Ann: Asset Impairment Flagged , page-22

Systematic,

You are right about the increased capitalisation .... Believe it or not, the accountants allowed CCU to increase the value of its asset because of its failure to get it into production on time and on budget .... So all of the additional costs (high pressure spray, ball mill, stockpiling etc ...) that have been necessary to get the mine still-not-up-to production capacity have been included in the value of the mine asset ....

Then come year end, the accountants say "hang on, with the POS lower than when we previously valued the mine, its worth less than before, so you need to write down its value. And moreover, since you increased the value of the mine by capitalising all that extra expenditure, you need to write it down by more in order to get to our current value".

Absolute gobbledygook.

Its pretty simple .... you are going well (as management) if more money goes into your company's bank account each month than goes out.

You are going well (as a shareholder) if:

A - management is going well as defined above; AND

B - management doesn't blow that extra cash on buying a crappy asset that builds its empire at your expense and returns that extra cash to you.

The accountants' gobbledygook will only serve to determine if the money going back to shareholders is called "capital return" or "unfranked dividend" or "franked dividend".

We can keep cutting and dicing it, but CCU needs to produce 200koz/month from Aug-Dec AND defer the $2.5m December debt repayment OR produce 250Koz/month from Aug-Dec otherwise it will run out of cash. POS has some impact, but on my calcs it doesn't really change the situation if its anywhere between AU$22/oz and AU$25/oz, remembering that the first 60koz per month is not effected by the POS as its hedged.

Tuskan,

I have $15.5m for Exploration / Development and Production in Dec-qtr. Absolute guesstimate.

GLTA.