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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.00 | -0.47% | 426.00 | 425.00 | 426.00 | 430.00 | 421.00 | 430.00 | 193,639 | 16:29:45 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Metal Mining Services | 341.98M | 38.77M | 0.2772 | 15.37 | 595.89M |
From Apr 2019 to Apr 2024
TIDMATYM
RNS Number : 4158T
Atalaya Mining PLC
25 March 2021
25 March 2021
Atalaya Mining Plc
("Atalaya" and/or the "Group")
Results for the year ended 31 December 2020
Atalaya Mining Plc (AIM: ATYM; TSX: AYM) is pleased to announce its audited consolidated results for the year ended 31 December 2020 ("FY2020" or the "Period").
The expanded plant was successfully completed and commissioned in early 2020 and despite the impact of COVID-19, Atalaya met production guidance reported issued at the start of the year with copper production for FY2020 of 55,890 tonnes (FY2019: 44,950 tonnes) thereby achieving a record production level for the Company.
The Company reported EBITDA of EUR67.4 million (FY2019: EUR61.3 million) and EUR59.0 million of cash flows from operating activities (FY2019: EUR37.9 million).
The audited consolidated Financial Statements are also available under the Company's profile on SEDAR at www.sedar.com and on Atalaya's website at www.atalayamining.com .
Financial Highlights for the Period
Hot Features
Premium
Year ended 31 December 2020 2019 %
Revenues from operations EURk 252,784 187,868 34.6%
----------------- ---------- ---------- ---------
Operating costs EURk (176,300) (115,944) 52.1%
----------------- ---------- ---------- ---------
EBITDA EURk 67,444 61,333 10.0%
----------------- ---------- ---------- ---------
Profit for the year EURk 30,390 30,720 (1.10%)
----------------- ---------- ---------- ---------
Earnings per share EUR cents/share 22.9 27.2 (15.8%)
----------------- ---------- ---------- ---------
Cash flows from operating
activities EURk 59,090 37,934 55.8%
----------------- ---------- ---------- ---------
Cash flows used in
investing activities EURk (30,160) (62,351) (51.6%)
----------------- ---------- ---------- ---------
Cash flows from financing
activities EURk 760 (576) (231.9%)
----------------- ---------- ---------- ---------
Working capital (deficit)/surplus EURk (17,904) 3,598 (597.6%)
----------------- ---------- ---------- ---------
Average realised copper
price $/lb 2.72 2.73 (0.4%)
----------------- ---------- ---------- ---------
Copper concentrate
produced (tonnes) 256,001 195,072 31.2%
----------------- ---------- ---------- ---------
Copper production (tonnes) 55,890 44,950 24.3%
----------------- ---------- ---------- ---------
Cash costs $/lb payable 1.95 1.80 8.3%
----------------- ---------- ---------- ---------
All-In Sustaining Cost $/lb payable 2.21 2.14 3.3%
----------------- ---------- ---------- ---------
-- Revenues of EUR252.8 million (FY2019: EUR187.9 million) from increased volumes of copper concentrates sold from the expanded plant with annualised realised price slightly lower than the prior year (FY2020: $2.72/lb versus FY2019: $2.73/lb). The impact of the increased volumes was partly offset by lower grades in concentrates and a stronger US Dollar/Euro exchange rate.
-- Higher processing rates during the year resulted in higher operating costs of EUR176.3 million (FY2019: EUR115.9 million).
-- Copper concentrates sold during the year under existing off-take agreements and at spot realised an average price of US$2.72/lb copper, compared with US$2.73/lb copper in the same period of 2019.
-- 2020 cash costs of US$1.95/lb payable copper (2019: US$1.80/lb payable copper) owing to exchange rate and challenging recoveries as a result of lower ore grades and costs associated with expansion start-up.
-- 2020 AISC of US$2.21/lb compared with US$2.14/lb in 2019 driven mainly by the increase in cash cost. FY2020 All-In Sustaining Cost excludes the costs associated with the one off tailings dam expansion project which amounts to EUR11.0 million in FY2020.
-- EBITDA for the year was EUR67.4 million (FY2019: EUR61.3 million)
-- FY2020 cash flows from operating activities were EUR59.1 million (FY2019: EUR37.9 million), out of which EUR0.9 are from working capital changes. Cash flow used for investing activities amounted to EUR30.2 million in FY2020 (FY2019: EUR62.4 million). The investments relate to tailings dams, capitalised stripping costs and enhancements to the processing systems. Cash from financing activities amounted to EUR0.8 million (FY2019: EUR0.6 million were used).
-- Inventories of concentrate at 31 December 2020 amounted to EUR8.6 million (EUR11.0 million at 31 December 2019)
-- Working capital deficit of EUR17.9 million as at 31 December 2020, decreased from excess working capital of EUR3.6 million reported as at 31 December 2019. The decrease in working capital is mainly attributable to the Astor Deferred Consideration which was classified as a current liability at the end of the year.
-- Unrestricted cash balances amounted to EUR37.8 million as at 31 December 2020. The net increase in cash and cash equivalents during 2020 amounted to EUR29.7 million, compared with a net decrease of EUR25.0 million in the prior year.
Proyecto Riotinto Operating Highlights
Mining
-- Despite the challenging year as a result of the COVID-19 pandemic, Atalaya met production guidance with copper production of 55,890 tonnes (FY2019: 44,950 tonnes). The expanded plant was successfully completed and commissioned in early 2020 and demonstrated record production levels during the year.
-- Ore mined during the year increased to 13.6Mtpa compared with 10.4Mtpa in the previous year.
Processing
-- 14.8Mtpa of ore processed (FY2019: 10.5 Mtpa) with an average copper head grade of 0.45% (FY2019: 0.49%) and within the guidance recovery rate of 84.53% (FY2019: 87.09%).
-- On-site concentrate inventories at 31 December 2020 were approximately 12,180 tonnes (FY2019: 14,201 tonnes) all of which were sold in January 2021.
Expansion Project at Proyecto Riotinto
-- The 15Mtpa Expansion Project was completed during late 2019 with the processing plant fully commissioned and operating at an increased annualised rate of 15Mtpa from January 2020.
Exploration and Geology
-- Exploration and infill drilling continue in Atalaya pit, Cerro Colorado pit and San Dionisio showing encouraging initial results.
-- An independent consultant is finalising the Cerro Colorado open pit reserves and resources update taking into consideration the exploration results with current copper prices, operating costs and geotechnical parameters. In addition, there is an ongoing independent evaluation of the historic polymetallic San Antonio and San Dionisio deposits. The San Antonio deposit is located east of the Cerro Colorado open pit, currently being mined, and would require underground mining methods. The San Dionisio deposit is located west of the Cerro Colorado pit and current indications show there is good potential for it to be mined with a combination of open pit and underground methods. San Dionisio contains copper as well as polymetallic mineralisation.
-- Exploration work started at the newly acquired Masa Valverde asset and will continue through 2021. First scoping studies are also planned during the year.
Proyecto Touro
-- On 1 March 2021, Atalaya received formal communication from the local government in Galicia rejecting the plan to develop Proyecto Touro, based on a negative environmental impact statement. This was the official communication of the information reported by the Company in January 2020.
-- Atalaya is currently evaluating its options to continue the development of the project. Options may include several types of appeals or modified project proposals to address the concerns of the Xunta de Galicia.
-- The Company continues to be confident that its world class approach to Proyecto Touro, which includes fully plastic lined tailings with zero discharge, will satisfy the most stringent environmental conditions that may be imposed by the authorities prior to development of the project.
Outlook for 2021
-- As previously announced, the Company expects production for FY2021 to be within 52,000 and 54,000 tonnes of copper.
-- Cash costs and AISC guidance to range from US$2.25/lb to US$2.35/lb and from US$2.50/lb to US$2.65/lb, respectively. These increases in the projected cash costs and AISC are driven mainly by stronger Euro levels anticipated for 2021. AISC guidance for FY2021 excludes the costs associated with the one off expansion project which is budgeted for EUR17 million in FY2021.
-- Management continues to monitor the impact of COVID-19 on the operations and the ongoing cost structure and will update the market with any potential changes in expectations.
Legal Overview
Proyecto Riotinto - Ruling of Autorizacion Ambiental Unificada ("AAU")
-- On 7 May 2020, the Company announced that the Junta de Andalucía had issued a favourable resolution (the "Resolution") which validates the Unified Environmental Authorisation (the "AAU") of Proyecto Riotinto. The Resolution ended the legal process announced by the Company on 26 September 2018 in relation to the judgement made by the Tribunal Superior de Justicia de Andalucía ("TSJA") in connection with the AAU, and the AAU is now revalidated.
-- On 1 June 2020, the Company announced that the Junta de Andalucía confirmed through the Spanish press that the mining permits for Proyecto Riotinto are now fully validated.
Astor
-- As at 31 December 2020, the deferred consideration to Astor Management, A.G. ("Astor") totalling EUR53 million (the "Deferred Consideration") had not been paid. However, the Board of Directors considered making an early payment to remove the timing uncertainty from the balance sheet.
-- On 15 March 2021, the Company approved the early payment of the Deferred Consideration. The Deferred Consideration was funded by unsecured credit lines from four major Spanish banks having a three-year tenure and an average annual interest rate of approximately two per cent.
-- The payment of the Deferred Consideration does not end the ongoing litigation as the issue as to whether any residual interest may or may not be payable remains unresolved.
-- On 2 March 2020, the Company filed an application in the High Court to seek clarity on the definition of "Excess Cash". The Company has now filed its statement of case to set out its formal position and the hearing for the trial will be heard on 21 February 2022.
-- Astor applied for the Court to determine at an early stage that particular aspects of the excess cash calculation can be resolved without the need for a full trial. A summary judgment will be heard on 14 June 2021 and Astor would have to demonstrate Atalaya has no reasonable prospect of success at Trial.
Corporate developments
The Company continues exploring opportunities to increase shareholder value:
-- Solar power project. Given its location in an area with a natural abundance of sunlight, on 24 September, the Company announced the start of the permitting process to develop a 50MW solar plant at Proyecto Riotinto for self-consumption. The solar plant project, in addition to making a significant contribution to reducing carbon emissions, is economically viable and could potentially also contribute to reducing operating costs. Permitting continues and the Company expects to complete it during Q2 2021.
-- Acquisition of Masa Valverde. On 21 October 2020, Atalaya announced that it had entered into a definitive purchase agreement to acquire 100% of the Masa Valverde polymetallic project located in Huelva (Spain) through the acquisition of 100% of a Spanish company for EUR1.4 million payable in two deferred and conditional instalments. Masa Valverde is one of the largest undeveloped volcanogenic massive sulphide deposits in the prolific Iberian Pyrite Belt and is located 28kms south west of Proyecto Riotinto.
-- E-LIX System. On 28 October 2020, Atalaya announced it had commenced a feasibility study to evaluate production of copper cathodes at Proyecto Riotinto using the newly developed E-LIX System owned by Lain Technologies, Ltd. It also entered into a Licence Agreement with Lain Technologies, Ltd. to use its patents on an exclusive basis, under certain conditions, within the Iberian pyrite belt in Spain and Portugal. The feasibility study will help Atalaya to understand the economic viability of a new industrial scale plant to produce cathodes from complex sulphide ores prevalent in the Iberian Pyrite Belt through the application of a new leaching process called the E-LIX System, followed by conventional SX-EW. The production of cathodes has the potential to generate cost savings by reducing charges associated with concentrate transportation, treatment and refining as well as penalties with certain elements, while also reducing carbon emissions.
COVID-19 Update and Going Concern
-- The Company issued COVID-19 updates throughout the year as the outbreak of the virus impacted the company both operationally and financially.
-- It is Atalaya's priority to protect its workforce and the local communities surrounding both Proyecto Riotinto and Proyecto Touro. Atalaya has followed and continues to follow the requirements and recommendations issued by the Government of Spain and the regional and local health authorities at all times to reduce the risk of COVID-19 exposure and avoid the spread of the virus.
-- In order to mitigate the potential operational and financial impact of COVID-19 resulting from a sharp decrease in commodities prices, the Company increased its cash balance from EUR8.1 million as at 31 December 2019 to EUR32.4 million as at 30 June 2020 by net drawdowns on existing credit facilities. Following the recovery of commodity prices, the Company repaid the credit facilities before the year-end.
Alberto Lavandeira, CEO commented :
"Atalaya made significant progress in 2020 despite the challenges of the COVID-19 pandemic. Ore mined during the year increased significantly, the copper production targets were met and the expanded plant achieved record production levels.
"Our key priority continues to be protecting our workforce and the local communities surrounding our facilities and because of the great efforts of the Atalaya team we have also delivered a strong financial performance highlighted by the increased operating cashflows and strong balance sheet.
"Looking ahead, Atalaya is looking at new technologies to increase productivity and reduce our carbon footprint and will continue to pursue opportunities to grow the business and develop new resources such as Masa Valverde."
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:
Elisabeth Cowell / Adam Lloyd / + 44 20 3757
SEC Newgate Tom Carnegie 6880
+44 20 3170
4C Communications Carina Corbett 7973
----------------------------------- -------------
Canaccord Genuity
(NOMAD and Joint Henry Fitzgerald-O'Connor / James +44 20 7523
Broker) Asensio 8000
----------------------------------- -------------
BMO Capital Markets +44 20 7236
(Joint Broker) Tom Rider 1010
----------------------------------- -------------
Peel Hunt LLP +44 20 7418
(Joint Broker) Ross Allister / David McKeown 8900
----------------------------------- -------------
About Atalaya Mining Plc
Atalaya is an AIM and TSX-listed mining and development group which produces copper concentrates and silver by-product at its wholly owned Proyecto Riotinto site in southwest Spain. In addition, the Group has a phased, earn-in agreement for up to 80% ownership of Proyecto Touro, a brownfield copper project in the northwest of Spain. For further information, visit www.atalayamining.com
Consolidated and Company Statements of Comprehensive Income
for the year ended 31 December 2020
The Company The Group The Company
The Group
(Euro 000's) Note 2020 2020 2019 2019
=========== ============ ========== ============
Revenue 5 252,784 1,442 187,868 1,283
Operating costs and mine site
administrative expenses (175,484) - (115,325) -
Mine site depreciation, amortisation
and impairment 13,14 (31,683) - (23,025) -
=========== ============ ========== ============
Gross profit 45,617 1,442 49,518 1,283
Administration and other expenses (6,854) (1,935) (6,718) (1,540)
Share based benefits 23 (816) - (619) -
Exploration expenses (1,661) - (3,588) -
Impairment loss on other receivables (49) (45) (1,694) (1,694)
Care and maintenance expenditure (525) - (373) -
Operating profit/(loss) 7 35,712 (538) 36,526 (1,951)
Other income 6 - - 88 124
Net foreign exchange (loss)/gain 4 (3,826) 16 350 (3)
Interest income from financial
assets at fair value through
profit and loss 9 - 13,607 - 13,607
Interest income from financial
assets at amortised cost 9 197 2,516 52 3,223
Finance costs 10 (341) - (89) -
Profit before tax 31,742 15,601 36,927 15,000
Tax 11 (1,352) (928) (6,207) (878)
=========== ============ ========== ============
Profit for the year 30,390 14,673 30,720 14,122
=========== ============ ========== ============
Profit for the year attributable
to:
* Owners of the parent 31,479 14,673 37,323 14,122
* Non-controlling interests (1,089) - (6,603) -
=========== ============ ========== ============
30,390 14,673 30,720 14,122
=========== ============ ========== ============
Earnings per share from operations
attributable to equity holders
of the parent during the year:
Basic earnings per share (EUR
cents per share) 12 22.9 27.2
=========== ============ ========== ============
Diluted earnings per share
(EUR cents per share) 12 22.4 26.8
=========== ============ ========== ============
Profit for the year 30,390 14,673 30,720 14,122
Other comprehensive income:
Other comprehensive income
that will not be reclassified
to profit or loss in subsequent
periods (net of tax):
Change in fair value of financial
assets through other comprehensive
income 'OCI' 20 44 44 (29) (29)
----------- ------------
Total comprehensive profit
for the year 30,434 14,717 30,691 14,093
=========== ============ ========== ============
Total comprehensive profit
for the year attributable to:
* Owners of the parent 31,523 14,717 37,294 14,093
* Non-controlling interests (1,089) - (6,603) -
=========== ============ ========== ============
30,434 14,717 30,691 14,093
=========== ============ ========== ============
The notes are an integral part of these consolidated and Company financial statements.
Consolidated and Company Statements of Financial Position
As at 31 December 2020
As at 31 December As at 31 December
The The The The Company
Group Company Group 2019
(Euro 000's) Note 2020 2020 2019
======== ========= ========= ===========
Assets
Non-current assets
Property, plant and equipment 13 327,174 - 307,815 -
Intangible assets 14 59,816 - 63,085 -
Investment in subsidiaries 15 - 5,448 - 4,630
Trade and other receivables 19 2,715 318,857 500 310,002
Non-current financial asset 20 1,101 - 1,101 -
Deferred tax asset 17 8,805 - 6,576 -
======== ========= ========= ===========
399,611 324,305 379,077 314,632
======== ========= ========= ===========
Current assets
Inventories 18 23,576 - 21,330 -
Trade and other receivables 19 43,191 10,737 32,857 4,043
Tax refundable 815 - 1,924 -
Other financial assets 20 86 86 42 42
Cash and cash equivalents 21 37,767 2,049 8,077 128
======== ========= ========= ===========
105,435 12,872 64,230 4,213
======== ========= ========= ===========
Total assets 505,046 337,177 443,307 318,845
======== ========= ========= ===========
Equity and liabilities
Equity attributable to
owners of the parent
Share capital 22 13,439 13,439 13,372 13,372
Share premium 22 315,714 315,714 314,319 314,319
Other reserves 23 40,049 7,295 22,836 6,435
Accumulated losses (15,512) (21,863) (30,669) (36,535)
======== ========= ========= ===========
353,690 314,585 319,858 297,591
Non-controlling interests 24 (3,491) - (2,402) -
======== ========= ========= ===========
Total equity 350,199 314,585 317,456 297,591
======== ========= ========= ===========
Liabilities
Non-current liabilities
Trade and other payables 25 1,448 - 13 -
Provisions 26 25,264 - 6,941 -
Lease liability 27 4,796 - 5,265 -
Deferred consideration 28 - - 53,000 9,117
31,508 - 65,219 9,117
======== ========= ========= ===========
Current liabilities
Trade and other payables 25 68,437 13,002 57,537 10,272
Lease liability 27 592 - 588 -
Current tax liabilities 11 1,310 473 2,507 1,865
Deferred consideration 28 53,000 9,117 - -
123,339 22,592 60,632 12,137
======== ========= ========= ===========
Total liabilities 154,847 22,592 125,851 21,254
======== ========= ========= ===========
Total equity and liabilities 505,046 337,177 443,307 318,845
======== ========= ========= ===========
The notes are an integral part of these consolidated and company financial statements.
The consolidated and company financial statements were authorised for issue by the Board of Directors on 24 March 2021 and were signed on its behalf.
Roger Davey Alberto Lavandeira Chairman Chief Execute Officer
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
Attributable to owners of the
parent
=========================================================
Non-
Note Share Share Other Accumulated controlling Total
capital Premium reserves losses Total interest equity
(Euro 000's) (2) (1)
========= ========= ========== ============= ======== ============= =========
At 1 January 2019 13,372 314,319 12,791 (58,308) 282,174 4,200 286,374
Profit / (loss)
for the year - - - 37,323 37,323 (6,602) 30,721
Change in fair
value of financial
assets through
OCI 20 - - (29) - (29) - (29)
--------- --------- ---------- ------------- -------- ------------- ---------
Total comprehensive
income - - (29) 37,323 37,294 (6,602) 30,692
Transactions with
owners
Depletion factor 23 - - 5,378 (5,378) - - -
Recognition of
share-based payments 23 - - 619 - 619 - 619
Recognition of
non-distributable
reserve 23 - - 1,984 (1,984) - - -
Recognition of
distributable
reserve 23 - - 1,844 (1,844) - - -
Other changes
in equity 23 249 (478) (229) - (229)
At 31 December
2019 /
1 January 2020 13,372 314,319 22,836 (30,669) 319,858 (2,402) 317,456
Profit / (loss)
for the year - - - 31,479 31,479 (1,089) 30,390
Change in fair
value of financial
assets through
OCI 20 - - 44 - 44 - 44
--------- --------- ---------- ------------- -------- ------------- ---------
Total comprehensive
income / (loss)
for the year - - 44 31,479 31,523 (1,089) 30,434
Transactions with
owners
Issuance of share
capital 22 67 1,395 - - 1,462 - 1,462
Depletion factor 23 - - 14,155 (14,155) - - -
Recognition of
share-based payments 23 - - 816 - 816 - 816
Recognition of
non-distributable
reserve 23 - - 2,198 (2,198) - - -
Other changes
in equity 23 - - - 31 31 - 31
At 31 December
2020 13,439 315,714 40,049 (15,512) 353,690 (3,491) 350,199
--------- --------- ---------- ------------- -------- ------------- ---------
(1) Refer to Note 23
(2) The share premium reserve is not available for distribution.
The notes are an integral part of these consolidated and company financial statements.
Company Statement of Changes in Equity
for the year ended 31 December 2020
Share Share Other Accumulated
Note capital premium reserves losses Total
(Euro 000's) (2) (1)
======== ======== ========= =========== ========
At 1 January 2019 13,372 314,319 5,845 (50,657) 282,879
Profit for the year - - - 14,122 14,122
Change in fair value of
financial assets through
OCI 20 - - (29) - (29)
-------- -------- --------- ----------- --------
Total comprehensive income - - (29) 14,122 14,093
Recognition of share-based
payments 23 - - 619 - 619
======== ========
At 31 December 2019/1 January
2020 13,372 314,319 6,435 (36,535) 297,591
Profit for the year - - - 14,673 14,673
Change in fair value of
financial assets through
OCI 20 - - 44 - 44
-------- -------- --------- ----------- --------
Total comprehensive income - - 44 14,673 14,717
Issuance of share capital 22 67 1,395 - - 1,462
Recognition of share-based
payments 23 - - 816 - 816
At 31 December 2020 13,439 315,714 7,295 (21,862) 314,585
======== ======== ========= =========== ========
(1) Refer to Note 23
(2) The share premium reserve is not available for distribution.
Companies, which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defence of the Republic Law, within two years after the end of the relevant tax year, will be deemed to have distributed this amount as dividend on the 31 of December of the second year. The amount of the deemed dividend distribution is reduced by any actual dividend already distributed by 31 of December of the second year for the year the profits relate.
The Company pays special defence contribution on behalf of the shareholders over the amount of the deemed dividend distribution at a rate of 17% (applicable since 2014) when the entitled shareholders are natural persons tax residents of Cyprus and have their domicile in Cyprus. In addition, from 2019 (deemed dividend distribution of year 2017 profits), the Company pays on behalf of the shareholders General Healthcare System (GHS) contribution at a rate of 2.65% (31 December 2019: 1.70%), when the entitled shareholders are natural persons tax residents of Cyprus, regardless of their domicile.
The notes are an integral part of these consolidated and company financial statements.
Consolidated Statement of Cash Flows
for the year ended 31 December 2020
(Euro 000's) Note 2020 2019
========= =========
Cash flows from operating activities
Profit before tax 31,742 36,927
Adjustments for:
Depreciation of property, plant and equipment 13 25,766 12,575
Amortisation of intangible assets 14 4,941 3,502
Impairment of intangibles 14 985 6,948
Recognition of share--based payments 23 816 619
Interest income 9 (197) (52)
Interest expense 10 180 41
Unwinding of discounting 10 144 40
Legal provisions 26 238 261
Impairment loss on other receivables 19 49 1,694
Rehabilitation provision - (18)
Unrealised foreign exchange loss on financing
activities (47) 2
Cash inflows from operating activities
before working capital changes 64,617 62,539
Changes in working capital:
Inventories 18 (2,246) (10,508)
Trade and other receivables 19 (10,356) (9,911)
Trade and other payables 25 11,747 1,159
--------- ---------
Cash flows from operations 63,762 43,279
Interest expense on lease liabilities 27 (17) (8)
Interest paid (180) (41)
Tax paid (4,475) (5,296)
========= =========
Net cash from operating activities 59,090 37,934
========= =========
Cash flows from investing activities
Purchases of property, plant and equipment 13 (27,046) (56,453)
Purchases of intangible assets 14 (3,311) (5,449)
Acquisition of other financial assets 20 - (501)
Interest received 9 197 52
========= =========
Net cash used in investing activities (30,160) (62,351)
========= =========
Cash flows from financing activities
Lease payment 27 (618) (576)
Proceeds from issue of share capital 1,378 -
Net cash from / (used in) financing activities 760 (576)
========= =========
Net increase / (decrease) in cash and cash
equivalents 29,690 (24,993)
Cash and cash equivalents:
At beginning of the year 21 8,077 33,070
========= =========
At end of the year 21 37,767 8,077
========= =========
The notes are an integral part of these consolidated and company financial statements.
Company Statement of Cash Flows
for the year ended 31 December 2020
(Euro 000's) Note 2020 2019
========= =========
Cash flows from operating activities
Profit before tax 15,601 15,000
Adjustments for:
Interest income 9 (16) (25)
Interest income from interest-bearing intercompany
loans 9 (16,123) (16,805)
Impairment loss on other receivables (45) -
Unrealised foreign exchange loss on financing 20 -
activities
Cash used in operating activities before
working capital changes (563) (1,830)
Changes in working capital:
Trade and other receivables 19 (15,549) (17,252)
Trade and other payables 25 2,728 2,204
Cash flows used in operations (13,384) (16,878)
Tax paid (2,194) (537)
Net cash used in operating activities (15,578) (17,415)
========= =========
Cash flows from investing activities
Interest received 9 - 25
Investment in subsidiaries (2) (113)
Interest income from interest-bearing intercompany
loans 9 16,123 16,805
Net cash from investing activities 16,121 16,717
========= =========
Cash flows from financing activities
Proceeds from issue of share capital 22 1,378 -
Net cash from financing activities 1,378 -
========= =========
Net increase/(decrease) in cash and cash
equivalents 1,921 (698)
Cash and cash equivalents:
At beginning of the year 21 128 826
========= =========
At end of the year 21 2,049 128
========= =========
The notes are an integral part of these consolidated and company financial statements.
Notes to the Consolidated and Company Financial Statements
Year ended 31 December 2020
1. Incorporation and summary of business
Country of incorporation
Atalaya Mining Plc (the "Company") was incorporated in Cyprus on 17 September 2004 as a private company with limited liability under the Companies Law, Cap. 113 and was converted to a public limited liability company on 26 January 2005. Its registered office is at 1 Lampousa Street, Nicosia, Cyprus.
The Company was listed on AIM of the London Stock Exchange in May 2005 under the symbol ATYM and on the TSX on 20 December 2010 under the symbol AYM. The Company continued to be listed on AIM and the TSX as at 31 December 2020.
Additional information about Atalaya Mining Plc is available at www.atalayamining.com as per requirement of AIM rule 26.
Change on name and share consolidation
Following the Company's EGM on 13 October 2015, the change of the name EMED Mining Public Limited to Atalaya Mining Plc became effective on 21 October 2015. On the same day, the consolidation of ordinary shares came into effect, whereby all shareholders received one new ordinary share of nominal value GBP0.075 for every 30 existing ordinary shares of nominal value of GBP0.0025.
Principal activities
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.
Atalaya also owns 10% of Proyecto Touro, a brownfield copper project in northwest Spain. The following four phases determine how the Company may acquire up to 80% of Proyecto Touro:
-- Phase 1 - The Company paid EUR0.5 million to secure the exclusivity agreement and will continue to fund up to a maximum of EUR5 million to get the project through the permitting and financing stages.
-- Phase 2 - When permits are granted, the Company will pay EUR2 million to earn-in an additional 30% interest in the project (cumulative 40%).
-- Phase 3 - Once development capital is in place and construction is underway, the Company will pay EUR5 million to earn-in an additional 30% interest in the project (cumulative 70%).
-- Phase 4 - Once commercial production is declared, the Company will purchase an additional 10% interest in the project (cumulative 80%) in return for a 0.75% Net Smelter Return (NSR) royalty, with a buyback option.
In November 2019, Atalaya executed the option to acquire 12.5% of Explotaciones Gallegas del Cobre, S.L. the exploration property around Touro, with known additional reserves, which will provide high potential to the Proyecto Touro.
On 21 October 2020, the Company announced that it entered into a definitive purchase agreement to acquire 100% of the shares of Cambridge Mineria España, S.L. (since renamed Atalaya Masa Valverde, S.L.U.), a Spanish company which fully owns the Masa Valverde polymetallic project located in Huelva (Spain). Under the terms of the agreement Atalaya will make an aggregate EUR1.4 million cash payment in two instalments of approximately the same amount. Initial payment to be executed once the project is permitted and second and last payment when first production is achieved from the concession.
The Company's and its subsidiaries' activity are to explore for and develop metals production operations in Europe, with an initial focus on copper.
The strategy is to evaluate and prioritise metal production opportunities in several jurisdictions throughout the well-known belts of base and precious metal mineralisation in Spain and the Eastern European region.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated and company financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
(a) Overview
The financial statements of Atalaya Mining Plc have been prepared in accordance with International Financial Reporting Standards ("IFRS"). IFRS comprise the standards issued by the International Accounting Standards Board ("IASB").
The financial statements are presented in EUR and all values are rounded to the nearest thousand (EUR'000), except where otherwise indicated.
Additionally, the financial statements have also been prepared in accordance with the IFRS as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113. For the year ending 31 December 2020, the standards applicable for IFRS's as adopted by the EU are aligned with the IFRS's as issued by the IASB.
The consolidated financial statements have been prepared on a historical cost basis except for the revaluation of certain financial instruments that are measured at fair value at the end of each reporting period, as explained below and in note 3.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.4.
(b) Going concern
The Directors have considered and debated different possible scenarios on the Company's operations, financial position and forecast for a period of at least 12 months since the approval of these financial statements. Possible scenarios range from (i) disruption in Proyecto Riotinto including any potential future impact of the COVID-19 pandemic; (ii) market volatility in commodity prices; and (iii) availability of existing credit facilities.
The Directors, after reviewing these scenarios, the current cash resources, forecasts and budgets, timing of cash flows, borrowing facilities, sensitivity analyses and considering the associated uncertainties to the Group's operations have a reasonable expectation that the Company has adequate resources to continue operating in the foreseeable future. The analysis included the long term credit lines available to fund the payment of the Deferred Consideration, reclassified as at 31 December 2020 as current liability.
Accordingly, these financial statements have been prepared based on accounting principles applicable to a going concern which assumes that the Group and the Company will realise its assets and discharge its liabilities in the normal course of business. Management has carried out an assessment of the going concern assumption and has concluded that the Group and the Company will generate sufficient cash and cash equivalents to continue operating for the next twelve months.
2.2 Changes in accounting policy and disclosures
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 2020.
Several other amendments and interpretations apply for the first time in 2020, but do not have a significant impact on the consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.
Conceptual Framework in IFRS standards
The IASB issued the revised Conceptual Framework for Financial Reporting on 29 March 2018. The Conceptual Framework sets out a comprehensive set of concepts for financial reporting, standard setting, guidance for preparers in developing consistent accounting policies and assistance to others in their efforts to understand and interpret the standards. IASB also issued a separate accompanying document, Amendments to References to the Conceptual Framework in IFRS Standards, which sets out the amendments to affected standards in order to update references to the revised Conceptual Framework. Its objective is to support transition to the revised Conceptual Framework for companies that develop accounting policies using the Conceptual Framework when no IFRS Standard applies to a particular transaction. For preparers who develop accounting policies based on the Conceptual Framework, it is effective for annual periods beginning on or after 1 January 2020.
2.2 Changes in accounting policy and disclosures (cont.)
IFRS 3: Business Combinations (Amendments)
The IASB issued amendments in Definition of a Business (Amendments to IFRS 3) aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. The Amendments are effective for business combinations for which the acquisition date is in the first annual reporting period beginning on or after 1 January 2020 and to asset acquisitions that occur on or after the beginning of that period, with earlier application permitted. As a result, the Group has adopted this accounting policy for the acquisition of the asset of Atalaya Masa Valverde.
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of 'material' (Amendments)
The Amendments are effective for annual periods beginning on or after 1 January 2020 with earlier application permitted. The Amendments clarify the definition of material and how it should be applied. The new definition states that, 'Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity'. In addition, the explanations accompanying the definition have been improved. The Amendments also ensure that the definition of material is consistent across all IFRS Standards. These amendments had no impact on the consolidated financial statements of the Group.
Interest Rate Benchmark Reform - IFRS 9, IAS 39 and IFRS 7 (Amendments)
In September 2019, the IASB issued amendments to IFRS 9, IAS 39 and IFRS 7, which concludes phase one of its work to respond to the effects of Interbank Offered Rates (IBOR) reform on financial reporting. The amendments published, deal with issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative interest rate and address the implications for specific hedge accounting requirements in IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, which require forward-looking analysis. The amendments provide temporary reliefs, applicable to all hedging relationships that are directly affected by the interest rate benchmark reform, which enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate. There are also amendments to IFRS 7 Financial Instruments: Disclosures regarding additional disclosures around uncertainty arising from the interest rate benchmark reform. The amendments are effective for annual periods beginning on or after 1 January 2020 and must be applied retrospectively. Phase two (ED) focuses on issues that could affect financial reporting when an existing interest rate benchmark is replaced with a risk-free interest rate (an RFR). These amendments had no impact on the consolidated financial statements of the Group.
2.2.1 Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements are disclosed below. Some of them were adopted by the European Union and others not yet. The Group and the Company intend to adopt these new and amended standards and interpretations, if applicable, when they become effective.
Amendment in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. In December 2015 the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. The amendments have not yet been endorsed by the EU. These amendments had no impact on the consolidated financial statements of the Group but may impact future periods should the Group enter into any Joint Venture.
IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (Amendments)
The amendments are effective for annual reporting periods beginning on or after January 1, 2022 with earlier application permitted. However, in response to the covid-19 pandemic, the Board has deferred the effective date by one year, i.e. 1 January 2023, to provide companies with more time to implement any classification changes resulting from the amendments. The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current or non-current. The amendments affect the presentation of liabilities in the statement of financial position and do not change existing requirements around measurement or timing of recognition of any asset, liability, income or expenses, nor the information that entities disclose about those items. Also, the amendments clarify the classification requirements for debt which may be settled by the company issuing own equity instruments. The amendments have not yet been endorsed by the EU. These amendments had no impact on the consolidated financial statements of the Group but may impact future periods.
IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets as well as Annual Improvements 2018-2020 (Amendments)
The amendments are effective for annual periods beginning on or after 1 January 2022 with earlier application permitted. The IASB has issued narrow-scope amendments to the IFRS Standards as follows:
-- IFRS 3 Business Combinations (Amendments) update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations.
-- IAS 16 Property, Plant and Equipment (Amendments) prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss.
-- IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendments) specify which costs a company includes in determining the cost of fulfilling a contract for the purpose of assessing whether a contract is onerous.
-- Annual Improvements 2018-2020 make minor amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments, IAS 41 Agriculture and the Illustrative Examples accompanying IFRS 16 Leases
The amendments have not yet been endorsed by the EU. These amendments had no impact on the consolidated financial statements of the Group but may impact future periods, Management is currently evaluating the effect of these standards or interpretations on its financial statements.
IFRS 16 Leases-C vid 19 Related Rent Concessions (Amendment)
The amendment applies, retrospectively, to annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted, including in financial statements not yet authorized for issue at 28 May 2020. IASB amended the standard to provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the covid-19 pandemic. The amendment provides a practical expedient for the lessee to account for any change in lease payments resulting from the covid-19 related rent concession the same way it would account for the change under IFRS 16, if the change was not a lease modification, only if all of the following conditions are met:
-- The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change.
-- Any reduction in lease payments affects only payments originally due on or before 30 June 2021.
-- There is no substantive change to other terms and conditions of the lease. Earlier application is permitted. This amendment had no material impact on the consolidated financial statements of the Group.
Interest Rate Benchmark Reform - Phase 2 - IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (Amendments)
In August 2020, the IASB published Interest Rate Benchmark Reform - Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, completing its work in response to IBOR reform. The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). In particular, the amendments provide for a practical expedient when accounting for changes in the basis for determining the contractual cash flows of financial assets and liabilities, to require the effective interest rate to be adjusted, equivalent to a movement in a market rate of interest. Also, the amendments introduce reliefs from discontinuing hedge relationships including a temporary relief from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component. Furthermore, the amendments to IFRS 4 are designed to allow insurers who are still applying IAS 39 to obtain the same reliefs as those provided by the amendments made
to IFRS 9. There are also amendments to IFRS 7 Financial Instruments: Disclosures to enable users of financial statements to understand the effect of interest rate benchmark reform on an entity's financial instruments and risk management strategy. The amendments are effective for annual periods beginning on or after 1 January 2021 with earlier application permitted. While application is retrospective, an entity is not required to restate prior periods.
2.3 Consolidation
(a) Basis of consolidation
The consolidated financial statements comprise the financial statements of Atalaya Mining Plc and its subsidiaries.
(b) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group and the Company has control. Control exists when the Group is exposed, or has rights, to variable returns for its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control.
De-facto control may arise in circumstances where the size of the Group's voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies, etc.
The Group re-assesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value'.
The main operating subsidiary of Atalaya Mining Plc is the 100% owned Atalaya Riotionto Minera, S.L.U. which operates "Proyecto Riotinto", in the historical site of Huelva, Spain.
The name and shareholding of the entities included in the Group in these financial statements are:
Entity name Business %(2) Country Atalaya Mining, Plc Holding n/a Cyprus EMED Marketing Ltd. Marketing 100% Cyprus EMED Mining Spain, S.L. Dormant 100% Spain Atalaya Riotinto Minera, S.L.U. Operating 100% Spain Recursos Cuenca Minera, S.L. Operating 50% Spain Atalaya Minasderiotinto Project Holding 100% United Kingdom (UK), Ltd. Eastern Mediterranean Exploration Operating 100% Spain & Development, S.L.U. Atalaya Touro (UK), Ltd. Holding 100% United Kingdom Fundación Atalaya Riotinto Trust 100% Spain Cobre San Rafael, S.L. (1) Development 10% Spain Atalaya Servicios Mineros, S.L.U. Dormant 100% Spain Atalaya Masa Valverde, S.L.U. Development 100% Spain Atalaya Financing Ltd Financing 100% Cyprus
Notes
(1) Cobre San Rafael, S.L. is the entity which holds the mining rights of the Proyecto Touro. The Group has control in the management of Cobre San Rafael, S.L., including one of the two Directors, management of the financial books and the capacity to appoint the key personnel. Refer to Note 31 for details on the acquisition of Cobre San Rafael, S.L.
(2) The effective proportion of shares held as at 31 December 2020 and 2019 remained unchanged.
The Group applied the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the transferred assets, liabilities incurred by the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the acquisition date. The Group recognised any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionated share of the recognised amounts of acquiree's identifiable net assets.
(c) Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquire is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 in profit or loss. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Gains and losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(d) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(e) Disposal of subsidiaries
When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
(f) Associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee (generally accompanying a shareholding of between 20% and 50% of the voting rights) but is not control or joint control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
Investments in associates or joint ventures are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. The Group's investment in associates or joint ventures includes goodwill identified on acquisition.
If the ownership interest in an associate or joint venture is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group's share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income, with a corresponding adjustment to the carrying amount of the investment. When the Group share of losses in an associate or a joint venture equals or exceeds its interest in the associate or joint venture, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate or the joint venture.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate or the joint venture is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or the joint venture and its carrying value and recognises the amount adjacent to 'share of profit/(loss) of associates' or joint ventures' in the income statement.
Profits and losses resulting from upstream and downstream transactions between the Group and its associate or joint venture are recognised in the Group's consolidated financial statements only to the extent of unrelated investors' interests in the associates or the joint ventures. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in associates or joint ventures are recognised in the income statement.
(g) Functional currency
Functional and presentation currency items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in Euro which is the Company's functional and presentation currency.
Determination of functional currency may involve certain judgements to determine the primary economic environment and the parent entity reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment.
Foreign currency transactions are translated into the functional currency using the spot exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in the income statement.
Monetary assets and liabilities denominated in foreign currencies are updated at year-end spot exchange rates.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Gains or losses of monetary and non-monetary items are recognised in the income statement.
Balance sheet items are translated at period-end exchange rates. Exchange differences on translation of the net assets of such entities whose functional currency are not the Euro are taken to equity and recorded in a separate currency translation reserve.
2.4 Investments in subsidiary companies in the Company's financial statements
Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognised as an expense in the period in which the impairment is identified.
2.5 Interest in joint arrangements
A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control that is when the strategic, financial and operating policy decisions relating to the activities the joint arrangement require the unanimous consent of the parties sharing control.
Where a Group entity undertakes its activities under joint arrangements directly, the Group's share of jointly controlled assets and any liabilities incurred jointly with other ventures are recognised in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group's share of the output of jointly controlled assets, and its share of joint arrangement expenses, are recognised when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably.
The Group enters joint arrangements that involve the establishment of a separate entity in which each acquiree has an interest (jointly controlled entity). The Group reports its interests in jointly controlled entities using the equity method of accounting.
Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the Group's interest in the joint arrangement.
2.6 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the CEO who makes strategic decisions.
The Group has only one distinct business segment, being that of mining operations, mineral exploration and development.
2.7 Inventory
Inventory consists of copper concentrates, ore stockpiles and metal in circuit and spare parts. Inventory is physically measured or estimated and valued at the lower of cost or net realisable value. Net realisable value is the estimated future sales price of the product the entity expects to realise when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted.
Cost is determined by using the FIFO method and comprises direct purchase costs and an appropriate portion of fixed and variable overhead costs, including depreciation and amortisation, incurred in converting materials into finished goods, based on the normal production capacity. The cost of production is allocated to joint products using a ratio of spot prices by volume at each month end. Separately identifiable costs of conversion of each metal are specifically allocated.
Materials and supplies are valued at the lower of cost or net realisable value. Any provision for obsolescence is determined by reference to specific items of stock. A regular review is undertaken to determine the extent of any provision for obsolescence.
2.8 Assets under construction
All subsequent expenditure on the construction, installation or completion of infrastructure facilities including mine plants and other necessary works for mining, are capitalised in "Assets under Construction". Any costs incurred in testing the assets to determine if they are functioning as intended, are capitalised, net of any proceeds received from selling any product produced while testing. Where these proceeds exceed the cost of testing, any excess is recognised in the statement of profit or loss and other comprehensive income. After production starts, all assets included in "Assets under Construction" are then transferred to the relevant asset categories.
Once a project has been established as commercially viable, related development expenditure is capitalised. A development decision is made based upon consideration of project economics, including future metal prices, reserves and resources, and estimated operating and capital costs. Capitalisation of costs incurred and proceeds received during the development phase ceases when the property is capable of operating at levels intended by management.
Capitalisation ceases when the mine is capable of commercial production, except for development costs which give rise to a future benefit.
Pre-commissioning sales are offset against the cost of assets under construction. No depreciation is recognised until the assets are substantially complete and ready for productive use.
2.9 Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses.
Subsequent costs are included in the assets' carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Property, plant and equipment are depreciated to their estimated residual value over the estimated useful life of the specific asset concerned, or the estimated remaining life of the associated mine ("LOM"), field or lease. Depreciation commences when the asset is available for use.
The major categories of property, plant and equipment are depreciated/amortised on a Unit of Production ("UOP") and/or straight-line basis as follows:
Buildings UOP Mineral rights UOP Deferred mining costs UOP Plant and machinery UOP Motor vehicles 5 years Furniture/fixtures/office 5 - 10 equipment years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within "Other (losses)/gains - net" in the income statement.
(a) Mineral rights
Mineral reserves and resources which can be reasonably valued are recognised in the assessment of fair values on acquisition. Mineral rights for which values cannot be reasonably determined are not recognised. Exploitable mineral rights are amortised using the UOP basis over the commercially recoverable reserves and, in certain circumstances, other mineral resources. Mineral resources are included in amortisation calculations where there is a high degree of confidence that they will be extracted in an economic manner.
(b) Deferred mining costs - stripping costs
Mainly comprises of certain capitalised costs related to pre-production and in-production stripping activities as outlined below.
Stripping costs incurred in the development phase of a mine (or pit) before production commences are capitalised as part of the cost of constructing the mine (or pit) and subsequently amortised over the life of the mine (or pit) on a UOP basis.
In-production stripping costs related to accessing an identifiable component of the ore body to realise benefits in the form of improved access to ore to be mined in the future (stripping activity asset), are capitalised within deferred mining costs provided all the following conditions are met:
i. it is probable that the future economic benefit associated with the stripping activity will be realised;
ii. the component of the ore body for which access has been improved can be identified and;
iii. the costs relating to the stripping activity associated with the improved access can be reliably measured.
If all of the criteria are not met, the production stripping costs are charged to the consolidated statement of income as they are incurred.
The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs.
(c) Exploration costs
Under the Group's accounting policy, exploration expenditure is not capitalised until the management determines a property will be developed and point is reached at which there is a high degree of confidence in the project's viability and it is considered probable that future economic benefits will flow to the Group. A development decision is made based upon consideration of project economics, including future metal prices, reserves and resources, and estimated operating and capital costs.
Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a project does not prove viable, all irrecoverable costs associated with the project net of any related impairment provisions are written off.
(d) Major maintenance and repairs
Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and overhaul costs. Where an asset, or part of an asset, that was separately depreciated and is now written off is replaced, and it is probable that future economic benefits associated with the item will flow to the Group through an extended life, the expenditure is capitalised.
Where part of the asset was not separately considered as a component and therefore not depreciated separately, the replacement value is used to estimate the carrying amount of the replaced asset(s) which is immediately written off. All other day-to-day maintenance and repairs costs are expensed as incurred.
(e) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale (a qualifying asset) are capitalised as part of the cost of the respective asset. Where funds are borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred. All other borrowing costs are recognised in the statement of profit or loss and other comprehensive income in the period in which they are incurred.
(f) Restoration, rehabilitation and decommissioning
Restoration, rehabilitation and decommissioning costs arising from the installation of plant and other site preparation work, discounted using a risk adjusted discount rate to their net present value, are provided for and capitalised at the time such an obligation arises.
The costs are charged to the consolidated statement of income over the life of the operation through depreciation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent site disturbance, which are created on an ongoing basis during production, are provided for at their net present values and charged to the consolidated statement of income as extraction progresses.
Changes in the estimated timing of the rehabilitation or changes to the estimated future costs are accounted for prospectively by recognising an adjustment to the rehabilitation liability and a corresponding adjustment to the asset to which it relates, provided the reduction in the provision is not greater than the depreciated capitalised cost of the related asset, in which case the capitalised cost is reduced to zero and the remaining adjustment recognised in the consolidated statement of income. In the case of closed sites, changes to estimated costs are recognised immediately in the consolidated statement of income.
2.10 Intangible assets
(a) Business combination and goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the acquired interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.
The results of businesses acquired during the year are brought into the consolidated financial statements from the effective date of acquisition. The identifiable assets, liabilities and contingent liabilities of a business which can be measured reliably are recorded at their provisional fair values at the date of acquisition. Acquisition-related costs are expensed as incurred.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
(b) Permits
Permits are capitalised as intangible assets which relate to projects that are at the pre-development stage. No amortisation charge is recognised in respect of these intangible assets. Once the Group receives those permits and commence production, the intangible assets relating to permits will be depreciated on a UOP basis.
Other intangible assets include computer software.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition provided they meet recognition criteria as per IFRS 3. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation (calculated on a straight-line basis over their useful lives) and accumulated impairment losses, if any.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated and company statements of comprehensive income when the asset is derecognised.
2.11 Impairment of non-financial assets
Assets that have an indefinite useful life - for example, goodwill or intangible assets not ready for use - are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
2.12 Financial assets and liabilities
2.12.1 Classification
From 1 January 2019, the Group classifies its financial assets in the following measurement categories:
-- those to be measured at amortised cost. -- those to be measured subsequently at fair value through OCI, and. -- those to be measured subsequently at fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's and the Company's business model for managing them. In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are 'solely payments of principal and interest' ('SPPI') on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Subsequent measurement of debt instruments depends on the Group's business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:
2.12.2 Amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses.
Impairment losses are presented as separate line item in the statement of profit or loss.
The Company's financial assets at amortised cost include current and non-current receivables (other than trade receivables which are measured at fair value through profit and loss) and cash and cash equivalents.
2.12.3 Fair value through other comprehensive income
Financial assets which are debt instruments, that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in profit/(loss) before tax and impairment expenses are presented as a separate line item in the statement of profit or loss.
At transition to IFRS 9, the Group had certain financial asset that were accounted for as debt instruments at fair value through other comprehensive income; however, at the year end, no such assets existed.
2.12.4 Equity instruments designated as fair value through other comprehensive income
Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the consolidated and company statements of comprehensive income when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.
The Group elected to classify irrevocably its listed equity investments under this category.
2.12.5 Assets at fair value through profit and loss
Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised as profit or loss and presented net within other gains/(losses) in the period in which it arises.
Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the consolidated and company statements of comprehensive income as applicable.
2.12.6 De-recognition of financial assets
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
2.12.7 Impairment of financial assets
From 1 January 2019, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost. Expected credit losses are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
For receivables (other than trade receivables which are measured at FVPL), the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity.
2.12.8. Financial liabilities and trade payables
After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the consolidated and company statements of comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process.
Amortised cost is calculated by taking any discount or premium on acquisition and fees or costs that are an integral part of the EIR, into account. The EIR amortisation is included as finance costs in the consolidated and company statements of comprehensive income
2.13 Current versus Non-current Classification
The Group presents assets and liabilities in the consolidated and company statements of financial position based on current/non-current classification.
(a) An asset is current when it is either: -- Expected to be realised or intended to be sold or consumed in normal operating cycle; -- Held primarily for the purpose of trading; -- Expected to be realised within 12 months after the reporting period
Or
-- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period
All other assets are classified as non-current.
(b) A liability is current when either: -- It is expected to be settled in the normal operating cycle; -- It is held primarily for the purpose of trading -- It is due to be settled within 12 months after the reporting period
Or
-- There is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
2.14 Cash and cash equivalents
In the consolidated and company statements of cash flows, cash and cash equivalents includes cash in hand and in bank including deposits held at call with banks, with a maturity of less than 3 months.
2.15 Provisions
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 the amount has been reliably estimated. Provisions are not recognised for future operating losses.
2.16 Interest-bearing loans and borrowings
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as part of the cost of that asset.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment and amortised over the period of the facility to which it relates.
Borrowing costs are interest and other costs that the Group incurs in connection with the borrowing of funds, including interest on borrowings, amortisation of discounts or premium relating to borrowings, amortisation of ancillary costs incurred in connection with the arrangement of borrowings, finance lease charges and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
2.17 Deferred consideration
Deferred consideration arises when settlement of all or any part of the cost of an agreement is deferred. It is stated at fair value at the date of recognition, which is determined by discounting the amount due to present value at that date. Interest is imputed on the fair value of non-interest-bearing deferred consideration at the discount rate and expensed within interest payable and similar charges. At each balance sheet date deferred consideration comprises the remaining deferred consideration valued at acquisition plus interest imputed on such amounts from recognition to the balance sheet date.
2.18 Share capital
Ordinary shares are classified as equity. The difference between the fair value of the consideration received by the Company and the nominal value of the share capital being issued is taken to the share premium account.
Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds in the share premium account.
2.19 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is also not recognised if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period date and are expected to apply when the related deferred tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
2.20 Share-based payments
The Group operates a share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The fair value is measured using the Black Scholes pricing model. The inputs used in the model are based on management's best estimates for the effects of non-transferability, exercise restrictions and behavioural considerations. Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest.
Vesting conditions are: (i) the personnel should be an employee that provides services to the Group; and (ii) should be in continuous employment for the whole vesting period of 3 years. Specific arrangements may exist with senior managers and board members, whereby their options stay in use until the end.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied (Note 23).
2.21 Rehabilitation provisions
The Group records the present value of estimated costs of legal and constructive obligations required to restore operating locations in the period in which the obligation is incurred. The nature of these restoration activities includes dismantling and removing structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation and re-vegetation of affected areas. The obligation generally arises when the asset is installed, or the ground/environment is disturbed at the production location. When the liability is initially recognised, the present value of the estimated cost is capitalised by increasing the carrying amount of the related mining assets to the extent that it was incurred prior to the production of related ore. Over time, the discounted liability is increased for the change in present value based on the discount rates that reflect current market assessments and the risks specific to the liability. The periodic unwinding of the discount is recognised in the consolidated income statement as a finance cost. Additional disturbances or changes in rehabilitation costs will be recognised as additions or charges to the corresponding assets and rehabilitation liability when they occur. For closed sites, changes to estimated costs are recognised immediately in the consolidated income statement.
The Group assesses its mine rehabilitation provision annually. Significant estimates and assumptions are made in determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes and changes in discount rates. Those uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at the consolidated statement of financial position date represents management's best estimate of the present value of the future rehabilitation costs required.
2.22 Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date including whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies:
a) There is a change in contractual terms, other than a renewal or extension of the arrangement;
b) A renewal option is exercised, or extension granted, unless the term of the renewal or extension was initially included in the lease term;
c) There is a change in the determination of whether fulfilment is dependent on a specified asset; or
d) There is a substantial change to the asset.
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
2.22.1 Group as a lessee
The Group has lease contracts for various items of laboratory equipment, motor vehicle, lands and buildings used in its operations. Leases of laboratory equipment and motor vehicles generally have lease terms for four years, while lands and buildings generally have lease terms for the life of mine, currently after 13 years of operation. The Group's obligations under its leases are secured by the lessor's title to the leased assets. Generally, the Group is restricted from assigning and subleasing the leased assets.
2.22.2 Accounting policy - leases
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.
The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.
After initial measurement, the right-of-use assets are depreciated from the commencement date using the straight-line method over the shorter of the estimated useful lives of the right-of-use assets or the end of lease term. These are as follows:
Right-of-use asset Depreciation terms in years
Lands and buildings Based on Units of Production
(UOP)
Motor vehicles Based on straight line depreciation
Laboratory equipment Based on straight line depreciation
After the commencement date, the right-of-use assets are measured at cost less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability.
Lease liabilities
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability include the following:
-- Fixed payments, less any lease incentives receivable
-- Variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date
-- Amounts expected to be payable by the lessee under residual value guarantees
-- The exercise price of a purchase option if the lessee is reasonably certain to exercise that option
-- Lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option
-- Payments of penalties for early terminating the lease, unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest rate method. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. The result of this re-measurement is disclosed in a line of the right-of-use assets note as modifications.
When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded as profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below EUR5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Significant judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Group has the option, under some of its leases to lease the assets for additional terms of three to five years. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy). The Group included the renewal period as part of the lease term for leases of plant and machinery due to the significance of these assets to its operations. These leases have a short non-cancellable period (i.e., three to five years) and there will be a significant negative effect on production if a replacement is not readily available. The renewal options for leases of motor vehicles were not included as part of the lease term because the Group has a policy of leasing motor vehicles for not more than five years and hence not exercising any renewal options.
2.23 Revenue recognition
(a) Revenue from contracts with customers
Atalaya is principally engaged in the business of producing copper concentrate and in some instances, provides freight/shipping services. Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which Atalaya expects to be entitled in exchange for those goods or services. Atalaya has concluded that it is the principal in its revenue contracts because it controls the goods or services before transferring them to the customer.
(b) Copper in concentrate (metal in concentrate) sales
For most copper in concentrate (metal in concentrate) sales, the enforceable contract is each purchase order, which is an individual, short-term contract. For the Group's metal in concentrate sales not sold under CIF Incoterms, the performance obligations are the delivery of the concentrate. A proportion of the Group's metal in concentrate sales are sold under CIF Incoterms, whereby the Group is also responsible for providing freight services. In these situations, the freight services also represent separate performance obligation (see paragraph (c) below).
The majority of the Group's sales of metal in concentrate allow for price adjustments based on the market price at the end of the relevant QP stipulated in the contract. These are referred to as provisional pricing arrangements and are such that the selling price for metal in concentrate is based on prevailing spot prices on a specified future date after shipment to the customer. Adjustments to the sales price occur based on movements in quoted market prices up to the end of the QP. The period between provisional invoicing and the end of the QP can be between one and three months.
Revenue is recognised when control passes to the customer, which occurs at a point in time when the metal in concentrate is physically transferred onto a vessel, train, conveyor or other delivery mechanism. The revenue is measured at the amount to which the Group expects to be entitled, being the estimate of the price expected to be received at the end of the QP, i.e., the forward price, and a corresponding trade receivable is recognised. For those arrangements subject to CIF shipping terms, a portion of the transaction price is allocated to the separate freight services provided (See paragraph (c) below).
For these provisional pricing arrangements, any future changes that occur over the QP are included within the provisionally priced trade receivables and are, therefore, within the scope of IFRS 9 and not within the scope of IFRS 15. Given the exposure to the commodity price, these provisionally priced trade receivables will fail the cash flow characteristics test within IFRS 9 and will be required to be measured at fair value through profit or loss up from initial recognition and until the date of settlement. These subsequent changes in fair value are recognised as part of revenue in the statement of profit or loss and other comprehensive income each period and disclosed separately from revenue from contracts with customers as part of 'Fair value gains/losses on provisionally priced trade receivables. Changes in fair value over, and until the end of, the QP, are estimated by reference to updated forward market prices for copper as well as taking other relevant fair value considerations as set out in IFRS 13, into account, including interest rate and credit risk adjustments.
Final settlement is based on quantities adjusted as required following the inspection of the product by the customer as well as applicable commodity prices. IFRS 15 requires that variable consideration should only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. As the adjustments relating to the final assay results for the quantity and quality of concentrate sold are not significant, they do not constrain the recognition of revenue.
(c) Freight services
As noted above, a proportion of the Group's metal in concentrate sales are sold under CIF Incoterms, whereby the Group is responsible for providing freight services (as principal) after the date that the Group transfers control of the metal in concentrate to its customers. The Group, therefore, has separate performance obligation for freight services which are provided solely to facilitate sale of the commodities it produces.
The revenue from freight services is a separate performance obligation under IFRS 15 and therefore is recognised as the service is provided, hence at year end a portion of revenue must be deferred.
Other Incoterms commonly used by the Group are FOB, where the Group has no responsibility for freight or insurance once control of the products has passed at the loading port, Ex works where control of the goods passes when the product is picked up at seller's promises, and CIP where control of the goods passes when the product is delivered to the agreed destination. For arrangements which have these Incoterms, the only performance obligations are the provision of the product at the point where control passes.
(d) Sales of services
The Group sells services in relation to maintenance of accounting records, management, technical, administrative support and other services to other companies. Revenue is recognised in the accounting period in which the services are rendered.
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. The Group does not have any contract assets as performance and a right to consideration occurs within a short period of time and all rights to consideration are unconditional.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.
From time to time, the Group recognises contract liabilities in relation to some metal in concentrate sales which are sold under CIF Incoterms, whereby a portion of the cash may be received from the customer before the freight services are provided.
2.24 Interest income
Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group and the Company reduce the carrying amount to its recoverable amount, the estimated future cash flow is discounted at the original effective interest rate of the instrument and the discount continues unwinding as interest income. Interest income on impaired loan and receivables is recognised using the original effective interest rate.
2.25 Dividend income
Dividend income is recognised when the right to receive payment is established.
2.26 Dividend distribution
Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. No dividend has been paid by the Company since its incorporation.
2.27 Earnings per share
Basic earnings per share is calculated by dividing the net profit for the year by the weighted average number of ordinary shares outstanding during the year. The basic and diluted earnings per share are the same as there are no instruments that have a dilutive effect on earnings.
2.28 Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
2.29 Amendment of financial statements after issue
The consolidated and company financial statements were authorised for issue by the Board of Directors on 24 March 2021. The Board of Directors has no right to amend the Financial Statements after they are authorised.
2.30 Fair value estimation
The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the reporting date.
The fair value of financial instruments traded in active markets, such as publicly traded and available--for--sale financial assets is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses a variety of methods, such as estimated discounted cash flows, and makes assumptions that are based on market conditions existing at the reporting date.
Fair value measurements recognised in the consolidated and company 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).
THE GROUP
(Euro 000's) Level 1 Level 2 Level 3 Total
31 December 2020
Other financial assets
Financial assets at FV through OCI 86 - 1,101 1,187
Trade and other receivables
Receivables (subject to provisional pricing) - 24,250 - 24,250
Total 86 24,250 1,101 25,437
======== ======== ======== =======
31 December 2019
Other financial assets
Financial assets at FV through OCI 42 - 1,101 1,143
Trade and other receivables
Receivables (subject to provisional pricing) - 17,716 - 17,716
======== ======== ======== =======
Total 42 17,716 1,101 18,859
======== ======== ======== =======
THE COMPANY
(Euro 000's) Level 1 Level 2 Level 3 Total
31 December 2020
Non-current receivables
Financial assets at FV through profit and loss - - 243,557 243,557
Other current assets
Financial assets at FV through OCI 86 - - 86
Total 86 - 243,557 243,643
======== ======== ======== ========
31 December 2019
Non-current receivables
Financial assets at FV through profit and loss - - 229,686 229,686
Other current assets
Financial assets at FV through OCI 42 - - 42
======== ======== ======== ========
Total 42 - 229,686 229,728
======== ======== ======== ========
3. Financial Risk Management and Critical accounting estimates and judgements
3.1 Financial risk factors
The Group manages its exposure to key financial risks in accordance with its financial risk management policy. The objective of the policy is to support the delivery of the Group's financial targets while protecting future financial security. The main risks that could adversely affect the Group's financial assets, liabilities or future cash flows are market risks comprising: commodity price risk, interest rate risk and foreign currency risk; liquidity risk and credit risk; operational risk, compliance risk and litigation risk. Management reviews and agrees policies for managing each of these risks that are summarised below.
The Group's senior management oversees the management of financial risks. The Group's senior management is supported by the AFRC that advises on financial risks and the appropriate financial risk governance framework for the Group. The AFRC provides assurance to the Group's senior management that the Group's financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group's policies and risk objectives. Currently, the Group does not apply any form of hedge accounting.
(a) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability but can also increase the risk of losses. The Group has procedures with the object of minimising such losses such as maintaining sufficient cash to meet liabilities when due. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group finance. Group finance monitors rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs.
The following tables detail the Group's remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes principal cash flows.
THE GROUP
Between
Carrying Contractual Less than Between 1 - 2 Between Over
(Euro 000's) amounts cash flows 3 months 3 - 12 months years 2 - 5 years 5 years
=============== =============== ========== =============== ======== ============= ===========
31 December
2020
Tax liability 1,310 1,310 - 1,310 - - -
Deferred
consideration 53,000 53,000 53,000 - - -
Trade and
other
payables 69,885 69,885 27,077 41,360 13 1,435 -
Lease
liability 6,046 6,046 154 463 619 1,623 3,187
=============== =============== ========== =============== ======== ============= ===========
130,241 130,241 80,231 43,133 632 3,058 3,187
=============== =============== ========== =============== ======== ============= ===========
31 December
2019
Land options
and mortgages 282 282 11 271 - - -
Tax liability 2,507 2,507 - 2,507 - - -
Deferred
consideration 53,000 53,000 - - - 53,000 -
Trade and
other
payables 56,681 56,681 44,407 12,265 9 - -
Lease
liability 6,512 6,512 141 453 604 1,672 3,632
=============== =============== ========== =============== ======== ============= ===========
118,982 118,982 44,569 15,496 613 54,672 3,632
=============== =============== ========== =============== ======== ============= ===========
THE COMPANY
Between
Carrying Contractual Less than Between 1 - 2 Between Over
(Euro 000's) amounts cash flows 3 months 3 - 12 months years 2 - 5 years 5 years
============== ============== ========== =============== ======== ============= ===========
31 December
2020
Tax liability 473 473 - 473 - - -
Deferred
consideration 9,117 9,117 - 9,117 - -
Trade and
other
payables 12,485 12,485 - 12,485 - - -
22,075 22,075 - 22,075 - - -
============== ============== ========== =============== ======== ============= ===========
31 December
2019
Tax liability 1,865 1,865 - 1,865 - - -
Deferred
consideration 9,117 9,117 - - - 9,117 -
Trade and
other
payables 10,272 10,272 - 10,272 - - -
21,254 21,254 - 12,137 - 9,117 -
============== ============== ========== =============== ======== ============= ===========
(b) Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.
Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Group's measurement currency. The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the US Dollar and the British Pound. The Group's management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.
Foreign currency sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in the foreign exchange rate, with all other variables held constant, of the Group's profit before tax due to changes in the carrying value of monetary assets and liabilities at reporting date:
Effect on profit before tax for the year ended Effect on profit before tax for the year ended
31 Dec 2020 increase/(decrease) 31 Dec 2019 increase/(decrease)
(Euro 000's)
================================================ =================================================
+5% 12,867 9,393
-5% (12,867) (9,393)
(c) Commodity price risk
Commodity price is the risk that the Group's future earnings will be adversely impacted by changes in the market prices of commodities, primarily copper. Management is aware of this impact on its primary revenue stream but knows that there is little it can do to influence the price earned apart from a hedging scheme.
Commodity price hedging is governed by the Group's policy which allows to limit the exposure to prices. The Group may decide to hedge part of its production during the year.
Commodity price sensitivity
The table below summarises the impact on profit before tax for changes in commodity prices on the fair value of derivative financial instruments and trade receivables (subject to provisional pricing). The impact on equity is the same as the impact on profit before income tax as these derivative financial instruments have not been designated as hedges and are classified as held-for-trading and are therefore fair valued through profit or loss.
The analysis is based on the assumption that the copper prices move $0.05/lb with all other variables held constant. Reasonably possible movements in commodity prices were determined based on a review of the last two years' historical prices.
Effect on profit before tax for the Effect on profit before tax for the
year ended 31 Dec 2020 year ended 31 Dec 2019
increase/(decrease) increase/(decrease)
===================================== =====================================
Eur 000's Eur 000's
Increase/(decrease) in copper prices
Increase $0.05/lb (2019: $0.05) 4,629 4,090
Decrease $0.05/lb (2019: $0.05) (4,629) (4,090)
(d) Credit risk
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. The Group has no significant concentration of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables. The Group has policies to limit the amount of credit exposure to any financial institution.
Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the maximum credit exposure without taking account of the value of any collateral obtained:
3.1
(Euro 000's) 2020 2019
======= =====
Unrestricted cash and cash equivalent at Group 24,519 1,730
Unrestricted cash and cash equivalent at operating entity 13,248 6,647
Cash and cash equivalents 37,767 8,077
======= =====
Restricted cash was reclassified to non-current trade and other receivables in 2019, as the deposit is considered to be long term (Note 19).
Besides of the above, there are no collaterals held in respect of these financial instruments and there are no financial assets that are past due or impaired as at 31 December 2020.
(e) Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group's management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
At the reporting date the interest rate profile of interest--bearing financial instruments was:
(Euro 000's) 2020 2019
======= =====
Variable rate instruments
Financial assets 37,767 8,077
======= =====
An increase of 100 basis points in interest rates at 31 December 2020 would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. For a decrease of 100 basis points there would be an equal and opposite impact on the profit and other equity.
Equity Profit or loss
(Euro 000's) 2020 2019 2020 2019
==== ===== ======== =======
Variable rate instruments 378 81 378 81
(f) Operational risk
Operational risk is the risk that derives from the deficiencies relating to the Group's information technology and control systems as well as the risk of human error and natural disasters. The Group's systems are evaluated, maintained and upgraded continuously.
(g) Compliance risk
Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non--compliance with laws and regulations. The Group has systems in place to mitigate this risk, including seeking advice from external legal and regulatory advisors in each jurisdiction.
(h) Litigation risk
Litigation risk is the risk of financial loss, interruption of the Group's operations or any other undesirable situation that arises from the possibility of non--execution or violation of legal contracts and consequentially of lawsuits. The risk is restricted through the contracts used by the Group to execute its operations.
3.2 Capital risk management
The Group considers its capital structure to consist of share capital, share premium and share options reserve. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group is not subject to any externally imposed capital requirements.
In order to maintain or adjust the capital structure, the Group issues new shares. The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The AFRC reviews the capital structure on a continuing basis.
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce borrowings.
The Group monitors capital on the basis of the gearing ratio. The gearing ratio is calculated as net debt divided by total capital. Net debt is calculated as provisions plus deferred consideration plus trade and other payables less cash and cash equivalents.
(Euro 000's) 2020 2019
======== =======
Net debt (1) 117,080 117,774
Total equity 353,690 319,858
======== =======
Total capital 470,770 437,632
======== =======
Gearing ratio 24.9% 26.9%
-------- -------
(1) Net debt includes non-current and current liabilities net of cash and cash equivalent.
3.3 Critical accounting estimates and judgements
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates and assumptions are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
In particular, the Group has identified a number of areas where significant judgements, estimates and assumptions are required.
(a) Capitalisation of exploration and evaluation costs
Under the Group's accounting policy, exploration and evaluation expenditure is not capitalised until the point is reached at which there is a high degree of confidence in the project's viability and it is considered probable that future economic benefits will flow to the Group. Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a project proves to be unviable, all irrecoverable costs associated with the project net of any related impairment provisions are written off.
(b) Stripping costs
The Group incurs waste removal costs (stripping costs) during the development and production phases of its surface mining operations. Furthermore, during the production phase, stripping costs are incurred in the production of inventory as well as in the creation of future benefits by improving access and mining flexibility in respect of the orebodies to be mined, the latter being referred to as a stripping activity asset. Judgement is required to distinguish between the development and production activities at surface mining operations.
The Group is required to identify the separately identifiable components or phases of the orebodies for each of its surface mining operations. Judgement is required to identify and define these components, and also to determine the expected volumes (tonnes) of waste to be stripped and ore to be mined in each of these components. These assessments may vary between mines because the assessments are undertaken for each individual mine and are based on a combination of information available in the mine plans, specific characteristics of the orebody, the milestones relating to major capital investment decisions and the type and grade of minerals being mined.
Judgement is also required to identify a suitable production measure that can be applied in the calculation and allocation of production stripping costs between inventory and the stripping activity asset. The Group considers the ratio of expected volume of waste to be stripped for an expected volume of ore to be mined for a specific component of the orebody, compared to the current period ratio of actual volume of waste to the volume of ore to be the most suitable measure of production.
These judgements and estimates are used to calculate and allocate the production stripping costs to inventory and/or the stripping activity asset(s). Furthermore, judgements and estimates are also used to apply the units of production method in determining the depreciable lives of the stripping activity asset(s).
(c) Ore reserve and mineral resource estimates
The Group estimates its ore reserves and mineral resources based on information compiled by appropriately qualified persons relating to the geological and technical data on the size, depth, shape and grade of the ore body and suitable production techniques and recovery rates.
Such an analysis requires complex geological judgements to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements and production costs, along with geological assumptions and judgements made in estimating the size and grade of the ore body.
The Group uses qualified persons (as defined by the Canadian Securities Administrators' National Instrument 43-101) to compile this data. Changes in the judgments surrounding proven and probable reserves may impact as follows:
-- The carrying value of exploration and evaluation assets, mine properties, property, plant and equipment, and goodwill may be affected due to changes in estimated future cash flows;
-- Depreciation and amortisation charges in the consolidated and company statements of comprehensive income may change where such charges are determined using the UOP method, or where the useful life of the related assets change;
-- Capitalised stripping costs recognised in the statement of financial position as either part of mine properties or inventory or charged to profit or loss may change due to changes in stripping ratios;
-- Provisions for rehabilitation and environmental provisions may change where reserve estimate changes affect expectations about when such activities will occur and the associated cost of these activities;
-- The recognition and carrying value of deferred income tax assets may change due to changes in the judgements regarding the existence of such assets and in estimates of the likely recovery of such assets.
(d) Impairment of assets
Events or changes in circumstances can give rise to significant impairment charges or impairment reversals in a particular year. The Group assesses each Cash Generating Unit ("CGU") annually to determine whether any indications of impairment exist. If it was necessary management could contract independent expert to value the assets. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered the higher of the fair value less cost to sell and value-in-use. An impairment loss is recognised immediately in net earnings. The Group has determined that each mine location is a CGU.
These assessments require the use of estimates and assumptions such as commodity prices, discount rates, future capital requirements, exploration potential and operating performance. Fair value is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value for mineral assets is generally determined as the present value of estimated future cash flows arising from the continued use of the asset, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may take into account. Cash flows are discounted at an appropriate discount rate to determine the net present value. For the purpose of calculating the impairment of any asset, management regards an individual mine or works site as a CGU.
Although management has made its best estimate of these factors, it is possible that changes could occur in the near term that could adversely affect management's estimate of the net cash flow to be generated from its projects.
(e) Provisions for decommissioning and site restoration costs
Accounting for restoration provisions requires management to make estimates of the future costs the Group will incur to complete the restoration and remediation work required to comply with existing laws, regulations and agreements in place at each mining operation and any environmental and social principles the Group is in compliance with. The calculation of the present value of these costs also includes assumptions regarding the timing of restoration and remediation work, applicable risk-free interest rate for discounting those future cash outflows, inflation and foreign exchange rates and assumptions relating to probabilities of alternative estimates of future cash outflows.
Management uses its judgement and experience to provide for and (in the case of capitalised decommissioning costs) amortise these estimated costs over the life of the mine. The ultimate cost of decommissioning and timing is uncertain and cost estimates can vary in response to many factors including changes to relevant environmental laws and regulations requirements, the emergence of new restoration techniques or experience at other mine sites. As a result, there could be significant adjustments to the provisions established which would affect
future financial results. Refer to Note 26 for further details.
(f) Income tax
Significant judgment is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group and Company recognise liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
Judgement is also required to determine whether deferred tax assets are recognised in the consolidated statements of financial position. Deferred tax assets, including those arising from unutilised tax losses, require the Group to assess the probability that the Group will generate sufficient taxable earnings in future periods, in order to utilise recognised deferred tax assets.
Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. These estimates of future taxable income are based on forecast cash flows from operations (which are impacted by production and sales volumes, commodity prices, reserves, operating costs, closure and rehabilitation costs, capital expenditure, dividends and other capital management transactions). To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets could be impacted.
In addition, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future periods.
(g) Inventory
Net realisable value tests are performed at each reporting date and represent the estimated future sales price of the product the entity expects to realise when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Where the time value of money is material, these future prices and costs to complete are discounted.
(h) Leases - Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group 'would have to pay', which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary's functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary's stand-alone credit rating).
(i) Contingent liabilities
A contingent liability arises where a past event has taken place for which the outcome will be confirmed only by the occurrence or non-occurrence of one or more uncertain events outside of the control of the Group, or a present obligation exists but is not recognised because it is not probable that an outflow of resources will be required to settle the obligation.
A provision is made when a loss to the Group is likely to crystallise. The assessment of the existence of a contingency and its likely outcome, particularly if it is considered that a provision might be necessary, involves significant judgment taking all relevant factors into account.
(j) Deferred consideration
As disclosed in Note 28, the Group has recorded a deferred consideration liability in relation to the obligation to pay Astor EUR53.0 million out of excess cash from operations at the Proyecto Riotinto.
In 2018 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.
(k) Share-based compensation benefits
Share based compensation benefits are accounted for in accordance with the fair value recognition provisions of IFRS 2 "Share-based Payment". As such, share-based compensation expense for equity-settled share-based payments is measured at the grant date based on the fair value of the award and is recognised as an expense over the vesting period. The fair value of such share-based awards at the grant date is measured using the Black Scholes pricing model. The inputs used in the model are based on management's best estimates for the effects of non-transferability, exercise restrictions, behavioural considerations and expected volatility. Please refer to Note 23.
(l) Consolidation of Cobre San Rafael
Cobre San Rafael, S.L. is the entity which holds the mining rights of Proyecto Touro. The Group controls Cobre San Rafael, S.L. as it is exposed to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The control is proven as: one of the two Directors belongs to the Group and management of the financial books and the capacity to appoint the key personnel is controlled by Atalaya.
(m) Classification of financial assets
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value
through OCI, or fair value through profit or loss.
The Group and Company exercises judgement upon determining the classification of its financial assets upon considering whether contractual features including interest rate could significantly affect future cash flows. Furthermore, judgment is required when assessing whether compensation paid or received on early termination of lending arrangements results in cash flows that are not 'solely payments of principal and interest (SPPI).
4. Business and geographical segments
Business segments
The Group has only one distinct business segment, that being mining operations, which include mineral exploration and development.
Copper concentrates produced by the Group are sold to three offtakers as per the relevant offtake agreement (Note 30.3)
Geographical segments
The Group's mining activities are located in Spain. The commercialisation of the copper concentrates produced in Spain is carried out through Cyprus. Sales transactions to related parties are on arm's length basis in a similar manner to transaction with third parties. Accounting policies used by the Group in different locations are the same as those contained in Note 2.
2020
(Euro 000's ) Cyprus Spain Other Total
========= ========== ========= ==========
Revenue 30,848 221,936 - 252,784
========= ========== ========= ==========
Earnings/(loss)before Interest, Tax, Depreciation and Amortisation 22,324 45,277 (157) 67,444
Depreciation/amortisation charge (2) (31,681) - (31,683)
Net foreign exchange gain/(loss) (960) (2,870) 4 (3,826)
Impairment of other receivables (49) - - (49)
Finance income - 197 - 197
Finance cost (1) (340) - (341)
========= ==========
Profit/(loss) before tax 21,312 10,583 (153) 31,742
========= ========== ========= ==========
Tax (2,036) 684 - (1,352)
==========
Profit for the year 30,390
==========
Total assets 37,284 466,605 1,157 505,046
========= ========== ========= ==========
Total liabilities (12,271) (142,545) (31) (154,847)
========= ========== ========= ==========
Depreciation of property, plant and equipment 2 25,741 - 25,743
========= ========== ========= ==========
Amortisation of intangible assets - 4,941 - 4,941
========= ========== ========= ==========
Total additions of non-current assets 2 58,650 - 58,652
========= ========== ========= ==========
2019
(Euro 000's ) Cyprus Spain Other Total
========= ========== ========= ==========
Revenue 10,335 177,533 - 187,868
========= ========== ========= ==========
Earnings/(loss)before Interest, Tax, Depreciation and Amortisation 4,195 58,209 (1,071) 61,333
Depreciation/amortisation charge (1) (23,024) - (23,025)
Net foreign exchange gain/(loss) 126 224 - 350
Impairment of other receivables (1,694) - - (1,694)
Finance income 25 27 - 52
Finance cost (1) (88) - (89)
--------- ---------- --------- ----------
Profit/(loss) before tax 2,650 35,348 (1,071) 36,927
========= ==========
Tax (1459) (4,748) - (6,207)
========= ========== ========= ==========
Profit for the year 30,720
==========
Total assets 19,515 422,316 1,476 443,307
Total liabilities (13,823) (111,461) (567) (125,851)
========= ========== ========= ==========
Depreciation of property, plant and equipment 1 12,574 - 12,575
========= ========== ========= ==========
Amortisation of intangible assets - 3,502 - 3,502
========= ========== ========= ==========
Total additions of non-current assets 1 63,498 - 63,499
========= ========== ========= ==========
Revenue represents the sales value of goods supplied to customers; net of value added tax. The following table summarises sales to customers with whom transactions have individually exceeded 10.0% of the Group's revenues.
(Euro 000's) 2020 2019
Segment EUR'000 Segment EUR'000
------------------------ -------- ------- -------
Offtaker 1 Copper 50,611 Copper 35,766
Offtaker 2 Copper 67,012 Copper 53,147
Offtaker 3 Copper 119, 491 Copper 98,955
5. Revenue
THE GROUP
(Euro 000's ) 2020 2019
======== =======
Revenue from contracts with customers (1) 249,438 188,019
Fair value gain/losses relating to provisional pricing within sales (2) 3,346 (151)
======== =======
Total revenue 252,784 187,868
======== =======
All revenue from copper concentrate is recognised at a point in time when the control is transferred. Revenue from freight services is recognised over time as the services are provided.
(1) Included within 2020 revenue there is a transaction price of EUR3.0 million (EUR0.2 million in 2019) related to the freight services provided by the Group to the customers arising from the sales of copper concentrate under CIF incoterm.
(2) Provisional pricing impact represented the change in fair value of the embedded derivative arising on sales of concentrate.
THE COMPANY
(Euro 000's ) 2020 2019
====== =====
Sales of services to related companies (Note 30.3) 1,442 1,283
1,442 1,283
====== =====
6. Other income
THE GROUP
(Euro 000's ) 2020 2019
===== ====
Gain on disposal of associate - 50
Release of prior year provision - -
Other income - 38
====== ====
- 88
====== ====
THE COMPANY
(Euro 000's ) 2020 2019
===== ====
Gain on disposal of associate - 50
Release of prior year provision - -
Sales of services to related parties (Note 30.3) - 74
====== ====
- 124
====== ====
7. Expenses by nature
THE GROUP
(Euro 000's ) 2020 2019
======== =======
Operating costs 150,253 92,699
Rents (Note 27) 4,509 4,040
Care and maintenance expenditure 369 240
Exploration expenses 1,661 3,588
Employee benefit expense (Note 8) 21,194 20,153
Compensation of key management personnel 2,100 2,105
Auditors' remuneration - audit 229 215
* Other services 19 31
Other accountants' remuneration 111 152
Consultants' remuneration 1,174 1,026
Depreciation of property, plant and equipment
(Note 13) 25,744 12,575
Amortisation of intangible assets (Note 14) 4,941 3,502
Travel costs 140 371
Share option-based employee benefits 816 619
Shareholders' communication expense 178 -
On-going listing costs 235 369
Legal costs 689 448
Public relations and communication development 492 567
Insurances 112 -
Impairment of intangible assets (Note 14) 985 6,948
Impairment loss on other receivables (Note
19) 49 1,694
Other expenses and provisions 1,069 -
======== =======
Total cost of operation, corporate, share based
benefits, care and maintenance,
and exploration expenses 217,069 151,342
======== =======
THE COMPANY
(Euro 000's ) 2020 2019
====== =====
Employee benefit expense (Note 8) - 122
Key management remuneration 656 386
Auditors' remuneration - audit 118 116
* Other services 17 31
Other accountants' remuneration 80 134
Consultants' remuneration 60 159
Management fees (Note 30.3) 55 42
Travel costs 4 13
Shareholders' communication expense 178 181
On-going listing costs 235 188
Legal costs 661 420
Insurances 113 -
Impairment loss on other receivables (Note
19) 45 1,694
Other expenses and provisions (242) (252)
Total cost of corporate, share based benefits
and impairment 1,980 3,234
====== =====
8. Employee benefit expense
THE GROUP
(Euro 000's ) 2020 2019
======= ======
Wages and salaries 15,675 14,599
Social security and social contributions 5,054 4,997
Employees' other allowances 20 21
Bonus to employees 445 536
21,194 20,153
======= ======
The average number of employees and the number of employees at year end by office are:
Average At year end
========== =============
Number of employees 2020 2019 2020 2019
==== ==== ====== =====
Spain - Full time 482 441 482 446
Spain - Part time 6 6 6 7
Cyprus - Full time 1 3 1 2
Cyprus - Part time 1 - 1 -
==== ==== ====== =====
Total 490 450 490 455
==== ==== ====== =====
THE COMPANY
(Euro 000's ) 2020 2019
===== ====
Wages and salaries - 109
Social security and social contributions - 13
- 122
=================================================== ====
The average number of employees and the number of employees at year end by office are:
Average At year end
========== =============
Number of employees 2020 2019 2020 2019
==== ==== ======= ====
Cyprus - Full time - 3 - -
==== ==== ======= ====
Total - 3 - -
==== ==== ======= ====
9. Finance income
THE GROUP
(Euro 000's ) 2020 2019
======= ====
Interest income 197 52
197 52
======= ====
THE COMPANY
(Euro 000's ) 2020 2019
========= ======
Interest income from interest-bearing intercompany
loans at fair value through profit and loss
(Note 30.3) 13,607 13,607
Interest income from interest-bearing intercompany
loans at amortised cost (Note 30.3) 2,516 3,198
Interest income 16 25
========= ======
16,139 16,830
========= ======
Interest income relates to interest received on bank balances.
10. Finance costs
THE GROUP
(Euro 000's ) 2020 2019
==== ====
Interest expense:
Other interest 180 40
Interest expense on lease liabilities 17 8
Unwinding of discount on mine rehabilitation
provision (Note 26) 144 41
341 89
==== ====
11. Tax
THE GROUP
(Euro 000's ) 2020 2019
======= =====
Current income tax charge 3,582 5,158
(Over)/under provision previous years - (302)
Deferred tax related to utilization of losses
for the year (Note 17) 777 256
Deferred tax income relating to the origination
of temporary differences (Note 17) (3,320) 874
Deferred tax expense relating to reversal of
temporary differences (Note 17) 313 221
1,352 6,207
======= =====
The tax on the Group's results before tax differs from the theoretical amount that would arise using the applicable tax rates as follows:
(Euro 000's ) 2020 2019
======== =======
Accounting profit before tax 31,742 36,927
======== =======
Tax calculated at the applicable tax rates
of the Company - 12.5% 3,968 4,616
Tax effect of expenses not deductible for tax
purposes 2,334 1,103
Tax effect of tax loss for the year 662 4,021
Tax effect of allowances and income not subject
to tax (3,502) (7,123)
Over provision for prior year taxes - (302)
Effect of higher tax rates in other jurisdictions
of the group 897 2,797
Tax effect of tax losses brought forward (777) (256)
Additional tax - -
Deferred tax (Note 17) (2,230) 1,351
Tax charge 1,352 6,207
======== =======
THE COMPANY
(Euro 000's ) 2020 2019
==== =====
Current income tax charge 928 1,152
(Over)/under provision previous years - (274)
928 878
==== =====
Tax losses carried forward
As at 31 December 2020, the Group had tax losses carried forward amounting to EUR15.4 million from the Spanish subsidiary for the period 2008 to 2015.
Cyprus
The corporation tax rate is 12.5%. Under certain conditions interest income may be subject to defence contribution at the rate of 30%. In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 17% for 2014 and thereafter. Under current legislation, tax losses may be carried forward and be set off against taxable income of the five succeeding years.
Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at 20% for the tax years 2012 and 2013 and 17% for 2014 and thereafter will be payable on such deemed dividends to the extent that the shareholders (companies and individuals) are Cyprus tax residents and Cyprus domiciled. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defence is payable by the Company for the account of the shareholders.
Spain
The corporation tax rate for 2020 and 2019 is 25%. The recent Spanish tax reform approved in 2014 reduced the general corporation tax rate from 30% to 28% in 2015 and to 25% in 2016, and introduced, among other changes, a 10% reduction in the tax base subject to equity increase and other requirements. Under current legislation, tax losses may be carried forward and be set off against taxable income with no limitation.
12. Earnings per share
The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the Company is based on the following data:
(Euro 000's ) 2020 2019
========== =======================
Parent company (2,842) (3,997)
Subsidiaries 34,321 41,320
========== =======================
Profit attributable to equity holders of the parent 31,479 37,323
========== =======================
Right of Deferred
Land and use Plant and Assets under mining Other
buildings assets equipment construction(3) costs (2) assets (1) Total
(Euro 000's ) (5)
=========== ========== =========== ================ ========== =========== ==========
2020
Cost
At 1 January 2020 46,063 6,421 248,221 16,517 34,013 781 352,016
Additions - 148 2,278 16,863 7,855 20 27,164
Increase in rehab.
provision 17,954 (7) - - - - - 17,954
Reclassifications - - 17,552(4) (17,552) - - -
Advances 17 - - - - - 17
At 31 December
2020 64,034 6,569 268,051 15,828 41,868 801 397,151
=========== ========== =========== ================ ========== =========== ==========
Depreciation
At 1 January 2020 8,257 391 28,872 - 6,061 620 44,201
Charge for the
year 3,414 565 (6) 19,257 (8) - 2,467 63 25,766
Disposals - - 5 - - 5 10
At 31 December
2020 11,671 956 48,134 - 8,528 688 69,977
=========== ========== =========== ================ ========== =========== ==========
Net book value at
31 December 2020 52,363 5,613 219,917 15,828 33,340 113 327,174
=========== ========== =========== ================ ========== =========== ==========
2019
Cost
At 1 January 2019 45,853 6,144 152,820 62,010 27,537 785 295,149
Additions 210 277 1,171 48,737 6,476 1 56,872
Reclassifications - - 94,230 (94,230) - - -
Disposals - - - - - (5) (5)
At 31 December
2019 46,063 6,421 248,221 16,517 34,013 781 352,016
=========== ========== =========== ================ ========== =========== ==========
Depreciation
At 1 January 2019 6,072 - 20,315 - 4,681 561 31,629
Charge for the
year 2,185 391 8,557 - 1,380 62 12,575
Disposals - - - - - (3) (3)
At 31 December
2019 8,257 391 28,872 - 6,061 620 44,201
=========== ========== =========== ================ ========== =========== ==========
Net book value at
31 December 2019 37,806 6,030 219,349 16,517 27,952 161 307,815
=========== ========== =========== ================ ========== =========== ==========
Weighted number of ordinary shares for the purposes of basic earnings per share ('000) 137,359 137,339
======== ========
Basic profit per share (EUR cents/share) 22.9 27.2
======== ========
Weighted number of ordinary shares for the purposes of diluted earnings per share ('000) 140,511 139,236
========== ==========
Diluted profit per share (EUR cents/share) 22.4 26.8
========== ==========
At 31 December 2020, there are 2,787,000 options (Note 23) and nil warrants (Note 22) (At 31 December 2019: 2,505,250 options and nil warrants) which have been included when calculating the weighted average number of shares for FY2020.
13. Property, plant and equipment
THE GROUP
(1) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.
(2) Stripping costs
(3) Assets under construction at 31 December 2020 amounted to EUR15.8 million (2019: EUR16.5 million). It includes the capitalisation of costs related sustaining capital expenses.
(4) Transfers related to sustaining Capex and the Tailing Dam Project.
(5) See leases in Note 27.
(6) Depreciation includes an adjustment of previous year amounted to EUR11k.
(7) Increase in lands related with the rehabilitation provision amounting to EUR17,941k
(8) The increase in the depreciation relate to the completion of the expansion project in January 2020 and the increase of ore processed.
The above fixed assets are mainly located in Spain.
THE COMPANY
Other
(Euro 000's ) assets (1) Total
=========== =======
2020
Cost
At 1 January 2020 15 15
Disposals - -
At 31 December 2020 15 15
=========== =======
Depreciation
At 1 January 2020 15 15
Charge for the year - -
At 31 December 2020 15 15
=========== =======
Net book value at 31 December 2020 - -
=========== =======
2019
Cost
At 1 January 2019 15 15
Disposals - -
At 31 December 2019 15 15
=========== =======
Depreciation
At 1 January 2019 15 15
Charge for the year - -
Disposals - -
At 31 December 2019 15 15
=========== =======
Net book value at 31 December 2019 - -
=========== =======
(1) Includes furniture, fixtures and office equipment which are depreciated over 5-10 years.
The Group
In 2017 the BoD approved an Expansion Project to increase the plant capacity to 15Mtpa. During 2020, the Expansion Project was completed with the processing plant fully commissioned and operating at an increased annualised rate of 15 Mtpa since January 2020.
During FY2020, the Group capitalised personnel costs amounting to EUR466k (2019: EUR953k).
14. Intangible assets
The Group
Permits (1) Licences, R&D and
Software
(Euro 000's ) T otal
============ ================= ========
2020
Cost
On 1 January 2020 76,538 7,610 84,148
Additions 1,672(2) 1,312 2,984
Disposals - (327) (327)
At 31 December 2020 78,210 8,595 86,805
============ ================= ==========
Amortisation
On 1 January 2020 13,808 7,255 21,063
Charge for the year 4,875 66 4,941
Impairment charge (Note 7) - 985 985
At 31 December 2020 18,683 8,306 26,989
============ ================= ==========
Net book value at 31 December 2020 59,527 289 59,816
============ ================= ==========
2019
Cost
On 1 January 2019 76,538 6,026 82,564
Additions from acquisition of subsidiary - 5,449 5,499
Additions - (3,865) (3,865)
At 31 December 2019 76,538 7,610 84,148
============ ================= ==========
Amortisation
On 1 January 2019 10,370 243 10,613
Charge for the year 3,438 64 3,502
Impairment charge (Note 7) - 6,948 6,948
At 31 December 2019 13,808 7,255 21,063
============ ================= ==========
Net book value at 31 December 2019 62,730 355 63,085
============ ================= ==========
(1) Permits include an amount of EUR5.0 million that relate to the Proyecto Touro mining rights.
(2) Addition resulting from the acquisition of Atalaya Masa Valverde SLU.
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 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 Proyecto Riotinto. The Report increased 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 the 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. Atalaya assessed its assets concluding that there are no indicators of impairment for either Proyecto Riotinto or Atalaya Masa Valverde as of 31 December 2020. Management decided to impair in 2019 all the investment (EUR6,948k) referred to exploration and other related expenses of Proyecto Touro due to the existence of substantial evidence of impairment based on the negative Environmental Impact Statement notified by the Xunta de Galicia. Mining rights relating to Proyecto Touro continue to be carried at their book value of EUR5.0 million in Permits as their market value is in excess of the carrying value.
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. back in September 2008. This amount was fully impaired on acquisition, in the absence of the mining licence back in 2008.
15. Investment in subsidiaries
(Euro 000's ) 2020 2019
====== ======
The Company
Opening amount at cost minus provision for impairment 4,630 3,899
Increase of investment (2) (4) 818 731
Closing amount at cost less provision for impairment 5,448 4,630
====== ======
The directly-owned subsidiaries of the Group, the percentage of equity owned and the main country of operation are set out below. These interests are consolidated within these financial statements.
Effective Effective
proportion of proportion of
Date of Principal Country of shares held in shares held in
Subsidiary incorporation/ activity incorporation 2020 (5) 2019 (5)
companies acquisition
================== =================== =================== ================== ================= =================
Atalaya Touro
(UK) Ltd(1) 10 March 2017 Holding United Kingdom 100% 100%
Atalaya
Minasderiotinto
Project (UK)
Ltd(2) 10 Sep 2008 Holding United Kingdom 100% 100%
EMED Marketing
Ltd 08 Sep 2008 Trading Cyprus 100% 100%
EMED Mining Spain
SLU(3) 12 April 2007 Exploration Spain 100% 100%
Atalaya Financing
Ltd(4) 16 Sep 2020 Financing Cyprus 100% 100%
As security for the obligation on ARM to pay consideration to Astor under the Master Agreement and the Loan Assignment Agreement, Atalaya Minasderiotinto Project (UK) Ltd has granted pledges to Astor Resources AG over the issued capital of ARM and granted a pledge to Astor over the issued share capital of Eastern Mediterranean Exploration and Development S.L.U. and the Company has provided a parent company guarantee (Note 28).
(1) On 10 March 2017, Atalaya Touro (UK) Limited was incorporated. Atalaya Mining Plc is its sole shareholder.
(2) During the year 2020 there was an increase amounting to EUR816k in the investment mainly related to the employee benefit expenses (2019: EUR731k).
(3) In December 2017, EMED Mining Spain S.L.U. increased its capital by EUR300k from its sole shareholder. This investment increase was fully impaired in the year.
(4) On 16 September 2020 the Group established a new company in Cyprus under the name of Atalaya Financing, Limited. The activity of the new company is financing. The audited consolidated financial statements include the results of the entity since its establishment date.
(5) The effective proportion of shares held as at 31 December 2020 and 2019 remained unchanged excluding Eastern Mediterranean Resources (Caucasus) Ltd which was sold in 2018.
16. Investment in joint venture
Country of incorporation Effective proportion of
C ompany name Principal activities shares
held at 31 December 2015
============================= ============================= ========================== ============================
Exploitation of tailing dams
Recursos Cuenca Minera S.L. and waste areas resources Spain 50%
In 2012 ARM entered into a 50/50 joint venture with Rumbo to evaluate and exploit the potential of the class B resources in the tailings dam and waste areas at The Proyecto Riotinto. Under the joint venture agreement, ARM will be the operator of the joint venture and will reimburse Rumbo for the costs associated with the application for classification of the Class B resources. ARM will fund the initial expenditure of a feasibility study up to a maximum of EUR2.0 million. Costs are then borne by the joint venture partners in accordance with their respective ownership interests.
16. Investment in joint venture (cont.)
The Group's significant aggregate amounts in respect of the joint venture are as follows:
(Euro 000's ) 2020 2019
====== =====
Intangible assets 94 94
Trade and other receivables 2 2
Cash and cash equivalents 21 21
Trade and other payables (115) (115)
====== =====
Net assets 2 2
====== =====
Revenue - -
Expenses - -
====== =====
Net profit/(loss) after tax - -
====== =====
17. Deferred tax
Consolidated Consolidated
statement of income statement
financial position
(Euro 000's) 2020 2019 2020 2019
----------- --------- ------------ ------
The Group
Deferred tax asset
At 1 January 6,576 7,927 - -
Deferred tax asset due to losses
available against future taxable - - - -
income (Note 11)
Deferred tax related to utilization
of losses for the year (Note
11) (777) (256) 777 256
Deferred tax asset due to losses
available against future taxable - - - -
income overprovision previous
years (Note 11)
Deferred tax income relating
to the origination of temporary
differences (Note 11) 3,319 (874) (3,319) 874
Deferred tax expense relating
to reversal of temporary differences
(Note 11) (313) (221) 313 221
=========== =========
At 31 December 8,805 6,576
Deferred tax income (Note 11) (2,229) 1,351
------------ ------
Deferred tax assets are recognised for the carry-forward of unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available in the future against which the unused tax losses/credits can be utilised.
In addition to recognised deferred income tax asset, the Group has unrecognised tax losses in Cyprus that are available to carry forward for 5 years against future taxable income of the Group companies in which the losses arose, and in Spain EUR15.4 million (2019: EUR18.5 million) which are available to carry forward indefinitely against future profits. Deferred tax assets have not been recognised in respect of losses in Cyprus as they may not be used to offset taxable profits elsewhere in the Group, and due to the uncertainty in profitability in the near future to support (either partially or in full) the recognition of the losses as deferred income tax assets.
18. Inventories
(Euro 000's ) 2020 2019
======= ======
The Group
Finished products 8,642 11,024
Materials and supplies 13,764 9,266
Work in progress 1,170 1,040
23,576 21,330
======= ======
As at 31 December 2020, copper concentrate produced and not sold amounted to 12,180 tonnes (FY2019: 14,201 tonnes). Accordingly, the inventory for copper concentrate was EUR8.6 million (FY2019: EUR11.0 million). During the year 2020 the Group recorded cost of sales amounting to EUR175.5 million (FY2019: EUR115.3 million).
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.
19. Trade and other receivables
(Euro 000's ) 2020 2019
========== =========
The Group
Non-current trade and other receivables
Deposits 48 500
Loans 2,667 -
2,715 500
========== =========
Current trade and other receivables
Trade receivables at fair value - subject
to provisional pricing 20,304 8,798
Trade receivables from shareholders at
fair value - subject to provisional pricing
(Note 30.5) 3,946 8,918
Other receivables from related parties
at amortised cost (Note 30.3) 56 56
Deposits 21 26
VAT receivable 15,826 14,380
Tax advances 9 7
Prepayments 2,507 616
Other current assets 522 56
========== =========
43,191 32,857
Allowance for expected credit losses - -
========== =========
Total trade and other receivables 45,906 33,357
========== =========
(Euro 000's ) 2020 2019
========== =========
The Company
Non-current trade and other receivables
Receivables from own subsidiaries at
amortised cost (Note 30.4) 75,300 80,316
Receivables from own subsidiaries at
fair value through profit and loss (Note
30.4) 243,557 229,686
318,857 310,002
========== =========
Current trade and other receivables
VAT receivable - 47
Receivables from own subsidiaries at amortised
cost (Note 30.4) 10,737 3,996
Total current trade and other receivables 10,737 4,043
========== =============
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 value of trade and other receivables approximate their book values.
The increase in loans is related to an agreement entered by the Group and lain Technologies Ltd in relation to the construction of the Pilot Plan to develop the E-LIX System. The Loan is secured with the pilot plant, has a grace period of up to four years and repayment terms depending on future investments on the system. Amounts withdrawn bears interest at 2%
In 2018, the Company recognised EUR200k prepayment from an option to acquire a portion of an investment on a company which held mining rights of a land. In 2019, the Company signed an agreement to acquire an option over a portion of investment in another entity. The total amount paid in as prepayment for these two investments in 2019 was EUR1,494k. After the exploration processed performed by the Company on both lands, management decided not to pursue with the execution of both options and therefore to fully impaired the prepayments in 2019. Set out below are the movements of the impairment:
(Euro 000's ) 2020 2019
===== ================
The GROUP
1 January - 200
Additions 49 1,494
Impairment (49) (1,694)
At 31 December - -
===== ================
20. Other Financial assets
The Group
(Euro 000's ) 2020 2019
====== =====
Financial asset at fair value through OCI
(see (a)) below) 1,187 1,143
Total current 86 42
====== =====
Total non-current 1,101 1,101
====== =====
THE COMPANY
(Euro 000's ) 2020 2019
===== ====
Financial asset at fair value through OCI
(see (a)) below) 86 42
Total current 86 42
===== ====
a) Financial assets at fair value through OCI
The Group
(Euro 000's ) 2020 2019
====== =====
At 1 January (1) 1,143 71
Additions (3) - 1,101
Fair value change recorded in equity (Note
23) 44 (29)
Reversal of previously impaired - 50
Disposals (2) - (50)
At 31 December 1,187 1,143
====== =====
THE COMPANY
(Euro 000's ) 2020 2019
===== ====
At 1 January (1) 42 71
Fair value change recorded in equity (Note
23) 44 (29)
Reversal of previously impaired - 50
Disposals (2) - (50)
At 31 December 86 42
===== ====
Country Effective proportion
C ompany name Principal activities of incorporation of shares
held at 31 December
2020
===================== ======================== =================== ====================
Explotaciones
Gallegas del Cobre
SL Exploration company Spain 12.5%
Exploration and
development mining
KEFI Minerals company listed on
Plc AIM UK 0.19%
Prospech Limited Exploration company Australia 0.53%
(1) The Group decided to recognise changes in the fair value of available-for-sale investments in Other Comprehensive Income ('OCI'), as explained in Note 2.12.
(2) On 20 March 2019, the Board of Directors approved the disposal of the 10% free-carried investment of Atalaya in Eastern Mediterranean Minerals (Cyprus) Limited, an exploration company with interest in Cyprus.
(3) In November 2019, Atalaya executed the option to acquire 12.5% of Explotaciones Gallegas del Cobre, S.L. the exploration property around Touro, with known additional reserves.
21. Cash and cash equivalents
The Group
(Euro 000's ) 2020 2019
====== =====
Cash at bank and in hand 37,767 8,077
====== =====
As at 31 December 2020, the Group's operating subsidiary held EUR250k (FY2019: EUR250k) as a collateral for bank guarantees, which was recorded as restricted cash (or deposit). Restricted cash was reclassified to non-current trade and other receivables (Note 19) since the deposit is considered to be long term.
Cash and cash equivalents denominated in the following currencies:
(Euro 000's ) 2020 2019
------- -----
Euro - functional and presentation currency 2,431 2,059
Great Britain Pound 2,019 374
United States Dollar 33,317 5,644
======= =====
37,767 8,077
======= =====
The Company
(Euro 000's) 2020 2019
Cash at bank and on hand 2,049 128
===== ====
Cash and cash equivalents denominated in the following currencies:
Euro - functional and presentation currency 62 97
Great Britain Pound 1,985 29
United States Dollar 2 2
====== ===
2,049 128
====== ===
22. Share capital
Nr. Share Share
Authorised of Shares capital Premium Total
'000' GBP GBP 000's GBP
s 000's 000's
Ordinary shares of GBP0.075
each 200,000 15,000 - 15,000
=========== ========= ============= ========
Issued and fully paid
000's Euro Euro 000's Euro
000's 000's
1 January 2019 137,340 13,372 314,319 327,691
Issue Date Price Details
(GBP)
3 31 December 2019/1
January 2020 137,340 13,372 314,319 327,691
Exercised share
22 Dec 2020 2.015 options (e) 228 19 491 510
Exercised share
22 Dec 2020 1.475 options (e) 41 3 65 68
Exercised share
22 Dec 2020 1.440 options (e) 499 42 758 800
Bonus share to
22 Dec 2020 2.302 former Key management 33 3 81 84
===========
31 December 2020 138,141 13,439 315,714 329,153
===========
Authorised capital
The Company's authorised share capital is 200,000,000 ordinary shares of GBP0.075 each.
Issued capital
FY2020
a) On 22 December 2020, the Company was notified that certain employees exercised options over 768,250 ordinary shares of GBP0.075 at a price between GBP1.44 to GBP2.015, thus creating a share premium of EUR1,314k.
b) On 22 December 2020, the Company granted a bonus share to a former Key management of 33,333 ordinary shares of GBP0.075 at a price GBP2.302.
FY2019
No issuances during the twelve months period ended 31 December 2019.
23. Other reserves
THE GROUP
(Euro 000's
) Fair
value
reserve
of financial
assets Non-distributable Distributable
Depletion at FVOCI reserve reserve(4)
Share Bonus factor (2) (3)
option share (1) Total
At 1 January
2019 6,752 208 5,500 (1,115) 1,446 - 12,791
Recognition
of depletion
factor - - 5,378 - - - 5,378
Recognition
of non-distributable
reserve - - - - 1,984 - 1,984
Recognition
of distributable
reserve - - - - - 1,844 1,844
Recognition
of share
based payments 619 - - - - - 619
Change in
fair value
of financial
assets at
fair value
through OCI
(Note 20) - - - (29) - - (29)
Other changes
in reserves - - - - - 249 249
At 31 December
2019 7,371 208 10,878 (1,144) 3,430 2,093 22,836
Recognition
of depletion
factor - - 14,155 - - - 14,155
Recognition
of non-distributable
reserve - - - - 2,198 - 2,198
Recognition - - - - - - -
of distributable
reserve
Recognition
of share
based payments 816 - - - - - 816
Change in
fair value
of financial
assets at
fair value
through OCI
(Note 20) - - - 44 - - 44
Other changes - - - - - - -
in reserves
At 31 December
2020 8,187 208 25,033 (1,100) 5,628 2,093 40,049
the Company
Fair value
reserve of
financial
(Euro 000's ) Share Bonus assets at
option share FVOCI (2) Total
At 1 January 2019 6,752 208 (1,115) 5,845
Adjustment for initial - - - -
application of IFRS 9
Recognition of share based
payments 619 - - 619
Change in fair value of
financial assets at fair
value through OCI (Note
20) - - (29) (29)
======= ====== =======
At 31 December 2019 7,371 208 (1,144) 6,435
Recognition of share based
payments 816 - - 816
Change in fair value of
financial assets at fair
value through OCI (Note
20) - - 44 44
=======
At 31 December 2020 8,187 208 (1,100) 7,295
=======
(1) Depletion factor reserve
During the twelve month period ended 31 December 2020, the Group has disposed EUR14.2 million (FY2019: EUR5.4 million) as a depletion factor reserve as per the Spanish Corporate Tax Act.
(2) Fair value reserve of financial assets at FVOCI
The Group decided to recognise changes in the fair value of certain investments in equity securities in OCI. These changes are accumulated within the FVOCI reserve under equity. The Group transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
(3) Non-distributable reserve
As required by the Spanish Corporate Tax Act, the Group classified a non-distributable reserve of 10% of the profits generated by the Spanish subsidiaries until the reserve is 20% of share capital of the subsidiary.
(4) Distributable reserve
As result of the 2018 profit generated in ARM, the Group decided to record a distributable reserve in order to comply with the Spanish Corporate Tax Act.
Details of share options outstanding as at 31 December 2020:
Grant date Expiry date Exercise price GBP Share options
23 Feb 2017 22 Feb 2022 1.44 314,000
29 May 2019 28-May-2024 2.015 1,064,500
8 July 2019 7 July 2024 2.045 400,000
30 June 2020 29 June 2030 1.475 1,008,500
Total 2,787,000
Weighted average
exercise price GBP Share options
At 1 January 2020 1.833 2,505,250
Granted options during the year 1.475 1,050,000
Options executed during the year 1.612 (768,250)
31 December 2020 1.759 2,787,000
On 30 May 2019, the Company announced a grant of 1,500,000 share options (the "Options") to Persons Discharging Managerial Responsibilities ("PDMRs") and management, in accordance with the Company's approved Share Option Plan 2013 (the "Option Plan"). The Options expire five years from the date of grant (29 May 2019), have an exercise price of 201.5 pence per ordinary share, based on the minimum share price in the five days preceding the grant date, and vest in two equal tranches, half on grant and half on the first anniversary of the granting date.
On 30 June 2020, the Company announced a grant of 1,050,000 share options (the "Options") to Person Discharging Managerial Responsibilities ("PDMRs") and key management in accordance to the Company's approved Share Option Plan 2020 (the "Option Plan"). The Options expire ten years from the date of grant (30 June 2030), have an exercise price of 147.5 pence per ordinary share, based on the minimum share price in the five days preceding the grant date, and vest in two equal tranches, half on grant and half on the first anniversary of the granting date.
On 10 July 2019, the Company announced a grant of 400,000 share options (the "Options") to Person Discharging Managerial Responsibilities ("PDMRs") in accordance with the Company's approved Share Option Plan 2013 (the "Option Plan"). The Options expire five years from the date of grant (8 July 2019), have an exercise price of 204.5 pence per ordinary share, based on the minimum share price in the five days preceding the grant date, and vest in two equal tranches, half on grant and half on the first anniversary of the granting date.
On 22 December 2020, the Company was notified that certain employees exercised options over 768,250 ordinary shares of GBP0.075 at a price between GBP1.44 to GBP2.015 (Note 22 (b)).
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 subdivision or consolidation of the ordinary shares, a reduction of share capital and offers or invitations (whether by way of rights issue or otherwise) to the holders of ordinary shares.
The estimated fair values of the options were calculated using the Black Scholes option pricing model. The inputs into the model and the results are as follows:
Weighted Weighted Estimated
average average Expected Risk Expected Fair
Grant share price exercise Expected life Free dividend Value
Date GBP price GBP volatility (years) rate yield GBP
23 Feb 2017 1.440 1.440 51.8% 5 0.6% Nil 0.666
29 May 2019 2.015 2.015 46.9% 5 0.8% Nil 0.66
8 July 2019 2.045 2.045 46.9% 5 0.8% Nil 0.66
30 June
2020 1.475 1.475 50.32% 10 0.3% Nil 0.60
The volatility has been estimated based on the underlying volatility of the price of the Company's shares in the preceding twelve months.
24. Non-controlling interest
(Euro 000's ) 2020 2019 Opening balance (2,402) 4,200 Share of results for the year (1,089) (6,602) Closing balance (3,491) (2,402)
The Group has a 10% interest in Cobre San Rafael, S.L. acquired in July 2017 while the remaining 90% is held by a non-controlling interest (Note 2.3 (b) ( 1)). The significant financial information with respect to the subsidiary before intercompany eliminations as at and for the year ended 31 December 2020 is as follows:
(Euro 000's ) 2020 2019 Non-current assets 5,111 5,096 Current assets 706 580 Non-current liabilities - - Current liabilities 9,697 8,345 Equity (3,879) (2669) Revenue - - Loss for the year and total comprehensive income (1,210) (7,336)
Cobre San Rafael, S.L. was established on 13 June 2016.
* 10% interest in Cobre San Rafael, S.L. was acquired by the Group in July 2017.
25. Trade and other payables
THE GROUP
(Euro 000's ) 2020 2019
Non-current trade and other payables
Other non-current payables 1,435 -
Government grant 13 13
1,448 13
Current trade and other payables
Trade payables 63,946 52,395
Land options and mortgage - 282
Accruals 4,355 4,860
VAT payable 60 -
Other 76 -
68,437 57,537
THE COMPANY
(Euro 000's ) 2020 2019
Current trade and other payables
Suppliers 753 21
Accruals 809 1,744
Payable to own subsidiaries (Note 30.4) 11,380 8,507
VAT payable 60 -
13,002 10,272
Other non-current payables are related with the acquisition of Atalaya Masa Valverde former Cambridge Minería España, SL (see note 29).
Trade payables are mainly for the acquisition of materials, supplies and other services. These payables do not accrue interest and no guarantees have been granted. The fair value of trade and other payables approximate their book values.
The Group's exposure to currency and liquidity risk related to liabilities is disclosed in Note 3.
Trade payables are non-interest-bearing and are normally settled on 60-day terms.
26. Provisions
THE GROUP
(Euro 000's ) Legal Rehabilitation Total 1 January 2019 127 6,392 6,519 Additions 284 138 422 Revision of provision (23) (18) (41) Finance cost (Note 10) - 41 41 31 December 2019/1 January 2020 388 6,553 6,941 Additions 311 - 311 (Reduction) / addition of provision (73) 17,941 17,868 Finance cost (Note 10) - 144 144 31 December 2020 626 24,638 25,264 (Euro 000's ) 2020 2019 Non-Current 25,264 6,941 Current - - Total 25,264 6,941
Rehabilitation provision
Rehabilitation provision represents the estimated cost required for 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.
During 2020, Management engaged an independent consultant to review and update the rehabilitation liability. The updated estimation includes the expanded capacity of the plant and its impact on the mining project. The key comparative figures are:
Key numbers 2020 2019 Undiscounted liability at the end of the Project (1) Euro 31,007,410 11,617,030 Undiscounted liability affected as at reporting date Euro 25,334,377 7,870,243 Life of mine (3) Years 13.8 13.8 Restoration period Years 20 13.8 Average inflation rate used % 0.8800% 1,50% Discount rate (2) % 1.3580% 1.8700% Discounted liability Euro 24,638,008 6,553,094
(1) Total undiscounted liability in 2019 was EUR9.3 million with an extra 25% provision
(2) The discount rate used in the calculation of the net present value of the liability as at 31 December 2020 was 1.36% (2019: 1.87%), which is the average of the 15-year Spain Government Bond rate from 2016 to 2020.
(3) In July 2018, the Company announced an updated technical report on the mineral resources and reserves of the Proyecto Riotinto. The Report increased 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 expected payments for the rehabilitation work are as follows:
(Euro 000 's) Between Between Between
1 - 5 Years 6 - 10 Years 10 - 20 Years
Expected payments for rehabilitation of the mining site, discounted 4,704 3,247 16,687
Legal provision
The Group has been named as defendant in several legal actions in Spain, the outcome of which is not determinable as at 31 December 2020. Management has reviewed individually each case and made a provision of EUR626k (EUR388k in 2019) for these claims, which has been reflected in these consolidated financial statements. (Note 32)
27. Leases
(Euro 000's) 31 Dec 2020 31 Dec 2019
Non-current
Leases 4,796 5,265
4,796 5,265
Current
Leases 592 588
592 588
The Group entered into lease arrangements for the renting of land, laboratory equipment, a building and vehicles which are subject to the adoption of all requirements of IFRS 16 Leases (Note 2.2). The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets.
Amounts recognised in the statement of financial position and profit or loss
Set out below are the carrying amounts of the Group's right-of-use assets and lease liabilities and the movements during the period:
Right - of-use assets
Laboratory Lease liabilities
(Euro 000's) Lands Vehicles equipment Total
and buildings
As at 1 January
2020 5,750 44 237 6,031 5,853
Additions 135 - - 135 135
Depreciation expense (469) (15) (69) (553) -
Interest expense - - - - 17
Payments - - - - (617)
-----------
As at 31 December
2020 5,416 29 168 5,613 5,388
The amounts recognised in profit or loss, are set out below:
Twelve month Twelve month
ended ended
31 Dec 31 Dec
(Euro 000's) 2020 2019
As at 31 December
Depreciation expense of right-of-use
assets (553) (391)
Interest expense on lease liabilities (17) (8)
Total amounts recognised in profit or
loss (570) (399)
The Group recognised rent expense from short-term leases (Note 7).
Depreciation expense regarding leases amounts to EUR0.5 million (2019: EUR0.3) for the twelve month period ended 31 December 2020.
The duration of the land and building lease is for a period of twelve years. Payments are due at the beginning of the month escalating annually on average by 1.5%. At 31 December 2020, the remaining term of this lease is twelve years. (Note 2)
The duration of the motor vehicle and laboratory equipment lease is for a period of four years, payments are due at the beginning of the month escalating annually on average by 1.5%. At 31 December 2020, the remaining term of this motor vehicle and laboratory equipment lease is two years and two and half years respectively.
(Euro 000's) 31 Dec 2020 31 Dec
2019
Minimum lease payments due:
* Within one year 592 588
* Two to five years 2,068 2,134
* Over five years 2,728 3,131
Less future finance charges - -
Present value of minimum lease payments
due 5,388 5,853
Present value of minimum lease payments
due:
* Within one year 592 588
* Two to five years 2,068 2,134
* Over five years 2,728 3,131
5,388 5,853
(Euro 000's) Lease liability
Balance 1 January 2020 5,853
Additions 135
Interest expense 17
Lease payments (617)
Balance at 31 Dec 2020 5,388
Balance at 31 Dec 2020
* Non-current liabilities 4,795
* Current liabilities 592
5,388
28. Deferred consideration
In September 2008, the Group moved to 100% ownership of Atalaya Riotinto Mineral S.L. ("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") with Astor Management AG ("Astor") which included a deferred consideration of EUR43.9 million (the "Deferred Consideration") payable as consideration in respect of the acquisition among other items. The Company also entered into a credit assignment agreement at the same time 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").
The Master Agreement has been the subject of litigation in the High Court and the Court of Appeal that has now concluded. As a consequence, ARM must apply any excess cash (after payment of operating expenses, sustaining capital expenditure, any senior debt service requirements and up to US$10 million per annum (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). "Excess cash" is not defined in the Master Agreement leaving ambiguity as to how it is to be calculated.
On 2 March 2020, the Company filed an application in the High Court to seek clarity on the definition of "Excess Cash". The Company and Astor have now exchanged statements of case to set out their formal position. The trial is listed to be heard from 21 February 2022 (the "Trial"). Following the filing of the statements of case for the Trial, Astor applied to Court seeking an early determination (without the need for a full trial) of the dispute in relation to the "Excess Cash" (the "Summary Judgment application"). The Summary Judgment application will be heard on 14-15 June 2021. Astor will need to demonstrate (i) Atalaya has no reasonable prospect of success at Trial: and (ii) there is no other compiling reason why the case or issue should be disposed of at Trial.
As at 31 December 2020, no consideration was paid to Astor. However, during December 2020 the Board had discussions and considered an early payment of the Deferred Consideration and the Loan Assignment provided certain conditions could be met. Conditions included among others the execution of credit facilities agreements to fund the payment.
The Company classified the liability as current as at 31 December 2020.
On 15 March 2021, the Company fulfilled all conditions required by the Board of Directors and made the early payment of EUR53 million to Astor. The payment was fully funded by unsecured credit facilities entered into between December 2020 and February 2021 at interest rates ranging from 1,60% to 2,45% and repayable by 2023 and 2024.
The payment of the Deferred Consideration does not end the ongoing litigation as the issue as to whether any residual interest may or may not be payable remains unresolved. Consequently, the Company continues with these aspects of the case.
29. Acquisition, incorporation and disposals of subsidiaries
2020
Acquisition and incorporation of subsidiaries
On 16 September 2020 the Group established a new company in Cyprus under the name of Atalaya Financing, Limited. The activity of the new company is financing. The unaudited interim condensed consolidated financial statements include the results of the entity for half month period since the acquisition date:
On 15 October 2020, the Company acquired 100% of the voting shares of Cambridge Minería España, SL, a company located in Huelva (Spain) that holds exploration permits for Masa Valverde polymetallic project located in Huelva (Spain) for EUR1.4 million payable in two instalments.
Disposals of subsidiaries
There were no disposals of subsidiaries during the year.
2019
Acquisition and incorporation of subsidiaries
There were no acquisition nor incorporation of subsidiaries during the year.
Disposals of subsidiaries
There were no disposals of subsidiaries during the year.
Wind-up of subsidiaries
There were no operations wound-up during FY2020 and FY2019.
30. Group information and related party disclosures
30.1 Information about subsidiaries
These audited consolidated financial statements include:
Effective proportion
of shares held
Parent Principal activity Country of
Subsidiary companies incorporation
Atalaya Touro (UK) Ltd Atalaya Mining Plc Holding United Kingdom 100%
Atalaya Financing
Limited Atalaya Mining Plc Financing Cyprus 100%
Atalaya
MinasdeRiotinto
Project (UK) Limited Atalaya Mining Plc Holding United Kingdom 100%
EMED Marketing Ltd Atalaya Mining Plc Trading Cyprus 100%
EMED Mining Spain
S.L.U. Atalaya Mining Plc Exploration Spain 100%
Atalaya
Atalaya Riotinto MinasdeRiotinto
Minera S.L.U. Project (UK) Limited Production Spain 100%
Eastern Mediterranean Atalaya
Exploration and MinasdeRiotinto
Development S.L.U. Project (UK) Limited Exploration Spain 100%
Cobre San Rafael, S.L. Atalaya Touro (UK)
(1) Limited Exploration Spain 10%
Recursos Cuenca Minera Atalaya Riotinto Exploration Spain J-V
S.L.U. Minera SLU
Fundacion Atalaya Atalaya Riotinto
Riotinto Minera SLU Trust Spain 100%
Atalaya
Atalaya Servicios MinasdeRiotinto
Mineros, S.L.U. Project (UK) Limited Dormant Spain 100%
Atalaya Masa Valverde Atalaya Servicios
S.L.U. (2) Mineros, S.L.U. Exploration Spain 100%
(1) Cobre San Rafael, S.L. is the entity which holds the mining rights of The Proyecto Touro. The Group has control in the management of Cobre San Rafael, S.L., including one of the two Directors, management of the financial books and the capacity of appointment the key personnel (Note 2.3 (b) (1)).
(2) Cambridge Mineria Espana, S.L.U. changed its name to Atalaya Masa Valverde, S.L.U on 28 November 2020.
The following transactions were carried out with related parties:
30.2 Compensation of key management personnel
The total remuneration and fees of Directors (including executive Directors) and other key management personnel was as follows:
The Group The Company
(Euro 000's ) 2020 2019 2020 2019
Directors' remuneration and fees 1,044 1,319 572 536
Director's bonus (1) 305 325 - -
Share option-based benefits to
Directors 291 173 - -
Key management personnel remuneration
(2) 522 765 - -
Key management bonus (1) 182 740 - -
Key management share bonus (3) 84 - - -
Share option-based and other benefits
to key management personnel (4) 374 267 - -
======
2,802 3,589 572 536
======
(1) These amounts related to the approved performance bonus for 2019 by the Board of Directors following the proposal of the CGNC Committee. The 2020 estimates recorded are not included in the table above as this is yet to be approved by the Board of Directors. There is no certainty or guarantee that the Board of Directors will approve a similar amount for 2020 performance.
(2) Includes wages and salaries of key management personnel of EUR506k (2019: EUR730k) and other benefits of EUR16k (2019: EUR35k).
(3) In December 2020, a former key management employee was granted with 33,333 shares.
(4) Includes share option of a former key management employee.
At 31 December 2020 amounts due to Directors, as from the Group, are EURnil (EURnil million at 31 December 2019) and EURnil million (EUR0.5 million at 31 December 2019) to key management.
At 31 December 2020 amounts due to Directors, as from the Company, are EURnil (EURnil at 31 December 2019) and EURnil (EURnil million at 31 December 2019) to key management.
Share-based benefits
In 2020, the Directors and key management personnel have been granted 1,050,000 options (2019: 1,650,000 options) (see note 23).
During 2020 the Directors and key management personnel have not been granted any bonus shares (2019: nil).
30.3 Transactions with shareholders and related parties
THE GROUP
(Euro 000's ) 2020 2019
Trafigura- Revenue from contracts 49,775 33,179
Freight services - -
49,775 33,179
Gains relating provisional pricing within
sales 837 2,587
Trafigura - Total revenue from contracts 50,592 35,766
50,592 35,766
======
THE COMPANY
(Euro 000's ) 2020 2019
Sales of services (Note 5):
* EMED Marketing Limited 749 690
* Atalaya MinasdeRiotinto Project (UK) Limited 693 593
======
1,442 1,283
======
Other income services (Note 6):
* EMED Marketing Limited - 74
Purchase of services (Note 7):
* Atalaya Riotinto Minera SLU (55) 42
Finance income (Note 9):
Atalaya MinasdeRiotinto Project (UK) Limited
- Finance income from interest-bearing loan:
* Credit agreement - at amortised cost 970 1,644
* Participative loan - at fair value through profit and
loss 13,606 13,607
* Credit facility - at amortised cost 1,547 1,554
16,123 16,805
======
THE GROUP
(Euro 000's ) 2020 2019
Current assets - Receivable from related
parties (Note 19):
Recursos Cuenca Minera S.L. 56 56
56 56
The above balances bear no interest and are repayable on demand.
30.4 Year-end balances with related parties
THE COMPANY
(Euro 000's ) 2020 2019 Non-current assets - Loan from related parties at FV through profit and loss (Note 19): Atalaya MinasdeRiotinto Project (UK) Limited - Participative Loan (1) 243,545 229,686 Atalaya MinasdeRiotinto Project (UK) Limited - Eastern Participative Loan (5) 12 - Total 243,557 229,686 Non-current assets - Loans and receivables from related parties at amortised cost (Note 19): Atalaya MinasdeRiotinto Project (UK) Limited - Credit Expansion Loan (2) 45,138 43,591 Atalaya MinasdeRiotinto Project (UK) Limited - Credit Agreement (3) 27,412 26,442 Atalaya Riotinto Minera SLU (4) - 9,117 EMED Marketing Limited (4) 892 - Atalaya MinasdeRiotinto Project (UK) Limited (4) 1,858 1,166 Total 75,300 80,316 Current assets - Loans and receivables from related parties at amortised cost (Note 19): Atalaya Riotinto Minera SLU (4) 9,117 - Atalaya Touro (UK) Limited (4) 1,618 1,611 EMED Marketing Limited (4) - 2,385 Atalaya Financing Ltd 2 - Total 10,737 3,996
(1) This balance bears interest of 6.75% (2019: 6.75%).
(2) This balance bears interest of EURIBOR 6m plus 4% (2019: LIBOR 6month + 4.00%).
(3) This balance bears interest of EURIBOR 12month plus 4% (2019: 12month plus 4%). The Note Facility Agreement expired on 29 September 2019. The Group signed on 30 September 2019 a new Credit Agreement for the amount due of the Note Facility Agreement bearing a EURIBOR 12month plus 4% interest and maturing on 30 September 2024
(4) These receivables bear no interest These balances are repayable on demand. However, management will not claim any repayment in the following twelve months period after the release of the current consolidated financial statements.
(5) This balance bears interest of 3.00% (2019: 3.00%).
THE COMPANY
(Euro 000's ) 2020 2019
Payable to related party (Note 25):
EMED Marketing Limited 10,808 7,990
EMED Mining Spain S.L. 262 262
Atalaya Riotinto Minera S.L.U. 310 255
11,380 8,507
The above balances bear no interest and are repayable on demand.
30.5 Year-end balances with shareholders
(Euro 000's ) 2020 2019
Receivable from shareholders (Note 19):
Trafigura - Debtor balance -subject to
provisional pricing 3,946 8,918
3,946 8,918
The above debtor balance arising from the pre-commissioning sales of goods bear no interest and is repayable on demand.
31. 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.
32. Commitments
There are no minimum exploration requirements at Proyecto Riotinto. However, the Group is obliged to pay local 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.
In 2012, ARM entered into a 50/50 joint venture with Rumbo to evaluate and exploit the potential of the class B resources in the tailings dam and waste areas at Proyecto Riotinto (mainly residual gold and silver in the old gossan tailings). Under the joint venture agreement, ARM will be the operator of the joint venture, will reimburse Rumbo for the costs associated with the application for classification of the Class B resources and will fund the initial expenditure of a feasibility study up to a maximum of EUR2.0 million. Costs are then borne by the joint venture partners in accordance with their respective ownership interests.
33. Significant events
COVID-19 outbreak
The Company issued COVID-19 updates through the year as the outbreak of the virus impacted the company both operationally and financially. As announced on 30 March 2020, a Royal Decree of 29 March 2020 excluded mining from essential industries resulting in the halting of operations at Proyecto Riotinto from 30 March 2020. As announced on 6 April 2020, further clarifications were received on the Royal Decree on 3 April 2020 which reinstated mining on the list of permitted activities and accordingly, operations at Proyecto Riotinto were authorized to recommence.
It is Atalaya's priority to protect its workforce and the local communities surrounding both Proyecto Riotinto and Proyecto Touro. Atalaya has followed and continues following the requirements and recommendations issued by the Government of Spain and the regional and local health authorities at all times to reduce the risk of COVID-19 exposure and avoid the spread of the virus.
In order to mitigate the potential operational and financial impact of COVID-19 resulting from a sharply decrease in commodities prices, the Company increased its cash balance from EUR8.1 million as at 31 December 2019 to EUR32.4 million as at 30 June 2020 by net drawdowns on existing credit facilities. Following the recoveries of the commodities prices, the Company has repaid the credit facilities as of 31 December 2020.
AAU Permits
The Junta de Andalucía issued a favourable report in relation to the Unified Environmental Authorisation (the "AAU") of Proyecto Riotinto in January 2020. After a short legal consultation period exclusively with parties involved in the process lapses, The Company now has the AAU revalidated with no impact on the operation.
Negative Environmental Impact Statement on Proyecto Touro
The "Dirección Xeral de Calidade Ambiental e Cambio Climático", (the General Directorate for the Environment and Climate Change of Galicia), announced on 28 January 2020 that a negative Environmental Impact Statement for Proyecto Touro (Declaración de Impacto Ambiental) had been signed.
The short release stated that the decision was based on two reports which form part of a wider evaluation consisting of fifteen reports produced by different departments of the Xunta de Galicia. These two reports challenge the ability of the Company to guarantee that there will be no environmental impact of the Project on the Ulla River and related protected ecosystems which are located downstream.
On 1 March 2021 the formal communication from the Xunta de Galicia was received. The Company along with its advisers, is evaluating potential next steps for the Project, which could include an appeal of the decision made by the Xunta de Galicia, and/or the clarification of the questions raised by the reports.
New group entity
In 2020, the Company has initiated the process to establish in Cyprus a new subsidiary under the name of Atalaya Financing, Limited. The activity of this new company will be financing.
On 21 October 2020, Atalaya announced that it had entered into a definitive purchase agreement to acquire 100% of the Masa Valverde polymetallic project located in Huelva (Spain) through the acquisition of 100% of a Spanish company for EUR1.4 million payable in two instalments. Masa Valverde is one of the largest undeveloped volcanogenic massive sulphide deposits in the prolific Iberian Pyrite Belt and is located 28kms south west of Proyecto Riotinto.
34. Events after the reporting period
Depending on the duration of the COVID-19 pandemic, and continued negative impact on economic activity, the Group might experience negative results, and liquidity restraints and incur impairments on its assets in 2021. The exact impact on the Group's activities in 2021 and thereafter cannot be predicted. In the period since 31 December 2020 the Group has not incurred losses due to impairments. Refer to note 19.
On 10 February 2021, the Company announced that its Board of Directors had appointed Mr. Neil Gregson as an independent Non-Executive Director of the Company.
On 12 February 2021, the Company was notified that certain employees exercised options over 40,750 ordinary shares of GBP0.075.
On 1 March 2021, Atalaya received the formal communication from Xunta de Galicia of the negative Enviromental Impact Declaration on Proyecto Touro (Note 33).
In March 2021, the Board of Directors of the Company decided to make an early payment of the Deferred Consideration and the Loan Assignment related to Astor. The Payment was completed in March 2021 (Note 28).
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