2012 Annual Report (2 April 2013) - Grange Resources

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2012 ANNUAL REPORT
Notes to the Financial Statements (cont.)
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (cont.)
(p)
Property, plant and equipment
Land and buildings and plant and equipment are measured
at cost less, where applicable, any accumulated depreciation,
amortisation or impairment in value. Cost includes expenditure
that is directly attributable to the acquisition of the item. In the
event that all or part of the purchase consideration is deferred,
cost is determined by discounting the amounts payable in the
future to their present value as at the date of acquisition.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of any component accounted for as
a separate asset is derecognised when replaced. All other repairs
and maintenance are charged to the income statement during the
reporting period in which they are incurred.
Land is not depreciated. Assets under construction are measured
at cost and are not depreciated until they are ready and available
for use. Depreciation on assets is calculated using either a
straight-line or diminishing value method to allocate the cost,net
of their residual values, over the estimated useful lives or the life
of the mine, whichever is shorter. Leasehold improvements and
certain leased plant and equipment are depreciated over the
shorter lease term.
Other non-mine plant and equipment typically has the following
estimated useful lives:
Buildings
10 years
Plant and Equipment
4 to 8 years
Computer Equipment
3 to 5 years
The assets residual values, useful lives and amortisation methods
are reviewed and adjusted if appropriate, at each financial period
end.
An item of property, plant and equipment is derecognised upon
disposal or when no further economic benefits are 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 period the asset is derecognised.
(q) Exploration and evaluation
Exploration and evaluation expenditure comprises costs which
are directly attributable to:
◆◆
research and analysing exploration data
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◆◆
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conducting geological studies, exploratory drilling and
sampling
examining and testing extraction and treatment methods
compiling pre-feasibility and definitive feasibility studies
Exploration and evaluation expenditure also includes the costs
incurred in acquiring rights, the entry premiums paid to gain
access to areas of interest and amounts payable to third parties
to acquire interests in existing projects.
Capitalisation of exploration expenditure commences on
acquisition of a beneficial interest, or option to acquire a beneficial
interest, in mineral rights.
Mining tenements and capitalised exploration expenditure
(including acquisition costs) are stated at cost, less, where
applicable, any accumulated amortisation. The carrying amount
of deferred mineral exploration and evaluation expenditure is
reviewed annually by Directors to ensure it is not in excess of the
recoverable amount from those assets.
The future recoverability of capitalised exploration expenditure is
dependent on a number of factors, including the level of proved,
probable and inferred mineral resources, future technological
changes that could impact the cost of mining, future legal
changes (including changes to environmental restoration
obligations) and changes to commodity prices.
Costs arising from the acquisition, exploration and evaluation
relating to an area of interest are carried forward provided that
rights to tenure of the area of interest are current and provided
further that at least one of the following conditions is met:
(i) such costs are expected to be recouped through successful
development and exploitation of the area of interest, or
alternatively by its sale; or
(ii) exploration and evaluation activities in the area of interest
have not, at balance date, reached a stage which permits
a reasonable assessment of the existence or otherwise of
economically recoverable reserves, and active and significant
operations in, or in relation to, the area of interest are
continuing.
To the extent that capitalised exploration expenditure is
determined not to be recoverable in the future, profits and net
assets will be reduced in the period in which this determination is
made.
Ultimate recoupment of these costs is dependent on the
successful development and commercial exploitation or sale, of
the respective areas of interest.