REG - Atalaya Mining PLC - 3rd Quarter Financial Results <Origin Href="QuoteRef">ATYM.L</Origin> - Part 2
16/11/2017 07:05
- Part 2: For the preceding part double click ID:nRSP6391Wa
(118,012) 176,366 - 176,366
Loss for the period - - - (7,984) (7,984) - (7,984)
Change in value of available-for-sale investment - - 85 - 85 - 85
Bonus shares issued in escrow - - 63 - 63 - 63
Recognition of share based payments - - 103 - 103 - 103
At 30 September 2016 11,632 277,238 5,759 (125,996) 168,633 - 168,633
Profit for the period - - - 20,021 20,021 - 20,021
Change in value of available-for-sale investment - - (126) - (126) - (126)
Bonus shares issued in escrow - - - - - - -
Recognition of share based payments - - 34 - 34 - 34
At 31 December 2016 11,632 277,238 5,667 (105,975) 188,562 - 188,562
Addition - - - - - 4,502 4,502
Profit for the period - - - 13,445 13,445 (15) 13,430
Change in value of available-for-sale investment - - (51) - (51) - (51)
Depletion factor - - 450 (450) - -
Recognition of share based payments - - 110 - 110 - 110
At 30 September 2017 11,632 277,238 6,176 (92,980) 202,066 4,487 206,553
The notes on pages 15 to 28 are an integral part of these unaudited condensed
interim consolidated financial statements.
Condensed interim consolidated statements of cash flows
(unaudited)
(Euro 000's) Notes Three months ended 30 Sept2017 Threemonths ended30 Sept2016 Nine months ended 30 Sept2017 Ninemonths ended30 Sept2016
Cash flows from operating activities
Profit /(loss) before tax 3,654 (1,517) 17,538 (7,976)
Adjustments for:
Depreciation of property, plant and equipment 6 2,910 2,215 9,311 4,422
Amortisation of intangibles 7 850 260 2,584 574
Recognition of share-based payments 11 65 35 110 103
Bonus shares issued in escrow 11 - - - 63
Interest income 4 - (52) (19) (70)
Interest expense 4 94 132 759 184
Interest on deferred consideration 4 614 - 1,803 -
Rehabilitation cost 4 25 - 74 47
Impairment of property, plant and equipment 6 - 903 - 903
Gain on disposal of property, plant and equipment - (3) - (4)
Unrealised foreign exchange loss on financing activities (204) - (150) -
Cash inflows/(outflows) from operating activities before working capital changes 8,008 1,973 32,010 (1,754)
Changes in working capital:
Inventories 8 (5,733) (4,093) (9,566) (15,058)
Trade and other receivables 9 7,496 (6,171) 2,821 (1,215)
Trade and other payables 12 3,557 4,973 (1,228) 23,697
Derivative instruments - - (215) -
Increase in provisions (25) - (74) (47)
Cash flows from operations 13,303 (3,318) 23,748 5,623
Interest paid (303) (132) (759) (184)
Tax paid (114) (20) (114) (20)
Net cash (used in)/from operating activities 12,886 (3,470) 22,875 5,419
Cash flows from investing activities
Purchase of property, plant and equipment 6 (4,879) (2,600) (12,551) (19,680)
Purchase of intangible assets 7 (499) (114) (2,099) (114)
Proceeds from sale of property, plant and equipment - 3 10 4
Interest received 4 - 52 19 70
Net cash used ininvesting activities (5,378) (2,659) (14,621) (19,720)
Net increase/(decrease) in cash and cash equivalents 7,508 (6,129) 8,254 (14,301)
Cash and cash equivalents:
At beginning of the period 1,881 10,446 1,135 18,618
At end of the period 9,389 4,317 9,389 4,317
The notes on pages 15 to 28 are an integral part of these unaudited condensed
interim consolidated financial statements.
Notes to the condensed interim consolidated financial statements
For the three and nine months to 30 September 2017 and 2016 (unaudited)
1. General information
Country of incorporation
Atalaya Mining Plc. and its subsidiaries ("Atalaya" and/or the "Group"), was
incorporated in Cyprus on 17 September 2004 as a private company with limited
liability under 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 Group has offices in Minas de Riotinto in Spain
and in Nicosia, Cyprus. The Company was listed on the AIM market of the London
Stock Exchange in May 2005 and on the TSX on 20 December 2010.
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 principal activity of the Company and its subsidiaries is to operate the
recently commissioned Rio Tinto Copper Project ("Proyecto Riotinto") and to
explore for and develop base metal assets in Europe, with a 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
metals mineralisation in the European region.
2. Basis of preparation and accounting policies
Basis of preparation
The condensed interim consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs). IFRSs
comprise the standards issued by the International Accounting Standard Board
("IASB"), and IFRS Interpretations Committee ("IFRICs") as issued by the IASB.
Additionally, the consolidated financial statements have also been prepared in
accordance with IFRSs as adopted by the European Union (EU), using the
historical cost convention.
These 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 Group and the Company for the year ended 31 December 2016.
These 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 Group's 31 December 2016 Annual Report. The
accounting policies are unchanged from those disclosed in the annual
consolidated financial statements.
The Directors have formed a judgment at the time of approving the financial
statements that there is a reasonable expectation that the Group and the
Company have adequate available resources to continue in operational existence
for the foreseeable future.
These condensed interim consolidated financial statements have been prepared
on the basis of accounting principles applicable to a going concern which
assumes that the Group will realise its assets and discharge its liabilities
in the normal course of business. Management has carried out an assessment of
the going concern assumption and has concluded that the Group's will generate
sufficient cash and cash equivalents to continue operating for the next twelve
months.
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 available-for-sale 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.
2. Basis of preparation and accounting policies (continued)
Fair value measurements recognised in the condensed interim consolidated
statement of financial position
The following table provides an analysis of financial instruments that are
measured subsequent to initial recognition at fair value, grouped into Levels
1 to 3 based on the degree to which the fair value is observable.
· Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities.
· Level 2 fair value measurements are those derived from inputs other
than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
· Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
Financial assets
(Euro 000's) Level 1 Level 2 Level 3 Total
30 September 2017
Available-for-sale financial assets 210 - - 210
Total 210 - - 210
31 December 2016
Available-for-sale financial assets 261 - - 261
Total 261 - - 261
Use and revision of accounting estimates
The preparation of the condensed interim consolidated financial statements
requires the making of estimations and assumptions that affect the recognised
amounts of assets, liabilities, revenues and expenses and the disclosure of
contingent liabilities. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making the judgments about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates. The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period or in the
period of the revision and future periods if the revision affects both current
and future periods.
Adoption of new and revised International Financial Reporting Standards
(IFRSs)
The Group has adopted all the new and revised IFRSs and International
Accounting Standards (IASs) which are relevant to its operations and are
effective for accounting periods commencing on 1 January 2017. The adoption of
these Standards did not have a material effect on the condensed interim
consolidated financial statements.
Critical accounting estimates and judgements
The fair values of the Group's financial assets and liabilities approximate
their carrying amounts at the reporting date. Estimates and judgments are
continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be
reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are unchanged from those disclosed in the annual
consolidated financial statements.
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.
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 30 September 2017
Sales 35,734 - - 33,734
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) 34,846 (25,544) (20) 9,282
Depreciation/amortisation charge - (3,760) - (3,760)
Net finance cost (145) (588) - (733)
Foreign exchange loss (1,000) (134) - (1,134)
Profit/(loss) for the period before taxation 33,701 (30,027) (20) 3,654
Tax charge (1,141)
Net profit for the period 2,513
Nine months ended 30 September 2017
Sales 114,808 - - 114,808
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) 109,419 (75,628) (26) 33,765
Depreciation/amortisation charge (3) (11,892) - (11,895)
Net finance cost (653) (1,759) - (2,412)
Foreign exchange loss (1,411) (508) - (1,919)
Profit/(loss) for the period before taxation 107,352 (89,788) (26) 17,538
Tax charge (4,108)
Net profit for the period 13,430
Total assets 13,818 309,975 275 324,068
Total liabilities (9,180) (108,242) (93) (117,515)
Depreciation of property, plant and equipment 3 9,308 - 9,311
Amortisation of intangible assets - 2,584 - 2,584
Total net additions of non-current assets - 20,093 - 20,093
Three months ended 30 September 2016
Sales 27,235 - - 27,235
Earnings Before Interest, Impairment, Tax, Depreciation and Amortisation (EBITDA) (722) 2,602 2 1,882
Depreciation/amortisation charge (4) (2,471) - (2,475)
Impairment of land options not exercised - (900) - (900)
Net finance (cost)/income (29) 24 - (5)
Foreign exchange (loss)/gain 103 (124) 2 (19)
Loss for the period before taxation (652) (869) 4 (1,517)
Tax charge 4
Net loss for the period (1,513)
Nine months ended 30 September 2016
Sales 49,854 - - 49,854
Earnings Before Interest, Impairment, Tax, Depreciation and Amortisation (EBITDA) (2,347) 655 (6) (1,698)
Depreciation/amortisation charge (12) (4,984) - (4,996)
Impairment of land options not exercised - (900) - (900)
Net finance cost (29) (57) - (86)
Foreign exchange (loss)/gain (240) (58) 2 (296)
Loss for the period before taxation (2,628) (5,344) (4) (7,976)
Tax charge (8)
Net loss for the period (7,984)
3. Business and geographical segments (continued)
Geographical segments (continued)
(Euro 000's) Cyprus Spain Other Total
Total assets 6,021 234,116 6 240,143
Total liabilities (15,846) (55,639) (25) (71,510)
Depreciation of property, plant and equipment 12 4,410 - 4,422
Amortisation of intangible assets - 574 - 574
Total net additions of non-current assets 1 19,793 - 19,794
4. Net finance cost
(Euro 000's) Three months ended Three months ended 30 Sept 2016 Nine months ended Nine months ended 30 Sept 2016
30 Sept 2017 30 Sept 2017
Interest expense:
Debt to department of social security and other interest 49 132 392 184
Interest on copper concentrate prepayment 4 - 110 -
Interest on early payment 40 - 256 -
Deferred consideration 614 - 1,803 -
Interest income - (52) (19) (70)
Rehabilitation cost (Note 13) 25 - 74 47
Net foreign exchange hedging - (75) (205) (75)
733 5 2,412 86
5. Basic and fully diluted profit/(loss) per share
The calculation of the basic and fully diluted profit/(loss) per share
attributable to the ordinary equity holders of the parent is based on the
following data:
(Euro 000's) Three months ended Three months ended Nine months ended Nine months ended 30 Sept 2016
30 Sept 2017 30 Sept 2016 30 Sept 2017
Parent (471) (652) (1,834) (2,628)
Subsidiaries 2,999 (861) 15,279 (5,356)
Profit/(loss) attributable to the ordinary holders of the parent 2,528 (1,513) 13,445 (7,984)
Weighted number of ordinary shares for the purposes of basic profit/(loss) per share (000's) 116,680 116,680 116,680 116,680
Basic profit/(loss) per share:
Basic profit/(loss) per share (cents) 2.1 (1.3) 11.5 (6.8)
Weighted number of ordinary shares for the purposes of fully diluted profit/(loss) per share (000's) 118,402 116,680 118,402 116,680
Fully diluted profit/(loss) per share (cents):
Fully diluted profit/(loss) per share (cents) 2.1 (1.3) 11.4 (6.8)
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 46(1) 19,630 - - - 4 19,680
Reclassifications - 99,460 - (94,256) (5,204) - -
Reclassifications - intangibles - 1,614 (50) - - (247) 1,317
Written off - - (900) - - (3) (903)
Disposals - - - - - (16) (16)
At 30 September 2016 39,107 143,750 - 269 5,130 764 189,020
Additions/(correction) 1,075(1) (3,647) - - 13,848 160 11,436
Reclassifications 6 4,827 - 297 (5,130) - -
Written off - - - - - (65) (65)
Disposals - - - - - (21) (21)
At 31 December 2016 40,188 144,930 - 566 13,848 838 200,370
Additions 335 - - 6,370 6,115 - 12,820
Reclassifications 400 472 - (872) - - -
Disposals - - - - - (53) (53)
At 30 September 2017 40,923 145,402 - 6,064 19,963 785 213,137
Depreciation
At 1 January 2016 - - - - - 518 518
Charge for the period 1,223 3,122 - - - 77 4,422
Reclassifications - 130 - - - (130) -
Reclassifications -intangibles - - - - - (92) (92)
Disposal - - - - - (16) (16)
Impairment - - 900 - - 3 903
Written off - - (900) - - (3) (903)
At 30 September 2016 1,223 3,252 - - - 357 4,832
Charge for the period 513 1,810 - - 1,758 140 4,221
Reclassifications - 11 - - - (11) -
Reclassifications -intangibles - - - - - 11 11
Written off - - - - - (65) (65)
Disposals - - - - - (9) (9)
At 31 December 2016 1,736 5,073 - - 1,758 423 8,990
Charge for the period 1,714 6,148 - - 1,378 71 9,311
Disposals - - - - - (43) (43)
At 30 September 2017 3,450 11,221 - - 3,136 451 18,258
Net book value
At 30 September 2017 37,473 134,181 - 6,064 16,827 334 194,879
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 & Touro Project Licences, R&D and software Goodwill Total
Cost
At 1 January 2016 20,158 - 9,333 29,491
Additions - 114 - 114
Reclassifications - property, plant and equipment (1,614) 297 - (1,317)
Other reclassifications (7) 54 - 47
At 30 September 2016 18,537 465 9,333 28,335
Additions 42,244(1) 1,220 - 43,464
Other reclassifications (21) - - (21)
At 31 December 2016 60,760 1,685 9,333 71,778
Additions 5,000 2,154 - 7,154
Reclassifications - - - -
At 30 September 2017 65,760 3,840 9,333 78,932
Amortisation
On 1 January 2016 - - 9,333 9,333
Charge for the period 555 19 - 574
Reclassifications - property, plant and equipment - 92 - 92
At 30 September 2016 555 111 9,333 9,999
Charge for the period 2,052 23 - 2,075
Reclassifications - property, plant and equipment - (11) - (11)
At 31 December 2016 2,607 123 9,333 12,063
Charge for the period 2,542 43 - 2,584
At 30 September 2017 5,149 166 9,333 14,647
Net book value
At 30 September 2017 60,611 3,674 - 64,285
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 amounting to 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) 30 Sept 2017 31 Dec 2016
Finished products 7,677 -
Materials and supplies 7,127 5,647
Work in progress 957 548
15,761 6,195
9. Trade and other receivables
(Euro 000's) 30 Sept 2017 31 Dec 2016
Non-current
Deposits 211 206
211 206
Current
Trade receivables 3,903 15,082
Receivables from related parties (Note 17.3 ii)) 68 68
Receivables from shareholders (Note 17.3 iii)) 8,329 2,024
Deposits and prepayments 225 522
VAT 13,272 11,187
Other receivables 1,227 967
27,024 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 30 September 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 30 September 2017.
Warrants
The Company has issued warrants to advisers of the Company. Warrants, noted
below, expire three years after the grant date and have exercise price of Stg
£1.425.
Details of share warrants outstanding as at 30 September 2017:
Number of warrants
Outstanding warrants at 1 January 2017 365,354
- Expired during the reporting period (102,785)
Outstanding warrants at 30 September 2017 262,569
During the quarter the following warrants were expired:
Equity instrument Grant date Expired date Number of warrants Ex price
Warrants 2 July 2012 2 July 2017 33,332 3.15
Warrants 22 August 2012 22 August 2017 69,453 2.55
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 - - - 85 85
Bonus shares issued in escrow - 63 - - 63
Recognition of share based payments 103 - - - 103
At 30 September 2016 6,350 208 - (799) 5,759
Change in value of available-for-sale investment - - - (126) (126)
Recognition of share based payments 34 - - - 34
At 31 December 2016 6,384 208 - (925) 5,667
Change in value of available-for-sale investments - - - (51) (51)
Recognition of share based payments 110 - - - 110
Recognition of the Depletion factor - - 450 - 450
At 30 September 2017 6,494 208 450 (976) 6,176
Share options
On 23 February 2017, the Company 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 Stg£1.44 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 30 September 2017:
Number of share options 000's
Outstanding options at 1 January 2017 500
- Issued during the reporting period 900
Outstanding options at 30 September 2017 1,400
12. Trade and other payables
(Euro 000's) 30 Sept 2017 31 Dec 2016
Non-current
Land options 84 115
84 115
Current
Trade payables 57,677 49,309
Payable to shareholders (Note 17.3 iii)) - 12
Copper concentrate prepayment 13 8,684
Social Security* - 1,741
Land options and mortgage 791 790
Accruals 2,910 1,826
Other 4 230
61,395 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.
Originally payable over 5 years, the repayment schedule was subsequently
extended until June 2017. As of 30 June 2017, the debt was fully repaid to the
Social Security.
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
Additions 213 269 482
Charge to profit and loss as finance cost - 74 74
At 30 September 2017 213 5,435 5,648
(Euro 000's) 30 Sept 2017 31 Dec 2016
Non-current 5,648 5,092
Current - -
Total 5,648 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.
The Group has been named a defendant in several legal actions in Spain, the
outcome of which is not determinable as at 30 June, 2017. Management has
reviewed individually each case and provided a provision of E213 thousand for
these claims, which has been reflected in these financial statements.
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 Minasderiotinto project (UK) Ltd (previously EMED
Holdings (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 Minasderiotinto project
(UK) Ltd 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 gave 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
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