Notes to the Financial Statements
80
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5. Revenue and expenses continued
Impairment – Challenger Gold Project
The Group announced on 28 June 2013 the impair-
ment of the carrying value of the Challenger Gold 
Mine as a result of the change of the mine plan to 
focus on the higher grade Challenger West 
orebody. The revised mine plan is the result of a 
strategic review of the Challenger Gold Mine in 
response to the significant and sustained decline 
in gold price and the mine’s operating perfor-
mance over the 2013 financial year.
An impairment is recognised when the carrying 
amount exceeds the recoverable amount. The 
recoverable amount for Challenger Gold Mine 
cash-generating unit has been determined based 
on its value in use (“VIU”). The impairment test 
is assessed at the cash-generating unit (“CGU”) 
level, which is the lowest level for which identifi-
able cash inflows are largely independent of the 
cash flows of other assets. The VIU approach is 
based on the present value of the future cash 
flows expected to be derived from the CGU.
While the Challenger Gold Project is expected 
to generate positive cash flows based on 
the revised plan, the cash flow estimates no 
longer support the full recovery of the carrying 
value. As a result of this assessment, the 
Group has recorded an impairment charge of 
$311,850,000 pre-tax, related to the carrying 
value of the property, plant and equipment and 
mine properties at Challenger Gold Project.
The key assumptions and estimates used in deter-
mining the recoverable amount (VIU) are related 
to gold price, gold production, discount rate, 
operating costs and capital expenditures. The 
basis for determination of the impairment was:
〉〉 gold price – future gold price was primarily 
based on current hedging programs 
consisting of 50,000 ounces of gold at a 
delivery price of A$1,435 per ounce, 6,500 
ounces at a delivery price of A$1,160 per 
ounce and a spot price of A$1,425 for the 
balance of production;
〉〉 gold production – future gold production 
was based on the new mine plan;
〉〉 discount rate – a pre-tax discount rate of 
10%; and
〉〉 operating costs and capital expenditure 
– these costs were based on historic mining 
costs, new mining contract cost estimates, 
existing royalty rates with the South 
Australian Government and the local land 
owners and management’s best estimates  
at the time of the impairment testing.
The impact on recoverable amount from varying 
the above assumptions has been assessed and, 
given the relatively short period of the expected 
remaining mine life of the Challenger Gold 
Project, has been assessed as having an immate-
rial impact on the impairment charge.
6. Income tax
2013 
$’000
2012 
$’000
a) Income tax expense
Current tax  3,670 15,591
Deferred tax (19,559) 680
Income tax (benefit) / expense (15,889) 16,271
Deferred tax expense / (benefit) included in tax expense comprises:
(Increase) / decrease in deferred tax assets  32,486 (4,908)
Increase / (decrease) in deferred tax liabilities  (52,045) 5,588
Deferred tax  (19,559) 680