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UPDATED: Bathurst Resources [NZX: BRL] has written off the total value of the assets covered by its Buller coal project as it hunkers down and waits for international coking coal market conditions to improve.
Bathurst chief executive Hamish Bohannan announced in a statement to the NZX that the company, which battled for years to get resource consents to undertake open-cast mining on the Denniston Plateau that were finally granted last year, that it was writing down the value of non-current assets by $449.9 million in an unaudited impairment adjustment.
The 2013 financial year accounts recorded total non-current assets at $464.1 million, of which $413.3 million was held in mine licences, properties, exploration and evaluation assets. Most of the remainder was in plant and equipment.
"The board believes the impairment adjustment is appropriate given current consensus coking coal prices from independent analysts, the adjusted production levels at Escarpment following the decision to defer exports, and the higher than anticipated New Zealand dollar exchange rate," said Bohannan.
“The adjustment is non cash in nature and will have no impact on Bathurst’s ability to continue to operate its business”.
An offsetting unaudited non-cash gain of $169 million has also been recorded against the project "as the current mining plan has no production activity scheduled beyond construction phase until international coking coal prices improve."
"No royalties or financial obligations linked to shipments of export coal will fall due in the foreseeable future."
The company operates several smaller mines in Westland and Southland that supply the local market and provide some cashflow, but its primary strategy has always been to develop the large resource of high quality coking coal, an input to the steel-making process that is highly sought after globally, but has been hit by the global downturn in demand for steel, driven in part by the slowdown in the Chinese construction sector.
Bathurst later reported an operating pre-tax loss of $3.6 million in the 12 months ended June 30, on revenue of $55.7 million. The writedowns took the bottom line down to a loss of $188.9 million.
"We were disappointed that market conditions meant temporarily deferring our export Escarpment project, however the result reflects the benefits of building a robust domestic business that can underpin the company until such time as Escarpment can ramp up to full production," Bohannan said.
Bathurst shares gained 3.8 percent to 5.5 cents, and have sunk 75 percent so far this year.