reserves

Janti

I know you're an accountant and seem to respect the professional qualities of KPMG so I was wondering if you could answer if the JORC committee doesn't recognise that we have a mineral resource that is able to be converted to reserves because a bank feasibility study hasn't been completed to prove it is economically viable to extract than why should the The International Financial Reporting Standards of which KPMG comply to recognise that we do and there for so do the ATO and Australian Government? Cudeco transferred $24 million in exploration and evaluation expenditure to Development expenditure for the half leaving only a balance of $16 million thus KPMG seem to be reporting that we do have a deposit that can be commercially exploited.

"During the half year exploration and evaluation costs of $24,164,000 relating to the Rocklands Copper Project were
transferred to development expenditure (refer to Note 11).

The ultimate recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases are dependent on the successful development and commercial exploitation, or alternatively sale of the respective areas of interest"

The International Financial Reporting Standards

2. Evaluation and 3. Development
The cut-off between evaluation and development is often a critical accounting issue. The cut-off point is once the technical feasibility and commercial viability of extracting the mineral resource has been determined; this is usually upon completion of a bankable feasibility study (BFS) and when a decision to develop has been made by the directors, usually based on the BFS.

The bankable feasibility study:
establishes the commercial viability of the project;
establishes the availability of financing;
identifies the existence of markets or long-term contracts for the product;
and decides whether or not the mine should be developed.

The distinction between the two phases is particularly relevant if an entity’s accounting policy for evaluation costs is to expense as incurred and for development costs to be capitalised. It is also important because the provisions of IFRS 6 Exploration for and Evaluation of Mineral Resources only apply to exploration and evaluation expenditure, not development expenditure