Commitments and Contingencies

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Commitments and Contingencies

4.     Commitments and Contingencies:

The Company's management believes that the Company is currently in substantial compliance with environmental regulatory requirements and that its accrued environmental reclamation costs are representative of management's estimate of costs required to fulfill its reclamation obligations.  Such costs are accrued at the time the expenditure becomes probable and the costs can reasonably be estimated.  The Company recognizes, however, that in some cases future environmental expenditures cannot be reliably determined due to the uncertainty of specific remediation methods, conflicts between regulating agencies relating to remediation methods and environmental law interpretations, and changes in environmental laws and regulations.  Any changes to the Company's reclamation plans as a result of these factors could have an adverse affect on the Company's operations.  The range of possible losses in excess of the amounts accrued cannot be reasonably estimated at this time.

The Company was previously involved in ongoing litigation related to royalty payments to outside parties for products that the Company sells.  The Company has agreed to a settlement with the plaintiffs which changes the royalty amount paid for both the prior and future product sales.  The settlement results in a reduction of the Company’s accrued liabilities of approximately $28,000 which has been reflected in the September 30, 2011 statements.

In 2005, a subsidiary of the Company signed an option agreement that gives it the exclusive right to explore and develop the San Miguel I and San Miguel II concessions for an annual payment of $50,000, and an option to purchase payment of $100,000 annually.  Total payments will not exceed $1,430,344, reduced by taxes paid.  During the nine months ended September 30, 2011 and the year ended December 31, 2010, $43,478 and $186,956 respectively, was paid and capitalized as mineral rights in accordance with the Company’s accounting policies.

From time to time, the Company is assessed fines and penalties by the Mine Safety and Health Administration (“MSHA”).  Using appropriate regulatory channels, management may contest these proposed assessments, and accrued $40,604 in other accrued liabilities as of December 31, 2010 which were subsequently paid.  Additionally there are MSHA proposed assessments of $73,225 outstanding which have not been settled on, and the entire amount was accrued in other accrued liabilities as of September 30, 2011.