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Fair value measurement | 6 Months Ended
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Jun. 30, 2023
Fair value measurement |
Fair value measurement | 22.Fair value measurement The Group has assessed that the fair values of cash and cash equivalents, trade and other receivables, trade and other payables and accrued labilities and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The Group’s marketable securities are fair valued by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets. Due to most of the Group’s long-term debt being either recently acquired debt measured at fair value or short-term in nature, the Group has determined for the long-term obligations measured at amortised cost that fair values approximate their carrying amounts. The fair value of the redeemable Class A ordinary shares was measured at their redemption amount. The following table shows the carrying values, fair values and fair value hierarchy of the Group’s financial instruments as at 30 June 2023, 31 December 2022 and 1 January 2022: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | 30 June 2023 |  | 31 December 2022 |  | 1 January 2022
US$ thousand | ​ | Level | ​ | Carrying value |  | Fair value | ​ | Carrying value |  | Fair value | ​ | Carrying value |  | Fair value
Financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortized cost |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade and other receivables |  | ​ | ​ | 20,881 |  | 20,881 |  | 53 |  | 53 |  | — |  | —
​ |  | ​ | ​ | 20,881 |  | 20,881 |  | 53 |  | 53 |  | — |  | —
Fair value through profit or loss |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | 1 |  | 43,732 |  | 43,732 |  | 42 |  | 42 |  | 955 |  | 955
Investments |  | 1 |  | — |  | — |  | 268,909 |  | 268,909 |  | 265,156 |  | 265,156
Derivative financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
Silver stream embedded derivative |  | 3 |  | 3,740 |  | 3,740 |  | — |  | — |  | — |  | —
Copper stream embedded derivative |  | 3 |  | 5,479 |  | 5,479 |  | — |  | — |  | — |  | —
​ | ​ | ​ |  | 52,951 |  | 52,951 |  | 268,951 |  | 268,951 |  | 266,111 |  | 266,111
Total financial assets |  |  |  | 73,832 |  | 73,832 |  | 269,004 |  | 269,004 |  | 266,111 |  | 266,111
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortized cost |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade and other payables |  |  |  | 63,754 |  | 63,754 |  | 927 |  | 927 |  | 604 |  | 604
Lease liability |  |  |  | 16,247 |  | 16,247 |  | — |  | — |  | — |  | —
Loans and borrowings |  |  |  | 425,907 |  | 425,907 |  | 786 |  | 786 |  | — |  | —
Other financial liabilities (excluding contingent consideration) |  |  |  | 10,326 |  | 10,326 |  | 280,996 |  | 285,428 |  | 253,530 |  | 274,436
​ | ​ | ​ |  | 516,234 |  | 516,234 |  | 282,709 |  | 287,141 |  | 254,134 |  | 275,040
Fair value through profit or loss |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other financial liabilities (contingent consideration) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Royalty Deed |  | 3 |  | 43,130 |  | 43,130 |  | — |  | — |  | — |  | —
Contingent copper consideration |  | 3 |  | 97,200 |  | 97,200 |  | — |  | — |  | — |  | —
Deferred consideration |  | 2 |  | 75,000 |  | 75,000 |  | — |  | — |  | — |  | —
Derivative financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Public Warrants |  | 1 |  | 12,374 |  | 12,374 |  | 4,335 |  | 4,335 |  | 5,174 |  | 5,174
Private Warrants |  | 2 |  | 9,150 |  | 9,150 |  | 3,107 |  | 3,107 |  | 3,266 |  | 3,266
Mezz Warrants |  | 3 |  | 13,310 |  | 13,310 |  | — |  | — |  | — |  | —
Mezz Facility embedded derivative |  | 2 |  | 42,821 |  | 42,821 |  | — |  | — |  | — |  | —
​ | ​ | ​ |  | 292,985 |  | 292,985 |  | 7,442 |  | 7,442 |  | 8,440 |  | 8,440
Total financial liabilities |  |  |  | 809,219 |  | 809,219 |  | 290,151 |  | 294,583 |  | 262,574 |  | 283,480
​ There have been no transfers between the different fair value hierarchy levels in any of the periods presented in the financial statements. 22.Fair value measurement (continued) Derivative instruments The following table shows the fair values of the Group’s derivative financial assets and liabilities as at 30 June 2023, 31 December 2022 and 1 January 2022. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | 30 June |  | 31 December |  | 1 January
US$ thousand | ​ | Note | ​ | 2023 | ​ | 2022 | ​ | 2022
Derivative financial assets |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Silver stream embedded derivative |  | (a) |  | 705 |  | — |  | —
Copper stream embedded derivative |  | (b) |  | 9 |  | — |  | —
​ | ​ | ​ |  | 714 |  | — | ​ | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-current |  |  |  |  |  |  |  |
Silver stream embedded derivative |  | (a) |  | 3,035 |  | — |  | —
Copper stream embedded derivative |  | (b) |  | 5,470 |  | — |  | —
​ | ​ | ​ |  | 8,505 |  | — |  | —
Total derivative financial assets | ​ | ​ |  | 9,219 |  | — |  | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial liabilities |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Warrants |  | (c) |  | — |  | — |  | —
Mezz facility embedded derivative |  | (d) |  | 11,792 |  | — |  | —
Conversion option |  | (e) |  | — |  | — |  | —
​ | ​ | ​ |  | 11,792 |  | — |  | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Non-current |  |  |  |  |  |  |  |
Warrants |  | (c) |  | 34,834 |  | 7,443 |  | 8,440
Mezz facility embedded derivative |  | (d) |  | 31,029 |  | — |  | —
Conversion option |  | (e) |  | — |  | — |  | —
​ | ​ | ​ |  | 65,863 |  | 7,443 |  | 8,440
Total derivative financial liabilities | ​ | ​ |  | 77,655 |  | 7,443 |  | 8,440
​ (a)Silver stream embedded derivative The silver stream is recognised as a financial liability at amortised cost and it contains an embedded derivative in relation to the embedded silver price within the agreement that is measured at fair value through profit or loss each reporting period. The silver stream embedded derivative is valued using a silver future curve simulation valuation model. ​ 22.Fair value measurement (continued) The following key inputs were used for the valuation of the embedded derivative, in addition to estimation of the Group’s anticipated deliveries of silver over the term of the agreement. The significant unobservable input used in the fair value measurement of the embedded derivative pertains to the anticipated silver deliveries. In isolation, a significant increase (decrease) in anticipated silver deliveries would result in a significantly lower (higher) fair value measurement. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 30 June |  | 31 December |  | 1 January
​ | ​ | 2023 | ​ | 2022 | ​ | 2022
Silver spot price (per oz) | ​ | $ | 22.81 |  | — |  | —
Own credit spread | ​ |  | 8.81 | % | — |  | —
Average silver price (per oz) | ​ | $ | 24.38 |  | — |  | —
​ The following table presents the continuity schedule for the silver stream embedded derivative for each of the following periods: ​
​ | ​ | ​ | ​ | ​
​ |  | Six months ended 30 June
US$ thousand | ​ | 2023 | ​ | 2022
Balance, beginning of period |  | — |  | —
Initial recognition |  | — |  | —
Change in fair value |  | 3,740 |  | —
Balance, end of period |  | 3,740 |  | —
​ (b)Copper stream embedded derivative The copper stream is recognised as a financial liability at amortised cost and it contains a single compound embedded derivative in relation to the embedded copper price within the agreement and the buy-down option (Note 18). The compound embedded derivative is measured at fair value through profit or loss each reporting period. The copper stream embedded derivative is valued using a copper future curve simulation valuation model. The following key inputs were used for the valuation of the compound embedded derivative, in addition to estimation of the Group’s anticipated deliveries of copper over the term of the agreement. The significant unobservable input used in the fair value measurement of the embedded derivative pertains to the anticipated copper deliveries. In isolation, a significant increase (decrease) in anticipated copper deliveries would result in a significantly lower (higher) fair value measurement. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 30 June |  | 31 December |  | 1 January
​ | ​ | 2023 | ​ | 2022 | ​ | 2022
Copper spot price (per tonne) | ​ | $ | 8,323 |  | — |  | —
Copper price volatility | ​ |  | 26.35 | % |  |  |
Own credit spread | ​ |  | 9.49 | % | — |  | —
Average copper price (per tonne) | ​ | $ | 8,341 |  | — |  | —
​ The following table presents the continuity schedule for the copper stream embedded derivative for each of the following periods: ​
​ | ​ | ​ | ​ | ​
​ |  | Six months ended 30 June
US$ thousand | ​ | 2023 | ​ | 2022
Balance, beginning of period |  | — |  | —
Initial recognition |  | 4,430 |  | —
Change in fair value |  | 1,049 |  | —
Balance, end of period |  | 5,479 |  | —
​ ​ 22.Fair value measurement (continued) (c)Warrants ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | Private |  | ​
​ | ​ | ​ | ​ | Placement | ​ | ​
US$ thousand | ​ | Public Warrants | ​ | Warrants | ​ | Mezz Warrants
For six months ended 30 June 2023 | ​ | ​ | ​ | ​ | ​ | ​
Balance, beginning of period |  | 4,335 |  | 3,108 |  | —
Promissory note conversion warrants |  | — |  | 102 |  | —
Issuance of warrants |  | — |  | — |  | 13,665
Change in fair value |  | 8,039 |  | 5,940 |  | (355)
Balance, end of period |  | 12,374 |  | 9,150 |  | 13,310
For six months ended 30 June 2022 |  |  |  |  |  |
Balance, beginning of period |  | 5,174 |  | 3,266 |  | —
Issuance of warrants |  | — |  | 480 |  | —
Change in fair value |  | (401) |  | (325) |  | —
Exercise of warrants |  | — |  | — |  | —
Balance, end of period |  | 4,773 |  | 3,421 |  | —
​ The Group’s Public Warrants, Private Placement Warrants and Mezz Warrants are classified and accounted for as derivative liabilities at fair value through profit or loss as they did not meet the “fixed for fixed” criteria under IAS 32.
| ● | On 20 September 2021, the Company’s Public Warrants began trading on the NYSE. The fair value of the Company’s Public Warrants is based on unadjusted quoted prices in an active market (NYSE). As of 30 June 2023, there were 8,838,260 Public Warrants outstanding.
| ● | The Company determined that the closing price of the Public Warrants as at 30 June 2023 was an appropriate estimate for the fair value of Private Placement Warrants due to a make-whole provision in the contractual terms of the Private Placement Warrants Agreement. As of 30 June 2023, there were 6,535,304 Private Placement Warrants outstanding.
| ● | During the period ended 30 June 2023, the Company issued 3,187,500 Mezz Warrants to Sprott Private Resource Lending II (Collector-2), LP in accordance with the terms of the Mezz Facility (Note 18). The fair value of the Mezz Warrants is determined using a Monte Carlo simulation model.
The initial fair value of the Mezz Warrants recognised on inception was $13,665 thousand. The following assumptions were used for the valuation of the Mezz Warrants. The significant unobservable inputs in the fair value measurement are the expected life of the Mezz Warrants and the expected volatility based on comparable publicly traded companies. Significant increases (decreases) in any of those inputs in isolation would result in a significantly higher (lower) fair value measurement. Generally, a change in the assumption used for the expected volatility is accompanied by a directionally opposite change in the assumption used for the expected life of the Mezz Warrants. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 30 June |  | 31 December |  | 1 January
​ | ​ | 2023 | ​ | 2022 | ​ | 2022
Risk-free rate |  | ​ | 3.93 | % | — |  | —
Warrant expected life |  | ​ | 5 years |  | — |  | —
Expected volatility |  | ​ | 53.94 | % | — |  | —
Expected dividend yield |  | ​ | 0 | % | — |  | —
Share price | ​ | $ | 10.30 |  | — |  | —
​ As of 30 June 2023, there were 3,187,500 Mezz Warrants outstanding. 22.Fair value measurement (continued) (d)Mezz Facility embedded derivative The Mezz Facility is recognised as a financial liability at amortised cost and it contains a single compound embedded derivative in relation to the prepayment option and the interest rate margin referenced to the LME Cash Settlement Price that is measured at fair value through profit or loss at each reporting period. The fair value of the compound embedded derivative was determined using a Monte-Carlo simulation model in relation to the future copper price and incorporation of the Longstaff-Schwartz algorithm to value the prepayment option. The key inputs in the valuation technique include the risk-free rate, copper price volatility, copper price forward curve, and the Company’s credit spread. The following table presents the continuity schedule for the Mezz Facility embedded derivative for each of the following periods: ​
​ | ​ | ​ | ​ | ​
​ |  | Six months ended 30 June
US$ thousand | ​ | 2023 |  | 2022
Balance, beginning of period |  | — |  | —
Initial recognition |  | 42,098 |  | —
Change in fair value |  | 723 |  | —
Balance, end of period |  | 42,821 |  | —
​
(e) | Conversion option
During the year ended 31 December 2022, the 2022 Sponsor Convertible Note was recognised as a financial liability at amortised cost and it contained an embedded derivative in relation to the conversion option that was measured at fair value through profit or loss. The conversion option was fair valued using a Monte Carlo simulation valuation model based on key inputs including the expected volatility of MAC’s ordinary shares as implied from the pricing of MAC’s Public Warrants, the expected holding period, risk-free rate, exercise price, and underlying warrant value, which were based on market conditions, management assumptions, and terms of the 2022 Sponsor Convertible Note. On 6 May 2022, the conversion option was recognised as a derivative liability in the amount of $8 thousand. The conversion option was exercised by the Sponsor on 24 May 2022 (Note 18). The following assumptions were used for the Monte Carlo valuation of the conversion option: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 24 May 2022 |  | ​ | ​ |
​ | ​ | Conversion (Final | ​ | 6 May 2022 Borrowing |
​ | ​ | Measurement) | ​ | (Initial Measurement) |
Underlying warrant value | ​ | $ | 0.60 | ​ | $ | 0.80 | ​
Exercise price | ​ | $ | 1.50 | ​ | $ | 1.50 | ​
Holding period | ​ |  | 0.35 | ​ |  | 0.40 | ​
Risk-free rate | ​ |  | 1.25 | % |  | 1.18 | %
Volatility | ​ |  | 59.57 | % |  | 55.35 | %
​ ​ 22.Fair value measurement (continued) Contingent consideration The following table shows the fair values of the Company’s contingent consideration as at 30 June 2023, 31 December 2022 and 1 January 2022: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | 30 June |  | 31 December |  | 1 January
US$ thousand | ​ | Note | ​ | 2023 | ​ | 2022 | ​ | 2022
Royalty deed |  | (a) |  | 43,130 |  | — |  | —
Contingent copper consideration |  | (b) |  | 97,200 |  | — |  | —
Deferred consideration |  | (c) |  | 75,000 |  | — |  | —
​ | ​ | ​ |  | 215,330 |  | — | ​ | —
​ (a)Royalty deed In connection with the acquisition of CMPL, the Company entered into a NSR royalty agreement with Glencore pursuant to which after the Closing of the Acquisition, CMPL will pay to Glencore a royalty equal to 1.5% from all NSR from all marketable and metal-bearing copper material produced from the mining tenure held by CMPL at the time of the initial Business Combination (Note 25). The contingent consideration was recognised at fair value on acquisition and at 30 June 2023. The contingent consideration is fair valued using the present value of discounted cash flows based on the expected amounts and timing of the NSR over the expected life of the CSA mine using an effective interest rate of 8%. The NSR is determined using consensus copper prices less estimated treatment and refining costs under the offtake agreement with Glencore. The discount rate of 8% takes into consideration the risks in the cash flow forecasts and the cost of debt. A significant increase (decrease) in the discount rate, in isolation, would result in a significant lower (higher) fair value measurement. The following table presents the continuity schedule for the royalty deed for each of the following periods: ​
​ | ​ | ​ | ​ | ​
​ |  | Six months ended 30 June
US$ thousand | ​ | 2023 |  | 2022
Balance, beginning of period |  | — |  | —
Initial recognition |  | 43,130 |  | —
Change in fair value |  | — |  | —
Royalty payments |  | — |  | —
Balance, end of period |  | 43,130 |  | —
​ (b)Contingent copper consideration The consideration for the acquisition of CMPL included two contingent cash payments of $75,000 thousand each that are unsecured, fully subordinated and payable if, over the life of the mine, the average daily LME closing copper price is greater than $4.25/lb for any rolling 18-month period and $4.50/lb for any rolling 24-month period, respectively (Note 25). The contingent consideration was recognised at fair value on acquisition and at 30 June 2023. Given the contingent consideration is subject to the uncertainty of future LME copper prices, a Monte Carlo simulation model is used to determine the fair value. The fair value for each contingent component is the result of the average expected payoff of all simulation iterations discounted to the present value at the risk-free borrowing rate. The change in fair value is dependent on the movement in copper prices and the change in the risk-free borrowing rate. ​ 22.Fair value measurement (continued) The following key inputs were used for the valuation of the contingent copper consideration. The significant unobservable input in the fair value measurement is the reversion factor. A significant increase (decrease) in the reversion factor, in isolation, would result in a significantly higher (lower) fair value measurement. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 30 June |  | 31 December |  | 1 January
​ | ​ | 2023 | ​ | 2022 | ​ | 2022
Long-term copper price | ​ | $ | 3.63 |  | — |  | —
Copper spot price | ​ | $ | 3.77 |  | — |  | —
Annual price volatility | ​ |  | 25.70 | % | — |  | —
Annual inflation rate | ​ |  | 1.07 | % | — |  | —
Risk-free rate | ​ |  | 3.97 | % | — |  | —
Reversion factor | ​ |  | 11.55 | % | — |  | —
​ The following table presents the continuity schedule for the contingent copper consideration for each of the following periods: ​
​ | ​ | ​ | ​ | ​
​ | ​ | Six months ended 30 June
US$ thousand |  | 2023 |  | 2022
Balance, beginning of period |  | — |  | —
Initial recognition |  | 97,200 |  | —
Change in fair value |  | — |  | —
Balance, end of period |  | 97,200 |  | —
​ (c)Deferred consideration The consideration for the acquisition of CMPL included a deferred cash payment of $75,000 thousand accounted for as contingent consideration and measured at fair value on the acquisition date and at 30 June 2023 (Note 25). The contingent consideration is fair valued based on the present value of the expected cash payment, taking into account the timing and estimated proceeds from the Company’s planned ASX listing (Note 25).

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