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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
Annual Report 2016 85
Notes to the consolidated financial statements
30 June 2016
(continued)
14 Mine properties (continued)
(a) Recognition and measurement (continued)
(i)
Mine properties (continued)
Mine properties in production
Mine properties in production represent the accumulation of all acquisition, exploration, evaluation and development
expenditure incurred by or on behalf of the Group in relation to areas of interest in which mining of the mineral resource
has commenced. When further development expenditure, including waste development and stripping, is incurred in
respect of a mine property after the commencement of production, such expenditure is carried forward as part of the
cost of that mine property only when substantial future economic benefits are established, otherwise such expenditure is
classified as part of the cost of production.
Amortisation is provided on a units-of-production basis, with separate calculations being made for each mineral
resource. The units-of-production method results in an amortisation charge proportional to the depletion of the
economically recoverable mineral resources (comprising proven and probable reserves).
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward
costs in relation to that area of interest. An impairment exists when the carrying value of mine properties exceeds its
estimated recoverable amount. The asset is then written down to its recoverable amount and the impairment losses are
recognised in profit or loss.
(ii)
Deferred stripping
Stripping activity costs incurred in the development phase of a mine are capitalised as part of the cost of constructing
the mine and subsequently amortised over the life of the mine on a units-of-production basis.
Stripping activity incurred during the production phase of a mine is assessed as to whether the benefit accruing from
that activity is to provide access to ore that can be used to produce ore inventory, or whether it in addition provides
improved access to ore that will be mined in future periods.
To the extent that the benefit from the stripping activity is realised in the form of inventory produced, the Group accounts
for those stripping activity costs in accordance with AASB102
Inventories
. A stripping activity asset is brought to account
if it is probable that future economic benefits (improved access to the ore body) will flow to the Group, the component of
the ore body for which access has been improved can be identified and costs relating to the stripping activity can be
measured reliably.
The amount of stripping activity costs that are capitalised is determined based on a comparison of the stripping ratio in
the relevant period with the life of mine stripping ratio. To the extent that there is a period of sustained stripping that
exceeds the average life of mine stripping ratio, mine waste stripping costs are capitalised to the stripping activity asset.
Such capitalised costs are amortised over the life of that mine on a units-of-production basis. The life of mine ratio is
based on ore reserves of the mine. Changes to the life of mine are accounted for prospectively.
(b) Key estimates and judgements
(i)
Proved and probable ore reserves
The Group uses the concept of a life of mine as an accounting value to determine the amortisation of mine properties. In
determining life of mine, the Group prepares ore reserve estimates in accordance with the JORC Code 2012, guidelines
prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian
Institute of Geoscientists and Minerals Council of Australia. The estimate of these proved and probable ore reserves, by
their very nature, require judgements, estimates and assumptions.
Where the proved and probable reserve estimates need to be modified, the amortisation expense is accounted for
prospectively from the date of the assessment until the end of the revised mine life (for both the current and future
years).
(ii)
Deferred stripping
The Group defers advanced stripping costs incurred during the production stage of its operations. This calculation
requires the use of judgements and estimates, such as estimates of tonnes of waste to be removed over the life of the
mining area and economically recoverable reserves extracted as a result. Changes in a mine's life and design may
result in changes to the expected stripping ratio (waste to mineral reserves ratio). Any resulting changes are accounted
for prospectively.
Independence Group NL
57