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Press Release: Avesoro Resources Inc. - Financial -8-

21 Mar 2018 11:00 am

10. Other assets
 
                                            December 31,2017  December 31,2016 
                                            $'000             $'000 
Current 
Surety deposit                                           400               400 
Deposit to supplier                                      662                 - 
Other deposits                                           648                 - 
Amounts in escrow in respect of an 
 operating lease                                           -               116 
                                                       1,710               516 
Non-current 
Asset retirement obligation deposit                      517                 - 
Other deposits                                           679                 - 
                                                       1,196                 - 
 

11. Property, plant and equipment
 
               Development  Mining    Stripping  Mine closure    Assets   Machinery  Vehicles  Leasehold    Total 
               assets       assets    asset      and             held     and                  improvement 
                                                 rehabilitation  under    equipment 
                                                                 finance 
                                                                 lease 
               $'000        $'000     $'000      $'000           $'000    $'000      $'000     $'000        $'000 
Cost 
At January 1, 
 2016              221,275         -          -               -        -      1,645     1,233           94   224,247 
Transfers        (221,275)   210,746          -           1,369    9,160          -         -            -         - 
Additions                -     7,017          -             854    4,469         30         -            -    12,370 
Acquired from 
 a related 
 party (Note 
 20)                     -         -          -               -        -     14,717       657            -    15,374 
Impairment               -  (42,473)          -               -        -          -         -            -  (42,473) 
Foreign 
 exchange                -         -          -               -        -          -       (6)         (11)      (17) 
At December 
 31, 2016                -   175,290          -           2,223   13,629     16,392     1,884           83   209,501 
Additions                -     8,322     16,229             544    2,025     27,752       996            -    55,868 
Acquisitions 
 (Note 4)                -    24,895          -           3,445        -     30,639       204            -    59,183 
Impairment               -         -          -               -  (3,896)          -         -            -   (3,896) 
Foreign 
 exchange                -         -          -               -        -         10         8            3        21 
At December 
 31, 2017                -   208,507     16,229           6,212   11,758     74,793     3,092           86   320,677 
Accumulated 
depreciation 
At January 1, 
 2016                    -         -          -               -        -      1,120       876           62     2,058 
Charge for 
 the period              -    14,909          -             116      651        518       148           17    16,359 
Foreign 
 exchange                -         -          -               -        -       (16)       (4)         (13)      (33) 
At December 
 31, 2016                -    14,909          -             116      651      1,622     1,020           66    18,384 
Charge for 
 the period              -    23,754      1,838             296    2,933      3,622       303           19    32,765 
Acquisitions 
 (Note 4)                -    13,442          -           1,878        -      5,633        39            -    20,992 
Impairment               -         -          -               -  (1,020)          -         -            -   (1,020) 
Foreign 
 exchange                -         -          -               -        -          3         -            1         4 
At December 
 31, 2017                -    52,105      1,838           2,290    2,564     10,880     1,362           86    71,125 
 
Net book 
value 
At December 
 31, 2016                -   160,381          -           2,107   12,978     14,770       864           17   191,117 
At December 
 31, 2017                -   156,402     14,391           3,922    9,194     63,913     1,730            -   249,552 
 

The additions to development assets for the year ended December 31, 2017 include capitalized borrowing costs of $nil (2016: $1.7 million). It also includes pre-production costs of $nil for the year ended December 31, 2017 (2016: $2.1 million), net of pre-production revenues of $nil (2016: $14.8 million).

Impairment of assets held under finance leases

During the year ended December 31, 2017, the Company agreed to cancel poor performing heavy mining equipment held as finance leases and fully acquire those with acceptable performance for a cash consideration of $2.7 million. The derecognition of the finance lease liabilities resulted in a gain of $4 million and an impairment of $2.9 million was recognised on those equipment with low availabilities.

Impairment of New Liberty Gold Mine

In accordance with IAS 36, Impairment of Assets, the Company assesses annually whether there are any indicators of impairment of non-current assets. When circumstances or events indicate that non-current assets may be impaired, these assets are reviewed in detail to determine whether their carrying value is higher than their recoverable value, and, where this is the result, an impairment is recognised. Recoverable value is the higher of value in use ("VIU") and fair value less costs to sell. VIU is estimated by calculating the present value of the future cash flows expected to be derived from the asset cash generating unit ("CGU"). Fair value less costs to sell is based on the most reliable information available, including market statistics and recent transactions. The New Liberty Gold Mine has been identified as the CGU. This includes the mining and development property and associated working capital.

The mine operations falling below expectations during the year represented an impairment trigger, and as a result, Management performed impairment testing in order to ensure that the recoverable value calculated exceeded the carrying value as presented. The results of this test did not result in any impairment for the year ended December 31, 2017 (2016: $42.5 million).

The recoverable amount of the CGU was determined by calculating its VIU, which has been determined to be greater than its fair value less cost to dispose. The key assumptions used in determining the VIU for the CGU is life-of-mine ("LOM") plan, long-term gold prices and discount rate. The estimates of future cash flows were derived from the latest LOM plan as at December 31, 2017 which showed an estimated life of 4 years (2016: seven years) and was based on management's current best estimates of optimized mine and processing plans, future operating costs and the assessment of capital expenditure of the New Liberty Gold Mine. The Company also used the following assumptions:
   -- estimated gold price of $1,300 per ounce (2016: a range from $1,200 to 
      $1,300 (LOM average $1,300) per ounce) based on observable market data 
      including spot price and industry consensus; and 
 
   -- a pre-tax discount rate of 8.5% (2016: 8.5%) was applied to present value 
      the net future cash flows based on the weighted average cost of capital 
      applicable to the CGU. 

12. Available-for-sale investments
 
                                            December 31,2017  December 31,2016 
                                            $'000             $'000 
Beginning of the year                                     55                83 
Loss recognised in statement of 
 comprehensive income                                   (34)              (28) 
End of the year                                           21                55 
 

As at December 31, 2017 and 2016, the Company holds 615,855 shares in Stellar Diamonds plc, a diamond mining and exploration company listed on the AIM market operated by the London Stock Exchange. The Company's available-for-sale investments are classified as Level 1 where the fair value is determined by reference to quoted prices (unadjusted) in active markets.

13. Borrowings
 
                                        December 31,  December 31, 
                                         2017          2016 
                                        $'000         $'000 
Current 
Bank loan - Senior Facility Tranche A         14,741        11,222 
Bank loan - Senior Facility Tranche B          9,737         9,090 
Shareholder loan                               8,106             - 
Related party loan                             3,415             - 
                                              35,999        20,312 
Non-current 
Bank loan - Senior Facility Tranche A         58,668        62,636 
Bank loan - Subordinated Facility             10,846        10,523 
Shareholder loan                              14,938             - 
Related party loan                            13,640             - 
                                              98,092        73,159 
 

(a) Bank loans

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