Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Fair Value Measurements

Fair Value Measurements

13. Fair Value Measurements

Financial assets and liabilities and nonfinancial assets and liabilities are measured at fair value on a recurring (annual) basis under a framework of a fair value hierarchy which prioritizes the inputs into valuation techniques used to measure fair value into three broad levels.  This hierarchy gives the highest priority to quoted prices (unadjusted) in active markets and the lowest priority to unobservable inputs.  Further, financial assets and liabilities should be classified by level in their entirety based upon the lowest level of input that was significant to the fair value measurement.  The three levels of the fair value hierarchy per ASC 820 are as follows:

Level 1:  Unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2:  Quoted prices in inactive markets for identical assets or liabilities, quoted prices for similar assets or liabilities in active markets, or other observable inputs either directly related to the asset or liability or derived principally from corroborated observable market data.

Level 3:  Unobservable inputs due to the fact that there is little or no market activity. This entails using assumptions in models which estimate what market participants would use in pricing the asset or liability.

The Company has consistently applied the valuation techniques discussed in Notes 2 and 3 in all periods presented.

The following table summarizes the Company’s financial assets at fair value at December 31, 2013, and 2012 by respective level of the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(in thousands)
At December 31, 2013
Assets:
Cash equivalents	$	19,146	$	—	$	—	$	19,146
Trade accounts receivable	25		—		—		25
	$	19,171	$	—	$	—	$	19,171
At December 31, 2012
Assets:
Cash equivalents	$	44,406	$	—	$	—	$	44,406
Short-term available for sale securities	242		—		—		242
Trade accounts receivable	1,291		—		—		1,291
	$	45,939	$	—	$	—	$	45,939

The Company’s cash equivalents, comprised principally of U.S. treasury securities, are classified within level 1 of the fair value hierarchy.

The Company’s short-term available for sale securities are classified within level 1 of the fair value hierarchy and are comprised of common stock, which has been valued using quoted prices in active markets.

The Company’s trade accounts receivable is classified within level 1 of the fair value hierarchy and is related to the sale of metals at our Velardeña Properties and is valued at published metals prices per the terms of the refining and smelting agreements.

The Company did not have any level 2 or level 3 financial assets at December 31, 2013 or 2012.

Non-recurring Fair Value Measurements

The following table summarizes the Company’s non-recurring fair value measurements at December 31, 2013, and 2012 by respective level of the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(in thousands)
At December 31, 2013
Assets:
Mineral properties	$	—	$	—	$	22,397	$	22,397
Exploration properties	—		—		2,993		2,993
Goodwill	—		—		—		—
	$	—	$	—	$	25,390	$	25,390
At December 31, 2012
Assets:
Mineral properties	$	—	$	—	$	239,200	$	239,200
Exploration properties	—		—		15,685		15,685
Goodwill	—		—		11,666		11,666
	$	—	$	—	$	266,551	$	266,551

The Company assesses the fair value of its long lived assets, including goodwill, at least annually or more frequently if circumstances indicate a change in the fair value has occurred.  The valuation policies are approved by the Chief Financial Officer who reviews and approves the inputs used in the fair value calculations and the changes in fair value measurements from period to period for reasonableness. Fair value measurements are discussed with the Company’s Chief Executive Officer, as deemed appropriate.

To determine the fair value of mineral properties and exploration properties the Company uses a market valuation approach which falls within level 3 of the fair value hierarchy. The market valuation approach relies upon assumptions related to the condition and location of the Properties in comparison to other corroborated observable market data for similar properties. In arriving at a fair value for the Velardeña mineral deposit and exploration properties and the San Diego exploration property the Company considered recently published market data reflecting an average in the ground mineral resource value for a representative group of junior silver mining companies primarily located in Mexico and South America. See Note 2 for details related to the unobservable inputs.

The Company uses an after tax discounted cash flow model to determined the implied fair value of the goodwill related to the Company’s  Velardeña Properties.  The goodwill model falls within level 3 of the fair value hierarchy and includes various inputs including the weighted average cost of capital, future metals prices, and assumptions from the Company’s Velardeña Properties mining and processing plan. The most significant unobservable factors are certain assumptions used in the Velardeña Properties mining and processing plan and include: 1) ore grades consistent with the Company’s current and previously reported estimates of mineralized material, 2) plant throughput, and 3) the Company’s projections of mining and processing costs. See Note 3 for details related to the unobservable inputs.