RECLAMATION COSTS

12 Months Ended

Dec. 31, 2012

RECLAMATION COSTS [Text Block]

10. RECLAMATION COSTS

The Company estimates its asset retirement obligations using an expected cash flow approach, in which multiple cash flow scenarios are used to reflect a range of possible outcomes. In March 31, 2011, the Company determined that certain aspects of the reclamation plan could be revised thus decreasing the estimated costs to reclaim the Johnson Camp Mine to approximately $9,100,000 (based on 2011 dollars). This estimate was subsequently refined during the quarter ended June 30, 2011 to $10,100,000. Accordingly, these cash flow revisions were effected in the estimated fair value of the asset retirement obligation as revised in the second quarter ended June 30, 2011.

To calculate the estimated fair value of this obligation in accordance with the related ASC, the projected cash flows, which were further adjusted for an estimated inflation rate of 2.5% per annum, were discounted at the Company’s estimated annual credit–adjusted risk free interest rate of 12.53% . The estimated remaining life of the Johnson Camp Mine as of December 31, 2012 is thirteen years. Accordingly, the cash expenditures for reclamation and closure activities are expected to occur at the conclusion of production, currently anticipated to be in 2024 – 2025. As 100% of the cash flows are projected to occur in 2024 – 2025, 100% of the accrued reclamation costs are classified as long-term within the consolidated balance sheets. A reconciliation of the beginning and ending carrying amounts of the Company’s accrued reclamation costs as of December 31, 2012 and 2011 is as follows:

		2012		2011
Accrued reclamation costs, beginning of year	$	3,195,497	$	3,932,966
Accretion expense		402,471		375,302
Revisions to cash flow estimates		-		(1,112,771	)
Accrued reclamation costs, end of year	$	3,597,968	$	3,195,497