Atalaya Mining plc
Annual Report 2019

Plain-text annual report

2019 Annual Report For the year ended 31 December 2019 2019 Annual Report For the year ended 31 December 2019 Atalaya Mining Plc. Annual Report - 8 - Annual Report c o n t e n t Atalaya Mining Plc. Content Company Overview.......................... .. . ... . . 10 Corporate Governance Report . .. . .. ..... 51 Performance highlights .................................. .. .. . ... 11 Board of Directors . .. . .. . .. . .. . .. . .. . .. . . .. .. . ... . .. .. .. .. . ... ..... 52 Atalaya at Glance ............................................. . ... . . 14 Audit and Financial Risk Committee . .. . .. . .. . .. . .. . .. . ...... 63 Letter from the Chairman ............ . .. . .. . 16 Corporate, Governance, Nominating and Compensation Committee Report . .. . .. . .. . .. . .. . .. . . .. ...... 65 Physical Risks Committee Report . .. . .. . .. . .. . .. . .. . . .. ...... 70 Management Report ....................... . .. .. . . 19 Basis of Reporting ......................................... . ... . ... 20 Operational Review ....................................... . ... . ... 21 Financial Review ........................................... ... . ... . 24 Financial Statements . .. . .. . .. . .. . .. . .. . .. . . ...... 73 Independent Auditor’s report . .. . .. . .. . .. . .. . .. . .. . . .. .. . ...... 74 Consolidated and Company Statements of Comprehensive Income . .. . .. . .. . .. . .. . .. . .. . . .. .. . ... . .. .. ...... 80 Risk Report ................................................... .. . . . .. . 30 Our business model and strategy ..................... .. .. . . .. 36 Consolidated and Company Statements of Financial Position . .. . .. . .. . .. . .. . .. . . .. .. . . ... . .. .. .. .. . ... . ....... 81 Market Overview ........................................... ... . ... . 38 Consolidated Statement of Changes in Equity . .. . .. . ..... 82 Statement of Corporate Governance ................. . .. . .. . 39 Company Statement of Changes in Equity . .. . .. . .. . .. ..... 83 Consolidated Statement of Cash Flows . .. . .. . .. . .. . .. . ..... 84 Sustainability Report ..................... .. . .. .. . 43 Company Statement of Cash Flows . .. . .. . .. . .. . .. . .. . . ...... 85 Social development ......................................... . ... . .. 45 Health and Safety .......................................... . ... . ... 47 Environment ................................................... . . . . . . 47 Notes to the Consolidated and Company Financial Statements . .. . .. . .. . .. . .. . .. . . .. .. . . ... . .. .. .. .. . ...... 87 Shareholder information . .. . .. . .. . .. . .. . .. ... 147 Glossary of terms . .. . .. . .. . .. . .. . .. . . .. .. . . ... . .. .. .. .. . ... . ..... 148 Shareholder Enquiries . .. . .. . .. . .. . .. . .. . . .. .. . . ... . .. .. .. .. . ... 152 - 9 - Atalaya Mining Plc. c o m p a n y o v e r v i e w Annual Report Company Overview - 10 - - 10 - Atalaya Mining Plc.company overviewAnnual ReportAnnual Report c o m p a n y o v e r v i e w Atalaya Mining Plc. Performance highlights — Operational highlights Unit 2020 Guidance 2019 2018 Copper concentrate Copper contained in concentrate (1) Payable copper contained in concentrate t t t - 195,072 180,661 55,000-58,000 44,950 42,114 - 42,935 40,306 (1) The Company is aware that the COVID-19 pandemic may still have further effects of impact on how the Company can manage it operations and is accordingly keeping its guidance under regular review. Should the Company consider the current guidance no longer achievable, then the Company will provide a further update. Full year 2019 copper production increased by 6.7% above 2018 2020 guidance targeting an improvement on 2019 production Expansion to 15Mtpa at Proyecto Riotinto is completed - 11 - - 11 - Atalaya Mining Plc.company overviewAnnual ReportAtalaya Mining Plc. c o m p a n y o v e r v i e w Annual Report — Financial Highlights Units (€k) (€k) 2019 2018 187,868 189,476 61,333 53,542 ($/lb payable) 1.80 2.14 1.94 2.26 3,598 8,435 8,077 33,070 Revenues EBITDA Cash cost All-in sustaining cost ($/lb payable) Working capital Cash at bank (€k) (€k) - 12 - Annual Report C O M P A N Y O V E R V I E W Atalaya Mining Plc. Higher EBITDA compared to previous 2019 year amounting to €61.3 million (2018: €53.5 million) €8.1 million cash at bank as at 31 December 2019 (2018: 33.1 million) Cash cost improvement from 2019 expectations. Cash costs and AISC for 2019 were US$1.80/lb and US$2.14/lb of payable copper, respectively (2018: US$1.94/lb and $2.26/lb) 61,333 €K 53,542 €K 2018 - 13 - Atalaya at Glance Atalaya is an AIM and TSX listed mining and development group which produces copper concentrates including silver by-product at its wholly owned Proyecto Riotinto site in southwest Spain. - 14 - Atalaya Mining Plc.company overviewAnnual ReportAnnual Report C O M P A N Y O V E R V I E W Atalaya Mining Plc. à Strong pipeline of low risk growth projects à Proven management team à Supportive strategic shareholders The Company owns and operates through a wholly owned subsidiary, “Proyecto Riotinto”, an open-pit copper mine located in the Pyritic belt, in the Andalusia region of Spain, approximately 65 km northwest of Seville. A brownfield expansion was completed in 2019. Atalaya also owns 10% of Proyecto Touro, a brownfield copper project in northwest Spain. The Company’s and its subsidiaries’ business are to explore for and develop metal production operations in Europe, with an initial focus on copper. The strategy is to evaluate and prioritise metal production opportunities in several jurisdictions throughout the well-known belts of base and precious 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. Proyecto Riotinto Atalaya owns 100% of the Proyecto Riotinto copper mine in Huelva. The Expansion Project to 15Mtpa reached full mechanical completion in August 2019 and was fully commis- sioned by January 2020. Proyecto Touro In 2017, Atalaya signed a phased, earn-in agreement for up to 80% ownership of Proyecto Touro, a brown- field copper project in northwest Spain. In February 2020 a formal communica- tion from the Xunta de Galicia announ- cing a negative Environmental Impact Statement for Proyecto Touro was published in Galicia´s official journal. In the meantime the Company, along with its advisers, is currently evaluating potential next steps for the project, which could include an appeal of the decision made by the Xunta de Galicia, and/or the clarification of the questions raised by the reports. - 15 - Atalaya Mining Plc. Atalaya Mining Plc. L E T T E R F R O M T H E C H A I R M A N L E T T E R F R O M T H E C H A I R M A N Annual Report Annual Report Letter from the Chairman Roger Davey Chairman of Atalaya Mining Plc Dear Shareholder, I am both pleased and proud to report that 2019 was another year of improvements at your operating project, the Riotinto mine, with increases in both ore processing rates and copper output. The ore processing throughput rate increased steadily during 2019 to achieve a cumulative plant throughput of 9.9Mtpa, with copper production of 45,000 tonnes, an increase of around 7% from the 42,100 tonnes produced in 2018, reaching the upper range of the updated guidance provided by the Company towards the end of 2019. This record production was even more remarkable as it was achieved whilst the Company was completing and integrating a 50% Expansion Project at Riotinto, whilst maintaining the existing opera- tions. The Expansion Project was completed in January 2020 and the new processing plant was fully commissioned to operate at the increased annualised rate of 15Mtpa together with a corresponding increase in mining rates. The average process plant feed grade of 0.49% copper was consistent with reserve estimates and 2018 feed grade. The process recovery rate reduced slightly in 2019 to an average of 87.09%, from 88.3% in 2018, driven by lower recovery rates achieved during the ramp-up of the new mill. Cash Costs and All-in Sustai- ning Costs for 2019 of $1.80/ lb and $2.14/lb respectively, were well below the budgeted figures of $2.10/lb and $2.32/lb respectively. Health and safety continue to be of paramount importance to the Company. We aim to provide a safe working environ- ment not only for our emplo- yees and consultants working on site, but also ensure a safe environment for the neighbou- ring communities. This is a key - 16 - - 16 - Annual Report Annual Report L E T T E R F R O M T H E C H A I R M A N L E T T E R F R O M T H E C H A I R M A N Atalaya Mining Plc. Atalaya Mining Plc. priority during the outbreak of the current global COVID-19 pandemic. The Company has been fully supportive of all the requirements and recommendations issued by the Government of Spain and the regional and local health authorities to manage the risk of the COVID-19 exposure to our employees, customers, communities and suppliers. At the end of March, in response to a Royal Decree, the mine was placed on care and maintenance for 10 days but following clarifications from the Spanish Gover- nment, Proyecto Riotinto recommenced on 3 April. The Company currently maintains its production guidance for 2020 in the range of 55,000 to 58,000 tonnes. We must, however, be conscious of the need to protect our employees from the rapid evolution of the COVID-19 virus, the poten- tial for increased measures being imposed by the Spanish Central Government to reduce its spread, and any poten- tial future impact of these restrictions. The Company will therefore update the market as necessary. Exploration and infill drilling continued throughout 2019 in the Atalaya and Cerro Colorado pits to maintain the life-of- mine reserve position based on the increased processing rate. Results from ongoing exploration activities to date have been positive, with drilling taking place at San Dionisio in the Atalaya pit and at Filon Sur in the Cerro Colorado pit. The new drill data obtained continue to define and validate historical data of the copper stockwork in the area. In January 2020, the Junta de Andalucía issued a favou- rable report in relation to the procedural error in the original issuance of the Unified Environmental Authorisa- tion (the “AAU”) of Proyecto Riotinto. The AAU is still in a short legal claim period as all deadlines of the process have been suspended by the Junta de Andalucía as result of COVID-19 outbreak. Once the process is completed, the validated AAU is expected to be issued. Whilst the valida- tion of the AAU is a required step towards the automatic validation of the mining permit, I would like to stress that the remediation of this procedural issue has in no way affected the normal running of the Proyecto Riotinto. During 2019 no consideration was paid to Astor as, according to our assessment, Proyecto Riotinto did not generate any “Excess Cash”. With the desire to clarify any uncertainty on this issue, in March 2020 the Company filed an application in the High Court to seek clarity on the definition of “Excess Cash”. The Company expects that this process will bring clarity to the definition of “Excess Cash” and thus the payment schedule of the Deferred Consideration and the Loan Assignment. The Company remains focused on growth opportunities. Having successfully completed the expansion of Proyecto Riotinto, the Company is focu- sing on resolving the issue with the negative Environmental Impact Statement for Proyecto Touro and is also continuing with the technical review and assessment of other opportu- nities for growth. Finally, I would like to thank our management and staff for their continued commitment and efforts, the board members for their continued support and contribution and, last but not least, our valued shareholders for their continued support. We look forward to the year ahead with continued confi- dence and optimism. Roger Davey Chairman of Atalaya Mining Plc 6 April 2020 - 17 - - 17 - Atalaya Mining Plc. m a n a g e m e n t r e p o r t Annual Report - 18 - - 18 - Atalaya Mining Plc.company overviewAnnual ReportAnnual Report m a n a g e m e n t r e p o r t Atalaya Mining Plc. Management Report 20 Basis of Reporting 21 Operational Review 24 Financial Review 30 Risk Report 36 Our business model and strategy 38 Market Overview 39 Statement of Corporate Governance - 19 - - 19 - Atalaya Mining Plc.company overviewAnnual ReportBasis of Reporting The Board of Directors of Atalaya Mining Plc presents its manage- ment report and the consolidated financial statements and the separate financial state- ments of the Company for the year ended 31 December 2019. — Introduction This report provides an overview and analysis of the financial results of operations of the Group, to enable the reader to assess material changes in the financial position between 31 December 2018 and 31 December 2019 and results of operations for the twelve month period ended 31 December 2019 and 31 December 2018. This report has been prepared as of 6 April 2020. The analysis hereby included, is intended to supplement and complement the consolidated and separate financial statements and notes thereto (“Financial State- ments”) as at and for the twelve month period ended 31 December 2019. The reader should review the Financial Statements in conjunction with the review of this report and with the consolidated financial state- ments for the twelve month period ended 31 December 2018. These documents can be found on the Atalaya website at www.atalayami- ning.com. Atalaya prepares its Financial State- ments in accordance with Interna- tional Financial Reporting Standards (“IFRS”) as issued by IASB and as adopted by the EU. The currency refe- rred to in this document is the Euro (“EUR”), unless otherwise specified. — Forward Looking Statements This report may include certain “forward-looking statements” and “forward-looking information” applicable under securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward-looking state- ments are frequently characterised by words such as “plan”, “expect”, “project”, “intend”, “believe”, “antici- pate”, “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 assump- tions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-loo- king statements. Assumptions upon which such forward-looking statements are based include all required third party regulatory and governmental approvals that will be obtained. Many of these assump- tions are based on factors and events that are not within the control of Atalaya and there is no assurance they will be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include changes in market conditions and other risk factors discussed or - 20 - 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 state- ments, 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-loo- king statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements. Atalaya Mining Plc.management report Annual ReportAnnual Report M A N A G E M E N T R E P O R T Atalaya Mining Plc. Operational Review 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. Atalaya also owns 10% of Proyecto Touro, a brownfield copper project in northwest Spain. In November 2019, Atalaya executed the option to acquire 12.5% of Explotaciones Gallegas del Cobre, S.L. the exploration property around Touro, with known additional reserves, for the amount of €500k. The Company’s and its subsidiaries’ business are to explore for and develop metal production operations in Europe, with an initial focus on copper. The strategy is to evaluate and prioritise metal production opportunities in several jurisdictions throughout the well- known belts of base and precious 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. Operational Review — Proyecto Riotinto The following table presents a summarised statement of operations of Proyecto Riotinto for the twelve month period ended 31 December 2019 and 2018. Units expressed in accordance with the international system of units (SI) Unit 2019 2018 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 All-in sustaining cost t t % % % t t t $/lb payable $/lb payable 10,366,903 10,753,598 10,453,116 9,819,839 0.49 23.01 87.09 0.49 23.31 88.30 195,072 180,661 44,950 42,114 42,935 40,306 1.80 2.14 1.94 2.26 Notes: There may be slight differences between the numbers in the above table due to rounding. - 21 - Atalaya Mining Plc. M A N A G E M E N T R E P O R T Annual Report — Mining and Processing — Proyecto Touro Mining Mining operations in 2019 progressed according to plan and at similar levels during the quarters. Ore mined during the year decreased slightly to 10.4 Mtpa compared to 10.8 Mtpa in the previous year. Processing During 2019 the plant processed 10.5 Mtpa of ore with an average copper head grade of 0.49% and a recovery rate of 87.09%. In comparison to the rates for 2018, throughput have increased however metallurgical recoveries have slightly decreased. Throughput has increased from 9.8 Mtpa in 2018 to 10.5 Mtpa in 2019. The annual copper recovery rate was 87.09% compared to 88.30% in 2018 driven by lower recovery rates achieved during Q4 2019 owing to the ramp-up of the SAG mill. Copper concentrate grade was 23.01%, in line with expectations and slightly below previous year´s grade 23.31%. Concentrate production for 2019 was 195,072 tonnes compared to 180,661 tonnes in 2018. Contained copper was 44,950 tonnes compared to 42,114 tonnes in 2018. Copper payable amounted to 42,935 tonnes from 40,306 tonnes in 2018. On-site concentrate inventories at 31 December 2019 were approximately 14,201 tonnes (4,667 tonnes in 2018) which has been fully sold in January 2020. All concentrate in stock was delivered to the port at Huelva. — Exploration and Geology Exploration and infill drilling continue in Atalaya pit and Cerro Colorado pit. Results from ongoing exploration drilling in 2019 were encouraging with 7,238 metres drilled at San Dionisio (in Atalaya pit) and 4,959 metres drilled at Filón Sur (in Cerro Colorado pit). Results of new Atalaya drill data continue defining and validating historical data of the copper stockwork in the area. — Expansion Project of Proyecto Riotinto The “Dirección Xeral de Calidade Ambiental e Cambio Climático”, (the General Directorate for the Environment and Climate Change of Galicia), announced on 28 January 2020 that a negative Environmental Impact Statement for Proyecto Touro (Declaración de Impacto Ambiental) had been signed. The short release stated that the decision was based on two reports which form part of a wider evaluation consis- ting of fifteen reports produced by different departments of the Xunta de Galicia. These two reports query the ability of the Company to guarantee that there will be no environ- mental impact of the Project on the Ulla River and related protected ecosystems which are located downstream. On 7 February 2020 the formal communication from the Xunta de Galicia was published in Galicia´s official journal. In the meantime the Company, along with its advisers, evaluates potential next steps for the Project, which could include an appeal of the decision made by the Xunta de Galicia, and/or the clarification of the questions raised by the reports. — Receipt of Ruling on a Claim made by an Environmental Group On 26 September 2018, Atalaya received notice from the Tribunal Superior de Justicia de Andalucía ruling in favour of certain claims made by environmental group Ecologistas en Accion (“EeA”) against the government of Andalucía (“Junta de Andalucía” or “JdA”) and Atalaya, as co-defendant in the case. In July 2014, EeA filed a legal claim to JdA with a request to declare the Unified Environmental declaration (in Spanish, Autorización Ambiental Unificada, or “AAU”) granted to Atalaya Riotinto Minera, S.L.U. dated 27 March 2014, null, which was required in order to secure the required mining permits for Proyecto Riotinto. The judgment, in spite of annulling the AAU on procedural grounds, made very clear that the AAU was correct and therefore, rejected the issues raised by EeA and confirmed the decision of JdA not to suspend the AAU. The JdA filed an appeal to the Supreme Court. Although the claim was against the JdA, Atalaya, being an interested party in the process, voluntarily joined as co-defendant to seek permission to appeal to the Supreme Court in Spain. The 15Mtpa Expansion Project was completed with the processing plant fully commissioned and operating at an increased annualised rate of 15Mtpa since January 2020. On 29 March 2019, Atalaya announced the receipt of notifi- cation from the Supreme Court in Spain stating that it does not have jurisdiction over the appeal made by the Junta de - 22 - Annual Report M A N A G E M E N T R E P O R T Atalaya Mining Plc. Andalucía and the Company, which voluntarily joined the appeal as co-defendant. The main legal consequence of the Supreme Court rejec- tion was the ruling of the Tribunal Superior de Justicia de la Junta de Andalucía (High Court of Justice of the Autono- mous Government of Andalusia) dated 26 September 2018 which compelled the environmental authority to repair the inaccuracies in the process. The Company received judgments relating to certain issues on the AAU and the Mining Permits from the Tribunal Superior de Justicia de Andalucía. The JdA continued the process of resolving the administrative issues identified and made public statements in support of Atalaya. The Company continued to operate the mine normally. On 30 January 2020 the JdA issued a favourable report in relation to the AAU of Proyecto Riotinto. The AAU is still on a short legal consultation period as the JdA has suspended all deadlines of the process as result of COVID-19 outbreak. After this process is completed, the JdA is expected to issue the validated AAU. This process will finally resolve all the administrative issues identified in the ruling of the Tribunal Superior de Justicia de Andalucía (“TSJA”) that took place on 19 September 2018 regarding the AAU. The validation of the AAU is a required step towards the automatic re-validation of the mining permit for Proyecto Riotinto. The Company continues to operate the mine normally and will update the market on any development in due course. Operational 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. The Company is aware that the COVID-19 pandemic may still have further effects of impact on how the Company can manage it operations and is accordingly keeping its guidance under regular review. Should the Company consider the current guidance no longer achievable, then the Company will provide a further update. Proyecto Riotinto operational guidance for 2020 is as follows: 55,000- 58,000 Contained copper (tonnes) 44,950 44,000 - 45,000 Ore processed (million tonnes) 15.1 10.5 10.6 Guidance 2020 Actual 2019 Guidance 2019(1) Guidance 2020 Actual 2019 Guidance 2019(1) (1) This is the updated guidance as of 17 October 2019. Copper head grade for 2020 is budgeted to average 0.45% copper, with a recovery rate of approximately 84% - 86%. Cash operating costs for 2020 are expected to be in the range of $1.95/lb – $2.05/lb. AISC for 2020 is expected to be in the range of $2.20/lb – $2.30 /lb copper payable. - 23 - - 23 - Atalaya Mining Plc. Atalaya Mining Plc. M A N A G E M E N T R E P O R T M A N A G E M E N T R E P O R T Annual Report Annual Report Financial Review Income Statement The following table presents a summarised consolidated income statement for the twelve months period ended 31 December 2019, with comparatives and comparison with the twelve months ended 31 December 2018. (Euro 000’s) Revenues from operations Total operating costs Corporate expenses Exploration expenses Care and maintenance expenditure Other income EBITDA Depreciation/amortisation and impairment Impairment loss on other receivables Net foreign exchange profit Net finance cost Tax charge Profit for the year Twelve months ended 31 Dec 2019 Twelve months ended 31 Dec 2018 187,868 (115,944) (6,718) (3,588) (373) 88 61,333 (23,025) (1,694) 350 (37) (6,207) 30,720 189,476 (128,923) (5,867) (1,021) (281) 158 53,542 (13,430) - 1,613 (182) (7,102) 34,441 - 24 - Revenues for FY2019 amounted to €187.9 million (FY2018: €189.5 million). Copper concentrate production during FY2019 was 195,072 tonnes (FY2018: 180,661 tonnes) and 185,545 tonnes of copper concentrate were sold in the same period (FY2018: 183,368). The realised price for the twelve- months period in 2019 was $2.73/lb copper compared to $2.95/lb copper in the same period of 2018. Concentrates were sold under offtake agreements in place. The Company did not enter into any hedging agreements in 2019 neither 2018. Exploration costs related to the Proyecto Riotinto for FY2019 amounted to €3.6 million compared to €1.0 million in the same period last year. Care and maintenance costs related to the Proyecto Riotinto for FY2019 amounted to €0.4 million compared to €0.3 million for FY2018. EBITDA for FY2019 amounted to €61.3 million compared to EBITDA of €53.5 million for FY2018. Depreciation, amortisation and impairment of assets amounted to €23.0 million for FY2019 (FY2018: €13.4 million). The higher cost was mainly driven by the impairment of intangibles in Cobre San Rafael, S.L. (€6.9 million) which resulted from the negative Environ- mental Impact Statement for Proyecto Touro formally communicated by the Xunta de Galicia and an impairment of other investments (€1.7 million). Net finance costs for FY2019 amounted to negative €37k (FY2018: negative €0.2 million). Operating costs for FY2019 amounted to €115.9 million compared to €128.9 million in FY2018. Lower costs in 2019 were driven by efficiencies in maintenance costs and technical services. Cash costs of $1.80/lb payable copper for FY2019, lower than $1.94/lb payable copper in the same period last year. All-in sustaining costs for FY2019 were US$2.14/lb payable copper compared to US$2.26/ lb payable copper in the FY2018. Sustaining capex for FY2019, included in capital expenditure, amounted to €9.8 million (FY2018: €8.0 million). Sustaining capex accounted for development programmes at the perimetric channel of tailings storage facility, optimisa- tion of the flotation circuit. Corporate costs for FY2019 were €6.7 million compared to €5.9 million for FY2018. - 25 - Atalaya Mining Plc.management report Annual ReportAlternative Performance Measures Atalaya has included certain non-IFRS measures including “EBITDA”, “Cash Cost per pound of payable copper” “All In Sustaining Costs” (“AISC”) and “realised prices” in this report. Non-IFRS measures do not have any standardised meaning prescribed under IFRS, and therefore they may not be comparable to similar measures presented by other companies. These measures are intended to provide additional information and should not be consi- dered 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 opera- ting costs, and off-site costs inclu- ding 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, expen- diture on rehabilitations, 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 discounts and other features governed by the offtake agreements of the Group and all discounts or premia provided in commodity hedge agreements with financial institutions, expressed in USD per pound of payable copper. Realised price is consistent with the widely accepted industry standard definition. - 26 - Atalaya Mining Plc.management report Annual ReportAnnual Report M A N A G E M E N T R E P O R T Atalaya Mining Plc. Financial position (Euro 000’s) ASSETS Non-current assets Other current assets Tax refundable Cash and cash equivalents Total Assets Shareholders’ equity LIABILITIES Non-current liabilities Current liabilities Total liabilities Total equity and liabilities 31 Dec 2019 31 Dec 2018 379,077 54,229 1,924 8,077 443,307 317,456 65,219 60,632 125,851 443,307 337,503 34,581 - 33,070 405,154 286,374 59,564 59,216 118,780 405,154 — Assets — Liabilities Total assets were €443.3 million as at 31 December 2019, compared to €405.2 million as at 31 December 2018, an increase of €38.1 million. The Group’s significant assets are its mining rights and mining plant at Proyecto Riotinto. Non-current assets increased mainly due to the Expansion Project despite of a negative impact from the impairment of Proyecto Touro. Other current assets as at 31 December 2019 amounted to €54.2 million (2018: €34.6 million), out of which €32.8 million (2018: €23.7 million) related to trade and other receivables and €21.3 million (2018: €10.8 million) related to spare parts and ore in stockpile classified as inventories. Trade and other receivables comprise €8.8 million of sales of copper concentrate receivables from third parties (2018: €4.5 million), €8.9 million (2018: €2.5 million) related to sales of copper concentrate receivables from related parties, €14.4 million (2018: €13.7 million) related to VAT due from authorities in Spain and Cyprus; €0.6 million (2018: €0.7 million) related to prepayments and other current assets amounted to €0.1 million (2018: €1.1 million). Non-current liabilities stood at €65.2 million as at 31 December 2019 compared to €59.6 million as at 31 December 2018. Non-current liabilities mainly represent the Deferred Consideration to Astor amounting to €53.0 million as at 31 December 2019 (2018: €53.0 million). In addition to the Deferred Consideration, non-current liabilities included the rehabilitation provision of €6.6 million (2018: €6.5 million), the long term portion of leases following the adoption of IFRS 16 of €5.3 million (2018: nil) and trade payables of €13k (2018: €0.1 million). Current liabilities amounted to €60.6 million at 31 December 2019 (2018: €59.2 million). Circa. 95% of current liabilities balance is comprised by trade and other paya- bles amounting to €57.5 million (2018: €57.3 million) out of which €52.4 million related to suppliers (2018: €53.1 million); €4.9 million related to accruals (2018: €3.4 million) and €0.3 million (2018: €0.8 million) related to land options and mortgage. Other current liabilities include the short term portion of leases and current tax liabilities. - 27 - Atalaya Mining Plc. M A N A G E M E N T R E P O R T Annual Report Liquidity and Capital Resources Atalaya monitors factors that could impact its liquidity as part of Atalaya’s overall capital mana- gement strategy. Factors that are monitored include, but are not limited to, the market price of copper, foreign currency rates, production levels, operating costs, capital and administrative costs. The following is a summary of Atalaya’s cash position as at 31 December 2019 and 2018, and cash flows for the twelve months ended 31 December 2019 and 2018. — Liquidity Information Unrestricted cash and cash equivalents as at 31 December 2019 decreased to €8.1 million from €32.8 million at 31 December 2018. The decrease in cash balances is mainly as result of the cash flow from investing activities in FY2019. Cash balances are unrestricted and include balances at corporate and operational level. Restricted cash at 31 December 2019 has been reclassified to non-current trade and other receivables since the deposit related to restricted cash is considered to be long term. As at 31 December 2019, Atalaya reported a working capital surplus of €3.6 million, compared to a working capital surplus of €8.4 million at 31 December 2018. The main liability of the working capital is trade payables related to Proyecto Riotinto contractors. The decrease was motivated by higher current tax liabilities and the lease impact in 2019. Liquidity (Euro 000’s) Unrestricted cash and cash equivalents at Group level Unrestricted cash and cash equivalents at Operation level Restricted cash Working capital surplus 31 December 2019 31 December 2018 1,730 6,347 - 3,598 24,357 8,463 250 8,435 — Overview of the Group’s Cash Flows Cash and cash equivalents decreased by €25.0 million in the twelve months period ended 31 December 2019. This decrease was due to cash from operating activities amounting to €37.9 million, cash used in investing activities amounting to €62.4 million and cash generated by finan- cing activities totalling negative €0.6 million. Cashflow (Euro 000’s) Cash flows from operating activities Cash flows used in investing activities Cash flows from financing activities Net (decrease)/increase in cash and cash equivalents Cash generated from operating activities before working capital changes was €62.5 million. Atalaya increased its trade receivables by €9.9 million, its trade payables balance in the period by €1.2 million and its inventory levels by €10.5 million. Investing activities in 2019 amounted to €62.4 million, mainly relating to the Expansion Project of Proyecto Riotinto and sustaining Capex. Financing activities in 2019 amounted to negative €0.6 million and related to the impact of leases as result of the application of IFRS 16. Twelve months ended 31 Dec 2019 Twelve months ended 31 Dec 2018 37,934 (62,351) (576) (24,993) 55,333 (65,712) 593 (9,786) - 28 - Annual Report M A N A G E M E N T R E P O R T Atalaya Mining Plc. excess cash (after payment of operating expenses, sustai- ning capital expenditure, any senior debt service require- ments and up to US$10 million per annum (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 Assign- ment). “Excess cash” is not defined in the Master Agree- ment leaving ambiguity as to how it is to be calculated. On 2 March 2020, the Company filed an application in the High Court to seek clarity on the definition of “Excess Cash”. A preliminary hearing is due to take place on 22 May 2020. As and when a substantive hearing takes place, the Company expects to have clarity on the definition of Excess Cash and the payment schedule of the Deferred Consideration and the Loan Assignment. As at 31 December 2019, no consideration has been paid. The amount of the liability recognised by the Group and Company is €53 million (€43.9 million + €9.1 million) and €9.1 million respectively. The effect of discounting remains insignificant, in line with prior year’s assessment, and therefore the Group has measured the liability for the Astor deferred consideration on an undiscounted basis. Critical accounting policies, estimates, judgements, assumptions and accounting changes The preparation of Atalaya’s Financial Statements in accordance with IFRS required management to made esti- mates and assumptions that affected amounts reported in the Financial Statements and accompanying notes. There is a full discussion and description of Atalaya’s critical accounting estimates and judgements in the audited financial statements for the year ended 31 December 2019 (Note 3.4). Foreign Exchange In FY2019, Atalaya recognised a foreign exchange gain of €0.4 million (FY2018 gain: €1.6 million). Foreign exchange gain 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: 31 Dec. 2019 31 Dec. 2018 Average rates for the periods Spot rates as at GBP – EUR 0.8777 0.8847 USD – EUR 1.1195 1.1810 GBP – EUR 0.8508 0.8945 USD – EUR 1.1234 1.1450 During 2019 neither 2018, Atalaya did not have any currency hedging agreements. Ruling on the Astor Litigation and Deferred Consideration In September 2008, the Group moved to 100% ownership of Atalaya Riotinto Mineral S.L. (“ARM”) (and thus full ownership of Proyecto Riotinto) by acquiring the remai- ning 49% of the issued capital of ARM. At the time of the acquisition, the Group signed a Master Agreement (the “Master Agreement”) with Astor Management AG (“Astor”) which included a deferred consideration of €43.9 million (the “Deferred Consideration”) payable as consideration in respect of the acquisition among other items. The Company also entered into a credit assignment agreement at the same time with a related company of Astor, Shor- thorn AG, pursuant to which the benefit of outstanding loans was assigned to the Company in consideration for the payment of €9.1 million to Shorthorn (the “Loan Assignment”). The Master Agreement has been the subject of litigation in the High Court and the Court of Appeal that has now concluded. As a consequence, ARM must apply any - 29 - Risk Report Principal Risks and Uncertainties 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-looking statements relating to Atalaya. Atalaya´s principal risks have continued to fall within four categories: • Strategic risks; • Commercial and financial risks; • External risks; and • Operational risks Strategic Risks Nature of the Risk Mitigation of Risk Single asset, single commodity and single country risk The Company´s current production relates to Proyecto Riotinto, which is its single producing asset. Atalaya produces and sells copper concen- trate with silver by-product. Any interruption in the producing asset may impact the Group’s results. e c n a t r o p m I Lack of replacement of reserves Atalaya must continually replace and expand its mineral resources. The depletion of its mineral reserves may not be offset by future discove- ries or acquisitions. Atalaya is constantly evaluating acquisitions in the mining sector, to increase the number of operations under management. The Group’s Business Development Committee reviews potential growth opportuni- ties and transactions, and approves or recommends them within autho- rity levels set by the Board. On-going exploration campaigns currently in areas close to Proyecto Riotinto. During 2019, Atalaya incurred in a total of EUR €3.6 million in explora- tion activities. Underestimation of capex, finance and license to operate Atalaya’s capital expenditure in Proyecto Riotinto may require more capital than anticipated and/ or Atalaya may have difficulties in obtaining required permitting and financing, which could delay project developments. Expansion of Proyecto Riotinto have been completed in 2019. Atalaya monitors project controls to ensure that we deliver approved projects on time, on budget and in line with the defined specifications. High Medium Low - 30 - Atalaya Mining Plc.management report Annual Report Annual Report m a n a g e m e n t r e p o r t Atalaya Mining Plc. Commercial and financial risks Nature of the Risk Mitigation of Risk Significant changes to commodity prices A decline in the price of copper and other metals in world markets, which can fluctuate widely, could adversely affect Atalaya´s business, operating results and prospects. Atalaya is constantly monitoring commodity prices and revisiting hedging strategies policies. Improved operating efficiencies and production driving down unit costs. Limited number of customers 100% of Atalaya´s concentrate production is sold to three offtakers. Offtakers’ business can significantly impact its operations. Close contact with offtakers to ensure we understand how they run their business. Lack of control over certain key inputs Atalaya may be unable to control the availability of key inputs such as fuel, cement and explosives, which are beyond management’s influence. The purchase department of the operating company is continually expanding their network influence to ensure supplier chain. I m p o r t a n c e Foreign exchange risk Atalaya’s operations are subject to complex and evolving environmental laws and regulations and changes may increase its running costs. Volatility in the EUR:US$ exchange rate affects the Group’s profitability. Liquidity risk Atalaya’s operations and business model are subject to variety of financial risks of third parties. Atalaya is continually monitoring exchange rate and revisiting hedging strategies policies. Manage the liquidity and financing structure according with the busi- ness model. Maintain a diverse portfolio of banks and funds. High Medium Low - 31 - Atalaya Mining Plc.company overviewAnnual Report External risks Nature of the Risk Mitigation of Risk Monitoring all legal and political decisions that might impact the mining sector, by participating among peer miners in the area in professional agencies and meetings. Partner with government and local municipalities. AAU and mining permit have been monitored by the company to achieve a successful result. Atalaya is monitoring the current situation of the environmental permit at Proyecto Touro. The Group has no operations or material exposure to the UK., Brexit is not expected to have any appreciable impact on the Group. This position is kept maintained under review as Brexit discussions continue. Recurrent meetings and analysis performed by local advisors to ensure that Atalaya monitored and anticipated taxa- tion for significant business decisions. Monitoring commodities prices and inter- national economic variations The Group is continuously monitoring public health threats and takes necessary steps to protect the health and safety of its staff and minimise any disruption to its operations. The Group’s main measures are as follows: reduce all non-critical site visits and meetings with contractors, require employees to work remotely whenever possible and communicate any potential exposure to any health threat, follow any mandatory health and safety instructions and restrictions imposed or recommended by the Authorities to reduce exposure. It is also adhering to all measures implemented by the central and regional governments. e c n a t r o p m I Political, legal and regulatory developments Atalaya is 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. Atalaya is also subject to laws and regulations relating to taxation, customs and royalties that could have an adverse effect on its busi- ness, financial conditions and results of operations. Economic conditions General economic conditions or changes in consumption patterns may adversely affect Atalaya´s growth and profitability. In particular, the Chinese market, which has significant impact on the world’s copper demand. Public health threats Public health threats such as coronavirus (COVID-19) or other epidemics or pandemics could affect the operations of the Group, the operations of the Group’s customers and suppliers. A temporary stoppage was announced on 30 March 2020 and the restart of operations on 3 April 2020 as a result of measures taken by the Spanish Central Government in response to the COVID-19 outbreak. High Medium Low - 32 - Atalaya Mining Plc.management report Annual Report External risks (cont.) Nature of the Risk Mitigation of Risk Dependence on key infrastructure Atalaya is dependent on transportation facilities, infrastructure and certain suppliers, a lack of which could impact its production and development projects. Atalaya´s contractors are very reliable. Atalaya maintains contingency plans to ensure operations. Operational risks and hazards Operational risks and hazards may adversely impact Atalaya’s business, financial condition and result of operations, particularly: floods, natural disasters, industrial accidents, labour disputes, structural collapses, transpor- tations delays and earthquakes. Labour disruptions Atalaya may be adversely affected by labour disruptions. Atalaya constantly invests in health and safety and regularly analyses ways in which to make its mine safer. Atalaya has periodic meetings with its trade unions to discuss and agree on any changes to labour conditions and concerns. Ongoing training programmes. Operational risks Nature of the Risk Mitigation of Risk Water, electricity and other key supply shortages Atalaya’s mining operations depend on the availability of water, electricity and other key inputs. Atalaya monitors water consumption and water levels frequently. As the Company expands, Atalaya will need more water and electricity. Atalaya has undertaken a water use enlargement project in which the Company will be incrementing their water resources by 50%. Complexity of environmental laws Atalaya’s operations are subject to complex and evolving environmental laws and regulations and changes may increase its running costs. Atalaya has a dedicated team that review any new laws and changes regu- larly. Atalaya has not been highlighted of any imminent change. Cyber security A cyber-attack could affect our systems, data bases and regular activities. Atalaya’s IT department is regularly reviewing the internal process to identify any potential attack and to minimise the impact. Additionally, the structure of the systems has been reviewed during 2019. I m p o r t a n c e I m p o r t a n c e High Medium Low In addition to the above commercial and finance risks, please refer to Note 3 of the financial statements for further details on the finance risk management policy adopted by the Group and the Company. - 33 - - 33 - Atalaya Mining Plc.management report Annual Report Atalaya Mining Plc. Atalaya Mining Plc. M A N A G E M E N T R E P O R T M A N A G E M E N T R E P O R T Annual Report Annual Report Internal Controls Going Concern 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 all risks completely 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 effecti- veness of the internal controls are through the Audit and Financial Risk Committee and Physical Risk Committee and the executive 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 structure 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 statements and press releases issued as material events unfold. On 11 March 2020, the World Health Organisation declared the Coronavirus COVID- 19 outbreak to be a pandemic in recognition of its rapid spread across the globe. Many governments are taking increasingly stringent steps to help contain, and in many jurisdictions, now delay, the spread of the virus, including: requiring self-isolation/ quarantine by those potentially affected, implementing social distancing measures, and controlling or closing borders and “locking- down” cities/regions or even entire countries. The crisis and the actions taken by governments have resulted in significant disruption to business operations, consumption patterns worldwide, equity markets and significant volatility in commodities prices, including copper, with prices declining below the Group’s ASIC level in March 2020. Furthermore, in Spain, where the Company has its single producing asset, the Government issued a Royal Decree on 14 March 2020 to declare a nationwide lockdown to reduce the impact of the COVID-19 pandemic. On 29 March 2020, the Spanish Government issued a new Royal Decree implementing enhanced measures to protect the people from the virus. The new Decree stipulated that only emplo- yees from a short list of essential industries are allowed to continue working from 30 March 2020. Mining was excluded as an essential industry and consequently the Proyecto Riotinto site was required to halt operations for a short period until 3 April 2020 when mining operations were permitted to restart. The significant impact on copper prices and the stoppage of Proyecto Riontinto as a result of the Royal Decree will impact revenues for the year ended 31 December 2020. The uncertainty surrounding future copper prices and if - 34 - Annual Report M A N A G E M E N T R E P O R T Atalaya Mining Plc. Proyecto Riotinto will be required to be halted again for a longer period makes difficult to determine and quantify the operational and financial impact the situation may cause to the business going forward. The Directors have considered and debated different possible scenarios on the Company’s operations, financial position and forecast for a period of at least 12 months since the approval of these financial statements. Possible scenarios range from (i) further disruption in Proyecto Riotinto; (ii) market volatility in commodity prices; and (iii) availability of existing credit facilities. The Company has increased its cash balance from €8.0 million as at 31 December 2019 to €41.7 million as at 31 March 2020 by drawing down on existing credit facilities. The Directors, after reviewing these scenarios, the current cash resources, forecasts and budgets, timing of cash flows, borrowing facilities, sensitivity analyses and consi- dering the associated uncertainties to the Group’s opera- tions have a reasonable expectation that the Company has adequate resources to continue operating for the foreseeable future. Accordingly, the consolidated financial statements continue to be prepared on a going concern basis (see Note 2.1(b)). Atalaya had a legal claim affecting their environmental authorisation AAU, however the Junta de Andalucía (“JdA”) issued in January 2020 a favourable report in relation to the AAU of Proyecto Riotinto. The AAU continues in a short legal consultation period exclusively with parties involved in the process, and the Company expects to have the AAU revalidated with no impact on the operation. Creditors’ Payment Terms The Group does not have a specific policy towards its suppliers and does not follow any code or standard prac- tice. 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. Political and Charitable Donations The Group made no political and no charitable donations during the year ended 31 December 2019 (2018: €nil). However, it often contributes financing for projects that benefit local communities in cooperation with local munici- palities based on our Corporate Social Responsibility. Research and Development Activities For details on research and development activities carried out by the Group and Company (refer to section (ii). Future developments of the Group and Company to the Manage- ment Report). Existence of Branches The Group does not operate any branches. Share Capital Structure During 2019, the Company had the following weighted average number of shares outstanding and commitments to issue shares: Weighted No. of Ordinary Shares Ordinary shares Options Diluted 137,339,126 1,896,516 139,235,642 During 2019, Atalaya did not increase its share capital (2018: increase of 2.1 million shares) but granted 1,900,000 share options (2018: nil). Details on authorised and issued share capital are disclosed in Note 22 of the consolidated financial statements. Proposal in Relation to the Distribution of Profits and Dividend The Directors do not recommend the payment of a divi- dend for the year (2018: €nil). - 35 - Atalaya Mining Plc. M A N A G E M E N T R E P O R T Annual Report Our business model and strategy 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 its success. Our values Importance of people à Importance of Safety, Health, Environment & Security Strategic pillars à Strong work force with longstanding employees Our people Operational excellence à Importance of cost management à Establishing high performance à Operating to a world-class standard à Maximising production capacity Creating value à Increase asset value under management à Focusing on generating free cash flows à Focusing on creating value for shareholders à Allocating capital efficiently à Creating opportunities for growth Social projects à Working closely with communities à Contribute to community development - 36 - Our business Our future Support to local communities Our people and relationships Key driver Achievements Principal Risks • 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. • Experienced mining team to ensure proper safety, health and security policies. • Focused on creating a high-performance culture where its people are its core asset. • Atalaya has a flat management structure with accessible people. • Atalaya’s personnel are primarily based at site. • Focused on improving its relationships with local government and communities. • Limited presence in the media, with efforts focused on direct contact with people. Cut expenditures to reduce environmental impact 450 employees 99% based at mine site Socially responsible through Fundación Atalaya Riotinto 2019 achievements Increased the number of employees at Proyecto Riotinto LTI and LTIFR improved in 2019 compared with 2018 2020 priorities Further improve health and safety statistics Operational risks External risks Our business Key driver Achievements Principal Risks • World-class processing plant in Europe to maximise value of the Group, thereby increasing free cash flows from operations. €61.3m EBITDA 45k tonnes of Cu produced 2019 achievements Production at Proyecto Riotinto above guidance. All-in sustaining cost improvement above expectations. The Junta de Andalucía issued a favourable report in relation to the AAU of Proyecto Riotinto in January 2020. 2020 priorities Consolidate our growth with a production plant of 15Mtpa. Maintaining operational continuity in view of COVID-19. Financial risks Operational risks Our future Key driver Achievements Principal Risks • Evaluation of existing capacity of each project and investment in exploration to replace reserves deployed • Searching and evaluating projects around the world share price of 192.0 pence as at 31 December 2019 2019 achievements Investment of €9.8 million (2018: €8.0 million) in sustaining Capex in Proyecto Riotinto. Finalised 15Mtpa expansion project according with budget and timeline. 2020 priorities Continuing exploration works to expand the reserves and resources of Proyecto Riotinto. Expecting AAU validation by the JdA. Monitoring new opportunities related with metals. Working to understand and resolve environmental permitting decision on Projecto Touro. Stategic risks External risks - 37 - Atalaya Mining Plc.management report Annual ReportAtalaya Mining Plc. M A N A G E M E N T R E P O R T Annual Report Atalaya’s Response The Group had no hedges on commodities prices during 2019. At the date of this report, the Group is fully exposed to copper prices with no commodities hedging agreement in place. — Foreign Exchange Foreign exchange rate movements can have a significant effect on Atalaya’s operations, financial position and results. Atalaya’s sales are denominated in U.S. dollars (“USD”), while Atalaya’s operating expenses, income taxes and other expenses are denominated in Euros (“EUR”), and to a much lesser extent in British Pounds (“GBP”). 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 positively impacted by favourable rate against USD, the currency in which all sales of the Group are denominated. Management is continuously monitoring currency rates and evaluating possible currency hedging to minimise risk. Market Overview Market Price In 2019, copper traded between US$2.60 and US$2.93 per pound of copper. The spot price for copper was US$2.65 as at 2 January 2019 and US$2.79 as at 31 December 2019, reflec- ting an increase of 5.3% for the period. The average market price for 2019 of $2.72/lb, 7.2% lower than the average for 2018. The average copper price for Q1 2020 was $2.55 and the spot price at 31 March 2020 was $2.18, reflecting the economic uncertainty resulting from the COVID-19 outbreak. The market copper price has a significant impact on Atalaya`s ability to generate positive opera- ting cash flows. — Realised Copper Prices The average prices of copper for 2019 and 2018 were: (USD) 2019 2018 Realised copper price per lb Market copper price per lb (period average) 2.73 2.72 2.95 2.93 Realised copper prices for the reporting period noted above have been calculated using payable copper and including both provisional invoices and final settlements of quotation periods (“QPs”) together. Higher realised prices than market copper prices are mainly due to the final sett- lement of invoices where the QP was fixed in the previous quarter due to a short open period when copper prices were higher. The realised price during the year, excluding the QP, was approximately $2.73/lb. - 38 - Annual Report M A N A G E M E N T R E P O R T Atalaya Mining Plc. Statement of Corporate Governance The Group and the Company give special attention to the application of sound corporate governance policies, prac- tices and procedures. Corporate Governance is the set of procedures followed for the proper management and administration of the Group. Corporate Governance rules the relationship between the shareholders, the Board of Directors and the management team of a company. The QCA code has been adopted by the Group and the Company since its inception for Directors’ dealings which is appropriate for a TSX and AIM listed company. The Direc- tors comply with Rules 21 and 31 of the AIM Rules relating to Directors’ dealings and will continue to take all reaso- nable steps to ensure compliance by the Group’s applicable employees as well. - 39 - Corporate Governance Code The QCA code is inherent to the Company´s foundation and Atalaya´s medium and long-term success depends on its compliance with the QCA code and with its forward looking and long-term objectives. The Company has adopted a code of standards since its inception for Directors’ dealings which is appropriate for a TSX and AIM listed company. The Directors do 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. The board reviews and is in frequent contact with the CEO and with other representatives of the Company to see if the Company and its employees are in a healthy working environment and to check if the state of the culture represents its values. The Company is incorporated in Cyprus, so it is subject to Cypriot laws and regulations, and is subject to the regulations of AIM and TSX, its trading platforms. There is no conflict there and in fact makes it easier to be more transparent and straightforward with its shareholders. Atalaya Mining Plc. M A N A G E M E N T R E P O R T Annual Report Quoted Company Alliance (QCA) The QCA is an independent member- ship that “champions the interests of small to mid-size listed companies”. The QCA represents companies employing around 1.4 million workers and they set out the guidelines of independence and transparency for said businesses. In 2018, the QCA issued an updated version of its Corporate Governance Code. This new and updated version of the Code includes 10 corporate governance principles that compa- nies should follow, and step-by-step guidance on how to effectively apply these principles. Please refer to the Corporate Gover- nance Report for further details. Directors’ Responsibilities for the Financial Statements Cyprus company law states that the Directors are responsible for the preparation of 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 finan- cial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; and Auditors 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 set their remuneration will be proposed at the next Annual General Meeting. Events after Reporting Period Any significant events that occurred after the end of the reporting period are described in Note 34 to the finan- cial statements. • 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 reasonable steps for the prevention and detection of fraud and other irregularities. Legislation in Cyprus governing the preparation and disse- mination of the financial statements may differ from legislation in other jurisdictions. — Composition, Responsibilities and Remuneration of the Board of Directors The members of the Board of Direc- tors as at 31 December 2019 and on the date of this report are presented in the Corporate Governance report. There were no significant changes in the assignment of responsibilities of the members of the Board of Directors. For further details on the composi- tion, responsibilities and remunera- tion of the Board of Directors, please refer to the Corporate Governance report. By Order of the Board of Directors, Roger Davey Chairman Nicosia, 6 April 2020 - 40 - - 41 - Atalaya Mining Plc.management report Annual ReportAtalaya Mining Plc. s u s t a i n a b i l i t y r e p o r t Annual Report - 42 - - 42 - Atalaya Mining Plc.management report Annual ReportAnnual Report s u s t a i n a b i l i t y r e p o r t Atalaya Mining Plc. Sustainability Report 45 Social development 47 Health and Safety 47 Environment - 43 - - 43 - Atalaya Mining Plc.management report Annual ReportAtalaya Mining Plc. s u s t a i n a b i l i t y r e p o r t Annual Report - 44 - Atalaya Mining Plc.sustainability reportAnnual ReportAnnual Report S U S T A I N A B I L I T Y R E P O R T Atalaya Mining Plc. Social development Overview Atalaya Mining is strongly committed with its Corporate Social Responsibility. In this regard, the management of the Company, supported by the Board of Directors, have integrated stan- dards and policies that operate across the whole organisation. These determine a strong will for an excellent performance in the way Atalaya´s operations affect people, the environment, and society. Our Communities Atalaya is devoted to being a responsible corporate citizen and is aware of its responsibilities as the most relevant productive player in its area. This circumstance highlights the importance of a well-tuned channel of communication with its stakeholders, in order to add value to its mining operations in accordance with the expectations and needs of its communities. Atalaya´s strategy to support the establishment of sustai- nable, long-standing operations is strongly attached to dealing with the environmental and social impact of its activities in a conscientious and delicate manner. This is achieved through ensuring that relations with governments, regional or local authorities, media, workforce, contractors and providers, and the society in general, are led by trans- parency and mutual trust, and an appropriate degree of interaction is encouraged. The result of the analysis of this continuous dialogue esta- blished with its stakeholders advises that even though the economic, social and environmental impact of the mining operations in Proyecto Riotinto are generally considered as very positive. Notwithstanding this, it is the Company´s responsible approach to opt for further involvement with the goals and aspirations of its communities. The most relevant goals are the efforts devoted to job creation, local development and diversification of the area. These goals are incorporated to Atalaya´s responsibility plans, which are implemented by its wholly owned Funda- ción Atalaya Riotinto, an organisation led by Proyecto Riotinto management that, after its third full year in operation, has built strong ties with the communities and developed numerous actions and programmes in order to assist and support the Riotinto Mining Basin communities. During 2019, Fundación Atalaya Riotinto has worked in four fields of action: Social Support, Culture & Heritage, Local Development & Education, and Health, Environ- ment & Sports. These four areas are worked on thanks to the collaboration with local associations and NGOs, the - 45 - Atalaya Mining Plc. S U S T A I N A B I L I T Y R E P O R T Annual Report programmes established with the various municipalities and the own initiatives managed by our Fundación Atalaya Riotinto. Atalaya has invested €0.5 million in 2019 in all these activities. Social Support Fundación Atalaya Riotinto is aware of the difficulties that part of the population, living in the mine´s surrounding areas, must deal with, and it has a commitment to assist when possible and alleviate such social problems. In this regard, Fundación Atalaya Riotinto establishes coopera- tion plans with charities, NGOs and local governments that address such issues. In 2019, Fundación Atalaya Riotino has supported programmes to assist people with Alzheimer Syndrome and their families, and the integration of an IT training classroom for people with disabilities. Also, Fundación Atalaya Riotinto has contributed with funds to support the acquisition, by a local charity, of a van that will allow groups of kids form disadvantaged areas to be transported to several educational activities. Atalaya has also sponsored a charitable golf tournament to benefit Huelva´s Food Bank, and has funded activities of Cruz Roja and Cáritas, in cooperation with the local government of Nerva to assist disadvantaged families with food, clothing and educational needs. Culture & Heritage The Riotinto Mining Basin is a place full of culture and heritage and it is considered as strategic by the commu- nity to preserve such wealth, be able to express itself and attract people to promote its economy. With this in mind, the Company has sponsored a regional music contest with the participation of hundreds of young musicians from official music schools; Atalaya has also sponsored the Cultural Week of Nerva´s official adults school. It has also signed agreements with the association of retired employees of Riotinto Mine, that represent more than 200 people, to contribute in the funding of some of their cultural activities. In cooperation with the city hall of Minas de Riotinto, Atalaya has provided the necessary funding for the opening of the Museum of the Town, which contains large scale models that represent the old town of Minas de Riotinto. In Campofrío, Atalaya has contributed to the refurbishment of the local church (XVII century), which is a relevant heritage site. Local Development & Education The development of economic areas so to not to be dependent on the mine is one of the main challenges that the region must address and that Atalaya perceives as its duty to support. This will be achieved by improving local infrastructures, promoting new businesses, improving local education and training for the local population. One of the main steps taken towards this objective is “Reto Malacate”, an initiative to reward the best business project to be identified in the region. In the 2019 edition, 10 ideas were presented, and the idea selected is the project for establishing an adventure tourism business that will use some of the great opportunities that the area provides. Other actions carried out in 2019 include cooperating with the city hall of Nerva, to provide the necessary funding for the reconstruction of a road that connects the town with some populated areas outside the town. Continuing with this involvement in education and entrepreneurship, the Company has extended the Language School Programme in cooperation with the city council of Nerva and has restarted the school visits programme of the mining region to Atalaya´s facilities. Atalaya has also reached agreements with the towns of Nerva and Campofrío, respectively, to repopulate an important street with palm trees, and advertising the town to attract tourism. Minas de Riotinto has started a renovation programme for some of their streets thanks to a programme sponsored by our Funda- ción Atalaya Riotinto. Nerva has also renovated two parks and changed some of their streetlights to LED. Berrocal has also invested funds coming from Fundación Atalaya Riotinto in fixing some of their infrastructure, including streets and rural roads. Health, Environment & Sports Atalaya is interested in promoting a better environment and supports a health culture based on prevention, self- care and the practice of sports. In this regard, Fundación Atalaya Riotinto has developed and sponsored several initiatives. For example, in collaboration with Asociación Matilde, the Company has been involved in a programme consisting of restoring an organic local garden and selling the vegeta- bles to local markets. People involved in this project come from families at risk of social exclusion. In El Campillo, the company has supported a project to create new facilities for abandoned dogs. In Nerva, Atalaya has cooperated with its municipality to fund the acquisition of new equipment to practice crossfit. Atalaya has also taken part into the GAVI program (Business Alliance for Childhood Vaccination) in cooperation with Fundación La Caixa and Bill & Melinda Gates Foundation. Atalaya has sponsored also many sport events, and local sport teams, throughout the entire year. - 46 - Annual Report S U S T A I N A B I L I T Y R E P O R T Atalaya Mining Plc. Health and Safety In the last quarter of 2019, the programme and lines of work planned for more compre- hensive action on health and safety at work were carried out. This programme has enabled Atalaya to end the 2019 year meeting its goals in terms of occupational accidents and reaching the lowest numbers of accidents since the start of operations. Index of severity and frequency rates of 0.15 and 6.10. The Company has significantly improved its rates compared to previous years. These improvements have been obtained through the following lines of work in the area of occupational risk prevention, supported by all departments: • Total implementation in the investigation of accidents to reach the root cause through the “5 why” methodology. • Implementation of a two-year theoretical and practical training programme to all company’ employees. This training was based on risk analysis and preventive measures in the protocols for high risk jobs mainly: working at height, reduced spaces and auto-breathing equipment, insulation, blocking and mechanical lifting of loads. • OSHAS qualification standards: 18001-2007 of the occupational health and safety management systems. • Regular meetings, involving employees’ representatives to discuss aspects of safety improvement conditions for employees. Furthermore, Atalaya set up a team to evaluate the psychosocial impacts in which these representatives have experienced. Likewise, the emergency drill plan has been fully accom- plished with three exercises being carried out in 2019, in order to learn about and improve the means of action in critical situations at the facility. Improvement of the circulation of information relating occupational safety and health using information screens located at strategic points in the mining facility, sending news and key occupational risk prevention messages. At the same time, the Company formed an emergency a first response brigade, made up of volunteers whose are being trained and coached in several disciplines such as rescue from heights, fire protection and first aid. Atalaya has also invested in preparing premises to house specific emergency materials. In 2020, Atalaya will continue with the “zero damage” policy, re-inforcing all the actions that have been taken and increasing safety in all its work. As such, it plans to esta- blish the discipline of field leadership, through an ambitious programme of audits, preventive observations, inspections and the “Stop and Talk” methodology. Environment Water management and mining facilities improvement have resulted in a 46% decrease in water pollution recorded prior to the start of Proyecto Riotinto in 2015. In terms of air quality, there is a continued decline in particle levels in the surrounding population (12% average reduction in these levels since 2017), as a result of the enormous efforts made by Atalaya to reduce particle emissions into the atmosphere as a consequence of its operation, such as the acquisition of four pieces of high tonnage equipment for the continuous irrigation of the mining tracks, the conducting of a study of particle emis- sions to the atmosphere in the surroundings of the mining region surrounding Riotinto and the hiring of a weather forecasting and air quality service. In 2019, in the town of Nerva, where air quality data is available prior to the start of the Proyecto Riotinto, particle - 47 - Atalaya Mining Plc. S U S T A I N A B I L I T Y R E P O R T Annual Report levels were recorded close to the concentrations of geochemical background in PM10 recorded between the years 2009-2014, and even in the regional background obtained in Doñana Natural Park. The data obtained in 2019 (a year that was hydrologically very dry, which faci- litates the production of emissions into the atmosphere), demonstrate the effectiveness of the atmospheric particu- late study carried out by ARM. Regarding the management of non-mining waste, in 2019 there has been a decrease in the production of waste from the operation in Proyecto Riotinto. In 2019, 11.3kg/t of waste of concentrate produced in 2019 was generated in Proyecto Riotinto, compared to an average of 13.4 kg/t in previous years, representing a 16% reduction in non-mining waste produced in 2019. Efforts made by the environment department to raise awareness among employees regarding recycling have been accomplished as there is a high percentage of waste destined for recycling (82%). In terms of quality management, the department of environ- ment, quality and historical heritage has continued to lead in 2019 the process of implementing an Integrated Quality Management System, so Atalaya sets itself standards of quality management, environmental management and prevention of occupational risks higher than those legally enforceable, pursuing excellence as a main objective. During 2019, the certification process of The Integrated Quality Management System of Atalaya has been under- taken, which is expected to be completed in the first half of 2020.,The leadership and commitment of Company mana- gement stand out as strengths in this certification process of the system due to their active participation in the audit process. The high level of training and commitment of the technical staff must also be noted. Regarding historical and archaeological heritage, a study and documentation of the archaeological site of the Look Out has been completed, providing remarkable results from the point of view of the spatial and chronological definition of the city of “Urium”, which is one of the most relevant models of active metallurgical deposits world- wide, since the Tartessos era. The most majestic era of the Tartessos during the Roman period since the Roman period, from the 3rd century B.C. until the end of the 2nd century A.D. Among the building elements exhumed in the excavation are two Roman metallurgical furnaces from the 1st century A.C. whose uniqueness and exceptional state of preserva- tion ensures they are of significant scientific interest. Said will be extracted and placed in a museum. - 48 - Targets for 2020: Water Quality It is planned to carry out the calculation of the water footprint of the mining project, as a tool for the improvement of the water management system currently in use. Air Quality As part of the continuous enhancement process undertaken since the beginning of the opera- tions in Riotinto, in 2020 the objective is to fina- lise actions on air quality improvement in the area of La Dehesa (located next to the industrial complex of Proyecto Riotinto). Carbon Footprint In addition, in 2020 the carbon footprint of the mining project will be available. It will be used to implement actions to achieve an improvement in the sustainability of the activity. Non-mining Waste The Company has integrated actions to improve the management of waste produced in its facili- ties in order to continue the downward trend in the production of non-mining waste and a more sustainable activity. Among these actions, the project of construction of a new non-hazardous waste park and a specific training in waste management to the entire staff of the Company. Historical and Archaeological Heritage The study and documentation of the Cortalago site (also belonging to the ancient city of Urium) will continue with the target of completing this intervention in 2021. - 49 - Atalaya Mining Plc.sustainability reportAnnual ReportAtalaya Mining Plc. c o r p o r a t e g o v e r n a n c e r e p o r t Annual Report - 50 - Annual Report c o r p o r a t e g o v e r n a n c e r e p o r t Atalaya Mining Plc. Corporate Governance Report 52 Board of Directors 63 Audit and Financial Risk Committee 65 Corporate, Governance, Nominating and Compensation Committee Report 70 Physical Risks Committee Report - 51 - Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report Board of Directors Board Structure Board of Directors Committees Audit and Financial Risk Committee (“AFRC”) Corporate Governance Nominating Compensation Committee (“CGNCC”) Physical Risk Committee (“PRC”) Summary of Committee responsibilities Summary of Committee responsibilities Summary of Committee responsibilities Reviews and monitors financial statements Reviews Directors’ compensa- tion and performance Reviews Corporate Governance of Atalaya and practices, inde- pendence, charters’ review, and structure Compensation and performance of officers of Atalaya Oversees safety, health, environ- ment 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 Reviews Company’s public disclosure of financial information Reviews estimates and judge- ments that are material to reported financial information Oversees the auditors arrange- ments and performance Reviews internal and external risks of the Company Dr. Hussein Barma (Chairman) Mr. Roger Davey Mr. Stephen Scott Stephen Scott (Chairman) Dr. Jose Sierra (Chairman) Mr. Roger Davey Dr. Hussein Barma Mr. Damon Barber Mr. Roger Davey Mr. Stephen Scott - 52 - Annual Report Annual Report C O R P O R A T E G O V E R N A N C E R E P O R T C O R P O R A T E G O V E R N A N C E R E P O R T Atalaya Mining Plc. Atalaya Mining Plc. Directors The names and particulars of the qualifications and experience of each director are set out below. 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 next AGM and offer themselves for re-election. — Roger Davey Non-executive Chairman of the Board Mr. Davey has over forty years’ expe- rience 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 subsidiaries in Argentina; operations 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 Highfield Resources Ltd., Central Asia Metals plc and Tharisa plc. — Alberto Lavandeira Managing Director and Chief Executive Officer 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 Insti- tute of Materials, Minerals 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. Mining experience, operations, proces- sing, exploration, Capital market, UK Market, International business, leader- ship, strategic, fund raising, M&A, governance, project management. 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 development 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. - 53 - - 53 - Name ......................................... Roger Davey Role ........................................... Chairman Independent Years of service ............................ Since May 2010 Executive ................................... Non-executive director Time commitment ........................ At least 75% meetings schedule Skills .......................................... Mining experience, operations, processing, exploration, Capital market, UK Market, International business, leadership, strategic, fund raising, M&A, governance, project management. Name ......................................... Alberto Lavandeira Role ........................................... Chief Executive Officer Years of service ............................ Since May 2014 Executive ................................... Executive Time commitment ........................ 100% Skills .......................................... Mining experience, operations, processing, exploration, commer- cial, Capital market, International business, leadership, strategic, fund raising, M&A, governance, project management, permitting, govern- ment relations, CEO, sustainability. Atalaya Mining Plc. Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report Annual Report — Damon Barber Non-executive Director 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 Engi- neering 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. — Dr. Hussein Barma Non-executive Director 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 until May 2018 he was a steering group member of the UK Financial Reporting Council’s Financial Reporting Lab. He is a non-executive Director of Chaarat Gold Holdings Limited. Dr. Barma is the Chair of the Audit and Financial Risk Committee, and a member of the Corporate Gover- nance Nominating Compensation Committee. — Jesús Fernández Non-executive Director Mr. Fernandez is head of the M&A team for Trafigura. He joined Trafi- gura in 2004 and has fifteen years of experience in mining investments and financing. Previously, he was a director of Nyrstar, Tiger Resources Limited, Cadilac Ventures, Anvil Mining Limited and Iberian Minerals Corp. plc. Name ............................................. Damon Barber Role ............................................... Non-Independent Years of service ................................ Since Sep 2015 Executive ....................................... Non-executive director Time commitment ............................ At least 75% meetings schedule Skills .............................................. Mining experience, operations, proces- sing, Capital market, International business, leadership, strategic, fund raising, M&A, governance, project management. Name ............................................. Hussein Barma Role ............................................... Chair of the AFRC Independent Years of service ................................ Since Sep 2015 Executive ....................................... Non-executive director Time commitment ............................ At least 75% meetings schedule Skills .............................................. Mining experience, Corporate finance, finance and accounting, legal, UK Market, Capital market, International business, leadership, strategic, fund raising, M&A communications, sustainability. Name ............................................. Jesús Fernández Role ............................................... Non-Independent Years of service ................................ Since Sep 2015 Executive ....................................... Non-executive director Time commitment ............................ At least 75% meetings schedule Skills .............................................. Mining experience, Capital market, UK Markets, International business, Corporate finance, finance and accounting, legal, leadership, strategic, fund raising, M&A, governance. - 54 - - 54 - Annual Report Annual Report C O R P O R A T E G O V E R N A N C E R E P O R T C O R P O R A T E G O V E R N A N C E R E P O R T Atalaya Mining Plc. Atalaya Mining Plc. — Harry Liu BSc. Economics - non-executive Director Mr. Liu is a board director of Yanggu Xiangguang Copper (Shandong, China), one of the world’s largest copper smelting, refining and proces- sing 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. — Jonathan Lamb 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 at Deutsche Bank’s Metals & Mining Investment Banking group in New York, where he worked on a variety of debt and equity financings and M&A transactions. — Dr. Jose Sierra Lopez Non-executive Director 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 European Commission. Most recently he was Commissioner at the National Energy Commission of Spain. He was also a member of the Single Electricity Market of the Republic of Ireland and Northern Ireland He was a member of the Board of Transport et Infrastruc- tures Gaz France. Dr. Sierra holds a Ph.D. in Mining 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. - 55 - - 55 - Name ............................................. Harry Liu Role ............................................... Non-Independent Years of service ................................ Since Oct 2010 Executive ....................................... Non-executive director Time commitment ............................ At least 75% meetings schedule Skills .............................................. Commodity trading and financing, Capital market, International business, leadership, strategic, fund raising, M&A, governance, project manage- ment, permitting. Name ............................................. John Lamb Role ............................................... Non-Independent Years of service ................................ Since Sep 2015 Executive ....................................... Non-executive director Time commitment ............................ At least 75% meetings schedule Skills .............................................. Mining experience, Capital market, UK Markets, International business, Corporate finance, finance and accounting, legal, leadership, strategic, fund raising, M&A, governance. Name ............................................. Jose Sierra Lopez Role ............................................... Non-Independent Years of service ................................ Since Sep 2015 Executive ....................................... Non-executive director Time commitment ............................ At least 75% meetings schedule Skills .............................................. Mining experience, operations, proces- sing, exploration, Capital market, UK Market, International business, leader- ship, strategic, governance, project management, permitting. Atalaya Mining Plc. Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report Annual Report — Stephen Scott Non-executive Director Mr. Scott is president and CEO of Entree Resources Limited. Previously, he was president and CEO of Minenet advisors advising on strategy, corpo- rate development, business restructu- ring 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 Compensa- tion Committee and a member of the Audit and Financial Risk Committee. Name ............................................. Damon Barber Role ............................................... Chair of the CGNCC - Independent Years of service ................................ Since Sep 2015 Executive ....................................... Non-executive director Time commitment ............................ At least 75% meetings schedule Skills .............................................. Mining experience, operations, proces- sing, exploration, Capital market, International business, leadership, stra- tegic, fund raising, M&A, governance, project management, permitting, CEO. - 56 - Annual Report C O R P O R A T E G O V E R N A N C E R E P O R T Atalaya Mining Plc. Management — Alberto Lavandeira Managing Director and Chief Executive Officer Mr. Lavandeira brings close to forty years of experience opera- ting 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 development 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. Name ..............................................Alberto Lavandeira Role .......................................... Chief Executive Officer Years of service .................................... Since May 2014 Executive ..................................................... Executive Time commitment ............................................... 100% Skills ............................................................... ..... ... .. Mining experience, operations, processing, exploration, commercial, capital market, international business, leadership, strategic, fund raising, M&A, governance, project management, permitting, government relations, CEO, sustainability. — Cesar Sanchez Chief Financial Officer Former CFO of companies in mining and financial sectors; inclu- ding CFO of Iberian Minerals Corp. with copper assets in Spain and Peru performing equity and debt raisings. Worked for Ernst & Young as financial advisor and auditor. Qualified accountant, holds a business administration degree. He is a graduate of the University of Sevilla, Spain with courses in Dublin City University and ESIC. Name .................................................... Cesar Sanchez Role ........................................... Chief Financial Officer Years of service .................................... Since June 2016 Executive ..................................................... Executive Time commitment ............................................... 100% Skills ................................................................ ... ..... . Mining experience, Capital market, Canada and UK Markets, International business, Corporate finance, finance and accounting, legal, leadership, strategic, fund raising, M&A, governance. Name ................................................. Enrique Delgado Role .......... Operation General Manager Proyecto Riotinto Years of service .................................... Since May 2019 Executive ..................................................... Executive Time commitment ............................................... 100% Skills ................................................................ ... ..... . Mining experience, operations, processing, exploration, international business, leadership, strategic, gover- nance, project management and permitting. — Enrique Delgado Operations - General Manager Proyecto Riotinto Former CEO of Tharsis Mining has also performed as director of Metallurgy and Environment at Cobre Las Cruces Mine (First Quantum) both in Spain. With First Quantum also participated in the start-up of Kansanshi Mine smelter in Zambia. Started his career as metallur- gist in Riotinto Mine and later with FreePort McMoran, at Atlantic Copper smelter in Huelva, Spain. He is a graduate of the University of Sevilla, Spain and Master of Senior Management of Leading Companies of the San Telmo International Institute of Sevilla, Spain. - 57 - Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report Director Independence The Board will be composed of at least the same number of independent Directors (in accordance with applicable securities laws and stock exchange rules) as non-indepen- dent, non-executive Directors. The CGNC Committee will determine whether a member of the Board, or nominee to the Board, is an independent Director. If at any time less than half of the non-executive Directors are independent, the Board shall take steps to ensure that the composition of the Board reflect that at least half are independent. If at any time the Chairman of the Board is not independent, the Board shall consider possible steps and processes to ensure that leadership is provided for the Board’s indepen- dent Directors. This ensures that all Board discussions or decisions have the benefit of outside views and experience, and that at least half of the non-executive Directors are free of any interests or influences that could or could reasonably be perceived to materially interfere with the Director’s ability to act in the best interests of the Company. Corporate Governance Compliance Statement The Company adheres to the QCA Corporate Governance Code. Its statement of compliance is contained in section iii of the Management Report. At least annually, the Board shall, with the assistance of the CGNC Committee, determine the independence of each director and the independence of each AFRC member. Board Appointments The Board is appointed by the shareholders and are chosen based on their skill, experience and expertise. Directors are always expected to be ambassadors for the Company and reflect its values and work ethic. They are also expected to devote substantial time to research and preparation before each meeting to ensure that the future of the Company is going in the right direction. Director Induction When appointed, new Directors are provided with an induction programme including meetings with other Directors, members of the senior management team and the Company’s professional advisors. They are also briefed on their responsibilities under AIM and TSX. New Directors are also provided with an opportunity to visit the Company’s operations in Spain to understand how Atalaya works on-site. The Company requires its Directors to keep themselves professionally up-to-date and familiar with its articles and charters. In the opinion of the Board, all Directors should bring specific skills and experience that add value to the Company. The balance of skills and experience of the Board is to be regularly reviewed by the CGNC Committee. When considering the potential reappointment of an exis- ting Director, the Board will consider the individual’s perfor- mance as well as the skills and experience mix required by the Board in the future. When considering vacancies, the Board will consider a candidate’s capacity to enhance the mix of skills and expe- rience of the Board. Role of the Board The Board has a duty to supervise the management of the business and affairs of the Company. The Board directly and with the Chair provide direction to senior management, generally through the CEO, to pursue the best interests of the Company. The Board has the final responsibility for the successful operations of the Company. The Board must ensure that management has in place appropriate processes for strategic planning and risk assessment, management and - 58 - Annual Report C O R P O R A T E G O V E R N A N C E R E P O R T Atalaya Mining Plc. internal control and monitor performance against bench- marks. The Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body. operations of the Company. The Board must at all times act honestly, fairly and diligently in all respects in accor- dance with the law applicable to the Company. Further- more, the Board will at all times act in accordance with all Company policies in force. The Board is responsible for guiding and monitoring the business and the affairs of the Company. The Company recognises the importance of the Board in providing a sound base for good corporate governance in the Each of the Directors, when representing the Company, must act in the best interests of shareholders of the Company and in the best interests of the Company as a whole. Highlights of the Board for this Year Atalaya has had thirteen Board meetings in which a whole array of subjects were dealt with. When needed, its professional advisors are invited to attend meetings to provide input into legal and finan- cial matters. Atalaya has also had four Physical Risk Committee meetings, six Audit and Financial Risk Commi- ttee meetings and three Corpo- rate Governance, Nominating and Compensation Committee meetings. These committee meetings were held to deal with specifics and then a summary of those meetings was reported to the Board of Directors. A summary of the topics discussed at Board and Committee meetings included: à Health and safety, reporting of accidents and reviewing policy to look for improvements including a go ahead on a restructuring of the safety department. à Operational, discussed all the different operational figures. à Financial, reviewed figures such as cost, capital investment, budgets, etc. à Quarterly reports, annual report and other deliverables to the Market. à Re-election of Directors. à Risk Management, Atalaya had a reassessment of risk and the areas that changed were updated. à Board and committees’ performance. The Board would like to thank the committees that have helped the Board reach its conclusions. - 59 - Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report The Role of Individual Directors As members of the Board, Directors have ultimate respon- sibility for the Company’s overall success. Therefore, Directors have an individual responsibility to ensure that the Board is undertaking its responsibilities as set out in the Board charters. Directors need to ensure the following: • Leadership to the Company, particularly in the areas of ethics and culture including a clear and appropriate strategic direction. • Accountability to key stakeholders, particularly shareholders. • Oversight of all control and accountability systems including all financial operations and solvency, risk management and compliance. improper to disclose it, or allow it to be disclosed, without appropriate authorisation. Chairman’s Role The Chairman is considered the “lead” Director and utilises his/her experience, skills and leadership abilities to facilitate the governance processes. The Chairman will be selected on the basis of relevant experience, skill and leadership abilities. The responsibilities of the Chair include but is not restricted to: • Chair Board, annual and extraordinary meetings; • Set Board agendas and ensure that the meetings are effective and follow the agenda; • Ensure that the decisions are implemented promptly; • Ensure that the Board behaves in accordance with the • An effective senior management team and appropriate Company´s code of conduct personnel policies; and • Timely and effective decisions on matters relating to it. It is also expected that the Directors comply with the following: • Behaving in a manner consistent with the words and spirit of the Code of Conduct. • Making reasonable efforts to attend all meetings of the Board, the annual general meeting of shareholders of the Company and of all the Board committees upon which they serve. Subject to extenuating circumstances, Directors are expected to attend at least 75% of regularly scheduled Board and committee meetings. The CGNC Committee will review the circumstances that prevent any director from achieving the minimum level and report its findings to the Board. • Addressing issues in a confident, firm and friendly manner but also ensure that others are given a reasonable opportunity to put forward their views. • Preparing thoroughly for each Board or Committee event. • Using judgement, common sense and tact when discussing issues. Lastly Directors will keep confidential all Board discussions and deliberations. Similarly, all confidential information received by a Director in the course of the exercise of the Director’s duties remains the property of the Company and is not to be discussed outside the boardroom. It is • The primary spokesperson and channel of communication for the Company in the annual general meeting and in all public relation activities; • To be kept informed by the CEO and other senior management which may be relevant to Directors in their capacity as Directors; • Ensures Directors devote sufficient time to their tasks. The Board monitors and promotes corporate culture with frequent contact via senior management and the CEO. The management and CEO report the state of the culture to the Board and include any recommendations they have. The Role of the CEO The CEO is responsible for the attainment of the Company’s goals and vision for the future, in accordance with the strategies, policies, programmes and performance requirements approved by the Board. The position reports directly to the Board. The CEO’s primary objective is to ensure the ongoing success of the Company through being responsible for all aspects of the management and development of the Company. The CEO is of critical importance to the Company in guiding the Company to develop new and imaginative ways of winning and conducting business. The CEO must have the industry knowledge and credibility to fulfil the requirements of the role. - 60 - Annual Report C O R P O R A T E G O V E R N A N C E R E P O R T Atalaya Mining Plc. • Keep the Chairman fully informed of all material matters which may be relevant to the Board and its members, in their capacity as directors; • Provide strong leadership to, and effective management of, the Company in order to: – Encourage co-operation and teamwork, build and maintain staff morale at a high level and build and maintain a strong sense of staff identity with, and a sense of allegiance to, the Company; – Advise the Board on the most effective organisational structure and overseeing its implementation; – Establishing and maintaining effective and positive relationships with Board members, shareholders, customers, suppliers and other government and business liaisons; – Carry out the day-to-day management of the Company. The role of Company Secretary The Company Secretary is charged with facilitating the Company’s corporate governance processes and so holds primary responsibility for ensuring that the Board processes and procedures run efficiently and effectively. The Company Secretary is accountable to the Board, through the Chairman, on all governance matters and reports directly to the Chairman as the representative of the Board. The Company Secretary is appointed and dismissed by the Board and all Directors have a right of access to the Company Secretary. The tasks of the Company Secretary shall include but not restricted to: • Notifying the directors in writing in advance of a meeting of the Board as specified in the Constitution and the Board Charter; • Recording, maintaining and distributing the minutes of all Board and Board Committee meetings as required; • Preparing for and attending all annual and extraordinary general meetings of the Company; • Overseeing the Company’s compliance programme and ensuring all Company legislative obligations are met; The CEO will manage a team of executives responsible for all functions contributing to the success of the Company. The tasks of the CEO shall include but not restricted to: • Develop with the Board, implement and monitor the short- medium- and long-term strategic and financial plans for the Company to achieve the Company’s vision and overall business objectives; • Develop all financial reports, and all other material reporting and external communications by the Company, including material announcements and disclosure, in accordance with the Company’s Shareholder Communication Policy; • Manage the appointment of the Chief Operating Officer (“COO”), CFO, Company Secretary and other specific senior management positions; • Develop, implement and monitor the Company’s risk management practices and policies; • Consult with the Chairman and the Company Secretary in relation to establishing the agenda for Board meetings; • Agree with the Chairman their respective roles in relation to all meetings (formal and informal) with shareholders and all public relations activities; • Be the primary channel of communication and point of contact between members of senior management and the Board (and the directors); Ensuring all requirements of regulatory bodies are fully met; and providing counsel on corporate governance prin- ciples and Director liability. - 61 - Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report Board Diversity Atalaya recognises the need to have a diverse board so that varying points of view can be brought to the table. It ensures its Directors are well qualified and have a range of different skills and experience, with a good international mix to meet the requirements of operating in a global industry. Board Meetings and Attendance The board and Directors do not have fixed time require- ments. They are expected to attend all meetings and be sufficiently prepared with all issues that arise. 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 13 times in 2019. Meetings occurred in person and by teleconference. Atalaya’s decisions are predominantly made by achieving a consensus at Board meetings. In exceptional circum- stances, decisions may be taken by the majority of Board members. 2019 Annual General Meeting All Directors are required to take decisions 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. Atalaya’s AGM will be held on 25 June 2020 at 11:00h in London (United Kingdom). The business of the meeting will be conducted in accordance with regulatory require- ments 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. Board meetings and attendance Directors R. Davey A. Lavandeira D. Barber H. Barma J. Fernández H. Liu J. Lamb J. Sierra Lopez S. Scott BoD AFRC CGNCC PRC Held Attended Held Attended Held Attended Held Attended 13 13 13 13 13 13 13 13 13 13 13 13 13 9 10 13 13 13 6 - - 6 - - - - 6 5 - - 6 - - - - 6 - 62 - - 62 - 3 3 3 - - - - 3 3 - 2 3 - - - - 3 4 - - - - - - 4 4 4 - - - - - - 4 4 Annual Report C O R P O R A T E G O V E R N A N C E R E P O R T Atalaya Mining Plc. Audit and Financial Risk Committee Indemnification of Directors and Officers During the year, the Company held insurance to indemnify Directors. The Company Secretary and its executive officers against liabilities incurred in the conduct of their duties to the extent permitted under applicable legislation. Membership Attendance Hussein Barma Stephen Scott Roger Davey 6/6 6/6 5/6 The Role of the AFRC The AFRC is responsible for assisting the Board in overseeing the indepen- dence of the external auditors and fulfilling the Boards’ statutory and fiduciary responsibilities relating to: • Financial reporting; • Reviewing and assessing the Company’s business and financial risk management process, including the adequacy of the overall internal control environment and controls in selected areas representing significant risk; and • External Audit. The Company’s Audit and Financial Risk Committee (“AFRC”) is responsible for ensuring that appropriate financial reporting 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. To fulfil these functions the AFRC shall have the following duties and responsibilities: • To review the quality and integrity of all published financial statements and reports including the annual Management Discussion and Analysis report (if applicable) and quarterly earnings press releases issued by the Company, prior to the Company publicly disclosing the information, as well as all other material continuous disclosure documents and analysis with a view to making a recommendation to the Board. • To review estimates and judgements that are material to reported financial information and consider the quality and acceptability of the Company’s accounting policies and procedures and the clarity of disclosure in financial statements. • To ensure compliance by the Company with legal and regulatory requirements related to financial reporting. - 63 - Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report • To review and to recommend to the Board the nomination and appointment of the external auditor for the purposes of prepa- ring or issuing an auditors’ report or performing other audit, review or attest services and to recom- mend to the Board the compensa- tion of the external auditor. • To review the qualifications, performance and independence of the external auditor, to consider the auditor’s recommendations and manage the relationship with the auditor, which includes meeting with the external auditor as required in connection with the audit services provided and to review the engagement letter of the external auditor. • To oversee the work of the external auditor engaged for the purposes of preparing or issuing an auditor’s report or performing other audit, review or attest services for the Company, including the resolution of disagreements between mana- gement and the external auditor regarding financial reporting. • To meet with the external auditor to discuss the annual financial report and any transaction refe- rred to in the Board Charter. • To provide the external auditor with the opportunity to meet with the AFRC without management present at least once per year for the purpose of discussing any issues. • To review the quality and inte- grity of the internal controls and accounting procedures of the Company including reviewing the Company’s procedures for internal control. • To identify risks inherent in the business of the Company and to review the Company’s risk mana- gement procedures. • To review and approve the — 2019 Review Company’s hiring policies regar- ding partners, employees and former partners and employees of the present and former external auditor of the Company. • To review any significant, inclu- ding any pending, transactions outside the Company’s ordinary course of business and any pending litigation involving the Company. • To review and monitor manage- ment’s responsiveness to external audit findings or any regulatory authority. • To report to the Board of Direc- tors, who in turn may refer the matter to the Corporate Gover- nance, Nominating and Compen- sation Committee, any improprie- ties or suspected improprieties with respect to accounting and other matters that affect financial reporting or the integrity of the business. IIn addition, the AFRC shall establish procedures for the receipt, retention and treatment of complaints (inclu- ding “whistleblowing” complaints) received by Atalaya Mining regarding risk management, legal/regulatory compliance, accounting, internal accounting controls or auditing. This is to include a process for confi- dential anonymous complaints by employees or other stakeholders. The AFRC comprises three members all of whom are non-executive and Independent. The current member- ship of the committee is Dr. H. Barma (Chairman), Mr. R. Davey and Mr. S. Scott. The secretary, CEO and CFO and external auditors also attend in when requested by the Committee. - 64 - The AFRC met six times during 2019. Four meetings were timed to coincide with approval of financial results for publication with two meetings held as planning meetings for the year-end. During the year, the AFRC maintained regular dialogue with management as well as the external auditors, both within and outside of formal committee meetings. The principal matters considered by the AFRC during the year and in its discussions with management and the external auditors included: • Review and approval of the quarterly, half yearly and full year financial results. • Impact of new accounting stan- dards and guidance, in particular IFRS 16 “Leases” and IFRIC 23. • The going concern statement in the Management Report above and in Note 2.1(b) to the Financial Statements, including the possible impact of the COVID-19 outbreak. • Key accounting and audit matters for 2019 including the Astor Defe- rred Consideration and Revenue Recognition. • An internal evaluation of the AFRC’s performance with feed- back from board members, senior management and the external auditors. • A review of the AFRC’s Charter to ensure that it remained fit for purpose and that the AFRC complied with its responsibilities. Hussein Barma Chairman of Audit and Financial Risk Committee 6 April 2020 Annual Report C O R P O R A T E G O V E R N A N C E R E P O R T Atalaya Mining Plc. Corporate, Governance, Nominating and Compensation Committee Report Membership Attendance Stephen Scott Damon Barber Hussein Barma Roger Davey 3/3 2/3 3/3 3/3 The Role of the CGNCC The Company’s Corporate Gover- nance, Nominating and Compen- sation Committee (“CGNCC”) is, among other things, responsible for reviewing the performance of the executives, setting their remu- neration, 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. Remuneration arrangements are aligned to support the implementa- The Company’s Corporate Governance, Nominating and Compensa- tion Committee (“CGNCC”) is, among other things, responsible for reviewing the performance of the executives, setting their remune- ration, 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. tion of the Company strategy and effective risk management for the medium to long-term. The remune- ration committee ensures that this is done and considers the views of shareholders. The Committee makes recom- mendations for Board review. The Committee shall have such powers and duties as may be conferred on it from time to time by resolution of the Board. In addition, the Commi- ttee shall have the following specific functions and responsibilities: • The Committee shall periodically review and, if advisable, approve and recommend for Board approval the compensation paid to Directors. - 65 - Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report • At least annually, and prior to the nomination or appointment of potential candidates, the Commi- ttee shall review the competen- cies, skills, experience and areas of expertise of the Board on an individual and collective basis. Based on this review, the Commi- ttee shall identify areas where additional competency, skill, experience or expertise would be of benefit to Atalaya Mining. • As required, the Committee shall identify and, if advisable, recom- mend to the Board for approval, potential candidates for nomina- tion or appointment to the Board having regard to the results of the review referred to above. The Board should consider whether or not each new nominee can devote sufficient time and resources to his or her duties as a Committee member. • The Committee shall periodically assess the contribution and effectiveness of the Board, the Directors, each Board Committee and the Chairman of the Board against their respective mandate, charters or other criteria the Committee considers appropriate. The Committee shall report its findings to the Board and, based on those findings, recommend any action plans that the Commi- ttee considers appropriate. • The Committee shall oversee the development of any orientation programmes for new Directors. The Committee shall periodically review any such programme and approve changes it considers appropriate. • The Committee shall periodically review Atalaya Mining’s corpo- rate governance practices and policies. As part of its review, the Committee shall take regulatory requirements and best prac- tices, including the UK Corporate evaluation shall be conducted in conjunction with the Chairman of the Board and shall be presented to the Board for its review. • The Committee shall periodically review, and, if advisable, approve and recommend for Board approval the Chief Executive Officer’s compensation package. The compensation package recommendation shall be based on the CEO’s evaluation, as well as other factors and criteria as may be determined by the Committee from time to time. • The Committee shall, as required, review and, if advisable, approve and recommend for Board approval, the appointment, compensation and other terms of employment of all senior manage- ment reporting directly to the CEO. • The Committee shall periodi- cally review and, if advisable, approve and recommend for Board approval, a succession and emergency preparedness plan for all senior management reporting directly to the CEO. Upon the vacancy of such senior manage- ment personnel, the Committee may make a replacement recom- mendation for Board approval based on the succession plan. • The Committee shall periodically review the Company’s existing share option plan and make any recommendations to the Board regarding the plan as it considers advisable. The Committee shall also review any proposed equity compensation grants (other than pursuant to the existing plan), programmes or plans. 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. Governance Code and QCA guidelines, into account. The Committee shall report the results of its review, including any recom- mended changes to existing practices, to the Board in a timely manner. • The Committee will also esta- blish and maintain a complaints programme to facilitate (1) the receipt, retention and treatment of complaints received by the Company regarding its Accoun- ting Standards, violations of the Code of Business Conduct and Ethics and the Anti-Bribery and Corruption Policy, breaches in compliance with applicable laws including relating to health and safety or the environment and (2) the confidential, anonymous submission by employees of the Company of any complaints made in these areas. • At least annually, the Committee shall evaluate each Director and each Audit and Financial Risk Committee member against the independence criteria established by the UK Corporate Governance Code and report the results to the Board. • The Committee shall review, in conjunction with management, the corporate governance disclo- sure for Atalaya Mining’s annual report, notice of shareholders meetings and other regulatory and shareholder reports. • The Committee shall periodically review and, if advisable, approve and recommend for Board approval performance goals for the CEO in light of the Company’s corporate goals and objectives. • The Committee shall periodically evaluate the performance of the Chief Executive Officer in relation to his or her performance goals. The Chief Executive Officer - 66 - Annual Report C O R P O R A T E G O V E R N A N C E R E P O R T Atalaya Mining Plc. — Directors’ Share Options 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 balance sheet date are as follows: There were no further option grants between the balance sheet date and the date of this report. 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. — Substantial Share Interests The Shareholders holding more than 3% of the share capital of the Company as at the date of this report were: — 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. Grant date Expiration date Exercise price A. Lavandeira 23 Feb 2017 22 Feb 2022 29 May 2019 28 May 2024 144p 201.5p Company Urion Holdings (Malta) Ltd (subsidiary of Trafigura) Yanggu Xiangguang Copper Co. Ltd Liberty Metals & Mining Holdings LLC Orion Mine Finance (Master) Fund I LP Cobas Asset Management, SGIIC, S.A. Ordinary shares 000’s 30,821 30,706 19,579 18,787 6,959 150,000 600,000 750,000 % 22.44 22.36 14.26 13.68 5.07 - 67 - Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report — Directors’ Emoluments In compliance with the disclosure requirements of the listing require- ments of AIM and TSX, the aggregate remuneration paid to the Directors of Atalaya Mining Plc for the year ended 31 December 2019 is set out below: (Euro 000’s) Short term benefits Share based payments 31 Dec 2019 Salary & fees Bonus Incentive options* Bonus shares** Total Executive directors A. Lavandeira Non-executive directors R. Davey D. Barber H. Barma J. Fernández J. Lamb H. Liu J. Sierra López S. Scott Notes: 457 107 56 76 51 51 51 65 79**** 993 325*** 173 - - - - - - - - - - - - - - - - 325 173 - - - - - - - - - - 955 107 56 76 51 51 51 65 79 1,491 (*) The amount relates to the non-cash expense recognised in accordance with IFRS 2 Share-based payments. On 29 May 2019 the Company granted 600,000 share options to the Executive Director Alberto Lavandeira (see Note 23). (**) There were no bonus shares granted during 2019. (***) The amount relates to the approval of the performance bonus for 2018 by the BoD following the proposal of the CGNC Committee. During 2019, the Group has expensed the same amount for the performance bonus of 2018 which is not included in the table. The amount is yet to be approved by the BoD. There is no certain or guarantee that the BoD will approve a similar amount for 2019 performance. (****) Includes €3k paid to the Canadian Pension Plan for fees related to previous years. - 68 - Annual Report C O R P O R A T E G O V E R N A N C E R E P O R T Atalaya Mining Plc. — 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 2019 and 2018, are as follows: 2019 2018 Nr. of existing ordinary shares % of issued share capital Nr. of existing ordinary shares % of issued share capital - 210,000 19,578,947* - 30,821,213* 31,150,943** 18,786,609* 26,666 - - 0.15% 14.26% - 22.44% 22.68% 13.68% 0.02% - - 160,000 19,578,947* - 30,821,213* 31,150,943** 18,786,609* 26,666 - - 0.12% 14.26% - 22.44% 22.68% 13.68% 0.02% - Name R. Davey A. Lavandeira D. Barber(1) H. Barma J. Fernández(2) H. Liu(3) J. Lamb(4) J. Sierra Lopez S. Scott Notes: (1) Liberty Metals & Mining Holdings LLC (2) Urion Holdings (Malta) Ltd (3) Yanggu Xiangguang Copper Co. Ltd (4) Orion Mine Finance (Master) Fund I LP (*) Shares held by the companies the Directors represent (**) includes 444,711 shares held personally by Mr. Liu. No movements during 2019. — 2019 Review The Committee met three times during 2019, covering a number of issues. The Company invited Field Fisher into their meetings to support all decisions from the Commi- ttee to be proposed to the Board. Atalaya keeps the balance and membership of its Board under review and no new appointments were made during the year. All Directors were re-elected at the last Annual General Meeting during 2019. Atalaya always bases their remuneration packages in comparison with their peers in the mining sector and in companies of similar size and similar financials. - 69 - Stephen Scott Chairman of Corporate Governance, Nominating and Compensation Committee 6 April 2020 Atalaya Mining Plc. C O R P O R A T E G O V E R N A N C E R E P O R T Annual Report Physical Risks Committee Report Membership Attendance Dr José Sierra López (Chair) Roger Davey Stephen Scott 4/4 4/4 4/4 The Role of the PRC The function of the PRC is oversight. It is recognised that members of the PRC who are Non-Executive Directors are not full-time employees of the Company and generally do not represent themselves as experts in the fields of safety, health, environment, security or risk management. As such, it is not the responsibility of the PRC personally to conduct safety, health, environment, security or risk reviews. Committee members are entitled to rely on Atalaya Mining Management with respect to matters within their responsibility and on external profes- sionals on matters within their areas of expertise. Committee members may assume the accuracy of information provided by such persons, so long as the members are not aware of any reaso- nable grounds upon which such reliance or assumption may not be appropriate. meets all regulations and assesses risk factors on a regular basis. I would like to thank the safety department personnel, in particular, for their contributions and sugges- tions to continually make our opera- tions safer. Dr José Sierra López Chairman of Physical Risks Committee 6 April 2020 Management is responsible for implementing, managing and main- taining appropriate enterprise-wide safety, health, environment, security and risk management systems, policies and procedures, reporting protocols and internal controls that are designed to ensure compliance with applicable laws and regulations. Management is also responsible for the preparation, presentation and integrity of the information provided to the Committee. The PRC comprises three members all of whom are non-executive and Independent. The current member- ship of the committee is Dr. J. Sierra (Chairman), Mr. R. Davey and Mr. S. Scott. — 2019 Review The PRC had four meetings in the year which covered a number of issues. These included meetings on site which covered health and safety issues and risk areas. Health and safety is a key priority to ensure a safe working environment for both employees and contractors and the Company is focused on ensuring it - 70 - - 71 - Atalaya Mining Plc.corporate governance reportAnnual ReportAtalaya Mining Plc. f i n a n c i a l s t a t e m e n t s Annual Report - 72 - Annual Report f i n a n c i a l s t a t e m e n t s Atalaya Mining Plc. Financial Statements 74 Independent Auditor’s report 80 Consolidated and Company Statements of Comprehensive Income 81 Consolidated and Company Statements of Financial Position 82 Consolidated Statement of Changes in Equity 83 Company Statement of Changes in Equity 84 Consolidated Statement of Cash Flows 85 Company Statement of Cash Flows 87 Notes to the Consolidated and Company Financial Statements - 73 - Independent Auditor’s report to the members of atalaya mining plc Report on the Audit of the Financial Statements - 74 - Atalaya Mining Plc.financial statementsAnnual Report- 75 - Atalaya Mining Plc.financial statementsAnnual Report- 76 - Atalaya Mining Plc.financial statementsAnnual Report- 77 - Atalaya Mining Plc.financial statementsAnnual Report- 78 - Atalaya Mining Plc.financial statementsAnnual Report- 79 - Atalaya Mining Plc.financial statementsAnnual ReportAtalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report Consolidated and Company Statements of Comprehensive Income — For the year ended 31 December 2019 (Euro 000’s) Revenue Note 5 Operating costs and mine site administrative expenses 187,868 (115,325) Mine site depreciation, amortisation and impairment 13,14 (23,025) The Group 2019 The Company 2019 The Group 2018 The Company 2018 1,283 189,476 1,323 - - 1,283 (1,540) - - (1,694) - (1,951) 124 (3) 13,607 3,223 - 15,000 (878) 14,122 14,122 - (128,707) (13,430) 47,339 (5,867) (216) (1,021) - (281) 39,954 158 1,613 - 71 (253) 41,543 (7,102) 34,441 34,715 (274) - - 1,323 (4,370) (10) - - - (3,057) 117 40 13,615 2,569 - 13,284 (1,524) 11,760 11,760 - 14,122 34,441 11,760 25.4 25.1 49,518 (6,718) (619) (3,588) (1,694) (373) 36,526 88 350 - 52 (89) 36,927 (6,207) 30,720 37,323 (6,603) 30,720 27.2 26.8 23 7 6 4 9 9 10 11 12 12 Gross profit Administration and other expenses Share based benefits Exploration expenses Impairment loss on other receivables Care and maintenance expenditure Operating profit/(loss) Other income Net foreign exchange gain/(loss) Interest income from financial assets at fair value Interest income from financial assets at amortised cost Finance costs Profit before tax Tax Profit for the year Profit for the year attributable to: — Owners of the parent — Non-controlling interests Earnings per share from operations attributable to equity holders of the parent during the year: Basic earnings per share (EUR cents per share) Diluted earnings per share (EUR cents per share) Profit for the year Other comprehensive income: Other comprehensive income that will not be reclassified to profit or loss in subsequent periods (net of tax): Change in fair value of financial assets through other comprehensive income 'OCI' 30,720 14,122 34,441 11,760 20 (29) (29) (58) (58) Total comprehensive profit for the year 30,691 14,093 34,383 11,702 Total comprehensive profit for the year attributable to: — Owners of the parent — Non-controlling interests 37,294 (6,603) 30,691 14,093 - 14,093 34,657 (274) 34,383 11,702 - 11,702 The notes on pages 85 to 140 are an integral part of these consolidated and Company financial statements. - 80 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. Consolidated and Company Statements of Financial Position — As at 31 December 2019 (Euro 000’s) ASSETS Non-current assets Property, plant and equipment Intangible assets Investment in subsidiaries Trade and other receivables Non-current financial asset Deferred tax asset Current assets Inventories Trade and other receivables Tax refundable Other financial assets Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity attributable to owners of the parent Share capital Share premium Other reserves Accumulated losses Non-controlling interests Total equity Liabilities Non-current liabilities Trade and other payables Provisions Leases Deferred consideration Current liabilities Trade and other payables Leases Current tax liabilities Total liabilities Total equity and liabilities Note The Group 2019 The Company 2019 The Group 2018 The Company 2018 13 14 15 19 20 17 18 19 20 21 22 22 23 24 25 26 27 28 25 27 11 307,815 63,085 - 500 1,101 6,576 - - 4,630 310,002 - - 379,077 314,632 21,330 32,857 1,924 42 8,077 64,230 443,307 13,372 314,319 22,836 (30,669) 319,858 (2,402) 317,456 13 6,941 5,265 53,000 65,219 57,537 588 2,507 60,632 125,851 443,307 - 4,043 - 42 128 4,213 318,845 13,372 314,319 6,435 (36,535) 297,591 - 297,591 - - - 9,117 9,117 10,272 - 1,865 12,137 21,254 318,845 257,376 71,951 - 249 - 7,927 337,503 10,822 23,688 - 71 33,070 67,651 405,154 13,372 314,319 12,791 (58,308) 282,174 4,200 286,374 45 6,519 - 53,000 59,564 57,271 - 1,945 59,216 118,780 405,154 - - 3,899 290,104 - - 294,003 - 6,689 - 71 826 7,586 301,589 13,372 314,319 5,845 (50,657) 282,879 - 282,879 - - - 9,117 9,117 8,069 - 1,524 9,593 18,710 301,589 The notes on pages 85 to 140 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 6 April 2020 and were signed on its behalf. Roger Davey Chairman Alberto Lavandeira Managing Director - 81 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report Consolidated Statement of Changes in Equity — For the year ended 31 December 2019 (Euro 000’s) At 1 January 2018 Profit for the year Change in fair value of financial assets through OCI Total comprehensive income Transactions with owners Issue of share capital Share issue costs Depletion factor Recognition of share-based payments Recognition of non-distributable reserve 20 22 22 23 23 23 Attributable to owners of the parent Note Share capital Share Premium(2) Other reserves(1) Accumulated losses Total Non- controlling interest Total equity 13,192 309,577 6,137 (86,527) 242,379 4,474 246,853 - - - 180 - - - - - - - 4,747 (5) - - - (58) (58) - - - 34,715 34,715 (274) 34,441 - (58) - (58) 34,715 34,657 (274) 34,383 - - 5,050 (5,050) 216 - 1,446 (1,446) 4,927 (5) - 216 - - - - - - 4,927 (5) - 216 - At 31 December 2018/ 1 January 2019 13,372 314,319 12,791 (58,308) 282,174 4,200 286,374 Profit for the year Change in fair value of financial assets through OCI Total comprehensive income Transactions with owners Depletion factor Recognition of share-based payments Recognition of non-distributable reserve Recognition of distributable reserve Other changes in equity 20 23 23 23 23 23 - - - - - - - - - - - - - - - - 37,323 37,323 (6,602) 30,721 - (29) - (29) 37,323 37,294 (6,602) 30,692 (29) (29) 5,378 (5,378) 619 - 1,984 (1,984) - 619 - - 1,844 249 (1,844) (478) (229) - - - - - - 619 - - (229) At 31 December 2019 13,372 314,319 22,836 (30,669) 319,858 (2,402) 317,456 (1) Refer to Note 23 (2) The share premium reserve is not available for distribution. The notes on pages 85 to 140 are an integral part of these consolidated and company financial statements. - 82 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. Company Statement of Changes in Equity — For the year ended 31 December 2019 (Euro 000’s) Note Share capital Share premium(2) Other reserves(1) Accumulated losses Total At 1 January 2018 Profit for the year Change in fair value of financial assets through OCI Total comprehensive income Issue of share capital Share issue costs Recognition of share-based payments At 31 December 2018/1 January 2019 Profit for the year Change in fair value of financial assets through OCI Total comprehensive income Recognition of share-based payments 20 22 22 23 20 23 13,192 309,577 5,687 (62,417) 266,039 - - - - - - 180 4,747 - - (5) - - (58) (58) - - 216 11,760 11,760 - (58) 11,760 - - - 11,702 4,927 (5) 216 13,372 314,319 5,845 (50,657) 282,879 - - - - - - - - - 14,122 14,122 (29) (29) 619 - (29) 14,122 14,093 - 619 At 31 December 2019 13,372 314,319 6,435 (36,535) 297,591 (1) Refer to Note 23 (2) The share premium reserve is not available for distribution. Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at 17% will be payable on such deemed dividends to the extent that the ultimate shareholders are both Cyprus tax resident and Cyprus domiciled. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defence is payable by the Company for the account of the shareholders. The notes on pages 85 to 140 are an integral part of these consolidated and company financial statements. - 83 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report Consolidated Statement of Cash Flows — For the year ended 31 December 2019 (Euro 000’s) Note 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Depreciation of property, plant and equipment Amortisation of intangible assets Impairment of intangibles Recognition of share based payments Interest income Interest expense Unwinding of discounting Legal provisions Release of prior year provision Impairment loss on other receivables Rehabilitation provision Loss on disposal of intangibles Unrealised foreign exchange loss on financing activities 13 14 14 23 9 10 10 26 6 19 36,927 41,543 12,575 3,502 6,948 619 (52) 41 40 261 - 1,694 (18) - 2 10,143 3,287 - 216 (71) 214 39 (86) (117) - - 955 179 CASH INFLOWS FROM OPERATING ACTIVITIES BEFORE WORKING CAPITAL CHANGES 62,539 56,302 Changes in working capital: Inventories Trade and other receivables Trade and other payables Deferred consideration Cash flows from operations Interest expense on lease liabilities Interest paid Tax paid Net cash from operating activities Cash flows from investing activities Purchases of property, plant and equipment Purchases of intangible assets Acquisition of other financial assets Disposal of subsidiary Interest received Net cash used in investing activities Cash flows from financing activities Lease payment Proceeds from issue of share capital Listing and issue costs Net cash from financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents: At beginning of the year At end of the year 18 19 25 27 13 14 20 15 9 27 22 21 21 (10,508) (9,911) 1,159 - 43,279 (8) (41) (5,296) 37,934 (56,453) (5,449) (501) - 52 2,852 11,697 (10,334) 17 60,534 - (214) (4,987) 55,333 (63,216) (2,492) - (75) 71 (62,351) (65,712) (576) - - (576) (24,993) 33,070 8,077 - 598 (5) 593 (9,786) 42,856 33,070 The notes on pages 85 to 140 are an integral part of these consolidated and Company financial statements. - 84 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. Company Statement of Cash Flows — For the year ended 31 December 2019 (Euro 000’s) Note 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Profit/(loss) before tax Adjustments for: Share based payments Interest income Interest income from interest-bearing intercompany loans Impairment loss on other receivables Release of prior year provision Unrealised foreign exchange loss on financing activities 15,000 13,284 - (25) 10 (63) (16,805) (16,121) - - - - (117) 209 9 9 6 CASH INFLOWS USED IN OPERATING ACTIVITIES BEFORE WORKING CAPITAL CHANGES (1,830) (2,798) Changes in working capital: Increase in trade and other receivables Increase in trade and other payables Cash flows used in operations Tax paid Net cash used in operating activities Cash flows from investing activities Interest received Investment in subsidiaries Interest income from interest-bearing intercompany loans Net cash from investing activities Cash flows from financing activities Proceeds from issue of share capital Listing and issue costs Net cash from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents: At beginning of the year At end of the year 19 25 9 9 22 22 21 21 (17,252) 2,204 (16,878) (537) (17,415) 25 (113) 16,805 16,717 - - - (53,969) 2,077 (54,690) - (54,690) 63 - 16,121 16,184 4,927 (5) 4,922 (698) (33,584) 826 128 34,410 826 The notes on pages 85 to 140 are an integral part of these consolidated and company financial statements. - 85 - - 86 - Atalaya Mining Plc.financial statementsAnnual ReportAnnual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. Notes to the Consolidated and Company Financial Statements — Year ended 31 December 2019 1. Incorporation and summary of business — Country of incorporation Atalaya Mining Plc (the “Company”) was incorporated in Cyprus on 17 September 2004 as a private company with limited liability under the Companies Law, Cap. 113 and was converted to a public limited liability company on 26 January 2005. Its registered office is at 1 Lampousa Street, Nicosia, Cyprus. The Company was listed on AIM of the London Stock Exchange in May 2005 under the symbol ATYM and on the TSX on 20 December 2010 under the symbol AYM. The Company continued to be listed on AIM and the TSX as at 31 December 2019. Additional information about Atalaya Mining Plc is avai- lable at www.atalayamining.com as per requirement of AIM rule 26. — Changed on name and share consolidation Following the Company’s EGM on 13 October 2015, the change of the name EMED Mining Public Limited to Atalaya Mining Plc became effective on 21 October 2015. On the same day, the consolidation of ordinary shares came into effect, whereby all shareholders received one new ordinary share of nominal value £0.075 for every 30 existing ordi- nary shares of nominal value of £0.0025. — Principal activities The Company owns and operates through a wholly owned subsidiary, “Proyecto Riotinto”, an open-pit copper mine located in the Pyritic belt, in the Andalusia region of Spain, approximately 65 km northwest of Seville. Atalaya also owns 10% of Proyecto Touro, a brownfield copper project in northwest Spain. In November 2019, Atalaya executed the option to acquired 12.5% of Explotaciones Gallegas del Cobre, S.L. the explora- tion property around Touro, with known additional reserves, which will provide high potential to the Proyecto Touro. The Company’s and its subsidiaries’ activity are to explore for and develop metals production operations in Europe, with an initial focus on copper. The strategy is to evaluate and prioritise metal production opportunities in several jurisdictions throughout the well- known belts of base and precious metal mineralisation in Spain and the Eastern European region. 2. Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated and company financial statements (hereinafter “financial statements”) are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation (a) Overview The financial statements of Atalaya Mining Plc have been prepared in accordance with International Financial Repor- ting Standards (“IFRS”). IFRS comprise the standards issued by the International Accounting Standards Board (“IASB”). The financial statements are presented in € and all values are rounded to the nearest thousand (€’000), except where otherwise indicated. - 87 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 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 2019, the standards applicable for IFRS’s as adopted by the EU are aligned with the IFRS’s as issued by the IASB. The consolidated financial statements have been prepared on a historical cost basis except for the revaluation of certain financial instruments that are measured at fair value at the end of each reporting period, as explained below and in note 3. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting esti- mates. It also requires management to exercise its judg- ment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.4.  (b) Going concern On 11 March 2020, the World Health Organisation declared the Coronavirus COVID- 19 outbreak to be a pandemic in recognition of its rapid spread across the globe. Many governments are taking increasingly stringent steps to help contain, and in many jurisdictions, now delay, the spread of the virus, including: requiring self-isolation/ quarantine by those potentially affected, implementing social distancing measures, and controlling or closing borders and “locking- down” cities/regions or even entire countries. The crisis and the actions taken by governments have resulted in significant disruption to business operations, consumption patterns worldwide, equity markets and significant volatility in commodities prices, including copper, which prices declined below Company’s ASIC level during March 2020. Furthermore, in Spain, where the Company has its single producing asset, the Government issued a Royal Decree on 14 March 2020 to declare the nationwide lockdown to reduce the impact of the COVID-19 pandemic. On 29 March 2020, the Spanish Government issued a new Royal Decree implementing enhanced measures to protect the people from the virus. The new Decree stipulated that only emplo- yees from a short list of essential industries are allowed to continue working from 30 March 2020. Mining was excluded as an essential industry and consequently the Proyecto Riotinto site was required to halt its operations for a short period until 3 April 2020 when mining operations were permitted to restart. The significant impact on copper prices and the stoppage of Proyecto Riontinto as a result of the Royal Decree will impact the revenues for the year ended 31 December 2020. The uncertain surrounding future copper prices and if Proyecto Riotinto will be required to be halted again for a longer period makes difficult to determine and quantify the operational and financial impact there may be on the business going forward. The Directors have considered and debated different possible scenarios on the Company’s operations, financial position and forecast for a period of at least 12 months since the approval of these financial statements. Possible scenarios range from (i) further disruption in Proyecto Riotinto; (ii) market volatility in commodity prices; and (iii) availability of existing credit facilities. The Company has increased its cash balance from €8.0 million as at 31 December 2019 to €41.7 million as at 31 March 2020 by drawing down on existing credit facilities (see Note 34). The Directors, after reviewing these scenarios, the current cash resources, forecasts and budgets, timing of cash flows, borrowing facilities, sensitivity analyses and considering the associated uncertainties to the Group’s operations have a reasonable expectation that the Company has adequate resources to continue operating in the foreseeable future. Accordingly, these financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Group and the Company will realise its assets and discharge its liabilities in the normal course of business. Management has carried out an assessment of the going concern assumption and has concluded that the Group and the Company will generate sufficient cash and cash equivalents to continue operating for the next twelve months (see Note 34). 2.2 Changes in accounting policy and disclosures The Group has adopted all the new and revised IFRSs and International Accounting Standards (IASs) which are relevant to its operations and are effective for accounting periods commencing on 1 January 2019. The Group applied IFRS 16 and IFRIC 23 for the first time from 1 January 2019. The nature and effect of the changes as a result of adoption of this new accounting standard is described below. Several other amendments and interpretations apply for the first time in 2019, but do not have a significant impact on the consolidated financial statements of the Group. The Group - 88 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. a) Comparative accounting policy in terms of IAS 17 IFRS 16 – Leases The Group has adopted all of the requirements of IFRS 16 Leases (‘IFRS 16’) effective 1 January 2019 (initial applica- tion). IFRS 16 supersedes IAS 17 Leases (‘IAS 17’). IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model. The Group has applied IFRS 16 using the modified retros- pective approach and therefore the comparative informa- tion has not been restated and continues to be reported in terms of IAS 17 and IFRIC 4: Determining Whether an Arrangement Contains a Lease. The Group has applied the modified retrospective approach whereby the right of use asset was set equal to the finance lease liability with no impact on retained earnings on 1 January 2019.The Group elected to use the “transition practical expedient” allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. As a result, the Group has changed its accounting policy for leases as detailed in the accounting policies (Note 2.2) In terms of IAS 17, the Group was required to classify its leases as either finance leases or operating leases and account for those two types of leases differently (both as a lessor or a lessee). A lease was classified as a finance lease if it transferred substantially all the risks and rewards incidental to ownership. A lease was classified as an opera- ting lease if all the risks and rewards incidental to owner- ship did not substantially transfer. Finance leases were recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The correspon- ding liability to the lessor was included in the statement of financial position as a finance lease obligation. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease. The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability. Operating lease payments, in the event of the Group operating as lessee, were recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments were recognised as an operating lease asset. The liability was not discounted. Impact of adopting IFRS 16 on the Group’s consolidated financial statements b) Accounting policy in terms of IFRS 16 The following table summarises the impact of adopting IFRS 16 on the Group’s extracted consolidated statement of financial position at 1 January 2019: The Group recognises right-of-use assets at the commen- cement date of the lease (i.e., the date the underlying asset Right-of-use assets (Euro 000’s) Non-current assets Note As previously reported 31 December 2018 Adjustments as at 1 January 2019 Balance as at 1 January 2019 Property, plant and equipment 13 Deferred tax asset Equity and liabilities Accumulated losses Non-current liabilities Leases Current liabilities Leases 27 27 257,376 7,927 (58,308) - - - 89 - 6,144 - - 5,609 534 263,520 7,927 (58,308) 5,609 534 Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right- of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment. Subsequent to initial measurement, the right-of-use assets are depreciated from the commencement date using the straight-line method over the shorter of the estimated useful lives of the right-of-use assets or the end of lease term. These are as follows: Right-of-use asset Depreciation terms in years Land Motor vehicles Laboratory equipment Based on Units of Production (UOP) Based on straight line depreciation Based on straight line depreciation After the commencement date, the right-of-use assets are measured at cost less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability. Lease liabilities The lease liability is initially measured at the present value of the lease payments that are not paid at the commen- cement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability include the following: • The exercise price of a purchase option if the lessee is reasonably certain to exercise that option • Lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option • Payments of penalties for early terminating the lease, unless the Group is reasonably certain not to terminate early. The lease liability is measured at amortised cost using the effective interest rate method. After the commence- ment date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. The result of this re-measurement is disclosed in a line of the right-of-use assets note as modifications. The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018, as follows: Assets Operating lease commitments as at 31 December 2018 Weighted average incremental borrowing rate as at 1 January 2019 Discounted operating lease commitments as at 1 January 2019 Lease liabilities as at 1 January 2019 €’000 6,803 1.50% 6,144 6,144 When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right- of-use asset or is recorded as profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Short-term leases and leases of low-value assets • Fixed payments, less any lease incentives receivable • Variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date • Amounts expected to be payable by the lessee under residual value guarantees The Group applies the short-term lease recognition exemp- tion to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below €5,000). Lease - 90 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. The amounts recognised in profit or loss, are set out below: Significant judgement in determining the lease term of contracts with renewal options (Euro 000’s) The Group determines the lease term as the non-cance- llable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option, under some of its leases to lease the assets for additional terms of three to five years. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commen- cement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy). The Group included the renewal period as part of the lease term for leases of plant and machinery due to the significance of these assets to its operations. These leases have a short non-cancellable period (i.e., three to five years) and there will be a significant negative effect on production if a replacement is not readily available. The renewal options for leases of motor vehicles were not included as part of the lease term because the Group has a policy of leasing motor vehicles for not more than five years and hence not exercising any renewal options. Twelve month ended 31 Dec 2019 Twelve month ended 31 Dec 2018 (391) (8) (399) - - - As at 31 December Depreciation expense of right-of-use assets Interest expense on lease liabilities Total amounts recognised in profit or loss The Group recognised rent expense from short-term leases. IFRIC Interpretation 23 Uncertainty over Income Tax Treatment The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following: • Whether an entity considers uncertain tax treatments separately c) Amounts recognised in the statement of financial posi- tion and profit or loss • The assumptions an entity makes about the examination of tax treatments by taxation authorities Set out below are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period: • How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates (Euro 000’s) As at 1 January 2019 Additions Depreciation expense Interest expense Payments As at 31 December 2019 Total 6,144 277 (390) - - Lease liabilities 6,144 277 - 8 (576) 5,853 - 277 (40) - - 237 6,031 Right – of-use assets Land Vehicles Laboratory equipment 59 - (15) - - 44 6,085 - (335) - - 5,750 - 91 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report • How an entity considers changes in facts and circumstances The Group determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty. The Group applies significant judgement in identifying uncertainties over income tax treatments. Since the Group operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements. Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Company’s and the subsidiaries’ tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group determined, based on its tax compliance and transfer pricing study, that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The Interpretation did not have an impact on the consolidated financial statements of the Group. Amendments to IFRS 9: Prepayment Features with Negative Compensation Under IFRS 9, a debt instrument can be measured at amortised cost or at fair value through other comprehen- sive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instru- ment is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of an event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termina- tion of the contract. These amendments had no impact on the consolidated financial statements of the Group. IAS 28: Long-term Interests in Associates and Joint Ventures (Amendments) The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests. The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net invest- ment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and Joint Ventures. These amendments had no impact on the consolidated financial statements as the Group does not have long term interests in its associate and joint venture. Amendments to IAS 19: Plan Amendment, Curtailment or Settlement The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to determine the current service cost for the remainder of the period after the plan amendment, curtailment or settlement, using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event. An entity is also required to determine the net interest for the remainder of the period after the plan amendment, curtailment or settlement using the net defined benefit liabi- lity (asset) reflecting the benefits offered under the plan and the plan assets after that event, and the discount rate used to remeasure that net defined benefit liability (asset). The amendments had no impact on the consolidated financial statements of the Group as it did not have any plan amend- ments, curtailments, or settlements during the period. Annual Improvements 2015-2017 Cycle • IFRS 3 Business Combinations. The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation. An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted. These amend- ments had no impact on the consolidated financial statements of the Group as there is no transaction where joint control is obtained. • IAS 12 Income Taxes. The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated - 92 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. distributable profits than to distributions to owners. Therefore, an entity recognises the income tax conse- quences of dividends in profit or loss, other comprehen- sive income or equity according to where it originally recognised those past transactions or events. An entity applies the amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted. When the entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period. Since the Group’s current practice is in line with these amend- ments, they had no impact on the consolidated financial statements of the Group. • IAS 23 Borrowing Costs. The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. The entity applies the amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019, with early application permi- tted. Since the Group’s current practice is in line with these amendments, they had no impact on the consoli- dated financial statements of the Group. 2.2.1 Standards issued but not yet effective The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements are disclosed below. Some of them were adopted by the European Union and others not yet. The Group and the Company intend to adopt these new and amended standards and interpretations, if appli- cable, when they become effective. 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 recognised 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, but an entity that early adopts the amendments must apply them prospectively. The amendments have not yet been endorsed by the EU. The Group will apply these amendments when they become effective. IFRS 3: Business Combinations (amendments) The IASB issued amendments in Definition of a Business (amendments to IFRS 3) aimed at resolving the difficul- ties that arise when an entity determines whether it has acquired a business or a group of assets. These amend- ments are effective for business combinations for which the acquisition date is in the first annual reporting period beginning on or after 1 January 2020 and to asset acqui- sitions that occur on or after the beginning of that period, with earlier application permitted. These Amendments have not yet been endorsed by the EU. The Group does not expect these amendments to have a material impact on its profit and financial position. IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of ‘material’ (amendments) The amendments are effective for annual periods begin- ning on or after 1 January 2020 with earlier application permitted. They clarify the definition of material and how it should be applied. The new definition states that, ’Infor- mation is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity’. In addition, the explanations accompanying the definition have been improved. The amendments also ensure that the definition of material is consistent across all IFRS Standards. The Group does not expect these amendments to have a material impact on its profit and financial position. Interest Rate Benchmark Reform - IFRS 9, IAS 39 and IFRS 7 (Amendments) The amendments are effective for annual periods begin- ning on or after 1 January 2020 and must be applied retrospectively. Earlier application is permitted. In September 2019, the IASB issued amendments to IFRS 9, IAS 39 and IFRS 7, which concludes phase one of its - 93 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report work to respond to the effects of Interbank Offered Rates (IBOR) reform on financial reporting. Phase two will focus on issues that could affect financial reporting when an existing interest rate benchmark is replaced with a risk- free interest rate (an RFR). The amendments published, deal with issues affecting financial reporting in the period before the replacement of an existing interest rate bench- mark with an alternative interest rate and address the implications for specific hedge accounting requirements in IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, which require forward-looking analysis. The amendments provided temporary reliefs, applicable to all hedging relationships that are directly affected by the interest rate benchmark reform, which enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate. There are also amendments to IFRS 7 Financial Instruments: Disclosures regarding additional disclosures around uncertainty arising from the interest rate benchmark reform. The Group does not expect these amendments to have a material impact on its profit and financial position. IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (Amendments) The amendments are effective for annual reporting periods beginning on or after January 1, 2022 with earlier applica- tion permitted. The amendments aim to promote consis- tency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current or non-current. The amendments affect the presentation of liabilities in the statement of financial position and do not change existing requirements around measurement or timing of recog- nition of any asset, liability, income or expenses, nor the information that entities disclose about those items. Also, the amendments clarify the classification requirements for debt which may be settled by the company issuing own equity instruments. These Amendments have not yet been endorsed by the EU. The Group does not expect these amendments to have a material impact on its profit and financial position. Conceptual Framework in IFRS standards The IASB issued the revised Conceptual Framework for Financial Reporting on 29 March 2018. The Conceptual Framework sets out a comprehensive set of concepts for financial reporting, standard setting, guidance for preparers in developing consistent accounting policies and assistance to others in their efforts to understand and interpret the standards. IASB also issued a separate accompanying document, Amendments to References to the Conceptual Framework in IFRS Standards, which sets out the amendments to affected standards in order to update references to the revised Conceptual Framework. Its objective is to support transition to the revised Concep- tual Framework for companies that develop accounting policies using the Conceptual Framework when no IFRS Standard applies to a particular transaction. For preparers who develop accounting policies based on the Conceptual Framework, it is effective for annual periods beginning on or after 1 January 2020. The Group and Company does not expect this framework to have a material impact on its results and financial position. 2.3 Consolidation (a) Basis of consolidation The consolidated financial statements comprise the finan- cial statements of Atalaya Mining Plc and its subsidiaries. (b) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group and the 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 considered 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. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. - 94 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial state- ments of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value’. The main operating subsidiary of Atalaya Mining Plc is the 100% owned Atalaya Riotionto Minera, S.L.U. which operates “Proyecto Riotinto”, in the historical site of Huelva, Spain. The name and shareholding of the entities included in the Group in these financial statements are: The Group applied the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the trans- ferred assets, liabilities incurred by 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, liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the acquisition date. The Group recognised any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionated share of the recognised amounts of acquiree’s identifiable net assets. (c) Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquire 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 IFRS 9 in profit or loss. Entity name Atalaya Mining, Plc 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 Atalaya Riotinto Cobre San Rafael, S.L.(1) Atalaya Servicios Mineros, S.L.U. Notes: Business Holding Marketing Dormant Operating Operating Holding Operating Holding Trust Development Dormant %(2) n/a 100% 100% 100% 50% Country Cyprus Cyprus Spain Spain Spain 100% United Kingdom 100% Spain 100% United Kingdom 100% 10% 100% Spain Spain Spain (1) Cobre San Rafael, S.L. is the entity which holds the mining rights of the Proyecto Touro. The Group has control in the management of 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 31 for details on the acquisition of Cobre San Rafael, S.L. (2) The effective proportion of shares held as at 31 December 2019 and 2018 remained unchanged. - 95 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity. Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Gains and losses resulting from intercom- pany 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 transactions – 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 the carrying value of net assets of the subsi- diary 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 comprehen- sive income are reclassified to profit or loss. (f) Associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee (generally accompanying a shareholding of between 20% and 50% of the voting rights) but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrange- ment, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Investments in associates or joint ventures are accounted for using the equity method of accounting. Under the equity method, the investment 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 acquisition. The Group’s invest- ment in associates or joint ventures includes goodwill identified on acquisition. If the ownership interest in an associate or joint venture is reduced but significant 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 recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income, with a corresponding adjustment to the carrying amount of the investment. When the Group share of losses in an asso- ciate or a joint venture equals or exceeds its interest in the associate or joint venture, 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 or the joint venture. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate or the joint venture is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or the joint venture and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) of associates’ or joint ventures’ in the income statement. Profits and losses resulting from upstream and downs- tream transactions between the Group and its associate or joint venture are recognised in the Group’s consoli- dated financial statements only to the extent of unrelated investors’ interests in the associates or the joint ventures. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transfe- rred. 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 or joint ventures 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 - 96 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. environment in which the entity operates (‘the functional currency’). The financial statements are presented in Euro which is the Group and the Company functional and presentation 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 updated 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 separate currency translation reserve. 2.4 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 stra- tegic, financial and operating policy decisions relating to the activities 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. 2.7 Inventory Inventory consists of 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 com- prises direct purchase costs and an appropriate portion of fixed and variable overhead costs, including depreciation and amortisation, incurred in converting materials into - 97 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 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. Sepa- rately identifiable 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 determined by reference to specific items of stock. A regular review is undertaken to determine the extent of any provision for obsolescence. 2.8 Assets under construction All subsequent expenditure on the construction, installa- tion 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 recognised in the statement of profit or loss and other comprehensive income. After production starts, all assets included in “Assets under Construction” are then transfe- rred to the relevant asset categories. Once a project has been established as commercially viable, related development expenditure is capitalised. A development decision is made based upon consi- deration of project economics, including future metal prices, reserves and resources, and estimated operating and capital costs. Capitalisation 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 commercial production, with the exception of development costs which give rise to a future benefit. Pre-commissioning sales are offset against the cost of assets under construction. No depreciation is recognised 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 impairment 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 esti- mated 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 ............................................................ UOP × Mineral rights ..................................................... UOP × Deferred mining costs ........................................ UOP × Plant and machinery ........................................... UOP × Motor vehicles ................................................ 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 compa- ring the proceeds with the carrying amount and are recog- nised within “Other (losses)/gains – net” in the income statement. (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 reasonably determined are not recognised. Exploitable mineral rights are amortised using the UOP basis over the commercially 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. - 98 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. (b) Deferred mining costs – stripping costs (d) Major maintenance and repairs 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 iden- tifiable 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: 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. i. it is probable that the future economic benefit associated with the stripping activity will be realised; (e) Borrowing costs ii. 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. (c) Exploration 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 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 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. 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 specifically to finance a project, the amount capi- talised 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 provision. 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. 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 zero 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. - 99 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 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 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 consolidated and company statements of 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 impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 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-finan- cial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Permits are capitalised as intangible assets which relate to projects that are at the pre-development stage. No amortisation 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. 2.12 Financial assets and liabilities 2.12.1 Classification From 1 January 2018, the Group classifies its financial assets in the following measurement categories: Other intangible assets include computer software. • those to be measured at amortised cost. 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 are carried at cost less any accumulated amorti- sation (calculated 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. • • those to be measured subsequently at fair value through OCI, and. those to be measured subsequently at fair value through profit or loss. The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows. The classification of financial assets at initial recogni- tion depends on the financial asset’s contractual cash flow characteristics and the Group’s and the Company’s business model for managing them. In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are ‘solely payments of principal and interest’ (‘SPPI’) on the principal amount - 100 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehen- sive income (FVOCI). The Group reclassifies debt investments when and only when its business model for managing those assets changes. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the finan- cial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments: 2.12.2 Amortised cost Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/ (losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss. The Group’s financial assets at amortised cost include receivables (other than trade receivables which are measured at fair value through profit and loss) and cash and cash equivalents. The Company´s financial assets at amortised cost include current and non-current receivables (other than trade recei- vables which are measured at fair value through profit and loss) and cash and cash equivalents. 2.12.3 Fair value through other comprehensive income Financial assets which are debt instruments, that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss. At transition to IFRS 9, the Group had certain financial asset that were accounted for as debt instruments at fair value through other comprehensive income; however, at the reporting date, no such assets existed. 2.12.4 Equity instruments designated as fair value through other comprehensive income Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the consolidated and company statements of comprehensive income when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment. The Group elected to classify irrevocably its listed equity investments under this category. - 101 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 2.12.5 Fair value through profit or loss Or Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised as profit or loss and presented net within other gains/(losses) in the period in which it arises. Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the consolidated and company statements of comprehensive income as applicable. 2.12.6 De-recognition of financial assets Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. 2.12.7 Impairment of financial assets From 1 January 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. Expected credit losses are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. For receivables (other than trade receivables which are measured at FVPL), the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. 2.13 Current versus Non-current Classification The Group presents assets and liabilities in the consoli- dated and company statements 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 reporting 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. (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 reporting period • • • Or • 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. 2.14 Cash and cash equivalents In the consolidated and company statements of cash flows, cash and cash equivalents includes cash in hand and in bank including deposits held at call with banks, with a maturity of less than 3 months. 2.15 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. 2.16 Interest-bearing loans and borrowings 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 - 102 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 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 transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construc- tion 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 recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw- down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a 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, including interest on borrowings, amortisation of discounts or premium relating to borrowings, amortisation of anci- llary 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 acqui- sition, 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 capita- lised 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. Financial liabilities and trade payables After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the consolidated and company statements of comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process. Amortised cost is calculated by taking any discount or premium on acquisition and fees or costs that are an integral part of the EIR, into account. The EIR amortisa- tion is included as finance costs in the consolidated and company statements of comprehensive income. 2.17 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. 2.18 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. 2.19 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 - 103 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 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 combination that at the time of the transaction affects neither accoun- ting nor taxable profit or loss. Income tax is determined using tax rates (and laws) that have been enacted or subs- tantively 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 is 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 inten- tion to settle the balances on a net basis. 2.20 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-transferability, exercise restrictions and behavioural considerations. 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). 2.21 Rehabilitation provisions The Group records the present value of estimated costs of legal and constructive obligations required to restore operating 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 of affected areas. The obligation generally arises when the asset is installed, or the ground/environ- ment is disturbed at the production location. When the liability is initially recognised, the present value of the estimated cost is capitalised 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 liability. The periodic unwinding of the discount is recog- nised in the consolidated income statement as a finance cost. Additional disturbances or changes in rehabilitation costs will be recognised 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. 2.22 Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arran- gement at inception date including whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies: a). There is a change in contractual terms, other than a renewal or extension of the arrangement; - 104 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. b). A renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included in the lease term; c). There is a change in the determination of whether fulfilment is dependent on a specified asset; or d). There is a substantial change to the asset. Group as a lessee The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Group as a lessee The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. 2.23 Revenue recognition (a) Revenue from contracts with customers Atalaya is principally engaged in the business of produ- cing copper concentrate and in some instances, provides freight/shipping services. Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which Atalaya expects to be entitled in exchange for those goods or services. Atalaya has concluded that it is the principal in its revenue contracts because it controls the goods or services before transferring them to the customer. (b) Copper in concentrate (metal in concentrate) sales For most copper in concentrate (metal in concentrate) sales, the enforceable contract is each purchase order, which is an individual, short-term contract. For the Group’s metal in concentrate sales not sold under CIF Incoterms, the performance obligations are the delivery of the concen- trate. A proportion of the Group’s metal in concentrate sales are sold under CIF Incoterms, whereby the Group is also responsible for providing freight services. In these situations, the freight services also represent separate performance obligation (see paragraph (c) below). The majority of the Group’s sales of metal in concentrate allow for price adjustments based on the market price at the end of the relevant QP stipulated in the contract. These are referred to as provisional pricing arrangements and are such that the selling price for metal in concentrate is based on prevailing spot prices on a specified future date after ship- ment to the customer. Adjustments to the sales price occur based on movements in quoted market prices up to the end of the QP. The period between provisional invoicing and the end of the QP can be between one and three months. Revenue is recognised when control passes to the customer, which occurs at a point in time when the metal in concentrate is physically transferred onto a vessel, train, conveyor or other delivery mechanism. The revenue is measured at the amount to which the Group expects to be entitled, being the estimate of the price expected to be received at the end of the QP, i.e., the forward price, and a corresponding trade receivable is recognised. For those arrangements subject to CIF shipping terms, a portion of the transaction price is allocated to the separate freight services provided (See paragraph (c) below). For these provisional pricing arrangements, any future changes that occur over the QP are included within the provisionally priced trade receivables and are, therefore, within the scope of IFRS 9 and not within the scope of IFRS 15. Given the exposure to the commodity price, these provisionally priced trade receivables will fail the cash flow characteristics test within IFRS 9 and will be required to be measured at fair value through profit or loss up from initial recognition and until the date of settlement. These subsequent changes in fair value are recognised as part of revenue in the statement of profit or loss and other comprehensive income each period and disclosed separa- tely from revenue from contracts with customers as part of ‘Fair value gains/losses on provisionally priced trade recei- vables. Changes in fair value over, and until the end of, the QP, are estimated by reference to updated forward market prices for copper as well as taking other relevant fair value considerations as set out in IFRS 13, into account, inclu- ding interest rate and credit risk adjustments. Final settlement is based on quantities adjusted as required following the inspection of the product by the customer as well as applicable commodity prices. IFRS 15 requires that variable consideration should only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. As the adjustments relating to the final assay results for the quantity and quality of concentrate sold are not significant, they do not constrain the recognition of revenue. (c) Freight services As noted above, a proportion of the Group’s metal in concentrate sales are sold under CIF Incoterms, whereby - 105 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report the Group is responsible for providing freight services (as principal) after the date that the Group transfers control of the metal in concentrate to its customers. The Group, therefore, has separate performance obligation for freight services which are provided solely to facilitate sale of the commodities it produces. The revenue from freight services is a separate perfor- mance obligation under IFRS 15 and therefore is recog- nised as the service is provided, hence at year end a portion of revenue must be deferred. Other Incoterms commonly used by the Group are FOB, where the Group has no responsibility for freight or insurance once control of the products has passed at the loading port, Ex works where control of the goods passes when the product is picked up at seller´s promises, and CIP where control of the goods passes when the product is delivered to the agreed destination. For arrangements which have these Incoterms, the only performance obli- gations are the provision of the product at the point where control passes. (d) Sales of services The Group sells services in relation to maintenance of accounting records, management, technical, adminis- trative support and other services to other companies. Revenue is recognised in the accounting period in which the services are rendered. Contract assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. The Group does not have any contract assets as performance and a right to consideration occurs within a short period of time and all rights to consideration are unconditional. From time to time, the Group recognises contract liabilities in relation to some metal in concentrate sales which are sold under CIF Incoterms, whereby a portion of the cash may be received from the customer before the freight services are provided. 2.24 Interest income Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Group and the Company reduce the carrying amount to its recoverable amount, the estimated future cash flow is discounted at the original effective interest rate of the instrument and the discount continues unwinding as inte- rest income. Interest income on impaired loan and receiva- bles is recognised using the original effective interest rate. 2.25 Dividend income Dividend income is recognised when the right to receive payment is established. 2.26 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. 2.27 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. Contract liabilities 2.28 Comparatives A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabi- lities are recognised as revenue when the Group performs under the contract. Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year. 2.29 Amendment of financial statements after issue The consolidated and company financial statements were authorised for issue by the Board of Directors on 6 April 2020. - 106 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 3. Financial Risk Management 3.1 Financial risk factors The Group manages its exposure to key financial risks in accordance with its financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets while protecting future financial security. The main risks that could adversely affect the Group’s financial assets, liabilities or future cash flows are market risks comprising: commodity price risk, interest rate risk and foreign currency risk; liquidity risk and credit risk; operational risk, compliance risk and litigation risk. Management reviews and agrees policies for managing each of these risks that are summarised below. The Group’s senior management oversees the manage- ment of financial risks. The Group’s senior management is supported by the AFRC that advises on financial risks and the appropriate financial risk governance framework for the Group. The AFRC provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and proce- dures and that financial risks are identified, measured and managed in accordance with the Group’s policies and risk objectives. Currently, the Group does not apply any form of hedge accounting. (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 fore- casting is performed in the operating entities of the Group and aggregated 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. THE COMPANY (Euro 000’s) 31 December 2019 Carrying amounts Contractual cash flows Less than 3 months Between 3–12 months Between 1–2 years Between 2–5 years Over 5 years Land options and mortgages 282 282 Tax liability 2,507 2,507 Deferred consideration 53,000 53,000 11 - - Trade and other payables 57,268 57,268 44,554 113,057 113,057 44,565 31 December 2018 Land options and mortgages Tax liability 823 1,945 823 1,945 Deferred consideration 53,000 53,000 - - - 271 2,507 - 12,705 15,483 791 1,945 - - - 9 9 32 - - 53,000 Trade and other payables 56,493 56,493 49,710 6,770 13 112,261 112,261 49,710 9,506 53,045 - - 53,000 - 53,000 - - - - - - - - - - - - - - - - 107 - - 107 - Atalaya Mining Plc. Atalaya Mining Plc. L E T T E R F R O M T H E C H A I R M A N F I N A N C I A L S T A T E M E N T S Annual Report Annual Report THE GROUP (Euro 000’s) 31 December 2019 Tax liability Deferred consideration Carrying amounts Contractual cash flows Less than 3 months Between 3–12 months Between 1–2 years Between 2–5 years Over 5 years 1,865 9,117 1,865 9,117 Trade and other payables 10,272 10,272 31 December 2018 Tax liability Deferred consideration Trade and other payables 21,254 21,254 1,524 9,117 8,069 1,524 9,117 8,069 18,710 18,710 - - - - - - 6,124 6,124 1,865 - 10,272 12,137 1,524 - - - - - - 9,117 1,945 3,469 - 9,117 - 9,117 - 9,117 - - - - - - - - - - - - (b) Currency risk (c) Commodity price risk Currency risk is the risk that the value of financial instru- ments 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. Foreign currency sensitivity The following table demonstrates the sensitivity to a reasonably possible change in the foreign exchange rate, with all other variables held constant, of the Group’s profit before tax due to changes in the carrying value of mone- tary assets and liabilities at reporting date: (Euro 000's) +5% -5% Effect on profit before tax for the year ended 31 Dec 2019 increase/ (decrease) Effect on profit before tax for the year ended 31 Dec 2018 increase/ (decrease) 9,393 (9,393) 9,474 (9,474) 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. Manage- ment 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. Commodity price hedging is governed by the Group´s policy which allows to limit the exposure to prices. The Group may decide to hedged part of its production during the year. Commodity price sensitivity The table below summarises the impact on profit before tax for changes in commodity prices on the fair value of derivative financial instruments and trade receivables (subject to provisional pricing). The impact on equity is the same as the impact on profit before income tax as these derivative financial instruments have not been designated as hedges and are classified as held-for-trading and are therefore fair valued through profit or loss. The analysis is based on the assumption that the copper prices move $0.05/lb with all other variables held constant. Reasonably possible movements in commodity prices were determined based on a review of the last two years’ historical prices. - 108 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. Effect on profit before tax for the year ended 31 Dec 2019 increase/ (decrease) Effect on profit before tax for the year ended 31 Dec 2018 increase/ (decrease) Eur 000's Eur 000's 4,090 3,845 (e) Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market inte- rest 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. (4,090) (3,845) At the reporting date the interest rate profile of interest bearing financial instruments was: Increase/ (decrease) in copper prices Increase $0.05/lb (2018: $0.05) Decrease $0.05/lb (2018: $0.05) (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 finan- cial 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) 2019 2018 Variable rate instruments Financial assets 8,077 33,070 An increase of 100 basis points in interest rates at 31 December 2019 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 (Euro 000's) 2019 2018 2019 2018 Variable rate instruments 808 331 808 331 (Euro 000's) 2019 2018 Unrestricted cash and cash equivalent at Group 1,730 24,357 (f) Operational risk Unrestricted cash and cash equivalent at operating entity 6,347 8,463 Restricted cash at the operating entity - 250 Cash and cash equivalents 8,077 33,070 Restricted cash as of 31 December 2018 has been reclassi- fied to non-current trade and other receivables in 2019, as the deposit is considered to be long term (Note 19). Besides of 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 2019. Operational risk is the risk that derives from the deficien- cies relating to the Group’s information technology and control systems as well as the risk of human error and natural disasters. 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 - 109 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 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. 3.3 Fair value estimation The fair values of the Group’s financial assets and liabilities approximate their carrying amounts at the reporting date. 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 safe- guard 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 while maximising 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 safeguard 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 share- holders, 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(1) Total equity Total capital Gearing ratio 2019 2018 117,774 85,710 319,858 282,174 437,632 367,884 26.9% 23.3% (1) Net debt includes non-current and current liabilities net of cash and cash equivalent. The increase in the gearing ratio during 2019 was mainly due to the undertaken impairments in the year which reduced the total equity for the year 2019 and the impact of the leases resulting in a debt increase. The fair value of financial instruments traded in active markets, such as publicly traded and available for sale financial assets is based on quoted market prices at the reporting date. The quoted market price used for finan- cial assets held by the Group is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses a variety of methods, such as estimated discounted cash flows, and makes assump- tions that are based on market conditions existing at the reporting date. Fair value measurements recognised in the consolidated and company 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). 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 assumptions are continually evaluated and are based on - 110 - Annual Report Annual Report F I N A N C I A L S T A T E M E N T S F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. Atalaya Mining Plc. THE GROUP (Euro 000's) 31 December 2019 Other financial assets Financial assets at FV through OCI Trade and other receivables Receivables (subject to provisional pricing) Total 31 December 2018 Other financial assets Financial assets at FV through OCI Trade and other receivables Receivables (subject to provisional pricing) Total THE COMPANY (Euro 000's) 31 December 2019 Non-current receivables Financial assets at FV through profit and loss Other current assets Financial assets at FV through OCI Total 31 December 2018 Non-current receivables Financial assets at FV through profit and loss Other current assets Financial assets at FV through OCI Total Level 1 Level 2 Level 3 Total 42 - 42 71 - 71 - 1,101 1,143 17,716 17,716 - 1,101 17,716 18,859 - 6,959 6,959 - - - 71 6,959 7,030 Level 1 Level 2 Level 3 Total - 42 42 - 71 71 - - - - - - 229,686 229,686 - 42 229,686 229,728 215,308 215,308 - 71 215,308 215,379 management’s experience and other factors, including expectations of future events that are believed to be reaso- nable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. 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. Subse- quent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a project proves to be unviable, all irrecoverable - 111 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report costs associated with the project net of any related impair- ment provisions are written off. (b) Stripping costs The Group incurs waste removal costs (stripping costs) during the development and production phases of its surface mining operations. Furthermore, during the production 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 refe- rred 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 identi- fiable 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 assessments 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 relating to major capital investment decisions and the type and grade of minerals being mined. Judgement is also required to identify a suitable produc- tion measure that can be applied in the calculation and allocation 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 compo- nent 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 produc- tion method in determining the depreciable lives of the stripping activity asset(s). (c) 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. Such an analysis requires complex geological judge- ments 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 Canadian 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 consolidated and company statements of 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 provisions 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 judgements regarding the existence of such assets and in estimates of the likely recovery of such assets. (d) Impairment of assets Events or changes in circumstances can give rise to signi- ficant impairment charges or impairment reversals in a particular year. The Group assesses each Cash Generating 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 impairment 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 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 - 112 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 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 assumptions that an independent market participant may take into account. Cash flows are discounted at an appro- priate discount rate to determine the net present value. For the purpose of calculating the impairment of any asset, management 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 esti- mate of the net cash flow to be generated from its projects. (e) Provisions for decommissioning and site restoration costs Accounting for restoration provisions requires manage- ment 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 environmental and social principles the Group is in compliance with. The calculation of the present value of these costs also includes assumptions regarding the timing of restoration and remediation work, applicable 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 restoration techniques or experience at other mine sites. As a result, there could be significant adjustments to the provisions established which would affect future financial results. Refer to Note 26 for further details. (f) Income tax Significant judgment is required in determining the provi- sion for income taxes. There are transactions and calcula- tions 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 suffi- cient taxable earnings in future periods, in order to utilise recognised 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 manage- ment 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. 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. (g) Inventory 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. (h) Leases - Estimating the incremental borrowing rate The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted - 113 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating). (i) Contingent liabilities A contingent liability arises where a past event has taken place for which the outcome will be confirmed only by the occurrence or non-occurrence of one or more uncertain events outside of the control of the Group, or a present obligation 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 contin- gency 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 28, 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 opera- tions at the Proyecto Riotinto. In 2018 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 consideration on an undiscounted basis. (l) Consolidation of Cobre San Rafael Cobre San Rafael, S.L. is the entity which holds the mining rights of Proyecto Touro. The Group controls Cobre San Rafael, S.L. as it is exposed to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The control is proven as: one of the two Directors belongs to the Group and management of the financial books and the capacity to appoint the key personnel is controlled by Atalaya. (m) Classification of financial assets The Group and Company exercises judgement upon deter- mining the classification of its financial assets upon consi- dering whether contractual features including interest rate could significantly affect future cash flows. Furthermore, judgment is required when assessing whether compen- sation paid or received on early termination of lending arrangements results in cash flows that are not SPPI. 4. Business and geographical segments Business segments The Group has only one distinct business segment, that being 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 The actual timing of any payments to Astor of the consi- deration involves significant judgment as it depends on certain factors which are out of control of management. 30.3) Geographical segments The Group’s mining activities are located in Spain. The commercialisation of the copper concentrates produced in Spain is carried out through Cyprus. Sales transactions to related parties are on arm’s length basis in a similar manner to transaction with third parties. Accounting poli- cies used by the Group in different locations are the same as those contained in Note 2. (k) Share-based compensation benefits 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 compensation 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 management’s best estimates for the effects of non-transferability, exercise restrictions, behavioural consi- derations and expected volatility. Please refer to Note 23. - 114 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 2019 (Euro 000's) Revenue Cyprus Spain Other Total 10,335 177,533 - 187,868 Earnings/(loss)before Interest, Tax, Depreciation and Amortisation 4,195 58,209 (1,071) 61,333 Depreciation/amortisation charge Net foreign exchange gain/(loss) Impairment of other receivables Finance income Finance cost Profit/(loss) before tax 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 2018 (Euro 000's) Revenue Earnings/(loss)before Interest, Tax, Depreciation and Amortisation Depreciation/amortisation charge Net foreign exchange gain/(loss) Finance income Finance cost Profit/(loss) before tax 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 (1) 126 (1,694) 25 (1) 2,650 (1,459) (23,024) 224 - 27 (88) 35,348 (4,748) 19,515 422,316 (13,823) (111,461) 1 - 1 12,574 3,502 63,498 - - - - - (1,071) - 1,476 (567) - - - (23,025) 350 (1,694) 52 (89) 36,927 (6,207) 30,720 443,307 (125,851) 12,575 3,502 63,499 Cyprus Spain Other Total 12,938 1,839 - 999 63 (2) 176,538 52,110 (13,430) 615 8 (251) - 189,476 (407) 53,542 - (1) - - (13,430) 1,613 71 (253) 2,899 39,052 (408) 41,543 31,721 372,790 (13,672) (104,931) - - - 10,143 3,287 69,086 643 (177) - - - (7,102) 34,441 405,154 (118,780) 10,143 3,287 69,086 Revenue represents the sales value of goods supplied to customers; net of value added tax. The following table summarises sales to customers with whom transactions have individually exceeded 10.0% of the Group’s revenues. (Euro 000's) Offtaker 1 Offtaker 2 Offtaker 3 2019 2018 Segment €'000 Segment Copper Copper Copper 35,766 53,147 98,955 Copper Copper Copper €'000 25,900 99,703 63,873 - 115 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 5. Revenue THE GROUP (Euro 000's) Revenue from contracts with customers(1) Fair value gain/losses relating to provisional pricing within sales (2) Total revenue 2019 188,019 (152) 187,868 2018 195,891 (6,415) 189,476 All revenue from copper concentrate is recognised at a point in time when the control is transferred. Revenue from freight services is recognised over time as the services are provided. (1) Included within 2019 revenue there is a transaction price of €0.2 million (€1.0 million in 2018) related to the freight services provided by the Group to the customers arising from the sales of copper concentrate under CIF incoterm. (2) Provisional pricing impact represented the change in fair value of the embedded derivative arising on sales of concentrate. THE COMPANY (Euro 000's) Sales of services to related companies (Note 30.3) 6. Other income THE GROUP (Euro 000's) Gain on disposal of associate Release of prior year provision Other income THE COMPANY (Euro 000's) Gain on disposal of associate Release of prior year provision Sales of services to related parties (Note 30.3) 2019 1,283 1,283 2019 50 - 38 88 2019 50 - 74 124 2018 1,323 1,323 2018 - 117 41 158 2018 - 117 - 117 - 116 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 7. Expenses by nature THE GROUP (Euro 000's) Operating costs Care and maintenance expenditure Exploration expenses Employee benefit expense (Note 8) Compensation of key management personnel Auditors' remuneration - audit — Other services Other accountants' remuneration Consultants' remuneration Depreciation of property, plant and equipment (Note 13) Amortisation of intangible assets (Note 14) Travel costs Share option-based employee benefits Shareholders' communication expense On-going listing costs Legal costs Public relations and communication development Impairment of intangible assets (Note 14) Impairment loss on other receivables (Note 19) Other expenses and provisions 2019 2018 96,739 110,140 240 3,588 20,153 2,105 215 31 152 1,026 12,575 3,502 371 619 - 369 448 567 6,948 1,694 281 1,021 17,248 2,061 196 8 85 881 10,143 3,287 329 125 172 163 450 640 - - - 2,292 Total cost of operation, corporate, share based benefits, care and maintenance, and exploration expenses 151,342 149,522 THE COMPANY (Euro 000's) Employee benefit expense (Note 8) Key management remuneration Auditors' remuneration - audit — Other services Other accountants' remuneration Consultants' remuneration Management fees (Note 30.3) Travel costs Shareholders' communication expense On-going listing costs Legal costs Impairment loss on other receivables (Note 19) Other expenses and provisions Total cost of corporate, share based benefits and impairment - 117 - 2019 2018 122 386 116 31 134 159 42 13 181 188 420 1,694 (252) 3,234 144 864 102 6 80 114 213 31 172 163 423 - 2,068 4,380 Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 8. Employee benefit expense THE GROUP (Euro 000's) Wages and salaries Social security and social contributions Employees’ other allowances Bonus to employees The average number of employees and the number of employees at year end by office are: 2019 14,599 4,997 21 536 2018 13,357 3,622 28 241 20,153 17,248 Number of employees Spain - Full time Spain - Part time Cyprus - Full time Total THE COMPANY (Euro 000's) Wages and salaries Social security and social contributions Average At year end 2019 441 6 3 450 2018 379 5 3 387 2019 446 7 2 455 2018 409 5 3 417 2019 2018 109 13 122 131 13 144 The average number of employees and the number of employees at year end by office are: Average At year end 2019 2018 2019 2018 3 3 3 3 - - 3 3 Number of employees Cyprus - Full time Total 9. Finance income THE GROUP (Euro 000's) Interest income THE COMPANY (Euro 000's) Interest income from interest-bearing intercompany loans at fair value through profit and loss (Note 30.3) Interest income from interest-bearing intercompany loans at amortised cost (Note 30.3) Interest income Interest income relates to interest received on bank balances. - 118 - 2019 2018 52 52 2019 13,607 3,198 25 16,830 71 71 2018 13,615 2,506 63 16,184 Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 10. Finance costs THE GROUP (Euro 000's) Interest expense: — Other interest — Interest expense on lease liabilities — Unwinding of discount on mine rehabilitation provision (Note 26) 11. Tax THE GROUP (Euro 000's) Current income tax charge (Over)/under provision previous years 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) 2019 2018 40 8 41 89 2019 5,158 (302) 256 874 221 6,207 214 - 39 253 2018 4,899 - 975 1,020 208 7,102 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) Accounting profit before tax Tax calculated at the applicable tax rates of the Company – 12.5% 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 Effect of higher tax rates in other jurisdictions of the group Tax effect of tax losses brought forward Additional tax Deferred tax (Note 17) Tax charge THE COMPANY (Euro 000's) Current income tax charge (Over)/under provision previous years - 119 - 2019 2018 36,927 41,543 4,616 1,103 4,021 5,193 2,212 86 (7,123) (4,501) (302) 2,797 (256) - 1,351 6,207 2019 1,152 (274) 878 - 2,710 (975) 174 2,203 7,102 2018 1,524 - 1,524 Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report Tax losses carried forward As at 31 December 2019, the Group had tax losses carried forward amounting to €18.5 million from the Spanish subsi- diary for the period 2008 to 2015. 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. Under current legis- lation, 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 and Cyprus domiciled. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defence is payable by the Company for the account of the shareholders. Spain The corporation tax rate for 2019 and 2018 is 25%. The recent Spanish tax reform approved in 2014 reduced the general corporation tax rate from 30% to 28% in 2015 and to 25% in 2016, and introduced, among other changes, a 10% reduction in the tax base subject to equity increase and other requirements. Under current legislation, tax losses may be carried forward and be set off against taxable income with no limitation. 12. 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) 2019 2018 Parent company (3,997) (5,587) Subsidiaries 41,320 40,302 Profit attributable to equity holders of the parent 37,323 34,715 Weighted number of ordinary shares for the purposes of basic earnings per share ('000) 137,339 136,755 Basic profit per share (EUR cents/share) 27.2 25.4 Weighted number of ordinary shares for the purposes of diluted earnings per share ('000) 139,236 138,110 Diluted profit per share (EUR cents/share) 26.8 25.1 At 31 December 2019, there are 2,505,250 options (Note 23) and nil warrants (Note 22) (At 31 December 2018: 1,313,000 options and nil warrants) which have been included when calculating the weighted average number of shares for FY2019. - 120 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 13. Property, plant and equipment THE GROUP (Euro 000's) 2019 COST Land and buildings Right of use assets(6) Plant and equipment Assets under construction(4) Deferred mining costs(3) Other assets(2) Total At 1 January 2019 45,853 6,144 152,820 62,010 27,537 785 295,149 Additions Reclassifications Disposals 210 277 1,171 48,737 6,476 - - - - 94,230(5) (94,230) - - - - At 31 December 2019 46,063 6,421 248,221 16,517 34,013 DEPRECIATION At 1 January 2019 Charge for the year Disposals 6,072 2,185 - - 20,315 391 - 8,557 - At 31 December 2019 8,257 391 28,872 - - - - 4,681 1,380 - 6,061 Net book value at 31 December 2019 37,806 6,030 219,349 16,517 27,952 1 - (5) 781 56,872 - (5) 352,016 561 31,629 62 (3) 620 161 12,575 (3) 44,201 307,815 2018 COST At 1 January 2018 Additions Reclassifications At 31 December 2018 DEPRECIATION At 1 January 2018 Charge for the year At 31 December 2018 40,995 4,858(1) - 45,853 4,076 1,996 6,072 Net book value at 31 December 2018 39,781 - - - - - - - - 145,402 11,445 22,317 785 220,944 2,324 5,094 55,659 5,220 (5,094) - - - 68,061 - 152,820 62,010 27,537 785 289,005 13,465 6,850 20,315 - - - 3,469 1,212 4,681 132,505 62,010 22,856 476 85 561 224 21,486 10,143 31,629 257,376 (1) Mine rehabilitation assets and Rumbo Royalty Buyout. On 5 April 2018, the Company entered into an agreement with Rumbo to purchase the whole royalty agreement for a total consideration of US$4,750,000 to be paid through the issuance of 1,600,907 new ordinary shares of £0.075 at a price of £2.118 per share. After this transaction the share premium increased by €3,887,128. On 13 April 2018, the new ordinary shares were issued to Rumbo. (2) Includes motor vehicles, furniture, fixtures and office equipment which are depreciated over 5-10 years. (3) Stripping costs. (4) Assets under construction at 31 December 2019 amounted to €16.5 million (2018: €62.0 million). It includes the capitalisation of costs related to the Expansion Project and sustaining capital expenses. (5) Transfers related to the completion of the Expansion Project (circa. €90 million) and the Tailing Dam Project (circa. €4 million). (6) See leases in Note 27. The above fixed assets are mainly located in Spain. - 121 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report Other assets(1) Total 15 - 15 15 - 15 - 15 - 15 15 - - 15 - 15 - 15 15 - 15 - 15 - 15 15 - - 15 - THE COMPANY (Euro 000's) 2019 COST At 1 January 2019 Disposals At 31 December 2019 DEPRECIATION At 1 January 2019 Charge for the year At 31 December 2019 Net book value at 31 December 2019 2018 COST At 1 January 2018 Disposals At 31 December 2018 DEPRECIATION At 1 January 2018 Charge for the year Disposals At 31 December 2018 Net book value at 31 December 2018 (1) Includes furniture, fixtures and office equipment which are depreciated over 5-10 years. The Group In 2017 the BoD approved an Expansion Project to increase the plant capacity to 15Mtpa. During 2019, the Expansion Project was completed with the processing plant fully commissioned and operating at an increased annualised rate of 15 Mtpa since January 2020. During FY2019, the Group capitalised personnel costs amounting to €953k (2018: €756k). - 122 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 14. Intangible assets THE GROUP (Euro 000's) 2019 COST On 1 January 2019 Additions Disposals At 31 December 2019 Amortisation On 1 January 2019 Charge for the year Impairment charge (Note 7) At 31 December 2019 Net book value at 31 December 2019 2018 COST On 1 January 2018 Additions from acquisition of subsidiary Additions At 31 December 2018 AMORTISATION On 1 January 2018 Charge for the year At 31 December 2018 Net book value at 31 December 2018 Permits(1) Licences, R&D and Software 76,538 - - 76,538 10,370 3,438 - 13,808 62,730 76,521 17 - 76,538 7,145 3,225 10,370 66,168 6,026 5,449 (3,865) 7,610 243 64 6,948 7,255 355 4,505 2,476 (955) 6,026 181 62 243 5,783 Total 82,564 5,449 (3,865) 84,148 10,613 3,502 6,948 21,063 63,085 81,026 2,493 (955) 82,564 7,326 3,287 10,613 71,951 (1) Permits include an amount of €5.0 million that relate to the Proyecto Touro mining rights. 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 increased the life of mine to 16 ½ years). In July 2018, the Company announced an updated technical report on the mineral resources and reserves of the Proyecto Riotinto. The Report increased the open pit mineral reserves by 29% and stated the life of mine as 13.8 years, considering the on-going expansion of the proces- sing plant. 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 the sale of the respective areas. The Group conducts impairment testing on an annual basis unless indicators of impairment are not present at the reporting date. Atalaya assessed its assets concluding that there are no indicators of impairment for Proyecto - 123 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report Riotinto as of 31 December 2019. Management has decided to impair all the investment (€6,948k) referred to exploration and other related expenses of Proyecto Touro due to the existence of substantial evidence of impairment based on the negative Environmental Impact Statement notified by the Xunta de Galicia. Mining rights relating to Proyecto Touro continue to be carried at their book value of €5.0 million in Permits as their market value is considered to be in excess of the carrying value. 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. back in September 2008. This amount was fully impaired on acquisition, in the absence of the mining licence back in 2008. 15. Investment in subsidiaries THE COMPANY (Euro 000's) Opening amount at cost minus provision for impairment Incorporation (1) Increase of investment (2) Disposal of investment (4) 2019 3,899 - 731 - 2018 3,693 - 206 - Closing amount at cost less provision for impairment 4,630 3,899 The subsidiaries of the Group, the percentage of equity owned and the main country of operation are set out below. These interests are consolidated within these financial statements. Subsidiary companies Date of incorporation/ acquisition Principal Activity Country of incorporation Effective proportion of shares held in 2019(5) Effective proportion of shares held in 2018(5) Atalaya Touro (UK) Ltd(1) 10 March 2017 Holding United Kingdom Atalaya Minasderiotinto Project (UK) Ltd(2) 10 Sep 2008 Holding United Kingdom EMED Marketing Ltd 08 Sep 2008 Trading EMED Mining Spain SLU(3) 12 April 2007 Exploration Cyprus Spain 100% 100% 100% 100% 100% 100% 100% 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 28). (1) On 10 March 2017, Atalaya Touro (UK) Limited was incorporated. Atalaya Mining Plc is its sole shareholder. (2) During the year 2019 there was an increase amounting to €731k in the investment mainly related to the employee benefit expenses (2018: €206k). (3) In December 2017, EMED Mining Spain S.L.U. increased its capi- tal by €300k from its sole shareholder. This investment increase was fully impaired in the year. (4) On 15 May 2018, the Group sold Eastern Mediterranean Resour- ces (Caucasus) Ltd., which was fully impaired, by transferring all issued shares. Following the sale the Company recognised a gain in the net amount of €117k as a result of the release of a prior year pro- vision in the amount of €250k relating to the subsidiary’s liabilities and the costs incurred of the sale in the total cost of €133k (Note 6). (5) The effective proportion of shares held as at 31 December 2019 and 2018 remained unchanged excluding Eastern Mediterranean Resources (Caucasus) Ltd which was sold in 2018. - 124 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 16. Investment in joint venture of the Class B resources. ARM will fund the initial expendi- ture of a feasibility study up to a maximum of €2.0 million. Costs are then borne by the joint venture partners in accor- dance with their respective ownership interests. Company name Principal activities Country of incorporation Effective proportion of shares held at 31 December 2015 Recursos Cuenca Minera S.L. Explotation of tailing dams and waste areas resources Spain 50% The Group’s significant aggregate amounts in respect of the joint venture are as follows: THE COMPANY (Euro 000's) Intangible assets Trade and other receivables Cash and cash equivalents 2019 2018 94 2 21 94 4 22 In 2012 ARM entered into a 50/50 joint venture with Rumbo to evaluate and exploit the potential of the class B resources in the tailings dam and waste areas at The Proyecto Riotinto. Under the joint venture agreement, ARM will be the operator of the joint venture and will reimburse Rumbo for the costs associated with the application for classification Trade and other payables (115) (115) Net assets Revenue Expenses Net loss after tax 2 - - - 5 - - - 17. Deferred tax THE GROUP Number of employees DEFERRED TAX ASSET At 1 January Consolidated statement of financial position Consolidated income statement 2019 2018 2019 2018 7,927 10,130 Deferred tax asset due to losses available against future taxable income (Note 11) - - Deferred tax related to utilization of losses for the year (Note 11) (256) (975) Deferred tax asset due to losses available against future taxable income overprovision previous years (Note 11) Deferred tax income relating to the origination of temporary differences (Note 11) Deferred tax expense relating to reversal of temporary differences (Note 11) At 31 December Deferred tax income (Note 11) - (874) (221) 6,576 - (1,020) (208) 7,927 - - 256 - 874 221 - - 975 - 1,020 208 1,351 2,203 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. In addition to recognised deferred income tax asset, the Group has unrecognised tax losses in Cyprus that are availa- ble to carry forward for 5 years against future taxable income of the Group companies in which the losses arose, and in Spain €18.5 million (2018: €24.9 million) which are available to carry forward indefinitely against future profits. 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, and due to the uncertainty in profi- tability in the near future to support (either partially or in full) the recognition of the losses as deferred income tax assets. - 125 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 18. Inventories THE GROUP (Euro 000's) Finished products Materials and supplies Work in progress 2019 11,024 9,266 1,040 2018 2,955 7,381 486 21,330 10,822 As at 31 December 2019, copper concentrate produced and not sold amounted to 14,201 tonnes (FY2018: 4,667 tonnes). Accordingly, the inventory for copper concentrate was €11.0 million (FY2018: €3.0 million). During the year 2019 the Group recorded cost of sales amounting to €115.3 million (FY2018: €140.5 million). Materials and supplies relate mainly to machinery spare parts. Work in progress represents ore stockpiles, which is ore that has been extracted and is available for further processing. 19. Trade and other receivables THE GROUP (Euro 000's) NON-CURRENT TRADE AND OTHER RECEIVABLES Deposits CURRENT TRADE AND OTHER RECEIVABLES Trade receivables at fair value - subject to provisional pricing Trade receivables from shareholders at fair value - subject to provisional pricing (Note 30.5) Other receivables from related parties at amortised cost (Note 30.3) Deposits VAT receivable Tax advances Prepayments Other current assets Allowance for expected credit losses Total trade and other receivables - 126 - 2019 2018 500 500 8,798 8,918 56 26 249 249 4,498 2,461 56 26 14,380 13,691 7 616 56 1,208 688 1,060 32,857 23,937 - - 33,357 23,937 Annual Report Annual Report F I N A N C I A L S T A T E M E N T S F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. Atalaya Mining Plc. THE GROUP (Euro 000's) NON-CURRENT TRADE AND OTHER RECEIVABLES Receivables from own subsidiaries at amortised cost (Note 30.4) Receivables from own subsidiaries at fair value through profit and loss (Note 30.4) CURRENT TRADE AND OTHER RECEIVABLES Deposits and prepayments VAT receivable Receivables from own subsidiaries at amortised cost (Note 30.4) Other receivables Total current trade and other receivables 2019 2018 80,316 74,796 229,686 215,308 310,002 290,104 - 47 3,996 - 4,043 - 161 6,328 200 6,689 Trade receivables are shown net of any interest applied to prepayments. Payment terms are aligned with offtake agreements and market standards and generally are 7 days on 90% of the invoice and the remaining 10% at the settlement date which can vary between 1 to 5 months. The fair value of trade and other receivables approximate their book values. Increase in deposits relates to the restricted cash of €250k reclassified from cash and cash equivalents (note 21) in non-current deposits in 2019 since the deposit is consi- dered to be long term. In 2018, the Company recognised €200k prepayment from an option to acquire a portion of an investment on a company which held mining rights of a land. In 2019, the Company signed an agreement to acquire an option over a portion of investment in another entity. The total amount paid in as prepayment for these two investments in 2019 was €1,494k. After the exploration processed performed by the Company on both lands, management decided not to pursue with the execution of both options and therefore to fully impaired the prepayments. Set out below are the movements of the impairment: THE GROUP (Euro 000's) 1 January Additions Impairment At 31 December 2019 200 1,494 (1,694) - 2018 - 200 - 200 - 127 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 20. Other Financial assets THE GROUP (Euro 000's) Financial asset at fair value through OCI (see (a)) below) Total current Total non-current THE COMPANY (Euro 000's) Financial asset at fair value through OCI (see (a)) below) Total current a) Financial asset at fair value through OCI THE GROUP (Euro 000's) At 1 January(1) Additions(3) Fair value change recorded in equity (Note 23) Reversal of previously impaired Disposals(2) At 31 December THE COMPANY (Euro 000's) At 1 January(1) Fair value change recorded in equity (Note 23) Reversal of previously impaired Disposals(2) At 31 December 2019 1,143 42 1,101 2018 71 71 - 2019 2018 42 42 71 71 2019 71 1,101 (29) 50 (50) 1,143 2018 129 - (58) - - 71 2019 2018 71 (29) 50 (50) 42 129 (58) - - 71 Company name Principal activities Country of incorporation Effective proportion of shares held at 31 December 2019 Explotaciones Gallegas del Cobre SL Exploration company Spain KEFI Minerals Plc Prospech Limited Exploration and development mining company listed on AIM UK Exploration company Australia 12.5% 1.80% 0.65% (1) The Group decided to recognise changes in the fair value of available-for-sale investments in Other Comprehensive Income (‘OCI’), as explained in Note 2.12. (2) On 20 March 2019, the Board of Directors approved the disposal of the 10% free-carried investment of Atalaya in Eastern Mediterranean Minerals (Cyprus) Limited, an exploration company with interest in Cyprus. (3) In November 2019, Atalaya executed the option to acquire 12.5% of Explotaciones Gallegas del Cobre, S.L. the exploration property around Touro, with known additional reserves. - 128 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 21. Cash and cash equivalents THE GROUP (Euro 000's) Cash at bank and in hand 2019 8,077 2018 33,070 As at 31 December 2019, the Group’s operating subsidiary held €250k (FY2018: €250k) as a collateral for bank guarantees, which has been reclassified as restricted cash (or deposit). In 2019 restricted cash were reclassified to non-current trade and other receivables (Note 19) since the deposit is considered to be long term. Cash and cash equivalents denominated in the following currencies: (Euro 000's) Euro - functional and presentation currency Great Britain Pound United States Dollar THE COMPANY (Euro 000's) Cash at bank and on hand Cash and cash equivalents denominated in the following currencies: Euro - functional and presentation currency Great Britain Pound United States Dollar 2019 2,059 374 5,644 8,077 2019 128 97 29 2 128 2018 7,649 255 25,166 33,070 2018 826 774 3 49 826 - 129 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 22. Share capital Authorised Nr. of Shares Share capital Share Premium Total ’000’s £ 000’s £ 000’s £ 000’s Ordinary shares of £0.075 each 200,000 15,000 - 15,000 Issued and fully paid 1 January 2018 Issue Date 13 Feb 2018 13 Feb 2018 13 April 2018 1 June 2018 000's Euro 000's Euro 000's Euro 000's 135,254 13,192 309,577 322,769 Price (£) Details 1.87 Shares issued to Rumbo(a) 1.44 Exercised share options(b) 193 29 2.118 1.425 Rumbo buyout(c) 1,601 Exercised warrants(d) Costs of Issued Shares 263 - 16 3 139 22 - 410 45 426 48 3,887 4,026 405 (5) 427 (5) 31 December 2018/1 January 2019 137,340 13,372 314,319 327,691 31 December 2019 137,340 13,372 314,319 327,691 Authorised capital The Company’s authorised share capital is 200,000,000 ordinary shares of £0.075 each. d) On 1 June 2018, 262,569 warrants were exercised at £1.425 per ordinary share. Hence, 262,569 new ordinary shares of £0.075 were issued, thus creating a share premium of €405,087. Issued capital FY2019 No issuances during the twelve months period ended 31 December 2019.  Warrants The Company has issued warrants to advisers to the Group. Warrants expired three years after the grant date and had exercise price £1.425. At 31 December 2019 there are nil warrants. FY2018 On 1 June 2018, all warrants were exercised. a) On 13 February 2018, the Company issued 192,540 Details of share warrants at 31 December 2018: new ordinary shares of £0.075 to Rumbo at a price of £1.867, thus creating a share premium of €410,146. b) On 13 February 2018, the Company was notified that certain employees exercised options over 29,000 ordinary shares of £0.075 at a price of £1.44, thus creating a share premium of €44,576. Outstanding warrants at 1 January 2018 — Exercised during the reporting period Number of warrants 262,569 (262,569) c) On 5 April 2018, the Company entered into an Outstanding warrants at 31 December 2018 - agreement with Rumbo to purchase the whole royalty agreement for a total consideration of US$4,750,000 to be paid through the issuance of 1,600,907 new ordinary shares of £0.075 at a price of £2.118 per share. After this transaction the share premium increased by €3,887,128. On 13 April 2018, the new ordinary shares were issued to Rumbo. On 1 June 2018, the Company received notification for the exercise of warrants over 262,569 ordinary shares of £0.075 in the Company at an exercise price of £1.425 per share. As a result, the Company received proceeds of £374,160.83 (as (d)) above). - 130 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 23. Other reserves THE GROUP (Euro 000's) Share option Bonus share Depletion factor(1) At 1 January 2018 6,536 208 Recognition of depletion factor Recognition of non-distributable reserve Recognition of share based payments Change in fair value of financial assets at fair value through OCI (Note 20) - - 216 - - - - - 450 5,050 - - - Fair value reserve of financial assets at FVOCI(2) (1,057) - - - (58) At 31 December 2018 6,752 208 5,500 (1,115) 1,446 Recognition of depletion factor Recognition of non-distributable reserve Recognition of distributable reserve - - - Recognition of share based payments 619 Change in fair value of financial assets at fair value through OCI (Note 20) Other changes in reserves - - - - - - - - 5,378 - - - - - - - - - (29) - - 1,984 - - - - Non- distributable reserve(3) Distributable reserve(4) - - 1,446 - - Total 6,137 5,050 1,446 216 (58) 12,791 5,378 1,984 - - - - - - - - 1,844 1,844 - - 249 619 (29) 249 At 31 December 2019 7,371 208 10,878 (1,144) 3,430 2,093 22,836 THE COMPANY (Euro 000's) At 1 January 2018 Recognition of share based payments Change in fair value of financial assets at fair value through OCI (Note 20) Share option Bonus share Fair value reserve of financial assets at FVOCI(2) Total 6,536 208 (1,057) 5,687 216 - - - - (58) 216 (58) At 31 December 2018 6,752 208 (1,115) 5,845 Adjustment for initial application of IFRS 9 Recognition of share based payments Change in fair value of financial assets at fair value through OCI (Note 20) - 619 - - - - - - (29) - 619 (29) At 31 December 2019 7,371 208 (1,144) 6,435 (1) Depletion factor reserve: During the twelve month period ended 31 December 2019, the Group has disposed €5.4 million (FY2018: €5.0 million) as a depletion factor reserve as per the Spanish Corporate Tax Act. (2) Fair value reserve of financial assets at FVOCI: The Group decided to recognise changes in the fair value of certain investments in equity securities in OCI. These changes are accumulated within the FVOCI reserve under equity. The Group transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised. (3) Non-distributable reserve: As required by the Spanish Corporate Tax Act, the Group classified a non-distributable reserve of 10% of the profits generated by the Spanish subsidiaries until the reserve is 20% of share capital of the subsidiary. (4) Distributable reserve: As result of the 2018 profit generated in ARM, the Group decided to record a distributable reserve in order to comply with the Spanish Corporate Tax Act. - 131 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report Details of share options outstanding as at 31 December 2019: Grant date 23 Feb 2017 29 May 2019 8 July 2019 Total Expiry date Exercise price £ Share options 22 Feb 2022 28-May-2024 7 July 2024 1.44 2.015 2.045 813,000 1,292,250 400,000 2,505,250 At 1 January 2019 Granted during the reporting period Granted during the reporting period Less options cancelled during the year 31 December 2019 Weighted average exercise price £ Share options 2.19 2.015 2.045 2.015 2.08 1,313,000 1,500,000 400,000 (707,750) 2,505,250 On 13 February 2018, the Company was notified that certain employees exercised options over 29,000 ordinary shares of £0.075 at a price of £1.44 (Note 22 (b)). On 30 May 2019, the Company announced a grant of 1,500,000 share options (the “Options”) to Persons Discharging Managerial Responsibilities (“PDMRs”) and management, in accordance with the Company’s approved Share Option Plan 2013 (the “Option Plan”). The Options expire five years from the date of grant (29 May 2019), have an exercise price of 201.5 pence per ordinary share, based on the minimum share price in the five days preceding the grant date, and vest in two equal tranches, half on grant and half on the first anniversary of the granting date. On 10 July 2019, the Company announced a grant of 400,000 share options (the “Options”) to Person Dischar- ging Managerial Responsibilities (“PDMRs”) in accordance with the Company’s approved Share Option Plan 2013 (the “Option Plan”). The Options expire five years from the date of grant (8 July 2019), have an exercise price of 204.5 pence per ordinary share, based on the minimum share price in the five days preceding the grant date, and vest in two equal tranches, half on grant and half on the first anniversary of the granting date. 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 29 May 2019 8 July 2019 Weighted average share price £ Weighted average exercise price £ Expected volatility Expected life (years) Risk Free rate Expected dividend yield Estimated Fair Value £ 1.440 2.015 2.045 1.440 2.015 2.045 51.8% 46.9% 46.9% 5 5 5 0.6% 0.8% 0.8% Nil Nil Nil 0.666 0.66 0.66 The volatility has been estimated based on the underlying volatility of the price of the Company’s shares in the prece- ding twelve months. - 132 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 24. Non-controlling interest (Euro 000's) Opening balance On acquisition of a subsidiary Share of results for the year Closing balance 2019 4,200 - (6,602) (2,402) 2018 4,474 - (274) 4,200 The Group has a 10% interest in Cobre San Rafael, S.L. acquired in July 2017 while the remaining 90% is held by a non-controlling interest (Note 2.3 (b) (1)). The significant financial information with respect to the subsidiary before intercompany eliminations as at and for the year ended 31 December 2019 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 2019 5,096 580 - 8,345 (2,669) - (7,336) 2018 7,024 456 - 2,813 4,667 - (304) 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. 25. Trade and other payables THE GROUP (Euro 000's) NON-CURRENT TRADE AND OTHER PAYABLES Land options Government grant CURRENT TRADE AND OTHER PAYABLES Trade payables Land options and mortgage Accruals - 133 - 2019 2018 - 13 13 32 13 45 52,395 53,098 282 4,860 791 3,382 57,537 57,271 Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report THE COMPANY (Euro 000's) CURRENT TRADE AND OTHER PAYABLES Accruals Payable to own subsidiaries (Note 30.4) Other 2019 2018 1,744 8,507 21 10,272 2,200 5,851 18 8,069 Trade payables are mainly for the acquisition of materials, supplies and other services. These payables do not accrue interest and no guarantees have been granted. The fair value of trade and other payables approximate their book values. The Group’s exposure to currency and liquidity risk related to liabilities is disclosed in Note 3. Trade payables are non-interest-bearing and are normally settled on 60-day terms. 26. Provisions THE GROUP (Euro 000's) 1 January 2018 Additions Revision of provision Finance cost (Note 10) 31 December 2018/1 January 2019 Additions Revision of provision Finance cost (Note 10) 31 December 2019 (Euro 000's) Non-Current Current Total Legal Rehabilitation 213 6 (92) - 127 284 (23) - 388 5,514 972 (133) 39 6,392 138 (18) 41 6,553 2019 6,941 - 6,941 Total 5,727 978 (225) 39 6,519 422 (41) 41 6,941 2018 6,519 - 6,519 Rehabilitation provision Rehabilitation provision represents the accrued cost required to provide adequate restoration and rehabilita- tion upon the completion of production activities. These amounts will be settled when rehabilitation is undertaken, generally over the project’s life. The discount rate used in the calculation of the net present value of the provision as at 31 December 2019 was 1.87%, which is the 15-year Spain Government Bond rate (2018: 1.87%). An inflation rate of 1.5% is applied on annual basis. - 134 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. The expected payments for the rehabilitation work are as follows: (Euro 000's) Between 1-5 Years Between 6-10 Years Between 10-15 Years Expected payments for rehabilitation of the mining site 401 2,069 4,083 Legal provision The Group has been named as defendant in several legal actions in Spain, the outcome of which is not determinable as at 31 December 2019. Management has reviewed indivi- dually each case and made a provision of €388k (€127k in 2018) for these claims, which has been reflected in these consolidated financial statements. (Note 32) 27. Leases (Euro 000's) Non-current Leases Current Leases 31 Dec 2019 31 Dec 2018 5,265 5,265 588 588 - - - - Finance leases The Group entered into lease arrangements for the renting of land, laboratory equipment and vehicles which are subject to the adoption of all requirements of IFRS 16 Leases (Note 2.2). The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. Depreciation expense regarding leases amounts to €0.3 million (2018: €nil) for the twelve month period ended 31 December 2019. The duration of the land lease is for a period of thirteen years. Payments are due at the beginning of the month escalating annually on average by 1.5%. At 31 December 2019, the remaining term of this lease is twelve years. (Note 2) The duration of the motor vehicle and laboratory equi- pment lease is for a period of four years, payments are due at the beginning of the month escalating annually on average by 1.5%. At 31 December 2019, the remaining term of this motor vehicle and laboratory equipment lease is three years and three and half years respectively. (Euro 000's) MINIMUM LEASE PAyMENTS DUE: — Within one year — Two to five years — Over five years Less future finance charges Present value of minimum lease payments due PRESENT VALUE OF MINIMUM LEASE PAyMENTS DUE: — Within one year — Two to five years — Over five years - 135 - 31 Dec 2019 31 Dec 2018 588 2,134 3,131 - 5,853 588 2,134 3,131 5,853 - - - - - - - - - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report (Euro 000's) Balance 1 January 2019 Additions Interest expense Lease payments Balance at 31 Dec 2019 Balance at 31 Dec 2019 — Non-current liabilities — Current liabilities Lease liability 6,144 277 8 (576) 5,853 5,265 588 5,853 28. Deferred consideration In September 2008, the Group moved to 100% ownership of Atalaya Riotinto Mineral S.L. (“ARM”) (and thus full owner- ship 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 Agree- ment”) with Astor Management AG (“Astor”) which included a deferred consideration of €43.9 million (the “Deferred Consideration”) payable as consideration in respect of the acquisition among other items. The Company also entered into a credit assignment agreement at the same time with a related company of Astor, Shorthorn AG, pursuant to which the benefit of outstanding loans was assigned to the Company in consideration for the payment of €9.1 million to Shorthorn (the “Loan Assignment”). The Master Agreement has been the subject of litigation in the High Court and the Court of Appeal that has now concluded. As a consequence, ARM must apply any excess cash (after payment of operating expenses, sustai- ning capital expenditure, any senior debt service require- ments and up to US$10 million per annum (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 Assign- ment). “Excess cash” is not defined in the Master Agree- ment leaving ambiguity as to how it is to be calculated. On 2 March 2020, the Company filed an application in the High Court to seek clarity on the definition of “Excess Cash”. A preliminary hearing is due to take place on 22 May 2020. As and when a substantive hearing takes place, the Company expects to have clarity on the definition of Excess Cash and the payment schedule of the Deferred Consideration and the Loan Assignment. As at 31 December 2019, no consideration has been paid. The amount of the liability recognised by the Group and Company is €53 million (€43.9 million + €9.1 million) and €9.1 million respectively. The effect of discounting remains insignificant, in line with prior year’s assessment, and therefore the Group has measured the liability for the Astor deferred consideration on an undiscounted basis. 29. Acquisition, incorporation and disposals of subsidiaries 2019 Acquisition and incorporation of subsidiaries There were no acquisition nor incorporation of subsidiaries during the year. Disposals of subsidiaries There were no disposals of subsidiaries during the year. 2018 Acquisition and incorporation of subsidiaries There were no acquisition nor incorporation of subsidiaries during the year. Disposals of subsidiaries On 15 May 2018, the Group sold Eastern Mediterranean Resources (Caucasus) Ltd. which was fully impaired, by transferring all issued shares. The net effect of the gain in the income statement arose from the release of the prior year provision of €250k (Georgian Tax liability). The total costs for the sale were €75k, paid to the buyer in addition to €58k relating consulting costs (Note 6). Wind-up of subsidiaries There were no operations wound-up during FY2019 and FY2018. - 136 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 30. Group information and related party disclosures 30.1 Information about subsidiaries These audited consolidated financial statements include: (1) Cobre San Rafael, S.L. is the entity which holds the mining rights of The Proyecto Touro. The Group has control in the management of Cobre San Rafael, S.L., including one of the two Directors, manage- ment of the financial books and the capacity of appointment the key personnel (Note 2.3 (b) (1)). Subsidiary companies Parent Principal activity Country of incorporation Effective proportion of shares held Atalaya Touro (UK) Ltd Atalaya Mining Plc Atalaya MinasdeRiotinto Project (UK) Limited Atalaya Mining Plc Holding Holding United Kingdom United Kingdom EMED Marketing Ltd Atalaya Mining Plc Trading Cyprus EMED Mining Spain S.L.U. Atalaya Mining Plc Exploration Spain Atalaya Riotinto Minera S.L.U. Atalaya MinasdeRiotinto Project (UK) Limited Production Spain 100% 100% 100% 100% 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 Recursos Cuenca Minera S.L.U. Atalaya Riotinto Minera SLU Exploration Fundacion Atalaya Riotinto Atalaya Riotinto Minera SLU Trust Spain Spain Spain Atalaya Servicios Mineros, S.L.U. Atalaya MinasdeRiotinto Project (UK) Limited Dormant Spain 10% J-V 100% 100% 30.2 Compensation of key management personnel The total remuneration and fees of Directors (including executive Directors) and other key management personnel was as follows: (1) These amounts related to the approved performance bonus for 2018 by the Board of Directors following the proposal of the CGNC Committee. The 2019 estimates recorded are not included in the table above as this is yet to be approved by the Board of Directors. There is no certainty or guarantee that the Board of Directors will approve a similar amount for 2019 performance. (Euro 000's) Directors' remuneration and fees Director's bonus (1) Share option-based benefits to Directors Key management personnel fees Key management bonus (1) Share option-based and other benefits to key management personnel The Group The Company 2019 1,319 325 173 765 740 267 2018 922 280 39 462 235 88 2019 536 - - - - - 3,589 2,026 536 2018 454 - - 116 150 10 730 - 137 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report At 31 December 2019 amounts due to Directors, as from the Group, are €nil (€0.5 million at 31 December 2018) and €0.5 million (€0.3 million at 31 December 2018) to key management. At 31 December 2019 amounts due to Directors, as from the Company, are €nil (€nil at 31 December 2018) and €nil (€0.2 million at 31 December 2018) to key management. Share-based benefits In 2019, the Directors and key management personnel have granted 1,650,000 options (2018: nil options) (see note 23). During 2019 the Directors and key management personnel have not been granted any bonus shares (2018: nil). 30.3 Transactions with shareholders and related parties THE GROUP (Euro 000's) Trafigura- Revenue from contracts Freight services Gains/(losses) relating provisional pricing within sales Trafigura - Total revenue from contracts THE COMPANY (Euro 000's) SALES OF SERVICES (NOTE 5): — EMED Marketing Limited — Atalaya MinasdeRiotinto Project (UK) Limited OThER INCOME SERVICES (NOTE 6): — EMED Marketing Limited PURChASE OF SERVICES (NOTE 7): — Atalaya Riotinto Minera SLU FINANCE INCOME (NOTE 9): Atalaya MinasdeRiotinto Project (UK) Limited - Finance income from interest-bearing loan : — Credit agreement - at amortised cost — Participative loan - at fair value through profit and loss — Credit facility - at amortised cost THE GROUP (Euro 000's) CURRENT ASSETS - RECEIVABLE FROM RELATED PARTIES (NOTE 19): Recursos Cuenca Minera S.L. 2019 33,179 - 33,179 2,587 35,766 35,766 2018 26,234 - 26,234 (334) 25,900 25,900 2019 2018 690 593 1,283 74 42 1,644 13,607 1,554 16,805 749 574 1,323 - 213 1,760 13,615 746 16,121 2019 2018 56 56 56 56 The above debtor balance arising from the pre-commissioning sales of goods bear no interest and is repayable on demand. - 138 - - 138 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. 30.4 Year-end balances with related parties THE COMPANY (Euro 000's) NON-CURRENT ASSETS - LOAN FROM RELATED PARTIES AT FV THROUGH PROFIT AND LOSS (NOTE 19): Atalaya MinasdeRiotinto Project (UK) Limited - Participative Loan (1) Total (5) NON-CURRENT ASSETS - LOANS AND RECEIVABLES FROM RELATED PARTIES AT AMORTISED COST (NOTE 19): Atalaya MinasdeRiotinto Project (UK) Limited - Credit Expansion Loan (2) Atalaya MinasdeRiotinto Project (UK) Limited - Credit agreement (3) Atalaya Riotinto Minera SLU (4) EMED Marketing Limited (4) Atalaya MinasdeRiotinto Project (UK) Limited (4) Total (5) CURRENT ASSETS - LOANS AND RECEIVABLES FROM RELATED PARTIES AT AMORTISED COST (NOTE 19): Atalaya MinasdeRiotinto Project (UK) Limited (4) Atalaya MinasdeRiotinto Project (UK) Limited - Credit agreement (3) Atalaya Riotinto Minera SLU (4) Atalaya Touro (UK) Limited (4) EMED Mining Spain SL (4) EMED Marketing Limited (4) Total (5) 2019 2018 229,686 215,308 229,686 215,308 43,591 26,442 9,117 - 1,166 38,743 24,798 9,117 1,563 575 80,316 74,796 - - - 1,611 - 2,385 3,996 5,230 - - 1,098 - - 6,328 (1) This balance bears interest of 6.75% (2018: 6.75%). (2) This balance bears interest of EURIBOR 6m plus 4% (2018: LIBOR 6month + 3.25% ). (3) This balance bears interest of EURIBOR 12month plus 4% (2018: nil). The Note Facility Agreement expired on 29 September 2019. The Group signed on 30 September 2019 a new Credit Agreement for the amount due of the Note Facility Agreement bearing a EURIBOR 12 month plus 4% interest and maturing on 30 September 2024 (4) These receivables bear no interest. These balances are repayable on demand. However, management will not claim any repayment in the following twelve months period after the release of the current consolidated financial statements. THE COMPANY (Euro 000's) PAyABLE TO RELATED PARTy (NOTE 25): EMED Marketing Limited EMED Mining Spain S.L. Atalaya Riotinto Minera SLU The above balances bear no interest and are repayable on demand. - 139 - 2019 2018 7,990 262 255 8,507 5,376 262 213 5,851 Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report 30.5 Year-end balances with shareholders (Euro 000's) 2019 2018 RECEIVABLE FROM ShAREhOLDERS (NOTE 19): Trafigura - Debtor balance -subject to provisional pricing declaration (in Spanish, Authorization Ambiental Unificada, or “AAU”) granted to Atalaya Riotinto Minera, S.L.U. dated 27 March 2014, which was required in order to secure the required mining permits for Proyecto Riotinto. The judg- ment, in spite of annulling the AAU on procedural grounds, made very clear that the AAU was correct and therefore, rejected the issues raised by EeA and confirmed the deci- sion of JdA not to suspend the AAU. 8,918 2,461 The JdA filed for appeal to the Supreme Court. Although 8,918 2,461 The above debtor balance arising from the pre-commis- sioning sales of goods bear no interest and is repayable on demand. 31. 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 disci- plinary 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. — Receipt of ruling of claim made by an environmental Group On 26 September 2018, Atalaya received notice from the Tribunal Superior de Justicia de Andalucía ruling in favour of certain claims made by environmental group Ecologistas en Accion (“EeA”) against the government of Andalucía (“Junta de Andalucía” or “JdA”) and Atalaya, as co-defendant in the case. In July 2014, EeA had filed a legal claim to JdA with a request to declare null the Unified Environmental the claim was against the JdA, Atalaya, being an interested party in the process, voluntarily joined as co-defendant to ask for permission to appeal to the Supreme Court in Spain. On 29 March 2019, Atalaya announced the receipt of notifi- cation from the Supreme Court in Spain stating that it does not have jurisdiction over the appeal made by the Junta de Andalucía and the Company, which voluntary joined the appeal as con-defendant. The main legal consequence of the Supreme Court rejection is the ruling of the Tribunal Superior de Justicia de la Junta de Andalucía dated 26 September 2018 is now final and enforceable and the environmental authority must repair the faultiness in the process. The Company is currently in discussions to the Junta de Andalucía to resolve the formal defects identified by the Tribunal Supe- rior de Justicia de Andalucía. The Company continues operating the mine normally as the ruling does not state the operation at Proyecto Riotinto is to be ceased, not even temporarily and it is still confident that the ruling will not impact its operations at Proyecto Riotinto. 32. Commitments There are no minimum exploration requirements at Proyecto Riotinto. However, the Group is obliged to pay local land taxes which currently are approximately €235,000 per year in Spain and the Group is required to maintain the Riotinto site in compliance with all applicable regulatory requirements. In 2012, ARM entered into a 50/50 joint venture with Rumbo to evaluate and exploit the potential of the class B resources in the tailings dam and waste areas at Proyecto Riotinto (mainly residual gold and silver in the old gossan tailings). Under the joint venture agreement, ARM will be the operator of the joint venture, will reimburse Rumbo for the costs associated with the application for classi- fication of the Class B resources and will fund the initial - 140 - Annual Report F I N A N C I A L S T A T E M E N T S Atalaya Mining Plc. expenditure of a feasibility study up to a maximum of €2.0 million. Costs are then borne by the joint venture partners respond to the pandemic to protect its workforce and local communities surrounding its projects. in accordance with their respective ownership interests. 33. Significant events On 30 May 2019, the Company announced a grant of 1,500,000 share options (the “Options”) to Persons Discharging Managerial Responsibilities (“PDMRs”) and management, in accordance with the Company’s approved Share Option Plan 2013 (the “Option Plan”). The Options expire five years from the date of grant (29 May 2019), have an exercise price of 201.5 pence per ordinary share, based on the minimum share price in the five days preceding the grant date, and vest in two equal tranches, half on grant and half on the first anniversary of the granting date. On 10 July 2019, the Company announced a grant of 400,000 share options (the “Options”) to Person Dischar- ging Managerial Responsibilities (“PDMRs”) in accordance with the Company’s approved Share Option Plan 2013 (the “Option Plan”). The Options expire five years from the date of grant (8 July 2019), have an exercise price of 204.5 pence per ordinary share, based on the minimum share price in the five days preceding the grant date, and vest in two equal tranches, half on grant and half on the first anniversary of the granting date. In May 2019 the Board of Directors appointed a new Opera- tional General Manager of Proyecto Riotinto. 34. Events after the reporting period COVID-19 outbreak On 11 March 2020, the World Health Organization raised the public health emergency caused by the coronavirus outbreak (COVID-19) to an international pandemic. The rapid national and international developments represent an unprecedented health crisis, which will impact the macro- economic environment and business developments. To address this situation, among other measures, the Spanish Government declared a state of emergency by publishing Royal Decree 463/2020 of 14 March and approved a series of extraordinary urgent measures to address the economic and social impact of COVID-19 by Royal Decree Law 8/2020 of 17 March. On 17 March 2020, the Company released an update on the measures taken to manage and In addition, a new Royal Decree was released on 29 March 2020 (the “Royal Decree”) implementing enhanced measures to protect the people from the virus. The Royal Decree stipulated that only employees from a short list of essential industries were allowed to continued working from 30 March 2020. Mining was excluded as an essen- tial industry and consequently the Company’s Proyecto Riotinto site was required to halt its operations for a period until 3 April 2020 when mining operations were permitted to restart. COVID-19 crisis is considered as a non-adjusting event and is therefore not reflected in the recognition and measu- rement of the assets and liabilities in the financial state- ments as at 31 December 2019. Due to the complexity of the situation and its fast evolu- tion, it is not possible at this time to make a reliable quantified estimate of the potential impact on the Group, which will be recognised prospectively in the 2020 financial statements. (see Note 2.1 (b)). The Company has increased its cash balance from €8.0 million as at 31 December 2019 to €41.7 million as at 31 March 2020 by drawing down on existing credit facilities. The Directors continue monitoring the business and taking appropriate steps to address the situation and reduce its operational and financial impact. After reviewing alter- native scenarios, the current cash resources, forecasts and budgets, timing of cash flows, borrowing facilities, sensitivity analyses on alternative commodities prices and considering the associated uncertainties to the Group’s operations, the Directors have a reasonable expectation that the Company has adequate resources to continue operating in the foreseeable future. Accordingly, the conso- lidated financial statements continue to be prepared on a going concern basis (see Note 2.1 (b)). The Company continues carrying out several measures and implemented an exceptional plan developed for the purpose of protecting its workforce and the people of the surrounding communities to manage the crisis. The main key risk, its impact and the response plans to protect its workforce are: Spread of COVID-19 at the mine site may cause disruption in the production and additional costs. The Group is implementing emergency response plans. Only critical employees for the operation are allowed to enter on site. There are severe distance and hygienical mandatory rules, mandatory body temperature controls, and facilitate systems and tools to work from home for all remaining employees. - 141 - Atalaya Mining Plc. F I N A N C I A L S T A T E M E N T S Annual Report consisting of fifteen reports produced by different depart- ments of the Xunta de Galicia. These two reports challenge the ability of the Company to guarantee that there will be no environmental impact of the Project on the Ulla River and related protected ecosystems which are located downstream. On 7 February 2020 the formal communication from the Xunta de Galicia was published in Galicia´s official journal. In the meantime, the Company along with its advisers, is evaluating potential next steps for the Project, which could include an appeal of the decision made by the Xunta de Galicia, and/or the clarification of the questions raised by the reports. New group entity In 2020, the Company has initiated the process to establish in Cyprus a new subsidiary under the name of Atalaya Financing, Limited. The activity of this new company will be financing. Additionally, the Group, up to the date of approval of these financial statements, assessed the existence of any impair- ment indicators and the sensitivity analysis to volatility of commodity prices about its key assets being the mining rights, the property plant and equipment, the intangible assets, deferred taxes, trade receivables and inventories corresponding above 95% of its total assets (excluding cash and cash equivalents). The Directors have considered and debated different possible scenarios on the Company’s operations, financial position and forecast for a period of at least 12 months since the approval of these financial state- ments. Possible scenarios range from (i) further disruption in Proyecto Riotinto; (ii) market volatility in commodity prices; and (iii) availability of existing credit facilities and have considered the capacity of the Group and its single asset Proyecto Riontinto to generate cash, the Group concluded that no impairment indicators are in place. All the above were considered in the assessment of the impact of COVID-19 in the 2020 operations for which an inherent uncertainty exists given the current facts and circumstances at the date of preparation of these financial statements. Although an impact is anticipated in certain projects due to delays, the overall conclusion is that such an impact given the current facts and circumstances does not cast a material uncertainty about the ability of the Group to continue as a going concern which is the assumption used for the preparation of these financial statements as per Note 2.1 (b). AAU Permits The Junta de Andalucía issued a favourable report in relation to the Unified Environmental Authorisation (the “AAU”) of Proyecto Riotinto in January 2020. The AAU is now on a short legal consultation period exclusively with parties involved in the process, as all deadlines of the process have been suspended by the Junta de Andalucía as result of COVID-19 outbreak. The validation of the AAU is a required step towards the automatic re-validation of the mining permit for Proyecto Riotinto. Negative Environmental Impact Statement on Proyecto Touro The “Dirección Xeral de Calidade Ambiental e Cambio Climático”, (the General Directorate for the Environment and Climate Change of Galicia), announced on 28 January 2020 that a negative Environmental Impact Statement for Proyecto Touro (Declaración de Impacto Ambiental) had been signed. The short release stated that the decision was based on two reports which form part of a wider evaluation - 142 - - 143 - Atalaya Mining Plc.financial statementsAnnual Report- 144 - Atalaya Mining Plc.financial statementsAnnual Report- 145 - Atalaya Mining Plc.financial statementsAnnual ReportAtalaya Mining Plc. s h a r e h o l d e r i n f o r m a t i o n Annual Report - 146 - Annual Report s h a r e h o l d e r i n f o r m a t i o n Atalaya Mining Plc. Shareholder information 148 Glossary of terms 152 Shareholder Enquiries - 147 - Glossary of Terms The following definitions and terms are used throughout this Annual Report. Currency abbreviations à US$ / USD or $ .......................... US Dollars à $000 ...................................... Thousand US dollars à $m ........................................ Million US Dollars à £ .......................................... Sterling Pound à £000 ...................................... Thousand Sterling Pounds à £m ........................................ Million Sterling Pounds à € / EUR ................................... Euro à €000 / €k ................................. Thousand Euros à €m ........................................ Million Euros à €nil ....................................... Zero Euros à Fy2019 / 2019 ........................... Twelve month period ended 31 December 2019 à Fy2018 / 2018 ........................... Twelve month period ended 31 December 2018 Definitions and conversion table à lb.......................................... Pound à oz ......................................... Troy ounce à ‘000 m³ ................................... Thousand cubic metres à t ........................................... Tonne à dmt ...................................... Dry Metric Tonne à ‘000 tonnes ............................. Thousand metric tonnes à 1 Kilogramme/ (kg) ..................... 2.2046 pounds à 1000 Kilogrammes/ (´000 kg) ......... 2,204.6 pounds à 1 Kilometre (km) ........................ 0.6214 miles à 1 troy ounce ............................. 31.1 grams à ha ........................................ Hectare à ft .......................................... Foot Chemical Symbols à Cu ......................................... Copper à Ag ......................................... Silver à Au ........................................ Gold - 148 - Atalaya Mining Plc.shareholder informationAnnual ReportBusiness, Finance and Accounting à AAu ...................................... Autorización Ambiental Unificada (Unified Environmental Declaration) à Atalaya or the Company ................ Atalaya Mining Plc, a company incorporated in Cyprus under the Companies law, cap. 113 à Atalaya Group or Group ................ Atalaya Mining Plc and its subsidiaries à AfrC ..................................... Audit and Financial Risk Committee à Agm ...................................... Annual General Meeting à Aim ....................................... Alternative Investment Market of the London Stock Exchange à AisC ...................................... All In Sustaining Cost à Ar ........................................ Annual Report à Arm ...................................... Atalaya Riotinto Minera, S.L.U. à Articles................................... The articles of association of Atalaya Mining Plc. à Average head grade .................... Average ore grade fed into the mill, expressed in % of weight à BoD or Board of Directors .............. The Board of Directors of the Company à CApex ................................... Capital Expenditure à Cash Cost ................................ The cost to produce one pound of copper à Ceo ....................................... Chief Executive Officer à C. Eng .................................... Chartered Engineer à Cfo ....................................... Chief Financial Officer à Coo ...................................... Chief Operational Officer à Cof ....................................... Cost of Freight à Cif ........................................ Cost Insurance and Freight à Cit ........................................ Corporate Income Tax à Cip ........................................ Carriage and Insurance paid to à Cgu ...................................... Cash Generating Unit à CgnCC ................................... Corporate Governance, Numeration and Compensation Committee à Code of Conduct ........................ Atalaya’s Code of Business Conduct and Ethics à Cont. . ....................................Continued à Csr ....................................... Cobre San Rafael S.L. à Directors ................................. The Directors of Atalaya for the reporting period à ebitdA ................................... Earnings Before Interest Tax Depreciation and Amortisation à eCl ....................................... Expected Credit Loss à eeA ....................................... Ecologistas en Accion à eir ........................................ Effective Interest Rate Method à emed tArtessus ..................... Eastern Mediterranean Exploration & Development TARTESSUS S.L. à Etc. .. .....................................Et cetera à eu ........................................ European Union - 149 - Atalaya Mining Plc.shareholder informationAnnual Report  à fifo ...................................... First In First Out à Financial statements ................... Consolidated and company financial statements of Atalaya Mining Plc. à fob ....................................... Free on Board à fv ........................................ Fair Value à fvoCi .................................... Fair Value Through Other Comprehensive Income à fvpl ..................................... Fair Value Through Profit or Loss à gAAp ..................................... Generally Accepted Accounting Policies à Group ..................................... Atalaya Mining plc and its subsidiaries à h1, h2 .................................... Six month periods ending 30th June and 31st December à iAs ........................................ International Accounting Standards à ie. ......................................... Id est (explanatory information) à ifrs ...................................... International Financial Reporting Standards à ipo ....................................... Initial Public Offering à JdA ....................................... Junta de Andalucía à KPI´s ..................................... Key Performance Indicators à ldC ....................................... Louis Dreyfus Company à libor .................................... The British Bankers’ Association Interest Settlement Rate for the relevant currency à litfr ..................................... Lost Injury Time Frequency Rate à Ltd. .... ...................................Limited à llC ....................................... Limited Liability Company à lp ......................................... Limited partnership à London Stock Exchange / LSE ........ London Stock Exchange plc à mbA ...................................... Master’s in Business Administration à NED´s ..................................... Non-Executive Directors à npv ...................................... Net Present Value à nr ......................................... Number à oCi ....................................... Other Comprehensive Income à Ordinary Shares ......................... Ordinary Shares of 10 pence each in the capital of the Company à Ph. d. ... ..................................Doctor of Philosophy à prC ....................................... Physical Risk Committee à pfs ....................................... Pre-Feasibility Study à Plc. ....................................... Public limited company à P&L ....................................... Profit and Loss à P&P reserves ............................ Proven and Probable reserves à q1, q2, q3, q4 ........................... Three month periods ending 31st March, 30th June, 30th September and 31st December - 150 - Atalaya Mining Plc.shareholder informationAnnual Report  à qCA ....................................... Quoted Companies Alliance à qp ........................................ Quotation Period à siC ........................................ Standard Interpretations Committee which were endorsed by the IAS à Shareholders ............................ Holders of Ordinary Shares à sl ......................................... Sociedad Limitada (private limited company) à slu ....................................... Sociedad Limitada Unipersonal (limited partnership) à tsx ....................................... Toronto Stock Exchange à United Kingdom or UK .................. the United Kingdom of Great Britain and Northern Ireland à United States or US ..................... the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia à uop ...................................... Unit of Production à vAt ....................................... Value Added Tax à wC ........................................ Working Capital à xgC ....................................... Yanggu Xiangguang Copper Co. Ltd Mining terms à Average head grade .................... Average ore grade fed into the mill, expressed in % of weight à Concentrate ............................. A fine powdery product of the milling process containing a high percentage of valuable metal à Contained copper ....................... Represents total copper in a mineral reserve before reduction to account for tonnes not able to be recovered by the applicable metallurgical process à Grade ..................................... The amount of metal in each tonne of ore, expressed as a percentage à Mtpa ...................................... Million tonnes per annum of valuable metal à ni 43-101 ................................ National Instrument 43-101, standard of disclosure for mineral projects according to Canadian guidelines à Open pit .................................. A mine where the minerals are mined entirely from the surface. Also referred to as open-cut or open-cast mine à Ore body ................................. A sufficiently large amount of ore that can be mined economically à P&P Reserves ........................... Proven and Probable reserves à Stripping ................................. Removal of overburden or waste rock overlying an ore body in preparation for mining by open pit methods à Tailings .................................. Materials left over after the process of separating the valuable fraction from the uneconomic fraction of an ore à TC/RC .................................... Treatment Charge and Refinement Charge à vtem ..................................... Versatile Time Electomagnetic mapping à 3d......................................... Three Dimensional - 151 - Atalaya Mining Plc.shareholder informationAnnual Report Atalaya Mining Plc. S H A R E H O L D E R I N F O R M A T I O N Annual Report Shareholder Enquiries Board of Directors: 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 Corporate brokers BMO Capital Markets Canaccord Genuity Limited 95 Queen Victoria Street 41 Lothbury London EC2R 7AE London, EC4V 4HG NOMAD Investor Relations Canaccord Genuity Limited Carina Corbett 41 Lothbury London EC2R 7AE 4C Communications Ltd. Hudson House 8 Tavistock Street London WC2E 7PP +44 (0) 203 170 7973 Public Relations Registrars Elisaberh Cowell Newgate Communications Sky Light City Tower 50 Basinghall Street London EC2V 5DE +44 (0) 207 680 6550 Cymain registrars Ltd. 26 Vyronos Avenue 1096 Nicosia, Cyprus - 152 - Annual Report S H A R E H O L D E R I N F O R M A T I O N Atalaya Mining Plc. Depositary / transfer agent Company secretary: Inter Jura CY (Services) Limited United Kingdom Computershare Investor Services Plc. 1 Lampousa Street, 1095 Nicosia, Cyprus The Pavilions Bridgwater Bristol BS13 8AE Canada Computershare Investor Services Inc. 100 Universtity Avenue 8th Floor, North Tower Toronto, Ontario M5J 2Y1 Group Auditor: Registered office: Ernst & Young Cyprus Ltd Jean Nouvel Tower, 6 Stasinos Avenue, P.O.Box 21656, 1511, Nicosia, Cyprus 1 Lampousa Street, 1095 Nicosia, Cyprus - 153 - spain office La Dehesa s/n Minas de Riotinto, 21660 Huelva, Spain registered office 1, Lambousa Street. Nicosia 1095, Cyprus cyprus office 3, Ayiou Demetriou Street, Acropolis 2012 Nicosia, Cyprus 

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