REG - Atalaya Mining PLC - Final Results <Origin Href="QuoteRef">ATYM.L</Origin> - Part 3
22/04/2016 07:06
- Part 3: For the preceding part double click ID:nRSV9939Vb
Trade and other payables are obligations to pay for goods, assets or services that have been acquired in the ordinary
course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one
year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current
liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method.
2.17 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised
in profit or loss over the period of the borrowings, using the effective interest method, unless they are directly
attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as
part of the cost of that asset.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down
occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the
fee is capitalised as a prepayment and amortised over the period of the facility to which it relates.
Borrowing costs are interest and other costs that the Group incurs in connection with the borrowing of funds, including
interest on borrowings, amortisation of discounts or premium relating to borrowings, amortisation of ancillary costs
incurred in connection with the arrangement of borrowings, finance lease charges and exchange differences arising from
foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, being
an asset that necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalised as
part of the cost of that asset, when it is probable that they will result in future economic benefits to the Group and the
costs can be measured reliably.
Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the
liability for at least twelve months after the reporting date.
2.18 Derivatives
Derivative financial instruments are initially accounted for at cost and subsequently measured at fair value. Fair value
is calculated using the Black Scholes valuation method. Derivatives are recorded as assets when their fair value is
positive and as liabilities when their fair value is negative. The adjustments on the fair value of derivatives held at
fair value through profit or loss are transferred to profit or loss.
2.19 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to
the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period date in the countries where the Company and its subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is also not
recognised if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Income tax is
determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period
date and are expected to apply when the related deferred tax asset is realised or the deferred income tax liability is
settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for
deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and
it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by
the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to
settle the balances on a net basis.
2.20 Share-based payments
The Group operates a share-based compensation plan, under which the entity receives services from employees as
consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange
for the grant of the options is recognised as an expense. The fair value is measured using the Black Scholes pricing
model. The inputs used in the model are based on management's best estimates for the effects of non-transferability,
exercise restrictions and behavioural considerations. Non-market performance and service conditions are included in
assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied.
2.21 Provisions
Provisions for environmental restoration, restructuring costs and legal claims 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 the amount has been reliably estimated. Provisions are not recognised for future operating
losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an
outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at
the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the obligation. The increase in the
provision due to passage of time is recognised as interest expense.
Rehabilitation provision
The Group records the present value of estimated costs of legal and constructive obligations required to restore operating
locations in the period in which the obligation is incurred. The nature of these restoration activities includes
dismantling and removing structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of
plant and waste sites and restoration, reclamation and re-vegetation of affected areas. The obligation generally arises
when the asset is installed or the ground/environment is disturbed at the production location. When the liability is
initially recognised, the present value of the estimated cost is capitalised by increasing the carrying amount of the
related mining assets to the extent that it was incurred prior to the production of related ore. Over time, the discounted
liability is increased for the change in present value based on the discount rates that reflect current market assessments
and the risks specific to the liability. The periodic unwinding of the discount is recognised in the consolidated income
statement as a finance cost. Additional disturbances or changes in rehabilitation costs will be recognised as additions or
charges to the corresponding assets and rehabilitation liability when they occur. For closed sites, changes to estimated
costs are recognised immediately in the consolidated income statement.
The Group assesses its mine rehabilitation provision annually. Significant estimates and assumptions are made in
determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate liability
payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes,
regulatory changes and changes in discount rates. Those uncertainties may result in future actual expenditure differing
from the amounts currently provided. The provision at the consolidated statement of financial position date represents
management's best estimate of the present value of the future rehabilitation costs required. Changes to estimated future
costs are recognised in the consolidated statement of financial position by either increasing or decreasing the
rehabilitation liability and rehabilitation asset if the initial estimate was originally recognised as part of an asset
measured in accordance with IAS 16 'Property, Plant and Equipment'. Any reduction in the rehabilitation liability and
therefore any deduction from the rehabilitation asset may not exceed the carrying amount of that asset. If it does, any
excess over the carrying value is taken immediately to the consolidated income statement.
If the change in estimate results in an increase in the rehabilitation liability and therefore an addition to the carrying
value of the asset, the entity is required to consider whether this is an indication of impairment of the asset as a whole
and to test for impairment in accordance with IAS 36. If, for mature mines, the revised mine assets net of rehabilitation
provisions exceeds the recoverable value, that portion of the increase is charged directly to expense. For closed sites,
changes to estimated costs are recognised immediately in the consolidated income statement. Also, rehabilitation
obligations that arise as a result of the production phase of a mine are expensed as incurred.
2.22 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the
income statement on a straight-line basis over the period of the lease.
The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at
the lease's commencement at the lower of the fair value of the leased property and the present value of the minimum lease
payments.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of
finance charges, are included in other long term payables. The interest element of the finance cost is charged to the
income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of
the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the
shorter of the useful life of the asset and the lease term.
2.23 Revenue recognition
Sales of goods
Revenue is recognised when Atalaya has transferred to the buyer all significant risks and rewards of ownership of the goods
sold. Revenue excludes any applicable sales taxes and is recognised at the fair value of the consideration received or
receivable to the extent that it is probable that economic benefits will flow to Atalaya and the revenues and costs can be
reliably measured. In most instances sales revenue is recognised when the product is delivered to the destination
specified by the customer, which is typically the vessel on which it is shipped, the destination port or the customer's
premises.
For certain commodities, the sales price is determined on a provisional basis at the date of sale as the final selling
price is subject to movements in market prices up to the date of final pricing, normally ranging from 30 to 90 days after
initial booking. Revenue on provisionally priced sales is recognised based on the estimated fair value of the total
consideration receivable. The revenue adjustment mechanism embedded within provisionally priced sales arrangements has the
character of a commodity derivative. Accordingly, the fair value of the final sales price adjustment is re-estimated
continuously and changes in fair value are recognised as an adjustment to revenue. In all cases, fair value is estimated by
reference to forward market prices. Pre-commissioning sales are offset against the cost of constructing the asset.
Sales of services
The Group sells services in relation to maintenance of accounting records, management, technical, administrative support
and other services to other companies. Revenue is recognised in the accounting period in which the services are rendered.
2.24 Interest income
Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group
reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original
effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on
impaired loan and receivables is recognised using the original effective interest rate.
2.25 Dividend income
Dividend income is recognised when the right to receive payment is established.
2.26 Dividend distribution
Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's shareholders. No dividend has been paid by the Company
since its incorporation.
2.27 Exploration costs
The Company expenses exploration expenditure as incurred.
Under the Group's accounting policy, exploration expenditure is not capitalised until the point is reached at which there
is a high degree of confidence in the project's viability and it is considered probable that future economic benefits will
flow to the Group. Subsequent recovery of the resulting carrying value depends on successful development or sale of the
undeveloped project. If a project does not prove viable, all irrecoverable costs associated with the project net of any
related impairment provisions are written off.
2.28 Amendment of financial statements after issue
The board of directors has the power to amend the financial statements after issue.
3. Financial Risk Management
3.1 Financial risk factors
Risk management is overseen by the AFRC under the board of directors. The AFRC oversees the risk management policies
employed by the Group to identify, evaluate and hedge financial risks, in close co-operation with the Group's operating
units. The Group is exposed to liquidity risk, credit risk, interest rate risk, operational risk, compliance risk,
litigation risk and currency risk arising from the financial instruments it holds. The risk management policies employed
by the Group to manage these risks are discussed below:
(a) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position
potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of
minimising such losses such as maintaining sufficient cash to meet liabilities when due. Cash flow forecasting is
performed in the operating entities of the Group and aggregated by Group finance. Group finance monitors rolling forecasts
of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs.
The following tables detail the Group's remaining contractual maturity for its financial liabilities. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be
required to pay. The table includes principal cash flows. A breakdown of the balances is shown in Notes 22, 23, 24 and
25.
(Euro 000's) Carrying amounts Contractual cash flows Less than3 months Between3 - 12 months Between1 - 2years Between2 - 5 years
31 December 2015
Social security 4,608 4,608 718 2,149 1,741 -
Land options and mortgages 944 944 - 789 80 75
Provisions 3,971 5,536 - - 25 5,511
Trade and other payables 38,231 38,231 38,231 - - -
47,754 49,319 38,949 2,938 1,846 5,586
31 December 2014
Bridge loan facility 19,764 19,764 19,764 - - -
Convertible note 13,952 13,980 13,980 - - -
Social security 7,679 7,679 772 2,042 3,180 1,685
Land options and mortgages 731 731 731 - - -
Trade and other payables 9,246 9,246 9,246 - - -
51,372 51,400 44,493 2,042 3,180 1,685
(b) Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.
Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a
currency that is not the Group's measurement currency. The Group is exposed to foreign exchange risk arising from various
currency exposures primarily with respect to the US Dollar and the British Pound. The Group's management monitors the
exchange rate fluctuations on a continuous basis and acts accordingly. The carrying amounts of the Group's foreign
currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
Liabilities Assets
(Euro 000's) 2015 2014 2015 2014
United States dollar - (18,547) 6,711 13,616
Great Britain pound - (13,952) 285 29
Sensitivity analysis
A 10% strengthening of the Euro against the following currencies at 31 December 2015 would have increased (decreased)
equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
interest rates, remain constant. For a 10% weakening of the Euro against the relevant currency, there would be an equal
and opposite impact on profit or loss and other equity.
Equity (Profit) or loss
(Euro 000's) 2015 2014 2015 2014
United States dollar (671) 615 (671) 615
Great Britain pound (29) 1,392 (29) 1,392
(c) Credit risk
Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash
inflows from financial assets on hand at the reporting date. The Company has no significant concentration of credit risk.
The Company has policies in place to ensure that sales of products and services are made to customers with an appropriate
credit history and monitors on a continuous basis the ageing profile of its receivables. The Company has policies to limit
the amount of credit exposure to any financial institution.
Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements,
which is net of impairment losses, represents the maximum credit exposure without taking account of the value of any
collateral obtained:
(Euro 000's) 2015 2014
Cash and cash equivalents 18,618 21,050
There are no collaterals held in respect of these financial instruments and there are no financial assets that are past due
or impaired as at 31 December 2015.
(d) Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest
rates. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed
rates expose the Group to fair value interest rate risk. The Group's Management monitors the interest rate fluctuations on
a continuous basis and acts accordingly.
At the reporting date the interest rate profile of interest- bearing financial instruments was:
(Euro 000's) 2015 2014
Variable rate instruments
Financial assets 18,618 21,050
An increase of 100 basis points in interest rates at 31 December 2015 would have increased/(decreased) equity and profit or
loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates,
remain constant. For a decrease of 100 basis points there would be an equal and opposite impact on the profit and other
equity.
Equity Profit or loss
(Euro 000's) 2015 2014 2015 2014
Variable rate instruments 186 211 186 211
(e) Operational risk
Operational risk is the risk that derives from the deficiencies relating to the Company's information technology and
control systems as well as the risk of human error and natural disasters. The Company's systems are evaluated, maintained
and upgraded continuously.
(f) Compliance risk
Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non-compliance with
laws and regulations. The Company has systems in place to mitigate this risk, including seeking advice from external legal
and regulatory advisors in each jurisdiction.
(g) Litigation risk
Litigation risk is the risk of financial loss, interruption of the Company's operations or any other undesirable situation
that arises from the possibility of non-execution or violation of legal contracts and consequentially of lawsuits. The
risk is restricted through the contracts used by the Company to execute its operations.
3.2 Capital risk management
The Group considers its capital structure to consist of share capital, share premium and share options reserve. The
Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. The Group is not subject to any externally imposed capital requirements.
In order to maintain or adjust the capital structure, the Group issues new shares. The Group manages its capital to ensure
that it will be able to continue as a going concern while maximizing the return to shareholders through the optimisation of
the debt and equity balance. The AFRC reviews the capital structure on a continuing basis.
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to
maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal
capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares,
buy back issued shares, obtain new borrowings or sell assets to reduce borrowings.
The Group monitors capital on the basis of the gearing ratio. The gearing ratio is calculated as net debt divided by total
capital. Net debt is calculated as borrowings plus trade and other payables less cash and cash equivalents.
(Euro 000's) 2015 2014
Net debt 29,160 29,250
Total equity 176,366 56,929
Total capital 205,526 86,179
Gearing ratio 14.2% 33.9%
The decrease in the gearing ratio during 2015 resulted primarily from the equity raising and the subsequent repayment of
the Bridge Loan and Convertible Note.
3.3 Fair value estimation
The fair values of the Company'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 Company 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 Company 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).
(Euro 000's) Level 1 Level 2 Level 3 Total
31 December 2015
Financial assets
Available for sale financial assets 302 - - 302
Total 302 - - 302
31 December 2014
Financial assets
Available for sale financial assets 984 - - 984
Total 984 - - 984
3.4 Critical accounting estimates and judgements
The fair values of the Groups' financial assets and liabilities approximate to 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 discussed below:
(a) Income taxes
Significant judgment is required in determining the provision for income taxes. There are transactions and calculations
for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises
liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the
income tax and deferred tax provisions in the period in which such determination is made.
Judgement is also required to determine whether deferred tax assets are recognised in the consolidated statements of
financial position. Deferred tax assets, including those arising from unutilised tax losses, require the Group to assess
the likelihood that the Group will generate sufficient taxable earnings in future periods, in order to utilise recognised
deferred tax assets.
Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. These
estimates of future taxable income are based on forecast cash flows from operations (which are impacted by production and
sales volumes, commodity prices, reserves, operating costs, closure and rehabilitation costs, capital expenditure,
dividends and other capital management transactions). To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the Group to realise the net deferred tax assets could be impacted.
In addition, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the
Group to obtain tax deductions in future periods.
(b) Capitalisation of exploration and evaluation costs
Under the Group's accounting policy, exploration and evaluation expenditure is not capitalised until the point is reached
at which there is a high degree of confidence in the project's viability and it is considered probable that future economic
benefits will flow to the Group. Subsequent recovery of the resulting carrying value depends on successful development or
sale of the undeveloped project. If a project does not prove viable, all irrecoverable costs associated with the project
net of any related impairment provisions are written off.
(c) Impairment review of asset carrying values
Events or changes in circumstances can give rise to significant impairment charges or impairment reversals in a particular
year. The Group assesses each cash-generating unit annually to determine whether any indications of impairment exist.
Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered the
higher of the fair value less cost to sell and value-in-use. These assessments require the use of estimates and assumptions
such as commodity prices, discount rates, future capital requirements, exploration potential and operating performance.
Fair value is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value for mineral assets is generally determined as
the present value of estimated future cash flows arising from the continued use of the asset, which includes estimates such
as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may
take into account. Cash flows are discounted at an appropriate discount rate to determine the net present value. For the
purpose of calculating the impairment of any asset, management regards an individual mine or works site as a
cash-generating unit.
(d) Contingencies
Material contingencies facing the Group are set out in Note 29 of the consolidated financial statements. A contingent
liability arises where a past event has taken place for which the outcome will be confirmed only by the occurrence or
non-occurrence of one or more uncertain events outside of the control of the Group, or a present obligation exists but is
not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A
provision is made when a loss to the Group is likely to crystallise. The assessment of the existence of a contingency and
its likely outcome, particularly if it is considered that a provision might be necessary, involves significant judgment
taking all relevant factors into account.
(e) Share-based compensation benefits
Share-based compensation benefits are accounted for in accordance with the fair value recognition provisions of IFRS 2
'Share-based Payment'. As such, share-based compensation expense for equity-settled share-based payments is measured at
the grant date based on the fair value of the award and is recognised as an expense over the vesting period. The fair
value of such share-based awards at the grant date is measured using the Black Scholes pricing model. The inputs used in
the model are based on management's best estimates for the effects of non-transferability, exercise restrictions,
behavioural considerations and expected volatility.
(f) Provisions for rehabilitation costs
Management uses its judgement and experience to provide for and (in the case of capitalised rehabilitation costs) amortise
the estimated costs for decommissioning and site rehabilitation over the life of the mine. The ultimate cost of
decommissioning and site rehabilitation is uncertain and cost estimates can vary in response to many factors including
changes to relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The
expected timing and extent of expenditure can also change, for example in response to changes in ore reserves or processing
levels. As a result, there could be significant adjustments to the provisions established which could affect future
financial results.
(g) Going Concern
Determining whether there exists material uncertainty that casts significant doubt about the Company's ability to continue
as a going concern requires management to exercise its judgement, in particular about its ability to obtain funds to
continue operations.
(h) Ore reserves and resource estimates
Ore Reserves are estimates of the amount of ore that can be economically and legally extracted from the group's mines,
based on Proven and Probable Ore Reserves. The group estimates its Ore Reserves and Mineral Resources based on information
compiled by appropriately qualified persons, relating to the geological data on the size, depth and shape of the orebody,
and require complex geological judgements to interpret the data. Changes in the Reserve or Resource estimates may impact
the carrying value of exploration and mining assets in terms of depreciation charged and possible impairment.
(i) Stripping costs
The group incurs waste removal costs (stripping costs) during the development and production phases of its surface mining
operations. Furthermore, during the production phase, stripping costs are incurred in the production of inventory as well
as in the creation of future benefits by improving access and mining flexibility in respect of the orebodies to be mined,
the latter being referred to as a stripping activity asset. Judgement is required to distinguish between the development
and production activities at the surface mining operations.
The group is required to identify the separately identifiable components of the orebodies for each of its surface mining
operations. Judgement is required to identify and define these components, and also to determine the expected volumes
(tonnes) of waste to be stripped and ore to be mined in each of these components. These assessments may vary between mines
because the assessments are undertaken for each individual mine and are based on a combination of information available in
the mine plans, specific characteristics of the orebody, the milestones relating to major capital investment decisions and
the type and grade of minerals being mined.
Judgement is also required to identify a suitable production measure that can be applied in the calculation and allocation
of production stripping costs between inventory and the stripping activity asset. The group considers the ratio of expected
volume of waste to be stripped for an expected volume of ore to be mined for a specific component of the orebody, compared
to the current period ratio of actual volume of waste to the volume of ore to be the most suitable measure of production.
These judgements and estimates are used to calculate and allocate the production stripping costs to inventory and/or the
stripping activity asset(s). Furthermore, judgements and estimates are also used to apply the units of production method in
determining the depreciable lives of the stripping activity asset(s).
4. 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 exploration activities are located in Spain and its administration is based in Cyprus.
2015
(Euro 000's) Cyprus Spain Other Total
Operating (loss)/profit (1,140) (5,048) 78 (6,110)
Finance income 2 36 - 38
Net foreign exchange loss (4,602) (116) (3) (4,721)
Finance costs (4,093) (239) - (4,332)
(Loss)/profit before tax and disposal of subsidiaries (9,833) (5,367) 75 (15,125)
Profit on disposal of subsidiaries 53
Profit on disposal of subsidiary/ associate 92
Tax charge (30)
Loss for the year (15,010)
Total assets 17,000 207,138 6 224,144
Total liabilities 219 47,520 39 47,778
Depreciation of property, plant and equipment 18 134 - 152
Total additions of non-current assets 125 105,763 - 105,888
2014
Operating loss (2,478) (8,977) (92) (11,547)
Gain on available-for-sale investments 1,186 - - 1,186
Finance income 1,909 - - 1,909
Net foreign exchange loss (369) (39) (1) (409)
Finance costs (2,000) (369) - (2,369)
Loss before tax (1,752) (9,385) (93) (11,230)
Tax charge (18)
Loss for the year (11,248)
Total assets 20,835 86,386 8 107,229
Total liabilities (33,407) (16,861) (32) (50,300)
Depreciation of property, plant and equipment 24 83 3 110
Total additions of non-current assets 1 15,217 - 15,218
5. Other income
(Euro 000's) 2015 2014
Other income 86 -
Sales of services 49 9
135 9
6. Expenses by nature
(Euro 000's) 2015 2014
Employee benefit expense (Note 7) 11,702 5,275
Compensation of key management personnel (Note 28.1) 1,585 3,010
Auditors' remuneration - audit 164 131
- prior year audit 7 7
- other 8 4
Other accountants' remuneration 45 47
Consultants' remuneration 282 776
Depreciation of property, plant and equipment (Note 12) 152 110
Travel costs 103 107
Share option-based employee benefits 71 95
Shareholders' communication expense 331 157
On-going listing costs 347 266
Legal costs 656 794
Other (capitalisation)/expenses (9,208) 777
Total cost of exploration, care and maintenance and administration expenses 6,245 11,556
7. Employee benefit expense
(Euro 000's) 2015 2014
Wages and salaries 9,014 4,474
Social security and social contributions 2,358 697
Employees' other allowances 330 104
11,702 5,275
8. Finance income
(Euro 000's) 2015 2014
Gain on fair value on the conversion feature of the convertible note - 1,904
Interest income 38 5
38 1,909
9. Finance costs
(Euro 000's) 2015 2014
Interest expense:
Debt to department of social security 239 369
Convertible note 1,178 1,309
Bridge loan 1,232 -
Accretion expense on convertible note 31 691
Bridge loan financing expenditure 1,342 -
Loss on fair value on conversion of the convertible note 310 -
4,332 2,369
10. Tax charge
(Euro 000's) 2015 2014
Income tax (24) (15)
Under provision previous years (6) (3)
(30) (18)
The tax on the Group's results before tax differs from the theoretical amount that would arise using the applicable tax
rates as follows:
(Euro 000's) 2015 2014
Loss before tax (14,980) (11,230)
Tax calculated at the applicable tax rates (2,448) (2,490)
Tax effect of expenses not deductible for tax purposes 815 177
Tax effect of tax loss for the year 1,726 2,473
Tax effect of allowances and income not subject to tax (123) (175)
Tax effect of utilization of tax losses brought forward that are deferred over the next five years - (3)
Tax charge (30) (18)
Due to tax losses sustained in the current and previous years, no tax liability arises on the Group. Under current
legislation, tax losses may be carried forward and be set off against taxable income of the following years. As at 31
December 2015, the balance of tax losses which is available for offset against future taxable profits amounted to E50.4
million (2014: E52.6 million).
(Euro 000's)
Tax year Cyprus Spain Total
Losses b/f - - -
2007 - 1,763 1,763
2008 - 5,175 5,175
2009 - 3,498 3,498
2010 - 5,641 5,641
2011 2,023 7,171 9,194
2012 2,456 1,967 4,423
2013 5,175 2,381 7,556
2014 4,110 3,517 7,627
2015 4,855 640 5,495
18,619 31,753 50,372
Cyprus
The corporation tax rate is 12.5% (2012: 10%). Under certain conditions interest income may be subject to defence
contribution at the rate of 30% (2012: 15%). In such cases this interest will be exempt from corporation tax. In certain
cases, dividends received from abroad may be subject to defence contribution at the rate of 20% for the tax years 2012 and
2013 and 17% for 2014 and thereafter. Due to tax losses sustained in the year and previous years, no tax liability arises
on the Company. Under current legislation, tax losses may be carried forward and be set off against taxable income of the
five succeeding years.
Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years
after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special
contribution for defence at 20% for the tax years 2012 and 2013 and 17% for 2014 and thereafter will be payable on such
deemed dividends to the extent that the shareholders (companies and individuals) are Cyprus tax residents. The amount of
deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This
special contribution for defence is payable by the Company for the account of the shareholders.
Spain
The corporation tax rate is between 25% and 30%. The recent Spanish tax reform approved in 2014 reduces the general
corporation tax rate from 30% to 28% in 2015 and to 25% in 2016, and introduces, among other changes, a 10% reduction in
the tax base subject to equity increase and other requirements. Due to tax losses sustained in the current and previous
years, no tax liability arises in the Company. Under current legislation, tax losses may be carried forward and be set off
against taxable income of the eighteen succeeding years.
11. Loss per share
The calculation of the basic and diluted loss per share attributable to the ordinary equity holders of the Company is based
on the following data:
(Euro 000's) 2015 2014
Parent company (9,675) (4,127)
Subsidiaries (5,335) (7,119)
Loss attributable to owners of the parent (15,010) (11,246)
Weighted number of ordinary shares for the purposes of basic loss per share ('000) 83,658 44,072*
Basic loss per share:
Basic and fully diluted loss per share (cents) (17.9) (25.5)
* Adjusted for the 30:1 share consolidation which took place in October 2015
There are 473,061 warrants and 931,654 options which have been excluded when calculating the weighted average number of
shares because they have an antidilutive effect.
12. Property, plant and equipment
THE GROUP
(Euro 000's)2015 Land and buildings Plant andequipment Mineral rights Assets under construction(4) Deferred mining costs(3) Other assets(2) Total
Cost
At 1 January 2015 35,797 29,087 - - - 1,086 65,970
Reclassifications (707) (5,883) 950 5,640 - - -
Additions 3,971(1) - - 88,885 10,334 72 103,262
Disposals - (158) - - - (132) (290)
At 31 December 2015 39,061 23,046 950 94,525 10,334 1,026 168,942
Depreciation
At 1 January 2015 - 158 - - - 498 656
Charge for the year - - - - - 152 152
Disposals - (158) - - - (132) (290)
At 31 December 2015 - - - - - 518 518
Net book value at 31 December 2015 39,061 23,046 950 94,525 10,334 508 168,424
2014
Cost
At 1 January 2014 35,549 17,268 - - - 905 53,722
Additions 248 11,819 - - - 317 12,384
Disposals - - - - - (136) (136)
At 31 December 2014 35,797 29,087 - - - 1,086 65,970
Depreciation
At 1 January 2014 - 158 - - - 512 670
Charge for the year - - - - - 110 110
Disposals - - - - - (124) (124)
At 31 December 2014 - 158 - - - 498 656
Net book value at 31 December 2014 35,797 28,929 - - - 588 65,314
(1) Rehabilitation provision (Note 23: Provisions).
(2) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.
(3) Stripping costs
(4) Net of pre-commissioning sales
THE COMPANY
(Euro 000's) Plant andequipment Otherassets(2) Total
2015
Cost
At 1 January 2015 158 235 393
Additions - 1 1
Disposals (158) (127) (285)
At 31 December 2015 - 109 109
Depreciation
At 1 January 2015 158 177 335
Charge for the year - 18 18
Disposals (158) (127) (285)
At 31 December 2015 - 68 68
Net book value at 31 December 2015 - 41 41
2014
Cost
At 1 January 2014 158 234 392
Additions - 1 1
At 31 December 2014 158 235 393
Depreciation
At 1 January 2014 158 153 311
Charge for the year - 24 24
At 31 December 2014 158 177 335
Net book value at 31 December 2014 - 58 58
(2) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.
The above fixed assets are located in Cyprus and Spain.
In 2012, the Group was granted options by Inland and Construcciones Zeitung, S.L. ("Zeitung") to acquire additional plots
of land in the surrounding district (the "Option Lands"), exercisable within four years at an aggregate price of E9
million.
Certain land plots required for Proyecto Riotinto (the "Project Lands") are affected by pre-existing liens and embargos
derived from unpaid obligations of former Project operators or owners (the "Pre-Existing Debt"). In May 2010 the Group
signed an agreement with the Department of Social Security in which it undertook to repay, over a period of 5 years, the
E16.9 million Pre-Existing Debt to the Department of Social Security in exchange for a stay of execution proceedings for
recovery of this debt against these Project Lands (the "Social Security Agreement").
The Group has met all of its obligations to date under the Social Security Agreement, having paid as at 31 December 2015 a
total of E12.3 million, with a remainder of E4.6 million to be paid in accordance with the Agreement that finalizes on 30
June 2017. The Project Lands are also subject to a lien in the amount of E5 million created in 1979 to secure the
repayment of certain government grants that were in all likelihood paid at the relevant time by former operators. Relevant
court proceedings have been followed to strike this lien from title, given that in the opinion of the Company the right of
the government to reclaim this Pre-Existing Debt has expired due to the relevant statute of limitations and the Company is
currently waiting for the court decision to be issued. The Project Lands are also
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