Atalaya Mining plc Annual Report 2017

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FY2017 Annual Report · Atalaya Mining plc

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Atalaya
Mining Plc

Annual Report

For the year ended 31 December 2017

Atalaya
Mining Plc

Annual Report

For the year ended 31 December 2017

Company
Highlights

Operational highlights

2017 first full
year of production with
copper production in
line with guidance

2018 guidance
targeting an
improvement on
2017 production

Expansion to
15Mtpa at Proyecto
Riotinto approved
and started in
December
2017

Progress on
permitting for
Proyecto Touro

GROUP PRODUCTION

Unit

2018 guidance

FY2017

Copper concentrate

Copper contained in concentrate

Payable copper contained in concentrate

* Commercial production declared in February 2016

37,000 – 40,000

165,965

37,164

35,504

FY2016*

122,468

26,179

25,353

Copper
concentrate

Copper contained
in concentrate

Payable copper contained
in concentrate

165,965

122,468

7
1
0
2

6
1
0
2

37,164

26,179

7
1
0
2

6
1
0
2

35,504

25,353

7
1
0
2

6
1
0
2

Annual ReportCompany HighlightsAtalaya Mining PlcFinancial highlights

GROUP FINANCIALS Unit

FY2017 FY2016*

Revenues

EBITDA

Cash cost

€k

160,537

98,768

41,347

15,393

$/lb payable

1.91

1.95

All-in sustaining cost

$/lb payable

2.30

not disclosed

Working capital**

Cash at bank**

€k

22,137

(25,382)

42,856

1,135

* Commercial production declared in February 2016

** Includes the proceeds of the equity raise in December 2017

Positive working capital
of €22,137k, including
€42,856k in cash at bank
as a result of operational
cash generated and the
equity raise in December
2017

Positive EBITDA
in line with 2017
expectations

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

98,768

160,537

41,347

Revenues

Ebitda

15,393

Cash cost

1.91

1.95

All-in sustaining cost

not disclosed

working capital

(25,382)

Cash at bank

1,135

2.30

22,137

42,856

7
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Annual ReportCompany HighlightsAtalaya Mining PlcContents

V.
Contents

8
8

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcStrategic report - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10

Group at a glance - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 11
Letter from the Chairman - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 12
Our business model - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -14
Our strategy - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 15
Market overview - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 16
Corporate social responsibility - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 18
Principal risks and uncertainties - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 20

Performance review - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 22

Operational review - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 23
Operational guidance - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 25
Financial review - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 26
Liquidity and capital resources - - - - - - - - - - - - - - - - - - - - - - - - - - - - 29
Foreign exchange - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 30
Ruling on the Astor litigation and deferred consideration - - - - - - - -31
Critical accounting policies, estimates and accounting changes - - -31

Corporate governance - - - - - - - - - - - - - - - - - - - - - - - - - - 32

Board of Directors - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 33
Committee overview - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 39
Remuneration report - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 40
Other information - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -41
Directors’ responsibility statements - - - - - - - - - - - - - - - - - - - - - - - 42

Management report - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 44

Financial statements - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 48

Independent auditors’ report - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 49
Statements of comprehensive income - - - - - - - - - - - - - - - - - - - - - - - - - - - - 53
Statements of financial position - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 54
Consolidated statements of changes in equity - - - - - - - - - - - - - - - - - - - - - - - - - - 55
Company statements of changes in equity - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 55
Consolidated statements of cash flows - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 56
Company statements of cash flows - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 57
Notes to the consolidated and company financial statements - - - - - - - - - - - - - - - - - - - - - - - 58

Shareholder information - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -116

Glossary of terms - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -117
Shareholder enquiries - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -118

V.
Contents

9
9

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcI.
Strategic
Report

I. Strategic Report

Atalaya Mining Plc

Annual Report

Group at a
glance

Atalaya is an AIM and TSX listed
mining and development group
which produces copper concen-
trates including silver by-product at
its wholly owned Proyecto Riotinto
site in southwest Spain. In addition,
the Group has a phased, earn-in
agreement to acquire up to 80% of
Proyecto Touro, a brownfield copper
project in northwest Spain which is
currently at the permitting stage.

Strong
pipeline of low
risk growth
projects

Proven
management
team

Supportive
strategic
shareholders

Proyecto Riotinto

Atalaya owns 100% of the Proyecto Riotinto copper
mine in Huelva. This historic mining site restarted
production in February 2016.

» Reserves of 153Mt at 0.45% Cu.

» 9.5Mtpa processing capacity.

» Open pit with 14+ years.

» Expansion to 15Mtpa started in December 2017.

» Low capital intensity.

» Located in the Iberian pyrite belt with access to

modern infrastructure.

Proyecto Touro

Atalaya has a phased, earn-in agreement for up
to 80% ownership of Proyecto Touro, a brown-
field copper project in northwest Spain which is
currently at the permitting stage.

» Low risk, advanced stage project.

» Excellent infrastructure and location.

» In permitting stage with Government support.

» An estimated €200m-€250m investment for

production of ~30,000 tpa Cu in concentrates.

I. Strategic Report

Atalaya Mining Plc

Annual Report

Letter from the
Chairman

Copper production

37,164 t

Expansion Project
Ongoing

15 Mtpa

I. Strategic Report
I. Strategic Report

12
12

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcCompany´s continuous improvement programme, impro-
vements to process and water supply systems are under
way, together with essential additions to the tailings storage
facilities. Whilst dust emission indicators remain below
legal requirements, as a precautionary measure, civil works
and structural fabrication are under way to install a dome
covering the coarse-ore stockpile.

The permitting of Proyecto Touro continues to progress
according to plan. The Company has already engaged a
number of consultants to address the recommendations
received as part of the permitting process. The technical
report is substantially completed at pre-feasibility level of
detail and in compliance with NI 43-101 guidelines. The
report will be released when the additional project improve-
ments are incorporated to accommodate the final permit-
ting process.

In March 2017, judgment in the Astor Case was handed
down in the High Court of Justice in London. The High
Court found that the deferred consideration under the
master agreement entered into between the Group, Astor
and others, did not start to become payable when permit
approval was granted for Proyecto Riotinto. Accordingly,
the first instalment of the deferred consideration had not
fallen due. While the Court confirmed that Atalaya was not
in breach of any of its obligations, the Master Agreement
and its provisions remain in place.

In April 2017, Atalaya and Astor applied for permission to
appeal to the Court of Appeal. In August 2017, the Court of
Appeal granted permission to both parties to appeal with
the Appeal scheduled to take place during May 2018.

All of our successful activities to date are due not only to
the continued commitment and efforts of our management,
staff and associates, but also to the continued support and
contributions of all the board members. For this, I offer my
sincerest thanks to all of them.

Last but not least, I extend my thanks to all of you, our
valued shareholders, for your continued support and look to
the year ahead with continued confidence and optimism.

Dear Shareholder,

2017 has been a year of stabilisation and process improve-
ments at the RioTinto Project and was the first full year of
commercial production for your company.

The ore processing throughput rate was steadily increased
to achieve a cumulative plant throughput of 8.8 Mtpa
(against a nameplate capacity 9.5 Mtpa). Copper grade was
consistent with reserve estimates and the process recovery
rate improved over the year to 85.45%, producing a total

of 37,164 tonnes of copper, an increase of 40% over the
2016 production, from an average copper head grade

of 0.49%.

This year, to date, copper grades, recoveries and
operating cash costs are within the forecast

values and the estimated copper production
guidance for 2018 remains in the range of
37,000 to 40,000 tonnes.

An expansion project to 15 Mtpa throu-
ghput was formally approved during Q4
2017 and launched at the beginning of
December 2017. Process flowsheet,
basic design criteria and preliminary
layouts have been established. Finan-
cing to initiate the expansion was raised
through a placing of new shares and
this allowed long-lead equipment to be
identified and purchase orders issued
according to the schedule. The expansion
is on track to deliver the increased produc-
tion by 2019.

To facilitate the assessment of potential

additional mining areas, the dewatering of the
Atalaya pit continues as previously reported. An

infill drilling campaign for reserve definition was

initiated in the Cerro Colorado pit and is planned
to last for most of 2018. Near-mine exploration also
continued with drilling of the north-west extension of
the Cerro Colorado pit. An updated resources and reserves
statement is being prepared as part of the 15 Mtpa expan-
sion Project.

Mining operations continue to run well, with the mining
fleet fully operational and preparing to meet the increased
requirements of the expansion programme. As part of the

Roger Davey
Chairman of Atalaya Mining Plc
27 March 2018

I. Strategic Report
I. Strategic Report

13
13

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcOur business
model

The business model of Atalaya is founded upon creating
value through operational and developmental excellence.
Experience and an unceasing search for improvement are
the pillars of our success

Our Values

Strategic Pillars

IMPORTANCE OF PEOPLE

Importance of Safety, Health, Environment & Security

Strong work force with longstanding employees

Working closely with communities

OUR PEOPLE AND RELATIONSHIPS

OPERATIONAL EXCELLENCE

Importance of cost management

Establishing stable performance

Operating to a world-class standard

Maximising production capacity

CREATING VALUE

Increasing asset value under management

Focusing on generating free cash flows

Focusing on creating value for shareholders

Allocating capital efficiently

Creating opportunities for growth

OUR BUSINESS

OUR FUTURE

I. Strategic Report

Atalaya Mining Plc

Annual Report

Our strategy

Key driver

Achievements

Principal
Risks

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› Environmental matters are discussed
across the group from the operating
workforce to the board of directors.

› Continuous communication with

regulatory bodies and shareholders to
ensure world-class operation.

expenditures
to reduce
environmental
impact

› Experienced mining team to ensure

proper safety, health and security policies.

373
employees

2017 achievements

Stabilised the number of employees at Proyecto
Riotinto.

2018 priorities

Increase work capacity for Proyecto Touro.

› Focused on creating a high-performance
culture where our people are our core
asset.

› We have a flat management structure

with accessible people.

99.9% based
at mine site

› Our people are primarily based at site.

› Focused on improving our relationships
with local government and communities.

› Limited presence in the media, with

efforts focused on direct contact with
people.

community
support
through
Atalaya
Foundation

› World-class processing plant in Europe

to maximise value of the Group, thereby
increasing free cash flows from operations

2017 achievements

Production at Proyecto Riotinto aligned with
guidance.

€41m EBITDA

Working capital deficit eliminated through equity
raise and cash generated by the operation.

Approval and commencement in Q4 2017 of
Proyecto Riotinto expansion to 15Mtpa.

Raised funds to initiate expansion works in
December 2017.

37k tonnes of
Cu produced

2018 priorities

Progress on expansion at Proyecto Riotinto and
permitting at Proyecto Touro.

e › Evaluation of existing capacity of each
r
u
t
u
f

project and investment in exploration to
replace reserves deployed

r
u
O

› Searching and evaluating projects around

the world

Market
capitalisation
of £223.17m
as of 31
December
2017

2017 achievements

Acquisition of 10% of Cobre San Rafael, S.L., the
holder of Proyecto Touro’s mining rights.

Investment of €7.4 million (2016: €0.9 million) in
sustaining capex in Proyecto Riotinto.

Investment of €2.7 million (2016: €nil) in
exploration at Proyecto Touro.

2018 priorities

Release of pre-feasibility study for Proyecto Touro.

Update reserves and resources at Proyecto
Riotinto to provide support for plant expansion.

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I. Strategic Report

Atalaya Mining Plc

Annual Report

Copper market price ($/lb)

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00

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Market
overview

Market price

During 2017, copper traded between US$2.48 and
US$3.27 per pound of copper. The spot price for
copper was US$2.53 as of 3 January 2017 and US$3.22
as of 29 December 2017, reflecting an increase of 28%
for the period.

The market price of copper has a significant impact on
Atalaya`s ability to generate positive operating cash
flows.

Realised copper prices

The average prices of copper for 2017 and 2016 were:

(USD)

FY2017

FY2016

Realised copper price
per lb

2.66

2.25

Market copper price per
lb (period average)

2.80

2.21

Realised copper prices for the reporting period noted
above have been calculated using payable copper and
including both provisional invoices and final settle-
ments of quotation periods (“QPs”) together. Lower
than market average realised prices are mainly due
to the final settlement of invoices Where the QP was
fixed in the previous quarter due to a short open
period when copper prices were lower. The realised
price during the year, excluding the QP, was approxi-
mately $2.72/lb.

I. Strategic Report

Annual ReportAtalaya Mining Plc

Market vs Realised Cu price

Atalaya’s response

The Group had no hedges on commodities prices
during 2017 and the resultant increase in revenues is
reflected in the income statement. As at the date of
this report, the Group is fully exposed to the copper
prices with no commodities hedging agreement in
place.

Foreign exchange

Foreign exchange rate movements can have a signifi-
cant effect on Atalaya’s operations, financial position
and results. Atalaya’s sales are denominated in U.S.
dollars (“USD”), while Atalaya’s operating expenses,
income taxes and other expenses are denominated in
Euros (“EUR”), and to a much lesser extent in British
Pounds (“GBP”).

Accordingly, fluctuations in the exchange rates can
impact the results of operations and carrying value of
assets and liabilities on the balance sheet.

Atalaya’s response

The Group was negatively impacted by unfavourable
rate against USD, the currency where all sales of the
Group are denominated.

Management continuously monitor currency rates
and evaluate currency hedging to minimise risk (Note
28.1).

3.0

2.5

2.0

1.5

1.0

0.5

0.0

3.0

2.5

2.0

1.5

1.0

0.5

0.0

1.14

1.12

1.00

0.80

0.60

0.40

0.20

0.90
0.88
0.86
0.84
0.82
0.80
0.78
0.76
0.74
0.72
0.70

Realised price

Market copper price

YTD3 m

YTD6 M

YTD9 m

FY2016

YTD3 m

YTD6 M

YTD9 m

FY2017

Realised Cu price vs C1 Cash cost

Realised price

YTD3 m

YTD6 M

YTD9 m

FY2016

YTD3 m

YTD6 M

YTD9 m

FY2017

FX USD/EUR

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I. Strategic Report

Annual ReportAtalaya Mining Plc

Corporate social
responsibility

Overview

Atalaya has integrated Corporate Social Responsibility
(“CSR”) into its activities at Proyecto Riotinto and strives for
excellent standards in health and safety, looking after the
environment and helping the community.

The Group employs highly qualified people to oversee its
CSR with the support of a specific CSR committee and the
board of directors.

I. Strategic Report

Annual ReportAtalaya Mining PlcOur communities

Atalaya is committed to being a
responsible corporate citizen by mana-
ging the environmental and social
impact of its mining operations in a
conscientious and sensitive manner.

Our strategy is to ensure that rela-
tions with authorities, society and the
environment are led by transparency
in our commercial activities, the
appropriate degree of interaction with
stakeholders and maximum respon-
sibility and accountability in all our
operations.

2017 was particularly important to our
communities. The Group launched a
significant archaeological programme
to study and document a number of
archaeological sites, including Corta-
lago, a Roman settlement of note.

In June 2017, the discovery of a
number of gold coins at the site was
well covered by the media. The formal
presentation of the discovery at the
Minas de Riotinto town Foundation
was closely followed by the local
communities.

Sustainable
development

Atalaya is committed to achieving
development that provides benefits
to those regions where it operates,
without compromising the ability of
future generations to meet their own
needs both economically and environ-
mentally. Atalaya will endeavour to
achieve excellence in environmental
performance, abiding by all expected
environmental standards.

The Group through its wholly owned
entities and foundation, frequently
organises site visits for engineering
schools and other mining professionals
to embed sustainability in its projects.

I. Strategic Report

Our people

Atalaya operates within a favou-
rable framework for labour relations
based on a non-discriminatory, equal
opportunities employment system,
that respects diversity and facilitates
communication at all levels of the
Group. The Group provides a healthy
and safe working environment by
implementing the best available inter-
national practices and procedures.

Communication

Atalaya advocates the establishment
of broad communication channels and
seeks opportunities for conversation

with its various stakeholders to ensure
that business objectives remain in
tune with social needs and expec-
tations. The Group will always seek
to provide relevant, transparent
and accurate information about its
activities and encourage continuous
improvement in this area.

Political and
charitable donations

The Group made no political or chari-
table donations during the year ended
31 December 2017 (2016: €nil) and
channelled its contribution to local
communities through the foundation,
by supporting cultural events during
the year.

Annual ReportAtalaya Mining PlcPrincipal risks
and uncertainties

Description

Level

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s
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s

i
r

l
a

c
n
a
n

i
f
d
n
a

l
a

c
r
e
m
m
o
C

Single
asset, single
commodity
and single
country risk

Our current production is from
Proyecto Riotinto, our single
producing asset. We produce and
sell copper concentrates with silver
by-product. Any interruption in the
producing asset may impact the
Group’s results

Mineral
resources and
reserves

We must continually replace and
expand our mineral resources and
mineral reserves. The depletion of our
mineral reserves may not be offset by
future discoveries or acquisitions

Capital
Projects

Significant
changes to
commodity
prices

Limited
number of
customers

Our capital expenditure requirements
in Proyecto Touro and/or Proyecto
Riotinto expansion may require more
capital than anticipated and/or we
may have difficulty obtaining required
permitting and financing, which could
delay project development

A decline in the price of copper and
other metals in world markets, which
can fluctuate widely, could adversely
affect our business, operating results
and prospects.

100% of our concentrate production
is sold to three offtakers. Offtakers’
business can significantly impact our
business

Control over
certain key
inputs

We may be unable to control the cost
and availability of key inputs, which
are beyond management’s influence

Insurance
coverage

Our insurance coverage does not
cover all potential losses, liabilities
and damage related to our business
and certain risks are uninsured or
uninsurable

Changes in
taxation and
other financial
conditions

We are subject to laws and
regulations relating to taxation,
customs and excise and royalties that
could have an adverse effect on our
business, financial conditions and
results of operations

Due to the nature of
Atalaya’s business in the
mining industry, the Group
is subject to various risks
that could materially
impact its future operating
results and could cause
actual events to differ
materially from those
described in forward-loo-
king statements relating to
Atalaya.

Our principal risks have
continued to fall within
four categories:

Strategic risks.

Financial risks.

External risks.

Operational risks.

I. Strategic Report

Annual ReportAtalaya Mining Plc

High

Medium

Low

Description

Level

Political,
legal and
regulatory
developments

We are subject to extensive
regulation, concessions,
authorisations, licences, and permits
which are subject to expiration, to
limitation on renewal and to various
other risks and uncertainties

s
k
s

i
r

l
a
n
r
e
t
x
E

s
k
s

i
r

l
a
n
o

i
t
a
r
e
p
O

Economic
conditions

Dependence
on key
infrastructure

Shortages of
equipment,
services
and skilled
personnel

Operational
risks and
hazards

General economic conditions or
changes in consumption patterns
may adversely affect our growth
and profitability. In particular,
the Chinese market, which has a
significant impact on the world’s
copper demand

We are dependent on transportation
facilities, infrastructure and
certain suppliers, a lack of which
could impact our production and
development projects

The industry has faced a worldwide
shortage of mining and construction
equipment, spare parts, contractors,
and other skilled personnel
during periods of high demand in
commodities

Operational risks and hazards may
adversely impact our business,
financial condition and result of
operations, particularly: floods,
natural disasters, industrial
accidents, labour disputes, structural
collapses, transportations delays and
earthquakes.

Labour
disruptions

We may be adversely affected by
labour disruptions.

Water,
electricity
and other key
supplies

Our mining operations depend on
the availability of water, electricity
and other key inputs

Complexity of
environmental
laws

Our operations are subject to
complex and evolving environmental
laws and regulations and changes
may increase our running costs

I. Strategic Report

Annual ReportAtalaya Mining Plc

II.
Performance
Review

II. Performance Review
II. Performance Review

22
22

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcOperational
Review

Proyecto Riotinto

Mining and Processing

The following table presents a summarised statement
of operations of Proyecto Riotinto for the twelve
months ended 31 December 2017 and 31 December
2016.

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

Unit

FY2017 FY2016(1)

9,340,028

7,754,499

8,796,715

6,505,762

0.50

0.49

22.39

21.56

85.45

83.29

165,965

122,468

37,164

26,179

35,504

25,353

Ore mined

Ore processed

Copper ore grade

Copper
concentrate
grade

Copper recovery
rate

Copper
concentrate

Copper contained
in concentrate

Payable copper
contained in
concentrate

Cash cost(2)

All-in sustaining
cost(2)

$/lb
payable

1.91

2.30

1.95

Not
available

Notes:

The numbers in the above table may slightly differ between
them due to rounding.

(1) 2016 figures include pre-commissioning production for
January 2016.

(2) Refer to note (iii) of this Report.

II. Performance Review
II. Performance Review

23
23

Mining

Mining operations are now stable quarter-on-quarter.
Operations continued in the Cerro Colorado open pit
and Proyecto Riotinto mined 9.3 million metric tonnes
of ore during 2017. In anticipation of higher mining
rates in the near future, additional mining equipment
was delivered, assembled and commissioned during the
second half of the year.

Processing

Ore processed during the year was 8.8 million tonnes
representing an improvement over the previous year
when 6.5 million tonnes were processed. Overall,
hourly throughput rates were improved quarter-
by-quarter as equipment availability and efficiency
increased.

Copper grade was consistent with estimates averaging
0.50% for 2017, in line with the previous year. Recovery
rate was above estimates, increasing to approximately
85.5%, a material improvement on last year. The copper
concentrate grade was 22.4% during 2017, in line with
expectations and also slightly above last year’s grade.

Concentrate production for 2017 was 165,965 tonnes
compared with 122,468 tonnes in 2016 (including
pre-commissioning production for January 2016).
Contained copper was 37,164 tonnes compared with
26,179 tonnes in 2016. Copper payable amounted to
35,504 tonnes from 25,353 tonnes in 2016.

As of the reporting date, all concentrate production
was sold except for 7,374 tonnes of concentrate which
were shipped during Q1 2018. Concentrate shipments
were not impacted by disruptions reported at ports
across Spain during Q1 2017.

A number of initiatives were delivered during the
year. In Q1 2017, process water supply systems were
upgraded and the main incoming electrical substation

Annual ReportAtalaya Mining Plcimmediately surrounding Proyecto Touro, where minera-
lised copper occurrences are documented.

An exploration campaign was initiated during the year
over the newly optioned exploration concessions around
Proyecto Touro. The campaign included an airborne
VTEM geophysical survey, detailed assessment of struc-
tural geology and a regional geochemical campaign. The
first phase of an airborne VTEM geophysical survey was
completed during the last quarter of 2017 with results still
pending.

went through yearly maintenance. With regards to the
environment, rehabilitation of the south waste dump
commenced. During Q2 2017, a new 300 m3 primary
rougher flotation cell was commissioned and installation of
plastic lining in one of the paddocks of the tailings storage
facilities was completed. A cover dome over the coarse ore
stockpile is under construction and the installation of an
additional secondary cone crusher is under evaluation.

Exploration and Geology

During 2017, near-mine exploration and infill drilling were
concentrated on the lateral extension of Filon Sur and the
north-west extension of Cerro Colorado. Results will form
part of a resource and reserve update due for completion
during Q2 2018.

An airborne VTEM geophysical survey was completed during
Q4 2017 with results expected in Q1 2018.

Expansion of Proyecto Riotinto

In June 2017, the board of directors approved the commen-
cement of a study to demonstrate the feasibility of increasing
mining and processing capacity at Proyecto Riotinto beyond
the existing 9.5Mtpa, to a maximum of 15Mtpa. Copper
production is estimated to reach 50,000 – 55,000 tonnes per
year once the expansion project is fully ramped up.

The study was completed in the third quarter of 2017,
concluding that the expansion was technically and finan-
cially robust. The expansion project was then approved
by the board of directors in Q4 2017 and launched in
December 2017.

The capital cost estimate is €80.4 million with commissio-
ning scheduled for the second half of 2019.

Proyecto Touro

Permitting is progressing according to schedule. Reports
were received as part of the permitting process and project
improvements were suggested. Consultants have already
been engaged in order to address these recommendations.

A technical report is substantially completed at pre-fea-
sibility level of detail and in compliance with NI 43-101
guidelines. The report will be released when the additional
project improvements are incorporated to accommodate
the final permitting process.

During Q3 2017, the Group signed an option agreement
to acquire exploration concessions that cover 122.7 km2

II. Performance Review

Annual ReportAtalaya Mining PlcOperational
guidance

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 note of this report.

Proyecto Riotinto operational guidance for 2018 is as
follows:

Copper head grade for 2018 is budgeted to average
between 0.47% and 0.50% Cu, with a recovery rate of
approximately 84% - 86%. Cash operating costs for 2018 are
expected to be in the range of $2.15/lb – $2.30/lb. AISC for
2018 is expected to be in the range of $2.50/lb – $2.60/lb
Cu payable.

Guidance

Actual

Guidance

Unit

Ore processed

million tonnes

2018

9.6

Contained copper

tonnes

37,000 - 40,000

2017

8.8

37,164

2017

8.7 – 9.0

36,000 - 39,000

II. Performance Review

Annual ReportAtalaya Mining PlcFinancial
review

Results

The following table presents a summarised
consolidated income statement for the twelve
months ended 31 December 2017, with
comparatives for twelve months ended 31
December 2016.

Revenues for the
twelve month
period ended 31
December 2017
amounted to
€160.5 million

Sales

Total operating costs

Corporate expenses

Exploration expenses

Other income

EBITDA

Depreciation/amortisation

Impairment of land options not exercised

Net foreign exchange loss

Net finance cost

Share of result of associate

Tax charge / (credit)

Twelve months ended

31 Dec 2017

(Euro 000’s)

31 Dec 2016

(Euro 000’s)

160,537

(114,687)

(4,508)

41,347

(16,671)

(2,212)

(557)

(3,696)

18,211

98,768

(77,845)(1)

(4,800)(1)

(1,022)

292

15,393

(11,757)(1)

(903)

(665)

(549)

(10)

12,187

13,696

(1) Include reclassifications on corporate expenses for comparative purposes.

II. Performance Review

Annual ReportAtalaya Mining PlcRevenues for the twelve month period ended 31 December
2017 amounted to €160.5 million (FY16: €98.8 million).
Commercial production at Proyecto Riotinto was declared
in February 2016. Revenue benefited from the increasing
copper price.

Copper concentrate production during FY17 was 165,965
tonnes (FY16: 122,468 tonnes). Inventories of concentrates
as at the reporting date were 7,374 tonnes with no invento-
ries held as at 31 December 2016. All concentrate invento-
ries held as of 31 December 2017 were shipped in Q1 2018.

The realised price for the twelve month period in 2017 was
$2.66/lb copper compared with $2.25/lb copper in the same
period of 2016. Concentrates were sold under offtake agree-
ments in place.

Operating costs for the twelve month period ended 31
December 2017 amounted to €114.7 million, compared
with €77.8 million in the twelve month period in 2016. The
increase was mainly due to higher mining and processing
variable costs directly attributable to an increase in copper
production.

Cash costs of $1.91/lb payable copper during the twelve
month period in 2017 compares with $1.95/lb payable
copper in the same period last year. All-in sustaining costs
for FY17 were $2.30/lb payable copper.

Sustaining capex for the twelve month period, included in
capital expenditure, amounted to €7.4 million. Sustaining
capex accounted for development programmes at the peri-
metric channel of tailings storage facility, optimisation of
the flotation circuit and coarse ore stock pile, modifications
to the processing flowsheet, upgrades at the main incoming
substation and improvements to process and water supply
systems.

Corporate costs for the twelve months period ended 31
December 2017 were €4.5 million, compared with €4.8

million in the twelve month period ended 31 December
2016.

Exploration costs related to Proyecto Touro were capitalised
during 2017.

EBITDA for the twelve months ended 31 December 2017
amounted to €41.3 million, compared with EBITDA of €15.4
million in the same period last year.

Depreciation and amortisation amounted to €16.7 million in
the twelve month period ended 31 December 2017 (FY16:
€11.7 million). The increase in depreciation was mainly
driven by higher production levels, as mining equipment is
depreciated by using the unit of production method (Note
2.9).

Net finance costs for FY17 amounted to €0.6 million (FY16:
€0.5 million) mainly related to the interest costs for the
Transamine prepayment and the Social Security debt. Both
the Transamine prepayment and the Social Security debt
were fully repaid as of 31 December 2017.

Cash cost methodology

Following the first full year of production at Proyecto
Riotinto, during the last quarter of 2017 Atalaya carried out
an exhaustive analysis on the methodology applied to its
operating costs reported through the year, with the main
purpose of providing enough and consistent information
to the market to assess the operating cash costs (“Cash
Cost” or “C1”) and All In Sustaining Cost (“AISC”) of Proyecto
Riotinto.

As a result of the analysis, management has changed the
methodology used when calculating C1 and AISC in previous
quarters. The following table provides a reconciliation
between the C1 and AISC reported and the reclassifications
and adjustments to make the information comparable.

Cash Cost C1 ($/lb)

Cash cost C1 reported

Q1 2017

Q2 2017

Q3 2017

Q4 2017

FY2017

$1.83

$2.07

$2.14

$2.35

$1.91

Reclassification from C1 to AISC – Astor agency
fee and local corporate costs

($0.03)

($0.06)

($0.07)

Ag credits

Exploration & geology costs

Finalisation of provision for concentrate penalties

Finalisation of provisions for freights, TCs and RCs

Other adjustments

Normalised cash costs

II. Performance Review

($0.09)

($0.02)

($0.01)

$1.64

($0.07)

($0.03)

($0.04)

$0.01

($0.07)

($0.02)

($0.07)

$1.88

$1.84

$2.35

$1.91

Annual ReportAtalaya Mining PlcAISC ($/lb)

AISC reported

Adjustments from C1

Reclassifications from C1

Corporate costs

Other adjustments

Normalised AISC costs

Q1 2017

Q2 2017

Q3 2017

Q4 2017

FY2017

$2.15

($0.15)

$0.03

($0.03)

$0.01

$2.01

$2.30

($0.13)

$0.06

($0.02)

$0.01

$2.22

$2.33

($0.23)

$0.07

($0.02)

$2.13

$2.94

$2.30

$2.94

$2.30

Realised Cu price vs C1 Cash cost

Realised price

3.0

2.5

2.0

1.5

1.0

0.5

0.0

YTD3m

YTD6M

YTD9m

FY2016

YTD3m

YTD6M

YTD9m

FY2017

Source: Interim Consolidated reports 2016 and 2017

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 addi-
tional 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 on-site
cash operating costs, and off-site 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 the C1 Cash
Costs plus royalties and agency fees, expenditure on reha-
bilitations, stripping costs, exploration and geology costs,
corporate costs, and sustaining capital expenditures.

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

II. Performance Review

Annual ReportAtalaya Mining PlcLiquidity 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, produc-
tion levels, operating costs, capital and administrative costs.

The following is a summary of Atalaya’s cash position as at
31 December 2017 and 31 December 2016 and cash flows
for the twelve months ended 31 December 2017 and 2016.

Liquidity information

(Euro 000’s)

Unrestricted cash and cash
equivalents at Group level

Unrestricted cash and cash
equivalents at Operation level

Restricted cash

Working capital surplus/
(deficit)

31 Dec.
2017

31 Dec.
2016

39,179

3,427

250

460

425

250

22,137

(25,382)

Unrestricted cash and cash equivalents as at 31 December
2017 increased to €42.6 million from €0.9 million at 31
December 2016. The increase in cash balances is the result
of net cash flow generated by the Group in the period and
the capital raised amounting to £31.0 million in December
2017. Cash balances are unrestricted and include balances
at operational and corporate level.

Restricted cash remains at €0.3 million as at 31 December
2017 and mainly relates to deposit bond guarantees.

As of 31 December 2017, Atalaya reported a working capital
surplus of €22.1 million, compared with a working capital
deficit of €25.4 million at 31 December 2016. Like last year, the
main liability of the working capital is trade payables related
to the main contractor, where the Group has reached certain
agreements to reduce its deficit progressively during 2018.

In June 2017, the Group completed repayment of €16.9
million to the Social Security’s General Treasury in Spain.
The debt liability was incurred by the former owners of the
assets. Repayment was completed according to the agreed
repayment schedule.

In 2016, the Group entered into a US$14 million copper
concentrate prepayment agreement with Transamine
Trading, S.A. an independent and privately owned commo-
dity trader company based in Geneva. The duration of the
prepayment was from 2016 to 31 December 2018 with
terms at market conditions and the settlement was agreed
to be paid through deductions from payments received
for each shipment. On 15 December 2017, the Group fully
settled the prepayment ahead of schedule and has decided
not to extend the contract on the same terms before
January 2018 as permitted under the original agreement.

Overview of the Group’s cash flows

(Euro 000’s)

Cash flows from operating
activities

Cash flows used in investing
activities

Cash flows from financing
activities

Net increase/(decrease) in
cash and cash equivalents

Twelve months ended

31 Dec.
2017

31 Dec.
2016

30,500

13,789

(22,678)

(31,272)

33,899

41,721

(17,483)

Cash and cash equivalents increased by €41.7 million during
the twelve months ended 31 December 2017. This was due to
cash from operating activities amounting to €30.5 million, cash
used in investing activities amounting to €22.7 million and
cash generated by financing activities totalling to €33.9 million.

Cash generated from operating activities before working
capital changes was €39.5 million. Atalaya increased its trade
receivables by €4.4 million, its trade payables balance in the
period by €5.4 million and its inventory levels by €7.5 million.

Investing activities in 2017 amounted to €22.7 million,
mainly relating to sustaining capex, the expansion of
Proyecto Riotinto, capitalised stripping costs and the
permits of Proyecto Touro.

Financing activities in 2017 related to the capital raised in
Q4 2017.

II. Performance Review

Annual ReportAtalaya Mining PlcForeign
exchange

During the twelve months ended
31 December 2017, Atalaya
recognised a foreign exchange loss
of €2.2 million. Foreign exchange
losses mainly related to variances
in EUR and USD conversion rates
during the period, as all sales are
settled and occasionally held in
USD.

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

Twelve months ended

31 Dec 2017

31 Dec 2016

Average rates for the periods

GBP – EUR

USD – EUR

Spot rates as at

GBP – EUR

USD – EUR

0.8767

1.1297

0.8872

1.1993

0.8195

1.1069

0.8562

1.0541

In February 2017, the Group entered into certain foreign
exchange hedging contracts to offset the agreements
in force as at 31 December 2016. During the remainder
of 2017, Atalaya did not have any currency hedging
agreements.

Further information on the hedging agreements is disclosed in
the audited, consolidated and company financial statements
(hereinafter “financial statements”) that follow (Note 28).

II. Performance Review

Atalaya Mining Plc

Annual Report

Ruling
on Astor
litigation
and deferred
consideration

On 6 March 2017, judgment in the Astor Management AG
(“Astor”) case (“Astor Case”) was handed down in the High
Court of Justice in London (the “Judgment”). On 31 March
2017 declarations were made by the High Court which give
effect to the Judgment.

In summary, the High Court found that the deferred consi-
deration of €43.8 million (the “Deferred Consideration”),
potentially payable to Astor under the master agreement
entered into in 2008 between inter alia the Company and
Astor (the “Master Agreement”), did not start to become
payable when permit approval was granted for Proyecto
Riotinto. In addition, the intra-group loans by which funding
for the restart of mining operations was made available
to the Company’s subsidiary, Atalaya Riotinto Minera S.L.
did not constitute a “Senior Debt Facility” so as to trigger
payment of the Deferred Consideration. Accordingly, the
first instalment of the Deferred Consideration has not fallen
due.

Astor failed to show that there had been a breach of the all
reasonable endeavours obligation contained in the Master
Agreement to obtain a senior debt facility or that the Group
had acted in bad faith in not obtaining a senior debt facility.
While the Court confirmed that the Group was not in breach
of any of its obligations, the Master Agreement and its
provisions remain in place. Accordingly, other than up to
US$10 million a year which may be required for non-Pro-
yecto Riotinto related expenses, Atalaya Riotinto Minera S.L.
cannot make any dividend, distribution or any repayment
of the money lent to it by companies in the Group until the
consideration under the Master Agreement (including the
Deferred Consideration) has been paid in full.

As a consequence, the Judgment requires that, in accor-
dance with the Master Agreement, Atalaya Riotinto Minera
S.L. must apply any excess cash (after payment of operating
expenses, sustaining capital expenditure, any senior debt

II. Performance Review

service requirements and up to US$10 million (for non-Pro-
yecto 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
agreement between the parties) early. The Court confirmed
that the obligation to pay consideration early out of excess
cash does not apply to the up-tick payments of up to €15.9
million (the “Up-tick Payments”) and the Judgment notes
that the only situation in which the Up-tick Payments could
ever become payable is in the unlikely event that mining
operations stop at Proyecto Riotinto and a senior debt
facility is then secured for a sum sufficient to restart mining
operations. Accordingly, the Group has recorded the liability
of €53 million.

On 25 April 2017, Atalaya and Astor applied for permission
to appeal to the Court of Appeal. On 11 August 2017, the
Court of Appeal granted permission to both parties to
appeal (although it rejected three of Astor’s seven grounds).
The Appeal will take place during May 2018.

More details on the Astor Case are included in Note 27 of
the audited financial statements that follow.

Critical
accounting
policies,
estimates and
accounting
changes

The preparation of Atalaya’s Financial Statements in accor-
dance with IFRS requires management to make estimates
and assumptions that affect amounts reported in the Finan-
cial Statements and accompanying notes. There is a full
discussion and description of Atalaya’s critical accounting
estimates and judgements in the audited financial state-
ments for the year ended 31 December 2017 (Note 3.4).

Annual ReportAtalaya Mining PlcIII.
Corporate
Governance

III. Corporate Governance
III. Corporate Governance

32
32

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcBoard of
Directors

Board Structure

Audit and Financial
Risk Committee
(“AFRC”)

Board of
Directors

Committees

Corporate
Governance
Nominating
Compensation
Committee
(“CGNCC”)

Physical Risk
Committee
(“PRC”)

Summary of Committee
responsibilities

› Reviews and monitors financial

› Reviews Directors’ compensation

› Oversees safety, health,

statements.

and performance.

› Reviews Company’s public

› Reviews Corporate Governance

disclosure of financial information.

› Reviews estimates and

judgements that are material to
reported financial information.

› Oversees the auditors

arrangements and performance.

› Reviews internal and external risks

of the Company.

of Atalaya and practices,
independence, charters’ review,
and structure.

› Compensation and performance

of officers of Atalaya.

environment and security matters
of the Company.

› Oversees enterprise-wide
physical risk management.

› Reviews compliance with legal
and regulatory obligations
relating to safety, health, and
environment.

Dr. Hussein Barma (Chairman)

Stephen Scott (Chairman)

Dr. Jose Sierra (Chairman)

Mr. Roger Davey

Mr. Stephen Scott

Mr. Roger Davey

Dr. Hussein Barma

Mr. Damon Barber

Mr. Roger Davey

Mr. Stephen Scott

III. Corporate Governance

Atalaya Mining Plc

Annual Report

Directors

Roger
Davey

Non-executive Chairman
of the Board

Mr. Davey has over forty
years’ experience in the
mining industry. Previous

employment included
assistant director and senior
mining engineer at NM
Rothschild & Sons; director,
vice-president and general
manager of AngloGold’s sub-
sidiaries in Argentina; opera-
tions director of Greenwich
Resources Plc, London;
production manager for Blue
Circle Industries in Chile;
and various production roles
from graduate trainee to
mine manager, in Gold Fields
of South Africa (1971 to

1978). Mr. Davey is currently
a director of Orosur Mining
inc., Central Asia Metals plc
and Tharisa plc.

Mr. Davey is a graduate of
the Camborne School of
Mines, England (1970), with
a Master of Science degree in
Mineral Production Manage-
ment from Imperial College,
London University, (1979)
and a Master of Science
degree from Bournemouth
University (1994). He is a

Chartered Engineer (C.Eng.),
a European Engineer (Eur.
Ing.) and a Member of the
Institute of Materials, Mine-
rals and Mining (MIMMM).

Mr. Davey is the Chair of
the Board of Directors and
a member of the Audit and
Financial Risk Committee, the
Physical Risk Committee and
the Corporate Governance
Nominating Compensation
Committee.

Alberto
Lavandeira

Damon
Barber

Dr. Hussein
Barma

Jesús
Fernández

Non-executive Director

Mr. Fernandez is head of
the M&A team for Trafi-
gura. He joined Trafigura in
2004 and has fifteen years
of experience in mining
investments and financing.
He is currently a director
of Mawson West Limited.
Previously, he was a
director of Tiger Resources
Limited, Cadilac Ventures,
Anvil Mining Limited and
Iberian Minerals Corp. plc.

Mr. Barber is currently the
Senior Managing Director
of Liberty Metals & Mining.
Mr. Barber has more than
20 years’ experience in
natural-resources finance,
mining project development
and mining operations. Mr.
Barber graduated from the
University of Kentucky with
a B.S. in Mining Engineering
and began his career as a
section foreman at CONSOL
Energy Inc.’s Loveridge
Mine. Mr. Barber holds an
MBA from the Wharton
School of the University of
Pennsylvania.

Mr. Barber is a member of
the Corporate Governance
Nominating Compensation
Committee.

Dr. Barma is a principal
of Barma Advisory. He
was formerly CFO (UK) of
Antofagasta Plc from 1998 to
2014 and possesses a deep
knowledge of governance
practices at board level,
as well as accounting and
reporting, investor relations
and regulatory requirements
of the London market. He
previously worked as an
auditor at Price Waterhouse
(now PwC) and is a steering
group member of the UK
Financial Reporting Council’s
Financial Reporting Lab.

Dr. Barma is the Chair of
the Audit and Financial Risk
Committee, and a member
of the Corporate Gover-
nance Nominating Compen-
sation Committee.

Managing Director and Chief
Executive Officer

Mr. Lavandeira brings close
to forty years of experience
operating and developing
mining projects. Formerly,
he was President, CEO and
COO of Rio Narcea Gold
Mines which built three
mines including Aguablanca,
El Vallés-Boinas y Tasiast. He
is a director of Black Dragon
Gold Corp. and Samref
Overseas S.A, and he was
involved in the develop-
ment of the Mutanda Mine
in the Democratic Republic
of Congo.

He is a graduate of the
University of Oviedo, Spain
with a degree in Mining
Engineering.

III. Corporate Governance

Annual ReportAtalaya Mining PlcHarry Liu

Jonathan
Lamb

Dr. José
Sierra
López

Stephen
Scott

BSc. Economics -
non-executive Director

Harry Liu, BSc. Economics -
non-executive Director

Mr. Liu is a vice president of
Yanggu Xiangguang Copper
(Shandong, China), one of
the world’s largest copper
smelting, refining and
processing groups.

Mr. Liu has held a number
of senior management
and marketing positions in
the mineral and financial
industries in Shanghai and
Hong Kong, including roles
as marketing manager at
BHP Billiton Marketing AG
and Director at BNP Paribas
Asia.

Mr. Liu graduated with
a Bachelor´s Degree in
Economics from Zhejiang
University in Zhejiang
Province, China.

Non-executive Director

Mr. Lamb is portfolio
manager at Orion Mine
Finance and a director at
Minera la Negra and former
director at Lynx Resources.
He was formerly invest-
ment manager for Red
Kite Group’s Mine Finance
business. He was previously
with Deutsche Bank’s
Metals & Mining Invest-
ment Banking group in New
York, where he worked
on a variety of debt and
equity financings and M&A
transactions.

Mr. Scott is president and
CEO of Entree Resources
Limited. Previously, he
was president and CEO of
Minenet advisors advising
on strategy, corporate
development, business
restructuring and project
management. He held
various global executive
positions with Rio Tinto
(2000-2014) and currently
serves on the boards of
a number of public and
private mining companies.

Mr. Scott is the Chair of
the Corporate Governance
Nominating Compensation
Committee and a member
of the Audit and Financial
Risk Committee.

Dr. Sierra has an extensive
experience as a mining
and energy leader in the
business and government
sectors. His experience
includes being Spain’s
national Director General
of Mines and Construction
Industries and EU Director
for Fossil Fuels for the Euro-
pean Commission. Most
recently he was Commis-
sioner at the National
Energy Commission of
Spain. He was a member of
the Board of Transport et
Infrastructures Gaz France.

Dr. Sierra holds a Ph.D. in
Mining Engineering from
the University of Madrid.
He obtained a DIC at the
Royal School of Mines
(Imperial College) and is
an elected member of the
Royal Academy of Doctors
of Spain. Dr. Sierra is the
Chair of the Physical Risk
Committee.

III. Corporate Governance

Annual ReportAtalaya Mining PlcBoard of directors

The Board is responsible for approving Company policy and
strategy. The Board is supplied with appropriate and timely
information and the Directors are free to seek any further
information they consider necessary. All Directors have
access to advice from the Company Secretary and indepen-
dent professionals at the Company’s expense. Training is
available for new Directors and other Directors as necessary.
A number of the Group’s key strategic and operational deci-
sions are reserved exclusively for the decision of the Board.

The Company has adopted a model code for Directors’
dealings which is appropriate for a TSX and AIM listed
company. The Directors intend to comply with Rules 21
and 31 of the AIM Rules relating to Directors’ dealings and
will take all reasonable steps to ensure compliance by the
Group’s applicable employees as well.

Board Composition

As of 31 December 2017, the Board of Directors of Atalaya
comprised a non-executive independent Chairman, one
executive Director and seven other non-executive directors.

Non-executive directors bring a breadth of experience and
knowledge, all of whom are independent of management
and four of whom (including the Chairman) are independent
of any business or other relationship which could interfere
with the exercise of their independent judgment. The Board
regularly reviews key business risks including the financial
risks facing the Group in the operation of its business.

III. Corporate Governance

Indemnification of directors and
officers

During the year, the Company held insurance to indemnify
Directors, the Company Secretary and executive officers
of the Company against liabilities incurred in the conduct
of their duties to the extent permitted under applicable
legislation.

Board changes during 2017

All directors held office from the start of the financial year
to the date of this report. In accordance with the Company’s
Articles of Association, one-third of the board of directors
must resign each year. All the directors will retire at the
AGM and offer themselves for re-election.

2018 Annual General Meeting

Atalaya’s AGM will be held in London on 27 of June 2018
at 11 hours (UK time). The business of the meeting will be
conducted in accordance with regulatory requirements and
standards. The Chairman of the Board and the Chairmen of
the Committees will be available to answer questions put
to them by shareholders at the meeting. The AGM Notice is
included in the documentation that has been provided with
this Annual Report and is also available on the Company’s
website.

Annual ReportAtalaya Mining PlcBoD

AFRC

CGNCC

PRC

Held

Attended

Held

Attended

Held

Attended

Held

Attended

R. Davey

A. Lavandeira

D. Barber

H. Barma

J. Fernández

H. Liu

J. Lamb

J. Sierra Lopez

S. Scott

Board meetings and attendance

Atalaya’s decisions are predominantly made by achieving a
consensus at Board meetings. In exceptional circumstances,
decisions may be taken by the majority of Board members.
Questions arising at any meeting are determined by a
majority of votes. All Directors are required to take deci-
sions objectively and in the best interests of the Company.
As part of their duties as directors, non-executive directors
are expected to apply independent judgement to contribute
to issues of strategy and performance and to scrutinise the
performance of management.

The Board is scheduled to meet at least 8 times a year, and
at such other times as are necessary to discharge its duties.
The Board met a total of 12 times in 2017. Meetings occu-
rred in person and by teleconference.

Directors’ interests

The interests of the Directors and their immediate families,
(all of which are beneficial unless otherwise stated) and of
persons connected with them, in Ordinary Shares, as at 31
December 2017 and 2016, are as follows:

2017

2016

No of existing
ordinary shares

% of issued share
capital

No of existing
ordinary shares

% of issued share
capital

R. Davey

A. Lavandeira

D. Barber(1)

H. Barma

J. Fernández(2)

H. Liu(3)

J. Lamb (4)

J. Sierra Lopez

S. Scott

160,000*

19,578,947**

30,821,213**

31,150,943***

18,786,609**

26,666

0.12%

14.48%

22.79%

23.03%

13.89%

0.02%

100,000*

16,315,789**

25,684,344**

26,033,238***

16,986,609**

26,666

0.09%

13.98%

22.01%

22.31%

14.56%

0.02%

(1) Liberty Metals & Mining Holdings LLC

* 66,666 shares held in escrow

(2) Urion Holdings (Malta) Ltd

** Shares held by the companies the directors represent

(3) Yanggu Xiangguang Copper Co. Ltd

*** includes 444,711 shares held personally by Mr. Liu. No movements during 2017.

(4) Orion Mine Finance (Master) Fund I LP

III. Corporate Governance

Annual ReportAtalaya Mining PlcDirectors’ share options

Substantial share interests

The Directors to whom options over ordinary shares have
been granted and the number of ordinary shares subject to
such options (post share consolidation figures) as at the date
of this report are as follows:

The Shareholders holding more than 3% of the share capital
of the Company as at the date of this report were:

Grant
date

Expiration
date

Exercise
price

A. Lavandeira

20 Mar. 14

19 Mar. 19

23 Feb. 17

22 Feb. 22

360 p

144 p

200,000

150,000

350,000

Options expire five years after grant date and are exercisable
at the exercise price in whole or in part up to one third in the
first year from the grant date, two thirds in the second year
from the grant date and the balance thereafter.

Urion Holdings (Malta) Ltd
(subsidiary of Trafigura)

Yanggu Xiangguang Copper
Co. Ltd

Orion Mine Finance (Master)
Fund I LP

Liberty Metals & Mining
Holdings LLC

Majedie Asset Management
Limited

Ordinary
shares 000’s

30,821

22.79

30,706

22.70

18,787

13.89

19,579

14.48

9,067

6.70

Corporate governance

The Directors comply with TSX and AIM regulations and
Cyprus Company Law. The Board remains accountable to the
Company’s shareholders for good corporate governance.

Substantial share interests (000´s)

19,579

9,067

30,821

30,706

6.70

14.48

22.79

13.89

22.70

Majedie Asset Management Limited

Liberty Metals & Mining Holdings LLC

Urion Holdings (Malta) Ltd (subsidiary of Trafigura)

Orion Mine Finance (Master) Fund I LP

Yanggu Xiangguang Copper Co. Ltd

18,787

III. Corporate Governance

Atalaya Mining Plc

Annual Report

Committee
overview

Audit and Financial Risk
Committee

The Company’s Audit and Financial Risk Committee (“AFRC”)
is responsible for ensuring that appropriate financial repor-
ting procedures are properly maintained and reported on,
for meeting with the Group’s auditors and reviewing their
reports on the Group’s financial statements and the internal
controls and for reviewing key financial risks.

The AFRC comprises three members all of whom are
non-executive and Independent. The current membership
of the committee is Dr. H. Barma (Chairman), Mr. R. Davey
and Mr. S. Scott.

Corporate Governance,
Nominating and Compensation
Committee

The Company’s Corporate Governance, Nominating and
Compensation Committee (“CGNCC”) is, among other
things, responsible for reviewing the performance of the

executives, setting their remuneration, determining the
payment of bonuses, considering the grant of options under
any share option scheme and, in particular, the price per
share and the application of performance standards which
may apply to any such grant.

The CGNCC comprises four members all of whom are
non-executive and three are Independent. The current
membership of the committee is Mr. S. Scott (Chairman), Mr.
R. Davey, Dr. H. Barma and Mr. D. Barber.

Physical Risks Committee

The Company’s Physical Risks Committee (“PRC”) is
responsible for reviewing the compliance with regulatory
and industry standards for environmental performance
and occupational health and safety of personnel and the
communities affected by the Company.

The PRC comprises three members all of whom are
non-executive and Independent. The current membership
of the committee is Dr. J. Sierra (Chairman), Mr. R. Davey
and Mr. S. Scott.

III. Corporate Governance

Atalaya Mining Plc

Annual Report

Remuneration
reports

Directors’ emoluments

In compliance with the disclosure requirements of the listing
requirements of AIM and TSX, the aggregate remunera-
tion paid to the directors of Atalaya Mining Plc for the year
ended 31 December 2017 is set out below:

31 Dec 2017

31 Dec 2016

m
r
e
t

t
r
o
h
S

s
t
fi
e
n
e
b

d
e
s
a
b
e
r
a
h
S

s
t
n
e
m
y
a
p

m
r
e
t

t
r
o
h
S

s
t
fi
e
n
e
b

d
e
s
a
b
e
r
a
h
S

s
t
n
e
m
y
a
p

’

)
s
0
0
0
o
r
u
E

(

s
e
e
f
&
y
r
a
l
a
S

s
u
n
o
B

*
s
n
o
i
t
p
o
e
v
i
t
n
e
c
n

*
*
s
e
r
a
h
s
s
u
n
o
B

l
a
t
o
T

’

)
s
0
0
0
o
r
u
E

(

s
e
e
f
&
y
r
a
l
a
S

s
u
n
o
B

*
s
n
o
i
t
p
o
e
v
i
t
n
e
c
n

*
*
s
e
r
a
h
s
s
u
n
o
B

l
a
t
o
T

Executive directors

A. Lavandeira

385

245***

Non-executive directors

R. Davey

D. Barber

H. Barma

J. Fernández

J. Lamb

H. Liu

J. Sierra Lopez

S. Scott

742

245

653

A. Lavandeira

350

500*

969

Non-executive directors

R. Davey

D. Barber

H. Barma

J. Fernández

J. Lamb

H. Liu

J. Sierra Lopez

S. Scott

1,010

696

500

1,315

* 150,000 new options granted during 2017.

** There were no new shares granted during 2017.

* The bonus relates to the Group’s performance for 2016. The
bonus for 2017 performance will be determined during 2018.

*** The bonus in related to the completion of construction for the
period up to the declaration of commercial production in early
2016.

III. Corporate Governance

Annual ReportAtalaya Mining Plc

Other
information

Internal controls

The Directors have overall responsibility for the Group’s
internal control and effectiveness in safeguarding the assets
of the Group. Internal control systems are designed to
reflect the particular type of business, operations and safety
risks and to identify and manage risks, but not entirely all
risks to which the business is exposed. As a result, internal
controls can only provide a reasonable, but not absolute,
assurance against material misstatements or loss.

The processes used by the Board to review the effectiveness
of the internal controls are through the AFRC and the execu-
tive management reporting to the Board on a regular basis
where business plans and budgets, including investments
are appraised and agreed. The Board also seeks to ensure
that there is a proper organisational and management struc-
ture with clear responsibilities and accountability. It is the
Board’s policy to ensure that the management structure and
the quality and integrity of the personnel are compatible
with the requirements of the Group.

The Board attaches importance to maintaining good
relationships with all its shareholders and ensures that all
price sensitive information is released to all shareholders at
the same time in accordance with AIM and TSX rules. The
Company’s principal communication with its investors is
through the annual report and accounts, the quarterly state-
ments and press releases issued as material events unfold.

III. Corporate Governance

Going concern

Operations at Proyecto Riotinto started in February 2016
and the Group has generated significant operational cash
flows during the year and also carried out an equity raise to
initiate the plant expansion project. Accordingly, the Direc-
tors have a reasonable expectation that the mining opera-
tion and the Group have adequate resources to continue in
operational existence for the foreseeable future.

Creditors’ payment terms

The Group does not have a specific policy towards our
suppliers and does not follow any code or standard practice.
However, terms of payment with suppliers are settled when
agreeing overall terms of business, and the Group seeks to
abide by the terms of the contracts to which it is bound.

Capital structure

At 31 December 2017, the Company had the following
weighted average number of shares outstanding and
commitments to issue shares:

Ordinary shares

Warrants

Options

Fully diluted

No. of shares

117,904,251

311,771

1,268,956

119,484,978

Details of share options granted after year end are set out in
Note 23 to the financial statements.

Annual ReportAtalaya Mining PlcDirectors’
responsibility
statements

Directors’ responsibilities
for the financial
statements

Cyprus company law states that the Direc-
tors are responsible for the preparation of
the financial statements for each financial
year which give a true and fair view of the
state of affairs of the Company and of
the Group and of the profit or loss of the
Group for that period.

In the preparation of these financial
statements, the Directors are required
to:

» Select suitable accounting policies
and then apply them consistently;

» Make judgments and estimates that
are reasonable and prudent; and

» State whether applicable accounting

standards have been followed, subject
to any material departures disclosed and
explained in the financial statements.

The Directors are responsible for maintaining
proper accounting records, for safeguarding
the assets of the Group and for taking reaso-
nable steps for the prevention and detection
of fraud and other irregularities. Legislation in
Cyprus governing the preparation and dissemi-
nation of the financial statements may differ from
legislation in other jurisdictions.

III. Corporate Governance

IV.
Management
Report

IV. Management Report
IV. Management Report

44
44

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcΤhe Board of Directors of Atalaya
Mining PLC (the “Company”)
presents to the members, its
management report and the
audited consolidated financial
statements of the Company and
its subsidiaries (“the Group”)
and the individual financial
statements of the Company for
the year ended 31 December
2017.

Profit after tax

€ 18.2
million

IV. Management Report
IV. Management Report

45
45

Review of developments, current
position and performance of the
Group’s business and principal
risks and uncertainties

During the year, the Group recorded a profit
after tax of € 18.2 million (15.5 cents per share),
compared to the profit of €13.70 million (11.7 cents
per share) in 2016. For details on the develop-
ments, current position and performance of the
Group and the Company, refer to the Performance
Review Report.

Principal risks and uncertainties

For details on the principal risks that both the
Group and the Company face are disclosed in the
Strategic Report. Additionally, these risks and the
risk management policy adopted by the Group and
the Company are explained in Note 3 of the finan-
cial statements.

Principal activities of the
Company and its subsidiaries

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. In addition, the Company has
a phased earn-in agreement up to 80% ownership
of Proyecto Touro, a brownfield copper project in
northwest Spain, which is currently at the permi-
tting stage. The Group’s business is to explore
for and develop metals production operations in
Europe, with an initial focus on copper. The stra-
tegy 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.

For further details on the principal activities of
the Group and the Company, refer to Note 1 of
the financial statements, the Performance review
report and the Strategic report.

Annual ReportAtalaya Mining PlcFuture developments
of the Group and the
Company

For details on the future develop-
ments of the Group and the Company
refer to the Strategic Report.

The Board of Directors does not
anticipate any significant changes in
the activities of the Group and the
Company in the foreseeable future.

Research and
development activities

For details on research and develo-
pment activities carried out by the
Group, refer to the Strategic Report.

Existence of branches

The Company and the Group do not
maintain any branches.

Share capital

The changes to the Company’s share
capital during the year ended 31
December 2017 are disclosed in Note
22 of the financial statements.

Proposed dividend

The Directors do not recommend the
payment of a dividend for the year
(2016: €nil).

Composition,
responsibilities and
remuneration of Board
of Directors

The members of the Board of Direc-
tors as at 31 December 2017 and on
the date of this report are presented
in the Corporate Governance report.
There were no significant changes
in the assignment of responsibili-
ties of the members of the Board of
Directors.

For further details on the composition,
responsibilities and remuneration of
the Board of Directors, refer to the
Corporate Governance report.

Events after the
reporting period

Material events after the reporting
period, which have a bearing on
the understanding of the financial
statements have been disclosed in the
Corporate Governance Report and
Note 34 of the financial statements.

Suggestion in relation
to the distribution of
profits, absorption of
losses and creation of
provisions.

The results of the Group and the
Company are set out on page 34-39.
The Board of Directors does not
suggest the payment of any dividend
(2016: € nil).

IV. Management Report

Atalaya Mining Plc

Annual Report

Statement of Corporate
Governance

Substantial share
interests

The Company gives special attention
to the application of sound corporate
governance policies, practices and
procedures. Corporate Governance is
the set of procedures followed for the
proper management and administra-
tion of the Group. Corporate Gover-
nance rules the relationship between
the shareholders, the board of
directors and the management team
of a company. Refer to the Corporate
Governance Report for further details.

Directors’ interests in the
Company’s capital

Directors’ interests in the Company’s
capital are listed in the Corporate
Governance Report.

The shareholders holding more
than 3% of the share capital of the
Company on 31 December 2017 and
as at the date of this report, are listed
in the Corporate Governance Report.

Auditors

During the year the independent audi-
tors of the Company, Moore Stephens
Stylianou & Co and MNP LLP, resigned
and Ernst & Young Cyprus Limited was
appointed in their place.

The auditors, Ernst & Young Cyprus
Ltd., have expressed their willingness
to continue in office and a resolution
approving their reappointment and
giving authority to the board of direc-
tors to fix their remuneration will be
proposed at the next Annual General
Meeting.

By Order of the Board of
Directors

Roger Davey
Chairman
Nicosia, 27 March 2018

IV. Management Report

Atalaya Mining Plc

Annual Report

V.
Financial
Statements

V. Financial Statements
V. Financial Statements

48
48

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcIndependent
Auditors’
Report

To the Members of
Atalaya Mining PLC

Report on the Audit
of the Financial
Statements

Basis for Opinion

We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under
those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated and
Parent Company Financial Statements section of our
report. We are independent of the Group in accordance
with the International Ethics Standards Board for Accoun-
tants’ Code of Ethics for Professional Accountants (IESBA
Code), and we have fulfilled our other ethical responsi-
bilities in accordance with the IESBA Code. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

Opinion

Key Audit Matters

We have audited the accompanying consolidated and
parent company financial statements of Atalaya Mining
PLC (the “Company” and together with its subsidiaries
the “Group”), which comprise the consolidated and
parent company statements of financial position as at
31 December 2017, and the consolidated and parent
company statements of comprehensive income, changes
in equity and cash flows for the year then ended, and
notes to the consolidated and parent company financial
statements, including a summary of significant accounting
policies.

In our opinion, the accompanying consolidated and
parent company financial statements give a true and
fair view of the consolidated and parent company
financial position of the Group and the Company as at
31 December 2017, and of the consolidated and parent
company financial performance and cash flows of the
Group and the Company for the year then ended in accor-
dance with International Financial Reporting Standards
(IFRSs) as issued by the IASB and as adopted by the Euro-
pean Union and the requirements of the Cyprus Compa-
nies Law, Cap. 113.

Key audit matters are those matters that, in our profes-
sional judgment, were of most significance in our audit
of the consolidated and parent company financial
statements of the current period. These matters were
addressed in the context of our audit of the consolidated
and parent company financial statements as a whole, and
in forming our opinion thereon, and we do not provide
a separate opinion on these matters. For each matter
below, our description of how our audit addressed the
matter is provided in that context.

We have fulfilled the responsibilities described in the
Auditor’s responsibilities for the audit of the consolidated
and parent company financial statements section of our
report, including in relation to these matters. Accor-
dingly, our audit included the performance of procedures
designed to respond to our assessment of the risks of
material misstatement of the consolidated and parent
company financial statements. The results of our audit
procedures, including the procedures performed to
address the matters below, provide the basis for our audit
opinion on the accompanying consolidated and parent
company financial statements.

V. Financial Statements

Atalaya Mining Plc

Annual Report

Risk

Our response to the risk

Astor deferred consideration

As of 31 December 2017, the deferred
consideration liability in respect of Astor amounts
to €53m for the Group and €9.1m for the
Company (Note 27).

The valuation of the Astor contingent
consideration has been identified as a key audit
matter considering it is a highly judgemental
matter with a range of possible outcomes. The
liability for the Astor deferred consideration as
at 31 December 2016 has been restated in the
financial statements as a result of discount rate
re-assessment. Refer to Note 2.1(c) for details on
the restatement.

IAS 37 requires the provision to be made using
management’s best estimate and discounted,
where the impact of doing so is material to the
financial statements. In order to determine the
best estimate and assess if discounting the liability
is needed, management has applied significant
judgments and assumptions.

Revenue recognition

During the year ended 31 December 2017 the
Group recognised revenue from operations of
€160.5m (2016: €98.8m). Refer to Note 4 and 31.4.

The significant number of sales transactions
and complex terms under which title, risks and
rewards pass to the customer increases the risk
of cut-off errors. We have also identified risks in
relation to the calculation of the adjustment for
provisional pricing. In particular:

› Cut-off: the complexity of terms that

define when the title, risks and rewards are
transferred to the customer, as well as the high
value of transactions, give rise to the risk that
revenue is not recognised in the correct period.

Measurement: at each reporting period there are
a number of open invoices that are provisionally
priced using the concentrate sold and the forward
pricing of those sales. Estimation is used in
the valuation of the embedded derivative and
the income statement impact of the mark to
market movement which is recorded in revenue.
This calculation is based on estimations and
susceptible to potential manipulation.

Our approach focused on the following procedures:

› We obtained an understanding of the issue through discussions with
management and from reading the Master Agreement, Final Court
Judgment, explanation from the Group’s external lawyers on the
definition of excess of cash and the accounting paper prepared by
management;

› We obtained an update on the status of the legal proceedings

through discussions with management and the Group’s external
lawyers. Furthermore, we have obtained a letter of representation
from the lawyers;

› We reviewed and assessed management’s judgements and

assumptions made to determine the best estimate of the liability
for the Astor deferred consideration, considering the timing of cash
outflows, and management’s conclusion not to discount the liability
as the effect of discounting, when applying the risk free rate, was not
considered significant;

› We have assessed the valuation of the liability for the Astor

deferred consideration to ascertain that the IAS 37 requirements,
specifically for the measurement of provisions, have appropriately
been considered. This assessment has additionally been performed
for the liability as at 31 December 2016 as restated in the financial
statements; and

We assessed whether the consolidated and parent company financial
statements include complete and adequate disclosures in respect of
the Astor deferred consideration and related management judgements
(Notes 27, 3.4(j) and 2.1(c).).

Our approach focused on the following procedures:

› We obtained an understanding of the key controls around the
revenue recognition process in order to assess whether it is
designed to prevent, detect or correct material misstatements in the
reported revenue figures;

› We analysed the terms and conditions of the sales contracts and
evaluated whether they have been accounted for in line with the
Group’s revenue recognition policy;

› We performed detailed substantive testing procedures over the
revenue transactions. This included: agreeing the main inputs
to supporting evidence (such as provisional and final invoices,
shipments confirmation, market prices, agreements and bank
statements), recalculating the amounts invoiced and recorded as
revenue, performing cut off testing over the revenue recognition in
the correct period;

› For open sales where provisional pricing applied, we compared to
external sources the inputs used and recalculated the provisional
price adjustment to evaluate whether it was correctly measured;

› We considered and analysed the nature of any significant credits
raised post year-end to evaluate that revenue transactions were
recorded at the correct value in the relevant period; and

We assessed whether the consolidated and parent company
financial statements include disclosures in respect of revenue and
the provisional pricing in accordance with the applicable IFRS (Notes
2.24(a), 4 and 31.4).

V. Financial Statements

Annual ReportAtalaya Mining PlcOther information

The Board of Directors is responsible for the other infor-
mation. The other information comprises the information
included in the Management report, Strategic report,
Performance Review report and the Corporate Governance
report but does not include the consolidated and parent
company financial statements and our auditor’s report
thereon.

Our opinion on the consolidated and parent company
financial statements does not cover the other information
and we do not express any form of assurance conclusion
thereon.

In connection with our audit of the consoli-
dated and parent company financial
statements, our responsibility is to
read the other information and, in
doing so, consider whether the
other information is materially
inconsistent with the conso-
lidated and parent company
financial statements or our
knowledge obtained in the
audit or otherwise appears to
be materially misstated. If, based
on the work we have performed,
we conclude that there is a material
misstatement of this other information,
we are required to report that fact. We have
nothing to report in this regard.

Responsibilities of the Board of Directors
and those charged with governance for the
Consolidated and Parent Company Financial
Statements

The Board of Directors is responsible for the preparation of
consolidated and parent company financial statements that
give a true and fair view in accordance with International
Financial Reporting Standards as issued by the IASB and as
adopted by the European Union and the requirements of
the Cyprus Companies Law, Cap. 113, and for such internal
control as the Board of Directors determines is necessary to
enable the preparation of consolidated and parent company
financial statements that are free from material misstate-
ment, whether due to fraud or error.

In preparing the consolidated and parent company financial
statements, the Board of Directors is responsible for asses-
sing the Group’s and the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accoun-
ting unless the Board of Directors either intends to liquidate

V. Financial Statements

the Group or Company or to cease operations, or has no
realistic alternative but to do so.

Those charged with governance are responsible for over-
seeing the Group’s and the Company’s financial reporting
process.

Auditor’s Responsibilities for the Audit of the
Consolidated and Parent Company Financial
Statements

Our objectives are to obtain reasonable assurance about
whether the consolidated and parent company financial

statements as a whole are free from material miss-
tatement, whether due to fraud or error, and
to issue an auditor’s report that includes
our opinion. Reasonable assurance is a
high level of assurance, but is not a

guarantee that an audit conducted
in accordance with ISAs will
always detect a material missta-
tement when it exists. Missta-
tements can arise from fraud
or error and are considered
material if, individually or in the
aggregate, they could reasonably

be expected to influence the
economic decisions of users taken
on the basis of these consolidated and

parent company financial statements.

As part of an audit in accordance with ISAs, we

exercise professional judgment and maintain professional
skepticism throughout the audit. We also:

» Identify and assess the risks of material misstatement
of the consolidated and parent company financial
statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collu-
sion, forgery, intentional omissions, misrepresentations,
or the override of internal control.

» Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the
Group’s and the Company’s internal control.

» Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and
related disclosures made by the Board of Directors.

Annual ReportAtalaya Mining Plc » Conclude on the appropriateness of the Board of

Report on Other Legal Requirements

Pursuant to the additional requirements of the Auditors Law
of 2017, we report the following:

» In our opinion, the management report has been

prepared in accordance with the requirements of the
Cyprus Companies Law, Cap. 113, and the information
given is consistent with the consolidated and parent
company financial statements.

» In our opinion, and in the light of the knowledge and
understanding of the Group and the Company and its
environment obtained in the course of the audit, we have
not identified material misstatements in the management
report.

Other Matters

(i) This report, including the opinion, has been prepared
for and only for the Company’s members as a body in
accordance with Section 69 of the Auditors Law of 2017
and for no other purpose. We do not, in giving this
opinion, accept or assume responsibility for any other
purpose or to any other person to whose knowledge
this report may come to.

(ii) Comparative figures

The corresponding consolidated and parent company
financial statements of the Group and the Company
for the year ended 31 December 2016 were audited by
another auditor who expressed an unmodified opinion
on those consolidated and parent company financial
statements on 5 April 2017.

The engagement partner on the audit resulting in this inde-
pendent auditor’s report is Stavros Pantzaris.

Stavros Pantzaris
Certified Public Accountant and Registered Auditor for and
on behalf of

Ernst & Young Cyprus Limited
Certified Public Accountants and Registered Auditors

Nicosia, 27 March 2018

Directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or condi-
tions that may cast significant doubt on the Group’s and
the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to
the related disclosures in the consolidated and parent
company financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or condi-
tions may cause the Group and the Company to cease to
continue as a going concern.

» Evaluate the overall presentation, structure and content

of the consolidated and parent company financial
statements, including the disclosures, and whether the
consolidated and parent company financial statements
represent the underlying transactions and events in a
manner that achieves a true and fair view.

» Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business
activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for
the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we iden-
tify during our audit.

We also provide those charged with governance with a
statement that we have complied with relevant ethical
requirements regarding independence, and to communi-
cate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and
where applicable, related safeguards.

From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated and parent
company financial statements of the current period and
are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter
should not be communicated in our report because the
adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such
communication.

V. Financial Statements

Annual ReportAtalaya Mining PlcStatements of comprehensive income

Years ended 31 December 2017 and 2016

Realised gains on derivative financial instruments held for trading

495

Sales

160,537

1,015

98,768

’

)
s
0
0
0
o
r
u
E

(

Gross sales

Operating costs and mine site administrative expenses

Mine site depreciation and amortization

Gross income

Corporate expenses

Corporate depreciation

Share based benefits

Exploration expenses

Impairment charge

Operating profit

Other income

Net foreign exchange loss

Finance income

Finance costs

Share of results of associate – net

Profit / (loss) before tax

Tax credit/(charge)

Profit / (loss) for the year

Profit / (loss) for the year attributable to:

› Owners of the parent

› Non-controlling interests

p
u
o
r
G
e
h
T

7
1
0
2

y
n
a
p
m
o
C

7
1
0
2

e
h
T

p
u
o
r
G
e
h
T

6
1
0
2

)
*
(

d
e
t
a
t
s
e
r

y
n
a
p
m
o
C

6
1
0
2

)
*
(

d
e
t
a
t
s
e
r

e
h
T

e
t
o
N

4 / 31.2

160,537

1,015

98,273

1,015

(4,001)

(7)

(34)

(114,687)

(16,664)

29,186

(4,356)

(7)

(152)

24,671

(3,027)

(2,212)

(579)

21,907

(3,696)

18,211

264

1,635

(1,127)

(77,845)

(11,743)

9,180

(4,663)

(14)

(137)

(1,022)

(903)

2,441

292

(665)

(590)

(10)

1,509

12,187

13,696

177

(3,620)

(14)

(137)

97,157

93,563

(74)

1,523

95,059

18,239

(1,127)

13,696

95,059

(28)

18,211

(1,127)

13,696

95,059

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

› Basic earnings per share (expressed in cents per share)

› Fully diluted earnings per share (expressed in cents per share)

15.5

15.3

11.7

Profit / (loss) for the year

Other comprehensive income:

18,211

(1,127)

13,696

95,059

› Change in value of available-for-sale investments

(132)

(41)

› Total comprehensive profit for the year

18,079

(1,259)

13,655

95,018

Total comprehensive profit for the year attributable to:

› Owners of the parent

› Non-controlling interests

(*) Refer to Note 2.1. (c)

18,107

(1,259)

13,655

95,018

(28)

18,079

(1,259)

13,655

95,018

The notes on pages 58 to 115 are an integral part of these consolidated and company financial statements.

V. Financial Statements

Annual ReportAtalaya Mining Plc

Statements of financial position

Years ended 31 December 2017 and 2016

(Euro 000’s)

Note

The Group
2017

The Company
2017

The Group
2016 restated (*)

The Company
2016 restated (*)

Non-current assets

Property, plant and equipment

Intangible assets

Investment in subsidiaries

Investment in associate

Trade and other receivables

Deferred tax asset

Current assets

Inventories

Trade and other receivables

Available-for-sale investments

Cash and cash equivalents

Total assets

Equity attributable to owners of the parent

Share capital

Share premium

Other reserves

Accumulated losses

Non-controlling interests

Total equity

Non-current liabilities

Trade and other payables

Provisions

Deferred consideration

Current liabilities

Trade and other payables

Current tax liabilities

Derivative instruments

s
t
e
s
s
A

y
t
i
u
q
E

s
e
i
t
i
l
i

b
a
L

Total liabilities

Total equity and liabilities

(*) Refer to Note 2.1. (c)

The notes on pages 58 to 115 are an integral part of these
consolidated and company financial statements.

The consolidated and company financial statements were
authorised for issue by the board of directors on 27 March 2018
and were signed on its behalf.

V. Financial Statements

199,458

73,700

212

10,130

283,500

13,674

34,213

129

42,856

90,872

374,372

13,192

309,577

6,137

(86,527)

242,379

4,474

246,853

5,727

52,983

58,784

67,983

752

68,735

127,519

374,372

3,693

242,824

129

34,410

277,363

281,056

13,192

309,577

5,687

(62,417)

266,039

9,100

5,917

15,017

281,056

191,380

70,011

206

12,196

273,793

6,195

29,850

261

1,135

37,441

311,234

11,632

277,238

5,667

(104,316)

190,221

115

5,092

52,983

58,190

62,592

215

62,823

121,013

311,234

3,572

3,592

240,245

261

320

240,826

244,418

11,632

277,238

5,667

(61,290)

233,247

9,100

2,071

11,171

244,418

Roger Davey
Chairman

Alberto Lavandeira
Managing Director

Annual ReportAtalaya Mining PlcConsolidated statements of changes in equity

Years ended 31 December 2017 and 2016

(Euro 000’s)

At 1 January 2016

Profit for the year restated(*)

Bonus shares issued in escrow

Change in value of available-for-sale investments

Recognition of share based payments

Profit for the year

Issue of share capital

Share issue costs

Depletion factor

Change in value of available-for-sale investments

Recognition of share based payments

Non-controlling interests

At 31 December 2017

Attributable to owners of the parent

Note

Share
capital

Share
Premium(2)

Other
reserves(1)

Accu-
mulated
losses

Total

Non-
contro-
lling
interest

11,632

277,238

5,508

(118,012)

176,366

(41)

137

13,696

(41)

137

1,560

33,182

(843)

450

(132)

152

34,742

(843)

(132)

152

(450)

Total
equity

176,366

13,696

(41)

137

190,221

34,742

(843)

(132)

152

At 31 December 2016/ 1 January 2017 restated(*)

11,632

277,238

5,667

(104,316)

190,221

18,239

(28)

18,211

13,192

309,577

6,137

(86,527)

242,379

4,474

246,853

4,502

(*) Refer to Note 2.1. (c)
The notes on pages 58 to 115 are an integral part of these consolidated and
company financial statements.

(1) Refer to Note 23
(2) The share premium reserve is not available for distribution.

Company statements of changes in equity

Years ended 31 December 2017 and 2016

(Euro 000’s)

At 1 January 2016

Profit for the year restated (*)

Bonus shares issued in escrow

Change in value of available-for-sale investments

Recognition of share based payments

At 31 December 2016/1 January 2017 restated (*)

Profit for the year

Issue of share capital

Share issue costs

Change in value of available-for-sale investments

Recognition of share based payments

At 31 December 2017

Note

Share
capital

11,632

Share
Premium(2)

Other
reserves(1)

Accumulated
losses

Total

277,238

5,508

(156,349)

138,029

(41)

137

95,059

(41)

137

11,632

277,238

5,667

(61,290)

233,247

1,56

33,182

(843)

13,192

309,577

(132)

152

5,687

(1,127)

34,742

(843)

(132)

152

(62,417)

266,039

(*) Refer to Note 2.1. (c)
The notes on pages 58 to 115 are an integral part of these consolidated and
company financial statements.

(1) Refer to Note 23
(2) The share premium reserve is not available for distribution.

V. Financial Statements

Annual ReportAtalaya Mining PlcConsolidated statements of cash flows

Years ended 31 December 2017 and 2016

(Euro 000’s)

Note

2017

Restated(*) 2016

Profit before tax

Depreciation of property, plant and equipment

Amortisation of intangible assets

Share of result of associate

Recognition of share-based payments

Bonus share issued in escrow

Hedging income

Interest income

Interest expense

Impairment charge

Gain on disposal of property, plant and equipment

Unwinding of discounting

Legal provisions

Gain on disposal of associate

Impairment on available-for-sale investment

Net foreign exchange loss on hedging expense

Unrealised foreign exchange loss on financing activities

:
r
o
f

s
t
n
e
m

t
s
u
d
A

Cash inflows from operating activities before working capital changes

: Increase in inventories
a
t
i

Increase in trade and other receivables

Increase in trade and other payables

Decrease in derivative instruments

Increase in provisions

Cash flows from operations

Interest paid

Tax paid

Net cash from operating activities

Purchases of property, plant and equipment

Purchases of intangible assets

Proceeds from sale of property, plant and equipment

Hedging income/(expense)

Interest received

Net cash used in investing activities

s Proceeds from issue of share capital
e
i
t
i
v
i
t
c
a

Net cash from financing activities

Listing and issue costs

Net increase / (decrease) in cash and cash equivalents

Cash and cash equivalents:

At beginning of the year

At end of the year

s
e
i
t
i
v
i
t
c
a
g
n
i
t
a
r
e
p
o
m
o
r
f
s
w
o
fl
h
s
a
C

s
e
g
n
a
h
C

p
a
c
g
n
i
k
r
o
w

s
w
o
fl
h
s
a
C

g
n
i
t
s
e
v
n

m
o
r
f

h
s
a
C

s
w
o
fl

m
o
r
f

s
e
i
t
i
v
i
t
c
a

g
n
c
n
a
n
fi

21,907

12,540

4,131

152

(205)

(22)

671

113

213

(49)

39,511

(7,479)

(2,653)

5,350

(215)

(733)

33,781

(671)

(2,610)

30,500

(20,220)

(2,694)

205

(22,678)

34,742

(843)

33,899

41,721

1,135

42,856

1,509

8,643

3,114

137

(41)

395

903

(4)

195

(28)

14,896

(6,195)

(13,424)

18,924

14,201

(395)

(17)

13,789

(29,995)

(1,334)

(31,272)

(17,483)

18,618

1,135

(*) Refer to Note 2.1. (c)
The notes on pages 58 to 115 are an integral part of these consolidated and company financial statements.

V. Financial Statements

Annual ReportAtalaya Mining Plc

Company statements of cash flows

Years ended 31 December 2017 and 2016

(Euro 000’s)

s
e
i
t
i
v
i
t
c
a
g
n
i
t
a
r
e
p
o
m
o
r
f
s
w
o
fl
h
s
a
C

:
r
o
f

s
t
n
e
m

t
s
u
d
A

s
e
g
n
a
h
C

g
n
i
k
r
o
w

Profit / (loss) before tax

Depreciation of property, plant and equipment

Share-based payments

Bonus share issue

Finance income from interest-bearing intercompany loan

Intercompany balances previously impaired

Loss on available-for-sale investment

Profit on disposal of investment

Profit on disposal of property, plant and equipment

Unrealised foreign exchange loss on financing activities

Cash inflows used in operating activities before working capital changes

: Increase in trade and other receivables
a
t
i

Increase in trade and other payables

p
a
c

Deferred consideration

Cash flows used in operations

Interest paid

h
s
a
C

m
o
r
f
s
w
o
fl

g
n
i
t
s
e
v
n

s
e
i
t
i
v
i
t
c
a

Net cash used in operating activities

Purchases of property, plant and equipment

Proceeds from disposal of property, plant and equipment

Finance income from interest-bearing intercompany loan

Net cash from investing activities

h
s
a
C

s
w
o
fl

m
o
r
f

g
n
c
n
a
n
fi

s Proceeds from issue of share capital
e
i
t
i
v
i
t
c
a

Listing and issue costs

Net cash from financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents:

At beginning of the year

At end of the year

Note

2017

Restated(*) 2016

(1,127)

95,059

(1,635)

(45)

(3)

(2,720)

(2,579)

3,846

(1,453)

1,635

1,644

34,742

(843)

33,899

34,090

320

34,410

137

(1,523)

(97,243)

(4)

(3,497)

(12,921)

1,854

9,100

(5,464)

(1)

1,523

1,538

(3,926)

4,246

320

(*) Refer to Note 2.1. (c)
The notes on pages 58 to 115 are an integral part of these consolidated and company financial statements.

V. Financial Statements

Annual ReportAtalaya Mining Plc

Notes to the consolidated and
company financial statements

Years ended 31 December 2017 and 2016

1. Incorporation and summary of
business

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

Country of incorporation

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

The Company was listed on AIM of the London Stock
Exchange in May 2005 under the symbol ATYM and on the
TSX on 20 December 2010 under the symbol AYM. The
Company continued to be listed on AIM and the TSX as at 31
December 2017.

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

Changed on name and share consolidation

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

Summary of business

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

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

2. Summary of significant
accounting policies

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

2.1 Basis of preparation

(a) Overview

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

Additionally, the financial statements have also been
prepared in accordance with the IFRS as adopted by the
European Union and the requirements of the Cyprus
Companies Law, Cap.113. For the year ending 31 December
2017, the standards applicable for IFRS’s as adopted by the
EU are aligned with the IFRS’s as issued by the IASB.

The financial statements have been prepared under the
historical cost convention, except for derivative financial
instruments that have been measured at fair value.

The preparation of financial statements in conformity
with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its
judgment in the process of applying the Group’s accounting

V. Financial Statements

Annual ReportAtalaya Mining Plcpolicies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed in
Note 3.4.

(b) Going concern

and the Company will generate sufficient cash and cash equi-
valents to continue operating for the next twelve months.

c) 2016 restatement

Deferred consideration (Note 27)

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

In 2017 the discount rate used to value the liability for the
deferred consideration was re-assessed to apply a risk free
rate as required by IAS 37. The discounted amount, when
applying this discount rate, was not considered significant and
the Group has measured the liability for the deferred conside-
ration on an undiscounted basis. The value of the liability is in
line with the court ruling issued on 6 March 2017.

Years ended 31 December

The Group

The Company

2016

(Euro 000’s)

As reported Adjustments Restated As reported Adjustments Restated

Statement of financial position

Intangible asset

Trade and other receivables

Total assets

59,715

10,296(1)

70,011

238,152

2,093(1)

240,245

Deferred consideration

44,346

8,637(1)

52,983

7,359

1,741(1)

9,100

Total liabilities

Retained earnings

Equity

(105,975)

1,659

(104,316)

(61,642)

352

(61,290)

(1) The Astor deferred consideration liability has been restated to remove the impact of discounting and is in line to the High Court ruling
issued in March 2017

Years ended 31 December

The Group

The Company

2016

(Euro 000’s)

As reported Adjustments Restated As reported Adjustments Restated

Income statement

Mine site depreciation and amortization

(11,278)

(465)(1)

(11,743)

Gross margin

Finance costs

Operating profit

Loss before tax

Tax credit / (charge)

Earnings per share

9,642

(2,713)

2,906

(150)

12,187

10.3

2,124(1)

9,180

(589)

2,441

1,509

12,187

11.7

177

(352)

93,563

94,707

352(1)

177

93,563

95,059

(1) The discount rate was re-assessed considering a risk free rate for the relevant periods as required by IAS 37. Discounting the provision
using the risk free rate would not result in a significant impact to the financial statements and the Group has measured the liability on an
undiscounted basis. The amount of the provision is in line with the court ruling. Finance costs have been revised to exclude the unwinding
of discount and amortisation charge revised based on the restated carrying amount of Intangible assets

V. Financial Statements

Annual ReportAtalaya Mining Plc2.2 Changes in accounting policy and
disclosures

» Annual Improvements Cycle - 2014-2016

IFRS 12 Disclosure of Interests in Other Entities:

During the current year the Group and Company adopted
all the new and revised International Financial Reporting
Standards (IFRS) that are relevant to its operations and are
effective for accounting periods beginning on 1 January
2017.

Up to the date of approval of the consolidated and company
financial statements, certain new standards, interpretations
and amendments to existing standards have been published
that are not yet effective for the current reporting period
and which the Group and Company has not early adopted,
as follows:

(i) Adoption of new standards and revised IFRSs

» IAS 12: Recognition of Deferred Tax Assets for Unrealized

Losses (Amendments)

The objective of the Amendments is to clarify the requi-
rements of deferred tax assets for unrealized losses in
order to address diversity in practice in the application of
IAS 12 Income Taxes. The specific issues where diversity
in practice existed relate to the existence of a deductible
temporary difference upon a decrease in fair value, to
recovering an asset for more than its carrying amount,
to probable future taxable profit and to combine versus
separate assessment. The standard has been endorsed by
EU. The Group has assessed that these amendments have
no material effect on the Group and Company financial
statements.

» IAS 7: Disclosure Initiative (Amendments)

The objective of the Amendments is to provide disclo-
sures that enable users of financial statements to
evaluate changes in liabilities arising from financing
activities, including both changes arising from cash flows
and non-cash changes. The Amendments specify that one
way to fulfil the disclosure requirement is by providing a
tabular reconciliation between the opening and closing
balances in the statement of financial position for liabi-
lities arising from financing activities, including changes
from financing cash flows, changes arising from obtaining
or losing control of subsidiaries or other businesses, the
effect of changes in foreign exchange rates, changes in
fair values and other changes. The standard has been
endorsed by EU. The Group and Company is financed
from equity and these amendments have no material
impact on the current and the comparative period.

The amendments clarify that the disclosure requirements
in IFRS 12, other than those of summarized financial infor-
mation for subsidiaries, joint ventures and associates,
apply to an entity’s interest in a subsidiary, a joint venture
or an associate that is classified as held for sale, as held
for distribution, or as discontinued operations in accor-
dance with IFRS 5. The Group has assessed that these
amendments have no affect the Group and Company
financial statements.

(ii) Standard issued but not yet effective and not early
adopted by the Group and Company

At the date of approval of these financial statements, stan-
dards and interpretations were issued by the International
Accounting Standards Board which were not yet effective.
Some of them were adopted by the European Union and
others not yet.

At the date of approval of these financial statements the
following accounting standards were issued by the Interna-
tional Accounting Standards Board but were not yet effective:

» IFRS 15 – Revenue from Contracts with Customers

and Clarifications to IFRS 15 – Revenue from Contracts
with Customers. New standard for recognising revenue
(replaces IAS 11, IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and
SIC 31). Effective for annual periods beginning on or after
1 January 2018.

IFRS 15 establishes a comprehensive framework for
determining whether, how much and when revenue is
recognised.

Provisional pricing sales

Some of Atalaya´s sales contain provisional pricing
features which are considered to be embedded (commo-
dity) derivatives.

IFRS 15 will not change the assessment of the existence
of embedded derivatives. IFRS 15 states that if a contract
is partially within scope of the standard and partially in
the scope of another standard, an entity will first apply
the separation and measurement requirements of the
other standard(s). Therefore, to the extent that provi-
sional pricing features are considered to be in the scope
of another standard, they will be outside the scope of
IFRS 15 and entities will be required to account for these
in accordance with IFRS 9. Any subsequent changes that
arise due to differences between initial and final assay will
still be considered within the scope of IFRS 15.

V. Financial Statements

Annual ReportAtalaya Mining PlcRevenue in respect of the host contract will be recog-
nised when control passes to the customer (which has
been determined to be the same point in time) and
will be measured at the amount Atalaya expects to be
entitled – being the estimate of the price expected to
be received at the end of the quotation period, and the
estimated forward price (which is consistent with current
practice). When considering the initial estimate, Atalaya
has considered the requirements of IFRS 15 in relation
to the constraint on estimates of variable consideration.
It will only include amounts in the calculation of revenue
where it is highly probable that a significant revenue
reversal will not occur when the uncertainty relating to
final price adjustment is subsequently resolved. The price
adjustments are not usually material to Atalaya, hence,
no change is expected when compared to the current
approach. Consequently, at the time the goods are
delivered to the destination agreed with the customer,
Atalaya will recognise a receivable because from that
time it considers it has an unconditional right to consi-
deration. This receivable will then be accounted for in
accordance with IFRS 9.

As explained below in the discussion on the potential
impact of IFRS 9, the embedded derivative will no longer
be separated from the host contract, i.e., the trade recei-
vable. This is because the existence of the provisional
pricing features will mean the trade receivable will fail
to meet the requirements to be measured at amortised
cost. Instead, the entire receivable will be measured at
fair value, with subsequent movements being recognised
in the consolidated income statements.

Atalaya expects that changes in the fair value will
continue to be classified as sales in the consolidated
income statements.

a) Sales of goods

Under IFRS 15, revenue will be recognised when a
customer obtains control of the goods, which will coin-
cide with the current moment of the revenue recognition
– upon delivery of the product to the destination agreed
with the customer.

In order to assess the implications of adopting the new
standard for existing contracts Atalaya has performed
an analysis of its contracts with customers based on the
five-step model of revenue recognition in accordance
with IFRS 15.

Based on the analysis performed by Atalaya, there is
a single performance obligation identified in the sales
contracts. Atalaya does not expect material changes in
the timing or measurement of revenue based on the
analysis performed, as the performance obligation is

satisfied on the delivery of the product to the destina-
tion point agreed with the customer, which is when the
control is transferred and the revenue is recognised.

b) Significant financing component

Other issues in IFRS 15 include the existence of signifi-
cant financing components in the contracts signed with
customers.

As at 31 December 2016 there was a copper concentrate
prepayment funding signed by Atalaya in September
2016 with Transamine Trading, S.A. of €8.7 million (€nil
at 31 December 2017). Atalaya´s preliminary assessment
indicates that the value of a deferred revenue that may
be recognised and an increase in finance costs is not
significant.

c) Disclosures

IFRS 15 requires that Atalaya presents different disag-
gregation of income beyond those presented with the
previous standard.

d) Transition

Atalaya plans to adopt IFRS 15 using the cumulative effect
method, with the effect of initially applying this standard
recognised at the date of initial application (i.e. 1 January
2018). As a result Atalaya will not apply the requirements
of IFRS 15 to the comparative period presented.

» IFRS 9 – Financial Instruments and subsequent amend-
ments. This standard replaces the classification, measu-
rement, recognition and derecognition in accounts of
financial assets and liabilities, hedge accounting, and
impairment set out in IAS 39 Financial instruments:
Recognition and Measurement. Effective for annual
periods beginning on or after 1 January 2018.

Atalaya has assessed the estimated impact that the initial
application of IFRS 9 will have on its financial statements.
From the analysis performed, it was concluded that the
application of this rule would not have significant effects
on the financial statements due to the following:

Classification – Financial assets

IFRS 9 contains a new classification and measurement
approach for financial assets that reflects the business
model in which assets are managed and their cash flow
characteristics.

IFRS 9 contains three principal classification categories for
financial assets: measured at amortised costs, fair value
through other comprehensive income (“FVOCI”) and fair

V. Financial Statements

Annual ReportAtalaya Mining Plcvalue through profit or loss (“FVTPL”). The standard elimi-
nates the existing IAS 39 categories of held to maturity,
loans and receivables and available-for-sale.

Based on the assessment, Atalaya does not believe that
the new classification requirements will have a material
impact on its accounting for trade receivables, loans,
equity investment. Equity investments hold by Atalaya
classified as available-for-sale are non-significant (of
€129k). Atalaya does not have held to maturity financial
assets.

Impairment – Financial assets and contract assets

IFRS 9 replaces the “incurred loss” model in IAS 39 with a
forward-looking “expected credit loss” (ECL) model. This
will require considerable judgement about how changes
in economic factors effect ECLs, which will be determined
on a probability-weighted basis.

The new impairment model will apply to financial assets
measured at amortised cost or FVOCI, except for invest-
ments in equity instruments, and to contract assets.
Under IFRS 9 loss allowance will be measured on either of
the following basis:

» 12-month ECLs: these are ECLs that result from

possible events within the 12 months after the repor-
ting date; applied if the credit risk of a financial asset at
the reporting date has not increased significantly since
initial recognition.

» Lifetime ECLs: these are ECLs that result from all

possible default events over the expected life of a
financial instrument; applied if the credit risk of a finan-
cial asset at the reporting date has increased signifi-
cantly since initial recognition.

Based on the analysis of the ECL performed, Atalaya
believes that the adoption of the new impairment model
will not have a significant impact on the financial state-
ments due to the following reasons:

a) Trade and other receivables: Atalaya does not have

significant credit risk and does not maintain a history
of non-compliance of fulfilment of payments by
customers.

b) Cash and cash equivalents: the cash and cash equi-

valents are held with banks which have strong credit
ratings.

Classification – Financial liabilities

IFRS 9 largely retains the existing requirements in IAS 39
for the classification of financial liabilities.

However, under IAS 39 all fair value changes of liabilities
designated as at FVTPL are recognized in profit and loss,
whereas under IFRS 9 these fair value changes are gene-
rally presented as follows:

» The amount of change in fair value that is attributable
to changes in the credit risk of the liability is presented
in OCI; and

» The remaining amount of changes in the fair value is

presented in profit and loss.

The Group´s assessment does not indicate any material
impact regarding the classification of financial liabilities at
1 January 2018.

Commodity derivative

As discussed in more detail in this note above and also
within the discussion on the potential impact of IFRS 15,
some of the Atalaya’s sales contain provisional pricing
features.

On adoption of IFRS 9, the embedded derivative will no
longer be separated from the receivables as the receiva-
bles are not expected to give rise to cash flows that repre-
sent solely payments of principal and interest. Instead, the
receivables will be accounted for as one instrument and
measured at fair value through profit or loss with subse-
quent changes in fair value recognised in the statement
of profit or loss and other comprehensive income each
period until final settlement and presented as part of
‘Other Income/Expense’. This will mean that the quantity
of the fair value movements will be different because the
current approach only calculates fair value movements
based on changes in the relevant commodity price,
whereas under IFRS 9, the fair value of the receivable will
not only include commodity price changes, but it will also
factor in the impact of credit and interest rates. However,
based on the analysis performed, Atalaya does not expect
these changes will have a significant impact.

Hedge accounting

The changes in IFRS 9 relating to hedge accounting will
have no impact, as Atalaya does not currently apply
hedge accounting.

Disclosures

IFRS 9 will require extensive new disclosures, in particular
about hedge accounting, credit risk and ECLs. Atalaya´s
assessment included an analysis to identify data gaps
against current processes and Atalaya is in the process
of implementing the system and controls changes that it
believes will be necessary to capture the required data.

V. Financial Statements

Annual ReportAtalaya Mining PlcTransition

Changes in accounting policies from the adoption of
IFRS 9 will generally be applied retrospectively, except as
described below.

» Atalaya will take advantage of the exemption allowing
it not to restate comparative information for prior
periods with respect to classification and measurement
(including impairment) changes.

» The assessment have to be made based on the facts

and circumstances that exist at the date of initial appli-
cation in respect of the determination of the business
model within which a financial assets is held.

» IFRS 16 – Leases. The new standard on leases that

replaces IAS 17, IFRIC 4, SIC-15 and SIC-27. Effective for
annual periods beginning on or after 1 January 2019.
Early adoption is permitted for entities that apply IFRS 15
at or before the date of initial application of IFRS 16.

IFRS 16 introduces a single, on-balance sheet lease
accounting model for lessees. A lessee recognises a right-
of-use asset representing it right to use the underlying
asset and a lease liability representing its obligation to
make lease payment. There are recognition exemptions
for short-term leases and leases of low-value items.
Lessor accounting remains similar to the current stan-
dard – i.e. lessor continue to classify leases as finance or
operating leases.

Atalaya has completed an initial assessment of the poten-
tial impact of IFRS 16 on its consolidated financial state-
ments but has not yet completed its detailed assessment.
The actual impact of applying IFRS 16 on the consolidated
financial statements in the period of initial application
will depend on future economic conditions, including the
Group´s borrowing rate at 1 January 2019, the compo-
sition of Atalaya´s borrowing rate at 1 January 2019 the
composition of Atalaya´s portfolio at that date, its latest
assessment of whether it will exercise any lease renewal
options and the extent to which Atalaya chooses to use
practical expedients and recognition exemptions.

As at 31 December 2017, Atalaya does not possess lease
payments under non-cancellable operating.

Considering the insignificant volume of commitments for
leases held by Atalaya, it is expected that the implemen-
tation of IFRS 16 will not have a significant impact on the
financial statements.

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

The amendments address an acknowledged inconsistency
between the requirements in IFRS 10 and those in IAS 28,
in dealing with the sale or contribution of assets between
an investor and its associate or joint venture. The main
consequence of the amendments is that a full gain or
loss is recognized when a transaction involves a business
(whether it is housed in a subsidiary or not). A partial gain
or loss is recognized when a transaction involves assets
that do not constitute a business, even if these assets
are housed in a subsidiary. In December 2015 the IASB
postponed the effective date of this amendment indefi-
nitely pending the outcome of its research project on the
equity method of accounting. The amendments have not
yet been endorsed by the EU. Management is currently
evaluating the effect of these standards or interpreta-
tions on its financial statements.

» IFRS 2: Classification and Measurement of Share based

Payment Transactions (Amendments)

The Amendments are effective for annual periods begin-
ning on or after 1 January 2018 with earlier application
permitted. The Amendments provide requirements on
the accounting for the effects of vesting and non-vesting
conditions on the measurement of cash-settled share-
based payments, for share-based payment transactions
with a net settlement feature for withholding tax obliga-
tions and for modifications to the terms and conditions of
a share-based payment that changes the classification of
the transaction from cash-settled to equity-settled. These
Amendments have not yet been endorsed by the EU.
Management is currently evaluating the effect of these
standards or interpretations on its financial statements.

» IAS 40: Transfers to Investment Property (Amendments).

The Amendments are effective for annual periods
beginning on or after 1 January 2018 with earlier appli-
cation permitted. The Amendments clarify when an
entity should transfer property, including property under
construction or development into, or out of investment
property. The Amendments state that a change in use
occurs when the property meets, or ceases to meet, the
definition of investment property and there is evidence of
the change in use. A mere change in management’s inten-
tions for the use of a property does not provide evidence
of a change in use. These Amendments have not yet been
endorsed by the EU. No investments properties are held
by the Group and Company and this amendment has no
effect on the financial statements.

V. Financial Statements

Annual ReportAtalaya Mining Plcdeferred income liability. If there are multiple payments
or receipts in advance, then the entity must determine
a date of the transactions for each payment or receipt
of advance consideration. This Interpretation has not
yet been endorsed by the EU. Management is currently
evaluating the effect of these standards or interpreta-
tions on its financial statements.

» The IASB has issued the Annual Improvements to IFRSs
2014 – 2016 Cycle, which is a collection of amendments
to IFRSs.

The amendments are effective for annual periods begin-
ning on or after 1 January for IAS 28 Investments in Asso-
ciates and Joint Ventures. Earlier application is permitted
for IAS 28 Investments in Associates and Joint Ventures.
These annual improvements have not yet been endorsed
by the EU. The amendments clarify that the election to
measure at fair value through profit or loss an investment
in an associate or a joint venture that is held by an entity
that is venture capital organization, or other qualifying
entity, is available for each investment in an associate or
joint venture on an investment-by-investment basis, upon
initial recognition. Management is currently evaluating
the effect of these standards or interpretations on its
financial statements.

» IFRS 9: Prepayment features with negative compensation

(Amendment)

The Amendment is effective for annual reporting periods
beginning on or after 1 January 2019 with earlier applica-
tion permitted. The Amendment allows financial assets
with prepayment features that permit or require a party
to a contract either to pay or receive reasonable compen-
sation for the early termination of the contract (so that,
from the perspective of the holder of the asset there may
be ‘negative compensation’), to be measured at amor-
tized cost or at fair value through other comprehensive
income. These Amendments have not yet been endorsed
by the EU. Management is currently evaluating the effect
of these standards or interpretations on its financial
statements.

» IAS 28: Long-term Interests in Associates and Joint

Ventures (Amendments)

The Amendments are effective for annual reporting
periods beginning on or after 1 January 2019 with
earlier application permitted. The Amendments relate
to whether the measurement, in particular impairment
requirements, of long term interests in associates and
joint ventures that, in substance, form part of the ‘net
investment’ in the associate or joint venture should be
governed by IFRS 9, IAS 28 or a combination of both. The
Amendments clarify that an entity applies IFRS 9 Financial
Instruments, before it applies IAS 28, to such long-term
interests for which the equity method is not applied. In
applying IFRS 9, the entity does not take account of any
adjustments to the carrying amount of long- term inte-
rests that arise from applying IAS 28. These Amendments
have not yet been endorsed by the EU. Management
is currently evaluating the effect of these standards or
interpretations on its financial statements.

» IFRIC INTERPETATION 22: Foreign Currency Transactions

and Advance Consideration

The Interpretation is effective for annual periods begin-
ning on or after 1 January 2018 with earlier application
permitted. The Interpretation clarifies the accounting
for transactions that include the receipt or payment
of advance consideration in a foreign currency. The
Interpretation covers foreign currency transactions when
an entity recognizes a non-monetary asset or a non-mo-
netary liability arising from the payment or receipt of
advance consideration before the entity recognizes the
related asset, expense or income. The Interpretation
states that the date of the transaction, for the purpose
of determining the exchange rate, is the date of initial
recognition of the non-monetary prepayment asset or

V. Financial Statements

Annual ReportAtalaya Mining Plc » IFRIC INTERPETATION 23: Uncertainty over Income Tax

Treatments

The Interpretation is effective for annual periods begin-
ning on or after 1 January 2019 with earlier application
permitted. The Interpretation addresses the accounting
for income taxes when tax treatments involve uncertainty
that affects the application of IAS 12. The Interpretation
provides guidance on considering uncertain tax treat-
ments separately or together, examination by tax autho-
rities, the appropriate method to reflect uncertainty
and accounting for changes in facts and circumstances.
This Interpretation has not yet been endorsed by the EU.
Management is currently evaluating the effect of these
standards or interpretations on its financial statements.

» The IASB has issued the Annual Improvements to IFRSs
2015 – 2017 Cycle, which is a collection of amendments
to IFRSs.

The amendments are effective for annual periods begin-
ning on or after 1 January 2019 with earlier application
permitted. These annual improvements have not yet
been endorsed by the EU. Management is currently
evaluating the effect of these standards or interpreta-
tions on its financial statements.

(i) IFRS 3 Business Combinations and IFRS 11 Joint Arran-
gements The amendments to IFRS 3 clarify that when
an entity obtains control of a business that is a joint
operation, it remeasures previously held interests in
that business. The amendments to IFRS 11 clarify that
when an entity obtains joint control of a business that
is a joint operation, the entity does not remeasure
previously held interests in that business.

(ii) IAS 12 Income Taxes: The amendments clarify that
the income tax consequences of payments on
financial instruments classified as equity should be
recognized according to where the past transactions
or events that generated distributable profits has
been recognized.

(iii) IAS 23 Borrowing Costs: The amendments clarify

paragraph 14 of the standard that, when a qualifying
asset is ready for its intended use or sale, and some of
the specific borrowing related to that qualifying asset
remains outstanding at that point, that borrowing
is to be included in the funds that an entity borrows
generally.

V. Financial Statements

Annual ReportAtalaya Mining Plc2.3 Consolidation

(a) Basis of consolidation

The consolidated financial statements comprise the financial
statements of Atalaya Mining Plc and its subsidiaries.

(b) Subsidiaries

Subsidiaries are all entities (including special purpose
entities) over which the Group and Company has control.
Control exists when the Group is exposed, or has rights, to
variable returns for its involvement with the investee and
has the ability to affect those returns through its power over
the investee. The existence and effect of potential voting
rights that are currently exercisable or convertible are consi-
dered when assessing whether the Group controls another
entity. The Group also assesses existence of control where
it does not have more than 50% of the voting power but is

able to govern the financial and operating policies by virtue
of de-facto control.

De-facto control may arise in circumstances where the size
of the Group’s voting rights relative to the size and disper-
sion of holdings of other shareholders give the Group the
power to govern the financial and operating policies, etc.

Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consoli-
dated from the date that control ceases.

The only operating subsidiary of Atalaya Mining Plc is
the 100% owned Atalaya Riotionto Minera, S.L.U. which
operates Proyecto Minero Riotinto, in the historical site of
Huelva, Spain.

The name and shareholding of the entities include in the
Group in these financial statements are:

Entity name

Atalaya Mining, Plc

Eastern Mediterranean Resources (Caucasus) Ltd

Georgian Minerals Development Company Ltd.

EMED Marketing Ltd.

EMED Mining Spain, S.L.

Atalaya Riotinto Minera, S.L.U.

Recursos Cuenca Minera, S.L.

Atalaya Minasderiotinto Project (UK), Ltd.

Eastern Mediterranean Exploration & Development, S.L.U.

Atalaya Touro (UK), Ltd.

Fundación Emed Tartessus

Cobre San Rafael, S.L. (1)

Notes

Business

%(2)

Country

Holding

Dormant

Marketing

Dormant

Operating

Holding

Operating

Holding

Trust

Operating

n.a.

100%

50%

100%

10%

Cyprus

Georgia

Cyprus

Spain

United Kingdom

Spain

United Kingdom

Spain

(1) Cobre San Rafael, S.L. is the entity which holds the mining rights of Proyecto Touro. The Group has a significant influence in the
management of the Cobre San Rafael, S.L., including one of the two directors, management of the financial books and the capacity to
appoint the key personnel. Refer to Note 29 for details on the acquisition of Cobre San Rafael, S.L..

(2) The effective proportion of shares held as at 31 December 2017 and 31 December 2016 remained unchanged other than Atalaya Touro
Project (UK) Ltd which was incorporated in the year 2017 and Cobre San Rafael, S.L. which was acquired during 2017.

V. Financial Statements

Annual ReportAtalaya Mining PlcThe Group applies the acquisition method to account for
business combinations. The consideration transferred for
the acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred to the former owners of
the acquiree and the equity interests issued by the Group.
The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination
are measured initially at their fair values at the acquisition
date. The Group recognises any non-controlling interest in
the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest’s proportionate
share of the recognised amounts of acquiree’s identifiable
net assets.

If the business combination is achieved in stages, the acqui-
sition date carrying value of the acquirer’s previously held
equity interest in the acquiree is re-measured to fair value
at the acquisition date; any gains or losses arising from such
re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the
Group is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent
consideration that is deemed to be an asset or liability
is recognised in accordance with IAS 39 in profit or loss.
Contingent consideration that is classified as equity is not
re-measured, and its subsequent settlement is accounted
for within equity.

Goodwill is initially measured as the excess of the aggre-
gate of the consideration transferred and the fair value of
non-controlling interest over the net identifiable assets
acquired and liabilities assumed. If this consideration is
lower than the fair value of the net assets of the subsidiary
acquired, the difference is recognised in profit or loss.

Inter-company transactions, balances, income and expenses
on transactions between group companies are eliminated.
Profits and losses resulting from intercompany transactions
that are recognised in assets are also eliminated. Accounting
policies of subsidiaries have been changed where necessary
to ensure consistency with the policies adopted by the group.

(d) Changes in ownership interests in subsidiaries without
change of control

Transactions with non-controlling interests that do not
result in loss of control are accounted for as equity tran-
sactions – that is, as transactions with the owners in their
capacity as owners. The difference between fair value of
any consideration paid and the relevant share acquired of

V. Financial Statements

the carrying value of net assets of the subsidiary is recorded
in equity. Gains or losses on disposals to non-controlling
interests are also recorded in equity.

(e) Disposal of subsidiaries.

When the Group ceases to have control any retained inte-
rest in the entity is re-measured to its fair value at the date
when control is lost, with the change in carrying amount
recognised in profit or loss. The fair value is the initial
carrying amount for the purposes of subsequently accoun-
ting for the retained interest as an associate, joint venture
or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of
that entity are accounted for as if the group had directly
disposed of the related assets or liabilities. This may mean
that amounts previously recognised in other comprehensive
income are reclassified to profit or loss.

(f) Associates

Associates are all entities over which the Group has signi-
ficant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for using the equity
method of accounting. Under the equity method, the invest-
ment is initially recognised at cost, and the carrying amount
is increased or decreased to recognise the investor’s share
of the profit or loss of the investee after the date of acquisi-
tion. The Group’s investment in associates includes goodwill
identified on acquisition.

If the ownership interest in an associate is reduced but signi-
ficant influence is retained, only a proportionate share of
the amounts previously recognised in other comprehensive
income is reclassified to profit or loss where appropriate.

The Group’s share of post-acquisition profit or loss is recog-
nised in the income statement, and its share of post-acquisi-
tion movements in other comprehensive income is recog-
nised in other comprehensive income, with a corresponding
adjustment to the carrying amount of the investment. When
the Group share of losses in an associate equals or exceeds
its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses,
unless it has incurred legal or constructive obligations or
made payments on behalf of the associate.

The Group determines at each reporting date whether
there is any objective evidence that the investment in the
associate is impaired. If this is the case, the Group calculates
the amount of impairment as the difference between the
recoverable amount of the associate and its carrying value
and recognises the amount adjacent to ‘share of profit/(loss)
of associates’ in the income statement.

Annual ReportAtalaya Mining PlcProfits and losses resulting from upstream and downstream
transactions between the Group and its associate are
recognised in the Group’s consolidated financial state-
ments only to the extent of unrelated investors’ interests
in the associates. Unrealised losses are eliminated unless
the transaction provides evidence of an impairment of the
asset transferred. Accounting policies of associates have
been changed where necessary to ensure consistency with
the policies adopted by the group. Dilution gains and losses
arising in investments in associates are recognised in the
income statement.

(g) Functional currency

Functional and presentation currency items included in
the financial statements of each of the Group’s entities
are measured using the currency of the primary economic
environment in which the entity operates (‘the functional
currency’). The financial statements are presented in Euro
which is the Group and Company functional and presenta-
tion currency.

Determination of functional currency may involve certain
judgements to determine the primary economic environ-
ment and the parent entity reconsiders the functional
currency of its entities if there is a change in events and
conditions which determined the primary economic
environment.

Foreign currency transactions are translated into the func-
tional currency using the spot exchange rates prevailing at
the dates of the transactions or valuation where items are
re-measured. Foreign exchange gains and losses resulting
from the settlement of such transactions are recognised in
the income statement.

Monetary assets and liabilities denominated in foreign
currencies are retranslated at year-end spot exchange rates.

Non-monetary items that are measured at historical cost in
a foreign currency are translated using the exchange rates
at the dates of the initial transaction. Non-monetary items
measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was
determined.

Gains or losses of monetary and non-monetary items are
recognised in the income statement.

Balance sheet items are translated at period-end exchange
rates. Exchange differences on translation of the net assets
of such entities are taken to equity and recorded in a sepa-
rate currency translation reserve.

V. Financial Statements

Annual ReportAtalaya Mining Plc2.4 Investments in subsidiary companies

Investments in subsidiary companies are stated at cost less
provision for impairment in value, which is recognised as an
expense in the period in which the impairment is identified.

2.5 Interest in joint arrangements

A joint arrangement is a contractual arrangement whereby
the Group and other parties undertake an economic activity
that is subject to joint control that is when the strategic,
financial and operating policy decisions relating to the acti-
vities the joint arrangement require the unanimous consent
of the parties sharing control.

Where a Group entity undertakes its activities under joint
arrangements directly, the Group’s share of jointly contro-
lled assets and any liabilities incurred jointly with other
ventures are recognised in the financial statements of the
relevant entity and classified according to their nature.
Liabilities and expenses incurred directly in respect of
interests in jointly controlled assets are accounted for on
an accrual basis. Income from the sale or use of the Group’s
share of the output of jointly controlled assets, and its share
of joint arrangement expenses, are recognised when it is
probable that the economic benefits associated with the
transactions will flow to/from the Group and their amount
can be measured reliably.

The Group undertakes joint arrangements that involve the
establishment of a separate entity in which each acquiree
has an interest (jointly controlled entity). The Group reports
its interests in jointly controlled entities using the equity
method of accounting.

Where the Group transacts with its jointly controlled
entities, unrealised profits and losses are eliminated to the
extent of the Group’s interest in the joint arrangement.

2.6 Segment reporting

Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is
responsible for allocating resources and assessing perfor-
mance of the operating segments, has been identified as
the CEO who makes strategic decisions.

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

V. Financial Statements

Annual ReportAtalaya Mining Plc2.7 Inventory

Inventory consists in copper concentrates, ore stockpiles
and metal in circuit and spare parts. Inventory is physically
measured or estimated and valued at the lower of cost or
net realisable value. Net realisable value is the estimated
future sales price of the product the entity expects to
realise when the product is processed and sold, less esti-
mated costs to complete production and bring the product
to sale. Where the time value of money is material, these
future prices and costs to complete are discounted.

Cost is determined by using the FIFO method and comprises
direct purchase costs and an appropriate portion of fixed
and variable overhead costs, including depreciation and
amortisation, incurred in converting materials into finished
goods, based on the normal production capacity. The cost
of production is allocated to joint products using a ratio of
spot prices by volume at each month end. Separately iden-
tifiable costs of conversion of each metal are specifically
allocated.

Materials and supplies are valued at the lower of cost or net
realisable value. Any provision for obsolescence is deter-
mined by reference to specific items of stock. A regular
review is undertaken to determine the extent of any provi-
sion for obsolescence.

2.8 Assets under construction

All subsequent expenditure on the construction, installation
or completion of infrastructure facilities including mine
plants and other necessary works for mining, are capita-
lised in “Assets under construction”. Any costs incurred in
testing the assets to determine if they are functioning as
intended, are capitalised, net of any proceeds received from
selling any product produced while testing. Where these
proceeds exceed the cost of testing, any excess is recog-
nised in the statement of profit or loss and other compre-
hensive income. After production starts, all assets included
in “Assets under construction” are then transferred to the
relevant asset categories.

Once a project has been established as commercially viable,
related development expenditure is capitalised. A deve-
lopment decision is made based upon consideration of
project economics, including future metal prices, reserves
and resources, and estimated operating and capital costs.
Capitalization of costs incurred and proceeds received
during the development phase ceases when the property is
capable of operating at levels intended by management.

Capitalisation ceases when the mine is capable of commer-
cial production, with the exception of development costs
which give rise to a future benefit.

V. Financial Statements

Pre-commissioning sales are offset against the cost of
constructing the asset. No depreciation is recorded until the
assets are substantially complete and ready for productive
use.

2.9 Property, plant and equipment

Property, plant and equipment are stated at historical cost
less accumulated depreciation and any accumulated impair-
ment losses.

Subsequent costs are included in the assets’ carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount
of the replaced part is derecognised. All other repairs and
maintenance are charged to the income statement during
the financial period in which they are incurred.

Property, plant and equipment are depreciated to their
estimated residual value over the estimated useful life of
the specific asset concerned, or the estimated remaining life
of the associated mine (“LOM”), field or lease. Depreciation
commences when the asset is available for use.

The major categories of property, plant and equipment are
depreciated/amortised on a Unit of Production (“UOP”)
and/or straight-line basis as follows:

Buildings

Mineral rights

Deferred mining costs

Plant and machinery

Motor vehicles

UOP

5 years

Furniture/fixtures/office equipment

5 – 10 years

The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at the end of each reporting
period.

An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing
the proceeds with the carrying amount and are recognised
within “Other (losses)/gains – net” in the income statement.

Annual ReportAtalaya Mining Plc(a) Mineral rights

Mineral reserves and resources which can be reasonably
valued are recognised in the assessment of fair values on
acquisition. Mineral rights for which values cannot be reaso-
nably determined are not recognised. Exploitable mineral
rights are amortised using the UOP basis over the commer-
cially recoverable reserves and, in certain circumstances,
other mineral resources. Mineral resources are included
in amortisation calculations where there is a high degree
of confidence that they will be extracted in an economic
manner.

(b) Deferred mining costs – stripping costs

Mainly comprises of certain capitalised costs related to
pre-production and in-production stripping activities as
outlined below.

Stripping costs incurred in the development phase of a
mine (or pit) before production commences are capitalised
as part of the cost of constructing the mine (or pit) and
subsequently amortised over the life of the mine (or pit) on
a UOP basis.

In-production stripping costs related to accessing an identi-
fiable component of the ore body to realise benefits in the
form of improved access to ore to be mined in the future
(stripping activity asset), are capitalised within deferred
mining costs provided all the following conditions are met:

ii.

it is probable that the future economic benefit asso-
ciated with the stripping activity will be realised;

the component of the ore body for which access has
been improved can be identified; and

iii.

the costs relating to the stripping activity associated
with the improved access can be reliably measured.

If all of the criteria are not met, the production stripping
costs are charged to the consolidated statement of income
as they are incurred.

The stripping activity asset is initially measured at cost,
which is the accumulation of costs directly incurred to
perform the stripping activity that improves access to the
identified component of ore, plus an allocation of directly
attributable overhead costs.

Under the Group’s accounting policy, exploration expendi-
ture is not capitalised until the management determines a
property will be developed and point is reached at which
there is a high degree of confidence in the project’s viability

V. Financial Statements

and it is considered probable that future economic benefits
will flow to the Group. A development decision is made
based upon consideration of project economics, including
future metal prices, reserves and resources, and estimated
operating and capital costs.

Subsequent recovery of the resulting carrying value
depends on successful development or sale of the undeve-
loped project. If a project does not prove viable, all irreco-
verable costs associated with the project net of any related
impairment provisions are written off.

(d) Major maintenance and repairs

Expenditure on major maintenance refits or repairs
comprises the cost of replacement assets or parts of assets
and overhaul costs. Where an asset, or part of an asset,
that was separately depreciated and is now written off is
replaced, and it is probable that future economic benefits
associated with the item will flow to the Group through an
extended life, the expenditure is capitalised.

Where part of the asset was not separately considered as a
component and therefore not depreciated separately, the
replacement value is used to estimate the carrying amount
of the replaced asset(s) which is immediately written off.
All other day-to-day maintenance and repairs costs are
expensed as incurred.

(e) Borrowing costs

Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes
a substantial period of time to get ready for its intended use
or sale (a qualifying asset) are capitalised as part of the cost
of the respective asset. Where funds are borrowed specifi-
cally to finance a project, the amount capitalised represents
the actual borrowing costs incurred.

(f) Restoration, rehabilitation and decommissioning

Restoration, rehabilitation and decommissioning costs
arising from the installation of plant and other site prepara-
tion work, discounted using a risk adjusted discount rate to
their net present value, are provided for and capitalised at
the time such an obligation arises.

The costs are charged to the consolidated statement of
income over the life of the operation through depreciation
of the asset and the unwinding of the discount on the provi-
sion. Costs for restoration of subsequent site disturbance,
which are created on an ongoing basis during production,
are provided for at their net present values and charged
to the consolidated statement of income as extraction
progresses.

Annual ReportAtalaya Mining Plcare carried at cost less any accumulated amortisation (calcu-
lated on a straight-line basis over their useful lives) and
accumulated impairment losses, if any.

The useful lives of intangible assets are assessed as either
finite or indefinite.

Intangible assets with finite lives are amortised over
their useful economic lives and assessed for impairment
whenever there is an indication that the intangible asset
may be impaired. The amortisation period and the amorti-
sation method for an intangible asset with a finite useful life
are reviewed at least at the end of each reporting period.

Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and
are recognised in the statement of profit or loss and other
comprehensive income when the asset is derecognised.

2.11 Impairment of non-financial assets

Assets that have an indefinite useful life – for example,
goodwill or intangible assets not ready to use – are not
subject to amortisation and are tested annually for impair-
ment. Assets that are subject to amortisation are reviewed
for impairment whenever events or changes in circum-
stances indicate that the carrying amount may not be reco-
verable. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows
(cash-generating units). Non-financial assets other than
goodwill that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.

2.12 Financial assets

2.12.1 Classification

The Group classifies its financial assets in the following cate-
gories: at fair value through profit or loss, loans and recei-
vables, and available for sale. The classification depends on
the purpose for which the financial assets were acquired.
Management determines the classification of its financial
assets at initial recognition. The Group’s financial assets
include cash and short-term deposits, trade and other recei-
vables and derivative financial assets.

Changes in the estimated timing of the rehabilitation or
changes to the estimated future costs are accounted for
prospectively by recognising an adjustment to the rehabili-
tation liability and a corresponding adjustment to the asset
to which it relates, provided the reduction in the provision
is not greater than the depreciated capitalised cost of the
related asset, in which case the capitalised cost is reduced
to nil and the remaining adjustment recognised in the
consolidated statement of income. In the case of closed
sites, changes to estimated costs are recognised immedia-
tely in the consolidated statement of income.

2.10 Intangible assets

(a) Business combination and goodwill

Goodwill arises on the acquisition of subsidiaries and
represents the excess of the consideration transferred over
the acquired interest in net fair value of the net identifiable
assets, liabilities and contingent liabilities of the acquiree and
the fair value of the non-controlling interest in the acquiree.

The results of businesses acquired during the year are
brought into the consolidated financial statements from
the effective date of acquisition. The identifiable assets,
liabilities and contingent liabilities of a business which can
be measured reliably are recorded at their provisional fair
values at the date of acquisition. Provisional fair values are
finalised within 12 months of the acquisition date. Acquisi-
tion-related costs are expensed as incurred.

Goodwill impairment reviews are undertaken annually or
more frequently if events or changes in circumstances indi-
cate a potential impairment. The carrying value of goodwill
is compared to the recoverable amount, which is the higher
of value in use and the fair value less costs to sell. Any
impairment is recognised immediately as an expense and is
not subsequently reversed.

(b) Permits

Permits are capitalised as intangible assets which relate to
projects that are at the pre-development stage. No amor-
tisation charge is recognised in respect of these intangible
assets. Once the Group receives those permits, the intangible
assets relating to permits will be depreciated on a UOP basis.

Other intangible assets include computer software.

Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired
in a business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets

V. Financial Statements

Annual ReportAtalaya Mining Plc(a) Financial assets at fair value through profit or loss

2.12.2 Recognition and measurement

Financial assets at fair value through profit or loss are
financial assets held for trading. A financial asset is classified
in this category if acquired principally for the purpose of
selling in the short term. Derivatives are also categorised
as held for trading unless they are designated as hedges.
Assets in this category are classified as current assets if
expected to be settled within 12 months, otherwise they are
classified as non-current.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. They are included in current assets,
except for maturities greater than 12 months after the end
of the reporting period. These are classified as non-current
assets. The Group’s loans and receivables comprise “trade
and other receivables” and “cash and cash equivalents” in
the statement of financial position (Notes 2.18).

Available-for-sale financial assets are non-derivatives that
are either designated in this category or not classified in
any of the other categories. They are included in non-cu-
rrent assets unless the investment matures or management
intends to dispose of it within 12 months of the end of the
reporting period.

Regular purchases and sales of financial assets are recog-
nised on the trade-date – the date on which the Group
commits to purchase or sell the asset. Investments are
initially recognised at fair value plus transaction costs for
all financial assets not carried at fair value through profit
or loss. Financial assets carried at fair value through profit
or loss are initially recognised at fair value, and transaction
costs are expensed in the income statement. Financial
assets are derecognised when the rights to receive cash
flows from the investments have expired or have been
transferred and the group has transferred substantially all
risks and rewards of ownership. Available-for-sale financial
assets and financial assets at fair value through profit or loss
are subsequently carried at fair value. Loans and receivables
are subsequently carried at amortised cost using the effec-
tive interest method.

Gains or losses arising from changes in the fair value of
the “financial assets at fair value through profit or loss”
category are presented in the income statement within
“other (losses)/gains – net” in the period in which they arise.
Dividend income from financial assets at fair value through
profit or loss is recognised in the income statement as part
of other income when the Group’s right to receive payments
is established.

Changes in the fair value of monetary securities classified
as available for sale are recognised in other comprehensive
income.

V. Financial Statements

Annual ReportAtalaya Mining PlcWhen securities classified as available for sale are sold or
impaired, the accumulated fair value adjustments recog-
nised in equity are included in the income statement as
“gains and losses from investment securities”. Interest on
available-for-sale securities calculated using the effective
interest method is recognised in the income statement
as part of finance income. Dividends on available-for-sale
equity instruments are recognised in the income statement
as part of other income when the Group’s right to receive
payments is established.

2.13 Financial liabilities

The Group classifies its financial liabilities in the following
categories: trade and other payables, provisions, Inte-
rest-bearing loans and borrowings, deferred consideration
and derivatives. The classification depends on the purpose
for which the financial assets were acquired. Management
determines the classification of its financial assets at initial
recognition.

(a) Trade and other payables

Trade and other payables are obligations to pay for goods,
assets or services that have been acquired in the ordinary
course of business from suppliers. Accounts payable are
classified as current liabilities if payment is due within one
year or less (or in the normal operating cycle of the business
if longer). If not, they are presented as non-current liabili-
ties. Trade and other payables are recognised initially at fair
value and subsequently measured at amortised cost using
the effective interest method.

(b) Provisions

Provisions for environmental restoration, restructuring
costs and legal claims 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 the amount has been
reliably estimated. Provisions are not recognised for future
operating losses.

Where there are a number of similar obligations, the likeli-
hood that an outflow will be required in settlement is deter-
mined by considering the class of obligations as a whole. A
provision is recognised even if the likelihood of an outflow
with respect to any one item included in the same class of
obligations may be small. Provisions are measured at the
present value of the expenditures expected to be required to
settle the obligation using a pre-tax rate that reflects current
market assessments of the time value of money and the risks
specific to the obligation. The increase in the provision due
to passage of time is recognised as interest expense.

Borrowings are recognised initially at fair value, net of tran-
saction costs incurred. Borrowings are subsequently stated
at amortised cost. Any difference between the proceeds
(net of transaction costs) and the redemption value is recog-
nised in profit or loss over the period of the borrowings,
using the effective interest method, unless they are directly
attributable to the acquisition, construction or production
of a qualifying asset, in which case they are capitalised as
part of the cost of that asset.

Fees paid on the establishment of loan facilities are recog-
nised as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down.
In this case, the fee is deferred until the draw-down occurs.
To the extent there is no evidence that it is probable that
some or all of the facility will be drawn down, the fee is
capitalised as a prepayment and amortised over the period
of the facility to which it relates.

Borrowing costs are interest and other costs that the Group
incurs in connection with the borrowing of funds, inclu-
ding interest on borrowings, amortisation of discounts or
premium relating to borrowings, amortisation of ancillary
costs incurred in connection with the arrangement of
borrowings, finance lease charges and exchange differences
arising from foreign currency borrowings to the extent that
they are regarded as an adjustment to interest costs.

Borrowing costs that are directly attributable to the acquisi-
tion, construction or production of a qualifying asset, being
an asset that necessarily takes a substantial period of time
to get ready for its intended use or sale, are capitalised as
part of the cost of that asset, when it is probable that they
will result in future economic benefits to the Group and the
costs can be measured reliably.

(d) Deferred consideration

Deferred consideration arises when settlement of all or any
part of the cost of an agreement is deferred. It is stated at
fair value at the date of recognition, which is determined by
discounting the amount due to present value at that date.
Interest is imputed on the fair value of non-interest bearing
deferred consideration at the discount rate and expensed
within interest pay able and similar charges. At each balance
sheet date deferred consideration comprises the remaining
deferred consideration valued at acquisition plus interest
imputed on such amounts from recognition to the balance
sheet date.

(e) Derivatives

Derivative financial instruments are initially accounted for
at cost and subsequently measured at fair value. Fair value

V. Financial Statements

Annual ReportAtalaya Mining Plcis calculated using the Black Scholes valuation method.
Derivatives are recorded as assets when their fair value is
positive and as liabilities when their fair value is negative.
The adjustments on the fair value of derivatives held at fair
value through profit or loss are transferred to profit or loss.

In the consolidated statement of cash flows, cash and cash
equivalents includes cash in hand and in bank net of outs-
tanding bank overdrafts and short-term deposits with an
original maturity of three months or less.

Sales of the Group’s copper are sold on a provisional basis
whereby sales are recognised at prevailing metal prices
when title transfers to the customer and final pricing is not
determined until a subsequent date. The Group uses deri-
vative financial instruments to reduce exposure to foreign
exchange, interest rate and commodity price movements.

The Group does not use such derivative instruments for
trading purposes. Such derivative financial instruments
are initially recognised at fair value on the date on which
a derivative contract is entered into and are subsequently
re-measured at fair value. Derivatives are carried as finan-
cial assets when the fair value is positive and as financial
liabilities when the fair value is negative. Any gains or
losses arising from changes in the fair value of derivatives
are taken directly to the statement of profit or loss and
other comprehensive income. Realised gains and losses
on commodity derivatives recognised in profit or loss are
recorded within revenue.

2.14 Current versus non-current classification

The Group presents assets and liabilities in statement
of financial position based on current/non-current
classification.

(a) An asset is current when it is either:

» Expected to be realised or intended to be sold or

consumed in normal operating cycle;

» Held primarily for the purpose of trading;

» Expected to be realised within 12 months after the repor-

ting period.

» Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12
months after the reporting period;

» All other assets are classified as non-current.

V. Financial Statements

(b) A liability is current when either:

» It is expected to be settled in the normal operating cycle;

» It is held primarily for the purpose of trading;

» It is due to be settled within 12 months after the repor-

ting period.

» There is no unconditional right to defer the settlement
of the liability for at least 12 months after the reporting
period.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-cu-
rrent assets and liabilities.

2.15 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount
reported in the statement of financial position when there is
a legally enforceable right to offset the recognised amounts
and there is an intention to settle on a net basis or realise
the asset and settle the liability simultaneously.

2.16 Impairment of financial assets

(a) Assets carried at amortised cost

The Group assesses at the end of each reporting period
whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or a
group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impair-
ment as a result of one or more events that occurred after
the initial recognition of the asset (a “loss event”) and that
loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets
that can be reliably estimated.

Evidence of impairment may include indications that the
debtors or a group of debtors are experiencing signifi-
cant financial difficulty, default or delinquency in inte-
rest or principal payments, the probability that they will
enter bankruptcy or other financial reorganisation, and
where observable data indicate that there is a measu-
rable decrease in the estimated future cash flows, such as
changes in arrears or economic conditions that correlate
with defaults.

For the loans and receivables category, the amount of the
loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future

Annual ReportAtalaya Mining Plccash flows (excluding future credit losses that have not
been incurred) discounted at the financial asset’s original
effective interest rate.

The carrying amount of the asset is reduced and the
amount of the loss is recognised in the consolidated income
statement. If a loan or held-to-maturity investment has a
variable interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate deter-
mined under the contract. As a practical expedient, the
Group may measure impairment on the basis of an instru-
ment’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised
(such as an improvement in the debtor’s credit rating), the
reversal of the previously recognised impairment loss is
recognised in the consolidated income statement.

(b) Assets classified as available-for-sale

The Group assesses at the end of each reporting period
whether there is objective evidence that a financial asset or
a group of financial assets is impaired. For debt securities,
the Group uses the criteria referred to in (a) above. In the
case of equity investments classified as available for sale,
a significant or prolonged decline in the fair value of the
security below its cost is also evidence that the assets are
impaired. If any such evidence exists for available-for-sale
financial assets, the cumulative loss – measured as the
difference between the acquisition cost and the current
fair value, less any impairment loss on that financial asset
previously recognised in profit or loss – is removed from
equity and recognised in profit or loss. Impairment losses
recognised in the consolidated income statement on equity
instruments are not subsequently reversed. If, in a subse-
quent period, the fair value of a debt instrument classified
as available for sale increases and the increase can be objec-
tively related to an event occurring after the impairment
loss was recognised in the income statement, the impair-
ment loss is reversed through the income statement.

2.17 Trade and other receivables

Trade receivables are amounts due from customers for
merchandise sold or services performed in the ordinary
course of business. If collection is expected in one year
or less (or in the normal operating cycle of the business if
longer), they are classified as current assets. If not, they are
presented as non-current assets.

Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost using
the effective interest method, less provision for impairment.

V. Financial Statements

At Company level, other receivables include intercompany
balances.

2.18 Cash and cash equivalents

In the consolidated statements of cash flows, cash and cash
equivalents includes cash in hand and in bank including
deposits held at call with banks.

2.19 Share capital

Ordinary shares are classified as equity. The difference
between the fair value of the consideration received by the
Company and the nominal value of the share capital being
issued is taken to the share premium account.

Incremental costs directly attributable to the issue of new
ordinary shares are shown in equity as a deduction, net of
tax, from the proceeds in the share premium account.

2.20 Current and deferred income tax

The tax expense for the period comprises current and defe-
rred tax. Tax is recognised in the income statement, except
to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the
tax is also recognised in other comprehensive income or
directly in equity, respectively.

The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end
of the reporting period date in the countries where the
Company and its subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken
in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in
the consolidated financial statements. However, deferred
tax liabilities are not recognised if they arise from the initial
recognition of goodwill; deferred income tax is also not
recognised if it arises from initial recognition of an asset
or liability in a transaction other than a business combi-
nation that at the time of the transaction affects neither
accounting nor taxable profit or loss. Income tax is deter-
mined using tax rates (and laws) that have been enacted or
substantively enacted by the end of the reporting period
date and are expected to apply when the related deferred
tax asset is realised or the deferred income tax liability

Annual ReportAtalaya Mining Plcis settled. Deferred tax assets are recognised only to the
extent that it is probable that future taxable profit will be
available against which the temporary differences can be
utilised.

Deferred income tax is provided on temporary differences
arising on investments in subsidiaries and associates, except
for deferred income tax liabilities where the timing of the
reversal of the temporary difference is controlled by the
Group and it is probable that the temporary difference will
not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax
assets and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable entity
or different taxable entities where there is an intention to
settle the balances on a net basis.

2.21 Share-based payments

The Group operates a share-based compensation plan,
under which the entity receives services from employees
as consideration for equity instruments (options) of the
Group. The fair value of the employee services received in
exchange for the grant of the options is recognised as an
expense. The fair value is measured using the Black Scholes
pricing model. The inputs used in the model are based on
management’s best estimates for the effects of non-trans-
ferability, exercise restrictions and behavioural considera-
tions. Non-market performance and service conditions are
included in assumptions about the number of options that
are expected to vest.

Vesting conditions are: (i) the personnel should be an
employee that provides services to the Group; and (ii)
should be in continuous employment for the whole vesting
period of 3 years. Specific arrangements may exist with
senior managers and board members, whereby their
options stay in use until the end.

The total expense is recognised over the vesting period,
which is the period over which all of the specified vesting
conditions are to be satisfied (Note 23).

of affected areas. The obligation generally
arises when the asset is installed or the
ground/environment is disturbed at
the production location. When
the liability is initially recog-
nised, the present value of
the estimated cost is capi-
talised by increasing the
carrying amount of the
related mining assets to
the extent that it was
incurred prior to the
production of related
ore. Over time, the
discounted liability
is increased for the
change in present value
based on the discount
rates that reflect current
market assessments and
the risks specific to the liabi-
lity. The periodic unwinding of
the discount is recognised in the
consolidated income statement as a
finance cost. Additional disturbances or
changes in rehabilitation costs will be recog-
nised as additions or charges to the corresponding
assets and rehabilitation liability when they occur. For closed
sites, changes to estimated costs are recognised immediately
in the consolidated income statement.

The Group assesses its mine rehabilitation provision
annually. Significant estimates and assumptions are made in
determining the provision for mine rehabilitation as there
are numerous factors that will affect the ultimate liability
payable. These factors include estimates of the extent and
costs of rehabilitation activities, technological changes,
regulatory changes and changes in discount rates. Those
uncertainties may result in future actual expenditure diffe-
ring from the amounts currently provided. The provision at
the consolidated statement of financial position date repre-
sents management’s best estimate of the present value of
the future rehabilitation costs required.

2.23 Leases

2.22 Rehabilitation provisions

The Group records the present value of estimated costs of
legal and constructive obligations required to restore opera-
ting locations in the period in which the obligation is incurred.
The nature of these restoration activities includes dismantling
and removing structures, rehabilitating mines and tailings
dams, dismantling operating facilities, closure of plant and
waste sites and restoration, reclamation and re-vegetation

Leases in which a significant portion of the risks and
rewards of ownership are retained by the lessor are classi-
fied as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) are
charged to the income statement on a straight-line basis
over the period of the lease.

The Group leases certain property, plant and equipment.
Leases of property, plant and equipment where the Group

V. Financial Statements

Annual ReportAtalaya Mining Plc2.25 Interest income

Interest income is recognised using the effective interest
method. When a loan and receivable is impaired, the Group
reduces the carrying amount to its recoverable amount,
being the estimated future cash flow discounted at the
original effective interest rate of the instrument, and conti-
nues unwinding the discount as interest income. Interest
income on impaired loan and receivables is recognised using
the original effective interest rate.

2.26 Dividend income

Dividend income is recognised when the right to receive
payment is established.

2.27 Dividend distribution

Dividend distributions to the Company’s shareholders are
recognised as a liability in the Group’s financial statements
in the period in which the dividends are approved by the
Company’s shareholders. No dividend has been paid by the
Company since its incorporation.

2.28 Earnings per share

Basic earnings per share is calculated by dividing the net
profit for the year by the weighted average number of
ordinary shares outstanding during the year. The basic and
diluted earnings per share are the same as there are no
instruments that have a dilutive effect on earnings.

2.29 Reclassification from prior year
presentation

Certain prior year amounts have been reclassified for
consistency with the financial statements for the year ended
31 December 2016.These reclassifications had no effect on
the reported results of the operation.

2.30 Amendment of financial statements after
issue

The board of directors has the power to amend the consoli-
dated financial statements after issue.

has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at
the lease’s commencement at the lower of the fair value of
the leased property and the present value of the minimum
lease payments.

Each lease payment is allocated between the liability and
finance charges. The corresponding rental obligations, net
of finance charges, are included in other long term payables.
The interest element of the finance cost is charged to the
income statement over the lease period so as to produce a
constant periodic rate of interest on the remaining balance
of the liability for each period. The property, plant and equi-
pment acquired under finance leases are depreciated over
the shorter of the useful life of the asset and the lease term.

2.24 Revenue recognition

(a) Sales of goods

Revenue is recognised when Atalaya has transferred to the
buyer all significant risks and rewards of ownership of the
goods sold. Revenue excludes any applicable sales taxes and
is recognised at the fair value of the consideration received
or receivable to the extent that it is probable that economic
benefits will flow to Atalaya and the revenues and costs can
be reliably measured. In most instances sales revenue is
recognised when the product is delivered to the destination
specified by the customer, which is typically the vessel on
which it is shipped, the destination port or the customer’s
premises.

For certain commodities, the sales price is determined on a
provisional basis at the date of sale as the final selling price
is subject to movements in market prices up to the date of
final pricing, normally ranging from 30 to 90 days after initial
booking. Revenue on provisionally priced sales is recognised
based on the estimated fair value of the total consideration
receivable. The revenue adjustment mechanism embedded
within provisionally priced sales arrangements has the
character of a commodity derivative. Accordingly, the fair
value of the final sales price adjustment is re-estimated
continuously and changes in fair value are recognised as an
adjustment to revenue.

Pre-commissioning sales are offset against the cost of cons-
tructing the asset.

(b) Sales of services

The Group sells services in relation to maintenance of
accounting records, management, technical, administrative
support and other services to other companies. Revenue is
recognised in the accounting period in which the services
are rendered.

V. Financial Statements

Annual ReportAtalaya Mining Plcfinancial risks, in close co-operation with the Group’s opera-
ting units. The Group is exposed to liquidity risk, currency
risk, commodity price risk, credit risk, interest rate risk,
operational risk, compliance risk and litigation risk arising
from the financial instruments it holds. The risk manage-
ment policies employed by the Group to manage these risks
are discussed below:

(a) Liquidity risk

Liquidity risk is the risk that arises when the maturity of
assets and liabilities does not match. An unmatched position
potentially enhances profitability, but can also increase the
risk of losses. The Group has procedures with the object
of minimising such losses such as maintaining sufficient
cash to meet liabilities when due. Cash flow forecasting is
performed in the operating entities of the Group and aggre-
gated by Group finance. Group finance monitors rolling
forecasts of the Group’s liquidity requirements to ensure it
has sufficient cash to meet operational needs.

The following tables detail the Group’s remaining contrac-
tual maturity for its financial liabilities. The tables have been
drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group can
be required to pay. The table includes principal cash flows.

3. Financial Risk Management

3.1 Financial risk factors

Risk management is overseen by the AFRC under the board
of directors. The AFRC oversees the risk management poli-
cies employed by the Group to identify, evaluate and hedge

g
n
y
r
r
a
C

s
t
n
u
o
m
a

5,727

52,983

67,983

l
a
u
t
c
a
r
t
n
o
C

s
w
o
fl
h
s
a
c

5,727

52,983

67,983

126,767

1,741

905

5,092

1,741

905

6,577

52,983

215

60,061

120,997

n
a
h
t
s
s
e
L

s
h
t
n
o
m
3

67,983

67,993

578

760

215

60,061

61,614

s
h
t
n
o
m
2
1
-
3

n
e
e
w
t
e
B

228

n
e
e
w
t
e
B

s
r
a
e
y
2
-

373

s
r
a
e
y
5
–
2

n
e
e
w
t
e
B

165

35,220

17,763

s
r
a
e
y
5

r
e
v
O

4,961

260

35,625

17,928

4,961

1,163

170

209

52,983

6,144

1,247

253

53,224

6,144

(Euro 000’s)

31 December 2017

Land options and mortgages

Provisions

Deferred consideration

Trade and other payables

31 December 2016

Social security

Land options and mortgages

Provisions

Deferred consideration

Derivative instrument

Trade and other payables

V. Financial Statements

Annual ReportAtalaya Mining Plc

(b) Currency risk

Currency risk is the risk that the value of financial instruments
will fluctuate due to changes in foreign exchange rates.

Currency risk arises when future commercial transactions
and recognised assets and liabilities are denominated in a
currency that is not the Group’s measurement currency. The
Group is exposed to foreign exchange risk arising from various
currency exposures primarily with respect to the US Dollar
and the British Pound. The Group’s management monitors
the exchange rate fluctuations on a continuous basis and
acts accordingly. The carrying amounts of the Group’s foreign
currency denominated monetary assets and monetary liabili-
ties at the end of the reporting period are as follows:

(Euro 000’s)

Liabilities

Assets

2017

2016

2017

2016

United States dollar

1,554

8,684

21,660

2,143

Great Britain pound

Australian dollar

South African rand

139

416

172

34,346

233

Sensitivity analysis

A 10% strengthening of the Euro against the following
currencies at 31 December 2017 would have increased
(decreased) equity and profit or loss by the amounts shown
below. This analysis assumes that all other variables, in parti-
cular interest rates, remain constant. For a 10% weakening
of the Euro against the relevant currency, there would be an
equal and opposite impact on profit or loss and other equity.

(Euro 000’s)

United States dollar

Great Britain pound

Australian dollar

South African rand

Equity

(Profit) or loss

2017

2016

2017

2016

2,011

3,421

654

2,011

3,421

Commodity price is the risk that the Group’s future earnings
will be adversely impacted by changes in the market prices
of commodities, primarily copper. Management is aware of
this impact on its primary revenue stream but knows that
there is little it can do to influence the price earned apart
from a hedging scheme.

decide to hedged part of its production during the year
(Note 28).

(d) Credit risk

Credit risk arises when a failure by counterparties to discharge
their obligations could reduce the amount of future cash
inflows from financial assets on hand at the reporting date.
The Group has no significant concentration of credit risk. The
Group has policies in place to ensure that sales of products
and services are made to customers with an appropriate
credit history and monitors on a continuous basis the ageing
profile of its receivables. The Group has policies to limit the
amount of credit exposure to any financial institution.

Except as detailed in the following table, the carrying
amount of financial assets recorded in the financial state-
ments, which is net of impairment losses, represents the
maximum credit exposure without taking account of the
value of any collateral obtained:

(Euro 000’s)

Unrestricted cash and cash equivalent at
Group

Unrestricted cash and cash equivalent at
operating entity

Restricted cash at the operating entity

2017

2016

39,179

460

3,427

250

425

250

Cash and cash equivalents

42,856

1,135

Restricted cash held as of 31 December 2017 is a collateral
of a bank guarantee provided to a contractor.

Other than the above, there are no collaterals held in
respect of these financial instruments and there are no
financial assets that are past due or impaired as at 31
December 2017.

Interest rate risk is the risk that the value of financial instru-
ments will fluctuate due to changes in market interest rates.
Borrowings issued at variable rates expose the Group to
cash flow interest rate risk. Borrowings issued at fixed rates
expose the Group to fair value interest rate risk. The Group’s
management monitors the interest rate fluctuations on a
continuous basis and acts accordingly.

At the reporting date the interest rate profile of interest
bearing financial instruments was:

(Euro 000’s)

2017

2016

654

(e) Interest rate risk

Commodity price hedging is governed by the Group´s policy
which allows to limit the exposure to prices. The Group may

Variable rate instruments

Financial assets

42,856

1,135

V. Financial Statements

Annual ReportAtalaya Mining PlcAn increase of 100 basis points in interest rates at 31
December 2017 would have increased / (decreased) equity
and profit or loss by the amounts shown below. This analysis
assumes that all other variables, in particular foreign
currency rates, remain constant. For a decrease of 100 basis
points there would be an equal and opposite impact on the
profit and other equity.

Equity

Profit or loss

2017

2016

2017

2016

429

(Euro 000’s)

Variable rate
instruments

(f) Operational risk

Operational risk is the risk that derives from the deficiencies
relating to the Group’s information technology and control
systems as well as the risk of human error and natural disas-
ters. The Group’s systems are evaluated, maintained and
upgraded continuously.

(g) Compliance risk

Compliance risk is the risk of financial loss, including fines
and other penalties, which arises from non compliance
with laws and regulations. The Group has systems in place
to mitigate this risk, including seeking advice from external
legal and regulatory advisors in each jurisdiction.

(h) Litigation risk

Litigation risk is the risk of financial loss, interruption of the
Group’s operations or any other undesirable situation that
arises from the possibility of non execution or violation of
legal contracts and consequentially of lawsuits. The risk
is restricted through the contracts used by the Group to
execute its operations.

3.2 Capital risk management

The Group considers its capital structure to consist of share
capital, share premium and share options reserve. The
Group’s objectives when managing capital are to safeguard
the Group’s ability to continue as a going concern in order
to provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to
reduce the cost of capital. The Group is not subject to any
externally imposed capital requirements.

In order to maintain or adjust the capital structure, the
Group issues new shares. The Group manages its capital to
ensure that it will be able to continue as a going concern

V. Financial Statements

while maximizing the return to shareholders through the
optimisation of the debt and equity balance. The AFRC
reviews the capital structure on a continuing basis.

The Group’s objectives when managing capital are to safe-
guard the Group’s ability to continue as a going concern and
to maintain an optimal capital structure so as to maximise
shareholder value. In order to maintain or achieve an
optimal capital structure, the Group may adjust the amount
of dividend payment, return capital to shareholders, issue
new shares, buy back issued shares, obtain new borrowings
or sell assets to reduce borrowings.

The Group monitors capital on the basis of the gearing ratio.
The gearing ratio is calculated as net debt divided by total
capital. Net debt is calculated as provisions plus deferred
consideration plus trade and other payables less cash and
cash equivalents.

(Euro 000’s)

Net debt

Total equity

Total capital

Gearing ratio

2017

2016

84,663

119,878

246,853

190,221

331,516

310,099

25.5%

38.7%

The decrease in the gearing ratio during 2017 was mainly
due to the capital increase executed in December 2017.

Net debt includes non-current and current all liabilities net
of cash and cash equivalent.

3.3 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 and available for sale finan-
cial 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 techni-
ques. The Group uses a variety of methods, such as esti-
mated discounted cash flows, and makes assumptions that
are based on market conditions existing at the reporting
date.

Annual ReportAtalaya Mining PlcFair value measurements recognised in the consolidated
statement of financial position

The following table provides an analysis of financial instru-
ments 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).

(Euro 000’s)

31 December 2017

Financial assets

Available for sale financial assets

Total

31 December 2016

Financial assets

Available for sale financial assets

Total

Level 1

Level 2

Level 3

Total

129

261

129

261

3.4 Critical accounting estimates and
judgements

The preparation of the financial statements requires mana-
gement 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 assump-
tions are continually evaluated and are based on manage-
ment’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 mate-
rial adjustment to the carrying amount of assets or liabilities
affected in future periods.

In particular, the Group has identified a number of areas
where significant judgements, estimates and assumptions
are required.

(a) Capitalisation of exploration and evaluation costs

Under the Group’s accounting policy, exploration and
evaluation expenditure is not capitalised until the point is
reached at which there is a high degree of confidence in the
project’s viability and it is considered probable that future
economic benefits will flow to the Group. Subsequent reco-
very of the resulting carrying value depends on successful
development or sale of the undeveloped project. If a project
does not prove viable, all irrecoverable costs associated with
the project net of any related impairment provisions are
written off.

V. Financial Statements

Annual ReportAtalaya Mining Plcimprovements or mineable reserve development. It is also
at this point that depreciation/amortisation commences.

The Group incurs waste removal costs (stripping costs)
during the development and production phases of its
surface mining operations. Furthermore, during the produc-
tion phase, stripping costs are incurred in the production
of inventory as well as in the creation of future benefits by
improving access and mining flexibility in respect of the
orebodies to be mined, the latter being referred to as a
stripping activity asset. Judgement is required to distinguish
between the development and production activities at
surface mining operations.

The Group is required to identify the separately identifiable
components or phases of the orebodies for each of its
surface mining operations. Judgement is required to identify
and define these components, and also to determine the
expected volumes (tonnes) of waste to be stripped and ore
to be mined in each of these components. These assess-
ments may vary between mines because the assessments
are undertaken for each individual mine and are based on
a combination of information available in the mine plans,
specific characteristics of the orebody, the milestones rela-
ting to major capital investment decisions and the type and
grade of minerals being mined.

Judgement is also required to identify a suitable production
measure that can be applied in the calculation and alloca-
tion of production stripping costs between inventory and
the stripping activity asset. The Group considers the ratio
of expected volume of waste to be stripped for an expected
volume of ore to be mined for a specific component of the
orebody, compared to the current period ratio of actual
volume of waste to the volume of ore to be the most
suitable measure of production.

These judgements and estimates are used to calculate and
allocate the production stripping costs to inventory and/
or the stripping activity asset(s). Furthermore, judgements
and estimates are also used to apply the units of production
method in determining the depreciable lives of the stripping
activity asset(s).

(d) Ore reserve and mineral resource estimates

The Group estimates its ore reserves and mineral resources
based on information compiled by appropriately qualified
persons relating to the geological and technical data on the
size, depth, shape and grade of the ore body and suitable
production techniques and recovery rates.

(b) Production start date

The Group assesses the stage of each mine under deve-
lopment/construction to determine when a mine moves
into the production phase, this being when the mine is
substantially complete and ready for its intended use. The
criteria used to assess the start date are determined based
on the unique nature of each mine development/construc-
tion project, such as the complexity of the project and its
location. The Group considers various relevant criteria to
assess when the production phase is considered to have
commenced. At this point, all related amounts are reclas-
sified from “Mines under construction” to “Property, plant
and equipment”. Some of the criteria used to identify the
production start date include, but are not limited to:

» Level of capital expenditure incurred compared with the

original construction cost estimate;

» Completion of a reasonable period of testing of the mine

plant and equipment;

» Ability to produce metal in saleable form (within specifi-

cations); and

» Ability to sustain ongoing production of metal.

When a mine development project moves into the produc-
tion phase, the capitalisation of certain mine development
costs ceases and costs are either regarded as forming part
of the cost of inventory or expensed, except for costs that
qualify for capitalisation relating to mining asset additions or

V. Financial Statements

Annual ReportAtalaya Mining PlcSuch an analysis requires complex geological judgements to
interpret the data. The estimation of recoverable reserves
is based upon factors such as estimates of foreign exchange
rates, commodity prices, future capital requirements and
production costs, along with geological assumptions and
judgements made in estimating the size and grade of the
ore body.

The Group uses qualified persons (as defined by the Cana-
dian Securities Administrators’ National Instrument 43-101)
to compile this data. Changes in the judgments surrounding
proven and probable reserves may impact as follows:

» The carrying value of exploration and evaluation assets,
mine properties, property, plant and equipment, and
goodwill may be affected due to changes in estimated
future cash flows;

» Depreciation and amortisation charges in the statement
of profit or loss and other comprehensive income may
change where such charges are determined using the
UOP method, or where the useful life of the related
assets change;

» Capitalised stripping costs recognised in the statement
of financial position as either part of mine properties or
inventory or charged to profit or loss may change due to
changes in stripping ratios;

» Provisions for rehabilitation and environmental provi-

sions may change where reserve estimate changes affect
expectations about when such activities will occur and
the associated cost of these activities;

» The recognition and carrying value of

deferred income tax assets may
change due to changes in the judge-
ments regarding the existence
of such assets and in estimates
of the likely recovery of such
assets.

(e) Impairment of assets

Events or changes in circum-
stances can give rise to significant
impairment charges or impairment
reversals in a particular year. The
Group assesses each Cash Genera-
ting Unit (“CGU”) annually to determine
whether any indications of impairment exist. If it
was necessary management could contract independent
expert to value the assets. Where an indicator of impair-
ment exists, a formal estimate of the recoverable amount
is made, which is considered the higher of the fair value
less cost to sell and value-in-use. An impairment loss is

V. Financial Statements

recognised immediately in net earnings. The Group has
determined that each mine location is a CGU.

These assessments require the use of estimates and
assumptions such as commodity prices, discount rates,
future capital requirements, exploration potential and
operating performance. Fair value is determined as the
price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date. Fair value for mineral
assets is generally determined as the present value of
estimated future cash flows arising from the continued use
of the asset, which includes estimates such as the cost of
future expansion plans and eventual disposal, using assump-
tions that an independent market participant may take
into account. Cash flows are discounted at an appropriate
discount rate to determine the net present value. For the
purpose of calculating the impairment of any asset, mana-
gement regards an individual mine or works site as a CGU.

Although management has made its best estimate of these
factors, it is possible that changes could occur in the near
term that could adversely affect management’s estimate of
the net cash flow to be generated from its projects.

(f) Provisions for decommissioning and site restoration
costs

Accounting for restoration provisions requires management
to make estimates of the future costs the Group will incur
to complete the restoration and remediation work required
to comply with existing laws, regulations and agreements
in place at each mining operation and any envi-
ronmental and social principles the Group
is in compliance with. The calculation
of the present value of these costs
also includes assumptions regar-
ding the timing of restoration
and remediation work, appli-
cable risk-free interest rate for
discounting those future cash
outflows, inflation and foreign
exchange rates and assump-
tions relating to probabilities of
alternative estimates of future

cash outflows.

Management uses its judgement and

experience to provide for and (in the

case of capitalised decommissioning costs)
amortise these estimated costs over the life of the
mine. The ultimate cost of decommissioning and timing
is uncertain and cost estimates can vary in response to
many factors including changes to relevant environmental
laws and regulations requirements, the emergence of new

Annual ReportAtalaya Mining Plcrestoration techniques or experience at other mine sites. As
a result, there could be significant adjustments to the provi-
sions established which would affect future financial results.

(g) Income tax

Significant judgment is required in determining the provision
for income taxes. There are transactions and calculations
for which the ultimate tax determination is uncertain during
the ordinary course of business. The Group and Company
recognise liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where
the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will
impact the income tax and deferred tax provisions in the
period in which such determination is made.

Judgement is also required to determine whether deferred
tax assets are recognised in the consolidated statements
of financial position. Deferred tax assets, including those
arising from unutilised tax losses, require the Group to
assess the probability that the Group will generate sufficient
taxable earnings in future periods, in order to utilise recog-
nised deferred tax assets.

Assumptions about the generation of future taxable profits
depend on management’s estimates of future cash flows.
These estimates of future taxable income are based on
forecast cash flows from operations (which are impacted by
production and sales volumes, commodity prices, reserves,
operating costs, closure and rehabilitation costs, capital
expenditure, dividends and other capital management
transactions). To the extent that future cash flows and
taxable income differ significantly from estimates, the ability
of the Group to realise the net deferred tax assets could be
impacted.

occurrence or non-occurrence of one or more uncertain
events outside of the control of the Group, or a present obli-
gation exists but is not recognised because it is not probable
that an outflow of resources will be required to settle the
obligation.

A provision is made when a loss to the Group is likely to
crystallise. The assessment of the existence of a contingency
and its likely outcome, particularly if it is considered that a
provision might be necessary, involves significant judgment
taking all relevant factors into account.

(j) Deferred consideration

As disclosed in Note 27, the Group has recorded a deferred
consideration liability in relation to the obligation to pay
Astor up to €53.0 million out of excess cash from operations
at Proyecto Riontinto.

In addition, future changes in tax laws in the jurisdictions
in which the Group operates could limit the ability of the
Group to obtain tax deductions in future periods.

The actual timing of any payments to Astor of the conside-
ration involves significant judgment as it depends on certain
factors which are out of control of management.

(h) Inventory

(k) Share-based compensation benefits

Net realisable value tests are performed at each reporting
date and represent the estimated future sales price of the
product the entity expects to realise when the product
is processed and sold, less estimated costs to complete
production and bring the product to sale. Where the time
value of money is material, these future prices and costs to
complete are discounted.

(i) Contingent liabilities

A contingent liability arises where a past event has taken
place for which the outcome will be confirmed only by the

Share based compensation benefits are accounted for in
accordance with the fair value recognition provisions of IFRS
2 “Share-based Payment”. As such, share-based compen-
sation expense for equity-settled share-based payments is
measured at the grant date based on the fair value of the
award and is recognised as an expense over the vesting
period. The fair value of such share-based awards at the
grant date is measured using the Black Scholes pricing
model. The inputs used in the model are based on mana-
gement’s best estimates for the effects of non-transfera-
bility, exercise restrictions, behavioural considerations and
expected volatility.

V. Financial Statements

Annual ReportAtalaya Mining Plc4. 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
offtakers as per the relevant offtake agreement (Note 31.2)

Geographical segments

The Group’s mining activities are located in Spain. The
commercialisation of the copper concentrates produced in
Spain is carried out in Cyprus. Corporate costs and admi-
nistration costs are based in Cyprus. Intercompany transac-
tions within the Group are on arm’s length basis in a manner
similar to transaction with third parties. Accounting policies
used by the Group in different locations are the same as
those contained in Note 2.

Spain

Other

(Euro 000’s)

2017

Sales

Earnings/(loss)before Interest,Tax,Depreciation and Amortisation

Depreciation/amortisation charge

Net foreign exchange loss

Finance income

Finance cost

Cyprus

160,537

151,331

(7)

(1,510)

(366)

(109,957)

(16,664)

(701)

(213)

(Loss)/profit before tax before share of loss of associate

149,448

(127,513)

Tax

Profit for the year

Total assets

Total liabilities

Depreciation of property, plant and equipment

Amortisation of intangible assets

Total additions of non-current assets

53,034

321,136

(11,836)

(115,624)

12,533

4,131

26,079

(27)

(1)

(28)

202

(59)

(Euro 000’s)

2016

Sales

Earnings/(loss)before Interest,Tax,Depreciation and Amortisation

Depreciation/amortisation charge restated (*)

Impairment of land options not exercised

Net foreign exchange gain/(loss)

Finance income

Finance costs restated (*)

(Loss)/profit before tax and share of loss of associate

Cyprus

Spain

Other

98,768

94,318

(14)

377

(142)

94,540

(78,917)

(11,743)

(903)

(1,041)

(448)

(9)

(1)

(93,011)

(10)

Share of loss of associate

Tax

Profit for the year restated (*)

Total assets

Total liabilities

Depreciation of property, plant and equipment

Amortisation of intangible assets restated (*)

Total additions of non-current assets

(*) Refer to Note 2.1. (c)

V. Financial Statements

18,687

292,850

(19,484)

(101,501)

8,629

3,114

87,402

(28)

Total

160,537

41,347

(16,671)

(2,212)

(579)

21,907

(3,696)

18,211

374,372

(127,519)

12,540

4,131

26,079

Total

98,768

15,393

(11,757)

(903)

(665)

(590)

1,519

(10)

12,187

13,696

311,541

(121,013)

8,643

3,114

87,404

Annual ReportAtalaya Mining Plc5. Other income

THE GROUP

(Euro 000’s)

Other income

Gain on disposal of associate

Loss on available-for-sale
investments

Gain on sale of property,
plant and equipment

Sales of services

2017

(49)

2016

235

292

THE COMPANY

(Euro 000’s)

Loss on available-for-sale
investments

Gain on disposal of associate

Gain on sale of property,
plant and equipment

Sales of services

2017

2016

(49)

6. Expenses by nature

THE GROUP

(Euro 000’s)

Operating costs

Impairment charge on land options not exercised

Employee benefit expense (Note 7)

Compensation of key management personnel (Note 31.1)

Auditors’ remuneration – audit

› prior year audit

› other

Other accountants’ remuneration

Consultants’ remuneration

Depreciation of property, plant and equipment (Note 12)

Amortisation of intangible assets (Note 13)

Travel costs

Share option-based employee benefits

Shareholders’ communication expense

On-going listing costs

Legal costs

Royalties

Provision for impairment

Other expenses

2017

2016 restated (*)

97,786

15,420

2,804

180

157

12,540

4,131

298

288

157

413

500

283

782

64,223

903

13,542

2,375

204

698

8,643

3,114

101

264

163

981

997

96,327

Total cost of operation, corporate, share based benefits, exploration and impairment

135,866

V. Financial Statements

Atalaya Mining Plc

Annual Report

THE COMPANY

(Euro 000’s)

Employee benefit expense (Note 7)

Key management remuneration (Note 31.1)

Auditors’ remuneration – audit

› prior year audit

Other accountants’ remuneration

Consultants’ remuneration

Depreciation of property, plant and equipment (Note 12)

Travel costs

Share option-based employee benefits

Shareholders’ communication expense

On-going listing costs

Legal costs

Provision for impairment

Other expenses

2017

180

1,854

104

288

157

410

583

268

2016

289

1,309

145

103

264

164

965

347

Total cost of corporate, share based benefits and impairment

4,042

3,771

V. Financial Statements
V. Financial Statements

88
88

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining Plc7. Employee benefit expense

THE GROUP

(Euro 000’s)

Wages and salaries

Social security and social contributions

Employees’ other allowances

Bonus to employees

2017

11,101

3,250

1,038

15,420

2016

10,154

2,890

476

13,542

The average number of employees and the number of employees at year end by office are:

Number of employees

2017

2016

2017

2016

Average

At year end

Spain – Full time

Spain – Part time

Cyprus – Full time

Total

THE COMPANY

(Euro 000’s)

Wages and salaries

Social security and social contributions

339

307

363

325

348

318

373

329

2017

164

180

2016

264

289

The average number of employees and the number of employees at year end by office are:

Number of employees

2017

2016

2017

2016

Average

At year end

Cyprus – Full time

Total

V. Financial Statements

Atalaya Mining Plc

Annual Report

8. Finance income

THE GROUP

(Euro 000’s)

Interest income

THE COMPANY

2017

2016

(Euro 000’s)

Finance income from interest-
bearing intercompany loan

2017

1,635

2016

1,523

1,635

1,523

Interest income relates to interest received on bank balances.

9. Finance costs

THE GROUP

(Euro 000’s)

Interest expense:

› Debt to department of social security (Note 25) and other interest

›

Interest on copper concentrate prepayment (1)

› Unwinding of discount on mine rehabilitation provision (Note 26)

›

Interest paid on early payment on receivable from trading

Hedging income (Note 28.1)

Net foreign exchange hedging expense (Note 28.1)

(1) Interest rate US$ 3 months LIBOR + 2.75%

2017

2016

306

109

113

256

(205)

579

252

143

195

590

V. Financial Statements
V. Financial Statements

90
90

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining Plc10. Tax

THE GROUP

(Euro 000’s)

Income tax

(Over)/under provision previous years

Deferred tax asset due to losses available against future taxable income (Note 17)

Deferred tax asset due to losses available against future taxable income overprovision previous years (Note 17)

Deferred tax related to utilization of losses for the year (Note 17)

Deferred tax income relating to the origination of temporary differences (Note 17)

Deferred tax expense relating to reversal of temporary differences (Note 17)

2017

1,622

1,459

345

2016

(7)

(8,276)

475

(4,593)

262

198

3,696

(12,187)

The tax on the Group’s results before tax differs from the theoretical amount that would arise using the applicable tax rates
as follows:

(Euro 000’s)

Profit before tax

Tax calculated at the applicable tax rates

Tax effect of expenses not deductible for tax purposes

Tax effect of tax loss for the year

Tax effect of allowances and income not subject to tax

Over provision for prior year taxes

Tax effect of tax losses brought forward

Deferred tax (Note 17)

Tax (credit)/charge

THE COMPANY

(Euro 000’s)

Income tax

(Over)/under provision previous years

2017

21,907

4,739

1,449

(4,212)

(363)

2,066

3,696

2016

1,509

(18)

318

(191)

(7)

(124)

(12,196)

(12,187)

2017

2016

The tax on the Group’s results before tax differs from the theoretical amount that would arise using the applicable tax rates
as follows:

(Euro 000’s)

Loss before tax

Tax calculated at the applicable tax rates

Tax effect of expenses not deductible for tax purposes

Tax effect of tax loss for the year

Tax effect of allowances and income not subject to tax

Tax effect of group tax relief

Tax (credit)/charge

V. Financial Statements

2017

(1,127)

(141)

140

(39)

2016

95,059

11,882

199

(12,146)

Annual ReportAtalaya Mining Plcsustained in the year and previous years, no tax liability
arises on the Company. Under current legislation, tax losses
may be carried forward and be set off against taxable
income of the five succeeding years.

Companies which do not distribute 70% of their profits after
tax, as defined by the relevant tax law, within two years
after the end of the relevant tax year, will be deemed to
have distributed as dividends 70% of these profits. Special
contribution for defence at 20% for the tax years 2012 and
2013 and 17% for 2014 and thereafter will be payable on
such deemed dividends to the extent that the shareholders
(companies and individuals) are Cyprus tax residents. The
amount of deemed distribution is reduced by any actual
dividends paid out of the profits of the relevant year at any
time. This special contribution for defence is payable by the
Company for the account of the shareholders.

Spain

The corporation tax rate for 2017 and 2016 is 25%. The
recent Spanish tax reform approved in 2014 reduces the
general corporation tax rate from 30% to 28% in 2015 and
to 25% in 2016, and introduces, among other changes, a
10% reduction in the tax base subject to equity increase
and other requirements. Due to tax losses sustained in
the current and previous years, no tax liability arises in the
subsidiaries in Spain. Under current legislation, tax losses
may be carried forward and be set off against taxable
income with no limitation.

TAX
LOSSES
CARRIED
FORWARD

(Euro 000’s)

Tax year

Cyprus

Spain

5,167

4,100

4,051

1,584

3,794

3,498

5,642

6,576

1,967

2,381

3,509

640

Total

3,794

3,498

5,642

6,576

1,967

7,548

7,609

4,691

1,584

14,902

28,007

42,909

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Cyprus

The corporation tax rate is 12.5%. Under certain conditions
interest income may be subject to defence contribution at
the rate of 30%. In such cases this interest will be exempt
from corporation tax. In certain cases, dividends received
from abroad may be subject to defence contribution at
the rate of 17% for 2014 and thereafter. Due to tax losses

11. Earnings per share

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

(Euro 000’s)

Parent company

Subsidiaries

Profit attributable to equity holders of the parent

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

Basic profit per share (cents)

(3,477)

21,716

18,239

117,904

15.5

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

119,485

Fully diluted profit per share (cents)

15.3

(3,798)

17,494

13,696

116,680

11.7

117,545

11.7

2017

2016 restated (*)

(*) Refer to Note 2.1. (c)

There are 262,569 warrants (Note 22) and 1,400,000 options (Note 23) (2016: 365,354 warrants and 500,000 options) which have been
included when calculating the weighted average number of shares for 2017.

V. Financial Statements

Annual ReportAtalaya Mining Plc12. Property, plant and equipment

THE GROUP

(Euro 000’s)

2017

Cost

At 1 January 2017

Additions

Reclassifications

Disposals

d
n
a
d
n
a
L

s
g
n
d

l
i

u
b

t
n
e
m
p
u
q
e

d
n
a
t
n
a
l

40,188

144,930

407(1)

400

472

At 31 December 2017

40,995

145,402

Depreciation

At 1 January 2017

Charge for the year

Disposals

1,736

2,340

5,073

8,392

At 31 December 2017

4,076

13,465

Net book value at 31 December 2017

36,919

131,937

2016

Cost

At 1 January 2016

Additions

Reclassifications

Reclassifications - intangibles

Disposals

Written off

39,061

1,121(1)

23,046

15,983

104,287

1,614

At 31 December 2016

40,188

144,930

Depreciation

At 1 January 2016

Charge for the year

Reclassifications

Reclassifications - intangibles

Disposals

Impairment

Written off

1,736

4,932

141

At 31 December 2016

1,736

5,073

Net book value at 31 December 2016

38,452

139,857

)
4
(
n
o
i
t
c
u
r
t
s
n
o
c

r
e
d
n
u
s
t
e
s
s
A

d
e
r
r
e
f
e
D

)
3
(
s
t
s
o
c
g
n
n
m

)
2
(
s
t
e
s
s
a
r
e
h
t

l
a
t
o
T

566

13,848

838

200,370

s
t
h
g
i
r

l
a
r
e
n
M

(50)

(900)

900

(900)

950

94,525

10,334

13,848

11,751

(872)

8,469

11,445

22,317

1,758

1,711

3,469

11,445

18,848

(93,959)

(10,334)

566

13,848

1,758

566

12,090

(53)

785

423

(44)

476

309

20,627

(53)

220,944

8,990

12,540

(44)

21,486

199,458

1,026

168,942

164

(247)

(37)

(68)

838

518

217

(141)

(81)

(25)

(68)

423

415

31,116

1,317

(37)

(968)

200,370

518

8,643

(81)

(25)

903

(968)

8,990

191,380

(1) Mine rehabilitation asset (Note 26).

(3) Stripping costs

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

(4) Net of pre-commissioning sales

The above fixed assets are located mainly in Spain.

V. Financial Statements

Annual ReportAtalaya Mining Plc

THE COMPANY

(Euro 000’s)

2017

Cost

At 1 January 2017

Disposals

At 31 December 2017

Depreciation

At 1 January 2017

Charge for the year

Disposals

At 31 December 2017

Net book value at 31 December 2017

2016

Cost

At 1 January 2016

Additions

Disposals

Written off

At 31 December 2016

Depreciation

At 1 January 2016

Charge for the year

Disposals

Written off

At 31 December 2016

Net book value at 31 December 2016

Other
assets(1)

Total

(53)

(44)

109

(37)

(5)

(25)

(5)

(53)

(44)

109

(37)

(5)

(25)

(5)

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

The Group

Certain land plots required for Proyecto Riotinto (the
“Project Lands”) are affected by pre-existing liens and
embargos derived from unpaid obligations of former Project
operators or owners (the “Pre-Existing Debt”).

a). In May 2010 the Group signed an agreement with the
Department of Social Security in which it undertook
to repay, over a period of 5 years, the €16.9 million
Pre-Existing Debt to the Department of Social Security in
exchange for a stay of execution proceedings for reco-
very of this debt against these Project Lands (the “Social
Security Agreement”). The Group granted a mortgage
to guarantee the payment of a total debt of €6,436,661
and two embargos to guarantee the two payments of a
total debt of €6,742,039 and €10,472,612 respectively

in favour of Social Security’s General Treasury. Originally
payable over 5 years, the repayment schedule was subse-
quently extended until June 2017. The Group repaid the
Department of Social Security on 30 June 2017.

b). The Project Lands are also subject to a lien in the amount
of €5.0 million created in 1979 to secure the repayment
of certain government grants that were in all likelihood
paid at the relevant time by former operators. Relevant
court proceedings have been followed to strike this lien
from title, given that in the opinion of the Group the
right of the government to reclaim this Pre-Existing Debt
has expired due to the relevant statute of limitations.

c). The Project Lands are also affected by the following
Pre-Existing Debt liens: A €400k mortgage to Oxiana
Limited (that will be paid in due course) and a mortgage

V. Financial Statements

Annual ReportAtalaya Mining Plcof €222k pre¬-existing on lands acquired by the Group in
August 2012 which has been paid in full.

d). Other land plots owned by the Group, but not required
for Proyecto Riotinto (the “Non-Project Lands”), are
affected by a Pre-Existing Debt lien of €10.5 million regis-
tered by the Junta de Andalucía. In the event execution
proceedings were commenced against the Non-Project
Lands, the Group would either negotiate a settlement or
allow the execution to proceed in total satisfaction of the
Pre-Existing Debt in question.

e). During 2016, an option expired which was previously

granted to Inland Trading 2006, S.L. and Construcciones
Zeitung, S.L. for the acquisition of certain mining rights
and recorded €900k as an impairment charge in the
profit and loss account.

During 2017, the Group capitalised personnel costs amoun-
ting to €259k (2016: €916k). No borrowing costs were
capitalised in the same period.

V. Financial Statements

Annual ReportAtalaya Mining Plc13. Intangible assets

THE GROUP

(Euro 000’s)

2017

Cost

On 1 January 2017

Additions from acquisition of subsidiary

Additions

At 31 December 2017

Amortisation

On 1 January 2017

Charge for the year

At 31 December 2017

Net book value at 31 December 2017

2016

Cost

On 1 January 2016

Additions restated (*)

Reclassifications – Property, plant and equipment

Other reclassifications

At 31 December 2016

Amortisation

On 1 January 2016

Charge for the year restated (*)

Reclassifications – Property, plant and equipment

At 31 December 2016

Net book value at 31 December 2016 restated (*)

Permits of
Projects

Licences,
R&D and
Software

Goodwill

Total

71,521

5,000

76,521

3,072

4,073

7,145

69,376

20,158

53,005(1)

(1,614)

(28)

71,521

3,072

68,449

1,685

126

2,694

4,505

123

181

4,324

1,334

297

1,685

123

1,562

9,333

82,539

5,126

2,694

90,359

12,528

4,131

16,659

73,700

29,491

54,339

(1,317)

82,539

9,333

3,114

12,528

70,011

(1) These additions relate to the deferred consideration as at 1.2.2016 (Note 27)

(*) Refer to Note 2.1. (c)

The useful life of the intangible assets is estimated to be not less than fourteen years from the start of production (the revised Reserves
and Resources statement which was announced in July 2016 has increased the life of mine to 16 ½ years).

The ultimate recovery of balances carried forward in
relation to areas of interest or all such assets including
intangibles is dependent on successful development, and
commercial exploitation, or alternatively sale of the respec-
tive areas.

The Group conducts impairment testing on an annual
basis unless indicators of impairment are not present at
the reporting date. In considering the carrying value of the
assets at Proyecto Riotinto, including the intangible assets
and any impairment thereof, the Group assessed that no

indicators were present as at 31 December 2017 and thus
no impairment has been recognised.

Goodwill of €9,333,000 arose on the acquisition of the
remaining 49% of the issued share capital of Atalaya Riotinto
Minera S.L.U. (“ARM”) back in September 2008. This amount
was fully impaired on acquisition, in the absence of the
mining licence back in 2008.

Permits include additions in 2017 amounting to €5,000,000
related to the Touro Project mining rights.

V. Financial Statements

Annual ReportAtalaya Mining Plc14. Investment in subsidiaries

THE COMPANY

(Euro 000’s)

Opening amount at cost less provision for impairment

Incorporation (1)

Increase of investment (2)

Closing amount at cost less provision for impairment

2017

3,572

118

2016

3,572

3,693

3,572

Subsidiary companies

Date of
incorporation/
acquisition

Principal
activity

Country of
incorporation

Effective
proportion of
shares held(5)

Atalaya Touro Project (UK) Ltd(1)

10 March 2017

Holding

United Kingdom

Atalaya Minasderiotinto Project (UK) Ltd(2)

EMED Marketing Ltd

EMED Mining Spain SLU(3)

10 Sep 2008

08 Sep 2008

12 April 2007

Eastern Mediterranean Resources (Caucasus) Ltd(4)

11 Nov 2005

Holding

United Kingdom

Trading

Exploration

Cyprus

Spain

Georgia

100%

As security for the obligation on ARM to pay consideration to
Astor under the Master Agreement and the Loan Assignment
Agreement, Atalaya Minasderiotinto Project (UK) Ltd has granted
pledges to Astor Resources AG over the issued capital of ARM and
granted a pledge to Astor over the issued share capital of Eastern
Mediterranean Exploration and Development S.L.U. and the
Company has provided a parent company guarantee (Note 27).

(1) On 10 March 2017, Atalaya Touro Project (UK) Limited was
incorporated. Atalaya Mining Plc is its sole shareholder.

(2) On 16 February 2017, Emed Holdings (UK) Ltd changed its name
to Atalaya Riotinto Project (UK) Ltd and changed again to Atalaya
Minasderiotinto Project (UK) Limited on 30 June 2017. During the
year there was an increase amounting to €118k in the investment
of ARM related to employee benefit expenses.

(3) In December 2017, EMED Mining Spain SLU increased its capital
by €300k from its sole shareholder. This investment increase was
fully impaired in the year.

(4) The Group started the liquidation process of this subsidiary in
2017. In 2018, the Group has reached an agreement with a third
party to dispose Eastern Mediterranean Resources (Caucasus)
Ltd by transferring all issued shares. The liquidation process was
halted in 2018 and the Group is expecting to transfer the shares
during 2018.

(5) The effective proportion of shares held as at 31 December 2017
and 31 December 2016 remained unchanged other than Atalaya
Touro Project (UK) Ltd which was incorporated in the year.

15. Investment in associate

(Euro 000’s)

THE GROUP

At 1 January

Profit on disposals from subsidiary/associate

Share of results of associate before tax

At 31 December

THE COMPANY

At 1 January

Disposal

At 31 December

V. Financial Statements

2017

2016

(4)

303

(313)

Annual ReportAtalaya Mining PlcIn December 2014, the Company entered into a condi-
tional Earn-in Agreement with Prospech Ltd (“Prospech”), a
private Australian exploration company, in relation with two
exploration licences held by Atalaya’s 100% owned Slovak
subsidiary, Slovenske Kovy s.r.o. (“SLOK”). The agreement
became effective in March 2015.

On 10 October 2017, the Company entered into a share and
rights sale and purchase agreement with Prospech Limited.
According to this agreement the Company agreed to sell its
19% of the share capital of Slovenske Kovy,s.r.o. to Pros-
pech Limited. The sale consideration was 937,500 fully paid
ordinary Prospech shares at A$0.16 per share, and 468,750
options, each with a right to convert to one fully paid ordi-
nary Prospech share at any time up to 30 September 2019
for A$0.25. The sale consideration was €99,010 resulting in
a consolidated profit of €99,010.

Further to the Sales and Purchase agreement with Pros-
pech Limited, the Company agreed to transfer 50% of its
Prospech shares and rights to the advisor for his services
provided for this agreement. Thus, the Group owned
468,500 fully paid Prospech shares and 234,375 options at a
cost of €49,505.

16. Investment in joint venture

Company name

Recursos Cuenca Minera
S.L.

Principal activities

Exploitation of tailing dams
and waste areas resources

paid by ARM in connection with the feasibility study can be
deducted from any royalty which may fall due to be paid.

Country of
incorporation

Effective proportion
of shares held at 31
December 2015

Spain

50%

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.
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. Half of the costs

V. Financial Statements

The Group’s significant aggregate amounts in respect of the
joint venture are as follows:

(Euro 000’s)

Intangible assets

Trade and other receivables

Cash and cash equivalents

2017

2016

Trade and other payables

(115)

(114)

Net assets

Revenue

Expenses

Net loss after tax

(1)

Annual ReportAtalaya Mining Plc17. Deferred tax

Deferred tax assets are recognised for the carry-forward
of unused tax losses and unused tax credits to the extent
that it is probable that taxable profits will be available in the
future against which the unused tax losses/credits can be
utilised.

During 2016, the Group recognised €12.2 million in net
deferred tax assets as it was determined that it is probable
that sufficient future taxable profits will be available to the
Group to benefit from the losses carried forward.

In addition to recognised deferred income tax asset, the
Group has unrecognised tax losses in Cyprus of €14.9million
(2016: €17.9) that are available to carry forward for 5 years
against future taxable income of the group companies
in which the losses arose, and in Spain €28million (2016:
€30.6million) which are available to carry forward indefini-
tely against future losses.

Deferred tax assets have not been recognised in respect of
losses in Cyprus as they may not be used to offset taxable
profits elsewhere in the Group, they have arisen in compa-
nies that have been loss-making for some time, and there
are no other tax planning opportunities or other evidence of
recoverability in the near future to support (either partially
or in full) the recognition of the losses as deferred income
tax assets.

Consolidated statement
of financial position

Consolidated income
statement

2017

2016
Restated

2017

2016
Restated

12,196

8,276

(475)

345

(8,276)

475

(Euro 000’s)

Deferred tax asset

At 1 January

Deferred tax asset due to losses available against future taxable
income (Note 10)

Deferred tax related to utilization of losses for the year (Note 10)

(345)

Deferred tax asset due to losses available against future taxable
income overprovision previous years (Note 10)

(1,459)

1,459

Deferred tax income relating to the origination of temporary
differences (Note 10)

Deferred tax expense relating to reversal of temporary
differences (Note 10)

At 31 December

Deferred tax income (Note 10)

4,593

(4,593)

(262)

(198)

262

198

10,130

12,196

2,066

(12,196)

V. Financial Statements

Annual ReportAtalaya Mining Plc18. Inventories

THE GROUP

(Euro 000’s)

Finished products

Materials and supplies

Work in progress

2017

4,797

8,003

874

13,674

2016

5,647

548

6,195

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

As of 31 December 2017, copper concentrate produced and
not sold amounted to 7,274 tonnes. Accordingly, the inven-
tory for copper concentrate was €4.8 million (2016:€ nil).
During the year the Group recorded cost of sales amounting
to €130.7 million (2016: €88.8 million).

19. Trade and other receivables

THE GROUP

(Euro 000’s)

Non-current trade and other receivables

Deposits

Current trade and other receivables

Trade receivables

Receivables from related parties (Note 31.3 and 31.4)

Deposits and prepayments

VAT receivable

Tax advances

Other receivables

THE COMPANY

(Euro 000’s)

Receivables from own subsidiaries (Note 31.3)

Deposits and prepayments

VAT receivable

Other receivables

2017

2016

212

12,113

1,612

221

17,804

1,716

747

34,213

206

15,082

2,092

522

11,187

967

29,850

2017

Restated 2016

242,416

239,335

389

506

352

242,824

240,245

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 settle-
ment date which can vary between 1 to 5 months.

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

V. Financial Statements

100

Annual ReportAtalaya Mining Plc20. Available-for-sale investments

THE GROUP & THE COMPANY

(Euro 000’s)

At 1 January

Addition

Impairment

Loss transferred to reserves (Note 23)

At 31 December

2017

261

(49)

(132)

129

2016

302

(41)

261

Company name

Principal activities

Eastern Mediterranean
Minerals Ltd

Holder of exploration
licences in Cyprus

KEFI Minerals Plc

Prospech Limited

Exploration and
development mining
company listed on AIM

Exploration company

Country of incorporation

Cyprus

Effective proportion of shares
held at 31 December 2017

10%

1.8%

Australia

0.65%

On 10 October 2017, the Company entered into a share and
rights sale and purchase agreement with Prospech Limited.
According to this agreement the Company agreed to sell its
19% of the share capital of Slovenske Kovy,s.r.o. to Prospech
Limited. The sale consideration is 937,500 fully paid ordinary
Prospech shares at A$0.16 per share, and 468,750 options,
each with a right to convert to one fully paid ordinary Pros-
pech share at any time up to 30 September 2019 for A$0.25.
The sale consideration was €99,010 resulting in a consoli-
dated profit of €99,010 (Note 15).

Further to the Sales and Purchase agreement with Pros-
pech Limited, the Company agrees to transfer 50% of its
Prospech shares and rights to the advisor for his services
provided for this agreement. Thus, the Group has 468,500
fully paid Prospech shares and 234,375 options at a cost of
€49,505 (Note 15).

V. Financial Statements
V. Financial Statements

101
101

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining Plc21. Cash and cash equivalents

(Euro 000’s)

THE GROUP

Cash at bank and in hand

2017

2016

42,856

1,135

As of 31 December 2017, the Group’s operating subsidiary held €250k (2016: €250k) as a collateral for bank guarantees, which has been
classified as restricted cash.

Cash and cash equivalents denominated in the following currencies:

Euro – functional and presentation currency

Great Britain Pound

United States Dollar

THE COMPANY

Cash at bank and in hand

Cash and cash equivalents denominated in the following currencies:

Euro – functional and presentation currency

Great Britain Pound

United States Dollar

517

34,346

7,993

42,856

34,410

34,345

34,410

783

233

119

1,135

320

229

320

V. Financial Statements
V. Financial Statements

102
102

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining Plc22. Share capital

Authorised

Ordinary shares of Stg £0.075 each

Issued and fully paid

1 January 2016

Issue Date

Price (Stg£)

Details

7 Dec 2017

1.67

Share placement

Share issue costs

31 December 2017

No. of Shares*

Share capital

Share Premium

Total

’000’s

200,000

000’s

116,679

18,575

135,254

Stg£ 000’s

15,000

Euro 000’s

11,632

277,238

288,870

1,560

13,192

33,182

(843)

309,577

34,742

(843)

322,769

Authorised capital

Issued capital

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

2017

2016

There was no share capital
issue during 2016.

On 7 December 2017,
18,574,555 ordinary shares
at Stg £0.075 were issued
at a price of £1.67. Upon
the issue an amount of
€32,338,512 was credited
to the Company’s share
premium reserve.

Warrants

No warrants were issued in
2017 and in 2016.

Details of share warrants
outstanding as at 31
December 2017:

Grant date

24 June 2015

Expiry date

Exercise price – Stg £

Number of warrants

24 June 2018

1.425

262,569

At 1 January 2017

Less warrants expired during the year

Outstanding warrants at 31 December 2017

Weig hted average
exercise price Stg £

Number of warrants

1.80

2.75

1.425

365,354

(102,785)

262,569

The estimated fair values of the warrants were calculated using the Black Scholes option pricing model. The inputs into the
model and the results are as follows:

Grant date

Weighted
average
share price
Stg£

Weighted
average
exercise
price Stg£

Expected
volatility

Expected
life (years)

Risk free
rate

Expected
dividend
yield

Estimated
fair value
Stg£

24 June 2015

1.425

64.40%

2.0%

Nil

0.330

The volatility has been estimated based on the underlying volatility of the price of the Company’s shares in the preceding twelve months.

On 20 February 2018, the Company received the notification from one of the warrants holders to exercise 233,184 warrants at an exercise
price of 142.5 pence per share. As of the date of this Report, the shares are yet to be allotted, as the holder did not transfer the exercise
price to the Group. The expiration date of the warrants is 24 June 2018.

V. Financial Statements

103

Annual ReportAtalaya Mining Plc23. Other reserves

THE GROUP

(Euro 000’s)

At 1 January 2016

Bonus shares issued in escrow

Recognition of share based payments

Change in value of available-for-sale
investments (Note 20)

At 31 December 2016

Recognition of depletion factor

Recognition of share based payments

Change in value of available-for-sale
investments (Note 20)

At 31 December 2017

THE COMPANY

(Euro 000’s)

Share option

Bonus share

Depletion
factor

Available-
for-sale
investments

Total

6,247

137

6,384

152

6,536

145

208

450

(884)

5,508

(41)

137

(41)

(925)

5,667

450

152

(132)

208

450

(1,057)

6,137

Share option

Bonus share

Available-
for-sale
investments

At 1 January 2016

Bonus shares issued in escrow

Recognition of share based payments

Change in value of available-for-sale investments (Note20)

At 31 December 2016

Recognition of share based payments

Change in value of available-for-sale investments (Note20)

At 31 December 2017

6,247

137

6,384

152

6,536

145

208

(884)

(41)

(925)

(132)

(1,057)

Total

5,508

137

(41)

5,667

152

(132)

5,687

Details of share options outstanding as at 31 December 2017:

Grant date

Expiry date

Exercise price – Stg £

Share options

20 Mar 2014

1 June 2014

23 Feb 2017

Total

19 Mar 2019

31 May 2019

22 Feb 2022

At 1 January 2017

Add options granted during the year

31 December 2017

V. Financial Statements

104

3.60

2.70

1.44

Weighted average
exercise price Stg £

3.42

1.44

2.15

400,000

100,000

900,000

1,400,000

Share options

500,000

900,000

1,400,000

Annual ReportAtalaya Mining PlcOn 23 February 2017, the Group announced that 900,000
share options were granted to Persons Discharging Mana-
gerial Responsibilities and management, of which 800,000
were in accordance with the incentive share option plan
and 100,000 were under a contractual entitlement. These
included 150,000 share options granted to a Director, as
disclosed in the Corporate Governance Report.

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 capitali-
sation of the Company’s reserves, a sub division or conso-
lidation of the ordinary shares, a reduction of share capital
and offers or invitations (whether by way of rights issue or
otherwise) to the holders of ordinary shares.

The estimated fair values of the options were calculated
using the Black Scholes option pricing model. The inputs
into the model and the results are as follows:

Grant date

23 Feb 2017

1 June 2014

20 Mar 2014

Weighted
average
share price
Stg£

Weighted
average
exercise
price Stg£

Expected
volatility

Expected
life (years)

Risk free
rate

Expected
dividend
yield

Estimated
fair value
Stg£

1.440

2.700

3.600

1.440

2.700

3.600

51.8%

62.9%

64.2%

0.6%

2.0%

Nil

0.666

0.597

0.705

The volatility has been estimated based on the underlying volatility of the price of the Company’s shares in the preceding twelve months.

24. Non-controlling interest

(Euro 000’s)

Opening balance

On acquisition of a subsidiary

Share of results for the year

Closing balance

2017

4,502

(28)

4,474

2016

The Group has a 10% interest in Cobre San Rafael, S.L., while
the remaining 90% is held by a non-controlling interest
(Note 2.3.). The significant financial information in respect

of the subsidiary before intercompany eliminations as at and
for the year ended 31 December 2017 is as follows:

(Euro 000’s)

Non-current assets

Current assets

Non-current liabilities

Current liabilities

Equity

Revenue

Loss for the year and total comprehensive income

(31)

(1) Cobre San Rafael, S.L. was established on 13 June 2016.

(*) 10% interest in Cobre San Rafael, S.L. was acquired by the Group in July 2017.

V. Financial Statements

105

2017(*)

2016(1)

5,127

1,087

1,242

4,972

(31)

Annual ReportAtalaya Mining Plc
2017

2016

115

64,234

49,309

791

2,660

291

1,741

8,684

790

1,826

230

67,983

62,592

2017

2016

1,287

4,614

5,917

649

1,193

229

2,071

(1) On 25 May 2010 ARM recognised a debt with the Social
Security’s General Treasury in Spain amounting to €16.9 million
that was incurred by a previous owner in order to stop the
execution process by Public Auction of the land over which Social
Security had a lien. This debt was repaid in June 2017.

(2) In September 2016, the Group signed a $14.0 million
prepayment funding with Transamine Trading, S.A. (“Transamine”).
The funding will be settled by 31 December 2018 via deductions
from payments received from sales. Terms of the funding are
market conditions bearing an interest of LIBOR 3 month + 2.75%
interest.

25. Trade and other payables

THE GROUP

(Euro 000’s)

Non-current trade and other payables

Land options

Current trade and other payables

Trade payables

Payable to related parties (Note 31.3)

Social security payable (1)

Copper concentrate advance payment by customer (2)

Land options and mortgage

Accruals

VAT payable

Other

THE COMPANY

(Euro 000’s)

Current trade and other payables

Accruals

Payable to own subsidiaries (Note 31.3)

Other

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

V. Financial Statements

106

Annual ReportAtalaya Mining Plc26. Provisions

THE GROUP

(Euro 000’s)

1 January 2016

Revision of discount rate

Revision of estimates

Accretion expense

31 December 2016/1 January 2017

Additions

Revision of discount rate

Finance cost (Note 9)

31 December 2017

(Euro 000’s)

Non-Current

Current

Total

Rehabilitation provision

Rehabilitation provision represents
the accrued cost required to provide
adequate restoration and rehabilita-
tion upon the completion of produc-
tion activities. These amounts will be
settled when rehabilitation is under-
taken, generally over the project’s life.

The discount rate used in the calcu-
lation of the net present value of the
provision as at 31 December 2017
was1.87%, which is the 15-year Spain
Government Bond rate (2016: 1.87%,
which is the 15-year Spain Govern-
ment Bond rate). An inflation rate of
1.5% is applied on annual basis.

(Euro 000’s)

Between 1 – 5
Years

Between 6 –
10 Years

Between 10 –
15 Years

The expected payments for the reha-
bilitation work are as follows:

More than 15
Years

Expected
payments for
rehabilitation
of the mining
site

553

1,579

2,692

690

Legal

Rehabilitation

213

3,971

732

296

5,092

407

(98)

113

5,514

2017

5,727

Total

3,971

732

296

5,092

620

(98)

113

5,727

2016

5,092

The Group has been named a defen-
dant in several legal actions in Spain,
the outcome of which is not determi-
nable as at 31 December 2017. Mana-
gement has reviewed individually each
case and made a provision of €213
thousand for these claims, which has
been reflected in these consolidated
financial statements.

V. Financial Statements

107

Atalaya Mining Plc

Annual Report

27. Deferred consideration

In September 2008, the Group moved to 100% ownership
of ARM (and thus full ownership of Proyecto Riotinto) by
acquiring the remaining 49% of the issued capital of ARM.
At the time of the acquisition, the Group signed a Master
Agreement (the “Master Agreement”) which included
deferred consideration of €43.8 million (the “Deferred
Consideration”) and potential up-tick payments of up to
€15.9 million depending on the price of copper (the “Up-tick
Payment”), in consideration of (a) all parties accepting the
legal structure of ARM (formerly Emed Tartessus); (b) the
validity of various agreements entered into prior to the
Master Agreement; and (c) the provision of indemnities by
Astor and its agreement not to pursue litigation.

The obligation to pay the Deferred Consideration and
the Up-tick Payments is subject to the satisfaction of the
following conditions (the “Conditions”): (a) all authorisations
to restart mining activities in Proyecto Riotinto having been
granted by the Junta de Andalucía (“Permit Approval”);
and (b) the Group securing a senior debt finance facility for
a sum sufficient to restart mining operations at Proyecto
Riotinto (“Senior Debt Facility”) and being able to draw
down funds under the Senior Debt Facility. At the time of
acquisition, the possible outcome for the obligation to pay
the deferred consideration could not be determined.

Subject to satisfaction of the Conditions, the Deferred
Consideration and the Up-tick Payments are payable over
a period of six or seven years (the “Payment Period”).
In addition to satisfaction of the Conditions, the Up-tick
Payments are only be payable if, during the relevant period,
the average price of copper per tonne is US$6,614 or more
(US$3.00/lb).

The Company also entered into a credit assignment
agreement with a related company of Astor, Shorthorn AG,
pursuant to which the benefit of outstanding loans were
assigned to the Company in consideration for the payment
of €9.1 million to Shorthorn (the “Loan Assignment”).
Payment under the Loan Assignment is also subject to satis-
faction of the Conditions and is payable in instalments over
the Payment Period.

As security, inter alia, for the obligation to pay the Deferred
Consideration, the Up-tick Payments and the Loan Assign-
ment to Astor, Atalaya Minasderiotinto Project (UK) Limited
has granted pledges over the issued capital of ARM and the
Company has provided a parent company guarantee.

As at the date of this report, the Permit Approval condition
has been satisfied. However, the Group has not entered into
arrangements in connection with a Senior Debt Facility and,
in the absence of drawdown of funds by the Group pursuant

V. Financial Statements

108

Annual ReportAtalaya Mining Plcto a Senior Debt Facility, the Conditions have not been
satisfied.

Assignment pursuant to the terms of the credit assignment
agreement.

Previously, the Group had not recognised the Deferred
Consideration in the initial purchase price allocation on
the basis that the payment of the amounts was not consi-
dered probable. The High Court judgment of 6 March 2017
required the Group to revisit its estimates and assumption
to book the liability.

As at 31 December 2017, the Group has not generated any
excess cash and, consequently, no consideration has been
paid.

As at the reporting date, the Group has presented the
deferred consideration in the consolidated and standalone
financial statements to reflect the Company’s best estimate
of the liability and the excess cash flows in the future years
in the view of the High Court ruling of March 2017 and in
line with IAS 37.

The nominal amount of the liability recognised is €53
million. In 2017 the discount rate used to measure the
liability for the deferred consideration was re-assessed to
apply a risk free rate for the relevant periods, as required
by IAS 37. The effect of discounting, when applying this
risk free rate, was considered insignificant and the Group
has measured the liability for the deferred consideration
on an undiscounted basis. The value of the liability for the
Group and Company is in line with the court ruling issued
on 6 March 2017 amounting to €53 million and €9.1 million
respectively. For details on the restatement of the deferred
consideration liability as at 31 December 2016, refer to Note
2.1(c).

On 25 April 2017, Atalaya and Astor applied for permis-
sion to appeal to the Court of Appeal. On 11 August 2017
the Court of Appeal granted permission to both parties to
appeal (although it rejected three of Astor’s seven grounds).
The Appeal will take place in May 2018.

On 6 March 2017, judgment in the case brought by (“Astor
Case”) was handed down in the High Court of Justice in
London (the “Judgment”). On 31 March 2017, declarations
were made by the High Court which give effect to the
Judgment.

In summary, the High Court found that the Deferred
Consideration did not start to become payable when Permit
Approval was granted. In addition, the intra-group loans
by which funding for the restart of mining operations was
made available to ARM did not constitute a Senior Debt
Facility so as to trigger payment of the Deferred Conside-
ration. Accordingly, the first instalment of the Deferred
Consideration has not fallen due.

Astor failed to show that there had been a breach of the all
reasonable endeavours obligation contained in the Master
Agreement to obtain a Senior Debt Facility or that the
Group had acted in bad faith in not obtaining a Senior Debt
Facility. While the Court confirmed that the Group was not
in breach of any of its obligations, the Master Agreement
and its provisions remain in place. Accordingly, other than
up to US$10.0 million a year which may be required for
non-Proyecto Riotinto related expenses, ARM cannot make
any dividend, distribution or any repayment of the money
lent to it by companies in the Group until the consideration
under the Master Agreement (including the Deferred Consi-
deration) has been paid in full.

As a consequence, the Judgment requires that, in accor-
dance with the Master Agreement, ARM must apply any
excess cash (after payment of operating expenses, sustai-
ning capital expenditure, any senior debt service require-
ments and up to US$10.0 million (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) early.
The Court confirmed that the obligation to pay considera-
tion early out of excess cash does not apply to the Up-tick
Payments and the Judgment notes that the only situation in
which the Up-tick Payments could ever become payable is in
the unlikely event that mining operations cease at Proyecto
Riotinto and a Senior Debt Facility is then secured for a sum
sufficient to restart mining operations.

While the Judgment confirms that the cash sweep provi-
sions of the Master Agreement require ARM to repay the
Loan Assignment early, it does not extend to the credit
assignment agreement which is governed by Spanish
law. The Judgment therefore does not provide any clarity
on whether the Conditions have been met in respect of
payment of the Loan Assignment and there remains signifi-
cant doubts concerning the legal obligation to pay the Loan

V. Financial Statements

109

Annual ReportAtalaya Mining Plc28. Derivative instruments

29. Acquisition, incorporation and
disposals of subsidiaries

28.1. Foreign exchange contract

As at 31 December 2017, Atalaya has no foreign exchange
contracts (Atalaya had certain short term foreign exchange
contracts as at 31 December 2016). The contracts were
in an unrealised loss position which was recorded as a
finance cost in the income statements (2016: €0.2 million),
the corresponding receivable amount recorded in other
receivables. The relevant information of the contracts was
as follows:

Foreign exchange contracts – Euro/USD

Period

June 2016 - March 2017

Contract type

FX Forward - Put

FX Forward – Call

Amount in USD

5,000,000

10,000,000

Contract rate

Strike

1.0955

n/a

1.0955

1.0450

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

28.2. Commodity contract

In 2016, Atalaya signed the following short term commodity
contracts, for copper, with a third party:

Period

August 2016

September 2016

Commodity

Copper

Contract type

Forward

FMT (Fine
metric tonnes)

Strike price
US$/FMT

2,113

4,960

1,090

4,845

In the twelve months ended 31 December 2016 the agree-
ments were closed at the maturity date with a gain of €0.5
million, which was recorded as revenue during the year.

The Group did not recognise any gain or loss for the twelve
months ended 31 December 2017. As at 31 December 2016
and 2017, the Group had no open positions.

V. Financial Statements

110

Incorporation of Atalaya Touro (UK) Limited

On 10 March 2017, Atalaya Touro (UK) Limited was incor-
porated. Atalaya Mining Plc is its sole shareholder. In July
2017, Atalaya Touro (UK) Limited executed the option and
acquired 10% of Cobre San Rafael, S.L. a company which
owns the mining rights of Proyecto Touro.

Acquisition of Cobre San Rafael, S.L. - Proyecto Touro

In July 2017, the Group announced that it had executed the
option to acquire 10% of the share capital of Cobre San
Rafael S.L., (“CSR”), a wholly owned subsidiary of Explota-
ciones Gallegas S.L. (“EG”), part of the F. GOMEZ company.
This is part of an earn-in agreement (the “Agreement”),
which will enable the Group to acquire up to 80% of CSR.

Following the acquisition of the initial 10% of CSR’s share
capital, the agreement included the following four phases:

» Phase 1 – The Group paid €0.5 million to secure the

exclusivity agreement and will continue to fund up to a
maximum of €5.0 million to get the project through the
permitting and financing stages.

» Phase 2 – When permits are granted, the Group will pay
€2.0 million to earn-in an additional 30% interest in the
project (cumulative 40%).

» Phase 3 – Once development capital is in place and cons-
truction is under way, the Group will pay €5.0 million to
earn-in an additional 30% interest in the project (cumula-
tive 70%).

» Phase 4 – Once commercial production is declared,

the Group will purchase an additional 10% interest in
the project (cumulative 80%) in return for a 0.75% Net
Smelter Return (NSR) royalty, with a buyback option.

The Agreement has been structured so that the various
phases and payments will only occur once the project is
de-risked, permitted and in operation.

In July 2017, the Group executed the acquisition of 10%
of CSR, which has been accounted for as a subsidiary with
a corresponding non-controlling interest of 90% as the
Company has control over the entity (Note 2.3 (b)).

The amount of €500.000 paid during the year for the acquisi-
tion of the initial 10% of CSR share capital, represents the
fair value of the net assets of CSR on the date of acquisition
giving rise to no goodwill. The non-controlling interest is set
out in Note 24.

Annual ReportAtalaya Mining PlcDisposals of subsidiaries

There were no disposals of subsidiaries during the twelve
month period ended 31 December 2017.

30. Wind-up of subsidiaries

There were no operations wound-up during 2017 and 2016.

31. Group information and related
party disclosures

31.0 Information about subsidiaries

These audited consolidated financial statements include:

Subsidiary companies

Parent

Principal
activity

Country of
incorporation

Effective
proportion of
shares held

Atalaya Touro Project (UK) Ltd

Atalaya Mining Plc

Holding

United Kingdom 100%

Atalaya Minasderiotinto Project
(UK) Ltd

Atalaya Mining Plc

Holding

United Kingdom 100%

EMED Marketing Ltd

Atalaya Mining Plc

Trading

Cyprus

100%

EMED Mining Spain S.L.U.

Atalaya Mining Plc

Exploration

Spain

100%

Eastern Mediterranean Resources
(Caucasus) Ltd

Atalaya Mining Plc

Exploration

Georgia

100%

Atalaya Riotinto Minera S.L.U.

Atalaya Minasderiotinto Project
(UK) Limited

Production

Spain

100%

Eastern Mediterranean Exploration
and Development S.L.U.

Atalaya Minasderiotinto Project
(UK) Limited

Exploration

Spain

100%

Cobre San Rafael, S.L. (1)

Atalaya Touro (UK) Limited

Exploration

Spain

Recursos Cuena Minera S.L.U.

Atalaya Riotinto Minera SLU

Exploration

Spain

10%

J-V

Fundacion Emed Tartessus

Atalaya Riotinto Minera SLU

Trust

Spain

100%

Georgian Mineral Development
Company Limited

Eastern Mediterranean Resources
(Caucasus) Ltd

Exploration

Georgia

100%

(1) Cobre San Rafael, S.L. is the entity which hold the mining rights of Proyecto Touro. The Group has a significant influence in the
management of the Cobre San Rafael, S.L., including one of the two directors, management of the financial books and the capacity of
appointment the key personnel.

V. Financial Statements

111

Annual ReportAtalaya Mining Plc31.1 Compensation of key management

Share-based benefits

personnel

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

In February 2017, the directors and key management
personnel have been granted 345,000 options (2016: nil)
(Note 23).

During 2017 the directors and key management personnel
have not been granted any bonus shares (2016: nil).

(Euro 000’s)

Directors' remuneration and fees

Director’s bonus

Directors’ bonus shares

Contractual entitlements upon resignation

Share option-based benefits to directors

Key management personnel fees

Key management bonus

Share option-based and other benefits to key management personnel

THE GROUP

THE COMPANY

2017

2016

742

245

467

1,270

2,804

696

500

444

500

2,375

2017

357

232

1,232

1,854

2016

346

347

500

1,309

31.2 Transactions with shareholders and

related parties

THE GROUP

(Euro 000’s)

Sales of goods

Trafigura PTE LTD (“Trafigura”) – Sales of goods (pre-commissioning sales offset against
the cost of constructing assets)

Trafigura– Sales of goods

Orion Mine Finance (Master) Fund I LP (“Orion”) – Sales of goods

2017

2016

28,119

(4)

28,115

2,452

26,351

3,526

32,329

XGC was granted an offtake over 49.12% of life of mine
reserves as per the NI 43-101 report issued in September
2016. Similarly, Orion was granted an offtake over 31.54%
and Trafigura 19.34% respectively of life of mine reserves
as per the same NI 43-101 report. In November 2016,
the Group was notified and consented the novation of

the Orion offtake agreement as Orion reached an agree-
ment with a third party to transfer the rights over the
concentrates.

V. Financial Statements

112

Annual ReportAtalaya Mining PlcTHE COMPANY

(Euro 000’s)

Sales of services:

› EMED Marketing Limited

› Atalaya Riotinto Minera SLU

› Atalaya Minasderiotinto Project (UK)Limited

Finance income:

› Atalaya Minasderiotinto Project (UK)Limited – Finance income from interest-

bearing loan (zero coupon note)

31.3 Year-end balances with related parties

THE GROUP

(Euro 000’s)

Receivable from related party (Note 19):

› Fundacion Atalaya Riotinto

› Recursos Cuenca Minera S.L.

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

THE COMPANY

(Euro 000’s)

Receivable from related party (Note 20):

› Atalaya Minasderiotinto Project (UK)Limited

› Atalaya Minasderiotinto Project (UK)Limited – Zero coupon Note

› Atalaya Riotinto Minera SLU

› Atalaya Touro (UK) Limited

› EMED Mining Spain SL

2017

2016

565

450

1,015

1,635

177

1,523

2017

2016

2017

2016

209,293

23,038

9,350

697

208,794

21,403

9,100

242,416

239,335

The above balances bear no interest and are repayable on demand, other than the zero coupon note bearing interest between 7.5% and
8% (2016: 7.5%-8%.

THE COMPANY

(Euro 000’s)

Payable to related party (Note 25):

› EMED Marketing Limited

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

V. Financial Statements

113

2017

2016

4,614

1,193

Annual ReportAtalaya Mining Plc31.4 Year-end balances with shareholders

(Euro 000’s)

Trafigura – Debtor balance (Note 19)

Orion – Creditor balance (Note 25)

2017

1,556

2016

2,024

(12)

32. 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.

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

33. Commitments

There are no minimum exploration requirements at
Proyecto Riotinto. However, the Group is obliged to pay
municipal 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.

As part of the consideration for the purchase of land from
Rumbo, the Group has agreed to pay a royalty to Rumbo
subject to commencement of production of $250,000 in
each quarter where the average price of LME copper or
the average copper sale price achieved by the Group is
at least $2.60/lb. No royalty is payable in respect of any
quarter where the average copper price for that quarter is
below this amount and in certain circumstances any quar-
terly royalty payment can be deferred until the following
quarter. The royalty obligation terminates 10 years after
commencement of production. Commencement of produc-
tion is defined as being the first to occur of processing of
ore at a rate of nine million metric tonnes per annum for

a continuous period of six months or the date that is 18
months after the first product sales from Proyecto Riotinto.
The commencement of the Rumbo royalty was in July 2017.

As average copper prices for Q3 2017 and Q4 2017 were
above the threshold identified in the agreement, the Group
has recognised the cost of US$500,000. The payment of the
royalty was settled during Q1 2018 by the issue of shares of
the Group (Note 34).

ARM has entered into a 50/50 joint venture with Rumbo to
evaluate and exploit the potential of the class B resources
in the tailings dam and waste areas at Proyecto Riotinto
(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. Half of the costs
paid by ARM in connection with the feasibility study can be
deducted from any royalty which may fall due.

34. Events after the reporting
period

Equity issuance January 2018

In accordance with the royalty agreement signed in July
2012 between the Company and Rumbo, Rumbo is entitled
to receive a royalty payment of up to US$250,000 per
quarter if the average copper sales price or LME price for
the period is equal to or above $2.60/lb. As of 31 December
2017, the Group recognised a $500,000 debt to Rumbo,
given the fact that the average copper price for the third
and fourth quarter of 2017 was above $2.60/lb.

After discussions with Rumbo, both parties agreed to satisfy
the payment through the issuance of 192,540 new ordinary
shares of 7.5p in the Company.

The Rumbo Shares were issued at the volume weighted
average price for the period between 5 February 2018 and

V. Financial Statements

114

Annual ReportAtalaya Mining Plc9 February 2018 of 186.7p per share and using the average
US$ to GBP exchange rate of 1.3909.

In addition, the Company issued 29,000 ordinary shares of
7.5 pence in the Company as certain employees exercised
their options at a price of 144 pence per share.

Exercise of warrants

On 20 February 2018, the Company received notification
from one of the warrants holders to exercise 233,184
warrants at an exercise price of 142.5 pence per share.

As of the date of this Report, the shares are yet to be allo-
tted, as the holder did not transfer the exercise price to the
Group. The expiration date of the warrants is 24 June 2018.

Incorporation of Atalaya Servicios Mineros, S.L.

On 14 February 2018, the Group incorporated a fully owned
subsidiary named Atalaya Servicios Mineros, S.L.U.

V. Financial Statements

115

Annual ReportAtalaya Mining PlcVI.
Shareholder
Information

VI. Shareholder Information
VI. Shareholder Information

116
116

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcGlossary of
terms

Atalaya or the
Company

o Atalaya Mining Plc, a

company incorporated
in Cyprus under the
Companies law, cap.
113

Atalaya Group
or Group

o Atalaya Mining Plc
and its subsidiaries

CSR

o Corporate Social
Responsibility

o Copper

Directors

o The Directors of
Atalaya for the
reporting period

AGM o Annual General

Meeting

Dollar or US$
or $

o United States dollars

AIM o Alternative Investment
Market of the London
Stock Exchange

AISC

o All In Sustaining Cost

EBITDA

o Earnings Before
interest Tax
Depreciation and
Amortisation

Articles

o The articles of

association of Atalaya
Mining Plc.

Financial
statements

o Consolidated and
company financial
statements of Atalaya
Mining Plc.

London Stock
Exchange or
LSE

o London Stock
Exchange plc

NI 43-101

o Canadian National
Instrument 43-101

Open pit

o A mine where the

minerals are mined
entirely from the
surface. Also referred
to as open-cut or
open-cast mine

Ordinary
Shares

o Ordinary Shares of
10 pence each in
the capital of the
Company

Ore body

o A sufficiently large
amount of ore
that can be mined
economically

Average head
grade

o Average ore grade fed
into the mill, expressed
in % of weight

BoD or Board
of Directors

o The Board of Directors

of the Company

Code of
Conduct

o Atalaya’s Code of

Business Conduct and
Ethics

Concentrate

Contained
copper

o Fine, powdery product
of the milling process
containing a high
percentage of valuable
metal

o Represents total

copper in a mineral
reserve before
reduction to account
for tonnes not able
to be recovered
by the applicable
metallurgical process

Grade

o The amount of metal
in each tonne of
ore, expressed as a
percentage of copper
metal

IAS

o International

Accounting Standards

IFR S

o International Financial
Reporting Standards

IPO

o Initial public offering

Shareholders

o Holders of Ordinary

Stripping

o Removal of

overburden or waste
rock overlying an ore
body in preparation
for mining by open pit
methods

TSX

o Toronto Stock
Exchange

KPI s

o Key performance

indicators

United
Kingdom or UK

o the United Kingdom
of Great Britain and
Northern Ireland

LIBOR

o The British Bankers’
Association Interest
Settlement Rate for the
relevant currency and
period displayed on
the appropriate page
of the Reuters’ screen

United States
or US

o the United States
of America, its
territories and
possessions, any state
of the United States
of America and the
District of Columbia

VI. Shareholder Information
VI. Shareholder Information

117
117

Atalaya Mining Plc

Annual Report

Annual ReportAtalaya Mining PlcShareholder
enquires

Board of directors:

Corporate brokers

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Roger Davey Chairman.
Non-executive chairman

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Alberto Lavandeira
Managing director and CEO
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Hui (Harry) Liu
Non-executive director

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Dr. Jose Sierra Lopez
Non-executive director

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Jesus Fernandez
Non-executive director

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Damon Barber
Non-executive director
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Dr. Hussein Barma
Non-executive director

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Jonathan Lamb
Non-executive director

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Stephen Scott
Non-executive director

BMO Capital Markets
95 Queen Victoria Street
London, EC4V 4HG

Canaccord Genuity Limited
41 Lothbury
London EC2R 7AE

Investor Relations

Carina Corbett
4C Communications Ltd.
Hudson House
8 Tavistock Street
London WC2E 7PP
+44 (0) 203 170 7973

Public Relations

Charles Chichester
Newgate Communications
Sky Light City Tower
50 Basinghall Street
London EC2V 5DE
+44 (0) 207 680 6550

Registrars

Cymain registrars Ltd.
26 Vyronos Avenue
1096 Nicosia, Cyprus

Depositary / transfer
agent

United Kingdom
Computershare Investor Services Plc.
The Pavilions
Bridgwater
Bristol BS13 8AE

Canada
Computershare Investor Services Inc.
100 Universtity Avenue
8th Floor, North Tower
Toronto, Ontario M5J 2Y1

Company secretary:

Inter Jura CY (Services) Limited
1 Lampousa Street,
1095 Nicosia, Cyprus

Group Auditor:

Ernst & Young Cyprus Ltd
Jean Nouvel Tower,
6 Stasinos Avenue,
P.O.Box 21656,
1511, Nicosia,
Cyprus

Registered office:

1 Lampousa Street,
1095 Nicosia, Cyprus

V. Shareholder Information

118

Atalaya Mining Plc

Annual Report

Forward looking statements

This report may include certain “forward-looking statements” and
“forward-looking information” under applicable securities laws. Except
for statements of historical fact, certain information contained herein
constitutes forward-looking statements. Forward-looking statements
are frequently characterised by words such as “plan”, “expect”, “project”,
“intend”, “believe”, “anticipate”, “estimate”, and other similar words,
or statements that certain events or conditions “may” or “will” occur.
Forward-looking statements are based on the opinions and estimates of
management at the date the statements are made, and are based on a
number of assumptions and subject to a variety of risks and uncertainties
and other factors that could cause actual events or results to differ mate-
rially from those projected in the forward-looking statements. Assump-
tions 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 mate-
rially 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 mana-
gement’s estimates or opinions should change except as required by appli-
cable securities laws. The reader is cautioned not to place undue reliance on
forward-looking statements.

V. Shareholder Information

119

Atalaya Mining Plc

Annual Report

V. Shareholder Information

120

Annual ReportAtalaya Mining PlcV. Shareholder Information

121

Annual ReportAtalaya Mining Plc