Q3 2020 Financial Results

RNS Number : 7915F
Atalaya Mining PLC
19 November 2020
 

19 November 2020

Atalaya Mining Plc.

("Atalaya" and/or the "Company")

 

Q3 2020 Financial Results

 

Atalaya Mining Plc (AIM: ATYM; TSX: AYM), is pleased to announce its quarterly results for the period ended 30 September 2020 ("Q3 2020"), together with its unaudited interim condensed consolidated financial statements for the year to date.

The Unaudited Interim Condensed Consolidated Financial Statements for the nine months ended 30 September 2020 ("YTD 2020") are also available under the Company´s profile on SEDAR at www.sedar.com and on Atalaya`s website at www.atalayamining.com.

Financial Highlights

 

Quarter ended 30 September

 

Q3 2020

Q3 2019

 

Nine months ended

30 Sep 2020

Nine months ended

30 Sep 2019

Revenues from operations

€k

65,836

44,383

 

183,569

139,165

Operating costs

€k

(43,571)

(34,514)

 

(139,196)

(97,752)

EBITDA

€k

22,265

9,869

 

44,373

41,413

Profit for the period

€k

12,237

6,933

 

18,203

27,937

Basics earnings per share

€ cents/share

9.0

5.1

 

13.7

20.5

 

 

 

 

 

 

 

Cash flows from operating activities

€k

18,820

16,487

 

41,820

31,457

Cash flows used in investing activities

€k

(6,338)

(13,115)

 

(19,669)

(45,390)

Cash flows used in financing activities

€k

(15,085)

(158)

 

(454)

(430)

 

 

 

 

 

 

 

Working capital surplus

€k

25,002

1,954

 

25,002

1,954

 

 

 

 

 

 

 

Average realised copper price

$/lb

2.72

2.68

 

2.60

2.76

 

 

 

 

 

 

 

Cu concentrate produced

(tonnes)

66,091

45,458

 

187,032

137,281

Cu production

(tonnes)

14,695

10,568

 

41,559

31,675

Cash costs

$/lb payable

1.94

1.92

 

1.93

1.85

All-In Sustaining Cost

$/lb payable

2.29

2.25

 

2.27

2.12

 

· Revenues for Q3 2020 increased to €65.8 million compared with €44.4 million for the three months ended 30 September 2019 ("Q3 2019"). The increase was mainly due to higher concentrate sales volumes in the period following the completion of the plant expansion at Proyecto Riotinto, in addition to higher copper prices.

· Operating costs during Q3 2020 were €43.6 million compared with €34.5 million in Q3 2019. This increase mainly reflects the higher production volumes.

· Q3 2020 EBITDA increased to €22.3 million compared with €9.9 million in Q3 2019 driven by higher copper concentrate sold in addition to higher copper prices.

· Q3 2020 profit for the period amounted to €12.2 million (or 9.0 cents basic earnings per share) compared with €6.9 million for Q3 2019 (or 5.1 cents basic earnings per share). Profit margin was lower mainly due to depreciation increasing significantly as a result of the plant expansion at Proyecto Riotinto.

· Q3 2020 cash costs were $1.94/lb of payable copper, similar to cash costs in Q3 2019 ($1.92/lb). This small increase is mainly the result of unfavourable FX rates and to a lower extent in maintenance and processing costs.

· All-in Sustaining Costs ("AISC") during Q3 2020 amounted to $2.29/lb of payable copper, slightly higher than Q3 2019 ($2.25/lb). AISC were impacted by additional investments in sustaining capex and higher capitalised stripping costs.

· Inventories of concentrate as of 30 September 2020 amounted to €6.7 million (€11.0 million at 31 December 2019).

· At the end of Q3 2020, the Company reported a working capital surplus of €25.0 million, a significant increase from the €3.6 million reported at the end of Q4 2019 and the €1.9 million reported at the end of Q3 2019. The increase mostly related to the cash generated from higher sales of concentrate, partly offset by capex in the period.

· Unrestricted cash balances as of 30 September 2020 amounted to €29.8 million.

· Cash flows from operating activities before changes in working capital were €21.3 million for Q3 2020 compared with €11.8 million during Q3 2019. In YTD 2020, cash flows from operating activities before changes in working capital were €43.2 million compared with €43.7 million during YTD 2019.

· Net cash flow used for investing activities amounted to €6.3 million and €19.7 million for Q3 2020 and YTD 2020, respectively, compared with €13.1 million and €45.4 million for the same periods in the prior year. Cash outflows in the current period is mostly related to sustaining capex and work on tailings dams.

· Net cash flow used in financing activities amounted to negative €15.1 million and €0.5 million for Q3 2020 and YTD 2020, compared with negative €0.2 million and €0.4 million, respectively, for the same periods in the previous year. Negative cash flows for Q3 2020 are mainly driven by the repayment of existing unsecured credit facilities taken out earlier in 2020 and leases repayments.

Operational Highlights

Proyecto Riotinto

· Copper production during Q3 2020 reached a new record of 14,695 tonnes, an increase of 39.1% compared with 10,568 tonnes produced during Q3 2019. Copper production for YTD 2020 was 41,559 tonnes compared with 31,675 tonnes during YTD 2019.

· Ore processed during Q3 2020 was 3,974,821 tonnes, an increase on Q3 2019 when ore processed amounted to 2,563,594 tonnes. Total ore processed during YTD 2020 amounted to 10,974,063 tonnes (YTD 2019: 7,575,130 tonnes).

· With the 15Mtpa expanded plant now fully operational and producing at nameplate capacity, the Company is focused on implementing cost reduction programmes relating to the reduction of fresh water and lime consumption.

· In addition, initiatives to improve copper recoveries, by using some of the extra installed flotation capacity, are also ongoing.

· The target of reducing the power cost at the plant in an environmentally conscious way is being addressed through the initiation of the permitting process to install a 50 MW solar power plant. The full capacity of the solar power plant will be used for self-consumption and is anticipated to make a significant contribution to reducing carbon emissions at Proyecto Riotinto.

Proyecto Touro

· The Company has yet to receive the formal communication from the local government in Galicia rejecting the plan to develop Proyecto Touro. This unexpected lack of confirmation is believed to be related mainly to COVID-19 delays.

· Once the expected communication is received, the Company will evaluate its options to address the concerns of the Xunta de Galicia.

· The Company continues to be confident that its world class approach to Proyecto Touro, which includes fully plastic lined tailings with zero discharge, will satisfy the most stringent environmental conditions that may be imposed by the authorities prior to the development of the project.

Outlook 2020

· Annual guidance range of US$1.95/lb-US$2.05/lb and US$2.20/lb-US$2.30/lb for cash costs and AISC, respectively, is currently being maintained.

· Production guidance remains at 55,000 to 58,000 tonnes of contained copper. The Company expects production to be at the lower end of the range.

· Management continues to monitor the impact of COVID-19 on the operations and the ongoing cost structure and will update the market with any potential changes in expectations.

COVID-19 Update

· Since the announcement on 6 April 2020, Proyecto Riotinto continues operating with augmented requirements and recommendations to prevent exposure to COVID-19 and the spread of the virus.

· Atalaya's key priority continues to be protecting its workforce and the local communities surrounding both Proyecto Riotinto and Proyecto Touro.

· In light of the recent new cases in Spain, the Company has further reinforced its measures to protect against the pandemic and any adverse developments will be notified accordingly.

Legal updates

·On 1 September 2020, the Company announced that the Junta de Andalucía has confirmed through the Spanish press that the mining permits for Proyecto Riotinto are now fully validated.

Corporate updates post Q3 2020

· The Company continues to go through a court process in order to determine the mechanism and timing for the payment of the deferred consideration to Astor.  Following the hearing on 30 October 2020, the following stages have been fixed by the Court: (i) Atalaya's application for permission to amend its statement of case will be heard in February 2021; (ii) a summary judgment hearing will be heard in June 2021; and (iii) if Astor's application is unsuccessful, a trial will take place in February 2022 for six days. There are no changes in the carrying value of the liability. Further details of the process are in note 17 of the financial statements.

· On 21 October 2020, Atalaya announced that it had entered into a definitive purchase agreement to acquire 100% of the Masa Valverde polymetallic project located in Huelva (Spain) through the acquisition of 100% of a Spanish company for €1.4 million payable in two instalments. Masa Valverde is one of the largest undeveloped volcanogenic massive sulphide deposits in the prolific Iberian Pyrite Belt and is located 28kms south west of Proyecto Riotinto.

· On 28 October 2020, Atalaya announced it had commenced a feasibility study to evaluate production of cathodes at Proyecto Riotinto using the newly developed E-LIX System owned by Lain Technologies, Ltd. It also entered into a Licence Agreement with Lain Technologies, Ltd. to use its patents on an exclusive basis under certain conditions, within the Iberian pyrite belt in Spain and Portugal.

· The feasibility study will help Atalaya to understand the economic viability of producing cathodes from complex sulphide ores prevalent in the Iberian Pyrite Belt through the application of a new leaching process called the E-LIX System, followed by conventional SXEW, with a new industrial scale plant. The production of cathodes has the potential to generate cost savings by reducing charges associated with concentrate transportation, treatment and refining as well as penalties with certain  elements, while also reducing carbon emissions.

 

Alberto Lavandeira, CEO commented:

"This has been another strong quarter for Atalaya, with copper production at Proyecto Riotinto reaching record levels. Our ability to grow the Company, despite the ongoing challenges posed by COVID-19, has been shown most recently through the purchase agreement regarding the Masa Valverde polymetallic project and the launching of the E-LIX System feasibility study, announced post period end. We remain confident in our outlook with our annual guidance and production ranges being maintained."

 

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)

Henry Fitzgerald-O'Connor / James Asensio

+44 20 7523 8000

BMO Capital Markets (Joint Broker)

Tom Rider / Michael Rechsteiner / Neil Elliot

+44 20 7236 1010

Peel Hunt LLP (Joint Broker)

Ross Allister / David McKeown

+44 20 7418 8900

 

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. For further information, visit www.atalayamining.com

 

ATALAYA MINING PLC

MANAGEMENT'S REVIEW AND

UNAUDITED INTERIM CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

30 September 2020

 

Management's review

(All amounts in Euro thousands unless otherwise stated)

For the period ended 30 September 2020 and 2019

 

Notice to Reader

The accompanying unaudited interim condensed consolidated financial statements of Atalaya Mining Plc have been prepared by and are the responsibility of Atalaya Mining Plc's management. The unaudited interim condensed 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 "Group"), to enable the reader to assess material changes in the financial position between 31 December 2019 and 30 September 2020 and results of operations for the three and nine months ended 30 September 2020 and 2019.

This report has been prepared as of 18 November 2020. The analysis, hereby included, is intended to supplement and complement the unaudited interim condensed consolidated financial statements and notes thereto ("Financial Statements") as at and for the period ended 30 September 2020. 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 2019, and the unaudited interim condensed consolidated financial statements for the period ended 30 September 2019. These documents can be found on SEDAR at www.sedar.com and on Atalaya's website at www.atalayamining.com .

Atalaya prepares its Annual Financial Statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by EU and its Unaudited Interim Condensed Consolidated Financial Statements in accordance with International Accounting Standards 34: Interim Financial Reporting. 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 constitute 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.  Description of the Business

Atalaya is a European mining and development company domiciled in Cyprus. The Company is listed on the AIM Market of the London Stock Exchange ("AIM") and on the Toronto Stock Exchange ("TSX").

Proyecto Riotinto, wholly owned by the Company's subsidiary Atalaya Riotinto Minera, S.L.U., is located in Huelva, Spain. The Group operates the Cerro Colorado open-pit mine and its associated processing plant where copper in concentrate and silver by-product is produced. A brownfield expansion of the plant was completed in 2019.

The Group has an initial 10% stake in Cobre San Rafael, S.L., the owner of Proyecto Touro, as part of an earn-in agreement which will enable the Group to acquire up to 80% of the copper project. Proyecto Touro is located in Galicia, north-west Spain.

In November 2019, Atalaya executed the option to acquire 12.5% of Explotaciones Gallegas del Cobre, S.L. the exploration property around Touro, with known additional reserves, which will add to the potential to the Proyecto Touro.

In October 2020, Atalaya acquired 100% of Cambridge Minería España, S.L., which owns the Masa Valverde polymetallic project located in Huelva (Spain).

 

2.  Overview of Operational Results

Proyecto Riotinto

The following table presents a summarised statement of operations of Proyecto Riotinto for the three and nine months ended 30 September 2020 and 2019, respectively.

 

Units expressed in accordance with the international system of units (SI)

 

 

Unit

Three months ended

30 Sep 2020

Three months ended

30 Sep 2019

Nine months ended

30 Sep 2020

Nine months

ended

30 Sep 2019

 

 

 

 

 

 

 

Ore mined

t

3,836,108

2,704,041

10,097,800

8,035,290

Ore processed

t

3,974,821

2,563,594

10,974,063

7,575,130

 

 

 

 

 

 

Copper ore grade

%

0.44

0.47

0.45

0.47

Copper concentrate grade

%

22.20

23.25

22.22

23.07

Copper recovery rate

%

83.78

87.38

84.13

88.77

 

 

 

 

 

 

Copper concentrate

t

66,091

45,458

187,032

137,281

Copper contained in concentrate

t

14,695

10,568

41,559

31,675

Payable copper contained in concentrate

t

14,034

10,113

39,688

30,303

Cash cost*

US$/lb payable

1.94

1.92

1.93

1.85

All-in sustaining cost*

US$/lb payable

2.29

2.25

2.27

2.12

(*) Refer to Section 5 of this Management's Review

Note: The numbers in the above table may slightly differ among them due to rounding.

 

Three months operational review

During Q3 2020 a total of 4.0 million tonnes of ore were processed with an average copper head grade of 0.44% and a recovery rate of 83.78%. In comparison with the same quarter of 2019, throughput increased 55% while recovery decreased 4%. The increase in copper production during Q3 2020 is mainly attributable to higher than budgeted levels of ore milled which compensated for a short period of lower recoveries while treating some transitional ores. Compared with Q2 2020, copper production increased 8% as a result of 11% higher throughput despite of lower recoveries.

 

2.  Overview of Operational Results (cont.)

The Company is pleased to confirm it is on track to meet the lower end of the range of its previously announced 2020 production guidance of 55,000 - 58,000 tonnes of copper demonstrating that the Company has successfully managed the challenges of operating with Covid-19 restrictions.

Mining operations have continued normally with enough equipment on site to maintain the higher production levels required for full operation of the expanded plant.

On-site concentrate inventories at the end of the quarter were approximately 8,402 tonnes. All concentrate in stock at the beginning of the quarter and produced during the Period was delivered to the port at Huelva.

Copper prices increased during the period compared with Q2 2020.  The average realised price per pound of copper payable for the Period, including the QPs closed in the period, was $2.72/lb compared with $2.51/lb in Q2 2020. The average copper spot price during the quarter was $2.96/lb. The realised price during the quarter excluding QPs was approximately $2.96/lb compared to $2.43/lb in Q2 2020.

Local exploration during the quarter continued to focus on defining new unmined resources under-the Atalaya pit. Calculations of the remaining mineable resource are ongoing and will be reported in conjunction with an update to the resource estimates at Proyecto Riotinto's Cerro Colorado pit.

 

Nine months operating review

Production of copper contained in concentrate during YTD 2020 was 41,559 tonnes, compared with 31,675 tonnes in the same period of 2019. Payable copper in concentrates was 39,688 tonnes compared with 30,303 tonnes of payable copper in YTD 2019.

Ore mined in YTD 2020 was 10,097,800 tonnes compared to 8,035,290 tonnes during YTD 2019. Ore processed was 10,974,063 tonnes versus 7,575,130 tonnes in YTD 2019.

Ore grade during YTD 2020 was 0.45% Cu compared with 0.47% Cu in YTD 2019. Copper recovery was 84.13% versus 88.77% in YTD 2019. Concentrate production amounted to 187,032 tonnes above YTD 2019 of 137,281 tonnes a s increased throughput partially offset by slightly lower grade and recoveries.

 

3.  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.

Operational guidance

The Company is aware that the COVID-19 pandemic may still further impact how the Company manages its operations and is according keeping its guidance under regular review.

Proyecto Riotinto operational guidance for 2020 remains unchanged. Should the Company consider the current guidance no longer achievable, then the Company will provide a further update.

 

 

Guidance

 

Unit

2020

Ore processed

million tonnes

14.0 - 15.0

Contained copper

tonnes

55,000 - 58,000

Copper head grade for 2020 is estimated to average 0.45% Cu, with a recovery rate of approximately 84% to 86%. Cash operating costs for 2020 are expected to be in the range of US$1.95/lb - US$2.05/lb, and AISC is estimated to be in the range of US$2.20/lb - US$2.30/lb Cu payable.

 

4.  Overview of the Financial Results

The following table presents summarised unaudited consolidated income statements for the three and nine months ended 30 September 2020, with comparatives for the three and nine months ended 30 September 2019, respectively.

 

 

( Euro 000's )

Three months ended

30 Sep 2020

 

Three months ended

30 Sep 2019

 

Nine months ended

30 Sep 2020

 

Nine months ended

30 Sep 2019

 

 

 

 

 

 

 

 

Revenue

 65,836

 

 44,383

 

 183,569

 

139,165

Costs of sales

 (41,813)

 

 (31,269)

 

 (134,024)

 

(89,602)

Administrative and other expenses

 (1,361)

 

 (2,070)

 

 (3,519)

 

(5,452)

Exploration expenses

 (380)

 

 (1,132)

 

 (1,484)

 

(2,534)

Care and maintenance expenditure

 (29)

 

 (43)

 

 (189)

 

(164)

Other income

 12

 

-

 

 20

 

-

EBITDA

 22,265

 

 9,869

 

 44,373

 

 41,413

Depreciation/amortisation

 (8,419)

 

 (3,722)

 

 (22,186)

 

 (10,893)

Impairment loss on other receivables

- 

 

-

 

 (45)

 

-

Net foreign exchange gain/(loss)

 (1,411)

 

 1,405

 

 (2,027)

 

 1,692

Net finance cost

 82

 

 43

 

(67)

 

 (23)

Tax

 (280)

 

 (662)

 

 (1,845)

 

 (4,252)

Profit for the period

 12,237

 

 6,933

 

 18,203

 

 27,937

 

Three months financial review

Revenues for the three month period ended 30 September 2020 amounted to €65.8 million (Q3 2019: €44.4 million). Higher revenues, compared with the same quarter in the previous year, were mainly driven by higher volumes sold during the period plus higher copper prices offset to an extent by weaker average US Dollar rates against the Euro.

Realised prices were $2.72/lb copper during Q3 2020 compared with $2.68/lb copper in Q3 2019. All concentrates were sold under offtake agreements in place.

Operating costs for the three month period ended 30 September 2020 amounted to €41.8 million, compared with €31.3 million in Q3 2019. In absolute terms, higher operating costs were mainly due to more tonnes being mined and processed during the quarter at slightly higher unit costs.

Cash costs of $1.94/lb payable copper during Q3 2020 compared with $1.92lb payable copper in the same period last year. Higher cash costs in Q3 2020 mainly as result of the raise of maintenance and processing costs relating to higher consumption of lime and grinding balls demanded by the ore treated in the period and to the SAG liners used in the new mills. Additionally, capitalised stripping costs during Q3 2020 amounted to €2.0 million compared with €1.1 million in Q3 2019. All-in sustaining costs in the reporting quarter were $2.29/lb payable copper compared with $2.25/lb payable copper in Q3 2019. Higher AISC compared with Q3 2019 mainly related to additional investments in sustaining capex and higher stripping costs.

Sustaining capex for Q3 2020 amounted to €3.5 million compared with €2.4 million in Q3 2019. Sustaining capex related to the tailing dams project and continuous improvement in processing systems of the plant and enhancements in security.

Administrative and other expenses amounted to €1.4 million (Q3 2019: €2.1 million) and include non-operating costs of the Cyprus office, corporate legal and consultancy costs, on-going listing costs, officers and directors' emoluments, and salaries and related costs of the corporate office.

Exploration costs at Proyecto Riotinto for the three month period ended 30 September 2020 amounted to €0.4 million (Q3 2019: €1.1 million). Lower costs related to a decrease in projects of drilling in 2020.

EBITDA for the three months ended 30 September 2020 amounted to €22.3 million compared with Q3 2019 of €9.9 million.

The main item below the EBITDA line is depreciation and amortisation of €8.4 million (Q3 2019: €3.7 million) which increased as a result of the higher throughput resulting from the 2019 plant expansion. Net finance income for Q3 2020 amounted to €0.1 million (Q3 2019: €43k loss).

 

4.  Overview of the Financial Results (cont.)

Nine months financial review

Revenues for the nine month period ended 30 September 2020 amounted to €183.6 million (YTD 2019: €139.2 million).

Copper concentrate production during the nine month period ended 30 September 2020 was 187,032 tonnes (YTD 2019:  137,281 tonnes) with 192,830 tonnes of copper concentrates sold in the period (YTD 2019: 139,762 tonnes). Inventories of concentrates as at the reporting date were 8,402 tonnes (31 Dec 2019: 14,201 tonnes).

Realised copper prices for YTD 2020 were $2.60/lb copper compared with $2.76/lb copper in the same period of 2019. Concentrates were sold under offtake agreements in place. The Company did not enter into any hedging agreements in 2020.

Operating costs for the nine month period ended 30 September 2020 amounted to €134.0 million, compared with €89.6 million in YTD 2019. Higher costs in 2020 were mainly attributable to the increase in production volumes and cash costs.

Cash costs of $1.93/lb payable copper during YTD 2020 compare with $1.85/lb payable copper in the same period last year. Higher cash costs in YTD 2020 mainly attributable to the increase of maintenance and processing costs during the period relating to higher consumption of lime and grinding balls and to the SAG liners used in the new mills compared with YTD 2019. All-in sustaining costs in the reporting period were $2.27/lb payable copper compared with $2.12/lb payable copper in YTD 2019. Higher AISC mainly related to higher underlying cash costs as well as additional investments in sustaining capex and higher stripping costs.

Sustaining capex for the nine month period ended 30 September 2020 amounted to €11.3 million, compared with €5.3 million in the same period in the previous year. Sustaining capex related to tailing dams and enhancements in processing systems.

Corporate costs for the first nine month period ended of 2020 were €3.5 million, compared with €5.5 million in YTD 2019. Corporate costs mainly include Company's overhead expenses.

Exploration costs related to Proyecto Riotinto for the nine month period ended 30 September 2020 amounted to €1.5 million, compared with €2.5 million in YTD 2019.

EBITDA for the nine months ended 30 September 2020 amounted to €44.4 million, compared with €41.4 million in YTD 2019.

Depreciation and amortisation amounted to €22.2 million for the nine-month period ended 30 September 2020 (YTD 2019: €10.9 million) as a result of the higher throughput resulting from the 2019 plant expansion.

Net finance costs for YTD 2020 amounted to €0.1 million (YTD 2019 €23k loss).

Copper prices

The average realised copper price increased by 1.5% from US$2.68 per pound in Q3 2019 to US$2.72 per pound in Q3 2020.

The average prices of copper for the three months ended 30 September 2020 and 2019 are summarised below:

 

 

( USD )

Three months ended

30 Sep 2020

 

Three months ended

30 Sep 2019

 

Nine months ended

30 Sep 2020

 

Nine months ended

30 Sep 2019

 

 

 

 

 

 

 

 

Realised copper price per lb

2.72

 

2.68

 

2.60

 

2.76

Market copper price per lb (period average)

2.96

 

2.63

 

2.65

 

2.74

Realised copper prices for the reporting period noted above have been calculated using payable copper and including provisional invoices and final settlements of quotation periods ("QPs") together. Higher realised prices than market averages are mainly due to the final settlement of invoices where QP was fixed in the previous quarter due to a short open period when copper prices were higher. The realised price of shipments during the quarter excluding QP was approximately $2.96/lb.

5.  Non-GAAP Measures

Atalaya has included certain non-IFRS measures including "EBITDA", "Cash Cost per pound of payable copper", "All-In Sustaining Costs" ("AISC") and "realised 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 gross sales net of penalties and discounts and all operating costs, excluding finance, tax, impairment, depreciation and amortisation expenses.

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

AISC per pound of payable copper includes C1 Cash Costs plus royalties and agency fees, expenditures on rehabilitation, capitalised stripping costs, exploration and geology costs, corporate costs and sustaining capital expenditures.

Realised price per pound of payable copper is the value of the copper payable included in the concentrate produced including the discounts and other features governed by the offtake agreements of the Group and all discounts or premiums provided in commodity hedge agreements with financial institutions, expressed in USD per pound of payable copper. Realised price is consistent with the widely accepted industry standard definition.

 

6.  Liquidity and Capital Resources

Atalaya monitors factors that could impact its liquidity as part of 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 and administrative costs.

The following is a summary of Atalaya's cash position and cash flows as at 30 September 2020 and 31 December 2019.

Liquidity information

( Euro 000's )

 

30 September 2020

31 December 2019

 

 

 

 

Unrestricted cash and cash equivalents at Group level

 

19,984

1,730

Unrestricted cash and cash equivalents at Operation level

 

9,790

6,347

Working capital surplus

 

25,002

3,598

 

Unrestricted cash and cash equivalents as at 30 September 2020 increased to €29.8 million from €8.1 million at 31 December 2019. The increase in cash balances is as result of the raise in operation activities. Cash balances are unrestricted and include balances at operational and corporate level.

As of 30 September 2020, Atalaya reported a working capital surplus of €25.0 million, compared with a working capital surplus of €3.6 million at 31 December 2019. The main liability of the working capital is trade payables related to Proyecto Riotinto contractors and the use of credit facilities. At 30 September 2020, trade payables have been increased by circa 7% compared with the same period last year.

6.  Liquidity and Capital Resources (cont.)

Overview of the Group's cash flows

 

 

( Euro 000's )

Three months ended

30 Sep 2020

 

Three months ended

30 Sep 2019

 

Nine  months ended

30 Sep 2020

 

Nine  months ended

30 Sep 2019

 

 

 

 

 

 

 

 

Cash flows from operating activities

18,820

 

16,487

 

41,820

 

31,457

Cash flows used in investing activities

(6,338)

 

(13,115)

 

(19,669)

 

(45,390)

Cash flows used in financing activities

(15,085)

 

(158)

 

(454)

 

(430)

Net (decrease)/increase in cash and cash equivalents

(2,603)

 

3,214

 

21,697

 

(14,363)

 

Three months cash flows review

Cash and cash equivalents decreased by €2.6 million during the three months ended 30 September 2020. This was due to the net results of cash from operating activities amounting to €18.8 million, the cash used in investing activities amounting to €6.3 million and the cash used in financing activities totalling €15.1 million.

Cash generated from operating activities before working capital changes was €21.3 million. Trade receivables decreased in the period by €7.7 million, inventory levels increased by €4.0 million and trade payables decreased by €3.9 million.

Investing activities during the quarter consumed €6.3 million, relating mainly to the tailing dams Capex and sustaining Capex mostly in enhancements in processing systems of the plant.

Financing activities during the quarter decreased by €15.1 million as result of the full repayment of the existing unsecured credit facilities drawdown during previous quarters.

Nine months cash flows review

Cash and cash equivalents increased by €21.7 million during the nine months ended 30 September 2020. This was due to cash from operating activities amounting to €41.8 million, cash used in investing activities amounting to €19.7 million and cash used in financing activities amounting to €0.5 million.

Cash generated from operating activities before working capital changes was €43.2 million. Trade payables increased in the period by €3.9 million, inventory levels decreased by €1.7 million and trade receivable balances decreased by €3.4 million.

Investing activities during the nine month period amounted to €19.7 million, mainly relating to the tailing dams project, stripping costs and sustaining Capex.

Financing activities during the nine month period ended 30 September 2020 reduced by €0.5 million driven by leases repayments.

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 mainly denominated in Euros ("EUR") which is the functional currency of the Group, and to a much lesser extent in British Pounds ("GBP").

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 and nine months ended 30 September 2020, Atalaya recognised a foreign exchange loss of €1.4 million and €2.0 million, respectively. Foreign exchange losses mainly related to changes in the period in EUR and USD conversion rates, as all sales are cashed and occasionally held in USD.

Liquidity and Capital Resources (cont.)

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

 

 

Three months ended

30 Sep 2020

Three months ended

30 Sep 2019

Nine months ended

30 Sep 2020

Nine months ended

30 Sep 2019

Average rates for the periods

 

 

 

 

  GBP - EUR

0.9050

0.9021

0.8851

0.8835

  USD - EUR

1.1689

1.1119

1.1250

1.1236

Spot rates as at

 

 

 

 

  GBP - EUR

0.9124

0.8857

0.9124

0.8857

  USD - EUR

1.1708

1.0889

1.1708

1.0889

 

 

 

 

 

 

6.  Deferred Consideration

In June 2008, the Group moved to 100% ownership of Atalaya Riotinto Mineral S.L. ("ARM") (and thus full ownership of Proyecto Riotinto) by acquiring the remaining 49% of the issued capital of ARM. At the time of the acquisition, the Group signed a Master Agreement (the "Master Agreement") with Astor Management AG ("Astor") which included a deferred consideration of €43.9 million (the "Deferred Consideration") payable as consideration in respect of the acquisition. The Company also entered into a credit assignment agreement at the same time with a related company of Astor, Shorthorn AG, pursuant to which the benefit of outstanding loans was assigned to the Company in consideration for the payment of €9.1 million to Shorthorn (the "Loan Assignment").

The Master Agreement has been the subject of litigation in the High Court and the Court of Appeal that has now concluded. As a consequence, ARM must apply any excess cash (after payment of operating expenses, sustaining capital expenditure, any senior debt service requirements and up to US$10 million per annum (for non-Proyecto Riotinto related expenses)) to pay the consideration due to Astor (including the Deferred Consideration and the amount of €9.1 million payable under the Loan Assignment). "Excess cash" is not defined in the Master Agreement leaving ambiguity as to how it is to be calculated.

On 2 March 2020, the Company filed an application in the High Court to seek clarity on the definition of "Excess Cash". A preliminary hearing took place in May 2020. Pursuant to the court order of May, Atalaya and Astor have served its statements of case.

Subsequently (i) on 26 October 2020, Atalaya issued an application for permission to amend its statement of case to take into account the position in respect of Spanish tax on payment of the Deferred Consideration; and (ii) on 29 October 2020, Astor issued an application for summary judgment on three alternative bases set out in its statement of case.

On 30 October 2020, a directions hearing took place. The next stages of the litigation will proceed as follows: (i) Atalaya's application for permission to amend its statement of case will be heard in February 2021; (ii) summary judgment hearing will be heard in June 2021; and (iii) if Astor's application is unsuccessful, trial will be taken place in February 2022 for six days.

As at 30 September 2020, no consideration has been paid.

The amount of the liability recognised by the Group is €53 million. The effect of discounting remains insignificant, in line with 2019 assessment, and therefore the Group has measured the liability for the Astor deferred consideration on an undiscounted basis.

 

7.  Corporate Social Responsibility

During the third quarter of the year, Atalaya has continued implementing initiatives to comply with its social responsibility in cooperation with its wholly-owned Fundación Atalaya Riotinto.

In this regards, Fundacion Atalaya Riotinto has sponsored initiatives with local communities:

-  A contribution to AFA - El Campillo: an NGO dedicated to support people who suffer from Alzheimer disease in their Day Care Center.

-  It has also cooperated with the municipality of Zalamea La Real to support the project that will restore the town´s boarding school.

-  In association with the municipality of Campofrío, Fundacion Atalaya Riotinto is supporting the opening of a Visitor´s Centre.

-  In coordination with Nerva townhall, Fundacion Atalaya Riotinto is sponsoring the town´s English Language School, and funding the acquisition of new equipment for the Youth House facilities.

8.  Health and Safety

Q3 2020 has been characterised by new actions to protect employees against COVID-19, in addition to continuing with the scheduled tasks in prevention of occupational risks:

-  In July 2020 PCR tests were performed at the nursery station to all employees, which resulted in a detection of two positive cases of asymptomatic people who returned from vacation. This situation was contained in time so not to affect employees or impacting production works either. Likewise, since September, serology tests have been carried out, by means of rapid tests, to all employees who return from vacation and, once a month, to the relief staff. Furthermore, the disinfection system of common areas with high attendance, changing rooms or training rooms has been improved to a faster and more efficient system.

-  A new record of days in a row without work accidents with sick leave has been achieved (more than 126 days).

-  In order to continue improving, a new activity has been developed: "leadership in the field". It is a management tool for the entire company. It started in July, with a goal of commitment to occupational health and safety and the inclusion of a preventive culture throughout the organization.

9.  Environmental Management

During the third quarter of 2020, the environmental department has continued to carry out environmental monitoring and environmental management activities, as well as environmental compliance inspection activities. Key points of the quarter:

-  Regular controls of channelled and non-channelled emissions into the atmosphere have been carried out. The results obtained in this quarter for diffuse emissions were favourable as none of them exceeded the established limit values. Currently, the Company is awaiting the results of diffuse and channelled emissions of September 2020, which, based on internal controls carried out, are not expected to exceed the established Emission Limit Values.

-  Additional measures in the action plan on dust have continued: increasing regular irrigations, implementing new coordination measures and carrying out an exhaustive monitoring of the emissions generated in the mine. In view of the data, the measures taken by Atalaya have had very positive results.

-  Environmental inspections focused on the storage and handling of chemical products, order and cleaning, waste management and good environmental practices, both for Atalaya and contractor staff.

The improvement and optimization of waste management in the mine continues. During this quarter, the works of the new non-hazardous waste park were completed. This works will improve the segregation and separation of waste, contributing to a development in safety, order and cleanliness.

 Risk Factors

Due to the nature of Atalaya's business in the mining industry, the Group is subject to various risks that could materially impact the future operating results 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 2019.

The Company continues to monitor the principal risks and uncertainties that could materially impact the Company's results and operations, including the areas of increasing uncertainty such as COVID-19 (refer to point 13 above).

 

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 2019.

 

11.  COVID-19 impact

The Company has issued a number of COVID-19 updates starting from 17 March 2020. As announced on 30 March 2020, a Royal Decree of 29 March 2020 excluded mining from essential industries resulting in the halting of operations at Proyecto Riotinto from 30 March 2020. As announced on 6 April 2020, further clarifications were received on the Royal Decree on 3 April 2020 which reinstated mining on the list of permitted activities and accordingly, operations at Proyecto Riotinto were authorized to recommence.

It is Atalaya's priority to protect its workforce and the local communities surrounding both Proyecto Riotinto and Proyecto Touro. Atalaya is following the requirements and recommendations issued by the Government of Spain and the regional and local health authorities to reduce the risk of COVID-19 exposure and avoid the spread of the virus.

In order to mitigate the potential operational and financial impact of COVID-19 the Company made net drawdowns on existing credit facilities in March 2020 which were repaid before the end of Q3 2020.

Refer to Note 22 and Note 2.1(b) of the Financial Statement for the on-going analysis carried out by the Company to evaluate the current impact of COVID-19 and potential scenario review by Management under the uncertainty on the development of the pandemic.

 

12.  Other Information

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

 

Unaudited Interim Condensed Consolidated Financial Statements on pages 11 to 33  

 

 

By Order of the Board of Directors,

 

 

 

 

___________________________________

Roger Davey

Chairman

Nicosia, 18 November 2020

 

 

Unaudited Interim Condensed Consolidated Income Statements

(All amounts in Euro thousands unless otherwise stated)

For the period ended 30 September 2020 and 2019

 

 

 

 

 

( Euro 000's )

 

 

 

 

Note

Three months ended

30 Sep 2020

Three months ended

30 Sep 2019

Nine months ended

30 Sep 2020

Nine

months ended

30 Sep 2019

 

 

 

 

 

 

Revenue

4

65,836

 44,383

183,569

 139,165

Operating costs and mine site administrative expenses

 

(41,565)

 (31,012)

(133,455)

 (89,239)

Mine site depreciation and amortization

 

(8,419)

 (3,723)

(22,186)

 (10,893)

Gross profit

 

15,852

 9,648

27,928

 39,033

Administration and other expenses

 

(1,361)

(2,070)

(3,519)

 (5,452)

Share-based benefits

12

(248)

 (256)

(569)

 (363)

Impairment loss on other receivables

 

-

-

(45)

-

Exploration expenses

 

(380)

 (1,132)

(1,484)

 (2,534)

Care and maintenance expenditure

 

(29)

 (43)

(189)

(164)

Operating profit

 

13,834

 6,147

22,122

 30,520

Other income

 

12

-

20

-

Net foreign exchange (loss)/gain

 

(1,411)

 1,405

(2,027)

 1,692

Net finance costs

5

82

 43

(67)

 (23)

Profit before tax

 

12,517

 7,595

20,048

 32,189

Tax

 

(280)

 (662)

(1,845)

 (4,252)

Profit for the period

 

12,237

 6,933

18,203

 27,937

 

 

 

 

 

 

Profit for the period attributable to:

 

 

 

 

 

-  Owners of the parent

 

12,402

 6,975

18,794

 28,090

-  Non-controlling interests

 

(165)

 (42)

(591)

 (153)

 

 

12,237

 6,933

18,203

 27,937

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

 

 

 

 

 

Basic earnings per share (EUR cents per share)

6

9.0

 5.1

13.7

 20.5

Fully diluted earnings per share (EUR cents per share)

6

8.8

 5.0

13.4

 20.2

 

 

 

 

 

 

Profit for the period

 

12,237

6,933

18,203

 27,937

Other comprehensive income:

 

 

 

 

 

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

 

61

(25)

52

 (37)

Total comprehensive income for the period

 

12,298

6,908

18,255

27,900

 

 

 

 

 

 

Total comprehensive income for the period attributable to:

 

 

 

 

 

-  Owners of the parent

 

12,463

 6,950

18,846

 28,053

-  Non-controlling interests

 

(165)

 (42)

(591)

 (153)

 

 

12,298

 6,908

18,255

 27,900

 

The notes on pages 11 to 33 are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.

 

Unaudited Interim Condensed Consolidated Statement of Financial Position

(All amounts in Euro thousands unless otherwise stated)

As at 30 September 2020 and 2019

 

(Euro 000's)

Note

30 Sep 2020

 

31 Dec 2019

Assets

 

Unaudited

 

Audited

Non-current assets

 

 

 

 

Property, plant and equipment

7

309,454

 

307,815

Intangible assets

8

59,429

 

63,085

Trade and other receivables

10

497

 

500

Non-current financial assets

 

1,101

 

1,101

Deferred tax asset

 

6,354

 

6,576

 

 

376,835

 

379,077

Current assets

 

 

 

 

Inventories

9

19,621

 

21,330

Trade and other receivables

10

38,551

 

32,857

Tax refundable

 

843

 

1,924

Other financial assets

 

94

 

42

Cash and cash equivalents

 

29,774

 

8,077

 

 

88,883

 

64,230

Total assets

 

465,718

 

443,307

Equity and liabilities

 

 

 

 

Equity attributable to owners of the parent

 

 

 

 

Share capital

11

13,372

 

13,372

Share premium

11

314,319

 

314,319

Other reserves

12

33,655

 

22,836

Accumulated losses

 

(22,046)

 

(30,669)

 

 

339,300

 

319,858

Non-controlling interests

 

(2,993)

 

(2,402)

Total equity

 

336,307

 

317,456

 

 

 

 

 

Liabilities

Non-current liabilities

 

 

 

 

Trade and other payables

13

13

 

13

Provisions

14

7,687

 

6,941

Leases

16

4,830

 

5,265

Deferred consideration

17

53,000

 

53,000

 

 

65,530

 

65,219

Current liabilities

 

 

 

 

Trade and other payables

13

61,472

 

57,537

Leases

16

582

 

588

Current tax liabilities

 

1,827

 

2,507

 

 

63,881

 

60,632

Total liabilities

 

129,411

 

125,851

Total equity and liabilities

 

465,718

 

443,307

 

 

The notes on pages 11 to 33 are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements. The unaudited interim condensed consolidated financial statements were authorised for issue by the Board of Directors on 18 November 2020 and were signed on its behalf.

 

 

 

 

 

Roger Davey

Alberto Lavandeira

Chairman

Managing Director

 

Unaudited Interim Condensed Consolidated Statements of Changes in Equity

(All amounts in Euro thousands unless otherwise stated)

For the period ended 30 September 2020 and 2019

 

 

 

(Euro 000's)

 

Note

 

Share
capital

 

Share premium(1)

Other reserves

Accum.

losses

 

Total

Non-controlling interest

 

Total equity

At 1 January 2020

 

13,372

314,319

22,836

(30,669)

319,858

(2,402)

317,456

Profit for the period

 

-

-

 

18,794

18,795

(591)

18,204

Change in fair value of financial assets through OCI

 

 

-

 

-

 

52

 

-

 

-

 

-

 

52

Total comprehensive income

 

-

-

52

18,794

18,846

(591)

18,255

Transactions with owners

 

 

 

 

 

 

 

 

Recognition of share-based payments

12

-

-

569

-

569

-

569

Recognition of depletion factor

12

-

-

8,000

(8,000)

-

-

-

Recognition of non-distributable reserve

12

-

-

2,198

(2,198)

-

  -

-

Other changes in equity

 

-

-

-

27

27

  -

27

At 30 September 2020

 

13,372

314,319

33,655

(22,046)

339,300

(2,993)

336,307

 

(1) The share premium reserve is not available for distribution

 

 

 

(Euro 000's)

 

Note

 

Share
capital

 

Share premium(1)

Other reserves

Accum.

losses

 

Total

Non-controlling interest

 

Total equity

At 1 January 2019

 

13,372

314,319

12,791

(58,308)

282,174

4,200

286,374

 

Profit for the period

 

-

-

-

28,090

28,090

(153)

27,937

 

Change in fair value of financial assets through OCI

 

-

 

-

 

(37 )

-

(37 )

-

(37 )

 

Total comprehensive income

 

-

-

(37)

28,090

28,053

(153)

27,900

 

Transactions with owners

 

 

 

 

 

 

 

 

 

Recognition of share-based payments

12

-

-

5,378

(5,378)

-

-

-

 

Recognition of depletion factor

12

-

-

363

-

363

-

363

 

Recognition of non-distributable reserve

12

-

-

1,984

(1,984)

-

-

-

 

Recognition of distributable reserve

12

-

-

1,844

(1,844)

-

-

-

 

At 30 September 2019

 

13,372

314,319

22,323

(39,424)

310,590

4,047

314,637

 

(1) The share premium reserve is not available for distribution

 

 

 

(Euro 000's)

Audited

 

Note

 

Share
capital

 

Share premium(1)

Other reserves

Accum.

losses

 

Total

Non-controlling interest

 

Total equity

At 1 January 2019

 

13,372

314,319

12,791

(58,308)

282,174

4,200

286,374

Profit for the period

 

-

-

 

37,323

37,323

(6,602)

30,721

Change in fair value of financial assets through OCI

 

 

-

 

-

 

(29)

 

-

 

(29)

 

-

 

(29)

Total comprehensive income

 

-

-

(29)

37,323

37,294

(6,602)

30,692

Transactions with owners

 

 

 

 

 

 

 

 

Recognition of depletion factor

12

-

-

5,378

(5,378)

-

-

-

Recognition of share-based payments

12

-

-

619

-

619

-

619

Recognition of non-distributable reserve

12

-

-

1,984

(1,984)

-

-

-

Recognition of distributable reserve

12

-

-

1,844

(1,844)

 

 

 

Other changes in equity

 

-

-

249

(478)

(229)

-

(229)

At 31 December 2019

 

13,372

314,319

22,836

(30,669)

319,858

(2,402)

317,456

 (1) The share premium reserve is not available for distribution

 

The notes on pages 11 to 33 are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.

 

Unaudited Interim Condensed Consolidated Statement of Cash Flows

(All amounts in Euro thousands unless otherwise stated)

For to the period ended 30 September 2020 and 2019

 

 

 

 

(Euro 000's)

 

 

 

Note

Three months ended

Sep

2020

Three months ended

30 Sep

2019

Nine months ended

30 Sep

2020

Nine

months ended

30 Sep

2019

Cash flows from operating activities

 

 

 

 

 

Profit before tax

 

12,517

7,595

20,048

32,189

Adjustments for:

 

 

 

 

 

Depreciation of property, plant and equipment

7

7,096

2,864

18,530

8,354

Amortisation of intangibles

8

1,323

858

3,656

2,539

Recognition of share-based payments

12

248

256

569

363

Interest income

5

(112)

(83)

(116)

(99)

Interest expense

5

56

29

109

33

Unwinding of discounting

5

(30)

30

62

89

Legal provisions

14

267

279

300

261

Rehab provisions

14

-

(18)

-

(18)

Loss on disposal of property, plant and equipment

7

-

-

45

2

Unrealised foreign exchange loss on financing activities

 

(90)

(22)

(19)

4

Cash inflows from operating activities before working capital changes

 

21,275

11,788

43,184

43,717

Changes in working capital:

 

 

 

 

 

Inventories

9

(4,052)

(97)

1,709

(653)

Trade and other receivables

10

7,700

6,174

(3,427)

(5,587)

Trade and other payables

13

(3,863)

(453)

3,934

(3,116)

Cash flows from operations

 

21,060

17,412

45,400

34,361

Interest expense on lease liabilities

 

(4)

(2)

(12)

(6)

Interest paid

 

(56)

(898)

(109)

(2,877)

Tax paid

 

(2,180)

(27)

(3,459)

(27)

Net cash from operating activities

 

18,820

16,487

41,820

31,457

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of property, plant and equipment

 

(6,450)

(12,890)

(19,875)

(44,462)

Purchase of intangible assets

8

-

(308)

-

(1,027)

Interest received

5

112

83

116

99

Net cash used in investing activities

 

(6,338)

(13,115)

(19,669)

(45,390)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Lease payments

16

(151)

(156)

(454)

(424)

Repayment of Borrowings

 

(14,934)

-

-

-

Net cash flows (used in)/from financing activities

 

(15,085)

(156)

(454)

(424)

 

 

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

 

(2,063)

3,214

21,697

(14,363)

Cash and cash equivalents :

 

 

 

 

 

At beginning of the period

 

32,377

15,493

8,077

33,070

At end of the period

 

29,774

18,707

29,774

18,707

 

The notes on pages 11 to 33 are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.

 

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(All amounts in Euro thousands unless otherwise stated)

For the period ended 30 September 2020 and 2019

 

1.  Incorporation and summary of business

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 30 September 2020.

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

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 Company owns and operates through a wholly-owned subsidiary, "Proyecto Riotinto", an open-pit copper mine located in the Pyritic belt, in the Andalusia region of Spain, approximately 65 km northwest of Seville. A brownfield expansion of this mine was completed in 2019.

In addition, the Company has a phased earn-in agreement to up 80% ownership of "Proyecto Touro", a brownfield copper project in northwest Spain.

In November 2019, Atalaya executed the option to acquire 12.5% of Explotaciones Gallegas del Cobre, S.L. the exploration property around Touro, with known additional reserves, which will provide high potential to the Proyecto Touro. The Company's and its subsidiaries' business is to explore for and develop metals production operations in Europe, with an initial focus on copper.

In October 2020, Atalaya acquired 100% of Cambridge Minería España, SL, which owns the Masa Valverde polymetallic project located in Huelva (Spain).

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.  Basis of preparation and accounting policies

2.1 Basis of preparation

(a)  Overview

The unaudited interim condensed consolidated financial statements for the nine month period ended 30 September 2020 have been prepared in accordance with International Accounting Standards 34: Interim Financial Reporting. IFRS comprise the standard issued by the International Accounting Standard Board ("IASB"), and IFRS Interpretations Committee ("IFRICs") as issued by the IASB. Additionally, the unaudited interim condensed consolidated financial statements have also been prepared in accordance with the IFRS as adopted by the European Union (EU), using the historical cost convention.

These unaudited interim condensed consolidated financial statements are 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 2019. These unaudited interim condensed 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 Group's 31 December 2019 Annual Report. The accounting policies are unchanged from those disclosed in the annual consolidated financial statements for the year ended 31 December 2019.

 

2.  Basis of preparation and accounting policies (cont.)

2.1 Basis of preparation (cont.)

(b)  Going concern

On 11 March 2020, the World Health Organisation declared the Coronavirus COVID- 19 outbreak to be a pandemic in recognition of its rapid spread across the globe. Many governments are continuing to take stringent steps to help contain, and in many jurisdictions, now delay, the spread of the virus, including: requiring self-isolation/ quarantine by those potentially affected, implementing social distancing measures, and controlling or closing borders and "locking-down" cities/regions or even entire countries.

The crisis and the actions taken by governments have resulted in significant disruption to business operations, consumption patterns worldwide, equity markets and significant volatility in commodities prices, including copper, which declined below Company's AISC level during March 2020 although commodities prices have recovered an the average market price for copper during Q2 2020 and Q3 2020 and the current spot price both exceed ASIC. Furthermore, in Spain, where the Company has its single producing asset, the Government issued a Royal Decree on 14 March 2020 to declare the nationwide lockdown to reduce the impact of the COVID-19 pandemic. On 29 March 2020, the Spanish government issued a new Royal Decree implementing enhanced measures to protect the people from the virus. The new Decree stipulated that only employees from a short list of essential industries are allowed to continue working from 30 March 2020. Mining was excluded as an essential industry and consequently the Proyecto Riotinto site was required to halt its operations for a short period until 3 April 2020 when mining operations were permitted to restart.

The significant impact on copper prices and the stoppage of Proyecto Riotinto as a result of the Royal Decree has partially impacted the revenues in the earlier part of this year.  Uncertainty remains on future copper prices and if Proyecto Riotinto will be required to be halted again for a longer period. The uncertainty makes difficult to determine and quantify the operational and financial impact there may be on the business going forward.

The Directors considered and debated different possible scenarios on the Company's operations, financial position and forecast for a period of at least 12 months since the approval of these financial statements. Discussion on the potential impact of the Pandemic continues at Director level, and include scenarios range from (i) further disruption in Proyecto Riotinto; (ii) market volatility in commodity prices; and (iii) availability of existing credit facilities.

The Company has increased its cash balance from €8.1 million as at 31 December 2019 to €29.8 million as at 30 September 2020.

The Directors, after reviewing these scenarios, the current cash resources, forecasts and budgets, timing of cash flows, borrowing facilities, sensitivity analyses and considering the associated uncertainties to the Group's operations have a reasonable expectation that the Company has adequate resources to continue operating in the foreseeable future.  Accordingly, these unaudited interim condensed consolidated 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.

 

2.2 New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2019, except for the adoption of new standards effective as of 1 January 2020. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2020, but do not have a material impact on the unaudited interim condensed consolidated financial statements of the Group.

Amendments to IFRS 3: Definition of a Business

The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on the consolidated financial statements of the Group, but may impact future periods should the Group enter into any business combinations.

 

2.  Basis of preparation and accounting policies (cont.)

2.2 New standards, interpretations and amendments adopted by the Group (cont.)

Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark Reform

The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument. These amendments had no impact on the consolidated financial statements of the Group as it does not have any interest rate hedge relationships.

Amendments to IAS 1 and IAS 8: Definition of Material

The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial statements of, nor is there expected to be any future impact to the Group.

Conceptual Framework for Financial Reporting issued on 29 March 2018

The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the IASB in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards. The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the consolidated financial statements of the Group.

 

2.3 Fair value estimation

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

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

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

Fair value measurements recognised in the consolidated statement of financial position

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

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

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

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

 

Basis of preparation and accounting policies (cont.)

2.3 Fair value estimation (cont.)

Financial assets or liabilities

 

 

 

 

 

(Euro 000's)

Level 1

Level 2

Level 3

 

Total

30 September 2020

 

 

 

 

 

Other financial assets

 

 

 

 

 

Financial assets at FV through OCI

94

-

1,101

 

1,195

Trade and other receivables

 

 

 

 

 

Receivables (subject to provisional pricing)

-

12,196

-

 

12,196

Total

94

12,196

1,101

 

13,391

31 December 2019

 

 

 

 

 

Other financial assets

 

 

 

 

 

Financial assets at FV through OCI

42

-

1,101

 

1,143

Trade and other receivables

 

 

 

 

 

Receivables (subject to provisional pricing)

-

17,716

-

 

17,716

Total

42

17,716

1,101

 

18,859

 

2.4 Critical accounting estimates and judgements

The preparation of the unaudited interim condensed consolidated financial statements require management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates and assumptions are continually evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

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.

A full analysis of critical accounting estimates and judgements is set out in Note 3.4 to the 2019 audited financial statements, as well as Note 2.1(b) of these unaudited interim condensed consolidated financial statements.

 

3.  Business and geographical segments

Business segments

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

Copper concentrates produced by the Group are sold to three off-takers as per the relevant offtake agreements (Note 4)

Geographical segments

The Group's mining activities are located in Spain. The commercialisation of the copper concentrates produced in Spain is carried out through Cyprus. Sales transactions to related parties are on arm's length basis in a similar manner to transaction with third parties. Accounting policies used by the Group in different locations are the same as those contained in Note 2.

3.  Business and geographical segments (cont.)

 

(Euro 000's)

Cyprus

Spain

Other

 

Total

Three months ended 30 September 2020

 

 

 

 

 

Revenue - from external customers

4,312

61,524

-

 

65,836

Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)

2,132

20,175

(42)

 

22,265

Depreciation/amortisation charge

-

(8,419)

-

 

(8,419)

Net foreign exchange loss

(425)

(986)

-

 

(1,411)

Finance income

-

112

-

 

112

Finance cost

-

(30)

-

 

(30)

Profit/(loss) before tax

1,707

10,852

(42)

 

12,517

Tax

405

(685)

-

 

(280)

Profit for the period

2,112

10,167

(42)

 

12,237

 

 

 

 

 

 

Nine months ended 30 September 2020

 

 

 

 

 

Revenue - from external customers

11,896

171,673

-

 

183,569

Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)

6,481

38,035

(143)

 

44,373

Depreciation/amortisation charge

-

(22,186)

-

 

(22,186)

Net foreign exchange gain/(loss)

(481)

(1,550)

4

 

(2,027)

Impairment of other receivables

(45)

-

-

 

45

Finance income

-

116

-

 

116

Finance cost

(1)

(182)

-

 

(183)

Profit/(loss) before tax

5,954

14,234

(139)

 

20,048

Tax

(1,022)

(823)

-

 

(1,845)

Profit for the period

4,932

13,411

(139)

 

18,203

 

 

 

 

 

 

Total assets

33,167

431,391

1,160

 

465,718

Total liabilities

(11,041)

(118,332)

(38)

 

(129,411)

Depreciation of property, plant and equipment

-

18,530

-

 

18,530

Amortisation of intangible assets

-

3,656

-

 

3,656

Total additions of non-current assets

-

26,364

-

 

26,364

 

Business and geographical segments (cont.)

 

(Euro 000's)

Cyprus

Spain

Other

 

Total

Three months ended 30 September 2019

 

 

 

 

 

Revenue - from external customers

2,706

41,677

-

 

44,383

Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)

 775

 8,969

 125

 

9,869

Depreciation/amortisation charge

-

(3,722)

-

 

 (3,722)

Net foreign exchange (loss)

788

617

-

 

 1,405

Finance income

75

8

-

 

 83

Finance cost

-

(40)

-

 

 (40)

Profit/(loss) before tax

 1,638

 5,832

 125

 

7,595

Tax

 

 

 

 

(662)

Profit for the period

 

 

 

 

6,933

 

 

 

 

 

 

Nine months ended 30 September 2019

 

 

 

 

 

Revenue - from external customers

9,391

129,774

-

 

139,165

Earnings/(loss) Before Interest, Tax, Depreciation and Amortisation (EBITDA)

 4,157

 37,792

 (536)

 

41,413

Depreciation/amortisation charge

(1)

(10,892)

-

 

 (10,893)

Net foreign exchange gain/(loss)

955

739

(2)

 

 1,692

Finance income

75

24

-

 

 99

Finance cost

(1)

(121)

-

 

 (122)

Profit/(loss) before tax

 5,185

 27,542

 (538)

 

32,189

Tax

 

 

 

 

 (4,252)

Profit for the period

 

 

 

 

 27,937

 

 

 

 

 

 

Total assets

29,063

409,078

656

 

 438,797

Total liabilities

(14,252)

(109,472)

(436)

 

 (124,160)

Depreciation of property, plant and equipment

1

8,353

-

 

 8,354

Amortisation of intangible assets

-

2,539

-

 

 2,539

Total additions of non-current assets

1

51,924

-

 

51,925

 

Revenue represents the sales value of goods supplied to customers, net of value added tax. The following table summarises sales to customers with whom transactions have individually exceeded 10.0% of the Group's revenues.

(Euro 000's) 

Nine months

 ended

30 Sep

2020

Nine months

ended

30 Sep

2019

 

Segment

€'000

Segment

€'000

 

 

 

 

 

Offtaker 1

Copper

30,821

Copper

27,267

Offtaker 2

Copper

56,687

Copper

39,045

Offtaker 3

Copper

96,061

Copper

72,853

 

4. Revenue

 

 

(Euro 000's )

Three months ended 

30 Sep 2020

Three months ended
30 Sep 2019

Nine months ended

30 Sep 2020

Nine months ended

30 Sep 2019

Revenue from contracts with customers (1)

183,447

46,185

63,421

140,177

Fair value (losses)/gains relating to provisional pricing within sales (2)

122

(1,802)

2,415

(1,012)

Total revenue

183,569

44,383

65,836

139,165

 

All revenue from copper concentrate is recognised at a point in time when the control is transferred. Revenue from freight services is recognised over time as the services are provided.

(1)  Included within YTD 2020 revenue, there is a transaction price of € 2.3 million (€0.1 million in YTD 2019) related to the freight services provided by the Group to the customers arising from the sales of copper concentrate under CIF incoterm.

(2)  Provisional pricing impact represents the change in fair value of the embedded derivative arising on sales of concentrate.

 

5. Net finance cost

 

 

 

 

(Euro 000's)

Three months ended 
30 Sep 2020

Three months ended
30 Sep 2019

Nine months ended
30 Sep 2020

Nine months ended

30 Sep 2019

Interest expense:

 

 

 

 

Other interest

(56)

(8)

(109)

(27)

Interest expense on lease liabilities

(4)

(2)

(12)

(6)

Unwinding of discount on mine rehabilitation provision (Note 14)

30

(30)

(62)

(89)

Interest income(1)

112

83

116

99

 

82

43

(67)

(23)

(1)  Interest income relates to interest received on bank balances

 

6. Earnings per share

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

 

 

 

 

(Euro 000's)

Three months ended
30 Sep 2020

Three months ended
30 Sep 2019

Nine months ended
30 Sep 2020

Nine months ended

30 Sep 2019

Profit attributable to equity holders of the parent

12,403

(962)

18,794

(2,494)

 

 

 

 

 

Weighted number of ordinary shares for the purposes of basic earnings per share (000's)

 

137,339

 

137,339

 

137,339

 

137,339

Basic profit per share (EUR cents/share)

9.0

5.1

13.7

20.5

 

 

 

 

 

Weighted number of ordinary shares for the purposes of fully diluted earnings per share (000's)

 

140,894

 

138,517

 

140,202

 

138,959

Fully diluted profit per share (EUR cents/share)

8.8

5.0

13.4

20.2

 

6. Earnings per share (cont.)

At 30 September 2020 there are nil warrants (Note 11) and 3,555,250 options (Note 12) (2019: nil warrants and 2,713,000 options) which have been included when calculating the weighted average number of shares for fully diluted earnings per share for 2020.

 

7. Property, plant and equipment

 

 

(Euro 000's)

Land and buildings

Right-of-use assets

Plant and machinery

Assets under construction (1)

 

Deferred mining costs (2)

Other assets (3)

Total

Cost

 

 

 

 

 

 

 

At 1 January 2019

45,853

6,144

152,820

62,010

27,537

785

295,149

Additions

169

277

646

41,846

1,940

1

44,879

Disposals

-

-

-

-

-

(5)

(5)

Reclassifications

-

-

4,609

(4,609)

-

-

-

At 30 September 2019

46,022

6,421

158,075

99,247

29,477

781

340,023

Additions

41

-

525

6,891

4,536

-

11,993

Reclassifications

-

-

89,621

(89,621)

-

-

-

At 31 December 2019

46,063

6,421

248,221

16,517

34,013

781

352,016

Additions

401

-

543

13,983

5,242

-

20,169

 

Reclassifications

-

-

9,296

(9,296)

-

-

-

 

At 30 September 2020

46,464

6,421

258,060

21,204

39,255

781

372,185

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

 

At 1 January 2019

6,072

-

20,315

-

4,681

561

31,629

Charge for the period

1,585

284

5,398

-

1,040

47

8,534

Disposals

-

-

-

-

-

(3)

(3)

At 30 September 2019

7,657

284

25,713

-

5,721

605

39,980

Charge for the period

600

107

3,159

-

340

25

4,221

At 31 December 2019

8,257

391

28,872

-

6,061

620

44,201

Charge for the period

2,278

402

14,044

-

1,765

41

18,530

At 30 September 2020

10,535

793

42,916

-

7,826

661

62,731

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

At 30 September 2020

35,929

21,204

120

309,454

At 31 December 2019

37,806

16,517

161

307,815

 

(1) Assets under construction at 30 September 2020 were €21.2 million (31 December 2019: €16.5 million) which include sustaining capital expenditures and tailings dams project.

(2) Stripping costs

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

The above fixed assets are mainly located in Spain.

8. Intangible assets

 

(Euro 000's)

Permits (1)

 

Licences, R&D and software

 

 

Total

Cost

 

 

 

 

At 1 January 2019

76,538

6,026

 

82,564

Additions

-

1,027

 

1,027

At 30 September 2019

76,538

7,053

 

83,591

Additions

-

557

 

557

At 31 December 2019

76,538

7,610

 

84,148

Additions

-

-

 

-

At 30 September 2020

76,538

7,610

 

84,148

Amortisation

 

 

 

 

On 1 January 2019

10,370

243

 

10,613

Charge for the period

2,492

47

 

2,539

At 30 September 2019

12,862

290

 

13,152

Charge for the period

946

17

 

963

Impairment charge

-

6,948

 

6,948

At 31 December 2019

13,808

7,255

 

21,063

Charge for the period

3,607

49

 

3,656

At 30 September 2020

17,415

7,304

 

24,719

Net book value

 

 

 

 

At 30 September 2020

59,123

306

 

59,429

At 31 December 2019

62,730

355

 

63,085

 

 

 

 

 

(1)  Permits include an amount of €5.0 million related to Proyecto Touro mining rights.

The ultimate recovery of balances carried forward in relation to areas of interest or assets (including intangibles) is dependent on successful development, and commercial exploitation, or alternatively the sale of the respective areas.

The Group conducts impairment testing on an annual basis unless indicators of impairment are not present at the reporting date. Considering the carrying value of the assets at Proyecto Riotinto, including the intangible assets and any impairment thereof, the Group assessed that no indicators were present as at 30 September 2020 and thus no impairment has been recognised.

9. Inventories

(Euro 000's)

30 Sep 2020

 

31 Dec 2019

Finished products

6,719

 

11,024

Materials and supplies

11,801

 

9,266

Work in progress

1,101

 

1,040

 

19,621

 

21,330

As of 30 September 2020, copper concentrate produced and not sold amounted to 8,402 tonnes (31 Dec 2019: 14,201 tonnes). Accordingly, the inventory for copper concentrate was €6.7 million (31 Dec 2019: €11.0 million).

Materials and supplies relate mainly to machinery spare parts. Work in progress represents ore stockpiles, which is ore that has been extracted and is available for further processing.

 10. Trade and other receivables

(Euro 000's)

30 Sep 2020

 

31 Dec 2019

Non-current

 

 

 

Deposits

497

 

500

 

497

 

500

Current

 

 

 

Trade receivables at fair value - subject to provisional pricing

10,941

 

8,798

Trade receivables from shareholders at fair value - subject to provisional pricing (Note 20.3)

 

1,255

 

 

8,918

Other receivables from related parties at amortised cost (Note 20.3)

56

 

56

Deposits

27

 

26

VAT receivables

23,162

 

14,380

Tax advances

1,063

 

7

Prepayments

2,040

 

616

Other current assets

7

 

56

 

38,551

 

32,857

Allowance for expected credit losses

-

 

-

Total trade and other receivables

38,551

 

33,357

Trade receivables are shown net of any interest applied to prepayments. Payment terms are aligned with offtake agreements and market standards and generally are 7 days on 90% of the invoice and the remaining 10% at the settlement date which can vary between 1 to 5 months. The fair values of trade and other receivables approximate to their book values.

 

11. 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 2019

 

137,339

13,372

314,319

 

327,691

Balance at 30 September 2019

 

137,339

13,372

314,319

 

327,691

Balance at 31 December 2019 / 30 September 2020

 

137,339

13,372

314,319

 

327,691

                       

 

Authorised capital

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

Issued capital

There were no changes in share capital during the nine months period ended 30 September 2020 and 2019.

Warrants

As at 30 September 2020 and 2019 there were no warrants.

12. Other reserves

 

 

 

(Euro 000's)

Share option

Bonus share

 

 

 

 

Depletion factor(1)

 

Fair value reserve of financial assets at FVOCI (2)

 

 

 

Non-Distributable reserve(3)

 

 

 

 

Distributable reserve(4)

 

 

 

 

 

Total

At 1 January 2019

6,752

208

5,500

(1,115)

1,446

6,752

 

12,791

Recognition of share- based payments

 

363

 

-

 

-

 

-

 

-

 

-

 

 

363

Recognition of depletion factor

 

-

 

-

 

5,378

 

-

 

-

 

-

 

 

5,378

Recognition of non-distributable reserve

 

-

 

-

 

-

 

-

 

1,984

 

-

 

 

 

1,984

Recognition of distributable reserve

 

-

 

-

 

-

 

-

 

-

 

1,844

 

 

1,844

Change in fair value of financial assets at fair value through OCI

 

 

-

 

 

-

 

 

-

 

 

(37)

 

 

-

 

 

-

 

 

 

(37)

At 30 September 2019

7,115

208

10,878

(1,152)

3,430

1,844

 

22,323

Recognition of share-based payments

256

-

-

 

-

 

 

256

Change in fair value of financial assets at fair value through OCI

-

-

-

12

-

-

 

 

Other changes in reserves

-

-

-

-

-

249

 

249

At 31 December 2019

7,371

208

10,878

(1,144)

3,430

2,093

 

22,836

Recognition of share-based payments

 

569

 

-

 

-

 

-

 

-

 

-

 

 

569

Recognition of depletion factor

 

-

 

-

 

8,000

 

-

 

-

 

-

 

 

8,000

Recognition of non-distributable reserve

 

-

 

-

 

-

 

-

 

2,198

 

-

 

 

2,198

Change in fair value of financial assets at fair value through OCI

 

 

 -

 

 

-

 

 

-

 

 

 52

 

 

-

 

 

-

 

 

 

52

At 30 September 2020

 

7,940

 

208

 

18,878

 

(1,092)

 

5,628

 

2,093

 

 

33,655

 

(1)  Depletion factor reserve

At 30 September 2020, the Group has disposed €8.0 million (30 September 2019: €5.4 million) as a depletion factor reserve as per the Spanish Corporate Tax Act.

(2)  Fair value reserve of financial assets at FVOCI

The Group has elected to recognise changes in the fair value of certain investments in equity securities in OCI, as explained in (1) above. These changes are accumulated within the FVOCI reserve within equity. The Group transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.

12. Other reserves (cont.)

(3)  Non-distributable reserve

To comply with Spanish Law, the Group needed to record a reserve when profit generated equal to a 10% of profit/(loss) for the year until 20% of share capital is reached.

(4)  Distributable reserve

The Group reclassified 10% of the profit of 2019 to distributable reserves.

In general, option agreements contain provisions adjusting the exercise price in certain circumstances including the allotment of fully paid ordinary shares by way of a capitalisation of the Company's reserves, a sub division or consolidation of the ordinary shares, a reduction of share capital and offers or invitations (whether by way of rights issue or otherwise) to the holders of ordinary shares.

Details of share options outstanding as at 30 September 2020:

 

Grant date

        Expiry date

Exercise price £

Share options

23 Feb 2017

22 Feb 2022

1.44

813,000

29 May 2019

28-May-2024

2.015

1,292,250

8 July 2019

7 July 2024

2.045

400,000

30 June 2020

29 June 2030

1.475

1,050,000

Total

3,555,250

 

 

 

 

 

 

Weighted average

exercise price  £

Share options

 

At 1 January 2020

2.08

2,505,250

 

Granted during the reported period

1.475

1,050,000

 

30 September 2020

1.924

3,555,250

               

 

13. Trade and other payables

(Euro 000's)

30 Sep 2020

 

31 Dec 2019

Non-current

 

 

 

Government grant

13

 

13

 

13

 

13

Current

 

 

 

Trade payables

59,039

 

52,395

Land options and mortgage

-

 

282

Accruals

2,433

 

4,860

 

61,472

 

57,537

Trade payables are mainly for the acquisition of materials, supplies and other services. These payables do not accrue interest and no guarantees have been granted. The fair value of trade and other payables approximate their book values. Trade payables are non-interest-bearing and are normally settled on 60-day terms.

14. Provisions

 

(Euro 000's)

 

Legal costs

Rehabilitation costs

 

 

Total costs

1 January 2019

127

6,392

 

6,519

Additions

284

140

 

424

Revision of provision

(23)

(18)

 

(41)

Finance cost

 

89

 

89

At 30 September 2019

388

6,603

 

6,991

Additions

-

(2)

 

(2)

Revision of provision

-

-

 

-

Finance cost

-

(48)

 

(48)

At 31 December 2019

388

6,553

 

6,941

Additions

300

384

 

684

Finance cost

-

62

 

62

At 30 September 2020

688

6,999

 

7,687

 

(Euro 000's)

30 Sep 2020

 

31 Dec 2019

Non-current

6,999

 

6,941

Current

-

 

-

Total

6,999

 

6,941

Rehabilitation provision

Rehabilitation provision represents the accrued cost required to provide adequate restoration and rehabilitation upon the completion of production activities. These amounts will be settled when rehabilitation is undertaken, generally over the project's life.

The discount rate used in the calculation of the net present value of the provision as at 30 September 2020 was 1%, which is the 15-year Spain Government Bond rate adjusted by Management judgement (31 December 2019: 1.87%).

The rehabilitation provision is currently being reviewed and is expected to be updated at year-end.

Legal provision

The Group has been named a defendant in several legal actions in Spain, the outcome of which is not determinable as at 30 September 2020. Management has reviewed individually each case and made a provis ion of €0.3 million for these claims, which has been reflected in these unaudited interim condensed consolidated financial statements.

15. Borrowings

The Group has unsecured credit facilities totalling €64.5 million. During the period to 30 September 2020, Atalaya drew down some of its existing credit facilities to strengthen the cash position of the Company to provide additional liquidity in view of any potential impacts of the COVID-19 pandemic. The average interest rate on the facilities was 1.69%. These borrowings were fully repaid by 30 September and the underlying credit facilities remain in place.

 

16. Leases

(Euro 000's)

30 Sep 2020

 

31 Dec 2019

Non-current

 

 

 

Leases

4,830

 

5,265

 

4,830

 

5,265

Current

 

 

 

Leases

582

 

588

 

582

 

588

Finance leases

The Group entered into lease arrangements for the renting of land, laboratory equipment and vehicles which are subject to the adoption of all requirements of IFRS 16 Leases. The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of twelve months or less and leases of low-value assets. Depreciation expense regarding leases amounts to €0.4 million (YTD 2019: €0.3 million) for the nine month period ended 30 September 2020. The duration of the land lease is for a period of thirteen years, payments are due at the beginning of the month escalating annually on average by 1.5%. At 30 September 2020, the remaining term of this lease is eleven years.

The duration of the motor vehicle and laboratory equipment lease is for a period of four years. Payments are due at the beginning of the month, currently escalating on an annual average of 0%. At 30 September 2020, the remaining term of this motor vehicle and laboratory equipment lease is two years, and two years and a have, respectively.

 

(Euro 000's)

30 Sep 2020

31 Dec 2019

Minimum lease payments due:

 

 

-  Within one year

582

588

-  Two to five years

2,050

2,134

-  Over five years

2,779

3,131

Present value of minimum lease payments due

5,411

5,853

 

(Euro 000's)

Lease liability

Balance 1 January 2020

5,853

Additions

-

Interest expense

12

Lease payments

(454)

Balance at 30 September 2020

5,411

 

 

Balance at 30 September 2020

 

-  Non-current liabilities

4,829

-  Current liabilities

582

 

5,411

 

17. Deferred consideration

In June 2008, the Group moved to 100% ownership of Atalaya Riotinto Mineral S.L. ("ARM") (and thus full ownership of Proyecto Riotinto) by acquiring the remaining 49% of the issued capital of ARM. At the time of the acquisition, the Group signed a Master Agreement (the "Master Agreement") with Astor Management AG ("Astor") which included a deferred consideration of €43.9 million (the "Deferred Consideration") payable as consideration in respect of the acquisition. The Company also entered into a credit assignment agreement at the same time with a related company of Astor, Shorthorn AG, pursuant to which the benefit of outstanding loans was assigned to the Company in consideration for the payment of €9.1 million to Shorthorn (the "Loan Assignment").

The Master Agreement has been the subject of litigation in the High Court and the Court of Appeal that has now concluded. As a consequence, ARM must apply any excess cash (after payment of operating expenses, sustaining capital expenditure, any senior debt service requirements and up to US$10 million per annum (for non-Proyecto Riotinto related expenses)) to pay the consideration due to Astor (including the Deferred Consideration and the amount of €9.1 million payable under the Loan Assignment). "Excess cash" is not defined in the Master Agreement leaving ambiguity as to how it is to be calculated.

On 2 March 2020, the Company filed an application in the High Court to seek clarity on the definition of "Excess Cash". A preliminary hearing took place in May 2020. Pursuant to the court order of May, Atalaya an Astor have served its statements of case.

Subsequently (i) on 26 October 2020, Atalaya issued an application for permission to amend its statement of case to take into account the position in respect of Spanish tax on payment of the Deferred Consideration; and (ii) on 29 October 2020, Astor issued an application for summary judgment on three alternative bases set out in its statement of case.

On 30 October 2020, a directions hearing took place. The next stages of the litigation will proceed as follows: (i) Atalaya's application for permission to amend its statement of case will be heard in February 2021; (ii) summary judgment hearing will be heard in June 2021; and (iii) if Astor's application is unsuccessful, trial will be taken place in February 2022 for six days.

As at 30 September 2020, no consideration has been paid.

The amount of the liability recognised by the Group is €53 million. The effect of discounting remains insignificant, in line with 2019 assessment, and therefore the Group has measured the liability for the Astor deferred consideration on an undiscounted basis.

 

18. Acquisition, incorporation and disposal of subsidiaries

On 16 September 2020 the Group established a new company in Cyprus under the name of Atalaya Financing, Limited. The activity of the new company is financing. The unaudited interim condensed consolidated financial statements include the results of the entity for half month period since the acquisition date:

On 15 October 2020, the Company acquired 100% of the voting shares of Cambridge Minería España, SL, a company located in Huelva (Spain) that holds exploration permits for Masa Valverde polymetallic project located in Huelva (Spain) for €1.4 million payable in two instalments.

 

19. Wind-up of subsidiaries

There were no operations wound-up during the nine-month period ended 30 September 2020.

 

20. Related party transactions

The following transactions were carried out with related parties:

 20. Related party transactions (cont.)

20.1 Compensation of key management personnel

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

 

 

(Euro 000's)

Three months ended

30 Sep 2020

Three months ended

30 Sep 2019

Nine months ended 30 Sep 2020

Nine  months ended

30 Sep 2019

Directors' remuneration and fees

246

244

758

730

Share option-based benefits and other benefits to directors

90

88

202

112

Director´s bonus

-

365

-

365

Key management personnel remuneration

130

174

379

454

Key management bonus

-

1,150

-

1,150

Share option-based and other benefits to key management personnel 

108

135

266

183

 

574

2,156

1,605

2,994

20.2 Share-based benefits

On 30 June 2020, the directors and key management personnel were granted with 750,000 share options. The options expire ten years from the deemed date of grant (30 June 2020), have an exercise price of 147.5 pence per ordinary share, based on the share price at the close of market on the grant date, and vest in two equal tranches, half on grant and half on the first anniversary of the granting date.

20.3 Transactions with related parties/shareholders

i) Transaction with shareholders

 

 

 

(Euro 000's

Three months ended

30 Sep 2020

Three months ended

30 Sep 2019

Nine months ended

30 Sep 2020

Nine months ended

 30 Sep 2019

Trafigura- Revenue from contracts

19,148

5,789

32,096

26,452

Freight services

-

-

-

-

 

19,148

5,789

32,096

26,452

Gain / (losses) relating provisional pricing within sales

(2,574)

826

(1,275)

815

Trafigura - Total revenue from contracts

16,573

6,615

30,821

27,267

 

ii) Period-end balances with related parties

 

 

(Euro 000's)

 

30 Sep 2020

 

 

31 Dec 2019

Receivables from related parties:

 

 

 

Recursos Cuenca Minera S.L.

56

 

56

Total (Note10)

56

 

56

The above balances bear no interest and are repayable on demand.

20. Related party transactions (cont.)

 

iii) Period-end balances with shareholders

 

(Euro 000's )

 

30 Sep 2020

 

 

31 Dec 2019

Trafigura - Debtor balance- subject to provisional pricing

1,255

 

8,918

Total (Note 10)

1,255

 

8,918

 

The above debtor balance arising from sales of goods and other balances bear no interest and is repayable on demand.

 

21. Contingent liabilities

Judicial and administrative cases

In the normal course of business, the Group may be involved in legal proceedings, claims and assessments. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and the Group accrues for adverse outcomes as they become probable and estimable.

Receipt of rulings of claims made by an environmental group

On 26 September 2018, Atalaya received notice from the Tribunal Superior de Justicia de Andalucía ("TSJA") 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 co-defendant.

On 7 May 2020, the Company announced the JdA has issued a favourable resolution (the "Resolution") which validates the AAU and ends the legal process. (Refer to Note 23)

In addition to the legal procedure described above, on 26 April 2019, the Company announced a judgment related to the Mining Permits to operate Proyecto Riotinto (the "Mining Permits") was handed down by the TSJA. The TSJA declared the Mining Permits are linked to the Environmental Permits, ruled by the same tribunal on September 2018. The new ruling on the Mining Permits is based on the requirement to have an AAU before issuing mining permits and therefore invalidated the existing Mining Permits. The TSJA has not accepted the requests by EeA for the cessation of activities at the mine and an increase in the scope of the environmental plan.

22. Commitments

There are no minimum exploration requirements at Proyecto Riotinto. However, the Group is obliged to pay local land taxes which currently are approximately €235,000 per year in Spain and the Group is required to maintain the Riotinto site in compliance with all applicable regulatory requirements.

In 2012, ARM 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 (mainly residual gold and silver in the old gossan tailings). 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 €2.0 million. Costs are then borne by the joint venture partners in accordance with their respective ownership interests.

 

23. Significant events

COVID-19 outbreak

On 11 March 2020, the World Health Organization raised the public health emergency caused by the coronavirus outbreak (COVID-19) to an international pandemic. The rapid national and international developments represent an unprecedented health crisis, which will impact the macroeconomic environment and business developments. To address this situation, among other measures, the Spanish government declared a state of emergency by publishing Royal Decree 463/2020 of 14 March and approved a series of extraordinary urgent measures to address the economic and social impact of COVID-19 by Royal Decree Law 8/2020 of 17 March. On 17 March 2020, the Company released an update on the measures taken to manage and respond to the pandemic to protect its workforce and local communities surrounding its projects.

In addition, a new Royal Decree was released on 29 March 2020 (the "Royal Decree") implementing enhanced measures to protect the people from the virus. The Royal Decree stipulated that only employees from a short list of essential industries were allowed to continue working from 30 March 2020. Mining was excluded as an essential industry and consequently the Company's Proyecto Riotinto site was required to halt its operations for a period until 3 April 2020 when mining operations were permitted to restart.

The Directors continue monitoring the business and taking appropriate steps to address the situation and reduce its operational and financial impact. After reviewing alternative scenarios, the current cash resources, forecasts and budgets, timing of cash flows, borrowing facilities, sensitivity analyses on alternative commodities prices and considering the associated uncertainties to the Group's operations, the Directors have a reasonable expectation that the Company has adequate resources to continue operating in the foreseeable future. Accordingly, the unaudited interim condensed consolidated financial statements continue to be prepared on a going concern basis.

The Company continues carrying out several measures and implemented an exceptional plan developed for the purpose of protecting its workforce and the people of the surrounding communities to manage the crisis. The main key risk, its impact and the response plans to protect its workforce are: Spread of COVID-19 at the mine site may cause disruption in the production and additional costs. The Group continues the implementation of emergency response plans. Only critical employees for the operation are allowed to enter on site. There are severe distance and hygienical mandatory rules, mandatory body temperature controls, and facilitate systems and tools to work from home for all remaining employees.

Additionally, the Group, up to the date of approval of these unaudited interim condensed financial statements, re-assessed the existence of any impairment indicators and the sensitivity analysis to volatility of commodity prices about its key assets being the mining rights, the property plant and equipment, the intangible assets, deferred taxes, trade receivables and inventories corresponding above 95% of its total assets (excluding cash and cash equivalents). The Directors have considered and debated different possible scenarios on the Company's operations, financial position and forecast for a period of at least 12 months since the approval of these unaudited interim condensed financial statements. Possible scenarios range from (i) further disruption in Proyecto Riotinto; (ii) market volatility in commodity prices; and (iii) availability of existing credit facilities and have considered the capacity of the Group and its single asset Proyecto Riotinto to generate cash, the Group concluded that no impairment indicators are in place.

AAU Permits

On 7 May 2020, the Company announced the Junta de Andalucía had issued a favourable resolution which validates the Unified Environmental Authorisation (the "AAU") of Proyecto Riotinto. The Resolution ends the legal process announced by the Company on 26 September 2018 in relation to the judgement made by the Tribunal Superior de Justicia de Andalucía ("TSJA") in connection with the AAU.

On 1 June 2020, further to the announcements on 7 May 2020 and 30 January 2020, the Junta de Andalucía confirmed  through the Spanish press that the mining permits for Proyecto Riotinto and are fully validated.

23. Significant events (cont.)

Negative Environmental Impact Statement on Proyecto Touro

The "Dirección Xeral de Calidade Ambiental e Cambio Climático", (the General Directorate for the Environment and Climate Change of Galicia), announced on 28 January 2020 that a negative Environmental Impact Statement for Proyecto Touro (Declaración de Impacto Ambiental) had been signed.

The short release stated that the decision was based on two reports which form part of a wider evaluation consisting of fifteen reports produced by different departments of the Xunta de Galicia. These two reports challenge the ability of the Company to guarantee that there will be no environmental impact of the Project on the Ulla River and related protected ecosystems which are located downstream.

On 7 February 2020, the formal communication from the Xunta de Galicia was published in Galicia´s official journal. In the meantime, the Company along with its advisers, is evaluating potential next steps for the Project, which could include an appeal of the decision made by the Xunta de Galicia, and/or the clarification of the questions raised by the reports.  

The Company has yet to receive the formal communication from the local government in Galicia rejecting the plan to develop Proyecto Touro. This unexpected lack of confirmation seems to be related mainly to Covid-19 delays.

Once the expected communication is received, the Company will evaluate its options to address the concerns of the Xunta de Galicia.

The Company continues to be confident that its world class approach to Proyecto Touro, which includes fully plastic lined tailings with zero discharge, will satisfy the most stringent environmental conditions that may be imposed by the authorities prior to the development of the project.

New group entity

On 16 September 2020 the Group established a new company in Cyprus under the name of Atalaya Financing, Limited. The activity of the new company is financing.

Development of 50MW solar plant at Proyecto Riotinto

On 24 September 2020, Atalaya announced that it has started the permitting process to develop a 50MW solar plant at Proyecto Riotinto. The full capacity of the Solar Project will be used for self-consumption.

 

24. Events after the reporting period

· On 21 October 2020, Atalaya announced that it has entered into a definitive purchase agreement to acquire 100% of the Masa Valverde polymetallic project located in Huelva (Spain) through the acquisition of 100% of a Spanish company for €1.4 million payable in two instalments. Masa Valverde is one of the largest undeveloped volcanogenic massive sulphide deposits in the prolific Iberian Pyrite Belt and is located 28kms south west of Proyecto Riotinto.

· On 28 October 2020, Atalaya announced it had commenced the execution of a feasibility study to evaluate the economic viability of producing cathodes from complex sulphide ores through the application of a new extraction process called the E-LIX System owned by Lain Technologies, Ltd. Atalaya has also entered into a Licence Agreement with Lain Technologies Ltd. for a period of five years to use its patents, on an exclusive licence basis within the Iberian pyrite belt in Spain and Portugal.

 

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