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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Atalaya Mining Plc | LSE:ATYM | London | Ordinary Share | CY0106002112 | ORD 7.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.50 | 0.34% | 443.00 | 439.00 | 440.50 | 452.50 | 437.50 | 443.50 | 522,062 | 16:35:08 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Metal Mining Services | 341.98M | 38.77M | - | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMATYM
RNS Number : 4734A
Atalaya Mining PLC
12 September 2018
12 September 2018
Atalaya Mining Plc.
("Atalaya" and/or the "Group")
Q2 and H1 2018 Interim Financial Statements
Atalaya Mining Plc (AIM: ATYM; TSX: AYM) is pleased to announce its unaudited quarterly results for the three and six months ended 30 June 2018, together with the unaudited, condensed, interim consolidated financial statements.
Operating Highlights
Proyecto Riotinto
-- Copper production during the three months ended 30 June 2018 ("Q2 2018") was 10,446 tonnes, 15% higher compared with 9,058 tonnes produced during the three months ended 30 June 2017 ("Q2 2017"). Copper production at Proyecto Riotinto during Q2 2018 replaces Q1 2018's as the second highest quarterly production on record. During the six months ended 30 June 2018 ("H1 2018) copper production was 19,887 tonnes compared with 17,863 tonnes during H1 2017, an 11% increase.
-- Ore processed during Q2 2018 was 2,490,483 tonnes compared with 2,154,907 tonnes in Q2 2017. During H1 2018 ore processed was 4,697,344 tonnes compared with 4,351,206 tonnes processed in the same period last year.
-- Copper recovery during the quarter was 87.3% (Q2 2017: 85.2%). Copper recovery for the six month period ended 30 June 2018 averaged 87.9% representing an improvement over 84.9% during H1 2017.
-- An NI 43-101 compliant technical report on an updated resources and reserves estimate for Proyecto Riotinto was released on 9 July 2018. Highlights of the report include a 29% increase in open pit proven and probable mineral reserves at Cerro Colorado and a 21% increase in contained copper, with a reduction of the average strip ratio from 1.95:1 to 1.43:1.
Expansion to 15Mtpa at Proyecto Riotinto
-- The expansion project to 15Mtpa is progressing according to schedule with engineering heading to completion and site construction activities picking up. Overall progress completion at the end of the reporting quarter was 41%. Procurement has progressed to 38% completed and engineering to 82% completed. Earthworks are well advanced and are expected to be completed by mid-Q3 2018. Civil engineering works are progressing with main activities now concentrated on the new SAG mill area. Structural steel works are ongoing in the flotation area. Installation of mechanical equipment has started in the concentrate handling area. The milling area is the critical path to completion. The expansion project is scheduled for mechanical completion at the end of Q2 2019.
Proyecto Touro
-- Permitting of Proyecto Touro continues as anticipated with good progress made on addressing additional studies from the regional administration. During the quarter, efforts were concentrated on progressing detailed reports to address certain project improvements and recommendations from the public hearing process. These reports, including those received recently, are now expected to be submitted to the authorities before the end of Q3 2018.
-- During the quarter, the Company announced the completion of a pre-feasibility study ("PFS") for the proposed open pit mine and concentrator at Proyecto Touro. The PFS report was prepared using the headings of, and guidance set out in the NI 43-101 report.
Financial Highlights
-- Revenues of EUR48.9 million for Q2 2018 compared with EUR53.4 million in Q2 2017 as lower sales volume due to timing of sales offset higher copper price. Revenues for H1 2018 increased significantly to EUR101.5 million compared with EUR79.1 million for the same 2017 period, due to higher volumes and copper prices.
-- Cash costs during Q2 2018 were $1.88/lb of payable copper, a decrease from cash costs of $2.27/lb of payable copper in Q1 2018 and similar to Q2 2017 ($1.88/lb). All-in sustaining costs ("AISC") during Q2 2018 amounted to $2.34/lb of payable copper representing a decrease from $2.65/lb of payable copper during Q1 2018. The decrease in costs per pound was mainly due to the beneficial impact of higher production volumes on fixed costs and, in the case of cash costs, the effect of the lower average strip ratio of the updated reserves and resources estimate which has resulted in a greater amount of stripping costs capitalised.
-- Cash costs for H1 2018 were $2.07/lb payable copper versus $1.77/lb payable copper during H1 2017. AISC amounted to $2.49/lb payable copper during H1 2018 against $2.12/lb payable copper for H1 2017. AISC for H1 2018 remains in line with forecast for the year.
-- EBITDA of EUR19.4 million in Q2 2018 compared with EUR11.9 million delivered in Q2 2017. The increase in EBITDA was mainly a result of higher realised copper prices. On an accumulative basis, EBITDA during H1 2018 was EUR34.4 million compared with EUR24.5 million in H1 2017.
-- Significant year-on-year increase in profit after tax in Q2 2018 to EUR15.7 million (Q2 2017 of EUR6.1 million). Profits after tax for H1 2018 was EUR24.5 million compared with EUR11.8 million during H1 2017.
-- Fully diluted earnings per share ("EPS") for Q2 2018 were 10.7 cents per share compared with 5.2 cents per share in Q2 2017. Fully diluted earnings per share for H1 2018 were 18.2 cents per share compared with 10.1 cents for the same period last year.
-- Inventories of concentrate at 30 June 2018 amounted to EUR9.3 million (EUR4.8 million at 31 December 2017).
-- Working capital surplus has strengthened over Q2 2018 as a result of cash generated from operations. At the end of Q2 2018 working capital was EUR32.7 million, representing a EUR6.2 million increase on Q1 2018 (EUR26.8 million). Unrestricted cash balances as at 30 June 2018 amounted to EUR51.1 million, which include the balance of proceeds from the equity raise in Q4 2017 to fund initial expansion costs.
-- Cash flow from operating activities before changes in working capital was EUR20.4 million for Q2 2018 compared with a cash flow of EUR11.7 million during Q2 2017. For H1 2018, cash flows from operating activities before changes in working capital were EUR35.6 million compared with EUR24.0 million during H1 2017.
-- Net cash flow from operating activities after changes in working capital was EUR12.3 million for Q2 2018 compared with a negative cash flow of EUR4.1 million during Q2 2017. Net cash flows from operating activities after changes in working capital were EUR30.7 million for H1 2018 compared with of EUR10.4 million during H1 2017.
Corporate Highlights
-- Exercise of warrants over 262,569 ordinary shares of 7.5 pence in the Company at an exercise price of 142.5 pence per share announced on 1 June 2018.
Commenting on 2018's first half results, Alberto Lavandeira, CEO said:
"The first half of 2018 has been very positive with record production levels, robust copper prices and operating costs within our stated guidance. The Riotinto plant is operating well with recoveries at record levels during the period and our expansion plans are well on track. We are optimistic that the second half will continue to deliver results in line with our expectations."
About Atalaya Mining Plc
Atalaya is an AIM and TSX-listed mining and development group. It produces copper concentrates and silver by-product at its wholly owned Proyecto Riotinto site in southwest Spain, which is also undergoing a brownfield expansion. 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:
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and Joint Broker) Asensio 8000
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Broker) / Tom Rider 1010
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Management's review
(All amounts in Euro thousands unless otherwise stated)
For the three and six months to 30 June 2018 and 2017 - (Unaudited)
ATALAYA MINING PLC
MANAGEMENT'S REVIEW AND
CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
30 June 2018
(UNAUDITED)
Notice to Reader
The accompanying unaudited, condensed, interim consolidated financial statements of Atalaya Mining Plc have been prepared by and are the responsibility of Atalaya Mining Plc's management. The unaudited, condensed, interim consolidated financial statements have not been reviewed by Atalaya's auditors.
Introduction
This report provides an overview and analysis of the financial results of operations of Atalaya Mining Plc and its subsidiaries ("Atalaya" and/or "Group"), to enable the reader to assess material changes in the financial position between 31 December 2017 and 30 June 2018 and results of operations for the three and six months ended 30 June 2018 and 2017.
This report has been prepared as of 12 September 2018. The analysis, hereby included, is intended to supplement and complement the unaudited, condensed, interim consolidated financial statements and notes thereto ("Financial Statements") as at and for the three and six months ended 30 June 2018. The reader should review the Financial Statements in conjunction with the review of this report and with the audited, consolidated financial statements for the year ended 31 December 2017, and the unaudited, condensed interim consolidated financial statements for the three and six months ended 30 June 2017. These documents can be found on Atalaya's website at www.atalayamining.com.
Atalaya prepares its Financial Statements in accordance with International Financial Reporting Standards ("IFRSs"). The currency referred to in this document is the Euro, unless otherwise specified.
Forward-looking statements
This report may include certain "forward-looking statements" and "forward-looking information" under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterised by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Assumptions upon which such forward-looking statements are based include that all required third party regulatory and governmental approvals will be obtained. Many of these assumptions are based on factors and events that are not within the control of Atalaya and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions and other risk factors discussed or referred to in this report and other documents filed with the applicable securities regulatory authorities. Although Atalaya has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Atalaya undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.
1. Description of the business
Atalaya is a Cyprus based copper producer with mining interests in Spain. The Company is listed on the AIM market of the London Stock Exchange and on the Toronto Stock Exchange ("TSX").
Proyecto Riotinto, wholly owned by the Company's subsidiary Atalaya Riotinto Minera, S.L.U., is located in Huelva, Spain. The Group operates the Cerro Colorado open-pit mine and its associated processing plant of 9.5Mtpa where copper in concentrate and silver by-product are produced. In December 2017, the Board of the Company approved and announced a project to expand Proyecto Riotinto's throughput capacity to 15Mtpa. The expansion is currently under construction and it is expected to be finalised during 2019.
The Group has an initial 10% stake in Cobre San Rafael, S.L., the owner of Proyecto Touro, as part of an earn-in agreement which will enable the Group to acquire up to 80% of the copper project. Proyecto Touro is located in Galicia, north-west Spain.
2. Overview of operating results
Proyecto Riotinto
The following table presents a summarised statement of operations of Proyecto Riotinto for the three and six wmonths ended 30 June 2018 and 2017.
Three months Three months ended Six months Six months ended
Units expressed in ended 30 June 2017 ended 30 June 2017
accordance with the Unit 30 June 2018 30 June 2018
international system of
units (SI)
Ore mined t 2,592,354 2,265,785 5,151,555 4,578,375
Ore processed t 2,490,483 2,154,907 4,697,344 4,351,206
Copper ore grade % 0.48 0.49 0.48 0.49
Copper concentrate grade % 22.16 22.77 22.20 22.34
Copper recovery rate % 87.31 85.16 87.92 84.90
Copper concentrate t 47,140 39,772 89,568 79,954
Copper contained in
concentrate t 10,446 9,058 19,887 17,863
Payable copper contained in
concentrate t 9,975 8,660 18,991 17,063
Cash cost* $/lb payable 1.88 1.88 2.07 1.77
All-in sustaining cost* $/lb payable 2.34 2.22 2.49 2.12
(*) Refer to Section 5 of this Management's Review
Note: The numbers in the above table may slightly differ among them due to rounding.
Three months operating review
Copper production at Proyecto Riotinto for Q2 2018 has increased to 10,446 tonnes from 9,058 tonnes reported in Q2 2017, and 9,441 tonnes in Q1 2018, representing an increase of 15.3% and 10.6%, respectively.
This quarter's copper production replaces Q1 2018's as the second highest quarterly production on record.
In terms of ore milled, 2.5 million tonnes were processed in the quarter, the highest ever quarterly throughput. Copper head grade was in line with expectations. The increase in copper production during the quarter is mainly attributable to the high volume of ore milled with above-budgeted metallurgical recovery rates, averaging 87.31%. Processing throughput was better than expected mainly due to high utilisation rates.
Mining operations are progressing to plan and at similar levels to previous quarters. On a combined basis, ore, waste and marginal ore amounted to 2.6 million m(3) in Q2 2018 versus 3.0 million m(3) in Q1 2018. After the heavy rains in March, mining operations returned to the original mining plan from May onwards.
As part of the Company's continuous improvements programme, a cone crusher has been installed and it will operate as a secondary crusher. It is expected to become operational during Q3 2018. As previously reported, modifications to current screening and crushing arrangements are under evaluation as part of a de-bottlenecking exercise. Structural steel fabrication of the dome to cover the coarse ore stockpile has been completed and fully delivered to site. Construction is expected to be completed before the end of Q3 2018.
Dewatering of the Atalaya pit is ongoing as previously reported. Dewatering of Cerro Colorado pit after heavy rains in March was completed in mid-May 2018 with pumping systems now on standby.
On-site concentrate inventories at the end of the quarter were approximately 2,089 tonnes. All concentrate in stock at the beginning of the quarter and produced during the quarter was delivered to the port at Huelva.
A NI 43-101 compliant technical report on an updated resources and reserves estimate for Proyecto Riotinto was released on 9 July 2018. Highlights of the report include a 29% increase in open pit proven and probable mineral reserves at Cerro Colorado and a 21% increase in contained copper, with a reduction in the average strip ratio from 1.95:1 to 1.43:1.
Exploration focus has now turned to the underground potential of the remaining massive sulphides below Atalaya pit. A drilling campaign is now underway and is expected to last until June 2019.
2. Overview of operational results (continued)
Six months operating review
Production of copper contained in concentrate during H1 2018 was 19,887 tonnes, compared with 17,863 tonnes in the same period of 2017. Payable copper in concentrates was 18,991 tonnes compared with 17,063 tonnes of payable copper in H1 2017.
Ore mined in H1 2018 was 5,151,555 tonnes compared to 4,578,375 tonnes during H1 2017. Ore processed was 4,697,344 tonnes versus 4,351,206 tonnes in H1 2017.
Ore grade during H1 2018 was 0.48% Cu compared with 0.49% Cu in H1 2017. Copper recovery was 87.92% versus 84.90% in H1 2017. Concentrate production amounted to 89,568 tonnes significantly above H1 2017 production of 79,954 tonnes.
Expansion to 15Mtpa at Proyecto Riotinto
The expansion project to 15 Mtpa is progressing according to schedule with engineering heading to completion and site construction activities picking up. Overall progress completion at the end of the reporting quarter was 41%. Procurement has progressed to 38% completed and engineering to 82% completed. Earthworks are well advanced and are expected to be completed by mid-Q3 2018. Civil engineering works are progressing with main activities now concentrated on the new SAG mill area. Structural steel works are ongoing in the flotation area. Installation of mechanical equipment has started in the concentrate handling area. The milling area is the critical path to completion. The expansion project is scheduled for mechanical completion at the end of Q2 2019.
Updated technical report at Proyecto Riotinto
A NI 43-101 compliant independent technical report on an updated resources and reserves estimate for Proyecto Riotinto was released on 9 July 2018. This was based on the mined surface of the open pit as at 31 December 2017. Highlights of the report include a 29% increase in open pit proven and probable mineral reserves at Cerro Colorado and a 21% increase in contained copper, with a reduction of the average strip ratio from 1.95:1 to 1.43:1. The life of mine under report is 13.8 years, taking into account the current expansion project to 15 Mtpa which is scheduled for mechanical completion at the end of Q2 2019.
In accordance with the Group's existing accounting policy, the updated reserves and resources statement has been taken into account in determining the amount of deferred mining cost (i.e. stripping costs capitalised) and depreciation from 1 January 2018, the date to which the independent technical report relates. Changes to deferred mining cost and depreciation have been fully reflected in Q2 2018 as changes in estimates, and amounts reported in Q1 2018 have accordingly not been restated.
The lower average strip ratio has resulted in a lower capitalisation threshold for stripping costs from 1 January 2018, and this has resulted in a lower cash cost reported in Q2 2018. AISC has not been affected, as this already includes all mining costs whether or not deferred.
All mining assets at Proyecto Rio Tinto are depreciated over the life of mine using a unit of production schedule. Current production levels do not yet reflect the expansion project which is ongoing, and hence applying the updated production profile and increased reserves under the technical report has resulted in a lower amount of depreciation charge from 1 January 2018 reflected in the Q2 2018 results, which will increase when the expanded production levels come on stream during 2019.
Proyecto Touro
Permitting of Proyecto Touro continues as anticipated with good progress made on addressing additional studies from the regional administration. During the quarter, efforts were concentrated on progressing detailed reports to address certain project improvements and recommendations from the public hearing process. These reports, including those received recently, are now expected to be submitted to the authorities before the end of Q3 2018.
During the quarter, the Company announced the completion of a pre-feasibility study ("PFS") for the proposed open pit mine and concentrator at Proyecto Touro. The PFS report was prepared within the guidances set out in the Canadian Instrument NI 43-101. Highlights of the PFS report are:
-- 392,000 tonnes of contained copper in P&P reserves;
-- Average yearly production of 30,000 tonnes copper and 70,000 ounces of silver in concentrate;
-- Pre-production capital expenditure of $165 million; -- All-in sustaining costs of US$1.85/lb of payable Cu net of silver credits; and -- NPV post-tax at 8% discount rate of $180 million using long term copper price of US3.00/lb. 3. Outlook
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 introduction note of this report.
Operating guidance
Proyecto Riotinto operating guidance for 2018 remains as follows:
Range
Unit 2018
Ore processed million tonnes 9.6
Contained copper tonnes 37,000 - 40,000
Copper head grade for 2018 is budgeted to average between 0.47% and 0.50% Cu, with a recovery rate of approximately 84% to 86%. Cash operating costs for 2018 are expected to be in the range of $2.15/lb - $2.30/lb, and AISC is estimated to be in the range of $2.50/lb - $2.60/lb.
4. Overview of the financial results
The following table presents summarised consolidated income statements for the three and six months ended 30 June 2018, with comparatives for the three and six months ended 30 June 2017.
Three months ended Six
Three months ended 30 June 2017 Six months ended months ended
30 June 2018 *restated 30 June 2018 30 June 2017
*restated
(Euro 000's)
Sales 48,867 53,426 101,543 79,074
Total operating costs (27,986) (41,014) (64,412) (52,522)
Corporate expenses (1,000) (220) (2,053) (1,628)
Exploration expenses (214) (313) (413) (446)
Care and maintenance
expenditure (281) (281)
Other income - 1 - 5
--------------------- --------------------- ------------------- ---------------------
EBITDA 19,386 11,880 34,384 24,483
Depreciation/amortisation (2,210) (3,699) (6,310) (8,215)
Net foreign exchange
gain/(loss) 932 (511) 1,102 (785)
Net finance cost (112) (241) (119) (490)
Tax charge (2,294) (1,312) (4,565) (3,179)
--------------------- --------------------- ------------------- ---------------------
15,702 6,117 24,492 11,814
--------------------- --------------------- ------------------- ---------------------
(*) Refer to Note 2.1. (c)
Three months financial review
Revenues for the three month period ended 30 June 2018 amounted to EUR48.9 million (Q2 2017: EUR53.4million). Lower revenues, compared with the same quarter in the previous year, were driven by lower volumes of concentrate sold and partially offset by higher realised prices.
During Q2 2018 the Company sold 46,172 tonnes of copper concentrate versus 55,574 tonnes sold in same quarter last year. Realised prices of $3.12/lb copper during Q2 2018 compared with $2.61/lb copper in Q2 2017.
All concentrates were sold under offtake agreements in place. The Group did not enter into any hedging agreements during the quarter.
Operating costs for the three month period ended 30 June 2018 amounted to EUR28.0 million, compared with EUR41.0 million in Q2 2017. Lower costs during 2018 related to (i) additional cost of sales of EUR10.0 million in the second quarter of 2017 as a high level of inventory held at 31 March 2017 was sold in the quarter; and (ii) a EUR3.0 million deferred mining cost capitalisation adjustment as per the updated strip ratio of 1:1.43.
4. Overview of the financial results (continued)
Cash costs of $1.88/lb payable copper during Q2 2018 were the same as in Q2 2017. All-in sustaining costs in the reporting quarter were $2.34/lb payable copper compared with $2.22/lb payable copper in Q2 2017.
Sustaining capex for Q2 2018 amounted to EUR2.5 million compared with EUR2.2 million in Q2 2017 and relates to continuous development programmes at the tailings storage facilities, optimisation of the flotation circuit and other processing systems.
Corporate expenses amounting to EUR1.0 million (Q2 2017: EUR0.2 million) include non-operating costs of the Cyprus office, corporate legal and consultancy costs, on-going listing costs, officers and directors' emoluments, and salaries and related costs of the corporate office.
Exploration costs at Proyecto Riotinto for the three month period ended 30 June 2018 amounted to EUR0.2 million compared with EUR0.3 million in Q2 2017. All exploration costs at Proyecto Touro are capitalised.
Care and maintenance expenditures relate to the non-capitalised administration costs of Proyecto Touro.
EBITDA for the three months ended 30 June 2018 amounted to EUR19.4 million as compared to Q2 2017 of EUR11.9 million.
The main item below the EBITDA line is depreciation and amortisation of EUR2.2 million (Q2 2017: EUR3.7 million). Net financing costs for Q2 2018 amounted to EUR112k compared with EUR241k in Q2 2017.
Six months financial review
Revenues for the six-month period ended 30 June 2018 amounted to EUR101.5 million (H1 2017: EUR79.1 million).
Copper concentrate production during the six month period ending 30 June 2018 was 89,568 tonnes (H1 2017: 79,954 tonnes) 94,854 tonnes of copper concentrates were sold in the period (H1 2017: 77,677 tonnes). Inventories of concentrates as at the reporting date were 2,089 tonnes (31 Dec 2017: 4,797 tonnes).
Realised copper prices for H1 2018 were $3.08/lb copper compared with $2.55/lb copper in the same period of 2017. Concentrates were sold under offtake agreements in place. The Company did not enter into any hedging agreements in 2018.
Operating costs for the six-month period ended 30 June 2018 amounted to EUR64.3 million, compared with EUR52.5 million in H1 2017. Higher costs in 2018 were directly attributable to higher copper production.
Cash costs of $2.07/lb payable copper during H1 2018 compares with $1.77/lb payable copper in the same period last year. The higher costs were due to (i) EUR1 million lower capitalisation of deferred mining costs in H1 2018; and (ii) higher maintenance and technical services. All-in sustaining costs in the reporting quarter were $2.49/lb payable copper compared with $2.12/lb payable copper in H1 2017. The higher AISC compared with H1 2017 results from increased cash costs together with higher sustaining capex.
Sustaining capex for the six month period amounted to EUR5.2 million, compared with EUR2.7 million in the same period in the previous year. Sustaining capex was attributed to continuous development programmes at the tailings storage facilities, optimisation of the flotation circuit and other processing systems.
Corporate costs for the first six month of 2018 were EUR2.1 million, compared with EUR1.6 million in H1 2017. Corporate costs mainly include Company overhead expenses.
Exploration costs related to Proyecto Riotinto for the six-month period ended 30 June 2018 amounted to EUR0.4 million, compared with EUR0.5 million in H1 2017.
EBITDA for the six months ended 30 June 2018 amounted to EUR34.4 million, compared with EUR24.5 million in H1 2017.
Depreciation and amortisation amounted to EUR6.3 million for the six-month period ended 30 June 2018 (H1 2017: EUR8.2 million). Lower depreciation was mainly driven by an extension of the life of mine as per updated reserves and resources report
Net finance costs for H1 2018 amounted to EUR0.1 million (H1 2017 EUR0.5 million).
4. Overview of the financial results (continued)
Realised copper prices
The average prices of copper for the three and six months ended 30 June 2018 and 2017 are summarised below:
Three months ended Three months ended Six months ended Six months ended
30 June 2018 30 June 2017 30 June 2018 30 June 2017
(USD)
Realised copper price per lb 3.12 2.61 3.08 2.55
Market copper price per lb (period
average) 3.12 2.65 3.14 2.61
Realised copper prices for the reporting period noted above have been calculated using payable copper and including provisional invoices and final settlements of quotation periods ("QPs") together. Lower realised prices than market averages during the six months ended 30 June 2018, are mainly due to the final settlement of invoices whose QP was fixed in the previous quarter due to a short open period when copper prices were lower. The realised price of shipments during the quarter excluding QP was approximately $3.15/lb.
The Group had no hedges during the six month period ended 30 June 2018.
5. 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 cash operating 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 C1 Cash Costs plus royalties and agency fees, expenditures on rehabilitation, stripping costs, exploration and geology costs, corporate costs and sustaining capital expenditures.
During the final quarter of 2017, Atalaya carried out an exhaustive analysis of the methodology applied to the C1 cash cost and AISC. As a result of the analysis, management changed the methodology used when calculating C1 and AISC in the first three quarters of 2017. A full reconciliation including Q1 and Q2 2017 is included in section iii of the performance review in the 2017 Annual Report.
Realised price per pound of payable copper is the value of the copper payable included in the concentrate produced including the penalties, discounts, credits and other feature governed by the offtake agreements of the Group and all discounts or premium 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.
6. 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 and cash flows as at 30 June 2018 and 31 December 2017.
Liquidity information
(Euro 000's) 30 June 2018 31 December
2017
Unrestricted cash and cash equivalents 51,123 42,606
Restricted cash 250 250
Working capital surplus 32,747 22,137
Unrestricted cash and cash equivalents as at 30 June 2018 increased to EUR51.1 million from EUR42.6 million at 31 December 2017. The increase in cash balances is the result of net cash flow incurred in the period. Cash balances are unrestricted and include balances at operational and corporate level, including the proceeds of the capital raise in Q4 2017.
Restricted cash remains at EUR0.3 million as at 30 June 2018 and mainly relates to deposit bond guarantees.
As of 30 June 2018, Atalaya reported a working capital surplus of EUR32.7 million, compared with a working capital surplus of EUR22.1 million at 31 December 2017. The surplus results from the equity raised in Q4 2017 and the cash generated by Proyecto Riotinto. The main liability of the working capital is trade payables. The principal trade payable account relates to the mining contractor where the Group has reached certain agreements to reduce the balance 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$14.0 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 1 January 2017 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 September 2017, the Group fully settled the prepayment ahead of schedule. During December 2017, the Group decided not to extend the contract on the same terms during 2018 as permitted under the original agreement.
Overview of the Group's cash flows
Three Six
Three months ended months ended Six months ended
(Euro 000's) 30 June 30 June 2017 *restated months ended 30 June 2017
2018 30 June 2018 *restated
Cash flows from/(used) operating
activities 10,837 (4,286) 29,214 9,989
Cash flows used in investing
activities (12,549) (3,844) (21,290) (9,243)
Cash flows from financing
activities 545 - 593 -
--------------------- ------------------------ --------------- --------------
Net (decrease)/increase in cash and
cash equivalents (1,167) (8,130) 8,517 746
--------------------- ------------------------ --------------- --------------
Three month cash flows review
Cash and cash equivalents decreased by EUR1.2 million during the three months ended 30 June 2018. This was due to the net results of cash from operating activities amounting to EUR10.9 million, cash used in investing activities amounting to EUR12.5 million and cash from financing activities amounting to EUR0.5 million.
6. Liquidity and capital resources (continued)
Cash generated from operating activities before working capital changes was EUR20.4 million. Atalaya decreased its trade receivables in the period by EUR0.5 million, as well as its inventory levels by EUR0.3 million and its trade payables by EUR8.8 million.
Investing activities during the quarter consumed EUR12.5 million, relating mainly to the expansion project Capex and Rumbo Royalty Buyout and deferred mining costs capitalised.
Six months cash flows review
Cash and cash equivalents increased by EUR8.5 million during the six months ended 30 June 2018. This was due to cash from operating activities amounting to EUR29.2 million, cash used in investing activities amounting to EUR21.3 million and cash from financing activities amounting to EUR0.6 million.
Cash generated from operating activities before working capital changes was EUR35.6 million. Atalaya decreased its trade payables in the period by EUR8.7 million, as well as its inventory levels by EUR4.3 million and increased its trade receivable balances by EUR0.5 million.
Investing activities during the six-month period amounted to EUR21.3 million, relating mainly to the deferred mining costs, expansion project Capex and Rumbo Royalty Buyout.
Foreign exchange
Foreign exchange rate movements can have a significant effect on Atalaya's operations, financial position and results. Atalaya's sales are denominated in U.S. dollars ("USD"), while Atalaya's operating expenses, income taxes and other expenses are denominated in Euros ("EUR"), and to a much lesser extent in British Pounds ("GBP").
Accordingly, fluctuations in the exchange rates can potentially impact the results of operations and carrying value of assets and liabilities on the balance sheet.
During the three and six months ended 30 June 2018, Atalaya recognised a foreign exchange profit of EUR0.9 million and EUR1.1 million respectively. Foreign exchange losses mainly related to change in the period end EUR and USD conversion rates, as all sales are cashed and occasionally held in USD.
The following table summarises the movement in key currencies versus the EUR:
Three months ended Three months ended Six months ended Six months ended
30 June 2018 30 June 2017 30 June 2018 30 June 2017
Average rates for the periods
GBP - EUR 0.8762 0.8611 0.8798 0.8606
USD - EUR 1.1915 1.1021 1.2104 1.0830
Spot rates as at
GBP - EUR 0.8861 0.8793 0.8861 0.8793
USD - EUR 1.1658 1.1412 1.1658 1.1412
In February 2017, the Group entered into certain foreign exchange hedging contracts to offset the agreements in force as at 31 December 2016. During H1 2018, Atalaya did not have any currency hedging agreements.
Further information on the hedging agreements is disclosed in the unaudited, condensed interim consolidated financial statements that follow (Note 15).
7. Rumbo royalty and Deferred consideration
Rumbo royalty
In July 2012, Atalaya Riotinto Minera, S.L. signed a royalty agreement with Rumbo 5 Cero, S.L. ("Rumbo"), at which Rumbo was 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 for ten years up to a maximum amount of US$10,000,000. As the average copper price for the third and fourth quarter of 2017 was above $2.60/lb, the company was obligated to pay a royalty amounted to US$500,000 to Rumbo. On 8 February 2018, the companies agreed to satisfy this payment through an issuance of 192,540 new ordinary shares at GB GBP7.5p.
On 5 April 2018, the Company signed a contract with Rumbo to purchase the remaining royalty agreement for a total consideration of US$4,750,000 to be paid through the issuance of 1,600,907 new ordinary shares of GB GBP7.5p.
7. Rumbo royalty and Deferred consideration (continued)
Astor Case
On 6 March 2017, judgment in the case (the "Astor Case") brought by Astor Management AG ("Astor") 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 gave 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 through which funding for the restart of mining operations were 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.
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 took place on 9 and 10 May 2018 and the Group expects the ruling to be issued in the coming months.
More details on the Astor Case are included in Note 14 of the unaudited, condensed, interim, consolidated financial statements that follow.
8. Risk factors
Due to the nature of Atalaya's business in the mining industry, the Group is subject to various risks that could materially impact the future operating results and could cause actual events to differ materially from those described in forward-looking statements relating to Atalaya. Readers are encouraged to read and consider the risk factors detailed in Atalaya's audited, consolidated financial statements for the year ended 31 December 2017.
9. 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 policies in the audited consolidated financial statements for the year ended 31 December 2017.
10. Other information
Additional information about Atalaya Mining Plc. is available at www.atalayamining.com
Condensed interim consolidated income Three Six months
statements Three months Six months ended
(All amounts in Euro thousands unless months ended ended 30 June
otherwise stated) ended 30 June 30 June 2017
For the three and six months to Notes 30 June 2017 2018 restated*
30 June 2018 and 2017 - (Unaudited) 2018 restated*
(Euro 000's)
Gross sales 48,867 53,426 101,543 79,074
Realised gains on derivative financial - - - -
instruments held for trading
========== ----------- ============= ===========
Sales 48,867 53,426 101,543 79,074
Operating costs and mine site administrative
expenses (27,953) (40,994) (64,345) (52,492)
Mine site depreciation and amortization (2,210) (3,699) (6,310) (8,212)
========== ----------- ============= ===========
Gross income 18,704 8,733 30,888 18,370
Corporate expenses (995) (211) (2,044) (1,613)
Corporate depreciation - - - (3)
Share based benefits (38) (29) (76) (45)
Exploration expenses (214) (313) (413) (446)
Care and maintenance costs (281) - (281) -
-----------
Operating profit 17,176 8,180 28,074 16,263
Other income - 1 - 5
Net foreign exchange gain/(loss) 932 (511) 1,102 (785)
Net finance costs 4 (112) (241) (119) (490)
-----------
Profit before tax 17,996 7,429 29,057 14,993
Tax charge (2,294) (1,312) (4,565) (3,179)
========== ----------- ------------- -----------
Profit for the period 15,702 6,117 24,492 11,814
========== ----------- ------------- -----------
Profit for the period attributable
to:
* Owners of the parent 15,901 6,117 24,758 11,814
* Non-controlling interests (199) - (266) -
15,702 6,117 24,492 11,814
========== =========== ============= ===========
Earnings per share from operations
attributable to equity holders of
the parent during the period :
Basic earnings per share (expressed
in cents per share) 5 11.7 5.2 18.2 10.1
========== =========== ============= ===========
Fully diluted earnings per share
(expressed in cents per share) 5 11.6 5.2 18.0 10.0
========== =========== ============= ===========
Profit for the period
Other comprehensive income: 15,702 6,117 24,492 11,814
Change in value of available-for-sale
investments (18) (6) (15) (40)
Total comprehensive profit for the
period 15,684 6,111 24,477 11,774
========== =========== ============= ===========
Total comprehensive profit for the
period attributable to:
* Owners of the parent 15,883 6,111 24,743 11,774
* Non-controlling interests (199) - (266) -
15,684 6,111 24,477 11,774
========== =========== ============= ===========
* Refer to Note 2.1. (c)
The notes on pages 14 to 29 are an integral part of these unaudited condensed interim consolidated financial statements.
Condensed interim consolidated statements 30 June 31 December
of financial position Note 2018 2017
(All amounts in Euro thousands unless
otherwise stated)
As at 30 June 2018 and 31 December 2017
- (Unaudited)
(Euro 000's)
Assets
Non-current assets
Property, plant and equipment 6 220,138 199,458
Intangible assets 7 72,971 73,700
Trade and other receivables 9 218 212
Deferred tax asset 10,030 10,130
======== ===========
303,357 283,500
======== ===========
Current assets
Inventories 8 9,330 13,674
Trade and other receivables 9 32,952 34,213
Available-for-sale investments 114 129
Cash and cash equivalents 51,373 42,856
======== ===========
93,769 90,872
======== ===========
Total assets 397,126 374,372
======== ===========
Equity and liabilities
Equity attributable to owners of the
parent
Share capital 10 13,372 13,192
Share premium 10 314,319 309,577
Other reserves 11 12,694 6,137
Accumulated losses (68,265) (86,527)
======== ===========
272,120 242,379
Non-controlling interests 4,208 4,474
-------- ===========
Total equity 276,328 246,853
-------- ===========
Liabilities
Non-current liabilities
Trade and other payables 12 62 74
Provisions 13 6,714 5,727
Deferred consideration 14 53,000 52,983
======== ===========
59,776 58,784
======== ===========
Current liabilities
Trade and other payables 12 58,831 67,983
Current tax liabilities 2,191 752
61,022 68,735
======== ===========
Total liabilities 120,798 127,519
======== ===========
Total equity and liabilities 397,126 374,372
======== ===========
The notes on pages 14 to 29 are an integral part of these unaudited condensed interim consolidated financial statements
.
Condensed interim
consolidated
statements of changes in
equity
(All amounts in Euro
thousands
unless otherwise stated)
For the three and six
months
to 30 June 2018 and 2017
- (Unaudited) Share Share Other Accum. Non-controlling Total
(Euro 000's) capital premium reserves losses Total interest equity
----------------
At 1 January 2017
restated 11,632 277,238 5,667 (104,316) 190,221 - 190,221
Profit for the period
restated* - - - 11,814 11,814 - 11,814
Change in value of
available-for-sale
investment - - (40) - (40) - (40)
Depletion factor - - 450 (450) - - -
Recognition of share
based
payments - - 45 - 45 - 45
========== ========== ========== ============ ========== ---------------- ==========
At 30 June 2017 restated 11,632 277,238 6,122 (92,952) 202,040 - 202,040
Profit for the period
restated* - - - 6,425 6,425 (28) 6,397
Issue of share capital 1,560 33,182 - - 34,742 - 34,742
Share issue costs - (843) - - (843) - (843)
Change in value of
available-for-sale
investment - - (92) - (92) - (92)
Recognition of share
based
payments - - 107 - 107 - 107
Non-controlling interests - - - - - 4,502 4,502
---------- ---------- ---------- ------------ ---------- ---------------- ----------
At 31 December 2017/1
January
2018 13,192 309,577 6,137 (86,527) 242,379 4,474 246,853
Profit for the period - - - 24,758 24,758 (266) 24,492
Issue of share capital 180 4,747 - - 4,927 4,927
Share issue costs - (5) - - (5) (5)
Change in value of
available-for-sale
investment - - (15) - (15) - (15)
Depletion factor - - 5,050 (5,050) - - -
Recognition of share
based
payments - - 76 - 76 - 76
Recognition of
non-distributable
reserve - - 1,446 (1,446) - - -
At 30 June 2018 13,372 314,319 12,694 (68,265) 272,120 4,208 276,328
========== ========== ========== ============ ========== ================ ==========
* Refer to Note 2.1. (c)
The notes on pages 14 to 29 are an integral part of these unaudited condensed interim consolidated financial statements.
Three Six
Three months Six months months
Condensed interim consolidated months ended ended ended
statements of cash flows Notes ended 30 June 30 June 30 June
(All amounts in Euro thousands 30 June 2017 2018 2017
unless otherwise stated) 2018 restated* restated*
For the three and six months
to 30 June 2018 and 2017 - (Unaudited)
(Euro 000's)
Cash flows from operating activities
2
(i)
Profit before tax (c) 17,996 7,429 29,057 14,993
Adjustments for:
Depreciation of property, plant
and equipment 6 1,666 2,875 4,736 6,401
Amortisation of intangibles 7 544 824 1,574 1,814
Recognition of share-based payments 11 38 29 76 45
Interest income 4 (19) (3) (39) (19)
Interest expense 4 104 424 105 665
Rehabilitation cost 4 27 25 53 49
Unrealised foreign exchange
loss on financing activities 49 129 4 54
========== =========== ============= ===========
Cash inflows from operating
activities before working capital
changes 20,405 11,732 35,566 24,002
Changes in working capital:
Inventories 8 264 9,406 4,344 (3,833)
Trade and other receivables 9 495 (13,034) (461) (4,675)
Trade and other payables 12 (8,836) (12,150) (8,760) (5,000)
Deferred consideration 14 - - 17 -
Provisions - (25) - (49)
========== =========== ============= ===========
Cash flows from/(used in) operations 12,328 (4,071) 30,706 10,445
Interest paid (104) (215) (105) (456)
Tax paid (1,387) - (1,387) -
Net cash from/(used in) operating
activities 10,837 (4,286) 29,214 9,989
========== =========== ============= ===========
Cash flows used in investing
activities
Purchase of property, plant
and equipment (12,204) (3,378) (20,484) (7,672)
Purchase of intangible assets 7 (364) (469) (845) (1,600)
Proceeds from sale of property,
plant and equipment - - - 10
Interest received 19 3 39 19
========== =========== ============= ===========
Net cash used in investing activities (12,549) (3,844) (21,290) (9,243)
========== =========== ============= ===========
Cash flows from financing activities
Proceeds from issue of shares 550 - 598 -
Issuance costs (5) - (5) -
========== =========== ============= ===========
Net cash flows from financing
activities 545 - 593 -
Net (decrease)/increase in cash
and cash equivalents (1,167) (8,130) 8,517 746
Cash and cash equivalents:
At beginning of the period 52,540 10,011 42,856 1,135
========== =========== ============= ===========
At end of the period 51,373 1,881 51,373 1,881
========== =========== ============= ===========
* Refer to Note 2.1. (c)
The notes on pages 14 to 29 are an integral part of these unaudited condensed interim consolidated financial statements.
Notes to the condensed interim consolidated financial statements
(All amounts in Euro thousands unless otherwise stated)
For the three and six months to 30 June 2018 and 2017 - (Unaudited)
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 30 June 2018.
Additional information about Atalaya Mining Plc is available at www.atalayamining.com as per requirement of AIM rule 26.
Change of name and share consolidation
Following the Company's Extraordinary General Meeting ("EGM") on 13 October 2015, the change of name from 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 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. A brownfield expansion of this mine is in progress.
In addition, the Company has a phased earn-in agreement to acquire up to 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 focused on exploring for and developing 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. Basis of preparation and accounting policies
2.1 Basis of preparation
(a) Overview
The unadited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). IFRS comprises the standards issued by the International Accounting Standard Board ("IASB"), and IFRS Interpretations Committee ("IFRICs") as issued by the IASB. Additionally, the unaudited condensed consolidated financial statements have also been prepared in accordance with IFRS as adopted by the European Union (EU), using the historical cost convention.
These condensed interim consolidated financial statements are unaudited and include the financial statements of the Company and its subsidiary undertakings. They have been prepared using accounting bases and policies consistent with those used in the preparation of the consolidated financial statements of the Company and the Group for the year ended 31 December 2017. These unaudited condensed interim consolidated financial statements do not include all of the disclosures required for annual financial statements, and accordingly, should be read in conjunction with the consolidated financial statements and other information set out in the Company's 31 December 2017 Annual Report. The accounting policies are unchanged from those disclosed in the annual consolidated financial statements.
The Directors have formed a judgment at the time of approving the unaudited condensed interim consolidated financial statements that there is a reasonable expectation that the Company and the Group have adequate available resources to continue in operational existence for the foreseeable future.
2. Basis of preparation and accounting policies (continued) (b) Going concern
These unaudited condensed interim consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Group 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 will generate sufficient cash and cash equivalents to continue operating for the next twelve months.
(c) 2016 Restatement
Deferred consideration (Note 14)
At the end of 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. Full details of the restatement to 2016 full year comparatives are set out in the audited, consolidated financial statements for the year ended 31 December 2017 available from the Atalaya website at www.atalayamining.com.
The Q2 and H1 2017 comparatives have been restated in line with this re-assessment as follows:
Q2 2017 Adjustments Q2 2017 H1 2017 Adjustments H1 2017
(Euro 000's) as reported as restated as reported as restated
Income statement
Mine site depreciation and
amortization (3,740) 41(1) (3,699) (8,132) (80)(1) (8,212)
Gross margin 8,692 8,733 18,450 18,370
Operating profit 8,139 8,180 16,343 16,263
Finance costs (846) 605(1) (241) (1,679) 1,189(1) (490)
Profit before tax 6,783 7,429 13,884 14,993
Tax charge (1,109) (203)(1) (1,312) (2,967) (212)(1) (3,179)
Basic earnings per share 4.9 5.2 9.4 10.1
Fully diluted earnings per share 4.8 5.2 9.2 10.0
---------------------------------- ------------ ----------- ------------ ------------ ----------- ------------
(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 discounts and amortisation charges based on the restated carrying amount of Intangible assets
2.2 Fair value estimation
The fair values of the Company'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 trading 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 Company 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 Company 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.
2. Basis of preparation and accounting policies (continued)
2.2 Fair value estimation (continued)
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).
Financial assets
(Euro 000's) Level 1 Level 2 Level 3 Total
30 June 2018
Available-for-sale financial assets 114 - - 114
-------- -------- -------- ------
Total 114 - - 114
-------- -------- -------- ------
31 December 2017
Available-for-sale financial assets 129 - - 129
-------- -------- -------- ------
Total 129 - - 129
-------- -------- -------- ------
2.3 Use and revision of accounting estimates
The preparation of the unaudited condensed interim consolidated financial statements requires the making of estimations and assumptions that affect the recognised amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
2.4 Adoption of new and revised International Financial Reporting Standards (IFRSs)
The Group has adopted all the new and revised IFRSs and International Accounting Standards (IASs) which are relevant to its operations and are effective for accounting periods commencing on 1 January 2018. The adoption of these Standards did not have a material effect on the condensed interim consolidated financial statements.
-- 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). The Company has adopted IFRS 15 as of January 1, 2018.
-- 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. The Company has adopted IFRS 9 as of January 1, 2018.
-- 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. The Company will adopt IFRS 16 as of 1 January 2019.
2. Basis of preparation and accounting policies (continued)
2.5 Critical accounting estimates and judgements
The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the reporting date. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are unchanged from those disclosed in the annual consolidated financial statements.
Provisions 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 a reliable estimate of the amount can be made. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
3. Business and geographical segments
Business segments
The Group has only one distinct business segment, being that of mining operations, mineral exploration and development. Copper concentrates produced by the Group are sold to three offtakers as per the relevant offtake agreement (Note 17.3).
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.
(Euro 000's) Cyprus Spain Other Total
Three months ended 30 June 2018
Sales 48,867 - - 48,867
========= ========== ======== ==========
Earnings Before Interest, Tax, Depreciation
and Amortisation (EBITDA) 46,779 (27,404) 11 19,386
Depreciation/amortisation charge - (2,210) - (2,210)
Finance income 19 - - 19
Finance cost (1) (130) - (131)
Foreign exchange gain 433 499 - 932
Profit/(loss) for the period before
taxation 47,230 (29,245) 11 17,996
========= ========== ========
Tax charge (2,294)
==========
Net profit for the period 15,702
==========
Six months ended 30 June 2018
Sales 101,543 - - 101,543
========= ========== ======== ==========
Earnings Before Interest, Tax, Depreciation
and Amortisation (EBITDA) 96,490 (62,112) 6 34,384
Depreciation/amortisation charge - (6,310) - (6,310)
Finance income 39 - - 39
Finance cost (1) (157) - (158)
Foreign exchange gain 887 215 - 1,102
Profit/(loss) for the period before
taxation 97,415 (68,364) 6 29,057
========= ========== ========
Tax charge (4,565)
==========
Net profit for the period 24,492
==========
3. Business and geographical segments
(continued)
Geographical segments (continued)
(Euro 000's) Cyprus Spain Other Total
30 June 2018
Total assets 61,389 335,437 300 397,126
========= ========== ======== ==========
Total liabilities (11,988) (108,755) (55) (120,798)
========= ========== ======== ==========
Depreciation of property, plant and
equipment - 4,736 - 4,736
========= ========== ======== ==========
Amortisation of intangible assets - 1,574 - 1,574
========= ========== ======== ==========
Total net additions of non-current assets - 26,167 - 26,167
========= ========== ======== ==========
Three months ended 30 June 2017 restated*
Sales 53,426 - - 53,426
========= ========== ======== ============
Earnings Before Interest, Tax, Depreciation
and Amortisation (EBITDA) 50,839 (38,944) (15) 11,880
Depreciation/amortisation charge - (3,699) - (3,699)
Finance income - 208 - 208
Finance cost (147) (302) - (449)
Foreign exchange loss (119) (392) - (511)
Profit/(loss) for the period before
taxation 50,573 (43,129) (15) 7,429
========= ========== ========
Tax charge (1,312)
============
Net profit for the period 6,117
Six months ended 30 June 2017 restated*
Sales 79,074 - - 79,074
========= ========== ======== ============
Earnings Before Interest, Tax, Depreciation
and Amortisation (EBITDA) 74,573 (50,084) (6) 24,483
Depreciation/amortisation charge (3) (8,212) - (8,215)
Finance income - 224 - 224
Finance cost (322) (392) - (714)
Foreign exchange loss (411) (374) - (785)
Profit/(loss) for the period before
taxation 73,837 (58,838) (6) 14,993
========= ========== ========
Tax charge (3,179)
============
Net profit for the period 11,814
============
Total assets 19,025 302,462 773 322,260
========= ========== ======== ============
Total liabilities* (13,552) (106,634) (34) (120,220)
========= ========== ======== ============
Depreciation of property, plant and
equipment (3) (6,398) - (6,401)
========= ========== ======== ============
Amortisation of intangible assets* - (1,814) - (1,814)
========= ========== ======== ============
Total net additions of non-current assets - 9,293 - 9,293
========= ========== ======== ============
* Refer to Note 2.1. (c)
4. Net finance cost
Three Six months
Three months months Six ended
ended 30 ended months 30 June
June 2018 30 June ended 2017
(Euro 000's) 2017 30 June restated*
restated* 2018
Interest expense :
Debt to department of social security
and other interest 104 171 105 343
Interest on copper concentrate prepayment(1) - 37 - 106
Interest on early payment - 216 - 216
Unwinding of discount on mine rehabilitation
provision (Note 13) 27 25 53 49
Interest income (19) (3) (39) (19)
Hedging - net foreign exchange - (205) - (205)
112 241 119 490
--------------- ----------- ---------- -----------
* Refer to Note 2.1. (c)
(1) Interest rate US$ 3 months LIBOR + 2.75%
5. Earnings per share
The calculation of the basic and fully diluted loss per share attributable to the ordinary equity holders of the Company is based on the following data:
Three months Six months
Three ended 30 Six months ended
months June 2017 ended 30 June
ended restated* 30 June 2017
(Euro 000's) 30 June 2018 restated*
2018
Parent company (1,464) (496) (1,322) (1,363)
Subsidiaries 17,365 6,613 26,080 13,177
---------- ------------- ------------- -----------
Profit attributable to equity
holders of the parent 15,901 6,117 24,758 11,814
---------- ------------- ------------- -----------
Weighted number of ordinary
shares for the purposes of
basic earnings per share (000's) 136,159 116,679 136,159 116,679
---------- ------------- ------------- -----------
Basic profit per share (cents) 11.7 5.2 18.2 10.1
---------- ------------- ------------- -----------
Weighted number of ordinary
shares for the purposes of
fully diluted earnings per
share (000's) 137,505 118,445 137,505 118,445
---------- ------------- ------------- -----------
Fully diluted profit per share
(cents) 11.6 5.2 18.0 10.0
---------- ------------- ------------- -----------
* Refer to Note 2.1. (c)
At 30 June 2018 there are 1,313,000 options (Note 11) and nil warrants (Note 10) (2017: 262,569 warrants and 1,400,000 options) which have been included when calculating the weighted average number of shares for 2018.
6. Property, plant and equipment
Plant Deferred
(Euro 000's) Land and Assets mining Other
and buildings machinery under construction(2) costs(3) assets(4) Total
Cost
At 1 January
2017 40,188 144,930 566 13,848 838 200,370
Additions 334(1) - 2,852 4,754 - 7,940
Reclassifications 400 99 (499) - - -
Disposals - - - - (53) (53)
At 30 June 2017 40,922 145,029 2,919 18,602 785 208,257
Additions 73(1) - 8,899 3,715 - 12,687
Reclassifications - 373 (373) - - -
At 31 December
2017 40,995 145,402 11,445 22,317 785 220,944
Additions 4,842(1) 1,490 15,352 3,732 - 25,416
Reclassifications - 1,579 (1,579) - - -
At 30 June 2018 45,837 148,471 25,218 26,049 785 246,360
--------------- ----------- ----------------------- ----------- ----------- --------
Depreciation
At 1 January
2017 1,736 5,073 - 1,758 423 8,990
Charge for the
period 1,139 4,097 - 1,116 49 6,401
Disposals - - - - (44) (44)
At 30 June 2017 2,875 9,170 - 2,874 428 15,347
Charge for the
period 1,201 4,295 - 595 92 6,183
Disposals - - - - (44) (44)
At 31 December
2017 4,076 13,465 - 3,469 476 21,486
Charge for the
period 879 3,138 - 550 169 4,736
At 30 June 2018 4,955 16,603 - 4,019 645 26,222
--------------- ----------- ----------------------- ----------- ----------- --------
Net book value
At 30 June 2018 40,882 131,868 25,218 22,030 140 220,138
--------------- ----------- ----------------------- ----------- ----------- --------
At 31 December
2017 36,919 131,937 11,445 18,848 309 199,458
--------------- ----------- ----------------------- ----------- ----------- --------
(1) Mine rehabilitation asset (Note 13). In 2018, it also includes the capitalisation of the remaining Rumbo royalty fee amounting to USD4,750,000 (ie. EUR4,025,000) paid through shares issue.
(2) Net of pre-commissioning sales
(3) Stripping costs
(4) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.
The above fixed assets are located mainly in Spain.
7. Intangible assets
Permits
of
(Euro 000's) Rio Tinto Licences,
Project R&D and
(1) software Goodwill Total
Cost
At 1 January 2017 restated* 71,521 1,685 9,333 82,539
Additions - 1,600 - 1,600
----------- ------------ ----------- --------
At 30 June 2017 71,521 3,285 9,333 84,139
Additions from acquisition
of subsidiary 5,000 126 - 5,126
Additions - 1,094 - 1,094
At 31 December 2017 76,521 4,505 9,333 90,359
Additions 17 828 - 845
At 30 June 2018 76,538 5,333 9,333 91,204
----------- ------------ ----------- --------
Amortisation
On 1 January 2017 restated* 3,072 123 9,333 12,528
Charge for the period restated* 1,786 28 - 1,814
----------- ------------ ----------- --------
At 30 June 2017 4,858 151 9,333 14,342
Charge for the period restated* 2,287 30 - 2,317
At 31 December 2017 7,145 181 9,333 16,659
Charge for the period 1,543 31 - 1,574
At 30 June 2018 8,688 212 9,333 18,233
----------- ------------ ----------- --------
Net book value
At 30 June 2018 67,850 5,121 - 72,971
----------- ------------ ----------- --------
At 31 December 2017 69,376 4,324 - 73,700
----------- ------------ ----------- --------
(1) Permits include an amount of EUR5,000,000 that relates to the Touro Project mining rights.
* 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). In July 2018, the Company announced an updated technical report on the mineral resources and reserves of the Rio Tinto Copper Project. The Report increases the open pit mineral reserves by 29% and stated the life of mine as 13.8 years, considering the on-going expansion of the processing plant.
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 30 June 2018 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.
8. Inventories
30 June 31 Dec
(Euro 000's) 2018 2017
Finished products 1,365 4,797
Materials and supplies 7,177 8,003
Work in progress 788 874
-------- -------
9,330 13,674
-------- -------
8. Inventories (continued)
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 30 June 2018, copper concentrate produced and not sold amounted to 2,089 tonnes. Accordingly, the inventory for copper concentrate was EUR1.4 million (31 Dec 2017: EUR4.8 million).
9. Trade and other receivables
30 June 31 Dec
(Euro 000's) 2018 2017
Non-current
Deposits 218 212
-------- -------
218 212
-------- -------
Current
Trade receivables 15,376 12,113
Receivables from related parties (Note 17.3
ii)) - 56
Receivables from shareholders (Note 17.3
iii)) 2,076 1,556
Deposits and prepayments 324 221
VAT 14,019 17,804
Tax advances - 1,716
Other receivables 1,157 747
-------- -------
32,952 34,213
-------- -------
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.
10. Share capital and share premium
Share Share
Shares Capital premium Total
000's StgGBP'000 StgGBP'000 StgGBP'000
Authorised
Ordinary shares of Stg GBP0.075
each* 200,000 15,000 - 15,000
------------- ------------ ------------ ---------------
Issued and fully paid 000's Euro Euro Euro
000's 000's 000's
Balance at 1 January 2017 and
30 June 2017 116,679 11,632 277,238 288,870
7 Dec 2017 Share placement at
GBP1.67 18,575 1,560 33,182 34,742
Share issue costs - - (843) (843)
------------- ------------ ------------ ---------------
Balance at 31 December 2017 135,254 13,192 309,577 322,769
13 Feb 2018 Shares issued to
Rumbo at GBP1.87 193 16 410 426
13 Feb 2018 Exercised share
options at GBP1.44 29 3 45 48
13 April 2018 Rumbo buyout
at GBP2.118 1,601 139 3,887 4,025
1 June 2018 Exercised warrants
at GBP1.425 263 22 405 428
Share issue costs - - (5) (5)
------------- ------------ ------------ ---------------
Balance at 30 June 2018 137,340 13,372 314,319 327,691
------------- ------------ ------------ ---------------
10. Share capital and share premium (continued)
Authorised capital
The Company's authorised share capital is 200,000,000 ordinary shares of Stg GBP0.075 each.
Issued capital
2018
a) On 13 February 2018, the Company issued 192,540 new ordinary shares of 7.5p to Rumbo at a price of 186.7p, thus creating a share premium of EUR410,146.
b) On 13 February 2018, the Company was notified that certain employees exercised options over 29,000 ordinary shares of 7.5p at a price of 144p, thus creating a share premium of EUR44,576.
c) On 5 April 2018, the Company signed with Rumbo a contract to purchase the whole royalty agreement for a total consideration of US$4,750,000 to be paid through the issuance of 1,600,907 new ordinary shares of 7.5p. After this transaction the share premium increased by EUR3,887,128. On 13 April 2018, the new ordinary shares were issued to Rumbo.
d) On 1 June 2018, 262,569 warrants were exercised at 142.5p per ordinary share. Hence, 262,569 ordinary shares of 7.5p were issued, thus creating a share premium of EUR405,087.
Warrants
The Company has issued warrants to advisers to the Group. Warrants expire three years after the grant date and have exercise price Stg GBP1.425.
Details of share warrants outstanding as at 30 June 2018:
Number of warrants
Outstanding options at 1 January 2018 262,569
- Exercised during the reporting period (262,569)
Outstanding options at 30 June 2018 -
-------------------
On 1 June 2018, the Company has received notification for the exercise of warrants over 262,569 ordinary shares of 7.5p in the Company at an exercise price of 142.5p per share. As a result, the Company has received proceeds of GBGBP374,160.83 (Note 10 d)).
11. Other reserves
(Euro 000's) Share Bonus Depletion Available-for-sale Non-distributable
option share factor investment reserve Total
At 1 January 2017 6,384 208 - (925) - 5,667
Change in value of
available-for-sale
investment - - - (40) - (40)
Recognition of share
based payments 45 - - - - 45
Recognition of the
Depletion factor - - 450 - - 450
-------- ------- ------------ ------------------- ------------------ --------
At 30 June 2017 6,429 208 450 (965) - 6,122
Change in value of
available-for-sale
investment - - - (92) - (92)
Recognition of share
based payments 107 - - - - 107
-------- ------- ------------ ------------------- ------------------ --------
At 31 December 2017 6,536 208 450 (1,057) - 6,137
Change in value of
available-for-sale
investments - - - (15) - (15)
Recognition of share
based payments 76 - - - - 76
Recognition of
non-distributable
reserve - - - - 1,446 1,446
Recognition of the
Depletion factor - - 5,050 - - 5,050
-------- ------- ------------ ------------------- ------------------ --------
At 30 June 2018 6,612 208 5,500 (1,072) 1,446 12,694
-------- ------- ------------ ------------------- ------------------ --------
11. Other reserves (continued)
Share options
During the six month period there were no options granted to either employees or directors.
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.
Details of share options outstanding as at 30 June 2018:
Number of share options 000's
Outstanding options at 1 January 2018 1,400
- Exercised during the reporting period (29)
- Cancelled during the reporting period (58)
------------------------------
Outstanding options at 30 June 2018 1,313
------------------------------
12. Trade and other payables
(Euro 000's) 30 June 2018 31 Dec 2017
Non-current
Land options 53 74
Other 9 -
------------- ------------
62 74
------------- ------------
Current
Trade payables 55,711 64,234
Land options and mortgage 791 791
Accruals 2,308 2,660
VAT payable - 7
Other 21 291
------------- ------------
58,831 67,983
------------- ------------
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.
13. Provisions
Rehabilitation
(Euro 000's) Legal costs costs Total costs
1 January 2017 - 5,092 5,092
Additions 213 269 482
Finance cost - 49 49
At 30 June 2017 213 5,410 5,623
Additions - 138 138
Revision of discount rate - (98) (98)
Finance cost - 64 64
-------------- --------------- --------------
At 31 December 2017 213 5,514 5,727
Additions - 1,007 1,007
Revision of provision (20) - (20)
At 30 June 2018 193 6,521 6,714
-------------- --------------- --------------
13. Provisions (continued)
(Euro 000's) 30 June 31 Dec
2018 2017
Non-current 6,714 5,727
Current - -
-------- -------
Total 6,714 5,727
-------- -------
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 30 June 2018 was 1.87%, which is the 15-year Spain Government Bond rate (31 December 2017: 1.87%, which is the 15-year Spain Government Bond rate). An inflation rate of 1.5% is applied on annual basis.
Legal provision
The Group has been named a defendant in several legal actions in Spain, the outcome of which is not determinable as at 30 June 2018. Management has reviewed individually each case and made a provision of EUR193 thousand for these claims, which has been reflected in these unaudited condensed interim consolidated financial statements.
14. 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 payable if, during the relevant period, the average price of copper per tonne is US$6,614 or more (US$3.00/lb).
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 was 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.
14. Deferred consideration (continued)
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 30 June 2018, 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.
The nominal amount of the liability recognised is EUR53.0 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 EUR53.0 million and EUR9.1 million respectively. For details on the restatement of the deferred consideration liability as at 31 December 2017, refer to 2017 Annual Report 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 took place on 9(th) and 10(th) May 2018 and the Group is expecting the ruling in the coming months.
15. Derivative instruments
15.1. Foreign exchange contract
As at 31 December 2016, Atalaya had certain short-term foreign exchange contracts with the following relevant information:
Foreign exchange contracts - Euro/USD
Period Contract type Amount in USD Contract rate Strike ------------------- --------------- -------------- -------------- ------- June 2016 - March FX Forward 2017 - 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.
In February 2017, the Group entered into certain foreign exchange hedging contracts to offset the agreements noted above before its expiration date. The contracts were signed with the same financial institution and resulted in a loss of EUR9,000 which was recorded as financial expense during the quarter.
During H1 2018 the Group did not enter into any foreign exchange hedging contract.
15.2. Commodity contract
During the six months ended 30 June 2018, the Company had not entered into any hedging contract.
16. Acquisition, incorporation and disposal of subsidiaries
On 14 February 2018, Atalaya Servicios Mineros, S.L. was incorporated. Atalaya Minasderiotinto Project (UK) Limited is its sole shareholder.
On 18 May 2018, the Company signed the disposal of the wholly-owned subsidiary Georgian Minerals Development Company, Ltd. a company incorporated and existing under the laws of Georgia. Following the disposal, the Company has no presence in Georgia.
17. Related party transactions
The following transactions were carried out with related parties:
17.1 Compensation of key management personnel
The total remuneration and fees of Directors (including Executive Directors) and other key management personnel was as follows:
Three Three Six months Six months
months months ended ended
(Euro 000's) ended ended 30 June 30 June
30 June 30 June 2018 2017
2018 2017
Directors' remuneration and fees 144 179 400 359
Share option-based benefits to directors 59 4 66 6
Key management personnel remuneration 88 120 207 213
Share option-based and other benefits
to key management personnel 57 13 57 22
-------- -------- ---------- ----------
348 316 730 600
-------- -------- ---------- ----------
17.2 Share-based benefits
The directors and key management personnel have not been granted any options during the six month period ended 30 June 2018 (2017: 900,000 options were granted).
17.3 Transactions with related parties/shareholders
i) Transaction with shareholders
Three months Three Six months Six months
(Euro 000's) ended months ended ended
30 June ended 30 June 30 June
2018 30 June 2018 2017
2017
Trafigura- Sales of goods 8,136 - 17,712 13,008
Orion Mine Finance (Master) Fund I
LP ("Orion") - Sales of goods - - - (4)
------------ -------- ---------- ----------
8,136 - 17,712 13,004
------------ -------- ---------- ----------
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. Similarly, in December 2017, XGC notified to the Group the novation of the offtake agreements with a third party.
ii) Period-end balances with related parties
(Euro 000's) 30 June 2018 31 Dec 2017
Receivables from related parties:
Recursos Cuenca Minera S.L. - 56
Total (Note 9) - 56
-------------- -------------
The above balances bear no interest and are repayable on demand.
17. Related party transactions (continued)
iii) Period-end balances with shareholders
(Euro 000's) 30 June 2018 31 Dec 2017
Trafigura - Debtor balance 2,076 1,556
Total (Note 9) 2,076 1,556
--------------- --------------
The above debtor balance arising from sales of goods and other balances bear no interest and is repayable on demand.
18. 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.
19. 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.
Expansion Capex commitments at 30 June 2018 amounted to EUR38.2 million. Commitments relate to the on-going expansion of the Proyecto Riotinto processing plant.
20. Significant events
Buyout of Rumbo Royalty
Following the statement on 13 February 2018, where Atalaya announced the issuance of new ordinary shares in the Company to satisfy the two first instalments due under the Royalty Agreement, Atalaya agreed with Rumbo to buy the Royalty Agreement for a total consideration of US$4,750,000 to be paid through the issuance of 1,600,907 new ordinary shares of 7.5p in the Company ("Rumbo Shares"). The shares were issued at the 30-day volume weighted average price (the "Calculation Period") of 211.8p per share and using the average US$ to GBP exchange rate for the Calculation Period of 1.4008. The Company also agreed to pay the VAT associated with the transaction through a cash payment of US$997,500 to Rumbo, which is recoverable by Atalaya upon an ordinary course application for a VAT reclaim from the Spanish tax authorities.
Exercise of Warrants and Issue of Equity
In May, Atalaya received notification for the exercise of options over 262,569 ordinary shares of 7.5p in the Company at an exercise price of 142.5p per share. As a result, the Company received proceeds of GBP374,160.83.
Application was made for the 262,569 shares ("New Ordinary Shares") to be admitted to trading on AIM and the dealings in the New Ordinary Shares commenced on 7 June 2018.
Following the issue of the New Ordinary Shares, the total number of Ordinary Shares in issue is 137,339,126.
21. Events after the reporting period
The following events occurred after the reporting period:
-- On 9 July 2018, Atalaya announced the completion of a NI 43-101 compliant technical report on an updated resources and reserves estimate for Proyecto Riotinto. Total open pit proven and probable mineral reserves at Cerro Colorado are estimated at 197 Mt grading 0.42% Cu. Main features are:
o Updated resources and reserves estimate reports a 29% increase in mineral reserves
o Contained copper increases 21% to 822,000 tonnes
o NPV post-tax at 8% discount rate of US$512 million using long term copper price of US$3.00/lb and life-of-mine average Euro to US dollars exchange rate of EUR1:$1.18.
o Total cash flow of US$1,207 million
o Estimated average C1 cash costs of US$2.10/lb of payable Cu net of silver credits
o All-in sustaining costs ("AISC") of US$2.22/lb of payable Cu net of silver credits
o Development capital expenditure of US$95 million to increase throughput to 15 Mt/y
o LOM sustaining capital expenditure of US$84 million
o Recoverable copper within P&P open pit reserves is estimated at 696,500 tonnes and 9.4 million ounces of silver
o Life of Mine ("LOM") of 13.8 years
o 2019 ramp-up production to 11 Mt/y and 2020 production at 15 Mt/y
o Average yearly production of 50,000 tonnes of copper and 670,000 ounces of silver in concentrate
o Reduced strip ratio, waste to ore, of 1.43:1
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR UASNRWNAKAAR
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September 12, 2018 02:00 ET (06:00 GMT)
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