Atalaya Mining PLC Announces Results for the year ended 31 December 2018

Atalaya Mining PLC


Atalaya Mining PLC Announces Results for the year ended 31 December 2018

Thursday, April 4, 2019 2:00 AM

A successful year reporting €53.5 million EBITDA for 42,114 tonnes of copper

NICOSIA, CYPRUS / ACCESSWIRE / April 4, 2019 / Atalaya Mining Plc (AIM: ATYM; TSX: AYM) is pleased to announce its audited consolidated results for the year ended 31 December 2018.

The full audited report, including the consolidated Financial Statements is also available under the Company’s profile on SEDAR at www.sedar.com and on Atalaya’s website at www.atalayamining.com

Financial Highlights

Year Ended 31 December

2018

2017

%

Revenues from operations

€k

189,476

160,537

18.0%

Operating costs

€k

(128,898)

(114,687)

12.4%

EBITDA

€k

53,542

41,347

29.5%

Profit for the year

€k

34,441

18,211

89.1%

Earning per shares

€ cents/share

25.4

15.5

63.9%

Cash flows from operating activities

€k

55,333

30,500

81.4%

Cash flows used in investing activities

€k

(65,712)

(22,678)

189.8%

Cash flows from financing activities

€k

593

33,899

(98.3)%

Working capital surplus

€k

8,435

22,137

(61.9)%

Average realised copper price

$/lb

2.95

2.66

10.9%

Cu concentrate produced

(tonnes)

180,661

165,965

8.9%

Cu production

(tonnes)

42,114

37,164

13.3%

Cash costs

$/lb payable

1.94

1.91

1.6%

All-In Sustaining Cost

$/lb payable

2.26

2.30

(1.7)%

  • Revenues amounted to €189.5 million during 2018 (2017: €160.5 million) as a result of 183,368 tonnes of concentrates sold in the period (2017: 158,591 tonnes). As at 31 December 2018, Atalaya had 4,667 tonnes of copper concentrate in inventories (2017: 7,274 tonnes), which were shipped during Q1 2019.
  • Group operating costs and corporate costs amounted to €128.9 million and €5.9 million, respectively (2017: €114.7 million and €4.5 million, respectively), providing an EBITDA of €53.5 million for the twelve months ended 31 December 2018 (2017: €41.3 million).
  • Cash costs for 2018 were US$1.94/lb of payable copper (2017: US$1.91/lb), below the revised guidance of US$1.95/lb, providing healthy margins and positive cash flows at average realised copper prices of $2.95/lb during the year.
  • AISC averaged $2.26/lb of payable copper for the year, within the revised guidance of US$2.25-2.40/lb.
  • Group net income of €34.4 million (or 25.4 cents per outstanding share) (2017: €18.2 million or 15.5 cents per outstanding share).
  • Net assets totalled €286.4 million (2017: €246.9 million), comprising non-current assets of €337.5 million, non-current liabilities of €59.6 million and working capital of €8.4 million. Long term liabilities include the Deferred Consideration to Astor amounting to €53 million. Working capital includes €33.1 million of cash and cash equivalents.
  • Positive cash flows from operating activities for the twelve months ended 31 December 2018 amounted to €55.3 million (2017: €30.5 million). Cash invested during the period amounted to €65.7 million (2017: €22.7 million), mainly for the expansion of Proyecto Riotinto and deferred mining costs.

Operating Highlights

Proyecto Riotinto – operating ahead of expectations

  • 11.4% increase in tonnes of ore processed to 9.8 million tonnes (“Mt”) (2017: 8.8 Mt) with stable operations quarter-on-quarter during the second full year of commercial production.
  • 13.3% year on year increase in copper production to 42,114 tonnes (2017: 37,164 tonnes), above the revised 2018 high-end guidance of 41,000 tonnes.
  • Copper grade consistent with estimates averaging 0.49% for 2018.
  • Year on year increase in recovery rate to 88.30% (2017: 85.45%), which was above revised increased high-end guidance for the year.
  • On 9 July 2018, Atalaya announced the completion of a NI 43-101 report on an updated resources and reserves estimate for Proyecto Riotinto. The main features of the reports, based on the position as at 31 December 2017, are:
    • Updated open pit proven and probable reserves estimate report a 29% increase in mineral reserves up to 197 million tonnes grading 0.42% of copper.
    • Reduced operating cash cost and All-in Sustaining costs of $2.10/lb and $2.22/lb of payable copper, respectively.
    • Life of mine of 13.8 years including ramp up production to 11 million tonnes in 2019 and 15 million tonnes from 2020.
    • Reduced strip ratio, waste to ore, of 1.43:1

Expansion of Proyecto Riotinto – remains on track for mechanical completion at the end of Q2 2019

  • The 15Mtpa Expansion Project progressed according to schedule during the year with an overall progress completion at the end of December 2018 of over 80%.
  • All efforts are now concentrated around site construction activities:
    • Earthworks were completed and civil engineering works are being finalised.
    • Installation of mechanical equipment was completed in the flotation and concentrate handling areas.
    • Structural steel works have been finalised in the flotation area with piping installation under way.
    • Piping was completed in the concentrate handling area with electrical installation well advanced.

Proyecto Touro

  • During the second quarter of 2018, the Company announced the completion of a pre-feasibility study (“PFS”) for the proposed open pit mine and concentrator at Proyecto Touro, prepared using the headings of, and guidance set out in the NI 43-101 report. Highlights of the PFS report are:
    • 392,000 tonnes of contained copper in Proven and Probable reserves;
    • Average yearly production of 30,000 tonnes of copper and 70,000 ounces of silver in concentrate;
    • Pre-production capital expenditure of $165 million;
    • All-in sustaining costs of US$1.85/lb of payable Cu net of silver credits; and
    • NPV of $180 million post-tax at 8% discount rate using long term copper price of US3.00/lb.
  • The environmental impact assessment process was completed during Q4 2018 and since the filing, a number of queries have been addressed and cleared as part of the consulting and permitting process. Atalaya is looking forward to the evaluation of the project from a regulatory perspective which is the next step in the permitting process.

Outlook for 2019

  • 2019 production guidance estimated within 45,000 to 46,500 tonnes of copper, including the impact of the extra capacity from the expansion towards the end of the year.
  • Cash costs and AISC 2019 guidance to range from US$1.95/lb to US$2.15/lb and from US$2.25/lb to US$2.45/lb, respectively.

Operating Highlights

Ruling of AAU

  • On 26 September 2018, Atalaya received notice from the Tribunal Superior de Justicia de Andalucía ruling in favour of certain claims made by environmental group Ecologistas en Accion (“EeA”) against the government of Andalucía (“Junta de Andalucía” or “JdA”) and Atalaya, as co-defendant in the case.

In July 2014, EeA had filed a legal claim to JdA with a request to declare null the Unified Environmental declaration (in Spanish, Authorization Ambiental Unificada, or “AAU”) granted to Atalaya Riotinto Minera, S.L.U. dated 27 March 2014, which was required in order to secure the required mining permits for Proyecto Riotinto. The judgment, in spite of annulling the AAU on procedural grounds, made very clear that the AAU was correct and therefore, rejected the issues raised by EeA and confirmed the decision of JdA not to suspend the AAU.

The JdA filed for appeal to the Supreme Court. Although the claim was against the JdA, Atalaya, being an interested party in the process, voluntarily joined as co-defendant to ask for permission to appeal to the Supreme Court in Spain.

On 29 March 2019, Atalaya announced the receipt of notification from the Supreme Court in Spain stating that it does not have jurisdiction over the appeal made by the Junta de Andalucía and the Company, which voluntary joined the appeal as con-defendant.

The main legal consequence of the Supreme Court rejection is the ruling of the Junta de Andalucía dated 26 September 2018 is now final and enforceable and the environmental authority must repair the faultiness in the process. The Company is currently in discussions to the Junta de Andalucía to resolve the formal defects identifiedw by the Tribunal Superior de Justicia de Andalucía.

The Company continues operating the mine normally as the ruling does not state the operation at Proyecto Riotinto

Astor

  • On 1 November 2018, the Company announced that a judgment had been handed down in the Astor Case at the Court of Appeal. The Court of Appeal confirmed the ruling from the High Court made on 6 March 2017, and consequently, the Company recorded a liability for €53 million to be paid from the excess cash generated by Atalaya Riotinto Minera, S.L.U. (“ARM”). As of 31 December 2018, no consideration has been paid.

Alberto Lavandeira, CEO commented:

“These results demonstrate once again that the team at Atalaya delivers. Our second year of production has successfully built on our first, with incremental growth quarter on quarter. We are delighted to have delivered ahead of or in line with expectations across the majority of our core key performance indicators, which has had a positive impact on our financials and bottom line. We have achieved all this while also progressing the expansion of Riotinto, and the rate at which this programme is advancing means that we look forward to 2019 with confidence. Riotinto’s additional exploration potential, combined with Proyecto Touro and our ongoing efforts to seek new opportunities, provides the pathway via which management can realise its ambition to grow the company.”

About Atalaya Mining Plc

Atalaya is an AIM and TSX-listed mining and development group which produces copper concentrates and silver by-product at its wholly owned Proyecto Riotinto site in southwest Spain. In addition, the Group has a phased, earn-in agreement for up to 80% ownership of Proyecto Touro, a brownfield copper project in the northwest of Spain which is currently in the permitting stage. For further information, visit www.atalayamining.com

This announcement contains information which, prior to its publication constituted inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Contacts:

Newgate Communications

Elisabeth Cowell / Adam Lloyd / Tom Carnegie

+ 44 20 3757 6880

4C Communications

Carina Corbett

+44 20 3170 7973

Canaccord Genuity (NOMAD and Joint Broker)

Martin Davison / Henry Fitzgerald-O'Connor / James Asensio

+44 20 7523 8000

BMO Capital Markets (Joint Broker)

Jeffrey Couch / Tom Rider / Michael Rechsteiner

+44 20 7236 1010


Years Ended 31 December 2018 and 2017

The Group

The Company

The Group

The Company

(Euro 000’s)

Note

2018

2018

2017

2017

Revenue

5

189,476

1,323

160,537

1,015

Operating costs and mine site administrative expenses

(128,707)

-

(114,687)

-

Mine site depreciation and amortization

13,14

(13,430)

-

(16,664)

-

Gross profit

47,339

1,323

29,186

1,015

Administration and other expenses

(5,867)

(4,370)

(4,356)

(4,001)

Corporate depreciation

-

-

(7)

(7)

Share based benefits

24

(216)

(10)

(152)

(34)

Care and maintenance expenditure

(281)

-

-

-

Exploration expenses

(1,021)

-

-

-

Operating profit/(loss)

7

39,954

(3,057)

24,671

(3,027)

Other income

6

158

117

5

1

Net foreign exchange gain/(loss)

4

1,613

40

(2,212)

264

Interest income form financial assets at fair value

9

-

13,615

-

-

Interest income form financial assets at amortised cost

9

71

2,569

22

1,635

Finance costs

10

(253)

-

(579)

-

Profit/(loss) before tax

41,543

13,284

21,907

(1,127)

Tax

11

(7,102)

(1,524)

(3,696)

-

Profit / (loss) for the year

34,441

11,760

18,211

(1,127)

Profit / (loss) for the year attributable to:

  • Owners of the parent

34,715

11,760

18,239

(1,127)

  • Non-controlling interests

(274)

-

(28)

-

34,441

11,760

18,211

(1,127)

Earnings per share from operations attributable to equity holders of the parent during the year:

Basic earnings per share (EUR cents per share)

12

25.4

15.5

Fully diluted earnings per share (EUR cents per share)

12

25.1

15.3

Profit / (loss) for the year

34,441

11,760

18,211

(1,127)

Other comprehensive income:

Change in fair value of financial assets through other comprehensive income ‘OCI’

21

(58)

(58)

-

-

Change in value of available-for-sale investments

20

-

-

(132)

(132)

Total comprehensive profit /(loss) for the year

34,383

11,702

18,079

(1,259)

Total comprehensive profit for the year attributable to:

  • Owners of the parent

34,657

11,702

18,107

(1,259)

  • Non-controlling interests

(274)

-

(28)

-

34,383

11,702

18,079

(1,259)

The notes on pages 7 to 59 are an integral part of these consolidated and Company financial statements.

As at 31 December 2018 and 2017

As at 31 December

As at 31 December

(Euro 000’s)

Note

The

Group

2018

The

Company 2018

The

Group

2017

The Company 2017

Assets

Non-current assets

Property, plant and equipment

13

257,376

-

199,458

-

Intangible assets

14

71,951

-

73,700

-

Investment in subsidiaries

15

-

3,899

-

3,693

Trade and other receivables

19

249

290,104

212

-

Deferred tax asset

17

7,927

-

10,130

-

337,503

294,003

283,500

3,693

Current assets

Inventories

18

10,822

-

13,674

-

Trade and other receivables

19

23,688

6,689

34,213

242,824

Available-for-sale investments

20

-

-

129

129

Other financial assets

21

71

71

-

-

Cash and cash equivalents

22

33,070

826

42,856

34,410

67,651

7,586

90,872

277,363

Total assets

405,154

301,589

374,372

281,056

Equity and liabilities

Equity attributable to owners of the parent

Share capital

23

13,372

13,372

13,192

13,192

Share premium

23

314,319

314,319

309,577

309,577

Other reserves

24

12,791

5,845

6,137

5,687

Accumulated losses

(58,308)

(50,657)

(86,527)

(62,417)

282,174

282,879

242,379

266,039

Non-controlling interests

25

4,200

-

4,474

-

Total equity

286,374

282,879

246,853

266,039

Liabilities

Non-current liabilities

Trade and other payables

26

45

-

74

-

Provisions

27

6,519

-

5,727

-

Deferred consideration

28

53,000

9,117

52,983

9,100

59,564

9,117

58,784

9,100

Current liabilities

Trade and other payables

26

57,271

8,069

67,983

5,917

Current tax liabilities

11

1,945

1,524

752

-

59,216

9,593

68,735

5,917

Total liabilities

118,780

18,710

127,519

15,017

Total equity and liabilities

405,154

301,589

374,372

281,056

The notes on pages 7 to 59 are an integral part of these consolidated and company financial statements.

The consolidated and company financial statements were authorised for issue by the Board of Directors on 3 April and were signed on its behalf.

Roger Davey

Alberto Lavandeira

Chairman

Managing Director

Years Ended 31 December 2018 and 2017

Attributable to owners of the parent

(Euro 000’s)

Note

Share capital

Share

Premium (2)

Other reserves(1)

Accumulated

losses

Total

Non-

controlling

interest

Total equity

At 1 January 2017

11,632

277,238

5,667

(104,316)

190,221

-

190,221

Profit for the year

-

-

-

18,239

18,239

(28)

18,211

Change in value of available-for-sale investments

20

-

-

(132)

-

(132)

-

(132)

Total comprehensive income

-

-

(132)

18,239

18,107

(28)

18,079

Transactions with owners

Issue of share capital

23

1,560

33,182

-

-

34,742

-

34,742

Share issue costs

23

-

(843)

-

-

(843)

-

(843)

Depletion factor

24

-

-

450

(450)

-

-

-

Recognition of share-based payments

-

-

152

-

152

-

152

Non-controlling interests

-

-

-

-

-

4,502

4,502

At 31 December 2017/

1 January 2018

13,192

309,577

6,137

(86,527)

242,379

4,474

246,853

Profit for the year

-

-

-

34,715

34,715

(274)

34,441

Change in fair value of financial assets through OCI

21

-

-

(58)

-

(58)

-

(58)

Total comprehensive income

-

-

(58)

34,715

34,657

(274)

34,383

Transactions with owners

Issue of share capital

23

180

4,747

-

-

4,927

-

4,927

Share issue costs

23

-

(5)

-

-

(5)

-

(5)

Depletion factor

24

-

-

5,050

(5,050)

-

-

-

Recognition of share-based payments

-

-

216

-

216

-

216

Recognition of non-distributable reserve

24

-

-

1,446

(1,446)

-

-

-

At 31 December 2018

13,372

314,319

12,791

(58,308)

282,174

4,200

286,374

(1) Refer to Note 24

(2) The share premium reserve is not available for distribution.

The notes on pages 7 to 59 are an integral part of these consolidated and company financial statements.

Years Ended 31 December 2018 and 2017

(Euro 000’s)

Note

Share capital

Share

premium(2)

Other

reserves(1)

Accumulated

losses

Total

At 1 January 2017

11,632

277,238

5,667

(61,290)

233,247

Loss for the year

-

-

-

(1,127)

(1,127)

Change in value of available-for-sale investments

20

-

-

(132)

-

(132)

Total comprehensive income

-

-

(132)

(1,127)

(1,259)

Issue of share capital

23

1,560

33,182

-

-

34,742

Share issue costs

23

-

(843)

-

-

(843)

Recognition of share-based payments

-

-

152

-

152

At 31 December 2017/1 January 2018

13,192

309,577

5,687

(62,417)

266,039

Profit for the year

-

-

-

11,760

11,760

Change in fair value of financial assets through OCI

21

-

-

(58)

-

(58)

Total comprehensive income

-

-

(58)

11,760

11,702

Issue of share capital

23

180

4,747

-

-

4,927

Share issue costs

23

-

(5)

-

-

(5)

Recognition of share-based payments

-

-

216

-

216

At 31 December 2018

13,372

314,319

5,845

(50,657)

282,879

(1) Refer to Note 24

(2) The share premium reserve is not available for distribution.

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 17% will be payable on such deemed dividends to the extent that the ultimate shareholders are both Cyprus tax resident and Cyprus domiciled. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defence is payable by the Company for the account of the shareholders.

The notes on pages 7 to 59 are an integral part of these consolidated and company financial statements.

Years Ended 31 December 2018 and 2017

(Euro 000’s)

Note

2018

2017

Cash flows from operating activities

Profit before tax

41,543

21,907

Adjustments for:

Depreciation of property, plant and equipment

13

10,143

12,540

Amortisation of intangible assets

14

3,287

4,131

Recognition of share‑based payments

24

216

152

Hedging income

10

-

(205)

Interest income

9

(71)

(22)

Interest expense

10

214

671

Unwinding of discounting

10

39

113

Legal provisions

27

(86)

213

Release of prior year provision

6

(117)

-

Gain on disposal of associate

6

-

(49)

Loss on disposal of intangibles

955

-

Impairment on available-for-sale investment

20

-

49

Unrealised foreign exchange loss on financing activities

179

11

Cash inflows from operating activities before working capital changes

56,302

39,511

Changes in working capital:

Inventories

18

2,852

(7,479)

Trade and other receivables

19

11,697

(2,653)

Trade and other payables

(10,334)

5,350

Derivative instruments

-

(215)

Deferred consideration

17

-

Provisions

27

-

(733)

Cash flows from operations

60,534

33,781

Interest paid

(214)

(671)

Tax paid

(4,987)

(2,610)

Net cash from operating activities

55,333

30,500

Cash flows from investing activities

Purchases of property, plant and equipment

13

(63,216)

(20,220)

Purchases of intangible assets

14

(2,492)

(2,694)

Proceeds from sale of property, plant and equipment

-

9

Disposal of subsidiary

15

(75)

-

Purchase of other financial assets

21

-

-

Hedging income

10

-

205

Interest received

9

71

22

Net cash used in investing activities

(65,712)

(22,678)

Cash flows from financing activities

Proceeds from issue of share capital

598

34,742

Listing and issue costs

23

(5)

(843)

Net cash from financing activities

593

33,899

Net (decrease) / increase in cash and cash equivalents

(9,786)

41,721

Cash and cash equivalents:

At beginning of the year

22

42,856

1,135

At end of the year

22

33,070

42,856

The notes on pages 7 to 59 are an integral part of these consolidated and company financial statements.

Years Ended 31 December 2018 and 2017

(Euro 000’s)

Note

2018

2017

Cash flows from operating activities

Profit/(loss) before tax

13,284

(1,127)

Adjustments for:

Depreciation of property, plant and equipment

13

-

7

Share‑based payments

7

10

34

Interest income

9

(63)

-

Interest income from interest-bearing intercompany loans

9

(16,121)

(1,635)

Loss on available-for-sale investment

6

-

49

Release of prior year provision

6

(117)

-

Gain on disposal of associate

6

-

(45)

Unrealised foreign exchange loss on financing activities

209

(3)

Cash inflows used in operating activities before working capital changes

(2,798)

(2,720)

Changes in working capital:

Increase in trade and other receivables

19

(53,969)

(2,579)

Increase in trade and other payables

26

2,077

3,846

Cash flows used in operations

(54,690)

(1,453)

Interest paid

-

-

Net cash used in operating activities

(54,690)

(1,453)

Cash flows from investing activities

Proceeds from disposal of property, plant and equipment

-

9

Interest received

9

63

-

Interest income from interest-bearing intercompany loans

9

16,121

1,635

Net cash from investing activities

16,184

1,644

Cash flows from financing activities

Proceeds from issue of share capital

23

4,927

34,742

Listing and issue costs

23

(5)

(843)

Net cash from financing activities

4,922

33,899

Net (decrease)/increase in cash and cash equivalents

(33,584)

34,090

Cash and cash equivalents:

At beginning of the year

22

34,410

320

At end of the year

22

826

34,410

The notes on pages 7 to 59 are an integral part of these consolidated and company financial statements

1. Incorporation and summary of business

Country of incorporation

Atalaya Mining Plc (the “Company”) was incorporated in Cyprus on 17 September 2004 as a private company with limited liability under the Companies Law, Cap. 113 and was converted to a public limited liability company on 26 January 2005. Its registered office is at 1 Lampousa Street, Nicosia, Cyprus.

The Company was listed on AIM of the London Stock Exchange in May 2005 under the symbol ATYM and on the TSX on 20 December 2010 under the symbol AYM. The Company continued to be listed on AIM and the TSX as at 31 December 2018.

Additional information about Atalaya Mining Plc is available at www.atalayamining.com as per requirement of AIM rule 26.

Changed on name and share consolidation

Following the Company’s EGM on 13 October 2015, the change of the name EMED Mining Public Limited to Atalaya Mining Plc became effective on 21 October 2015. On the same day, the consolidation of ordinary shares came into effect, whereby all shareholders received one new ordinary share of nominal value £0.075 for every 30 existing ordinary shares of nominal value of £0.0025.

Principal activities

The Company owns and operates through a wholly-owned subsidiary, “The Riotinto Project”, an open-pit copper mine located in the Pyritic belt, in the Andalusia region of Spain, approximately 65 km northwest of Seville.

In addition, the Company has a phased earn-in agreement up to 80% ownership of “The Touro Project”, a brownfield copper project in northwest Spain, which is currently at the permitting stage.

The Company’s and its subsidiaries’ activity is to explore for and develop metals production operations in Europe, with an initial focus on copper.

The strategy is to evaluate and prioritise metal production opportunities in several jurisdictions throughout the well-known belts of base and precious metal mineralisation in Spain and the Eastern European region.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated and company financial statements (hereinafter “financial statements”) are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

(a) Overview

The financial statements of Atalaya Mining Plc have been prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS comprise the standards issued by the International Accounting Standards Board (“IASB”) and IFRS Interpretations Committee (“IFRICs”) as issued by the IASB.

Additionally, the financial statements have also been prepared in accordance with the IFRS as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113. For the year ending 31 December 2018, the standards applicable for IFRS’s as adopted by the EU are aligned with the IFRS’s as issued by the IASB.

The consolidated financial statements have been prepared on a historical cost basis except for the revaluation of certain financial instruments that are measured at fair value at the end of each reporting period, as explained below.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.4.

2. Summary of significant accounting policies (continued)

(b) Going concern

These financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Group and the Company will realise its assets and discharge its liabilities in the normal course of business. Management has carried out an assessment of the going concern assumption and has concluded that the Group and the Company will generate sufficient cash and cash equivalents to continue operating for the next twelve months.

2.2 Changes in accounting policy and disclosures

2.2.1 New and amended standards and interpretations

During the current year the Group and the Company adopted all the new and revised International Financial Reporting Standards (IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2018.

The Group and the Company applied IFRS 9 and IFRS 15 for the first time from 1 January 2018. The nature and effect of the changes as a result of adoption of these new accounting standards are described below.

Several other amendments and interpretations apply for the first time in 2018, but do not have a significant impact on the consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments addresses the classification, measurement, and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets.

Based on the assessment performed, the new guidance has the following impacts on the classification and measurement of its financial instruments.

  • Classification and measurement of the embedded derivatives arising from sales: The financial assets and liabilities arising from the revaluation of provisional priced contracts were previously disclosed separately in the balance sheet as part of “Other financial assets/liabilities”. Under IFRS 9, the embedded derivative is no longer separated from the host contract and therefore the revaluation of provisionally priced contract is disclosed within the receivable of the host contract in “Trade and other receivables” and classified as fair value through profit and loss. An embedded derivative will often make a financial asset fail the SPPI test thereby requiring the instrument to be measured at fair value through profit or loss in its entirety. This is applicable to the Group’s trade receivables (subject to provisional pricing). No significant impact on measurement on transition to IFRS 9.
  • Classification and measurement of the Parent Company participative loan: The Participative loan was previously classified at amortised cost. Under IFRS 9 the classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. The Participative loan is now classified as fair value through profit and loss. No significant impact on measurement on transition to IFRS 9.
  • Financial assets at fair value through Other Comprehensive Income (“OCI”): The equity instruments that were classified as available-for-sale financial assets satisfy the conditions for classification as at fair value through other comprehensive income (FVOCI) and therefore there is no impact in classification. Gains and losses accumulated in other comprehensive income are not recycled to the income statement.

Furthermore, under IFRS 9 there is no exception to carry investments in entities at costs less any recognised impairment and therefore, fair value will need to be calculated. There are no other significant changes to the accounting treatment of these assets.

  • Impairment: The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39. The Group applies the simplified approach and records lifetime expected losses on all trade receivables. However, given the short term nature of the Group’s receivables, there is not a significant impact in the financial statements.

For the Parent Company, current and non-current receivables (except for non-current assets at fair value through profit and loss) are stated at amortised cost. A provision for impairment of receivables is established using the expected credit loss impairment model according IFRS 9.

2. Summary of significant accounting policies (cont.)

2.2 Changes in accounting policy and disclosures (cont.)

2.2.1 New and amended standards and interpretations (cont.)

The amount of the provision is the difference between the carrying amount and the recoverable amount and this difference is recognised in the income statement.

  • Disclosures: The standard introduces expanded disclosure requirements and changes in presentation included in this report. The Group also assessed other changes introduced by IFRS 9 that have no impact
  • on the financial statements as explained below:
  • There is no impact on the accounting for financial liabilities, as the new requirements of IFRS 9 only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities.
  • No impacts in relation to derecognition of financial instruments as the same rules have been transferred from IAS39 Financial Instruments: Recognition and Measurement

IFRS 15 Revenue from Contracts with Customers

The IASB has issued a new standard for the recognition of revenue arising from contracts with customers. The new revenue standard supersedes all current revenue recognition requirements under IFRS.

The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The Group evaluates recognition and measurement of revenue based on the five-step model in IFRS 15 and has not identified significant financial impacts, hence no adjustments were recorded derived from the adoption of IFRS 15 other than certain reclassifications as explained below.

The Group adopted the new standard from 1 January 2018 applying the simplified transition method and modified retrospective approach. Certain disclosures changed as a result of the requirements of IFRS 15.

The key issues identified, and the Group’s views and perspective are set below:

The revaluation of provisionally priced contracts is recorded as an adjustment to revenue. IFRS 15 does not change the assessment of the provisional price adjustment, but they are not considered within the scope of IFRS 15, and consequently have to be disclosed separately (refer to Note 5).

Impact of shipping terms: The group sells a very small portion of its products on CIF Incoterms and therefore the Group is responsible for shipping services after the date at which control of the copper passes to the customer. Under IAS 18, these shipping services were not considered to be part of the revenue transaction and thus the Group disclosed them as selling expenses. However, under IFRS 15, the Group reclassified the portion of these selling expenses relating to transport of copper from the Group’s production plants to the ports and to the customers, and reclassify those costs to cost of sales. The shipping services reclassified for the period ending 31 December 2018 amounted to €1.0 million. The Group assessed the amount of costs related to shipping services which are considered a separate performance obligation under IFRS 15 and therefore, a portion of the revenue currently recognised when the title has passed to the customer will need to be deferred and recognised as the shipping services are subsequently provided. Under IFRS 15 the costs related to shipping services are considered a separate performance obligation and therefore they should be deferred and recognised as the shipping services are subsequently provided. Based on the Group’s assessment, the shipping services being provided at the beginning and end of the reporting period are immaterial and therefore these have not been deferred. The total shipping services recognised during the year as a separate performance obligation under IFRS 15 amounts to €1.0 million and have been disclosed in Note 5.

IFRS 2: Classification and Measurement of Share based Payment Transactions (Amendments)

The Amendments are effective for annual periods beginning on or after 1 January 2018 with earlier application permitted. The Amendments provide requirements on the accounting for the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments, for share-based payment transactions with a net settlement feature for withholding tax obligations and for modifications to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. As the Company does not have cash settled awards, the amendments to IFRS 2 do not impact the Consolidated and Company’s financial statements

2. Summary of significant accounting policies (cont.)

2.2 Changes in accounting policy and disclosures (cont.)

2.2.2 Standards issued but not yet effective

The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements are disclosed below. Some of them were adopted by the European Union and others not yet. The Group and the Company intend to adopt these new and amended standards and interpretations, if applicable, when they become effective.

IFRS 16 – Leases

The new standard on leases that replaces IAS 17, IFRIC 4, SIC-15 and SIC-27. Under the provisions of the standard most leases, including the majority of those previously classified as operating leases, will be brought onto the statement of financial position, as both a right-of-use asset and a largely offsetting lease liability. The right-of-use asset and lease liability are both based on the present value of lease payments due over the term of the lease, with the asset being depreciated in accordance with IAS 16 ‘Property, Plant and Equipment’ and the liability increased for the accretion of interest and reduced by lease payments.

Atalaya has completed an initial assessment of the potential impact of IFRS 16 on its consolidated financial statements but has not yet completed its detailed assessment. The actual impact of applying IFRS 16 on the consolidated financial statements in the period of initial application will depend on future economic conditions, including the Group´s borrowing rate at 1 January 2019, the composition of Atalaya´s borrowing rate at 1 January 2019, the composition of Atalaya´s portfolio at that date, its latest assessment of whether it will exercise any lease renewal options, and the extent to which Atalaya chooses to use practical expedients and recognition exemptions. The directors continue to consider the potential effects on the Group’s financial statements and do not currently expect that there will be a material impact, given the current market and internal conditions.

IFRS 9: Prepayment features with negative compensation (Amendment)

These Amendments should be applied retrospectively and are effective from 1 January 2019, with earlier application permitted, These Amendments have no impact on the consolidated financial statements of the Group..

Amendment in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.

The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. In December 2015 the IASB postponed the effective date of this amendment indefinitely, but an entity that early adopts the amendments must apply them prospectively. The Group will apply these amendments when they become effective.

IFRS 17 Insurance Contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of IFRS 17 is the general model, supplemented by:

• A specific adaptation for contracts with direct participation features (the variable fee approach)

• A simplified approach (the premium allocation approach) mainly for short-duration contracts

IFRS 17 is effective for reporting periods beginning on or after 1 January 2021, with comparative figures required. Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17. This standard is not applicable to the Group.

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SOURCE: Atalaya Mining PLC


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