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Central Asia Metals PLC Proposed acquisition of -40-

22 Sep 2017 6:01 am

-- income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
   --           all resulting exchange differences are recognised in other comprehensive income. 

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
   (b)        Transactions and balances 

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss. Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statement of comprehensive income, within finance income and costs. All other foreign exchange gains and losses are presented in the consolidated statement of comprehensive income on a net basis within finance income and costs.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
   2.3       Property, plant and equipment 

Property acquisition costs are capitalized. Property, plant and equipment is stated at cost, as defined in IAS 16, less accumulated depreciation and accumulated impairment losses.
   2.4       Mining properties and mine development costs 

Development costs relating to specific properties are capitalized once management determines a property will be developed. A development decision is made based upon consideration of project economics, including future metal prices, reserves and resources, and estimated operating and capital costs. Capitalization of costs incurred and proceeds received during the development phase ceases when the property is capable of operating at levels intended by management and is considered commercially viable. Costs incurred during the production phase to increase future output by providing access to additional reserves, are deferred and depreciated on a units-of-production basis over the component of the reserves to which they relate. Ore reserves may be declared for an undeveloped mining project before its commercial viability has been fully determined.

Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit. The cost of mineral properties also includes the estimated close-down and restoration costs associated with the asset.

Interest on borrowings related to qualifying assets for construction or development projects is capitalised, at the rate payable on project-specific debt if applicable or at SASA's cost of borrowing, until the project becomes commercially viable.
   2.5       Depreciation 

Property, plant and equipment is depreciated over their useful life, or over the remaining life of the operation if shorter, to residual value. No depreciation is recorded until the assets are substantially complete and ready for productive use. The major asset categories are depreciated as follows:

Mining Properties, including capitalised financing costs, are depreciated on a Unit of Production basis (UoP), in proportion to the volume of ore extracted in the year compared with total proven and probable reserves at the beginning of the year. Assets within operations for which production is not expected to fluctuate significantly from one year to another or which have a physical life shorter than the related mine are depreciated on a Straight-Line basis. This pertains to all asset classes, including:
   --           Buildings and mining infrastructure (which includes mining properties) 
   --           Machinery, Plant and other equipment 

Depreciation calculated on a straight-line basis is as follows for major asset categories:

Office equipment............................................................................................ 20%-37.5%

Furniture and fittings....................................................................................... 20%-37.5%

Other Mining Infrastructure and buildings......................................................... 2.5%-10%

Motor vehicles................................................................................................ 25%-37.5%

Land is not depreciated.

Development costs are not depreciated. Depreciation on equipment utilized in the development of assets, including underground mine development, is depreciated and recapitalized as development costs attributable to the related asset.

The depreciation of property, plant and equipment shall start after expiration of the month of the start-up in the year in which the utilisation of the property, plant and equipment started.
   2.6       Exploration and evaluation expenditure 

Exploration and evaluation expenditure comprises costs that are directly attributable to:
   --           researching and analysing existing exploration data; 
   --           conducting geological studies, exploratory drilling and sampling; 
   --           examining and testing extraction and treatment methods; and/or 
   --           compiling pre-feasibility and feasibility studies. 

Evaluation expenditure relates to a detailed assessment of deposits or other projects that have been identified as having economic potential. Exploration and evaluation costs are expensed in the period incurred.
   2.7       Impairment of property plant and equipment 

At each reporting date, under IAS 36 SASA reviews the carrying amounts of its mineral properties, and property, plant and equipment to determine whether there is any indication that those assets are impaired. If such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment. Where the asset does not generate cash flows that are independent from other assets, SASA estimates the recoverable amount of the CGU to which the asset belongs.

Internal and external factors are considered in assessing whether indicators of impairment are present. Significant assumptions regarding commodity prices, operating costs, capital expenditures and discount rates are used in determining whether there are any indicators of impairment. These assumptions are reviewed regularly by senior management and compared, where applicable, to observable market data.

Recoverable amount is the higher of fair value less costs of disposal and value in use (VIU). Fair value less costs of disposal is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. For mining assets this would generally be determined based on the present value of the estimated future cash flows arising from the continued development, use or eventual disposal of the asset. In assessing these cash flows and discounting them to present value, assumptions used are those that an independent market participant would consider appropriate. In assessing VIU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognised in the income statement.

Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment been recognised for the asset or CGU. A reversal of an impairment loss is recognised in the income statement.
   2.8       Inventories 

Inventories comprise raw materials (mined ore and other), work-in-progress (crushed ore), finished products (concentrate), spare parts and other materials and are carried at lower of cost and net realisable value.

The cost of inventories comprises all costs of purchase, production and other production overheads attributable to the production of finished goods (such as electricity, salaries, transport costs, fuel costs, food, beverages, and other) and other costs incurred in bringing the inventories to their present location and condition as follows:

Raw materials..................................................... Mining costs incurred

Spare parts and other materials............................. Purchase cost on a weighted average basis

Finished goods, work in progress.......................... Cost of direct materials and labour and a proportion of production overheads, based on normal operating capacity

Obsolete, redundant and slow-moving inventories are identified and written down to their net realisable value as required.

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September 22, 2017 02:01 ET (06:01 GMT)

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