NOTE 5 MINERAL PROPERTY INTERESTS

On April 19, 2016, the Company completed the acquisition of the sliding scale net smelter return royalty (the “Royalty”) on the El Gallo 1 mine and El Gallo 2 project, previously requiring payment of 3.5% of gross revenue less allowable deductions, eventually reducing to 1%. The total purchase price was $6.3 million and consisted of a $5.3 million payment at closing and a deferred payment of $1.0 million due on June 30, 2018, conditional that the El Gallo 1 mine and El Gallo 2 project are in operation at that time.

The total cost of the Royalty was accounted for as an addition to mineral property interests. The cost was allocated to El Gallo 1 mine and El Gallo 2 project based on the relative fair value of the future royalty payments for each project. The allocation resulted in approximately $5.1 million allocated to the El Gallo 1 mine and $1.2 million allocated to the El Gallo 2 project. The $1.0 million conditional deferred payment has been included under non-current other liabilities as of December 31, 2016. The Royalty ceased accruing at the end of March 2016.

The Company conducts a review of potential triggering events for impairment for all its mineral projects on a quarterly basis. When events or changes in circumstances indicate that the related carrying amounts may not be recoverable, the Company carries out a review and evaluation of its long-lived assets. In the year ended December 31, 2016, no such triggering events were identified with respect to the Company’s Nevada, Argentina or Mexico properties.

For the year ended December 31, 2015, the Company recognized impairments on its Argentina and Nevada properties and portion of Mexico construction-in-progress, for an aggregate of $50.6 million. For the Nevada properties, an initial $29.7 million impairment was recorded in the second quarter of 2015 when the Company performed a strategic review of its mineral property interests from which a decision was made to allow certain non-essential claims and portions of claims, included within the Gold Bar project and Tonkin property, to lapse on the September 1, 2015 renewal date and therefore reduce property holding costs that otherwise would have been incurred in 2015. Subsequently, during the fourth quarter of 2015 an additional $7.5 million was recorded given the continuous decline in the observed market value of the Nevada properties. The deferred income tax recoveries resulting from the Nevada impairments made in the second quarter and fourth quarter of 2015 were $10.4 million and $2.2 million, respectively. The Company used the market approach to estimate the fair value of the impaired properties.

Further, when performing the recoverability test for the Los Azules project and El Gallo 2 project asset groups in the fourth quarter of 2015, the Company noted that the carrying value of each of the asset groups exceeded their estimated fair value, resulting in a total impairment charge for Los Azules project and El Gallo 2 project asset groups of $11.4 million and $2.0 million, respectively, along with a resulting deferred income tax recovery of $1.3 million and $nil million, respectively, being recorded in the Statement of Operations and Comprehensive Loss for the year ended December 31, 2015. The Company used the market approach to estimate the fair value of the impaired properties.

For the year ended December 31, 2014, the Company recognized impairments on its Argentina and Nevada properties, for an aggregate of $353.7 million. For the Argentina properties, an initial $120.4 million impairment was recorded in the second quarter of 2014 when the Los Azules project was deemed to have a lower carrying value than the market price determined from a contemporaneous and comparable transaction completed at the time. Subsequently, during the fourth quarter of 2014 an additional $107.9 million was recorded given the continuous decline in the observed market value of the Los Azules project. The Company used the market approach to estimate the fair value of the impaired properties. The deferred income tax recoveries resulting from these impairments were $22.5 million and $19.3 million, respectively. Further, when performing the recoverability test for the Gold Bar, Tonkin and North Battle Mountain properties in Nevada and its other exploration properties in Argentina, the Company noted that the carrying value of each of the properties exceeded their estimated fair value, resulting in a total impairment charge for Nevada and Los Azules properties amounted to $98.4 million and $27.0 million, respectively, along with a resulting deferred income tax recovery of $31.6 million and $3.2 million, respectively, being recorded in the Statement of Operations and Comprehensive Loss for the year ended December 31, 2014.

Based on the above, impairment charges were recorded on the following mineral property interests for the years ended December 31, 2016, 2015, and 2014:


Name of Property	Segment	2016		2015		2014
Los Azules Project	Argentina	$	—	$	11,399	$	228,301
Other San Juan Properties	Argentina		—		—		7,817
Cerro Mojon Tenements	Argentina		—		—		1,971
La Merced Tenements	Argentina		—		—		1,891
Cabeza de Vaca Tenements	Argentina		—		—		877
El Trumai Tenements	Argentina		—		—		1,534
Martes 13 Tenements	Argentina		—		—		3,568
Celestina Tenements	Argentina		—		—		1,753
Other Santa Cruz Exploration Properties	Argentina		—		—		7,601
Gold Bar Project	Nevada		—		20,847		31,391
Tonkin Properties	Nevada		—		14,939		25,435
Limo Project	Nevada		—		—		23,438
North Battle Mountain Properties	Nevada		—		1,443		1,921
East Battle Mountain Properties	Nevada		—		—		4,060
West Battle Mountain Properties	Nevada		—		—		2,567
Other United States Properties	Nevada		—		—		9,611
Property, Plant and Equipment	Mexico		—		1,972		—
Total impairment		$	—	$	50,600	$	353,736

The carrying values for all of the mineral properties held by the Company as at December 31, 2016 and 2015 are noted below:


Name of Property	State/Province	Country	2016		2015
Los Azules Copper Project	San Juan	Argentina	$	191,490	$	191,490
Tonkin Properties	Nevada	United States		4,833		4,833
Gold Bar Project	Nevada	United States		31,180		30,730
North Battle Mountain Properties	Nevada	United States		785		785
El Gallo 1 Mine	Sinaloa	Mexico		8,545		5,925
El Gallo 2 Properties	Sinaloa	Mexico		5,807		3,482
Total Mineral Property Interests			$	242,640	$	237,245

For the year ended December 31, 2016, the Company recorded $2.4 million (2015 - $1.3 million and 2014 - $1.3 million) of amortization expense related to El Gallo 1 mine, which is included in Production Costs Applicable to Sales in the Statement of Operations and Comprehensive Income (Loss). This included $0.5 million (2015 - $0.5 million and 2014 - $0.5 million) related to the amortization of capitalized asset retirement costs and $1.9 million (2015 - $0.8 million and 2014 - $0.8 million) in amortization expense related to its mineral properties in Mexico and the capitalized royalty costs attributable to El Gallo 1 mine property which were acquired in the second quarter of 2016.