ANNUAL Report June 2024 Notes to the Consolidated Financial Statements 23 Once the production phase begins, capitalised development stripping costs are depreciated using the UoP method based on the proven and probable reserves of the relevant identified component of the ore body which the initial stripping activity benefits. Production Stripping Costs These are post initial overburden removal costs incurred during the normal course of production activity, which commences after the first saleable minerals have been extracted. Production stripping costs can give rise to two benefits, the accounting for which is outlined below: Production Stripping Activity Benefits of stripping activity Extraction of ore (inventory in the current period. Improved access to future ore extraction. Period benefited Current period. Future period(s). Recognition and measurement criteria When the benefits of stripping activities are realised in the form of inventory produced; the associated costs are recorded in accordance with the Group’s inventory accounting policy. When the benefits of stripping activies are improved access to future ore; production costs are capitalised when all the following criteria are met: ▪ the production stripping activity improves access to a specific component of the ore body and it is probable that future economic benefits arising from the improved access to future ore production will be realised. ▪ The component of the ore body for which access has been improved can be identified. ▪ Costs associated with that component can be measured reliably. Allocation of costs Production stripping costs are allocated between the inventory produced and the production stripping asset using a life-of-component waste-to-ore (or mineral contained) strip ratio. When the current strip ratio is greater than the estimated life-of component ratio a portion of the stripping costs are capitalised to the production stripping asset. Asset recognised from stripping activity Inventory Other mineral assets within property, plant and equipment Depreciation basis Not applicable On a component-buy-component basis using the units of production method based on proven and probable reserves. Depreciation Depreciation of assets, other than land, assets under construction and capitalised exploration and evaluation that are not depreciated, is calculated using the straight-line (SL) method or UoP method, net of residual values, over the estimated useful lives of specific assets. The depreciation method and rates applied to specific assets reflect the pattern in which the asset’s benefits are expected to the used by the Group. The Group’s proved and probable reserves for mineral assets are used to determine Up depreciation unless doing so results in depreciation charges that do not reflect the asset’s useful life. Assets classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell and therefore not depreciated. EQ Resources Limited Annual Report 2024 89
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