Red 5 flags $70m impairment

Gold miner Red 5 has revealed the financial extent of having to temporarily shut down its Siana mine operations, today flagging a $70 million impairment in its half-year accounts.

Perth-based Red 5 said it expected to incur the non-cash impairment charge for the six months to December, but it was a non-cash item and would not impact cash flows or operations.

“In arriving at this conclusion, management considered the delay to the approval for the new tailings storage facility resulting in the Siana processing plant being placed on standby,” Red 5 said in a statement.

It also considered foreign exchange rates, a higher weighted average cost of capital discount rate of 12 per cent given an increased sovereign risk for mining in the Philippines, and the long-term US dollar gold price over the life of the mine.

“The final impairment expense will be dependent on completion of the half year financial statements and is subject to completion of the half year review by the company’s auditors,” it said.

Red 5 announced in January that its Siana gold mining operations had to be put on temporary standby after the Philippines government delayed processing an environmental compliance certificate required for Red 5 to construct a long-term tailing storage facility at the mine.

The existing TSF facilities can only accommodate the needs of the open-pit mine until the end of the March quarter, and so regulatory approval for construction of a long-term TSF was needed.

Red 5 shares were 3.2 per cent higher to 6.3 cents each ahead of the close of trade.