REG - Atalaya Mining PLC - Final Results <Origin Href="QuoteRef">ATYM.L</Origin> - Part 4
22/04/2016 07:06
- Part 4: For the preceding part double click ID:nRSV9939Vc
affected by the following Pre-Existing
Debt liens: A E400,000 mortgage to Oxiana Limited (that will be paid in due course) and a mortgage of E222,000
pre--existing on lands acquired by the Company in August 2012 which has been paid in full.
Other land plots owned by the Company, but not required for Proyecto Riotinto (the "Non-Project Lands"), are affected by a
Pre-Existing Debt lien of E10 million registered by the Junta de Andalucía. In the event execution proceedings were
commenced against the Non-Project Lands, the Company would either negotiate a settlement or allow the execution to proceed
in total satisfaction of the Pre-Existing Debt in question.
13. Intangible assets
The Group
(Euro 000's) Permits of Rio Tinto Project Acquisition of mineral rights Goodwill Total
2015
Cost
On 1 January 2015 17,655 310 10,023 27,988
Additions 2,503 - 123 2,626
Disposals/closure of subsidiaries - (310) (813) (1,123)
At 31 December 2015 20,158 - 9,333 29,491
Provision for impairment
On 1 January 2015 - 310 10,023 10,333
Charge for the year - - 123 123
Disposal/closure of subsidiaries - (310) (813) (1,123)
At 31 December 2015 - - 9,333 9,333
Net book value at 31 December 2015 20,158 - - 20,158
2014
Cost
On 1 January 2014 14,821 310 10,023 25,154
Additions 2,834 - - 2,834
At 31 December 2014 17,655 310 10,023 27,988
Provision for impairment
On 1 January 2014 - 310 10,023 10,333
Charge for the year - - - -
At 31 December 2014 - 310 10,023 10,333
Net book value at 31 December 2014 17,655 - - 17,655
The useful life of the intangible assets is estimated to be not less than fourteen years from the start of production. The
ultimate recoupment of balances carried forward in relation to areas of interest or all such assets including intangibles
is dependent on successful development, and commercial exploitation, or alternatively sale of the respective areas. The
Company conducts impairment testing on an annual basis unless indicators of impairment are present at the reporting date.
In considering the carrying value of the assets at Proyecto Riotinto, including the intangible assets and any impairment
thereof, the Company assessed the carrying values having regard to (a) the current recovery value (less costs to sell) and
(b) the net present value of potential cash flows from operations. In both cases, the estimated net realisable values
exceeded current carrying values and thus no impairment has been recognised.
Goodwill of E9,333,000 arose on the acquisition of the remaining 49% of the issued share capital of ARM back in September
2008. This amount was fully impaired on acquisition, in the absence of the mining license back in 2008.
On 21 January 2015, the Company completed the purchase of the remaining 5% of the issued share capital of Eastern
Mediterranean Minerals (Cyprus) Ltd ("EMM"), held by Hellenic Mining Public Company Ltd, for a consideration of E7,500.
The purchase of the non-controlling interest resulted in a goodwill of E123,490. This goodwill was immediately impaired.
The Company currently holds only 10% of the issued share capital of EMM following the sale of 90% of the issued share
capital of EMM on 8 September 2015 (Note 18).
14. Investment in subsidiaries
(Euro 000's) 2015 2014
THE COMPANY
Opening amount at cost 3,576 4,471
Transfer to investment in associate (Note 15) (4) -
Impairment of investments - (895)
Closing amount at cost 3,572 3,576
Subsidiary companies Date of incorporation/acquisition Country of incorporation Effective proportion of shares held
EMED Mining Spain S.L.U. 12 Apr 2007 Spain 100%
Atalaya Riotinto Minera S.L. 12 Apr 07/30 Sep 08 Spain 100%
EMED Marketing Ltd 08 Sep 2008 Cyprus 100%
EMED Holdings (UK) Ltd 10 Sep 2008 United Kingdom 100%
Eastern Mediterranean Exploration and Development S.L.U. 3 Dec 2012 Spain 100%
As security for the obligation on ARM to pay the deferred consideration to Astor, EMED Holdings (UK) Limited has granted a
pledge to Astor Resources AG over the issued capital of ARM and granted a pledge to Astor over the issued share capital of
Eastern Mediterranean Exploration and Development S.L.U. and the Company has provided a parent company guarantee.
15. Investment in associate
(Euro 000's) 2015 2014
THE GROUP
At 1 January - -
Profit on disposals from subsidiary/associate 256 -
Transfer from investment in subsidiaries (Note 14) 4 -
Share of results of associate before tax (250) -
At 31 December 10 -
THE COMPANY
At 1 January - 1,058
Partial disposal - (29)
Transfer from investment in subsidiaries (Note 14) 4 -
Transfer to available-for-sale investments (Note 18) - (1,029)
At 31 December 4 -
In December 2014, Atalaya entered into a conditional Earn-in Agreement with Prospech Ltd ("Prospech"), a private Australian
exploration company, in relation to two exploration licences held by Atalaya's 100% owned Slovak subsidiary, Slovenske Kovy
s.r.o. ("SLOK"). The agreement became effective in March 2015.
Prospech will invest up to a E1 million over a three-year period in return for an 81% interest in SLOK. An amount of
E86,000 was paid to the Company as consideration. As at 31 December 2015, Prospech invested E400,000, earning them a
conditional 51% interest. As a result, during 2015 the Group lost control over SLOK and reclassified it from investment in
subsidiary to investment in associate. The parties will enter into a joint venture agreement, which will provide that, in
the event that the Company dilutes to 5% or less in SLOK and a Bankable Feasibility Study of a discovery recommends
commencement of mining, the Company will have the option to convert its interest to a net smelter royalty at the rate of
1.0% for a 5% interest.
Company name Principal activities Country of incorporation Effective proportion of sharesheld at 31 December 2015
Slovenske Kovy s.r.o. Exploration and development Slovakia 49%
The Group's significant aggregate amounts in respect of the investment in associate are as follows:
(Euro 000's) 2015 2014
Non-current assets 9 -
Current assets 21 -
Current liabilities (89) -
Net liabilities (100%) (59) -
Group's share of net liabilities (49%) (29) -
Carrying amount of interest in associate (29) -
Loss from continuing operations (100%) (305) -
Total comprehensive loss (100%) (305) -
Total comprehensive loss (100%, 70% and 49%) (250) -
Group's share of loss and total comprehensive loss (250) -
The transfer of the 51% interest in SLOK resulted in a consolidated profit on the disposal of the subsidiary of E342,000,
giving a net profit after deducting the share of loss in the associate of E92,000.
16. Investment in joint venture
Company name Principal activities Country of incorporation Effective proportion of sharesheld at 31 December 2015
Recursos Cuenca Minera S.L. Exploitation of tailing dams and waste areas resources Spain 50%
ARM has entered into a 50/50 joint venture with Rumbo to evaluate and exploit the potential of the class B resources in the
tailings dam and waste areas at Proyecto Riotinto. Under the joint venture agreement, ARM will be the operator of the
joint venture, will reimburse Rumbo for the costs associated with the application for classification of the Class B
resources and will fund the initial expenditure of a feasibility study up to a maximum of E2 million. Costs are then borne
by the joint venture partners in accordance with their respective ownership interests. Half of the costs paid by ARM in
connection with the feasibility study can be deducted from any royalty which may fall due to be paid.
The Group's significant aggregate amounts in respect of the joint venture are as follows:
(Euro 000's) 2015 2014
Intangible assets 94 94
Trade and other receivables 21 20
Cash and cash equivalents 1 3
Trade and other payables (114) (115)
Net assets 2 2
Revenue - 94
Expenses (1) (95)
Net loss after tax (1) (1)
17. Trade and other receivables
(Euro 000's) 2015 2014
THE GROUP
Receivables from related parties (Note 28.3 and 28.4) 6,596 56
Deposits and prepayments 1,114 156
VAT 7,970 1,852
Other receivables 952 162
16,632 2,226
THE COMPANY
Receivables from own subsidiaries 225,634 129,074
Impairment of receivables from own subsidiaries (97,243) (106,784)
Deposits and prepayments 508 2
VAT 336 302
Other receivables 846 12
130,081 22,606
The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented
above.
18. Available-for-sale investments
(Euro 000's) 2015 2014
THE GROUP
At 1 January 984 -
Gain on reclassification from investment in associate to available-for-sale investment - 1,186
Loss transferred to reserves (Note 21) (682) (202)
At 31 December 302 984
THE COMPANY
At 1 January 984 -
Transfer from investment in associates (Note 15) - 1,029
Gain on reclassification from investment in associate to available-for-sale investment - 157
Loss transferred to reserves (Note 21) (682) (202)
At 31 December 302 984
Company name Principal activities Country of incorporation Effective proportion of sharesheld at 31 December 2015
Mining Group Slovakia s.r.o Holder of exploration licence in Slovakia Slovakia 30%
Eastern Mediterranean Minerals Ltd Holder of exploration licences in Cyprus Cyprus 10%
KEFI Minerals Plc Exploration and development mining company listed on AIM UK 2.7%
In July 2015, Atalaya Mining sold 70% of its holding in Mining Group Slovakia,s.r.o. (ex.EMED Slovakia s.r.o.), holder of
the Biely Vrch Exploration Licence that hosts a gold resource to FDP Real Estate & Investments a. s. ("FDP"), a private
Slovak company. FDP has undertaken all of the running costs of Mining Group Slovakia, whilst Atalaya Mining retained a 30%
free-carried equity in Mining Group Slovakia and a director. The sale consideration was E3,000 resulting to a consolidated
profit of E3,000. Atalaya Mining does not exercise significant influence over the company.
On 25 August 2015, the Company sold 90% of the shares in Eastern Mediterranean Minerals Group ("EMM") - Eastern
Mediterranean Minerals (Cyprus) Limited and its subsidiaries; Tredington Ventures Limited and Winchcombe Ventures Limited -
owners of a geo-scientific database and holder of ten Exploration Licences in Cyprus, to Semarang Enterprises Ltd, a
Cyprus company. The sale consideration was E100,000 resulting in a consolidated profit of E49,950. 50% of the purchase
consideration was paid on sign off and the remaining 50% is to be paid by 25 August 2017. In the event that a bankable
feasibility study of any discovery recommends commencement of mining, each party shall contribute their pro-rata share of
project expenditure and the Company may or may not elect to contribute and, instead, convert its 10% equity to a 1.5% Net
Smelter Royalty.
During 2014, the Board of Directors of Atalaya classified the investment in KEFI Minerals Plc ("KEFI") as an
available-for-sale investment given that Atalaya's shareholding percentage ownership was reduced and it no longer exercises
significant influence over KEFI.
19. Cash and cash equivalents
(Euro 000's) 2015 2014
THE GROUP
Cash at bank and in hand 18,618 21,050
Cash and cash equivalents denominated in the following currencies:
Euro - functional and presentation currency 18,163 7,405
Great Britain Pound 285 29
United States Dollar 170 13,616
18,618 21,050
THE COMPANY
Cash at bank and on hand 4,246 19,391
Cash and cash equivalents denominated in the following currencies:
Euro - functional and presentation currency 3,951 5,746
Great Britain Pound 285 29
United States Dollar 10 13,616
4,246 19,391
20. Share capital
Authorised No.of Shares*'000's SharecapitalStg£ 000's SharePremiumStg£ 000's TotalStg£ 000's
Ordinary shares of Stg £0.075 each* 200,000 15,000 - 5,500
Issued and fully paid 000's** Euro 000's Euro 000's Euro 000's
Balance at 1 January 2014 41,822 3,830 134,316 138,146
Issue Date Price (Stg£) Details
20 Aug 14 2.175** Share placement 6,040 566 15,845 16,411
5 Sep 14 0.075** Bonus share issue 133 13 - 13
Share issue costs - - (338) (338)
Balance at 31 December 2014 47,995 4,409 149,823 154,232
25 June 15 1.425** Share placement c) 68,684 7,223 130,017 137,240
Share issue costs - - (2,920) (2,920)
Warrant issue costs - - (122) (122)
Derivative element of conversion of convertible note - - 440 440
Balance at 31 December 2015 116,679 11,632 277,238 288,870
Authorised capital
On 23 June 2015, the shareholders approved the increase of the authorised share capital of the Company from Stg £5,500,000
to Stg £15,000,000 by the creation of 3,800,000,000 new ordinary shares of Stg £0.0025 each in the capital of the Company
ranking pari passu with the existing ordinary shares of Stg £0.0025 each in the capital of the Company.
*Following the Company's EGM on 13 October 2015, the consolidation of ordinary shares came into effect on 21 October 2015,
whereby all shareholders received one new ordinary share of nominal value Stg £0.075 for every 30 existing ordinary shares
of nominal value Stg £0.0025. As a result, the Company's authorised share capital is now 200,000,000 ordinary shares of
Stg £0.075 each.
Issued capital
2014
a) On 20 August 2014, 6,040,000 shares at Stg £0.075 were issued at a price of Stg £2.175. Upon the issue an amount of
E15,844,853 was credited to the Company's share premium reserve
b) On 5 September 2014, 133,332 shares at Stg £0.075 were issued at a price of Stg £0.075. Mr. Isaac Querub (CEO) and
Mr. Alberto Lavandeira (COO) were each issued 66,666 ordinary shares in the Company at par (7.5p per share). These shares
would be held in escrow and released to Mr. Querub and Mr. Lavandeira once they have been employed by the Company for two
years or if their service agreements are terminated for certain specified reasons. The 66,666 shares for Mr. Querub were
released following his departure on 24 December 2014.
2015
c) On 25 June 2015, 68,684,020 shares at Stg £0.075 were issued at a price of Stg £1.425. Upon the issue an amount of
E130,017,000 was credited to the Company's share premium reserve.
** Post share consolidation figures
Warrants
2015
During the year, the Company issued 262,569 warrants, at exercise price Stg £1.425, to Group's advisers. Warrants, noted
below, expire three or five years after the grant date and have exercise prices ranging from Stg £1.425 to Stg £3.150.
2014
No warrants were issued in 2014.
Details of share warrants outstanding as at 31 December 2015:
Grant date Expiry date Exercise price - Stg £* Number of warrants*
02 July 2012 01 July 2017 3.150 33,332
22 August 2012 21 August 2017 2.550 69,453
23 December 2013 23 December 2016 2.400 107,707
24 June 2015 24 June 2018 1.425 262,569
473,061
Weighted averageexercise price Stg £* Number of warrants*
Outstanding warrants at 1 January 2015 2.568 210,492
- granted during the year 1.425 262,569
Outstanding warrants at 31 December 2015 1.934 473,061
* Post share consolidation figures
The estimated fair values of the warrants were calculated using the Black Scholes option pricing model. The inputs into
the model and the results are as follows:
Grant date Weighted average share price Stg£ Weighted average exercise price Stg£ Expected volatility Expected life (years) Risk free rate Expected dividend yield Estimated fair value Stg£
02 Jul 2012 3.150 3.150 71.46% 5 2.0% Nil 0.840
22 Aug 2012 2.550 2.550 85.50% 5 2.0% Nil 0.900
23 Dec 2013 2.400 2.400 62.44% 3 0.87% Nil 0.525
24 June 2015 1.425 1.425 64.40% 3 2.0% Nil 0.330
The volatility has been estimated based on the underlying volatility of the price of the Company's shares in the preceding
twelve months.
21. Other reserves
THE GROUP and the company
(Euro 000's) Share option Bonus share Available-for-sale investments Total
At 1 January 2014 5,724 - - 5,724
Bonus shares issued in escrow - 239 - 239
Recognition of share based payments 249 - - 249
Change in value of available-for-sale investments (Note18) - - (202) (202)
Bonus shares released from escrow - (195) - (195)
At 31 December 2014 5,973 44 (202) 5,815
Bonus shares issued in escrow - 101 - 101
Recognition of share based payments 152 - - 152
Change in value of available-for-sale investments (Note18) - - (682) (682)
Warrants issue costs 122 - - 122
At 31 December 2015 6,247 145 (884) 5,508
Details of share options outstanding as at 31 December 2015:
Grant date Expiry date Exercise price - Stg £* Share options*
01 Oct 2011 30 Sep 2016 2.70 33,333
01 Dec 2011 30 Nov 2016 2.70 33,333
28 Dec 2011 27 Dec 2016 3.00 166,658
28 Dec 2011 27 Dec 2016 3.00 131,664
21 Apr 2012 20 Apr 2017 3.15 33,333
5 Nov 2012 4 Nov 2017 3.63 33,333
20 Mar 2014 19 Mar 2019 3.60 200,000
20 Mar 2014 19 Mar 2019 3.60 200,000
1 June 2014 31 May 2019 2.70 100,000
Total 931,654
* Post share consolidation figures
Weighted averageexercise price Stg £ Share options
At 1 January / 31 December 2015 3.23 931,654
2015
No options were issued in 2015.
2014
On 20 March 2014, 200,000 options were issued to Isaac Querub (former MD and CEO). These options are exercisable at Stg
£3.60, expire 5 years after the date of issue and have a vesting of one third at the end of twelve months from the date of
issue, one third at the end of twenty four months from the date of issue and the balance at the end of thirty six months
from the date of issue. On 14 April 2014, 200,000 options were issued to Alberto Lavandeira (MD and CEO). These options
are exercisable at Stg £3.60, expire on 19 March 2019 and have a vesting of one third at the end of twelve months from the
date of issue, one third at the end of twenty four months from the date of issue and the balance at the end of thirty six
months from the date of issue.
On 1 June 2014, Julian Sanchez (management) was granted options to subscribe for an aggregate total of 100,000 Ordinary
Shares at an exercise price per Ordinary Share of Stg £2.70. These options expire five years after the date of issue and
have a vesting of one-third at the end of twelve months from the date of issue, one-third at the end of twenty four months
from the date of issue and the balance at the end of thirty six months from the date of issue.
In general, option agreements contain provisions adjusting the exercise price in certain circumstances including the
allotment of fully paid Ordinary Shares by way of a capitalisation of the Company's reserves, a sub division or
consolidation of the Ordinary Shares, a reduction of share capital and offers or invitations (whether by way of rights
issue or otherwise) to the holders of Ordinary Shares.
The estimated fair values of the options were calculated using the Black Scholes option pricing model. The inputs into the
model and the results are as follows:
GrantDate Weighted average share price Stg£ Weighted average exercise price Stg£ Expected volatility Expected life(years) RiskFreerate Expected dividend yield Estimated Fair Value Stg£
1 June 2014 2.700 2.700 62.9% 5 2.0% Nil 0.597
20 Mar 2014 3.600 3.600 64.2% 5 2.0% Nil 0.705
5 Nov 2012 3.619 3.618 60.8% 5 2.0% Nil 0.780
21 Apr 2012 3.150 3.150 69.4% 5 2.0% Nil 0.921
28 Dec 2011 3.000 3.000 73.6% 5 2.0% Nil 0.663
01 Dec 2011 2.700 2.700 80.0% 5 2.0% Nil 0.705
01 Oct 2011 2.700 2.700 76.2% 5 2.0% Nil 0.501
The volatility has been estimated based on the underlying volatility of the price of the Company's shares in the preceding
twelve months.
22. Trade and other payables
(Euro 000's) 2015 2014
THE GROUP
Non-current trade and other payables
Social security* 1,741 4,631
Land options 155 -
1,896 4,631
Current trade and other payables
Trade payables 37,106 7,181
Social security* 2,867 3,048
Land options and mortgage 789 731
Accruals 1,124 2,047
Tax liability 24 15
Other 1 18
41,911 13,040
(Euro 000's) 2015 2014
THE COMPANY
Current trade and other payables
Accruals 217 754
Other payables - 14
217 768
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.
* On 25 May 2010 ARM recognised a debt with the Social Security's General Treasury in Spain amounting to E16.9 million that
was incurred by a previous owner in order to stop the execution process by Public Auction of the land over which Social
Security had a lien. E12.3 million has been repaid to date. Originally payable over 5 years, the repayment schedule was
renegotiated in July 2013 with the General Treasury in Spain and was extended until June 2017.
23. Provisions
THE GROUP
(Euro 000's) Rehabilitation costs
1 January 2015 -
Additions 3,971
31 December 2015 3,971
(Euro 000's) 2015 2014
Non-Current 3,971 -
Current - -
Total 3,971 -
Rehabilitation provision represents the accrued cost required to provide adequate restoration and rehabilitation upon the
completion of production activities. These amounts will be settled when rehabilitation is undertaken, generally over the
project's life.
24. Convertible note
THE GROUP and the company
2015 2014
(Euro 000's) Debt component Derivative component Debt component Derivative component
1 January 13,952 130 11,267 2,034
Accrued interest 1,178 - 1,309 -
Accretion expense 31 - 691 -
Foreign exchange 894 - 685 -
Fair value of the derivative component - (130) - (1,904)
Repayment (16,055) - - -
31 December - - 13,952 130
(Euro 000's) 2015 2014
Current
Derivative component - 130
Debt component - 13,952
Total - 14,082
On 12 July 2013 the Company issued Convertible Notes (the "Notes") in the amount of GBP 9,582,000 of which GBP 7,026,800
was subscribed by XGC and Stg £2,555,200 was subscribed by Orion. The Notes had an original term of 18 months to 12
January 2015 (the "Maturity Date"). As part of the Loan agreed on 24 December 2014 with the Note holders and others, the
Maturity Date of the Notes was extended to be the earlier of 30 March 2015 and the date on which the Loan was due for
payment. On 27 March 2015, by virtue of the extension of the maturity date of the Loan, the maturity date was extended to
be the earlier of 30 June 2015 and the date of which the Loan was due for repayment. The Notes carried a coupon of 9% per
annum in the first 12 months and 11% thereafter. Interest was capitalised every three months and rolled up, payable either
on the Maturity Date or the earlier conversion or redemption of the Notes.
Within the period of 10 business days prior to the Maturity Date, the Note holders could have elected to convert all
outstanding principal and accrued interest of their Notes into ordinary shares of 0.25 pence each in the Company ("Ordinary
Shares"). Note holders could also have elected to convert their Notes following the Company seeking to redeem the Notes or
a potential business sale or change of control of the Company. In addition, the Notes would have automatically converted
into new Ordinary Shares at the time the Company (or any of its subsidiaries) made its first drawdown (the "Drawdown Date")
from a facility made available by senior financial institutions for the restart of operations at the Company's Proyecto
Riotinto in Andalucía, Spain. Where the Notes automatically converted on funds being made available under a senior secured
debt facility, the conversion price of the Notes was the lower of 9 pence per share and the VWAP of a Company share on AIM
for the 20 immediately preceding trading days immediately preceding the Drawdown Date. In all other cases, the Notes would
have converted at 9 pence per share.
The Company may have elected to redeem for cash the principal and accrued interest of the Notes at any time between 12 July
2014 (first anniversary of the date of issue) and the first to occur of the Drawdown Date or Maturity Date upon giving the
holders of the Notes not less than 15 business days' notice. A Note holder could have chosen to convert their Notes into
Ordinary Shares rather than have them redeemed but if they did so it would have been at a price of 9 pence per share and
was not conditional on the Drawdown Date occurring. The Notes benefited from security interests granted by the Company
over the share capital of EMED Holdings (UK) Limited and EMED Marketing Limited as well as certain intra-group debts owing
to the Company. In addition, the Company and certain of its subsidiaries had undertaken not to further encumber their
assets or share capital, save in certain circumstances, including in connection with the proposed senior debt facility
required in order to restart operations at Proyecto Riotinto.
The Notes were subject to certain standard events of default following which Note holders could have elected to immediately
redeem their Notes and accrued interest.
Assuming that the Notes converted in full at a conversion price of 9 pence per share (including the conversion of 21
months' accrued interest) the Note Holders would have received 125,494,668 shares. The Company paid intermediary fees of
Stg£192,000 on the issuance of these Notes. The Notes were considered hybrid financial instruments comprising a Note
liability and a conversion feature for Ordinary Shares ("the Conversion Feature"). As the conversion price (9 pence) was
denominated in a currency other than the Company's functional currency, the Conversion Feature was considered to be a
derivative financial instrument and was measured at fair value through profit or loss.
On 25 June 2015, in connection with the Subscription, Placing and Open Offer to raise Stg £64.9 million announced on 28 May
2015, the liability to pay the outstanding principal of the Notes together with accrued interest up to and including 15 May
2015 was satisfied by the issue of 241,668,731 shares for the conversion of the Notes at 4.75 pence per share.
25. Bridge loan facility
THE GROUP ANDTHE COMPANY
(Euro 000's) 2015 2014
Current
Bridge Loan - 19,764
Bridge Loan - Financing costs - (1,217)
- 18,547
On 24 December 2014, the Company agreed an unsecured bridging finance facility for up to US$30 million (the "Loan") with
Trafigura, Orion and Hong Kong Xiangguang, an affiliate of XGC (Trafigura, Orion and Hong Kong Xiangguang being the
"Lenders"). The initial instalment of the Loan of US$24 million was drawn down on 30 December 2014, with the remaining
US$6 million drawn down in early April 2015. The Loan was repayable on the earliest of three months following the receipt
of the initial Loan funds, a change of control of the Company or the Company raising debt or equity funding in an amount
equal to or greater than the amounts outstanding under the loan agreement.
The Company paid interest on the outstanding amount of the Loan at a rate of 10% per annum and there were no penalties for
early repayment of the Loan, but in the event of a payment default the interest rate would have risen to 12% per annum.
Each Lender was paid an arrangement fee of 2.5% of the amount of the Loan advanced by that Lender and the Company
reimbursed the due diligence and associated costs of the Lenders in connection with the Loan and other historic costs up to
an aggregate amount of US$1.5 million, of which US$1 million was paid out of the proceeds of the Loan and the balance of
US$ 0.5 million was added to the Loan and repaid at the time the Loan was repaid. Any additional costs of the Lenders were
not reimbursed at that time and were deferred until such time as further finance was raised in excess of amounts
outstanding under the loan agreement or, if earlier, 15 April 2015. The arrangement fees and costs deducted amounted to
US$ 1.5 million (E1.2 million). Trafigura was also granted the right to appoint an observer to attend meetings of the
Board of Directors of the Company for such time as Trafigura held not less than 15% of the issued share capital of the
Company. This was in addition to the existing rights of Orion and XGC who each had the right to appoint a Director to the
Board.
On 27 March 2015, the Company agreed with the Lenders to extend the Maturity Date of the Loan by three months to 30 June
2015. In consideration for extending the term of the Loan, should a meeting of shareholders not be called by 30 April 2015
in order to approve a long term funding package, the Company had agreed to pay an extension fee of 0.5% on all outstanding
amounts (including accrued interest and costs) owed to the Lenders pursuant to the Loan and the Convertible Notes.
Additionally, a further fee equal to 1% would have been payable should a meeting of shareholders not be called by 31 May
2015. All other repayment terms of the Loan remained unchanged.
On 25 June 2015, in connection with the Subscription, Placing and Open Offer to raise GBP 64.9 million announced on 28 May
2015, the liability to pay the outstanding principal of the Loan together with accrued interest up to and including 15 May
2015 was satisfied by the issue of 452,648,133 shares for the conversion of the Notes at 4.75 pence per share.
26. Acquisition and disposals of subsidiaries
There were no acquisitions during 2015 and 2014.
During 2015, there were three disposals of subsidiaries - see Notes 14, 15 and 18 (2014: nil).
27. Wind-up of subsidiaries
There were no operations wound-up during 2015 and 2014.
28. Related party transactions
The following transactions were carried out with related parties:
28.1 Compensation of key management personnel
The total remuneration and fees of Directors (including Executive Directors) and other key management personnel was as
follows:
(Euro 000's) 2015 2014
Directors' fees 592 1,096
Directors' other benefits - 197
Directors' bonus shares 101 252
Contractual entitlements upon resignation 292 700
Share option-based benefits to directors 56 127
Key management personnel fees 505 513
Share option-based and other benefits to key management personnel 39 125
1,585 3,010
Share-based benefits
The directors and key management personnel have not been granted options or bonus shares during 2015 (Note 21). Charges in
2015 relate to options issued in prior years which vest over a three-year period.
28.2 Transactions with shareholders
(Euro 000's) 2015 2014
XGC - Convertible note issue - -
XGC - Convertible note accrued interest - 960
XGC - Bridge loan - 6,588
XGC - Bridge loan deferred financing expenditure - (439)
Orion - Convertible note accrued Interest - 349
Orion - Bridge loan - 6,588
Orion - Bridge loan deferred financing expenditure - (339)
Trafigura - Bridge loan - 6,588
Trafigura - Bridge loan deferred financing expenditure - (439)
Trafigura - Sales of goods (pre commissioning sales offset against the cost of constructing assets)* 10,954 -
10,954 19,856
* XGC has been granted an offtake over 49.12% of life of mine reserves as per the NI 43-101 report issued in February 2013.
Similarly, Orion has been granted an offtake over 31.54% and Trafigura 19.34% respectively of life of mine reserves as per
the same NI 43-101 report.
28.3 Year-end balances arising from sales of services
(Euro 000's) 2015 2014
Receivable from related party (Note 17):
Recursos Cuenca Minera S.L. 55 56
The above balances bear no interest and are repayable on demand.
28.4 Year-end balances with shareholders
(Euro 000's) 2015 2014
XGC - Convertible note debt component - 10,232
XGC - Derivative component - 95
XGC Bridge loan - 6,588
Orion - Convertible note debt component - 3,720
Orion - Derivative component - 35
Orion Bridge loan - 6,588
Trafigura Bridge loan - 6,588
Trafigura - Debtor balance (Note 17) 6,541 -
6,541 33,846
The above debtor balance arising from the pre-commissioning sales of goods bear no interest and is repayable on demand.
29. Contingent liabilities
Deferred consideration
In September 2008, the Group moved to 100% ownership of ARM (and thus full ownership of Proyecto Riotinto) by acquiring the
remaining 49% of the issued capital of ARM. The cost of the acquisition was satisfied by issuing 39,140,000 Ordinary
Shares to MRI Trading AG ("MRI") at an issue price of 21p per Ordinary Share and a deferred cash settlement of up to E53
million ("Deferred Consideration"), (including loans of E9,116,617.30 owed to companies related to MRI incurred in relation
to the operation of Proyecto Riotinto). The obligation to pay the Deferred Consideration is subject to the satisfaction of
the following conditions (the "Conditions"): (a) all authorisations to restart mining activities in Proyecto Riotinto
having been granted by the Junta de Andalucía ("Permit Approval"); and (b) the Group securing a senior debt finance
facility for a sum sufficient to restart mining operations at Proyecto Riotinto ("Senior Debt Facility") and being able to
draw down funds under the Senior Debt Facility.
Originally the Group was obliged to pay the Deferred Consideration in instalments commencing on the date of drawdown under
the Senior Debt Facility until the second anniversary of commercial production at Proyecto Riotinto. On 31 March 2009,
pursuant to a deed of amendment, MRI consented to the Group paying the Deferred Consideration over a period of six or seven
years following satisfaction of the Conditions (the "Payment Period"). In return, the Company agreed to potentially pay
further Deferred Consideration of up to E15,900,000 in regular instalments over the Payment Period depending upon the price
of copper. Any such additional Deferred Consideration would only be payable if, during the relevant period, the average
price of copper per tonne is US$6,614 or more (US$3.00/lb). On 11 November 2011 MRI novated its right to be paid the
Deferred Consideration to Astor Management AG ("Astor").
As security, inter alia, for the obligation to pay the Deferred Consideration to Astor, EMED Holdings (UK) Limited has
granted a pledge to Astor Resources AG over the issued capital of ARM and the Company has provided a parent company
guarantee.
As at the date of this report, the Permit Approval condition has been satisfied. However, the Group has not entered into
arrangements in connection with a Senior Debt Facility and, in the absence of drawdown of funds by the Group pursuant to a
Senior Debt Facility, there is significant doubt concerning the legal obligation on the Company to pay any of the Deferred
Consideration.
On 2 November 2015, the Company announced that it was in receipt of a formal claim from Astor (the "Claim"). The Claim was
made in the High Court of Justice in London against the Company and certain other members of the Group. In its Claim,
Astor is claiming, inter alia, that the Conditions have been satisfied and the first instalment of the Deferred
Consideration is due (together with damages). The Company is disputing this and it is defending the proceedings
vigorously.
Judicial and administrative cases
On 23 September 2010, ARM was notified that the Andalucían Water Authority ("AWA") had initiated a Statement of Objections
and Opening of File (the "Administrative File 2010") following allegations by third parties of unauthorised industrial
discharges from the Tailings Management Facility ("TMF") at the Rio Tinto Copper Mine in the winter months of late 2010 and
early 2011. These assertions are judicial (alleging negligence) and administrative (alleging damage to the environment) in
nature. At that time, the Company owned 33% of the TMF and the owners of the remaining 67% are co-defendants (Rumbo and
Zeitung).
In December 2011 the judicial claims were dismissed in the initial discovery phase by the appeals Court (upholding a lower
court decision) finding that the controlled discharges of excess rainwater were force majeure events carried out to protect
the stability of the TMF, thereby ensuring public safety and protection of the environment (the "Court Decisions"). Given
that all judicial claims were dismissed in the very early stages of the court´s investigation, no formal charges were ever
made against ARM or against any of its Directors or Officers.
Now that the Court Decisions are final, the Administrative File 2010, which can only result in a monetary sanction against
the co-defendants, was re-opened. The defence arguments successfully used in a later case which has been dismissed on 11
February 2015 will be used in the Administrative 2010 and the management is positive that they will be accepted.
On January 2, 2013 ARM, Rumbo and Zeitung were notified of a Resolution of Fine and Damages (in a total amount of
E1,867,958.39). In February 2013 ARM appealed this Resolution and the Court has agreed that the Fine and Damages amount be
secured by a mortgage over certain properties owned by the Company until the final decision on the alleged discharges is
known.
In the Company's view, no "industrial discharge" took place, but rather a force majeure controlled discharge of excess
rainwater accumulated in the TMF since industrial operations ceased in the early 2000´s with no actual damage to the
environment having taken place.
In the Company's view it is unlikely that any fine or sanction will be imposed against ARM once the Administrative File
2010 reaches its final conclusion after all appeals are exhausted in approximately 3-5 years. On 9 February 2016, the Court
ruled in favour of ARM, Rumbo and Zeitung. Although AWA reserves the right to appeal to the Supreme Court, the likelihood
of overturning the decision is very low.
On 28 January 2014, ARM was notified that the Huelva Territorial Delegation of the Ministry of Environment (which has
absorbed the former AWA) had initiated another disciplinary proceeding for unauthorised discharge (the "Administrative File
2013") of administrative nature following allegations by the administration of alleged unauthorised industrial discharges
from the TMF at the Rio Tinto Copper Mine during the heavy rains occurred from 7 March to 25 April 2013. The
Administration has proposed the amount of E726,933.30 as compensation for alleged damages to the environment ("Public Water
Domain") and a fine of between E300,507 to E601,012. On 11 February 2015, the Huelva Territorial Delegation of the
Ministry of Environment dismissed the case. This outcome is especially relevant as it can now be used as a precedent for
defence of any other proceedings of a similar nature.
On 19 February 2015, ARM was notified that the Huelva Territorial Delegation of the Ministry of Environment had initiated
another disciplinary proceeding for unauthorised discharge (the "Administrative File 2014") which has proposed a fine of
between E300,507 to E601,012. On 10 March 2015 the Company submitted the relevant defence arguments.
In the Company´s view, it is unlikely that any fine or sanction will be imposed against ARM once the Administrative files
reach their final conclusion and taking into account the already accepted allegations and mentioned arguments of defence.
30. Commitments
Spain
There are no minimum exploration requirements at Proyecto Riotinto. However, the Group is obliged to pay municipal land
taxes which currently are approximately E110,000 per year in Spain and the Group is required to maintain the Riotinto site
in compliance with all applicable regulatory requirements.
As part of the consideration for the purchase of land from Rumbo, ARM has agreed to pay a royalty to Rumbo subject to
commencement of production of $250,000 in each quarter where the average price of LME copper or the average copper sale
price achieved by the Group is at least $2.60/lb. No royalty is payable in respect of any quarter where the average copper
price for that quarter is below this amount and in certain circumstances any quarterly royalty payment can be deferred
until the following quarter. The royalty obligation terminates 10 years after commencement of production.
Commencement of production is defined as being the first to occur of processing of ore at a rate of nine million tonnes per
annum for a continuous period of six months or the date that is 18 months after the first product sales from Proyecto
Riotinto. Additionally, if after seven years from the date of the land purchase, the Group has not obtained all necessary
licenses to open and operate Proyecto Riotinto, the land will be sold back to Rumbo for E1. Should the Group sell the land
prior to this date to a third party, Rumbo shall be paid E5.5 million and the above mentioned royalty novated to the third
party.
ARM has entered into a 50/50 joint venture with Rumbo to evaluate and exploit the potential of the class B resources in the
tailings dam and waste areas at Proyecto Riotinto. Under the joint venture agreement, ARM will be the operator of the
joint venture, will reimburse Rumbo for the costs associated with the application for classification of the Class B
resources and will fund the initial expenditure of a feasibility study up to a maximum of E2 million. Costs are then borne
by the joint venture partners in accordance with their respective ownership interests. Half of the costs paid by ARM in
connection with the feasibility study can be deducted from any royalty which may fall due to be paid.
At Proyecto Riotinto, the Group has four year options with each of Zeitung and Inland for the purchase of certain land
plots adjacent to the mine at a purchase price of E4.202 million (expiry date 31 July 2016) and E4.648 million (expiry
date 2 August 2016)
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