SALE OF ROYALTY

12 Months Ended

Dec. 31, 2011

SALE OF ROYALTY [Text Block]

8. SALE OF ROYALTY

On March 31, 2009, the Company sold to IRC Nevada Inc., an entity which was subsequently acquired by Royal Gold, a 2.5% net smelter royalty on the mineral production sold from the existing mineral rights at Johnson Camp. The net proceeds of the sale in the amount of $4,950,000 were recorded as deferred revenue and are being amortized to revenue over the life of the mine based on a “units of production” method. Amounts payable to Royal Gold, which are being calculated based on the revenue generated from the sale of copper, are being expensed in the period incurred. During 2011, the Company recognized $45,948 in revenue and recorded $361,069 in royalty expense related to this royalty within the consolidated statement of operations. Total deferred revenue is $4,685,060 as of December 31, 2011, of which $38,172 is expected to be amortized to revenue over the next twelve months. During 2010, the Company recognized $119,696 in revenue and recorded $760,359 in royalty expense related to this royalty within the consolidated statement of operations.

Under the terms of the related agreement, amounts that are not paid to Royal Gold in accordance thereof, accrue interest at an annual rate of 12%. Accordingly, as of December 31, 2011 and 2010, included in accounts payable is $1,161,755 and $995,686, respectively, due to Royal Gold and, included in accrued interest on the consolidated balance sheet, is an additional $225,793 and $73,528, respectively, in accrued interest related thereto.