ASSET RETIREMENT OBLIGATIONS

3 Months Ended

Mar. 31, 2016

MINERAL PROPERTY INTERESTS AND ASSET RETIREMENT OBLIGATIONS

MINERAL PROPERTY INTERESTS AND ASSET RETIREMENT OBLIGATIONS

NOTE 4   ASSET RETIREMENT OBLIGATIONS

Asset Retirement Obligations

The Company is responsible for reclamation of certain past and future disturbances at its properties.  The two most significant properties subject to these obligations are the Tonkin property in Nevada and the El Gallo 1 Mine in Mexico.

A reconciliation of the Company’s asset retirement obligations for the three months ended March 31, 2016 and for the year ended December 31, 2015 are as follows:

	Three months ended  March 31, 2016		Year ended December 31, 2015
Asset retirement obligation liability, beginning balance	$	7,784	$	7,471
Accretion of liability		124		429
Adjustment reflecting updated estimates		—		(116)
Asset retirement obligation liability, ending balance	$	7,908	$	7,784

As at March 31, 2016, the current portion of the asset retirement obligation was $0.2 million (December 31, 2015 - $0.2 million).

Amortization of Mineral Property Interests and Asset Retirement Costs

The definition of proven and probable reserves is set forth in the SEC Industry Guide 7. If proven and probable reserves exist at the Company’s properties, the relevant capitalized mineral property interests and asset retirement costs are charged to expense based on the units of production method and upon commencement of production. Since the Company has not completed feasibility or other studies sufficient to characterize the mineralized material at the El Gallo 1 Mine as proven or probable reserves, the amortization of the capitalized mineral property interests and asset retirement costs are charged to expense based on the straight-line method over the estimated useful life of the mine. For the three months ended March 31, 2016, the Company recorded $0.3 million (March 31, 2015, $0.3 million), of amortization expense related to the El Gallo 1 Mine, which is included in Production Costs Applicable to Sales in the Consolidated Statement of Operations and Comprehensive Income, of which $0.1 million, related to the amortization of capitalized asset retirement costs (March 31, 2015 - $0.1 million).