The Company's financial instruments consist of cash and cash equivalents accounts receivable, trade accounts payable and accrued liabilities, and derivative liabilities. Cash and cash equivalents are classified as fair value through profit or loss, and are measured at fair value at initial recognition and at each reporting date. Accounts receivable are designated as loans and receivables and accounted for at amortized cost on initial recognition and at each reporting date. Trade accounts payable, accrued liabilities and income taxes payable are classified as other financial liabilities and accounted for at amortized cost upon initial recognition and at each reporting date. The Company's non-functional currency denominated common share purchase warrants are considered derivative instruments and were measured at fair value on initial recognition. Changes in fair value at each reporting date is recognized in the consolidated statement of operations.
Cash and Cash Equivalents: Cash and cash equivalents include demand deposits held with banks and highly liquid investments with remaining maturities of three months or less at acquisition date. For purposes of reporting cash flows, the Company considers all cash accounts that are not subject to withdrawal restrictions or penalties to be cash and cash equivalents.
Property, Plant and Equipment: Property, plant and equipment are stated at historic cost. The Company has the following sub-categories of equipment with useful lives and depreciation methods as follows:
-- Machinery and equipment - 10 years, 10% per year-- Office equipment - 10 years, 10% per year-- Computer and communication equipment - 5 years, 20% per year-- Fleet and transportation equipment - 5 years, 20% per year
The cost of assets sold, retired, or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts. Expenditures for maintenance and repairs are charged to expense as incurred.
Exploration Costs: Exploration costs are incurred in gathering the information necessary to determine whether a particular property can become a commercially viable operating mine and include costs to determine whether a property adjacent to a property with Proven and Probable Reserves has Proven and Probable Reserves, whether Inferred Resources can be classified as Measured and Indicated Resources, or whether Measured and Indicated Resources can be converted to Proven and Probable Reserves. These costs are expensed as incurred. When it has been determined than an exploration property can be economically developed as a result of establishing Proven and Probable Reserves, costs incurred prospectively to develop the property and place it into commercial production are classified as development costs and capitalized as they are incurred until the asset is ready for its intended use.
Costs to acquire mineral properties as part of an asset acquisition are capitalized and represent the property's fair value at the time it was acquired.
Interest cost is capitalized for qualifying assets during the period in which the asset is being installed and prepared for its intended use. Capitalized interest cost is amortized on the same basis as the related asset. No interest costs were capitalized for the periods ended 31 December 2011 and 2010.
Impairment of non-financial assets: The carrying amount of the Company's property plant and equipment is reviewed at a minimum each reporting period to determine if there is any indication of impairment. If indicators of impairment exists, the fair value less costs to sell of the asset is estimated and compared to the carrying value to determine the extent of the impairment and is recorded in the statement of operations and comprehensive income.