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EX-31.2 - EXHIBIT 31.2 - SILVER BULL RESOURCES, INC.ex31x2.htm
EX-32.2 - EXHIBIT 32.2 - SILVER BULL RESOURCES, INC.ex32x2.htm
EX-32.1 - EXHIBIT 32.1 - SILVER BULL RESOURCES, INC.ex32x1.htm
EX-31.1 - EXHIBIT 31.1 - SILVER BULL RESOURCES, INC.ex31x1.htm
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10-Q - FORM 10-Q FOR THE PERIOD ENDED 1/31/2012 - SILVER BULL RESOURCES, INC.svbr_10q-013112.htm
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Financial Instruments
3 Months Ended
Jan. 31, 2012
Financial Instruments [Abstract]  
Financial Instruments

NOTE 16 – FINANCIAL INSTRUMENTS

Fair Value Measurements

All financial assets and financial liabilities are recorded at fair value on initial recognition. Transaction costs are expensed when they are incurred, unless they are directly attributable to the acquisition of qualifying assets, in which case they are added to the costs of those assets until such time as the assets are substantially ready for their intended use or sale.

The three levels of the fair value hierarchy are as follows:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2

Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

 

Level 3

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of January 31, 2012 and October 31, 2011, the Company had no financial or non-financial assets or liabilities required to be reported for fair value purposes.

The carrying amounts of the Company's financial instruments, including cash and cash equivalents, restricted cash, other receivables, accounts payable, accrued liabilities and expenses approximate fair value at January 31, 2012 and October 31, 2011 due to the short maturities of these financial instruments.

Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Company by failing to discharge its obligations. To mitigate exposure to credit risk on financial assets the Company has established policies to ensure liquidity of funds and ensure counterparties demonstrate minimum acceptable credit worthiness.

The Company maintains its US Dollar and Canadian Dollar ("$CDN") cash and cash equivalents in bank and demand deposit accounts with major financial institutions with high credit standings. Cash deposits held in the United States are insured by the Federal Deposit Insurance Corporation ("FDIC") for up to $250,000 and $CDN cash deposits held in Canada are insured by the Canada Deposit Insurance Corporation ("CDIC") for up to $CDN 100,000. Certain United States and Canadian bank accounts held by the Company exceed these federally insured limits or are uninsured as they related to US Dollar deposits held in Canadian financial institutions. As of January 31, 2012 and October 31, 2011, the Company's cash and cash equivalent balances held in United States and Canadian financial institutions included $10,570,576 and $4,008,674 respectively, which was not insured by the FDIC or CDIC. The Company has not experienced any losses on such accounts and management believes that using major financial institutions with high credit ratings mitigates the credit risk in cash.

The Company also maintains cash in bank accounts in Mexico and Gabon. These accounts are denominated in the local currency and are considered uninsured. As of January 31, 2012 and October 31, 2011, the US dollar equivalent balance for these accounts was $443,367 and $116,451, respectively.

Interest Rate Risk

The Company holds substantially all of the Company's cash and cash equivalents in bank and demand deposit accounts with major financial institutions. The interest rates received on these balances may fluctuate with changes in economic conditions. Based on the average cash and cash equivalent and restricted cash balances during the three months ended January 31, 2012, a 1% decrease in interest rates would have resulted in a reduction in interest income for the period of approximately $3,379.

Foreign Currency Exchange Risk

Certain purchases of labor, operating supplies and capital assets are denominated in $CDN, $MXN, Central African Francs ("$CFA") or other currencies. As a result, currency exchange fluctuations may impact the costs of our operations. Specifically, the appreciation of the $MXN, $CDN or $CFA against the US dollar may result in an increase in operating expenses and capital costs in US dollar terms. To reduce this risk as of January 31, 2012, the Company maintains minimum cash balances in $CFA and $MXN. As of January 31, 2012, the Company maintained the majority of its cash balance in $US dollar. The Company currently does not engage in any currency hedging activities.