Philippines-based gold miner Medusa (ASX:MML) has taken a A$260mln write-down of its assets due to the slide in the price of the precious metal.
As a result of the write-down, Medusa reported a net loss of A$218.1mln for the year to June.
Geoff Davis, chief executive said: “Given that the carrying value of the company’s asset was considerable higher than its market capitalisation at 30 June 2015, the company was compelled to perform an impairment test, which resulted in a charge of almost US$260mln to its 2015 financials.
“I wish to add that this is purely an accounting treatment and has no bearing on our JORC resources and reserves in the Co-O mine and therefore will not affect operations.
“On the positive side, the impairment will decrease future depreciation and amortisation charges.”
Ignoring the impairment, Medusa made an underlying profit of US$41.5mln (US$30.9mln), an increase of 34% and a good result, said Davies.
House broker SP Angel said that the charge was inevitable given the current market cap of the company.
“Medusa remains profitable even under current gold prices with an AISC [all-in-sustaining-costs] of around US$1,000/oz with scope for this to come down as operational improvements are put into place to improve mining throughput to match plant capacity.
“Continued generation of cash and return of management credibility will be key to re-rating the shares as well as a stable gold price.”
The impairment was based on changes to a number of assumptions notably a reduction in the gold price forecast by US$100 to US$1,200 per ounce, an increase in the discount rate to 11.1% from 10%.
Under the new assumptions, probable reserves fall to 590,000oz from 820,000 oz.