REG - Central Asia Metals - Proposed acquisition of Lynx Resources Limited <Origin Href="QuoteRef">CAML.L</Origin> - Part 7
22/09/2017 07:08
- Part 7: For the preceding part double click ID:nRSV5104Rf
.......................................... 9 (2,175,835) (2,558,767)
Write off/disposals .............................................. 13 (59,193) (345)
Depreciation expenses ........................................ 13 (5,471,987) (5,299,455)
Other operating expenses ................................... 10 (3,579,879) (4,242,290)
Other operating income ...................................... 6 77,067 51,482
Total operating profit ......................................... 38,475,701 46,594,805
Finance income .................................................... 11 14,862,593 24,102,409
Finance costs ....................................................... 11 (7,456,370) (6,561,409)
Finance (costs)/income-net ............................... 7,406,223 17,541,000
Profit before income tax ..................................... 45,881,924 64,135,805
Income tax expense .............................................. 12 (5,670,052) (14,351,957)
Profit for the year ............................................... 40,211,872 49,783,848
Other comprehensive income ........................... (5,389,552) (15,355,838)
Total other comprehensive income for the year ........................................................................ 34,822,320 34,428,010
Profit attributable to the owners ........................ 34,822,320 34,428,010
Total comprehensive income attributable to the owners: ........................................................... 34,822,320 34,428,010
Rudnik SASA dooel-Makedonska Kamenica
IFRS Financial information for the two years ended 31 December 2015
(all amounts are in USD unless otherwise stated)
Statement offinancial position
Note As at As at As at
31 December 2015 31 December 2014 1 January 2014
ASSETS
Non-current assets
Property, plant and equipment ............... 13 46,123,471 49,053,587 49,710,928
Total non-current assets......................... 46,123,471 49,053,587 49,710,928
Current assets
Inventories................................................. 14 1,538,766 2,032,084 2,287,103
Trade receivables...................................... 15 6,022,610 45,415,543 48,720,568
Other receivables...................................... 15 1,374,647 2,351,664 2,078,910
Income tax receivable............................... 169,882 - 86,887
Loans.......................................................... 16 - 55,500,372 152,853,968
Cash and cash equivalents...................... 17 216,641 962,947 1,487,671
Total current assets................................. 9,322,546 106,262,610 207,515,107
TOTAL ASSETS 55,446,017 155,316,197 257,226,035
EQUITY AND LIABILITIES Equity
Own capital................................................ 4,672,933 4,672,933 4,672,933
Statutory reserves..................................... 934,596 934,596 934,596
Other reserves........................................... (20,656,718) (15,267,166) 137,866,133
Retained earnings .................................... 53,362,909 78,759,564 91,592,049
Total equity................................................ 18 38,313,720 69,099,927 235,065,711
Non-current liabilities
Borrowings................................................. 20 - 5,019,047 9,234,874
Provisions for liabilities and charges..... 19 2,449,711 2,335,326 2,124,472
Total non-current liabilities................... 2,449,711 7,354,373 11,359,346
Current liabilities
Borrowings................................................. 20 11,208,226 4,209,520 4,536,423
Trade and other payables ....................... 21 2,097,672 1,882,145 3,491,756
Other current liabilities............................. 21 1,240,687 63,815,239 2,635,236
Provisions for liabilities and charges..... 19 136,001 55,716 90,834
Income tax payable................................... - 8,899,277 46,729
Total current liabilities 14,682,586 78,861,897 10,800,978
Total liabilities . 17,132,297 86,216,270 22,160,324
TOTAL LIABILITIES AND EQUITY...... 55,446,017 155,316,197 257,226,035
Rudnik SASA dooel-Makedonska Kamenica
IFRS Financial information for the two years ended 31 December 2015
(all amounts are in USD unless otherwise stated)
Statement ofchanges in equity
Own Capital Statutory reserves Other reserves Retained Earnings Total
Balance at 1 January 2014........................ 4,672,933 934,596 137,866,132 91,592,049 235,065,710
Transactions with owners
Other reserves distribution......................... - - (137,777,460) - (137,777,460)
Dividends distribution................................. - - - (62,616,333) (62,616,333)
4,672,933 934,596 88,672 28,975,716 34,671,917
Net profit for 2014......................................... - - - 49,783,848 49,783,848
Other comprehensive income..................... - - (15,355,838) - (15,355,838)
Total comprehensive income..................... - - (15,355,838) 49,783,848 34,428,010
Balance at 31 December 2014.................. 4,672,933 934,596 (15,267,166) 78,759,564 69,099,927
Balance at 1 January 2015........................ 4,672,933 934,596 (15,267,166) 78,759,564 69,099,927
Transactions with owners
Dividends distribution................................. - - - (65,608,527) (65,608,527)
4,672,933 934,596 (15,267,166) 13,151,037 3,491,400
Net profit for 2015......................................... - - - 40,211,872 40,211,872
Other comprehensive income..................... - - (5,389,552) - (5,389,552)
Total comprehensive income..................... - - (5,389,552) 40,211,872 34,822,320
Balance at 31 December 2015.................. 4,672,933 934,596 (20,656,718) 53,362,909 38,313,720
Rudnik SASA dooel-Makedonska Kamenica
IFRS Financial information for the two years ended 31 December 2015
(all amounts are in USD unless otherwise stated)
Statement ofcash flows
Year ended 31 December
2015 2014
OperatingactivitiesProfit/(Loss)beforetax........................................................................................................... 45,881,924 64,135,805
Adjustmentsfor:Depreciation(Note13)............................................................................................................ 5,471,987 5,299,455
Interestexpense(Note11)..................................................................................................... 676,975 1,195,528
Interestincome(Note11)...................................................................................................... (265,366) (1,448,526)
Accretionexpense(Note11)................................................................................................. 185,848 182,589
Unrealizedforeignexchange(gain)loss(Note13)........................................................... (185,092) (237,129)
Cashgeneratedfromoperationsbeforechangesinworkingcapital......................... 51,766,276 69,127,722
Cashflowfromoperatingactivities(Increase)/decreaseininventories...................................................................................... 288,252 (16,020)
(Increase)/decreaseintradereceivables............................................................................ 35,257,987 (2,656,865)
(Increase)/decreaseinotherreceivables........................................................................... 746,078 (563,808)
Increase/(decrease)intradepayables................................................................................ 416,114 (1,304,457)
Increase/(decrease)inothercurrentliabilities.................................................................. (59,319) (953,662)
Cashgeneratedfromoperations 88,415,388 63,632,910
Interestandbankchargespaid............................................................................................ (676,975) (1,195,528)
Incometaxespaid.................................................................................................................... (13,950,631) (4,625,167)
Netcashgeneratedfromoperatingactivities.................................................................. 73,787,782 57,812,215
CashflowfrominvestingactivitiesAcquisitionofproperty,plantandequipment.................................................................. (8,059,612) (9,713,590)
Proceedsfromloans................................................................................................................ 50,563,614 85,638,365
Interestreceived....................................................................................................................... 265,366 1,448,526
Netcashusedininvestingactivities................................................................................. 42,769,368 77,373,301
CashflowfromfinancingactivitiesRepaymentofborrowing........................................................................................................ (8,407,685) (3,177,460)
Proceedsfromborrowings..................................................................................................... 12,258,355 -
Dividendspaid.......................................................................................................................... (121,065,047) (132,388,737)
Netcashusedinfinancingactivities................................................................................. (117,214,377) (135,566,197)
Netdecreaseincashandcashequivalents...................................................................... (657,227) (380,681)
Effectsofexchangeratechangesoncashandcashequivalents............................... (89,079) (144,043)
Cashandcashequivalentsat1January........................................................................... 962,947 1,487,671
Cashandcashequivalentsat31December(Note17).................................................. 216,641 962,947
Rudnik SASA dooel-Makedonska Kamenica
Notes to the Financial information for the two years ended 31 December 2015 (all amounts are in USD unless otherwise
stated)
1. General information
Sasa-dooel Makedonska Kamenica ("SASA") is a base metals company which operates the Sasa zinc and lead mine registered in:
Rudarska No28 Makedonska Kamenica.
The company was founded on 28 June 2005. The registration in the Central Register is done with the Decision no 4047/2005 in
the Primary Court Skopje. The initial capital amounts to USD 4,672,933.
From 4 November 2015 SASA's new owner was Lynx Europe dooel Skopje with 100% ownership from Solway Industries Limited and
Solway Industries EESTI AS. The ultimate parent is Lynx resources resident in Hamilton, Bermuda. As of 31 December 2015,
SASA had 680 employees (2014: 689 employees). The General Manager of SASA serving during the financial year was:
Aleksandr Rakov
The primary activity of SASA is the extraction of mineralized ores and the production of zinc and lead concentrates under
the code 7.29-Extraction of other ores of coloured metals.
The activity of SASA is organized through the following organizational activities:
• Mine
• Flotation
• Laboratory
• Machine workshop
• General administration
2. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of this financial information is out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation and statement of compliance with IFRS
This financial information has been prepared for the purposes of the re-admission of CAML to AIM. This special purpose
financial information has been prepared in accordance with the requirements of the AIM Rules for Companies and in
accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").
The financial information relating to "SASA" has been prepared in a form that is consistent with the accounting policies
adopted in CAML's latest annual accounts.
Prior to the adoption of IFRS, for all periods up to and including the year ended 31 December 2014, SASA prepared its
financial statements in accordance with Macedonian generally accepted accounting principles ("Macedonian GAAP"). This
financial information for the year ended 31 December 2015 represents the first time SASA has prepared its financial
information in accordance with IFRS. Accordingly, SASA has prepared financial information which comply with IFRS applicable
for periods ending on or after 31 December 2015, together with the comparative period data as at and for the year ended 31
December 2014, as described in the accounting policies. In preparing this financial information, SASA's opening statement
of financial position was prepared as at 1 January 2014 in accordance with IFRS.
The main changes to the presentation of the financial information as a result of adopting IFRS are due to the following
accounting policies:
• Asset Retirement Obligation (Note 19),
• Employee Benefits (Note 19), and
• Jubilee Awards (Note 19).
Disclosure of our elected transition exemptions and reconciliation and explanation of account policy differences compared
to Macedonian GAAP have been provided in Note 24 to this financial information.
The financial information is presented in USD, unless otherwise stated.
The historical consolidated financial information has been prepared on a going concern basis.
2.2 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial information are measured using the currency of the primary economic environment in which
the entity operates ('the functional currency') which is MKD and which, for the purposes of the re-admission of CAML to
AIM, are translated to the presentation currency which is USD.
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet
• income and expenses for each statement of profit or loss and statement of comprehensive income are translated
at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
• all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive
income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated
exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities
of the foreign operation and translated at the closing rate.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the
transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end
exchange rates are generally recognized in profit or loss. Foreign exchange gains and losses that relate to borrowings are
presented in the consolidated statement of comprehensive income, within finance income and costs. All other foreign
exchange gains and losses are presented in the consolidated statement of comprehensive income on a net basis within finance
income and costs.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss.
2.3 Property, plant and equipment
Property acquisition costs are capitalized. Property, plant and equipment is stated at cost, as defined in IAS 16, less
accumulated depreciation and accumulated impairment losses.
2.4 Mining properties and mine development costs
Development costs relating to specific properties are capitalized once management determines a property will be developed.
A development decision is made based upon consideration of project economics, including future metal prices, reserves and
resources, and estimated operating and capital costs. Capitalization of costs incurred and proceeds received during the
development phase ceases when the property is capable of operating at levels intended by management and is considered
commercially viable. Costs incurred during the production phase to increase future output by providing access to additional
reserves, are deferred and depreciated on a units-of-production basis over the component of the reserves to which they
relate. Ore reserves may be declared for an undeveloped mining project before its commercial viability has been fully
determined.
Development costs incurred after the commencement of production are capitalised to the extent they are expected to give
rise to a future economic benefit. The cost of mineral properties also includes the estimated close-down and restoration
costs associated with the asset.
Interest on borrowings related to qualifying assets for construction or development projects is capitalised, at the rate
payable on project-specific debt if applicable or at SASA's cost of borrowing, until the project becomes commercially
viable.
2.5 Depreciation
Property, plant and equipment is depreciated over their useful life, or over the remaining life of the operation if
shorter, to residual value. No depreciation is recorded until the assets are substantially complete and ready for
productive use. The major asset categories are depreciated as follows:
Mining Properties, including capitalised financing costs, are depreciated on a Unit of Production basis (UoP), in
proportion to the volume of ore extracted in the year compared with total proven and probable reserves at the beginning of
the year. Assets within operations for which production is not expected to fluctuate significantly from one year to another
or which have a physical life shorter than the related mine are depreciated on a Straight-Line basis. This pertains to all
asset classes, including:
• Buildings and mining infrastructure (which includes mining properties)
• Machinery, Plant and other equipment
Depreciation calculated on a straight-line basis is as follows for major asset categories:
Office equipment............................................................................................ 20%-37.5%
Furniture and fittings....................................................................................... 20%-37.5%
Other Mining Infrastructure and buildings......................................................... 2.5%-10%
Motor vehicles................................................................................................ 25%-37.5%
Land is not depreciated.
Development costs are not depreciated. Depreciation on equipment utilized in the development of assets, including
underground mine development, is depreciated and recapitalized as development costs attributable to the related asset.
The depreciation of property, plant and equipment shall start after expiration of the month of the start-up in the year in
which the utilisation of the property, plant and equipment started.
2.6 Exploration and evaluation expenditure
Exploration and evaluation expenditure comprises costs that are directly attributable to:
• researching and analysing existing exploration data;
• conducting geological studies, exploratory drilling and sampling;
• examining and testing extraction and treatment methods; and/or
• compiling pre-feasibility and feasibility studies.
Evaluation expenditure relates to a detailed assessment of deposits or other projects that have been identified as having
economic potential. Exploration and evaluation costs are expensed in the period incurred.
2.7 Impairment of property plant and equipment
At each reporting date, under IAS 36 SASA reviews the carrying amounts of its mineral properties, and property, plant and
equipment to determine whether there is any indication that those assets are impaired. If such an indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of any impairment. Where the asset does not
generate cash flows that are independent from other assets, SASA estimates the recoverable amount of the CGU to which the
asset belongs.
Internal and external factors are considered in assessing whether indicators of impairment are present. Significant
assumptions regarding commodity prices, operating costs, capital expenditures and discount rates are used in determining
whether there are any indicators of impairment. These assumptions are reviewed regularly by senior management and compared,
where applicable, to observable market data.
Recoverable amount is the higher of fair value less costs of disposal and value in use (VIU). Fair value less costs of
disposal is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction
between knowledgeable and willing parties. For mining assets this would generally be determined based on the present value
of the estimated future cash flows arising from the continued development, use or eventual disposal of the asset. In
assessing these cash flows and discounting them to present value, assumptions used are those that an independent market
participant would consider appropriate. In assessing VIU, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which estimates of future cash flows have not been adjusted. If the recoverable amount of an
asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its
recoverable amount. An impairment loss is recognised in the income statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment been recognised for the asset or CGU. A reversal of an impairment loss is
recognised in the income statement.
2.8 Inventories
Inventories comprise raw materials (mined ore and other), work-in-progress (crushed ore), finished products (concentrate),
spare parts and other materials and are carried at lower of cost and net realisable value.
The cost of inventories comprises all costs of purchase, production and other production overheads attributable to the
production of finished goods (such as electricity, salaries, transport costs, fuel costs, food, beverages, and other) and
other costs incurred in bringing the inventories to their present location and condition as follows:
Raw materials..................................................... Mining costs incurred
Spare parts and other materials............................. Purchase cost on a weighted average basis
Finished goods, work in progress.......................... Cost of direct materials and labour and a proportion of
production overheads, based on normal operating capacity
Obsolete, redundant and slow-moving inventories are identified and written down to their net realisable value as required.
Stockpiles comprise coarse ore that has been extracted from the mine and is available for further processing. Stockpiles
are measured by estimating the number of tonnes added and removed from the stockpile. Stockpile tonnages are verified by
periodic surveys, and valued based on procurement or mining costs incurred up to the point of stockpiling the ore.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of completion
and the estimated costs necessary to make the sale.
2.9 Trade and other receivables
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.
A provision for impairment of trade receivables is established when there is objective evidence that SASA will not be able
to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the
debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in
payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference
between the asset's carrying amount and the present value of the estimated future cash flows discounted at the financial
asset's original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance
account, and the amount of the loss is recognised in Profit or loss. When a trade receivable is uncollectible, it is
written off against the allowance account for trade receivables.
2.10 Cash and cash equivalents
Cash and cash equivalents comprise bank balances in local and foreign currency, cash in hand and deposits in banks with
original maturity with less than 3 months. The carrying amount of cash and cash equivalents is stated at cost, which
approximates fair value.
2.11 Impairment of financial assets
SASA assesses at each reporting date whether a financial asset or group of financial assets is impaired. A financial asset
is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred
after the initial recognition of the asset. Evidence of impairment may include indications that the debtor is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, bankruptcy or other such
events.
Assets carried at amortised cost
If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, 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 expected credit losses that have not been incurred) discounted at the financial asset's original
effective interest rate (i.e the effective interest rate computed at initial recognition). The carrying amount of the asset
is reduced through use of an allowance account. The amount of the loss shall be recognised in the consolidated statement of
comprehensive income.
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, the previously recognised impairment loss is reversed, to the extent
that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an
impairment loss is recognised in the consolidated statement of comprehensive income.
In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the
probability of insolvency or significant financial difficulties of the debtor) that SASA will not be able to collect all of
the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an
allowance account. Impaired debts are derecognised when they are assessed as uncollectible.
2.12 Own capital
(а) Own capital consists of paid in monetary considerations contributed by the shareholders.
(b) Statutory and other Reserves
Legal reserves are created during the periods by transfer from retained earnings based on the legislation and decisions of
the Management of SASA.
(c) Retained earnings
Retained earnings comprise of non-distributed earnings from the current and past periods.
(d) Dividends
Dividend distribution to SASA's owners is recognised as a liability in SASA's financial information in the period in which
the dividends are approved (declared) by SASA's shareholders.
2.13 Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they
are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
2.14 Provisions and contingent liabilities
Provisions are recognized when SASA has a present legal or constructive obligation as a result of past events and it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made.
Provisions are measured and recorded as the best estimate of the expenditure required to settle the present obligation at
the balance sheet date. The provision charge is recognized in the statement of comprehensive income within the expense
corresponding to the nature of the provision.
Provision for rehabilitation and environment
Management estimate, and provide for, obligations to incur restoration, rehabilitation and environment costs when
environmental disturbance is caused by the initial or ongoing development of a mining property. Costs arising from
establishing infrastructure at the start of a project are discounted to their net present value, provided for and
capitalised when obligation arises. These costs are charged against profits over the useful life of the related asset
through the unwinding of the discount and depreciation charge.
The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated
future costs or in the discount rate applied are added to or deducted from the costs of the asset. No provision is
recognized for contingent liabilities. A contingent liability is a possible obligation that arises from past events and
whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the entity; or a present obligation that arises from past events but is not recognized because
it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or
the amount of the obligation cannot be measured with sufficient reliability.
2.15 Income taxes
The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the
extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is
also recognized in other comprehensive income or directly in equity, respectively. Current tax assets and liabilities for
the current and prior periods are measured at the amounts expected to be recovered or paid to the taxation authorities. The
tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted by the reporting
date.
Current income tax
Companies did not have to pay income tax on their profit before tax (earned since 1 January 2009) until that profit was
distributed in a form of dividend or other forms of profit distributions. If dividend was paid, 10% income tax was payable
at the moment of the dividend payment, regardless of whether in monetary or non-monetary form, to the foreign non-resident
legal entities and, foreign and domestic individuals. The dividends paid out to the resident legal entities were tax
exempt. Apart from distribution of dividends, the tax was still payable on the non-deductible expenses incurred in that
fiscal year, decreased by the amount of tax credits and other tax reliefs.
In January 2014 the profit tax law was amended whereby the income tax is payable at the moment of dividend distribution
regardless of the ownership structure. In accordance with these changes applicable as of January 2014, the income tax in
Macedonia ceased to have the characteristics of withholding taxes. Consequently, as per IAS 12, the income tax arising from
the payment of dividends was accounted for as a liability and profit and loss in the period in which dividends were
declared, regardless of the actual payment date or the period for which the dividends were paid.
As of 1 August 2014, new profit tax law came into force being applicable from 1 January 2015 for the net income for 2014,
with which the base for income tax computation had been shifted from income "distribution" concept to the profit before
taxes. According to the provisions of the new law, the tax base is the profit generated during the fiscal year increased
for non-deductible expenses and reduced for deductible revenue (i.e. dividends already taxed at the payer) and the income
tax rate is 10%. In line with these changes income tax for the year was calculated and recorded in the Statement of
comprehensive income.
Deferred income tax
Deferred tax is recognized applying the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial information. However, deferred tax is not accounted for 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. Deferred tax is determined using income tax rates
that have been enacted or substantially enacted by the financial statement date and are expected to apply when the related
deferred tax asset is realized or the deferred tax liability is settled.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit (or reversing deferred tax
liabilities) will be available against which the temporary differences can be utilized. Deferred income 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 taxes 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.
2.16 Employees Benefits
a) Pension
SASA, in the normal course of business, makes payments on behalf of its employees for pensions, health care, employment and
personnel tax which are calculated on the basis on gross salaries and wages according to the legislation. SASA makes these
contributions to the Governmental health and retirement funds as well to private retirement funds. The cost of these
payments is charged to the income statement in the same period as the related salary cost.
SASA does not operate any other pension scheme or post-retirement benefits plan and consequently, has no obligation in
respect of pensions.
b) Termination benefits
Termination benefits are payable whenever an employee's employment is terminated before the normal retirement date or
whenever an employee accepts voluntary redundancy in exchange for these benefits. SASA recognises termination benefits when
it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan
without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary
redundancy.
c) Retirement benefits and jubilee awards
Pursuant to the Labour law prevailing in the Republic of Macedonia, SASA is obliged to pay retirement benefits in an amount
equal to two average monthly salaries, at their retirement date. According to the Collective agreement, SASA is also
obliged to pay jubilee anniversary awards that correspond to the total number of years of service of the employee. Due to
the long-term nature of these plans, such estimates are subject to significant uncertainty. In addition, SASA is not
obligated to provide further benefits to current and former employees.
Retirement benefit obligations arising on severance pay are stated at the present value of expected future cash payments
towards the qualifying employees. These benefits have been accrued by an independent actuary in accordance with the
prevailing rules of actuarial mathematics. Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to income over the employees' expected average remaining working lives.
2.17 Borrowings
Borrowings are recognised initially at fair value. Borrowings are subsequently carried at amortised cost; any difference
between the proceeds and the redemption value is recognised in the income statement over the period of the borrowings using
the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs.
To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is
capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
2.18 Leases
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of
comprehensive income on a straight-line basis over the period of the lease.
2.19 Revenue
Revenue is derived principally from the sale of metal concentrate and is measured at the fair value of consideration
received or receivable, after deducting discounts, volume rebates, value added tax and other sales taxes. A sale is
recognised when the significant risks and rewards of ownership have passed. This is when title and insurance risk have
passed to the customer and the goods have been delivered to a contractually agreed location.
Sales of metal concentrate are stated at their invoiced amount which is net of treatment and refining charges. Sales of
metal concentrate are determined based on the market price from the LME at the date of sale. Sales are not provisionally
priced.
Revenues from the sale of material by-products are included within revenue. Where a by-product is not regarded as
significant, revenue will be credited against the cost of sales. Revenue from services is recognised as services are
rendered and accepted by the customer. Amounts billed to customers in respect of shipping and handling activities are
classified as revenue where SASA is responsible for freight. In situations where SASA is acting as an agent, amounts billed
to customers are offset against the relevant costs.
3. Financial risk management
3.1 Financial risk factors
SASA does not apply hedge accounting for its financial instruments, all gains and losses are recognized in the income
statement. SASA is exposed in particular to risks from movements in exchange rates and market prices that affect its assets
and liabilities, credit risk and liquidity risk. Financial risk management aims to limit these market risks through ongoing
operational and finance activities.
(i) Market risk
Market risk is defined as the 'risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices' and includes interest rate risk, currency risk and other price risk. The majority of
the revenues of SASA are generated in USD and the remaining part mainly in MKD.
Expenses incurred by SASA are primarily in MKD, followed by EUR and USD and the residual amounts in Swedish Krona ("SEK").
As a result, SASA's objective is to minimize the level of its financial risk in MKD terms. For the presentation of market
risks in accordance with IFRS 7 a sensitivity analyses is prepared below to show the effects of hypothetical changes of the
relevant risk variables on profit or loss and owner's equity. The periodic effects are determined by relating the
hypothetical changes in the risk variables to the balance of financial instruments at the balance sheet date. The balance
at the balance sheet date is representative for the year as a whole.
Commodity prices, primarily lead and zinc, are key revenue drivers for SASA. The prices for lead and zinc can fluctuate
widely and are affected by various factors beyond SASA's control. The main driver for metal price fluctuations is the
supply and demand balance but other factors such as exchange rates, interest rates or speculative activities and the change
in global economies can impact price levels and volatility too. To anticipate the full extent of the impact of any driver
for commodity prices market developments is impossible management believes that is taking all the necessary measures to
support the sustainability and growth of SASA's business in the current circumstances. Nevertheless, future market
fluctuations cannot be predicted with accuracy. SASA does not currently hedge interest commodity price exposure. Any
hedging activity requires approval of SASA's Board of Directors. SASA will not hold or issue derivative instruments for
speculation.
Commodity price sensitivity
SASA is affected by the volatility of certain commodities. Its operating activities require the ongoing sales of Pb and Zn
and processing of ore. The following table shows the effect of metal prices on SASA's financial results:
Change in metal prices Effect on financial position Effect on profit before tax
USD USD
2015................................................................................... 100 USD 3,921,567 3,147,221
(100) USD (4,083,591) (3,147,332)
2014................................................................................... 100 USD 4,372,513 3,760,884
(100) USD (4,553,168) (3,760,884)
Foreign exchange risk
SASA's functional currency is the MKD. The foreign exchange risk exposure of SASA is related to holding foreign currency
cash balances, and operating activities through revenues from and payments to international companies as well as capital
expenditure contracted with vendors in foreign currency.
The currency giving rise to this risk is primarily USD. SASA manages the foreign exchange risk exposure by striving to
manage sales contracts in USD and thus most of the trade receivables are in USD. SASA has small cash reserves in USD
currency. SASA uses cash deposits in MKD or cash deposits in MKD indexed to EUR, to economically manage its foreign
currency risk as well as local currency risk in accordance with the available banks offers.
However, the purchase of spare parts and raw materials are mostly denominated in MKD or EUR and connected to the price
movement on the global movement, which is denominated in the both currencies. Therefore there is associated inherent
business risk with such transactions. SASA's exposure to foreign currency risk was as follows:
MKD EUR USD SEK Other
AssetsCashandcashequivalents ................ 62,262 154,379 - - -
Tradeandotherreceivables ............... 72,411 97,810 6,014,982 - -
Totalassets ......................... 134,673 252,189 6,014,982 - -
LiabilitiesTradepayables ....................... 1,473,914 442,470 45,641 135,647 -
Othercurrentfinancialliabilities ............ 1,240,687 - - - -
Borrowings.......................... 11,208,226 - - - -
Totalliabilities ....................... 13,922,827 442,470 45,641 135,647 -
Netbalancesheetexposure .............. (13,788,154) (190,281) 5,969,341 (135,647) -
2014 MKD EUR USD SEK Other
AssetsCashandcashequivalents .............. 24,308 15,506 923,134 - -
Tradeandotherreceivables.............. 2,137,028 223,732 45,406,425 - -
Short-termloans ..................... 12,688,013 24,559,636 18,252,723 - -
Totalassets........................ 14,849,349 24,798,874 64,582,282 - -
LiabilitiesTradepayables ...................... 1,412,350 380,871 - 88,923 -
Othercurrentfinancialliabilities........... 63,815,239 - - - -
Borrowings ........................ - - 9,228,567 - -
Totalliabilities ..................... 65,227,589 380,871 9,228,567 88,923 -
Netbalancesheetexposure ............. (50,378,240) 24,418,003 55,353,715 (88,923) -
At 31 December 2015, if the MKD had weakened/strengthened by 0.5%, 2% i.e. 0.5% against the EUR/USD/SEK respectively with
all other variables held constant, the recalculated post-tax profit for the year would have been for USD 958 lower/higher
(2014: USD 122,092 lower/higher) for EUR; USD 119,380 lower/ higher (2014: USD 1,107,072 lower/higher) for USD; and USD 674
lower/higher (2014: USD 435 lower/ higher) for SEK.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. Change in the interest rates and interest margins may influence financing costs and
returns on financial investments. Changes in market interest rates affect the interest income on time deposits with banks.
SASA has borrowings in amounts of USD 11,208,226 as of 31 December 2015 (2014: USD 9,228,566), therefore 1 percentage point
rise in market interest rate would have caused (ceteris paribus) the interest paid to increase by approximately USD 112,072
annually before tax (2014: USD 92,305), while a similar decrease would have caused the same decrease in interest paid.
SASA has nil loans receivables as of 31 December 2015 (2014: USD 55,500,372 ), therefore 1 percentage point rise in market
interest rate would have caused (ceteris paribus) the interest received to increase by МКD nil (2014: USD 555,000) annually
before tax, while a similar decrease would have caused the same decrease in interest received.
SASA has cash and cash equivalents in amounts of USD 216,641 as of 31 December 2015 (2014: USD 923,391), therefore 1
percentage point rise in market interest rate would have caused (ceteris paribus) the interest received to increase by
approximately USD 2,164 annually before tax (2014: USD 9,632), while a similar decrease would have caused the same decrease
in interest paid.
(ii) Credit risk
Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss for the other party
by failing to discharge an obligation. SASA is exposed to credit risk from its operating activities and certain financing
activities, as it carries similar credit risk borne by its Ultimate parent, which exposes it to all financial consequences
of default from the parent company's customers failing to make required payments. The process of managing the credit risk
from operating activities includes preventive measures such as creditability checking and prevention barring, corrective
measures during legal relationship for example reminding and disconnection activities. The overdue payments are followed
through a debt escalation procedure based on customer's type, credit class and amount of debt. The credit risk is
controlled through credibility checking - which determines that the customer is not indebted and the customer's credit
worthiness.
SASA's procedures ensure on a permanent basis that
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