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Atalaya Mining PLC - Third Quarter Financial Results

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

 

Quarter ended 30 September

 

Q3 2019

Q3 2018

 

Nine months ended

30 Sept 2019

Nine months ended

30 Sept 2018

Revenues from operations

€k

44,383

42,811

 

139,165

144,354

Operating costs

€k

(34,514)

(35,152)

 

(97,752)

(102,311)

EBITDA

€k

9,869

7,659

 

41,413

42,043

Profit for the period

€k

6,933

3,133

 

27,937

27,625

Earnings per share

€ cents/share

5.1

2.2

 

20.5

20.4

 

 

 

 

 

 

 

Cash flows from operating activities

€k

16,487

14,937

 

31,457

44,151

Cash flows used in investing activities

€k

(13,115)

(20,414)

 

(45,390)

(41,704)

Cash flows (used)/from financing activities

€k

(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 €44.4 million compared with €42.8 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 €139.2 million were lower than the €144.4 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 €34.5 million compared with €35.2 million in Q3 2018. Operating costs for the nine month ended 30 September 2019 amounted to €97.8 million compared with €102.3 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 €9.9 million in Q3 2019 compared with €7.7 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 €41.4 million compared with €42.0 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 €6.9 million (or 5.1 cents basic earnings per share) compared with a profit for Q3 2018 of €3.1 million (or 2.2 cents basic earnings per share). Profit after tax for the nine month period ended 30 September 2019 was €27.9 million compared with €27.6 million during the same period in 2018.

·      At 30 September 2019, the Company reported a working capital surplus of €2.0 million, a decrease from the €8.4 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 €18.5 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:

Newgate Communications

Elisabeth Cowell / Adam Lloyd / Tom Carnegie

+ 44 20 3757 6880

4C Communications

Carina Corbett

+44 20 3170 7973

Canaccord Genuity (NOMAD and Joint Broker)

Henry Fitzgerald-O'Connor / James Asensio

+44 20 7523 8000

BMO Capital Markets (Joint Broker)

Tom Rider / Michael Rechsteiner

+44 20 7236 1010

Peel Hunt LLP (Joint Broker)

Ross Allister / David McKeown

+44 20 7418 8900

 

About Atalaya Mining Plc

Atalaya is an AIM and TSX-listed mining and development group which produces copper concentrates and silver by-product at its wholly owned Proyecto Riotinto site in southwest Spain. In addition, the Group has a phased, earn-in agreement for up to 80% ownership of Proyecto Touro, a brownfield copper project in the northwest of Spain 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 accordance with the international system of units (SI)

 

 

Unit

Three month ended

30 Sept 2019

Three month ended

30 Sept 2018

Nine month ended

30 Sept 2019

Nine month ended

30 Sept 2018

 

 

 

 

 

 

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 m3 in Q3 2019 versus 2.3 million m3 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.

 

 

(Euro 000's)

Three months ended

30 Sept 2019

Three months ended

30 Sept 2018

Nine months ended

30 Sept 2019

Nine months ended

30 Sept 2018

 

 

 

 

 

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 €44.4 million (Q3 2018: €42.8 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 €31.3 million, compared with €33.6 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 €2.4 million compared with €1.9 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 €2.1 million (Q3 2018: €1.2 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 €1.1 million (Q3 2018: €0.4 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 €9.9 million compared with Q3 2018 of €7.7 million.

The main item below the EBITDA line is depreciation and amortisation of €3.7 million (Q3 2018: €3.5 million). Net finance costs for Q3 2019 amounted to €43k gain compared with €77k 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 €139.2 million (YTD 2018: €144.4 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 €89.6 million, compared with €98.0 million in the nine month period ended 30 September 2018. Lower costs in 2019 were mainly attributable to: (i) a reduction of circa €4.0 million in technical services and maintenance costs; (ii) reduction of €2.1 million cost of sales as the inventory decreased in ca. 2,270 tonnes less than in YTD 2018; (iii) a decrease of €2.0 million in earthwork costs and (iv) a €1.3 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 €5.3 million, compared with €7.1 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 €5.5 million, compared with €3.3 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 €2.5 million, compared with €0.8 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 €41.4 million, compared with €42.0 million in the nine month period ended 30 September 2018.

Depreciation and amortisation for the nine month period ended 30 September 2019 amounted to €10.9 million (€9.8 million during the nine month period ended 30 September 2018).

Net finance costs for the nine month period ended 30 September 2019 amounted to €23k loss (loss of €196k 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:

 

 

(USD)

Three months ended

30 Sept 2019

 

Three months ended

30 Sept 2018

 

Nine months ended

30 Sept 2019

 

Nine months ended

30 Sept 2018

 

 

 

 

 

 

 

 

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 €18.5 million from €24.4 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 €0.3 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 €2.0 million, compared with a working capital surplus of €8.4 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 €2.0 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

 

 

(Euro 000's)

Three months ended

30 Sept 2019

 

Three months ended

30 Sept 2018

 

Nine     months ended

30 Sept 2019

 

Nine   months ended

30 Sept 2018

 

 

 

 

 

 

 

 

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 €3.2 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 €16.5 million, the cash used in investing activities amounting to €13.1 million and the cash from financing activities totalling €0.2 million.

Cash generated from operating activities before working capital changes was €11.8 million. Atalaya decreased its trade receivables in the period by €6.2 million, increased its inventory levels by €0.1 million and decreased its trade payables by €0.5 million.

Investing activities during the quarter consumed €13.1 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 €14.4 million during the nine month period ended 30 September 2019. This was due to cash from operating activities amounting to €31.5 million, cash used in investing activities amounting to €45.4 million and cash from financing activities amounting to €0.4 million.

Cash generated from operating activities before working capital changes was €43.7 million. The Company decreased its trade payables in the period by €3.1 million, increased its inventory levels by €0.7 million as well as its trade receivable balances by €5.6 million.

Investing activities during the nine month period ended 30 September 2019 amounted to €45.4 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 €1.4 million and €1.7 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

30 Sept 2019

Three months ended

30 Sept 2018

Nine months ended

30 Sept 2019

Nine months ended

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 €43.9 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 €9.1 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 €9.1 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 €53 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 €53 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)

 

 

 

 

 

 

(Euro 000's)

 

 

 

 

Notes

Three months ended

30 Sept 2019*

Three months ended

30 Sept 2018

Nine months ended

30 Sept 2019*

Nine months ended

30 Sept 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

 

(Euro 000's)

 

Notes

30 September 2019*

 

31 December 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

 

 

 

(Euro 000's)

 

Share  capital

 

Share premium(1)

Other reserves(2)

Accum.

losses

 

Total

Non-controlling interest

 

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

 

 

(Euro 000's)

 

Share
capital

 

Share premium(1)

Other reserves(2)

Accum.

losses

 

Total

Non-controlling interest

 

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

 

 

 

(Euro 000's)

 

Share
capital

 

Share premium(1)

Other reserves(2)

Accum.

losses

 

Total

Non-controlling interest

 

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

 

 

 

 

(Euro 000's)

 

 

 

Notes

Three months ended

30 September

2019*

Three months ended

30 September

2018

Nine months ended

30 September

2019*

Nine

months ended

30 September

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 £0.075 for every 30 existing ordinary shares of nominal value Stg £0.0025.

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)

 

Note

As previously reported

31 December 2018

Adjustments as at

1 January 2019

Balance as at

1 January 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 €5,000). 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

 

 

 

 

 

 

 

(Euro 000's)

 

Land

 

Vehicles

Laboratory equipment

 

Total

 

Lease liabilities

 

 

 

 

 

 

 

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:

 

 

 

(Euro 000's)

Nine months ended

30 September

2019

Nine months ended

30 September

2018

 

 

 

As at 31 December 2018

 

 

Depreciation expense of right-of-use assets

284

-

Interest expense on lease liabilities

6

-

Total amounts recognised in profit or loss

290

-

 

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.

(Euro 000's) 

Nine months

 ended

30 September

2019

Nine months

ended

30 September

2018

 

Segment

€'000

Segment

€'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

 

 

(Euro 000's)

Three months ended
30 Sept 2019

Three months ended
30 Sept 2018

Nine months ended
30
Sept 2019

Nine months ended

30 Sept 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 €0.1 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

 

 

(Euro 000's)

Three months ended
30
Sept 2019

Three months ended
30 Sept 2018

Nine months ended
30 
Sept 2019

Nine months ended

30 Sept 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:

 

  

(Euro 000's)

Three months ended
30 Sept 2019

Three months ended
30
Sept 2018

Nine months ended
30 Sept 2019

Nine months ended

30 Sept 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

 

 

(Euro 000's)

Land and buildings (1)

Right-of-use assets (5)

Plant and machinery

Assets under construction (2)

 

Deferred mining costs (3)

Other assets (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 €99.2 million (2018: €62.0 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

 

(Euro 000's)

Permits of Rio Tinto Project (1)

 

Licences, R&D and 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 €5.0 million and an amount of €3.8 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 €9,333,000 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 2019

 

31 Dec 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 €1.6 million (31 December 2018: €3.0 million). During the nine month period ended 30 September 2019 the Group recorded operating costs amounting to €89.2 million (2018: €97.9 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 2019

 

31 Dec 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

 

 

 

 

 

Shares

000's

Share Capital

Stg£'000

Share premium

Stg£'000

 

 

Total

Stg£'000

 

Authorised

 

 

 

 

 

 

Ordinary shares of Stg £0.075 each

 

200,000

15,000

-

 

15,000

 

 

 

 

 

 

 

Issued and fully paid

 

000's

Euro 000's

Euro 000's

 

Euro 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 £1.87

a)

193

16

410

 

426

13 Feb 2018 Exercised share options at £1.44

b)

29

3

45

 

48

13 April 2018 Shares issued to Rumbo buyout at £2.118

 

c)

 

1,601

 

139

 

3,887

 

 

4,026

1 June 2018 Exercised warrants at £1.425

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 £0.075 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 £0.075 to Rumbo at a price of £1.867, thus creating a share premium of €410,146.

b)     On 13 February 2018, the Company was notified that certain employees exercised options over 29,000 ordinary shares of £0.075 at a price of £1.44, thus creating a share premium of €44,576.

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 £0.075 at a price of £2.118 per share. After this transaction the share premium increased by €3,887,128. On 13 April 2018, the new ordinary shares were issued to Rumbo.

d)     On 1 June 2018, 262,569 warrants were exercised at £1.425 per ordinary share. Hence, 262,569 new ordinary shares of £0.075 were issued creating a share premium of €405,087.

Warrants

All warrants were exercised on 1 June 2018 (see (d) above).

As at 30 September 2019, there were no warrants.

 

 

12. Other reserves

 

 

 

(Euro 000's)

Share option

Bonus share

 

 

 

 

Depletion factor (1)

 

Fair value reserve of financial assets at FVOCI (3)

 

 

 

Non-Distributable reserve (4)

 

 

 

 

Distributable reserve (5)

 

 

 

 

 

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 €5.4 million (nine month period ended 30 September 2018: €5.0 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

 

(Euro 000's)

 

Legal costs

Rehabilitation 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 2019

 

31 Dec 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 €284 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 €0.3 million (2018: €nil). 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 2019

31 Dec 2018

Minimum lease payments due:

 

 

-       Within one year

148

-

-       Two to five years

2,249

-

-       Over five years

3,605

-

Less future finance charges

-

-

Present value of minimum lease payments due

6,002

-

 

 

 

Present value of minimum lease payments due:

 

 

-       Within one year

148

-

-       Two to five years

2,249

-

-       Over five years

3,605

-

 

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 €43.9 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 €9.1 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 €9.1 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 €53 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 €53 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:

 

 

(Euro 000's)

Three months ended

30 Sept 2019

Three months ended

30 Sept 2018

Nine months ended 30 Sept 2019

Nine months ended

30 Sept 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

 

 

 

(Euro 000's)

Three months ended

30 Sept 2019

Three months ended

30 Sept 2018

Nine months ended

30 Sept 2019

Nine months ended

 30 Sept 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 [email protected] or visit www.rns.com.
 
END
 
 
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