(f) Exploration and evaluation assets
The Company is in the exploration stage with respect to its investment in exploration and evaluation assets and accordingly follows the practice of capitalizing all costs relating to the acquisition of, exploration for and development of mineral claims to which the Company has rights and crediting all proceeds received from farm-out arrangements or recovery of costs against the cost of the related claims. Acquisition costs include, but are
not
exclusive to land surface rights acquired. Deferred exploration costs include, but are
not
exclusive to geological, geophysical studies, annual mining taxes, exploratory drilling and sampling. At such time as commercial production commences, these costs will be charged to profit or loss on a unit-of-production method based on proven and probable reserves. The aggregate costs related to abandoned mineral claims are charged to profit or loss at the time of any abandonment or when it has been determined that there is evidence of an impairment.
The Company considers the following facts and circumstances in determining if it should test exploration and evaluation assets for impairment:
| (i) | the period for which the Company has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed; |
| (ii) | substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned; |
| (iii) | exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and |
| (iv) | sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation assets is unlikely to be recovered in full from successful development or by sale. |
An impairment charge
may
be reversed but only to the extent that this does
not
exceed the original carrying value of the property that would have resulted if
no
impairment had been recognized. General exploration costs in areas of interest in which the Company has
not
secured rights are expensed as incurred.
The recoverability of amounts shown for exploration and evaluation assets is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain financing to complete development of the properties, and on future production or proceeds of disposition.
The Company recognizes in profit or loss costs recovered on exploration and evaluation assets when amounts received or receivable are in excess of the carrying amount.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are
first
tested for impairment and then reclassified to development asset within property, plant and equipment.
All capitalized exploration and evaluation expenditures are monitored for indications of impairment.
Where a potential impairment is indicated, assessments are performed for each area of interest. To the extent that exploration expenditure is
not
expected to be recovered, it is charged to profit or loss. Exploration areas where reserves have been discovered, but require major capital expenditure before production can begin, are continually evaluated to ensure that commercial quantities of reserves exist or to ensure that additional exploration work is underway as planned.
