INCOME TAXES

12 Months Ended

Jul. 31, 2016

NOTE 12:

INCOME TAXES

At July 31, 2016, the Company had U.S. and Canadian net operating loss carry-forwards of approximately $137.2 million and $6.1 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,
	2016			2015			2014
Federal income tax provision rate		35.00	%		35.00	%		35.00	%
State income tax provision rate, net of federal income tax effect		0.35	%		0.32	%		0.22	%
Total income tax provision rate		35.35	%		35.32	%		35.22	%

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,
	2016			2015			2014
Loss before income taxes	$	(17,362,111)		$	(23,397,341)		$	(26,044,816)
Corporate tax rate		35.35	%		35.32	%		35.22	%
Expected tax recovery		(6,137,506)			(8,263,941)			(9,172,984)
Increase (decrease) resulting from
Foreign tax rate differences		230,148			223,980			286,071
Permanent differences		806,736			1,473,225			585,482
Prior year true-up		(647,307)			50,025			(79,672)
State tax rate true-up		(105,843)			(205,285)			(199,795)
Foreign exchange rate differences		129,015			144,242			97,565
Other		59,705			62,398			(10,431)
Change in valuation allowance		5,627,606			6,474,775			8,419,286
Tax adjustment from operations		(37,446)			(40,581)			(74,478)
Unrealized loss, other comprehensive loss		5,207			5,168			4,769
Deferred income tax benefit	$	(32,239)		$	(35,413)		$	(69,709)

The Company has incurred taxable losses for all years since inception and accordingly, no provision for current income tax has been recorded for the current or any prior fiscal year. During Fiscal 2016, the Company recorded a deferred income tax benefit of $32,239 (Fiscal 2015: $35,413; Fiscal 2014: $69,709) on the consolidated statements of operations.

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

	Year Ended July 31,
	2016		2015		2014
United States	$	(16,488,447)	$	(22,612,974)	$	(25,009,106)
Canada		54,216		158,616		155,408
Paraguay		(927,880)		(942,983)		(1,191,118)
	$	(17,362,111)	$	(23,397,341)	$	(26,044,816)

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

	July 31, 2016		July 31, 2015
Deferred tax assets (liabilities)
Mineral property acquisitions	$	1,917,796	$	1,867,777
Exploration costs		10,648,043		10,931,265
Stock option expense		7,081,853		5,771,387
Depreciable property		(66,912)		78,651
Inventories		(3,632,178)		(2,530,383)
Asset retirement obligations		(220,209)		(316,136)
Other		271,468		333,026
Loss carry forward		49,565,476		43,802,183
		65,565,337		59,937,770
Valuation allowance		(65,570,544)		(59,942,938)
Deferred tax assets		(5,207)		(5,168)
Deferred tax assets, other comprehensive loss		5,207		5,168

Deferred tax liabilities
Mineral property acquisition		(643,825)		(676,064)
Net deferred tax liabilities	$	(643,825)	$	(676,064)

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		21,173,540
July 31, 2035		18,974,097
July 31, 2036		14,837,092
	$	137,158,570

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		1,314,392
July 31, 2031		2,210,551
July 31, 2032		761,843
July 31, 2033		69,854
July 31, 2034		61,769
July 31, 2035		41,173
July 31, 2036		9,952
	$	6,051,499