REG - Atalaya Mining PLC - Final Results <Origin Href="QuoteRef">ATYM.L</Origin> - Part 5
06/04/2017 07:06
- Part 5: For the preceding part double click ID:nRSF7360Bd
at any time. This
special contribution for defence is payable by the Company for the account of the shareholders.
Spain
The corporation tax rate is between 25% and 30%. The recent Spanish tax reform approved in 2014 reduces the general
corporation tax rate from 30% to 28% in 2015 and to 25% in 2016, and introduces, among other changes, a 10% reduction in
the tax base subject to equity increase and other requirements. Due to tax losses sustained in the current and previous
years, no tax liability arises in the Company. Under current legislation, tax losses may be carried forward and be set off
against taxable income of the eighteen succeeding years.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
11. Earnings/(loss) per share
The calculation of the basic and diluted earnings/(loss) per share attributable to the ordinary equity holders of the
Company is based on the following data:
(Euro 000's) 2016 2015
Parent company (2,536) (9,675)
Subsidiaries 14,573 (5,335)
Profit/(loss) attributable to equity holders of the parent 12,037 (15,010)
Weighted number of ordinary shares for the purposes of basic earnings/(loss) per share ('000) 116,680 83,658
Basic profit/(loss) per share (cents) 10.3 (17.9)
Weighted number of ordinary shares for the purposes of fully diluted earnings/(loss) per share ('000) 117,545 83,658
Fully diluted profit/(loss) per share (cents) 10.2 (17.9)
There are 365,354 warrants (Note 23) and 500,000 options (Note 24) (2015: 473,061 warrants and 931,654 options) which have
been included when calculating the weighted average number of shares for 2016. These were excluded in 2015 because they
had an antidilutive effect.
12. Company's analysis of profit for the year
(Euro 000's) 2016 2015
Loss from operations (2,536) (19,145)
Reversal of intercompany balances previously impaired 97,243 9,625
Profit/(loss) for the year 94,707 (9,520)
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
13. Property, plant and equipment
THE GROUP
(Euro 000's) Land and buildings Plant andequipment Mineral rights Assets under construction(4) Deferred mining costs(3) Other assets(2) Total
2016
Cost
At 1 January 2016 39,061 23,046 950 94,525 10,334 1,026 168,942
Additions 1,121(1) 15,983 - - 13,848 164 31,116
Reclassifications 6 104,287 - (93,959) (10,334) - -
Reclassifications - intangibles - 1,614 (50) - - (247) 1,317
Disposals - - - - (37) (37)
Written off - - (900) - (68) (968)
At 31 December 2016 40,188 144,830 - 566 13,848 838 200,370
Depreciation
At 1 January 2016 - - - - - 518 518
Charge for the year 1,736 4,932 - - 1,758 217 8,643
Reclassifications - 141 - - - (141) -
Reclassifications - intangibles - - - - - (81) (81)
Disposals - - - - - (25) (25)
Impairment - - 900 - - 3 903
Written off - - (900) - - (68) (968)
At 31 December 2016 1,736 5,073 - - 1,758 423 8,990
Net book value at 31 December2016 38,452 139,857 - 566 12,090 415 191,380
2015
Cost
At 1 January 2015 35,797 29,087 - - - 1,086 65,970
Reclassifications (707) (5,883) 950 5,640 - - -
Additions 3,971(1) - - 88,885 10,334 72 103,262
Disposals - (158) - - - (132) (290)
At 31 December 2015 39,061 23,046 950 94,525 10,334 1,026 168,942
Depreciation
At 1 January 2015 - 158 - - - 498 656
Charge for the year - - - - - 152 152
Disposals - (158) - - - (132) (290)
At 31 December 2015 - - - - - 518 518
Net book value at 31 December 2015 39,061 23,046 950 94,525 10,334 508 168,424
(1) Rehabilitation provision (Note 26).
(2) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.
(3) Stripping costs
(4) Net of pre-commissioning sales
The above fixed assets are located in Cyprus and Spain.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
13. Property, plant and equipment (continued)
THE COMPANY
(Euro 000's) Plant andequipment Otherassets(1) Total
2016
Cost
At 1 January 2016 - 109 109
Additions - 1 1
Disposals - (37) (37)
Written off - (5) (5)
At 31 December 2016 - 68 68
Depreciation
At 1 January 2016 - 68 68
Charge for the year - 14 14
Disposals - (25) (25)
Written off - (5) (5)
At 31 December 2016 - 52 52
Net book value at 31 December2016 - 16 16
2015
Cost
At 1 January 2015 158 235 393
Additions - 1 1
Disposals (158) (127) (285)
At 31 December 2015 - 109 109
Depreciation
At 1 January 2015 158 177 335
Charge for the year - 18 18
Disposals (158) (127) (285)
At 31 December 2015 - 68 68
Net book value at 31 December 2015 - 41 41
(1) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.
Certain land plots required for Proyecto Riotinto (the "Project Lands") are affected by pre-existing liens and embargos
derived from unpaid obligations of former Project operators or owners (the "Pre-Existing Debt").
a) In May 2010 the Group signed an agreement with the Department of Social Security in which it undertook to repay, over
a period of 5 years, the E16.9 million Pre-Existing Debt to the Department of Social Security in exchange for a stay of
execution proceedings for recovery of this debt against these Project Lands (the "Social Security Agreement"). Originally
payable over 5 years, the repayment schedule was subsequently extended until June 2017. The Group has met all of its
obligations to date under the Social Security Agreement, having paid as at 31 December 2016 a total of E15.2 million, with
a remainder of E1.7 million to be paid in accordance with the Agreement that finalises on 30 June 2017. The Group granted
a mortgage to guarantee the payment of a total debt of E6,436,661,and two embargos to guarantee the twopayments of a total
debt of E6,742,039 and E10,472,612 respectively in favor of Social Security's General Treasury.
b) The Project Lands are also subject to a lien in the amount of E5 million created in 1979 to secure the repayment of
certain government grants that were in all likelihood paid at the relevant time by former operators. Relevant court
proceedings have been followed to strike this lien from title, given that in the opinion of the Company the right of the
government to reclaim this Pre-Existing Debt has expired due to the relevant statute of limitations and the Company is
currently waiting for the court decision to be issued.
c) The Project Lands are also 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.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
13. Property, plant and equipment (continued)
d) 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 E10.5 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
During 2016 an option expired which was previously granted to Inland Trading 2006, S.L. and Construcciones Zeitung, S.L.
for the acquisition of certain mining rights and recorded E900,000 as an impairment charge in the profit and loss account.
The Group capitalised during the year personnel cost amounting to E916,094. No borrowing cost were capitalised in the
period.
In the condensed interim consolidated financial statements for the three months ended 31 March 2016, 30 June 2016 and 30
September 2016 the deferred mining costs amounted to E1,519,397, E5,129,509 and E5,129,509 accordingly, whether based on
the annual financial statements these amounts should be E2,028,678, E6,715,000 and E10,528,269 accordingly.
In the condensed interim consolidated financial statements for the three months ended 31 March 2016, 30 June 2016 and 30
September 2016 the accumulated amortization of deferred mining costs amounted to ENIL, whether based on the annual
financial statements these amounts should be E33,562, E223,686 and E811,887 accordingly.
14. Intangible assets
The Group
(Euro 000's) Permits of Rio Tinto Project Acquisition of mineral rights Licences, R&D and Software Goodwill Total
2016
Cost
On 1 January 2016 20,158 - - 9,333 29,491
Additions 42,244(1) - 1,334 - 43,578
Reclassifications - Property, plant and equipment (1,614) - 297 - (1,317)
Other reclassifications (28) - 54 - 26
At 31 December 2016 60,760 - 1,685 9,333 71,778
Provision for impairment
On 1 January 2016 - - - 9,333 9,333
Charge for the year 2,607 - 42 - 2,649
Reclassifications - Property, plant and equipment - - 81 - 81
At 31 December 2016 2,607 - 123 9,333 12,063
Net book value at 31 December 2016 58,153 - 1,562 - 59,715
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
(1) This addition relate to the deferred consideration as at 1.2.2016 (Note 27)
The useful life of the intangible assets is estimated to be not less than fourteen years from the start of production (the
revised Reserves and Resources statement which was announced in July 2016 has increased the life of mine to 16 ½ years).
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
14. Intangible assets (continued)
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 Group 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 Group 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 Atalaya Riotinto Minera S.L.U. ("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 21).
15. Investment in subsidiaries
(Euro 000's) 2016 2015
The Company
Opening amount at cost 3,572 3,576
Transfer to investment in associate (Note 16) - (4)
Closing amount at cost 3,572 3,572
Subsidiary companies Date of incorporation/acquisition Principal activity Country of incorporation Effective proportion of shares held
Eastern Mediterranean Resources (Caucasus) Ltd(1) 11 Nov 2005 Exploration Georgia 100%
Georgian Mineral Development Company Ltd(1) 27 Dec 05/11 Feb 2006 Exploration Georgia 100%
EMED Mining Spain S.L.U. 12 Apr 2007 Exploration Spain 100%
Atalaya Riotinto Minera S.L. 12 Apr 07/30 Sep 08 Mining Spain 100%
EMED Marketing Ltd 08 Sep 2008 Marketing Cyprus 100%
Atalaya Riotinto Project (UK) Ltd(2) 10 Sep 2008 Holding United Kingdom 100%
Eastern Mediterranean Exploration and Development S.L.U. 3 Dec 2012 Exploration Spain 100%
As security for the obligation on ARM to pay consideration to Astor under the Master Agreement and the Loan Assignment
Agreement, EMED Holdings (UK) Limited has granted pledges 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.
(1) The Group has started the liquidation process for the company.
(2) On 16 February 2017, Emed Holdings (UK) Ltd changed its name to Atalaya Riotinto Project (UK) Ltd.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
16. Investment in associate
(Euro 000's) 2016 2015
The GROUP
At 1 January 10 -
Profit on disposals from subsidiary/associate 303 256
Transfer from investment in subsidiaries (Note 15) - 4
Share of results of associate before tax (313) (250)
At 31 December - 10
The Company
At 1 January 4 -
Transfer from investment in subsidiaries (Note 15) - 4
At 31 December 4 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 met its investment obligations by the end of 2016, earning the agreed 81% interest in SLOK. During 2017, 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.
Companyname Principal activities Country of incorporation Effective proportion of shares held at 31 December 2016
Slovenske Kovy s.r.o. Exploration and development Slovakia 19%
The Group had significant influence in Slovenske Kovy s.r.o, even though it holds less than 20% of the voting rights, as
the work program and exploration budgets for the Exploration Expenditure of the Joint Venture are developed and approved by
the Supervisory Board of Directors of the Joint Venture, prior to any exploration being undertaken. The Supervisory Board
of Directors of the Joint Venture consisted of two directors of the Group and two directors nominated by Prospech Limited
up to 31 January 2017 which changed to one director of the Group and two directors nominated by Prospech Limited
The Group's significant aggregate amounts in respect of the investment in associate are as follows:
(Euro 000's) 2016 2015
Non-current assets 6 9
Current assets 9 21
Current liabilities (89) (89)
Net liabilities (100%) (74) (59)
Group's share of net liabilities - (2016:19%, 2015:49%) (14) (29)
Loss from continuing operations/Total comprehensive loss (100%) (771) (305)
Group's share of loss and total comprehensive loss (19% and 49%) (313) (250)
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
17. Investment in joint venture
Companyname Principal activities Country of incorporation Effective proportion of shares held 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) 2016 2015
Intangible assets 94 94
Trade and other receivables 1 21
Cash and cash equivalents 20 1
Trade and other payables (114) (114)
Net assets 1 2
Revenue - -
Expenses (1) (1)
Net loss after tax (1) (1)
18. Deferred tax
Consolidated statement of financial position Consolidated income statement
(Euro 000's) 2016 2015 2016 2015
The Group
Deferred tax asset
Deferred tax asset due to losses available against future taxable income (Note 10) 8,276 - 12,196 -
Deferred tax related to utilization of losses for the year (Note 10) (475) - - -
Deferred tax income relating to the origination of temporary differences (Note 10) 4,593 - - -
Deferred tax expense relating to reversal of temporary differences (Note 10) (198) - - -
Deferred tax asset (net) 12,196 -
Deferred tax income (Note 10) 12,196 -
Deferred tax assets are recognised for the carry-forward of unused tax losses and unused tax credits to the extent that it
is probable that taxable profits will be available in the future against which the unused tax losses/credits can be
utilised.
During the year, the Group recognised E122 million in net deferred tax assets as it was determined that it is probable that
sufficient future taxable profits will be available to the Group to benefit from the losses carried forward.
In addition to recognised deferred income tax asset, the Group has unrecognised tax losses of E17.9 million (2015: E18,6)
that are available to carry forward for 5 years against future taxable income of the group companies in which the losses
arose, and ENil (2015: E31.8) which are available to carry forward indefinitely against future losses. Deferred tax assets
have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the
Group, they have arisen in companies that have been loss-making for some time, and there are no other tax planning
opportunities or other evidence of recoverability in the near future to support (either partially or in full) the
recognition of the losses as deferred income tax assets.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
19. Inventories
(Euro 000's) 2016 2015
The Group
Materials and supplies 5,647 -
Work in progress 548 -
6,195 -
Materials and supplies relate mainly to machinery spare parts. Work in progress represents ore stockpiles, which is ore
that has been extracted and is available for further processing.
As of 31 December 2016, all concentrates produced were sold. Accordingly, the inventory for copper concentrates as of
reporting date was nil (2015 -E nil). During the year the Group recorded cost of sales amounted to E88.8 million (2015 -
nil).
20. Trade and other receivables
(Euro 000's) 2016 2015
The Group
Non-current trade and other receivables
Deposits 206 -
206 -
Current trade and other receivables
Trade receivables 15,082 -
Receivables from related parties (Note 32.3 and 32.4) 2,092 6,596
Deposits and prepayments 522 1,114
VAT 11,187 7,970
Other receivables 967 952
29,850 16,632
The Company
Receivables from own subsidiaries 230,235 225,634
Impairment of receivables from own subsidiaries - (97,243)
Deposits and prepayments 506 508
VAT 352 336
Other receivables 52 846
231,145 130,081
The fair values of trade and other receivables approximate to their carrying amounts as presented above.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
21. Available-for-sale investments
(Euro 000's) 2016 2015
The Group & The Company
At 1 January 302 984
Loss transferred to reserves (Note 24) (41) (682)
At 31 December 261 302
Companyname Principal activities Country of incorporation Effective proportion of shares held at 31 December 2016
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 1.8%
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.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
22. Cash and cash equivalents
(Euro 000's) 2016 2015
The Group
Cash at bank and in hand 1,135 18,618
As of 31 December 2016, the Group's operating subsidiary held E250k (2015: E40k) as a collateral for bank guaranties, which
has been classified as restricted cash.
Cash and cash equivalents denominated in the following currencies:
Euro - functional and presentation currency 783 18,163
Great Britain Pound 233 285
United States Dollar 119 170
1,135 18,618
The Company
Cash at bank and on hand 320 4,246
Cash and cash equivalents denominated in the following currencies:
Euro - functional and presentation currency 86 3,951
Great Britain Pound 229 285
United States Dollar 5 10
320 4,246
23. 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 - 15,000
Issued and fully paid 000's Euro 000's Euro 000's Euro 000's
Balance at 1 January 2015 47,995 4,409 149,823 154,232
Issue Date Price (Stg£) Details
25 June 15 1.425* Share placement a) 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 / 31 December 2016 116,679 11,632 277,238 288,870
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
23. Share capital (continued)
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
2016
There was no share capital issue during 2016.
2015
a) 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.
Warrants
2016
No warrants were issued in 2016.
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.
Details of share warrants outstanding as at 31 December 2016:
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
24 June 2015 24 June 2018 1.425 262,569
365,354
Weighted averageexercise price Stg £ Number of warrants
At 1 January 2016 1.93 473,061
Less warrants expired during the year 2.40 (107,707)
Outstanding warrants at 31 December 2016 1.80 365,354
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
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.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
24. Other reserves
THE GROUP and the company
(Euro 000's) Share option Bonus share Available-for-sale investments Total
At 1 January 2015 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 (Note21) - - (682) (682)
Warrants issue costs 122 - - 122
At 31 December 2015 6,247 145 (884) 5,508
Bonus shares issued in escrow - 63 - 63
Recognition of share based payments 137 - - 137
Change in value of available-for-sale investments (Note21) - - (41) (41)
At 31 December 2016 6,384 208 (925) 5,667
Details of share options outstanding as at 31 December 2016:
Grant date Expiry date Exercise price - Stg £ Share options
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 500,000
Weighted averageexercise price Stg £ Share options
At 1 January 2016 3.23 931,654
Less options expired during the year 3.01 (431,654)
31 December 2016 3.42 500,000
No options were issued in 2016 and 2015.Details of options granted after 31 December 2016 are set out in Note 35 to the
Financial Statements.
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 ValueStg£
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
The volatility has been estimated based on the underlying volatility of the price of the Company's shares in the preceding
twelve months.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
25. Trade and other payables
THE GROUP
(Euro 000's) 2016 2015
Non-current trade and other payables
Social security(1) - 1,741
Land options 115 155
115 1,896
Current trade and other payables
Trade payables 49,309 37,106
Payable to related parties (Note 32.4) 12 -
Copper concentrate prepayment(2) 8,684 -
Social security* 1,741 2,867
Land options and mortgage 790 789
Accruals 1,826 1,124
Tax liability 16 24
Other 230 1
62,608 41,911
THE COMPANY
(Euro 000's) 2016 2015
Current trade and other payables
Accruals 649 217
Payable to own subsidiaries 1,193 -
Other 229 -
2,071 217
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.
(1) 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. E15.2 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.
(2) In September 2016, the Group signed a $14 million prepayment funding with Transamine Trading, S.A. ("Transamine"). The
funding will be settled by 31 December 2018 via deductions from payments received from sales. Terms of the funding are
market conditions bearing an interest of LIBOR + 2.75% interest.
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
26. Provisions
THE GROUP
(Euro 000's) Rehabilitation costs
1 January 2015 -
Additions 3,971
31 December 2015 (Note 13) 3,971
Revision of discount rate 732
Revision of estimates 296
Accretion expense 93
31 December 2016 (Note 13) 5,092
(Euro 000's) 2016 2015
Non-Current 5,092 3,971
Current - -
Total 5,092 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.
The discount rate used in the calculation of the net present value of the provision as at 31 December 2016 was 1.87%, which
is the 15-year Spain Government Bond rate (2015: 2,349% - 20-year Spain Government Bond rate). An inflation rate of 1.5%
was applied on annual basis.
The expected payments for the rehabilitation work is as follows:
(Euro 000's) Between 1 - 5 Years Between 6 - 10 Years Between 10 - 15 Years More than 15 Years
Expected payments for rehabilitation of the mining site 273 126 2,658 2,035
27. 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. At the time of the acquisition, the Group signed a Master Agreement (the
"Master Agreement") which includes deferred consideration of E43.8 million (the "Deferred Consideration") and potential
up-tick payments of up to E15.9 million depending on the price of copper (the "Up-tick Payment"), in consideration of (a)
all parties accepting the legal structure of ARM (formerly Emed Tartessus); (b) the validity of various agreements entered
into prior to the Master Agreement; and (c) the provision of indemnities by Astor and its agreement not to pursue
litigation.
The obligation to pay the Deferred Consideration and the Up-tick Payments 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.
Subject to satisfaction of the Conditions, the Deferred Consideration and the Up-tick Payments are payable over a period of
six or seven years (the "Payment Period"). In addition to satisfaction of the Conditions, the Up-tick Payments are 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).
Notes to the consolidated financial statements
Years ended 31 December 2016 and 2015
27. Deferred consideration (continued)
The Company also entered into a credit assignment agreement with a related company of Astor, Shorthorn AG, pursuant to
which the benefit of outstanding loans were assigned to the Company in consideration for the payment of E9.1 million to
Shorthorn (the "Loan Assignment"). Payment under the Loan Assignment is also subject to satisfaction of the Conditions and
is payable in instalments over the Payment Period.
As security, inter alia, for the obligation to pay the Deferred Consideration, the Up-tick Payments and the Loan Assignment
to Astor, EMED Holdings (UK) Limited has granted pledges to 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, the Conditions have not been satisfied.
On 6 March 2017, judgment in the case brought by ("Astor Case") was handed down in the High Court of Justice in London (the
"Judgment"). On 31 March 2017 declarations were made by the High Court which give effect to the Judgment.
In summary, the High Court found that the Deferred Consideration did not start to become payable when Permit Approval was
granted. In addition, the intra-group loans by which funding for the restart of mining operations was made available to ARM
did not constitute a Senior Debt Facility so as to trigger payment of the Deferred Consideration. Accordingly, the first
instalment of the Deferred Consideration has not fallen due.
Astor failed to show that there had been a breach of the all reasonable endeavours obligation contained in the Master
Agreement to obtain a Senior Debt Facility or that the Group had acted in bad faith in not obtaining a Senior Debt
Facility. While the Court confirmed that the Group was not in breach of any of its obligations, the Master Agreement and
its provisions remain in place. Accordingly, other than up to US$10 million a year which may be required for non-Proyecto
Riotinto related expenses, ARM cannot make any dividend, distribution or any repayment of the money lent to it by companies
in the Group until the consideration under the Master Agreement (including the Deferred Consideration) has been paid in
full.
As a consequence, the Judgment requires that, in accordance with the Master Agreement, ARM must apply any excess cash
(after payment of operating expenses, sustaining capital expenditure, any senior debt service requirements and up to US$10
million (for non-Proyecto Riotinto related expenses)) to pay the consideration due to Astor (including the Deferred
Consideration and the amount of E9.1 million payable under the Loan Assignment) early. The Court confirmed that the
obligation to pay consideration early out of excess cash does not apply to the Up-tick Payments and the Judgment notes that
the only situation in which the Up-tick Payments could ever become payable is in the unlikely event that mining operations
stop at Proyecto Riotinto and a Senior Debt Facility is then secured for a sum sufficient to restart mining operations.
While the Judgment confirms that the cash sweep provisions of the Master Agreement require ARM to repay the Loan Assignment
early, it does not extend to the credit assignment agreement which is governed by Spanish law. The Judgment therefore does
not provide any clarity on whether the Conditions have been met in respect of payment of Loan Assignment and there remains
significant doubts concerning the legal obligation to pay the Loan Assignment pursuant to the terms of the credit
assignment agreement.
Previously, the Company had not recognised the Deferred Consideration in the initial purchase price allocation on the basis
that the payment of the amounts was not considered probable. The High Court judgment of 6 March 2017 required the Group to
revisit its estimates and assumption as at and for the year ended 31 December 2016. Accordingly, the Group has recorded the
liability at fair value using a discount rate on an estimated excess cash flow of Atalaya Riotinto Minera, S.L.U. The fair
values disclosed are provisional as of 31 December 2016 due to the complexity of the Master Agreement, and the inherently
uncertain nature of the assumptions to calculate the future cash flows of Atalaya Riotinto
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