REG - Atalaya Mining PLC - Early Commissioning of Expansion & Q1 Financials <Origin Href="QuoteRef">ATYM.L</Origin> - Part 2

Atalaya MiningAnnouncement

26/05/2016 07:06

- Part 2: For the preceding part double click  ID:nRSZ3288Za 

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 the Company
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. 
 
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 to 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
30/05/2015. On 29 March 2016 the Huelva Territorial Delegation of the Ministry
of Environment dismissed finally and without further recourse the
Administrative File 2013. 
 
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 to E601,012.  On 10 March 2015 the Company
submitted the relevant defence arguments. 
 
16. Commitments 
 
Spain 
 
There are no minimum exploration requirements at Proyecto Riotinto.  However,
the Group is obliged to pay municipal land taxes which currently are
approximately E110,000 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. 
 
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.  Additionally, if after seven years from the
date of the land purchase, the Group has not obtained all necessary licenses
to open and operate Proyecto Riotinto, the land will be sold back to Rumbo for
E1.  Should the Group sell the land prior to this date to a third party, Rumbo
shall be paid E5.5 million and the above mentioned royalty novated to the
third party. 
 
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.  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. 
 
At Proyecto Riotinto, the Group has four year options with each of Zeitung and
Inland for the purchase of certain land plots adjacent to the mine at a
purchase price of E4.202 million (expiry date 31 July 2016)  and E4.648
million (expiry date 2 August 2016) respectively.  The Zeitung option requires
an annual option payment from the Group of E119,500 and the Inland option
requires an annual payment of E130,500 which is deductible from the purchase
price.  In each case, half of the purchase price can be made by the issue of
shares in the Company based on a weighted average market price at the time of
the purchase. 
 
17. Significant events 
 
The Group declared commercial production on 1 February 2016.  The
commissioning of the Expansion Project began in May 2016, with nameplate
capacity of 9.5Mtpa forecast for January 2017. 
 
18. Events after the reporting period 
 
There were no other events after the reporting period, which would have a
material effect on the consolidated financial statements. 
 
This information is provided by RNS
The company news service from the London Stock Exchange