I enjoy Peaky Blinders as well. Are you getting series 2? It started here (UK) a few weeks ago.
Underground mines are inevitably development intensive. Over the last 3 years MML has capitalised $95.8m of Plant & Equipment and depreciated $20.2m through the P&L. It has capitalised development of $99.8m and amortised $21.5m through the P&L. So a total of $195.6m of inward investment was capitalised over the expansion period and $41.7m of that has already been expensed through the income statement.
Plant & Equipment investment is pretty straight forward and understandable. Also it's tapered depreciation through the P&L as a non-cash reduction in net profit per annum is relatively clear-cut and standard accounting practise.
It is the outlay on development that appears to be the main issue with investors. It is certainly clear from comments on HC and UK boards that people think it should be a sustainable cost that should be expensed as part of Cost of Sales over each accounting period and not capitalised. However, as underground development clearly provides long term benefits to operations I do not have an issue with the fact that U/G miners capitalise significant amounts of such outlays.
Consider the following:
Current development advance per month is c. 1600m along 60 priority headings.
So that equates to 26.7m of advance per heading per month.
Strike length is c. 2,000m, hence time to advance to the full strike length is 75 months or 6.25 years!
Haulage drifts are tracked, ventilated, pumped, powered, etc, throughout their usable life so development activity undertaken this year is still highly likely to be providing benefit to the mine 6, 7, 8, years into the future (as it currently is with Levels 1 & 2, some 8 years and counting since they were first developed).
If you look at any underground miner you will see the same high proportion of fixed assets accumulated on their balance sheet under 'development' or 'mineral properties' headings - it is an unavoidable facet of this form of mining.
CPDLC
MML Price at posting:
68.5¢ Sentiment: Buy Disclosure: Held
(20min delay)