Medusa reports write-offs, says Co-O project remains viable
Australia-based Medusa Mining Ltd. assured shareholders that it remained profitable with viable projects despite taking an impairment charge on certain assets and activities as part of a regular accounting exercise.
In a disclosure to shareholders via the Australia Securities Exchange, Medusa Mining reported a statutory after-tax-loss of $218.1 million which included asset impairment losses of $259.6 million.
Company CEO Geoff Davis said this impairment loss was a non-cash charge to the accounts and was done in accordance with accounting standards.
Medusa Mining noted that this impairment charge had no effect on the company’s operations, particularly the resources and reserves of the Co-O mine in Agusan del Sur province.
“The underlying profit of the company for the year is approximately $41.5 million compared to $30.9 million the previous year (if the impairment charge is not taken into account). This represents an increase of 34 percent and is a good result camouflaged by the impairment,” Davis said.
Given that the carrying value of the company’s asset was considerable higher than its market capitalization as of June 30, 2015, Medusa was compelled to perform an impairment test, which resulted in a charge of almost $260 million to its 2015 financials, Davis said.
He added that as a purely accounting treatment, the impairment charge had no bearing on the company’s resources.
“On the positive side, the impairment will decrease future depreciation and amortization charges,” Davis said.
The term impairment refers to assets that are no longer of the same value as in a prior period. An impairment charge is used and the asset is revalued downward. The impairment charge has been described as the new term for writing off so-called goodwill assets and activities.
Medusa Mining said it had identified a substantial pipeline of gold exploration prospects in Mindanao. In the Co-O mine alone, it identified high-priority exploration areas around existing production area.
The company’s portfolio of mining tenements are under different stages of development, ranging “greenfields” or unexplored areas to those with defined resources. So far, only the Bananghilig and Saugon deposits have resources besides the operating Co-O mine.
