included in the cost of inventory produced during the period except for stripping costs incurred to provide access to sources of reserves that will be produced in future periods and would not otherwise have been accessible, which are capitalized to the cost of mineral property interests and depleted on a unit-of-production method over the reserves that directly benefit from the stripping activity. 

When a mine construction project moves into the production stage, the capitalization of certain mine costs ceases and costs are either charged to inventory or expensed. Mining costs incurred to stockpile ores for production are charged to inventory. 

From time to time, the Company may acquire or dispose of a mineral property interest pursuant to the terms of an option agreement. As such options are exercisable entirely at the discretion of the optionees, the amounts payable or receivable are not recorded at the time of the agreement. Option payments are recorded as property costs or recoveries when the payments are made or received. 

i. Income taxes 

Income taxes are accounted for using the liability method. Under this method, future income tax assets and liabilities are determined based on differences between the financial statement carrying values and their respective income tax bases. The amount of future income tax assets recognized is limited to the extent that they are considered, more likely than not, to be realized. Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. 

j. Earnings (loss) per share 

Basic earnings (loss) per share is calculated using the weighted average number of common shares outstanding during the year. 

Diluted earnings (loss) per share is calculated using the treasury stock method. Under the treasury stock method, the weighted average number of shares outstanding used in the calculation of diluted earnings (loss) per share assumes that the deemed proceeds received from the exercise of stock options, agents’ options, share purchase warrants and similar instruments that are “in the money” would be used to repurchase common shares of the Company at the average market price during the year. The dilutive effect of convertible securities is determined using the “if converted” method. Common share equivalents consisting of stock options, warrants and convertible securities are not considered in the computation of diluted earnings (loss) per share where their effect would be anti-dilutive. 

Shares held in escrow, other than where their release is subject to the passage of time, are not included in the calculation of the weighted average number of common shares outstanding. 

k. Stock-based compensation 

The Company accounts for stock purchase options granted to directors, employees and consultants and other stock- based payments using the fair value based method. Under this method, compensation expense for options granted is determined based on estimated fair values of the options using the Black-Scholes option pricing model. For employees and directors, the fair value of the options is measured at the time of grant. For non-employees the fair value of the options is measured at the time of grant if they are fully vested and non-forfeitable, or the earlier of the date the performance is completed or the performance commitment is reached. The cost is recognized over the vesting or service period of the respective options and, with a corresponding increase to contributed surplus, is either capitalized to mineral property interests for grants to individuals working directly on mineral projects, capitalized to construction costs for grants to individuals working directly on construction of Selinsing, charged to inventory for grants to individuals working directly on mining or processing activities, or charged against operations otherwise. When stock options are exercised, the corresponding fair value is transferred from contributed surplus to share capital. 

