As used in herein, the terms “Timberline,” the “Company,” “we,” “us,” and “our” refer to Timberline Resources Corporation.
Our business is mineral exploration in Nevada with a focus on district-scale gold projects such as our district-scale Eureka Project, where we are focused on delivering high-grade Carlin-type gold discoveries. The Eureka property includes the historic Lookout Mountain and Windfall Mines in a total property position of approximately 24 square miles (62 square kilometers). The Eureka mineral resource was reported in compliance with Canadian NI 43-101 in an Updated Technical Report on the Lookout Mountain Project by Mine Development Associates, Effective March 1, 2013, filed on SEDAR April 12, 2013:
Effective January 1, 2021, the Securities and Exchange Commission (“SEC”) adopted amendments to modernize the property disclosure requirements for mining registrants and related guidance, which are currently set forth in Item 102 of Regulation S-K Subpart 1300 under the Securities Act of 1933 and the Securities Exchange Act of 1934. The amendments more closely align the SEC’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards.
We are also operator of the Paiute Joint Venture Project with Nevada Gold Mines in the Battle Mountain District. These properties all lie on the prolific Battle Mountain-Eureka gold trend. We also control the Seven Troughs Project in northern Nevada, which is one of the state’s highest-grade former gold producers. We control over 43 square miles (111 square kilometers) of mineral rights in Nevada. Detailed maps and mineral resource estimates for the Eureka Project and NI 43-101 technical reports for its projects may be viewed at http://timberlineresources.co/.
Exploration activities during the quarter ending June 30, 2022 focused on the Eureka Project, where a sizable drill campaign concluded during the middle of January 2022. That drilling was concentrated on the Water Well Zone (WWZ), near the Lookout Mountain Resource, and the Oswego target, approximately 1km to the east. The Company received, interpreted, and reported results from that program through May 2022. Having reported strong drill results that the Company believed warranted follow-up, work began during the quarter to plan the 2022 drill campaign. Timberline worked with its environmental and permitting contractor to update the work program within its Lookout Mountain plan of operations with the Bureau of Land Management.
Highlights of the 2021-2022 exploration program completed during January 2022 include:
During the quarter ending March 31, 2022, the Company reported the majority of the drill results from the 2021 drill campaign, including the following highlights:
During the quarter ending June 30, 2022, Timberline reported the final results from the 2021-2022 drilling campaign, these included several drill holes from the Oswego target, one hole from the WWZ, and final multielement results from one hole into the Graben Zone.
Due to a lack of availability of drill crews in Nevada, we were forced to split our 2021 drill program into two phases. The first phase was comprised of five RC holes that were completed during July and August 2021; we reported those results on October 27, 2021. The RC drill rig returned to the property in October and drilled until mid-December 2021. A diamond core rig joined the drill program in November and worked until mid-January 2022. The assay results from this second phase of drilling were reported during the quarters ending March 31 and June 30, 2022.
This second phase of drilling included completion of 23 drill holes totaling 4,859 meters (15,942 feet) aimed primarily at the WWZ and Oswego Targets. (Figure 1). A summary of the drill program RC, diamond core (core), and RC with core tails is included in Table 1.
The WWZ is immediately adjacent to the Lookout Mountain Resource and has the potential to significantly expand the resource at higher gold grades. Fourteen new drill holes, including six core holes, in the second phase of this drill program have added many more gold assays and much more geologic information to the WWZ target. We also drilled a core hole to the east of the WWZ as a test of the significant IP anomaly in the Graben Zone. We also completed nine RC holes at the Oswego Target, approximately one kilometer east of the WWZ, testing the downdip extension of the high-grade surface sampling reported in December (see our news release dated December 6, 2021).
Table 1. Compilation of 2021-2022 Phase 2 Drilling, Eureka Project (October – January)
Hole Type | No. of Holes | Meters Drilled | Target Area(s)* |
Reverse Circulation (RC) | 16 | 2,527 | WWZ (6); Oswego (9); LM (1) |
Diamond Core | 4 | 1,363 | WWZ (3), Graben Zone IP (1) |
RC/Core Tails | 3 | 969 | WWZ (3) |
Total | 23 | 4,859 | |
*WWZ: Water Well Zone; Oswego: Road-cut Au occurrence/Dugout Tunnel Fault; LM: Lookout Mountain Resource area |
The RC cuttings and drill core were logged in the Company’s Eureka, Nevada facility. Approximately 3,300 samples were collected and submitted to ALS Global, in Elko, Nevada for preparation and analysis.
Water Well Zone
The WWZ emerged during the last two quarters as hosting significant higher-grade gold intercepts over a large area. Repeated drill hole intercepts through the base of the Dunderberg Shale have yielded strong gold mineralization associated with a well-developed breccia horizon that has been intensely altered with increased presence of carbon, silica, and sulfides. Core holes BHSE-220C and 212C are the best holes drilled to date in the WWZ and they are separated by approximately 400 meters north to south. BHSE-220C is the northernmost hole in the WWZ and the intercept is open to the north and east. BHSE-212C is the farthest south hole in the WWZ, and the intercept is open to the south and east. We also reported results from a core hole approximately midway between these two holes (BHSE-192C). This hole confirmed a strong interval of gold mineralization in the same geologic unit (the base of the Dunderberg Shale). This mineralized interval is also open to the east. The current footprint of the WWZ is shown in Figure 1. Timberline’s objectives for ongoing exploration in the WWZ will be to both improve our understanding of the continuity of the zone and to grow it beyond its current footprint. To achieve these objectives, Timberline is planning to add more drill holes within this footprint and beyond it to the north, south, and east.
We also documented during the last two quarters that some of the RC drilling into the WWZ may have been biased low with respect to gold grade. The Company’s February 24, 2022, and March 24, 2022 news releases described comparative results from RC and core drilling in the northern portion of the WWZ. BHSE-220C was a core twin of BHSE-205, which was a RC hole. The final results from BHSE-220C indicated that core drilling recovered significantly higher grades from mineralized intervals than corresponding RC drilling.
This part of the WWZ mineralization is below the water table, which can affect sample quality in RC drilling. Fine-grained material may be washed away during the drilling and sampling process, and drill cuttings may be washed downhole from higher up. Either circumstance could result in under-reporting of gold grades when sampling with RC drilling below the water table. Core drilling is generally regarded as superior to RC drilling for the quality of both assays and geological information, but it is also much more costly.
The initial indication from incomplete and expedited assays was that the core drilling yielded considerably higher-grade gold than did the RC drilling. The complete results for BHSE-220C confirmed that both drill holes encountered a zone of very similar geology and thickness, and the grades over the full interval are significantly higher in the drill core.
Table 2 – Comparison of Average Mineralized Intervals in Twinned* Drill Holes
Hole | Type | Inclination (°) | From (m) | To (m) | Interval (m) | Gold (g/t) |
BHSE-205 | RC | -90 | 138.7 | 175.3 | 36.6 | 1.06 |
BHSE-220C | Core | -90 | 140.8 | 185.0 | 44.2 | 4.10 |
* - Drill holes collared approximately 2 meters apart from same drill pad |
Figure 1. Location of 2021-2022 Drilling at the Eureka Project, the Water Well Zone and Oswego Targets
The additional assays received since the earlier news release were from a lower-grade interval below the previously reported high-grade. Both the RC and core drilling encountered this lower-grade zone, and a direct comparison between the assays in the two drill holes is shown in Figure 2. The overall grade of the core interval also increased slightly from the February report due to the inclusion of one overlimit assay (a repeat assay on samples that assay above 10 g/t in the initial analysis).
Much of the drilling in the WWZ encountered significant groundwater inflow during drilling. As previously reported in October 2021, Timberline increased the proportion of core drilling in the WWZ during this program to evaluate the reliability of gold grades and increase the confidence of geological interpretations. This newly discovered part of the WWZ is much thicker and higher grade than expected, and it is wide open for follow-up drilling to the north, northwest, and east. The intercept from BHSE-220C, which is 400m south from BHSE-220C, confirmed the highest grade and thickness yet drilled in the WWZ (See Company news release dated March 9, 2022).
Figure 2 - Comparison of Geology & Gold in Twinned Holes at WWZ
This phenomenon of drill sampling below the water table is well known in the gold exploration industry, as anecdotal reports and some comprehensive studies have demonstrated higher gold grades from core drilling in comparison to twin RC drill holes. The difference reported here is higher than expected, but this result is from only one pair of twin holes. The data so far suggest that the recent RC drilling in the WWZ may have underestimated the actual gold grade. The Company continues to assess the geology, assay, and quality control data before drawing conclusions from these data but plans to twin additional RC holes during 2022.
At the time of this writing, the Company has commenced its 2022 drill program but has not yet reported new results. The current drill plan includes additional core holes in close proximity to RC holes that encountered significant gold during the 2020 or 2021 drill programs. In addition, the 2022 drill plan includes primarily core drilling within the WWZ footprint, though RC drilling has been used to drill the upper portions of several of these core holes (above the water table). This technique, known as pre-collaring, saves considerable expense by utilizing cheaper RC drilling for the upper part of deeper drill holes. It should also be noted that Timberline has also changed RC drilling contractors for the 2022 drill program. Our technical team will continue to evaluate the efficacy and appropriateness of RC drilling at the Water Well Zone, but the less expensive drilling method clearly has a place in a well managed exploration project.
Oswego Target
The Oswego Target lies approximately 1.0km from the eastern margin of the WWZ, or 1.2km from the Lookout Mountain Resource. Oswego is a historic gold showing with limited historic mining (late 19th and/or early 20th century) and exploration during the early 1990s. The area is cut by a large north-south fault zone known as the Dugout Tunnel Fault (DTF). The DTF is analogous to the Lookout Mountain Fault zone that occurs just west of Timberline’s Lookout Mountain resource. Surface sampling at Oswego has repeatedly returned high-grade gold from the fault itself, where the Eldorado Dolomite is highly silicified. During the 2021 program, we drilled 9 RC holes in and around the Oswego Target area. The 2021 drilling was aimed at confirming historic drill results and testing the downdip continuity of the surface gold zone.
Prior to the drilling, we also completed systematic channel sampling at the Oswego Target during the quarter ending December 31, 2021. Our geologists collected 67 channel and rock samples along the 65-meter strike length of an exposed fault scarp, where historic results had indicated the presence of high-grade gold. Sampling was focused along the Trench Fault and associated cross structures. There is a zone of alteration and mineralization approximately 10 meters wide, which is pervasively oxidized at surface. The sampling consisted of continuous chip and channel samples utilizing diamond saws and hammer drills. However, due to limited access and cliff-forming outcrops, some of the samples are along the strike of the fault in highly silicified Eldorado Dolomite (channel samples). Where possible, we employed an excavator to cut trenches across the structure. In the trenches, the sampling likely represents true width of mineralization perpendicular to the fault (trench samples).
The results from the surface sampling at Oswego corroborate historic sampling that indicated a long zone of outcropping structure containing 12 to 13 g/t gold (See Company news release dated June 12, 2018). The newer data provided better information on the continuity and dimensions of the mineralized structure. The results are summarized in Figure 3.
Oswego is separated from the Lookout – WWZ trend by a basin with volcanic rocks at surface and underlain by extensive faulting, potential host rocks for Carlin-type gold, and fine-grained altered intrusive rocks (see Company news release dated March 24, 2022). This structural corridor includes both Cambrian and Ordovician aged host rocks that Timberline intends to drill test. These rocks include the Dunderberg Shale, the host of Carlin-type mineralization at the WWZ and Lookout Mountain, and the Goodwin and Ninemile Formations, which are prolific hosts of gold at the Ruby Hill Mine (i80 Gold Corp.) in the north of the Eureka District. We completed nine shallow RC holes into the Oswego alteration zone to test the downdip extension of the surface mineralization.
Timberline reported the results of the 2021 drilling at Oswego in May of 2022, some highlights are shown below:
| · | 35.1m at 2.32 g/t gold (oxide) from 6.1m depth in BHSE-213, |
| o | including 19.8m at 3.93 g/t gold from 7.6m depth; and |
| · | 13.7m at 1.31 g/t gold from 3.0m depth in BHSE-215, |
| o | including 6.1m at 2.49 g/t gold from 9.1m depth, |
Figure 3 – Geology, Sampling, and Drilling at the Oswego Target
Most of the 2021 Oswego drill holes (BHSE-202, 207, and 213 – 217) were positioned west of the fault zone and drilled at an angle to undercut surface mineralization and cut across the structure. The logs of the drill cuttings indicate that most of these holes were collared in the Secret Canyon Formation, which consists of platy brown to orange chips of argillaceous material (shale) with a high carbonate content. Drilling progressed through the shale into an apparent faulted contact with the Eldorado Dolomite, which was normally brown to reddish-brown or black, very fine-grained jasperoid (silicified sedimentary rock). The relationship of the fault to the shale and dolomite is complex, but all of the drill holes in this area bottomed in the dolomite.
The gold mineralization at Oswego is most often associated with, or centered upon, the silicified fault (jasperoid). However, some of the highest gold grades occur in altered dolomite or in sediments at the margins of the jasperoid. Drillholes BHSE-213 and -207 tested the southern extent of high gold in surface samples. The shallow gold zone appears to be cut off on the south, and additional mapping and sampling is required to understand the controls of gold in that area. All the drillholes in this area encountered highly anomalous gold (>0.100 g/t) well into the Eldorado Dolomite. None of the drill holes reached sufficient depth to test other favorable host rocks that are interpreted to lie at depth along this structure, such as the Ninemile Formation.
The 2022 drill program will include several drill holes at the Oswego target, aimed at testing for downdip and lateral extensions of the shallow mineralization reported in 2021 and early 2022. There may also be deeper drilling into the graben west of Oswego to examine possible connections between Oswego and the Lookout/WWZ zones and possibly linked to the geophysical anomalies in this area.
Results of Operations for the nine months ended June 30, 2022 and 2021
Consolidated Results
(US$) | | Three Months Ended June 30, | | | Nine months Ended June 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Exploration expenses: | | | | | | | | | | | | |
Eureka | | $ | 808,519 | | | $ | 330,599 | | | $ | 2,462,543 | | | $ | 1,471,948 | |
Other exploration properties | | | 87,946 | | | | 97,309 | | | | 234,254 | | | | 356,032 | |
Total exploration expenditures | | | 896,465 | | | | 427,908 | | | | 2,696,797 | | | | 1,827,980 | |
Non-cash expenses: | | | | | | | | | | | | | | | | |
Stock option expenses | | | - | | | | 519,400 | | | | 44,321 | | | | 646,422 | |
Depreciation, amortization and accretion | | | 1,478 | | | | 1,408 | | | | 4,434 | | | | 4,224 | |
Total non-cash expenses | | | 1,478 | | | | 520,808 | | | | 48,755 | | | | 650,646 | |
Professional fees expenses | | | 61,234 | | | | 39,384 | | | | 155,938 | | | | 160,257 | |
Insurance expenses | | | 43,204 | | | | 38,766 | | | | 116,651 | | | | 102,367 | |
Salaries and benefits expenses | | | 71,819 | | | | 74,584 | | | | 219,750 | | | | 230,502 | |
Interest and other (income) expense | | | 228,479 | | | | 44,564 | | | | 251,505 | | | | 74,616 | |
Other general and administrative expenses | | | 148,270 | | | | 117,245 | | | | 283,499 | | | | 286,163 | |
Net loss | | $ | 1,450,949 | | | $ | 1,263,259 | | | $ | 3,772,895 | | | $ | 3,332,531 | |
Our consolidated net loss for the three months ended June 30, 2022 was $1,450,949, compared to a consolidated net loss of $1,263,259 for the three months ended June 30, 2021. Total exploration expenses of $896,465 were recorded on our statement of operations for the three months ended June 30, 2022, compared with $427,908 for the three months ended June 30, 2021. The year-over-year increase in net loss is due to the significant increase in exploration expenses made possible by the infusion of cash that occurred in May 2022, an increase in professional fees related to that financing, and increases in foreign exchange losses resulting from our private placement of May 2022, offset by reduced share-based compensation during the three months ended June 30, 2022 compared with June 30, 2021. Insurance expense was somewhat higher in the comparative period due to the normal increases the industry is experiencing.
Our consolidated net loss for the nine months ended June 30, 2022 was $3,772,895, compared to a consolidated net loss of $3,332,531 for the nine months ended June 30, 2021. Total exploration expenses of $2,696,797 were recorded on our statement of operations for the nine months ended June 30, 2022, compared with $1,827,980 for the nine months ended June 30, 2021. The year-over-year increase in net loss is due to the significant increase in exploration expenses made possible by the infusion of cash that occurred near the close of fiscal year 2020, exercises of warrants during the period and the May 2022 private placement, and increases in foreign exchange losses resulting from our private placement of May 2022. These were offset by a decrease in share-based compensation with no new stock options issued to directors, officers and consultants. Insurance expense was somewhat higher in the first nine months of 2021 due to the normal increases the industry is experiencing.
Subject to adequate funding in 2022, we expect to continue to incur exploration expenses for the advancement of our Eureka Project.
Financial Condition and Liquidity
At June 30, 2022, we had assets of $18,637,789, consisting of cash of $4,182,930, property, mineral rights and equipment of $13,875,085, net of depreciation, reclamation bonds of $528,643, and prepaid expenses, deposits and other assets in the amount of $51,131.
On June 30, 2022, we had total liabilities of $634,015 and total assets of $18,637,789. This compares to total liabilities of $570,144 and total assets of $17,716,406 on September 30, 2021. As of June 30, 2022, our liabilities consist of $122,681 for asset retirement obligations, $270,991 of senior unsecured note payable – related party, and $177,071 of trade payables and accrued liabilities and $63,272 of interest and expenses payable to related parties. Of these liabilities, $511,334 are due within twelve months. The liabilities compared to September 30, 2021, have changed as a result of a slight decrease in accrued payables offset by increases in accrued liabilities and accrued interest - related party. The increase in total assets was due to the increase in -cash from warrant exercises and the May 2022 private placement, with small increases to prepaid expense and other assets and mineral rights.
On June 30 2022, we had working capital of $3,717,027 and stockholders’ equity of $18,003,774 compared to working capital of $3,170,019 and stockholders’ equity of $17,146,262 for the year ended September 30, 2021. Working capital experienced a favorable change because of the increase in cash associated equity infusions and an increase in accounts payable and increases in accrued expenses – related party and accrued interest - related party. These were offset somewhat by a decrease in accrued expenses.
During the nine months ended June 30, 2022, we used cash from operating activities of $3,686,561, compared to cash used of $2,715,608 for the nine months ended June 30, 2021. The use of cash from operating activities results primarily from the net loss of $3,772,895 for the nine-month period ended June 30, 2022 compared to net loss of $3,332,531 for the nine months ended June 30, 2021. Each of the comparable periods experienced significantly different non-cash effects as a result of changes in stock-based compensation. Changes to the net loss for the comparative periods are described above.
During the nine-month period ended June 30, 2022, cash of $43,947 was used by investment activities, compared with cash of $14,571 provided for the nine-month period ended June 30, 2022. During the nine months ended June 30, 2021, we paid $54,000 for mineral rights and received a refund on our reclamation bonds of $10,053, compared to at June 30, 2021, we received $78,571 for lease payments to us for company-owned mineral properties offset by $64,000 paid for mineral rights.
During the nine-month period ended June 30, 2022, $4,586,086 was provided by financing activities, compared to cash of $2,739,417 provided during the nine-month period ended June 30, 2021. For the nine-month period ended June 30, 2022, cash of $4,439,587 was provided through the sale of stock and warrants, net of issuance costs, and $146,499 was provided by the exercise of warrants. For the nine-month period ended June 30, 2021, cash of $1,788,334 was provided through the sale of stock and warrants, $617,750 provided by the exercise of warrants and $333,333 from the proceeds from stock subscriptions paid for which stock had not yet been issued.
Going Concern:
The audit opinion and notes that accompany our consolidated financial statements for the year ended September 30, 2021 disclose a ‘going concern’ qualification to our ability to continue in business. These consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of our assets and the settlement of our liabilities in the normal course of our operations. Disruptions in the credit and financial markets over the past several years have had a material adverse impact on a number of financial institutions and investors and have limited access to capital and credit for many companies. In addition, commodity prices and mining equities have seen significant volatility which increases the risk to precious metal investors. Market disruptions and alternative investment options, among other things, make it more difficult for us to obtain, or increase our cost of obtaining, capital and financing for our operations. Our access to additional capital may not be available on terms acceptable to us or at all. If we are unable to obtain financing through equity investments, we will seek multiple solutions including, but not limited to, asset sales, corporate transactions, credit facilities or debenture issuances in order to continue as a going concern.
The consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. We believe that the going concern condition cannot be removed with confidence until the Company has entered into a business climate where funding of its activities is more assured. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.
At June 30, 2022, we had working capital of $3,717,027. We have a cash balance of $4,182,930 and $634,015 outstanding in total liabilities. As of the date of this report on Form 10-Q, we have sufficient cash to meet our normal operating commitments for the next 12 months. Therefore, we do not expect to be required to engage in financial transactions to increase our cash balance or decrease our cash obligations in the near term. However, we are an exploration company with exploration programs that require significant cash expenditures. A significant drilling program, such as those we have planned, will result in depletion of cash and return us to a position of insufficient cash to support normal operations for the following 12 months. Cash-raising efforts may include equity financings, corporate transactions, joint venture agreements, sales of assets, credit facilities or debenture issuances, or other strategic transactions.
We plan, as funding allows, to follow up on our positive drill results on our Eureka and Paiute Projects. Principally, we plan to execute drilling as part of the ongoing exploration program at Eureka. Also, subject to available capital, we may continue prudent exploration programs on our material exploration properties and/or fund some exploratory activities on early-stage properties.
We will require additional funding and/or reductions in exploration and administrative expenditures in future periods. Given current economic conditions, we cannot provide assurance that necessary financing transactions will be available on terms acceptable to us, or at all. Without additional financing, we would have to curtail our exploration and other expenditures while we seek alternative funding arrangements to provide sufficient capital to meet our ongoing, non-discretionary expenditures, and maintain our primary mineral properties. If we cannot obtain sufficient additional financing, we may be unable to make required property payments on a timely basis and be forced to return some or all of our leased or optioned properties to the underlying owners.
Financing Activities
On May 2, 2022, we closed a non-brokered private placement of the Company to accredited investors at a price of $0.25 per common share. We issued 18,933,705 common shares for cash proceeds of $4,733,426. Finders fees in the amount of $293,839 and 1,016,022 Series N Warrants were paid to licensed brokers and consultants in association with the offering. The warrants have a term of 18 months and are exercisable at $0.25 per common share.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
Critical Accounting Policies and Estimates
See Note 2 to the financial statements contained in this Quarterly Report for a summary of the significant accounting policies used in the presentation of our financial statements. We are required to make estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue and expenses. We believe that our most critical accounting estimates are related to asset impairments and asset retirement obligations.
Our critical accounting policies and estimates are as follows:
Asset Impairments - Carrying Value of Property, Mineral Rights and Equipment
Significant property acquisition payments for active exploration properties are capitalized. The evaluation of our mineral properties for impairment is based on market conditions for minerals, underlying mineralized material associated with the properties, and future costs that may be required for ultimate realization through mining operations or by sale. If no mineable ore body is discovered, or market conditions for minerals deteriorate, there is the potential for a material adjustment to the value assigned to such mineral properties.
We review the carrying value of equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment or abandonment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the equipment is used, and the effects of obsolescence, demand, competition, and other economic factors.
Asset Retirement Obligations
We have an obligation to reclaim our properties after the surface has been disturbed by exploration methods at the site. As a result, we have recorded a liability for the fair value of the reclamation costs we expect to incur at our Lookout Mountain Target on our Eureka Project, and our Paiute Project. We estimate applicable inflation and credit-adjusted risk-free rates as well as expected reclamation time frames. To the extent that the estimated reclamation costs change, such changes will impact future reclamation expense recorded. A liability is recognized for the present value of estimated environmental remediation (asset retirement obligation) in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The offsetting balance is charged to the related long-lived asset. Adjustments are made to the liability for changes resulting from passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation.