Asset Retirement Obligation

12 Months Ended

Dec. 31, 2012

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligation

Asset Retirement Obligation

The following table presents the activity in the Company’s asset retirement obligation for the years ended December 31, 2012 and 2011 (in thousands):

	December 31,
	2012			2011
Balance at beginning of period	$	15,541		$	12,471
Obligations settled	(2,954		)	(1,030		)
Accretion expense	1,299			955
Revisions in estimated cash flows	7,872			2,508
Loss on settlement	367			637
Balance at end of period	$	22,125		$	15,541

The balances above for the years ended December 31, 2012 and 2011 include a short-term portion of $3.5 million and $0.4 million, respectively, which were recorded under other current liabilities. Depreciation expense associated with the asset retirement cost was $2.0 million, $1.0 million and $1.1 million for the years ended December 31, 2012, 2011 and 2010, respectively.

During 2012, the Company increased its projected asset retirement obligation cash flows by approximately $7.9 million, of which $3.8 million related to the addition of new processing facilities at its Molycorp Mountain Pass facility and $4.1 million related to revised estimates for the demolition and reclamation of the old mill and mineral recovery areas at the same facility. In connection with new land disturbance and the construction of new infrastructures at its Molycorp Mountain Pass facility in 2011, the Company increased its projected asset retirement obligation cash flows by approximately $2.5 million.

The Company is required to provide the applicable governmental agencies with financial assurances relating to its closure and reclamation obligations. At December 31, 2012, the Company had financial assurance requirements of $28.7 million, which were satisfied with surety bonds placed with California state and regional agencies.