ANNUAL Report June 2024 Notes to the Consolidated Financial Statements 22 Exploration and evaluation costs in relation to separate areas of interest for which rights of tenure are current are brought to account in the year in which they are incurred and carried forward provided that: ▪ such costs are expected to be recouped through successful development and exploitation of the area, or alternatively through its sale; or ▪ exploration and/or evaluation activities in the area have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. Once a development decision has been taken, all past and future exploration and evaluation expenditure in respect of the area of interest is aggregated within costs of development. Impairment The Directors assess at each reporting date whether the above carry forward criteria are met for exploration and evaluation costs. Accumulated costs in respect of areas of interest are written off or a provision made in profit or loss when the above criteria do not apply or when the Directors assess that the carrying value may exceed the recoverable amount. The costs of productive areas are amortised over the life of the area of interest to which such costs relate on the production output basis, provisions would be reviewed and if appropriate, written back. Development Expenditure Development expenditure incurred by or on behalf of the Company is accumulated separately for each area of interest in which economically recoverable reserves have been identified to the satisfaction of the Directors. Such expenditure comprises net direct costs and, in the same manner as for exploration and evaluation expenditure, an appropriate portion of related overhead expenditure having a specific connection with the development property. All expenditure incurred prior to the commencement of commercial levels of production from each development property is carried forward to the extent to which recoupment out of revenue to be derived from the sale of production from the relevant development property, or from the sale of that property, is reasonably assured. No amortisation is provided in respect of development properties until a decision has been made to commence mining. After this decision, all subsequent development expenditure is capitalised and classified as assets under construction, provided commercial viability conditions continue to be satisfied and the previously recognised costs are amortised over the life of the area of interest, to which such costs relate, on a units of production (UoP) basis. Mine Properties Mine properties comprise of: ▪ capitalised exploration, evaluation and development expenditure for assets in production; ▪ mineral rights acquired; and ▪ capitalised development and production stripping costs. Overburden Removal Costs The process of removing overburden and other waste materials to access mineral deposits is referred to as stripping. Stripping is necessary to obtain access to mineral deposits and occurs throughout the life of an openpit mine. Development and production stripping costs are classified as other mineral assets in property, plant and equipment. The Group accounts for stripping activities as follows: Development Stripping Costs These are initial overburden removal costs incurred to obtain access to mineral deposits that will be commercially produced. These costs are capitalised when it is probable that future economic benefits (access to mineral ores) will flow to the Group and costs can be measured reliably. Notes to the Consolidated Financial Statements continued 88 EQ Resources Limited Annual Report 2024
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