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7.
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ASSET RETIREMENT OBLIGATION
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September 30, 2012
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December 31, 2011
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Balance, beginning of period |
$ |
171,395
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$ |
155,395
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Accretion expense |
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12,000
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16,000
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Balance, end of period |
$ |
183,395
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$ |
171,395
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The Company has a legal obligation associated with its mineral properties for clean up costs when work programs are completed.
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The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated at $220,000
(2011 - $220,000). The obligation was calculated using a credit- adjusted risk free discount rate of
10% and an inflation rate of
2%. It is expected that this obligation will be funded from general Company resources at the time the costs are incurred. The Company has been required by the Ghanaian government to post a bond of $220,961
which has been recorded in restricted cash with accrued interest ($220,961
at September 30, 2012).
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