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Revenue and Related Costs
12 Months Ended
Dec. 31, 2015
Revenue and Related Costs  
Revenue and Related Costs.

 

17.Revenue and Related Costs

 

Sale of Metals and Cost of Metals Sold

 

During the years ended December 31, 2015 and 2014, the Company sold marketable concentrate products from its Velardeña Propertiesto three customers.  Under the terms of the Company’s agreements with customers, title generally passes when a provisional payment is made, which occurs generally after the product is shipped and customary sales documents are completed.  Costs related to the sale of metals products include direct and indirect costs incurred to mine, process and market the products.  At December 31, 2014 the Company had written down its metals and in-process inventories to net realizable value including a charge to the cost of metals sold of approximately $1.2 million and a charge to depreciation expense of approximately $0.7 million. The Company had no metals or in-process inventories at December 31, 2015 as a result of the suspension of mining and processing at its Velardeña Properties (see Note 1).

 

Oxide Plant Lease and Oxide Plant Lease Costs

 

On July 15, 2015 the Company entered into a leasing agreement with a third party, which for a monthly fixed fee and a variable tonnage fee will allow the third party to control and process its own material through the oxide plant at the Velardeña Properties for a period of up to 30 months and a minimum period of 18 months. In addition, under the terms of the lease the Company is entitled to reimbursement for certain costs it incurs related to the lease.  For the year ended December 31, 2015 the Company recorded revenue of approximately $0.7 million and related costs of approximately $0.2 million associated with the lease of the oxide plant. In addition, the Company received an advance payment of $0.5 million that will be applied to the lease amounts due during the first four months of 2016. At December 31, 2015 the advance payment was recorded as deferred revenue on the accompanying Consolidated Balance Sheets.

 

The Company recognizes oxide plant lease fees and reimbursements for labor, utility and other costs as “Revenue from Oxide plant lease” in the Consolidated Statements of Operations and Comprehensive Loss following the guidance of ASC 605 regarding “income statement characterization of reimbursements received for “out-of-pocket” expenses incurred” and “reporting revenue gross as a principal versus net as an agent”.  ASC 605 supports recording as gross revenue fees received for the reimbursement of expenses in situations where the recipient is the primary obligor and has certain discretion in the incurrence of the reimbursable expense.  The actual costs incurred for reimbursed direct labor and utility costs are reported as “Oxide plant lease costs” in the statement of operations. The Company recognizes lease fees during the period the fees are earned per the terms of the lease.