REG - Atalaya Mining PLC - 1st Quarter Financial Results
14 May 2020
Atalaya Mining Plc.
("Atalaya" and/or the "Group")
Unaudited Condensed Interim Consolidated Financial Statements for the three months ended 31 March 2020
Atalaya Mining Plc (AIM: ATYM; TSX: AYM), is pleased to announce its unaudited quarterly results for the three months ended 31 March 2020 ("Q1 2020"), together with the unaudited, condensed, interim consolidated financial statements.
The Q1 2020 Unaudited Condensed Interim Consolidated Financial Statements are also available under the Company's profile on SEDAR at www.sedar.com and on Atalaya's website at www.atalayamining.com.
Unaudited Financial Highlights for the Period
Quarter ended 31 March
Q1 2020
Q1 2019
%
Revenues from operations
€k
61,189
51,712
18.3%
Operating costs
€k
(49,191)
(30,026)
63.8%
EBITDA
€k
9,274
19,510
(52.5%)
Profit for the period
€k
2,931
14,155
(79.3%)
Earnings per share
€ cents/share
2.3
10.3
(77.7%)
Cash flows from operating activities
€k
15,485
8,114
90.8%
Cash flows used in investing activities
€k
(5,585)
(17,138)
(67.4%)
Cash flows from financing activities
€k
24,046
-
-
Working capital surplus
€k
7,878
9,010
(12.6%)
Average realised copper price
US$/lb
2.58
2.80
(7.9%)
Cu concentrate produced
(tonnes)
60,003
43,441
38.1%
Cu production
(tonnes)
13,229
10,219
29.5%
Cash costs
US$/lb payable
1.99
1.89
5.3%
All-In Sustaining Costs
US$/lb payable
2.27
2.18
4.1%
· Q1 2020 revenues of €61.2 million (Q1 2019: €51.7 million) due to higher concentrate sales as a result of increased production following the completion of the Proyecto Riotinto plant expansion.
· Q1 2020 operating costs of €49.2 million (Q1 2019: €30.0 million). Higher expenses are mainly related to the higher production volume as well as the one-off increased electricity consumption during January to fulfil the SAG mill, consumables and maintenance costs required to support the nameplate processing capacity during the initial weeks of the year.
· Q1 2020 EBITDA of €9.3 million (Q1 2019: €19.5 million). The decrease in EBITDA was driven by lower realised copper prices and higher operating costs during Q1 2020.
· Q1 2020 profit after tax of €2.9 million or 2.3 cents basic earnings per share (Q1 2019: €14.2 million or 10.3 cents basic earnings per share).
· Q1 2020 average realised copper prices, including QPs, of US$2.58/lb (Q1 2019: US$2.80/lb) with significant variances between the January average realised copper price of US$2.78/lb and the March average realised copper price of US$2.35/lb.
· Q1 2020 cash costs of US$1.99/lb payable copper (Q4 2019: US$1.70/lb payable copper) (Q1 2019: US$1.89/lb payable copper) due to higher processing and maintenance costs. All-in Sustaining Costs ("AISC") during Q1 2020 amounted to US$2.27/lb of payable copper compared with US$2.18/lb of payable copper during Q4 2019 and Q1 2019 (US$2.18/lb). The increased AISC is due to a one-off sustaining capex project at the tailings dams.
· Inventories of concentrate at 31 March 2020 amounted to €4.4 million (€11.0 million at 31 December 2019).
· At the end of Q1 2020, working capital was €7.9 million, a €4.3 million increase from €3.6 million at the end of Q4 2019.
· €24.0 million drawn down from existing unsecured credit facilities with annual average interest rates below 2% to ensure sufficient liquidity during the COVID-19 pandemic. Unrestricted cash as at 31 March 2020 was €42.0 million.
· Cash flow from operating activities before changes in working capital of €10.0 million (Q1 2019: €20.3 million).
· Net cash flow from operating activities after changes in working capital of €15.5 million (Q1 2019: €8.1 million).
Operating Highlights
Proyecto Riotinto
· Copper production during Q1 2020 was 13,229 tonnes, an increase of 29.5% compared with 10,219 tonnes produced during Q1 2019.
· Ore processed during Q1 2020 was 3,427,148 tonnes, an increase of 40.1% on Q1 2019 when ore processed amounted to 2,445,977 tonnes.
· Q1 2020 copper recovery of 82.62% (Q1 2019: 90.26%). Lower recoveries were due to a combination of treating lower grade surface stockpiles resulting from partial flooding of the pit floor during December 2019, several plant stoppages for scheduled maintenance and the COVID-19 shutdown order.
· The 15Mtpa Expansion Project was completed with the processing plant fully commissioned and operating at an increased annualised rate of 15Mtpa since January 2020.
· As announced on 30 March 2020, the Royal Decree issued by the Spanish government resulted in the Company stopping operations at Proyecto Riotinto for four full days until clarification was provided on 3 April 2020 and operations restarted. Proyecto Riotinto continues to operate in compliance with the government's specific requirements and recommendations, to prevent exposure to COVID-19 and the spread of the virus.
Proyecto Touro
· On 13 April 2020, the Company was formally notified that the Environment Department of the Xunta de Galicia had issued a negative Impact Declaration ("DIA") required to restart copper production at Proyecto Touro.
· The restart proposal for Proyecto Touro, a former open pit mine, included managing past environmental liabilities and using transfer mining techniques with zero water discharge. Flotation tailings were to be stored in a plastic-lined impoundment built with compacted rock walls using techniques similar to those used in water dam construction.
· The Company, together with its advisers, is assessing its options to progress Proyecto Touro. These may include several types of appeal or modified project proposals to address the concerns of the Xunta de Galicia.
Outlook 2020
· Annual guidance range of US$1.95/lb-US$2.05/lb and US$2.20/lb-US$2.30/lb for cash costs and AISC, respectively, is currently being maintained.
· Production guidance remains at 55k to 58k tonnes of contained copper.
Management continues to monitor the impact of COVID-19 on the operations and the ongoing cost structure and will update the market with any potential changes in expectations.
Legal 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. The Resolution ends 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.
Alberto Lavandeira, CEO commented:
"We are very pleased to have obtained a favourable conclusion to the legal process in relation to the AAU of Proyecto Riotinto, which has been resolved with no impact to our operation. Notwithstanding the successful commissioning of our 15Mtpa expansion and the consequent increase in production, higher operating costs relating to the integration of the expanded plant, together with a significant reduction in the copper price during the period, have impacted our financial results. We remain confident that our guidance numbers on production and costs for the remainder of the year will be achievable. However, 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."
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 three months to 31 March 2020 and 2019 - (Unaudited)
ATALAYA MINING PLC
MANAGEMENT'S REVIEW AND
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
31 March 2020
(UNAUDITED)
Notice to Reader
The accompanying unaudited, condensed, interim consolidated financial statements of Atalaya Mining Plc have been prepared by and are the responsibility of Atalaya Mining Plc's management. The unaudited, condensed, interim consolidated financial statements have not been reviewed by Atalaya's auditors.
Introduction
This report provides an overview and analysis of the financial results of operations of Atalaya Mining Plc and its subsidiaries ("Atalaya" and/or "Group"), to enable the reader to assess material changes in the financial position between 31 December 2019 and 31 March 2020 and results of operations for the three months ended 31 March 2020 and 2019.
This report has been prepared as of 13 May 2020. The analysis hereby included, is intended to supplement and complement the unaudited, condensed, interim consolidated financial statements and notes thereto ("Financial Statements") as at and for the three months ended 31 March 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, condensed, interim consolidated financial statements for the three months ended 31 March 2019. These documents can be found on Atalaya's website at www.atalayamining.com.
Atalaya prepares its Financial Statements in accordance with International Financial Reporting Standards ("IFRSs"). The currency referred to in this document is the Euro, unless otherwise specified.
Forward-looking statements
This report may include certain "forward-looking statements" and "forward-looking information" under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterised by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Assumptions upon which such forward-looking statements are based include that all required third party regulatory and governmental approvals will be obtained. Many of these assumptions are based on factors and events that are not within the control of Atalaya and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions and other risk factors discussed or referred to in this report and other documents filed with the applicable securities regulatory authorities. Although Atalaya has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Atalaya undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.
1. Description of the Business
Atalaya is a 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 months ended 31 March 2020 and 2019 and the three months ended 31 December 2019.
Units expressed in accordance with the international system of units (SI)
Unit
Three months
ended
31 Mar 2020
Three months ended
31 Mar 2019
Three months ended
31 Dec 2019
Ore mined
t
3,029,362
2,549,985
2,331,614
Ore processed
t
3,427,148
2,445,977
2,877,986
Copper ore grade
%
0.47
0.46
0.55
Copper concentrate grade
%
22.05
23.52
22.86
Copper recovery rate
%
82.62
90.26
83.16
Copper concentrate
t
60,003
43,441
57,797
Copper contained in concentrate
t
13,229
10,219
13,211
Payable copper contained in concentrate
t
12,629
9,785
12,633
Cash cost*
US$/lb payable
1.99
1.89
1.70
All-in sustaining cost*
US$/lb payable
2.27
2.18
2.18
(*) Refer to Section 5 of this Management's Review
Note: There may be slight differences between the numbers in the above table due to rounding.
Three months operational review
During Q1 2020, 3,427,148 tonnes of ore processed with an average copper head grade of 0.47% and a recovery rate of 82.62%. Compared with Q1 2019, throughput increased 40.1% while recoveries decreased 8.5%. Compared with Q4 2019, copper production was similar as a result of a 17% higher throughput offsetting the lower grade and recoveries.
Lower than planned plant recoveries were owing to a combination of treating lower grade surface stockpiles as a result of partial flooding of the pit floor during December 2019, several plant stoppages for scheduled maintenance and the COVID-19 shutdown order.
In February 2020, major scheduled maintenance was undertaken, during which time the plant was not running. These upgrades led to a new production record being achieved in March 2020 with 5,375 tonnes of copper produced from the processing of 1.35 million tonnes of ore with a recovery of 84.6%.
2. Overview of Operational Results (cont.)
Three months operational review (cont.)
Heavy rains in December 2019 meant mining operations concentrated on ore from the higher levels of the pit. The new equipment mobilised to site by the contractor has successfully been adapted to the increased volumes as a result of the plant expansion. On a combined basis, ore, waste and marginal ore amounted to 2.9 million m3 in Q1 2020 versus 3.0 million m3 in Q4 2019.
On-site concentrate inventories at the end of the quarter were approximately 6,071 tonnes.
Copper prices decreased, with an average realised price per pound of copper payable, including the QPs closed in the period, of US$2.58/lb compared with US$2.65/lb in Q4 2019. The average copper spot price during the quarter was US$2.56/lb. The realised price during the quarter, excluding QPs, was approximately US$2.54/lb.
As announced on 30 March 2020, the Royal Decree issued by the Spanish Government resulted in the Company stopping operations at Proyecto Riotinto for four full days until clarification was provided on 3 April 2020 and operations restarted. Proyecto Riotinto continues to operate in compliance with the specific requirements and recommendations of the Spanish government to prevent COVID-19 exposure and the spread of the virus.
Exploration at Proyecto Riotinto concentrated on the massive sulphides and stockwork mineralisation under the Atalaya pit as well as potential resource increases at the Cerro Colorado pit. In early March 2020, as a result of the sharp copper price decrease, non-essential drilling activities were put on hold.
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
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 months ended 31 March 2020, with comparatives for the three months ended 31 March 2019.
(Euro 000's)
Three months ended
31 Mar 2020
Three months ended
31 Mar 2019
Revenue
61,189
51,712
Total operating costs
(49,191)
(30,026)
Administrative and other expenses
(1,708)
(1,917)
Exploration expenses
(902)
(201)
Care and maintenance expenditure
(114)
(5)
EBITDA
9,274
19,510
Depreciation/amortisation
(6,666)
(3,426)
Impairment loss on other receivables
(45)
-
Net foreign exchange gain
445
713
Net finance cost
(11)
(31)
Tax
(66)
(2,611)
Profit for the period
2,931
14,155
Three months financial review
Revenues for the three month period ended 31 March 2020 amounted to €61.2 million (Q1 2019: €51.7 million). Higher revenues, compared with the same quarter in the previous year, were mainly driven by higher concentrate sold offset by lower copper prices and US Dollar average rates against Euro.
Realised prices of US$2.58/lb copper during Q1 2020 compared with US$2.80/lb copper in Q1 2019.
Operating costs for the three month period ended 31 March 2020 amounted to €49.2 million, compared with €30.1 million in Q1 2019. Higher expenses were mainly due to the higher production volume as well as an increase of power consumption, consumables and maintenance costs.
Cash costs of US$1.99/lb payable copper during Q1 2020 compared with US$1.89lb payable copper in the same period last year. The increase against Q1 2019 was mainly the result of higher processing and maintenance costs. Capitalised stripping costs during Q1 2020 amounted to €0.8 million as well as in Q1 2019. All-In Sustaining Costs in the reporting quarter were US$2.27/lb payable copper compared with US$2.18/lb payable copper in Q1 2019. The increase in AISC is due to a sustaining capex project at the tailing dams compared with Q1 2019.
Sustaining capex for Q1 2020 amounted to €3.3 million compared with €1.7 million in Q1 2019. Sustaining capex mainly related to the development of the tailing dams and continuous enhancements in the processing systems of the plant.
Administrative and other expenses amounted to €1.7 million (Q1 2019: €1.9 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 31 March 2020 amounted to €0.9 million, higher than Q1 2019 (€0.2 million).
EBITDA for the three months ended 31 March 2020 amounted to €9.3 million compared with Q1 2019 of €19.5 million.
The main item below the EBITDA line is depreciation and amortisation of €6.7 million (Q1 2019: €3.4 million). Higher depreciation mainly due to the increase of plant assets as result of the completion of the Expansion Project. Net financing costs for Q1 2020 amounted to €11k compared with €31k in Q1 2019.
4. Overview of the Financial Results (cont.)
Copper prices
The average realised copper price decreased 7.9% from US$2.80 per pound in Q1 2019 to US$2.58 per pound in Q1 2020.
The average prices of copper for the three months ended 31 March 2020 and 2019 are summarised below:
(USD)
Three months ended
31 Mar 2020
Three months ended
31 Mar 2019
Realised copper price per lb
2.58
2.80
Market copper price per lb
2.56
2.82
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 copper prices are mainly due to the final settlement of invoices where the QP was fixed in the previous quarter due to a short open period when copper prices were higher. The realised price of shipments during the quarter excluding QP was approximately US$2.54/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 31 March 2020 and 31 December 2019.
Liquidity information
(Euro 000's)
31 March 2020
31 December 2019
Unrestricted cash and cash equivalents at Group level
9,236
1,730
Unrestricted cash and cash equivalents at Operation level
32,787
6,347
Working capital surplus
7,878
3,598
6. Liquidity and Capital Resources (cont.)
Unrestricted cash and cash equivalents as at 31 March 2020 increased to €42.0 million from €8.1 million at 31 December 2019. The increase in cash balances is the result of net cash flow incurred in the period and draw down of credit facilities. Cash balances are unrestricted and include balances at the operational and corporate levels.
As of 31 March 2020, Atalaya reported a working capital surplus of €7.9 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, to a lesser extent, short-term loans following the drawdown of credit facilities. The increase in working capital resulted from higher cash collected from the operations.
Overview of the Group's cash flows
(Euro 000's)
Three months ended
31 Mar 2020
Three months ended
31 Mar 2019
Cash flows from operating activities
15,485
8,114
Cash flows used in investing activities
(5,585)
(17,138)
Cash flows from financing activities
24,046
-
Net (decrease)/increase in cash and cash equivalents
33,946
(9,024)
Three months cash flows review
Cash and cash equivalents increased by €33.9 million during the three months ended 31 March 2020. This was due to the net results of cash from operating activities amounting to €15.5 million, the cash used in investing activities amounting to €5.6 million and the cash from financing activities totalling €24.1 million.
Cash generated from operating activities before working capital changes was €10.0 million. Atalaya increased its trade receivables in the period by €2.2 million, decreased its inventory levels by €5.2 million and increased its trade payables by €3.9 million.
Investing activities during the quarter consumed €5.6 million, relating mainly to a tailings dams project and continuous enhancements in the processing systems of the plant.
Financing activities during the quarter increased by €24.1 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"), 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 months ended 31 March 2020, Atalaya recognised a foreign exchange profit of €0.5 million. Foreign exchange losses mainly related to change in the period end EUR and USD conversion rates, as all sales are cashed and occasionally held in USD.
The following table summarises the movement in key currencies versus the EUR:
Three months ended
31 Mar 2020
Three months ended
31 Mar 2019
Average rates for the periods
GBP - EUR
0.8493
0.8725
USD - EUR
1.1100
1.1358
Spot rates as at
GBP - EUR
0.8864
0.8583
USD - EUR
1.0956
1.1235
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 in the High Court to seek clarity on the definition of "Excess Cash". A preliminary hearing is due to take place on 22 May 2020. As and when a substantive hearing takes place, the Company expects to have clarity on the definition of Excess Cash and the payment schedule of the Deferred Consideration and the Loan Assignment.
As at 31 March 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 continued with its social responsibility activities through Fundación Atalaya Riotinto, with several initiatives.
In this regard, the Foundation has agreed to start new collaboration programmes with two additional nearby towns, Zalamea La Real and La Granada de Riotinto. The agreements will provide funds in order to execute actions to cover various areas of improvement: heritage, infrastructure, social aids, training and education, environment and others.
Continuing its work in education and entrepreneurship, the Company has renewed the Language School Program in cooperation with the City Council of Nerva and has restarted the school visits program of the mining region to Atalaya´s facilities. It has also provided sponsoring to various cultural associations to support their activities and events, as well as some sporting competitions to which our Foundation has provided sponsorship, with a double objective which are in line with its core values: promoting a healthy lifestyle and attract visitors to the area.
9. Health and Safety
The results of the first quarter of 2020 show improvements: 2.32 for the Frequency Index and 0.05 for the Severity Index, reporting only a single minor accident.
The year began with the preparation of training for the Emergency Brigade, training in field leadership, presentation of annual safety reports, presentation of the results of the survey of psychosocial factors carried out in the previous year to the department directors and the preparation of legal audits of prevention management among others.
The presence of the COVID-19 virus and the State of Emergency in Spain has necessitated the establishment of multiple extraordinary measures to prevent the spread throughout the mining facilities and to adapt to all the changes demanded by Health Authorities and the Spanish government. The most significant measures were: a strong information campaign, a protocol for action in different scenarios, the establishment of a monitoring committee to regularly inform workers' representatives, setting special hygiene measures including testing the temperature of employees both at the entrance and at the way out of the facility and the design of an exhaustive disinfection programme as well as the reorganisation of cleaning in all areas to obtain greater efficiency of resources.
10. Environment
During the first quarter of 2020, Atalaya continued carrying out the regular activities of environmental monitoring, quality management of the natural environment and the historical heritage, although the declaration of the State of Alarm in March 2020 brought important changes in the regular work trend such as:
· The archaeological excavation work in Cortalago site was interrupted to prevent a possible spread of COVID-19. Minimum services were kept including four assistants and two archaeologists in the field (in addition to two archaeologists working from home).
The 2019 annual declarations of hazardous and non-hazardous waste were presented in February 2020. The waste ratio was lower than the average of previous years and the percentage of waste destined for recovery was in line with 2018.
The development of pollution on the surroundings of Proyecto Riotinto was analysed and the results were mainly: a 85% reduction in the pollutant load compared to the beginning of the mining operation as a result of the water management actions carried out such as the water reuse system and restoration actions.
The quality certificate of OHSAS system was received in January 2020.
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.
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.
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 €42.0 million as at 31 March 2020 by drawing down on existing credit facilities.
14. Other Information
Additional information about Atalaya Mining Plc. is available at www.atalayamining.com
Interim Consolidated Income Statements
(All amounts in Euro thousands unless otherwise stated)
For the three months to 31 March 2020 and 2019 - (Unaudited)
(Euro 000's)
Notes
Three months ended
31 March 2020
Three
months ended
31 March 2019
Revenue
4
61,189
51,712
Operating costs and mine site administrative expenses
(49,030)
(30,026)
Mine site depreciation and amortization
(6,666)
(3,426)
Gross profit
5,493
18,260
Administration and other expenses
(1,708)
(1,917)
Share-based benefits
12
(161)
(53)
Impairment loss on other receivables
(45)
-
Care and maintenance expenditure
(114)
(5)
Exploration expenses
(902)
(201)
Operating profit
2,563
16,084
Net foreign exchange gain
445
713
Net finance costs
5
(11)
(31)
Profit before tax
2,997
16,766
Tax
(66)
(2,611)
Profit for the period
2,931
14,155
Profit for the period attributable to:
- Owners of the parent
3,175
14,161
- Non-controlling interests
(244)
(6)
2,931
14,155
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
10.3
Fully diluted earnings per share (EUR cents per share)
6
2.3
10.2
Profit for the period
Other comprehensive income:
2,931
14,155
Change in fair value of financial assets through other comprehensive income 'OCI'
(19)
5
Total comprehensive profit for the period
2,912
14,160
Total comprehensive profit for the period attributable to:
- Owners of the parent
3,156
14,166
- Non-controlling interests
(244)
(6)
2,912
14,160
The notes on pages 13 to 30 are an integral part of these unaudited condensed interim consolidated financial statements.
Interim Consolidated Balance Sheet
(All amounts in Euro thousands unless otherwise stated)
As at 31 March 2020 and 31 December 2019 - (Unaudited)
(Euro 000's)
Note
31 March 2020
31 December 2019
Assets
Non-current assets
Property, plant and equipment
7
307,879
307,815
Intangible assets
8
61,942
63,085
Trade and other receivables
10
499
500
Non-current financial assets
1,101
1,101
Deferred tax asset
6,509
6,576
377,930
379,077
Current assets
Inventories
9
16,158
21,330
Trade and other receivables
10
36,204
32,857
Tax refundable
843
1,924
Other financial assets
23
42
Cash and cash equivalents
42,023
8,077
95,251
64,230
Total assets
473,181
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
33,175
22,836
Accumulated losses
(37,664)
(30,669)
323,202
319,858
Non-controlling interests
(2,646)
(2,402)
Total equity
320,556
317,456
Liabilities
Non-current liabilities
Trade and other payables
13
13
13
Provisions
14
6,974
6,941
Leases
16
5,265
5,265
Deferred consideration
17
53,000
53,000
65,252
65,219
Current liabilities
Trade and other payables
13
61,407
57,537
Leases
16
441
588
Borrowings
15
24,197
-
Current tax liabilities
1,328
2,507
87,373
60,632
Total liabilities
152,625
125,851
Total equity and liabilities
473,181
443,307
The notes on pages 13 to 30 are an integral part of these unaudited condensed interim consolidated financial statements
Interim Consolidated Statements of Changes in Equity
(All amounts in Euro thousands unless otherwise stated)
For the three months to 31 March 2020 and 2019 - (Unaudited)
(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
-
-
-
14,161
14,161
(6)
14,155
Change in fair value of financial assets through OCI
-
-
5
-
5
-
5
Total comprehensive income
13,372
314,319
12,796
(44,147)
296,340
4,194
300,534
Transactions with owners
Recognition of share-based payments
12
-
-
53
-
53
-
53
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 31 March 2019
13,372
314,319
22,055
(53,353)
296,393
4,194
300,587
Profit for the period
-
-
-
23,162
23,162
(6,596)
16,566
Change in fair value of financial assets through OCI
-
-
(34)
-
(34)
-
(34)
Total comprehensive income
13,372
314,319
22,021
(30,191)
319,521
(2,402)
317,119
Transactions with owners
Recognition of share-based payments
12
-
-
566
-
566
-
566
Other changes in equity
249
(478)
(229)
-
(229)
At 31 December 2019/1 January 2020
13,372
314,319
22,836
(30,669)
319,858
(2,402)
317,456
Profit for the period
-
-
-
3,175
3,175
(244)
2,931
Change in fair value of financial assets through OCI
-
-
(19)
-
(19)
(19)
Total comprehensive income
13,372
314,319
22,817
(27,494)
323,014
(2,646)
320,368
Transactions with owners
Recognition of share-based payments
12
-
-
161
-
161
-
161
Recognition of depletion factor
12
-
-
8,000
(8,000)
-
-
-
Recognition of non-distributable reserve
12
-
-
2,198
(2,198)
-
-
-
Other changes in equity
-
-
(1)
28
27
At 31 March 2020
13,372
314,319
33,175
(37,664)
323,202
(2,646)
320,556
(1) The share premium reserve is not available for distribution
The notes on pages 13 to 30 are an integral part of these unaudited condensed interim consolidated financial statements.
Interim Consolidated Statements of Cash Flows
(All amounts in Euro thousands unless otherwise stated)
For the three months to 31 March 2020 and 2019 - (Unaudited)
(Euro 000's)
Notes
Three months ended
31 March
2020
Three
months ended
31 March
2019
Cash flows from operating activities
Profit before tax
2,997
16,766
Adjustments for:
Depreciation of property, plant and equipment
7
5,523
2,604
Amortisation of intangibles
8
1,143
822
Recognition of share-based payments
12
161
53
Interest income
5
(2)
(3)
Interest expense
5
8
4
Unwinding of discounting
5
-
30
Legal provisions
14
33
2
Impairment loss on other receivables
45
-
Loss in disposal of property, plant and equipment
7
-
2
Unrealised foreign exchange loss on financing activities
62
(1)
Cash inflows from operating activities before working capital changes
9,970
20,279
Changes in working capital:
Inventories
9
5,172
744
Trade and other receivables
10
(2,237)
(11,861)
Trade and other payables
13
3,871
(1,044)
Cash flows from operations
16,776
8,118
Interest expense on lease liabilities
5
(4)
-
Interest paid
5
(8)
(4)
Tax paid
(1,279)
-
Net cash from operating activities
15,485
8,114
Cash flows from investing activities
Purchase of property, plant and equipment
7
(5,587)
(16,698)
Purchase of intangible assets
8
-
(443)
Interest received
5
2
3
Net cash used in investing activities
(5,585)
(17,138)
Cash flows from financing activities
Lease payments
16
(151)
-
Proceeds from borrowings
15
24,197
-
Net cash flows from financing activities
24,046
-
Net (decrease) / increase in cash and cash equivalents
28,946
(9,024)
Cash and cash equivalents:
At beginning of the period
8,077
33,070
At end of the period
42,023
24,046
The notes on pages 13 to 30 are an integral part of these unaudited condensed interim consolidated financial statements.
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
(All amounts in Euro thousands unless otherwise stated)
For the three months to 31 March 2020 and 2019 - (Unaudited)
1. Incorporation and Summary of Business
Country of incorporation
Atalaya Mining Plc (the "Company") was incorporated in Cyprus on 17 September 2004 as a private company with limited liability under the Companies Law, Cap. 113 and was converted to a public limited liability company on 26 January 2005. Its registered office is at 1 Lampousa Street, Nicosia, Cyprus.
The Company was listed on AIM of the London Stock Exchange in May 2005 under the symbol ATYM and on the TSX on 20 December 2010 under the symbol AYM. The Company continued to be listed on AIM and the TSX as at 31 March 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 condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). 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 condensed interim 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 condensed interim consolidated financial statements are unaudited and include the financial statements of the Company and its subsidiary undertakings. They have been prepared using accounting bases and policies consistent with those used in the preparation of the consolidated financial statements of the Company and the Group for the year ended 31 December 2019. These unaudited condensed interim consolidated financial statements do not include all of the disclosures required for annual financial statements, and accordingly, should be read in conjunction with the consolidated financial statements and other information set out in the Company's 31 December 2019 Annual Report. The accounting policies are unchanged from those disclosed in the annual consolidated financial statements for the year ended 31 December 2019.
2. Basis of Preparation and Accounting Policies (cont.)
2.1 Basis of preparation (cont.)
(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 prices declined below Company's AISC level during March 2020. 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 are 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 significant impact on copper prices and the stoppage of Proyecto Riotinto as a result of the Royal Decree has partially impacted the revenues for the three months period ended 31 March 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 €42.0 million as at 31 March 2020 by drawing down on 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.
2. Basis of Preparation and Accounting Policies (cont.)
2.2 New standards, interpretations and amendments adopted by the Group (cont.)
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).
2. Basis of Preparation and Accounting Policies (cont.)
2.3 Fair value estimation (cont.)
Financial assets
(Euro 000's)
Level 1
Level 2
Level 3
Total
31 March 2019
Other financial assets
Financial assets at FV through OCI
23
-
-
23
Trade and other receivables
Receivables (subject to provisional pricing)
-
20,458
-
20,458
Total
23
20,458
-
20,481
31 December 2019
Other financial assets
Financial assets at FV through OCI
42
-
-
42
Trade and other receivables
Receivables (subject to provisional pricing)
-
17,716
-
17,716
Total
42
17,716
-
17,758
2.4 Critical accounting estimates and judgements
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the unaudited condensed interim 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 of the 2019 audited 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 agreement (Note 19.3)
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 an arm's length basis in a similar manner to transactions with third parties. Accounting policies used by the Group in different locations are the same as those contained in Note 2.
5. Business and Geographical Segments (cont.)
(Euro 000's)
Cyprus
Spain
Other
Total
Three months ended 31 March 2020
Revenue
4,126
57,063
-
61,189
Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)
2,074
7,233
(33)
9,274
Depreciation/amortisation charge
-
(6,666)
-
(6,666)
Net foreign exchange (loss) / gain
202
244
(2)
444
Impairment of other receivables
(45)
-
-
(45)
Finance income
-
2
-
2
Finance cost
-
(12)
-
(12)
Profit/(loss) before tax
2,231
801
(35)
2,997
Tax
-
(66)
-
(66)
Profit for the period
2,231
735
(35)
2,931
Total assets
29,924
437,094
1,163
468,181
Total liabilities
(12,946)
(134,437)
(242)
(147,625)
Depreciation of property, plant and equipment
-
5,523
-
5,523
Amortisation of intangible assets
-
1,143
-
1,143
Total additions of non-current assets
-
12,007
-
12,007
Three months ended 31 March 2019
Revenue
3,325
48,387
-
51,712
Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)
1,703
17,900
(93)
19,510
Depreciation/amortisation charge
-
(3,426)
-
(3,426)
Net foreign exchange gain
447
226
-
713
Finance income
-
3
-
3
Finance cost
-
(34)
-
(34)
Profit/(loss) before tax
2,150
14,709
(93)
16,766
Tax
(2,611)
Profit for the period
14,155
Total assets
38,835
380,338
654
419,827
Total liabilities
(14,552)
(104,531)
(157)
(119,240)
Depreciation of property, plant and equipment
-
2,604
-
2,604
Amortisation of intangible assets
-
822
-
822
Total additions of non-current assets
-
17,256
-
17,256
4. Revenues
(Euro 000's)
Three months ended
31 March 2020
Three months ended
31 March 2019
Revenue from contracts with customers (1)
64,161
48,218
Fair value gains/(losses) relating to provisional pricing within sales (2)
(2,972)
3,494
Total revenue
61,189
51,712
4. Revenues (cont.)
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 Q1 2020 revenue, there is a transaction price of €0.9 million (€nil in Q1 2019) related to the freight services provided by the Group to the customers arising from the sales of copper concentrate under CIF incoterm.
(2) Provisional pricing impact represented the change in fair value of the embedded derivative arising on sales of concentrate.
5. Net Finance Costs
(Euro 000's)
Three months ended
31 March 2020
Three months ended
31 March 2019
Interest expense :
Other interest
(8)
4
Interest expense on lease liabilities
(4)
-
Unwinding of discount on mine rehabilitation provision (Note 14)
-
30
Interest income(1)
2
(3)
(10)
31
(1) Interest income relates to interest received on bank balances
6. Earnings per share
The calculation of the basic and fully diluted profit per share attributable to the ordinary equity holders of the Company is based on the following data:
(Euro 000's)
Three months ended
31 March 2020
Three months ended
31 March 2019
Parent company
(621)
(904)
Subsidiaries
3,796
15,065
Profit attributable to equity holders of the parent
3,175
14,161
Weighted number of ordinary shares for the purposes of basic earnings per share (000's)
137,339
137,339
Basic profit per share (EUR cents/share)
2.3
10.3
Weighted number of ordinary shares for the purposes of fully diluted earnings per share (000's)
139,844
138,306
Fully diluted profit per share (EUR cents/share)
2.3
10.2
At 31 March 2020, there are nil warrants (Note 11) and 2,505,250 options (Note 12) (2019: nil warrants and 913,000 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 (4)
Plant and machinery
Deferred mining costs(2)
Other assets(1)
Total
Cost
At 1 January 2019
45,853
6,144
152,820
62,010
27,537
785
295,149
Additions
166
69
413
15,486
754
-
16,888
Disposals
-
-
-
-
-
(5)
(5)
Reclassifications
-
-
183
(183)
-
-
-
At 31 March 2019
46,019
6,213
153,416
77,313
28,291
780
312,032
Additions
44
208
758
33,251
5,722
1
39,984
Reclassifications
-
-
94,047
(94,047)
-
At 31 December 2019
46,063
6,421
248,221
16,517
34,013
781
352,016
Additions
17
-
10
4,332
1,288
-
5,587
Reclassifications
-
-
-
-
-
-
-
At 31 March 2020
46,080
6,421
248,231
20,849
35,241
781
357,603
Depreciation
At 1 January 2019
6,072
-
20,315
-
4,681
561
31,629
Charge for the period
512
98
1,757
-
319
16
2,702
At 31 March 2019
6,584
98
22,072
-
5,000
571
34,325
Charge for the period
1,673
293
6,800
-
1,061
49
9,876
At 31 December 2019
8,257
391
28,872
-
6,061
620
44,201
Charge for the period
712
125
4,176
-
496
14
5,523
At 31 March 2020
8,969
516
33,048
-
6,557
634
49,724
Net book value
At 31 March 2020
37,711
5,905
215,183
20,849
28,684
147
307,879
At 31 December 2019
37,806
6,030
219,349
16,517
27,952
161
307,815
(1) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.
(2) Stripping costs
(3) Assets under construction at 31 March 2020 were €33.3 million (2019: €77.3 million) which include sustaining capital expenditures.
(4) See lease in Note 16.
The above fixed assets are mostly 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
-
443
443
At 31 March 2019
76,538
6,469
83,007
Additions
-
5,006
2,012
Disposals
-
(3,865)
(3,865)
At 31 December 2019
76,538
7,610
84,148
Additions
-
-
-
At 31 March 2020
76,538
6,469
84,148
Amortisation
On 1 January 2019
10,370
243
10,163
Charge for the period
806
16
822
At 31 March 2019
11,176
259
11,435
Charge for the period
2,632
6,996
9,628
At 31 December 2019
13,808
7,255
21,063
Charge for the period
1,129
14
1,143
At 31 March 2019
14,937
7,769
22,206
Net book value
At 31 March 2020
61,601
341
61,942
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 31 March 2020 and thus no impairment has been recognised.
9. Inventories
(Euro 000's)
31 Mar 2020
31 Dec 2019
Finished products
4,431
11,024
Materials and supplies
10,774
9,266
Work in progress
953
1,040
16,158
21,330
As of 31 March 2020, copper concentrate produced and not sold amounted to 6,071 tonnes (31 Dec 2019: 14,201 tonnes). Accordingly, the inventory for copper concentrate was €4.4 million (31 Dec 2019: €11 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)
31 Mar 2020
31 Dec 2019
Non-current
Deposits
499
250
499
250
Current
Trade receivables at fair value - subject to provisional pricing
15,317
6,628
Trade receivables from shareholders at fair value - subject to provisional pricing (Note 19.3)
5,141
8,846
Other receivables from related parties at amortised cost (Note 19.3)
56
56
Deposits
28
29
VAT receivable
14,661
15,189
Tax advances
7
-
Prepayments
944
2,082
Other current assets
50
1,510
36,204
34,340
Allowance for expected credit losses
-
-
Total current trade and other receivables
36,204
34,340
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 31 December 2018/1 January 2019
137,340
13,372
314,319
327,691
Balance at 31 March 2019
137,340
13,372
314,319
327,691
Balance at 31 December 2019/31 March 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 three months ended 31 March 2020 and 2019.
11. Share Capital and Share Premium (cont.)
Warrants
As at 31 March 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
-
12,791
Recognition of depletion factor
-
-
5,378
-
-
-
5,378
Recognition of non-distributable reserve
-
-
-
-
1,984
-
1,984
Recognition of distributable reserve
-
-
-
-
-
1,844
1, 844
Recognition of share based payments
53
-
-
-
-
-
53
Change in fair value of financial assets at fair value through OCI
-
-
-
5
-
-
5
At 31 March 2019
6,805
208
10,878
(1,110)
3,430
1,844
22,055
Recognition of share based payments
566
-
-
-
-
-
566
Change in fair value of financial assets at fair value through OCI
-
-
-
(34)
-
-
(34)
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
161
-
-
-
-
-
161
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
-
-
-
(19)
-
-
(19)
Other changes in reserves
-
-
-
-
-
(1)
(1)
At 31 March 2020
7,532
208
18,878
(1,163)
5,628
2,094
33,175
12. Other Reserves (cont.)
(1) Depletion factor reserve
At 31 March 2020, the Group has disposed €8.0million as a depletion factor reserve in order to fulfil with 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 31 March 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
Total
2,505,250
Weighted average
exercise price £
Share options
At 1 January 2020
2.08
2,505,250
31 March 2020
2.08
2,505,250
13. Trade and Other Payables
(Euro 000's)
31 Mar 2020
31 Dec 2019
Non-current
Government grant
13
13
13
13
Current
Trade payables
56,729
52,395
Land options and mortgage
271
282
Accruals
4,343
4,860
VAT payable
51
-
61,394
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
121
126
Revision of provision
(3)
-
(3)
Finance cost
-
30
30
At 31 March 2019
129
6,543
6,672
Additions
279
17
296
Revision of provision
(20)
(18)
(38)
Finance cost
-
11
11
At 31 December 2019
388
6,553
6,941
Additions
33
-
33
At 31 March 2020
421
6,553
6,974
(Euro 000's)
31 Mar 2020
31 Dec 2019
Non-current
6,974
6,672
Total
6,974
6,672
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 31 March 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 31 March 2020. Management has individually reviewed each case and made a provision of €33 thousand for these claims, which has been reflected in these unaudited condensed interim consolidated financial statements.
15. Borrowings
(Euro 000's)
31 Mar 2020
31 Dec 2019
Current borrowings
Credit facilities
24,197
-
24,197
-
The Group has uncommitted credit facilities totalling €40.7 million. During the quarter, 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 1.35%. The maximum term of the facilities is one year. All borrowings are unsecured.
16. Leases
(Euro 000's)
31 Mar 2020
31 Dec 2019
Non-current
Leases
5,265
5,265
5,265
5,265
Current
Leases
441
588
441
588
Finance leases
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 €0.1 million (2019: €0.4) for the three month period ended 31 March 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 31 March 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 31 March 2020, the remaining term of this motor vehicle and laboratory equipment lease is three years and three and half years respectively.
(Euro 000's)
31 Mar 2020
31 Dec 2019
Minimum lease payments due:
- Within one year
442
588
- Two to five years
2,134
2,134
- Over five years
3,130
3,131
Present value of minimum lease payments due
5,706
5,853
(Euro 000's)
Lease liability
Balance 1 January 2020
5,853
Additions
-
Interest expense
4
Lease payments
(151)
Balance at 31 March 2020
5,706
Balance at 31 March 2020
- Non-current liabilities
5,265
- Current liabilities
441
5,706
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 in the High Court to seek clarity on the definition of "Excess Cash". A preliminary hearing is due to take place on 22 May 2020. As and when a substantive hearing takes place, the Company expects to have clarity on the definition of Excess Cash and the payment schedule of the Deferred Consideration and the Loan Assignment.
As at 31 March 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
2020
Acquisition and incorporation of subsidiaries
There were no acquisition or incorporation of subsidiaries during the three months period ended 31 March 2020.
Disposals of subsidiaries
There were no disposals of subsidiaries during the three months period ended 31 March 2020.
Wind-up of subsidiaries
There were no operations wound-up during the three months period ended 31 March 2020.
2019
Acquisition and incorporation of subsidiaries
There were no acquisition nor incorporation of subsidiaries during the three months period ended 31 March 2019
Disposals of subsidiaries
There were no disposals of subsidiaries during the three months period ended 31 March 2019.
Wind-up of subsidiaries
There were no operations wound-up during the three months period ended 31 March 2019.
19. Related Party Transactions
The following transactions were carried out with related parties:
19.1 Compensation of key management personnel
The total remuneration and fees of Directors (including Executive Directors) and other key management personnel was as follows:
(Euro 000's)
Three months ended
31 Mar 2020
Three months ended
31 Mar 2019
Directors' remuneration and fees
265
244
Share option-based benefits to directors
56
11
Key management personnel fees
124
114
Share option-based and other benefits to key management personnel
79
25
524
394
19.2 Share-based benefits
The directors and key management personnel have not been granted any options during the three month period ended 31 March 2020 (Q1 2019: nil).
19.3 Transactions with related parties/shareholders
i) Transaction with shareholders
(Euro 000's)
Three months ended
31 Mar 2020
Three months ended
31 Mar 2019
Trafigura- Revenue from contracts
8,393
11,677
Freight services
-
-
8,393
11,677
Gain / (losses) relating provisional pricing within sales
(405)
771
7,988
12,448
ii) Period-end balances with related parties
(Euro 000's)
31 Mar 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)
31 Mar 2020
31 Dec 2019
Trafigura - Debtor balance- subject to provisional pricing
5,141
8,918
Total (Note 10)
5,141
8,918
The above debtor balance arising from sales of goods and other balances bear no interest and is repayable on demand.
20. Contingent Liabilities
Judicial and administrative cases
In the normal course of business, the Group may be involved in legal proceedings, claims and assessments. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and the Group accrues for adverse outcomes as they become probable and estimable.
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 22)
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. The TSJA has not accepted the requests by EeA for the cessation of activities at the mine and an increase in the scope of the environmental plan.
21. 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.
22. 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 Company has adequate resources to continue operating in the foreseeable future. Accordingly, the unaudited condensed interim consolidated financial statements continue to be prepared on a going concern basis.
The Company continues carrying out several measures and implemented an exceptional plan developed for the purpose of protecting its workforce and the people of the surrounding communities to manage the crisis. The main key risk, its impact and the response plans to protect its workforce are: Spread of COVID-19 at the mine site may cause disruption in the production and additional costs. The Group continues the implementation of emergency response plans. Only critical employees for the operation are allowed to enter on site. There are severe distance and hygienical mandatory rules, mandatory body temperature controls, 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 condensed interim 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 Company's operations, financial position and forecast for a period of at least 12 months since the approval of these unaudited condensed interim 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 and have considered the capacity of the Group and its single asset Proyecto Riontinto to generate cash, the Group concluded that no impairment indicators are in place.
22. Significant Events (cont.)
AAU Permits
On 7 May 2020, the Company announced the Junta de Andalucía had issued a favourable resolution which validates the Unified Environmental Authorisation (the "AAU") of Proyecto Riotinto. The Resolution ends 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.
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
During the first quarter of 2020, the Company continues the process of establishing in Cyprus a new subsidiary under the name of Atalaya Financing, Limited. The activity of this new company will be financing.
23. Events after the Reporting Period
On 7 May, the Company announced the issuance of a favourable resolution to validate the Unified Environmental Authorisation of Proyecto Riotinto. Refer to Note 22.
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