The terms of repayment of loans granted to finance operations abroad, including planned repayment dates, were set in individual agreements. Pursuant to the schedule, the principal amount and interest are paid on demand, but not later than 15 December 2024. Due to the implementation of IFRS 9 as at 1 January 2018, the expected, undiscounted credit loss at the moment of initial recognition was estimated to amount to PLN 6 105 million (USD 1 754 million per the 3.4813 USDPLN exchange rate of NBP dated 29 December 2017).
The start of repayment of loans by Sierra Gorda S.C.M. will depend on that company’s financial standing. It is assumed in the long-term plans of Sierra Gorda S.C.M. that the loans will be repaid with interest. The Group does not foresee a demand to repay the loan by the end of 2021, and therefore the loan is presented as a non-current receivable. Due to the fact that settling the loan is planned and probable in the foreseeable future, the loan is not a net investment under IAS 21.15.
Pursuant to the requirements of IFRS 22.214.171.124, the Group performed impairment testing of the loan. To estimate the expected credit losses, scenario analysis (IFRS 126.96.36.199) was used, comprising the Group’s assumptions on the repayment of the loan granted. Scenario analysis was based on cash flows adopted in December 2020 in Sierra Gorda S.C.M.’s budget, which were subsequently discounted using the effective interest rate method adjusted by the credit risk, determined at the initial recognition of the loan pursuant to IFRS 9.B5.5.45 at the level of 6.42%.