FAIR VALUE ACCOUNTING

6 Months Ended

Jun. 30, 2013

FAIR VALUE ACCOUNTING

FAIR VALUE ACCOUNTING

NOTE 11   FAIR VALUE ACCOUNTING

Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are described below:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following table identifies the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy.  As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Fair Value as a June 30, 2013
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Cash and cash equivalents	$	34,773	$	34,773	$	—	$	—
IVA taxes receivable	9,031		—		9,031		—
	$	43,804	$	34,773	$	9,031	$	—
Liabilities:
Accounts payable and accrued liabilities	$	10,694	$	—	$	10,694	$	—
	$	10,694	$	—	$	10,694	$	—

	Fair Value as at December 31, 2012
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Cash and cash equivalents	$	70,921	$	70,921	$	—	$	—
IVA taxes receivable	9,150		—		9,150		—
	$	80,071	$	70,921	$	9,150	$	—
Liabilities:
Accounts payable and accrued liabilities	$	21,235	$	—	$	21,235	$	—
Litigation settlement liability	3,830		3,830		—		—
	$	25,065	$	3,830	$	21,235	$	—

The Company’s cash and cash equivalents is classified within Level 1 of the fair value hierarchy because it is valued using quoted market prices.  The carrying value of this balance approximates its fair value due to its short-term nature and historically negligible credit losses.  The cash equivalent instruments that are valued based on quoted market prices in active markets are primarily money market securities.

The fair value of the IVA receivable, accounts payable and accrued liabilities approximates its carrying value due to their short-term nature.

The litigation settlement liability at December 31, 2012 represented the fair value of the 1,000,000 shares of the Company’s common stock that were required to be issued as part of the settlement with TNR Gold Corp. Since the Company’s common stock is quoted on an active market, the liability was classified within Level 1 of the fair value hierarchy.

In the second quarter of 2013, the Company recorded impairment charges related to its investment in MSC and mineral property interests in the Santa Cruz Province, Argentina. The following provides information related to assets that were measured at fair value on a nonrecurring basis after initial recognition during the six months ended June 30, 2013.

	Fair Value as a June 30, 2013
	Total		Level 1		Level 2		Level 3		Total Loss
	(in thousands)
Mineral property interests
Telken Tenements	$	26,442	$	—	$	—	$	26,442	$	13,792
Este Tenements	5,337		—		—		5,337		2,784
Piramides Tenements	9,736		—		—		9,736		5,079
Tobias Tenements	11,645		—		—		11,645		6,074
Investment in MSC	176,282		—		—		176,282		95,878
	$	229,442	$	—	$	—	$	229,442	$	123,607

The estimated fair values of the Santa Cruz mineral property interests were determined using observed market value per acre in the region. The estimated fair value of the Company’s investment in MSC was determined using a discounted cash flow approach. The following table sets forth a summary of the quantitative and qualitative information related to the unobservable inputs used in the calculation of the Company’s non-recurring Level 3 fair value measurements at June 30, 2013.

	Fair Value At		Valuation	Unobservable	Range /
	June 30, 2013		Technique	Input	Weighted Average
Investment in MSC	$	176,282	Discounted cash flow	Discount Rate	10.0%
				Long Term Gold Price	$1,300 per ounce
				Long Term Silver Price	$22.75 per ounce
				Argentina Inflation Index	10.0%
				United States Inflation Index	1.7%