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Commitments and Contingencies
6 Months Ended
Jun. 30, 2013
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

10. Commitments and Contingencies

 

The Company has third party minimum lease obligations with certain of its mineral properties and related party leases. Minimum annual third party lease payments payable are $57,600 and related party lease payments payable are $880,500. For most of the mineral properties and leases, the Company is subject to a range of royalty obligations from 0.5% to 6% of net smelter revenues from minerals produced on the properties. Certain factors that will influence the amount of the royalties include ounces extracted and prices of gold.

 

Included in the related party leases is an operating agreement with Northern Comstock Mining, LLC; a related party and an entity controlled by a member of the Board of Directors. The terms of this agreement provide that the Company will make a total of $34.5 million in annual payments of $862,500, in the form of either cash or Series A-1 preferred stock. The operating agreement requires these payments, at least annually, through October, 2049. At June 30, 2013, $30.45 million remained due and may be prepaid without penalty.

 

In January 2013, the Company initially determined that an accelerated capital contribution may have been required pursuant to the operating agreement of Northern Comstock Mining, LLC. Pursuant to the operating agreement, $5,000,000 in accelerated capital contributions are triggered when the Company determines, through geological estimates derived from a third party technical report, that an additional 200,000 gold equivalent ounces of measured and indicated resources are validated. Upon further analysis, the Company concluded that such threshold was not surpassed and no accelerated capital contribution is required at this time.

 

The Company's mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.

 

From time to time, we are involved in lawsuits, claims, investigations and proceedings that arise in the ordinary course of business. There are no matters pending that we expect to have a material adverse impact on our business, results of operations, financial condition or cash flows.