IGO Interactive Annual Report 2020

INDEPENDENT AUDITOR’S REPORT INDEPENDENT AUDITOR’S REPORT 130 — IGO ANNUAL REPORT 2020 IGO ANNUAL REPORT 2020— 131 Carrying Value of Mine Properties Key audit matter How the matter was addressed in our audit Refer to Note 15 of the financial statements, for disclosure over the mine properties asset. The carrying value of mine properties is impacted by various key estimates and judgements in particular: · Ore Reserves and estimates; · Amortisation rates; · Capitalisation and attribution of mining costs; and · Life of mine average stripping ratio. The Group is also required to assess for indicators of impairment at each reporting period. The assessment of impairment indicators in relation to the mine assets requires management to make significant accounting judgements and estimates which includes discount rates, commodity price and ore reserve estimates. This is a key audit matter due to the quantum of the asset and the significant judgement involved in management’s assessment of the carrying value of mine properties. Our work included, but was not limited, to the following procedures: · Reviewing management’s amortisation models, including agreeing key inputs to supporting information; · Assessing the competency and objectivity of, and work performed by, management’s experts in respect of the ore reserve estimates; · Challenging management’s judgements over capitalisation of development costs of underground mining operations; · Assessing whether the recognition of the deferred stripping assets was consistent with the requirements of IFRIC 20; · Evaluating and challenging management’s assessment of indicators of impairment under the Australian Accounting Standards for the mining assets by: · Comparing the carrying amount of the Group’s net assets against the market capitalisation, both as at 30 June 2020, and subsequent movements; · Considering commodity price assumptions at 30 June 2020, including forecasts; · Reviewing board and sub-committee meeting minutes, and holding discussions with key management, including non-finance personnel; and · Assessing economic indicators for impacts on appropriate discount rates; and · We also assessed the adequacy of related disclosures in Note 15 to the financial statements. Valuation of Inventory Key audit matter How the matter was addressed in our audit We consider accounting for inventory to be a key audit matter because of the: · Quantitative significance of the inventory balance; · Complexity involved in determining inventory quantities on hand due the assumptions used such as grades, volumes and densities; · Significant judgement in applying an appropriate costing methodology in accordance with the Group’s accounting policy and estimates for calculating stockpiles and concentrate on hand; · Judgemental aspect of the carrying amount of the non-current stockpile at Tropicana; and · Significant judgements made in determining net realisable value, including estimating the future sales price of commodities, less any estimated costs to complete production. Refer to Note 9 for the detailed disclosures which include the related accounting policies, including a description of the major estimates management are required to make. Our work included but was not limited to the following procedures: · Testing the controls over the appropriate allocation of costs to ensure that they are absorbed into inventory accurately; · Reconciling ore stockpile and concentrate inventory balances held at 30 June 2020 to supporting documentation; · Verifying the physical inputs included in the cost models as at 30 June 2020 to stockpile survey and technical reports; · Assessing the competence and objectivity of the experts used by management in the preparation of stockpile surveys; · Assessing the methodology applied by management to record all appropriate costs into the calculation of inventories on hand; · Evaluating management’s Net Realisable Value assessment and agree that the inventory cost carried is lower than Net Realisable Value; and · Testing the net realisable value by assessing management’s calculation including: · Future commodity pricing; · Expected cost to complete; and · In the case of the non-current stockpile at Tropicana, a review of management’s plans to blend the low grade stockpile with future high grade production over several years; and · We also assessed the adequacy of related disclosures in Note 9 to the financial statements.