CHANGES IN ACCOUNTING POLICY

The company changed its accounting policy on stripping costs, under both IFRS and US GAAP, in the current year. Previously, costs of production stage waste stripping in excess of the expected pit life average stripping ratio were deferred and then charged to production when the actual stripping ratio was below the expected pit life average stripping ratio. Under the revised accounting policy, all stripping costs incurred during the production phase of a mine are treated as variable production costs and as a result are included in the cost of the inventory produced during the period that the stripping costs are incurred. Under US GAAP, EITF 04-06 ‘Accounting for Stripping Costs Incurred during Production in the Mining Industry’ is effective for reporting periods beginning after 15 December 2005. The consensus does not permit the deferral of any waste stripping costs during the production phase of a mine, but requires instead that they should be treated as variable production costs. The directors have decided to adopt the same treatment under IFRS which will ensure that the accounting policies applied under IFRS and US GAAP remain in line.

With regard to the conclusions reached by the EITF, the directors believe the revised policy will mean that the financial statements provide reliable and more relevant information about the group’s financial position and its financial performance. In accordance with the requirements of IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, the change in the IFRS policy has been applied retrospectively and hence the 2005 comparatives have been restated.