Accounting policy change adds to Galactic loss

A much more conservative accounting policy has been adopted by Galactic Resources, major gold producing asset of which is the Summitville mine in Colorado. As a result, Galactic reported a year-end net loss of $25.6 million(US) on revenues of $20.5 million.

Robert Friedland, chairman, said the accounting change and expensing of costs, with allowance for accrued amortization, contributed $22.8 million or $1.16 per share to the net loss for the year ended Dec 31.

The policy change moves Galactic in line with established gold producers, he explained, adding the change was not expected to “adversely affect the company’s working capital position, future cash flows, or its ability to conduct ongoing business operations.” Nor would it have any impact on the company’s proven ore reserves, he said.

Mr Friedland noted that $9 million of the costs incurred on the Summitville leach pad were expenditures required to rebuild the pad because of construction and design deficiencies. Because this was a non-recurring expenditure, the company wrote it off during the 1986 fiscal year. Mine development expenditures, recorded at $8.9 million of waste removal, dike construction and other mine development, are included in the loss for the year.

The new accounting policy will result in lower depreciation and amortized charges against income of approximately $52(US) per oz of gold produced in future periods, he added.

March gold production at Summitville is expected to exceed 2,500 oz bringing total gold equivalent production since last June to about 65,000 oz. Mining activities are expected to recommence on May 1 and ore production is expected to be three million tons per year on leach pads.