NOTE 5 — ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations arise from the acquisition, development, construction and normal operation of mining property, plant and equipment due to government controls and regulations that protect the environment on the closure and reclamation of mining properties. The exact nature of environmental issues and costs, if any, which the Company or the LLC may encounter in the future are subject to change, primarily because of the changing character of environmental requirements that may be enacted by governmental authorities.
In January 2013, the LLC commenced preliminary construction activities at the Mt. Hope Project resulting in additional disturbance at the property. This has resulted in an increase to the reclamation liabilities recorded in the LLC’s financial statements. The following table shows asset retirement obligations for future mine closure and reclamation costs in connection with the Mt. Hope Project and within the boundaries of the Plan of Operations (“PoO”):
|
|
|
At |
| |
|
At January 1, 2013 |
|
— |
| |
|
Additions |
|
$ |
1,112 |
|
|
Accretion |
|
— |
| |
|
At December 31, 2013 |
|
1,112 |
| |
The estimated future reclamation costs for the Mt. Hope Project have been discounted using a rate of 8%. The total inflated and undiscounted estimated reclamation costs associated with current disturbance under the PoO at the Mt. Hope Project were $9.4 million at December 31, 2013.
The LLC is required by U.S. federal and state laws to provide financial assurance sufficient to allow a third party to implement approved closure and reclamation plans if the LLC is unable to do so. The laws govern the determination of the scope and cost of the closure, and the amount and forms of financial assurance. As of December 31, 2013, the LLC has provided the appropriate regulatory authorities with $73.4 million in reclamation financial guarantees through the posting of surety bonds for reclamation of the Mt. Hope Project as approved in the ROD. As of December 31, 2013, we had $6.3 million in cash deposits associated with these bonds, which are accounted for as restricted cash and are unrelated to the inflated and undiscounted liability referenced above.
The LLC has a smaller liability at the Mt. Hope Project for disturbance which occurred outside the PoO boundaries. The LLC has not discounted the reclamation liability incurred as the total amount is approximately $0.1 million.
The Company’s Liberty Property is currently in the exploration stage. The Company has not discounted the reclamation liability incurred at the Liberty Property as the total liability is approximately $0.1 million.
|
|
|
Mt. Hope Project |
|
Liberty |
| ||
|
|
|
(in thousands) |
| ||||
|
At January 1, 2013 |
|
$ |
502 |
|
$ |
125 |
|
|
Additions |
|
— |
|
— |
| ||
|
Adjustments * |
|
(421 |
) |
— |
| ||
|
At December 31, 2013 |
|
$ |
81 |
|
$ |
125 |
|
* Includes reduced / reclaimed disturbance, BLM rate changes, and transfer into the approved PoO.