FAIR VALUE ACCOUNTING

9 Months Ended

Sep. 30, 2013

FAIR VALUE ACCOUNTING

FAIR VALUE ACCOUNTING

NOTE 12   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 September 30, 2013
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Cash and cash equivalents	$	31,062	$	31,062	$	—	$	—
IVA taxes receivable	10,129		—		10,129		—
	$	41,191	$	31,062	$	10,129	$	—
Liabilities:
Accounts payable and accrued liabilities	$	10,041	$	38	$	10,003	$	—
	$	10,041	$	38	$	10,003	$	—

	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 their carrying value due to their short-term nature.

As at September 30, 2013, accounts payable included an accrual for the fair value of approximately 15,800 shares of common stock that are required to be issued as part of the settlement of certain amounts due by the Company to one of its vendors, as discussed in Note 7, Shareholders’ Equity. As the Company’s stock is quoted on an active market, this liability is classified within Level 1 of the fair value hierarchy.

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 mineral property interests in the Santa Cruz Province, Argentina and its investment in MSC, as discussed in Notes 5 and 6, respectively. 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 discounted cash flow model used significant unobservable inputs and is, therefore, considered within Level 3 of the fair value hierarchy.

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.

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