Operating costs for the year 2012 were $5.0 million or $882/oz of gold sold as compared to $6.6 million or $723/oz of gold sold for 2011. The 2012 figure includes $0.2 million ($38/oz) of mining costs charged directly to operating costs for the months in which there was no new ore mined. There was not a comparable amount in 2011.
Included in the 2012 operating cost amount is $0.4 million or $75/oz related to the amortization of the bump-up to fair value from the estimated cost of work in progress on re-valuation on September 15, 2009. Cash operating costs were therefore $807/oz. In 2011, $1.1 million or $123/oz of similar costs were included in operating costs resulting in the cash cost of gold sold for this period of $600/oz.
The $1.6 million decrease in operating costs is due to the reduction in the quantity of recoverable gold mined and sold during 2012. The $159/oz increase in per unit operating costs is a result of two factors. The first is a decrease in the grade of the ore mined to 0.57 g/t in 2012 as compared to 0.80 g/t in 2011. As mining costs are based on the volume of ore mined and not the grade of that ore, a reduction in grade will result in an increase in the cost per oz of gold mined and sold. The second factor is that even if mining of ore is curtailed, there remains a fixed component of mining costs that are still incurred which results in a higher per unit operating cost.
In 2012, the Corporation expensed to professional fees $2.4 million of costs previously recorded as prepaid expenses related to a planned initial public offering and listing on an Asian stock exchange. This plan was put on hold in 2012 initially due to the requirement to obtain approval from the government of Kazakhstan which took in excess of one and one half years. In the interim, the decline in the trading price of Alhambra's shares combined with the deterioration in the financial markets for equity issues, particularly junior mining companies, resulted in further delays in Alhambra's plans for the listing. Alhambra still has plans to proceed with this listing once market conditions are more receptive to financings and the Corporation's current financial issues are resolved.
An impairment test was triggered because the carrying amount of property, plant and equipment was more than the Corporation's market capitalization at December 31, 2012 indicating that the assets may be impaired. As a result, a detailed test was carried out and it was determined that based on the Corporation's recoverable resources, gold prices and costs including operating administrative and capital, the value was not impaired and accordingly, no write down of property, plant and equipment was necessary.
An impairment test was not triggered for intangible assets.
In 2012 the Corporation recorded capital expenditures of $0.9 million, virtually all in Kazakhstan. Of that total, less than $0.1 million relates to buildings, machinery and equipment used in the operations in Kazakhstan. In 2012 the Corporation had recorded $0.7 million of exploration costs as a result of the assessment by the tax authorities for the Commercial Discovery Bonus. The Corporation appealed the ruling and as a result of the March 12, 2013 decision by the appeals court, the bonus was reduced to just under $0.2 million. This $0.6 million reduction was accounted for in 2012 as a reduction in capital expenditure. The remaining $1.5 million relates to the Corporation's 2012 exploration program detailed below.
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