9.1 Business Combinations
The fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill, if any, requires that management make estimates based on the information provided by the acquiree. Changes to the provisional values of assets acquired and liabilities assumed, deferred income taxes and resulting goodwill, if any, will be retrospectively adjusted when the final measurements are determined (within one year of acquisition date).
Sales of coal are recognized when title transfers and the rights and obligations of ownership pass to the customer, which occurs upon delivery, and the price is reasonably determinable.
Coal and coal stockpile inventories are valued at the lower of average cost and net realizable value. Coal stockpiles include materials previously processed and discarded as waste, which have been determined to contain coal. Coal inventories include coal located at the mine or in transit. Coal stockpiles not expected to be processed in the next twelve months, are included in non-current inventory.
Coal inventory costs include all direct costs incurred in production including direct labor and materials, freight, depreciation and amortization, and directly attributable overhead costs. Coal stockpiles are valued at fair value at acquisition and are depleted on a units of production basis.
When inventories have been written down to net realizable value, a new assessment of net realizable value is made in each subsequent period. If the circumstances that caused the write-down no longer exist, the amount of the write-down is reversed.
Consumables are stated at the lower of cost and net realizable value. Cost is determined using the first-in, first out ("FIFO") method. Net realizable value is the estimated selling price less applicable selling expenses. Cost includes acquisition, freight, and other directly attributable costs.
9.4 Mineral Properties
The Company records its interests in mineral properties and areas of geological interest at cost less option payments received and other recoveries. All direct and indirect costs relating to the acquisition of these interests are capitalized on the basis of specific claim blocks or areas of geological interest until the properties to which they relate are placed into production, sold, abandoned or management has determined there to be an impairment. These costs will be amortized over the proven reserves available on the related property following commencement of production. The amounts shown for mineral properties represent costs incurred to date and are not intended to reflect present or future values.
Mineral properties which are sold before that property reaches the production stage will have all revenues from the sale of the property credited against the cost of the property. Properties which have reached the production stage will have a gain or loss calculated based on the portion of that property sold.
The Company defers all exploration expenses relating to mineral properties and areas of geological interest until the properties to which they relate are placed into production, sold, abandoned or management has determined there to be an impairment. These costs will be amortized over the reserves available on the related property following commencement of production.
Management's estimates of recoverability of the Company's investment in various projects have been based on current conditions. However, it is reasonably possible that changes could occur in the near term which could adversely affect management's estimates and may result in material future write-downs of capitalized property carrying values.
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