Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Fair Value Measurements

Fair Value Measurements

11.Fair Value Measurements

Financial assets and liabilities and nonfinancial assets and liabilities are measured at fair value  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 following table summarizes the Company’s financial assets and liabilities at fair value on a recurring basis at March 31, 2015 and December 31, 2014, by respective level of the fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(in thousands)
At March 31, 2015
Assets:
Cash and cash equivalents	$	6,052	$	—	$	—	$	6,052
Short-term investments	119		—		—		119
Trade accounts receivable	92		—		—		92
	$	6,263	$	—	$	—	$	6,263
Liabilities:
KELTIP liability	$	71	$	—	$	—	$	71
Warrant liability	—		—		904		904
	$	71	$	—	$	904	$	975
At December 31, 2014
Assets:
Cash and cash equivalents	$	8,579	$	—	$	—	$	8,579
Trade accounts receivable	—		—		—		—
	$	8,579	$	—	$	—	$	8,579
Liabilities:
KELTIP liability	$	93	$	—	$	—	$	93
Warrant liability	—		—		1,554		1,554
	$	93	$	—	$	1,554	$	1,647

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 investments consist of available for sale common stock of a junior mining company for which quoted prices exist in an active market and are also classified within Level 1 (see Note 3).  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 KELTIP liabilities are related to employee and officer compensation as discussed in Note 8 and are marked to market at the end of each period based on the closing price of the Company’s common stock resulting in a classification of Level 1 within the fair value hierarchy.

At March 31, 2015 and December 31, 2014 the Company has recorded a liability for warrants to acquire the Company’s stock as a result of anti-dilution clauses in the warrant agreements that could result in a resetting of the warrant exercise price in the event the Company were to issue additional shares of its common stock in a future transaction at a an offering price lower than the current exercise price of the warrants (see Note 13). The Company assesses the fair value of its warrant liability at the end of each reporting period, with changes in the value recorded as a separate line item on the Company’s Consolidated Statements of Operations and Comprehensive Income.  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.  The warrant liability has been recorded at fair value as of March 31, 2015 and December 31, 2014 based primarily on a valuation performed by a third party expert using a Monte Carlo simulation, which falls within Level 3 of the fair value hierarchy.  The valuation model takes into account the probability that the Company could issue additional shares in a future transaction at a lower price than the current exercise price of the warrants.  In addition to the warrant exercise prices (see Note 13) other significant inputs to the valuation model included the following:

	March 31,			December 31,
	2015			2014
Company’s ending stock price	$	0.41		$	0.54
Company’s stock volatility	85		%	90		%
Applicable risk free interest rate	1.3		%	1.6		%

An increase or decrease in the Company’s stock price, in isolation, would result in a relatively lower or higher fair value measurement respectively.  A decrease in the probability of the issuance of additional common stock at a lower price than the current warrant exercise price would result in a lower value for the warrants.  The table below highlights the change in fair value of the warrant liability.

	Fair Value Measurements
	Using Significant Unobservable
	Inputs (level 3)
	Warrant Liabilities
	(in thousands)
Beginning balance at January 1, 2015	$	1,554
Change in estimated fair value	(650		)
Ending balance at March 31, 2015	$	904

Non-recurring Fair Value Measurements

There were no non-recurring fair value measurements at March 31, 2015 and December 31, 2014.