INCOME TAXES

12 Months Ended

Jul. 31, 2014

INCOME TAXES [Text Block]

NOTE 12: INCOME TAXES

At July 31, 2014, the Company had U.S. and Canadian net operating loss carry-forwards of approximately $101.8 million and $6.0 million in Canadian dollars, respectively, that may be available to reduce future years’ taxable income. These carry-forwards will begin to expire, if not utilized, commencing in 2023. Future tax benefits which may arise as a result of these losses have not been recognized in these consolidated financial statements, as their realization has been determined not likely to occur and accordingly, the Company has recorded a full valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

The Company reviews its valuation allowance requirements on an annual basis based on projected future operations. When circumstances change resulting in a change in management’s judgement about the recoverability of future tax assets, the impact of the change on the valuation allowance will generally be reflected in current income.

A reconciliation of income tax computed at the federal and state statutory tax rates including the Company’s effective tax rate is as follows:

	Year Ended July 31,
	2014	2013	2012
Federal income tax provision rate	35.00%	35.00%	35.00%
State income tax provision rate, net of federal income tax effect	0.22%	0.10%	0.18%
Total income tax provision rate	35.22%	35.10%	35.18%

The actual income tax provisions differ from the expected amounts calculated by applying the combined federal and state corporate income tax rates to the Company’s loss before income taxes. The components of these differences are as follows:

		Year Ended July 31,
		2014			2013			2012
Loss before income taxes	$	26,044,816		$	21,873,844		$	25,145,508
Corporate tax rate		35.22%			35.10%			35.18%
Expected tax recovery		9,172,984			7,677,719			8,846,190
(Increase) decrease resulting from
Foreign tax rate differences		(286,071	)		(211,744	)		(660,185	)
Permanent differences		(585,482	)		(193,821	)		(864,911	)
Prior year true-up		79,672			522,982			723,571
State tax rate true-up		199,795			(58,729	)		59,559
Other		(87,134	)		(49,289	)		(2,207	)
Change in valuation allowance		(8,419,286	)		(7,684,149	)		(8,021,670	)
Tax adjustment from operations		74,478			2,969			80,347
Unrealized (loss) gain, other comprehensive income		(4,769	)		7,784			(18,559	)
Deferred income tax benefit	$	69,709		$	10,753		$	61,788

The Company has incurred taxable losses for all years since inception and accordingly, no provision for current income taxes has been recorded for the current or any prior fiscal year. During Fiscal 2014, the Company recorded a deferred income tax benefit of $69,709 (Fiscal 2013: $10,753 ; Fiscal 2012: $61,788) on the consolidated statements of operations.

The components of loss (income) from continuing operations before income taxes, by tax jurisdiction, were as follows:

		Year Ended July 31,
		2014			2013			2012
United States	$	25,009,106		$	21,105,334		$	22,586,744
Canada		(155,408	)		(125,652	)		(101,683	)
Paraguay		1,191,118			894,162			2,660,447
	$	26,044,816		$	21,873,844		$	25,145,508

The Company’s deferred tax assets (liabilities) are as follows:

		July 31, 2014			July 31, 2013
Deferred tax assets (liabilities)
Mineral property acquisitions	$	1,644,916		$	1,169,831
Exploration costs		11,424,636			9,714,579
Stock option expense		4,924,354			4,461,072
Depreciable property		(430,745	)		(110,031	)
Inventories		(1,143,744	)		(551,954	)
Asset retirement obligations		(429,710	)		(523,265	)
Other		201,876			214,811
Loss carry forward		37,271,811			30,681,618
		53,463,394			45,056,661
Valuation allowance		(53,468,163	)		(45,048,877	)
Deferred tax assets		(4,769	)		7,784
Deferred tax assets (liabilities), other comprehensive income		4,769			(7,784	)
Deferred tax liabilities
Mineral property acquisition		(711,477	)		(781,186	)
Net deferred tax liabilities	$	(711,477	)	$	(781,186	)

As the criteria for recognizing future income tax assets have not been met due to the uncertainty of realization, a valuation allowance of 100% has been recorded for the current and prior years.

The Company’s U.S. net operating loss carry-forwards expire as follows:

July 31, 2023	$	180,892
July 31, 2024		228,757
July 31, 2025		507,833
July 31, 2026		5,895,221
July 31, 2027		3,892,722
July 31, 2028		9,913,533
July 31, 2029		8,469,032
July 31, 2030		7,319,644
July 31, 2031		14,420,187
July 31, 2032		15,014,013
July 31, 2033		16,332,007
July 31, 2034		19,614,639
	$	101,788,480

For U.S. federal income tax purposes, a change in ownership under IRC Section 382 may have occurred in a prior year. If an ownership change has occurred, the utilization of these losses against future income would be subject to an annual limitation. The annual limitation would be equal to the value of the Company immediately prior to the change in ownership multiplied by the IRC Section 382 rate in effect during the month of the change.

The Company’s Canadian net operating loss carry-forwards in Canadian dollars expire as follows:

July 31, 2027	$	183,105
July 31, 2028		629,788
July 31, 2029		769,072
July 31, 2030		1,360,900
July 31, 2031		2,210,551
July 31, 2032		761,843
July 31, 2033		69,854
July 31, 2034		61,855
	$	6,046,968