Silver Falcon Mining Inc. (fka SFMI)

[Monypit]

Keg, Mr Cowboy Pickle and other investors - here is a correspondence with RK about the reported Inventory numbers. All others can skip my post. Read from bottom up, as it is an Email thread

AS of 12/31/10 SFMI’s inventory represented only ore transport costs. Company decided that mill operating costs in 2010 should be expensed as the mill was in start-up.
During Q1, SFMI continued with that policy. In addition, no ore was transported during Q1 due to winter conditions on the mountain. That’s why inventory has not changed.
SFMI’s CFO and auditors are being very conservative in their accounting pronouncements.
The second qtr. ending June 30, 2011, the Company will expand their note disclosure/discussion to better explain the accounting during this current period ( ½ way through 2nd qtr).

From:
Sent: Tuesday, May 17, 2011 8:17 PM
To: [e-mail]
Subject: Re: concerning 10Q

Thank you for your response, but that description was already to be had, within the 10Q, which I read already.
Insight is what I was asking for as to you current valuation rationale and to what extent was work or progress, being for the whole first quarter, as inventory represented was not changed for the quarter but expenses increased.
If you are stating that the valuation for inventory at year end is the lower of estimated cost incurred or estimated net realizable value, then the whole milling operation to date, has only a worth 300k per asset value?
If per stock pile,then all the tailing is worth 300k
Finished product has already been reported at 8k so that cannot be subjective to the inventory numbers as it is already sold to the smelter and already reported within the annual report.
Please inform the valuation means, because investment decisions will be made due to your response.
As again, thank you very much for your time
xxxxxx

In a message dated 5/17/2011 4:28:30 P.M. Eastern Daylight Time, [e-mail] writes:

Inventories are stated at the lower of average costs incurred
or estimated net realizable value. Major types of inventories include materials and supplies and metals product inventory, which is determined by the stage at which the ore is in the production process (stockpiled ore, work in process and finished goods).
Materials and supplies inventory are valued at the lower of average cost or net realizable value.
Stockpiled ore inventory represents ore that has been mined, hauled to the surface, and is available for further processing. Stockpiles are measured by estimating the number of tons added and removed from the stockpile, the number of contained metal ounces or pounds (based on assay data) and the estimated metallurgical recovery rates (based on the expected processing method). Stockpile ore tonnages are verified by periodic surveys. Costs are allocated to a stockpile based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the ore, including applicable overhead, depreciation, depletion and amortization relating to mining operations, and removed at each stockpile’s average cost per recoverable unit.
Work in process inventory represents materials that are currently in the process of being converted to a saleable product and includes inventories in our milling process. In-process material is measured based on assays of the material fed into the process and the projected recoveries of the respective plants. In-process inventories are valued at the average cost of the material fed into the process attributable to the source material coming from the mines and stockpiles, plus the in-process conversion costs, including applicable depreciation relating to the process facilities incurred to that point in the process.
Finished goods inventory includes bullion doré and concentrates at our operations, bullion doré in transit to refiners and bullion dore in our accounts at refineries. Inventories are valued at the lower of full cost of production or net realizable value based on current metals prices.

From:
Sent: Tuesday, May 17, 2011 4:23 PM
To: [e-mail]
Subject: concerning 10Q

I am a shareholder and have been for years. This is the first time I feel the need to contact you on the company and its regulatory filings, due to the dramatic drop in SP that we saw today. Please feel free to use Accounting terminology if need be. My question is on the reporting for Inventory for the 10Q for 2011.

MARCH 31, 2011
DECEMBER 31, 2010

(UNAUDITED)
(AUDITED)
ASSETS


Cash
$ 81,567
$ 61,530
Inventories
352,911
352,911
Total current assets
434,478
414,441

Question on 10Q:
On an accounting stand point, why did the 10Q not reflect the additional concentrate that was put through the mill?
Whether it is a percentage of completion or other means for the calculation of inventory available for sales. As Y/E 2010 and the 1st Qtr Inventory amounts in the B.S. are identical, represented at $352,911. Though investor relations and all other expense cats. went up along with milling overhead charges, but the reflecting of the additional concentrate did not move the asset numbers presented. Even if representation at the lower of cost, raw tailings may be identified as lower than processed material, but processed material should have been carried on the books at a higher value, as it is closer to being available for sale, but not at market value for raw Au or Ag.
Thank you for your time and attention to my question
Sincerely,
xxxxxx


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