Note 6 - Wastewater Discharge Liability

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Waste Water Discharge Liability [Text Block]

NOTE

6

-        WASTEWATER DISCHARGE LIABILITY

During the

fourth

quarter of

2014,

LKA received a Notice of Violation

(NOV)

from the Colorado Department of Health and Environment (CDPHE) for failure to meet certain requirements of the Company's wastewater discharge permit. During

2016,

the Company undertook all corrective actions specified in the

NOV,

under CDPHE oversight, and believes it is in compliance with the terms of its permit. Additional work is going to be required to modify and upgrade the mine's water treatment process in

2017

to meet regulatory requirements and bring LKA back into compliance with its discharge permit requirements. Until this work is completed to the satisfaction of CDPHE, the Company is considered to be in a "non-compliance" status with the terms of its discharge permit and additional penalties could be assessed beyond those described (anticipated) above.  It is currently expected that discussions with the CDPHE will be concluded within the

first

half of

2017

and that any financial penalty assessed and any further corrective actions will not likely cost less than

$75,000

but not more than

$150,000.

If LKA is unsuccessful is achieving full compliance with permit requirements, it

may

be subject to additional penalties or revocation of its discharge permit. As a result, LKA has accrued a liability of

$150,000

and

$75,000

as of

March

31,

2017

and

December

31,

2016,

respectively, as there is no better estimate of the amount of loss within this range. During the

three

months ended

March

31,

2017,

due to an increase in estimated costs to meet proposed corrective actions, LKA increase the accrual by

$75,000.