Ann: Half Year Results December 2015, page-61

Fangk

No, as i said I would need to do some digging and my brain is not functioning.

About 18-24 months ago when my brain was functioning a lot better I posted a lot of commentary why we should disregard the profit figures posted by the company (there were a lot of posts by me, CPDLC and chuk on this issue - perhaps check it out) - it is to do with the fact that there is so much mine development costs that capitalising them and then depreciating them over time is not appropriate in this case. The significant costs that is tunnel building to access ore should not be capitalised in the case of MML because those tunnels are needed to access ore and once the ore in an area has been extracted then there is no more ore there and they have to keep building more tunnels and shafts (ie it is actually an ongoing cost that should be fully expensed each period as it is incurred).

Under the accounting standards these capitalised expenses may be counted as an asset in the accounts and expensed over time as depreciation, when in fact they are nolonger an asset in the sense there is no more income to be derived in the areas that has been mined.

MML recently wrote of a massive amount of their past capital expenditure on these tunnels and mines as a loss (have a look at their past accounts).

All of this is legitimate according to the Oz accounting standards but is meaningless in terms of what cash margins a company actually earns after all expenses incurred.

Hence I simply disregard the standard accounting profits and use ASIC as the chief guide. MML took a long time but finally in the last year provided AISC after many shareholder complaints that they were "cooking the books" (done legitimately by the accounting standards but useless on which to base ones investment decisions).

I have a strong belief that their AISC figures now provides a fair representation of all ongoing operational costs in generating their income, having spoken with the company - plus the fact that they are able to fund their development costs without seeking more funds from us or extensive borrowings (unlike so many other goldies).

People who think the that their profit figures are correct are deluding themselves. They will not be able to pay out dividends based on the way they currently construct their accounts. Any dividends paid will be from the operating margins that are the difference between gold price and AISC.

If you look at EVN's recent quarterly report you will see that they include some of their sustaining mine development costs in the AISC figure they generate but there is an additional component that they capitalise - so in a way MML's AISC figure is better than what EVN supplies.

Sorry but I have to end this here.

loki (a really lousy old accountant - only got my CPA when I was 60 years, never actually worked as one, and now my brain has gone bunk on me.)