TIDMATYM
RNS Number : 0039J
Atalaya Mining PLC
27 March 2018
27 March 2018
Atalaya Mining Plc
("Atalaya" and/or the "Group")
Results for the year ended 31 December 2017
First full year of commercial production: EUR41 million EBITDA
for 37,100 tonnes of Cu
Atalaya Mining Plc (AIM: ATYM; TSX: AYM) is pleased to announce
its audited consolidated results for the year ended 31 December
2017.
Operational Highlights
Proyecto Riotinto
-- 2017 has been the first full year of commercial production
with throughput reporting 8.8 million tonnes of ore processed and
stable operations quarter-on-quarter.
-- Copper production was 37,164 tonnes, in line with 2017
guidance and 42% higher than 26,179 tonnes produced in 2016.
-- Copper grade was also consistent with estimates averaging
0.50% for 2017, in line with previous year.
-- Recovery rate was above estimates, increasing to
approximately 85.5%, a material improvement on 2016 rate of
83.3%.
-- 2018 production guidance targeting an improvement on 2017,
with contained copper estimated within 37,000 - 40,000 tonnes.
Expansion of Proyecto Riotinto
-- In June 2017, the Board of Directors approved a feasibility
study to increase mining and processing capacity to 15.0 Mtpa.
-- The study was completed in Q3 2017, concluding that the
expansion was technically and financially robust.
-- The expansion project was then approved for implementation in
Q4 2017. The Group raised funds of EUR34.7 million to launch the
expansion in December 2017.
-- The capital cost estimate is EUR80.4 million with
commissioning scheduled for the second half of 2019. Total copper
production is estimated to reach 50,000 - 55,000 tonnes per year
once the expansion project is fully operational.
Proyecto Touro
-- Permitting is progressing according to schedule. Reports were
received as part of the permitting process and project improvements
were suggested. Consultants have already been engaged to address
these recommendations.
-- A technical report is close to completion at pre-feasibility
level of detail and in compliance with NI 43-101 guidelines. The
report will be released in Q2 2018 once additional project
improvements are incorporated to accommodate the final permitting
process.
-- In Q3 2017, the Group signed an option agreement to acquire
exploration concessions covering 122.7 km(2) immediately
surrounding Proyecto Touro, where mineralised copper occurrences
are documented.
-- An exploration campaign was initiated during the year over
the newly optioned exploration concessions around Proyecto Touro.
The campaign included an airborne VTEM geophysical survey, detailed
assessment of structural geology and a regional geochemical
campaign.
Financial Highlights
-- Sales amounted to EUR160.5 million in 2017. Inventory of
7,274 tonnes of copper concentrate as of 31 December 2017 were
shipped during Q1 2018.
-- Group operating costs and corporate costs amounted to
EUR114.7 million and EUR4.5 million, respectively, providing an
EBITDA of EUR41.4 million for the twelve months ended 31 December
2017.
-- Cash costs for 2017 were US$1.91/lb of payable copper,
providing healthy margins and positive cash flows at average market
copper prices of $2.80/lb during the year. AISC averaged $2.30/lb
of payable copper for the year. Increases over guidance of $2,20/lb
were mainly due to unfavourable foreign exchange and one-off
sustaining costs (construction of cover for the coarse ore
stockpile). AISC costs were within guidance for the first three
quarters of 2017.
-- Net income of EUR18.2 million (or 15.5 cents per outstanding share).
-- As at 31 December 2017, reported net assets totalled EUR246.9
million, comprising non-current assets of EUR283.5 million,
non-current liabilities of EUR58.7 million and working capital of
EUR22.1 million. Long term liabilities include the deferred
consideration to Astor presented by the nominal amount of EUR53
million and the rehabilitation provisions of EUR5.5 million.
Working capital includes EUR34.7 million of cash from the proceeds
of the equity raised in December 2017.
-- During 2017, the Group fully repaid the Transamine Trading
S.A. prepayment signed in September 2016 and the Social Security
debt signed prior to the declaration of production.
-- Positive cash flows from operating activities for the twelve
months ended 31 December 2017 amounted to EUR30.5 million. Cash
used for investing activities was EUR22.7 million, mainly for
deferred mining costs, sustaining capital expenditure at Proyecto
Riotinto and capitalised costs at Proyecto Touro. Financing surplus
cash flow of EUR33.9 million was from the equity raised in December
2017.
Corporate Highlights
-- On 25 April 2017, Atalaya and Astor applied for permission to
appeal to the Court of Appeal. On 11 August 2017, the Court of
Appeal granted permission to both parties to appeal (although it
rejected three of Astor's seven grounds). The Appeal is anticipated
to take place in May 2018.
Alberto Lavandeira, CEO commented:
"We are delighted to report that our first full year of
production at Proyecto Riotinto has been a success, with
incremental operating improvements each quarter. We remain positive
on the outlook for copper and believe that our plans to expand
Riotinto to 15Mtpa and to deliver Proyecto Touro will ensure that
these two projects commence production when the fundamentals for
copper are at their most robust. 2018 will be another year of
exciting progress as we implement these plans to grow our
business."
About Atalaya Mining Plc
Atalaya is an AIM and TSX listed operational and development
group which produces copper concentrates and silver by-product at
its fully owned Proyecto Riotinto site in southwest Spain. In
addition, the Group has a phased, earn-in agreement for up to 80%
ownership of Proyecto Touro, a brownfield copper project in the
northwest of Spain which is currently in the permitting stage. For
further information, visit www.atalayamining.com
This announcement contains information which, prior to its
publication constituted inside information for the purposes of
Article 7 of Regulation (EU) No 596/2014.
Contacts:
Charlie Chichester
Newgate Communications / James Ash / James +44 20 7680
(Financial PR) Browne 6550
------------------------ ---------------------------- ------------
4C Communications +44 20 3170
(Investor Relations) Carina Corbett 7973
------------------------ ---------------------------- ------------
Canaccord Genuity Martin Davison /
(NOMAD and Joint Henry Fitzgerald-O'Connor +44 20 7523
Broker) / James Asensio 8000
------------------------ ---------------------------- ------------
BMO Capital Markets Jeffrey Couch / Neil +44 20 7236
(Joint Broker) Haycock / Tom Rider 1010
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i. Operational review
Proyecto Riotinto
The following table presents a summarised statement of
operations of Proyecto Riotinto for the twelve months ended 31
December 2017 and 31 December 2016.
Units expressed in accordance with the international system of units (SI)
Unit FY2017 FY2016(1)
Ore mined t 9,340,028 7,754,499
Ore processed t 8,796,715 6,505,762
Copper ore grade % 0.50 0.49
Copper concentrate grade % 22.39 21.56
Copper recovery rate % 85.45 83.29
Copper concentrate t 165,965 122,468
Copper contained in concentrate t 37,164 26,179
Payable copper contained in concentrate t 35,504 25,353
Cash cost(2) $/lb payable 1.91 1.95
All-in sustaining cost(2) $/lb payable 2.30 Not available
Notes:
The numbers in the above table may slightly differ between them
due to rounding.
1) 2016 figures include pre-commissioning production for January 2016.
2) Refer to note (iii) of this Report
Mining and Processing
Mining
Mining operations are now stable quarter-on-quarter. Operations
continued in the Cerro Colorado open pit and Proyecto Riotinto
mined 9.3 million metric tonnes of ore during 2017. In anticipation
of higher mining rates in the near future, additional mining
equipment was delivered, assembled and commissioned during the
second half of the year.
Processing
Ore processed during the year was 8.8 million tonnes
representing an improvement over the previous year when 6.5 million
tonnes were processed. Overall, hourly throughput rates were
improved quarter-by-quarter as equipment availability and
efficiency increased.
Copper grade was consistent with estimates averaging 0.50% for
2017, in line with the previous year. Recovery rate was above
estimates, increasing to approximately 85.5%, a material
improvement on last year. The copper concentrate grade was 22.4%
during 2017, in line with expectations and also slightly above last
year's grade.
Concentrate production for 2017 was 165,965 tonnes compared with
122,468 tonnes in 2016 (including pre-commissioning production for
January 2016). Contained copper was 37,164 tonnes compared with
26,179 tonnes in 2016. Copper payable amounted to 35,504 tonnes
from 25,353 tonnes in 2016.
As of the reporting date, all concentrate production was sold
except for 7,374 tonnes of concentrate which were shipped during Q1
2018. Concentrate shipments were not impacted by disruptions
reported at ports across Spain during Q1 2017.
A number of initiatives were delivered during the year. In Q1
2017, process water supply systems were upgraded and the main
incoming electrical substation went through yearly maintenance.
With regards to the environment, rehabilitation of the south waste
dump commenced. During Q2 2017, a new 300 m3 primary rougher
flotation cell was commissioned and installation of plastic lining
in one of the paddocks of the tailings storage facilities was
completed. A cover dome over the coarse ore stockpile is under
construction and the installation of an additional secondary cone
crusher is under evaluation.
i. Operational review (continued)
Exploration and Geology
During 2017, near-mine exploration and infill drilling were
concentrated on the lateral extension of Filon Sur and the
north-west extension of Cerro Colorado. Results will form part of a
resource and reserve update due for completion during Q2 2018.
An airborne VTEM geophysical survey was completed during Q4 2017
with results expected in Q1 2018.
Expansion of Proyecto Riotinto
In June 2017, the board of directors approved the commencement
of a study to demonstrate the feasibility of increasing mining and
processing capacity at Proyecto Riotinto beyond the existing
9.5Mtpa, to a maximum of 15Mtpa. Copper production is estimated to
reach 50,000 - 55,000 tonnes per year once the expansion project is
fully ramped up.
The study was completed in the third quarter of 2017, concluding
that the expansion was technically and financially robust. The
expansion project was then approved by the board of directors in Q4
2017 and launched in December 2017.
The capital cost estimate is EUR80.4 million with commissioning
scheduled for the second half of 2019.
Proyecto Touro
Permitting is progressing according to schedule. Reports were
received as part of the permitting process and project improvements
were suggested. Consultants have already been engaged in order to
address these recommendations.
A technical report is substantially completed at pre-feasibility
level of detail and in compliance with NI 43-101 guidelines. The
report will be released when the additional project improvements
are incorporated to accommodate the final permitting process.
During Q3 2017, the Group signed an option agreement to acquire
exploration concessions that cover 122.7 km(2) immediately
surrounding Proyecto Touro, where mineralised copper occurrences
are documented.
An exploration campaign was initiated during the year over the
newly optioned exploration concessions around Proyecto Touro. The
campaign included an airborne VTEM geophysical survey, detailed
assessment of structural geology and a regional geochemical
campaign. The first phase of an airborne VTEM geophysical survey
was completed during the last quarter of 2017 with results still
pending.
ii. Operational guidance
The forward-looking information contained in this section is
subject to the risk factors and assumptions contained in the
cautionary statement on forward-looking statements included in the
note of this report.
Proyecto Riotinto operational guidance for 2018 is as
follows:
Guidance Actual Guidance
Unit 2018 2017 2017
million
Ore processed tonnes 9.6 8.8 8.7 - 9.0
Contained 37,000 36,000
copper tonnes - 40,000 37,164 - 39,000
Copper head grade for 2018 is budgeted to average between 0.47%
and 0.50% Cu, with a recovery rate of approximately 84% - 86%. Cash
operating costs for 2018 are expected to be in the range of
$2.15/lb - $2.30/lb. AISC for 2018 is expected to be in the range
of $2.50/lb - $2.60/lb Cu payable.
iii. Financial review
Results
The following table presents a summarised consolidated income
statement for the twelve months ended 31 December 2017, with
comparatives for twelve months ended 31 December 2016.
Twelve Twelve
months months
(Euro 000's) ended ended
31 Dec 31 Dec
2017 2016
Sales 160,537 98,768
Total operating
costs (114,687) (77,845)(1)
Corporate
expenses (4,508) (4,800)(1)
Exploration
expenses - (1,022)
Other income 5 292
----------- -------------
EBITDA 41,347 15,393
Depreciation/amortisation (16,671) (11,757)(1)
Impairment
of land options
not exercised - (903)
Net foreign
exchange
loss (2,212) (665)
Net finance
cost (557) (549)
Share of
result of
associate - (10)
Tax charge
/ (credit) (3,696) 12,187
----------- -------------
18,211 13,696
----------- -------------
(1) Include reclassifications on corporate expenses for
comparative purposes
Revenues for the twelve month period ended 31 December 2017
amounted to EUR160.5 million (FY16: EUR98.8 million). Commercial
production at Proyecto Riotinto was declared in February 2016.
Revenue benefited from the increasing copper price.
Copper concentrate production during FY17 was 165,965 tonnes
(FY16: 122,468 tonnes). Inventories of concentrates as at the
reporting date were 7,374 tonnes with no inventories held as at 31
December 2016. All concentrate inventories held as of 31 December
2017 were shipped in Q1 2018.
The realised price for the twelve month period in 2017 was
$2.66/lb copper compared with $2.25/lb copper in the same period of
2016. Concentrates were sold under offtake agreements in place.
Operating costs for the twelve month period ended 31 December
2017 amounted to EUR114.7 million, compared with EUR77.8 million in
the twelve month period in 2016. The increase was mainly due to
higher mining and processing variable costs directly attributable
to an increase in copper production.
iii. Financial review (continued)
Cash costs of $1.91/lb payable copper during the twelve month
period in 2017 compares with $1.95/lb payable copper in the same
period last year. All-in sustaining costs for FY17 were $2.30/lb
payable copper.
Sustaining capex for the twelve month period, included in
capital expenditure, amounted to EUR7.4 million. Sustaining capex
accounted for development programmes at the perimetric channel of
tailings storage facility, optimisation of the flotation circuit
and coarse ore stock pile, modifications to the processing
flowsheet, upgrades at the main incoming substation and
improvements to process and water supply systems.
Corporate costs for the twelve months period ended 31 December
2017 were EUR4.5 million, compared with EUR4.8 million in the
twelve month period ended 31 December 2016.
Exploration costs related to Proyecto Touro were capitalised
during 2017.
EBITDA for the twelve months ended 31 December 2017 amounted to
EUR41.3 million, compared with EBITDA of EUR15.4 million in the
same period last year.
Depreciation and amortisation amounted to EUR16.7 million in the
twelve month period ended 31 December 2017 (FY16: EUR11.7 million).
The increase in depreciation was mainly driven by higher production
levels, as mining equipment is depreciated by using the unit of
production method (Note 2.9).
Net finance costs for FY17 amounted to EUR0.6 million (FY16:
EUR0.5 million) mainly related to the interest costs for the
Transamine prepayment and the Social Security debt. Both the
Transamine prepayment and the Social Security debt were fully
repaid as of 31 December 2017.
Cash cost methodology
Following the first full year of production at Proyecto
Riotinto, during the last quarter of 2017 Atalaya carried out an
exhaustive analysis on the methodology applied to its operating
costs reported through the year, with the main purpose of providing
enough and consistent information to the market to assess the
operating cash costs ("Cash Cost" or "C1") and All In Sustaining
Cost ("AISC") of Proyecto Riotinto.
As a result of the analysis, management has changed the
methodology used when calculating C1 and AISC in previous quarters.
The following table provides a reconciliation between the C1 and
AISC reported and the reclassifications and adjustments to make the
information comparable.
Cash Cost C1 ($/lb) Q1 Q2 Q3 Q4 FY2017
2017 2017 2017 2017
Cash cost C1 reported $1.83 $2.07 $2.14 $2.35 $1.91
---------------------------- -------- -------- -------- ------ -------
Reclassification
from C1 to AISC
- Astor agency fee
and local corporate
costs ($0.03) ($0.06) ($0.07) - -
Ag credits ($0.09) ($0.07) ($0.07) - -
Exploration & geology
costs ($0.02) ($0.03) ($0.02) - -
Finalisation of
provision for concentrate
penalties ($0.02) ($0.04) ($0.07) - -
Finalisation of
provisions for freights,
TCs and RCs ($0.02) $0.01 ($0.07) - -
Other adjustments ($0.01) - - - -
Normalised cash
costs $1.64 $1.88 $1.84 $2.35 $1.91
---------------------------- -------- -------- -------- ------ -------
iii. Financial review (continued)
AISC ($/lb) Q1 Q2 Q3 Q4 FY2017
2017 2017 2017 2017
AISC reported $2.15 $2.30 $2.33 $2.94 $2.30
------------------- -------- -------- -------- ------ -------
Adjustments from
C1 ($0.15) ($0.13) ($0.23) - -
Reclassifications
from C1 $0.03 $0.06 $0.07 - -
Corporate costs ($0.03) ($0.02) ($0.02) - -
Other adjustments $0.01 $0.01 ($0.02) - -
------------------- -------- -------- -------- ------ -------
Normalised AISC
costs $2.01 $2.22 $2.13 $2.94 $2.30
------------------- -------- -------- -------- ------ -------
Non-GAAP Measures
Atalaya has included certain non-IFRS measures including
"EBITDA", "Cash Cost per pound of payable copper" "All In
Sustaining Costs" ("AISC") and "realised prices" in this report.
Non-IFRS measures do not have any standardised meaning prescribed
under IFRS, and therefore they may not be comparable to similar
measures presented by other companies. These measures are intended
to provide additional information and should not be considered in
isolation or as a substitute for indicators prepared in accordance
with IFRS.
EBITDA includes gross sales net of penalties and discounts and
all operating costs, excluding finance, tax, impairment,
depreciation and amortisation expenses.
Cash Cost per pound of payable copper includes on-site cash
operating costs, and off-site costs including treatment and
refining charges ("TC/RC"), freight and distribution costs net of
by-product credits. Cash Cost per pound of payable copper is
consistent with the widely accepted industry standard established
by Wood Mackenzie and is also known as the C1 cash cost.
AISC per pound of payable copper includes the C1 Cash Costs plus
royalties and agency fees, expenditure on rehabilitations,
stripping costs, exploration and geology costs, corporate costs,
and sustaining capital expenditures.
Realised prices per pound of payable copper is the value of the
copper payable included in the concentrate produced including the
penalties, discounts, credits and other features governed by the
offtake agreements of the Group and all discounts or premia
provided in commodity hedge agreements with financial institutions,
expressed in USD per pound of payable copper. Realised price is
consistent with the widely accepted industry standard
definition.
iv. Liquidity and capital resources
Atalaya monitors factors that could impact its liquidity as part
of Atalaya's overall capital management strategy. Factors that are
monitored include, but are not limited to, the market price of
copper, foreign currency rates, production levels, operating costs,
capital and administrative costs.
The following is a summary of Atalaya's cash position as at 31
December 2017 and 31 December 2016 and cash flows for the twelve
months ended 31 December 2017 and 2016.
Liquidity information
(Euro 000's) 31 December 31 December
2017 2016
Unrestricted cash and
cash equivalents at Group
level 39,179 460
Unrestricted cash and
cash equivalents at Operation
level 3,427 425
Restricted cash 250 250
Working capital surplus/(deficit) 22,137 (25,382)
Unrestricted cash and cash equivalents as at 31 December 2017
increased to EUR42.6 million from EUR0.9 million at 31 December
2016. The increase in cash balances is the result of net cash flow
generated by the Group in the period and the capital raised
amounting to GBP31.0 million in December 2017. Cash balances are
unrestricted and include balances at operational and corporate
level.
iv. Liquidity and capital resources (continued)
Liquidity and capital resources (continued)
Restricted cash remains at EUR0.3 million as at 31 December 2017
and mainly relates to deposit bond guarantees.
As of 31 December 2017, Atalaya reported a working capital
surplus of EUR22.1 million, compared with a working capital deficit
of EUR25.4 million at 31 December 2016. Like last year, the main
liability of the working capital is trade payables related to the
main contractor, where the Group has reached certain agreements to
reduce its deficit progressively during 2018.
In June 2017, the Group completed repayment of EUR16.9 million
to the Social Security's General Treasury in Spain. The debt
liability was incurred by the former owners of the assets.
Repayment was completed according to the agreed repayment
schedule.
In 2016, the Group entered into a US$14 million copper
concentrate prepayment agreement with Transamine Trading, S.A. an
independent and privately owned commodity trader company based in
Geneva. The duration of the prepayment was from 2016 to 31 December
2018 with terms at market conditions and the settlement was agreed
to be paid through deductions from payments received for each
shipment. On 15 December 2017, the Group fully settled the
prepayment ahead of schedule and has decided not to extend the
contract on the same terms before January 2018 as permitted under
the original agreement.
Overview of the Group's cash flows
Twelve Twelve
(Euro 000's) months months
ended ended
31 Dec 31 Dec
2017 2016
Cash flows from operating
activities 30,500 13,789
Cash flows used in investing
activities (22,678) (31,272)
Cash flows from financing 33,899 -
activities
--------- ---------
Net increase/(decrease)
in cash and cash equivalents 41,721 (17,483)
========= =========
Cash and cash equivalents increased by EUR41.7 million during
the twelve months ended 31 December 2017. This was due to cash from
operating activities amounting to EUR30.5 million, cash used in
investing activities amounting to EUR22.7 million and cash
generated by financing activities totalling to EUR33.9 million.
Cash generated from operating activities before working capital
changes was EUR39.5 million. Atalaya increased its trade
receivables by EUR4.4 million, its trade payables balance in the
period by EUR5.4 million and its inventory levels by EUR7.5
million.
Investing activities in 2017 amounted to EUR22.7 million, mainly
relating to sustaining capex, the expansion of Proyecto Riotinto,
capitalised stripping costs and the permits of Proyecto Touro.
Financing activities in 2017 related to the capital raised in Q4
2017.
v. Foreign exchange
During the twelve months ended 31 December 2017, Atalaya
recognised a foreign exchange loss of EUR2.2 million. Foreign
exchange losses mainly related to variances in EUR and USD
conversion rates during the period, as all sales are settled and
occasionally held in USD.
The following table summarises the movement in key currencies
versus the EUR:
Twelve Twelve
months months
ended ended
31 Dec 31 Dec
2017 2016
Average rates for the
periods
GBP - EUR 0.8767 0.8195
USD - EUR 1.1297 1.1069
Spot rates as at
GBP - EUR 0.8872 0.8562
USD - EUR 1.1993 1.0541
In February 2017, the Group entered into certain foreign
exchange hedging contracts to offset the agreements in force as at
31 December 2016. During the remainder of 2017, Atalaya did not
have any currency hedging agreements.
Further information on the hedging agreements is disclosed in
the audited, consolidated and company financial statements
(hereinafter "financial statements") that follow (Note 28).
vi. Ruling on Astor litigation and deferred consideration
Astor Case
On 6 March 2017, judgment in the Astor Management AG ("Astor")
case ("Astor Case") was handed down in the High Court of Justice in
London (the "Judgment"). On 31 March 2017 declarations were made by
the High Court which give effect to the Judgment.
In summary, the High Court found that the deferred consideration
of EUR43.8 million (the "Deferred Consideration"), potentially
payable to Astor under the master agreement entered into in 2008
between inter alia the Company and Astor (the "Master Agreement"),
did not start to become payable when permit approval was granted
for Proyecto Riotinto. In addition, the intra-group loans by which
funding for the restart of mining operations was made available to
the Company's subsidiary, Atalaya Riotinto Minera S.L. did not
constitute a "Senior Debt Facility" so as to trigger payment of the
Deferred Consideration. Accordingly, the first instalment of the
Deferred Consideration has not fallen due.
Astor failed to show that there had been a breach of the all
reasonable endeavours obligation contained in the Master Agreement
to obtain a senior debt facility or that the Group had acted in bad
faith in not obtaining a senior debt facility. While the Court
confirmed that the Group was not in breach of any of its
obligations, the Master Agreement and its provisions remain in
place. Accordingly, other than up to US$10 million a year which may
be required for non-Proyecto Riotinto related expenses, Atalaya
Riotinto Minera S.L. cannot make any dividend, distribution or any
repayment of the money lent to it by companies in the Group until
the consideration under the Master Agreement (including the
Deferred Consideration) has been paid in full.
vi. Ruling on Astor litigation and deferred consideration
(continued)
As a consequence, the Judgment requires that, in accordance with
the Master Agreement, Atalaya Riotinto Minera S.L. must apply any
excess cash (after payment of operating expenses, sustaining
capital expenditure, any senior debt service requirements and up to
US$10 million (for non-Proyecto Riotinto related expenses)) to pay
the consideration due to Astor (including the Deferred
Consideration and the amount of EUR9.1 million payable under the
loan assignment agreement between the parties) early. The Court
confirmed that the obligation to pay consideration early out of
excess cash does not apply to the up-tick payments of up to EUR15.9
million (the "Up-tick Payments") and the Judgment notes that the
only situation in which the Up-tick Payments could ever become
payable is in the unlikely event that mining operations stop at
Proyecto Riotinto and a senior debt facility is then secured for a
sum sufficient to restart mining operations. Accordingly, the Group
has recorded the liability of EUR53 million.
On 25 April 2017, Atalaya and Astor applied for permission to
appeal to the Court of Appeal. On 11 August 2017, the Court of
Appeal granted permission to both parties to appeal (although it
rejected three of Astor's seven grounds). The Appeal will take
place during May 2018.
More details on the Astor Case are included in Note 27 of the
audited financial statements that follow.
vii. Critical accounting policies, estimates and accounting
changes
The preparation of Atalaya's Financial Statements in accordance
with IFRS requires management to make estimates and assumptions
that affect amounts reported in the Financial Statements and
accompanying notes. There is a full discussion and description of
Atalaya's critical accounting estimates and judgements in the
audited financial statements for the year ended 31 December 2017
(Note 3.4).
Years ended
31 December
The The The
The Company Group Company
Group
(Euro 000's) Note 2017 2017 2016 2016
restated restated
(*) (*)
============ ========= =========== ==========
4 /
Gross sales 31.2 160,537 1,015 98,273 177
Realised gains on
derivative financial
instruments held for
trading 28 - - 495 -
Sales 160,537 1,015 98,768 177
Operating costs and
mine site administrative
expenses (114,687) - (77,845) -
Mine site depreciation
and amortization (16,664) - (11,743) -
============ ========= =========== ==========
Gross income 29,186 1,015 9,180 177
Corporate expenses (4,356) (4,001) (4,663) (3,620)
Corporate depreciation (7) (7) (14) (14)
Share based benefits (152) (34) (137) (137)
Exploration expenses - (1,022) -
Impairment charge - (903) 97,157
Operating profit 24,671 (3,027) 2,441 93,563
Other income 5 5 1 292 47
Net foreign exchange
loss 4 (2,212) 264 (665) (74)
Finance income 8 22 1,635 41 1,523
Finance costs 9 (579) - (590) -
Share of results of
associate - net 15 - - (10) -
Profit / (loss) before
tax 21,907 (1,127) 1,509 95,059
Tax credit/(charge) 10 (3,696) - 12,187 -
============ ========= =========== ==========
Profit / (loss) for
the year 18,211 (1,127) 13,696 95,059
============ ========= =========== ==========
Profit / (loss) for
the year attributable
to:
* Owners of the parent 18,239 (1,127) 13,696 95,059
(28) - - -
* Non-controlling interests
============ ========= =========== ==========
18,211 (1,127) 13,696 95,059
============ ========= =========== ==========
Earnings per share
from operations attributable
to equity holders
of the parent during
the year:
Basic earnings per
share (expressed in
cents per share) 11 15.5 11.7
============ ========= =========== ==========
Fully diluted earnings
per share (expressed
in cents per share) 11 15.3 11.7
============ ========= =========== ==========
Profit / (loss) for
the year 18,211 (1,127) 13,696 95,059
Other comprehensive
income:
Change in value of
available-for-sale
investments 20 (132) (132) (41) (41)
============ ========= =========== ==========
Total comprehensive
profit for the year 18,079 (1,259) 13,655 95,018
============ ========= =========== ==========
Total comprehensive
profit for the year
attributable to:
* Owners of the parent 18,107 (1,259) 13,655 95,018
(28) - - -
* Non-controlling interests
============ ========= =========== ==========
18,079 (1,259) 13,655 95,018
================================== ====== ============ ========= =========== ==========
(*) Refer to Note 2.1. (c)
The notes on pages 40 to 94 are an integral part of these
consolidated and company financial statements.
As at 31 December As at 31 December
The The The The Company
Group Company Group 2016
Note 2017 2017 2016 restated
restated (*)
(Euro 000's) (*)
======== ========= ========== ===========
Assets
Non-current assets
Property, plant and
equipment 12 199,458 - 191,380 16
Intangible assets 13 73,700 - 70,011 -
Investment in subsidiaries 14 - 3,693 - 3,572
Investment in associate 15 - - - 4
Trade and other receivables 19 212 - 206 -
Deferred tax asset 17 10,130 - 12,196 -
======== ========= ========== ===========
283,500 3,693 273,793 3,592
======== ========= ========== ===========
Current assets
Inventories 18 13,674 - 6,195 -
Trade and other receivables 19 34,213 242,824 29,850 240,245
Available-for-sale
investments 20 129 129 261 261
Cash and cash equivalents 21 42,856 34,410 1,135 320
======== ========= ========== ===========
90,872 277,363 37,441 240,826
======== ========= ========== ===========
Total assets 374,372 281,056 311,234 244,418
======== ========= ========== ===========
Equity and liabilities
Equity attributable
to owners of the
parent
Share capital 22 13,192 13,192 11,632 11,632
Share premium 22 309,577 309,577 277,238 277,238
Other reserves 23 6,137 5,687 5,667 5,667
Accumulated losses (86,527) (62,417) (104,316) (61,290)
======== ========= ========== ===========
242,379 266,039 190,221 233,247
Non-controlling interests 24 4,474 - - -
======== ========= ========== ===========
Total equity 246,853 266,039 190,221 233,247
======== ========= ========== ===========
Liabilities
Non-current liabilities
Trade and other payables 25 74 - 115 -
Provisions 26 5,727 - 5,092 -
Deferred consideration 27 52,983 9,100 52,983 9,100
58,784 9,100 58,190 9,100
======== ========= ========== ===========
Current liabilities
Trade and other payables 25 67,983 5,917 62,592 2,071
Current tax liabilities 752 - 16 -
Derivative instruments 28 - - 215 -
68,735 5,917 62,823 2,071
======== ========= ========== ===========
Total liabilities 127,519 15,017 121,013 11,171
======== ========= ========== ===========
Total equity and
liabilities 374,372 281,056 311,234 244,418
======== ========= ========== ===========
(*) Refer to Note 2.1. (c)
The notes on pages 40 to 94 are an integral part of these
consolidated and company financial statements.
Attributable to owners
of the parent
=============================================================
Non-
Note Share Share Other Accumulated controlling Total
capital Premium reserves(1) losses Total interest equity
(Euro 000's) (2)
========= ========== ============ ============ ========== ============ ==========
At 1 January
2016 11,632 277,238 5,508 (118,012) 176,366 - 176,366
Profit for
the year restated
(*) - - - 13,696 13,696 - 13,696
Bonus shares
issued in
escrow 23 - - 63 - 63 - 63
Change in
value of
available-for-sale
investments - - (41) - (41) - (41)
Recognition
of share based
payments - - 137 - 137 - 137
------------ ------------ ---------- ------------ ----------
At 31 December
2016/
1 January
2017 restated
(*) 11,632 277,238 5,667 (104,316) 190,221 - 190,221
Profit for
the year - - - 18,239 18,239 (28) 18,211
Issue of share
capital 22 1,560 33,182 - - 34,742 - 34,742
Share issue
costs - (843) - - (843) - (843)
Depletion
factor - - 450 (450) - - -
Change in
value of
available-for-sale
investments - - (132) - (132) - (132)
Recognition
of share based
payments - - 152 - 152 - 152
Non-controlling
interests - - - - - 4,502 4,502
At 31 December
2017 13,192 309,577 6,137 (86,527) 242,379 4,474 246,853
--------- ---------- ------------ ------------ ---------- ------------ ----------
(*) Refer to Note 2.1. (c)
(1) Refer to Note 23
(2) The share premium reserve is not available for
distribution.
The notes on pages 40 to 94 are an integral part of these
consolidated and company financial statements.
Share Share Other Accumulated
(Euro 000's) Note capital premium(2) reserves(1) losses Total
======== =========== ============ =========== ========
At 1 January 2016 11,632 277,238 5,508 (156,349) 138,029
Profit for the year
restated (*) - - - 95,059 95,059
Bonus shares issued
in escrow 23 - - 63 - 63
Change in value of
available-for-sale
investments (41) - (41)
Recognition of share
based payments - - 137 - 137
======== =========== ============ =========== ========
At 31 December 2016/1
January 2017 restated
(*) 11,632 277,238 5,667 (61,290) 233,247
Profit for the year - - - (1,127) (1,127)
Issue of share capital 22 1,560 33,182 - - 34,742
Share issue costs - (843) - - (843)
Change in value of
available-for-sale
investments - - (132) - (132)
Recognition of share
based payments - - 152 - 152
At 31 December 2017 13,192 309,577 5,687 (62,417) 266,039
======== =========== ============ =========== ========
(*) Refer to Note 2.1. (c)
(1) Refer to Note 23
(2) The share premium reserve is not available for
distribution.
The notes on pages 40 to 94 are an integral part of these
consolidated and company financial statements.
Note Restated
(*)
(Euro 000's) 2017 2016
========= =========
Cash flows from operating activities
Profit before tax 21,907 1,509
Adjustments for:
Depreciation of property, plant
and equipment 12 12,540 8,643
Amortisation of intangible assets 13 4,131 3,114
Share of result of associate 15 - 10
Recognition of share--based payments 23 152 137
Bonus share issued in escrow - 63
Hedging income 9 (205) -
Interest income 8 (22) (41)
Interest expense 9 671 395
Impairment charge 12 - 903
Gain on disposal of property,
plant and equipment - (4)
Unwinding of discounting 9 113 -
Legal provisions 26 213 -
Gain on disposal of associate 20 (49) -
Impairment on available-for-sale
investment 20 49 -
Net foreign exchange loss on
hedging expense - 195
Unrealised foreign exchange loss
on financing activities 11 (28)
Cash inflows from operating activities
before working capital changes 39,511 14,896
Changes in working capital:
Increase in inventories 18 (7,479) (6,195)
Increase in trade and other receivables 19 (2,653) (13,424)
Increase in trade and other payables 25 5,350 18,924
Decrease in derivative instruments 28 (215) -
Increase in provisions 26 (733) -
========= =========
Cash flows from operations 33,781 14,201
Interest paid (671) (395)
Tax paid (2,610) (17)
========= =========
Net cash from operating activities 30,500 13,789
========= =========
Cash flows from investing activities
Purchases of property, plant
and equipment 12 (20,220) (29,995)
Purchases of intangible assets 13 (2,694) (1,334)
Proceeds from sale of property,
plant and equipment 9 16
Hedging income/(expense) 9 205 -
Interest received 8 22 41
========= =========
Net cash used in investing activities (22,678) (31,272)
========= =========
Cash flows from financing activities
Proceeds from issue of share
capital 22 34,742 -
Listing and issue costs 22 (843) -
Net cash from financing activities 33,899 -
========= =========
Net increase / (decrease) in cash
and cash equivalents 41,721 (17,483)
Cash and cash equivalents:
At beginning of the year 21 1,135 18,618
========= =========
At end of the year 21 42,856 1,135
========= =========
(*) Refer to Note 2.1. (c)
The notes on pages 40 to 94 are an integral part of these
consolidated and company financial statements.
Restated
(*)
(Euro 000's) Note 2017 2016
======== =========
Cash flows from operating activities
Profit / (loss) before tax (1,127) 95,059
Adjustments for:
Depreciation of property, plant
and equipment 12 7 14
Share--based payments 6 34 137
Bonus share issue - 63
Finance income from interest-bearing
intercompany loan 8 (1,635) (1,523)
Intercompany balances previously
impaired - (97,243)
Loss on available-for-sale investment 5 49 -
Profit on disposal of investment 5 (45) -
Profit on disposal of property,
plant and equipment - (4)
Unrealised foreign exchange loss (3) -
on financing activities
======== =========
Cash inflows used in operating
activities before working capital
changes (2,720) (3,497)
Changes in working capital:
Increase in trade and other receivables 19 (2,579) (12,921)
Increase in trade and other payables 25 3,846 1,854
Deferred consideration - 9,100
======== =========
Cash flows used in operations (1,453) (5,464)
Interest paid - -
Net cash used in operating activities (1,453) (5,464)
======== =========
Cash flows from investing activities
Purchases of property, plant and
equipment 12 - (1)
Proceeds from disposal of property,
plant and equipment 9 16
Finance income from interest-bearing
intercompany loan 1,635 1,523
Net cash from investing activities 1,644 1,538
======== =========
Cash flows from financing activities
Proceeds from issue of share capital 34,742 -
Listing and issue costs 22 (843) -
Net cash from financing activities 33,899 -
======== =========
Net decrease in cash and cash
equivalents 34,090 (3,926)
Cash and cash equivalents:
At beginning of the year 21 320 4,246
======== =========
At end of the year 21 34,410 320
======== =========
(*) Refer to Note 2.1. (c)
The notes on pages 40 to 94 are an integral part of these
consolidated and company financial statements
1. Incorporation and summary of business
Country of incorporation
Atalaya Mining Plc (the "Company") was incorporated in Cyprus on
17 September 2004 as a private company with limited liability under
the Companies Law, Cap. 113 and was converted to a public limited
liability company on 26 January 2005. Its registered office is at 1
Lampousa Street, Nicosia, Cyprus.
The Company was listed on AIM of the London Stock Exchange in
May 2005 under the symbol ATYM and on the TSX on 20 December 2010
under the symbol AYM. The Company continued to be listed on AIM and
the TSX as at 31 December 2017.
Additional information about Atalaya Mining Plc is available at
www.atalayamining.com as per requirement of AIM rule 26.
Changed on name and share consolidation
Following the Company's EGM on 13 October 2015, the change of
the name Emed Mining Public Limited to Atalaya Mining Plc became
effective on 21 October 2015. On the same day, the consolidation of
ordinary shares came into effect, whereby all shareholders received
one new ordinary share of nominal value Stg GBP0.075 for every 30
existing ordinary shares of nominal value of Stg GBP0.0025.
Summary of business
The Company owns and operates through a wholly-owned subsidiary,
Proyecto Riotinto, an open-pit copper mine located in the Pyritic
belt, in the Andalusia region of Spain, approximately 65 km
northwest of Seville.
In addition, the Company has a phased earn-in agreement to up
80% ownership of Proyecto Touro, a brownfield copper project in
northwest Spain, which is currently at the permitting stage.
The Company's and its subsidiaries' business is to explore for
and develop metals production operations in Europe, with an initial
focus on copper.
The strategy is to evaluate and prioritise metal production
opportunities in several jurisdictions throughout the well-known
belts of base and precious metal mineralisation in Spain and the
Eastern European region.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated and company financial statements (hereinafter
"financial statements") are set out below. These policies have been
consistently applied to all the years presented, unless otherwise
stated.
2.1 Basis of preparation
(a) Overview
The financial statements of Atalaya Mining have been prepared in
accordance with International Financial Reporting Standards
("IFRS"). IFRS comprise the standards issued by the International
Accounting Standards Board ("IASB") and IFRS Interpretations
Committee ("IFRICs") as issued by the IASB.
Additionally, the financial statements have also been prepared
in accordance with the IFRS as adopted by the European Union and
the requirements of the Cyprus Companies Law, Cap.113. For the year
ending 31 December 2017, the standards applicable for IFRS's as
adopted by the EU are aligned with the IFRS's as issued by the
IASB.
The financial statements have been prepared under the historical
cost convention, except for derivative financial instruments that
have been measured at fair value.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements are disclosed in Note 3.4.
(b) Going concern
These financial statements have been prepared on the basis of
accounting principles applicable to a going concern which assumes
that the Group and the Company will realise its assets and
discharge its liabilities in the normal course of business.
Management has carried out an assessment of the going concern
assumption and has concluded that the Group and the Company will
generate sufficient cash and cash equivalents to continue operating
for the next twelve months.
2. Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
(c) 2016 restatement
Deferred consideration (Note 27)
In 2017 the discount rate used to value the liability for the
deferred consideration was re-assessed to apply a risk free rate as
required by IAS 37. The discounted amount, when applying this
discount rate, was not considered significant and the Group has
measured the liability for the deferred consideration on an
undiscounted basis. The value of the liability is in line with the
court ruling issued on 6 March 2017.
Years ended 31 December The Group The Company
-------------------------------------- --------------------------------------
2016 2016 2016 2016
(Euro 000's) as reported Adjustments restated as reported Adjustments restated
Statement of financial position
Intangible asset 59,715 10,296 (1) 70,011
Trade and other receivables 238,152 2,093 (1) 240,245
Total assets
Deferred consideration 44,346 8,637 (1) 52,983 7,359 1,741 (1) 9,100
Total liabilities
Retained earnings (105,975) 1,659 (104,316) (61,642) 352 (61,290)
Equity
-------------------------------- ------------ ------------- --------- ------------ ------------- ---------
(1) The Astor deferred consideration liability has been restated
to remove the impact of discounting and is in line to the High
Court ruling issued in March 2017
Years ended 31 December The Group The Company
-------------------------------------- --------------------------------------
2016 2016 2016 2016
(Euro 000's) as reported Adjustments restated as reported Adjustments restated
Income statement
Mine site depreciation and
amortization (11,278) (465)(1) (11,743) - - -
Gross margin 9,642 9,180 177 - 177
Finance costs (2,713) 2,124(1) (589) (352) 352(1) -
Operating profit 2,906 2,441 93,563 93,563
Loss before tax (150) 1,509 94,707 95,059
Tax credit / (charge) 12,187 12,187 - -
Earnings per share 10.3 11.7 - - -
------------------------------------ ------------ ------------- --------- ------------ ------------- ---------
(1) The discount rate was re-assessed considering a risk free
rate for the relevant periods as required by IAS 37. Discounting
the provision using the risk free rate would not result in a
significant impact to the financial statements and the Group has
measured the liability on an undiscounted basis. The amount of the
provision is in line with the court ruling. Finance costs have been
revised to exclude the unwinding of discount and amortisation
charge revised based on the restated carrying amount of Intangible
assets
2.2 Changes in accounting policy and disclosures
During the current year the Group and Company adopted all the
new and revised International Financial Reporting Standards (IFRS)
that are relevant to its operations and are effective for
accounting periods beginning on 1 January 2017.
Up to the date of approval of the consolidated and company
financial statements, certain new standards, interpretations and
amendments to existing standards have been published that are not
yet effective for the current reporting period and which the Group
and Company has not early adopted, as follows:
2. Summary of significant accounting policies (continued)
2.2 Changes in accounting policy and disclosures (continued)
(i) Adoption of new standards and revised IFRSs
-- IAS 12: Recognition of Deferred Tax Assets for Unrealized Losses (Amendments)
The objective of the Amendments is to clarify the requirements
of deferred tax assets for unrealized losses in order to address
diversity in practice in the application of IAS 12 Income Taxes.
The specific issues where diversity in practice existed relate to
the existence of a deductible temporary difference upon a decrease
in fair value, to recovering an asset for more than its carrying
amount, to probable future taxable profit and to combine versus
separate assessment. The standard has been endorsed by EU. The
Group has assessed that these amendments have no material effect on
the Group and Company financial statements.
-- IAS 7: Disclosure Initiative (Amendments)
The objective of the Amendments is to provide disclosures that
enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both
changes arising from cash flows and non-cash changes. The
Amendments specify that one way to fulfil the disclosure
requirement is by providing a tabular reconciliation between the
opening and closing balances in the statement of financial position
for liabilities arising from financing activities, including
changes from financing cash flows, changes arising from obtaining
or losing control of subsidiaries or other businesses, the effect
of changes in foreign exchange rates, changes in fair values and
other changes. The standard has been endorsed by EU. The Group and
Company is financed from equity and these amendments have no
material impact on the current and the comparative period.
-- Annual Improvements Cycle - 2014-2016
IFRS 12 Disclosure of Interests in Other Entities:
The amendments clarify that the disclosure requirements in IFRS
12, other than those of summarized financial information for
subsidiaries, joint ventures and associates, apply to an entity's
interest in a subsidiary, a joint venture or an associate that is
classified as held for sale, as held for distribution, or as
discontinued operations in accordance with IFRS 5. The Group has
assessed that these amendments have no affect the Group and Company
financial statements.
(ii) Standard issued but not yet effective and not early adopted
by the Group and Company
At the date of approval of these financial statements, standards
and interpretations were issued by the International Accounting
Standards Board which were not yet effective. Some of them were
adopted by the European Union and others not yet.
At the date of approval of these financial statements the
following accounting standards were issued by the International
Accounting Standards Board but were not yet effective:
-- IFRS 15 - Revenue from Contracts with Customers and
Clarifications to IFRS 15 - Revenue from Contracts with Customers.
New standard for recognising revenue (replaces IAS 11, IAS 18,
IFRIC 13, IFRIC 15, IFRIC 18 and SIC 31). Effective for annual
periods beginning on or after 1 January 2018.
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised.
Provisional pricing sales
Some of Atalaya's sales contain provisional pricing features
which are considered to be embedded (commodity) derivatives.
IFRS 15 will not change the assessment of the existence of
embedded derivatives. IFRS 15 states that if a contract is
partially within scope of the standard and partially in the scope
of another standard, an entity will first apply the separation and
measurement requirements of the other standard(s). Therefore, to
the extent that provisional pricing features are considered to be
in the scope of another standard, they will be outside the scope of
IFRS 15 and entities will be required to account for these in
accordance with IFRS 9. Any subsequent changes that arise due to
differences between initial and final assay will still be
considered within the scope of IFRS 15.
2. Summary of significant accounting policies (continued)
2.2 Changes in accounting policy and disclosures (continued)
Revenue in respect of the host contract will be recognised when
control passes to the customer (which has been determined to be the
same point in time) and will be measured at the amount Atalaya
expects to be entitled - being the estimate of the price expected
to be received at the end of the quotation period, and the
estimated forward price (which is consistent with current
practice). When considering the initial estimate, Atalaya has
considered the requirements of IFRS 15 in relation to the
constraint on estimates of variable consideration. It will only
include amounts in the calculation of revenue where it is highly
probable that a significant revenue reversal will not occur when
the uncertainty relating to final price adjustment is subsequently
resolved. The price adjustments are not usually material to
Atalaya, hence, no change is expected when compared to the current
approach. Consequently, at the time the goods are delivered to the
destination agreed with the customer, Atalaya will recognise a
receivable because from
that time it considers it has an unconditional right to
consideration. This receivable will then be accounted for in
accordance with IFRS 9.
As explained below in the discussion on the potential impact of
IFRS 9, the embedded derivative will no longer be separated from
the host contract, i.e., the trade receivable. This is because the
existence of the provisional pricing features will mean the trade
receivable will fail to meet the requirements to be measured at
amortised cost. Instead, the entire receivable will be measured at
fair value, with subsequent movements being recognised in the
consolidated income statements.
Atalaya expects that changes in the fair value will continue to
be classified as sales in the consolidated income statements.
a) Sales of goods
Under IFRS 15, revenue will be recognised when a customer
obtains control of the goods, which will coincide with the current
moment of the revenue recognition - upon delivery of the product to
the destination agreed with the customer.
In order to assess the implications of adopting the new standard
for existing contracts Atalaya has performed an analysis of its
contracts with customers based on the five--step model of revenue
recognition in accordance with IFRS 15.
Based on the analysis performed by Atalaya, there is a single
performance obligation identified in the sales contracts. Atalaya
does not expect material changes in the timing or measurement of
revenue based on the analysis performed, as the performance
obligation is satisfied on the delivery of the product to the
destination point agreed with the customer, which is when the
control is transferred and the revenue is recognised.
b) Significant financing component
Other issues in IFRS 15 include the existence of significant
financing components in the contracts signed with customers.
As at 31 December 2016 there was a copper concentrate prepayment
funding signed by Atalaya in September 2016 with Transamine
Trading, S.A. of EUR8.7 million (EURnil at 31 December 2017).
Atalaya's preliminary assessment indicates that the value of a
deferred revenue that may be recognised and an increase in finance
costs is not significant.
c) Disclosures
IFRS 15 requires that Atalaya presents different disaggregation
of income beyond those presented with the previous standard.
d) Transition
Atalaya plans to adopt IFRS 15 using the cumulative effect
method, with the effect of initially applying this standard
recognised at the date of initial application (i.e. 1 January
2018). As a result Atalaya will not apply the requirements of IFRS
15 to the comparative period presented.
2. Summary of significant accounting policies (continued)
2.2 Changes in accounting policy and disclosures (continued)
-- IFRS 9 - Financial Instruments and subsequent amendments.
This standard replaces the classification, measurement, recognition
and derecognition in accounts of financial assets and liabilities,
hedge accounting, and impairment set out in IAS 39 Financial
instruments: Recognition and Measurement. Effective for annual
periods beginning on or after 1 January 2018.
Atalaya has assessed the estimated impact that the initial
application of IFRS 9 will have on its financial statements. From
the analysis performed, it was concluded that the application of
this rule would not have significant effects on the financial
statements due to the following:
Classification - Financial assets
IFRS 9 contains a new classification and measurement approach
for financial assets that reflects the business model in which
assets are managed and their cash flow characteristics.
IFRS 9 contains three principal classification categories for
financial assets: measured at amortised costs, fair value through
other comprehensive income ("FVOCI") and fair value through profit
or loss ("FVTPL"). The standard eliminates the existing IAS 39
categories of held to maturity, loans and receivables and
available-for-sale.
Based on the assessment, Atalaya does not believe that the new
classification requirements will have a material impact on its
accounting for trade receivables, loans, equity investment. Equity
investments hold by Atalaya classified as available-for-sale are
non-significant (of EUR129k). Atalaya does not have held to
maturity financial assets.
Impairment - Financial assets and contract assets
IFRS 9 replaces the "incurred loss" model in IAS 39 with a
forward-looking "expected credit loss" (ECL) model. This will
require considerable judgement about how changes in economic
factors effect ECLs, which will be determined on a
probability-weighted basis.
The new impairment model will apply to financial assets measured
at amortised cost or FVOCI, except for investments in equity
instruments, and to contract assets. Under IFRS 9 loss allowance
will be measured on either of the following basis:
-- 12-month ECLs: these are ECLs that result from possible
events within the 12 months after the reporting date; applied if
the credit risk of a financial asset at the reporting date has not
increased significantly since initial recognition.
-- Lifetime ECLs: these are ECLs that result from all possible
default events over the expected life of a financial instrument;
applied if the credit risk of a financial asset at the reporting
date has increased significantly since initial recognition.
Based on the analysis of the ECL performed, Atalaya believes
that the adoption of the new impairment model will not have a
significant impact on the financial statements due to the following
reasons:
a) Trade and other receivables: Atalaya does not have
significant credit risk and does not maintain a history of
non-compliance of fulfilment of payments by customers.
b) Cash and cash equivalents: the cash and cash equivalents are
held with banks which have strong credit ratings.
Classification - Financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification of financial liabilities.
However, under IAS 39 all fair value changes of liabilities
designated as at FVTPL are recognized in profit and loss, whereas
under IFRS 9 these fair value changes are generally presented as
follows:
-- The amount of change in fair value that is attributable to
changes in the credit risk of the liability is presented in OCI;
and
-- The remaining amount of changes in the fair value is presented in profit and loss.
The Group's assessment does not indicate any material impact
regarding the classification of financial liabilities at 1 January
2018.
2. Summary of significant accounting policies (continued)
2.2 Changes in accounting policy and disclosures (continued)
Commodity derivative
As discussed in more detail in this note above and also within
the discussion on the potential impact of IFRS 15, some of the
Atalaya's sales contain provisional pricing features.
On adoption of IFRS 9, the embedded derivative will no longer be
separated from the receivables as the receivables are not expected
to give rise to cash flows that represent solely payments of
principal and interest. Instead, the receivables will be accounted
for as one instrument and measured at fair value through profit or
loss with subsequent changes in fair value recognised in the
statement of profit or loss and other comprehensive income each
period until final settlement and presented as part of 'Other
Income/Expense'. This will mean that the quantity of the fair value
movements will be different because the current approach only
calculates fair value movements based on changes in the relevant
commodity price, whereas under IFRS 9, the fair value of the
receivable will not only include commodity price changes, but it
will also factor in the impact of credit and interest rates.
However, based on the analysis performed, Atalaya does not expect
these changes will have a significant impact.
Hedge accounting
The changes in IFRS 9 relating to hedge accounting will have no
impact, as Atalaya does not currently apply hedge accounting.
Disclosures
IFRS 9 will require extensive new disclosures, in particular
about hedge accounting, credit risk and ECLs. Atalaya's assessment
included an analysis to identify data gaps against current
processes and Atalaya is in the process of implementing the system
and controls changes that it believes will be necessary to capture
the required data.
Transition
Changes in accounting policies from the adoption of IFRS 9 will
generally be applied retrospectively, except as described
below.
-- Atalaya will take advantage of the exemption allowing it not
to restate comparative information for prior periods with respect
to classification and measurement (including impairment)
changes.
-- The assessment have to be made based on the facts and
circumstances that exist at the date of initial application in
respect of the determination of the business model within which a
financial assets is held.
-- IFRS 16 - Leases. The new standard on leases that replaces
IAS 17, IFRIC 4, SIC-15 and SIC-27. Effective for annual periods
beginning on or after 1 January 2019. Early adoption is permitted
for entities that apply IFRS 15 at or before the date of initial
application of IFRS 16.
IFRS 16 introduces a single, on-balance sheet lease accounting
model for lessees. A lessee recognises a right-of-use asset
representing it right to use the underlying asset and a lease
liability representing its obligation to make lease payment. There
are recognition exemptions for short-term leases and leases of
low-value items. Lessor accounting remains similar to the current
standard - i.e. lessor continue to classify leases as finance or
operating leases.
Atalaya has completed an initial assessment of the potential
impact of IFRS 16 on its consolidated financial statements but has
not yet completed its detailed assessment. The actual impact of
applying IFRS 16 on the consolidated financial statements in the
period of initial application will depend on future economic
conditions, including the Group's borrowing rate at 1 January 2019,
the composition of Atalaya's borrowing rate at 1 January 2019 the
composition of Atalaya's portfolio at that date, its latest
assessment of whether it will exercise any lease renewal options
and the extent to which Atalaya chooses to use practical expedients
and recognition exemptions.
As at 31 December 2017, Atalaya does not possess lease payments
under non-cancellable operating.
Considering the insignificant volume of commitments for leases
held by Atalaya, it is expected that the implementation of IFRS 16
will not have a significant impact on the financial statements.
2. Summary of significant accounting policies (continued)
2.2 Changes in accounting policy and disclosures (continued)
-- Amendment in IFRS 10 Consolidated Financial Statements and
IAS 28 Investments in Associates and Joint Ventures: Sale or
Contribution of Assets between an Investor and its Associate or
Joint Venture
The amendments address an acknowledged inconsistency between the
requirements in IFRS 10 and those in IAS 28, in dealing with the
sale or contribution of assets between an investor and its
associate or joint venture. The main consequence of the amendments
is that a full gain or loss is recognized when a transaction
involves a business (whether it is housed in a subsidiary or not).
A partial gain or loss is recognized when a transaction involves
assets that do not constitute a business, even if these assets are
housed in a subsidiary. In December 2015 the IASB postponed the
effective date of this amendment indefinitely pending the outcome
of its research project on the equity method of accounting. The
amendments have not yet been endorsed by the EU. Management is
currently evaluating the effect of these standards or
interpretations on its financial statements.
-- IFRS 2: Classification and Measurement of Share based Payment Transactions (Amendments)
The Amendments are effective for annual periods beginning on or
after 1 January 2018 with earlier application permitted. The
Amendments provide requirements on the accounting for the effects
of vesting and non-vesting conditions on the measurement of
cash-settled share-based payments, for share-based payment
transactions with a net settlement feature for withholding tax
obligations and for modifications to the terms and conditions of a
share-based payment that changes the classification of the
transaction from cash-settled to equity-settled. These Amendments
have not yet been endorsed by the EU. Management is currently
evaluating the effect of these standards or interpretations on its
financial statements.
-- IAS 40: Transfers to Investment Property (Amendments)
The Amendments are effective for annual periods beginning on or
after 1 January 2018 with earlier application permitted. The
Amendments clarify when an entity should transfer property,
including property under construction or development into, or out
of investment property. The Amendments state that a change in use
occurs when the property meets, or ceases to meet, the definition
of investment property and there is evidence of the change in use.
A mere change in management's intentions for the use of a property
does not provide evidence of a change in use. These Amendments have
not yet been endorsed by the EU. No investments properties are held
by the Group and Company and this amendment has no effect on the
financial statements.
-- IFRS 9: Prepayment features with negative compensation (Amendment)
The Amendment is effective for annual reporting periods
beginning on or after 1 January 2019 with earlier application
permitted. The Amendment allows financial assets with prepayment
features that permit or require a party to a contract either to pay
or receive reasonable compensation for the early termination of the
contract (so that, from the perspective of the holder of the asset
there may be 'negative compensation'), to be measured at amortized
cost or at fair value through other comprehensive income. These
Amendments have not yet been endorsed by the EU. Management is
currently evaluating the effect of these standards or
interpretations on its financial statements.
-- IAS 28: Long-term Interests in Associates and Joint Ventures (Amendments)
The Amendments are effective for annual reporting periods
beginning on or after 1 January 2019 with earlier application
permitted. The Amendments relate to whether the measurement, in
particular impairment requirements, of long term interests in
associates and joint ventures that, in substance, form part of the
'net investment' in the associate or joint venture should be
governed by IFRS 9, IAS 28 or a combination of both. The Amendments
clarify that an entity applies IFRS 9 Financial Instruments, before
it applies IAS 28, to such long-term interests for which the equity
method is not applied. In applying IFRS 9, the entity does not take
account of any adjustments to the carrying amount of long- term
interests that arise from applying IAS 28. These Amendments have
not yet been endorsed by the EU. Management is currently evaluating
the effect of these standards or interpretations on its financial
statements.
2. Summary of significant accounting policies (continued)
2.2 Changes in accounting policy and disclosures (continued)
-- IFRIC INTERPETATION 22: Foreign Currency Transactions and Advance Consideration
The Interpretation is effective for annual periods beginning on
or after 1 January 2018 with earlier application permitted. The
Interpretation clarifies the accounting for transactions that
include the receipt or payment of advance consideration in a
foreign currency. The Interpretation covers foreign currency
transactions when an entity recognizes a non-monetary asset or a
non-monetary liability arising from the payment or receipt of
advance consideration before the entity recognizes the related
asset, expense or income. The Interpretation states that the date
of the transaction, for the purpose of determining the exchange
rate, is the date of initial recognition of the non-monetary
prepayment asset or deferred income liability. If there are
multiple payments or receipts in advance, then the entity must
determine a date of the transactions for each payment or receipt of
advance consideration. This Interpretation has not yet been
endorsed by the EU. Management is currently evaluating the effect
of these standards or interpretations on its financial
statements.
-- The IASB has issued the Annual Improvements to IFRSs 2014 -
2016 Cycle, which is a collection of amendments to IFRSs.
The amendments are effective for annual periods beginning on or
after 1 January for IAS 28 Investments in Associates and Joint
Ventures. Earlier application is permitted for IAS 28 Investments
in Associates and Joint Ventures. These annual improvements have
not yet been endorsed by the EU. The amendments clarify that the
election to measure at fair value through profit or loss an
investment in an associate or a joint venture that is held by an
entity that is venture capital organization, or other qualifying
entity, is available for each investment in an associate or joint
venture on an investment-by-investment basis, upon initial
recognition. Management is currently evaluating the effect of these
standards or interpretations on its financial statements.
-- IFRIC INTERPETATION 23: Uncertainty over Income Tax Treatments
The Interpretation is effective for annual periods beginning on
or after 1 January 2019 with earlier application permitted. The
Interpretation addresses the accounting for income taxes when tax
treatments involve uncertainty that affects the application of IAS
12. The Interpretation provides guidance on considering uncertain
tax treatments separately or together, examination by tax
authorities, the appropriate method to reflect uncertainty and
accounting for changes in facts and circumstances. This
Interpretation has not yet been endorsed by the EU. Management is
currently evaluating the effect of these standards or
interpretations on its financial statements.
-- The IASB has issued the Annual Improvements to IFRSs 2015 -
2017 Cycle, which is a collection of amendments to IFRSs.
The amendments are effective for annual periods beginning on or
after 1 January 2019 with earlier application permitted. These
annual improvements have not yet been endorsed by the EU.
Management is currently evaluating the effect of these standards or
interpretations on its financial statements.
(i) IFRS 3 Business Combinations and IFRS 11 Joint Arrangements:
The amendments to IFRS 3 clarify that when an entity obtains
control of a business that is a joint operation, it remeasures
previously held interests in that business. The amendments to IFRS
11 clarify that when an entity obtains joint control of a business
that is a joint operation, the entity does not remeasure previously
held interests in that business.
(ii) IAS 12 Income Taxes: The amendments clarify that the income
tax consequences of payments on financial instruments classified as
equity should be recognized according to where the past
transactions or events that generated distributable profits has
been recognized.
(iii) IAS 23 Borrowing Costs: The amendments clarify paragraph
14 of the standard that, when a qualifying asset is ready for its
intended use or sale, and some of the specific borrowing related to
that qualifying asset remains outstanding at that point, that
borrowing is to be included in the funds that an entity borrows
generally.
2. Summary of significant accounting policies (continued)
2.3 Consolidation
(a) Basis of consolidation
The consolidated financial statements comprise the financial
statements of Atalaya Mining Plc and its subsidiaries.
(b) Subsidiaries
Subsidiaries are all entities (including special purpose
entities) over which the Group and Company has control. Control
exists when the Group is exposed, or has rights, to variable
returns for its involvement with the investee and has the ability
to affect those returns through its power over the investee. The
existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether
the Group controls another entity. The Group also assesses
existence of control where it does not have more than 50% of the
voting power but is able to govern the financial and operating
policies by virtue of de-facto control.
De-facto control may arise in circumstances where the size of
the Group's voting rights relative to the size and dispersion of
holdings of other shareholders give the Group the power to govern
the financial and operating policies, etc.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from
the date that control ceases.
The only operating subsidiary of Atalaya Mining Plc is the 100%
owned Atalaya Riotionto Minera, S.L.U. which operates Proyecto
Minero Riotinto, in the historical site of Huelva, Spain.
The name and shareholding of the entities include in the Group
in these financial statements are:
Entity name Business %(2) Country
Atalaya Mining, Plc Holding n.a. Cyprus
Eastern Mediterranean Resources Dormant 100% Georgia
(Caucasus) Ltd
Georgian Minerals Development Dormant 100% Georgia
Company Ltd.
EMED Marketing Ltd. Marketing 100% Cyprus
EMED Mining Spain, S.L. Dormant 100% Spain
Atalaya Riotinto Minera, Operating 100% Spain
S.L.U.
Recursos Cuenca Minera, Operating 50% Spain
S.L.
Atalaya Minasderiotinto Holding 100% United
Project (UK), Ltd. Kingdom
Eastern Mediterranean Exploration Operating 100% Spain
& Development, S.L.U.
Atalaya Touro (UK), Ltd. Holding 100% United
Kingdom
Fundación Emed Tartessus Trust 100% Spain
Cobre San Rafael, S.L. Operating 10% Spain
(1)
Notes
(1) Cobre San Rafael, S.L. is the entity which holds the mining
rights of Proyecto Touro. The Group has a significant influence in
the management of the Cobre San Rafael, S.L., including one of the
two directors, management of the financial books and the capacity
to appoint the key personnel. Refer to Note 29 for details on the
acquisition of Cobre San Rafael, S.L..
(2) The effective proportion of shares held as at 31 December
2017 and 31 December 2016 remained unchanged other than Atalaya
Touro Project (UK) Ltd which was incorporated in the year 2017 and
Cobre San Rafael, S.L. which was acquired during 2017.
2. Summary of significant accounting policies (continued)
2.3 Consolidation (continued)
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. The Group recognises any non-controlling interest
in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest's proportionate share
of the recognised amounts of acquiree's identifiable net
assets.
(c) Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is re-measured to fair value at the
acquisition date; any gains or losses arising from such
re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39 in profit or loss. Contingent consideration that is
classified as equity is not re-measured, and its subsequent
settlement is accounted for within equity.
Goodwill is initially measured as the excess of the aggregate of
the consideration transferred and the fair value of non-controlling
interest over the net identifiable assets acquired and liabilities
assumed. If this consideration is lower than the fair value of the
net assets of the subsidiary acquired, the difference is recognised
in profit or loss.
Inter-company transactions, balances, income and expenses on
transactions between group companies are eliminated. Profits and
losses resulting from intercompany transactions that are recognised
in assets are also eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the
policies adopted by the group.
(d) Changes in ownership interests in subsidiaries without
change of control
Transactions with non-controlling interests that do not result
in loss of control are accounted for as equity transactions - that
is, as transactions with the owners in their capacity as owners.
The difference between fair value of any consideration paid and the
relevant share acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains or losses on disposals to
non-controlling interests are also recorded in equity.
(e) Disposal of subsidiaries.
When the Group ceases to have control any retained interest in
the entity is re-measured to its fair value at the date when
control is lost, with the change in carrying amount recognised in
profit or loss. The fair value is the initial carrying amount for
the purposes of subsequently accounting for the retained interest
as an associate, joint venture or financial asset. In addition, any
amounts previously recognised in other comprehensive income in
respect of that entity are accounted for as if the group had
directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive
income are reclassified to profit or loss.
(f) Associates
Associates are all entities over which the Group has significant
influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting. Under the
equity method, the investment is initially recognised at cost, and
the carrying amount is increased or decreased to recognise the
investor's share of the profit or loss of the investee after the
date of acquisition. The Group's investment in associates includes
goodwill identified on acquisition.
If the ownership interest in an associate is reduced but
significant influence is retained, only a proportionate share of
the amounts previously recognised in other comprehensive income is
reclassified to profit or loss where appropriate.
The Group's share of post-acquisition profit or loss is
recognised in the income statement, and its share of
post-acquisition movements in other comprehensive income is
recognised in other comprehensive income, with a corresponding
adjustment to the carrying amount of the investment. When the Group
share of losses in an associate equals or exceeds its interest in
the associate, including any other unsecured receivables, the Group
does not recognise further losses, unless it has incurred legal or
constructive obligations or made payments on behalf of the
associate.
2. Summary of significant accounting policies (continued)
2.3 Consolidation (continued)
The Group determines at each reporting date whether there is any
objective evidence that the investment in the associate is
impaired. If this is the case, the Group calculates the amount of
impairment as the difference between the recoverable amount of the
associate and its carrying value and recognises the amount adjacent
to 'share of profit/(loss) of associates' in the income
statement.
Profits and losses resulting from upstream and downstream
transactions between the Group and its associate are recognised in
the Group's consolidated financial statements only to the extent of
unrelated investors' interests in the associates. Unrealised losses
are eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency
with the policies adopted by the group. Dilution gains and losses
arising in investments in associates are recognised in the income
statement.
(g) Functional currency
Functional and presentation currency items included in the
financial statements of each of the Group's entities are measured
using the currency of the primary economic environment in which the
entity operates ('the functional currency'). The financial
statements are presented in Euro which is the Group and Company
functional and presentation currency.
Determination of functional currency may involve certain
judgements to determine the primary economic environment and the
parent entity reconsiders the functional currency of its entities
if there is a change in events and conditions which determined the
primary economic environment.
Foreign currency transactions are translated into the functional
currency using the spot exchange rates prevailing at the dates of
the transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions are recognised in the income statement.
Monetary assets and liabilities denominated in foreign
currencies are retranslated at year-end spot exchange rates.
Non-monetary items that are measured at historical cost in a
foreign currency are translated using the exchange rates at the
dates of the initial transaction. Non-monetary items measured at
fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
Gains or losses of monetary and non-monetary items are
recognised in the income statement.
Balance sheet items are translated at period-end exchange rates.
Exchange differences on translation of the net assets of such
entities are taken to equity and recorded in a separate currency
translation reserve.
2.4 Investments in subsidiary companies
Investments in subsidiary companies are stated at cost less
provision for impairment in value, which is recognised as an
expense in the period in which the impairment is identified.
2.5 Interest in joint arrangements
A joint arrangement is a contractual arrangement whereby the
Group and other parties undertake an economic activity that is
subject to joint control that is when the strategic, financial and
operating policy decisions relating to the activities the joint
arrangement require the unanimous consent of the parties sharing
control.
Where a Group entity undertakes its activities under joint
arrangements directly, the Group's share of jointly controlled
assets and any liabilities incurred jointly with other ventures are
recognised in the financial statements of the relevant entity and
classified according to their nature. Liabilities and expenses
incurred directly in respect of interests in jointly controlled
assets are accounted for on an accrual basis. Income from the sale
or use of the Group's share of the output of jointly controlled
assets, and its share of joint arrangement expenses, are recognised
when it is probable that the economic benefits associated with the
transactions will flow to/from the Group and their amount can be
measured reliably.
The Group undertakes joint arrangements that involve the
establishment of a separate entity in which each acquiree has an
interest (jointly controlled entity). The Group reports its
interests in jointly controlled entities using the equity method of
accounting.
Where the Group transacts with its jointly controlled entities,
unrealised profits and losses are eliminated to the extent of the
Group's interest in the joint arrangement.
2. Summary of significant accounting policies (continued)
2.6 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the CEO who makes strategic
decisions.
The Group has only one distinct business segment, being that of
mining operations, mineral exploration and development.
2.7 Inventory
Inventory consists in copper concentrates, ore stockpiles and
metal in circuit and spare parts. Inventory is physically measured
or estimated and valued at the lower of cost or net realisable
value. Net realisable value is the estimated future sales price of
the product the entity expects to realise when the product is
processed and sold, less estimated costs to complete production and
bring the product to sale. Where the time value of money is
material, these future prices and costs to complete are
discounted.
Cost is determined by using the FIFO method and comprises direct
purchase costs and an appropriate portion of fixed and variable
overhead costs, including depreciation and amortisation, incurred
in converting materials into finished goods, based on the normal
production capacity. The cost of production is allocated to joint
products using a ratio of spot prices by volume at each month end.
Separately identifiable costs of conversion of each metal are
specifically allocated.
Materials and supplies are valued at the lower of cost or net
realisable value. Any provision for obsolescence is determined by
reference to specific items of stock. A regular review is
undertaken to determine the extent of any provision for
obsolescence.
2.8 Assets under construction
All subsequent expenditure on the construction, installation or
completion of infrastructure facilities including mine plants and
other necessary works for mining, are capitalised in "Assets under
construction". Any costs incurred in testing the assets to
determine if they are functioning as intended, are capitalised, net
of any proceeds received from selling any product produced while
testing. Where these proceeds exceed the cost of testing, any
excess is recognised in the statement of profit or loss and other
comprehensive income. After production starts, all assets included
in "Assets under construction" are then transferred to the relevant
asset categories.
Once a project has been established as commercially viable,
related development expenditure is capitalised. A development
decision is made based upon consideration of project economics,
including future metal prices, reserves and resources, and
estimated operating and capital costs. Capitalization of costs
incurred and proceeds received during the development phase ceases
when the property is capable of operating at levels intended by
management.
Capitalisation ceases when the mine is capable of commercial
production, with the exception of development costs which give rise
to a future benefit.
Pre-commissioning sales are offset against the cost of
constructing the asset. No depreciation is recorded until the
assets are substantially complete and ready for productive use.
2.9 Property, plant and equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation and any accumulated impairment losses.
Subsequent costs are included in the assets' carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the income
statement during the financial period in which they are
incurred.
Property, plant and equipment are depreciated to their estimated
residual value over the estimated useful life of the specific asset
concerned, or the estimated remaining life of the associated mine
("LOM"), field or lease. Depreciation commences when the asset is
available for use.
2. Summary of significant accounting policies (continued)
2.9 Property, plant and equipment (continued)
The major categories of property, plant and equipment are
depreciated/amortised on a Unit of Production ("UOP") and/or
straight-line basis as follows:
Buildings UOP
Mineral rights UOP
Deferred mining UOP
costs
Plant and machinery UOP
Motor vehicles 5 years
Furniture/fixtures/office 5 - 10
equipment years
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within "Other
(losses)/gains - net" in the income statement.
(a) Mineral rights
Mineral reserves and resources which can be reasonably valued
are recognised in the assessment of fair values on acquisition.
Mineral rights for which values cannot be reasonably determined are
not recognised. Exploitable mineral rights are amortised using the
UOP basis over the commercially recoverable reserves and, in
certain circumstances, other mineral resources. Mineral resources
are included in amortisation calculations where there is a high
degree of confidence that they will be extracted in an economic
manner.
(b) Deferred mining costs - stripping costs
Mainly comprises of certain capitalised costs related to
pre-production and in-production stripping activities as outlined
below.
Stripping costs incurred in the development phase of a mine (or
pit) before production commences are capitalised as part of the
cost of constructing the mine (or pit) and subsequently amortised
over the life of the mine (or pit) on a UOP basis.
In-production stripping costs related to accessing an
identifiable component of the ore body to realise benefits in the
form of improved access to ore to be mined in the future (stripping
activity asset), are capitalised within deferred mining costs
provided all the following conditions are met:
i. it is probable that the future economic benefit associated
with the stripping activity will be realised;
ii. the component of the ore body for which access has been improved can be identified; and
iii. the costs relating to the stripping activity associated
with the improved access can be reliably measured.
If all of the criteria are not met, the production stripping
costs are charged to the consolidated statement of income as they
are incurred.
The stripping activity asset is initially measured at cost,
which is the accumulation of costs directly incurred to perform the
stripping activity that improves access to the identified component
of ore, plus an allocation of directly attributable overhead
costs.
(c) Exploration costs
Under the Group's accounting policy, exploration expenditure is
not capitalised until the management determines a property will be
developed and point is reached at which there is a high degree of
confidence in the project's viability and it is considered probable
that future economic benefits will flow to the Group. A development
decision is made based upon consideration of project economics,
including future metal prices, reserves and resources, and
estimated operating and capital costs.
Subsequent recovery of the resulting carrying value depends on
successful development or sale of the undeveloped project. If a
project does not prove viable, all irrecoverable costs associated
with the project net of any related impairment provisions are
written off.
2. Summary of significant accounting policies (continued)
2.9 Property, plant and equipment (continued)
(d) Major maintenance and repairs
Expenditure on major maintenance refits or repairs comprises the
cost of replacement assets or parts of assets and overhaul costs.
Where an asset, or part of an asset, that was separately
depreciated and is now written off is replaced, and it is probable
that future economic benefits associated with the item will flow to
the Group through an extended life, the expenditure is
capitalised.
Where part of the asset was not separately considered as a
component and therefore not depreciated separately, the replacement
value is used to estimate the carrying amount of the replaced
asset(s) which is immediately written off. All other day-to-day
maintenance and repairs costs are expensed as incurred.
(e) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale (a qualifying asset) are capitalised as part of the cost of
the respective asset. Where funds are borrowed specifically to
finance a project, the amount capitalised represents the actual
borrowing costs incurred.
(f) Restoration, rehabilitation and decommissioning
Restoration, rehabilitation and decommissioning costs arising
from the installation of plant and other site preparation work,
discounted using a risk adjusted discount rate to their net present
value, are provided for and capitalised at the time such an
obligation arises.
The costs are charged to the consolidated statement of income
over the life of the operation through depreciation of the asset
and the unwinding of the discount on the provision. Costs for
restoration of subsequent site disturbance, which are created on an
ongoing basis during production, are provided for at their net
present values and charged to the consolidated statement of income
as extraction progresses.
Changes in the estimated timing of the rehabilitation or changes
to the estimated future costs are accounted for prospectively by
recognising an adjustment to the rehabilitation liability and a
corresponding adjustment to the asset to which it relates, provided
the reduction in the provision is not greater than the depreciated
capitalised cost of the related asset, in which case the
capitalised cost is reduced to nil and the remaining adjustment
recognised in the consolidated statement of income. In the case of
closed sites, changes to estimated costs are recognised immediately
in the consolidated statement of income.
2.10 Intangible assets
(a) Business combination and goodwill
Goodwill arises on the acquisition of subsidiaries and
represents the excess of the consideration transferred over the
acquired interest in net fair value of the net identifiable assets,
liabilities and contingent liabilities of the acquiree and the fair
value of the non-controlling interest in the acquiree.
The results of businesses acquired during the year are brought
into the consolidated financial statements from the effective date
of acquisition. The identifiable assets, liabilities and contingent
liabilities of a business which can be measured reliably are
recorded at their provisional fair values at the date of
acquisition. Provisional fair values are finalised within 12 months
of the acquisition date. Acquisition-related costs are expensed as
incurred.
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of goodwill is compared to
the recoverable amount, which is the higher of value in use and the
fair value less costs to sell. Any impairment is recognised
immediately as an expense and is not subsequently reversed.
(b) Permits
Permits are capitalised as intangible assets which relate to
projects that are at the pre-development stage. No amortisation
charge is recognised in respect of these intangible assets. Once
the Group receives those permits, the intangible assets relating to
permits will be depreciated on a UOP basis.
Other intangible assets include computer software.
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation (calculated on a
straight-line basis over their useful lives) and accumulated
impairment losses, if any.
2. Summary of significant accounting policies (continued)
2.10 Intangible assets (continued)
The useful lives of intangible assets are assessed as either
finite or indefinite.
Intangible assets with finite lives are amortised over their
useful economic lives and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the end of
each reporting period.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
the statement of profit or loss and other comprehensive income when
the asset is derecognised.
2.11 Impairment of non-financial assets
Assets that have an indefinite useful life - for example,
goodwill or intangible assets not ready to use - are not subject to
amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an
asset's fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows
(cash-generating units). Non-financial assets other than goodwill
that suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.
2.12 Financial assets
2.12.1 Classification
The Group classifies its financial assets in the following
categories: at fair value through profit or loss, loans and
receivables, and available for sale. The classification depends on
the purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at
initial recognition. The Group's financial assets include cash and
short-term deposits, trade and other receivables and derivative
financial assets.
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are
financial assets held for trading. A financial asset is classified
in this category if acquired principally for the purpose of selling
in the short term. Derivatives are also categorised as held for
trading unless they are designated as hedges. Assets in this
category are classified as current assets if expected to be settled
within 12 months, otherwise they are classified as non-current.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities
greater than 12 months after the end of the reporting period. These
are classified as non-current assets. The Group's loans and
receivables comprise "trade and other receivables" and "cash and
cash equivalents" in the statement of financial position (Notes
2.18).
(c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are
either designated in this category or not classified in any of the
other categories. They are included in non-current assets unless
the investment matures or management intends to dispose of it
within 12 months of the end of the reporting period.
2.12.2 Recognition and measurement
Regular purchases and sales of financial assets are recognised
on the trade-date - the date on which the Group commits to purchase
or sell the asset. Investments are initially recognised at fair
value plus transaction costs for all financial assets not carried
at fair value through profit or loss. Financial assets carried at
fair value through profit or loss are initially recognised at fair
value, and transaction costs are expensed in the income statement.
Financial assets are derecognised when the rights to receive cash
flows from the investments have expired or have been transferred
and the group has transferred substantially all risks and rewards
of ownership. Available-for-sale financial assets and financial
assets at fair value through profit or loss are subsequently
carried at fair value. Loans and receivables are subsequently
carried at amortised cost using the effective interest method.
2. Summary of significant accounting policies (continued)
2.12 Financial assets (continued)
Gains or losses arising from changes in the fair value of the
"financial assets at fair value through profit or loss" category
are presented in the income statement within "other (losses)/gains
- net" in the period in which they arise. Dividend income from
financial assets at fair value through profit or loss is recognised
in the income statement as part of other income when the Group's
right to receive payments is established.
Changes in the fair value of monetary securities classified as
available for sale are recognised in other comprehensive
income.
When securities classified as available for sale are sold or
impaired, the accumulated fair value adjustments recognised in
equity are included in the income statement as "gains and losses
from investment securities". Interest on available-for-sale
securities calculated using the effective interest method is
recognised in the income statement as part of finance income.
Dividends on available-for-sale equity instruments are recognised
in the income statement as part of other income when the Group's
right to receive payments is established.
2.13 Financial liabilities
The Group classifies its financial liabilities in the following
categories: trade and other payables, provisions, Interest-bearing
loans and borrowings, deferred consideration and derivatives. The
classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of
its financial assets at initial recognition.
(a) Trade and other payables
Trade and other payables are obligations to pay for goods,
assets or services that have been acquired in the ordinary course
of business from suppliers. Accounts payable are classified as
current liabilities if payment is due within one year or less (or
in the normal operating cycle of the business if longer). If not,
they are presented as non-current liabilities. Trade and other
payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
(b) Provisions
Provisions for environmental restoration, restructuring costs
and legal claims are recognised when: the Group has a present legal
or constructive obligation as a result of past events; it is
probable that an outflow of resources will be required to settle
the obligation; and the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the
provision due to passage of time is recognised as interest
expense.
(c) Interest-bearing loans and borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in profit
or loss over the period of the borrowings, using the effective
interest method, unless they are directly attributable to the
acquisition, construction or production of a qualifying asset, in
which case they are capitalised as part of the cost of that
asset.
Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case,
the fee is deferred until the draw-down occurs. To the extent there
is no evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalised as a prepayment and
amortised over the period of the facility to which it relates.
Borrowing costs are interest and other costs that the Group
incurs in connection with the borrowing of funds, including
interest on borrowings, amortisation of discounts or premium
relating to borrowings, amortisation of ancillary costs incurred in
connection with the arrangement of borrowings, finance lease
charges and exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an adjustment to
interest costs.
2. Summary of significant accounting policies (continued)
2.13 Financial liabilities (continued)
Borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset,
being an asset that necessarily takes a substantial period of time
to get ready for its intended use or sale, are capitalised as part
of the cost of that asset, when it is probable that they will
result in future economic benefits to the Group and the costs can
be measured reliably.
(d) Deferred consideration
Deferred consideration arises when settlement of all or any part
of the cost of an agreement is deferred. It is stated at fair value
at the date of recognition, which is determined by discounting the
amount due to present value at that date. Interest is imputed on
the fair value of non-interest bearing deferred consideration at
the discount rate and expensed within interest pay able and similar
charges. At each balance sheet date deferred consideration
comprises the remaining deferred consideration valued at
acquisition plus interest imputed on such amounts from recognition
to the balance sheet date.
(e) Derivatives
Derivative financial instruments are initially accounted for at
cost and subsequently measured at fair value. Fair value is
calculated using the Black Scholes valuation method. Derivatives
are recorded as assets when their fair value is positive and as
liabilities when their fair value is negative. The adjustments on
the fair value of derivatives held at fair value through profit or
loss are transferred to profit or loss.
In the consolidated statement of cash flows, cash and cash
equivalents includes cash in hand and in bank net of outstanding
bank overdrafts and short-term deposits with an original maturity
of three months or less.
Sales of the Group's copper are sold on a provisional basis
whereby sales are recognised at prevailing metal prices when title
transfers to the customer and final pricing is not determined until
a subsequent date. The Group uses derivative financial instruments
to reduce exposure to foreign exchange, interest rate and commodity
price movements.
The Group does not use such derivative instruments for trading
purposes. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative contract
is entered into and are subsequently re-measured at fair value.
Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is
negative. Any gains or losses arising from changes in the fair
value of derivatives are taken directly to the statement of profit
or loss and other comprehensive income. Realised gains and losses
on commodity derivatives recognised in profit or loss are recorded
within revenue.
2.14 Current versus non-current classification
The Group presents assets and liabilities in statement of
financial position based on current/non-current classification.
(a) An asset is current when it is either:
-- Expected to be realised or intended to be sold or consumed in normal operating cycle;
-- Held primarily for the purpose of trading;
-- Expected to be realised within 12 months after the reporting period
Or
-- Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months
after the reporting period
All other assets are classified as non-current.
(b) A liability is current when either:
-- It is expected to be settled in the normal operating cycle;
-- It is held primarily for the purpose of trading
-- It is due to be settled within 12 months after the reporting period
Or
-- There is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
2. Summary of significant accounting policies (continued)
2.15 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the statement of financial position when there is a
legally enforceable right to offset the recognised amounts and
there is an intention to settle on a net basis or realise the asset
and settle the liability simultaneously.
2.16 Impairment of financial assets
(a) Assets carried at amortised cost
The Group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of
financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of
the asset (a "loss event") and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors
or a group of debtors are experiencing significant financial
difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other
financial reorganisation, and where observable data indicate that
there is a measurable decrease in the estimated future cash flows,
such as changes in arrears or economic conditions that correlate
with defaults.
For the loans and receivables category, the amount of the loss
is measured as the difference between the asset's carrying amount
and the present value of estimated future cash flows (excluding
future credit losses that have not been incurred) discounted at the
financial asset's original effective interest rate.
The carrying amount of the asset is reduced and the amount of
the loss is recognised in the consolidated income statement. If a
loan or held-to-maturity investment has a variable interest rate,
the discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract. As a
practical expedient, the Group may measure impairment on the basis
of an instrument's fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an
improvement in the debtor's credit rating), the reversal of the
previously recognised impairment loss is recognised in the
consolidated income statement.
(b) Assets classified as available-for-sale
The Group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or a group of
financial assets is impaired. For debt securities, the Group uses
the criteria referred to in (a) above. In the case of equity
investments classified as available for sale, a significant or
prolonged decline in the fair value of the security below its cost
is also evidence that the assets are impaired. If any such evidence
exists for available-for-sale financial assets, the cumulative loss
- measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that financial
asset previously recognised in profit or loss - is removed from
equity and recognised in profit or loss. Impairment losses
recognised in the consolidated income statement on equity
instruments are not subsequently reversed. If, in a subsequent
period, the fair value of a debt instrument classified as available
for sale increases and the increase can be objectively related to
an event occurring after the impairment loss was recognised in the
income statement, the impairment loss is reversed through the
income statement.
2.17 Trade and other receivables
Trade receivables are amounts due from customers for merchandise
sold or services performed in the ordinary course of business. If
collection is expected in one year or less (or in the normal
operating cycle of the business if longer), they are classified as
current assets. If not, they are presented as non-current
assets.
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
At Company level, other receivables include intercompany
balances.
2. Summary of significant accounting policies (continued)
2.18 Cash and cash equivalents
In the consolidated statements of cash flows, cash and cash
equivalents includes cash in hand and in bank including deposits
held at call with banks.
2.19 Share capital
Ordinary shares are classified as equity. The difference between
the fair value of the consideration received by the Company and the
nominal value of the share capital being issued is taken to the
share premium account.
Incremental costs directly attributable to the issue of new
ordinary shares are shown in equity as a deduction, net of tax,
from the proceeds in the share premium account.
2.20 Current and deferred income tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity,
respectively.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the end of the
reporting period date in the countries where the Company and its
subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill;
deferred income tax is also not recognised if it arises from
initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Income tax
is determined using tax rates (and laws) that have been enacted or
substantively enacted by the end of the reporting period date and
are expected to apply when the related deferred tax asset is
realised or the deferred income tax liability is settled. Deferred
tax assets are recognised only to the extent that it is probable
that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except for deferred
income tax liabilities where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable
that the temporary difference will not reverse in the foreseeable
future.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
2.21 Share-based payments
The Group operates a share-based compensation plan, under which
the entity receives services from employees as consideration for
equity instruments (options) of the Group. The fair value of the
employee services received in exchange for the grant of the options
is recognised as an expense. The fair value is measured using the
Black Scholes pricing model. The inputs used in the model are based
on management's best estimates for the effects of
non-transferability, exercise restrictions and behavioural
considerations. Non-market performance and service conditions are
included in assumptions about the number of options that are
expected to vest.
Vesting conditions are: (i) the personnel should be an employee
that provides services to the Group; and (ii) should be in
continuous employment for the whole vesting period of 3 years.
Specific arrangements may exist with senior managers and board
members, whereby their options stay in use until the end.
The total expense is recognised over the vesting period, which
is the period over which all of the specified vesting conditions
are to be satisfied. (Note 23)
2. Summary of significant accounting policies (continued)
2.22 Rehabilitation provisions
The Group records the present value of estimated costs of legal
and constructive obligations required to restore operating
locations in the period in which the obligation is incurred. The
nature of these restoration activities includes dismantling and
removing structures, rehabilitating mines and tailings dams,
dismantling operating facilities, closure of plant and waste sites
and restoration, reclamation and re-vegetation of affected areas.
The obligation generally arises when the asset is installed or the
ground/environment is disturbed at the production location. When
the liability is initially recognised, the present value of the
estimated cost is capitalised by increasing the carrying amount of
the related mining assets to the extent that it was incurred prior
to the production of related ore. Over time, the discounted
liability is increased for the change in present value based on the
discount rates that reflect current market assessments and the
risks specific to the liability. The periodic unwinding of the
discount is recognised in the consolidated income statement as a
finance cost. Additional disturbances or changes in rehabilitation
costs will be recognised as additions or charges to the
corresponding assets and rehabilitation liability when they occur.
For closed sites, changes to estimated costs are recognised
immediately in the consolidated income statement.
The Group assesses its mine rehabilitation provision annually.
Significant estimates and assumptions are made in determining the
provision for mine rehabilitation as there are numerous factors
that will affect the ultimate liability payable. These factors
include estimates of the extent and costs of rehabilitation
activities, technological changes, regulatory changes and changes
in discount rates. Those uncertainties may result in future actual
expenditure differing from the amounts currently provided. The
provision at the consolidated statement of financial position date
represents management's best estimate of the present value of the
future rehabilitation costs required.
2.23 Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
The Group leases certain property, plant and equipment. Leases
of property, plant and equipment where the Group has substantially
all the risks and rewards of ownership are classified as finance
leases. Finance leases are capitalised at the lease's commencement
at the lower of the fair value of the leased property and the
present value of the minimum lease payments.
Each lease payment is allocated between the liability and
finance charges. The corresponding rental obligations, net of
finance charges, are included in other long term payables. The
interest element of the finance cost is charged to the income
statement over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period. The property, plant and equipment acquired under
finance leases are depreciated over the shorter of the useful life
of the asset and the lease term.
2.24 Revenue recognition
(a) Sales of goods
Revenue is recognised when Atalaya has transferred to the buyer
all significant risks and rewards of ownership of the goods sold.
Revenue excludes any applicable sales taxes and is recognised at
the fair value of the consideration received or receivable to the
extent that it is probable that economic benefits will flow to
Atalaya and the revenues and costs can be reliably measured. In
most instances sales revenue is recognised when the product is
delivered to the destination specified by the customer, which is
typically the vessel on which it is shipped, the destination port
or the customer's premises.
For certain commodities, the sales price is determined on a
provisional basis at the date of sale as the final selling price is
subject to movements in market prices up to the date of final
pricing, normally ranging from 30 to 90 days after initial booking.
Revenue on provisionally priced sales is recognised based on the
estimated fair value of the total consideration receivable. The
revenue adjustment mechanism embedded within provisionally priced
sales arrangements has the character of a commodity derivative.
Accordingly, the fair value of the final sales price adjustment is
re-estimated continuously and changes in fair value are recognised
as an adjustment to revenue.
Pre-commissioning sales are offset against the cost of
constructing the asset.
(b) Sales of services
The Group sells services in relation to maintenance of
accounting records, management, technical, administrative support
and other services to other companies. Revenue is recognised in the
accounting period in which the services are rendered.
2. Summary of significant accounting policies (continued)
2.25 Interest income
Interest income is recognised using the effective interest
method. When a loan and receivable is impaired, the Group reduces
the carrying amount to its recoverable amount, being the estimated
future cash flow discounted at the original effective interest rate
of the instrument, and continues unwinding the discount as interest
income. Interest income on impaired loan and receivables is
recognised using the original effective interest rate.
2.26 Dividend income
Dividend income is recognised when the right to receive payment
is established.
2.27 Dividend distribution
Dividend distributions to the Company's shareholders are
recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders. No dividend has been paid by the Company since its
incorporation.
2.28 Earnings per share
Basic earnings per share is calculated by dividing the net
profit for the year by the weighted average number of ordinary
shares outstanding during the year. The basic and diluted earnings
per share are the same as there are no instruments that have a
dilutive effect on earnings.
2.29 Reclassification from prior year presentation
Certain prior year amounts have been reclassified for
consistency with the financial statements for the year ended 31
December 2016.These reclassifications had no effect on the reported
results of the operation.
2.30 Amendment of financial statements after issue
The board of directors has the power to amend the consolidated
financial statements after issue.
3. Financial Risk Management
3.1 Financial risk factors
Risk management is overseen by the AFRC under the board of
directors. The AFRC oversees the risk management policies employed
by the Group to identify, evaluate and hedge financial risks, in
close co-operation with the Group's operating units. The Group is
exposed to liquidity risk, currency risk, commodity price risk,
credit risk, interest rate risk, operational risk, compliance risk
and litigation risk arising from the financial instruments it
holds. The risk management policies employed by the Group to manage
these risks are discussed below:
(a) Liquidity risk
Liquidity risk is the risk that arises when the maturity of
assets and liabilities does not match. An unmatched position
potentially enhances profitability, but can also increase the risk
of losses. The Group has procedures with the object of minimising
such losses such as maintaining sufficient cash to meet liabilities
when due. Cash flow forecasting is performed in the operating
entities of the Group and aggregated by Group finance. Group
finance monitors rolling forecasts of the Group's liquidity
requirements to ensure it has sufficient cash to meet operational
needs.
The following tables detail the Group's remaining contractual
maturity for its financial liabilities. The tables have been drawn
up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to
pay. The table includes principal cash flows.
Between
Carrying Contractual Less than Between 1 - 2 Between Over
(Euro 000's) amounts cash flows 3 months 3 - 12 months years 2 - 5 years 5 years
============== ============== ========== =============== ======== ============= ===========
31 December
2017
Land options
and mortgages 74 74 10 32 32 - -
Provisions 5,727 5,727 - 228 373 165 4,961
Deferred
consideration 52,983 52,983 - - 35,220 17,763 -
Trade and
other
payables 67,983 67,983 67,983 - - - -
============== ============== ========== =============== ======== ============= ===========
126,767 126,767 67,993 260 35,625 17,928 4,961
============== ============== ========== =============== ======== ============= ===========
31 December
2016
Social
security 1,741 1,741 578 1,163 - - -
Land options
and mortgages 905 905 760 30 83 32 -
Provisions 5,092 6,577 - 54 170 209 6,144
Deferred
consideration 52,983 52,983 - - 52,983
Derivative
instrument 215 215 215 - - - -
Trade and
other
payables 60,061 60,061 60,061 - - -
============== ============== ========== =============== ======== ============= ===========
120,997 120,997 61,614 1,247 253 53,224 6,144
============== ============== ========== =============== ======== ============= ===========
(b) Currency risk
Currency risk is the risk that the value of financial
instruments will fluctuate due to changes in foreign exchange
rates.
Currency risk arises when future commercial transactions and
recognised assets and liabilities are denominated in a currency
that is not the Group's measurement currency. The Group is exposed
to foreign exchange risk arising from various currency exposures
primarily with respect to the US Dollar and the British Pound. The
Group's management monitors the exchange rate fluctuations on a
continuous basis and acts accordingly. The carrying amounts of the
Group's foreign currency denominated monetary assets and monetary
liabilities at the end of the reporting period are as follows:
Liabilities Assets
(Euro 000's) 2017 2016 2017 2016
====== ====== ======= ======
United States dollar 1,554 8,684 21,660 2,143
Great Britain pound 139 172 34,346 233
Australian dollar 416 - - -
South African rand 5 - - -
Sensitivity analysis
A 10% strengthening of the Euro against the following currencies
at 31 December 2017 would have increased (decreased) equity and
profit or loss by the amounts shown below. This analysis assumes
that all other variables, in particular interest rates, remain
constant. For a 10% weakening of the Euro against the relevant
currency, there would be an equal and opposite impact on profit or
loss and other equity.
3. Financial Risk Management (continued)
3.1 Financial risk factors (continued)
Equity (Profit) or loss
(Euro 000's) 2017 2016 2017 2016
====== ===== ========== =======
United States dollar 2,011 654 2,011 654
Great Britain pound 3,421 6 3,421 6
Australian dollar 42 - 42 -
South African rand 1 - 1 -
(c) Commodity price risk
Commodity price is the risk that the Group's future earnings
will be adversely impacted by changes in the market prices of
commodities, primarily copper. Management is aware of this impact
on its primary revenue stream but knows that there is little it can
do to influence the price earned apart from a hedging scheme.
Commodity price hedging is governed by the Group's policy which
allows to limit the exposure to prices. The Group may decide to
hedged part of its production during the year (Note 28).
(d) Credit risk
Credit risk arises when a failure by counterparties to discharge
their obligations could reduce the amount of future cash inflows
from financial assets on hand at the reporting date. The Group has
no significant concentration of credit risk. The Group has policies
in place to ensure that sales of products and services are made to
customers with an appropriate credit history and monitors on a
continuous basis the ageing profile of its receivables. The Group
has policies to limit the amount of credit exposure to any
financial institution.
Except as detailed in the following table, the carrying amount
of financial assets recorded in the financial statements, which is
net of impairment losses, represents the maximum credit exposure
without taking account of the value of any collateral obtained:
(Euro 000's) 2017 2016
======= =====
Unrestricted cash and cash equivalent at Group 39,179 460
Unrestricted cash and cash equivalent at operating entity 3,427 425
Restricted cash at the operating entity 250 250
======= =====
Cash and cash equivalents 42,856 1,135
======= =====
Restricted cash held as of 31 December 2017 is a collateral of a
bank guarantee provided to a contractor.
Other than the above, there are no collaterals held in respect
of these financial instruments and there are no financial assets
that are past due or impaired as at 31 December 2017.
(e) Interest rate risk
Interest rate risk is the risk that the value of financial
instruments will fluctuate due to changes in market interest rates.
Borrowings issued at variable rates expose the Group to cash flow
interest rate risk. Borrowings issued at fixed rates expose the
Group to fair value interest rate risk. The Group's management
monitors the interest rate fluctuations on a continuous basis and
acts accordingly.
At the reporting date the interest rate profile of interest--
bearing financial instruments was
(Euro 000's) 2017 2016
======= =====
Variable rate instruments
Financial assets 42,856 1,135
======= =====
An increase of 100 basis points in interest rates at 31 December
2017 would have increased / (decreased) equity and profit or loss
by the amounts shown below. This analysis assumes that all other
variables, in particular foreign currency rates, remain constant.
For a decrease of 100 basis points there would be an equal and
opposite impact on the profit and other equity.
3. Financial Risk Management (continued)
3.1 Financial risk factors (continued)
Equity Profit or loss
(Euro 000's) 2017 2016 2017 2016
==== ===== ======== =======
Variable rate instruments 429 11 429 11
(f) Operational risk
Operational risk is the risk that derives from the deficiencies
relating to the Group's information technology and control systems
as well as the risk of human error and natural disasters. The
Group's systems are evaluated, maintained and upgraded
continuously.
(g) Compliance risk
Compliance risk is the risk of financial loss, including fines
and other penalties, which arises from non--compliance with laws
and regulations. The Group has systems in place to mitigate this
risk, including seeking advice from external legal and regulatory
advisors in each jurisdiction.
(h) Litigation risk
Litigation risk is the risk of financial loss, interruption of
the Group's operations or any other undesirable situation that
arises from the possibility of non--execution or violation of legal
contracts and consequentially of lawsuits. The risk is restricted
through the contracts used by the Group to execute its
operations.
3.2 Capital risk management
The Group considers its capital structure to consist of share
capital, share premium and share options reserve. The Group's
objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of
capital. The Group is not subject to any externally imposed capital
requirements.
In order to maintain or adjust the capital structure, the Group
issues new shares. The Group manages its capital to ensure that it
will be able to continue as a going concern while maximizing the
return to shareholders through the optimisation of the debt and
equity balance. The AFRC reviews the capital structure on a
continuing basis.
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern and to maintain
an optimal capital structure so as to maximise shareholder value.
In order to maintain or achieve an optimal capital structure, the
Group may adjust the amount of dividend payment, return capital to
shareholders, issue new shares, buy back issued shares, obtain new
borrowings or sell assets to reduce borrowings.
The Group monitors capital on the basis of the gearing ratio.
The gearing ratio is calculated as net debt divided by total
capital. Net debt is calculated as provisions plus deferred
consideration plus trade and other payables less cash and cash
equivalents.
(Euro 000's) 2017 2016
======== =======
Net debt 84,663 119,878
Total equity 246,853 190,221
======== =======
Total capital 331,516 310,099
======== =======
Gearing ratio 25.5% 38.7%
The decrease in the gearing ratio during 2017 was mainly due to
the capital increase executed in December 2017.
Net debt includes non-current and current all liabilities net of
cash and cash equivalent.
3. Financial Risk Management (continued)
3.3 Fair value estimation
The fair values of the Group's financial assets and liabilities
approximate their carrying amounts at the reporting date.
The fair value of financial instruments traded in active
markets, such as publicly traded and available--for--sale financial
assets is based on quoted market prices at the reporting date. The
quoted market price used for financial assets held by the Group is
the current bid price. The appropriate quoted market price for
financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. The
Group uses a variety of methods, such as estimated discounted cash
flows, and makes assumptions that are based on market conditions
existing at the reporting date.
Fair value measurements recognised in the consolidated statement
of financial position
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable.
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
(Euro 000's) Level 1 Level 2 Level 3 Total
31 December 2017
Financial assets
Available for sale financial assets 129 - - 129
Total 129 - - 129
======== ======== ======== ======
31 December 2016
Financial assets
Available for sale financial assets 261 - - 261
======== ======== ======== ======
Total 261 - - 261
======== ======== ======== ======
3.4 Critical accounting estimates and judgements
The preparation of the financial statements requires management
to make judgements, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and
the accompanying disclosures, and the disclosure of contingent
liabilities at the date of the consolidated financial statements.
Estimates and assumptions are continually evaluated and are based
on management's experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected
in future periods.
In particular, the Group has identified a number of areas where
significant judgements, estimates and assumptions are required.
3. Financial Risk Management (continued)
3.4 Critical accounting estimates and judgements (continued)
(a) Capitalisation of exploration and evaluation costs
Under the Group's accounting policy, exploration and evaluation
expenditure is not capitalised until the point is reached at which
there is a high degree of confidence in the project's viability and
it is considered probable that future economic benefits will flow
to the Group. Subsequent recovery of the resulting carrying value
depends on successful development or sale of the undeveloped
project. If a project does not prove viable, all irrecoverable
costs associated with the project net of any related impairment
provisions are written off.
(b) Production start date
The Group assesses the stage of each mine under
development/construction to determine when a mine moves into the
production phase, this being when the mine is substantially
complete and ready for its intended use. The criteria used to
assess the start date are determined based on the unique nature of
each mine development/construction project, such as the complexity
of the project and its location. The Group considers various
relevant criteria to assess when the production phase is considered
to have commenced. At this point, all related amounts are
reclassified from "Mines under construction" to "Property, plant
and equipment". Some of the criteria used to identify the
production start date include, but are not limited to:
-- Level of capital expenditure incurred compared with the
original construction cost estimate;
-- Completion of a reasonable period of testing of the mine plant and equipment;
-- Ability to produce metal in saleable form (within specifications); and
-- Ability to sustain ongoing production of metal.
When a mine development project moves into the production phase,
the capitalisation of certain mine development costs ceases and
costs are either regarded as forming part of the cost of inventory
or expensed, except for costs that qualify for capitalisation
relating to mining asset additions or improvements or mineable
reserve development. It is also at this point that
depreciation/amortisation commences.
(c) Stripping costs
The Group incurs waste removal costs (stripping costs) during
the development and production phases of its surface mining
operations. Furthermore, during the production phase, stripping
costs are incurred in the production of inventory as well as in the
creation of future benefits by improving access and mining
flexibility in respect of the orebodies to be mined, the latter
being referred to as a stripping activity asset. Judgement is
required to distinguish between the development and production
activities at surface mining operations.
The Group is required to identify the separately identifiable
components or phases of the orebodies for each of its surface
mining operations. Judgement is required to identify and define
these components, and also to determine the expected volumes
(tonnes) of waste to be stripped and ore to be mined in each of
these components. These assessments may vary between mines because
the assessments are undertaken for each individual mine and are
based on a combination of information available in the mine plans,
specific characteristics of the orebody, the milestones relating to
major capital investment decisions and the type and grade of
minerals being mined.
Judgement is also required to identify a suitable production
measure that can be applied in the calculation and allocation of
production stripping costs between inventory and the stripping
activity asset. The Group considers the ratio of expected volume of
waste to be stripped for an expected volume of ore to be mined for
a specific component of the orebody, compared to the current period
ratio of actual volume of waste to the volume of ore to be the most
suitable measure of production.
These judgements and estimates are used to calculate and
allocate the production stripping costs to inventory and/or the
stripping activity asset(s). Furthermore, judgements and estimates
are also used to apply the units of production method in
determining the depreciable lives of the stripping activity
asset(s).
3. Financial Risk Management (continued)
3.4 Critical accounting estimates and judgements (continued)
(d) Ore reserve and mineral resource estimates
The Group estimates its ore reserves and mineral resources based
on information compiled by appropriately qualified persons relating
to the geological and technical data on the size, depth, shape and
grade of the ore body and suitable production techniques and
recovery rates.
Such an analysis requires complex geological judgements to
interpret the data. The estimation of recoverable reserves is based
upon factors such as estimates of foreign exchange rates, commodity
prices, future capital requirements and production costs, along
with geological assumptions and judgements made in estimating the
size and grade of the ore body.
The Group uses qualified persons (as defined by the Canadian
Securities Administrators' National Instrument 43-101) to compile
this data. Changes in the judgments surrounding proven and probable
reserves may impact as follows:
-- The carrying value of exploration and evaluation assets, mine
properties, property, plant and equipment, and goodwill may be
affected due to changes in estimated future cash flows;
-- Depreciation and amortisation charges in the statement of
profit or loss and other comprehensive income may change where such
charges are determined using the UOP method, or where the useful
life of the related assets change;
-- Capitalised stripping costs recognised in the statement of
financial position as either part of mine properties or inventory
or charged to profit or loss may change due to changes in stripping
ratios;
-- Provisions for rehabilitation and environmental provisions
may change where reserve estimate changes affect expectations about
when such activities will occur and the associated cost of these
activities;
-- The recognition and carrying value of deferred income tax
assets may change due to changes in the judgements regarding the
existence of such assets and in estimates of the likely recovery of
such assets.
(e) Impairment of assets
Events or changes in circumstances can give rise to significant
impairment charges or impairment reversals in a particular year.
The Group assesses each Cash Generating Unit ("CGU") annually to
determine whether any indications of impairment exist. If it was
necessary management could contract independent expert to value the
assets. Where an indicator of impairment exists, a formal estimate
of the recoverable amount is made, which is considered the higher
of the fair value less cost to sell and value-in-use. An impairment
loss is recognised immediately in net earnings. The Group has
determined that each mine location is a CGU.
These assessments require the use of estimates and assumptions
such as commodity prices, discount rates, future capital
requirements, exploration potential and operating performance. Fair
value is determined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Fair value for
mineral assets is generally determined as the present value of
estimated future cash flows arising from the continued use of the
asset, which includes estimates such as the cost of future
expansion plans and eventual disposal, using assumptions that an
independent market participant may take into account. Cash flows
are discounted at an appropriate discount rate to determine the net
present value. For the purpose of calculating the impairment of any
asset, management regards an individual mine or works site as a
CGU.
Although management has made its best estimate of these factors,
it is possible that changes could occur in the near term that could
adversely affect management's estimate of the net cash flow to be
generated from its projects.
(f) Provisions for decommissioning and site restoration
costs
Accounting for restoration provisions requires management to
make estimates of the future costs the Group will incur to complete
the restoration and remediation work required to comply with
existing laws, regulations and agreements in place at each mining
operation and any environmental and social principles the Group is
in compliance with. The calculation of the present value of these
costs also includes assumptions regarding the timing of restoration
and remediation work, applicable risk-free interest rate for
discounting those future cash outflows, inflation and foreign
exchange rates and assumptions relating to probabilities of
alternative estimates of future cash outflows.
3. Financial Risk Management (continued)
3.4 Critical accounting estimates and judgements (continued)
Management uses its judgement and experience to provide for and
(in the case of capitalised decommissioning costs) amortise these
estimated costs over the life of the mine. The ultimate cost of
decommissioning and timing is uncertain and cost estimates can vary
in response to many factors including changes to relevant
environmental laws and regulations requirements, the emergence of
new restoration techniques or experience at other mine sites. As a
result, there could be significant adjustments to the provisions
established which would affect future financial results.
(g) Income tax
Significant judgment is required in determining the provision
for income taxes. There are transactions and calculations for which
the ultimate tax determination is uncertain during the ordinary
course of business. The Group and Company recognise liabilities for
anticipated tax audit issues based on estimates of whether
additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded,
such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
Judgement is also required to determine whether deferred tax
assets are recognised in the consolidated statements of financial
position. Deferred tax assets, including those arising from
unutilised tax losses, require the Group to assess the probability
that the Group will generate sufficient taxable earnings in future
periods, in order to utilise recognised deferred tax assets.
Assumptions about the generation of future taxable profits
depend on management's estimates of future cash flows. These
estimates of future taxable income are based on forecast cash flows
from operations (which are impacted by production and sales
volumes, commodity prices, reserves, operating costs, closure and
rehabilitation costs, capital expenditure, dividends and other
capital management transactions). To the extent that future cash
flows and taxable income differ significantly from estimates, the
ability of the Group to realise the net deferred tax assets could
be impacted.
In addition, future changes in tax laws in the jurisdictions in
which the Group operates could limit the ability of the Group to
obtain tax deductions in future periods.
(h) Inventory
Net realisable value tests are performed at each reporting date
and represent the estimated future sales price of the product the
entity expects to realise when the product is processed and sold,
less estimated costs to complete production and bring the product
to sale. Where the time value of money is material, these future
prices and costs to complete are discounted.
(i) Contingent liabilities
A contingent liability arises where a past event has taken place
for which the outcome will be confirmed only by the occurrence or
non-occurrence of one or more uncertain events outside of the
control of the Group, or a present obligation exists but is not
recognised because it is not probable that an outflow of resources
will be required to settle the obligation.
A provision is made when a loss to the Group is likely to
crystallise. The assessment of the existence of a contingency and
its likely outcome, particularly if it is considered that a
provision might be necessary, involves significant judgment taking
all relevant factors into account.
(j) Deferred consideration
As disclosed in Note 27, the Group has recorded a deferred
consideration liability in relation to the obligation to pay Astor
up to EUR53.0 million out of excess cash from operations at
Proyecto Riontinto.
The actual timing of any payments to Astor of the consideration
involves significant judgment as it depends on certain factors
which are out of control of management.
(k) Share-based compensation benefits
Share based compensation benefits are accounted for in
accordance with the fair value recognition provisions of IFRS 2
"Share-based Payment". As such, share-based compensation expense
for equity-settled share-based payments is measured at the grant
date based on the fair value of the award and is recognised as an
expense over the vesting period. The fair value of such share-based
awards at the grant date is measured using the Black Scholes
pricing model. The inputs used in the model are based on
management's best estimates for the effects of non-transferability,
exercise restrictions, behavioural considerations and expected
volatility.
4. Business and geographical segments
Business segments
The Group has only one distinct business segment, being that of
mining operations, which include mineral exploration and
development.
Copper concentrates produced by the Group are sold to three
offtakers as per the relevant offtake agreement (Note 31.2)
Geographical segments
The Group's mining activities are located in Spain. The
commercialisation of the copper concentrates produced in Spain is
carried out in Cyprus. Corporate costs and administration costs are
based in Cyprus. Intercompany transactions within the Group are on
arm's length basis in a manner similar to transaction with third
parties. Accounting policies used by the Group in different
locations are the same as those contained in Note 2.
2017
(Euro 000's) Cyprus Spain Other Total
========= =========== ====== ==========
Sales 160,537 - - 160,537
========= =========== ====== ==========
Earnings/(loss)before Interest,Tax,Depreciation
and Amortisation 151,331 (109,957) (27) 41,347
Depreciation/amortisation
charge (7) (16,664) - (16,671)
Net foreign exchange loss (1,510) (701) (1) (2,212)
Finance income - 22 - 22
Finance cost (366) (213) - (579)
(Loss)/profit before tax
before share of loss of
associate 149,448 (127,513) (28) 21,907
========= =========== ======
Tax (3,696)
==========
Profit for the year 18,211
==========
Total assets 53,034 321,136 202 374,372
========= =========== ====== ==========
Total liabilities (11,836) (115,624) (59) (127,519)
========= =========== ====== ==========
Depreciation of property,
plant and equipment 7 12,533 - 12,540
========= =========== ====== ==========
Amortisation of intangible
assets - 4,131 - 4,131
========= =========== ====== ==========
Total additions of non-current
assets - 26,079 - 26,079
========= =========== ====== ==========
2016
(Euro 000's) Cyprus Spain Other Total
========= =========== ====== ==========
Sales 98,768 - - 98,768
========= =========== ====== ==========
Earnings/(loss) before Interest,
Impairment, Tax, Depreciation
and Amortisation 94,318 (78,917) (9) 15,393
Depreciation/amortisation
charge restated (*) (14) (11,743) - (11,757)
Impairment of land options
not exercised - (903) - (903)
Net foreign exchange gain/(loss) 377 (1,041) (1) (665)
Finance income - 41 - 41
Finance costs restated (*) (142) (448) - (590)
(Loss)/profit before tax
and share of loss of associate 94,540 (93,011) (10) 1,519
========= =========== ======
Share of loss of associate (10)
Tax 12,187
==========
Profit for the year restated
(*) 13,696
==========
Total assets 18,687 292,850 4 311,541
========= =========== ====== ==========
Total liabilities (19,484) (101,501) (28) (121,013)
========= =========== ====== ==========
Depreciation of property,
plant and equipment 14 8,629 - 8,643
========= =========== ====== ==========
Amortisation of intangible
assets restated (*) - 3,114 - 3,114
========= =========== ====== ==========
Total additions of non-current
assets 2 87,402 - 87,404
========= =========== ====== ==========
(*) Refer to Note 2.1. (c)
5. Other income
THE GROUP(Euro 000's) 2017 2016
===== ====
Other income - 235
Gain on disposal of associate 49 -
Loss on available-for-sale investments (49) -
Gain on sale of property, plant and equipment - 4
Sales of services 5 53
===== ====
5 292
===== ====
THE COMPANY
(Euro 000's) 2017 2016
===== ====
Loss on available-for-sale investments (49) -
Gain on disposal of associate 45 -
Gain on sale of property, plant and equipment - 4
Sales of services 5 43
===== ====
1 47
===== ====
6. Expenses by nature
THE GROUP
(Euro 000's) 2017 2016
restated
(*)
======== =========
Operating costs 97,786 64,223
Impairment charge on land options
not exercised - 903
Employee benefit expense (Note 7) 15,420 13,542
Compensation of key management personnel
(Note 31.1) 2,804 2,375
Auditors' remuneration - audit 180 204
- prior year audit 27 17
- other - 38
Other accountants' remuneration 13 8
Consultants' remuneration 157 698
Depreciation of property, plant and
equipment (Note 12) 12,540 8,643
Amortisation of intangible assets
(Note 13) 4,131 3,114
Travel costs 298 101
Share option-based employee benefits 87 56
Shareholders' communication expense 288 264
On-going listing costs 157 163
Legal costs 413 981
Royalties 500 -
Provision for impairment 283 -
Other expenses 782 997
======== =========
Total cost of operation, corporate,
share based benefits, exploration
and impairment 135,866 96,327
======== =========
THE COMPANY
(Euro 000's) 2017 2016
====== =====
Employee benefit expense (Note 7) 180 289
Key management remuneration (Note
31.1) 1,854 1,309
Auditors' remuneration - audit 104 145
- prior year audit 8 58
Other accountants' remuneration 12 8
Consultants' remuneration 95 11
Depreciation of property, plant and
equipment (Note 12) 7 14
Travel costs 67 94
Share option-based employee benefits 9 103
Shareholders' communication expense 288 264
On-going listing costs 157 164
Legal costs 410 965
Provision for impairment 583 -
Other expenses 268 347
====== =====
Total cost of corporate, share based
benefits and impairment 4,042 3,771
====== =====
7. Employee benefit expense
THE GROUP
(Euro 000's) 2017 2016
======= ======
Wages and salaries 11,101 10,154
Social security and social contributions 3,250 2,890
Employees' other allowances 31 22
Bonus to employees 1,038 476
======= ======
15,420 13,542
======= ======
The average number of employees and the number of employees at
year end by office are:
Average At year end
========== =============
Number of employees 2017 2016 2017 2016
==== ==== ======= ====
Spain - Full time 339 307 363 325
Spain - Part time 6 7 7 -
Cyprus - Full time 3 4 3 4
==== ==== ======= ====
Total 348 318 373 329
==== ==== ======= ====
THE COMPANY
(Euro 000's) 2017 2016
==== ====
Wages and salaries 164 264
Social security and social contributions 16 25
180 289
==== ====
The average number of employees and the number of employees at
year end by office are:
Average At year end
========== =============
Number of employees 2017 2016 2017 2016
==== ==== ======= ====
Cyprus - Full time 3 4 3 4
==== ==== ======= ====
Total 3 4 3 4
==== ==== ======= ====
8. Finance income
THE GROUP
(Euro 000's) 2017 2016
====== ====
Interest income 22 41
22 41
====== ====
Interest income relates to interest received on bank
balances.
THE COMPANY
(Euro 000's) 2017 2016
========= =====
Finance income from interest-bearing
intercompany loan 1,635 1,523
1,635 1,523
========= =====
9. Finance costs
THE GROUP
(Euro 000's) 2017 2016
====== ====
Interest expense:
Debt to department of social security
(Note 25) and other interest 306 252
Interest on copper concentrate prepayment
(1) 109 143
Unwinding of discount on mine rehabilitation
provision (Note 26) 113 -
Interest paid on early payment on
receivable from trading 256 -
Hedging income (Note 28.1) (205) -
Net foreign exchange hedging expense
(Note 28.1) - 195
579 590
====== ====
(1) Interest rate US$ 3 months LIBOR + 2.75%
10. Tax
THE GROUP
(Euro 000's) 2017 2016
======= ========
Income tax 1,622 16
(Over)/under provision previous years 8 (7)
Deferred tax asset due to losses available
against future taxable income (Note 17) - (8,276)
Deferred tax asset due to losses available
against future taxable income overprovision 1,459 -
previous years (Note 17)
Deferred tax related to utilization of
losses for the year (Note 17) 345 475
Deferred tax income relating to the origination
of temporary differences (Note 17) - (4,593)
Deferred tax expense relating to reversal
of temporary differences (Note 17) 262 198
3,696 (12,187)
======= ========
The tax on the Group's results before tax differs from the
theoretical amount that would arise using the applicable tax rates
as follows:
(Euro 000's) 2017 2016
======== ========
Profit before tax 21,907 1,509
======== ========
Tax calculated at the applicable tax
rates 4,739 (18)
Tax effect of expenses not deductible
for tax purposes 1,449 31
Tax effect of tax loss for the year 9 318
Tax effect of allowances and income not
subject to tax (4,212) (191)
Over provision for prior year taxes 8 (7)
Tax effect of tax losses brought forward (363) (124)
Deferred tax (Note 17) 2,066 (12,196)
Tax (credit)/charge 3,696 (12,187)
======== ========
10. Tax (continued)
THE COMPANY
(Euro 000's) 2017 2016
==== ====
Income tax - -
(Over)/under provision previous years - -
- -
==== ====
The tax on the Company's results before tax differs from the
theoretical amount that would arise using the applicable tax rates
as follows:
(Euro 000's) 2017 2016
======== ========
Loss before tax (1,127) 95,059
======== ========
Tax calculated at the applicable tax
rates (141) 11,882
Tax effect of expenses not deductible
for tax purposes 140 65
Tax effect of tax loss for the year - 199
Tax effect of allowances and income not
subject to tax (39) (12,146)
Tax effect of group tax relief 40 -
Tax (credit)/charge - -
======== ========
10. Tax (continued)
(Euro 000's)
Tax losses carried forward
============================ ======= ======= =======
Tax year Cyprus Spain Total
============================ ======= ======= =======
2007 - - -
2008 - 3,794 3,794
2009 - 3,498 3,498
2010 - 5,642 5,642
2011 - 6,576 6,576
2012 - 1,967 1,967
2013 5,167 2,381 7,548
2014 4,100 3,509 7,609
2015 4,051 640 4,691
2016 1,584 - 1,584
2017 - - -
14,902 28,007 42,909
======= ======= =======
Cyprus
The corporation tax rate is 12.5%. Under certain conditions
interest income may be subject to defence contribution at the rate
of 30%. In such cases this interest will be exempt from corporation
tax. In certain cases, dividends received from abroad may be
subject to defence contribution at the rate of 17% for 2014 and
thereafter. Due to tax losses sustained in the year and previous
years, no tax liability arises on the Company. Under current
legislation, tax losses may be carried forward and be set off
against taxable income of the five succeeding years.
Companies which do not distribute 70% of their profits after
tax, as defined by the relevant tax law, within two years after the
end of the relevant tax year, will be deemed to have distributed as
dividends 70% of these profits. Special contribution for defence at
20% for the tax years 2012 and 2013 and 17% for 2014 and thereafter
will be payable on such deemed dividends to the extent that the
shareholders (companies and individuals) are Cyprus tax residents.
The amount of deemed distribution is reduced by any actual
dividends paid out of the profits of the relevant year at any time.
This special contribution for defence is payable by the Company for
the account of the shareholders.
Spain
The corporation tax rate for 2017 and 2016 is 25%. The recent
Spanish tax reform approved in 2014 reduces the general corporation
tax rate from 30% to 28% in 2015 and to 25% in 2016, and
introduces, among other changes, a 10% reduction in the tax base
subject to equity increase and other requirements. Due to tax
losses sustained in the current and previous years, no tax
liability arises in the subsidiaries in Spain. Under current
legislation, tax losses may be carried forward and be set off
against taxable income with no limitation.
11. Earnings per share
The calculation of the basic and diluted earnings per share
attributable to the ordinary equity holders of the Company is based
on the following data:
(Euro 000's) 2017 2016 restated (*)
========== ==================
Parent company (3,477) (3,798)
Subsidiaries 21,716 17,494
========== ==================
Profit attributable to equity holders of the parent 18,239 13,696
========== ==================
Weighted number of ordinary shares for the purposes of basic earnings per share
('000) 117,904 116,680
========== ==================
Basic profit per share (cents) 15.5 11.7
========== ==================
Weighted number of ordinary shares for the purposes of fully diluted earnings per share
('000) 119,485 117,545
========== ==========
Fully diluted profit per share (cents) 15.3 11.7
========== ==========
(*) Refer to Note 2.1. (c)
There are 262,569 warrants (Note 22) and 1,400,000 options (Note
23) (2016: 365,354 warrants and 500,000 options) which have been
included when calculating the weighted average number of shares for
2017.
12. Property, plant and equipment
Deferred
Land and Plant and Mineral Assets under mining Other
(Euro 000's) buildings equipment rights construction(4) costs(3) assets(2) Total
============ =========== ============ ================ ============ ============ ==========
2017
Cost
At 1 January 2017 40,188 144,930 - 566 13,848 838 200,370
Additions 407(1) - - 11,751 8,469 - 20,627
Reclassifications 400 472 - (872) - - -
Disposals - - - - - (53) (53)
At 31 December
2017 40,995 145,402 - 11,445 22,317 785 220,944
============ =========== ============ ================ ============ ============ ==========
Depreciation
At 1 January 2017 1,736 5,073 - - 1,758 423 8,990
Charge for the
year 2,340 8,392 - - 1,711 97 12,540
Disposals - - - - - (44) (44)
At 31 December
2017 4,076 13,465 - - 3,469 476 21,486
============ =========== ============ ================ ============ ============ ==========
Net book value at
31 December 2017 36,919 131,937 - 11,445 18,848 309 199,458
============ =========== ============ ================ ============ ============ ==========
2016
Cost
At 1 January 2016 39,061 23,046 950 94,525 10,334 1,026 168,942
Additions 1,121(1) 15,983 - - 13,848 164 31,116
Reclassifications 6 104,287 - (93,959) (10,334) - -
Reclassifications
- intangibles - 1,614 (50) - - (247) 1,317
Disposals - - - - (37) (37)
Written off - - (900) - (68) (968)
============ =========== ============ ================ ============ ============ ==========
At 31 December
2016 40,188 144,930 - 566 13,848 838 200,370
============ =========== ============ ================ ============ ============ ==========
Depreciation
At 1 January 2016 - - - - - 518 518
Charge for the
year 1,736 4,932 - - 1,758 217 8,643
Reclassifications - 141 - - - (141) -
Reclassifications
- intangibles - - - - - (81) (81)
Disposals - - - - - (25) (25)
Impairment - - 900 - - 3 903
Written off - - (900) - - (68) (968)
============ =========== ============ ================ ============ ============ ==========
At 31 December
2016 1,736 5,073 - - 1,758 423 8,990
============ =========== ============ ================ ============ ============ ==========
Net book value at
31 December 2016 38,452 139,857 - 566 12,090 415 191,380
============ =========== ============ ================ ============ ============ ==========
THE GROUP
(1) Mine rehabilitation asset (Note 26).
(2) Includes motor vehicles, furniture, fixtures and office
equipment which are depreciated over 5-10 years.
(3) Stripping costs
(4) Net of pre-commissioning sales
The above fixed assets are located mainly in Spain.
12. Property, plant and equipment (continued)
THE COMPANY
Other
(Euro 000's) assets(1) Total
========== =======
2017
Cost
At 1 January 2017 68 68
Disposals (53) (53)
At 31 December 2017 15 15
========== =======
Depreciation
At 1 January 2017 52 52
Charge for the year 7 7
Disposals (44) (44)
At 31 December 2017 15 15
========== =======
Net book value at 31 December 2017 - -
========== =======
2016
Cost
At 1 January 2016 109 109
Additions 1 1
Disposals (37) (37)
Written off (5) (5)
At 31 December 2016 68 68
========== =======
Depreciation
At 1 January 2016 68 68
Charge for the year 14 14
Disposals (25) (25)
Written off (5) (5)
At 31 December 2016 52 52
========== =======
Net book value at 31 December 2016 16 16
========== =======
(1) Includes motor vehicles, furniture, fixtures and office
equipment which are depreciated over 5-10 years.
The Group
Certain land plots required for Proyecto Riotinto (the "Project
Lands") are affected by pre-existing liens and embargos derived
from unpaid obligations of former Project operators or owners (the
"Pre-Existing Debt").
a) In May 2010 the Group signed an agreement with the Department
of Social Security in which it undertook to repay, over a period of
5 years, the EUR16.9 million Pre-Existing Debt to the Department of
Social Security in exchange for a stay of execution proceedings for
recovery of this debt against these Project Lands (the "Social
Security Agreement"). The Group granted a mortgage to guarantee the
payment of a total debt of EUR6,436,661 and two embargos to
guarantee the two payments of a total debt of EUR6,742,039 and
EUR10,472,612 respectively in favour of Social Security's General
Treasury. Originally payable over 5 years, the repayment schedule
was subsequently extended until June 2017. The Group repaid the
Department of Social Security on 30 June 2017.
b) The Project Lands are also subject to a lien in the amount of
EUR5.0 million created in 1979 to secure the repayment of certain
government grants that were in all likelihood paid at the relevant
time by former operators. Relevant court proceedings have been
followed to strike this lien from title, given that in the opinion
of the Group the right of the government to reclaim this
Pre-Existing Debt has expired due to the relevant statute of
limitations.
c) The Project Lands are also affected by the following
Pre-Existing Debt liens: A EUR400k mortgage to Oxiana Limited (that
will be paid in due course) and a mortgage of EUR222k pre--existing
on lands acquired by the Group in August 2012 which has been paid
in full.
12. Property, plant and equipment (continued)
d) Other land plots owned by the Group, but not required for
Proyecto Riotinto (the "Non-Project Lands"), are affected by a
Pre-Existing Debt lien of EUR10.5 million registered by the Junta
de Andalucía. In the event execution proceedings were commenced
against the Non-Project Lands, the Group would either negotiate a
settlement or allow the execution to proceed in total satisfaction
of the Pre-Existing Debt in question
e) During 2016, an option expired which was previously granted
to Inland Trading 2006, S.L. and Construcciones Zeitung, S.L. for
the acquisition of certain mining rights and recorded EUR900k as an
impairment charge in the profit and loss account.
During 2017, the Group capitalised personnel costs amounting to
EUR259k (2016: EUR916k). No borrowing costs were capitalised in the
same period.
13. Intangible assets
The Group
Permits Licences,
of Projects R&D and Goodwill Total
(Euro 000's) Software
============= ========= ========== ========
2017
Cost
On 1 January 2017 71,521 1,685 9,333 82,539
Additions from acquisition
of subsidiary 5,000 126 5,126
Additions - 2,694 - 2,694
At 31 December 2017 76,521 4,505 9,333 90,359
============= ========= ========== ==========
Amortisation
On 1 January 2017 3,072 123 9,333 12,528
Charge for the year 4,073 58 - 4,131
At 31 December 2017 7,145 181 9,333 16,659
============= ========= ========== ==========
Net book value at 31
December 2017 69,376 4,324 - 73,700
============= ========= ========== ==========
2016
Cost
On 1 January 2016 20,158 - 9,333 29,491
Additions restated (*) 53,005(1) 1,334 - 54,339
Reclassifications -
Property, plant and
equipment (1,614) 297 - (1,317)
Other reclassifications (28) 54 - 26
============= ========= ========== ==========
At 31 December 2016 71,521 1,685 9,333 82,539
============= ========= ========== ==========
Amortisation
On 1 January 2016 - - 9,333 9,333
Charge for the year
restated (*) 3,072 42 - 3,114
Reclassifications -
Property, plant and
equipment - 81 - 81
============= ========= ========== ==========
At 31 December 2016 3,072 123 9,333 12,528
============= ========= ========== ==========
Net book value at 31
December 2016 restated
(*) 68,449 1,562 - 70,011
============= ========= ========== ==========
(1) These additions relate to the deferred consideration as at 1.2.2016 (Note 27)
(*) Refer to Note 2.1. (c)
The useful life of the intangible assets is estimated to be not
less than fourteen years from the start of production (the revised
Reserves and Resources statement which was announced in July 2016
has increased the life of mine to 16 1/2 years).
13. Intangible assets (continued)
The ultimate recovery of balances carried forward in relation to
areas of interest or all such assets including intangibles is
dependent on successful development, and commercial exploitation,
or alternatively sale of the respective areas.
The Group conducts impairment testing on an annual basis unless
indicators of impairment are not present at the reporting date. In
considering the carrying value of the assets at Proyecto Riotinto,
including the intangible assets and any impairment thereof, the
Group assessed that no indicators were present as at 31 December
2017 and thus no impairment has been recognised.
Goodwill of EUR9,333,000 arose on the acquisition of the
remaining 49% of the issued share capital of Atalaya Riotinto
Minera S.L.U. ("ARM") back in September 2008. This amount was fully
impaired on acquisition, in the absence of the mining licence back
in 2008.
Permits include additions in 2017 amounting to EUR5,000,000
related to the Touro Project mining rights.
14. Investment in subsidiaries
(Euro 000's) 2017 2016
====== ======
The Company
Opening amount at cost less provision for impairment 3,572 3,572
Incorporation(1) 3 -
Increase of investment (2) 118 -
Closing amount at cost less provision for impairment 3,693 3,572
====== ======
Effective proportion
of shares held(5)
Date of incorporation/ Principal activity Country of
Subsidiary companies acquisition incorporation
====================== ======================= ====================== ====================== =====================
Atalaya Touro Project
(UK) Ltd(1) 10 March 2017 Holding United Kingdom 100%
Atalaya
Minasderiotinto
Project (UK) Ltd(2) 10 Sep 2008 Holding United Kingdom 100%
EMED Marketing Ltd 08 Sep 2008 Trading Cyprus 100%
EMED Mining Spain
SLU(3) 12 April 2007 Exploration Spain 100%
Eastern Mediterranean
Resources (Caucasus)
Ltd(4) 11 Nov 2005 Exploration Georgia 100%
As security for the obligation on ARM to pay consideration to
Astor under the Master Agreement and the Loan Assignment Agreement,
Atalaya Minasderiotinto Project (UK) Ltd has granted pledges to
Astor Resources AG over the issued capital of ARM and granted a
pledge to Astor over the issued share capital of Eastern
Mediterranean Exploration and Development S.L.U. and the Company
has provided a parent company guarantee (Note 27).
(1) On 10 March 2017, Atalaya Touro Project (UK) Limited was
incorporated. Atalaya Mining Plc is its sole shareholder.
(2) On 16 February 2017, Emed Holdings (UK) Ltd changed its name
to Atalaya Riotinto Project (UK) Ltd and changed again to Atalaya
Minasderiotinto Project (UK) Limited on 30 June 2017. During the
year there was an increase amounting to EUR118k in the investment
of ARM related to employee benefit expenses.
(3) In December 2017, EMED Mining Spain SLU increased its
capital by EUR300k from its sole shareholder. This investment
increase was fully impaired in the year.
(4) The Group started the liquidation process of this subsidiary
in 2017. In 2018, the Group has reached an agreement with a third
party to dispose Eastern Mediterranean Resources (Caucasus) Ltd by
transferring all issued shares. The liquidation process was halted
in 2018 and the Group is expecting to transfer the shares during
2018.
(5) The effective proportion of shares held as at 31 December
2017 and 31 December 2016 remained unchanged other than Atalaya
Touro Project (UK) Ltd which was incorporated in the year.
15. Investment in associate
(Euro 000's) 2017 2016
==== ======
The GROUP
At 1 January - 10
Profit on disposals from subsidiary/associate - 303
Share of results of associate
before tax - (313)
==== ======
At 31 December - -
==== ======
The Company
At 1 January 4 4
Disposal (4) -
At 31 December - 4
==== ======
In December 2014, the Company entered into a conditional Earn-in
Agreement with Prospech Ltd ("Prospech"), a private Australian
exploration company, in relation with two exploration licences held
by Atalaya's 100% owned Slovak subsidiary, Slovenske Kovy s.r.o.
("SLOK"). The agreement became effective in March 2015.
On 10 October 2017, the Company entered into a share and rights
sale and purchase agreement with Prospech Limited. According to
this agreement the Company agreed to sell its 19% of the share
capital of Slovenske Kovy, s.r.o. to Prospech Limited. The sale
consideration was 937,500 fully paid ordinary Prospech shares at
A$0.16 per share, and 468,750 options, each with a right to convert
to one fully paid ordinary Prospech share at any time up to 30
September 2019 for A$0.25. The sale consideration was EUR99,010
resulting in a consolidated profit of EUR99,010.
Further to the Sales and Purchase agreement with Prospech
Limited, the Company agreed to transfer 50% of its Prospech shares
and rights to the advisor for his services provided for this
agreement. Thus, the Group owned 468,500 fully paid Prospech shares
and 234,375 options at a cost of EUR49,505.
16. Investment in joint venture
Effective proportion
Company name Principal Country of of shares
activities incorporation held at 31 December
2015
================ ================== ================= ====================
Exploitation
Recursos of tailing
Cuenca Minera dams and waste
S.L. areas resources Spain 50%
ARM entered into a 50/50 joint venture with Rumbo to evaluate
and exploit the potential of the class B resources in the tailings
dam and waste areas at Proyecto Riotinto. Under the joint venture
agreement, ARM will be the operator of the joint venture, will
reimburse Rumbo for the costs associated with the application for
classification of the Class B resources and will fund the initial
expenditure of a feasibility study up to a maximum of EUR2.0
million. Costs are then borne by the joint venture partners in
accordance with their respective ownership interests. Half of the
costs paid by ARM in connection with the feasibility study can be
deducted from any royalty which may fall due to be paid.
The Group's significant aggregate amounts in respect of the
joint venture are as follows:
(Euro 000's) 2017 2016
====== =====
Intangible assets 94 94
Trade and other receivables 2 1
Cash and cash equivalents 22 20
Trade and other payables (115) (114)
====== =====
Net assets 3 1
====== =====
Revenue - -
Expenses - (1)
====== =====
Net loss after tax - (1)
====== =====
17. Deferred tax
Consolidated Consolidated
statement income statement
of financial
position
(Euro 000's) 2017 2016 2017 2016
Restated Restated
---------- --------- -------- -----------
The Group
Deferred tax asset
At 1 January 12,196 -
Deferred tax asset due to
losses available against
future taxable income (Note
10) - 8,276 - (8,276)
Deferred tax related to
utilization of losses for
the year (Note 10) (345) (475) 345 475
Deferred tax asset due to
losses available against
future taxable income overprovision
previous years (Note 10) (1,459) - 1,459
Deferred tax income relating
to the origination of temporary
differences (Note 10) - 4,593 - (4,593)-
Deferred tax expense relating
to reversal of temporary
differences (Note 10) (262) (198) 262 198
========== =========
At 31 December 10,130 12,196
Deferred tax income (Note
10)
======== ===========
2,066 (12,196)
-------- -----------
Deferred tax assets are recognised for the carry-forward of
unused tax losses and unused tax credits to the extent that it is
probable that taxable profits will be available in the future
against which the unused tax losses/credits can be utilised.
During 2016, the Group recognised EUR12.2 million in net
deferred tax assets as it was determined that it is probable that
sufficient future taxable profits will be available to the Group to
benefit from the losses carried forward.
In addition to recognised deferred income tax asset, the Group
has unrecognised tax losses in Cyprus of EUR14.9million (2016:
EUR17.9) that are available to carry forward for 5 years against
future taxable income of the group companies in which the losses
arose, and in Spain EUR28million (2016: EUR30.6million) which are
available to carry forward indefinitely against future losses.
Deferred tax assets have not been recognised in respect of losses
in Cyprus as they may not be used to offset taxable profits
elsewhere in the Group, they have arisen in companies that have
been loss-making for some time, and there are no other tax planning
opportunities or other evidence of recoverability in the near
future to support (either partially or in full) the recognition of
the losses as deferred income tax assets.
18. Inventories
(Euro 000's) 2017 2016
======= =====
The Group
Finished products 4,797 -
Materials and supplies 8,003 5,647
Work in progress 874 548
13,674 6,195
======= =====
Materials and supplies relate mainly to machinery spare parts.
Work in progress represents ore stockpiles, which is ore that has
been extracted and is available for further processing.
As of 31 December 2017, copper concentrate produced and not sold
amounted to 7,274 tonnes. Accordingly, the inventory for copper
concentrate was EUR4.8 million (2016:EUR nil). During the year the
Group recorded cost of sales amounting to EUR130.7 million (2016:
EUR88.8 million).
19. Trade and other receivables
(Euro 000's) 2017 2016
======== =========
The Group
Non-current trade and other receivables
Deposits 212 206
212 206
======== =========
Current trade and other receivables
Trade receivables 12,113 15,082
Receivables from related parties
(Note 31.3 and 31.4) 1,612 2,092
Deposits and prepayments 221 522
VAT receivable 17,804 11,187
Tax advances 1,716 -
Other receivables 747 967
======== =========
34,213 29,850
======== =========
The Company
(Euro 000's) 2017 2016
Restated
======== ===========
Receivables from own subsidiaries
(Note 31.3) 242,416 239,335
Deposits and prepayments 6 506
VAT receivable 389 352
Other receivables 13 52
======== ==========
242,824 240,245
======== ==========
Trade receivables are shown net of any interest applied to
prepayments. Payment terms are aligned with offtake agreements and
market standards and generally are 7 days on 90% of the invoice and
the remaining 10% at the settlement date which can vary between 1
to 5 months.
The fair values of trade and other receivables approximate to
their carrying amounts as presented above.
20. Available-for-sale investments
(Euro 000's) 2017 2016
====== ====
The Group & The Company
At 1 January 261 302
Addition 49 -
Impairment (49)
Loss transferred to reserves (Note
23) (132) (41)
At 31 December 129 261
====== ====
Country Effective proportion
Company name Principal activities of incorporation of shares
held at 31 December
2017
======================= ======================== =================== ====================
Eastern Mediterranean Holder of exploration
Minerals Ltd licences in Cyprus Cyprus 10%
Exploration and
development mining
KEFI Minerals company listed
Plc on AIM UK 1.8%
Prospech Limited Exploration company Australia 0.65%
20. Available-for-sale investments (continued)
On 10 October 2017, the Company entered into a share and rights
sale and purchase agreement with Prospech Limited. According to
this agreement the Company agreed to sell its 19% of the share
capital of Slovenske Kovy, s.r.o. to Prospech Limited . The sale
consideration is 937,500 fully paid ordinary Prospech shares at
A$0.16 per share, and 468,750 options, each with a right to convert
to one fully paid ordinary Prospech share at any time up to 30
September 2019 for A$0.25. The sale consideration was EUR99,010
resulting in a consolidated profit of EUR99,010 (Note 15)
Further to the Sales and Purchase agreement with Prospech
Limited, the Company agrees to transfer 50% of its Prospech shares
and rights to the advisor for his services provided for this
agreement. Thus, the Group has 468,500 fully paid Prospech shares
and 234,375 options at a cost of EUR49,505 (Note 15)
21. Cash and cash equivalents
(Euro 000's) 2017 2016
====== =====
The Group
Cash at bank and in hand 42,856 1,135
====== =====
As of 31 December 2017, the Group's operating subsidiary held
EUR250k (2016: EUR250k) as a collateral for bank guarantees, which
has been classified as restricted cash.
Cash and cash equivalents denominated in the following
currencies:
Euro - functional and presentation
currency 517 783
Great Britain Pound 34,346 233
United States Dollar 7,993 119
======= =====
42,856 1,135
======= =====
The Company
Cash at bank and on hand 34,410 320
====== ===
Cash and cash equivalents denominated in the following
currencies:
Euro - functional and presentation
currency 64 86
Great Britain Pound 34,345 229
United States Dollar 1 5
======= ===
34,410 320
======= ===
22. Share capital
No. Share Share
Authorised of Shares* capital Premium Total
'000's StgGBP StgGBP StgGBP
000's 000's 000's
Ordinary shares
of Stg GBP0.075
each 200,000 15,000 - 15,000
============ ========= ========= =========
Issued and fully 000's Euro Euro Euro
paid 000's 000's 000's
1 January 2016 116,679 11,632 277,238 288,870
Issue Price Details
Date (StgGBP)
7 Dec
2017 1.67 Share placement 18,575 1,560 33,182 34,742
Share issue
costs - - (843) (843)
============ ========= ========= =========
31 December 2017 135,254 13,192 309,577 322,769
============ ========= ========= =========
Authorised capital
The Company's authorised share capital is 200,000,000 ordinary
shares of Stg GBP0.075 each.
Issued capital
2017
On 7 December 2017, 18,574,555 ordinary shares at Stg GBP0.075
were issued at a price of GBP1.67. Upon the issue an amount of
EUR32,338,512 was credited to the Company's share premium
reserve.
2016
There was no share capital issue during 2016.
Warrants
No warrants were issued in 2017 and in 2016.
Details of share warrants outstanding as at 31 December
2017:
Number of
Grant date Expiry date Exercise price - Stg GBP warrants
============= ============== ==========
24 June 2015 24 June 2018 1.425 262,569
262,569
Weighted average
exercise price Number of
Stg GBP warrants
================= ==========
At 1 January 2017 1.80 365,354
Less warrants expired during the year 2.75 (102,785)
Outstanding warrants at 31 December 2017 1.425 262,569
The estimated fair values of the warrants were calculated using
the Black Scholes option pricing model. The inputs into the model
and the results are as follows:
Weighted
Weighted average Expected Estimated
average share exercise Expected Expected life Risk free dividend fair value
Grant date price StgGBP price StgGBP volatility (years) rate yield StgGBP
24 June 2015 1.425 1.425 64.40% 3 2.0% Nil 0.330
The volatility has been estimated based on the underlying
volatility of the price of the Company's shares in the preceding
twelve months.
On 20 February 2018, the Company received the notification from
one of the warrants holders to exercise 233,184 warrants at an
exercise price of 142.5 pence per share. As of the date of this
Report, the shares are yet to be allotted, as the holder did not
transfer the exercise price to the Group. The expiration date of
the warrants is 24 June 2018.
23. Other reserves
THE GROUP
Depletion factor Available-for-sale
(Euro 000's) Share option Bonus share investments Total
At 1 January 2016 6,247 145 - (884) 5,508
Bonus shares issued in escrow - 63 - - 63
Recognition of share based
payments 137 - - - 137
Change in value of
available-for-sale
investments (Note 20) - - - (41) (41)
At 31 December 2016 6,384 208 - (925) 5,667
Recognition of depletion
factor - - 450 - 450
Recognition of share based
payments 152 - - - 152
Change in value of
available-for-sale
investments (Note 20) - - - (132) (132)
At 31 December 2017 6,536 208 450 (1,057) 6,137
============ =========== ========
the company
Available-for-sale investments
(Euro 000's) Share option Bonus share Total
At 1 January 2016 6,247 145 (884) 5,508
Bonus shares issued in escrow - 63 - 63
Recognition of share based payments 137 - - 137
Change in value of available-for-sale investments
(Note20) - - (41) (41)
At 31 December 2016 6,384 208 (925) 5,667
Recognition of share based payments 152 - - 152
Change in value of available-for-sale investments
(Note20) - - (132) (132)
At 31 December 2017 6,536 208 (1,057) 5,687
============ =========== ======
Details of share options outstanding as at 31 December 2017:
Grant date Expiry date Exercise price - Stg GBP Share options
20 Mar 2014 19 Mar 2019 3.60 400,000
1 June 2014 31 May 2019 2.70 100,000
23 Feb 2017 22 Feb 2022 1.44 900,000
Total 1,400,000
Weighted average
exercise price Stg GBP Share options
At 1 January 2017 3.42 500,000
Add options granted during the year 1.44 900,000
31 December 2017 2.15 1,400,000
On 23 February 2017, the Group announced that 900,000 share
options were granted to Persons Discharging Managerial
Responsibilities and management, of which 800,000 were in
accordance with the incentive share option plan and 100,000 were
under a contractual entitlement. These included 150,000 share
options granted to a Director, as disclosed in the Corporate
Governance Report.
In general, option agreements contain provisions adjusting the
exercise price in certain circumstances including the allotment of
fully paid ordinary shares by way of a capitalisation of the
Company's reserves, a sub division or consolidation of the ordinary
shares, a reduction of share capital and offers or invitations
(whether by way of rights issue or otherwise) to the holders of
ordinary shares.
The estimated fair values of the options were calculated using
the Black Scholes option pricing model. The inputs into the model
and the results are as follows:
23. Other reserves (continued)
Weighted
Weighted average Risk
Grant average share exercise Expected Expected life Free Expected Estimated Fair
Date price StgGBP price StgGBP volatility (years) rate dividend yield Value StgGBP
23 Feb 2017 1.440 1.440 51.8% 5 0.6% Nil 0.666
1 June 2014 2.700 2.700 62.9% 5 2.0% Nil 0.597
20 Mar 2014 3.600 3.600 64.2% 5 2.0% Nil 0.705
The volatility has been estimated based on the underlying
volatility of the price of the Company's shares in the preceding
twelve months.
24. Non-controlling interest
(Euro 000's) 2017 2016
Opening balance - -
On acquisition of a subsidiary 4,502 -
Share of results for the year (28) -
Closing balance 4,474 -
The Group has a 10% interest in Cobre San Rafael, S.L., while
the remaining 90% is held by a non-controlling interest (Note
2.3.). The significant financial information in respect of the
subsidiary before intercompany eliminations as at and for the year
ended 31 December 2017 is as follows:
(Euro 000's) 2017(*) 2016(1)
Non-current assets 5,127 -
Current assets 1,087 3
Non-current liabilities - -
Current liabilities 1,242 -
Equity 4,972 3
Revenue - -
Loss for the year and total comprehensive income (31) -
(1) Cobre San Rafael, S.L. was established on 13 June 2016.
(*) 10% interest in Cobre San Rafael, S.L. was acquired by the
Group in July 2017.
25. Trade and other payables
THE GROUP
(Euro 000's) 2017 2016
Non-current trade and other payables
Land options 74 115
74 115
Current trade and other payables
Trade payables 64,234 49,309
Payable to related parties (Note 31.3) - 12
Social security payable(1) - 1,741
Copper concentrate advance payment by customer (2) - 8,684
Land options and mortgage 791 790
Accruals 2,660 1,826
VAT payable 7 -
Other 291 230
67,983 62,592
THE COMPANY
(Euro 000's) 2017 2016
Current trade and other payables
Accruals 1,287 649
Payable to own subsidiaries (Note 31.3) 4,614 1,193
Other 16 229
5,917 2,071
The fair values of trade and other payables due within one year
approximate to their carrying amounts as presented above.
(1) On 25 May 2010 ARM recognised a debt with the Social
Security's General Treasury in Spain amounting to EUR16.9 million
that was incurred by a previous owner in order to stop the
execution process by Public Auction of the land over which Social
Security had a lien. This debt was repaid in June 2017.
(2) In September 2016, the Group signed a $14.0 million
prepayment funding with Transamine Trading, S.A. ("Transamine").
The funding will be settled by 31 December 2018 via deductions from
payments received from sales. Terms of the funding are market
conditions bearing an interest of LIBOR 3 month + 2.75%
interest.
26. Provisions
THE GROUP
(Euro 000's) Legal Rehabilitation Total
1 January 2016 - 3,971 3,971
Revision of discount rate - 732 732
Revision of estimates - 296 296
Accretion expense - 93 93
31 December 2016/1 January 2017 - 5,092 5,092
Additions 213 407 620
Revision of discount rate - (98) (98)
Finance cost (Note 9) - 113 113
31 December 2017 213 5,514 5,727
(Euro 000's) 2017 2016
Non-Current 5,727 5,092
Current - -
Total 5,727 5,092
Rehabilitation provision
Rehabilitation provision represents the accrued cost required to
provide adequate restoration and rehabilitation upon the completion
of production activities. These amounts will be settled when
rehabilitation is undertaken, generally over the project's
life.
The discount rate used in the calculation of the net present
value of the provision as at 31 December 2017 was1.87%, which is
the 15-year Spain Government Bond rate (2016: 1.87%, which is the
15-year Spain Government Bond rate). An inflation rate of 1.5% is
applied on annual basis.
The expected payments for the rehabilitation work are as
follows:
(Euro 000's) Between Between Between More than 15 Years
1 - 5 Years 6 - 10 Years 10 - 15 Years
Expected payments for rehabilitation of the mining
site 553 1,579 2,692 690
Legal provision
The Group has been named a defendant in several legal actions in
Spain, the outcome of which is not determinable as at 31 December
2017. Management has reviewed individually each case and made a
provision of EUR213 thousand for these claims, which has been
reflected in these consolidated financial statements.
27. Deferred consideration
In September 2008, the Group moved to 100% ownership of ARM (and
thus full ownership of Proyecto Riotinto) by acquiring the
remaining 49% of the issued capital of ARM. At the time of the
acquisition, the Group signed a Master Agreement (the "Master
Agreement") which included deferred consideration of EUR43.8
million (the "Deferred Consideration") and potential up-tick
payments of up to EUR15.9 million depending on the price of copper
(the "Up-tick Payment"), in consideration of (a) all parties
accepting the legal structure of ARM (formerly Emed Tartessus); (b)
the validity of various agreements entered into prior to the Master
Agreement; and (c) the provision of indemnities by Astor and its
agreement not to pursue litigation.
The obligation to pay the Deferred Consideration and the Up-tick
Payments is subject to the satisfaction of the following conditions
(the "Conditions"): (a) all authorisations to restart mining
activities in Proyecto Riotinto having been granted by the Junta de
Andalucía ("Permit Approval"); and (b) the Group securing a senior
debt finance facility for a sum sufficient to restart mining
operations at Proyecto Riotinto ("Senior Debt Facility") and being
able to draw down funds under the Senior Debt Facility. At the time
of acquisition, the possible outcome for the obligation to pay the
deferred consideration could not be determined.
Subject to satisfaction of the Conditions, the Deferred
Consideration and the Up-tick Payments are payable over a period of
six or seven years (the "Payment Period"). In addition to
satisfaction of the Conditions, the Up-tick Payments are only be
payable if, during the relevant period, the average price of copper
per tonne is US$6,614 or more (US$3.00/lb).
27. Deferred consideration (continued)
The Company also entered into a credit assignment agreement with
a related company of Astor, Shorthorn AG, pursuant to which the
benefit of outstanding loans were assigned to the Company in
consideration for the payment of EUR9.1 million to Shorthorn (the
"Loan Assignment"). Payment under the Loan Assignment is also
subject to satisfaction of the Conditions and is payable in
instalments over the Payment Period.
As security, inter alia, for the obligation to pay the Deferred
Consideration, the Up-tick Payments and the Loan Assignment to
Astor, Atalaya Minasderiotinto Project (UK) Limited has granted
pledges over the issued capital of ARM and the Company has provided
a parent company guarantee.
As at the date of this report, the Permit Approval condition has
been satisfied. However, the Group has not entered into
arrangements in connection with a Senior Debt Facility and, in the
absence of drawdown of funds by the Group pursuant to a Senior Debt
Facility, the Conditions have not been satisfied.
On 6 March 2017, judgment in the case brought by ("Astor Case")
was handed down in the High Court of Justice in London (the
"Judgment"). On 31 March 2017, declarations were made by the High
Court which give effect to the Judgment.
In summary, the High Court found that the Deferred Consideration
did not start to become payable when Permit Approval was granted.
In addition, the intra-group loans by which funding for the restart
of mining operations was made available to ARM did not constitute a
Senior Debt Facility so as to trigger payment of the Deferred
Consideration. Accordingly, the first instalment of the Deferred
Consideration has not fallen due.
Astor failed to show that there had been a breach of the all
reasonable endeavours obligation contained in the Master Agreement
to obtain a Senior Debt Facility or that the Group had acted in bad
faith in not obtaining a Senior Debt Facility. While the Court
confirmed that the Group was not in breach of any of its
obligations, the Master Agreement and its provisions remain in
place. Accordingly, other than up to US$10.0 million a year which
may be required for non-Proyecto Riotinto related expenses, ARM
cannot make any dividend, distribution or any repayment of the
money lent to it by companies in the Group until the consideration
under the Master Agreement (including the Deferred Consideration)
has been paid in full.
As a consequence, the Judgment requires that, in accordance with
the Master Agreement, ARM must apply any excess cash (after payment
of operating expenses, sustaining capital expenditure, any senior
debt service requirements and up to US$10.0 million (for
non-Proyecto Riotinto related expenses)) to pay the consideration
due to Astor (including the Deferred Consideration and the amount
of EUR9.1 million payable under the Loan Assignment) early. The
Court confirmed that the obligation to pay consideration early out
of excess cash does not apply to the Up-tick Payments and the
Judgment notes that the only situation in which the Up-tick
Payments could ever become payable is in the unlikely event that
mining operations cease at Proyecto Riotinto and a Senior Debt
Facility is then secured for a sum sufficient to restart mining
operations.
While the Judgment confirms that the cash sweep provisions of
the Master Agreement require ARM to repay the Loan Assignment
early, it does not extend to the credit assignment agreement which
is governed by Spanish law. The Judgment therefore does not provide
any clarity on whether the Conditions have been met in respect of
payment of the Loan Assignment and there remains significant doubts
concerning the legal obligation to pay the Loan Assignment pursuant
to the terms of the credit assignment agreement.
Previously, the Group had not recognised the Deferred
Consideration in the initial purchase price allocation on the basis
that the payment of the amounts was not considered probable. The
High Court judgment of 6 March 2017 required the Group to revisit
its estimates and assumption to book the liability.
As at 31 December 2017, the Group has not generated any excess
cash and, consequently, no consideration has been paid.
As at the reporting date, the Group has presented the deferred
consideration in the consolidated and standalone financial
statements to reflect the Company's best estimate of the liability
and the excess cash flows in the future years in the view of the
High Court ruling of March 2017 and in line with IAS 37.
27. Deferred consideration (continued)
THE GROUP and the company
The nominal amount of the liability recognised is EUR53 million.
In 2017 the discount rate used to measure the liability for the
deferred consideration was re-assessed to apply a risk free rate
for the relevant periods, as required by IAS 37. The effect of
discounting, when applying this risk free rate, was considered
insignificant and the Group has measured the liability for the
deferred consideration on an undiscounted basis. The value of the
liability for the Group and Company is in line with the court
ruling issued on 6 March 2017 amounting to EUR53 million and EUR9.1
million respectively. For details on the restatement of the
deferred consideration liability as at 31 December 2016, refer to
Note 2.1(c).
On 25 April 2017, Atalaya and Astor applied for permission to
appeal to the Court of Appeal. On 11 August 2017 the Court of
Appeal granted permission to both parties to appeal (although it
rejected three of Astor's seven grounds). The Appeal will take
place in May 2018.
28. Derivative instruments
28.1. Foreign exchange contract
As at 31 December 2017, Atalaya has no foreign exchange
contracts (Atalaya had certain short term foreign exchange
contracts as at 31 December 2016). The contracts were in an
unrealised loss position which was recorded as a finance cost in
the income statements (2016: EUR0.2 million), the corresponding
receivable amount recorded in other receivables. The relevant
information of the contracts was as follows:
Foreign exchange contracts - Euro/USD
Period Contract type Amount in USD Contract rate Strike
======================= ================== ============= ============= =======
June 2016 - March 2017 FX Forward - Put 5,000,000 1.0955 n/a
FX Forward - Call 10,000,000 1.0955 1.0450
The counter parties of the foreign exchange agreements are third
parties.
28.2. Commodity contract
In 2016, Atalaya signed the following short term commodity
contracts, for copper, with a third party:
Period Commodity Contract type FMT (Fine metric tonnes) Strike price US$/FMT
August 2016 Copper Forward 2,113 4,960
September 2016 Copper Forward 1,090 4.845
In the twelve months ended 31 December 2016 the agreements were
closed at the maturity date with a gain of EUR0.5 million, which
was recorded as revenue during the year.
The Group did not recognise any gain or loss for the twelve
months ended 31 December 2017. As at 31 December 2016 and 2017, the
Group had no open positions.
29. Acquisition, incorporation and disposals of subsidiaries
Incorporation of Atalaya Touro (UK) Limited
On 10 March 2017, Atalaya Touro (UK) Limited was incorporated.
Atalaya Mining Plc is its sole shareholder. In July 2017, Atalaya
Touro (UK) Limited executed the option and acquired 10% of Cobre
San Rafael, S.L. a company which owns the mining rights of Proyecto
Touro.
Acquisition of Cobre San Rafael, S.L. - Proyecto Touro
In July 2017, the Group announced that it had executed the
option to acquire 10% of the share capital of Cobre San Rafael
S.L., ("CSR"), a wholly owned subsidiary of Explotaciones Gallegas
S.L. ("EG"), part of the F. GOMEZ company. This is part of an
earn-in agreement (the "Agreement"), which will enable the Group to
acquire up to 80% of CSR.
Following the acquisition of the initial 10% of CSR's share
capital, the agreement included the following four phases:
-- Phase 1 - The Group paid EUR0.5 million to secure the
exclusivity agreement and will continue to fund up to a maximum of
EUR5.0 million to get the project through the permitting and
financing stages.
-- Phase 2 - When permits are granted, the Group will pay EUR2.0
million to earn-in an additional 30% interest in the project
(cumulative 40%).
-- Phase 3 - Once development capital is in place and
construction is under way, the Group will pay EUR5.0 million to
earn-in an additional 30% interest in the project (cumulative
70%).
-- Phase 4 - Once commercial production is declared, the Group
will purchase an additional 10% interest in the project (cumulative
80%) in return for a 0.75% Net Smelter Return (NSR) royalty, with a
buyback option.
The Agreement has been structured so that the various phases and
payments will only occur once the project is de-risked, permitted
and in operation.
In July 2017, the Group executed the acquisition of 10% of CSR,
which has been accounted for as a subsidiary with a corresponding
non-controlling interest of 90% as the Company has control over the
entity (Note 2.3 (b)).
The amount of EUR500.000 paid during the year for the
acquisition of the initial 10% of CSR share capital, represents the
fair value of the net assets of CSR on the date of acquisition
giving rise to no goodwill. The non-controlling interest is set out
in Note 24.
Disposals of subsidiaries
There were no disposals of subsidiaries during the twelve month
period ended 31 December 2017.
30. Wind-up of subsidiaries
There were no operations wound-up during 2017 and 2016.
31. Group information and related party disclosures
31.0 Information about subsidiaries
These audited consolidated financial statements include:
Effective proportion
of shares held
Parent Principal activity Country of
Subsidiary companies incorporation
====================== ====================== ====================== ======================= =====================
Atalaya Touro Project
(UK) Ltd Atalaya Mining Plc Holding United Kingdom 100%
Atalaya
Minasderiotinto
Project (UK) Ltd Atalaya Mining Plc Holding United Kingdom 100%
EMED Marketing Ltd Atalaya Mining Plc Trading Cyprus 100%
EMED Mining Spain
S.L.U. Atalaya Mining Plc Exploration Spain 100%
Eastern Mediterranean
Resources (Caucasus)
Ltd Atalaya Mining Plc Exploration Georgia 100%
Atalaya
Atalaya Riotinto Minasderiotinto
Minera S.L.U. Project (UK) Limited Production Spain 100%
Eastern Mediterranean Atalaya
Exploration and Minasderiotinto
Development S.L.U. Project (UK) Limited Exploration Spain 100%
Cobre San Rafael, Atalaya Touro (UK)
S.L. (1) Limited Exploration Spain 10%
Recursos Cuena Minera Atalaya Riotinto Exploration Spain J-V
S.L.U. Minera SLU
Fundacion Emed Atalaya Riotinto
Tartessus Minera SLU Trust Spain 100%
Georgian Mineral Eastern Mediterranean
Development Company Resources (Caucasus)
Limited Ltd Exploration Georgia 100%
(1) Cobre San Rafael, S.L. is the entity which hold the mining
rights of Proyecto Touro. The Group has a significant influence in
the management of the Cobre San Rafael, S.L., including one of the
two directors, management of the financial books and the capacity
of appointment the key personnel.
The following transactions were carried out with related
parties:
31.1 Compensation of key management personnel
The total remuneration and fees of Directors (including
executive Directors) and other key management personnel was as
follows:
The group The Company
(Euro 000's) 2017 2016 2017 2016
Directors' remuneration and fees 742 696 357 346
Director's bonus 245 500 - -
Directors' bonus shares - 63 - -
Contractual entitlements upon resignation - 83 - 83
Share option-based benefits to directors 23 56 - -
Key management personnel fees 467 444 232 347
Key management bonus 1,270 500 1,232 500
Share option-based and other benefits to key management personnel 57 33 34 33
======
2,804 2,375 1,854 1,309
======
31. Related party transactions (continued)
31.1 Compensation of key management personnel (continued)
Share-based benefits
In February 2017, the directors and key management personnel
have been granted 345,000 options (2016: nil) (Note 23).
During 2017 the directors and key management personnel have not
been granted any bonus shares (2016: nil)
31.2 Transactions with shareholders and related parties
THE GROUP
(Euro 000's) 2017 2016
Sales of goods
Trafigura PTE LTD ("Trafigura") - Sales of goods
(pre-commissioning sales offset against the cost
of constructing assets) - 2,452
Trafigura- Sales of goods 28,119 26,351
Orion Mine Finance (Master) Fund I LP ("Orion") -
Sales of goods (4) 3,526
28,115 32,329
XGC was granted an offtake over 49.12% of life of mine reserves
as per the NI 43-101 report issued in September 2016. Similarly,
Orion was granted an offtake over 31.54% and Trafigura 19.34%
respectively of life of mine reserves as per the same NI 43-101
report. In November 2016, the Group was notified and consented the
novation of the Orion offtake agreement as Orion reached an
agreement with a third party to transfer the rights over the
concentrates.
THE COMPANY
(Euro 000's) 2017 2016
Sales of services:
* EMED Marketing Limited 565 -
* Atalaya Riotinto Minera SLU 450 -
* Atalaya Minasderiotinto Project (UK)Limited - 177
1,015 177
=====
Finance income:
* Atalaya Minasderiotinto Project (UK)Limited - Finance
income from interest-bearing loan (zero coupon note) 1,635 1,523
1,635 1,523
=====
31.3 Year-end balances with related parties
THE GROUP
(Euro 000's) 2017 2016
Receivable from related party (Note 19):
Fundacion Atalaya Riotinto - 12
Recursos Cuenca Minera S.L. 56 56
56 68
The above balances bear no interest and are repayable on
demand.
THE COMPANY
(Euro 000's) 2017 2016
Receivable from related party (Note 20):
Atalaya Minasderiotinto Project (UK)Limited 209,293 208,794
Atalaya Minasderiotinto Project (UK)Limited - Zero coupon Note 23,038 21,403
Atalaya Riotinto Minera SLU 9,350 9,100
Atalaya Touro (UK) Limited 697 -
EMED Mining Spain SL 38 38
242,416 239,335
The above balances bear no interest and are repayable on demand,
other than the zero coupon note bearing interest between 7.5% and
8% (2016: 7.5%-8%.
31. Related party transactions (continued)
31.3 Year-end balances with related parties (continued)
THE COMPANY
(Euro 000's) 2017 2016
Payable to related party (Note 25):
EMED Marketing Limited 4,614 1,193
4,614 1,193
The above balances bear no interest and are repayable on
demand.
31.4 Year-end balances with shareholders
(Euro 000's) 2017 2016
Trafigura - Debtor balance (Note 19) 1,556 2,024
Orion - Creditor balance (Note 25) - (12)
The above debtor balance arising from the pre-commissioning
sales of goods bear no interest and is repayable on demand.
32. Contingent liabilities
Judicial and administrative cases
In the normal course of business, the Group may be involved in
legal proceedings, claims and assessments. Such matters are subject
to many uncertainties, and outcomes are not predictable with
assurance. Legal fees for such matters are expensed as incurred and
the Group accrues for adverse outcomes as they become probable and
estimable.
The Junta de Andalucía notified the Group of another
disciplinary proceeding for unauthorised discharge in 2014. The
Group submitted the relevant defence arguments on 10 March 2015 but
has had no response or feedback from the Junta de Andalucía since
the submissions. Based on the time that has lapsed without a
response, it is expected that the outcome of this proceedings will
also be favourable for the Group. Once the necessary time has
lapsed, the Group will ask for the Administrative File to be
dismissed.
33. Commitments
There are no minimum exploration requirements at Proyecto
Riotinto. However, the Group is obliged to pay municipal land taxes
which currently are approximately EUR235,000 per year in Spain and
the Group is required to maintain the Riotinto site in compliance
with all applicable regulatory requirements.
As part of the consideration for the purchase of land from
Rumbo, the Group has agreed to pay a royalty to Rumbo subject to
commencement of production of $250,000 in each quarter where the
average price of LME copper or the average copper sale price
achieved by the Group is at least $2.60/lb. No royalty is payable
in respect of any quarter where the average copper price for that
quarter is below this amount and in certain circumstances any
quarterly royalty payment can be deferred until the following
quarter. The royalty obligation terminates 10 years after
commencement of production. Commencement of production is defined
as being the first to occur of processing of ore at a rate of nine
million metric tonnes per annum for a continuous period of six
months or the date that is 18 months after the first product sales
from Proyecto Riotinto. The commencement of the Rumbo royalty was
in July 2017.
As average copper prices for Q3 2017 and Q4 2017 were above the
threshold identified in the agreement, the Group has recognised the
cost of US$500,000. The payment of the royalty was settled during
Q1 2018 by the issue of shares of the Group (Note 34).
ARM has entered into a 50/50 joint venture with Rumbo to
evaluate and exploit the potential of the class B resources in the
tailings dam and waste areas at Proyecto Riotinto (mainly residual
gold and silver in the old gossan tailings). Under the joint
venture agreement, ARM will be the operator of the joint venture,
will reimburse Rumbo for the costs associated with the application
for classification of the Class B resources and will fund the
initial expenditure of a feasibility study up to a maximum of
EUR2.0 million. Costs are then borne by the joint venture partners
in accordance with their respective ownership interests. Half of
the costs paid by ARM in connection with the feasibility study can
be deducted from any royalty which may fall due.
34. Events after the reporting period
Equity issuance January 2018
In accordance with the royalty agreement signed in July 2012
between the Company and Rumbo, Rumbo is entitled to receive a
royalty payment of up to US$250,000 per quarter if the average
copper sales price or LME price for the period is equal to or above
$2.60/lb. As of 31 December 2017, the Group recognised a $500,000
debt to Rumbo, given the fact that the average copper price for the
third and fourth quarter of 2017 was above $2.60/lb.
After discussions with Rumbo, both parties agreed to satisfy the
payment through the issuance of 192,540 new ordinary shares of 7.5p
in the Company.
The Rumbo Shares were issued at the volume weighted average
price for the period between 5 February 2018 and 9 February 2018 of
186.7p per share and using the average US$ to GBP exchange rate of
1.3909.
In addition, the Company issued 29,000 ordinary shares of 7.5
pence in the Company as certain employees exercised their options
at a price of 144 pence per share.
Exercise of warrants
On 20 February 2018, the Company received notification from one
of the warrants holders to exercise 233,184 warrants at an exercise
price of 142.5 pence per share.
As of the date of this Report, the shares are yet to be
allotted, as the holder did not transfer the exercise price to the
Group. The expiration date of the warrants is 24 June 2018.
Incorporation of Atalaya Servicios Mineros, S.L.
On 14 February 2018, the Group incorporated a fully owned
subsidiary named Atalaya Servicios Mineros, S.L.U.
This information is provided by RNS
The company news service from the London Stock Exchange
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