- Part 4: For the preceding part double click ID:nRSF7360Bc
receivables category, the amount of the loss is measured as the difference between the asset's carrying
amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial asset's original effective interest rate.
The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement.
If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate determined under the contract. As a practical expedient, the group may measure
impairment on the basis of an instrument's fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of
the previously recognised impairment loss is recognised in the consolidated income statement.
(b) Assets classified as available for sale
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a
group of financial assets is impaired. For debt securities, the Group uses the criteria referred to in (a) above. In the
case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the
security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale
financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value,
less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and
recognised in profit or loss. Impairment losses recognised in the consolidated income statement on equity instruments are
not subsequently reversed. If, in a subsequent period, the fair value of a debt instrument classified as available for
sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised
in the income statement, the impairment loss is reversed through the income statement.
2.18 Trade and other receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of
business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they
are classified as current assets. If not, they are presented as non-current assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
At Company level, other receivables include intercompany balances.
2.19 Cash and cash equivalents
In the consolidated statements of cash flows, cash and cash equivalents includes cash in hand and in bank including
deposits held at call with banks.
2.20 Share capital
Ordinary shares are classified as equity. The difference between the fair value of the consideration received by the
Company and the nominal value of the share capital being issued is taken to the share premium account.
Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax,
from the proceeds in the share premium account.
2.21 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to
the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period date in the countries where the Company and its subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.21 Current and deferred income tax (continued)
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is also not
recognised if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Income tax is
determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period
date and are expected to apply when the related deferred tax asset is realised or the deferred income tax liability is
settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for
deferred income tax liabilities where the timing of the reversal of the temporary difference is controlled by the Group and
it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by
the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to
settle the balances on a net basis.
2.22 Share-based payments
The Group operates a share-based compensation plan, under which the entity receives services from employees as
consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange
for the grant of the options is recognised as an expense. The fair value is measured using the Black Scholes pricing
model. The inputs used in the model are based on management's best estimates for the effects of non-transferability,
exercise restrictions and behavioural considerations. Non-market performance and service conditions are included in
assumptions about the number of options that are expected to vest.
Vesting conditions are: (i) the personnel should be an employee that provides services to the Group; and (ii) should be in
continuous employment for the whole vesting period of 3 years. Specific arrangements may exist with senior managers and
board members, whereby their options stay in use until the end.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied. (Note 24)
2.23 Rehabilitation provisions
The Group records the present value of estimated costs of legal and constructive obligations required to restore operating
locations in the period in which the obligation is incurred. The nature of these restoration activities includes
dismantling and removing structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of
plant and waste sites and restoration, reclamation and re-vegetation of affected areas. The obligation generally arises
when the asset is installed or the ground/environment is disturbed at the production location. When the liability is
initially recognised, the present value of the estimated cost is capitalised by increasing the carrying amount of the
related mining assets to the extent that it was incurred prior to the production of related ore. Over time, the discounted
liability is increased for the change in present value based on the discount rates that reflect current market assessments
and the risks specific to the liability. The periodic unwinding of the discount is recognised in the consolidated income
statement as a finance cost. Additional disturbances or changes in rehabilitation costs will be recognised as additions or
charges to the corresponding assets and rehabilitation liability when they occur. For closed sites, changes to estimated
costs are recognised immediately in the consolidated income statement.
The Group assesses its mine rehabilitation provision annually. Significant estimates and assumptions are made in
determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate liability
payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes,
regulatory changes and changes in discount rates. Those uncertainties may result in future actual expenditure differing
from the amounts currently provided. The provision at the consolidated statement of financial position date represents
management's best estimate of the present value of the future rehabilitation costs required.
2.24 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
2. Summary of significant accounting policies (continued)
2.24 Leases (continued)
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to the income statement on a straight-line basis over the period of the lease.
The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at
the lease's commencement at the lower of the fair value of the leased property and the present value of the minimum lease
payments.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of
finance charges, are included in other long term payables. The interest element of the finance cost is charged to the
income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of
the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the
shorter of the useful life of the asset and the lease term.
2.25 Revenue recognition
(a) Sales of goods
Revenue is recognised when Atalaya has transferred to the buyer all significant risks and rewards of ownership of the goods
sold. Revenue excludes any applicable sales taxes and is recognised at the fair value of the consideration received or
receivable to the extent that it is probable that economic benefits will flow to Atalaya and the revenues and costs can be
reliably measured. In most instances sales revenue is recognised when the product is delivered to the destination
specified by the customer, which is typically the vessel on which it is shipped, the destination port or the customer's
premises.
For certain commodities, the sales price is determined on a provisional basis at the date of sale as the final selling
price is subject to movements in market prices up to the date of final pricing, normally ranging from 30 to 90 days after
initial booking. Revenue on provisionally priced sales is recognised based on the estimated fair value of the total
consideration receivable. The revenue adjustment mechanism embedded within provisionally priced sales arrangements has the
character of a commodity derivative. Accordingly, the fair value of the final sales price adjustment is re-estimated
continuously and changes in fair value are recognised as an adjustment to revenue.
Pre-commissioning sales are offset against the cost of constructing the asset.
(b) Sales of services
The Group sells services in relation to maintenance of accounting records, management, technical, administrative support
and other services to other companies. Revenue is recognised in the accounting period in which the services are rendered.
2.26 Interest income
Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group
reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original
effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on
impaired loan and receivables is recognised using the original effective interest rate.
2.27 Dividend income
Dividend income is recognised when the right to receive payment is established.
2.28 Dividend distribution
Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's shareholders. No dividend has been paid by the Company
since its incorporation.
2.29 Earnings per share
Basic earnings per share is calculated by dividing the net profit for the year by the weighted average number of ordinary
shares outstanding during the year. The basic and diluted earnings per share are the same as there are no instruments that
have a dilutive effect on earnings.
2.30 Reclassification from prior year presentation
Certain prior year amounts have been reclassified for consistency with the financial statements for the year ended 31
December 2016.
Theses reclassifications had no effect on the reported results of the operation. During 2016, the Riotinto mine started its
operations and the presentation of the consolidated income statements have been changed to allow the reader understanding
of the operations of the Group.
2.31 Amendment of financial statements after issue
The board of directors has the power to amend the consolidated financial statements after issue.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
3. Financial Risk Management
3.1 Financial risk factors
Risk management is overseen by the AFRC under the board of directors. The AFRC oversees the risk management policies
employed by the Group to identify, evaluate and hedge financial risks, in close co-operation with the Group's operating
units. The Group is exposed to liquidity risk, commodity price risk, credit risk, interest rate risk, operational risk,
compliance risk, litigation risk and currency risk arising from the financial instruments it holds. The risk management
policies employed by the Group to manage these risks are discussed below:
(a) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position
potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of
minimising such losses such as maintaining sufficient cash to meet liabilities when due. Cash flow forecasting is
performed in the operating entities of the Group and aggregated by Group finance. Group finance monitors rolling forecasts
of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs.
The following tables detail the Group's remaining contractual maturity for its financial liabilities. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be
required to pay. The table includes principal cash flows. A breakdown of the balances is shown in Notes 25, 26, 27 and
28.
(Euro 000's) Carrying amounts Contractual cash flows Less than3 months Between3 - 12 months Between1 - 2years Between2 - 5 years Over 5 years
31 December 2016
Social security 1,741 1,741 578 1,163 - - -
Land options and mortgages 905 905 760 30 83 32 -
Provisions 5,092 6,577 - 54 170 209 6,144
Deferred consideration 44,346 53,000 - - 53,000
Derivative instrument 215 215 215 - - - -
Trade and other payables 60,061 60,061 60,061 - - -
112,360 122,499 61,614 1,247 253 53,241 6,144
31 December 2015
Social security 4,608 4,608 718 2,149 1,741 - -
Land options and mortgages 944 944 - 789 80 75 -
Provisions 3,971 5,536 - - 28 135 5,373
Trade and other payables 38,231 38,231 38,231 - - - -
47,754 49,319 38,949 2,938 1,849 210 5,373
(b) Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.
Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a
currency that is not the Group's measurement currency. The Group is exposed to foreign exchange risk arising from various
currency exposures primarily with respect to the US Dollar and the British Pound. The Group's management monitors the
exchange rate fluctuations on a continuous basis and acts accordingly. The carrying amounts of the Group's foreign
currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
Liabilities Assets
(Euro 000's) 2016 2015 2016 2015
United States dollar 8,684 - 2,143 6,711
Great Britain pound 172 - 233 285
Sensitivity analysis
A 10% strengthening of the Euro against the following currencies at 31 December 2016 would have increased (decreased)
equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
interest rates, remain constant. For a 10% weakening of the Euro against the relevant currency, there would be an equal
and opposite impact on profit or loss and other equity.
Equity (Profit) or loss
(Euro 000's) 2016 2015 2016 2015
United States dollar 654 (671) 654 (671)
Great Britain pound (6) (29) (6) (29)
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
3. Financial Risk Management (continued)
3.1 Financial risk factors (continued)
(c) Commodity price risk
Commodity price is the risk that the Group's future earnings will be adversely impacted by changes in the market prices of
commodities, primarily copper. Management is aware of this impact on its primary revenue stream but knows that there is
little it can do to influence the price earned apart from a hedging scheme.
Commodity price hedging is governed by the Group´s policy which allows to limit the exposure to prices. The Group hedged
part of its production (Note 28) during the year.
(d) Credit risk
Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash
inflows from financial assets on hand at the reporting date. The Group has no significant concentration of credit risk.
The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate
credit history and monitors on a continuous basis the ageing profile of its receivables. The Group has policies to limit
the amount of credit exposure to any financial institution.
Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements,
which is net of impairment losses, represents the maximum credit exposure without taking account of the value of any
collateral obtained:
(Euro 000's) 2016 2015
Unrestricted cash and cash equivalent 885 18,578
Restricted cash 250 40
Cash and cash equivalents 1,135 18,618
Restricted cash held as of 31 December 2016 is a collateral of a bank guarantee provided to a contractor.
Other than the above, there are no collaterals held in respect of these financial instruments and there are no financial
assets that are past due or impaired as at 31 December 2016.
(e) Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest
rates. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed
rates expose the Group to fair value interest rate risk. The Group's Management monitors the interest rate fluctuations on
a continuous basis and acts accordingly.
At the reporting date the interest rate profile of interest- bearing financial instruments was
(Euro 000's) 2016 2015
Variable rate instruments
Financial assets 1,135 18,618
An increase of 100 basis points in interest rates at 31 December 2016 would have increased / (decreased) equity and profit
or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates,
remain constant. For a decrease of 100 basis points there would be an equal and opposite impact on the profit and other
equity.
Equity Profit or loss
(Euro 000's) 2016 2015 2016 2015
Variable rate instruments 11 186 11 186
(f) Operational risk
Operational risk is the risk that derives from the deficiencies relating to the Group's information technology and control
systems as well as the risk of human error and natural disasters. The Group's systems are evaluated, maintained and
upgraded continuously.
(g) Compliance risk
Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non-compliance with
laws and regulations. The Group has systems in place to mitigate this risk, including seeking advice from external legal
and regulatory advisors in each jurisdiction.
(h) Litigation risk
Litigation risk is the risk of financial loss, interruption of the Group's operations or any other undesirable situation
that arises from the possibility of non-execution or violation of legal contracts and consequentially of lawsuits. The
risk is restricted through the contracts used by the Group to execute its operations.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
3. Financial Risk Management (continued)
3.2 Capital risk management
The Group considers its capital structure to consist of share capital, share premium and share options reserve. The
Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. The Group is not subject to any externally imposed capital requirements.
In order to maintain or adjust the capital structure, the Group issues new shares. The Group manages its capital to ensure
that it will be able to continue as a going concern while maximizing the return to shareholders through the optimisation of
the debt and equity balance. The AFRC reviews the capital structure on a continuing basis.
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to
maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal
capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares,
buy back issued shares, obtain new borrowings or sell assets to reduce borrowings.
The Group monitors capital on the basis of the gearing ratio. The gearing ratio is calculated as net debt divided by total
capital. Net debt is calculated as provisions plus deferred consideration plus trade and other payables less cash and cash
equivalents.
(Euro 000's) 2016 2015
Net debt 111,241 29,160
Total equity 188,562 176,366
Total capital 299,803 205,526
Gearing ratio 37.1% 14.2%
The increase in the gearing ratio during 2016 resulted primarily from the start of operations and the build-up of trade
creditors.
3.3 Fair value estimation
The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the reporting date.
The fair value of financial instruments traded in active markets, such as publicly traded and available-for-sale financial
assets is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by
the Group is the current bid price. The appropriate quoted market price for financial liabilities is the current ask
price.
The fair value of financial instruments that are not traded in an active market is determined by using valuation
techniques. The Group uses a variety of methods, such as estimated discounted cash flows, and makes assumptions that are
based on market conditions existing at the reporting date.
Fair value measurements recognised in the consolidated statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
· Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities.
· Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
· Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
(Euro 000's) Level 1 Level 2 Level 3 Total
31 December 2016
Financial assets
Available for sale financial assets 261 - - 261
Total 261 - - 261
31 December 2015
Financial assets
Available for sale financial assets 302 - - 302
Total 302 - - 302
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
3. Financial Risk Management (continued)
3.4 Critical accounting estimates and judgements
The preparation of the Atalaya's consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying
disclosures, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates
and assumptions are continually evaluated and are based on management's experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or
liabilities affected in future periods.
In particular, the Group has identified a number of areas where significant judgements, estimates and assumptions are
required.
(a) Capitalisation of exploration and evaluation costs
Under the Group's accounting policy, exploration and evaluation expenditure is not capitalised until the point is reached
at which there is a high degree of confidence in the project's viability and it is considered probable that future economic
benefits will flow to the Group. Subsequent recovery of the resulting carrying value depends on successful development or
sale of the undeveloped project. If a project does not prove viable, all irrecoverable costs associated with the project
net of any related impairment provisions are written off.
(b) Production start date
The Group assesses the stage of each mine under development/construction to determine when a mine moves into the production
phase, this being when the mine is substantially complete and ready for its intended use. The criteria used to assess the
start date are determined based on the unique nature of each mine development/construction project, such as the complexity
of the project and its location. The Group considers various relevant criteria to assess when the production phase is
considered to have commenced. At this point, all related amounts are reclassified from "Mines under construction" to
"Property, plant and equipment". Some of the criteria used to identify the production start date include, but are not
limited to:
· Level of capital expenditure incurred compared with the original construction cost estimate;
· Completion of a reasonable period of testing of the mine plant and equipment;
· Ability to produce metal in saleable form (within specifications); and
· Ability to sustain ongoing production of metal.
When a mine development project moves into the production phase, the capitalisation of certain mine development costs
ceases and costs are either regarded as forming part of the cost of inventory or expensed, except for costs that qualify
for capitalisation relating to mining asset additions or improvements or mineable reserve development. It is also at this
point that depreciation/amortisation commences.
According to the above paragraph, Management declared start of commercial production of the Riotinto mine in February
2016.
(c) Stripping costs
The Group incurs waste removal costs (stripping costs) during the development and production phases of its surface mining
operations. Furthermore, during the production phase, stripping costs are incurred in the production of inventory as well
as in the creation of future benefits by improving access and mining flexibility in respect of the orebodies to be mined,
the latter being referred to as a stripping activity asset. Judgement is required to distinguish between the development
and production activities at the surface mining operations.
The Group is required to identify the separately identifiable components or phases of the orebodies for each of its surface
mining operations. Judgement is required to identify and define these components, and also to determine the expected
volumes (tonnes) of waste to be stripped and ore to be mined in each of these components. These assessments may vary
between mines because the assessments are undertaken for each individual mine and are based on a combination of information
available in the mine plans, specific characteristics of the orebody, the milestones relating to major capital investment
decisions and the type and grade of minerals being mined.
Judgement is also required to identify a suitable production measure that can be applied in the calculation and allocation
of production stripping costs between inventory and the stripping activity asset. The Group considers the ratio of expected
volume of waste to be stripped for an expected volume of ore to be mined for a specific component of the orebody, compared
to the current period ratio of actual volume of waste to the volume of ore to be the most suitable measure of production.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
3. Financial Risk Management (continued)
3.4 Critical accounting estimates and judgements (continued)
These judgements and estimates are used to calculate and allocate the production stripping costs to inventory and/or the
stripping activity asset(s). Furthermore, judgements and estimates are also used to apply the units of production method in
determining the depreciable lives of the stripping activity asset(s).
(d) Ore reserve and mineral resource estimates
The Group estimates its ore reserves and mineral resources based on information compiled by appropriately qualified persons
relating to the geological and technical data on the size, depth, shape and grade of the ore body and suitable production
techniques and recovery rates.
Such an analysis requires complex geological judgements to interpret the data. The estimation of recoverable reserves is
based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements and
production costs, along with geological assumptions and judgements made in estimating the size and grade of the ore body.
The Group uses qualified persons (as defined by the Canadian Securities Administrators' National Instrument 43-101) to
compile this data. Changes in the judgments surrounding proven and probable reserves may impact as follows:
· The carrying value of exploration and evaluation assets, mine properties, property, plant and equipment, and
goodwill may be affected due to changes in estimated future cash flows;
· Depreciation and amortisation charges in the statement of profit or loss and other comprehensive income may change
where such charges are determined using the UOP method, or where the useful life of the related assets change;
· Capitalised stripping costs recognised in the statement of financial position as either part of mine properties or
inventory or charged to profit or loss may change due to changes in stripping ratios;
· Provisions for rehabilitation and environmental provisions may change where reserve estimate changes affect
expectations about when such activities will occur and the associated cost of these activities;
· The recognition and carrying value of deferred income tax assets may change due to changes in the judgements
regarding the existence of such assets and in estimates of the likely recovery of such assets.
(e) Impairment of assets
Events or changes in circumstances can give rise to significant impairment charges or impairment reversals in a particular
year. The Group assesses each Cash Generating Unit ("CGU") annually to determine whether any indications of impairment
exist. If it was necessary Management could contract independent expert to value the assets. Where an indicator of
impairment exists, a formal estimate of the recoverable amount is made, which is considered the higher of the fair value
less cost to sell and value-in-use. An impairment loss is recognised immediately in net earnings. The Group has determined
that each mine location is a CGU.
These assessments require the use of estimates and assumptions such as commodity prices, discount rates, future capital
requirements, exploration potential and operating performance. Fair value is determined as the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. Fair value for mineral assets is generally determined as the present value of estimated future cash flows arising
from the continued use of the asset, which includes estimates such as the cost of future expansion plans and eventual
disposal, using assumptions that an independent market participant may take into account. Cash flows are discounted at an
appropriate discount rate to determine the net present value. For the purpose of calculating the impairment of any asset,
management regards an individual mine or works site as a CGU.
Although management has made its best estimate of these factors, it is possible that changes could occur in the near term
that could adversely affect management's estimate of the net cash flow to be generated from its projects.
(f) Provisions for decommissioning and site restoration costs
Accounting for restoration provisions requires management to make estimates of the future costs the Group will incur to
complete the restoration and remediation work required to comply with existing laws, regulations and agreements in place at
each mining operation and any environmental and social principles the Group is in compliance with. The calculation of the
present value of these costs also includes assumptions regarding the timing of restoration and remediation work, applicable
risk-free interest rate for discounting those future cash outflows, inflation and foreign exchange rates and assumptions
relating to probabilities of alternative estimates of future cash outflows.
Notes to the consolidated financial statements (continued)
Years ended 31 December 2016 and 2015
3. Financial Risk Management (continued)
3.4 Critical accounting estimates and judgements (continued)
(f) Provisions for decommissioning and site restoration costs (continued)
Management uses its judgement and experience to provide for and (in the case of capitalised decommissioning costs) amortise
these estimated costs over the life of the mine. The ultimate cost of decommissioning and timing is uncertain and cost
estimates can vary in response to many factors including changes to relevant environmental laws and regulations
requirements, the emergence of new restoration techniques or experience at other mine sites. As a result, there could be
significant adjustments to the provisions established which would affect future financial results.
(g) Income tax
Significant judgment is required in determining the provision for income taxes. There are transactions and calculations for
which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities
for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of
these matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
Judgement is also required to determine whether deferred tax assets are recognised in the consolidated statements of
financial position. Deferred tax assets, including those arising from unutilised tax losses, require the Group to assess
the probability that the Group will generate sufficient taxable earnings in future periods, in order to utilise recognised
deferred tax assets.
Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. These
estimates of future taxable income are based on forecast cash flows from operations (which are impacted by production and
sales volumes, commodity prices, reserves, operating costs, closure and rehabilitation costs, capital expenditure,
dividends and other capital management transactions). To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the Group to realise the net deferred tax assets could be impacted.
In addition, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the
Group to obtain tax deductions in future periods.
(h) Inventory
Net realisable value tests are performed at each reporting date and represent 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.
(i) Contingent liabilities
A contingent liability arises where a past event has taken place for which the outcome will be confirmed only by the
occurrence or non-occurrence of one or more uncertain events outside of the control of the Group, or a present obligation
exists but is not recognised because it is not probable that an outflow of resources will be required to settle the
obligation.
A provision is made when a loss to the Group is likely to crystallise. The assessment of the existence of a contingency and
its likely outcome, particularly if it is considered that a provision might be necessary, involves significant judgment
taking all relevant factors into account.
(j) Deferred consideration
As disclosed in Note 27, the Group has recorded a deferred consideration liability in relation to the obligation to pay
Astor up to E53.0 million out of excess cash from operations at Proyecto Riontinto.
The actual timing of any payments to Astor of the consideration involves significant judgment as it depends on certain
factors which are out of control of management.
(k) Share-based compensation benefits
Share based compensation benefits are accounted for in accordance with the fair value recognition provisions of IFRS 2
'Share-based Payment'. As such, share-based compensation expense for equity-settled share-based payments is measured at the
grant date based on the fair value of the award and is recognised as an expense over the vesting period. The fair value of
such share-based awards at the grant date is measured using the Black Scholes pricing model. The inputs used in the model
are based on management's best estimates for the effects of non-transferability, exercise restrictions, behavioural
considerations and expected volatility.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
4. Business and geographical segments
Business segments
The Group has only one distinct business segment, being that of mining operations, which include mineral exploration and
development.
Geographical segments
The Group's mining activities are located in Spain. The commercialization of the copper concentrates produced in Spain is
carried out in Cyprus. Corporate costs and administration costs are based in Cyprus. Intercompany transactions within the
Group are on arm's length basis in a manner similar to transaction with third parties. Accounting policies used by the
Group in different locations are the same as those contained in Note 2.
2016
(Euro 000's) Cyprus Spain Other Total
Sales 98,768 - - 98,768
Earnings/(loss) before Interest, Impairment, Tax, Depreciation and Amortisation (3,665) 19,067 (9) 15,393
Depreciation/amortisation charge (14) (11,278) - (11,292)
Impairment of land options not exercised - (903) - (903)
Finance income - 41 - 41
Finance cost (495) (2,218) - (2,713)
Net foreign exchange loss 377 (1,042) (1) (666)
(Loss)/profit before tax before share of loss of associate (3,797) 3,667 (10) (140)
Share of loss of associate (10)
Tax credit 12,187
Profit for the year 12,037
Total assets 18,687 282,247 4 300,938
Total liabilities (17,742) (94,605) (29) (112,376)
Depreciation of property, plant and equipment 14 8,629 - 8,643
Amortisation of intangible assets - 2,649 - 2,649
Total additions of non-current assets 2 87,094 - 87,096
2015
(Euro 000's) Cyprus Spain Other Total
Earnings/(loss) before Interest, Tax, Depreciation and Depreciation/amortisation (1,122) (4,914) 78 (5,958)
Depreciation/amortisation charge (18) (134) - (152)
Net foreign exchange loss (4,602) (116) (3) (4,721)
Finance income 2 36 - 38
Finance costs (4,093) (239) - (4,332)
(Loss)/profit before tax and disposal of subsidiaries (9,833) (5,367) 75 (15,125)
Profit on disposal of subsidiaries 53
Profit on disposal of subsidiary/ associate 92
Tax charge (30)
Loss for the year (15,010)
Total assets 17,000 207,138 6 224,144
Total liabilities 219 47,520 39 47,778
Depreciation of property, plant and equipment 18 134 - 152
Total additions of non-current assets 125 105,763 - 105,888
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
5. Other income
(Euro 000's) 2016 2015
Other income 235 86
Gain on sale of property,plant and equipment 4 -
Sales of services 53 49
292 135
Other income amounting to E235k (2015: E86k) is mainly due to the sale of scrap.
6. Expenses by nature
(Euro 000's) 2016 2015
Operating costs 64,223 -
Impairment charge on land options not exercised 903 -
Employee benefit expense (Note 7) 13,542 11,702
Compensation of key management personnel (Note 32.1) 2,375 1,585
Auditors' remuneration - audit 204 164
- prior year audit 17 7
- other 38 8
Other accountants' remuneration 8 45
Consultants' remuneration 698 282
Depreciation of property, plant and equipment (Note 13) 8,643 152
Amortisation of intangible assets (Note 14) 2,649 123
Travel costs 101 103
Share option-based employee benefits 56 71
Shareholders' communication expense 264 331
On-going listing costs 163 347
Legal costs 981 656
Other expenses/(capitalisation) 997 (9,331)
Total cost of operation, administration, share based benefits, care and maintenance, exploration and impairment 95,862 6,245
7. Employee benefit expense
(Euro 000's) 2016 2015
Wages and salaries 10,154 9,014
Social security and social contributions 2,890 2,358
Employees' other allowances 22 330
Bonus to employees 476 -
13,542 11,702
The average number of employees and the number of employees at year end by office are:
Number of employees Average At year end
2016 2015 2016 2015
Spain 307 264 325 303
Cyprus 3 3 3 3
Total 310 267 328 306
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
8. Finance income
(Euro 000's) 2016 2015
Interest income 41 38
41 38
Interest income relates to interest received on bank balances.
9. Finance costs
(Euro 000's) 2016 2015
Interest expense:
Debt to department of social security (Note 25) and other interest 252 239
Interest on copper concentrate prepayment (1) 143 -
Deferred consideration 2,123 -
Convertible note - 1,178
Bridge loan - 1,232
Accretion expense on convertible note - 31
Bridge loan financing expenditure - 1,342
Loss on fair value on conversion of the convertible note - 310
Net foreign exchange hedging expense - Note 28.1 195 -
2,713 4,332
(1) Interest rate US$ 6 months LIBOR + 2.75%
10. Tax charge
(Euro 000's) 2016 2015
Income tax 16 24
(Over)/under provision previous years (7) 6
Deferred tax asset due to losses available against future taxable income (Note 18) (8,276) -
Deferred tax related to utilization of losses for the year (Note 18) 475 -
Deferred tax income relating to the origination of temporary differences (Note 18) (4,593) -
Deferred tax expense relating to reversal of temporary differences (Note 18) 198 -
(12,187) 30
The tax on the Group's results before tax differs from the theoretical amount that would arise using the applicable tax
rates as follows:
(Euro 000's) 2016 2015
Loss before tax (150) (14,980)
Tax calculated at the applicable tax rates (18) (2,448)
Tax effect of expenses not deductible for tax purposes 31 815
Tax effect of tax loss for the year 318 1,786
Tax effect of allowances and income not subject to tax (191) (123)
Over provision for prior year taxes (7) -
Tax effect of utilisation of exhaustion factor reserve (124) -
Deferred tax (Note 18) (12,196) -
Tax (credit)/charge (12,187) 30
Due to tax losses sustained in the current and previous years, no tax liability arises on the Group. Under current
legislation, tax losses may be carried forward and be set off against taxable income of the following years. As at 31
December 2016, the balance of tax losses available for offset against future taxable profits amounted to E48.6million
(2015: E50.4 million).
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
10. Tax (continued)
(Euro 000's)
Tax year Cyprus Spain Total
2007 - 1,268 1,268
2008 - 5,175 5,175
2009 - 3,498 3,498
2010 - 5,642 5,642
2011 - 6,576 6,576
2012 2,456 1,967 4,423
2013 5,172 2,381 7,553
2014 4,106 3,509 7,615
2015 4,051 640 4,691
2016 2,134 - 2,134
17,919 30,656 48,575
Cyprus
The corporation tax rate is 12.5%. Under certain conditions interest income may be subject to defence contribution at the
rate of 30% . In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from
abroad may be subject to defence contribution at the rate of 20% for the tax years 2012 and 2013 and 17% for 2014 and
thereafter. Due to tax losses sustained in the year and previous years, no tax liability arises on the Company. Under
current legislation, tax losses may be carried forward and be set off against taxable income of the five succeeding years.
Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years
after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special
contribution for defence at 20% for the tax years 2012 and 2013 and 17% for 2014 and thereafter will be payable on such
deemed dividends to the extent that the shareholders (companies and individuals) are Cyprus tax residents. The amount of
deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year
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