Banff takes US$71m Kasese writeoff

Following a review of the carrying value of the Kasese Cobalt operation in western Uganda, Banff Resources (BFF-V) has decided to write off the remaining book value of the project’s capital assets.

Despite positive cash flow (prior to debt servicing) during the past three months and record monthly cobalt production of 58 tonnes in July, the company will take a US$71-million writeoff. This includes capitalized operating losses of US$13 million. Banff says the move will have no impact on its cash flow, reserves or production.

The writeoff will appear in the company’s results for the fiscal year ended June 30, 2001, which are expected in late September. The result will be a net asset deficiency of more than US$100 million, compared with a previous working capital deficit topping US$20 million.

Banff attributes the writeoff to a current cobalt price of about US$9.50 per lb. (US$15 per lb. was assumed in the original feasibility) and to initial cost overruns related to construction of the cobalt processing and hydro facilities. Other factors include equipment failures and lower-than-expected cobalt recoveries, which have led to a prolonged commissioning period and higher-than-projected operating costs.