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DEFERRED REVENUE

3 Months Ended

Mar. 31, 2013

7.	DEFERRED REVENUE

On March 31, 2009, the Company sold to Royal Gold, Inc. (“Royal Gold”), formerly known as IRC Nevada Inc.) 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 expensed in the period incurred. During the three month periods ended March 31, 2013 and 2012, the Company recognized $5,959 and $8,250, respectively, in revenue and recorded $43,671 and $59,245, respectively, in royalty expense related to this royalty within the condensed consolidated statements of operations. As of March 31, 2013 and December 31, 2012, the total amount owed by the Company under the terms of the royalty agreement was $1,393,853 and $1,350,182, respectively, and is included in accounts payable on the condensed consolidated balance sheets. Furthermore, amounts greater than 30 days past due accrue interest at a rate of 12% per annum for which the Company has accrued $286,601 and $247,042 of interest as of March 31, 2013 and December 31, 2012, respectively, which is included within accrued interest on the condensed consolidated balance sheets.

On October 18, 2012, the Company received $180,000 in advance royalty payment from Texas Canyon, the producer of decorative rock and aggregate from the Company’s waste rock, in exchange for $204,000 of future royalties. The deferred revenue is being amortized to miscellaneous income as Texas Canyon sells the aggregate to a third party. During the three month period ended March 31, 2013, the Company recognized $156,645 in miscellaneous income.

Total deferred revenue for both contracts is $4,655,682 and $4,661,371 as of March 31, 2013 and December 31, 2012, respectively. Deferred revenue of $47,791 is expected to be amortized to revenue over the next twelve months.

- Definition

The entire disclosure for deferred revenues at the end of the reporting period, and description and amounts of significant changes that occurred during the reporting period. Deferred revenue is a liability as of the balance sheet date related to a revenue producing activity for which revenue has not yet been recognized. Generally, an entity records deferred revenue when it receives consideration from a customer before achieving certain criteria that must be met for revenue to be recognized in conformity with GAAP.

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