Ann: Quarterly Activities Report, page-103

Malgmac, thanks for your excellent post. I might be able to add some further thoughts, and like you I am posting from experience in these matters.
My reading of the notes to financial statements and after reference back to the relevant standards suggest to me that the impairment relates to the current economic value of P1. You are correct, the assets must be recorded at either cost less depreciation, or where there are signs that depreciated cost is not fair value, then the asset value is deemed to be impaired and book value written down to fair value. Values can be impaired for a number of reasons as per your post. Given the apparent differences in cost of P1 and P2 it seems likely the cost of P1 was higher than it should have been if the construction project proceeded according to plan. Time overruns and changes of contractors create inefficiencies and costs escalate, but this obviously does not make the plant any more valuable. If this scenario caused the impairment, I would ask the question why it was not recognised in the FY2013 financials?
I therefore assume the value was not impaired because of the cost overruns and that leaves two possible causes. The first being the proven productive capacity of the plant. In theory the P1 unit can produce 11k tonne p.a. Given the performance to date it is unlikely the directors would make an impairment of a plant which has not been fully tested at its theoretical productive capacity. The third scenario is economic value of the plant, and this is the scenario which I believe most likely. I will not try and explain the detail of the calcualtion model as your explanation is easily understood and technically correct. So what can cause this economic loss in value? Reduced capacity is obviously one cause, but to me the most likely cause is the actual known reduction in ASP. P1 cost more to build than P2 but we are told will produce the same as P2. With the ASP dropping below LY $25/kg level it is likely P1 has become uneconomic at current ASP levels whereas P2 book value is still below the fair value as determined by the economic value calculation on current ASP. Therefore P1 value was impaired in FY 2014. This has nothing to do with tax and is purely an accounting adjustment. The worst part for shareholders is that once an impairment charge has been booked it is not reversed if ASP or production levels increase. The only bonus is annual depreciation charge is based on a lower value therefore the ongoing depreciation cost is reduced by the impairment charge over the life of the asset, in this case P1. Not sure whether this has added further clarification or muddied the waters?