Acquisition of ECU Silver Mining Inc. (Tables)

9 Months Ended

Sep. 30, 2012

Acquisition of ECU Silver Mining Inc.

Schedule of calculation of purchase price

Calculation of purchase price ($000’s):

Cash consideration	$	129
Stock consideration (a)	223,097
Replacement options (b)	1,109
Replacement warrants (b)	8,744
Total purchase price	$	233,079

(a)The value of the Company’s common stock was $13.94 per share, the closing price on the NYSE Amex September 2, 2011.

(b)The fair value of Replacement Options and Replacement Warrants was determined using a Black-Scholes pricing model.

Schedule of allocation of purchase price

Allocation of purchase price ($000’s):

Current assets (c)	$	9,001
Inventories (d)	1,520
Mineral properties (e)	239,200
Asset retirement cost (e)	1,883
Exploration properties (e)	12,732
Plant and equipment (f)	14,059
Goodwill (g)	70,155
Deferred tax asset (h)	8,797
Current liabilities (c)	(26,122		)
Long term debt (c)	(30,752		)
Asset retirement obligation (e)	(1,883		)
Deferred tax liability (h)	(65,511		)
Total purchase price	$	233,079

(c)Monetary assets and liabilities assumed have been recorded at their carrying values, which approximate fair value. Long term debt includes: (1) a term loan payable to two investment funds managed by IIG Capital, LLC in the amount of $15.5 million, and (2) a convertible note (the “Note”) payable to the Company in the amount of $15.2 million. The Note, the funds from which were provided to ECU prior to the consummation of the Arrangement in a separate transaction, is eliminated for financial reporting purposes in consolidation with the Company’s corresponding note receivable.

(d)Inventories consist of salable concentrate, precipitate and doré recorded at net realizable value.

(e)Mineral properties and the asset retirement obligation are recorded at estimated fair market value based on valuations performed with the assistance of an independent appraisal firm and a minerals engineering company. The asset valuations were derived in accordance with the guidance of ASC Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”) using a combination of income, market and cost approach models depending on the asset. In applying the appropriate valuation model or models, the valuation consultants employed a variety of economic factors and market data, including discount rates, income tax rates, projections of future metals prices, and third party market surveys. The mineral properties will be amortized on a units of production basis as minerals are depleted.

(f)Plant and equipment purchased in the Arrangement have been recorded at fair value based on valuations performed with the assistance of an independent appraisal firm in accordance with the guidance of ASC 820. The plant and equipment will be depreciated on a straight line basis over their remaining useful lives.

(g)Goodwill is primarily the result of the requirement to record a deferred tax liability for the difference between the fair value and the tax basis of the assets acquired and liabilities assumed at amounts that do not reflect fair value (see Note 9). The goodwill is not deductable for income tax purposes.

(h)The deferred tax asset is related to certain net operating loss carry forwards available in Mexico. The deferred tax liability was calculated by applying the Mexico corporate income tax rate of 28% to the difference between the fair value and the tax basis of the assets acquired and liabilities assumed and it does not reflect fair value. The deferred tax asset and deferred tax liability are netted for presentation on the accompanying balance sheet.