6. Involvement in joint ventures
in PLN millions, unless otherwise stated
Accounting policies |
|---|
| The item involvement in joint ventures comprises investments in joint ventures accounted for using the equity method and loans granted to joint ventures. The Group classifies as investments accounted for using the equity method the interest in joint ventures which are joint contractual arrangements, in which the parties sharing control have the right to the net assets of a given entity. Joint control occurs when decisions on the relevant activities of joint ventures require the unanimous consent of the parties sharing control. Investments are initially recognised at cost. The Group’s share in profit or loss of entities accounted for using the equity method (assessed while taking into account the impact of measurements to fair value at the investment’s acquisition date) from the acquisition date is recognised in profit or loss, while its share in changes of accumulated other comprehensive income from the acquisition date is recognised in the relevant item of accumulated comprehensive income. Unrealised gains and losses on transactions between the investor and the joint venture are eliminated in the amount proportional to the investor’s share in these profits/losses. If there are any indications of impairment, an investment is tested for impairment by calculating the recoverable amount in accordance with the policy presented in Part 3. Loans granted to joint ventures do not meet the criteria of recognition as net investments in a joint venture. |
Significant estimates and assumptions |
|---|
| Joint control The Group classifies Sierra Gorda S.C.M. as a joint venture under IFRS 11, in which KGHM INTERNATIONAL LTD’s share equals 55%. Classification of Sierra Gorda S.C.M. as a joint venture, despite the 55% share of the Group, was made based on analysis of the terms of the agreements between the parties and contractual stipulations which indicated joint control. Pursuant to the terms of the agreements, all relevant activities of Sierra Gorda S.C.M. require the unanimous consent of both owners. The Group and other owners have three members each in the appointed Owners Council. The Owners Council makes strategic decisions and is responsible for overseeing their execution. Moreover, it approves the appointment of senior management. In the reporting period, there were no changes to provisions that were the basis of classifying the investment as a joint venture. |
Note 6.1 Joint ventures accounted for using the equity method
| | 2018 | 2017 | ||||
|---|---|---|---|---|---|---|
| Sierra Gorda S.C.M. | Other entities | Total | Sierra Gorda S.C.M. | Other entities | Total | |
| As at 1 January | - | 8 | 8 | - | 27 | 27 |
| Acquisition of shares | 666 | - | 666 | 461 | - | 461 |
| Share of losses of joint ventures accounted for using the equity method | (658) | (4) | (662) | (474) | - | (474) |
| Liquidation of a joint venture | - | - | - | - | (19) | (19) |
| Exchange differences from the translation of foreign operation statements with a functional currency other than PLN | (8) | - | (8) | 13 | - | 13 |
| As at 31 December | - | 4 | 4 | - | 8 | 8 |
| | from 1 January 2018 to 31 December 2018 | from 1 January 2017 to 31 December 2017 |
|---|---|---|
| The Group’s share (55%) of loss for the period, of which: | (767) | (525) |
| recognised share of joint ventures’ loss | (658) | (474) |
| unrecognised share of joint ventures’ loss | (109) | (51) |
Information on entities accounted for using the equity method
| Jointly controlled entities | Main place of business | % of share capital held by the Group | % of voting power | Value of the investment in the consolidated statement of financial position | ||
|---|---|---|---|---|---|---|
| As at 31 December 2018 | As at 31 December 2017 | |||||
| | Sierra Gorda S.C.M. | Chile | 55 | 50 | - | - |
| | Other | Poland | 49 | 50 | 4 | 8 |
| Total | | | | 4 | 8 | |
Condensed financial data of Sierra Gorda S.C.M. is presented in the table below
| | As at 31 December 2018 | As at 31 December 2017 |
|---|---|---|
| Non-current assets | 14 649 | 13 524 |
| Current assets, including: | 1 444 | 1 228 |
| Cash and cash equivalents | 364 | 358 |
| Non-current liabilities, including: | 19 458 | 17 928 |
| Liabilities due to bank loans | 1 128 | 1 915 |
| Liabilities due to loans granted by jointly-controlling entities | 16 583 | 14 244 |
| Current liabilities, including: | 2 979 | 2 509 |
| Liabilities due to bank loans | 552 | 533 |
| | ||
| Fair value of net assets | (6 344) | (5 685) |
| The Group’s share in net assets (55%) | (3 489) | (3 126) |
| Cumulatively unrecognised share of losses of Sierra Gorda S.C.M. | 4 976 | 4 867 |
| Balance of impairment loss on interest in Sierra Gorda S.C.M. | ( 671) | ( 671) |
| Adjustment by the value of unrealised gains | ( 110) | ( 110) |
| Exchange differences from the translation of changes of investment in Sierra Gorda S.C.M. using exchange rates from prior periods | (706) | (960) |
| Value of the investment in the consolidated statement of financial position | - | - |
| | from 1 January 2018 to 31 December 2018 | from 1 January 2017 to 31 December 2017 |
| Sales revenue | 3 542 | 3 623 |
| Depreciation/amortisation | (993) | (845) |
| Interest costs | (1 441) | (1 419) |
| Other incomes/(costs) | (2 393) | (2 579) |
| Loss before income tax | (1 285) | (1 220) |
| Income tax | (109) | 265 |
| Loss for the period | (1 394) | (955) |
| Total comprehensive income | (1 394) | (955) |
Other information on the Group’s involvement in the joint venture Sierra Gorda S.C.M.
| As at 31 December 2018 | As at 31 December 2017 | ||
|---|---|---|---|
| | Group’s share in commitments (investment and operating) | 2 501 | 2 248 |
| | Group’s share in the total amount of future minimal payments due to leasing agreements for mining equipment | 709 | 777 |
| Note 8.6 | Guarantees granted by the Group | 1 815 | 1 740 |
Note 6.2 Loans granted to joint ventures (Sierra Gorda S.C.M.)
| Accounting policies | Significant estimates and assumptions |
|---|---|
| Loans granted to Sierra Gorda S.C.M., classified in accordance with IFRS 9 in the category “measured at amortised cost” are initially recognised at fair value adjusted by direct costs associated with the loan and are measured at the reporting date at amortised cost using the effective interest rate, reflecting impairment. Loans are classified as loans measured at amortised cost if they met two conditions: they are in a business model whose objective is to collect contractual cash flows due to holding financial assets, and have passed the SPPI (solely payments of principal and interest) test. | The terms of repayment of loans granted to finance operations abroad, including planned repayment dates, were set in individual agreements. Pursuant to the schedule, the principal amount and interest are paid on demand, but not later than 15 December 2024. The start of repayment of loans by Sierra Gorda S.C.M. will depend on the company’s financial standing. It is assumed in the long-term plans of Sierra Gorda S.C.M. that the loans will be repaid with interest. Due to the fact that settling the loan is planned and probable in the foreseeable future, the loan is not a net investment under IAS 21.15 |
| 2018 | 2017 | ||
|---|---|---|---|
| As at 1 January | 3 889 | 4 313 | |
| Accrued interest | 257 | 319 | |
| Note 4.4 | Gains due to the reversal of allowances for impairment of loans | 733 | - |
| Exchange differences from the translation of foreign operation statements with a functional currency other than PLN | 320 | (743) | |
| As at 31 December | 5 199 | 3 889 |