additional payment to ultimately satisfy the debt obligation was a derivative liability. The derivative's fair value was $789,276 at September 30, 2014, and $250,000 at December 31, 2013. The recognized loss on the change in fair value of the derivative liability for the three and nine month periods ended September 30, 2014 was $372,804 and $535,851, respectively, and was included as a component of change in fair value of derivatives in the condensed consolidated statements of operations.

Gold Call Option and Forward Derivatives - During the nine months ended September 30, 2014, the Company entered into separate gold forward and call option derivative contracts related to future gold sales with its primary customer. Premiums received at the inception of written gold call options are recorded as a liability and totaled $52,510 at September 30, 2014. During the three and nine month periods ended September 30, 2014, the Company recognized a loss of $11,139 and $11,227, respectively, on the change in fair value of the gold forward derivatives. During the three and nine month periods ended September 30, 2014, the Company recognized a gain of $20,965 and a loss of $41,283 on the change in fair value of the call option derivatives. The recognized gains and losses were included as a component of mining revenues as the contracts relate to gold sales. The gold forward and call option derivative contracts outstanding at September 30, 2014 covered a total of 1,838 and 4,200 gold ounces with an average price of $1,210 and $1,295 per ounce, respectively, and are expected to settle or expire within five months.