Mineral Resources and Reserves

4. PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION

4.1 General

Property, plant and equipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing part of such plant and equipment when that cost is incurred if the recognition criteria are met. The carrying amounts of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.

An item of property, plant and equipment is derecognised upon disposal or when future economic benefits are no longer expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. When an item of plant and equipment comprises a number of significant components each with different useful lives, these components are recorded and depreciated as separate items. Expenditure incurred to replace or modify a significant component of plant is capitalised and any remaining book value of the original component is expensed in the income statement.

The costs of adding to, replacing part of, or servicing an item, following a major inspection, are recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied.

4.2 Production stripping costs

The capitalisation of pre-production stripping costs as part of mine development and decommissioning assets ceases when the mine is commissioned and ready for production.

Where the benefits of production stripping costs are realised in the form of inventory produced in the period, the production stripping costs are accounted for as part of the cost of producing those inventories. Where production stripping costs are incurred, resulting in the creation of mining flexibility and improved access to orebodies to be mined in the future, the costs are recognised as a non-current asset. These are referred to as stripping activity assets, if:

–	future economic benefits (being improved access to the orebody concerned) are probable;
–	the component of the orebody for which access will be improved can be accurately identified; and
–	the costs associated with the improved access can be reliably measured.

If these criteria are not met, the production stripping costs are charged to the income statement as operating costs.

The stripping activity asset is initially measured at cost, which consists of the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of the orebody and an allocation of directly attributable overhead costs. If incidental operations are occurring at the same time as the production stripping activity, but are not necessary for the production stripping activity to continue as planned, these costs are not included in the cost of the stripping activity asset. In the event that the costs of the stripping activity asset and the inventory produced are not separately identifiable, a relevant production measure is used to allocate the production stripping costs between the inventory produced and the stripping activity asset.

The stripping activity asset is subsequently depreciated over the life of the identified component of the orebody that became more accessible as a result of the stripping activity. Based on Proven and Probable Reserves, the units-of-production method is used to determine the expected useful life of the identified component of the orebody that became more accessible.

4.3 Prospecting, exploration, mine development and decommissioning assets

Costs related to property acquisitions and mineral and surface rights related to exploration are capitalised and depreciated over a maximum period of 25 years. All exploration expenditures are expensed until they result in projects that are evaluated as being technically and commercially feasible and from which a future economic benefit stream is highly probable.

Exploration expenditure incurred on greenfield sites where the company does not have any mineral deposits which are already being mined or developed, is expensed as incurred until a bankable feasibility study has been completed after which the expenditure is capitalised.

Exploration expenditure incurred on brownfield sites, adjacent to any mineral deposits which are already being mined or developed, is expensed as incurred until the company has obtained sufficient information from all available sources to ameliorate the identified project risk areas and which indicates by means of a pre-feasibility study that the future economic benefits are highly probable.

Exploration expenditure relating to extensions of mineral deposits which are already being mined or developed, including expenditure on the definition of mineralisation of such mineral deposits, is capitalised and depreciated on a straight-line basis over a maximum period of 25 years.

Activities in relation to evaluating the technical feasibility and commercial viability of Mineral Resources are treated as forming part of exploration expenditures.

Refer item 12.1 for the decommissioning assets accounting policy.

Underground mine development includes all directly attributable development costs, including those incurred prior to the commencement of stoping, are capitalised when incurred

4.4 Depreciation

Depreciation of the various types of assets is determined on the following bases:

Mineral and prospecting rights
Mineral Reserves, which are being depleted, are amortised over their estimated useful lives using the units-of-production method based on Proven and Probable Ore Reserves. Where the reserves are not determinable, due to their scattered nature, the straight- line method is applied. The maximum rate of depletion of any mineral right is 25 years. Mineral rights which are not being depleted are not amortised. Mineral rights which have no commercial value are written off in full.

Land and buildings
Land is not depreciated. Owner-occupied properties, which are designed for a specific use, are only depreciated if carrying value exceeds estimated residual value, in which case they are depreciated to estimated residual value on a straight-line basis over their estimated useful lives. The annual depreciation rates used vary up to a maximum of a period of 25 years.

Mine and industrial properties are depreciated to estimated residual values at the lesser of life-of-mine and expected useful life of the asset on the straight-line basis.

Plant, machinery and equipment
Mining plant, machinery and equipment is depreciated over the lesser of its estimated useful life, estimated at between five and 25 years (being the remaining life of the mine), and the units-of-production method based on estimated Proven and Probable Ore Reserves. Where Ore Reserves are not determinable, due to their scattered nature, the straight-line method of depreciation is applied.

Industrial plant, machinery and equipment is depreciated on the straight-line basis, over its useful life, up to a maximum of 25 years.

Vehicles
Vehicles are depreciated on the straight-line basis. The annual depreciation rates used vary between five and nine years.

Furniture and fittings
Furniture and fittings are depreciated on the straight-line basis. The annual depreciation rates used vary between three and 10 years.

Office equipment
Office equipment is depreciated on the straight-line basis. The annual depreciation rates used vary between two and 11 years.

Computer hardware
Computer hardware is depreciated on the straight-line basis. The annual depreciation rates used vary between two and 11 years.

Computer software
Computer software is depreciated on the straight-line basis. The annual depreciation rates used vary between three and five years.

Capital work-in-progress
Capital work-in-progress is not depreciated and is transferred to the category to which it pertains when the asset is available for use as intended.

Mining development assets
Mining development assets are depreciated using the units-of-production method based on Proven and Probable Ore Reserves. The tonnes used to determine depreciation include all the Proven and Probable Ore Reserves that management expects to access within the respective phase. The Proven and Probable Ore Reserves of other phases are adjusted to include those reserves that management determines will be extracted from these areas that are to be developed (refer item “2.2 Depreciation based on units of production") once it has been determined that these other phases of mining will be undertaken.