Ann: Full Year Results 2015, page-63

Peppie,

The non-cash impairment has no direct impact on AISC. It was a reduction in the carrying value of assets that had already been paid for in earlier accounting periods. ie.


Plant and equipment reduces from US$115.185m (FY14) to US$45.022m (FY15).
Exploration reduces from US$29.857m to US$11.027m.
Development reduces from US$231.886m to US$87.048m.

Hence total carrying value reduces from US$376.927m to US$143.097m.

This was forced by the fall in the market price of the company and the fall in the gold price relative to the book price of those assets held on the balance sheet at the end of FY15.

In the normal course of business the carrying value of these assets are worked off through non-cash debits to the Profit & Loss in a tapered manner over the life of mine as Depreciation and Amortisation (D&A). Hence, the impact of the impairment will be a sharp reduction in future D&A.

The Price/Book Value of the company is now at c. 0.3 (30%) whereas it would have been c. 0.15 (15%) without the impairment. The 30% Price/Book is one of the lowest out of 75 producers that I track. Frankly, it now looks a prime candidate for a predatory take-over with the drop in market value in total contradiction to the improvements made over the last year!

All-In-Sustaining- Costs (AISC) are made up by the addition of the following:

Cash Costs
Corporate Admin
Share based Payments
Reclamation & Remediation
Corporate Social responsibility
Mine exploration & Study
Realised gains/losses on hedges
Capitalised stripping & UG Development
Sustaining Capital Expenditure

The total of all those outlays is then divided by oz of gold sold to give the AISC/oz.

Given the improvements to haulage capacity and the reducing requirement for the haulage of waste versus ore in the months ahead, coupled with improved levels of ore grade, it would appear reasonable to assume that production will rise relative to oz sold - thus AISC should improve over the current FY16.
CPDLC