for the year ended 30 June 2023 FINANCIAL REPORT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 82 Westgold Resources Limited Annual Report 2023 17. MINE PROPERTIES AND DEVELOPMENT (CONTINUED) Results of impairment testing Mine Properties and development Westgold is a dynamic, growth oriented Western Australian gold miner and is unique in the Australian gold sector as an owner operator. Westgold’s operations are comprised of: – the Bryah Operations at Fortnum (FGO) – the Murchison Operations at Meekatharra (MGO) and Cue (CGO) These operations are the Cash Generating Units of the Group as they each operate independent of the other. A Cash Generating Unit (CGU) is defined as the smallest group of assets that includes the assets and generates cash flows that are largely independent of the cash inflows from other assets or group of assets. In assessing whether an impairment is required, the carrying value of the asset or CGU is compared with its recoverable amount. The recoverable amount is the higher of the CGU’s fair value less costs of disposal (FVLCD) and value in use (VIU). Given the nature of the Group’s activities, information on the fair value of an asset is usually difficult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, the VIU for each CGU has been estimated based on discounted future estimated cash flows (expressed in real terms) expected to be generated from the continued use of the CGUs using market-based commodity price and exchange assumptions. Production and cost assumptions were derived from estimated quantities of recoverable minerals, production levels, operating costs and capital requirements, and its eventual disposal, based on the CGU latest life of mine (LOM) plans. These cash flows were discounted using a real post-tax discount rate that reflects the weighted average cost of capital of the Group. Estimates of quantities of recoverable minerals, production levels, operating costs and capital requirements are generated as part of the Group’s planning process, including LOM plans, budgets, forecasts and CGU-specific studies. This assessment is in accordance with the relevant accounting standards taking into consideration the current outlook for gold prices, increasing supply chain cost pressures including diesel fuel, consumables, labour costs and interest rates while maintaining the production, processing and recovery assumptions. In performing the impairment assessment, the company determined that the carrying value of each CGU did not exceed its recoverable amount. Therefore, no impairment was recorded for the 30 June 2023 period (30 June 2022: $175,535,410). Key Assumptions The table below summarises the key assumptions used in the 2023 year end carrying value assessments. Assumption Value Gold price ($/oz) A$2,794/oz – A$2,100/oz real Discount rate 5.5% real post tax Gold prices Gold prices are estimated with reference to external market forecasts based on a consensus view of market experts. Discount rate In determining the fair value of CGU’s, the future real cashflows are discounted using rates based on the Group’s estimated after tax real weighted average cost of capital with a mid-point of 5.5%. Operating and capital costs Life of mine operating and capital cost assumptions are based on the Group’s latest budget and life-of-mine plans. Climate related risks The potential financial impact of climate related risks have been considered in impairment test through the inclusion of committed initiatives in cash flow forecasts including commitments to replace the Diesel power generation with solar and gas power generation.
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