REG - Atalaya Mining PLC - 3rd Quarter Financial Results <Origin Href="QuoteRef">ATYM.L</Origin> - Part 3
16/11/2017 07:05
- Part 3: For the preceding part double click ID:nRSP6391Wb
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 30 September 2017, the Group has not generated any excess cash and,
consequently, no consideration has been paid.
As at the reporting date, 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: E46,149,187
14. Deferred consideration (continued)
The fair values disclosed are provisional as of 30 September 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. On 11 August 2017 the Court of Appeal granted permission to
both parties to appeal (although it rejected three of Astor's seven grounds).
The Appeal will take place in May 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 - June 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.
During the three-month period ended 30 September 2017, the Group had not
entered into any short term foreign exchange contract.
15.2. Commodity contract
During the nine-month period ended 30 September 2017, the Group had not
entered into any hedging contract.
16. Acquisition, incorporation and disposal of subsidiaries
Incorporation of Atalaya Touro (UK) Limited
On 10 March 2017, Atalaya Touro (UK) Limited was incorporated. Atalaya Mining
Plc. is its sole shareholder. In July 2017, Atalaya Touro (UK) Limited
executed the option and acquired 10% of Cobre San Rafael, S.L. the Company
which owns the mining rights of Proyecto Touro.
Acquisition of Cobre San Rafael, S.L. - Proyecto Touro
On 23 February 2017, the Group 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
Company. This is part of an earn-in agreement (the "Agreement"), which will
enable the Group 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 Group paid E0.5 million to secure the exclusivity
agreement and will continue to fund up to a maximum of E5.0 million to get the
project through the permitting and financing stages.
· Phase 2 - When permits are granted, the Group will pay E2.0 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 Group will pay E5.0 million to earn-in an additional 30%
interest in the project (cumulative 70%).
· Phase 4 - Once commercial production is declared, the Group 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.
16. Acquisition, incorporation and disposal of subsidiaries (continued)
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.
In July 2017, the Group executed the acquisition of 10% of CSR, which has been
accounted as a subsidiary with corresponding non-controlling interest of 90%
as the Company has control over the entity.
Disposals of subsidiaries
There were no disposals of subsidiaries during the nine-month period to 30
September 2017
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 30 Sept 2017 Three months ended 30 Sept 2016 Nine months ended 30 Sept 2017 Nine months ended 30 Sept 2016
Directors' remuneration and fees 190 167 549 517
Share option-based benefits to directors 11 14 17 42
Bonus shares issued to director, in escrow - - - 63
Bonus 398 - 398 -
Key management personnel remuneration 1,126 131 1,339 321
Share option-based and other benefits to key management personnel 16 9 38 25
1,741 321 2,341 968
17.2 Share-based benefits
The directors and key management personnel have been granted 345,000 options
during the nine-month period.
17.3 Transactions with related parties/shareholders
i) Transaction with shareholders
(Euro 000's) Three months ended 30 Sept 2017 Three months ended 30 Sept 2016 Nine months ended 30 Sept 2017 Ninemonths ended 30 Sept 2016
Trafigura PTE LTD ("Trafigura") - Sales of goods (pre-commissioning sales offset against the cost of constructing assets) - - - 2,452
Trafigura- Sales of goods 9,154 4,495 22,162 15,888
Orion Mine Finance (Master) Fund I LP ("Orion") - Sales of goods - 3,753 (4) 3,753
9,154 8,248 22,158 22,093
ii) Period-end balances with related parties
(Euro 000's) 30 Sept 2017 31 Dec 2016
Receivables from related parties:
Fundación 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
17. Related party transactions (continued)
17.3 Transactions with related parties/shareholders (continued)
iii) Period-end balances with shareholders
(Euro 000's) 30 Sept 2017 31 Dec 2016
Trafigura - Debtor balance (Note 9) 8,329 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 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.
ARM has been notified for certain industrial discharges from the Tailing
Management Facility ("TMF"). A full description of each notification from the
Authorities and its resolution have been included in the 2016 financial
statements. As of June 2017, all notifications related to discharges dated
September 2010, January 2014 and February 2015 were either ruled by a Court in
favour of ARM or lapse without any further notification from the Authorities.
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 Atalaya 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
were 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. During Q3 2017, the
commencement of production as per Rumbo Royalty has started and the average
price of LME copper is above $2.6/lb. Consequently, the Group has expensed
$250,000 during the quarter.
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. Events after the reporting period
There were no significant events to disclose subsequent to the reporting
date.
This information is provided by RNS
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