development drives are amortised on a production basis against the payable ore. So if you spend $2million to access an ore block containing 100,000 ounces you write the cost off as you produce the ounces pro rata
If you put a decline down and you can justify a three to four production life from that decline then you write it off over that period.
It doesn't count as cash cost which means I never bother with cash cost figures when I evaulate mines. In WA they are getting very high amortisation costs of around $100 an ounce.
Another example is DOM, they seem to writing off $100 an ounce on amortisation yet still quote cash costs when these are only 70% of total costs. The worst examples are SBM who quote cash costs as if they are doing OK when in fact they are losing money.
As a rule of thumb I always add $150 an ounce to cash costs to cover the rest of the stuff they hide in the annual reports.
MCO Price at posting:
13.8¢ Sentiment: Buy Disclosure: Held
