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Central Asia Metals PLC Proposed acquisition of -70-

22 Sep 2017 6:01 am
                                                              cost and        retirement     Other 
                                                           decommissioning     benefits     benefits     Total 
                                                         -----------------  ------------  ----------  ---------- 
 As of 1 January 
  2016......................................                     2,158,939       138,255     249,676   2,546,870 
 Unwinding of discount 
  and changes in 
  provision............................................ 
  ..............                                                   273,090       (7,550)     203,006     468,546 
                                                         -----------------  ------------  ----------  ---------- 
 As at 31 December 
  2016...............................                            2,432,029       130,705     452,682   3,015,416 
 Non-current.......................................... 
  ............                                                   2,432,029       111,349     405,754   2,949,132 
 Current.............................................. 
  ................                                                       -        19,356      46,928      66,284 
                                                         -----------------  ------------  ----------  ---------- 
                                                                 2,432,029       130,705     452,682   3,015,416 
                                                         =================  ============  ==========  ========== 
 
   (i)         Restoration and decommissioning provision 

Under current legislation entities operating mining and related activities in the Republic of Macedonia are required to take remedial action for the land where such activities have occurred based on a plan approved by the Ministry of the Environment as well as in accordance with international best practices. After the ceasing of mining activities the Lynx Group is obliged to restore the mining area and to return in its initial condition.

The Lynx Group has engaged an independent expert to conduct an independent assessment on the environment of the mining activities of the Lynx Group and to prepare assessment of the restoration and the relevant costs connected with the mine, tailing site and the mining properties. The calculation was performed on a basis of this independent assessment performed by an environmental technical expert.

The expected current cash flows were projected over the useful life of the mining sites and discounted to 2016 terms using a risk free discount rate. The cost of the related assets are depreciated over the useful life of the assets and are included in property, plant and equipment. If the estimated discount rate used in the calculation had been 10% lower than management's estimates, the carrying amount of the restoration and decommissioning provision would have been $255,910 higher.
   (ii)        Employee retirement benefit provision 

All employers in the Republic of Macedonia are obliged to pay employees minimum severance pay on retirement equal to two months of the average monthly salary applicable in the Country at the time of retirement.
   (iii)       Other employee benefits 

The Lynx Group is also obliged to pay jubilee anniversary awards that correspond to the total number of years of service of the employee. Provisions for termination and retirement obligations are recognized in accordance with actuary calculation in 2016. Basic actuary assumptions are used as follows:
 
                                           2016 
                                           ----- 
Discount rate . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . . . . 
 . . . .                                    4.3% 
Expected rate of salary increase . . . 
 . . . . . . . . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . . . . 
 . .                                        2.5% 
 

Retirement benefit obligation is stated at the present value of expected future payments to employees with respect to employment retirement pay. The present value of expected future payments to employees is determined by an independent authorised actuary in accordance with the prevailing rules of actuarial mathematics.
   25.       Borrowings 
 
                                                                                              2016          2015 
                                                                                          ------------  ------------ 
 Non-current 
  Borrowings............................................................................ 
  ..                                                                                        62,571,429    25,000,000 
 Current 
  Borrowings............................................................................ 
  ..                                                                                        28,742,611    11,119,170 
 Accrued interest 
  payable.................................................................                           -        43,151 
                                                                                           912,324,040    36,162,321 
                                                                                          ============  ============ 
 

Non-current borrowings are measured at amortized cost. Non-current borrowings represent the long-term loan that was issued of $75,000,000 from Societe Generale, Investec and Ohridska Banka (the Senior Facility) obtained in October 2016 with an interest rate of 3 month LIBOR plus 5%, maturing on 30 September 2023.

The borrowings are measured at amortized cost. Bank borrowings from Ohridska Banka represent four short- term loans. The first loan was issued in amount of $5,307,885 (MKD 310,300,000) with interest rate of 6.2% p.a. maturing on 30 June 2017. The second loan was issued in amount of $525,948 (MKD 370,000,000) with interest rate of 4.5% p.a. with maturity date on 5 September 2017. The third loan was approved in amount of $1,051,707 (MKD 61,483,000) with interest rate of 4.5% p.a. maturing on 30 November 2017. Short-term loan outstanding as at 31 December 2016 of $14,625,335 (MKD 855.000.000) is obtained from Ohridska Banka with interest rate of 3% with maturity date of 13 days.

The carrying amounts and fair value of all borrowings are as follows:
 
                                                                   Carrying amount             Fair value 
                                                              ------------------------  ------------------------ 
                                                                  2016         2015         2016         2015 
                                                              -----------  -----------  -----------  ----------- 
 Ohridska Banka AD 
  Skoje..................................................... 
  ...........................                                  18,324,040   11,119,170   18,324,040   11,119,170 
 SG 
  Facility.................................................. 
  .........................................................    73,000,000            -   73,000,000            - 
 Lynx 
  Metals.................................................... 
  ....................................................                  -   25,000,000            -   25,000,000 
 Accrued interest 
  payable - Lynx 
  Metals.................................................... 
  ...                                                                   -       43,151            -       43,151 
                                                              -----------  -----------  -----------  ----------- 
                                                               91,324,040   36,162,321   91,324,040   36,162,321 
                                                              ===========  ===========  ===========  =========== 
 

The fair value of all borrowings equals their carrying amount, as the impact of discounting is not significant. The information in relation to the pledge of collateral is presented in Note 15.

The carrying amounts of the borrowings are denominated in the following currencies:
 
                                                                                                2016         2015 
                                                                                            -----------  ----------- 
 MKD..................................................................................... 
  ..............                                                                             18,234,040   11,119,170 
 USD..................................................................................... 
  ...............                                                                            73,000,000   25,043,151 
                                                                                             91,324,040   36,162,321 
                                                                                            ===========  =========== 
 
   26.       Related party transactions 

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September 22, 2017 02:01 ET (06:01 GMT)

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