IXM B.V.,Rotterdam, The Netherlands
Non-statutory Consolidated Financial Statementsfor the year ended 31 December 2019and Report of the Independent Auditor
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| Geneva, 30 March 30 2020 IXM B.V. Report of the Independent Auditor for the year ended 31 December 2019 Page 2 |
| Geneva, 30 March 30 2020 IXM B.V. Report of the Independent Auditor for the year ended 31 December 2019 Page 3 |
Table of Contents
Consolidated Statement of Income ...... 3
Consolidated Statement of Comprehensive Income ...... 4
Consolidated Statement of Financial Position ...... 5
Consolidated Statement of Cash Flows ...... 7
Consolidated Statement of Changes in Equity ...... 8
Notes to the Consolidated Financial Statements ...... 9
IXM B.V.CONSOLIDATED STATEMENT OF INCOME
For the year ended 31 December 2019
| (in thousands of US dollars) | Notes | 2019 | 2018 | |
| Net sales | 1,17 | 14,401,006 | 13,004,441 | |
| Cost of sales | 1 | (14,151,715) | (12,824,947) | |
| Gross Margin | 249,291 | 179,494 | 1.00 | |
| Commercial and administrative expenses | (90,295) | (74,561) | ||
| Finance costs, net | 18 | (64,570) | (59,232) | |
| Share of gain in investment in joint venture | 314 | 434 | ||
| Loss on investments | 20 | (27) | (106) | |
| Loss on sale of fixed assets | (47) | (447) | ||
| Other gains | 21 | 6,403 | - | |
| Income before tax | 101,069 | 45,582 | 1.00 | |
| Income tax expense | 15 | (22,809) | (11,092) | |
| Net income | 78,260 | 34,490 | 1.00 | |
| Attributable to: | 1.00 | |||
| Owners of the Company | 78,260 | 34,490 | 1.00 | |
| Non-Controlling Interests | - | - | 1.00 |
IXM B.V.CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
| 2019 | 2018 | r | |||
| (in thousands of US dollars) | Pre-Tax | Tax | Net | Net | 1 |
| Net income | 101,069 | (22,809) | 78,260 | 34,490 | 1 |
| Items that may be reclassified subsequently from equity to net income | 1 | ||||
| Cash flow hedges - change in fair value | 377 | (45) | 332 | 203 | |
| Exchange differences arising on translation of foreign operations | (1,335) | - | (1,335) | (4,928) | |
| Total | (958) | (45) | (1,003) | (4,725) | 1 |
| 1 | |||||
| Items that will not be reclassified subsequently from equity to net income | 1 | ||||
| Pensions | (1,364) | 164 | (1,200) | (303) | |
| Total | (1,364) | 164 | (1,200) | (303) | 1 |
| 1 | |||||
| Changes in Other Comprehensive Income | (2,322) | 119 | (2,203) | (5,028) | 1 |
| 1 | |||||
| Total Comprehensive Income | 98,747 | (22,690) | 76,057 | 29,462 | 1 |
| Attributable to: | 1 | ||||
| Owners of the Company | 76,057 | 29,462 | |||
| Non-Controlling Interests | - | - | 1 | ||
IXM B.V.CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
| (in thousands of US dollars) | Notes | 2019 | 2018 |
| Non-Current Assets | |||
| Intangible assets | 3 | 26,801 | 26,535 |
| Property, plant and equipment | 4 | 30,311 | 10,920 |
| Investment in joint venture | 264 | 572 | |
| Other investments, deposits and sundry | 5 | 6,687 | 13,824 |
| Deferred income tax assets | 15 | 5,438 | 1,878 |
| Total Non-Current Assets | 69,501 | 53,729 | |
| Current Assets | |||
| Inventories | 1,6 | 1,836,854 | 1,579,890 |
| Trade and other receivables | 8 | 1,185,631 | 1,052,348 |
| Derivative assets | 7 | 304,730 | 249,649 |
| Margin deposits | 7 | 356,381 | 141,221 |
| Current income tax assets | 6,171 | 7,636 | |
| Other financial assets | 9 | 544 | 61 |
| Cash and cash equivalents | 10 | 75,267 | 21,006 |
| Total Current Assets | 3,765,578 | 3,051,811 | |
| Total Assets | 3,835,079 | 3,105,540 |
IXM B.V.CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
As at 31 December 2019
| (in thousands of US dollars) | Notes | 2019 | 2018 |
| Equity | |||
| Issued capital and share premium | 94,629 | 32,289 | |
| Retained earnings | 505,195 | 426,935 | |
| Other reserves | (7,698) | (5,495) | |
| Equity attributable to Owners of the Company | 592,126 | 453,729 | |
| Equity attributable to Non-Controlling Interests | (4) | (4) | |
| Total Stockholders' Equity and Non-Controlling Interests | 11 | 592,122 | 453,725 |
| Non-Current Liabilities | |||
| Long-term debt | 12 | 108,741 | 132,199 |
| Retirement benefit obligations | 14 | 2,388 | 871 |
| Deferred income tax | 15 | 32,469 | 29,105 |
| Other non-current liabilities | 23 | 23,831 | 13,856 |
| Total Non-Current Liabilities | 167,429 | 176,031 | |
| Current Liabilities | |||
| Bank loans and acceptances | 1,13 | 2,067,219 | 1,947,190 |
| Accounts payable and accrued expenses | 16 | 623,010 | 368,635 |
| Derivative liabilities | 1,7 | 367,211 | 156,548 |
| Current income tax liabilities | 18,088 | 3,411 | |
| Total Current Liabilities | 3,075,528 | 2,475,784 | |
| Total Liabilities | 3,242,957 | 2,651,815 | |
| Total Equity and Liabilities | 3,835,079 | 3,105,540 |
IXM B.V.CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Net income | 78,260 | 34,490 | |
| Adjustments for items not affecting cash | 1 | ||
| Depreciation and amortization | 7,200 | 2,869 | |
| Current taxes | 22,766 | 14,219 | |
| Deferred taxes | 43 | (3,127) | |
| Interests, net | 64,085 | 59,734 | |
| Other provisions, net | 462 | 1,488 | |
| Share of gain in investment in joint venture, net of dividends | (314) | (434) | |
| Loss on investments and on sale of fixed assets | 74 | 556 | |
| 172,576 | 109,795 | ||
| Changes in operating assets and liabilities | 1 | ||
| Inventories and derivatives | (103,044) | 137,688 | |
| Margin deposits net of margin deposit liabilities | (212,198) | 207,769 | |
| Trade and other receivables | (115,248) | (48,720) | |
| Trade and other payables | 266,072 | (2,356) | |
| Interests paid1 | (94,709) | (87,331) | |
| Interests received | 30,825 | 27,706 | |
| Income tax paid | (6,306) | (21,610) | |
| Net cash (used in) from operating activities | (62,032) | 322,941 | |
| Investing activities | 1 | ||
| Purchase of intangible assets | (8,928) | (808) | |
| Purchase of property, plant and equipment | (1,168) | (1,225) | |
| Proceeds from sale of fixed assets | 70 | 18 | |
| Change in short-term securities | (510) | - | |
| Change in loans and advances made | (12,306) | (15,044) | |
| Dividends received from joint-venture | 279 | - | |
| Net cash used in investing activities | (22,563) | (17,059) | |
| Financing activities | 1 | ||
| Increase (decrease) in bank loans and acceptances1 | 118,094 | (332,926) | |
| Increase in long term debt | 90,000 | - | |
| Repayment of long term debt | (131,308) | (1,320) | |
| Capital contribution | 62,340 | 17,269 | |
| Net cash from (used in) financing activities | 139,126 | (316,977) | |
| Exchange difference on cash | (270) | (484) | |
| Increase (decrease) in cash and cash equivalents | 54,261 | (11,579) | |
| Cash and cash equivalents, at beginning of the year | 21,006 | 32,585 | |
| Cash and cash equivalents, at end of the year | 75,267 | 21,006 |
IXM B.V.CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2019
| (in thousands of US dollars) | Issued Capital and Share Premium | Retained Earnings | Other Reserves | Equity attributable to Owners of the Company | Equity attributable to Non-Controlling Interests | Total Equity | 1 |
| Balance at 1 January 2018 | 15,020 | 392,462 | (467) | 407,015 | (4) | 407,011 | 1 |
| Net income | - | 34,490 | - | 34,490 | - | 34,490 | 1 |
| Other comprehensive income, net of tax | - | - | (5,028) | (5,028) | - | (5,028) | |
| Total Comprehensive income, net of tax | - | 34,490 | (5,028) | 29,462 | - | 29,462 | |
| Deferred compensation plan, net of tax | - | (17) | - | (17) | - | (17) |
| Share premium increase | 17,269 | - | - | 17,269 | - | 17,269 | |
| Balance at 31 December 2018 | 32,289 | 426,935 | (5,495) | 453,729 | (4) | 453,725 | |
| Net income | - | 78,260 | - | 78,260 | - | 78,260 | 1 |
| Other comprehensive income, net of tax | - | - | (2,203) | (2,203) | - | (2,203) |
| Total Comprehensive income, net of tax | - | 78,260 | (2,203) | 76,057 | - | 76,057 | 1 |
| Capital contribution | 62,340 | - | - | 62,340 | - | 62,340 | |
| Balance at 31 December 2019 | 94,629 | 505,195 | (7,698) | 592,126 | (4) | 592,122 |
IXM B.V. (the “Company”) is a privately owned company incorporated in the Netherlands on 25 November 2005. With effect from22 June 2018, the name of the Company was changed from Louis Dreyfus Company Metals B.V. to IXM B.V. The address of itsregistered office is Westblaak 92, 3012 KM Rotterdam – The Netherlands.
On 26 December 2017, NCCL Natural Resources Investment Fund LP (“NCCL NRIF”) had entered into a definitive agreementwith Louis Dreyfus Company B.V. to acquire 100% interest in Louis Dreyfus Company Metals B.V. The completion of thetransaction occurred on 11 May 2018. The Company became, as of that date, a direct subsidiary of New Silk Road CommoditiesLtd (“NSRC Ltd”), a company incorporated in Hong-Kong, and an indirect subsidiary of NCCL NRIF.
On 18 April 2019, NSRC Ltd contributed the shares of IXM B.V. into New Silk Road Commodities SA (“NSRC SA”), a wholy-owned subsidiary of NSRC Ltd incorporated in Switzerland.
On 24 July 2019, NSRC Ltd sold its participation into NSRC SA to CMOC Ltd, a company incorporated in Hong-Kong and a limitedpartner in NCCL NRIF. As of that date, the Company is a wholy-owned subsidiary of New Silk Road Commodities SA, and anindirect subsidiary of CMOC Ltd. The Company’s indirect controlling shareholder is China Molybdenum Co., Ltd, a companyincorporated in the People’s Reuplic of China and listed on the Hong Kong and Shanghai stock exchanges.
IXM B.V. and its subsidiaries (the "Group") is a trading and service business unit in the field of raw material and refined basemetals. It contracts out of offices in Geneva, with commercial offices in all major producing and consuming regions throughout theworld. The business scope covers copper, lead and zinc concentrates, refined metals and aluminium along with other minor andassociated metals and by-products. The Group is also actively involved in organizing the logistics and financing of all parts of thesupply chain from the raw material through to the refined metal.
1. ACCOUNTING POLICIES
The consolidated financial statements of IXM B.V. are prepared in thousands of United States Dollars, unless otherwise stated,consistent with the predominant functional currency of IXM B.V.’s operations. The consolidated financial statements have beenapproved by the Board of Directors of IXM B.V. on 30 March 2020.Statement of complianceThe consolidated financial statement have been prepared in accordance with:
? International Financial Reporting Standards (“IFRS”) and interpretations as adopted by the European Union (EU)effective for the year ended 31 December 2019, and? IFRS and interpretations as issued by the International Accounting Standards Board (IASB) effective for the year ended31 December 2019.
The accounting policies used to prepare these financial statements are the same as those used to prepare the consolidatedfinancial statements at and for the year ended 31 December 2018, except for the adoption of new amendments, standards andinterpretations at 1 January 2019 detailed below.
NEW AND AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS IN EFFECT STARTING FROM 2019
? IFRS 16 – LeasesThe new standard provides a comprehensive model for identification of lease arrangements and their treatment (on-balance sheet)in the financial statements of both lessees and lessors. It superseded IAS 17 Leases and its associated interpretative guidance.The Group applied the cumulative catch-up approach. Under this approach, the Group did not restate prior-year amounts reportedand applied the practical expedient that permits an entity not to reassess whether a contract is, or contains, a lease at the date ofinitial application (grandfathering).
The Group has elected to apply the following other transitional reliefs available under the standard:
? The use of hindsight for determination of the lease term as of the date of initial applications;? The exclusion of initial direct costs of obtaining a lease from the measurement of right-of-use assets at the date of initial
application; and? Low value leases and leases with a remaining lease term of less than 12 months from the date of initial application have
not been recognised under IFRS 16 and will remain accounted for as operating expenditures.
Upon adoption of IFRS 16, right-of-use assets and lease liabilities of $15.01 million were recognised as at 1 January 2019. Thereconciliation between the operating lease commitments as at 31 December 2018 and the opening balance for the lease liabilitiesas at 1 January 2019 is as follows:
| (in thousands of US dollars) | |
| Operating lease commitments at 31 December 2018 | 1,252 |
| Exemption of commitments for leases of low value assets | - |
| Exemption of commitments for short-term leases | (4) |
| Optional extension periods not disclosed at 31 December 2018 | 13,904 |
| Undiscounted future lease payments from operating lease | 15,152 |
| Effect of discounting | (88) |
| Lease liabilities at 1 January 2019 | 15,064 |
| New and Amended standards | |
| Amendments to IFRS 9 | Prepayment features with negative compensation |
| Amendments to IAS 28 | Long-term interests in asociates and joint ventures |
| Amendments to IAS 19 | Plan Amendment, curtailment or settlement |
| Annual Improvements to IFRSs 2015-2017 Cycle | Amendments to IFRS 3 business combinations, IFRS 11 joint arrangements, IAS 12 income taxes and IAS 23 borrowing costs |
NEW AND AMENDED STANDARDS ISSUED BUT NOT YET EFFECTIVE
At the date of authorisation of these consolidated financial statements, the following revised IFRS standards applicable to theGroup were issued but not yet effective:
| New and Amended standards issued but not yet effective | Effective for annual period beginning on or after | |
| Amendments to IFRS 3 | Definition of business | 1 January 2020 |
| Amendments to IAS 1 and IAS 8 | Definition of material | 1 January 2020 |
USE OF ESTIMATES AND CRITICAL ACCOUNTING JUDGEMENTSThe preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions thataffect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.Price risk managementThe Group engages in price risk management activities, principally for trading purposes. Activities for trading purposes areaccounted for using the mark-to-market method. The market prices used to value these transactions reflect management’s bestestimate considering various factors including the closing exchange and over-the-counter quotations, parity differentials, timevalue and price volatility underlying the commitments. The values are adjusted to reflect the potential impact of liquidating theGroup’s positions in an orderly manner over a reasonable period of time under present market conditions.Deferred tax assetsDeferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be availableagainst which the losses can be utilized. Significant management judgment is required to determine the amount of deferred taxassets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planningstrategies.
Classification of trade receivables and liabilities at amortized cost or fair value through profit and lossTrade receivables containing provisional pricing elements (i.e. the final selling price is subject to movements in market prices afterthe date of sale) need to be assessed to determine the appropriate IFRS 9 classification: measured at fair value through profitand loss or amortized cost. Those receivables that are exposed to market prices variations and for which the objective of thebusiness model is not to collect contractual cash flows are therefore measured at fair value through profit or loss.On the other hand, trade receivables that do not have provisional pricing features are classified as at “amortized cost”.
A similar assessment is done for trade payables, and for those payables that contain provisional price elements, the Group electedto designate them as at fair value through profit and loss consistent with the accounting for provisionally priced receivables. Thebalance of trade payables are classified as at “amortized cost”.FOREIGN CURRENCIES
Financial statements of foreign operations are translated from the functional currency into US Dollars using exchange rates ineffect at period end for assets and liabilities, and average exchange rates during the period for results of operations and cashflows. However, for certain material transactions, a specific exchange rate is used when considered relevant. Related translationadjustments are reported as a separate component of equity. A proportionate share of translation adjustments relating to a foreigninvestment is recognized in income when this investment is sold fully or partially.
When the functional currency is not the local currency, the local statements are first converted using historical exchange rates forinventories, properties, and depreciation, and related translation adjustments are included in the current year’s operations.
Exchange differences arising on monetary items that form an integral part of the net investment in foreign subsidiaries arerecognized in Other Comprehensive Income, under “Exchange Differences arising on translation of foreign operations”, for theirnet-of-tax amount.
Exchange differences on receivables and payables denominated in a foreign currency are recorded in the income for the year.
On a regular basis, the Group reviews the functional currencies used in measuring foreign operations to assess the impact ofrecent evolutions of its activities and the environment in which it operates.CONSOLIDATED STATEMENT OF INCOMEIncome and expenses are analyzed by function in the consolidated statement of income. Cost of sales includes depreciation andemployment costs relating to processing plants. It also includes the net unrealized gain or loss on open contracts of the commodityand freight trading activity. Commercial and administrative expenses include the cost of traders and administrative employees,the depreciation of office buildings and equipment, as well as the charge resulting from the fair value of shares and stock optionsgranted to employees.CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAssets and liabilities are presented separately between current and non-current assets, and current and non-current liabilities.This classification is based for each asset and liability on the expected recoverability or settlement, before or after twelve monthsfrom the statement of financial position date.
INTANGIBLE ASSETSOther intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in abusiness combination is the fair value at the date of acquisition. Following initial recognition, intangible assets are carried at costless any accumulated amortization and any accumulated impairment losses. Intangible assets with finite life are amortized overperiods ranging from one to ten years.
The useful life of all acquired trademarks has been assessed to be qualified as finite.
PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are recorded at cost less accumulated depreciation and accumulated impairment losses. Borrowingcosts that are directly attributable to the acquisition, construction or production of a qualifying asset, incurred during theconstruction period, are capitalized as part of the cost of that asset. When relevant, property, plant and equipment costs includeinitial estimate of decommissioning and site restoration costs.
The depreciation of other property, plant and equipment is calculated based on the carrying amount, net of residual value,principally using the straight-line method over the estimated useful lives of the assets, as follows: Buildings, 15 to 40 years;Machinery and Equipment, 5 to 25 years; and Other Tangible Assets, 1 to 20 years.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it isprobable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measuredreliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statementof income during the financial period in which they are incurred.ImpairmentWhere the carrying amount of an asset exceeds its recoverable amount, the carrying amount of the asset shall be reduced to itsrecoverable amount. That reduction is an impairment loss. Recoverable amount is the higher of fair value less costs to sell andvalue in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which theestimates of future cash flows have not been adjusted.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of itsrecoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have beendetermined had no impairment loss been recognized for the asset in prior years.
LEASESPolicies applicable from 1 January 2019
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-useasset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-termleases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Grouprecognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless anothersystematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowingrate, determined as the rate the Group would borrow over a similar term to obtain a similar asset in a similar economic environment.Lease payments included in the measurement of the lease liability may comprise of:
? Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;? Variable lease payments that depend on an index or rate, initially measured using the index or rate at the? commencement date;? The amount expected to be payable by the lessee under residual value guarantees;? The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and? Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option toextend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it isreasonably certain not to be exercised. The Group has the option, for some of its leases to lease the assets for additional terms.The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considersall relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Groupreassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its abilityto exercise (or not to exercise) the option to renew.
Policies applicable prior 1 January 2019
Previously to the adoption of IFRS 16 leases, the Group was applying IAS 17 Leases. Lease contracts where the lessor wasretaining substantially all the risks and rewards of ownership of the assets were classified as operating leases and were expensedon a straight-line basis over the lease term.INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholdingbetween 20% and 50% of the voting rights.
Joint ventures are a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the netassets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only whendecisions about the relevant activities require unanimous consent of the parties sharing control.
Investments in associates and joint ventures are accounted for using the equity method and are initially recognized at cost. Thecarrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of the associate or jointventure since the acquisition date. The Group’s investment in associates and joint ventures includes goodwill identified onacquisition date, net of any accumulated impairment loss.
OTHER INVESTMENTS, DEPOSITS AND SUNDRY
Other investments, deposits and sundry mainly include long-term loans and advances. These assets are initially recognized atfair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized costusing the effective interest method.INVENTORIES AND DERIVATIVESTrading inventoriesTrading inventories are valued at fair value less costs to sell. The “mark-to-market” valuation policy, which is accepted as acommodity industry practice, presents a fair reflection of the Group’s trading activities. Changes in fair value are recognized in thestatement of income in “Cost of sales”.
Other inventories
The other inventories are valued at the lower of cost or net realizable value, especially for certain entities for which the tradingmodel is not applicable.DerivativesThe Group uses futures and option contracts mostly to hedge trading inventories and open commitments in commodities andsecurities. Futures and option contracts are recognized at fair value, and the resulting unrealized gains and losses are recognizedin the statement of income. Undelivered commodities purchase and sale commitments and swap / supply arrangements arerecognized at fair value, and the resulting unrealized gain or loss is recognized in the statement of income. Foreign exchangehedge contracts are recognized at fair value, and the resulting unrealized gains and losses are recognized in the statement ofincome in “Finance costs, net” for the foreign exchange exposure on funding and in “Cost of sales”, for the foreign exchange gainsand losses related to working capital. Expected costs associated with the execution of contracts are accrued.HEDGE ACCOUNTING
The Group carries out assessments of hedging operations that qualify for hedge accounting, based on documentation of hedgingrelationships. This documentation includes the identification of the hedging instrument, the hedged item, the risk being hedgedand the effectiveness of the hedge, at inception of the hedge and throughout financial reporting periods for which the hedge wasdesignated.
Cash flow hedgesThe effective portion of the gain or loss on the hedging instrument is recognized directly in other reserves, while any ineffectiveportion is recognized immediately in the statement of income. Amounts taken to equity are transferred to the statement of incomewhen the hedged transaction affects the statement of income, such as when the hedged financial income or financial expense isrecognized or when a forecasted sale occurs.FINANCIAL ASSETS AND LIABILITIESFinancial assets at amortized costTrade receivables are recognized at fair value and carried out at amortised costs, adjusted for any loss allowance.
Margin deposits consist of cash with brokers and exchanges, to meet initial and variation margin requirements in respect of futurespositions on commodities exchanges.
Cash and cash equivalents include highly liquid investments with a maturity of three months or less at the time of the purchase.Treasury bills, money market funds, commercial paper, bank certificates of deposit and marketable securities having insignificantrisk of change in value qualify under that definition.Any difference between the carrying amount of the cash equivalents and its fair value is recognized in the statement of income.The statement of cash flows presents the change in cash and cash equivalents. Changes in bank overdrafts that form part of thefinancing activities are presented in increase (decrease) in bank loans and acceptances.
Financial assets and liabilities at fair-value through profit and loss
Trade receivables and payables containing provisional pricing elements and other financial assets corresponding to shares inlisted companies are recognized at fair-value through profit and loss.Financial liabilities at amortized cost
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilitiesare subsequently measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expenseover the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through theexpected life of the financial liability to the net carrying amount on initial recognition.Impairment of financial assets
The Group recognises a loss allowance for expected credit loss (ECL) on financial assets which are subject to impairment underIFRS 9 (including trade and other receivables). The amount of ECL is updated at each reporting date to reflect changes in creditrisk since initial recognition. Assessment is done based on historical credit loss experience, adjusted for factors that are specificto the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as theforecast of future conditions.Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when ittransfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognitionof a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of theconsideration received and receivable is recognised in profit or loss. On derecognition of an investment in equity instrument whichIXM Group has elected on initial recognition to measure at Fair Value through Other Comprehensive Income (FVTOCI) uponapplication of IFRS 9, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassifiedto profit or loss, but is transferred to retained profits.
PROVISIONSProvisions for environmental restoration and decommissioning, restructuring costs and legal claims are recognized when theGroup has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources will berequired to settle the obligation, and a reliable estimate can be made.EMPLOYEE BENEFITSShort-term employee benefitsShort-term employee benefits include wages, salaries, social security contributions, compensated absences, profit-sharing andbonuses and are expected to be settled wholly before twelve months after the end of the reporting period. Short-term employeebenefit obligations are measured on an undiscounted basis and are recognized in operating income as the related service isprovided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit sharing plans if theGroup has a present legal or constructive obligation to pay this amount as a result of past service provided by the employees andthe obligation can be estimated reliably.
Pensions and post-retirement benefitsDefined contribution plans are funded by contributions paid by employees and Group companies to the organizations responsiblefor managing the plans. The Group’s obligations are limited to the payment of such contributions.
Defined benefit plans consist of either funded or unfunded plans. Obligations under these plans are generally determined byindependent actuaries using the projected unit credit method. The Group measures and recognizes post-employment benefits inaccordance with IAS 19:
? contributions to defined contribution plans are recognized as an expense;? defined benefit plans are measured using actuarial valuations.
The Group uses the projected unit credit method as the actuarial method for measuring its post-employment benefit obligations,on the basis of the national or company-wide collective agreements effective within each entity.
Factors used in calculating the obligation include length of service, life expectancy, salary inflation, staff turnover, and macro-economic assumptions specific to countries in which the Group operates (such as inflation rate and discount rate).
Actuarial gains and losses relating to defined benefit plans (pensions and other post-employment benefits), arising from the effectsof changes in actuarial assumptions and experience adjustments, are recognized net of deferred taxes in other comprehensiveincome.
The liability recognized in the statement of financial position in respect of defined benefit plans is the present value of the definedbenefit obligation at the statement of financial position date less the fair value of plan.
If the value of plan assets exceeds the obligation under the plan, the net amount is recognized as a non-current asset. Overfundedplans are recognized as assets only if they represent future economic benefits that will be available to the Group through futurerefunds from the plan or reductions in future contributions to the plan.Other long-term benefitsThe Group’s net obligation in respect of long-term benefits, other than post-employment plans, is the amount of future benefitsthat employees have earned in return for their service in the current and prior periods. The value of the obligation is determinedusing the projected unit credit method.
Actuarial gains and losses are immediately recognized in the statement of income as part of the commercial and administrativeexpenses.
Share-based payment transactionsPhantom equity plans are measured at fair value, corresponding to the value of the benefit granted to the employee on the grantdate. The transactions are recognized in commercial and administrative expenses in the statement of income on a graduatedbasis over the vesting period, with a corresponding increase in other reserves in equity when the plan is deemed an equity plan.The transactions are recognized in commercial and administrative expenses in the statement of income on a graduated basisover the vesting period, with a corresponding increase in liabilities when the plan is deemed a cash-settled plan.INCOME TAXESIncome tax expense represents the sum of the current tax and deferred tax.
Current tax is based on taxable profit for the year. Taxable profit differs from income before tax because of income or expensethat are taxable or deductible in other years and items that are never taxable or deductible. Current tax is calculated using taxrates that have been enacted by the end of the reporting period.
Deferred taxes arise from temporary differences between the carrying amounts of certain assets and liabilities and their tax basis.The Group accounts for deferred income tax in accordance with the statement of financial position liability method using the mostrecent established tax rates at year-end. The Group recognizes future tax benefits to the extent that the realization of such benefitsis probable. The carrying amount of deferred tax assets is reviewed at each statement of financial position date. Tax assets andliabilities are offset when the taxes relate to income taxes levied by the same taxation authority.REVENUE
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinarycourse of the Group’s activities.
Revenue arises from sale of goods, services rendered and use by others of entity assets, yielding interest, royalties and dividends.
Sale of goods
The Group recognizes revenue when the amount of revenue can be reliably measured, control of the goods is transferred to thebuyer and it is probable that future economic benefits will flow to the entity. Control of an asset is transferred when the Group nolonger has the ability to direct the use of, nor obtain substantially all the remaining benefits from, the asset. The amount of revenueis not considered to be reliably measurable until all contingencies relating to the sale have been resolved. If the control has nottransferred to the buyer revenue is not recognised and any proceeds received are accounted for as a financing arrangement.Revenue on provisionally priced sales is recognised at fair-value at reporting date. The fair value of the final sales price adjustmentis re-estimated continuously and changes in fair value are recognised as an adjustment to revenue and thus reflecting thecommodity derivative character of such revenue. Fair value is always calculated by reference to forward market prices.
Physical purchases and sales of products are reflected as cost of goods sold and sales, respectively, in the accompanyingconsolidated statement of income at the time such products are shipped and control passes to the customer. Costs for shippingof inventories are included in cost of goods sold in the accompanying consolidated statement of income.Revenue is presented net of returns, rebates and discounts and after eliminating sales within the Group.
If the Group acts in the capacity of an agent rather than as the principal in a transaction, then the revenue recognized is the netamount realized by the Group.Services rendered
When the outcome of services rendered can be estimated reliably, revenue associated is recognized by reference to the stage ofcompletion of the transaction at the statement of financial position date.Financial incomeInterest income and expenses are recognized on a time-proportion basis using the effective interest method. Dividend income isrecognized when the right to receive payment is established.
3. INTANGIBLE ASSETS
At 31 December 2019 and 31 December 2018 intangible assets consist of the following:
| 2019 | 2018 | ||||||
| (in thousands of US dollars) | Gross value | Accumulated amortization | Net value | Gross value | Accumulated amortization | Net value | |
| Other intangible assets | 39,715 | (12,914) | 26,801 | 37,414 | (10,879) | 26,535 | |
| 39,715 | (12,914) | 26,801 | 37,414 | (10,879) | 26,535 | ||
| (in thousands of US dollars) | 2019 | 2018 |
| Balance at 1 January, | 26,535 | 27,956 |
| Acquisitions and additions | 4,121 | 933 |
| Disposals | - | (463) |
| Amortization of the year | (3,855) | (1,891) |
| Closing Balance | 26,801 | 26,535 |
| 2019 | 2018 | ||||||
| (in thousands of US dollars) | Gross value | Accumulated depreciation | Net value | Gross value | Accumulated depreciation | Net value | |
| Buildings | 12,220 | (3,665) | 8,555 | 12,166 | (2,686) | 9,480 | |
| Machinery and equipment | 709 | (306) | 403 | 697 | (208) | 489 | |
| Other tangible assets | 2,085 | (751) | 1,334 | 1,441 | (851) | 590 | |
| Tangible assets in progress | 236 | - | 236 | 361 | - | 361 | |
| Right-of-use assets | 21,638 | (1,855) | 19,783 | - | - | - | |
| 36,888 | (6,577) | 30,311 | 14,665 | (3,745) | 10,920 | ||
| 2019 | |||
| (in thousands of US dollars) | Gross value | Accumulated depreciation | Net value |
| Office leases | 12,830 | (958) | 11,872 |
| Land leases | 7,920 | (617) | 7,303 |
| Warehouse leases | 888 | (280) | 608 |
| 21,638 | (1,855) | 19,783 | |
Changes in net value of property, plant and equipment, for the year ended 31 December 2019 and the year ended 31 December2018 are as follows:
| (in thousands of US dollars) | 2019 | 2018 |
| Balance at 1 January, | 10,920 | 10,688 |
| Impact of adoption of IFRS 16 | 15,064 | - |
| Additions to right of use assets | 6,580 | - |
| Acquisitions and additions | 1,168 | 1,225 |
| Disposals | (70) | (4) |
| Depreciation for the year | (3,213) | (978) |
| Impairment | (132) | - |
| Foreign currency translation adjustment | (6) | (11) |
| Closing Balance | 30,311 | 10,920 |
| (in thousands of US dollars) | 2019 | 2018 |
| Long-term loan to suppliers | 6,687 | 13,824 |
| 6,687 | 13,824 |
| (in thousands of US dollars) | 2019 | 2018 |
| Readily marketable inventory | 1,813,294 | 1,519,280 |
| Non-trading inventory | 23,824 | 60,874 |
| Inventories (Gross value) | 1,837,118 | 1,580,154 |
| Impairment of non-trading inventory | (264) | (264) |
| 1,836,854 | 1,579,890 |
The VAR that the Group measures is a model-based estimate grounded upon various assumptions such as: the returns of riskfactors affecting the market environment follow a log-normal distribution, parameters are calculated by using exponentiallyweighted historical data in order to put more emphasis on the latest market information.
The VAR computed hence represents an estimate, with a confidence level of 95%, of the potential loss that is not expected to beexceeded should the current market risk position remain unchanged for one day. The use of 95% confidence level means that,within a one-day horizon, losses exceeding the VAR figure are not expected to occur statistically more than once every twenty(trading) days. The VAR may be under or over-estimated due to the assumptions placed on risk factors and historical correlationsand volatilities in market prices, and the probability of large market moves may be underestimated per the normal distribution.Calculations are back tested against reported statement of income on a regular basis.
AVERAGE VAR AS A % OF STOCKHOLDER’S EQUITYThe monthly average of VAR as percentage of the ultimate stockholder’s equity corresponds to the average over a month of theVAR computed daily as percentage of the ultimate stockholder’s equity at the beginning of each quarter.
During the year ended 31 December 2019, the monthly average Group VAR for trading activities has been less than 1% of theultimate stockholder’s equity. The yearly average VAR for the Group reached 0.24% of year-end equity of the ultimatestockholder in 2019 versus 0.06% in 2018. VAR is only one of the risk metrics within a wider risk management system appliedwithin the Group.
COMPLIANCE RISKThe Group has in place four compliance programs:
? Regulatory: complying with regulations applicable to commodity exchanges? Trade Practice: policies and controls to maintain ethical commercial and business practices? Trade Sanctions: ensuring compliance with trade sanctions? Sustainability: be a "responsible citizen" in all the markets and activities in which the Company participates, and strives to
retain and improve that status through all corporate actions. The Group also applies its “responsible sourcing’, andEnvironmental, Social and Governance (ESG) policy across its business linesThe Group adopts a risk-based approach, with adequate resources dedicated to transaction monitoring and training.
FOREIGN CURRENCY RISKThe Group’s functional currency is USD. The Group operates internationally and is therefore exposed to changes in foreigncurrency exchange for its assets and liabilities denominated in a currency different from the functional currency of each entity.Each entity within the Group enters into foreign exchange derivative contracts to hedge its exposures back to its own functionalcurrency. The operating current assets and liabilities are denominated in the following currencies before hedge at 31 December2019 and 31 December 2018.
| 2019 | |||||||
| (in thousands of US dollars) | US Dollar | Euro | Chinese Yuan | Peruvian Soles | Mexican pesos | Other Currencies | Total |
| Inventories - gross | 1,710,270 | - | 126,848 | - | - | - | 1,837,118 |
| Trade and other receivables - gross | 1,020,525 | 31,745 | 96,147 | 16,358 | 15,535 | 5,532 | 1,185,842 |
| Derivative assets | 148,421 | - | 156,309 | - | - | - | 304,730 |
| Margin deposits | 324,696 | - | 31,685 | - | - | - | 356,381 |
| Current income tax assets | - | - | - | 2,993 | 3,178 | - | 6,171 |
| Assets | 3,203,912 | 31,745 | 410,989 | 19,351 | 18,713 | 5,532 | 3,690,242 |
| Accounts payable and accrued expenses | 555,757 | 1,338 | 25,718 | 36,329 | 714 | 3,154 | 623,010 |
| Derivative liabilities | 223,319 | - | 143,892 | - | - | - | 367,211 |
| Current income tax liabilities | 432 | - | 6,786 | - | 60 | 10,810 | 18,088 |
| Liabilities | 779,508 | 1,338 | 176,396 | 36,329 | 774 | 13,964 | 1,008,309 |
| Net Current Assets and Liabilities | 2,424,404 | 30,407 | 234,593 | (16,978) | 17,939 | (8,432) | 2,681,933 |
COUNTERPARTY RISKThe Group is engaged in the business of trading a diversified portfolio of commodities. Accordingly, a substantial portion of theGroup’s trade receivables is with companies across several different industries within the commodity sector. Part of margindeposits consist of US treasury bills and are on deposit with commodity exchanges and brokers which hold such deposits in acustodial capacity.The Group has implemented risk management procedures to monitor its exposures and to minimize counterparty risk. Theseprocedures include initial credit and limit approvals, credit insurance, margin requirements, master netting arrangements, lettersof credit and other guarantees.
The Group’s trade receivables include debtors with a carrying amount of $35.2 million which are past due at 31 December 2019.The credit quality of financial assets is assessed by reference to credit ratings, historical information about counterparty defaultrates, risk mitigation tools in place, existing market conditions, market-based (“systematic”) risk factors and loan-specific(“idiosyncratic”) risk factors.
| 2019 | 2018 | |||||
| (in thousands of US dollars) | Gross value | Provision | Net value | Gross value | Provision | Net value |
| Not due | 1,506,858 | (40) | 1,506,818 | 1,157,985 | - | 1,157,985 |
| Due since < 3 months | 32,396 | - | 32,396 | 35,961 | (377) | 35,584 |
| Due since 3 - 6 months | 149 | - | 149 | 226 | (226) | - |
| Due since 6 months -1 year | 2,212 | (171) | 2,041 | 411 | (411) | - |
| Due since > 1 year | 608 | - | 608 | 4,024 | (4,024) | - |
| Closing balance | 1,542,223 | (211) | 1,542,012 | 1,198,607 | (5,038) | 1,193,569 |
| Including: | ||||||
| Trade receivables | 438,077 | (40) | 438,037 | 366,614 | (1,300) | 365,314 |
| Staff and tax receivables | 43,033 | - | 43,033 | 35,911 | - | 35,911 |
| Accrued receivables | 537,463 | - | 537,463 | 462,396 | (3,738) | 458,658 |
| Prepayments and prepaid expenses | 128,219 | (171) | 128,048 | 165,837 | - | 165,837 |
| Other receivables | 19,563 | - | 19,563 | 19,131 | - | 19,131 |
| Dividend receivables | 320 | - | 320 | - | - | - |
| Loans receivables | 19,167 | - | 19,167 | 7,497 | - | 7,497 |
| Margin deposits | 356,381 | - | 356,381 | 141,221 | - | 141,221 |
| 2018 | |||||||
| (in thousands of US dollars) | US Dollar | Euro | Chinese Yuan | Peruvian Soles | Mexican pesos | Other Currencies | Total |
| Inventories - gross | 1,403,898 | - | 176,259 | - | - | - | 1,580,157 |
| Trade and other receivables - gross | 928,686 | 542 | 101,992 | 15,795 | 9,774 | 597 | 1,057,386 |
| Derivative assets | 198,403 | - | 51,546 | - | - | - | 249,949 |
| Margin deposits | 65,582 | - | 75,639 | - | - | - | 141,221 |
| Current income tax assets | 18 | - | - | 3,423 | 3,570 | 625 | 7,636 |
| Assets | 2,596,587 | 542 | 405,436 | 19,218 | 13,344 | 1,222 | 3,036,349 |
| Accounts payable and accrued expenses | 301,596 | 898 | 62,712 | 2,003 | 413 | 1,013 | 368,635 |
| Derivative liabilities | 128,768 | - | 27,780 | - | - | - | 156,548 |
| Current income tax liabilities | 325 | - | 533 | 397 | 191 | 1,965 | 3,411 |
| Liabilities | 430,689 | 898 | 91,025 | 2,400 | 604 | 2,978 | 528,594 |
| Net Current Assets and Liabilities | 2,165,898 | (356) | 314,411 | 16,818 | 12,740 | (1,756) | 2,507,755 |
POLITICAL AND COUNTRY RISK
In its cross-border operations, the Group is exposed to country risk associated with a country’s overall political, economic, financial,regulatory and commercial situations. The Group does not seek to retain country risk and it is the trade finance, insurance andcredit risk departments’ duty to seek to mitigate political and country risk by transferring or covering them with major financialinstitutions or insurance.
LIQUIDITY RISK
Liquidity risk arises in the general funding of the Group’s commodity trading activities and in the management of positions. Itincludes both the risk of being unable to fund the Group’s portfolio of assets at appropriate maturities and rates, and the risk ofbeing unable to liquidate a position in a timely manner at a reasonable price.
Management of the liquidity profile is designed to ensure that the Group has access to the funds necessary to cover maturingliabilities. Sources of funds include interest-bearing and non-interest-bearing deposits, bank notes, trading account liabilities,repurchase agreements, long term debt, and borrowing arrangements.
The Group holds derivative contracts for the sale of physical commodities and derivative assets that are expected to generatecash inflows that will be available to meet cash outflows on purchases and liabilities. In the trading business, settling commoditycontracts and liquidating trading inventories, by exchanging the commodity for cash before the contractual maturity term is a usualpractice. The liquidity risk is consequently measured by allocating liabilities to the earliest estimated period on which thecounterparty can require repayment, and assets to the earliest estimated period on which the Group can realize in cash theseassets without any significant discount from market value. This measurement takes into consideration the market depth and pricesensitivity to significant transaction volumes. The inclusion of information on non-financial items is necessary to understand theGroup’s liquidity risk management, as the liquidity is managed on a net asset and liability basis.
The table below summarizes the maturity profile of the Group’s financial assets and liabilities at 31 December 2019 and 31December 2018.
| 2019 | 2018 | |||||||||||||||
| (in thousands of US dollars) | Under 3 months | 3 to 6 months | Over 6 months | Total | Under 3 months | 3 to 6 months | Over 6 months | Total | ||||||||
| Derivative assets | 278,345 | 3,322 | 23,063 | 304,730 | 236,254 | 2,467 | 10,928 | 249,649 | ||||||||
| Trade and other receivables | 968,903 | 25,127 | 1,024 | 995,054 | 843,103 | - | - | 843,103 | ||||||||
| Loans to suppliers | 2,499 | 2,499 | 20,856 | 25,854 | - | 2,499 | 18,822 | 21,321 | ||||||||
| Bank loans and acceptances | (2,043,136) | (22,160) | (1,923) | (2,067,219) | (1,947,190) | - | - | (1,947,190) | ||||||||
| Derivative liabilities | (361,342) | (957) | (4,912) | (367,211) | (156,548) | - | - | (156,548) | ||||||||
| Trade and other payables | (483,603) | (3,573) | (3,032) | (490,208) | (272,975) | (17,181) | (5,030) | (295,186) | ||||||||
| Long-term debt | - | - | (108,741) | (108,741) | - | - | (132,199) | (132,199) | ||||||||
| Total Assets net of Liabilities | (1,638,334) | 4,258 | (73,665) | (1,707,741) | (1,297,356) | (12,215) | (107,479) | (1,417,050) |
The schedule below analyzes the Group’s financial interests which will be settled on future periods based on the financial debt at31 December 2019 and 31 December 2018. These interests are grouped by maturity based on the contractual maturity date ofthe interests.
| (in thousands of US dollars) | 2019 | 2018 |
| Maturity < 1 year | 1,322 | 1,687 |
| Maturity between 1-2 years | 22 | 73 |
| Maturity between 2-3 years | - | 19 |
| Maturity between 3-4 years | - | - |
| Maturity between 4-5 years | - | - |
| Maturity > 5 years | - | - |
| Interests future cash outflows related to financial debt existing at closing date | 1,344 | 1,779 |
| Of which: | ||
| Fixed rate | 91 | 223 |
| Floating rate | 1,253 | 1,556 |
| (in thousands of US dollars) | 2019 | 2018 |
| Fixed rate | 30,839 | 133,507 |
| Floating rate | 2,145,121 | 1,945,882 |
| Total short and long term financing | 2,175,960 | 2,079,389 |
| (in thousands of US dollars) | Fair value through profit and loss | Fair value through Other Comprehensive Income | Amortized cost | Total |
| Other investments, deposits and sundry | - | - | 6,687 | 6,687 |
| Total Non-Current Assets | - | - | 6,687 | 6,687 |
| Trade and other receivables | 537,455 | - | 457,599 | 995,054 |
| Short term loans to suppliers | - | - | 19,167 | 19,167 |
| Margin deposits | - | - | 356,381 | 356,381 |
| Derivative assets | 304,730 | - | - | 304,730 |
| Other financial assets | 34 | - | 510 | 544 |
| Cash and cash equivalents | - | - | 75,267 | 75,267 |
| Total Current Assets | 842,219 | - | 908,924 | 1,751,143 |
| Total Financial Assets | 842,219 | - | 915,611 | 1,757,830 |
| (in thousands of US dollars) | Fair value through profit and loss | Fair value through Other Comprehensive Income | Amortized cost | Total |
| Long term debt | - | - | 108,741 | 108,741 |
| Total Non-Current Liabilities | - | - | 108,741 | 108,741 |
| Bank loans and acceptances | - | - | 2,067,219 | 2,067,219 |
| Accounts payable and accrued expenses | 272,753 | - | 217,455 | 490,208 |
| Derivative liabilities | 367,211 | - | - | 367,211 |
| Total Current Liabilities | 639,964 | - | 2,284,674 | 2,924,638 |
| Total Financial Liabilities | 639,964 | - | 2,393,415 | 3,033,379 |
| (in thousands of US dollars) | Fair value through profit and loss | Fair value through Other Comprehensive Income | Amortized cost | Total |
| Other investments, deposits and sundry | - | - | 13,824 | 13,824 |
| Total Non-Current Assets | - | - | 13,824 | 13,824 |
| Trade and other receivables | 458,658 | - | 384,445 | 843,103 |
| Margin deposits | - | - | 141,221 | 141,221 |
| Short term loans to suppliers | - | - | 7,497 | 7,497 |
| Derivative assets | 249,649 | - | - | 249,649 |
| Other financial assets | 61 | - | - | 61 |
| Cash and cash equivalents | - | - | 21,006 | 21,006 |
| Total Current Assets | 708,368 | - | 554,169 | 1,262,537 |
| Total Financial Assets | 708,368 | - | 567,993 | 1,276,361 |
| (in thousands of US dollars) | Fair value through profit and loss | Fair value through Other Comprehensive Income | Amortized cost | Total |
| Long term debt | - | - | 132,199 | 132,199 |
| Total Non-Current Liabilities | - | - | 132,199 | 132,199 |
| Bank loans and acceptances | - | - | 1,947,190 | 1,947,190 |
| Accounts payable and accrued expenses | 109,976 | - | 185,210 | 295,186 |
| Derivative liabilities | 156,548 | - | - | 156,548 |
| Total Current Liabilities | 266,524 | - | 2,132,400 | 2,398,924 |
| Total Financial Liabilities | 266,524 | - | 2,264,599 | 2,531,123 |
CLASSIFICATION OF DERIVATIVE FINANCIAL INSTRUMENTS
At 31 December 2019 and 31 December 2018, derivatives financial instruments are as follows:
| 2019 | 2018 | |||
| (in thousands of US dollars) | Assets | Liabilities | Assets | Liabilities |
| Forward purchase and sale agreements | 92,060 | 148,656 | 62,100 | 47,990 |
| Swaps | - | - | 620 | 600 |
| Futures and options | 203,475 | 211,241 | 171,484 | 95,381 |
| Forward foreign exchange contracts | 9,195 | 7,314 | 15,445 | 12,577 |
| Derivatives at fair value through profit and loss | 304,730 | 367,211 | 249,649 | 156,548 |
| Total Derivatives | 304,730 | 367,211 | 249,649 | 156,548 |
| Amounts set off in the statement of financial position | Amounts not set off in the statement of financial position | |||||
| (in thousands of US dollars) | Gross amount of financial assets | Gross amount of financial liabilities | Net amount recognized in the statement of financial position | Under master netting agreements and margin deposit | Not under master netting agreements | Total presented in the statement of financial position |
| Derivative assets | 226,908 | (23,433) | 203,475 | - | 101,255 | 304,730 |
| Derivative liabilities | (41,450) | 252,691 | 211,241 | - | 155,970 | 367,211 |
| Margin deposit assets | - | - | - | 356,381 | - | 356,381 |
| 268,358 | (276,124) | (7,766) | 356,381 | (54,715) | 293,900 | |
FAIR VALUE HIERARCHY
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuationtechnique:
? Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;? Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,either directly or indirectly;? Level 3: techniques that use inputs which have a significant effect on the recorded fair value that are not based on
observable market data.
The following table shows an analysis of financial instruments and trading inventories recorded at fair value by level of the fairvalue hierarchy at 31 December 2019 and 31 December 2018:
| 2019 | 2018 | 1 | |||||||||||||
| (in thousands of US dollars) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | 1 | ||||||
| Trading inventories | - | 1,813,294 | - | 1,813,294 | - | 1,519,280 | - | 1,519,280 | |||||||
| Derivative assets | 203,475 | 101,255 | - | 304,730 | 171,484 | 78,165 | - | 249,649 | |||||||
| Commercial accrued receivables | - | 537,455 | - | 537,455 | - | 458,658 | - | 458,658 | |||||||
| Other financial assets | 34 | - | - | 34 | 61 | - | - | 61 | |||||||
| Cash and cash equivalents | 75,267 | - | - | 75,267 | 21,006 | - | - | 21,006 | |||||||
| Total Assets | 278,776 | 2,452,004 | - | 2,730,780 | 192,551 | 2,056,103 | - | 2,248,654 | |||||||
| Derivative liabilities | 211,241 | 155,970 | - | 367,211 | 95,381 | 61,167 | - | 156,548 | |||||||
| Commercial accrued payables | - | 272,753 | - | 272,753 | - | 109,976 | - | 109,976 | |||||||
| Total Liabilities | 211,241 | 428,723 | - | 639,964 | 95,381 | 171,143 | - | 266,524 | |||||||
| 2019 | 2018 | |||||
| (in thousands of US dollars) | Gross value | Provision | Net value | Gross value | Provision | Net value |
| Trade receivables | 438,077 | (40) | 438,037 | 366,614 | (1,300) | 365,314 |
| Staff and tax receivables | 43,033 | - | 43,033 | 35,911 | - | 35,911 |
| Prepayments and advances to suppliers | 89,066 | (171) | 88,895 | 122,240 | - | 122,240 |
| Prepaid expenses | 39,153 | - | 39,153 | 43,597 | - | 43,597 |
| Accrued receivables | 537,463 | - | 537,463 | 462,396 | (3,738) | 458,658 |
| Dividend receivables | 320 | - | 320 | - | - | - |
| Loans receivables | 19,167 | - | 19,167 | 7,497 | - | 7,497 |
| Other receivables | 19,563 | - | 19,563 | 19,131 | - | 19,131 |
| 1,185,842 | (211) | 1,185,631 | 1,057,386 | (5,038) | 1,052,348 |
At 31 December 2019 the amount of the provision is $0.2 million (at 31 December 2018 the amount of the provision for tradeand other receivables was $5.04 million). The changes in the provisions on trade and other receivables are as follows:
| (in thousands of US dollars) | 2019 | 2018 |
| Balance at 1 January | (5,038) | (4,157) |
| Increase in provision | (211) | (881) |
| Write-off of provision | 5,038 | - |
| Closing balance | (211) | (5,038) |
| 2019 | 2018 | |||
| (in thousands of US dollars) | Ownership | Balance | Ownership | Balance |
| Camrova Resources Inc., publicly traded in Canada | 5.3% | 34 | 5.3% | 61 |
| Remunerated certificate of deposit | 510 | - | ||
| Listed and other financial assets | 544 | 61 | ||
| (in thousands of US dollars) | 2019 | 2018 |
| Short term cash deposit | 16,200 | - |
| Cash | 59,067 | 21,006 |
| 75,267 | 21,006 |
| (in thousands of US dollars) | 2019 | 2018 |
| Issued capital | 5,021 | 5,021 |
| Share premium | 89,608 | 27,268 |
| Retained earnings | 505,195 | 426,935 |
| Other reserves | (7,698) | (5,495) |
| Equity attributable to Owners of the Company | 592,126 | 453,729 |
| Non-Controlling Interests | (4) | (4) |
| Total Equity | 592,122 | 453,725 |
CAPITAL
When managing capital, objectives of the Group are to safeguard its ability to continue as a going concern so that it can providereturns to shareholders, bring benefits to its other partners and optimize the structure of the capital in order to reduce its cost.
At 31 December 2019 and at 31 December 2018, the capital of the Company is composed of 41,349 shares, with a 100-Euronominal value each ($121 at historical value), that are issued and fully paid.
On 17 December 2019, the Company’s indirect shareholder CMOC Ltd, Hong Kong, made a voluntary capital contribution ofCHF 61 million into IXM SA (converted to $ 62.3 million at transaction exchange rate). The capital contribution has not resulted inthe issuance of shares or other equity instruments.
OTHER RESERVES
Other Reserves at 31 December 2019 and 31 December 2018 relate to:
| 2019 | 2018 | |||||||
| (in thousands of US dollars) | Pre-tax | Tax | Non-Controlling share | Owners of the Company share | Pre-tax | Tax | Non-Controlling share | Owners of the Company share |
| Other comprehensive income | (7,809) | 111 | - | (7,698) | (5,487) | (8) | - | (5,495) |
| Other reserves | (7,809) | 111 | - | (7,698) | (5,487) | (8) | - | (5,495) |
| (in thousands of US dollars) | Cash-flow hedges | Pensions | Foreign Currency translation adjustment | Total |
| Balance at 1 January 2019 - Owners of the Company share | - | (30) | (5,465) | (5,495) |
| of which : | ||||
| Pre-tax | - | (22) | (5,465) | (5,487) |
| Tax | - | (8) | - | (8) |
| Non-Controlling share | - | - | - | - |
| Current period gains (losses) | 332 | (1,200) | (1,335) | (2,203) |
| Reclassification to profit or loss | - | - | - | - |
| Other comprehensive income for the period – Owners of the Company share | 332 | (1,200) | (1,335) | (2,203) |
| of which : | ||||
| Pre-tax | 377 | (1,364) | (1,335) | (2,322) |
| Tax | (45) | 164 | - | 119 |
| Non-Controlling share | - | - | - | - |
| Balance at 31 December 2019 - Owners of the Company share | 332 | (1,230) | (6,800) | (7,698) |
| of which : | ||||
| Pre-tax | 377 | (1,386) | (6,800) | (7,809) |
| Tax | (45) | 156 | - | 111 |
| Non-Controlling share | - | - | - | - |
| (in thousands of US dollars) | Cash-flow hedges | Pensions | Foreign Currency translation adjustment | Total |
| Balance at 1 January 2018 - Owners of the Company share | (203) | 273 | (537) | (467) |
| of which : | ||||
| Pre-tax | (227) | 322 | (537) | (442) |
| Tax | 24 | (49) | - | (25) |
| Non-Controlling share | - | - | - | - |
| Current period gains (losses) | 203 | (303) | (4,928) | (5,028) |
| Reclassification to profit or loss | - | - | - | - |
| Other comprehensive income for the period – Owners of the Company share | 203 | (303) | (4,928) | (5,028) |
| of which : | ||||
| Pre-tax | 227 | (344) | (4,928) | (5,045) |
| Tax | (24) | 41 | - | 17 |
| Non-Controlling share | - | - | - | - |
| Balance at 31 December 2018 - Owners of the Company share | - | (30) | (5,465) | (5,495) |
| of which : | ||||
| Pre-tax | - | (22) | (5,465) | (5,487) |
| Tax | - | (8) | - | (8) |
| Non-Controlling share | - | - | - | - |
| (in thousands of US dollars) | 2019 | 2018 |
| Bank loans | 1,730,516 | 1,534,663 |
| Bank overdrafts | 333,157 | 411,219 |
| Total Short term financing | 2,063,673 | 1,945,882 |
| Current portion of long term financing | 1,366 | 1,308 |
| Total Bank loans and acceptances | 2,065,039 | 1,947,190 |
| Current portion of lease liabilities under IFRS 16 | 2,180 | - |
| Total Short term debt | 2,067,219 | 1,947,190 |
| Of which: | ||
| Fixed rate | 3,546 | 1,308 |
| Floating rate | 2,063,673 | 1,945,882 |
The debt outstanding is comprised of loans in the following currencies at 31 December 2019 and 31 December 2018:
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| US Dollar | 1,905,100 | 1,796,616 | |
| Chinese Yuan | 147,210 | 130,552 | |
| Peruvian Nuevo Sol | 6,440 | 14,754 | |
| Euro | 6,289 | 5,268 | |
| Other currencies | - | - | |
| Total Bank loans and acceptances | 2,065,039 | 1,947,190 | |
| US Dollar | 876 | - | |
| Chinese Yuan | 434 | - | |
| Peruvian Nuevo Sol | 223 | - | |
| Other currencies | 647 | - | |
| Total Current portion of lease liabilities under IFRS 16 | 2,180 | - | |
| Total Short term debt | 2,067,219 | 1,947,190 |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Long-term pension benefit | 2,388 | 871 | |
| Retirement benefit obligations | 2,388 | 871 | 1 |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Present value of defined benefit obligation | 15,968 | 12,263 | |
| Fair value of plan assets | (13,580) | (11,392) | |
| Net liability in the statement of financial position | 2,388 | 871 | 1 |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Service cost expense | 979 | 677 | |
| Interest expense, net | 7 | 4 | |
| Administrative expenses | 19 | 16 | |
| 1,005 | 697 |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Remeasurement (gains)/losses on net defined benefit obligation | |||
| Change in financial assumptions | 1,230 | 68 | |
| Experience adjustments on benefit obligations | 136 | 310 | |
| Actual return on plan assets excluding net interest expense | (2) | (34) | |
| 1,364 | 344 |
Movements in the net defined benefit obligation during the year:
| (in thousands of US dollars) | 2019 | 2018 |
| Balance at 1 January, | 871 | 528 |
| Expense recognized in the statement of income | 1,005 | 697 |
| Remeasurements recognized in other comprehensive income | 1,364 | 344 |
| Contributions paid by the Group | (848) | (709) |
| Exchange differences | (4) | 11 |
| Closing balance | 2,388 | 871 |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Balance at 1 January, | 12,263 | 11,840 | |
| Service cost | 979 | 677 | |
| Interest cost | 103 | 75 | |
| Administrative expenses | 19 | 16 | |
| Ordinary contributions paid by employees | 521 | 378 | |
| Contributions paid by plan participants | 1,734 | 2,797 | |
| Plan settlement | - | (3,400) | |
| Benefits paid from plan of assets | (964) | (327) | |
| Remeasurement losses on defined benefit obligation | 1,366 | 378 | |
| Exchange rate (gains)/losses | (53) | 171 |
| Closing balance | 15,968 | 12,263 |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Balance at 1 January, | 11,392 | 11,312 | |
| Interest income on plan assets | 96 | 71 | |
| Return on plan assets excluding amounts included in net interest expense | 2 | 40 | |
| Ordinary contributions paid by employer | 852 | 709 | |
| Ordinary contributions paid by employees | 521 | 378 | |
| Contributions paid by plan participants | 1,734 | 2,861 | |
| Benefits paid from plan of assets | (964) | (327) | |
| Plan settlement | - | (3,324) | |
| Exchange differences | (53) | (328) |
| Closing balance | 13,580 | 11,392 |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Insurance contracts | 13,580 | 11,392 | |
| 13,580 | 11,392 |
The principal weighted average actuarial assumptions used in determining the cost of benefits are as follows:
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Discount rate | 0.20% | 0.85% | |
| Interest rate on savings | 0.50% | 0.85% | |
| Inflation | 1.00% | 1.00% | |
| Salary increase | 2.00% | 2.00% | |
| Increase in pension | 0.00% | 0.00% | |
| Retirement age | M65/W64 | M65/W64 | |
| Demographic assumptions | BVG 2015 GT | BVG 2015 GT |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Current income tax expense | (22,766) | (14,219) | |
| Deferred income tax (expense) income | (43) | 3,127 | |
| Total tax expense reported in the statement of income | (22,809) | (11,092) |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Deferred income tax income recognized directly in other comprehensive income | 119 | 17 | |
| Total tax credit recognized directly in other comprehensive income | 119 | 17 |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Income before income taxes and attribution | 101,069 | 45,582 | |
| Less: Share of income from joint venture | (314) | (434) | |
| Parent Company’s and subsidiaries’ income before income tax and attribution | 100,755 | 45,148 | |
| Income tax expense calculated at the Dutch income tax rate of 25% (2018:25%) | (25,189) | (11,287) | |
| Tax effects of: | |||
| Different tax rates from the standard Dutch income tax rate | 10,191 | 1,614 | |
| Permanent adjustments coming from non-taxable income | 127 | 4 | |
| Permanent adjustments coming from non-deductible expenses | (1,141) | (689) | |
| Foreign exchange fluctuations | (622) | 64 | |
| Changes in recognition of tax losses and temporary differences | (1,236) | (20) | |
| Changes in tax rates | (3,889) | - | |
| Prior year tax adjustment | 397 | (746) | |
| Other tax adjustment | (1,447) | (32) | |
| Total income tax expense | (22,809) | (11,092) |
The impact of change in tax rates of $3.9 million arose primarily from corporate tax changes in Switzerland which led to aremeasurement of the deferred tax liabilities.
The net changes in consolidated deferred income tax assets (liabilities) recorded at 31 December 2019 and 31 December 2018arise from:
| (in thousands of US dollars) | Total | 1 |
| Net deferred income tax liability at 1 January 2018 | (30,805) |
| Items recognized in the statement of income: | 3,127 | |
| Items credited to other comprehensive income | 17 | |
| Exchange differences and other | 434 | |
| Net deferred income tax liability at 31 December 2018 | (27,227) | |
| Items recognized in the statement of income: | (43) | |
| Items credited to other comprehensive income | 119 | |
| Exchange differences and other | 120 | |
| Net deferred income tax liability at 31 December 2019 | (27,031) |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Statutory provision on inventories | (27,420) | (23,520) | |
| Mark-to-market on derivatives and inventories | (4,752) | (7,557) | |
| Employee benefit, pensions | 4,511 | 2,621 | |
| Tax losses carried forward | 144 | 1,193 | |
| Other | 486 | 36 | |
| Net deferred income tax liability | (27,031) | (27,227) |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Trade payables | 198,734 | 159,019 | |
| Accrued payables | 274,970 | 109,976 | |
| Staff and tax payables | 34,845 | 16,628 | |
| Prepayments and advances received | 64,503 | 37,190 | |
| Other payables | 18,721 | 26,191 | |
| Deferred income | 31,237 | 19,631 | |
| 623,010 | 368,635 |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Sales of goods | 14,398,335 | 13,001,229 | |
| Income from services rendered | 775 | 2,109 | |
| Other income | 1,896 | 1,103 | |
| 14,401,006 | 13,004,441 |
18. FINANCE COSTS, NET
Interest net of interest income included in the statement of income can be analyzed as follows:
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Interest expense1 | (94,918) | (88,310) | |
| Interest income2 | 30,833 | 28,576 | |
| Foreign exchange | (485) | 196 | |
| Other financial income and expense | - | 306 | |
| (64,570) | (59,232) |
| (in thousands of US dollars) | 2019 | 2018 | 1 |
| Net sales, net of cost of sales | (104) | (8,209) | |
| Commercial and administrative expenses | (262) | (664) | |
| Finance costs, net | (485) | 196 | |
| (851) | (8,677) |
| (in thousands of US dollars) | 2019 | 2018 | 1 | ||
| Loss on other financial assets | 27 | 106 | |||
| 27 | 106 | ||||
| (in thousands of US dollars) | 2019 | 2018 | 1 | ||
| Letters of credit: | |||||
| Commodity trading | 75,504 | 13,627 | |||
| 75,504 | 13,627 | ||||
23. SHARE-BASED PAYMENT
Phantom Equity Retention Plan (PERP)In 2018 a cash-settled share-based payment called Phantom Equity Retention Plan (PERP) was put in place. Awards granted toemployees during 2019 related to the PERP are of $ 0.3 million, awards forfeited are $1 million. Awards granted to employeesduring 2018 related to the PERP were $32.6 million.
At 31 December 2019, outstanding value of the PERP awards is $44.5 million of which $12.6 million corresponded to capital gain(respectively $37 million and $4.4 million at 31 December 2018).
At 31 December 2019, PERP awards fully vested is nil and awards vesting ratably over periods ranging from 5 months to 53months are of $44.5 million.
Compensation costs related to PERP recognized in commercial and administrative expenses are of $16.1 million for the yearended 2019 of which $5.6 million corresponded to capital gain (respectively $7.9 million and $0.9 million for the year ended 2018).
Phantom Equity Participation Plan (PEPP)In 2019 a new cash-settled share-based payment called Phantom Equity Participation Plan (PEPP) was put in place. Awardsgranted to employees during 2019 related to the PEPP are of $5.6 million. At 31 December 2019, outstanding value of the PEPPawards is $6.9 million of which $1.3 million corresponded to capital gain.
At 31 December 2019, PEPP awards fully vested is nil and awards vesting ratably over periods ranging from 5 months to 41months are of $6.9 million.
Compensation costs related to PEPP recognized in commercial and administrative expenses are of $2.4 million for the year ended2019 of which $0.4 million corresponded to capital gain.
24. NUMBER OF EMPLOYEES AND PERSONNEL EXPENSES
For the year ended 31 December 2019, the personnel expenses reached $71.3 million for an average number of employees of
310. For the year ended 31 December 2018, they were $53.45 million for an average number of employees of 249.
The average number of employees is as follows:
| 2019 | 2018 | 1 | |
| Members of the Executive Committee | 9 | 9 | |
| Managers | 74 | 74 | |
| Employees | 227 | 166 | |
| 310 | 249 |
| 2019 | 2018 | |||
| Statement of income (in thousands of US dollars) | Total | From 01.01.2018 to 10.05.2018 | From 11.05.2018 to 31.12.2018 | Total |
| Sales | 120,791 | 1,271 | - | 1,271 |
| Cost of goods sold | (668,265) | (23,320) | (107,582) | (130,902) |
| Other income net of expenses | 312 | (4,162) | - | (4,162) |
| Finance costs, net | 603 | (2,428) | (4,772) | (7,200) |
| Statement of Financial Position (in thousands of US dollars) | 2019 | 2018 |
| Trade and other receivables | 58,954 | - |
| Total Assets | 58,924 | - |
| Long term debt | 90,000 | 130,000 |
| Trade and other payables | 167,571 | - |
| Total Liabilities | 257,571 | 130,000 |
| 2019 | 2018 | ||||
| Company | % of control | % of ownership | % of control | % of ownership | |
| IXM Beijing Metals Trading Company Ltd. (China) | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXM Pte Ltd. (Singapore) | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXM Chile Limitada | 100.00 | 100.00 | 100.00 | 100.00 | |
| Louis Dreyfus Commodities Metals MEA DMCC | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXM S.A. (Switzerland) | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXM (Shanghai) Corporate Management Company Limited | 100.00 | 100.00 | 100.00 | 100.00 | |
| Maritime Port Properties (Proprietary) Limited (Namibia) | 76.00 | 76.00 | 76.00 | 76.00 | |
| IXM Trading LLC | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXM Trading Holding LLC | 100.00 | 100.00 | 100.00 | 100.00 | |
| Compromin S.A. de C.V. | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXM Peru S.A. | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXMetais Brasil Ltda | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXM Servicios Administrativos Mexicanos S.A. de C.V. | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXM Africa (Pty) Ltd | 100.00 | 100.00 | 100.00 | 100.00 | |
| IXM Trading Peru S.A.C | 100.00 | 100.00 | 100.00 | 100.00 | |