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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Atalaya Mining Plc | LSE:ATYM | London | Ordinary Share | CY0106002112 | ORD 7.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.50 | -0.35% | 425.00 | 423.00 | 425.00 | 430.00 | 415.50 | 430.00 | 422,945 | 16:29:55 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Metal Mining Services | 341.98M | 38.77M | - | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMATYM
RNS Number : 1280U
Atalaya Mining PLC
21 November 2019
21 November 2019
Atalaya Mining Plc.
("Atalaya", the "Group" and/or the "Company")
Unaudited, Condensed, Interim, Consolidated Financial Statements for the period ended 30 September 2019
Atalaya Mining Plc (AIM: ATYM; TSX: AYM), the European mining and development company, is pleased to announce its quarterly results for the period ended 30 September 2019 ("Q3 2019"), together with the Unaudited, Condensed, Interim, Consolidated Financial Statements.
Financial Highlights
Hot Features
Premium
Quarter ended 30 September Q3 2019 Q3 2018 Nine Nine
months months
ended ended
30 Sept 30 Sept
2019 2018
Revenues from operations EURk 44,383 42,811 139,165 144,354
----------------- --------- --------- --------- ----------
Operating costs EURk (34,514) (35,152) (97,752) (102,311)
----------------- --------- --------- --------- ----------
EBITDA EURk 9,869 7,659 41,413 42,043
----------------- --------- --------- --------- ----------
Profit for the period EURk 6,933 3,133 27,937 27,625
----------------- --------- --------- --------- ----------
Earnings per share EUR cents/share 5.1 2.2 20.5 20.4
----------------- --------- --------- --------- ----------
Cash flows from operating
activities EURk 16,487 14,937 31,457 44,151
----------------- --------- --------- --------- ----------
Cash flows used in investing
activities EURk (13,115) (20,414) (45,390) (41,704)
----------------- --------- --------- --------- ----------
Cash flows (used)/from
financing activities EURk (158) - (430) 593
----------------- --------- --------- --------- ----------
Average realised copper
price $/lb 2.68 2.89 2.76 3.02
----------------- --------- --------- --------- ----------
Cu concentrate produced (tonnes) 45,458 44,562 137,281 134,130
----------------- --------- --------- --------- ----------
Cu production (tonnes) 10,568 11,055 31,675 30,942
----------------- --------- --------- --------- ----------
Cash costs $/lb payable 1.92 1.88 1.85 2.00
----------------- --------- --------- --------- ----------
All-In Sustaining Cost $/lb payable 2.25 2.13 2.12 2.35
----------------- --------- --------- --------- ----------
-- Revenues for Q3 2019 were EUR44.4 million compared with EUR42.8 million for the three month period ended 30 September 2018 ("Q3 2018"). The higher revenues were the result of increased volumes sold during Q3 2019 and stronger average US Dollar rates against the Euro. Revenues for the nine month period ended 30 September 2019 ("YTD 2019") of EUR139.2 million were lower than the EUR144.4 million reported for the nine month ended 30 September 2018 ("YTD 2018") owing mainly to c. 9% lower realised copper prices throughout 2019.
-- Operating costs (including administrative, exploration and care and maintenance costs) during Q3 2019 were EUR34.5 million compared with EUR35.2 million in Q3 2018. Operating costs for the nine month ended 30 September 2019 amounted to EUR97.8 million compared with EUR102.3 million during the same period in 2018. Lower costs were driven by efficiencies in mining, maintenance costs and technical services.
-- Cash costs during Q3 2019 were $1.92/lb of payable copper, higher than the cash costs of $1.88/lb in Q3 2018 as a result of a reduction in copper produced during Q3 2019. All-in Sustaining Costs ("AISC") during Q3 2019 amounted to $2.25/lb of payable copper, higher than $2.13/lb in the same quarter last year. Cash costs for YTD 2019 were $1.85/lb of payable copper versus $2.00/lb payable copper during Q3 2018. AISC for YTD 2019 and YTD 2018 were $2.12/lb and $2.35/lb, respectively.
-- As previously announced, the Company has carried out a cost analysis during 2019 and confirms a reduced cash cost and AISC 2019 guidance. Cash costs and AISC expected for 2019 are within the range $1.85 - $1.95/lb and $2.10 - $2.25/lb, respectively.
-- The Company is currently reviewing its sustaining Capex commitments and evaluating several projects as part of its capex programme seeking further reductions to its operating costs.
-- Higher EBITDA of EUR9.9 million in Q3 2019 compared with EUR7.7 million in Q3 2018 was driven by lower operating costs and higher revenues. On an accumulative basis, EBITDA during the nine month period ended 30 September 2019 was EUR41.4 million compared with EUR42.0 million in the same period last year, as lower copper prices were largely offset by lower operating costs.
-- Q3 2019 profit after tax amounted to EUR6.9 million (or 5.1 cents basic earnings per share) compared with a profit for Q3 2018 of EUR3.1 million (or 2.2 cents basic earnings per share). Profit after tax for the nine month period ended 30 September 2019 was EUR27.9 million compared with EUR27.6 million during the same period in 2018.
-- At 30 September 2019, the Company reported a working capital surplus of EUR2.0 million, a decrease from the EUR8.4 million surplus reported at 31 December 2018. This was mainly due to a reduction in cash balances as a result of the investment in the Expansion Project. The working capital for Q3 2019 assumes that the entirety of the Astor Deferred Consideration is considered a non-current liability (please refer to note 7 for further detail). Unrestricted cash balances as at 30 September 2019 amounted to EUR18.5 million.
Operational Highlights
Proyecto Riotinto
-- Copper production during Q3 2019 was 10,568 tonnes, a decrease of 4.4% from the 11,055 tonnes produced during Q3 2018. During the nine month period ended 30 September 2019 copper production was 31,675 tonnes, a 2.4% increase from the 30,942 tonnes produced during the same period in 2018.
-- Ore processed during Q3 2019 was 2,563,594 tonnes, an increase on Q3 2018 when ore processed amounted to 2,491,403 tonnes. Total ore processed during the nine month period ended 30 September 2019 was 7,575,130 tonnes compared with 7,188,747 tonnes processed in the same period last year.
-- Copper recovery during the quarter was 87.38%, lower than 88.40% achieved in Q3 2018. Copper recovery for the nine month period ended 30 September 2019 averaged 88.77% representing an improvement over 88.06% during the same period in 2018.
-- As announced on 17 October 2019, the Company reviewed its production guidance for 2019 with a reduction in expected ore processed to 10.6Mt and copper produced expected to be in the range of 44,000 to 45,000 tonnes.
Expansion to 15Mtpa at Proyecto Riotinto ("Expansion Project")
-- Electricity supplier Endesa has finalised the work required and the additional electricity capacity is now available at site.
-- As announced in October 2019, the cold mechanical commissioning and the new installation (SAG Mill and auxiliary mills) were completed during Q3 2019 and the Company is now gradually ramping up and fine tuning to achieve a full production rate during Q4 2019.
-- All other equipment for the Expansion Project (new primary crusher, the new flotation cells and concentrate handling areas) has been commissioned and incorporated into the processing plant circuit and it is running in steady state.
Proyecto Touro
-- During the quarter, the Company continued addressing additional information requests from administrative bodies. Atalaya addressed comments from Aguas de Galicia, Natural Heritage and the General Directorate of Mines.
Legal updates
On 29 March 2019, the Company announced that it had received notification from the Supreme Court in Spain that it did not have jurisdiction over the appeal made by the Junta de Andalucía ("JdA") and therefore the announced ruling by the Tribunal Superior de Justicia de Andalucía ("TSJA") dated 26 September 2018 remains valid.
On 26 April 2019, the Company announced that a judgment relating to the Mining Permits to operate Proyecto Riotinto (the "Mining Permits") was handed down by the TSJA. The TSJA declared the Mining Permits are linked to the environmental permits, ruled by the same tribunal in September 2018. The new ruling on the Mining Permits is based on the requirement to have an environmental permit before issuing Mining Permits and therefore invalidates the existing mining permits. The TSJA did not accept the requests by Ecologistas en Accion ("EeA") for the cessation of activities at the mine and an increase in the scope of the environmental plan.
On 20 November 2019, the Company received an informal notification that its appeal to the Supreme Court on the ruling handed down by the TSJA on 26 April 2019 had been rejected. The Company has been advised by its lawyers that the rejection has no impact over the Company's legal status quo.
The JdA is undergoing the process to resolve the previously reported administrative issues identified by the TSJA relating to the Environmental and Mining Permits. The Company continues operating the mine normally and remains confident that the ongoing process carried out by the JdA will not impact its operations at Proyecto Riotinto.
Alberto Lavandeira, CEO commented:
"We are pleased to demonstrate another strong quarter of operations at Proyecto Riotinto which was achieved at the same time as completing and testing of the new 15Mtpa expansion, illustrating the flexibility within the plant. With the additional power supply now fully up and running we are confident that our stated production rates will be met during Q4 2019."
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 + 44 20 3757
Newgate Communications Lloyd / Tom Carnegie 6880
+44 20 3170
4C Communications Carina Corbett 7973
--------------------------------- -------------
Canaccord Genuity (NOMAD Henry Fitzgerald-O'Connor +44 20 7523
and Joint Broker) / James Asensio 8000
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BMO Capital Markets (Joint +44 20 7236
Broker) Tom Rider / Michael Rechsteiner 1010
--------------------------------- -------------
+44 20 7418
Peel Hunt LLP (Joint Broker) Ross Allister / David McKeown 8900
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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 which is currently in the permitting stage. For further information, visit www.atalayamining.com
Management's review
(All amounts in Euro thousands unless otherwise stated)
For the period ended 30 September 2019 and 2018
ATALAYA MINING PLC
MANAGEMENT'S REVIEW AND
UNAUDITED, CONDENSED, INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
30 September 2019
Notice to Reader
The accompanying Unaudited, Condensed, Interim, Consolidated Financial Statements of Atalaya Mining Plc have been prepared by and are the responsibility of Atalaya Mining Plc's management. The Unaudited, Condensed, Interim Consolidated Financial Statements have not been reviewed by Atalaya's auditors.
Introduction
This report provides an overview and analysis of the financial results of operations of Atalaya Mining Plc and its subsidiaries ("Atalaya" and/or "Group"), to enable the reader to assess material changes in the financial position between 31 December 2018 and 30 September 2019 and results of operations for the three and nine month periods ended 30 September 2019 and 2018.
This report has been prepared as of 20 November 2019. The analysis, hereby included, is intended to supplement and complement the Unaudited, Condensed, Interim, Consolidated Financial Statements and notes thereto ("Financial Statements") for the nine month period ended 30 September 2019. The reader should review the Financial Statements in conjunction with the review of this report and with the audited, consolidated financial statements for the year ended 31 December 2018, and the Unaudited, Condensed, Interim, Consolidated Financial Statements for the nine month period ended 30 September 2018. These documents can be found on Atalaya's website at www.atalayamining.com.
Atalaya prepares its Annual Financial Statements in accordance with International Financial Reporting Standards ("IFRSs") and its Unaudited, Condensed, Interim, Consolidated Financial Statements in accordance with International Accounting Standards 34: Interim Financial Reporting. The currency referred to in this document is the Euro, unless otherwise specified.
Forward-looking statements
This report may include certain "forward-looking statements" and "forward-looking information" under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterised by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Assumptions upon which such forward-looking statements are based include that all required third party regulatory and governmental approvals will be obtained. Many of these assumptions are based on factors and events that are not within the control of Atalaya and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions and other risk factors discussed or referred to in this report and other documents filed with the applicable securities regulatory authorities. Although Atalaya has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Atalaya undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.
1. Description of the business
Atalaya is a European mining and development company domiciliated in Cyprus. The Company is listed on the AIM Market of the London Stock Exchange ("AIM") and on the Toronto Stock Exchange ("TSX").
Proyecto Riotinto, wholly owned by the Company's subsidiary Atalaya Riotinto Minera, S.L.U., is located in Huelva, Spain. The Group operates the Cerro Colorado open-pit mine and its associated processing plant where copper in concentrate and silver by-product are produced.
The Group has an initial 10% stake in Cobre San Rafael, S.L., the owner of Proyecto Touro, as part of an earn-in agreement which will enable the Group to acquire up to 80% of the copper project. Proyecto Touro is located in Galicia, north-west Spain.
2. Overview of operational results
Proyecto Riotinto
The following table presents a summarised statement of operations of Proyecto Riotinto for the three and nine month periods ended 30 September 2019 and 2018.
Units expressed in Three month ended Three month ended Nine month ended Nine month ended accordance with the 30 Sept 2019 30 Sept 2018 30 Sept 2019 30 Sept 2018 international system of Unit units (SI) Ore mined t 2,704,041 2,787,406 8,035,290 7,938,961 Ore processed t 2,563,594 2,491,403 7,575,130 7,188,747 Copper ore grade % 0.47 0.50 0.47 0.49 Copper concentrate grade % 23.25 24.81 23.07 23.07 Copper recovery rate % 87.38 88.40 88.77 88.06 Copper concentrate t 45,458 44,562 137,281 134,130 Copper contained in concentrate t 10,568 11,055 31,675 30,942 Payable copper contained in concentrate t 10,113 10,609 30,303 29,600 Cash cost* $/lb payable 1.92 1.88 1.85 2.00 All-in sustaining cost* $/lb payable 2.25 2.13 2.12 2.35
(*) Refer to Section 5 of this Management's Review
Note: The numbers in the above table may slightly differ among them due to rounding.
Three month operational review
Copper production at Proyecto Riotinto for Q3 2019 decreased to 10,568 tonnes from 11,055 tonnes reported in Q3 2018, representing a decrease of 4.4%. Ore milled was similar to the previous quarter and lower than management's expectations as the Expansion of Proyecto Riotinto experienced some delays in electricity availability. Copper head grade was in line with the previous quarter and expectations. The slight decrease in copper production during the quarter over Q3 2018 was mainly driven by lower ore grades.
Mining operations are progressing according to plan and up from previous quarters. On a combined basis, ore and waste increased to 2.6 million m(3) in Q3 2019 versus 2.3 million m(3) in Q2 2019.
During Q3 2019, the Group sold 46,723 tonnes of concentrates, compared with 43,927 tonnes in Q3 2018. On-site concentrate inventories at the end of the quarter were approximately 2,186 tonnes. All concentrate in stock at the beginning of the quarter and produced during the quarter was delivered to the port at Huelva.
2. Overview of operational results (continued)
Exploration and infill drilling continue to progress with two rigs at Filón Sur-Cerro Colorado. One deep hole is being drilled in Cerro Colorado in order to explore a rich Cu stockwork zone that occurs under the Salomon zone. The RC drilling continues the infill drilling programme in order to better define the occurrence of penalty elements in the mining pit.
Nine month operating review
Production of copper contained in concentrate during the nine month period ended 30 September 2019 was 31,675 tonnes, compared with 30,942 tonnes in the same period of 2018. Payable copper in concentrates for the nine month period ended 30 September 2019 was 30,303 tonnes compared with 29,600 tonnes of payable copper in the same period of 2018.
Ore mined in the nine month ended 30 September 2019 was 8,035,290 tonnes compared with 7,938,961 tonnes during the same period of 2018. Ore processed was 7,575,130 tonnes versus 7,188,747 tonnes in 2018.
Ore grade during the nine month period ended 30 September 2019 was 0.47% Cu compared with 0.49% Cu in the nine month ended period 30 September 2018. Copper recovery was 88.77% versus 88.06% in 2018. Concentrate production amounted to 137,281 tonnes in the nine month period ended 30 September 2019 resulting in higher production than the same period of 2018 when production amounted to 134,130 tonnes.
Expansion to 15Mtpa at Proyecto Riotinto
Endesa has finalised the work required and the extra electricity capacity is now available at site. The cold mechanical commissioning and the new installation (SAG Mill and auxiliary mills) were completed during Q3 2019 and the Company is now gradually ramping up and fine tuning to achieve full production during Q4 2019.
All other equipment for the Expansion Project (new primary crusher, the new flotation cells and concentrate handling areas) has been commissioned and incorporated into the processing plant circuit and it is running in steady state.
Proyecto Touro
During the quarter, the Company has continued addressing additional information requests from administrative bodies. Atalaya addressed comments from Aguas de Galicia, Natural Heritage and the General Directorate of Mines.
3. Outlook
The forward-looking information contained in this section is subject to the risk factors and assumptions contained in the cautionary statement on forward-looking statements included in the introduction note of this report.
Operating guidance
On 17 October 2019, the Company updated its operating guidance at Proyecto Riotinto for 2019 which remains as follows:
Guidance
Unit 2019
Ore processed million tonnes 10.6
Contained copper tonnes 44,000 - 45,000
Copper head grade for 2019 is budgeted to average 0.47% Cu, with a recovery rate of approximately 85% to 87%.
The cash operating cost for 2019 is expected to be lower than previously announced. Management has updated the full year operating costs which are now estimated to be within the range of $1.85 - $1.95/lb compared $1.95 - $2.15/lb announced in April 2019. AISC is estimated to be in the range of $2.10 - $2.25 per pound of copper payable ($2.25 - $2.45/lb reported in April 2019).
4. Overview of the financial results
The following table presents summarised consolidated income statements for the three and nine month periods ended 30 September 2019, with comparatives for the three and nine month periods ended 30 September 2018.
Three months ended Three months ended Nine months ended Nine months ended
30 Sept 2019 30 Sept 2018 30 Sept 2019 30 Sept 2018
(Euro 000's)
Revenue 44,383 42,811 139,165 144,354
Total operating costs (31,269) (33,592) (89,602) (98,004)
Administrative and other
expenses (2,070) (1,249) (5,452) (3,302)
Exploration expenses (1,132) (405) (2,534) (818)
Care and maintenance
expenditure (43) 94 (164) (187)
EBITDA 9,869 7,659 41,413 42,043
Depreciation/amortisation (3,722) (3,484) (10,893) (9,794)
Net foreign exchange
gain/(loss) 1,405 (10) 1,692 1,092
Net finance cost 43 (77) (23) (196)
Tax (662) (955) (4,252) (5,520)
------------------- ------------------- ------------------ ------------------
Profit for the period 6,933 3,133 27,937 27,625
------------------- ------------------- ------------------ ------------------
Three month financial review
Revenues for the three month period ended 30 September 2019 amounted to EUR44.4 million (Q3 2018: EUR42.8 million). Higher revenues, compared with the same quarter in the previous year, were mainly driven by an increase in copper concentrate sold during the period (46,723 tonnes in Q3 2019 vs 43,927 tonnes in Q3 2018) and stronger average US Dollar rates against the Euro (1.1119 in Q3 2019 vs 1.1629 in Q3 2018) partially offset by lower realised copper prices. Realised prices were $2.68/lb copper during Q3 2019 compared with $2.89/lb copper in Q3 2018. All concentrates were sold under offtake agreements in place.
Operating costs for the three month period ended 30 September 2019 amounted to EUR31.3 million, compared with EUR33.6 million in Q3 2018. In absolute terms, lower operating costs were mainly the result of lower mining, technical services and administrative costs.
Cash costs of $1.92/lb payable copper during Q3 2019 compared with $1.88lb payable copper in the same period last year. Higher cash costs were mostly due to a lower copper payable contained in concentrate during the quarter. All-in sustaining costs in the reporting quarter were $2.25/lb payable copper compared with $2.13/lb payable copper in Q3 2018. Higher AISC compared with Q3 2018 mainly related to higher sustaining capex and capitalised stripping costs.
Sustaining capex for Q3 2019 amounted to EUR2.4 million compared with EUR1.9 million in Q3 2018. Sustaining capex related to the continuous improvement in processing systems of the plant and enhancements in security.
Administrative and other expenses for Q3 2019 amounted to EUR2.1 million (Q3 2018: EUR1.2 million) and include non-operating costs of the Cyprus office, corporate, legal and consultancy costs, on-going listing costs, personnel costs of the corporate office. The increase in administrative and other expenses was mainly due to a rise in legal costs, employee options expenses and provisions.
Exploration costs at Proyecto Riotinto for the three month period ended 30 September 2019 amounted to EUR1.1 million (Q3 2018: EUR0.4 million). All exploration costs at Proyecto Touro are capitalised. Higher costs relate to an upturn in drillings and explored ground.
EBITDA for Q3 2019 amounted to EUR9.9 million compared with Q3 2018 of EUR7.7 million.
The main item below the EBITDA line is depreciation and amortisation of EUR3.7 million (Q3 2018: EUR3.5 million). Net finance costs for Q3 2019 amounted to EUR43k gain compared with EUR77k loss in Q3 2018.
4. Overview of the financial results (continued)
Nine month financial review
Revenues for the nine month period ended 30 September 2019 amounted to EUR139.2 million (YTD 2018: EUR144.4 million).
Copper concentrate production during the nine month period ended 30 September 2019 was 137,281 tonnes (YTD 2018: 134,130 tonnes) with 139,762 tonnes of copper concentrates sold (nine month period ended 30 September 2018: 138,781 tonnes). Inventories of concentrates as at the reporting date were 2,186 tonnes (31 Dec 2018: 4,667 tonnes).
Realised copper prices for the nine month period ended 30 September 2019 were $2.76/lb copper compared with $3.02/lb copper in the same period of 2018. Concentrates were sold under offtake agreements in place. The Company did not enter into any hedging agreements in 2019.
Operating costs for the nine month period ended 30 September 2019 amounted to EUR89.6 million, compared with EUR98.0 million in the nine month period ended 30 September 2018. Lower costs in 2019 were mainly attributable to: (i) a reduction of circa EUR4.0 million in technical services and maintenance costs; (ii) reduction of EUR2.1 million cost of sales as the inventory decreased in ca. 2,270 tonnes less than in YTD 2018; (iii) a decrease of EUR2.0 million in earthwork costs and (iv) a EUR1.3 million decrease in consumables expenses.
Cash costs of $1.85/lb payable copper during the nine month period ended 30 September 2019 compared with $2.00/lb payable copper in the same period last year. Lower costs were mainly due to lower mining, technical services and maintenance costs compared with YTD 2018. All-in sustaining costs in the reporting quarter amounted to $2.12/lb payable copper compared with $2.35/lb payable copper for the same period in 2018. AISC in YTD 2019 decreased in comparison with YTD 2018 mostly as a result of lower sustaining capex and capitalised stripping costs.
Sustaining capex for the nine month period ended 30 September 2019 amounted to EUR5.3 million, compared with EUR7.1 million in the same period in the previous year. The Company is currently reviewing its sustaining capex commitments and evaluating several projects as part of its capex programme seeking further reductions on its operating costs.
Corporate costs for the first nine month of 2019 were EUR5.5 million, compared with EUR3.3 million in the same period in 2018. Corporate costs mainly include the Company's overhead expenses.
Exploration costs related to Proyecto Riotinto for the nine month period ended 30 September 2019 amounted to EUR2.5 million, compared with EUR0.8 million in the same period in 2018. Higher costs relate to an upturn in drillings and explored ground.
EBITDA for the nine month period ended 30 September 2019 amounted to EUR41.4 million, compared with EUR42.0 million in the nine month period ended 30 September 2018.
Depreciation and amortisation for the nine month period ended 30 September 2019 amounted to EUR10.9 million (EUR9.8 million during the nine month period ended 30 September 2018).
Net finance costs for the nine month period ended 30 September 2019 amounted to EUR23k loss (loss of EUR196k for the nine month period ended 30 September 2018).
Copper prices
The average realised copper price decreased by 7.3% from US$2.89 per pound in Q3 2018 to US$2.68 per pound in Q3 2019.
The average prices of copper for the three and nine month periods ended 30 September 2019 and 2018 are shown below:
Three months ended Three months ended Nine months ended Nine months ended
30 Sept 2019 30 Sept 2018 30 Sept 2019 30 Sept 2018
(USD)
Realised copper price per lb 2.68 2.89 2.76 3.02
Market copper price per lb 2.63 2.77 2.74 3.14
Realised copper prices for the reporting period noted above have been calculated using payable copper and including provisional invoices and final settlements of quotation periods ("QPs") together.
4. Overview of the financial results (continued)
Higher than market averages realised prices are mainly due to the final settlement of invoices where QP was fixed in the previous quarter due to a short open period when copper prices were higher. The realised price of shipments during the quarter (excluding QP) was approximately $2.67/lb.
5. Non-GAAP Measures
Atalaya has included certain non-IFRS measures including "EBITDA", "Cash Cost per pound of payable copper", "All In Sustaining Costs" ("AISC") and "realised prices" in this report. Non-IFRS measures do not have any standardised meaning prescribed under IFRS, and therefore they may not be comparable to similar measures presented by other companies. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for indicators prepared in accordance with IFRS.
EBITDA includes gross sales net of penalties and discounts and all operating costs, excluding finance, tax, impairment, depreciation and amortisation expenses.
Cash Cost per pound of payable copper includes cash operating costs, including treatment and refining charges ("TC/RC"), freight and distribution costs net of by-product credits. Cash Cost per pound of payable copper is consistent with the widely accepted industry standard established by Wood Mackenzie and is also known as the C1 cash cost.
AISC per pound of payable copper includes C1 Cash Costs plus royalties and agency fees, expenditures on rehabilitation, capitalised stripping costs, exploration and geology costs, corporate costs and sustaining capital expenditures.
Realised price per pound of payable copper is the value of the copper payable included in the concentrate produced after discounts but before deducting penalties, credits and other features governed by the offtake agreements of the Group and all discounts or premiums provided in commodity hedge agreements with financial institutions, expressed in USD per pound of payable copper. Realised price is consistent with the widely accepted industry standard definition.
6. Liquidity and capital resources
Atalaya monitors factors that could impact its liquidity as part of Atalaya's overall capital management strategy. Factors that are monitored include, but are not limited to, the market price of copper, foreign currency rates, production levels, operating costs, capital and administrative costs.
The following table shows a summary of Atalaya's cash position and cash flows as at 30 September 2019 and 31 December 2018.
Liquidity information
(Euro 000's) 30 Sept 2019 31 December
2018
Unrestricted cash and cash equivalents
at Group level 18,457 24,357
Unrestricted cash and cash equivalents
at Operation level 3,274 8,463
Restricted cash 250 250
Working capital surplus 1,954 8,435
Unrestricted cash and cash equivalents as at 30 September 2019 decreased to EUR18.5 million from EUR24.4 million at 31 December 2018. The reduction in cash balances is the result of net cash flow used for investments during the nine month period ended 30 September 2019. Cash balances are unrestricted and include balances at operational and corporate level.
Restricted cash remains at EUR0.3 million as at 30 September 2019 and mainly relates to deposit bond guarantees.
As of 30 September 2019, Atalaya reported a working capital surplus of EUR2.0 million, compared with a working capital surplus of EUR8.4 million at 31 December 2018. The main liability of the working capital is trade payables related to Proyecto Riotinto contractors. At 30 September 2019, trade payables have been reduced by EUR2.0 million compared with 30 September 2018.
The working capital for Q3 2019 assumes that the entirety of the Astor Deferred Consideration is considered a non-current liability.
6. Liquidity and capital resources (continued)
Overview of the Group's cash flows
Three months ended Three months ended Nine months ended Nine months ended
30 Sept 2019 30 Sept 2018 30 Sept 2019 30 Sept 2018
(Euro 000's)
Cash flows from operating
activities 16,487 14,937 31,457 44,151
Cash flows used in investing
activities (13,115) (20,414) (45,390) (41,704)
Cash flows from financing
activities (158) - (430) 593
------------------- ------------------- ------------------ ------------------
Net increase/(decrease) in
cash and cash equivalents 3,214 (5,477) (14,363) 3,040
------------------- ------------------- ------------------ ------------------
Three month cash flows review
Cash and cash equivalents increased by EUR3.2 million during the three month period ended 30 September 2019. This rise was due to the net result of cash from operating activities amounting to EUR16.5 million, the cash used in investing activities amounting to EUR13.1 million and the cash from financing activities totalling EUR0.2 million.
Cash generated from operating activities before working capital changes was EUR11.8 million. Atalaya decreased its trade receivables in the period by EUR6.2 million, increased its inventory levels by EUR0.1 million and decreased its trade payables by EUR0.5 million.
Investing activities during the quarter consumed EUR13.1 million, mainly related to the Expansion Project Capex and sustaining Capex (mostly in enhancements to the processing systems of the plant).
Nine month cash flows review
Cash and cash equivalents decreased by EUR14.4 million during the nine month period ended 30 September 2019. This was due to cash from operating activities amounting to EUR31.5 million, cash used in investing activities amounting to EUR45.4 million and cash from financing activities amounting to EUR0.4 million.
Cash generated from operating activities before working capital changes was EUR43.7 million. The Company decreased its trade payables in the period by EUR3.1 million, increased its inventory levels by EUR0.7 million as well as its trade receivable balances by EUR5.6 million.
Investing activities during the nine month period ended 30 September 2019 amounted to EUR45.4 million, mainly related to the Expansion Project Capex and sustaining Capex.
Foreign exchange
Foreign exchange rate movements can have a significant effect on Atalaya's operations, financial position and results. Atalaya's sales are denominated in U.S. dollars ("USD"), while its operating expenses, income taxes and other expenses are mainly denominated in Euros ("EUR"), and to a much lesser extent in British Pounds ("GBP").
Accordingly, fluctuations in exchange rates can potentially impact the results of operations and carrying value of assets and liabilities on the balance sheet.
During the three and nine month periods ended 30 September 2019 Atalaya recognised a foreign exchange profit of EUR1.4 million and EUR1.7 million, respectively. Foreign exchange profit mainly related to changes in the period in EUR and USD conversion rates, as all sales are cashed and occasionally held in USD.
6. Liquidity and capital resources (continued)
The following table summarises the movement in key currencies versus the EUR:
Three months ended Three months ended Nine months ended Nine months ended
30 Sept 2019 30 Sept 2018 30 Sept 2019 30 Sept 2018
Average rates for the periods
GBP - EUR 0.9021 0.8924 0.8835 0.8841
USD - EUR 1.1119 1.1629 1.1236 1.1942
Spot rates as at
GBP - EUR 0.8857 0.8908 0.8857 0.8908
USD - EUR 1.0889 1.1606 1.0889 1.1606
7. Deferred consideration
In September 2008, the Group moved to 100% ownership of Atalaya Riotinto Minera 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. 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).
As at 30 September 2019, no consideration has been paid.
"Excess cash" is not defined in the Master Agreement leaving ambiguity as to how it is to be calculated. The Company has continued to regularly review its assessment of when this could be payable. As a result, at 30 September 2019, the EUR53 million liability has been classified as non-current, reflecting results to date, the Company's copper price estimation for 2019 and the sustaining capex projects and commitments for 2019. At 30 June 2019, a portion of the EUR53 million liability was classified as a current liability based on estimates at that point.
As previously stated, the precise timing and quantum of payments will be estimated depending on future key variables such as methodology for the calculation, definition of "Project", the price of copper and the US Dollar and Euro exchanges rates, timing of sustaining capital expenditures, increased costs and other operational issues. These factors can vary significantly, and any amounts actually paid within twelve months of the balance sheet date may differ substantially from the amounts presently estimated, if any, to become payable within this period.
The effect of discounting remains insignificant, in line with the 2018 assessment, and therefore the Group has measured the liability for the Astor Deferred Consideration on an undiscounted basis.
8. Corporate social responsibility
During the quarter, Atalaya has continued its involvement in social responsibility through several activities by means of Fundación Atalaya Riotinto ("Fundacion").
Following its co-operation with several local non-governmental organisations involved in social issues, Fundacion has established agreements to sponsor some of their activities. In this regard, Fundacion is supporting programmes to assist people with Alzheimer Syndrome and their families, plus an IT training lesson for people with disabilities. Furthermore, Fundacion provided financing to a local charity to purchase a van that will allow children from disadvantaged areas to go to several educational activities.
Fundacion carries on with the second edition of "Reto Malacate", an initiative to reward the best business project to be settled in the local region.
In co-operation with a few local governments in the area, Fundación has financed projects for the benefit and enhancement of the local area, including improvements in infrastructure and cultural events.
9. Health and safety
During the quarter, the Company has continued its 2019 guidelines for safety. The Emergency Squad has carried on with the training in the field of protection and practical training in works at heights. Furthermore, the Company has integrated all material and equipment needed for the Emergency Squad.
Likewise, an external company has audited the OSHAS 18001.
10. Environmental management
During the third quarter of 2019, the environmental department has continued the monitoring of the operation and the historical heritage. Key points of the quarter:
- Dust levels were high as the third quarter corresponds to the warmer season of the year.
- The second stage to integrate the quality management system through the audit certification has been carried out during the quarter.
Archaeological excavation work at the Look Out is almost complete, expecting to finalise the Excavation Report plus the extraction of two ladle melt furnaces. Next excavation works to be performed at Corta Lago.
11. Risk factors
Owing to the nature of Atalaya's business in the mining industry, the Group is subject to various risks that could materially impact the future operating results and could cause actual events to differ materially from those described in forward-looking statements relating to Atalaya. Readers are encouraged to read and consider the risk factors detailed in Atalaya's audited, consolidated financial statements for the year ended 31 December 2018.
12. Critical accounting policies, estimates and accounting changes
The preparation of Atalaya's Financial Statements in accordance with IFRS requires management to make estimates and assumptions that affect amounts reported in the Financial Statements and accompanying notes. There is a full discussion and description of Atalaya's critical accounting policies in the audited consolidated financial statements for the year ended 31 December 2018. The impact of adopting IFRS 16 Leases which became effective on 1 January 2019 is set out in Note 2.2 to the Unaudited, Condensed, Interim, Consolidated Financial Statements.
13. Other information
Additional information about Atalaya Mining Plc. is available at www.atalayamining.com
Unaudited, Condensed, Interim, Consolidated Financial Statements on pages 11 to 34
By Order of the Board of Directors,
Roger Davey
Chairman
Nicosia, 20 November 2019
Condensed interim consolidated income statements
(All amounts in Euro thousands unless otherwise stated)
For the three and nine months to 30 September 2019 and 2018 - (Unaudited)
Three Three Nine Nine
months months months months
ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept
(Euro 000's) Notes 2019* 2018 2019* 2018
Revenue 4 44,383 42,811 139,165 144,354
Operating costs and mine site
administrative expenses (31,012) (33,515) (89,239) (97,860)
Mine site depreciation and amortization (3,723) (3,484) (10,893) (9,794)
---------- ========= ========== =========
Gross profit 9,648 5,812 39,033 36,700
Administration and other expenses (2,070) (1,240) (5,452) (3,284)
Share-based benefits (256) (86) (363) (162)
Exploration expenses (1,132) (405) (2,534) (818)
Care and maintenance expenditure (43) 94 (164) (187)
Operating profit 6,147 4,175 30,520 32,249
Net foreign exchange (loss)/gain 1,405 (10) 1,692 1,092
Net finance income/(costs) 5 43 (77) (23) (196)
---------- ---------
Profit before tax 7,595 4,088 32,189 33,145
Tax (662) (955) (4,252) (5,520)
---------- --------- ========== =========
Profit for the period 6,933 3,133 27,937 27,625
---------- --------- ========== =========
Profit for the period attributable
to:
* Owners of the parent 6,975 3,049 28,090 27,807
* Non-controlling interests (42) 84 (153) (182)
----------
6,933 3,133 27,937 27,625
---------- ========= ========== =========
Earnings per share from operations
attributable to equity holders
of the parent during the period:
Basic earnings per share (EUR
cents per share) 6 5.1 2.2 20.5 20.4
---------- ========= ========== =========
Fully diluted earnings per share
(EUR cents per share) 6 5.0 2.2 20.2 20.2
---------- ========= ========== =========
Profit for the period 6,933 3,133 27,937 27,625
Other comprehensive income:
Change in fair value of financial
assets through other comprehensive
income 'OCI' (25) (15) (37) (30)
----------
Total comprehensive income for
the period 6,908 3,118 27,900 27,595
---------- ========= ========== =========
Total comprehensive income for
the period attributable to:
* Owners of the parent 6,950 3,034 28,053 27,777
* Non-controlling interests (42) 84 (153) (182)
---------- ----------
6,908 3,118 27,900 27,595
---------- ========= ---------- =========
The notes on pages 15 to 34 are an integral part of these Unaudited, Condensed, Interim, Consolidated Financial Statements.
* Refer to Note 2.2 Adoption of "IFRS 16 - Leases"
Interim Condensed Consolidated Statement of Financial Position
(All amounts in Euro thousands unless otherwise stated)
As at 30 September 2019 and 2018
30 September 31 December
(Euro 000's) Notes 2019* 2018
Assets
Non-current assets
Property, plant and equipment 7 300,043 257,376
Intangible assets 8 70,439 71,951
Trade and other receivables 10 250 249
Deferred tax asset 7,801 7,927
============ ===========
378,533 337,503
============ ===========
Current assets
Inventories 9 11,475 10,822
Trade and other receivables 10 30,046 23,688
Other financial assets 36 71
Cash and cash equivalents 18,707 33,070
============ ===========
60,264 67,651
============ ===========
Total assets 438,797 405,154
============ ===========
Equity and liabilities
Equity attributable to owners of
the parent
Share capital 11 13,372 13,372
Share premium 11 314,319 314,319
Other reserves 12 22,323 12,791
Accumulated losses (39,424) (58,308)
============ ===========
310,590 282,174
Non-controlling interests 4,047 4,200
------------ -----------
Total equity 314,637 286,374
------------ -----------
Liabilities
Non-current liabilities
Trade and other payables 13 13 45
Provisions 14 6,991 6,519
Leases 15 5,846 -
Deferred consideration 16 53,000 53,000
============ ===========
65,850 59,564
============ ===========
Current liabilities
Trade and other payables 13 54,188 57,271
Leases 15 156 -
Current tax liabilities 3,966 1,945
Deferred consideration 16 -
58,310 59,216
============ ===========
Total liabilities 124,160 118,780
============ ===========
Total equity and liabilities 438,797 405,154
============ ===========
* Refer to Note 2.2 Adoption of "IFRS 16 - Leases"
The notes on pages 15 to 34 are an integral part of these Unaudited, Condensed, Interim, Consolidated Financial Statements. The Unaudited, Condensed, Interim, Consolidated Financial Statements were authorised for issue by the Board of Directors on 20 November 2019 and were signed on its behalf.
Roger Davey Alberto Lavandeira Chairman Chief Executive Officer
Interim Condensed Consolidated Statements of Changes in Equity
(All amounts in Euro thousands unless otherwise stated)
For the period ended 30 September 2019 and 2018
Non-controlling
Share Share Other Accum. interest Total
(Euro 000's) capital premium(1) reserves(2) losses Total equity
----------------
At 1 January 2019 13,372 314,319 12,791 (58,308) 282,174 4,200 286,374
Profit for the period - - - 28,090 28,090 (153) 27,937
Change in fair value
of financial assets
through OCI - - (37) - (37) - (37)
---------- ------------- ------------- --------- -------- ---------------- ---------
Total comprehensive
income - - (37) 28,090 28,053 (153) 27,900
Transactions with owners
Recognition of
share-based
payments - - 5,378 (5,378) - - -
Recognition of depletion
factor - - 363 - 363 - 363
Recognition of
non-distributable
reserve - - 1,984 (1,984) - - -
Recognition of
distributable
reserve - - 1,844 (1,844) - - -
At 30 September 2019 13,372 314,319 22,323 (39,424) 310,590 4,047 314,637
========== ============= ============= ========= ======== ================ =========
(1) The share premium reserve is not available for distribution
(2) Refer to Note 12
Non-controlling
Share Share Other Accum. interest Total
(Euro 000's) capital premium(1) reserves(2) losses Total equity
----------------
At 1 January 2018 13,192 309,577 6,137 (86,527) 242,379 4,474 246,853
Profit for the period - - - 27,807 27,807 (182) 27,625
Change in fair value
of financial assets
through OCI - - (30) - (30) - (30)
---------- ------------- ------------- --------- -------- ---------------- ---------
Total comprehensive
income - - (30) 27,807 27,777 (182) 27,595
Transactions with owners
Issue of share capital 180 4,747 - - 4,927 - 4,927
Share issue costs - (5) - - (5) - (5)
Change in value of
available
for sale investment - - (30) - (30) - (30)
Depletion factor - - 5,050 (5,050) - - -
Recognition of
share-based
payments - - 162 - 162 - 162
Recognition of
non-distributable
reserve - 1,446 (1,446) - - -
========== ============= ============= ========= ======== ================ =========
At 30 September 2018 13,372 314,319 12,765 (65,216) 275,240 4,292 279,532
========== ============= ============= ========= ======== ================ =========
(1) The share premium reserve is not available for distribution
(2) Refer to Note 12
Non-controlling
Share Share Other Accum. interest Total
(Euro 000's) capital premium(1) reserves(2) losses Total equity
----------------
At 1 January 2018 13,192 309,577 6,137 (86,527) 242,379 4,474 246,853
Profit for the period - - - 34,715 34,715 (274) 34,441
Change in fair value
of financial assets
through OCI - - (58) - (58) - (58)
---------- ------------- ------------- --------- -------- ---------------- ---------
Total comprehensive
income - - (58) 34,715 34,657 (274) 34,383
Transactions with owners
Issue of share capital 180 4,747 - - 4,927 - 4,927
Share issue costs - (5) - - (5) - (5)
Depletion factor - - 5,050 (5,050) - - -
Recognition of
share-based
payments - - 216 - 216 - 216
Recognition of
non-distributable
reserve - - 1,446 (1,446) - - -
========== ============= ============= ========= ======== ================ =========
At 31 December 2018 13,372 314,319 12,791 (58,308) 282,174 4,200 286,374
========== ============= ============= ========= ======== ================ =========
(1) The share premium reserve is not available for distribution
(2) Refer to Note 12
The notes on pages 15 to 34 are an integral part of these Unaudited, Condensed, Interim, Consolidated Financial Statements.
Interim Condensed Consolidated Statement of Cash Flows
(All amounts in Euro thousands unless otherwise stated)
For to the period ended 30 September 2019 and 2018
Three Three Nine Nine
months months months months
ended ended ended ended
(Euro 000's) Notes 30 September 30 September 30 September 30 September
2019* 2018 2019* 2018
Cash flows from operating activities
Profit before tax 7,595 4,088 32,189 33,145
Adjustments for:
Depreciation of property, plant
and equipment 7 2,864 2,650 8,354 7,386
Amortisation of intangibles 8 858 834 2,539 2,408
Recognition of share-based payments 12 256 86 363 162
Interest income 5 (83) (19) (99) (58)
Interest expense 5 29 65 33 170
Unwinding of discounting 5 30 31 89 84
Gain(loss) on disposal of a subsidiary - (115) - (115)
Legal provisions 14 279 - 261 -
Rehab provisions 14 (18) - (18) -
Loss in disposal of property,
plant and equipment 7 - - 2 -
Unrealised foreign exchange loss
on financing activities (22) 127 4 131
-------------- -------------- ============== ==============
Cash inflows from operating activities
before working capital changes 11,788 7,747 43,717 43,313
Changes in working capital:
Inventories 9 (97) (189) (653) 4,155
Trade and other receivables 10 6,174 10,715 (5,587) 10,254
Trade and other payables 13 (453) (2,174) (3,116) (10,934)
Deferred consideration 16 - - - 17
-------------- --------------
Cash flows from operations 17,412 16,099 34,361 46,805
Interest paid (898) (65) (2,877) (170)
Tax paid (27) (1,097) (27) (2,484)
-------------- --------------
Net cash from operating activities 16,487 14,937 31,457 44,151
-------------- -------------- ============== ==============
Cash flows from investing activities
Purchase of property, plant and
equipment (12,890) (20,052) (44,462) (40,536)
Purchase of intangible assets 8 (308) (381) (1,027) (1,226)
Interest received 5 83 19 99 58
-------------- -------------- ============== ==============
Net cash used in investing activities (13,115) (20,414) (45,390) (41,704)
-------------- -------------- ============== ==============
Cash flows from financing activities
Proceeds from issue of share
capital - - - 598
Issuance costs - - - (5)
Lease payment 15 (156) - (424) -
Interest expense on lease liabilities 15 (2) - (6) -
Net cash flows from financing
activities (158) - (430) 593
-------------- --------------
Net increase / (decrease) in
cash and cash equivalents 3,214 (5,477) (14,363) 3,040
Cash and cash equivalents:
At beginning of the period 15,493 51,373 33,070 42,856
-------------- -------------- ============== ==============
At end of the period 18,707 45,896 18,707 45,896
-------------- -------------- ============== ==============
The notes on pages 15 to 34 are an integral part of these Unaudited, Condensed, Interim, Consolidated Financial Statements.
Notes to the Interim Condensed Consolidated Financial Statements
(All amounts in Euro thousands unless otherwise stated)
For the period ended 30 September 2019 and 2018
1. Incorporation and summary of business
Country of incorporation
Atalaya Mining Plc (the "Company") was incorporated in Cyprus on 17 September 2004 as a private company with limited liability under the Companies Law, Cap. 113 and was converted to a public limited liability company on 26 January 2005. Its registered office is at 1 Lampousa Street, Nicosia, Cyprus.
The Company was listed on AIM of the London Stock Exchange in May 2005 under the symbol ATYM and on the TSX on 20 December 2010 under the symbol AYM. The Company continued to be listed on AIM and the TSX as at 30 September 2019.
Additional information about Atalaya Mining Plc is available at www.atalayamining.com as per requirement of AIM rule 26.
Change of name and share consolidation
Following the Company's Extraordinary General Meeting ("EGM") on 13 October 2015, the change of name from EMED Mining Public Limited to Atalaya Mining Plc became effective on 21 October 2015. On the same day, the consolidation of ordinary shares came into effect, whereby all shareholders received one new ordinary share of nominal value Stg GBP0.075 for every 30 existing ordinary shares of nominal value Stg GBP0.0025.
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.
In addition, the Company has a phased earn-in agreement up to 80% ownership of "Proyecto Touro", a brownfield copper project in northwest Spain, which is currently at the permitting stage.
The Company's and its subsidiaries' business is 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 Europe and internationally.
2. Basis of preparation and accounting policies
2.1 Basis of preparation
(a) Overview
The Unaudited, Condensed, Interim, Consolidated Financial Statements for the period ended 30 September 2019 have been prepared in accordance with International Accounting Standards 34: Interim Financial Reporting.
These Unaudited, Condensed, Interim, Consolidated Financial Statements include the financial statements of the Company and its subsidiary undertakings. They have been prepared using accounting bases and policies consistent with those used in the preparation of the consolidated financial statements of the Group for the year ended 31 December 2018, other than as described in Note 2.2 for the changes in accounting policies. These Unaudited, Condensed, Interim, Consolidated Financial Statements do not include all of the information and disclosures required in the annual financial statements, and accordingly, should be read in conjunction with the Group's annual consolidated financial statements, which have been prepared in accordance with IFRS and is set out in the Group's Annual Report for the year ended 31 December 2018.
2. Basis of preparation and accounting policies (cont.)
2.1 Basis of preparation (cont.)
(b) Going concern
These Unaudited, Condensed, Interim, Consolidated Financial Statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Group will realise its assets and discharge its liabilities in the normal course of business. Management has carried out an assessment of the going concern assumption and has concluded that the Group will generate sufficient cash and cash equivalents to continue operating for the next twelve months.
The Directors have considered at the time of the financial statements approval that there is a reasonable expectation that the Company and the Group have adequate available resources to continue in operational existence for the foreseeable future.
2.2 Changes in accounting policies 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 2019.
The Group applied IFRS 16 for the first time from 1 January 2019. As required by IAS 34, the nature and effect of the changes as a result of adoption of this new accounting standard is described below.
Several other amendments and interpretations apply for the first time in 2019, but do not have a significant impact on the Unaudited, Condensed, Interim, 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.
IFRS 16 - Leases
The Group has adopted all of the requirements of IFRS 16 Leases ('IFRS 16') effective 1 January 2019 (initial application). IFRS 16 supersedes IAS 17 Leases ('IAS 17'). IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model.
The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported in terms of IAS 17 and IFRIC 4: Determining Whether an Arrangement Contains a Lease. The Group has applied the modified retrospective approach whereby the right of use asset was set equal to the finance lease liability with no impact on retained earnings on 1 January 2019.The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. As a result, the Group has changed its accounting policy for leases as detailed in the accounting policies.
2. Basis of preparation and accounting policies (cont.)
2.2 Changes in accounting policies and disclosures (cont.)
IFRS 16 - Leases (cont.)
Impact of adopting IFRS 16 on the Group's consolidated financial statements
The following table summarises the impact of adopting IFRS 16 on the Group's extracted consolidated statement of financial position at 1 January 2019:
(Euro 000's) As previously Adjustments Balance as
Note reported as at at
31 December 1 January 1 January
2018 2019 2019
Non-current assets
Property, plant and
equipment 7 257,376 6,144 263,520
Deferred tax asset 7,927 - 7,927
Equity and liabilities
Accumulated losses (58,308) - (58,308)
Non-current liabilities
Leases 15 - 5,609 5,609
Current liabilities
Leases 15 - 534 534
a) Comparative accounting policy in terms of IAS 17
In terms of IAS 17, the Group was required to classify its leases as either finance leases or operating leases and account for those two types of leases differently (both as a lessor or a lessee). A lease was classified as a finance lease if it transferred substantially all the risks and rewards incidental to ownership. A lease was classified as an operating lease if all the risks and rewards incidental to ownership did not substantially transfer.
Finance leases were recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor was included in the statement of financial position as a finance lease obligation. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease. The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.
Operating lease payments, in the event of the Group operating as lessee, were recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments were recognised as an operating lease asset. The liability was not discounted.
2. Basis of preparation and accounting policies (cont.)
2.2 Changes in accounting policies and disclosures (cont.)
b) Accounting policy in terms of IFRS 16
Right-of-use assets
The Group recognised 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.
Subsequent to 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
Land 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 starting 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. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, an extension or a termination option.
When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
2. Basis of preparation and accounting policies (cont.)
2.2 Changes in accounting policies and disclosures (cont.)
b) Accounting policy in terms of IFRS 16 (cont.)
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 twelve 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.
c) 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) Land Vehicles equipment Total
As at 1 January
2019 6,085 59 - 6,144 6,144
Additions - - 277 277 277
Depreciation expense (250) (11) (23) (284) -
Interest expense - - - - 6
Payments - - - - (425)
------- ----------- ----------- -------- ----------------------
As at 30 September
2019 5,835 48 254 6,137 6,002
------- ----------- ----------- -------- ----------------------
Set out below, are the amounts recognised in profit or loss:
Nine months Nine months
ended ended
30 September 30 September
(Euro 000's) 2019 2018
As at 31 December 2018
Depreciation expense of right-of-use 284 -
assets
Interest expense on lease liabilities 6 -
Total amounts recognised in profit or 290 -
loss
-------------- ----------------
The Group recognised rent expense from short-term leases.
2. Basis of preparation and accounting policies (cont.)
2.3 Fair value estimation
The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the reporting date.
The fair value of financial instruments traded in active markets, such as publicly traded trading and other financial assets is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses a variety of methods, such as estimated discounted cash flows, and makes assumptions that are based on market conditions existing at the reporting date.
Fair value measurements recognised in the consolidated statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, Grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
-- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Financial assets or liabilities
(Euro 000's) Level 1 Level 2 Level 3 Total
30 September 2019
Other financial assets
Financial assets at FV through OCI 36 - - 36
Trade and other receivables
Receivables (subject to provisional pricing) - 12,023 - 12,023
Total 36 12,023 - 12,059
-------- -------- -------- -------
31 December 2018
Other financial assets
Financial assets at FV through OCI 71 - - 71
Trade and other receivables
Receivables (subject to provisional pricing) - 6,959 - 6,959
-------- -------- -------- -------
Total 71 6,959 - 7,030
-------- -------- -------- -------
2.4 Critical accounting estimates and judgements
The preparation of the Unaudited, Condensed, Interim, Consolidated Financial Statements require 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.
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
A full analysis of critical accounting estimates and judgements is set out in Note 3.4 to the 2018 audited consolidated financial statements, as well as Note 2.2 of these Unaudited, Condensed, Interim, Consolidated Financial Statements.
3. Business and geographical segments
Business segments
The Group has only one distinct business segment, being that of mining operations, which include mineral exploration and development.
Copper concentrates produced by the Group are sold to three off-takers as per the relevant offtake agreements (Note 4)
Geographical segments
The Group's mining activities are located in Spain. The commercialisation of the copper concentrate 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.
(Euro 000's) Cyprus Spain Other Total
Three months ended 30 September 2019
(*)
Revenue - from external customers 2,706 41,677 - 44,383
======== ========= ======= ==========
Earnings/(loss) Before Interest,
Tax, Depreciation and Amortisation
(EBITDA) 775 8,969 125 9,869
Depreciation/amortisation charge - (3,722) - (3,722)
Net foreign exchange (loss) / gain 788 617 - 1,405
Finance income 75 8 - 83
Finance cost - (40) - (40)
Profit/(loss) before tax 1,638 5,832 125 7,595
======== ========= =======
Tax (662)
==========
Profit for the period 6,933
==========
Nine months ended 30 September 2019
(*)
Revenue - from external customers 9,391 129,774 - 139,165
======== ========= ======= ==========
Earnings/(loss) Before Interest,
Tax, Depreciation and Amortisation
(EBITDA) 4,157 37,792 (536) 41,413
Depreciation/amortisation charge (1) (10,892) - (10,893)
Net foreign exchange gain/(loss) 955 739 (2) 1,692
Finance income 75 24 - 99
Finance cost (1) (121) - (122)
Profit/(loss) before tax 5,185 27,542 (538) 32,189
======== ========= =======
Tax (4,252)
==========
Profit for the period 27,937
==========
Total assets 29,063 409,078 656 438,797
======== ========= ======= ==========
Total liabilities (14,252) (109,472) (436) (124,160)
======== ========= ======= ==========
Depreciation of property, plant and
equipment 1 8,353 - 8,354
======== ========= ======= ==========
Amortisation of intangible assets - 2,539 - 2,539
======== ========= ======= ==========
Total additions of non-current assets 1 51,924 - 51,925
======== ========= ======= ==========
*Refer to Note 2.2 Adoption of "IFRS 16 - Leases"
3. Business and geographical segments (cont.)
Geographical segments (cont.)
(Euro 000's) Cyprus Spain Other Total
Three months ended 30 September 2018(1)
Revenue - from external customers 42,811 - - 48,867
========= ========== ====== ==========
Earnings/(loss) Before Interest, Tax,
Depreciation and Amortisation (EBITDA) 40,982 (33,239) (84) 7,659
Depreciation/amortisation charge - (3,484) - (3,484)
Net foreign exchange gain/(loss) (106) 96 - (10)
Finance income 15 4 - 19
Finance cost (1) (95) - (96)
Profit/(loss) before tax 40,890 (36,718) (84) 4,088
========= ========== ======
Tax (955)
----------
Profit for the period 3,133
----------
Nine months ended 30 September 2018(1)
Revenue - from external customers 144,354 - - 144,354
========= ========== ====== ==========
Earnings/(loss) Before Interest, Tax,
Depreciation and Amortisation (EBITDA) 137,472 (95,351) (78) 42,043
Depreciation/amortisation charge - (9,794) - (9,794)
Net foreign exchange gain/(loss) 781 311 - 1,092
Finance income 54 4 - 58
Finance cost (2) (252) - (254)
Profit/(loss) before tax 138,305 (105,082) (78) 33,145
========= ========== ======
Tax (5,520)
==========
Profit for the period 27,625
==========
Total assets 46,441 351,029 426 397,896
========= ========== ====== ==========
Total liabilities (10,644) (107,662) (58) (118,364)
========= ========== ====== ==========
Depreciation of property, plant and
equipment - 7,386 - 7,386
========= ========== ====== ==========
Amortisation of intangible assets - 2,408 - 2,408
========= ========== ====== ==========
Total additions of non-current assets - 46,452 - 46,452
========= ========== ====== ==========
(1) For the purposes of the geographical segment, in 2019 revenues have been reallocated between Cyprus and Spain as per IFRS 15. Comparatives for 2018 have not been restated
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.
Nine months Nine months
ended ended
30 September 30 September
(Euro 000's) 2019 2018
Segment EUR'000 Segment EUR'000
------------------------ ------- ------- -------
Offtaker 1 Copper 27,267 Copper 23,641
Offtaker 2 Copper 39,045 Copper 77,722
Offtaker 3 Copper 72,853 Copper 42,975
4. Revenue
Three Three Nine months Nine months
months months ended ended
(Euro 000's) ended ended 30 Sept 30 Sept
30 Sept 30 Sept 2019 2018
2019 2018
======== ======== =========== ===========
Revenue from contracts with customers 46,185 46,039 140,177 148,445
Fair value (losses) relating to
provisional pricing within sales
(1) (1,802) (3,228) (1,012) (4,106)
======== ======== =========== ===========
Total revenue 44,383 42,811 139,165 144,338
======== ======== =========== ===========
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 the nine month period ended 30 September 2019 revenue, there is a transaction price of EUR0.1 million related to the freight services provided by the Group.
(2) Provisional pricing impact represented the change in fair value of the embedded derivative arising on sales of concentrate.
5. Net finance (income) / cost
Three months Three months Nine months Nine months
ended ended ended ended
(Euro 000's) 30 Sept 30 Sept 30 Sept 30 Sept
2019 2018 2019 2018
Interest expense:
Other interest (8) (65) (27) (170)
Interest expense on lease
liabilities (2) - (6) -
Unwinding of discount on
mine rehabilitation provision
(Note 14) (30) (31) (89) (84)
Interest income(1) 83 19 99 58
------------- ------------- ------------ ------------
43 (77) (23) (196)
------------- ------------- ------------ ------------
(1) Interest income relates to interest received on bank balances
6. Earnings per share
The calculation of the basic and fully diluted loss per share attributable to the ordinary equity holders of the Company is based on the following data:
Three Three Nine months Nine
months months ended months
(Euro 000's) ended ended 30 Sept ended
30 Sept 30 Sept 2019 30 Sept
2019 2018 2018
Profit/(loss) attributable to
equity holders of the parent (962) 3,049 (2,494) 27,807
---------- ---------- ------------ ----------
Weighted number of ordinary shares
for the purposes of basic earnings
per share (000's) 137,339 137,340 137,339 136,558
---------- ---------- ------------ ----------
Basic profit per share (EUR cents/share) 5.1 2.2 20.5 20.4
---------- ---------- ------------ ----------
Weighted number of ordinary shares
for the purposes of fully diluted
earnings per share (000's) 138,517 138,652 138,959 137,910
---------- ---------- ------------ ----------
Fully diluted profit per share
(EUR cents/share) 5.0 2.2 20.2 20.2
---------- ---------- ------------ ----------
6. Earnings per share (cont.)
At 30 September 2019 there are nil warrants (Note 11) and 2,713,000 options (Note 12) (2018: 262,569 warrants and 1,334,333 options) which have been included when calculating the weighted average number of shares for 2019.
7. Property, plant and equipment
Deferred
(Euro 000's) Land Right-of-use Plant Assets under mining Other
and buildings assets and construction costs assets
(1) (5) machinery (2) (3) (4) Total
Cost
At 1 January
2018 40,995 - 145,402 11,445 22,317 785 220,944
Additions 4,853(1) - 1,978 34,178 4,354 - 43,363
Reclassifications - - 1,579 (1,579) - - -
At 30 September
2018 45,848 - 148,959 44,044 26,671 785 266,307
Additions 5(1) - 346 21,481 866 - 22,698
Reclassifications - - 3,515 (3,515) - - -
At 31 December
2018 45,853 - 152,820 62,010 27,537 785 289,005
Adoption of
IFRS 16(5) - 6,144 - - - - 6,144
At 1 January
2019 45,853 6,144 152,820 62,010 27,537 785 295,149
Additions 169 277 646 41,846 1,940 1 44,879
Disposals - - - - - (5) (5)
Reclassifications - - 4,609 (4,609) - - -
At 30 September
2019 46,022 6,421 158,075 99,247 29,477 781 340,023
--------------- ------------- ----------- -------------- ----------- -------- ------------
Depreciation
At 1 January
2018 4,076 - 13,465 - 3,469 476 21,486
Charge for the
period 1,446 - 4,819 - 873 248 7,386
At 30 September
2018 5,522 - 18,284 - 4,342 724 28,872
Charge for the
period 550 - 2,031 339 (163) 2,757
At 31 December
2018 6,072 - 20,315 - 4,681 561 31,629
Charge for the
period 1,585 284 5,398 - 1,040 47 8,354
Disposals - - - - - (3) (3)
At 30 September
2019 7,657 284 25,713 - 5,721 605 39,980
--------------- ------------- ----------- -------------- ----------- -------- ------------
Net book value
At 30 September
2019 38,365 6,137 132,362 99,247 23,756 176 300,043
--------------- ------------- ----------- -------------- ----------- -------- ------------
At 31 December
2018 39,781 - 132,505 62,010 22,856 224 257,376
--------------- ------------- ----------- -------------- ----------- -------- ------------
(1) Mine rehabilitation assets and Rumbo Royalty Buyout.
(2) Assets under construction at 30 September 2019 were EUR99.2 million (2018: EUR62.0 million) which include the capitalisation of costs related to the Expansion Project and sustaining capital expenditures.
(3) Stripping costs
(4) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.
(5) Refer to Note 2.2 Adoption of "IFRS 16 - Leases"
The above fixed assets are mainly located in Spain.
8. Intangible assets
Permits
(Euro 000's) of Rio Tinto Licences,
Project R&D and
(1) software Total
Cost
At 1 January 2018 76,521 4,505 81,026
Additions 17 1,209 1,226
At 30 September 2018 76,538 5,714 82,252
Additions - 1,267 1,267
Disposals - (955) (955)
At 31 December 2018 76,538 6,026 82,564
Additions - 1,027 1,027
At 30 September 2019 76,538 7,053 83,591
-------------- ------------ --------
Amortisation
On 1 January 2018 7,145 181 7,326
Charge for the period 2,363 45 2,408
At 30 September 2018 9,508 226 9,734
Charge for the period 862 17 879
At 31 December 2018 10,370 243 10,613
Charge for the period 2,492 47 2,539
At 30 September 2019 12,862 290 13,152
-------------- ------------ --------
Net book value
At 30 September 2019 63,676 6,763 70,439
-------------- ------------ --------
At 31 December 2018 66,168 5,783 71,951
-------------- ------------ --------
(1) Permits and R&D include an amount of EUR5.0 million and an amount of EUR3.8 million respectively that relate to the Touro Project mining rights.
In July 2018, the Company announced an updated technical report on the mineral resources and reserves of Proyecto Riotinto. The report increased the open pit mineral reserves by 29% and stated the life of mine to 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. In considering the carrying value of the assets at Proyecto Riotinto, including the intangible assets and any impairment thereof, the Group assessed that no indicators were present as at 30 September 2019 and thus no impairment has been recognised.
Goodwill of EUR9,333,000 arose on the acquisition of the remaining 49% of the issued share capital of Atalaya Riotinto Minera S.L.U. back in September 2008. This amount was fully impaired on acquisition, in the absence of the mining licence back in 2008.
9. Inventories
(Euro 000's) 30 Sept 31 Dec
2019 2018
Finished products 1,641 2,955
Materials and supplies 8,764 7,381
Work in progress 1,070 486
-------- -------
11,475 10,822
-------- -------
As of 30 September 2019, copper concentrate produced and not sold amounted to 2,186 tonnes (31 December 2018: 4,667 tonnes). Accordingly, the inventory for copper concentrate was EUR1.6 million (31 December 2018: EUR3.0 million). During the nine month period ended 30 September 2019 the Group recorded operating costs amounting to EUR89.2 million (2018: EUR97.9 million).
Materials and supplies mainly relate to machinery spare parts. Work in progress represents ore stockpiles, which is ore that has been extracted and is available for further processing.
10. Trade and other receivables
(Euro 000's) 30 Sept 31 Dec
2019 2018
Non-current
Deposits 250 249
-------- -------
250 249
-------- -------
Current
Trade receivables at fair value - subject
to provisional pricing 6,212 4,498
Trade receivables from shareholders at fair
value - subject to provisional pricing (Note
19.3) 5,811 2,461
Other receivables from related parties at
amortised cost (Note 19.3) 56 56
Deposits 26 26
VAT receivable 11,475 13,691
Tax refundable - -
Tax advances 1,980 1,208
Prepayments 1,000 688
Other current assets 3,486 1,060
-------- -------
30,046 23,688
Allowance for expected credit losses - -
-------- -------
Total current trade and other receivables 30,046 23,688
-------- -------
Trade receivables are shown net of any interest applied to prepayments. Payment terms are aligned with offtake agreements and market standards which generally are 7 days for the 90% of the invoice and the remaining 10% at the settlement date which can vary between 1 to 5 months. Fair values of trade and other receivables approximate their book values.
11. Share capital and share premium
Share Share
Shares Capital premium Total
000's StgGBP'000 StgGBP'000 StgGBP'000
Authorised
Ordinary shares of Stg GBP0.075
each 200,000 15,000 - 15,000
---------- ------------ ------------ ---------------
Issued and fully paid 000's Euro Euro Euro
000's 000's 000's
Balance at 31 December 2017/1
January 2018 135,254 13,192 309,577 322,769
13 Feb 2018 Shares issued
to Rumbo at GBP1.87 a) 193 16 410 426
13 Feb 2018 Exercised share
options at GBP1.44 b) 29 3 45 48
13 April 2018 Shares issued
to Rumbo buyout at GBP2.118 c) 1,601 139 3,887 4,026
1 June 2018 Exercised warrants
at GBP1.425 d) 263 22 405 427
Share issued costs - - (5) (5)
---------- ------------ ------------ ---------------
Balance at 30 September 2018
/ 31 December 2018 / 30 September
2019 137,340 13,372 314,319 327,691
---------- ------------ ------------ ---------------
Authorised capital
The Company's authorised share capital is 200,000,000 ordinary shares of Stg GBP0.075 each.
Issued capital
2019
There were no changes in share capital during the nine month period ended 30 September 2019.
2018
a) On 13 February 2018, the Company issued 192,540 new ordinary shares of GBP0.075 to Rumbo at a price of GBP1.867, thus creating a share premium of EUR410,146.
b) On 13 February 2018, the Company was notified that certain employees exercised options over 29,000 ordinary shares of GBP0.075 at a price of GBP1.44, thus creating a share premium of EUR44,576.
c) On 5 April 2018, the Company entered into an agreement with Rumbo to purchase the whole royalty agreement for a total consideration of US$4,750,000 to be paid through the issuance of 1,600,907 new ordinary shares of GBP0.075 at a price of GBP2.118 per share. After this transaction the share premium increased by EUR3,887,128. On 13 April 2018, the new ordinary shares were issued to Rumbo.
d) On 1 June 2018, 262,569 warrants were exercised at GBP1.425 per ordinary share. Hence, 262,569 new ordinary shares of GBP0.075 were issued creating a share premium of EUR405,087.
Warrants
All warrants were exercised on 1 June 2018 (see (d) above).
As at 30 September 2019, there were no warrants.
12. Other reserves
Fair
value
(Euro 000's) reserve Non-Distributable
Depletion of reserve Distributable
factor financial (4) reserve
(1) Available-for-sale assets (5)
Share Bonus investment at FVOCI
option share (2) (3) Total
----------- ------------------- ---------------
At 1 January
2018 6,536 208 450 (1,057) - - 6,137
Adjustment
for initial
application
of IFRS 9 - - - 1,057 (1,057) - - -
Recognition
of depletion
factor - - 5,050 - - - - 5,050
Recognition
of share-
based payments 76 - - - - - - 76
Recognition
of
non-distributable
reserve - - - - - 1,446 - 1,446
Change in
fair value
of financial
assets at
fair value
through OCI - - - - (15) - - (15)
------- ------ ----------- ------------------- ----------- ------------------- --------------- --------
At 30 September
2018 6,612 208 5,500 - (1,072) 1,446 - 12,694
Recognition
of share-based
payments 140 - - - - - 140
Change in
fair value
of financial
assets at
fair value
through OCI - - - - (43) - - (43)
----------- ------------------- ---------------
At 31 December
2018 6,752 208 5,500 - (1,115) 1,446 - 12,791
Recognition
of share-based
payments 363 - - - - - - 363
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
Change in
fair value
of financial
assets at
fair value
through OCI - - - - (37) - - (37)
----------- ------------------- ---------------
At 30 September
2019 7,115 208 10,878 - (1,152) 3,430 1,844 22,323
------- ------ ----------- ------------------- ----------- ------------------- --------------- --------
(1) Depletion factor reserve
During the nine month period ended 30 September 2019, the Group has disposed EUR5.4 million (nine month period ended 30 September 2018: EUR5.0 million) as a depletion factor reserve as per the Spanish Corporate Tax Act.
(2) Available-for-sale investments reserve
As at 31 December 2017 this reserve recorded fair value changes on available-for-sale investments. On disposal or impairment, the cumulative changes in fair value were recycled to the income statement. These assets were reclassified upon adoption of IFRS 9.
(3) 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, as explained in comment (2) above. 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.
(4) 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.
12. Other reserves (cont.)
(5) 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.
In general, option agreements contain provisions adjusting the exercise price in certain circumstances including the allotment of fully paid ordinary shares by way of a capitalisation of the Company's reserves, a sub division or consolidation of the ordinary shares, a reduction of share capital and offers or invitations (whether by way of rights issue or otherwise) to the holders of ordinary shares.
Details of share options outstanding as at 30 September 2019:
Number of share options 000's
Outstanding options at 1 January 2019 1,313
* Expired during the reporting period (500)
* Granted during the reporting period (1) 1,900
------------------------------
Outstanding options at 30 September 2019 2,713
------------------------------
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 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.
13. Trade and other payables
(Euro 000's) 30 Sept 2019 31 Dec 2018
Non-current
Land options - 32
Government grant 13 13
------------- ------------
13 45
------------- ------------
Current
Trade payables 49,848 53,098
Land options and mortgage 292 791
Accruals 4,048 3,382
54,188 57,271
------------- ------------
Trade payables mostly comprise the purchase 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.
Trade payables are non-interest-bearing and usually settled on a 60-day term.
14. Provisions
Rehabilitation
(Euro 000's) Legal costs costs Total costs
1 January 2018 213 5,514 5,727
Additions 6 953 959
Revision of provision (35) - (20)
Finance cost - - -
At 30 September 2018 184 6,467 6,651
Additions - 19 19
Revision of provision (57) (133) (190)
Finance cost - 39 39
-------------- --------------- --------------
At 31 December 2018 127 6,392 6,519
Additions 284 140 424
Revision of provision (23) (18) (41)
Finance cost 89 89
At 30 September 2019 388 6,603 6,991
-------------- --------------- --------------
(Euro 000's) 30 Sept 31 Dec
2019 2018
Non-current 6,991 6,519
Current - -
-------- -------
Total 6,991 6,519
-------- -------
Rehabilitation provision
Rehabilitation provision represents the accrued cost required to provide adequate restoration and rehabilitation upon the completion of production activities. These amounts will be settled when rehabilitation is undertaken, generally over the project's life.
The discount rate used in the calculation of the net present value of the provision as at 30 September 2019 was 1.87%, which is the 15-year Spain Government Bond rate (31 December 2018: 1.87%). An inflation rate of 1.5% is applied on annual basis.
Legal provision
The Group has been named as defendant in several legal actions in Spain, the outcome of which is not determinable as at 30 September 2019. Management has reviewed individually each case and made a provision of EUR284 thousand for these claims, which has been reflected in these unaudited condensed interim consolidated financial statements.
15. Leases
(Euro 000's) 30 Sept 2019 31 Dec 2018
Non-current
Leases 5,846 -
5,846 -
------------- ------------
Current
Leases 156 -
156 -
------------- ------------
Finance leases
The Group entered into lease arrangements for the renting of land, laboratory equipment and vehicles. 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. Depreciation expense for the nine month period ended 30 September 2019 regarding leases amounted to EUR0.3 million (2018: EURnil). The term of the land lease is thirteen years. Payments are due at the beginning of the month escalating on an annual average of 1.5%. As at 30 September 2019, the remaining term of this lease is twelve and a quarter years.
15. Leases (continued)
The term of the motor vehicle and laboratory equipment leases is four years Payments are due at the beginning of the month increasing by a 1.5% average on an annual basis. At 30 September 2019, the remaining term of the motor vehicle and laboratory equipment leases is three and a quarter years, and three years and nine months, respectively.
(Euro 000's) 30 Sept 31 Dec
2019 2018
Minimum lease payments due:
148 -
* Within one year
2,249 -
* Two to five years
3,605 -
* Over five years
Less future finance charges - -
-------- -------
Present value of minimum lease payments 6,002 -
due
-------- -------
Present value of minimum lease payments
due:
148 -
* Within one year
2,249 -
* Two to five years
3,605 -
* Over five years
-------- -------
6,002 -
-------- -------
(Euro 000's) Lease liability
Balance 1 January 2019 6,144
Additions 277
Interest expense 6
Lease payments (424)
Balance at 30 September 2019 6,002
----------------
Balance at 30 September 2019
* Non-current liabilities 5,846
* Current liabilities 156
----------------
6,002
----------------
16. Deferred consideration
In September 2008, the Group moved to 100% ownership of Atalaya Riotinto Minera 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. 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).
As at 30 September 2019, no consideration has been paid.
"Excess cash" is not defined in the Master Agreement leaving ambiguity as to how it is to be calculated. The Company has continued to regularly review its assessment of when this could be payable. As a result, at 30 September 2019, the EUR53 million liability has been classified as non-current, reflecting results to date, the Company's copper price estimation and the sustaining capex projects and commitments for 2019. At 30 June 2019, a portion of the EUR53 million liability was classified as a current liability based on estimates at that point.
As previously stated, the precise timing and quantum of payments will be estimated depending on the future key variables such as methodology for the calculation, definition of "Project", the price of copper and the US Dollar and Euro exchanges rates, timing of sustaining capital expenditures, increased costs and other operational issues. These factors can vary significantly, and any amounts actually paid within twelve months of the balance sheet date may differ substantially from the amounts presently estimated, if any, to become payable within this period.
16. Deferred consideration (continued)
The effect of discounting remains insignificant, in line with the 2018 assessment, and therefore the Group has measured the liability for the Astor Deferred Consideration on an undiscounted basis.
17. Acquisition, incorporation and disposal of subsidiaries
There were neither acquisition nor incorporation of subsidiaries during the nine month period ended 30 September 2019.
18. Wind-up of subsidiaries
There were no operations wound-up during the nine month period ended 30 September 2019.
19. Related party transactions
The following transactions were carried out with related parties:
19.1 Compensation of key management personnel
The total remuneration and fees of Directors (including Executive Directors) and other key management personnel was as follows:
Three Three Nine Nine
months months months months
(Euro 000's) ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept
2019 2018 2019 2018
Directors' remuneration and fees 244 193 730 593
Share option-based benefits and other
benefits to directors 88 26 112 39
Director's bonus 365 - 365 68
Key management personnel fees (1) 174 106 454 313
Key management bonus (1) 1,150 - 1,150 -
Share option-based and other benefits
to key management personnel (1) 135 39 183 81
Share bonus to key management personnel (*) - (*) -
(1)
-------- -------- -------- --------
2,156 364 2,994 1,094
-------- -------- -------- --------
(1) Included compensation approved by the Board of Directors of the Company to a former employee of the Group.
(*) Included a compensation of 33,333 ATYM shares to a former employee of the Group.
19.2 Share-based benefits
On 30 May 2019, the directors and key management personnel have been granted 1,500,000 options. The options will expire in 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 (Q3 2018: nil).
On 10 July 2019, the Company announced that it granted 400,000 share options (the "Options") to Persons 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.
19. Related party transactions (continued)
19.3 Transactions with related parties/shareholders
i) Transaction with shareholders
Three months Three months Nine months Nine months
ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept
(Euro 000's) 2019 2018 2019 2018
============= ============ ============ ===========
Trafigura- Revenue from contracts 5,789 8,258 26,452 26,296
Freight services - - - -
------------- ------------ ------------ -----------
5,789 8,258 26,452 26,296
Gain/(losses) relating provisional
pricing within sales 826 (2,329) 815 (2,655)
------------- ------------ ------------ -----------
Trafigura - Total revenue from contracts 6,615 5,929 27,267 23,641
============= ============ ============ ===========
XGC was granted an offtake over 49.12% of life of mine reserves as per the NI 43-101 report issued in September 2016. Similarly, Orion was granted an offtake over 31.54% and Trafigura 19.34% respectively of life of mine reserves as per the same NI 43-101 report. In November 2016, the Group was notified and consented the novation of the Orion offtake agreement as Orion reached an agreement with a third party (XGC) to transfer the rights over the concentrates. In December 2017, the Group was notified and consented the novation of XGC offtake agreement as XGC reached an agreement with a third party (LDC) to transfer the rights over the concentrates.
ii) Period-end balances with related parties
(Euro 000's) 30 Sept 2019 31 Dec 2018
Receivables from related parties:
Recursos Cuenca Minera S.L. 56 56
Total (Note10) 56 56
-------------- -------------
The above balances bear no interest and are repayable on demand.
iii) Period-end balances with shareholders
(Euro 000's) 30 Sept 2019 31 Dec 2018
Trafigura - Debtor balance- subject to
provisional pricing 5,811 2,461
Total (Note 10) 5,811 2,461
--------------- --------------
The above debtor balance arose from sales of goods. It bears no interest and is repayable on demand.
20. Contingent liabilities
Judicial and administrative cases
In the normal course of business, the Group may be involved in legal proceedings, claims and assessments. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and the Group accrues for adverse outcomes as they become probable and estimable.
The Junta de Andalucía notified the Group of another disciplinary proceeding for unauthorised discharge in 2014. The Group submitted the relevant defence arguments on 10 March 2015 but has had no response or feedback from the Junta de Andalucía since the submissions. Based on the time that has lapsed without a response, it is expected that the outcome of these proceedings will also be favourable for the Group. Once the necessary time has lapsed, the Group will ask for the Administrative File to be dismissed.
20. Contingent liabilities (continued)
Receipt of rulings of claims made by an environmental Group
On 29 March 2019, the Company announced that it had received notification from the Supreme Court in Spain that it did not have jurisdiction over the appeal made by the Junta de Andalucía ("JdA") and therefore the announced, Ruling by the Tribunal Superior de Justicia de Andalucía ("TSJA") dated 26 September 2018 remains valid.
On 26 April 2019, the Company announced that a judgment relating to the Mining Permits to operate Proyecto Riotinto (the "Mining Permits") was handed down by the TSJA. The TSJA declared the Mining Permits are linked to the environmental permits, ruled by the same tribunal in September 2018. The new ruling on the mining permits is based on the requirement to have an environmental permit before issuing mining permits and therefore invalidates the existing mining permits. The TSJA did not accept the requests by Ecologistas en Accion ("EeA") for the cessation of activities at the mine and an increase in the scope of the environmental plan.
On 20 November 2019, the Company received an informal notification that its appeal to the Supreme Court on the ruling handed down by the TSJA on 26 April 2019 had been rejected. The Company has been advised by its lawyers that the rejection has no impact over the Company's legal status quo.
The JdA is undergoing the process to resolve the previously reported administrative issues identified by the TSJA relating to the environmental and mining permits. The Company continues operating the mine normally and remains confident that the ongoing process carried out by the JdA will not impact its operations at Proyecto Riotinto.
21. Commitments
The Company has capital commitments related to the multiple projects to improve the environmental management, the capacity of the tailing dams and to increase the efficiency of the processing plant.
22. Significant events
There have been no significant events during the nine month period ended 30 September 2019 other than as disclosed in the unaudited, interim, condensed, consolidated financial statements and the notes above.
23. Events after the reporting period
-- On 29 October 2019 the Board of Directors approved the issuance of 33,333 shares to a former employee of the Group.
-- On 13 November 2019, the Company executed a Share Purchase Agreement to acquire the 12.5% of Explotaciones Gallegas del Cobre, S.L. a limited company which held the permits for the land surrounding the Proyecto Touro with exploration potential.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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