Note 13. Interests in Resource Properties

The Group’s interests in resource properties as at December 31, 2019 and 2018 comprised the following:


	2019		2018
Interest in an iron ore mine	$	216,575	$	218,203
Hydrocarbon development and production assets		36,488		38,040
Exploration and evaluation assets – hydrocarbon probable reserves		12,367		12,367
Exploration and evaluation assets – hydrocarbon undeveloped lands		4,640		4,640
	$	270,070	$	273,250

The movements in the interest in an iron ore mine and hydrocarbon development and production assets included in non-current assets during the year ended December 31, 2019 were as follows:


	Opening		Decommissioning		Ending
Costs	balance		obligations		balance
Interest in an iron ore mine	$	218,203	$	—	$	218,203
Hydrocarbon development and production assets		45,533		1,167		46,700
	$	263,736	$	1,167	$	264,903


	Opening				Ending
Accumulated depreciation	balance		Additions		balance
Interest in an iron ore mine	$	—	$	1,628	$	1,628
Hydrocarbon development and production assets		7,493		2,719		10,212
		7,493	$	4,347		11,840
Net book value	$	256,243			$	253,063

The movements in the interest in an iron ore mine and hydrocarbon development and production assets included in non-current assets during the year ended December 31, 2018 were as follows:


					Reversal of
	Opening		Decommissioning		impairment		Ending
Costs	balance		obligations		losses		balance
Interest in an iron ore mine	$	30,000	$	—	$	188,203	$	218,203
Hydrocarbon development and production assets		45,871		(338)		—		45,533
	$	75,871	$	(338)	$	188,203	$	263,736


					Reversal of
	Opening				impairment		Ending
Accumulated depreciation	balance		Additions		losses		balance
Interest in an iron ore mine	$	—	$	—	$	—	$	—
Hydrocarbon development and production assets		5,022		2,471		—		7,493
		5,022	$	2,471	$	—		7,493
Net book value	$	70,849					$	256,243

The movements in exploration and evaluation assets presented as hydrocarbon probable reserves and undeveloped lands during the years ended December 31, 2019 and 2018 were as follows:


	2019				2018
	Probable		Undeveloped		Probable		Undeveloped
	reserves		lands		reserves		lands
Balance, beginning of year	$	12,367	$	4,640	$	12,367	$	9,335
Additions		—		—		—		—
Disposal		—		—		—		(4,695)
Balance, end of year	$	12,367	$	4,640	$	12,367	$	4,640

Interest in an iron ore mine

The Group derives revenue from a mining sub-lease of the lands upon which the Scully iron ore mine is situated in Newfoundland and Labrador, Canada. The sub-lease commenced in 1956 and expires in 2055. The iron ore deposit is currently sub-leased to a third-party entity under certain lease agreements which will also expire in 2055. Pursuant and subject to the terms of the lease agreements, the Group collects royalty payments directly from a third-party operator based on a pre-determined formula, with a minimum payment of $3,250 per year which is deferred to contract liabilities under contracts with customers until earned as defined in the underlying lease agreements.

In 2017, a third party (the new operator) acquired the mine out of proceedings under the Companies’ Creditors Arrangement Act (Canada). In 2018, the new operator announced that it had completed the financing for the mining operations on the iron ore mine and planned to recommence the operations in the summer of 2019. As a result of these new developments, management re-assessed whether there was any indication that previously recognized impairments for the asset might no longer exist or might have decreased. Pursuant to the re-assessment study of which the future cash flows were discounted at 8.3% per annum, management concluded that the previously recognized impairment loss of $188,203 should be reversed in the year ended December 31, 2018. Management performed another assessment on December 31, 2019 and concluded that there was no impairment.

Hydrocarbon properties

The Group owns hydrocarbon properties in western Canada. The majority of such operations are located in the Deep Basin fairway of the Western Canada Sedimentary Basin. The Group’s hydrocarbon development and production assets include producing natural gas wells, non-producing natural gas wells, producing oil wells and non-producing oil wells, but do not include a land position that includes net working interests in undeveloped acreage and properties containing probable reserves only, both of which are included in exploration and evaluation assets.

The recoverable amounts of the Group’s hydrocarbon CGUs are determined whenever facts and circumstances provide impairment indicators. CGUs are mainly determined based upon the geographical region of the Group’s producing properties. An impairment is recognized if the carrying value of a CGU exceeds the recoverable amount for that CGU. The Group determines the recoverable amount by using the greater of fair value less cost to sell and the value-in-use. Value-in-use is generally the future cash flows expected to be derived from production of proven and probable reserves estimated by the Company's third party reserve evaluators. These third party reserve engineers take many data points and forecasts into consideration when estimating the value-in-use of the CGU, including best estimates of future natural gas prices, production based on current estimates of recoverable reserves and resources, exploration potential, future operating costs, non-expansionary capital expenditures and inflation.

On December 31, 2017, the Group performed an impairment assessment on its hydrocarbon properties utilizing a post-tax discount rate of 11% and recognized a net non-cash reversal of impairment losses of $15,585, of which $13,264 were allocated to development and production assets and $2,951 to probable reserves and an impairment loss of $630 was allocated to undeveloped lands. On December 31, 2018, the Group performed an impairment assessment on its hydrocarbon properties utilizing a post-tax discount rate of 9.25% and no impairments or reversals of impairments were recognized. On December 31, 2019, the Group changed its valuation methodology for these assets to value-in-use from fair value less costs to sell and performed an impairment assessment on its hydrocarbon properties utilizing a pre-tax discount rate of 10.0% and no impairments or reversals of impairments were recognized. The Group changed to use the pre-tax discount rate in 2019 so as to conform with general practices in the industry. Numerous variables were utilized for this assessment, including price forecasts, production assumptions, inflation expectations, maintenance, decommissioning obligations and capital expenditure estimates, among others. Any change in these assumptions and variables could have an impact on the valuation of the asset. If the discount rate had been 100 basis points higher, the Group’s net loss would have been $388 higher in the year ended December 31, 2019.