Half-year Report

RNS Number : 1370J

Atalaya Mining PLC

07 September 2016

 

Atalaya Mining Plc

("Atalaya" or the "Company")

Half Yearly Financial Statements

Atalaya Mining plc (AIM:ATYM, TSX:AYM), the European mining and development company, announces its unaudited quarterly and interim results for the three and six months to June 30 2016, together with the unaudited, condensed interim consolidated financial statements.

The complete unaudited, condensed half yearly financial statements displayed below, are also available under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.atalayamining.com

Period Highlights

·      The Expansion Project was declared mechanically complete during the first week of May 2016, ahead of schedule and under budget.

·      The ramp-up process progressed according to plan.  Copper production increased by 10% in Q2 2016 to 4,442 tonnes, compared with 4,048 tonnes in Q1 2016.  The 10% increase in production during the second quarter was significant considering the plant was temporarily shut down as a result of both the tailings discharge suspension by the Junta de Andalucía and the interruptions required to commission the Expansion Project. 

·      1.3 million tonnes of ore were processed, compared with 1.1 million tonnes during Q1 2016, representing a 15% increase.  Production levels in June 2016 increased to an annualised rate of 6.8Mtpa, in line with the ramp-up schedule.  This trend continued in August 2016 with annualised rate equivalent to 8.3Mtpa.

·      Copper grade in the final concentrate was consistent with the previous quarter, reporting 21.43% in Q2 2016 as compared to 21.33% for Q1 2016. Recoveries were lower at 80.46% during Q2 2016, compared with 84.26% during Q1 2016.  Recoveries increased back to over 84% during July and August, which is the expected rate of the new flotation circuit.

·      Atalaya announced commercial production in February 2016 with revenues of €17.7 million and €22.6 million for the three months and six months period, respectively.  Negative EBITDA of €1.1 million and €3.6 million was recorded for the three months and six months period respectively.  EBITDA values were significantly impacted by ramp-up of production but have improved in Q2 2016 as compared to Q1 2016 and are expected to improve further in Q3 2016.

·      The average market prices of copper for the three and six months ended 30 June 2016 amounted to US$2.21/lb for the second quarter and US$2.16/lb for the six months.  The Company's realised copper prices for the same periods were US$2.11/lb and US$2.06/lb respectively.  As commercial production was declared in February 2016, no comparative operational data was available for 2015.

·      Operating cash costs per pound of payable copper were negatively impacted by the normal ramp-up process and the temporary suspension.  Cash costs for Q2 2016 were $2.36/lb whereas for H1 2016 were $2.31/lb.  These costs are projected to come down as nameplate capacity is reached and steady state production is achieved.

·      Inventories of concentrates at 30 June 2016 amounted to €6.2 million.

·      Capital expenditure for the six months ending 30 June 2016 amounted to €17.1 million.

·      Astor case - Atalaya continues to work closely with its legal advisors in preparing for trial at the High Court of Justice in London, with the date for the trial having been set for 30 January 2017.  Atalaya remains confident of a positive outcome of the upcoming trial and will update shareholders following the trial, or if there are any material developments in the meantime.

Events after the reporting period

·      The Company announced the appointment of Cesar Sanchez as Group Chief Financial Officer.

·      An updated Reserves and Resources statement was released indicating a 12% increase in contained reserves and extended life of mine to 16.5 years.

·      BMO Capital Markets Limited was appointed as Joint Corporate Broker.

·      On 5 September 2016, the Company announced the completion of a US$14 million prepayment funding facility with Transamine Trading S.A.  The facility covers part of the Group's short term working needs in order to support itself through the ramp-up phase.  The Group continues to work on alternative funding solutions to improve its balance sheet and its working capital position during the ramp-up period to full expanded production.

Alberto Lavandeira, CEO commented:

"We continue to be satisfied with the rapid progress of the successful commissioning of the plant expansion.  The Company experienced a couple of isolated operational incidences that together with the weak copper price have adversely affected the operations and results.  We nevertheless remain confident that with the ramp up of the expansion and with steady throughput being rapidly achieved, the Company is moving to positive cash generation in the coming months.  We continue to remain bullish on the long term outlook for copper."

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Contacts:

Atalaya Mining plc	Roger Davey / Alberto Lavandeira	[phone]
Canaccord Genuity (NOMAD and Joint Broker)	Henry Fitzgerald-O'Connor / Martin Davison	[phone]
BMO Capital Markets (Joint Broker)	Jeffrey Couch/Neil Haycock/Tom Rider	[phone]

 

ATALAYA MINING PLC

MANAGEMENT'S REVIEW AND

CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

30 JUNE 2016

(UNAUDITED)

Notice to Reader

The accompanying unaudited condensed interim consolidated financial statements of Atalaya have been prepared by and are the responsibility of Atalaya's management.  The unaudited, condensed interim consolidated financial statements have not been reviewed by Atalaya's auditors.

Introduction

This report provides an overview and analysis of the financial results of operations of Atalaya Mining plc and its subsidiaries ("Atalaya" and/or the "Group"), to enable the reader to assess material changes in the financial position between 31 December 2015 and 30 June 2016 and results of operations for the three and six months ended 30 June 2016 and 2015.

This report has been prepared as of 6 September 2016.  The analysis, hereby included, is intended to supplement and complement the unaudited, condensed, consolidated financial statements and notes thereto ("Financial Statements") as at and for the three and six months ended 30 June 2016.  The reader should review the Financial Statements in conjunction with the review of this report and with the audited, consolidated financial statements for the year ended 31 December 2015, and the unaudited, condensed consolidated financial statements for the three months ended 31 March 2016.  These documents can be found on the Atalaya website at www.atalayamining.com.

Atalaya prepares its Financial Statements in accordance with International Financial Reporting Standards ("IFRSs"). The currency referred to in this document is the Euro, unless otherwise specified.

Forward-looking statements

This report may include certain "forward-looking statements" and "forward-looking information" under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterised by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Assumptions upon which such forward-looking statements are based include that all required third party regulatory and governmental approvals will be obtained. Many of these assumptions are based on factors and events that are not within the control of Atalaya and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions and other risk factors discussed or referred to in this report and other documents filed with the applicable securities regulatory authorities. Although Atalaya has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Atalaya undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.

1.       Highlights - three and six months ended 30 June 2016

Operational performance

·      The expansion project was declared mechanically complete during the first week of May 2016, ahead of schedule and under budget.

·      Copper production increased by 10% in Q2 2016 to 4,442 tonnes, compared with 4,048 tonnes in Q1 2016. The increase in production was significant considering the plant was temporarily shut down due to the administrative tailings discharge suspension and interruptions required to commission the expansion project.

·      1.3 million tonnes of ore were processed compared with 1.1 million tonnes during Q1 2016, representing a 15% increase.

·      Ramp-up of production is continuing as planned, with the plant now running at 8.3 Mtpa with accumulated production for July and August being 26% higher than Q2 2016.  Full plant throughput rate of 9.5 Mtpa expected to be achieved by the end of 2016.

·      Copper grade in final concentrate remained consistent at 21.43% while recoveries decreased to 80.46% during Q2 2016, compared with 84.26% in Q1 2016.  Recoveries increased back and continued to average over 84% in July and August.

·      An updated Reserves and Resources statement was released following the end of Q2 2016, indicating a 12% increase in contained reserves and extended life of mine to 16.5 years.

Financial performance

·      Atalaya announced commercial production in February 2016 with revenues of €17.7 million and €22.6 million for the three months and six months period, respectively.

·      Negative Earnings Before Interest, Taxation, Depreciation and Amortisation ("EBITDA") of €1.1 million and €3.6 million for the three months and six months period respectively. EBITDA values were significantly impacted by ramp-up of production but have improved in Q2 2016 as compared to Q1 2016.

·      Inventories of concentrates at 30 June 2016 amounted to €6.2 million.

·      Capital expenditure for the six months period ended on 30 June 2016 amounted to €17.1 million.

1.       Highlights - three and six months ended 30 June 2016 (continued)

Funding

·      On 5 September 2016, Atalaya announced the completion of a US$14 million prepayment funding facility with Transamine Trading S.A.  The facility covers part of Atalaya's short term working needs in order to support itself through the ramp-up phase.  Atalaya continues to work on alternative funding solutions to improve its balance sheet and its working capital position during the ramp-up period to full expanded production.

2.       Overview of operational results

The following table presents a summarised statement of operations for the three and six months ended 30 June 2016. As commercial production was declared in February 2016, no operational data was available for 2015.

	Unit	Three months ended 30 June 2016*	Three months ended 30 June 2015***	Six months ended 30 June 2016**	Six months ended 30 June 2015***
Ore mined	T	1,340,492	n/a	2,474,253	n/a
Ore processed	T	1,308,780	n/a	2,442,728	n/a
Copper ore grade	%	0.44	n/a	0.44	n/a
Copper concentrate grade	%	21.43	n/a	21.38	n/a
Copper recovery rate	%	80.46	n/a	82.20	n/a
Copper concentrate	DMT	20,727	n/a	39,897	n/a
Copper contained in concentrate	FMT	4,442	n/a	8,489	n/a
Payable copper contained in concentrate	FMT	4,287	n/a	8,283	n/a
Cash cost per lb of payable copper	$/lb	2.36	n/a	2.31	n/a

Note: The numbers in the above table may slightly differ between them due to roundings.

* Quarterly operation data compared to prior quarter.  Commercial production started in February 2016.

** For comparison purposes, the six months figures include pre-commissioning production for January 2016.

*** There were no operations in 2015.

Expansion Project

During the first week of May 2016, the expansion project was declared mechanically complete, ahead of schedule and under budget.  Commissioning of the new equipment and subsequent handover to the operations team took place during the latter part of the quarter.  Production levels increased to an annualised rate of 6.8 Mtpa in June, in line with the ramp-up schedule. This trend has continued and the annualised rate achieved during August was equivalent to 8.3 Mtpa.

Phase 1 of the plant ramp-up was performing well at the start of the quarter before operations were temporarily suspended by the Junta de Andalucía.  During the suspension period, which was lifted on 4 May 2016, the site team integrated the new expansion equipment into the existing Phase 1 section, which then allowed commissioning and ramp-up to move continuously through May.

 

Mining and Processing

Copper production increased by 10% during Q2 2016 to a total of 4,442 tonnes compared with 4,048 tonnes during Q1 2016. The increase was adversely impacted by the temporary operational suspension due to the tailings discharge issue as well as the interruptions required to connect the Expansion of the plant to the Phase 1 Project. Copper grade in the final concentrate was consistent with the previous quarter, reporting 21.43% in Q2 2016 as compared to 21.33% for Q1 2016. Recoveries were lower at 80.46% during Q2 2016, compared with 84.26% during Q1 2016.  Recoveries increased back to over 84% during July and August, which is the expected rate of the new flotation circuit.

A total of 1,308,780 tonnes of ore was processed during Q2 2016, compared with 1,133,948 tonnes during Q1 2016.   A total of 1,343,400 cubic metres of waste was removed during Q2 2016 compared with 935,452 cubic metres during Q1 2016.  The accumulated cash cost per lb of payable copper for the six months period of $2.31/lb was impacted by the cost scale of an expanded plant, but with lower production levels and a temporary stoppage of production in Q2 2016.

Ramp-up of production is progressing as planned, with the plant now running at 8.3 Mtpa annualized capacity and having produced 3,175 tonnes of copper during August. This is approximately a 30% improvement over July`s production of 2,442 tonnes of copper. Accumulated production for July and August 2016 is already 26% higher than the production of the second quarter of 2016, and is an indication of the good progress of the ramp-up of the Expansion Project that is expected to be working at full capacity by the end of 2016.

Exploration and Geology

Following the end of Q2 2016, a Reserves and Resources statement was released on 14 July 2016. Total open-pit mineral reserves have increased from 123 million tonnes at 0.49% Cu to 153 million tonnes averaging 0.45% Cu using variable, declining cut-off grades, representing a 12% increase in contained metal.  Total open-pit Measured and Indicated Mineral Resources were estimated at 193 million tonnes averaging 0.43% Cu, compared with the previous estimate of 203 million tonnes at 0.46% Cu. Inferred Mineral Resources increased to 23 million tonnes averaging 0.48% Cu, from 2 million tonnes at 0.50% Cu.

An exploration drilling campaign has been initiated during the quarter to evaluate historical mineral resources around both the Corta Atalaya and Filon Sur pits.

2.       Outlook

The forward-looking information contained in this section is subject to the risk factors and assumptions contained in the cautionary statement on forward-looking statements included in the Introduction note of this report.

Operations

The Riotinto Project operational guidance for 2016 is as follows:

		Range
	Unit	2016
Ore processed	T million	6.7 - 7.1
Concentrate	DMT	115,000 - 130,000
Contained copper	T	23,500 - 27,000

The average head grade for 2016 is expected to be between 0.48% Cu and 0.50% Cu with a recovery rate of approximately 80%.  Cash operating cost is expected to be within $2.05/lb to $2.20/lb of payable copper in the second half of the year.

 

3.       Overview of the financial results

The following table presents a summarised consolidated income statements for the three and six months ended June 2016 with comparatives for the three and six months ended June 2015.

	Three months ended 30 June 2016	Three months ended 30 June 2015	Six months ended 30 June 2016	Six months ended 30 June 2015
(Euro 000's)
Sales	17,723	-	22,619	-
Total operating costs	(17,799)	-	(22,852)	-
Gross loss	(76)	-	(233)	-
Administrative expenses	(2,402)	(649)	(5,214)	(1,736)
Care and maintenance expenses	-	(746)	-	(4,961)
Exploration expenses	(517)	(42)	(679)	(90)
Operating loss	(2,995)	(1,437)	(6,126)	(6,787)
Other income	15	16	25	102
Net foreign exchange loss	(183)	(1,735)	(277)	(4,922)
Net finance cost	(45)	(2,019)	(81)	(4,228)
Loss before tax	(3,208)	(5,175)	(6,459)	(15,835)
Tax	(6)	-	(12)	-
Loss for the period attributable to owners of the parent	(3,214)	(5,175)	(6,471)	(15,835)

As at 30 June 2016, Atalaya shows revenues amounting to €22.6 million. Revenues include sales of concentrate to off takers during the period.  Total operating costs include operating production costs amounting to €22.9 million.

Administrative expenses for the period included head office costs, costs associated with a publicly listed company and any costs incurred by Atalaya not directly linked to production. The cost for the period ended 30 June 2016 amounted to €5.2 million.  Exploration costs amounted to €0.7 million.

Realised copper prices

The average prices of copper for the three and six months ended 30 June 2016 are as summarised below.  As commercial production was declared in February 2016, no operational data was available for 2015.

	Three months ended 30 June 2016	Three months ended 30 June 2015	Six months ended 30 June 2016	Six months ended 30 June 2015
USD
Realised copper price per lb	2.11	n/a	2.06	n/a
Market copper price per lb (period average)	2.21	n/a	2.16	n/a

4.       Non-GAAP Measures

Atalaya has included certain non-IFRS measures including "EBITDA", "Cash Operating Cost per pound of payable copper" and "realisable prices" in this report.  Non-IFRS measures do not have any standardised meaning prescribed under IFRS, and therefore they may not be comparable to similar measures presented by other companies. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for indicators prepared in accordance with IFRS.

EBITDA includes all operating costs in the operation, excluding finance, tax, depreciation and amortisation expenses.  The realised price for copper concentrates is the average price of copper per tonne sold over the period under analysis.

The Cash Operating Cost per pound of payable copper includes cash operating costs, including treatment and refining charges ("TC/RC"), freight and distribution costs, and is net of by-product metal credits. The Cash Operating Cost per pound of payable copper indicator is consistent with the widely accepted industry standard established by Wood Mackenzie and is also known as the C1 cash cost.

5.       Liquidity and capital resources

Atalaya monitors factors that could impact its liquidity as part of the Atalaya's overall capital management strategy.  Factors that are monitored include, but are not limited to, the market price of copper, foreign currency rates, production levels, operating costs, capital costs and administrative costs.

The following is a summary of Atalaya's cash position and cash flows as at 30 June 2016 and 31 December 2015 and for the six months ended 30 June 2016 and year ended 31 December 2015:

Liquidity information

Euro 000's		30 June 2016		31 December 2015
Unrestricted cash and cash equivalents		10,156		18,578
Restricted cash		290		40
Working capital deficit		(28,618)		(6,359)
		Six  months ended 30 June  2016		Six  months ended 30 June  2015
Cash flows from/(used in) operating activities		8,936		(19,803)
Cash flows from financing activities		-		93,507
Cash flows used in investing activities		(17,108)		(35,826)
Net (decrease)/increase in cash and cash equivalents		(8.172)		37,878

Unrestricted cash and cash equivalents as at 30 June 2016 decreased to €10.2 million from €18.6 million at 31 December 2015. The decrease in the cash balances is the result of capital expenditures incurred in the period related to the finalisation of the expansion project, certain ramp-up inefficiencies and slow revenues cash inflows.  Atalaya reported a working capital deficiency of €28.6 million at 30 June 2016 compared with €6.4 million at 31 December 2015.

6.       Foreign exchange

Foreign exchange rate movements can have a significant effect on Atalaya's operations, financial position and results. Atalaya's sales are denominated in U.S. dollars ("USD"), while Atalaya's operating expenses, income taxes and other expenses are denominated in Euros ("EUR") and to a much lesser extent in British Pounds ("GBP") and USD.  Accordingly, fluctuations in the exchange rates can potentially impact the results of operations and carrying value of assets and liabilities on the balance sheet.

During the three months ended 30 June 2016, Atalaya recognised a foreign exchange loss of €183,000 whilst for the six months ended 30 June 2016, Atalaya recognised a foreign exchange loss of €277,000.

 

The following table summarises the movement in key currencies versus the EUR:

	Three months ended 30 June  2016	Three   months  ended  30 June  2015		Six  months ended 30 June  2016	Six  months ended  30 June  2015
Average rates for the periods ended
GBP - EUR	0.83	n/a		0.81	n/a
USD - EUR	1.11	n/a		1.12	n/a
Spot rates as at
GBP - EUR	1.29	n/a		1.28	n/a
USD - EUR	1.10	n/a		1.12	n/a

During Q2 2016, Atalaya signed certain short term hedging agreements to ensure a competitive rate to USD.  Further information on the hedging agreements is disclosed in the Financial Statements (Note 14).

7.       Contingencies

Astor

Following the announcements on 2 November 2015 and 26 May 2016, Atalaya continues to work closely with its legal advisors in preparing for trial at the High Court of Justice in London.  The date for the trial has been set for 30 January 2017.  Atalaya remains confident of a positive outcome of the upcoming trial and will update shareholders following the trial, or if there are any material developments in the meantime.

More details on contingencies are included in Note 17 of the Financial Statements that follow.

8.       Off-balance sheet arrangements

Atalaya has no off-balance sheet arrangements.

9.       Risk factors

Due to the nature of Atalaya's business in the mining industry it is subject to various risks that could materially impact the future operating results of Atalaya and could cause actual events to differ materially from those described in forward-looking statements relating to Atalaya.  Readers are encouraged to read and consider the risk factors detailed in Atalaya's audited, consolidated financial statements for the year ended 31 December 2015.

10.     Critical accounting policies, estimates and accounting changes

The preparation of Atalaya's Financial Statements in accordance with IFRS requires management to make estimates and assumptions that affect amounts reported in the Financial Statements and accompanying notes. There is a full discussion and description of Atalaya's critical accounting policies in the audited consolidated financial statements for the year ended 31 December 2015.

11.     Other information

Additional information about Atalaya Mining Plc is available at www.atalayamining.com

 

Atalaya Mining Plc

(All amounts in Euro thousands unless otherwise stated)

Condensed interim consolidated income statements

(unaudited)

	Notes	Three months ended 30 June 2016		Three months ended 30 June 2015		Six months ended 30 June 2016		Six months ended 30 June 2015
Sales		17,723		-		22,619		-
Total operating costs		(17,799)		-		(22,852)		-
Gross loss		(76)		-		(233)		-
Administrative expenses		(2,402)		(649)		(5,214)		(1,736)
Care and maintenance expenses		-		(746)		-		(4,961)
Exploration expenses		(517)		(42)		(679)		(90)
Operating loss		(2,995)		(1,437)		(6,126)		(6,787)
Other income		15		16		25		102
Net foreign exchange loss		(183)		(1,735)		(277)		(4,922)
Net finance cost	4	(45)		(2,019)		(81)		(4,228)
Loss before tax		(3,208)		(5,175)		(6,459)		(15,835)
Tax		(6)		-		(12)		-
Loss for the period attributable to owners of the parent		(3,214)		(5,175)		(6,471)		(15,835)
Loss per share from operations attributable to equity holders of the parent during the period:
Basic and fully diluted loss per share (expressed in cents per share)	5	(2.8)		(9.9)		(5.5)		(31.7)
Loss  for the period		(3,214)		(5,175)		(6,471)		(15,835)
Other comprehensive profit:
Change in value of available-for-sale investment		161		(172)		193		(172)
Total comprehensive loss for the period attributable to owners of the parent		(3,053)		(5,347)		(6,278)		(16,007)

 

Condensed interim consolidated statements of financial position

(unaudited)

	Notes	30 June 2016		31 December 2015
Assets
Non-current assets
Property, plant and equipment	6	184,910		168,424
Intangible assets	7	18,278		20,158
Investment in associate		10		10
		203,198		188,592
Current Assets
Inventories	8	10,965		-
Trade and other receivables	9	11,676		16,632
Available-for-sale investment		495		302
Cash and cash equivalents		10,446		18,618
		33,582		35,552
Total assets		236,780		224,144
Equity and Liabilities
Equity attributable to owners of the parent
Share capital	10	11,632		11,632
Share premium	10	277,238		277,238
Other reserves	11	5,832		5,508
Accumulated losses		(124,483)		(118,012)
Total equity		170,219		176,366
Liabilities
Non-current liabilities
Trade and other payables	12	343		1,896
Provisions	13	4,018		3,971
		4,361		5,867
Current liabilities
Trade and other payables	12	62,200		41,911
		62,200		41,911
Total liabilities		66,561		47,778
Total equity and liabilities		236,780		224,144

 

Condensed interim consolidated statements of changes in equity

(unaudited)

	Share  capital	Share premium	Other reserves	Accumulated losses	Total	Non -controlling Interest	Total
At 1 January 2015	4,409	149,823	5,815	(103,002)	57,045	(116)	56,929
Total comprehensive loss for the period	-	-	-	(15,835)	(15,835)	-	(15,835)
Issue of share capital	7,223	130,017	-	-	137,240	-	137,240
Share issue costs	-	(2,592)	-	-	(2,592)	-	(2,592)
Derivative element of conversion of convertible note	-	440	-	-	440	-	440
Purchase of minority interest share	-	-	-	-	-	116	116
Change in value of available-for-sale investment	-	-	(172)	-	(172)	-	(172)
Bonus shares issued in escrow	-	-	50	-	50	-	50
Warrant issue costs	-	(122)	122	-	-	-	-
Recognition of share based payments	-	-	76	-	76	-	76
At 30 June 2015	11,632	277,566	5,891	(118,837)	176,252	-	176,252
Total comprehensive profit for the period	-	-	-	825	825	-	825
Share issue costs	-	(328)	-	-	(328)	-	(328)
Bonus shares issued in escrow	-	-	51	-	51	-	51
Change in value of available-for-sale investment	-	-	(510)	-	(510)	-	(510)
Recognition of share based payments	-	-	76	-	76	-	76
At 31 December 2015	11,632	277,238	5,508	(118,012)	176,366	-	176,366
Total comprehensive loss for the period	-	-	-	(6,471)	(6,471)	-	(6,471)
Change in value of available-for-sale investment	-	-	193	-	193	-	193
Bonus shares issued in escrow	-	-	63	-	63	-	63
Recognition of share based payments	-	-	68	-	68	-	68
At 30 June 2016	11,632	277,238	5,832	(124,483)	170,219	-	170,219

 

Condensed interim consolidated statements of cash flows

(unaudited)

	Notes	Three  months ended 30 June 2016	Three months ended 30 June 2015	Six  months ended 30 June 2016	Six months ended 30 June 2015
Cash flows from operating activities
Loss before tax		(3,208)	(5,175)	(6,459)	(15,835)
Adjustments for:
Depreciation of property, plant and equipment	6	1,712	33	2,207	66
Amortisation of intangibles	7	200	-	314	123
Recognition of share-based payments	11	34	38	68	76
Bonus share issued in escrow	11	31	25	63	50
Interest income	4	(4)	(1)	(18)	(1)
Interest expense	4	25	61	52	136
Rehabilitation cost	4	24	-	47	-
Gain on disposal of property, plant and equipment		(1)	-	(1)	-
(Gain)/loss on fair value on the convertible note	4		(827)	-	310
Accretion expense on convertible note	4	-	-	-	31
Bridge loan interest expense	4	-	678	-	1,232
Bridge loan financing expenditure	4	-	1,342	-	1,342
Convertible note interest expense	4	-	766	-	1,178
Foreign exchange loss on repayment of borrowings		-	1,846	-	5,304
Unrealised foreign exchange loss on financing activities		-	248	-	248
Cash outflows from operating activities before working capital changes		(1,187)	(966)	(3,727)	(5,740)
Changes in working capital:
Inventories	8	(3,464)	(1,669)	(10,965)	(1,669)
Trade and other receivables		(119)	(5,550)	4,956	(7,506)
Trade and other payables		12,234	(5,137)	18,724	(4,059)
Cash flows from/(used in) operations		7,464	(13,322)	8,988	(18,974)
Interest paid		(25)	(590)	(52)	(665)
Financing expenditure paid		-	(164)	-	(164)
Tax paid		-	-	-	-
Net cash from/(used) in operating activities		7,439	(14,076)	8,936	(19,803)
Cash flows from investing activities
Purchase of property, plant and equipment	6	(8,788)	(19,180)	(17,079)	(27,838)
Purchase of intangible assets		-	(5,646)	-	(7,982)
Proceeds from disposal of property, plant and equipment		1	-	1	-
Increase in provisions		(24)	-	(47)	-
Payment for increase in investment in subsidiary		-	-	-	(7)
Interest received		3	1	17	1
Net cash used in investing activities		(8,808)	(24,825)	(17,108)	(35,826)
Cash flows from financing activities
Proceeds from issue of share capital		-	90,435	-	90,435
Listing and issue costs		-	(2,592)	-	(2,592)
Proceeds from bridge loan drawn down in the period		-	5,664	-	5,664
Net cash from financing activities		-	93,507	-	93,507
Net (decrease)/increase in cash and cash equivalents		(1,369)	54,606	(8,172)	37,878
Cash and cash equivalents:
At beginning of the period		11,815	4,322	18,618	21,050
At end of the period		10,446	58,928	10,446	58,928

Atalaya Mining Plc

 (All amounts in Euro thousands unless otherwise stated)

Notes to the condensed interim consolidated financial statements

For the three and six months to 30 June 2016 and 2015 - (Unaudited)

1.   General information

Country of incorporation

Atalaya Mining Plc ("Atalaya Mining" and/or the "Company"), and its subsidiaries ("Atalaya" and/or the "Group"), 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 Group has offices in Minas de Riotinto in Spain and in Nicosia, Cyprus.  The Company was listed on AIM of the London Stock Exchange in May 2005 and on the TSX on 20 December 2010.

Change of name and share consolidation

Following the Company's Extraordinary General Meeting ("EGM") on 13 October 2015, the change of name from 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 Stg £0.075 for every 30 existing ordinary shares of nominal value Stg £0.0025.

Principal activities

The principal activity of the Company and its subsidiaries is to operate the recently commissioned Rio Tinto Copper Project ("Proyecto Riotinto") and to explore and develop metal 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 metals mineralisation in the European region.

2. Basis of preparation and accounting policies

Basis of preparation

The condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) including International Accounting Standard 34 "Interim Financial Reporting" and IFRIC interpretations as adopted by the European Union (EU), using the historical cost convention.

These condensed interim consolidated financial statements are unaudited and include the financial statements of the Company and its subsidiary undertakings.  They have been prepared using accounting bases and policies consistent with those used in the preparation of the consolidated financial statements of the Company and the Group for the year ended 31 December 2015.  These condensed interim consolidated financial statements do not include all of the disclosures required for annual financial statements, and accordingly, should be read in conjunction with the consolidated financial statements and other information set out in the Company's 31 December 2015 Annual Report.  The accounting policies are unchanged from those disclosed in the annual consolidated financial statements.

The Directors have formed a judgment at the time of approving the financial statements that there is a reasonable expectation that the Company and the Group have adequate available resources to continue in operational existence for the foreseeable future. 

The condensed interim consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Company will realise its assets and discharge its liabilities in the normal course of business. These condensed interim consolidated financial statements do not give effect to any adjustment, which would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realise its assets and discharge its liabilities in other than the normal course of business and at amounts different than those reflected in the consolidated financial statements.

Fair value estimation

The fair values of the Company's financial assets and liabilities approximate their carrying amounts at the reporting date.

The fair value of financial instruments traded in active markets, such as publicly traded trading and available‑for‑sale financial assets is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Company is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses a variety of methods, such as estimated discounted cash flows, and makes assumptions that are based on market conditions existing at the reporting date.

Fair value measurements recognised in the consolidated statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

·      Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

·      Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

·      Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Financial assets	Level 1	Level 2	Level 3	Total
30 June 2016
Available for sale financial assets	495	-	-	495
Total	495	-	-	495
31 December 2015
Available for sale financial assets	302	-	-	302
Total	302	-	-	302

Use and revision of accounting estimates

The preparation of the condensed interim consolidated financial statements requires the making of estimations and assumptions that affect the recognised amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources.   Actual results may differ from these estimates.  The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Adoption of new and revised International Financial Reporting Standards (IFRSs)

The Group has adopted all the new and revised IFRSs and International Accounting Standards (IASs) which are relevant to its operations and are effective for accounting periods commencing on 1 January 2016.  The adoption of these Standards did not have a material effect on the condensed interim consolidated financial statements.

Critical accounting estimates and judgements

The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the reporting date.  Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are unchanged from those disclosed in the annual consolidated financial statements.

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

 

3. Business and geographical segments

Business segments

The Group has only one distinct business segment, being that of mining operations, mineral exploration and development.

Geographical segments

The Group's mining and exploration activities are located in Spain and its administration is based in Cyprus.

Three months ended 30 June  2016	Cyprus	Spain	Other		Total
Sales	17,723	-	-		17,723
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)	(647)	(417)	(4)		(1,068)
Depreciation/amortisation charge	(4)	(1,908)	-		(1,912)
Net finance cost	-	(45)	-		(45)
Foreign exchange (loss) / gain	(247)	64	-		(183)
Loss for the period before taxation	(898)	(2,306)	(4)		(3,208)
Tax					(6)
Net loss for the period					(3,214)
Six months ended 30 June  2016	Cyprus	Spain	Other		Total
Sales	22,619	-	-		22,619
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)	(1,625)	(1,947)	(8)		(3,580)
Depreciation/amortisation charge	(8)	(2,513)	-		(2,521)
Net finance cost	-	(81)	-		(81)
Foreign exchange (loss) / gain	(343)	66	-		(277)
Loss for the period before taxation	(1,976)	(4,475)	(8)		(6,459)
Tax					(12)
Net loss for the period					(6,471)
Total assets	4,327	232,448	5		236,780
Total liabilities	(9,080)	(57,422)	(59)		(66,561)
Depreciation of property, plant and equipment	8	2,199	-		2,207
Amortisation of intangible assets	-	314	-		314
Total net additions of non-current assets	-	17,079	-		17,0079
Three months ended 30 June 2015	Cyprus	Spain	Other		Total
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)	(371)	(861)	-		(1,232)
Depreciation/amortisation charge	(132)	(57)	-		(189)
Finance cost	(1,958)	(61)	-		(2,019)
Foreign exchange loss	(1,715)	(20)	-		(1,735)
Loss for the period before taxation	(4,176)	(999)	-		(5,175)
Tax					-
Net loss for the period					(5,175)

Six months ended 30 June 2015	Cyprus	Spain	Other		Total
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)	(1,284)	(5,202)	(10)		(6,496)
Depreciation/amortisation charge	(132)	(57)	-		(189)
Finance cost	(4,092)	(136)	-		(4,228)
Foreign exchange loss	(4,866)	(56)	-		(4,922)
Loss for the period before taxation	(10,374)	(5,451)	(10)		(15,835)
Tax					-
Net loss for the period					(15,835)

Total assets	23,803	166,052	9		189,864
Total liabilities	(383)	(13,194)	(35)		(13,612)
Depreciation of property, plant and equipment	9	57	-		66
Amortisation of intangible assets	123	-	-		123
Total net additions of non-current assets	123	35,820	-		35,943

4. Net finance cost

	Three months ended               30 June 2016		Three  months ended 30 June 2015		Six months ended               30 June 2016		Six months ended 30 June 2015
Interest expense	25		61		52		136
Interest income	(4)		(1)		(18)		(1)
Rehabilitation cost	24		-		47		-
Accretion expense on convertible note	-		-		-		31
Bridge loan interest expense	-		678		-		1,232
Convertible note interest expense	-		766		-		1,178
Bridge loan financing expenditure	-		1,342		-		1,342
Loss on fair value on conversion of the convertible note	-		(827)		-		310
	45		2,019		81		4,228

5. Basic and fully diluted loss per share

The calculation of the basic and fully diluted loss per share attributable to the ordinary equity holders of the parent is based on the following data:

	Three months ended 30 June 2016		Three  months ended 30  June 2015		Six months ended           30 June 2016		Six months ended 30  June 2015
Parent	(730)		(4,176)		(1,379)		(10,374)
Subsidiaries	(2,484)		(999)		(5,092)		(5,461)
Loss attributable to the ordinary holders of the parent	(3,214)		(5,175)		(6,471)		(15,835)
Weighted number of ordinary shares for the purposes of basic loss per share (000's)	116,680		51,811*		116,680		49,903*
Basic loss per share:
Basic and fully diluted loss per share (cents)	(2.8)		(9.9)		(5.5)		(31.7)

* Adjusted for the 30:1 share consolidation which took place in October 2015

6. Property, plant and equipment

Cost	Land and buildings	Plant and machinery	Mineral rights	Assets under construction	Deferred mining costs(2)	Other assets(3)		Total
At 1 January 2015	35,797	29,087	-	-	-	1,086		65,970
Additions	23	27,747	-	-		68		27,838
At 30 June 2015	35,820	56,834	-	-	-	1,154		93,808
Additions / (reclassifications)	3,971(1)	(27,770)	-	88,885	10,334	4		75,424
Reclassifications	(730)	(5,860)	950	5,640	-	-		-
Disposals	-	(158)	-	-		(132)		(290)
At 31 December 2015	39,061	23,046	950	94,525	10,334	1,026		168,942
Additions	46	16,994	-		-	39		17,079
Reclassifications	-	46,935	-	(41,731)	(5,204)	-		-
Reclassifications -intangibles	-	1,614	-	-	-	-		1,614
Disposals	-	-	-	-	-	(5)		(5)
At 30 June 2016	39,107	88,589	950	52,794	5,130	1,060		187,630
Depreciation
At 1 January 2015	-	158	-	-	-	498		656
Charge for the period	-	-	-	-	-	66		66
At 30 June 2015	-	158	-	-	-	564		722
Charge for the period	-	-	-	-	-	86		86
Disposals	-	(158)	-	-	-	(132)		(290)
At 31 December 2015	-	-	-	-	-	518		518
Charge for the period	658	1,652	-	-	-	(103)		2,207
Disposals	-	-	-	-	-	(5)		(5)
At 30 June  2016	658	1,652	-	-	-	410		2,720
Net book value
At 30 June 2016	38,449	86,937	950	52,794	5,130	650		184,910
At 31 December 2015	39,061	23,046	950	104,859	-	508		168,424

⁽¹⁾ Rehabilitation provision

⁽²⁾ Stripping costs

⁽³⁾ Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years.

The above property, plant and equipment is located in Cyprus and Spain.

 

7. Intangible assets

Cost	Permits of Rio Tinto Project	Acquisition of mineral rights	Goodwill		Total
At 1 January 2015	17,655	310	10,023		27,988
Additions	7,982	-	123		8,105
At 30 June 2015	25,637	310	10,146		36,093
Reclassification	(5,479)	-	-		(5,479)
Disposals/closure of subsidiaries	-	(310)	(813)		(1,123)
At 31 December 2015	20,158	-	9,333		29,491
Reclassifications - property, plant and equipment	(1,614)	-	-		(1,614)
Other reclassifications	48	-	-		48
At 30 June 2016	18,592	-	9,333		27,925
Provision for impairment
On 1 January 2015	-	310	10,023		10,333
Provision for the period	-	-	123		123
At 30 June 2015	-	310	10,146		10,456
Disposal/closure of subsidiaries	-	(310)	(813)		(1,123)
At 31 December 2015	-	-	9,333		9,333
Provision for the period	314	-	-		314
At 30 June 2016	314	-	9,333		9,647
Net book value
At 30 June 2016	18,278	-	-		18,278
At 31 December 2015	20,158	-	-		20,158

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).  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 €9,333,000 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.

8. Inventories

	30 June 2016		31 Dec 2015
Finished products	6,216		-
Materials and supplies	4,749		-
	10,965		-

 

9. Trade and other receivables

	30 June 2016		31 Dec 2015
Trade receivables	1,016		-
Receivables from related parties (Note 16.4)	570		6,541
Deposits and prepayments	1,109		1,114
VAT	8,789		7,970
Other receivables	192		1,007
	11,676		16,632

The fair values of trade and other receivables approximate to their carrying amounts as presented above.

10. Share capital and share premium

					Shares 000's		Share Capital Stg£'000		Share premium Stg£'000			Total Stg£'000
Authorised
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 2016 and  30 June 2016					116,679		11,632		277,238			288,870

Authorised capital

2015

*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.

2016

The Company's authorised share capital is 200,000,000 ordinary shares of Stg £0.075 each.

Issued capital

2016

No shares were issued in the period from 1 January 2016 to 30 June 2016.

Warrants

The Company has issued warrants to advisers to the Group.  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 30 June 2016:

		Number of warrants
Outstanding warrants at 1 January and 30 June 2016		473,061

 

11. Other reserves

	Share option	Bonus share	Available-for-sale investment		Total
At 1 January 2015	5,973	44	(202)		5,815
Change in value of available-for-sale investment	-	-	(172)		(172)
Bonus shares issued in escrow	-	50	-		50
Warrant issue costs	122	-	-		122
Recognition of share based payments	76	-	-		76
At 30 June 2015	6,171	94	(374)		5,891
Bonus shares issued in escrow	-	51	-		51
Change in value of available-for-sale investment	-	-	(510)		(510)
Recognition of share based payments	76	-	-		76
At 31 December 2015	6,247	145	(884)		5,508
Change in value of available-for-sale investments	-	-	193		193
Bonus shares issued in escrow	-	63	-		63
Recognition of share based payments	68	-	-		68
At 30 June 2016	6,315	208	(691)		5,832

Share options

No share options were issued in the period from 1 January 2016 to 30 June 2016.  Details of share options outstanding as at 30 June 2016:

		Number of share options 000's
Outstanding options at 1 January 2016		931,654
-  cancelled/expired during the reporting period		(113,331)
Outstanding options at 30 June 2016		818,323

 

12. Trade and other payables

	30 June 2016		31 Dec 2015
Non-current trade and other payables
Social Security*	208		1,741
Land options	135		155
	343		1,896
Current trade and other payables
Trade payables	48,594		37,106
Deferred income	5,403		-
Deferred income (Note 16.4)	3,503		-
Social Security*	3,248		2,867
Land options and mortgage	774		789
Accruals	642		1,124
Tax liability	36		24
Other	-		1
	62,200		41,911

The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.

* On 25 May 2010 ARM recognised a debt with the Social Security's General Treasury in Spain amounting to €16.9 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.  €13.5 million has been repaid to date.  Originally payable over 5 years, the repayment schedule was subsequently extended until June 2017.

13. Provisions

		Rehabilitation costs
At 1 January 2015		-
Additions		3,971
At 31 December 2015		3,971
Charge to profit and loss as finance cost (Note 4)		47
At 30 June 2016		4,018

	30 June 2016		31 Dec 2015
Non-current	4,018		3,971
Current	-		-
Total	4,018		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.

14. Derivative instruments

As at 30 June 2016, Atalaya had certain short term foreign exchange contracts. The contracts were in an unrealised gain position which was recorded as a foreign exchange gain in the income statements (30 June 2016 - €54,000), as part of net foreign exchange loss, the corresponding receivable amount recorded in other receivables. The relevant information of the contracts is as follows:

Foreign exchange contracts - Euro/USD

Period	Contract type	Amount in USD	Contract rate	Strike
June 2016  - March 2017	FX Forward - Put	5,000,000	1.0955	n/a
	FX Forward - Call	10,000,000	1.0955	1.0450

The counter parties of the foreign exchange agreements are third parties.

15. Acquisition and disposal of subsidiaries

There were no acquisitions in the six months ended 30 June 2016.

16. Related party transactions

The following transactions were carried out with related parties:

16.1 Compensation of key management personnel

The total remuneration and fees of Directors (including Executive Directors) and other key management personnel was as follows:

			Three months ended 30 June 2016		Three months ended 30 June 2015		Six months ended 30 June 2016		Six months ended 30 June 2015
Directors' remuneration and fees			175		170		350		258
Share option-based benefits to directors			14		14		28		28
Bonus shares issued to director, in escrow			31		25		63		50
Key management personnel remuneration			95		157		190		315
Share option-based and other benefits to key management personnel			8		20		16		26
			323		386		647		677

16.2 Share-based benefits

The directors and key management personnel have not been granted options during the three month period.

 

16.3 Transactions with shareholders

			Three months ended 30 June 2016		Three months ended 30 June 2015		Six months ended 30 June 2016		Six months ended 30 June 2015
Trafigura - Sales of goods (pre commissioning sales offset against the cost of constructing assets)			-		-		2,452		-
Trafigura - Sales of goods			6,497		-		11,393		-
			6,497		-		13,845		-

16.4 Period-end balances with shareholders

	30 June 2016		31 Dec 2015
Receivables from related parties (Note 9):
Trafigura	570		6,541
The above debtor balance arising from sales of goods bears no interest and is repayable on demand.
Deferred income (Note 12):
Orion	3,503		-

17. Contingent liabilities

Deferred consideration

In September 2008, the Group moved to 100% ownership of ARM (and thus full ownership of Proyecto Riotinto) by acquiring the remaining 49% of the issued capital of ARM.  The cost of the acquisition was satisfied by issuing 39,140,000 Ordinary Shares to MRI Trading AG ("MRI") at an issue price of 21p per Ordinary Share and a deferred cash settlement of up to €53 million ("Deferred Consideration"), (including loans of €9,116,617.30 owed to companies related to MRI incurred in relation to the operation of Proyecto Riotinto).  The obligation to pay the Deferred Consideration is subject to the satisfaction of the following conditions (the "Conditions"): (a) all authorisations to restart mining activities in Proyecto Riotinto having been granted by the Junta de Andalucía ("Permit Approval"); and (b) the Group securing a senior debt finance facility for a sum sufficient to restart mining operations at Proyecto Riotinto ("Senior Debt Facility") and being able to draw down funds under the Senior Debt Facility.

Originally the Group was obliged to pay the Deferred Consideration in instalments commencing on the date of drawdown under the Senior Debt Facility until the second anniversary of commercial production at Proyecto Riotinto.  On 31 March 2009, pursuant to a deed of amendment, MRI consented to the Group paying the Deferred Consideration over a period of six or seven years following satisfaction of the Conditions (the "Payment Period").  In return, the Company agreed to potentially pay further Deferred Consideration of up to €15,900,000 in regular instalments over the Payment Period depending upon the price of copper.  Any such additional Deferred Consideration would only be payable if, during the relevant period, the average price of copper per tonne is US$6,614 or more (US$3.00/lb).  On 11 November 2011 MRI novated its right to be paid the Deferred Consideration to Astor Management AG ("Astor").

As security, inter alia, for the obligation to pay the Deferred Consideration to Astor, EMED Holdings (UK) Limited has granted a pledge to Astor Resources AG over the issued capital of ARM and the Company has provided a parent company guarantee.

As at the date of this report, the Permit Approval condition has been satisfied.  However, the Group has not entered into arrangements in connection with a Senior Debt Facility and, in the absence of drawdown of funds by the Group pursuant to a Senior Debt Facility, there is significant doubt concerning the legal obligation on the Company to pay any of the Deferred Consideration.

On 2 November 2015, the Company announced that it was in receipt of a formal claim from Astor (the "Claim").  The Claim was made in the High Court of Justice in London against the Company and certain other members of the Group.  In its Claim, Astor is claiming, inter alia, that the Conditions have been satisfied and the first instalment of the Deferred Consideration is due (together with damages).  The Company is disputing this and it is defending the proceedings vigorously.  The Company continues to work closely with its legal advisors in preparing for trial at the High Court of Justice in London.  The date for the trial has been set for 30 January 2017.

Judicial and administrative cases

On 23 September 2010, ARM was notified that the Andalucían Water Authority ("AWA") had initiated a Statement of Objections and Opening of File (the "Administrative File 2010") following allegations by third parties of unauthorised industrial discharges from the Tailings Management Facility ("TMF") at the Rio Tinto Copper Mine in the winter months of late 2010 and early 2011.  These assertions are judicial (alleging negligence) and administrative (alleging damage to the environment) in nature.  At that time, the Company owned 33% of the TMF and the owners of the remaining 67% are co-defendants (Rumbo and Zeitung).

In December 2011, the judicial claims were dismissed in the initial discovery phase by the appeals Court (upholding a lower court decision) finding that the controlled discharges of excess rainwater were force majeure events carried out to protect the stability of the TMF, thereby ensuring public safety and protection of the environment (the "Court Decisions"). 

Given that all judicial claims were dismissed in the very early stages of the court´s investigation, no formal charges were ever made against ARM or against any of its Directors or Officers.

Now that the Court Decisions are final, the Administrative File 2010, which can only result in a monetary sanction against the co-defendants, was re-opened in 2012.  The defence arguments successfully used in a later case which has been dismissed on 11 February 2015 (see below) will be used in the defence of Administrative File 2010 and the management is positive that they will be accepted.

On January 2, 2013 ARM, Rumbo and Zeitung were notified of a Resolution of Fine and Damages (in a total amount of €1,867,958.39).  In February 2013 ARM appealed this Resolution and the Court has agreed that the Fine and Damages amount be secured by a mortgage over certain properties owned by ARM until the final decision on the alleged discharges is known.

In the Company's view, no "industrial discharge" took place, but rather a force majeure controlled discharge of excess rainwater accumulated in the TMF since industrial operations ceased in the early 2000´s with no actual damage to the environment having taken place.   

In the Company's view it is unlikely that any fine or sanction will be imposed against ARM once the Administrative File 2010 reaches its final conclusion after all appeals are exhausted in approximately 3-5 years. On 28 January 2016, the Court ruled in favour of ARM, Rumbo and Zeitung.   On 26 April 2016 the Court issued a final decree by which the 28 January 2016 ruling was declared final.

On 20 January 2014, ARM was notified that the Huelva Territorial Delegation of the Ministry of Environment (which has absorbed the former AWA) had initiated another disciplinary proceeding for unauthorised discharge (the "Administrative File 2013") of administrative nature following allegations by the administration of alleged unauthorised industrial discharges from the TMF at the Rio Tinto Copper Mine during the heavy rains occurred from 7 March to 25 April 2013.  The Administration has proposed the amount of €726,933.30 as compensation for alleged damages to the environment ("Public Water Domain") and a fine of between €300,507 and €601,012.  On 11 February 2015, the Huelva Territorial Delegation of the Ministry of Environment dismissed the case.  On 13 May 2015, the Huelva Territorial Delegation of the Ministry of Environment re-opened the Administrative File 2013. Written allegations were submitted on 30 May 2015. On 29 March 2016 the Huelva Territorial Delegation of the Ministry of Environment dismissed finally and without further recourse the Administrative File 2013.

On 19 February 2015, ARM was notified that the Huelva Territorial Delegation of the Ministry of Environment had initiated another disciplinary proceeding for unauthorised discharge (the "Administrative File 2014") which has proposed a fine of between €300,507 and €601,012.  On 10 March 2015 the Company submitted the relevant defence arguments.

The Junta de Andalucía notified ARM of another disciplinary proceeding for unauthorised discharge in 2014.  ARM submitted the relevant defence arguments on 10 March 2015 but has had no response or feedback from the Junta de Andalucía since the submissions.  Based on the time that has lapsed without a response, it is expected that the outcome of this proceedings will also be favourable for ARM.  Once the necessary time has lapsed, ARM will ask for the Administrative File to be dismissed.

 

18. Commitments

Spain

There are no minimum exploration requirements at Proyecto Riotinto.  However, the Group is obliged to pay municipal land taxes which currently are approximately €110,000 per year in Spain and the Group is required to maintain the Riotinto site in compliance with all applicable regulatory requirements.

As part of the consideration for the purchase of land from Rumbo, ARM has agreed to pay a royalty to Rumbo subject to commencement of production of $250,000 in each quarter where the average price of LME copper or the average copper sale price achieved by the Group is at least $2.60/lb.  No royalty is payable in respect of any quarter where the average copper price for that quarter is below this amount and in certain circumstances any quarterly royalty payment can be deferred until the following quarter.  The royalty obligation terminates 10 years after commencement of production.

Commencement of production is defined as being the first to occur of processing of ore at a rate of nine million tonnes per annum for a continuous period of six months or the date that is 18 months after the first product sales from Proyecto Riotinto. 

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 €2 million.  Costs are then borne by the joint venture partners in accordance with their respective ownership interests.  Half of the costs paid by ARM in connection with the feasibility study can be deducted from any royalty which may fall due to be paid.

At Proyecto Riotinto, the Group had four year options with each of Zeitung and Inland for the purchase of certain land plots adjacent to the mine at a purchase price of €4,202,000 (expiry date 31 July 2016) and €4,648,000 (expiry date 2 August 2016) respectively.  The completion of the infill drilling programme, assays and updating of the block model provided the Group with a better understanding of the mineralisation.  Based on these results, the Group took the view that the options on the said land plots were no longer necessary and opted not to exercise them.

19. Significant events

The Group declared commercial production on 1 February 2016.  The commissioning of the expansion project began in May 2016, with nameplate capacity of 9.5Mtpa forecast by the end of 2016.

The updated Reserves and Resources statement released on 14 July 2016 indicated a 12% increase in contained reserves and extended life of mine to 16 ½ years.

20. Events after the reporting period

On 7 July 2016, the Annual General Meeting was held at Rio Tinto, in Spain, with all resolutions being passed by shareholders.  On the same day, Atalaya announced the appointment of Mr Cesar Sanchez as Group Chief Financial Officer.

On 5 September 2016, the Company announced the completion of a US$14 million prepayment funding facility with Transamine Trading S.A.  The facility covers part of the Group's short term working needs in order to support itself through the ramp-up phase.  The Group continues to work on alternative funding solutions to improve its balance sheet and its working capital position during the ramp-up period to full expanded production.

There were no other events after the reporting period, which would have a material effect on the consolidated financial statements.

 

END

 

 

IR LLFSAAEIRIIR