REG - Atalaya Mining PLC - Q2 and H1 2020 Interim Financial Statements
13 August 2020
Atalaya Mining Plc.
("Atalaya" and/or the "Group")
Unaudited Interim Condensed Consolidated Financial Statements for the period ended 30 June 2020
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 June 2020 ("Q2 2020"), together with its unaudited interim condensed consolidated financial statements.
The Unaudited Interim Condensed Consolidated Financial Statements for the six months ended 30 June 2020 ("H1 2020") are also available under the Company's profile on SEDAR at www.sedar.com and on Atalaya's website at www.atalayamining.com.
Financial Highlights
Period ended 30 June
Q2 2020
Q2 2019
H1 2020
H1 2019
Revenues from operations
€k
56,544
43,070
117,733
94,782
Operating costs
€k
(43,710)
(31,036)
(95,625)
(63,238)
EBITDA
€k
12,834
12,034
22,108
31,544
Profit for the period
€k
3,035
6,849
5,966
21,004
Basic earnings per share
€ cents/share
2.3
5.1
4.6
15.4
Cash flows from operating activities
€k
7,515
6,856
23,000
14,970
Cash flows used in investing activities
€k
(7,746)
(15,137)
(13,331)
(32,275)
Cash flows (used in)/from financing activities
€k
(9,415)
(268)
14,631
(268)
Working capital surplus / (deficit)
€k
10,309
(18,391)
10,309
(18,391)
Average realised copper price
US$/lb
2.51
2.81
2.54
2.80
Cu concentrate produced
(tonnes)
60,938
48,382
120,941
91,823
Cu production
(tonnes)
13,635
10,889
26,864
21,108
Cash costs
US$/lb payable
1.87
1.74
1.93
1.81
All-In Sustaining Cost
US$/lb payable
2.22
1.95
2.25
2.06
Operational Highlights
Proyecto Riotinto
Outlook 2020
· Management continues to monitor the impact of COVID-19 on the operations and the ongoing cost structure and will update the market with any potential changes in expectations.
COVID-19 Update
· Since the announcement on 6 April 2020, Proyecto Riotinto continues operating with exceptional requirements and recommendations to prevent exposure to COVID-19 and the spread of the virus.
· Atalaya's key priority continues to be protecting its workforce and the local communities surrounding both Proyecto Riotinto and Proyecto Touro.
· In light of new cases in the north of Spain, the Company has reinforced its measures to protect against the pandemic and any adverse development will be notified accordingly.
Legal updates
· On 7 May 2020, the Company announced the Junta de Andalucía had issued a favourable resolution (the "Resolution") which validates the Unified Environmental Authorisation (the "AAU") of Proyecto Riotinto. In addition, on 1 June 2020, the Company announced the Junta de Andalucía validated the Mining Permits. The Resolutions end the legal process announced by the Company on 26 September 2018 in relation to the judgement made by the Tribunal Superior de Justicia de Andalucía ("TSJA") in connection with the AAU and the Mining Permits.
Alberto Lavandeira, CEO commented:
"Despite the challenges of COVID-19, our Proyecto Riotinto site continues to perform well, with copper production and ore milled both increasing over the quarter and half year and our production and cash costs on track to meet our full year guidance. The work the Atalaya team has carried out during this time gives me immense pride as our key priority continues to be protecting our workforce and the local communities surrounding both Proyecto Riotinto and Proyecto Touro. Looking ahead, the completion of the Proyecto Riotinto expansion in 2019 means that Atalaya is well positioned to continue benefitting from higher copper concentrate sales and the improved commodity price environment."
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 / Neil Elliot
+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. For further information, visit www.atalayamining.com
Management's review
(All amounts in Euro thousands unless otherwise stated)
For the period ended 30 June 2020 and 2019
Notice to Reader
The accompanying unaudited interim condensed consolidated financial statements of Atalaya Mining Plc have been prepared by and are the responsibility of Atalaya Mining Plc's management. The unaudited interim condensed consolidated financial statements have been reviewed by Atalaya's auditors in accordance with the International Standard on Review Engagements 2410 "Review of Interim Financial Information performed by the Independent Auditor of the Entity".
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 2019 and 30 June 2020 and results of operations for the three and six months ended 30 June 2020 and 2019.
This report has been prepared as of 12 August 2020. The analysis hereby included, is intended to supplement and complement the unaudited interim condensed consolidated financial statements and notes thereto ("Financial Statements") as at and for the period ended 30 June 2020. 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 2019, and the unaudited interim condensed consolidated financial statements for the period ended 30 June 2019. 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") as adopted by EU and its Unaudited Interim Condensed 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 constitute 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 domiciled 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 is produced. A brownfield expansion of the plant was completed in 2019.
The Group has an initial 10% stake in Cobre San Rafael, S.L., the owner of Proyecto Touro, as part of an earn-in agreement which will enable the Group to acquire up to 80% of the copper project. Proyecto Touro is located in Galicia, north-west Spain.
In November 2019, Atalaya executed the option to acquire 12.5% of Explotaciones Gallegas del Cobre, S.L. the exploration property around Touro, with known additional reserves, which will add to the potential to the Proyecto Touro.
2. Overview of Operational Results
Proyecto Riotinto
The following table presents a summarised statement of operations of Proyecto Riotinto for the three and six months ended 30 June 2020 and 2019, respectively.
Units expressed in accordance with the international system of units (SI)
Unit
Three months ended
30 June 2020
Three months ended
30 June 2019
Six months ended
30 June 2020
Six months
ended
30 June 2019
Ore mined
t
3,232,331
2,781,264
6,261,693
5,331,249
Ore processed
t
3,572,094
2,565,559
6,999,242
5,011,536
Copper ore grade
%
0.44
0.48
0.46
0.47
Copper concentrate grade
%
22.35
22.51
22.21
22.99
Copper recovery rate
%
85.89
88.72
84.32
89.47
Copper concentrate
t
60,938
48,382
120,941
91,823
Copper contained in concentrate
t
13,635
10,889
26,864
21,108
Payable copper contained in concentrate
t
13,025
10,405
25,654
20,190
Cash cost*
US$/lb payable
1.87
1.74
1.93
1.81
All-in sustaining cost*
US$/lb payable
2.22
1.95
2.25
2.06
(*) Refer to Section 5 of this Management's Review
Note: The numbers in the above table may slightly differ among them due to rounding.
Three months operational review
During Q2 2020 a total of 3.6 million tonnes of ore were processed with an average copper head grade of 0.44% and a recovery rate of 85.89%. In comparison with the same quarter of 2019, throughput increased 39% while recovery decreased 3% as a result of the plant expansion completed in 2019. Compared with Q1 2020, copper production increased 3% as a result of a 6% higher throughput and lower grades being compensated for by higher recoveries.
Plant recoveries compared to Q1 2020 increased as a result of operational improvements to the fully commissioned plant despite scheduled maintenance and mandatory COVID-19 shutdown during the quarter.
As reported on 30 March 2020, operations at Proyecto Riotinto halted for five days following the Royal Decree issued by the Spanish government to increase the national protective measures against COVID-19, affecting tonnage processed during April 2020 and resulting in lower ore milled than planned during Q2 2020.
Mining operations continued concentrating on mining ore from the higher levels of the mine. On a combined basis, ore, waste and marginal ore amounted to 3.2 million m3 in Q2 2020 versus 2.9 million m3 in Q1 2020.
On-site concentrate inventories at the end of the quarter were approximately 3,845 tonnes.
Copper prices decreased during Q2 2020 compared with Q1 2020, with an average realised price per pound of copper payable, including the QPs closed in the period, of US$2.51/lb compared with US$2.58/lb in Q1 2020. The average copper spot price during the quarter was US$2.42/lb. The realised price during the quarter, excluding QPs, was approximately US$2.43/lb.
Cash operating costs for Q2 2020 are within the lower end of the range of the annual AISC guidance of US$2.20-US$2.30/lb.
Exploration around Proyecto Riotinto continued during Q2 2020 focused around the massive sulphides and stockwork mineralisation under the Atalaya pit as well as potential resource increases at the Cerro Colorado pit.
Six months operational review
Production of copper contained in concentrate during H1 2020 was 26,864 tonnes, compared with 21,108 tonnes in the same period of 2019. Payable copper in concentrates was 25,654 tonnes compared with 20,190 tonnes of payable copper in H1 2019 as a result of the plant expansion completed in 2019.
Ore mined in H1 2020 was 6,261,693 tonnes compared to 5,331,249 tonnes during H1 2019. Ore processed was 6,999,242 tonnes versus 5,011,536 tonnes in H1 2019.
Ore grade during H1 2020 was 0.46% Cu compared with 0.47% Cu in H1 2019. Copper recovery was 84.32% versus 89.47% in H1 2019. Concentrate production amounted to 120,941 tonnes above H1 2019 production of 91,823 tonnes as increased throughput and recoveries offset the slightly lower grade.
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.
Operational guidance
The Company is aware that the COVID-19 pandemic may still further impact how the Company manages its operations and is accordingly keeping its guidance under regular review.
Proyecto Riotinto operational guidance for 2020 remains unchanged. Should the Company consider the current guidance no longer achievable, then the Company will provide a further update.
Guidance
Unit
2020
Ore processed
million tonnes
14.0 - 15.0
Contained copper in concentrate
tonnes
55,000 - 58,000
Copper head grade for 2020 is estimated to average 0.45% Cu, with a recovery rate of approximately 84% to 86%. Cash operating costs for 2020 are expected to be in the range of US$1.95/lb - US$2.05/lb, and AISC is estimated to be in the range of US$2.20/lb - US$2.30/lb Cu payable.
4. Overview of the Financial Results
The following table presents summarised consolidated income statements for the three and six months ended 30 June 2020, with comparatives for the three and six months ended 30 June 2019, respectively.
(Euro 000's)
Three months ended
30 June 2020
Three months ended
30 June 2019
Six months ended
30 June 2020
Six months ended
30 June 2019
Revenue
56,544
43,070
117,733
94,782
Costs of sales
(43,020)
(28,255)
(92,211)
(58,334)
Administrative and other expenses
(450)
(1,465)
(2,158)
(3,382)
Exploration expenses
(202)
(1,201)
(1,104)
(1,402)
Care and maintenance expenditure
(46)
(116)
(160)
(121)
Other income
8
-
8
-
EBITDA
12,834
12,033
22,108
31,543
Depreciation/amortisation
(7,101)
(3,744)
(13,767)
(7,170)
Impairment loss on other receivables
-
-
(45)
-
Net foreign exchange (loss)/gain
(1,061)
(426)
(616)
287
Net finance cost
(138)
(35)
(149)
(66)
Tax
(1,499)
(979)
(1,565)
(3,590)
Profit for the period after tax
3,035
6,849
5,966
21,004
Three months financial review
Revenues for the three month period ended 30 June 2020 amounted to €56.5 million (Q2 2019: €43.1 million). Higher revenues, compared with the same quarter in the previous year, were mainly driven by higher volumes sold during the period and to some extent by stronger average US Dollar rates against Euro offset by lower copper prices.
Realised prices were US$2.51/lb copper during Q2 2020 compared with US$2.81/lb copper in Q2 2019. All concentrates were sold under offtake agreements in place.
Operating costs for the three month period ended 30 June 2020 amounted to €43.0 million, compared with €28.3 million in Q2 2019. In absolute terms, higher operating costs were mainly due to more tonnes being mined and processed during the quarter at higher unit costs.
Cash costs of US$1.87/lb payable copper during Q2 2020 compared with US$1.74lb payable copper in the same period last year. Higher cash costs in Q2 2020 mainly attributable to increased processing costs during the quarter relating to higher consumption of lime and grinding balls and, to a lesser extent, SAG liners. All-in sustaining costs in the reporting quarter were US$2.22/lb payable copper compared with US$1.95/lb payable copper in Q2 2019. Higher AISC compared with Q2 2019 mainly related to higher cash cost and sustaining capex.
Sustaining capex for Q2 2020 amounted to €4.6 million compared with €1.3 million in Q2 2019. Sustaining capex related works done on the tailing dams and continuous improvement in processing systems of the plant and enhancements in security.
Administrative and other expenses amounted to €0.5 million (Q2 2019: €1.5 million) and include non-operating costs of the Cyprus office, corporate legal and consultancy costs, on-going listing costs, officers and directors' emoluments, and salaries and related costs of the corporate office.
Exploration costs at Proyecto Riotinto for the three month period ended 30 June 2020 amounted to €0.2 million (Q2 2019: €1.2 million). Lower costs related to a decrease in drilling activities, during the period.
EBITDA for the three months ended 30 June 2020 amounted to €12.8 million compared with Q2 2019 of €12.0 million.
The main item below the EBITDA line is depreciation and amortisation of €7.1 million (Q2 2019: €3.8 million) which increased as a result of the higher throughput resulting from the 2019 plant expansion. Net financing costs for Q2 2020 amounted to €0.1 million (Q2 2019: €0.1 million).
Six months financial review
Revenues for the six month period ended 30 June 2020 amounted to €117.7 million (H1 2019: €94.8 million).
Copper concentrate production during the six month period ended 30 June 2020 was 120,941 tonnes (H1 2019: 91,823 tonnes) with 133,775 tonnes of copper concentrates sold in the period (H1 2019: 93,039 tonnes). Inventories of concentrates as at the reporting date were 3,845 tonnes (31 Dec 2019: 14,201 tonnes).
Realised copper prices for H1 2020 were US$2.54/lb copper compared with US$2.80/lb copper in the same period of 2019. Concentrates were sold under offtake agreements in place. The Company did not enter into any hedging agreements in 2020.
Operating costs for the six month period ended 30 June 2020 amounted to €92.2 million, compared with €58.3 million in H1 2019. Higher costs in 2020 reflected the higher production volumes and higher cash costs
Cash costs of US$1.93/lb payable copper during H1 2020 compare with US$1.81/lb payable copper in the same period last year. Higher cash costs in Q2 2020 mainly attributable to increased processing costs during the quarter relating to higher consumption of lime and grinding balls and, to a lesser extent, SAG liners. All-in sustaining costs in the reporting quarter were US$2.25/lb payable copper compared with US$2.06/lb payable copper in H1 2019. Higher AISC compared with H1 2019 mostly related to higher cash costs, sustaining capex and capitalised stripping costs.
Sustaining capex for the six month period ended 30 June 2020 amounted to €7.9 million, compared with €2.9 million in the same period in the previous year. Sustaining capex related to tailing dams and enhancements in processing systems.
Corporate costs for the first six month period ended of 2020 were €2.2 million, compared with €3.4 million in H1 2019. Corporate costs mainly include Company's overhead expenses.
Exploration costs related to Proyecto Riotinto for the six month period ended 30 June 2020 amounted to €1.1 million, compared with €1.4 million in H1 2019.
EBITDA for the six months ended 30 June 2020 amounted to €22.1 million, compared with €31.5 million in H1 2019.
Depreciation and amortisation amounted to €13.8 million for the six month period ended 30 June 2020 (H1 2019: €7.2 million) as a result of the higher throughput resulting from the 2019 plant expansion.
Net finance costs for H1 2020 amounted to €0.1 million (H1 2019 €0.1 million).
Copper prices
The average realised copper price decreased by 11% from US$2.81 per pound in Q2 2019 to US$2.51 per pound in Q2 2020.
The average prices of copper for the three months ended 30 June 2020 and 2019 are summarised below:
(USD)
Three months ended
30 June 2020
Three months ended
30 June 2019
Six months ended
30 June 2020
Six months ended
30 June 2019
Realised copper price per lb
2.51
2.81
2.54
2.80
Market copper price per lb (period average)
2.42
2.77
2.49
2.80
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. Higher realised prices than market averages 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. Q2 2020 realised price excluding QP was approximately US$2.43/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 including the discounts 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 is a summary of Atalaya's cash position and cash flows as at 30 June 2020 and 31 December 2019.
Liquidity information
(Euro 000's)
30 June 2020
31 December 2019
Unrestricted cash and cash equivalents at Group level
10,024
1,730
Unrestricted cash and cash equivalents at Operation level
22,353
6,347
Working capital surplus
10,309
3,598
Unrestricted cash and cash equivalents as at 30 June 2020 increased to €32.4 million from €8.1 million at 31 December 2019. The increase in cash balances is the result of the operation and use of credit facilities. Cash balances are unrestricted and include balances at operational and corporate level.
As of 30 June 2020, Atalaya reported a working capital surplus of €10.3 million, compared with a working capital surplus of €3.6 million at 31 December 2019. The main liability of the working capital is trade payables related to Proyecto Riotinto contractors and the use of credit facilities. At 30 June 2020, trade payables have been increased by circa 20% compared with the same period last year.
Overview of the Group's cash flows
(Euro 000's)
Three months ended
30 June 2020
Three months ended
30 June 2019
Six months ended
30 June 2020
Six months ended
30 June 2019
Cash flows from operating activities
7,515
6,856
23,000
14,970
Cash flows used in investing activities
(7,746)
(15,137)
(13,331)
(32,275)
Cash flows (used in)/from financing activities
(9,415)
(272)
14,631
(272)
Net (decrease)/increase in cash and cash equivalents
(9,646)
(8,553)
24,300
(17,577)
Three months cash flows review
Cash and cash equivalents decreased by €9.6 million during the three months ended 30 June 2020. This was due to the net results of cash from operating activities amounting to €7.5 million, the cash used in investing activities amounting to €7.7 million and the cash used in financing activities totalling €9.4 million.
Cash generated from operating activities before working capital changes was €11.9 million. Atalaya increased its trade receivables in the period by €8.9 million, decreased its inventory levels by €0.6 million and increased its trade payables by €3.9 million.
Investing activities during the quarter consumed €7.7 million, relating mainly to the tailing dams Capex and sustaining Capex mostly in enhancements in processing systems of the plant.
Financing activities during the quarter decreased by €9.4 million as result of the reduced use of existing unsecured credit facilities.
Six months cash flows review
Cash and cash equivalents increased by €24.3 million during the six months ended 30 June 2020. This was due to cash from operating activities amounting to €23.0 million, cash used in investing activities amounting to €13.3 million and cash from financing activities amounting to €14.6 million.
Cash generated from operating activities before working capital changes was €21.9 million. Atalaya increased its trade payables in the period by €7.8 million, decreased its inventory levels by €5.8 million and increased its trade receivable balances by €11.1 million.
Investing activities during the six month period amounted to €7.7 million, mainly relating to the tailing dams project and sustaining Capex.
Financing activities during the six month period ended 30 June 2020 increased by €14.6 million driven by the use of existing unsecured credit facilities.
Foreign exchange
Foreign exchange rate movements can have a significant effect on Atalaya's operations, financial position and results. Atalaya's sales are denominated in U.S. dollars ("USD"), while Atalaya's operating expenses, income taxes and other expenses are mainly denominated in Euros ("EUR") which is the functional currency of the Group, and to a much lesser extent in British Pounds ("GBP").
Accordingly, fluctuations in the exchange rates can potentially impact the results of operations and carrying value of assets and liabilities on the balance sheet.
During the three and six months ended 30 June 2020, Atalaya recognised a foreign exchange loss of €1.1 million and €0.6 million, respectively. Foreign exchange losses mainly related to changes in the period in EUR and USD conversion rates, as all sales are cashed and occasionally held in USD.
The following table summarises the movement in key currencies versus the EUR:
Three months ended
30 June 2020
Three months ended
30 June 2019
Six months ended
30 June 2020
Six months ended
30 June 2019
Average rates for the periods
GBP - EUR
0.8874
0.8748
0.8746
0.8736
USD - EUR
1.1014
1.1237
1.1020
1.1298
Spot rates as at
GBP - EUR
0.9124
0.8966
0.9124
0.8966
USD - EUR
1.1198
1.1380
1.1198
1.1380
7. Deferred Consideration
In September 2008, the Group moved to 100% ownership of Atalaya Riotinto Mineral S.L. ("ARM") (and thus full ownership of Proyecto Riotinto) by acquiring the remaining 49% of the issued capital of ARM. At the time of the acquisition, the Group signed a Master Agreement (the "Master Agreement") with Astor Management AG ("Astor") which included a deferred consideration of €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). "Excess cash" is not defined in the Master Agreement leaving ambiguity as to how it is to be calculated.
On 2 March 2020, the Company filed an application for directions in the High Court to seek clarity on the definition of "Excess Cash" and to determine when it is payable. The Company has served its Statement of Case to the High Court and a case management hearing is scheduled for 30 October 2020 with a trial expected in 2021.
As at 30 June 2020, no consideration has been paid.
The amount of the liability recognised by the Group is €53 million. The effect of discounting remains insignificant, in line with 2019 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 implemented several initiatives to continue with its social responsibility activities through Fundación Atalaya Riotinto.
Due to the special circumstances derived from the COVID-19 pandemic episode, Fundacion Atalaya Riotinto Minera ("Fundacion") established an extraordinary aid program to support the local communities, specially aimed at financing the acquisition of protection and cleaning equipment by local municipalities and other local institutions. The program comprised a €20,000 investment that was distributed among the various requesters.
Additionally, the Fundacion has sponsored a number of initiatives by local NGOs, including the sponsoring of a charitable event to collect money for the people affected by the floods suffered by Nerva town last winter. Also, the Fundacion has supported the publishing of a book released by Nerva´s historical TV and Radio station. Furthermore, the Fundacion has finalised an agreement with Asocación Athenea, to make a significant contribution to their very valuable work at supporting the disabled of the whole region.
9. Health and Safety
During the second quarter of 2020, the safety leadership for management programme continues in developing a training in communication and safety skills. Key points of the quarter:
- Strong information campaign for COVID-19;
- a protocol for action in different scenarios;
- the implementation of a monitoring committee to regularly inform workers' representatives, the establishment of special hygiene measures (including taking the temperature of employees both at the entrance and at the exit of the facility);
- the design of an exhaustive disinfection program as well as the reorganization of cleaning in all areas to obtain greater efficiency of resources; and
- the implementation of specific rules that are being controlled with a strict monitoring program by safety technicians.
The result of internal measures against COVID-19 is that contagion has been avoided. These works will continue throughout the year.
On the other hand, occupational health and safety performance is on a positive trend meeting the targets set for 2020. In this respect, the Frequency Index and the Severity Index are below expectations as of June 2020.
10. Environmental Management
During the second quarter of 2020, the environmental department has continued executing the actions of environmental monitoring of the activity, management of the natural environment and the usual historical heritage. Key points of the quarter:
- Monitoring of dust emissions into the atmosphere has continued without exceeding the established limit values. The large volume of work due to the increase in production and the beginning of the summer season have produced an increase in dust emissions. To confront it, Atalaya has implemented a plan to control and reinforce the emissions.
- The furnaces from the Look Out were finally extracted. After the extraction the mining works continued on that area.
- The archaeological excavation work in Cortalago has been highly conditioned this quarter by the COVID-19 measures. After the State of Alarm declared by the Spanish Government was finalised, a relay system was launched in June, so that 24 archaeological assistants/day are already working at the site.
- Atalaya obtained an authorization for the excavation of the two deposits that remain in Filón Norte. These excavations will start in the third quarter of 2020 and are expected to finish in 3-6 months.
- Certifications: ISO 9000 and ISO 14000 systems were also obtained and the migration process from the OHSAS 18000 system to certification ISO 45000 has begun in this quarter.#
11. Risk Factors
Due to the nature of Atalaya's business in the mining industry, the Group is subject to various risks that could materially impact the future operating results and could cause actual events to differ materially from those described in forward-looking statements relating to Atalaya. Readers are encouraged to read and consider the risk factors detailed in Atalaya's audited, consolidated financial statements for the year ended 31 December 2019.
The Company continues to monitor the principal risks and uncertainties that could materially impact the Company's results and operations, including the areas of increasing uncertainty such as COVID-19 (refer to point 13 below).
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 2019.
As at 30 June 2020, there are not significant changes in critical accounting policies or estimates to those applied in 2019.
13. COVID-19 impact
The Company issued COVID-19 updates on 17 March 2020, 30 March 2020 and 6 April 2020. As announced on 30 March 2020, a Royal Decree of 29 March 2020 excluded mining from essential industries resulting in the halting of operations at Proyecto Riotinto from 30 March 2020. As announced on 6 April 2020, further clarifications were received on the Royal Decree on 3 April 2020 which reinstated mining on the list of permitted activities and accordingly, operations at Proyecto Riotinto were authorized to recommence.
It is Atalaya's priority to protect its workforce and the local communities surrounding both Proyecto Riotinto and Proyecto Touro. Atalaya is following the requirements and recommendations issued by the Government of Spain and the regional and local health authorities to reduce the risk of COVID-19 exposure and avoid the spread of the virus.
In order to mitigate the potential operational and financial impact of COVID-19 the Company has increased its cash balance from €8.1 million as at 31 December 2019 to €32.4 million as at 30 June 2020 by net drawdowns on existing credit facilities.
Refer to Note 23 and Note 2.1(b) of the Financial Statement for the on-going analysis carried out by the Company to evaluate the current impact of COVID-19 and potential scenario review by Management under the uncertainty on the development of the pandemic.
14. Other Information
Additional information about Atalaya Mining Plc. is available at www.atalayamining.com
Unaudited Interim condensed consolidated financial statements on pages 12 to 34
By Order of the Board of Directors,
___________________________________
Roger Davey
Chairman
Nicosia, 12 August 2020
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TO THE SHAREHOLDERS OF ATALAYA MINING PLC
Introduction
We have reviewed the interim condensed consolidated financial statements of Atalaya Mining Plc (the "Company"), and its subsidiaries (collectively referred to as "the Group") on pages 12 to 34 contained in the accompanying interim report, which comprise the interim condensed consolidated statement of financial position as at 30 June 2020 and the interim condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the period then ended and selected explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting (IAS 34). Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements do not present fairly, in all material respects, the financial position of the Group as at 30 June 2020 and of its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting (IAS 34).
Stavros Pantzaris
Certified Public Accountant and Registered Auditor
for and on behalf of
Ernst & Young Cyprus Limited
Certified Public Accountants and Registered Auditors
Nicosia
12August 2020
Unaudited Interim Condensed Consolidated Income Statements
(All amounts in Euro thousands unless otherwise stated)
For the period ended 30 June 2020 and 2019
(Euro 000's)
Note
Three months ended
30 June 2020
Three months ended
30 June 2019
Six months ended
30 June 2020
Six
months ended
30 June 2019
Revenue
4
56,544
43,070
117,733
94,782
Operating costs and mine site administrative expenses
(42,860)
(28,201)
(91,890)
(58,227)
Mine site depreciation and amortization
(7,101)
(3,744)
(13,767)
(7,170)
Gross profit
6,583
11,125
12,076
29,385
Administration and other expenses
(450)
(1,465)
(2,158)
(3,382)
Share-based benefits
12
(160)
(54)
(321)
(107)
Impairment loss on other receivables
-
-
(45)
-
Exploration expenses
(202)
(1,201)
(1,104)
(1,402)
Care and maintenance expenditure
(46)
(116)
(160)
(121)
Operating profit
5,725
8,289
8,288
24,373
Other income
8
-
8
-
Net foreign exchange (loss)/gain
(1,061)
(426)
(616)
287
Net finance costs
5
(138)
(35)
(149)
(66)
Profit before tax
4,534
7,828
7,531
24,594
Tax
(1,499)
(979)
(1,565)
(3,590)
Profit for the period
3,035
6,849
5,966
21,004
Profit for the period attributable to:
- Owners of the parent
3,217
6,954
6,392
21,115
- Non-controlling interests
(182)
(105)
(426)
(111)
3,035
6,849
5,966
21,004
Earnings per share from operations attributable to equity holders of the parent during the period:
Basic earnings per share (EUR cents per share)
6
2.3
5.1
4.6
15.4
Fully diluted earnings per share (EUR cents per share)
6
2.3
5.1
4.5
15.3
Profit for the period
3,035
6,849
5,966
21,004
Other comprehensive income:
Change in fair value of financial assets through other comprehensive income 'OCI'
10
(17)
(9)
(12)
Total comprehensive income for the period
3,045
6,832
5,957
20,992
Total comprehensive income for the period attributable to:
- Owners of the parent
3,227
6,937
6,383
21,103
- Non-controlling interests
(182)
(105)
(426)
(111)
3,045
6,832
5,957
20,992
The notes on pages 16 to 34 are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.
Unaudited Interim Condensed Consolidated Statement of Financial Position
(All amounts in Euro thousands unless otherwise stated)
As at 30 June 2020 and 2019
(Euro 000's)
Note
30 June 2020
31 December 2019
Assets
Unaudited
Audited
Non-current assets
Property, plant and equipment
7
310,070
307,815
Intangible assets
8
60,752
63,085
Trade and other receivables
10
497
500
Non-current financial assets
1,101
1,101
Deferred tax asset
6,438
6,576
378,858
379,077
Current assets
Inventories
9
15,569
21,330
Trade and other receivables
10
45,096
32,857
Tax refundable
743
1,924
Other financial assets
32
42
Cash and cash equivalents
32,377
8,077
93,817
64,230
Total assets
472,675
443,307
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
33,346
22,836
Accumulated losses
(34,449)
(30,669)
326,588
319,858
Non-controlling interests
(2,828)
(2,402)
Total equity
323,760
317,456
Liabilities
Non-current liabilities
Trade and other payables
13
13
13
Provisions
14
7,420
6,941
Leases liabilities
16
4,974
5,265
Deferred consideration
17
53,000
53,000
65,407
65,219
Current liabilities
Trade and other payables
13
65,707
57,537
Leases liabilities
16
584
588
Borrowings
15
14,934
-
Current tax liabilities
2,283
2,507
83,508
60,632
Total liabilities
148,915
125,851
Total equity and liabilities
472,675
443,307
The notes on pages 16 to 34 are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements. The unaudited interim condensed consolidated financial statements were authorised for issue by the Board of Directors on 12 August 2020 and were signed on its behalf.
Roger Davey
Alberto Lavandeira
Chairman
Managing Director
Unaudited Interim Condensed Consolidated Statements of Changes in Equity
(All amounts in Euro thousands unless otherwise stated)
For the period ended 30 June 2020 and 2019
(Euro 000's)
Note
Share
capital
Share premium(1)
Other reserves
Accum.
losses
Total
Non-controlling interest
Total equity
At 1 January 2020
13,372
314,319
22,836
(30,669)
319,858
(2,402)
317,456
Profit for the period
-
-
-
6,392
6,392
(426)
5,966
Change in fair value of financial assets through OCI
-
-
(9)
-
(9)
-
(9)
Total comprehensive income
-
-
(9)
6,392
6,383
(426)
5,957
Transactions with owners
Recognition of share-based payments
12
-
-
321
-
321
-
321
Recognition of depletion factor
12
-
-
8,000
(8,000)
-
-
-
Recognition of non-distributable reserve
12
-
-
2,198
(2,198)
-
-
-
Other changes in equity
-
-
-
26
26
-
26
At 30 June 2020
13,372
314,319
33,346
(34,449)
326,588
(2,828)
323,760
(1) The share premium reserve is not available for distribution
(Euro 000's)
Note
Share
capital
Share premium(1)
Other reserves
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
-
-
-
21,115
21,115
(111)
21,004
Change in fair value of financial assets through OCI
-
-
(12)
-
(12)
-
(12)
Total comprehensive income
-
-
(12)
21,115
21,103
(111)
20,992
Transactions with owners
Recognition of share-based payments
12
-
-
107
-
107
-
107
Recognition of depletion factor
12
-
-
5,378
(5,378)
-
-
-
Recognition of non-distributable reserve
12
-
-
1,984
(1,984)
-
-
-
Recognition of distributable reserve
12
-
-
1,844
(1,844)
-
-
-
At 30 June 2019
13,372
314,319
22,092
(46,399)
303,384
4,089
307,473
(1) The share premium reserve is not available for distribution
(Euro 000's)
Audited
Note
Share
capital
Share premium(1)
Other reserves
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
-
-
-
37,323
37,323
(6,602)
30,721
Change in fair value of financial assets through OCI
-
-
(29)
-
(29)
-
(29)
Total comprehensive income
-
-
(29)
37,323
37,294
(6,602)
30,692
Transactions with owners
Recognition of depletion factor
12
-
-
5,378
(5,378)
-
-
-
Recognition of share-based payments
12
-
-
619
-
619
-
619
Recognition of non-distributable reserve
12
-
-
1,984
(1,984)
-
-
-
Recognition of distributable reserve
12
-
-
1,844
(1,844)
-
-
-
Other changes in equity
-
-
249
(478)
(229)
-
(229)
At 31 December 2019
13,372
314,319
22,836
(30,669)
319,858
(2,402)
317,456
(1) The share premium reserve is not available for distribution
The notes on pages 16 to 34 are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.
Unaudited Interim Condensed Consolidated Statement of Cash Flows
(All amounts in Euro thousands unless otherwise stated)
For to the period ended 30 June 2020 and 2019
(Euro 000's)
Note
Three months ended
30 June
2020
Three months ended
30 June
2019
Six months ended
30 June
2020
Six
months ended
30 June
2019
Cash flows from operating activities
Profit before tax
4,534
7,828
7,531
24,594
Adjustments for:
Depreciation of property, plant and equipment
7
5,911
2,886
11,434
5,490
Amortisation of intangibles
8
1,190
859
2,333
1,681
Recognition of share-based payments
12
160
54
321
107
Interest income
5
(2)
(13)
(4)
(16)
Interest expense
5
45
19
53
23
Unwinding of discounting on mine rehabilitation provision
5
92
29
92
59
Impairment loss on other receivables
-
-
45
-
Legal provisions
14
-
(20)
33
(18)
Loss on disposal of property, plant and equipment
7
-
-
-
2
Unrealised foreign exchange loss on financing activities
9
27
71
26
Cash inflows from operating activities before working capital changes
11,939
11,669
21,909
31,948
Changes in working capital:
Inventories
9
589
(1,300)
5,761
(556)
Trade and other receivables
10
(8,890)
100
(11,127)
(11,761)
Trade and other payables
13
3,926
(1,619)
7,797
(2,663)
Cash flows from operations
7,564
8,850
24,340
16,968
Interest on leases liabilities
(4)
(4)
(8)
(4)
Interest paid
(45)
(15)
(53)
(19)
Tax paid
-
(1,979)
(1,279)
(1,979)
Net cash from operating activities
7,515
6,852
23,000
14,966
Cash flows from investing activities
Purchase of property, plant and equipment
(7,748)
(14,874)
(13,335)
(31,572)
Purchase of intangible assets
8
-
(276)
-
(719)
Interest received
5
2
13
4
16
Net cash used in investing activities
(7,746)
(15,137)
(13,331)
(32,275)
Cash flows from financing activities
Lease payments
16
(152)
(268)
(303)
(268)
Net (repayment)/proceeds from borrowings
15
(9,263)
-
14,934
-
Net cash flows (used in)/from financing activities
(9,415)
(268)
14,631
(268)
Net (decrease) / increase in cash and cash equivalents
(9,646)
(8,553)
24,300
(17,577)
Cash and cash equivalents:
At beginning of the period
42,023
24,046
8,077
33,070
At end of the period
32,377
15,493
32,377
15,493
The notes on pages 16 to 34 are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in Euro thousands unless otherwise stated)
For the period ended 30 June 2020 and 2019
1. Incorporation and summary of business
Atalaya Mining Plc (the "Company") was incorporated in Cyprus on 17 September 2004 as a private company with limited liability under the Companies Law, Cap. 113 and was converted to a public limited liability company on 26 January 2005. Its registered office is at 1 Lampousa Street, Nicosia, Cyprus.
The Company was listed on AIM of the London Stock Exchange in May 2005 under the symbol ATYM and on the TSX on 20 December 2010 under the symbol AYM. The Company continued to be listed on AIM and the TSX as at 30 June 2020.
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. A brownfield expansion of this mine was completed in 2019.
In addition, the Company has a phased earn-in agreement to up 80% ownership of "Proyecto Touro", a brownfield copper project in northwest Spain.
In November 2019, Atalaya executed the option to acquire 12.5% of Explotaciones Gallegas del Cobre, S.L. the exploration property around Touro, with known additional reserves, which will provide high potential to the Proyecto Touro. The Company's and its subsidiaries' business is to explore for and develop metals production operations in Europe, with an initial focus on copper.
The strategy is to evaluate and prioritise metal production opportunities in several jurisdictions throughout the well-known belts of base and precious metal mineralisation in Spain and the Eastern European region.
2. Basis of preparation and accounting policies
2.1 Basis of preparation
(a) Overview
The unaudited interim condensed consolidated financial statements for the period ended 30 June 2020 have been prepared in accordance with International Accounting Standards 34: Interim Financial Reporting. IFRS comprise the standard issued by the International Accounting Standard Board ("IASB"), and IFRS Interpretations Committee ("IFRICs") as issued by the IASB. Additionally, the unaudited interim condensed consolidated financial statements have also been prepared in accordance with the IFRS as adopted by the European Union (EU), using the historical cost convention.
These unaudited interim condensed consolidated financial statements are unaudited but reviewed and include the financial statements of the Company and its subsidiary undertakings. They have been prepared using accounting bases and policies consistent with those used in the preparation of the consolidated financial statements of the Company and the Group for the year ended 31 December 2019. These unaudited interim condensed consolidated financial statements do not include all of the disclosures required for annual financial statements, and accordingly, should be read in conjunction with the consolidated financial statements and other information set out in the Group's 31 December 2019 Annual Report. The accounting policies are unchanged from those disclosed in the annual consolidated financial statements for the year ended 31 December 2019. These unaudited interim condensed consolidated financial statements for the period ended 30 June 2020 have been reviewed in accordance with the International Standard on Review Engagements 2410 'Review of Interim Financial Information performed by the Independent Auditor of the Entity' by the Group's external auditors, not audited.
(b) Going concern
On 11 March 2020, the World Health Organisation declared the Coronavirus COVID- 19 outbreak to be a pandemic in recognition of its rapid spread across the globe. Many governments are taking increasingly stringent steps to help contain, and in many jurisdictions, now delay, the spread of the virus, including: requiring self-isolation/ quarantine by those potentially affected, implementing social distancing measures, and controlling or closing borders and "locking-down" cities/regions or even entire countries.
The crisis and the actions taken by governments have resulted in significant disruption to business operations, consumption patterns worldwide, equity markets and significant volatility in commodities prices, including copper, which declined below Company's AISC level during March 2020 although commodity prices have recovered and the average market price for copper during Q2 2020 and the current spot price both exceed AISC. Furthermore, in Spain, where the Company has its single producing asset, the Government issued a Royal Decree on 14 March 2020 to declare the nationwide lockdown to reduce the impact of the COVID-19 pandemic. On 29 March 2020, the Spanish government issued a new Royal Decree implementing enhanced measures to protect the people from the virus. The new Decree stipulated that only employees from a short list of essential industries were allowed to continue working from 30 March 2020. Mining was excluded as an essential industry and consequently the Proyecto Riotinto site was required to halt its operations for a short period until 3 April 2020 when mining operations were permitted to restart.
The impact on copper prices and the stoppage of Proyecto Riotinto as a result of the Royal Decree has partially impacted the revenues for the six months period ended 30 June 2020. Uncertainty remains on future copper prices and if Proyecto Riotinto will be required to be halted again for a longer period. The uncertainty makes difficult to determine and quantify the operational and financial impact there may be on the business going forward.
The Directors considered and debated different possible scenarios on the Company's operations, financial position and forecast for a period of at least 12 months since the approval of these financial statements. Discussion on the potential impact of the Pandemic continues at Director level, and include scenarios range from (i) further disruption in Proyecto Riotinto; (ii) market volatility in commodity prices; and (iii) availability of existing credit facilities.
The Company has increased its cash balance from €8.1 million as at 31 December 2019 to €32.4 million as at 30 June 2020 by net drawdowns from existing credit facilities.
The Directors, after reviewing these scenarios, the current cash resources, forecasts and budgets, timing of cash flows, borrowing facilities, sensitivity analyses and considering the associated uncertainties to the Group's operations have a reasonable expectation that the Company has adequate resources to continue operating in the foreseeable future. Accordingly, 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 and the Company will realise its assets and discharge its liabilities in the normal course of business.
2.2 New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the unaudited condensed interim consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2019, except for the adoption of new standards effective as of 1 January 2020. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2020, but do not have a material impact on the unaudited condensed interim consolidated financial statements of the Group.
Amendments to IFRS 3: Definition of a Business
The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on the consolidated financial statements of the Group, but may impact future periods should the Group enter into any business combinations.
Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark Reform
The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument. These amendments had no impact on the consolidated financial statements of the Group as it does not have any interest rate hedge relationships.
Amendments to IAS 1 and IAS 8: Definition of Material
The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial statements of, nor is there expected to be any future impact to the Group.
Conceptual Framework for Financial Reporting issued on 29 March 2018
The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the IASB in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards. The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the consolidated financial statements of the Group.
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 June 2020
Other financial assets
Financial assets at FV through OCI
32
-
1,101
1,133
Trade and other receivables
Receivables (subject to provisional pricing)
-
22,239
-
22,239
Total
32
22,239
1,101
23,372
31 December 2019
Other financial assets
Financial assets at FV through OCI
42
-
1,101
1,143
Trade and other receivables
Receivables (subject to provisional pricing)
-
17,716
-
17,716
Total
42
17,716
1,101
18,859
2.4 Critical accounting estimates and judgements
The preparation of the unaudited interim condensed 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 2019 audited financial statements, as well as Note 2.1(b) of these unaudited interim condensed 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 20.3)
Geographical segments
The Group's mining activities are located in Spain. The commercialisation of the copper concentrates produced in Spain is carried out through Cyprus. Sales transactions to related parties are on arm's length basis in a similar manner to transaction with third parties. Accounting policies used by the Group in different locations are the same as those contained in Note 2.
(Euro 000's)
Cyprus
Spain
Other
Total
Three months ended 30 June 2020
Revenue - from external customers
3,458
53,086
-
56,544
Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)
2,275
10,627
(68)
12,834
Depreciation/amortisation charge
-
(7,101)
-
(7,101)
Net foreign exchange (loss) / gain
(258)
(808)
5
(1,061)
Finance income
-
2
-
2
Finance cost
(1)
(139)
-
(140)
Profit/(loss) before tax
2,016
2,581
(63)
4,534
Tax
(1,499)
Profit for the period
3,035
Six months ended 30 June 2020
Revenue - from external customers
7,584
110,149
-
117,733
Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)
4,349
17,860
(101)
22,108
Depreciation/amortisation charge
-
(13,767)
-
(13,767)
Net foreign exchange (loss)/gain
(56)
(564)
4
(616)
Impairment of other receivables
(45)
-
-
(45)
Finance income
-
4
-
4
Finance cost
(1)
(152)
-
(153)
Profit/(loss) before tax
4,247
3,381
(97)
7,531
Tax
(1,565)
Profit for the period
5,966
Total assets
32,365
439,142
1,168
472,675
Total liabilities
(12,989)
(135,890)
(36)
(148,915)
Depreciation of property, plant and equipment
-
11,434
-
11,434
Amortisation of intangible assets
-
2,333
-
2,333
Total additions of non-current assets
-
19,969
-
19,969
(Euro 000's)
Cyprus
Spain
Other
Total
Three months ended 30 June 2019
Revenue - from external customers
3,360
39,710
-
43,070
Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)
1,679
10,923
(568)
12,034
Depreciation/amortisation charge
(1)
(3,744)
-
(3,745)
Net foreign exchange (loss)
(280)
(144)
(2)
(426)
Finance income
-
13
-
13
Finance cost
(1)
(47)
-
(48)
Profit/(loss) before tax
1,397
7,001
(570)
7,828
Tax
(979)
Profit for the period
6,849
Six months ended 30 June 2019
Revenue - from external customers
6,685
88,097
-
94,782
Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)
3,382
28,823
(661)
31,544
Depreciation/amortisation charge
(1)
(7,170)
-
(7,171)
Net foreign exchange gain/(loss)
167
122
(2)
287
Finance income
-
16
-
16
Finance cost
(1)
(81)
-
(82)
Profit/(loss) before tax
3,547
21,710
(663)
24,594
Tax
(3,590)
Profit for the period
21,004
Total assets
26,869
404,667
694
432,230
Total liabilities
(14,777)
(109,352)
(628)
(124,757)
Depreciation of property, plant and equipment
1
5,489
-
5,490
Amortisation of intangible assets
-
1,681
-
1,681
Total additions of non-current assets
1
38,747
-
38,748
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)
Six months
ended
30 June
2020
Six months
ended
30 June
2019
Segment
€'000
Segment
€'000
Offtaker 1
Copper
14,248
Copper
20,652
Offtaker 2
Copper
45,681
Copper
29,681
Offtaker 3
Copper
57,804
Copper
44,449
4. Revenue
(Euro 000's)
Three months ended
30 June 2020
Three months ended 30 June 2019
Six months ended
30 June 2020
Six months ended
30 June 2019
Revenue from contracts with customers (1)
55,865
45,774
120,026
93,992
Fair value (losses)/gains relating to provisional pricing within sales (2)
679
(2,704)
(2,293)
790
Total revenue
56,544
43,070
117,733
94,782
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 H1 2020 revenue, there is a transaction price of €2.0 million (€nil in H1 2019) related to the freight services provided by the Group to the customers arising from the sales of copper concentrate under CIF incoterm.
(2) Provisional pricing impact represents the change in fair value of the embedded derivative arising on sales of concentrate.
5. Net finance cost
(Euro 000's)
Three months ended 30 June 2020
Three months ended 30 June 2019
Six months ended 30 June 2020
Six months ended
30 June 2019
Interest expense:
Other interest
44
15
53
19
Interest on lease liabilities
4
4
8
4
Unwinding of discount on mine rehabilitation provision (Note 14)
92
29
92
59
Interest income (1)
(2)
(13)
(4)
(16)
138
35
149
66
(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 June 2020
Three months ended 30 June 2019
Six months ended 30 June 2020
Six months ended
30 June 2019
Profit attributable to equity holders of the parent
(59)
6,954
(680)
21,115
Weighted number of ordinary shares for the purposes of basic earnings per share (000's)
137,339
137,339
138,102
137,339
Basic profit per share (EUR cents/share)
2.3
5.1
4.6
15.4
Weighted number of ordinary shares for the purposes of fully diluted earnings per share (000's)
139,858
138,680
140,627
138,419
Fully diluted profit per share (EUR cents/share)
2.3
5.1
4.5
15.3
At 30 June 2020 there are nil warrants (Note 11) and 3,555,250 options (Note 12) (2019: nil warrants and 2,505,250 options) which have been included when calculating the weighted average number of shares for 2020.
7. Property, plant and equipment
(Euro 000's)
Land and buildings
Right-of-use assets
Plant and machinery
Assets under construction (1)
Deferred mining costs (2)
Other assets (3)
Total
Cost
At 1 January 2019
45,853
6,144
152,820
62,010
27,537
785
295,149
Additions
166
277
272
30,410
845
1
31,971
Disposals
-
-
-
-
-
(5)
(5)
Reclassifications
-
-
183
(183)
-
-
-
At 30 June 2019
46,019
6,421
153,275
92,237
28,382
781
327,115
Additions
44
-
899
18,327
5,631
-
24,901
Reclassifications
-
-
94,047
(94,047)
-
-
-
At 31 December 2019
46,063
6,421
248,221
16,517
34,013
781
352,016
Additions
371
-
439
9,682
3,197
-
13,689
Disposals
-
-
-
-
-
-
-
Reclassifications
-
-
1,924
(1,924)
-
-
-
At 30 June 2020
46,434
6,421
250,584
24,275
37,210
781
365,705
Depreciation
At 1 January 2019
6,072
-
20,315
-
4,681
561
31,629
Charge for the period
1,048
190
3,543
-
677
32
5,490
Disposals
-
-
-
-
-
(3)
(3)
At 30 June 2019
7,120
190
23,858
-
5,358
590
37,116
Charge for the period
1,137
201
5,014
-
703
30
7,085
At 31 December 2019
8,257
391
28,872
-
6,061
620
44,201
Charge for the period
1,453
255
8,650
-
1,049
27
11,434
At 30 June 2020
9,710
646
37,522
-
7,110
647
55,635
Net book value
At 30 June 2020
36,724
5,775
213,062
24,275
30,100
134
310,070
At 31 December 2019
37,806
6,030
219,349
16,517
27,952
161
307,815
(1) Assets under construction at 30 June 2020 were €24.3 million (2019: €92.2 million) which include sustaining capital expenditures and tailings dams project.
(2) Stripping costs
(3) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.
The above fixed assets are mainly located in Spain.
8. Intangible assets
(Euro 000's)
Permits (1)
Licences, R&D and software
Total
Cost
At 1 January 2019
76,538
6,026
82,564
Additions
-
719
719
At 30 June 2019
76,538
6,745
83,283
Additions
-
4,730
4,730
Disposals
-
(3,865)
(3,865)
At 31 December 2019
76,538
7,610
84,148
Additions
-
-
-
At 30 June 2020
76,538
7,610
84,148
Amortisation
On 1 January 2019
10,370
243
10,613
Charge for the period
1,650
31
1,681
At 30 June 2019
12,020
274
12,294
Charge for the period
1,788
33
1,821
Impairment charge
-
6,948
6,948
At 31 December 2019
13,808
7,255
21,063
Charge for the period
2,300
33
2,333
At 30 June 2020
16,108
7,288
23,396
Net book value
At 30 June 2020
60,430
322
60,752
At 31 December 2019
62,730
355
63,085
(1) Permits include an amount of €5.0 million related to Proyecto Touro mining rights.
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 June 2020 and thus no impairment has been recognised.
9. Inventories
(Euro 000's)
30 Jun 2020
31 Dec 2019
Finished products
2,863
11,024
Materials and supplies
11,660
9,266
Work in progress
1,046
1,040
15,569
21,330
As of 30 June 2020, copper concentrate produced and not sold amounted to 3,845 tonnes (31 Dec 2019: 14,201 tonnes). Accordingly, the inventory for copper concentrate was €2.9 million (31 Dec 2019: €11.0 million).
Materials and supplies relate mainly to machinery spare parts. Work in progress represents ore stockpiles, which is ore that has been extracted and is available for further processing.
10. Trade and other receivables
(Euro 000's)
30 Jun 2020
31 Dec 2019
Non-current
Deposits
497
500
497
500
Current
Trade receivables at fair value - subject to provisional pricing
15,170
8,798
Trade receivables from shareholders at fair value - subject to provisional pricing (Note 20.3)
7,069
8,918
Other receivables from related parties at amortised cost (Note 20.3)
56
56
Deposits
27
26
VAT receivables
21,764
14,380
Tax advances
7
7
Prepayments
927
616
Other current assets
76
56
45,096
32,857
Allowance for expected credit losses
-
-
Total trade and other receivables
45,593
33,357
Trade receivables are shown net of any interest applied to prepayments. Payment terms are aligned with offtake agreements and market standards and generally are 7 days on 90% of the invoice and the remaining 10% at the settlement date which can vary between 1 to 5 months. The fair values of trade and other receivables approximate to their 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 1 January 2019
137,340
13,372
314,319
327,691
Balance at 30 June 2019
137,340
13,372
314,319
327,691
Balance at 31 December 2019 / 30 June 2020
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
There were no changes in share capital during the six months ended 30 June 2020 and 2019.
Warrants
As at 30 June 2020 and 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 (2)
Non-Distributable reserve (3)
Distributable reserve (4)
Total
At 1 January 2019
6,752
208
5,500
(1,115)
1,446
6,752
12,791
Recognition of share- based payments
107
-
-
-
-
-
107
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
-
-
-
(12)
-
-
(12)
At 30 June 2019
6,859
208
10,878
(1,127)
3,430
1,844
22,092
Recognition of share-based payments
512
-
-
-
-
-
512
Change in fair value of financial assets at fair value through OCI
-
-
-
(17)
-
-
(17)
Other changes in reserves
-
-
-
-
-
249
249
At 31 December 2019
7,371
208
10,878
(1,144)
3,430
2,093
22,836
Recognition of share-based payments
321
-
-
-
-
-
321
Recognition of depletion factor
-
-
8,000
-
-
-
8,000
Recognition of non-distributable reserve
-
-
-
-
2,198
-
2,198
Change in fair value of financial assets at fair value through OCI
-
-
-
(9)
-
-
(9)
At 30 June 2020
7,692
208
18,878
(1,153)
5,628
2,093
33,346
(1) Depletion factor reserve
At 30 June 2020, the Group has disposed €8.0 million (H1 2019: €5.4 million) as a depletion factor reserve as per the Spanish Corporate Tax Act.
(2) Fair value reserve of financial assets at FVOCI
The Group has elected to recognise changes in the fair value of certain investments in equity securities in OCI, as explained in (1) above. These changes are accumulated within the FVOCI reserve within equity. The Group transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
(3) Non-distributable reserve
To comply with Spanish Law, the Group needed to record a reserve when profit generated equal to a 10% of profit/(loss) for the year until 20% of share capital is reached.
(4) Distributable reserve
The Group reclassified 10% of the profit of 2019 to distributable reserves.
In general, option agreements contain provisions adjusting the exercise price in certain circumstances including the allotment of fully paid ordinary shares by way of a capitalisation of the Company's reserves, a sub division or consolidation of the ordinary shares, a reduction of share capital and offers or invitations (whether by way of rights issue or otherwise) to the holders of ordinary shares.
Details of share options outstanding as at 30 June 2020:
Grant date
Expiry date
Exercise price £
Share options
23 Feb 2017
22 Feb 2022
1.44
813,000
29 May 2019
28-May-2024
2.015
1,292,250
8 July 2019
7 July 2024
2.045
400,000
30 June 2020
29 June 2030
1.475
1,050,000
Total
3,555,250
Weighted average
exercise price £
Share options
At 1 January 2020
2.08
2,505,250
Granted during the reported period
1.475
1,050,000
30 June 2020
1.924
3,555,250
13. Trade and other payables
(Euro 000's)
30 Jun 2020
31 Dec 2019
Non-current
Government grant
13
13
13
13
Current
Trade payables
61,913
52,395
Land options and mortgage
261
282
Accruals
3,533
4,860
65,707
57,537
Trade payables are mainly for the acquisition of materials, supplies and other services. These payables do not accrue interest and no guarantees have been granted. The fair value of trade and other payables approximate their book values. Trade payables are non-interest-bearing and are normally settled on 60-day terms.
14. Provisions
(Euro 000's)
Legal costs
Rehabilitation costs
Total costs
1 January 2019
127
6,392
6,519
Additions
5
122
127
Revision of provision
(23)
-
(23)
Finance cost
-
59
59
At 30 June 2019
109
6,573
6,682
Additions
279
16
295
Revision of provision
-
(18)
(18)
Finance cost
-
(18)
(18)
At 31 December 2019
388
6,553
6,941
Additions
33
354
387
Finance cost
-
92
92
At 30 June 2020
421
6,999
7,420
(Euro 000's)
30 Jun 2020
31 Dec 2019
Non-current
7,420
6,941
Current
-
-
Total
7,420
6,941
Rehabilitation provision
Rehabilitation provision represents the accrued cost required to provide adequate restoration and rehabilitation upon the completion of production activities. These amounts will be settled when rehabilitation is undertaken, generally over the project's life.
The discount rate used in the calculation of the net present value of the provision as at 30 June 2020 was 1.87%, which is the 15-year Spain Government Bond rate (31 December 2019: 1.87%, which is the 15-year Spain Government Bond rate). An inflation rate of 1.5% is applied on annual basis.
Legal provision
The Group has been named a defendant in several legal actions in Spain, the outcome of which is not determinable as at 30 June 2020. Management has reviewed individually each case and made a provision of €33 thousand for these claims, which has been reflected in these unaudited interim condensed consolidated financial statements.
15. Borrowings
(Euro 000's)
30 Jun 2020
31 Dec 2019
Current borrowings
Credit facilities
14,934
-
14,934
-
The Group has unsecured credit facilities totalling €47.5 million. During the half year, Atalaya has drawn down some of its existing credit facilities to strengthen the cash position of the Company to provide additional liquidity in view of any potential impacts of the COVID-19 pandemic. The average interest rate on the facilities is 1.69%. The maximum term of the facilities is one year. All borrowings are unsecured.
16. Leases liabilities
(Euro 000's)
30 Jun 2020
31 Dec 2019
Non-current
Leases liabilities
4,974
5,265
4,974
5,265
Current
Leases liabilities
584
588
584
588
Leases liabilities
The Group entered into lease arrangements for the renting of land, laboratory equipment and vehicles which are subject to the adoption of all requirements of IFRS 16 Leases. 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 regarding leases amounts to €0.2 million (2019: €0.2 million) for the six month period ended 30 June 2020. The duration of the land lease is for a period of thirteen years, payments are due at the beginning of the month escalating annually on average by 1.5%. At 30 June 2020, the remaining term of this lease is twelve years.
The duration of the motor vehicle and laboratory equipment lease is for a period of four years, payments are due at the beginning of the month escalating annually on average by 1.5%. At 30 June 2020, the remaining term of this motor vehicle and laboratory equipment lease is two years and a half, and three years, respectively.
(Euro 000's)
30 Jun 2020
31 Dec 2019
Minimum lease payments due:
- Within one year
584
588
- Two to five years
2,078
2,134
- Over five years
2,896
3,131
Present value of minimum lease payments due
5,558
5,853
(Euro 000's)
Lease liabilities
Balance 1 January 2020
5,853
Additions
-
Interest expense
8
Lease payments
(303)
Balance at 30 June 2020
5,558
Balance at 30 June 2020
- Non-current liabilities
4,974
- Current liabilities
584
5,558
17. Deferred consideration
In September 2008, the Group moved to 100% ownership of Atalaya Riotinto Mineral S.L. ("ARM") (and thus full ownership of Proyecto Riotinto) by acquiring the remaining 49% of the issued capital of ARM. At the time of the acquisition, the Group signed a Master Agreement (the "Master Agreement") with Astor Management AG ("Astor") which included a deferred consideration of €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). "Excess cash" is not defined in the Master Agreement leaving ambiguity as to how it is to be calculated.
On 2 March 2020, the Company filed an application for directions in the High Court to seek clarity on the definition of "Excess Cash" and to determine when it is payable. The Company has served its Statement of Case to the High Court and a case management hearing is scheduled for 30 October 2020 with a trial expected in 2021.
As at 30 June 2020, no consideration has been paid.
The amount of the liability recognised by the Group is €53 million. The effect of discounting remains insignificant, in line with prior year's assessment, and therefore the Group has measured the liability for the Deferred Consideration on an undiscounted basis.
18. Acquisition, incorporation and disposal of subsidiaries
There were neither acquisition nor incorporation of subsidiaries during the six month period to 30 June 2020.
19. Winding-up of subsidiaries
There were no subsidiaries wound-up during the six month period to 30 June 2020.
20. Related party transactions
The following transactions were carried out with related parties:
20.1 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 June 2020
Three months ended
30 June 2019
Six months ended 30 June 2020
Six months ended
30 June 2019
Directors' remuneration and fees
247
242
512
486
Share option-based benefits and other benefits to directors
56
13
112
24
Key management personnel fees
125
616
249
730
Share option-based and other benefits to key management personnel
79
23
158
48
507
894
1,031
1,288
20.2 Share-based benefits
On 30 June 2020, the directors and key management personnel have been granted with 750,000 share options. The options expire ten years from the deemed date of grant (30 June 2020), have an exercise price of 147.5 pence per ordinary share, based on the share price at the close of market on the grant date, and vest in two equal tranches, half on grant and half on the first anniversary of the granting date.
20.3 Transactions with related parties/shareholders
i) Transaction with shareholders
(Euro 000's)
Three months ended
30 June 2020
Three months ended
30 June 2019
Six months ended
30 June 2020
Six months ended
30 June 2019
Trafigura- Revenue from contracts
4,555
8,986
12,948
20,663
Freight services
-
-
-
-
4,555
8,986
12,948
20,663
Gain / (losses) relating provisional pricing within sales
1,704
(782)
1,299
(11)
Trafigura - Total revenue from contracts
6,259
8,204
14,248
20,652
ii) Period-end balances with related parties
(Euro 000's)
30 Jun 2020
31 Dec 2019
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 Jun 2020
31 Dec 2019
Trafigura - Debtor balance- subject to provisional pricing
7,069
8,918
Total (Note 10)
7,069
8,918
The above debtor balance arising from sales of goods and other balances bear no interest and is repayable on demand.
21. 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.
Receipt of rulings of claims made by an environmental group
On 26 September 2018, Atalaya received notice from the Tribunal Superior de Justicia de Andalucía ("TSJA") ruling in favour of certain claims made by environmental group Ecologistas en Accion ("EeA") against the government of Andalucía ("Junta de Andalucía" or "JdA") and Atalaya, as co-defendant in the case.
In July 2014, EeA had filed a legal claim to JdA with a request to declare null the Unified Environmental declaration (in Spanish, Authorization Ambiental Unificada, or "AAU") granted to Atalaya Riotinto Minera, S.L.U. dated 27 March 2014, which was required in order to secure the required mining permits for Proyecto Riotinto. The judgment, in spite of annulling the AAU on procedural grounds, made very clear that the AAU was correct and therefore, rejected the issues raised by EeA and confirmed the decision of JdA not to suspend the AAU.
The JdA filed for appeal to the Supreme Court. Although the claim was against the JdA, Atalaya, being an interested party in the process, voluntarily joined as co-defendant to ask for permission to appeal to the Supreme Court in Spain.
On 29 March 2019, Atalaya announced the receipt of notification from the Supreme Court in Spain stating that it does not have jurisdiction over the appeal made by the Junta de Andalucía and the Company, which voluntary joined the appeal as co-defendant.
On 7 May 2020, the Company announced the JdA has issued a favourable resolution (the "Resolution") which validates the AAU and ends the legal process. (Refer to Note 23)
In addition to the legal procedure described above, on 26 April 2019, the Company announced a judgment related 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 on September 2018. The new ruling on the Mining Permits is based on the requirement to have an AAU before issuing mining permits and therefore invalidates the existing Mining Permits.
On 1 June 2020, the Company announced the validation of the mining permits by the Junta de Andalucía. The validation of the mining permits ends all legal processes previously announced by the Company in relation to claims made by interest parties in connection with the approval process of Proyecto Riotinto.
22. Commitments
There are no minimum exploration requirements at Proyecto Riotinto. However, the Group is obliged to pay local land taxes which currently are approximately €235,000 per year in Spain and the Group is required to maintain the Riotinto site in compliance with all applicable regulatory requirements.
In 2012, ARM entered into a 50/50 joint venture with Rumbo to evaluate and exploit the potential of the class B resources in the tailings dam and waste areas at Proyecto Riotinto (mainly residual gold and silver in the old gossan tailings). Under the joint venture agreement, ARM will be the operator of the joint venture, will reimburse Rumbo for the costs associated with the application for classification of the Class B resources and will fund the initial expenditure of a feasibility study up to a maximum of €2.0 million. Costs are then borne by the joint venture partners in accordance with their respective ownership interests.
23. Significant events
COVID-19 outbreak
On 11 March 2020, the World Health Organization raised the public health emergency caused by the coronavirus outbreak (COVID-19) to an international pandemic. The rapid national and international developments represent an unprecedented health crisis, which will impact the macroeconomic environment and business developments. To address this situation, among other measures, the Spanish government declared a state of emergency by publishing Royal Decree 463/2020 of 14 March and approved a series of extraordinary urgent measures to address the economic and social impact of COVID-19 by Royal Decree Law 8/2020 of 17 March. On 17 March 2020, the Company released an update on the measures taken to manage and respond to the pandemic to protect its workforce and local communities surrounding its projects.
In addition, a new Royal Decree was released on 29 March 2020 (the "Royal Decree") implementing enhanced measures to protect the people from the virus. The Royal Decree stipulated that only employees from a short list of essential industries were allowed to continue working from 30 March 2020. Mining was excluded as an essential industry and consequently the Company's Proyecto Riotinto site was required to halt its operations for a period until 3 April 2020 when mining operations were permitted to restart.
The Directors continue monitoring the business and taking appropriate steps to address the situation and reduce its operational and financial impact. After reviewing alternative scenarios, the current cash resources, forecasts and budgets, timing of cash flows, borrowing facilities, sensitivity analyses on alternative commodities prices and considering the associated uncertainties to the Group's operations, the Directors have a reasonable expectation that the Group has adequate resources to continue operating in the foreseeable future. Accordingly, the unaudited interim condensed consolidated financial statements continue to be prepared on a going concern basis.
The Company continues carrying out several measures and implemented a plan developed for the purpose of protecting its workforce and the people of the surrounding communities to manage the crisis. The main key risks, their potential impacts and the response plans to protect its workforce are, amongst others:
· spread of COVID-19 at the mine site may cause an interruption of production either on a partial or whole basis;
· a disruption of either the national or international logistics of the operation;
· partial supply chain disruptions;
· unavailability of key personnel of the Company;
· additional costs as a result of implementing control measures to spread the virus; and
· the impact on the commodity demand fundamentals affecting the Company's products or commodity prices.
The Group continues the implementation of response plans. Only critical employees for the operation are allowed to enter on site. There are stringent distance and hygienical mandatory rules, mandatory body temperature controls, key protection mandatory safety equipment, tests to employees, meeting control track and facilitate systems and tools to work from home for all remaining employees.
Additionally, the Group, up to the date of approval of these unaudited interim condensed consolidated financial statements, re-assessed the existence of any impairment indicators and the sensitivity analysis to volatility of commodity prices about its key assets being the mining rights, the property plant and equipment, the intangible assets, deferred taxes, trade receivables and inventories corresponding above 95% of its total assets (excluding cash and cash equivalents). The Directors have considered and debated different possible scenarios on the Group's operations, financial position and forecast for a period of at least 12 months since the approval of these unaudited interim condensed consolidated financial statements. Possible scenarios range from (i) further disruption in Proyecto Riotinto; (ii) market volatility in commodity prices; and (iii) availability of existing credit facilities. The directors have considered the capacity of the Group and its single asset Proyecto Riontinto to generate cash, and have concluded that no impairment indicators are in place.
In the current environment, assumptions about future commodity prices, exchange rates, and interest rates are subject to greater variability than normal, which could in the future affect the valuation of the Company's assets, both financial and non-financial. While these matters continue to be monitored, the short-term prices for copper increased during Q2 2020, and the Group's estimates in relation to these assumptions over a long-term view have remained unchanged, reflecting the long life of the Group 's single operation Proyecto Riotinto.
While the Group has not experienced any significant negative impact to date, the extent to which COVID-19 could impact the future business activity or financial results, and the duration of any such negative impact, will depend on future developments, which are highly uncertain and unknown at this time.
AAU Permits
On 7 May 2020, the Company announced that the Junta de Andalucía had issued a favourable resolution which validates the Unified Environmental Authorisation (the "AAU") of Proyecto Riotinto. In addition, on 1 June 2020, the Company announced that the Junta de Andalucía validated the Mining Permits. The Resolutions end the legal process announced by the Company on 26 September 2018 in relation to the judgement made by the Tribunal Superior de Justicia de Andalucía ("TSJA") in connection with the AAU and the Mining Permits.
Negative Environmental Impact Statement on Proyecto Touro
The "Dirección Xeral de Calidade Ambiental e Cambio Climático", (the General Directorate for the Environment and Climate Change of Galicia), announced on 28 January 2020 that a negative Environmental Impact Statement for Proyecto Touro (Declaración de Impacto Ambiental) had been signed.
The short release stated that the decision was based on two reports which form part of a wider evaluation consisting of fifteen reports produced by different departments of the Xunta de Galicia. These two reports challenge the ability of the Company to guarantee that there will be no environmental impact of the Project on the Ulla River and related protected ecosystems which are located downstream.
On 7 February 2020, the formal communication from the Xunta de Galicia was published in Galicia´s official journal. In the meantime, the Company along with its advisers, is evaluating potential next steps for the Project, which could include an appeal of the decision made by the Xunta de Galicia, and/or the clarification of the questions raised by the reports.
New group entity
On 16 June 2020 the Group established a new company in Cyprus under the name of Atalaya Financing, Limited. The activity of the new company is financing.
24. Events after the reporting period
There were no significant events subsequent to the reporting period.
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