9.8.1 S.C.M. Franke and Carlota Copper Company
in PLN millions, unless otherwise stated
On 26 April 2022 subsidiaries of KGHM International Ltd., Franke Holdings Ltd. and Centenario Holdings Ltd., signed an agreement for the sale of 100% of the shares of the company Sociedad Contractual Minera Franke, being the owner of the Franke mine in Chile, to the company Minera Las Cenizas S.A. for the negotiated initial purchase price of USD 25 million.
In accordance with the sale agreement, the negotiated initial purchase price was adjusted by, among others, the change in net working capital, cash and borrowings between 31 March 2022 and the transaction date. The initial adjusted purchase price for 100% of the shares of S.C.M. Franke amounted to USD 23 million (payable in cash). The carrying amount of assets and liabilities that were subject to the sales transaction as at the transaction date amounted to USD 19 million.
Apart from the initial payment (initial purchase price), the pricing mechanism reflects contingent payments in the maximum amount of USD 45 million. Taking into account the probability of receiving these payments and the period of their realisation, they were measured at the discounted amount of USD 13 million and recognised in gain on disposal.
Gain on disposal of S.C.M. Franke was recognised in “Other operating income”.
| USD mn | PLN mn | |
| Initial purchase price | 25 | 109 |
| Change in net working capital, cash and borrowings between 31 March 2022 and 26 April 2022 | (2) | (9) |
| Initial adjusted purchase price | 23 | 100 |
| Carrying amount of assets and liabilities that were subject to the sales transaction | 19 | 86 |
| Measurement of contingent payments at the date of disposal | 13 | 60 |
| Re-measurement of contingent payments at the reporting date | 1 | 5 |
| Gain on disposal | 18 | 79 |
| Exchange differences reclassified from other comprehensive income to gain on disposal | – | 64 |
| Gain on disposal in the consolidated statement of profit or loss | – | 143 |
As at 30 June 2022, the criteria set forth in IFRS 5 under which Carlota Copper Company was classified as an asset held for sale were reassessed. As a result of the analysis conducted, the Management Board of the Parent Entity as at 30 June 2022 reclassified the assets and liabilities of the company back to continued activities, because the sale was not highly probable. The process of selling the mining assets of Carlota Copper Company was not completed.
In accordance with IFRS 5.27, the recoverable amount of the assets of Carlota Copper Company was determined immediately following the reclassification. There were no substantial differences compared to the carrying amount as at 30 June 2022.
In November 2022, the process of selling Carlota Copper Company was resumed, however, in the opinion of the Management Board of the Parent Entity, it is not advanced enough to conclude that the sale is highly probable. Therefore, as at 31 December 2022, the company’s assets and related liabilities are not recognised as held for sale.
The activities of the companies S.C.M. Franke and Carlota Copper Company were presented as part of the segment KGHM INTERNATIONAL LTD.
The financial data of the above-mentioned companies were presented together with continued operations in the consolidated statement of profit or loss, in the consolidated statement of cash flows and explanatory notes to these statements because they do not represent a major line of business and they are not a part of a larger plan to dispose of a major line of business (IFRS 5.32 a and b).
| As at 26 April 2022 (sale date – date of loss of control) |
As at 31 December 2021 (presentation under assets and liabilities classified to disposal Group) |
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| S.C.M. Franke | S.C.M. Franke | Carlota Copper Company | |
| ASSETS | |||
| Mining and metallurgical intangible assets | 125 | 116 | 3 |
| Other financial instruments measured at amortised cost | 2 | 3 | – |
| Non-current assets | 127 | 119 | 3 |
| Inventories | 91 | 87 | 62 |
| Trade receivables, including: | 14 | 13 | – |
| trade receivables measured at fair value through profit or loss | 14 | 13 | – |
| Tax assets | 5 | 3 | – |
| Other non-financial assets | 15 | 3 | – |
| Cash and cash equivalents | 8 | 5 | – |
| Current assets | 133 | 111 | 62 |
| TOTAL ASSETS IN DISPOSAL GROUP | 260 | 230 | 65 |
| LIABILITIES | |||
| Borrowings, leases and debt securities | – | – | 1 |
| Provisions for decommissioning costs of mines and other technological facilities | 91 | 75 | 214 |
| Non-current liabilities | 91 | 75 | 215 |
| Non-current liabilities | 1 | 2 | 1 |
| Trade payables | 58 | 26 | 7 |
| Employee benefits liabilities | 6 | 5 | 3 |
| Tax liabilities | 1 | 1 | – |
| Provisions for liabilities and other charges | – | – | 1 |
| Other liabilities | 18 | 21 | 4 |
| Current liabilities | 84 | 55 | 16 |
| TOTAL LIABILITIES IN DISPOSAL GROUP | 175 | 130 | 231 |
| from 1 January 2022 to 26 April 2022 |
from 1 January 2021 to 31 December 2021 |
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| S.C.M. Franke | S.C.M. Franke | Carlota Copper Company | |
| Revenues | 132 | 497 | 209 |
| Costs | (197) | (443) | (111) |
| Profit/(loss) on operating activities | (65) | 54 | 98 |
| Finance costs | (1) | (3) | (5) |
| Profit/(loss) before income tax | (66) | 51 | 93 |
| Income tax expense | – | – | – |
| PROFIT/(LOSS) FOR THE PERIOD | (66) | 51 | 93 |
| from 1 January 2022 to 26 April 2022 |
from 1 January 2021 to 31 December 2021 |
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| S.C.M. Franke | S.C.M. Franke | Carlota Copper Company | |
| Net cash generated from/(used in) operating activities, including: | (40) | (7) | 11 |
| change in provision for decommissioning of mines | 10 | (6) | (5) |
| Net cash used in investing activities | – | (5) | (10) |
| Net cash generated from/(used in) financing activities | 42 | (2) | (2) |
| TOTAL NET CASH FLOW | 2 | (14) | (1) |