CONCENTRATIONS OF CREDIT RISK

12 Months Ended

Dec. 31, 2011

CONCENTRATIONS OF CREDIT RISK [Text Block]

23. CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments, marketable securities, accounts receivable, and derivatives. The Company places its cash and marketable securities with high quality financial institutions and limits its credit exposure with any one financial institution. At times, the Company’s bank account balances may exceed federally insured limits. As of December 31, 2011 and 2010, 95% and 94%, respectively, of the Company’s total accounts receivable were from one customer to whom 100% of the Company’s copper production is sold.

The Company had no potential direct loss due to credit risk on its derivative instruments as of December 31, 2011. All other derivatives were in a liability position as of December 31, 2011. The counterparty to the Company’s derivatives, Nedbank, is also the senior leader on the Company’s long term debt, for which substantially all of the Company’s assets are held as collateral. Furthermore, in accordance with the related Credit Agreement, the Company’s default on the derivative contracts triggers a cross default under the Credit Agreement which puts Nedbank in a position to pursue any and all remedies under the related derivative contracts and Credit Agreement. In addition, under the Credit Agreement and derivative contracts, there is a master netting agreement which allows either party to offset an obligation by the other should either party be in default of its obligations.

The Company neither deposited nor holds any collateral related to its derivative financial instruments. In addition, to date, the Company has not required any of its counterparties or customers to post collateral.