REG - Atalaya Mining PLC - Final Results <Origin Href="QuoteRef">ATYM.L</Origin> - Part 3
06/04/2017 07:06
- Part 3: For the preceding part double click ID:nRSF7360Bb
- (41) - (41) - (41)
Recognition of share based payments - - 137 - 137 - 137
At 31 December 2016 11,632 277,238 5,667 (105,975) 188,562 - 188,562
The notes on pages 28 to 71 are an integral part of these consolidated financial statements.
Company statements of changes in equity
Years ended 31 December 2016 and 2015
(Euro 000's) Note Share capital Sharepremium Otherreserves Accumulatedlosses Total
At 1 January 2015 4,409 149,823 5,815 (146,829) 13,218
Loss for the year 12 - - - (9,520) (9,520)
Issue of share capital 7,223 130,017 - - 137,240
Share issue costs - (2,920) - - (2,920)
Derivative element of conversion of convertible note - 440 - - 440
Bonus shares issued in escrow - - 101 - 101
Change in value of available-for-sale investments (682) (682)
Recognition of share based payments - - 152 - 152
Warrants issue cost - (122) 122 - -
At 31 December 2015/1 January 2016 11,632 277,238 5,508 (156,349) 138,029
Profit for the year 12 - - - 94,707 94,707
Bonus shares issued in escrow - - 63 - 63
Change in value of available-for-sale investments - - (41) - (41)
Recognition of share based payments - - 137 - 137
At 31 December 2016 11,632 277,238 5,667 (61,642) 232,895
The notes on pages 28 to 71 are an integral part of these consolidated financial statements.
Consolidated statements of cash flows
Years ended 31 December 2016 and 2015
(Euro 000's) Note 2016 2015
Cash flows from operating activities
Lossbefore tax (150) (14,980)
Adjustments for:
Depreciation of property, plant and equipment 13 8,643 152
Amortisation of intangible assets 14 2,649 123
Share of result of associate 10 -
Recognition of share-based payments 24 137 152
Bonus share issued in escrow 63 101
Interest income 8 (41) (38)
Interest expense 9 395 239
Interest on deferred consideration 9 2,123 -
Impairment charge 13 903 -
Loss on fair value on the conversion feature of the convertible note 9 - 310
Accretion expense on convertible note 9 - 31
Convertible note interest expense 9 - 1,178
Bridge loan interest expense 9 - 1,232
Bridge loan financing expenditure 9 - 1,342
Foreign exchange loss on repayment of borrowings - 5,304
Gain on disposal of property, plant and equipment (4) (1)
Gain on disposal of subsidiaries - (53)
Gain on disposal of subsidiary/associate - (92)
Unrealised foreign exchange loss on financing activities 162 286
Cash outflows from operating activities before working capital changes 14,890 (4,714)
Changes in working capital:
Inventories (6,195) -
Trade and other receivables (13,218) (14,406)
Trade and other payables 18,724 26,127
Cash flows from operations 14,201 7,007
Interest paid (395) (768)
Financing expenditure paid - (164)
Tax paid (17) (21)
Net cash from operating activities 13,789 6,054
Cash flows from investing activities
Purchases of property, plant and equipment (29,995) (99,290)
Purchases of intangible assets 14 (1,334) (2,503)
Proceeds from sale of property, plant and equipment 16 1
Proceeds from sale of subsidiaries - 88
Interest received 8 41 38
Net cash used ininvesting activities (31,272) (101,666)
Cash flows from financing activities
Proceeds from issue of share capital - 90,435
Listing and issue costs 23 - (2,920)
Proceeds from bridge loan - net - 5,665
Net cash from financing activities - 93,180
Net decreasein cash and cash equivalents (17,483) (2,432)
Cash and cash equivalents:
At beginning of the year 22 18,618 21,050
At end of the year 22 1,135 18,618
The notes on pages 28 to 71 are an integral part of these consolidated financial statements.
Company statements of cash flows
Years ended 31 December 2016 and 2015
(Euro 000's) Note 2016 2015
Cash flows from operating activities
Profit/(loss)before tax 94,707 (9,520)
Adjustments for:
Depreciation of property, plant and equipment 13 14 18
Share-based payments 137 39
Bonus share issue 63 -
Interest expense 352 -
Interest income - (2)
Loss on fair value on the conversion feature of the convertible note - 310
Accretion expense on convertible note - 31
Convertible note interest expense - 1,178
Bridge loan interest expense - 1,232
Bridge loan financing expenditure - 1,342
Foreign exchange loss on repayment of borrowings - 5,304
Zero coupon interest rate (1,523) (1,411)
Intercompany balances previously impaired (97,243) (9,625)
Impairment of investment in subsidiaries - 8
Profit on disposal of property, plant and equipment (4) (1)
Unrealised foreign exchange loss on financing activities - (78)
Cash outflows used in operating activities before working capital changes (3,497) (11,175)
Changes in working capital:
Trade and other receivables (2,298) (95,988)
Trade and other payables 1,854 (552)
Cash flows used inoperations (3,941) (107,715)
Interest paid - (529)
Financing expenditure paid - (164)
Net cash used inoperating activities (3,941) (108,408)
Cash flows from investing activities
Purchases of property, plant and equipment 13 (1) (1)
Proceeds from disposal of property, plant and equipment 16 1
Purchase of investment - (7)
Proceeds from sale of subsidiaries - 88
Interest received - 2
Net cash from investing activities 15 83
Cash flows from financing activities
Proceeds from issue of share capital - 90,435
Listing and issue costs 23 - (2,920)
Proceeds from bridge loan - net - 5,665
Net cash from financing activities - 93,180
Net decreasein cash and cash equivalents (3,926) (15,145)
Cash and cash equivalents:
At beginning of the year 22 4,246 19,391
At end of the year 22 320 4,246
The notes on pages 28 to 71 are an integral part of these consolidated financial statements.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
1. Incorporation and summary of business
Country of incorporation
Atalaya Mining Plc was incorporated in Cyprus on 17 September 2004 as a private company with limited liability under the
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 Company was listed on AIM of the London Stock Exchange in May 2005 under the
symbol ATYM and on the TSX on 20 December 2010 under the symbol AYM. The Company continued listed in AYM and TSX as at 31
December 2016.
Changed on name and share consolidation
Following the Company's EGM on 13 October 2015, the change of the name 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 of Stg £0.0025.
Summary of business
The Company owns and operates through a wholly-owned subsidiary, the Proyecto Riotinto, an open-pit copper mine located in
the Pyritic belt, in the Andalusia region, approximately 65 km northwest of Seville.
In addition to the production of copper concentrates, the Company's and its subsidiaries' business is to explore for and
develop metals production operations in Europe, with an initial 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 metal mineralisation in Spain and the Eastern European region.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
(a) Overview
The consolidated financial statements of Atalaya Mining have been prepared in accordance with International Financial
Reporting Standards ("IFRS"). IFRS comprise the standards issued by the International Accounting Standards Board ("IASB")
and IFRS Interpretations Committee ("IFRICs") as issued by the IASB.
Additionally, the consolidated financial statements have also been prepared in accordance with the IFRS as adopted by the
European Union and the requirements of the Cyprus Companies Law, Cap.113.
The consolidated financial statements have been prepared under the historical cost convention, except for derivative
financial instruments that have been measured at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note 3.4.
(b) Going concern
These 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.
2.2 Changes in accounting policy and disclosures
During the current year the Group adopted all the new and revised International Financial Reporting Standards (IFRS) that
are relevant to its operations and are effective for accounting periods beginning on 1 January 2016. This adoption did not
have a material effect on the accounting policies of the Group.
Up to the date of approval of the consolidated financial statements, certain new standards, interpretations and amendments
to existing standards have been published that are not yet effective for the current reporting period and which the Group
has not early adopted, as follows:
(i) Issued by the IASB and adopted by the European Union
New standards
• IFRS 9 ''Financial Instruments'' (effective for annual periods beginning on or after 1 January 2018).
• IFRS 15 ''Revenue from Contracts with Customers'' (effective for annual periods beginning on or after 1 January
2018).
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.2 Changes in accounting policy and disclosures
(continued)
(ii) Issued by the IASB but not yet adopted by the European Union
New standards
• IFRS 16 ''Leases'' (effective for annual periods beginning on or after 1 January 2019).
Amendments
• Amendments to IFRS2: Classification and Measurement of Share-based Payment Transactions (effective for annual
periods beginning on or after 1 January 2018).
• Amendments to IFRS 4: Applying IFRS 9 ''Financial Instruments'' with IFRS 4 ''Insurance Contracts'' (effective for
annual periods beginning on or after 1 January 2018).
• Clarifications to IFRS 15 ''Revenue from Contracts with Customers'' (effective for annual periods beginning on or
after 1 January 2018).
• IAS 7 (Amendments) ''Disclosure Initiative'' (effective for annual periods beginning on or after 1 January 2017)
• IAS 12 (Amendments) ''Recognition of Deferred Tax Assets for Unrealised Losses'' (effective for annual periods
beginning on or after 1 January 2017).
• Annual Improvements to IFRSs 2014-2016 Cycle (issued on 8 December 2016) (effective for annual periods beginning on
or after 1 January 2017).
• Annual Improvements to IFRSs 2014-2016 Cycle (issued on 8 December 2016) (effective for annual periods beginning on
or after 1 January 2018).
• Amendments to IAS 40: ''Transfers of Investment Property'' (effective for annual periods beginning on or after 1
January 2018).
New IFRICs
• IFRIC Interpretation 22 ''Foreign Currency Transactions and Advance Consideration'' (effective for annual periods
beginning on or after 1 January 2018).
The Group is currently evaluating the effect of these standards or interpretations on its consolidated financial
statements.
2.3 Consolidation
(a) Basis of consolidation
The consolidated financial statements comprise the financial statements of Atalaya Mining plc and its subsidiaries.
(b) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has control. Control exists when
the Group is exposed, or has rights, to variable returns for its involvement with the investee and has the ability to
affect those returns through its power over the investee. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group
also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the
financial and operating policies by virtue of de-facto control.
De-facto control may arise in circumstances where the size of the Group's voting rights relative to the size and dispersion
of holdings of other shareholders give the Group the power to govern the financial and operating policies, etc.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The only operating subsidiary of Atalaya Mining plc is the 100% owned Atalaya Riotionto Minera, S.L.U. which operates the
Proyecto Minero Riotinto, in the historical site of Huelva, Spain.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of
the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable
net assets.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.3 Consolidation (continued)
(c) Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such
re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is
recognised in accordance with IAS 39 in profit or loss. Contingent consideration that is classified as equity is not
re-measured, and its subsequent settlement is accounted for within equity.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of
non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower
than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits
and losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.
(d) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions
- that is, as transactions with the owners in their capacity as owners. The difference between fair value of any
consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in
equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(e) Disposal of subsidiaries.
When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when
control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying
amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial
asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are
accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts
previously recognised in other comprehensive income are reclassified to profit or loss.
(f) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity
method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is
increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of
acquisition. The Group's investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of
the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group's share of post-acquisition profit or loss is recognised in the income statement, and its share of
post-acquisition movements in other comprehensive income is recognised in other comprehensive income, with a corresponding
adjustment to the carrying amount of the investment. When the Group share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless
it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is
impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable
amount of the associate and its carrying value and recognises the amount adjacent to 'share of profit/(loss) of associates'
in the income statement.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.3 Consolidation (continued)
Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised
in the Group's consolidated financial statements only to the extent of unrelated investors' interests in the associates.
Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the
group. Dilution gains and losses arising in investments in associates are recognised in the income statement.
(g) Functional currency
Functional and presentation currency items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the entity operates ('the functional currency').
The consolidated financial statements are presented in Euro which is the Group's functional and presentation currency.
Determination of functional currency may involve certain judgements to determine the primary economic environment and the
parent entity reconsiders the functional currency of its entities if there is a change in events and conditions which
determined the primary economic environment.
Foreign currency transactions are translated into the functional currency using the spot exchange rates prevailing at the
dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the
settlement of such transactions are recognised in the income statement.
Monetary assets and liabilities denominated in foreign currencies are retranslated at year-end spot exchange rates.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates at
the dates of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value was determined.
Gains or losses of monetary and non-monetary items are recognised in the income statement.
Balance sheet items are translated at period-end exchange rates. Exchange differences on translation of the net assets of
such entities are taken to equity and recorded in a separate currency translation reserve.
2.4 Investments in subsidiary companies
Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognised as an
expense in the period in which the impairment is identified. This policy only applies to the "Company's" financial
statements.
2.5 Interest in joint arrangements
A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic activity that is
subject to joint control that is when the strategic, financial and operating policy decisions relating to the activities
the joint arrangement require the unanimous consent of the parties sharing control.
Where a group entity undertakes its activities under joint arrangements directly, the Group's share of jointly controlled
assets and any liabilities incurred jointly with other ventures are recognised in the financial statements of the relevant
entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in
jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group's share of the
output of jointly controlled assets, and its share of joint arrangement expenses, are recognised when it is probable that
the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured
reliably.
The Group undertakes joint arrangements that involve the establishment of a separate entity in which each acquiree has an
interest (jointly controlled entity). The Group reports its interests in jointly controlled entities using the equity
method of accounting.
Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent
of the Group's interest in the joint arrangement.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.6 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the CEO who makes strategic decisions.
The Group has only one distinct business segment, being that of mining operations, mineral exploration and development.
2.7 Inventory
Inventory consists in copper concentrates, ore stockpiles and metal in circuit and spare parts. Inventory is physically
measured or estimated and valued at the lower of cost or net realisable value. Net realisable value is the estimated future
sales price of the product the entity expects to realise when the product is processed and sold, less estimated costs to
complete production and bring the product to sale. Where the time value of money is material, these future prices and costs
to complete are discounted.
Cost is determined by using the FIFO method and comprises direct purchase costs and an appropriate portion of fixed and
variable overhead costs, including depreciation and amortisation, incurred in converting materials into finished goods,
based on the normal production capacity. The cost of production is allocated to joint products using a ratio of spot prices
by volume at each month end. Separately identifiable costs of conversion of each metal are specifically allocated.
Materials and supplies are valued at the lower of cost or net realisable value. Any provision for obsolescence is
determined by reference to specific items of stock. A regular review is undertaken to determine the extent of any provision
for obsolescence.
2.8 Assets under construction
All subsequent expenditure on the construction, installation or completion of infrastructure facilities including mine
plants and other necessary works for mining, are capitalised in 'Assets under construction'. Any costs incurred in testing
the assets to determine if they are functioning as intended, are capitalised, net of any proceeds received from selling any
product produced while testing. Where these proceeds exceed the cost of testing, any excess is recognised in the statement
of profit or loss and other comprehensive income. After production starts, all assets included in 'Assets under
construction' are then transferred to the relevant asset categories.
Once a project has been established as commercially viable, related development expenditure is capitalised. A development
decision is made based upon consideration of project economics, including future metal prices, reserves and resources, and
estimated operating and capital costs. Capitalization of costs incurred and proceeds received during the development phase
ceases when the property is capable of operating at levels intended by management.
Capitalisation ceases when the mine is capable of commercial production, with the exception of development costs which give
rise to a future benefit.
Pre-commissioning sales are offset against the cost of constructing the asset.
No depreciation is recorded until the assets are substantially complete and ready for productive use.
2.9 Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment
losses.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can
be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are
charged to the income statement during the financial period in which they are incurred.
Property, plant and equipment are depreciated to their estimated residual value over the estimated useful life of the
specific asset concerned, or the estimated remaining life of the associated mine ("LOM"), field or lease. Depreciation
commences when the asset is available for use.
The major categories of property, plant and equipment are depreciated/amortised on a Unit of Production ("UOP") and/or
straight-line basis as follows:
· Buildings UOP
· Mineral rights UOP
· Deferred mining costs UOP
· Plant and machinery UOP
· Motor vehicles 5 years
· Furniture/fixtures/office equipment 5-10 years
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.9 Property, plant and equipment (continued)
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within
'Other (losses)/gains - net' in the income statement.
(a) Mineral rights
Mineral reserves and resources which can be reasonably valued are recognised in the assessment of fair values on
acquisition. Mineral rights for which values cannot be reasonably determined are not recognised. Exploitable mineral rights
are amortised using the UOP basis over the commercially recoverable reserves and, in certain circumstances, other mineral
resources. Mineral resources are included in amortisation calculations where there is a high degree of confidence that they
will be extracted in an economic manner.
(b) Deferred mining costs - stripping costs
Mainly comprises of certain capitalised costs related to pre-production and in-production stripping activities as outlined
below.
Stripping costs incurred in the development phase of a mine (or pit) before production commences are capitalised as part of
the cost of constructing the mine (or pit) and subsequently amortised over the life of the mine (or pit) on a UOP basis.
In-production stripping costs related to accessing an identifiable component of the ore body to realise benefits in the
form of improved access to ore to be mined in the future (stripping activity asset), are capitalised within deferred mining
costs provided all the following conditions are met:
i. it is probable that the future economic benefit associated with the stripping activity will be realised;
ii. the component of the ore body for which access has been improved can be identified; and
iii. the costs relating to the stripping activity associated with the improved access can be reliably measured.
If all of the criteria are not met, the production stripping costs are charged to the consolidated statement of income as
they are incurred.
The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform
the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable
overhead costs.
(c) Exploration costs
The Group expenses of Exploration and evaluation are expenditure in the period incurred.
Under the Group's accounting policy, exploration expenditure is not capitalised until the management determines a property
will be developed and 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. A development decision is made based upon
consideration of project economics, including future metal prices, reserves and resources, and estimated operating and
capital costs.
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.
(d) Major maintenance and repairs
Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and overhaul
costs. Where an asset, or part of an asset, that was separately depreciated and is now written off is replaced, and it is
probable that future economic benefits associated with the item will flow to the Group through an extended life, the
expenditure is capitalised.
Where part of the asset was not separately considered as a component and therefore not depreciated separately, the
replacement value is used to estimate the carrying amount of the replaced asset(s) which is immediately written off. All
other day-to-day maintenance and repairs costs are expensed as incurred.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.10 Property, plant and equipment (continued)
(e) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale (a qualifying asset) are capitalised as part of the
cost of the respective asset. Where funds are borrowed specifically to finance a project, the amount capitalised represents
the actual borrowing costs incurred.
(f) Restoration, rehabilitation and decommissioning
Restoration, rehabilitation and decommissioning costs arising from the installation of plant and other site preparation
work, discounted using a risk adjusted discount rate to their net present value, are provided for and capitalised at the
time such an obligation arises.
The costs are charged to the consolidated statement of income over the life of the operation through depreciation of the
asset and the unwinding of the discount on the provision. Costs for restoration of subsequent site disturbance, which are
created on an ongoing basis during production, are provided for at their net present values and charged to the consolidated
statement of income as extraction progresses.
Changes in the estimated timing of the rehabilitation or changes to the estimated future costs are accounted for
prospectively by recognising an adjustment to the rehabilitation liability and a corresponding adjustment to the asset to
which it relates, provided the reduction in the provision is not greater than the depreciated capitalised cost of the
related asset, in which case the capitalised cost is reduced to nil and the remaining adjustment recognised in the
consolidated statement of income. In the case of closed sites, changes to estimated costs are recognised immediately in the
consolidated statement of income.
2.11 Intangible assets
(a) Business combination and goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the
acquired interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree
and the fair value of the non-controlling interest in the acquiree.
The results of businesses acquired during the year are brought into the consolidated financial statements from the
effective date of acquisition. The identifiable assets, liabilities and contingent liabilities of a business which can be
measured reliably are recorded at their provisional fair values at the date of acquisition. Provisional fair values are
finalised within 12 months of the acquisition date. Acquisition-related costs are expensed as incurred.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value
in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not
subsequently reversed.
(b) Permits
Permits are capitalised as intangible assets which relate to projects that are at the pre-development stage. No
amortisation charge is recognised in respect of these intangible assets. Once the Group receives those permits, the
intangible assets relating to permits will be depreciated on a UOP basis.
Other intangible assets include computer software.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired
in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation (calculated on a straight-line basis over their useful lives) and
accumulated impairment losses, if any.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever
there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for
an intangible asset with a finite useful life are reviewed at least at the end of each reporting period.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss and other comprehensive
income when the asset is derecognised.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.12 Impairment of non-financial assets
Assets that have an indefinite useful life - for example, goodwill or intangible assets not ready to use - are not subject
to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.
2.13 Financial assets
2.13.1 Classification
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and
receivables, and available for sale. The classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at initial recognition. The Group's financial
assets include cash and short-term deposits, trade and other receivables and derivative financial assets.
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also
categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current
assets if expected to be settled within 12 months, otherwise they are classified as non-current.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for maturities greater than 12 months after the end of the
reporting period. These are classified as non-current assets. The Group's loans and receivables comprise 'trade and other
receivables' and 'cash and cash equivalents' in the statement of financial position (Notes 2.18).
(c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in
any of the other categories. They are included in non-current assets unless the investment matures or management intends
to dispose of it within 12 months of the end of the reporting period.
2.13.2 Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the Group commits to
purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial
assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are
initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are
derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group
has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets
at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently
carried at amortised cost using the effective interest method.
Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss'
category are presented in the income statement within 'other (losses)/gains - net' in the period in which they arise.
Dividend income from financial assets at fair value through profit or loss is recognised in the income statement as part of
other income when the Group's right to receive payments is established.
Changes in the fair value of monetary securities classified as available for sale are recognised in other comprehensive
income.
When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in
equity are included in the income statement as 'gains and losses from investment securities'. Interest on
available-for-sale securities calculated using the effective interest method is recognised in the income statement as part
of finance income. Dividends on available-for-sale equity instruments are recognised in the income statement as part of
other income when the Group's right to receive payments is established.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.14 Financial liabilities
The Group classifies its financial liabilities in the following categories: trade and other payables, provisions,
Interest-bearing loans and borrowings, deferred consideration and derivatives. The classification depends on the purpose
for which the financial assets were acquired. Management determines the classification of its financial assets at initial
recognition.
(a) Trade and other payables
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.
(b) 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.
(c) Interest-bearing loans and 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.
(d) Deferred consideration
Deferred consideration arises when settlement of all or any part of the cost of an agreement is deferred. It is stated at
fair value at the date of recognition, which is determined by discounting the amount due to present value at that date.
Interest is imputed on the fair value of non-interest bearing deferred consideration at the discount rate and expensed
within interest pay able and similar charges. At each balance sheet date deferred consideration comprises the remaining
deferred consideration valued at acquisition plus interest imputed on such amounts from recognition to the balance sheet
date.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.14 Financial liabilities (continued)
(e) 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.
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand and in bank net of outstanding
bank overdrafts and short-term deposits with an original maturity of three months or less.
Sales of the Group's copper are sold on a provisional basis whereby sales are recognised at prevailing metal prices when
title transfers to the customer and final pricing is not determined until a subsequent date. The Group uses derivative
financial instruments to reduce exposure to foreign exchange, interest rate and commodity price movements.
The Group does not use such derivative instruments for trading purposes. Such derivative financial instruments are
initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are
taken directly to the statement of profit or loss and other comprehensive income. Realised gains and losses on commodity
derivatives recognised in profit or loss are recorded within revenue.
2.15 Current versus non-current classification
The Group presents assets and liabilities in statement of financial position based on current/non-current classification.
(a) An asset is current when it is either:
· Expected to be realised or intended to be sold or consumed in normal operating cycle;
· Held primarily for the purpose of trading;
· Expected to be realised within 12 months after the reporting period
Or
· Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months
after the reporting period
All other assets are classified as non-current.
(b) A liability is current when either:
· It is expected to be settled in the normal operating cycle;
· It is held primarily for the purpose of trading
· It is due to be settled within 12 months after the reporting period
Or
· There is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting
period
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
2.16 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there
is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or
realise the asset and settle the liability simultaneously.
2.17 Impairment of financial assets
(a) Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group
of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are
incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.17 Impairment of financial assets (continued)
(a) Assets carried at amortised cost (continued)
For the loans and
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