To answer the question, one needs to understand what "Capital Expenditure" (CAPEX) is and how it's treated in accounting terms.
BREAKING DOWN 'Capital Expenditure (CAPEX)'
In terms of accounting, an expense is considered to be a capital expenditure when the asset is a newly purchased capital asset or an investment that improves the useful life of an existing capital asset.
If an expense is a capital expenditure, it needs to be capitalized. This requires the company to spread the cost of the expenditure (the fixed cost) over the useful life of the asset
Read more:
Capital Expenditure (CAPEX) Definition | Investopedia http://www.investopedia.com/terms/c/capitalexpenditure.asp#ixzz4OHhpV9lQ
According to KNL's BFS these (below) are the Capital Items that go towards the mine construction - all these items will be taken up by KNL as Capital Expenditure in their accounting process - the costs of which will be amortized or depreciated over the mine life. That suggests to me ALL these items should be considered as CAPEX - you can't take out "bits" to make it look "lower/better" - and when further items are identified (and they usually are) they will also be included.
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What about owner's cost? Do you consider compensation to occupiers of land to be capital investment or is it a mere expense? How about payment of employees for construction?"
You can't exclude these from CAPEX, IMO. How would you treat if you did? Payment of employees for construction would be included by the successful tender(s) who are awarded the various contracts to develop the mine. Day to day employee costs (once mine is established/up and running) are expensed.
KNL CAPITAL ITEM (US$m)
Mining 2.4
Process Plant 45.1
Infrastructure 10.9
EPC 11.0
Contingency (10%) 6.2
Owners Cost 1.9
Total 77.5
This is an example from a typical open pit mine - showing what items are capitalised
|
Column 1 |
Column 2 |
| 1 |
{caption}Capital Costs{/caption} |
|
| 2 |
Equipment Purchase |
$8,579,500 |
| 3 |
Haul Roads / Site Work |
2,096,900 |
| 4 |
Pre-production Stripping |
483,600 |
| 5 |
Buildings |
1,744,400 |
| 6 |
Electrical System |
132,700 |
| 7 |
Sustaining Capital |
1,804,700 |
| 8 |
Working Capital |
810,100 |
| 9 |
Engineering |
2,412,800 |
| 10 |
Contingency |
1,545,000 |
| 11 |
----------- |
|
| 12 |
Total Capital Costs |
$19,609,700 |
http://costs.infomine.com/costdatacenter/miningcostmodel.aspx
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