REG - Atalaya Mining PLC - 1st Quarter Results <Origin Href="QuoteRef">ATYM.L</Origin> - Part 2
25/05/2017 07:06
- Part 2: For the preceding part double click ID:nRSY1633Ga
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.
3. Business and geographical segments
Business segments
The Group has only one distinct business segment, being that of mining
operations, mineral exploration and development.
Geographical segments
The Group's mining and exploration activities are located in Spain and its
administration is based in Cyprus.
(Euro 000's) Cyprus Spain Other Total
Three months ended 31 March 2017
Sales 25,648 - - 25,648
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) 23,734 (11,140) 9 12,603
Depreciation/amortisation charge (3) (4,392) - (4,395)
Net finance income/(cost) 189 (1,022) - (833)
Foreign exchange (loss) / gain (292) 18 - (274)
Profit/(Loss) for the period before taxation 23,628 (16,536) 9 7,101
Tax charge (1,858)
Net profit for the period 5,243
Total assets 1,852 314,625 7 316,484
Total liabilities (25,861) (96,367) (19) (122,247)
Depreciation of property, plant and equipment 3 3,523 - 3,526
Amortisation of intangible assets - 869 - 869
Total net additions of non-current assets - 5,770 - 5,770
Three months ended 31 March 2016
Sales 4,896 - - 4,896
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) (978) (1,530) (4) (2,512)
Depreciation/amortisation charge (4) (605) - (609)
Finance cost - (36) - (36)
Foreign exchange (loss) / gain (96) 2 - (94)
Loss for the period before taxation (1,078) (2,169) (4) (3,251)
Tax charge (6)
Net loss for the period (3,257)
Total assets 3,972 223,504 5 227,481
Total liabilities (81) (54,144) (49) (54,274)
Depreciation of property, plant and equipment 4 491 - 495
Amortisation of intangible assets - 114 - 114
Total net additions of non-current assets - 8,291 - 8,291
4. Net finance cost
(Euro 000's) Three months ended 31 March 2017 Three months ended 31 March 2016
Interest expense :
Debt to department of social security and other interest 172 27
Interest on copper concentrate prepayment 69 -
Deferred consideration 584 -
Interest income (16) (14)
Rehabilitation cost (Note 13) 24 23
833 36
5. Basic and fully diluted loss per share
The calculation of the basic and fully diluted loss per share attributable to
the ordinary equity holders of the parent is based on the following data:
(Euro 000's) Three months ended 31 March 2017 Three months ended 31 March 2016
Parent (867) (1,078)
Subsidiaries 6,110 (2,179)
Profit/(loss) attributable to the ordinary holders of the parent 5,243 (3,257)
Weighted number of ordinary shares for the purposes of basic profit/(loss) per share (000's) 116,680 116,680
Basic profit/(loss) per share:
Basic profit/(loss) per share (cents) 4.5 (2.8)
Weighted number of ordinary shares for the purposes of fully diluted profit/(loss) per share (000's) 118,445 116,680
Fully diluted loss per share (cents) :
Fully diluted profit/(loss) per share (cents) 4.4 (2.8)
6. Property, plant and equipment
(Euro 000's) Land and buildings Plant and machinery Mineral rights Assets under construction Deferred mining costs(2) Other assets(3) Total
Cost
At 1 January 2016 39,061 23,046 950 94,525 10,334 1,026 168,942
Additions - 8,233 - - - 58 8,291
Reclassifications - 65,822 - (57,007) (8,815) - -
Reclassifications - intangibles - 1,589 - - - - 1,589
At 31 March 2016 39,061 98,690 950 37,518 1,519 1,084 178,822
Additions 1,121(1) 7,750 - - 13,848 106 22,825
Reclassifications 6 38,465 - (36,952) (1,519) - -
Reclassifications - intangibles - 25 (50) - - (247) (272)
Disposals - - - - - (37) (37)
Written off - - (900) - - (68) (968)
At 31 December 2016 40,188 144,930 - 566 13,848 838 200,370
Additions 334 - - 543 3,751 - 4,628
Disposals - - - - - (53) (53)
At 31 March 2017 40,522 144,930 - 1,109 17,599 785 204,945
Depreciation
At 1 January 2016 - - - - - 518 518
Charge/(correction) for the period 461 156 - - - (122) 495
At 31 March 2016 461 156 - - - 396 1,013
Charge for the period 1,275 4,776 - - 1,758 339 8,148
Reclassifications - 141 - - - (141) -
Reclassifications -intangibles - - - - - (81) (81)
Disposals - - - - - (25) (25)
Impairment - - 900 - - 3 903
Written off - - (900) - - (68) (968)
At 31 December 2016 1,736 5,073 - - 1,758 423 8,990
Charge for the period 556 2,068 - - 876 26 3,526
Disposals - - - - - (44) (44)
At 31 March 2017 2,292 7,141 - - 2,634 405 12,472
Net book value
At 31 March 2017 38,230 137,789 - 1,109 14,965 380 192,473
At 31 December 2016 38,452 139,857 - 566 12,090 415 191,380
(1) Rehabilitation provision
(2) Stripping costs
(3) Includes motor vehicles, furniture, fixtures and office equipment which
are depreciated over 5-10 years.
The above property, plant and equipment is located in Cyprus and Spain.
7. Intangible assets
(Euro 000's) Permits of Rio Tinto Project Licences, R&D and software Goodwill Total
Cost
At 1 January 2016 20,158 - 9,333 29,491
Reclassifications - property, plant and equipment (1,589) - - (1,589)
At 31 March 2016 18,569 - 9,333 27,902
Additions 42,244(1) 1,334 - 43,578
Reclassifications - property, plant and equipment (25) 297 - 272
Other reclassifications (28) 54 - 26
At 31 December 2016 60,760 1,685 9,333 71,778
Additions - 1,131 - 1,131
At 31 March 2017 60,760 2,816 9,333 72,909
Amortisation
On 1 January 2016 - - 9,333 9,333
Charge for the period 114 - - 114
At 31 March 2016 114 - 9,333 9,447
Charge for the period 2,493 42 - 2,535
Reclassifications - property, plant and equipment - 81 - 81
At 31 December 2016 2,607 123 9,333 12,063
Charge for the period 855 14 - 869
At 31 March 2017 3,462 137 9,333 12,932
Net book value
At 31 March 2017 57,298 2,679 - 59,977
At 31 December 2016 58,153 1,562 - 59,715
(1) This addition relates to the deferred consideration as at 1
February 2016 (Note 14)
The useful life of the intangible assets is estimated to be not less than 16 ½
years according to the revised Reserves and Resources statement released in
July 2016. The ultimate recoupment 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 sale of
the respective areas. The Group conducts impairment testing on an annual basis
unless indicators of impairment are 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
the carrying values having regard to (a) the current recovery value (less
costs to sell) and (b) the net present value of potential cash flows from
operations. In both cases, the estimated net realisable values exceeded
current carrying values and thus no impairment has been recognised.
Goodwill of E9,333,000 arose on the acquisition of the remaining 49% of the
issued share capital of Atalaya Riotinto Minera S.L.U. ("ARM") back in
September 2008. This amount was fully impaired on acquisition, in the absence
of the mining license back in 2008.
8. Inventories
(Euro 000's) 31 March 2017 31 Dec 2016
Finished products 12,410 -
Materials and supplies 6,583 5,647
Work in progress 441 548
19,434 6,195
9. Trade and other receivables
(Euro 000's) 31 March 2017 31 Dec 2016
Non-current
Deposits 211 206
211 206
Current
Trade receivables 3,551 15,082
Receivables from related parties (Note 17.3 ii) 68 68
Receivables from shareholders (Note 17.3 iii) 4,139 2,024
Deposits and prepayments 520 522
VAT 12,520 11,187
Other receivables 1,151 967
21,949 29,850
The fair values of trade and other receivables approximate to their carrying
amounts as presented above.
10. Share capital and share premium
Shares000's Share CapitalStg£'000 Share premiumStg£'000 TotalStg£'000
Authorised
Ordinary shares of Stg £0.075 each* 200,000 15,000 - 15,000
000's Euro 000's Euro 000's Euro 000's
Issued and fully paid
Balance at 1 January 2017 and 31 March 2017 116,680 11,632 277,238 288,870
Authorised capital
The Company's authorised share capital is 200,000,000 ordinary shares of Stg
£0.075 each.
Issued capital
2017
No shares were issued in the period from 1 January 2017 to 31 March 2017.
Warrants
The Company has issued warrants to advisers to the Group. Warrants, noted
below, expire three or five years after the grant date and have exercise
prices ranging from Stg £1.425 to Stg £3.150.
Details of share warrants outstanding as at 31 March 2017:
Number of warrants
Outstanding warrants at 1 January 2016 and 31 March 2017 365,354
11. Other reserves
(Euro 000's) Share option Bonus share Depletion factor Available-for-sale investment Total
At 1 January 2016 6,247 145 - (884) 5,508
Change in value of available-for-sale investment - - - 32 32
Bonus shares issued in escrow - 32 - - 32
Recognition of share based payments 34 - - - 34
At 31 March 2016 6,281 177 - (852) 5,606
Bonus shares issued in escrow - 31 - - 31
Change in value of available-for-sale investment - - - (73) (73)
Recognition of share based payments 103 - - - 103
At 31 December 2016 6,384 208 - (925) 5,667
Change in value of available-for-sale investments - - - (34) (34)
Recognition of share based payments 16 - - - 16
Recognition of the Depletion factor - - 450 - 450
At 31 March 2017 6,400 208 450 (959) 6,099
Share options
On 23 February 2017, the Company has granted 900,000 incentive share options
to Persons Discharging Managerial Responsibilities ("PDMRs") and management in
accordance with the Company's Share Option Plan 2013.
The share options expire five years from the date of grant, have an exercise
price of 144.0 pence per share, based on the minimum share price in the five
days preceding the grant date and vest in three equal tranches - one third on
grant, one third on the first anniversary of the original grant date and one
third on the second anniversary of the original grant date.
Details of share options outstanding as at 31 March 2017:
Number of share options 000's
Outstanding options at 1 January 2017 500
- Issued during the reporting period 900
Outstanding options at 31 March 2017 1,400
12. Trade and other payables
(Euro 000's) 31 March 2017 31 Dec 2016
Non-current
Land options 105 115
105 115
Current
Trade payables 61,716 49,309
Payable to shareholders (Note 17.3 iii) - 12
Copper concentrate prepayment 4,560 8,684
Social Security* 857 1,741
Land options and mortgage 791 790
Accruals 1,825 1,826
Other 3 230
69,752 62,592
The fair values of trade and other payables due within one year approximate to
their carrying amounts as presented above.
* On 25 May 2010 ARM recognised a debt with the Social Security's General
Treasury in Spain amounting to E16.9 million that was incurred by a previous
owner in order to stop the execution process by Public Auction of the land
over which Social Security had a lien. E16.0 million has been repaid to date.
Originally payable over 5 years, the repayment schedule was subsequently
extended until June 2017.
13. Provisions
(Euro 000's) Legal costs Rehabilitation costs Total costs
1 January 2016 - 3,971 3,971
Revision of discount rate - 732 732
Revision of estimates - 296 296
Accretion expense - 93 93
At 31 December 2016 - 5,092 5,092
Charge to profit and loss as operating costs 129 334 463
Charge to profit and loss as finance cost - 24 24
At 31 March 2017 129 5,450 5,579
(Euro 000's) 31 March 2017 31 Dec 2016
Non-current 5,579 5,092
Current - -
Total 5,579 5,092
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.
14. Deferred consideration
In September 2008, the Group moved to 100% ownership of 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, certain companies in the
Group signed a master agreement with Astor (the "Master Agreement") which
includes the potential payment of deferred consideration of E43.8 million (the
"Deferred Consideration") and up-tick payments of up to E15.9 million
depending on the price of copper (the "Up-tick Payments"). These potential
payments are in consideration of (a) all parties to the Master Agreement
accepting the legal structure of ARM (formerly Emed Tartessus); (b) the
parties agreeing to waive claims and rights under various agreements relating
to ARM and Proyecto Riotinto entered into prior to the Master Agreement; and
(c) the provision of indemnities by Astor and its related parties in favour of
the Company and Atalaya Riotinto Project (UK) Limited and the agreement by
Astor and its related parties not to pursue litigation against the Company or
ARM.
The obligation to pay the Deferred Consideration and the Up-tick Payments is
subject to the satisfaction of the following conditions (the "Conditions"):
(a) all authorisations to restart mining activities in Proyecto Riotinto
having been granted by the Junta de Andalucía ("Permit Approval"); and (b) the
Group securing senior debt finance and related guarantee facilities for a sum
sufficient to restart mining operations at Proyecto Riotinto ("Senior Debt
Facility") and being able to draw down funds under the Senior Debt Facility.
Subject to satisfaction of the Conditions, the Deferred Consideration and the
Up-tick Payments are payable over a period of six or seven years (the "Payment
Period"). In addition to the satisfaction of the Conditions, the Up-tick
Payments are only be payable if, during the relevant period, the average price
of copper per tonne is US$6,614 or more (US$3.00/lb).
14. Deferred consideration (continued)
The Company has also entered into a credit assignment agreement with a related
company of Astor, Astor Resources AG (previously Shorthorn AG), pursuant to
which the benefit of outstanding loans were assigned to the Company in
consideration for the payment of E9.1 million to Astor Resources (the "Loan
Assignment"). Payment under the Loan Assignment is also subject to
satisfaction of the Conditions and is payable in instalments over the Payment
Period.
As security, inter alia, for the obligation to pay the Deferred Consideration,
the Up-tick Payments and the Loan Assignment, Atalaya Riotinto Project (UK)
Limited (previously EMED Holdings (UK) Limited) has granted pledges to Astor
Resources over the issued capital of ARM and the Company has provided a parent
company guarantee.
As at the date of this report, the Condition relating to Permit Approval has
been satisfied. However, the Group has not entered into arrangements in
connection with a Senior Debt Facility and, in the absence of drawdown of
funds by the Group pursuant to a Senior Debt Facility, the Conditions have not
been satisfied.
On 6 March 2017, judgment in the Astor Case was handed down in the High Court
of Justice in London. On 31 March 2017 declarations were made by the High
Court which give effect to the Judgment.
In summary, the High Court found that the Deferred Consideration did not start
to become payable when Permit Approval was granted. In addition, the
intra-group loans by which funding for the restart of mining operations was
made available to ARM did not constitute a Senior Debt Facility so as to
trigger payment of the Deferred Consideration. Accordingly, the first
instalment of the Deferred Consideration has not fallen due.
Astor failed to show that there had been a breach of the all reasonable
endeavours obligation contained in the Master Agreement to obtain a Senior
Debt Facility or that the Group had acted in bad faith in not obtaining a
Senior Debt Facility. While the Court confirmed that the Group was not in
breach of any of its obligations, the Master Agreement and its provisions
remain in place. Accordingly, other than up to US$10 million a year which may
be required for non-Proyecto Riotinto related expenses, ARM cannot make,
declare or pay any dividend, distribution or any repayment of the money lent
to it by companies in the Group until the consideration under the Master
Agreement (including the Deferred Consideration) has been paid in full.
As a consequence, the Judgment requires that, in accordance with the Master
Agreement, 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 (for non-Proyecto Riotinto related expenses)) to pay
the consideration due to Astor (including the Deferred Consideration and the
amount of E9.1 million payable under the Loan Assignment) early. The Court
confirmed that the obligation to pay consideration early out of excess cash
does not apply to the Up-tick Payments and the Judgment notes that the only
situation in which the Up-tick Payments could ever become payable is in the
unlikely event that mining operations stop at Proyecto Riotinto and a Senior
Debt Facility is then secured for a sum sufficient to restart mining
operations.
While the Judgment confirms that the cash sweep provisions of the Master
Agreement require ARM to repay the Loan Assignment early, it does not extend
to the credit assignment agreement which is governed by Spanish law. The
Judgment therefore does not provide any clarity on whether the Conditions have
been met in respect of payment of Loan Assignment and there remains
significant doubts concerning the legal obligation to pay the Loan Assignment
pursuant to the terms of the credit assignment agreement.
Before the Judgment dated 6 March 2017, the Company had not recognised the
Deferred Consideration on the basis that the payment of the amounts was not
considered probable. The Judgment required the Group to revisit its estimates
and assumptions as at and for the year ended 31 December 2016. Accordingly,
the Group recorded the liability at fair value using a discount rate on an
estimated excess cash flow of ARM.
As at 31 March 2017, the Group has updated the estimation of the excess cash
flows and the fair value of the Deferred Consideration. The main assumptions
of the net present value are as follows:
Gross amount: E53,000,000
Discount rate: 5.5%
Net present value: E 44,930,017.47
14. Deferred consideration (continued)
THE GROUP
The fair values disclosed are provisional as of 31 March 2017 due to the
complexity of the Master Agreement, and the inherently uncertain nature of the
assumptions to calculate the future cash flows of ARM.
When determining the net present value of the Deferred Consideration, the
Group has used historical facts and future assumptions, based on opinions and
estimates on the excess cash to be generated at ARM.
Many of these assumptions are based on factors such as commodities prices,
cost of operations, future settlements on current and future trade creditors
and debtors and other events that are not within the control of Atalaya.
On 25 April 2017, Atalaya and Astor applied for permission to appeal to the
Court of Appeal. It is likely that the applications will be ruled on by the
end of Q3 2017 and if permission is granted that the appeal hearings will take
place in 2018.
15. Derivative instruments
15.1. Foreign exchange contract
As at 31 December 2016, Atalaya had certain short term foreign exchange
contracts with the following relevant information:
Foreign exchange contracts - Euro/USD
Period Contract type Amount in USD Contract rate Strike
June 2016 - March 2017 FX Forward - Put 5,000,000 1.0955 n/a
FX Forward - Call 10,000,000 1.0955 1.0450
The counter parties of the foreign exchange agreements are third parties.
In February 2017, the Group entered into certain foreign exchange hedging
contracts to offset the agreements noted above before its expiration date. The
contracts were signed with the same financial institution and resulted in a
loss of E9,000 which was recorded as financial expense during the quarter.
15.2. Commodity contract
During the three months ended 31 March 2017, the Company had not entered into
any hedging contract.
16. Acquisition, incorporation and disposal of subsidiaries
During the three months ended 31 March 2017, the company announced the
exercise of the option to acquire 10% of Touro Project. Further details are
given in Note 20.
On 10 March 2017, Atalaya Touro (UK) Limited was incorporated. Atalaya Mining
Plc is its sole shareholder.
17. Related party transactions
The following transactions were carried out with related parties:
17.1 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 March 2017 Three months ended 31 March 2016
Directors' remuneration and fees 180 175
Share option-based benefits to directors 2 14
Bonus shares issued to director, in escrow - 32
Key management personnel remuneration 93 95
Share option-based and other benefits to key management personnel 9 8
284 324
17.2 Share-based benefits
The directors and key management personnel have been granted 900,000 options
during the three month period.
17.3 Transactions with related parties/shareholders
i) Transaction with shareholders
(Euro 000's) Three months ended 31 March 2017 Three months ended 31 March 2016
Trafigura PTE LTD ("Trafigura") - Sales of goods (pre commissioning sales offset against the cost of constructing assets) - 2,549
Trafigura- Sales of goods 9,687 4,896
Orion Mine Finance (Master) Fund I LP ("Orion") - Sales of goods (4) -
9,683 7,445
ii) Period-end balances with related parties
(Euro 000's) 31 March 2017 31 Dec 2016
Receivables from related parties:
Fundacion Atalaya Riotinto 12 12
Recursos Cuenca Minera S.L. 56 56
Total (Note 9) 68 68
The above debtor balance arising from sales of goods bears no interest and is
repayable on demand
iii) Period-end balances with shareholders
(Euro 000's) 31 March 2017 31 Dec 2016
Trafigura - Debtor balance (Note 9) 4,139 2,024
Orion - Creditor balance (Note 12) - (12)
The above debtor balance arising from the pre-commissioning sales of goods
bear no interest and is repayable on demand.
18. Contingent liabilities
Judicial and administrative cases
In the normal course of business, the Company 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 Company accrues for adverse
outcomes as they become probable and estimable.
The Company has been named a defendant in several legal actions in Spain, the
outcome of which is not determinable as at March 31, 2017. Unless otherwise
noted, no provision for these claims has been reflected in these financial
statements
Industrial discharges from the Tailings Management Facility 2010
On 23 September 2010, ARM was notified that the Andalucían Water Authority
("AWA") had initiated a Statement of Objections and Opening of File (the
"Administrative File 2010") following allegations by third parties of
unauthorised industrial discharges from the Tailings Management Facility
("TMF") at the Rio Tinto Copper Mine in the winter months of late 2010 and
early 2011. These assertions are judicial (alleging negligence) and
administrative (alleging damage to the environment) in nature. At that time,
the Company owned 33% of the TMF and the owners of the remaining 67% are
co-defendants (Rumbo and Zeitung).
In December 2011, the judicial claims were dismissed in the initial discovery
phase by the appeals Court (upholding a lower court decision) finding that the
controlled discharges of excess rainwater were force majeure events carried
out to protect the stability of the TMF, thereby ensuring public safety and
protection of the environment (the "Court Decisions").
Given that all judicial claims were dismissed in the very early stages of the
court´s investigation, no formal charges were ever made against ARM or against
any of its Directors or Officers.
Now that the Court Decisions are final, the Administrative File 2010, which
can only result in a monetary sanction against the co-defendants, was
re-opened in 2012. The defence arguments successfully used in a later case
which has been dismissed on 11 February 2015 (see below) will be used in the
defence of Administrative File 2010 and the management is positive that they
will be accepted.
On January 2, 2013 ARM, Rumbo and Zeitung were notified of a Resolution of
Fine and Damages (in a total amount of E1,867,958.39). In February 2013 ARM
appealed this Resolution and the Court has agreed that the Fine and Damages
amount be secured by a mortgage over certain properties owned by ARM until the
final decision on the alleged discharges is known.
In the Company's view, no "industrial discharge" took place, but rather a
force majeure controlled discharge of excess rainwater accumulated in the TMF
since industrial operations ceased in the early 2000´s with no actual damage
to the environment having taken place. In the Company's view it is unlikely
that any fine or sanction will be imposed against ARM once the Administrative
File 2010 reaches its final conclusion after all appeals are exhausted in
approximately 3-5 years.
On 28 January 2016, the Court ruled in favour of ARM, Rumbo and Zeitung. On 26
April 2016 the Court issued a final decree by which the 28 January 2016 ruling
was declared final.
18. Contingent liabilities (continued)
Industrial discharges from the Tailings Management Facility 2014
On 20 January 2014, ARM was notified that the Huelva Territorial Delegation of
the Ministry of Environment (which has absorbed the former AWA) had initiated
another disciplinary proceeding for unauthorised discharge (the
"Administrative File 2013") of administrative nature following allegations by
the administration of alleged unauthorised industrial discharges from the TMF
at the Rio Tinto Copper Mine during the heavy rains occurred from 7 March to
25 April 2013. The Administration has proposed the amount of E726,933.30 as
compensation for alleged damages to the environment ("Public Water Domain")
and a fine of between E300,507 and E601,012. On 11 February 2015, the Huelva
Territorial Delegation of the Ministry of Environment dismissed the case. On
13 May 2015, the Huelva Territorial Delegation of the Ministry of Environment
re-opened the Administrative File 2013. Written allegations were submitted on
30 May 2015.
Industrial discharges 2015
On 19 February 2015, ARM was notified that the Huelva Territorial Delegation
of the Ministry of Environment had initiated another disciplinary proceeding
for unauthorised discharge (the "Administrative File 2014") which has proposed
a fine of between E300,507 and E601,012. On 10 March 2015 the Company
submitted the relevant defence arguments.
On 29 March 2016 the Huelva Territorial Delegation of the Ministry of
Environment dismissed finally and without further recourse the Administrative
File 2013.
Industrial discharges from the Tailings Management Facility 2014
The Junta de Andalucía notified ARM of another disciplinary proceeding for
unauthorised discharge in 2014. ARM submitted the relevant defence arguments
on 10 March 2015 but has had no response or feedback from the Junta de
Andalucía since the submissions. Based on the time that has lapsed without a
response, it is expected that the outcome of this proceedings will also be
favourable for ARM. Once the necessary time has lapsed, ARM will ask for the
Administrative File to be dismissed.
19. Commitments
There are no minimum exploration requirements at Proyecto Riotinto. However,
the Group is obliged to pay municipal land taxes which currently are
approximately E235,000 per year in Spain and the Group is required to maintain
the Riotinto site in compliance with all applicable regulatory requirements.
As part of the consideration for the purchase of land from Rumbo, ARM has
agreed to pay a royalty to Rumbo subject to commencement of production of
$250,000 in each quarter where the average price of LME copper or the average
copper sale price achieved by the Group is at least $2.60/lb. No royalty is
payable in respect of any quarter where the average copper price for that
quarter is below this amount and in certain circumstances any quarterly
royalty payment can be deferred until the following quarter. The royalty
obligation terminates 10 years after commencement of production. No payments
made in 2016 (2015 - nil). Commencement of production is defined as being the
first to occur of processing of ore at a rate of nine million tonnes per annum
for a continuous period of six months or the date that is 18 months after the
first product sales from Proyecto Riotinto.
ARM has 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 E2 million.
Costs are then borne by the joint venture partners in accordance with their
respective ownership interests. Half of the costs paid by ARM in connection
with the feasibility study can be deducted from any royalty which may fall due
to be paid.
20. Significant events
Touro Project
On 23 February 2017, the Company announced that it had exercised an option to
acquire 10% of the share capital of Cobre San Rafael S.L., ("CSR"), a wholly
owned subsidiary of Explotaciones Gallegas S.L. ("EG"), part of the F. GOMEZ
Group. This is part of an earn-in agreement (the "Agreement"), which will
enable the Company to acquire up to 80% of CSR.
Following the acquisition of the initial 10% of CSR's share capital, the
agreement included the following four phases:
· Phase 1 - The Company paid E0.5 million to secure the exclusivity
agreement and will continue to fund up to a maximum of E5 million to get the
project through the permitting and financing stages.
· Phase 2 - When permits are granted, the Company will pay E2 million to
earn-in an additional 30% interest in the project (cumulative 40%).
· Phase 3 - Once development capital is in place and construction is
underway, the Company will pay E5 million to earn-in an additional 30%
interest in the project (cumulative 70%).
· Phase 4 - Once commercial production is declared, the Company will
purchase an additional 10% interest in the project (cumulative 80%) in return
for a 0.75% Net Smelter Return (NSR) royalty, with a buyback option.
The Agreement has been structured so that the various phases and payments will
only occur once the project is de-risked, permitted and in operation.
21. Events after the reporting period
There were no events after the reporting period, which would have a material
effect on the consolidated financial statements.
This information is provided by RNS
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