ANNUAL Report June 2025 Notes to the Consolidated Financial Statements 13 Development Expenditure Development expenditure incurred by or on behalf of the Company is accumulated separately for each area of interest in which economically recoverable reserves have been identified to the satisfaction of the Directors. Such expenditure comprises net direct costs and, in the same manner as for exploration and evaluation expenditure, an appropriate portion of related overhead expenditure having a specific connection with the development property. All expenditure incurred prior to the commencement of commercial levels of production from each development property is carried forward to the extent to which recoupment out of revenue to be derived from the sale of production from the relevant development property, or from the sale of that property, is reasonably assured. No amortisation is provided in respect of development properties until a decision has been made to commence mining. After this decision, all subsequent development expenditure is capitalised and classified as assets under construction, provided commercial viability conditions continue to be satisfied and the previously recognised costs are amortised over the life of the area of interest, to which such costs relate, on a units of production (UoP) basis. Mine Properties Mine properties comprise of: ▪ capitalised exploration, evaluation and development expenditure for assets in production; ▪ mineral rights acquired; and ▪ capitalised development and production stripping costs. Overburden Removal Costs The process of removing overburden and other waste materials to access mineral deposits is referred to as stripping. Stripping is necessary to obtain access to mineral deposits and occurs throughout the life of an openpit mine. Development and production stripping costs are classified as other mineral assets in property, plant and equipment. The Group accounts for stripping activities as follows: Development Stripping Costs These are initial overburden removal costs incurred to obtain access to mineral deposits that will be commercially produced. These costs are capitalised when it is probable that future economic benefits (access to mineral ores) will flow to the Group and costs can be measured reliably. Once the production phase begins, capitalised development stripping costs are depreciated using the UoP method based on the proven and probable reserves of the relevant identified component of the ore body which the initial stripping activity benefits. Production Stripping Costs These are post initial overburden removal costs incurred during the normal course of production activity, which commences after the first saleable minerals have been extracted. EQ Resources Limited Annual Report 2025 79
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