Asset Retirement and Reclamation Liabilities

9 Months Ended

Sep. 30, 2012

Asset Retirement and Reclamation Liabilities

Asset Retirement and Reclamation Liabilities

11.   Asset Retirement and Reclamation Liabilities

The Company recorded an approximately $3.5 million asset retirement obligation (“ARO”) and offsetting asset retirement cost (“ARC”) related to the Velardeña Operations upon the acquisition of ECU (see Note 20).  The Company with the help of a third party engineering firm, estimated the ARO and ARC based on the engineering firm’s experience with mining operations of similar size and scope as that of the Velardeña Operations. Shortly after the completion of the acquisition the Company retained the services of another engineering firm to complete a detailed closure plan for the Velardeña Operations.  That plan was completed during the second quarter 2012 and indicated an ARO and ARC of approximately $1.9 million.  The ARO and ARC amounts were adjusted accordingly as set forth in changes in estimates, and other in the table below.

  The Company will continue to accrue additional estimated ARO amounts based on an asset retirement plan as activities requiring future reclamation and remediation occur.  During the first nine months of 2012 the Company recognized approximately $0.1 million of accretion expense during the period and approximately $0.2 million of amortization expense related to the ARC.

The following table summarizes activity in the Velardeña Operations ARO:

	September 30,			December 31,
	2012			2011
	(in thousands)			(in thousands)
Beginning balance	$	3,577		$	—
ARO arising in the period (acquired at merger)	—			3,506
Changes in estimates, and other	(1,656		)	—
Liabilities settled	—			—
Accretion expense	118			71
Ending balance	$	2,039		$	3,577

Asset retirement and reclamation liabilities for both periods include approximately $0.2 million of reclamation liabilities related to activities at the El Quevar project in Argentina.