Impala Platinum Holdings Limited – Annual report – 30 June 2018
1.3 Significant accounting policies (extract)
Mining metal inventories
Costs incurred in the production process are appropriately accumulated as stockpiles, metal in process and product inventories. Platinum, palladium and rhodium are treated as main products and other platinum group and base metals produced as by-products.
In-process and final inventories are carried at the lowest of average cost of normal production and net realisable value. Costs relating to inefficiencies in the production process are charged to the income statement as incurred.
Net realisable value tests are performed, at least, on each reporting date and represent the expected sales price of the product based on prevailing metal prices, less estimated costs to complete production and bring the product to sale.
The average cost of normal production includes total costs incurred on mining and refining, including depreciation, less net revenue from the sale of by-products, allocated to main products based on units produced under normal production. Stock values are adjusted for upstream intra-group transactions with subsidiaries and equity-accounted entities within the Group, eliminating intra-group profit in profit or loss and share of profit from equity-accounted entities, where applicable.
Refined by-products are valued at net realisable value and quantities of in-process metals are based on latest available assays. Recoverable metal quantities are continually tested for reasonableness by comparing the grade of ore with the metal actually recovered. Engineering estimates are used to determine recoverable metal quantities and these estimates and the methodologies applied are improved on an ongoing basis. Metal quantities are adjusted without affecting production and impacting the calculation of unit cost per ounce produced.
Operating metal lease payments or receipts are accounted for in profit or loss and the metal is carried as inventory.
Non-mining metal inventories
All metals purchased or recycled by the Group are valued at the lower of cost or net realisable value. The cost of non‑mining metal inventories comprise the cost of purchase as well as refining costs required to convert the metal to its refined state.
Stores and materials
Stores and materials are valued at the lower of cost or net realisable value, on a weighted average basis. Obsolete, redundant and slow-moving stores are identified and written down to net realisable value which is the estimated selling price in the ordinary course of business, less selling expenses.
The write down to net realisable value comprises R250 (2017: R78) million for refined mining metal and R1 268 (2017: R948) million for in-process mining metal.
Included in refined metal is ruthenium on lease to third parties of 45 000 (2017: 36 000) ounces (Metal lease fee income is disclosed in note 28).
Quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of metal actually recovered (metallurgical balancing). The nature of this process inherently limits the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering estimates are refined based on actual results over time. Changes in engineering estimates of metal contained in-process resulted in an increase of in-process metal of R435 (2017: R376) million.
Non-mining metal consists mainly of inventory held by Impala Refining Services.
No inventories are encumbered.